-EN BANC

b. The Highest Bidder must execute the Stock Purchase and

Sale Agreement with GSIS x x x x
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -

[G.R. No. 122156. February 3, 1997]

The Highest Bidder will be declared the Winning Bidder/Strategic Partner

after the following conditions are met:
a. Execution of the necessary contracts with GSIS/MHC not
later than October 23, 1995 (reset to November 3, 1995); and

MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE INSURANCE SYSTEM,

MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF
THE GOVERNMENT CORPORATE COUNSEL, respondents.
DECISION
BELLOSILLO, J.:
The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights,
privileges, and concessions covering the national economy and patrimony, the State shall give
preference to qualified Filipinos,1 is invoked by petitioner in its bid to acquire 51% of the shares of
the Manila Hotel Corporation (MHC) which owns the historic Manila Hotel. Opposing, respondents
maintain that the provision is not self-executing but requires an implementing legislation for its
enforcement. Corollarily, they ask whether the 51% shares form part of the national economy and
patrimony covered by the protective mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS),
pursuant to the privatization program of the Philippine Government under Proclamation No. 50
dated 8 December 1986, decided to sell through public bidding 30% to 51% of the issued and
outstanding shares of respondent MHC. The winning bidder, or the eventual strategic partner, is
to provide management expertise and/or an international marketing/reservation system, and
financial support to strengthen the profitability and performance of the Manila Hotel .2 In a close
bidding held on 18 September 1995 only two (2) bidders participated: petitioner Manila Prince
Hotel Corporation, a Filipino corporation, which offered to buy 51% of the MHC or 15,300,000
shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel
operator, which bid for the same number of shares at P44.00 per share, or P2.42 more than the
bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC 1. The Highest Bidder must comply with the conditions set forth below
by October 23, 1995 (reset to November 3, 1995) or the Highest Bidder will
lose the right to purchase the Block of Shares and GSIS will instead offer the
Block of Shares to the other Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the
GSIS/MHC
the
Management
Contract,
International
Marketing/Reservation System Contract or other type of contract
specified by the Highest Bidder in its strategic plan for the Manila
Hotel x x x x

[Type text]

b. Requisite approvals from the GSIS/MHC and COP

(Committee on Privatization)/ OGCC (Office of the Government
Corporate Counsel) are obtained.3
Pending the declaration of Renong Berhard as the winning bidder/strategic partner and the
execution of the necessary contracts, petitioner in a letter to respondent GSIS dated 28
September 1995 matched the bid price of P44.00 per share tendered by Renong Berhad. 4 In a
subsequent letter dated 10 October 1995 petitioner sent a managers check issued by Philtrust
Bank for Thirty-three Million Pesos (P33,000,000.00) as Bid Security to match the bid of the
Malaysian Group, Messrs. Renong Berhad x x x x5 which respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender
of the matching bid and that the sale of 51% of the MHC may be hastened by respondent GSIS
and consummated with Renong Berhad, petitioner came to this Court on prohibition and
mandamus. On 18 October 1995 the Court issued a temporary restraining order enjoining
respondents from perfecting and consummating the sale to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was
referred to it by the First Division. The case was then set for oral arguments with former Chief
Justice Enrique M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and
submits that the Manila Hotel has been identified with the Filipino nation and has practically
become a historical monument which reflects the vibrancy of Philippine heritage and culture. It is
a proud legacy of an earlier generation of Filipinos who believed in the nobility and sacredness of
independence and its power and capacity to release the full potential of the Filipino people. To all
intents and purposes, it has become a part of the national patrimony.6 Petitioner also argues that
since 51% of the shares of the MHC carries with it the ownership of the business of the hotel
which is owned by respondent GSIS, a government-owned and controlled corporation, the hotel
business of respondent GSIS being a part of the tourism industry is unquestionably a part of the
national economy. Thus, any transaction involving 51% of the shares of stock of the MHC is clearly
covered by the term national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution,
applies.7
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and
its business also unquestionably part of the national economy petitioner should be preferred after
it has matched the bid offer of the Malaysian firm. For the bidding rules mandate that if for any
reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the
other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are
willing to match the highest bid in terms of price per share. 8
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987
Constitution is merely a statement of principle and policy since it is not a self-executing provision

and requires implementing legislation(s) x x x x Thus, for the said provision to operate, there
must be existing laws to lay down conditions under which business may be done. 9
Second, granting that this provision is self-executing, Manila Hotel does not fall under the
term national patrimony which only refers to lands of the public domain, waters, minerals, coal,
petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna and all marine wealth in its territorial sea, and exclusive marine zone as
cited in the first and second paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to
respondents, while petitioner speaks of the guests who have slept in the hotel and the events that
have transpired therein which make the hotel historic, these alone do not make the hotel fall
under the patrimony of the nation. What is more, the mandate of the Constitution is addressed to
the State, not to respondent GSIS which possesses a personality of its own separate and distinct
from the Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional
provision invoked is still inapplicable since what is being sold is only 51% of the outstanding
shares of the corporation, not the hotel building nor the land upon which the building stands.
Certainly, 51% of the equity of the MHC cannot be considered part of the national patrimony.
Moreover, if the disposition of the shares of the MHC is really contrary to the Constitution,
petitioner should have questioned it right from the beginning and not after it had lost in the
bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides
that if for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer
this to the other Qualified Bidders that have validly submitted bids provided that these Qualified
Bidders are willing to match the highest bid in terms of price per share, is misplaced. Respondents
postulate that the privilege of submitting a matching bid has not yet arisen since it only takes
place if for any reason, the Highest Bidder cannot be awarded the Block of Shares. Thus the
submission by petitioner of a matching bid is premature since Renong Berhad could still very well
be awarded the block of shares and the condition giving rise to the exercise of the privilege to
submit a matching bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since
respondent GSIS did not exercise its discretion in a capricious, whimsical manner, and if ever it did
abuse its discretion it was not 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. Similarly, the petition for mandamus should fail
as petitioner has no clear legal right to what it demands and respondents do not have an
imperative duty to perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and
administration of a nation. It is supreme, imperious, absolute and unalterable except by the
authority from which it emanates. It has been defined as the fundamental and paramount law of
the nation.10 It prescribes the permanent framework of a system of government, assigns to the
different departments their respective powers and duties, and establishes certain fixed principles
on which government is founded. The fundamental conception in other words is that it is a
supreme law to which all other laws must conform and in accordance with which all private rights
must be determined and all public authority administered. 11 Under the doctrine of constitutional
supremacy, if a law or contract violates any norm of the constitution that law or contract whether
promulgated by the legislative or by the executive branch or entered into by private persons for
private purposes is null and void and without any force and effect. Thus, since the Constitution is
the fundamental, paramount and supreme law of the nation, it is deemed written in every statute
and contract.

Admittedly, some constitutions are merely declarations of policies and principles. Their
provisions command the legislature to enact laws and carry out the purposes of the framers who
merely establish an outline of government providing for the different departments of the
governmental machinery and securing certain fundamental and inalienable rights of citizens. 12 A
provision which lays down a general principle, such as those found in Art. II of the 1987
Constitution, is usually not self-executing. But a provision which is complete in itself and becomes
operative without the aid of supplementary or enabling legislation, or that which supplies
sufficient rule by means of which the right it grants may be enjoyed or protected, is selfexecuting. Thus a constitutional provision is self-executing if the nature and extent of the right
conferred and the liability imposed are fixed by the constitution itself, so that they can be
determined by an examination and construction of its terms, and there is no language indicating
that the subject is referred to the legislature for action. 13
As against constitutions of the past, modern constitutions have been generally drafted upon
a different principle and have often become in effect extensive codes of laws intended to operate
directly upon the people in a manner similar to that of statutory enactments, and the function of
constitutional conventions has evolved into one more like that of a legislative body. Hence, unless
it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-executing. If the constitutional
provisions are treated as requiring legislation instead of self-executing, the legislature would have
the power to ignore and practically nullify the mandate of the fundamental law. 14 This can be
cataclysmic. That is why the prevailing view is, as it has always been, that x x x x in case of doubt, the Constitution should be considered self-executing
rather than non-self-executing x x x x Unless the contrary is clearly intended, the
provisions of the Constitution should be considered self-executing, as a contrary rule
would give the legislature discretion to determine when, or whether, they shall be
effective. These provisions would be subordinated to the will of the lawmaking body,
which could make them entirely meaningless by simply refusing to pass the needed
implementing statute.15
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not
self-executing, as they quote from discussions on the floor of the 1986 Constitutional Commission
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the
Committee on Style. If the wording of PREFERENCE is given to QUALIFIED
FILIPINOS, can it be understood as a preference to qualified Filipinos vis-a-vis
Filipinos who are not qualified. So, why do we not make it clear? To qualified
Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the word
QUALIFIED?
MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against whom? As
against aliens or over aliens ?
MR. NOLLEDO. Madam President, I think that is understood. We use the word QUALIFIED
because the existing laws or prospective laws will always lay down conditions
under which business may be done. For example, qualifications on capital,
qualifications on the setting up of other financial structures, et cetera
(underscoring supplied by respondents).
MR. RODRIGO. It is just a matter of style.

[Type text]

MR. NOLLEDO. Yes.16

Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it
appear that it is non-self-executing but simply for purposes of style. But, certainly, the legislature
is not precluded from enacting further laws to enforce the constitutional provision so long as the
contemplated statute squares with the Constitution. Minor details may be left to the legislature
without impairing the self-executing nature of constitutional provisions.

patrimony, the State shall give preference to qualified Filipinos, it means just that - qualified
Filipinos shall be preferred. And when our Constitution declares that a right exists in certain
specified circumstances an action may be maintained to enforce such right notwithstanding the
absence of any legislation on the subject; consequently, if there is no statute especially enacted
to enforce such constitutional right, such right enforces itself by its own inherent potency and
puissance, and from which all legislations must take their bearings. Where there is a right there is
a remedy. Ubi jus ibi remedium.

In self-executing constitutional provisions, the legislature may still enact legislation to

facilitate the exercise of powers directly granted by the constitution, further the operation of such
a provision, prescribe a practice to be used for its enforcement, provide a convenient remedy for
the protection of the rights secured or the determination thereof, or place reasonable safeguards
around the exercise of the right. The mere fact that legislation may supplement and add to or
prescribe a penalty for the violation of a self-executing constitutional provision does not render
such a provision ineffective in the absence of such legislation. The omission from a constitution of
any express provision for a remedy for enforcing a right or liability is not necessarily an indication
that it was not intended to be self-executing. The rule is that a self-executing provision of the
constitution does not necessarily exhaust legislative power on the subject, but any legislation
must be in harmony with the constitution, further the exercise of constitutional right and make it
more available.17 Subsequent legislation however does not necessarily mean that the subject
constitutional provision is not, by itself, fully enforceable.

As regards our national patrimony, a member of the 1986 Constitutional Commission 34

explains -

Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII
is implied from the tenor of the first and third paragraphs of the same section which undoubtedly
are not self-executing.18 The argument is flawed. If the first and third paragraphs are not selfexecuting because Congress is still to enact measures to encourage the formation and operation
of enterprises fully owned by Filipinos, as in the first paragraph, and the State still needs
legislation to regulate and exercise authority over foreign investments within its national
jurisdiction, as in the third paragraph, then a fortiori, by the same logic, the second paragraph can
only be self-executing as it does not by its language require any legislation in order to give
preference to qualified Filipinos in the grant of rights, privileges and concessions covering the
national economy and patrimony. A constitutional provision may be self-executing in one part and
non-self-executing in another.19

Manila Hotel has become a landmark - a living testimonial of Philippine heritage. While it was
restrictively an American hotel when it first opened in 1912, it immediately evolved to be truly
Filipino. Formerly a concourse for the elite, it has since then become the venue of various
significant events which have shaped Philippine history. It was called the Cultural Center of the
1930s. It was the site of the festivities during the inauguration of the Philippine Commonwealth.
Dubbed as the Official Guest House of the Philippine Government it plays host to dignitaries and
official visitors who are accorded the traditional Philippine hospitality. 36

Even the cases cited by respondents holding that certain constitutional provisions are merely
statements of principles and policies, which are basically not self-executing and only placed in the
Constitution as moral incentives to legislation, not as judicially enforceable rights - are simply not
in point. Basco v. Philippine Amusements and Gaming Corporation 20 speaks of constitutional
provisions on personal dignity, 21 the sanctity of family life, 22 the vital role of the youth in nationbuilding,23 the promotion of social justice, 24 and the values of education. 25 Tolentino v. Secretary of
Finance26 refers to constitutional provisions on social justice and human rights 27 and on
education.28 Lastly, Kilosbayan, Inc. v. Morato29 cites provisions on the promotion of general
welfare,30 the sanctity of family life,31 the vital role of the youth in nation-building 32 and the
promotion of total human liberation and development. 33 A reading of these provisions indeed
clearly shows that they are not judicially enforceable constitutional rights but merely guidelines
for legislation. The very terms of the provisions manifest that they are only principles upon which
legislations must be based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory,
positive command which is complete in itself and which needs no further guidelines or
implementing laws or rules for its enforcement. From its very words the provision does not require
any legislation to put it in operation. It is per se judicially enforceable. When our Constitution
mandates that [i]n the grant of rights, privileges, and concessions covering national economy and

[Type text]

The patrimony of the Nation that should be conserved and developed refers not
only to our rich natural resources but also to the cultural heritage of our race. It
also refers to our intelligence in arts, sciences and letters. Therefore, we should
develop not only our lands, forests, mines and other natural resources but also the
mental ability or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage.35 When
the Constitution speaks of national patrimony, it refers not only to the natural resources of the
Philippines, as the Constitution could have very well used the term natural resources, but also to
the cultural heritage of the Filipinos.

The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and
Memory of a City.37 During World War II the hotel was converted by the Japanese Military
Administration into a military headquarters. When the American forces returned to recapture
Manila the hotel was selected by the Japanese together with Intramuros as the two (2) places for
their final stand. Thereafter, in the 1950s and 1960s, the hotel became the center of political
activities, playing host to almost every political convention. In 1970 the hotel reopened after a
renovation and reaped numerous international recognitions, an acknowledgment of the Filipino
talent and ingenuity. In 1986 the hotel was the site of a failed coup d etat where an aspirant for
vice-president was proclaimed President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and
failures, loves and frustrations of the Filipinos; its existence is impressed with public interest; its
own historicity associated with our struggle for sovereignty, independence and nationhood. Verily,
Manila Hotel has become part of our national economy and patrimony. For sure, 51% of the equity
of the MHC comes within the purview of the constitutional shelter for it comprises the majority
and controlling stock, so that anyone who acquires or owns the 51% will have actual control and
management of the hotel. In this instance, 51% of the MHC cannot be disassociated from the
hotel and the land on which the hotel edifice stands. Consequently, we cannot sustain
respondents claim that the Filipino First Policy provision is not applicable since what is being sold
is only 51% of the outstanding shares of the corporation, not the Hotel building nor the land upon
which the building stands.38

The argument is pure sophistry. The term qualified Filipinos as used in our Constitution also
includes corporations at least 60% of which is owned by Filipinos. This is very clear from the
proceedings of the 1986 Constitutional Commission THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And
the amendment would consist in substituting the words QUALIFIED FILIPINOS with
the following: CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS
WHOSE CAPITAL OR CONTROLLING STOCK IS WHOLLY OWNED BY SUCH CITIZENS.
xxxx

MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise,
will the Filipino still be preferred?
MR. NOLLEDO. The answer is yes.
MR. FOZ. Thank you.41
Expounding further on the Filipino First Policy provision Commissioner Nolledo continues
MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be SHALL - THE STATE
SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called
Filipino First policy. That means that Filipinos should be given preference in the
grant of concessions, privileges and rights covering the national patrimony. 42

MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have to
raise a question. Suppose it is a corporation that is 80-percent Filipino, do we not
give it preference?

The exchange of views in the sessions of the Constitutional Commission regarding the
subject provision was still further clarified by Commissioner Nolledo 43 -

MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about a
corporation wholly owned by Filipino citizens?

Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic

concerns. It is better known as the FILIPINO FIRST Policy x x x x This provision was never
found in previous Constitutions x x x x

MR. MONSOD. At least 60 percent, Madam President.

MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference
should only be 100-percent Filipino.
MR. DAVIDE. I want to get that meaning clear because QUALIFIED FILIPINOS may refer
only to individuals and not to juridical personalities or entities.
MR. MONSOD. We agree, Madam President.

39

xxxx
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: IN THE GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY, THE STATE
SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. And the word Filipinos here, as
intended by the proponents, will include not only individual Filipinos but also
Filipino-controlled entities or entities fully-controlled by Filipinos. 40
The phrase preference to qualified Filipinos was explained thus MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please
restate his amendment so that I can ask a question.
MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS COVERING
THE NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE
TO QUALIFIED FILIPINOS.
MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and a
Filipino enterprise is also qualified, will the Filipino enterprise still be given a
preference?
MR. NOLLEDO. Obviously.

[Type text]

The term qualified Filipinos simply means that preference shall be given to those
citizens who can make a viable contribution to the common good, because of credible
competence and efficiency. It certainly does NOT mandate the pampering and
preferential treatment to Filipino citizens or organizations that are incompetent or
inefficient, since such an indiscriminate preference would be counterproductive and
inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a choice has
to be made between a qualified foreigner and a qualified Filipino, the latter shall be
chosen over the former.
Lastly, the word qualified is also determinable. Petitioner was so considered by respondent
GSIS and selected as one of the qualified bidders. It was pre-qualified by respondent GSIS in
accordance with its own guidelines so that the sole inference here is that petitioner has been
found to be possessed of proven management expertise in the hotel industry, or it has significant
equity ownership in another hotel company, or it has an overall management and marketing
proficiency to successfully operate the Manila Hotel.44
The penchant to try to whittle away the mandate of the Constitution by arguing that the
subject provision is not self-executory and requires implementing legislation is quite disturbing.
The attempt to violate a clear constitutional provision - by the government itself - is only too
distressing. To adopt such a line of reasoning is to renounce the duty to ensure faithfulness to the
Constitution. For, even some of the provisions of the Constitution which evidently need
implementing legislation have juridical life of their own and can be the source of a judicial remedy.
We cannot simply afford the government a defense that arises out of the failure to enact further
enabling, implementing or guiding legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J.,
on constitutional government is apt The executive department has a constitutional duty to implement laws, including
the Constitution, even before Congress acts - provided that there are discoverable legal
standards for executive action. When the executive acts, it must be guided by its own
understanding of the constitutional command and of applicable laws. The responsibility
for reading and understanding the Constitution and the laws is not the sole prerogative
of Congress. If it were, the executive would have to ask Congress, or perhaps the Court,

for an interpretation every time the executive is confronted by a constitutional

command. That is not how constitutional government operates. 45
Respondents further argue that the constitutional provision is addressed to the State, not to
respondent GSIS which by itself possesses a separate and distinct personality. This argument
again is at best specious. It is undisputed that the sale of 51% of the MHC could only be carried
out with the prior approval of the State acting through respondent Committee on Privatization. As
correctly pointed out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of
respondents GSIS and MHC a state action. In constitutional jurisprudence, the acts of persons
distinct from the government are considered state action covered by the Constitution (1) when
the activity it engages in is a public function; (2) when the government is so significantly involved
with the private actor as to make the government responsible for his action; and, (3) when the
government has approved or authorized the action. It is evident that the act of respondent GSIS in
selling 51% of its share in respondent MHC comes under the second and third categories of state
action. Without doubt therefore the transaction, although entered into by respondent GSIS, is in
fact a transaction of the State and therefore subject to the constitutional command. 46
When the Constitution addresses the State it refers not only to the people but also to the
government as elements of the State. After all, government is composed of three (3) divisions of
power - legislative, executive and judicial. Accordingly, a constitutional mandate directed to the
State is correspondingly directed to the three (3) branches of government. It is undeniable that in
this case the subject constitutional injunction is addressed among others to the Executive
Department and respondent GSIS, a government instrumentality deriving its authority from the
State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the
winning bidder. The bidding rules expressly provide that the highest bidder shall only be declared
the winning bidder after it has negotiated and executed the necessary contracts, and secured the
requisite approvals. Since the Filipino First Policy provision of the Constitution bestows preference
on qualified Filipinos the mere tending of the highest bid is not an assurance that the highest
bidder will be declared the winning bidder. Resultantly, respondents are not bound to make the
award yet, nor are they under obligation to enter into one with the highest bidder. For in choosing
the awardee respondents are mandated to abide by the dictates of the 1987 Constitution the
provisions of which are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is,
as it should be, impliedly written in the bidding rules issued by respondent GSIS, lest the bidding
rules be nullified for being violative of the Constitution. It is a basic principle in constitutional law
that all laws and contracts must conform with the fundamental law of the land. Those which
violate the Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the Highest Bidder
cannot be awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have
validly submitted bids provided that these Qualified Bidders are willing to match the highest bid in
terms of price per share.47 Certainly, the constitutional mandate itself is reason enough not to
award the block of shares immediately to the foreign bidder notwithstanding its submission of a
higher, or even the highest, bid. In fact, we cannot conceive of a stronger reason than the
constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding
concerning the grant of rights, privileges and concessions covering the national economy and
patrimony, thereby exceeding the bid of a Filipino, there is no question that the Filipino will have
to be allowed to match the bid of the foreign entity. And if the Filipino matches the bid of a foreign
firm the award should go to the Filipino. It must be so if we are to give life and meaning to the

[Type text]

Filipino First Policy provision of the 1987 Constitution. For, while this may neither be expressly
stated nor contemplated in the bidding rules, the constitutional fiat is omnipresent to be simply
disregarded. To ignore it would be to sanction a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign
investors. But the Constitution and laws of the Philippines are understood to be always open to
public scrutiny. These are given factors which investors must consider when venturing into
business in a foreign jurisdiction. Any person therefore desiring to do business in the Philippines or
with any of its agencies or instrumentalities is presumed to know his rights and obligations under
the Constitution and the laws of the forum.
The argument of respondents that petitioner is now estopped from questioning the sale to
Renong Berhad since petitioner was well aware from the beginning that a foreigner could
participate in the bidding is meritless. Undoubtedly, Filipinos and foreigners alike were invited to
the bidding. But foreigners may be awarded the sale only if no Filipino qualifies, or if the qualified
Filipino fails to match the highest bid tendered by the foreign entity. In the case before us, while
petitioner was already preferred at the inception of the bidding because of the constitutional
mandate, petitioner had not yet matched the bid offered by Renong Berhad. Thus it did not have
the right or personality then to compel respondent GSIS to accept its earlier bid. Rightly, only after
it had matched the bid of the foreign firm and the apparent disregard by respondent GSIS of
petitioners matching bid did the latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the
award has been finally made. To insist on selling the Manila Hotel to foreigners when there is a
Filipino group willing to match the bid of the foreign group is to insist that government be treated
as any other ordinary market player, and bound by its mistakes or gross errors of judgment,
regardless of the consequences to the Filipino people. The miscomprehension of the Constitution
is regrettable. Thus we would rather remedy the indiscretion while there is still an opportunity to
do so than let the government develop the habit of forgetting that the Constitution lays down the
basic conditions and parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to
the bidding rules, respondent GSIS is left with no alternative but to award to petitioner the block
of shares of MHC and to execute the necessary agreements and documents to effect the sale in
accordance not only with the bidding guidelines and procedures but with the Constitution as well.
The refusal of respondent GSIS to execute the corresponding documents with petitioner as
provided in the bidding rules after the latter has matched the bid of the Malaysian firm clearly
constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987
Constitution not merely to be used as a guideline for future legislation but primarily to be
enforced; so must it be enforced. This Court as the ultimate guardian of the Constitution will never
shun, under any reasonable circumstance, the duty of upholding the majesty of the Constitution
which it is tasked to defend. It is worth emphasizing that it is not the intention of this Court to
impede and diminish, much less undermine, the influx of foreign investments. Far from it, the
Court encourages and welcomes more business opportunities but avowedly sanctions the
preference for Filipinos whenever such preference is ordained by the Constitution. The position of
the Court on this matter could have not been more appropriately articulated by Chief Justice
Narvasa As scrupulously as it has tried to observe that it is not its function to substitute its
judgment for that of the legislature or the executive about the wisdom and feasibility of
legislation economic in nature, the Supreme Court has not been spared criticism for
decisions perceived as obstacles to economic progress and development x x x x in

connection with a temporary injunction issued by the Courts First Division against the
sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements were
published in a major daily to the effect that that injunction again demonstrates that the
Philippine legal system can be a major obstacle to doing business here.
Let it be stated for the record once again that while it is no business of the Court to
intervene in contracts of the kind referred to or set itself up as the judge of whether
they are viable or attainable, it is its bounden duty to make sure that they do not violate
the Constitution or the laws, or are not adopted or implemented with grave abuse of
discretion amounting to lack or excess of jurisdiction. It will never shirk that duty, no
matter how buffeted by winds of unfair and ill-informed criticism. 48
Privatization of a business asset for purposes of enhancing its business viability and
preventing further losses, regardless of the character of the asset, should not take precedence
over non-material values. A commercial, nay even a budgetary, objective should not be pursued
at the expense of national pride and dignity. For the Constitution enshrines higher and nobler nonmaterial values. Indeed, the Court will always defer to the Constitution in the proper governance
of a free society; after all, there is nothing so sacrosanct in any economic policy as to draw itself
beyond judicial review when the Constitution is involved. 49
Nationalism is inherent in the very concept of the Philippines being a democratic and
republican state, with sovereignty residing in the Filipino people and from whom all government
authority emanates. In nationalism, the happiness and welfare of the people must be the goal.
The nation-state can have no higher purpose. Any interpretation of any constitutional provision
must adhere to such basic concept. Protection of foreign investments, while laudible, is merely a
policy. It cannot override the demands of nationalism. 50
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to
the highest bidder solely for the sake of privatization. We are not talking about an ordinary piece
of property in a commercial district. We are talking about a historic relic that has hosted many of
the most important events in the short history of the Philippines as a nation. We are talking about
a hotel where heads of states would prefer to be housed as a strong manifestation of their desire
to cloak the dignity of the highest state function to their official visits to the Philippines. Thus the
Manila Hotel has played and continues to play a significant role as an authentic repository of
twentieth century Philippine history and culture. In this sense, it has become truly a reflection of
the Filipino soul - a place with a history of grandeur; a most historical setting that has played a
part in the shaping of a country.51
This Court cannot extract rhyme nor reason from the determined efforts of respondents to
sell the historical landmark - this Grand Old Dame of hotels in Asia - to a total stranger. For,
indeed, the conveyance of this epic exponent of the Filipino psyche to alien hands cannot be less
than mephistophelian for it is, in whatever manner viewed, a veritable alienation of a nations soul
for some pieces of foreign silver. And so we ask: What advantage, which cannot be equally drawn
from a qualified Filipino, can be gained by the Filipinos if Manila Hotel - and all that it stands for is sold to a non-Filipino? How much of national pride will vanish if the nations cultural heritage is
entrusted to a foreign entity? On the other hand, how much dignity will be preserved and realized
if the national patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino?
This is the plain and simple meaning of the Filipino First Policy provision of the Philippine
Constitution. And this Court, heeding the clarion call of the Constitution and accepting the duty of
being the elderly watchman of the nation, will continue to respect and protect the sanctity of the
Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL
CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE

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COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the Manila Hotel
Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner MANILA PRINCE
HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila Hotel Corporation
at P44.00 per share and thereafter to execute the necessary agreements and documents to effect
the sale, to issue the necessary clearances and to do such other acts and deeds as may be
necessary for the purpose.
SO ORDERED.

beggar-thy-neighbor policies that unilaterally protect weak and inefficient domestic producers of
goods and services. In the words of Peter Drucker, the well-known management guru, Increased
participation in the world economy has become the key to domestic economic growth and
prosperity.
EN BANC
Brief Historical Background
[G.R. No. 118295. May 2, 1997]

WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as members of the Philippine

Senate and as taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as
members of the House of Representatives and as taxpayers; NICANOR P.
PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION,
NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE
DEVELOPMENT INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC.,
PHILIPPINE RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN
NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE PEASANT INSTITUTE, in
representation of various taxpayers and as non-governmental organizations,
petitioners, vs. EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOSSHAHANI, HEHERSON ALVAREZ, AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI
GONZALES, ERNESTO HERRERA, JOSE LINA, GLORIA MACAPAGAL-ARROYO,
ORLANDO MERCADO, BLAS OPLE, JOHN OSMEA, SANTANINA RASUL, RAMON
REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective
capacities as members of the Philippine Senate who concurred in the
ratification by the President of the Philippines of the Agreement Establishing
the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as
Secretary of Budget and Management; CARIDAD VALDEHUESA, in her capacity
as National Treasurer; RIZALINO NAVARRO, in his capacity as Secretary of Trade
and Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture;
ROBERTO DE OCAMPO, in his capacity as Secretary of Finance; ROBERTO
ROMULO, in his capacity as Secretary of Foreign Affairs; and TEOFISTO T.
GUINGONA, in his capacity as Executive Secretary, respondents.
DECISION
PANGANIBAN, J.:
The emergence on January 1, 1995 of the World Trade Organization, abetted by the
membership thereto of the vast majority of countries has revolutionized international business
and economic relations amongst states. It has irreversibly propelled the world towards trade
liberalization and economic globalization. Liberalization, globalization, deregulation and
privatization, the third-millennium buzz words, are ushering in a new borderless world of business
by sweeping away as mere historical relics the heretofore traditional modes of promoting and
protecting national economies like tariffs, export subsidies, import quotas, quantitative
restrictions, tax exemptions and currency controls. Finding market niches and becoming the best
in specific industries in a market-driven and export-oriented global scenario are replacing age-old

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To hasten worldwide recovery from the devastation wrought by the Second World War, plans
for the establishment of three multilateral institutions -- inspired by that grand political body, the
United Nations -- were discussed at Dumbarton Oaks and Bretton Woods. The first was the World
Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged and later
developing countries; the second, the International Monetary Fund (IMF) which was to deal with
currency problems; and the third, the International Trade Organization (ITO), which was to foster
order and predictability in world trade and to minimize unilateral protectionist policies that invite
challenge, even retaliation, from other states. However, for a variety of reasons, including its nonratification by the United States, the ITO, unlike the IMF and WB, never took off. What remained
was only GATT -- the General Agreement on Tariffs and Trade. GATT was a collection of treaties
governing access to the economies of treaty adherents with no institutionalized body
administering the agreements or dependable system of dispute settlement.
After half a century and several dizzying rounds of negotiations, principally the Kennedy
Round, the Tokyo Round and the Uruguay Round, the world finally gave birth to that administering
body -- the World Trade Organization -- with the signing of the Final Act in Marrakesh, Morocco and
the ratification of the WTO Agreement by its members. 52
Like many other developing countries, the Philippines joined WTO as a founding member
with the goal, as articulated by President Fidel V. Ramos in two letters to the Senate (infra), of
improving Philippine access to foreign markets, especially its major trading partners, through the
reduction of tariffs on its exports, particularly agricultural and industrial products. The President
also saw in the WTO the opening of new opportunities for the services sector x x x, (the reduction
of) costs and uncertainty associated with exporting x x x, and (the attraction of) more
investments into the country. Although the Chief Executive did not expressly mention it in his
letter, the Philippines - - and this is of special interest to the legal profession - - will benefit from
the WTO system of dispute settlement by judicial adjudication through the independent WTO
settlement bodies called (1) Dispute Settlement Panels and (2) Appellate Tribunal. Heretofore,
trade disputes were settled mainly through negotiations where solutions were arrived at
frequently on the basis of relative bargaining strengths, and where naturally, weak and
underdeveloped countries were at a disadvantage.

The Petition in Brief

Arguing mainly (1) that the WTO requires the Philippines to place nationals and products of
member-countries on the same footing as Filipinos and local products and (2) that the WTO
intrudes, limits and/or impairs the constitutional powers of both Congress and the Supreme Court,
the instant petition before this Court assails the WTO Agreement for violating the mandate of the
1987 Constitution to develop a self-reliant and independent national economy effectively

controlled by Filipinos x x x (to) give preference to qualified Filipinos (and to) promote the
preferential use of Filipino labor, domestic materials and locally produced goods.
Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide
trade liberalization and economic globalization? Does it prescribe Philippine integration into a
global economy that is liberalized, deregulated and privatized? These are the main questions
raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court
praying (1) for the nullification, on constitutional grounds, of the concurrence of the Philippine
Senate in the ratification by the President of the Philippines of the Agreement Establishing the
World Trade Organization (WTO Agreement, for brevity) and (2) for the prohibition of its
implementation and enforcement through the release and utilization of public funds, the
assignment of public officials and employees, as well as the use of government properties and
resources by respondent-heads of various executive offices concerned therewith. This concurrence
is embodied in Senate Resolution No. 97, dated December 14, 1994.

Round of Multilateral Trade Negotiations and includes various agreements and associated legal
instruments (identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively
referred to as Multilateral Trade Agreements, for brevity) as follows:
ANNEX 1
Annex 1A: Multilateral Agreement on Trade in Goods
General Agreement on Tariffs and Trade 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing

The Facts

On April 15, 1994, Respondent Rizalino Navarro, then Secretary of the Department of Trade
and Industry (Secretary Navarro, for brevity), representing the Government of the Republic of the
Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay
Round of Multilateral Negotiations (Final Act, for brevity).
By signing the Final Act, 53 Secretary Navarro on behalf of the Republic of the Philippines,
agreed:
(a) to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities, with a view to seeking approval of the Agreement in
accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
On August 12, 1994, the members of the Philippine Senate received a letter dated August
11, 1994 from the President of the Philippines, 54 stating among others that the Uruguay Round
Final Act is hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII
of the Constitution.
On August 13, 1994, the members of the Philippine Senate received another letter from the
President of the Philippines 55 likewise dated August 11, 1994, which stated among others that the
Uruguay Round Final Act, the Agreement Establishing the World Trade Organization, the Ministerial
Declarations and Decisions, and the Understanding on Commitments in Financial Services are
hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the
Constitution.
On December 9, 1994, the President of the Philippines certified the necessity of the
immediate adoption of P.S. 1083, a resolution entitled Concurring in the Ratification of the
Agreement Establishing the World Trade Organization. 56
On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which Resolved, as
it is hereby resolved, that the Senate concur, as it hereby concurs, in the ratification by the
President of the Philippines of the Agreement Establishing the World Trade Organization. 57 The text
of the WTO Agreement is written on pages 137 et seq. of Volume I of the 36-volume Uruguay

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Agreement on Technical Barriers to Trade

Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994
Agreement on Implementation of Article VII of the General on
Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating Measures
Agreement on Safeguards
Annex 1B: General Agreement on Trade in Services and Annexes
Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property
Rights
ANNEX 2
Understanding on Rules
Settlement of Disputes

and

Procedures

Governing

the

ANNEX 3
Trade Policy Review Mechanism
On December 16, 1994, the President of the Philippines signed 58 the Instrument of
Ratification, declaring:
NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of
the Philippines, after having seen and considered the aforementioned Agreement
Establishing the World Trade Organization and the agreements and associated legal

instruments included in Annexes one (1), two (2) and three (3) of that Agreement which
are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do hereby
ratify and confirm the same and every Article and Clause thereof.
To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of
the Agreement Proper and the associated legal instruments included in Annexes one (1), two (2)
and three (3) of that Agreement which are integral parts thereof.
On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO
Agreement (and its integral annexes aforementioned) but also (1) the Ministerial Declarations and
Decisions and (2) the Understanding on Commitments in Financial Services. In his Memorandum
dated May 13, 1996,59 the Solicitor General describes these two latter documents as follows:
The Ministerial Decisions and Declarations are twenty-five declarations and
decisions on a wide range of matters, such as measures in favor of least developed
countries, notification procedures, relationship of WTO with the International Monetary
Fund (IMF), and agreements on technical barriers to trade and on dispute settlement.
The Understanding on Commitments in Financial Services dwell on, among other
things, standstill or limitations and qualifications of commitments to existing nonconforming measures, market access, national treatment, and definitions of nonresident supplier of financial services, commercial presence and new financial service.
On December 29, 1994, the present petition was filed. After careful deliberation on
respondents comment and petitioners reply thereto, the Court resolved on December 12, 1995, to
give due course to the petition, and the parties thereafter filed their respective memoranda. The
Court also requested the Honorable Lilia R. Bautista, the Philippine Ambassador to the United
Nations stationed in Geneva, Switzerland, to submit a paper, hereafter referred to as Bautista
Paper,60 for brevity, (1) providing a historical background of and (2) summarizing the said
agreements.
During the Oral Argument held on August 27, 1996, the Court directed:
(a) the petitioners to submit the (1) Senate Committee Report on the matter in
controversy and (2) the transcript of proceedings/hearings in the Senate; and
(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine
treaties signed prior to the Philippine adherence to the WTO Agreement, which derogate
from Philippine sovereignty and (2) copies of the multi-volume WTO Agreement and
other documents mentioned in the Final Act, as soon as possible.
After receipt of the foregoing documents, the Court said it would consider the case submitted
for resolution. In a Compliance dated September 16, 1996, the Solicitor General submitted a
printed copy of the 36-volume Uruguay Round of Multilateral Trade Negotiations, and in another
Compliance dated October 24, 1996, he listed the various bilateral or multilateral treaties or
international instruments involving derogation of Philippine sovereignty. Petitioners, on the other
hand, submitted their Compliance dated January 28, 1997, on January 30, 1997.

The Issues

In their Memorandum dated March 11, 1996, petitioners summarized the issues as follows:

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A. Whether the petition presents a political question or is otherwise not justiciable.

B. Whether the petitioner members of the Senate who participated in the deliberations
and voting leading to the concurrence are estopped from impugning the validity of
the Agreement Establishing the World Trade Organization or of the validity of the
concurrence.
C. Whether the provisions of the Agreement Establishing the World Trade Organization
contravene the provisions of Sec. 19, Article II, and Secs. 10 and 12, Article XII, all
of the 1987 Philippine Constitution.
D. Whether provisions of the Agreement Establishing the World Trade Organization
unduly limit, restrict and impair Philippine sovereignty specifically the legislative
power which, under Sec. 2, Article VI, 1987 Philippine Constitution is vested in the
Congress of the Philippines;
E. Whether provisions of the Agreement Establishing the World Trade Organization
interfere with the exercise of judicial power.
F. Whether the respondent members of the Senate acted in grave abuse of discretion
amounting to lack or excess of jurisdiction when they voted for concurrence in the
ratification of the constitutionally-infirm Agreement Establishing the World Trade
Organization.
G. Whether the respondent members of the Senate acted in grave abuse of discretion
amounting to lack or excess of jurisdiction when they concurred only in the
ratification of the Agreement Establishing the World Trade Organization, and not
with the Presidential submission which included the Final Act, Ministerial
Declaration and Decisions, and the Understanding on Commitments in Financial
Services.
On the other hand, the Solicitor General as counsel for respondents synthesized the several
issues raised by petitioners into the following: 61
1. Whether or not the provisions of the Agreement Establishing the World Trade
Organization and the Agreements and Associated Legal Instruments included in
Annexes one (1), two (2) and three (3) of that agreement cited by petitioners directly
contravene or undermine the letter, spirit and intent of Section 19, Article II and
Sections 10 and 12, Article XII of the 1987 Constitution.
2. Whether or not certain provisions of the Agreement unduly limit, restrict or
impair the exercise of legislative power by Congress.
3. Whether or not certain provisions of the Agreement impair the exercise of
judicial power by this Honorable Court in promulgating the rules of evidence.
4. Whether or not the concurrence of the Senate in the ratification by the President
of the Philippines of the Agreement establishing the World Trade Organization implied
rejection of the treaty embodied in the Final Act.
By raising and arguing only four issues against the seven presented by petitioners, the
Solicitor General has effectively ignored three, namely: (1) whether the petition presents a
political question or is otherwise not justiciable; (2) whether petitioner-members of the Senate
(Wigberto E. Taada and Anna Dominique Coseteng) are estopped from joining this suit; and (3)
whether the respondent-members of the Senate acted in grave abuse of discretion when they

voted for concurrence in the ratification of the WTO Agreement. The foregoing notwithstanding,
this Court resolved to deal with these three issues thus:
(1) The political question issue -- being very fundamental and vital, and being a
matter that probes into the very jurisdiction of this Court to hear and decide this case -was deliberated upon by the Court and will thus be ruled upon as the first issue;
(2) The matter of estoppel will not be taken
and the respondents have effectively waived it
pleadings; in any event, this issue, even if ruled in
petitions dismissal as there are petitioners other
vulnerable to the defense of estoppel; and

up because this defense is waivable

by not pursuing it in any of their
respondents favor, will not cause the
than the two senators, who are not

(3) The issue of alleged grave abuse of discretion on the part of the respondent
senators will be taken up as an integral part of the disposition of the four issues raised
by the Solicitor General.
During its deliberations on the case, the Court noted that the respondents did not question
the locus standi of petitioners. Hence, they are also deemed to have waived the benefit of such
issue. They probably realized that grave constitutional issues, expenditures of public funds and
serious international commitments of the nation are involved here, and that transcendental public
interest requires that the substantive issues be met head on and decided on the merits, rather
than skirted or deflected by procedural matters.62
To recapitulate, the issues that will be ruled upon shortly are:
(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED,
DOES THE PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT
HAS NO JURISDICTION?
(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES
CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE
PHILIPPINE CONSTITUTION?
(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR
IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY CONGRESS?
(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF
JUDICIAL POWER BY THIS COURT IN PROMULGATING RULES ON EVIDENCE?
(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS
ANNEXES SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE
THE FINAL ACT, MINISTERIAL DECLARATIONS AND DECISIONS, AND THE
UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES?

Constitution is upheld.63 Once a controversy as to the application or interpretation of a

constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue
which the Court is bound by constitutional mandate to decide. 64
The jurisdiction of this Court to adjudicate the matters 65 raised in the petition is clearly set
out in the 1987 Constitution,66 as follows:
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or instrumentality of the government.
The foregoing text emphasizes the judicial departments duty and power to strike down grave
abuse of discretion on the part of any branch or instrumentality of government including
Congress. It is an innovation in our political law. 67 As explained by former Chief Justice Roberto
Concepcion,68 the judiciary is the final arbiter on the question of whether or not a branch of
government or any of its officials has acted without jurisdiction or in excess of jurisdiction or so
capriciously as to constitute an abuse of discretion amounting to excess of jurisdiction. This is not
only a judicial power but a duty to pass judgment on matters of this nature.
As this Court has repeatedly and firmly emphasized in many cases, 69 it will not shirk, digress
from or abandon its sacred duty and authority to uphold the Constitution in matters that involve
grave abuse of discretion brought before it in appropriate cases, committed by any officer,
agency, instrumentality or department of the government.
As the petition alleges grave abuse of discretion and as there is no other plain, speedy or
adequate remedy in the ordinary course of law, we have no hesitation at all in holding that this
petition should be given due course and the vital questions raised therein ruled upon under Rule
65 of the Rules of Court. Indeed, certiorari, prohibition and mandamus are appropriate remedies
to raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative
and executive officials. On this, we have no equivocation.
We should stress that, in deciding to take jurisdiction over this petition, this Court will not
review the wisdom of the decision of the President and the Senate in enlisting the country into the
WTO, or pass upon the merits of trade liberalization as a policy espoused by said international
body. Neither will it rule on the propriety of the governments economic policy of
reducing/removing tariffs, taxes, subsidies, quantitative restrictions, and other import/trade
barriers. Rather, it will only exercise its constitutional duty to determine whether or not there had
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the
Senate in ratifying the WTO Agreement and its three annexes.

Second Issue: The WTO Agreement and Economic Nationalism

The First Issue: Does the Court Have Jurisdiction Over the Controversy?

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of the
legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the
right but in fact the duty of the judiciary to settle the dispute. The question thus posed is judicial
rather than political. The duty (to adjudicate) remains to assure that the supremacy of the

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This is the lis mota, the main issue, raised by the petition.
Petitioners vigorously argue that the letter, spirit and intent of the Constitution mandating
economic nationalism are violated by the so-called parity provisions and national treatment
clauses scattered in various parts not only of the WTO Agreement and its annexes but also in the
Ministerial Decisions and Declarations and in the Understanding on Commitments in Financial
Services.

Specifically, the flagship constitutional provisions referred to are Sec. 19, Article II, and Secs.
10 and 12, Article XII, of the Constitution, which are worded as follows:
Article II
DECLARATION OF PRINCIPLES AND STATE POLICIES
xx

xx

xx

xx

Sec. 19. The State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos.
xx

xx

xx

(b) that an enterprises purchases or use of imported products be limited to an

amount related to the volume or value of local products that it exports.

xx

2. TRIMS that are inconsistent with the obligations of general elimination of quantitative
restrictions provided for in paragraph 1 of Article XI of GATT 1994 include those
which are mandatory or enforceable under domestic laws or under administrative
rulings, or compliance with which is necessary to obtain an advantage, and which
restrict:

NATIONAL ECONOMY AND PATRIMONY

xx

xx

(a) the purchase or use by an enterprise of products of domestic origin or

from any domestic source, whether specified in terms of particular
products, in terms of volume or value of products, or in terms of
proportion of volume or value of its local production; or

xx

Article XII

xx

1. TRIMS that are inconsistent with the obligation of national treatment provided for in
paragraph 4 of Article III of GATT 1994 include those which are mandatory or
enforceable under domestic law or under administrative rulings, or compliance with
which is necessary to obtain an advantage, and which require:

Sec. 10. x x x. The Congress shall enact measures that will encourage the
formation and operation of enterprises whose capital is wholly owned by Filipinos.

(a) the importation by an enterprise of products used in or related to the local

production that it exports;

In the grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos.

(b) the importation by an enterprise of products used in or related to its local

production by restricting its access to foreign exchange inflows
attributable to the enterprise; or

xx

xx

xx

xx

Sec. 12. The State shall promote the preferential use of Filipino labor, domestic
materials and locally produced goods, and adopt measures that help make them
competitive.
Petitioners aver that these sacred constitutional principles are desecrated by the following
WTO provisions quoted in their memorandum: 70
a) In the area of investment measures related to trade in goods (TRIMS, for
brevity):
Article 2
National Treatment and Quantitative Restrictions.
1. Without prejudice to other rights and obligations under GATT 1994. no
Member shall apply any TRIM that is inconsistent with the provisions of
Article III or Article XI of GATT 1994.
2. An Illustrative list of TRIMS that are inconsistent with the obligations of
general elimination of quantitative restrictions provided for in paragraph I
of Article XI of GATT 1994 is contained in the Annex to this Agreement.
(Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay
Round, Legal Instruments, p.22121, emphasis supplied).
The Annex referred to reads as follows:
ANNEX
Illustrative List

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(c) the exportation or sale for export specified in terms of particular products,
in terms of volume or value of products, or in terms of a preparation of
volume or value of its local production. (Annex to the Agreement on TradeRelated Investment Measures, Vol. 27, Uruguay Round Legal Documents,
p.22125, emphasis supplied).
The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:
The products of the territory of any contracting party imported into the
territory of any other contracting party shall be accorded treatment no
less favorable than that accorded to like products of national origin
in respect of laws, regulations and requirements affecting their internal sale,
offering for sale, purchase, transportation, distribution or use. the provisions
of this paragraph shall not prevent the application of differential internal
transportation charges which are based exclusively on the economic
operation of the means of transport and not on the nationality of the product.
(Article III, GATT 1947, as amended by the Protocol Modifying Part II, and
Article XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in relation to
paragraph 1(a) of the General Agreement on Tariffs and Trade 1994, Vol. 1,
Uruguay Round, Legal Instruments p.177, emphasis supplied).
b) In the area of trade related aspects of intellectual property rights (TRIPS, for
brevity):
Each Member shall accord to the nationals of other Members
treatment no less favourable than that it accords to its own
nationals with regard to the protection of intellectual property... (par. 1,
Article 3, Agreement on Trade-Related Aspect of Intellectual Property rights,
Vol. 31, Uruguay Round, Legal Instruments, p.25432 (emphasis supplied)

(c) In the area of the General Agreement on Trade in Services:

National Treatment
1. In the sectors inscribed in its schedule, and subject to any conditions and
qualifications set out therein, each Member shall accord to services and
service suppliers of any other Member, in respect of all measures affecting
the supply of services, treatment no less favourable than it accords
to its own like services and service suppliers.
2. A Member may meet the requirement of paragraph I by according to
services and service suppliers of any other Member, either formally
identical treatment or formally different treatment to that it accords to its
own like services and service suppliers.
3. Formally identical or formally different treatment shall be considered to be
less favourable if it modifies the conditions of completion in favour of
services or service suppliers of the Member compared to like services or
service suppliers of any other Member. (Article XVII, General Agreement on
Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p.22610
emphasis supplied).
It is petitioners position that the foregoing national treatment and parity provisions of the
WTO Agreement place nationals and products of member countries on the same footing as
Filipinos and local products, in contravention of the Filipino First policy of the Constitution. They
allegedly render meaningless the phrase effectively controlled by Filipinos. The constitutional
conflict becomes more manifest when viewed in the context of the clear duty imposed on the
Philippines as a WTO member to ensure the conformity of its laws, regulations and administrative
procedures with its obligations as provided in the annexed agreements. 71 Petitioners further argue
that these provisions contravene constitutional limitations on the role exports play in national
development and negate the preferential treatment accorded to Filipino labor, domestic materials
and locally produced goods.
On the other hand, respondents through the Solicitor General counter (1) that such Charter
provisions are not self-executing and merely set out general policies; (2) that these nationalistic
portions of the Constitution invoked by petitioners should not be read in isolation but should be
related to other relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that read
properly, the cited WTO clauses do not conflict with the Constitution; and (4) that the WTO
Agreement contains sufficient provisions to protect developing countries like the Philippines from
the harshness of sudden trade liberalization.
We shall now discuss and rule on these arguments.

Declaration of Principles Not Self-Executing

By its very title, Article II of the Constitution is a declaration of principles and state policies.
The counterpart of this article in the 1935 Constitution 72 is called the basic political creed of the
nation by Dean Vicente Sinco. 73 These principles in Article II are not intended to be self-executing
principles ready for enforcement through the courts. 74 They are used by the judiciary as aids or as
guides in the exercise of its power of judicial review, and by the legislature in its enactment of
laws. As held in the leading case of Kilosbayan, Incorporated vs. Morato, 75 the principles and state

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policies enumerated in Article II and some sections of Article XII are not self-executing provisions,
the disregard of which can give rise to a cause of action in the courts. They do not embody
judicially enforceable constitutional rights but guidelines for legislation.
In the same light, we held in Basco vs. Pagcor76 that broad constitutional principles need
legislative enactments to implement them, thus:
On petitioners allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12
(Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and
Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it to state
also that these are merely statements of principles and policies. As such, they are
basically not self-executing, meaning a law should be passed by Congress to clearly
define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be selfexecuting principles ready for enforcement through the courts. They were
rather directives addressed to the executive and to the legislature. If the
executive and the legislature failed to heed the directives of the article, the
available remedy was not judicial but political. The electorate could express
their displeasure with the failure of the executive and the legislature through
the language of the ballot. (Bernas, Vol. II, p. 2).
The reasons for denying a cause of action to an alleged infringement of broad constitutional
principles are sourced from basic considerations of due process and the lack of judicial authority
to wade into the uncharted ocean of social and economic policy making. Mr. Justice Florentino P.
Feliciano in his concurring opinion in Oposa vs. Factoran, Jr.,77 explained these reasons as follows:
My suggestion is simply that petitioners must, before the trial court, show a more
specific legal right -- a right cast in language of a significantly lower order of generality
than Article II (15) of the Constitution -- that is or may be violated by the actions, or
failures to act, imputed to the public respondent by petitioners so that the trial court
can validly render judgment granting all or part of the relief prayed for. To my mind, the
court should be understood as simply saying that such a more specific legal right or
rights may well exist in our corpus of law, considering the general policy principles
found in the Constitution and the existence of the Philippine Environment Code, and
that the trial court should have given petitioners an effective opportunity so to
demonstrate, instead of aborting the proceedings on a motion to dismiss.
It seems to me important that the legal right which is an essential component of a
cause of action be a specific, operable legal right, rather than a constitutional or
statutory policy, for at least two (2) reasons. One is that unless the legal right claimed
to have been violated or disregarded is given specification in operational terms,
defendants may well be unable to defend themselves intelligently and effectively; in
other words, there are due process dimensions to this matter.
The second is a broader-gauge consideration -- where a specific violation of law or
applicable regulation is not alleged or proved, petitioners can be expected to fall back
on the expanded conception of judicial power in the second paragraph of Section 1 of
Article VIII of the Constitution which reads:
Section 1.

xxx

Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable,

and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Emphases supplied)
When substantive standards as general as the right to a balanced and healthy
ecology and the right to health are combined with remedial standards as broad ranging
as a grave abuse of discretion amounting to lack or excess of jurisdiction, the result will
be, it is respectfully submitted, to propel courts into the uncharted ocean of social and
economic policy making. At least in respect of the vast area of environmental protection
and management, our courts have no claim to special technical competence and
experience and professional qualification. Where no specific, operable norms and
standards are shown to exist, then the policy making departments -- the legislative and
executive departments -- must be given a real and effective opportunity to fashion and
promulgate those norms and standards, and to implement them before the courts
should intervene.

Economic Nationalism Should Be Read with Other Constitutional Mandates to Attain

Balanced Development of Economy

On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general
principles relating to the national economy and patrimony, should be read and understood in
relation to the other sections in said article, especially Secs. 1 and 13 thereof which read:
Section 1. The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the
underprivileged.
The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full and
efficient use of human and natural resources, and which are competitive in both
domestic and foreign markets. However, the State shall protect Filipino enterprises
against unfair foreign competition and trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. x x x
xxx

x x xx x x

Sec. 13. The State shall pursue a trade policy that serves the general welfare and
utilizes all forms and arrangements of exchange on the basis of equality and reciprocity.
As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national
economic development, as follows:
1. A more equitable distribution of opportunities, income and wealth;
2. A sustained increase in the amount of goods and services provided by the nation for the
benefit of the people; and
3. An expanding productivity as the key to raising the quality of life for all especially the

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underprivileged.
With these goals in context, the Constitution then ordains the ideals of economic nationalism
(1) by expressing preference in favor of qualified Filipinos in the grant of rights, privileges and
concessions covering the national economy and patrimony 78 and in the use of Filipino labor,
domestic materials and locally-produced goods; (2) by mandating the State to adopt measures
that help make them competitive; 79 and (3) by requiring the State to develop a self-reliant and
independent national economy effectively controlled by Filipinos. 80 In similar language, the
Constitution takes into account the realities of the outside world as it requires the pursuit of a
trade policy that serves the general welfare and utilizes all forms and arrangements of exchange
on the basis of equality and reciprocity; 81 and speaks of industries which are competitive in both
domestic and foreign markets as well as of the protection of Filipino enterprises against unfair
foreign competition and trade practices.
It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance
System, et al.,82 this Court held that Sec. 10, second par., Art. XII of the 1987 Constitution is a
mandatory, positive command which is complete in itself and which needs no further guidelines or
implementing laws or rules for its enforcement. From its very words the provision does not require
any legislation to put it in operation. It is per se judicially enforceable. However, as the
constitutional provision itself states, it is enforceable only in regard to the grants of rights,
privileges and concessions covering national economy and patrimony and not to every aspect of
trade and commerce. It refers to exceptions rather than the rule. The issue here is not whether
this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a rule,
there are enough balancing provisions in the Constitution to allow the Senate to ratify the
Philippine concurrence in the WTO Agreement. And we hold that there are.
All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services,
labor and enterprises, at the same time, it recognizes the need for business exchange with the
rest of the world on the bases of equality and reciprocity and limits protection of Filipino
enterprises only against foreign competition and trade practices that are unfair. 83 In other words,
the Constitution did not intend to pursue an isolationist policy. It did not shut out foreign
investments, goods and services in the development of the Philippine economy. While the
Constitution does not encourage the unlimited entry of foreign goods, services and investments
into the country, it does not prohibit them either. In fact, it allows an exchange on the basis of
equality and reciprocity, frowning only on foreign competition that is unfair.

WTO Recognizes Need to Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some built-in advantages
to protect weak and developing economies, which comprise the vast majority of its members.
Unlike in the UN where major states have permanent seats and veto powers in the Security
Council, in the WTO, decisions are made on the basis of sovereign equality, with each members
vote equal in weight to that of any other. There is no WTO equivalent of the UN Security Council.
WTO decides by consensus whenever possible, otherwise, decisions of the
Ministerial Conference and the General Council shall be taken by the majority of the
votes cast, except in cases of interpretation of the Agreement or waiver of the
obligation of a member which would require three fourths vote. Amendments would
require two thirds vote in general. Amendments to MFN provisions and the Amendments
provision will require assent of all members. Any member may withdraw from the

Agreement upon the expiration of six months from the date of notice of withdrawals. 84
Hence, poor countries can protect their common interests more effectively through the WTO
than through one-on-one negotiations with developed countries. Within the WTO, developing
countries can form powerful blocs to push their economic agenda more decisively than outside
the Organization. This is not merely a matter of practical alliances but a negotiating strategy
rooted in law. Thus, the basic principles underlying the WTO Agreement recognize the need of
developing countries like the Philippines to share in the growth in international trade
commensurate with the needs of their economic development. These basic principles are found in
the preamble85 of the WTO Agreement as follows:
The Parties to this Agreement,
Recognizing that their relations in the field of trade and economic endeavour
should be conducted with a view to raising standards of living, ensuring full
employment and a large and steadily growing volume of real income and effective
demand, and expanding the production of and trade in goods and services, while
allowing for the optimal use of the worlds resources in accordance with the objective of
sustainable development, seeking both to protect and preserve the environment and to
enhance the means for doing so in a manner consistent with their respective needs and
concerns at different levels of economic development,
Recognizing further that there is need for positive efforts designed to ensure that
developing countries, and especially the least developed among them, secure a share in
the growth in international trade commensurate with the needs of their economic
development,
Being desirous of contributing to these objectives by entering into reciprocal and
mutually advantageous arrangements directed to the substantial reduction of tariffs and
other barriers to trade and to the elimination of discriminatory treatment in
international trade relations,
Resolved, therefore, to develop an integrated, more viable and durable multilateral
trading system encompassing the General Agreement on Tariffs and Trade, the results of
past trade liberalization efforts, and all of the results of the Uruguay Round of
Multilateral Trade Negotiations,
Determined to preserve the basic principles and to further the objectives
underlying this multilateral trading system, x x x. (underscoring supplied.)

Specific WTO Provisos Protect Developing Countries

So too, the Solicitor General points out that pursuant to and consistent with the foregoing
basic principles, the WTO Agreement grants developing countries a more lenient treatment, giving
their domestic industries some protection from the rush of foreign competition. Thus, with respect
to tariffs in general, preferential treatment is given to developing countries in terms of the amount
of tariff reduction and the period within which the reduction is to be spread out. Specifically, GATT
requires an average tariff reduction rate of 36% for developed countries to be effected within a
period of six (6) years while developing countries -- including the Philippines -- are required to
effect an average tariff reduction of only 24% within ten (10) years.

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In respect to domestic subsidy, GATT requires developed countries to reduce domestic

support to agricultural products by 20% over six (6) years, as compared to only 13% for
developing countries to be effected within ten (10) years.
In regard to export subsidy for agricultural products, GATT requires developed countries to
reduce their budgetary outlays for export subsidy by 36% and export volumes receiving export
subsidy by 21% within a period of six (6) years. For developing countries, however, the reduction
rate is only two-thirds of that prescribed for developed countries and a longer period of ten (10)
years within which to effect such reduction.
Moreover, GATT itself has provided built-in protection from unfair foreign competition and
trade practices including anti-dumping measures, countervailing measures and safeguards
against import surges. Where local businesses are jeopardized by unfair foreign competition, the
Philippines can avail of these measures. There is hardly therefore any basis for the statement that
under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be
deprived of control of the economy. Quite the contrary, the weaker situations of developing
nations like the Philippines have been taken into account; thus, there would be no basis to say
that in joining the WTO, the respondents have gravely abused their discretion. True, they have
made a bold decision to steer the ship of state into the yet uncharted sea of economic
liberalization. But such decision cannot be set aside on the ground of grave abuse of discretion,
simply because we disagree with it or simply because we believe only in other economic policies.
As earlier stated, the Court in taking jurisdiction of this case will not pass upon the advantages
and disadvantages of trade liberalization as an economic policy. It will only perform its
constitutional duty of determining whether the Senate committed grave abuse of discretion.

Constitution Does Not Rule Out Foreign Competition

Furthermore, the constitutional policy of a self-reliant and independent national economy 86

does not necessarily rule out the entry of foreign investments, goods and services. It
contemplates neither economic seclusion nor mendicancy in the international community. As
explained by Constitutional Commissioner Bernardo Villegas, sponsor of this constitutional policy:
Economic self-reliance is a primary objective of a developing country that is keenly
aware of overdependence on external assistance for even its most basic needs. It does
not mean autarky or economic seclusion; rather, it means avoiding mendicancy in the
international community. Independence refers to the freedom from undue foreign
control of the national economy, especially in such strategic industries as in the
development of natural resources and public utilities. 87
The WTO reliance on most favored nation, national treatment, and trade without
discrimination cannot be struck down as unconstitutional as in fact they are rules of equality and
reciprocity that apply to all WTO members. Aside from envisioning a trade policy based on
equality and reciprocity, 88 the fundamental law encourages industries that are competitive in both
domestic and foreign markets, thereby demonstrating a clear policy against a sheltered domestic
trade environment, but one in favor of the gradual development of robust industries that can
compete with the best in the foreign markets. Indeed, Filipino managers and Filipino enterprises
have shown capability and tenacity to compete internationally. And given a free trade
environment, Filipino entrepreneurs and managers in Hongkong have demonstrated the Filipino
capacity to grow and to prosper against the best offered under a policy of laissez faire.

Constitution Favors Consumers, Not Industries or Enterprises

The Constitution has not really shown any unbalanced bias in favor of any business or
enterprise, nor does it contain any specific pronouncement that Filipino companies should be
pampered with a total proscription of foreign competition. On the other hand, respondents claim
that WTO/GATT aims to make available to the Filipino consumer the best goods and services
obtainable anywhere in the world at the most reasonable prices. Consequently, the question boils
down to whether WTO/GATT will favor the general welfare of the public at large.
Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality?
Will WTO/GATT succeed in promoting the Filipinos general welfare because it will -- as
promised by its promoters -- expand the countrys exports and generate more employment?

Third Issue: The WTO Agreement and Legislative Power

The WTO Agreement provides that (e)ach Member shall ensure the conformity of its laws,
regulations and administrative procedures with its obligations as provided in the annexed
Agreements.90 Petitioners maintain that this undertaking unduly limits, restricts and impairs
Philippine sovereignty, specifically the legislative power which under Sec. 2, Article VI of the 1987
Philippine Constitution is vested in the Congress of the Philippines. It is an assault on the
sovereign powers of the Philippines because this means that Congress could not pass legislation
that will be good for our national interest and general welfare if such legislation will not conform
with the WTO Agreement, which not only relates to the trade in goods x x x but also to the flow of
investments and money x x x as well as to a whole slew of agreements on socio-cultural matters x
x x.91

The responses to these questions involve judgment calls by our policy makers, for which they
are answerable to our people during appropriate electoral exercises. Such questions and the
answers thereto are not subject to judicial pronouncements based on grave abuse of discretion.

More specifically, petitioners claim that said WTO proviso derogates from the power to tax,
which is lodged in the Congress. 92 And while the Constitution allows Congress to authorize the
President to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other
duties or imposts, such authority is subject to specified limits and x x x such limitations and
restrictions as Congress may provide, 93 as in fact it did under Sec. 401 of the Tariff and Customs
Code.

Constitution Designed to Meet Future Events and Contingencies

Sovereignty Limited by International Law and Treaties

No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted
and ratified in 1987. That does not mean however that the Charter is necessarily flawed in the
sense that its framers might not have anticipated the advent of a borderless world of business. By
the same token, the United Nations was not yet in existence when the 1935 Constitution became
effective. Did that necessarily mean that the then Constitution might not have contemplated a
diminution of the absoluteness of sovereignty when the Philippines signed the UN Charter,
thereby effectively surrendering part of its control over its foreign relations to the decisions of
various UN organs like the Security Council?

This Court notes and appreciates the ferocity and passion by which petitioners stressed their
arguments on this issue. However, while sovereignty has traditionally been deemed absolute and
all-encompassing on the domestic level, it is however subject to restrictions and limitations
voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of
nations. Unquestionably, the Constitution did not envision a hermit-type isolation of the country
from the rest of the world. In its Declaration of Principles and State Policies, the Constitution
adopts the generally accepted principles of international law as part of the law of the land, and
adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all
nations."94 By the doctrine of incorporation, the country is bound by generally accepted principles
of international law, which are considered to be automatically part of our own laws. 95 One of the
oldest and most fundamental rules in international law is pacta sunt servanda -- international
agreements must be performed in good faith. A treaty engagement is not a mere moral obligation
but creates a legally binding obligation on the parties x x x. A state which has contracted valid
international obligations is bound to make in its legislations such modifications as may be
necessary to ensure the fulfillment of the obligations undertaken. 96

Will it bring more prosperity, employment, purchasing power and quality products at the
most reasonable rates to the Filipino public?

It is not difficult to answer this question. Constitutions are designed to meet not only the
vagaries of contemporary events. They should be interpreted to cover even future and unknown
circumstances. It is to the credit of its drafters that a Constitution can withstand the assaults of
bigots and infidels but at the same time bend with the refreshing winds of change necessitated by
unfolding events. As one eminent political law writer and respected jurist 89 explains:
The Constitution must be quintessential rather than superficial, the root and not
the blossom, the base and framework only of the edifice that is yet to rise. It is but the
core of the dream that must take shape, not in a twinkling by mandate of our delegates,
but slowly in the crucible of Filipino minds and hearts, where it will in time develop its
sinews and gradually gather its strength and finally achieve its substance. In fine, the
Constitution cannot, like the goddess Athena, rise full-grown from the brow of the
Constitutional Convention, nor can it conjure by mere fiat an instant Utopia. It must
grow with the society it seeks to re-structure and march apace with the progress of the
race, drawing from the vicissitudes of history the dynamism and vitality that will keep it,
far from becoming a petrified rule, a pulsing, living law attuned to the heartbeat of the
nation.

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By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By
their voluntary act, nations may surrender some aspects of their state power in exchange for
greater benefits granted by or derived from a convention or pact. After all, states, like individuals,
live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also
commonly agree to limit the exercise of their otherwise absolute rights. Thus, treaties have been
used to record agreements between States concerning such widely diverse matters as, for
example, the lease of naval bases, the sale or cession of territory, the termination of war, the
regulation of conduct of hostilities, the formation of alliances, the regulation of commercial
relations, the settling of claims, the laying down of rules governing conduct in peace and the
establishment of international organizations.97 The sovereignty of a state therefore cannot in fact

and in reality be considered absolute. Certain restrictions enter into the picture: (1) limitations
imposed by the very nature of membership in the family of nations and (2) limitations imposed by
treaty stipulations. As aptly put by John F. Kennedy, Today, no nation can build its destiny alone.
The age of self-sufficient nationalism is over. The age of interdependence is here. 98

UN Charter and Other Treaties Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter members, it
consented to restrict its sovereign rights under the concept of sovereignty as auto-limitation. 47-A
Under Article 2 of the UN Charter, (a)ll members shall give the United Nations every assistance in
any action it takes in accordance with the present Charter, and shall refrain from giving assistance
to any state against which the United Nations is taking preventive or enforcement action. Such
assistance includes payment of its corresponding share not merely in administrative expenses but
also in expenditures for the peace-keeping operations of the organization. In its advisory opinion
of July 20, 1961, the International Court of Justice held that money used by the United Nations
Emergency Force in the Middle East and in the Congo were expenses of the United Nations under
Article 17, paragraph 2, of the UN Charter. Hence, all its members must bear their corresponding
share in such expenses. In this sense, the Philippine Congress is restricted in its power to
appropriate. It is compelled to appropriate funds whether it agrees with such peace-keeping
expenses or not. So too, under Article 105 of the said Charter, the UN and its representatives
enjoy diplomatic privileges and immunities, thereby limiting again the exercise of sovereignty of
members within their own territory. Another example: although sovereign equality and domestic
jurisdiction of all members are set forth as underlying principles in the UN Charter, such provisos
are however subject to enforcement measures decided by the Security Council for the
maintenance of international peace and security under Chapter VII of the Charter. A final example:
under Article 103, (i)n the event of a conflict between the obligations of the Members of the
United Nations under the present Charter and their obligations under any other international
agreement, their obligation under the present charter shall prevail, thus unquestionably denying
the Philippines -- as a member -- the sovereign power to make a choice as to which of conflicting
obligations, if any, to honor.
Apart from the UN Treaty, the Philippines has entered into many other international pacts -both bilateral and multilateral -- that involve limitations on Philippine sovereignty. These are
enumerated by the Solicitor General in his Compliance dated October 24, 1996, as follows:
(a) Bilateral convention with the United States regarding taxes on income, where the
Philippines agreed, among others, to exempt from tax, income received in the
Philippines by, among others, the Federal Reserve Bank of the United States, the
Export/Import Bank of the United States, the Overseas Private Investment
Corporation of the United States. Likewise, in said convention, wages, salaries and
similar remunerations paid by the United States to its citizens for labor and
personal services performed by them as employees or officials of the United
States are exempt from income tax by the Philippines.
(b) Bilateral agreement with Belgium, providing, among others, for the avoidance of
double taxation with respect to taxes on income.
(c) Bilateral convention with the Kingdom of Sweden for the avoidance of double
taxation.

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(d) Bilateral convention with the French Republic for the avoidance of double taxation.
(e) Bilateral air transport agreement with Korea where the Philippines agreed to exempt
from all customs duties, inspection fees and other duties or taxes aircrafts of South
Korea and the regular equipment, spare parts and supplies arriving with said
aircrafts.
(f) Bilateral air service agreement with Japan, where the Philippines agreed to exempt
from customs duties, excise taxes, inspection fees and other similar duties, taxes or
charges fuel, lubricating oils, spare parts, regular equipment, stores on board
Japanese aircrafts while on Philippine soil.
(g) Bilateral air service agreement with Belgium where the Philippines granted Belgian
air carriers the same privileges as those granted to Japanese and Korean air carriers
under separate air service agreements.
(h) Bilateral notes with Israel for the abolition of transit and visitor visas where the
Philippines exempted Israeli nationals from the requirement of obtaining transit or
visitor visas for a sojourn in the Philippines not exceeding 59 days.
(I) Bilateral agreement with France exempting French nationals from the requirement of
obtaining transit and visitor visa for a sojourn not exceeding 59 days.
(j) Multilateral Convention on Special Missions, where the Philippines agreed that
premises of Special Missions in the Philippines are inviolable and its agents can not
enter said premises without consent of the Head of Mission concerned. Special
Missions are also exempted from customs duties, taxes and related charges.
(k) Multilateral Convention on the Law of Treaties. In this convention, the Philippines
agreed to be governed by the Vienna Convention on the Law of Treaties.
(l) Declaration of the President of the Philippines accepting compulsory jurisdiction of
the International Court of Justice. The International Court of Justice has jurisdiction
in all legal disputes concerning the interpretation of a treaty, any question of
international law, the existence of any fact which, if established, would constitute a
breach of international obligation.
In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its
sovereign powers of taxation, eminent domain and police power. The underlying consideration in
this partial surrender of sovereignty is the reciprocal commitment of the other contracting states
in granting the same privilege and immunities to the Philippines, its officials and its citizens. The
same reciprocity characterizes the Philippine commitments under WTO-GATT.
International treaties, whether relating to nuclear disarmament, human rights, the
environment, the law of the sea, or trade, constrain domestic political sovereignty
through the assumption of external obligations. But unless anarchy in international
relations is preferred as an alternative, in most cases we accept that the benefits of the
reciprocal obligations involved outweigh the costs associated with any loss of political
sovereignty. (T)rade treaties that structure relations by reference to durable, welldefined substantive norms and objective dispute resolution procedures reduce the risks
of larger countries exploiting raw economic power to bully smaller countries, by
subjecting power relations to some form of legal ordering. In addition, smaller countries
typically stand to gain disproportionately from trade liberalization. This is due to the
simple fact that liberalization will provide access to a larger set of potential new trading
relationship than in case of the larger country gaining enhanced success to the smaller

countrys market.99

show that his product was produced without the use of the patented process.

The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived
without violating the Constitution, based on the rationale that the Philippines adopts the generally
accepted principles of international law as part of the law of the land and adheres to the policy of
x x x cooperation and amity with all nations.

The foregoing notwithstanding, the patent owner still has the burden of proof since,
regardless of the presumption provided under paragraph 1 of Article 34, such owner still has to
introduce evidence of the existence of the alleged identical product, the fact that it is identical to
the genuine one produced by the patented process and the fact of newness of the genuine
product or the fact of substantial likelihood that the identical product was made by the patented
process.

Fourth Issue: The WTO Agreement and Judicial Power

The foregoing should really present no problem in changing the rules of evidence as the
present law on the subject, Republic Act No. 165, as amended, otherwise known as the Patent
Law, provides a similar presumption in cases of infringement of patented design or utility model,
thus:

Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic Principles of
the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 100 intrudes on the
power of the Supreme Court to promulgate rules concerning pleading, practice and procedures. 101
To understand the scope and meaning of Article 34, TRIPS, 102 it will be fruitful to restate its
full text as follows:
Article 34
Process Patents: Burden of Proof
1. For the purposes of civil proceedings in respect of the infringement of the rights of
the owner referred to in paragraph 1(b) of Article 28, if the subject matter of a patent is
a process for obtaining a product, the judicial authorities shall have the authority to
order the defendant to prove that the process to obtain an identical product is different
from the patented process. Therefore, Members shall provide, in at least one of the
following circumstances, that any identical product when produced without the consent
of the patent owner shall, in the absence of proof to the contrary, be deemed to have
been obtained by the patented process:
(a) if the product obtained by the patented process is new;
(b) if there is a substantial likelihood that the identical product was made by
the process and the owner of the patent has been unable through
reasonable efforts to determine the process actually used.
2. Any Member shall be free to provide that the burden of proof indicated in paragraph
1 shall be on the alleged infringer only if the condition referred to in subparagraph (a) is
fulfilled or only if the condition referred to in subparagraph (b) is fulfilled.
3. In the adduction of proof to the contrary, the legitimate interests of defendants in
protecting their manufacturing and business secrets shall be taken into account.
From the above, a WTO Member is required to provide a rule of disputable (note the words in
the absence of proof to the contrary) presumption that a product shown to be identical to one
produced with the use of a patented process shall be deemed to have been obtained by the
(illegal) use of the said patented process, (1) where such product obtained by the patented
product is new, or (2) where there is substantial likelihood that the identical product was made
with the use of the said patented process but the owner of the patent could not determine the
exact process used in obtaining such identical product. Hence, the burden of proof contemplated
by Article 34 should actually be understood as the duty of the alleged patent infringer to
overthrow such presumption. Such burden, properly understood, actually refers to the burden of
evidence (burden of going forward) placed on the producer of the identical (or fake) product to

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SEC. 60. Infringement. - Infringement of a design patent or of a patent for utility

model shall consist in unauthorized copying of the patented design or utility model for
the purpose of trade or industry in the article or product and in the making, using or
selling of the article or product copying the patented design or utility model. Identity or
substantial identity with the patented design or utility model shall constitute evidence
of copying. (underscoring supplied)
Moreover, it should be noted that the requirement of Article 34 to provide a disputable
presumption applies only if (1) the product obtained by the patented process is NEW or (2) there
is a substantial likelihood that the identical product was made by the process and the process
owner has not been able through reasonable effort to determine the process used. Where either of
these two provisos does not obtain, members shall be free to determine the appropriate method
of implementing the provisions of TRIPS within their own internal systems and processes.
By and large, the arguments adduced in connection with our disposition of the third issue -derogation of legislative power - will apply to this fourth issue also. Suffice it to say that the
reciprocity clause more than justifies such intrusion, if any actually exists. Besides, Article 34 does
not contain an unreasonable burden, consistent as it is with due process and the concept of
adversarial dispute settlement inherent in our judicial system.
So too, since the Philippine is a signatory to most international conventions on patents,
trademarks and copyrights, the adjustment in legislation and rules of procedure will not be
substantial.103

Fifth Issue: Concurrence Only in the WTO Agreement and Not in Other Documents
Contained in the Final Act

Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes -- but
not in the other documents referred to in the Final Act, namely the Ministerial Declaration and
Decisions and the Understanding on Commitments in Financial Services -- is defective and
insufficient and thus constitutes abuse of discretion. They submit that such concurrence in the
WTO Agreement alone is flawed because it is in effect a rejection of the Final Act, which in turn
was the document signed by Secretary Navarro, in representation of the Republic upon authority
of the President. They contend that the second letter of the President to the Senate 104 which
enumerated what constitutes the Final Act should have been the subject of concurrence of the
Senate.

A final act, sometimes called protocol de clture, is an instrument which records the
winding up of the proceedings of a diplomatic conference and usually includes a reproduction of
the texts of treaties, conventions, recommendations and other acts agreed upon and signed by
the plenipotentiaries attending the conference. 105 It is not the treaty itself. It is rather a summary
of the proceedings of a protracted conference which may have taken place over several years.
The text of the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade
Negotiations is contained in just one page 106 in Vol. I of the 36-volume Uruguay Round of
Multilateral Trade Negotiations. By signing said Final Act, Secretary Navarro as representative of
the Republic of the Philippines undertook:
"(a) to submit, as appropriate, the WTO Agreement for the consideration of their
respective competent authorities with a view to seeking approval of the Agreement
in accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions."
The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act
required from its signatories, namely, concurrence of the Senate in the WTO Agreement.
The Ministerial Declarations and Decisions were deemed adopted without need for
ratification. They were approved by the ministers by virtue of Article XXV: 1 of GATT which
provides that representatives of the members can meet to give effect to those provisions of this
Agreement which invoke joint action, and generally with a view to facilitating the operation and
furthering the objectives of this Agreement. 107
The Understanding on Commitments in Financial Services also approved in Marrakesh does
not apply to the Philippines. It applies only to those 27 Members which have indicated in their
respective schedules of commitments on standstill, elimination of monopoly, expansion of
operation of existing financial service suppliers, temporary entry of personnel, free transfer and
processing of information, and national treatment with respect to access to payment, clearing
systems and refinancing available in the normal course of business. 108
On the other hand, the WTO Agreement itself expresses what multilateral agreements are
deemed included as its integral parts,109 as follows:
Article II
Scope of the WTO
1. The WTO shall provide the common institutional framework for the conduct of trade
relations among its Members in matters to the agreements and associated legal
instruments included in the Annexes to this Agreement.
2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3
(hereinafter referred to as Multilateral Agreements) are integral parts of this Agreement,
binding on all Members.
3. The Agreements and associated legal instruments included in Annex 4 (hereinafter
referred to as Plurilateral Trade Agreements) are also part of this Agreement for those
Members that have accepted them, and are binding on those Members. The Plurilateral
Trade Agreements do not create either obligation or rights for Members that have not
accepted them.
4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A
(hereinafter referred to as GATT 1994) is legally distinct from the General Agreement on

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Tariffs and Trade, dated 30 October 1947, annexed to the Final Act adopted at the
conclusion of the Second Session of the Preparatory Committee of the United Nations
Conference on Trade and Employment, as subsequently rectified, amended or modified
(hereinafter referred to as GATT 1947).
It should be added that the Senate was well-aware of what it was concurring in as shown by
the members deliberation on August 25, 1994. After reading the letter of President Ramos dated
August 11, 1994,110 the senators of the Republic minutely dissected what the Senate was
concurring in, as follows: 111
THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up
in the first day hearing of this Committee yesterday. Was the observation made by
Senator Taada that what was submitted to the Senate was not the agreement on
establishing the World Trade Organization by the final act of the Uruguay Round which is
not the same as the agreement establishing the World Trade Organization? And on that
basis, Senator Tolentino raised a point of order which, however, he agreed to withdraw
upon understanding that his suggestion for an alternative solution at that time was
acceptable. That suggestion was to treat the proceedings of the Committee as being in
the nature of briefings for Senators until the question of the submission could be
clarified.
And so, Secretary Romulo, in effect, is the President submitting a new... is he
making a new submission which improves on the clarity of the first submission?
MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be
no misunderstanding, it was his intention to clarify all matters by giving this letter.
THE CHAIRMAN: Thank you.
Can this Committee hear from Senator Taada and later on Senator Tolentino since
they were the ones that raised this question yesterday?
Senator Taada, please.
SEN. TAADA: Thank you, Mr. Chairman.
Based on what Secretary Romulo has read, it would now clearly appear that what
is being submitted to the Senate for ratification is not the Final Act of the Uruguay
Round, but rather the Agreement on the World Trade Organization as well as the
Ministerial Declarations and Decisions, and the Understanding and Commitments in
Financial Services.
I am now satisfied with the wording of the new submission of President Ramos.
SEN. TAADA. . . . of President Ramos, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Taada. Can we hear from Senator Tolentino?
And after him Senator Neptali Gonzales and Senator Lina.
SEN TOLENTINO, Mr. Chairman, I have not seen the new submission actually
transmitted to us but I saw the draft of his earlier, and I think it now complies with the
provisions of the Constitution, and with the Final Act itself. The Constitution does not
require us to ratify the Final Act. It requires us to ratify the Agreement which is now
being submitted. The Final Act itself specifies what is going to be submitted to with the
governments of the participants.

In paragraph 2 of the Final Act, we read and I quote:

By signing the present Final Act, the representatives agree: (a) to submit
as appropriate the WTO Agreement for the consideration of the respective
competent authorities with a view to seeking approval of the Agreement in
accordance with their procedures.
In other words, it is not the Final Act that was agreed to be submitted to the
governments for ratification or acceptance as whatever their constitutional procedures
may provide but it is the World Trade Organization Agreement. And if that is the one
that is being submitted now, I think it satisfies both the Constitution and the Final Act
itself.
Thank you, Mr. Chairman.
THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales.
SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of
record. And they had been adequately reflected in the journal of yesterdays session and
I dont see any need for repeating the same.
Now, I would consider the new submission as an act ex abudante cautela.
THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make
any comment on this?
SEN. LINA. Mr. President, I agree with the observation just made by Senator
Gonzales out of the abundance of question. Then the new submission is, I believe,
stating the obvious and therefore I have no further comment to make.

Epilogue

In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners
are invoking this Courts constitutionally imposed duty to determine whether or not there has been
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Senate in
giving its concurrence therein via Senate Resolution No. 97. Procedurally, a writ of certiorari
grounded on grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of
Court when it is amply shown that petitioners have no other plain, speedy and adequate remedy
in the ordinary course of law.
By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as
is equivalent to lack of jurisdiction. 112 Mere abuse of discretion is not enough. It must be grave
abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason
of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of
a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation
of law.113 Failure on the part of the petitioner to show grave abuse of discretion will result in the
dismissal of the petition.114
In rendering this Decision, this Court never forgets that the Senate, whose act is under
review, is one of two sovereign houses of Congress and is thus entitled to great respect in its
actions. It is itself a constitutional body independent and coordinate, and thus its actions are
presumed regular and done in good faith. Unless convincing proof and persuasive arguments are

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presented to overthrow such presumptions, this Court will resolve every doubt in its favor. Using
the foregoing well-accepted definition of grave abuse of discretion and the presumption of
regularity in the Senates processes, this Court cannot find any cogent reason to impute grave
abuse of discretion to the Senates exercise of its power of concurrence in the WTO Agreement
granted it by Sec. 21 of Article VII of the Constitution. 115
It is true, as alleged by petitioners, that broad constitutional principles require the State to
develop an independent national economy effectively controlled by Filipinos; and to protect and/or
prefer Filipino labor, products, domestic materials and locally produced goods. But it is equally
true that such principles -- while serving as judicial and legislative guides -- are not in themselves
sources of causes of action. Moreover, there are other equally fundamental constitutional
principles relied upon by the Senate which mandate the pursuit of a trade policy that serves the
general welfare and utilizes all forms and arrangements of exchange on the basis of equality and
reciprocity and the promotion of industries which are competitive in both domestic and foreign
markets, thereby justifying its acceptance of said treaty. So too, the alleged impairment of
sovereignty in the exercise of legislative and judicial powers is balanced by the adoption of the
generally accepted principles of international law as part of the law of the land and the adherence
of the Constitution to the policy of cooperation and amity with all nations.
That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its
consent to the WTO Agreement thereby making it a part of the law of the land is a legitimate
exercise of its sovereign duty and power. We find no patent and gross arbitrariness or despotism
by reason of passion or personal hostility in such exercise. It is not impossible to surmise that this
Court, or at least some of its members, may even agree with petitioners that it is more
advantageous to the national interest to strike down Senate Resolution No. 97. But that is not a
legal reason to attribute grave abuse of discretion to the Senate and to nullify its decision. To do
so would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably,
what the Senate did was a valid exercise of its authority. As to whether such exercise was wise,
beneficial or viable is outside the realm of judicial inquiry and review. That is a matter between
the elected policy makers and the people. As to whether the nation should join the worldwide
march toward trade liberalization and economic globalization is a matter that our people should
determine in electing their policy makers. After all, the WTO Agreement allows withdrawal of
membership, should this be the political desire of a member.
The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian
Renaissance116 where the East will become the dominant region of the world economically,
politically and culturally in the next century. He refers to the free market espoused by WTO as the
catalyst in this coming Asian ascendancy. There are at present about 31 countries including China,
Russia and Saudi Arabia negotiating for membership in the WTO. Notwithstanding objections
against possible limitations on national sovereignty, the WTO remains as the only viable structure
for multilateral trading and the veritable forum for the development of international trade law. The
alternative to WTO is isolation, stagnation, if not economic self-destruction. Duly enriched with
original membership, keenly aware of the advantages and disadvantages of globalization with its
on-line experience, and endowed with a vision of the future, the Philippines now straddles the
crossroads of an international strategy for economic prosperity and stability in the new
millennium. Let the people, through their duly authorized elected officers, make their free choice.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.

declaration in the certificate of candidacy, is not a resident, much less a registered voter, of the
province of Sarangani where he seeks election. To substantiate their allegations, private
respondents presented the following evidence:
1. Annex A the Certificate of Candidacy of respondent for the position of Congressman
of the Lone District of the Province of Sarangani filed with the Office of the Provincial
Election Supervisor of Sarangani on March 25, 1998, where in item 4 thereof he
wrote his date of birth as December 5, 1953; in item 9, he claims he have resided
in the constituency where he seeks election for one (1) year and two (2) months;
and, in item 10, that he is registered voter of Precinct No. 14A-1, Barangay
Poblacion, Alabel, Sarangani;
2. Annex B Voters Registration Record with SN 31326504 dated June 22, 1997
indicating respondents registration at Precinct No. 4400-A, Old Balara, Quezon City;
EN BANC

3. Annex C Respondents Community Tax Certificate No. 11132214C dated January 15,
1997;
4. Annex D Certified true copy of the letter of Herson D. Dema-ala, Deputy Provincial &
Municipal Treasurer of Alabel, Sarangani, dated February 26, 1998, addressed to Mr.
Conrado G. Butil, which reads:

[G.R. No. 134015. July 19, 1999]

JUAN DOMINO, petitioner, vs. COMMISSION ON ELECTIONS, NARCISO Ra. GRAFILO, JR.,
EDDY B. JAVA, JUAN P. BAYONITO, JR., ROSARIO SAMSON and DIONISIO P. LIM,
SR., respondents.
LUCILLE CHIONGBIAN-SOLON, intervenor.
DECISION
DAVIDE, JR., C.J.:
Challenged in this case for certiorari with a prayer for preliminary injunction are the
Resolution of 6 May 1998117 of the Second Division of the Commission on Elections (hereafter
COMELEC), declaring petitioner Juan Domino (hereafter DOMINO) disqualified as candidate for
representative of the Lone Legislative District of the Province of Sarangani in the 11 May 1998
elections, and the Decision of 29 May 1998 118 of the COMELEC en banc denying DOMINOs motion
for reconsideration.
The antecedents are not disputed.
On 25 March 1998, DOMINO filed his certificate of candidacy for the position of
Representative of the Lone Legislative District of the Province of Sarangani indicating in item nine
(9) of his certificate that he had resided in the constituency where he seeks to be elected for one
(1) year and two (2) months immediately preceding the election. 119
On 30 March 1998, private respondents Narciso Ra. Grafilo, Jr., Eddy B. Java, Juan P. Bayonito,
Jr., Rosario Samson and Dionisio P. Lim, Sr., filed with the COMELEC a Petition to Deny Due Course
to or Cancel Certificate of Candidacy, which was docketed as SPA No. 98-022 and assigned to the
Second Division of the COMELEC. Private respondents alleged that DOMINO, contrary to his

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In connection with your letter of even date, we are furnishing you herewith
certified xerox copy of the triplicate copy of COMMUNITY TAX CERTIFICATE NO.
11132214C in the name of Juan Domino.
Furthermore, Community Tax Certificate No. 11132212C of the same stub was
issued to Carlito Engcong on September 5, 1997, while Certificate No. 11132213C was
also issued to Mr. Juan Domino but was cancelled and serial no. 11132215C was issued
in the name of Marianita Letigio on September 8, 1997.
5. Annex E The triplicate copy of the Community Tax Certificate No. 11132214C in the
name of Juan Domino dated September 5, 1997;
6. Annex F Copy of the letter of Provincial Treasurer Lourdes P. Riego dated March 2,
1998 addressed to Mr. Herson D. Dema-ala, Deputy Provincial Treasurer and
Municipal Treasurer of Alabel, Sarangani, which states:
For easy reference, kindly turn-over to the undersigned for safekeeping, the stub of
Community Tax Certificate containing Nos. 11132201C-11132250C issued to you on
June 13, 1997 and paid under Official Receipt No. 7854744.
Upon request of Congressman James L. Chiongbian.
7. Annex G Certificate of Candidacy of respondent for the position of Congressman in
the 3rd District of Quezon City for the 1995 elections filed with the Office of the
Regional Election Director, National Capital Region, on March 17, 1995, where, in
item 4 thereof, he wrote his birth date as December 22, 1953; in item 8 thereof his
residence in the constituency where I seek to be elected immediately preceding the
election as 3 years and 5 months; and, in item 9, that he is a registered voter of
Precinct No. 182, Barangay Balara, Quezon City;
8. Annex H a copy of the APPLICATION FOR TRANSFER OF REGISTRATION RECORDS
DUE TO CHANGE OF RESIDENCE of respondent dated August 30, 1997 addressed to
and received by Election Officer Mantil Alim, Alabel, Sarangani, on September 22,

1997, stating among others, that [T]he undersigneds previous residence is at 24

Bonifacio Street, Ayala Heights, Quezon City, III District, Quezon City; wherein he is a
registered voter and that for business and residence purposes, the undersigned has
transferred and conducts his business and reside at Barangay Poblacion, Alabel,
Province of Sarangani prior to this application;
9. Annex I Copy of the SWORN APPLICATION FOR CANCELLATION OF VOTERS
[TRANSFER OF] PREVIOUS REGISTRATION of respondent subscribed and sworn to on
22 October 1997 before Election Officer Mantil Allim at Alabel, Sarangani. 120
For his defense, DOMINO maintains that he had complied with the one-year residence
requirement and that he has been residing in Sarangani since January 1997. In support of the said
contention, DOMINO presented before the COMELEC the following exhibits, to wit:
1. Annex 1 - Copy of the Contract of Lease between Nora Dacaldacal as Lessor and
Administrator of the properties of deceased spouses Maximo and Remedios
Dacaldacal and respondent as Lessee executed on January 15, 1997, subscribed and
sworn to before Notary Public Johnny P. Landero;
2. Annex 2 - Copy of the Extra-Judicial Settlement of Estate with Absolute Deed of sale
executed by and between the heirs of deceased spouses Maximo and Remedios
Dacaldacal, namely: Maria Lourdes, Jupiter and Beberlie and the respondent on
November 4, 1997, subscribed and sworn to before Notary Public Jose A. Alegario;
3. Annex 3 - True Carbon Xerox copy of the Decision dated January 19, 1998, of the
Metropolitan Trial Court of Metro Manila, Branch 35, Quezon City, in Election Case
NO. 725 captioned as In the Matter of the Petition for the Exclusion from the List of
voters of Precinct No. 4400-A Brgy. Old Balara, Quezon City, Spouses Juan and
Zorayda Domino, Petitioners, -versus- Elmer M. Kayanan, Election Officer, Quezon
City, District III, and the Board of Election Inspectors of Precinct No. 4400-A, Old
Balara, Quezon City, Respondents. The dispositive portion of which reads:
1. Declaring the registration of petitioners as voters of Precinct No. 4400-A,
Barangay Old Balara, in District III Quezon City as completely erroneous as petitioners
were no longer residents of Quezon City but of Alabel, Sarangani where they have been
residing since December 1996;
2. Declaring this erroneous registration of petitioners in Quezon City as done in
good faith due to an honest mistake caused by circumstances beyond their control and
without any fault of petitioners;
3. Approving the transfer of registration of voters of petitioners from Precinct No.
4400-A of Barangay Old Balara, Quezon City to Precinct No. 14A1 of Barangay Poblacion
of Alabel, Sarangani; and
4. Ordering the respondents to immediately transfer and forward all the
election/voters registration records of the petitioners in Quezon City to the Election
Officer, the Election Registration Board and other Comelec Offices of Alabel, Sarangani
where the petitioners are obviously qualified to exercise their respective rights of
suffrage.
4. Annex 4 - Copy of the Application for Transfer of Registration Records due to Change
of Residence addressed to Mantil Alim, COMELEC Registrar, Alabel, Sarangani, dated
August 30, 1997.

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5. Annex 5 - Certified True Copy of the Notice of Approval of Application, the roster of
applications for registration approved by the Election Registration Board on October
20, 1997, showing the spouses Juan and Zorayda Bailon Domino listed as numbers
111 and 112 both under Precinct No. 14A1, the last two names in the slate indicated
as transferees without VRR numbers and their application dated August 30, 1997
and September 30, 1997, respectively.
6. Annex 6 - same as Annex 5
7. Annex 6-a - Copy of the Sworn Application for Cancellation of Voters Previous
Registration (Annex I, Petition);
8. Annex 7 - Copy of claim card in the name of respondent showing his VRR No.
31326504 dated October 20, 1997 as a registered voter of Precinct No. 14A1,
Barangay Poblacion, Alabel, Sarangani;
9. Annex 7-a - Certification dated April 16, 1998, issued by Atty. Elmer M. Kayanan,
Election Officer IV, District III, Quezon City, which reads:
This is to certify that the spouses JUAN and ZORAYDA DOMINO are no longer
registered voters of District III, Quezon City. Their registration records (VRR) were
transferred and are now in the possession of the Election Officer of Alabel, Sarangani.
This certification is being issued upon the request of Mr. JUAN DOMINO.
10. Annex 8 - Affidavit of Nora Dacaldacal and Maria Lourdes Dacaldacal stating the
circumstances and incidents detailing their alleged acquaintance with respondent.
11. Annexes 8-a, 8-b, 8-c and 8-d - Copies of the uniform affidavits of witness Myrna
Dalaguit, Hilario Fuentes, Coraminda Lomibao and Elena V. Piodos subscribed and
sworn to before Notary Public Bonifacio F. Doria, Jr., on April 18, 1998, embodying
their alleged personal knowledge of respondents residency in Alabel, Sarangani;
12. Annex 8-e - A certification dated April 20, 1998, subscribed and sworn to before
Notary Public Bonifacio, containing a listing of the names of fifty-five(55) residents of
Alabel, Sarangani, declaring and certifying under oath that they personally know the
respondent as a permanent resident of Alabel, Sarangani since January 1997 up to
present;
13. Annexes 9, 9-a and 9-b- Copies of Individual Income Tax Return for the year 1997,
BIR form 2316 and W-2, respectively, of respondent; and,
14. Annex 10 - The affidavit of respondent reciting the chronology of events and
circumstances leading to his relocation to the Municipality of Alabel, Sarangani,
appending Annexes A, B, C, D, D-1, E, F, G with sub-markings G-1 and G-2 and H his
CTC No. 111`32214C dated September 5, 1997, which are the same as Annexes 1, 2,
4, 5, 6-a, 3, 7, 9 with sub-markings 9-a and 9-b except Annex H. 121
On 6 May 1998, the COMELEC 2nd Division promulgated a resolution declaring DOMINO
disqualified as candidate for the position of representative of the lone district of Sarangani for lack
of the one-year residence requirement and likewise ordered the cancellation of his certificate of
candidacy, on the basis of the following findings:
What militates against respondents claim that he has met the residency requirement for the
position sought is his own Voters Registration Record No. 31326504 dated June 22, 1997 [Annex

B, Petition] and his address indicated as 24 Bonifacio St., Ayala Heights, Old Balara, Quezon
City. This evidence, standing alone, negates all his protestations that he established residence at
Barangay Poblacion, Alabel, Sarangani, as early as January 1997. It is highly improbable, nay
incredible, for respondent who previously ran for the same position in the 3rd Legislative District
of Quezon City during the elections of 1995 to unwittingly forget the residency requirement for
the office sought.

The first issue.

The contention of DOMINO that the decision of the Metropolitan Trial Court of Quezon City in
the exclusion proceedings declaring him a resident of the Province of Sarangani and not of
Quezon City is final and conclusive upon the COMELEC cannot be sustained.

Counting, therefore, from the day after June 22, 1997 when respondent registered at Precinct
No. 4400-A, up to and until the day of the elections on May 11, 1998, respondent clearly lacks the
one (1) year residency requirement provided for candidates for Member of the House of
Representatives under Section 6, Article VI of the Constitution.

The COMELEC has jurisdiction as provided in Sec. 78, Art. IX of the Omnibus Election Code,
over a petition to deny due course to or cancel certificate of candidacy. In the exercise of the said
jurisdiction, it is within the competence of the COMELEC to determine whether false
representation as to material facts was made in the certificate of candidacy, that will include,
among others, the residence of the candidate.

All told, petitioners evidence conspire to attest to respondents lack of residence in the
constituency where he seeks election and while it may be conceded that he is a registered voter
as contemplated under Section 12 of R.A. 8189, he lacks the qualification to run for the position of
Congressman for the Lone District of the Province of Sarangani. 122

The determination of the Metropolitan Trial Court of Quezon City in the exclusion proceedings
as to the right of DOMINO to be included or excluded from the list of voters in the precinct within
its territorial jurisdiction, does not preclude the COMELEC, in the determination of DOMINOs
qualification as a candidate, to pass upon the issue of compliance with the residency requirement.

On 11 May 1998, the day of the election, the COMELEC issued Supplemental Omnibus
Resolution No. 3046, ordering that the votes cast for DOMINO be counted but to suspend the
proclamation if winning, considering that the Resolution disqualifying him as candidate had not
yet become final and executory.123

The proceedings for the exclusion or inclusion of voters in the list of voters are summary in
character. Thus, the factual findings of the trial court and its resultant conclusions in the exclusion
proceedings on matters other than the right to vote in the precinct within its territorial jurisdiction
are not conclusive upon the COMELEC. Although the court in inclusion or exclusion proceedings
may pass upon any question necessary to decide the issue raised including the questions of
citizenship and residence of the challenged voter, the authority to order the inclusion in or
exclusion from the list of voters necessarily caries with it the power to inquire into and settle all
matters essential to the exercise of said authority. However, except for the right to remain in the
list of voters or for being excluded therefrom for the particular election in relation to which the
proceedings had been held, a decision in an exclusion or inclusion proceeding, even if final and
unappealable, does not acquire the nature of res judicata.129 In this sense, it does not operate as a
bar to any future action that a party may take concerning the subject passed upon in the
proceeding.130 Thus, a decision in an exclusion proceeding would neither be conclusive on the
voters political status, nor bar subsequent proceedings on his right to be registered as a voter in
any other election.131

The result of the election, per Statement of Votes certified by the Chairman of the Provincial
Board of Canvassers,124 shows that DOMINO garnered the highest number of votes over his
opponents for the position of Congressman of the Province of Sarangani.
On 15 May 1998, DOMINO filed a motion for reconsideration of the Resolution dated 6 May
1998, which was denied by the COMELEC en banc in its decision dated 29 May 1998. Hence, the
present Petition for Certiorari with prayer for Preliminary Mandatory Injunction alleging, in the
main, that the COMELEC committed grave abuse of discretion amounting to excess or lack of
jurisdiction when it ruled that he did not meet the one-year residence requirement.
On 14 July 1998, acting on DOMINOs Motion for Issuance of Temporary Restraining Order, the
Court directed the parties to maintain the status quo prevailing at the time of the filing of the
instant petition.125
On 15 September 1998, Lucille L. Chiongbian-Solon, (hereafter INTERVENOR), the candidate
receiving the second highest number of votes, was allowed by the Court to Intervene. 126
INTERVENOR in her Motion for Leave to Intervene and in her Comment in Intervention127 is
asking the Court to uphold the disqualification of petitioner Juan Domino and to proclaim her as
the duly elected representative of Sarangani in the 11 May 1998 elections.
Before us DOMINO raised the following issues for resolution, to wit:
a. Whether or not the judgment of the Metropolitan Trial Court of Quezon City declaring
petitioner as resident of Sarangani and not of Quezon City is final, conclusive and
binding upon the whole world, including the Commission on Elections.
b. Whether or not petitioner herein has resided in the subject congressional district for
at least one (1) year immediately preceding the May 11, 1998 elections; and
c. Whether or not respondent COMELEC has jurisdiction over the petition a quo for the
disqualification of petitioner.128

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Thus, in Tan Cohon v. Election Registrar132 we ruled that:

xxx It is made clear that even as it is here held that the order of the City Court in question has
become final, the same does not constitute res adjudicata as to any of the matters therein
contained. It is ridiculous to suppose that such an important and intricate matter of citizenship
may be passed upon and determined with finality in such a summary and peremptory proceeding
as that of inclusion and exclusion of persons in the registry list of voters. Even if the City Court
had granted appellants petition for inclusion in the permanent list of voters on the allegation that
she is a Filipino citizen qualified to vote, her alleged Filipino citizenship would still have been left
open to question.
Moreover, the Metropolitan Trial Court of Quezon City in its 18 January decision exceeded its
jurisdiction when it declared DOMINO a resident of the Province of Sarangani, approved and
ordered the transfer of his voters registration from Precinct No. 4400-A of Barangay Old Balara,
Quezon City to precinct 14A1 of Barangay Poblacion, Alabel, Sarangani. It is not within the
competence of the trial court, in an exclusion proceedings, to declare the challenged voter a
resident of another municipality. The jurisdiction of the lower court over exclusion cases is limited
only to determining the right of voter to remain in the list of voters or to declare that the
challenged voter is not qualified to vote in the precinct in which he is registered, specifying the
ground of the voters disqualification. The trial court has no power to order the change or transfer
of registration from one place of residence to another for it is the function of the election

Registration Board as provided under Section 12 of R.A. No. 8189. 133 The only effect of the
decision of the lower court excluding the challenged voter from the list of voters, is for the
Election Registration Board, upon receipt of the final decision, to remove the voters registration
record from the corresponding book of voters, enter the order of exclusion therein, and thereafter
place the record in the inactive file.134
Finally, the application of the rule on res judicata is unavailing. Identity of parties, subject
matter and cause of action are indispensable requirements for the application of said doctrine.
Neither herein Private Respondents nor INTERVENOR, is a party in the exclusion proceedings. The
Petition for Exclusion was filed by DOMINO himself and his wife, praying that he and his wife be
excluded from the Voters List on the ground of erroneous registration while the Petition to Deny
Due Course to or Cancel Certificate of Candidacy was filed by private respondents against
DOMINO for alleged false representation in his certificate of candidacy. For the decision to be a
basis for the dismissal by reason of res judicata, it is essential that there must be between the
first and the second action identity of parties, identity of subject matter and identity of causes of
action.135 In the present case, the aforesaid essential requisites are not present. In the case of
Nuval v. Guray, et al.,136 the Supreme Court in resolving a similar issue ruled that:
The question to be solved under the first assignment of error is whether or not the judgment
rendered in the case of the petition for the exclusion of Norberto Gurays name from the election
list of Luna, is res judicata, so as to prevent the institution and prosecution of an action in quo
warranto, which is now before us.
The procedure prescribed by section 437 of the Administrative Code, as amended by Act No.
3387, is of a summary character and the judgment rendered therein is not appealable except
when the petition is tried before the justice of the peace of the capital or the circuit judge, in
which case it may be appealed to the judge of first instance, with whom said two lower judges
have concurrent jurisdiction.
The petition for exclusion was presented by Gregorio Nuval in his dual capacity as qualified
voter of the municipality of Luna, and as a duly registered candidate for the office of president of
said municipality, against Norberto Guray as a registered voter in the election list of said
municipality. The present proceeding of quo warranto was interposed by Gregorio Nuval in his
capacity as a registered candidate voted for the office of municipal president of Luna, against
Norberto Guray, as an elected candidate for the same office. Therefore, there is no identity of
parties in the two cases, since it is not enough that there be an identity of persons, but there must
be an identity of capacities in which said persons litigate. ( Art. 1259 of the Civil Code; Bowler vs.
Estate of Alvarez, 23 Phil., 561; 34 Corpus Juris, p. 756, par. 1165)
In said case of the petition for the exclusion, the object of the litigation, or the litigious
matter was the exclusion of Norberto Guray as a voter from the election list of the municipality of
Luna, while in the present quo warranto proceeding, the object of the litigation, or the litigious
matter is his exclusion or expulsion from the office to which he has been elected. Neither does
there exist, then, any identity in the object of the litigation, or the litigious matter.

identity of parties, or of things or litigious matter, or of issues or causes of action, there is no res
judicata.

The Second Issue.

Was DOMINO a resident of the Province of Sarangani for at least one year immediately
preceding the 11 May 1998 election as stated in his certificate of candidacy?
We hold in the negative.
It is doctrinally settled that the term residence, as used in the law prescribing the
qualifications for suffrage and for elective office, means the same thing as domicile, which imports
not only an intention to reside in a fixed place but also personal presence in that place, coupled
with conduct indicative of such intention. 137 Domicile denotes a fixed permanent residence to
which, whenever absent for business, pleasure, or some other reasons, one intends to return. 138
Domicile is a question of intention and circumstances. In the consideration of circumstances, three
rules must be borne in mind, namely: (1) that a man must have a residence or domicile
somewhere; (2) when once established it remains until a new one is acquired; and (3) a man can
have but one residence or domicile at a time. 139
Records show that petitioners domicile of origin was Candon, Ilocos Sur 140 and that sometime
in 1991, he acquired a new domicile of choice at 24 Bonifacio St. Ayala Heights, Old Balara,
Quezon City, as shown by his certificate of candidacy for the position of representative of the 3 rd
District of Quezon City in the May 1995 election. Petitioner is now claiming that he had effectively
abandoned his residence in Quezon City and has established a new domicile of choice at the
Province of Sarangani.
A persons domicile once established is considered to continue and will not be deemed lost
until a new one is established. 141 To successfully effect a change of domicile one must
demonstrate an actual removal or an actual change of domicile; a bona fide intention of
abandoning the former place of residence and establishing a new one and definite acts which
correspond with the purpose. 142 In other words, there must basically be animus manendi coupled
with animus non revertendi. The purpose to remain in or at the domicile of choice must be for an
indefinite period of time; the change of residence must be voluntary; and the residence at the
place chosen for the new domicile must be actual.143
It is the contention of petitioner that his actual physical presence in Alabel, Sarangani since
December 1996 was sufficiently established by the lease of a house and lot located therein in
January 1997 and by the affidavits and certifications under oath of the residents of that place that
they have seen petitioner and his family residing in their locality.

In said case of the petition for exclusion, the cause of action was that Norberto Guray had
not the six months legal residence in the municipality of Luna to be a qualified voter thereof, while
in the present proceeding of quo warranto, the cause of action is that Norberto Guray has not the
one years legal residence required for eligibility to the office of municipal president of Luna.
Neither does there exist therefore, identity of causes of action.

While this may be so, actual and physical is not in itself sufficient to show that from said date
he had transferred his residence in that place. To establish a new domicile of choice, personal
presence in the place must be coupled with conduct indicative of that intention. While residence
simply requires bodily presence in a given place, domicile requires not only such bodily presence
in that place but also a declared and probable intent to make it ones fixed and permanent place of
abode, ones home.144

In order that res judicata may exist the following are necessary: (a) identity of parties; (b)
identity of things; and (c) identity of issues (Aquino vs. Director of Lands, 39 Phil. 850). And as in
the case of the petition for exclusion and in the present quo warranto proceeding, as there is no

As a general rule, the principal elements of domicile, physical presence in the locality
involved and intention to adopt it as a domicile, must concur in order to establish a new domicile.
No change of domicile will result if either of these elements is absent. Intention to acquire a

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domicile without actual residence in the locality does not result in acquisition of domicile, nor does
the fact of physical presence without intention. 145
The lease contract entered into sometime in January 1997, does not adequately support a
change of domicile. The lease contract may be indicative of DOMINOs intention to reside in
Sarangani but it does not engender the kind of permanency required to prove abandonment of
ones original domicile. The mere absence of individual from his permanent residence, no matter
how long, without the intention to abandon it does not result in loss or change of domicile. 146 Thus
the date of the contract of lease of a house and lot located in the province of Sarangani, i.e., 15
January 1997, cannot be used, in the absence of other circumstances, as the reckoning period of
the one-year residence requirement.
Further, Dominos lack of intention to abandon his residence in Quezon City is further
strengthened by his act of registering as voter in one of the precincts in Quezon City. While voting
is not conclusive of residence, it does give rise to a strong presumption of residence especially in
this case where DOMINO registered in his former barangay. Exercising the right of election
franchise is a deliberate public assertion of the fact of residence, and is said to have decided
preponderance is a doubtful case upon the place the elector claims as, or believes to be, his
residence.147 The fact that a party continuously voted in a particular locality is a strong factor in
assisting to determine the status of his domicile.148
His claim that his registration in Quezon City was erroneous and was caused by events over
which he had no control cannot be sustained. The general registration of voters for purposes of
the May 1998 elections was scheduled for two (2) consecutive weekends, viz.: June 14, 15, 21,
and 22.149
While, Dominos intention to establish residence in Sarangani can be gleaned from the fact
that be bought the house he was renting on November 4, 1997, that he sought cancellation of his
previous registration in Quezon City on 22 October 1997, 150 and that he applied for transfer of
registration from Quezon City to Sarangani by reason of change of residence on 30 August
1997,151 DOMINO still falls short of the one year residency requirement under the Constitution.
In showing compliance with the residency requirement, both intent and actual presence in
the district one intends to represent must satisfy the length of time prescribed by the
fundamental law.152 Dominos failure to do so rendered him ineligible and his election to office null
and void.153

The Third Issue.

DOMINOs contention that the COMELEC has no jurisdiction in the present petition is bereft of
merit.
As previously mentioned, the COMELEC, under Sec. 78, Art. IX of the Omnibus Election Code,
has jurisdiction over a petition to deny due course to or cancel certificate of candidacy. Such
jurisdiction continues even after election, if for any reason no final judgment of disqualification is
rendered before the election, and the candidate facing disqualification is voted for and receives
the highest number of votes 154 and provided further that the winning candidate has not been
proclaimed or has taken his oath of office.155
It has been repeatedly held in a number of cases, that the House of Representatives Electoral
Tribunals sole and exclusive jurisdiction over all contests relating to the election, returns and

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qualifications of members of Congress as provided under Section 17 of Article VI of the

Constitution begins only after a candidate has become a member of the House of
Representatives.156
The fact of obtaining the highest number of votes in an election does not automatically vest
the position in the winning candidate. 157 A candidate must be proclaimed and must have taken his
oath of office before he can be considered a member of the House of Representatives.
In the instant case, DOMINO was not proclaimed as Congressman-elect of the Lone
Congressional District of the Province of Sarangani by reason of a Supplemental Omnibus
Resolution issued by the COMELEC on the day of the election ordering the suspension of DOMINOs
proclamation should he obtain the winning number of votes. This resolution was issued by the
COMELEC in view of the non-finality of its 6 May 1998 resolution disqualifying DOMINO as
candidate for the position.
Considering that DOMINO has not been proclaimed as Congressman-elect in the Lone
Congressional District of the Province of Sarangani he cannot be deemed a member of the House
of Representative. Hence, it is the COMELEC and not the Electoral Tribunal which has jurisdiction
over the issue of his ineligibility as a candidate.158

Issue raised by INTERVENOR.

After finding that DOMINO is disqualified as candidate for the position of representative of
the province of Sarangani, may INTERVENOR, as the candidate who received the next highest
number of votes, be proclaimed as the winning candidate?
It is now settled doctrine that the candidate who obtains the second highest number of votes
may not be proclaimed winner in case the winning candidate is disqualified. 159
In every election, the peoples choice is the paramount consideration and their expressed will
must, at all times, be given effect. When the majority speaks and elects into office a candidate by
giving the highest number of votes cast in the election for that office, no one can be declared
elected in his place.160
It would be extremely repugnant to the basic concept of the constitutionally guaranteed right
to suffrage if a candidate who has not acquired the majority or plurality of votes is proclaimed a
winner and imposed as the representative of a constituency, the majority of which have positively
declared through their ballots that they do not choose him. 161 To simplistically assume that the
second placer would have received the other votes would be to substitute our judgment for the
mind of the voters. He could not be considered the first among qualified candidates because in a
field which excludes the qualified candidate, the conditions would have substantially changed. 162
Sound policy dictates that public elective offices are filled by those who have received the
highest number of votes cast in the election for that office, and it is fundamental idea in all
republican forms of government that no one can be declared elected and no measure can be
declared carried unless he or it receives a majority or plurality of the legal votes cast in the
election.163
The effect of a decision declaring a person ineligible to hold an office is only that the election
fails entirely, that the wreath of victory cannot be transferred 164 from the disqualified winner to the
repudiated loser because the law then as now only authorizes a declaration of election in favor of

the person who haS obtained a plurality of votes 165 and does not entitle the candidate receiving
the next highest number of votes to be declared elected. In such case, the electors have failed to
make a choice and the election is a nullity. 166 To allow the defeated and repudiated candidate to
take over the elective position despite his rejection by the electorate is to disenfranchise the
electorate without any fault on their part and to undermine the importance and meaning of
democracy and the peoples right to elect officials of their choice. 167
INTERVENORs plea that the votes cast in favor of DOMINO be considered stray votes cannot
be sustained. INTERVENORs reliance on the opinion made in the Labo, Jr. case168 to wit: if the
electorate, fully aware in fact and in law of a candidates disqualification so as to bring such
awareness within the realm of notoriety, would nevertheless cast their votes in favor of the
ineligible candidate, the electorate may be said to have waived the validity and efficacy of their
votes by notoriously misapplying their franchise or throwing away their votes, in which case, the
eligible candidate obtaining the next higher number of votes may be deemed elected, is
misplaced.
Contrary to the claim of INTERVENOR, petitioner was not notoriously known by the public as
an ineligible candidate. Although the resolution declaring him ineligible as candidate was
rendered before the election, however, the same is not yet final and executory. In fact, it was no
less than the COMELEC in its Supplemental Omnibus Resolution No. 3046 that allowed DOMINO to
be voted for the office and ordered that the votes cast for him be counted as the Resolution
declaring him ineligible has not yet attained finality. Thus the votes cast for DOMINO are
presumed to have been cast in the sincere belief that he was a qualified candidate, without any
intention to misapply their franchise. Thus, said votes can not be treated as stray, void, or
meaningless.169
WHEREFORE, the instant petition is DISMISSED. The resolution dated 6 May 1998 of the
COMELEC 2nd Division and the decision dated 29 May 1998 of the COMELEC En Banc, are hereby
AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 161872

April 13, 2004

REV. ELLY CHAVEZ PAMATONG, ESQUIRE, petitioner,

vs.
COMMISSION ON ELECTIONS, respondent.
RESOLUTION
TINGA, J.:
Petitioner Rev. Elly Velez Pamatong filed his Certificate of Candidacy for President on December
17, 2003. Respondent Commission on Elections (COMELEC) refused to give due course to

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petitioners Certificate of Candidacy in its Resolution No. 6558 dated January 17, 2004. The
decision, however, was not unanimous since Commissioners Luzviminda G. Tancangco and Mehol
K. Sadain voted to include petitioner as they believed he had parties or movements to back up his
candidacy.
On January 15, 2004, petitioner moved for reconsideration of Resolution No. 6558. Petitioners
Motion for Reconsideration was docketed as SPP (MP) No. 04-001. The COMELEC, acting on
petitioners Motion for Reconsideration and on similar motions filed by other aspirants for national
elective positions, denied the same under the aegis of Omnibus Resolution No. 6604 dated
February 11, 2004. The COMELEC declared petitioner and thirty-five (35) others nuisance
candidates who could not wage a nationwide campaign and/or are not nominated by a political
party or are not supported by a registered political party with a national constituency.
Commissioner Sadain maintained his vote for petitioner. By then, Commissioner Tancangco had
retired.
In this Petition For Writ of Certiorari, petitioner seeks to reverse the resolutions which were
allegedly rendered in violation of his right to "equal access to opportunities for public service"
under Section 26, Article II of the 1987
Constitution,1 by limiting the number of qualified candidates only to those who can afford to wage
a nationwide campaign and/or are nominated by political parties. In so doing, petitioner argues
that the COMELEC indirectly amended the constitutional provisions on the electoral process and
limited the power of the sovereign people to choose their leaders. The COMELEC supposedly erred
in disqualifying him since he is the most qualified among all the presidential candidates, i.e., he
possesses all the constitutional and legal qualifications for the office of the president, he is
capable of waging a national campaign since he has numerous national organizations under his
leadership, he also has the capacity to wage an international campaign since he has practiced law
in other countries, and he has a platform of government. Petitioner likewise attacks the validity of
the form for the Certificate of Candidacy prepared by the COMELEC. Petitioner claims that the
form does not provide clear and reasonable guidelines for determining the qualifications of
candidates since it does not ask for the candidates bio-data and his program of government.
First, the constitutional and legal dimensions involved.
Implicit in the petitioners invocation of the constitutional provision ensuring "equal access to
opportunities for public office" is the claim that there is a constitutional right to run for or hold
public office and, particularly in his case, to seek the presidency. There is none. What is
recognized is merely a privilege subject to limitations imposed by law. Section 26, Article II of the
Constitution neither bestows such a right nor elevates the privilege to the level of an enforceable
right. There is nothing in the plain language of the provision which suggests such a thrust or
justifies an interpretation of the sort.
The "equal access" provision is a subsumed part of Article II of the Constitution, entitled
"Declaration of Principles and State Policies." The provisions under the Article are generally
considered not self-executing,2 and there is no plausible reason for according a different treatment
to the "equal access" provision. Like the rest of the policies enumerated in Article II, the provision
does not contain any judicially enforceable constitutional right but merely specifies a guideline for
legislative or executive action.3 The disregard of the provision does not give rise to any cause of
action before the courts.4

An inquiry into the intent of the framers 5 produces the same determination that the provision is
not self-executory. The original wording of the present Section 26, Article II had read, "The State
shall broaden opportunities to public office and prohibit public dynasties." 6 Commissioner (now
Chief Justice) Hilario Davide, Jr. successfully brought forth an amendment that changed the word
"broaden" to the phrase "ensure equal access," and the substitution of the word "office" to
"service." He explained his proposal in this wise:
I changed the word "broaden" to "ENSURE EQUAL ACCESS TO" because what is important would
be equal access to the opportunity. If you broaden, it would necessarily mean that the
government would be mandated to create as many offices as are possible to
accommodate as many people as are also possible. That is the meaning of broadening
opportunities to public service. So, in order that we should not mandate the State to make
the government the number one employer and to limit offices only to what may be
necessary and expedient yet offering equal opportunities to access to it, I change the
word "broaden."7 (emphasis supplied)
Obviously, the provision is not intended to compel the State to enact positive measures that
would accommodate as many people as possible into public office. The approval of the "Davide
amendment" indicates the design of the framers to cast the provision as simply enunciatory of a
desired policy objective and not reflective of the imposition of a clear State burden.
Moreover, the provision as written leaves much to be desired if it is to be regarded as the source
of positive rights. It is difficult to interpret the clause as operative in the absence of legislation
since its effective means and reach are not properly defined. Broadly written, the myriad of claims
that can be subsumed under this rubric appear to be entirely open-ended. 8 Words and phrases
such as "equal access," "opportunities," and "public service" are susceptible to countless
interpretations owing to their inherent impreciseness. Certainly, it was not the intention of the
framers to inflict on the people an operative but amorphous foundation from which innately
unenforceable rights may be sourced.
As earlier noted, the privilege of equal access to opportunities to public office may be subjected to
limitations. Some valid limitations specifically on the privilege to seek elective office are found in
the provisions9 of the Omnibus Election Code on "Nuisance Candidates" and COMELEC Resolution
No. 645210 dated December 10, 2002 outlining the instances wherein the COMELEC may motu
proprio refuse to give due course to or cancel a Certificate of Candidacy.
As long as the limitations apply to everybody equally without discrimination, however, the equal
access clause is not violated. Equality is not sacrificed as long as the burdens engendered by the
limitations are meant to be borne by any one who is minded to file a certificate of candidacy. In
the case at bar, there is no showing that any person is exempt from the limitations or the burdens
which they create.
Significantly, petitioner does not challenge the constitutionality or validity of Section 69 of the
Omnibus Election Code and COMELEC Resolution No. 6452 dated 10 December 2003. Thus, their
presumed validity stands and has to be accorded due weight.
Clearly, therefore, petitioners reliance on the equal access clause in Section 26, Article II of the
Constitution is misplaced.

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The rationale behind the prohibition against nuisance candidates and the disqualification of
candidates who have not evinced a bona fide intention to run for office is easy to divine. The State
has a compelling interest to ensure that its electoral exercises are rational, objective, and orderly.
Towards this end, the State takes into account the practical considerations in conducting
elections. Inevitably, the greater the number of candidates, the greater the opportunities for
logistical confusion, not to mention the increased allocation of time and resources in preparation
for the election. These practical difficulties should, of course, never exempt the State from the
conduct of a mandated electoral exercise. At the same time, remedial actions should be available
to alleviate these logistical hardships, whenever necessary and proper. Ultimately, a disorderly
election is not merely a textbook example of inefficiency, but a rot that erodes faith in our
democratic institutions. As the United States Supreme Court held:
[T]here is surely an important state interest in requiring some preliminary showing of a significant
modicum of support before printing the name of a political organization and its candidates on the
ballot the interest, if no other, in avoiding confusion, deception and even frustration of the
democratic [process].11
The COMELEC itself recognized these practical considerations when it promulgated Resolution No.
6558 on 17 January 2004, adopting the study Memorandum of its Law Department dated 11
January 2004. As observed in the COMELECs Comment:
There is a need to limit the number of candidates especially in the case of candidates for national
positions because the election process becomes a mockery even if those who cannot clearly wage
a national campaign are allowed to run. Their names would have to be printed in the Certified List
of Candidates, Voters Information Sheet and the Official Ballots. These would entail additional
costs to the government. For the official ballots in automated counting and canvassing of votes,
an additional page would amount to more or less FOUR HUNDRED FIFTY MILLION PESOS
(P450,000,000.00).
xxx[I]t serves no practical purpose to allow those candidates to continue if they cannot wage a
decent campaign enough to project the prospect of winning, no matter how slim. 12
The preparation of ballots is but one aspect that would be affected by allowance of "nuisance
candidates" to run in the elections. Our election laws provide various entitlements for candidates
for public office, such as watchers in every polling place, 13 watchers in the board of canvassers, 14
or even the receipt of electoral contributions. 15 Moreover, there are election rules and regulations
the formulations of which are dependent on the number of candidates in a given election.
Given these considerations, the ignominious nature of a nuisance candidacy becomes even more
galling. The organization of an election with bona fide candidates standing is onerous enough. To
add into the mix candidates with no serious intentions or capabilities to run a viable campaign
would actually impair the electoral process. This is not to mention the candidacies which are
palpably ridiculous so as to constitute a one-note joke. The poll body would be bogged by
irrelevant minutiae covering every step of the electoral process, most probably posed at the
instance of these nuisance candidates. It would be a senseless sacrifice on the part of the State.
Owing to the superior interest in ensuring a credible and orderly election, the State could exclude
nuisance candidates and need not indulge in, as the song goes, "their trips to the moon on
gossamer wings."

The Omnibus Election Code and COMELEC Resolution No. 6452 are cognizant of the compelling
State interest to ensure orderly and credible elections by excising impediments thereto, such as
nuisance candidacies that distract and detract from the larger purpose. The COMELEC is
mandated by the Constitution with the administration of elections 16 and endowed with
considerable latitude in adopting means and methods that will ensure the promotion of free,
orderly and honest elections.17 Moreover, the Constitution guarantees that only bona fide
candidates for public office shall be free from any form of harassment and discrimination. 18 The
determination of bona fide candidates is governed by the statutes, and the concept, to our mind
is, satisfactorily defined in the Omnibus Election Code.
Now, the needed factual premises.
However valid the law and the COMELEC issuance involved are, their proper application in the
case of the petitioner cannot be tested and reviewed by this Court on the basis of what is now
before it. The assailed resolutions of the COMELEC do not direct the Court to the evidence which it
considered in determining that petitioner was a nuisance candidate. This precludes the Court from
reviewing at this instance whether the COMELEC committed grave abuse of discretion in
disqualifying petitioner, since such a review would necessarily take into account the matters
which the COMELEC considered in arriving at its decisions.
Petitioner has submitted to this Court mere photocopies of various documents purportedly
evincing his credentials as an eligible candidate for the presidency. Yet this Court, not being a trier
of facts, can not properly pass upon the reproductions as evidence at this level. Neither the
COMELEC nor the Solicitor General appended any document to their respective Comments.
The question of whether a candidate is a nuisance candidate or not is both legal and factual. The
basis of the factual determination is not before this Court. Thus, the remand of this case for the
reception of further evidence is in order.
A word of caution is in order. What is at stake is petitioners aspiration and offer to serve in the
government. It deserves not a cursory treatment but a hearing which conforms to the
requirements of due process.
As to petitioners attacks on the validity of the form for the certificate of candidacy, suffice it to
say that the form strictly complies with Section 74 of the Omnibus Election Code. This provision
specifically enumerates what a certificate of candidacy should contain, with the required
information tending to show that the candidate possesses the minimum qualifications for the
position aspired for as established by the Constitution and other election laws.
IN VIEW OF THE FOREGOING, COMELEC Case No. SPP (MP) No. 04-001 is hereby remanded to the
COMELEC for the reception of further evidence, to determine the question on whether petitioner
Elly Velez Lao Pamatong is a nuisance candidate as contemplated in Section 69 of the Omnibus
Election Code.
The COMELEC is directed to hold and complete the reception of evidence and report its findings to
this Court with deliberate dispatch.
SO ORDERED.

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THIS case portrays the peculiar story of an international flight steward who was dismissed
because of his failure to adhere to the weight standards of the airline company.
He is now before this Court via a petition for review on certiorari claiming that he was illegally
dismissed. To buttress his stance, he argues that (1) his dismissal does not fall under 282(e) of the
Labor Code; (2) continuing adherence to the weight standards of the company is not a bona fide
occupational qualification; and (3) he was discriminated against because other overweight
employees were promoted instead of being disciplined.
After a meticulous consideration of all arguments pro and con, We uphold the legality of dismissal.
Separation pay, however, should be awarded in favor of the employee as an act of social justice or
based on equity. This is so because his dismissal is not for serious misconduct. Neither is it
reflective of his moral character.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines,
Inc. (PAL). He stands five feet and eight inches (58") with a large body frame. The proper weight
for a man of his height and body structure is from 147 to 166 pounds, the ideal weight being 166
pounds, as mandated by the Cabin and Crew Administration Manual 1 of PAL.
The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an
extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight
concerns. Apparently, petitioner failed to meet the companys weight standards, prompting
another leave without pay from March 5, 1985 to November 1985.
After meeting the required weight, petitioner was allowed to return to work. But petitioners
weight problem recurred. He again went on leave without pay from October 17, 1988 to February
1989.

Republic of the Philippines

SUPREME COURT
Manila

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with
company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989. He was
formally requested to trim down to his ideal weight and report for weight checks on several dates.
He was also told that he may avail of the services of the company physician should he wish to do
so. He was advised that his case will be evaluated on July 3, 1989. 2

THIRD DIVISION
G.R. No. 168081

October 17, 2008

ARMANDO G. YRASUEGUI, petitioners,

vs.
PHILIPPINE AIRLINES, INC., respondents.
DECISION
REYES, R.T., J.:

[Type text]

On February 25, 1989, petitioner underwent weight check. It was discovered that he gained,
instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the limit.
Consequently, his off-duty status was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his
residence to check on the progress of his effort to lose weight. Petitioner weighed 217 pounds,
gaining 2 pounds from his previous weight. After the visit, petitioner made a commitment 3 to
reduce weight in a letter addressed to Cabin Crew Group Manager Augusto Barrios. The letter, in
full, reads:
Dear Sir:

I would like to guaranty my commitment towards a weight loss from 217 pounds
to 200 pounds from today until 31 Dec. 1989.
From thereon, I promise to continue reducing at a reasonable percentage until
such time that my ideal weight is achieved.
Likewise, I promise to personally report to your office at the designated time
schedule you will set for my weight check.

On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was
undergoing a weight reduction program to lose at least two (2) pounds per week so as to attain
his ideal weight.10
On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his
ideal weight, "and considering the utmost leniency" extended to him "which spanned a period
covering a total of almost five (5) years," his services were considered terminated "effective
immediately."11
His motion for reconsideration having been denied, 12 petitioner filed a complaint for illegal
dismissal against PAL.

Respectfully Yours,
F/S Armando Yrasuegui4

Labor Arbiter, NLRC and CA Dispositions

Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained
overweight. On January 3, 1990, he was informed of the PAL decision for him to remain grounded
until such time that he satisfactorily complies with the weight standards. Again, he was directed
to report every two weeks for weight checks.
Petitioner failed to report for weight checks. Despite that, he was given one more month to
comply with the weight requirement. As usual, he was asked to report for weight check on
different dates. He was reminded that his grounding would continue pending satisfactory
compliance with the weight standards.5
Again, petitioner failed to report for weight checks, although he was seen submitting his passport
for processing at the PAL Staff Service Division.

On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled 13 that petitioner was illegally
dismissed. The dispositive part of the Arbiter ruling runs as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring
the complainants dismissal illegal, and ordering the respondent to reinstate him
to his former position or substantially equivalent one, and to pay him:
a. Backwages of Php10,500.00 per month from his dismissal on June 15, 1993
until reinstated, which for purposes of appeal is hereby set from June 15, 1993 up
to August 15, 1998 at P651,000.00;
b. Attorneys fees of five percent (5%) of the total award.

On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight
check would be dealt with accordingly. He was given another set of weight check dates. 6 Again,
petitioner ignored the directive and did not report for weight checks. On June 26, 1990, petitioner
was required to explain his refusal to undergo weight checks. 7
When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was still
way over his ideal weight of 166 pounds.
From then on, nothing was heard from petitioner until he followed up his case requesting for
leniency on the latter part of 1992. He weighed at 219 pounds on August 20, 1992 and 205
pounds on November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for
violation of company standards on weight requirements. He was given ten (10) days from receipt
of the charge within which to file his answer and submit controverting evidence. 8

SO ORDERED.14
The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature of the
job of petitioner.15 However, the weight standards need not be complied with under pain of
dismissal since his weight did not hamper the performance of his duties. 16 Assuming that it did,
petitioner could be transferred to other positions where his weight would not be a negative
factor.17 Notably, other overweight employees, i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were
promoted instead of being disciplined. 18
Both parties appealed to the National Labor Relations Commission (NLRC). 19
On October 8, 1999, the Labor Arbiter issued a writ of execution directing the reinstatement of
petitioner without loss of seniority rights and other benefits. 20
On February 1, 2000, the Labor Arbiter denied21 the Motion to Quash Writ of Execution22 of PAL.

On December 7, 1992, petitioner submitted his Answer. Notably, he did not deny being
overweight. What he claimed, instead, is that his violation, if any, had already been condoned by
PAL since "no action has been taken by the company" regarding his case "since 1988." He also
claimed that PAL discriminated against him because "the company has not been fair in treating
the cabin crew members who are similarly situated."
9

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On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC. 23
On June 23, 2000, the NLRC rendered judgment24 in the following tenor:

WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18

November 1998 as modified by our findings herein, is hereby AFFIRMED and
that part of the dispositive portion of said decision concerning complainants
entitlement to backwages shall be deemed to refer to complainants entitlement
to his full backwages, inclusive of allowances and to his other benefits or their
monetary equivalent instead of simply backwages, from date of dismissal until
his actual reinstatement or finality hereof. Respondent is enjoined to manifests
(sic) its choice of the form of the reinstatement of complainant, whether physical
or through payroll within ten (10) days from notice failing which, the same shall
be deemed as complainants reinstatement through payroll and execution in case
of non-payment shall accordingly be issued by the Arbiter. Both appeals of
respondent thus, are DISMISSED for utter lack of merit.25
According to the NLRC, "obesity, or the tendency to gain weight uncontrollably regardless of the
amount of food intake, is a disease in itself." 26 As a consequence, there can be no intentional
defiance or serious misconduct by petitioner to the lawful order of PAL for him to lose weight. 27
Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable. However, it
found as unnecessary the Labor Arbiter holding that petitioner was not remiss in the performance
of his duties as flight steward despite being overweight. According to the NLRC, the Labor Arbiter
should have limited himself to the issue of whether the failure of petitioner to attain his ideal
weight constituted willful defiance of the weight standards of PAL. 28

On May 10, 2005, the CA denied petitioners motion for reconsideration. 41 Elaborating on its
earlier ruling, the CA held that the weight standards of PAL are a bona fide occupational
qualification which, in case of violation, "justifies an employees separation from the service." 42
Issues
In this Rule 45 petition for review, the following issues are posed for resolution:
I.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONERS OBESITY CAN BE A GROUND FOR DISMISSAL UNDER PARAGRAPH
(e) OF ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES;
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONERS DISMISSAL FOR OBESITY CAN BE PREDICATED ON THE "BONA FIDE
OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE";
III.

PAL moved for reconsideration to no avail. 29 Thus, PAL elevated the matter to the Court of Appeals
(CA) via a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. 30
By Decision dated August 31, 2004, the CA reversed 31 the NLRC:
WHEREFORE, premises considered, we hereby GRANT the petition. The assailed
NLRC decision is declared NULL and VOID and is hereby SET ASIDE. The private
respondents complaint is hereby DISMISSED. No costs.
SO ORDERED.32
The CA opined that there was grave abuse of discretion on the part of the NLRC because it "looked
at wrong and irrelevant considerations" 33 in evaluating the evidence of the parties. Contrary to the
NLRC ruling, the weight standards of PAL are meant to be a continuing qualification for an
employees position.34 The failure to adhere to the weight standards is an analogous cause for the
dismissal of an employee under Article 282(e) of the Labor Code in relation to Article 282(a). It is
not willful disobedience as the NLRC seemed to suggest. 35 Said the CA, "the element of willfulness
that the NLRC decision cites is an irrelevant consideration in arriving at a conclusion on whether
the dismissal is legally proper." 36 In other words, "the relevant question to ask is not one of
willfulness but one of reasonableness of the standard and whether or not the employee qualifies
or continues to qualify under this standard." 37
Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of PAL are
reasonable.38 Thus, petitioner was legally dismissed because he repeatedly failed to meet the
prescribed weight standards. 39 It is obvious that the issue of discrimination was only invoked by
petitioner for purposes of escaping the result of his dismissal for being overweight. 40

[Type text]

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

PETITIONER WAS NOT UNDULY DISCRIMINATED AGAINST WHEN HE WAS
DISMISSED WHILE OTHER OVERWEIGHT CABIN ATTENDANTS WERE EITHER GIVEN
FLYING DUTIES OR PROMOTED;
IV.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED
ASIDE PETITIONERS CLAIMS FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR
BEING MOOT AND ACADEMIC.43 (Underscoring supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under Article 282(e)
Code.

44

of the Labor

A reading of the weight standards of PAL would lead to no other conclusion than that they
constitute a continuing qualification of an employee in order to keep the job. Tersely put, an
employee may be dismissed the moment he is unable to comply with his ideal weight as
prescribed by the weight standards. The dismissal of the employee would thus fall under Article
282(e) of the Labor Code. As explained by the CA:
x x x [T]he standards violated in this case were not mere "orders" of the
employer; they were the "prescribed weights" that a cabin crew must maintain in

order to qualify for and keep his or her position in the company. In other
words, they were standards that establish continuing qualifications for an
employees position. In this sense, the failure to maintain these standards does
not fall under Article 282(a) whose express terms require the element of
willfulness in order to be a ground for dismissal. The failure to meet the
employers qualifying standards is in fact a ground that does not squarely fall
under grounds (a) to (d) and is therefore one that falls under Article 282(e) the
"other causes analogous to the foregoing."
By its nature, these "qualifying standards" are norms that apply prior to and
after an employee is hired. They apply prior to employment because these
are the standards a job applicant must initially meet in order to be hired. They
apply after hiring because an employee must continue to meet these standards
while on the job in order to keep his job. Under this perspective, a violation is not
one of the faults for which an employee can be dismissed pursuant to pars. (a) to
(d) of Article 282; the employee can be dismissed simply because he no longer
"qualifies" for his job irrespective of whether or not the failure to qualify was
willful or intentional. x x x45
Petitioner, though, advances a very interesting argument. He claims that obesity is a "physical
abnormality and/or illness."46 Relying on Nadura v. Benguet Consolidated, Inc., 47 he says his
dismissal is illegal:
Conscious of the fact that Naduras case cannot be made to fall squarely within
the specific causes enumerated in subparagraphs 1(a) to (e), Benguet invokes
the provisions of subparagraph 1(f) and says that Naduras illness occasional
attacks of asthma is a cause analogous to them.
Even a cursory reading of the legal provision under consideration is sufficient to
convince anyone that, as the trial court said, "illness cannot be included as an
analogous cause by any stretch of imagination."
It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the
others expressly enumerated in the law are due to the voluntary and/or willful act
of the employee. How Naduras illness could be considered as "analogous" to any
of them is beyond our understanding, there being no claim or pretense that the
same was contracted through his own voluntary act.48
The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from
the case at bar. First, Nadura was not decided under the Labor Code. The law applied in that case
was Republic Act (RA) No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the
rationale there cannot apply here. Third, in Nadura, the employee who was a miner, was laid off
from work because of illness, i.e., asthma. Here, petitioner was dismissed for his failure to meet
the weight standards of PAL. He was not dismissed due to illness. Fourth, the issue in Nadura is
whether or not the dismissed employee is entitled to separation pay and damages. Here, the
issue centers on the propriety of the dismissal of petitioner for his failure to meet the weight
standards of PAL. Fifth, in Nadura, the employee was not accorded due process. Here, petitioner
was accorded utmost leniency. He was given more than four (4) years to comply with the weight
standards of PAL.

[Type text]

In the case at bar, the evidence on record militates against petitioners claims that obesity is a
disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is possible
for him to lose weight given the proper attitude, determination, and self-discipline. Indeed, during
the clarificatory hearing on December 8, 1992, petitioner himself claimed that "[t]he issue is could
I bring my weight down to ideal weight which is 172, then the answer is yes. I can do it now." 49
True, petitioner claims that reducing weight is costing him "a lot of expenses." 50 However,
petitioner has only himself to blame. He could have easily availed the assistance of the company
physician, per the advice of PAL. 51 He chose to ignore the suggestion. In fact, he repeatedly failed
to report when required to undergo weight checks, without offering a valid explanation. Thus, his
fluctuating weight indicates absence of willpower rather than an illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation
and Hospitals,52 decided by the United States Court of Appeals (First Circuit). In that case, Cook
worked from 1978 to 1980 and from 1981 to 1986 as an institutional attendant for the mentally
retarded at the Ladd Center that was being operated by respondent. She twice resigned
voluntarily with an unblemished record. Even respondent admitted that her performance met the
Centers legitimate expectations. In 1988, Cook re-applied for a similar position. At that time, "she
stood 52" tall and weighed over 320 pounds." Respondent claimed that the morbid obesity of
plaintiff compromised her ability to evacuate patients in case of emergency and it also put her at
greater risk of serious diseases.
Cook contended that the action of respondent amounted to discrimination on the basis of a
handicap. This was in direct violation of Section 504(a) of the Rehabilitation Act of 1973, 53 which
incorporates the remedies contained in Title VI of the Civil Rights Act of 1964. Respondent
claimed, however, that morbid obesity could never constitute a handicap within the purview of
the Rehabilitation Act. Among others, obesity is a mutable condition, thus plaintiff could simply
lose weight and rid herself of concomitant disability.
The appellate Court disagreed and held that morbid obesity is a disability under the Rehabilitation
Act and that respondent discriminated against Cook based on "perceived" disability. The evidence
included expert testimony that morbid obesity is a physiological disorder. It involves a dysfunction
of both the metabolic system and the neurological appetite suppressing signal system, which is
capable of causing adverse effects within the musculoskeletal, respiratory, and cardiovascular
systems. Notably, the Court stated that "mutability is relevant only in determining the
substantiality of the limitation flowing from a given impairment," thus "mutability only precludes
those conditions that an individual can easily and quickly reverse by behavioral alteration."
Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the
District of Rhode Island, Cook was sometime before 1978 "at least one hundred pounds more than
what is considered appropriate of her height." According to the Circuit Judge, Cook weighed "over
320 pounds" in 1988. Clearly, that is not the case here. At his heaviest, petitioner was only less
than 50 pounds over his ideal weight.
In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight
attendant, becomes an analogous cause under Article 282(e) of the Labor Code that justifies his
dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary. As
the CA correctly puts it, "[v]oluntariness basically means that the just cause is solely attributable
to the employee without any external force influencing or controlling his actions. This element

runs through all just causes under Article 282, whether they be in the nature of a wrongful action
or omission. Gross and habitual neglect, a recognized just cause, is considered voluntary although
it lacks the element of intent found in Article 282(a), (c), and (d)." 54
II. The dismissal of petitioner can be predicated on the bona fide occupational qualification
defense.
Employment in particular jobs may not be limited to persons of a particular sex, religion, or
national origin unless the employer can show that sex, religion, or national origin is an actual
qualification for performing the job. The qualification is called a bona fide occupational
qualification (BFOQ).55 In the United States, there are a few federal and many state job
discrimination laws that contain an exception allowing an employer to engage in an otherwise
unlawful form of prohibited discrimination when the action is based on a BFOQ necessary to the
normal operation of a business or enterprise. 56
Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute
providing for it.57 Further, there is no existing BFOQ statute that could justify his dismissal. 58
Both arguments must fail.
First, the Constitution,59 the Labor Code,60 and RA No. 727761 or the Magna Carta for Disabled
Persons62 contain provisions similar to BFOQ.
Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British
Columbia Government and Service Employees Union (BCGSEU), 63 the Supreme Court of Canada
adopted the so-called "Meiorin Test" in determining whether an employment policy is justified.
Under this test, (1) the employer must show that it adopted the standard for a purpose rationally
connected to the performance of the job; 64 (2) the employer must establish that the standard is
reasonably necessary65 to the accomplishment of that work-related purpose; and (3) the employer
must establish that the standard is reasonably necessary in order to accomplish the legitimate
work-related purpose. Similarly, in Star Paper Corporation v. Simbol,66 this Court held that in order
to justify a BFOQ, the employer must prove that (1) the employment qualification is reasonably
related to the essential operation of the job involved; and (2) that there is factual basis for
believing that all or substantially all persons meeting the qualification would be unable to properly
perform the duties of the job.67
In short, the test of reasonableness of the company policy is used because it is parallel to BFOQ. 68
BFOQ is valid "provided it reflects an inherent quality reasonably necessary for satisfactory job
performance."69
In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc., 70 the Court did
not hesitate to pass upon the validity of a company policy which prohibits its employees from
marrying employees of a rival company. It was held that the company policy is reasonable
considering that its purpose is the protection of the interests of the company against possible
competitor infiltration on its trade secrets and procedures.
Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting
statute. Too, the Labor Arbiter,71 NLRC,72 and CA73 are one in holding that the weight standards of

[Type text]

PAL are reasonable. A common carrier, from the nature of its business and for reasons of public
policy, is bound to observe extraordinary diligence for the safety of the passengers it transports. 74
It is bound to carry its passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the circumstances. 75
The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only
logical to hold that the weight standards of PAL show its effort to comply with the exacting
obligations imposed upon it by law by virtue of being a common carrier.
The business of PAL is air transportation. As such, it has committed itself to safely transport its
passengers. In order to achieve this, it must necessarily rely on its employees, most particularly
the cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be
viewed as imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the weight standards for cabin
crew is flight safety. It cannot be gainsaid that cabin attendants must maintain agility at all times
in order to inspire passenger confidence on their ability to care for the passengers when
something goes wrong. It is not farfetched to say that airline companies, just like all common
carriers, thrive due to public confidence on their safety records. People, especially the riding
public, expect no less than that airline companies transport their passengers to their respective
destinations safely and soundly. A lesser performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving meals or attending to the
whims and caprices of the passengers. The most important activity of the cabin crew is to care for
the safety of passengers and the evacuation of the aircraft when an emergency occurs. Passenger
safety goes to the core of the job of a cabin attendant. Truly, airlines need cabin attendants who
have the necessary strength to open emergency doors, the agility to attend to passengers in
cramped working conditions, and the stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are important factors to
consider in case of emergency. Aircrafts have constricted cabin space, and narrow aisles and exit
doors. Thus, the arguments of respondent that "[w]hether the airlines flight attendants are
overweight or not has no direct relation to its mission of transporting passengers to their
destination"; and that the weight standards "has nothing to do with airworthiness of respondents
airlines," must fail.
The rationale in Western Air Lines v. Criswell 76 relied upon by petitioner cannot apply to his case.
What was involved there were two (2) airline pilots who were denied reassignment as flight
engineers upon reaching the age of 60, and a flight engineer who was forced to retire at age 60.
They sued the airline company, alleging that the age-60 retirement for flight engineers violated
the Age Discrimination in Employment Act of 1967. Age-based BFOQ and being overweight are
not the same. The case of overweight cabin attendants is another matter. Given the cramped
cabin space and narrow aisles and emergency exit doors of the airplane, any overweight cabin
attendant would certainly have difficulty navigating the cramped cabin area.
In short, there is no need to individually evaluate their ability to perform their task. That an obese
cabin attendant occupies more space than a slim one is an unquestionable fact which courts can
judicially recognize without introduction of evidence. 77 It would also be absurd to require airline

companies to reconfigure the aircraft in order to widen the aisles and exit doors just to
accommodate overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the possibility of impeding passengers
from evacuating the aircraft, should the occasion call for it. The job of a cabin attendant during
emergencies is to speedily get the passengers out of the aircraft safely. Being overweight
necessarily impedes mobility. Indeed, in an emergency situation, seconds are what cabin
attendants are dealing with, not minutes. Three lost seconds can translate into three lost lives.
Evacuation might slow down just because a wide-bodied cabin attendant is blocking the narrow
aisles. These possibilities are not remote.
Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made
known to him prior to his employment. He is presumed to know the weight limit that he must
maintain at all times.78 In fact, never did he question the authority of PAL when he was repeatedly
asked to trim down his weight. Bona fides exigit ut quod convenit fiat. Good faith demands that
what is agreed upon shall be done. Kung ang tao ay tapat kanyang tutuparin ang
napagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations based on height and body
frame for both male and female cabin attendants. A progressive discipline is imposed to allow
non-compliant cabin attendants sufficient opportunity to meet the weight standards. Thus, the
clear-cut rules obviate any possibility for the commission of abuse or arbitrary action on the part
of PAL.
III. Petitioner failed to substantiate his claim that he was discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a convenient excuse to discriminate
against him.79 We are constrained, however, to hold otherwise. We agree with the CA that "[t]he
element of discrimination came into play in this case as a secondary position for the private
respondent in order to escape the consequence of dismissal that being overweight entailed. It is a
confession-and-avoidance position that impliedly admitted the cause of dismissal, including the
reasonableness of the applicable standard and the private respondents failure to comply." 80 It is a
basic rule in evidence that each party must prove his affirmative allegation. 81
Since the burden of evidence lies with the party who asserts an affirmative allegation, petitioner
has to prove his allegation with particularity. There is nothing on the records which could support
the finding of discriminatory treatment. Petitioner cannot establish discrimination by simply
naming the supposed cabin attendants who are allegedly similarly situated with him. Substantial
proof must be shown as to how and why they are similarly situated and the differential treatment
petitioner got from PAL despite the similarity of his situation with other employees.
Indeed, except for pointing out the names of the supposed overweight cabin attendants,
petitioner miserably failed to indicate their respective ideal weights; weights over their ideal
weights; the periods they were allowed to fly despite their being overweight; the particular flights
assigned to them; the discriminating treatment they got from PAL; and other relevant data that
could have adequately established a case of discriminatory treatment by PAL. In the words of the
CA, "PAL really had no substantial case of discrimination to meet." 82

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We are not unmindful that findings of facts of administrative agencies, like the Labor Arbiter and
the NLRC, are accorded respect, even finality. 83 The reason is simple: administrative agencies are
experts in matters within their specific and specialized jurisdiction. 84 But the principle is not a hard
and fast rule. It only applies if the findings of facts are duly supported by substantial evidence. If it
can be shown that administrative bodies grossly misappreciated evidence of such nature so as to
compel a conclusion to the contrary, their findings of facts must necessarily be reversed. Factual
findings of administrative agencies do not have infallibility and must be set aside when they fail
the test of arbitrariness.85
Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We thus annul their
findings.
To make his claim more believable, petitioner invokes the equal protection clause guaranty 86 of
the Constitution. However, in the absence of governmental interference, the liberties guaranteed
by the Constitution cannot be invoked. 87 Put differently, the Bill of Rights is not meant to be
invoked against acts of private individuals. 88 Indeed, the United States Supreme Court, in
interpreting the Fourteenth Amendment, 89 which is the source of our equal protection guarantee,
is consistent in saying that the equal protection erects no shield against private conduct, however
discriminatory or wrongful.90 Private actions, no matter how egregious, cannot violate the equal
protection guarantee.91
IV. The claims of petitioner for reinstatement and wages are moot.
As his last contention, petitioner avers that his claims for reinstatement and wages have not been
mooted. He is entitled to reinstatement and his full backwages, "from the time he was illegally
dismissed" up to the time that the NLRC was reversed by the CA. 92
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer, merely reinstated in
the payroll. The posting of a bond by the employer shall not stay the execution
for reinstatement provided herein.
The law is very clear. Although an award or order of reinstatement is self-executory and does not
require a writ of execution,93 the option to exercise actual reinstatement or payroll reinstatement
belongs to the employer. It does not belong to the employee, to the labor tribunals, or even to the
courts.
Contrary to the allegation of petitioner that PAL "did everything under the sun" to frustrate his
"immediate return to his previous position," 94 there is evidence that PAL opted to physically
reinstate him to a substantially equivalent position in accordance with the order of the Labor
Arbiter.95 In fact, petitioner duly received the return to work notice on February 23, 2001, as
shown by his signature.96

Petitioner cannot take refuge in the pronouncements of the Court in a case 97 that "[t]he unjustified
refusal of the employer to reinstate the dismissed employee entitles him to payment of his
salaries effective from the time the employer failed to reinstate him despite the issuance of a writ
of execution"98 and ""even if the order of reinstatement of the Labor Arbiter is reversed on appeal,
it is obligatory on the part of the employer to reinstate and pay the wages of the employee during
the period of appeal until reversal by the higher court." 99 He failed to prove that he complied with
the return to work order of PAL. Neither does it appear on record that he actually rendered
services for PAL from the moment he was dismissed, in order to insist on the payment of his full
backwages.
In insisting that he be reinstated to his actual position despite being overweight, petitioner in
effect wants to render the issues in the present case moot. He asks PAL to comply with the
impossible. Time and again, the Court ruled that the law does not exact compliance with the
impossible.100
V. Petitioner is entitled to separation pay.

EN BANC
DATU MICHAEL ABAS KIDA v SENATE (2011)
x------------------------------------------------------------------------------------x
DECISION
BRION, J.:
On June 30, 2011, Republic Act (RA) No. 10153, entitled An Act Providing for the
Synchronization of the Elections in the Autonomous Region in Muslim Mindanao (ARMM) with the

Be that as it may, all is not lost for petitioner.

National and Local Elections and for Other Purposes was enacted. The law reset the ARMM

Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced
from the language of Article 279 of the Labor Code that "[a]n employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his
actual reinstatement." Luckily for petitioner, this is not an ironclad rule.

elections from the 8th of August 2011, to the second Monday of May 2013 and every three (3)

Exceptionally, separation pay is granted to a legally dismissed employee as an act "social

justice,"101 or based on "equity."102 In both instances, it is required that the dismissal (1) was not
for serious misconduct; and (2) does not reflect on the moral character of the employee. 103

May 2013 elections shall have qualified and assumed office.

Here, We grant petitioner separation pay equivalent to one-half (1/2) months pay for every year
of service.104 It should include regular allowances which he might have been receiving. 105 We are
not blind to the fact that he was not dismissed for any serious misconduct or to any act which
would reflect on his moral character. We also recognize that his employment with PAL lasted for
more or less a decade.

petitions against their validity; House Bill No. 4146 and Senate Bill No. 2756 were challenged in

WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in that
petitioner Armando G. Yrasuegui is entitled to separation pay in an amount equivalent to one-half
(1/2) months pay for every year of service, which should include his regular allowances.

granted the President the power to appoint officers-in-charge (OICs) for the Office of the Regional
Governor, the Regional Vice-Governor, and the Members of the Regional Legislative Assembly,
who shall perform the functions pertaining to the said offices until the officials duly elected in the

Even before its formal passage, the bills that became RA No. 10153 already spawned
petitions filed with this Court. These petitions multiplied after RA No. 10153 was passed.

Factual Antecedents
The State, through Sections 15 to 22, Article X of the 1987 Constitution, mandated the

SO ORDERED.

creation of autonomous regions in Muslim Mindanao and the Cordilleras. Section 15 states:
Republic of the Philippines
Supreme Court
Manila

[Type text]

years thereafter, to coincide with the countrys regular national and local elections. The law as well

Section 15. There shall be created autonomous regions in Muslim Mindanao and in the
Cordilleras consisting of provinces, cities, municipalities, and geographical areas sharing
common and distinctive historical and cultural heritage, economic and social structures,
and other relevant characteristics within the framework of this Constitution and the
national sovereignty as well as territorial integrity of the Republic of the Philippines.

Section 18 of the Article, on the other hand, directed Congress to enact an organic act for
these autonomous regions to concretely carry into effect the granted autonomy.

RA No. 9054 was ratified in a plebiscite held on August 14, 2001. The province of Basilan
and Marawi City voted to join ARMM on the same date.
RA No. 93332 was subsequently passed by Congress to reset the ARMM regional elections

Section 18. The Congress shall enact an organic act for each autonomous region
with the assistance and participation of the regional consultative commission
composed of representatives appointed by the President from a list of nominees
from multisectoral bodies. The organic act shall define the basic structure of
government for the region consisting of the executive department and legislative
assembly, both of which shall be elective and representative of the constituent
political units. The organic acts shall likewise provide for special courts with
personal, family and property law jurisdiction consistent with the provisions of
this Constitution and national laws.
The creation of the autonomous region shall be effective when approved
by a majority of the votes cast by the constituent units in a plebiscite called for
the purpose, provided that only provinces, cities, and geographic areas voting
favorably in such plebiscite shall be included in the autonomous region.

to the 2

nd

Monday of August 2005, and on the same date every 3 years thereafter. Unlike RA No.

6734 and RA No. 9054, RA No. 9333 was not ratified in a plebiscite.
Pursuant to RA No. 9333, the next ARMM regional elections should have been held on
August 8, 2011. COMELEC had begun preparations for these elections and had accepted
certificates of candidacies for the various regional offices to be elected. But on June 30, 2011, RA
No. 10153 was enacted, resetting the ARMM elections to May 2013, to coincide with the regular
national and local elections of the country.
RA No. 10153 originated in the House of Representatives as House Bill ( HB) No. 4146,
seeking the postponement of the ARMM elections scheduled on August 8, 2011. On March 22,
2011, the House of Representatives passed HB No. 4146, with one hundred ninety one (191)

On August 1, 1989 or two years after the effectivity of the 1987 Constitution, Congress

Members voting in its favor.

acted through Republic Act (RA) No. 6734 entitled An Act Providing for an Organic Act for the
Autonomous Region in Muslim Mindanao. A plebiscite was held on November 6, 1990 as required

After the Senate received HB No. 4146, it adopted its own version, Senate Bill No. 2756

by Section 18(2), Article X of RA No. 6734, thus fully establishing the Autonomous Region of

(SB No. 2756), on June 6, 2011. Thirteen (13) Senators voted favorably for its passage. On June 7,

Muslim Mindanao (ARMM). The initially assenting provinces were Lanao del Sur, Maguindanao,

2011, the House of Representative concurred with the Senate amendments, and on June 30, 2011,

Sulu and Tawi-tawi. RA No. 6734 scheduled the first regular elections for the regional officials of

the President signed RA No. 10153 into law.

the ARMM on a date not earlier than 60 days nor later than 90 days after its ratification.
As mentioned, the early challenge to RA No. 10153 came through a petition filed with this
RA No. 9054 (entitled An Act to Strengthen and Expand the Organic Act for the Autonomous

Court G.R. No. 1962713 - assailing the constitutionality of both HB No. 4146 and SB No. 2756,

Region in Muslim Mindanao, Amending for the Purpose Republic Act No. 6734, entitled An Act

and challenging the validity of RA No. 9333 as well for non-compliance with the constitutional

Providing for the Autonomous Region in Muslim Mindanao, as Amended) was the next legislative

plebiscite requirement. Thereafter, petitioner Basari Mapupuno in G.R. No. 196305 filed another

act passed. This law provided further refinement in the basic ARMM structure first defined in the

petition4 also assailing the validity of RA No. 9333.

original organic act, and reset the regular elections for the ARMM regional officials to the second
With the enactment into law of RA No. 10153, the COMELEC stopped its preparations for

Monday of September 2001.

the ARMM elections. The law gave rise as well to the filing of the following petitions against its
Congress passed the next law affecting ARMM RA No. 9140 - on June 22, 2001. This law
1

constitutionality:

reset the first regular elections originally scheduled under RA No. 9054, to November 26, 2001. It
likewise set the plebiscite to ratify RA No. 9054 to not later than August 15, 2001.

[Type text]

a)

Petition for Certiorari and Prohibition5 filed by Rep. Edcel Lagman as a member of the

On September 13, 2011, the Court issued a temporary restraining order enjoining the

House of Representatives against Paquito Ochoa, Jr. (in his capacity as the Executive

implementation of RA No. 10153 and ordering the incumbent elective officials of ARMM to

Secretary) and the COMELEC, docketed as G.R. No. 197221;

continue to perform their functions should these cases not be decided by the end of their term on
September 30, 2011.

b)

Petition for Mandamus and Prohibition 6 filed by Atty. Romulo Macalintal as a taxpayer
against the COMELEC, docketed as G.R. No. 197282;

c)

Petition for Certiorari and Mandamus, Injunction and Preliminary Injunction 7 filed by Louis

The Arguments

Barok Biraogo against the COMELEC and Executive Secretary Paquito N. Ochoa, Jr.,
The petitioners assailing RA No. 9140, RA No. 9333 and RA No. 10153 assert that these laws

docketed as G.R. No. 197392; and

amend RA No. 9054 and thus, have to comply with the supermajority vote and plebiscite
d)

Petition for Certiorari and Mandamus filed by Jacinto Paras as a member of the House of

requirements prescribed under Sections 1 and 3, Article XVII of RA No. 9094 in order to become

Representatives against Executive Secretary Paquito Ochoa, Jr. and the COMELEC,

effective.

docketed as G.R. No. 197454.

The petitions assailing RA No. 10153 further maintain that it is unconstitutional for its failure
Petitioners Alamarim Centi Tillah and Datu Casan Conding Cana as registered voters from

to comply with the three-reading requirement of Section 26(2), Article VI of the Constitution. Also

the ARMM, with the Partido Demokratiko Pilipino Lakas ng Bayan (a political party with candidates

cited as grounds are the alleged violations of the right of suffrage of the people of ARMM, as well

in the ARMM regional elections scheduled for August 8, 2011), also filed a Petition for Prohibition

as the failure to adhere to the elective and representative character of the executive and

and Mandamus9 against the COMELEC, docketed as G.R. No. 197280, to assail the

legislative departments of the ARMM. Lastly, the petitioners challenged the grant to the President

constitutionality of RA No. 9140, RA No. 9333 and RA No. 10153.

of the power to appoint OICs to undertake the functions of the elective ARMM officials until the
officials elected under the May 2013 regular elections shall have assumed office. Corrolarily, they

Subsequently, Anak Mindanao Party-List, Minority Rights Forum Philippines, Inc. and
Bangsamoro Solidarity Movement filed their own Motion for Leave to Admit their Motion for

also argue that the power of appointment also gave the President the power of control over the
ARMM, in complete violation of Section 16, Article X of the Constitution.

Intervention and Comment-in-Intervention dated July 18, 2011. On July 26, 2011, the Court
granted the motion. In the same Resolution, the Court ordered the consolidation of all the
petitions relating to the constitutionality of HB No. 4146, SB No. 2756, RA No. 9333, and RA No.
The Issues

10153.
Oral arguments were held on August 9, 2011 and August 16, 2011. Thereafter, the parties
were instructed to submit their respective memoranda within twenty (20) days.

From the parties submissions, the following issues were recognized and argued by the parties
in the oral arguments of August 9 and 16, 2011:

5
6

I.

Whether the 1987 Constitution mandates the synchronization of elections

II.

Whether the passage of RA No. 10153 violates Section 26(2), Article VI of the
1987 Constitution

7
8
9

[Type text]

I. Synchronization as a recognized constitutional mandate

III. Whether the passage of RA No. 10153 requires a supermajority vote and
plebiscite
A.

Does the postponement of the ARMM regular elections constitute an

amendment to Section 7, Article XVIII of RA No. 9054?

B.

Does the requirement of a supermajority vote for amendments or

revisions to RA No. 9054 violate Section 1 and Section 16(2), Article
VI of the 1987 Constitution and the corollary doctrine on irrepealable
laws?

C.

IV.

The respondent Office of the Solicitor General (OSG) argues that the Constitution mandates
synchronization, and in support of this position, cites Sections 1, 2 and 5, Article XVIII (Transitory
Provisions) of the 1987 Constitution, which provides:

Section 1. The first elections of Members of the Congress under this Constitution
shall be held on the second Monday of May, 1987.
The first local elections shall be held on a date to be determined by the
President, which may be simultaneous with the election of the Members of the
Congress. It shall include the election of all Members of the city or municipal
councils in the Metropolitan Manila area.

Does the requirement of a plebiscite apply only in the creation of

autonomous regions under paragraph 2, Section 18, Article X of the
1987 Constitution?

Whether RA No. 10153 violates the autonomy granted to the ARMM

Section 2. The Senators, Members of the House of Representatives and the local
officials first elected under this Constitution shall serve until noon of June 30,
1992.

V. Whether the grant of the power to appoint OICs violates:

Of the Senators elected in the election in 1992, the first twelve obtaining the
highest number of votes shall serve for six year and the remaining twelve for
three years.

A. Section 15, Article X of the 1987 Constitution

VI.

B. Section 16, Article X of the 1987 Constitution

xxx

C. Section 18, Article X of the 1987 Constitution

Section 5. The six-year term of the incumbent President and Vice President
elected in the February 7, 1986 election is, for purposes of synchronization of
elections, hereby extended to noon of June 30, 1992.
The first regular elections for President and Vice-President under this Constitution
shall be held on the second Monday of May, 1992.

Whether the proposal to hold special elections is constitutional and legal.

We shall discuss these issues in the order they are presented above.

We agree with this position.

While the Constitution does not expressly state that Congress has to synchronize national
and local elections, the clear intent towards this objective can be gleaned from the Transitory
OUR RULING
We resolve to DISMISS the petitions and thereby UPHOLD the constitutionality of RA

Provisions (Article XVIII) of the Constitution, 10 which show the extent to which the Constitutional
Commission, by deliberately making adjustments to the terms of the incumbent officials, sought
to attain synchronization of elections. 11

No. 10153 in toto.

10
11

[Type text]

The objective behind setting a common termination date for all elective officials, done

A basic rule in constitutional construction is that the words used should be understood in

among others through the shortening the terms of the twelve winning senators with the least

the sense that they have in common use and given their ordinary meaning, except when technical

number of votes, is to synchronize the holding of all future elections whether national or local to

terms are employed, in which case the significance thus attached to them prevails. 15 As this Court

once every three years.12 This intention finds full support in the discussions during the

explained in People v. Derilo,16 [a]s the Constitution is not primarily a lawyers document, its

Constitutional Commission deliberations.13

language should be understood in the sense that it may have in common. Its words should be

These Constitutional Commission exchanges, read with the provisions of the Transitory

given their ordinary meaning except where technical terms are employed.

Provisions of the Constitution, all serve as patent indicators of the constitutional mandate to hold
Understood in its ordinary sense, the word local refers to something that primarily serves the

synchronized national and local elections, starting the second Monday of May, 1992 and for all the

needs of a particular limited district, often a community or minor political subdivision. 17 Regional

following elections.

elections in the ARMM for the positions of governor, vice-governor and regional assembly
representatives obviously fall within this classification, since they pertain to the elected officials
This Court was not left behind in recognizing the synchronization of the national and local
elections as a constitutional mandate. In Osmea v. Commission on Elections,

14

who will serve within the limited region of ARMM.

we explained:
From the perspective of the Constitution, autonomous regions are considered one of the
forms of local governments, as evident from Article X of the Constitution entitled Local

It is clear from the aforequoted provisions of the 1987 Constitution that

the terms of office of Senators, Members of the House of Representatives, the
local officials, the President and the Vice-President have been synchronized to
end on the same hour, date and year noon of June 30, 1992.
It is likewise evident from the wording of the above-mentioned Sections
that the term of synchronization is used synonymously as the phrase holding
simultaneously since this is the precise intent in terminating their Office Tenure
on the same day or occasion. This common termination date will synchronize
future elections to once every three years (Bernas, the Constitution of the
Republic of the Philippines, Vol. II, p. 605).
That the election for Senators, Members of the House of Representatives
and the local officials (under Sec. 2, Art. XVIII) will have to be synchronized with
the election for President and Vice President (under Sec. 5, Art. XVIII) is likewise
evident from the x x x records of the proceedings in the Constitutional
Commission. [Emphasis supplied.]

Government. Autonomous regions are established and discussed under Sections 15 to 21 of this
Article the article wholly devoted to Local Government. That an autonomous region is considered
a form of local government is also reflected in Section 1, Article X of the Constitution, which
provides:
Section 1. The territorial and political subdivisions of the Republic of the Philippines are
the provinces, cities, municipalities, and barangays. There shall be autonomous regions in
Muslim Mindanao, and the Cordilleras as hereinafter provided.
Thus, we find the contention that the synchronization mandated by the Constitution does
not include the regional elections of the ARMM unmeritorious. We shall refer to synchronization in
the course of our discussions below, as this concept permeates the consideration of the various
issues posed in this case and must be recalled time and again for its complete resolution.

Although called regional elections, the ARMM elections should be included among the
elections to be synchronized as it is a local election based on the wording and structure of the
Constitution.

II. The Presidents Certification on the Urgency of RA No. 10153

12

15

13

16

14

17

[Type text]

The petitioners in G.R. No. 197280 also challenge the validity of RA No. 10153 for its
alleged failure to comply with Section 26(2), Article VI of the Constitution

18

The sufficiency of the factual basis of the suspension of the writ of

habeas corpus or declaration of martial law Art. VII, Section 18, or the existence
of a national emergency justifying the delegation of extraordinary powers to the
President under Art. VI, Section 23(2) is subject to judicial review because basic
rights of individuals may be of hazard. But the factual basis of presidential
certification of bills, which involves doing away with procedural
requirements designed to insure that bills are duly considered by
members of Congress, certainly should elicit a different standard of
review. [Emphasis supplied.]

which provides that

before bills passed by either the House or the Senate can become laws, they must pass through
three readings on separate days. The exception is when the President certifies to the necessity of
the bills immediate enactment.
The Court, in Tolentino v. Secretary of Finance,19 explained the effect of the Presidents
certification of necessity in the following manner:
The presidential certification dispensed with the requirement not only of printing
but also that of reading the bill on separate days. The phrase "except when the President
certifies to the necessity of its immediate enactment, etc." in Art. VI, Section 26[2]
qualifies the two stated conditions before a bill can become a law: [i] the bill has passed
three readings on separate days and [ii] it has been printed in its final form and
distributed three days before it is finally approved.

The House of Representatives and the Senate in the exercise of their legislative discretion
gave full recognition to the Presidents certification and promptly enacted RA No. 10153. Under the
circumstances, nothing short of grave abuse of discretion on the part of the two houses of
Congress can justify our intrusion under our power of judicial review. 21
The petitioners, however, failed to provide us with any cause or justification for this

xxx

course of action. Hence, while the judicial department and this Court are not bound by the
That upon the certification of a bill by the President, the requirement of
three readings on separate days and of printing and distribution can be
dispensed with is supported by the weight of legislative practice. For example,
the bill defining the certiorari jurisdiction of this Court which, in consolidation
with the Senate version, became Republic Act No. 5440, was passed on second
and third readings in the House of Representatives on the same day [May 14,
1968] after the bill had been certified by the President as urgent.

acceptance of the President's certification by both the House of Representatives and the Senate,
prudent exercise of our powers and respect due our co-equal branches of government in matters
committed to them by the Constitution, caution a stay of the judicial hand. 22
In any case, despite the Presidents certification, the two-fold purpose that underlies the
requirement for three readings on separate days of every bill must always be observed to enable
our legislators and other parties interested in pending bills to intelligently respond to them.

In the present case, the records show that the President wrote to the Speaker of the

Specifically, the purpose with respect to Members of Congress is: (1) to inform the legislators of

House of Representatives to certify the necessity of the immediate enactment of a law

the matters they shall vote on and (2) to give them notice that a measure is in progress through

synchronizing the ARMM elections with the national and local elections.

the enactment process.23

20

Following our Tolentino

ruling, the Presidents certification exempted both the House and the Senate from having to
We find, based on the records of the deliberations on the law, that both advocates and

comply with the three separate readings requirement.

the opponents of the proposed measure had sufficient opportunities to present their views. In this
On the follow-up contention that no necessity existed for the immediate enactment of

light, no reason exists to nullify RA No. 10153 on the cited ground.

these bills since there was no public calamity or emergency that had to be met, again we hark
back to our ruling in Tolentino:
18

21

19

22

20

23

[Type text]

III. A. RA No. 9333 and RA No. 10153 are not amendments to RA No. 9054
The effectivity of RA No. 9333 and RA No. 10153 has also been challenged because they
did not comply with Sections 1 and 3, Article XVII of RA No. 9054 in amending this law. These
provisions require:
Section 1. Consistent with the provisions of the Constitution, this Organic Act may
be reamended or revised by the Congress of the Philippines upon a vote of twothirds (2/3) of the Members of the House of Representatives and of the Senate
voting separately.
Section 3. Any amendment to or revision of this Organic Act shall become
effective only when approved by a majority of the vote cast in a plebiscite called
for the purpose, which shall be held not earlier than sixty (60) days or later than
ninety (90) days after the approval of such amendment or revision.

legislative enactment. Consequently, RA No. 7647, 25 RA No. 8176,26 RA No. 8746,27 RA No. 8753,28
and RA No. 901229 were all enacted by Congress to fix the dates of the ARMM elections. Since
these laws did not change or modify any part or provision of RA No. 6734, they were not
amendments to this latter law. Consequently, there was no need to submit them to any plebiscite
for ratification.
The Second Organic Act RA No. 9054 which lapsed into law on March 31, 2001, provided
that the first elections would be held on the second Monday of September 2001. Thereafter,
Congress passed RA No. 914030 to reset the date of the ARMM elections. Significantly, while RA No.
9140 also scheduled the plebiscite for the ratification of the Second Organic Act (RA No. 9054),
the new date of the ARMM regional elections fixed in RA No. 9140 was not among the provisions
ratified in the plebiscite held to approve RA No. 9054. Thereafter, Congress passed RA No. 9333, 31
which further reset the date of the ARMM regional elections. Again, this law was not ratified
through a plebiscite.

We find no merit in this contention.

From these legislative actions, we see the clear intention of Congress to treat the laws
which fix the date of the subsequent ARMM elections as separate and distinct from the Organic
Acts. Congress only acted consistently with this intent when it passed RA No. 10153 without

In the first place, neither RA No. 9333 nor RA No. 10153 amends RA No. 9054. As an
examination of these laws will show, RA No. 9054 only provides for the schedule of the first

requiring compliance with the amendment prerequisites embodied in Section 1 and Section 3,
Article XVII of RA No. 9054.

ARMM elections and does not fix the date of the regular elections. A need therefore existed for the
Congress to fix the date of the subsequent ARMM regular elections, which it did by enacting RA
No. 9333 and thereafter, RA No. 10153. Obviously, these subsequent laws RA No. 9333 and RA
No. 10153 cannot be considered amendments to RA No. 9054 as they did not change

III. B. Supermajority voting requirement unconstitutional for giving RA No. 9054 the
character of an irrepealable law

or revise any provision in the latter law; they merely filled in a gap in RA No. 9054 or
supplemented the law by providing the date of the subsequent regular elections.
This view that Congress thought it best to leave the determination of the date of
succeeding ARMM elections to legislative discretion finds support in ARMMs recent history.
25

To recall, RA No. 10153 is not the first law passed that rescheduled the ARMM elections.
The First Organic Act RA No. 6734 not only did not fix the date of the subsequent elections; it did
not even fix the specific date of the first ARMM elections, 24 leaving the date to be fixed in another

26
27
28
29
30

24

[Type text]

31

Even assuming that RA No. 9333 and RA No. 10153 did in fact amend RA No. 9054, the
supermajority (2/3) voting requirement required under Section 1, Article XVII of RA No. 9054

32

or the effect of subsequent legislation upon existing statutes.34 (Emphasis

ours.)

has

to be struck down for giving RA No. 9054 the character of an irrepealable law by requiring more
than what the Constitution demands.
Thus, while a supermajority is not a total ban against a repeal, it is a limitation in excess
Section 16(2), Article VI of the Constitution provides that a majority of each House shall
constitute a quorum to do business. In other words, as long as majority of the members of the

of what the Constitution requires on the passage of bills and is constitutionally obnoxious because
it significantly constricts the future legislators room for action and flexibility.

House of Representatives or the Senate are present, these bodies have the quorum needed to
conduct business and hold session. Within a quorum, a vote of majority is generally sufficient to
enact laws or approve acts.

III. C. Section 3, Article XVII of RA No. 9054 excessively enlarged the plebiscite
requirement found in Section 18, Article X of the Constitution

In contrast, Section 1, Article XVII of RA No. 9054 requires a vote of no less than twothirds (2/3) of the Members of the House of Representatives and of the Senate, voting separately,

The requirements of RA No. 9054 not only required an unwarranted supermajority, but

in order to effectively amend RA No. 9054. Clearly, this 2/3 voting requirement is higher than what

enlarged as well the plebiscite requirement, as embodied in its Section 3, Article XVII of that Act.

the Constitution requires for the passage of bills, and served to restrain the plenary powers of

As we did on the supermajority requirement, we find the enlargement of the plebiscite

Congress to amend, revise or repeal the laws it had passed. The Courts pronouncement in City of

requirement required under Section 18, Article X of the Constitution to be excessive to point of

Davao v. GSIS33 on this subject best explains the basis and reason for the unconstitutionality:

absurdity and, hence, a violation of the Constitution.

Moreover, it would be noxious anathema to democratic principles for a

legislative body to have the ability to bind the actions of future legislative body,
considering that both assemblies are regarded with equal footing, exercising as
they do the same plenary powers. Perpetual infallibility is not one of the
attributes desired in a legislative body, and a legislature which attempts
to forestall future amendments or repeals of its enactments labors under
delusions of omniscience.

Section 18, Article X of the Constitution states that the plebiscite is required only for the
creation of autonomous regions and for determining which provinces, cities and geographic areas
will be included in the autonomous regions. While the settled rule is that amendments to the
Organic Act have to comply with the plebiscite requirement in order to become effective, 35
questions on the extent of the matters requiring ratification may unavoidably arise because of the
seemingly general terms of the Constitution and the obvious absurdity that would result if a
plebiscite were to be required for every statutory amendment.

xxx
A state legislature has a plenary law-making power over all subjects,
whether pertaining to persons or things, within its territorial jurisdiction, either to
introduce new laws or repeal the old, unless prohibited expressly or by implication
by the federal constitution or limited or restrained by its own. It cannot bind itself or
its successors by enacting irrepealable laws except when so restrained. Every
legislative body may modify or abolish the acts passed by itself or its predecessors.
This power of repeal may be exercised at the same session at which the original act
was passed; and even while a bill is in its progress and before it becomes a law.
This legislature cannot bind a future legislature to a particular mode of
repeal. It cannot declare in advance the intent of subsequent legislatures

Section 18, Article X of the Constitution plainly states that The creation of the
autonomous region shall be effective when approved by the majority of the votes case by the
constituent units in a plebiscite called for the purpose. With these wordings as standard, we
interpret the requirement to mean that only amendments to, or revisions of, the Organic Act
constitutionally-essential to the creation of autonomous regions i.e., those aspects specifically
mentioned in the Constitution which Congress must provide for in the Organic Act require
ratification through a plebiscite. These amendments to the Organic Act are those that relate to:

32

34

33

35

[Type text]

(a) the basic structure of the regional government; (b) the regions judicial system, i.e., the special

those elected in the synchronized elections assume office; 38 (2) to hold special elections in the

courts with personal, family, and property law jurisdiction; and, (c) the grant and extent of the

ARMM, with the terms of those elected to expire when those elected in the synchronized elections

legislative powers constitutionally conceded to the regional government under Section 20, Article

assume office; or (3) to authorize the President to appoint OICs, pursuant to Section 3 of RA No.

X of the Constitution.

10153, also until those elected in the synchronized elections assume office.

36

The date of the ARMM elections does not fall under any of the matters that the

As will be abundantly clear in the discussion below, Congress, in choosing to grant the

Constitution specifically mandated Congress to provide for in the Organic Act. Therefore, even

President the power to appoint OICs, chose the correct option and passed RA No. 10153 as a

assuming that the supermajority votes and the plebiscite requirements are valid, any change in

completely valid law.

the date of elections cannot be construed as a substantial amendment of the Organic Act that
would require compliance with these requirements.
V.

The Constitutionality of RA No. 10153

A.

IV. The synchronization issue

Basic Underlying Premises

As we discussed above, synchronization of national and local elections is a constitutional

To fully appreciate the available options, certain underlying material premises must be

mandate that Congress must provide for and this synchronization must include the ARMM

fully understood. The first is the extent of the powers of Congress to legislate; the second is the

elections. On this point, an existing law in fact already exists RA No. 7166 as the forerunner of the

constitutional mandate for the synchronization of elections; and the third is on the concept of

current RA No. 10153. RA No. 7166 already provides for the synchronization of local elections with

autonomy as recognized and established under the 1987 Constitution.

the national and congressional elections. Thus, what RA No. 10153 provides is an old matter for
local governments (with the exception of barangay and Sanggunian Kabataan elections where the

The grant of legislative power to Congress is broad, general and comprehensive. 39 The

terms are not constitutionally provided) and is technically a reiteration of what is already reflected

legislative body possesses plenary power for all purposes of civil government. 40 Any power,

in the law, given that regional elections are in reality local elections by express constitutional

deemed to be legislative by usage and tradition, is necessarily possessed by Congress, unless the

recognition.

Constitution has lodged it elsewhere. 41 Except as limited by the Constitution, either expressly or

37

impliedly, legislative power embraces all subjects and extends to all matters of general concern or
To achieve synchronization, Congress necessarily has to reconcile the schedule of the

common interest.42

ARMMs regular elections (which should have been held in August 2011 based on RA No. 9333)
The constitutional limitations on legislative power are either express or implied. The

with the fixed schedule of the national and local elections (fixed by RA No. 7166 to be held in May

express limitations are generally provided in some provisions of the Declaration of Principles and

2013).

State Policies (Article 2) and in the provisions Bill of Rights (Article 3). Other constitutional
During the oral arguments, the Court identified the three options open to Congress in

provisions (such as the initiative and referendum clause of Article 6, Sections 1 and 32, and the

order to resolve this problem. These options are: (1) to allow the elective officials in the ARMM to

38

remain in office in a hold over capacity, pursuant to Section 7(1), Article VII of RA No. 9054, until

39
40

36

41

37

42

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autonomy provisions of Article X) provide their own express limitations. The implied limitations are

suggests directly carries a narrower regional effect although its national effect cannot be

found in the evident purpose which was in view and the circumstances and historical events which

discounted.

led to the enactment of the particular provision as a part of organic law.

43

These underlying basic concepts characterize the powers and limitations of Congress
The constitutional provisions on autonomy specifically, Sections 15 to 21 of Article X of the

when it acted on RA No. 10153. To succinctly describe the legal situation that faced Congress

Constitution constitute express limitations on legislative power as they define autonomy, its

then, its decision to synchronize the regional elections with the national, congressional and all

requirements and its parameters, thus limiting what is otherwise the unlimited power of Congress

other local elections (save for barangay and sangguniang kabataan elections) left it with the

to legislate on the governance of the autonomous region.

problem of how to provide the ARMM with governance in the intervening period between
the expiration of the term of those elected in August 2008 and the assumption to office twenty-

Of particular relevance to the issues of the present case are the limitations posed by the

one (21) months away of those who will win in the synchronized elections on May 13, 2013.

prescribed basic structure of government i.e., that the government must have an executive
department and a legislative assembly, both of which must be elective and representative of the

The problem, in other words, was for interim measures for this period, consistent with

constituent political units; national government, too, must not encroach on the legislative powers

the terms of the Constitution and its established supporting jurisprudence, and with the respect

granted under Section 20, Article X. Conversely and as expressly reflected in Section 17, Article X,

due to the concept of autonomy. Interim measures, to be sure, is not a strange phenomenon in

all powers and functions not granted by this Constitution or by law to the autonomous regions

the Philippine legal landscape. The Constitutions Transitory Provisions themselves collectively

shall be vested in the National Government.

provide measures for transition from the old constitution to the new 46 and for the introduction of
new concepts.47 As previously mentioned, the adjustment of elective terms and of elections

The totality of Sections 15 to 21 of Article X should likewise serve as a standard that

towards the goal of synchronization first transpired under the Transitory Provisions. The

Congress must observe in dealing with legislation touching on the affairs of the autonomous

adjustments, however, failed to look far enough or deeply enough, particularly into the problems

regions. The terms of these sections leave no doubt on what the Constitution intends the idea of

that synchronizing regional autonomous elections would entail; thus, the present problem is with

self-rule or self-government, in particular, the power to legislate on a wide array of social,

us today.

economic and administrative matters. But equally clear under these provisions are the
permeating principles of national sovereignty and the territorial integrity of the Republic, as

The creation of local government units also represents instances when interim measures

expressed in the above-quoted Section 17 and in Section 15. 44 In other words, the Constitution

are required. In the creation of Quezon del Sur 48 and Dinagat Islands,49 the creating statutes

and the supporting jurisprudence, as they now stand, reject the notion of imperium et imperio45 in

authorized the President to appoint an interim governor, vice-governor and members of the

the relationship between the national and the regional governments.

sangguniang panlalawigan although these positions are essentially elective in character; the
appointive officials were to serve until a new set of provincial officials shall have been elected and

In relation with synchronization, both autonomy and the synchronization of national and local

qualified.50 A similar authority to appoint is provided in the transition of a local government from a

elections are recognized and established constitutional mandates, with one being as compelling

sub-province to a province.51

as the other. If their compelling force differs at all, the difference is in their coverage;
synchronization operates on and affects the whole country, while regional autonomy as the term

46
47
48

43

49

44

50

45

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In all these, the need for interim measures is dictated by necessity; out-of-the-way

It is not competent for the legislature to extend the term of officers by

providing that they shall hold over until their successors are elected and
qualified where the constitution has in effect or by clear implication prescribed
the term and when the Constitution fixes the day on which the official term shall
begin, there is no legislative authority to continue the office beyond that period,
even though the successors fail to qualify within the time.

arrangements and approaches were adopted or used in order to adjust to the goal or objective in
sight in a manner that does not do violence to the Constitution and to reasonably accepted norms.
Under these limitations, the choice of measures was a question of wisdom left to congressional
discretion.

In American Jurisprudence it has been stated as follows:

To return to the underlying basic concepts, these concepts shall serve as the guideposts
and markers in our discussion of the options available to Congress to address the problems
It has been broadly stated that the legislature
cannot, by an act postponing the election to fill an office
the term of which is limited by the Constitution, extend
the term of the incumbent beyond the period as limited
by the Constitution. [Emphasis ours.]

brought about by the synchronization of the ARMM elections, properly understood as interim
measures that Congress had to provide. The proper understanding of the options as interim
measures assume prime materiality as it is under these terms that the passage of RA No.
10153 should be measured, i.e., given the constitutional objective of synchronization
that cannot legally be faulted, did Congress gravely abuse its discretion or violate the
Constitution when it addressed through RA No. 10153 the concomitant problems that
the adjustment of elections necessarily brought with it?

Independently of the Osmea ruling, the primacy of the Constitution as the supreme law of
the land dictates that where the Constitution has itself made a determination or given its
mandate, then the matters so determined or mandated should be respected until the Constitution
itself is changed by amendment or repeal through the applicable constitutional process. A

B. Holdover Option is Unconstitutional

necessary corollary is that none of the three branches of government can deviate from the
constitutional mandate except only as the Constitution itself may allow. 53 If at all, Congress may

We rule out the first option holdover for those who were elected in executive and
legislative positions in the ARMM during the 2008-2011 term as an option that Congress could
have chosen because a holdover violates Section 8, Article X of the Constitution. This provision

only pass legislation filing in details to fully operationalize the constitutional command or to
implement it by legislation if it is non-self-executing; this Court, on the other hand, may only
interpret the mandate if an interpretation is appropriate and called for. 54

states:
In the case of the terms of local officials, their term has been fixed clearly and unequivocally,
Section 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. [emphases
ours]

allowing no room for any implementing legislation with respect to the fixed term itself and no
vagueness that would allow an interpretation from this Court. Thus, the term of three years for
local officials should stay at three (3) years as fixed by the Constitution and cannot be extended
by holdover by Congress.

Since elective ARMM officials are local officials, they are covered and bound by the threeyear term limit prescribed by the Constitution; they cannot extend their term through a holdover.
As this Court put in Osmea v. COMELEC:

52

If it will be claimed that the holdover period is effectively another term mandated by
Congress, the net result is for Congress to create a new term and to appoint the occupant for the
new term. This view like the extension of the elective term is constitutionally infirm because
53

52

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54

Congress cannot do indirectly what it cannot do directly, i.e., to act in a way that would effectively

provision. The deletion is a policy decision that is wholly within the discretion of Congress to make

extend the term of the incumbents. Indeed, if acts that cannot be legally done directly can be

in the exercise of its plenary legislative powers; this Court cannot pass upon questions of wisdom,

done indirectly, then all laws would be illusory.

justice or expediency of legislation, 62 except where an attendant unconstitutionality or grave

55

Congress cannot also create a new term and

effectively appoint the occupant of the position for the new term. This is effectively an act of

abuse of discretion results.

appointment by Congress and an unconstitutional intrusion into the constitutional appointment

C. The COMELEC has no authority to order special elections

power of the President.56 Hence, holdover whichever way it is viewed is a constitutionally infirm
option that Congress could not have undertaken.

Another option proposed by the petitioner in G.R. No. 197282 is for this Court to compel

Jurisprudence, of course, is not without examples of cases where the question of holdover
was brought before, and given the imprimatur of approval by, this Court. The present case though

COMELEC to immediately conduct special elections pursuant to Section 5 and 6 of Batas

Pambansa Bilang (BP) 881.

differs significantly from past cases with contrary rulings, particularly from Sambarani v.
COMELEC,57 Adap v. Comelec,58 and Montesclaros v. Comelec,59 where the Court ruled that the
elective officials could hold on to their positions in a hold over capacity.

The power to fix the date of elections is essentially legislative in nature, as evident from,
and exemplified by, the following provisions of the Constitution:
Section 8, Article VI, applicable to the legislature, provides:

All these past cases refer to elective barangay or sangguniang kabataan officials whose
terms of office are not explicitly provided for in the Constitution; the present case, on the other

Section 8. Unless otherwise provided by law, the regular election of

the Senators and the Members of the House of Representatives shall be held on
the second Monday of May. [Emphasis ours]

hand, refers to local elective officials the ARMM Governor, the ARMM Vice-Governor, and the
members of the Regional Legislative Assembly whose terms fall within the three-year term limit
set by Section 8, Article X of the Constitution. Because of their constitutionally limited term,
Congress cannot legislate an extension beyond the term for which they were originally elected.

Section 4(3), Article VII, with the same tenor but applicable solely to the President and ViceEven assuming that holdover is constitutionally permissible, and there had been statutory
basis for it (namely Section 7, Article VII of RA No. 9054) in the past,

60

President, states:

we have to remember that

the rule of holdover can only apply as an available option where no express or implied

xxxx

legislative intent to the contrary exists; it cannot apply where such contrary intent is

Section 4. xxx Unless otherwise provided by law, the regular

election for President and Vice-President shall be held on the second Monday of
May. [Emphasis ours]

evident.61
Congress, in passing RA No. 10153, made it explicitly clear that it had the intention of
suppressing the holdover rule that prevailed under RA No. 9054 by completely removing this

while Section 3, Article X, on local government, provides:

55
56

Section 3. The Congress shall enact a local government code

which shall provide for xxx the qualifications, election, appointment and
removal, term, salaries, powers and functions and duties of local officials[.]
[Emphases ours]

57
58
59
60
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These provisions support the conclusion that no elections may be held on any other date
for the positions of President, Vice President, Members of Congress and local officials, except
when so provided by another Act of Congress, or upon orders of a body or officer to whom
Congress may have delegated either the power or the authority to ascertain or fill in the details in
the execution of that power.63
Notably, Congress has acted on the ARMM elections by postponing the scheduled August
2011 elections and setting another date May 13, 2011 for regional elections synchronized with the
presidential, congressional and other local elections. By so doing, Congress itself has made a
policy decision in the exercise of its legislative wisdom that it shall not call special
elections as an adjustment measure in synchronizing the ARMM elections with the other
elections.
After Congress has so acted, neither the Executive nor the Judiciary can act to the
contrary by ordering special elections instead at the call of the COMELEC. This Court, particularly,
cannot make this call without thereby supplanting the legislative decision and effectively
legislating. To be sure, the Court is not without the power to declare an act of Congress null and
void for being unconstitutional or for having been exercised in grave abuse of discretion. 64 But

Section 5. Postponement of election. - When for any serious cause such

as violence, terrorism, loss or destruction of election paraphernalia or
records, force majeure, and other analogous causes of such a nature that
the holding of a free, orderly and honest election should become impossible in
any political subdivision, the Commission, motu proprio or upon a verified
petition by any interested party, and after due notice and hearing, whereby all
interested parties are afforded equal opportunity to be heard, shall postpone
the election therein to a date which should be reasonably close to the
date of the election not held, suspended or which resulted in a failure
to elect but not later than thirty days after the cessation of the cause for such
postponement or suspension of the election or failure to elect.
Section 6. Failure of election. - If, on account of force majeure,
violence, terrorism, fraud, or other analogous causes the election in any
polling place has not been held on the date fixed, or had been
suspended before the hour fixed by law for the closing of the voting, or after the
voting and during the preparation and the transmission of the election returns or
in the custody or canvass thereof, such election results in a failure to elect,
and in any of such cases the failure or suspension of election would affect the
result of the election, the Commission shall, on the basis of a verified petition by
any interested party and after due notice and hearing, call for the holding or
continuation of the election not held, suspended or which resulted in a failure to
elect on a date reasonably close to the date of the election not held, suspended
or which resulted in a failure to elect but not later than thirty days after the
cessation of the cause of such postponement or suspension of the election or
failure to elect. [Emphasis ours]

our power rests on very narrow ground and is merely to annul a contravening act of
Congress; it is not to supplant the decision of Congress nor to mandate what Congress
itself should have done in the exercise of its legislative powers. Thus, contrary to what
the petition in G.R. No. 197282 urges, we cannot compel COMELEC to call for special elections.

A close reading of Section 5 of BP 881 reveals that it is meant to address instances where
elections have already been scheduled to take place but have to be postponed because
of (a) violence, (b) terrorism, (c) loss or destruction of election paraphernalia or records, (d) force

Furthermore, we have to bear in mind that the constitutional power of the COMELEC, in

majeure, and (e) other analogous causes of such a nature that the holding of a free, orderly and

contrast with the power of Congress to call for, and to set the date of, elections, is limited to

honest election should become impossible in any political subdivision. Under the principle of

enforcing and administering all laws and regulations relative to the conduct of an election.

65

ejusdem generis, the term analogous causes will be restricted to those unforeseen or

Statutorily, COMELEC has no power to call for the holding of special elections unless pursuant to a

unexpected events that prevent the holding of the scheduled elections. These analogous causes

specific statutory grant. True, Congress did grant, via Sections 5 and 6 of BP 881, COMELEC with

are further defined by the phrase of such nature that the holding of a free, orderly and honest

the power to postpone elections to another date. However, this power is limited to, and can only

election should become impossible.

be exercised within, the specific terms and circumstances provided for in the law. We quote:
Similarly, Section 6 of BP 881 applies only to those situations where elections have
already been scheduled but do not take place because of (a) force majeure, (b) violence, (c)
terrorism, (d) fraud, or (e) other analogous causes the election in any polling place has
63
64
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not been held on the date fixed, or had been suspended before the hour fixed by law for
the closing of the voting, or after the voting and during the preparation and the transmission of

the election returns or in the custody or canvass thereof, such election results in a failure to

elective local officials in the ARMM for less, or more, than the constitutionally mandated

elect. As in Section 5 of BP 881, Section 6 addresses instances where the elections do not occur

three years71 as this tinkering would directly contravene Section 8, Article X of the Constitution

or had to be suspended because of unexpected and unforeseen circumstances.

as we ruled in Osmena.

In the present case, the postponement of the ARMM elections is by law i.e., by

Thus, in the same way that the term of elective ARMM officials cannot be extended

congressional policy and is pursuant to the constitutional mandate of synchronization of

through a holdover, the term cannot be shortened by putting an expiration date earlier than

national and local elections. By no stretch of the imagination can these reasons be given the same

the three (3) years that the Constitution itself commands. This is what will happen a

character as the circumstances contemplated by Section 5 or Section 6 of BP 881, which all

term of less than two years if a call for special elections shall prevail. In sum, while

pertain to extralegal causes that obstruct the holding of elections. Courts, to be sure, cannot

synchronization is achieved, the result is at the cost of a violation of an express provision of the

enlarge the scope of a statute under the guise of interpretation, nor include situations not

Constitution.

provided nor intended by the lawmakers. 66 Clearly, neither Section 5 nor Section 6 of BP 881 can
Neither we nor Congress can opt to shorten the tenure of those officials to be elected in

apply to the present case and this Court has absolutely no legal basis to compel the COMELEC to
hold special elections.

the ARMM elections instead of acting on their term (where the term means the time during which
the officer may claim to hold office as of right and fixes the interval after which the several
incumbents shall succeed one another, while the tenure represents the term during which the
incumbent actually holds the office). 72 As with the fixing of the elective term, neither Congress nor

D. The Court has no power to shorten the terms of elective officials

Even assuming that it is legally permissible for the Court to compel the COMELEC to hold

the Court has any legal basis to shorten the tenure of elective ARMM officials. They would commit
an unconstitutional act and gravely abuse their discretion if they do so.

special elections, no legal basis likewise exists to rule that the newly elected ARMM officials shall
hold office only until the ARMM officials elected in the synchronized elections shall have assumed
office.

E. The Presidents Power to Appoint OICs

In the first place, the Court is not empowered to adjust the terms of elective officials.

Based on the Constitution, the power to fix the term of office of elective officials, which can be
exercised only in the case of barangay officials,67 is specifically given to Congress. Even Congress
itself may be denied such power, as shown when the Constitution shortened the terms of twelve

The above considerations leave only Congress chosen interim measure RA No. 10153 and
the appointment by the President of OICs to govern the ARMM during the pre-synchronization
period pursuant to Sections 3, 4 and 5 of this law as the only measure that Congress can make.
This choice itself, however, should be examined for any attendant constitutional infirmity.

Senators obtaining the least votes, 68 and extended the terms of the President and the VicePresident69 in order to synchronize elections; Congress was not granted this same power. The

At the outset, the power to appoint is essentially executive in nature, and the limitations

settled rule is that terms fixed by the Constitution cannot be changed by mere statute. 70 More

on or qualifications to the exercise of this power should be strictly construed; these limitations or

particularly, not even Congress and certainly not this Court, has the authority to fix the terms of

qualifications must be clearly stated in order to be recognized. 73 The appointing power is

66

embodied in Section 16, Article VII of the Constitution, which states:

67
68

71

69

72

70

73

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units. This requirement indeed is an express limitation whose non-observance in the assailed law
Section 16. The President shall nominate and, with the consent of the
Commission on Appointments, appoint the heads of the executive departments,
ambassadors, other public ministers and consuls or officers of the armed forces
from the rank of colonel or naval captain, and other officers whose appointments
are vested in him in this Constitution. He shall also appoint all other officers
of the Government whose appointments are not otherwise provided for
by law, and those whom he may be authorized by law to appoint. The
Congress may, by law, vest the appointment of other officers lower in rank in the
President alone, in the courts, or in the heads of departments, agencies,
commissions, or boards. [emphasis ours]
This provision classifies into four groups the officers that the President can appoint. These
are:

leaves the appointment of OICs constitutionally defective.

After fully examining the issue, we hold that this alleged constitutional problem is more
apparent than real and becomes very real only if RA No. 10153 were to be mistakenly read as a
law that changes the elective and representative character of ARMM positions. RA No.
10153, however, does not in any way amend what the organic law of the ARMM (RA No. 9054)
sets outs in terms of structure of governance. What RA No. 10153 in fact only does is to appoint
officers-in-charge for the Office of the Regional Governor, Regional Vice Governor and Members of
the Regional Legislative Assembly who shall perform the functions pertaining to the said offices
until the officials duly elected in the May 2013 elections shall have qualified and assumed office.
This power is far different from appointing elective ARMM officials for the abbreviated term ending

First, the heads of the executive departments; ambassadors; other public ministers and

on the assumption to office of the officials elected in the May 2013 elections.

consuls; officers of the Armed Forces of the Philippines, from the rank of colonel or naval captain;
and other officers whose appointments are vested in the President in this Constitution;
Second, all other officers of the government whose appointments are not otherwise
provided for by law;
Third, those whom the President may be authorized by law to appoint; and

As we have already established in our discussion of the supermajority and plebiscite

requirements, the legal reality is that RA No. 10153 did not amend RA No. 9054. RA No.
10153, in fact, provides only for synchronization of elections and for the interim
measures that must in the meanwhile prevail. And this is how RA No. 10153 should be read
in the manner it was written and based on its unambiguous facial terms. 75 Aside from its order
for synchronization, it is purely and simply an interim measure responding to the
adjustments that the synchronization requires.

Fourth, officers lower in rank whose appointments the Congress may by law vest in the
President alone.74

Thus, the appropriate question to ask is whether the interim measure is an unreasonable
move for Congress to adopt, given the legal situation that the synchronization unavoidably
brought with it. In more concrete terms and based on the above considerations, given the plain
unconstitutionality of providing for a holdover and the unavailability of constitutional

Since the Presidents authority to appoint OICs emanates from RA No. 10153, it falls under
the third group of officials that the President can appoint pursuant to Section 16, Article VII of the
Constitution. Thus, the assailed law facially rests on clear constitutional basis.

possibilities for lengthening or shortening the term of the elected ARMM officials, is
the choice of the Presidents power to appoint for a fixed and specific period as an
interim measure, and as allowed under Section 16, Article VII of the Constitution an
unconstitutional or unreasonable choice for Congress to make?

If at all, the gravest challenge posed by the petitions to the authority to appoint OICs
under Section 3 of RA No. 10153 is the assertion that the Constitution requires that the ARMM
executive and legislative officials to be elective and representative of the constituent political
74

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Admittedly, the grant of the power to the President under other situations or where the
power of appointment would extend beyond the adjustment period for synchronization would be
to foster a government that is not democratic and republican. For then, the peoples right to
75

choose the leaders to govern them may be said to be systemically withdrawn to the point of

VI. Other Constitutional Concerns

fostering an undemocratic regime. This is the grant that would frontally breach the elective and
Outside of the above concerns, it has been argued during the oral arguments that

representative governance requirement of Section 18, Article X of the Constitution.

upholding the constitutionality of RA No. 10153 would set a dangerous precedent of giving the
But this conclusion would not be true under the very limited circumstances contemplated
in RA No. 10153 where the period is fixed and, more importantly, the terms of governance both

President the power to cancel elections anywhere in the country, thus allowing him to replace
elective officials with OICs.

under Section 18, Article X of the Constitution and RA No. 9054 will not systemically be touched
nor affected at all. To repeat what has previously been said, RA No. 9054 will govern unchanged

This claim apparently misunderstands that an across-the-board cancellation of elections

and continuously, with full effect in accordance with the Constitution, save only for the interim

is a matter for Congress, not for the President, to address. It is a power that falls within the

and temporary measures that synchronization of elections requires.

powers of Congress in the exercise of its legislative powers. Even Congress, as discussed above, is
limited in what it can legislatively undertake with respect to elections.

Viewed from another perspective, synchronization will temporarily disrupt the election
process in a local community, the ARMM, as well as the communitys choice of leaders, but this will

If RA No. 10153 cancelled the regular August 2011 elections, it was for a very specific and

take place under a situation of necessity and as an interim measure in the manner that interim

limited purpose the synchronization of elections. It was a temporary means to a lasting end the

measures have been adopted and used in the creation of local government units

and the

synchronization of elections. Thus, RA No. 10153 and the support that the Court gives this

76

These measures, too, are used in light

legislation are likewise clear and specific, and cannot be transferred or applied to any other cause

of the wider national demand for the synchronization of elections (considered vis--vis the regional

for the cancellation of elections. Any other localized cancellation of elections and call for special

interests involved). The adoption of these measures, in other words, is no different from the

elections can occur only in accordance with the power already delegated by Congress to the

exercise by Congress of the inherent police power of the State, where one of the essential tests is

COMELEC, as above discussed.

adjustments of sub-provinces to the status of provinces.

77

the reasonableness of the interim measure taken in light of the given circumstances.
Given that the incumbent ARMM elective officials cannot continue to act in a holdover
Furthermore, the representative character of the chosen leaders need not necessarily be

capacity upon the expiration of their terms, and this Court cannot compel the COMELEC to

affected by the appointment of OICs as this requirement is really a function of the appointment

conduct special elections, the Court now has to deal with the dilemma of a vacuum in governance

process; only the elective aspect shall be supplanted by the appointment of OICs. In this regard,

in the ARMM.

RA No. 10153 significantly seeks to address concerns arising from the appointments by providing,
To emphasize the dire situation a vacuum brings, it should not be forgotten that a period

under Sections 3, 4 and 5 of the assailed law, concrete terms in the Appointment of OIC, the
Manner and Procedure of Appointing OICs, and their Qualifications.

of 21 months or close to 2 years intervenes from the time that the incumbent ARMM elective
officials terms expired and the time the new ARMM elective officials begin their terms in 2013. As

Based on these considerations, we hold that RA No. 10153 viewed in its proper context is

the lessons of our Mindanao history past and current teach us, many developments, some of them

a law that is not violative of the Constitution (specifically, its autonomy provisions), and one that

critical and adverse, can transpire in the countrys Muslim areas in this span of time in the way

is reasonable as well under the circumstances.

they transpired in the past. 78 Thus, it would be reckless to assume that the presence of an acting
ARMM Governor, an acting Vice-Governor and a fully functioning Regional Legislative Assembly
can be done away with even temporarily. To our mind, the appointment of OICs under the present

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circumstances is an absolute necessity.

78

Significantly, the grant to the President of the power to appoint OICs to undertake the

B. Autonomy in the ARMM

functions of the elective members of the Regional Legislative Assembly is neither novel nor
It is further argued that while synchronization may be constitutionally mandated, it

innovative. We hark back to our earlier pronouncement in Menzon v. Petilla, etc., et al.:79

cannot be used to defeat or to impede the autonomy that the Constitution granted to the ARMM.
Phrased in this manner, one would presume that there exists a conflict between two recognized
It may be noted that under Commonwealth Act No. 588 and the Revised
Administrative Code of 1987, the President is empowered to make temporary
appointments in certain public offices, in case of any vacancy that may occur.
Albeit both laws deal only with the filling of vacancies in appointive
positions. However, in the absence of any contrary provision in the
Local Government Code and in the best interest of public service, we
see no cogent reason why the procedure thus outlined by the two laws
may not be similarly applied in the present case. The respondents contend
that the provincial board is the correct appointing power. This argument has no
merit. As between the President who has supervision over local governments as
provided by law and the members of the board who are junior to the vicegovernor, we have no problem ruling in favor of the President, until the law
provides otherwise.

Constitutional mandates synchronization and regional autonomy such that it is necessary to

choose one over the other.
We find this to be an erroneous approach that violates a basic principle in constitutional
construction ut magis valeat quam pereat: that the Constitution is to be interpreted as a whole, 81
and one mandate should not be given importance over the other except where the primacy of one
over the other is clear.82 We refer to the Courts declaration in Ang-Angco v. Castillo, et al.,83 thus:
A provision of the constitution should not be construed in isolation from
the rest. Rather, the constitution must be interpreted as a whole, and apparently,
conflicting provisions should be reconciled and harmonized in a manner
that may give to all of them full force and effect. [Emphasis supplied.]

A vacancy creates an anomalous situation and finds no approbation

under the law for it deprives the constituents of their right of representation and
governance in their own local government.
In a republican form of government, the majority rules through their
chosen few, and if one of them is incapacitated or absent, etc., the management
of governmental affairs is, to that extent, may be hampered. Necessarily, there
will be a consequent delay in the delivery of basic services to the
people of Leyte if the Governor or the Vice-Governor is missing.80
(Emphasis ours.)

Synchronization is an interest that is as constitutionally entrenched as regional autonomy. They

are interests that this Court should reconcile and give effect to, in the way that Congress did in RA
No. 10153 which provides the measure to transit to synchronized regional elections with the least
disturbance on the interests that must be respected. Particularly, regional autonomy will be
respected instead of being sidelined, as the law does not in any way alter, change or modify its
governing features, except in a very temporary manner and only as necessitated by the attendant
circumstances.

As in Menzon, leaving the positions of ARMM Governor, Vice Governor, and members of
the Regional Legislative Assembly vacant for 21 months, or almost 2 years, would clearly cause

Elsewhere, it has also been argued that the ARMM elections should not be synchronized with

disruptions and delays in the delivery of basic services to the people, in the proper management

the national and local elections in order to maintain the autonomy of the ARMM and insulate its

of the affairs of the regional government, and in responding to critical developments that may

own electoral processes from the rough and tumble of nationwide and local elections. This

arise. When viewed in this context, allowing the President in the exercise of his constitutionally-

argument leaves us far from convinced of its merits.

recognized appointment power to appoint OICs is, in our judgment, a reasonable measure to take.
As heretofore mentioned and discussed, while autonomous regions are granted political
autonomy, the framers of the Constitution never equated autonomy with independence. The
ARMM as a regional entity thus continues to operate within the larger framework of the State and
81
79

82

80

83

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is still subject to the national policies set by the national government, save only for those specific

In other words, the autonomy granted to the ARMM cannot be invoked to defeat national

areas reserved by the Constitution for regional autonomous determination. As reflected during the

policies and concerns. Since the synchronization of elections is not just a regional concern but a

constitutional deliberations of the provisions on autonomous regions:

national one, the ARMM is subject to it; the regional autonomy granted to the ARMM cannot be
used to exempt the region from having to act in accordance with a national policy mandated by

Mr. Bennagen. xxx We do not see here a complete separation from the central
government, but rather an efficient working relationship between the autonomous region
and the central government. We see this as an effective partnership, not a separation.

no less than the Constitution.

Mr. Romulo. Therefore, complete autonomy is not really thought of as complete

independence.

Conclusion

Mr. Ople. We define it as a measure of self-government within the larger

political framework of the nation.84 [Emphasis supplied.]
This exchange of course is fully and expressly reflected in the above-quoted Section 17,
Article X of the Constitution, and by the express reservation under Section 1 of the same Article
that autonomy shall be within the framework of this Constitution and the national sovereignty as
well as the territorial integrity of the Republic of the Philippines.
Interestingly, the framers of the Constitution initially proposed to remove Section 17 of
Article X, believing it to be unnecessary in light of the enumeration of powers granted to
autonomous regions in Section 20, Article X of the Constitution. Upon further reflection, the
framers decided to reinstate the provision in order to make it clear, once and for all, that these are
the limits of the powers of the autonomous government. Those not enumerated are actually
to be exercised by the national government[.]85 Of note is the Courts pronouncement in
Pimentel, Jr. v. Hon. Aguirre86 which we quote:
Under the Philippine concept of local autonomy, the national government
has not completely relinquished all its powers over local governments, including
autonomous regions. Only administrative powers over local affairs are delegated
to political subdivisions. The purpose of the delegation is to make governance
more directly responsive and effective at the local levels. In turn, economic,
political and social development at the smaller political units are expected to
propel social and economic growth and development. But to enable the
country to develop as a whole, the programs and policies effected
locally must be integrated and coordinated towards a common national
goal. Thus, policy-setting for the entire country still lies in the
President and Congress. [Emphasis ours.]

Congress acted within its powers and pursuant to a constitutional mandate the
synchronization of national and local elections when it enacted RA No. 10153. This Court cannot
question the manner by which Congress undertook this task; the Judiciary does not and cannot
pass upon questions of wisdom, justice or expediency of legislation. 87 As judges, we can only
interpret and apply the law and, despite our doubts about its wisdom, cannot repeal or amend it. 88
Nor can the Court presume to dictate the means by which Congress should address what
is essentially a legislative problem. It is not within the Courts power to enlarge or abridge laws;
otherwise, the Court will be guilty of usurping the exclusive prerogative of Congress. 89 The
petitioners, in asking this Court to compel COMELEC to hold special elections despite its lack of
authority to do so, are essentially asking us to venture into the realm of judicial legislation, which
is abhorrent to one of the most basic principles of a republican and democratic government the
separation of powers.
The petitioners allege, too, that we should act because Congress acted with grave abuse
of discretion in enacting RA No. 10153. Grave abuse of discretion is such capricious and whimsical
exercise of judgment that is patent and gross as to amount to an evasion of a positive duty or to a
virtual refusal to perform a duty enjoined by law or to act at all in contemplation of the law as
where the power is exercised in an arbitrary and despotic manner by reason of passion and
hostility.90

87
84

88

85

89

86

90

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We find that Congress, in passing RA No. 10153, acted strictly within its constitutional

accordance with the fundamental law before it was finally enacted.95

[Emphasis ours.]

mandate. Given an array of choices, it acted within due constitutional bounds and with marked
reasonableness in light of the necessary adjustments that synchronization demands. Congress,
therefore, cannot be accused of any evasion of a positive duty or of a refusal to perform its duty.
We thus find no reason to accord merit to the petitioners claims of grave abuse of discretion.

Given the failure of the petitioners to rebut the presumption of constitutionality in favor of
RA No. 10153, we must support and confirm its validity.

On the general claim that RA No. 10153 is unconstitutional, we can only reiterate the
established rule that every statute is presumed valid. 91 Congress, thus, has in its favor the
presumption of constitutionality of its acts, and the party challenging the validity of a statute has
the onerous task of rebutting this presumption.

92

95

Any reasonable doubt about the validity of the

law should be resolved in favor of its constitutionality. 93 As this Court declared in Garcia v.
EN BANC

Executive Secretary:94
The policy of the courts is to avoid ruling on constitutional questions and
to presume that the acts of the political departments are valid in the absence of
a clear and unmistakable showing to the contrary. To doubt is to sustain. This
presumption is based on the doctrine of separation of powers which enjoins upon
each department a becoming respect for the acts of the other departments. The
theory is that as the joint act of Congress and the President of the
Philippines, a law has been carefully studied and determined to be in

G.R No. 196271 DATU MICHAEL ABAS KIDA, ET AL., Petitioners,

v. SENATE OF THE PHILIPPINES, ET AL., Respondents.
October 18, 2011
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DISSENTING OPINION
CARPIO, J.:

The Cases
These are original actions1 assailing the validity of statutes and bills on the holding of
elections in the Autonomous Region in Muslim Mindanao (ARMM).

Background
91
92
93
94

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The ARMM Organic Act, Republic Act No. 6734 (RA 6734), as amended by Republic Act No.
9054 (RA 9054), mandated the holding of the first regular elections for Governor, Vice-Governor
and Members of the Regional Legislative Assembly x x x on the second Monday of September
2001.2 The elected officials would serve a three-year term beginning 30 September 2001. 3 Before

WHEREFORE, premises considered, we DISMISS the consolidated petitions assailing the

validity of RA No. 10153 for lack of merit, and UPHOLD the constitutionality of this law. We
likewise LIFT the temporary restraining order we issued in our Resolution of September 13, 2011.
No costs.

SO ORDERED.
the September 2001 elections could take place, however, Congress moved the elections to 26
November 2001 by enacting Republic Act No. 9140 (RA 9140). 4
Nearly four years later, Congress enacted Republic Act No. 9333 (RA 9333) fixing the date of
the regular elections in the ARMM on the second Monday of August 2005 [and] x x x every three
years thereafter.5 Elections in the ARMM took place on the second Mondays of August 2005 and
August 2008 following RA 9333.
A few months before the ARMM elections on the second Monday of August 2011, several
members of the House of Representatives jointly filed House Bill No. 4146 (HB 4146), moving the
date of the elections to the second Monday of May 2013 and x x x every three years thereafter. As
the term of office of the then incumbent elective officials in the ARMM would expire on 30
September 2011, HB 4146 authorized the President to appoint officers-in-charge who would hold
office from 30 September 2011 until 30 June 2013 when the officials elected in the May 2013
elections would have assumed office. HB 4146 aimed to synchronize the ARMM elections with the
local and national elections scheduled on the second Monday of May 2013. 6 The House of
Representatives approved HB 4146 on 23 March 2011, voting 191- 47 with two abstentions.
After receiving HB 4146, the Senate, where a counterpart measure (Senate Bill No. 2756 [SB
2756]) was pending, approved its own version on 6 June 2011 by a vote of 13-7, modifying some
parts of HB 4146 but otherwise leaving its core provisions intact. The affirmative votes were two
votes short of 2/3 of the Senate membership (23). The following day, the House of
Representatives adopted the Senates version. On 30 June 2011, the President signed the measure
into law as Republic Act No. 10153 (RA 10153).
After the House of Representatives approved HB 4146, petitioners in G.R. No. 196271 filed
their petition assailing the constitutionality of HB 4146, SB 2756 and RA 9333. Soon after,
petitioner in G.R. No. 196305 filed suit assailing the constitutionality of RA 9333. After the
President signed into law RA 10153, petitioners in G.R. Nos. 197221, 197280, 197282, 197392 and
197454 filed their petitions assailing the constitutionality of RA 10153. Petitioners in G.R. No.
197280 also assail the constitutionality of RA 9140 and RA 9333. In a supplemental petition,
petitioners in G.R. No. 196271 joined these latter petitions in questioning the constitutionality of
RA 10153.
The petitions against RA 9140, RA 9333 and RA 10153 7 treat these laws as amending RA
9054 and charge Congress with failing to comply with the twin requirements prescribed in
Sections 1 and 3, Article XVII of RA 9054 8 for amending RA 9054. These twin requirements are: (1)

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approval by a 2/3 vote of the members of the House of Representatives and the Senate voting
separately, and (2) submission of the amendments to ARMM voters in a plebiscite. RA 9140, RA
9333 and RA 10153 do not provide for their submission to ARMM voters in a plebiscite. On the
other hand, although the 191 affirmative votes in the Lower House for HB 4146 satisfied the 2/3
vote threshold in RA 9054, the 13 affirmative votes in the Senate for SB 2756 fell two votes short
of the 2/3 vote threshold.
Petitioners unanimity ends here, however, for they differ on when the elections in the ARMM
should take place. The petitions against RA 10153 favor the holding of elections on the second
Monday of August 20119 while those attacking RA 9333 only, 10 or together with RA 9140 and RA
10153,11 seek the holding of elections on the second Monday of September 2011, purportedly
following RA 9054. Another petition, which finds RA 10153 unconstitutional, leave it to the Court
to order special elections within a period reasonably close to the elections mandated in RA 9333. 12
The petitions against RA 10153 further raise the following issues: (1) postponing the ARMM
elections to the second Monday of May 2013 undermines the republican and autonomous nature
of the ARMM, in violation of the Constitution and RA 9054; (2) granting the President the power to
appoint OICs unconstitutionally expands his power over the ARMM to encompass not only general
supervision but also control; and, for the petition in G.R. No. 197280, (3) Congress, in enacting RA
10153, defectively waived the Constitutions requirement for the separate reading of bills and the
advance distribution of their printed copies because the Presidents certification for the urgent
passage of HB 4146 and SB 2756 was not grounded on public calamity or emergency.
The petition in G.R. No. 196271 extends the reach of its attack to HB 4146 and SB 2756, for
failing to include a provision requiring the submission of the anticipated law to ARMM voters in a
plebiscite.
In their separate Comments to the petitions in G.R. No. 196271 and G.R. No. 196305, the
Senate and the House of Representatives pray for the dismissal of the petitions. The Senate
disagrees with the proposition that RA 9333 constitutes an amendment to RA 9054, treating RA
9333 as merely filling the void left by RA 9054 in failing to schedule the succeeding regular
elections in the ARMM. Thus, the Senate finds irrelevant the twin requirements in RA 9054 in the
enactment of the assailed laws. Alternatively, the Senate gives a narrow construction to the
plebiscite requirement in RA 9054, limiting the plebiscite to cover amendatory laws affecting
substantive matters, as opposed to administrative concerns such as fixing election dates. 13

The Issues
The House of Representatives accepts the amendatory nature of RA 9333 but attacks the
constitutionality of the twin requirements in RA 9054 mandating a supermajority vote of each
House of Congress and the approval by ARMM voters in a plebiscite for purposes of amending RA
9054. The Lower House grounds its attack on two points: (1) save in exceptional cases not
applicable to the present petitions, the Constitution only requires a simple majority of a quorum in
each House of Congress to enact, amend or repeal laws; and (2) the rule against the passage of
irrepealable laws. Alternatively, the House of Representatives, like the Senate, narrowly construes
the plebiscite requirement in RA 9054 to cover only amendatory laws creating or expanding the
ARMMs territory.

The following are the issues for resolution:

I.

Did the passage of RA 10153 violate Section 26(2), Article VI of the Constitution?

II.

Do Section 2 of RA 10153, Section 1 of RA 9333 and Section 2 of RA 9140 constitute an

amendment to Section 7, Article XVIII of RA 9054? If in the affirmative
1.

Is Section 1, Article XVII of RA 9054 repugnant to Section 1 and Section 16(2), Article VI
of the Constitution and violative of the rule against the passage of irrepealable laws?; and

2.

Does Section 3, Article XVII of RA 9054 apply only in the creation of autonomous regions
under paragraph 2, Section 18, Article X of the Constitution?

The Senate and the House of Representatives uniformly contend that the question on the
constitutionality of HB 4146 and SB 2756 is non-justiciable.
The Office of the Solicitor General (OSG), representing respondent Commission on Elections
(COMELEC) and the other individual public respondents, joined causes with the House of
Representatives on the issue of the validity of the twin requirements in RA 9054 for the passage of
amendatory laws. In defending the Presidents authority under RA 10153 to appoint OICs, the OSG
treats the authority as a species of legislation falling under Section 16, Article VII of the
Constitution authorizing the President to appoint those whom he may be authorized by law to
appoint. The OSG rejects petitioners treatment of this authority as granting the President control
over the ARMM, contending instead that it is analogous to Section 7, Article XVIII of the
Constitution, authorizing the President for a limited period to appoint sectoral representatives in
the House of Representatives.
On 9 August 2011, the Court heard the parties in oral argument.
On 13 September 2011, the Court issued a temporary restraining order enjoining
respondents from implementing RA 10153. Meanwhile, the Court authorized the then incumbent
elective officials in the ARMM to continue in office in the event that the present petitions remain
unresolved after the officials term of office expires on 30 September 2011.
The Court granted intervention to four groups of parties who filed comments-in-intervention
joining causes with respondents.

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III.

IV.

Do Sections 3, 4 and 5 of RA 10153

1.

Violate Sections 15, 16, and 18, Article X of the Constitution?;

2.

Fall under Section 16, Article VII of the Constitution?; and

3.

Repeal the second sentence of Section 7(1), Article VII of RA 9054?

Does RA 10153 implement Sections 2 and 5, Article XVIII of the Constitution?

I vote to declare RA 9333 constitutional, and RA 10153 partly unconstitutional. The

synchronization of the ARMM elections with the national and local elections under RA 10153 is
constitutional. However, Sections 3, 4 and 5 of RA 10153 authorizing the President to appoint OICs
in place of elective ARMM officials are unconstitutional. Save in newly created local government
units prior to special or regular elections, elective officials of local government units like the ARMM
cannot be appointed by the President but must be elected in special or regular elections. Hence,
respondent COMELEC should be ordered to hold special elections in the ARMM as soon as

possible.
Pending the assumption to office of the elected ARMM Governor, the President, under his
general supervision over local governments, may appoint an officer-in-charge in the office of the
ARMM Governor. Such appointment is absolutely necessary and unavoidable to keep functioning
essential government services in the ARMM. On the other hand, I vote to declare unconstitutional
the second sentence of Section 7(1), Article VII of RA 9054 authorizing ARMM elective officials to
hold over until the election and qualification of their successors. Such hold over violates the fixed
term of office of elective local officials under the Constitution.

The challenge against the constitutionality of HB 4146 and SB 2756 raises a non-justiciable
question, hence immediately dismissible. Until legislative bills become laws, attacks against their
constitutionality are premature, lying beyond the pale of judicial review. 14

The Presidents Certification on Urgency of Legislation

Not Subject to Heightened Scrutiny
Petitioners in G.R. No. 197280 claim that Congress defectively passed RA 10153 for failing to
comply with the requirement in the Constitution for the reading of bills on three separate days
and the advanced distribution of their printed copies in final form under the second paragraph of
Section 26, Article VI, which provides:
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. (Emphasis supplied)

[Type text]

Although the President certified HB 4146 and SB 2756 as urgent measures, thus dispensing
with the bills separate reading and advanced distribution, petitioners in G.R. No. 197280 find the
basis of the Presidents certification, namely, the need to protect x x x ARMMs autonomy x x x and
provide mechanism to institutionalize electoral reforms, as flimsy, falling short of the Constitutions
requirement of public calamity or emergency. 15
The Court has refused in the past to subject to heightened scrutiny presidential certifications
on the urgency of the passage of legislative measures. In Tolentino v. Secretary of Finance,16
petitioners in that case questioned the sufficiency of the Presidents certification of a growing
budget deficit as basis for the urgent passage of revenue measures, claiming that this does not
amount to a public calamity or emergency. The Court declined to strike down the Presidents
certification upon a showing that members of both Houses of Congress had the opportunity to
study the bills and no fundamental constitutional rights were at hazard:
It is nonetheless urged that the certification of the bill in this case was invalid because
there was no emergency, the condition stated in the certification of a growing budget
deficit not being an unusual condition in this country.
It is noteworthy that no member of the Senate saw fit to controvert the reality of the
factual basis of the certification. To the contrary, by passing S. No. 1630 on second and
third readings on March 24, 1994, the Senate accepted the Presidents certification.
Should such certification be now reviewed by this Court, especially when no evidence has
been shown that, because S. No. 1630 was taken up on second and third readings on the
same day, the members of the Senate were deprived of the time needed for the study of
a vital piece of legislation?
The sufficiency of the factual basis of the suspension of the writ of habeas corpus or
declaration of martial law under Art. VII, 18, or the existence of a national emergency
justifying the delegation of extraordinary powers to the President under Art. VI, 23(2), is
subject to judicial review because basic rights of individuals may be at hazard. But the
factual basis of presidential certification of bills, which involves doing away with
procedural requirements designed to insure that bills are duly considered by members of
Congress, certainly should elicit a different standard of review. (Emphasis supplied)

As in Tolentino, Congress, in passing RA 10153, found sufficient the factual bases for
President Aquinos certification of HB 4146 and SB 2756 as emergency measures. Petitioners in
G.R. No. 197280 do not allege, and there is nothing on record to show, that members of Congress
were denied the opportunity to examine HB 4146 and SB 2756 because of the Presidents
certification. There is thus no basis to depart from Tolentino.17

In the exercise of its plenary legislative power, Congress filled this void by enacting RA 9333,
Section 1 of which provides:
Section 1. Date of Election. The regular election for regional Governor and
Regional Vice-Governor and Members of the Regional Legislative Assembly of the
Autonomous Region in Muslim Mindanao (ARMM) shall be held on the second Monday
of August 2005. Succeeding regular elections shall be held on the same date
every three years thereafter. (Emphasis supplied)

RA 9333 and RA 10153 Supplement

and do not Amend RA 9054
The petitions assailing RA 9333 and RA 10153 are united in their contention that these
amendatory laws to RA 9054 are invalid for failure to comply with the twin requirements in RA
9054, namely, that the amendments must be approved by a 2/3 vote of each House of Congress
and submitted to ARMM voters in a plebiscite. The underlying assumption of petitioners theory
that RA 9333 and RA 10153 amend RA 9054 is legally baseless.

In the discharge of the same power, Congress subsequently passed RA 10153, Section 2 of
which states:
SEC. 2. Regular Elections. - The regular elections for the Regional Governor,
Regional Vice-Governor and Members of the Regional Legislative Assembly of the
Autonomous Region in Muslim Mindanao (ARMM) shall be held on the second (2nd)
Monday of May 2013. Succeeding regular elections shall be held on the same
date every three (3) years thereafter. (Emphasis supplied)

Section 7, Article XVIII of RA 9054 on the holding of ARMM elections provides in part:
First Regular Elections. The first regular elections of the Regional Governor,
Regional Vice-Governor and members of the regional legislative assembly under this
Organic Act shall be held on the second Monday of September 2001. The Commission on
Elections shall promulgate rules and regulations as may be necessary for the conduct of
said election. (Emphasis supplied)
xxxx
The ambit of Section 7 is narrow, confined to the first regular elections, scheduled on the
second Monday of September 2001. This left open the scheduling of elections succeeding the
first regular elections.

[Type text]

Had Congress intended RA 9054 to govern not only the first regular elections but also
succeeding regular elections, it would have included in Section 7 of Article XVIII a provision
stating to the effect that the succeeding regular elections shall be held on the same date every
three years thereafter, consistent with the three-year term of office of elective officials in the
ARMM.18 Instead, RA 9054 confines itself to the first regular elections. Tellingly, it is only in
Section 1 of RA 9333 and Section 2 of RA 10153 that Congress touched on the succeeding
regular elections in the ARMM, by uniformly providing that [s]ucceeding regular elections shall
be held on the date indicated every three years thereafter.
The legislative practice of limiting the reach of the ARMM Organic Act to the first regular
elections, leaving the date of the succeeding regular elections for Congress to fix in a subsequent
legislation, traces its roots in the ARMMs first Organic Act, RA 6734. Section 7, Article XIX of RA
6734 fixed the date of the first regular elections, to take place not earlier than sixty (60) days or
later than ninety (90) days after the ratification of RA 6743. Section 7 reads in full:

The first regular elections of the Regional Governor, Vice-Governor and Members of the
Regional Assembly under this Organic Act shall be held not earlier than sixty (60) days or
later than ninety (90) days after the ratification of this Act. The Commission on Elections
shall promulgate such rules and regulations as may be necessary for the conduct of said
election. (Emphasis supplied)
To fix the date of the succeeding regular elections, Congress passed several measures,
moving the election day as it deemed proper. 19 Like RA 9333 and RA 10153, these enactments
merely filled a void created by the narrow wording of RA 6734. RA 9333 and RA 10153 are
therefore separate, stand-alone statutes that do not amend any provision of RA 9054.

That RA 9333 and RA 10153 merely filled a void in RA 9054 would have sufficed to dispose of
the argument that these laws are invalid for non-compliance with the twin requirements in RA
9054. These requirements would have been left unreviewed were it not for the fact that
respondents and intervenors vigorously insist on their invalidity. The issue having been raised
squarely, the Court should pass upon it.

Section 1, Article XVII of RA 9054

Requiring 2/3 Vote to Amend RA 9054
Unconstitutional

RA 9140 Rendered Functus Officio

after 26 November 2001 Elections
Petitioners in G.R. No. 197280 attack Section 2 of RA 9140 also for its failure to comply with
the twin requirements in amending RA 9054.20 To recall, under Section 2 of RA 9140, which
immediately preceded RA 9333, the date of the first elections in the ARMM under RA 9054 was
moved to 26 November 2001.
There is no reason to traverse this issue for the simple reason that Congress passed RA 9140
solely for the narrow purpose of fixing the date of the plebiscite for RA 9054 (Section 1) and the
date of the first regular elections in the ARMM under RA 9054 (Section 2). These electoral
exercises took place on 14 August 2001 and 26 November 2001, respectively. Hence, RA 9140
became functus officio after 26 November 2001. It is futile, in this case, to review the validity of a
functus officio law.

Granting that RA 9333 and RA 10153 Amend

RA 9054, these Laws Remain Valid

[Type text]

Section 1, Article XVII of RA 9054 requires a 2/3 supermajority vote of the members of each
House of Congress to amend or repeal RA 9054. This provision states:
Consistent with the provisions of the Constitution, this Organic Act may be reamended
or revised by the Congress of the Philippines upon a vote of two-thirds (2/3) of the
Members of the House of Representatives and of the Senate voting separately.
(Emphasis supplied)

Respondents House of Representatives, COMELEC and individual officials assail this

provisions constitutionality on two grounds. First, it is repugnant to Section 16 (2), Article VI of the
Constitution requiring a mere majority of members of both Houses of Congress to constitute a
quorum to do business.21 Second, it violates the doctrine barring the passage of irrepealable laws,
a doctrine rooted on the plenary power of Congress to amend or repeal laws that it enacts.
Section 16 (2), Article VI of the Constitution, which provides that [a] majority of each
House shall constitute a quorum to do business x x x, sets the vote threshold for Congress
to conduct its legislative work in plenary session. Under this provision, a majority of each House
suffices for Congress to hold sessions and pass, amend, or repeal bills and resolutions, upon a
vote of a majority of the members present who constitute a quorum. In short, a majority of a

quorum, or a majority of a majority, can enact, amend or repeal laws or approve acts requiring the
affirmative action of Congress, unless the Constitution prescribes a qualified or supermajority in
specific cases.22
By providing that RA 9054 may be reamended or revised by the Congress of the Philippines
upon a vote of two-thirds (2/3) of the Members of the House of Representatives and of the
Senate voting separately, Section 1, Article XVII of RA 9054 raised the vote threshold necessary
to amend RA 9054 to a level higher than what Section 16 (2), Article VI of the Constitution
requires. Thus, without Section 1, Article XVII of RA 9054, it takes only 72 23 votes in the Lower
House and 724 votes in the Senate to pass amendments or revisions to RA 9054, assuming a
simple quorum in attendance in either House. With the same provision in the statute books, at
least 189 votes in the House of Representatives and at least 15 in the Senate are needed to enact
the same amendatory or repealing legislation, assuming the same simple quorum in either House.
The repugnancy between the statutory provision and the Constitution is irreconcilable. Needless
to say, the Constitution prevails.
Section 1, Article XVII of RA 9054 also runs afoul of the inherent limitation on Congress power
barring it from passing irrepealable laws.25 Section 1, Article XVII of RA 9054 erects a high vote
threshold for each House of Congress to surmount, effectively and unconstitutionally, taking RA
9054 beyond the reach of Congress amendatory powers. One Congress cannot limit or reduce the
plenary legislative power of succeeding Congresses by requiring a higher vote threshold than
what the Constitution requires to enact, amend or repeal laws. No law can be passed fixing such a
higher vote threshold because Congress has no power, by ordinary legislation, to amend the
Constitution.

or regional government units. To say that autonomy means shackling the hands of Congress in
improving laws or passing remedial legislations betrays a gross misconception of autonomy.
Nor is the provision in Section 27(1), Article VI of the Constitution requiring a 2/3 vote for
Congress to override a presidential veto an argument for the validity of Section 1, Article XVII of
RA 9054. The veto-override provision neither negates the simple majority rule for Congress to
legislate nor allows the passage of irrepealable laws. The Presidential veto is a power of the
Executive to reject a law28 passed by Congress, with the associated power of Congress to override
such veto by a 2/3 vote. This associated power of Congress is not an independent power to
prescribe a higher vote threshold to enact, amend or repeal laws, an act which does not involve
any Presidential veto but operates as an auto-limitation on the plenary power of Congress to
legislate.
The veto-override provision is a small but vital mechanism presidential systems adopt to
calibrate the balance of power between the Executive and the Legislature. It ensures the
Executive a substantial voice in legislation by requiring the Legislature to surmount a vote
threshold higher than the simple majority required to pass the vetoed legislation. The vetooverride provision cannot be used to immobilize future Congresses from amending or repealing
laws by a simple majority vote as provided in Section 16(2), Article VI of the Constitution.

Plebiscite Mandatory only

The Constitutions rule allowing a simple majority of each House of Congress to do business
evinces the framers familiarity with the perennial difficulty plaguing national legislative
assemblies in constituting a quorum. Set the quorum requirement any higher and plenary
legislative work will most likely slow down if not grind to a halt. The 2/3 vote threshold in Section
1, Article XVII of RA 9054 effectively ensures the near immutability of RA 9054, in derogation of
Congress plenary power to amend or repeal laws. Unless the Constitution itself mandates a higher
vote threshold to enact, amend or repeal laws, 26 each House of Congress can do so by simple
majority of the members present who constitute a quorum.
There is no merit in the proposition that Section 1, Article XVII of RA 9054 is an additional
safeguard[] to protect and guarantee the autonomy of the ARMM. 27 Autonomy, even of the
expanded type prevailing in the ARMM, means vesting of more powers and resources to the local

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in Approving Creation or Expansion

of the ARMM
The second paragraph of Section 18, Article X of the Constitution requires the holding of a
plebiscite in the autonomous region for the approval of its creation, thus:
The creation of the autonomous region shall be effective when approved by a majority
of the votes cast by the constituent units in a plebiscite called for the purpose. (Emphasis
supplied)

Section 18 of Article X is substantially similar to Section 10, Article X of the Constitution,

mandating that no local government unit shall be created, divided, merged, abolished, or its
boundaries substantially altered 29 unless, among others, voters of the affected units approve the
proposed measure in a plebiscite.
The narrow ambit of these constitutional provisions, limiting the plebiscite to changes in the
size of the units territory, is commonsensical. The Constitution requires that territorial changes,
affecting the jurisdiction, income, and population of a local government unit, should not be left
solely for politicians to decide but must be submitted for approval or rejection by the people
affected.30
In sharp contrast to the narrow scope of Section 10 and Section 18 of Article X of the
Constitution, Section 3, Article XVII of RA 9054 mandates the holding of a plebiscite in the ARMM
to approve [a]ny amendment to or revision of RA 9054, thus:
Any amendment to or revision of this Organic Act shall become effective only
when approved by a majority of the vote cast in a plebiscite called for the purpose, which
shall be held not earlier than sixty (60) days or later than ninety (90) days after the
approval of such amendment or revision. (Emphasis supplied)
Petitioners give a literal interpretation to this provision by applying it to all amendments to
or revisions of RA 9054, including the fixing of the date of elections in the ARMM that RA 10153
mandates.
By requiring the holding of a plebiscite to approve any amendment to or revision of RA 9054,
Section 3, Article XVII of RA 9054, a supposed statutory implementation of the second paragraph
of Section 18, Article X of the Constitution, impermissibly expands the scope of the subject
matter that the Constitution requires to be submitted to a plebiscite. By barring any change to
RA 9054 from taking effect unless approved by ARMM voters in a plebiscite, even if unrelated to
the ARMMs creation, reduction or expansion, Section 3 of Article XVII directly contravenes Section
18, Article X of the Constitution.31
True, the Court held in Disomangcop v. Datumanong32 that Republic Act No. 8999 (RA 8999)
creating an engineering office within the ARMM is an amendatory law which should x x x first
obtain the approval of the people of the ARMM before it can validly take effect. 33 This statement,
obviously an obiter dicta, furnishes no ground to support petitioners interpretation of Section 3,
Article XVII of RA 9054. What the Court resolved in Disomangcop was whether RA 8999, creating

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an office performing functions inconsistent with those created under the ARMM Organic Act,
prevails over the latter. The Court anchored its negative answer, not on the ground that RA 8999
was invalid for not having been approved in a plebiscite, but on the fact that RA 8999, signed into
law in January 2001, was repealed and superseded by RA 9054, enacted in March 2001. Thus, in
disposing of the case, we ruled:
WHEREFORE, considering that Republic Act No. 9054 repealed Republic Act No.
8999 and rendered DPWH Department Order No. 119 functus officio, the petition insofar
as it seeks the writs of certiorari and prohibition is GRANTED. 34 x x x x (Emphasis
supplied)
The Court was not confronted in Disomangcop, as it is now, with the issue of whether a law
changing the date of elections in the ARMM should be submitted to ARMM voters in a plebiscite.

Congress Power to Synchronize National and Local Elections

does not Encompass Appointment of OICs
in Place of Elective Officials
The Constitution impliedly requires the synchronization of elections for President, VicePresident, members of Congress and local officials after the end of their first term by
simultaneously ending their tenure on 30 June 1992, extending in the process the initial tenure of
the members of Congress and local officials.35 As the Court confirmed in Osmea v. Commission on
Elections:36 [t]he Constitution has mandated a synchronized national and local election prior to
June 30, 1992 or more specifically as provided for in Article XVIII, Sec. 5 on the second Monday of
May 1992.37 After the Court struck down Republic Act No. 7065 in Osmea for desynchronizing local
and national elections, Congress subsequently passed Republic Act No. 7166 (RA 7166)
synchronizing elections for presidential, vice-presidential, congressional, provincial, city and
municipal officials. RA 10153 widens the ambit of the Constitutions policy of synchronizing
elections by including the ARMM into the loop of synchronized elections. With the passage of RA
10153, only barangay and sangguniang kabataan elections are excluded from the synchronized
national and local elections.38

The contention of petitioners in G.R. No. 196271 that the elections in the ARMM cannot be
synchronized with the existing synchronized national and local elections is untenable. Petitioners
advance the theory that elections in the ARMM are not local elections because ARMM officials are
not local officials within the meaning of Sections 2 and 5, Article XVIII of the Constitution. 39
Under Section 1, Article X of the Constitution, the ARMM is a local government unit just like
provinces, cities, municipalities, and barangays. Section 1, Article X of the Constitution provides:
The territorial and political subdivisions of the Republic of the Philippines are the
provinces, cities, municipalities, and barangays. There shall be autonomous regions in
Muslim Mindanao and the Cordilleras as hereinafter provided. (Emphasis supplied)
The entire Article X of the Constitution is entitled Local Government because Article X
governs the creation of, and the grant of powers to, all local government units, including
autonomous regions.40 Thus, elective officials of the ARMM are local officials because the ARMM is
a local government unit, just like provinces, cities and municipalities.
Section 8, Article X of the Constitution provides that [t]he term of office of elective local
officials, except barangay officials, which shall be determined by law, shall be three years x x
x. In compliance with this provision, ARMM elective officials serve three-year terms under RA
9054.41 Congress cannot fix the term of elective local officials in the ARMM for less, or more, than
three years. Clearly, elective officials in the ARMM are local officials and elections in the ARMM, a
local government unit, are local elections.

Elective Offices After 30 September 2011

In desiring to include elections in the ARMM in the existing synchronized national and local
elections, Congress faced a dilemma arising from the different schedules of the election cycles
under RA 7166 and RA 9333. Under RA 7166, national and local elections simultaneously take
place every second Monday of May in a three-year cycle starting 1992. On the other hand, under
RA 9333, elections in the ARMM take place every second Monday of August in a three-year cycle
starting 2005. Thus, a 21-month gap separates the two electoral cycles. The horn of the dilemma
lies in how to fill up elective offices in the ARMM during this gap.
There are three apparent ways out of this dilemma, namely: (1) allow the elective officials in
the ARMM to remain in office in a hold over capacity; (2) authorize the President to appoint OICs;
or (3) hold special elections in the ARMM, with the terms of those elected to expire on 30 June
2013. Two petitions favor partial hold over pending the holding of special elections. 43 On the other
hand, the OSG defends Congress choice under RA 10153 authorizing the President to appoint OICs
who will hold office until 30 June 2013.

Sections 3, 4 and 5 of RA 10153 Authorizing

the President to Appoint OICs
in Elective Local Offices in the

Congress power to provide for the simultaneous holding of elections for national and local
officials, however, does not encompass the power to authorize the President to appoint officers-incharge in place of elective local officials, canceling in the process scheduled local elections. To
hold otherwise is to sanction the perversion of the Philippine States democratic and republican
nature.42 Offices declared by the Constitution as elective must be filled up by election
and not by appointment. To appoint officials to offices mandated by the Constitution to be
elective, absent an absolutely unavoidable necessity to keep functioning essential government
services, is a blatant violation of an express command of the Constitution.

Options to Fill Vacancies in the ARMM

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ARMM Unconstitutional
Historically, the legislature has authorized the President to appoint OICs for elective local
offices only as an incident to the creation of a new local government unit or to its transition from
a sub-unit to a full-fledged political subdivision. Thus, statutes creating the provinces of Quezon
del Sur44 and Dinagat Islands45 uniformly authorized the President to appoint an interim governor,
vice-governor and members of the sangguniang panlalawigan, who shall serve only until a new
set of provincial officials have been elected and qualified.46 Similarly, the statute creating the
municipality of Tboli in South Cotabato authorized the President to appoint the elective officials of
the new Municipality who shall hold office until their successors shall have been duly elected in
the general elections next following the issuance of this Decree.47 The same authorization is found

in the Local Government Code for sub-provinces, authorizing the President to appoint the interim
governor, vice-governor and members of the sangguniang panlalawigan while the sub-provinces
are transitioning to the status of a province.48
These legislative authorizations are rendered imperative by the fact that incipient or
transitioning local government units are devoid of elective officials prior to special or regular local
elections. Where the law provides for the creation of a local government unit prior to the election
of its local officials, it becomes absolutely necessary and unavoidable for the legislature to
authorize the President to appoint interim officials in elective local offices to insure that essential
government services start to function.
In authorizing the President to appoint OICs in the ARMM, Section 3 of RA 10153 provides:
Appointment of Officers-in-Charge.The President shall appoint officers-in-charge for the
Office of the Regional Governor, Regional Vice-Governor and Members of the Regional
Legislative Assembly who shall perform the functions pertaining to the said offices until
the officials duly elected in the May 2013 elections shall have qualified and assumed
office.
Section 3 is supplemented by Section 4 which provides the manner and procedure of
appointment49 while Section 5 states the qualifications for the OICs. 50
It takes no extensive analysis to conclude that Section 3 is neither necessary nor
unavoidable for the ARMM to function. The ARMM is an existing, as opposed to a newly created
or transitioning, local government unit created more than two decades ago in 1989. At the time
of the passage of RA 10153, elected officials occupied all the elective offices in the ARMM. No one
claims that it is impossible to hold special local elections in the ARMM to determine its next set of
elective officials.
Section 3 of RA 10153 negates the representative and democratic nature of the Philippine
State and its political subdivisions such as the ARMM. 51 Section 18, Article X of the Constitution on
the organic act of autonomous regions expressly requires the organic act to define the [b]asic
structure of government for the region consisting of the executive department and legislative
assembly, both of which shall be elective and representative of the constituent political units.52
The ARMMs Organic Act, RA 6734, as amended by RA 9054, implements Section 18, Article X of
the Constitution by mandating the popular election of its executive and legislative officials. 53
Section 3 of RA 10153, however, negates Congress implementation of the Constitution under RA

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9054 by making the executive and legislative offices in the ARMM appointive.
There is no merit in the OSGs argument that Section 3 of RA 10153 is similar to Section 7,
Article XVIII of the 1987 Constitution, authorizing the President to appoint sectoral representatives
in Congress pending the passage of legislation on party-list representation. 54 The filling of seats in
the House of Representatives under Section 7, Article XVIII of the Constitution is authorized by the
Constitution itself and thus can never be questioned as unconstitutional. In ratifying the
Constitution, the Filipino people authorized the President to appoint sectoral representatives for a
limited period. However, the appointment by the President of OICs in the ARMM under Sections 3,
4 and 5 of RA 10153 is not authorized under the Constitution but is in fact in violation of the
Constitution that the Filipino people ratified overwhelmingly.
What Section 3 of RA 10153 approximates is the provision in the Freedom Constitution
allowing [a]ll elective x x x officials [to] continue in office until otherwise provided by
proclamation or executive order or upon the designation or appointment and qualification of their
successors, if such is made within a period of one year from February 25, 1986. 55 Wisely enough,
none of the respondents saw fit to invoke this provision as precedent. The mass replacement of
elective local officials following the EDSA uprising in 1986 was part of the then revolutionary
governments purging of the local government ranks of officials linked to the excesses of the
previous regime. In making her appointments, then President Corazon C. Aquino wielded
executive and legislative powers unconstrained by any specific constitutional limitation. This is not
the situation in the present case.
Nor is Section 3 of RA 10153 a species of legislation falling under Section 16, Article VII of the
Constitution authorizing the President to appoint those whom he may be authorized by law to
appoint. This provision does not empower Congress to authorize the President to fill up by
appointment positions that, by express mandate of the Constitution, are elective and
representative offices. Section 16, Article VII of the Constitution obviously refers only to
appointive and not elective offices.
Clearly, authorizing the President to appoint OICs in place of elective officials in the ARMM,
an existing local government unit, contravenes Section 18, Article X of the Constitution, which
mandates that the executive department and legislative assembly of the ARMM shall be
elective and representative. Elective local offices in the ARMM, after the ARMMs creation and
holding of regular local elections, cannot be filled up through the appointment of OICs by the
President without violating Section 18, Article X of the Constitution.

However, under Section 4, Article X of the Constitution, the President exercises general
supervision over all local governments. In case it is absolutely necessary and unavoidable to
keep functioning essential government services, the President may, under his power of
general supervision over local governments, appoint OICs where vacancies occur in existing
elective local offices and the law does not provide for succession, or where succession is
inapplicable because the terms of elective officials have expired.
Thus, the President may appoint an officer-in-charge in the office of the ARMM Governor
pending the holding of special local elections in the ARMM. The appointment of such officer-incharge is absolutely necessary and unavoidable because someone must insure that essential
government services continue to function in the ARMM. The officer-in-charge shall exercise the
powers and perform the functions of the ARMM Governor under RA 9054 and related laws until the
assumption to office of the elected ARMM Governor. However, all appointments made by the
officer-in-charge shall terminate upon the assumption to office of the elected Governor.
It is, however, not absolutely necessary and unavoidable to appoint OICs in the ARMM
Regional Legislative Assembly because Section 22, Article VII of RA 9054 provides for the
automatic reenactment of the ARMM budget if the Regional Legislative Assembly fails to pass the
appropriation bill for the ensuing fiscal year. 56 Even without OIC regional assembly members, the
ARMM will have an operational budget for the next fiscal year. However, following the Local
Government Code, which applies suppletorily to the ARMM, 57 only the annual appropriations for
salaries and wages of existing positions, statutory and contractual obligations, and essential
operating expenses authorized in the annual and supplemental budgets for the preceding year
are deemed reenacted.58 The officer-in-charge in the office of the ARMM Governor shall disburse
funds from the reenacted budget in accordance with the applicable provisions of the Local
Government Code and its implementing rules.

Second Sentence of Section 7(1),

Article VII of RA 9054 Authorizing
the Hold Over of ARMM Officials
Unconstitutional

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Petitioner in G.R. No. 197282 invokes the second sentence of Section 7(1), Article VII of RA
9054, which provides:
Terms of Office of Elective Regional Officials. (1) Terms of Office. The terms of office of
the Regional Governor, Regional Vice-Governor and members of the Regional Assembly
shall be for a period of three (3) years, which shall begin at noon on the 30th day of
September next following the day of the election and shall end at noon of the same date
three (3) years thereafter. The incumbent elective officials of the autonomous
region shall continue in office until their successors are elected and qualified.59
(Emphasis supplied)
as statutory authorization for ARMM elective officials at the time of the passage of RA 10153
to remain in office until their successors, elected in special elections, assume office. Petitioner in
G.R. No. 197221 adopts the same view. On the other hand, respondents-intervenors 60 consider the
same provision unconstitutional for extending the term of office of ARMM officials beyond the
three years mandated in Section 8, Article X of the Constitution. There is merit to this latter claim.
Section 8, Article X of the Constitution limits the term of office of elective local officials,
except barangay officials, to three years:
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)
Elective ARMM officials are local officials 61 within the meaning of Section 8, Article X of the
Constitution. The ARMM Charter, RA 9054, complies with Section 8, Article X of the Constitution by
providing that [t]he terms of office of the Regional Governor, Regional Vice-Governor and
members of the Regional Assembly shall be for a period of three (3) years. 62
The question of whether a law may constitutionally mandate the hold over of local officials
beyond the expiration of their term as fixed in the Constitution is not novel. The Court
reviewed such a law in Osmea and struck down the law, holding that it is not competent of the
legislature to extend the term of officers by providing that they shall hold over until their
successors are elected and qualified where the [C]onstitution has x x x prescribed the
term:

[S]ection 2, Article XVIII of the Constitution x x x provides that the local official first
elected under the Constitution shall serve until noon of June 30, 1992. But under Sec. 3 of
RA 7056, these incumbent local officials shall hold over beyond June 30, 1992
and shall serve until their successors shall have been duly elected and
qualified. It has been held that:
It is not competent for the legislature to extend the term of officers by providing that
they shall hold over until their successors are elected and qualified where the
constitution has in effect or by clear implication prescribed the term and when
the Constitution fixes the day on which the official term shall begin, there is no legislative
authority to continue the office beyond that period, even though the successors fail to
qualify with the time. x x x x

In American Jurisprudence it has been stated as follows:

It has been broadly stated that the legislature cannot, by an act postponing
the election to fill an office the term of which is limited by the Constitution,
extend the term of the incumbent beyond the period as limited by the
Constitution.

Also, there is Section 8, Article X of the Constitution which provides that:

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. . .

[Type text]

x x x .63 (Boldfacing supplied; italicization in the original)

Osmea is grounded on reasons of power and public policy. First, the power of Congress to fix
the terms of public offices stems from (1) its inherent power to create such public offices or (2) a
constitutionally delegated power to that effect. Thus, if a public office is created by the
Constitution with a fixed term, or if the term of a public office created by Congress is fixed by the
Constitution, Congress is devoid of any power to change the term of that office. Thus, statutes
which extend the term of an elective office as fixed in the Constitution either by postponing
elections, changing the date of commencement of term of the successor, or authorizing the
incumbent to remain in office until his successor is elected and qualified are unconstitutional as it
amounts to an appointment of an official by Congress to a constitutional office, a power vested
either in the Executive or in the electorate,64 or a negation of the term of office fixed in the
Constitution.

Second, constitutional provisions fixing the terms of elective officials serve the ends of
democratic republicanism by depriving elective officials of any legal basis to remain in office after
the end of their terms, ensuring the holding of elections, and paving the way for the newly elected
officials to assume office.65 Such provisions, which are found in the 1987 Constitution, are framed
upon the belief that to ensure democratic values, there must be periodic electoral exercises. By
refusing to include hold over provisions in fixing the terms of elective national and non-barangay
local officials, the framers of the 1987 Constitution guaranteed not only the elective nature of
these offices66 but also secured our democratic values.

The wisdom of Osmea is magnified when the evils it seeks to bar are applied to the elective
officials whose terms of office the 1987 Constitution fixed, namely:

1.
2.
3.

4.

5.

President, with a single term of six years, beginning at noon on the thirtieth day of June
next following the day of the election;67
Vice-President, with a term of six years beginning at noon on the thirtieth day of June
next following the day of the election, eligible for one reelection; 68
Senators, with a term of six years beginning at noon on the thirtieth day of June next
following the day of the election, unless otherwise provided by law, eligible for two
consecutive reelections;69
Members of the House of Representatives, with a term of three years beginning at noon
on the thirtieth day of June next following the day of the election, unless otherwise
provided by law, eligible for two consecutive reelections; 70 and
Local officials, except barangay officials, with a term of three years, for a maximum of
three consecutive terms.71

A ruling contrary to Osmea would allow Congress to pass a law, in the guise of ensuring the
continuity of public service and preventing a hiatus in office, mandating the President, VicePresident, Senators, Congressmen and elective local officials other than barangay officials to
remain in office until their successors are elected and qualified. In doing so, Congress would have
arrogated to itself the power to lengthen the terms of office of the President, Vice-President,
Senators, Congressmen and non-barangay elective local officials in contravention of their terms as
fixed in the Constitution. The absence in the Constitution of any provision allowing the hold over
of national and non-barangay elective local officials or of any provision vesting on Congress the
power to fix the terms of office of these officials means that any alteration in their terms of office
can only be effected through a constitutional amendment.

The Local Government Code does not authorize the hold over of elective local officials. 72 This
is consistent with the constitutional provision fixing the term, without hold over, of all elective

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non-barangay local officials. With the exception of the hold over provision in RA 9054, Congress
refrained from passing laws allowing hold over of non-barangay elective local officials. Congress
passed a law to that effect (Section 5 of Republic Act No. 9164 [RA 9164]) only for barangay and
sangguniang kabataan officials which the Court reviewed and upheld in Sambarani v. COMELEC.73
The legislatures passage of RA 9164 is in accord with the Constitutions grant to Congress of the
power to determine the term of barangay officials.

In contrast, Section 7(1), Article VII of RA 9054, allowing for the hold over of elective local
officials in the ARMM, finds no basis in the Constitution. Indeed, Section 7(1) contravenes the
Constitution by extending the term of office of such elective local officials beyond the three year
period fixed in Section 8, Article X of the Constitution.

Beyond the question of power, Osmea protects democratic values and assures public order.
The certainty of departure from office that term endings and term limits bring carries with it the
certainty of the holding of regular and periodic elections, securing the voters right to elect the
officials for the new term. On the other hand, faced with no choice but to leave office on the day
their terms end, elective officials stand to gain nothing in sabotaging electoral processes to
extend their stay in office.

It is immaterial that the laws Congress enacted in the past postponing elections in the ARMM
all contained provisions for the hold over of the incumbents until the election of their successors. 74
None of these laws were challenged before the Court, thus the Court had no occasion to pass
upon their validity.75

Nor is the Courts Resolution of 13 September 2011 authorizing the then incumbent ARMM
elective officials to continue in office under Section 7(1), Article VII of RA 9054 a prejudgment of
the provisions validity. The Resolution of 13 September 2011 is a preliminary, ancillary remedy to
ensure the continued functioning of essential government services in the ARMM. Implicit in the

issuance of the Resolution of 13 September 2011 is the understanding that such was without
prejudice to the resolution of the issues raised in these petitions, including the validity of Section
7(1), Article VII of RA 9054.

Section 5, BP 881 Basis for

Holding of Special Elections

The unconstitutionality of Section 7(1), Article VII of RA 9054 and Sections 3, 4 and 5 of RA
10153 leaves the holding of special elections as the only constitutionally permissible
option to fill up the offices of the ARMM Governor, Vice-Governor and members of the
Regional Legislative Assembly after 30 September 2011. Section 5 of Batas Pambansa
Bilang 881 (BP 881), as amended, authorizes respondent COMELEC to hold special elections
[w]hen for any serious cause such as x x x loss or destruction of election paraphernalia or
records x x x the holding of a free, orderly and honest election should become
impossible in any political subdivision x x x.76 The tight timeframe in the enactment and
signing into law of RA 10153 on 30 June 2011, and the filing of the present petitions shortly before
and after the signing, rendering impossible the holding of elections on 8 August 2011 as
scheduled under RA 9333, is a cause analogous to the administrative mishaps covered in Section
5 of BP 881. The postponement of the ARMM elections was an unavoidable result of the time lag
legislative and judicial processes normally entail. The ARMM officials to be elected in the special
ARMM elections shall hold office until 30 June 2013, when the terms of office of elective national
and local officials covered by the synchronized elections also expire.

Electoral and Other Reforms Must be Consistent

With Principles of Regional Autonomy and

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Representative Democracy

Beyond the expressly stated policy in RA 10153 of synchronizing national and local elections,
the OSG calls the Courts attention to the governments other policy goals in enacting RA 10153.
The OSG presents RA 10153 as the cure for the ills plaguing the ARMM, manifested in the
symptoms of padded voters list, rampant criminality and highly dynastic politics, among others.
Genuine regional autonomy, in the OSGs view, starts upon the assumption to office of the newly
elected officials on 30 June 2013, when the national government, through the OICs, is done
cleaning the ARMM government.77

In the first place, these policy goals to reform the ARMM society are nowhere stated or even
implied in RA 10153. Electoral reform is mentioned in the Presidents certification on the urgency
of HB 4146 and SB 2756 but RA 10153 itself is silent on such policy goal. The only apparent
reason for the enactment of RA 10153 is to synchronize the ARMM elections with the national and
local elections, a policy the legislature can pursue even in the absence of a constitutional directive
to synchronize all elections.

In any event, it is a terribly dangerous precedent for this Court to legitimize the cancelation
of scheduled local elections in the ARMM and allow the appointment of OICs in place of elected
local officials for the purpose of reforming the ARMM society and curing all social, political and
economic ills plaguing it. If this can be done to the ARMM, it can also be done to other regions,
provinces, cities and municipalities, and worse, it can even be done to the entire Philippines:
cancel scheduled elections, appoint OICs in place of elective officials, all for the ostensible
purpose of reforming society a purpose that is perpetually a work-in-progress. This Court cannot
allow itself to be co-opted into such a social re-engineering in clear violation of the Constitution.
One has to see the problem in the Muslim South in the larger canvass of the Filipino Muslims
centuries-old struggle for self-determination. The Muslim problem in southern Mindanao is rooted
on the Philippine States failure to craft solutions sensitive to the Filipino Muslims common and
distinctive historical and cultural heritage, economic and social structures, and other relevant

characteristics.78 The framers of the 1987 Constitution, for the first time, recognized these causes
and devised a solution by mandating the creation of an autonomous region in Muslim
Mindanao, a political accommodation radically vesting State powers to the region, save those
withheld by the Constitution and national laws. 79 Lying at the heart of this unprecedented
empowerment is the Constitutions guarantee that the executive and legislative offices of the
autonomous region shall be be elective and representative of the constituent political
units.80 The essence of an autonomous region is the untrammeled right of the people in the
region to freely choose those who will govern them. A region is not autonomous if its leaders are
not elected by the people of the region but appointed by the central government in Manila. It is
the solemn duty of this Court to uphold the genuine autonomy of the ARMM as crafted by the
framers and enshrined in the Constitution. Otherwise, our Muslim brothers in the South who
justifiably seek genuine autonomy for their region would find no peaceful solution under the
Constitution.

By disenfranchising voters in the ARMM, even for a single electoral cycle, denying them their
fundamental right of electing their leaders and representatives, RA 10153 strikes at the heart of
the Constitutions project of creating autonomous regions. In the opinion of the biggest Islamic
rebel group in the region, the cancelation of elections under RA 10153 speaks loudly why this
entity [ARMM] is not autonomous; it is controlled, nay dictated, by Manila.81 Contrary to
the OSGs view, denial of the right of suffrage is always too high a price to pay in exchange for
promised reforms to be undertaken by OICs with no mandate from the people. Incidentally, the
OICs to be appointed under RA 10153 are not even barred from running in the next ARMM
elections, immediately putting at risk the promised reforms due to obvious conflict of interest.

The ARMM enjoys no monopoly of the evils the government now belatedly claims it wants to
eradicate in passing RA 10153. Private armies and political dynasties litter the length and breadth
of this archipelago and spurious voters registration has perennially polluted the national voters
list. The solutions to these problems lie not in tinkering with democratic processes but in
addressing their root causes. Notably, the government recently upgraded the countrys age-old
manual elections into an automated system, ridding the elections of the fraud-prone manual
system, without skipping a single electoral cycle. Similarly, the cleansing of the voters list is on
track, with the incumbent head of respondent COMELEC himself admitting that the COMELEC is
now 65%-70% done with biometrics registration. 82

[Type text]

In reviewing legislative measures impinging on core constitutional principles such as

democratic republicanism, the Court, as the last bulwark of democracy, must necessarily be
deontological. The Court must determine the constitutionality of a law based on the laws
adherence to the Constitution, not on the laws supposed beneficial consequences. The
laudable ends of legislative measures cannot justify the denial, even if temporal, of the sovereign
peoples constitutional right of suffrage to choose freely and periodically those whom they please
to govern them.83 The Court should strike a balance between upholding constitutional imperatives
on regional autonomy and republican democratic principles, on the one hand, and the incumbent
administrations legislative initiative to synchronize elections, on the other hand. Had it done so
here, the Court would have faithfully performed its sworn duty to protect and uphold the
Constitution without fear or favor.

Accordingly, I vote to GRANT in part the petitions in G.R. Nos. 196271, 197221, 197280,
197282, 197392 and 197454 and declare UNCONSTITUTIONAL Sections 3, 4 and 5 of Republic
Act No. 10153. Respondent Commission on Elections should be ordered to hold, as soon as
possible, special elections in the Autonomous Region in Muslim Mindanao for the positions of
Governor, Vice-Governor and members of the Regional Legislative Assembly. The officials elected
in the special elections should hold office until 30 June 2013. Pending the holding of special
elections and the assumption to office of the elected ARMM Governor, the President may appoint
an officer-in-charge in the office of the ARMM Governor.

I further vote to declare UNCONSTITUTIONAL the second sentence of Section 7(1), Article
VII and Sections 1 and 3, Article XVII of Republic Act No. 9054.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 202242

July 17, 2012

FRANCISCO I. CHAVEZ, Petitioner,

vs.
JUDICIAL AND BAR COUNCIL, SEN. FRANCIS JOSEPH G. ESCUDERO and REP. NIEL C. TUPAS, JR.,
Respondents.
DECISION
MENDOZA, J.:
The issue at hand has been in hibernation until the unexpected departure of Chief Justice Renato C. Corona on
May 29, 2012, and the nomination of former Solicitor General Francisco I. Chavez (petitioner), as his potential
successor, triggered the filing of this case. The issue has constantly been nagging legal minds, yet remained
dormant for lack of constitutional challenge.
As the matter is of extreme urgency considering the constitutional deadline in the process of selecting the
nominees for the vacant seat of the Chief Justice, the Court cannot delay the resolution of the issue a day longer.
Relegating it in the meantime to the back burner is not an option.
Does the first paragraph of Section 8, Article VIII of the 1987 Constitution allow more than one (1) member of
Congress to sit in the JBC? Is the practice of having two (2) representatives from each house of Congress with one
(1) vote each sanctioned by the Constitution? These are the pivotal questions to be resolved in this original action
for prohibition and injunction.
Long before the naissance of the present Constitution, the annals of history bear witness to the fact that the
exercise of appointing members of the Judiciary has always been the exclusive prerogative of the executive and
legislative branches of the government. Like their progenitor of American origins, both the Malolos Constitution 1 and
the 1935 Constitution2 had vested the power to appoint the members of the Judiciary in the President, subject to
confirmation by the Commission on Appointments. It was during these times that the country became witness to the
deplorable practice of aspirants seeking confirmation of their appointment in the Judiciary to ingratiate themselves
with the members of the legislative body. 3
Then, with the fusion of executive and legislative power under the 1973 Constitution, 4 the appointment of
judges and justices was no longer subject to the scrutiny of another body. It was absolute, except that the
appointees must have all the qualifications and none of the disqualifications.
Prompted by the clamor to rid the process of appointments to the Judiciary from political pressure and partisan
activities,5 the members of the Constitutional Commission saw the need to create a separate, competent and
independent body to recommend nominees to the President. Thus, it conceived of a body representative of all the
stakeholders in the judicial appointment process and called it the Judicial and Bar Council (JBC). Its composition,
term and functions are provided under Section 8, Article VIII of the Constitution, viz:
Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court
composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress
as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme
Court, and a representative of the private sector.
(2) The regular members of the Council shall be appointed by the President for a term of four
years with the consent of the Commission on Appointments. Of the Members first appointed, the
representative of the Integrated Bar shall serve for four years, the professor of law for three years,
the retired Justice for two years, and the representative of the private sector for one year.
(3) The Clerk of the Supreme Court shall be the Secretary ex officio of the Council and shall keep
a record of its proceedings.

(4) The regular Members of the Council shall receive such emoluments as may be determined by
the Supreme Court. The Supreme Court shall provide in its annual budget the appropriations for the
Council.
(5) The Council shall have the principal function of recommending appointees to the Judiciary. It
may exercise such other functions and duties as the Supreme Court may assign to it.
In compliance therewith, Congress, from the moment of the creation of the JBC, designated one representative
to sit in the JBC to act as one of the ex officio members. 6 Perhaps in order to give equal opportunity to both houses
to sit in the exclusive body, the House of Representatives and the Senate would send alternate representatives to
the JBC. In other words, Congress had only one (1) representative.
In 1994, the composition of the JBC was substantially altered. Instead of having only seven (7) members, an
eighth (8th) member was added to the JBC as two (2) representatives from Congress began sitting in the JBC - one
from the House of Representatives and one from the Senate, with each having one-half (1/2) of a vote. 7 Then,
curiously, the JBC En Banc, in separate meetings held in 2000 and 2001, decided to allow the representatives from
the Senate and the House of Representatives one full vote each. 8 At present, Senator Francis Joseph G. Escudero
and Congressman Niel C. Tupas, Jr. (respondents) simultaneously sit in the JBC as representatives of the legislature.
It is this practice that petitioner has questioned in this petition, 9 setting forth the following
GROUNDS FOR ALLOWANCE OF THE PETITION
I
Article VIII, Section 8, Paragraph 1 is clear, definite and needs no interpretation in that the JBC shall have only
one representative from Congress.
II
The framers of the Constitution clearly envisioned, contemplated and decided on a JBC composed of only seven
(7) members.
III
Had the framers of the Constitution intended that the JBC composed of the one member from the Senate and
one member from the House of Representatives, they could have easily said so as they did in the other provisions of
the Constitution.
IV
The composition of the JBC providing for three ex-officio members is purposely designed for a balanced
representation of each of the three branches of the government.
V
One of the two (2) members of the JBC from Congress has no right (not even right) to sit in the said
constitutional body and perform the duties and functions of a member thereof.
VI
The JBC cannot conduct valid proceedings as its composition is illegal and unconstitutional. 10
On July 9, 2012, the JBC filed its Comment. 11 It, however, abstained from recommending on how this
constitutional issue should be disposed in gracious deference to the wisdom of the Court. Nonetheless, the JBC was
more than generous enough to offer the insights of various personalities previously connected with it. 12
Through the Office of the Solicitor General (OSG), respondents defended their position as members of the JBC
in their Comment13 filed on July 12, 2012. According to them, the crux of the controversy is the phrase "a

representative of Congress."14 Reverting to the basics, they cite Section 1, Article VI of the Constitution 15 to
determine the meaning of the term
"Congress." It is their theory that the two houses, the Senate and the House of Representatives, are permanent
and mandatory components of "Congress," such that the absence of either divests the term of its substantive
meaning as expressed under the Constitution. In simplistic terms, the House of Representatives, without the Senate
and vice-versa, is not Congress. 16 Bicameralism, as the system of choice by the Framers, requires that both houses
exercise their respective powers in the performance of its mandated duty which is to legislate. Thus, when Section
8(1), Article VIII of the Constitution speaks of "a representative from Congress," it should mean one representative
each from both Houses which comprise the entire Congress. 17
Tracing the subject provisions history, the respondents claim that when the JBC was established, the Framers
originally envisioned a unicameral legislative body, thereby allocating "a representative of the National Assembly"
to the JBC. The phrase, however, was not modified to
aptly jive with the change to bicameralism, the legislative system finally adopted by the Constitutional
Commission on July 21, 1986. According to respondents, if the Commissioners were made aware of the consequence
of having a bicameral legislature instead of a unicameral one, they would have made the corresponding adjustment
in the representation of Congress in the JBC.18
The ambiguity having resulted from a plain case of inadvertence, the respondents urge the Court to look
beyond the letter of the disputed provision because the literal adherence to its language would produce absurdity
and incongruity to the bicameral nature of Congress. 19 In other words, placing either of the respondents in the JBC
will effectively deprive a house of Congress of its representation. In the same vein, the electorate represented by
Members of Congress will lose their only opportunity to participate in the nomination process for the members of
the Judiciary, effectively diminishing the republican nature of the government. 20
The respondents further argue that the allowance of two (2) representatives of Congress to be members of the
JBC does not render the latters purpose nugatory. While they admit that the purpose in creating the JBC was to
insulate appointments to the Judiciary from political influence, they likewise cautioned the Court that this
constitutional vision did not intend to entirely preclude political factor in said appointments. Therefore, no evil
should be perceived in the current set-up of the JBC because two (2) members coming from Congress, whose
membership to certain political parties is irrelevant, does not necessarily amplify political partisanship in the JBC. In
fact, the presence of two (2) members from Congress will most likely provide balance as against the other six (6)
members who are undeniably presidential appointees. 21
The Issues
In resolving the procedural and substantive issues arising from the petition, as well as the myriad of counterarguments proffered by the respondents, the Court synthesized them into two:
(1) Whether or not the conditions sine qua non for the exercise of the power of judicial review have been met in
this case; and
(2) Whether or not the current practice of the JBC to perform its functions with eight (8) members, two (2) of
whom are members of Congress, runs counter to the letter and spirit of the 1987 Constitution.
The Power of Judicial Review
In its Comment, the JBC submits that petitioner is clothed with locus standi to file the petition, as a citizen and
taxpayer, who has been nominated to the position of Chief Justice. 22
For the respondents, however, petitioner has no "real interest" in questioning the constitutionality of the JBCs
current composition.23 As outlined in jurisprudence, it is well-settled that for locus standi to lie, petitioner must
exhibit that he has been denied, or is about to be denied, of a personal right or privilege to which he is entitled.
Here, petitioner failed to manifest his acceptance of his recommendation to the position of Chief Justice, thereby
divesting him of a substantial interest in the controversy. Without his name in the official list of applicants for the
post, the respondents claim that there is no personal stake on the part of petitioner that would justify his outcry of
unconstitutionality. Moreover, the mere allegation that this case is of transcendental importance does not excuse
the waiver of the rule on locus standi, because, in the first place, the case lacks the requisites therefor. The
respondents also question petitioners belated filing of the petition. 24 Being aware that the current composition of
the JBC has been in practice since 1994, petitioners silence for eighteen (18) years show that the constitutional

issue being raised before the Court does not comply with the "earliest possible opportunity" requirement.
Before addressing the above issues in seriatim, the Court deems it proper to first ascertain the nature of the
petition. Pursuant to the rule that the nature of an action is determined by the allegations therein and the character
of the relief sought, the Court views the petition as essentially an action for declaratory relief under Rule 63 of the
1997 Rules of Civil Procedure.25
The Constitution as the subject matter, and the validity and construction of Section 8 (1), Article VIII as the
issue raised, the petition should properly be considered as that which would result in the adjudication of rights sans
the execution process because the only relief to be granted is the very declaration of the rights under the document
sought to be construed. It being so, the original jurisdiction over the petition lies with the appropriate Regional Trial
Court (RTC). Notwithstanding the fact that only questions of law are raised in the petition, an action for declaratory
relief is not among those within the original jurisdiction of this Court as provided in Section 5, Article VIII of the
Constitution.26
At any rate, due to its serious implications, not only to government processes involved but also to the sanctity
of the Constitution, the Court deems it more prudent to take cognizance of it. After all, the petition is also for
prohibition under Rule 65 seeking to enjoin Congress from sending two (2) representatives with one (1) full vote
each to the JBC.
The Courts power of judicial review, like almost all other powers conferred by the Constitution, is subject to
several limitations, namely: (1) there must be an actual case or controversy calling for the exercise of judicial power;
(2) the person challenging the act must have "standing" to challenge; he must have a personal and substantial
interest in the case, such that he has sustained or will sustain, direct injury as a result of its enforcement; (3) the
question of constitutionality must be raised at the earliest possible opportunity; and (4) the issue of constitutionality
must be the very lis mota of the case. 27 Generally, a party will be allowed to litigate only when these conditions sine
qua non are present, especially when the constitutionality of an act by a co-equal branch of government is put in
issue.
Anent locus standi, the question to be answered is this: does the party possess a personal stake in the outcome
of the controversy as to assure that there is real, concrete and legal conflict of rights and duties from the issues
presented before the Court? In David v. Macapagal-Arroyo, 28 the Court summarized the rules on locus standi as
culled from jurisprudence. There, it was held that taxpayers, voters, concerned citizens, and legislators may be
accorded standing to sue, provided that the following requirements are met: (1) cases involve constitutional issues;
(2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is
unconstitutional; (3) for voters, there must be a showing of obvious interest in the validity of the election law in
question; (4) for concerned citizens, there must be a showing that the issues raised are of transcendental
importance which must be settled early; and (5) for legislators, there must be a claim that the official action
complained of infringes upon their prerogatives as legislators.
In public suits, the plaintiff, representing the general public, asserts a "public right" in assailing an allegedly
illegal official action. The plaintiff may be a person who is affected no differently from any other person, and can be
suing as a "stranger," or as a "citizen" or "taxpayer." Thus, taxpayers have been allowed to sue where there is a
claim that public funds are illegally disbursed or that public money is being deflected to any improper purpose, or
that public funds are wasted through the enforcement of an invalid or unconstitutional law. Of greater import than
the damage caused by the illegal expenditure of public funds is the mortal wound inflicted upon the fundamental
law by the enforcement of an invalid statute. 29
In this case, petitioner seeks judicial intervention as a taxpayer, a concerned citizen and a nominee to the
position of Chief Justice of the Supreme Court. As a taxpayer, petitioner invokes his right to demand that the taxes
he and the rest of the citizenry have been paying to the government are spent for lawful purposes. According to
petitioner, "since the JBC derives financial support for its functions, operation and proceedings from taxes paid,
petitioner possesses as taxpayer both right and legal standing to demand that the JBCs proceedings are not tainted
with illegality and that its composition and actions do not violate the Constitution." 30
Notably, petitioner takes pains in enumerating past actions that he had brought before the Court where his
legal standing was sustained. Although this inventory is unnecessary to establish locus standi because obviously,
not every case before the Court exhibits similar issues and facts, the Court recognizes the petitioners right to sue in
this case. Clearly, petitioner has the legal standing to bring the present action because he has a personal stake in
the outcome of this controversy.
The Court disagrees with the respondents contention that petitioner lost his standing to sue because he is not
an official nominee for the post of Chief Justice. While it is true that a "personal stake" on the case is imperative to

have locus standi, this is not to say that only official nominees for the post of Chief Justice can come to the Court
and question the JBC composition for being unconstitutional. The JBC likewise screens and nominates other
members of the Judiciary. Albeit heavily publicized in this regard, the JBCs duty is not at all limited to the
nominations for the highest magistrate in the land. A vast number of aspirants to judicial posts all over the country
may be affected by the Courts ruling. More importantly, the legality of the very process of nominations to the
positions in the Judiciary is the nucleus of the controversy. The Court considers this a constitutional issue that must
be passed upon, lest a constitutional process be plagued by misgivings, doubts and worse, mistrust. Hence, a
citizen has a right to bring this question to the Court, clothed with legal standing and at the same time, armed with
issues of transcendental importance to society. The claim that the composition of the JBC is illegal and
unconstitutional is an object of concern, not just for a nominee to a judicial post, but for all citizens who have the
right to seek judicial intervention for rectification of legal blunders.
With respect to the question of transcendental importance, it is not difficult to perceive from the opposing
arguments of the parties that the determinants established in jurisprudence are attendant in this case: (1) the
character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a
constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and
(3) the lack of any other party with a more direct and specific interest in the questions being raised. 31 The
allegations of constitutional violations in this case are not empty attacks on the wisdom of the other branches of the
government. The allegations are substantiated by facts and, therefore, deserve an evaluation from the Court. The
Court need not elaborate on the legal and societal ramifications of the issues raised. It cannot be gainsaid that the
JBC is a constitutional innovation crucial in the selection of the magistrates in our judicial system.
The Composition of the JBC
Central to the resolution of the foregoing petition is an understanding of the composition of the JBC as stated in
the first paragraph of Section 8, Article VIII of the Constitution. It reads:
Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court
composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress
as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme
Court, and a representative of the private sector.
From a simple reading of the above-quoted provision, it can readily be discerned that the provision is clear and
unambiguous. The first paragraph calls for the creation of a JBC and places the same under the supervision of the
Court. Then it goes to its composition where the regular members are enumerated: a representative of the
Integrated Bar, a professor of law, a retired member of the Court and a representative from the private sector. On
the second part lies the crux of the present controversy. It enumerates the ex officio or special members of the JBC
composed of the Chief Justice, who shall be its Chairman, the Secretary of Justice and "a representative of
Congress."
As petitioner correctly posits, the use of the singular letter "a" preceding "representative of Congress" is
unequivocal and leaves no room for any other construction. It is indicative of what the members of the
Constitutional Commission had in mind, that is, Congress may designate only one (1) representative to the JBC. Had
it been the intention that more than one (1) representative from the legislature would sit in the JBC, the Framers
could have, in no uncertain terms, so provided.
One of the primary and basic rules in statutory construction is 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. 32 It
is a well-settled principle of constitutional construction that the language employed in the Constitution must be
given their ordinary meaning except where technical terms are employed. As much as possible, the words of the
Constitution should be understood in the sense they have in common use. What it says according to the text of the
provision to be construed compels acceptance and negates the power of the courts to alter it, based on the
postulate that the framers and the people mean what they say. 33 Verba legis non est recedendum from the words
of a statute there should be no departure. 34
The raison d tre for the rule is essentially two-fold: First, because it is assumed that the words in which
constitutional provisions are couched express the objective sought to be attained; 35 and second, because the
Constitution is not primarily a lawyers document but essentially that of the people, in whose consciousness it
should ever be present as an important condition for the rule of law to prevail. 36
Moreover, under the maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is
equally susceptible of various meanings, its correct construction may be made clear and specific by considering the
company of words in which it is founded or with which it is associated. 37 This is because a word or phrase in a

statute is always used in association with other words or phrases, and its meaning may, thus, be modified or
restricted by the latter.38 The particular words, clauses and phrases should not be studied as detached and isolated
expressions, but the whole and every part of the statute must be considered in fixing the meaning of any of its parts
and in order to produce a harmonious whole. A statute must be so construed as to harmonize and give effect to all
its provisions whenever possible. 39 In short, every meaning to be given to each word or phrase must be ascertained
from the context of the body of the statute since a word or phrase in a statute is always used in association with
other words or phrases and its meaning may be modified or restricted by the latter.
Applying the foregoing principle to this case, it becomes apparent that the word "Congress" used in Article VIII,
Section 8(1) of the Constitution is used in its generic sense. No particular allusion whatsoever is made on whether
the Senate or the House of Representatives is being referred to, but that, in either case, only a singular
representative may be allowed to sit in the JBC. The foregoing declaration is but sensible, since, as pointed out by
an esteemed former member of the Court and consultant of the JBC in his memorandum, 40 "from the enumeration of
the membership of the JBC, it is patent that each category of members pertained to a single individual only." 41
Indeed, the spirit and reason of the statute may be passed upon where a literal meaning would lead to
absurdity, contradiction, injustice, or defeat the clear purpose of the lawmakers. 42 Not any of these instances,
however, is present in the case at bench. Considering that the language of the subject constitutional provision is
plain and unambiguous, there is no need to resort extrinsic aids such as records of the Constitutional Commission.
Nevertheless, even if the Court should proceed to look into the minds of the members of the Constitutional
Commission, it is undeniable from the records thereof that it was intended that the JBC be composed of seven (7)
members only. Thus:
MR. RODRIGO: Let me go to another point then.
On page 2, Section 5, there is a novel provision about the appointments of members of the Supreme Court and
judges of the lower courts. At present it is the President who appoints them. If there is a Commission on
Appointments, then it is the President with the confirmation of the Commission on Appointment. In this proposal, we
would like to establish a new office, a sort of a board composed of seven members called the Judicial and Bar
Council. And while the President will still appoint the member of the judiciary, he will be limited to the
recommendees of this Council.
xxx

xxx

xxx

MR. RODRIGO. Of the seven members of the Judicial and Bar Council, the President appoints four of them who
are regular members.
xxx

xxx

xxx

MR. CONCEPCION. The only purpose of the Committee is to eliminate partisan politics. 43
xxx

xxx

xxx

MR. RODRIGO. If my amendment is approved, then the provision will be exactly the same as the provision in
the 1935 Constitution, Article VIII, Section 5.
xxx

xxx

xxx

If we do not remove the proposed amendment on the creation of the Judicial and Bar Council, this will be a
diminution of the appointing power of the highest magistrate of the land, of the
President of the Philippines elected by all the Filipino people. The appointing power will be limited by a group of
seven people who are not elected by the people but only appointed.
Mr. Presiding Officer, if this Council is created, there will be no uniformity in our constitutional provisions on
appointments. The members of the Judiciary will be segregated from the rest of the government. Even a municipal
judge cannot be appointed by the President except upon recommendation or nomination of the three names by this
Committee of seven people, commissioners of the Commission on Elections, the COA and the Commission on Civil
Serviceeven ambassadors, generals of the Army will not come under this restriction. Why are we going to

segregate the Judiciary from the rest of our government in the appointment of high-ranking officials?
Another reason is that this Council will be ineffective. It will just besmirch the honor of our President without
being effective at all because this Council will be under the influence of the President. Four out of seven are
appointees of the President and they can be reappointed when their term ends. Therefore, they would be kowtow
the President. A fifth member is the Minister of Justice, an alter ego of the President. Another member represents
the Legislature. In all probability, the controlling part in the legislature belongs to the President and, therefore, this
representative form the National Assembly is also under the influence of the President. And may I say, Mr. Presiding
Officer, that event the Chief Justice of the Supreme Court is an appointee of the President. So it is futile he will be
influence anyway by the President.44 [Emphases supplied]
At this juncture, it is worthy to note that the seven-member composition of the JBC serves a practical purpose,
that is, to provide a solution should there be a stalemate in voting. This underlying reason leads the Court to
conclude that a single vote may not be divided into half (1/2), between two representatives of Congress, or among
any of the sitting members of the JBC for that matter. This unsanctioned practice can possibly cause disorder and
eventually muddle the JBCs voting process, especially in the event a tie is reached. The aforesaid purpose would
then be rendered illusory, defeating the precise mechanism which the Constitution itself created. While it would be
unreasonable to expect that the Framers provide for every possible scenario, it is sensible to presume that they
knew that an odd composition is the best means to break a voting deadlock.
The respondents insist that owing to the bicameral nature of Congress, the word "Congress" in Section 8(1),
Article VIII of the Constitution should be read as including both the Senate and the House of Representatives. They
theorize that it was so worded because at the time the said provision was being drafted, the Framers initially
intended a unicameral form of Congress.
Then, when the Constitutional Commission eventually adopted a bicameral form of Congress, the Framers,
through oversight, failed to amend Article VIII, Section 8 of the Constitution. 45 On this score, the Court cites the
insightful analysis of another member of the Court and JBC consultant, retired Justice Consuelo Ynares-Santiago. 46
Thus:
A perusal of the records of the Constitutional Commission reveals that the composition of the JBC reflects the
Commissions desire "to have in the Council a representation for the major elements of the community." xxx The exofficio members of the Council consist of representatives from the three main branches of government while the
regular members are composed of various stakeholders in the judiciary. The unmistakeable tenor of Article VIII,
Section 8(1) was to treat each ex-officio member as representing one co-equal branch of government.
xxx Thus, the JBC was designed to have seven voting members with the three ex-officio members having equal
say in the choice of judicial nominees.
xxx

xxx

xxx

No parallelism can be drawn between the representative of Congress in the JBC and the exercise
by Congress of its legislative powers under Article VI and constituent powers under Article XVII of the
Constitution. Congress, in relation to the executive and judicial branches of government, is constitutionally treated
as another co-equal branch of in the matter of its representative in the JBC. On the other hand, the exercise of
legislative and constituent powers requires the Senate and House of Representatives to coordinate and act as
distinct bodies in furtherance of Congress role under our constitutional scheme. While the latter justifies and, in
fact, necessitates the separateness of the two houses of Congress as they relate inter se, no such
dichotomy need be made when Congress interacts with the other two co-equal branches of
government.
It is more in keeping with the co-equal nature of the three governmental branches to assign the
same weight to considerations that any of its representatives may have regarding aspiring nominees
to the judiciary. The representatives of the Senate and the House of Representatives act as such for
one branch and should not have any more quantitative influence as the other branches in the exercise
of prerogatives evenly bestowed upon the three. Sound reason and principle of equality among the three
branches support this conclusion. [Emphases and underscoring supplied]
More than the reasoning provided in the above discussed rules of constitutional construction, the Court finds
the above thesis as the paramount justification of the Courts conclusion that "Congress," in the context of JBC
representation, should be considered as one body. It is evident that the definition of "Congress" as a bicameral body
refers to its primary function in government - to legislate. 47 In the passage of laws, the Constitution is explicit in the
distinction of the role of each house in the process. The same holds true in Congress non-legislative powers such
as, inter alia, the power of appropriation, 48 the declaration of an existence of a state of war, 49 canvassing of electoral

returns for the President and Vice-President, 50 and impeachment.51 In the exercise of these powers, the Constitution
employs precise language in laying down the roles which a particular house plays, regardless of whether the two
houses consummate an official act by voting jointly or separately. An inter-play between the two houses is
necessary in the realization of these powers causing a vivid dichotomy that the Court cannot simply discount. Verily,
each house is constitutionally granted with powers and functions peculiar to its nature and with keen consideration
to 1) its relationship with the other chamber; and 2) in consonance with the principle of checks and balances, to the
other branches of government.
This, however, cannot be said in the case of JBC representation because no liaison between the two houses
exists in the workings of the JBC. No mechanism is required between the Senate and the House of Representatives
in the screening and nomination of judicial officers. Hence, the term "Congress" must be taken to mean the entire
legislative department. A fortiori, a pretext of oversight cannot prevail over the more pragmatic scheme which the
Constitution laid with firmness, that is, that the JBC has a seat for a single representative of Congress, as one of the
co-equal branches of government.
Doubtless, the Framers of our Constitution intended to create a JBC as an innovative solution in response to the
public clamor in favor of eliminating politics in the appointment of members of the Judiciary. 52 To ensure judicial
independence, they adopted a holistic approach and hoped that, in creating a JBC, the private sector and the three
branches of government would have an active role and equal voice in the selection of the members of the Judiciary.
Therefore, to allow the Legislature to have more quantitative influence in the JBC by having more than one
voice speak, whether with one full vote or one-half (1/2) a vote each, would, as one former congressman and
member of the JBC put it, "negate the principle of equality among the three branches of government which is
enshrined in the Constitution."53
To quote one former Secretary of Justice:
The present imbalance in voting power between the Legislative and the other sectors represented in the JBC
must be corrected especially when considered vis--vis the avowed purpose for its creation, i.e., to insulate the
appointments in the Judiciary against political influence. By allowing both houses of Congress to have a
representative in the JBC and by giving each representative one (1) vote in the Council, Congress, as compared to
the other members of the JBC, is accorded greater and unwarranted influence in the appointment of judges. 54
[Emphasis supplied]
It is clear, therefore, that the Constitution mandates that the JBC be composed of seven (7) members only.
Thus, any inclusion of another member, whether with one whole vote or half (1/2) of it, goes against that mandate.
Section 8(1), Article VIII of the Constitution, providing Congress with an equal voice with other members of the JBC
in recommending appointees to the Judiciary is explicit. Any circumvention of the constitutional mandate should not
be countenanced for the Constitution is the supreme law of the land. The Constitution is the basic and paramount
law to which all other laws must conform and to which all persons, including the highest officials of the land, must
defer. Constitutional doctrines must remain steadfast no matter what may be the tides of time. It cannot be simply
made to sway and accommodate the call of situations and much more tailor itself to the whims and caprices of the
government and the people who run it. 55 Hence, any act of the government or of a public official or employee which
is contrary to the Constitution is illegal, null and void.
As to the effect of the Courts finding that the current composition of the JBC is unconstitutional, it bears
mentioning that as a general rule, an unconstitutional act 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. 56 This rule, however, is
not absolute. In the interest of fair play under the doctrine of operative facts, actions previous to the declaration of
unconstitutionality are legally recognized. They are not nullified. In Planters Products, Inc. v. Fertiphil Corporation, 57
the Court explained:
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair
play.1wphi1 It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to
a determination of unconstitutionality is an operative fact and may have consequences which cannot always be
ignored. The past cannot always be erased by a new judicial declaration.
The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who
have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would
put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law
creating it.

Considering the circumstances, the Court finds the exception applicable in this case and holds that
notwithstanding its finding of unconstitutionality in the current composition of the JBC, all its prior official actions are
nonetheless valid.
At this point, the Court takes the initiative to clarify that it is not in a position to determine as to who should
remain as the sole representative of Congress in the JBC. This is a matter beyond the province of the Court and is
best left to the determination of Congress.
Finally, while the Court finds wisdom in respondents' contention that both the Senate and the House of
Representatives should be equally represented in the JBC, the Court is not in a position to stamp its imprimatur on
such a construction at the risk of expanding the meaning of the Constitution as currently worded. Needless to state,
the remedy lies in the amendment of this constitutional provision. The courts merely give effect to the lawgiver's
intent. The solemn power and duty of the Court to interpret and apply the law does not include the power to correct,
by reading into the law what is not written therein.
WHEREFORE, the petition is GRANTED. The current numerical composition of the Judicial and Bar Council IS
declared UNCONSTITUTIONAL. The Judicial and Bar Council is hereby enjoined to reconstitute itself so that only one (
1) member of Congress will sit as a representative in its proceedings, in accordance with Section 8( 1 ), Article
VIII of the 1987 Constitution.
This disposition is immediately executory.
SO ORDERED.
3
4
5

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 202242

April 16, 2013

FRANCISCO I. CHAVEZ, Petitioner,

vs.
JUDICIALAND BAR COUNCIL, SEN. FRANCIS JOSEPH G. ESCUDERO and REP. NIEL C. TUPAS, JR., Respondents.
RESOLUTION
MENDOZA, J.:
This resolves the Motion for Reconsideration1 filed by the Office of the Solicitor General (OSG) on behalf of the
respondents, Senator Francis Joseph G. Escudero and Congressman Niel C. Tupas, Jr. (respondents), duly opposed2
by the petitioner, former Solicitor General Francisco I. Chavez (petitioner).
By way of recapitulation, the present action stemmed from the unexpected departure of former Chief Justice
Renato C. Corona on May 29, 2012, and the nomination of petitioner, as his potential successor. In his initiatory
pleading, petitioner asked the Court to determine 1] whether the first paragraph of Section 8, Article VIII of the 1987
Constitution allows more than one (1) member of Congress to sit in the JBC; and 2] if the practice of having two (2)
representatives from each House of Congress with one (1) vote each is sanctioned by the Constitution.
On July 17, 2012, the Court handed down the assailed subject decision, disposing the same in the following
manner:

WHEREFORE, the petition is GRANTED. The current numerical composition of the Judicial and Bar Council is
declared UNCONSTITUTIONAL. The Judicial and Bar Council is hereby enjoined to reconstitute itself so that only one
(1) member of Congress will sit as a representative in its proceedings, in accordance with Section 8(1), Article VIII of
the 1987 Constitution.
This disposition is immediately executory.
SO ORDERED.
On July 31, 2012, following respondents motion for reconsideration and with due regard to Senate Resolution
Nos. 111,3 112,4 113,5 and 114,6 the Court set the subject motion for oral arguments on August 2, 2012.7 On
August 3, 2012, the Court discussed the merits of the arguments and agreed, in the meantime, to suspend the
effects of the second paragraph of the dispositive portion of the July 17, 2012 Decision which decreed that it was
immediately executory. The decretal portion of the August 3, 2012 Resolution8 reads:
WHEREFORE, the parties are hereby directed to submit their respective MEMORANDA within ten (10) days from
notice. Until further orders, the Court hereby SUSPENDS the effect of the second paragraph of the dispositive
portion of the Courts July 17, 2012 Decision, which reads: "This disposition is immediately executory."9
Pursuant to the same resolution, petitioner and respondents filed their respective memoranda.10
Brief Statement of the Antecedents
In this disposition, it bears reiterating that from the birth of the Philippine Republic, the exercise of appointing
members of the Judiciary has always been the exclusive prerogative of the executive and legislative branches of the
government. Like their progenitor of American origins, both the Malolos Constitution11 and the 1935 Constitution12
vested the power to appoint the members of the Judiciary in the President, subject to confirmation by the
Commission on Appointments. It was during these times that the country became witness to the deplorable practice
of aspirants seeking confirmation of their appointment in the Judiciary to ingratiate themselves with the members of
the legislative body.13
Then, under the 1973 Constitution,14 with the fusion of the executive and legislative powers in one body, the
appointment of judges and justices ceased to be subject of scrutiny by another body. The power became exclusive
and absolute to the Executive, subject only to the condition that the appointees must have all the qualifications and
none of the disqualifications.
Prompted by the clamor to rid the process of appointments to the Judiciary of the evils of political pressure and
partisan activities,15 the members of the Constitutional Commission saw it wise to create a separate, competent
and independent body to recommend nominees to the President.
Thus, it conceived of a body, representative of all the stakeholders in the judicial appointment process, and
called it the Judicial and Bar Council (JBC). The Framers carefully worded Section 8, Article VIII of the 1987
Constitution in this wise:
Section 8. (1) A Judicial and Bar Council is hereby created under the supervision of the Supreme Court
composed of the Chief Justice as ex officio Chairman, the Secretary of Justice, and a representative of the Congress
as ex officio Members, a representative of the Integrated Bar, a professor of law, a retired Member of the Supreme
Court, and a representative of the private sector.
From the moment of the creation of the JBC, Congress designated one (1) representative to sit in the JBC to act
as one of the ex-officio members.16 Pursuant to the constitutional provision that Congress is entitled to one (1)
representative, each House sent a representative to the JBC, not together, but alternately or by rotation.
In 1994, the seven-member composition of the JBC was substantially altered.1wphi1 An eighth member was
added to the JBC as the two (2) representatives from Congress began sitting simultaneously in the JBC, with each
having one-half (1/2) of a vote.17
In 2001, the JBC En Banc decided to allow the representatives from the Senate and the House of
Representatives one full vote each.18 It has been the situation since then.
Grounds relied upon by Respondents
Through the subject motion, respondents pray that the Court reconsider its decision and dismiss the petition on
the following grounds: 1] that allowing only one representative from Congress in the JBC would lead to absurdity
considering its bicameral nature; 2] that the failure of the Framers to make the proper adjustment when there was a
shift from unilateralism to bicameralism was a plain oversight; 3] that two representatives from Congress would not
subvert the intention of the Framers to insulate the JBC from political partisanship; and 4] that the rationale of the
Court in declaring a seven-member composition would provide a solution should there be a stalemate is not exactly

correct.
While the Court may find some sense in the reasoning in amplification of the third and fourth grounds listed by
respondents, still, it finds itself unable to reverse the assailed decision on the principal issues covered by the first
and second grounds for lack of merit. Significantly, the conclusion arrived at, with respect to the first and second
grounds, carries greater bearing in the final resolution of this case.
As these two issues are interrelated, the Court shall discuss them jointly.
Ruling of the Court
The Constitution evinces the direct action of the Filipino people by which the fundamental powers of
government are established, limited and defined and by which those powers are distributed among the several
departments for their safe and useful exercise for the benefit of the body politic.19 The Framers reposed their
wisdom and vision on one suprema lex to be the ultimate expression of the principles and the framework upon
which government and society were to operate. Thus, in the interpretation of the constitutional provisions, the Court
firmly relies on the basic postulate that the Framers mean what they say. The language used in the Constitution
must be taken to have been deliberately chosen for a definite purpose. Every word employed in the Constitution
must be interpreted to exude its deliberate intent which must be maintained inviolate against disobedience and
defiance. What the Constitution clearly says, according to its text, compels acceptance and bars modification even
by the branch tasked to interpret it.
For this reason, the Court cannot accede to the argument of plain oversight in order to justify constitutional
construction. As stated in the July 17, 2012 Decision, in opting to use the singular letter "a" to describe
"representative of Congress," the Filipino people through the Framers intended that Congress be entitled to only one
(1) seat in the JBC. Had the intention been otherwise, the Constitution could have, in no uncertain terms, so
provided, as can be read in its other provisions.
A reading of the 1987 Constitution would reveal that several provisions were indeed adjusted as to be in tune
with the shift to bicameralism. One example is Section 4, Article VII, which provides that a tie in the presidential
election shall be broken "by a majority of all the Members of both Houses of the Congress, voting separately."20
Another is Section 8 thereof which requires the nominee to replace the Vice-President to be confirmed "by a majority
of all the Members of both Houses of the Congress, voting separately."21 Similarly, under Section 18, the
proclamation of martial law or the suspension of the privilege of the writ of habeas corpus may be revoked or
continued by the Congress, voting separately, by a vote of at least a majority of all its Members."22 In all these
provisions, the bicameral nature of Congress was recognized and, clearly, the corresponding adjustments were
made as to how a matter would be handled and voted upon by its two Houses.
Thus, to say that the Framers simply failed to adjust Section 8, Article VIII, by sheer inadvertence, to their
decision to shift to a bicameral form of the legislature, is not persuasive enough. Respondents cannot just lean on
plain oversight to justify a conclusion favorable to them. It is very clear that the Framers were not keen on adjusting
the provision on congressional representation in the JBC because it was not in the exercise of its primary function
to legislate. JBC was created to support the executive power to appoint, and Congress, as one whole body, was
merely assigned a contributory non-legislative function.
The underlying reason for such a limited participation can easily be discerned. Congress has two (2) Houses.
The need to recognize the existence and the role of each House is essential considering that the Constitution
employs precise language in laying down the functions which particular House plays, regardless of whether the two
Houses consummate an official act by voting jointly or separately. Whether in the exercise of its legislative23 or its
non-legislative functions such as inter alia, the power of appropriation,24 the declaration of an existence of a state
of war,25 canvassing of electoral returns for the President and Vice-President,26 and impeachment,27 the
dichotomy of each House must be acknowledged and recognized considering the interplay between these two
Houses. In all these instances, each House is constitutionally granted with powers and functions peculiar to its
nature and with keen consideration to 1) its relationship with the other chamber; and 2) in consonance with the
principle of checks and balances, as to the other branches of government.
In checkered contrast, there is essentially no interaction between the two Houses in their participation in the
JBC. No mechanism is required between the Senate and the House of Representatives in the screening and
nomination of judicial officers. Rather, in the creation of the JBC, the Framers arrived at a unique system by adding
to the four (4) regular members, three (3) representatives from the major branches of government - the Chief
Justice as ex-officio Chairman (representing the Judicial Department), the Secretary of Justice (representing the
Executive Department), and a representative of the Congress (representing the Legislative Department). The total is
seven (7), not eight. In so providing, the Framers simply gave recognition to the Legislature, not because it was in
the interest of a certain constituency, but in reverence to it as a major branch of government.
On this score, a Member of Congress, Hon. Simeon A. Datumanong, from the Second District of Maguindanao,
submitted his well-considered position28 to then Chief Justice Reynato S. Puno:

I humbly reiterate my position that there should be only one representative of Congress in the JBC in
accordance with Article VIII, Section 8 (1) of the 1987 Constitution x x x.
The aforesaid provision is clear and unambiguous and does not need any further interpretation. Perhaps, it is
apt to mention that the oft-repeated doctrine that "construction and interpretation come only after it has been
demonstrated that application is impossible or inadequate without them."
Further, to allow Congress to have two representatives in the Council, with one vote each, is to negate the
principle of equality among the three branches of government which is enshrined in the Constitution.
In view of the foregoing, I vote for the proposition that the Council should adopt the rule of single
representation of Congress in the JBC in order to respect and give the right meaning to the above-quoted provision
of the Constitution. (Emphases and underscoring supplied)
On March 14, 2007, then Associate Justice Leonardo A. Quisumbing, also a JBC Consultant, submitted to the
Chief Justice and ex-officio JBC Chairman his opinion,29 which reads:
8. Two things can be gleaned from the excerpts and citations above: the creation of the JBC is intended to
curtail the influence of politics in Congress in the appointment of judges, and the understanding is that seven (7)
persons will compose the JBC. As such, the interpretation of two votes for Congress runs counter to the intendment
of the framers. Such interpretation actually gives Congress more influence in the appointment of judges. Also, two
votes for Congress would increase the number of JBC members to eight, which could lead to voting deadlock by
reason of even-numbered membership, and a clear violation of 7 enumerated members in the Constitution.
(Emphases and underscoring supplied)
In an undated position paper,30 then Secretary of Justice Agnes VST Devanadera opined:
As can be gleaned from the above constitutional provision, the JBC is composed of seven (7) representatives
coming from different sectors. From the enumeration it is patent that each category of members pertained to a
single individual only. Thus, while we do not lose sight of the bicameral nature of our legislative department, it is
beyond dispute that Art. VIII, Section 8 (1) of the 1987 Constitution is explicit and specific that "Congress" shall have
only "xxx a representative." Thus, two (2) representatives from Congress would increase the number of JBC
members to eight (8), a number beyond what the Constitution has contemplated. (Emphases and underscoring
supplied)
In this regard, the scholarly dissection on the matter by retired Justice Consuelo Ynares-Santiago, a former JBC
consultant, is worth reiterating.31 Thus:
A perusal of the records of the Constitutional Commission reveals that the composition of the JBC reflects the
Commissions desire "to have in the Council a representation for the major elements of the community." xxx The exofficio members of the Council consist of representatives from the three main branches of government while the
regular members are composed of various stakeholders in the judiciary. The unmistakeable tenor of Article VIII,
Section 8(1) was to treat each ex-officio member as representing one co-equal branch of government. xxx Thus, the
JBC was designed to have seven voting members with the three ex-officio members having equal say in the choice
of judicial nominees.
xxx
No parallelism can be drawn between the representative of Congress in the JBC and the exercise by Congress
of its legislative powers under Article VI and constituent powers under Article XVII of the Constitution. Congress, in
relation to the executive and judicial branches of government, is constitutionally treated as another co-equal branch
in the matter of its representative in the JBC. On the other hand, the exercise of legislative and constituent powers
requires the Senate and the House of Representatives to coordinate and act as distinct bodies in furtherance of
Congress role under our constitutional scheme. While the latter justifies and, in fact, necessitates the separateness
of the two Houses of Congress as they relate inter se, no such dichotomy need be made when Congress interacts
with the other two co-equal branches of government.
It is more in keeping with the co-equal nature of the three governmental branches to assign the same weight to
considerations that any of its representatives may have regarding aspiring nominees to the judiciary. The
representatives of the Senate and the House of Representatives act as such for one branch and should not have any
more quantitative influence as the other branches in the exercise of prerogatives evenly bestowed upon the three.
Sound reason and principle of equality among the three branches support this conclusion. [Emphases and
underscoring supplied]
The argument that a senator cannot represent a member of the House of Representatives in the JBC and viceversa is, thus, misplaced. In the JBC, any member of Congress, whether from the Senate or the House of
Representatives, is constitutionally empowered to represent the entire Congress. It may be a constricted
constitutional authority, but it is not an absurdity.

From this score stems the conclusion that the lone representative of Congress is entitled to one full vote. This
pronouncement effectively disallows the scheme of splitting the said vote into half (1/2), between two
representatives of Congress. Not only can this unsanctioned practice cause disorder in the voting process, it is
clearly against the essence of what the Constitution authorized. After all, basic and reasonable is the rule that what
cannot be legally done directly cannot be done indirectly. To permit or tolerate the splitting of one vote into two or
more is clearly a constitutional circumvention that cannot be countenanced by the Court. Succinctly put, when the
Constitution envisioned one member of Congress sitting in the JBC, it is sensible to presume that this representation
carries with him one full vote.
It is also an error for respondents to argue that the President, in effect, has more influence over the JBC simply
because all of the regular members of the JBC are his appointees. The principle of checks and balances is still
safeguarded because the appointment of all the regular members of the JBC is subject to a stringent process of
confirmation by the Commission on Appointments, which is composed of members of Congress.
Respondents contention that the current irregular composition of the JBC should be accepted, simply because
it was only questioned for the first time through the present action, deserves scant consideration. Well-settled is the
rule that acts done in violation of the Constitution no matter how frequent, usual or notorious cannot develop or
gain acceptance under the doctrine of estoppel or laches, because once an act is considered as an infringement of
the Constitution it is void from the very beginning and cannot be the source of any power or authority.
It would not be amiss to point out, however, that as a general rule, an unconstitutional act 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. This rule, however, is not absolute. Under the doctrine of operative facts, actions previous to the
declaration of unconstitutionality are legally recognized. They are not nullified. This is essential in the interest of fair
play. To reiterate the doctrine enunciated in Planters Products, Inc. v. Fertiphil Corporation:32
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair
play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a
determination of unconstitutionality is an operative fact and may have consequences which cannot always be
ignored. The past cannot always be erased by a new judicial declaration. The doctrine is applicable when a
declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it
was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or
would put in limbo the acts done by a municipality in reliance upon a law creating it.33
Under the circumstances, the Court finds the exception applicable in this case and holds that notwithstanding
its finding of unconstitutionality in the current composition of the JBC, all its prior official actions are nonetheless
valid.
Considering that the Court is duty bound to protect the Constitution which was ratified by the direct action of
the Filipino people, it cannot correct what respondents perceive as a mistake in its mandate. Neither can the Court,
in the exercise of its power to interpret the spirit of the Constitution, read into the law something that is contrary to
its express provisions and justify the same as correcting a perceived inadvertence. To do so would otherwise
sanction the Court action of making amendment to the Constitution through a judicial pronouncement.
In other words, the Court cannot supply the legislative omission. According to the rule of casus omissus "a case
omitted is to be held as intentionally omitted."34 "The principle proceeds from a reasonable certainty that a
particular person, object or thing has been omitted from a legislative enumeration."35 Pursuant to this, "the Court
cannot under its power of interpretation supply the omission even though the omission may have resulted from
inadvertence or because the case in question was not foreseen or contemplated."36 "The Court cannot supply what
it thinks the legislature would have supplied had its attention been called to the omission, as that would be judicial
legislation."37
Stated differently, the Court has no power to add another member by judicial construction.
The call for judicial activism fails to stir the sensibilities of the Court tasked to guard the Constitution against
usurpation. The Court remains steadfast in confining its powers in the sphere granted by the Constitution itself.
Judicial activism should never be allowed to become judicial exuberance.38 In cases like this, no amount of practical
logic or convenience can convince the Court to perform either an excision or an insertion that will change the
manifest intent of the Framers. To broaden the scope of congressional representation in the JBC is tantamount to the
inclusion of a subject matter which was not included in the provision as enacted. True to its constitutional mandate,
the Court cannot craft and tailor constitutional provisions in order to accommodate all of situations no matter how
ideal or reasonable the proposed solution may sound. To the exercise of this intrusion, the Court declines.
WHEREFORE, the Motion for Reconsideration filed by respondents is hereby DENIED.
The suspension of the effects of the second paragraph of the dispositive portion of the July 17, 2012 Decision of
the Court, which reads, "This disposition is immediately executory," is hereby LIFTED.

SO ORDERED.
7
8
9
10

SECOND DIVISION
G.R. No. 183626 : October 4, 2010
SURIGAO DEL NORTE ELECTRIC COOPERATIVE, INC. (SURNECO), Petitioner, v. ENERGY REGULATORY
COMMISSION, Respondent.
DECISION
NACHURA, J.:
Assailed in this petition for review on certiorari1 under Rule 45 of the Rules of Court are the Decision dated
April 17, 20082 and the Resolution dated June 25, 20083 of the Court of Appeals (CA) in CA-G.R. SP No. 99781.
The antecedent facts and proceedings follow
Petitioner Surigao Del Norte Electric Cooperative, Inc. (SURNECO) is a rural electric cooperative organized and
existing by virtue of Presidential Decree No. 269.
On February 8, 1996, the Association of Mindanao Rural Electric Cooperatives, as representative of SURNECO
and of the other 33 rural electric cooperatives in Mindanao, filed a petition before the then Energy Regulatory Board
(ERB) for the approval of the formula for automatic cost adjustment and adoption of the National Power Corporation
(NPC) restructured rate adjustment to comply with Republic Act (R.A.) No. 7832.4 The case was docketed as ERB
Case No. 96-49, and later consolidated with identical petitions of other associations of electric cooperatives in the
Philippines.
The relevant provisions of R.A. No. 7832 for compliance are Sections 10 and 14, which provide
Sec. 10. Rationalization of System Losses by Phasing Out Pilferage Losses as a Component Thereof. There is
hereby established a cap on the recoverable rate of system losses as follows:
xxxx
(b) For rural electric cooperatives:
(i) Twenty-two percent (22%) at the end of the first year following the effectivity of this Act;
(ii) Twenty percent (20%) at the end of the second year following the effectivity of this Act;
(iii) Eighteen percent (18%) at the end of the third year following the effectivity of this Act;
(iv) Sixteen percent (16%) at the end of the fourth year following the effectivity of this Act; and
(v) Fourteen percent (14%) at the end of the fifth year following the effectivity of this Act.
Provided, that the ERB is hereby authorized to determine at the end of the fifth year following the effectivity of
this Act, and as often as is necessary, taking into account the viability of rural electric cooperatives and the interest
of consumers, whether the caps herein or theretofore established shall be reduced further which shall, in no case,
be lower than nine percent (9%) and accordingly fix the date of the effectivity of the new caps.
xxxx
Sec. 14. Rules and Regulations. The ERB shall, within thirty (30) working days after the conduct of hearings
which must commence within thirty (30) working days upon the effectivity of this Act, issue the rules and regulation
as may be necessary to ensure the efficient and effective implementation of the provisions of this Act, to include but
not limited to, the development of methodologies for computing the amount of electricity illegally used and the
amount of payment or deposit contemplated in Section 7 hereof as a result of the presence of the prima facie
evidence discovered.

Corollary thereto, Sections 4 and 5 of Rule IX of the Implementing Rules and Regulations (IRR) of R.A. No. 7832
provide
Section 4. Caps on System Loss allowed to Rural Electric Cooperatives. The maximum rate of system loss that
the cooperative can pass on to its customers shall be as follows:
a. Twenty-two percent (22%) effective on February 1996 billing.
b. Twenty percent (20%) effective on February 1997 billing.
c. Eighteen percent (18%) effective on February 1998 billing.
d. Sixteen percent (16%) effective on February 1999 billing.
e. Fourteen percent (14%) effective on February 2000 billing.
Section 5. Automatic Cost Adjustment Formula. Each and every cooperative shall file with the ERB, on or before
September 30, 1995, an application for approval of an amended Purchased Power Adjustment Clause that would
reflect the new system loss cap to be included in its schedule of rates.
The automatic cost adjustment of every electric cooperative shall be guided by the following formula:
Purchased Power Adjustment Clause
(PPA) = A
B (C + D)
Where:
A = Cost of electricity purchased and generated for the previous month
B = Total Kwh purchased and generated for the previous month
C = The actual system loss but not to exceed the maximum recoverable rate of system loss in Kwh plus actual
company use in kwhrs but not to exceed 1% of total kwhrs purchased and generated
D = kwh consumed by subsidized consumers
E = Applicable base cost of power equal to the amount incorporated into their basic rate per kwh.
In an Order5 dated February 19, 1997, the ERB granted SURNECO and other rural electric cooperatives
provisional authority to use and implement the Purchased Power Adjustment (PPA) formula pursuant to the
mandatory provisions of R.A. No. 7832 and its IRR, with a directive to submit relevant and pertinent documents for
the Boards review, verification, and confirmation.
In the meantime, the passage of R.A. No. 91366 led to the creation of the Energy Regulatory Commission
(ERC), replacing and succeeding the ERB. All pending cases before the ERB were transferred to the ERC. ERB Case
No. 96-49 was re-docketed as ERC Case No. 2001-343.
In the Order dated June 17, 2003, the ERC clarified ERBs earlier policy regarding the PPA formula to be used by
the electric cooperatives, viz.
After a careful evaluation of the records, the Commission noted that the PPA formula which was approved by
the ERB was silent on whether the calculation of the cost of electricity purchased and generated in the formula
should be "gross" or "net" of the discounts.
Let it be noted that the power cost is said to be at "gross" if the discounts are not passed-on to the end-users
whereas it is said to be at "net" if the said discounts are passed-on to the end-users.
To attain uniformity in the implementation of the PPA formula, the Commission has resolved that:
1. In the confirmation of past PPAs, the power cost shall still be based on "gross," and
2. In the confirmation of future PPAs, the power cost shall be based on "net."

The electric cooperatives filed their respective motions for clarification and/or reconsideration. Hence, the ERC
issued an Order7 dated January 14, 2005, stating that the PPA was a cost-recovery mechanism, not a revenuegenerating scheme, so that the distribution utilities or the electric cooperatives must recover from their customers
only the actual cost of purchased power. The ERC thus adopted a new PPA policy, to wit
A. The computation and confirmation of the PPA prior to the Commissions Order dated June 17, 2003 shall be
based on the approved PPA Formula;
B. The computation and confirmation of the PPA after the Commissions Order dated June 17, 2003 shall be
based on the power cost "net" of discount; and
C. If the approved PPA Formula is silent on the terms of discount, the computation and confirmation of the PPA
shall be based on the
cost at "gross," subject to the submission of proofs that said discounts are being
extended to the end-users.8chanroblesvirtuallawlibrary
Thereafter, the ERC continued its review, verification, and confirmation of the electric cooperatives
implementation of the PPA formula based on the available data and information submitted by the latter.
On March 19, 2007, the ERC issued its assailed Order,9 mandating that the discounts earned by SURNECO from
its power supplier should be deducted from the computation of the power cost, disposing in this wise
WHEREFORE, the foregoing premises considered, the Commission hereby confirms the Purchased Power
Adjustment (PPA) of Surigao del Norte Electric Cooperative, Inc. (SURNECO) for the period February 1996 to July
2004 which resulted to an over-recovery amounting to EIGHTEEN MILLION ONE HUNDRED EIGHTY EIGHT THOUSAND
SEVEN HUNDRED NINETY FOUR PESOS (PhP18,188,794.00) equivalent to PhP0.0500/kwh. In this connection,
SURNECO is hereby directed to refund the amount of PhP0.0500/kwh to its Main Island consumers starting the next
billing cycle from receipt of this Order until such time that the full amount shall have been refunded.
The Commission likewise confirms the PPA of SU0oRNECO for its Hikdop Island consumers for the period
February 1996 to July 2004 which resulted to an under-recovery amounting to TWO MILLION FOUR HUNDRED
SEVENTY EIGHT THOUSAND FORTY FIVE PESOS (PhP2,478,045.00). SURNECO is hereby authorized to collect from its
Hikdop Island consumers the amount of PhP0.0100/kwh starting the next billing cycle from receipt of this Order until
such time that the full amount shall have been collected.
Accordingly, SURNECO is directed to:
a) Reflect the PPA refund/collection as a separate item in the bill using the phrase "Previous Years Adjustment
on Power Cost";
b) Submit, within ten (10) days from its initial implementation of the refund/collection, a sworn statement
indicating its compliance with the aforecited directive; and
c) Accomplish and submit a report in accordance with the attached prescribed format, on or before the 30th
day of January of the succeeding year and every year thereafter until the amount shall have been fully
refunded/collected.
SO ORDERED.10chanroblesvirtuallawlibrary
SURNECO filed a motion for reconsideration, but it was denied by the ERC in its Order11 dated May 29, 2007 on
the ground that the motion did not raise any new matter which was not already passed upon by the ERC.
Aggrieved, SURNECO went to the CA via a petition for review,12 with prayer for the issuance of a temporary
restraining order and preliminary injunction, seeking the annulment of the ERC Orders dated March 19, 2007 and
May 29, 2007.
In its Decision dated April 17, 2008, the CA denied SURNECOs petition and affirmed the assailed Orders of the
ERC.
On June 25, 2008, upon motion for reconsideration13 of SURNECO, the CA issued its Resolution denying the
same.
Hence, this petition, with SURNECO ascribing error to the CA and the ERC in: (1) disallowing its use of the
multiplier scheme to compute its systems loss; (2) ordering it to deduct from the power cost or refund to its
consumers the discounts extended to it by its power supplier, NPC; and (3) ordering it to refund alleged overrecoveries arrived at by the ERC without giving SURNECO the opportunity to be heard.

The petition should be denied.

First. SURNECO points out that the National Electrification Administration (NEA), which used to be the
government authority charged by law with the power to fix rates of rural electric cooperatives, entered into a loan
agreement with the Asian Development Bank (ADB). The proceeds of the loan were intended for use by qualified
rural electric cooperatives, SURNECO included, in their rehabilitation and expansion projects. The loan agreement
imposed a 15% system loss cap, but provided a Power Cost Adjustment Clause authorizing cooperatives to charge
and show "system losses in excess of 15%" as a separate item in their consumers bill. Thus, the cooperatives
charged their consumer-members "System Loss Levy" for system losses in excess of the 15% cap.
SURNECO states that, in January 1984, it was authorized by the NEA that all increases in the NPC power cost (in
case of NPC-connected cooperatives) shall be uniformly passed on to the member-consumers using the 1.4
multiplier, which is divided into 1.3 as allowance for 23% system loss and 0.1 as provision for the corresponding
increase in operating expenses to partly offset the effects of inflation.14 Subsequently, the NEA, through NEA
Memorandum No. 1-A dated March 30, 1992, revised the aforesaid issuance as follows
Pursuant to NEA Board Resolution No. 98, Series of 1991, x x x, the revised cooperatives multiplier will be as
follows:
1.2 Rural Electric Cooperatives (RECs) with system loss of 15% and below;
1.3 RECs with system loss ranging from 16% to 22%;
1.4 RECs with system loss of 23% and above.
SURNECO posits that, per NEA Memorandum No. 1-A, the NEA had authorized it to adopt a multiplier scheme
as the method to recover system loss. It claims that this cannot be abrogated, revoked, or superseded by any order,
resolution, or issuance by the ERC prescribing a certain formula to implement the caps of recoverable rate of system
loss under R.A. No. 7832 without violating the non-impairment clause15 of the Constitution.
We disagree. SURNECO cannot insist on using the multiplier scheme even after the imposition of the system
loss caps under Section 10 of R.A. No. 7832. The law took effect on January 17, 1995. Perusing Section 10, and also
Section 11,16 providing for the application of the caps as of the date of the effectivity of R.A. No. 7832, readily
shows that the imposition of the caps was self-executory and did not require the issuance of any enabling set of
rules or any action by the then ERB, now ERC. Thus, the caps should have been applied as of January 17, 1995 when
R.A. No. 7832 took effect.
Indeed, under NEA Memorandum No. 1-A, the use of the multiplier scheme allows the recovery of system
losses even beyond the caps mandated in R.A. No. 7832, which is intended to gradually phase out pilferage losses
as a component of the recoverable system losses by the distributing utilities such as SURNECO. However, it is totally
repugnant to and incompatible with the system loss caps established in R.A. No. 7832, and is repealed by Section
1617 of the law. As between NEA Memorandum No. 1-A, a mere administrative issuance, and R.A. No. 7832, a
legislative enactment, the latter must prevail.
Second. The ERC was merely implementing the system loss caps in R.A. No. 7832 when it reviewed and
confirmed SURNECOS PPA charges, and ordered the refund of the amount collected in excess of the allowable
system loss caps through its continued use of the multiplier scheme. As the ERC held in its March 19, 2007 Order
On January 14, 2005, the Commission issued an Order adopting a new PPA policy as follows: (a) the
computation and confirmation of the PPA prior to the Commissions Order dated June 17, 2003 shall be based on the
approved PPA Formula; (b) the computation and confirmation of the PPA after the Commissions Order dated June 17,
2003 shall be based on the power cost "net" of discount; and (c) if the approved PPA Formula is silent in terms of
discount, the computation and confirmation of the PPA shall be based on the power cost at "gross" reduced by the
amount of discounts extended to customers, subject to the submission of proofs that said discounts are indeed
being extended to customers.
However, the Commission deemed it appropriate to clarify its PPA confirmation process particularly on the
treatment of the Prompt Payment Discount (PPD) granted to distribution utilities (DUs) by their power suppliers, to
wit:
I. The over-or-under recovery will be determined by comparing the allowable power cost with the actual
revenue billed to end-users.
II. Calculation of the DUs allowable power cost as prescribed in the PPA formula:

a. If the PPA formula explicitly provides the manner by which discounts availed from the power supplier/s shall
be treated, the allowable power cost will be computed based on the specific provision of the formula, which may
either be at "net" or "gross"; and
b. If the PPA formula is silent in terms of discounts, the allowable power cost will be computed at "net" of
discounts availed from the power supplier/s, if there be any.
III. Calculation of DUs actual revenues/actual amount billed to end-users.
a. On actual PPA computed at net of discounts availed from power supplier/s:
a.1. If a DU bills at net of discounts availed from the power supplier/s (i.e., gross power cost minus discounts
from power supplier/s) and the DU is not extending discounts to end-users, the actual revenue should be equal to
the allowable power cost; and
a.2. If a DU bills at net of discounts availed from the power supplier/s (i.e., gross power cost minus discounts
from power supplier/s) and the DU is extending discounts to end-users, the discount extended to end-users shall be
added back to the actual revenue.
b. On actual PPA computed at gross:
b.1. If a DU bills at gross (i.e., gross power cost not reduced by discounts from power supplier/s) and the DU is
extending discounts to end-users, the actual revenue shall be calculated as: gross power revenue less discounts
extended to end-users. The result shall then be compared to the allowable power cost; and
b.2. If a DU bills at gross (i.e., gross power cost not reduced by discounts from power supplier/s) and the DU is
not extending discounts to end-users, the actual revenue shall be taken as is which shall be compared to the
allowable power cost.
IV. In the calculation of the DUs actual revenues, the amount of discounts extended to end-users shall, in no
case, be higher than the discounts availed by the DU from its power supplier/s.
The foregoing clarification was intended to ensure that only the actual costs of purchased power are recovered
by the DUs.
In the meantime, SURNECO submitted reports on its monthly implementation of the PPA covering the period
January 1998 to July 2004 and attended the conferences conducted by the Commission on December 11, 2003 and
May 4, 2005 relative thereto.
The Commission evaluated SURNECOs monthly PPA implementation covering the period February 1996 to July
2004, which disclosed the following:
Schedule 1, Main Island
Period Covered Over
(Under)
Recoveries
(In PhP) Over
(Under) Recoveries
(In kWh)
February 1996 to
December 1998 20,737,074 0.2077
January 1999 to
July 2004 (2,548,280) (0.0097)
TOTAL 18,188,794 0.0500
Schedule 2, Municipality of Hikdop
February 1996 to
December 1998
PPA Plus Basic
Cha[r]ge 70,235 0.3190
January 1999 to

July 2004 (2,548,280) (0.0097)

TOTAL (2,478,045) (0.0100)
The over-recoveries were due to the following:
1. For the period February 1996 to December 1998, SURNECOs PPA computation included the power cost and
the corresponding kWh purchased from Hikdop end-users. The Commission excluded those months which SURNECO
did not impose variable charges to Hikdop end-user which resulted to a total net over-recovery of
PhP21,245,034.00; and
2. SURNECOs basic charge for Hikdop end-users were beyond the approved basic charge for the period
February 1996 to September 1998 resulting to a net over-recovery of PhP128,489.00.
SURNECOs under recoveries for the period January 1999 to June 2004 were due to the following:
1. For the period August 2001 to June 2004, SURNECO erroneously deducted the Power Act Reduction
Adjustments (PARA) in the total purchased power cost of its PPA computation resulting to an under-recovery of
PhP1,377,763.00;
2. SURNECOs power cost and kWh computation includes Dummy Load resulting to an under recovery
amounting to PhP226,196.00; and
3. The new grossed-up factor scheme adopted by the Commission which provided a true-up mechanism to
allow the DUs to recover the actual costs of purchased power.19chanroblesvirtuallawlibrary
In directing SURNECO to refund its over-recoveries based on PPA policies, which only ensured that the PPA
mechanism remains a purely cost-recovery mechanism and not a revenue-generating scheme for the electric
cooperatives, the ERC merely exercised its authority to regulate and approve the rates imposed by the electric
cooperatives on their consumers. The ERC simply performed its mandate to protect the public interest imbued in
those rates.
It is beyond cavil that the State, in the exercise of police power, can regulate the rates imposed by a public
utility
such
as
SURNECO.
As
we
held
in
Republic
of
the
Philippines
v.
Manila
Electric
Company20chanroblesvirtuallawlibrary
The regulation of rates to be charged by public utilities is founded upon the police powers of the State and
statutes prescribing rules for the control and regulation of public utilities are a valid exercise thereof. When private
property is used for a public purpose and is affected with public interest, it ceases to be juris privati only and
becomes subject to regulation. The regulation is to promote the common good. Submission to regulation may be
withdrawn by the owner by discontinuing use; but as long as use of the property is continued, the same is subject to
public regulation.
Likewise, SURNECO cannot validly assert that the caps set by R.A. No. 7832 are arbitrary, or that they violate
the non-impairment clause of the Constitution for allegedly traversing the loan agreement between NEA and ADB.
Striking down a legislative enactment, or any of its provisions, can be done only by way of a direct action, not
through a collateral attack, and more so, not for the first time on appeal in order to avoid compliance. The challenge
to the laws constitutionality should also be raised at the earliest opportunity.21chanroblesvirtuallawlibrary
Even assuming, merely for arguments sake, that the ERC issuances violated the NEA and ADB covenant, the
contract had to yield to the greater authority of the States exercise of police power. It has long been settled that
police power legislation, adopted by the State to promote the health, morals, peace, education, good order, safety,
and general welfare of the people prevail not only over future contracts but even over those already in existence,
for all private contracts must yield to the superior and legitimate measures taken by the State to promote public
welfare.22chanroblesvirtuallawlibrary
SURNECO also avers that the Electric Power Industry Reform Act of 2001 (EPIRA) removed the alleged arbitrary
caps in R.A. No. 7832. We differ. The EPIRA allows the caps to remain until replaced by the caps to be determined by
the ERC, pursuant to its delegated authority under Section 4323 of R.A. No. 9136 to prescribe new system loss caps,
based on technical parameters such as load density, sales mix, cost of service, delivery voltage, and other technical
considerations it may promulgate.
Third. We also disagree with SURNECO in its insistence that the PPA confirmation policies constituted an
amendment to the IRR of R.A. No. 7832 and must, therefore, comply with the publication requirement for the
effectivity of administrative issuances.
The PPA formula provided in the IRR of R.A. No. 7832 was only a model to be used as a guide by the electric

cooperatives in proposing their own PPA formula for approval by the then ERB. Sections 4 and 5, Rule IX of the IRR
directed the electric cooperatives to apply for approval of such formula with the ERB so that the system loss caps
under the law would be incorporated in their computation of power cost adjustments. The IRR did not provide for a
specific formula; therefore, there was nothing in the IRR that was amended or could have been amended relative to
the PPA formula. The IRR left to the ERB, now the ERC, the authority to approve and oversee the implementation of
the electric cooperatives PPA formula in the exercise of its rate-making power over them.
We likewise differ from SURNECOs stance that it was denied due process when the ERC issued its questioned
Orders. Administrative due process simply requires an opportunity to explain ones side or to seek reconsideration of
the action or ruling complained of.24 It means being given the opportunity to be heard before judgment, and for this
purpose, a formal trial-type hearing is not even essential. It is enough that the parties are given a fair and
reasonable chance to demonstrate their respective positions and to present evidence in support
thereof.25chanroblesvirtuallawlibrary
Verily, the PPA confirmation necessitated a review of the electric cooperatives monthly documentary
submissions to substantiate their PPA charges. The cooperatives were duly informed of the need for other required
supporting documents and were allowed to submit them accordingly. In fact, hearings were conducted. Moreover,
the ERC conducted exit conferences with the electric cooperatives representatives, SURNECO included, to discuss
preliminary figures and to double-check these figures for inaccuracies, if there were any. In addition, after the
issuance of the ERC Orders, the electric cooperatives were allowed to file their respective motions for
reconsideration. It cannot be gainsaid, therefore, that SURNECO was not denied due process.
Finally, the core of the issues raised is factual in character. It needs only to be reiterated that factual findings of
administrative bodies on technical matters within their area of expertise should be accorded not only respect but
even finality if they are supported by substantial evidence even if not overwhelming or preponderant,26 more so if
affirmed by the CA. Absent any grave abuse of discretion on the part of ERC, we must sustain its findings. Hence, its
assailed Orders, following the rule of non-interference on matters addressed to the sound discretion of government
agencies entrusted with the regulation of activities coming their special technical knowledge and training, must be
upheld.27chanroblesvirtuallawlibrary
WHEREFORE, the petition is DENIED. The Decision dated April 17, 2008 and the Resolution dated June 25, 2008
of the Court of Appeals in CA-G.R. SP No. 99781 are AFFIRMED. Costs against petitioner.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION
THE HERITAGE HOTEL MANILA, acting through its owner, GRAND PLAZA HOTEL CORPORATION,
Petitioner,
- versus NATIONAL UNION OF WORKERS IN THE HOTEL, RESTAURANT AND ALLIED INDUSTRIES-HERITAGE
HOTEL MANILA SUPERVISORS CHAPTER (NUWHRAIN-HHMSC), Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari of the Decision of the Court of Appeals (CA) dated May 30,
2005 and Resolution dated June 4, 2007. The assailed Decision affirmed the dismissal of a petition for cancellation
of union registration filed by petitioner, Grand Plaza Hotel Corporation, owner of Heritage Hotel Manila, against
respondent, National Union of Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila
Supervisors Chapter (NUWHRAIN-HHMSC), a labor organization of the supervisory employees of Heritage Hotel
Manila.

The case stemmed from the following antecedents:

On October 11, 1995, respondent filed with the Department of Labor and Employment-National Capital
Region (DOLE-NCR) a petition for certification election. The Med-Arbiter granted the petition on February 14, 1996
and ordered the holding of a certification election. On appeal, the DOLE Secretary, in a Resolution dated August 15,
1996, affirmed the Med-Arbiters order and remanded the case to the Med-Arbiter for the holding of a preelection
conference on February 26, 1997. Petitioner filed a motion for reconsideration, but it was denied on September 23,
1996.

The preelection conference was not held as initially scheduled; it was held a year later, or on February 20,
1998. Petitioner moved to archive or to dismiss the petition due to alleged repeated non-appearance of respondent.
The latter agreed to suspend proceedings until further notice. The preelection conference resumed on January 29,
2000.

Subsequently, petitioner discovered that respondent had failed to submit to the Bureau of Labor Relations
(BLR) its annual financial report for several years and the list of its members since it filed its registration papers in
1995. Consequently, on May 19, 2000, petitioner filed a Petition for Cancellation of Registration of respondent, on
the ground of the non-submission of the said documents. Petitioner prayed that respondents Certificate of Creation
of Local/Chapter be cancelled and its name be deleted from the list of legitimate labor organizations. It further
requested the suspension of the certification election proceedings.

On June 1, 2000, petitioner reiterated its request by filing a Motion to Dismiss or Suspend the 7[Certification
Election] Proceedings, arguing that the dismissal or suspension of the proceedings is warranted, considering that
the legitimacy of respondent is seriously being challenged in the petition for cancellation of registration. Petitioner
maintained that the resolution of the issue of whether respondent is a legitimate labor organization is crucial to the
issue of whether it may exercise rights of a legitimate labor organization, which include the right to be certified as
the bargaining agent of the covered employees.

Nevertheless, the certification election pushed through on June 23, 2000. Respondent emerged as the winner.

On June 28, 2000, petitioner filed a Protest with Motion to Defer Certification of Election Results and
Winner, stating that the certification election held on June 23, 2000 was an exercise in futility because, once
respondents registration is cancelled, it would no longer be entitled to be certified as the exclusive bargaining agent
of the supervisory employees. Petitioner also claimed that some of respondents members were not qualified to join
the union because they were either confidential employees or managerial employees. It then prayed that the
certification of the election results and winner be deferred until the petition for cancellation shall have been
resolved, and that respondents members who held confidential or managerial positions be excluded from the
supervisors bargaining unit.
Meanwhile, respondent filed its Answer to the petition for the cancellation of its registration. It averred that the
petition was filed primarily to delay the conduct of the certification election, the respondents certification as the
exclusive bargaining representative of the supervisory employees, and the commencement of bargaining
negotiations. Respondent prayed for the dismissal of the petition for the following reasons: (a) petitioner is estopped
from questioning respondents status as a legitimate labor organization as it had already recognized respondent as
such during the preelection conferences; (b) petitioner is not the party-in-interest, as the union members are the
ones who would be disadvantaged by the non-submission of financial reports; (c) it has already complied with the
reportorial requirements, having submitted its financial statements for 1996, 1997, 1998, and 1999, its updated list
of officers, and its list of members for the years 1995, 1996, 1997, 1998, and 1999; (d) the petition is already moot
and academic, considering that the certification election had already been held, and the members had manifested
their will to be represented by respondent.

Citing National Union of Bank Employees v. Minister of Labor, et al. and Samahan ng Manggagawa sa Pacific
Plastic v. Hon. Laguesma, the Med-Arbiter held that the pendency of a petition for cancellation of registration is not
a bar to the holding of a certification election. Thus, in an Order dated January 26, 2001, the Med-Arbiter dismissed
petitioners protest, and certified respondent as the sole and exclusive bargaining agent of all supervisory
employees.

Petitioner subsequently appealed the said Order to the DOLE Secretary. The appeal was later dismissed by
DOLE Secretary Patricia A. Sto. Tomas (DOLE Secretary Sto. Tomas) in the Resolution of August 21, 2002. Petitioner
moved for reconsideration, but the motion was also denied.

In the meantime, Regional Director Alex E. Maraan (Regional Director Maraan) of DOLE-NCR finally resolved the
petition for cancellation of registration. While finding that respondent had indeed failed to file financial reports and
the list of its members for several years, he, nonetheless, denied the petition, ratiocinating that freedom of
association and the employees right to self-organization are more substantive considerations. He took into account
the fact that respondent won the certification election and that it had already been certified as the exclusive
bargaining agent of the supervisory employees. In view of the foregoing, Regional Director Maraanwhile
emphasizing that the non-compliance with the law is not viewed with favorconsidered the belated submission of the
annual financial reports and the list of members as sufficient compliance thereof and considered them as having
been submitted on time. The dispositive portion of the decision dated December 29, 2001 reads:

WHEREFORE, premises considered, the instant petition to delist the National Union of
Workers in the Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter
from the roll of legitimate labor organizations is hereby DENIED.
SO ORDERED.

Aggrieved, petitioner appealed the decision to the BLR. BLR Director Hans Leo Cacdac inhibited himself from
the case because he had been a former counsel of respondent.

In view of Director Cacdacs inhibition, DOLE Secretary Sto. Tomas took cognizance of the appeal. In a resolution
dated February 21, 2003, she dismissed the appeal, holding that the constitutionally guaranteed freedom of
association and right of workers to self-organization outweighed respondents noncompliance with the statutory
requirements to maintain its status as a legitimate labor organization.

Petitioner filed a motion for reconsideration, but the motion was likewise denied in a resolution dated May
30, 2003. DOLE Secretary Sto. Tomas admitted that it was the BLR which had jurisdiction over the appeal, but she
pointed out that the BLR Director had voluntarily inhibited himself from the case because he used to appear as
counsel for respondent. In order to maintain the integrity of the decision and of the BLR, she therefore accepted the
motion to inhibit and took cognizance of the appeal.

Petitioner filed a petition for certiorari with the CA, raising the issue of whether the DOLE Secretary acted with
grave abuse of discretion in taking cognizance of the appeal and affirming the dismissal of its petition for
cancellation of respondents registration.

In a Decision dated May 30, 2005, the CA denied the petition. The CA opined that the DOLE Secretary may
legally assume jurisdiction over an appeal from the decision of the Regional Director in the event that the Director of
the BLR inhibits himself from the case. According to the CA, in the absence of the BLR Director, there is no person
more competent to resolve the appeal than the DOLE Secretary. The CA brushed aside the allegation of bias and
partiality on the part of the DOLE Secretary, considering that such allegation was not supported by any evidence.

The CA also found that the DOLE Secretary did not commit grave abuse of discretion when she affirmed the
dismissal of the petition for cancellation of respondents registration as a labor organization. Echoing the DOLE
Secretary, the CA held that the requirements of registration of labor organizations are an exercise of the overriding
police power of the State, designed for the protection of workers against potential abuse by the union that recruits
them. These requirements, the CA opined, should not be exploited to work against the workers constitutionally
protected right to self-organization.

Petitioner filed a motion for reconsideration, invoking this Courts ruling in Abbott Labs. Phils., Inc. v. Abbott
Labs. Employees Union, which categorically declared that the DOLE Secretary has no authority to review the
decision of the Regional Director in a petition for cancellation of union registration, and Section 4, Rule VIII, Book V
of the Omnibus Rules Implementing the Labor Code.

In its Resolution dated June 4, 2007, the CA denied petitioners motion, stating that the BLR Directors inhibition
from the case was a peculiarity not present in the Abbott case, and that such inhibition justified the assumption of
jurisdiction by the DOLE Secretary.

In this petition, petitioner argues that:

I.
The Court of Appeals seriously erred in ruling that the Labor Secretary properly assumed
jurisdiction over Petitioners appeal of the Regional Directors Decision in the Cancellation Petition x
x x.
A.
Jurisdiction is conferred only by law. The Labor Secretary had no jurisdiction
to review the decision of the Regional Director in a petition for cancellation. Such
jurisdiction is conferred by law to the BLR.
B.
The unilateral inhibition by the BLR Director cannot justify the Labor
Secretarys exercise of jurisdiction over the Appeal.
C.
The Labor Secretarys assumption of jurisdiction over the Appeal without
notice violated Petitioners right to due process.
II.
The Court of Appeals gravely erred in affirming the dismissal of the Cancellation Petition despite
the mandatory and unequivocal provisions of the Labor Code and its Implementing Rules.

The petition has no merit.

Jurisdiction to review the decision of the Regional Director lies with the BLR. This is clearly provided in the
Implementing Rules of the Labor Code and enunciated by the Court in Abbott. But as pointed out by the CA, the
present case involves a peculiar circumstance that was not present or covered by the ruling in Abbott. In this case,
the BLR Director inhibited himself from the case because he was a former counsel of respondent. Who, then, shall
resolve the case in his place?

In Abbott, the appeal from the Regional Directors decision was directly filed with the Office of the DOLE
Secretary, and we ruled that the latter has no appellate jurisdiction. In the instant case, the appeal was filed by
petitioner with the BLR, which, undisputedly, acquired jurisdiction over the case. O nce jurisdiction is acquired by the
court, it remains with it until the full termination of the case.

Thus, jurisdiction remained with the BLR despite the BLR Directors inhibition. When the DOLE Secretary
resolved the appeal, she merely stepped into the shoes of the BLR Director and performed a function that the latter
could not himself perform. She did so pursuant to her power of supervision and control over the BLR.

Expounding on the extent of the power of control, the Court, in Araneta, et al. v. Hon. M. Gatmaitan, et al.,
pronounced that, if a certain power or authority is vested by law upon the Department Secretary, then such power
or authority may be exercised directly by the President, who exercises supervision and control over the

departments. This principle was incorporated in the Administrative Code of 1987, which defines supervision and
control as including the authority to act directly whenever a specific function is entrusted by law or regulation to a
subordinate. Applying the foregoing to the present case, it is clear that the DOLE Secretary, as the person exercising
the power of supervision and control over the BLR, has the authority to directly exercise the quasi-judicial function
entrusted by law to the BLR Director.

It is true that the power of control and supervision does not give the Department Secretary unbridled authority
to take over the functions of his or her subordinate. Such authority is subject to certain guidelines which are stated
in Book IV, Chapter 8, Section 39(1)(a) of the Administrative Code of 1987. However, in the present case, the DOLE
Secretarys act of taking over the function of the BLR Director was warranted and necessitated by the latters
inhibition from the case and the objective to maintain the integrity of the decision, as well as the Bureau itself.

Petitioner insists that the BLR Directors subordinates should have resolved the appeal, citing the provision
under the Administrative Code of 1987 which states, in case of the absence or disability of the head of a bureau or
office, his duties shall be performed by the assistant head. The provision clearly does not apply considering that the
BLR Director was neither absent nor suffering from any disability; he remained as head of the BLR. Thus, to dispel
any suspicion of bias, the DOLE Secretary opted to resolve the appeal herself.

Petitioner was not denied the right to due process when it was not notified in advance of the BLR Directors
inhibition and the DOLE Secretarys assumption of the case. Well-settled is the rule that the essence of due process
is simply an opportunity to be heard, or, as applied to administrative proceedings, an opportunity to explain ones
side or an opportunity to seek a reconsideration of the action or ruling complained of. Petitioner had the opportunity
to question the BLR Directors inhibition and the DOLE Secretarys taking cognizance of the case when it filed a
motion for reconsideration of the latters decision. It would be well to state that a critical component of due process
is a hearing before an impartial and disinterested tribunal, for all the elements of due process, like notice and
hearing, would be meaningless if the ultimate decision would come from a partial and biased judge. It was precisely
to ensure a fair trial that moved the BLR Director to inhibit himself from the case and the DOLE Secretary to take
over his function.

Petitioner also insists that respondents registration as a legitimate labor union should be cancelled. Petitioner
posits that once it is determined that a ground enumerated in Article 239 of the Labor Code is present, cancellation
of registration should follow; it becomes the ministerial duty of the Regional Director to cancel the registration of the
labor organization, hence, the use of the word shall. Petitioner points out that the Regional Director has admitted in
its decision that respondent failed to submit the required documents for a number of years; therefore, cancellation
of its registration should have followed as a matter of course.

We are not persuaded.

Articles 238 and 239 of the Labor Code read:

ART. 238. CANCELLATION OF REGISTRATION; APPEAL

The certificate of registration of any legitimate labor organization, whether national or local, shall
be canceled by the Bureau if it has reason to believe, after due hearing, that the said labor
organization no longer meets one or more of the requirements herein prescribed.
ART. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION.
The following shall constitute grounds for cancellation of union registration:
xxxx
(d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the
closing of every fiscal year and misrepresentation, false entries or fraud in the preparation of the
financial report itself;
xxxx
(i) Failure to submit list of individual members to the Bureau once a year or whenever required by
the Bureau.

These provisions give the Regional Director ample discretion in dealing with a petition for cancellation of a
unions registration, particularly, determining whether the union still meets the requirements prescribed by law. It is
sufficient to give the Regional Director license to treat the late filing of required documents as sufficient compliance
with the requirements of the law. After all, the law requires the labor organization to submit the annual financial
report and list of members in order to verify if it is still viable and financially sustainable as an organization so as to
protect the employer and employees from fraudulent or fly-by-night unions. With the submission of the required
documents by respondent, the purpose of the law has been achieved, though belatedly.

We cannot ascribe abuse of discretion to the Regional Director and the DOLE Secretary in denying the petition
for cancellation of respondents registration. The union members and, in fact, all the employees belonging to the
appropriate bargaining unit should not be deprived of a bargaining agent, merely because of the negligence of the
union officers who were responsible for the submission of the documents to the BLR.

Labor authorities should, indeed, act with circumspection in treating petitions for cancellation of union
registration, lest they be accused of interfering with union activities. In resolving the petition, consideration must be
taken of the fundamental rights guaranteed by Article XIII, Section 3 of the Constitution, i.e., the rights of all workers
to self-organization, collective bargaining and negotiations, and peaceful concerted activities. Labor authorities
should bear in mind that registration confers upon a union the status of legitimacy and the concomitant right and
privileges granted by law to a legitimate labor organization, particularly the right to participate in or ask for
certification election in a bargaining unit. Thus, the cancellation of a certificate of registration is the equivalent of
snuffing out the life of a labor organization. For without such registration, it loses - as a rule - its rights under the
Labor Code.

It is worth mentioning that the Labor Codes provisions on cancellation of union registration and on reportorial
requirements have been recently amended by Republic Act (R.A.) No. 9481, An Act Strengthening the Workers
Constitutional Right to Self-Organization, Amending for the Purpose Presidential Decree No. 442, As Amended,
Otherwise Known as the Labor Code of the Philippines, which lapsed into law on May 25, 2007 and became effective
on June 14, 2007. The amendment sought to strengthen the workers right to self-organization and enhance the
Philippines compliance with its international obligations as embodied in the International Labour Organization (ILO)
Convention No. 87, pertaining to the non-dissolution of workers organizations by administrative authority. Thus, R.A.
No. 9481 amended Article 239 to read:

ART. 239. Grounds for Cancellation of Union Registration.The following may constitute grounds for
cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of
the constitution and by-laws or amendments thereto, the minutes of ratification, and the list of
members who took part in the ratification;
(b) Misrepresentation, false statements or fraud in connection with the election of officers,
minutes of the election of officers, and the list of voters;
(c) Voluntary dissolution by the members.

R.A. No. 9481 also inserted in the Labor Code Article 242-A, which provides:

ART. 242-A. Reportorial Requirements.The following are documents required to be submitted to

the Bureau by the legitimate labor organization concerned:
(a) Its constitution and by-laws, or amendments thereto, the minutes of ratification, and the list of
members who took part in the ratification of the constitution and by-laws within thirty (30) days
from adoption or ratification of the constitution and by-laws or amendments thereto;
(b) Its list of officers, minutes of the election of officers, and list of voters within thirty (30) days
from election;
(c) Its annual financial report within thirty (30) days after the close of every fiscal year; and

(d) Its list of members at least once a year or whenever required by the Bureau.
Failure to comply with the above requirements shall not be a ground for cancellation
of union registration but shall subject the erring officers or members to suspension,
expulsion from membership, or any appropriate penalty.

ILO Convention No. 87, which we have ratified in 1953, provides that workers and employers organizations
shall not be liable to be dissolved or suspended by administrative authority. The ILO has expressed the opinion that
the cancellation of union registration by the registrar of labor unions, which in our case is the BLR, is tantamount to
dissolution of the organization by administrative authority when such measure would give rise to the loss of legal
personality of the union or loss of advantages necessary for it to carry out its activities, which is true in our
jurisdiction. Although the ILO has allowed such measure to be taken, provided that judicial safeguards are in place,
i.e., the right to appeal to a judicial body, it has nonetheless reminded its members that dissolution of a union, and
cancellation of registration for that matter, involve serious consequences for occupational representation. It has,
therefore, deemed it preferable if such actions were to be taken only as a last resort and after exhausting other
possibilities with less serious effects on the organization.

The aforesaid amendments and the ILOs opinion on this matter serve to fortify our ruling in this case. We
therefore quote with approval the DOLE Secretarys rationale for denying the petition, thus:

It is undisputed that appellee failed to submit its annual financial reports and list of
individual members in accordance with Article 239 of the Labor Code. However, the existence of
this ground should not necessarily lead to the cancellation of union registration. Article 239
recognizes the regulatory authority of the State to exact compliance with reporting requirements.
Yet there is more at stake in this case than merely monitoring union activities and requiring
periodic documentation thereof.
The more substantive considerations involve the constitutionally guaranteed freedom of
association and right of workers to self-organization. Also involved is the public policy to promote
free trade unionism and collective bargaining as instruments of industrial peace and democracy. An
overly stringent interpretation of the statute governing cancellation of union registration without
regard to surrounding circumstances cannot be allowed. Otherwise, it would lead to an
unconstitutional application of the statute and emasculation of public policy objectives. Worse, it
can render nugatory the protection to labor and social justice clauses that pervades the
Constitution and the Labor Code.
Moreover, submission of the required documents is the duty of the officers of the union. It would
be unreasonable for this Office to order the cancellation of the union and penalize the entire union
membership on the basis of the negligence of its officers. In National Union of Bank Employees vs.
Minister of Labor, L-53406, 14 December 1981, 110 SCRA 296, the Supreme Court ruled:
As aptly ruled by respondent Bureau of Labor Relations Director Noriel: The
rights of workers to self-organization finds general and specific constitutional
guarantees. x x x Such constitutional guarantees should not be lightly taken much
less nullified. A healthy respect for the freedom of association demands that acts
imputable to officers or members be not easily visited with capital punishments
against the association itself.
At any rate, we note that on 19 May 2000, appellee had submitted its financial statement for the
years 1996-1999. With this submission, appellee has substantially complied with its duty to submit
its financial report for the said period. To rule differently would be to preclude the union, after
having failed to meet its periodic obligations promptly, from taking appropriate measures to correct
its omissions. For the record, we do not view with favor appellees late submission. Punctuality on

the part of the union and its officers could have prevented this petition.

WHEREFORE, premises considered, the Court of Appeals Decision dated May 30, 2005 and Resolution dated
June 4, 2007 are AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
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
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 Governments 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 BOCEAs
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 BOCEAs 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
1217 of 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 P196 billion which they
surpassed by as much as P2 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 P8,500.00. 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 P8,500.00 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 Governments 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 Boards 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 BOCEAs 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. BOCEAs 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.29 However, 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
todays 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 delegates authority and prevent the delegation from running riot. To be
sufficient, the standard must specify the limits of the delegates 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 Revenue Targets Percent (%) of the Excess 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 Boards 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 BOCEAs 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 states jurisdiction against intentional and arbitrary discrimination, whether occasioned
by the express terms of a statute or by its improper execution through the states 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 ones side.39 BOCEAs 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 BOCEAs claim that its members may be removed for unattained target
collection even due to causes which are beyond their control. Moreover, an employees 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 imposition of a punishment, penal or
otherwise, and the lack of judicial trial.451avvphi1
In his Concurring Opinion in Tuason v. Register of Deeds, Caloocan City,46 Justice Florentino P. Feliciano traces
the roots of a Bill of Attainder, to wit:
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 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 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 x47
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 protected.
A final note.
We find that BOCEAs petition is replete with allegations of defects and anomalies in allocation, distribution and
receipt of rewards. While BOCEA intimates that it intends to curb graft and corruption in the BOC in particular and in
the government in general which is nothing but noble, these intentions do not 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 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 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 statutes a meaning detached from the manifest
intendment and language thereof.49 Just like any other law, R.A. No. 9335 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.50 We have so declared in Abakada, and we now reiterate
that R.A. No. 9335 and its IRR are constitutional.
WHEREFORE, the present petition for certiorari and prohibition with prayer for injunctive relief/s is DISMISSED.
No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 180236

January 17, 2012

GEMMA P. CABALIT, Petitioner,

vs.
COMMISSION ON AUDIT-REGION VII, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 180342
LEONARDO G. OLAIVAR, in his capacity as Transportation Regulation Officer and Officer-In-Charge of Land
Transportation Office, Jagna, Province of Bohol, Petitioner,
vs.
HON. PRIMO C. MIRO, in his official capacity as Deputy Ombudsman for Visayas, EDGARDO G. CANTON, in his
capacity as Graft Investigator Officer, ATTY. ROY L. URSAL, in his capacity as Regional Cluster Director, Commission
on Audit, Cebu City, Respondents.
DECISION
VILLARAMA, JR., J.:
Three employees from the Land Transportation Office (LTO) in Jagna, Bohol were found by the Ombudsman to
have perpetrated a scheme to defraud the government of proper motor vehicle registration fees. They now seek in
the present consolidated petitions a judgment from this Court annulling the January 18, 2006 Decision1 and
September 21, 2007 Resolution2 of the Court of Appeals (CA) which affirmed with modification the Decision3 of the
Office of the Ombudsman-Visayas dismissing them from government service.
The facts follow:
On September 4, 2001, the Philippine Star News, a local newspaper in Cebu City, reported that employees of
the LTO in Jagna, Bohol, are shortchanging the government by tampering with their income reports.4 Accordingly,
Regional Director Ildefonso T. Deloria of the Commission on Audit (COA) directed State Auditors Teodocio D. Cabalit
and Emmanuel L. Coloma of the Provincial Revenue Audit Group to conduct a fact-finding investigation. A
widespread tampering of official receipts of Motor Vehicle Registration during the years 1998, 1999, 2000 and 2001
was then discovered by the investigators.
According to the investigators, a total of 106 receipts were tampered. The scheme was done by detaching the
Plate Release and Owners copy from the set of official receipts then typing thereon the correct details
corresponding to the vehicle registered, the owners name and address, and the correct amount of registration fees.
The other copies, consisting of the copies for the Collector, EDP, Record, Auditor, and Regional Office, meanwhile,
were typed on to make it appear that the receipts were issued mostly for the registration of motorcycles with much
lower registration charges. Incorrect names and/or addresses were also used on said file copies. The difference
between the amounts paid by the vehicle owners and the amounts appearing on the file copies were then pocketed

by the perpetrators, and only the lower amounts appearing on the retained duplicate file copies were reported in
the Report of Collections.5 According to State Auditors Cabalit and Coloma in their Joint-Affidavit, the scheme was
perpetrated by LTO employees Leonardo G. Olaivar, Gemma P. Cabalit, Filadelfo S. Apit and Samuel T. Alabat, and
resulted in an unreported income totaling P169,642.50.6
On August 8, 2002, COA Regional Cluster Director Atty. Roy L. Ursal reported the tampering of official receipts
to Deputy Ombudsman Primo C. Miro.7 According to Atty. Ursal, the irregularity is penalized under Article 217, in
relation to Article 171 of the Revised Penal Code;8 Section 3(e)9 of the Anti-Graft and Corrupt Practices Act, and
likewise violates Republic Act (R.A.) No. 6713.10
In a Joint Evaluation Report, Graft Investigators Pio R. Dargantes and Virginia Palanca-Santiago found grounds
to conduct a preliminary investigation.11 Hence, a formal charge for dishonesty was filed against Olaivar, Cabalit,
Apit and Alabat before the Office of the Ombudsman-Visayas, and the parties were required to submit their counteraffidavits.
In compliance, Olaivar, Cabalit, Apit and Alabat submitted separate counter-affidavits, all essentially denying
knowledge and responsibility for the anomalies. As to Olaivar, he maintained that the receipts were typed outside
his office by regular and casual employees. He claimed that the receipts were presented to him only for signature
and he does not receive the payment when he signs the receipts.12 Cabalit, for her part, claimed that her duty as
cashier was to receive collections turned over to her and to deposit them in the Land Bank of the Philippines in
Tagbilaran City. She claimed that she was not even aware of any anomaly in the collection of fees prior to the
investigation.13 As to Apit, he admitted that he countersigned the official receipts, but he too denied being aware of
any illegal activity in their office. He claimed that upon being informed of the charge, he verified the photocopies of
the tampered receipts and was surprised to find that the signatures above his name were falsified.14 Alabat,
meanwhile, claimed he did not tamper, alter or falsify any public document in the performance of his duties. He
insisted that the initial above his name on Official Receipt No. 64056082 was Apits, while the initial on Official
Receipt No. 64056813 was that of Olaivar.15
During the hearing before Graft Investigator Pio R. Dargantes, State Auditor Cabalit testified on the
investigation he conducted in the LTO in Jagna, Bohol. He testified that he was furnished with the owners and
duplicate copies of the tampered receipts. Upon comparison of the Owners copy with the Collector or Records
copy, he noticed that the amounts shown in the original copies were much bigger than those appearing in the file
copies. State Auditor Cabalit also declared that the basis for implicating Olaivar is the fact that his signature
appears in all the 106 tampered official receipts and he signed as verified correct the Report of Collections, which
included the tampered receipts. As to Apit and Cabalit, they are the other signatories of the official receipts.16 In
some official receipts, the Owners copy is signed by F.S. Apit as Computer Evaluator, G.P. Cabalit as Cashier, and
Leonardo Olaivar as District Head, but their signatures do not appear on the file copies.17
On February 12, 2004, the Office of the Ombudsman-Visayas directed18 the parties to submit their position
papers pursuant to Administrative Order (A.O.) No. 17, dated September 7, 2003, amending the Rules of Procedure
of the Office of the Ombudsman.19 No cross-examination of State Auditor Cabalit was therefore conducted.
Complying with the above Order, the COA submitted its position paper on March 18, 2004. Olaivar, Cabalit and
Apit, for their part, respectively submitted their position papers on April 29, 2004, March 18, 2004 and March 15,
2004.
In its position paper,20 the COA pointed out that the signatures of Cabalit, Apit and Olaivar were indispensable
to the issuance of the receipts. As to Olaivar, the original receipts bear his signature, thereby showing that he
approved of the amounts collected for the registration charges. However, when the receipts were reported in the
Report of Collections, the data therein were already tampered reflecting a much lesser amount. By affixing his
signature on the Report of Collections and thereby attesting that the entries therein were verified by him as correct,
he allowed the scheme to be perpetrated. As to Cabalit, the COA pointed out that as cashier, Cabalits signature on
the receipts signified that she received the registration fees. The correct amounts should have therefore appeared in
the Report of Collections, but as already stated, lesser amounts appeared on the Report of Collections, which she
prepares. In the same manner, Apit, as computer evaluator, also signed the subject receipts allowing the
irregularities to be perpetuated.1avvphi1
In his position paper,21 Olaivar meanwhile insisted that he had no participation in the anomalies. He stressed
that his only role in the issuance of the official receipts was to review and approve the applications, and that he was
the last one to sign the official receipts. He argued that based on the standard procedure for the processing of
applications for registration of motor vehicles, it could be deduced that there was a concerted effort or conspiracy
among the evaluator, typist and cashier, while he was kept blind of their modus operandi.
Cabalit, for her part, questioned the findings of the investigators. She stressed in her position paper22 that had
there been a thorough investigation of the questioned official receipts, the auditors would have discovered that the
signatures appearing above her name were actually that of Olaivar. She outlined the standard paper flow of a
regular transaction at the LTO. It begins when the registrant goes to the computer evaluator for the computation of
applicable fees and proceeds to the cashier for payment. After paying, the typist will prepare the official receipts

consisting of seven (7) copies, which will be routed to the computer evaluator, to the district head, and to the
cashier for signature. The cashier retains the copies for the EDP, Regional Office, Collector and Auditor, while the
remaining copies (Owner, Plate Release and Records copy) will be forwarded to the Releasing Section for
distribution and release.
Cabalit insisted that on several occasions Olaivar disregarded the standard procedure and directly
accommodated some registrants who were either his friends or referred to him by friends. For such transactions,
Olaivar assumes the functions of computer evaluator, typist and cashier, as he is the one who computes the fees,
receives the payment and prepares the official receipts. Olaivar would then remit the payment to her. As the
cashier, she has to accept the payment as a matter of ministerial duty.
Apit, meanwhile, stressed in his position paper23 that the strokes of the signatures appearing above his
typewritten name on the official receipts are different, indicating that the same are falsified. He also explained that
considering that the LTO in Jagna issues around 20 to 25 receipts a day, he signed the receipts relying on the faith
that his co-employees had properly accomplished the forms. He also pointed out that Engr. Dano admitted signing
accomplished official receipts when the regular computer encoder is out, which just shows that other personnel
could have signed above the name of F.S. Apit.lawphil
On May 3, 2004, the Office of the Ombudsman-Visayas rendered judgment finding petitioners liable for
dishonesty for tampering the official receipts to make it appear that they collected lesser amounts than they
actually collected. The OMB-Visayas ruled:
WHEREFORE, premises considered, it is hereby resolved that the following respondents be found guilty of the
administrative infraction of DISHONESTY and accordingly be meted out the penalty of DISMISSAL FROM THE
SERVICE with the accessory penalties of cancellation of civil service eligibility, forfeiture of retirement benefits and
disqualification from re-employment in the government service:
1. Leonardo G. Olaivar -Transportation Regulation Officer II/ Office[r]-In-Charge
LTO Jagna District Office
Jagna, Bohol;
2. Gemma P. Cabalit - Cashier II, LTO Jagna District Office Jagna, Bohol;
3. Filadelpo S. Apit - Clerk II, LTO Jagna District Office Jagna, Bohol;
The complaint against respondent Samuel T. Alabat, presently the Head of Apprehension Unit of the Tagbilaran
City LTO, is hereby DISMISSED for insufficiency of evidence.
The complaint regarding the LTO official receipts/MVRRs issued by the LTO Jagna District Office, which are not
covered by original copies are hereby DISMISSED without prejudice to the filing of the appropriate charges upon the
recovery of the original copies thereof.
SO DECIDED.24
Petitioners sought reconsideration of the decision, but their motions were denied by the Ombudsman.25 Thus,
they separately sought recourse from the CA.
On January 18, 2006, the CA promulgated the assailed Decision in CA-G.R. SP. Nos. 86256, 86394 and 00047.
The dispositive portion of the CA decision reads,
WHEREFORE, premises considered, judgment is hereby rendered by US DISMISSING the instant consolidated
petitions. The assailed decision of the Office of the Ombudsman-Visayas dated May 3, 2004 in OMB-V-A-02-0415-H is
hereby AFFIRMED with a modification that petitioner Olaivar be held administratively liable for gross neglect of duty
which carries the same penalty as provided for dishonesty. No pronouncement as to costs.
SO ORDERED.26
According to the CA, it was unbelievable that from 1998 to 2001, Cabalit and Apit performed vital functions by
routinely signing LTO official receipts but did not have any knowledge of the irregularity in their office. With regard
to Olaivar, the CA believed that the tampering of the receipts could have been avoided had he exercised the
required diligence in the performance of his duties. Thus, the CA held him liable merely for gross neglect of duty.
Petitioners sought reconsideration of the CA decision, but the CA denied their motions.27 Hence, they filed the
instant petitions before the Court.
In her petition, petitioner Cabalit argues that

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE OMBUDSMAN'S DECISION WHICH
GAVE RETROACTIVE EFFECT TO THE NEW ADMINISTRATIVE ORDER NO. 17 IN THE PROCEEDINGS BELOW THAT WAS
ALREADY ON TRIAL IN ACCORDANCE WITH ADMINISTRATIVE ORDER NO. 07.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT ALTHOUGH THE TRIAL TYPE
HEARING UNDER ADMINISTRATIVE ORDER NO. 07 DID NOT PUSH THRU, PETITIONER WAS STILL ACCORDED HER
RIGHT TO DUE PROCESS UNDER THE SUMMARY PROCEEDINGS PURSUANT TO ADMINISTRATIVE ORDER NO. 17.
III. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION
OF RESPONDENT OMBUDSMAN DESPITE HAVING FAILED TO MAKE A CATEGORICAL RULING ON THE ISSUE OF
WHETHER THE QUESTIONED AND/OR FORGED SIGNATURES BELONG TO PETITIONER GEMMA CABALIT.
IV. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT FAILED TO RULE ON THE
DOCTRINAL VALUE AND/OR APPLICABILITY OF THE TAPIADOR VS. OFFICE OF THE OMBUDSMAN (G.R. [129124],
MARCH 15, 2002) RULING HERE IN THE INSTANT CASE.28
Meanwhile, Apit interposes the following arguments in his petition:
I. THE COURT OF APPEALS ERRED IN LIMITING ADMINISTRATIVE DUE PROCESS AS AN OPPORTUNITY TO BE
HEARD ONLY.
II. THE COURT OF APPEALS ERRED IN CONCLUDING THE DEFENSE OF PETITIONER APIT AS MERE DENIAL.
III. THE COURT OF APPEALS ERRED IN ITS FAILURE TO RECONSIDER THE EVIDENCE THAT CLEARLY PROVED
THAT THE SIGNATURES ABOVE THE NAME OF PETITIONER APIT IN THE QUESTIONED RECEIPTS ARE ALL FORGED AND
FALSIFIED.29
As for Olaivar, he assails the CA Decision raising the following issues:
I. WHETHER THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER LEONARDO G. OLAIVAR
IS ADMINISTRATIVELY LIABLE FOR GROSS NEGLIGENCE.
II. WHETHER THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT PETITIONER LEONARDO G.
OLAIVAR WAS NOT DENIED DUE PROCESS WHEN THE OFFICE OF THE OMBUDSMAN VISAYAS FOUND HIM GUILTY FOR
DISHONESTY AND METED OUT THE PENALTY OF DISMISSAL FROM SERVICE.30
On January 15, 2008, said petitions were consolidated.31
Essentially, the issues for our resolution are: (1) whether there was a violation of the right to due process when
the hearing officer at the Office of the Ombudsman-Visayas adopted the procedure under A.O. No. 17
notwithstanding the fact that the said amendatory order took effect after the hearings had started; and (2) whether
Cabalit, Apit and Olaivar are administratively liable.
As regards the first issue, petitioners claim that they were denied due process of law when the investigating
lawyer proceeded to resolve the case based only on the affidavits and other evidence on record without conducting
a formal hearing. They lament that the case was submitted for decision without giving them opportunity to present
witnesses and cross-examine the witnesses against them. Petitioner Cabalit also argues that the Office of the
Ombudsman erred in applying the amendments under A.O. No. 17 to the trial of the case, which was already in
progress under the old procedures under A.O. No. 07. She stressed that under A.O. No. 07, she had the right to
choose whether to avail of a formal investigation or to submit the case for resolution on the basis of the evidence on
record. Here, she was not given such option and was merely required to submit her position paper.
Petitioners arguments deserve scant consideration.
Suffice to say, petitioners were not denied due process of law when the investigating lawyer proceeded to
resolve the case based on the affidavits and other evidence on record. Section 5(b)(1)32 Rule 3, of the Rules of
Procedure of the Office of the Ombudsman, as amended by A.O. No. 17, plainly provides that the hearing officer
may issue an order directing the parties to file, within ten days from receipt of the order, their respective verified
position papers on the basis of which, along with the attachments thereto, the hearing officer may consider the case
submitted for decision. It is only when the hearing officer determines that based on the evidence, there is a need to
conduct clarificatory hearings or formal investigations under Section 5(b)(2) and Section 5(b)(3) that such further
proceedings will be conducted. But the determination of the necessity for further proceedings rests on the sound
discretion of the hearing officer. As the petitioners have utterly failed to show any cogent reason why the hearing
officers determination should be overturned, the determination will not be disturbed by this Court. We likewise find
no merit in their contention that the new procedures under A.O. No. 17, which took effect while the case was already
undergoing trial before the hearing officer, should not have been applied.

The rule in this jurisdiction is that one does not have a vested right in procedural rules. In Tan, Jr. v. Court of
Appeals,33 the Court elucidated:
Statutes regulating the procedure of the courts will be construed as applicable to actions pending and
undetermined at the time of their passage. Procedural laws are retroactive in that sense and to that extent. The fact
that procedural statutes may somehow affect the litigants rights may not preclude their retroactive application to
pending actions. The retroactive application of procedural laws is not violative of any right of a person who may feel
that he is adversely affected. Nor is the retroactive application of procedural statutes constitutionally objectionable.
The reason is that as a general rule no vested right may attach to, nor arise from, procedural laws. It has been held
that "a person has no vested right in any particular remedy, and a litigant cannot insist on the application to the
trial of his case, whether civil or criminal, of any other than the existing rules of procedure. (Emphasis supplied.)
While the rule admits of certain exceptions, such as when the statute itself expressly or by necessary
implication provides that pending actions are excepted from its operation, or where to apply it would impair vested
rights, petitioners failed to show that application of A.O. No. 17 to their case would cause injustice to them. Indeed,
in this case, the Office of the Ombudsman afforded petitioners every opportunity to defend themselves by allowing
them to submit counter-affidavits, position papers, memoranda and other evidence in their defense. Since
petitioners have been afforded the right to be heard and to defend themselves, they cannot rightfully complain that
they were denied due process of law. Well to remember, due process, as a constitutional precept, does not always
and in all situations require a trial-type proceeding. It is satisfied when a person is notified of the charge against him
and given an opportunity to explain or defend himself. In administrative proceedings, the filing of charges and
giving reasonable opportunity for the person so charged to answer the accusations against him constitute the
minimum requirements of due process. More often, this opportunity is conferred through written pleadings that the
parties submit to present their charges and defenses.34 But as long as a party is given the opportunity to defend his
or her interests in due course, said party is not denied due process.35
Neither is there merit to Cabalits assertion that she should have been investigated under the "old rules of
procedure" of the Office of the Ombudsman, and not under the "new rules." In Marohomsalic v. Cole,36 we clarified
that the Office of the Ombudsman has only one set of rules of procedure and that is A.O. No. 07, series of 1990, as
amended. There have been various amendments made thereto but it has remained, to date, the only set of rules of
procedure governing cases filed in the Office of the Ombudsman. Hence, the phrase "as amended" is correctly
appended to A.O. No. 7 every time it is invoked. A.O. No. 17 is just one example of these amendments.
But did the CA correctly rule that petitioners Cabalit and Apit are liable for dishonesty while petitioner Olaivar is
liable for gross neglect of duty?
Cabalit argues that the CA erred in affirming the decision of the Ombudsman finding her liable for dishonesty.
She asserts that it was not established by substantial evidence that the forged signatures belong to her. Meanwhile,
Apit contends that the CA erred in not considering evidence which proves that the signatures appearing above his
name are falsified. However, we note that both Cabalit and Apit raise essentially factual issues which are not proper
in petitions filed under Rule 45. Settled jurisprudence dictates that subject to a few exceptions, only questions of law
may be brought before the Court via a petition for review on certiorari. In Diokno v. Cacdac,37 the Court held:
x x x [T]he scope of this Courts judicial review of decisions of the Court of Appeals is generally confined only to
errors of law, and questions of fact are not entertained. We elucidated on our fidelity to this rule, and we said:
Thus, only questions of law may be brought by the parties and passed upon by this Court in the exercise of its
power to review. Also, judicial review by this Court does not extend to a reevaluation of the sufficiency of the
evidence upon which the proper x x x tribunal has based its determination. (Emphasis supplied.)
It is aphoristic that a re-examination of factual findings cannot be done through a petition for review on
certiorari under Rule 45 of the Rules of Court because this Court is not a trier of facts; it reviews only questions of
law. The Supreme Court is not duty-bound to analyze and weigh again the evidence considered in the proceedings
below. 38
Here, the CA affirmed the findings of fact of the Office of the Ombudsman-Visayas which are supported by
substantial evidence such as affidavits of witnesses and copies of the tampered official receipts.39 The CA found
that a perusal of the questioned receipts would easily reveal the discrepancies between the date, name and vehicle
in the Owner's or Plate Release copies and the File, Auditor, and Regional Office copies. It upheld the factual findings
of the Ombudsman that petitioners Cabalit and Apit tampered with the duplicates of the official receipts to make it
appear that they collected a lesser amount. Their participation was found to have been indispensable as the
irregularities could not have been committed without their participation. They also concealed the misappropriation
of public funds by falsifying the receipts.
Now, superior courts are not triers of facts. When the findings of fact of the Ombudsman are supported by
substantial evidence, it should be considered as conclusive.40 This Court recognizes the expertise and
independence of the Ombudsman and will avoid interfering with its findings absent a finding of grave abuse of
discretion.41 Hence, being supported by substantial evidence, we find no reason to disturb the factual findings of

the Ombudsman which are affirmed by the CA.

As for Olaivar, he insists that the CA erred in holding him administratively liable for gross negligence when he
relied to a reasonable extent and in good faith on the actions of his subordinates in the preparation of the
applications for registration. He questions the appellate courts finding that he failed to exercise the required
diligence in the performance of his duties.1avvphi1
While as stated above, the general rule is that factual findings of the CA are not reviewable by this Court, we
find that Olaivars case falls in one of the recognized exceptions laid down in jurisprudence since the CAs findings
regarding his liability are premised on the supposed absence of evidence but contradicted by the evidence on
record.42
The Office of the Ombudsman-Visayas found Olaivar administratively liable for dishonesty while the CA ruled
that he may not be held liable for dishonesty supposedly for lack of sufficient evidence. The CA ruled that there was
no substantial evidence to show that Olaivar participated in the scheme, but the tampering of the official receipts
could have been avoided had he exercised the required diligence in the performance of his duties as officer-incharge of the Jagna District Office. Thus, the CA found him liable only for gross neglect of duty. This, however, is
clear error on the part of the CA.
For one, there is clear evidence that Olaivar was involved in the anomalies. Witness Joselito Taladua
categorically declared in his affidavit43 that he personally paid Olaivar the sum of P2,675 for the renewal of
registration of a jeep for which he was issued Official Receipt No. 47699853. Much to his dismay, Taladua later found
out that his payment was not reflected correctly in the Report of Collections, and that the vehicle was deemed
unregistered for the year 2000.
More, Cabalit pointed to Olaivar as the person behind the anomaly in the LTO-Jagna District Office. She
narrated in her position paper that on several times, Olaivar directly accommodated some registrants and assumed
the functions of computer evaluator, typist and cashier, and computed the fees, received payment and prepared the
official receipts for those transactions. She also revealed that Olaivar would ask her for unused official receipts and
would later return the duplicate copies to her with the cash collections. Later, he would verify the Report of
Collections as correct.44
Likewise, Motor Vehicle Inspector Engr. Lowell A. Dano confirmed that in several instances, he witnessed
Olaivar type the data himself in the official receipts even if they have a typist in the office to do the job. Engr. Dano
added that after typing, Olaivar personally brought the accomplished official receipts for him (Engr. Dano) to sign.45
Moreover, Jacinto Jalop, the records officer of the LTO in Jagna, Bohol, illustrated how the official receipts were
tampered. He disclosed that the correct charges were typed in the Owners copy and the Plate Release copy of the
official receipts, but a much lower charge and an incorrect address were indicated in the other copies. He asserted
that Olaivar was responsible for tampering the official receipts.46
Neglect of duty implies only the failure to give proper attention to a task expected of an employee arising from
either carelessness or indifference.47 However, the facts of this case show more than a failure to mind ones task.
Rather, they manifest that Olaivar committed acts of dishonesty, which is defined as the concealment or distortion
of truth in a matter of fact relevant to ones office or connected with the performance of his duty. It implies a
disposition to lie, cheat, deceive, or defraud; untrustworthiness; lack of integrity; lack of honesty, probity, or
integrity in principle.48 Hence, the CA should have found Olaivar liable for dishonesty.
But be that as it may, still, the CA correctly imposed the proper penalty upon Olaivar. Under Section 52, Rule IV
of the Uniform Rules on Administrative Cases in the Civil Service, dishonesty, like gross neglect of duty, is classified
as a grave offense punishable by dismissal even if committed for the first time.49 Under Section 58,50 such penalty
likewise carries with it the accessory penalties of cancellation of civil service eligibility, forfeiture of retirement
benefits and disqualification from re-employment in the government service.
One final note. Cabalit contends that pursuant to the obiter in Tapiador v. Office of the Ombudsman,51 the
Office of the Ombudsman can only recommend administrative sanctions and not directly impose them. However, in
Office of the Ombudsman v. Masing,52 this Court has already settled the issue when we ruled that the power of the
Ombudsman to determine and impose administrative liability is not merely recommendatory but actually
mandatory. We held,
We reiterated this ruling in Office of the Ombudsman v. Laja, where we emphasized that "the Ombudsmans
order to remove, suspend, demote, fine, censure, or prosecute an officer or employee is not merely advisory or
recommendatory but is actually mandatory." Implementation of the order imposing the penalty is, however, to be
coursed through the proper officer. Recently, in Office of the Ombudsman v. Court of Appeals, we also held
While Section 15(3) of RA 6770 states that the Ombudsman has the power to "recommend x x x removal,
suspension, demotion x x x" of government officials and employees, the same Section 15(3) also states that the
Ombudsman in the alternative may "enforce its disciplinary authority as provided in Section 21" of RA 6770.

(emphasis supplied.)53
Subsequently, in Ledesma v. Court of Appeals,54 and Office of the Ombudsman v. Court of Appeals,55 the
Court upheld the Ombudsmans power to impose the penalty of removal, suspension, demotion, fine, censure, or
prosecution of a public officer or employee found to be at fault in the exercise of its administrative disciplinary
authority. In Office of the Ombudsman v. Court of Appeals, we held that the exercise of such power is well founded
in the Constitution and R.A. No. 6770, otherwise known as The Ombudsman Act of 1989, thus:
The Court further explained in Ledesma that the mandatory character of the Ombudsmans order imposing a
sanction should not be interpreted as usurpation of the authority of the head of office or any officer concerned. This
is because the power of the Ombudsman to investigate and prosecute any illegal act or omission of any public
official is not an exclusive authority but a shared or concurrent authority in respect of the offense charged. By
stating therefore that the Ombudsman "recommends" the action to be taken against an erring officer or employee,
the provisions in the Constitution and in Republic Act No. 6770 intended that the implementation of the order be
coursed through the proper officer.
Consequently in Ledesma, the Court affirmed the appellate courts decision which had, in turn, affirmed an
order of the Office of the Ombudsman imposing the penalty of suspension on the erring public official.56
The duty and privilege of the Ombudsman to act as protector of the people against the illegal and unjust acts
of those who are in the public service emanate from no less than the 1987 Constitution. Section 12 of Article XI
thereof states:
Section 12. The Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints
filed in any form or manner against public officials or employees of the Government, or any subdivision, agency or
instrumentality thereof, including government-owned or controlled corporations, and shall, in appropriate cases,
notify the complainants of the action taken and the result thereof.
In addition, Section 15 (3) of R.A. No. 6770, provides:
SEC. 15. Powers, Functions and Duties. The Office of the Ombudsman shall have the following powers,
functions and duties:
xxxx
(3) Direct the officer concerned to take appropriate action against a public officer or employee at fault or who
neglects to perform an act or discharge a duty required by law, and recommend his removal, suspension, demotion,
fine, censure, or prosecution, and ensure compliance therewith; or enforce its disciplinary authority as provided in
Section 21 of this Act: Provided, That the refusal by any officer without just cause to comply with an order of the
Ombudsman to remove, suspend, demote, fine, censure or prosecute an officer or employee who is at fault or who
neglects to perform an act or discharge a duty required by law shall be a ground for disciplinary action against said
officer.
xxxx
Section 19 of R.A. No. 6770 grants to the Ombudsman the authority to act on all administrative complaints:
SEC. 19. Administrative Complaints. The Ombudsman shall act on all complaints relating, but not limited to
acts or omissions which:
(1) Are contrary to law or regulation;
(2) Are unreasonable, unfair, oppressive or discriminatory;
(3) Are inconsistent with the general course of an agencys functions, though in accordance with law;
(4) Proceed from a mistake of law or an arbitrary ascertainment of facts;
(5) Are in the exercise of discretionary powers but for an improper purpose; or
(6) Are otherwise irregular, immoral or devoid of justification.
In the exercise of his duties, the Ombudsman is given full administrative disciplinary authority. His power is not
limited merely to receiving, processing complaints, or recommending penalties. He is to conduct investigations, hold
hearings, summon witnesses and require production of evidence and place respondents under preventive
suspension. This includes the power to impose the penalty of removal, suspension, demotion, fine, or censure of a
public officer or employee.57

The provisions in R.A. No. 6770 taken together reveal the manifest intent of the lawmakers to bestow on the
Office of the Ombudsman full administrative disciplinary authority. These provisions cover the entire gamut of
administrative adjudication which entails the authority to, inter alia, receive complaints, conduct investigations, hold
hearings in accordance with its rules of procedure, summon witnesses and require the production of documents,
place under preventive suspension public officers and employees pending an investigation, determine the
appropriate penalty imposable on erring public officers or employees as warranted by the evidence, and,
necessarily, impose the said penalty.58 Thus, it is settled that the Office of the Ombudsman can directly impose
administrative sanctions.
We find it worthy to state at this point that public service requires integrity and discipline.1avvphi1 For this
reason, public servants must exhibit at all times the highest sense of honesty and dedication to duty. By the very
nature of their duties and responsibilities, public officers and employees must faithfully adhere to hold sacred and
render inviolate the constitutional principle that a public office is a public trust; and must at all times be accountable
to the people, serve them with utmost responsibility, integrity, loyalty and efficiency.59
WHEREFORE, the petitions for review on certiorari are DENIED. The assailed Decision dated January 18, 2006
and Resolution dated September 21, 2007 of the Court of Appeals in CA-G.R. SP. Nos. 86256, 86394 and 00047 are
AFFIRMED with MODIFICATION. Petitioner Leonardo G. Olaivar is held administratively liable for DISHONESTY and
meted the penalty of dismissal from the service as well as the accessory penalties inherent to said penalty.
With costs against petitioners.
SO ORDERED.
11
12

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
Adm. Case No. 6475

January 30, 2013

FE A. YLAYA, Complainant,
vs.
ATTY. GLENN CARLOS GACOTT, Respondent.
DECISION
BRION, J.:
For the Court's consideration is the disbarment complaint 1 tiled by Fe A. Ylaya (complainant)
against Atty. Glenn Carlos Gacott (respondent) who allegedly deceived the complainant and her late
husband, Laurentino L. Ylaya, into signing a "preparatory" Deed of Sale that the respondent converted
into a Deed of Absolute Sale in favor of his relatives.
After the submission of the respondent's comment to the complaint, the Court referred the
complaint to the Commission on Bar Discipline ofthe Integrated Bar of the Philippines (IBP) for
investigation, evaluation and recommendation.
The complainant alleged that she and her late husband are the registered owners of two (2) parcels
of land covered by Transfer Certificate of Title ( TCT) Nos. 162632 and 162633 located at Barangay Sta.

Lourdes, Puerto Princesa City. Prior to the acquisition of these properties, TCT No. 162632 (property)
was already the subject of expropriation proceedings filed by the City Government of Puerto Princesa
(City Government) on May 23, 1996 against its former registered owner, Cirilo Arellano. The
expropriation case was filed with the Regional Trial Court (RTC) of Palawan and Puerto Princesa, Branch
95, and was docketed as Civil Case No. 2902. The RTC already fixed the price and issued an order for
the City Government to deposit P6,000,000.00 as just compensation for the property.2
The respondent briefly represented the complainant and her late husband in the expropriation case
as intervenors for being the new registered owners of the property. The complainant alleged that the
respondent convinced them to sign a "preparatory deed of sale" for the sale of the property, but he left
blank the space for the name of the buyer and for the amount of consideration. The respondent further
alleged that the deed would be used in the sale to the City Government when the RTC issues the order
to transfer the titles.3 The respondent then fraudulently without their knowledge and consent, and
contrary to their understanding converted the "preparatory deed of sale" into a Deed of Absolute
Sale dated June 4, 2001,4 selling the subject property to Reynold So and Sylvia Carlos So for
P200,000.00.5
The complainant denied that she and Laurentino were paid the P200,000.00 purchase price or that
they would sell the property "for such a measly sum" when they stood to get at least P6,000,000.00 as
just compensation.6
The complainant also claimed that the respondent notarized the Deed of Absolute Sale dated June
4, 2001 even though Reynold and Sylvia (his mothers sister) are his uncle and his aunt, respectively. 7
The respondent denied all the allegations in the complaint. 8
The respondent argued that the complainants greed to get the just Compensation 9 caused her to
file this "baseless, unfounded and malicious" disbarment case. 10 He claimed that the sale was their
voluntary transaction and that he "simply ratified the document." 11 He also claimed that Reynold and
Laurentino had originally jointly purchased the properties from Cirilo Arellano on July 10, 2000; that
they were co-owners for some time; and that Laurentino subsequently sold his share to Reynold under
a Deed of Absolute Sale dated June 4, 2001.12
The respondent specifically denied asking the complainant and her late husband to execute any

"preparatory deed of sale" in favor of the City Government. 13 He also denied that the Deed of
Absolute Sale contained blanks when they signed it. 14 That he filed for the spouses Ylaya and Reynold
an opposition to the just compensation the RTC fixed proved that there was no agreement to use the
document for the expropriation case. 15 He also argued that it was clear from the document that the
intended buyer was a natural person, not a juridical person, because there were spaces for the buyers
legal age, marital status, and citizenship,16 and he was even constrained to file a subsequent Motion
to Intervene on behalf of Reynold because the complainant "maliciously retained" the TCTs to the
subject properties after borrowing them from his office. 17 Lastly, he denied violating the Rules on
Notarial Practice.18
On September 4, 2006, the respondent filed a Motion to Resolve or Decide the Case dated August
24, 2006 praying for the early resolution of the complaint. 19
On December 5, 2006, the complainant filed an Ex Parte Motion to Withdraw the Verified Complaint
and To Dismiss the Case dated November 14, 2006.20
On February 28, 2008, the complainant executed an Affidavit 21 affirming and confirming the
existence, genuineness and due execution of the Deed of Absolute Sale notarized on March 6, 2000; 22
the Memorandum of Agreement (MOA) dated April 19, 2000; 23 and the Deed of Absolute Sale
notarized in 2001.24 The respondent submitted this Affidavit to the IBP as an attachment to his Motion

for Reconsideration of April 21, 2008.25

The IBPs Findings
In her Report and Recommendation dated November 19, 2007, IBP Commissioner Anna Caridad
Sazon-Dupaya found the respondent administratively liable for violating Canon 1, Rule 1.01 (A lawyer
shall not engage in unlawful, dishonest, immoral or deceitful conduct) and Canon 16 ("A lawyer shall
hold in trust all moneys and properties of his client that may come into his possession) of the Code of
Professional Responsibility, and Section 3(c), Rule IV of A.M. No. 02-8-13-SC (2004 Rules on Notarial
Practice).26 She recommended his suspension from the practice of law for a period of six (6)
months.27
In its Resolution No. XVIII-2007-302 28 dated December 14, 2007, the IBP Board of Governors
adopted the IBP Commissioners finding, but increased the penalty imposed to two (2) years
suspension and a warning:
RESOLVED to ADOPT and APPROVE, as it is hereby unanimously ADOPTED and APPROVED, with
modification, the Report and Recommendation of the Investigating Commissioner [in] the aboveentitled case, herein made part of this Resolution as Annex "A"; and, finding the recommendation fully
supported by the evidence on record and the applicable laws and rules, and considering respondents
violations of Canon 1, [Rule] 1.01 and Canon 16 of the Code of Professional Responsibility and Rule IV,
Sec. 39(c) of A.M. No. 02-8-13-SC (2004 Rules on Notarial Practice), Atty. Glenn Carlos Gacott is hereby
SUSPENDED from practice of law for two (2) years with a Warning that commission of a similar offense
will be dealt with more severely. [emphases supplied]
On May 8, 2008, the respondent filed a Motion for Reconsideration dated April 21, 2008, attaching,
among others, a copy of the complainants Affidavit dated February 27, 2008, admitting the existence,
genuineness and due execution of the Deed of Absolute Sale between Cirilo and Laurentino; the MOA
between Laurentino and Reynold; the Deed of Absolute Sale between Laurentino and Reynold; and the
Compromise Agreement between Reynold and the complainant dated November 14, 2006 for the
expropriation case.29
On September 4, 2008, the respondent filed a Manifestation with the Supreme Court, requesting
that the IBP be directed to resolve his Motion for Reconsideration. 30
By Resolution No. XIX-2010-545 dated October 8, 2010, 31 the IBP Board of Governors denied the
respondents Motion for Reconsideration for failing to raise any new substantial matter or any cogent
reason to warrant a reversal or even a modification of its Resolution No. XVIII-2007-302. 32
On March 14, 2012, the respondent filed a Petition for Review (on appeal) assailing the IBPs
findings, as follows:33
a) In conveniently concluding that the Deed of Absolute Sale was pre-signed and
fraudulently notarized without requiring Fe Ylaya to adduce evidence in a formal hearing thus,
violated the respondents right to due process as he was not able to cross-examine her. This is
not to mention that the complainant failed to offer corroborative proof to prove her bare
allegations;
b) In sweepingly and arbitrarily disregarded/skirted (sic) the public documents (MOA and
2 other DOAS) duly executed by the parties therein and notarized by the respondent;
c) In totally ignoring the complainants Affidavit admitting the genuineness and due
execution of the Deed of Absolute Sale in issue;
d) In arbitrarily concluding the absence of co-ownership by Reynold So and Fe Ylaya of the
subject lots despite the existence of a notarized MOA clearly showing the co-ownership of
Ylaya and So; and
e) In finding the respondent/appellants act of notarizing the DOAS as contrary to the

notarial rules.
The Issues
From the assigned errors, the complainant poses the following issues:
(1) whether the IBP violated the respondents right to due process; and
(2) whether the evidence presented supports a finding that the respondent is
administratively liable for violating Canon 1, Rule 1.01 and Canon 16 of the Code of
Professional Responsibility, and Section 3(c), Rule IV of A.M. No. 02-8-13-SC.
The Courts Ruling
We set aside the findings and recommendations of the IBP Commissioner and those of the IBP
Board of Governors finding the respondent liable for violating Canon 1, Rules 1.01 and Section 3(c),
Rule IV of A.M. No. 02-8-13-SC.34
We however hold the respondent liable for violating Canon 16 of the Code of Professional
Responsibility for being remiss in his obligation to hold in trust his clients properties. We likewise find
him liable for violation of (1) Canon 15, Rule 15.03 for representing conflicting interests without the
written consent of the represented parties, thus, violating the rule on conflict of interests; and (2)
Canon 18, Rule 18.03 for neglecting a legal matter entrusted to him.
a. Due process violation
The most basic tenet of due process is the right to be heard. Denial of due process means the total
lack of opportunity to be heard or to have ones day in court. As a rule, no denial of due process takes
place where a party has been given an opportunity to be heard and to present his case; 35 what is
prohibited is the absolute lack of opportunity to be heard.
The respondent claims that the IBP violated his right to due process because he was not given the
"amplest opportunity to defend himself, to cross examine the witness complainant, to object to the
admissibility of documents or present controverting evidence" 36 when the IBP rendered its conclusion
without requiring the complainant to adduce evidence in a formal hearing and despite the absence of
corroborative proof. He insists that these defects rendered the complainants allegations as hearsay,
and the IBPs report, recommendation or resolution null and void.
Although the respondent failed to have a face-to-face confrontation with the complainant when she
failed to appear at the required mandatory conference on October 6, 2005, 37 the records reveal that
the respondent fully participated during the entire proceedings and submitted numerous pleadings,
including evidence, before the IBP. He was even allowed to file a motion for reconsideration supported
by his submitted evidence, which motion the IBP considered and ruled upon in its Resolution No. XIX2010-545 dated October 8, 2010.38
In Alliance of Democratic Free Labor Organization v. Laguesma, 39 we held that due process, as
applied to administrative proceedings, is the opportunity to explain ones side. In Samalio v. Court of
Appeals,40 due process in an administrative context does not require trial-type proceedings similar to
those in courts of justice. Where the opportunity to be heard, either through oral arguments or through
pleadings, is accorded, no denial of procedural due process takes place. The requirements of due
process are satisfied where the parties are afforded a fair and reasonable opportunity to explain their
side of the controversy at hand.
Similarly, in A.Z. Arnaiz Realty, Inc. v. Office of the President, 41 we held that "due process, as a
constitutional precept, does not always, and in all situations, require a trial-type proceeding. Litigants
may be heard through pleadings, written explanations, position papers, memoranda or oral arguments.
The standard of due process that must be met in administrative tribunals allows a certain degree of
latitude[, provided that] fairness is not ignored. It is, therefore, not legally objectionable for being
violative of due process, for an administrative agency to resolve a case based solely on position

papers, affidavits or documentary evidence submitted by the parties." 42

In this case, the respondents failure to cross-examine the complainant is not a sufficient ground to
support the claim that he had not been afforded due process. The respondent was heard through his
pleadings, his submission of alleged controverting evidence, and his oral testimony during the October
6, 2005 mandatory conference. These pleadings, evidence and testimony were received and
considered by the IBP Commissioner when she arrived at her findings and recommendation, and were
the bases for the IBP Boards Resolution.
Moreover, "any seeming defect in the observance of due process is cured by the filing of a motion
for reconsideration. A denia of due process cannot be successfully invoked by a party who has had the
opportunity to be heard on his motion for reconsideration. Undoubtedly in this case, the requirement of
the law was afforded to the respondent."43
We also note that the respondent, on a Motion to Resolve or Decide the Case dated August 24,
2006, submitted his case to the IBP for its resolution without any further hearings. The motion, filed
almost one year after the mandatory conference on October 6, 2005, significantly did not contain any
statement regarding a denial of due process. In effect, the respondent himself waived his crossexamination of the complainant when he asked the IBP Board of Governors to resolve the case based
on the pleadings and the evidence on record. To quote his own submission:
1. On June 30, 2004, a complaint was filed in this case;
2. On October 19, 2004, the respondent filed his comment with all its attachments
denying all the allegations in the complaint;
3. On June 23, 2005, the respondent filed his position paper. On April 28, 2006, the
respondent also filed his supplemental position paper. By contrast, up to this date, the
complainant/petitioner has not filed her verified position paper thus, waived her right to file
the same;
4. There being no other genuine issues to be heard in this case as all the defenses and
counter-arguments are supported by documentary evidence, it is most respectfully prayed
that the instant case be resolved on its merits or be ordered dismissed for lack of merit
without further hearing;
5. Further, considering that there is an on-going case in Branch 52 of the Regional Trial
Court of Palawan in Civil Case No. 2902 for Expropriation involving the same property, and
such fact was deliberately omitted by the complainant in her Verified Complaint as shown in
the certification of non-forum shopping, the outright dismissal of this case is warranted, hence,
this motion; and
6. This is meant to expedite the termination of this case. 44 (underscore ours; italics
supplied)
Finally, we note Section 11, Rule 139-B of the Rules of Court which provides that:
No defect in a complaint, notice, answer, or in the proceeding or the Investigators Report shall be
considered as substantial unless the Board of Governors, upon considering the whole record, finds that
such defect has resulted or may result in a miscarriage of justice, in which event the
Board shall take such remedial action as the circumstances may warrant, including invalidation of
the entire proceedings.
In this case, the IBP Commissioners findings were twice reviewed by the IBP Board of Governors
the first review resulted in Resolution No. XVIII-2007-302 45 dated December 14, 2007, affirming the
IBP Commissioners findings, but modifying the penalty; the second review resulted in Resolution No.
XIX-2010-545 dated October 8, 2010, 46 denying the respondents motion for reconsideration. In both
instances, the IBP Board of Governors found no defect or miscarriage of justice warranting a remedial
action or the invalidation of the proceedings.

We emphasize that disciplinary proceedings against lawyers are sui generis in that they are neither
purely civil nor purely criminal; they involve investigations by the Court into the conduct of one of its
officers,47 not the trial of an action or a suit.
Disciplinary proceedings against lawyers are sui generis. Neither purely civil nor purely criminal,
they do not involve a trial of an action or a suit, but is rather an investigation by the Court into the
conduct of one of its officers. Not being intended to inflict punishment, it is in no sense a criminal
prosecution. Accordingly, there is neither a plaintiff nor a prosecutor therein. It may be initiated by the
Court motu proprio. Public interest is its primary objective, and the real question for determination is
whether or not the attorney is still a fit person to be allowed the privileges as such. Hence, in the
exercise of its disciplinary powers, the Court merely calls upon a member of the Bar to account for his
actuations as an officer of the Court with the end in view of preserving the purity of the legal
profession and the proper and honest administration of justice by purging the profession of members
who by their misconduct have proved themselves no longer worthy to be entrusted with the duties and
responsibilities pertaining to the office of an attorney. In such posture, there can thus be no occasion to
speak of a complainant or a prosecutor. [emphases deleted]
The complainant in disbarment cases is not a direct party to the case but a witness who brought the
matter to the attention of the Court. 48 Flowing from its sui generis character, it is not mandatory to
have a formal hearing in which the complainant must adduce evidence.
From all these, we find it clear that the complainant is not indispensable to the disciplinary
proceedings and her failure to appear for cross-examination or to provide corroborative evidence of her
allegations is of no merit. What is important is whether, upon due investigation, the IBP
Board of Governors finds sufficient evidence of the respondents misconduct to warrant the exercise
of its disciplinary powers.
b. Merits of the Complaint
"In administrative cases against lawyers, the quantum of proof required is preponderance of
evidence which the complainant has the burden to discharge." 49 Preponderance of evidence means
that the evidence adduced by one side is, as a whole, superior to or has a greater weight than that of
the other. It means evidence which is more convincing to the court as worthy of belief compared to the
presented contrary evidence.
Under Section 1, Rule 133 of the Rules of Court, in determining whether preponderance of evidence
exists, the court may consider the following: (a) all the facts and circumstances of the case; (b) the
witnesses manner of testifying, their intelligence, their means and opportunity of knowing the facts to
which they are testifying, the nature of the facts to which they testify, and the probability or
improbability of their testimony; (c) the witnesses interest or want of interest, and also their personal
credibility so far as the same may ultimately appear in the trial; and (d) the number of witnesses,
although it does not mean that preponderance is necessarily with the greater number. 50 By law, a
lawyer enjoys the legal presumption that he is innocent of the charges against him until the contrary is
proven, and that as an officer of the court, he is presumed to have performed his duties in accordance
with his oath.51
The IBP Commissioner set out her findings as follows:
The undersigned, after a careful evaluation of the evidence presented by both parties, finds that
the charges of the complainant against the respondent are worthy of belief based on the following:
First, the allegation of the respondent that Reynold So was actually co-owner of spouses Ylanas (sic)
in the properties subject of the Deed of Sale between Felix Arellano and Spouses Ylanas (sic) is hard to
believe despite the presentation of the Memorandum of Agreement.
It is elementary in Rules of Evidence that when the contents of a written document are put in issue,
the best evidence would be the document itself. In the Deed of Sale between Felix Arellano and
Spouses Ylanas (sic), the buyer of the subject properties is only Laurentino L. Ylaya married to Fe A.
Ylaya. The document does not state that Reynold So was likewise a buyer together with Laurentino
Ylaya, or that the former paid half of the purchase price.

Also, it is hard for this Commission to believe that Reynold So, assisted by a lawyer at that and who
allegedly paid half of the purchase price, would not insist for the inclusion of his name in the Deed of
Sale as well as the Transfer Certificate of Title subsequently issued.
The Memorandum of Agreement between the spouses Ylaya and Reynold So produced by the
respondent cannot overturn the belief of this Commission considering that the Memorandum of
Agreement was executed more than a month AFTER the Deed of Sale between Felix Arellano and the
Ylayas was notarized. This is not to mention the fact that the complainant denied ever having executed
the Memorandum of Agreement. A close examination of the signatories in the said Memorandum of
Agreement would reveal that indeed, the alleged signatures of the complainant and her husband are
not the same with their signatures in other documents.
Assuming, for the sake of argument, that the Memorandum of Agreement is valid, thereby making
Laurentino Ylaya and co-owner Reynold So co-owners of the subject properties (Please see Annex "B"
of respondents Comment), this Commission finds it hard to believe Laurentino Ylaya would sell it to
Reynold So for P200,000 x x x when his minimum expenses for the purchase thereof is already
P225,000.00 and he was expecting to receive P7,000,000.00, more or less. That would mean that if
Reynold So and the complainant were co-owners, the P7,000,000.00 would then be equally divided
among them at P3,500,000.00 each, far above the P200,000.00 selling price reflected in the presigned Deed of Sale.
As to the second issue, this Commission believes that the respondent committed serious error in
notarizing the Deed of Sale and the Memorandum of Agreement between his uncle Reynold So and
Laurentino Ylaya based on Rule IV, Section 3 (c) of A.M. No. 02-8-13-SC which provides as follows:
"Sec. 3. Disqualifications a notary public is disqualified from performing a notarial act if he:
(a) x x x.
(b) x x x.
(c) is a spouse, common-law partner, ancestor, descendant, or relative by affinity or
consanguinity of the principal within the fourth civil degree."
The defense therefore of the respondent that he did not violate the aforementioned Rule
becausehis uncle Reynold So, the buyer is not the principal in the Subject Deed of Sale but the seller
Laurentino Ylaya (please see page 3 of the respondents Supplemental Position Paper) is misplaced.
Clearly, both the buyer and the seller in the instant case are considered principals in the contract
entered into.
Furthermore, if we are to consider the argument of the respondent that his uncle was not a principal
so as to apply the afore-quoted provision of the Rules, the respondent still violated the Rules when he
notarized the subject Memorandum of Agreement between Laurentino Ylaya and his uncle Reynold So.
Clearly, both complainant and Reynold So were principal parties in the said Memorandum of
Agreement.52
The respondent argues that the IBP Commissioners findings are contrary to the presented
evidence, specifically to the MOA executed by Laurentino and Reynold acknowledging the existence of
a co-ownership;53 to the complainants Ex Parte Motion to Withdraw the Verified Complaint and To
Dismiss the Case dated November 14, 2006 where she stated that the parties have entered into a
compromise agreement in Civil Case No. 2902, and that the disbarment complaint arose from a
misunderstanding, miscommunication and improper appreciation of facts; 54 to her Affidavit dated
February 27, 200855 affirming and confirming the existence, genuineness and due execution of the
Deed of Absolute Sale notarized on March 6, 2000; 56 and to the Deed of Absolute Sale notarized in
2001.57

In all, the respondent claims that these cited pieces of evidence prove that this administrative
complaint against him is fabricated, false and untrue. He also points to Atty. Robert Peneyra, the
complainants counsel in this administrative case, as the hand behind the complaint. 58 According to
the respondent, Atty. Peneyra harbors ill-will against him and his family after his father filed several

administrative cases against Atty. Peneyra, one of which resulted in the imposition of a warning and a
reprimand on Atty. Peneyra.59
Reynold, in his Affidavit dated October 11, 2004, confirms that there was a co-ownership between
him and Laurentino; that Laurentino decided to sell his half of the property to Reynold because he
(Laurentino) had been sickly and in dire need of money to pay for his medical bills; that Laurentino
agreed to the price of P200,000.00 as this was almost the same value of his investment when he and
Reynold jointly acquired the property; and that the sale to Reynold was with the agreement and
consent of the complainant who voluntarily signed the Deed of Sale. 60
After examining the whole record of the case, we agree with the respondent and find the evidence
insufficient to prove the charge that he violated Canon 1, Rule 1.01 of the Code of Professional
Responsibility and Section 3(c), Rule IV of A.M. No. 02-8-13-SC. Specifically, (1) the evidence against
the respondent fails to show the alleged fraudulent and deceitful acts he has taken to mislead the
complainant and her husband into signing a "preparatory deed of sale" and the conversion into a Deed
of Absolute Sale dated June 4, 2001 in favor of Reynold; and (2) no prohibition exists against the
notarization of a document in which any of the parties interested is the notarys relative within the 4th
civil degree, by affinity or consanguinity, at that time the respondent notarized the documents.
In her Report and Recommendation,61 the IBP Commissioner concluded that the respondent is
liable for deceit and fraud because he failed to prove the existence of a co-ownership between
Laurentino and Reynold; in her opinion, the signatures of the complainant and of her husband on the
MOA "are not the same with their signatures in other documents." 62
We do not agree with this finding. While the facts of this case may raise some questions regarding
the respondents legal practice, we nevertheless found nothing constituting clear evidence of the
respondents specific acts of fraud and deceit. His failure to prove the existence of a co-ownership
does not lead us to the conclusion that the MOA and the Deed of Absolute Sale dated June 4, 2001 are
spurious and that the respondent was responsible for creating these spurious documents. We are
further persuaded, after noting that in disregarding the MOA, the IBP Commissioner failed to specify
what differences she observed in the spouses Ylayas signatures in the MOA and what documents were
used in comparison.
Apart from her allegations, the complainants pieces of evidence consist of TCT Nos. 162632 and

162633;63 her Motion for Leave to Intervene in Civil Case No. 2902 dated May 17, 2000; 64 the RTC
order in Civil Case No. 2902 dated November 6, 2000 fixing the price of just compensation; 65 the Deed

of Absolute Sale dated June 4, 2001; 66 the spouses Ylayas Verified Manifestation dated September 2,
2002, filed with the RTC in Civil Case No. 2902, assailing the Motion to Deposit Just Compensation filed
by the respondent on behalf of Reynold and manifesting the sale between Laurentino and Reynold; 67
the Provincial Prosecutors Subpoena to the complainant in connection with the respondents complaint
for libel;68 the respondents complaint for libel against the complainant dated August 27, 2003; 69 the
complainants Counter Affidavit dated March 26, 2004 against the charge of libel; 70 and the
respondents letter to the Provincial Attorney of Palawan dated April 5, 2004, requesting for "official
information regarding the actual attendance of Atty. ROBERT Y. PENEYRA" at an MCLE seminar. 71
We do not see these documentary pieces of evidence as proof of specific acts constituting deceit or
fraud on the respondents part. The documents by themselves are neutral and, at the most, show the
breakdown of the attorney-client relationship between the respondent and the complainant. It is one
thing to allege deceit and misconduct, and it is another to demonstrate by evidence the specific acts
constituting these allegations.72
We reiterate that in disbarment proceedings, the burden of proof is on the complainant; the Court
exercises its disciplinary power only if the complainant establishes her case by clear, convincing, and
satisfactory evidence.73 Preponderance of evidence means that the evidence adduced by one side is,
as a whole, superior to or has a greater weight than that of the other party. When the pieces of
evidence of the parties are evenly balanced or when doubt exists on the preponderance of evidence,
the equipoise rule dictates that the decision be against the party carrying the burden of proof. 74
In this case, we find that the complainants evidence and the records of the case do not show the

respondents deliberate fraudulent and deceitful acts. In the absence of such proof, the complaint for
fraud and deceit under Canon 1, Rule 1.01 of the Code of Professional Responsibility must perforce be
dismissed.
We note that the respondent has not squarely addressed the issue of his relationship with Reynold,
whom the complainant alleges to be the respondents uncle because Reynold is married to the
respondents maternal aunt.75 However, this is of no moment as the respondent cannot be held liable
for violating Section 3(c), Rule IV of A.M. No. 02-8-13-SC because the Deed of Absolute Sale dated June
4, 200176 and the MOA dated April 19, 2000 77 were notarized by the respondent prior to the
effectivity of A.M. No. 02-8-13-SC on July 6, 2004. The notarial law in force in the years 2000 - 2001
was Chapter 11 of Act No. 2711 (the Revised Administrative Code of 1917) which did not contain the
present prohibition against notarizing documents where the parties are related to the notary public
within the 4th civil degree, by affinity or consanguinity. Thus, we must likewise dismiss the charge for
violation of A.M. No. 02-8-13-SC.
c. Liability under Canons 15, 16 and 18 We find the respondent liable under Canon 15, Rule 15.03
for representing conflicting interests without the written consent of all concerned, particularly the
complainant; under Canon 16 for being remiss in his obligation to hold in trust his clients properties;
and under Canon 18, Rule 18.03 for neglecting a legal matter entrusted to him.
Canon 15, Rule 15.03 states:
A lawyer shall not represent conflicting interests except by written consent of all concerned given
after a full disclosure of the facts. [emphasis ours]
The relationship between a lawyer and his client should ideally be imbued with the highest level of
trust and confidence. Necessity and public interest require that this be so. Part of the lawyers duty to
his client is to avoid representing conflicting interests. He is duty bound to decline professional
employment, no matter how attractive the fee offered may be, if its acceptance involves a violation of
the proscription against conflict of interest, or any of the rules of professional conduct. Thus, a lawyer
may not accept a retainer from a defendant after he has given professional advice to the plaintiff
concerning his claim; nor can he accept employment from another in a matter adversely affecting any
interest of his former client. It is his duty to decline employment in any of these and similar
circumstances in view of the rule prohibiting representation of conflicting interests. 78
The proscription against representation of conflicting interest applies "even if the lawyer would not
be called upon to contend for one client that which the lawyer has to oppose for the other, or that
there would be no occasion to use the confidential information acquired from one to the disadvantage
of the other as the two actions are wholly unrelated." 79 The sole exception is provided in Canon 15,
Rule 15.03 of the Code of Professional Responsibility if there is a written consent from all the parties
after full disclosure.
Based on the records, we find substantial evidence to hold the respondent liable for violating Canon
15, Rule 15.03 of the Code of Professional Responsibility. The facts of this case show that the
respondent retained clients who had close dealings with each other. The respondent admits to acting
as legal counsel for Cirilo Arellano, the spouses Ylaya and Reynold at one point during the proceedings
in Civil Case No. 2902. 80 Subsequently, he represented only Reynold in the same proceedings, 81
asserting Reynolds ownership over the property against all other claims, including that of the spouses
Ylaya.82
We find no record of any written consent from any of the parties involved and we cannot give the
respondent the benefit of the doubt in this regard. We find it clear from the facts of this case that the
respondent retained Reynold as his client and actively opposed the interests of his former client, the
complainant. He thus violated Canon 15, Rule 15.03 of the Code of Professional Responsibility.
We affirm the IBP Commissioners finding that the respondent violated Canon 16. The respondent
admits to losing certificates of land titles that were entrusted to his care by Reynold. 83 According to
the respondent, the complainant "maliciously retained" the TCTs over the properties sold by Laurentino
to Reynold after she borrowed them from his office. 84 Reynold confirms that the TCTs were taken by
the complainant from the respondents law office.85

The respondent is reminded that his duty under Canon 16 is to "hold in trust all moneys and
properties of his client that may come into his possession." Allowing a party to take the original TCTs of
properties owned by another an act that could result in damage should merit a finding of legal
malpractice. While we note that it was his legal staff who allowed the complainant to borrow the TCTs
and it does not appear that the respondent was aware or present when the complainant borrowed the
TCTs,86 we nevertheless hold the respondent liable, as the TCTs were entrusted to his care and
custody; he failed to exercise due diligence in caring for his clients properties that were in his custody.
We likewise find the respondent liable for violating Canon 18, Rule 18.03 for neglecting a legal
matter entrusted to him. Despite the respondents admission that he represented the complainant and
her late husband in Civil Case No. 2902 and that he purportedly filed a Motion for Leave to Intervene in
their behalf, the records show that he never filed such a motion for the spouses Ylaya. The
complainant herself states that she and her late husband were forced to file the Motion for Leave to
Intervene on their own behalf. The records of the case, which include the Motion for Leave to Intervene
filed by the spouses Ylaya, support this conclusion. 87
Canon 18, Rule 18.03 requires that a lawyer "shall not neglect a legal matter entrusted to him, and
his negligence in connection [therewith] shall render him liable." What amounts to carelessness or
negligence in a lawyers discharge of his duty to his client is incapable of an exact formulation, but the
Court has consistently held that the mere failure of a lawyer to perform the obligations due his client is
per se a violation.88
In Canoy v. Ortiz,89 we held that a lawyers failure to file a position paper was per se a violation of
Rule 18.03 of the Code of Professional Responsibility. Similar to Canoy, the respondent clearly failed in
this case in his duty to his client when, without any explanation, he failed to file the Motion for Leave to
Intervene on behalf of the spouses Ylaya. Under the circumstances, we find that there was want of
diligence; without sufficient justification, this is sufficient to hold the respondent liable for violating
Canon 18, Rule 18.03 of the Code of Professional Responsibility.
d. The Complainants Ex Parte Motion to Withdraw the Verified Complaint and to Dismiss the Case
and her Affidavit
We are aware of the complainants Ex Parte Motion to Withdraw the Verified Complaint and To
Dismiss the Case dated November 14, 2006 90 and her Affidavit91 affirming and confirming the
existence, genuineness and due execution of the Deed of Absolute Sale notarized on March 6, 2000. 92
The complainant explains that the parties have entered into a compromise agreement in Civil Case No.
2902, and that this disbarment complaint was filed because of a "misunderstanding,
miscommunication and improper appreciation of facts"; 93 she erroneously accused the respondent of
ill motives and bad intentions, but after being enlightened, she is convinced that he has no personal or
pecuniary interests over the properties in Civil Case No. 2902; that such misunderstanding was due to
her unfamiliarity with the transactions of her late husband during his lifetime. 94 The complainant now
pleads for the respondents forgiveness, stating that he has been her and her late husbands lawyer for
over a decade and affirms her trust and confidence in him. 95 We take note that under their
Compromise Agreement dated November 14, 2006 for the expropriation case, 96 the complainant and
Reynold equally share the just compensation, which have since increased to P10,000,000.00.
While the submitted Ex Parte Motion to Withdraw the Verified Complaint and to Dismiss the Case
and the Affidavit appear to exonerate the respondent, complete exoneration is not the necessary legal
effect as the submitted motion and affidavit are immaterial for purposes of the present proceedings.
Section 5, Rule 139-B of the Rules of Court states that, "No investigation shall be interrupted or
terminated by reason of the desistance, settlement, compromise, restitution, withdrawal of charges, or
failure of the complainant to prosecute the same."
In Angalan v. Delante,97 despite the Affidavit of Desistance, we disbarred the respondent therein
for taking advantage of his clients and for transferring the title of their property to his name. In
Bautista v. Bernabe,98 we revoked the lawyers notarial commission, disqualified him from
reappointment as a notary public for two years, and suspended him from the practice of law for one
year for notarizing a document without requiring the affiant to personally appear before him. In this
cited case, we said:

Complainants desistance or withdrawal of the complaint does not exonerate respondent or put an
end to the administrative proceedings. A case of suspension or disbarment may proceed regardless of
interest or lack of interest of the complainant. What matters is whether, on the basis of the facts borne
out by the record, the charge of deceit and grossly immoral conduct has been proven. This rule is
premised on the nature of disciplinary proceedings. A proceeding for suspension or disbarment is not a
civil action where the complainant is a plaintiff and the respondent lawyer is a defendant. Disciplinary
proceedings involve no private interest and afford no redress for private grievance. They are
undertaken and prosecuted solely for the public welfare. They are undertaken for the purpose of
preserving courts of justice from the official ministration of persons unfit to practice in them. The
attorney is called to answer to the court for his conduct as an officer of the court. The complainant or
the person who called the attention of the court to the attorneys alleged misconduct is in no sense a
party, and has generally no interest in the outcome except as all good citizens may have in the proper
administration of justice.99
In sum, in administrative proceedings against lawyers, the complainants desistance or withdrawal
does not terminate the proceedings. This is particularly true in the present case where pecuniary
consideration has been given to the complainant as a consideration for her desistance. We note in this
regard that she would receive P5,000,000.00, or half of the just compensation under the Compromise
Agreement,100 and thus agreed to withdraw all charges against the respondent. 101 From this
perspective, we consider the complainants desistance to be suspect; it is not grounded on the fact
that the respondent did not commit any actual misconduct; rather, because of the consideration, the
complainant is now amenable to the position of the respondent and/or Reynold.
e. Procedural aspect
We remind all parties that resolutions from the IBP Board of Governors are merely recommendatory
and do not attain finality without a final action from this Court. Section 12, Rule 139-B is clear on this
point that:
Section 12. Review and decision by the Board of Governors.
xxxx
(b) If the Board, by the vote of a majority of its total membership, determines that the respondent
should be suspended from the practice of law or disbarred, it shall issue a resolution setting forth its
findings and recommendations which, together with the whole record of the case, shall forthwith be
transmitted to the Supreme Court for final action.1wphi1
The Supreme Court exercises exclusive jurisdiction to regulate the practice of law. 102 It exercises
such disciplinary functions through the IBP, but it does not relinquish its duty to form its own judgment.
Disbarment proceedings are exercised under the sole jurisdiction of the Supreme Court, and the IBPs
recommendations imposing the penalty of suspension from the practice of law or disbarment are
always subject to this Courts review and approval.
The Penalty
In Solidon v. Macalalad,103 we imposed the penalty of suspension of six ( 6) months from the
practice of law on the respondent therein for his violation of Canon 18, Rule 18.03 and Canon 16, Rule
16.01 of the Code of Professional Responsibility. In Josefina M. Anion v. Atty. Clemencio Sabitsana,
Jr.,104 we suspended the respondent therein from the practice of law for one (1) year, for violating
Canon 15, Rule 15.03 of the Code of Professional Responsibility. Under the circumstances, we find a
one (1) year suspension to be a sufficient and appropriate sanction against the respondent.
WHEREFORE, premises considered, we set aside Resolution No. XVIII-.2007-302 dated December
14, 2007 and Resolution No. XIX-2010-545 dated October 8, 2010 of the IBP Board of Governors, and
find respondent Atty. Glenn Carlos Gacott GUILTY of violating Rule 15.03 of Canon 15, Canon 16, and
Rule 18.03 of Canon 18 of the Code of Professional Responsibility. As a penalty, he is SUSPENDED from
the practice of law for one (1) year, with a WARNING that a repetition of the same or similar act will be
dealt with more severely.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 176830

February 11, 2014

SATURNINO
C.
OCAMPO,
Petitioner,
vs.
HON. EPHREM S. ABANDO, in his capacity as Presiding Judge of the Regional Trial Court of
Hilongos, Leyte, Branch 18, CESAR M. MERIN, in. his capacity as Approving Prosecutor and
Officer-in-Charge, ROSULO U. VIVERO, in his capacity as Investigating Prosecutor, RAUL M.
GONZALEZ, in his capacity as Secretary of the Department of Justice, Respondents.
x-----------------------x
DECISION
SERENO, CJ.:
On 26 August 2006, a mass grave was discovered by elements of the 43rd Infantry Brigade of the
Philippine Army at Sitio Sapang Daco, Barangay Kaulisihan, Inopacan, Leyte.1 The mass grave
contained skeletal remains of individuals believed to be victims of "Operation Venereal Disease"
(Operation VD) launched by members of the Communist Party of the Philippines/New Peoples
Army/National Democratic Front of the Philippines (CPP/NPA/NDFP) to purge their ranks of suspected
military informers.
While the doctrine of hierarchy of courts normally precludes a direct invocation of this Courts
jurisdiction, we take cognizance of these petitions considering that petitioners have chosen to take
recourse directly before us and that the cases are of significant national interest.
Petitioners have raised several issues, but most are too insubstantial to require consideration.
Accordingly, in the exercise of sound judicial discretion and economy, this Court will pass primarily
upon the following:
1. Whether petitioners were denied due process during preliminary investigation and in
the issuance of the warrants of arrest.
2. Whether the murder charges against petitioners should be dismissed under the political
offense doctrine.
ANTECEDENT FACTS
These are petitions for certiorari and prohibition2 seeking the annulment of the orders and
resolutions of public respondents with regard to the indictment and issuance of warrants of arrest
against petitioners for the crime of multiple murder.
Police Chief Inspector George L. Almaden (P C/Insp. Almaden) of the Philippine National Police (PNP)
Regional Office 8 and Staff Judge Advocate Captain Allan Tiu (Army Captain Tiu) of the 8th Infantry

Division of the Philippine Army sent 12 undated letters to the Provincial Prosecutor of Leyte through
Assistant Provincial Prosecutor Rosulo U. Vivero (Prosecutor Vivero).3 The letters requested appropriate
legal action on 12 complaint-affidavits attached therewith accusing 71 named members of the
Communist Party of the Philippines/New Peoples Army/National Democratic Front of the Philippines
(CPP/NPA/NDFP) of murder, including petitioners herein along with several other unnamed members.
The letters narrated that on 26 August 2006, elements of the 43rd Infantry Brigade of the Philippine
Army discovered a mass grave site of the CPP/NPA/NDFP at Sitio Sapang Daco, Barangay Kaulisihan,
Inopacan, Leyte.4 Recovered from the grave site were 67 severely deteriorated skeletal remains
believed to be victims of Operation VD.5
The PNP Scene of the Crime Operation (SOCO) Team based in Regional Office 8 was immediately
dispatched to the mass grave site to conduct crime investigation, and to collect, preserve and analyze
the skeletal remains.6 Also, from 11-17 September 2006, an investigation team composed of
intelligence officers, and medico-legal and DNA experts, conducted forensic crime analysis and
collected from alleged relatives of the victims DNA samples for matching.7
The Initial Specialist Report8 dated 18 September 2006 issued by the PNP Crime Laboratory in
Camp Crame, Quezon City, was inconclusive with regard to the identities of the skeletal remains and
even the length of time that they had been buried. The report recommended the conduct of further
tests to confirm the identities of the remains and the time window of death.9
However, in a Special Report10 dated 2 October 2006, the Case Secretariat of the Regional and
National Inter-Agency Legal Action Group (IALAG) came up with the names of ten (10) possible victims
after comparison and examination based on testimonies of relatives and witnesses.11
The 12 complaint-affidavits were from relatives of the alleged victims of Operation VD. All of them
swore that their relatives had been abducted or last seen with members of the CPP/NPA/NDFP and
were never seen again.
They also expressed belief that their relatives remains were among those discovered at the mass
grave site.
Also attached to the letters were the affidavits of Zacarias Piedad,12 Leonardo C. Tanaid, Floro M.
Tanaid, Numeriano Beringuel, Glecerio Roluna and Veronica P. Tabara. They narrated that they were
former members of the CPP/NPA/NDFP.13 According to them, Operation VD was ordered in 1985 by the
CPP/NPA/NDFP Central Committee.14 Allegedly, petitioners Saturnino C. Ocampo (Ocampo),15 Randall
B. Echanis (Echanis),16 Rafael G. Baylosis (Baylosis),17 and Vicente P. Ladlad (Ladlad)18 were then
members of the Central Committee.
According to these former members, four sub-groups were formed to implement Operation VD,
namely, (1) the Intel Group responsible for gathering information on suspected military spies and
civilians who would not support the movement; (2) the Arresting Group charged with their arrests; (3)
the Investigation Group which would subject those arrested to questioning; and (4) the Execution
Group or the "cleaners" of those confirmed to be military spies and civilians who would not support the
movement.19
From 1985 to 1992, at least 100 people had been abducted, hog-tied, tortured and executed by
members of the CPP/NPA/NDF20 pursuant to Operation VD.21
On the basis of the 12 letters and their attachments, Prosecutor Vivero issued a subpoena requiring,
among others, petitioners to submit their counter-affidavits and those of their witnesses.22 Petitioner
Ocampo submitted his counter-affidavit.23 Petitioners Echanis24 and Baylosis25 did not file counteraffidavits because they were allegedly not served the copy of the complaint and the attached
documents or evidence. Counsel of petitioner Ladlad made a formal entry of appearance on 8
December 2006 during the preliminary investigation.26 However, petitioner Ladlad did not file a
counter-affidavit because he was allegedly not served a subpoena.27
In a Resolution28 dated 16 February 2007, Prosecutor Vivero recommended the filing of an
Information for 15 counts of multiple murder against 54 named members of the CPP/NPA/NDFP,
including petitioners herein, for the death of the following: 1) Juanita Aviola, 2) Concepcion Aragon, 3)
Gregorio Eras, 4) Teodoro Recones, Jr., 5) Restituto Ejoc, 6) Rolando Vasquez, 7) Junior Milyapis, 8)
Crispin Dalmacio, 9) Zacarias Casil, 10) Pablo Daniel, 11) Romeo Tayabas, 12) Domingo Napoles, 13)

Ciriaco Daniel, 14) Crispin Prado, and 15) Ereberto Prado.29

Prosecutor Vivero also recommended that Zacarias Piedad, Leonardo Tanaid, Numeriano Beringuel
and Glecerio Roluna be dropped as respondents and utilized as state witnesses, as their testimonies
were vital to the success of the prosecution.30 The Resolution was silent with regard to Veronica
Tabara.
The Information was filed before the Regional Trial Court (RTC) Hilongos, Leyte, Branch 18 (RTC
Hilongos, Leyte) presided by Judge Ephrem S. Abando (Judge Abando) on 28 February 2007, and
docketed as Criminal Case No. H-1581.31 Petitioner Ocampo filed an Ex Parte Motion to Set Case for
Clarificatory Hearing dated 5 March 2007 prior to receiving a copy of the Resolution recommending the
filing of the Information.32
On 6 March 2007, Judge Abando issued an Order finding probable cause "in the commission by all
mentioned accused of the crime charged."33 He ordered the issuance of warrants of arrest against
them with no recommended bail for their temporary liberty.34
On 16 March 2007, petitioner Ocampo filed before us this special civil action for certiorari and
prohibition under Rule 65 of the Rules of Court and docketed as G.R. No. 176830 seeking the
annulment of the 6 March 2007 Order of Judge Abando and the 16 February 2007 Resolution of
Prosecutor Vivero.35 The petition prayed for the unconditional release of petitioner Ocampo from PNP
custody, as well as the issuance of a temporary restraining order/ writ of preliminary injunction to
restrain the conduct of further proceedings during the pendency of the petition.36
Petitioner Ocampo argued that a case for rebellion against him and 44 others (including petitioners
Echanis and Baylosis37 and Ladlad38) docketed as Criminal Case No. 06-944 was then pending before
the RTC Makati, Branch 150 (RTC Makati).39 Putting forward the political offense doctrine, petitioner
Ocampo argues that common crimes, such as murder in this case, are already absorbed by the crime
of rebellion when committed as a necessary means, in connection with and in furtherance of
rebellion.40
We required41 the Office of the Solicitor General (OSG) to comment on the petition and the prayer
for the issuance of a temporary restraining order/ writ of preliminary injunction, and set42 the case for
oral arguments on 30 March 2007. The OSG filed its Comment on 27 March 2007.43
The following were the legal issues discussed by the parties during the oral arguments:
1. Whether the present petition for certiorari and prohibition is the proper remedy of
petitioner Ocampo;
2. Assuming it is the proper remedy, whether he was denied due process during
preliminary investigation and in the issuance of the warrant of arrest;
3. Whether the murder charges against him are already included in the rebellion charge
against him in the RTC.44
Afterwards, the parties were ordered to submit their memoranda within 10 days.45 On 3 April 2007,
the Court ordered the provisional release of petitioner Ocampo under a P100,000 cash bond.46
Acting on the observation of the Court during the oral arguments that the single Information filed
before the RTC Hilongos, Leyte was defective for charging 15 counts of murder, the prosecution filed a
Motion to Admit Amended Information and New Informations on 11 April 2007.47 In an Order dated 27
July 2007, Judge Abando held in abeyance the resolution thereof and effectively suspended the
proceedings during the pendency of G.R. No. 176830 before this Court.48
While the proceedings were suspended, petitioner Echanis was arrested on 28 January 2008 by
virtue of the warrant of arrest issued by Judge Abando on 6 March 2007.49 On 1 February 2008,
petitioners Echanis and Baylosis filed a Motion for Judicial Reinvestigation/ Determination of Probable
Cause with Prayer to Dismiss the Case Outright and Alternative Prayer to Recall/ Suspend Service of
Warrant.50
On 30 April 2008, Judge Abando issued an Order denying the motion. 51 Petitioners Echanis and
Baylosis filed a Motion for Reconsideration52 dated 30 May 2008, but before being able to rule

thereon, Judge Abando issued an Order dated 12 June 2008 transmitting the records of Criminal Case
No. H-1581 to the Office of the Clerk of Court, RTC Manila.53 The Order was issued in compliance with
the Resolution dated 23 April 2008 of this Court granting the request of then Secretary of Justice Raul
Gonzales to transfer the venue of the case.
The case was re-raffled to RTC Manila, Branch 32 (RTC Manila) presided by Judge Thelma BunyiMedina (Judge Medina) and re-docketed as Criminal Case No. 08-262163.54 Petitioner Echanis was
transferred to the PNP Custodial Center in Camp Crame, Quezon City. On 12 August 2008, petitioners
Echanis and Baylosis filed their Supplemental Arguments to Motion for Reconsideration.55
In an Order56 dated 27 October 2008, Judge Medina suspended the proceedings of the case
pending the resolution of G.R. No. 176830 by this Court.
On 18 December 2008, petitioner Ladlad filed with the RTC Manila a Motion to Quash and/or
Dismiss.57
On 23 December 2008, petitioner Echanis filed before us a special civil action for certiorari and
prohibition under Rule 65 of the Rules of Court seeking the annulment of the 30 April 2008 Order of
Judge Abando and the 27 October 2008 Order of Judge Medina.58 The petition, docketed as G.R. No.
185587, prayed for the unconditional and immediate release of petitioner Echanis, as well as the
issuance of a temporary restraining order/writ of preliminary injunction to restrain his further
incarceration.59
On 5 January 2009, petitioner Baylosis filed before us a special civil action for certiorari and
prohibition under Rule 65 of the Rules of Court also seeking the annulment of the 30 April 2008 Order
of Judge Abando and the 27 October 2008 Order of Judge Medina.60 The petition, docketed as G.R. No.
185636, prayed for the issuance of a temporary restraining order/ writ of preliminary injunction to
restrain the implementation of the warrant of arrest against petitioner Baylosis.61
The Court consolidated G.R. Nos. 185587 and 185636 on 12 January 2009.62
On 3 March 2009, the Court ordered the further consolidation of these two cases with G.R. No.
176830.63 We required64 the OSG to comment on the prayer for petitioner Echaniss immediate
release, to which the OSG did not interpose any objection on these conditions: that the temporary
release shall only be for the purpose of his attendance and participation in the formal peace
negotiations between the Government of the Republic of the Philippines (GRP) and the CPP/NPA/NDFP,
set to begin in August 2009; and that his temporary release shall not exceed six (6) months. 65 The
latter condition was later modified, such that his temporary liberty shall continue for the duration of his
actual participation in the peace negotiations.66
On 11 August 2009, the Court ordered the provisional release of petitioner Echanis under a
P100,000 cash bond, for the purpose of his participation in the formal peace negotiations.67
Meanwhile, the Department of Justice (DOJ) filed its Opposition68 to petitioner Ladlads motion to
quash before the RTC Manila. The trial court conducted a hearing on the motion on 13 February
2009.69
On 6 May 2009, Judge Medina issued an Order70 denying the motion to quash. The motion for
reconsideration filed by petitioner Ladlad was also denied on 27 August 2009.71
On 9 November 2009, petitioner Ladlad filed before us a special civil action for certiorari under Rule
65 of the Rules of Court seeking the annulment of the 6 May 2009 and 27 August 2009 Orders of Judge
Medina.72 The petition was docketed as G.R. No. 190005.
On 11 January 2010, we ordered the consolidation of G.R. No. 190005 with G.R. Nos. 176830,
185587 and 185636.73 We also required the OSG to file its comment thereon. The OSG submitted its
Comment74 on 7 May 2010.
On 27 July 2010, we likewise required the OSG to file its Comment in G.R. Nos. 185636 and
185587.75 These Comments were filed by the OSG on 13 December 201076 and on 21 January
2011,77 respectively. Petitioners Echanis and Baylosis filed their Consolidated Reply78 on 7 June 2011.

On 2 May 2011, petitioner Ladlad filed an Urgent Motion to Fix Bail. 79 On 21 July 2011, petitioner
Baylosis filed A Motion to Allow Petitioner to Post Bail.80 The OSG interposed no objection to the grant
of a P100,000 cash bail to them considering that they were consultants of the NDFP negotiating team,
which was then holding negotiations with the GRP peace panel for the signing of a peace accord.81
On 17 January 2012, we granted the motions of petitioners Ladlad and Baylosis and fixed their bail
in the amount of P100,000, subject to the condition that their temporary release shall be limited to the
period of their actual participation in the peace negotiations.82
Petitioner Ladlad filed his Reply83 to the OSG Comment on 18 January 2013.
OUR RULING
Petitioners were accorded due
process during preliminary
investigation and in the issuance of
the warrants of arrest.
A. Preliminary Investigation
A preliminary investigation is "not a casual affair."84 It is conducted to protect the innocent from
the embarrassment, expense and anxiety of a public trial.85 While the right to have a preliminary
investigation before trial is statutory rather than constitutional, it is a substantive right and a
component of due process in the administration of criminal justice.86
In the context of a preliminary investigation, the right to due process of law entails the opportunity
to be heard.87 It serves to accord an opportunity for the presentation of the respondents side with
regard to the accusation. Afterwards, the investigating officer shall decide whether the allegations and
defenses lead to a reasonable belief that a crime has been committed, and that it was the respondent
who committed it. Otherwise, the investigating officer is bound to dismiss the complaint.
"The essence of due process is reasonable opportunity to be heard and submit evidence in support
of one's defense."88 What is proscribed is lack of opportunity to be heard. 89 Thus, one who has been
afforded a chance to present ones own side of the story cannot claim denial of due process.90
Petitioners Echanis and Baylosis allege that they did not receive a copy of the complaint and the
attached documents or evidence.91 Petitioner Ladlad claims that he was not served a subpoena due to
the false address indicated in the 12 undated letters of P C/Insp. Almaden and Army Captain Tiu to
Prosecutor Vivero.92 Furthermore, even though his counsels filed their formal entry of appearance
before the Office of the Prosecutor, petitioner Ladlad was still not sent a subpoena through his
counsels addresses.93 Thus, they were deprived of the right to file counter-affidavits.
Petitioner Ocampo claims that Prosecutor Vivero, in collusion with P C/Insp. Almaden and Army
Captain Tiu, surreptitiously inserted the Supplemental Affidavit of Zacarias Piedad in the records of the
case without furnishing petitioner Ocampo a copy.94 The original affidavit of Zacarias Piedad dated 14
September 2006 stated that a meeting presided by petitioner Ocampo was held in 1984, when the
launching of Operation VD was agreed upon.95 Petitioner Ocampo refuted this claim in his Counteraffidavit dated 22 December 2006 stating that he was in military custody from October 1976 until his
escape in May 1985.96 Thereafter, the Supplemental Affidavit of Zacarias Piedad dated 12 January
2007 admitted that he made a mistake in his original affidavit, and that the meeting actually took
place in June 1985.97 Petitioner Ocampo argues that he was denied the opportunity to reply to the
Supplemental Affidavit by not being furnished a copy thereof.
Petitioner Ocampo also claims that he was denied the right to file a motion for reconsideration or to
appeal the Resolution of Prosecutor Vivero, because the latter deliberately delayed the service of the
Resolution by 19 days, effectively denying petitioner Ocampo his right to due process.98
As to the claim of petitioners Echanis and Baylosis, we quote the pertinent portion of Prosecutor
Viveros Resolution, which states:
In connection with the foregoing and pursuant to the Revised Rules of Criminal Procedure[,] the
respondents were issued and served with Subpoena at their last known address for them to submit

their counter-affidavits and that of their witnesses.

Majority of the respondents did not submit their counter-affidavits because they could no longer be
found in their last known address, per return of the subpoenas. On the other hand, Saturnino Ocampo
@ Satur, Fides Lim, Maureen Palejaro and Ruben Manatad submitted their Counter-Affidavits. However,
Vicente Ladlad and Jasmin Jerusalem failed to submit the required Counter Affidavits in spite entry of
appearance by their respective counsels.99
Section 3(d), Rule 112 of the Rules of Court, allows Prosecutor Vivero to resolve the complaint
based on the evidence before him if a respondent could not be subpoenaed. As long as efforts to reach
a respondent were made, and he was given an opportunity to present countervailing evidence, the
preliminary investigation remains valid.100 The rule was put in place in order to foil underhanded
attempts of a respondent to delay the prosecution of offenses.101
In this case, the Resolution stated that efforts were undertaken to serve subpoenas on the named
respondents at their last known addresses. This is sufficient for due process. It was only because a
majority of them could no longer be found at their last known addresses that they were not served
copies of the complaint and the attached documents or evidence.
Petitioner Ladlad claims that his subpoena was sent to the nonexistent address "53 Sct. Rallos St.,
QC,"102 which had never been his address at any time.103 In connection with this claim, we take note
of the fact that the subpoena to Fides Lim, petitioner Ladlads wife, 104 was sent to the same address,
and that she was among those mentioned in the Resolution as having timely submitted their counteraffidavits.
Despite supposedly never receiving a subpoena, petitioner Ladlads counsel filed a formal entry of
appearance on 8 December 2006.105 Prosecutor Vivero had a reason to believe that petitioner Ladlad
had received the subpoena and accordingly instructed his counsel to prepare his defense.
Petitioner Ladlad, through his counsel, had every opportunity to secure copies of the complaint
after his counsels formal entry of appearance and, thereafter, to participate fully in the preliminary
investigation. Instead, he refused to participate.
We have previously cautioned that "litigants represented by counsel should not expect that all they
need to do is sit back, relax and await the outcome of their case."106 Having opted to remain passive
during the preliminary investigation, petitioner Ladlad and his counsel cannot now claim a denial of
due process, since their failure to file a counter-affidavit was of their own doing.
Neither do we find any merit in petitioner Ocampos allegation of collusion to surreptitiously insert
the Supplemental Affidavit of Zacarias Piedad in the records. There was nothing surreptitious about the
Supplemental Affidavit since it clearly alludes to an earlier affidavit and admits the mistake committed
regarding the date of the alleged meeting. The date of the execution of the Supplemental Affidavit was
also clearly stated. Thus, it was clear that it was executed after petitioner Ocampo had submitted his
counter-affidavit. Should the case go to trial, that will provide petitioner Ocampo with the opportunity
to question the execution of Zacarias Piedads Supplemental Affidavit.
Neither can we uphold petitioner Ocampos contention that he was denied the right to be heard. For
him to claim that he was denied due process by not being furnished a copy of the Supplemental
Affidavit of Zacarias Piedad would imply that the entire case of the prosecution rested on the
Supplemental Affidavit. The OSG has asserted that the indictment of petitioner Ocampo was based on
the collective affidavits of several other witnesses107 attesting to the allegation that he was a
member of the CPP/NPA/NDFP Central Committee, which had ordered the launch of Operation VD.
As to his claim that he was denied the right to file a motion for reconsideration or to appeal the
Resolution of Prosecutor Vivero due to the 19-day delay in the service of the Resolution, it must be
pointed out that the period for filing a motion for reconsideration or an appeal to the Secretary of
Justice is reckoned from the date of receipt of the resolution of the prosecutor, not from the date of the
resolution. This is clear from Section 3 of the 2000 National Prosecution Service Rule on Appeal:
Sec. 3. Period to appeal. The appeal shall be taken within fifteen (15) days from receipt of the
resolution, or of the denial of the motion for reconsideration/ reinvestigation if one has been filed
within fifteen (15) days from receipt of the assailed resolution. Only one motion for reconsideration
shall be allowed. (Emphasis supplied)

Thus, when petitioner Ocampo received the Resolution of Prosecutor Vivero on 12 March 2007, 108
the former had until 27 March 2007 within which to file either a motion for reconsideration before the
latter or an appeal before the Secretary of Justice. Instead, petitioner Ocampo chose to file the instant
petition for certiorari directly before this Court on 16 March 2007.
B. Issuance of the Warrants of Arrest
Article III, Section 2 of the Constitution provides that "no search warrant or warrant of arrest shall
issue except upon probable cause to be determined personally by the judge after examination under
oath or affirmation of the complainant and the witnesses he may produce."
Petitioner Ocampo alleges that Judge Abando did not comply with the requirements of the
Constitution in finding the existence of probable cause for the issuance of warrants of arrest against
petitioners.109
Probable cause for the issuance of a warrant of arrest has been defined as "such facts and
circumstances which would lead a reasonably discreet and prudent man to believe that an offense has
been committed by the person sought to be arrested."110 Although the Constitution provides that
probable cause shall be determined by the judge after an examination under oath or an affirmation of
the complainant and the witnesses, we have ruled that a hearing is not necessary for the
determination thereof.111 In fact, the judges personal examination of the complainant and the
witnesses is not mandatory and indispensable for determining the aptness of issuing a warrant of
arrest.112
It is enough that the judge personally evaluates the prosecutors report and supporting documents
showing the existence of probable cause for the indictment and, on the basis thereof, issue a warrant
of arrest; or if, on the basis of his evaluation, he finds no probable cause, to disregard the prosecutor's
resolution and require the submission of additional affidavits of witnesses to aid him in determining its
existence.113
Petitioners Echanis and Baylosis claim that, had Judge Abando painstakingly examined the records
submitted by Prosecutor Vivero, the judge would have inevitably dismissed the charge against
them.114 Additionally, petitioner Ocampo alleges that Judge Abando did not point out facts and
evidence in the record that were used as bases for his finding of probable cause to issue a warrant of
arrest.115
The determination of probable cause for the issuance of warrants of arrest against petitioners is
addressed to the sound discretion of Judge Abando as the trial judge.116 Further elucidating on the
wide latitude given to trial judges in the issuance of warrants of arrest, this Court stated in Sarigumba
v. Sandiganbayan117 as follows:
x x x. The trial court's exercise of its judicial discretion should not, as a general rule, be interfered
with in the absence of grave abuse of discretion. Indeed, certiorari will not lie to cure errors in the trial
court's appreciation of the evidence of the parties, the conclusion of facts it reached based on the said
findings, as well as the conclusions of law. x x x.
Whether or not there is probable cause for the issuance of warrants for the arrest of the accused is
a question of fact based on the allegations in the Informations, the Resolution of the Investigating
Prosecutor, including other documents and/or evidence appended to the Information.
Here, the allegations of petitioners point to factual matters indicated in the affidavits of the
complainants and witnesses as bases for the contention that there was no probable cause for
petitioners indictment for multiple murder or for the issuance of warrants for their arrest. As stated
above, the trial judges appreciation of the evidence and conclusion of facts based thereon are not
interfered with in the absence of grave abuse of discretion. Again, "he sufficiently complies with the
requirement of personal determination if he reviews the [I]nformation and the documents attached
thereto, and on the basis thereof forms a belief that the accused is probably guilty of the crime with
which he is being charged."118
Judge Abandos review of the Information and the supporting documents is shown by the following
portion of the judges 6 March 2007 Order:
On the evaluation of the Resolution and its Information as submitted and filed by the Provincial

Prosecution of Leyte Province supported by the following documents: Affidavits of Complainants, Sworn
Statements of Witnesses and other pertinent documents issued by the Regional Crime Laboratory
Office, PNP, Region VIII and Camp Crame, Quezon City, pictures of the grave site and skeletal remains,
this court has the findings [sic] of probable cause in the commission by all mentioned accused of the
crime charged.119
At bottom, issues involving the finding of probable cause for an indictment and issuance of a
warrant of arrest, as petitioners are doubtless aware, are primarily questions of fact that are normally
not within the purview of a petition for certiorari,120 such as the petitions filed in the instant
consolidated cases.
The political offense doctrine is not a
ground to dismiss the charge against
petitioners prior to a determination
by the trial court that the murders
were committed in furtherance of
rebellion.
Under the political offense doctrine, "common crimes, perpetrated in furtherance of a political
offense, are divested of their character as "common" offenses and assume the political complexion of
the main crime of which they are mere ingredients, and, consequently, cannot be punished separately
from the principal offense, or complexed with the same, to justify the imposition of a graver
penalty."121
Any ordinary act assumes a different nature by being absorbed in the crime of rebellion. 122 Thus,
when a killing is committed in furtherance of rebellion, the killing is not homicide or murder. Rather,
the killing assumes the political complexion of rebellion as its mere ingredient and must be prosecuted
and punished as rebellion alone.
However, this is not to say that public prosecutors are obliged to consistently charge respondents
with simple rebellion instead of common crimes. No one disputes the well-entrenched principle in
criminal procedure that the institution of criminal charges, including whom and what to charge, is
addressed to the sound discretion of the public prosecutor.123
But when the political offense doctrine is asserted as a defense in the trial court, it becomes crucial
for the court to determine whether the act of killing was done in furtherance of a political end, and for
the political motive of the act to be conclusively demonstrated.124
Petitioners aver that the records show that the alleged murders were committed in furtherance of
the CPP/NPA/NDFP rebellion, and that the political motivation behind the alleged murders can be
clearly seen from the charge against the alleged top leaders of the CPP/NPA/NDFP as co-conspirators.
We had already ruled that the burden of demonstrating political motivation must be discharged by
the defense, since motive is a state of mind which only the accused knows. 125 The proof showing
political motivation is adduced during trial where the accused is assured an opportunity to present
evidence supporting his defense. It is not for this Court to determine this factual matter in the instant
petitions.
As held in the case of Office of the Provincial Prosecutor of Zamboanga Del Norte v. CA,126 if during
trial, petitioners are able to show that the alleged murders were indeed committed in furtherance of
rebellion, Section 14, Rule 110 of the Rules of Court provides the remedy, to wit:
SECTION 14. Amendment or substitution. A complaint or information may be amended, in form or
in substance, without leave of court, at any time before the accused enters his plea. After the plea and
during the trial, a formal amendment may only be made with leave of court and when it can be done
without causing prejudice to the rights of the accused.
However, any amendment before plea, which downgrades the nature of the offense charged in or
excludes any accused from the complaint or information, can be made only upon motion by the
prosecutor, with notice to the offended party and with leave of court. The court shall state its reasons
in resolving the motion and copies of its order shall be furnished all parties, especially the offended
party. (n)

If it appears at any time before judgment that a mistake has been made in charging the proper
offense, the court shall dismiss the original complaint or information upon the filing of a new one
charging the proper offense in accordance with Section 19, Rule 119, provided the accused shall not be
placed in double jeopardy. The court may require the witnesses to give bail for their appearance at the
trial. (Emphasis supplied)
Thus, if it is shown that the proper charge against petitioners should have been simple rebellion,
the trial court shall dismiss the murder charges upon the filing of the Information for simple rebellion,
as long as petitioners would not be placed in double jeopardy.
Section 7, Rule 117 of the Rules of Court, states:
SEC. 7. Former conviction or acquittal; double jeopardy. When an accused has been convicted or
acquitted, or the case against him dismissed or otherwise terminated without his express consent by a
court of competent jurisdiction, upon a valid complaint or information or other formal charge sufficient
in form and substance to sustain a conviction and after the accused had pleaded to the charge, the
conviction or acquittal of the accused or the dismissal of the case shall be a bar to another prosecution
for the offense charged, or for any attempt to commit the same or frustration thereof, or for any
offense which necessarily includes or is necessarily included in the offense charged in the former
complaint or information.
Based on the above provision, double jeopardy only applies when: (1) a first jeopardy attached; (2)
it has been validly terminated; and (3) a second jeopardy is for the same offense as in the first.127
A first jeopardy attaches only after the accused has been acquitted or convicted, or the case has
been dismissed or otherwise terminated without his express consent, by a competent court in a valid
indictment for which the accused has entered a valid plea during arraignment.128
To recall, on 12 May 2006, an Information for the crime of rebellion, as defined and penalized under
Article 134 in relation to Article 135 of the Revised Penal Code, docketed as Criminal Case No. 06-944
was filed before the RTC Makati against petitioners and several others.129
However, petitioners were never arraigned in Criminal Case No. 06-944.1awp++i1 Even before the
indictment for rebellion was filed before the RTC Makati, petitioners Ocampo, Echanis and Ladlad had
already filed a petition before this Court to seek the nullification of the Orders of the DOJ denying their
motion for the inhibition of the members of the prosecution panel due to lack of impartiality and
independence.130 When the indictment was filed, petitioners Ocampo, Echanis and Ladlad filed
supplemental petitions to enjoin the prosecution of Criminal Case No. 06-944.131 We eventually
ordered the dismissal of the rebellion case. It is clear then that a first jeopardy never had a chance to
attach.
Petitioner Ocampo shall remain on provisional liberty under the P100,000 cash bond posted before
the Office of the Clerk of Court. He shall remain on provisional liberty until the termination of the
proceedings before the RTC Manila.1wphi1
The OSG has given its conformity to the provisional liberty of petitioners Echanis, Baylosis and
Ladlad in view of the ongoing peace negotiations. Their provisional release from detention under the
cash bond of P100,000 each shall continue under the condition that their temporary release shall be
limited to the period of their actual participation as CPP-NDF consultants in the peace negotiations with
the government or until the termination of the proceedings before the RTC Manila, whichever is sooner.
It shall be the duty of the government to inform this Court the moment that peace negotiations are
concluded.
WHEREFORE, the instant consolidated petitions are DISMISSED. The RTC of Manila, Branch 32, is
hereby ORDERED to proceed with dispatch with the hearing of Criminal Case No. 08-262163. Petitioner
Saturnino C. Ocampo shall remain on temporary liberty under the same bail granted by this Court until
the termination of the proceedings before the RTC Manila. Petitioners Randall B. Echanis, Rafael G.
Baylosis and Vicente P. Ladlad shall remain on temporary liberty under the same bail granted by this
Court until their actual participation as CPP-NDF consultants in the peace negotiations with the
government are concluded or terminated, or until the termination of the proceedings before the RTC
Manila, whichever is sooner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 122846

January 20, 2009

WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA TOURIST &
DEVELOPMENT CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S. LIM, Respondent.
DECISION
Tinga, J.:
With another city ordinance of Manila also principally involving the tourist district as subject, the
Court is confronted anew with the incessant clash between government power and individual liberty in
tandem with the archetypal tension between law and morality.
In City of Manila v. Laguio, Jr., 1 the Court affirmed the nullification of a city ordinance barring the
operation of motels and inns, among other establishments, within the Ermita-Malate area. The petition
at bar assails a similarly-motivated city ordinance that prohibits those same establishments from
offering short-time admission, as well as pro-rated or "wash up" rates for such abbreviated stays. Our
earlier decision tested the city ordinance against our sacred constitutional rights to liberty, due process
and equal protection of law. The same parameters apply to the present petition.
This Petition2 under Rule 45 of the Revised Rules on Civil Procedure, which seeks the reversal of the
Decision3 in C.A.-G.R. S.P. No. 33316 of the Court of Appeals, challenges the validity of Manila City
Ordinance No. 7774 entitled, "An Ordinance Prohibiting Short-Time Admission, Short-Time Admission
Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns, Lodging Houses, Pension Houses, and
Similar Establishments in the City of Manila" (the Ordinance).

I.
The facts are as follows:
On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law the Ordinance. 4 The
Ordinance is reproduced in full, hereunder:
SECTION 1. Declaration of Policy. It is hereby the declared policy of the City Government to protect
the best interest, health and welfare, and the morality of its constituents in general and the youth in
particular.
SEC. 2. Title. This ordinance shall be known as "An Ordinance" prohibiting short time admission in
hotels, motels, lodging houses, pension houses and similar establishments in the City of Manila.
SEC. 3. Pursuant to the above policy, short-time admission and rate [sic], wash-up rate or other
similarly concocted terms, are hereby prohibited in hotels, motels, inns, lodging houses, pension
houses and similar establishments in the City of Manila.
SEC. 4. Definition of Term[s]. Short-time admission shall mean admittance and charging of room
rate for less than twelve (12) hours at any given time or the renting out of rooms more than twice a
day or any other term that may be concocted by owners or managers of said establishments but would
mean the same or would bear the same meaning.
SEC. 5. Penalty Clause. Any person or corporation who shall violate any provision of this ordinance
shall upon conviction thereof be punished by a fine of Five Thousand (P5,000.00) Pesos or
imprisonment for a period of not exceeding one (1) year or both such fine and imprisonment at the
discretion of the court; Provided, That in case of [a] juridical person, the president, the manager, or the
persons in charge of the operation thereof shall be liable: Provided, further, That in case of subsequent
conviction for the same offense, the business license of the guilty party shall automatically be
cancelled.
SEC. 6. Repealing Clause. Any or all provisions of City ordinances not consistent with or contrary to
this measure or any portion hereof are hereby deemed repealed.
SEC. 7. Effectivity. This ordinance shall take effect immediately upon approval.
Enacted by the city Council of Manila at its regular session today, November 10, 1992.
Approved by His Honor, the Mayor on December 3, 1992.
On December 15, 1992, the Malate Tourist and Development Corporation (MTDC) filed a complaint
for declaratory relief with prayer for a writ of preliminary injunction and/or temporary restraining order
( TRO)5 with the Regional Trial Court (RTC) of Manila, Branch 9 impleading as defendant, herein
respondent City of Manila (the City) represented by Mayor Lim. 6 MTDC prayed that the Ordinance,
insofar as it includes motels and inns as among its prohibited establishments, be declared invalid and
unconstitutional. MTDC claimed that as owner and operator of the Victoria Court in Malate, Manila it
was authorized by Presidential Decree (P.D.) No. 259 to admit customers on a short time basis as well
as to charge customers wash up rates for stays of only three hours.
On December 21, 1992, petitioners White Light Corporation (WLC), Titanium Corporation (TC) and
Sta. Mesa Tourist and Development Corporation (STDC) filed a motion to intervene and to admit
attached complaint-in-intervention7 on the ground that the Ordinance directly affects their business

interests as operators of drive-in-hotels and motels in Manila. 8 The three companies are components
of the Anito Group of Companies which owns and operates several hotels and motels in Metro Manila. 9
On December 23, 1992, the RTC granted the motion to intervene. 10 The RTC also notified the
Solicitor General of the proceedings pursuant to then Rule 64, Section 4 of the Rules of Court. On the
same date, MTDC moved to withdraw as plaintiff.11

On December 28, 1992, the RTC granted MTDC's motion to withdraw. 12 The RTC issued a TRO on
January 14, 1993, directing the City to cease and desist from enforcing the Ordinance. 13 The City filed
an Answer dated January 22, 1993 alleging that the Ordinance is a legitimate exercise of police
power.14
On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to desist from
the enforcement of the Ordinance. 15 A month later, on March 8, 1993, the Solicitor General filed his
Comment arguing that the Ordinance is constitutional.
During the pre-trial conference, the WLC, TC and STDC agreed to submit the case for decision
without trial as the case involved a purely legal question. 16 On October 20, 1993, the RTC rendered a
decision declaring the Ordinance null and void. The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the City of Manila is hereby
declared null and void.
Accordingly, the preliminary injunction heretofor issued is hereby made permanent.
SO ORDERED.17
The RTC noted that the ordinance "strikes at the personal liberty of the individual guaranteed and
jealously guarded by the Constitution."18 Reference was made to the provisions of the Constitution
encouraging private enterprises and the incentive to needed investment, as well as the right to
operate economic enterprises. Finally, from the observation that the illicit relationships the Ordinance
sought to dissuade could nonetheless be consummated by simply paying for a 12-hour stay, the RTC
likened the law to the ordinance annulled in Ynot v. Intermediate Appellate Court, 19 where the
legitimate purpose of preventing indiscriminate slaughter of carabaos was sought to be effected
through an inter-province ban on the transport of carabaos and carabeef.
The City later filed a petition for review on certiorari with the Supreme Court.20 The petition was
docketed as G.R. No. 112471. However in a resolution dated January 26, 1994, the Court treated the
petition as a petition for certiorari and referred the petition to the Court of Appeals. 21
Before the Court of Appeals, the City asserted that the Ordinance is a valid exercise of police power
pursuant to Section 458 (4)(iv) of the Local Government Code which confers on cities, among other
local government units, the power:
[To] regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses,
hotels, motels, inns, pension houses, lodging houses and other similar establishments, including tourist
guides and transports.22
The Ordinance, it is argued, is also a valid exercise of the power of the City under Article III, Section
18(kk) of the Revised Manila Charter, thus:
"to enact all ordinances it may deem necessary and proper for the sanitation and safety, the
furtherance of the prosperity and the promotion of the morality, peace, good order, comfort,
convenience and general welfare of the city and its inhabitants, and such others as be necessary to
carry into effect and discharge the powers and duties conferred by this Chapter; and to fix penalties for
the violation of ordinances which shall not exceed two hundred pesos fine or six months imprisonment,
or both such fine and imprisonment for a single offense. 23
Petitioners argued that the Ordinance is unconstitutional and void since it violates the right to
privacy and the freedom of movement; it is an invalid exercise of police power; and it is an
unreasonable and oppressive interference in their business.
The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality of the

Ordinance.24 First, it held that the Ordinance did not violate the right to privacy or the freedom of

movement, as it only penalizes the owners or operators of establishments that admit individuals for
short time stays. Second, the virtually limitless reach of police power is only constrained by having a
lawful object obtained through a lawful method. The lawful objective of the Ordinance is satisfied since
it aims to curb immoral activities. There is a lawful method since the establishments are still allowed to
operate. Third, the adverse effect on the establishments is justified by the well-being of its constituents
in general. Finally, as held in Ermita-Malate Motel Operators Association v. City Mayor of Manila, liberty
is regulated by law.
TC, WLC and STDC come to this Court via petition for review on certiorari. 25 In their petition and
Memorandum, petitioners in essence repeat the assertions they made before the Court of Appeals.
They contend that the assailed Ordinance is an invalid exercise of police power.
II.
We must address the threshold issue of petitioners standing. Petitioners allege that as owners of
establishments offering "wash-up" rates, their business is being unlawfully interfered with by the
Ordinance. However, petitioners also allege that the equal protection rights of their clients are also
being interfered with. Thus, the crux of the matter is whether or not these establishments have the
requisite standing to plead for protection of their patrons' equal protection rights.
Standing or locus standi is the ability of a party to demonstrate to the court sufficient connection to
and harm from the law or action challenged to support that party's participation in the case. More
importantly, the doctrine of standing is built on the principle of separation of powers, 26 sparing as it
does unnecessary interference or invalidation by the judicial branch of the actions rendered by its coequal branches of government.
The requirement of standing is a core component of the judicial system derived directly from the
Constitution.27 The constitutional component of standing doctrine incorporates concepts which
concededly are not susceptible of precise definition. 28 In this jurisdiction, the extancy of "a direct and
personal interest" presents the most obvious cause, as well as the standard test for a petitioner's
standing.29 In a similar vein, the United States Supreme Court reviewed and elaborated on the
meaning of the three constitutional standing requirements of injury, causation, and redressability in
Allen v. Wright.30
Nonetheless, the general rules on standing admit of several exceptions such as the overbreadth
doctrine, taxpayer suits, third party standing and, especially in the Philippines, the doctrine of
transcendental importance.31
For this particular set of facts, the concept of third party standing as an exception and the
overbreadth doctrine are appropriate. In Powers v. Ohio,32 the United States Supreme Court wrote
that: "We have recognized the right of litigants to bring actions on behalf of third parties, provided
three important criteria are satisfied: the litigant must have suffered an injury-in-fact, thus giving him
or her a "sufficiently concrete interest" in the outcome of the issue in dispute; the litigant must have a
close relation to the third party; and there must exist some hindrance to the third party's ability to
protect his or her own interests."33 Herein, it is clear that the business interests of the petitioners are
likewise injured by the Ordinance. They rely on the patronage of their customers for their continued
viability which appears to be threatened by the enforcement of the Ordinance. The relative silence in
constitutional litigation of such special interest groups in our nation such as the American Civil
Liberties Union in the United States may also be construed as a hindrance for customers to bring
suit.34
American jurisprudence is replete with examples where parties-in-interest were allowed standing to
advocate or invoke the fundamental due process or equal protection claims of other persons or classes
of persons injured by state action. In Griswold v. Connecticut,35 the United States Supreme Court held
that physicians had standing to challenge a reproductive health statute that would penalize them as
accessories as well as to plead the constitutional protections available to their patients. The Court held
that:
"The rights of husband and wife, pressed here, are likely to be diluted or adversely affected unless
those rights are considered in a suit involving those who have this kind of confidential relation to

them."36
An even more analogous example may be found in Craig v. Boren,37 wherein the United States
Supreme Court held that a licensed beverage vendor has standing to raise the equal protection claim
of a male customer challenging a statutory scheme prohibiting the sale of beer to males under the age
of 21 and to females under the age of 18. The United States High Court explained that the vendors had
standing "by acting as advocates of the rights of third parties who seek access to their market or
function."38
Assuming arguendo that petitioners do not have a relationship with their patrons for the former to
assert the rights of the latter, the overbreadth doctrine comes into play. In overbreadth analysis,
challengers to government action are in effect permitted to raise the rights of third parties. Generally
applied to statutes infringing on the freedom of speech, the overbreadth doctrine applies when a
statute needlessly restrains even constitutionally guaranteed rights. 39 In this case, the petitioners
claim that the Ordinance makes a sweeping intrusion into the right to liberty of their clients. We can
see that based on the allegations in the petition, the Ordinance suffers from overbreadth.
We thus recognize that the petitioners have a right to assert the constitutional rights of their clients
to patronize their establishments for a "wash-rate" time frame.
III.
To students of jurisprudence, the facts of this case will recall to mind not only the recent City of
Manila ruling, but our 1967 decision in Ermita-Malate Hotel and Motel Operations Association, Inc., v.
Hon. City Mayor of Manila.40 Ermita-Malate concerned the City ordinance requiring patrons to fill up a
prescribed form stating personal information such as name, gender, nationality, age, address and
occupation before they could be admitted to a motel, hotel or lodging house. This earlier ordinance
was precisely enacted to minimize certain practices deemed harmful to public morals. A purpose
similar to the annulled ordinance in City of Manila which sought a blanket ban on motels, inns and
similar establishments in the Ermita-Malate area. However, the constitutionality of the ordinance in
Ermita-Malate was sustained by the Court.
The common thread that runs through those decisions and the case at bar goes beyond the
singularity of the localities covered under the respective ordinances. All three ordinances were enacted
with a view of regulating public morals including particular illicit activity in transient lodging
establishments. This could be described as the middle case, wherein there is no wholesale ban on
motels and hotels but the services offered by these establishments have been severely restricted. At
its core, this is another case about the extent to which the State can intrude into and regulate the lives
of its citizens.
The test of a valid ordinance is well established. A long line of decisions including City of Manila 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 pass 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.41
The Ordinance prohibits two specific and distinct business practices, namely wash rate admissions
and renting out a room more than twice a day. The ban is evidently sought to be rooted in the police
power as conferred on local government units by the Local Government Code through such
implements as the general welfare clause.
A.
Police power, while incapable of an exact definition, has been purposely veiled in general terms to
underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and
flexible response as the conditions warrant. 42 Police power is based upon the concept of necessity of

the State and its corresponding right to protect itself and its people. 43 Police power has been used as
justification for numerous and varied actions by the State. These range from the regulation of dance

halls,44 movie theaters,45 gas stations46 and cockpits.47 The awesome scope of police power is best
demonstrated by the fact that in its hundred or so years of presence in our nations legal system, its
use has rarely been denied.
The apparent goal of the Ordinance is to minimize if not eliminate the use of the covered
establishments for illicit sex, prostitution, drug use and alike. These goals, by themselves, are
unimpeachable and certainly fall within the ambit of the police power of the State. Yet the desirability
of these ends do not sanctify any and all means for their achievement. Those means must align with
the Constitution, and our emerging sophisticated analysis of its guarantees to the people. The Bill of
Rights stands as a rebuke to the seductive theory of Macchiavelli, and, sometimes even, the political
majorities animated by his cynicism.
Even as we design the precedents that establish the framework for analysis of due process or equal
protection questions, the courts are naturally inhibited by a due deference to the co-equal branches of
government as they exercise their political functions. But when we are compelled to nullify executive
or legislative actions, yet another form of caution emerges. If the Court were animated by the same
passing fancies or turbulent emotions that motivate many political decisions, judicial integrity is
compromised by any perception that the judiciary is merely the third political branch of government.
We derive our respect and good standing in the annals of history by acting as judicious and neutral
arbiters of the rule of law, and there is no surer way to that end than through the development of
rigorous and sophisticated legal standards through which the courts analyze the most fundamental
and far-reaching constitutional questions of the day.
B.
The primary constitutional question that confronts us is one of due process, as guaranteed under
Section 1, Article III of the Constitution. Due process evades a precise definition. 48 The purpose of the
guaranty is to prevent arbitrary governmental encroachment against the life, liberty and property of
individuals. The due process guaranty serves as a protection against arbitrary regulation or seizure.
Even corporations and partnerships are protected by the guaranty insofar as their property is
concerned.
The due process guaranty has traditionally been interpreted as imposing two related but distinct
restrictions on government, "procedural due process" and "substantive due process." Procedural due
process refers to the procedures that the government must follow before it deprives a person of life,
liberty, or property.49 Procedural due process concerns itself with government action adhering to the
established process when it makes an intrusion into the private sphere. Examples range from the form
of notice given to the level of formality of a hearing.
If due process were confined solely to its procedural aspects, there would arise absurd situation of
arbitrary government action, provided the proper formalities are followed. Substantive due process
completes the protection envisioned by the due process clause. It inquires whether the government
has sufficient justification for depriving a person of life, liberty, or property. 50
The question of substantive due process, moreso than most other fields of law, has reflected
dynamism in progressive legal thought tied with the expanded acceptance of fundamental freedoms.
Police power, traditionally awesome as it may be, is now confronted with a more rigorous level of
analysis before it can be upheld. The vitality though of constitutional due process has not been
predicated on the frequency with which it has been utilized to achieve a liberal result for, after all, the
libertarian ends should sometimes yield to the prerogatives of the State. Instead, the due process
clause has acquired potency because of the sophisticated methodology that has emerged to determine
the proper metes and bounds for its application.
C.
The general test of the validity of an ordinance on substantive due process grounds is best tested
when assessed with the evolved footnote 4 test laid down by the U.S. Supreme Court in U.S. v.
Carolene Products.51 Footnote 4 of the Carolene Products case acknowledged that the judiciary would
defer to the legislature unless there is a discrimination against a "discrete and insular" minority or
infringement of a "fundamental right."52 Consequently, two standards of judicial review were
established: strict scrutiny for laws dealing with freedom of the mind or restricting the political process,
and the rational basis standard of review for economic legislation.

A third standard, denominated as heightened or immediate scrutiny, was later adopted by the U.S.
Supreme Court for evaluating classifications based on gender 53 and legitimacy.54 Immediate scrutiny
was adopted by the U.S. Supreme Court in Craig, 55 after the Court declined to do so in Reed v.
Reed.56 While the test may have first been articulated in equal protection analysis, it has in the United
States since been applied in all substantive due process cases as well.
We ourselves have often applied the rational basis test mainly in analysis of equal protection
challenges.57 Using the rational basis examination, laws or ordinances are upheld if they rationally
further a legitimate governmental interest. 58 Under intermediate review, governmental interest is
extensively examined and the availability of less restrictive measures is considered. 59 Applying strict
scrutiny, the focus is on the presence of compelling, rather than substantial, governmental interest and
on the absence of less restrictive means for achieving that interest.
In terms of judicial review of statutes or ordinances, strict scrutiny refers to the standard for
determining the quality and the amount of governmental interest brought to justify the regulation of
fundamental freedoms.60 Strict scrutiny is used today to test 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.61 The United States Supreme Court has expanded the scope of strict
scrutiny to protect fundamental rights such as suffrage, 62 judicial access63 and interstate travel.64
If we were to take the myopic view that an Ordinance should be analyzed strictly as to its effect
only on the petitioners at bar, then it would seem that the only restraint imposed by the law which we
are capacitated to act upon is the injury to property sustained by the petitioners, an injury that would
warrant the application of the most deferential standard the rational basis test. Yet as earlier stated,
we recognize the capacity of the petitioners to invoke as well the constitutional rights of their patrons
those persons who would be deprived of availing short time access or wash-up rates to the lodging
establishments in question.
Viewed cynically, one might say that the infringed rights of these customers were are trivial since
they seem shorn of political consequence. Concededly, these are not the sort of cherished rights that,
when proscribed, would impel the people to tear up their cedulas. Still, the Bill of Rights does not
shelter gravitas alone. Indeed, it is those "trivial" yet fundamental freedoms which the people
reflexively exercise any day without the impairing awareness of their constitutional consequence that
accurately reflect the degree of liberty enjoyed by the people. Liberty, as integrally incorporated as a
fundamental right in the Constitution, is not a Ten Commandments-style enumeration of what may or
what may not be done; but rather an atmosphere of freedom where the people do not feel labored
under a Big Brother presence as they interact with each other, their society and nature, in a manner
innately understood by them as inherent, without doing harm or injury to others.
D.
The rights at stake herein fall within the same fundamental rights to liberty which we upheld in City
of Manila v. Hon. Laguio, Jr. We expounded on that most primordial of rights, thus:
Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to
exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into
mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right
of man to enjoy the facilities with which he has been endowed by his Creator, subject only to such
restraint as are necessary for the common welfare."[ 65] In accordance with this case, the rights of the
citizen to be free to use his faculties in all lawful ways; to live and work where he will; to earn his
livelihood by any lawful calling; and to pursue any avocation are all deemed embraced in the concept
of liberty.[66]
The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to clarify the meaning of
"liberty." It said:
While the Court has not attempted to define with exactness the liberty . . . guaranteed [by the Fifth
and Fourteenth Amendments], the term denotes not merely freedom from bodily restraint but also the
right of the individual to contract, to engage in any of the common occupations of life, to acquire
useful knowledge, to marry, establish a home and bring up children, to worship God according to the

dictates of his own conscience, and generally to enjoy those privileges long recognized . . . as essential
to the orderly pursuit of happiness by free men. In a Constitution for a free people, there can be no
doubt that the meaning of "liberty" must be broad indeed. 67 [Citations omitted]
It cannot be denied that the primary animus behind the ordinance is the curtailment of sexual
behavior. The City asserts before this Court that the subject establishments "have gained notoriety as
venue of prostitution, adultery and fornications in Manila since they provide the necessary
atmosphere for clandestine entry, presence and exit and thus became the ideal haven for prostitutes
and thrill-seekers."68 Whether or not this depiction of a mise-en-scene of vice is accurate, it cannot be
denied that legitimate sexual behavior among willing married or consenting single adults which is
constitutionally protected69 will be curtailed as well, as it was in the City of Manila case. Our holding
therein retains significance for our purposes:
The concept of liberty compels respect for the individual whose claim to privacy and interference
demands respect. As the case of Morfe v. Mutuc, borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are
indefeasible; indeed, they are so fundamental that they are the basis on which his civic obligations are
built. He cannot abandon the consequences of his isolation, which are, broadly speaking, that his
experience is private, and the will built out of that experience personal to himself. If he surrenders his
will to others, he surrenders himself. If his will is set by the will of others, he ceases to be a master of
himself. I cannot believe that a man no longer a master of himself is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which
should be justified by a compelling state interest. Morfe accorded recognition to the right to privacy
independently of its identification with liberty; in itself it is fully deserving of constitutional protection.
Governmental powers should stop short of certain intrusions into the personal life of the citizen. 70
We cannot discount other legitimate activities which the Ordinance would proscribe or impair. There
are very legitimate uses for a wash rate or renting the room out for more than twice a day. Entire
families are known to choose pass the time in a motel or hotel whilst the power is momentarily out in
their homes. In transit passengers who wish to wash up and rest between trips have a legitimate
purpose for abbreviated stays in motels or hotels. Indeed any person or groups of persons in need of
comfortable private spaces for a span of a few hours with purposes other than having sex or using
illegal drugs can legitimately look to staying in a motel or hotel as a convenient alternative.
E.
That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a product and the
petitioners of lucrative business ties in with another constitutional requisite for the legitimacy of the
Ordinance as a police power measure. It must appear that the interests of the public generally, as
distinguished from those of a particular class, require an interference with private rights and the
means must be reasonably necessary for the accomplishment of the purpose and not unduly
oppressive of private rights.71 It must also be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. More importantly, a
reasonable relation must exist between the purposes of the measure and the means employed for its
accomplishment, for even under the guise of protecting the public interest, personal rights and those
pertaining to private property will not be permitted to be arbitrarily invaded. 72
Lacking a concurrence of these requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights. As held in Morfe v. Mutuc, the exercise of police power is subject to judicial
review when life, liberty or property is affected. 73 However, this is not in any way meant to take it
away from the vastness of State police power whose exercise enjoys the presumption of validity. 74

Similar to the Comelec resolution requiring newspapers to donate advertising space to candidates,

this Ordinance is a blunt and heavy instrument. 75 The Ordinance makes no distinction between places
frequented by patrons engaged in illicit activities and patrons engaged in legitimate actions. Thus it
prevents legitimate use of places where illicit activities are rare or even unheard of. A plain reading of
section 3 of the Ordinance shows it makes no classification of places of lodging, thus deems them all
susceptible to illicit patronage and subject them without exception to the unjustified prohibition.

The Court has professed its deep sentiment and tenderness of the Ermita-Malate area, its longtime
home,76 and it is skeptical of those who wish to depict our capital city the Pearl of the Orient as a
modern-day Sodom or Gomorrah for the Third World set. Those still steeped in Nick Joaquin-dreams of
the grandeur of Old Manila will have to accept that Manila like all evolving big cities, will have its
problems. Urban decay is a fact of mega cities such as Manila, and vice is a common problem
confronted by the modern metropolis wherever in the world. The solution to such perceived decay is
not to prevent legitimate businesses from offering a legitimate product. Rather, cities revive
themselves by offering incentives for new businesses to sprout up thus attracting the dynamism of
individuals that would bring a new grandeur to Manila.
The behavior which the Ordinance seeks to curtail is in fact already prohibited and could in fact be
diminished simply by applying existing laws. Less intrusive measures such as curbing the proliferation
of prostitutes and drug dealers through active police work would be more effective in easing the
situation. So would the strict enforcement of existing laws and regulations penalizing prostitution and
drug use. These measures would have minimal intrusion on the businesses of the petitioners and other
legitimate merchants. Further, it is apparent that the Ordinance can easily be circumvented by merely
paying the whole day rate without any hindrance to those engaged in illicit activities. Moreover, drug
dealers and prostitutes can in fact collect "wash rates" from their clientele by charging their customers
a portion of the rent for motel rooms and even apartments.
IV.
We reiterate that individual rights may be adversely affected only to the extent that may fairly be
required by the legitimate demands of public interest or public welfare. The State is a leviathan that
must be restrained from needlessly intruding into the lives of its citizens. However well -intentioned the
Ordinance may be, it is in effect an arbitrary and whimsical intrusion into the rights of the
establishments as well as their patrons. The Ordinance needlessly restrains the operation of the
businesses of the petitioners as well as restricting the rights of their patrons without sufficient
justification. The Ordinance rashly equates wash rates and renting out a room more than twice a day
with immorality without accommodating innocuous intentions.
The promotion of public welfare and a sense of morality among citizens deserves the full
endorsement of the judiciary provided that such measures do not trample rights this Court is sworn to
protect.77 The notion that the promotion of public morality is a function of the State is as old as
Aristotle.78 The advancement of moral relativism as a school of philosophy does not de-legitimize the
role of morality in law, even if it may foster wider debate on which particular behavior to penalize. It is
conceivable that a society with relatively little shared morality among its citizens could be functional
so long as the pursuit of sharply variant moral perspectives yields an adequate accommodation of
different interests.79
To be candid about it, the oft-quoted American maxim that "you cannot legislate morality" is
ultimately illegitimate as a matter of law, since as explained by Calabresi, that phrase is more
accurately interpreted as meaning that efforts to legislate morality will fail if they are widely at
variance with public attitudes about right and wrong. 80 Our penal laws, for one, are founded on ageold moral traditions, and as long as there are widely accepted distinctions between right and wrong,
they will remain so oriented.
Yet the continuing progression of the human story has seen not only the acceptance of the rightwrong distinction, but also the advent of fundamental liberties as the key to the enjoyment of life to
the fullest. Our democracy is distinguished from non-free societies not with any more extensive
elaboration on our part of what is moral and immoral, but from our recognition that the individual
liberty to make the choices in our lives is innate, and protected by the State. Independent and fairminded judges themselves are under a moral duty to uphold the Constitution as the embodiment of
the rule of law, by reason of their expression of consent to do so when they take the oath of office, and
because they are entrusted by the people to uphold the law. 81
Even as the implementation of moral norms remains an indispensable complement to governance,
that prerogative is hardly absolute, especially in the face of the norms of due process of liberty. And
while the tension may often be left to the courts to relieve, it is possible for the government to avoid
the constitutional conflict by employing more judicious, less drastic means to promote morality.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals is REVERSED, and

the Decision of the Regional Trial Court of Manila, Branch 9, is REINSTATED. Ordinance No. 7774 is
hereby declared UNCONSTITUTIONAL. No pronouncement as to costs.
SO ORDERED.

13
14

THIRD DIVISION

THE OFFICE OF THE SOLICITOR GENERAL,

Petitioner,
- versus AYALA LAND INCORPORATED, ROBINSONS LAND CORPORATION, SHANGRI-LA PLAZA CORPORATION
and SM PRIME HOLDINGS, INC.,
Respondents.

G.R. No. 177056

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari,[1] under Rule 45 of the Revised Rules of Court, filed by
petitioner Office of the Solicitor General (OSG), seeking the reversal and setting aside of the Decision[2] dated 25
January 2007 of the Court of Appeals in CA-G.R. CV No. 76298, which affirmed in toto the Joint Decision[3] dated 29
May 2002 of the Regional Trial Court (RTC) of Makati City, Branch 138, in Civil Cases No. 00-1208 and No. 00-1210;
and (2) the Resolution[4] dated 14 March 2007 of the appellate court in the same case which denied the Motion for
Reconsideration of the OSG. The RTC adjudged that respondents Ayala Land Incorporated (Ayala Land), Robinsons
Land Corporation (Robinsons), Shangri-la Plaza Corporation (Shangri-la), and SM Prime Holdings, Inc. (SM Prime)
could not be obliged to provide free parking spaces in their malls to their patrons and the general public.

Respondents Ayala Land, Robinsons, and Shangri-la maintain and operate shopping malls in various locations in
Metro Manila. Respondent SM Prime constructs, operates, and leases out commercial buildings and other structures,
among which, are SM City, Manila; SM Centerpoint, Sta. Mesa, Manila; SM City, North Avenue, Quezon City; and SM
Southmall, Las Pias.

The shopping malls operated or leased out by respondents have parking facilities for all kinds of motor
vehicles, either by way of parking spaces inside the mall buildings or in separate buildings and/or adjacent lots that
are solely devoted for use as parking spaces. Respondents Ayala Land, Robinsons, and SM Prime spent for the
construction of their own parking facilities. Respondent Shangri-la is renting its parking facilities, consisting of land
and building specifically used as parking spaces, which were constructed for the lessors account.

Respondents expend for the maintenance and administration of their respective parking facilities. They provide
security personnel to protect the vehicles parked in their parking facilities and maintain order within the area. In
turn, they collect the following parking fees from the persons making use of their parking facilities, regardless of
whether said persons are mall patrons or not:

Respondent

Parking Fees
Ayala Land
On weekdays, P25.00 for the first four hours and P10.00 for every succeeding hour; on weekends, flat rate of
P25.00 per day

Robinsons
P20.00 for the first three hours and P10.00 for every succeeding hour

Shangri-la
Flat rate of P30.00 per day

SM Prime
P10.00 to P20.00 (depending on whether the parking space is outdoors or indoors) for the first three hours and
59 minutes, and P10.00 for every succeeding hour or fraction thereof

The parking tickets or cards issued by respondents to vehicle owners contain the stipulation that respondents
shall not be responsible for any loss or damage to the vehicles parked in respondents parking facilities.

In 1999, the Senate Committees on Trade and Commerce and on Justice and Human Rights conducted a joint
investigation for the following purposes: (1) to inquire into the legality of the prevalent practice of shopping malls of
charging parking fees; (2) assuming arguendo that the collection of parking fees was legally authorized, to find out
the basis and reasonableness of the parking rates charged by shopping malls; and (3) to determine the legality of
the policy of shopping malls of denying liability in cases of theft, robbery, or carnapping, by invoking the waiver
clause at the back of the parking tickets. Said Senate Committees invited the top executives of respondents, who
operate the major malls in the country; the officials from the Department of Trade and Industry (DTI), Department of
Public Works and Highways (DPWH), Metro Manila Development Authority (MMDA), and other local government
officials; and the Philippine Motorists Association (PMA) as representative of the consumers group.

After three public hearings held on 30 September, 3 November, and 1 December 1999, the afore-mentioned
Senate Committees jointly issued Senate Committee Report No. 225[5] on 2 May 2000, in which they concluded:

In view of the foregoing, the Committees find that the collection of parking fees by shopping malls is contrary
to the National Building Code and is therefor [sic] illegal. While it is true that the Code merely requires malls to
provide parking spaces, without specifying whether it is free or not, both Committees believe that the reasonable
and logical interpretation of the Code is that the parking spaces are for free. This interpretation is not only
reasonable and logical but finds support in the actual practice in other countries like the United States of America
where parking spaces owned and operated by mall owners are free of charge.

Figuratively speaking, the Code has expropriated the land for parking something similar to the subdivision law
which require developers to devote so much of the land area for parks.

Moreover, Article II of R.A. No. 9734 (Consumer Act of the Philippines) provides that it is the policy of the State
to protect the interest of the consumers, promote the general welfare and establish standards of conduct for
business and industry. Obviously, a contrary interpretation (i.e., justifying the collection of parking fees) would be
going against the declared policy of R.A. 7394.

Section 201 of the National Building Code gives the responsibility for the administration and enforcement of the
provisions of the Code, including the imposition of penalties for administrative violations thereof to the Secretary of
Public Works. This set up, however, is not being carried out in reality.

In the position paper submitted by the Metropolitan Manila Development Authority (MMDA), its chairman,
Jejomar C. Binay, accurately pointed out that the Secretary of the DPWH is responsible for the
implementation/enforcement of the National Building Code. After the enactment of the Local Government Code of
1991, the local government units (LGUs) were tasked to discharge the regulatory powers of the DPWH. Hence, in the

local level, the Building Officials enforce all rules/ regulations formulated by the DPWH relative to all building plans,
specifications and designs including parking space requirements. There is, however, no single national department
or agency directly tasked to supervise the enforcement of the provisions of the Code on parking, notwithstanding
the national character of the law.[6]

Senate Committee Report No. 225, thus, contained the following recommendations:

In light of the foregoing, the Committees on Trade and Commerce and Justice and Human Rights hereby
recommend the following:

1. The Office of the Solicitor General should institute the necessary action to enjoin the collection of parking
fees as well as to enforce the penal sanction provisions of the National Building Code. The Office of the Solicitor
General should likewise study how refund can be exacted from mall owners who continue to collect parking fees.

2. The Department of Trade and Industry pursuant to the provisions of R.A. No. 7394, otherwise known as the
Consumer Act of the Philippines should enforce the provisions of the Code relative to parking. Towards this end, the
DTI should formulate the necessary implementing rules and regulations on parking in shopping malls, with prior
consultations with the local government units where these are located. Furthermore, the DTI, in coordination with
the DPWH, should be empowered to regulate and supervise the construction and maintenance of parking
establishments.

3. Finally, Congress should amend and update the National Building Code to expressly prohibit shopping malls
from collecting parking fees by at the same time, prohibit them from invoking the waiver of liability.[7]

Respondent SM Prime thereafter received information that, pursuant to Senate Committee Report No. 225, the
DPWH Secretary and the local building officials of Manila, Quezon City, and Las Pias intended to institute, through
the OSG, an action to enjoin respondent SM Prime and similar establishments from collecting parking fees, and to
impose upon said establishments penal sanctions under Presidential Decree No. 1096, otherwise known as the
National Building Code of the Philippines (National Building Code), and its Implementing Rules and Regulations (IRR).
With the threatened action against it, respondent SM Prime filed, on 3 October 2000, a Petition for Declaratory
Relief[8] under Rule 63 of the Revised Rules of Court, against the DPWH Secretary and local building officials of
Manila, Quezon City, and Las Pias. Said Petition was docketed as Civil Case No. 00-1208 and assigned to the RTC of
Makati City, Branch 138, presided over by Judge Sixto Marella, Jr. (Judge Marella). In its Petition, respondent SM
Prime prayed for judgment:

a) Declaring Rule XIX of the Implementing Rules and Regulations of the National Building Code as
ultra vires, hence, unconstitutional and void;
b) Declaring [herein respondent SM Prime]s clear legal right to lease parking spaces appurtenant
to its department stores, malls, shopping centers and other commercial establishments; and
c) Declaring the National Building Code of the Philippines Implementing Rules and Regulations as
ineffective, not having been published once a week for three (3) consecutive weeks in a newspaper

of general circulation, as prescribed by Section 211 of Presidential Decree No. 1096.

[Respondent SM Prime] further prays for such other reliefs as may be deemed just and equitable
under the premises.[9]

The very next day, 4 October 2000, the OSG filed a Petition for Declaratory Relief and Injunction (with
Prayer for Temporary Restraining Order and Writ of Preliminary Injunction)[10] against respondents. This Petition
was docketed as Civil Case No. 00-1210 and raffled to the RTC of Makati, Branch 135, presided over by Judge
Francisco B. Ibay (Judge Ibay). Petitioner prayed that the RTC:

1. After summary hearing, a temporary restraining order and a writ of preliminary injunction be
issued restraining respondents from collecting parking fees from their customers; and
2. After hearing, judgment be rendered declaring that the practice of respondents in charging
parking fees is violative of the National Building Code and its Implementing Rules and Regulations
and is therefore invalid, and making permanent any injunctive writ issued in this case.
Other reliefs just and equitable under the premises are likewise prayed for.[11]

On 23 October 2000, Judge Ibay of the RTC of Makati City, Branch 135, issued an Order consolidating Civil
Case No. 00-1210 with Civil Case No. 00-1208 pending before Judge Marella of RTC of Makati, Branch 138.
As a result of the pre-trial conference held on the morning of 8 August 2001, the RTC issued a Pre-Trial
Order[12] of even date which limited the issues to be resolved in Civil Cases No. 00-1208 and No. 00-1210 to the
following:

1. Capacity of the plaintiff [OSG] in Civil Case No. 00-1210 to institute the present proceedings and relative
thereto whether the controversy in the collection of parking fees by mall owners is a matter of public welfare.

2.

Whether declaratory relief is proper.

3.
Whether respondent Ayala Land, Robinsons, Shangri-La and SM Prime are obligated to provide
parking spaces in their malls for the use of their patrons or the public in general, free of charge.

4.

Entitlement of the parties of [sic] award of damages.[13]

On 29 May 2002, the RTC rendered its Joint Decision in Civil Cases No. 00-1208 and No. 00-1210.

The RTC resolved the first two issues affirmatively. It ruled that the OSG can initiate Civil Case No. 00-1210
under Presidential Decree No. 478 and the Administrative Code of 1987.[14] It also found that all the requisites for
an action for declaratory relief were present, to wit:

The requisites for an action for declaratory relief are: (a) there is a justiciable controversy; (b) the
controversy is between persons whose interests are adverse; (c) the party seeking the relief has a
legal interest in the controversy; and (d) the issue involved is ripe for judicial determination.
SM, the petitioner in Civil Case No. 001-1208 [sic] is a mall operator who stands to be affected
directly by the position taken by the government officials sued namely the Secretary of Public
Highways and the Building Officials of the local government units where it operates shopping malls.
The OSG on the other hand acts on a matter of public interest and has taken a position adverse to
that of the mall owners whom it sued. The construction of new and bigger malls has been
announced, a matter which the Court can take judicial notice and the unsettled issue of whether
mall operators should provide parking facilities, free of charge needs to be resolved.[15]

As to the third and most contentious issue, the RTC pronounced that:

The Building Code, which is the enabling law and the Implementing Rules and Regulations do not
impose that parking spaces shall be provided by the mall owners free of charge. Absent such
directive[,] Ayala Land, Robinsons, Shangri-la and SM [Prime] are under no obligation to provide
them for free. Article 1158 of the Civil Code is clear:
Obligations derived from law are not presumed. Only those expressly
determined in this Code or in special laws are demandable and shall be regulated
by the precepts of the law which establishes them; and as to what has not been
foreseen, by the provisions of this Book (1090).[]
xxxx
The provision on ratios of parking slots to several variables, like shopping floor area or customer
area found in Rule XIX of the Implementing Rules and Regulations cannot be construed as a
directive to provide free parking spaces, because the enabling law, the Building Code does not so
provide. x x x.
To compel Ayala Land, Robinsons, Shangri-La and SM [Prime] to provide parking spaces for free
can be considered as an unlawful taking of property right without just compensation.
Parking spaces in shopping malls are privately owned and for their use, the mall operators collect
fees. The legal relationship could be either lease or deposit. In either case[,] the mall owners have
the right to collect money which translates into income. Should parking spaces be made free, this
right of mall owners shall be gone. This, without just compensation. Further, loss of effective control
over their property will ensue which is frowned upon by law.
The presence of parking spaces can be viewed in another light. They can be looked at as
necessary facilities to entice the public to increase patronage of their malls because without
parking spaces, going to their malls will be inconvenient. These are[,] however[,] business
considerations which mall operators will have to decide for themselves. They are not sufficient to
justify a legal conclusion, as the OSG would like the Court to adopt that it is the obligation of the
mall owners to provide parking spaces for free.[16]

The RTC then held that there was no sufficient evidence to justify any award for damages.

The RTC finally decreed in its 29 May 2002 Joint Decision in Civil Cases No. 00-1208 and No. 00-1210 that:

FOR THE REASONS GIVEN, the Court declares that Ayala Land[,] Inc., Robinsons Land Corporation,
Shangri-la Plaza Corporation and SM Prime Holdings[,] Inc. are not obligated to provide parking
spaces in their malls for the use of their patrons or public in general, free of charge.
All counterclaims in Civil Case No. 00-1210 are dismissed.
No pronouncement as to costs.[17]

CA-G.R. CV No. 76298 involved the separate appeals of the OSG[18] and respondent SM Prime[19] filed with
the Court of Appeals. The sole assignment of error of the OSG in its Appellants Brief was:

THE TRIAL COURT ERRED IN HOLDING THAT THE NATIONAL BUILDING CODE DID NOT INTEND
MALL PARKING SPACES TO BE FREE OF CHARGE[;][20]

while the four errors assigned by respondent SM Prime in its Appellants Brief were:

I
THE TRIAL COURT ERRED IN FAILING TO DECLARE RULE XIX OF THE IMPLEMENTING RULES AS
HAVING BEEN ENACTED ULTRA VIRES, HENCE, UNCONSTITUTIONAL AND VOID.
II
THE TRIAL COURT ERRED IN FAILING TO DECLARE THE IMPLEMENTING RULES INEFFECTIVE FOR
NOT HAVING BEEN PUBLISHED AS REQUIRED BY LAW.
III
THE TRIAL COURT ERRED IN FAILING TO DISMISS THE OSGS PETITION FOR DECLARATORY RELIEF
AND INJUNCTION FOR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.
IV
THE TRIAL COURT ERRED IN FAILING TO DECLARE THAT THE OSG HAS NO LEGAL CAPACITY TO SUE
AND/OR THAT IT IS NOT A REAL PARTY-IN-INTEREST IN THE INSTANT CASE.[21]

Respondent Robinsons filed a Motion to Dismiss Appeal of the OSG on the ground that the lone issue raised
therein involved a pure question of law, not reviewable by the Court of Appeals.

The Court of Appeals promulgated its Decision in CA-G.R. CV No. 76298 on 25 January 2007. The appellate
court agreed with respondent Robinsons that the appeal of the OSG should suffer the fate of dismissal, since the
issue on whether or not the National Building Code and its implementing rules require shopping mall operators to
provide parking facilities to the public for free was evidently a question of law. Even so, since CA-G.R. CV No. 76298
also included the appeal of respondent SM Prime, which raised issues worthy of consideration, and in order to satisfy
the demands of substantial justice, the Court of Appeals proceeded to rule on the merits of the case.

In its Decision, the Court of Appeals affirmed the capacity of the OSG to initiate Civil Case No. 00-1210 before
the RTC as the legal representative of the government,[22] and as the one deputized by the Senate of the Republic
of the Philippines through Senate Committee Report No. 225.

The Court of Appeals rejected the contention of respondent SM Prime that the OSG failed to exhaust
administrative remedies. The appellate court explained that an administrative review is not a condition precedent to
judicial relief where the question in dispute is purely a legal one, and nothing of an administrative nature is to be or
can be done.

The Court of Appeals likewise refused to rule on the validity of the IRR of the National Building Code, as such
issue was not among those the parties had agreed to be resolved by the RTC during the pre-trial conference for Civil
Cases No. 00-1208 and No. 00-1210. Issues cannot be raised for the first time on appeal. Furthermore, the appellate
court found that the controversy could be settled on other grounds, without touching on the issue of the validity of
the IRR. It referred to the settled rule that courts should refrain from passing upon the constitutionality of a law or
implementing rules, because of the principle that bars judicial inquiry into a constitutional question, unless the
resolution thereof is indispensable to the determination of the case.

Lastly, the Court of Appeals declared that Section 803 of the National Building Code and Rule XIX of the IRR
were clear and needed no further construction. Said provisions were only intended to control the occupancy or
congestion of areas and structures. In the absence of any express and clear provision of law, respondents could not
be obliged and expected to provide parking slots free of charge.

The fallo of the 25 January 2007 Decision of the Court of Appeals reads:

WHEREFORE, premises considered, the instant appeals are DENIED. Accordingly, appealed
Decision is hereby AFFIRMED in toto.[23]

In its Resolution issued on 14 March 2007, the Court of Appeals denied the Motion for Reconsideration of the
OSG, finding that the grounds relied upon by the latter had already been carefully considered, evaluated, and
passed upon by the appellate court, and there was no strong and cogent reason to modify much less reverse the
assailed judgment.

The OSG now comes before this Court, via the instant Petition for Review, with a single assignment of
error:
THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE RULING OF THE LOWER COURT
THAT RESPONDENTS ARE NOT OBLIGED TO PROVIDE FREE PARKING SPACES TO THEIR CUSTOMERS
OR THE PUBLIC.[24]

The OSG argues that respondents are mandated to provide free parking by Section 803 of the National
Building Code and Rule XIX of the IRR.

According to Section 803 of the National Building Code:

SECTION 803. Percentage of Site Occupancy

(a) Maximum site occupancy shall be governed by the use, type of construction, and height of the
building and the use, area, nature, and location of the site; and subject to the provisions of the
local zoning requirements and in accordance with the rules and regulations promulgated by the
Secretary.

In connection therewith, Rule XIX of the old IRR,[25] provides:

RULE XIX PARKING AND LOADING SPACE REQUIREMENTS

Pursuant to Section 803 of the National Building Code (PD 1096) providing for maximum site
occupancy, the following provisions on parking and loading space requirements shall be observed:
1. The parking space ratings listed below are minimum off-street requirements
for specific uses/occupancies for buildings/structures:
1.1 The size of an average automobile parking slot shall be computed as
2.4 meters by 5.00 meters for perpendicular or diagonal parking, 2.00
meters by 6.00 meters for parallel parking. A truck or bus parking/loading
slot shall be computed at a minimum of 3.60 meters by 12.00 meters. The
parking slot shall be drawn to scale and the total number of which shall be
indicated on the plans and specified whether or not parking
accommodations, are attendant-managed. (See Section 2 for computation
of parking requirements).
xxxx
1.7 Neighborhood shopping center 1 slot/100 sq. m. of shopping floor
area

The OSG avers that the aforequoted provisions should be read together with Section 102 of the National
Building Code, which declares:

SECTION 102. Declaration of Policy

It is hereby declared to be the policy of the State to safeguard life, health, property, and public
welfare, consistent with the principles of sound environmental management and control; and to
this end, make it the purpose of this Code to provide for all buildings and structures, a framework
of minimum standards and requirements to regulate and control their location, site, design, quality
of materials, construction, use, occupancy, and maintenance.

The requirement of free-of-charge parking, the OSG argues, greatly contributes to the aim of safeguarding life,
health, property, and public welfare, consistent with the principles of sound environmental management and
control. Adequate parking spaces would contribute greatly to alleviating traffic congestion when complemented by
quick and easy access thereto because of free-charge parking. Moreover, the power to regulate and control the use,

occupancy, and maintenance of buildings and structures carries with it the power to impose fees and, conversely, to
control -- partially or, as in this case, absolutely -- the imposition of such fees.

The Court finds no merit in the present Petition.

The explicit directive of the afore-quoted statutory and regulatory provisions, garnered from a plain
reading thereof, is that respondents, as operators/lessors of neighborhood shopping centers, should provide parking
and loading spaces, in accordance with the minimum ratio of one slot per 100 square meters of shopping floor area.
There is nothing therein pertaining to the collection (or non-collection) of parking fees by respondents. In fact, the
term parking fees cannot even be found at all in the entire National Building Code and its IRR.

Statutory construction has it that if a statute is clear and unequivocal, it must be given its literal meaning
and applied without any attempt at interpretation.[26] Since Section 803 of the National Building Code and Rule XIX
of its IRR do not mention parking fees, then simply, said provisions do not regulate the collection of the same. The
RTC and the Court of Appeals correctly applied Article 1158 of the New Civil Code, which states:

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in
this Code or in special laws are demandable, and shall be regulated by the precepts of the law
which establishes them; and as to what has not been foreseen, by the provisions of this Book.
(Emphasis ours.)

Hence, in order to bring the matter of parking fees within the ambit of the National Building Code and its
IRR, the OSG had to resort to specious and feeble argumentation, in which the Court cannot concur.

The OSG cannot rely on Section 102 of the National Building Code to expand the coverage of Section 803
of the same Code and Rule XIX of the IRR, so as to include the regulation of parking fees. The OSG limits its citation
to the first part of Section 102 of the National Building Code declaring the policy of the State to safeguard life,
health, property, and public welfare, consistent with the principles of sound environmental management and
control; but totally ignores the second part of said provision, which reads, and to this end, make it the purpose of
this Code to provide for all buildings and structures, a framework of minimum standards and requirements to
regulate and control their location, site, design, quality of materials, construction, use, occupancy, and
maintenance. While the first part of Section 102 of the National Building Code lays down the State policy, it is the
second part thereof that explains how said policy shall be carried out in the Code. Section 102 of the National
Building Code is not an all-encompassing grant of regulatory power to the DPWH Secretary and local building
officials in the name of life, health, property, and public welfare. On the contrary, it limits the regulatory power of
said officials to ensuring that the minimum standards and requirements for all buildings and structures, as set forth
in the National Building Code, are complied with.

Consequently, the OSG cannot claim that in addition to fixing the minimum requirements for parking
spaces for buildings, Rule XIX of the IRR also mandates that such parking spaces be provided by building owners
free of charge. If Rule XIX is not covered by the enabling law, then it cannot be added to or included in the

implementing rules. The rule-making power of administrative agencies must be confined to details for regulating the
mode or proceedings to carry into effect the law as it has been enacted, and it cannot be extended to amend or
expand the statutory requirements or to embrace matters not covered by the statute. Administrative regulations
must always be in harmony with the provisions of the law because any resulting discrepancy between the two will
always be resolved in favor of the basic law.[27]

From the RTC all the way to this Court, the OSG repeatedly referred to Republic v. Gonzales[28] and City of
Ozamis v. Lumapas[29] to support its position that the State has the power to regulate parking spaces to promote
the health, safety, and welfare of the public; and it is by virtue of said power that respondents may be required to
provide free parking facilities. The OSG, though, failed to consider the substantial differences in the factual and legal
backgrounds of these two cases from those of the Petition at bar.

In Republic, the Municipality of Malabon sought to eject the occupants of two parcels of land of the public
domain to give way to a road-widening project. It was in this context that the Court pronounced:

Indiscriminate parking along F. Sevilla Boulevard and other main thoroughfares was prevalent;
this, of course, caused the build up of traffic in the surrounding area to the great discomfort and
inconvenience of the public who use the streets. Traffic congestion constitutes a threat to the
health, welfare, safety and convenience of the people and it can only be substantially relieved by
widening streets and providing adequate parking areas.

The Court, in City of Ozamis, declared that the City had been clothed with full power to control and
regulate its streets for the purpose of promoting public health, safety and welfare. The City can regulate the time,
place, and manner of parking in the streets and public places; and charge minimal fees for the street parking to
cover the expenses for supervision, inspection and control, to ensure the smooth flow of traffic in the environs of the
public market, and for the safety and convenience of the public.

Republic and City of Ozamis involved parking in the local streets; in contrast, the present case deals with
privately owned parking facilities available for use by the general public. In Republic and City of Ozamis, the
concerned local governments regulated parking pursuant to their power to control and regulate their streets; in the
instant case, the DPWH Secretary and local building officials regulate parking pursuant to their authority to ensure
compliance with the minimum standards and requirements under the National Building Code and its IRR. With the
difference in subject matters and the bases for the regulatory powers being invoked, Republic and City of Ozamis do
not constitute precedents for this case.

Indeed, Republic and City of Ozamis both contain pronouncements that weaken the position of the OSG in
the case at bar. In Republic, the Court, instead of placing the burden on private persons to provide parking facilities
to the general public, mentioned the trend in other jurisdictions wherein the municipal governments themselves
took the initiative to make more parking spaces available so as to alleviate the traffic problems, thus:

Under the Land Transportation and Traffic Code, parking in designated areas along public streets

or highways is allowed which clearly indicates that provision for parking spaces serves a useful
purpose. In other jurisdictions where traffic is at least as voluminous as here, the provision by
municipal governments of parking space is not limited to parking along public streets or highways.
There has been a marked trend to build off-street parking facilities with the view to removing
parked cars from the streets. While the provision of off-street parking facilities or carparks has been
commonly undertaken by private enterprise, municipal governments have been constrained to put
up carparks in response to public necessity where private enterprise had failed to keep up with the
growing public demand. American courts have upheld the right of municipal governments to
construct off-street parking facilities as clearly redounding to the public benefit.[30]

In City of Ozamis, the Court authorized the collection by the City of minimal fees for the parking of vehicles
along the streets: so why then should the Court now preclude respondents from collecting from the public a fee for
the use of the mall parking facilities? Undoubtedly, respondents also incur expenses in the maintenance and
operation of the mall parking facilities, such as electric consumption, compensation for parking attendants and
security, and upkeep of the physical structures.

It is not sufficient for the OSG to claim that the power to regulate and control the use, occupancy, and
maintenance of buildings and structures carries with it the power to impose fees and, conversely, to control,
partially or, as in this case, absolutely, the imposition of such fees. Firstly, the fees within the power of regulatory
agencies to impose are regulatory fees. It has been settled law in this jurisdiction that this broad and allcompassing governmental competence to restrict rights of liberty and property carries with it the undeniable power
to collect a regulatory fee. It looks to the enactment of specific measures that govern the relations not only as
between individuals but also as between private parties and the political society.[31] True, if the regulatory agencies
have the power to impose regulatory fees, then conversely, they also have the power to remove the same. Even so,
it is worthy to note that the present case does not involve the imposition by the DPWH Secretary and local building
officials of regulatory fees upon respondents; but the collection by respondents of parking fees from persons who
use the mall parking facilities. Secondly, assuming arguendo that the DPWH Secretary and local building officials do
have regulatory powers over the collection of parking fees for the use of privately owned parking facilities, they
cannot allow or prohibit such collection arbitrarily or whimsically. Whether allowing or prohibiting the collection of
such parking fees, the action of the DPWH Secretary and local building officials must pass the test of classic
reasonableness and propriety of the measures or means in the promotion of the ends sought to be accomplished.
[32]

Keeping in mind the aforementioned test of reasonableness and propriety of measures or means, the
Court notes that Section 803 of the National Building Code falls under Chapter 8 on Light and Ventilation.
Evidently, the Code deems it necessary to regulate site occupancy to ensure that there is proper lighting and
ventilation in every building. Pursuant thereto, Rule XIX of the IRR requires that a building, depending on its specific
use and/or floor area, should provide a minimum number of parking spaces. The Court, however, fails to see the
connection between regulating site occupancy to ensure proper light and ventilation in every building vis--vis
regulating the collection by building owners of fees for the use of their parking spaces. Contrary to the averment of
the OSG, the former does not necessarily include or imply the latter. It totally escapes this Court how lighting and
ventilation conditions at the malls could be affected by the fact that parking facilities thereat are free or paid for.

The OSG attempts to provide the missing link by arguing that:

Under Section 803 of the National Building Code, complimentary parking spaces are required to
enhance light and ventilation, that is, to avoid traffic congestion in areas surrounding the building,
which certainly affects the ventilation within the building itself, which otherwise, the annexed
parking spaces would have served. Free-of-charge parking avoids traffic congestion by ensuring
quick and easy access of legitimate shoppers to off-street parking spaces annexed to the malls,
and thereby removing the vehicles of these legitimate shoppers off the busy streets near the
commercial establishments.[33]

The Court is unconvinced. The National Building Code regulates buildings, by setting the minimum
specifications and requirements for the same. It does not concern itself with traffic congestion in areas
surrounding the building. It is already a stretch to say that the National Building Code and its IRR also intend to
solve the problem of traffic congestion around the buildings so as to ensure that the said buildings shall have
adequate lighting and ventilation. Moreover, the Court cannot simply assume, as the OSG has apparently done, that
the traffic congestion in areas around the malls is due to the fact that respondents charge for their parking facilities,
thus, forcing vehicle owners to just park in the streets. The Court notes that despite the fees charged by
respondents, vehicle owners still use the mall parking facilities, which are even fully occupied on some days. Vehicle
owners may be parking in the streets only because there are not enough parking spaces in the malls, and not
because they are deterred by the parking fees charged by respondents. Free parking spaces at the malls may even
have the opposite effect from what the OSG envisioned: more people may be encouraged by the free parking to
bring their own vehicles, instead of taking public transport, to the malls; as a result, the parking facilities would
become full sooner, leaving more vehicles without parking spaces in the malls and parked in the streets instead,
causing even more traffic congestion.

Without using the term outright, the OSG is actually invoking police power to justify the regulation by the
State, through the DPWH Secretary and local building officials, of privately owned parking facilities, including the
collection by the owners/operators of such facilities of parking fees from the public for the use thereof. The Court
finds, however, that in totally prohibiting respondents from collecting parking fees from the public for the use of the
mall parking facilities, the State would be acting beyond the bounds of police power.

Police power is the power of promoting the public welfare by restraining and regulating the use of liberty
and property. It is usually exerted in order to merely regulate the use and enjoyment of the property of the owner.
The power to regulate, however, does not include the power to prohibit. A fortiori, the power to regulate does not
include the power to confiscate. Police power does not involve the taking or confiscation of property, with the
exception of a few cases where there is a necessity to confiscate private property in order to destroy it for the
purpose of protecting peace and order and of promoting the general welfare; for instance, the confiscation of an
illegally possessed article, such as opium and firearms. [34]

When there is a taking or confiscation of private property for public use, the State is no longer exercising
police power, but another of its inherent powers, namely, eminent domain. Eminent domain enables the State to
forcibly acquire private lands intended for public use upon payment of just compensation to the owner.[35]

Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and

possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of
only to impose a burden upon the owner of condemned property, without loss of title and possession.[36] It is a
settled rule that neither acquisition of title nor total destruction of value is essential to taking. It is usually in cases
where title remains with the private owner that inquiry should be made to determine whether the impairment of a
property is merely regulated or amounts to a compensable taking. A regulation that deprives any person of the
profitable use of his property constitutes a taking and entitles him to compensation, unless the invasion of rights is
so slight as to permit the regulation to be justified under the police power. Similarly, a police regulation that
unreasonably restricts the right to use business property for business purposes amounts to a taking of private
property, and the owner may recover therefor.[37]
Although in the present case, title to and/or possession of the parking facilities remain/s with respondents,
the prohibition against their collection of parking fees from the public, for the use of said facilities, is already
tantamount to a taking or confiscation of their properties. The State is not only requiring that respondents devote a
portion of the latters properties for use as parking spaces, but is also mandating that they give the public access to
said parking spaces for free. Such is already an excessive intrusion into the property rights of respondents. Not only
are they being deprived of the right to use a portion of their properties as they wish, they are further prohibited
from profiting from its use or even just recovering therefrom the expenses for the maintenance and operation of the
required parking facilities.

The ruling of this Court in City Government of Quezon City v. Judge Ericta[38] is edifying. Therein, the City
Government of Quezon City passed an ordinance obliging private cemeteries within its jurisdiction to set aside at
least six percent of their total area for charity, that is, for burial grounds of deceased paupers. According to the
Court, the ordinance in question was null and void, for it authorized the taking of private property without just
compensation:

There is no reasonable relation between the setting aside of at least six (6) percent of the total
area of all private cemeteries for charity burial grounds of deceased paupers and the promotion of'
health, morals, good order, safety, or the general welfare of the people. The ordinance is actually a
taking without compensation of a certain area from a private cemetery to benefit paupers who are
charges of the municipal corporation. Instead of' building or maintaining a public cemetery for this
purpose, the city passes the burden to private cemeteries.
'The expropriation without compensation of a portion of private cemeteries is not covered by
Section 12(t) of Republic Act 537, the Revised Charter of Quezon City which empowers the city
council to prohibit the burial of the dead within the center of population of the city and to provide
for their burial in a proper place subject to the provisions of general law regulating burial grounds
and cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in Section
177(q) that a sangguniang panlungsod may "provide for the burial of the dead in such place and in
such manner as prescribed by law or ordinance" it simply authorizes the city to provide its own city
owned land or to buy or expropriate private properties to construct public cemeteries. This has
been the law, and practise in the past. It continues to the present. Expropriation, however, requires
payment of just compensation. The questioned ordinance is different from laws and regulations
requiring owners of subdivisions to set aside certain areas for streets, parks, playgrounds, and
other public facilities from the land they sell to buyers of subdivision lots. The necessities of public
safety, health, and convenience are very clear from said requirements which are intended to insure
the development of communities with salubrious and wholesome environments. The beneficiaries
of the regulation, in turn, are made to pay by the subdivision developer when individual lots are
sold to homeowners.

In conclusion, the total prohibition against the collection by respondents of parking fees from persons who use
the mall parking facilities has no basis in the National Building Code or its IRR. The State also cannot impose the
same prohibition by generally invoking police power, since said prohibition amounts to a taking of respondents
property without payment of just compensation.
Given the foregoing, the Court finds no more need to address the issue persistently raised by respondent SM
Prime concerning the unconstitutionality of Rule XIX of the IRR. In addition, the said issue was not among those that
the parties, during the pre-trial conference for Civil Cases No. 12-08 and No. 00-1210, agreed to submit for
resolution of the RTC. It is likewise axiomatic that the constitutionality of a law, a regulation, an ordinance or an act
will not be resolved by courts if the controversy can be, as in this case it has been, settled on other grounds.[39]

WHEREFORE, the instant Petition for Review on Certiorari is hereby DENIED. The Decision dated 25
January 2007 and Resolution dated 14 March 2007 of the Court of Appeals in CA-G.R. CV No. 76298, affirming in toto
the Joint Decision dated 29 May 2002 of the Regional Trial Court of Makati City, Branch 138, in Civil Cases No. 001208 and No. 00-1210 are hereby AFFIRMED. No costs.

SO ORDERED.

THIRD DIVISION

CHEVRON PHILIPPINES, INC. (Formerly CALTEX PHILIPPINES, INC.),

Petitioner,
- versus BASES CONVERSION DEVELOPMENT AUTHORITY and CLARK DEVELOPMENT CORPORATION,
Respondents.

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
This petition for review on certiorari assails the Decision[1] dated November 30, 2005 of the Court of Appeals
(CA) in CA-G.R. SP No. 87117, which affirmed the Resolution[2] dated August 2, 2004 and the Order[3] dated
September 30, 2004 of the Office of the President in O.P. Case No. 04-D-170.
The facts follow.
On June 28, 2002, the Board of Directors of respondent Clark Development Corporation (CDC) issued and
approved Policy Guidelines on the Movement of Petroleum Fuel to and from the Clark Special Economic Zone (CSEZ)
[4] which provided, among others, for the following fees and charges:
1. Accreditation Fee
xxxx
2. Annual Inspection Fee
xxxx
3. Royalty Fees

Suppliers delivering fuel from outside sources shall be assessed the following royalty fees:
Php0.50 per liter those delivering Coastal petroleum fuel to CSEZ
locators not sanctioned by CDC
Php1.00 per liter those bringing-in petroleum fuel (except Jet A-1)
from outside sources
xxxx
4. Gate Pass Fee
x x x x[5]
The above policy guidelines were implemented effective July 27, 2002. On October 1, 2002, CDC sent a
letter[6] to herein petitioner Chevron Philippines, Inc. (formerly Caltex Philippines, Inc.), a domestic corporation
which has been supplying fuel to Nanox Philippines, a locator inside the CSEZ since 2001, informing the petitioner
that a royalty fee of P0.50 per liter shall be assessed on its deliveries to Nanox Philippines effective August 1, 2002.
Thereafter, on October 21, 2002 a Statement of Account[7] was sent by CDC billing the petitioner for royalty fees in
the amount of P115,000.00 for its fuel sales from Coastal depot to Nanox Philippines from August 1-31 to September
3-21, 2002.
Claiming that nothing in the law authorizes CDC to impose royalty fees or any fees based on a per unit
measurement of any commodity sold within the special economic zone, petitioner sent a letter[8] dated October 30,
2002 to the President and Chief Executive Officer of CDC, Mr. Emmanuel Y. Angeles, to protest the assessment for
royalty fees. Petitioner nevertheless paid the said fees under protest on November 4, 2002.
On August 18, 2003, CDC again wrote a letter[9] to petitioner regarding the latters unsettled royalty fees
covering the period of December 2002 to July 2003. Petitioner responded through a letter[10] dated September 8,
2003 reiterating its continuing objection over the assessed royalty fees and requested a refund of the amount paid
under protest on November 4, 2002. The letter also asked CDC to revoke the imposition of such royalty fees. The
request was denied by CDC in a letter[11] dated September 29, 2003.
Petitioner elevated its protest before respondent Bases Conversion Development Authority (BCDA) arguing that
the royalty fees imposed had no reasonable relation to the probable expenses of regulation and that the imposition
on a per unit measurement of fuel sales was for a revenue generating purpose, thus, akin to a tax. The protest was
however denied by BCDA in a letter[12] dated March 3, 2004.
Petitioner appealed to the Office of the President which dismissed[13] the appeal for lack of merit on August 2,
2004 and denied[14] petitioners motion for reconsideration thereof on September 30, 2004.
Aggrieved, petitioner elevated the case to the CA which likewise dismissed[15] the appeal for lack of merit on
November 30, 2005 and denied[16] the motion for reconsideration on July 26, 2006.
The CA held that in imposing the challenged royalty fees, respondent CDC was exercising its right to regulate
the flow of fuel into CSEZ, which is bolstered by the fact that it possesses exclusive right to distribute fuel within
CSEZ pursuant to its Joint Venture Agreement (JVA)[17] with Subic Bay Metropolitan Authority (SBMA) and Coastal
Subic Bay Terminal, Inc. (CSBTI) dated April 11, 1996. The appellate court also found that royalty fees were assessed
on fuel delivered, not on the sale, by petitioner and that the basis of such imposition was petitioners delivery
receipts to Nanox Philippines. The fact that revenue is incidentally also obtained does not make the imposition a tax

as long as the primary purpose of such imposition is regulation.[18]

Petitioner filed a motion for reconsideration but the CA denied the same in its Resolution[19] dated July 26,
2006.
Hence, this petition raising the following grounds:

I. THE ISSUE RAISED BEFORE THE COURT A QUO IS A QUESTION OF SUBSTANCE NOT HERETOFORE
DETERMINED BY THE HONORABLE SUPREME COURT.

II. THE RULING OF THE COURT OF APPEALS THAT THE CDC HAS THE POWER TO IMPOSE THE QUESTIONED
ROYALTY FEES IS CONTRARY TO LAW.

III. THE COURT OF APPEALS WAS MANIFESTLY MISTAKEN AND COMMITTED GRAVE ABUSE OF DISCRETION AND A
CLEAR MISUNDERSTANDING OF FACTS WHEN IT RULED CONTRARY TO THE EVIDENCE THAT: (i) THE QUESTIONED
ROYALTY FEE IS PRIMARILY FOR REGULATION; AND (ii) ANY REVENUE EARNED THEREFROM IS MERELY INCIDENTAL
TO THE PURPOSE OF REGULATION.

IV. THE COURT OF APPEALS FAILED TO GIVE DUE WEIGHT AND CONSIDERATION TO THE EVIDENCE PRESENTED
BY CPI SUCH AS THE LETTERS COMING FROM RESPONDENT CDC ITSELF PROVING THAT THE QUESTIONED ROYALTY
FEES ARE IMPOSED ON THE BASIS OF FUEL SALES (NOT DELIVERY OF FUEL) AND NOT FOR REGULATION BUT PURELY
FOR INCOME GENERATION, I.E. AS PRICE OR CONSIDERATION FOR THE RIGHT TO MARKET AND DISTRIBUTE FUEL
INSIDE THE CSEZ.[20]

Petitioner argues that CDC does not have any power to impose royalty fees on sale of fuel inside the CSEZ on
the basis of purely income generating functions and its exclusive right to market and distribute goods inside the
CSEZ. Such imposition of royalty fees for revenue generating purposes would amount to a tax, which the
respondents have no power to impose. Petitioner stresses that the royalty fee imposed by CDC is not regulatory in
nature but a revenue generating measure to increase its profits and to further enhance its exclusive right to market
and distribute fuel in CSEZ.[21]
Petitioner would also like this Court to note that the fees imposed, assuming arguendo they are regulatory in
nature, are unreasonable and are grossly in excess of regulation costs. It adds that the amount of the fees should be
presumed to be unreasonable and that the burden of proving that the fees are not unreasonable lies with the
respondents.[22]
On the part of the respondents, they argue that the purpose of the royalty fees is to regulate the flow of fuel to
and from the CSEZ. Such being its main purpose, and revenue (if any) just an incidental product, the imposition
cannot be considered a tax. It is their position that the regulation is a valid exercise of police power since it is aimed
at promoting the general welfare of the public. They claim that being the administrator of the CSEZ, CDC is
responsible for the safe distribution of fuel products inside the CSEZ.[23]
The petition has no merit.

In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the
implemented measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though the
measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it is
deemed a regulation and an exercise of the police power of the state, even though incidentally, revenue is
generated. Thus, in Gerochi v. Department of Energy,[24] the Court stated:
The conservative and pivotal distinction between these two (2) 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.

In the case at bar, we hold that the subject royalty fee was imposed primarily for regulatory purposes, and not
for the generation of income or profits as petitioner claims. The Policy Guidelines on the Movement of Petroleum
Fuel to and from the Clark Special Economic Zone[25] provides:
DECLARATION OF POLICY

It is hereby declared the policy of CDC to develop and maintain the Clark Special Economic Zone (CSEZ)
as a highly secured zone free from threats of any kind, which could possibly endanger the lives and properties of
locators, would-be investors, visitors, and employees.
It is also declared the policy of CDC to operate and manage the CSEZ as a separate customs territory ensuring
free flow or movement of goods and capital within, into and exported out of the CSEZ.[26] (Emphasis
supplied.)

From the foregoing, it can be gleaned that the Policy Guidelines was issued, first and foremost, to ensure the
safety, security, and good condition of the petroleum fuel industry within the CSEZ. The questioned royalty fees
form part of the regulatory framework to ensure free flow or movement of petroleum fuel to and from the CSEZ. The
fact that respondents have the exclusive right to distribute and market petroleum products within CSEZ pursuant to
its JVA with SBMA and CSBTI does not diminish the regulatory purpose of the royalty fee for fuel products supplied
by petitioner to its client at the CSEZ.
As pointed out by the respondents in their Comment, from the time the JVA took effect up to the time CDC
implemented its Policy Guidelines on the Movement of Petroleum Fuel to and from the CSEZ, suppliers/distributors
were allowed to bring in petroleum products inside CSEZ without any charge at all. But this arrangement clearly
negates CDCs mandate under the JVA as exclusive distributor of CSBTIs fuel products within CSEZ and respondents
ownership of the Subic-Clark Pipeline.[27] On this score, respondents were justified in charging royalty fees on fuel
delivered by outside suppliers.
However, it was erroneous for petitioner to argue that such exclusive right of respondent CDC to market and
distribute fuel inside CSEZ is the sole basis of the royalty fees imposed under the Policy Guidelines. Being the
administrator of CSEZ, the responsibility of ensuring the safe, efficient and orderly distribution of fuel products
within the Zone falls on CDC. Addressing specific concerns demanded by the nature of goods or products involved is
encompassed in the range of services which respondent CDC is expected to provide under the law, in pursuance of
its general power of supervision and control over the movement of all supplies and equipment into the CSEZ.
Section 2 of Executive Order No. 80[28] provides:

SEC. 2. Powers and Functions of the Clark Development Corporation. The BCDA, as the incorporator and
holding company of its Clark subsidiary, shall determine the powers and functions of the CDC. Pursuant to Section
15 of RA 7227, the CDC shall have the specific powers of the Export Processing Zone Authority as provided for in
Section 4 of Presidential Decree No. 66 (1972) as amended.

Among those specific powers granted to CDC under Section 4 of Presidential Decree No. 66 are:
(a) To operate, administer and manage the export processing zone established in the Port of Mariveles, Bataan,
and such other export processing zones as may be established under this Decree; to construct, acquire, own, lease,
operate and maintain infrastructure facilities, factory building, warehouses, dams, reservoir, water distribution,
electric light and power system, telecommunications and transportation, or such other facilities and services
necessary or useful in the conduct of commerce or in the attainment of the purposes and objectives of this Decree;
xxxx
(g) To fix, assess and collect storage charges and fees, including rentals for the lease, use or occupancy of
lands, buildings, structure, warehouses, facilities and other properties owned and administered by the Authority;
and to fix and collect the fees and charges for the issuance of permits, licenses and the rendering of
services not enumerated herein, the provisions of law to the contrary notwithstanding;
(h) For the due and effective exercise of the powers conferred by law and to the extend (sic) [extent] requisite
therefor, to exercise exclusive jurisdiction and sole police authority over all areas owned or administered by the
Authority. For this purpose, the Authority shall have supervision and control over the bringing in or taking
out of the Zone, including the movement therein, of all cargoes, wares, articles, machineries, equipment,
supplies or merchandise of every type and description;
x x x x (Emphasis supplied.)

In relation to the regulatory purpose of the imposed fees, this Court in Progressive Development Corporation v.
Quezon City,[29] stated that x x x the imposition questioned must relate to an occupation or activity that so
engages the public interest in health, morals, safety and development as to require regulation for the protection and
promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of
regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well.
In the case at bar, there can be no doubt that the oil industry is greatly imbued with public interest as it vitally
affects the general welfare.[30] In addition, fuel is a highly combustible product which, if left unchecked, poses a
serious threat to life and property. Also, the reasonable relation between the royalty fees imposed on a per liter
basis and the regulation sought to be attained is that the higher the volume of fuel entering CSEZ, the greater the
extent and frequency of supervision and inspection required to ensure safety, security, and order within the Zone.
Respondents submit that increased administrative costs were triggered by security risks that have recently
emerged, such as terrorist strikes in airlines and military/government facilities. Explaining the regulatory feature of
the charges imposed under the Policy Guidelines, then BCDA President Rufo Colayco in his letter dated March 3,
2004 addressed to petitioners Chief Corporate Counsel, stressed:

The need for regulation is more evident in the light of the 9/11 tragedy considering that what is being moved
from one location to another are highly combustible fuel products that could cause loss of lives and damage to
properties, hence, a set of guidelines was promulgated on 28 June 2002. It must be emphasized also that greater
security measure must be observed in the CSEZ because of the presence of the airport which is a vital public

infrastructure.

We are therefore constrained to sustain the imposition of the royalty fees on deliveries of CPIs fuel products to
Nanox Philippines.[31]
As to the issue of reasonableness of the amount of the fees, we hold that no evidence was adduced by the
petitioner to show that the fees imposed are unreasonable.
Administrative issuances have the force and effect of law.[32] They benefit from the same presumption of
validity and constitutionality enjoyed by statutes. These two precepts place a heavy burden upon any party
assailing governmental regulations.[33] Petitioners plain allegations are simply not enough to overcome the
presumption of validity and reasonableness of the subject imposition.
WHEREFORE, the petition is DENIED for lack of merit and the Decision of the Court of Appeals dated
November 30, 2005 in CA-G.R. SP No. 87117 is hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 143855

September 21, 2010

REPRESENTATIVES GERARDO S. ESPINA, ORLANDO FUA, JR., PROSPERO AMATONG,

ROBERT ACE S. BARBERS, RAUL M. GONZALES, PROSPERO PICHAY, JUAN MIGUEL ZUBIRI and
FRANKLIN
BAUTISTA,
Petitioners,
vs.
HON. RONALDO ZAMORA, JR. (Executive Secretary), HON. MAR ROXAS (Secretary of Trade
and Industry), HON. FELIPE MEDALLA (Secretary of National Economic and Development
Authority), GOV. RAFAEL BUENAVENTURA (Bangko Sentral ng Pilipinas) and HON. LILIA
BAUTISTA (Chairman, Securities and Exchange Commission), Respondents.
DECISION
ABAD, J.:
This case calls upon the Court to exercise its power of judicial review and determine the
constitutionality of the Retail Trade Liberalization Act of 2000, which has been assailed as in breach of
the constitutional mandate for the development of a self-reliant and independent national economy
effectively controlled by Filipinos.
The Facts and the Case
On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, also known
as the Retail Trade Liberalization Act of 2000. It expressly repealed R.A. 1180, which absolutely
prohibited foreign nationals from engaging in the retail trade business. R.A. 8762 now allows them to
do so under four categories:
Category ALess than
US$2,500,000.00Exclusively for Filipino citizens and corporations wholly owned by Filipino
citizens.Category BUS$2,500,000.00 up but less than US$7,500,000.00For the first two years
of R.A. 8762s effectivity, foreign ownership is allowed up to 60%. After the two-year period,
100% foreign equity shall be allowed.Category CUS$7,500,000.00 or moreMay be wholly
owned by foreigners. Foreign investments for establishing a store in Categories B and C shall
not be less than the equivalent in Philippine Pesos of US$830,000.00.Category
DUS$250,000.00 per store of foreign enterprises specializing in high-end or luxury
productsMay be wholly owned by foreigners.
R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now reside in
the Philippines, to engage in the retail trade business with the same rights as Filipino citizens.
On October 11, 2000 petitioners ***Magtanggol T. Gunigundo I, Michael T. Defensor, Gerardo S.
Espina, Benjamin S. Lim, Orlando Fua, Jr., Prospero Amatong, Sergio Apostol, Robert Ace S. Barbers,
Enrique Garcia, Jr., Raul M. Gonzales, Jaime Jacob, Apolinario Lozada, Jr., Leonardo Montemayor, Ma.
Elena Palma-Gil, Prospero Pichay, Juan Miguel Zubiri and Franklin Bautista, all members of the House of
Representatives, filed the present petition, assailing the constitutionality of R.A. 8762 on the following
grounds:
First, the law runs afoul of Sections 9, 19, and 20 of Article II of the Constitution which
enjoins the State to place the national economy under the control of Filipinos to achieve equal
distribution of opportunities, promote industrialization and full employment, and protect
Filipino enterprise against unfair competition and trade policies.
Second, the implementation of R.A. 8762 would lead to alien control of the retail trade,
which taken together with alien dominance of other areas of business, would result in the loss
of effective Filipino control of the economy.
Third, foreign retailers like Walmart and K-Mart would crush Filipino retailers and sari-sari
store vendors, destroy self-employment, and bring about more unemployment.
Fourth, the World Bank-International Monetary Fund had improperly imposed the passage
of R.A. 8762 on the government as a condition for the release of certain loans.

Fifth, there is a clear and present danger that the law would promote monopolies or
combinations in restraint of trade.
Respondents Executive Secretary Ronaldo Zamora, Jr., Trade and Industry Secretary Mar Roxas,
National Economic and Development Authority (NEDA) Secretary Felipe Medalla, Bangko Sentral ng
Pilipinas Gov. Rafael Buenaventura, and Securities and Exchange Commission Chairman Lilia Bautista
countered that:
First, petitioners have no legal standing to file the petition. They cannot invoke the fact
that they are taxpayers since R.A. 8762 does not involve the disbursement of public funds. Nor
can they invoke the fact that they are members of Congress since they made no claim that the
law infringes on their right as legislators.
Second, the petition does not involve any justiciable controversy. Petitioners of course
claim that, as members of Congress, they represent the small retail vendors in their respective
districts but the petition does not allege that the subject law violates the rights of those
vendors.
Third, petitioners have failed to overcome the presumption of constitutionality of R.A.
8762. Indeed, they could not specify how the new law violates the constitutional provisions
they cite. Sections 9, 19, and 20 of Article II of the Constitution are not self-executing
provisions that are judicially demandable.
Fourth, the Constitution mandates the regulation but not the prohibition of foreign
investments. It directs Congress to reserve to Filipino citizens certain areas of investments
upon the recommendation of the NEDA and when the national interest so dictates. But the
Constitution leaves to the discretion of the Congress whether or not to make such reservation.
It does not prohibit Congress from enacting laws allowing the entry of foreigners into certain
industries not reserved by the Constitution to Filipino citizens.
The Issues Presented
Simplified, the case presents two issues:
1. Whether or not petitioner lawmakers have the legal standing to challenge the
constitutionality of R.A. 8762; and
2. Whether or not R.A. 8762 is unconstitutional.
The Courts Ruling
One. The long settled rule is that he who challenges the validity of a law must have a standing to
do so.1 Legal standing or locus standi refers to the right of a party to come to a court of justice and
make such a challenge. More particularly, standing refers to his personal and substantial interest in
that he has suffered or will suffer direct injury as a result of the passage of that law. 2 To put it another
way, he must show that he has been or is about to be denied some right or privilege to which he is
lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the law
he complains of.3
Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act
prejudices petitioners or inflicts damages on them, either as taxpayers 4 or as legislators.5 Still the
Court will resolve the question they raise since the rule on standing can be relaxed for nontraditional
plaintiffs like ordinary citizens, taxpayers, and legislators when as in this case the public interest so
requires or the matter is of transcendental importance, of overarching significance to society, or of
paramount public interest.6
Two. Petitioners mainly argue that R.A. 8762 violates the mandate of the 1987 Constitution for the
State to develop a self-reliant and independent national economy effectively controlled by Filipinos.
They invoke the provisions of the Declaration of Principles and State Policies under Article II of the
1987 Constitution, which read as follows:

Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity
and independence of the nation and free the people from poverty through policies that provide
adequate social services, promote full employment, a rising standard of living, and an improved quality
of life for all.
xxxx
Section 19. The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos.
Section 20. The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.
Petitioners also invoke the provisions of the National Economy and Patrimony under Article XII of
the 1987 Constitution, which reads:
Section 10. The Congress shall, upon recommendation of the economic and planning agency, when
the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at
least sixty per centum of whose capital is owned by such citizens, or such higher percentage as
Congress may prescribe, certain areas of investments. The Congress shall enact measures that will
encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony,
the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities.
xxxx
Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and
locally produced goods, and adopt measures that help make them competitive.
Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all
forms and arrangements of exchange on the basis of equality and reciprocity.
But, as the Court explained in Taada v. Angara,7 the provisions of Article II of the 1987
Constitution, the declarations of principles and state policies, are not self-executing. Legislative failure
to pursue such policies cannot give rise to a cause of action in the courts.
The Court further explained in Taada that Article XII of the 1987 Constitution lays down the ideals
of economic nationalism: (1) by expressing preference in favor of qualified Filipinos in the grant of
rights, privileges and concessions covering the national economy and patrimony and in the use of
Filipino labor, domestic materials and locally-produced goods; (2) by mandating the State to adopt
measures that help make them competitive; and (3) by requiring the State to develop a self-reliant and
independent national economy effectively controlled by Filipinos. 8ten.lihpwal
In other words, while Section 19, Article II of the 1987 Constitution requires the development of a
self-reliant and independent national economy effectively controlled by Filipino entrepreneurs, it does
not impose a policy of Filipino monopoly of the economic environment. The objective is simply to
prohibit foreign powers or interests from maneuvering our economic policies and ensure that Filipinos
are given preference in all areas of development.
Indeed, the 1987 Constitution takes into account the realities of the outside world as it requires the
pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity; and speaks of industries which are competitive in
both domestic and foreign markets as well as of the protection of Filipino enterprises against unfair
foreign competition and trade practices. Thus, while the Constitution mandates a bias in favor of
Filipino goods, services, labor and enterprises, it also recognizes the need for business exchange with
the rest of the world on the bases of equality and reciprocity and limits protection of Filipino
enterprises only against foreign competition and trade practices that are unfair. 9

In other words, the 1987 Constitution does not rule out the entry of foreign investments, goods, and
services. While it does not encourage their unlimited entry into the country, it does not prohibit them
either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign
competition that is unfair. 10 The key, as in all economies in the world, is to strike a balance between
protecting local businesses and allowing the entry of foreign investments and services.1avvphi1
More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion to
reserve to Filipinos certain areas of investments upon the recommendation of the NEDA and when the
national interest requires. Thus, Congress can determine what policy to pass and when to pass it
depending on the economic exigencies. It can enact laws allowing the entry of foreigners into certain
industries not reserved by the Constitution to Filipino citizens. In this case, Congress has decided to
open certain areas of the retail trade business to foreign investments instead of reserving them
exclusively to Filipino citizens. The NEDA has not opposed such policy.
The control and regulation of trade in the interest of the public welfare is of course an exercise of
the police power of the State. A persons right to property, whether he is a Filipino citizen or foreign
national, cannot be taken from him without due process of law. In 1954, Congress enacted the Retail
Trade Nationalization Act or R.A. 1180 that restricts the retail business to Filipino citizens. In denying
the petition assailing the validity of such Act for violation of the foreigners right to substantive due
process of law, the Supreme Court held that the law constituted a valid exercise of police power. 11 The
State had an interest in preventing alien control of the retail trade and R.A. 1180 was reasonably
related to that purpose. That law is not arbitrary.
Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint on the
foreigners right to property or to engage in an ordinarily lawful business, it cannot be said that the law
amounts to a denial of the Filipinos right to property and to due process of law. Filipinos continue to
have the right to engage in the kinds of retail business to which the law in question has permitted the
entry of foreign investors.
Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save
when it blatantly violates the Constitution. But as the Court has said, there is no showing that the law
has contravened any constitutional mandate. The Court is not convinced that the implementation of
R.A. 8762 would eventually lead to alien control of the retail trade business. Petitioners have not
mustered any concrete and strong argument to support its thesis. The law itself has provided strict
safeguards on foreign participation in that business. Thus
First, aliens can only engage in retail trade business subject to the categories above-enumerated;
Second, only nationals from, or juridical entities formed or incorporated in countries which allow the
entry of Filipino retailers shall be allowed to engage in retail trade business; and Third, qualified foreign
retailers shall not be allowed to engage in certain retailing activities outside their accredited stores
through the use of mobile or rolling stores or carts, the use of sales representatives, door-to-door
selling, restaurants and sari-sari stores and such other similar retailing activities.
In sum, petitioners have not shown how the retail trade liberalization has prejudiced and can
prejudice the local small and medium enterprises since its implementation about a decade ago.
WHEREFORE, the Court DISMISSES the petition for lack of merit. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 161107

March 12, 2013

HON. MA. LOURDES C. FERNANDO, in her capacity as City Mayor of Marikina City,
JOSEPHINE C. EVANGELIST A, in her capacity as Chief, Permit Division, Office of the City

Engineer, and ALFONSO ESPIRITU, in his capacity as City Engineer of Marikina City,
Petitioners,
vs.
ST. SCHOLASTICA'S COLLEGE and ST. SCHOLASTICA'S ACADEMY-MARIKINA, INC.,
Respondents.
DECISION
MENDOZA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court, which

seeks to set aside the December 1, 2003 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No.
75691.
The Facts
Respondents St. Scholasticas College (SSC) and St. Scholasticas Academy-Marikina, Inc. (SSAMarikina) are educational institutions organized under the laws of the Republic of the Philippines, with
principal offices and business addresses at Leon Guinto Street, Malate, Manila, and at West Drive,
Marikina Heights, Marikina City, respectively. 2
Respondent SSC is the owner of four (4) parcels of land measuring a total of 56,306.80 square
meters, located in Marikina Heights and covered by Transfer Certificate Title (TCT) No. 91537. Located
within the property are SSA-Marikina, the residence of the sisters of the Benedictine Order, the
formation house of the novices, and the retirement house for the elderly sisters. The property is
enclosed by a tall concrete perimeter fence built some thirty (30) years ago. Abutting the fence along
the West Drive are buildings, facilities, and other improvements. 3
The petitioners are the officials of the City Government of Marikina. On September 30, 1994, the
Sangguniang Panlungsod of Marikina City enacted Ordinance No. 192, 4 entitled "Regulating the
Construction of Fences and Walls in the Municipality of Marikina." In 1995 and 1998, Ordinance Nos.
2175 and 2006 were enacted to amend Sections 7 and 5, respectively. Ordinance No. 192, as
amended, is reproduced hereunder, as follows:
ORDINANCE No. 192
Series of 1994
ORDINANCE REGULATING THE CONSTRUCTION OF FENCES AND WALLS IN THE
MUNICIPALITY OF MARIKINA
WHEREAS, under Section 447.2 of Republic Act No. 7160 otherwise known as the Local
Government Code of 1991 empowers the Sangguniang Bayan as the local legislative
body of the municipality to "x x x Prescribe reasonable limits and restraints on the use of
property within the jurisdiction of the municipality, x x x";
WHEREAS the effort of the municipality to accelerate its economic and physical
development, coupled with urbanization and modernization, makes imperative the
adoption of an ordinance which shall embody up-to-date and modern technical design in
the construction of fences of residential, commercial and industrial buildings;
WHEREAS, Presidential Decree No. 1096, otherwise known as the National Building Code
of the Philippines, does not adequately provide technical guidelines for the construction
of fences, in terms of design, construction, and criteria;
WHEREAS, the adoption of such technical standards shall provide more efficient and
effective enforcement of laws on public safety and security;
WHEREAS, it has occurred in not just a few occasions that high fences or walls did not
actually discourage but, in fact, even protected burglars, robbers, and other lawless
elements from the view of outsiders once they have gained ingress into these walls,

hence, fences not necessarily providing security, but becomes itself a "security problem";
WHEREAS, to discourage, suppress or prevent the concealment of prohibited or unlawful
acts earlier enumerated, and as guardian of the people of Marikina, the municipal
government seeks to enact and implement rules and ordinances to protect and promote
the health, safety and morals of its constituents;
WHEREAS, consistent too, with the "Clean and Green Program" of the government,
lowering of fences and walls shall encourage people to plant more trees and ornamental
plants in their yards, and when visible, such trees and ornamental plants are expected to
create an aura of a clean, green and beautiful environment for Marikeos;
WHEREAS, high fences are unsightly that, in the past, people planted on sidewalks to
"beautify" the faade of their residences but, however, become hazards and obstructions
to pedestrians;
WHEREAS, high and solid walls as fences are considered "un-neighborly" preventing
community members to easily communicate and socialize and deemed to create "boxedin" mentality among the populace;
WHEREAS, to gather as wide-range of opinions and comments on this proposal, and as a
requirement of the Local Government Code of 1991 (R.A. 7160), the Sangguniang Bayan
of Marikina invited presidents or officers of homeowners associations, and commercial
and industrial establishments in Marikina to two public hearings held on July 28, 1994 and
August 25, 1994;
WHEREAS, the rationale and mechanics of the proposed ordinance were fully presented
to the attendees and no vehement objection was presented to the municipal government;
NOW, THEREFORE, BE IT ORDAINED BY THE SANGGUINANG BAYAN OF MARIKINA IN
SESSION DULY ASSEMBLED:
Section 1. Coverage: This Ordinance regulates the construction of all fences, walls and
gates on lots classified or used for residential, commercial, industrial, or special purposes.
Section 2. Definition of Terms:
a. Front Yard refers to the area of the lot fronting a street, alley or public
thoroughfare.
b. Back Yard the part of the lot at the rear of the structure constructed
therein.
c. Open fence type of fence which allows a view of "thru-see" of the inner
yard and the improvements therein. (Examples: wrought iron, wooden lattice,
cyclone wire)
d. Front gate refers to the gate which serves as a passage of persons or
vehicles fronting a street, alley, or public thoroughfare.
Section 3. The standard height of fences or walls allowed under this ordinance are as
follows:
(1) Fences on the front yard shall be no more than one (1) meter in height.
Fences in excess of one (1) meter shall be of an open fence type, at least eighty
percent (80%) see-thru; and
(2) Fences on the side and back yard shall be in accordance with the
provisions of P.D. 1096 otherwise known as the National Building Code.
Section 4. No fence of any kind shall be allowed in areas specifically reserved or

classified as parks.
Section 5. In no case shall walls and fences be built within the five (5) meter parking
area allowance located between the front monument line and the building line of
commercial and industrial establishments and educational and religious institutions. 7
Section 6. Exemption.
(1) The Ordinance does not cover perimeter walls of residential subdivisions.
(2) When public safety or public welfare requires, the Sangguniang Bayan may
allow the construction and/or maintenance of walls higher than as prescribed
herein and shall issue a special permit or exemption.
Section 7. Transitory Provision. Real property owners whose existing fences and walls do
not conform to the specifications herein are allowed adequate period of time from the
passage of this Ordinance within which to conform, as follows:
(1) Residential houses eight (8) years
(2) Commercial establishments five (5) years
(3) Industrial establishments three (3) years
(4) Educational institutions five (5) years8 (public and privately owned)
Section 8. Penalty. Walls found not conforming to the provisions of this Ordinance shall
be demolished by the municipal government at the expense of the owner of the lot or
structure.
Section 9. The Municipal Engineering Office is tasked to strictly implement this
ordinance, including the issuance of the necessary implementing guidelines, issuance of
building and fencing permits, and demolition of non-conforming walls at the lapse of the
grace period herein provided.
Section 10. Repealing Clause. All existing Ordinances and Resolutions, Rules and
Regulations inconsistent with the foregoing provisions are hereby repealed, amended or
modified.
Section 11. Separability Clause. If for any reason or reasons, local executive orders,
rules and regulations or parts thereof in conflict with this Ordinance are hereby repealed
and/or modified accordingly.
Section 12. Effectivity. This ordinance takes effect after publication.
APPROVED: September 30, 1994
(Emphases supplied)
On April 2, 2000, the City Government of Marikina sent a letter to the respondents ordering them to
demolish and replace the fence of their Marikina property to make it 80% see-thru, and, at the same
time, to move it back about six (6) meters to provide parking space for vehicles to park. 9 On April 26,
2000, the respondents requested for an extension of time to comply with the directive. 10 In response,
the petitioners, through then City Mayor Bayani F. Fernando, insisted on the enforcement of the subject
ordinance.
Not in conformity, the respondents filed a petition for prohibition with an application for a writ of
preliminary injunction and temporary restraining order before the Regional Trial Court, Marikina,

Branch 273 (RTC), docketed as SCA Case No. 2000-381-MK.11

The respondents argued that the petitioners were acting in excess of jurisdiction in enforcing
Ordinance No. 192, asserting that such contravenes Section 1, Article III of the 1987 Constitution. That
demolishing their fence and constructing it six (6) meters back would result in the loss of at least
1,808.34 square meters, worth about P9,041,700.00, along West Drive, and at least 1,954.02 square
meters, worth roughly P9,770,100.00, along East Drive. It would also result in the destruction of the
garbage house, covered walk, electric house, storage house, comfort rooms, guards room, guards
post, waiting area for visitors, waiting area for students, Blessed Virgin Shrine, P.E. area, and the multipurpose hall, resulting in the permanent loss of their beneficial use. The respondents, thus, asserted
that the implementation of the ordinance on their property would be tantamount to an appropriation of
property without due process of law; and that the petitioners could only appropriate a portion of their
property through eminent domain. They also pointed out that the goal of the provisions to deter
lawless elements and criminality did not exist as the solid concrete walls of the school had served as
sufficient protection for many years. 12
The petitioners, on the other hand, countered that the ordinance was a valid exercise of police
power, by virtue of which, they could restrain property rights for the protection of public safety, health,
morals, or the promotion of public convenience and general prosperity. 13
On June 30, 2000, the RTC issued a writ of preliminary injunction, enjoining the petitioners from
implementing the demolition of the fence at SSCs Marikina property. 14
Ruling of the RTC
On the merits, the RTC rendered a Decision, 15 dated October 2, 2002, granting the petition and
ordering the issuance of a writ of prohibition commanding the petitioners to permanently desist from
enforcing or implementing Ordinance No. 192 on the respondents property.
The RTC agreed with the respondents that the order of the petitioners to demolish the fence at the
SSC property in Marikina and to move it back six (6) meters would amount to an appropriation of
property which could only be done through the exercise of eminent domain. It held that the petitioners
could not take the respondents property under the guise of police power to evade the payment of just
compensation.
It did not give weight to the petitioners contention that the parking space was for the benefit of the
students and patrons of SSA-Marikina, considering that the respondents were already providing for
sufficient parking in compliance with the standards under Rule XIX of the National Building Code.
It further found that the 80% see-thru fence requirement could run counter to the respondents
right to privacy, considering that the property also served as a residence of the Benedictine sisters,
who were entitled to some sense of privacy in their affairs. It also found that the respondents were
able to prove that the danger to security had no basis in their case. Moreover, it held that the purpose
of beautification could not be used to justify the exercise of police power.
It also observed that Section 7 of Ordinance No. 192, as amended, provided for retroactive
application. It held, however, that such retroactive effect should not impair the respondents vested
substantive rights over the perimeter walls, the six-meter strips of land along the walls, and the
building, structures, facilities, and improvements, which would be destroyed by the demolition of the
walls and the seizure of the strips of land.
The RTC also found untenable the petitioners argument that Ordinance No. 192 was a remedial or
curative statute intended to correct the defects of buildings and structures, which were brought about
by the absence or insufficiency of laws. It ruled that the assailed ordinance was neither remedial nor
curative in nature, considering that at the time the respondents perimeter wall was built, the same
was valid and legal, and the ordinance did not refer to any previous legislation that it sought to correct.
The RTC noted that the petitioners could still take action to expropriate the subject property through
eminent domain.
The RTC, thus, disposed:

WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued commanding the
respondents to permanently desist from enforcing or implementing Ordinance No. 192, Series of 1994,
as amended, on petitioners property in question located at Marikina Heights, Marikina, Metro Manila.
No pronouncement as to costs.
SO ORDERED.16
Ruling of the CA
In its December 1, 2003 Decision, the CA dismissed the petitioners appeal and affirmed the RTC
decision.
The CA reasoned out that the objectives stated in Ordinance No. 192 did not justify the exercise of
police power, as it did not only seek to regulate, but also involved the taking of the respondents
property without due process of law. The respondents were bound to lose an unquantifiable sense of
security, the beneficial use of their structures, and a total of 3,762.36 square meters of property. It,
thus, ruled that the assailed ordinance could not be upheld as valid as it clearly invaded the personal
and property rights of the respondents and "[f]or being unreasonable, and undue restraint of trade." 17
It noted that although the petitioners complied with procedural due process in enacting Ordinance
No. 192, they failed to comply with substantive due process. Hence, the failure of the respondents to
attend the public hearings in order to raise objections did not amount to a waiver of their right to
question the validity of the ordinance.
The CA also shot down the argument that the five-meter setback provision for parking was a legal
easement, the use and ownership of which would remain with, and inure to, the benefit of the
respondents for whom the easement was primarily intended. It found that the real intent of the
setback provision was to make the parking space free for use by the public, considering that such
would cease to be for the exclusive use of the school and its students as it would be situated outside
school premises and beyond the school administrations control.
In affirming the RTC ruling that the ordinance was not a curative statute, the CA found that the
petitioner failed to point out any irregularity or invalidity in the provisions of the National Building Code
that required correction or cure. It noted that any correction in the Code should be properly undertaken
by the Congress and not by the City Council of Marikina through an ordinance.
The CA, thus, disposed:
WHEREFORE, all foregoing premises considered, the instant appeal is DENIED.1wphi1 The October
2, 2002 Decision and the January 13, 2003 Order of the Regional Trial Court (RTC) of Marikina City,
Branch 273, granting petitioners-appellees petition for Prohibition in SCA Case No. 2000-381-MK are
hereby AFFIRMED.
SO ORDERED.18
Aggrieved by the decision of the CA, the petitioners are now before this Court presenting the
following
ASSIGNMENT OF ERRORS
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT
CITY ORDINANCE NO. 192, SERIES OF 1994 IS NOT A VALID EXERCISE OF POLICE POWER;
2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
AFOREMENTIONED ORDINANCE IS AN EXERCISE OF THE CITY OF THE POWER OF EMINENT
DOMAIN;
3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT
THE CITY VIOLATED THE DUE PROCESS CLAUSE IN IMPLEMENTING ORDINANCE NO. 192,

SERIES OF 1994; AND

4. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE

ABOVE-MENTIONED ORDINANCE CANNOT BE GIVEN RETROACTIVE APPLICATION. 19

In this case, the petitioners admit that Section 5 of the assailed ordinance, pertaining to the fivemeter setback requirement is, as held by the lower courts, invalid. 20 Nonetheless, the petitioners
argue that such invalidity was subsequently cured by Zoning Ordinance No. 303, series of 2000. They
also contend that Section 3, relating to the 80% see-thru fence requirement, must be complied with, as
it remains to be valid.
Ruling of the Court
The ultimate question before the Court is whether Sections 3.1 and 5 of Ordinance No. 192 are valid
exercises of police power by the City Government of Marikina.
"Police power is the plenary power vested in the legislature to make statutes and ordinances to
promote the health, morals, peace, education, good order or safety and general welfare of the
people."21 The State, through the legislature, has delegated the exercise of police power to local
government units, as agencies of the State. This delegation of police power is embodied in Section
1622 of the Local Government Code of 1991 (R.A. No. 7160), known as the General Welfare Clause, 23
which has two branches. "The first, known as the general legislative power, authorizes the municipal
council to enact ordinances and make regulations not repugnant to law, as may be necessary to carry
into effect and discharge the powers and duties conferred upon the municipal council by law. The
second, known as the police power proper, authorizes the municipality to enact ordinances as may be
necessary and proper for the health and safety, prosperity, morals, peace, good order, comfort, and
convenience of the municipality and its inhabitants, and for the protection of their property." 24
White Light Corporation v. City of Manila,25 discusses the test of a valid ordinance:
The test of a valid ordinance is well established. A long line of decisions including City of Manila 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 pass 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. 26
Ordinance No. 192 was passed by the City Council of Marikina in the apparent exercise of its police
power. To successfully invoke the exercise of police power as the rationale for the enactment of an
ordinance and to free it from the imputation of constitutional infirmity, two tests have been used by
the Court the rational relationship test and the strict scrutiny test:
We ourselves have often applied the rational basis test mainly in analysis of equal protection
challenges. Using the rational basis examination, laws or ordinances are upheld if they rationally
further a legitimate governmental interest. Under intermediate review, governmental interest is
extensively examined and the availability of less restrictive measures is considered. Applying strict
scrutiny, the focus is on the presence of compelling, rather than substantial, governmental interest and
on the absence of less restrictive means for achieving that interest. 27
Even without going to a discussion of the strict scrutiny test, Ordinance No. 192, series of 1994
must be struck down for not being reasonably necessary to accomplish the Citys purpose. More
importantly, it is oppressive of private rights.
Under the rational relationship test, an ordinance must pass the following requisites as discussed in
Social Justice Society (SJS) v. Atienza, Jr.:28
As with the State, local governments may be considered as having properly exercised their police

power only if the following requisites are met: (1) the interests of the public generally, as distinguished
from those of a particular class, require its exercise and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. In short,
there must be a concurrence of a lawful subject and lawful method. 29
Lacking a concurrence of these two requisites, the police power measure shall be struck down as an
arbitrary intrusion into private rights and a violation of the due process clause. 30
Section 3.1 and 5 of the assailed ordinance are pertinent to the issue at hand, to wit:
Section 3. The standard height of fences of walls allowed under this ordinance are as follows:
(1) Fences on the front yard shall be no more than one (1) meter in height. Fences in excess of
one (1) meter shall be an open fence type, at least eighty percent (80%) see-thru;
xxx

xxx

xxx

Section 5. In no case shall walls and fences be built within the five (5) meter parking area allowance
located between the front monument line and the building line of commercial and industrial
establishments and educational and religious institutions.
The respondents, thus, sought to prohibit the petitioners from requiring them to (1) demolish their
existing concrete wall, (2) build a fence (in excess of one meter) which must be 80% see-thru, and (3)
build the said fence six meters back in order to provide a parking area.
Setback Requirement
The Court first turns its attention to Section 5 which requires the five-meter setback of the fence to
provide for a parking area. The petitioners initially argued that the ownership of the parking area to be
created would remain with the respondents as it would primarily be for the use of its students and
faculty, and that its use by the public on non-school days would only be incidental. In their Reply,
however, the petitioners admitted that Section 5 was, in fact, invalid for being repugnant to the
Constitution.31
The Court agrees with the latter position.
The Court joins the CA in finding that the real intent of the setback requirement was to make the
parking space free for use by the public, considering that it would no longer be for the exclusive use of
the respondents as it would also be available for use by the general public. Section 9 of Article III of the
1987 Constitution, a provision on eminent domain, provides that private property shall not be taken for
public use without just compensation.
The petitioners cannot justify the setback by arguing that the ownership of the property will
continue to remain with the respondents. It is a settled rule that neither the acquisition of title nor the
total destruction of value is essential to taking. In fact, it is usually in cases where the title remains
with the private owner that inquiry should be made to determine whether the impairment of a property
is merely regulated or amounts to a compensable taking. 32 The Court is of the view that the
implementation of the setback requirement would be tantamount to a taking of a total of 3,762.36
square meters of the respondents private property for public use without just compensation, in
contravention to the Constitution.
Anent the objectives of prevention of concealment of unlawful acts and "un-neighborliness," it is
obvious that providing for a parking area has no logical connection to, and is not reasonably necessary
for, the accomplishment of these goals.
Regarding the beautification purpose of the setback requirement, it has long been settled that the
State may not, under the guise of police power, permanently divest owners of the beneficial use of
their property solely to preserve or enhance the aesthetic appearance of the community. 33 The Court,
thus, finds Section 5 to be unreasonable and oppressive as it will substantially divest the respondents
of the beneficial use of their property solely for aesthetic purposes. Accordingly, Section 5 of Ordinance

No. 192 is invalid.

The petitioners, however, argue that the invalidity of Section 5 was properly cured by Zoning
Ordinance No. 303,34 Series of 2000, which classified the respondents property to be within an
institutional zone, under which a five-meter setback has been required.
The petitioners are mistaken. Ordinance No. 303, Series of 2000, has no bearing to the case at
hand.
The Court notes with displeasure that this argument was only raised for the first time on appeal in
this Court in the petitioners Reply. Considering that Ordinance No. 303 was enacted on December 20,
2000, the petitioners could very well have raised it in their defense before the RTC in 2002. The settled
rule in this jurisdiction is that a party cannot change the legal theory of this case under which the
controversy was heard and decided in the trial court. It should be the same theory under which the
review on appeal is conducted. Points of law, theories, issues, and arguments not adequately brought
to the attention of the lower court will not be ordinarily considered by a reviewing court, inasmuch as
they cannot be raised for the first time on appeal. This will be offensive to the basic rules of fair play,
justice, and due process.35
Furthermore, the two ordinances have completely different purposes and subjects. Ordinance No.
192 aims to regulate the construction of fences, while Ordinance No. 303 is a zoning ordinance which
classifies the city into specific land uses. In fact, the five-meter setback required by Ordinance No. 303
does not even appear to be for the purpose of providing a parking area.
By no stretch of the imagination, therefore, can Ordinance No. 303, "cure" Section 5 of Ordinance
No. 192.
In any case, the clear subject of the petition for prohibition filed by the respondents is Ordinance
No. 192 and, as such, the precise issue to be determined is whether the petitioners can be prohibited
from enforcing the said ordinance, and no other, against the respondents.
80% See-Thru Fence Requirement
The petitioners argue that while Section 5 of Ordinance No. 192 may be invalid, Section 3.1 limiting
the height of fences to one meter and requiring fences in excess of one meter to be at least 80% seethru, should remain valid and enforceable against the respondents.
The Court cannot accommodate the petitioner.
For Section 3.1 to pass the rational relationship test, the petitioners must show the reasonable
relation between the purpose of the police power measure and the means employed for its
accomplishment, for even under the guise of protecting the public interest, personal rights and those
pertaining to private property will not be permitted to be arbitrarily invaded. 36
The principal purpose of Section 3.1 is "to discourage, suppress or prevent the concealment of
prohibited or unlawful acts." The ultimate goal of this objective is clearly the prevention of crime to
ensure public safety and security. The means employed by the petitioners, however, is not reasonably
necessary for the accomplishment of this purpose and is unduly oppressive to private rights. The
petitioners have not adequately shown, and it does not appear obvious to this Court, that an 80% seethru fence would provide better protection and a higher level of security, or serve as a more
satisfactory criminal deterrent, than a tall solid concrete wall. It may even be argued that such
exposed premises could entice and tempt would-be criminals to the property, and that a see-thru
fence would be easier to bypass and breach. It also appears that the respondents concrete wall has
served as more than sufficient protection over the last 40 years. `
As to the beautification purpose of the assailed ordinance, as previously discussed, the State may
not, under the guise of police power, infringe on private rights solely for the sake of the aesthetic
appearance of the community. Similarly, the Court cannot perceive how a see-thru fence will foster
"neighborliness" between members of a community.
Compelling the respondents to construct their fence in accordance with the assailed ordinance is,

thus, a clear encroachment on their right to property, which necessarily includes their right to decide
how best to protect their property.
It also appears that requiring the exposure of their property via a see-thru fence is violative of their
right to privacy, considering that the residence of the Benedictine nuns is also located within the
property. The right to privacy has long been considered a fundamental right guaranteed by the
Constitution that must be protected from intrusion or constraint. The right to privacy is essentially the
right to be let alone, 37 as governmental powers should stop short of certain intrusions into the
personal life of its citizens. 38 It is inherent in the concept of liberty, enshrined in the Bill of Rights
(Article III) in Sections 1, 2, 3(1), 6, 8, and 17, Article III of the 1987 Constitution. 39
The enforcement of Section 3.1 would, therefore, result in an undue interference with the
respondents rights to property and privacy. Section 3.1 of Ordinance No. 192 is, thus, also invalid and
cannot be enforced against the respondents.
No Retroactivity
Ordinance No. 217 amended Section 7 of Ordinance No. 192 by including the regulation of
educational institutions which was unintentionally omitted, and giving said educational institutions five
(5) years from the passage of Ordinance No. 192 (and not Ordinance No. 217) to conform to its
provisions.40 The petitioners argued that the amendment could be retroactively applied because the
assailed ordinance is a curative statute which is retroactive in nature.
Considering that Sections 3.1 and 5 of Ordinance No. 192 cannot be enforced against the
respondents, it is no longer necessary to rule on the issue of retroactivity. The Court shall,
nevertheless, pass upon the issue for the sake of clarity.
"Curative statutes are enacted to cure defects in a prior law or to validate legal proceedings which
would otherwise be void for want of conformity with certain legal requirements. They are intended to
supply defects, abridge superfluities and curb certain evils. They are intended to enable persons to
carry into effect that which they have designed or intended, but has failed of expected legal
consequence by reason of some statutory disability or irregularity in their own action. They make valid
that which, before the enactment of the statute was invalid. Their purpose is to give validity to acts
done that would have been invalid under existing laws, as if existing laws have been complied with.
Curative statutes, therefore, by their very essence, are retroactive."41
The petitioners argue that Ordinance No. 192 is a curative statute as it aims to correct or cure a
defect in the National Building Code, namely, its failure to provide for adequate guidelines for the
construction of fences. They ultimately seek to remedy an insufficiency in the law. In aiming to cure
this insufficiency, the petitioners attempt to add lacking provisions to the National Building Code. This
is not what is contemplated by curative statutes, which intend to correct irregularities or invalidity in
the law. The petitioners fail to point out any irregular or invalid provision. As such, the assailed
ordinance cannot qualify as curative and retroactive in nature.
At any rate, there appears to be no insufficiency in the National Building Code with respect to
parking provisions in relation to the issue of the respondents. Paragraph 1.16.1, Rule XIX of the Rules
and Regulations of the said code requires an educational institution to provide one parking slot for
every ten classrooms. As found by the lower courts, the respondents provide a total of 76 parking slots
for their 80 classrooms and, thus, had more than sufficiently complied with the law.
Ordinance No. 192, as amended, is, therefore, not a curative statute which may be applied
retroactively.
Separability
Sections 3.1 and 5 of Ordinance No. 192, as amended, are, thus, invalid and cannot be enforced
against the respondents. Nonetheless, "the general rule is that where part of a statute is void as
repugnant to the Constitution, while another part is valid, the valid portion, if susceptible to being
separated from the invalid, may stand and be enforced." 42 Thus, the other sections of the assailed
ordinance remain valid and enforceable.

Conclusion
Considering the invalidity of Sections 3.1 and 5, it is clear that the petitioners were acting in excess
of their jurisdiction in enforcing Ordinance No. 192 against the respondents. The CA was correct in
affirming the decision of the RTC in issuing the writ of prohibition. The petitioners must permanently
desist from enforcing Sections 3.1 and 5 of the assailed ordinance on the respondents' property in
Marikina City.
WHEREFORE, the petition is DENIED. The October 2, 2002 Decision of the Regional Trial Court in
SCA Case No. 2000-381-MK is AFFIRMED but MODIFIED to read as follows:
WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued commanding the
respondents to permanently desist from enforcing or implementing Sections 3.1 and 5 of Ordinance
No. 192, Series of 1994, as amended, on the petitioners' property in question located in Marikina
Heights, Marikina, Metro Manila.
No pronouncement as to costs.
SO ORDERED.

EN BANC
G.R. No. 159110, December 10, 2013
VALENTINO L. LEGASPI, Petitioner, v. CITY OF CEBU, T.C. (TITO) SAYSON AND RICARDO HAPITAN,
Respondents.

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 thereby 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. 1664 to authorize the
traffic 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:chanRoblesvirtualLawlibrary
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 vehicle as hereinabove provided.
Section 3. PENALTIES Any motor vehicle, owner or driver violating any ordinance on parking
prohibitions, regulations and/or restrictions, as may be provided under 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 (P500.00) 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:chanRoblesvirtualLawlibrary
a)
b)
Chairman,
Committee
c) Asst. City Fiscal Felipe Belcia

Chairman,
on
Police,

Fire

and

CITOM
Penology

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 (P2,000.00) nor more than Five Thousand Pesos (P5,000.00), 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. Osmea, 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 from his office; 4 that 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
P4,200.00 as a fine to the City Treasurer of Cebu City for the release of his car; 6 that 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 P1,500.00 (itemized as P500.00 for the
clamping and P1,000.00 for 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 P1,400.00 for the
release of his car without a court hearing and a final judgment rendered by a court of justice. 7red
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
daughters 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 soninlaw 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 codefendants, 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:chanRoblesvirtualLawlibrary
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 ones life, liberty or property must be done upon and with
observance of the due process clause of the Constitution and the nonobservance 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 P500.00 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;
x

WHEREFORE, premised (sic) considered, judgment is hereby rendered declaring Ordinance No. 1664
unconstitutional and directing the defendant City of Cebu to pay the plaintiff Valentino Legaspi the sum
of P110,000.00 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 P100,000.00 each or
P300,000.00 all as nominal damages and another P100,000.00 each or P300,000.00 all as temperate
or
moderate
damages.
With
costs
against
defendant
City
of
Cebu.
SO ORDERED.16 (citations omitted)
The City of Cebu and its codefendants 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, 17 overturning the RTC and declaring Ordinance No.
1664 valid, to wit:chanRoblesvirtualLawlibrary
The principal thrust of this appeal is the constitutionality of Ordinance 1664. Defendantsappellants
contend that the passage of Ordinance 1664 is 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:chanRoblesvirtualLawlibrary
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:chanRoblesvirtualLawlibrary
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 catchall 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 wellnigh 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 peoples 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
wit:chanRoblesvirtualLawlibrary

the

parties,

the

following

issues

are

decisive

of

the

challenge,

1.

Whether Ordinance No. 1664 was enacted within the ambit of the legislative powers of
the City of Cebu; and

2.

Whether Ordinance No. 1664 complied with the requirements for validity and
constitutionality, particularly the limitations set by the Constitution and the relevant statutes.

to

Ruling
The petitions for review have no merit.
A.
Tests for a valid ordinance
In City of Manila v. Laguio, Jr.,18 the Court restates the tests of a valid ordinance thusly:chanRoblesvirtualLawlibrary
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 States 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
Authority
v.
BelAir
Village
Association,
Inc.,23
the
Court
cogently
observed:chanRoblesvirtualLawlibrary
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. 24
Section 458 of the LGC relevantly states:chanRoblesvirtualLawlibrary
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:
x

(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:
x

(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 privatelyowned 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. 1664with 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:chanRoblesvirtualLawlibrary
Section 1. No person shall be deprived of life, liberty or property without due process of law, nor
shall any person be denied the equal protection of the laws.
The 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:chanRoblesvirtualLawlibrary
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 persons life, liberty, or property. In other words, substantive due process
looks to whether there is sufficient justification for the governments 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.28 He reminds that the grant of police powers for the general welfare under the LGC was not unlimited
but subject to constitutional limitations; 29 and 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
codefendants.
Judged according to the foregoing enunciation of the guaranty of due process of law, the contentions of the
petitioners cannot be sustained. 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 avowedly 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:chanRoblesvirtualLawlibrary
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.
Legaspis attack against the provisions of Ordinance No. 1664 for being vague and ambiguous cannot stand
scrutiny. As can be readily seen, its text was forthright 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 Belcia 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 transgressor 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 trialtype hearing prior to the clamping constitute a breach of procedural due
process, for giving 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, Legaspis 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 banc 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 petitions 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.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 175356

December 3, 2013

MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC., Petitioners,

vs.
SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT and THE
SECRETARY OF THE DEPARTMENT OF FINANCE, Respondents.
DECISION
DEL CASTILLO, J.:
When a party challeges the constitutionality of a law, the burden of proof rests upon him.
Before us is a Petition for Prohibition2 under Rule 65 of the Rules of Court filed by petitioners Manila
Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc., domestic corporations engaged in the business of
providing funeral and burial services, against public respondents Secretaries of the Department of
Social Welfare and Development (DSWD) and the Department of Finance (DOF).
Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. 7432,3 as amended by
RA 9257,4 and the implementing rules and regulations issued by the DSWD and DOF insofar as these
allow business establishments to claim the 20% discount given to senior citizens as a tax deduction.
Factual Antecedents
On April 23, 1992, RA 7432 was passed into law, granting senior citizens the following privileges:
SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the following:
a) the grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment[s], restaurants and recreation centers
and purchase of medicine anywhere in the country: Provided, That private establishments may claim
the cost as tax credit;
b) a minimum of twenty percent (20%) discount on admission fees charged by theaters, cinema
houses and concert halls, circuses, carnivals and other similar places of culture, leisure, and
amusement;
c) exemption from the payment of individual income taxes: Provided, That their annual taxable
income does not exceed the property level as determined by the National Economic and Development
Authority (NEDA) for that year;

d) exemption from training fees for socioeconomic programs undertaken by the OSCA as part of its
work;
e) free medical and dental services in government establishment[s] anywhere in the country,
subject to guidelines to be issued by the Department of Health, the Government Service Insurance
System and the Social Security System;
f) to the extent practicable and feasible, the continuance of the same benefits and privileges given
by the Government Service Insurance System (GSIS), Social Security System (SSS) and PAG-IBIG, as
the case may be, as are enjoyed by those in actual service.
On August 23, 1993, Revenue Regulations (RR) No. 02-94 was issued to implement RA 7432.
Sections 2(i) and 4 of RR No. 02-94 provide:
Sec. 2. DEFINITIONS. For purposes of these regulations: i. Tax Credit refers to the amount
representing the 20% discount granted to a qualified senior citizen by all establishments relative to
their utilization of transportation services, hotels and similar lodging establishments, restaurants,
drugstores, recreation centers, theaters, cinema houses, concert halls, circuses, carnivals and other
similar places of culture, leisure and amusement, which discount shall be deducted by the said
establishments from their gross income for income tax purposes and from their gross sales for valueadded tax or other percentage tax purposes. x x x x Sec. 4. RECORDING/BOOKKEEPING
REQUIREMENTS FOR PRIVATE ESTABLISHMENTS. Private establishments, i.e., transport services,
hotels and similar lodging establishments, restaurants, recreation centers, drugstores, theaters,
cinema houses, concert halls, circuses, carnivals and other similar places of culture[,] leisure and
amusement, giving 20% discounts to qualified senior citizens are required to keep separate and
accurate record[s] of sales made to senior citizens, which shall include the name, identification
number, gross sales/receipts, discounts, dates of transactions and invoice number for every
transaction. The amount of 20% discount shall be deducted from the gross income for income tax
purposes and from gross sales of the business enterprise concerned for purposes of the VAT and other
percentage taxes.
In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5 the Court declared
Sections 2(i) and 4 of RR No. 02-94 as erroneous because these contravene RA 7432,6 thus:
RA 7432 specifically allows private establishments to claim as tax credit the amount of discounts
they grant. In turn, the Implementing Rules and Regulations, issued pursuant thereto, provide the
procedures for its availment. To deny such credit, despite the plain mandate of the law and the
regulations carrying out that mandate, is indefensible. First, the definition given by petitioner is
erroneous. It refers to tax credit as the amount representing the 20 percent discount that "shall be
deducted by the said establishments from their gross income for income tax purposes and from their
gross sales for value-added tax or other percentage tax purposes." In ordinary business language, the
tax credit represents the amount of such discount. However, the manner by which the discount shall
be credited against taxes has not been clarified by the revenue regulations. By ordinary acceptation, a
discount is an "abatement or reduction made from the gross amount or value of anything." To be more
precise, it is in business parlance "a deduction or lowering of an amount of money;" or "a reduction
from the full amount or value of something, especially a price." In business there are many kinds of
discount, the most common of which is that affecting the income statement or financial report upon
which the income tax is based.
xxxx
Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20 percent discount
deductible from gross income for income tax purposes, or from gross sales for VAT or other percentage
tax purposes. In effect, the tax credit benefit under RA 7432 is related to a sales discount. This
contrived definition is improper, considering that the latter has to be deducted from gross sales in
order to compute the gross income in the income statement and cannot be deducted again, even for
purposes of computing the income tax. When the law says that the cost of the discount may be
claimed as a tax credit, it means that the amount when claimed shall be treated as a reduction
from any tax liability, plain and simple. The option to avail of the tax credit benefit depends upon the
existence of a tax liability, but to limit the benefit to a sales discount which is not even identical to
the discount privilege that is granted by law does not define it at all and serves no useful purpose.
The definition must, therefore, be stricken down.
Laws Not Amended by Regulations

Second, the law cannot be amended by a mere regulation. In fact, a regulation that "operates to
create a rule out of harmony with the statute is a mere nullity;" it cannot prevail. It is a cardinal rule
that courts "will and should respect the contemporaneous construction placed upon a statute by the
executive officers whose duty it is to enforce it x x x." In the scheme of judicial tax administration, the
need for certainty and predictability in the implementation of tax laws is crucial. Our tax authorities fill
in the details that "Congress may not have the opportunity or competence to provide." The regulations
these authorities issue are relied upon by taxpayers, who are certain that these will be followed by the
courts. Courts, however, will not uphold these authorities interpretations when clearly absurd,
erroneous or improper. In the present case, the tax authorities have given the term tax credit in
Sections 2.i and 4 of RR 2-94 a meaning utterly in contrast to what RA 7432 provides. Their
interpretation has muddled x x x the intent of Congress in granting a mere discount privilege, not a
sales discount. The administrative agency issuing these regulations may not enlarge, alter or restrict
the provisions of the law it administers; it cannot engraft additional requirements not contemplated by
the legislature.
In case of conflict, the law must prevail. A "regulation adopted pursuant to law is law." Conversely, a
regulation or any portion thereof not adopted pursuant to law is no law and has neither the force nor
the effect of law.7
On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:
SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of
services in hotels and similar lodging establishments, restaurants and recreation centers, and purchase
of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including
funeral and burial services for the death of senior citizens;
xxxx
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction
based on the net cost of the goods sold or services rendered: Provided, That the cost of the discount
shall be allowed as deduction from gross income for the same taxable year that the discount is
granted. Provided, further, That the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended.
To implement the tax provisions of RA 9257, the Secretary of Finance issued RR No. 4-2006, the
pertinent provision of which provides:
SEC. 8. AVAILMENT BY ESTABLISHMENTS OF SALES DISCOUNTS AS DEDUCTION FROM GROSS
INCOME. Establishments enumerated in subparagraph (6) hereunder granting sales discounts to
senior citizens on the sale of goods and/or services specified thereunder are entitled to deduct the said
discount from gross income subject to the following conditions:
(1) Only that portion of the gross sales EXCLUSIVELY USED, CONSUMED OR ENJOYED BY THE SENIOR
CITIZEN shall be eligible for the deductible sales discount.
(2) The gross selling price and the sales discount MUST BE SEPARATELY INDICATED IN THE OFFICIAL
RECEIPT OR SALES INVOICE issued by the establishment for the sale of goods or services to the senior
citizen.
(3) Only the actual amount of the discount granted or a sales discount not exceeding 20% of the
gross selling price can be deducted from the gross income, net of value added tax, if applicable, for
income tax purposes, and from gross sales or gross receipts of the business enterprise concerned, for
VAT or other percentage tax purposes.
(4) The discount can only be allowed as deduction from gross income for the same taxable year
that the discount is granted.
(5) The business establishment giving sales discounts to qualified senior citizens is required to keep
separate and accurate record[s] of sales, which shall include the name of the senior citizen, TIN, OSCA

ID, gross sales/receipts, sales discount granted, [date] of [transaction] and invoice number for every
sale transaction to senior citizen.
(6) Only the following business establishments which granted sales discount to senior citizens on
their sale of goods and/or services may claim the said discount granted as deduction from gross
income, namely:
xxxx
(i) Funeral parlors and similar establishments The beneficiary or any person who shall shoulder
the funeral and burial expenses of the deceased senior citizen shall claim the discount, such as casket,
embalmment, cremation cost and other related services for the senior citizen upon payment and
presentation of [his] death certificate.
The DSWD likewise issued its own Rules and Regulations Implementing RA 9257, to wit:
RULE VI DISCOUNTS AS TAX DEDUCTION OF ESTABLISHMENTS
Article 8. Tax Deduction of Establishments. The establishment may claim the discounts granted
under Rule V, Section 4 Discounts for Establishments, Section 9, Medical and Dental Services in
Private Facilities and Sections 10 and 11 Air, Sea and Land Transportation as tax deduction based on
the net cost of the goods sold or services rendered.
Provided, That the cost of the discount shall be allowed as deduction from gross income for the
same taxable year that the discount is granted; Provided, further, That the total amount of the claimed
tax deduction net of value added tax if applicable, shall be included in their gross sales receipts for tax
purposes and shall be subject to proper documentation and to the provisions of the National Internal
Revenue Code, as amended; Provided, finally, that the implementation of the tax deduction shall be
subject to the Revenue Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved
by the Department of Finance (DOF).
Feeling aggrieved by the tax deduction scheme, petitioners filed the present recourse, praying that
Section 4 of RA 7432, as amended by RA 9257, and the implementing rules and regulations issued by
the DSWD and the DOF be declared unconstitutional insofar as these allow business establishments to
claim the 20% discount given to senior citizens as a tax deduction; that the DSWD and the DOF be
prohibited from enforcing the same; and that the tax credit treatment of the 20% discount under the
former Section 4 (a) of RA 7432 be reinstated.
Issues
Petitioners raise the following issues:
A.
WHETHER THE PETITION PRESENTS AN ACTUAL CASE OR CONTROVERSY.
B.
WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS IMPLEMENTING RULES AND
REGULATIONS, INSOFAR AS THEY PROVIDE THAT THE TWENTY PERCENT (20%) DISCOUNT TO SENIOR
CITIZENS MAY BE CLAIMED AS A TAX DEDUCTION BY THE PRIVATE ESTABLISHMENTS, ARE INVALID AND
UNCONSTITUTIONAL.9
Petitioners Arguments
Petitioners emphasize that they are not questioning the 20% discount granted to senior citizens but
are only assailing the constitutionality of the tax deduction scheme prescribed under RA 9257 and the
implementing rules and regulations issued by the DSWD and the DOF.10
Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of the Constitution,
which provides that: "[p]rivate property shall not be taken for public use without just compensation."11

In support of their position, petitioners cite Central Luzon Drug Corporation,12 where it was ruled
that the 20% discount privilege constitutes taking of private property for public use which requires the
payment of just compensation,13 and Carlos Superdrug Corporation v. Department of Social Welfare
and Development,14 where it was acknowledged that the tax deduction scheme does not meet the
definition of just compensation.15
Petitioners likewise seek a reversal of the ruling in Carlos Superdrug Corporation16 that the tax
deduction scheme adopted by the government is justified by police power.17
They assert that "[a]lthough both police power and the power of eminent domain have the general
welfare for their object, there are still traditional distinctions between the two" 18 and that "eminent
domain cannot be made less supreme than police power."19
Petitioners further claim that the legislature, in amending RA 7432, relied on an erroneous
contemporaneous construction that prior payment of taxes is required for tax credit.20
Petitioners also contend that the tax deduction scheme violates Article XV, Section 421 and Article
XIII, Section 1122 of the Constitution because it shifts the States constitutional mandate or duty of
improving the welfare of the elderly to the private sector.23
Under the tax deduction scheme, the private sector shoulders 65% of the discount because only
35%24 of it is actually returned by the government.25
Consequently, the implementation of the tax deduction scheme prescribed under Section 4 of RA
9257 affects the businesses of petitioners.26
Thus, there exists an actual case or controversy of transcendental importance which deserves
judicious disposition on the merits by the highest court of the land.27
Respondents Arguments
Respondents, on the other hand, question the filing of the instant Petition directly with the Supreme
Court as this disregards the hierarchy of courts.28
They likewise assert that there is no justiciable controversy as petitioners failed to prove that the
tax deduction treatment is not a "fair and full equivalent of the loss sustained" by them.29
As to the constitutionality of RA 9257 and its implementing rules and regulations, respondents
contend that petitioners failed to overturn its presumption of constitutionality.30
More important, respondents maintain that the tax deduction scheme is a legitimate exercise of the
States police power.31
Our Ruling
The Petition lacks merit.
There exists an actual case or controversy.
We shall first resolve the procedural issue. When the constitutionality of a law is put in issue,
judicial review may be availed of only if the following requisites concur: "(1) the existence of an actual
and appropriate case; (2) the existence of personal and substantial interest on the part of the party
raising the [question of constitutionality]; (3) recourse to judicial review is made at the earliest
opportunity; and (4) the [question of constitutionality] is the lis mota of the case."32
In this case, petitioners are challenging the constitutionality of the tax deduction scheme provided
in RA 9257 and the implementing rules and regulations issued by the DSWD and the DOF.
Respondents, however, oppose the Petition on the ground that there is no actual case or controversy.
We do not agree with respondents. An actual case or controversy exists when there is "a conflict of
legal rights" or "an assertion of opposite legal claims susceptible of judicial resolution."33

The Petition must therefore show that "the governmental act being challenged has a direct adverse
effect on the individual challenging it."34
In this case, the tax deduction scheme challenged by petitioners has a direct adverse effect on
them. Thus, it cannot be denied that there exists an actual case or controversy.
The validity of the 20% senior citizen discount and tax deduction scheme under RA
9257, as an exercise of police power of the State, has already been settled in Carlos
Superdrug Corporation.
Petitioners posit that the resolution of this case lies in the determination of whether the legally
mandated 20% senior citizen discount is an exercise of police power or eminent domain. If it is police
power, no just compensation is warranted. But if it is eminent domain, the tax deduction scheme is
unconstitutional because it is not a peso for peso reimbursement of the 20% discount given to senior
citizens. Thus, it constitutes taking of private property without payment of just compensation. At the
outset, we note that this question has been settled in Carlos Superdrug Corporation.35
In that case, we ruled:
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation
of private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated
for the discount. Examining petitioners arguments, it is apparent that what petitioners are ultimately
questioning is the validity of the tax deduction scheme as a reimbursement mechanism for the twenty
percent (20%) discount that they extend to senior citizens. Based on the afore-stated DOF Opinion, the
tax deduction scheme does not fully reimburse petitioners for the discount privilege accorded to senior
citizens. This is because the discount is treated as a deduction, a tax-deductible expense that is
subtracted from the gross income and results in a lower taxable income. Stated otherwise, it is an
amount that is allowed by law to reduce the income prior to the application of the tax rate to compute
the amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on a
peso for peso basis but merely offers a fractional reduction in taxes owed. Theoretically, the treatment
of the discount as a deduction reduces the net income of the private establishments concerned. The
discounts given would have entered the coffers and formed part of the gross sales of the private
establishments, were it not for R.A. No. 9257. The permanent reduction in their total revenues is a
forced subsidy corresponding to the taking of private property for public use or benefit. This
constitutes compensable taking for which petitioners would ordinarily become entitled to a just
compensation. Just compensation is defined as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the takers gain but the owners loss. The word just is
used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to
be rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does
not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of
just compensation. Having said that, this raises the question of whether the State, in promoting the
health and welfare of a special group of citizens, can impose upon private establishments the burden
of partly subsidizing a government program. The Court believes so. The Senior Citizens Act was
enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant
benefits and privileges to them for their improvement and well-being as the State considers them an
integral part of our society. The priority given to senior citizens finds its basis in the Constitution as set
forth in the law itself. Thus, the Act provides: SEC. 2. Republic Act No. 7432 is hereby amended to read
as follows:
SECTION 1. Declaration of Policies and Objectives. Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the State may design
programs of social security for them. In addition to this, Section 10 in the Declaration of Principles and
State Policies provides: "The State shall provide social justice in all phases of national development."
Further, Article XIII, Section 11, provides: "The State shall adopt an integrated and comprehensive
approach to health development which shall endeavor to make essential goods, health and other social
services available to all the people at affordable cost. There shall be priority for the needs of the
underprivileged sick, elderly, disabled, women and children." Consonant with these constitutional
principles the following are the declared policies of this Act:

(f) To recognize the important role of the private sector in the improvement of the welfare of senior
citizens and to actively seek their partnership.

To implement the above policy, the law grants a twenty percent discount to senior citizens for
medical and dental services, and diagnostic and laboratory fees; admission fees charged by theaters,
concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement; fares for
domestic land, air and sea travel; utilization of services in hotels and similar lodging establishments,
restaurants and recreation centers; and purchases of medicines for the exclusive use or enjoyment of
senior citizens. As a form of reimbursement, the law provides that business establishments extending
the twenty percent discount to senior citizens may claim the discount as a tax deduction. The law is a
legitimate exercise of police power which, similar to the power of eminent domain, has general welfare
for its object. Police power is not capable of an exact definition, but has been purposely veiled in
general terms to underscore its comprehensiveness to meet all exigencies and provide enough room
for an efficient and flexible response to conditions and circumstances, thus assuring the greatest
benefits. Accordingly, it has been described as "the most essential, insistent and the least limitable of
powers, extending as it does to all the great public needs." It is "[t]he 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 subjects of the same." For
this reason, when the conditions so demand as determined by the legislature, property rights must
bow to the primacy of police power because property rights, though sheltered by due process, must
yield to general welfare. Police power as an attribute to promote the common good would be diluted
considerably if on the mere plea of petitioners that they will suffer loss of earnings and capital, the
questioned provision is invalidated. Moreover, in the absence of evidence demonstrating the alleged
confiscatory effect of the provision in question, there is no basis for its nullification in view of the
presumption of validity which every law has in its favor. Given these, it is incorrect for petitioners to
insist that the grant of the senior citizen discount is unduly oppressive to their business, because
petitioners have not taken time to calculate correctly and come up with a financial report, so that they
have not been able to show properly whether or not the tax deduction scheme really works greatly to
their disadvantage. In treating the discount as a tax deduction, petitioners insist that they will incur
losses because, referring to the DOF Opinion, for every P1.00 senior citizen discount that petitioners
would give, P0.68 will be shouldered by them as only P0.32 will be refunded by the government by way
of a tax deduction. To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive
maintenance drug Norvasc as an example. According to the latter, it acquires Norvasc from the
distributors at P37.57 per tablet, and retails it at P39.60 (or at a margin of 5%). If it grants a 20%
discount to senior citizens or an amount equivalent to P7.92, then it would have to sell Norvasc at
P31.68 which translates to a loss from capital of P5.89 per tablet. Even if the government will allow a
tax deduction, only P2.53 per tablet will be refunded and not the full amount of the discount which is
P7.92. In short, only 32% of the 20% discount will be reimbursed to the drugstores. Petitioners
computation is flawed. For purposes of reimbursement, the law states that the cost of the discount
shall be deducted from gross income, the amount of income derived from all sources before deducting
allowable expenses, which will result in net income. Here, petitioners tried to show a loss on a per
transaction basis, which should not be the case. An income statement, showing an accounting of
petitioners' sales, expenses, and net profit (or loss) for a given period could have accurately reflected
the effect of the discount on their income. Absent any financial statement, petitioners cannot
substantiate their claim that they will be operating at a loss should they give the discount. In addition,
the computation was erroneously based on the assumption that their customers consisted wholly of
senior citizens. Lastly, the 32% tax rate is to be imposed on income, not on the amount of the
discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of
their medicines given the cutthroat nature of the players in the industry. It is a business decision on the
part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as alleged
by petitioners, is merely a result of this decision. Inasmuch as pricing is a property right, petitioners
cannot reproach the law for being oppressive, simply because they cannot afford to raise their prices
for fear of losing their customers to competition. The Court is not oblivious of the retail side of the
pharmaceutical industry and the competitive pricing component of the business. While the
Constitution protects property rights, petitioners must accept the realities of business and the State, in
the exercise of police power, can intervene in the operations of a business which may result in an
impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as x x x reminder[s] that
the right to property can be relinquished upon the command of the State for the promotion of public
good. Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means employed
in invoking the active participation of the private sector, in order to achieve the purpose or objective of
the law, is reasonably and directly related. Without sufficient proof that Section 4 (a) of R.A. No. 9257 is
arbitrary, and that the continued implementation of the same would be unconscionably detrimental to

petitioners, the Court will refrain from quashing a legislative act.36 (Bold in the original; underline
supplied)
We, thus, found that the 20% discount as well as the tax deduction scheme is a valid exercise of the
police power of the State.
No compelling reason has been proffered to overturn, modify or abandon the ruling in
Carlos Superdrug Corporation.
Petitioners argue that we have previously ruled in Central Luzon Drug Corporation37 that the 20%
discount is an exercise of the power of eminent domain, thus, requiring the payment of just
compensation. They urge us to re-examine our ruling in Carlos Superdrug Corporation 38 which
allegedly reversed the ruling in Central Luzon Drug Corporation.39
They also point out that Carlos Superdrug Corporation40 recognized that the tax deduction scheme
under the assailed law does not provide for sufficient just compensation. We agree with petitioners
observation that there are statements in Central Luzon Drug Corporation41 describing the 20%
discount as an exercise of the power of eminent domain, viz.:
[T]he privilege enjoyed by senior citizens does not come directly from the State, but rather from the
private establishments concerned. Accordingly, the tax credit benefit granted to these establishments
can be deemed as their just compensation for private property taken by the State for public use. The
concept of public use is no longer confined to the traditional notion of use by the public, but held
synonymous with public interest, public benefit, public welfare, and public convenience. The discount
privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to
which these citizens belong. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments concerned, were it not for RA 7432. The permanent
reduction in their total revenues is a forced subsidy corresponding to the taking of private property for
public use or benefit. As a result of the 20 percent discount imposed by RA 7432, respondent becomes
entitled to a just compensation. This term refers not only to the issuance of a tax credit certificate
indicating the correct amount of the discounts given, but also to the promptness in its release.
Equivalent to the payment of property taken by the State, such issuance when not done within a
reasonable time from the grant of the discounts cannot be considered as just compensation. In
effect, respondent is made to suffer the consequences of being immediately deprived of its revenues
while awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope with
the reduction in its revenues. Besides, the taxation power can also be used as an implement for the
exercise of the power of eminent domain. Tax measures are but "enforced contributions exacted on
pain of penal sanctions" and "clearly imposed for a public purpose." In recent years, the power to tax
has indeed become a most effective tool to realize social justice, public welfare, and the equitable
distribution of wealth. While it is a declared commitment under Section 1 of RA 7432, social justice
"cannot be invoked to trample on the rights of property owners who under our Constitution and laws
are also entitled to protection. The social justice consecrated in our [C]onstitution [is] not intended to
take away rights from a person and give them to another who is not entitled thereto." For this reason,
a just compensation for income that is taken away from respondent becomes necessary. It is in the tax
credit that our legislators find support to realize social justice, and no administrative body can alter
that fact. To put it differently, a private establishment that merely breaks even without the discounts
yet will surely start to incur losses because of such discounts. The same effect is expected if its
mark-up is less than 20 percent, and if all its sales come from retail purchases by senior citizens. Aside
from the observation we have already raised earlier, it will also be grossly unfair to an establishment if
the discounts will be treated merely as deductions from either its gross income or its gross sales.
Operating at a loss through no fault of its own, it will realize that the tax credit limitation under RR 2-94
is inutile, if not improper. Worse, profit-generating businesses will be put in a better position if they
avail themselves of tax credits denied those that are losing, because no taxes are due from the
latter.42 (Italics in the original; emphasis supplied)
The above was partly incorporated in our ruling in Carlos Superdrug Corporation43 when we stated
preliminarily that
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation
of private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated
for the discount. Examining petitioners arguments, it is apparent that what petitioners are ultimately
questioning is the validity of the tax deduction scheme as a reimbursement mechanism for the twenty
percent (20%) discount that they extend to senior citizens. Based on the afore-stated DOF Opinion, the

tax deduction scheme does not fully reimburse petitioners for the discount privilege accorded to senior
citizens. This is because the discount is treated as a deduction, a tax-deductible expense that is
subtracted from the gross income and results in a lower taxable income. Stated otherwise, it is an
amount that is allowed by law to reduce the income prior to the application of the tax rate to compute
the amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on a
peso for peso basis but merely offers a fractional reduction in taxes owed. Theoretically, the treatment
of the discount as a deduction reduces the net income of the private establishments concerned. The
discounts given would have entered the coffers and formed part of the gross sales of the private
establishments, were it not for R.A. No. 9257. The permanent reduction in their total revenues is a
forced subsidy corresponding to the taking of private property for public use or benefit. This
constitutes compensable taking for which petitioners would ordinarily become entitled to a just
compensation. Just compensation is defined as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the takers gain but the owners loss. The word just is
used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to
be rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does
not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of
just compensation. Having said that, this raises the question of whether the State, in promoting the
health and welfare of a special group of citizens, can impose upon private establishments the burden
of partly subsidizing a government program. The Court believes so.44
This, notwithstanding, we went on to rule in Carlos Superdrug Corporation45 that the 20% discount
and tax deduction scheme is a valid exercise of the police power of the State. The present case, thus,
affords an opportunity for us to clarify the above-quoted statements in Central Luzon Drug
Corporation46 and Carlos Superdrug Corporation.47
First, we note that the above-quoted disquisition on eminent domain in Central Luzon Drug
Corporation48 is obiter dicta and, thus, not binding precedent. As stated earlier, in Central Luzon Drug
Corporation,49 we ruled that the BIR acted ultra vires when it effectively treated the 20% discount as a
tax deduction, under Sections 2.i and 4 of RR No. 2-94, despite the clear wording of the previous law
that the same should be treated as a tax credit. We were, therefore, not confronted in that case with
the issue as to whether the 20% discount is an exercise of police power or eminent domain. Second,
although we adverted to Central Luzon Drug Corporation50 in our ruling in Carlos Superdrug
Corporation,51 this referred only to preliminary matters. A fair reading of Carlos Superdrug
Corporation52 would show that we categorically ruled therein that the 20% discount is a valid exercise
of police power. Thus, even if the current law, through its tax deduction scheme (which abandoned the
tax credit scheme under the previous law), does not provide for a peso for peso reimbursement of the
20% discount given by private establishments, no constitutional infirmity obtains because, being a
valid exercise of police power, payment of just compensation is not warranted. We have carefully
reviewed the basis of our ruling in Carlos Superdrug Corporation53 and we find no cogent reason to
overturn, modify or abandon it. We also note that petitioners arguments are a mere reiteration of
those raised and resolved in Carlos Superdrug Corporation.54 Thus, we sustain Carlos Superdrug
Corporation.55
Nonetheless, we deem it proper, in what follows, to amplify our explanation in Carlos Superdrug
Corporation56 as to why the 20% discount is a valid exercise of police power and why it may not,
under the specific circumstances of this case, be considered as an exercise of the power of eminent
domain contrary to the obiter in Central Luzon Drug Corporation.57
Police power versus eminent domain.
Police power is the inherent power of the State to regulate or to restrain the use of liberty and
property for public welfare.58
The only limitation is that the restriction imposed should be reasonable, not oppressive.59
In other words, to be a valid exercise of police power, it must have a lawful subject or objective and
a lawful method of accomplishing the goal.60
Under the police power of the State, "property rights of individuals may be subjected to restraints
and burdens in order to fulfill the objectives of the government."61
The State "may interfere with personal liberty, property, lawful businesses and occupations to
promote the general welfare [as long as] the interference [is] reasonable and not arbitrary."62

Eminent domain, on the other hand, is the inherent power of the State to take or appropriate
private property for public use.63
The Constitution, however, requires that private property shall not be taken without due process of
law and the payment of just compensation.64
Traditional distinctions exist between police power and eminent domain. In the exercise of police
power, a property right is impaired by regulation,65 or the use of property is merely prohibited,
regulated or restricted66 to promote public welfare. In such cases, there is no compensable taking,
hence, payment of just compensation is not required. Examples of these regulations are property
condemned for being noxious or intended for noxious purposes (e.g., a building on the verge of
collapse to be demolished for public safety, or obscene materials to be destroyed in the interest of
public morals)67 as well as zoning ordinances prohibiting the use of property for purposes injurious to
the health, morals or safety of the community (e.g., dividing a citys territory into residential and
industrial areas).68
It has, thus, been observed that, in the exercise of police power (as distinguished from eminent
domain), although the regulation affects the right of ownership, none of the bundle of rights which
constitute ownership is appropriated for use by or for the benefit of the public.69
On the other hand, in the exercise of the power of eminent domain, property interests are
appropriated and applied to some public purpose which necessitates the payment of just
compensation therefor. Normally, the title to and possession of the property are transferred to the
expropriating authority. Examples include the acquisition of lands for the construction of public
highways as well as agricultural lands acquired by the government under the agrarian reform law for
redistribution to qualified farmer beneficiaries. However, it is a settled rule that the acquisition of title
or total destruction of the property is not essential for "taking" under the power of eminent domain to
be present.70
Examples of these include establishment of easements such as where the land owner is perpetually
deprived of his proprietary rights because of the hazards posed by electric transmission lines
constructed above his property71 or the compelled interconnection of the telephone system between
the government and a private company.72
In these cases, although the private property owner is not divested of ownership or possession,
payment of just compensation is warranted because of the burden placed on the property for the use
or benefit of the public.
The 20% senior citizen discount is an exercise of police power.
It may not always be easy to determine whether a challenged governmental act is an exercise of
police power or eminent domain. The very nature of police power as elastic and responsive to various
social conditions73 as well as the evolving meaning and scope of public use74 and just
compensation75 in eminent domain evinces that these are not static concepts. Because of the
exigencies of rapidly changing times, Congress may be compelled to adopt or experiment with
different measures to promote the general welfare which may not fall squarely within the traditionally
recognized categories of police power and eminent domain. The judicious approach, therefore, is to
look at the nature and effects of the challenged governmental act and decide, on the basis thereof,
whether the act is the exercise of police power or eminent domain. Thus, we now look at the nature
and effects of the 20% discount to determine if it constitutes an exercise of police power or eminent
domain. The 20% discount is intended to improve the welfare of senior citizens who, at their age, are
less likely to be gainfully employed, more prone to illnesses and other disabilities, and, thus, in need of
subsidy in purchasing basic commodities. It may not be amiss to mention also that the discount serves
to honor senior citizens who presumably spent the productive years of their lives on contributing to the
development and progress of the nation. This distinct cultural Filipino practice of honoring the elderly is
an integral part of this law. As to its nature and effects, the 20% discount is a regulation affecting the
ability of private establishments to price their products and services relative to a special class of
individuals, senior citizens, for which the Constitution affords preferential concern.76
In turn, this affects the amount of profits or income/gross sales that a private establishment can
derive from senior citizens. In other words, the subject regulation affects the pricing, and, hence, the
profitability of a private establishment. However, it does not purport to appropriate or burden specific
properties, used in the operation or conduct of the business of private establishments, for the use or
benefit of the public, or senior citizens for that matter, but merely regulates the pricing of goods and

services relative to, and the amount of profits or income/gross sales that such private establishments
may derive from, senior citizens. The subject regulation may be said to be similar to, but with
substantial distinctions from, price control or rate of return on investment control laws which are
traditionally regarded as police power measures.77
These laws generally regulate public utilities or industries/enterprises imbued with public interest in
order to protect consumers from exorbitant or unreasonable pricing as well as temper corporate greed
by controlling the rate of return on investment of these corporations considering that they have a
monopoly over the goods or services that they provide to the general public. The subject regulation
differs therefrom in that (1) the discount does not prevent the establishments from adjusting the level
of prices of their goods and services, and (2) the discount does not apply to all customers of a given
establishment but only to the class of senior citizens. Nonetheless, to the degree material to the
resolution of this case, the 20% discount may be properly viewed as belonging to the category of price
regulatory measures which affect the profitability of establishments subjected thereto. On its face,
therefore, the subject regulation is a police power measure. The obiter in Central Luzon Drug
Corporation,78 however, describes the 20% discount as an exercise of the power of eminent domain
and the tax credit, under the previous law, equivalent to the amount of discount given as the just
compensation therefor. The reason is that (1) the discount would have formed part of the gross sales of
the establishment were it not for the law prescribing the 20% discount, and (2) the permanent
reduction in total revenues is a forced subsidy corresponding to the taking of private property for
public use or benefit. The flaw in this reasoning is in its premise. It presupposes that the subject
regulation, which impacts the pricing and, hence, the profitability of a private establishment,
automatically amounts to a deprivation of property without due process of law. If this were so, then all
price and rate of return on investment control laws would have to be invalidated because they impact,
at some level, the regulated establishments profits or income/gross sales, yet there is no provision for
payment of just compensation. It would also mean that overnment cannot set price or rate of return on
investment limits, which reduce the profits or income/gross sales of private establishments, if no just
compensation is paid even if the measure is not confiscatory. The obiter is, thus, at odds with the
settled octrine that the State can employ police power measures to regulate the pricing of goods and
services, and, hence, the profitability of business establishments in order to pursue legitimate State
objectives for the common good, provided that the regulation does not go too far as to amount to
"taking."79
In City of Manila v. Laguio, Jr.,80 we recognized that x x x a taking also could be found if
government regulation of the use of property went "too far." When regulation reaches a certain
magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation
to support the act. While property may be regulated to a certain extent, if regulation goes too far it will
be recognized as a taking. No formula or rule can be devised to answer the questions of what is too far
and when regulation becomes a taking. In Mahon, Justice Holmes recognized that it was "a question of
degree and therefore cannot be disposed of by general propositions." On many other occasions as
well, the U.S. Supreme Court has said that the issue of when regulation constitutes a taking is a matter
of considering the facts in each case. The Court asks whether justice and fairness require that the
economic loss caused by public action must be compensated by the government and thus borne by
the public as a whole, or whether the loss should remain concentrated on those few persons subject to
the public action.81
The impact or effect of a regulation, such as the one under consideration, must, thus, be
determined on a case-to-case basis. Whether that line between permissible regulation under police
power and "taking" under eminent domain has been crossed must, under the specific circumstances of
this case, be subject to proof and the one assailing the constitutionality of the regulation carries the
heavy burden of proving that the measure is unreasonable, oppressive or confiscatory. The timehonored rule is that the burden of proving the unconstitutionality of a law rests upon the one assailing
it and "the burden becomes heavier when police power is at issue."82
The 20% senior citizen discount has not been shown to be unreasonable, oppressive or confiscatory.
In Alalayan v. National Power Corporation,83 petitioners, who were franchise holders of electric
plants, challenged the validity of a law limiting their allowable net profits to no more than 12% per
annum of their investments plus two-month operating expenses. In rejecting their plea, we ruled that,
in an earlier case, it was found that 12% is a reasonable rate of return and that petitioners failed to
prove that the aforesaid rate is confiscatory in view of the presumption of constitutionality.84
We adopted a similar line of reasoning in Carlos Superdrug Corporation85 when we ruled that
petitioners therein failed to prove that the 20% discount is arbitrary, oppressive or confiscatory. We
noted that no evidence, such as a financial report, to establish the impact of the 20% discount on the

overall profitability of petitioners was presented in order to show that they would be operating at a loss
due to the subject regulation or that the continued implementation of the law would be unconscionably
detrimental to the business operations of petitioners. In the case at bar, petitioners proceeded with a
hypothetical computation of the alleged loss that they will suffer similar to what the petitioners in
Carlos Superdrug Corporation86 did. Petitioners went directly to this Court without first establishing the
factual bases of their claims. Hence, the present recourse must, likewise, fail. Because all laws enjoy
the presumption of constitutionality, courts will uphold a laws validity if any set of facts may be
conceived to sustain it.87
On its face, we find that there are at least two conceivable bases to sustain the subject regulations
validity absent clear and convincing proof that it is unreasonable, oppressive or confiscatory. Congress
may have legitimately concluded that business establishments have the capacity to absorb a decrease
in profits or income/gross sales due to the 20% discount without substantially affecting the reasonable
rate of return on their investments considering (1) not all customers of a business establishment are
senior citizens and (2) the level of its profit margins on goods and services offered to the general
public. Concurrently, Congress may have, likewise, legitimately concluded that the establishments,
which will be required to extend the 20% discount, have the capacity to revise their pricing strategy so
that whatever reduction in profits or income/gross sales that they may sustain because of sales to
senior citizens, can be recouped through higher mark-ups or from other products not subject of
discounts. As a result, the discounts resulting from sales to senior citizens will not be confiscatory or
unduly oppressive. In sum, we sustain our ruling in Carlos Superdrug Corporation88 that the 20%
senior citizen discount and tax deduction scheme are valid exercises of police power of the State
absent a clear showing that it is arbitrary, oppressive or confiscatory.
Conclusion
In closing, we note that petitioners hypothesize, consistent with our previous ratiocinations, that the
discount will force establishments to raise their prices in order to compensate for its impact on overall
profits or income/gross sales. The general public, or those not belonging to the senior citizen class, are,
thus, made to effectively shoulder the subsidy for senior citizens. This, in petitioners view, is unfair.
As already mentioned, Congress may be reasonably assumed to have foreseen this eventuality. But,
more importantly, this goes into the wisdom, efficacy and expediency of the subject law which is not
proper for judicial review. In a way, this law pursues its social equity objective in a non-traditional
manner unlike past and existing direct subsidy programs of the government for the poor and
marginalized sectors of our society. Verily, Congress must be given sufficient leeway in formulating
welfare legislations given the enormous challenges that the government faces relative to, among
others, resource adequacy and administrative capability in implementing social reform measures
which aim to protect and uphold the interests of those most vulnerable in our society. In the process,
the individual, who enjoys the rights, benefits and privileges of living in a democratic polity, must bear
his share in supporting measures intended for the common good. This is only fair. In fine, without the
requisite showing of a clear and unequivocal breach of the Constitution, the validity of the assailed law
must be sustained.
Refutation of the Dissent
The main points of Justice Carpios Dissent may be summarized as follows: (1) the discussion on
eminent domain in Central Luzon Drug Corporation89 is not obiter dicta ; (2) allowable taking, in police
power, is limited to property that is destroyed or placed outside the commerce of man for public
welfare; (3) the amount of mandatory discount is private property within the ambit of Article III, Section
990 of the Constitution; and (4) the permanent reduction in a private establishments total revenue,
arising from the mandatory discount, is a taking of private property for public use or benefit, hence, an
exercise of the power of eminent domain requiring the payment of just compensation. I We maintain
that the discussion on eminent domain in Central Luzon Drug Corporation91 is obiter dicta. As
previously discussed, in Central Luzon Drug Corporation,92 the BIR, pursuant to Sections 2.i and 4 of
RR No. 2-94, treated the senior citizen discount in the previous law, RA 7432, as a tax deduction
instead of a tax credit despite the clear provision in that law which stated
SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the following:
a) The grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment, restaurants and recreation centers
and purchase of medicines anywhere in the country: Provided, That private establishments may claim
the cost as tax credit; (Emphasis supplied)

Thus, the Court ruled that the subject revenue regulation violated the law, viz:
The 20 percent discount required by the law to be given to senior citizens is a tax credit, not merely
a tax deduction from the gross income or gross sale of the establishment concerned. A tax credit is
used by a private establishment only after the tax has been computed; a tax deduction, before the tax
is computed. RA 7432 unconditionally grants a tax credit to all covered entities. Thus, the provisions of
the revenue regulation that withdraw or modify such grant are void. Basic is the rule that
administrative regulations cannot amend or revoke the law.93
As can be readily seen, the discussion on eminent domain was not necessary in order to arrive at
this conclusion. All that was needed was to point out that the revenue regulation contravened the law
which it sought to implement. And, precisely, this was done in Central Luzon Drug Corporation 94 by
comparing the wording of the previous law vis--vis the revenue regulation; employing the rules of
statutory construction; and applying the settled principle that a regulation cannot amend the law it
seeks to implement. A close reading of Central Luzon Drug Corporation95 would show that the Court
went on to state that the tax credit "can be deemed" as just compensation only to explain why the
previous law provides for a tax credit instead of a tax deduction. The Court surmised that the tax credit
was a form of just compensation given to the establishments covered by the 20% discount. However,
the reason why the previous law provided for a tax credit and not a tax deduction was not necessary to
resolve the issue as to whether the revenue regulation contravenes the law. Hence, the discussion on
eminent domain is obiter dicta.
A court, in resolving cases before it, may look into the possible purposes or reasons that impelled
the enactment of a particular statute or legal provision. However, statements made relative thereto
are not always necessary in resolving the actual controversies presented before it. This was the case in
Central Luzon Drug Corporation96 resulting in that unfortunate statement that the tax credit "can be
deemed" as just compensation. This, in turn, led to the erroneous conclusion, by deductive reasoning,
that the 20% discount is an exercise of the power of eminent domain. The Dissent essentially adopts
this theory and reasoning which, as will be shown below, is contrary to settled principles in police
power and eminent domain analysis. II The Dissent discusses at length the doctrine on "taking" in
police power which occurs when private property is destroyed or placed outside the commerce of man.
Indeed, there is a whole class of police power measures which justify the destruction of private
property in order to preserve public health, morals, safety or welfare. As earlier mentioned, these
would include a building on the verge of collapse or confiscated obscene materials as well as those
mentioned by the Dissent with regard to property used in violating a criminal statute or one which
constitutes a nuisance. In such cases, no compensation is required. However, it is equally true that
there is another class of police power measures which do not involve the destruction of private
property but merely regulate its use. The minimum wage law, zoning ordinances, price control laws,
laws regulating the operation of motels and hotels, laws limiting the working hours to eight, and the
like would fall under this category. The examples cited by the Dissent, likewise, fall under this category:
Article 157 of the Labor Code, Sections 19 and 18 of the Social Security Law, and Section 7 of the PagIBIG Fund Law. These laws merely regulate or, to use the term of the Dissent, burden the conduct of
the affairs of business establishments. In such cases, payment of just compensation is not required
because they fall within the sphere of permissible police power measures. The senior citizen discount
law falls under this latter category. III The Dissent proceeds from the theory that the permanent
reduction of profits or income/gross sales, due to the 20% discount, is a "taking" of private property for
public purpose without payment of just compensation. At the outset, it must be emphasized that
petitioners never presented any evidence to establish that they were forced to suffer enormous losses
or operate at a loss due to the effects of the assailed law. They came directly to this Court and
provided a hypothetical computation of the loss they would allegedly suffer due to the operation of the
assailed law. The central premise of the Dissents argument that the 20% discount results in a
permanent reduction in profits or income/gross sales, or forces a business establishment to operate at
a loss is, thus, wholly unsupported by competent evidence. To be sure, the Court can invalidate a law
which, on its face, is arbitrary, oppressive or confiscatory.97
But this is not the case here.
In the case at bar, evidence is indispensable before a determination of a constitutional violation can
be made because of the following reasons. First, the assailed law, by imposing the senior citizen
discount, does not take any of the properties used by a business establishment like, say, the land on
which a manufacturing plant is constructed or the equipment being used to produce goods or services.
Second, rather than taking specific properties of a business establishment, the senior citizen discount
law merely regulates the prices of the goods or services being sold to senior citizens by mandating a
20% discount. Thus, if a product is sold at P10.00 to the general public, then it shall be sold at P8.00
( i.e., P10.00 less 20%) to senior citizens. Note that the law does not impose at what specific price the
product shall be sold, only that a 20% discount shall be given to senior citizens based on the price set

by the business establishment. A business establishment is, thus, free to adjust the prices of the goods
or services it provides to the general public. Accordingly, it can increase the price of the above product
to P20.00 but is required to sell it at P16.00 (i.e. , P20.00 less 20%) to senior citizens. Third, because
the law impacts the prices of the goods or services of a particular establishment relative to its sales to
senior citizens, its profits or income/gross sales are affected. The extent of the impact would, however,
depend on the profit margin of the business establishment on a particular good or service. If a product
costs P5.00 to produce and is sold at P10.00, then the profit98 is P5.0099 or a profit margin100 of
50%.101
Under the assailed law, the aforesaid product would have to be sold at P8.00 to senior citizens yet
the business would still earn P3.00102 or a 30%103 profit margin. On the other hand, if the product
costs P9.00 to produce and is required to be sold at P8.00 to senior citizens, then the business would
experience a loss of P1.00.104
But note that since not all customers of a business establishment are senior citizens, the business
establishment may continue to earn P1.00 from non-senior citizens which, in turn, can offset any loss
arising from sales to senior citizens.
Fourth, when the law imposes the 20% discount in favor of senior citizens, it does not prevent the
business establishment from revising its pricing strategy.
By revising its pricing strategy, a business establishment can recoup any reduction of profits or
income/gross sales which would otherwise arise from the giving of the 20% discount. To illustrate,
suppose A has two customers: X, a senior citizen, and Y, a non-senior citizen. Prior to the law, A sells
his products at P10.00 a piece to X and Y resulting in income/gross sales of P20.00 (P10.00 + P10.00).
With the passage of the law, A must now sell his product to X at P8.00 (i.e., P10.00 less 20%) so that
his income/gross sales would be P18.00 (P8.00 + P10.00) or lower by P2.00. To prevent this from
happening, A decides to increase the price of his products to P11.11 per piece. Thus, he sells his
product to X at P8.89 (i.e. , P11.11 less 20%) and to Y at P11.11. As a result, his income/gross sales
would still be P20.00105 (P8.89 + P11.11). The capacity, then, of business establishments to revise
their pricing strategy makes it possible for them not to suffer any reduction in profits or income/gross
sales, or, in the alternative, mitigate the reduction of their profits or income/gross sales even after the
passage of the law. In other words, business establishments have the capacity to adjust their prices so
that they may remain profitable even under the operation of the assailed law.
The Dissent, however, states that The explanation by the majority that private establishments can
always increase their prices to recover the mandatory discount will only encourage private
establishments to adjust their prices upwards to the prejudice of customers who do not enjoy the 20%
discount. It was likewise suggested that if a company increases its prices, despite the application of
the 20% discount, the establishment becomes more profitable than it was before the implementation
of R.A. 7432. Such an economic justification is self-defeating, for more consumers will suffer from the
price increase than will benefit from the 20% discount. Even then, such ability to increase prices
cannot legally validate a violation of the eminent domain clause.106
But, if it is possible that the business establishment, by adjusting its prices, will suffer no reduction
in its profits or income/gross sales (or suffer some reduction but continue to operate profitably) despite
giving the discount, what would be the basis to strike down the law? If it is possible that the business
establishment, by adjusting its prices, will not be unduly burdened, how can there be a finding that the
assailed law is an unconstitutional exercise of police power or eminent domain? That there may be a
burden placed on business establishments or the consuming public as a result of the operation of the
assailed law is not, by itself, a ground to declare it unconstitutional for this goes into the wisdom and
expediency of the law.
The cost of most, if not all, regulatory measures of the government on business establishments is
ultimately passed on to the consumers but that, by itself, does not justify the wholesale nullification of
these measures. It is a basic postulate of our democratic system of government that the Constitution is
a social contract whereby the people have surrendered their sovereign powers to the State for the
common good.107
All persons may be burdened by regulatory measures intended for the common good or to serve
some important governmental interest, such as protecting or improving the welfare of a special class
of people for which the Constitution affords preferential concern. Indubitably, the one assailing the law
has the heavy burden of proving that the regulation is unreasonable, oppressive or confiscatory, or has
gone "too far" as to amount to a "taking." Yet, here, the Dissent would have this Court nullify the law
without any proof of such nature.

Further, this Court is not the proper forum to debate the economic theories or realities that impelled
Congress to shift from the tax credit to the tax deduction scheme. It is not within our power or
competence to judge which scheme is more or less burdensome to business establishments or the
consuming public and, thereafter, to choose which scheme the State should use or pursue. The shift
from the tax credit to tax deduction scheme is a policy determination by Congress and the Court will
respect it for as long as there is no showing, as here, that the subject regulation has transgressed
constitutional limitations. Unavoidably, the lack of evidence constrains the Dissent to rely on
speculative and hypothetical argumentation when it states that the 20% discount is a significant
amount and not a minimal loss (which erroneously assumes that the discount automatically results in a
loss when it is possible that the profit margin is greater than 20% and/or the pricing strategy can be
revised to prevent or mitigate any reduction in profits or income/gross sales as illustrated above), 108
and not all private establishments make a 20% profit margin (which conversely implies that there are
those who make more and, thus, would not be greatly affected by this regulation).109
In fine, because of the possible scenarios discussed above, we cannot assume that the 20%
discount results in a permanent reduction in profits or income/gross sales, much less that business
establishments are forced to operate at a loss under the assailed law. And, even if we gratuitously
assume that the 20% discount results in some degree of reduction in profits or income/gross sales, we
cannot assume that such reduction is arbitrary, oppressive or confiscatory. To repeat, there is no actual
proof to back up this claim, and it could be that the loss suffered by a business establishment was
occasioned through its fault or negligence in not adapting to the effects of the assailed law. The law
uniformly applies to all business establishments covered thereunder. There is, therefore, no unjust
discrimination as the aforesaid business establishments are faced with the same constraints. The
necessity of proof is all the more pertinent in this case because, as similarly observed by Justice
Velasco in his Concurring Opinion, the law has been in operation for over nine years now. However, the
grim picture painted by petitioners on the unconscionable losses to be indiscriminately suffered by
business establishments, which should have led to the closure of numerous business establishments,
has not come to pass. Verily, we cannot invalidate the assailed law based on assumptions and
conjectures. Without adequate proof, the presumption of constitutionality must prevail. IV At this
juncture, we note that the Dissent modified its original arguments by including a new paragraph, to
wit:
Section 9, Article III of the 1987 Constitution speaks of private property without any distinction. It
does not state that there should be profit before the taking of property is subject to just compensation.
The private property referred to for purposes of taking could be inherited, donated, purchased,
mortgaged, or as in this case, part of the gross sales of private establishments. They are all private
property and any taking should be attended by corresponding payment of just compensation. The 20%
discount granted to senior citizens belong to private establishments, whether these establishments
make a profit or suffer a loss. In fact, the 20% discount applies to non-profit establishments like
country, social, or golf clubs which are open to the public and not only for exclusive membership. The
issue of profit or loss to the establishments is immaterial.110
Two things may be said of this argument. First, it contradicts the rest of the arguments of the
Dissent. After it states that the issue of profit or loss is immaterial, the Dissent proceeds to argue that
the 20% discount is not a minimal loss111 and that the 20% discount forces business establishments
to operate at a loss.112
Even the obiter in Central Luzon Drug Corporation,113 which the Dissent essentially adopts and
relies on, is premised on the permanent reduction of total revenues and the loss that business
establishments will be forced to suffer in arguing that the 20% discount constitutes a "taking" under
the power of eminent domain. Thus, when the Dissent now argues that the issue of profit or loss is
immaterial, it contradicts itself because it later argues, in order to justify that there is a "taking" under
the power of eminent domain in this case, that the 20% discount forces business establishments to
suffer a significant loss or to operate at a loss. Second, this argument suffers from the same flaw as
the Dissent's original arguments. It is an erroneous characterization of the 20% discount. According to
the Dissent, the 20% discount is part of the gross sales and, hence, private property belonging to
business establishments. However, as previously discussed, the 20% discount is not private property
actually owned and/or used by the business establishment. It should be distinguished from properties
like lands or buildings actually used in the operation of a business establishment which, if appropriated
for public use, would amount to a "taking" under the power of eminent domain. Instead, the 20%
discount is a regulatory measure which impacts the pricing and, hence, the profitability of business
establishments. At the time the discount is imposed, no particular property of the business
establishment can be said to be "taken." That is, the State does not acquire or take anything from the
business establishment in the way that it takes a piece of private land to build a public road. While the
20% discount may form part of the potential profits or income/gross sales114 of the business
establishment, as similarly characterized by Justice Bersamin in his Concurring Opinion, potential

profits or income/gross sales are not private property, specifically cash or money, already belonging to
the business establishment. They are a mere expectancy because they are potential fruits of the
successful conduct of the business. Prior to the sale of goods or services, a business establishment
may be subject to State regulations, such as the 20% senior citizen discount, which may impact the
level or amount of profits or income/gross sales that can be generated by such establishment. For this
reason, the validity of the discount is to be determined based on its overall effects on the operations of
the business establishment.
Again, as previously discussed, the 20% discount does not automatically result in a 20% reduction
in profits, or, to align it with the term used by the Dissent, the 20% discount does not mean that a 20%
reduction in gross sales necessarily results. Because (1) the profit margin of a product is not
necessarily less than 20%, (2) not all customers of a business establishment are senior citizens, and
(3) the establishment may revise its pricing strategy, such reduction in profits or income/gross sales
may be prevented or, in the alternative, mitigated so that the business establishment continues to
operate profitably. Thus, even if we gratuitously assume that some degree of reduction in profits or
income/gross sales occurs because of the 20% discount, it does not follow that the regulation is
unreasonable, oppressive or confiscatory because the business establishment may make the
necessary adjustments to continue to operate profitably. No evidence was presented by petitioners to
show otherwise. In fact, no evidence was presented by petitioners at all. Justice Leonen, in his
Concurring and Dissenting Opinion, characterizes "profits" (or income/gross sales) as an inchoate right.
Another way to view it, as stated by Justice Velasco in his Concurring Opinion, is that the business
establishment merely has a right to profits. The Constitution adverts to it as the right of an enterprise
to a reasonable return on investment.115
Undeniably, this right, like any other right, may be regulated under the police power of the State to
achieve important governmental objectives like protecting the interests and improving the welfare of
senior citizens. It should be noted though that potential profits or income/gross sales are relevant in
police power and eminent domain analyses because they may, in appropriate cases, serve as an
indicia when a regulation has gone "too far" as to amount to a "taking" under the power of eminent
domain. When the deprivation or reduction of profits or income/gross sales is shown to be
unreasonable, oppressive or confiscatory, then the challenged governmental regulation may be
nullified for being a "taking" under the power of eminent domain. In such a case, it is not profits or
income/gross sales which are actually taken and appropriated for public use. Rather, when the
regulation causes an establishment to incur losses in an unreasonable, oppressive or confiscatory
manner, what is actually taken is capital and the right of the business establishment to a reasonable
return on investment. If the business losses are not halted because of the continued operation of the
regulation, this eventually leads to the destruction of the business and the total loss of the capital
invested therein. But, again, petitioners in this case failed to prove that the subject regulation is
unreasonable, oppressive or confiscatory.
V.
The Dissent further argues that we erroneously used price and rate of return on investment control
laws to justify the senior citizen discount law. According to the Dissent, only profits from industries
imbued with public interest may be regulated because this is a condition of their franchises. Profits of
establishments without franchises cannot be regulated permanently because there is no law regulating
their profits. The Dissent concludes that the permanent reduction of total revenues or gross sales of
business establishments without franchises is a taking of private property under the power of eminent
domain. In making this argument, it is unfortunate that the Dissent quotes only a portion of the
ponencia The subject regulation may be said to be similar to, but with substantial distinctions from,
price control or rate of return on investment control laws which are traditionally regarded as police
power measures. These laws generally regulate public utilities or industries/enterprises imbued with
public interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations considering that
they have a monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior citizens. x x x116
The above paragraph, in full, states
The subject regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded as police power
measures. These laws generally regulate public utilities or industries/enterprises imbued with public
interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper

corporate greed by controlling the rate of return on investment of these corporations considering that
they have a monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior citizens.
Nonetheless, to the degree material to the resolution of this case, the 20% discount may be
properly viewed as belonging to the category of price regulatory measures which affects the
profitability of establishments subjected thereto. (Emphasis supplied)
The point of this paragraph is to simply show that the State has, in the past, regulated prices and
profits of business establishments. In other words, this type of regulatory measures is traditionally
recognized as police power measures so that the senior citizen discount may be considered as a police
power measure as well. What is more, the substantial distinctions between price and rate of return on
investment control laws vis--vis the senior citizen discount law provide greater reason to uphold the
validity of the senior citizen discount law. As previously discussed, the ability to adjust prices allows
the establishment subject to the senior citizen discount to prevent or mitigate any reduction of profits
or income/gross sales arising from the giving of the discount. In contrast, establishments subject to
price and rate of return on investment control laws cannot adjust prices accordingly. Certainly, there is
no intention to say that price and rate of return on investment control laws are the justification for the
senior citizen discount law. Not at all. The justification for the senior citizen discount law is the plenary
powers of Congress. The legislative power to regulate business establishments is broad and covers a
wide array of areas and subjects. It is well within Congress legislative powers to regulate the profits or
income/gross sales of industries and enterprises, even those without franchises. For what are
franchises but mere legislative enactments? There is nothing in the Constitution that prohibits
Congress from regulating the profits or income/gross sales of industries and enterprises without
franchises. On the contrary, the social justice provisions of the Constitution enjoin the State to regulate
the "acquisition, ownership, use, and disposition" of property and its increments.117
This may cover the regulation of profits or income/gross sales of all businesses, without
qualification, to attain the objective of diffusing wealth in order to protect and enhance the right of all
the people to human dignity.118
Thus, under the social justice policy of the Constitution, business establishments may be compelled
to contribute to uplifting the plight of vulnerable or marginalized groups in our society provided that
the regulation is not arbitrary, oppressive or confiscatory, or is not in breach of some specific
constitutional limitation. When the Dissent, therefore, states that the "profits of private establishments
which are non-franchisees cannot be regulated permanently, and there is no such law regulating their
profits permanently,"119 it is assuming what it ought to prove. First, there are laws which, in effect,
permanently regulate profits or income/gross sales of establishments without franchises, and RA 9257
is one such law. And, second, Congress can regulate such profits or income/gross sales because, as
previously noted, there is nothing in the Constitution to prevent it from doing so. Here, again, it must
be emphasized that petitioners failed to present any proof to show that the effects of the assailed law
on their operations has been unreasonable, oppressive or confiscatory. The permanent regulation of
profits or income/gross sales of business establishments, even those without franchises, is not as
uncommon as the Dissent depicts it to be. For instance, the minimum wage law allows the State to set
the minimum wage of employees in a given region or geographical area. Because of the added labor
costs arising from the minimum wage, a permanent reduction of profits or income/gross sales would
result, assuming that the employer does not increase the prices of his goods or services. To illustrate,
suppose it costs a company P5.00 to produce a product and it sells the same at P10.00 with a 50%
profit margin. Later, the State increases the minimum wage. As a result, the company incurs greater
labor costs so that it now costs P7.00 to produce the same product. The profit per product of the
company would be reduced to P3.00 with a profit margin of 30%. The net effect would be the same as
in the earlier example of granting a 20% senior citizen discount. As can be seen, the minimum wage
law could, likewise, lead to a permanent reduction of profits. Does this mean that the minimum wage
law should, likewise, be declared unconstitutional on the mere plea that it results in a permanent
reduction of profits? Taking it a step further, suppose the company decides to increase the price of its
product in order to offset the effects of the increase in labor cost; does this mean that the minimum
wage law, following the reasoning of the Dissent, is unconstitutional because the consuming public is
effectively made to subsidize the wage of a group of laborers, i.e., minimum wage earners? The same
reasoning can be adopted relative to the examples cited by the Dissent which, according to it, are valid
police power regulations. Article 157 of the Labor Code, Sections 19 and 18 of the Social Security Law,
and Section 7 of the Pag-IBIG Fund Law would effectively increase the labor cost of a business
establishment. This would, in turn, be integrated as part of the cost of its goods or services. Again, if
the establishment does not increase its prices, the net effect would be a permanent reduction in its
profits or income/gross sales. Following the reasoning of the Dissent that "any form of permanent

taking of private property (including profits or income/gross sales)120 is an exercise of eminent

domain that requires the State to pay just compensation,"121 then these statutory provisions would,
likewise, have to be declared unconstitutional. It does not matter that these benefits are deemed part
of the employees legislated wages because the net effect is the same, that is, it leads to higher labor
costs and a permanent reduction in the profits or income/gross sales of the business
establishments.122
The point then is this most, if not all, regulatory measures imposed by the State on business
establishments impact, at some level, the latters prices and/or profits or income/gross sales.123
If the Court were to sustain the Dissents theory, then a wholesale nullification of such measures
would inevitably result. The police power of the State and the social justice provisions of the
Constitution would, thus, be rendered nugatory. There is nothing sacrosanct about profits or
income/gross sales. This, we made clear in Carlos Superdrug Corporation:124
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the
provision in question, there is no basis for its nullification in view of the presumption of validity which
every law has in its favor.
xxxx
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive
pricing component of the business. While the Constitution protects property rights petitioners must the
realities of business and the State, in the exercise of police power, can intervene in the operations of a
business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the percept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continously serve as a reminder for the
promotion of public good.
Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means employed
in invoking the active participation of the private sector, in order to achieve the purpose or objective of
the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of R.A. No. 9257 is
arbitrary, and that the continued implementation of the same would be unconscionably detrimental to
petitioners, the Court will refrain form quashing a legislative act.125
In conclusion, we maintain that the correct rule in determining whether the subject regulatory
measure has amounted to a "taking" under the power of eminent domain is the one laid down in
Alalayan v. National Power Corporation126 and followed in Carlos Superdurg Corporation127 consistent
with long standing principles in police power and eminent domain analysis. Thus, the deprivation or
reduction of profits or income. Gross sales must be clearly shown to be unreasonable, oppressive or
confiscatory. Under the specific circumstances of this case, such determination can only be made upon
the presentation of competent proof which petitioners failed to do. A law, which has been in operation
for many years and promotes the welfare of a group accorded special concern by the Constitution,
cannot and should not be summarily invalidated on a mere allegation that it reduces the profits or
income/gross sales of business establishments.
WHEREFORE, the Petition is hereby DISMISSED for lack of merit.
SO ORDERED.

FIRST DIVISION
G.R. No. 167290, November 26, 2014

HERMANO OIL MANUFACTURING & SUGAR CORPORATION, Petitioner, v. TOLL REGULATORY BOARD,
ENGR. JAIME S. DUMLAO, JR., PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (PNCC) AND
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), Respondents.
DECISION
BERSAMIN, J.:
The issue to be determined concerns the demand of the petitioner to have access to the North Luzon
Expressway (NLEX) by way of an easement of right of way. The demand was rebuffed by the respondents, and
upheld by both the trial and appellate courts.
The Case
On appeal by review on certiorari is the decision promulgated on October 27, 2004, 1 whereby the Court of Appeals
(CA) affirmed the dismissal of the petitioners complaint for specific performance by the Regional Trial Court (RTC) in
Malolos, Bulacan, Branch 7, through the order issued on March 6, 2002. 2
Antecedents
The petitioner owned a parcel of land located at the right side of the Sta. Rita Exit of the NLEX situated at Barangay
Sta. Rita, Guiguinto, Bulacan and covered by Transfer Certificate of Title (TCT) No. T-134222 in its name issued by
the Registry of Deeds of Bulacan. 3 The parcel of land was bounded by an access fence along the NLEX. In its letter
dated September 7, 2001,4 the petitioner requested that respondent Toll Regulatory Board (TRB) grant an easement
of right of way, contending that it had been totally deprived of the enjoyment and possession of its property by the
access fence that had barred its entry into and exit from the NLEX. On September 26, 2001, however, the TRB
denied the petitioners request, explaining thusly:chanroblesvirtuallawlibrary
It is with regret that we cannot favorably consider your clients request at this point in time. Said
request is inconsistent with the provision of Section 7.0 of Republic Act No. 2000, also known as the
Limited Access Highway Act. Moreover, allowing easement of right-of-way may have
detrimental/adverse effect on the scheduled rehabilitation and improvement of the North Luzon
Expressway Interchanges, as well as on the operational problems, i.e. traffic conflicts that may arise, if
approved.5
Thereafter, the petitioner sued the TRB and Engr. Jaime S. Dumlao, the TRBs Executive Director, in the RTC, 6
demanding specific performance, the grant of the easement of right of way and damages (Civil Case No. 37-M2002). The petitioner amended its complaint to implead the Philippine National Construction Corporation (PNCC)
and
the
Department
of
Public
Works
and
Highways
(DPWH)
as
indispensable
parties. 7
The petitioner alleged in its amended complaint that the access fence had totally deprived it of the use and
enjoyment of its property by preventing ingress and egress to its property; that the only access leading to its
property was the road network situated in front of its property; that it was thereby deprived of its property without
due process of law and just compensation; and that it was also denied equal protection of the law because adjacent
property owners had been given ingress and egress access to their properties. It prayed that the
RTC:chanroblesvirtuallawlibrary
1. Immediately issue a writ of preliminary injunction/temporary restraining order enjoining the
defendants, its agents and/or representatives from depriving plaintiff to ingress and egress of its
property;
2. After due hearing:chanroblesvirtuallawlibrary
a)
b)

Render

the

Granting

foregoing
plaintiff

writ

of

preliminary
a

right

injunction
of

perpetual;
way;

c) Declare the condemnation of plaintiffs property as null and void. Alternatively, plaintiff
prays that defendants be ordered to pay plaintiff a just and fair compensation of the

latters property in the amount of not less than Four Thousand Pesos (Ps. 4,000.00) per
square
meter;
d) To pay plaintiff the amount of THREE HUNDRED THOUSAND PESOS (Ps. 300,000.00)
and
Ps.
5,000.00
per
court
appearance
by
way
of
Attorneys
fees;
e) To pay plaintiff Moral and Exemplary Damages in the amount of Ps. 200,000.00; and
f) To pay plaintiff the costs of suit.
Plaintiff further prays for such other reliefs and remedies as may be deemed just and equitable
under the premises.8
Appearing for the TRB, the Office of the Solicitor General (OSG) filed a Motion to Dismiss with Opposition to the
Application for the Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction based on the
following grounds:9
I.
THE HONORABLE COURT HAS NO JURISDICTION OVER THE CASE
II.
THE PETITION STATES NO CAUSE OF ACTION CONSIDERING THAT:
A.
B.

C.

PLAINTIFF IS NOT THE REAL PARTY IN INTEREST

EASEMENT WILL NOT LIE BECAUSE THE LIMITED ACCESS TO THE NORTH LUZON
EXPRESSWAY IS ALLOWED UNDER REPUBLIC ACT 2000
THE STATE CANNOT BE SUED WITHOUT ITS CONSENT
III.

THE REQUISITES FOR THE ISSUANCE OF TEMPORARY RESTRAINING ORDER AND/OR WRIT OF
INJUNCTION ARE NOT PRESENT
IV.
THE COMPLAINT HAS NO LEGAL BASIS, THE PROPER REMEDY AVAILABLE IN THIS CASE IS NOT
COMPLAINT BUT A PETITION FOR CERTIORARI UNDER RULE 65 OF THE RULES OF COURT.
In its order dated March
follows:chanroblesvirtuallawlibrary

6,

2002,10

the

RTC

granted

the

motion

to

dismiss,

observing

The present action against the defendants Toll Regulatory Board and its Executive Director, Engr.
Jaime S. Dumlao, Jr., could be considered as a suit against the state without its consent as among the
reliefs prayed for in the complaint is to require the said defendants to pay, jointly and severally, a just
and reasonable compensation of the plaintiffs property which, if awarded in the judgment against said
defendants, would ultimately involve an appropriation by the state of the amount needed to pay the
compensation and damages so awarded. Moreover, as pointed out by the defendants-movants,
defendant Jaime S. Dumlao, Jr. is sued in his official capacity so that the instant complaint against him
is tantamount to a claim against the state which cannot be sued without its consent.
This principle applies with equal force as regards new defendant Department of Public Works and
Highways
(DPWH).
Defendant Philippine National Construction Corporation (PNCC), on the other hand, was impleaded as
additional defendant being the entity that operates the North Luzon Expressway and was primarily
responsible in depriving the plaintiff of the use and enjoyment of its property by reason of the
construction of the access or right of way fence that prevents ingress to and egress from the subject
property, considering further that the other defendants had refused to grant plaintiffs request for an

as

easement

of

right

of

way.

The main objective and prayer of the plaintiff is for this court to issue a writ of injunction that will
restrain the defendants from depriving it of ingress and egress to its property in question or to grant to
it
a
right
of
way
to
its
property.
Suffice it to say that the main relief sought by the plaintiff is beyond the jurisdiction of this court to
grant as provided for under Presidential Decree No. 1818 and Republic Act No. 8975 which essentially
prohibit the courts from issuing temporary restraining orders and/or writs of injunction against
government infrastructure projects, and which expressly declares any such TRO or writ of injunction
void
under
Section
3
of
R.A.
No.
8975.
In

view

of

all

WHEREFORE,

the
the

foregoing,

the

instant

motion

to

complaint

dismiss
is

is

hereby

hereby

GRANTED.
DISMISSED.

SO ORDERED.11
The

petitioner

sought

reconsideration,

but

the

RTC

denied

its

motion

on

July

25,

2002. 12

The petitioner appealed.13

Judgment of the CA
On October 27, 2004, the CA promulgated its assailed judgment, affirming the RTCs dismissal of the complaint, to
wit:chanroblesvirtuallawlibrary
The law is clear. Plaintiff-appellant does not deny that the NLEX is a limited access facility. Neither
did it put forward any reason why it should not be covered by the said law. Plaintiff-appellant,
therefore, cannot expect any court to issue a decision in its favor in violation of an existing law. The
Court further notes that plaintiff-appellant skirted this issue in its pleadings perhaps because it
recognizes the fact that its prayers in the complaint before the trial court is in violation of the said law.
Moreover, as pointed out by defendants-appellees (Rollo, p. 19 and 127-128), when plaintiff-appellant
acquired the property on December 14, 1999 (See: Records, p. 33), the NLEX was already in existence
and as a matter of fact Entry No. 189568 in the title indicated that a portion of the property was
already sold to the Republic of the Philippines (See: Dorsal portion, Records, p. 33). It is basic that a
person cannot demand an easement of right of way if the isolation of the property was due to owners
own act (Art. 649, NCC; Villanueva v Velasco, 346 SCRA 99 [2000]). In the present case, when the
plaintiff-appellant bought the property in 1999, the NLEX was already in existence and so was the
access fence. In short, its predecessors-in-interest allowed the property to be isolated. Plaintiffappellant
is
now
bound
by
the
acts
of
its
predecessors-in-interest.
Moreover, as admitted by plaintiff-appellant in its amended complaint, there is a road network in front
of the property which serves as its access (Records, p. 28). It is settled that to be able to demand a
compulsory right of way, the dominant estate must not have adequate access to a public highway
(Villanueva v Velasco, supra). Plaintiff-appellant did not complaint about the adequacy of the existing
road
works.
Also, as pointed out by defendants-appellees, the action below was one for specific performance which
is proper only in case of contractual breach. In the present case, plaintiff-appellant cannot claim that
defendants-appellees committed a breach of contract because there is precisely no contract between
them.
As to the matter of non-suability, the Court notes that while defendant-appellee PNCC is a government
owned and controlled corporation, the other defendants-appellees are either agencies of the State
(DPWH and TRB) or an employee of a government agency. Plaintiff-appellant argued that the principle
of non-suability of the state does not apply when the government acted in a non-governmental
capacity. The Court, however, notes that plaintiff-appellant merely cites cases to this effect but did not
put forward any argument why the maintenance of NLEX should be considered as a non-governmental
function. It cannot be denied that the maintenance of the highways is part of the necessary functions
of
the
government
of
maintaining
public
infrastructures.
Coming now to PNCC although it is not strictly a government agency, its function is a necessary
incident to a government function and, hence, it should likewise enjoy immunity from suit (See: Union

Insurance

Society

of

Canton,

Ltd.

Republic

of

the

Philippines,

46

SCRA

120

[1972]).

As to the assertion that no expropriation proceeding was taken against the subject property, the Court
agrees with the PNCC that these arguments were not raised in the Court below and, hence, is no
longer proper at this stage. Moreover, the Court notes that the proper party to complain against the
alleged lack of proper expropriation proceeding is the previous owner, when portion of the property
was
sold
to
the
Republic
of
the
Philippines
in
1979.
WHEREFORE, the appealed Order dated March 6, 2002 of the Regional Trial Court of Malolos, Bulacan,
Branch
7,
in
Civil
Case
No.
37-M-2002
is
hereby
AFFIRMED.
SO ORDERED.14
Issues
The present appeal is anchored on the following grounds, namely:chanroblesvirtuallawlibrary
FIRST
THE DECISION OF THE COURT OF APPEALS IS REPUGNANT TO THE DUE PROCESS AND EQUAL
PROTECTION CLAUSE ENSHRINED IN OUR CONSTITUTION AND PREVAILING JURISPRUDENCE.
SECOND
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING THAT ENTRY NO.
189568 IN THE TITLE OF HEREIN PETITIONER WAS ALREADY IN EXISTENCE WHICH SHOWED THAT EVEN
BEFORE THE ACQUISITION OF THE PROPERTY IN 1999, THE NLEX WAS ALREADY IN EXISTENCE AND SO
WAS THE ACCESS FENCE. THUS, ITS PREDECESSORS-IN-INTEREST ALLOWED THE PROPERTY TO BE
ISOLATED.
THIRD
THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT RESPONDENT PNCC, ALTHOUGH NOT
STRICTLY A GOVERNMENT AGENCY, SHOULD LIKEWISE ENJOY IMMUNITY FROM SUIT. 15
The foregoing grounds boil down to the issue of whether Civil Case No. 37-M-2002 was properly dismissed.
Ruling
We

concur

with

both

lower

courts.

In our view, the TRB, Dumlao and the DPWH correctly invoked the doctrine of sovereign immunity in their favor. The
TRB and the DPWH performed purely or essentially government or public functions. As such, they were invested
with the inherent power of sovereignty. Being unincorporated agencies or entities of the National Government, they
could not be sued as such. On his part, Dumlao was acting as the agent of the TRB in respect of the matter
concerned.
In Air Transportation Office v. Ramos,16 we expounded on the doctrine of sovereign immunity in the following
manner:chanroblesvirtuallawlibrary
An unincorporated government agency without any separate juridical personality of its own enjoys
immunity from suit because it is invested with an inherent power of sovereignty. Accordingly, a claim
for damages against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is
violated. However, the need to distinguish between an unincorporated government agency performing
governmental function and one performing proprietary functions has arisen. The immunity has been
upheld in favor of the former because its function is governmental or incidental to such function; it has
not been upheld in favor of the latter whose function was not in pursuit of a necessary function of
government but was essentially a business.
Nonetheless, the petitioner properly argued that the PNCC, being a private business entity, was not immune
from suit. The PNCC was incorporated in 1966 under its original name of Construction Development Corporation of

the Philippines (CDCP) for a term of fifty years pursuant to the Corporation Code. 17 In 1983, the CDCP changed its
corporate name to the PNCC to reflect the extent of the Governments equity investment in the company, a
situation that came about after the government financial institutions converted their loans into equity following the
CDCPs inability to pay the loans. 18 Hence, the Government owned 90.3% of the equity of the PNCC, and only
9.70% of the PNCCs voting equity remained under private ownership. 19 Although the majority or controlling shares
of the PNCC belonged to the Government, the PNCC was essentially a private corporation due to its having been
created in accordance with the Corporation Code, the general corporation statute. 20 More specifically, the PNCC
was an acquired asset corporation under Administrative Order No. 59, and was subject to the regulation and
jurisdiction of the Securities and Exchange Commission. 21 Consequently, the doctrine of sovereign immunity had no
application

to

the

PNCC.

The foregoing conclusion as to the PNCC notwithstanding, the Court affirms the dismissal of the complaint due to
lack
of
jurisdiction
and
due
to
lack
of
cause
of
action.
It appears that the petitioners complaint principally sought to restrain the respondents from implementing an
access fence on its property, and to direct them to grant it a right of way to the NLEX. Clearly, the reliefs being
sought by the petitioner were beyond the jurisdiction of the RTC because no court except the Supreme Court could
issue an injunction against an infrastructure project of the Government. This is because Presidential Decree No.
1818, issued on January 16, 1981, prohibited judges from issuing restraining orders against government
infrastructure projects, stating in its sole provision: No court in the Philippines shall have jurisdiction to issue any
restraining order, preliminary injunction or preliminary order, preliminary mandatory injunction in any case, dispute
or controversy involving an infrastructure project. Presidential Decree No. 1818 was amended by Republic Act No.
8975,22 approved on November 7, 2000, whose pertinent parts provide:chanroblesvirtuallawlibrary
Section 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions.- No court, except the Supreme Court, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory injunction against the government,
or any of its subdivisions, officials or any person or entity, whether public or private, acting under the
government's
direction,
to
restrain,
prohibit
or
compel
the
following
acts:
(a) Acquisition, clearance and development of the right-of-way and/or site or location of any national
government
project;
(b) Bidding or awarding of contract/project of the national government as defined under Section 2
hereof;
(c) Commencement, prosecution, execution, implementation, operation of any such contract or project;
(d)

Termination

or

rescission

of

any

such

contract/project;

and

(e) The undertaking or authorization of any other lawful activity necessary for such contract/project.
This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited to cases filed by bidders or those claiming to have rights through such bidders
involving such contract/project. This prohibition shall not apply when the matter is of extreme urgency
involving a constitutional issue, such that unless a temporary restraining order is issued, grave
injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by
the court, which bond shall accrue in favor of the government if the court should finally decide that the
applicant
was
not
entitled
to
the
relief
sought.
If after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or order a
rebidding of the same, without prejudice to any liability that the guilty party may incur under existing
laws.
Section 4. Nullity of Writs and Orders.- Any temporary restraining order, preliminary injunction or
preliminary mandatory injunction issued in violation of Section 3 hereof is void and of no force and
effect.
Section 5. Designation of Regional Trial Courts.- The Supreme Court may designate regional trial courts
to act as commissioners with the sole function of receiving facts of the case involving acquisition,

clearance and development of right-of-way for government infrastructure projects. The designated
regional trial court shall within thirty (30) days from the date of receipt of the referral, forward its
findings of facts to the Supreme Court for appropriate action. x x x
As to what was embraced by the term infrastructure project as used in Presidential Decree No. 1818, the Court
has ruled in Francisco, Jr. v. UEM-MARA Philippines Corporation:23
PD 1818 proscribes the issuance of a writ of preliminary injunction in any case involving an
infrastructure project of the government. The aim of the prohibition, as expressed in its second
whereas clause, is to prevent delay in the implementation or execution of government infrastructure
projects (particularly through the use of provisional remedies) to the detriment of the greater good
since it disrupts the pursuit of essential government projects and frustrates the economic development
effort
of
the
nation.
Petitioner argues that the collection of toll fees is not an infrastructure project of the government. He
cites the definition of infrastructure projects we used in Republic v. Silerio:chanroblesvirtuallawlibrary
The term infrastructure projects means construction, improvement and rehabilitation
of roads, and bridges, railways, airports, seaports, communication facilities, irrigation,
flood control and drainage, water supply and sewage systems, shore protection, power
facilities, national buildings, school buildings, hospital buildings, and other related
construction projects that form part of the government capital investment.
xxxx
The definition of infrastructure projects specifically includes the improvement and
rehabilitation of roads and not just its construction. Accordingly, even if the Coastal Road was
merely upgraded and not constructed from scratch, it is still covered by the definition. Moreover, PD
1818 itself states that any person, entity or governmental official cannot be prohibited
from continuing the execution or implementation of such project or pursuing any lawful
activity necessary for such execution or implementation. Undeniably, the collection of toll fees
is part of the execution or implementation of the MCTEP as agreed upon in the TOA. The TOA is valid
since it has not been nullified. Thus it is a legitimate source of rights and obligations. It has the force
and effect of law between the contracting parties and is entitled to recognition by this Court. The
MCTEP is an infrastructure project of the government forming part of the government capital
investment considering that under the TOA, the government owns the expressways comprising the
project. (Emphasis supplied.)
There can be no question that the respondents maintenance of safety measures, including the establishment
of the access fence along the NLEX, was a component of the continuous improvement and development of the
NLEX. Consequently, the lower courts could not validly restrain the implementation of the access fence by granting
the
petitioner
its
right
of
way
without
exceeding
its
jurisdiction.
Nor did the establishment of the access fence violate the petitioners constitutional and legal rights.
It is relevant to mention that the access fence was put up pursuant to Republic Act No. 2000 ( Limited Access
Highway Act), the enforcement of which was under the authority of the DOTC. Clarifying the DOTCs jurisdiction
under this law in Mirasol v. Department of Public Works and Highways,24 the Court has said
RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22 June 1957.
Section 4 of RA 2000 provides that [t]he Department of Public Works and Communications is
authorized to do so design any limited access facility and to so regulate, restrict, or prohibit access as
to best serve the traffic for which such facility is intended. The RTC construed this authorization to
regulate, restrict, or prohibit access to limited access facilities to apply to the Department of Public
Works
and
Highways
(DPWH).
The RTCs ruling is based on a wrong premise. The RTC assumed that the DPWH derived its authority
from its predecessor, the Department of Public Works and Communications, which is expressly
authorized to regulate, restrict, or prohibit access to limited access facilities under Section 4 of RA
2000. However, such assumption fails to consider the evolution of the Department of Public Works and
Communications.
x

Upon the ratification of the 1987 Constitution in February 1987, the former Ministry of Public Works and
Highways became the Department of Public Works and Highways (DPWH) and the former Ministry of
Transportation and Communications became the Department of Transportation and Communications
(DOTC).
DPWH issued DO 74 and DO 215 declaring certain expressways as limited access facilities on 5 April
1993 and 25 June 1998, respectively. Later, the TRB, under the DPWH, issued the Revised Rules and
Regulations on Limited Access Facilities. However, on 23 July 1979, long before these department
orders and regulations were issued, the Ministry of Public Works, Transportation and Communications
was divided into two agencies the Ministry of Public Works and the Ministry of Transportation and
Communications by virtue of EO 546. The question is, which of these two agencies is now authorized
to
regulate,
restrict,
or
prohibit
access
to
limited
access
facilities?
Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed the public
works functions of the Ministry of Public Works, Transportation and Communications. On
the other hand, among the functions of the Ministry of Transportation and Communications
(now Department of Transportation and Communications [DOTC]) were to (1) formulate and
recommend national policies and guidelines for the preparation and implementation of an
integrated and comprehensive transportation and communications systems at the national,
regional, and local levels; and (2) regulate, whenever necessary, activities relative to
transportation and communications and prescribe and collect fees in the exercise of such
power. Clearly, under EO 546, it is the DOTC, not the DPWH, which has authority to
regulate,
restrict,
or
prohibit
access
to
limited
access
facilities.
Even under Executive Order No. 125 (EO 125) and Executive Order No. 125-A (EO 125-A),
which further reorganized the DOTC, the authority to administer and enforce all laws, rules
and
regulations
relative
to
transportation
is
clearly
with
the
DOTC.
Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare certain
expressways as limited access facilities. Under the law, it is the DOTC which is authorized
to administer and enforce all laws, rules and regulations in the field of transportation and
to regulate related activities. (Emphasis supplied.)
Moreover, the putting up of the access fence on the petitioners property was in the valid exercise of police
power, assailable only upon proof that such putting up unduly violated constitutional limitations like due process
and equal protection of the law. 25 In Mirasol v. Department of Public Works and Highways, the Court has further
noted that:chanroblesvirtuallawlibrary
A toll way is not an ordinary road. As a facility designed to promote the fastest access to certain
destinations, its use, operation, and maintenance require close regulation. Public interest and safety
require the imposition of certain restrictions on toll ways that do not apply to ordinary roads. As a
special kind of road, it is but reasonable that not all forms of transport could use it. 26
Clearly, therefore, the access fence was a reasonable restriction on the petitioners property given the location
thereof at the right side of Sta. Rita Exit of the NLEX. Although some adjacent properties were accorded unrestricted
access to the expressway, there was a valid and reasonable classification for doing so because their owners
provided ancillary services to motorists using the NLEX, like gasoline service stations and food stores. 27 A
classification based on practical convenience and common knowledge is not unconstitutional simply because it may
lack
purely
theoretical
or
scientific
uniformity. 28
Lastly, the limited access imposed on the petitioners property did not partake of a compensable taking due to the
exercise of the power of eminent domain. There is no question that the property was not taken and devoted for
public use. Instead, the property was subjected to a certain restraint, i.e. the access fence, in order to secure the
general safety and welfare of the motorists using the NLEX. There being a clear and valid exercise of police power,
the
petitioner
was
certainly
not
entitled
to
any
just
compensation. 29
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated on
October
27,
2004;
and
ORDERS
the
petitioner
to
pay
the
costs
of
suit.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO ARNAIZ, and CIELO OUANO
MARTINEZ,
Petitioners,
- versus THE REPUBLIC OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, and
THE REGISTER OF DEEDS FOR THE CITY OF CEBU,
Respondents.
x-------------------------------------------x
DECISION
VELASCO, JR., J.:

At the center of these two (2) Petitions for Review on Certiorari under Rule 45 is the issue of the right of the
former owners of lots acquired for the expansion of the Lahug Airport in Cebu City to repurchase or secure
reconveyance of their respective properties.
In the first petition, docketed as G.R. No. 168770, petitioners Anunciacion vda. de Ouano, Mario Ouano,
Leticia Ouano Arnaiz and Cielo Ouano Martinez (the Ouanos) seek to nullify the Decision[1] dated September 3,
2004 of the Court of Appeals (CA) in CA-G.R. CV No. 78027, affirming the Order dated December 9, 2002 of the
Regional Trial Court (RTC), Branch 57 in Cebu City, in Civil Case No. CEB-20743, a suit to compel the Republic of the
Philippines and/or the Mactan-Cebu International Airport Authority (MCIAA) to reconvey to the Ouanos a parcel of
land.
The second petition, docketed as G.R. No. 168812, has the MCIAA seeking principally to annul and set aside
the Decision[2] and Resolution[3] dated January 14, 2005 and June 29, 2005, respectively, of the CA in CA-G.R. CV
No. 64356, sustaining the RTC, Branch 13 in Cebu City in its Decision of October 7, 1988 in Civil Case No. CEB18370.

Per its October 19, 2005 Resolution, the Court ordered the consolidation of both cases.
Except for the names of the parties and the specific lot designation involved, the relevant factual antecedents
which gave rise to these consolidated petitions are, for the most part, as set forth in the Courts Decision[4] of
October 15, 2003, as reiterated in a Resolution[5] dated August 9, 2005, in G.R. No. 156273 entitled Heirs of
Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority (Heirs of Moreno), and in other
earlier related cases.[6]
In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency, pursued a program to expand the
Lahug Airport in Cebu City. Through its team of negotiators, NAC met and negotiated with the owners of the
properties situated around the airport, which included Lot Nos. 744-A, 745-A, 746, 747, 761-A, 762-A, 763-A, 942,
and 947 of the Banilad Estate. As the landowners would later claim, the government negotiating team, as a
sweetener, assured them that they could repurchase their respective lands should the Lahug Airport expansion
project do not push through or once the Lahug Airport closes or its operations transferred to Mactan-Cebu Airport.
Some of the landowners accepted the assurance and executed deeds of sale with a right of repurchase. Others,
however, including the owners of the aforementioned lots, refused to sell because the purchase price offered was
viewed as way below market, forcing the hand of the Republic, represented by the then Civil Aeronautics
Administration (CAA), as successor agency of the NAC, to file a complaint for the expropriation of Lot Nos. 744-A,
745-A, 746, 747, 761-A, 762-A, 763-A, 942, and 947, among others, docketed as Civil Case No. R-1881 entitled
Republic v. Damian Ouano, et al.
On December 29, 1961, the then Court of First Instance (CFI) of Cebu rendered judgment for the Republic,
disposing, in part, as follows:
IN VIEW OF THE FOREGOING, judgment is hereby rendered:
1. Declaring the expropriation of Lots Nos. 75, 76, 76, 89, 90, 91, 92, 105, 106, 107, 108, 104, 921-A, 88, 93,
913-B, 72, 77, 916, 777-A, 918, 919, 920, 764-A, 988, 744-A, 745-A, 746, 747, 762-A, 763-A, 951, 942, 720-A, x x x
and 947, included in the Lahug Airport, Cebu City, justified in and in lawful exercise of the right of eminent domain.

xxxx
3. After the payment of the foregoing financial obligation to the landowners, directing the latter to deliver to
the plaintiff the corresponding Transfer Certificates of Title to their respective lots; and upon the presentation of the
said titles to the Register of Deeds, ordering the latter to cancel the same and to issue, in lieu thereof, new Transfer
Certificates of Title in the name of the plaintiff.[7]

In view of the adverted buy-back assurance made by the government, the owners of the lots no longer
appealed the decision of the trial court.[8] Following the finality of the judgment of condemnation, certificates of
title for the covered parcels of land were issued in the name of the Republic which, pursuant to Republic Act No.
6958,[9] were subsequently transferred to MCIAA.

At the end of 1991, or soon after the transfer of the aforesaid lots to MCIAA, Lahug Airport completely ceased
operations, Mactan Airport having opened to accommodate incoming and outgoing commercial flights. On the
ground, the expropriated lots were never utilized for the purpose they were taken as no expansion of Lahug Airport

was undertaken. This development prompted the former lot owners to formally demand from the government that
they be allowed to exercise their promised right to repurchase. The demands went unheeded. Civil suits followed.
G.R. No. 168812 (MCIAA Petition)
On February 8, 1996, Ricardo L. Inocian and four others (all children of Isabel Limbaga who originally owned six
[6] of the lots expropriated); and Aletha Suico Magat and seven others, successors-in-interest of Santiago Suico, the
original owner of two (2) of the condemned lots (collectively, the Inocians), filed before the RTC in Cebu City a
complaint for reconveyance of real properties and damages against MCIAA. The complaint, docketed as Civil Case
No. CEB-18370, was eventually raffled to Branch 13 of the court.

On September 29, 1997, one Albert Chiongbian (Chiongbian), alleging to be the owner of Lot Nos. 761-A and
762-A but which the Inocians were now claiming, moved and was later allowed to intervene.

During the pre-trial, MCIAA admitted the following facts:

1.
That the properties, which are the subject matter of Civil Case No. CEB-18370, are also the
properties involved in Civil Case R-1881;

2.
That the purpose of the expropriation was for the expansion of the old Lahug Airport; that the
Lahug Airport was not expanded;

3.

That the old Lahug Airport was closed sometime in June 1992;

4.

That the price paid to the lot owners in the expropriation case is found in the decision of the court;

and

5.
That some properties were reconveyed by the MCIAA because the previous owners were able to
secure express waivers or riders wherein the government agreed to return the properties should the expansion of
the Lahug Airport not materialize.
During trial, the Inocians adduced evidence which included the testimony of Ricardo Inocian (Inocian) and
Asterio Uy (Uy). Uy, an employee of the CAA, testified that he was a member of the team which negotiated for the
acquisition of certain lots in Lahug for the proposed expansion of the Lahug Airport. He recalled that he acted as the
interpreter/spokesman of the team since he could speak the Cebuano dialect. He stated that the other members of
the team of negotiators were Atty. Pedro Ocampo, Atty. Lansang, and Atty. Saligumba. He recounted that, in the
course of the negotiation, their team assured the landowners that their landholdings would be reconveyed to them
in the event the Lahug Airport would be abandoned or if its operation were transferred to the Mactan Airport. Some
landowners opted to sell, while others were of a different bent owing to the inadequacy of the offered price.
Inocian testified that he and his mother, Isabel Lambaga, attended a meeting called by the NAC team of
negotiators sometime in 1947 or 1949 where he and the other landowners were given the assurance that they could
repurchase their lands at the same price in the event the Lahug Airport ceases to operate. He further testified that
they rejected the NACs offer. However, he said that they no longer appealed the decree of expropriation due to the

repurchase assurance adverted to.

The MCIAA presented Michael Bacarizas (Bacarizas), who started working for MCIAA as legal assistant in 1996.
He testified that, in the course of doing research work on the lots subject of Civil Case No. CEB-18370, he discovered
that the same lots were covered by the decision in Civil Case No. R-1881. He also found out that the said decision
did not expressly contain any condition on the matter of repurchase.
Ruling of the RTC
On October 7, 1998, the RTC rendered a Decision in Civil Case No. CEB-18370, the dispositive portion of which
reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered directing defendant Mactan Cebu
International Airport Authority (MCIAA) to reconvey (free from liens and encumbrances) to plaintiffs Ricardo Inocian,
Olimpia E. Esteves, Emilia E. Bacalla, Restituta E. Montana and Raul Inocian Lots No. 744-A, 745-A, 746, 762-A, 747,
761-A and to plaintiffs Aletha Suico Magat, Philip M. Suico, Doris S. dela Cruz, James M. Suico, Edward M. Suico,
Roselyn S. Lawsin, Rex M. Suico and Kharla Suico-Gutierrez Lots No. 942 and 947, after plaintiffs shall have paid
MCIAA the sums indicated in the decision in Civil Case No. R-1881. Defendant MCIAA is likewise directed to pay the
aforementioned plaintiffs the sum or P50,000.00 as and for attorneys fees and P10,000.00 for litigation expenses.

Albert Chiongbians intervention should be, as it is hereby DENIED for utter lack of factual basis.
With costs against defendant MCIAA.[10]
Therefrom, MCIAA went to the CA on appeal, docketed as CA-G.R. CV No. 64356.
Ruling of the CA

On January 14, 2005, the CA rendered judgment for the Inocians, declaring them entitled to the reconveyance
of the questioned lots as the successors-in-interest of the late Isabel Limbaga and Santiago Suico, as the case may
be, who were the former registered owners of the said lots. The decretal portion of the CAs Decision reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the appeal
filed in this case and AFFFIRMING the decision rendered by the court a quo on October 7, 1998 in Civil Case No.
CEB-18370.

SO ORDERED.

The CA, citing and reproducing excerpts from Heirs of Moreno,[11] virtually held that the decision in Civil Case
No. R-1881 was conditional, stating that the expropriation of [plaintiff-appellees] lots for the proposed expansion of
the Lahug Airport was ordered by the CFI of Cebu under the impression that Lahug Airport would continue in
operation.[12] The condition, as may be deduced from the CFIs decision, was that should MCIAA, or its precursor
agency, discontinue altogether with the operation of Lahug Airport, then the owners of the lots expropriated may, if
so minded, demand of MCIAA to make good its verbal assurance to allow the repurchase of the properties. To the
CA, this assurance, a demandable agreement of repurchase by itself, has been adequately established.
On September 21, 2005, the MCIAA filed with Us a petition for review of the CAs Decision, docketed as G.R. No.
168812.

G.R. No. 168770 (Ouano Petition)

Soon after the MCIAA jettisoned the Lahug Airport expansion project, informal settlers entered and occupied
Lot No. 763-A which, before its expropriation, belonged to the Ouanos. The Ouanos then formally asked to be
allowed to exercise their right to repurchase the aforementioned lot, but the MCIAA ignored the demand. On August
18, 1997, the Ouanos instituted a complaint before the Cebu City RTC against the Republic and the MCIAA for
reconveyance, docketed as Civil Case No. CEB-20743.
Answering, the Republic and MCIAA averred that the Ouanos no longer have enforceable rights whatsoever
over the condemned Lot No. 763-A, the decision in Civil Case No. R-1881 not having found any reversionary
condition.
Ruling of the RTC
By a Decision dated November 28, 2000, the RTC, Branch 57 in Cebu City ruled in favor of the Ouanos,
disposing as follows:
WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the plaintiffs,
Anunciacion Vda. De Ouano, Mario P. Ouano, Leticia Ouano Arnaiz and Cielo Ouano Martinez and against the
Republic of the Philippines and Mactan Cebu International Airport Authority (MCIAA) to restore to plaintiffs, the
possession and ownership of their land, Lot No. 763-A upon payment of the expropriation price to defendants; and

2. Ordering the Register of Deeds to effect the transfer of the Certificate of Title from defendant Republic of the
Philippines on Lot 763-A, canceling TCT No. 52004 in the name of defendant Republic of the Philippines and to issue
a new title on the same lot in the names of Anunciacion Vda. De Ouano, Mario P. Ouano, Leticia Ouano Arnaiz and
Cielo Ouano Martinez.

No pronouncement as to costs.[13]
Acting on the motion of the Republic and MCIAA for reconsideration, however, the RTC, Branch 57 in Cebu City,
presided this time by Judge Enriqueta L. Belarmino, issued, on December 9, 2002, an Order[14] that reversed its
earlier decision of November 28, 2000 and dismissed the Ouanos complaint.
Ruling of the CA
In time, the Ouanos interposed an appeal to the CA, docketed as CA-G.R. CV No. 78027. Eventually, the
appellate court rendered a Decision[15] dated September 3, 2004, denying the appeal, thus:
WHEREFORE, premises considered, the Order dated December 9, 2002, of the Regional Trial Court, 7 th Judicial
Region, Branch 57, Cebu City, in Civil Case No. CEB-20743, is hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Explaining its case disposition, the CA stated that the decision in Civil Case No. R-1881 did not state any

condition that Lot No. 763-A of the Ouanosand all covered lots for that matterwould be returned to them or that they
could repurchase the same property if it were to be used for purposes other than for the Lahug Airport. The
appellate court also went on to declare the inapplicability of the Courts pronouncement in MCIAA v. Court of
Appeals, RTC, Branch 9, Cebu City, Melba Limbago, et al.,[16] to support the Ouanos cause, since the affected
landowners in that case, unlike the Ouanos, parted with their property not through expropriation but via a sale and
purchase transaction.
The Ouanos filed a motion for reconsideration of the CAs Decision, but was denied per the CAs May 26, 2005
Resolution.[17] Hence, they filed this petition in G.R. No. 168770.

The Issues

G.R. No. 168812

GROUNDS FOR ALLOWANCE OF THE PETITION

l.
THE ASSAILED ISSUANCES ILLEGALLY STRIPPED THE REPUBLIC OF ITS ABSOLUTE AND
UNCONDITIONAL TITLE TO THE SUBJECT EXPROPRIATED PROPERTIES.

ll.
THE IMPUNGED DISPOSITIONS INVALIDLY OVERTURNED THIS HONORABLE COURTS FINAL
RULINGS IN FERY V. MUNICIPALITY OF CABANATUAN, MCIAA V. COURT OF APPEALS AND REYES V.
NATIONAL HOUSING AUTHORITY.

lll. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THIS HONORABLE COURTS RULING IN MORENO,
ALBEIT IT HAS NOT YET ATTAINED FINALITY.[18]
G.R. No. 168770

Questions of law presented in this Petition

Whether or not the testimonial evidence of the petitioners proving the promises, assurances and
representations by the airport officials and lawyers are inadmissbale under the Statute of Frauds.

Whether or not under the ruling of this Honorable Court in the heirs of Moreno Case, and pursuant to the
principles enunciated therein, petitioners herein are entitiled to recover their litigated property.

Reasons for Allowances of this Petition

Respondents did not object during trial to the admissibility of petitioners testimonial evidence under the
Statute of Frauds and have thus waived such objection and are now barred from raising the same. In any event, the
Statute of Frauds is not applicable herein. Consequently, petitioners evidence is admissible and should be duly given

weight and credence, as initially held by the trial court in its original Decision.[19]

While their respective actions against MCIAA below ended differently, the Ouanos and the Inocians proffered
arguments presented before this Court run along parallel lines, both asserting entitlement to recover the litigated
property on the strength of the Courts ruling in Heirs of Moreno. MCIAA has, however, formulated in its Consolidated
Memorandum the key interrelated issues in these consolidated cases, as follows:
I
WHETHER ABANDONMENT OF THE PUBLIC USE FOR WHICH THE SUBJECT PROPERTIES WERE EXPROPRIATED
ENTITLES PETITIONERS OUANOS, ET AL. AND RESPONDENTS INOCIAN, ET AL. TO REACQUIRE THEM.

II

WHETHER PETITIONERS OUANOS, ET AL. AND RESPONDENTS INOCIAN, ET AL. ARE ENTITLED TO
RECONVEYANCE OF THE SUBJECT PROPERTIES SIMPLY ON THE BASIS OF AN ALLEGED VERBAL PROMISE OR
ASSURANCE OF SOME NAC OFFICIALS THAT THE SUBJECT PROPERTIES WILL BE RETUNRED IF THE AIRPORT PROJECT
WOULD BE ABANDONED.

The Courts Ruling

The Republic and MCIAAs petition in G.R. No. 168812 is bereft of merit, while the Ouano petition in G.R. No.
168770 is meritorious.
At the outset, three (3) fairly established factual premises ought to be emphasized:
First, the MCIAA and/or its predecessor agency had not actually used the lots subject of the final decree of
expropriation in Civil Case No. R-1881 for the purpose they were originally taken by the government, i.e., for the
expansion and development of Lahug Airport.
Second, the Lahug Airport had been closed and abandoned. A significant portion of it had, in fact, been
purchased by a private corporation for development as a commercial complex.[20]
Third, it has been preponderantly established by evidence that the NAC, through its team of negotiators, had
given assurance to the affected landowners that they would be entitled to repurchase their respective lots in the
event they are no longer used for airport purposes.[21] No less than Asterio Uy, the Court noted in Heirs of Moreno,
one of the members of the CAA Mactan Legal Team, which interceded for the acquisition of the lots for the Lahug
Airports expansion, affirmed that persistent assurances were given to the landowners to the effect that as soon as
the Lahug Airport is abandoned or transferred to Mactan, the lot owners would be able to reacquire their properties.
[22] In Civil Case No. CEB-20743, Exhibit G, the transcript of the deposition[23] of Anunciacion vda. de Ouano
covering the assurance made had been formally offered in evidence and duly considered in the initial decision of the
RTC Cebu City. In Civil Case No. CEB-18370, the trial court, on the basis of testimonial evidence, and later the CA,
recognized the reversionary rights of the suing former lot owners or their successors in interest[24] and resolved the
case accordingly. In point with respect to the representation and promise of the government to return the lots taken
should the planned airport expansion do not materialize is what the Court said in Heirs of Moreno, thus:

This is a difficult case calling for a difficult but just solution. To begin with there exists an undeniable
historical narrative that the predecessors of respondent MCIAA had suggested to the landowners of the
properties covered by the Lahug Airport expansion scheme that they could repurchase their properties at the
termination of the airports venue. Some acted on this assurance and sold their properties; other landowners held
out and waited for the exercise of eminent domain to take its course until finally coming to terms with respondents
predecessors that they would not appeal nor block further judgment of condemnation if the right of repurchase was
extended to them. A handful failed to prove that they acted on such assurance when they parted with ownership of
their land.[25] (Emphasis supplied; citations omitted.)

For perspective, Heirs of Morenolater followed by MCIAA v. Tudtud (Tudtud)[26] and the consolidated cases at
baris cast under the same factual setting and centered on the expropriation of privately-owned lots for the public
purpose of expanding the Lahug Airport and the alleged promise of reconveyance given by the negotiating NAC
officials to the private lot owners. All the lots being claimed by the former owners or successors-in-interest of the
former owners in the Heirs of Moreno, Tudtud, and the present cases were similarly adjudged condemned in favor of
the Republic in Civil Case No. R-1881. All the claimants sought was or is to have the condemned lots reconveyed to
them upon the payment of the condemnation price since the public purpose of the expropriation was never met.
Indeed, the expropriated lots were never used and were, in fact, abandoned by the expropriating government
agencies.
In all then, the issues and supporting arguments presented by both sets of petitioners in these consolidated
cases have already previously been passed upon, discussed at length, and practically peremptorily resolved in Heirs
of Moreno and the November 2008 Tudtud ruling. The Ouanos, as petitioners in G.R. No. 168770, and the Inocians,
as respondents in G.R. No. 168812, are similarly situated as the heirs of Moreno in Heirs of Moreno and Benjamin
Tudtud in Tudtud. Be that as it may, there is no reason why the ratio decidendi in Heirs of Moreno and Tudtud should
not be made to apply to petitioners Ouanos and respondents Inocians such that they shall be entitled to recover
their or their predecessors respective properties under the same manner and arrangement as the heirs of Moreno
and Tudtud. Stare decisis et non quieta movere (to adhere to precedents, and not to unsettle things which are
established).[27]

Just like in Tudtud and earlier in Heirs of Moreno, MCIAA would foist the theory that the judgment of
condemnation in Civil Case No. R-1881 was without qualification and was unconditional. It would, in fact, draw
attention to the fallo of the expropriation courts decision to prove that there is nothing in the decision indicating that
the government gave assurance or undertook to reconvey the covered lots in case the Lahug airport expansion
project is aborted. Elaborating on this angle, MCIAA argues that the claim of the Ouanos and the Inocians regarding
the alleged verbal assurance of the NAC negotiating team that they can reacquire their landholdings is barred by
the Statute of Frauds.[28]
Under the rule on the Statute of Frauds, as expressed in Article 1403 of the Civil Code, a contract for the sale or
acquisition of real property shall be unenforceable unless the same or some note of the contract be in writing and
subscribed by the party charged. Subject to defined exceptions, evidence of the agreement cannot be received
without the writing, or secondary evidence of its contents.
MCIAAs invocation of the Statute of Frauds is misplaced primarily because the statute applies only to executory
and not to completed, executed, or partially consummated contracts.[29] Carbonnel v. Poncio, et al., quoting Chief
Justice Moran, explains the rationale behind this rule, thusly:
x x x The reason is simple. In executory contracts there is a wide field for fraud because unless they may be in

writing there is no palpable evidence of the intention of the contracting parties. The statute has been precisely been
enacted to prevent fraud. x x x However, if a contract has been totally or partially performed, the exclusion of parol
evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived
by him from the transaction in litigation, and at the same time, evade the obligations, responsibilities or liabilities
assumed or contracted by him thereby.[30] (Emphasis in the original.)

Analyzing the situation of the cases at bar, there can be no serious objection to the proposition that the
agreement package between the government and the private lot owners was already partially performed by the
government through the acquisition of the lots for the expansion of the Lahug airport. The parties, however, failed
to accomplish the more important condition in the CFI decision decreeing the expropriation of the lots litigated
upon: the expansion of the Lahug Airport. The projectthe public purpose behind the forced property takingwas, in
fact, never pursued and, as a consequence, the lots expropriated were abandoned. Be that as it may, the two
groups of landowners can, in an action to compel MCIAA to make good its oral undertaking to allow repurchase,
adduce parol evidence to prove the transaction.
At any rate, the objection on the admissibility of evidence on the basis of the Statute of Frauds may be waived
if not timely raised. Records tend to support the conclusion that MCIAA did not, as the Ouanos and the Inocians
posit, object to the introduction of parol evidence to prove its commitment to allow the former landowners to
repurchase their respective properties upon the occurrence of certain events.
In a bid to deny the lot owners the right to repurchase, MCIAA, citing cases,[31] points to the dispositive part of
the decision in Civil Case R-1881 which, as couched, granted the Republic absolute title to the parcels of land
declared expropriated. The MCIAA is correct about the unconditional tone of the dispositive portion of the decision,
but that actuality would not carry the day for the agency. Addressing the matter of the otherwise absolute tenor of
the CFIs disposition in Civil Case No. R-1881, the Court, in Heirs of Moreno, after taking stock of the ensuing portion
of the body of the CFIs decision, said:
As for the public purpose of the expropriation proceeding, it cannot now be doubted. Although Mactan Airport is
being constructed, it does not take away the actual usefulness and importance of the Lahug Airport: it is handling
the air traffic of both civilian and military. From it aircrafts fly to Mindanao and Visayas and pass thru it on their
flights to the North and Manila. Then, no evidence was adduced to show how soon is the Mactan Airport to be
placed in operation and whether the Lahug Airport will be closed immediately thereafter. It is up to the other
departments of the Government to determine said matters. The Court cannot substitute its judgments for those of
the said departments or agencies. In the absence of such showing, the court will presume that the Lahug
Airport will continue to be in operation.[32] (Emphasis supplied.)

We went on to state as follows:

While the trial court in Civil Case No. R-1881 could have simply acknowledged the presence of public purpose
for the exercise of eminent domain regardless of the survival of the Lahug Airport, the trial court in its Decision
chose not to do so but instead prefixed its finding of public purpose upon its understanding that Lahug Airport will
continue to be in operation. Verily, these meaningful statements in the body of the Decision warrant the conclusion
that the expropriated properties would remain to be so until it was confirmed that Lahug Airport was no longer in
operation. This inference further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such
and the expropriated lots were not being used for any airport expansion project, the rights vis--vis the expropriated
lots x x x as between the State and their former owners, petitioners herein, must be equitably adjusted; and (b) the
foregoing unmistakable declarations in the body of the Decision should merge with and become an intrinsic part of
the fallo thereof which under the premises is clearly inadequate since the dispositive portion is not in accord with

the findings as contained in the body thereof.[33]

Not to be overlooked of course is what the Court said in its Resolution disposing of MCIAAs motion to reconsider
the original ruling in Heirs of Moreno. In that resolution, We stated that the fallo of the decision in Civil Case R-1881
should be viewed and understood in connection with the entire text, which contemplated a return of the property
taken if the airport expansion project were abandoned. For ease of reference, following is what the Court wrote:
Moreover, we do not subscribe to the [MCIAAs] contention that since the possibility of the Lahug Airports
closure was actually considered by the trial court, a stipulation on reversion or repurchase was so material that it
should not have been discounted by the court a quo in its decision in Civil Case No. R-1881, if, in fact, there was
one. We find it proper to cite, once more, this Courts ruling that the fallo of the decision in Civil Case No. R-1881
must be read in reference to the other portions of the decision in which it forms a part. A reading of the Courts
judgment must not be confined to the dispositive portion alone; rather it should be meaningfully construed in
unanimity with the ratio decidendi thereof to grasp the true intent and meaning of a decision.[34]
The Court has, to be sure, taken stock of Fery v. Municipality of Cabanatuan,[35] a case MCIAA cites at every
possible turn, where the Court made these observations:
If, for example, land is expropriated for a particular purpose, with the condition that when that purpose is
ended or abandoned the property shall return to its former owner, then of course, when the purpose is terminated
or abandoned, the former owner reacquires the property so expropriated. x x x If, upon the contrary, however the
decree of expropriation gives to the entity a fee simple title, then, of course, the land becomes the absolute
property of the expropriator x x x and in that case the non-user does not have the effect of defeating the title
acquired by the expropriation proceedings x x x.
Fery notwithstanding, MCIAA cannot really rightfully say that it has absolute title to the lots decreed
expropriated in Civil Case No. R-1881. The correct lesson of Fery is captured by what the Court said in that case,
thus: the government acquires only such rights in expropriated parcels of land as may be allowed by the character
of its title over the properties. In light of our disposition in Heirs of Moreno and Tudtud, the statement immediately
adverted to means that in the event the particular public use for which a parcel of land is expropriated is
abandoned, the owner shall not be entitled to recover or repurchase it as a matter of right, unless such recovery or
repurchase is expressed in or irresistibly deducible from the condemnation judgment. But as has been
determined below, the decision in Civil Case No. R-1881 enjoined MCIAA, as a condition of approving expropriation,
to allow recovery or repurchase upon abandonment of the Lahug airport project. To borrow from our underlying
decision in Heirs of Moreno, [n]o doubt, the return or repurchase of the condemned properties of petitioners could
readily be justified as the manifest legal effect of consequence of the trial courts underlying presumption that Lahug
Airport will continue to be in operation when it granted the complaint for eminent domain and the airport
discontinued its activities.[36]
Providing added support to the Ouanos and the Inocians right to repurchase is what in Heirs of Moreno was
referred to as constructive trust, one that is akin to the implied trust expressed in Art. 1454 of the Civil Code,[37]
the purpose of which is to prevent unjust enrichment.[38] In the case at bench, the Ouanos and the Inocians parted
with their respective lots in favor of the MCIAA, the latter obliging itself to use the realties for the expansion of
Lahug Airport; failing to keep its end of the bargain, MCIAA can be compelled by the former landowners to reconvey
the parcels of land to them, otherwise, they would be denied the use of their properties upon a state of affairs that
was not conceived nor contemplated when the expropriation was authorized. In effect, the government merely held
the properties condemned in trust until the proposed public use or purpose for which the lots were condemned was
actually consummated by the government. Since the government failed to perform the obligation that is the basis of

the transfer of the property, then the lot owners Ouanos and Inocians can demand the reconveyance of their old
properties after the payment of the condemnation price.
Constructive trusts are fictions of equity that courts use as devices to remedy any situation in which the holder
of the legal title, MCIAA in this case, may not, in good conscience, retain the beneficial interest. We add, however,
as in Heirs of Moreno, that the party seeking the aid of equitythe landowners in this instance, in establishing the
trustmust himself do equity in a manner as the court may deem just and reasonable.
The Court, in the recent MCIAA v. Lozada, Sr., revisited and abandoned the Fery ruling that the former owner is
not entitled to reversion of the property even if the public purpose were not pursued and were abandoned, thus:
On this note, we take this opportunity to revisit our ruling in Fery, which involved an expropriation suit
commenced upon parcels of land to be used as a site for a public market. Instead of putting up a public market,
respondent Cabanatuan constructed residential houses for lease on the area. Claiming that the municipality lost its
right to the property taken since it did not pursue its public purpose, petitioner Juan Fery, the former owner of the
lots expropriated, sought to recover his properties. However, as he had admitted that, in 1915,
respondent Cabanatuan acquired a fee simple title to the lands in question, judgment was rendered in favor of the
municipality, following American jurisprudence, particularly City of Fort Wayne v. Lake Shore& M.S. RY. Co.,
McConihay v. Theodore Wright, and Reichling v. Covington Lumber Co., all uniformly holding that the transfer to a
third party of the expropriated real property, which necessarily resulted in the abandonment of the particular public
purpose for which the property was taken, is not a ground for the recovery of the same by its previous owner, the
title of the expropriating agency being one of fee simple.

Obviously, Fery was not decided pursuant to our now sacredly held constitutional right that private property
shall not be taken for public use without just compensation. It is well settled that the taking of private property by
the Governments power of eminent domain is subject to two mandatory requirements: (1) that it is for a particular
public purpose; and (2) that just compensation be paid to the property owner. These requirements partake of the
nature of implied conditions that should be complied with to enable the condemnor to keep the property
expropriated.

More particularly, with respect to the element of public use, the expropriator should commit to
use the property pursuant to the purpose stated in the petition for expropriation filed, failing which, it
should file another petition for the new purpose. If not, it is then incumbent upon the expropriator to
return the said property to its private owner, if the latter desires to reacquire the same. Otherwise, the
judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for the proper
exercise of the power of eminent domain, namely, the particular public purpose for which the property will be
devoted. Accordingly, the private property owner would be denied due process of law, and the judgment would
violate the property owners right to justice, fairness, and equity.

In light of these premises, we now expressly hold that the taking of private property, consequent to the
Governments exercise of its power of eminent domain, is always subject to the condition that the property be
devoted to the specific public purpose for which it was taken. Corollarily, if this particular purpose or intent is not
initiated or not at all pursued, and is peremptorily abandoned, then the former owners, if they so desire, may seek
the reversion of the property, subject to the return of the amount of just compensation received. In such a case, the
exercise of the power of eminent domain has become improper for lack of the required factual justification.[39]
(Emphasis supplied.)

Clinging to Fery, specifically the fee simple concept underpinning it, is no longer compelling, considering the
ensuing inequity such application entails. Too, the Court resolved Fery not under the cover of any of the Philippine

Constitutions, each decreeing that private property shall not be taken for public use without just compensation. The
twin elements of just compensation and public purpose are, by themselves, direct limitations to the exercise of
eminent domain, arguing, in a way, against the notion of fee simple title. The fee does not vest until payment of just
compensation.[40]
In esse, expropriation is forced private property taking, the landowner being really without a ghost of a chance
to defeat the case of the expropriating agency. In other words, in expropriation, the private owner is deprived of
property against his will. Withal, the mandatory requirement of due process ought to be strictly followed, such that
the state must show, at the minimum, a genuine need, an exacting public purpose to take private property, the
purpose to be specifically alleged or least reasonably deducible from the complaint.
Public use, as an eminent domain concept, has now acquired an expansive meaning to include any use that is
of usefulness, utility, or advantage, or what is productive of general benefit [of the public].[41] If the genuine public
necessitythe very reason or condition as it wereallowing, at the first instance, the expropriation of a private land
ceases or disappears, then there is no more cogent point for the governments retention of the expropriated land.
The same legal situation should hold if the government devotes the property to another public use very much
different from the original or deviates from the declared purpose to benefit another private person. It has been said
that the direct use by the state of its power to oblige landowners to renounce their productive possession to another
citizen, who will use it predominantly for that citizens own private gain, is offensive to our laws.[42]
A condemnor should commit to use the property pursuant to the purpose stated in the petition for
expropriation, failing which it should file another petition for the new purpose. If not, then it behooves the
condemnor to return the said property to its private owner, if the latter so desires. The government cannot plausibly
keep the property it expropriated in any manner it pleases and, in the process, dishonor the judgment of
expropriation. This is not in keeping with the idea of fair play,
The notion, therefore, that the government, via expropriation proceedings, acquires unrestricted ownership
over or a fee simple title to the covered land, is no longer tenable. We suggested as much in Heirs of Moreno and in
Tudtud and more recently in Lozada, Sr. Expropriated lands should be differentiated from a piece of land, ownership
of which was absolutely transferred by way of an unconditional purchase and sale contract freely entered by two
parties, one without obligation to buy and the other without the duty to sell. In that case, the fee simple concept
really comes into play. There is really no occasion to apply the fee simple concept if the transfer is conditional. The
taking of a private land in expropriation proceedings is always conditioned on its continued devotion to its public
purpose. As a necessary corollary, once the purpose is terminated or peremptorily abandoned, then the former
owner, if he so desires, may seek its reversion, subject of course to the return, at the very least, of the just
compensation received.
To be compelled to renounce dominion over a piece of land is, in itself, an already bitter pill to swallow for the
owner. But to be asked to sacrifice for the common good and yield ownership to the government which reneges on
its assurance that the private property shall be for a public purpose may be too much. But it would be worse if the
power of eminent domain were deliberately used as a subterfuge to benefit another with influence and power in the
political process, including development firms. The mischief thus depicted is not at all far-fetched with the continued
application of Fery. Even as the Court deliberates on these consolidated cases, there is an uncontroverted allegation
that the MCIAA is poised to sell, if it has not yet sold, the areas in question to Cebu Property Ventures, Inc. This
provides an added dimension to abandon Fery.
Given the foregoing disquisitions, equity and justice demand the reconveyance by MCIAA of the litigated lands
in question to the Ouanos and Inocians. In the same token, justice and fair play also dictate that the Ouanos and
Inocian return to MCIAA what they received as just compensation for the expropriation of their respective properties

plus legal interest to be computed from default, which in this case should run from the time MCIAA complies with
the reconveyance obligation.[43] They must likewise pay MCIAA the necessary expenses it might have incurred in
sustaining their respective lots and the monetary value of its services in managing the lots in question to the extent
that they, as private owners, were benefited thereby.
In accordance with Art. 1187 of the Civil Code on mutual compensation, MCIAA may keep whatever income or
fruits it may have obtained from the parcels of land expropriated. In turn, the Ouanos and Inocians need not require
the accounting of interests earned by the amounts they received as just compensation.[44]
Following Art. 1189 of the Civil Code providing that [i]f the thing is improved by its nature, or by time,
the improvement shall inure to the benefit of the creditor x x x, the Ouanos and Inocians do not have to
settle the appreciation of the values of their respective lots as part of the reconveyance process, since the value
increase is merely the natural effect of nature and time.
Finally, We delete the award of PhP 50,000 and PhP 10,000, as attorneys fees and litigation expenses,
respectively, made in favor of the Inocians by the Cebu City RTC in its judgment in Civil Case No. CEB-18370, as
later affirmed by the CA. As a matter of sound policy, no premium should be set on the right to litigate where there
is no doubt about the bona fides of the exercise of such right,[45] as here, albeit the decision of MCIAA to resist the
former landowners claim eventually turned out to be untenable.
WHEREFORE, the petition in G.R. No. 168770 is GRANTED. Accordingly, the CA Decision dated September
3, 2004 in CA-G.R. CV No. 78027 is REVERSED and SET ASIDE. Mactan-Cebu International Airport Authority is
ordered to reconvey subject Lot No. 763-A to petitioners Anunciacion vda. de Ouano, Mario P. Ouano, Leticia Ouano
Arnaiz, and Cielo Ouano Martinez. The Register of Deeds of Cebu City is ordered to effect the necessary cancellation
of title and transfer it in the name of the petitioners within fifteen (15) days from finality of judgment.
The petition of the Mactan-Cebu International Airport Authority in G.R. No. 168812 is DENIED, and the CAs
Decision and Resolution dated January 14, 2005 and June 29, 2005, respectively, in CA-G.R. CV No. 64356 are
AFFIRMED, except insofar as they awarded attorneys fees and litigation expenses that are hereby DELETED.
Accordingly, Mactan-Cebu International Airport Authority is ordered to reconvey to respondents Ricardo L. Inocian,
Olympia E. Esteves, Emilia E. Bacalla, Restituta E. Montana, and Raul L. Inocian the litigated Lot Nos. 744-A, 745-A,
746, 762-A, 747, and 761-A; and to respondents Aletha Suico Magat, Philip M. Suico, Dolores S. dela Cruz, James M.
Suico, Edward M. Suico, Roselyn S. Lawsin, Rex M. Suico, and Kharla Suico-Gutierrez the litigated Lot Nos. 942 and
947. The Register of Deeds of Cebu City is ordered to effect the necessary cancellation of title and transfer it in the
name of respondents within a period of fifteen (15) days from finality of judgment.
The foregoing dispositions are subject to QUALIFICATIONS, to apply to these consolidated petitions, when
appropriate, as follows:

(1) Petitioners Ouano, et al. in G.R. No. 168770 and respondents Ricardo L Inocian, et al. in G.R. No. 168812 are
ordered to return to the MCIAA the just compensation they or their predecessors-in-interest received for the
expropriation of their respective lots as stated in Civil Case No. R-1881, within a period of sixty (60) days from
finality of judgment;

(2) The MCIAA shall be entitled to RETAIN whatever fruits and income it may have obtained from the subject
expropriated lots without any obligation to refund the same to the lot owners; and

(3) Petitioners Ouano, et al. in G.R. No. 168770 and respondents Ricardo L. Inocian, et al. in G.R. No. 168812
shall RETAIN whatever interests the amounts they received as just compensation may have earned in the
meantime without any obligation to refund the same to MCIAA.
SO ORDERED.

FIRST DIVISION
[G.R. No. 165828 : August 24, 2011]
NATIONAL POWER CORPORATION, PETITIONER, VS. HEIRS OF MACABANGKIT SANGKAY, NAMELY: CEBU,
BATOWA-AN, SAYANA, NASSER, MANTA, EDGAR, PUTRI , MONGKOY*, AND AMIR, ALL SURNAMED
MACABANGKIT, RESPONDENTS.
DECISION
BERSAMIN, J.:

Private property shall not be taken for public use without just compensation.
- Section 9, Article III, 1987 Constitution

The

application

of

this

provision

of

the

Constitution

is

the

focus

of

this

appeal.

Petitioner National Power Corporation (NPC) seeks the review on certiorari of the decision promulgated on October
5, 2004,[1] whereby the Court of Appeals (CA) affirmed the decision dated August 13, 1999 and the supplemental
decision dated August 18, 1999, ordering NPC to pay just compensation to the respondents, both rendered by the
Regional Trial Court, Branch 1, in Iligan City (RTC).
Antecedents
Pursuant to its legal mandate under Republic Act No. 6395 (An Act Revising the Charter of the National Power
Corporation), NPC undertook the Agus River Hydroelectric Power Plant Project in the 1970s to generate electricity
for Mindanao. The project included the construction of several underground tunnels to be used in diverting the
water
flow
from
the
Agus
River
to
the
hydroelectric
plants.[2]
On November 21, 1997, the respondents, namely: Cebu, Bangowa-an, Sayana, Nasser, Manta, Edgar, Putri, Mongkoy
and Amir, all surnamed Macabangkit (Heirs of Macabangkit), as the owners of land with an area of 221,573 square
meters situated in Ditucalan, Iligan City, sued NPC in the RTC for the recovery of damages and of the property, with
the alternative prayer for the payment of just compensation.[3] They alleged that they had belatedly discovered
that one of the underground tunnels of NPC that diverted the water flow of the Agus River for the operation of the
Hydroelectric Project in Agus V, Agus VI and Agus VII traversed their land; that their discovery had occurred in 1995
after Atty. Saidali C. Gandamra, President of the Federation of Arabic Madaris School, had rejected their offer to sell
the land because of the danger the underground tunnel might pose to the proposed Arabic Language Training
Center and Muslims Skills Development Center; that such rejection had been followed by the withdrawal by Global
Asia Management and Resource Corporation from developing the land into a housing project for the same reason;
that Al-Amanah Islamic Investment Bank of the Philippines had also refused to accept their land as collateral
because of the presence of the underground tunnel; that the underground tunnel had been constructed without

their knowledge and consent; that the presence of the tunnel deprived them of the agricultural, commercial,
industrial and residential value of their land; and that their land had also become an unsafe place for habitation
because of the loud sound of the water rushing through the tunnel and the constant shaking of the ground, forcing
them
and
their
workers
to
relocate
to
safer
grounds.
In its answer with counterclaim,[4] NPC countered that the Heirs of Macabangkit had no right to compensation
under section 3(f) of Republic Act No. 6395, under which a mere legal easement on their land was established; that
their cause of action, should they be entitled to compensation, already prescribed due to the tunnel having been
constructed in 1979; and that by reason of the tunnel being an apparent and continuous easement, any action
arising from such easement prescribed in five years.
Ruling of the RTC
On July 23, 1998, an ocular inspection of the land that was conducted by RTC Judge Mamindiara P. Mangotara and
the representatives of the parties resulted in the following observations and findings:
a.

That a concrete post which is about two feet in length from the ground which according to
the claimants is the middle point of the tunnel.

b.

That at least three fruit bearing durian trees were uprooted and as a result of the
construction by the defendant of the tunnel and about one hundred coconuts planted died.

c.

That underground tunnel was constructed therein.[5]

After trial, the RTC ruled in favor of the plaintiffs (Heirs of Macabangkit),[6] decreeing:
WHEREFORE,

premises

considered:

1. The prayer for the removal or dismantling of defendant's tunnel is denied. However, defendant is
hereby directed and ordered:
a) To pay plaintiffs' land with a total area of 227,065 square meters, at the rate of FIVE
HUNDRED (P500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN MILLION
FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED (P113,532,500.00), PESOS, plus
interest,
as
actual
damages
or
just
compensation;
b) To pay plaintiff a monthly rental of their land in the amount of THIRTY THOUSAND
(P30,000.00) PESOS from 1979 up to July 1999 with 12% interest per annum;
c) To pay plaintiffs the sum of TWO HUNDRED THOUSAND (P200,000.00) PESOS, as moral
damages;
d) To pay plaintiffs, the sum of TWO HUNDRED THOUSAND (P200,000.00) PESOS, as exemplary
damages;
e) To pay plaintiffs, the sum equivalent to 15% of the total amount awarded, as attorney's fees,
and to pay the cost.
SO ORDERED.

The RTC found that NPC had concealed the construction of the tunnel in 1979 from the Heirs of Macabangkit, and
had since continuously denied its existence; that NPC had acted in bad faith by taking possession of the
subterranean portion of their land to construct the tunnel without their knowledge and prior consent; that the
existence of the tunnel had affected the entire expanse of the land, and had restricted their right to excavate or to
construct a motorized deep well; and that they, as owners, had lost the agricultural, commercial, industrial and
residential
value
of
the
land.
The RTC fixed the just compensation at P500.00/square meter based on the testimony of Dionisio Banawan, OIC-City
Assessor of Iligan City, to the effect that the appraised value of the adjoining properties ranged from P700.00 to
P750.00, while the appraised value of their affected land ranged from P400.00 to P500.00. The RTC also required

NPC to pay rentals from 1979 due to its bad faith in concealing the construction of the tunnel from the Heirs of
Macabangkit.
On August 18, 1999, the RTC issued a supplemental decision,[7] viz:
Upon a careful review of the original decision dated August 13, 1999, a sentence should be added
to paragraph 1(a) of the dispositive portion thereof, to bolster, harmonize, and conform to the findings
of the Court, which is quoted hereunder, to wit:
"Consequently, plaintiffs' land or properties are hereby condemned in favor of defendant
National Power Corporation, upon payment of the aforesaid sum."
Therefore, paragraph 1(a) of the dispositive portion of the original decision should read, as follows:
a) To pay plaintiffs' land with a total area of 227,065 square meters, at the rate of FIVE
HUNDRED (P500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN MILLION
FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED (P113,532,500.00) PESOS, plus
interest, as actual damages or just compensation; Consequently, plaintiffs' land or properties
are hereby condemned in favor of defendant National Power Corporation, upon payment of the
aforesaid sum;
This supplemental decision shall be considered as part of paragraph 1(a) of the dispositive portion of
the
original
decision.
Furnish

copy

of

this

supplemental

decision

to

all

parties

immediately.

SO ORDERED.

On

its

part,

NPC

appealed

to

the

CA

on

August

25,

1999.[8]

Earlier, on August 18, 1999, the Heirs of Macabangkit filed an urgent motion for execution of judgment pending
appeal.[9] The RTC granted the motion and issued a writ of execution,[10] prompting NPC to assail the writ by
petition for certiorari in the CA. On September 15, 1999, the CA issued a temporary restraining order (TRO) to enjoin
the RTC from implementing its decision. The Heirs of Macabangkit elevated the ruling of the CA (G.R. No. 141447),
but the Court upheld the CA on May 4, 2006.[11]
Ruling of the CA
NPC raised only two errors in the CA, namely:
I
THE COURT A QUO SERIOUSLY ERRED IN RULING THAT NAPOCOR'S UNDERGROUND TUNNEL IN ITS
AGUS RIVER HYDRO-ELECTRIC PLANT PROJECT TRAVERSED AND/OR AFFECTED APPELLEES' PROPERTY
AS THERE IS NO CLEAR EVIDENCE INDUBITABLY ESTABLISHING THE SAME
II
THE COURT A QUO SERIOUSLY ERRED IN GRANTING APPELLEES' CLAIMS IN THEIR ENTIRETY FOR
GRANTING ARGUENDO THAT NAPOCOR'S UNDERGROUND TUNNEL INDEED TRAVERSED APPELLEE'S
PROPERTY, THEIR CAUSE OF ACTION HAD ALREADY BEEN BARRED BY PRESCRIPTION, ESTOPPEL AND
LACHES

On October 5, 2004, the CA affirmed the decision of the RTC, holding that the testimonies of NPC's witness Gregorio
Enterone and of the respondents' witness Engr. Pete Sacedon, the topographic survey map, the sketch map, and the
ocular inspection report sufficiently established the existence of the underground tunnel traversing the land of the
Heirs of Macabangkit; that NPC did not substantiate its defense that prescription already barred the claim of the
Heirs of Macabangkit; and that Section 3(i) of R.A. No. 6395, being silent about tunnels, did not apply, viz:
As regard Section 3(i) of R.A. No. 6395 (An Act Revising the Charter of the National Power
Corporation), it is submitted that the same provision is not applicable. There is nothing in Section 3(i)

of said law governing claims involving tunnels. The same provision is applicable to those projects or
facilities on the surface of the land, that can easily be discovered, without any mention about the
claims involving tunnels, particularly those surreptitiously constructed beneath the surface of the land,
as
in
the
instant
case.
Now, while it is true that Republic Act No. 6395 authorizes NAPOCOR to take water from any public
stream, river, creek, lake, spring or waterfall in the Philippines for the realization of the purposes
specified therein for its creation; to intercept and divert the flow of waters from lands of riparian
owners (in this case, the "Heirs"), and from persons owning or interested in water which are or may be
necessary to said purposes, the same Act expressly mandates the payment of just compensation.
WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit. Accordingly,
the appealed Decision dated August 13, 1999, and the supplemental Decision dated August 18, 1999,
are
hereby
AFFIRMED
in
toto.
SO ORDERED.[12]

Issue
NPC has come to the Court, assigning the lone error that:
THE APPELLATE COURT ERRED ON A QUESTION OF LAW WHEN IT AFFIRMED THE DECISION AND
SUPPLEMENTAL DECISION OF THE COURT A QUO DIRECTING AND ORDERING PETITIONER TO PAY JUST
COMPENSATION TO RESPONDENTS.

NPC reiterates that witnesses Enterone and Sacedon lacked personal knowledge about the construction and
existence of the tunnel and were for that reason not entitled to credence; and that the topographic and relocation
maps prepared by Sacedon should not be a basis to prove the existence and location of the tunnel due to being selfserving.
NPC contends that the CA should have applied Section 3(i) of Republic Act No. 6395, which provided a period of only
five years from the date of the construction within which the affected landowner could bring a claim against it; and
that even if Republic Act No. 6395 should be inapplicable, the action of the Heirs of Macabangkit had already
prescribed due to the underground tunnel being susceptible to acquisitive prescription after the lapse of 10 years
pursuant to Article 620 of the Civil Code due to its being a continuous and apparent legal easement under Article
634
of
the
Civil
Code.
The issues for resolution are, therefore, as follows:
(1) Whether the CA and the RTC erred in holding that there was an underground tunnel traversing
the
Heirs
of
Macabangkit's
land
constructed
by
NPC;
and
(2) Whether the Heirs of Macabangkit's right to claim just compensation had prescribed under section
3(i) of Republic Act No. 6395, or, alternatively, under Article 620 and Article 646 of the Civil Code.

Ruling
We uphold the liability of NPC for payment of just compensation.
1.
Factual findings of the RTC,
when affirmed by the CA, are binding
The existence of the tunnel underneath the land of the Heirs of Macabangkit, being a factual matter, cannot now be
properly reviewed by the Court, for questions of fact are beyond the pale of a petition for review on certiorari.
Moreover, the factual findings and determinations by the RTC as the trial court are generally binding on the Court,
particularly after the CA affirmed them.[13] Bearing these doctrines in mind, the Court should rightly dismiss NPC's
appeal.

NPC argues, however, that this appeal should not be dismissed because the Heirs of Macabangkit essentially failed
to prove the existence of the underground tunnel. It insists that the topographic survey map and the right-of-way
map presented by the Heirs of Macabangkit did not at all establish the presence of any underground tunnel.
NPC

still

fails

to

convince.

Even assuming, for now, that the Court may review the factual findings of the CA and the RTC, for NPC to insist that
the evidence on the existence of the tunnel was not adequate and incompetent remains futile. On the contrary, the
evidence on the tunnel was substantial, for the significance of the topographic survey map and the sketch map (as
indicative of the extent and presence of the tunnel construction) to the question on the existence of the tunnel was
strong, as the CA correctly projected in its assailed decision, viz:
Among the pieces of documentary evidence presented showing the existence of the said tunnel
beneath the subject property is the topographic survey map. The topographic survey map is one
conducted to know about the location and elevation of the land and all existing structures above and
underneath it. Another is the Sketch Map which shows the location and extent of the land traversed or
affected by the said tunnel. These two (2) pieces of documentary evidence readily point the
extent and presence of the tunnel construction coming from the power cavern near the
small man-made lake which is the inlet and approach tunnel, or at a distance of about two
(2) kilometers away from the land of the plaintiffs-appellees, and then traversing the
entire and the whole length of the plaintiffs-appellees' property, and the outlet channel of
the tunnel is another small man-made lake. This is a sub-terrain construction, and considering
that both inlet and outlet are bodies of water, the tunnel can hardly be noticed. All constructions done
were beneath the surface of the plaintiffs-appellees' property. This explains why they could never
obtain any knowledge of the existence of such tunnel during the period that the same was constructed
and installed beneath their property.[14]

The power cavern and the inlet and outlet channels established the presence of the underground tunnel, based on
the declaration in the RTC by Sacedon, a former employee of the NPC. [15] It is worthy to note that NPC did not
deny the existence of the power cavern, and of the inlet and outlet channels adverted to and as depicted in the
topographic survey map and the sketch map. The CA cannot be faulted for crediting the testimony of Sacedon
despite the effort of NPC to discount his credit due to his not being an expert witness, simply because Sacedon had
personal knowledge based on his being NPC's principal engineer and supervisor tasked at one time to lay out the
tunnels and transmission lines specifically for the hydroelectric projects,[16] and to supervise the construction of
the Agus 1 Hydroelectric Plant itself[17] from 1978 until his retirement from NPC.[18] Besides, he declared that he
personally experienced the vibrations caused by the rushing currents in the tunnel, particularly near the outlet
channel.[19]
Under
any
circumstances,
Sacedon
was
a
credible
and
competent
witness.
The ocular inspection actually confirmed the existence of the tunnel underneath the land of the Heirs of
Macabangkit. Thus, the CA observed:
More so, the Ocular inspection conducted on July 23, 1998 further bolstered such claim of the
existence and extent of such tunnel. This was conducted by a team composed of the Honorable
Presiding Judge of the Regional Trial Court, Branch 01, Lanao del Norte, herself and the respective
lawyers of both of the parties and found that, among others, said underground tunnel was
constructed beneath the subject property.[20]

It bears noting that NPC did not raise any issue against or tender any contrary comment on the ocular inspection
report.
2.
Five-year prescriptive period under Section 3(i) of Republic
Act No. 6395 does not apply to claims for just compensation
The CA held that Section 3(i) of Republic Act No. 6395 had no application to this action because it covered facilities
that could be easily discovered, not tunnels that were inconspicuously constructed beneath the surface of the land.
[21]

NPC disagrees, and argues that because Article 635[22] of the Civil Code directs the application of special laws
when an easement, such as the underground tunnel, was intended for public use, the law applicable was Section
3(i) of Republic Act No. 6395, as amended, which limits the action for recovery of compensation to five years from
the date of construction. It posits that the five-year prescriptive period already set in due to the construction of the
underground
tunnel
having
been
completed
in
1979
yet.
Without necessarily adopting the reasoning of the CA, we uphold its conclusion that prescription did not bar the
present
action
to
recover
just
compensation.
Section 3 (i) of Republic Act No. 6395, the cited law, relevantly provides:
Section 3. Powers and General Functions of the Corporation. - The powers, functions, rights and
activities of the Corporation shall be the following:
xxx
(i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume,
street, avenue, highway or railway of private and public ownership, as the location of said works
may require:Provided, That said works be constructed in such a manner as not to endanger life
or property; And provided, further, That the stream, watercourse, canal ditch, flume, street,
avenue, highway or railway so crossed or intersected be restored as near as possible to their
former state, or in a manner not to impair unnecessarily their usefulness. Every person or entity
whose right of way or property is lawfully crossed or intersected by said works shall not obstruct
any such crossings or intersection and shall grant the Board or its representative, the proper
authority for the execution of such work. The Corporation is hereby given the right of way to
locate, construct and maintain such works over and throughout the lands owned by the
Republic of the Philippines or any of its branches and political subdivisions. The Corporation or
its representative may also enter upon private property in the lawful performance or
prosecution of its business and purposes, including the construction of the transmission lines
thereon; Provided, that the owner of such property shall be indemnified for any actual damage
caused thereby;Provided, further, That said action for damages is filed within five years
after the rights of way, transmission lines, substations, plants or other facilities shall
have been established; Provided, finally, That after said period, no suit shall be brought to
question the said rights of way, transmission lines, substations, plants or other facilities;

A cursory reading shows that Section 3(i) covers the construction of "works across, or otherwise, any stream,
watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location
of said works may require." It is notable that Section 3(i) includes no limitation except those enumerated after the
term works. Accordingly, we consider the term works as embracing all kinds of constructions, facilities, and other
developments that can enable or help NPC to meet its objectives of developing hydraulic power expressly provided
under paragraph (g) of Section 3.[23] The CA's restrictive construal of Section 3(i) as exclusive of tunnels was
obviously unwarranted, for the provision applies not only to development works easily discoverable or on the
surface of the earth but also to subterranean works like tunnels. Such interpretation accords with the fundamental
guideline in statutory construction that when the law does not distinguish, so must we not. [24] Moreover, when the
language of the statute is plain and free from ambiguity, and expresses a single, definite, and sensible meaning,
that meaning is conclusively presumed to be the meaning that the Congress intended to convey.[25]
Even

so,

we

still

cannot

side

with

NPC.

We rule that the prescriptive period provided under Section 3(i) of Republic Act No. 6395 is applicable only to an
action for damages, and does not extend to an action to recover just compensation like this case. Consequently,
NPC cannot thereby bar the right of the Heirs of Macabangkit to recover just compensation for their land.
The action to recover just compensation from the State or its expropriating agency differs from the action for
damages. The former, also known as inverse condemnation, has the objective to recover the value of property taken
in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been
attempted by the taking agency.[26] Just compensation is the full and fair equivalent of the property taken from its
owner by the expropriator. The measure is not the taker's gain, but the owner's loss. The word just is used to
intensify the meaning of the word compensation in order to convey the idea that the equivalent to be rendered for
the property to be taken shall be real, substantial, full, and ample. [27] On the other hand, the latter action seeks to

vindicate a legal wrong through damages, which may be actual, moral, nominal, temperate, liquidated, or
exemplary. When a right is exercised in a manner not conformable with the norms enshrined in Article 19[28] and
like provisions on human relations in the Civil Code, and the exercise results to the damage of another, a legal
wrong
is
committed
and
the
wrongdoer
is
held
responsible.[29]
The two actions are radically different in nature and purpose. The action to recover just compensation is based on
the Constitution[30] while the action for damages is predicated on statutory enactments. Indeed, the former arises
from the exercise by the State of its power of eminent domain against private property for public use, but the latter
emanates from the transgression of a right. The fact that the owner rather than the expropriator brings the former
does not change the essential nature of the suit as an inverse condemnation,[31] for the suit is not based on tort,
but on the constitutional prohibition against the taking of property without just compensation. [32] It would very well
be contrary to the clear language of the Constitution to bar the recovery of just compensation for private property
taken
for
a
public
use
solely
on
the
basis
of
statutory
prescription.
Due to the need to construct the underground tunnel, NPC should have first moved to acquire the land from the
Heirs of Macabangkit either by voluntary tender to purchase or through formal expropriation proceedings. In either
case, NPC would have been liable to pay to the owners the fair market value of the land, for Section 3(h) of Republic
Act No. 6395 expressly requires NPC to pay the fair market value of such property at the time of the taking, thusly:
(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber and otherwise
dispose of property incident to, or necessary, convenient or proper to carry out the
purposes for which the Corporation was created: Provided, That in case a right of way is
necessary for its transmission lines, easement of right of way shall only be sought: Provided, however,
That in case the property itself shall be acquired by purchase, the cost thereof shall be the
fair market value at the time of the taking of such property.

This was what NPC was ordered to do in National Power Corporation v. Ibrahim,[33] where NPC had denied the right
of the owners to be paid just compensation despite their land being traversed by the underground tunnels for
siphoning water from Lake Lanao needed in the operation of Agus II, Agus III, Agus IV, Agus VI and Agus VII
Hydroelectric Projects in Saguiran, Lanao del Sur, in Nangca and Balo-I in Lanao del Norte and in Ditucalan and
Fuentes in Iligan City. There, NPC similarly argued that the underground tunnels constituted a mere easement that
did not involve any loss of title or possession on the part of the property owners, but the Court resolved against
NPC, to wit:
Petitioner contends that the underground tunnels in this case constitute an easement upon the
property of the respondents which does not involve any loss of title or possession. The manner in
which the easement was created by petitioner, however, violates the due process rights of
respondents as it was without notice and indemnity to them and did not go through proper
expropriation proceedings. Petitioner could have, at any time, validly exercised the power of eminent
domain to acquire the easement over respondents' property as this power encompasses not only the
taking or appropriation of title to and possession of the expropriated property but likewise covers even
the imposition of a mere burden upon the owner of the condemned property. Significantly, though,
landowners cannot be deprived of their right over their land until expropriation proceedings are
instituted in court. The court must then see to it that the taking is for public use, that there is payment
of just compensation and that there is due process of law.[34]

3.
NPC's construction of the tunnel
constituted taking of the land, and
entitled owners to just compensation
The Court held in National Power Corporation v. Ibrahim that NPC was "liable to pay not merely an easement fee but
rather the full compensation for land" traversed by the underground tunnels, viz:
In disregarding this procedure and failing to recognize respondents' ownership of the sub-terrain
portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be
emphasized that the acquisition of the easement is not without expense. The underground tunnels
impose limitations on respondents' use of the property for an indefinite period and deprive them of its
ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just

compensation. Notwithstanding the fact that petitioner only occupies the sub-terrain
portion, it is liable to pay not merely an easement fee but rather the full compensation for
land. This is so because in this case, the nature of the easement practically deprives the
owners of its normal beneficial use. Respondents, as the owner of the property thus
expropriated, are entitled to a just compensation which should be neither more nor less,
whenever it is possible to make the assessment, than the money equivalent of said
property.[35]

Here, like in National Power Corporation v. Ibrahim, NPC constructed a tunnel underneath the land of the Heirs of
Macabangkit without going through formal expropriation proceedings and without procuring their consent or at least
informing them beforehand of the construction. NPC's construction adversely affected the owners' rights and
interests because the subterranean intervention by NPC prevented them from introducing any developments on the
surface, and from disposing of the land or any portion of it, either by sale or mortgage.
Did such consequence constitute taking of the land as to entitle the owners to just compensation?
We agree with both the RTC and the CA that there was a full taking on the part of NPC, notwithstanding that the
owners were not completely and actually dispossessed. It is settled that the taking of private property for public
use, to be compensable, need not be an actual physical taking or appropriation.[36] Indeed, the expropriator's
action may be short of acquisition of title, physical possession, or occupancy but may still amount to a taking. [37]
Compensable taking includes destruction, restriction, diminution, or interruption of the rights of ownership or of the
common and necessary use and enjoyment of the property in a lawful manner, lessening or destroying its value. [38]
It is neither necessary that the owner be wholly deprived of the use of his property, [39] nor material whether the
property is removed from the possession of the owner, or in any respect changes hands. [40]
As a result, NPC should pay just compensation for the entire land. In that regard, the RTC pegged just compensation
at P500.00/square meter based on its finding on what the prevailing market value of the property was at the time of
the
filing
of
the
complaint,
and
the
CA
upheld
the
RTC.
We affirm the CA, considering that NPC did not assail the valuation in the CA and in this Court. NPC's silence was
probably due to the correctness of the RTC's valuation after careful consideration and weighing of the parties'
evidence, as follows:
The matter of what is just compensation for these parcels of land is a matter of evidence. These
parcels of land is (sic) located in the City of Iligan, the Industrial City of the South. Witness Dionisio
Banawan, OIC- City Assessor's Office, testified, "Within that area, that area is classified as industrial
and residential. That plaintiffs' land is adjacent to many subdivisions and that is within the industrial
classification. He testified and identified Exhibit "AA" and "AA-1", a Certification, dated April 4, 1997,
showing that the appraised value of plaintiffs land ranges from P400.00 to P500.00 per square meter
(see, TSN, testimony of Dionisio Banawan, pp. 51, 57, and 71, February 9, 1999). Also, witness
Banawan, testified and identified Two (2) Deeds of Sale, marked as Exhibit "AA-2" and "AA-3,["]
showing that the appraised value of the land adjoining or adjacent to plaintiff land ranges from
P700.00 to P750.00 per square meter. As between the much lower price of the land as testified by
defendant's witness Gregorio Enterone, and that of the City Assessor of Iligan City, the latter is more
credible. Considering however, that the appraised value of the land in the area as determined by the
City Assessor's Office is not uniform, this Court, is of the opinion that the reasonable amount of just
compensation of plaintiff's land should be fixed at FIVE HUNDRED (500.00) PESOS, per square meter.
xxx.[41]

The RTC based its fixing of just compensation ostensibly on the prevailing market value at the time of the filing of
the complaint, instead of reckoning from the time of the taking pursuant to Section 3(h) of Republic Act No. 6395.
The CA did not dwell on the reckoning time, possibly because NPC did not assign that as an error on the part of the
RTC.
We rule that the reckoning value is the value at the time of the filing of the complaint, as the RTC provided in its
decision. Compensation that is reckoned on the market value prevailing at the time either when NPC entered or
when it completed the tunnel, as NPC submits, would not be just, for it would compound the gross unfairness
already caused to the owners by NPC's entering without the intention of formally expropriating the land, and without
the prior knowledge and consent of the Heirs of Macabangkit. NPC's entry denied elementary due process of law to

the owners since then until the owners commenced the inverse condemnation proceedings. The Court is more
concerned with the necessity to prevent NPC from unjustly profiting from its deliberate acts of denying due process
of law to the owners. As a measure of simple justice and ordinary fairness to them, therefore, reckoning just
compensation on the value at the time the owners commenced these inverse condemnation proceedings is entirely
warranted.
In National Power Corporation v. Court of Appeals,[42] a case that involved the similar construction of an
underground tunnel by NPC without the prior consent and knowledge of the owners, and in which we held that the
basis in fixing just compensation when the initiation of the action preceded the entry into the property was the time
of the filing of the complaint, not the time of taking,[43] we pointed out that there was no taking when the entry by
NPC was made "without intent to expropriate or was not made under warrant or color of legal authority."
4.
Awards for rentals, moral damages, exemplary
damages, and attorney's fees are deleted
for insufficiency of factual and legal bases

The CA upheld the RTC's granting to the Heirs of Macabangkit of rentals of P 30,000.00/month "from 1979 up to July
1999 with 12% interest per annum" by finding NPC guilty of bad faith in taking possession of the land to construct
the
tunnel
without
their
knowledge
and
consent.
Granting rentals is legally and factually bereft of justification, in light of the taking of the land being already justly
compensated. Conformably with the ruling in Manila International Airport Authority v. Rodriguez,[44] in which the
award of interest was held to render the grant of back rentals unwarranted, we delete the award of back rentals and
in its place prescribe interest of 12% interest per annum from November 21, 1997, the date of the filing of the
complaint, until the full liability is paid by NPC. The imposition of interest of 12% interest per annum follows a long
line of pertinent jurisprudence, [45] whereby the Court has fixed the rate of interest on just compensation at 12%
per

annum

whenever

the

expropriator

has

not

immediately

paid

just

compensation.

The RTC did not state any factual and legal justifications for awarding to the Heirs of Macabangkit moral and
exemplary damages each in the amount of P200,000.00. The awards just appeared in the fallo of its decision.
Neither did the CA proffer any justifications for sustaining the RTC on the awards. We consider the omissions of the
lower courts as pure legal error that we feel bound to correct even if NPC did not submit that for our consideration.
There was, to begin with, no factual and legal bases mentioned for the awards. It is never trite to remind that moral
and exemplary damages, not by any means liquidated or assessed as a matter of routine, always require evidence
that establish the circumstances under which the claimant is entitled to them. Moreover, the failure of both the RTC
and the CA to render the factual and legal justifications for the moral and exemplary damages in the body of their
decisions immediately demands the striking out of the awards for being in violation of the fundamental rule that the
decision must clearly state the facts and the law on which it is based. Without the factual and legal justifications,
the awards are exposed as the product of conjecture and speculation, which have no place in fair judicial
adjudication.
We also reverse and set aside the decree of the RTC for NPC to pay to the Heirs of Macabangkit "the sum equivalent
to 15% of the total amount awarded, as attorney's fees, and to pay the cost." The body of the decision did not state
the factual and legal reasons why NPC was liable for attorney's fees. The terse statement found at the end of the
body of the RTC's decision, stating: "xxx The contingent attorney's fee is hereby reduced from 20% to only 15% of
the total amount of the claim that may be awarded to plaintiffs," without more, did not indicate or explain why and
how the substantial liability of NPC for attorney's fees could have arisen and been determined.
In assessing attorney's fees against NPC and in favor of the respondents, the RTC casually disregarded the
fundamental distinction between the two concepts of attorney's fees -- the ordinary and the extraordinary. These
concepts were aptly distinguished in Traders Royal Bank Employees Union-Independent v. NLRC,[46] thuswise:
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation
is
the
fact
of
his
employment
by
and
his
agreement
with
the
client.

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be
paid by the losing party in a litigation. The basis of this is any of the cases provided by law where such
award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the
lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof.

By referring to the award as contingency fees, and reducing the award from 20% to 15%, the RTC was really
referring to a supposed agreement on attorney's fees between the Heirs of Macabangkit and their counsel. As such,
the concept of attorney's fees involved was the ordinary. Yet, the inclusion of the attorney's fees in the judgment
among the liabilities of NPC converted the fees to extraordinary. We have to disagree with the RTC thereon, and we
express our discomfort that the CA did not do anything to excise the clearly erroneous and unfounded grant.
An award of attorney's fees has always been the exception rather than the rule. To start with, attorney's fees are not
awarded every time a party prevails in a suit.[47] Nor should an adverse decision ipso facto justify an award of
attorney's fees to the winning party.[48] The policy of the Court is that no premium should be placed on the right to
litigate.[49] Too, such fees, as part of damages, are assessed only in the instances specified in Art. 2208, Civil Code.
[50] Indeed, attorney's fees are in the nature of actual damages.[51] But even when a claimant is compelled to
litigate with third persons or to incur expenses to protect his rights, attorney's fees may still be withheld where no
sufficient showing of bad faith could be reflected in a party's persistence in a suit other than an erroneous
conviction of the righteousness of his cause.[52] And, lastly, the trial court must make express findings of fact and
law that bring the suit within the exception. What this demands is that the factual, legal or equitable justifications
for
the
award
must
be
set
forth
not only in the fallo but also in the text of the decision, or else, the award should be thrown out for being speculative
and
conjectural.[53]
Sound policy dictates that even if the NPC failed to raise the issue of attorney's fees, we are not precluded from
correcting the lower courts' patently erroneous application of the law.[54] Indeed, the Court, in supervising the
lower courts, possesses the ample authority to review legal matters like this one even if not specifically raised or
assigned as error by the parties.
5.
Attorney's fees under quantum meruit principle
are fixed at 10% of the judgment award

Based on the pending motions of Atty. Macarupung Dibaratun and Atty. Manuel D. Ballelos to assert their respective
rights to attorney's fees, both contending that they represented the Heirs of Macabangkit in this case, a conflict
would
ensue
from
the
finality
of
the
judgment
against
NPC.
A look at the history of the legal representation of the Heirs of Macabangkit herein provides a helpful predicate for
resolving
the
conflict.
Atty. Dibaratun was the original counsel of the Heirs of Macabangkit. When the appeal was submitted for decision in
the CA,[55] Atty. Ballelos filed his entry of appearance,[56] and a motion for early decision.[57] Atty. Ballelos
subsequently
filed
also
a
manifestation,[58]
supplemental
manifestation,[59]
reply,[60] and ex parte motion reiterating the motion for early decision.[61] It appears that a copy of the CA's
decision was furnished solely to Atty. Ballelos. However, shortly before the rendition of the decision, Atty. Dibaratun
filed in the CA a motion to register attorney's lien,[62] alleging that he had not withdrawn his appearance and had
not been aware of the entry of appearance by Atty. Ballelos. A similar motion was also received by the Court from
Atty. Dibaratun a few days after the petition for review was filed.[63] Thus, on February 14, 2005,[64] the Court
directed Atty. Dibaratun to enter his appearance herein. He complied upon filing the comment.[65]
Amir Macabangkit confirmed Atty. Dibaratun's representation through an ex parte manifestation that he filed in his
own behalf and on behalf of his siblings Mongkoy and Putri.[66] Amir reiterated his manifestation on March 6, 2006,

[67] and further imputed malpractice to Atty. Ballelos for having filed an entry of appearance bearing Amir's forged
signature and for plagiarism, i.e., copying verbatim the arguments contained in the pleadings previously filed by
Atty.
Dibaratun.[68]
On September 11, 2008, Atty. Ballelos submitted two motions, to wit: (a) a manifestation and motion authorizing a
certain Abdulmajeed Djamla to receive his attorney's fees equivalent of 15% of the judgment award,[69] and (b) a
motion
to
register
his
attorney's
lien
that
he
claimed
was
contingent. [70]
Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement to attorney's fees was contingent. Yet, a
contract for a contingent fees is an agreement in writing by which the fees, usually a fixed percentage of what may
be recovered in the action, are made to depend upon the success in the effort to enforce or defend a supposed
right. Contingent fees depend upon an express contract, without which the attorney can only recover on the basis of
quantum meruit.[71] With neither Atty. Dibaratun nor Atty. Ballelos presenting a written agreement bearing upon
their supposed contingent fees, the only way to determine their right to appropriate attorney's fees is to apply the
principle
of
quantum
meruit.
Quantum meruit - literally meaning as much as he deserves - is used as basis for determining an attorney's
professional fees in the absence of an express agreement.[72] The recovery of attorney's fees on the basis of
quantum meruit is a device that prevents an unscrupulous client from running away with the fruits of the legal
services of counsel without paying for it and also avoids unjust enrichment on the part of the attorney himself. [73]
An attorney must show that he is entitled to reasonable compensation for the effort in pursuing the client's cause,
taking
into
account
certain
factors
in
fixing
the
amount
of
legal
fees.[74]
Rule 20.01 of the Code of Professional Responsibility lists the guidelines for determining the proper amount of
attorney fees, to wit:
Rule 20.1 - A lawyer shall be guided by the following factors in determining his fees:
a)

The

b)

time

The

c)

spent

and

novelty
The

d)

the

extent

and

difficult

important

of

The

of

the

services

of

the
the

rendered
questions
subject

skill

or

required;
involved;
matter;
demanded;

e) The probability of losing other employment as a result of acceptance of the proffered case;
f) The customary charges for similar services and the schedule of fees of the IBP chapter to which he
belongs;
g) The amount involved in the controversy and the benefits resulting to the client from the service;
h)
i)

The

The

contingency

character

of

the

or

employment,

certainty
whether

occasional

of
or

compensation;
established;

and

j) The professional standing of the lawyer.

In the event of a dispute as to the amount of fees between the attorney and his client, and the intervention of the
courts is sought, the determination requires that there be evidence to prove the amount of fees and the extent and
value of the services rendered, taking into account the facts determinative thereof. [75] Ordinarily, therefore, the
determination of the attorney's fees on quantum meruit is remanded to the lower court for the purpose. However, it
will be just and equitable to now assess and fix the attorney's fees of both attorneys in order that the resolution of
"a comparatively simple controversy," as Justice Regalado put it in Traders Royal Bank Employees UnionIndependent v. NLRC,[76] would not be needlessly prolonged, by taking into due consideration the accepted
guidelines
and
so
much
of
the
pertinent
data
as
are
extant
in
the
records.
Atty. Dibaratun and Atty. Ballelos each claimed attorney's fees equivalent to 15% of the principal award of
P113,532,500.00, which was the amount granted by the RTC in its decision. Considering that the attorney's fees will

be defrayed by the Heirs of Macabangkit out of their actual recovery from NPC, giving to each of the two attorney's
15% of the principal award as attorney's fees would be excessive and unconscionable from the point of view of the
clients. Thus, the Court, which holds and exercises the power to fix attorney's fees on a quantum meruit basis in the
absence of an express written agreement between the attorney and the client, now fixes attorney's fees at 10% of
the
principal
award
of
P113,532,500.00.
Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who should receive attorney's fees from the Heirs of
Macabangkit is a question that the Court must next determine and settle by considering the amount and quality of
the
work
each
performed
and
the
results
each
obtained.
Atty. Dibaratun, the attorney from the outset, unquestionably carried the bulk of the legal demands of the case. He
diligently prepared and timely filed in behalf of the Heirs of Macabangkit every pleading and paper necessary in the
full resolution of the dispute, starting from the complaint until the very last motion filed in this Court. He
consistently appeared during the trial, and examined and cross-examined all the witnesses presented at that stage
of the proceedings. The nature, character, and substance of each pleading and the motions he prepared for the
Heirs of Macabangkit indicated that he devoted substantial time and energy in researching and preparing the case
for the trial. He even advanced P250,000.00 out of his own pocket to defray expenses from the time of the filing of
the motion to execute pending appeal until the case reached the Court.[77] His representation of all the Heirs of
Macabangkit
was
not
denied
by
any
of
them.
We note that Atty. Dibaratun possessed some standing in the legal profession and in his local community. He
formerly served as a member of the Board of Director of the Integrated Bar of the Philippines (IBP), Lanao del NorteIligan City Chapter, and was an IBP national awardee as Best Legal Aid Committee Chairman. He taught at Mindanao
State University College of Law Extension. He was a Municipal Mayor of Matungao, Lanao del Norte, and was
enthroned
Sultan
a
Gaus.
In contrast, not much about the character and standing of Atty. Ballelos, as well as the nature and quality of the
legal services he rendered for the Heirs of Macabangkit are in the records. The motions he filed in the
Court and in the CA lacked enlightening research and were insignificant to the success of the clients' cause. His
legal service, if it can be called that, manifested no depth or assiduousness, judging from the quality of the
pleadings from him. His written submissions in the case appeared either to have been lifted verbatim from the
pleadings previously filed by Atty. Dibaratun, or to have been merely quoted from the decisions and resolutions of
the RTC and the CA. Of the Heirs of Macabangkit, only Cebu, Batowa-an, Sayana, Nasser, Manta, Mongkoy[78] and
Edgar gave their consent to Atty. Ballelos to appear in their behalf in the CA, which he did despite Atty. Dibaratun
not having yet filed any withdrawal of his appearance. The Court did not receive any notice of appearance for the
Heirs of Macabangkit from Atty. Ballelos, but that capacity has meanwhile become doubtful in the face of Amir's
strong
denial
of
having
retained
him.
In fairness and justice, the Court accords full recognition to Atty. Dibaratun as the counsel de parte of the Heirs of
Macabangkit who discharged his responsibility in the prosecution of the clients' cause to its successful end. It is he,
not Atty. Ballelos, who was entitled to the full amount of attorney's fees that the clients ought to pay to their
attorney. Given the amount and quality of his legal work, his diligence and the time he expended in ensuring the
success of his prosecution of the clients' cause, he deserves the recognition, notwithstanding that some of the
clients might appear to have retained Atty. Ballelos after the rendition of a favorable judgment. [79]
Atty. Ballelos may claim only from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, the only parties who
engaged him. The Court considers his work in the case as very minimal. His compensation under the quantum
meruit principle is fixed at P5,000.00, and only the Heirs of Macabangkit earlier named are liable to him.
WHEREFORE, the Court AFFIRMS the decision promulgated on October 5, 2004 by the Court of Appeals, subject to
the following MODIFICATIONS, to wit:
(a) Interest at the rate of 12% per annum is IMPOSED on the principal amount of P113,532,500.00
as just compensation, reckoned from the filing of the complaint on November 21, 1997 until the full
liability
is
paid;
(b) The awards of P30,000.00 as rental fee, P200,000.00 as moral damages, and P200,000.00 as

exemplary

damages

are

DELETED;

and

(c) The award of 15% attorney's fees decreed to be paid by National Power Corporation to the Heirs of
Macabangkit is DELETED.

The Court PARTLY GRANTS the motion to register attorney's lien filed by Atty. Macarupung Dibaratun, and FIXES
Atty. Dibaratun's attorney's fees on the basis of quantum meruit at 10% of the principal award of P113,532,500.00.
The motion to register attorney's lien of Atty. Manuel D. Ballelos is PARTLY GRANTED, and Atty. Ballelos is
DECLARED ENTITLED TO RECOVER from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, all surnamed
Macabangkit, the amount of P5,000.00 as attorney's fees on the basis of quantum meruit.
Costs

of

suit

to

be

paid

by

the

petitioner.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 187677

April 17, 2013

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS

AND
HIGHWAYS
(DPWH),
Petitioner,
vs.
HON. ROSA SAMSON-TATAD, as Presiding Judge of the Regional Trial Court, Branch 105,
Quezon City, and SPOUSES WILLIAM AND REBECCA GENATO, Respondents.
DECISION
SERENO, CJ.:
This is an appeal via a Petition for Review on Certiorari 1 dated 19 June 2009 assailing the Decision 2
and Resolution3of the Court of Appeals (CA) in C.A. G.R. SP No. 93227 which affirmed the Orders 4 of
the Regional Trial Court (RTC), Branch 105, Quezon City in Civil Case No. Q-01-44595.The RTC barred
petitioner from presenting evidence to prove its claim of ownership over the subject property, as the
presentation thereof would constitute a collateral attack on private respondents' title.
The antecedent facts are as follows:

On 13 July 2001, petitioner Republic of the Philippines, represented by the Department of Public
Works and Highways (DPWH), filed a Complaint against several defendants, including private
respondents, for the expropriation of several parcels of land affected by the construction of the EDSAQuezon Avenue Flyover.5 Private respondents, Spouses William and Rebecca Genato, are the
registered owners of a piece of land ("subject property") covered by Transfer Certificate of Title (TCT)
No. RT-11603 (383648)6 and having an area of 460 square meters.
During the pendency of the proceedings, petitioner received a letter dated 14 June 2002 from Engr.
Patrick B. Gatan, Project Manager IV of the DPWH-NCR, reporting that the subject property was
"government land and that the transfer certificate of title of the said claimant respondent x x x is of
dubious origin and of fabrication as it encroached or overlapped on a government property." 7 As a
result, petitioner filed an Amended Complaint on 24 June 2002, 8 seeking to limit the coverage of the
proceedings to an area conforming to the findings of the DPWH:
4. To accomplish said project, which is to be undertaken by the Department of Public Works and
Highways [DPWH], it is necessary and urgent for plaintiff to acquire in fee simple portions of the
following parcels of land belonging to, occupied, possessed, and/or the ownership of which are being
claimed by the defendants, to wit:
xxxx
[c] Defendants William O. Genato and Rebecca G. Genato.
xxxx
5. The portion of the above properties that are affected by the project and shaded green in the
sketch plan hereto attached and made integral part hereof as Annex E, consisting of an area of: x x x
[c] 460 square meters of the aforedescribed property registered in the name of defendants spouses
William and Rebecca Genato; x x x. (Emphasis in the original)
On 18 July 2002, petitioner filed a Manifestation and Motion 9 to have the subject property "declared
or considered of uncertain ownership or subject to conflicting claims."
In an Order dated 10 December 2002, 10 the RTC admitted petitioners Amended Complaint,
deferred the release to respondents the amount of eighteen million four hundred thousand pesos
(P18,400,000) deposited in the bank, equivalent to the current zonal valuation of the land, and
declared the property as the subject of conflicting claims.
While petitioner was presenting evidence to show that the subject property actually belonged to the
Government, private respondents interposed objections saying that petitioner was barred from
presenting the evidence, as it constituted a collateral attack on the validity of their TCT No. RT-11603
(383648). The RTC then required the parties to submit their respective Memoranda.
Upon receipt of the Memoranda, the trial court issued on 12 July 2005 an Order 11 as follows:
WHEFEFORE, premises considered, the Court finds that the issue of the validity of the TCT No.
11603 (383648) can only be raised in an action expressly instituted for that purpose and not in this
instant proceeding. Accordingly, plaintiff is barred from presenting evidence as they [sic] constitute
collateral attack on the validity of the title to the subject lot in violation of Sec. 48 of P. D. 1529.
On 4 August 2005, petitioner seasonably filed a Motion for Reconsideration, 12 but the motion was
denied by the RTC in an Order dated 17 November 2005. 13
On 4 January 2006, private respondents filed a Motion for the payment of just compensation
amounting to twenty million seven hundred thousand pesos (20,700,000) and for the release of
eighteen million four hundred thousand pesos (P18,400,000) deposited in the Land BankSouth
Harbor Branch as partial payment.14 This Motion remains pending in the RTC to date.

On 9 February 2006, petitioner filed with the CA a Petition for Certiorari with Prayer for the Issuance
of a Temporary Restraining Order and/or Writ of Preliminary Injunction. 15
The appellate court ruled that since the subject property was covered by a Torrens title, Presidential
Decree No. 1529, or the Property Registration Decree (P. D. 1529), necessarily finds significance. Thus,
it held that the RTC rightly applied Sec. 48. Accordingly, the CA issued its 29 September 2008
Decision,16 the dispositive portion of which reads:
WHEREFORE, the Petition for Certiorari is DISMISSED. The prayer for the issuance of a Writ of
Preliminary Injunction is accordingly DENIED.
On 29 October 2008, petitioner filed a Motion for Reconsideration, 17 but the motion was also
denied in a Resolution dated 27 April 2009.18
Hence, the instant Petition.
A Comment19 on the Petition was filed by private respondents on 1 September 2009, and a
Reply20 thereto by petitioner on 27 January 2010.
ISSUE
From the foregoing, the sole issue submitted for resolution before this Court is whether petitioner
may be barred from presenting evidence to assail the validity of respondents title under TCT No. RT11603 (383648).
The Courts Ruling
Petitioner argues that under Section 9, Rule 67 of the Rules of Court, if the ownership of a property
to be expropriated is uncertain, the court in the same expropriation proceeding is also given authority
to make a proper adjudication of the matter. Section 9 of Rule 67 reads:
SECTION 9. Uncertain Ownership. Conflicting Claims. If the ownership of the property taken is
uncertain, or there are conflicting claims to any part thereof, the court may order any sum or sums
awarded as compensation for the property to be paid to the clerk of the court for the benefit of the
persons adjudged in the same proceeding to be entitled thereto. But the judgment shall require the
payment of the sum or sums awarded to either the defendant or the clerk before the plaintiff can enter
upon the property, or retain it for the public use or purpose if entry has already been made.
This view is allegedly supported by Republic v. Court of First Instance of Pampanga, presided
formerly by Judge L. Pasicolan 21(Republic) in which the trial court hearing the expropriation
proceeding was also allowed to resolve the issue of ownership.
Petitioner further argues that the original Complaint was amended "precisely to reflect the fact that
herein private respondents, albeit ostensibly appearing as registered owners, are to be considered as
mere claimants of one of the properties subject of the expropriation." This is the reason why the RTC
issued an Order declaring the property subject of conflicting claims.
Moreover, this being an in rem proceeding, "plaintiff Republic of the Philippines seeks the relief,
both in the original and amended complaints, to transfer to plaintiff the titles to said parcels of land
together with their improvements free from all liens and encumbrances. For this particular purpose,
the expropriation suit is essentially a direct proceeding." 22
Private respondents, on the other hand, invoke Section 48 of P. D. 1529, viz:
SECTION 48. Certificate Not Subject to Collateral Attack. A certificate of title shall not be subject
to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in
accordance with law.

It is their contention that by allowing petitioner to present adversarial evidence, the court is in
effect allowing respondents Torrens title to be collaterally attacked an action prohibited by P. D.
1529.
We rule that petitioner may be allowed to present evidence to assert its ownership over the subject
property, but for the sole purpose of determining who is entitled to just compensation.
I
Proper interpretation of Section 9, Rule 67
Proceeding from the principle of jus regalia, the right to eminent domain has always been
considered as a fundamental state power that is inseparable from sovereignty. 23 It is described as the
States inherent power that need not be granted even by the Constitution, 24 and as the government's
right to appropriate, in the nature of compulsory sale to the State, private property for public use or
purpose.25
Expropriation, or the exercise of the States right to eminent domain, is proscribed by the restraints
of public use and just compensation. 26It is governed by Rule 67 of the Rules of Court, which presents
procedural guidelines for the court to ensure that due process is observed and just compensation
rightly paid to the private owners.
Indeed, this Court first had the occasion to interpret Section 9, Rule 67 in the case of Republic. In
addressing the issue of "whether or not the court that hears the expropriation case has also jurisdiction
to determine, in the same proceeding, the issue of ownership of the land sought to be condemned,"
the Court answered in the affirmative:
The sole issue in this case, i.e., whether or not the court that hears the expropriation case has also
jurisdiction to determine, in the same proceeding, the issue of ownership of the land sought to be
condemned, must be resolved in the affirmative. That the court is empowered to entertain the
conflicting claims of ownership of the condemned or sought to be condemned property and adjudge
the rightful owner thereof, in the same expropriation case, is evident from Section 9 of the Revised
Rule 69, which provides:
SEC. 9. Uncertain ownership. Conflicting claims. If the ownership of the property taken is
uncertain, or there are conflicting claims to any part thereof, the court may order any sum or sums
awarded as compensation for the property to be paid to the clerk of court for the benefit of the
persons adjudged in the same proceeding to be entitled thereto. But the judgment shall require the
payment of the sum or sums awarded to either the defendant or the clerk before the plaintiff can enter
upon the property, or retain it for the public use or purpose if entry has already been made.
In fact, the existence of doubt or obscurity in the title of the person or persons claiming ownership
of the properties to be expropriated would not preclude the commencement of the action nor prevent
the court from assuming jurisdiction thereof. The Rules merely require, in such eventuality, that the
entity exercising the right of eminent domain should state in the complaint that the true ownership of
the property cannot be ascertained or specified with accuracy. 27
We arrived at the same conclusion in Republic v. Rural Bank of Kabacan, Inc., 28 in which we held
thus:
The trial court should have been guided by Rule 67, Section 9 of the 1997 Rules of Court, which
provides thus:
SEC. 9. Uncertain ownership; conflicting claims. If the ownership of the property taken is
uncertain, or there are conflicting claims to any part thereof, the court may order any sum or sums
awarded as compensation for the property to be paid to the court for the benefit of the person
adjudged in the same proceeding to be entitled thereto. But the judgment shall require the payment of
the sum or sums awarded to either the defendant or the court before the plaintiff can enter upon the
property, or retain it for the public use or purpose if entry has already been made.

Hence, the appellate court erred in affirming the trial courts Order to award payment of just
compensation to the defendants-intervenors. There is doubt as to the real owner of Lot No. 3080.
Despite the fact that the lot was covered by TCT No. T-61963 and was registered under its name,
the Rural Bank of Kabacan manifested that the owner of the lot was no longer the bank, but the
defendants-intervenors; however, it presented no proof as to the conveyance thereof. In this regard,
we deem it proper to remand this case to the trial court for the reception of evidence to establish the
present owner of Lot No. 3080 who will be entitled to receive the payment of just
compensation.1wphi1 (Emphases supplied)
However, the authority to resolve ownership should be taken in the proper context. The discussion
in Republic was anchored on the question of who among the respondents claiming ownership of the
property must be indemnified by the Government:
Now, to determine the person who is to be indemnified for the expropriation of Lot 6, Block 6, Psd2017, the court taking cognizance of the expropriation must necessarily determine if the sale to the
Punzalan spouses by Antonio Feliciano is valid or not. For if valid, said spouses must be the ones to be
paid by the condemnor; but if invalid, the money will be paid to someone else. x x x. 29
Thus, such findings of ownership in an expropriation proceeding should not be construed as final
and binding on the parties. By filing an action for expropriation, the condemnor (petitioner), merely
serves notice that it is taking title to and possession of the property, and that the defendant is
asserting title to or interest in the property, not to prove a right to possession, but to prove a right to
compensation for the taking.30
If at all, this situation is akin to ejectment cases in which a court is temporarily authorized to
determine ownership, if only to determine who is entitled to possession. This is not conclusive, and it
remains open to challenge through proper actions. 31 The consequences of Sec. 9, Rule 67 cannot be
avoided, as they are due to the intimate relationship of the issue of ownership with the claim for the
expropriation payment.32
II
Inapplicability of Section 48, P. D. 1529
Verily, our interpretation of Sec. 9, Rule 67 does not run counter to Section 48 of P.D. 1529. Under
Sec. 48, collateral attacks on a Torrens title are prohibited. We have explained the concept in Oo v.
Lim,33 to wit:
An action or proceeding is deemed an attack on a title when its objective is to nullify the title,
thereby challenging the judgment pursuant to which the title was decreed. The attack is direct when
the objective is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the
attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment
is nevertheless made as an incident thereof.
In several instances, we have considered an Answer praying for the cancellation of the plaintiff's

Torrens title as a form of a collateral attack. 34 We have afforded the similar treatment in a petition
questioning the validity of a deed of sale for a registered land, 35 and in a reformation of a deed of sale
to include areas registered under the name of another party. 36 But a resolution on the issue of
ownership in a partition case was deemed neither to be a direct or collateral attack, for "until and
unless this issue of co-ownership is definitely and finally resolved, it would be premature to effect a
partition of the disputed properties." 37
Here, the attempt of petitioner to present evidence cannot be characterized as an "attack." It must
be emphasized that the objective of the case is to appropriate private property, and the contest on
private respondents' title arose only as an incident to the issue of whom should be rightly
compensated.
Contrary to petitioner's allegations, the Complaint and Amended Complaint cannot also be

considered as a direct attack. The amendment merely limited the coverage of the expropriation
proceedings to the uncontested portion of the subject property. The RTC's Order declaring the property
as subject of conflicting claims is a recognition that there are varying claimants to the sums to be
awarded as just compensation. This serves as an authority for the court to conduct a limited inquiry on
the property's ownership.
WHEREFORE, the Court GRANTS the Petition for Review on Certiorari and the prayer for a Writ of
Preliminary Injunction. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
93227, as well as the Decision of the Regional Trial Court, Branch 105, Quezon City in Civil Case No. Q01-44595, are hereby REVERSED and SET ASIDE. This case is REMANDED to the RTC to hear the issue
of ownership for the purpose of just compensation.
SO ORDERED.

SECOND DIVISION
G.R. NO. 202690, June 05, 2013
HENRY L. SY, Petitioner, v. LOCAL GOVERNMENT OF QUEZON CITY, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the January 20, 2012 Decision2 and July 16, 2012
Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 91964 which affirmed with modification the August 22,
2008 Order4 of the Regional Trial Court of Quezon City, Branch 80 (RTC) in Civil Case No. Q-96-29352, ordering
respondent Local Government of Quezon City (the City) to pay petitioner Henry L. Sy (Sy) just compensation set at
P5,500.00 per square meter (sq. m.), including P200,000.00 as exemplary damages and attorneys fees equivalent
to one percent (1%) of the total amount due. lawlibrary
The Facts
On November 7, 1996, the City, through then Mayor Ismael Mathay, Jr., filed a complaint for expropriation with the
RTC in order to acquire a 1,000 sq. m. parcel of land, owned and registered under the name of Sy (subject
property),5 which was intended to be used as a site for a multi-purpose barangay hall, day-care center, playground
and community activity center for the benefit of the residents of Barangay Balingasa, Balintawak, Quezon City. 6
The requisite ordinance to undertake the aforesaid expropriation namely, Ordinance No. Sp-181, s-94, was enacted
on
April
12,
1994.7chanroblesvirtuallawlibrary
On March 18, 1997, pursuant to Section 198 of Republic Act No. 7160 (RA 7160), otherwise known as the "Local
Government Code of 1991," the City deposited the amount of P241,090.00 with the Office of the Clerk of Court,
representing
15%
of
the
fair
market
value
of
the
subject
property
based
on
its
tax
9
declaration. chanroblesvirtuallawlibrary
During the preliminary conference on November 8, 2006, Sy did not question the Citys right to expropriate the
subject property. Thus, only the amount of just compensation remained at issue. 10chanroblesvirtuallawlibrary
On July 6, 2006, the RTC appointed Edgardo Ostaco (Commissioner Ostaco), Engr. Victor Salinas (Commissioner
Salinas) and Atty. Carlo Alcantara (Commissioner Alcantara) as commissioners to determine the proper amount of
just compensation to be paid by the City for the subject property. Subsequently, Commissioners Ostaco and
Alcantara, in a Report dated February 11, 2008, recommended the payment of P5,500.00 per sq. m., to be

computed from the date of the filing of the expropriation complaint, or on November 7, 1996. On the other hand,
Commissioner Salinas filed a separate Report dated March 7, 2008, recommending the higher amount of P13,500.00
per sq. m. as just compensation.11chanroblesvirtuallawlibrary lawlibrary
The RTC Ruling
In the Order dated August 22, 2008, 12 the RTC, citing the principle that just compensation must be fair not only to
the owner but to the expropriator as well, adopted the findings of Commissioners Ostaco and Alcantara and thus,
held that the just compensation for the subject property should be set at P5,500.00 per sq. m. 13 Further, it found no
basis for the award of damages and back rentals in favor of Sy. 14 Finally, while legal interest was not claimed, for
equity considerations, it awarded six percent (6%) legal interest, computed from November 7, 1996 until full
payment
of
just
compensation.15chanroblesvirtuallawlibrary
Dissatisfied, Sy filed an appeal with the CA.16chanroblesvirtuallawlibrary lawlibrary
The CA Ruling
In the Decision dated January 20, 2012, 17 the CA affirmed the RTCs ruling but modified the same, ordering the City
to pay Sy the amount of P200,000.00 as exemplary damages and attorneys fees equivalent to one percent (1%) of
the
total
amount
due.
It found the appraisal of Commissioners Ostaco and Alcantara for the subject property to be more believable than
the P13,000.00 per sq. m. valuation made by independent appraisers Cuervo and Asian Appraisers in 1995 and
1996, respectively, considering that it was arrived at after taking into account: (a) the fair market value of the
subject property in the amount of P4,000.00 per sq. m. based on the September 4, 1996 recommendation of the
City Appraisal Committee;18 (b) the market value of the subject lot in the amount of P2,000.00 per sq. m. based on
several sworn statements made by Sy himself; 19 and (c) Sys own tax declaration for 1996, 20 stating that the
subject property has a total market value of P2,272,050.00. Accordingly, it held that the fair market value of
P5,500.00 per sq. m., or P5,500,000.00 in total, for the 1,000 sq. m. subject property arrived at by Commissioners
Ostaco
and
Alcantara
was
more
than
fair
and
reasonable. 21chanroblesvirtuallawlibrary
The CA also denied Sys assertion that he should be entitled to damages on account of the purported shelving of his
housing project, finding no sufficient evidence to support the same. Likewise, it observed that the expropriation
would not leave the rest of Sys properties useless as they would still be accessible through a certain Lot 8 based on
the
Property
Identification
Map.22chanroblesvirtuallawlibrary
Nonetheless, citing the case of Manila International Airport Authority v. Rodriguez (MIAA), 23 it awarded exemplary
damages in the amount of P200,000.00 and attorneys fees equivalent to one percent (1%) of the amount due
because of the Citys taking of the subject property without even initiating expropriation proceedings. 24 It, however,
denied Sys claim of back rentals considering that the RTC had already granted legal interest in his
favor.25chanroblesvirtuallawlibrary
Aggrieved, Sy moved for reconsideration which was denied in the Resolution dated July 16, 2012 26 for being filed
out of time.27 The City also filed a motion for reconsideration which was equally denied for lack of
merit.28chanroblesvirtuallawlibrary
Hence, this petition. lawlibrary
Issues Before The Court
The present controversy revolves around the issue of whether the CA correctly: (a) dismissed Sys motion for

reconsideration for being filed out of time; (b) upheld the amount of just compensation as determined by the RTC as
well as its grant of six percent (6%) legal interest; and (c) awarded exemplary damages and attorneys fees.
lawlibrary
The Courts Ruling
The

petition

A.
Failure
excusable

is

to
seasonably
negligence;

partly

move
relaxation

for

meritorious.

reconsideration;nadcralavvonlinelawlibrary
of
procedural
rules

At the outset, the Court observes that Sys motion for reconsideration was filed out of time and thus, was properly
dismissed by the CA. Records show that, as per the Postmasters Certification, the CAs January 20, 2012 Decision
was received by Sy on January 26, 2012 and as such, any motion for reconsideration therefrom should have been
filed not later than fifteen (15) days from receipt, 29 or on February 10, 2012.30 However, Sy filed his motion for
reconsideration (subject motion) a day late, or on February 13, 2012, 31 which thus, renders the CA decision final
and
executory.32chanroblesvirtuallawlibrary
In this regard, it is apt to mention that Sys counsel, Atty. Tranquilino F. Meris (Atty. Meris), claims that his secretarys
inadvertent placing of the date January 27, 2012, instead of January 26, 2012, on the Notice of Decision 33
constitutes

excusable

negligence

The

which

should

therefore,

justify

assertion

relaxation

of

is

the

rules.

untenable.

A claim of excusable negligence does not loosely warrant a relaxation of the rules. Verily, the party invoking such
should be able to show that the procedural oversight or lapse is attended by a genuine miscalculation or unforeseen
fortuitousness which ordinary prudence could not have guarded against so as to justify the relief sought .34 The
standard of care required is that which an ordinarily prudent man bestows upon his important business. 35 In this
accord, the duty rests on every counsel to see to adopt and strictly maintain a system that will efficiently take into
account
all
court
notices
sent
to
him.36chanroblesvirtuallawlibrary
Applying these principles, the Court cannot excuse Atty. Meris misstep based on his proffered reasons. Evidently,
the erroneous stamping of the Notice of Decision could have been averted if only he had instituted a credible filing
system in his office to account for oversights such as that committed by his secretary. Indeed, ordinary prudence
could
have
prevented
such
mistake.
Be that as it may, procedural rules may, nonetheless, be relaxed for the most persuasive of reasons in order to
relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed.37 Corollarily, the rule, which states that the mistakes of counsel bind the client, may not be
strictly followed where observance of it would result in the outright deprivation of the clients liberty or property, or
where
the
interest
of
justice
so
requires. 38chanroblesvirtuallawlibrary
As applied in this case, the Court finds that the procedural consequence of the above-discussed one-day delay in
the filing of the subject motion which, as a matter of course, should render the CAs January 20, 2012 Decision
already final and executory and hence, bar the instant petition is incommensurate to the injustice which Sy may
suffer. This is in line with the Courts observation that the amount of just compensation, the rate of legal interest, as
well as the time of its accrual, were incorrectly adjudged by both the RTC and the CA, contrary to existing
jurisprudence. In this respect, the Court deems it proper to relax the rules of procedure and thus, proceed to resolve
these
substantive
issues.
B.

Rate

of

legal

interest

and

time

of

accrual

Based on a judicious review of the records and application of jurisprudential rulings, the Court holds that the correct
rate of legal interest to be applied is twelve percent (12%) and not six percent (6%) per annum, owing to the nature

of

the

Citys

obligation

as

an

effective

forbearance.

In the case of Republic v. CA,39 the Court ruled that the debt incurred by the government on account of the taking
of the property subject of an expropriation constitutes an effective forbearance which therefore, warrants the
application of the 12% legal interest rate, viz:
The constitutional limitation of "just compensation" is considered to be the sum equivalent to the
market value of the property, broadly described to be the price fixed by the seller in open market in
the usual and ordinary course of legal action and competition or the fair value of the property as
between one who receives, and one who desires to sell, it fixed at the time of the actual taking by the
government. Thus, if property is taken for public use before compensation is deposited with the court
having jurisdiction over the case, the final compensation must include interests on its just value to be
computed from the time the property is taken to the time when compensation is actually paid or
deposited with the court. In fine, between the taking of the property and the actual payment, legal
interests accrue in order to place the owner in a position as good as (but not better than) the position
he
was
in
before
the
taking
occurred.
The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of the
property to be computed from the time petitioner instituted condemnation proceedings and "took" the
property in September 1969. This allowance of interest on the amount found to be the value
of the property as of the time of the taking computed, being an effective forbearance, at
12% per annum should help eliminate the issue of the constant fluctuation and inflation of
the value of the currency over time. x x x (Emphasis and underscoring supplied)

In similar regard, the Court, in Land Bank of the Philippines v. Rivera, 40 pronounced that:
In many cases decided by this Court, 41 it has been repeated time and again that the award of
12% interest is imposed in the nature of damages for delay in payment which in effect
makes the obligation on the part of the government one of forbearance. This is to ensure
prompt payment of the value of the land and limit the opportunity loss of the owner that can drag from
days to decades. (Emphasis and underscoring supplied)

As to the reckoning point on which the legal interest should accrue, the same should be computed from the time of
the taking of the subject property in 1986 and not from the filing of the complaint for expropriation on November 7,
1996.
Records show that the City itself admitted in its Appellees Brief filed before the CA that as early as 1986, "a
burden was already imposed upon the owner of the [subject] property x x x, considering that the expropriated
property was already being used as Barangay day care and office." 42 Thus, the property was actually taken during
that time and from thereon, legal interest should have already accrued. In this light, the Court has held that:
43chanroblesvirtuallawlibrary
x x x [T]he final compensation must include interests on its just value to be computed from
the time the property is taken to the time when compensation is actually paid or deposited with
the court[.] x x x (Emphasis supplied)

This is based on the principle that interest "runs as a matter of law and follows from the right of the landowner to be
placed in as good position as money can accomplish, as of the date of the taking." 44chanroblesvirtuallawlibrary
Notably, the lack of proper authorization, i.e., resolution to effect expropriation,45 did not affect the character of the
Citys taking of the subject property in 1986 as the CA, in its January 20, 2012 Decision, suggests. Case law dictates
that there is "taking" when the owner is actually deprived or dispossessed of his property; when there is a practical
destruction or a material impairment of the value of his property or when he is deprived of the ordinary use
thereof.46 Therefore, notwithstanding the lack of proper authorization, the legal character of the Citys action as one
of "taking" did not change. In this relation, the CA noted that the City enacted Ordinance No. Sp-181, s-94, only on

April 12, 1994 and filed its expropriation complaint on November 7, 1996. However, as it previously admitted, it
already commenced with the taking of the subject property as early as 1986. Accordingly, interest must run from
such
time.
This irregularity does not, however, proceed without any consequence. As correctly observed by the CA, citing as
basis the MIAA case, exemplary damages and attorneys fees should be awarded to the landowner if the
government takes possession of the property for a prolonged period of time without properly initiating expropriation
proceedings. The MIAA ruling was applied in the more recent case of City of Iloilo v. Judge Lolita ContrerasBesana,47 wherein the Court said:
We stress, however, that the City of Iloilo should be held liable for damages for taking private
respondents property without payment of just compensation. In Manila International Airport Authority
v. Rodriguez, the Court held that a government agencys prolonged occupation of private property
without the benefit of expropriation proceedings undoubtedly entitled the landowner to damages:
Such pecuniary loss entitles him to adequate compensation in the form
of actual or compensatory damages, which in this case should be the legal
interest (6%) on the value of the land at the time of taking, from said point up
to full payment by the MIAA. This is based on the principle that interest "runs as a
matter of law and follows from the right of the landowner to be placed in as good position
as money can accomplish, as of the date of the taking x x x. lawlibrary
xxxx
For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of expropriation
proceedings and without the MIAA exerting efforts to ascertain ownership of the lot and negotiating
with any of the owners of the property. To our mind, these are wanton and irresponsible acts
which should be suppressed and corrected. Hence, the award of exemplary damages and
attorneys fees is in order. x x x. (Emphasis and underscoring supplied; citations omitted)

All told, the Court finds the grant of exemplary damages in the amount of P200,000.00 as well as attorneys fees
equivalent to 1% of the total amount due amply justified, square as it is with existing jurisprudence.
C.

Amount

of

just

compensation

Finally, the Court cannot sustain the amount of P5,500.00/sq. m. as just compensation which was set by the RTC and
upheld by the CA. The said valuation was actually arrived at after considering: (a) the September 4, 1996
recommendation of the City Appraisal Committee; (b) several sworn statements made by Sy himself; and (c) Sys
own tax declaration for 1996. 48It is well-settled that the amount of just compensation is to be ascertained as of the
time of the taking.49 However, the above-stated documents do not reflect the value of the subject property at the
time of its taking in 1986 but rather, its valuation in 1996. Consequently, the case must be remanded to the RTC in
order to properly determine the amount of just compensation during such time the subject property was actually
taken.
WHEREFORE, the petition is PARTLY GRANTED. The January 20, 2012 Decision and July 16, 2012 Resolution of the
Court of Appeals in CA-G.R. CV No. 91964 are hereby SET ASIDE. Accordingly, the case is REMANDED to the trial
court for the proper determination of the amount of just compensation in accordance with this Decision. To forestall
any further delay in the resolution of this case, the trial court is hereby ordered to fix the just compensation for
petitioner Henry L. Sy's property with dispatch and report to the Court its compliance. Finally, respondent Local
Government of Quezon City is ordered to PAY exemplary damages in the amount of P200,000.00 and attorneys
fees equivalent to one percent (1%) of the amount due, after final determination of the amount of just
compensation.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179334

July 1, 2013

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT

ENGINEER CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of
Appeals (CA) Decision1 dated July 31, 2007 in CA-G.R. CV No. 77997. The assailed decision affirmed
with modification the Regional Trial Court (RTC) 2 Decision3 dated March 22, 2002 in Civil Case No. 208M-95.
The case stemmed from the following factual and procedural antecedents:
Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a parcel of land
with an area of 7,268 square meters located in San Pablo, Malolos, Bulacan and covered by Transfer
Certificate of Title (TCT) No. T-43006 4 of the Register of Deeds of Bulacan. Said parcel of land was
among the properties taken by the government sometime in 1940 without the owners consent and
without the necessary expropriation proceedings and used for the construction of the MacArthur
Highway.5
In a letter6 dated December 15, 1994, respondents demanded the payment of the fair market value
of the subject parcel of land. Petitioner Celestino R. Contreras (petitioner Contreras), then District
Engineer of the First Bulacan Engineering District of petitioner Department of Public Works and
Highways (DPWH), offered to pay the subject land at the rate of P0.70 per square meter per Resolution
of the Provincial Appraisal Committee (PAC) of Bulacan. 7 Unsatisfied with the offer, respondents
demanded for the return of their property or the payment of compensation at the current fair market
value.8
As their demand remained unheeded, respondents filed a Complaint 9 for recovery of possession
with damages against petitioners, praying that they be restored to the possession of the subject parcel
of land and that they be paid attorneys fees. 10 Respondents claimed that the subject parcel of land
was assessed at P2,543,800.00.11

Instead of filing their Answer, petitioners moved for the dismissal of the complaint on the following
grounds: (1) that the suit is against the State which may not be sued without its consent; (2) that the
case has already prescribed; (3) that respondents have no cause of action for failure to exhaust
administrative remedies; and (4) if respondents are entitled to compensation, they should be paid only
the value of the property in 1940 or 1941. 12
On June 28, 1995, the RTC issued an Order 13 granting respondents motion to dismiss based on the
doctrine of state immunity from suit. As respondents claim includes the recovery of damages, there is
no doubt that the suit is against the State for which prior waiver of immunity is required. When
elevated to the CA,14 the appellate court did not agree with the RTC and found instead that the
doctrine of state immunity from suit is not applicable, because the recovery of compensation is the
only relief available to the landowner. To deny such relief would undeniably cause injustice to the
landowner. Besides, petitioner Contreras, in fact, had earlier offered the payment of compensation
although at a lower rate.Thus, the CA reversed and set aside the dismissal of the complaint and,

consequently, remanded the case to the trial court for the purpose of determining the just
compensation to which respondents are entitled to recover from the government. 15 With the finality of
the aforesaid decision, trial proceeded in the RTC.
The Branch Clerk of Court was initially appointed as the Commissioner and designated as the
Chairman of the Committee that would determine just compensation, 16 but the case was later referred
to the PAC for the submission of a recommendation report on the value of the subject property. 17 In
PAC Resolution No. 99-007,18 the PAC recommended the amount of P1,500.00 per square meter as the
just compensation for the subject property.
On March 22, 2002, the RTC rendered a Decision,19 the dispositive portion of which reads:
WHEREFORE, premises considered, the Department of Public Works and Highways or its duly
assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One
Thousand Five Hundred Pesos (P1,500.00) per square meter for the lot subject matter of this case in
accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001.
SO ORDERED.20
On appeal, the CA affirmed the above decision with the modification that the just compensation
stated above should earn interest of six percent (6%) per annum computed from the filing of the action
on March 17, 1995 until full payment. 21
In its appeal before the CA, petitioners raised the issues of prescription and laches, which the CA
brushed aside on two grounds: first, that the issue had already been raised by petitioners when the
case was elevated before the CA in CA-G.R. CV No. 51454. Although it was not squarely ruled upon by
the appellate court as it did not find any reason to delve further on such issues, petitioners did not
assail said decision barring them now from raising exactly the same issues; and second, the issues
proper for resolution had been laid down in the pre-trial order which did not include the issues of
prescription and laches. Thus, the same can no longer be further considered. As to the propriety of the
propertys valuation as determined by the PAC and adopted by the RTC, while recognizing the rule that
the just compensation should be the reasonable value at the time of taking which is 1940, the CA
found it necessary to deviate from the general rule. It opined that it would be obviously unjust and
inequitable if respondents would be compensated based on the value of the property in 1940 which is
P0.70 per sq m, but the compensation would be paid only today. Thus, the appellate court found it just
to award compensation based on the value of the property at the time of payment. It, therefore,
adopted the RTCs determination of just compensation of P1,500.00 per sq m as recommended by the
PAC. The CA further ordered the payment of interest at the rate of six percent (6%) per annum
reckoned from the time of taking, which is the filing of the complaint on March 17, 1995.
Aggrieved, petitioners come before the Court assailing the CA decision based on the following
grounds:
I.
THE COURT OF APPEALS GRAVELY ERRED IN GRANTING JUST COMPENSATION TO
RESPONDENTS
CONSIDERING
THE
HIGHLY
DUBIOUS
AND
QUESTIONABLE
CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY.
II.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING JUST COMPENSATION TO
RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND
DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES.
III.
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURTS DECISION
ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET

VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS. 22

Petitioners insist that the action is barred by prescription having been filed fifty-four (54) years after
the accrual of the action in 1940. They explain that the court can motu proprio dismiss the complaint if
it shows on its face that the action had already prescribed. Petitioners likewise aver that respondents
slept on their rights for more than fifty years; hence, they are guilty of laches. Lastly, petitioners claim
that the just compensation should be based on the value of the property at the time of taking in 1940
and not at the time of payment.23
The petition is partly meritorious.
The instant case stemmed from an action for recovery of possession with damages filed by
respondents against petitioners. It, however, revolves around the taking of the subject lot by
petitioners for the construction of the MacArthur Highway. There is taking when the expropriator enters
private property not only for a momentary period but for a permanent duration, or for the purpose of
devoting the property to public use in such a manner as to oust the owner and deprive him of all
beneficial enjoyment thereof.24
It is undisputed that the subject property was taken by petitioners without the benefit of
expropriation proceedings for the construction of the MacArthur Highway. After the lapse of more than
fifty years, the property owners sought recovery of the possession of their property. Is the action
barred by prescription or laches? If not, are the property owners entitled to recover possession or just
compensation?
As aptly noted by the CA, the issues of prescription and laches are not proper issues for resolution
as they were not included in the pre-trial order. We quote with approval the CAs ratiocination in this
wise:
Procedurally, too, prescription and laches are no longer proper issues in this appeal. In the pre-trial
order issued on May 17, 2001, the RTC summarized the issues raised by the defendants, to wit: (a)
whether or not the plaintiffs were entitled to just compensation; (b) whether or not the valuation would
be based on the corresponding value at the time of the taking or at the time of the filing of the action;
and (c) whether or not the plaintiffs were entitled to damages. Nowhere did the pre-trial order indicate
that prescription and laches were to be considered in the adjudication of the RTC. 25
To be sure, the pre-trial order explicitly defines and limits the issues to be tried and controls the

subsequent course of the action unless modified before trial to prevent manifest injustice. 26

Even if we squarely deal with the issues of laches and prescription, the same must still fail. Laches
is principally a doctrine of equity which is applied to avoid recognizing a right when to do so would
result in a clearly inequitable situation or in an injustice. 27 This doctrine finds no application in this
case, since there is nothing inequitable in giving due course to respondents claim. Both equity and the
law direct that a property owner should be compensated if his property is taken for public use. 28
Neither shall prescription bar respondents claim following the long-standing rule "that where private
property is taken by the Government for public use without first acquiring title thereto either through
expropriation or negotiated sale, the owners action to recover the land or the value thereof does not
prescribe."29
When a property is taken by the government for public use, jurisprudence clearly provides for the
remedies available to a landowner. The owner may recover his property if its return is feasible or, if it is
not, the aggrieved owner may demand payment of just compensation for the land taken. 30 For failure
of respondents to question the lack of expropriation proceedings for a long period of time, they are
deemed to have waived and are estopped from assailing the power of the government to expropriate
or the public use for which the power was exercised. What is left to respondents is the right of
compensation.31 The trial and appellate courts found that respondents are entitled to compensation.
The only issue left for determination is the propriety of the amount awarded to respondents.
Just compensation is "the fair value of the property as between one who receives, and one who
desires to sell, x x x fixed at the time of the actual taking by the government." This rule holds true
when the property is taken before the filing of an expropriation suit, and even if it is the property

owner who brings the action for compensation. 32

The issue in this case is not novel.
In Forfom Development Corporation [Forfom] v. Philippine National Railways [PNR], 33 PNR entered
the property of Forfom in January 1973 for public use, that is, for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation
proceedings.34 In 1990, Forfom filed a complaint for recovery of possession of real property and/or
damages against PNR. In Eusebio v. Luis, 35 respondents parcel of land was taken in 1980 by the City
of Pasig and used as a municipal road now known as A. Sandoval Avenue in Pasig City without the
appropriate expropriation proceedings. In 1994, respondent demanded payment of the value of the
property, but they could not agree on its valuation prompting respondent to file a complaint for
reconveyance and/or damages against the city government and the mayor. In Manila International
Airport Authority v. Rodriguez,36 in the early 1970s, petitioner implemented expansion programs for

its runway necessitating the acquisition and occupation of some of the properties surrounding its
premises. As to respondents property, no expropriation proceedings were initiated.1wphi1 In 1997,
respondent demanded the payment of the value of the property, but the demand remained unheeded
prompting him to institute a case for accion reivindicatoria with damages against petitioner. In
Republic v. Sarabia,37 sometime in 1956, the Air Transportation Office (ATO) took possession and
control of a portion of a lot situated in Aklan, registered in the name of respondent, without initiating
expropriation proceedings. Several structures were erected thereon including the control tower, the
Kalibo crash fire rescue station, the Kalibo airport terminal and the headquarters of the PNP Aviation
Security Group. In 1995, several stores and restaurants were constructed on the remaining portion of
the lot. In 1997, respondent filed a complaint for recovery of possession with damages against the
storeowners where ATO intervened claiming that the storeowners were its lessees.
The Court in the above-mentioned cases was confronted with common factual circumstances where
the government took control and possession of the subject properties for public use without initiating
expropriation proceedings and without payment of just compensation, while the landowners failed for a
long period of time to question such government act and later instituted actions for recovery of
possession with damages. The Court thus determined the landowners right to the payment of just
compensation and, more importantly, the amount of just compensation. The Court has uniformly ruled
that just compensation is the value of the property at the time of taking that is controlling for purposes
of compensation. In Forfom, the payment of just compensation was reckoned from the time of taking in
1973; in Eusebio, the Court fixed the just compensation by determining the value of the property at
the time of taking in 1980; in MIAA, the value of the lot at the time of taking in 1972 served as basis
for the award of compensation to the owner; and in Republic, the Court was convinced that the taking
occurred in 1956 and was thus the basis in fixing just compensation. As in said cases, just
compensation due respondents in this case should, therefore, be fixed not as of the time of payment
but at the time of taking, that is, in 1940.
The reason for the rule has been clearly explained in Republic v. Lara, et al., 38 and repeatedly held
by the Court in recent cases, thus:
x x x "The value of the property should be fixed as of the date when it was taken and not the date
of the filing of the proceedings." For where property is taken ahead of the filing of the condemnation
proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the entry
by the plaintiff upon the property may have depreciated its value thereby; or, there may have been a
natural increase in the value of the property from the time it is taken to the time the complaint is filed,
due to general economic conditions. The owner of private property should be compensated only for
what he actually loses; it is not intended that his compensation shall extend beyond his loss or injury.
And what he loses is only the actual value of his property at the time it is taken x x x. 39
Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was
P0.70/sq m.40 Hence, it should, therefore, be used in determining the amount due respondents instead
of the higher value which is P1,500.00. While disparity in the above amounts is obvious and may
appear inequitable to respondents as they would be receiving such outdated valuation after a very
long period, it is equally true that they too are remiss in guarding against the cruel effects of belated
claim. The concept of just compensation does not imply fairness to the property owner alone.
Compensation must be just not only to the property owner, but also to the public which ultimately
bears the cost of expropriation.41

Clearly, petitioners had been occupying the subject property for more than fifty years without the
benefit of expropriation proceedings. In taking respondents property without the benefit of
expropriation proceedings and without payment of just compensation, petitioners clearly acted in utter
disregard of respondents proprietary rights which cannot be countenanced by the Court. 42 For said
illegal taking, respondents are entitled to adequate compensation in the form of actual or
compensatory damages which in this case should be the legal interest of six percent (6%) per annum
on the value of the land at the time of taking in 1940 until full payment. 43 This is based on the
principle that interest runs as a matter of law and follows from the right of the landowner to be placed
in as good position as money can accomplish, as of the date of taking. 44
WHEREFORE, premises considered, the pet1t10n is PARTIALLY GRANTED. The Court of Appeals
Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the subject
property owned by respondents shall be F0.70 instead of P1,500.00 per square meter, with interest at
six percent ( 6o/o) per annum from the date of taking in 1940 instead of March 17, 1995, until full
payment.
SO ORDERED.

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Figuratively speaking, the Code has expropriated the land for parking something similar to the subdivision law
which require developers to devote so much of the land area for parks.

Moreover, Article II of R.A. No. 9734 (Consumer Act of the Philippines) provides that it is the policy of the State
to protect the interest of the consumers, promote the general welfare and establish standards of conduct for
business and industry. Obviously, a contrary interpretation (i.e., justifying the collection of parking fees) would be
going against the declared policy of R.A. 7394.

Section 201 of the National Building Code gives the responsibility for the administration and enforcement of the
provisions of the Code, including the imposition of penalties for administrative violations thereof to the Secretary of
Public Works. This set up, however, is not being carried out in reality.

In the position paper submitted by the Metropolitan Manila Development Authority (MMDA), its chairman,
Jejomar C. Binay, accurately pointed out that the Secretary of the DPWH is responsible for the
implementation/enforcement of the National Building Code. After the enactment of the Local Government Code of
1991, the local government units (LGUs) were tasked to discharge the regulatory powers of the DPWH. Hence, in the
local level, the Building Officials enforce all rules/ regulations formulated by the DPWH relative to all building plans,
specifications and designs including parking space requirements. There is, however, no single national department
or agency directly tasked to supervise the enforcement of the provisions of the Code on parking, notwithstanding
the national character of the law.[6]

Senate Committee Report No. 225, thus, contained the following recommendations:

In light of the foregoing, the Committees on Trade and Commerce and Justice and Human Rights hereby
recommend the following:

1. The Office of the Solicitor General should institute the necessary action to enjoin the collection of parking
fees as well as to enforce the penal sanction provisions of the National Building Code. The Office of the Solicitor
General should likewise study how refund can be exacted from mall owners who continue to collect parking fees.

2. The Department of Trade and Industry pursuant to the provisions of R.A. No. 7394, otherwise known as the
Consumer Act of the Philippines should enforce the provisions of the Code relative to parking. Towards this end, the
DTI should formulate the necessary implementing rules and regulations on parking in shopping malls, with prior
consultations with the local government units where these are located. Furthermore, the DTI, in coordination with
the DPWH, should be empowered to regulate and supervise the construction and maintenance of parking
establishments.

3. Finally, Congress should amend and update the National Building Code to expressly prohibit shopping malls

from collecting parking fees by at the same time, prohibit them from invoking the waiver of liability.[7]

Respondent SM Prime thereafter received information that, pursuant to Senate Committee Report No. 225, the
DPWH Secretary and the local building officials of Manila, Quezon City, and Las Pias intended to institute, through
the OSG, an action to enjoin respondent SM Prime and similar establishments from collecting parking fees, and to
impose upon said establishments penal sanctions under Presidential Decree No. 1096, otherwise known as the
National Building Code of the Philippines (National Building Code), and its Implementing Rules and Regulations (IRR).
With the threatened action against it, respondent SM Prime filed, on 3 October 2000, a Petition for Declaratory
Relief[8] under Rule 63 of the Revised Rules of Court, against the DPWH Secretary and local building officials of
Manila, Quezon City, and Las Pias. Said Petition was docketed as Civil Case No. 00-1208 and assigned to the RTC of
Makati City, Branch 138, presided over by Judge Sixto Marella, Jr. (Judge Marella). In its Petition, respondent SM
Prime prayed for judgment:

a) Declaring Rule XIX of the Implementing Rules and Regulations of the National Building Code as
ultra vires, hence, unconstitutional and void;
b) Declaring [herein respondent SM Prime]s clear legal right to lease parking spaces appurtenant
to its department stores, malls, shopping centers and other commercial establishments; and
c) Declaring the National Building Code of the Philippines Implementing Rules and Regulations as
ineffective, not having been published once a week for three (3) consecutive weeks in a newspaper
of general circulation, as prescribed by Section 211 of Presidential Decree No. 1096.
[Respondent SM Prime] further prays for such other reliefs as may be deemed just and equitable
under the premises.[9]

The very next day, 4 October 2000, the OSG filed a Petition for Declaratory Relief and Injunction (with
Prayer for Temporary Restraining Order and Writ of Preliminary Injunction)[10] against respondents. This Petition
was docketed as Civil Case No. 00-1210 and raffled to the RTC of Makati, Branch 135, presided over by Judge
Francisco B. Ibay (Judge Ibay). Petitioner prayed that the RTC:

1. After summary hearing, a temporary restraining order and a writ of preliminary injunction be
issued restraining respondents from collecting parking fees from their customers; and
2. After hearing, judgment be rendered declaring that the practice of respondents in charging
parking fees is violative of the National Building Code and its Implementing Rules and Regulations
and is therefore invalid, and making permanent any injunctive writ issued in this case.
Other reliefs just and equitable under the premises are likewise prayed for.[11]

On 23 October 2000, Judge Ibay of the RTC of Makati City, Branch 135, issued an Order consolidating Civil
Case No. 00-1210 with Civil Case No. 00-1208 pending before Judge Marella of RTC of Makati, Branch 138.
As a result of the pre-trial conference held on the morning of 8 August 2001, the RTC issued a Pre-Trial
Order[12] of even date which limited the issues to be resolved in Civil Cases No. 00-1208 and No. 00-1210 to the
following:

1. Capacity of the plaintiff [OSG] in Civil Case No. 00-1210 to institute the present proceedings and relative
thereto whether the controversy in the collection of parking fees by mall owners is a matter of public welfare.

2.

Whether declaratory relief is proper.

3.
Whether respondent Ayala Land, Robinsons, Shangri-La and SM Prime are obligated to provide
parking spaces in their malls for the use of their patrons or the public in general, free of charge.

4.

Entitlement of the parties of [sic] award of damages.[13]

On 29 May 2002, the RTC rendered its Joint Decision in Civil Cases No. 00-1208 and No. 00-1210.

The RTC resolved the first two issues affirmatively. It ruled that the OSG can initiate Civil Case No. 00-1210
under Presidential Decree No. 478 and the Administrative Code of 1987.[14] It also found that all the requisites for
an action for declaratory relief were present, to wit:

The requisites for an action for declaratory relief are: (a) there is a justiciable controversy; (b) the
controversy is between persons whose interests are adverse; (c) the party seeking the relief has a
legal interest in the controversy; and (d) the issue involved is ripe for judicial determination.
SM, the petitioner in Civil Case No. 001-1208 [sic] is a mall operator who stands to be affected
directly by the position taken by the government officials sued namely the Secretary of Public
Highways and the Building Officials of the local government units where it operates shopping malls.
The OSG on the other hand acts on a matter of public interest and has taken a position adverse to
that of the mall owners whom it sued. The construction of new and bigger malls has been
announced, a matter which the Court can take judicial notice and the unsettled issue of whether
mall operators should provide parking facilities, free of charge needs to be resolved.[15]

As to the third and most contentious issue, the RTC pronounced that:

The Building Code, which is the enabling law and the Implementing Rules and Regulations do not
impose that parking spaces shall be provided by the mall owners free of charge. Absent such
directive[,] Ayala Land, Robinsons, Shangri-la and SM [Prime] are under no obligation to provide
them for free. Article 1158 of the Civil Code is clear:
Obligations derived from law are not presumed. Only those expressly
determined in this Code or in special laws are demandable and shall be regulated
by the precepts of the law which establishes them; and as to what has not been
foreseen, by the provisions of this Book (1090).[]
xxxx

The provision on ratios of parking slots to several variables, like shopping floor area or customer
area found in Rule XIX of the Implementing Rules and Regulations cannot be construed as a
directive to provide free parking spaces, because the enabling law, the Building Code does not so
provide. x x x.
To compel Ayala Land, Robinsons, Shangri-La and SM [Prime] to provide parking spaces for free
can be considered as an unlawful taking of property right without just compensation.
Parking spaces in shopping malls are privately owned and for their use, the mall operators collect
fees. The legal relationship could be either lease or deposit. In either case[,] the mall owners have
the right to collect money which translates into income. Should parking spaces be made free, this
right of mall owners shall be gone. This, without just compensation. Further, loss of effective control
over their property will ensue which is frowned upon by law.
The presence of parking spaces can be viewed in another light. They can be looked at as
necessary facilities to entice the public to increase patronage of their malls because without
parking spaces, going to their malls will be inconvenient. These are[,] however[,] business
considerations which mall operators will have to decide for themselves. They are not sufficient to
justify a legal conclusion, as the OSG would like the Court to adopt that it is the obligation of the
mall owners to provide parking spaces for free.[16]

The RTC then held that there was no sufficient evidence to justify any award for damages.

The RTC finally decreed in its 29 May 2002 Joint Decision in Civil Cases No. 00-1208 and No. 00-1210 that:

FOR THE REASONS GIVEN, the Court declares that Ayala Land[,] Inc., Robinsons Land Corporation,
Shangri-la Plaza Corporation and SM Prime Holdings[,] Inc. are not obligated to provide parking
spaces in their malls for the use of their patrons or public in general, free of charge.
All counterclaims in Civil Case No. 00-1210 are dismissed.
No pronouncement as to costs.[17]

CA-G.R. CV No. 76298 involved the separate appeals of the OSG[18] and respondent SM Prime[19] filed with
the Court of Appeals. The sole assignment of error of the OSG in its Appellants Brief was:

THE TRIAL COURT ERRED IN HOLDING THAT THE NATIONAL BUILDING CODE DID NOT INTEND
MALL PARKING SPACES TO BE FREE OF CHARGE[;][20]

while the four errors assigned by respondent SM Prime in its Appellants Brief were:

I
THE TRIAL COURT ERRED IN FAILING TO DECLARE RULE XIX OF THE IMPLEMENTING RULES AS
HAVING BEEN ENACTED ULTRA VIRES, HENCE, UNCONSTITUTIONAL AND VOID.
II

THE TRIAL COURT ERRED IN FAILING TO DECLARE THE IMPLEMENTING RULES INEFFECTIVE FOR
NOT HAVING BEEN PUBLISHED AS REQUIRED BY LAW.
III
THE TRIAL COURT ERRED IN FAILING TO DISMISS THE OSGS PETITION FOR DECLARATORY RELIEF
AND INJUNCTION FOR FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES.
IV
THE TRIAL COURT ERRED IN FAILING TO DECLARE THAT THE OSG HAS NO LEGAL CAPACITY TO SUE
AND/OR THAT IT IS NOT A REAL PARTY-IN-INTEREST IN THE INSTANT CASE.[21]

Respondent Robinsons filed a Motion to Dismiss Appeal of the OSG on the ground that the lone issue raised
therein involved a pure question of law, not reviewable by the Court of Appeals.

The Court of Appeals promulgated its Decision in CA-G.R. CV No. 76298 on 25 January 2007. The appellate
court agreed with respondent Robinsons that the appeal of the OSG should suffer the fate of dismissal, since the
issue on whether or not the National Building Code and its implementing rules require shopping mall operators to
provide parking facilities to the public for free was evidently a question of law. Even so, since CA-G.R. CV No. 76298
also included the appeal of respondent SM Prime, which raised issues worthy of consideration, and in order to satisfy
the demands of substantial justice, the Court of Appeals proceeded to rule on the merits of the case.

In its Decision, the Court of Appeals affirmed the capacity of the OSG to initiate Civil Case No. 00-1210 before
the RTC as the legal representative of the government,[22] and as the one deputized by the Senate of the Republic
of the Philippines through Senate Committee Report No. 225.

The Court of Appeals rejected the contention of respondent SM Prime that the OSG failed to exhaust
administrative remedies. The appellate court explained that an administrative review is not a condition precedent to
judicial relief where the question in dispute is purely a legal one, and nothing of an administrative nature is to be or
can be done.

The Court of Appeals likewise refused to rule on the validity of the IRR of the National Building Code, as such
issue was not among those the parties had agreed to be resolved by the RTC during the pre-trial conference for Civil
Cases No. 00-1208 and No. 00-1210. Issues cannot be raised for the first time on appeal. Furthermore, the appellate
court found that the controversy could be settled on other grounds, without touching on the issue of the validity of
the IRR. It referred to the settled rule that courts should refrain from passing upon the constitutionality of a law or
implementing rules, because of the principle that bars judicial inquiry into a constitutional question, unless the
resolution thereof is indispensable to the determination of the case.

Lastly, the Court of Appeals declared that Section 803 of the National Building Code and Rule XIX of the IRR
were clear and needed no further construction. Said provisions were only intended to control the occupancy or
congestion of areas and structures. In the absence of any express and clear provision of law, respondents could not

be obliged and expected to provide parking slots free of charge.

The fallo of the 25 January 2007 Decision of the Court of Appeals reads:

WHEREFORE, premises considered, the instant appeals are DENIED. Accordingly, appealed
Decision is hereby AFFIRMED in toto.[23]

In its Resolution issued on 14 March 2007, the Court of Appeals denied the Motion for Reconsideration of the
OSG, finding that the grounds relied upon by the latter had already been carefully considered, evaluated, and
passed upon by the appellate court, and there was no strong and cogent reason to modify much less reverse the
assailed judgment.

The OSG now comes before this Court, via the instant Petition for Review, with a single assignment of
error:
THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE RULING OF THE LOWER COURT
THAT RESPONDENTS ARE NOT OBLIGED TO PROVIDE FREE PARKING SPACES TO THEIR CUSTOMERS
OR THE PUBLIC.[24]

The OSG argues that respondents are mandated to provide free parking by Section 803 of the National
Building Code and Rule XIX of the IRR.

According to Section 803 of the National Building Code:

SECTION 803. Percentage of Site Occupancy

(a) Maximum site occupancy shall be governed by the use, type of construction, and height of the
building and the use, area, nature, and location of the site; and subject to the provisions of the
local zoning requirements and in accordance with the rules and regulations promulgated by the
Secretary.

In connection therewith, Rule XIX of the old IRR,[25] provides:

RULE XIX PARKING AND LOADING SPACE REQUIREMENTS

Pursuant to Section 803 of the National Building Code (PD 1096) providing for maximum site
occupancy, the following provisions on parking and loading space requirements shall be observed:
1. The parking space ratings listed below are minimum off-street requirements
for specific uses/occupancies for buildings/structures:
1.1 The size of an average automobile parking slot shall be computed as
2.4 meters by 5.00 meters for perpendicular or diagonal parking, 2.00
meters by 6.00 meters for parallel parking. A truck or bus parking/loading
slot shall be computed at a minimum of 3.60 meters by 12.00 meters. The

parking slot shall be drawn to scale and the total number of which shall be
indicated on the plans and specified whether or not parking
accommodations, are attendant-managed. (See Section 2 for computation
of parking requirements).
xxxx
1.7 Neighborhood shopping center 1 slot/100 sq. m. of shopping floor
area

The OSG avers that the aforequoted provisions should be read together with Section 102 of the National
Building Code, which declares:

SECTION 102. Declaration of Policy

It is hereby declared to be the policy of the State to safeguard life, health, property, and public
welfare, consistent with the principles of sound environmental management and control; and to
this end, make it the purpose of this Code to provide for all buildings and structures, a framework
of minimum standards and requirements to regulate and control their location, site, design, quality
of materials, construction, use, occupancy, and maintenance.

The requirement of free-of-charge parking, the OSG argues, greatly contributes to the aim of safeguarding life,
health, property, and public welfare, consistent with the principles of sound environmental management and
control. Adequate parking spaces would contribute greatly to alleviating traffic congestion when complemented by
quick and easy access thereto because of free-charge parking. Moreover, the power to regulate and control the use,
occupancy, and maintenance of buildings and structures carries with it the power to impose fees and, conversely, to
control -- partially or, as in this case, absolutely -- the imposition of such fees.

The Court finds no merit in the present Petition.

The explicit directive of the afore-quoted statutory and regulatory provisions, garnered from a plain
reading thereof, is that respondents, as operators/lessors of neighborhood shopping centers, should provide parking
and loading spaces, in accordance with the minimum ratio of one slot per 100 square meters of shopping floor area.
There is nothing therein pertaining to the collection (or non-collection) of parking fees by respondents. In fact, the
term parking fees cannot even be found at all in the entire National Building Code and its IRR.

Statutory construction has it that if a statute is clear and unequivocal, it must be given its literal meaning
and applied without any attempt at interpretation.[26] Since Section 803 of the National Building Code and Rule XIX
of its IRR do not mention parking fees, then simply, said provisions do not regulate the collection of the same. The
RTC and the Court of Appeals correctly applied Article 1158 of the New Civil Code, which states:

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in
this Code or in special laws are demandable, and shall be regulated by the precepts of the law
which establishes them; and as to what has not been foreseen, by the provisions of this Book.

(Emphasis ours.)

Hence, in order to bring the matter of parking fees within the ambit of the National Building Code and its
IRR, the OSG had to resort to specious and feeble argumentation, in which the Court cannot concur.

The OSG cannot rely on Section 102 of the National Building Code to expand the coverage of Section 803
of the same Code and Rule XIX of the IRR, so as to include the regulation of parking fees. The OSG limits its citation
to the first part of Section 102 of the National Building Code declaring the policy of the State to safeguard life,
health, property, and public welfare, consistent with the principles of sound environmental management and
control; but totally ignores the second part of said provision, which reads, and to this end, make it the purpose of
this Code to provide for all buildings and structures, a framework of minimum standards and requirements to
regulate and control their location, site, design, quality of materials, construction, use, occupancy, and
maintenance. While the first part of Section 102 of the National Building Code lays down the State policy, it is the
second part thereof that explains how said policy shall be carried out in the Code. Section 102 of the National
Building Code is not an all-encompassing grant of regulatory power to the DPWH Secretary and local building
officials in the name of life, health, property, and public welfare. On the contrary, it limits the regulatory power of
said officials to ensuring that the minimum standards and requirements for all buildings and structures, as set forth
in the National Building Code, are complied with.

Consequently, the OSG cannot claim that in addition to fixing the minimum requirements for parking
spaces for buildings, Rule XIX of the IRR also mandates that such parking spaces be provided by building owners
free of charge. If Rule XIX is not covered by the enabling law, then it cannot be added to or included in the
implementing rules. The rule-making power of administrative agencies must be confined to details for regulating the
mode or proceedings to carry into effect the law as it has been enacted, and it cannot be extended to amend or
expand the statutory requirements or to embrace matters not covered by the statute. Administrative regulations
must always be in harmony with the provisions of the law because any resulting discrepancy between the two will
always be resolved in favor of the basic law.[27]

From the RTC all the way to this Court, the OSG repeatedly referred to Republic v. Gonzales[28] and City of
Ozamis v. Lumapas[29] to support its position that the State has the power to regulate parking spaces to promote
the health, safety, and welfare of the public; and it is by virtue of said power that respondents may be required to
provide free parking facilities. The OSG, though, failed to consider the substantial differences in the factual and legal
backgrounds of these two cases from those of the Petition at bar.

In Republic, the Municipality of Malabon sought to eject the occupants of two parcels of land of the public
domain to give way to a road-widening project. It was in this context that the Court pronounced:

Indiscriminate parking along F. Sevilla Boulevard and other main thoroughfares was prevalent;
this, of course, caused the build up of traffic in the surrounding area to the great discomfort and
inconvenience of the public who use the streets. Traffic congestion constitutes a threat to the
health, welfare, safety and convenience of the people and it can only be substantially relieved by
widening streets and providing adequate parking areas.

The Court, in City of Ozamis, declared that the City had been clothed with full power to control and
regulate its streets for the purpose of promoting public health, safety and welfare. The City can regulate the time,
place, and manner of parking in the streets and public places; and charge minimal fees for the street parking to
cover the expenses for supervision, inspection and control, to ensure the smooth flow of traffic in the environs of the
public market, and for the safety and convenience of the public.

Republic and City of Ozamis involved parking in the local streets; in contrast, the present case deals with
privately owned parking facilities available for use by the general public. In Republic and City of Ozamis, the
concerned local governments regulated parking pursuant to their power to control and regulate their streets; in the
instant case, the DPWH Secretary and local building officials regulate parking pursuant to their authority to ensure
compliance with the minimum standards and requirements under the National Building Code and its IRR. With the
difference in subject matters and the bases for the regulatory powers being invoked, Republic and City of Ozamis do
not constitute precedents for this case.

Indeed, Republic and City of Ozamis both contain pronouncements that weaken the position of the OSG in
the case at bar. In Republic, the Court, instead of placing the burden on private persons to provide parking facilities
to the general public, mentioned the trend in other jurisdictions wherein the municipal governments themselves
took the initiative to make more parking spaces available so as to alleviate the traffic problems, thus:

Under the Land Transportation and Traffic Code, parking in designated areas along public streets
or highways is allowed which clearly indicates that provision for parking spaces serves a useful
purpose. In other jurisdictions where traffic is at least as voluminous as here, the provision by
municipal governments of parking space is not limited to parking along public streets or highways.
There has been a marked trend to build off-street parking facilities with the view to removing
parked cars from the streets. While the provision of off-street parking facilities or carparks has been
commonly undertaken by private enterprise, municipal governments have been constrained to put
up carparks in response to public necessity where private enterprise had failed to keep up with the
growing public demand. American courts have upheld the right of municipal governments to
construct off-street parking facilities as clearly redounding to the public benefit.[30]

In City of Ozamis, the Court authorized the collection by the City of minimal fees for the parking of vehicles
along the streets: so why then should the Court now preclude respondents from collecting from the public a fee for
the use of the mall parking facilities? Undoubtedly, respondents also incur expenses in the maintenance and
operation of the mall parking facilities, such as electric consumption, compensation for parking attendants and
security, and upkeep of the physical structures.

It is not sufficient for the OSG to claim that the power to regulate and control the use, occupancy, and
maintenance of buildings and structures carries with it the power to impose fees and, conversely, to control,
partially or, as in this case, absolutely, the imposition of such fees. Firstly, the fees within the power of regulatory
agencies to impose are regulatory fees. It has been settled law in this jurisdiction that this broad and allcompassing governmental competence to restrict rights of liberty and property carries with it the undeniable power
to collect a regulatory fee. It looks to the enactment of specific measures that govern the relations not only as

between individuals but also as between private parties and the political society.[31] True, if the regulatory agencies
have the power to impose regulatory fees, then conversely, they also have the power to remove the same. Even so,
it is worthy to note that the present case does not involve the imposition by the DPWH Secretary and local building
officials of regulatory fees upon respondents; but the collection by respondents of parking fees from persons who
use the mall parking facilities. Secondly, assuming arguendo that the DPWH Secretary and local building officials do
have regulatory powers over the collection of parking fees for the use of privately owned parking facilities, they
cannot allow or prohibit such collection arbitrarily or whimsically. Whether allowing or prohibiting the collection of
such parking fees, the action of the DPWH Secretary and local building officials must pass the test of classic
reasonableness and propriety of the measures or means in the promotion of the ends sought to be accomplished.
[32]

Keeping in mind the aforementioned test of reasonableness and propriety of measures or means, the
Court notes that Section 803 of the National Building Code falls under Chapter 8 on Light and Ventilation.
Evidently, the Code deems it necessary to regulate site occupancy to ensure that there is proper lighting and
ventilation in every building. Pursuant thereto, Rule XIX of the IRR requires that a building, depending on its specific
use and/or floor area, should provide a minimum number of parking spaces. The Court, however, fails to see the
connection between regulating site occupancy to ensure proper light and ventilation in every building vis--vis
regulating the collection by building owners of fees for the use of their parking spaces. Contrary to the averment of
the OSG, the former does not necessarily include or imply the latter. It totally escapes this Court how lighting and
ventilation conditions at the malls could be affected by the fact that parking facilities thereat are free or paid for.

The OSG attempts to provide the missing link by arguing that:

Under Section 803 of the National Building Code, complimentary parking spaces are required to
enhance light and ventilation, that is, to avoid traffic congestion in areas surrounding the building,
which certainly affects the ventilation within the building itself, which otherwise, the annexed
parking spaces would have served. Free-of-charge parking avoids traffic congestion by ensuring
quick and easy access of legitimate shoppers to off-street parking spaces annexed to the malls,
and thereby removing the vehicles of these legitimate shoppers off the busy streets near the
commercial establishments.[33]

The Court is unconvinced. The National Building Code regulates buildings, by setting the minimum
specifications and requirements for the same. It does not concern itself with traffic congestion in areas
surrounding the building. It is already a stretch to say that the National Building Code and its IRR also intend to
solve the problem of traffic congestion around the buildings so as to ensure that the said buildings shall have
adequate lighting and ventilation. Moreover, the Court cannot simply assume, as the OSG has apparently done, that
the traffic congestion in areas around the malls is due to the fact that respondents charge for their parking facilities,
thus, forcing vehicle owners to just park in the streets. The Court notes that despite the fees charged by
respondents, vehicle owners still use the mall parking facilities, which are even fully occupied on some days. Vehicle
owners may be parking in the streets only because there are not enough parking spaces in the malls, and not
because they are deterred by the parking fees charged by respondents. Free parking spaces at the malls may even
have the opposite effect from what the OSG envisioned: more people may be encouraged by the free parking to
bring their own vehicles, instead of taking public transport, to the malls; as a result, the parking facilities would
become full sooner, leaving more vehicles without parking spaces in the malls and parked in the streets instead,

causing even more traffic congestion.

Without using the term outright, the OSG is actually invoking police power to justify the regulation by the
State, through the DPWH Secretary and local building officials, of privately owned parking facilities, including the
collection by the owners/operators of such facilities of parking fees from the public for the use thereof. The Court
finds, however, that in totally prohibiting respondents from collecting parking fees from the public for the use of the
mall parking facilities, the State would be acting beyond the bounds of police power.

Police power is the power of promoting the public welfare by restraining and regulating the use of liberty
and property. It is usually exerted in order to merely regulate the use and enjoyment of the property of the owner.
The power to regulate, however, does not include the power to prohibit. A fortiori, the power to regulate does not
include the power to confiscate. Police power does not involve the taking or confiscation of property, with the
exception of a few cases where there is a necessity to confiscate private property in order to destroy it for the
purpose of protecting peace and order and of promoting the general welfare; for instance, the confiscation of an
illegally possessed article, such as opium and firearms. [34]

When there is a taking or confiscation of private property for public use, the State is no longer exercising
police power, but another of its inherent powers, namely, eminent domain. Eminent domain enables the State to
forcibly acquire private lands intended for public use upon payment of just compensation to the owner.[35]

Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and
possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of
only to impose a burden upon the owner of condemned property, without loss of title and possession.[36] It is a
settled rule that neither acquisition of title nor total destruction of value is essential to taking. It is usually in cases
where title remains with the private owner that inquiry should be made to determine whether the impairment of a
property is merely regulated or amounts to a compensable taking. A regulation that deprives any person of the
profitable use of his property constitutes a taking and entitles him to compensation, unless the invasion of rights is
so slight as to permit the regulation to be justified under the police power. Similarly, a police regulation that
unreasonably restricts the right to use business property for business purposes amounts to a taking of private
property, and the owner may recover therefor.[37]
Although in the present case, title to and/or possession of the parking facilities remain/s with respondents,
the prohibition against their collection of parking fees from the public, for the use of said facilities, is already
tantamount to a taking or confiscation of their properties. The State is not only requiring that respondents devote a
portion of the latters properties for use as parking spaces, but is also mandating that they give the public access to
said parking spaces for free. Such is already an excessive intrusion into the property rights of respondents. Not only
are they being deprived of the right to use a portion of their properties as they wish, they are further prohibited
from profiting from its use or even just recovering therefrom the expenses for the maintenance and operation of the
required parking facilities.

The ruling of this Court in City Government of Quezon City v. Judge Ericta[38] is edifying. Therein, the City

Government of Quezon City passed an ordinance obliging private cemeteries within its jurisdiction to set aside at
least six percent of their total area for charity, that is, for burial grounds of deceased paupers. According to the
Court, the ordinance in question was null and void, for it authorized the taking of private property without just
compensation:

There is no reasonable relation between the setting aside of at least six (6) percent of the total
area of all private cemeteries for charity burial grounds of deceased paupers and the promotion of'
health, morals, good order, safety, or the general welfare of the people. The ordinance is actually a
taking without compensation of a certain area from a private cemetery to benefit paupers who are
charges of the municipal corporation. Instead of' building or maintaining a public cemetery for this
purpose, the city passes the burden to private cemeteries.
'The expropriation without compensation of a portion of private cemeteries is not covered by
Section 12(t) of Republic Act 537, the Revised Charter of Quezon City which empowers the city
council to prohibit the burial of the dead within the center of population of the city and to provide
for their burial in a proper place subject to the provisions of general law regulating burial grounds
and cemeteries. When the Local Government Code, Batas Pambansa Blg. 337 provides in Section
177(q) that a sangguniang panlungsod may "provide for the burial of the dead in such place and in
such manner as prescribed by law or ordinance" it simply authorizes the city to provide its own city
owned land or to buy or expropriate private properties to construct public cemeteries. This has
been the law, and practise in the past. It continues to the present. Expropriation, however, requires
payment of just compensation. The questioned ordinance is different from laws and regulations
requiring owners of subdivisions to set aside certain areas for streets, parks, playgrounds, and
other public facilities from the land they sell to buyers of subdivision lots. The necessities of public
safety, health, and convenience are very clear from said requirements which are intended to insure
the development of communities with salubrious and wholesome environments. The beneficiaries
of the regulation, in turn, are made to pay by the subdivision developer when individual lots are
sold to homeowners.

In conclusion, the total prohibition against the collection by respondents of parking fees from persons who use
the mall parking facilities has no basis in the National Building Code or its IRR. The State also cannot impose the
same prohibition by generally invoking police power, since said prohibition amounts to a taking of respondents
property without payment of just compensation.
Given the foregoing, the Court finds no more need to address the issue persistently raised by respondent SM
Prime concerning the unconstitutionality of Rule XIX of the IRR. In addition, the said issue was not among those that
the parties, during the pre-trial conference for Civil Cases No. 12-08 and No. 00-1210, agreed to submit for
resolution of the RTC. It is likewise axiomatic that the constitutionality of a law, a regulation, an ordinance or an act
will not be resolved by courts if the controversy can be, as in this case it has been, settled on other grounds.[39]

WHEREFORE, the instant Petition for Review on Certiorari is hereby DENIED. The Decision dated 25
January 2007 and Resolution dated 14 March 2007 of the Court of Appeals in CA-G.R. CV No. 76298, affirming in toto
the Joint Decision dated 29 May 2002 of the Regional Trial Court of Makati City, Branch 138, in Civil Cases No. 001208 and No. 00-1210 are hereby AFFIRMED. No costs.

SO ORDERED.

THIRD DIVISION

CHEVRON PHILIPPINES, INC. (Formerly CALTEX PHILIPPINES, INC.),

Petitioner,
- versus -

BASES CONVERSION DEVELOPMENT AUTHORITY and CLARK DEVELOPMENT CORPORATION,

Respondents.
Promulgated:

September 15, 2010

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
This petition for review on certiorari assails the Decision[1] dated November 30, 2005 of the Court of Appeals
(CA) in CA-G.R. SP No. 87117, which affirmed the Resolution[2] dated August 2, 2004 and the Order[3] dated
September 30, 2004 of the Office of the President in O.P. Case No. 04-D-170.
The facts follow.
On June 28, 2002, the Board of Directors of respondent Clark Development Corporation (CDC) issued and
approved Policy Guidelines on the Movement of Petroleum Fuel to and from the Clark Special Economic Zone (CSEZ)
[4] which provided, among others, for the following fees and charges:
1. Accreditation Fee
xxxx
2. Annual Inspection Fee
xxxx
3. Royalty Fees
Suppliers delivering fuel from outside sources shall be assessed the following royalty fees:
Php0.50 per liter those delivering Coastal petroleum fuel to CSEZ
locators not sanctioned by CDC
Php1.00 per liter those bringing-in petroleum fuel (except Jet A-1)
from outside sources
xxxx
4. Gate Pass Fee

x x x x[5]
The above policy guidelines were implemented effective July 27, 2002. On October 1, 2002, CDC sent a
letter[6] to herein petitioner Chevron Philippines, Inc. (formerly Caltex Philippines, Inc.), a domestic corporation
which has been supplying fuel to Nanox Philippines, a locator inside the CSEZ since 2001, informing the petitioner
that a royalty fee of P0.50 per liter shall be assessed on its deliveries to Nanox Philippines effective August 1, 2002.
Thereafter, on October 21, 2002 a Statement of Account[7] was sent by CDC billing the petitioner for royalty fees in
the amount of P115,000.00 for its fuel sales from Coastal depot to Nanox Philippines from August 1-31 to September
3-21, 2002.
Claiming that nothing in the law authorizes CDC to impose royalty fees or any fees based on a per unit
measurement of any commodity sold within the special economic zone, petitioner sent a letter[8] dated October 30,
2002 to the President and Chief Executive Officer of CDC, Mr. Emmanuel Y. Angeles, to protest the assessment for
royalty fees. Petitioner nevertheless paid the said fees under protest on November 4, 2002.
On August 18, 2003, CDC again wrote a letter[9] to petitioner regarding the latters unsettled royalty fees
covering the period of December 2002 to July 2003. Petitioner responded through a letter[10] dated September 8,
2003 reiterating its continuing objection over the assessed royalty fees and requested a refund of the amount paid
under protest on November 4, 2002. The letter also asked CDC to revoke the imposition of such royalty fees. The
request was denied by CDC in a letter[11] dated September 29, 2003.
Petitioner elevated its protest before respondent Bases Conversion Development Authority (BCDA) arguing that
the royalty fees imposed had no reasonable relation to the probable expenses of regulation and that the imposition
on a per unit measurement of fuel sales was for a revenue generating purpose, thus, akin to a tax. The protest was
however denied by BCDA in a letter[12] dated March 3, 2004.
Petitioner appealed to the Office of the President which dismissed[13] the appeal for lack of merit on August 2,
2004 and denied[14] petitioners motion for reconsideration thereof on September 30, 2004.
Aggrieved, petitioner elevated the case to the CA which likewise dismissed[15] the appeal for lack of merit on
November 30, 2005 and denied[16] the motion for reconsideration on July 26, 2006.
The CA held that in imposing the challenged royalty fees, respondent CDC was exercising its right to regulate
the flow of fuel into CSEZ, which is bolstered by the fact that it possesses exclusive right to distribute fuel within
CSEZ pursuant to its Joint Venture Agreement (JVA)[17] with Subic Bay Metropolitan Authority (SBMA) and Coastal
Subic Bay Terminal, Inc. (CSBTI) dated April 11, 1996. The appellate court also found that royalty fees were assessed
on fuel delivered, not on the sale, by petitioner and that the basis of such imposition was petitioners delivery
receipts to Nanox Philippines. The fact that revenue is incidentally also obtained does not make the imposition a tax
as long as the primary purpose of such imposition is regulation.[18]
Petitioner filed a motion for reconsideration but the CA denied the same in its Resolution[19] dated July 26,
2006.
Hence, this petition raising the following grounds:

I. THE ISSUE RAISED BEFORE THE COURT A QUO IS A QUESTION OF SUBSTANCE NOT HERETOFORE

DETERMINED BY THE HONORABLE SUPREME COURT.

II. THE RULING OF THE COURT OF APPEALS THAT THE CDC HAS THE POWER TO IMPOSE THE QUESTIONED
ROYALTY FEES IS CONTRARY TO LAW.

III. THE COURT OF APPEALS WAS MANIFESTLY MISTAKEN AND COMMITTED GRAVE ABUSE OF DISCRETION AND A
CLEAR MISUNDERSTANDING OF FACTS WHEN IT RULED CONTRARY TO THE EVIDENCE THAT: (i) THE QUESTIONED
ROYALTY FEE IS PRIMARILY FOR REGULATION; AND (ii) ANY REVENUE EARNED THEREFROM IS MERELY INCIDENTAL
TO THE PURPOSE OF REGULATION.

IV. THE COURT OF APPEALS FAILED TO GIVE DUE WEIGHT AND CONSIDERATION TO THE EVIDENCE PRESENTED
BY CPI SUCH AS THE LETTERS COMING FROM RESPONDENT CDC ITSELF PROVING THAT THE QUESTIONED ROYALTY
FEES ARE IMPOSED ON THE BASIS OF FUEL SALES (NOT DELIVERY OF FUEL) AND NOT FOR REGULATION BUT PURELY
FOR INCOME GENERATION, I.E. AS PRICE OR CONSIDERATION FOR THE RIGHT TO MARKET AND DISTRIBUTE FUEL
INSIDE THE CSEZ.[20]

Petitioner argues that CDC does not have any power to impose royalty fees on sale of fuel inside the CSEZ on
the basis of purely income generating functions and its exclusive right to market and distribute goods inside the
CSEZ. Such imposition of royalty fees for revenue generating purposes would amount to a tax, which the
respondents have no power to impose. Petitioner stresses that the royalty fee imposed by CDC is not regulatory in
nature but a revenue generating measure to increase its profits and to further enhance its exclusive right to market
and distribute fuel in CSEZ.[21]
Petitioner would also like this Court to note that the fees imposed, assuming arguendo they are regulatory in
nature, are unreasonable and are grossly in excess of regulation costs. It adds that the amount of the fees should be
presumed to be unreasonable and that the burden of proving that the fees are not unreasonable lies with the
respondents.[22]
On the part of the respondents, they argue that the purpose of the royalty fees is to regulate the flow of fuel to
and from the CSEZ. Such being its main purpose, and revenue (if any) just an incidental product, the imposition
cannot be considered a tax. It is their position that the regulation is a valid exercise of police power since it is aimed
at promoting the general welfare of the public. They claim that being the administrator of the CSEZ, CDC is
responsible for the safe distribution of fuel products inside the CSEZ.[23]
The petition has no merit.
In distinguishing tax and regulation as a form of police power, the determining factor is the purpose of the
implemented measure. If the purpose is primarily to raise revenue, then it will be deemed a tax even though the
measure results in some form of regulation. On the other hand, if the purpose is primarily to regulate, then it is
deemed a regulation and an exercise of the police power of the state, even though incidentally, revenue is
generated. Thus, in Gerochi v. Department of Energy,[24] the Court stated:
The conservative and pivotal distinction between these two (2) 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.

In the case at bar, we hold that the subject royalty fee was imposed primarily for regulatory purposes, and not
for the generation of income or profits as petitioner claims. The Policy Guidelines on the Movement of Petroleum
Fuel to and from the Clark Special Economic Zone[25] provides:
DECLARATION OF POLICY

It is hereby declared the policy of CDC to develop and maintain the Clark Special Economic Zone (CSEZ)
as a highly secured zone free from threats of any kind, which could possibly endanger the lives and properties of
locators, would-be investors, visitors, and employees.
It is also declared the policy of CDC to operate and manage the CSEZ as a separate customs territory ensuring
free flow or movement of goods and capital within, into and exported out of the CSEZ.[26] (Emphasis
supplied.)

From the foregoing, it can be gleaned that the Policy Guidelines was issued, first and foremost, to ensure the
safety, security, and good condition of the petroleum fuel industry within the CSEZ. The questioned royalty fees
form part of the regulatory framework to ensure free flow or movement of petroleum fuel to and from the CSEZ. The
fact that respondents have the exclusive right to distribute and market petroleum products within CSEZ pursuant to
its JVA with SBMA and CSBTI does not diminish the regulatory purpose of the royalty fee for fuel products supplied
by petitioner to its client at the CSEZ.
As pointed out by the respondents in their Comment, from the time the JVA took effect up to the time CDC
implemented its Policy Guidelines on the Movement of Petroleum Fuel to and from the CSEZ, suppliers/distributors
were allowed to bring in petroleum products inside CSEZ without any charge at all. But this arrangement clearly
negates CDCs mandate under the JVA as exclusive distributor of CSBTIs fuel products within CSEZ and respondents
ownership of the Subic-Clark Pipeline.[27] On this score, respondents were justified in charging royalty fees on fuel
delivered by outside suppliers.
However, it was erroneous for petitioner to argue that such exclusive right of respondent CDC to market and
distribute fuel inside CSEZ is the sole basis of the royalty fees imposed under the Policy Guidelines. Being the
administrator of CSEZ, the responsibility of ensuring the safe, efficient and orderly distribution of fuel products
within the Zone falls on CDC. Addressing specific concerns demanded by the nature of goods or products involved is
encompassed in the range of services which respondent CDC is expected to provide under the law, in pursuance of
its general power of supervision and control over the movement of all supplies and equipment into the CSEZ.
Section 2 of Executive Order No. 80[28] provides:

SEC. 2. Powers and Functions of the Clark Development Corporation. The BCDA, as the incorporator and
holding company of its Clark subsidiary, shall determine the powers and functions of the CDC. Pursuant to Section
15 of RA 7227, the CDC shall have the specific powers of the Export Processing Zone Authority as provided for in
Section 4 of Presidential Decree No. 66 (1972) as amended.

Among those specific powers granted to CDC under Section 4 of Presidential Decree No. 66 are:
(a) To operate, administer and manage the export processing zone established in the Port of Mariveles, Bataan,
and such other export processing zones as may be established under this Decree; to construct, acquire, own, lease,
operate and maintain infrastructure facilities, factory building, warehouses, dams, reservoir, water distribution,

electric light and power system, telecommunications and transportation, or such other facilities and services
necessary or useful in the conduct of commerce or in the attainment of the purposes and objectives of this Decree;
xxxx
(g) To fix, assess and collect storage charges and fees, including rentals for the lease, use or occupancy of
lands, buildings, structure, warehouses, facilities and other properties owned and administered by the Authority;
and to fix and collect the fees and charges for the issuance of permits, licenses and the rendering of
services not enumerated herein, the provisions of law to the contrary notwithstanding;
(h) For the due and effective exercise of the powers conferred by law and to the extend (sic) [extent] requisite
therefor, to exercise exclusive jurisdiction and sole police authority over all areas owned or administered by the
Authority. For this purpose, the Authority shall have supervision and control over the bringing in or taking
out of the Zone, including the movement therein, of all cargoes, wares, articles, machineries, equipment,
supplies or merchandise of every type and description;
x x x x (Emphasis supplied.)

In relation to the regulatory purpose of the imposed fees, this Court in Progressive Development Corporation v.
Quezon City,[29] stated that x x x the imposition questioned must relate to an occupation or activity that so
engages the public interest in health, morals, safety and development as to require regulation for the protection and
promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of
regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well.
In the case at bar, there can be no doubt that the oil industry is greatly imbued with public interest as it vitally
affects the general welfare.[30] In addition, fuel is a highly combustible product which, if left unchecked, poses a
serious threat to life and property. Also, the reasonable relation between the royalty fees imposed on a per liter
basis and the regulation sought to be attained is that the higher the volume of fuel entering CSEZ, the greater the
extent and frequency of supervision and inspection required to ensure safety, security, and order within the Zone.
Respondents submit that increased administrative costs were triggered by security risks that have recently
emerged, such as terrorist strikes in airlines and military/government facilities. Explaining the regulatory feature of
the charges imposed under the Policy Guidelines, then BCDA President Rufo Colayco in his letter dated March 3,
2004 addressed to petitioners Chief Corporate Counsel, stressed:

The need for regulation is more evident in the light of the 9/11 tragedy considering that what is being moved
from one location to another are highly combustible fuel products that could cause loss of lives and damage to
properties, hence, a set of guidelines was promulgated on 28 June 2002. It must be emphasized also that greater
security measure must be observed in the CSEZ because of the presence of the airport which is a vital public
infrastructure.

We are therefore constrained to sustain the imposition of the royalty fees on deliveries of CPIs fuel products to
Nanox Philippines.[31]
As to the issue of reasonableness of the amount of the fees, we hold that no evidence was adduced by the
petitioner to show that the fees imposed are unreasonable.
Administrative issuances have the force and effect of law.[32] They benefit from the same presumption of
validity and constitutionality enjoyed by statutes. These two precepts place a heavy burden upon any party

assailing governmental regulations.[33] Petitioners plain allegations are simply not enough to overcome the
presumption of validity and reasonableness of the subject imposition.
WHEREFORE, the petition is DENIED for lack of merit and the Decision of the Court of Appeals dated
November 30, 2005 in CA-G.R. SP No. 87117 is hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 143855

September 21, 2010

REPRESENTATIVES GERARDO S. ESPINA, ORLANDO FUA, JR., PROSPERO AMATONG,

ROBERT ACE S. BARBERS, RAUL M. GONZALES, PROSPERO PICHAY, JUAN MIGUEL ZUBIRI and
FRANKLIN
BAUTISTA,
Petitioners,
vs.
HON. RONALDO ZAMORA, JR. (Executive Secretary), HON. MAR ROXAS (Secretary of Trade
and Industry), HON. FELIPE MEDALLA (Secretary of National Economic and Development
Authority), GOV. RAFAEL BUENAVENTURA (Bangko Sentral ng Pilipinas) and HON. LILIA
BAUTISTA (Chairman, Securities and Exchange Commission), Respondents.
DECISION
ABAD, J.:
This case calls upon the Court to exercise its power of judicial review and determine the
constitutionality of the Retail Trade Liberalization Act of 2000, which has been assailed as in breach of
the constitutional mandate for the development of a self-reliant and independent national economy
effectively controlled by Filipinos.
The Facts and the Case
On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, also known
as the Retail Trade Liberalization Act of 2000. It expressly repealed R.A. 1180, which absolutely
prohibited foreign nationals from engaging in the retail trade business. R.A. 8762 now allows them to
do so under four categories:
Category ALess than
US$2,500,000.00Exclusively for Filipino citizens and corporations wholly owned by Filipino
citizens.Category BUS$2,500,000.00 up but less than US$7,500,000.00For the first two years
of R.A. 8762s effectivity, foreign ownership is allowed up to 60%. After the two-year period,
100% foreign equity shall be allowed.Category CUS$7,500,000.00 or moreMay be wholly
owned by foreigners. Foreign investments for establishing a store in Categories B and C shall
not be less than the equivalent in Philippine Pesos of US$830,000.00.Category
DUS$250,000.00 per store of foreign enterprises specializing in high-end or luxury
productsMay be wholly owned by foreigners.

R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now reside in
the Philippines, to engage in the retail trade business with the same rights as Filipino citizens.
On October 11, 2000 petitioners ***Magtanggol T. Gunigundo I, Michael T. Defensor, Gerardo S.
Espina, Benjamin S. Lim, Orlando Fua, Jr., Prospero Amatong, Sergio Apostol, Robert Ace S. Barbers,
Enrique Garcia, Jr., Raul M. Gonzales, Jaime Jacob, Apolinario Lozada, Jr., Leonardo Montemayor, Ma.
Elena Palma-Gil, Prospero Pichay, Juan Miguel Zubiri and Franklin Bautista, all members of the House of
Representatives, filed the present petition, assailing the constitutionality of R.A. 8762 on the following
grounds:
First, the law runs afoul of Sections 9, 19, and 20 of Article II of the Constitution which
enjoins the State to place the national economy under the control of Filipinos to achieve equal
distribution of opportunities, promote industrialization and full employment, and protect
Filipino enterprise against unfair competition and trade policies.
Second, the implementation of R.A. 8762 would lead to alien control of the retail trade,
which taken together with alien dominance of other areas of business, would result in the loss
of effective Filipino control of the economy.
Third, foreign retailers like Walmart and K-Mart would crush Filipino retailers and sari-sari
store vendors, destroy self-employment, and bring about more unemployment.
Fourth, the World Bank-International Monetary Fund had improperly imposed the passage
of R.A. 8762 on the government as a condition for the release of certain loans.
Fifth, there is a clear and present danger that the law would promote monopolies or
combinations in restraint of trade.
Respondents Executive Secretary Ronaldo Zamora, Jr., Trade and Industry Secretary Mar Roxas,
National Economic and Development Authority (NEDA) Secretary Felipe Medalla, Bangko Sentral ng
Pilipinas Gov. Rafael Buenaventura, and Securities and Exchange Commission Chairman Lilia Bautista
countered that:
First, petitioners have no legal standing to file the petition. They cannot invoke the fact
that they are taxpayers since R.A. 8762 does not involve the disbursement of public funds. Nor
can they invoke the fact that they are members of Congress since they made no claim that the
law infringes on their right as legislators.
Second, the petition does not involve any justiciable controversy. Petitioners of course
claim that, as members of Congress, they represent the small retail vendors in their respective
districts but the petition does not allege that the subject law violates the rights of those
vendors.
Third, petitioners have failed to overcome the presumption of constitutionality of R.A.
8762. Indeed, they could not specify how the new law violates the constitutional provisions
they cite. Sections 9, 19, and 20 of Article II of the Constitution are not self-executing
provisions that are judicially demandable.
Fourth, the Constitution mandates the regulation but not the prohibition of foreign
investments. It directs Congress to reserve to Filipino citizens certain areas of investments
upon the recommendation of the NEDA and when the national interest so dictates. But the
Constitution leaves to the discretion of the Congress whether or not to make such reservation.
It does not prohibit Congress from enacting laws allowing the entry of foreigners into certain
industries not reserved by the Constitution to Filipino citizens.
The Issues Presented
Simplified, the case presents two issues:
1. Whether or not petitioner lawmakers have the legal standing to challenge the
constitutionality of R.A. 8762; and

2. Whether or not R.A. 8762 is unconstitutional.

The Courts Ruling
One. The long settled rule is that he who challenges the validity of a law must have a standing to
do so.1 Legal standing or locus standi refers to the right of a party to come to a court of justice and
make such a challenge. More particularly, standing refers to his personal and substantial interest in
that he has suffered or will suffer direct injury as a result of the passage of that law. 2 To put it another
way, he must show that he has been or is about to be denied some right or privilege to which he is
lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the law
he complains of.3
Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act
prejudices petitioners or inflicts damages on them, either as taxpayers 4 or as legislators.5 Still the
Court will resolve the question they raise since the rule on standing can be relaxed for nontraditional
plaintiffs like ordinary citizens, taxpayers, and legislators when as in this case the public interest so
requires or the matter is of transcendental importance, of overarching significance to society, or of
paramount public interest.6
Two. Petitioners mainly argue that R.A. 8762 violates the mandate of the 1987 Constitution for the
State to develop a self-reliant and independent national economy effectively controlled by Filipinos.
They invoke the provisions of the Declaration of Principles and State Policies under Article II of the
1987 Constitution, which read as follows:
Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity
and independence of the nation and free the people from poverty through policies that provide
adequate social services, promote full employment, a rising standard of living, and an improved quality
of life for all.
xxxx
Section 19. The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos.
Section 20. The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.
Petitioners also invoke the provisions of the National Economy and Patrimony under Article XII of
the 1987 Constitution, which reads:
Section 10. The Congress shall, upon recommendation of the economic and planning agency, when
the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at
least sixty per centum of whose capital is owned by such citizens, or such higher percentage as
Congress may prescribe, certain areas of investments. The Congress shall enact measures that will
encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony,
the State shall give preference to qualified Filipinos.
The State shall regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities.
xxxx
Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and
locally produced goods, and adopt measures that help make them competitive.
Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all
forms and arrangements of exchange on the basis of equality and reciprocity.

But, as the Court explained in Taada v. Angara,7 the provisions of Article II of the 1987
Constitution, the declarations of principles and state policies, are not self-executing. Legislative failure
to pursue such policies cannot give rise to a cause of action in the courts.
The Court further explained in Taada that Article XII of the 1987 Constitution lays down the ideals
of economic nationalism: (1) by expressing preference in favor of qualified Filipinos in the grant of
rights, privileges and concessions covering the national economy and patrimony and in the use of
Filipino labor, domestic materials and locally-produced goods; (2) by mandating the State to adopt
measures that help make them competitive; and (3) by requiring the State to develop a self-reliant and
independent national economy effectively controlled by Filipinos. 8ten.lihpwal
In other words, while Section 19, Article II of the 1987 Constitution requires the development of a
self-reliant and independent national economy effectively controlled by Filipino entrepreneurs, it does
not impose a policy of Filipino monopoly of the economic environment. The objective is simply to
prohibit foreign powers or interests from maneuvering our economic policies and ensure that Filipinos
are given preference in all areas of development.
Indeed, the 1987 Constitution takes into account the realities of the outside world as it requires the
pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity; and speaks of industries which are competitive in
both domestic and foreign markets as well as of the protection of Filipino enterprises against unfair
foreign competition and trade practices. Thus, while the Constitution mandates a bias in favor of
Filipino goods, services, labor and enterprises, it also recognizes the need for business exchange with
the rest of the world on the bases of equality and reciprocity and limits protection of Filipino
enterprises only against foreign competition and trade practices that are unfair. 9
In other words, the 1987 Constitution does not rule out the entry of foreign investments, goods, and
services. While it does not encourage their unlimited entry into the country, it does not prohibit them
either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign
competition that is unfair. 10 The key, as in all economies in the world, is to strike a balance between
protecting local businesses and allowing the entry of foreign investments and services.1avvphi1
More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion to
reserve to Filipinos certain areas of investments upon the recommendation of the NEDA and when the
national interest requires. Thus, Congress can determine what policy to pass and when to pass it
depending on the economic exigencies. It can enact laws allowing the entry of foreigners into certain
industries not reserved by the Constitution to Filipino citizens. In this case, Congress has decided to
open certain areas of the retail trade business to foreign investments instead of reserving them
exclusively to Filipino citizens. The NEDA has not opposed such policy.
The control and regulation of trade in the interest of the public welfare is of course an exercise of
the police power of the State. A persons right to property, whether he is a Filipino citizen or foreign
national, cannot be taken from him without due process of law. In 1954, Congress enacted the Retail
Trade Nationalization Act or R.A. 1180 that restricts the retail business to Filipino citizens. In denying
the petition assailing the validity of such Act for violation of the foreigners right to substantive due
process of law, the Supreme Court held that the law constituted a valid exercise of police power. 11 The
State had an interest in preventing alien control of the retail trade and R.A. 1180 was reasonably
related to that purpose. That law is not arbitrary.
Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint on the
foreigners right to property or to engage in an ordinarily lawful business, it cannot be said that the law
amounts to a denial of the Filipinos right to property and to due process of law. Filipinos continue to
have the right to engage in the kinds of retail business to which the law in question has permitted the
entry of foreign investors.
Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save
when it blatantly violates the Constitution. But as the Court has said, there is no showing that the law
has contravened any constitutional mandate. The Court is not convinced that the implementation of
R.A. 8762 would eventually lead to alien control of the retail trade business. Petitioners have not
mustered any concrete and strong argument to support its thesis. The law itself has provided strict
safeguards on foreign participation in that business. Thus

First, aliens can only engage in retail trade business subject to the categories above-enumerated;
Second, only nationals from, or juridical entities formed or incorporated in countries which allow the
entry of Filipino retailers shall be allowed to engage in retail trade business; and Third, qualified foreign
retailers shall not be allowed to engage in certain retailing activities outside their accredited stores
through the use of mobile or rolling stores or carts, the use of sales representatives, door-to-door
selling, restaurants and sari-sari stores and such other similar retailing activities.
In sum, petitioners have not shown how the retail trade liberalization has prejudiced and can
prejudice the local small and medium enterprises since its implementation about a decade ago.
WHEREFORE, the Court DISMISSES the petition for lack of merit. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 161107

March 12, 2013

HON. MA. LOURDES C. FERNANDO, in her capacity as City Mayor of Marikina City,
JOSEPHINE C. EVANGELIST A, in her capacity as Chief, Permit Division, Office of the City
Engineer, and ALFONSO ESPIRITU, in his capacity as City Engineer of Marikina City,
Petitioners,
vs.
ST. SCHOLASTICA'S COLLEGE and ST. SCHOLASTICA'S ACADEMY-MARIKINA, INC.,
Respondents.
DECISION
MENDOZA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court, which
seeks to set aside the December 1, 2003 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No.
75691.
The Facts
Respondents St. Scholasticas College (SSC) and St. Scholasticas Academy-Marikina, Inc. (SSAMarikina) are educational institutions organized under the laws of the Republic of the Philippines, with
principal offices and business addresses at Leon Guinto Street, Malate, Manila, and at West Drive,
Marikina Heights, Marikina City, respectively. 2
Respondent SSC is the owner of four (4) parcels of land measuring a total of 56,306.80 square
meters, located in Marikina Heights and covered by Transfer Certificate Title (TCT) No. 91537. Located
within the property are SSA-Marikina, the residence of the sisters of the Benedictine Order, the
formation house of the novices, and the retirement house for the elderly sisters. The property is
enclosed by a tall concrete perimeter fence built some thirty (30) years ago. Abutting the fence along
the West Drive are buildings, facilities, and other improvements. 3
The petitioners are the officials of the City Government of Marikina. On September 30, 1994, the
Sangguniang Panlungsod of Marikina City enacted Ordinance No. 192, 4 entitled "Regulating the
Construction of Fences and Walls in the Municipality of Marikina." In 1995 and 1998, Ordinance Nos.
2175 and 2006 were enacted to amend Sections 7 and 5, respectively. Ordinance No. 192, as
amended, is reproduced hereunder, as follows:

ORDINANCE No. 192

Series of 1994
ORDINANCE REGULATING THE CONSTRUCTION OF FENCES AND WALLS IN THE
MUNICIPALITY OF MARIKINA
WHEREAS, under Section 447.2 of Republic Act No. 7160 otherwise known as the Local
Government Code of 1991 empowers the Sangguniang Bayan as the local legislative
body of the municipality to "x x x Prescribe reasonable limits and restraints on the use of
property within the jurisdiction of the municipality, x x x";
WHEREAS the effort of the municipality to accelerate its economic and physical
development, coupled with urbanization and modernization, makes imperative the
adoption of an ordinance which shall embody up-to-date and modern technical design in
the construction of fences of residential, commercial and industrial buildings;
WHEREAS, Presidential Decree No. 1096, otherwise known as the National Building Code
of the Philippines, does not adequately provide technical guidelines for the construction
of fences, in terms of design, construction, and criteria;
WHEREAS, the adoption of such technical standards shall provide more efficient and
effective enforcement of laws on public safety and security;
WHEREAS, it has occurred in not just a few occasions that high fences or walls did not
actually discourage but, in fact, even protected burglars, robbers, and other lawless
elements from the view of outsiders once they have gained ingress into these walls,
hence, fences not necessarily providing security, but becomes itself a "security problem";
WHEREAS, to discourage, suppress or prevent the concealment of prohibited or unlawful
acts earlier enumerated, and as guardian of the people of Marikina, the municipal
government seeks to enact and implement rules and ordinances to protect and promote
the health, safety and morals of its constituents;
WHEREAS, consistent too, with the "Clean and Green Program" of the government,
lowering of fences and walls shall encourage people to plant more trees and ornamental
plants in their yards, and when visible, such trees and ornamental plants are expected to
create an aura of a clean, green and beautiful environment for Marikeos;
WHEREAS, high fences are unsightly that, in the past, people planted on sidewalks to
"beautify" the faade of their residences but, however, become hazards and obstructions
to pedestrians;
WHEREAS, high and solid walls as fences are considered "un-neighborly" preventing
community members to easily communicate and socialize and deemed to create "boxedin" mentality among the populace;
WHEREAS, to gather as wide-range of opinions and comments on this proposal, and as a
requirement of the Local Government Code of 1991 (R.A. 7160), the Sangguniang Bayan
of Marikina invited presidents or officers of homeowners associations, and commercial
and industrial establishments in Marikina to two public hearings held on July 28, 1994 and
August 25, 1994;
WHEREAS, the rationale and mechanics of the proposed ordinance were fully presented
to the attendees and no vehement objection was presented to the municipal government;
NOW, THEREFORE, BE IT ORDAINED BY THE SANGGUINANG BAYAN OF MARIKINA IN
SESSION DULY ASSEMBLED:
Section 1. Coverage: This Ordinance regulates the construction of all fences, walls and
gates on lots classified or used for residential, commercial, industrial, or special purposes.
Section 2. Definition of Terms:

a. Front Yard refers to the area of the lot fronting a street, alley or public
thoroughfare.
b. Back Yard the part of the lot at the rear of the structure constructed
therein.
c. Open fence type of fence which allows a view of "thru-see" of the inner
yard and the improvements therein. (Examples: wrought iron, wooden lattice,
cyclone wire)
d. Front gate refers to the gate which serves as a passage of persons or
vehicles fronting a street, alley, or public thoroughfare.
Section 3. The standard height of fences or walls allowed under this ordinance are as
follows:
(1) Fences on the front yard shall be no more than one (1) meter in height.
Fences in excess of one (1) meter shall be of an open fence type, at least eighty
percent (80%) see-thru; and
(2) Fences on the side and back yard shall be in accordance with the
provisions of P.D. 1096 otherwise known as the National Building Code.
Section 4. No fence of any kind shall be allowed in areas specifically reserved or
classified as parks.
Section 5. In no case shall walls and fences be built within the five (5) meter parking
area allowance located between the front monument line and the building line of
commercial and industrial establishments and educational and religious institutions. 7
Section 6. Exemption.
(1) The Ordinance does not cover perimeter walls of residential subdivisions.
(2) When public safety or public welfare requires, the Sangguniang Bayan may
allow the construction and/or maintenance of walls higher than as prescribed
herein and shall issue a special permit or exemption.
Section 7. Transitory Provision. Real property owners whose existing fences and walls do
not conform to the specifications herein are allowed adequate period of time from the
passage of this Ordinance within which to conform, as follows:
(1) Residential houses eight (8) years
(2) Commercial establishments five (5) years
(3) Industrial establishments three (3) years
(4) Educational institutions five (5) years8 (public and privately owned)
Section 8. Penalty. Walls found not conforming to the provisions of this Ordinance shall
be demolished by the municipal government at the expense of the owner of the lot or
structure.
Section 9. The Municipal Engineering Office is tasked to strictly implement this
ordinance, including the issuance of the necessary implementing guidelines, issuance of
building and fencing permits, and demolition of non-conforming walls at the lapse of the
grace period herein provided.

Section 10. Repealing Clause. All existing Ordinances and Resolutions, Rules and
Regulations inconsistent with the foregoing provisions are hereby repealed, amended or
modified.
Section 11. Separability Clause. If for any reason or reasons, local executive orders,
rules and regulations or parts thereof in conflict with this Ordinance are hereby repealed
and/or modified accordingly.
Section 12. Effectivity. This ordinance takes effect after publication.
APPROVED: September 30, 1994
(Emphases supplied)
On April 2, 2000, the City Government of Marikina sent a letter to the respondents ordering them to
demolish and replace the fence of their Marikina property to make it 80% see-thru, and, at the same
time, to move it back about six (6) meters to provide parking space for vehicles to park. 9 On April 26,
2000, the respondents requested for an extension of time to comply with the directive. 10 In response,
the petitioners, through then City Mayor Bayani F. Fernando, insisted on the enforcement of the subject
ordinance.
Not in conformity, the respondents filed a petition for prohibition with an application for a writ of
preliminary injunction and temporary restraining order before the Regional Trial Court, Marikina,
Branch 273 (RTC), docketed as SCA Case No. 2000-381-MK.11
The respondents argued that the petitioners were acting in excess of jurisdiction in enforcing
Ordinance No. 192, asserting that such contravenes Section 1, Article III of the 1987 Constitution. That
demolishing their fence and constructing it six (6) meters back would result in the loss of at least
1,808.34 square meters, worth about P9,041,700.00, along West Drive, and at least 1,954.02 square
meters, worth roughly P9,770,100.00, along East Drive. It would also result in the destruction of the
garbage house, covered walk, electric house, storage house, comfort rooms, guards room, guards
post, waiting area for visitors, waiting area for students, Blessed Virgin Shrine, P.E. area, and the multipurpose hall, resulting in the permanent loss of their beneficial use. The respondents, thus, asserted
that the implementation of the ordinance on their property would be tantamount to an appropriation of
property without due process of law; and that the petitioners could only appropriate a portion of their
property through eminent domain. They also pointed out that the goal of the provisions to deter
lawless elements and criminality did not exist as the solid concrete walls of the school had served as
sufficient protection for many years. 12
The petitioners, on the other hand, countered that the ordinance was a valid exercise of police
power, by virtue of which, they could restrain property rights for the protection of public safety, health,
morals, or the promotion of public convenience and general prosperity. 13
On June 30, 2000, the RTC issued a writ of preliminary injunction, enjoining the petitioners from
implementing the demolition of the fence at SSCs Marikina property. 14
Ruling of the RTC
On the merits, the RTC rendered a Decision, 15 dated October 2, 2002, granting the petition and
ordering the issuance of a writ of prohibition commanding the petitioners to permanently desist from
enforcing or implementing Ordinance No. 192 on the respondents property.
The RTC agreed with the respondents that the order of the petitioners to demolish the fence at the
SSC property in Marikina and to move it back six (6) meters would amount to an appropriation of
property which could only be done through the exercise of eminent domain. It held that the petitioners
could not take the respondents property under the guise of police power to evade the payment of just
compensation.
It did not give weight to the petitioners contention that the parking space was for the benefit of the
students and patrons of SSA-Marikina, considering that the respondents were already providing for

sufficient parking in compliance with the standards under Rule XIX of the National Building Code.
It further found that the 80% see-thru fence requirement could run counter to the respondents
right to privacy, considering that the property also served as a residence of the Benedictine sisters,
who were entitled to some sense of privacy in their affairs. It also found that the respondents were
able to prove that the danger to security had no basis in their case. Moreover, it held that the purpose
of beautification could not be used to justify the exercise of police power.
It also observed that Section 7 of Ordinance No. 192, as amended, provided for retroactive
application. It held, however, that such retroactive effect should not impair the respondents vested
substantive rights over the perimeter walls, the six-meter strips of land along the walls, and the
building, structures, facilities, and improvements, which would be destroyed by the demolition of the
walls and the seizure of the strips of land.
The RTC also found untenable the petitioners argument that Ordinance No. 192 was a remedial or
curative statute intended to correct the defects of buildings and structures, which were brought about
by the absence or insufficiency of laws. It ruled that the assailed ordinance was neither remedial nor
curative in nature, considering that at the time the respondents perimeter wall was built, the same
was valid and legal, and the ordinance did not refer to any previous legislation that it sought to correct.
The RTC noted that the petitioners could still take action to expropriate the subject property through
eminent domain.
The RTC, thus, disposed:
WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued commanding the
respondents to permanently desist from enforcing or implementing Ordinance No. 192, Series of 1994,
as amended, on petitioners property in question located at Marikina Heights, Marikina, Metro Manila.
No pronouncement as to costs.
SO ORDERED.16
Ruling of the CA
In its December 1, 2003 Decision, the CA dismissed the petitioners appeal and affirmed the RTC
decision.
The CA reasoned out that the objectives stated in Ordinance No. 192 did not justify the exercise of
police power, as it did not only seek to regulate, but also involved the taking of the respondents
property without due process of law. The respondents were bound to lose an unquantifiable sense of
security, the beneficial use of their structures, and a total of 3,762.36 square meters of property. It,
thus, ruled that the assailed ordinance could not be upheld as valid as it clearly invaded the personal
and property rights of the respondents and "[f]or being unreasonable, and undue restraint of trade." 17
It noted that although the petitioners complied with procedural due process in enacting Ordinance
No. 192, they failed to comply with substantive due process. Hence, the failure of the respondents to
attend the public hearings in order to raise objections did not amount to a waiver of their right to
question the validity of the ordinance.
The CA also shot down the argument that the five-meter setback provision for parking was a legal
easement, the use and ownership of which would remain with, and inure to, the benefit of the
respondents for whom the easement was primarily intended. It found that the real intent of the
setback provision was to make the parking space free for use by the public, considering that such
would cease to be for the exclusive use of the school and its students as it would be situated outside
school premises and beyond the school administrations control.
In affirming the RTC ruling that the ordinance was not a curative statute, the CA found that the
petitioner failed to point out any irregularity or invalidity in the provisions of the National Building Code
that required correction or cure. It noted that any correction in the Code should be properly undertaken
by the Congress and not by the City Council of Marikina through an ordinance.

The CA, thus, disposed:

WHEREFORE, all foregoing premises considered, the instant appeal is DENIED.1wphi1 The October
2, 2002 Decision and the January 13, 2003 Order of the Regional Trial Court (RTC) of Marikina City,
Branch 273, granting petitioners-appellees petition for Prohibition in SCA Case No. 2000-381-MK are
hereby AFFIRMED.
SO ORDERED.18
Aggrieved by the decision of the CA, the petitioners are now before this Court presenting the
following
ASSIGNMENT OF ERRORS
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT
CITY ORDINANCE NO. 192, SERIES OF 1994 IS NOT A VALID EXERCISE OF POLICE POWER;
2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
AFOREMENTIONED ORDINANCE IS AN EXERCISE OF THE CITY OF THE POWER OF EMINENT
DOMAIN;
3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT
THE CITY VIOLATED THE DUE PROCESS CLAUSE IN IMPLEMENTING ORDINANCE NO. 192,
SERIES OF 1994; AND
4. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
ABOVE-MENTIONED ORDINANCE CANNOT BE GIVEN RETROACTIVE APPLICATION. 19
In this case, the petitioners admit that Section 5 of the assailed ordinance, pertaining to the fivemeter setback requirement is, as held by the lower courts, invalid. 20 Nonetheless, the petitioners
argue that such invalidity was subsequently cured by Zoning Ordinance No. 303, series of 2000. They
also contend that Section 3, relating to the 80% see-thru fence requirement, must be complied with, as
it remains to be valid.
Ruling of the Court
The ultimate question before the Court is whether Sections 3.1 and 5 of Ordinance No. 192 are valid
exercises of police power by the City Government of Marikina.
"Police power is the plenary power vested in the legislature to make statutes and ordinances to
promote the health, morals, peace, education, good order or safety and general welfare of the
people."21 The State, through the legislature, has delegated the exercise of police power to local
government units, as agencies of the State. This delegation of police power is embodied in Section
1622 of the Local Government Code of 1991 (R.A. No. 7160), known as the General Welfare Clause, 23
which has two branches. "The first, known as the general legislative power, authorizes the municipal
council to enact ordinances and make regulations not repugnant to law, as may be necessary to carry
into effect and discharge the powers and duties conferred upon the municipal council by law. The
second, known as the police power proper, authorizes the municipality to enact ordinances as may be
necessary and proper for the health and safety, prosperity, morals, peace, good order, comfort, and
convenience of the municipality and its inhabitants, and for the protection of their property." 24
White Light Corporation v. City of Manila,25 discusses the test of a valid ordinance:
The test of a valid ordinance is well established. A long line of decisions including City of Manila 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 pass 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. 26
Ordinance No. 192 was passed by the City Council of Marikina in the apparent exercise of its police
power. To successfully invoke the exercise of police power as the rationale for the enactment of an
ordinance and to free it from the imputation of constitutional infirmity, two tests have been used by
the Court the rational relationship test and the strict scrutiny test:
We ourselves have often applied the rational basis test mainly in analysis of equal protection
challenges. Using the rational basis examination, laws or ordinances are upheld if they rationally
further a legitimate governmental interest. Under intermediate review, governmental interest is
extensively examined and the availability of less restrictive measures is considered. Applying strict
scrutiny, the focus is on the presence of compelling, rather than substantial, governmental interest and
on the absence of less restrictive means for achieving that interest. 27
Even without going to a discussion of the strict scrutiny test, Ordinance No. 192, series of 1994
must be struck down for not being reasonably necessary to accomplish the Citys purpose. More
importantly, it is oppressive of private rights.
Under the rational relationship test, an ordinance must pass the following requisites as discussed in
Social Justice Society (SJS) v. Atienza, Jr.:28
As with the State, local governments may be considered as having properly exercised their police
power only if the following requisites are met: (1) the interests of the public generally, as distinguished
from those of a particular class, require its exercise and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. In short,
there must be a concurrence of a lawful subject and lawful method. 29
Lacking a concurrence of these two requisites, the police power measure shall be struck down as an
arbitrary intrusion into private rights and a violation of the due process clause. 30
Section 3.1 and 5 of the assailed ordinance are pertinent to the issue at hand, to wit:
Section 3. The standard height of fences of walls allowed under this ordinance are as follows:
(1) Fences on the front yard shall be no more than one (1) meter in height. Fences in excess of
one (1) meter shall be an open fence type, at least eighty percent (80%) see-thru;
xxx

xxx

xxx

Section 5. In no case shall walls and fences be built within the five (5) meter parking area allowance
located between the front monument line and the building line of commercial and industrial
establishments and educational and religious institutions.
The respondents, thus, sought to prohibit the petitioners from requiring them to (1) demolish their
existing concrete wall, (2) build a fence (in excess of one meter) which must be 80% see-thru, and (3)
build the said fence six meters back in order to provide a parking area.
Setback Requirement
The Court first turns its attention to Section 5 which requires the five-meter setback of the fence to
provide for a parking area. The petitioners initially argued that the ownership of the parking area to be
created would remain with the respondents as it would primarily be for the use of its students and
faculty, and that its use by the public on non-school days would only be incidental. In their Reply,
however, the petitioners admitted that Section 5 was, in fact, invalid for being repugnant to the
Constitution.31
The Court agrees with the latter position.

The Court joins the CA in finding that the real intent of the setback requirement was to make the
parking space free for use by the public, considering that it would no longer be for the exclusive use of
the respondents as it would also be available for use by the general public. Section 9 of Article III of the
1987 Constitution, a provision on eminent domain, provides that private property shall not be taken for
public use without just compensation.
The petitioners cannot justify the setback by arguing that the ownership of the property will
continue to remain with the respondents. It is a settled rule that neither the acquisition of title nor the
total destruction of value is essential to taking. In fact, it is usually in cases where the title remains
with the private owner that inquiry should be made to determine whether the impairment of a property
is merely regulated or amounts to a compensable taking. 32 The Court is of the view that the
implementation of the setback requirement would be tantamount to a taking of a total of 3,762.36
square meters of the respondents private property for public use without just compensation, in
contravention to the Constitution.
Anent the objectives of prevention of concealment of unlawful acts and "un-neighborliness," it is
obvious that providing for a parking area has no logical connection to, and is not reasonably necessary
for, the accomplishment of these goals.
Regarding the beautification purpose of the setback requirement, it has long been settled that the
State may not, under the guise of police power, permanently divest owners of the beneficial use of
their property solely to preserve or enhance the aesthetic appearance of the community. 33 The Court,
thus, finds Section 5 to be unreasonable and oppressive as it will substantially divest the respondents
of the beneficial use of their property solely for aesthetic purposes. Accordingly, Section 5 of Ordinance
No. 192 is invalid.
The petitioners, however, argue that the invalidity of Section 5 was properly cured by Zoning
Ordinance No. 303,34 Series of 2000, which classified the respondents property to be within an
institutional zone, under which a five-meter setback has been required.
The petitioners are mistaken. Ordinance No. 303, Series of 2000, has no bearing to the case at
hand.
The Court notes with displeasure that this argument was only raised for the first time on appeal in
this Court in the petitioners Reply. Considering that Ordinance No. 303 was enacted on December 20,
2000, the petitioners could very well have raised it in their defense before the RTC in 2002. The settled
rule in this jurisdiction is that a party cannot change the legal theory of this case under which the
controversy was heard and decided in the trial court. It should be the same theory under which the
review on appeal is conducted. Points of law, theories, issues, and arguments not adequately brought
to the attention of the lower court will not be ordinarily considered by a reviewing court, inasmuch as
they cannot be raised for the first time on appeal. This will be offensive to the basic rules of fair play,
justice, and due process.35
Furthermore, the two ordinances have completely different purposes and subjects. Ordinance No.
192 aims to regulate the construction of fences, while Ordinance No. 303 is a zoning ordinance which
classifies the city into specific land uses. In fact, the five-meter setback required by Ordinance No. 303
does not even appear to be for the purpose of providing a parking area.
By no stretch of the imagination, therefore, can Ordinance No. 303, "cure" Section 5 of Ordinance
No. 192.
In any case, the clear subject of the petition for prohibition filed by the respondents is Ordinance
No. 192 and, as such, the precise issue to be determined is whether the petitioners can be prohibited
from enforcing the said ordinance, and no other, against the respondents.
80% See-Thru Fence Requirement
The petitioners argue that while Section 5 of Ordinance No. 192 may be invalid, Section 3.1 limiting
the height of fences to one meter and requiring fences in excess of one meter to be at least 80% seethru, should remain valid and enforceable against the respondents.

The Court cannot accommodate the petitioner.

For Section 3.1 to pass the rational relationship test, the petitioners must show the reasonable
relation between the purpose of the police power measure and the means employed for its
accomplishment, for even under the guise of protecting the public interest, personal rights and those
pertaining to private property will not be permitted to be arbitrarily invaded. 36
The principal purpose of Section 3.1 is "to discourage, suppress or prevent the concealment of
prohibited or unlawful acts." The ultimate goal of this objective is clearly the prevention of crime to
ensure public safety and security. The means employed by the petitioners, however, is not reasonably
necessary for the accomplishment of this purpose and is unduly oppressive to private rights. The
petitioners have not adequately shown, and it does not appear obvious to this Court, that an 80% seethru fence would provide better protection and a higher level of security, or serve as a more
satisfactory criminal deterrent, than a tall solid concrete wall. It may even be argued that such
exposed premises could entice and tempt would-be criminals to the property, and that a see-thru
fence would be easier to bypass and breach. It also appears that the respondents concrete wall has
served as more than sufficient protection over the last 40 years. `
As to the beautification purpose of the assailed ordinance, as previously discussed, the State may
not, under the guise of police power, infringe on private rights solely for the sake of the aesthetic
appearance of the community. Similarly, the Court cannot perceive how a see-thru fence will foster
"neighborliness" between members of a community.
Compelling the respondents to construct their fence in accordance with the assailed ordinance is,
thus, a clear encroachment on their right to property, which necessarily includes their right to decide
how best to protect their property.
It also appears that requiring the exposure of their property via a see-thru fence is violative of their
right to privacy, considering that the residence of the Benedictine nuns is also located within the
property. The right to privacy has long been considered a fundamental right guaranteed by the
Constitution that must be protected from intrusion or constraint. The right to privacy is essentially the
right to be let alone, 37 as governmental powers should stop short of certain intrusions into the
personal life of its citizens. 38 It is inherent in the concept of liberty, enshrined in the Bill of Rights
(Article III) in Sections 1, 2, 3(1), 6, 8, and 17, Article III of the 1987 Constitution. 39

The enforcement of Section 3.1 would, therefore, result in an undue interference with the
respondents rights to property and privacy. Section 3.1 of Ordinance No. 192 is, thus, also invalid and
cannot be enforced against the respondents.
No Retroactivity
Ordinance No. 217 amended Section 7 of Ordinance No. 192 by including the regulation of
educational institutions which was unintentionally omitted, and giving said educational institutions five
(5) years from the passage of Ordinance No. 192 (and not Ordinance No. 217) to conform to its
provisions.40 The petitioners argued that the amendment could be retroactively applied because the
assailed ordinance is a curative statute which is retroactive in nature.
Considering that Sections 3.1 and 5 of Ordinance No. 192 cannot be enforced against the
respondents, it is no longer necessary to rule on the issue of retroactivity. The Court shall,
nevertheless, pass upon the issue for the sake of clarity.
"Curative statutes are enacted to cure defects in a prior law or to validate legal proceedings which
would otherwise be void for want of conformity with certain legal requirements. They are intended to
supply defects, abridge superfluities and curb certain evils. They are intended to enable persons to
carry into effect that which they have designed or intended, but has failed of expected legal
consequence by reason of some statutory disability or irregularity in their own action. They make valid
that which, before the enactment of the statute was invalid. Their purpose is to give validity to acts
done that would have been invalid under existing laws, as if existing laws have been complied with.
Curative statutes, therefore, by their very essence, are retroactive."41
The petitioners argue that Ordinance No. 192 is a curative statute as it aims to correct or cure a

defect in the National Building Code, namely, its failure to provide for adequate guidelines for the
construction of fences. They ultimately seek to remedy an insufficiency in the law. In aiming to cure
this insufficiency, the petitioners attempt to add lacking provisions to the National Building Code. This
is not what is contemplated by curative statutes, which intend to correct irregularities or invalidity in
the law. The petitioners fail to point out any irregular or invalid provision. As such, the assailed
ordinance cannot qualify as curative and retroactive in nature.
At any rate, there appears to be no insufficiency in the National Building Code with respect to
parking provisions in relation to the issue of the respondents. Paragraph 1.16.1, Rule XIX of the Rules
and Regulations of the said code requires an educational institution to provide one parking slot for
every ten classrooms. As found by the lower courts, the respondents provide a total of 76 parking slots
for their 80 classrooms and, thus, had more than sufficiently complied with the law.
Ordinance No. 192, as amended, is, therefore, not a curative statute which may be applied
retroactively.
Separability
Sections 3.1 and 5 of Ordinance No. 192, as amended, are, thus, invalid and cannot be enforced
against the respondents. Nonetheless, "the general rule is that where part of a statute is void as
repugnant to the Constitution, while another part is valid, the valid portion, if susceptible to being
separated from the invalid, may stand and be enforced." 42 Thus, the other sections of the assailed
ordinance remain valid and enforceable.
Conclusion
Considering the invalidity of Sections 3.1 and 5, it is clear that the petitioners were acting in excess
of their jurisdiction in enforcing Ordinance No. 192 against the respondents. The CA was correct in
affirming the decision of the RTC in issuing the writ of prohibition. The petitioners must permanently
desist from enforcing Sections 3.1 and 5 of the assailed ordinance on the respondents' property in
Marikina City.
WHEREFORE, the petition is DENIED. The October 2, 2002 Decision of the Regional Trial Court in
SCA Case No. 2000-381-MK is AFFIRMED but MODIFIED to read as follows:
WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued commanding the
respondents to permanently desist from enforcing or implementing Sections 3.1 and 5 of Ordinance
No. 192, Series of 1994, as amended, on the petitioners' property in question located in Marikina
Heights, Marikina, Metro Manila.
No pronouncement as to costs.
SO ORDERED.

EN BANC
G.R. No. 159110, December 10, 2013
VALENTINO L. LEGASPI, Petitioner, v. CITY OF CEBU, T.C. (TITO) SAYSON AND RICARDO HAPITAN,
Respondents.

[G.R. No. 159692]

BIENVENIDO P. JABAN, SR., AND BIENVENIDO DOUGLAS LUKE BRADBURY JABAN, Petitioners, v. COURT OF
APPEALS, CITY OF CEBU, CITY MAYOR ALVIN GARCIA, SANGGUNIANG PANLUNSOD OF CITY OF CEBU,
HON. RENATO V. OSMEA, 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 thereby 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. 1664 to authorize the
traffic 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:chanRoblesvirtualLawlibrary
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 vehicle as hereinabove provided.
Section 3. PENALTIES Any motor vehicle, owner or driver violating any ordinance on parking
prohibitions, regulations and/or restrictions, as may be provided under 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 (P500.00) 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:chanRoblesvirtualLawlibrary
a)
b)
Chairman,
Committee
c) Asst. City Fiscal Felipe Belcia

Chairman,
on
Police,

Fire

and

CITOM
Penology

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 (P2,000.00) nor more than Five Thousand Pesos (P5,000.00), 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. Osmea, 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 from his office; 4 that 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
P4,200.00 as a fine to the City Treasurer of Cebu City for the release of his car; 6 that 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 P1,500.00 (itemized as P500.00 for the
clamping and P1,000.00 for 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 P1,400.00 for the
release of his car without a court hearing and a final judgment rendered by a court of justice. 7red
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
daughters 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 soninlaw 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 codefendants, 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:chanRoblesvirtualLawlibrary
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 ones life, liberty or property must be done upon and with
observance of the due process clause of the Constitution and the nonobservance 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 P500.00 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;
x

WHEREFORE, premised (sic) considered, judgment is hereby rendered declaring Ordinance No. 1664
unconstitutional and directing the defendant City of Cebu to pay the plaintiff Valentino Legaspi the sum
of P110,000.00 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 P100,000.00 each or
P300,000.00 all as nominal damages and another P100,000.00 each or P300,000.00 all as temperate
or
moderate
damages.
With
costs
against
defendant
City
of
Cebu.
SO ORDERED.16 (citations omitted)
The City of Cebu and its codefendants 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, 17 overturning the RTC and declaring Ordinance No.
1664 valid, to wit:chanRoblesvirtualLawlibrary
The principal thrust of this appeal is the constitutionality of Ordinance 1664. Defendantsappellants
contend that the passage of Ordinance 1664 is 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:chanRoblesvirtualLawlibrary
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:chanRoblesvirtualLawlibrary
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 catchall 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 wellnigh 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 peoples 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
wit:chanRoblesvirtualLawlibrary

the

parties,

the

following

issues

are

decisive

of

the

challenge,

3.

Whether Ordinance No. 1664 was enacted within the ambit of the legislative powers of
the City of Cebu; and

4.

Whether Ordinance No. 1664 complied with the requirements for validity and
constitutionality, particularly the limitations set by the Constitution and the relevant statutes.
Ruling

The petitions for review have no merit.

A.

to

Tests for a valid ordinance

In City of Manila v. Laguio, Jr.,18 the Court restates the tests of a valid ordinance thusly:chanRoblesvirtualLawlibrary
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 States 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
Authority
v.
BelAir
Village
Association,
Inc.,23
the
Court
cogently
observed:chanRoblesvirtualLawlibrary
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. 24

Section 458 of the LGC relevantly states:chanRoblesvirtualLawlibrary

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:
x

(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:
x

(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 privatelyowned 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. 1664with 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:chanRoblesvirtualLawlibrary
Section 1. No person shall be deprived of life, liberty or property without due process of law, nor
shall any person be denied the equal protection of the laws.
The 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:chanRoblesvirtualLawlibrary

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 persons life, liberty, or property. In other words, substantive due process
looks to whether there is sufficient justification for the governments 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.28 He reminds that the grant of police powers for the general welfare under the LGC was not unlimited
but subject to constitutional limitations; 29 and 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
codefendants.
Judged according to the foregoing enunciation of the guaranty of due process of law, the contentions of the
petitioners cannot be sustained. 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 avowedly 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:chanRoblesvirtualLawlibrary
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.
Legaspis attack against the provisions of Ordinance No. 1664 for being vague and ambiguous cannot stand
scrutiny. As can be readily seen, its text was forthright 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 Belcia 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 transgressor 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 trialtype hearing prior to the clamping constitute a breach of procedural due
process, for giving 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, Legaspis 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 banc 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 petitions 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.

b
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 175356

December 3, 2013

MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC., Petitioners,

vs.
SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT and THE
SECRETARY OF THE DEPARTMENT OF FINANCE, Respondents.
DECISION
DEL CASTILLO, J.:
When a party challeges the constitutionality of a law, the burden of proof rests upon him.
Before us is a Petition for Prohibition2 under Rule 65 of the Rules of Court filed by petitioners Manila
Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc., domestic corporations engaged in the business of
providing funeral and burial services, against public respondents Secretaries of the Department of
Social Welfare and Development (DSWD) and the Department of Finance (DOF).
Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. 7432,3 as amended by
RA 9257,4 and the implementing rules and regulations issued by the DSWD and DOF insofar as these
allow business establishments to claim the 20% discount given to senior citizens as a tax deduction.

Factual Antecedents
On April 23, 1992, RA 7432 was passed into law, granting senior citizens the following privileges:
SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the following:
a) the grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment[s], restaurants and recreation centers
and purchase of medicine anywhere in the country: Provided, That private establishments may claim
the cost as tax credit;
b) a minimum of twenty percent (20%) discount on admission fees charged by theaters, cinema
houses and concert halls, circuses, carnivals and other similar places of culture, leisure, and
amusement;
c) exemption from the payment of individual income taxes: Provided, That their annual taxable
income does not exceed the property level as determined by the National Economic and Development
Authority (NEDA) for that year;
d) exemption from training fees for socioeconomic programs undertaken by the OSCA as part of its
work;
e) free medical and dental services in government establishment[s] anywhere in the country,
subject to guidelines to be issued by the Department of Health, the Government Service Insurance
System and the Social Security System;
f) to the extent practicable and feasible, the continuance of the same benefits and privileges given
by the Government Service Insurance System (GSIS), Social Security System (SSS) and PAG-IBIG, as
the case may be, as are enjoyed by those in actual service.
On August 23, 1993, Revenue Regulations (RR) No. 02-94 was issued to implement RA 7432.
Sections 2(i) and 4 of RR No. 02-94 provide:
Sec. 2. DEFINITIONS. For purposes of these regulations: i. Tax Credit refers to the amount
representing the 20% discount granted to a qualified senior citizen by all establishments relative to
their utilization of transportation services, hotels and similar lodging establishments, restaurants,
drugstores, recreation centers, theaters, cinema houses, concert halls, circuses, carnivals and other
similar places of culture, leisure and amusement, which discount shall be deducted by the said
establishments from their gross income for income tax purposes and from their gross sales for valueadded tax or other percentage tax purposes. x x x x Sec. 4. RECORDING/BOOKKEEPING
REQUIREMENTS FOR PRIVATE ESTABLISHMENTS. Private establishments, i.e., transport services,
hotels and similar lodging establishments, restaurants, recreation centers, drugstores, theaters,
cinema houses, concert halls, circuses, carnivals and other similar places of culture[,] leisure and
amusement, giving 20% discounts to qualified senior citizens are required to keep separate and
accurate record[s] of sales made to senior citizens, which shall include the name, identification
number, gross sales/receipts, discounts, dates of transactions and invoice number for every
transaction. The amount of 20% discount shall be deducted from the gross income for income tax
purposes and from gross sales of the business enterprise concerned for purposes of the VAT and other
percentage taxes.
In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5 the Court declared
Sections 2(i) and 4 of RR No. 02-94 as erroneous because these contravene RA 7432,6 thus:
RA 7432 specifically allows private establishments to claim as tax credit the amount of discounts
they grant. In turn, the Implementing Rules and Regulations, issued pursuant thereto, provide the
procedures for its availment. To deny such credit, despite the plain mandate of the law and the
regulations carrying out that mandate, is indefensible. First, the definition given by petitioner is
erroneous. It refers to tax credit as the amount representing the 20 percent discount that "shall be
deducted by the said establishments from their gross income for income tax purposes and from their
gross sales for value-added tax or other percentage tax purposes." In ordinary business language, the
tax credit represents the amount of such discount. However, the manner by which the discount shall
be credited against taxes has not been clarified by the revenue regulations. By ordinary acceptation, a
discount is an "abatement or reduction made from the gross amount or value of anything." To be more

precise, it is in business parlance "a deduction or lowering of an amount of money;" or "a reduction
from the full amount or value of something, especially a price." In business there are many kinds of
discount, the most common of which is that affecting the income statement or financial report upon
which the income tax is based.
xxxx
Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20 percent discount
deductible from gross income for income tax purposes, or from gross sales for VAT or other percentage
tax purposes. In effect, the tax credit benefit under RA 7432 is related to a sales discount. This
contrived definition is improper, considering that the latter has to be deducted from gross sales in
order to compute the gross income in the income statement and cannot be deducted again, even for
purposes of computing the income tax. When the law says that the cost of the discount may be
claimed as a tax credit, it means that the amount when claimed shall be treated as a reduction
from any tax liability, plain and simple. The option to avail of the tax credit benefit depends upon the
existence of a tax liability, but to limit the benefit to a sales discount which is not even identical to
the discount privilege that is granted by law does not define it at all and serves no useful purpose.
The definition must, therefore, be stricken down.
Laws Not Amended by Regulations
Second, the law cannot be amended by a mere regulation. In fact, a regulation that "operates to
create a rule out of harmony with the statute is a mere nullity;" it cannot prevail. It is a cardinal rule
that courts "will and should respect the contemporaneous construction placed upon a statute by the
executive officers whose duty it is to enforce it x x x." In the scheme of judicial tax administration, the
need for certainty and predictability in the implementation of tax laws is crucial. Our tax authorities fill
in the details that "Congress may not have the opportunity or competence to provide." The regulations
these authorities issue are relied upon by taxpayers, who are certain that these will be followed by the
courts. Courts, however, will not uphold these authorities interpretations when clearly absurd,
erroneous or improper. In the present case, the tax authorities have given the term tax credit in
Sections 2.i and 4 of RR 2-94 a meaning utterly in contrast to what RA 7432 provides. Their
interpretation has muddled x x x the intent of Congress in granting a mere discount privilege, not a
sales discount. The administrative agency issuing these regulations may not enlarge, alter or restrict
the provisions of the law it administers; it cannot engraft additional requirements not contemplated by
the legislature.
In case of conflict, the law must prevail. A "regulation adopted pursuant to law is law." Conversely, a
regulation or any portion thereof not adopted pursuant to law is no law and has neither the force nor
the effect of law.7
On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:
SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of
services in hotels and similar lodging establishments, restaurants and recreation centers, and purchase
of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including
funeral and burial services for the death of senior citizens;
xxxx
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction
based on the net cost of the goods sold or services rendered: Provided, That the cost of the discount
shall be allowed as deduction from gross income for the same taxable year that the discount is
granted. Provided, further, That the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to
proper documentation and to the provisions of the National Internal Revenue Code, as amended.
To implement the tax provisions of RA 9257, the Secretary of Finance issued RR No. 4-2006, the
pertinent provision of which provides:
SEC. 8. AVAILMENT BY ESTABLISHMENTS OF SALES DISCOUNTS AS DEDUCTION FROM GROSS
INCOME. Establishments enumerated in subparagraph (6) hereunder granting sales discounts to

senior citizens on the sale of goods and/or services specified thereunder are entitled to deduct the said
discount from gross income subject to the following conditions:
(1) Only that portion of the gross sales EXCLUSIVELY USED, CONSUMED OR ENJOYED BY THE SENIOR
CITIZEN shall be eligible for the deductible sales discount.
(2) The gross selling price and the sales discount MUST BE SEPARATELY INDICATED IN THE OFFICIAL
RECEIPT OR SALES INVOICE issued by the establishment for the sale of goods or services to the senior
citizen.
(3) Only the actual amount of the discount granted or a sales discount not exceeding 20% of the
gross selling price can be deducted from the gross income, net of value added tax, if applicable, for
income tax purposes, and from gross sales or gross receipts of the business enterprise concerned, for
VAT or other percentage tax purposes.
(4) The discount can only be allowed as deduction from gross income for the same taxable year
that the discount is granted.
(5) The business establishment giving sales discounts to qualified senior citizens is required to keep
separate and accurate record[s] of sales, which shall include the name of the senior citizen, TIN, OSCA
ID, gross sales/receipts, sales discount granted, [date] of [transaction] and invoice number for every
sale transaction to senior citizen.
(6) Only the following business establishments which granted sales discount to senior citizens on
their sale of goods and/or services may claim the said discount granted as deduction from gross
income, namely:
xxxx
(i) Funeral parlors and similar establishments The beneficiary or any person who shall shoulder
the funeral and burial expenses of the deceased senior citizen shall claim the discount, such as casket,
embalmment, cremation cost and other related services for the senior citizen upon payment and
presentation of [his] death certificate.
The DSWD likewise issued its own Rules and Regulations Implementing RA 9257, to wit:
RULE VI DISCOUNTS AS TAX DEDUCTION OF ESTABLISHMENTS
Article 8. Tax Deduction of Establishments. The establishment may claim the discounts granted
under Rule V, Section 4 Discounts for Establishments, Section 9, Medical and Dental Services in
Private Facilities and Sections 10 and 11 Air, Sea and Land Transportation as tax deduction based on
the net cost of the goods sold or services rendered.
Provided, That the cost of the discount shall be allowed as deduction from gross income for the
same taxable year that the discount is granted; Provided, further, That the total amount of the claimed
tax deduction net of value added tax if applicable, shall be included in their gross sales receipts for tax
purposes and shall be subject to proper documentation and to the provisions of the National Internal
Revenue Code, as amended; Provided, finally, that the implementation of the tax deduction shall be
subject to the Revenue Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved
by the Department of Finance (DOF).
Feeling aggrieved by the tax deduction scheme, petitioners filed the present recourse, praying that
Section 4 of RA 7432, as amended by RA 9257, and the implementing rules and regulations issued by
the DSWD and the DOF be declared unconstitutional insofar as these allow business establishments to
claim the 20% discount given to senior citizens as a tax deduction; that the DSWD and the DOF be
prohibited from enforcing the same; and that the tax credit treatment of the 20% discount under the
former Section 4 (a) of RA 7432 be reinstated.
Issues
Petitioners raise the following issues:

A.
WHETHER THE PETITION PRESENTS AN ACTUAL CASE OR CONTROVERSY.
B.
WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS IMPLEMENTING RULES AND
REGULATIONS, INSOFAR AS THEY PROVIDE THAT THE TWENTY PERCENT (20%) DISCOUNT TO SENIOR
CITIZENS MAY BE CLAIMED AS A TAX DEDUCTION BY THE PRIVATE ESTABLISHMENTS, ARE INVALID AND
UNCONSTITUTIONAL.9
Petitioners Arguments
Petitioners emphasize that they are not questioning the 20% discount granted to senior citizens but
are only assailing the constitutionality of the tax deduction scheme prescribed under RA 9257 and the
implementing rules and regulations issued by the DSWD and the DOF.10
Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of the Constitution,
which provides that: "[p]rivate property shall not be taken for public use without just compensation."11
In support of their position, petitioners cite Central Luzon Drug Corporation,12 where it was ruled
that the 20% discount privilege constitutes taking of private property for public use which requires the
payment of just compensation,13 and Carlos Superdrug Corporation v. Department of Social Welfare
and Development,14 where it was acknowledged that the tax deduction scheme does not meet the
definition of just compensation.15
Petitioners likewise seek a reversal of the ruling in Carlos Superdrug Corporation16 that the tax
deduction scheme adopted by the government is justified by police power.17
They assert that "[a]lthough both police power and the power of eminent domain have the general
welfare for their object, there are still traditional distinctions between the two" 18 and that "eminent
domain cannot be made less supreme than police power."19
Petitioners further claim that the legislature, in amending RA 7432, relied on an erroneous
contemporaneous construction that prior payment of taxes is required for tax credit.20
Petitioners also contend that the tax deduction scheme violates Article XV, Section 421 and Article
XIII, Section 1122 of the Constitution because it shifts the States constitutional mandate or duty of
improving the welfare of the elderly to the private sector.23
Under the tax deduction scheme, the private sector shoulders 65% of the discount because only
35%24 of it is actually returned by the government.25
Consequently, the implementation of the tax deduction scheme prescribed under Section 4 of RA
9257 affects the businesses of petitioners.26
Thus, there exists an actual case or controversy of transcendental importance which deserves
judicious disposition on the merits by the highest court of the land.27
Respondents Arguments
Respondents, on the other hand, question the filing of the instant Petition directly with the Supreme
Court as this disregards the hierarchy of courts.28
They likewise assert that there is no justiciable controversy as petitioners failed to prove that the
tax deduction treatment is not a "fair and full equivalent of the loss sustained" by them.29
As to the constitutionality of RA 9257 and its implementing rules and regulations, respondents
contend that petitioners failed to overturn its presumption of constitutionality.30

More important, respondents maintain that the tax deduction scheme is a legitimate exercise of the
States police power.31
Our Ruling
The Petition lacks merit.
There exists an actual case or controversy.
We shall first resolve the procedural issue. When the constitutionality of a law is put in issue,
judicial review may be availed of only if the following requisites concur: "(1) the existence of an actual
and appropriate case; (2) the existence of personal and substantial interest on the part of the party
raising the [question of constitutionality]; (3) recourse to judicial review is made at the earliest
opportunity; and (4) the [question of constitutionality] is the lis mota of the case."32
In this case, petitioners are challenging the constitutionality of the tax deduction scheme provided
in RA 9257 and the implementing rules and regulations issued by the DSWD and the DOF.
Respondents, however, oppose the Petition on the ground that there is no actual case or controversy.
We do not agree with respondents. An actual case or controversy exists when there is "a conflict of
legal rights" or "an assertion of opposite legal claims susceptible of judicial resolution."33
The Petition must therefore show that "the governmental act being challenged has a direct adverse
effect on the individual challenging it."34
In this case, the tax deduction scheme challenged by petitioners has a direct adverse effect on
them. Thus, it cannot be denied that there exists an actual case or controversy.
The validity of the 20% senior citizen discount and tax deduction scheme under RA
9257, as an exercise of police power of the State, has already been settled in Carlos
Superdrug Corporation.
Petitioners posit that the resolution of this case lies in the determination of whether the legally
mandated 20% senior citizen discount is an exercise of police power or eminent domain. If it is police
power, no just compensation is warranted. But if it is eminent domain, the tax deduction scheme is
unconstitutional because it is not a peso for peso reimbursement of the 20% discount given to senior
citizens. Thus, it constitutes taking of private property without payment of just compensation. At the
outset, we note that this question has been settled in Carlos Superdrug Corporation.35
In that case, we ruled:
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation
of private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated
for the discount. Examining petitioners arguments, it is apparent that what petitioners are ultimately
questioning is the validity of the tax deduction scheme as a reimbursement mechanism for the twenty
percent (20%) discount that they extend to senior citizens. Based on the afore-stated DOF Opinion, the
tax deduction scheme does not fully reimburse petitioners for the discount privilege accorded to senior
citizens. This is because the discount is treated as a deduction, a tax-deductible expense that is
subtracted from the gross income and results in a lower taxable income. Stated otherwise, it is an
amount that is allowed by law to reduce the income prior to the application of the tax rate to compute
the amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on a
peso for peso basis but merely offers a fractional reduction in taxes owed. Theoretically, the treatment
of the discount as a deduction reduces the net income of the private establishments concerned. The
discounts given would have entered the coffers and formed part of the gross sales of the private
establishments, were it not for R.A. No. 9257. The permanent reduction in their total revenues is a
forced subsidy corresponding to the taking of private property for public use or benefit. This
constitutes compensable taking for which petitioners would ordinarily become entitled to a just
compensation. Just compensation is defined as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the takers gain but the owners loss. The word just is
used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to
be rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does
not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of

just compensation. Having said that, this raises the question of whether the State, in promoting the
health and welfare of a special group of citizens, can impose upon private establishments the burden
of partly subsidizing a government program. The Court believes so. The Senior Citizens Act was
enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant
benefits and privileges to them for their improvement and well-being as the State considers them an
integral part of our society. The priority given to senior citizens finds its basis in the Constitution as set
forth in the law itself. Thus, the Act provides: SEC. 2. Republic Act No. 7432 is hereby amended to read
as follows:
SECTION 1. Declaration of Policies and Objectives. Pursuant to Article XV, Section 4 of the
Constitution, it is the duty of the family to take care of its elderly members while the State may design
programs of social security for them. In addition to this, Section 10 in the Declaration of Principles and
State Policies provides: "The State shall provide social justice in all phases of national development."
Further, Article XIII, Section 11, provides: "The State shall adopt an integrated and comprehensive
approach to health development which shall endeavor to make essential goods, health and other social
services available to all the people at affordable cost. There shall be priority for the needs of the
underprivileged sick, elderly, disabled, women and children." Consonant with these constitutional
principles the following are the declared policies of this Act:

(f) To recognize the important role of the private sector in the improvement of the welfare of senior
citizens and to actively seek their partnership.
To implement the above policy, the law grants a twenty percent discount to senior citizens for
medical and dental services, and diagnostic and laboratory fees; admission fees charged by theaters,
concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement; fares for
domestic land, air and sea travel; utilization of services in hotels and similar lodging establishments,
restaurants and recreation centers; and purchases of medicines for the exclusive use or enjoyment of
senior citizens. As a form of reimbursement, the law provides that business establishments extending
the twenty percent discount to senior citizens may claim the discount as a tax deduction. The law is a
legitimate exercise of police power which, similar to the power of eminent domain, has general welfare
for its object. Police power is not capable of an exact definition, but has been purposely veiled in
general terms to underscore its comprehensiveness to meet all exigencies and provide enough room
for an efficient and flexible response to conditions and circumstances, thus assuring the greatest
benefits. Accordingly, it has been described as "the most essential, insistent and the least limitable of
powers, extending as it does to all the great public needs." It is "[t]he 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 subjects of the same." For
this reason, when the conditions so demand as determined by the legislature, property rights must
bow to the primacy of police power because property rights, though sheltered by due process, must
yield to general welfare. Police power as an attribute to promote the common good would be diluted
considerably if on the mere plea of petitioners that they will suffer loss of earnings and capital, the
questioned provision is invalidated. Moreover, in the absence of evidence demonstrating the alleged
confiscatory effect of the provision in question, there is no basis for its nullification in view of the
presumption of validity which every law has in its favor. Given these, it is incorrect for petitioners to
insist that the grant of the senior citizen discount is unduly oppressive to their business, because
petitioners have not taken time to calculate correctly and come up with a financial report, so that they
have not been able to show properly whether or not the tax deduction scheme really works greatly to
their disadvantage. In treating the discount as a tax deduction, petitioners insist that they will incur
losses because, referring to the DOF Opinion, for every P1.00 senior citizen discount that petitioners
would give, P0.68 will be shouldered by them as only P0.32 will be refunded by the government by way
of a tax deduction. To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive
maintenance drug Norvasc as an example. According to the latter, it acquires Norvasc from the
distributors at P37.57 per tablet, and retails it at P39.60 (or at a margin of 5%). If it grants a 20%
discount to senior citizens or an amount equivalent to P7.92, then it would have to sell Norvasc at
P31.68 which translates to a loss from capital of P5.89 per tablet. Even if the government will allow a
tax deduction, only P2.53 per tablet will be refunded and not the full amount of the discount which is
P7.92. In short, only 32% of the 20% discount will be reimbursed to the drugstores. Petitioners
computation is flawed. For purposes of reimbursement, the law states that the cost of the discount
shall be deducted from gross income, the amount of income derived from all sources before deducting
allowable expenses, which will result in net income. Here, petitioners tried to show a loss on a per
transaction basis, which should not be the case. An income statement, showing an accounting of
petitioners' sales, expenses, and net profit (or loss) for a given period could have accurately reflected
the effect of the discount on their income. Absent any financial statement, petitioners cannot

substantiate their claim that they will be operating at a loss should they give the discount. In addition,
the computation was erroneously based on the assumption that their customers consisted wholly of
senior citizens. Lastly, the 32% tax rate is to be imposed on income, not on the amount of the
discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of
their medicines given the cutthroat nature of the players in the industry. It is a business decision on the
part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as alleged
by petitioners, is merely a result of this decision. Inasmuch as pricing is a property right, petitioners
cannot reproach the law for being oppressive, simply because they cannot afford to raise their prices
for fear of losing their customers to competition. The Court is not oblivious of the retail side of the
pharmaceutical industry and the competitive pricing component of the business. While the
Constitution protects property rights, petitioners must accept the realities of business and the State, in
the exercise of police power, can intervene in the operations of a business which may result in an
impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as x x x reminder[s] that
the right to property can be relinquished upon the command of the State for the promotion of public
good. Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means employed
in invoking the active participation of the private sector, in order to achieve the purpose or objective of
the law, is reasonably and directly related. Without sufficient proof that Section 4 (a) of R.A. No. 9257 is
arbitrary, and that the continued implementation of the same would be unconscionably detrimental to
petitioners, the Court will refrain from quashing a legislative act.36 (Bold in the original; underline
supplied)
We, thus, found that the 20% discount as well as the tax deduction scheme is a valid exercise of the
police power of the State.
No compelling reason has been proffered to overturn, modify or abandon the ruling in
Carlos Superdrug Corporation.
Petitioners argue that we have previously ruled in Central Luzon Drug Corporation37 that the 20%
discount is an exercise of the power of eminent domain, thus, requiring the payment of just
compensation. They urge us to re-examine our ruling in Carlos Superdrug Corporation 38 which
allegedly reversed the ruling in Central Luzon Drug Corporation.39
They also point out that Carlos Superdrug Corporation40 recognized that the tax deduction scheme
under the assailed law does not provide for sufficient just compensation. We agree with petitioners
observation that there are statements in Central Luzon Drug Corporation41 describing the 20%
discount as an exercise of the power of eminent domain, viz.:
[T]he privilege enjoyed by senior citizens does not come directly from the State, but rather from the
private establishments concerned. Accordingly, the tax credit benefit granted to these establishments
can be deemed as their just compensation for private property taken by the State for public use. The
concept of public use is no longer confined to the traditional notion of use by the public, but held
synonymous with public interest, public benefit, public welfare, and public convenience. The discount
privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to
which these citizens belong. The discounts given would have entered the coffers and formed part of
the gross sales of the private establishments concerned, were it not for RA 7432. The permanent
reduction in their total revenues is a forced subsidy corresponding to the taking of private property for
public use or benefit. As a result of the 20 percent discount imposed by RA 7432, respondent becomes
entitled to a just compensation. This term refers not only to the issuance of a tax credit certificate
indicating the correct amount of the discounts given, but also to the promptness in its release.
Equivalent to the payment of property taken by the State, such issuance when not done within a
reasonable time from the grant of the discounts cannot be considered as just compensation. In
effect, respondent is made to suffer the consequences of being immediately deprived of its revenues
while awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope with
the reduction in its revenues. Besides, the taxation power can also be used as an implement for the
exercise of the power of eminent domain. Tax measures are but "enforced contributions exacted on
pain of penal sanctions" and "clearly imposed for a public purpose." In recent years, the power to tax
has indeed become a most effective tool to realize social justice, public welfare, and the equitable
distribution of wealth. While it is a declared commitment under Section 1 of RA 7432, social justice

"cannot be invoked to trample on the rights of property owners who under our Constitution and laws
are also entitled to protection. The social justice consecrated in our [C]onstitution [is] not intended to
take away rights from a person and give them to another who is not entitled thereto." For this reason,
a just compensation for income that is taken away from respondent becomes necessary. It is in the tax
credit that our legislators find support to realize social justice, and no administrative body can alter
that fact. To put it differently, a private establishment that merely breaks even without the discounts
yet will surely start to incur losses because of such discounts. The same effect is expected if its
mark-up is less than 20 percent, and if all its sales come from retail purchases by senior citizens. Aside
from the observation we have already raised earlier, it will also be grossly unfair to an establishment if
the discounts will be treated merely as deductions from either its gross income or its gross sales.
Operating at a loss through no fault of its own, it will realize that the tax credit limitation under RR 2-94
is inutile, if not improper. Worse, profit-generating businesses will be put in a better position if they
avail themselves of tax credits denied those that are losing, because no taxes are due from the
latter.42 (Italics in the original; emphasis supplied)
The above was partly incorporated in our ruling in Carlos Superdrug Corporation43 when we stated
preliminarily that
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation
of private property. Compelling drugstore owners and establishments to grant the discount will result in
a loss of profit and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded
medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated
for the discount. Examining petitioners arguments, it is apparent that what petitioners are ultimately
questioning is the validity of the tax deduction scheme as a reimbursement mechanism for the twenty
percent (20%) discount that they extend to senior citizens. Based on the afore-stated DOF Opinion, the
tax deduction scheme does not fully reimburse petitioners for the discount privilege accorded to senior
citizens. This is because the discount is treated as a deduction, a tax-deductible expense that is
subtracted from the gross income and results in a lower taxable income. Stated otherwise, it is an
amount that is allowed by law to reduce the income prior to the application of the tax rate to compute
the amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on a
peso for peso basis but merely offers a fractional reduction in taxes owed. Theoretically, the treatment
of the discount as a deduction reduces the net income of the private establishments concerned. The
discounts given would have entered the coffers and formed part of the gross sales of the private
establishments, were it not for R.A. No. 9257. The permanent reduction in their total revenues is a
forced subsidy corresponding to the taking of private property for public use or benefit. This
constitutes compensable taking for which petitioners would ordinarily become entitled to a just
compensation. Just compensation is defined as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the takers gain but the owners loss. The word just is
used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to
be rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does
not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of
just compensation. Having said that, this raises the question of whether the State, in promoting the
health and welfare of a special group of citizens, can impose upon private establishments the burden
of partly subsidizing a government program. The Court believes so.44
This, notwithstanding, we went on to rule in Carlos Superdrug Corporation45 that the 20% discount
and tax deduction scheme is a valid exercise of the police power of the State. The present case, thus,
affords an opportunity for us to clarify the above-quoted statements in Central Luzon Drug
Corporation46 and Carlos Superdrug Corporation.47
First, we note that the above-quoted disquisition on eminent domain in Central Luzon Drug
Corporation48 is obiter dicta and, thus, not binding precedent. As stated earlier, in Central Luzon Drug
Corporation,49 we ruled that the BIR acted ultra vires when it effectively treated the 20% discount as a
tax deduction, under Sections 2.i and 4 of RR No. 2-94, despite the clear wording of the previous law
that the same should be treated as a tax credit. We were, therefore, not confronted in that case with
the issue as to whether the 20% discount is an exercise of police power or eminent domain. Second,
although we adverted to Central Luzon Drug Corporation50 in our ruling in Carlos Superdrug
Corporation,51 this referred only to preliminary matters. A fair reading of Carlos Superdrug
Corporation52 would show that we categorically ruled therein that the 20% discount is a valid exercise
of police power. Thus, even if the current law, through its tax deduction scheme (which abandoned the
tax credit scheme under the previous law), does not provide for a peso for peso reimbursement of the
20% discount given by private establishments, no constitutional infirmity obtains because, being a
valid exercise of police power, payment of just compensation is not warranted. We have carefully
reviewed the basis of our ruling in Carlos Superdrug Corporation53 and we find no cogent reason to
overturn, modify or abandon it. We also note that petitioners arguments are a mere reiteration of
those raised and resolved in Carlos Superdrug Corporation.54 Thus, we sustain Carlos Superdrug

Corporation.55
Nonetheless, we deem it proper, in what follows, to amplify our explanation in Carlos Superdrug
Corporation56 as to why the 20% discount is a valid exercise of police power and why it may not,
under the specific circumstances of this case, be considered as an exercise of the power of eminent
domain contrary to the obiter in Central Luzon Drug Corporation.57
Police power versus eminent domain.
Police power is the inherent power of the State to regulate or to restrain the use of liberty and
property for public welfare.58
The only limitation is that the restriction imposed should be reasonable, not oppressive.59
In other words, to be a valid exercise of police power, it must have a lawful subject or objective and
a lawful method of accomplishing the goal.60
Under the police power of the State, "property rights of individuals may be subjected to restraints
and burdens in order to fulfill the objectives of the government."61
The State "may interfere with personal liberty, property, lawful businesses and occupations to
promote the general welfare [as long as] the interference [is] reasonable and not arbitrary."62
Eminent domain, on the other hand, is the inherent power of the State to take or appropriate
private property for public use.63
The Constitution, however, requires that private property shall not be taken without due process of
law and the payment of just compensation.64
Traditional distinctions exist between police power and eminent domain. In the exercise of police
power, a property right is impaired by regulation,65 or the use of property is merely prohibited,
regulated or restricted66 to promote public welfare. In such cases, there is no compensable taking,
hence, payment of just compensation is not required. Examples of these regulations are property
condemned for being noxious or intended for noxious purposes (e.g., a building on the verge of
collapse to be demolished for public safety, or obscene materials to be destroyed in the interest of
public morals)67 as well as zoning ordinances prohibiting the use of property for purposes injurious to
the health, morals or safety of the community (e.g., dividing a citys territory into residential and
industrial areas).68
It has, thus, been observed that, in the exercise of police power (as distinguished from eminent
domain), although the regulation affects the right of ownership, none of the bundle of rights which
constitute ownership is appropriated for use by or for the benefit of the public.69
On the other hand, in the exercise of the power of eminent domain, property interests are
appropriated and applied to some public purpose which necessitates the payment of just
compensation therefor. Normally, the title to and possession of the property are transferred to the
expropriating authority. Examples include the acquisition of lands for the construction of public
highways as well as agricultural lands acquired by the government under the agrarian reform law for
redistribution to qualified farmer beneficiaries. However, it is a settled rule that the acquisition of title
or total destruction of the property is not essential for "taking" under the power of eminent domain to
be present.70
Examples of these include establishment of easements such as where the land owner is perpetually
deprived of his proprietary rights because of the hazards posed by electric transmission lines
constructed above his property71 or the compelled interconnection of the telephone system between
the government and a private company.72
In these cases, although the private property owner is not divested of ownership or possession,
payment of just compensation is warranted because of the burden placed on the property for the use
or benefit of the public.
The 20% senior citizen discount is an exercise of police power.

It may not always be easy to determine whether a challenged governmental act is an exercise of
police power or eminent domain. The very nature of police power as elastic and responsive to various
social conditions73 as well as the evolving meaning and scope of public use74 and just
compensation75 in eminent domain evinces that these are not static concepts. Because of the
exigencies of rapidly changing times, Congress may be compelled to adopt or experiment with
different measures to promote the general welfare which may not fall squarely within the traditionally
recognized categories of police power and eminent domain. The judicious approach, therefore, is to
look at the nature and effects of the challenged governmental act and decide, on the basis thereof,
whether the act is the exercise of police power or eminent domain. Thus, we now look at the nature
and effects of the 20% discount to determine if it constitutes an exercise of police power or eminent
domain. The 20% discount is intended to improve the welfare of senior citizens who, at their age, are
less likely to be gainfully employed, more prone to illnesses and other disabilities, and, thus, in need of
subsidy in purchasing basic commodities. It may not be amiss to mention also that the discount serves
to honor senior citizens who presumably spent the productive years of their lives on contributing to the
development and progress of the nation. This distinct cultural Filipino practice of honoring the elderly is
an integral part of this law. As to its nature and effects, the 20% discount is a regulation affecting the
ability of private establishments to price their products and services relative to a special class of
individuals, senior citizens, for which the Constitution affords preferential concern.76
In turn, this affects the amount of profits or income/gross sales that a private establishment can
derive from senior citizens. In other words, the subject regulation affects the pricing, and, hence, the
profitability of a private establishment. However, it does not purport to appropriate or burden specific
properties, used in the operation or conduct of the business of private establishments, for the use or
benefit of the public, or senior citizens for that matter, but merely regulates the pricing of goods and
services relative to, and the amount of profits or income/gross sales that such private establishments
may derive from, senior citizens. The subject regulation may be said to be similar to, but with
substantial distinctions from, price control or rate of return on investment control laws which are
traditionally regarded as police power measures.77
These laws generally regulate public utilities or industries/enterprises imbued with public interest in
order to protect consumers from exorbitant or unreasonable pricing as well as temper corporate greed
by controlling the rate of return on investment of these corporations considering that they have a
monopoly over the goods or services that they provide to the general public. The subject regulation
differs therefrom in that (1) the discount does not prevent the establishments from adjusting the level
of prices of their goods and services, and (2) the discount does not apply to all customers of a given
establishment but only to the class of senior citizens. Nonetheless, to the degree material to the
resolution of this case, the 20% discount may be properly viewed as belonging to the category of price
regulatory measures which affect the profitability of establishments subjected thereto. On its face,
therefore, the subject regulation is a police power measure. The obiter in Central Luzon Drug
Corporation,78 however, describes the 20% discount as an exercise of the power of eminent domain
and the tax credit, under the previous law, equivalent to the amount of discount given as the just
compensation therefor. The reason is that (1) the discount would have formed part of the gross sales of
the establishment were it not for the law prescribing the 20% discount, and (2) the permanent
reduction in total revenues is a forced subsidy corresponding to the taking of private property for
public use or benefit. The flaw in this reasoning is in its premise. It presupposes that the subject
regulation, which impacts the pricing and, hence, the profitability of a private establishment,
automatically amounts to a deprivation of property without due process of law. If this were so, then all
price and rate of return on investment control laws would have to be invalidated because they impact,
at some level, the regulated establishments profits or income/gross sales, yet there is no provision for
payment of just compensation. It would also mean that overnment cannot set price or rate of return on
investment limits, which reduce the profits or income/gross sales of private establishments, if no just
compensation is paid even if the measure is not confiscatory. The obiter is, thus, at odds with the
settled octrine that the State can employ police power measures to regulate the pricing of goods and
services, and, hence, the profitability of business establishments in order to pursue legitimate State
objectives for the common good, provided that the regulation does not go too far as to amount to
"taking."79
In City of Manila v. Laguio, Jr.,80 we recognized that x x x a taking also could be found if
government regulation of the use of property went "too far." When regulation reaches a certain
magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation
to support the act. While property may be regulated to a certain extent, if regulation goes too far it will
be recognized as a taking. No formula or rule can be devised to answer the questions of what is too far
and when regulation becomes a taking. In Mahon, Justice Holmes recognized that it was "a question of
degree and therefore cannot be disposed of by general propositions." On many other occasions as
well, the U.S. Supreme Court has said that the issue of when regulation constitutes a taking is a matter
of considering the facts in each case. The Court asks whether justice and fairness require that the
economic loss caused by public action must be compensated by the government and thus borne by

the public as a whole, or whether the loss should remain concentrated on those few persons subject to
the public action.81
The impact or effect of a regulation, such as the one under consideration, must, thus, be
determined on a case-to-case basis. Whether that line between permissible regulation under police
power and "taking" under eminent domain has been crossed must, under the specific circumstances of
this case, be subject to proof and the one assailing the constitutionality of the regulation carries the
heavy burden of proving that the measure is unreasonable, oppressive or confiscatory. The timehonored rule is that the burden of proving the unconstitutionality of a law rests upon the one assailing
it and "the burden becomes heavier when police power is at issue."82
The 20% senior citizen discount has not been shown to be unreasonable, oppressive or confiscatory.
In Alalayan v. National Power Corporation,83 petitioners, who were franchise holders of electric
plants, challenged the validity of a law limiting their allowable net profits to no more than 12% per
annum of their investments plus two-month operating expenses. In rejecting their plea, we ruled that,
in an earlier case, it was found that 12% is a reasonable rate of return and that petitioners failed to
prove that the aforesaid rate is confiscatory in view of the presumption of constitutionality.84
We adopted a similar line of reasoning in Carlos Superdrug Corporation85 when we ruled that
petitioners therein failed to prove that the 20% discount is arbitrary, oppressive or confiscatory. We
noted that no evidence, such as a financial report, to establish the impact of the 20% discount on the
overall profitability of petitioners was presented in order to show that they would be operating at a loss
due to the subject regulation or that the continued implementation of the law would be unconscionably
detrimental to the business operations of petitioners. In the case at bar, petitioners proceeded with a
hypothetical computation of the alleged loss that they will suffer similar to what the petitioners in
Carlos Superdrug Corporation86 did. Petitioners went directly to this Court without first establishing the
factual bases of their claims. Hence, the present recourse must, likewise, fail. Because all laws enjoy
the presumption of constitutionality, courts will uphold a laws validity if any set of facts may be
conceived to sustain it.87
On its face, we find that there are at least two conceivable bases to sustain the subject regulations
validity absent clear and convincing proof that it is unreasonable, oppressive or confiscatory. Congress
may have legitimately concluded that business establishments have the capacity to absorb a decrease
in profits or income/gross sales due to the 20% discount without substantially affecting the reasonable
rate of return on their investments considering (1) not all customers of a business establishment are
senior citizens and (2) the level of its profit margins on goods and services offered to the general
public. Concurrently, Congress may have, likewise, legitimately concluded that the establishments,
which will be required to extend the 20% discount, have the capacity to revise their pricing strategy so
that whatever reduction in profits or income/gross sales that they may sustain because of sales to
senior citizens, can be recouped through higher mark-ups or from other products not subject of
discounts. As a result, the discounts resulting from sales to senior citizens will not be confiscatory or
unduly oppressive. In sum, we sustain our ruling in Carlos Superdrug Corporation88 that the 20%
senior citizen discount and tax deduction scheme are valid exercises of police power of the State
absent a clear showing that it is arbitrary, oppressive or confiscatory.
Conclusion
In closing, we note that petitioners hypothesize, consistent with our previous ratiocinations, that the
discount will force establishments to raise their prices in order to compensate for its impact on overall
profits or income/gross sales. The general public, or those not belonging to the senior citizen class, are,
thus, made to effectively shoulder the subsidy for senior citizens. This, in petitioners view, is unfair.
As already mentioned, Congress may be reasonably assumed to have foreseen this eventuality. But,
more importantly, this goes into the wisdom, efficacy and expediency of the subject law which is not
proper for judicial review. In a way, this law pursues its social equity objective in a non-traditional
manner unlike past and existing direct subsidy programs of the government for the poor and
marginalized sectors of our society. Verily, Congress must be given sufficient leeway in formulating
welfare legislations given the enormous challenges that the government faces relative to, among
others, resource adequacy and administrative capability in implementing social reform measures
which aim to protect and uphold the interests of those most vulnerable in our society. In the process,
the individual, who enjoys the rights, benefits and privileges of living in a democratic polity, must bear
his share in supporting measures intended for the common good. This is only fair. In fine, without the
requisite showing of a clear and unequivocal breach of the Constitution, the validity of the assailed law
must be sustained.

Refutation of the Dissent

The main points of Justice Carpios Dissent may be summarized as follows: (1) the discussion on
eminent domain in Central Luzon Drug Corporation89 is not obiter dicta ; (2) allowable taking, in police
power, is limited to property that is destroyed or placed outside the commerce of man for public
welfare; (3) the amount of mandatory discount is private property within the ambit of Article III, Section
990 of the Constitution; and (4) the permanent reduction in a private establishments total revenue,
arising from the mandatory discount, is a taking of private property for public use or benefit, hence, an
exercise of the power of eminent domain requiring the payment of just compensation. I We maintain
that the discussion on eminent domain in Central Luzon Drug Corporation91 is obiter dicta. As
previously discussed, in Central Luzon Drug Corporation,92 the BIR, pursuant to Sections 2.i and 4 of
RR No. 2-94, treated the senior citizen discount in the previous law, RA 7432, as a tax deduction
instead of a tax credit despite the clear provision in that law which stated
SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the following:
a) The grant of twenty percent (20%) discount from all establishments relative to utilization of
transportation services, hotels and similar lodging establishment, restaurants and recreation centers
and purchase of medicines anywhere in the country: Provided, That private establishments may claim
the cost as tax credit; (Emphasis supplied)
Thus, the Court ruled that the subject revenue regulation violated the law, viz:
The 20 percent discount required by the law to be given to senior citizens is a tax credit, not merely
a tax deduction from the gross income or gross sale of the establishment concerned. A tax credit is
used by a private establishment only after the tax has been computed; a tax deduction, before the tax
is computed. RA 7432 unconditionally grants a tax credit to all covered entities. Thus, the provisions of
the revenue regulation that withdraw or modify such grant are void. Basic is the rule that
administrative regulations cannot amend or revoke the law.93
As can be readily seen, the discussion on eminent domain was not necessary in order to arrive at
this conclusion. All that was needed was to point out that the revenue regulation contravened the law
which it sought to implement. And, precisely, this was done in Central Luzon Drug Corporation 94 by
comparing the wording of the previous law vis--vis the revenue regulation; employing the rules of
statutory construction; and applying the settled principle that a regulation cannot amend the law it
seeks to implement. A close reading of Central Luzon Drug Corporation95 would show that the Court
went on to state that the tax credit "can be deemed" as just compensation only to explain why the
previous law provides for a tax credit instead of a tax deduction. The Court surmised that the tax credit
was a form of just compensation given to the establishments covered by the 20% discount. However,
the reason why the previous law provided for a tax credit and not a tax deduction was not necessary to
resolve the issue as to whether the revenue regulation contravenes the law. Hence, the discussion on
eminent domain is obiter dicta.
A court, in resolving cases before it, may look into the possible purposes or reasons that impelled
the enactment of a particular statute or legal provision. However, statements made relative thereto
are not always necessary in resolving the actual controversies presented before it. This was the case in
Central Luzon Drug Corporation96 resulting in that unfortunate statement that the tax credit "can be
deemed" as just compensation. This, in turn, led to the erroneous conclusion, by deductive reasoning,
that the 20% discount is an exercise of the power of eminent domain. The Dissent essentially adopts
this theory and reasoning which, as will be shown below, is contrary to settled principles in police
power and eminent domain analysis. II The Dissent discusses at length the doctrine on "taking" in
police power which occurs when private property is destroyed or placed outside the commerce of man.
Indeed, there is a whole class of police power measures which justify the destruction of private
property in order to preserve public health, morals, safety or welfare. As earlier mentioned, these
would include a building on the verge of collapse or confiscated obscene materials as well as those
mentioned by the Dissent with regard to property used in violating a criminal statute or one which
constitutes a nuisance. In such cases, no compensation is required. However, it is equally true that
there is another class of police power measures which do not involve the destruction of private
property but merely regulate its use. The minimum wage law, zoning ordinances, price control laws,
laws regulating the operation of motels and hotels, laws limiting the working hours to eight, and the
like would fall under this category. The examples cited by the Dissent, likewise, fall under this category:
Article 157 of the Labor Code, Sections 19 and 18 of the Social Security Law, and Section 7 of the PagIBIG Fund Law. These laws merely regulate or, to use the term of the Dissent, burden the conduct of
the affairs of business establishments. In such cases, payment of just compensation is not required
because they fall within the sphere of permissible police power measures. The senior citizen discount

law falls under this latter category. III The Dissent proceeds from the theory that the permanent
reduction of profits or income/gross sales, due to the 20% discount, is a "taking" of private property for
public purpose without payment of just compensation. At the outset, it must be emphasized that
petitioners never presented any evidence to establish that they were forced to suffer enormous losses
or operate at a loss due to the effects of the assailed law. They came directly to this Court and
provided a hypothetical computation of the loss they would allegedly suffer due to the operation of the
assailed law. The central premise of the Dissents argument that the 20% discount results in a
permanent reduction in profits or income/gross sales, or forces a business establishment to operate at
a loss is, thus, wholly unsupported by competent evidence. To be sure, the Court can invalidate a law
which, on its face, is arbitrary, oppressive or confiscatory.97
But this is not the case here.
In the case at bar, evidence is indispensable before a determination of a constitutional violation can
be made because of the following reasons. First, the assailed law, by imposing the senior citizen
discount, does not take any of the properties used by a business establishment like, say, the land on
which a manufacturing plant is constructed or the equipment being used to produce goods or services.
Second, rather than taking specific properties of a business establishment, the senior citizen discount
law merely regulates the prices of the goods or services being sold to senior citizens by mandating a
20% discount. Thus, if a product is sold at P10.00 to the general public, then it shall be sold at P8.00
( i.e., P10.00 less 20%) to senior citizens. Note that the law does not impose at what specific price the
product shall be sold, only that a 20% discount shall be given to senior citizens based on the price set
by the business establishment. A business establishment is, thus, free to adjust the prices of the goods
or services it provides to the general public. Accordingly, it can increase the price of the above product
to P20.00 but is required to sell it at P16.00 (i.e. , P20.00 less 20%) to senior citizens. Third, because
the law impacts the prices of the goods or services of a particular establishment relative to its sales to
senior citizens, its profits or income/gross sales are affected. The extent of the impact would, however,
depend on the profit margin of the business establishment on a particular good or service. If a product
costs P5.00 to produce and is sold at P10.00, then the profit98 is P5.0099 or a profit margin100 of
50%.101
Under the assailed law, the aforesaid product would have to be sold at P8.00 to senior citizens yet
the business would still earn P3.00102 or a 30%103 profit margin. On the other hand, if the product
costs P9.00 to produce and is required to be sold at P8.00 to senior citizens, then the business would
experience a loss of P1.00.104
But note that since not all customers of a business establishment are senior citizens, the business
establishment may continue to earn P1.00 from non-senior citizens which, in turn, can offset any loss
arising from sales to senior citizens.
Fourth, when the law imposes the 20% discount in favor of senior citizens, it does not prevent the
business establishment from revising its pricing strategy.
By revising its pricing strategy, a business establishment can recoup any reduction of profits or
income/gross sales which would otherwise arise from the giving of the 20% discount. To illustrate,
suppose A has two customers: X, a senior citizen, and Y, a non-senior citizen. Prior to the law, A sells
his products at P10.00 a piece to X and Y resulting in income/gross sales of P20.00 (P10.00 + P10.00).
With the passage of the law, A must now sell his product to X at P8.00 (i.e., P10.00 less 20%) so that
his income/gross sales would be P18.00 (P8.00 + P10.00) or lower by P2.00. To prevent this from
happening, A decides to increase the price of his products to P11.11 per piece. Thus, he sells his
product to X at P8.89 (i.e. , P11.11 less 20%) and to Y at P11.11. As a result, his income/gross sales
would still be P20.00105 (P8.89 + P11.11). The capacity, then, of business establishments to revise
their pricing strategy makes it possible for them not to suffer any reduction in profits or income/gross
sales, or, in the alternative, mitigate the reduction of their profits or income/gross sales even after the
passage of the law. In other words, business establishments have the capacity to adjust their prices so
that they may remain profitable even under the operation of the assailed law.
The Dissent, however, states that The explanation by the majority that private establishments can
always increase their prices to recover the mandatory discount will only encourage private
establishments to adjust their prices upwards to the prejudice of customers who do not enjoy the 20%
discount. It was likewise suggested that if a company increases its prices, despite the application of
the 20% discount, the establishment becomes more profitable than it was before the implementation
of R.A. 7432. Such an economic justification is self-defeating, for more consumers will suffer from the
price increase than will benefit from the 20% discount. Even then, such ability to increase prices
cannot legally validate a violation of the eminent domain clause.106

But, if it is possible that the business establishment, by adjusting its prices, will suffer no reduction
in its profits or income/gross sales (or suffer some reduction but continue to operate profitably) despite
giving the discount, what would be the basis to strike down the law? If it is possible that the business
establishment, by adjusting its prices, will not be unduly burdened, how can there be a finding that the
assailed law is an unconstitutional exercise of police power or eminent domain? That there may be a
burden placed on business establishments or the consuming public as a result of the operation of the
assailed law is not, by itself, a ground to declare it unconstitutional for this goes into the wisdom and
expediency of the law.
The cost of most, if not all, regulatory measures of the government on business establishments is
ultimately passed on to the consumers but that, by itself, does not justify the wholesale nullification of
these measures. It is a basic postulate of our democratic system of government that the Constitution is
a social contract whereby the people have surrendered their sovereign powers to the State for the
common good.107
All persons may be burdened by regulatory measures intended for the common good or to serve
some important governmental interest, such as protecting or improving the welfare of a special class
of people for which the Constitution affords preferential concern. Indubitably, the one assailing the law
has the heavy burden of proving that the regulation is unreasonable, oppressive or confiscatory, or has
gone "too far" as to amount to a "taking." Yet, here, the Dissent would have this Court nullify the law
without any proof of such nature.
Further, this Court is not the proper forum to debate the economic theories or realities that impelled
Congress to shift from the tax credit to the tax deduction scheme. It is not within our power or
competence to judge which scheme is more or less burdensome to business establishments or the
consuming public and, thereafter, to choose which scheme the State should use or pursue. The shift
from the tax credit to tax deduction scheme is a policy determination by Congress and the Court will
respect it for as long as there is no showing, as here, that the subject regulation has transgressed
constitutional limitations. Unavoidably, the lack of evidence constrains the Dissent to rely on
speculative and hypothetical argumentation when it states that the 20% discount is a significant
amount and not a minimal loss (which erroneously assumes that the discount automatically results in a
loss when it is possible that the profit margin is greater than 20% and/or the pricing strategy can be
revised to prevent or mitigate any reduction in profits or income/gross sales as illustrated above), 108
and not all private establishments make a 20% profit margin (which conversely implies that there are
those who make more and, thus, would not be greatly affected by this regulation).109
In fine, because of the possible scenarios discussed above, we cannot assume that the 20%
discount results in a permanent reduction in profits or income/gross sales, much less that business
establishments are forced to operate at a loss under the assailed law. And, even if we gratuitously
assume that the 20% discount results in some degree of reduction in profits or income/gross sales, we
cannot assume that such reduction is arbitrary, oppressive or confiscatory. To repeat, there is no actual
proof to back up this claim, and it could be that the loss suffered by a business establishment was
occasioned through its fault or negligence in not adapting to the effects of the assailed law. The law
uniformly applies to all business establishments covered thereunder. There is, therefore, no unjust
discrimination as the aforesaid business establishments are faced with the same constraints. The
necessity of proof is all the more pertinent in this case because, as similarly observed by Justice
Velasco in his Concurring Opinion, the law has been in operation for over nine years now. However, the
grim picture painted by petitioners on the unconscionable losses to be indiscriminately suffered by
business establishments, which should have led to the closure of numerous business establishments,
has not come to pass. Verily, we cannot invalidate the assailed law based on assumptions and
conjectures. Without adequate proof, the presumption of constitutionality must prevail. IV At this
juncture, we note that the Dissent modified its original arguments by including a new paragraph, to
wit:
Section 9, Article III of the 1987 Constitution speaks of private property without any distinction. It
does not state that there should be profit before the taking of property is subject to just compensation.
The private property referred to for purposes of taking could be inherited, donated, purchased,
mortgaged, or as in this case, part of the gross sales of private establishments. They are all private
property and any taking should be attended by corresponding payment of just compensation. The 20%
discount granted to senior citizens belong to private establishments, whether these establishments
make a profit or suffer a loss. In fact, the 20% discount applies to non-profit establishments like
country, social, or golf clubs which are open to the public and not only for exclusive membership. The
issue of profit or loss to the establishments is immaterial.110
Two things may be said of this argument. First, it contradicts the rest of the arguments of the

Dissent. After it states that the issue of profit or loss is immaterial, the Dissent proceeds to argue that
the 20% discount is not a minimal loss111 and that the 20% discount forces business establishments
to operate at a loss.112
Even the obiter in Central Luzon Drug Corporation,113 which the Dissent essentially adopts and
relies on, is premised on the permanent reduction of total revenues and the loss that business
establishments will be forced to suffer in arguing that the 20% discount constitutes a "taking" under
the power of eminent domain. Thus, when the Dissent now argues that the issue of profit or loss is
immaterial, it contradicts itself because it later argues, in order to justify that there is a "taking" under
the power of eminent domain in this case, that the 20% discount forces business establishments to
suffer a significant loss or to operate at a loss. Second, this argument suffers from the same flaw as
the Dissent's original arguments. It is an erroneous characterization of the 20% discount. According to
the Dissent, the 20% discount is part of the gross sales and, hence, private property belonging to
business establishments. However, as previously discussed, the 20% discount is not private property
actually owned and/or used by the business establishment. It should be distinguished from properties
like lands or buildings actually used in the operation of a business establishment which, if appropriated
for public use, would amount to a "taking" under the power of eminent domain. Instead, the 20%
discount is a regulatory measure which impacts the pricing and, hence, the profitability of business
establishments. At the time the discount is imposed, no particular property of the business
establishment can be said to be "taken." That is, the State does not acquire or take anything from the
business establishment in the way that it takes a piece of private land to build a public road. While the
20% discount may form part of the potential profits or income/gross sales114 of the business
establishment, as similarly characterized by Justice Bersamin in his Concurring Opinion, potential
profits or income/gross sales are not private property, specifically cash or money, already belonging to
the business establishment. They are a mere expectancy because they are potential fruits of the
successful conduct of the business. Prior to the sale of goods or services, a business establishment
may be subject to State regulations, such as the 20% senior citizen discount, which may impact the
level or amount of profits or income/gross sales that can be generated by such establishment. For this
reason, the validity of the discount is to be determined based on its overall effects on the operations of
the business establishment.
Again, as previously discussed, the 20% discount does not automatically result in a 20% reduction
in profits, or, to align it with the term used by the Dissent, the 20% discount does not mean that a 20%
reduction in gross sales necessarily results. Because (1) the profit margin of a product is not
necessarily less than 20%, (2) not all customers of a business establishment are senior citizens, and
(3) the establishment may revise its pricing strategy, such reduction in profits or income/gross sales
may be prevented or, in the alternative, mitigated so that the business establishment continues to
operate profitably. Thus, even if we gratuitously assume that some degree of reduction in profits or
income/gross sales occurs because of the 20% discount, it does not follow that the regulation is
unreasonable, oppressive or confiscatory because the business establishment may make the
necessary adjustments to continue to operate profitably. No evidence was presented by petitioners to
show otherwise. In fact, no evidence was presented by petitioners at all. Justice Leonen, in his
Concurring and Dissenting Opinion, characterizes "profits" (or income/gross sales) as an inchoate right.
Another way to view it, as stated by Justice Velasco in his Concurring Opinion, is that the business
establishment merely has a right to profits. The Constitution adverts to it as the right of an enterprise
to a reasonable return on investment.115
Undeniably, this right, like any other right, may be regulated under the police power of the State to
achieve important governmental objectives like protecting the interests and improving the welfare of
senior citizens. It should be noted though that potential profits or income/gross sales are relevant in
police power and eminent domain analyses because they may, in appropriate cases, serve as an
indicia when a regulation has gone "too far" as to amount to a "taking" under the power of eminent
domain. When the deprivation or reduction of profits or income/gross sales is shown to be
unreasonable, oppressive or confiscatory, then the challenged governmental regulation may be
nullified for being a "taking" under the power of eminent domain. In such a case, it is not profits or
income/gross sales which are actually taken and appropriated for public use. Rather, when the
regulation causes an establishment to incur losses in an unreasonable, oppressive or confiscatory
manner, what is actually taken is capital and the right of the business establishment to a reasonable
return on investment. If the business losses are not halted because of the continued operation of the
regulation, this eventually leads to the destruction of the business and the total loss of the capital
invested therein. But, again, petitioners in this case failed to prove that the subject regulation is
unreasonable, oppressive or confiscatory.
V.
The Dissent further argues that we erroneously used price and rate of return on investment control

laws to justify the senior citizen discount law. According to the Dissent, only profits from industries
imbued with public interest may be regulated because this is a condition of their franchises. Profits of
establishments without franchises cannot be regulated permanently because there is no law regulating
their profits. The Dissent concludes that the permanent reduction of total revenues or gross sales of
business establishments without franchises is a taking of private property under the power of eminent
domain. In making this argument, it is unfortunate that the Dissent quotes only a portion of the
ponencia The subject regulation may be said to be similar to, but with substantial distinctions from,
price control or rate of return on investment control laws which are traditionally regarded as police
power measures. These laws generally regulate public utilities or industries/enterprises imbued with
public interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations considering that
they have a monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior citizens. x x x116
The above paragraph, in full, states
The subject regulation may be said to be similar to, but with substantial distinctions from, price
control or rate of return on investment control laws which are traditionally regarded as police power
measures. These laws generally regulate public utilities or industries/enterprises imbued with public
interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper
corporate greed by controlling the rate of return on investment of these corporations considering that
they have a monopoly over the goods or services that they provide to the general public. The subject
regulation differs therefrom in that (1) the discount does not prevent the establishments from
adjusting the level of prices of their goods and services, and (2) the discount does not apply to all
customers of a given establishment but only to the class of senior citizens.
Nonetheless, to the degree material to the resolution of this case, the 20% discount may be
properly viewed as belonging to the category of price regulatory measures which affects the
profitability of establishments subjected thereto. (Emphasis supplied)
The point of this paragraph is to simply show that the State has, in the past, regulated prices and
profits of business establishments. In other words, this type of regulatory measures is traditionally
recognized as police power measures so that the senior citizen discount may be considered as a police
power measure as well. What is more, the substantial distinctions between price and rate of return on
investment control laws vis--vis the senior citizen discount law provide greater reason to uphold the
validity of the senior citizen discount law. As previously discussed, the ability to adjust prices allows
the establishment subject to the senior citizen discount to prevent or mitigate any reduction of profits
or income/gross sales arising from the giving of the discount. In contrast, establishments subject to
price and rate of return on investment control laws cannot adjust prices accordingly. Certainly, there is
no intention to say that price and rate of return on investment control laws are the justification for the
senior citizen discount law. Not at all. The justification for the senior citizen discount law is the plenary
powers of Congress. The legislative power to regulate business establishments is broad and covers a
wide array of areas and subjects. It is well within Congress legislative powers to regulate the profits or
income/gross sales of industries and enterprises, even those without franchises. For what are
franchises but mere legislative enactments? There is nothing in the Constitution that prohibits
Congress from regulating the profits or income/gross sales of industries and enterprises without
franchises. On the contrary, the social justice provisions of the Constitution enjoin the State to regulate
the "acquisition, ownership, use, and disposition" of property and its increments.117
This may cover the regulation of profits or income/gross sales of all businesses, without
qualification, to attain the objective of diffusing wealth in order to protect and enhance the right of all
the people to human dignity.118
Thus, under the social justice policy of the Constitution, business establishments may be compelled
to contribute to uplifting the plight of vulnerable or marginalized groups in our society provided that
the regulation is not arbitrary, oppressive or confiscatory, or is not in breach of some specific
constitutional limitation. When the Dissent, therefore, states that the "profits of private establishments
which are non-franchisees cannot be regulated permanently, and there is no such law regulating their
profits permanently,"119 it is assuming what it ought to prove. First, there are laws which, in effect,
permanently regulate profits or income/gross sales of establishments without franchises, and RA 9257
is one such law. And, second, Congress can regulate such profits or income/gross sales because, as
previously noted, there is nothing in the Constitution to prevent it from doing so. Here, again, it must
be emphasized that petitioners failed to present any proof to show that the effects of the assailed law

on their operations has been unreasonable, oppressive or confiscatory. The permanent regulation of
profits or income/gross sales of business establishments, even those without franchises, is not as
uncommon as the Dissent depicts it to be. For instance, the minimum wage law allows the State to set
the minimum wage of employees in a given region or geographical area. Because of the added labor
costs arising from the minimum wage, a permanent reduction of profits or income/gross sales would
result, assuming that the employer does not increase the prices of his goods or services. To illustrate,
suppose it costs a company P5.00 to produce a product and it sells the same at P10.00 with a 50%
profit margin. Later, the State increases the minimum wage. As a result, the company incurs greater
labor costs so that it now costs P7.00 to produce the same product. The profit per product of the
company would be reduced to P3.00 with a profit margin of 30%. The net effect would be the same as
in the earlier example of granting a 20% senior citizen discount. As can be seen, the minimum wage
law could, likewise, lead to a permanent reduction of profits. Does this mean that the minimum wage
law should, likewise, be declared unconstitutional on the mere plea that it results in a permanent
reduction of profits? Taking it a step further, suppose the company decides to increase the price of its
product in order to offset the effects of the increase in labor cost; does this mean that the minimum
wage law, following the reasoning of the Dissent, is unconstitutional because the consuming public is
effectively made to subsidize the wage of a group of laborers, i.e., minimum wage earners? The same
reasoning can be adopted relative to the examples cited by the Dissent which, according to it, are valid
police power regulations. Article 157 of the Labor Code, Sections 19 and 18 of the Social Security Law,
and Section 7 of the Pag-IBIG Fund Law would effectively increase the labor cost of a business
establishment. This would, in turn, be integrated as part of the cost of its goods or services. Again, if
the establishment does not increase its prices, the net effect would be a permanent reduction in its
profits or income/gross sales. Following the reasoning of the Dissent that "any form of permanent
taking of private property (including profits or income/gross sales)120 is an exercise of eminent
domain that requires the State to pay just compensation,"121 then these statutory provisions would,
likewise, have to be declared unconstitutional. It does not matter that these benefits are deemed part
of the employees legislated wages because the net effect is the same, that is, it leads to higher labor
costs and a permanent reduction in the profits or income/gross sales of the business
establishments.122
The point then is this most, if not all, regulatory measures imposed by the State on business
establishments impact, at some level, the latters prices and/or profits or income/gross sales.123
If the Court were to sustain the Dissents theory, then a wholesale nullification of such measures
would inevitably result. The police power of the State and the social justice provisions of the
Constitution would, thus, be rendered nugatory. There is nothing sacrosanct about profits or
income/gross sales. This, we made clear in Carlos Superdrug Corporation:124
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the
provision in question, there is no basis for its nullification in view of the presumption of validity which
every law has in its favor.
xxxx
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive
pricing component of the business. While the Constitution protects property rights petitioners must the
realities of business and the State, in the exercise of police power, can intervene in the operations of a
business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides
the percept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continously serve as a reminder for the
promotion of public good.
Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means employed
in invoking the active participation of the private sector, in order to achieve the purpose or objective of
the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of R.A. No. 9257 is
arbitrary, and that the continued implementation of the same would be unconscionably detrimental to
petitioners, the Court will refrain form quashing a legislative act.125
In conclusion, we maintain that the correct rule in determining whether the subject regulatory
measure has amounted to a "taking" under the power of eminent domain is the one laid down in

Alalayan v. National Power Corporation126 and followed in Carlos Superdurg Corporation127 consistent
with long standing principles in police power and eminent domain analysis. Thus, the deprivation or
reduction of profits or income. Gross sales must be clearly shown to be unreasonable, oppressive or
confiscatory. Under the specific circumstances of this case, such determination can only be made upon
the presentation of competent proof which petitioners failed to do. A law, which has been in operation
for many years and promotes the welfare of a group accorded special concern by the Constitution,
cannot and should not be summarily invalidated on a mere allegation that it reduces the profits or
income/gross sales of business establishments.
WHEREFORE, the Petition is hereby DISMISSED for lack of merit.
SO ORDERED.

FIRST DIVISION
G.R. No. 167290, November 26, 2014
HERMANO OIL MANUFACTURING & SUGAR CORPORATION, Petitioner, v. TOLL REGULATORY BOARD,
ENGR. JAIME S. DUMLAO, JR., PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (PNCC) AND
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), Respondents.
DECISION
BERSAMIN, J.:
The issue to be determined concerns the demand of the petitioner to have access to the North Luzon
Expressway (NLEX) by way of an easement of right of way. The demand was rebuffed by the respondents, and
upheld by both the trial and appellate courts.
The Case
On appeal by review on certiorari is the decision promulgated on October 27, 2004, 1 whereby the Court of Appeals
(CA) affirmed the dismissal of the petitioners complaint for specific performance by the Regional Trial Court (RTC) in
Malolos, Bulacan, Branch 7, through the order issued on March 6, 2002. 2
Antecedents
The petitioner owned a parcel of land located at the right side of the Sta. Rita Exit of the NLEX situated at Barangay
Sta. Rita, Guiguinto, Bulacan and covered by Transfer Certificate of Title (TCT) No. T-134222 in its name issued by
the Registry of Deeds of Bulacan. 3 The parcel of land was bounded by an access fence along the NLEX. In its letter
dated September 7, 2001,4 the petitioner requested that respondent Toll Regulatory Board (TRB) grant an easement
of right of way, contending that it had been totally deprived of the enjoyment and possession of its property by the
access fence that had barred its entry into and exit from the NLEX. On September 26, 2001, however, the TRB
denied the petitioners request, explaining thusly:chanroblesvirtuallawlibrary
It is with regret that we cannot favorably consider your clients request at this point in time. Said
request is inconsistent with the provision of Section 7.0 of Republic Act No. 2000, also known as the
Limited Access Highway Act. Moreover, allowing easement of right-of-way may have
detrimental/adverse effect on the scheduled rehabilitation and improvement of the North Luzon
Expressway Interchanges, as well as on the operational problems, i.e. traffic conflicts that may arise, if
approved.5
Thereafter, the petitioner sued the TRB and Engr. Jaime S. Dumlao, the TRBs Executive Director, in the RTC, 6
demanding specific performance, the grant of the easement of right of way and damages (Civil Case No. 37-M2002). The petitioner amended its complaint to implead the Philippine National Construction Corporation (PNCC)
and
the
Department
of
Public
Works
and
Highways
(DPWH)
as
indispensable
parties. 7

The petitioner alleged in its amended complaint that the access fence had totally deprived it of the use and
enjoyment of its property by preventing ingress and egress to its property; that the only access leading to its
property was the road network situated in front of its property; that it was thereby deprived of its property without
due process of law and just compensation; and that it was also denied equal protection of the law because adjacent
property owners had been given ingress and egress access to their properties. It prayed that the
RTC:chanroblesvirtuallawlibrary
1. Immediately issue a writ of preliminary injunction/temporary restraining order enjoining the
defendants, its agents and/or representatives from depriving plaintiff to ingress and egress of its
property;
2. After due hearing:chanroblesvirtuallawlibrary
a)
b)

Render

the

Granting

foregoing

writ

of

plaintiff

preliminary
a

right

injunction
of

perpetual;
way;

c) Declare the condemnation of plaintiffs property as null and void. Alternatively, plaintiff
prays that defendants be ordered to pay plaintiff a just and fair compensation of the
latters property in the amount of not less than Four Thousand Pesos (Ps. 4,000.00) per
square
meter;
d) To pay plaintiff the amount of THREE HUNDRED THOUSAND PESOS (Ps. 300,000.00)
and
Ps.
5,000.00
per
court
appearance
by
way
of
Attorneys
fees;
e) To pay plaintiff Moral and Exemplary Damages in the amount of Ps. 200,000.00; and
f) To pay plaintiff the costs of suit.
Plaintiff further prays for such other reliefs and remedies as may be deemed just and equitable

under the premises.8

Appearing for the TRB, the Office of the Solicitor General (OSG) filed a Motion to Dismiss with Opposition to the
Application for the Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction based on the
following grounds:9
I.
THE HONORABLE COURT HAS NO JURISDICTION OVER THE CASE
II.
THE PETITION STATES NO CAUSE OF ACTION CONSIDERING THAT:
D.
E.

F.

PLAINTIFF IS NOT THE REAL PARTY IN INTEREST

EASEMENT WILL NOT LIE BECAUSE THE LIMITED ACCESS TO THE NORTH LUZON
EXPRESSWAY IS ALLOWED UNDER REPUBLIC ACT 2000
THE STATE CANNOT BE SUED WITHOUT ITS CONSENT
III.

THE REQUISITES FOR THE ISSUANCE OF TEMPORARY RESTRAINING ORDER AND/OR WRIT OF
INJUNCTION ARE NOT PRESENT
IV.
THE COMPLAINT HAS NO LEGAL BASIS, THE PROPER REMEDY AVAILABLE IN THIS CASE IS NOT
COMPLAINT BUT A PETITION FOR CERTIORARI UNDER RULE 65 OF THE RULES OF COURT.

In its order dated March

follows:chanroblesvirtuallawlibrary

6,

2002,10

the

RTC

granted

the

motion

to

dismiss,

observing

as

The present action against the defendants Toll Regulatory Board and its Executive Director, Engr.
Jaime S. Dumlao, Jr., could be considered as a suit against the state without its consent as among the
reliefs prayed for in the complaint is to require the said defendants to pay, jointly and severally, a just
and reasonable compensation of the plaintiffs property which, if awarded in the judgment against said
defendants, would ultimately involve an appropriation by the state of the amount needed to pay the
compensation and damages so awarded. Moreover, as pointed out by the defendants-movants,
defendant Jaime S. Dumlao, Jr. is sued in his official capacity so that the instant complaint against him
is tantamount to a claim against the state which cannot be sued without its consent.
This principle applies with equal force as regards new defendant Department of Public Works and
Highways
(DPWH).
Defendant Philippine National Construction Corporation (PNCC), on the other hand, was impleaded as
additional defendant being the entity that operates the North Luzon Expressway and was primarily
responsible in depriving the plaintiff of the use and enjoyment of its property by reason of the
construction of the access or right of way fence that prevents ingress to and egress from the subject
property, considering further that the other defendants had refused to grant plaintiffs request for an
easement
of
right
of
way.
The main objective and prayer of the plaintiff is for this court to issue a writ of injunction that will
restrain the defendants from depriving it of ingress and egress to its property in question or to grant to
it
a
right
of
way
to
its
property.
Suffice it to say that the main relief sought by the plaintiff is beyond the jurisdiction of this court to
grant as provided for under Presidential Decree No. 1818 and Republic Act No. 8975 which essentially
prohibit the courts from issuing temporary restraining orders and/or writs of injunction against
government infrastructure projects, and which expressly declares any such TRO or writ of injunction
void
under
Section
3
of
R.A.
No.
8975.
In

view

of

all

WHEREFORE,

the
the

foregoing,

the

instant

motion

to

complaint

dismiss
is

is

hereby

hereby

GRANTED.
DISMISSED.

SO ORDERED.11
The

petitioner

sought

reconsideration,

but

the

RTC

denied

its

motion

on

July

25,

2002. 12

The petitioner appealed.13

Judgment of the CA
On October 27, 2004, the CA promulgated its assailed judgment, affirming the RTCs dismissal of the complaint, to
wit:chanroblesvirtuallawlibrary
The law is clear. Plaintiff-appellant does not deny that the NLEX is a limited access facility. Neither
did it put forward any reason why it should not be covered by the said law. Plaintiff-appellant,
therefore, cannot expect any court to issue a decision in its favor in violation of an existing law. The
Court further notes that plaintiff-appellant skirted this issue in its pleadings perhaps because it
recognizes the fact that its prayers in the complaint before the trial court is in violation of the said law.
Moreover, as pointed out by defendants-appellees (Rollo, p. 19 and 127-128), when plaintiff-appellant
acquired the property on December 14, 1999 (See: Records, p. 33), the NLEX was already in existence
and as a matter of fact Entry No. 189568 in the title indicated that a portion of the property was
already sold to the Republic of the Philippines (See: Dorsal portion, Records, p. 33). It is basic that a
person cannot demand an easement of right of way if the isolation of the property was due to owners
own act (Art. 649, NCC; Villanueva v Velasco, 346 SCRA 99 [2000]). In the present case, when the
plaintiff-appellant bought the property in 1999, the NLEX was already in existence and so was the
access fence. In short, its predecessors-in-interest allowed the property to be isolated. Plaintiffappellant
is
now
bound
by
the
acts
of
its
predecessors-in-interest.
Moreover, as admitted by plaintiff-appellant in its amended complaint, there is a road network in front
of the property which serves as its access (Records, p. 28). It is settled that to be able to demand a

compulsory right of way, the dominant estate must not have adequate access to a public highway
(Villanueva v Velasco, supra). Plaintiff-appellant did not complaint about the adequacy of the existing
road
works.
Also, as pointed out by defendants-appellees, the action below was one for specific performance which
is proper only in case of contractual breach. In the present case, plaintiff-appellant cannot claim that
defendants-appellees committed a breach of contract because there is precisely no contract between
them.
As to the matter of non-suability, the Court notes that while defendant-appellee PNCC is a government
owned and controlled corporation, the other defendants-appellees are either agencies of the State
(DPWH and TRB) or an employee of a government agency. Plaintiff-appellant argued that the principle
of non-suability of the state does not apply when the government acted in a non-governmental
capacity. The Court, however, notes that plaintiff-appellant merely cites cases to this effect but did not
put forward any argument why the maintenance of NLEX should be considered as a non-governmental
function. It cannot be denied that the maintenance of the highways is part of the necessary functions
of
the
government
of
maintaining
public
infrastructures.
Coming now to PNCC although it is not strictly a government agency, its function is a necessary
incident to a government function and, hence, it should likewise enjoy immunity from suit (See: Union
Insurance Society of Canton, Ltd. v Republic of the Philippines, 46 SCRA 120 [1972]).
As to the assertion that no expropriation proceeding was taken against the subject property, the Court
agrees with the PNCC that these arguments were not raised in the Court below and, hence, is no
longer proper at this stage. Moreover, the Court notes that the proper party to complain against the
alleged lack of proper expropriation proceeding is the previous owner, when portion of the property
was
sold
to
the
Republic
of
the
Philippines
in
1979.
WHEREFORE, the appealed Order dated March 6, 2002 of the Regional Trial Court of Malolos, Bulacan,
Branch
7,
in
Civil
Case
No.
37-M-2002
is
hereby
AFFIRMED.
SO ORDERED.14
Issues
The present appeal is anchored on the following grounds, namely:chanroblesvirtuallawlibrary
FIRST
THE DECISION OF THE COURT OF APPEALS IS REPUGNANT TO THE DUE PROCESS AND EQUAL
PROTECTION CLAUSE ENSHRINED IN OUR CONSTITUTION AND PREVAILING JURISPRUDENCE.
SECOND
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING THAT ENTRY NO.
189568 IN THE TITLE OF HEREIN PETITIONER WAS ALREADY IN EXISTENCE WHICH SHOWED THAT EVEN
BEFORE THE ACQUISITION OF THE PROPERTY IN 1999, THE NLEX WAS ALREADY IN EXISTENCE AND SO
WAS THE ACCESS FENCE. THUS, ITS PREDECESSORS-IN-INTEREST ALLOWED THE PROPERTY TO BE
ISOLATED.
THIRD
THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT RESPONDENT PNCC, ALTHOUGH NOT
STRICTLY A GOVERNMENT AGENCY, SHOULD LIKEWISE ENJOY IMMUNITY FROM SUIT. 15
The foregoing grounds boil down to the issue of whether Civil Case No. 37-M-2002 was properly dismissed.
Ruling
We

concur

with

both

lower

courts.

In our view, the TRB, Dumlao and the DPWH correctly invoked the doctrine of sovereign immunity in their favor. The
TRB and the DPWH performed purely or essentially government or public functions. As such, they were invested
with the inherent power of sovereignty. Being unincorporated agencies or entities of the National Government, they

could not be sued as such. On his part, Dumlao was acting as the agent of the TRB in respect of the matter
concerned.
In Air Transportation Office v. Ramos,16 we expounded on the doctrine of sovereign immunity in the following
manner:chanroblesvirtuallawlibrary
An unincorporated government agency without any separate juridical personality of its own enjoys
immunity from suit because it is invested with an inherent power of sovereignty. Accordingly, a claim
for damages against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is
violated. However, the need to distinguish between an unincorporated government agency performing
governmental function and one performing proprietary functions has arisen. The immunity has been
upheld in favor of the former because its function is governmental or incidental to such function; it has
not been upheld in favor of the latter whose function was not in pursuit of a necessary function of
government but was essentially a business.
Nonetheless, the petitioner properly argued that the PNCC, being a private business entity, was not immune
from suit. The PNCC was incorporated in 1966 under its original name of Construction Development Corporation of
the Philippines (CDCP) for a term of fifty years pursuant to the Corporation Code. 17 In 1983, the CDCP changed its
corporate name to the PNCC to reflect the extent of the Governments equity investment in the company, a
situation that came about after the government financial institutions converted their loans into equity following the
CDCPs inability to pay the loans. 18 Hence, the Government owned 90.3% of the equity of the PNCC, and only
9.70% of the PNCCs voting equity remained under private ownership. 19 Although the majority or controlling shares
of the PNCC belonged to the Government, the PNCC was essentially a private corporation due to its having been
created in accordance with the Corporation Code, the general corporation statute. 20 More specifically, the PNCC
was an acquired asset corporation under Administrative Order No. 59, and was subject to the regulation and
jurisdiction of the Securities and Exchange Commission. 21 Consequently, the doctrine of sovereign immunity had no
application

to

the

PNCC.

The foregoing conclusion as to the PNCC notwithstanding, the Court affirms the dismissal of the complaint due to
lack
of
jurisdiction
and
due
to
lack
of
cause
of
action.
It appears that the petitioners complaint principally sought to restrain the respondents from implementing an
access fence on its property, and to direct them to grant it a right of way to the NLEX. Clearly, the reliefs being
sought by the petitioner were beyond the jurisdiction of the RTC because no court except the Supreme Court could
issue an injunction against an infrastructure project of the Government. This is because Presidential Decree No.
1818, issued on January 16, 1981, prohibited judges from issuing restraining orders against government
infrastructure projects, stating in its sole provision: No court in the Philippines shall have jurisdiction to issue any
restraining order, preliminary injunction or preliminary order, preliminary mandatory injunction in any case, dispute
or controversy involving an infrastructure project. Presidential Decree No. 1818 was amended by Republic Act No.
8975,22 approved on November 7, 2000, whose pertinent parts provide:chanroblesvirtuallawlibrary
Section 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions.- No court, except the Supreme Court, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory injunction against the government,
or any of its subdivisions, officials or any person or entity, whether public or private, acting under the
government's
direction,
to
restrain,
prohibit
or
compel
the
following
acts:
(a) Acquisition, clearance and development of the right-of-way and/or site or location of any national
government
project;
(b) Bidding or awarding of contract/project of the national government as defined under Section 2
hereof;
(c) Commencement, prosecution, execution, implementation, operation of any such contract or project;
(d)

Termination

or

rescission

of

any

such

contract/project;

and

(e) The undertaking or authorization of any other lawful activity necessary for such contract/project.

This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited to cases filed by bidders or those claiming to have rights through such bidders
involving such contract/project. This prohibition shall not apply when the matter is of extreme urgency
involving a constitutional issue, such that unless a temporary restraining order is issued, grave
injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by
the court, which bond shall accrue in favor of the government if the court should finally decide that the
applicant
was
not
entitled
to
the
relief
sought.
If after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or order a
rebidding of the same, without prejudice to any liability that the guilty party may incur under existing
laws.
Section 4. Nullity of Writs and Orders.- Any temporary restraining order, preliminary injunction or
preliminary mandatory injunction issued in violation of Section 3 hereof is void and of no force and
effect.
Section 5. Designation of Regional Trial Courts.- The Supreme Court may designate regional trial courts
to act as commissioners with the sole function of receiving facts of the case involving acquisition,
clearance and development of right-of-way for government infrastructure projects. The designated
regional trial court shall within thirty (30) days from the date of receipt of the referral, forward its
findings of facts to the Supreme Court for appropriate action. x x x
As to what was embraced by the term infrastructure project as used in Presidential Decree No. 1818, the Court
has ruled in Francisco, Jr. v. UEM-MARA Philippines Corporation:23
PD 1818 proscribes the issuance of a writ of preliminary injunction in any case involving an
infrastructure project of the government. The aim of the prohibition, as expressed in its second
whereas clause, is to prevent delay in the implementation or execution of government infrastructure
projects (particularly through the use of provisional remedies) to the detriment of the greater good
since it disrupts the pursuit of essential government projects and frustrates the economic development
effort
of
the
nation.
Petitioner argues that the collection of toll fees is not an infrastructure project of the government. He
cites the definition of infrastructure projects we used in Republic v. Silerio:chanroblesvirtuallawlibrary
The term infrastructure projects means construction, improvement and rehabilitation
of roads, and bridges, railways, airports, seaports, communication facilities, irrigation,
flood control and drainage, water supply and sewage systems, shore protection, power
facilities, national buildings, school buildings, hospital buildings, and other related
construction projects that form part of the government capital investment.
xxxx
The definition of infrastructure projects specifically includes the improvement and
rehabilitation of roads and not just its construction. Accordingly, even if the Coastal Road was
merely upgraded and not constructed from scratch, it is still covered by the definition. Moreover, PD
1818 itself states that any person, entity or governmental official cannot be prohibited
from continuing the execution or implementation of such project or pursuing any lawful
activity necessary for such execution or implementation. Undeniably, the collection of toll fees
is part of the execution or implementation of the MCTEP as agreed upon in the TOA. The TOA is valid
since it has not been nullified. Thus it is a legitimate source of rights and obligations. It has the force
and effect of law between the contracting parties and is entitled to recognition by this Court. The
MCTEP is an infrastructure project of the government forming part of the government capital
investment considering that under the TOA, the government owns the expressways comprising the
project. (Emphasis supplied.)
There can be no question that the respondents maintenance of safety measures, including the establishment
of the access fence along the NLEX, was a component of the continuous improvement and development of the
NLEX. Consequently, the lower courts could not validly restrain the implementation of the access fence by granting
the
petitioner
its
right
of
way
without
exceeding
its
jurisdiction.
Nor did the establishment of the access fence violate the petitioners constitutional and legal rights.

It is relevant to mention that the access fence was put up pursuant to Republic Act No. 2000 ( Limited Access
Highway Act), the enforcement of which was under the authority of the DOTC. Clarifying the DOTCs jurisdiction
under this law in Mirasol v. Department of Public Works and Highways,24 the Court has said
RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22 June 1957.
Section 4 of RA 2000 provides that [t]he Department of Public Works and Communications is
authorized to do so design any limited access facility and to so regulate, restrict, or prohibit access as
to best serve the traffic for which such facility is intended. The RTC construed this authorization to
regulate, restrict, or prohibit access to limited access facilities to apply to the Department of Public
Works
and
Highways
(DPWH).
The RTCs ruling is based on a wrong premise. The RTC assumed that the DPWH derived its authority
from its predecessor, the Department of Public Works and Communications, which is expressly
authorized to regulate, restrict, or prohibit access to limited access facilities under Section 4 of RA
2000. However, such assumption fails to consider the evolution of the Department of Public Works and
Communications.
x

Upon the ratification of the 1987 Constitution in February 1987, the former Ministry of Public Works and
Highways became the Department of Public Works and Highways (DPWH) and the former Ministry of
Transportation and Communications became the Department of Transportation and Communications
(DOTC).
DPWH issued DO 74 and DO 215 declaring certain expressways as limited access facilities on 5 April
1993 and 25 June 1998, respectively. Later, the TRB, under the DPWH, issued the Revised Rules and
Regulations on Limited Access Facilities. However, on 23 July 1979, long before these department
orders and regulations were issued, the Ministry of Public Works, Transportation and Communications
was divided into two agencies the Ministry of Public Works and the Ministry of Transportation and
Communications by virtue of EO 546. The question is, which of these two agencies is now authorized
to
regulate,
restrict,
or
prohibit
access
to
limited
access
facilities?
Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed the public
works functions of the Ministry of Public Works, Transportation and Communications. On
the other hand, among the functions of the Ministry of Transportation and Communications
(now Department of Transportation and Communications [DOTC]) were to (1) formulate and
recommend national policies and guidelines for the preparation and implementation of an
integrated and comprehensive transportation and communications systems at the national,
regional, and local levels; and (2) regulate, whenever necessary, activities relative to
transportation and communications and prescribe and collect fees in the exercise of such
power. Clearly, under EO 546, it is the DOTC, not the DPWH, which has authority to
regulate,
restrict,
or
prohibit
access
to
limited
access
facilities.
Even under Executive Order No. 125 (EO 125) and Executive Order No. 125-A (EO 125-A),
which further reorganized the DOTC, the authority to administer and enforce all laws, rules
and
regulations
relative
to
transportation
is
clearly
with
the
DOTC.
Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare certain
expressways as limited access facilities. Under the law, it is the DOTC which is authorized
to administer and enforce all laws, rules and regulations in the field of transportation and
to regulate related activities. (Emphasis supplied.)
Moreover, the putting up of the access fence on the petitioners property was in the valid exercise of police
power, assailable only upon proof that such putting up unduly violated constitutional limitations like due process
and equal protection of the law. 25 In Mirasol v. Department of Public Works and Highways, the Court has further
noted that:chanroblesvirtuallawlibrary
A toll way is not an ordinary road. As a facility designed to promote the fastest access to certain
destinations, its use, operation, and maintenance require close regulation. Public interest and safety
require the imposition of certain restrictions on toll ways that do not apply to ordinary roads. As a
special kind of road, it is but reasonable that not all forms of transport could use it. 26
Clearly, therefore, the access fence was a reasonable restriction on the petitioners property given the location
thereof at the right side of Sta. Rita Exit of the NLEX. Although some adjacent properties were accorded unrestricted
access to the expressway, there was a valid and reasonable classification for doing so because their owners

provided ancillary services to motorists using the NLEX, like gasoline service stations and food stores. 27 A
classification based on practical convenience and common knowledge is not unconstitutional simply because it may
lack
purely
theoretical
or
scientific
uniformity. 28
Lastly, the limited access imposed on the petitioners property did not partake of a compensable taking due to the
exercise of the power of eminent domain. There is no question that the property was not taken and devoted for
public use. Instead, the property was subjected to a certain restraint, i.e. the access fence, in order to secure the
general safety and welfare of the motorists using the NLEX. There being a clear and valid exercise of police power,
the
petitioner
was
certainly
not
entitled
to
any
just
compensation. 29
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated on
October
27,
2004;
and
ORDERS
the
petitioner
to
pay
the
costs
of
suit.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
ANUNCIACION VDA. DE OUANO, MARIO P. OUANO, LETICIA OUANO ARNAIZ, and CIELO OUANO
MARTINEZ,
Petitioners,
- versus THE REPUBLIC OF THE PHILIPPINES, THE MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY, and
THE REGISTER OF DEEDS FOR THE CITY OF CEBU,
Respondents.
x-------------------------------------------x
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA),
Petitioner,
- versus -

RICARDO L. INOCIAN, in his personal capacity and as Attorney-in-Fact of OLYMPIA E. ESTEVES,

EMILIA E. BACALLA, RESTITUTA E. MONTANA, and RAUL L. INOCIAN; and ALETHA SUICO MAGAT, in her
personal capacity and as Attorney-in-Fact of PHILIP M. SUICO, DORIS S. DELA CRUZ, JAMES M. SUICO,
EDWARD M. SUICO, ROSELYN SUICO-LAWSIN, REX M. SUICO, KHARLA SUICO-GUTIERREZ, ALBERT
CHIONGBIAN, and JOHNNY CHAN,
Respondents.

G.R. No. 168770

Present:
CORONA, C.J., Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO,
PEREZ, JJ.
DECISION
VELASCO, JR., J.:

At the center of these two (2) Petitions for Review on Certiorari under Rule 45 is the issue of the right of the
former owners of lots acquired for the expansion of the Lahug Airport in Cebu City to repurchase or secure
reconveyance of their respective properties.
In the first petition, docketed as G.R. No. 168770, petitioners Anunciacion vda. de Ouano, Mario Ouano,
Leticia Ouano Arnaiz and Cielo Ouano Martinez (the Ouanos) seek to nullify the Decision[1] dated September 3,
2004 of the Court of Appeals (CA) in CA-G.R. CV No. 78027, affirming the Order dated December 9, 2002 of the
Regional Trial Court (RTC), Branch 57 in Cebu City, in Civil Case No. CEB-20743, a suit to compel the Republic of the
Philippines and/or the Mactan-Cebu International Airport Authority (MCIAA) to reconvey to the Ouanos a parcel of
land.
The second petition, docketed as G.R. No. 168812, has the MCIAA seeking principally to annul and set aside
the Decision[2] and Resolution[3] dated January 14, 2005 and June 29, 2005, respectively, of the CA in CA-G.R. CV
No. 64356, sustaining the RTC, Branch 13 in Cebu City in its Decision of October 7, 1988 in Civil Case No. CEB18370.
Per its October 19, 2005 Resolution, the Court ordered the consolidation of both cases.
Except for the names of the parties and the specific lot designation involved, the relevant factual antecedents
which gave rise to these consolidated petitions are, for the most part, as set forth in the Courts Decision[4] of
October 15, 2003, as reiterated in a Resolution[5] dated August 9, 2005, in G.R. No. 156273 entitled Heirs of
Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority (Heirs of Moreno), and in other
earlier related cases.[6]
In 1949, the National Airport Corporation (NAC), MCIAAs predecessor agency, pursued a program to expand the
Lahug Airport in Cebu City. Through its team of negotiators, NAC met and negotiated with the owners of the
properties situated around the airport, which included Lot Nos. 744-A, 745-A, 746, 747, 761-A, 762-A, 763-A, 942,
and 947 of the Banilad Estate. As the landowners would later claim, the government negotiating team, as a
sweetener, assured them that they could repurchase their respective lands should the Lahug Airport expansion
project do not push through or once the Lahug Airport closes or its operations transferred to Mactan-Cebu Airport.
Some of the landowners accepted the assurance and executed deeds of sale with a right of repurchase. Others,
however, including the owners of the aforementioned lots, refused to sell because the purchase price offered was
viewed as way below market, forcing the hand of the Republic, represented by the then Civil Aeronautics

Administration (CAA), as successor agency of the NAC, to file a complaint for the expropriation of Lot Nos. 744-A,
745-A, 746, 747, 761-A, 762-A, 763-A, 942, and 947, among others, docketed as Civil Case No. R-1881 entitled
Republic v. Damian Ouano, et al.
On December 29, 1961, the then Court of First Instance (CFI) of Cebu rendered judgment for the Republic,
disposing, in part, as follows:
IN VIEW OF THE FOREGOING, judgment is hereby rendered:
1. Declaring the expropriation of Lots Nos. 75, 76, 76, 89, 90, 91, 92, 105, 106, 107, 108, 104, 921-A, 88, 93,
913-B, 72, 77, 916, 777-A, 918, 919, 920, 764-A, 988, 744-A, 745-A, 746, 747, 762-A, 763-A, 951, 942, 720-A, x x x
and 947, included in the Lahug Airport, Cebu City, justified in and in lawful exercise of the right of eminent domain.

xxxx
3. After the payment of the foregoing financial obligation to the landowners, directing the latter to deliver to
the plaintiff the corresponding Transfer Certificates of Title to their respective lots; and upon the presentation of the
said titles to the Register of Deeds, ordering the latter to cancel the same and to issue, in lieu thereof, new Transfer
Certificates of Title in the name of the plaintiff.[7]

In view of the adverted buy-back assurance made by the government, the owners of the lots no longer
appealed the decision of the trial court.[8] Following the finality of the judgment of condemnation, certificates of
title for the covered parcels of land were issued in the name of the Republic which, pursuant to Republic Act No.
6958,[9] were subsequently transferred to MCIAA.

At the end of 1991, or soon after the transfer of the aforesaid lots to MCIAA, Lahug Airport completely ceased
operations, Mactan Airport having opened to accommodate incoming and outgoing commercial flights. On the
ground, the expropriated lots were never utilized for the purpose they were taken as no expansion of Lahug Airport
was undertaken. This development prompted the former lot owners to formally demand from the government that
they be allowed to exercise their promised right to repurchase. The demands went unheeded. Civil suits followed.
G.R. No. 168812 (MCIAA Petition)
On February 8, 1996, Ricardo L. Inocian and four others (all children of Isabel Limbaga who originally owned six
[6] of the lots expropriated); and Aletha Suico Magat and seven others, successors-in-interest of Santiago Suico, the
original owner of two (2) of the condemned lots (collectively, the Inocians), filed before the RTC in Cebu City a
complaint for reconveyance of real properties and damages against MCIAA. The complaint, docketed as Civil Case
No. CEB-18370, was eventually raffled to Branch 13 of the court.

On September 29, 1997, one Albert Chiongbian (Chiongbian), alleging to be the owner of Lot Nos. 761-A and
762-A but which the Inocians were now claiming, moved and was later allowed to intervene.

During the pre-trial, MCIAA admitted the following facts:

1.

That the properties, which are the subject matter of Civil Case No. CEB-18370, are also the

properties involved in Civil Case R-1881;

2.
That the purpose of the expropriation was for the expansion of the old Lahug Airport; that the
Lahug Airport was not expanded;

3.

That the old Lahug Airport was closed sometime in June 1992;

4.

That the price paid to the lot owners in the expropriation case is found in the decision of the court;

and

5.
That some properties were reconveyed by the MCIAA because the previous owners were able to
secure express waivers or riders wherein the government agreed to return the properties should the expansion of
the Lahug Airport not materialize.
During trial, the Inocians adduced evidence which included the testimony of Ricardo Inocian (Inocian) and
Asterio Uy (Uy). Uy, an employee of the CAA, testified that he was a member of the team which negotiated for the
acquisition of certain lots in Lahug for the proposed expansion of the Lahug Airport. He recalled that he acted as the
interpreter/spokesman of the team since he could speak the Cebuano dialect. He stated that the other members of
the team of negotiators were Atty. Pedro Ocampo, Atty. Lansang, and Atty. Saligumba. He recounted that, in the
course of the negotiation, their team assured the landowners that their landholdings would be reconveyed to them
in the event the Lahug Airport would be abandoned or if its operation were transferred to the Mactan Airport. Some
landowners opted to sell, while others were of a different bent owing to the inadequacy of the offered price.
Inocian testified that he and his mother, Isabel Lambaga, attended a meeting called by the NAC team of
negotiators sometime in 1947 or 1949 where he and the other landowners were given the assurance that they could
repurchase their lands at the same price in the event the Lahug Airport ceases to operate. He further testified that
they rejected the NACs offer. However, he said that they no longer appealed the decree of expropriation due to the
repurchase assurance adverted to.
The MCIAA presented Michael Bacarizas (Bacarizas), who started working for MCIAA as legal assistant in 1996.
He testified that, in the course of doing research work on the lots subject of Civil Case No. CEB-18370, he discovered
that the same lots were covered by the decision in Civil Case No. R-1881. He also found out that the said decision
did not expressly contain any condition on the matter of repurchase.
Ruling of the RTC
On October 7, 1998, the RTC rendered a Decision in Civil Case No. CEB-18370, the dispositive portion of which
reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered directing defendant Mactan Cebu
International Airport Authority (MCIAA) to reconvey (free from liens and encumbrances) to plaintiffs Ricardo Inocian,
Olimpia E. Esteves, Emilia E. Bacalla, Restituta E. Montana and Raul Inocian Lots No. 744-A, 745-A, 746, 762-A, 747,
761-A and to plaintiffs Aletha Suico Magat, Philip M. Suico, Doris S. dela Cruz, James M. Suico, Edward M. Suico,
Roselyn S. Lawsin, Rex M. Suico and Kharla Suico-Gutierrez Lots No. 942 and 947, after plaintiffs shall have paid
MCIAA the sums indicated in the decision in Civil Case No. R-1881. Defendant MCIAA is likewise directed to pay the
aforementioned plaintiffs the sum or P50,000.00 as and for attorneys fees and P10,000.00 for litigation expenses.

Albert Chiongbians intervention should be, as it is hereby DENIED for utter lack of factual basis.
With costs against defendant MCIAA.[10]
Therefrom, MCIAA went to the CA on appeal, docketed as CA-G.R. CV No. 64356.
Ruling of the CA

On January 14, 2005, the CA rendered judgment for the Inocians, declaring them entitled to the reconveyance
of the questioned lots as the successors-in-interest of the late Isabel Limbaga and Santiago Suico, as the case may
be, who were the former registered owners of the said lots. The decretal portion of the CAs Decision reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the appeal
filed in this case and AFFFIRMING the decision rendered by the court a quo on October 7, 1998 in Civil Case No.
CEB-18370.

SO ORDERED.

The CA, citing and reproducing excerpts from Heirs of Moreno,[11] virtually held that the decision in Civil Case
No. R-1881 was conditional, stating that the expropriation of [plaintiff-appellees] lots for the proposed expansion of
the Lahug Airport was ordered by the CFI of Cebu under the impression that Lahug Airport would continue in
operation.[12] The condition, as may be deduced from the CFIs decision, was that should MCIAA, or its precursor
agency, discontinue altogether with the operation of Lahug Airport, then the owners of the lots expropriated may, if
so minded, demand of MCIAA to make good its verbal assurance to allow the repurchase of the properties. To the
CA, this assurance, a demandable agreement of repurchase by itself, has been adequately established.
On September 21, 2005, the MCIAA filed with Us a petition for review of the CAs Decision, docketed as G.R. No.
168812.
G.R. No. 168770 (Ouano Petition)
Soon after the MCIAA jettisoned the Lahug Airport expansion project, informal settlers entered and occupied
Lot No. 763-A which, before its expropriation, belonged to the Ouanos. The Ouanos then formally asked to be
allowed to exercise their right to repurchase the aforementioned lot, but the MCIAA ignored the demand. On August
18, 1997, the Ouanos instituted a complaint before the Cebu City RTC against the Republic and the MCIAA for
reconveyance, docketed as Civil Case No. CEB-20743.
Answering, the Republic and MCIAA averred that the Ouanos no longer have enforceable rights whatsoever
over the condemned Lot No. 763-A, the decision in Civil Case No. R-1881 not having found any reversionary
condition.
Ruling of the RTC
By a Decision dated November 28, 2000, the RTC, Branch 57 in Cebu City ruled in favor of the Ouanos,
disposing as follows:

WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the plaintiffs,
Anunciacion Vda. De Ouano, Mario P. Ouano, Leticia Ouano Arnaiz and Cielo Ouano Martinez and against the
Republic of the Philippines and Mactan Cebu International Airport Authority (MCIAA) to restore to plaintiffs, the
possession and ownership of their land, Lot No. 763-A upon payment of the expropriation price to defendants; and

2. Ordering the Register of Deeds to effect the transfer of the Certificate of Title from defendant Republic of the
Philippines on Lot 763-A, canceling TCT No. 52004 in the name of defendant Republic of the Philippines and to issue
a new title on the same lot in the names of Anunciacion Vda. De Ouano, Mario P. Ouano, Leticia Ouano Arnaiz and
Cielo Ouano Martinez.

No pronouncement as to costs.[13]
Acting on the motion of the Republic and MCIAA for reconsideration, however, the RTC, Branch 57 in Cebu City,
presided this time by Judge Enriqueta L. Belarmino, issued, on December 9, 2002, an Order[14] that reversed its
earlier decision of November 28, 2000 and dismissed the Ouanos complaint.
Ruling of the CA
In time, the Ouanos interposed an appeal to the CA, docketed as CA-G.R. CV No. 78027. Eventually, the
appellate court rendered a Decision[15] dated September 3, 2004, denying the appeal, thus:
WHEREFORE, premises considered, the Order dated December 9, 2002, of the Regional Trial Court, 7 th Judicial
Region, Branch 57, Cebu City, in Civil Case No. CEB-20743, is hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Explaining its case disposition, the CA stated that the decision in Civil Case No. R-1881 did not state any
condition that Lot No. 763-A of the Ouanosand all covered lots for that matterwould be returned to them or that they
could repurchase the same property if it were to be used for purposes other than for the Lahug Airport. The
appellate court also went on to declare the inapplicability of the Courts pronouncement in MCIAA v. Court of
Appeals, RTC, Branch 9, Cebu City, Melba Limbago, et al.,[16] to support the Ouanos cause, since the affected
landowners in that case, unlike the Ouanos, parted with their property not through expropriation but via a sale and
purchase transaction.
The Ouanos filed a motion for reconsideration of the CAs Decision, but was denied per the CAs May 26, 2005
Resolution.[17] Hence, they filed this petition in G.R. No. 168770.

The Issues

G.R. No. 168812

GROUNDS FOR ALLOWANCE OF THE PETITION

l.
THE ASSAILED ISSUANCES ILLEGALLY STRIPPED THE REPUBLIC OF ITS ABSOLUTE AND
UNCONDITIONAL TITLE TO THE SUBJECT EXPROPRIATED PROPERTIES.

ll.
THE IMPUNGED DISPOSITIONS INVALIDLY OVERTURNED THIS HONORABLE COURTS FINAL
RULINGS IN FERY V. MUNICIPALITY OF CABANATUAN, MCIAA V. COURT OF APPEALS AND REYES V.
NATIONAL HOUSING AUTHORITY.

lll. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THIS HONORABLE COURTS RULING IN MORENO,
ALBEIT IT HAS NOT YET ATTAINED FINALITY.[18]
G.R. No. 168770

Questions of law presented in this Petition

Whether or not the testimonial evidence of the petitioners proving the promises, assurances and
representations by the airport officials and lawyers are inadmissbale under the Statute of Frauds.

Whether or not under the ruling of this Honorable Court in the heirs of Moreno Case, and pursuant to the
principles enunciated therein, petitioners herein are entitiled to recover their litigated property.

Reasons for Allowances of this Petition

Respondents did not object during trial to the admissibility of petitioners testimonial evidence under the
Statute of Frauds and have thus waived such objection and are now barred from raising the same. In any event, the
Statute of Frauds is not applicable herein. Consequently, petitioners evidence is admissible and should be duly given
weight and credence, as initially held by the trial court in its original Decision.[19]

While their respective actions against MCIAA below ended differently, the Ouanos and the Inocians proffered
arguments presented before this Court run along parallel lines, both asserting entitlement to recover the litigated
property on the strength of the Courts ruling in Heirs of Moreno. MCIAA has, however, formulated in its Consolidated
Memorandum the key interrelated issues in these consolidated cases, as follows:
I
WHETHER ABANDONMENT OF THE PUBLIC USE FOR WHICH THE SUBJECT PROPERTIES WERE EXPROPRIATED
ENTITLES PETITIONERS OUANOS, ET AL. AND RESPONDENTS INOCIAN, ET AL. TO REACQUIRE THEM.

II

WHETHER PETITIONERS OUANOS, ET AL. AND RESPONDENTS INOCIAN, ET AL. ARE ENTITLED TO
RECONVEYANCE OF THE SUBJECT PROPERTIES SIMPLY ON THE BASIS OF AN ALLEGED VERBAL PROMISE OR
ASSURANCE OF SOME NAC OFFICIALS THAT THE SUBJECT PROPERTIES WILL BE RETUNRED IF THE AIRPORT PROJECT

WOULD BE ABANDONED.

The Courts Ruling

The Republic and MCIAAs petition in G.R. No. 168812 is bereft of merit, while the Ouano petition in G.R. No.
168770 is meritorious.
At the outset, three (3) fairly established factual premises ought to be emphasized:
First, the MCIAA and/or its predecessor agency had not actually used the lots subject of the final decree of
expropriation in Civil Case No. R-1881 for the purpose they were originally taken by the government, i.e., for the
expansion and development of Lahug Airport.
Second, the Lahug Airport had been closed and abandoned. A significant portion of it had, in fact, been
purchased by a private corporation for development as a commercial complex.[20]
Third, it has been preponderantly established by evidence that the NAC, through its team of negotiators, had
given assurance to the affected landowners that they would be entitled to repurchase their respective lots in the
event they are no longer used for airport purposes.[21] No less than Asterio Uy, the Court noted in Heirs of Moreno,
one of the members of the CAA Mactan Legal Team, which interceded for the acquisition of the lots for the Lahug
Airports expansion, affirmed that persistent assurances were given to the landowners to the effect that as soon as
the Lahug Airport is abandoned or transferred to Mactan, the lot owners would be able to reacquire their properties.
[22] In Civil Case No. CEB-20743, Exhibit G, the transcript of the deposition[23] of Anunciacion vda. de Ouano
covering the assurance made had been formally offered in evidence and duly considered in the initial decision of the
RTC Cebu City. In Civil Case No. CEB-18370, the trial court, on the basis of testimonial evidence, and later the CA,
recognized the reversionary rights of the suing former lot owners or their successors in interest[24] and resolved the
case accordingly. In point with respect to the representation and promise of the government to return the lots taken
should the planned airport expansion do not materialize is what the Court said in Heirs of Moreno, thus:
This is a difficult case calling for a difficult but just solution. To begin with there exists an undeniable
historical narrative that the predecessors of respondent MCIAA had suggested to the landowners of the
properties covered by the Lahug Airport expansion scheme that they could repurchase their properties at the
termination of the airports venue. Some acted on this assurance and sold their properties; other landowners held
out and waited for the exercise of eminent domain to take its course until finally coming to terms with respondents
predecessors that they would not appeal nor block further judgment of condemnation if the right of repurchase was
extended to them. A handful failed to prove that they acted on such assurance when they parted with ownership of
their land.[25] (Emphasis supplied; citations omitted.)

For perspective, Heirs of Morenolater followed by MCIAA v. Tudtud (Tudtud)[26] and the consolidated cases at
baris cast under the same factual setting and centered on the expropriation of privately-owned lots for the public
purpose of expanding the Lahug Airport and the alleged promise of reconveyance given by the negotiating NAC
officials to the private lot owners. All the lots being claimed by the former owners or successors-in-interest of the
former owners in the Heirs of Moreno, Tudtud, and the present cases were similarly adjudged condemned in favor of
the Republic in Civil Case No. R-1881. All the claimants sought was or is to have the condemned lots reconveyed to
them upon the payment of the condemnation price since the public purpose of the expropriation was never met.
Indeed, the expropriated lots were never used and were, in fact, abandoned by the expropriating government

agencies.
In all then, the issues and supporting arguments presented by both sets of petitioners in these consolidated
cases have already previously been passed upon, discussed at length, and practically peremptorily resolved in Heirs
of Moreno and the November 2008 Tudtud ruling. The Ouanos, as petitioners in G.R. No. 168770, and the Inocians,
as respondents in G.R. No. 168812, are similarly situated as the heirs of Moreno in Heirs of Moreno and Benjamin
Tudtud in Tudtud. Be that as it may, there is no reason why the ratio decidendi in Heirs of Moreno and Tudtud should
not be made to apply to petitioners Ouanos and respondents Inocians such that they shall be entitled to recover
their or their predecessors respective properties under the same manner and arrangement as the heirs of Moreno
and Tudtud. Stare decisis et non quieta movere (to adhere to precedents, and not to unsettle things which are
established).[27]

Just like in Tudtud and earlier in Heirs of Moreno, MCIAA would foist the theory that the judgment of
condemnation in Civil Case No. R-1881 was without qualification and was unconditional. It would, in fact, draw
attention to the fallo of the expropriation courts decision to prove that there is nothing in the decision indicating that
the government gave assurance or undertook to reconvey the covered lots in case the Lahug airport expansion
project is aborted. Elaborating on this angle, MCIAA argues that the claim of the Ouanos and the Inocians regarding
the alleged verbal assurance of the NAC negotiating team that they can reacquire their landholdings is barred by
the Statute of Frauds.[28]
Under the rule on the Statute of Frauds, as expressed in Article 1403 of the Civil Code, a contract for the sale or
acquisition of real property shall be unenforceable unless the same or some note of the contract be in writing and
subscribed by the party charged. Subject to defined exceptions, evidence of the agreement cannot be received
without the writing, or secondary evidence of its contents.
MCIAAs invocation of the Statute of Frauds is misplaced primarily because the statute applies only to executory
and not to completed, executed, or partially consummated contracts.[29] Carbonnel v. Poncio, et al., quoting Chief
Justice Moran, explains the rationale behind this rule, thusly:
x x x The reason is simple. In executory contracts there is a wide field for fraud because unless they may be in
writing there is no palpable evidence of the intention of the contracting parties. The statute has been precisely been
enacted to prevent fraud. x x x However, if a contract has been totally or partially performed, the exclusion of parol
evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived
by him from the transaction in litigation, and at the same time, evade the obligations, responsibilities or liabilities
assumed or contracted by him thereby.[30] (Emphasis in the original.)

Analyzing the situation of the cases at bar, there can be no serious objection to the proposition that the
agreement package between the government and the private lot owners was already partially performed by the
government through the acquisition of the lots for the expansion of the Lahug airport. The parties, however, failed
to accomplish the more important condition in the CFI decision decreeing the expropriation of the lots litigated
upon: the expansion of the Lahug Airport. The projectthe public purpose behind the forced property takingwas, in
fact, never pursued and, as a consequence, the lots expropriated were abandoned. Be that as it may, the two
groups of landowners can, in an action to compel MCIAA to make good its oral undertaking to allow repurchase,
adduce parol evidence to prove the transaction.
At any rate, the objection on the admissibility of evidence on the basis of the Statute of Frauds may be waived

if not timely raised. Records tend to support the conclusion that MCIAA did not, as the Ouanos and the Inocians
posit, object to the introduction of parol evidence to prove its commitment to allow the former landowners to
repurchase their respective properties upon the occurrence of certain events.
In a bid to deny the lot owners the right to repurchase, MCIAA, citing cases,[31] points to the dispositive part of
the decision in Civil Case R-1881 which, as couched, granted the Republic absolute title to the parcels of land
declared expropriated. The MCIAA is correct about the unconditional tone of the dispositive portion of the decision,
but that actuality would not carry the day for the agency. Addressing the matter of the otherwise absolute tenor of
the CFIs disposition in Civil Case No. R-1881, the Court, in Heirs of Moreno, after taking stock of the ensuing portion
of the body of the CFIs decision, said:
As for the public purpose of the expropriation proceeding, it cannot now be doubted. Although Mactan Airport is
being constructed, it does not take away the actual usefulness and importance of the Lahug Airport: it is handling
the air traffic of both civilian and military. From it aircrafts fly to Mindanao and Visayas and pass thru it on their
flights to the North and Manila. Then, no evidence was adduced to show how soon is the Mactan Airport to be
placed in operation and whether the Lahug Airport will be closed immediately thereafter. It is up to the other
departments of the Government to determine said matters. The Court cannot substitute its judgments for those of
the said departments or agencies. In the absence of such showing, the court will presume that the Lahug
Airport will continue to be in operation.[32] (Emphasis supplied.)

We went on to state as follows:

While the trial court in Civil Case No. R-1881 could have simply acknowledged the presence of public purpose
for the exercise of eminent domain regardless of the survival of the Lahug Airport, the trial court in its Decision
chose not to do so but instead prefixed its finding of public purpose upon its understanding that Lahug Airport will
continue to be in operation. Verily, these meaningful statements in the body of the Decision warrant the conclusion
that the expropriated properties would remain to be so until it was confirmed that Lahug Airport was no longer in
operation. This inference further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such
and the expropriated lots were not being used for any airport expansion project, the rights vis--vis the expropriated
lots x x x as between the State and their former owners, petitioners herein, must be equitably adjusted; and (b) the
foregoing unmistakable declarations in the body of the Decision should merge with and become an intrinsic part of
the fallo thereof which under the premises is clearly inadequate since the dispositive portion is not in accord with
the findings as contained in the body thereof.[33]

Not to be overlooked of course is what the Court said in its Resolution disposing of MCIAAs motion to reconsider
the original ruling in Heirs of Moreno. In that resolution, We stated that the fallo of the decision in Civil Case R-1881
should be viewed and understood in connection with the entire text, which contemplated a return of the property
taken if the airport expansion project were abandoned. For ease of reference, following is what the Court wrote:
Moreover, we do not subscribe to the [MCIAAs] contention that since the possibility of the Lahug Airports
closure was actually considered by the trial court, a stipulation on reversion or repurchase was so material that it
should not have been discounted by the court a quo in its decision in Civil Case No. R-1881, if, in fact, there was
one. We find it proper to cite, once more, this Courts ruling that the fallo of the decision in Civil Case No. R-1881
must be read in reference to the other portions of the decision in which it forms a part. A reading of the Courts
judgment must not be confined to the dispositive portion alone; rather it should be meaningfully construed in
unanimity with the ratio decidendi thereof to grasp the true intent and meaning of a decision.[34]
The Court has, to be sure, taken stock of Fery v. Municipality of Cabanatuan,[35] a case MCIAA cites at every
possible turn, where the Court made these observations:

If, for example, land is expropriated for a particular purpose, with the condition that when that purpose is
ended or abandoned the property shall return to its former owner, then of course, when the purpose is terminated
or abandoned, the former owner reacquires the property so expropriated. x x x If, upon the contrary, however the
decree of expropriation gives to the entity a fee simple title, then, of course, the land becomes the absolute
property of the expropriator x x x and in that case the non-user does not have the effect of defeating the title
acquired by the expropriation proceedings x x x.
Fery notwithstanding, MCIAA cannot really rightfully say that it has absolute title to the lots decreed
expropriated in Civil Case No. R-1881. The correct lesson of Fery is captured by what the Court said in that case,
thus: the government acquires only such rights in expropriated parcels of land as may be allowed by the character
of its title over the properties. In light of our disposition in Heirs of Moreno and Tudtud, the statement immediately
adverted to means that in the event the particular public use for which a parcel of land is expropriated is
abandoned, the owner shall not be entitled to recover or repurchase it as a matter of right, unless such recovery or
repurchase is expressed in or irresistibly deducible from the condemnation judgment. But as has been
determined below, the decision in Civil Case No. R-1881 enjoined MCIAA, as a condition of approving expropriation,
to allow recovery or repurchase upon abandonment of the Lahug airport project. To borrow from our underlying
decision in Heirs of Moreno, [n]o doubt, the return or repurchase of the condemned properties of petitioners could
readily be justified as the manifest legal effect of consequence of the trial courts underlying presumption that Lahug
Airport will continue to be in operation when it granted the complaint for eminent domain and the airport
discontinued its activities.[36]
Providing added support to the Ouanos and the Inocians right to repurchase is what in Heirs of Moreno was
referred to as constructive trust, one that is akin to the implied trust expressed in Art. 1454 of the Civil Code,[37]
the purpose of which is to prevent unjust enrichment.[38] In the case at bench, the Ouanos and the Inocians parted
with their respective lots in favor of the MCIAA, the latter obliging itself to use the realties for the expansion of
Lahug Airport; failing to keep its end of the bargain, MCIAA can be compelled by the former landowners to reconvey
the parcels of land to them, otherwise, they would be denied the use of their properties upon a state of affairs that
was not conceived nor contemplated when the expropriation was authorized. In effect, the government merely held
the properties condemned in trust until the proposed public use or purpose for which the lots were condemned was
actually consummated by the government. Since the government failed to perform the obligation that is the basis of
the transfer of the property, then the lot owners Ouanos and Inocians can demand the reconveyance of their old
properties after the payment of the condemnation price.
Constructive trusts are fictions of equity that courts use as devices to remedy any situation in which the holder
of the legal title, MCIAA in this case, may not, in good conscience, retain the beneficial interest. We add, however,
as in Heirs of Moreno, that the party seeking the aid of equitythe landowners in this instance, in establishing the
trustmust himself do equity in a manner as the court may deem just and reasonable.
The Court, in the recent MCIAA v. Lozada, Sr., revisited and abandoned the Fery ruling that the former owner is
not entitled to reversion of the property even if the public purpose were not pursued and were abandoned, thus:
On this note, we take this opportunity to revisit our ruling in Fery, which involved an expropriation suit
commenced upon parcels of land to be used as a site for a public market. Instead of putting up a public market,
respondent Cabanatuan constructed residential houses for lease on the area. Claiming that the municipality lost its
right to the property taken since it did not pursue its public purpose, petitioner Juan Fery, the former owner of the
lots expropriated, sought to recover his properties. However, as he had admitted that, in 1915,
respondent Cabanatuan acquired a fee simple title to the lands in question, judgment was rendered in favor of the

municipality, following American jurisprudence, particularly City of Fort Wayne v. Lake Shore& M.S. RY. Co.,
McConihay v. Theodore Wright, and Reichling v. Covington Lumber Co., all uniformly holding that the transfer to a
third party of the expropriated real property, which necessarily resulted in the abandonment of the particular public
purpose for which the property was taken, is not a ground for the recovery of the same by its previous owner, the
title of the expropriating agency being one of fee simple.

Obviously, Fery was not decided pursuant to our now sacredly held constitutional right that private property
shall not be taken for public use without just compensation. It is well settled that the taking of private property by
the Governments power of eminent domain is subject to two mandatory requirements: (1) that it is for a particular
public purpose; and (2) that just compensation be paid to the property owner. These requirements partake of the
nature of implied conditions that should be complied with to enable the condemnor to keep the property
expropriated.

More particularly, with respect to the element of public use, the expropriator should commit to
use the property pursuant to the purpose stated in the petition for expropriation filed, failing which, it
should file another petition for the new purpose. If not, it is then incumbent upon the expropriator to
return the said property to its private owner, if the latter desires to reacquire the same. Otherwise, the
judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for the proper
exercise of the power of eminent domain, namely, the particular public purpose for which the property will be
devoted. Accordingly, the private property owner would be denied due process of law, and the judgment would
violate the property owners right to justice, fairness, and equity.

In light of these premises, we now expressly hold that the taking of private property, consequent to the
Governments exercise of its power of eminent domain, is always subject to the condition that the property be
devoted to the specific public purpose for which it was taken. Corollarily, if this particular purpose or intent is not
initiated or not at all pursued, and is peremptorily abandoned, then the former owners, if they so desire, may seek
the reversion of the property, subject to the return of the amount of just compensation received. In such a case, the
exercise of the power of eminent domain has become improper for lack of the required factual justification.[39]
(Emphasis supplied.)

Clinging to Fery, specifically the fee simple concept underpinning it, is no longer compelling, considering the
ensuing inequity such application entails. Too, the Court resolved Fery not under the cover of any of the Philippine
Constitutions, each decreeing that private property shall not be taken for public use without just compensation. The
twin elements of just compensation and public purpose are, by themselves, direct limitations to the exercise of
eminent domain, arguing, in a way, against the notion of fee simple title. The fee does not vest until payment of just
compensation.[40]
In esse, expropriation is forced private property taking, the landowner being really without a ghost of a chance
to defeat the case of the expropriating agency. In other words, in expropriation, the private owner is deprived of
property against his will. Withal, the mandatory requirement of due process ought to be strictly followed, such that
the state must show, at the minimum, a genuine need, an exacting public purpose to take private property, the
purpose to be specifically alleged or least reasonably deducible from the complaint.
Public use, as an eminent domain concept, has now acquired an expansive meaning to include any use that is
of usefulness, utility, or advantage, or what is productive of general benefit [of the public].[41] If the genuine public
necessitythe very reason or condition as it wereallowing, at the first instance, the expropriation of a private land
ceases or disappears, then there is no more cogent point for the governments retention of the expropriated land.
The same legal situation should hold if the government devotes the property to another public use very much

different from the original or deviates from the declared purpose to benefit another private person. It has been said
that the direct use by the state of its power to oblige landowners to renounce their productive possession to another
citizen, who will use it predominantly for that citizens own private gain, is offensive to our laws.[42]
A condemnor should commit to use the property pursuant to the purpose stated in the petition for
expropriation, failing which it should file another petition for the new purpose. If not, then it behooves the
condemnor to return the said property to its private owner, if the latter so desires. The government cannot plausibly
keep the property it expropriated in any manner it pleases and, in the process, dishonor the judgment of
expropriation. This is not in keeping with the idea of fair play,
The notion, therefore, that the government, via expropriation proceedings, acquires unrestricted ownership
over or a fee simple title to the covered land, is no longer tenable. We suggested as much in Heirs of Moreno and in
Tudtud and more recently in Lozada, Sr. Expropriated lands should be differentiated from a piece of land, ownership
of which was absolutely transferred by way of an unconditional purchase and sale contract freely entered by two
parties, one without obligation to buy and the other without the duty to sell. In that case, the fee simple concept
really comes into play. There is really no occasion to apply the fee simple concept if the transfer is conditional. The
taking of a private land in expropriation proceedings is always conditioned on its continued devotion to its public
purpose. As a necessary corollary, once the purpose is terminated or peremptorily abandoned, then the former
owner, if he so desires, may seek its reversion, subject of course to the return, at the very least, of the just
compensation received.
To be compelled to renounce dominion over a piece of land is, in itself, an already bitter pill to swallow for the
owner. But to be asked to sacrifice for the common good and yield ownership to the government which reneges on
its assurance that the private property shall be for a public purpose may be too much. But it would be worse if the
power of eminent domain were deliberately used as a subterfuge to benefit another with influence and power in the
political process, including development firms. The mischief thus depicted is not at all far-fetched with the continued
application of Fery. Even as the Court deliberates on these consolidated cases, there is an uncontroverted allegation
that the MCIAA is poised to sell, if it has not yet sold, the areas in question to Cebu Property Ventures, Inc. This
provides an added dimension to abandon Fery.
Given the foregoing disquisitions, equity and justice demand the reconveyance by MCIAA of the litigated lands
in question to the Ouanos and Inocians. In the same token, justice and fair play also dictate that the Ouanos and
Inocian return to MCIAA what they received as just compensation for the expropriation of their respective properties
plus legal interest to be computed from default, which in this case should run from the time MCIAA complies with
the reconveyance obligation.[43] They must likewise pay MCIAA the necessary expenses it might have incurred in
sustaining their respective lots and the monetary value of its services in managing the lots in question to the extent
that they, as private owners, were benefited thereby.
In accordance with Art. 1187 of the Civil Code on mutual compensation, MCIAA may keep whatever income or
fruits it may have obtained from the parcels of land expropriated. In turn, the Ouanos and Inocians need not require
the accounting of interests earned by the amounts they received as just compensation.[44]
Following Art. 1189 of the Civil Code providing that [i]f the thing is improved by its nature, or by time,
the improvement shall inure to the benefit of the creditor x x x, the Ouanos and Inocians do not have to
settle the appreciation of the values of their respective lots as part of the reconveyance process, since the value
increase is merely the natural effect of nature and time.
Finally, We delete the award of PhP 50,000 and PhP 10,000, as attorneys fees and litigation expenses,

respectively, made in favor of the Inocians by the Cebu City RTC in its judgment in Civil Case No. CEB-18370, as
later affirmed by the CA. As a matter of sound policy, no premium should be set on the right to litigate where there
is no doubt about the bona fides of the exercise of such right,[45] as here, albeit the decision of MCIAA to resist the
former landowners claim eventually turned out to be untenable.
WHEREFORE, the petition in G.R. No. 168770 is GRANTED. Accordingly, the CA Decision dated September
3, 2004 in CA-G.R. CV No. 78027 is REVERSED and SET ASIDE. Mactan-Cebu International Airport Authority is
ordered to reconvey subject Lot No. 763-A to petitioners Anunciacion vda. de Ouano, Mario P. Ouano, Leticia Ouano
Arnaiz, and Cielo Ouano Martinez. The Register of Deeds of Cebu City is ordered to effect the necessary cancellation
of title and transfer it in the name of the petitioners within fifteen (15) days from finality of judgment.
The petition of the Mactan-Cebu International Airport Authority in G.R. No. 168812 is DENIED, and the CAs
Decision and Resolution dated January 14, 2005 and June 29, 2005, respectively, in CA-G.R. CV No. 64356 are
AFFIRMED, except insofar as they awarded attorneys fees and litigation expenses that are hereby DELETED.
Accordingly, Mactan-Cebu International Airport Authority is ordered to reconvey to respondents Ricardo L. Inocian,
Olympia E. Esteves, Emilia E. Bacalla, Restituta E. Montana, and Raul L. Inocian the litigated Lot Nos. 744-A, 745-A,
746, 762-A, 747, and 761-A; and to respondents Aletha Suico Magat, Philip M. Suico, Dolores S. dela Cruz, James M.
Suico, Edward M. Suico, Roselyn S. Lawsin, Rex M. Suico, and Kharla Suico-Gutierrez the litigated Lot Nos. 942 and
947. The Register of Deeds of Cebu City is ordered to effect the necessary cancellation of title and transfer it in the
name of respondents within a period of fifteen (15) days from finality of judgment.
The foregoing dispositions are subject to QUALIFICATIONS, to apply to these consolidated petitions, when
appropriate, as follows:

(1) Petitioners Ouano, et al. in G.R. No. 168770 and respondents Ricardo L Inocian, et al. in G.R. No. 168812 are
ordered to return to the MCIAA the just compensation they or their predecessors-in-interest received for the
expropriation of their respective lots as stated in Civil Case No. R-1881, within a period of sixty (60) days from
finality of judgment;

(2) The MCIAA shall be entitled to RETAIN whatever fruits and income it may have obtained from the subject
expropriated lots without any obligation to refund the same to the lot owners; and

(3) Petitioners Ouano, et al. in G.R. No. 168770 and respondents Ricardo L. Inocian, et al. in G.R. No. 168812
shall RETAIN whatever interests the amounts they received as just compensation may have earned in the
meantime without any obligation to refund the same to MCIAA.
SO ORDERED.

FIRST DIVISION
[G.R. No. 165828 : August 24, 2011]
NATIONAL POWER CORPORATION, PETITIONER, VS. HEIRS OF MACABANGKIT SANGKAY, NAMELY: CEBU,
BATOWA-AN, SAYANA, NASSER, MANTA, EDGAR, PUTRI , MONGKOY*, AND AMIR, ALL SURNAMED
MACABANGKIT, RESPONDENTS.

DECISION
BERSAMIN, J.:

Private property shall not be taken for public use without just compensation.
- Section 9, Article III, 1987 Constitution

The

application

of

this

provision

of

the

Constitution

is

the

focus

of

this

appeal.

Petitioner National Power Corporation (NPC) seeks the review on certiorari of the decision promulgated on October
5, 2004,[1] whereby the Court of Appeals (CA) affirmed the decision dated August 13, 1999 and the supplemental
decision dated August 18, 1999, ordering NPC to pay just compensation to the respondents, both rendered by the
Regional Trial Court, Branch 1, in Iligan City (RTC).
Antecedents
Pursuant to its legal mandate under Republic Act No. 6395 (An Act Revising the Charter of the National Power
Corporation), NPC undertook the Agus River Hydroelectric Power Plant Project in the 1970s to generate electricity
for Mindanao. The project included the construction of several underground tunnels to be used in diverting the
water
flow
from
the
Agus
River
to
the
hydroelectric
plants.[2]
On November 21, 1997, the respondents, namely: Cebu, Bangowa-an, Sayana, Nasser, Manta, Edgar, Putri, Mongkoy
and Amir, all surnamed Macabangkit (Heirs of Macabangkit), as the owners of land with an area of 221,573 square
meters situated in Ditucalan, Iligan City, sued NPC in the RTC for the recovery of damages and of the property, with
the alternative prayer for the payment of just compensation.[3] They alleged that they had belatedly discovered
that one of the underground tunnels of NPC that diverted the water flow of the Agus River for the operation of the
Hydroelectric Project in Agus V, Agus VI and Agus VII traversed their land; that their discovery had occurred in 1995
after Atty. Saidali C. Gandamra, President of the Federation of Arabic Madaris School, had rejected their offer to sell
the land because of the danger the underground tunnel might pose to the proposed Arabic Language Training
Center and Muslims Skills Development Center; that such rejection had been followed by the withdrawal by Global
Asia Management and Resource Corporation from developing the land into a housing project for the same reason;
that Al-Amanah Islamic Investment Bank of the Philippines had also refused to accept their land as collateral
because of the presence of the underground tunnel; that the underground tunnel had been constructed without
their knowledge and consent; that the presence of the tunnel deprived them of the agricultural, commercial,
industrial and residential value of their land; and that their land had also become an unsafe place for habitation
because of the loud sound of the water rushing through the tunnel and the constant shaking of the ground, forcing
them
and
their
workers
to
relocate
to
safer
grounds.
In its answer with counterclaim,[4] NPC countered that the Heirs of Macabangkit had no right to compensation
under section 3(f) of Republic Act No. 6395, under which a mere legal easement on their land was established; that
their cause of action, should they be entitled to compensation, already prescribed due to the tunnel having been
constructed in 1979; and that by reason of the tunnel being an apparent and continuous easement, any action
arising from such easement prescribed in five years.
Ruling of the RTC
On July 23, 1998, an ocular inspection of the land that was conducted by RTC Judge Mamindiara P. Mangotara and
the representatives of the parties resulted in the following observations and findings:
d.

That a concrete post which is about two feet in length from the ground which according to
the claimants is the middle point of the tunnel.

e.

That at least three fruit bearing durian trees were uprooted and as a result of the
construction by the defendant of the tunnel and about one hundred coconuts planted died.

f.

That underground tunnel was constructed therein.[5]

After trial, the RTC ruled in favor of the plaintiffs (Heirs of Macabangkit),[6] decreeing:
WHEREFORE,

premises

considered:

1. The prayer for the removal or dismantling of defendant's tunnel is denied. However, defendant is
hereby directed and ordered:
a) To pay plaintiffs' land with a total area of 227,065 square meters, at the rate of FIVE
HUNDRED (P500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN MILLION
FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED (P113,532,500.00), PESOS, plus
interest,
as
actual
damages
or
just
compensation;
b) To pay plaintiff a monthly rental of their land in the amount of THIRTY THOUSAND
(P30,000.00) PESOS from 1979 up to July 1999 with 12% interest per annum;
c) To pay plaintiffs the sum of TWO HUNDRED THOUSAND (P200,000.00) PESOS, as moral
damages;
d) To pay plaintiffs, the sum of TWO HUNDRED THOUSAND (P200,000.00) PESOS, as exemplary
damages;
e) To pay plaintiffs, the sum equivalent to 15% of the total amount awarded, as attorney's fees,
and to pay the cost.
SO ORDERED.

The RTC found that NPC had concealed the construction of the tunnel in 1979 from the Heirs of Macabangkit, and
had since continuously denied its existence; that NPC had acted in bad faith by taking possession of the
subterranean portion of their land to construct the tunnel without their knowledge and prior consent; that the
existence of the tunnel had affected the entire expanse of the land, and had restricted their right to excavate or to
construct a motorized deep well; and that they, as owners, had lost the agricultural, commercial, industrial and
residential
value
of
the
land.
The RTC fixed the just compensation at P500.00/square meter based on the testimony of Dionisio Banawan, OIC-City
Assessor of Iligan City, to the effect that the appraised value of the adjoining properties ranged from P700.00 to
P750.00, while the appraised value of their affected land ranged from P400.00 to P500.00. The RTC also required
NPC to pay rentals from 1979 due to its bad faith in concealing the construction of the tunnel from the Heirs of
Macabangkit.
On August 18, 1999, the RTC issued a supplemental decision,[7] viz:
Upon a careful review of the original decision dated August 13, 1999, a sentence should be added
to paragraph 1(a) of the dispositive portion thereof, to bolster, harmonize, and conform to the findings
of the Court, which is quoted hereunder, to wit:
"Consequently, plaintiffs' land or properties are hereby condemned in favor of defendant
National Power Corporation, upon payment of the aforesaid sum."
Therefore, paragraph 1(a) of the dispositive portion of the original decision should read, as follows:
a) To pay plaintiffs' land with a total area of 227,065 square meters, at the rate of FIVE
HUNDRED (P500.00) PESOS per square meter, or a total of ONE HUNDRED THIRTEEN MILLION
FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE HUNDRED (P113,532,500.00) PESOS, plus
interest, as actual damages or just compensation; Consequently, plaintiffs' land or properties
are hereby condemned in favor of defendant National Power Corporation, upon payment of the
aforesaid sum;
This supplemental decision shall be considered as part of paragraph 1(a) of the dispositive portion of
the
original
decision.
Furnish

copy

of

this

supplemental

decision

to

all

parties

immediately.

SO ORDERED.

On

its

part,

NPC

appealed

to

the

CA

on

August

25,

1999.[8]

Earlier, on August 18, 1999, the Heirs of Macabangkit filed an urgent motion for execution of judgment pending
appeal.[9] The RTC granted the motion and issued a writ of execution,[10] prompting NPC to assail the writ by
petition for certiorari in the CA. On September 15, 1999, the CA issued a temporary restraining order (TRO) to enjoin
the RTC from implementing its decision. The Heirs of Macabangkit elevated the ruling of the CA (G.R. No. 141447),
but the Court upheld the CA on May 4, 2006.[11]
Ruling of the CA
NPC raised only two errors in the CA, namely:
I
THE COURT A QUO SERIOUSLY ERRED IN RULING THAT NAPOCOR'S UNDERGROUND TUNNEL IN ITS
AGUS RIVER HYDRO-ELECTRIC PLANT PROJECT TRAVERSED AND/OR AFFECTED APPELLEES' PROPERTY
AS THERE IS NO CLEAR EVIDENCE INDUBITABLY ESTABLISHING THE SAME
II
THE COURT A QUO SERIOUSLY ERRED IN GRANTING APPELLEES' CLAIMS IN THEIR ENTIRETY FOR
GRANTING ARGUENDO THAT NAPOCOR'S UNDERGROUND TUNNEL INDEED TRAVERSED APPELLEE'S
PROPERTY, THEIR CAUSE OF ACTION HAD ALREADY BEEN BARRED BY PRESCRIPTION, ESTOPPEL AND
LACHES

On October 5, 2004, the CA affirmed the decision of the RTC, holding that the testimonies of NPC's witness Gregorio
Enterone and of the respondents' witness Engr. Pete Sacedon, the topographic survey map, the sketch map, and the
ocular inspection report sufficiently established the existence of the underground tunnel traversing the land of the
Heirs of Macabangkit; that NPC did not substantiate its defense that prescription already barred the claim of the
Heirs of Macabangkit; and that Section 3(i) of R.A. No. 6395, being silent about tunnels, did not apply, viz:
As regard Section 3(i) of R.A. No. 6395 (An Act Revising the Charter of the National Power
Corporation), it is submitted that the same provision is not applicable. There is nothing in Section 3(i)
of said law governing claims involving tunnels. The same provision is applicable to those projects or
facilities on the surface of the land, that can easily be discovered, without any mention about the
claims involving tunnels, particularly those surreptitiously constructed beneath the surface of the land,
as
in
the
instant
case.
Now, while it is true that Republic Act No. 6395 authorizes NAPOCOR to take water from any public
stream, river, creek, lake, spring or waterfall in the Philippines for the realization of the purposes
specified therein for its creation; to intercept and divert the flow of waters from lands of riparian
owners (in this case, the "Heirs"), and from persons owning or interested in water which are or may be
necessary to said purposes, the same Act expressly mandates the payment of just compensation.
WHEREFORE, premises considered, the instant appeal is hereby DENIED for lack of merit. Accordingly,
the appealed Decision dated August 13, 1999, and the supplemental Decision dated August 18, 1999,
are
hereby
AFFIRMED
in
toto.
SO ORDERED.[12]

Issue
NPC has come to the Court, assigning the lone error that:
THE APPELLATE COURT ERRED ON A QUESTION OF LAW WHEN IT AFFIRMED THE DECISION AND
SUPPLEMENTAL DECISION OF THE COURT A QUO DIRECTING AND ORDERING PETITIONER TO PAY JUST
COMPENSATION TO RESPONDENTS.

NPC reiterates that witnesses Enterone and Sacedon lacked personal knowledge about the construction and
existence of the tunnel and were for that reason not entitled to credence; and that the topographic and relocation
maps prepared by Sacedon should not be a basis to prove the existence and location of the tunnel due to being selfserving.
NPC contends that the CA should have applied Section 3(i) of Republic Act No. 6395, which provided a period of only
five years from the date of the construction within which the affected landowner could bring a claim against it; and
that even if Republic Act No. 6395 should be inapplicable, the action of the Heirs of Macabangkit had already
prescribed due to the underground tunnel being susceptible to acquisitive prescription after the lapse of 10 years
pursuant to Article 620 of the Civil Code due to its being a continuous and apparent legal easement under Article
634
of
the
Civil
Code.
The issues for resolution are, therefore, as follows:
(1) Whether the CA and the RTC erred in holding that there was an underground tunnel traversing
the
Heirs
of
Macabangkit's
land
constructed
by
NPC;
and
(2) Whether the Heirs of Macabangkit's right to claim just compensation had prescribed under section
3(i) of Republic Act No. 6395, or, alternatively, under Article 620 and Article 646 of the Civil Code.

Ruling
We uphold the liability of NPC for payment of just compensation.
1.
Factual findings of the RTC,
when affirmed by the CA, are binding
The existence of the tunnel underneath the land of the Heirs of Macabangkit, being a factual matter, cannot now be
properly reviewed by the Court, for questions of fact are beyond the pale of a petition for review on certiorari.
Moreover, the factual findings and determinations by the RTC as the trial court are generally binding on the Court,
particularly after the CA affirmed them.[13] Bearing these doctrines in mind, the Court should rightly dismiss NPC's
appeal.
NPC argues, however, that this appeal should not be dismissed because the Heirs of Macabangkit essentially failed
to prove the existence of the underground tunnel. It insists that the topographic survey map and the right-of-way
map presented by the Heirs of Macabangkit did not at all establish the presence of any underground tunnel.
NPC

still

fails

to

convince.

Even assuming, for now, that the Court may review the factual findings of the CA and the RTC, for NPC to insist that
the evidence on the existence of the tunnel was not adequate and incompetent remains futile. On the contrary, the
evidence on the tunnel was substantial, for the significance of the topographic survey map and the sketch map (as
indicative of the extent and presence of the tunnel construction) to the question on the existence of the tunnel was
strong, as the CA correctly projected in its assailed decision, viz:
Among the pieces of documentary evidence presented showing the existence of the said tunnel
beneath the subject property is the topographic survey map. The topographic survey map is one
conducted to know about the location and elevation of the land and all existing structures above and
underneath it. Another is the Sketch Map which shows the location and extent of the land traversed or
affected by the said tunnel. These two (2) pieces of documentary evidence readily point the
extent and presence of the tunnel construction coming from the power cavern near the
small man-made lake which is the inlet and approach tunnel, or at a distance of about two
(2) kilometers away from the land of the plaintiffs-appellees, and then traversing the
entire and the whole length of the plaintiffs-appellees' property, and the outlet channel of
the tunnel is another small man-made lake. This is a sub-terrain construction, and considering
that both inlet and outlet are bodies of water, the tunnel can hardly be noticed. All constructions done
were beneath the surface of the plaintiffs-appellees' property. This explains why they could never
obtain any knowledge of the existence of such tunnel during the period that the same was constructed

and installed beneath their property.[14]

The power cavern and the inlet and outlet channels established the presence of the underground tunnel, based on
the declaration in the RTC by Sacedon, a former employee of the NPC. [15] It is worthy to note that NPC did not
deny the existence of the power cavern, and of the inlet and outlet channels adverted to and as depicted in the
topographic survey map and the sketch map. The CA cannot be faulted for crediting the testimony of Sacedon
despite the effort of NPC to discount his credit due to his not being an expert witness, simply because Sacedon had
personal knowledge based on his being NPC's principal engineer and supervisor tasked at one time to lay out the
tunnels and transmission lines specifically for the hydroelectric projects,[16] and to supervise the construction of
the Agus 1 Hydroelectric Plant itself[17] from 1978 until his retirement from NPC.[18] Besides, he declared that he
personally experienced the vibrations caused by the rushing currents in the tunnel, particularly near the outlet
channel.[19]
Under
any
circumstances,
Sacedon
was
a
credible
and
competent
witness.
The ocular inspection actually confirmed the existence of the tunnel underneath the land of the Heirs of
Macabangkit. Thus, the CA observed:
More so, the Ocular inspection conducted on July 23, 1998 further bolstered such claim of the
existence and extent of such tunnel. This was conducted by a team composed of the Honorable
Presiding Judge of the Regional Trial Court, Branch 01, Lanao del Norte, herself and the respective
lawyers of both of the parties and found that, among others, said underground tunnel was
constructed beneath the subject property.[20]

It bears noting that NPC did not raise any issue against or tender any contrary comment on the ocular inspection
report.
2.
Five-year prescriptive period under Section 3(i) of Republic
Act No. 6395 does not apply to claims for just compensation
The CA held that Section 3(i) of Republic Act No. 6395 had no application to this action because it covered facilities
that could be easily discovered, not tunnels that were inconspicuously constructed beneath the surface of the land.
[21]
NPC disagrees, and argues that because Article 635[22] of the Civil Code directs the application of special laws
when an easement, such as the underground tunnel, was intended for public use, the law applicable was Section
3(i) of Republic Act No. 6395, as amended, which limits the action for recovery of compensation to five years from
the date of construction. It posits that the five-year prescriptive period already set in due to the construction of the
underground
tunnel
having
been
completed
in
1979
yet.
Without necessarily adopting the reasoning of the CA, we uphold its conclusion that prescription did not bar the
present
action
to
recover
just
compensation.
Section 3 (i) of Republic Act No. 6395, the cited law, relevantly provides:
Section 3. Powers and General Functions of the Corporation. - The powers, functions, rights and
activities of the Corporation shall be the following:
xxx
(i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume,
street, avenue, highway or railway of private and public ownership, as the location of said works
may require:Provided, That said works be constructed in such a manner as not to endanger life
or property; And provided, further, That the stream, watercourse, canal ditch, flume, street,
avenue, highway or railway so crossed or intersected be restored as near as possible to their
former state, or in a manner not to impair unnecessarily their usefulness. Every person or entity
whose right of way or property is lawfully crossed or intersected by said works shall not obstruct
any such crossings or intersection and shall grant the Board or its representative, the proper
authority for the execution of such work. The Corporation is hereby given the right of way to

locate, construct and maintain such works over and throughout the lands owned by the
Republic of the Philippines or any of its branches and political subdivisions. The Corporation or
its representative may also enter upon private property in the lawful performance or
prosecution of its business and purposes, including the construction of the transmission lines
thereon; Provided, that the owner of such property shall be indemnified for any actual damage
caused thereby;Provided, further, That said action for damages is filed within five years
after the rights of way, transmission lines, substations, plants or other facilities shall
have been established; Provided, finally, That after said period, no suit shall be brought to
question the said rights of way, transmission lines, substations, plants or other facilities;

A cursory reading shows that Section 3(i) covers the construction of "works across, or otherwise, any stream,
watercourse, canal, ditch, flume, street, avenue, highway or railway of private and public ownership, as the location
of said works may require." It is notable that Section 3(i) includes no limitation except those enumerated after the
term works. Accordingly, we consider the term works as embracing all kinds of constructions, facilities, and other
developments that can enable or help NPC to meet its objectives of developing hydraulic power expressly provided
under paragraph (g) of Section 3.[23] The CA's restrictive construal of Section 3(i) as exclusive of tunnels was
obviously unwarranted, for the provision applies not only to development works easily discoverable or on the
surface of the earth but also to subterranean works like tunnels. Such interpretation accords with the fundamental
guideline in statutory construction that when the law does not distinguish, so must we not. [24] Moreover, when the
language of the statute is plain and free from ambiguity, and expresses a single, definite, and sensible meaning,
that meaning is conclusively presumed to be the meaning that the Congress intended to convey.[25]
Even

so,

we

still

cannot

side

with

NPC.

We rule that the prescriptive period provided under Section 3(i) of Republic Act No. 6395 is applicable only to an
action for damages, and does not extend to an action to recover just compensation like this case. Consequently,
NPC cannot thereby bar the right of the Heirs of Macabangkit to recover just compensation for their land.
The action to recover just compensation from the State or its expropriating agency differs from the action for
damages. The former, also known as inverse condemnation, has the objective to recover the value of property taken
in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been
attempted by the taking agency.[26] Just compensation is the full and fair equivalent of the property taken from its
owner by the expropriator. The measure is not the taker's gain, but the owner's loss. The word just is used to
intensify the meaning of the word compensation in order to convey the idea that the equivalent to be rendered for
the property to be taken shall be real, substantial, full, and ample. [27] On the other hand, the latter action seeks to
vindicate a legal wrong through damages, which may be actual, moral, nominal, temperate, liquidated, or
exemplary. When a right is exercised in a manner not conformable with the norms enshrined in Article 19[28] and
like provisions on human relations in the Civil Code, and the exercise results to the damage of another, a legal
wrong
is
committed
and
the
wrongdoer
is
held
responsible.[29]
The two actions are radically different in nature and purpose. The action to recover just compensation is based on
the Constitution[30] while the action for damages is predicated on statutory enactments. Indeed, the former arises
from the exercise by the State of its power of eminent domain against private property for public use, but the latter
emanates from the transgression of a right. The fact that the owner rather than the expropriator brings the former
does not change the essential nature of the suit as an inverse condemnation,[31] for the suit is not based on tort,
but on the constitutional prohibition against the taking of property without just compensation. [32] It would very well
be contrary to the clear language of the Constitution to bar the recovery of just compensation for private property
taken
for
a
public
use
solely
on
the
basis
of
statutory
prescription.
Due to the need to construct the underground tunnel, NPC should have first moved to acquire the land from the
Heirs of Macabangkit either by voluntary tender to purchase or through formal expropriation proceedings. In either
case, NPC would have been liable to pay to the owners the fair market value of the land, for Section 3(h) of Republic
Act No. 6395 expressly requires NPC to pay the fair market value of such property at the time of the taking, thusly:
(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber and otherwise
dispose of property incident to, or necessary, convenient or proper to carry out the
purposes for which the Corporation was created: Provided, That in case a right of way is
necessary for its transmission lines, easement of right of way shall only be sought: Provided, however,

That in case the property itself shall be acquired by purchase, the cost thereof shall be the
fair market value at the time of the taking of such property.

This was what NPC was ordered to do in National Power Corporation v. Ibrahim,[33] where NPC had denied the right
of the owners to be paid just compensation despite their land being traversed by the underground tunnels for
siphoning water from Lake Lanao needed in the operation of Agus II, Agus III, Agus IV, Agus VI and Agus VII
Hydroelectric Projects in Saguiran, Lanao del Sur, in Nangca and Balo-I in Lanao del Norte and in Ditucalan and
Fuentes in Iligan City. There, NPC similarly argued that the underground tunnels constituted a mere easement that
did not involve any loss of title or possession on the part of the property owners, but the Court resolved against
NPC, to wit:
Petitioner contends that the underground tunnels in this case constitute an easement upon the
property of the respondents which does not involve any loss of title or possession. The manner in
which the easement was created by petitioner, however, violates the due process rights of
respondents as it was without notice and indemnity to them and did not go through proper
expropriation proceedings. Petitioner could have, at any time, validly exercised the power of eminent
domain to acquire the easement over respondents' property as this power encompasses not only the
taking or appropriation of title to and possession of the expropriated property but likewise covers even
the imposition of a mere burden upon the owner of the condemned property. Significantly, though,
landowners cannot be deprived of their right over their land until expropriation proceedings are
instituted in court. The court must then see to it that the taking is for public use, that there is payment
of just compensation and that there is due process of law.[34]

3.
NPC's construction of the tunnel
constituted taking of the land, and
entitled owners to just compensation
The Court held in National Power Corporation v. Ibrahim that NPC was "liable to pay not merely an easement fee but
rather the full compensation for land" traversed by the underground tunnels, viz:
In disregarding this procedure and failing to recognize respondents' ownership of the sub-terrain
portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be
emphasized that the acquisition of the easement is not without expense. The underground tunnels
impose limitations on respondents' use of the property for an indefinite period and deprive them of its
ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just
compensation. Notwithstanding the fact that petitioner only occupies the sub-terrain
portion, it is liable to pay not merely an easement fee but rather the full compensation for
land. This is so because in this case, the nature of the easement practically deprives the
owners of its normal beneficial use. Respondents, as the owner of the property thus
expropriated, are entitled to a just compensation which should be neither more nor less,
whenever it is possible to make the assessment, than the money equivalent of said
property.[35]

Here, like in National Power Corporation v. Ibrahim, NPC constructed a tunnel underneath the land of the Heirs of
Macabangkit without going through formal expropriation proceedings and without procuring their consent or at least
informing them beforehand of the construction. NPC's construction adversely affected the owners' rights and
interests because the subterranean intervention by NPC prevented them from introducing any developments on the
surface, and from disposing of the land or any portion of it, either by sale or mortgage.
Did such consequence constitute taking of the land as to entitle the owners to just compensation?
We agree with both the RTC and the CA that there was a full taking on the part of NPC, notwithstanding that the
owners were not completely and actually dispossessed. It is settled that the taking of private property for public
use, to be compensable, need not be an actual physical taking or appropriation.[36] Indeed, the expropriator's
action may be short of acquisition of title, physical possession, or occupancy but may still amount to a taking. [37]
Compensable taking includes destruction, restriction, diminution, or interruption of the rights of ownership or of the
common and necessary use and enjoyment of the property in a lawful manner, lessening or destroying its value. [38]

It is neither necessary that the owner be wholly deprived of the use of his property, [39] nor material whether the
property is removed from the possession of the owner, or in any respect changes hands. [40]
As a result, NPC should pay just compensation for the entire land. In that regard, the RTC pegged just compensation
at P500.00/square meter based on its finding on what the prevailing market value of the property was at the time of
the
filing
of
the
complaint,
and
the
CA
upheld
the
RTC.
We affirm the CA, considering that NPC did not assail the valuation in the CA and in this Court. NPC's silence was
probably due to the correctness of the RTC's valuation after careful consideration and weighing of the parties'
evidence, as follows:
The matter of what is just compensation for these parcels of land is a matter of evidence. These
parcels of land is (sic) located in the City of Iligan, the Industrial City of the South. Witness Dionisio
Banawan, OIC- City Assessor's Office, testified, "Within that area, that area is classified as industrial
and residential. That plaintiffs' land is adjacent to many subdivisions and that is within the industrial
classification. He testified and identified Exhibit "AA" and "AA-1", a Certification, dated April 4, 1997,
showing that the appraised value of plaintiffs land ranges from P400.00 to P500.00 per square meter
(see, TSN, testimony of Dionisio Banawan, pp. 51, 57, and 71, February 9, 1999). Also, witness
Banawan, testified and identified Two (2) Deeds of Sale, marked as Exhibit "AA-2" and "AA-3,["]
showing that the appraised value of the land adjoining or adjacent to plaintiff land ranges from
P700.00 to P750.00 per square meter. As between the much lower price of the land as testified by
defendant's witness Gregorio Enterone, and that of the City Assessor of Iligan City, the latter is more
credible. Considering however, that the appraised value of the land in the area as determined by the
City Assessor's Office is not uniform, this Court, is of the opinion that the reasonable amount of just
compensation of plaintiff's land should be fixed at FIVE HUNDRED (500.00) PESOS, per square meter.
xxx.[41]

The RTC based its fixing of just compensation ostensibly on the prevailing market value at the time of the filing of
the complaint, instead of reckoning from the time of the taking pursuant to Section 3(h) of Republic Act No. 6395.
The CA did not dwell on the reckoning time, possibly because NPC did not assign that as an error on the part of the
RTC.
We rule that the reckoning value is the value at the time of the filing of the complaint, as the RTC provided in its
decision. Compensation that is reckoned on the market value prevailing at the time either when NPC entered or
when it completed the tunnel, as NPC submits, would not be just, for it would compound the gross unfairness
already caused to the owners by NPC's entering without the intention of formally expropriating the land, and without
the prior knowledge and consent of the Heirs of Macabangkit. NPC's entry denied elementary due process of law to
the owners since then until the owners commenced the inverse condemnation proceedings. The Court is more
concerned with the necessity to prevent NPC from unjustly profiting from its deliberate acts of denying due process
of law to the owners. As a measure of simple justice and ordinary fairness to them, therefore, reckoning just
compensation on the value at the time the owners commenced these inverse condemnation proceedings is entirely
warranted.
In National Power Corporation v. Court of Appeals,[42] a case that involved the similar construction of an
underground tunnel by NPC without the prior consent and knowledge of the owners, and in which we held that the
basis in fixing just compensation when the initiation of the action preceded the entry into the property was the time
of the filing of the complaint, not the time of taking,[43] we pointed out that there was no taking when the entry by
NPC was made "without intent to expropriate or was not made under warrant or color of legal authority."
4.
Awards for rentals, moral damages, exemplary
damages, and attorney's fees are deleted
for insufficiency of factual and legal bases

The CA upheld the RTC's granting to the Heirs of Macabangkit of rentals of P 30,000.00/month "from 1979 up to July
1999 with 12% interest per annum" by finding NPC guilty of bad faith in taking possession of the land to construct
the
tunnel
without
their
knowledge
and
consent.

Granting rentals is legally and factually bereft of justification, in light of the taking of the land being already justly
compensated. Conformably with the ruling in Manila International Airport Authority v. Rodriguez,[44] in which the
award of interest was held to render the grant of back rentals unwarranted, we delete the award of back rentals and
in its place prescribe interest of 12% interest per annum from November 21, 1997, the date of the filing of the
complaint, until the full liability is paid by NPC. The imposition of interest of 12% interest per annum follows a long
line of pertinent jurisprudence, [45] whereby the Court has fixed the rate of interest on just compensation at 12%
per

annum

whenever

the

expropriator

has

not

immediately

paid

just

compensation.

The RTC did not state any factual and legal justifications for awarding to the Heirs of Macabangkit moral and
exemplary damages each in the amount of P200,000.00. The awards just appeared in the fallo of its decision.
Neither did the CA proffer any justifications for sustaining the RTC on the awards. We consider the omissions of the
lower courts as pure legal error that we feel bound to correct even if NPC did not submit that for our consideration.
There was, to begin with, no factual and legal bases mentioned for the awards. It is never trite to remind that moral
and exemplary damages, not by any means liquidated or assessed as a matter of routine, always require evidence
that establish the circumstances under which the claimant is entitled to them. Moreover, the failure of both the RTC
and the CA to render the factual and legal justifications for the moral and exemplary damages in the body of their
decisions immediately demands the striking out of the awards for being in violation of the fundamental rule that the
decision must clearly state the facts and the law on which it is based. Without the factual and legal justifications,
the awards are exposed as the product of conjecture and speculation, which have no place in fair judicial
adjudication.
We also reverse and set aside the decree of the RTC for NPC to pay to the Heirs of Macabangkit "the sum equivalent
to 15% of the total amount awarded, as attorney's fees, and to pay the cost." The body of the decision did not state
the factual and legal reasons why NPC was liable for attorney's fees. The terse statement found at the end of the
body of the RTC's decision, stating: "xxx The contingent attorney's fee is hereby reduced from 20% to only 15% of
the total amount of the claim that may be awarded to plaintiffs," without more, did not indicate or explain why and
how the substantial liability of NPC for attorney's fees could have arisen and been determined.
In assessing attorney's fees against NPC and in favor of the respondents, the RTC casually disregarded the
fundamental distinction between the two concepts of attorney's fees -- the ordinary and the extraordinary. These
concepts were aptly distinguished in Traders Royal Bank Employees Union-Independent v. NLRC,[46] thuswise:
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation
is
the
fact
of
his
employment
by
and
his
agreement
with
the
client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be
paid by the losing party in a litigation. The basis of this is any of the cases provided by law where such
award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the
lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof.

By referring to the award as contingency fees, and reducing the award from 20% to 15%, the RTC was really
referring to a supposed agreement on attorney's fees between the Heirs of Macabangkit and their counsel. As such,
the concept of attorney's fees involved was the ordinary. Yet, the inclusion of the attorney's fees in the judgment
among the liabilities of NPC converted the fees to extraordinary. We have to disagree with the RTC thereon, and we
express our discomfort that the CA did not do anything to excise the clearly erroneous and unfounded grant.
An award of attorney's fees has always been the exception rather than the rule. To start with, attorney's fees are not
awarded every time a party prevails in a suit.[47] Nor should an adverse decision ipso facto justify an award of
attorney's fees to the winning party.[48] The policy of the Court is that no premium should be placed on the right to
litigate.[49] Too, such fees, as part of damages, are assessed only in the instances specified in Art. 2208, Civil Code.
[50] Indeed, attorney's fees are in the nature of actual damages.[51] But even when a claimant is compelled to
litigate with third persons or to incur expenses to protect his rights, attorney's fees may still be withheld where no
sufficient showing of bad faith could be reflected in a party's persistence in a suit other than an erroneous
conviction of the righteousness of his cause.[52] And, lastly, the trial court must make express findings of fact and

law that bring the suit within the exception. What this demands is that the factual, legal or equitable justifications
for
the
award
must
be
set
forth
not only in the fallo but also in the text of the decision, or else, the award should be thrown out for being speculative
and
conjectural.[53]
Sound policy dictates that even if the NPC failed to raise the issue of attorney's fees, we are not precluded from
correcting the lower courts' patently erroneous application of the law.[54] Indeed, the Court, in supervising the
lower courts, possesses the ample authority to review legal matters like this one even if not specifically raised or
assigned as error by the parties.
5.
Attorney's fees under quantum meruit principle
are fixed at 10% of the judgment award

Based on the pending motions of Atty. Macarupung Dibaratun and Atty. Manuel D. Ballelos to assert their respective
rights to attorney's fees, both contending that they represented the Heirs of Macabangkit in this case, a conflict
would
ensue
from
the
finality
of
the
judgment
against
NPC.
A look at the history of the legal representation of the Heirs of Macabangkit herein provides a helpful predicate for
resolving
the
conflict.
Atty. Dibaratun was the original counsel of the Heirs of Macabangkit. When the appeal was submitted for decision in
the CA,[55] Atty. Ballelos filed his entry of appearance,[56] and a motion for early decision.[57] Atty. Ballelos
subsequently
filed
also
a
manifestation,[58]
supplemental
manifestation,[59]
reply,[60] and ex parte motion reiterating the motion for early decision.[61] It appears that a copy of the CA's
decision was furnished solely to Atty. Ballelos. However, shortly before the rendition of the decision, Atty. Dibaratun
filed in the CA a motion to register attorney's lien,[62] alleging that he had not withdrawn his appearance and had
not been aware of the entry of appearance by Atty. Ballelos. A similar motion was also received by the Court from
Atty. Dibaratun a few days after the petition for review was filed.[63] Thus, on February 14, 2005,[64] the Court
directed Atty. Dibaratun to enter his appearance herein. He complied upon filing the comment.[65]
Amir Macabangkit confirmed Atty. Dibaratun's representation through an ex parte manifestation that he filed in his
own behalf and on behalf of his siblings Mongkoy and Putri.[66] Amir reiterated his manifestation on March 6, 2006,
[67] and further imputed malpractice to Atty. Ballelos for having filed an entry of appearance bearing Amir's forged
signature and for plagiarism, i.e., copying verbatim the arguments contained in the pleadings previously filed by
Atty.
Dibaratun.[68]
On September 11, 2008, Atty. Ballelos submitted two motions, to wit: (a) a manifestation and motion authorizing a
certain Abdulmajeed Djamla to receive his attorney's fees equivalent of 15% of the judgment award,[69] and (b) a
motion
to
register
his
attorney's
lien
that
he
claimed
was
contingent. [70]
Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement to attorney's fees was contingent. Yet, a
contract for a contingent fees is an agreement in writing by which the fees, usually a fixed percentage of what may
be recovered in the action, are made to depend upon the success in the effort to enforce or defend a supposed
right. Contingent fees depend upon an express contract, without which the attorney can only recover on the basis of
quantum meruit.[71] With neither Atty. Dibaratun nor Atty. Ballelos presenting a written agreement bearing upon
their supposed contingent fees, the only way to determine their right to appropriate attorney's fees is to apply the
principle
of
quantum
meruit.
Quantum meruit - literally meaning as much as he deserves - is used as basis for determining an attorney's
professional fees in the absence of an express agreement.[72] The recovery of attorney's fees on the basis of
quantum meruit is a device that prevents an unscrupulous client from running away with the fruits of the legal
services of counsel without paying for it and also avoids unjust enrichment on the part of the attorney himself. [73]
An attorney must show that he is entitled to reasonable compensation for the effort in pursuing the client's cause,

taking

into

account

certain

factors

in

fixing

the

amount

of

legal

fees.[74]

Rule 20.01 of the Code of Professional Responsibility lists the guidelines for determining the proper amount of
attorney fees, to wit:
Rule 20.1 - A lawyer shall be guided by the following factors in determining his fees:
a) The time spent and the extent of the services rendered or required;
b) The novelty and difficult of the questions involved;
c) The important of the subject matter;
d) The skill demanded;
e) The probability of losing other employment as a result of acceptance of the proffered case;
f) The customary charges for similar services and the schedule of fees of the IBP chapter to which he
belongs;
g) The amount involved in the controversy and the benefits resulting to the client from the service;
h) The contingency or certainty of compensation;
i) The character of the employment, whether occasional or established; and
j) The professional standing of the lawyer.

In the event of a dispute as to the amount of fees between the attorney and his client, and the intervention of the
courts is sought, the determination requires that there be evidence to prove the amount of fees and the extent and
value of the services rendered, taking into account the facts determinative thereof. [75] Ordinarily, therefore, the
determination of the attorney's fees on quantum meruit is remanded to the lower court for the purpose. However, it
will be just and equitable to now assess and fix the attorney's fees of both attorneys in order that the resolution of
"a comparatively simple controversy," as Justice Regalado put it in Traders Royal Bank Employees UnionIndependent v. NLRC,[76] would not be needlessly prolonged, by taking into due consideration the accepted
guidelines
and
so
much
of
the
pertinent
data
as
are
extant
in
the
records.
Atty. Dibaratun and Atty. Ballelos each claimed attorney's fees equivalent to 15% of the principal award of
P113,532,500.00, which was the amount granted by the RTC in its decision. Considering that the attorney's fees will
be defrayed by the Heirs of Macabangkit out of their actual recovery from NPC, giving to each of the two attorney's
15% of the principal award as attorney's fees would be excessive and unconscionable from the point of view of the
clients. Thus, the Court, which holds and exercises the power to fix attorney's fees on a quantum meruit basis in the
absence of an express written agreement between the attorney and the client, now fixes attorney's fees at 10% of
the
principal
award
of
P113,532,500.00.
Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who should receive attorney's fees from the Heirs of
Macabangkit is a question that the Court must next determine and settle by considering the amount and quality of
the
work
each
performed
and
the
results
each
obtained.
Atty. Dibaratun, the attorney from the outset, unquestionably carried the bulk of the legal demands of the case. He
diligently prepared and timely filed in behalf of the Heirs of Macabangkit every pleading and paper necessary in the
full resolution of the dispute, starting from the complaint until the very last motion filed in this Court. He
consistently appeared during the trial, and examined and cross-examined all the witnesses presented at that stage
of the proceedings. The nature, character, and substance of each pleading and the motions he prepared for the
Heirs of Macabangkit indicated that he devoted substantial time and energy in researching and preparing the case
for the trial. He even advanced P250,000.00 out of his own pocket to defray expenses from the time of the filing of
the motion to execute pending appeal until the case reached the Court.[77] His representation of all the Heirs of
Macabangkit
was
not
denied
by
any
of
them.
We note that Atty. Dibaratun possessed some standing in the legal profession and in his local community. He

formerly served as a member of the Board of Director of the Integrated Bar of the Philippines (IBP), Lanao del NorteIligan City Chapter, and was an IBP national awardee as Best Legal Aid Committee Chairman. He taught at Mindanao
State University College of Law Extension. He was a Municipal Mayor of Matungao, Lanao del Norte, and was
enthroned
Sultan
a
Gaus.
In contrast, not much about the character and standing of Atty. Ballelos, as well as the nature and quality of the
legal services he rendered for the Heirs of Macabangkit are in the records. The motions he filed in the
Court and in the CA lacked enlightening research and were insignificant to the success of the clients' cause. His
legal service, if it can be called that, manifested no depth or assiduousness, judging from the quality of the
pleadings from him. His written submissions in the case appeared either to have been lifted verbatim from the
pleadings previously filed by Atty. Dibaratun, or to have been merely quoted from the decisions and resolutions of
the RTC and the CA. Of the Heirs of Macabangkit, only Cebu, Batowa-an, Sayana, Nasser, Manta, Mongkoy[78] and
Edgar gave their consent to Atty. Ballelos to appear in their behalf in the CA, which he did despite Atty. Dibaratun
not having yet filed any withdrawal of his appearance. The Court did not receive any notice of appearance for the
Heirs of Macabangkit from Atty. Ballelos, but that capacity has meanwhile become doubtful in the face of Amir's
strong
denial
of
having
retained
him.
In fairness and justice, the Court accords full recognition to Atty. Dibaratun as the counsel de parte of the Heirs of
Macabangkit who discharged his responsibility in the prosecution of the clients' cause to its successful end. It is he,
not Atty. Ballelos, who was entitled to the full amount of attorney's fees that the clients ought to pay to their
attorney. Given the amount and quality of his legal work, his diligence and the time he expended in ensuring the
success of his prosecution of the clients' cause, he deserves the recognition, notwithstanding that some of the
clients might appear to have retained Atty. Ballelos after the rendition of a favorable judgment. [79]
Atty. Ballelos may claim only from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, the only parties who
engaged him. The Court considers his work in the case as very minimal. His compensation under the quantum
meruit principle is fixed at P5,000.00, and only the Heirs of Macabangkit earlier named are liable to him.
WHEREFORE, the Court AFFIRMS the decision promulgated on October 5, 2004 by the Court of Appeals, subject to
the following MODIFICATIONS, to wit:
(a) Interest at the rate of 12% per annum is IMPOSED on the principal amount of P113,532,500.00
as just compensation, reckoned from the filing of the complaint on November 21, 1997 until the full
liability
is
paid;
(b) The awards of P30,000.00 as rental fee, P200,000.00 as moral damages, and P200,000.00 as
exemplary
damages
are
DELETED;
and
(c) The award of 15% attorney's fees decreed to be paid by National Power Corporation to the Heirs of
Macabangkit is DELETED.

The Court PARTLY GRANTS the motion to register attorney's lien filed by Atty. Macarupung Dibaratun, and FIXES
Atty. Dibaratun's attorney's fees on the basis of quantum meruit at 10% of the principal award of P113,532,500.00.
The motion to register attorney's lien of Atty. Manuel D. Ballelos is PARTLY GRANTED, and Atty. Ballelos is
DECLARED ENTITLED TO RECOVER from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, all surnamed
Macabangkit, the amount of P5,000.00 as attorney's fees on the basis of quantum meruit.
Costs

of

suit

to

be

paid

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio City

by

the

petitioner.

FIRST DIVISION
G.R. No. 187677

April 17, 2013

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS

AND
HIGHWAYS
(DPWH),
Petitioner,
vs.
HON. ROSA SAMSON-TATAD, as Presiding Judge of the Regional Trial Court, Branch 105,
Quezon City, and SPOUSES WILLIAM AND REBECCA GENATO, Respondents.
DECISION
SERENO, CJ.:
This is an appeal via a Petition for Review on Certiorari 1 dated 19 June 2009 assailing the Decision 2
and Resolution3of the Court of Appeals (CA) in C.A. G.R. SP No. 93227 which affirmed the Orders 4 of
the Regional Trial Court (RTC), Branch 105, Quezon City in Civil Case No. Q-01-44595.The RTC barred
petitioner from presenting evidence to prove its claim of ownership over the subject property, as the
presentation thereof would constitute a collateral attack on private respondents' title.
The antecedent facts are as follows:
On 13 July 2001, petitioner Republic of the Philippines, represented by the Department of Public
Works and Highways (DPWH), filed a Complaint against several defendants, including private
respondents, for the expropriation of several parcels of land affected by the construction of the EDSAQuezon Avenue Flyover.5 Private respondents, Spouses William and Rebecca Genato, are the
registered owners of a piece of land ("subject property") covered by Transfer Certificate of Title (TCT)
No. RT-11603 (383648)6 and having an area of 460 square meters.
During the pendency of the proceedings, petitioner received a letter dated 14 June 2002 from Engr.
Patrick B. Gatan, Project Manager IV of the DPWH-NCR, reporting that the subject property was
"government land and that the transfer certificate of title of the said claimant respondent x x x is of
dubious origin and of fabrication as it encroached or overlapped on a government property." 7 As a
result, petitioner filed an Amended Complaint on 24 June 2002, 8 seeking to limit the coverage of the
proceedings to an area conforming to the findings of the DPWH:
4. To accomplish said project, which is to be undertaken by the Department of Public Works and
Highways [DPWH], it is necessary and urgent for plaintiff to acquire in fee simple portions of the
following parcels of land belonging to, occupied, possessed, and/or the ownership of which are being
claimed by the defendants, to wit:
xxxx
[c] Defendants William O. Genato and Rebecca G. Genato.
xxxx
5. The portion of the above properties that are affected by the project and shaded green in the
sketch plan hereto attached and made integral part hereof as Annex E, consisting of an area of: x x x
[c] 460 square meters of the aforedescribed property registered in the name of defendants spouses
William and Rebecca Genato; x x x. (Emphasis in the original)
On 18 July 2002, petitioner filed a Manifestation and Motion 9 to have the subject property "declared
or considered of uncertain ownership or subject to conflicting claims."
In an Order dated 10 December 2002, 10 the RTC admitted petitioners Amended Complaint,
deferred the release to respondents the amount of eighteen million four hundred thousand pesos
(P18,400,000) deposited in the bank, equivalent to the current zonal valuation of the land, and

declared the property as the subject of conflicting claims.

While petitioner was presenting evidence to show that the subject property actually belonged to the
Government, private respondents interposed objections saying that petitioner was barred from
presenting the evidence, as it constituted a collateral attack on the validity of their TCT No. RT-11603
(383648). The RTC then required the parties to submit their respective Memoranda.
Upon receipt of the Memoranda, the trial court issued on 12 July 2005 an Order 11 as follows:
WHEFEFORE, premises considered, the Court finds that the issue of the validity of the TCT No.
11603 (383648) can only be raised in an action expressly instituted for that purpose and not in this
instant proceeding. Accordingly, plaintiff is barred from presenting evidence as they [sic] constitute
collateral attack on the validity of the title to the subject lot in violation of Sec. 48 of P. D. 1529.
On 4 August 2005, petitioner seasonably filed a Motion for Reconsideration, 12 but the motion was
denied by the RTC in an Order dated 17 November 2005. 13
On 4 January 2006, private respondents filed a Motion for the payment of just compensation
amounting to twenty million seven hundred thousand pesos (20,700,000) and for the release of
eighteen million four hundred thousand pesos (P18,400,000) deposited in the Land BankSouth
Harbor Branch as partial payment.14 This Motion remains pending in the RTC to date.
On 9 February 2006, petitioner filed with the CA a Petition for Certiorari with Prayer for the Issuance
of a Temporary Restraining Order and/or Writ of Preliminary Injunction. 15
The appellate court ruled that since the subject property was covered by a Torrens title, Presidential
Decree No. 1529, or the Property Registration Decree (P. D. 1529), necessarily finds significance. Thus,
it held that the RTC rightly applied Sec. 48. Accordingly, the CA issued its 29 September 2008
Decision,16 the dispositive portion of which reads:
WHEREFORE, the Petition for Certiorari is DISMISSED. The prayer for the issuance of a Writ of
Preliminary Injunction is accordingly DENIED.
On 29 October 2008, petitioner filed a Motion for Reconsideration, 17 but the motion was also
denied in a Resolution dated 27 April 2009.18
Hence, the instant Petition.
A Comment19 on the Petition was filed by private respondents on 1 September 2009, and a
Reply20 thereto by petitioner on 27 January 2010.
ISSUE
From the foregoing, the sole issue submitted for resolution before this Court is whether petitioner
may be barred from presenting evidence to assail the validity of respondents title under TCT No. RT11603 (383648).
The Courts Ruling
Petitioner argues that under Section 9, Rule 67 of the Rules of Court, if the ownership of a property
to be expropriated is uncertain, the court in the same expropriation proceeding is also given authority
to make a proper adjudication of the matter. Section 9 of Rule 67 reads:
SECTION 9. Uncertain Ownership. Conflicting Claims. If the ownership of the property taken is
uncertain, or there are conflicting claims to any part thereof, the court may order any sum or sums
awarded as compensation for the property to be paid to the clerk of the court for the benefit of the

persons adjudged in the same proceeding to be entitled thereto. But the judgment shall require the
payment of the sum or sums awarded to either the defendant or the clerk before the plaintiff can enter
upon the property, or retain it for the public use or purpose if entry has already been made.
This view is allegedly supported by Republic v. Court of First Instance of Pampanga, presided
formerly by Judge L. Pasicolan 21(Republic) in which the trial court hearing the expropriation
proceeding was also allowed to resolve the issue of ownership.
Petitioner further argues that the original Complaint was amended "precisely to reflect the fact that
herein private respondents, albeit ostensibly appearing as registered owners, are to be considered as
mere claimants of one of the properties subject of the expropriation." This is the reason why the RTC
issued an Order declaring the property subject of conflicting claims.
Moreover, this being an in rem proceeding, "plaintiff Republic of the Philippines seeks the relief,
both in the original and amended complaints, to transfer to plaintiff the titles to said parcels of land
together with their improvements free from all liens and encumbrances. For this particular purpose,
the expropriation suit is essentially a direct proceeding." 22
Private respondents, on the other hand, invoke Section 48 of P. D. 1529, viz:
SECTION 48. Certificate Not Subject to Collateral Attack. A certificate of title shall not be subject
to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in
accordance with law.
It is their contention that by allowing petitioner to present adversarial evidence, the court is in
effect allowing respondents Torrens title to be collaterally attacked an action prohibited by P. D.
1529.
We rule that petitioner may be allowed to present evidence to assert its ownership over the subject
property, but for the sole purpose of determining who is entitled to just compensation.
I
Proper interpretation of Section 9, Rule 67
Proceeding from the principle of jus regalia, the right to eminent domain has always been
considered as a fundamental state power that is inseparable from sovereignty. 23 It is described as the
States inherent power that need not be granted even by the Constitution, 24 and as the government's
right to appropriate, in the nature of compulsory sale to the State, private property for public use or
purpose.25
Expropriation, or the exercise of the States right to eminent domain, is proscribed by the restraints
of public use and just compensation. 26It is governed by Rule 67 of the Rules of Court, which presents
procedural guidelines for the court to ensure that due process is observed and just compensation
rightly paid to the private owners.
Indeed, this Court first had the occasion to interpret Section 9, Rule 67 in the case of Republic. In
addressing the issue of "whether or not the court that hears the expropriation case has also jurisdiction
to determine, in the same proceeding, the issue of ownership of the land sought to be condemned,"
the Court answered in the affirmative:
The sole issue in this case, i.e., whether or not the court that hears the expropriation case has also
jurisdiction to determine, in the same proceeding, the issue of ownership of the land sought to be
condemned, must be resolved in the affirmative. That the court is empowered to entertain the
conflicting claims of ownership of the condemned or sought to be condemned property and adjudge
the rightful owner thereof, in the same expropriation case, is evident from Section 9 of the Revised
Rule 69, which provides:
SEC. 9. Uncertain ownership. Conflicting claims. If the ownership of the property taken is
uncertain, or there are conflicting claims to any part thereof, the court may order any sum or sums

awarded as compensation for the property to be paid to the clerk of court for the benefit of the
persons adjudged in the same proceeding to be entitled thereto. But the judgment shall require the
payment of the sum or sums awarded to either the defendant or the clerk before the plaintiff can enter
upon the property, or retain it for the public use or purpose if entry has already been made.
In fact, the existence of doubt or obscurity in the title of the person or persons claiming ownership
of the properties to be expropriated would not preclude the commencement of the action nor prevent
the court from assuming jurisdiction thereof. The Rules merely require, in such eventuality, that the
entity exercising the right of eminent domain should state in the complaint that the true ownership of
the property cannot be ascertained or specified with accuracy. 27
We arrived at the same conclusion in Republic v. Rural Bank of Kabacan, Inc., 28 in which we held
thus:
The trial court should have been guided by Rule 67, Section 9 of the 1997 Rules of Court, which
provides thus:
SEC. 9. Uncertain ownership; conflicting claims. If the ownership of the property taken is
uncertain, or there are conflicting claims to any part thereof, the court may order any sum or sums
awarded as compensation for the property to be paid to the court for the benefit of the person
adjudged in the same proceeding to be entitled thereto. But the judgment shall require the payment of
the sum or sums awarded to either the defendant or the court before the plaintiff can enter upon the
property, or retain it for the public use or purpose if entry has already been made.
Hence, the appellate court erred in affirming the trial courts Order to award payment of just
compensation to the defendants-intervenors. There is doubt as to the real owner of Lot No. 3080.
Despite the fact that the lot was covered by TCT No. T-61963 and was registered under its name,
the Rural Bank of Kabacan manifested that the owner of the lot was no longer the bank, but the
defendants-intervenors; however, it presented no proof as to the conveyance thereof. In this regard,
we deem it proper to remand this case to the trial court for the reception of evidence to establish the
present owner of Lot No. 3080 who will be entitled to receive the payment of just
compensation.1wphi1 (Emphases supplied)
However, the authority to resolve ownership should be taken in the proper context. The discussion
in Republic was anchored on the question of who among the respondents claiming ownership of the
property must be indemnified by the Government:
Now, to determine the person who is to be indemnified for the expropriation of Lot 6, Block 6, Psd2017, the court taking cognizance of the expropriation must necessarily determine if the sale to the
Punzalan spouses by Antonio Feliciano is valid or not. For if valid, said spouses must be the ones to be
paid by the condemnor; but if invalid, the money will be paid to someone else. x x x. 29
Thus, such findings of ownership in an expropriation proceeding should not be construed as final
and binding on the parties. By filing an action for expropriation, the condemnor (petitioner), merely
serves notice that it is taking title to and possession of the property, and that the defendant is
asserting title to or interest in the property, not to prove a right to possession, but to prove a right to
compensation for the taking.30
If at all, this situation is akin to ejectment cases in which a court is temporarily authorized to
determine ownership, if only to determine who is entitled to possession. This is not conclusive, and it
remains open to challenge through proper actions. 31 The consequences of Sec. 9, Rule 67 cannot be
avoided, as they are due to the intimate relationship of the issue of ownership with the claim for the
expropriation payment.32
II
Inapplicability of Section 48, P. D. 1529
Verily, our interpretation of Sec. 9, Rule 67 does not run counter to Section 48 of P.D. 1529. Under

Sec. 48, collateral attacks on a Torrens title are prohibited. We have explained the concept in Oo v.
Lim,33 to wit:
An action or proceeding is deemed an attack on a title when its objective is to nullify the title,
thereby challenging the judgment pursuant to which the title was decreed. The attack is direct when
the objective is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the
attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment
is nevertheless made as an incident thereof.
In several instances, we have considered an Answer praying for the cancellation of the plaintiff's
Torrens title as a form of a collateral attack. 34 We have afforded the similar treatment in a petition
questioning the validity of a deed of sale for a registered land, 35 and in a reformation of a deed of sale
to include areas registered under the name of another party. 36 But a resolution on the issue of
ownership in a partition case was deemed neither to be a direct or collateral attack, for "until and
unless this issue of co-ownership is definitely and finally resolved, it would be premature to effect a
partition of the disputed properties." 37
Here, the attempt of petitioner to present evidence cannot be characterized as an "attack." It must
be emphasized that the objective of the case is to appropriate private property, and the contest on
private respondents' title arose only as an incident to the issue of whom should be rightly
compensated.
Contrary to petitioner's allegations, the Complaint and Amended Complaint cannot also be
considered as a direct attack. The amendment merely limited the coverage of the expropriation
proceedings to the uncontested portion of the subject property. The RTC's Order declaring the property
as subject of conflicting claims is a recognition that there are varying claimants to the sums to be
awarded as just compensation. This serves as an authority for the court to conduct a limited inquiry on
the property's ownership.
WHEREFORE, the Court GRANTS the Petition for Review on Certiorari and the prayer for a Writ of
Preliminary Injunction. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
93227, as well as the Decision of the Regional Trial Court, Branch 105, Quezon City in Civil Case No. Q01-44595, are hereby REVERSED and SET ASIDE. This case is REMANDED to the RTC to hear the issue
of ownership for the purpose of just compensation.
SO ORDERED.

SECOND DIVISION
G.R. NO. 202690, June 05, 2013
HENRY L. SY, Petitioner, v. LOCAL GOVERNMENT OF QUEZON CITY, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the January 20, 2012 Decision2 and July 16, 2012
Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 91964 which affirmed with modification the August 22,
2008 Order4 of the Regional Trial Court of Quezon City, Branch 80 (RTC) in Civil Case No. Q-96-29352, ordering
respondent Local Government of Quezon City (the City) to pay petitioner Henry L. Sy (Sy) just compensation set at
P5,500.00 per square meter (sq. m.), including P200,000.00 as exemplary damages and attorneys fees equivalent
to one percent (1%) of the total amount due. lawlibrary
The Facts

On November 7, 1996, the City, through then Mayor Ismael Mathay, Jr., filed a complaint for expropriation with the
RTC in order to acquire a 1,000 sq. m. parcel of land, owned and registered under the name of Sy (subject
property),5 which was intended to be used as a site for a multi-purpose barangay hall, day-care center, playground
and community activity center for the benefit of the residents of Barangay Balingasa, Balintawak, Quezon City. 6
The requisite ordinance to undertake the aforesaid expropriation namely, Ordinance No. Sp-181, s-94, was enacted
on
April
12,
1994.7chanroblesvirtuallawlibrary
On March 18, 1997, pursuant to Section 198 of Republic Act No. 7160 (RA 7160), otherwise known as the "Local
Government Code of 1991," the City deposited the amount of P241,090.00 with the Office of the Clerk of Court,
representing
15%
of
the
fair
market
value
of
the
subject
property
based
on
its
tax
9
declaration. chanroblesvirtuallawlibrary
During the preliminary conference on November 8, 2006, Sy did not question the Citys right to expropriate the
subject property. Thus, only the amount of just compensation remained at issue. 10chanroblesvirtuallawlibrary
On July 6, 2006, the RTC appointed Edgardo Ostaco (Commissioner Ostaco), Engr. Victor Salinas (Commissioner
Salinas) and Atty. Carlo Alcantara (Commissioner Alcantara) as commissioners to determine the proper amount of
just compensation to be paid by the City for the subject property. Subsequently, Commissioners Ostaco and
Alcantara, in a Report dated February 11, 2008, recommended the payment of P5,500.00 per sq. m., to be
computed from the date of the filing of the expropriation complaint, or on November 7, 1996. On the other hand,
Commissioner Salinas filed a separate Report dated March 7, 2008, recommending the higher amount of P13,500.00
per sq. m. as just compensation.11chanroblesvirtuallawlibrary lawlibrary
The RTC Ruling
In the Order dated August 22, 2008, 12 the RTC, citing the principle that just compensation must be fair not only to
the owner but to the expropriator as well, adopted the findings of Commissioners Ostaco and Alcantara and thus,
held that the just compensation for the subject property should be set at P5,500.00 per sq. m. 13 Further, it found no
basis for the award of damages and back rentals in favor of Sy. 14 Finally, while legal interest was not claimed, for
equity considerations, it awarded six percent (6%) legal interest, computed from November 7, 1996 until full
payment
of
just
compensation.15chanroblesvirtuallawlibrary
Dissatisfied, Sy filed an appeal with the CA.16chanroblesvirtuallawlibrary lawlibrary
The CA Ruling
In the Decision dated January 20, 2012, 17 the CA affirmed the RTCs ruling but modified the same, ordering the City
to pay Sy the amount of P200,000.00 as exemplary damages and attorneys fees equivalent to one percent (1%) of
the
total
amount
due.
It found the appraisal of Commissioners Ostaco and Alcantara for the subject property to be more believable than
the P13,000.00 per sq. m. valuation made by independent appraisers Cuervo and Asian Appraisers in 1995 and
1996, respectively, considering that it was arrived at after taking into account: (a) the fair market value of the
subject property in the amount of P4,000.00 per sq. m. based on the September 4, 1996 recommendation of the
City Appraisal Committee;18 (b) the market value of the subject lot in the amount of P2,000.00 per sq. m. based on
several sworn statements made by Sy himself; 19 and (c) Sys own tax declaration for 1996, 20 stating that the
subject property has a total market value of P2,272,050.00. Accordingly, it held that the fair market value of
P5,500.00 per sq. m., or P5,500,000.00 in total, for the 1,000 sq. m. subject property arrived at by Commissioners
Ostaco
and
Alcantara
was
more
than
fair
and
reasonable. 21chanroblesvirtuallawlibrary
The CA also denied Sys assertion that he should be entitled to damages on account of the purported shelving of his

housing project, finding no sufficient evidence to support the same. Likewise, it observed that the expropriation
would not leave the rest of Sys properties useless as they would still be accessible through a certain Lot 8 based on
the
Property
Identification
Map.22chanroblesvirtuallawlibrary
Nonetheless, citing the case of Manila International Airport Authority v. Rodriguez (MIAA), 23 it awarded exemplary
damages in the amount of P200,000.00 and attorneys fees equivalent to one percent (1%) of the amount due
because of the Citys taking of the subject property without even initiating expropriation proceedings. 24 It, however,
denied Sys claim of back rentals considering that the RTC had already granted legal interest in his
favor.25chanroblesvirtuallawlibrary
Aggrieved, Sy moved for reconsideration which was denied in the Resolution dated July 16, 2012 26 for being filed
out of time.27 The City also filed a motion for reconsideration which was equally denied for lack of
merit.28chanroblesvirtuallawlibrary
Hence, this petition. lawlibrary
Issues Before The Court
The present controversy revolves around the issue of whether the CA correctly: (a) dismissed Sys motion for
reconsideration for being filed out of time; (b) upheld the amount of just compensation as determined by the RTC as
well as its grant of six percent (6%) legal interest; and (c) awarded exemplary damages and attorneys fees.
lawlibrary
The Courts Ruling
The petition is partly meritorious.
A. Failure to seasonably move for reconsideration;nadcralavvonlinelawlibrary
excusable negligence; relaxation of procedural rules
At the outset, the Court observes that Sys motion for reconsideration was filed out of time and thus, was properly
dismissed by the CA. Records show that, as per the Postmasters Certification, the CAs January 20, 2012 Decision
was received by Sy on January 26, 2012 and as such, any motion for reconsideration therefrom should have been
filed not later than fifteen (15) days from receipt,29 or on February 10, 2012.30 However, Sy filed his motion for
reconsideration (subject motion) a day late, or on February 13, 2012,31 which thus, renders the CA decision final
and executory.32chanroblesvirtuallawlibrary
In this regard, it is apt to mention that Sys counsel, Atty. Tranquilino F. Meris (Atty. Meris), claims that his secretarys
inadvertent placing of the date January 27, 2012, instead of January 26, 2012, on the Notice of Decision 33
constitutes excusable negligence which should therefore, justify a relaxation of the rules.
The assertion is untenable.
A claim of excusable negligence does not loosely warrant a relaxation of the rules. Verily, the party invoking such
should be able to show that the procedural oversight or lapse is attended by a genuine miscalculation or unforeseen
fortuitousness which ordinary prudence could not have guarded against so as to justify the relief sought.34 The
standard of care required is that which an ordinarily prudent man bestows upon his important business. 35 In this
accord, the duty rests on every counsel to see to adopt and strictly maintain a system that will efficiently take into
account all court notices sent to him.36chanroblesvirtuallawlibrary
Applying these principles, the Court cannot excuse Atty. Meris misstep based on his proffered reasons. Evidently,
the erroneous stamping of the Notice of Decision could have been averted if only he had instituted a credible filing

system in his office to account for oversights such as that committed by his secretary. Indeed, ordinary prudence
could have prevented such mistake.
Be that as it may, procedural rules may, nonetheless, be relaxed for the most persuasive of reasons in order to
relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed.37 Corollarily, the rule, which states that the mistakes of counsel bind the client, may not be
strictly followed where observance of it would result in the outright deprivation of the clients liberty or property, or
where the interest of justice so requires.38chanroblesvirtuallawlibrary
As applied in this case, the Court finds that the procedural consequence of the above-discussed one-day delay in
the filing of the subject motion which, as a matter of course, should render the CAs January 20, 2012 Decision
already final and executory and hence, bar the instant petition is incommensurate to the injustice which Sy may
suffer. This is in line with the Courts observation that the amount of just compensation, the rate of legal interest, as
well as the time of its accrual, were incorrectly adjudged by both the RTC and the CA, contrary to existing
jurisprudence. In this respect, the Court deems it proper to relax the rules of procedure and thus, proceed to resolve
these substantive issues.
B. Rate of legal interest and time of accrual
Based on a judicious review of the records and application of jurisprudential rulings, the Court holds that the correct
rate of legal interest to be applied is twelve percent (12%) and not six percent (6%) per annum, owing to the nature
of the Citys obligation as an effective forbearance.
In the case of Republic v. CA,39 the Court ruled that the debt incurred by the government on account of the taking
of the property subject of an expropriation constitutes an effective forbearance which therefore, warrants the
application of the 12% legal interest rate, viz:
The constitutional limitation of "just compensation" is considered to be the sum equivalent to the
market value of the property, broadly described to be the price fixed by the seller in open market in
the usual and ordinary course of legal action and competition or the fair value of the property as
between one who receives, and one who desires to sell, it fixed at the time of the actual taking by the
government. Thus, if property is taken for public use before compensation is deposited with the court
having jurisdiction over the case, the final compensation must include interests on its just value to be
computed from the time the property is taken to the time when compensation is actually paid or
deposited with the court. In fine, between the taking of the property and the actual payment, legal
interests accrue in order to place the owner in a position as good as (but not better than) the position
he
was
in
before
the
taking
occurred.
The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of the
property to be computed from the time petitioner instituted condemnation proceedings and "took" the
property in September 1969. This allowance of interest on the amount found to be the value
of the property as of the time of the taking computed, being an effective forbearance, at
12% per annum should help eliminate the issue of the constant fluctuation and inflation of
the value of the currency over time. x x x (Emphasis and underscoring supplied)

In similar regard, the Court, in Land Bank of the Philippines v. Rivera, 40 pronounced that:
In many cases decided by this Court, 41 it has been repeated time and again that the award of
12% interest is imposed in the nature of damages for delay in payment which in effect
makes the obligation on the part of the government one of forbearance. This is to ensure
prompt payment of the value of the land and limit the opportunity loss of the owner that can drag from
days to decades. (Emphasis and underscoring supplied)

As to the reckoning point on which the legal interest should accrue, the same should be computed from the time of
the taking of the subject property in 1986 and not from the filing of the complaint for expropriation on November 7,
1996.

Records show that the City itself admitted in its Appellees Brief filed before the CA that as early as 1986, "a
burden was already imposed upon the owner of the [subject] property x x x, considering that the expropriated
property was already being used as Barangay day care and office." 42 Thus, the property was actually taken during
that time and from thereon, legal interest should have already accrued. In this light, the Court has held that:
43chanroblesvirtuallawlibrary
x x x [T]he final compensation must include interests on its just value to be computed from
the time the property is taken to the time when compensation is actually paid or deposited with
the court[.] x x x (Emphasis supplied)

This is based on the principle that interest "runs as a matter of law and follows from the right of the landowner to be
placed in as good position as money can accomplish, as of the date of the taking." 44chanroblesvirtuallawlibrary
Notably, the lack of proper authorization, i.e., resolution to effect expropriation,45 did not affect the character of the
Citys taking of the subject property in 1986 as the CA, in its January 20, 2012 Decision, suggests. Case law dictates
that there is "taking" when the owner is actually deprived or dispossessed of his property; when there is a practical
destruction or a material impairment of the value of his property or when he is deprived of the ordinary use
thereof.46 Therefore, notwithstanding the lack of proper authorization, the legal character of the Citys action as one
of "taking" did not change. In this relation, the CA noted that the City enacted Ordinance No. Sp-181, s-94, only on
April 12, 1994 and filed its expropriation complaint on November 7, 1996. However, as it previously admitted, it
already commenced with the taking of the subject property as early as 1986. Accordingly, interest must run from
such
time.
This irregularity does not, however, proceed without any consequence. As correctly observed by the CA, citing as
basis the MIAA case, exemplary damages and attorneys fees should be awarded to the landowner if the
government takes possession of the property for a prolonged period of time without properly initiating expropriation
proceedings. The MIAA ruling was applied in the more recent case of City of Iloilo v. Judge Lolita ContrerasBesana,47 wherein the Court said:
We stress, however, that the City of Iloilo should be held liable for damages for taking private
respondents property without payment of just compensation. In Manila International Airport Authority
v. Rodriguez, the Court held that a government agencys prolonged occupation of private property
without the benefit of expropriation proceedings undoubtedly entitled the landowner to damages:
Such pecuniary loss entitles him to adequate compensation in the form
of actual or compensatory damages, which in this case should be the legal
interest (6%) on the value of the land at the time of taking, from said point up
to full payment by the MIAA. This is based on the principle that interest "runs as a
matter of law and follows from the right of the landowner to be placed in as good position
as money can accomplish, as of the date of the taking x x x. lawlibrary
xxxx
For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of expropriation
proceedings and without the MIAA exerting efforts to ascertain ownership of the lot and negotiating
with any of the owners of the property. To our mind, these are wanton and irresponsible acts
which should be suppressed and corrected. Hence, the award of exemplary damages and
attorneys fees is in order. x x x. (Emphasis and underscoring supplied; citations omitted)

All told, the Court finds the grant of exemplary damages in the amount of P200,000.00 as well as attorneys fees
equivalent to 1% of the total amount due amply justified, square as it is with existing jurisprudence.
C.

Amount

of

just

compensation

Finally, the Court cannot sustain the amount of P5,500.00/sq. m. as just compensation which was set by the RTC and
upheld by the CA. The said valuation was actually arrived at after considering: (a) the September 4, 1996

recommendation of the City Appraisal Committee; (b) several sworn statements made by Sy himself; and (c) Sys
own tax declaration for 1996. 48It is well-settled that the amount of just compensation is to be ascertained as of the
time of the taking.49 However, the above-stated documents do not reflect the value of the subject property at the
time of its taking in 1986 but rather, its valuation in 1996. Consequently, the case must be remanded to the RTC in
order to properly determine the amount of just compensation during such time the subject property was actually
taken.
WHEREFORE, the petition is PARTLY GRANTED. The January 20, 2012 Decision and July 16, 2012 Resolution of the
Court of Appeals in CA-G.R. CV No. 91964 are hereby SET ASIDE. Accordingly, the case is REMANDED to the trial
court for the proper determination of the amount of just compensation in accordance with this Decision. To forestall
any further delay in the resolution of this case, the trial court is hereby ordered to fix the just compensation for
petitioner Henry L. Sy's property with dispatch and report to the Court its compliance. Finally, respondent Local
Government of Quezon City is ordered to PAY exemplary damages in the amount of P200,000.00 and attorneys
fees equivalent to one percent (1%) of the amount due, after final determination of the amount of just
compensation.
SO ORDERED.

THIRD DIVISION
G.R. No. 179334

July 1, 2013

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT

ENGINEER CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of
Appeals (CA) Decision1 dated July 31, 2007 in CA-G.R. CV No. 77997. The assailed decision affirmed
with modification the Regional Trial Court (RTC) 2 Decision3 dated March 22, 2002 in Civil Case No. 208M-95.
The case stemmed from the following factual and procedural antecedents:
Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a parcel of land
with an area of 7,268 square meters located in San Pablo, Malolos, Bulacan and covered by Transfer
Certificate of Title (TCT) No. T-43006 4 of the Register of Deeds of Bulacan. Said parcel of land was
among the properties taken by the government sometime in 1940 without the owners consent and
without the necessary expropriation proceedings and used for the construction of the MacArthur
Highway.5
In a letter6 dated December 15, 1994, respondents demanded the payment of the fair market value
of the subject parcel of land. Petitioner Celestino R. Contreras (petitioner Contreras), then District
Engineer of the First Bulacan Engineering District of petitioner Department of Public Works and
Highways (DPWH), offered to pay the subject land at the rate of P0.70 per square meter per Resolution
of the Provincial Appraisal Committee (PAC) of Bulacan. 7 Unsatisfied with the offer, respondents
demanded for the return of their property or the payment of compensation at the current fair market
value.8
As their demand remained unheeded, respondents filed a Complaint 9 for recovery of possession

with damages against petitioners, praying that they be restored to the possession of the subject parcel
of land and that they be paid attorneys fees. 10 Respondents claimed that the subject parcel of land
was assessed at P2,543,800.00.11
Instead of filing their Answer, petitioners moved for the dismissal of the complaint on the following
grounds: (1) that the suit is against the State which may not be sued without its consent; (2) that the
case has already prescribed; (3) that respondents have no cause of action for failure to exhaust
administrative remedies; and (4) if respondents are entitled to compensation, they should be paid only
the value of the property in 1940 or 1941. 12
On June 28, 1995, the RTC issued an Order 13 granting respondents motion to dismiss based on the
doctrine of state immunity from suit. As respondents claim includes the recovery of damages, there is
no doubt that the suit is against the State for which prior waiver of immunity is required. When
elevated to the CA,14 the appellate court did not agree with the RTC and found instead that the
doctrine of state immunity from suit is not applicable, because the recovery of compensation is the
only relief available to the landowner. To deny such relief would undeniably cause injustice to the
landowner. Besides, petitioner Contreras, in fact, had earlier offered the payment of compensation
although at a lower rate.Thus, the CA reversed and set aside the dismissal of the complaint and,
consequently, remanded the case to the trial court for the purpose of determining the just
compensation to which respondents are entitled to recover from the government. 15 With the finality of
the aforesaid decision, trial proceeded in the RTC.
The Branch Clerk of Court was initially appointed as the Commissioner and designated as the
Chairman of the Committee that would determine just compensation, 16 but the case was later referred
to the PAC for the submission of a recommendation report on the value of the subject property. 17 In
PAC Resolution No. 99-007,18 the PAC recommended the amount of P1,500.00 per square meter as the
just compensation for the subject property.
On March 22, 2002, the RTC rendered a Decision,19 the dispositive portion of which reads:
WHEREFORE, premises considered, the Department of Public Works and Highways or its duly
assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One
Thousand Five Hundred Pesos (P1,500.00) per square meter for the lot subject matter of this case in
accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001.
SO ORDERED.20
On appeal, the CA affirmed the above decision with the modification that the just compensation
stated above should earn interest of six percent (6%) per annum computed from the filing of the action
on March 17, 1995 until full payment. 21
In its appeal before the CA, petitioners raised the issues of prescription and laches, which the CA
brushed aside on two grounds: first, that the issue had already been raised by petitioners when the
case was elevated before the CA in CA-G.R. CV No. 51454. Although it was not squarely ruled upon by
the appellate court as it did not find any reason to delve further on such issues, petitioners did not
assail said decision barring them now from raising exactly the same issues; and second, the issues
proper for resolution had been laid down in the pre-trial order which did not include the issues of
prescription and laches. Thus, the same can no longer be further considered. As to the propriety of the
propertys valuation as determined by the PAC and adopted by the RTC, while recognizing the rule that
the just compensation should be the reasonable value at the time of taking which is 1940, the CA
found it necessary to deviate from the general rule. It opined that it would be obviously unjust and
inequitable if respondents would be compensated based on the value of the property in 1940 which is
P0.70 per sq m, but the compensation would be paid only today. Thus, the appellate court found it just
to award compensation based on the value of the property at the time of payment. It, therefore,
adopted the RTCs determination of just compensation of P1,500.00 per sq m as recommended by the
PAC. The CA further ordered the payment of interest at the rate of six percent (6%) per annum
reckoned from the time of taking, which is the filing of the complaint on March 17, 1995.
Aggrieved, petitioners come before the Court assailing the CA decision based on the following

grounds:
I.
THE COURT OF APPEALS GRAVELY ERRED IN GRANTING JUST COMPENSATION TO
RESPONDENTS
CONSIDERING
THE
HIGHLY
DUBIOUS
AND
QUESTIONABLE
CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY.
II.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING JUST COMPENSATION TO
RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND
DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES.
III.
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURTS DECISION
ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET
VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS. 22
Petitioners insist that the action is barred by prescription having been filed fifty-four (54) years after
the accrual of the action in 1940. They explain that the court can motu proprio dismiss the complaint if
it shows on its face that the action had already prescribed. Petitioners likewise aver that respondents
slept on their rights for more than fifty years; hence, they are guilty of laches. Lastly, petitioners claim
that the just compensation should be based on the value of the property at the time of taking in 1940
and not at the time of payment.23
The petition is partly meritorious.
The instant case stemmed from an action for recovery of possession with damages filed by
respondents against petitioners. It, however, revolves around the taking of the subject lot by
petitioners for the construction of the MacArthur Highway. There is taking when the expropriator enters
private property not only for a momentary period but for a permanent duration, or for the purpose of
devoting the property to public use in such a manner as to oust the owner and deprive him of all
beneficial enjoyment thereof.24
It is undisputed that the subject property was taken by petitioners without the benefit of
expropriation proceedings for the construction of the MacArthur Highway. After the lapse of more than
fifty years, the property owners sought recovery of the possession of their property. Is the action
barred by prescription or laches? If not, are the property owners entitled to recover possession or just
compensation?
As aptly noted by the CA, the issues of prescription and laches are not proper issues for resolution
as they were not included in the pre-trial order. We quote with approval the CAs ratiocination in this
wise:
Procedurally, too, prescription and laches are no longer proper issues in this appeal. In the pre-trial
order issued on May 17, 2001, the RTC summarized the issues raised by the defendants, to wit: (a)
whether or not the plaintiffs were entitled to just compensation; (b) whether or not the valuation would
be based on the corresponding value at the time of the taking or at the time of the filing of the action;
and (c) whether or not the plaintiffs were entitled to damages. Nowhere did the pre-trial order indicate
that prescription and laches were to be considered in the adjudication of the RTC. 25
To be sure, the pre-trial order explicitly defines and limits the issues to be tried and controls the

subsequent course of the action unless modified before trial to prevent manifest injustice. 26

Even if we squarely deal with the issues of laches and prescription, the same must still fail. Laches
is principally a doctrine of equity which is applied to avoid recognizing a right when to do so would
result in a clearly inequitable situation or in an injustice. 27 This doctrine finds no application in this
case, since there is nothing inequitable in giving due course to respondents claim. Both equity and the

law direct that a property owner should be compensated if his property is taken for public use. 28
Neither shall prescription bar respondents claim following the long-standing rule "that where private
property is taken by the Government for public use without first acquiring title thereto either through
expropriation or negotiated sale, the owners action to recover the land or the value thereof does not
prescribe."29
When a property is taken by the government for public use, jurisprudence clearly provides for the
remedies available to a landowner. The owner may recover his property if its return is feasible or, if it is
not, the aggrieved owner may demand payment of just compensation for the land taken. 30 For failure
of respondents to question the lack of expropriation proceedings for a long period of time, they are
deemed to have waived and are estopped from assailing the power of the government to expropriate
or the public use for which the power was exercised. What is left to respondents is the right of
compensation.31 The trial and appellate courts found that respondents are entitled to compensation.
The only issue left for determination is the propriety of the amount awarded to respondents.
Just compensation is "the fair value of the property as between one who receives, and one who
desires to sell, x x x fixed at the time of the actual taking by the government." This rule holds true
when the property is taken before the filing of an expropriation suit, and even if it is the property
owner who brings the action for compensation. 32
The issue in this case is not novel.
In Forfom Development Corporation [Forfom] v. Philippine National Railways [PNR], 33 PNR entered
the property of Forfom in January 1973 for public use, that is, for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation
proceedings.34 In 1990, Forfom filed a complaint for recovery of possession of real property and/or
damages against PNR. In Eusebio v. Luis, 35 respondents parcel of land was taken in 1980 by the City
of Pasig and used as a municipal road now known as A. Sandoval Avenue in Pasig City without the
appropriate expropriation proceedings. In 1994, respondent demanded payment of the value of the
property, but they could not agree on its valuation prompting respondent to file a complaint for
reconveyance and/or damages against the city government and the mayor. In Manila International
Airport Authority v. Rodriguez,36 in the early 1970s, petitioner implemented expansion programs for

its runway necessitating the acquisition and occupation of some of the properties surrounding its
premises. As to respondents property, no expropriation proceedings were initiated.1wphi1 In 1997,
respondent demanded the payment of the value of the property, but the demand remained unheeded
prompting him to institute a case for accion reivindicatoria with damages against petitioner. In
Republic v. Sarabia,37 sometime in 1956, the Air Transportation Office (ATO) took possession and
control of a portion of a lot situated in Aklan, registered in the name of respondent, without initiating
expropriation proceedings. Several structures were erected thereon including the control tower, the
Kalibo crash fire rescue station, the Kalibo airport terminal and the headquarters of the PNP Aviation
Security Group. In 1995, several stores and restaurants were constructed on the remaining portion of
the lot. In 1997, respondent filed a complaint for recovery of possession with damages against the
storeowners where ATO intervened claiming that the storeowners were its lessees.
The Court in the above-mentioned cases was confronted with common factual circumstances where
the government took control and possession of the subject properties for public use without initiating
expropriation proceedings and without payment of just compensation, while the landowners failed for a
long period of time to question such government act and later instituted actions for recovery of
possession with damages. The Court thus determined the landowners right to the payment of just
compensation and, more importantly, the amount of just compensation. The Court has uniformly ruled
that just compensation is the value of the property at the time of taking that is controlling for purposes
of compensation. In Forfom, the payment of just compensation was reckoned from the time of taking in
1973; in Eusebio, the Court fixed the just compensation by determining the value of the property at
the time of taking in 1980; in MIAA, the value of the lot at the time of taking in 1972 served as basis
for the award of compensation to the owner; and in Republic, the Court was convinced that the taking
occurred in 1956 and was thus the basis in fixing just compensation. As in said cases, just
compensation due respondents in this case should, therefore, be fixed not as of the time of payment
but at the time of taking, that is, in 1940.
The reason for the rule has been clearly explained in Republic v. Lara, et al., 38 and repeatedly held
by the Court in recent cases, thus:

x x x "The value of the property should be fixed as of the date when it was taken and not the date
of the filing of the proceedings." For where property is taken ahead of the filing of the condemnation
proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the entry
by the plaintiff upon the property may have depreciated its value thereby; or, there may have been a
natural increase in the value of the property from the time it is taken to the time the complaint is filed,
due to general economic conditions. The owner of private property should be compensated only for
what he actually loses; it is not intended that his compensation shall extend beyond his loss or injury.
And what he loses is only the actual value of his property at the time it is taken x x x. 39
Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was
P0.70/sq m.40 Hence, it should, therefore, be used in determining the amount due respondents instead
of the higher value which is P1,500.00. While disparity in the above amounts is obvious and may
appear inequitable to respondents as they would be receiving such outdated valuation after a very
long period, it is equally true that they too are remiss in guarding against the cruel effects of belated
claim. The concept of just compensation does not imply fairness to the property owner alone.
Compensation must be just not only to the property owner, but also to the public which ultimately
bears the cost of expropriation.41
Clearly, petitioners had been occupying the subject property for more than fifty years without the
benefit of expropriation proceedings. In taking respondents property without the benefit of
expropriation proceedings and without payment of just compensation, petitioners clearly acted in utter
disregard of respondents proprietary rights which cannot be countenanced by the Court. 42 For said
illegal taking, respondents are entitled to adequate compensation in the form of actual or
compensatory damages which in this case should be the legal interest of six percent (6%) per annum
on the value of the land at the time of taking in 1940 until full payment. 43 This is based on the
principle that interest runs as a matter of law and follows from the right of the landowner to be placed
in as good position as money can accomplish, as of the date of taking. 44
WHEREFORE, premises considered, the pet1t10n is PARTIALLY GRANTED. The Court of Appeals
Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the subject
property owned by respondents shall be F0.70 instead of P1,500.00 per square meter, with interest at
six percent ( 6o/o) per annum from the date of taking in 1940 instead of March 17, 1995, until full
payment.
SO ORDERED.

soli

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