Name: CALO, Michael John T.

Citation: LAMP VS. SEC OF BUDGET AND MANAGEMENT

G.R. No. 164987, April 24, 2012

FACTS:

For consideration of the Court is an original action for certiorari assailing the
constitutionality and legality of the implementation of the Priority
Development Assistance Fund (PDAF) as provided for in Republic Act (R.A.)
9206 or the General Appropriations Act for 2004 (GAA of 2004).
Petitioner Lawyers Against Monopoly and Poverty (LAMP), a group of
lawyers who have banded together with a mission of dismantling all forms of
political, economic or social monopoly in the country. According to LAMP, the
above provision is silent and, therefore, prohibits an automatic or direct
allocation of lump sums to individual senators and congressmen for the
funding of projects. It does not empower individual Members of Congress to
propose, select and identify programs and projects to be funded out of PDAF.

For LAMP, this situation runs afoul against the principle of separation of
powers because in receiving and, thereafter, spending funds for their chosen
projects, the Members of Congress in effect intrude into an executive
function. Further, the authority to propose and select projects does not
pertain to legislation. It is, in fact, a non-legislative function devoid of
constitutional sanction,8 and, therefore, impermissible and must be
considered nothing less than malfeasance.

RESPONDENTS POSITION:
The perceptions of LAMP on the implementation of PDAF must not be based
on mere speculations circulated in the news media preaching the evils of pork
barrel.
ISSUES:

1) whether or not the mandatory requisites for the exercise of judicial review
are met in this case; and 2) whether or not the implementation of PDAF by
the Members of Congress is unconstitutional and illegal.

HELD:

I.
A question is ripe for adjudication when the act being challenged has had a
direct adverse effect on the individual challenging it. In this case, the
petitioner contested the implementation of an alleged unconstitutional
statute, as citizens and taxpayers. The petition complains of illegal
disbursement of public funds derived from taxation and this is sufficient
reason to say that there indeed exists a definite, concrete, real or substantial
controversy before the Court.

LOCUS STANDI: The gist of the question of standing is whether a party

alleges such a personal stake in the outcome of the controversy as to assure
that concrete adverseness which sharpens the presentation of issues upon
which the court so largely depends for illumination of difficult constitutional
questions. Here, the sufficient interest preventing the illegal expenditure of
money raised by taxation required in taxpayers suits is established. Thus, in
the claim that PDAF funds have been illegally disbursed and wasted through
the enforcement of an invalid or unconstitutional law, LAMP should be
allowed to sue.

Lastly, the Court is of the view that the petition poses issues impressed with
paramount public interest. The ramification of issues involving the
unconstitutional spending of PDAF deserves the consideration of the Court,
warranting the assumption of jurisdiction over the petition.

II.
The Court rules in the negative.

In determining whether or not a statute is unconstitutional, the Court does

not lose sight of the presumption of validity accorded to statutory acts of
Congress. To justify the nullification of the law or its implementation, there
must be a clear and unequivocal, not a doubtful, breach of the Constitution.
In case of doubt in the sufficiency of proof establishing unconstitutionality,
the Court must sustain legislation because to invalidate [a law] based on x x
x baseless supposition is an affront to the wisdom not only of the legislature
that passed it but also of the executive which approved it.

The petition is miserably wanting in this regard. No convincing proof was

presented showing that, indeed, there were direct releases of funds to the
Members of Congress, who actually spend them according to their sole
discretion. Devoid of any pertinent evidentiary support that illegal misuse of
PDAF in the form of kickbacks has become a common exercise of
unscrupulous Members of Congress, the Court cannot indulge the petitioners
request for rejection of a law, which is outwardly legal and capable of lawful
enforcement.

PORK BARREL:
The Members of Congress are then requested by the President to recommend
projects and programs which may be funded from the PDAF. The list
submitted by the Members of Congress is endorsed by the Speaker of the
House of Representatives to the DBM, which reviews and determines
whether such list of projects submitted are consistent with the guidelines and
the priorities set by the Executive.33 This demonstrates the power given to
the President to execute appropriation laws and therefore, to exercise the
spending per se of the budget.

As applied to this case, the petition is seriously wanting in establishing that

individual Members of Congress receive and thereafter spend funds out of
PDAF. So long as there is no showing of a direct participation of legislators in
the actual spending of the budget, the constitutional boundaries between the
Executive and the Legislative in the budgetary process remain intact.

_______________
NOTES:

POWER OF JUDICIAL REVIEW:

(1) there must be an actual case or controversy calling for the exercise of
judicial power;
(2) (2) the person challenging the act must have the standing to question the
validity of the subject act or issuance; otherwise stated, he must have a
personal and substantial interest in the case such that he has sustained, or
will sustain, direct injury as a result of its enforcement;
(3) (3) the question of constitutionality must be raised at the earliest
opportunity; and
(4) (4) the issue of constitutionality must be the very lis mota of the case.
Citation: Belgica v. Executive Secretary

FACTS:

HISTORY

In the Philippines, the pork barrel (a term of American-English origin) has

been commonly referred to as lump-sum, discretionary funds of Members of
the Legislature (Congressional Pork Barrel). However, it has also come to
refer to certain funds to the Executive. The Congressional Pork Barrel can
be traced from Act 3044 (Public Works Act of 1922), the Support for Local
Development Projects during the Marcos period, the Mindanao Development
Fund and Visayas Development Fund and later the Countrywide
Development Fund (CDF) under the Corazon Aquino presidency, and the
Priority Development Assistance Fund (PDAF) under the Joseph Estrada
administration, as continued by the Gloria-Macapagal Arroyo and the
present Benigno Aquino III administrations.

SPECIAL PROVISIONS OF THE 2013 PDAF ARTICLE

2. Project Identification. Identification of projects and/or designation of

beneficiaries shall conform to the priority list, standard or design prepared by
each implementing agency: PROVIDED, That preference shall be given to
projects located in the 4th to 6th class municipalities or indigents identified
under the MHTS-PR by the DSWD. For this purpose, the implementing
agency shall submit to Congress said priority list, standard or design within
ninety (90) days from effectivity of this Act.
All programs/projects, except for assistance to indigent patients and
scholarships, identified by a member of the House of Representatives outside
of his/her legislative district shall have the written concurrence of the
member of the House of Representatives of the recipient or beneficiary
legislative district, endorsed by the Speaker of the House of Representatives.

3. Legislators Allocation. The Total amount of projects to be identified by

legislators shall be as follows:

a. For Congressional District or Party-List Representative: Thirty Million

Pesos (P30,000,000) for soft programs and projects listed under Item A and
Forty Million Pesos (P40,000,000) for infrastructure projects listed under
Item B, the purposes of which are in the project menu of Special Provision
No. 1; and
b. For Senators: One Hundred Million Pesos (P100,000,000) for soft programs
and projects listed under Item A and One Hundred Million Pesos
(P100,000,000) for infrastructure projects listed under Item B, the purposes
of which are in the project menu of Special Provision No. 1.

Subject to the approved fiscal program for the year and applicable Special
Provisions on the use and release of fund, only fifty percent (50%) of the
foregoing amounts may be released in the first semester and the remaining
fifty percent (50%) may be released in the second semester.

4. Realignment of Funds. Realignment under this Fund may only be allowed

once. The Secretaries of Agriculture, Education, Energy, Interior and Local
Government, Labor and Employment, Public Works and Highways, Social
Welfare and Development and Trade and Industry are also authorized to
approve realignment from one project/scope to another within the allotment
received from this Fund, subject to the following:
 (i) for infrastructure projects, realignment is within the same
implementing unit and same project category as the original
project;
(ii) allotment released has not yet been obligated for the original
project/scope of work; and
(iii) request is with the concurrence of the legislator concerned. The
DBM must be informed in writing of any realignment within five
(5) calendar days from approval thereof: PROVIDED, That any
realignment under this Fund shall be limited within the same
classification of soft or hard programs/projects listed under Special
Provision 1 hereof: PROVIDED, FURTHER, That in case of
realignments, modifications and revisions of projects to be
implemented by LGUs, the LGU concerned shall certify that the
cash has not yet been disbursed and the funds have been deposited
back to the BTr.

Any realignment, modification and revision of the project identification shall

be submitted to the House Committee on Appropriations and the Senate
Committee on Finance, for favorable endorsement to the DBM or the
implementing agency, as the case may be.

5. Release of Funds. All requests for release of funds shall be supported by

the documents prescribed under Special Provision No. 1 and favorably
endorsed by the House Committee on Appropriations and the Senate
Committee on Finance, as the case may be. Funds shall be released to the
implementing agencies subject to the conditions under Special Provision No.
1 and the limits prescribed under Special Provision No. 3.
PRESIDENTIAL PORK BARREL

The Presidential Pork Barrel questioned by the petitioners include the

Malampaya Fund and the Presidential Social Fund. The Malampaya Fund
was created as a special fund under Section 8, Presidential Decree (PD) 910
by then-President Ferdinand Marcos to help intensify, strengthen, and
consolidate government efforts relating to the exploration, exploitation, and
development of indigenous energy resources vital to economic growth. The
Presidential Social Fund was created under Section 12, Title IV, PD 1869
(1983) or the Charter of the Philippine Amusement and Gaming Corporation
(PAGCOR), as amended by PD 1993 issued in 1985. The Presidential Social
Fund has been described as a special funding facility managed and
administered by the Presidential Management Staff through which the
President provides direct assistance to priority programs and projects not
funded under the regular budget. It is sourced from the share of the
government in the aggregate gross earnings of PAGCOR.

ISSUES:

A. Procedural Issues

1.) Whether or not (WON) the issues raised in the consolidated petitions
involve an actual and justiciable controversy
2.) WON the issues raised in the consolidated petitions are matters of policy
subject to judicial review
3.) WON petitioners have legal standing to sue
4.) WON the 1994 Decision of the Supreme Court (the Court) on Philippine
Constitution Association v. Enriquez (Philconsa) and the 2012 Decision of the
Court on Lawyers Against Monopoly and Poverty v. Secretary of Budget and
Management (LAMP) bar the re-litigation of the issue of constitutionality of
the pork barrel system under the principles of res judicata and stare decisis

B. Substantive Issues on the Congressional Pork Barrel

WON the 2013 PDAF Article and all other Congressional Pork Barrel Laws
similar to it are unconstitutional considering that they violate the principles
of/constitutional provisions on
1.) separation of powers
2.) non-delegability of legislative power
3.) checks and balances
4.) accountability
5.) political dynasties
6.) local autonomy
C. Substantive Issues on the Presidential Pork Barrel

WON the phrases:

(a) and for such other purposes as may be hereafter directed by the
President under Section 8 of PD 910 relating to the Malampaya Funds, and
(b) to finance the priority infrastructure development projects and to finance
the restoration of damaged or destroyed facilities due to calamities, as may be
directed and authorized by the Office of the President of the Philippines
under Section 12 of PD 1869, as amended by PD 1993, relating to the
Presidential Social Fund,
are unconstitutional insofar as they constitute undue delegations of
legislative power
* HELD AND RATIO:

A. Procedural Issues

No question involving the constitutionality or validity of a law or

governmental act may be heard and decided by the Court unless there is
compliance with the legal requisites for judicial inquiry, namely: (a) there
must be an actual case or controversy calling for the exercise of judicial
power; (b) the person challenging the act must have the standing to question
the validity of the subject act or issuance; (c) the question of constitutionality
must be raised at the earliest opportunity; and (d) the issue of
constitutionality must be the very lis mota of the case.

1.) YES. There exists an actual and justiciable controversy in these

cases. The requirement of contrariety of legal rights is clearly satisfied
by the antagonistic positions of the parties on the constitutionality of the
Pork Barrel System. Also, the questions in these consolidated cases are ripe
for adjudication since the challenged funds and the provisions allowing for
their utilization such as the 2013 GAA for the PDAF, PD 910 for
the Malampaya Funds and PD 1869, as amended by PD 1993, for
the Presidential Social Fund are currently existing and operational;
hence, there exists an immediate or threatened injury to petitioners as a
result of the unconstitutional use of these public funds.

As for the PDAF, the Court dispelled the notion that the issues related
thereto had been rendered moot and academic by the reforms undertaken by
respondents. A case becomes moot when there is no more actual controversy
between the parties or no useful purpose can be served in passing upon the
merits. The respondents proposed line-item budgeting scheme would
not terminate the controversy nor diminish the useful purpose for its
resolution since said reform is geared towards the 2014 budget, and not the
2013 PDAF Article which, being a distinct subject matter, remains legally
effective and existing. Neither will the Presidents declaration that he had
already abolished the PDAF render the issues on PDAF moot precisely
because the Executive branch of government has no constitutional authority
to nullify or annul its legal existence.

Even on the assumption of mootness, nevertheless, jurisprudence dictates

that the moot and academic principle is not a magical formula that can
automatically dissuade the Court in resolving a case. The Court will decide
cases, otherwise moot, if:

i.) There is a grave violation of the Constitution: This is clear from the
fundamental posture of petitioners they essentially allege grave violations
of the Constitution with respect to the principles of separation of powers,
non-delegability of legislative power, checks and balances, accountability and
local autonomy.

ii.) The exceptional character of the situation and the paramount public
interest is involved: This is also apparent from the nature of the interests
involved the constitutionality of the very system within which significant
amounts of public funds have been and continue to be utilized and
expended undoubtedly presents a situation of exceptional character as well
as a matter of paramount public interest. The present petitions, in fact, have
been lodged at a time when the systems flaws have never before been
magnified. To the Courts mind, the coalescence of the CoA Report, the
accounts of numerous whistle-blowers, and the governments own recognition
that reforms are needed to address the reported abuses of the
PDAF demonstrates a prima facie pattern of abuse which only underscores
the importance of the matter.
It is also by this finding that the Court finds petitioners claims as not merely
theorized, speculative or hypothetical. Of note is the weight accorded by the
Court to the findings made by the CoA which is the constitutionally-
mandated audit arm of the government. if only for the purpose of validating
the existence of an actual and justiciable controversy in these cases, the
Court deems the findings under the CoA Report to be sufficient.
iii.) When the constitutional issue raised requires formulation of controlling
principles to guide the bench, the bar, and the public: This is applicable
largely due to the practical need for a definitive ruling on the systems
constitutionality. There is a compelling need to formulate controlling
principles relative to the issues raised herein in order to guide the bench, the
bar, and the public, not just for the expeditious resolution of the
anticipated disallowance cases, but more importantly, so that the government
may be guided on how public funds should be utilized in accordance
with constitutional principles.

iv.) The case is capable of repetition yet evading review. This is called for by
the recognition that the preparation and passage of the national budget is,
by constitutional imprimatur, an affair of annual occurrence. The myriad of
issues underlying the manner in which certain public funds are spent, if not
resolved at this most opportune time, are capable of repetition and hence,
must not evade judicial review.

2.) YES. The intrinsic constitutionality of the Pork Barrel System is not an
issue dependent upon the wisdom of the political branches of government but
rather a legal one which the Constitution itself has commanded the Court to
act upon. Scrutinizing the contours of the system along constitutional lines is
a task that the political branches of government are incapable of rendering
precisely because it is an exercise of judicial power. More importantly, the
present Constitution has not only vested the Judiciary the right to exercise
judicial power but essentially makes it a duty to proceed therewith (Section 1,
Article VIII of the 1987 Constitution).

3. YES. Petitioners have sufficient locus standi to file the instant cases.
Petitioners have come before the Court in their respective capacities as
citizen-taxpayers and accordingly, assert that they dutifully contribute to
the coffers of the National Treasury. As taxpayers, they possess the requisite
standing to question the validity of the existing Pork Barrel System under
which the taxes they pay have been and continue to be utilized. They are
bound to suffer from the unconstitutional usage of public funds, if the Court
so rules. Invariably, 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, as in these cases.

Moreover, as citizens, petitioners have equally fulfilled the standing

requirement given that the issues they have raised may be classified as
matters of transcendental importance, of overreaching significance to
society, or of paramount public interest. The CoA Chairpersons statement
during the Oral Arguments that the present controversy involves not
[merely] a systems failure but a complete breakdown of controls amplifies
the seriousness of the issues involved. Indeed, 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.

4.) NO. On the one hand, res judicata states that a judgment on the merits in
a previous case rendered by a court of competent jurisdiction would bind a
subsequent case if, between the first and second actions, there exists
an identity of parties, of subject matter, and of causes of action. This required
identity is not attendant hereto since Philconsa and LAMP involved
constitutional challenges against the 1994 CDF Article and 2004 PDAF
Article respectively. However, the cases at bar call for a broader
constitutional scrutiny of the entire Pork Barrel System. Also, the ruling in
LAMP is essentially a dismissal based on a procedural technicality and,
thus, hardly a judgment on the merits. Thus, res judicata cannot apply.

On the other hand, the doctrine of stare decisis is a bar to any attempt to re-
litigate where the same questions relating to the same event have been put
forward by the parties similarly situated as in a previous case litigated and
decided by a competent court. Absent any powerful
countervailing considerations, like cases ought to be decided
alike. Philconsa was a limited response to a separation of powers problem,
specifically on the propriety of conferring post-enactment identification
authority to Members of Congress. On the contrary, the present cases call for
a more holistic examination of (a) the inter-relation between the CDF and
PDAF Articles with each other, formative as they are of the entire Pork
Barrel System as well as (b) the intra-relation of post-enactment measures
contained within a particular CDF or PDAF Article, including not only those
related to the area of project identification but also to the areas of fund
release and realignment. The complexity of the issues and the broader legal
analyses herein warranted may be, therefore, considered as a powerful
countervailing reason against a wholesale application of the stare decisis
principle.

In addition, the Court observes that the Philconsa ruling was actually riddled
with inherent constitutional inconsistencies, which similarly countervail
against a full resort to stare decisis. Since the Court now benefits from
hindsight and current findings (such as the CoA Report), it must partially
abandon its previous ruling in Philconsa insofar as it validated the post-
enactment identification authority of Members of Congress on the guise that
the same was merely recommendatory.
Again, since LAMP was dismissed on a procedural technicality and, hence,
has not set any controlling doctrine susceptible of current application to the
substantive issues in these cases, stare decisis would not apply.

B. Substantive Issues on the Congressional Pork Barrel

1.) YES. At its core, legislators have been consistently accorded post-
enactment authority to identify the projects they desire to be funded through
various Congressional Pork Barrel allocations. Under the 2013 PDAF Article,
the statutory authority of legislators to identify projects post-GAA may be
construed from Special Provisions 1 to 3 and the second paragraph of Special
Provision 4. Legislators have also been accorded post-enactment authority in
the areas of fund release (Special Provision 5 under the 2013 PDAF
Article) and realignment (Special Provision 4, paragraphs 1 and 2 under the
2013 PDAF Article).

Thus, legislators have been, in one form or another, authorized to participate

in the various operational aspects of budgeting, including the evaluation of
work and financial plans for individual activities and the regulation and
release of funds, in violation of the separation of powers principle. That the
said authority is treated as merely recommendatory in nature does not alter
its unconstitutional tenor since the prohibition covers any role in
the implementation or enforcement of the law. Towards this end, the
Court must therefore abandon its ruling in Philconsa. The Court also points
out that respondents have failed to substantiate their position that the
identification authority of legislators is only of recommendatory import.
In addition to declaring the 2013 PDAF Article as well as all other provisions
of law which similarly allow legislators to wield any form of post-enactment
authority in the implementation or enforcement of the budget, the Court also
declared that informal practices, through which legislators have effectively
intruded into the proper phases of budget execution, must be deemed as acts
of grave abuse of discretion amounting to lack or excess of jurisdiction and,
hence, accorded the same unconstitutional treatment.

2.) YES. The 2013 PDAF Article violates the principle of non-delegability
since legislators are effectively allowed to individually exercise the power
of appropriation, which, as settled in Philconsa, is lodged in Congress. The
power to appropriate must be exercised only through legislation, pursuant to
Section 29(1), Article VI of the 1987 Constitution which states: No money
shall be paid out of the Treasury except in pursuance of an appropriation
made by law. The power of appropriation, as held by the Court in Bengzon v.
Secretary of Justice and Insular Auditor, involves (a) setting apart by law a
certain sum from the public revenue for (b) a specified purpose. Under the
2013 PDAF Article, individual legislators are given a personal lump-sum
fund from which they are able to dictate (a) how much from such fund would
go to (b) a specific project or beneficiary that they themselves also determine.
Since these two acts comprise the exercise of the power of appropriation as
described in Bengzon, and given that the 2013 PDAF Article authorizes
individual legislators to perform the same, undoubtedly, said legislators have
been conferred the power to legislate which the Constitution does not,
however, allow.

3.) YES. Under the 2013 PDAF Article, the amount of P24.79
Billion only appears as a collective allocation limit since the said amount
would be further divided among individual legislators who would then
receive personal lump-sum allocations and could, after the GAA is
passed, effectively appropriate PDAF funds based on their own discretion. As
these intermediate appropriations are made by legislators only after the GAA
is passed and hence, outside of the law, it means that the actual items of
PDAF appropriation would not have been written into the
General Appropriations Bill and thus effectuated without veto consideration.
This kind of lump-sum/post-enactment legislative identification
budgeting system fosters the creation of a budget within a budget
which subverts the prescribed procedure of presentment and consequently
impairs the Presidents power of item veto. As petitioners aptly point out, the
President is forced to decide between (a) accepting the entire P24. 79 Billion
PDAF allocation without knowing the specific projects of the legislators,
which may or may not be consistent with his national agenda and (b)
rejecting the whole PDAF to the detriment of all other legislators with
legitimate projects.

Even without its post-enactment legislative identification feature, the 2013

PDAF Article would remain constitutionally flawed since the lump-sum
amount of P24.79 Billion would be treated as a mere funding source allotted
for multiple purposes of spending (i.e. scholarships, medical missions,
assistance to indigents, preservation of historical materials, construction of
roads, flood control, etc). This setup connotes that the appropriation law
leaves the actual amounts and purposes of the appropriation for further
determination and, therefore, does not readily indicate a discernible item
which may be subject to the Presidents power of item veto.
The same lump-sum budgeting scheme has, as the CoA Chairperson relays,
limit[ed] state auditors from obtaining relevant data and information that
would aid in more stringently auditing the utilization of said Funds.
Accordingly, she recommends the adoption of a line by line budget or amount
per proposed program, activity or project, and per implementing agency.
4.) YES. To a certain extent, the conduct of oversight would be tainted as said
legislators, who are vested with post-enactment authority, would, in effect, be
checking on activities in which they themselves participate. Also, this very
same concept of post-enactment authorization runs afoul of Section 14,
Article VI of the 1987 Constitution which provides that: [A Senator or
Member of the House of Representatives] shall not intervene in any matter
before any office of the Government for his pecuniary benefit or where he
may be called upon to act on account of his office. Allowing legislators to
intervene in the various phases of project implementation renders them
susceptible to taking undue advantage of their own office.

However, the Court cannot completely agree that the same post-enactment
authority and/or the individual legislators control of his PDAF per se would
allow him to perpetrate himself in office. This is a matter which must be
analyzed based on particular facts and on a case-to-case basis.

Also, while the Court accounts for the possibility that the close operational
proximity between legislators and the Executive department, through the
formers post-enactment participation, may affect the process
of impeachment, this matter largely borders on the domain of politics and
does not strictly concern the Pork Barrel Systems intrinsic constitutionality.
As such, it is an improper subject of judicial assessment.

5.) NO. Section 26, Article II of the 1987 Constitution is considered as not
self-executing due to the qualifying phrase as may be defined by law. In this
respect, said provision does not, by and of itself, provide a judicially
enforceable constitutional right but merely specifies a guideline for legislative
or executive action. Therefore, since there appears to be no standing law
which crystallizes the policy on political dynasties for enforcement, the Court
must defer from ruling on this issue.
In any event, the Court finds the above-stated argument on this score to be
largely speculative since it has not been properly demonstrated how the Pork
Barrel System would be able to propagate political dynasties.
6.) YES. The Court, however, finds an inherent defect in the system which
actually belies the avowed intention of making equal the unequal
(Philconsa, 1994). The gauge of PDAF and CDF allocation/division is based
solely on the fact of office, without taking into account the specific interests
and peculiarities of the district the legislator represents. As a result, a
district representative of a highly-urbanized metropolis gets the same
amount of funding as a district representative of a far-flung rural province
which would be relatively underdeveloped compared to the former. To add,
what rouses graver scrutiny is that even Senators and Party-List
Representatives and in some years, even the Vice-President who do not
represent any locality, receive funding from the Congressional Pork Barrel as
well.

The Court also observes that this concept of legislator control underlying the
CDF and PDAF conflicts with the functions of the various Local Development
Councils (LDCs) which are already legally mandated to assist the
corresponding sanggunian in setting the direction of economic and social
development, and coordinating development efforts within its territorial
jurisdiction. Considering that LDCs are instrumentalities whose functions
are essentially geared towards managing local affairs, their programs,
policies and resolutions should not be overridden nor duplicated by individual
legislators, who are national officers that have no law-making authority
except only when acting as a body.

C. Substantive Issues on the Presidential Pork Barrel

YES. Regarding the Malampaya Fund: The phrase and for such other
purposes as may be hereafter directed by the President under Section 8 of
PD 910 constitutes an undue delegation of legislative power insofar as it does
not lay down a sufficient standard to adequately determine the limits of the
Presidents authority with respect to the purpose for which the Malampaya
Funds may be used. As it reads, the said phrase gives the President wide
latitude to use the Malampaya Funds for any other purpose he may direct
and, in effect, allows him to unilaterally appropriate public funds beyond the
purview of the law.

That the subject phrase may be confined only to energy resource

development and exploitation programs and projects of the government
under the principle of ejusdem generis, meaning that the general word or
phrase is to be construed to include or be restricted to things akin
to, resembling, or of the same kind or class as those specifically mentioned, is
belied by three (3) reasons: first, the phrase energy resource development
and exploitation programs and projects of the government states a singular
and general class and hence, cannot be treated as a statutory reference of
specific things from which the general phrase for such other purposes may
be limited; second, the said phrase also exhausts the class it represents,
namely energy development programs of the government; and, third, the
Executive department has used the Malampaya Funds for non-energy related
purposes under the subject phrase, thereby contradicting respondents own
position that it is limited only to energy resource development and
exploitation programs and projects of the government.

However, the rest of Section 8, insofar as it allows for the use of the
Malampaya Funds to finance energy resource development and exploitation
programs and projects of the government, remains legally effective and
subsisting.
Regarding the Presidential Social Fund: Section 12 of PD 1869, as amended
by PD 1993, indicates that the Presidential Social Fund may be used to
[first,] finance the priority infrastructure development projects and [second,]
to finance the restoration of damaged or destroyed facilities due to calamities,
as may be directed and authorized by the Office of the President of the
Philippines.

The second indicated purpose adequately curtails the authority of the

President to spend the Presidential Social Fund only for restoration purposes
which arise from calamities. The first indicated purpose, however, gives
him carte blanche authority to use the same fund for any infrastructure
project he may so determine as a priority. Verily, the law does not supply a
definition of priority infrastructure development projects and hence, leaves
the President without any guideline to construe the same. To note,
the delimitation of a project as one of infrastructure is too broad of
a classification since the said term could pertain to any kind of facility.
Thus, the phrase to finance the priority infrastructure development
projects must be stricken down as unconstitutional since similar to Section
8 of PD 910 it lies independently unfettered by any sufficient standard of
the delegating law. As they are severable, all other provisions of Section 12 of
PD 1869, as amended by PD 1993, remains legally effective and subsisting.

Topic: Political Law Constitutional Law Separation of Powers Fund

Realignment Constitutionality of the Disbursement Acceleration Program
Power of the Purse Executive Impoundment

Citation: Araullo v Aquino

Facts:
When President Benigno Aquino III took office, his administration noticed
the sluggish growth of the economy. The World Bank advised that the
economy needed a stimulus plan. Budget Secretary Florencio Butch Abad
then came up with a program called the Disbursement Acceleration Program
(DAP).

The DAP was seen as a remedy to speed up the funding of government

projects. DAP enables the Executive to realign funds from slow moving
projects to priority projects instead of waiting for next years appropriation.
So what happens under the DAP was that if a certain government project is
being undertaken slowly by a certain executive agency, the funds allotted
therefor will be withdrawn by the Executive. Once withdrawn, these funds
are declared as savings by the Executive and said funds will then be
reallotted to other priority projects. The DAP program did work to stimulate
the economy as economic growth was in fact reported and portion of such
growth was attributed to the DAP (as noted by the Supreme Court).

Other sources of the DAP include the unprogrammed funds from the General
Appropriations Act (GAA). Unprogrammed funds are standby appropriations
made by Congress in the GAA.

Meanwhile, in September 2013, Senator Jinggoy Estrada made an expos

claiming that he, and other Senators, received Php50M from the President as
an incentive for voting in favor of the impeachment of then Chief Justice
Renato Corona. Secretary Abad claimed that the money was taken from the
DAP but was disbursed upon the request of the Senators.

This apparently opened a can of worms as it turns out that the DAP does not
only realign funds within the Executive. It turns out that some non-Executive
projects were also funded; to name a few: Php1.5B for the CPLA (Cordillera
Peoples Liberation Army), Php1.8B for the MNLF (Moro National Liberation
Front), P700M for the Quezon Province, P50-P100M for certain Senators
each, P10B for Relocation Projects, etc.

This prompted Maria Carolina Araullo, Chairperson of the Bagong

Alyansang Makabayan, and several other concerned citizens to file various
petitions with the Supreme Court questioning the validity of the DAP.
Among their contentions was:

DAP is unconstitutional because it violates the constitutional rule which

provides that no money shall be paid out of the Treasury except in
pursuance of an appropriation made by law.

Secretary Abad argued that the DAP is based on certain laws particularly the
GAA (savings and augmentation provisions thereof), Sec. 25(5), Art. VI of the
Constitution (power of the President to augment), Secs. 38 and 49 of
Executive Order 292 (power of the President to suspend expenditures and
authority to use savings, respectively).

Issues:

I. Whether or not the DAP violates the principle no money shall be paid out
of the Treasury except in pursuance of an appropriation made by law (Sec.
29(1), Art. VI, Constitution).

II. Whether or not the DAP realignments can be considered as impoundments

by the executive.
III. Whether or not the DAP realignments/transfers are constitutional.

IV. Whether or not the sourcing of unprogrammed funds to the DAP is

constitutional.

V. Whether or not the Doctrine of Operative Fact is applicable.

HELD:
I. No, the DAP did not violate Section 29(1), Art. VI of the Constitution. DAP
was merely a program by the Executive and is not a fund nor is it an
appropriation. It is a program for prioritizing government spending. As such,
it did not violate the Constitutional provision cited in Section 29(1), Art. VI of
the Constitution. In DAP no additional funds were withdrawn from the
Treasury otherwise, an appropriation made by law would have been required.
Funds, which were already appropriated for by the GAA, were merely being
realigned via the DAP.

II. No, there is no executive impoundment in the DAP. Impoundment of funds

refers to the Presidents power to refuse to spend appropriations or to retain
or deduct appropriations for whatever reason. Impoundment is actually
prohibited by the GAA unless there will be an unmanageable national
government budget deficit (which did not happen). Nevertheless, theres no
impoundment in the case at bar because whats involved in the DAP was the
transfer of funds.

III. No, the transfers made through the DAP were unconstitutional. It is true
that the President (and even the heads of the other branches of the
government) are allowed by the Constitution to make realignment of funds,
however, such transfer or realignment should only be made within their
respective offices. Thus, no cross-border transfers/augmentations may be
allowed. But under the DAP, this was violated because funds appropriated by
the GAA for the Executive were being transferred to the Legislative and
other non-Executive agencies.

Further, transfers within their respective offices also contemplate

realignment of funds to an existing project in the GAA. Under the DAP, even
though some projects were within the Executive, these projects are non-
existent insofar as the GAA is concerned because no funds were appropriated
to them in the GAA. Although some of these projects may be legitimate, they
are still non-existent under the GAA because they were not provided for by
the GAA. As such, transfer to such projects is unconstitutional and is without
legal basis.

On the issue of what are savings

These DAP transfers are not savings contrary to what was being declared
by the Executive. Under the definition of savings in the GAA, savings only
occur, among other instances, when there is an excess in the funding of a
certain project once it is completed, finally discontinued, or finally
abandoned. The GAA does not refer to savings as funds withdrawn from a
slow moving project. Thus, since the statutory definition of savings was not
complied with under the DAP, there is no basis at all for the
transfers. Further, savings should only be declared at the end of the fiscal
year. But under the DAP, funds are already being withdrawn from certain
projects in the middle of the year and then being declared as savings by the
Executive particularly by the DBM.

Sec. 25 Par. 5 Article 6;

3 elements: Savings, Same Department, Augment on existing item)
IV. No. Unprogrammed funds from the GAA cannot be used as money source
for the DAP because under the law, such funds may only be used if there is a
certification from the National Treasurer to the effect that the revenue
collections have exceeded the revenue targets. In this case, no such
certification was secured before unprogrammed funds were used.

V. Yes. The Doctrine of Operative Fact, which recognizes the legal effects of
an act prior to it being declared as unconstitutional by the Supreme Court, is
applicable. The DAP has definitely helped stimulate the economy. It has
funded numerous projects. If the Executive is ordered to reverse all actions
under the DAP, then it may cause more harm than good. The DAP effects can
no longer be undone. The beneficiaries of the DAP cannot be asked to return
what they received especially so that they relied on the validity of the DAP.
However, the Doctrine of Operative Fact may not be applicable to the
authors, implementers, and proponents of the DAP if it is so found in the
appropriate tribunals (civil, criminal, or administrative) that they have not
acted in good faith.

*other source Araullo v Aquino

Citation: MA. CAROLINA P. ARAULLO ET AL. v. BENIGNO SIMEON C.

AQUINO III ET AL., G.R. NO. 209287, July 1, 2014

In a Decision dated July 1, 2014, the Supreme Court partially granted the
consolidated petitions for certiorari and prohibition and declared the
following acts and practices under the Disbursement Acceleration Program
(DAP), National Budget Circular No. 541 and related executive issuances
unconstitutional for violating Section 25(5), Article VI of the 1987
Constitution and the doctrine of separation of powers, namely:

(a) The withdrawal of unobligated allotments from the implementing

agencies, and the declaration of the withdrawn unobligated allotments and
unreleased appropriations as savings prior to the end of the fiscal year and
without complying with the statutory definition of savings contained in the
General Appropriations Acts;

(b) The cross-border transfers of the savings of the Executive to augment the
appropriations of other offices outside the Executive; and

(c) The funding of projects, activities and programs that were not covered by
any appropriation in the General Appropriations Acts.

The Court further declared void the use of unprogrammed funds despite the
absence of a certification by the National Treasurer that the revenue
collections exceeded the revenue targets for non-compliance with the
conditions provided in the relevant General Appropriations Acts (GAAs).

Remedial law; Certiorari and prohibition. The remedies of certiorari and

prohibition are necessarily broader in scope and reach, and the writ
of certiorari or prohibition may be issued to correct errors of
jurisdiction committed not only by a tribunal, corporation, board or officer
exercising judicial, quasi-judicial or ministerial functions but also to set right,
undo and restrain any act of grave abuse of discretion amounting to lack or
excess of jurisdiction by any branch or instrumentality of the
Government, even if the latter does not exercise judicial, quasi-judicial or
ministerial functions. Thus, petitions for certiorari and prohibition are
appropriate remedies to raise constitutional issues and to review and/or
prohibit or nullify the acts of legislative and executive officials.

Remedial law; Locus standi. Citing De Castro v. Judicial and Bar Council,
the Supreme Court ruled that the assertion of a public right as a predicate
for challenging a supposedly illegal or unconstitutional executive
or legislative action rests on the theory that the petitioner represents
the public in general. Although such petitioner may not be as
adversely affected by the action complained against as are others, it is
enough that he sufficiently demonstrates in his petition that he is entitled to
protection or relief from the Court in the vindication of a public right. The
Court likewise cited Agan, Jr. v. Philippine International Air Terminals Co.,
Inc., to explain that [s]tanding is a peculiar concept in constitutional law
because in some cases, suits are not brought by parties who have been
personally injured by the operation of a law or any other government act but
by concerned citizens, taxpayers or voters who actually sue in the public
interest.

Transcendental importance as a ground to waive locus standi. Each of the

petitioners has established sufficient interest in the outcome of the
controversy as to confer locus standi on each of them. In addition, considering
that the issues center on the extent of the power of the Chief Executive to
disburse and allocate public funds, whether appropriated by Congress or not,
these cases pose issues that are of transcendental importance to the entire
Nation, the petitioners included. As such, the determination of such
important issues call for the Courts exercise of its broad and wise discretion
to waive the requirement and so remove the impediment to its addressing
and resolving the serious constitutional questions raised.
Administrative law; Budget process; Implementation and funding of the
Disbursement Allocation Program (DAP). Four phases comprise the
Philippine budget process, specifically: (1) Budget Preparation; (2) Budget
Legislation; (3) Budget Execution; and (4) Accountability.

The DAP was to be implemented and funded (1) by declaring savings

coming from the various departments and agencies derived from pooling
unobligated allotments and withdrawing unreleased appropriations; (2)
releasing unprogrammed funds; and (3) applying the savings and
unprogrammed funds to augment existing [program, activity or project] or to
support other priority PAPs.

Administrative law; Nature of the DAP. The DAP was a government policy
or strategy designed to stimulate the economy through accelerated spending.
In the context of the DAPs adoption and implementation being a function
pertaining to the Executive as the main actor during the Budget Execution
Stage under its constitutional mandate to faithfully execute the laws,
including the GAAs, Congress did not need to legislate to adopt or to
implement the DAP.

Constitutional law; The DAP is not an appropriation measure and does not
contravene Section 29(1), Article VI. The President, in keeping with his duty
to faithfully execute the laws, had sufficient discretion during the execution
of the budget to adapt the budget to changes in the countrys economic
situation. He could adopt a plan like the DAP for the purpose. He could pool
the savings and identify the PAPs to be funded under the DAP. The pooling
of savings pursuant to the DAP, and the identification of the PAPs to be
funded under the DAP did not involve appropriation in the strict sense
because the money had been already set apart from the public treasury by
Congress through the GAAs. In such actions, the Executive did not usurp the
power vested in Congress under Section 29(1), Article VI of the Constitution
[that no money shall be paid out of the Treasury except in pursuance of
an appropriation made by law].

Requisites of a valid transfer of appropriated funds under Section 25(5),

Article VI. The transfer of appropriated funds, to be valid under Section
25(5), [Article VI of the Constitution], must be made upon a concurrence of
the following requisites, namely: (1) There is a law authorizing the President,
the President of the Senate, the Speaker of the House of Representatives, the
Chief Justice of the Supreme Court, and the heads of the Constitutional
Commissions to transfer funds within their respective offices; (2) The funds
to be transferred are savings generated from the appropriations for their
respective offices; and (3) The purpose of the transfer is to augment an item
in the general appropriations law for their respective offices.

It is then indubitable that the power to augment was to be used only when
the purpose for which the funds had been allocated were already satisfied, or
the need for such funds had ceased to exist, for only then could savings be
properly realized. This interpretation prevents the Executive from unduly
transgressing Congress power of the purse.

Savings, defined. The definition of savings under the 2011, 2012 and 2013
GAAs refer to portions or balances of any programmed appropriation in this
Act free from any obligation or encumbrance which are: (i) still available
after the completion or final discontinuance or abandonment of the work,
activity or purpose for which the appropriation is authorized; (ii) from
appropriations balances arising from unpaid compensation and related costs
pertaining to vacant positions and leaves of absence without pay; and (iii)
from appropriations balances realized from the implementation of measures
resulting in improved systems and efficiencies and thus enabled agencies to
meet and deliver the required or planned targets.
The Court agreed with petitioners that respondents were forcing the
generation of savings in order to have a larger fund available for
discretionary spending. Respondents, by withdrawing unobligated allotments
in the middle of the fiscal year, in effect deprived funding for PAPs
with existing appropriations under the GAAs.

The mandate of Section 28, Chapter IV, Book VI of the Administrative Code
is to revert to the General Fund balances of appropriations that remained
unexpended at the end of the fiscal year. The Executive could not circumvent
this provision by declaring unreleased appropriations and
unobligated allotments as savings prior to the end of the fiscal year.

Augmentation is valid only when funding is deficient. The GAAs for 2011,
2012 and 2013 set as a condition for augmentation that the appropriation
for the PAP item to be augmented must be deficient, to wit: x x x
Augmentation implies the existence in this Act of a program, activity, or
project with an appropriation, which upon implementation, or subsequent
evaluation of needed resources, is determined to be deficient. In no case shall
a non-existent program, activity, or project, be funded by augmentation from
savings or by the use of appropriations otherwise authorized in this Act.

The President cannot substitute his own will for that of Congress. The Court
held that the savings pooled under the DAP were allocated to PAPs that
were not covered by any appropriations in the pertinent GAAs. Although the
[Office of the Solicitor General] rightly contends that the Executive was
authorized to spend in line with its mandate to faithfully execute the laws
(which included the GAAs), such authority did not translate to unfettered
discretion that allowed the President to substitute his own will for that of
Congress. He was still required to remain faithful to the provisions of the
GAAs, given that his power to spend pursuant to the GAAs was but a
delegation to him from Congress. Verily, the power to spend the public
wealth resided in Congress, not in the Executive. Moreover, leaving the
spending power of the Executive unrestricted would threaten to undo the
principle of separation of powers.

Cross-border transfers or augmentations are prohibited. By providing that

the President, the President of the Senate, the Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, and the Heads of
the Constitutional Commissions may be authorized to augment any item in
the GAA for their respective offices, Section 25(5) has delineated borders
between their offices, such that funds appropriated for one office are
prohibited from crossing over to another office even in the guise of
augmentation of a deficient item or items. Thus, we call such transfers of
funds cross-border transfers or cross-border augmentations.

Regardless of the variant characterizations of the cross-border transfers of

funds, the plain text of Section 25(5) disallowing cross-border transfers was
disobeyed. Cross-border transfers, whether as augmentation, or as aid, are
prohibited under Section 25(5).

No violation of equal protection. Petitioners claim that the Executive

discriminated against some legislators on the ground alone of their receiving
less than the others could not of itself warrant a finding of contravention of
the Equal Protection Clause. The denial of equal protection of any law should
be an issue to be raised only by parties who supposedly suffer it, and, in these
cases, such parties would be the few legislators claimed to have been
discriminated against in the releases of funds under the DAP. The reason for
the requirement is that only such affected legislators could properly and fully
bring to the fore when and how the denial of equal protection occurred, and
explain why there was a denial in their situation. The requirement was not
met here.

Operative fact doctrine. The doctrine of operative fact recognizes the

existence of the law or executive act prior to the determination of its
unconstitutionality as an operative fact that produced consequences that
cannot always be erased, ignored or disregarded. In short, it nullifies the void
law or executive act but sustains its effects. It provides an exception to the
general rule that a void or unconstitutional law produces no effect. But its
use must be subjected to great scrutiny and circumspection, and it cannot be
invoked to validate an unconstitutional law or executive act, but is resorted
to only as a matter of equity and fair play. It applies only to cases where
extraordinary circumstances exist, and only when the extraordinary
circumstances have met the stringent conditions that will permit its
application.

The operative fact doctrine applies to the implementation of the DAP. To

declare the implementation of the DAP unconstitutional without recognizing
that its prior implementation constituted an operative fact that produced
consequences in the real as well as juristic worlds of the Government and the
Nation is to be impractical and unfair. Unless the doctrine is held to apply,
the Executive as the disburser and the offices under it and elsewhere as the
recipients could be required to undo everything that they had implemented in
good faith under the DAP. That scenario would be enormously burdensome
for the Government. Equity alleviates such burden.

Tolentino v Sec. of Finance

Facts:
- House of Rep. filed House Bill 11197 (An Act Restructuring the VAT
System to Widen its Tax Base and Enhance its Admin., Amending for these
Purposes)
- Upon receipt of Senate, Senate filed another bill completely different
from that of the House Bill
- Senate finished debates on the bill and had the 2nd and 3rd reading of
the Bill on the same day
- Bill was deliberated upon in the Conference Committee and become
enrolled bill which eventually became the EVAT law.

Procedural Issue:
(1) WoN RA 7716 originated exclusively from the House of Rep. in
accordance with sec 24, art 6 of Consti
(2) WoN the Senate bill violated the three readings on separate days
requirement of the Consti
(3) WoN RA 7716 violated sec 26(1), art 6 - one subject, one title rule.

NOTE: This case was filed by PAL because before the EVAT Law, they were
exempt from taxes. After the passage of EVAT, they were already included.
PAL contended that neither the House or Senate bill provided for the removal
of the exemption from taxes of PAL and that it was only made after the
meeting of the Conference Committee w/c was not expressed in the title of RA
7166

Held:
(1) YES Court said that it is not the law which should originate from the
House of Rep, but the revenue bill which was required to originate from the
House of Rep. The initiative must come from the Lower House because they
are elected in the district level meaning they are expected to be more
sensitive to the needs of the locality.
Also, a bill originating from the Lower House may undergo extensive changes
while in the Senate. Senate can introduce a separate and distinct bill other
than the one the Lower House proposed. The Constitution does not prohibit
the filing in the Senate of a substitute bill in anticipation of its receipt of the
House bill, so long as action by Senate is withheld pending the receipt of the
House bill.

(2) NO. The Pres. certified that the Senate bill was urgent. Presidential
certification dispensed the requirement not only of printing but also reading
the bill in 3 separate days. In fact, the Senate accepted the Pres.
Certification. The determination of urgency is a political question.

(3) No. Court said that the title states that the purpose of the statute is to
expand the VAT system and one way of doing this is to widen its base by
withdrawing some of the exemptions granted before. It is also in the power of
Congress to amend, alter, repeal grant of franchises for operation of public
utility when the common good so requires.

One subject rule is intended to prevent surprise upon Congress members and
inform people of pending legislation. In the case of PAL, they did not know of
their situation not because of any defect in title but because they might have
not noticed its publication until some event calls attention to its existence.

Citation: BOLINAO ELECTRONICS vs VALENCIA, 11 SCRA 486

June 30, 1964
Intro. Article VI. The Legislative Department

Sec. 27 (1) Every bill passed by the Congress shall, before it becomes a law,
be presented to the President. If he approves the same, he shall sign it;
otherwise, he shall veto it and return the same with his objections to the
house where it originated, which shall enter the objections at large in its
journal and proceed to reconsider it. If, after such reconsideration, two-thirds
of all the members of such house shall agree to pass the bill, it shall be sent,
together with the objections, to the other House by which it shall likewise be
reconsidered, and if approved by two-thirds of all the members of that House,
it shall become a Law. In all such cases, the votes of each House shall be
determined by Yeas or Nays, and the names of the members voting for or
against shall be entered in its Journal. The President shall communicate his
Veto of any bill to the House where it originated within thirty days after the
date of receipt thereof; otherwise, it shall become a law as if he had signed it.

(2) The President shall have the power to Veto any particular item or items in
an Appropriation, Revenue, or Tariff Bill, but the Veto shall not affect the
item or items to which he does not object.

Petitioners: BOLINAO ELECTRONICS CORPORATION, CHRONICLE

BROADCASTING NETWORK, INC., and MONSERRAT BROADCASTING
SYSTEM, INC.
Vs.
Respondents: BRIGIDO VALENCIA, Secretary of the Department of Public
Works and Communications and ROBERT SAN ANDRES of the Radio
Control Division

Facts:
 This is an original petition for prohibition, mandatory injunction with
preliminary injunction filed by the Bolinao Electronics Corporation,
Chronicle Broadcasting Network, Inc., and Monserrat Broadcasting System,
Inc., owners and operators of radio and television stations enumerated
therein, against respondents Secretary of Public Works and Communications
and Acting Chief of the Radio Control Division. Later the Republic of the
Philippines, as operator of the Philippine Broadcasting Service, sought and
was allowed to intervene in this case, said interveners having been granted a
construction permit to install and operate a television station in Manila.
Petitioners applications for renewal of their station licenses were
denied because it should be filed two month before the expiration of the
license. Pursuant to Section 3 of Act 3846, as amended by Republic Act 584,
on the powers and duties of the Secretary of Public Works and
Communications (formerly Commerce And Communications), he may
approve or disapprove any application for renewal of station or operator
license, provided, however, That no application for renewal shall bed is
approved without giving the licensee a hearing. Thus the notices of hearing
were sent by respondents to petitioners. Clearly, the intention of the
investigation is to find out whether there is ground to disapprove the
applications for renewal. According to petitioner however, the violation has
ceased to exist when the act of late filing was condoned or pardoned by
respondents by the issuance of the circular dated July24, 1962.The lone
reason given for the investigation of petitioners' applications, i.e., late filing
thereof, is therefore no longer tenable. The violation, in legal effect, ceased to
exist and, hence, there is no reason nor need for the present investigation.
They were summoned by Valencia, then Secretary of Communications,
for operating even after their permit has expired. Valencia claimed that
because of CBNs continued operation sans license and their continuing
operation had caused damage to his department.
Issues:
(1) Whether the investigation being conducted by respondents, in connection
with petitioners' applications for renewal of their station licenses, has any
legal basis;
(2) Whether or not there was abandonment or renunciation by the Chronicle
Broadcasting Network (CBN) of channel 9in favor of PBS; and
(3) Whether or not Philippine Broadcasting Service can legally operate
Channel 9 and Brigido Valencia is entitled to claim damages, for Chronicle
Broadcasting Network's refusal to give up operations thereof.
Held:
In the case at bar, the issuance of the said circular, the lone reason
given for the investigation of petitioners' applications, i.e., late filing thereof,
is therefore no longer tenable. The violation, in legal effect, ceased to exist
and, hence, there is no reason nor need for the present investigation.
There was no express agreement there was abandonment or
renunciation by the Chronicle Broadcasting Network (CBN) of channel 9 in
favor of PBS. The only basis of the contention of the respondents that there
was such renunciation is the statement "Channel 10 assigned in lieu
of Channel 9", appearing in the construction permit to transfer television
station DZXL-TV from Quezon City to Baguio City, issued to petitioner. This
statement alone, however, does not establish any agreement between the
radio control authority and the station operator, on the switch or change
of operations of CBN from Channel 9 to Channel 10.
The Supreme Court ruled in the negative. Valencia failed to show that
any right of his has been violated by the refusal of Chronicle Broadcasting
Network to cease operation. Further, the Supreme Court noted that as the
records show, the appropriation to operate the Philippine Broadcasting
Service as approved by Congress and incorporated in the 1962-1963 Budget
of the Republic of the Philippines does not allow appropriations for TV
stations particularly in Luzon. Hence, since there was no appropriation
allotted then there can be no damage; and if there are expenditures made by
Valencias department they are in fact in violation of the law and they cannot
claim damages therefrom. And even if it is shown that the then President
vetoed this provision of the Budget Act, this gives rise to the question of
whether the President may legally veto a condition attached to an
appropriation or item in the appropriation bill. The executive's veto power
does not carry with it the power to strike out conditions or restrictions, has
been adhered to in subsequent cases.
If the veto is unconstitutional, it follows that the same produced no effect
whatsoever, and the restriction imposed by the appropriation bill, therefore,
remains. Any expenditure made by the intervener PBS, for the purpose of
installing or operating a television station in Manila, where there are already
television stations in operation, would be in violation of the express condition
for the release of the appropriation and, consequently, null and void. It is not
difficult to see that even if it were able to prove its right to operate on
Channel 9, said intervener would not have been entitled to reimbursement of
its illegal expenditures.

Citation: Gonzales v. Macaraig

191 SCRA 452 (1990)

Facts:
 On 16 December 1988, Congress passed House Bill 19186, or the
General Appropriations Bill for the Fiscal Year 1989. As passed, it eliminated
or decreased certain items included in the proposed budget submitted by the
President. Pursuant to the constitutional provision on the passage of bills,
Congress presented the said Bill to the President for consideration and
approval. On 29 December 1988, the President signed the Bill into law, and
declared the same to have become RA 6688. In the process, 7 Special
Provisions and Section 55, a General Provision, were vetoed. On 2 February
1989, the Senate, in Resolution 381 (Authorizing and Directing the
Committee on Finance to Bring in the Name of the Senate of the Philippines
the Proper Suit with the Supreme Court of the Philippines contesting the
Constitutionality of the Veto by the President of Special and General
Provisions, particularly Section 55, of the General Appropriation Bill of 1989
(H.B. No. 19186) and For Other Purposes) was adopted. On 11 April 1989,
the Petition for Prohibition/ Mandamus was filed by Neptali A. Gonzales,
Ernesto M. Maceda, Alberto G. Romulo, Heherson T. Alvarez, Edgardo J.
Angara, Agapito A. Aquino, Teofisto T. Guingona, Jr., Ernesto F. Herrera,
Jose D. Lina, Jr., John Osmea, Vicente T. Paterno, Rene A. Saguisag,
Leticia Ramos-Shahani, Mamintal Abdul J. Tamano, Wigberto E. Taada,
Jovito R. Salonga, Orlando S. Mercado, Juan Ponce Enrile, Joseph Estrada,
Sotero Laurel, Aquilino Pimentel, Jr., Santanina Rasul, Victor Ziga, as
members and ex-officio members of the Committee on Finance of the Senate
and as substantial taxpayers whose vital interests may be affected by this
case, with a prayer for the issuance of a Writ of Preliminary Injunction and
Restraining Order, assailing mainly the constitutionality or legality of the
Presidential veto of Section 55, and seeking to enjoin Catalino Macaraig, Jr.,
Vicente Jayme, Carlos Dominguez, Fulgencio Factoran, Fiorello Estuar,
Lourdes Quisumbing, Raul Manglapus, Alfredo Bengson, Jose Concepcion,
Luis Santos, Mita Pardo De Tavera, Rainerio Reyes, Guillermo Carague,
Rosalina Cajucom and Eufemio C. Domingo from implementing RA 6688. No
Restraining Order was issued by the Supreme Court. Gonzales et al.s cause
is anchored on the following grounds: (1) the Presidents line-veto power as
regards appropriation bills is limited to item/s and does not cover provision/s;
therefore, she exceeded her authority when she vetoed Section 55 (FY 89)
and Section 16 (FY 90) which are provisions; (2) when the President objects
to a provision of an appropriation bill, she cannot exercise the item-veto
power but should veto the entire bill; (3) the item-veto power does not carry
with it the power to strike out conditions or restrictions for that would be
legislation, in violation of the doctrine of separation of powers; and (4) the
power of augmentation in Article VI, Section 25 [5] of the 1987 Constitution,
has to be provided for by law and, therefore, Congress is also vested with the
prerogative to impose restrictions on the exercise of that power. The Solicitor
General, as counsel for Macaraig et al., counters that the issue in the present
case is a political question beyond the power of the Supreme Court to
determine; that Gonzales et al. had a political remedy, which was to override
the veto; that Section 55 is a rider because it is extraneous to the
Appropriations Act and, therefore, merits the Presidents veto; that the power
of the President to augment items in the appropriations for the executive
branches had already been provided for in the Budget Law, specifically
Sections 44 and 45 of PD 1177, as amended by RA 6670 (4 August 1988); and
that the President is empowered by the Constitution to veto provisions or
other distinct and severable parts of an Appropriations Bill.

Issue:

whether or not the President exceeded the item-veto power

accorded by the Constitution or differently put, has the President the power
to veto provisions of an Appropriations Bill

Held:
 No. The veto power of the President is expressed in Article VI,
Section 27 of the 1987 Constitution. Paragraph (1) refers to the general veto
power of the President and if exercised would result in the veto of the entire
bill, as a general rule. Paragraph (2) is what is referred to as the item-veto
power or the line-veto power. It allows the exercise of the veto over a
particular item or items in an appropriation, revenue, or tariff bill. As
specified, the President may not veto less than all of an item of an
Appropriations Bill. In other words, the power given the executive to
disapprove any item or items in an Appropriations Bill does not grant the
authority to veto a part of an item and to approve the remaining portion of
the same item. Notwithstanding the elimination in Article VI, Section 27 (2)
of the 1987 Constitution of any reference to the veto of a provision, the extent
of the Presidents veto power as previously defined by the 1935 Constitution
has not changed. This is because the eliminated proviso merely pronounces
the basic principle that a distinct and severable part of a bill may be the
subject of a separate veto. The restrictive interpretation urged by Gonzales et
al. that the President may not veto a provision without vetoing the entire bill
not only disregards the basic principle that a distinct and severable part of a
bill may be the subject of a separate veto but also overlooks the
Constitutional mandate that any provision in the general appropriations bill
shall relate specifically to some particular appropriation therein and that any
such provision shall be limited in its operation to the appropriation to which
it relates. In other words, in the true sense of the term, a provision in an
Appropriations Bill is limited in its operation to some particular
appropriation to which it relates, and does not relate to the entire bill. The
President promptly vetoed Section 55 (FY 89) and Section 16 (FY 90)
because they nullify the authority of the Chief Executive and heads of
different branches of government to augment any item in the General
Appropriations Law for their respective offices from savings in other items of
their respective appropriations, as guaranteed by Article VI, Section 25 (5) of
the Constitution. Noteworthy is the fact that the power to augment from
savings lies dormant until authorized by law. When Sections 55 (FY 89) and
16 (FY 90) prohibit the restoration or increase by augmentation of
appropriations disapproved or reduced by Congress, they impair the
constitutional and statutory authority of the President and other key officials
to augment any item or any appropriation from savings in the interest of
expediency and efficiency. The exercise of such authority in respect of
disapproved or reduced items by no means vests in the Executive the power
to rewrite the entire budget, the leeway granted being delimited to transfers
within the department or branch concerned, the sourcing to come only from
savings. More importantly, for such a special power as that of augmentation
from savings, the same is merely incorporated in the General Appropriations
Bill. An Appropriations Bill is one the primary and specific aim of which is
to make appropriation of money from the public treasury. It is a legislative
authorization of receipts and expenditures. The power of augmentation from
savings, on the other hand, can by no means be considered a specific
appropriation of money. It is a non-appropriation item inserted in an
appropriation measure.

Issue:

whether Section 55 (FY 89) and Section 16 (FY 90) are provisions,
not items, in the appropriation bill

Held:

No. Section 55 (FY 89) and Section 16 (FY 90) are not provisions in
the budgetary sense of the term. Article VI, Section 25 (2) of the 1987
Constitution provides: Sec. 25 (2) No provision or enactment shall be
embraced in the general appropriations bill unless it relates specifically to
some particular appropriation therein. Any such provision or enactment shall
be limited in its operation to the appropriation to which it relates. Explicit is
the requirement that a provision in the Appropriations Bill should relate
specifically to some particular appropriation therein. The challenged
provisions fall short of this requirement. Firstly, the vetoed provisions do
not relate to any particular or distinctive appropriation. They apply generally
to all items disapproved or reduced by Congress in the Appropriations Bill.
Secondly, the disapproved or reduced items are nowhere to be found on the
face of the Bill. To discover them, resort will have to be made to the original
recommendations made by the President and to the source indicated by the
Legislative Budget Research and Monitoring Office. Thirdly, the vetoed
Sections are more of an expression of Congressional policy in respect of
augmentation from savings rather than a budgetary appropriation.
Consequently, Section 55 (FY 89) and Section 16 (FY 90) although labeled as
provisions, are actually inappropriate provisions that should be treated as
items for the purpose of the Presidents veto power.

Issue:

whether the Legislatures inclusion of qualifications, conditions,

limitations or restrictions on expenditure of funds in the Appropriation Bill
was proper

Held:

There can be no denying that inherent in the power of

appropriation is the power to specify how money shall be spent; and that in
addition to distinct items of appropriation, the Legislature may include in
Appropriation Bills qualifications, conditions, limitations or restrictions on
expenditure of funds. Settled also is the rule that the Executive is not allowed
to veto a condition or proviso of an appropriation while allowing the
appropriation itself to stand. The veto of a condition in an Appropriations Bill
which did not include a veto of the items to which the condition related was
deemed invalid and without effect whatsoever. However, for the rule to apply,
restrictions should be such in the real sense of the term, not some matters
which are more properly dealt with in a separate legislation. Restrictions or
conditions in an Appropriations Bill must exhibit a connection with money
items in a budgetary sense in the schedule of expenditures. Again, the test is
appropriateness. It is not enough that a provision be related to the
institution or agency to which funds are appropriated. Conditions and
limitations properly included in an appropriation bill must exhibit such a
connexity with money items of appropriation that they logically belong in a
schedule of expenditures . . . the ultimate test is one of appropriateness.
Tested by these criteria, Section 55 (FY 89) and Section 16 (FY 90) must also
be held to be inappropriate conditions. While they, particularly, Section 16
(FY 90), have been artfully drafted to appear as true conditions or
limitations, they are actually general law measures more appropriate for
substantive and, therefore, separate legislation. Further, neither of them
shows the necessary connection with a schedule of expenditures. The reason
is that items reduced or disapproved by Congress would not appear on the
face of the enrolled bill or Appropriations Act itself. They can only be detected
when compared with the original budgetary submittals of the President. In
fact, Sections 55 (FY 89) and 16 (FY 90) themselves provide that an item
shall be deemed to have been disapproved by Congress if no corresponding
appropriation for the specific purpose is provided in this Act. Herein, there is
no condition, in the budgetary sense of the term, attached to an appropriation
or item in the appropriation bill which was struck out. For obviously,
Sections 55 (FY 89) and 16 (FY 90) partake more of a curtailment on the
power to augment from savings; in other words, a general provision of law,
which happens to be put in an appropriation bill.

Issue:

whether the legislature has a remedy when it believes that the veto
powers by the executive were unconstitutional

Held:

Yes. If, indeed, the legislature believed that the exercise of the veto
powers by the executive were unconstitutional, the remedy laid down by the
Constitution is crystal clear. A Presidential veto may be overridden by the
votes of two-thirds of members of Congress (1987 Constitution, Article VI,
Section 27[1]). But Congress made no attempt to override the Presidential
veto. Gonzales et al.s argument that the veto is ineffectual so that there is
nothing to override has lost force and effect with the executive veto having
been herein upheld. There need be no future conflict if the legislative and
executive branches of government adhere to the spirit of the Constitution,
each exercising its respective powers with due deference to the constitutional
responsibilities and functions of the other. Thereby, the delicate equilibrium
of governmental powers remains on even keel.

Note:

SC ruled that Congress cannot include in a general appropriations bill

matters that should be more properly enacted in separate legislation, and if it
does that, the inappropriate provisions inserted by it must be treated as
item, which can be vetoed by the President in the exercise of his item-veto
power. The SC went one step further and rules that even assuming arguendo
that provisions are beyond the executive power to veto, and Section 55 (FY
89) and Section 16 (FY 90) were not provisions in the budgetary sense of
the term, they are inappropriate provisions that should be treated as
items for the purpose of the Presidents veto power.

Note: Executive Impoundment

Definition: This refers to a refusal by the President, for whatever reason, to

spend funds made available by Congress. It is the failure to spend or obligate
budget authority of any type.

Argument against executive impoundment: Those who deny to the President

the power to impound argue that once Congress has set aside the fund for a
specific purpose in an appropriations act, it becomes mandatory on the part of
the President to implement the project and to spend the money appropriated
therefor. The President has no discretion on the matter, for the Constitution
imposes on him the duty to faithfully execute the laws.

Argument for executive impoundment: Proponents of impoundment have

invoked at least three principal sources of the authority of the President.
Foremost is the authority to impound given to him either expressly or
impliedly by Congress. Second is the executive power drawn from the
Presidents role as Commander-in-Chief. Third is the Faithful Execution
Clause which ironically is the same provisions invoked by petitioners herein.

The proponents insist that a faithful execution of the laws requires that the
President desist from implementing the law if doing so would prejudice public
interest. An example given is when through efficient and prudent
management of a project, substantial savings are made. In such a case, it is
sheer folly to expect the President to spend the entire amount budgeted in
the law.
Topic: Political Law Veto Power Part of the Legislative Process

Citation: Philippine Constitution Association vs Enriquez

FACTS:

This is a consolidation of cases which sought to question the veto authority of

the president involving the General Appropriations Act of 1994. This case
also involves the power of Congress as far as the pork barrel fund is
concerned. Philippine Constitution Association (PHILCONSA) questions the
countrywide development fund. PHILCONSA said that Congress can only
allocate funds but they cannot specify the items as to which those funds
would be applied for since that is already the function of the executive. In
another case, after the vetoing by the president of some provisions of the GAA
of 1994, neither house of congress took steps to override the veto. Instead,
Senators Taada and Romulo sought the issuance of the writs of prohibition
and mandamus against the same respondents in G.R. No. 113766. In this
petition, petitioners contest the constitutionality of: (1) the veto on four
special provisions added to items in the GAA of 1994 for the Armed Forces of
the Philippines (AFP) and the Department of Public Works and Highways
(DPWH); and (2) the conditions imposed by the President in the
implementation of certain appropriations for the CAFGUs, the DPWH, and
the National Housing Authority (NHA).

ISSUE: Whether or not the Presidents veto is valid.

HELD:

In the PHILCONSA petition, the SC ruled that Congress acted within its
power. In the Taada petitions the SC dismissed the other petitions and
granted the others.

Veto on special provisions

The president did his veto with certain conditions and compliant to the ruling
in Gonzales vs Macaraig. The president particularly vetoed the debt
reduction scheme in the GAA of 1994 commenting that the scheme is already
taken cared of by other legislation and may be more properly addressed by
revising the debt policy. He, however did not delete the P86,323,438,000.00
appropriation therefor. Taada et al averred that the president cannot
validly veto that provision w/o vetoing the amount allotted therefor. The veto
of the president herein is sustained for the vetoed provision is considered
inappropriate; in fact the SC found that such provision if not vetoed would
in effect repeal the Foreign Borrowing Act making the legislation as a log-
rolling legislation.

Veto of provisions for revolving funds of SUCs

The appropriation for State Universities and Colleges (SUCs), the President
vetoed special provisions which authorize the use of income and the creation,
operation and maintenance of revolving funds was likewise vetoed. The
reason for the veto is that there were already funds allotted for the same in
the National expenditure Program. Taada et al claimed this as
unconstitutional. The SC ruled that the veto is valid for it is in compliant to
the One Fund Policy it avoided double funding and redundancy.
Veto of provision on 70% (administrative)/30% (contract) ratio for road
maintenanceThe President vetoed this provision on the basis that it may
result to a breach of contractual obligations. The funds if allotted may result
to abandonment of some existing contracts. The SC ruled that this Special
Provision in question is not an inappropriate provision which can be the
subject of a veto. It is not alien to the appropriation for road maintenance,
and on the other hand, it specifies how the said item shall be expended 70%
by administrative and 30% by contract. The 1987 Constitution allows the
addition by Congress of special provisions, conditions to items in an
expenditure bill, which cannot be vetoed separately from the items to which
they relate so long as they are appropriate in the budgetary sense. The veto
herein is then not valid.

Veto of provision on prior approval of Congress for purchase of military

equipment

As reason for the veto, the President stated that the said condition and
prohibition violate the Constitutional mandate of non-impairment of
contractual obligations, and if allowed, shall effectively alter the original
intent of the AFP Modernization Fund to cover all military equipment
deemed necessary to modernize the AFP. The SC affirmed the veto. Any
provision blocking an administrative action in implementing a law or
requiring legislative approval of executive acts must be incorporated in a
separate and substantive bill. Therefore, being inappropriate provisions.

Veto of provision on use of savings to augment AFP pension funds

According to the President, the grant of retirement and separation benefits

should be covered by direct appropriations specifically approved for the
purpose pursuant to Section 29(1) of Article VI of the Constitution. Moreover,
he stated that the authority to use savings is lodged in the officials
enumerated in Section 25(5) of Article VI of the Constitution. The SC
retained the veto per reasons provided by the president.

Condition on the deactivation of the CAFGUs

Congress appropriated compensation for the CAFGUs including the payment

of separation benefits. The President declared in his Veto Message that the
implementation of this Special Provision to the item on the CAFGUs shall be
subject to prior Presidential approval pursuant to P.D. No. 1597 and R.A. No.
6758. The SC ruled to retain the veto per reasons provided by the president.
Further, if this provision is allowed the it would only lead to the repeal of
said existing laws.

Conditions on the appropriation for the Supreme Court, etc

In his veto message: The said condition is consistent with the Constitutional
injunction prescribed under Section 8, Article IX-B of the Constitutional
which states that no elective or appointive public officer or employee shall
receive additional, double, or indirect compensation unless specifically
authorized by law. I am, therefore, confident that the heads of the said
offices shall maintain fidelity to the law and faithfully adhere to the well-
established principle on compensation standardization. Taada et al claim
that the conditions imposed by the President violated the independence and
fiscal autonomy of the Supreme court, the Ombudsman, the COA and the
CHR. The SC sustained the veto: In the first place, the conditions questioned
by petitioners were placed in the GAB by Congress itself, not by the
President. The Veto Message merely highlighted the Constitutional mandate
that additional or indirect compensation can only be given pursuant to law.
In the second place, such statements are mere reminders that the
disbursements of appropriations must be made in accordance with law. Such
statements may, at worse, be treated as superfluities.
Demetria vs. Alba
Facts:

Assailed in this petition for prohibition with prayer for a writ of preliminary
injunction is the constitutionality of the first paragraph of Section 44 of
Presidential Decree No. 1177, otherwise known as the "Budget Reform
Decree of 1977."

Petitioners, who filed the instant petition as concerned citizens of this

country, as members of the National Assembly/Batasan Pambansa
representing their millions of constituents, as parties with general interest
common to all the people of the Philippines, and as taxpayers whose vital
interests may be affected by the outcome of the reliefs prayed for" 1 listed the
grounds relied upon in this petition as follows:

A. SECTION 44 OF THE 'BUDGET REFORM DECREE OF

1977' INFRINGES UPON THE FUNDAMENTAL LAW BY
AUTHORIZING THE ILLEGAL TRANSFER OF PUBLIC
MONEYS.

B. SECTION 44 OF PRESIDENTIAL DECREE NO. 1177 IS

REPUGNANT TO THE CONSTITUTION AS IT FAILS TO
SPECIFY THE OBJECTIVES AND PURPOSES FOR WHICH
THE PROPOSED TRANSFER OF FUNDS ARE TO BE MADE.

C. SECTION 44 OF PRESIDENTIAL DECREE NO. 1177

ALLOWS THE PRESIDENT TO OVERRIDE THE
SAFEGUARDS, FORM AND PROCEDURE PRESCRIBED BY
THE CONSTITUTION IN APPROVING APPROPRIATIONS.
 D. SECTION 44 OF THE SAME DECREE AMOUNTS TO AN
UNDUE DELEGATION OF LEGISLATIVE POWERS TO THE
EXECUTIVE.

E. THE THREATENED AND CONTINUING TRANSFER OF FUNDS BY

THE PRESIDENT AND THE IMPLEMENTATION THEREOF BY THE
BUDGET MINISTER AND THE TREASURER OF THE PHILIPPINES ARE
WITHOUT OR IN EXCESS OF THEIR AUTHORITY AND JURISDICTION

Commenting on the petition in compliance with the Court resolution dated

September 19, 1985, the Solicitor General, for the public respondents,
questioned the legal standing of petitioners, who were allegedly merely
begging an advisory opinion from the Court, there being no justiciable
controversy fit for resolution or determination. He further contended that the
provision under consideration was enacted pursuant to Section 16[5], Article
VIII of the 1973 Constitution; and that at any rate, prohibition will not lie
from one branch of the government to a coordinate branch to enjoin the
performance of duties within the latter's sphere of responsibility.

On February 27, 1986, the Court required the petitioners to file a Reply to
the Comment. This, they did, stating, among others, that as a result of the
change in the administration, there is a need to hold the resolution of the
present case in abeyance "until developments arise to enable the parties to
concretize their respective stands."

Issue:

WON section 44 of the PD 1177 is constitutional.

Ruling:
The conflict between paragraph 1 of Section 44 of Presidential Decree No.
1177 and Section 16[5], Article VIII of the 1973 Constitution is readily
perceivable from a mere cursory reading thereof. Said paragraph 1 of Section
44 provides:

The President shall have the authority to transfer any fund,

appropriated for the different departments, bureaus, offices and
agencies of the Executive Department, which are included in the
General Appropriations Act, to any program, project or activity
of any department, bureau, or office included in the General
Appropriations Act or approved after its enactment.

On the other hand, the constitutional provision under consideration reads as

follows:

Sec. 16[5]. No law shall be passed authorizing any transfer of

appropriations, however, the President, the Prime Minister, the
Speaker, the Chief Justice of the Supreme Court, and the heads
of constitutional commis ions may by law be authorized to
augment any item in the general appropriations law for their
respective offices from savings in other items of their respective
appropriations.

The prohibition to transfer an appropriation for one item to another was

explicit and categorical under the 1973 Constitution. However, to afford the
heads of the different branches of the government and those of the
constitutional commissions considerable flexibility in the use of public funds
and resources, the constitution allowed the enactment of a law authorizing
the transfer of funds for the purpose of augmenting an item from savings in
another item in the appropriation of the government branch or constitutional
body concerned. The leeway granted was thus limited. The purpose and
conditions for which funds may be transferred were specified, i.e. transfer
may be allowed for the purpose of augmenting an item and such transfer may
be made only if there are savings from another item in the appropriation of
the government branch or constitutional body.

Paragraph 1 of Section 44 of P.D. No. 1177 unduly over extends the privilege
granted under said Section 16[5]. It empowers the President to
indiscriminately transfer funds from one department, bureau, office or
agency of the Executive Department to any program, project or activity of any
department, bureau or office included in the General Appropriations Act or
approved after its enactment, without regard as to whether or not the funds
to be transferred are actually savings in the item from which the same are to
be taken, or whether or not the transfer is for the purpose of augmenting the
item to which said transfer is to be made. It does not only completely
disregard the standards set in the fundamental law, thereby amounting to an
undue delegation of legislative powers, but likewise goes beyond the tenor
thereof. Indeed, such constitutional infirmities render the provision in
question null and void.

"For the love of money is the root of all evil: ..." and money belonging to no
one in particular, i.e. public funds, provide an even greater temptation for
misappropriation and embezzlement. This, evidently, was foremost in the
minds of the framers of the constitution in meticulously prescribing the rules
regarding the appropriation and disposition of public funds as embodied in
Sections 16 and 18 of Article VIII of the 1973 Constitution.

Petition granted.
Guingona vs. Carangue

Facts:

This is a case of first impression whereby petitioners question the

constitutionality of the automatic appropriation for debt service in the 1990
budget.

As alleged in the petition, the facts are as follows:

The 1990 budget consists of P98.4 Billion in automatic appropriation (with

P86.8 Billion for debt service) and P155.3 Billion appropriated under
Republic Act No. 6831, otherwise known as the General Appropriations Act,
or a total of P233.5 Billion,1 while the appropriations for the Department of
Education, Culture and Sports amount to P27,017,813,000.00.2

The said automatic appropriation for debt service is authorized by P.D. No.
81, entitled "Amending Certain Provisions of Republic Act Numbered Four
Thousand Eight Hundred Sixty, as Amended (Re: Foreign Borrowing Act),"
by P.D. No. 1177, entitled "Revising the Budget Process in Order to
Institutionalize the Budgetary Innovations of the New Society," and by P.D.
No. 1967, entitled "An Act Strenghthening the Guarantee and Payment
Positions of the Republic of the Philippines on Its Contingent Liabilities
Arising out of Relent and Guaranteed Loan by Appropriating Funds For The
Purpose.

There can be no question that petitioners as Senators of the Republic of the

Philippines may bring this suit where a constitutional issue is
raised.3 Indeed, even a taxpayer has personality to restrain unlawful
expenditure of public funds.
The petitioner seek the declaration of the unconstitutionality of P.D. No. 81,
Sections 31 of P.D. 1177, and P.D. No. 1967. The petition also seeks to
restrain the disbursement for debt service under the 1990 budget pursuant to
said decrees.

Respondents contend that the petition involves a pure political question

which is the repeal or amendment of said laws addressed to the judgment,
wisdom and patriotism of the legislative body and not this Court.

Issue:

1. WON THE APPROPRIATION OF P86 BILLION IN THE P233

BILLION 1990 BUDGET VIOLATIVE OF SECTION 5, ARTICLE
XIV OF THE CONSTITUTION?
2. ARE PD No. 81, PD No. 1177 AND PD No. 1967 STILL
OPERATIVE UNDER THE CONSTITUTION?
3. ARE THEY VIOLATIVE OF SECTION 29(l), ARTICLE VI OF THE
CONSTITUTION?

Ruling:

1. There is thus a justiciable controversy raised in the petition which this

Court may properly take cognizance of On the first issue, the
petitioners aver

According to Sec. 5, Art. XIV of the Constitution:

(5) The State shall assign the highest budgetary priority to

education and ensure that teaching will attract and retain its
rightful share of the best available talents through adequate
remuneration and other means of job satisfaction and
fulfillment.
However, as against this constitutional intention, P86 Billion is appropriated
for debt service while only P27 Billion is appropriated for the Department of
Education in the 1990 budget. It plain, therefore, that the said appropriation
for debt services is inconsistent with the Constitution, hence, viod (Art. 7,
New Civil Code).7

While it is true that under Section 5(5), Article XIV of the Constitution
Congress is mandated to "assign the highest budgetary priority to education"
in order to "insure that teaching will attract and retain its rightful share of
the best available talents through adequate remuneration and other means of
job satisfaction and fulfillment," it does not thereby follow that the hands of
Congress are so hamstrung as to deprive it the power to respond to the
imperatives of the national interest and for the attainment of other state
policies or objectives.

As aptly observed by respondents, since 1985, the budget for education has
tripled to upgrade and improve the facility of the public school system. The
compensation of teachers has been doubled. The amount of
P29,740,611,000.008 set aside for the Department of Education, Culture and
Sports under the General Appropriations Act (R.A. No. 6831), is the highest
budgetary allocation among all department budgets. This is a clear
compliance with the aforesaid constitutional mandate according highest
priority to education.

Having faithfully complied therewith, Congress is certainly not without any

power, guided only by its good judgment, to provide an appropriation, that
can reasonably service our enormous debt, the greater portion of which was
inherited from the previous administration. It is not only a matter of honor
and to protect the credit standing of the country. More especially, the very
survival of our economy is at stake. Thus, if in the process Congress
appropriated an amount for debt service bigger than the share allocated to
education, the Court finds and so holds that said appropriation cannot be
thereby assailed as unconstitutional.

2. To begin with, Rep. Act 4860 entitled "AN ACT AUTHORIZING THE
PRESIDENT OF THE PHILIPPINES TO OBTAIN SUCH
FOREIGN LOANS AND CREDITS, OR TO INCUR SUCH FOREIGN
INDEBTEDNESS, AS MAY BE NECESSARY TO FINANCE
APPROVED ECONOMIC DEVELOPMENT PURPOSES OR
PROJECTS, AND TO GUARANTEE, IN BEHALF OF THE
REPUBLIC OF THE PHILIPPINES, FOREIGN LOANS OBTAINED
OR BONDS ISSUED BY CORPORATIONS OWNED OR
CONTROLLED BY THE GOVERNMENT OF THE PHILIPPINES
FOR ECONOMIC DEVELOPMENT PURPOSES INCLUDING
THOSE INCURRED FOR PURPOSES OF RELENDING TO THE
PRIVATE SECTOR, APPROPRIATING THE NECESSARY FUNDS
THEREFOR, AND FOR OTHER PURPOSES, provides:

Sec. 2. The total amount of loans, credits and indebtedness, excluding

interests, which the President of the Philippines is authorized to incur
under this Act shall not exceed one billion United States dollars or its
equivalent in other foreign currencies at the exchange rate prevailing at
the time the loans, credits and indebtedness are incurred: Provided,
however, That the total loans, credits and indebtedness incurred under
this Act shall not exceed two hundred fifty million in the fiscal year of the
approval of this Act, and two hundred fifty million every fiscal year
thereafter, all in United States dollars or its equivalent in other
currencies.
Sec. 5. It shall be the duty of the President, within thirty days after the
opening of every regular session, to report to the Congress the amount
of loans, credits and indebtedness contracted, as well as the guarantees
extended, and the purposes and projects for which the loans, credits and
indebtedness were incurred, and the guarantees extended, as well as such
loans which may be reloaned to Filipino owned or controlled corporations
and similar purposes.

Sec. 6. The Congress shall appropriate the necessary amount out of any
funds in the National Treasury not otherwise appropriated, to cover the
payment of the principal and interest on such loans, credits or
indebtedness as and when they shall become due.

However, after the declaration of martial law, President Marcos issued PD

81 amending Section 6, thus:

Sec. 7. Section six of the same Act is hereby further amended to read as
follows:

Sec. 6. Any provision of law to the contrary notwithstanding, and in

order to enable the Republic of the Philippines to pay the principal,
interest, taxes and other normal banking charges on the loans, credits or
indebtedness, or on the bonds, debentures, securities or other evidences of
indebtedness sold in international markets incurred under the authority
of this Act, the proceeds of which are deemed appropriated for the
projects, all the revenue realized from the projects financed by such loans,
credits or indebtedness, or on the bonds, debentures, securities or other
evidences of indebtedness, shall be turned over in full, after deducting
actual and necessary expenses for the operation and maintenance of said
projects, to the National Treasury by the government office, agency or
instrumentality, or government-owned or controlled corporation
concerned, which is hereby appropriated for the purpose as and when they
shall become due. In case the revenue realized is insufficient to cover the
principal, interest and other charges, such portion of the budgetary
savings as may be necessary to cover the balance or deficiency shall be set
aside exclusively for the purpose by the government office, agency or
instrumentality, or government-owned or controlled corporation
concerned: Provided, That, if there still remains a deficiency, such amount
necessary to cover the payment of the principal and interest on such
loans, credit or indebtedness as and when they shall become due is hereby
appropriated out of any funds in the national treasury not otherwise
appropriated: . . .

President Marcos also issued PD 1177, which provides:

Sec. 31. Automatic appropriations. All expenditures for (a) personnel

retirement premiums, government service insurance, and other similar
fixed expenditures, (b) principal and interest on public debt, (c)
national government guarantees of obligations which are drawn upon, are
automatically appropriated; Provided, that no obligations shall be
incurred or payments made from funds thus automatically
appropriated except as issued in the form of regular budgetary allotments.

and PD 1967, which provides:

Sec. 1. There is hereby appropriated, out of any funds in the National

Treasury not otherwise appropriated, such amounts as may be necessary
to effect payments on foreign or domestic loans,or foreign or domestic
loans whereon creditors make a call on the direct and indirect guarantee
of the Republic of the Philippines, obtained by:
a. The Republic of the Philippines the proceeds of which were relent to
government-owned or controlled corporations and/or government financial
institutions;

b. government-owned or controlled corporations and/or government

financial institutions the proceeds of which were relent to public or
private institutions;

c. government-owned or controlled corporations and/or financial

institutions and guaranteed by the Republic of the Philippines;

d. other public or private institutions and guaranteed by government-

owned or controlled corporations and/or government financial institutions.

Sec. 2. All repayments made by borrower institutions on the loans for

whose account advances were made by the National Treasury will revert
to the General Fund.

Sec. 3. In the event that any borrower institution is unable to settle the
advances made out of the appropriation provided therein, the Treasurer of
the Philippines shall make the proper recommendation to the Minister of
Finance on whether such advances shall be treated as equity or subsidy of
the National Government to the institution concerned, which shall be
considered in the budgetary program of the Government.

In the "Budget of Expenditures and Sources of Financing Fiscal Year

1990," which accompanied her budget message to Congress, the President
of the Philippines, Corazon C. Aquino, stated:

Sources Appropriation

The P233.5 billion budget proposed for fiscal year 1990 will require P132.1
billion of new programmed appropriations out of a total P155.3 billion in
 new legislative authorization from Congress. The rest of the budget,
totalling P101.4 billion, will be sourced from existing
appropriations: P98.4 billion from Automatic Appropriations and P3.0
billion from Continuing Appropriations (Fig. 4).

The Court is not persuaded.

Section 3, Article XVIII of the Constitution recognizes that

"All existing laws, decrees, executive orders, proclamations, letters of
instructions and other executive issuances not inconsistent with the
Constitution shall remain operative until amended, repealed or revoked."

This transitory provision of the Constitution has precisely been adopted by its
framers to preserve the social order so that legislation by the then President
Marcos may be recognized. Such laws are to remain in force and effect unless
they are inconsistent with the Constitution or, are otherwise amended,
repealed or revoked.

An examination of the aforecited presidential decrees show the clear intent

that the amounts needed to cover the payment of the principal and interest
on all foreign loans, including those guaranteed by the national government,
should be made available when they shall become due precisely without the
necessity of periodic enactments of separate laws appropriating funds
therefor, since both the periods and necessities are incapable of
determination in advance.

The automatic appropriation provides the flexibility for the effective

execution of debt management policies. Its political wisdom has been
convincingly discussed by the Solicitor General as he argues

. . . First, for example, it enables the Government to take advantage of

a favorable turn of market conditions by redeeming high-interest
 securities and borrowing at lower rates, or to shift from short-term to
long-term instruments, or to enter into arrangements that could
lighten our outstanding debt burden debt-to-equity, debt to asset, debt-
to-debt or other such schemes. Second, the automatic appropriation
obviates the serious difficulties in debt servicing arising from any
deviation from what has been previously programmed. The annual
debt service estimates, which are usually made one year in advance,
are based on a mathematical set or matrix or, in layman's parlance,
"basket" of foreign exchange and interest rateassumptions which may
significantly differ from actual rates not even in proportion to changes
on the basis of the assumptions. Absent an automatic appropriation
clause, the Philippine Government has to await and depend upon
Congressional action, which by the time this comes, may no longer be
responsive to the intended conditions which in the meantime may have
already drastically changed. In the meantime, also, delayed payments
and arrearages may have supervened, only to worsen our debt service-
to-total expenditure ratio in the budget due to penalties and/or demand
for immediate payment even before due dates.

Clearly, the claim that payment of the loans and indebtedness is

conditioned upon the continuance of the person of President Marcos
and his legislative power goes against the intent and purpose of the
law. The purpose is foreseen to subsist with or without the person of
Marcos.13

The argument of petitioners that the said presidential decrees did not meet
the requirement and are therefore inconsistent with Sections 24 and 27 of
Article VI of the Constitution which requires, among others, that "all
appropriations, . . . bills authorizing increase of public debt" must be passed
by Congress and approved by the President is untenable. Certainly, the
framers of the Constitution did not contemplate that existing laws in the
statute books including existing presidential decrees appropriating public
money are reduced to mere "bills" that must again go through the legislative
million The only reasonable interpretation of said provisions of the
Constitution which refer to "bills" is that they mean appropriation measures
still to be passed by Congress. If the intention of the framers thereof were
otherwise they should have expressed their decision in a more direct or
express manner.

Well-known is the rule that repeal or amendment by implication is frowned

upon. Equally fundamental is the principle that construction of the
Constitution and law is generally applied prospectively and not
retrospectively unless it is so clearly stated.

3. On the third issue that there is undue delegation of legislative power,

in Edu vs. Ericta,14 this Court had this to say

What cannot be delegated is the authority under the Constitution to make

laws and to alter and repeal them; the test is the completeness of the
statute in all its terms and provisions when it leaves the hands of the
legislature. To determine whether or not there is an undue delegation of
legislative power, the inequity must be directed to the scope and
definiteness of the measure enacted. The legislature does not abdicate its
function when it describes what job must be done, who is to do it, and
what is the scope of his authority. For a complex economy, that may
indeed be the only way in which legislative process can go forward . . .
To avoid the taint of unlawful delegation there must be a standard, which
implies at the very least that the legislature itself determines matters of
principle and lays down fundamental policy . . .

The standard may be either express or implied . . . from the policy and
purpose of the act considered as whole . . .

In People vs. Vera,15 this Court said "the true distinction is between the
delegation of power to make the law, which necessarily involves discretion
as to what the law shall be, and conferring authority or discretion as to its
execution, to be exercised under and in pursuance of the law. The first
cannot be done; to the latter no valid objection can be made."

Ideally, the law must be complete in all its essential terms and conditions
when it leaves the legislature so that there will be nothing left for the
delegate to do when it reaches him except enforce it. If there are gaps in
the law that will prevent its enforcement unless they are first filled, the
delegate will then have been given the opportunity to step in the shoes of
the legislature and exercise a discretion essentially legislative in order to
repair the omissions. This is invalid delegation.16

The Court finds that in this case the questioned laws are complete in all
their essential terms and conditions and sufficient standards are indicated
therein.

The legislative intention in R.A. No. 4860, as amended, Section 31 of P.D.

No. 1177 and P.D. No. 1967 is that the amount needed should be
automatically set aside in order to enable the Republic of the Philippines
to pay the principal, interest, taxes and other normal banking charges on
the loans, credits or indebtedness incurred as guaranteed by it when they
shall become due without the need to enact a separate law appropriating
funds therefor as the need arises. The purpose of these laws is to enable
the government to make prompt payment and/or advances for all loans to
protect and maintain the credit standing of the country.

Although the subject presidential decrees do not state specific amounts to

be paid, necessitated by the very nature of the problem being addressed,
the amounts nevertheless are made certain by the legislative parameters
provided in the decrees. The Executive is not of unlimited discretion as to
the amounts to be disbursed for debt servicing. The mandate is to pay only
the principal, interest, taxes and other normal banking charges on the
loans, credits or indebtedness, or on the bonds, debentures or security or
other evidences of indebtedness sold in international markets incurred by
virtue of the law, as and when they shall become due. No uncertainty
arises in executive implementation as the limit will be the exact amounts
as shown by the books of the Treasury.

There being no undue delegation of legislative power as clearly above

shown, petitioners insist nevertheless that subject presidential decrees
constitute undue delegation of legislative power to the executive on the
alleged ground that the appropriations therein are not exact,
certain or definite, invoking in support therefor the Constitution of
Nebraska, the constitution under which the case of State v. Moore, 69
NW 974, cited by petitioners, was decided. Unlike the Constitution of
Nebraska, however, our Constitution does not require a definite,
certain, exact or "specific appropriation made by law." Section 29,
Article VI of our 1987 Constitution omits any of these words and
simply states:

Section 29(l). No money shall be paid out of the treasury except

in pursuance of an appropriation made by law.
 More significantly, there is no provision in our Constitution that
provides or prescribes any particular form of words or religious recitals
in which an authorization or appropriation by Congress shall be made,
except that it be "made by law," such as precisely the authorization or
appropriation under the questioned presidential decrees. In other
words, in terms of time horizons, an appropriation may be made
impliedly (as by past but subsisting legislations) as well as expressly
for the current fiscal year (as by enactment of laws by the present
Congress), just as said appropriation may be made in general as well
as in specific terms. The Congressional authorization may be embodied
in annual laws, such as a general appropriations act or in special
provisions of laws of general or special application which appropriate
public funds for specific public purposes, such as the questioned
decrees. An appropriation measure is sufficient if the legislative
intention clearly and certainly appears from the language employed
(In re Continuing Appropriations, 32 P. 272), whether in the past or in
the present.17

Thus, in accordance with Section 22, Article VII of the 1987

Constitution, President Corazon C. Aquino submitted to Congress the
Budget of Expenditures and Sources of Financing for the Fiscal Year
1990.

PCCG vs. COCOFED

Facts:
The very roots of this case are anchored on the historic events that transpired
during the change of government in 1986. Immediately after the 1986 EDSA
Revolution, then President Corazon C. Aquino issued Executive Order (EO)
Nos. 1,5 26 and 14.7

"On the explicit premise that 'vast resources of the government have been
amassed by former President Ferdinand E. Marcos, his immediate family,
relatives, and close associates both here and abroad,' the Presidential
Commission on Good Government (PCGG) was created by Executive Order
No. 1 to assist the President in the recovery of the ill-gotten wealth thus
accumulated whether located in the Philippines or abroad."8

Executive Order No. 2 states that the ill-gotten assets and properties are in
the form of bank accounts, deposits, trust accounts, shares of stocks,
buildings, shopping centers, condominiums, mansions, residences, estates,
and other kinds of real and personal properties in the Philippines and in
various countries of the world.9

Executive Order No. 14, on the other hand, empowered the PCGG, with the
assistance of the Office of the Solicitor General and other government
agencies, inter alia, to file and prosecute all cases investigated by it under EO
Nos. 1 and 2.

Pursuant to these laws, the PCGG issued and implemented numerous

sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten
companies, assets and properties, real or personal.10

Among the properties sequestered by the Commission were shares of stock in

the United Coconut Planters Bank (UCPB) registered in the names of the
alleged "one million coconut farmers," the so-called Coconut Industry
Investment Fund companies (CIIF companies) and Private Respondent
Eduardo Cojuangco Jr. (hereinafter "Cojuangco").
In connection with the sequestration of the said UCPB shares, the PCGG, on
July 31, 1987, instituted an action for reconveyance, reversion, accounting,
restitution and damages docketed as Case No. 0033 in the Sandiganbayan.

On November 15, 1990, upon Motion11 of Private Respondent COCOFED, the

Sandiganbayan issued a Resolution12 lifting the sequestration of the subject
UCPB shares on the ground that herein private respondents in particular,
COCOFED and the so-called CIIF companies had not been impleaded by
the PCGG as parties-defendants in its July 31, 1987 Complaint for
reconveyance, reversion, accounting, restitution and damages. The
Sandiganbayan ruled that the Writ of Sequestration issued by the
Commission was automatically lifted for PCGG's failure to commence the
corresponding judicial action within the six-month period ending on August
2, 1987 provided under Section 26, Article XVIII of the 1987 Constitution.
The anti-graft court noted that though these entities were listed in an annex
appended to the Complaint, they had not been named as parties-respondents.

This Sandiganbayan Resolution was challenged by the PCGG in a Petition for

Certiorari docketed as GR No. 96073 in this Court. Meanwhile, upon motion
of Cojuangco, the anti-graft court ordered the holding of elections for the
Board of Directors of UCPB. However, the PCGG applied for and was granted
by this Court a Restraining Order enjoining the holding of the election.
Subsequently, the Court lifted the Restraining Order and ordered the UCPB
to proceed with the election of its board of directors. Furthermore, it allowed
the sequestered shares to be voted by their registered owners.

The victory of the registered shareholders was fleeting because the Court,
acting on the solicitor general's Motion for Clarification/Manifestation, issued
a Resolution on February 16, 1993, declaring that "the right of petitioners
[herein private respondents] to vote stock in their names at the meetings of
the UCPB cannot be conceded at this time. That right still has to be
established by them before the Sandiganbayan. Until that is done, they
cannot be deemed legitimate owners of UCPB stock and cannot be accorded
the right to vote them."13 The dispositive portion of the said Resolution reads
as follows:

"IN VIEW OF THE FOREGOING, the Court recalls and sets aside the
Resolution dated March 3, 1992 and, pending resolution on the merits
of the action at bar, and until further orders, suspends the effectivity of
the lifting of the sequestration decreed by the Sandiganbayan on
November 15, 1990, and directs the restoration of the status quo ante,
so as to allow the PCGG to continue voting the shares of stock under
sequestration at the meetings of the United Coconut Planters Bank."14

Six years later, on February 13, 2001, the Board of Directors of UCPB
received from the ACCRA Law Office a letter written on behalf of the
COCOFED and the alleged nameless one million coconut farmers, demanding
the holding of a stockholders' meeting for the purpose of, among others,
electing the board of directors. In response, the board approved a Resolution
calling for a stockholders' meeting on March 6, 2001 at three o'clock in the
afternoon.

On February 23, 2001, "COCOFED, et al. and Ballares, et al." filed the "Class
Action Omnibus Motion"17 referred to earlier in Sandiganbayan Civil Case
Nos. 0033-A, 0033-B and 0033-F, asking the court a quo:

"1. To enjoin the PCGG from voting the UCPB shares of stock
registered in the respective names of the more than one million
coconut farmers; and

"2. To enjoin the PCGG from voting the SMC shares registered in the
names of the 14 CIIF holding companies including those registered in
the name of the PCGG."18
On February 28, 2001, respondent court, after hearing the parties on oral
argument, issued the assailed Order.

Hence, this Petition by the Republic of the Philippines represented by the

PCGG.19

ISSUE:

1. WON the PCCG has the right to vote for the sequestered shares.
2. WON the Shares are public in character

Ruling:

1. Simply stated, the gut substantive issue to be resolved in the present

Petition is: "Who may vote the sequestered UCPB shares while the main case
for their reversion to the State is pending in the Sandiganbayan?"

This Court holds that the government should be allowed to continue voting
those shares inasmuch as they were purchased with coconut levy funds that
are prima facie public in character or, at the very least, are "clearly affected
with public interest."

General Rule: Sequestered Shares

Are Voted by the Registered Holder

At the outset, it is necessary to restate the general rule that the registered
owner of the shares of a corporation exercises the right and the privilege of
voting.25 This principle applies even to shares that are sequestered by the
government, over which the PCGG as a mere conservator cannot, as a
general rule, exercise acts of dominion.26On the other hand, it is authorized to
vote these sequestered shares registered in the names of private persons and
acquired with allegedly ill-gotten wealth, if it is able to satisfy the two-tiered
test devised by the Court inCojuangco v. Calpo27 and PCGG v. Cojuangco
Jr.,28 as follows:

(1) Is there prima facie evidence showing that the said shares are ill-
gotten and thus belong to the State?

(2) Is there an imminent danger of dissipation, thus necessitating their

continued sequestration and voting by the PCGG, while the main issue
is pending with the Sandiganbayan?

Sequestered Shares Acquired with Public Funds are an Exception

From the foregoing general principle, the Court in Baseco v.

PCGG29 (hereinafter "Baseco") and Cojuangco Jr. v. Roxas30 ("Cojuangco-
Roxas") has provided two clear "public character" exceptions under which the
government is granted the authority to vote the shares:

(1) Where government shares are taken over by private persons or

entities who/which registered them in their own names, and

(2) Where the capitalization or shares that were acquired with public
funds somehow landed in private hands.

The exceptions are based on the common-sense principle that legal fiction
must yield to truth; that public property registered in the names of non-
owners is affected with trust relations; and that the prima facie beneficial
owner should be given the privilege of enjoying the rights flowing from
the prima facie fact of ownership.

In Baseco, a private corporation known as the Bataan Shipyard and

Engineering Co. was placed under sequestration by the PCGG. Explained the
Court:
 "The facts show that the corporation known as BASECO was owned
and controlled by President Marcos 'during his administration,
through nominees, by taking undue advantage of his public office
and/or using his powers, authority, or influence,' and that it was by
and through the same means, that BASECO had taken over the
business and/or assets of the National Shipyard and Engineering Co.,
Inc., and other government-owned or controlled entities."31

Given this factual background, the Court discussed PCGG's right over
BASECO in the following manner:

"Now, in the special instance of a business enterprise shown by

evidence to have been 'taken over by the government of the Marcos
Administration or by entities or persons close to former President
Marcos,' the PCGG is given power and authority, as already adverted
to, to 'provisionally take (it) over in the public interest or to prevent * *
(its) disposal or dissipation;' and since the term is obviously employed
in reference to going concerns, or business enterprises in operation,
something more than mere physical custody is connoted; the PCGG
may in this case exercise some measure of control in the operation,
running, or management of the business itself."32

Citing an earlier Resolution, it ruled further:

"Petitioner has failed to make out a case of grave abuse or excess of

jurisdiction in respondents' calling and holding of a stockholders'
meeting for the election of directors as authorized by the Memorandum
of the President * * (to the PCGG) dated June 26, 1986, particularly,
where as in this case, the government can, through its designated
directors, properly exercise control and management over what appear
to be properties and assets owned and belonging to the government
 itself and over which the persons who appear in this case on behalf of
BASECO have failed to show any right or even any shareholding in
said corporation."33 (Italics supplied)

The Court granted PCGG the right to vote the sequestered shares because
they appeared to be "assets belonging to the government itself. cases; most
recently, in Antiporda v. Sandiganbayan.37 Expressly citing Conjuangco-
Roxas,38 this Court said that in determining the issue of whether the PCGG
should be allowed to vote sequestered shares, it was crucial to find out first
whether these were purchased with public funds, as follows:

"It is thus important to determine first if the sequestered corporate

shares came from public funds that landed in private hands."39

In short, when sequestered shares registered in the names of private

individuals or entities are alleged to have been acquired with ill-gotten
wealth, then the two-tiered test is applied. However, when the sequestered
shares in the name of private individuals or entities are shown, prima facie,
to have been (1) originally government shares, or (2) purchased with public
funds or those affected with public interest, then the two-tiered test does not
apply. Rather, the public character exceptions in Baseco v.
PCGG and Cojuangco Jr. v. Roxas prevail; that is, the government shall vote
the shares.

UCPB Shares Were Acquired With Coconut Levy Funds

In the present case before the Court, it is not disputed that the money used to
purchase the sequestered UCPB shares came from the Coconut Consumer
Stabilization Fund (CCSF), otherwise known as the coconut levy funds.

This fact was plainly admitted by private respondent's counsel, Atty. Teresita
J. Herbosa, during the Oral Arguments held on April 17, 2001 in Baguio City,
Coconut Levy Funds Are Affected With Public Interest

Having conclusively shown that the sequestered UCPB shares were

purchased with coconut levies, we hold that these funds and shares are, at
the very least, "affected with public interest."

The Resolution issued by the Court on February 16, 1993 in Republic v.

Sandiganbayan42 stated that coconut levy funds were "clearly affected with
public interest"; thus, herein private respondents even if they are the
registered shareholders cannot be accorded the right to vote them. We
quote the said Resolution in part, as follows:

"The coconut levy funds being 'clearly affected with public interest, it
follows that the corporations formed and organized from those funds,
and all assets acquired therefrom should also be regarded as 'clearly
affected with public interest.'"43

xxx xxx xxx

"Assuming, however, for purposes of argument merely, the lifting of

sequestration to be correct, may it also be assumed that the lifting of
sequestration removed the character of the coconut levy companies of
being affected with public interest, so that they and their stock and
assets may now be considered to be of private ownership? May it be
assumed that the lifting of sequestration operated to relieve the
holders of stock in the coconut levy companies affected with public
interest of the obligation of proving how that stock had been
legitimately transferred to private ownership, or that those
stockholders who had had some part in the collection, administration,
or disposition of the coconut levy funds are now deemed qualified to
acquire said stock, and freed from any doubt or suspicion that they had
taken advantage of their special or fiduciary relation with the agencies
 in charge of the coconut levies and the funds thereby accumulated?
The obvious answer to each of the questions is a negative one. It seems
plain that the lifting of sequestration has no relevance to the nature of
the coconut levy companies or their stock or property, or to the legality
of the acquisition by private persons of their interest therein, or to the
latter's capacity or disqualification to acquire stock in the companies or
any property acquired from coconut levy funds.

"This being so, the right of the [petitioners] to vote stock in their
names at the meetings of the UCPB cannot be conceded at this time.
That right still has to be established by them before the
Sandiganbayan. Until that is done, they cannot be deemed legitimate
owners of UCPB stock and cannot be accorded the right to vote
them."44 (Italics supplied)

1. Coconut Levy Funds Are Raised Through the State's Police and Taxing
Powers.

Indeed, coconut levy funds partake of the nature of taxes which, in general,
are enforced proportional contributions from persons and properties, exacted
by the State by virtue of its sovereignty for the support of government and for
all public needs.49

Based on this definition, a tax has three elements, namely: a) it is an

enforced proportional contribution from persons and properties; b) it is
imposed by the State by virtue of its sovereignty; and c) it is levied for the
support of the government. The coconut levy funds fall squarely into these
elements for the following reasons:

(a) They were generated by virtue of statutory enactments imposed on

the coconut farmers requiring the payment of prescribed amounts.
Thus, PD No. 276, which created the Coconut Consumer Stabilization
Fund (CCSF), mandated the following:

"a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its
equivalent in other coconut products, shall be imposed on every first
sale, in accordance with the mechanics established under RA 6260,
effective at the start of business hours on August 10, 1973.

"The proceeds from the levy shall be deposited with the Philippine
National Bank or any other government bank to the account of the
Coconut Consumers Stabilization Fund, as a separate trust fund which
shall not form part of the general fund of the government."50

The coco levies were further clarified in amendatory laws, specifically

PD No. 96151 and PD No. 146852 in this wise:

"The Authority (Philippine Coconut Authority) is hereby empowered to

impose and collect a levy, to be known as the Coconut Consumers
Stabilization Fund Levy, on every one hundred kilos of copra resecada,
or its equivalent in other coconut products delivered to, and/or
purchased by, copra exporters, oil millers, desiccators and other end-
users of copra or its equivalent in other coconut products. The levy
shall be paid by such copra exporters, oil millers, desiccators and other
end-users of copra or its equivalent in other coconut products under
such rules and regulations as the Authority may prescribe. Until
otherwise prescribed by the Authority, the current levy being collected
shall be continued."53

Like other tax measures, they were not voluntary payments or

donations by the people. They were enforced contributions exacted on
pain of penal sanctions, as provided under PD No. 276:
"3. Any person or firm who violates any provision of this Decree or the
rules and regulations promulgated thereunder, shall, in addition to
penalties already prescribed under existing administrative and special
law, pay a fine of not less than P2,500 or more than P10,000, or suffer
cancellation of licenses to operate, or both, at the discretion of the
Court."54

Such penalties were later amended thus:

"Whenever any person or entity willfully and deliberately violates any

of the provisions of this Act, or any rule or regulation legally
promulgated hereunder by the Authority, the person or persons
responsible for such violation shall be punished by a fine of not more
than P20,000.00 and by imprisonment of not more than five years. If
the offender be a corporation, partnership or a juridical person, the
penalty shall be imposed on the officer or officers authorizing,
permitting or tolerating the violation. Aliens found guilty of any
offenses shall, after having served his sentence, be immediately
deported and, in the case of a naturalized citizen, his certificate of
naturalization shall be cancelled."55

(b) The coconut levies were imposed pursuant to the laws enacted by
the proper legislative authorities of the State. Indeed, the CCSF was
collected under PD No. 276, issued by former President Ferdinand E.
Marcos who was then exercising legislative powers.56

(c) They were clearly imposed for a public purpose. There is absolutely
no question that they were collected to advance the government's
avowed policy of protecting the coconut industry. This Court takes
judicial notice of the fact that the coconut industry is one of the great
economic pillars of our nation, and coconuts and their byproducts
 occupy a leading position among the country's export products; that it
gives employment to thousands of Filipinos; that it is a great source of
the state's wealth; and that it is one of the important sources of foreign
exchange needed by our country and, thus, pivotal in the plans of a
government committed to a policy of currency stability.

Taxation is done not merely to raise revenues to support the government, but
also to provide means for the rehabilitation and the stabilization of a
threatened industry, which is so affected with public interest as to be within
the police power of the State, as held in Caltex Philippines v.
COA57 and Osmea v. Orbos.58

Even if the money is allocated for a special purpose and raised by special
means, it is still public in character. In the case before us, the funds were
even used to organize and finance State offices. In Cocofed v. PCGG,59 the
Court observed that certain agencies or enterprises "were organized and
financed with revenues derived from coconut levies imposed under a
succession of laws of the late dictatorship x x x with deposed Ferdinand
Marcos and his cronies as the suspected authors and chief beneficiaries of the
resulting coconut industry monopoly."60The Court continued: "x x x. It cannot
be denied that the coconut industry is one of the major industries supporting
the national economy. It is, therefore, the State's concern to make it a strong
and secure source not only of the livelihood of a significant segment of the
population, but also of export earnings the sustained growth of which is one
of the imperatives of economic stability. x x x."61

2. Coconut Funds Are Levied for the Benefit of the Coconut Industry and Its
Farmers.

Just like the sugar levy funds, the coconut levy funds constitute state funds
even though they may be held for a special public purpose.
In fact, Executive Order No. 481 dated May 1, 1998 specifically likens the
coconut levy funds to the sugar levy funds, both being special public funds
acquired through the taxing and police powers of the State. The sugar levy
funds, which are strikingly similar to the coconut levies in their imposition
and purpose, were declared public funds by this Court in Gaston v. Republic
Planters Bank,62 from which we quote:

"The stabilization fees collected are in the nature of a tax which is

within the power of the state to impose for the promotion of the sugar
industry (Lutz vs. Araneta, 98 Phil. 148). They constitute sugar liens
(Sec. 7[b], P.D. No. 388). The collections made accrue to a 'Special
Fund,' a 'Development and Stabilization Fund,' almost identical to the
'Sugar Adjustment and Stabilization Fund' created under Section 6 of
Commonwealth Act 567. The tax collected is not in a pure exercise of
the taxing power. It is levied with a regulatory purpose, to provide
means for the stabilization of the sugar industry. The levy is primarily
in the exercise of the police power of the State. (Lutz vs.
Araneta, supra.)."63

The Court further explained:64

"The stabilization fees in question are levied by the State upon sugar
millers, planters and producers for a special purpose that of
'financing the growth and development of the sugar industry and all its
components, stabilization of the domestic market including the foreign
market.' The fact that the State has taken possession of moneys
pursuant to law is sufficient to constitute them as state funds, even
though they are held for a special purpose (Lawrence v. American
Surety Co., 263 Mich 586. 294 ALR 535, cited in 42 Am. Jur., Sec. 2., p.
718). Having been levied for a special purpose, the revenues collected
are to be treated as a special fund, to be, in the language of the statute,
'administered in trust' for the purpose intended. Once the purpose has
been fulfilled or abandoned, the balance, if any, is to be transferred to
the general funds of the Government. That is the essence of the trust
intended (see 1987 Constitution, Art. VI, Sec. 29[3], lifted from the
1935 Constitution, Article VI, Sec. 23[1]. (Italics supplied)

"The character of the Stabilization Fund as a special fund is

emphasized by the fact that the funds are deposited in the Philippine
National Bank and not in the Philippine Treasury, moneys from which
may be paid out only in pursuance of an appropriation made by law
(1987 Constitution, Article VI, Sec. 29[1], 1973 Constitution, Article
VIII, Sec. 18[1]).

"That the fees were collected from sugar producers, planters and
millers, and that the funds were channeled to the purchase of shares of
stock in respondent Bank do not convert the funds into a trust fund for
their benefit nor make them the beneficial owners of the shares so
purchased. It is but rational that the fees be collected from them since
it is also they who are to be benefited from the expenditure of the
funds derived from it. The investment in shares of respondent Bank is
not alien to the purpose intended because of the Bank's character as a
commodity bank for sugar conceived for the industry's growth and
development. Furthermore, of note is the fact that one-half (1/2) or
P0.50 per picul, of the amount levied under P.D. No. 388 is to be
utilized for the 'payment of salaries and wages of personnel, fringe
benefits and allowances of officers and employees of PHILSUCOM'
thereby immediately negating the claim that the entire amount levied
is in trust for sugar, producers, planters and millers.

"To rule in petitioners' favor would contravene the general principle

that revenues derived from taxes cannot be used for purely private
 purposes or for the exclusive benefit of private persons. The
Stabilization Fund is to be utilized for the benefit of the entire sugar
industry, 'and all its components, stabilization of the domestic market
including the foreign market,' the industry being of vital importance to
the country's economy and to national interest."

In the same manner, this Court has also ruled that the oil stabilization funds
were public in character and subject to audit by COA. It ruled in this wise:

"Hence, it seems clear that while the funds collected may be referred to
as taxes, they are exacted in the exercise of the police power of the
State. Moreover, that the OPSF is a special fund is plain from the
special treatment given it by E.O. 137. It is segregated from the
general fund; and while it is placed in what the law refers to as a 'trust
liability account,' the fund nonetheless remains subject to the scrutiny
and review of the COA. The Court is satisfied that these measures
comply with the constitutional description of a 'special fund.' Indeed,
the practice is not without precedent."65

In his Concurring Opinion in Kilosbayan v. Guingona,66 Justice Florentino P.

Feliciano explained that the funds raised by the On-line Lottery System were
also public in nature. In his words:

"x x x. In the case presently before the Court, the funds involved are
clearly public in nature. The funds to be generated by the proposed
lottery are to be raised from the population at large. Should the
proposed operation be as successful as its proponents project, those
funds will come from well-nigh every town and barrio of Luzon. The
funds here involved are public in another very real sense: they will
belong to the PCSO, a government owned or controlled corporation and
an instrumentality of the government and are destined for utilization
 in social development projects which, at least in principle, are designed
to benefit the general public. x x x. The interest of a private citizen in
seeing to it that public funds, from whatever source they may have
been derived, go only to the uses directed and permitted by law is as
real and personal and substantial as the interest of a private taxpayer
in seeing to it that tax monies are not intercepted on their way to the
public treasury or otherwise diverted from uses prescribed or allowed
by law. It is also pertinent to note that the more successful the
government is in raising revenues by non-traditional methods such as
PAGCOR operations and privatization measures, the lesser will be the
pressure upon the traditional sources of public revenues, i.e., the
pocket books of individual taxpayers and importers."67

Thus, the coconut levy funds like the sugar levy and the oil stabilization
funds, as well as the monies generated by the On-line Lottery System are
funds exacted by the State. Being enforced contributions, the are prima
faciepublic funds.

5. The BIR Has Pronounced That the Coconut Levy Funds Are Taxes.

In response to a query posed by the administrator of the Philippine Coconut

Authority regarding the character of the coconut levy funds, the Bureau of
Internal Revenue has affirmed that these funds are public in character. It
held as follows: "[T]he coconut levy is not a public trust fund for the benefit of
the coconut farmers, but is in the nature of a tax and, therefore, x x x public
funds that are subject to government administration and disposition."73

Furthermore, the executive branch treats the coconut levies as public funds.
Thus, Executive Order No. 277, issued on September 24, 1995, directed the
mode of treatment, utilization, administration and management of the
coconut levy funds. It provided as follows:
 '(a) The coconut levy funds, which include all income, interests,
proceeds or profits derived therefrom, as well as all assets, properties
and shares of stocks procured or obtained with the use of such
funds, shall be treated, utilized, administered and managed as public
funds consistent with the uses and purposes under the laws which
constituted them and the development priorities of the government,
including the government's coconut productivity, rehabilitation,
research extension, farmers organizations, and market promotions
programs, which are designed to advance the development of the
coconut industry and the welfare of the coconut farmers."74 (Italics
supplied)

Doctrinally, acts of the executive branch are prima facie valid and binding,
unless declared unconstitutional or contrary to law.

The Public Character of Shares Is a Valid Issue

Private respondents also contend that the public nature of the coconut levy
funds was not raised as an issue before the Sandiganbayan. Hence, it could
not be taken up before this Court.

Again we disagree. By ruling that the two-tiered test should be applied in

evaluating private respondents' claim of exercising voting rights over the
sequestered shares, the Sandiganbayan effectively held that the subject
assets were private in character. Thus, to meet this issue, the Office of the
Solicitor General countered that the shares were not private in character,
and that quite the contrary, they were and are public in nature because they
were acquired with coco levy funds which are public in character. In short,
the main issue of who may vote the shares cannot be determined without
passing upon the question of the public/private character of the shares and
the funds used to acquire them. The latter issue, although not specifically
raised in the Court a quo, should still be resolved in order to fully adjudicate
the main issue.

Pascual vs Sec. of Public Works

Facts:

On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of

Rizal, instituted this action for declaratory relief, with injunction, upon the
ground that Republic Act No. 920, entitled "An Act Appropriating Funds for
Public Works", approved on June 20, 1953, contained, in section 1-C (a)
thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction,
repair, extension and improvement" of Pasig feeder road terminals (Gen.
Roxas Gen. Araneta Gen. Lucban Gen. Capinpin Gen. Segundo
Gen. Delgado Gen. Malvar Gen. Lim)"; that, at the time of the passage
and approval of said Act, the aforementioned feeder roads were "nothing but
projected and planned subdivision roads, not yet constructed, . . . within the
Antonio Subdivision . . . situated at . . . Pasig, Rizal" (according to the
tracings attached to the petition as Annexes A and B, near Shaw Boulevard,
not far away from the intersection between the latter and Highway 54),
which projected feeder roads "do not connect any government property or any
important premises to the main highway"; that the aforementioned Antonio
Subdivision (as well as the lands on which said feeder roads were to be
construed) were private properties of respondent Jose C. Zulueta, who, at the
time of the passage and approval of said Act, was a member of the Senate of
the Philippines; that on May, 1953, respondent Zulueta, addressed a letter to
the Municipal Council of Pasig, Rizal, offering to donate said projected feeder
roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the offer was
accepted by the council, subject to the condition "that the donor would submit
a plan of the said roads and agree to change the names of two of them"; that
no deed of donation in favor of the municipality of Pasig was, however,
executed; that on July 10, 1953, respondent Zulueta wrote another letter to
said council, calling attention to the approval of Republic Act. No. 920, and
the sum of P85,000.00 appropriated therein for the construction of the
projected feeder roads in question; that the municipal council of Pasig
endorsed said letter of respondent Zulueta to the District Engineer of Rizal,
who, up to the present "has not made any endorsement thereon" that
inasmuch as the projected feeder roads in question were private property at
the time of the passage and approval of Republic Act No. 920, the
appropriation of P85,000.00 therein made, for the construction,
reconstruction, repair, extension and improvement of said projected feeder
roads, was illegal and, therefore, void ab initio"; that said appropriation of
P85,000.00 was made by Congress because its members were made to believe
that the projected feeder roads in question were "public roads and not private
streets of a private subdivision"'; that, "in order to give a semblance of
legality, when there is absolutely none, to the aforementioned appropriation",
respondents Zulueta executed on December 12, 1953, while he was a member
of the Senate of the Philippines, an alleged deed of donation copy of which
is annexed to the petition of the four (4) parcels of land constituting said
projected feeder roads, in favor of the Government of the Republic of the
Philippines; that said alleged deed of donation was, on the same date,
accepted by the then Executive Secretary; that being subject to an onerous
condition, said donation partook of the nature of a contract; that, such, said
donation violated the provision of our fundamental law prohibiting members
of Congress from being directly or indirectly financially interested in any
contract with the Government, and, hence, is unconstitutional, as well as null
and void ab initio, for the construction of the projected feeder roads in
question with public funds would greatly enhance or increase the value of the
aforementioned subdivision of respondent Zulueta, "aside from relieving him
from the burden of constructing his subdivision streets or roads at his own
expense"; that the construction of said projected feeder roads was then being
undertaken by the Bureau of Public Highways; and that, unless restrained by
the court, the respondents would continue to execute, comply with, follow and
implement the aforementioned illegal provision of law, "to the irreparable
damage, detriment and prejudice not only to the petitioner but to the Filipino
nation."

Petitioner prayed, therefore, that the contested item of Republic Act No. 920
be declared null and void

Issue:

1. WON RA 920 is unconstitutional?

2. WON the petitioners have the legal standing?

Ruling:

1. Acting upon said motions to dismiss, the lower court rendered the
aforementioned decision, dated October 29, 1953, holding that, since public
interest is involved in this case, the Provincial Governor of Rizal and the
provincial fiscal thereof who represents him therein, "have the requisite
personalities" to question the constitutionality of the disputed item of
Republic Act No. 920; that "the legislature is without power appropriate
public revenues for anything but a public purpose", that the instructions and
improvement of the feeder roads in question, if such roads where private
property, would not be a public purpose; that, being subject to the following
condition:

The within donation is hereby made upon the condition that the
Government of the Republic of the Philippines will use the parcels of
land hereby donated for street purposes only and for no other purposes
whatsoever; it being expressly understood that should the Government
of the Republic of the Philippines violate the condition hereby imposed
upon it, the title to the land hereby donated shall, upon such violation,
ipso facto revert to the DONOR, JOSE C. ZULUETA. (Emphasis
supplied.)

which is onerous, the donation in question is a contract; that said donation or

contract is "absolutely forbidden by the Constitution" and consequently
"illegal", for Article 1409 of the Civil Code of the Philippines, declares in
existence and void from the very beginning contracts "whose cause, objector
purpose is contrary to law, morals . . . or public policy"; that the legality of
said donation may not be contested, however, by petitioner herein, because
his "interest are not directly affected" thereby; and that, accordingly, the
appropriation in question "should be upheld" and the case dismissed.

At the outset, it should be noted that we are concerned with a decision

granting the aforementioned motions to dismiss, which as much, are deemed
to have admitted hypothetically the allegations of fact made in the petition of
appellant herein. According to said petition, respondent Zulueta is the owner
of several parcels of residential land situated in Pasig, Rizal, and known as
the Antonio Subdivision, certain portions of which had been reserved for the
projected feeder roads aforementioned, which, admittedly, were private
property of said respondent when Republic Act No. 920, appropriating
P85,000.00 for the "construction, reconstruction, repair, extension and
improvement" of said roads, was passed by Congress, as well as when it was
approved by the President on June 20, 1953. The petition further alleges that
the construction of said roads, to be undertaken with the aforementioned
appropriation of P85,000.00, would have the effect of relieving respondent
Zulueta of the burden of constructing his subdivision streets or roads at his
own expenses, 1and would "greatly enhance or increase the value of the
subdivision" of said respondent. The lower court held that under these
circumstances, the appropriation in question was "clearly for a private, not a
public purpose."

As regards the legal feasibility of appropriating public funds for a public

purpose, the principle according to Ruling Case Law, is this:

It is a general rule that the legislature is without power to appropriate

public revenue for anything but a public purpose. . . . It is the essential
character of the direct object of the expenditure which must determine
its validity as justifying a tax, and not the magnitude of the interest to
be affected nor the degree to which the general advantage of the
community, and thus the public welfare, may be ultimately benefited
by their promotion. Incidental to the public or to the state, which
results from the promotion of private interest and the prosperity of
private enterprises or business, does not justify their aid by the use
public money. (25 R.L.C. pp. 398-400; Emphasis supplied.)

The rule is set forth in Corpus Juris Secundum in the following language:

In accordance with the rule that the taxing power must be exercised
for public purposes only, discussedsupra sec. 14, money raised by
taxation can be expended only for public purposes and not for the
advantage of private individuals. (85 C.J.S. pp. 645-646; emphasis
supplied.)
Explaining the reason underlying said rule, Corpus Juris Secundum states:

Generally, under the express or implied provisions of the

constitution, public funds may be used only for public purpose. The
right of the legislature to appropriate funds is correlative with its right
to tax, and, under constitutional provisions against taxation except for
public purposes and prohibiting the collection of a tax for one purpose
and the devotion thereof to another purpose, no appropriation of state
funds can be made for other than for a public purpose.

xxx xxx xxx

The test of the constitutionality of a statute requiring the use of public funds
is whether the statute is designed to promote the public interest, as opposed
to the furtherance of the advantage of individuals, although each advantage
to individuals might incidentally serve the public

2. This notwithstanding, the lower court felt constrained to uphold the

appropriation in question, upon the ground that petitioner may not contest
the legality of the donation above referred to because the same does not affect
him directly. This conclusion is, presumably, based upon the following
premises, namely: (1) that, if valid, said donation cured the constitutional
infirmity of the aforementioned appropriation; (2) that the latter may not be
annulled without a previous declaration of unconstitutionality of the said
donation; and (3) that the rule set forth in Article 1421 of the Civil Code is
absolute, and admits of no exception. We do not agree with these premises.
The validity of a statute depends upon the powers of Congress at the time of
its passage or approval, not upon events occurring, or acts performed,
subsequently thereto, unless the latter consists of an amendment of the
organic law, removing, with retrospective operation, the constitutional
limitation infringed by said statute. Referring to the P85,000.00
appropriation for the projected feeder roads in question, the legality thereof
depended upon whether said roads were public or private property when the
bill, which, latter on, became Republic Act 920, was passed by Congress, or,
when said bill was approved by the President and the disbursement of said
sum became effective, or on June 20, 1953 (see section 13 of said Act).
Inasmuch as the land on which the projected feeder roads were to be
constructed belonged then to respondent Zulueta, the result is that said
appropriation sought a private purpose, and hence, was null and void. 4 The
donation to the Government, over five (5) months after the approval and
effectivity of said Act, made, according to the petition, for the purpose of
giving a "semblance of legality", or legalizing, the appropriation in question,
did not cure its aforementioned basic defect. Consequently, a judicial
nullification of said donation need not precede the declaration of
unconstitutionality of said appropriation.

Again, Article 1421 of our Civil Code, like many other statutory enactments,
is subject to exceptions. For instance, the creditors of a party to an illegal
contract may, under the conditions set forth in Article 1177 of said Code,
exercise the rights and actions of the latter, except only those which are
inherent in his person, including therefore, his right to the annulment of said
contract, even though such creditors are not affected by the same, except
indirectly, in the manner indicated in said legal provision.

Again, it is well-stated that the validity of a statute may be contested only by

one who will sustain a direct injury in consequence of its enforcement. Yet,
there are many decisions nullifying, at the instance of taxpayers, laws
providing for the disbursement of public funds, 5upon the theory that "the
expenditure of public funds by an officer of the State for the purpose of
administering an unconstitutional act constitutes a misapplication of such
funds.

The relation between the people of the Philippines and its taxpayers, on the
other hand, and the Republic of the Philippines, on the other, is not identical
to that obtaining between the people and taxpayers of the U.S. and its
Federal Government. It is closer, from a domestic viewpoint, to that existing
between the people and taxpayers of each state and the government thereof,
except that the authority of the Republic of the Philippines over the people of
the Philippines is more fully direct than that of the states of the Union,
insofar as the simple and unitarytype of our national government is not
subject to limitations analogous to those imposed by the Federal Constitution
upon the states of the Union, and those imposed upon the Federal
Government in the interest of the Union. For this reason, the rule recognizing
the right of taxpayers to assail the constitutionality of a legislation
appropriating local or state public funds which has been upheld by the
Federal Supreme Court.
Cruz vs. Paras

Facts:

Municipality of Bocaue, Bulacan prohibited, through Ordinance 84, the

operation of cabarets and night clubs. The reason is that 84 was an exercise
of police power to prohibit immoral conduct. But petitioners contended that
84 was null and void because the municipality has not authority to prohibit a
lawful business from operating. 84 also violated petitioners right to due
process and equal protection because it withdrew their licenses without
judicial hearing.

(allege by pet.>>Ordinance No. 84 is violative of the petitioners' right to due

process and the equal protection of the law, as the license previously given to
petitioners was in effect withdrawn without judicial hearing. 3. That under
Presidential Decree No. 189, as amended, by Presidential Decree No. 259, the
power to license and regulate tourist-oriented businesses including night
clubs, has been transferred to the Department of Tourism." 6

The cases were assigned to respondent Judge, now Associate Justice Paras of
the Intermediate Appellate Court, who issued a restraining order on
November 7, 1975. The answers were thereafter filed. It was therein alleged:
" 1. That the Municipal Council is authorized by law not only to regulate but
to prohibit the establishment, maintenance and operation of night clubs
invoking Section 2243 of the RAC, CA 601, Republic Acts Nos. 938, 978 and
1224. 2. The Ordinance No. 84 is not violative of petitioners' right to due
process and the equal protection of the law, since property rights are
subordinate to public interests.

3. That Presidential Decree No. 189, as amended, did not deprive Municipal
Councils of their jurisdiction to regulate or prohibit night clubs." 7There was
the admission of the following facts as having been established: "l. That
petitioners Vicente de la Cruz, et al. in Civil Case No. 4755-M had been
previously issued licenses by the Municipal Mayor of Bocaue-petitioner Jose
Torres III, since 1958; petitioner Vicente de la Cruz, since 1960; petitioner
Renato Alipio, since 1961 and petitioner Leoncio Corpuz, since 1972; 2. That
petitioners had invested large sums of money in their businesses; 3. That the
night clubs are well-lighted and have no partitions, the tables being near
each other; 4. That the petitioners owners/operators of these clubs do not
allow the hospitality girls therein to engage in immoral acts and to go out
with customers; 5. That these hospitality girls are made to go through
periodic medical check-ups and not one of them is suffering from any venereal
disease and that those who fail to submit to a medical check-up or those who
are found to be infected with venereal disease are not allowed to work; 6.
That the crime rate there is better than in other parts of Bocaue or in other
towns of Bulacan." 8 Then came on January 15, 1976 the decision upholding
the constitutionality and validity of Ordinance No. 84 and dismissing the
cases. Hence this petition for certiorari by way of appeal.

Issue: Whether Ordinance 84 is valid.

Ruling:

The decision now under review refers to Republic Act No. 938 as
amended. 17 It was originally enacted on June 20, 1953. It is entitled: "AN
ACT GRANTING MUNICIPAL OR CITY BOARDS AND COUNCILS THE
POWER TO REGULATE THE ESTABLISHMENT, MAINTENANCE AND
OPERATION OF CERTAIN PLACES OF AMUSEMENT WITHIN THEIR
RESPECTIVE TERRITORIAL JURISDICTIONS.' 18 Its first section insofar
as pertinent reads: "The municipal or city board or council of each chartered
city shall have the power to regulate by ordinance the establishment,
maintenance and operation of night clubs, cabarets, dancing schools,
pavilions, cockpits, bars, saloons, bowling alleys, billiard pools, and other
similar places of amusement within its territorial jurisdiction: ... " 19 Then on
May 21, 1954, the first section was amended to include not merely "the power
to regulate, but likewise "Prohibit ... " 20 The title, however, remained the
same. It is worded exactly as Republic Act No. 938. It is to be admitted that
as thus amended, if only the above portion of the Act were considered, a
municipal council may go as far as to prohibit the operation of night clubs. If
that were all, then the appealed decision is not devoid of support in law. That
is not all, however. The title was not in any way altered. It was not changed
one whit. The exact wording was followed. The power granted remains that
of regulation, not prohibition. There is thus support for the view advanced by
petitioners that to construe Republic Act No. 938 as allowing the prohibition
of the operation of night clubs would give rise to a constitutional question.

The Constitution mandates: "Every bill shall embrace only one subject which
shall be expressed in the title thereof. " 21 Since there is no dispute as the
title limits the power to regulating, not prohibiting, it would result in the
statute being invalid if, as was done by the Municipality of Bocaue, the
operation of a night club was prohibited. There is a wide gap between the
exercise of a regulatory power "to provide for the health and safety, promote
the prosperity, improve the morals, 22 in the language of the Administrative
Code, such competence extending to all "the great public needs, 23 to quote
from Holmes, and to interdict any calling, occupation, or enterprise. In
accordance with the well-settled principle of constitutional construction that
between two possible interpretations by one of which it will be free from
constitutional infirmity and by the other tainted by such grave defect, the
former is to be preferred. A construction that would save rather than one that
would affix the seal of doom certainly commends itself. We have done so
before We do so again. 24

the writ of certiorari is granted and the decision of the lower court dated
January 15, 1976 reversed, set aside, and nullied. Ordinance No. 84, Series of
1975 of the Municipality of Bocaue is declared void and unconstitutional
Tio vs. Videogram regulatory Board

Facts:

On November 5, 1985, a month after the promulgation of the abovementioned

decree, Presidential Decree No. 1994 amended the National Internal Revenue
Code providing, inter alia:

SEC. 134. Video Tapes. There shall be collected on each

processed video-tape cassette, ready for playback, regardless of
length, an annual tax of five pesos; Provided, That locally
manufactured or imported blank video tapes shall be subject to
sales tax.
On October 23, 1986, the Greater Manila Theaters Association, Integrated
Movie Producers, Importers and Distributors Association of the Philippines,
and Philippine Motion Pictures Producers Association, hereinafter
collectively referred to as the Intervenors, were permitted by the Court to
intervene in the case, over petitioner's opposition, upon the allegations that
intervention was necessary for the complete protection of their rights and
that their "survival and very existence is threatened by the unregulated
proliferation of film piracy." The Intervenors were thereafter allowed to file
their Comment in Intervention.

The rationale behind the enactment of the DECREE, is set out in its
preambular clauses as follows:

1. WHEREAS, the proliferation and unregulated circulation of

videograms including, among others, videotapes, discs, cassettes
or any technical improvement or variation thereof, have greatly
prejudiced the operations of moviehouses and theaters, and have
caused a sharp decline in theatrical attendance by at least forty
percent (40%) and a tremendous drop in the collection of sales,
contractor's specific, amusement and other taxes, thereby
resulting in substantial losses estimated at P450 Million
annually in government revenues;

2. WHEREAS, videogram(s) establishments collectively earn

around P600 Million per annum from rentals, sales and
disposition of videograms, and such earnings have not been
subjected to tax, thereby depriving the Government of
approximately P180 Million in taxes each year;

3. WHEREAS, the unregulated activities of videogram

establishments have also affected the viability of the movie
industry, particularly the more than 1,200 movie houses and
theaters throughout the country, and occasioned industry-wide
displacement and unemployment due to the shutdown of
numerous moviehouses and theaters;

4. "WHEREAS, in order to ensure national economic recovery, it

is imperative for the Government to create an environment
conducive to growth and development of all business industries,
including the movie industry which has an accumulated
investment of about P3 Billion;

5. WHEREAS, proper taxation of the activities of videogram

establishments will not only alleviate the dire financial
condition of the movie industry upon which more than 75,000
families and 500,000 workers depend for their livelihood, but
also provide an additional source of revenue for the Government,
and at the same time rationalize the heretofore uncontrolled
distribution of videograms;

6. WHEREAS, the rampant and unregulated showing of obscene

videogram features constitutes a clear and present danger to the
moral and spiritual well-being of the youth, and impairs the
mandate of the Constitution for the State to support the rearing
of the youth for civic efficiency and the development of moral
character and promote their physical, intellectual, and social
well-being;

7. WHEREAS, civic-minded citizens and groups have called for

remedial measures to curb these blatant malpractices which
have flaunted our censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies corroding the moral
values of the people and betraying the national economic recovery program,
bold emergency measures must be adopted with dispatch

Issue:

WON Section 10 thereof, which imposes a tax of 30% on the gross receipts
payable to the local government is a RIDER and the same is not germane to
the subject matter thereof.

Ruling:

1. The Constitutional requirement that "every bill shall embrace only one
subject which shall be expressed in the title thereof" 1 is sufficiently complied
with if the title be comprehensive enough to include the general purpose
which a statute seeks to achieve. It is not necessary that the title express
each and every end that the statute wishes to accomplish. The requirement is
satisfied if all the parts of the statute are related, and are germane to the
subject matter expressed in the title, or as long as they are not inconsistent
with or foreign to the general subject and title.2 An act having a single
general subject, indicated in the title, may contain any number of provisions,
no matter how diverse they may be, so long as they are not inconsistent with
or foreign to the general subject, and may be considered in furtherance of
such subject by providing for the method and means of carrying out the
general object." 3 The rule also is that the constitutional requirement as to
the title of a bill should not be so narrowly construed as to cripple or impede
the power of legislation. 4 It should be given practical rather than technical
construction. 5

Tested by the foregoing criteria, petitioner's contention that the tax provision
of the DECREE is a rider is without merit. That section reads, inter alia:
 Section 10. Tax on Sale, Lease or Disposition of Videograms.
Notwithstanding any provision of law to the contrary, the
province shall collect a tax of thirty percent (30%) of the
purchase price or rental rate, as the case may be, for every sale,
lease or disposition of a videogram containing a reproduction of
any motion picture or audiovisual program. Fifty percent (50%)
of the proceeds of the tax collected shall accrue to the province,
and the other fifty percent (50%) shall acrrue to the municipality
where the tax is collected; PROVIDED, That in Metropolitan
Manila, the tax shall be shared equally by the City/Municipality
and the Metropolitan Manila Commission.

xxx xxx xxx

The foregoing provision is allied and germane to, and is reasonably necessary
for the accomplishment of, the general object of the DECREE, which is the
regulation of the video industry through the Videogram Regulatory Board as
expressed in its title. The tax provision is not inconsistent with, nor foreign to
that general subject and title. As a tool for regulation 6 it is simply one of the
regulatory and control mechanisms scattered throughout the DECREE. The
express purpose of the DECREE to include taxation of the video industry in
order to regulate and rationalize the heretofore uncontrolled distribution of
videograms is evident from Preambles 2 and 5, supra. Those preambles
explain the motives of the lawmaker in presenting the measure. The title of
the DECREE, which is the creation of the Videogram Regulatory Board, is
comprehensive enough to include the purposes expressed in its Preamble and
reasonably covers all its provisions. It is unnecessary to express all those
objectives in the title or that the latter be an index to the body of the
DECREE.
WHEREFORE, the instant Petition is hereby dismissed.

Tobias vs. Abalos

Facts:

Invoking their rights as taxpayers and as residents of Mandaluyong, herein

petitioners assail the constitutionality of Republic Act No. 7675, otherwise
known as "An Act Converting the Municipality of Mandaluyong into a Highly
Urbanized City to be known as the City of Mandaluyong."

Prior to the enactment of the assailed statute, the municipalities of

Mandaluyong and San Juan belonged to only one legislative district. Hon.
Ronaldo Zamora, the incumbent congressional representative of this
legislative district, sponsored the bill which eventually became R.A. No. 7675.
President Ramos signed R.A. No. 7675 into law on February 9, 1994.

Pursuant to the Local Government Code of 1991, a plebiscite was held on

April 10, 1994. The people of Mandaluyong were asked whether they
approved of the conversion of the Municipality of Mandaluyong into a highly
urbanized city as provided under R.A. No. 7675. The turnout at the plebiscite
was only 14.41% of the voting population. Nevertheless, 18,621 voted "yes"
whereas 7,911 voted "no." By virtue of these results, R.A. No. 7675 was
deemed ratified and in effect.

Petitioners now come before this Court, contending that R.A. No. 7675,
specifically Article VIII, Section 49 thereof, is unconstitutional for being
violative of three specific provisions of the Constitution.
Article VIII, Section 49 of R.A. No. 7675 provides:

As a highly-urbanized city, the City of Mandaluyong shall have

its own legislative district with the first representative to be
elected in the next national elections after the passage of this
Act. The remainder of the former legislative district of San
Juan/Mandaluyong shall become the new legislative district of
San Juan with its first representative to be elected at the same
election.

Petitioner's first objection to the aforequoted provision of R.A. No. 7675 is

that it contravenes the "one subject-one bill" rule, as enunciated in Article VI,
Section 26(1) of the Constitution, to wit:

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

Petitioners allege that the inclusion of the assailed Section 49 in the subject
law resulted in the latter embracing two principal subjects, namely: (1) the
conversion of Mandaluyong into a highly urbanized city; and (2) the division
of the congressional district of San Juan/Mandaluyong into two separate
districts.

Petitioners contend that the second aforestated subject is not germane to the
subject matter of R.A. No. 7675 since the said law treats of the conversion of
Mandaluyong into a highly urbanized city, as expressed in the title of the
law. Therefore, since Section 49 treats of a subject distinct from that stated in
the title of the law, the "one subject-one bill" rule has not been complied with
Issue:

WON the provision of R.A. No. 7675 contravenes the "one subject-one bill"
rule

Ruling:

The contentions are devoid of merit.

Anent the first issue, we agree with the observation of the Solicitor General
that the statutory conversion of Mandaluyong into a highly urbanized city
with a population of not less than two hundred fifty thousand indubitably
ordains compliance with the "one city-one representative" proviso in the
Constitution:

. . . Each city with a population of at least two hundred fifty

thousand, or each province, shall have at least one
representative" (Article VI, Section 5(3), Constitution).

Hence, it is in compliance with the aforestated constitutional mandate that

the creation of a separate congressional district for the City of Mandaluyong
is decreed under Article VIII, Section 49 of R.A. No. 7675.

Contrary to petitioners' assertion, the creation of a separate congressional

district for Mandaluyong is not a subject separate and distinct from the
subject of its conversion into a highly urbanized city but is a natural and
logical consequence of its conversion into a highly urbanized city. Verily, the
title of R.A. No. 7675, "An Act Converting the Municipality of Mandaluyong
Into a Highly Urbanized City of Mandaluyong" necessarily includes and
contemplates the subject treated under Section 49 regarding the creation of a
separate congressional district for Mandaluyong.
Moreover, a liberal construction of the "one title-one subject" rule has been
invariably adopted by this court so as not to cripple or impede legislation.
Thus, in Sumulong v. Comelec (73 Phil. 288 [1941]), we ruled that the
constitutional requirement as now expressed in Article VI, Section 26(1)
"should be given a practical rather than a technical construction. It should be
sufficient compliance with such requirement if the title expresses the general
subject and all the provisions are germane to that general subject."

The liberal construction of the "one title-one subject" rule had been further
elucidated in Lidasan v. Comelec (21 SCRA 496 [1967]), to wit:

Of course, the Constitution does not require Congress to employ

in the title of an enactment, language of such precision as to
mirror, fully index or catalogue all the contents and the minute
details therein. It suffices if the title should serve the purpose of
the constitutional demand that it inform the legislators, the
persons interested in the subject of the bill and the public, of the
nature, scope and consequences of the proposed law and its
operation" (emphasis supplied).

Topic: Effectivity of Laws

TAADA VS. TUVERA

136 SCRA 27 (April 24, 1985)

FACTS:

Invoking the right of the people to be informed on matters of public concern

as well as the principle that laws to be valid and enforceable must be
published in the Official Gazette, petitioners filed for writ of mandamus to
compel respondent public officials to publish and/or cause to publish various
presidential decrees, letters of instructions, general orders, proclamations,
executive orders, letters of implementations and administrative orders.

The Solicitor General, representing the respondents, moved for the dismissal
of the case, contending that petitioners have no legal personality to bring the
instant petition.

ISSUE:

Whether or not publication in the Official Gazette is required before any law
or statute becomes valid and enforceable.

HELD:

Art. 2 of the Civil Code does not preclude the requirement of publication in
the Official Gazette, even if the law itself provides for the date of its
effectivity. The clear object of this provision is to give the general public
adequate notice of the various laws which are to regulate their actions and
conduct as citizens. Without such notice and publication, there would be no
basis for the application of the maxim ignoratia legis nominem excusat. It
would be the height of injustive to punish or otherwise burden a citizen for
the transgression of a law which he had no notice whatsoever, not even a
constructive one.

The very first clause of Section 1 of CA 638 reads: there shall be published in
the Official Gazette. The word shall therein imposes upon respondent
officials an imperative duty. That duty must be enforced if the constitutional
right of the people to be informed on matter of public concern is to be given
substance and validity.
The publication of presidential issuances of public nature or of general
applicability is a requirement of due process. It is a rule of law that before a
person may be bound by law, he must first be officially and specifically
informed of its contents. The Court declared that presidential issuances of
general application which have not been published have no force and effect.

EXECUTIVE ORDER NO. 200 June 18, 1987

PROVIDING FOR THE PUBLICATION OF LAWS EITHER IN THE

OFFICIAL GAZETTE OR IN A NEWSPAPER OF GENERAL
CIRCULATION IN THE PHILIPPINES AS A REQUIREMENT FOR THEIR
EFFECTIVITY

WHEREAS, Article 2 of the Civil Code partly provides that "laws shall take
effect after fifteen days following the completion of their publication in the
Official Gazette, unless it is otherwise provided . . .;"

WHEREAS, the requirement that for laws to be effective only a publication

thereof in the Official Gazette will suffice has entailed some problems, a point
recognized by the Supreme Court in Taada. et al. vs. Tuvera, et al. (G.R. No.
63915, December 29, 1986) when it observed that "[t]here is much to be said
of the view that the publication need not be made in the Official Gazette,
considering its erratic release and limited readership";

WHEREAS, it was likewise observed that "[u]ndoubtedly, newspapers of

general circulation could better perform the function of communicating the
laws to the people as such periodicals are more easily available, have a wider
readership, and come out regularly"; and

WHEREAS, in view of the foregoing premises Article 2 of the Civil Code

should accordingly be amended so the laws to be effective must be published
either in the Official Gazette or in a newspaper of general circulation in the
country;

NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines,

by virtue of the powers vested in me by the Constitution, do hereby order:

Sec. 1. Laws shall take effect after fifteen days following the completion of
their publication either in the Official Gazette or in a newspaper of general
circulation in the Philippines, unless it is otherwise provided.

Sec. 2. Article 2 of Republic Act No. 386, otherwise known as the "Civil Code
of the Philippines," and all other laws inconsistent with this Executive Order
are hereby repealed or modified accordingly.

Sec. 3. This Executive Order shall take effect immediately after its
publication in the Official Gazette.

Done in the City of Manila, this 18th day of June, in the year of Our Lord,
nineteen hundred and eighty-seven.

PVB employees vs Judge Vera

FACTS:

On January 2, 1992, the Congress enacted R.A. 7169 providing for the
rehabilitation of Philippine Veterans Bank. It was published in the Official
Gazette in February 24, 1992. Thereafter, petitioners filed with the labor
tribunals their residual claims for benefits and for reinstatement upon
reopening the bank.

In May 1992, the Central Bank issued a certificate of authority allowing the
PVB to reopen despite the late mandate for rehabilitation and reopening,
Judge Vega continued with the liquidation proceedings of the bank alleging
further that RA 7169 became effective only on March 10, 1992 or 15 days
after its publication in the Official Gazette on February 24, 1992.

ISSUE:
Whether or not RA 7169 became effective on January 2, 1992.

RULING:

Yes. RA 7169 expressly provided that it should take effect upon its approval.
Aquino signed it into law on January 2, 1992. Thereafter, said law became
effective on said date. Its subsequent publication was not necessary for its
effectivity. RA 7169 is of internal nature and not have general application
thus it took effect on the date provided for and hence was rightfully invoked
by the petitioners. The Supreme Court upheld that while as a rule laws take
effect after 15 days following completion of their publication in the Official
Gazette or in a newspaper of general circulation in the Philippines, the
legislature has the authority to provide for exceptions as indicated in the
clause unless otherwise provided

IN AID OF LEGISLATION

Senate vs Ermita
FACTS:

This is a petition for certiorari and prohibition proffer that the President has
abused power by issuing E.O. 464 Ensuring Observance of the Principles of
Separation of Powers, Adherence to the Rule on Executive Privilege and
Respect for the Rights of Public Officials Appearing in Legislative Inquiries
in Aid of Legislation Under the Constitution, and for Other Purposes.
Petitioners pray for its declaration as null and void for being
unconstitutional.

In the exercise of its legislative power, the Senate of the Philippines, through
its various Senate Committees, conducts inquiries or investigations in aid of
legislation which call for, inter alia, the attendance of officials and employees
of the executive department, bureaus, and offices including those employed in
Government Owned and Controlled Corporations, the Armed Forces of the
Philippines (AFP), and the Philippine National Police (PNP).

The Committee of the Senate issued invitations to various officials of the

Executive Department for them to appear as resource speakers in a public
hearing on the railway project, others on the issues of massive election fraud
in the Philippine elections, wire tapping, and the role of military in the so-
called Gloriagate Scandal.

Said officials were not able to attend due to lack of consent from the
President as provided by E.O. 464, Section 3 which requires all the public
officials enumerated in Section 2(b) to secure the consent of the President
prior to appearing before either house of Congress.

ISSUE:
Is Section 3 of E.O. 464, which requires all the public officials, enumerated in
Section 2(b) to secure the consent of the President prior to appearing before
either house of Congress, valid and constitutional?

RULING:
No. The enumeration in Section 2 (b) of E.O. 464 is broad and is covered by
the executive privilege. The doctrine of executive privilege is premised on the
fact that certain information must, as a matter of necessity, be kept
confidential in pursuit of the public interest. The privilege being, by
definition, an exemption from the obligation to disclose information, in this
case to Congress, the necessity must be of such high degree as to outweigh
the public interest in enforcing that obligation in a particular case.

Congress undoubtedly has a right to information from the executive branch

whenever it is sought in aid of legislation. If the executive branch withholds
such information on the ground that it is privileged, it must so assert it and
state the reason therefor and why it must be respected.

The infirm provisions of E.O. 464, however, allow the executive branch to
evade congressional requests for information without need of clearly
asserting a right to do so and/or proffering its reasons therefor. By the mere
expedient of invoking said provisions, the power of Congress to conduct
inquiries in aid of legislation is frustrated.

Bengzon vs Senate Blue Ribbon

203 SCRA 767 Political Law Constitutional Law The Legislative

Department Inquiry in Aid of Legislation When not Allowed
FACTS:

It was alleged that Benjamin Kokoy Romualdez and his wife together with
the Marcoses unlawfully and unjustly enriched themselves at the expense of
the Filipino people. That they obtained with the help of the Bengzon Law
Office and Ricardo Lopa Corys brother in law, among others, control over
some of the biggest business enterprises in the country including MERALCO,
PCI Bank, Shell Philippines and Benguet Consolidated Mining Corporation.

Senator Juan Ponce Enrile subsequently delivered a privilege speech alleging

that Lopa took over various government owned corporations which is in
violation of the Anti-Graft and Corrupt Practices Act. Contained in the
speech is a motion to investigate on the matter. The motion was referred to
the Committee on Accountability of Public Officers or the Blue Ribbon
Committee. After committee hearing, Lopa refused to testify before the
committee for it may unduly prejudice a pending civil case against him.
Bengzon likewise refused invoking his right to due process. Lopa however
sent a letter to Enrile categorically denying his allegations and that his
allegations are baseless and malicious.

Enrile subsequently took advantage of the Senates privilege hour upon

which he insisted to have an inquiry regarding the matter. The SBRC
rejected Lopas and Bengzons plea.

Claiming that the Senate Blue Ribbon Committee is poised to subpoena them
and require their attendance and testimony in proceedings before the
Committee, in excess of its jurisdiction and legislative purpose, in clear and
blatant disregard of their constitutional rights, and to their grave and
irreparable damage, prejudice and injury, and that there is no appeal nor any
other plain, speedy and adequate remedy in the ordinary course of law,
Bengzon et al filed a petition for prohibition with a prayer for temporary
restraining order and/or injunctive relief against the SBRC.

ISSUE: Whether or not the inquiry sought by the SBRC be granted.

HELD: No, the inquiry cannot be given due course. The speech of Enrile
contained no suggestion of contemplated legislation; he merely called upon
the Senate to look into a possible violation of Sec. 5 of RA No. 3019, otherwise
known as The Anti-Graft and Corrupt Practices Act. In other words, the
purpose of the inquiry to be conducted by the Blue Ribbon Committee was to
find out whether or not the relatives of Cory, particularly Lopa, had violated
the law in connection with the alleged sale of the 36 or 39 corporations
belonging to Kokoy to the Lopa Group. There appears to be, therefore, no
intended legislation involved. Hence, the contemplated inquiry by the SBRC
is not really in aid of legislation because it is not related to a purpose within
the jurisdiction of Congress, since the aim of the investigation is to find out
whether or not the relatives of the President or Mr. Ricardo Lopa had
violated Section 5 of RA No. 3019, the Anti-Graft and Corrupt Practices Act,
a matter that appears more within the province of the courts rather than of
the legislature. Besides, the Court may take judicial notice that Mr. Ricardo
Lopa died during the pendency of this case.

Citation: Standard Charted Bank Phil v Senate

[G.R. No. 167173; December 27, 2007]

Petition for Prohibition

- With prayer for issuance of Temporary Restraining Order and/or Injunction
- Dated and filed Mar 11, 2005.
- Purpose: to enjoin respondents from
1. proceeding with its inquiry pursuant to Phil Senate (PS) No. 166
2. compelling petitioners (officers of SCB-Phils) to attend and justify before
any hearing to be conducted by respondents particularly set on Mar 15, 2005.
enforcing any Hold Departure Order (HDO) and/or putting petitioner on
Watch List
Also prays for:

3. annulment of SUBPOENA AD TESTIFICANDUM and DUCES TECUM

issued to P.

SUBPOENA AD TESTIFICANDUM: A process to cause a witness to

appear and give testimony, under conditions therein mentioned.
SUBPOENA DUCES TECUM: a command to produce documents

FACTS

1. Feb 1 2005. Senator Juan Ponce Enrile (VC of R) delivered a privilege

speech = Arrogance of Wealth.
- Based on a letter from Atty. Mark Bacobo denouncing SCB Phils for selling
unregistered securities in violation of the Securities Regulation Code (RA
8799)
- According to letter, P is reported to have a sale of unregistered and high-
risk securities by Standard Chartered Bank which resulted in billions of
losses to the investing public
- Urging the Senate to immediately conduct an inquiry, aid in legislation, to
prevent the occurrence of a similar fraudulent activity in the future.

2. Sen. Francis Pangilinan motioned the speech to be referred to R. PS

Resolution was earler been introduced by Sen. Enrile.

3. R invited petitioners and other resource persons to attend hearing. On Feb

28, 2005 when the investigation was commenced, Senator Enrile moved that
subpoena be issued to those who did not attend and requested Dept of Justice
to issue an HDO against them or include them in the Watch List.
4. P were later served SUBPOENA AD TESTIFICANDUM and DUCES
TECUM to compel them to attend the next set hearing, thus they filed this
petition.

5. The issues raised against SCB Phils regarding the selling of unregistered
foreign documents are already foreign securities.

Primary: Did the Senate Blue Ribbon Committee have jurisdiction over the
case at bar?

HELD
Petition for Prohibition -DENIED, lack of merit.
Senate Blue Ribbon Committee has jurisdiction over the matter.

*Note from Nachura: it was held that the legislative inquiry does not violate
the petitioners right to privacy.

RATIO
A. Bengzon Jr v Senate Blue Ribbon Committee does not apply in this case.
- -The similarity of Bengzon Jr and of this case is only until the presence of
cases already pending in various courts and admin bodies regarding the
matter to be investigated.
- -Bengzon Jr, was not in aid of legislation. The speech therein contained no
contemplated legislation
- On the other hand, this case is explicit on the nature of the inquiry, as
stated in last 3 WHEREAS clauses in P.S.
Resolution No 166.

a. exisiting laws including the Securities Regulation Code seem to be

inadequate
c. the regulatory intervention by the SEC and BSP likewise appear to be
inadequate.
d. there is a need for remedial legislation to address the issue.
- Conclusion of Enriles privilege speech: conduct an inquiry, in aid of
legislation.

B. landmark case Arnault v. Nazareno

- -the power of inquiry is an essential and appropriate auxiliary to the
legislative function.
- -P cannot claim to have been singled out by R before there are other
resource persons invited to help them in the case.
- -purpose of the investigation: quest for remedies, to prevent recurrence
- independent of the judiciary, it can assest its authority and punish non-
compliance.

C. Right of privacy ---not absolute right. (Sec 21, ART VI of Consti)

Sabio v Gordon, Right to privacy is not absolute where there is an overriding
compelling state interest

NORECO II vs Sanguniang Panglungsod

155 SCRA 421 Political Law Inquiry in Aid of Legislation LGUs

In 1985, the Sangguniang Panlungsod (SP) of Dumaguete sought to conduct

an investigation in connection with pending legislation related to the
operations of public utilities. Invited in the hearing were the heads of
NORECO II (Negros Oriental II Electric Cooperative, Inc.) Paterio Torres
and Arturo Umbac. NORECO II is alleged to have installed inefficient power
lines in the said city. Torres and Umbac refused to appear before the SP and
they alleged that the power to investigate, and to order the improvement of,
alleged inefficient power lines to conform to standards is lodged exclusively
with the National Electrification Administration (NEA); and neither the
Charter of the City of Dumaguete nor the [old] Local Government Code
(Batas Pambansa Blg. 337) grants the SP such power. The SP averred that
inherent in the legislative functions performed by the respondent SP is the
power to conduct investigations in aid of legislation and with it, the power to
punish for contempt in inquiries on matters within its jurisdiction.

ISSUE: Whether or not LGUs can issue contempt.

HELD: No. There is no express provision either in the 1973 Constitution or in

the LGC (BP 337) granting local legislative bodies, the power to subpoena
witnesses and the power to punish non-members for contempt. Absent a
constitutional or legal provision for the exercise of these powers, the only
possible justification for the issuance of a subpoena and for the punishment of
non-members for contumacious behavior would be for said power to be
deemed implied in the statutory grant of delegated legislative power. But, the
contempt power and the subpoena power partake of a judicial nature. They
cannot be implied in the grant of legislative power. Neither can they exist as
mere incidents of the performance of legislative functions. To allow local
legislative bodies or administrative agencies to exercise these powers without
express statutory basis would run afoul of the doctrine of separation of
powers. There being no provision in the LGC explicitly granting local
legislative bodies, the power to issue compulsory process and the power to
punish for contempt, the SP of Dumaguete is devoid of power to punish the
petitioners Torres and Umbac for contempt. The Ad Hoc Committee of said
legislative body has even less basis to claim that it can exercise these powers.
Even assuming that the SP and the Ad-Hoc Committee had the power to
issue the subpoena and the order complained of, such issuances would still be
void for being ultra vires. The contempt power (and the subpoena power) if
actually possessed, may only be exercised where the subject matter of the
investigation is within the jurisdiction of the legislative body.

Arnault v. Nazareno, G.R. No. L-3820, July 18, 1950

DECISION

(En Banc)

OZAETA, J.:

I. THE FACTS

The Senate investigated the purchase by the government of two parcels of

land, known as Buenavista and Tambobong estates. An intriguing question
that the Senate sought to resolve was the apparent irregularity of the
governments payment to one Ernest Burt, a non-resident American citizen,
of the total sum of Php1.5 million for his alleged interest in the two estates
that only amounted to Php20,000.00, which he seemed to have forfeited
anyway long before. The Senate sought to determine who were responsible
for and who benefited from the transaction at the expense of the government.

Petitioner Jean Arnault, who acted as agent of Ernest Burt in the subject
transactions, was one of the witnesses summoned by the Senate to its
hearings. In the course of the investigation, the petitioner repeatedly refused
to divulge the name of the person to whom he gave the amount of
Php440,000.00, which he withdrew from the Php1.5 million proceeds
pertaining to Ernest Burt.

Arnault was therefore cited in contempt by the Senate and was committed to
the custody of the Senate Sergeant-at-Arms for imprisonment until he
answers the questions. He thereafter filed a petition for habeas corpus
directly with the Supreme Court questioning the validity of his detention.

II. THE ISSUE

1. Did the Senate have the power to punish the petitioner for contempt for
refusing to reveal the name of the person to whom he gave the
Php440,000.00?

2. Did the Senate have the authority to commit petitioner for contempt for a
term beyond its period of legislative session?

3. May the petitioner rightfully invoke his right against self-incrimination?

III. THE RULING

[The Court DENIED the petition for habeas corpus filed by Arnault.]
1. Yes, the Senate had the power to punish the petitioner for contempt for
refusing to reveal the name of the person to whom he gave the
Php440,000.00.

Although there is no provision in the [1935] Constitution expressly investing

either House of Congress with power to make investigations and exact
testimony to the end that it may exercise its legislative functions as to be
implied. In other words, the power of inquiry with process to enforce it is
an essential and appropriate auxiliary to the legislative function. A
legislative body cannot legislate wisely or effectively in the absence of
information respecting the conditions which the legislation is intended to
effect or change; and where the legislative body does not itself possess the
requisite information which is not infrequently true recourse must be had
to others who do possess it. Experience has shown that mere requests for
such information are often unavailing, and also that information which is
volunteered is not always accurate or complete; so some means of compulsion
is essential to obtain what is needed.

xxx xxx xxx

[W]e find that the question for the refusal to answer which the petitioner was
held in contempt by the Senate is pertinent to the matter under inquiry. In
fact, this is not and cannot be disputed. Senate Resolution No. 8, the validity
of which is not challenged by the petitioner, requires the Special Committee,
among other things, to determine the parties responsible for the Buenavista
and Tambobong estates deal, and it is obvious that the name of the person to
whom the witness gave the P440,000 involved in said deal is pertinent to that
determination it is in fact the very thing sought to be determined. The
contention is not that the question is impertinent to the subject of the inquiry
but that it has no relation or materiality to any proposed legislation. We have
already indicated that it is not necessary for the legislative body to show that
every question propounded to a witness is material to any proposed or
possible legislation; what is required is that is that it be pertinent to the
matter under inquiry.

xxx xxx xxx

If the subject of investigation before the committee is within the range of

legitimate legislative inquiry and the proposed testimony of the witness
called relates to that subject, obedience, to its process may be enforced by the
committee by imprisonment.

2. YES, the Senate had the authority to commit petitioner for contempt for
a term beyond its period of legislative session.

We find no sound reason to limit the power of the legislative body to punish
for contempt to the end of every session and not to the end of the last session
terminating the existence of that body. The very reason for the exercise of the
power to punish for contempt is to enable the legislative body to perform its
constitutional function without impediment or obstruction. Legislative
functions may be and in practice are performed during recess by duly
constituted committees charged with the duty of performing investigations or
conducting hearing relative to any proposed legislation. To deny to such
committees the power of inquiry with process to enforce it would be to defeat
the very purpose for which that the power is recognized in the legislative
body as an essential and appropriate auxiliary to is legislative function. It is
but logical to say that the power of self-preservation is coexistent with the life
to be preserved.

But the resolution of commitment here in question was adopted by the

Senate, which is a continuing body and which does not cease exist upon the
periodical dissolution of the Congress . . . There is no limit as to time to the
Senates power to punish for contempt in cases where that power may
constitutionally be exerted as in the present case.

3. NO, the petitioner may NOT rightfully invoke his right against self-
incrimination.

Since according to the witness himself the transaction was legal, and that he
gave the [P440,000.00] to a representative of Burt in compliance with the
latters verbal instruction, we find no basis upon which to sustain his claim
that to reveal the name of that person might incriminate him. There is no
conflict of authorities on the applicable rule, to wit:

Generally, the question whether testimony is privileged is for the

determination of the Court. At least, it is not enough for the witness to say
that the answer will incriminate him as he is not the sole judge of his
liability. The danger of self-incrimination must appear reasonable and real to
the court, from all the circumstances, and from the whole case, as well as
from his general conception of the relations of the witness. Upon the facts
thus developed, it is the province of the court to determine whether a direct
answer to a question may criminate or not. . . The fact that the testimony of a
witness may tend to show that he has violated the law is not sufficient to
entitle him to claim the protection of the constitutional provision against self-
incrimination, unless he is at the same time liable to prosecution and
punishment for such violation. The witness cannot assert his privilege by
reason of some fanciful excuse, for protection against an imaginary danger, or
to secure immunity to a third person.

It is the province of the trial judge to determine from all the facts and
circumstances of the case whether the witness is justified in refusing to
answer. A witness is not relieved from answering merely on his own
declaration that an answer might incriminate him, but rather it is for the
trial judge to decide that questionArnault v. Nazareno, G.R. No. L-3820, July
18, 1950
GUDANI VS. SENGA

Posted by kaye lee on 10:51 PM

GR No. 170165, August 15, 2006 [Article VI Sec. 22: Congress' Power of
Inquiry; Legislative Investigation]

FACTS:

The Senate invited Gen. Gudani and Lt. Col. Balutan to clarify allegations of
2004 election fraud and the surfacing of the Hello Garci tapes. PGMA
issued EO 464 enjoining officials of the executive department including the
military establishment from appearing in any legislative inquiry without her
consent. AFP Chief of Staff Gen. Senga issued a Memorandum, prohibiting
Gen. Gudani, Col. Balutan et al from appearing before the Senate Committee
without Presidential approval. However, the two appeared before the Senate
in spite the fact that a directive has been given to them. As a result, the two
were relieved of their assignments for allegedly violating the Articles of War
and the time honoured principle of the Chain of Command. Gen. Senga
ordered them to be subjected before the General Court Martial proceedings
for willfuly violating an order of a superior officer.

ISSUE:

Whether or not the President has the authority to issue an order to the
members of the AFP preventing them from testifying before a legislative
inquiry.
RULING:

Yes. The SC hold that President has constitutional authority to do so, by

virtue of her power as commander-in-chief, and that as a consequence a
military officer who defies such injunction is liable under military justice. At
the same time, any chamber of Congress which seeks the appearance before
it of a military officer against the consent of the President has adequate
remedies under law to compel such attendance. Any military official whom
Congress summons to testify before it may be compelled to do so by the
President. If the President is not so inclined, the President may be
commanded by judicial order to compel the attendance of the military officer.
Final judicial orders have the force of the law of the land which the President
has the duty to faithfully execute.

SC ruled in Senate v. Ermita that the President may not issue a blanket
requirement of prior consent on executive officials summoned by the
legislature to attend a congressional hearing. In doing so, the Court
recognized the considerable limitations on executive privilege, and affirmed
that the privilege must be formally invoked on specified grounds. However,
the ability of the President to prevent military officers from testifying before
Congress does not turn on executive privilege, but on the Chief Executives
power as commander-in-chief to control the actions and speech of members of
the armed forces. The Presidents prerogatives as commander-in-chief are not
hampered by the same limitations as in executive privilege.

At the same time, the refusal of the President to allow members of the
military to appear before Congress is still subject to judicial relief. The
Constitution itself recognizes as one of the legislatures functions is the
conduct of inquiries in aid of legislation. Inasmuch as it is ill-advised for
Congress to interfere with the Presidents power as commander-in-chief, it is
similarly detrimental for the President to unduly interfere with Congresss
right to conduct legislative inquiries. The impasse did not come to pass in
this petition, since petitioners testified anyway despite the presidential
prohibition. Yet the Court is aware that with its pronouncement today that
the President has the right to require prior consent from members of the
armed forces, the clash may soon loom or actualize.

The duty falls on the shoulders of the President, as commander-in-chief, to

authorize the appearance of the military officers before Congress. Even if the
President has earlier disagreed with the notion of officers appearing before
the legislature to testify, the Chief Executive is nonetheless obliged to comply
with the final orders of the courts.
NERI VS. SENATE COMMITTEE

MARCH 28, 2013 ~ VBDIAZ

ROMULO L. NERI, petitioner vs. SENATE COMMITTEE ON

ACCOUNTABILITY OF PUBLIC OFFICERS AND INVESTIGATIONS,
SENATE COMMITTEE ON TRADE AND COMMERCE, AND SENATE
COMMITTEE ON NATIONAL DEFENSE AND SECURITY

G.R. No. 180643, March 25, 2008

FACTS: On April 21, 2007, the Department of Transportation and

Communication (DOTC) entered into a contract with Zhong Xing
Telecommunications Equipment (ZTE) for the supply of equipment and
services for the National Broadband Network (NBN) Project in the amount of
U.S. $ 329,481,290 (approximately P16 Billion Pesos). The Project was to be
financed by the Peoples Republic of China.

The Senate passed various resolutions relative to the NBN deal. In the
September 18, 2007 hearing Jose de Venecia III testified that several high
executive officials and power brokers were using their influence to push the
approval of the NBN Project by the NEDA.

Neri, the head of NEDA, was then invited to testify before the Senate Blue
Ribbon. He appeared in one hearing wherein he was interrogated for 11 hrs
and during which he admitted that Abalos of COMELEC tried to bribe him
with P200M in exchange for his approval of the NBN project. He further
narrated that he informed President Arroyo about the bribery attempt and
that she instructed him not to accept the bribe.
However, when probed further on what they discussed about the NBN
Project, petitioner refused to answer, invoking executive privilege. In
particular, he refused to answer the questions on:

(a) whether or not President Arroyo followed up the NBN Project,

(b) whether or not she directed him to prioritize it, and

(c) whether or not she directed him to approve.

He later refused to attend the other hearings and Ermita sent a letter to the
senate averring that the communications between GMA and Neri are
privileged and that the jurisprudence laid down in Senate vs Ermita be
applied. He was cited in contempt of respondent committees and an order for
his arrest and detention until such time that he would appear and give his
testimony.

ISSUE:

Are the communications elicited by the subject three (3) questions covered by
executive privilege?

HELD:

The communications are covered by executive privilege

The revocation of EO 464 (advised executive officials and employees to follow

and abide by the Constitution, existing laws and jurisprudence, including,
among others, the case of Senate v. Ermita when they are invited to
legislative inquiries in aid of legislation.), does not in any way diminish the
concept of executive privilege. This is because this concept has Constitutional
underpinnings.

The claim of executive privilege is highly recognized in cases where the

subject of inquiry relates to a power textually committed by the Constitution
to the President, such as the area of military and foreign relations. Under our
Constitution, the President is the repository of the commander-in-chief,
appointing, pardoning, and diplomatic powers. Consistent with the doctrine
of separation of powers, the information relating to these powers may enjoy
greater confidentiality than others.

Several jurisprudence cited provide the elements of presidential

communications privilege:

1) The protected communication must relate to a quintessential and non-

delegable presidential power.

2) The communication must be authored or solicited and received by a close

advisor of the President or the President himself. The judicial test is that an
advisor must be in operational proximity with the President.

3) The presidential communications privilege remains a qualified privilege

that may be overcome by a showing of adequate need, such that the
information sought likely contains important evidence and by the
unavailability of the information elsewhere by an appropriate investigating
authority.
In the case at bar, Executive Secretary Ermita premised his claim of
executive privilege on the ground that the communications elicited by the
three (3) questions fall under conversation and correspondence between the
President and public officials necessary in her executive and policy decision-
making process and, that the information sought to be disclosed might
impair our diplomatic as well as economic relations with the Peoples
Republic of China. Simply put, the bases are presidential communications
privilege and executive privilege on matters relating to diplomacy or foreign
relations.

Using the above elements, we are convinced that, indeed, the

communications elicited by the three (3) questions are covered by the
presidential communications privilege. First, the communications relate to a
quintessential and non-delegable power of the President, i.e. the power to
enter into an executive agreement with other countries. This authority of the
President to enter into executive agreements without the concurrence of the
Legislature has traditionally been recognized in Philippine jurisprudence.
Second, the communications are received by a close advisor of the
President. Under the operational proximity test, petitioner can be
considered a close advisor, being a member of President Arroyos cabinet. And
third, there is no adequate showing of a compelling need that would justify
the limitation of the privilege and of the unavailability of the information
elsewhere by an appropriate investigating authority.

Respondent Committees further contend that the grant of petitioners claim

of executive privilege violates the constitutional provisions on the right of the
people to information on matters of public concern.50 We might have agreed
with such contention if petitioner did not appear before them at all. But
petitioner made himself available to them during the September 26 hearing,
where he was questioned for eleven (11) hours. Not only that, he expressly
manifested his willingness to answer more questions from the Senators, with
the exception only of those covered by his claim of executive privilege.

The right to public information, like any other right, is subject to limitation.
Section 7 of Article III provides:

The right of the people to information on matters of public concern shall be

recognized. Access to official records, and to documents, and papers
pertaining to official acts, transactions, or decisions, as well as to government
research data used as basis for policy development, shall be afforded the
citizen, subject to such limitations as may be provided by law.