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2017 Bar Exams – Syllabus – Political Law and International Law (Constitutional Law)

General Considerations

A. Article I – THE NATIONAL TERRITORY

The national territory of the Philippines comprises:

1) the Philippine archipelago;
2) all other territories over which the Philippines has sovereignty or jurisdiction

PHILIPPINE ARCHIPELAGO – that body of water studded with islands which is delineated in the Treaty of Paris
(1898), as amended by the Treaty of Washington (1900) and the Treaty with Great Britain (1930).

– consists of its
a) Terrestrial
b) Fluvial
c) Aerial domains

– including its
a) Territorial sea
b) The seabed
c) The subsoil
d) The insular shelves; and
e) The other submarine areas

INTERNAL WATERS – the waters Around, Between and Connecting the islands of the archipelago, regardless of
their breadth and dimensions

ALL OTHER TERRITORIES OVER WHICH THE PHILIPPINES HAS SOVEREIGNTY OR JURISDICTION
–includes any territory that presently belongs or might in the future belong to the Philippines through any of
the accepted international modes of acquiring territory.

ARCHIPELAGIC PRINCIPLE

Two elements:

1. The definition of internal waters (supra);

2. The straight baseline method of delineating the territorial sea – consists of drawing straight lines
connecting the outermost points on the coast without departing to any appreciable extent from the
general direction of the coast.

Important distances with respect to the waters around the Philippines

TERRITORIAL SEA

- The belt of the sea located between the coast and internal waters of the coastal state on the one hand, and
the high seas on the other, extending up to 12 nautical miles from the low water mark.
- 12 nautical miles (n.m.)
- as defined by the 1982 United Nations Convention on the Law of the Sea, is a belt of
coastal waters extending at most 12 nautical miles (22.2 km; 13.8 mi) from the baseline (usually the mean
low-water mark) of a coastal state.
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CONTIGUOUS ZONE

- Extends up to 12 nautical miles from the territorial sea. Although not part of the territory, the coastal State
may exercise jurisdiction to prevent infringement of customs, fiscal, immigration or sanitary laws.
- 12 n.m. from the edge of the territorial sea
- an area seaward of the territorial sea in which the coastal State may exercise the control necessary to
prevent or punish infringement of its customs, fiscal, immigration, and sanitary laws and regulations that
occur within its territory or territorial seal (but not for so-called security).

EXCLUSIVE ECONOMIC ZONE

- Body of water extending up to 200 nautical miles, within which the state may exercise sovereign rights to
explore, exploit, conserve and manage the natural resources
- 200 n.m. from the baseline
- an area of coastal water and seabed within a certain distance of a country's coastline, to which the country
claims exclusive rights for fishing, drilling, and other economic activities.
- a sea zone prescribed by the United Nations Convention on the Law of the Sea over which a state has
special rights regarding the exploration and use of marine resources, including energy production from
water and wind.
- includes T.S. and C.Z.

The state in the EEZ exercises jurisdiction with regard to:

1. the establishment and use of artificial islands, installations, and structures;
2. marine scientific research;
3. the protection and preservation of marine environment;

Distinction: Territorial waters is 12 miles from the baseline and EEZ is 200 miles from baseline.

NOTE: There can be a Continental Shelf without an EEZ, but not an EEZ without a Continental Shelf.

(continental shelf - the area of seabed around a large landmass where the sea is relatively shallow compared
with the open ocean. The continental shelf is geologically part of the continental crust.)

B. State Immunity - State Immunity

 Suability of State
1) The State cannot be sued without its consent.
2) When considered a suit against the State
a) The Republic is sued by name;
b) Suits against an un-incorporated government agency;
c) Suit is against a government official, but is such that ultimate liability shall devolve on the government
i. When a public officer acts in bad faith, or beyond the scope of his authority, he can be held
personally liable for damages.
ii. BUT: If he acted pursuant to his official duties, without malice, negligence, or bad faith, they are not
personally liable, and the suit is really one against the State.
3) This rule applies not only in favor of the Philippines but also in favor of foreign states.
4) The rule likewise prohibits a person from filing for interpleader, with the State as one of the defendants
being compelled to interplead.

Consent to be sued
A. Express consent:
1) The law expressly grants the authority to sue the State or any of its agencies.
2) Examples:
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a). A law creating a government body expressly providing that such body “may sue or be sued.”
b). Art. 2180 of the Civil Code, which creates liability against the State when it acts through a special agent.

B. Implied consent:
1). The State enters into a private contract.
a). The contract must be entered into by the proper officer and within the scope of his authority.
b). UNLESS: The contract is merely incidental to the performance of a governmental function.

2). The State enters into an operation that is essentially a business operation.
a). UNLESS: The operation is incidental to the performance of a governmental function (e.g. arrastre
services)
b). Thus, when the State conducts business operations through a GOCC, the latter can generally be sued,
even if its charter contains no express “sue or be sued” clause.

3). Suit against an incorporated government agency.

a) This is because they generally conduct propriety business operations and have charters which grant them
a separate juridical personality.

4). The State files suit against a private party.

UNLESS: The suit is entered into only to resist a claim.

Garnishment of government funds:

1) GENERAL RULE: NO. Whether the money is deposited by way of general or special deposit, they remain
government funds and are not subject to garnishment.
2) EXCEPTION: A law or ordinance has been enacted appropriating a specific amount to pay a valid
government obligation, then the money can be garnished.

Consent to be sued is not equivalent to consent to liability:

1) The Fact that the State consented to being sued does not mean that the State will ultimately be held
liable.
2) Even if the case is decided against the State, an award cannot be satisfied by writs of execution or
garnishment against public funds. Reason: No money shall be paid out of the public treasury unless
pursuant to an appropriation made by law.

Section 4. THE ARMED FORCES OF THE PHILIPPINES

Composition:
A citizen armed force
Prohibitions and disqualifications:
1) Military men cannot engage, directly or indirectly, in any partisan political activity, except to vote.
2) Members of the AFP in active service cannot be appointed to a civilian position in the government, including
GOCCs or their subsidiaries.

The Chief of Staff:

1) Tour of duty: Not exceed to three years
2) EXCEPTION: In times of war or other national emergency as declared by Congress, the President may
extend such tour of duty

The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability of the
State, is expressly provided in Secv. 3, Article XVI of the 1987 Constitution, viz:
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Section 3. The State may not be sued without its consent.

The immunity from suit is based on the political truism that the State, as a sovereign, can do no wrong.
Moreover, as the eminent Justice Holmes said in Kawananakoa v. Polyblank:[6]

The territory [of Hawaii], of course, could waive its exemption (Smith v. Reeves, 178 US436, 44 L ed 1140, 20
Sup. Ct. Rep. 919), and it took no objection to the proceedings in the cases cited if it could have done so. xxx
But in the case at bar it did object, and the question raised is whether the plaintiffs were bound to yield. Some
doubts have been expressed as to the source of the immunity of a sovereign power from suit without its own
permission, but the answer has been public property since before the days of Hobbes. Leviathan, chap. 26, 2. A
sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and
practical ground that there can be no legal right as against the authority that makes the law on which the right
depends. “Car on peut bien recevoir loy d’autruy, mais il est impossible par nature de se donner loy.” Bodin,
Republique, 1, chap. 8, ed. 1629, p. 132; Sir John Eliot, De Jure Maiestatis, chap. 3. Nemo suo statuto ligatur
necessitative. Baldus, De Leg. et Const. Digna Vox, 2. ed. 1496, fol. 51b, ed. 1539, fol. 61.[7]

Practical considerations dictate the establishment of an immunity from suit in favor of the State. Otherwise,
and the State is suable at the instance of every other individual, government service may be severely
obstructed and public safety endangered because of the number of suits that the State has to defend
against.[8] Several justifications have been offered to support the adoption of the doctrine in the Philippines,
but that offered in Providence Washington Insurance Co. v. Republic of the Philippines[9] is “the most
acceptable explanation,” according to Father Bernas, a recognized commentator on Constitutional Law,[10] to
wit:

[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience
that may be caused private parties, the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions are far greater if such a fundamental principle were abandoned
and the availability of judicial remedy were not thus restricted. With the well-known propensity on the
part of our people to go to court, at the least provocation, the loss of time and energy required to defend
against law suits, in the absence of such a basic principle that constitutes such an effective obstacle, could
very well be imagined.

An unincorporated government agency without any separate juridical personality of its own enjoys immunity
from suit because it is invested with an inherent power of sovereignty. Accordingly, a claim for damages
against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is violated.[11] However,
the need to distinguish between an unincorporated government agency performing governmental function
and one performing proprietary functions has arisen. The immunity has been upheld in favor of the former
because its function is governmental or incidental to such function;[12] it has not been upheld in favor of the
latter whose function was not in pursuit of a necessary function of government but was essentially a
business.[13]

Should the doctrine of sovereignty immunity or non-suability of the State be extended to the ATO?

In its challenged decision,[14] the CA answered in the negative, holding:

On the first assignment of error, appellants seek to impress upon Us that the subject contract of sale partook
of a governmental character. Apropos, the lower court erred in applying the High Court’s ruling in National
Airports Corporation vs. Teodoro (91 Phil. 203 [1952]), arguing that in Teodoro, the matter involved the
collection of landing and parking fees which is a proprietary function, while the case at bar involves the
maintenance and operation of aircraft and air navigational facilities and services which are governmental
functions.
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We are not persuaded.

Contrary to appellants’ conclusions, it was not merely the collection of landing and parking fees which was
declared as proprietary in nature by the High Court in Teodoro, but management and maintenance of airport
operations as a whole, as well. Thus, in the much later case of Civil Aeronautics Administration vs. Court of
Appeals (167 SCRA 28 [1988]), the Supreme Court, reiterating the pronouncements laid down in Teodoro,
declared that the CAA (predecessor of ATO) is an agency not immune from suit, it being engaged in functions
pertaining to a private entity. It went on to explain in this wise:

xxx
The Civil Aeronautics Administration comes under the category of a private entity. Although not a body
corporate it was created, like the National Airports Corporation, not to maintain a necessary function of
government, but to run what is essentially a business, even if revenues be not its prime objective but rather
the promotion of travel and the convenience of the travelling public. It is engaged in an enterprise which, far
from being the exclusive prerogative of state, may, more than the construction of public roads, be undertaken
by private concerns. [National Airports Corp. v. Teodoro, supra, p. 207.]

xxx
True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec. Order 365 (Reorganizing
the Civil Aeronautics Administration and Abolishing the National Airports Corporation). Republic Act No. 776
(Civil Aeronautics Act of the Philippines), subsequently enacted on June 20, 1952, did not alter the character of
the CAA’s objectives under Exec. Order 365. The pertinent provisions cited in the Teodoro case, particularly
Secs. 3 and 4 of Exec. Order 365, which led the Court to consider the CAA in the category of a private entity
were retained substantially in Republic Act 776, Sec. 32(24) and (25). Said Act provides:

Sec. 32. Powers and Duties of the Administrator. – Subject to the general control and supervision of the
Department Head, the Administrator shall have among others, the following powers and duties:

xxx
(24) To administer, operate, manage, control, maintain and develop the Manila International Airport and all
government-owned aerodromes except those controlled or operated by the Armed Forces of the Philippines
including such powers and duties as: (a) to plan, design, construct, equip, expand, improve, repair or alter
aerodromes or such structures, improvement or air navigation facilities; (b) to enter into, make and execute
contracts of any kind with any person, firm, or public or private corporation or entity; …

(25) To determine, fix, impose, collect and receive landing fees, parking space fees, royalties on sales or
deliveries, direct or indirect, to any aircraft for its use of aviation gasoline, oil and lubricants, spare parts,
accessories and supplies, tools, other royalties, fees or rentals for the use of any of the property under its
management and control.

xxx
From the foregoing, it can be seen that the CAA is tasked with private or non-governmental functions which
operate to remove it from the purview of the rule on State immunity from suit. For the correct rule as set
forth in the Teodoro case states:

xxx
Not all government entities, whether corporate or non-corporate, are immune from suits. Immunity from suits
is determined by the character of the objects for which the entity was organized. The rule is thus stated in
Corpus Juris:

Suits against State agencies with relation to matters in which they have assumed to act in private or non-
governmental capacity, and various suits against certain corporations created by the state for public purposes,
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but to engage in matters partaking more of the nature of ordinary business rather than functions of a
governmental or political character, are not regarded as suits against the state. The latter is true, although the
state may own stock or property of such a corporation for by engaging in business operations through a
corporation, the state divests itself so far of its sovereign character, and by implication consents to suits
against the corporation. (59 C.J., 313) [National Airports Corporation v. Teodoro, supra, pp. 206-207; Italics
supplied.]

This doctrine has been reaffirmed in the recent case of Malong v. Philippine National Railways [G.R. No. L-
49930, August 7, 1985, 138 SCRA 63], where it was held that the Philippine National Railways, although owned
and operated by the government, was not immune from suit as it does not exercise sovereign but purely
proprietary and business functions. Accordingly, as the CAA was created to undertake the management of
airport operations which primarily involve proprietary functions, it cannot avail of the immunity from suit
accorded to government agencies performing strictly governmental functions.[15]

In our view, the CA thereby correctly appreciated the juridical character of the ATO as an agency of the
Government not performing a purely governmental or sovereign function, but was instead involved in the
management and maintenance of theLoakanAirport, an activity that was not the exclusive prerogative of the
State in its sovereign capacity. Hence, the ATO had no claim to the State’s immunity from suit. We uphold the
CA’s aforequoted holding.
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C. General Principles and Policies - DECLARATION OF PRINCIPLES AND STATE POLICIES

Principles

SEC. 1. The Philippines is a democratic and republican State. Sovereignty resides in the people and all
government authority emanates from them.

SEC. 2. The Philippines renounces war as an instrument of national policy, adopts the generally accepted
principles of international law as part of the law of the land and adheres to the policy of peace, equality,
justice, freedom, cooperation, and amity with all nations.

SEC. 3. Civilian authority is, at all times, supreme over the military. The Armed Forces of the Philippines is the
protector of the people and the State. Its goal is to secure the sovereignty of the State and the integrity of the
national territory.

SEC. 4. The prime duty of the Government is to serve and protect the people. The Government may call upon
the people to defend the State and, in the fulfillment thereof, all citizens may be required, under conditions
provided by law, to render personal military or civil service.

SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and the promotion of
the general welfare are essential for the enjoyment by all the people of the blessings of democracy.

SEC. 6. The separation of Church and State shall be inviolable.

State Policies

SEC. 7. The State shall pursue an independent foreign policy. In its relations with other states the paramount
consideration shall be national sovereignty, territorial integrity, national interest, and the right to self-
determination.

SEC. 8. The Philippines, consistent with the national interest, adopts and pursues a policy of freedom from
nuclear weapons in its territory.

SEC. 9. The State shall promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that provide adequate social
services, promote full employment, a rising standard of living, and an improved quality of life for all.

SEC. 10. The State shall promote social justice in all phases of national development.

SEC. 11. The State values the dignity of every human person and guarantees full respect for human rights.

SEC. 12. The State recognizes the sanctity of family life and shall protect and strengthen the family as a basic
autonomous social institution. It shall equally protect the life of the mother and the life of the unborn from
conception. The natural and primary right and duty of parents in the rearing of the youth for civic efficiency
and the development of moral character shall receive the support of the Government.

SEC. 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect their
physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth patriotism and
nationalism, and encourage their involvement in public and civic affairs.

SEC. 14. The State recognizes the role of women in nation-building, and shall ensure the fundamental equality
before the law of women and men.
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SEC. 15. The State shall protect and promote the right to health of the people and instill health consciousness
among them.

SEC. 16. The State shall protect and advance the right of the people to a balanced and healthful ecology in
accord with the rhythm and harmony of nature.

SEC. 17. The State shall give priority to education, science and technology, arts, culture, and sports to foster
patriotism and nationalism, accelerate social progress, and promote total human liberation and development.

SEC. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and
promote their welfare.

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

SEC. 20. The State recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investments.

SEC. 21. The State shall promote comprehensive rural development and agrarian reform.

SEC. 22. The State recognizes and promotes the rights of indigenous cultural communities within the
framework of national unity and development.

SEC. 23. The State shall encourage non-governmental, community- based, or sectoral organizations that
promote the welfare of the nation.

SEC. 24. The State recognizes the vital role of communication and information in nation-building.

SEC. 25. The State shall ensure the autonomy of local governments.

SEC. 26. The State shall guarantee equal access to opportunities for public service, and prohibit political
dynasties as may be defined by law.

SEC. 27. The State shall maintain honesty and integrity in the public service and take positive and effective
measures against graft and corruption.

SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full
public disclosure of all its transactions involving public interest.
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D. Separtion of Powers

Separation of Power
As has often been repeated by this Court, the doctrine of separation of powers is the very wellspring from
which the Court draws its legitimacy. Former Chief Justice Reynato S. Puno has traced its origin and rationale
as inhering in the republican system of government:

The principle of separation of powers prevents the concentration of legislative, executive, and judicial powers
to a single branch of government by deftly allocating their exercise to the three branches of government…
In his famed treatise, The Spirit of the Laws, Montesquieu authoritatively analyzed the nature of executive,
legislative and judicial powers and with a formidable foresight counselled that any combination of these
powers would create a system with an inherent tendency towards tyrannical actions…

Again, there is no liberty, if the judiciary power be not separated from the legislative and the executive. Were
it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary control; for the
judge would be then the legislator. Were it joined to the executive power, the judge might behave with
violence and oppression.

There would be an end of everything, were the same man or the same body, whether of the nobles or of the
people, to exercise those three powers, that of enacting laws, that of executing the public resolutions, and that
of trying the causes of individuals.

The principle of separation of powers is explained by the Court in the leading case of Angara v. Electoral
Commission:37

***The separation of powers is a fundamental principle in our system of government.

It obtains not through express provision but by actual division in our Constitution. Each department of the
government has exclusive cognizance of matters within its jurisdiction, and is supreme within its own sphere.
But it does not follow from the fact that the three powers are to be kept separate and distinct that the
Constitution intended them to be absolutely unrestrained and independent of each other. The Constitution
has provided for an elaborate system of checks and balances to secure coordination in the workings of the
various departments of the government. x x x And the judiciary in turn, with the Supreme Court as the final
arbiter, effectively checks the other department in its exercise of its power to determine the law, and hence to
declare executive and legislative acts void if violative of the Constitution.38

Truth Commission Violates Separation of Powers

Power of the President to Create the Truth Commission

In his memorandum in G.R. No. 192935, Biraogo asserts that the Truth Commission is a public office and not
merely an adjunct body of the Office of the President.[31] Thus, in order that the President may create a public
office he must be empowered by the Constitution, a statute or an authorization vested in him by law.
According to petitioner, such power cannot be presumed[32] since there is no provision in the Constitution or
any specific law that authorizes the President to create a truth commission.[33] He adds that Section 31 of the
Administrative Code of 1987, granting the President the continuing authority to reorganize his office, cannot
serve as basis for the creation of a truth commission considering the aforesaid provision merely uses verbs
such as “reorganize,” “transfer,” “consolidate,” “merge,” and “abolish.”[34] Insofar as it vests in the President
the plenary power to reorganize the Office of the President to the extent of creating a public office, Section 31
is inconsistent with the principle of separation of powers enshrined in the Constitution and must be deemed
repealed upon the effectivity thereof.[35]
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Similarly, in G.R. No. 193036, petitioners-legislators argue that the creation of a public office lies within the
province of Congress and not with the executive branch of government. They maintain that the delegated
authority of the President to reorganize under Section 31 of the Revised Administrative Code:
1) does not permit the President to create a public office, much less a truth commission;
2) is limited to the reorganization of the administrative structure of the Office of the President;
3) is limited to the restructuring of the internal organs of the Office of the President Proper, transfer of
functions and transfer of agencies; and
4) only to achieve simplicity, economy and efficiency.[36]

Such continuing authority of the President to reorganize his office is limited, and by issuing Executive Order
No. 1, the President overstepped the limits of this delegated authority.

The OSG counters that there is nothing exclusively legislative about the creation by the President of a fact-
finding body such as a truth commission. Pointing to numerous offices created by past presidents, it argues
that the authority of the President to create public offices within the Office of the President Proper has long
been recognized.[37]
According to the OSG, the Executive, just like the other two branches of government, possesses the inherent
authority to create fact-finding committees to assist it in the performance of its constitutionally mandated
functions and in the exercise of its administrative functions.[38] This power, as the OSG explains it, is but an
adjunct of the plenary powers wielded by the President under Section 1 and his power of control under
Section 17, both of Article VII of the Constitution.[39]

It contends that the President is necessarily vested with the power to conduct fact-finding investigations,
pursuant to his duty to ensure that all laws are enforced by public officials and employees of his department
and in the exercise of his authority to assume directly the functions of the executive department, bureau and
office, or interfere with the discretion of his officials.[40] The power of the President to investigate is not
limited to the exercise of his power of control over his subordinates in the executive branch, but extends
further in the exercise of his other powers, such as his power to discipline subordinates,[41] his power for rule
making, adjudication and licensing purposes[42] and in order to be informed on matters which he is entitled to
know.[43]

The OSG also cites the recent case of Banda v. Ermita,[44] where it was held that the President has the power
to reorganize the offices and agencies in the executive department in line with his constitutionally granted
power of control and by virtue of a valid delegation of the legislative power to reorganize executive offices
under existing statutes.

Thus, the OSG concludes that the power of control necessarily includes the power to create offices. For the
OSG, the President may create the PTC in order to, among others, put a closure to the reported large scale
graft and corruption in the government.[45]

The question, therefore, before the Court is this:

Does the creation of the PTC fall within the ambit of the power to reorganize as expressed in Section 31 of
the Revised Administrative Code?
Section 31 contemplates “reorganization” as limited by the following functional and structural lines:
(1) restructuring the internal organization of the Office of the President Proper by abolishing, consolidating or
merging units thereof or transferring functions from one unit to another;
(2) transferring any function under the Office of the President to any other Department/Agency or vice versa;
or
(3) transferring any agency under the Office of the President to any other Department/Agency or vice versa.
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Clearly, the provision refers to reduction of personnel, consolidation of offices, or abolition thereof by reason
of economy or redundancy of functions. This points to situations where a body or an office is already existent
but a modification or alteration thereof has to be effected. The creation of an office is nowhere mentioned,
much less envisioned in said provision. Accordingly, the answer to the question is in the negative.

To say that the PTC is borne out of a restructuring of the Office of the President under Section 31 is a
misplaced supposition, even in the plainest meaning attributable to the term “restructure”– an “alteration of
an existing structure.” Evidently, the PTC was not part of the structure of the Office of the President prior to
the enactment of Executive Order No. 1. As held in Buklod ng Kawaning EIIB v. Hon. Executive Secretary,[46]
But of course, the list of legal basis authorizing the President to reorganize any department or agency in the
executive branch does not have to end here. We must not lose sight of the very source of the power – that
which constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise
known as the Administrative Code of 1987), “the President, subject to the policy in the Executive Office and in
order to achieve simplicity, economy and efficiency, shall have the continuing authority to reorganize the
administrative structure of the Office of the President.” For this purpose, he may transfer the functions of
other Departments or Agencies to the Office of the President. In Canonizado v. Aguirre [323 SCRA 312 (2000)],
we ruled that reorganization “involves the reduction of personnel, consolidation of offices, or abolition thereof
by reason of economy or redundancy of functions.” It takes place when there is an alteration of the existing
structure of government offices or units therein, including the lines of control, authority and responsibility
between them.

The EIIB is a bureau attached to the Department of Finance. It falls under the Office of the President. Hence, it
is subject to the President’s continuing authority to reorganize. [Emphasis Supplied]

In the same vein, the creation of the PTC is not justified by the President’s power of control.
Control is essentially the power to alter or modify or nullify or set aside what a subordinate officer had done in
the performance of his duties and to substitute the judgment of the former with that of the latter.[47] Clearly,
the power of control is entirely different from the power to create public offices. The former is inherent in the
Executive, while the latter finds basis from either a valid delegation from Congress, or his inherent duty to
faithfully execute the laws.

The question is this, is there a valid delegation of power from Congress, empowering the President to create a
public office?

According to the OSG, the power to create a truth commission pursuant to the above provision finds statutory
basis under P.D. 1416, as amended by P.D. No. 1772.[48] The said law granted the President the continuing
authority to reorganize the national government, including the power to group, consolidate bureaus and
agencies, to abolish offices, to transfer functions, to create and classify functions, services and activities,
transfer appropriations, and to standardize salaries and materials. This decree, in relation to Section 20, Title I,
Book III of E.O. 292 has been invoked in several cases such as Larin v. Executive Secretary.[49]

The Court, however, declines to recognize P.D. No. 1416 as a justification for the President to create a public
office. Said decree is already stale, anachronistic and inoperable. P.D. No. 1416 was a delegation to then
President Marcos of the authority to reorganize the administrative structure of the national government
including the power to create offices and transfer appropriations pursuant to one of the purposes of the
decree, embodied in its last “Whereas” clause:

WHEREAS, the transition towards the parliamentary form of government will necessitate flexibility in the
organization of the national government.

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

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

** While the power to create a truth commission cannot pass muster on the basis of P.D. No. 1416 as
amended by P.D. No. 1772, the creation of the PTC finds justification under Section 17, Article VII of the
Constitution, imposing upon the President the duty to ensure that the laws are faithfully executed.

Section 17 reads:
Section 17. The President shall have control of all the executive departments, bureaus, and offices. He shall
ensure that the laws be faithfully executed. (Emphasis supplied).

As correctly pointed out by the respondents, the allocation of power in the three principal branches of
government is a grant of all powers inherent in them. The President’s power to conduct investigations to aid
him in ensuring the faithful execution of laws – in this case, fundamental laws on public accountability and
transparency – is inherent in the President’s powers as the Chief Executive. That the authority of the President
to conduct investigations and to create bodies to execute this power is not explicitly mentioned in the
Constitution or in statutes does not mean that he is bereft of such authority.[51] As explained in the landmark
case of Marcos v. Manglapus:[52]

x x x. The 1987 Constitution, however, brought back the presidential system of government and restored the
separation of legislative, executive and judicial powers by their actual distribution among three distinct
branches of government with provision for checks and balances.

It would not be accurate, however, to state that “executive power” is the power to enforce the laws, for the
President is head of state as well as head of government and whatever powers inhere in such positions pertain
to the office unless the Constitution itself withholds it. Furthermore, the Constitution itself provides that the
execution of the laws is only one of the powers of the President. It also grants the President other powers that
do not involve the execution of any provision of law, e.g., his power over the country’s foreign relations.
On these premises, we hold the view that although the 1987 Constitution imposes limitations on the exercise
of specific powers of the President, it maintains intact what is traditionally considered as within the scope of
“executive power.” Corollarily, the powers of the President cannot be said to be limited only to the specific
powers enumerated in the Constitution. In other words, executive power is more than the sum of specific
powers so enumerated.

It has been advanced that whatever power inherent in the government that is neither legislative nor judicial
has to be executive. x x x.

Indeed, the Executive is given much leeway in ensuring that our laws are faithfully executed. As stated
above, the powers of the President are not limited to those specific powers under the Constitution.[53] One
of the recognized powers of the President granted pursuant to this constitutionally-mandated duty is the
 13

power to create ad hoc committees. This flows from the obvious need to ascertain facts and determine if laws
have been faithfully executed. Thus, in Department of Health v. Camposano,[54] the authority of the President
to issue Administrative Order No. 298, creating an investigative committee to look into the administrative
charges filed against the employees of the Department of Health for the anomalous purchase of medicines
was upheld. In said case, it was ruled:

The Chief Executive’s power to create the Ad hoc Investigating Committee cannot be doubted. Having
been constitutionally granted full control of the Executive Department, to which respondents belong, the
President has the obligation to ensure that all executive officials and employees faithfully comply with the
law. With AO 298 as mandate, the legality of the investigation is sustained. Such validity is not affected by the
fact that the investigating team and the PCAGC had the same composition, or that the former used the offices
and facilities of the latter in conducting the inquiry. [Emphasis supplied]

It should be stressed that the purpose of allowing ad hoc investigating bodies to exist is to allow an inquiry into
matters which the President is entitled to know so that he can be properly advised and guided in the
performance of his duties relative to the execution and enforcement of the laws of the land. And if history is to
be revisited, this was also the objective of the investigative bodies created in the past like the PCAC, PCAPE,
PARGO, the Feliciano Commission, the Melo Commission and the Zenarosa Commission. There being no
changes in the government structure, the Court is not inclined to declare such executive power as non-existent
just because the direction of the political winds have changed.

On the charge that Executive Order No. 1 transgresses the power of Congress to appropriate funds for the
operation of a public office, suffice it to say that there will be no appropriation but only an allotment or
allocations of existing funds already appropriated. Accordingly, there is no usurpation on the part of the
Executive of the power of Congress to appropriate funds. Further, there is no need to specify the amount to be
earmarked for the operation of the commission because, in the words of the Solicitor General, “whatever
funds the Congress has provided for the Office of the President will be the very source of the funds for the
commission.”[55] Moreover, since the amount that would be allocated to the PTC shall be subject to existing
auditing rules and regulations, there is no impropriety in the funding.

Power of the Truth Commission to Investigate

The President’s power to conduct investigations to ensure that laws are faithfully executed is well
recognized. It flows from the faithful-execution clause of the Constitution under Article VII, Section 17
thereof.[56] As the Chief Executive, the president represents the government as a whole and sees to it that all
laws are enforced by the officials and employees of his department. He has the authority to directly assume
the functions of the executive department.[57]
Invoking this authority, the President constituted the PTC to primarily investigate reports of graft and
corruption and to recommend the appropriate action. As previously stated, no quasi-judicial powers have
been vested in the said body as it cannot adjudicate rights of persons who come before it. It has been said that
“Quasi-judicial powers involve the power to hear and determine questions of fact to which the legislative
policy is to apply and to decide in accordance with the standards laid down by law itself in enforcing and
administering the same law.”[58] In simpler terms, judicial discretion is involved in the exercise of these quasi-
judicial power, such that it is exclusively vested in the judiciary and must be clearly authorized by the
legislature in the case of administrative agencies.

The distinction between the power to investigate and the power to adjudicate was delineated by the Court
in Cariño v. Commission on Human Rights.[59] Thus:

“Investigate,” commonly understood, means to examine, explore, inquire or delve or probe into, research on,
study. The dictionary definition of “investigate” is “to observe or study closely: inquire into systematically: “to
search or inquire into: x x to subject to an official probe x x: to conduct an official inquiry.” The purpose of
investigation, of course, is to discover, to find out, to learn, obtain information. Nowhere included or intimated
 14

is the notion of settling, deciding or resolving a controversy involved in the facts inquired into by application of
the law to the facts established by the inquiry.

The legal meaning of “investigate” is essentially the same: “(t)o follow up step by step by patient inquiry or
observation. To trace or track; to search into; to examine and inquire into with care and accuracy; to find out
by careful inquisition; examination; the taking of evidence; a legal inquiry;” “to inquire; to make an
investigation,” “investigation” being in turn described as “(a)n administrative function, the exercise of which
ordinarily does not require a hearing. 2 Am J2d Adm L Sec. 257; x x an inquiry, judicial or otherwise, for the
discovery and collection of facts concerning a certain matter or matters.”

“Adjudicate,” commonly or popularly understood, means to adjudge, arbitrate, judge, decide, determine,
resolve, rule on, settle. The dictionary defines the term as “to settle finally (the rights and duties of the parties
to a court case) on the merits of issues raised: x x to pass judgment on: settle judicially: x x act as judge.” And
“adjudge” means “to decide or rule upon as a judge or with judicial or quasi-judicial powers: x x to award or
grant judicially in a case of controversy x x.”

In the legal sense, “adjudicate” means: “To settle in the exercise of judicial authority. To determine finally.
Synonymous with adjudge in its strictest sense;” and “adjudge” means: “To pass on judicially, to decide, settle
or decree, or to sentence or condemn. x x. Implies a judicial determination of a fact, and the entry of a
judgment.” [Italics included. Citations Omitted]

Fact-finding is not adjudication and it cannot be likened to the judicial function of a court of justice, or even a
quasi-judicial agency or office. The function of receiving evidence and ascertaining therefrom the facts of a
controversy is not a judicial function. To be considered as such, the act of receiving evidence and arriving at
factual conclusions in a controversy must be accompanied by the authority of applying the law to the factual
conclusions to the end that the controversy may be decided or resolved authoritatively, finally and definitively,
subject to appeals or modes of review as may be provided by law.[60] Even respondents themselves admit
that the commission is bereft of any quasi-judicial power.[61]

Contrary to petitioners’ apprehension, the PTC will not supplant the Ombudsman or the DOJ or erode
their respective powers. If at all, the investigative function of the commission will complement those of the
two offices. As pointed out by the Solicitor General, the recommendation to prosecute is but a consequence
of the overall task of the commission to conduct a fact-finding investigation.”[62] The actual prosecution of
suspected offenders, much less adjudication on the merits of the charges against them,[63] is certainly not a
function given to the commission. The phrase, “when in the course of its investigation,” under Section 2(g),
highlights this fact and gives credence to a contrary interpretation from that of the petitioners. The function of
determining probable cause for the filing of the appropriate complaints before the courts remains to be with
the DOJ and the Ombudsman.[64]

At any rate, the Ombudsman’s power to investigate under R.A. No. 6770 is not exclusive but is shared
with other similarly authorized government agencies. Thus, in the case of Ombudsman v. Galicia,[65] it was
written:

This power of investigation granted to the Ombudsman by the 1987 Constitution and The Ombudsman
Act is not exclusive but is shared with other similarly authorized government agencies such as the PCGG and
judges of municipal trial courts and municipal circuit trial courts. The power to conduct preliminary
investigation on charges against public employees and officials is likewise concurrently shared with the
Department of Justice. Despite the passage of the Local Government Code in 1991, the Ombudsman retains
concurrent jurisdiction with the Office of the President and the local Sanggunians to investigate complaints
against local elective officials. [Emphasis supplied].
 15

Also, Executive Order No. 1 cannot contravene the power of the Ombudsman to investigate criminal
cases under Section 15 (1) of R.A. No. 6770, which states:

(1) Investigate and prosecute on its own or on complaint by any person, any act or omission of any public
officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or
inefficient. It has primary jurisdiction over cases cognizable by the Sandiganbayan and, in the exercise of
its primary jurisdiction, it may take over, at any stage, from any investigatory agency of government, the
investigation of such cases. [Emphases supplied]

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

The same holds true with respect to the DOJ. Its authority under Section 3 (2), Chapter 1, Title III, Book IV
in the Revised Administrative Code is by no means exclusive and, thus, can be shared with a body likewise
tasked to investigate the commission of crimes.

Finally, nowhere in Executive Order No. 1 can it be inferred that the findings of the PTC are to be
accorded conclusiveness. Much like its predecessors, the Davide Commission, the Feliciano Commission and
the Zenarosa Commission, its findings would, at best, be recommendatory in nature. And being so, the
Ombudsman and the DOJ have a wider degree of latitude to decide whether or not to reject the
recommendation. These offices, therefore, are not deprived of their mandated duties but will instead be aided
by the reports of the PTC for possible indictments for violations of graft laws.

E. CHECKS AND BALANCES

The ends of government are better achieved if the system of checks and balances will be observed.

Under the system of checks and balances, one department is given certain powers by which it may definitely
restrain the others from exceeding constitutional authority. It may object or resist any encroachment upon its
authority, or it may question, if necessary any act or acts which unlawfully interferes with its sphere of
jurisdiction and authority. (Suarez, 2005).

The following are illustrations where there are checks and balances:
a) the lawmaking power of the Congress is checked by the President through its veto power, which in turn
maybe overturn by the legislature
b) the Congress may refuse to give its concurrence to an amnesty proclaimed by the President and the
Senate to a treaty he has concluded
c) the President may nullify a conviction in a criminal case by pardoning the offender
d) the Congress may limit the jurisdiction of the Supreme Court and that of inferior courts and even abolish
the latter tribunals
e) the Judiciary in general has the power to declare invalid an act done by the Congress, the President and
his subordinates, or the Constitutional Commissions.
 16

F. Delegation of Powers

What is Delegation of Powers?

Fundamentally, legislative power is an attribute of sovereignty, in that the Constitution itself, the fundamental
law of the State, is a legislation of the sovereign people. However, through the Constitution, the people
“delegated” the legislative power to the Congress of the Philippines. Section 1, Article VI states that
“Legislative power shall be vested in the Congress of the Philippines…” The delegation of power entails a
surrender of authority to the representatives, or in the case of legislative power, to the Congress. Thus, law-
making can only be performed by the Congress, even if the law it enacts involves the people.

What is the Principle of Non-delegation of Powers?

The Congress cannot further delegate the power delegated to it by the people. This is in keeping with the
principle of non-delegation of powers which is applicable to all the three branches of the government. The rule
states that what has been delegated cannot further be delegated – “potestas delegata non delegari potest.”
A delegated power must be discharged directly by the delegate and not through the delegate’s agent. It is
basically an ethical principle which requires direct performance by the delegate of an entrusted power. Further
delegation therefore constitutes violation of the trust reposed by the delegator on the delegate. The people,
through the Constitution, delegated lawmaking powers to the Congress, and as such, it cannot as a rule
delegate further the same to another.

Exceptions to the Principle of Non-delegation of Powers

Permissible Delegation:
(1) Delegation of tariff powers to the President.

Article 6, Section 28(2). “The Congress may by law authorize the President to fix within specified limits, and
subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage
and wharfage dues, and other duties or imposts, within the framework of the national development program of
the Government.”

- the reason for this delegation is the necessity, not to say expediency, of giving the chief executive the
authority to act immediately on certain matters affecting the national economy lest delay result in hardship to
the people.

(2) Delegation of emergency powers to the President.

Article 6, Section 23(2). “In times of war or other national emergency, the Congress may by law authorize the
President, for a limited period and subject to such restrictions as it may prescribe, to exercise powers
necessary and proper to carry out a declared national policy. Unless sooner withdrawn by resolution of the
Congress, such powers shall cease upon its next adjournment.”

The conditions for the vesture of emergency powers in the President are the following:
a. There must be war or other national emergency.
b. The delegation must be for a limited period only.
c. The delegation must be subject to such restrictions as the Congress may prescribe.
d. The emergency powers must be exercised to carry out a national policy declared by the Congress.

Important points:
* the emergency powers are self-liquidating unless sooner withdrawn.
* Conferment of emergency powers on the President is not mandatory on the Congress. The Congress may
choose to hold on to its legislative powers and validly refuse to delegate it.
 17

(3) Delegation to the people at large.

- The Congress further delegates its legislative power by allowing direct legislation by the people in cases of
initiative and referendum.

(4) Delegation to local governments.

- This delegation is based on the principle that the local government is in better position than the national
government to act on purely local concerns. Legislative power is therefore given to them for effective local
legislation.

(5) Delegation to administrative bodies.

- The Congress delegates the so called “power of subordinate legislation” to administrative bodies. Due to the
growing complexity of modern society, it has become necessary to allow specialized administrative bodies to
promulgate supplementary rules, so that they can deal with technical problems with more expertise and
dispatch than the Congress or the courts. Regulations or supplementary rules passed by the administrative
bodies are intended to fill-in the gaps and provide details to what is otherwise a broad statute passed by
Congress. For the rules and regulations to be valid and binding, they must be in accordance with the statute on
which they are based, complete in themselves, and fix sufficient standards. If any of the requirements is not
satisfied, the regulation will not be allowed to affect private rights.

The Completeness Test

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.

Sufficient Standard Test

It is intended to map out the boundaries of the delegate’s authority by defining the legislative policy and
indicating the circumstances under which it is to be pursued and effected. The purpose of the sufficient
standard is to prevent a total transference of legislative power from the lawmaking body to the delegate.

Xxx Department Secretary alter ego of Congress.

Congress delegated the power of ascertainment of facts upon which the enforcement and administration of
the increase rate under the law is contingent to the Secretary of Finance. The legislature has made the
operation of the 12% rate effective January 1, 2006 contingent upon a specified fact or condition. It leaves the
entire operation or non-operation of the 12% rate upon factual matters outside the control of the executive.
No discretion would be exercised by the President.

In making his recommendation to the President on the existence of either of the two conditions, the Secretary
of Finance is not acting as the alter ego of the President or even her subordinate. In such instance, he is not
subject to the power of control and direction of the President. He is acting as the agent of the legislative
department, to determine and declare the event upon which its expressed will is to take effect. The Secretary
becomes the means or tool by which legislative policy is determined and implemented, considering that he
possesses all the facilities to gather data and information and has a much broader perspective to properly
evaluate them. His personality in such instance is in reality but a projection of that of Congress. Thus, being the
agent of Congress and not of the President, the President cannot alter or modify or nullify, or set aside the
findings of the Secretary and to substitute the judgment of the former for that of the latter. Congress simply
granted the Secretary the authority to ascertain the existence of a fact. If it is exists, the Secretary, by
legislative mandate, must submit such information to the President who must impose the 12% VAT rate. There
is no undue delegation of legislation power but only of the discretion as to the execution of a law. This is
constitutionally permissible. (Abakada Guro Party List, etc., et al. vs. Executive Secretary, G.R. No. 168056, and
other cases, September 1, 2005).
 18

Q — Section 34 of RA 9136, otherwise known as the “Electric Power Industry Reform Act of 200_” (EPIRA)
imposes Universal Charge upon end-users of electricity (a charge imposed for the recovery of stranded cost;
stranded debts refer to any unpaid financial obligations of the NPC which has not been liquidated by the
proceeds from the sales and privatization of NPC Assets; stranded contract costs of NPC or distribution utility
refer to the excess of the contract cost of electricity under eligible contracts over the actual selling price of the
contracted energy output of such contracts in the market.

ERC issued its Implementing Rules and Regulations defining Universal Charge refers to the charge, if any,
imposed for the recovery of Stranded Debts, Stranded Contract Costs of NPC and Stranded Contract Costs of
Eligible Contracts of Distribution Utilities and other purposes pursuant to Section 34 of the EPIRA. (Rule 4 (rrr,
IRR).

National Power Corporation-Strategic Power Utilities Group (NPC-SPUG) filed with Energy Regulatory
Commission (ERC) a petition for the availment from the Universal Charge of its share for Missionary
Electrification.

The ERC decided the NPC’s petition authorizing it to draw up to P70, 000, 000.00 from PSALM for its 2003
Watershed Rehabilitation Budget subject to the availability of funds for the Environmental Fund component of
the Universal Charge.

On the basis of the said ERC decisions, Panay Electric Company, Inc. (PECO) charged Romeo P. Gerochi and all
other end-users with the Universal Charge as reflected in their respective electric bills starting from the month
of July 2003.

Hence, this original action.

Petitioners submit that the assailed provision of law and its IRR which sought to implement the same are
unconstitutional on the following grounds:

a) The universal charge provided for under Section 34 of the EPIRA and sought to be implemented under Sec.
2, Rule 18 of the IRR of the said law is a tax which is to be collected from all electric end-users and self-
generating entities. The power to tax is strictly a legislative function and as such, the delegation of said
power to any executive or administrative agency like the ERC is unconstitutional, giving the same unlimited
authority. The assailed provision clearly provides that the Universal Charge is to be determined, fixed and
approved by the ERC, hence leaving to the latter complete discretionary legislative authority.
b) The ERC is also empowered to approve and determine where the funds collected should be used.
c) The imposition of the Universal Charge on all end-users is oppressive and confiscatory and amounts to
taxation without representation as the consumers were not given a chance to be heard and represented.

Petitioners contend that the Universal Charge has the characteristics of a tax and is collected to fund the
operations of the NPC. They argue that the cases Osmeña v. Orbos, G.R. No. 99886, March 31, 1993, 220 SCRA
703; Valmonte v. Energy Regulatory Board, G.R. Nos. L-79601-03, June 23, 1988, 162 SCRA 521; and Gaston v.
Republic Planters Bank, L-77194, March 15, 1988, 158 SCRA 626, invoked by the respondents clearly show the
regulatory purpose of the charges imposed therein, which is not so in the case at bench. In said cases, the
respective funds were created in order to balance and stabilize the prices of oil and sugar, and to act as buffer
to counteract the changes and adjustments in prices, peso devaluation, and other variables which cannot be
adequately and timely monitored by the legislature. Thus, there was a need to delegate powers to
administrative bodies. They posited that the Universal Charge is imposed not for a similar purpose.

The ultimate issues in the case at bar are:

1. Whether or not, the Universal Charge imposed under Sec. 34 of the EPIRA is a tax; and
2. Whether or not there is undue delegation of legislative power to tax on the part of the ERC. Decide.
 19

ANS: 1. As to the first issue.

No, the Universal Charge is not a tax. In exacting the said charge through Sec. 34 of the EPIRA, the
State’s police power, particularly its regulatory dimension, is invoked. Such can be deduced from Sec. 34 which
enumerates the purposes for which the Universal Charge is imposed, and which can be amply discerned as
regulatory in character.

Moreover, it is a well-established doctrine that the taxing power may be used as an implement of police
power. (Osmeña v. Orbos, Gaston v. Republic Planters Bank, Tio v. Videogram Regulatory Board, No. L-75697,
151 SCRA 208, 216, and Lutz v. Araneta, 98 Phil. 148 (1955)). In Valmonte v. Energy Regulatory Board, et al.
and in Gaston v. Republic Planters Bank, it was held that the Oil Price Stabilization Fund (OPSF) and the Sugar
Stabilization Fund (SSF) were exactions made in exercise of the police power. The doctrine was reiterated in
Osmeña v. Orbos, with respect to the OPSF.

With the Universal Charge, a Special Trust Fund (STF) is also created under the administration of PSALM.

As aptly pointed out by the OSG, evidently, the establishment and maintenance of the Special Trust Fund,
under the last paragraph of Section 34, R.A. No. 9136, is well within the pervasive and non-waivable power and
responsibility of the government to secure the physical and economic survival and well-being of the
community, that comprehensive sovereign authority we designate as the police power of the State.

This feature of the Universal Charge further boosts the position that the same is an exaction imposed primarily
in the pursuit of the State’s police objectives. The STF reasonably serves and assures attainment and
perpetuity of the purposes for which the Universal Charge is imposed, i.e., to ensure the viability of the
country’s electric power industry. (Gerochi, et al. v. Dept. of Energy, et al., G.R. No. 159796, July 17, 2007,
Nachura, J).

2. As to the second issue.

No, there is no undue delegation of powers to the ERC. The EPIRA, read and appreciated in its entirety, in
relation to Sec. 34 thereof, is complete in all its essential terms and conditions, and it contains sufficient
standards.

Although Sec. 34 of the EPIRA merely provides that within one (1) year from the effectivity thereof, a
Universal Charge to be determined, fixed and approved by the ERC, shall be imposed on all electricity end-
users, and therefore, does not state the specific amount to be paid as Universal Charge, the amount
nevertheless is made certain by the legislative parameters provided by the law itself when it provided for the
promulgation and enforcement of a National Grid Code, and a Distribution Code.

This is also the case when the EPIRA law authorized the PSALM to compute the stranded debts and stranded
costs of the NPC which is to form the basis of the ERC in determining its universal charge.

As to the second test, the Court had, in the past, accepted as sufficient standards the following: “interest of
law and order;” “adequate and efficient instruction;” “public interest;” “justice and equity;” “public
convenience and welfare;” “simplicity, economy and efficiency;” “standardization and regulation of medical
education;” and “fair and equitable employment practices.” Provisions of the EPIRA such as, among others, “to
ensure the total electrification of the country and the quality, reliability, security and affordability of the supply
of electric power”, and “watershed rehabilitation and management” meet the requirements for valid
delegation, as they provide the limitations on the ERC’s power to formulate the IRR. These are sufficient
standards. (Gerochi, et al. v. Dept. of Energy, et al., G.R. No. 159796, July 17, 2007, Nachura, J).
 20

Note: It may be noted that this is not the first time that the ERC’s conferred powers were challenged. In
Freedom from Debt Coalition v. Energy Regulatory Commission, G.R. No. 161113, June 15, 2004, 432 SCRA 157,
it has been held:

“In determining the extent of powers possessed by the ERC, the provisions of the EPIRA must not be read in
separate parts. Rather, the law must be read in its entirely, because a statute is passed as a whole, and is
animated by one general purpose and intent. Its meaning cannot to be extracted from any single part thereof
but from a general consideration of the statute as a whole. Considering the intent of Congress in enacting the
EPIRA and reading the statute in its entirety, it is plain to see that the law has expanded the jurisdiction of the
regulatory body, the ERC in this case, to enable the latter to implement the reforms sought to be accomplished
by the EPIRA. When the legislators decided to broaden the jurisdiction of the ERC, they did not intend to
abolish or reduce the powers already conferred upon ERC’s predecessors. To sustain the view that the ERC
possess only the powers and functions listed under Section 43 of the EPIRA is to frustrate the objectives of the
law.

Chief Justice Reynato S. Puno described the immensity of police power in relation to the delegation of powers
to the ERC and its regulatory functions over electric power as a vital public utility, to wit:

Over the years, however, the range of police power was no longer limited to the preservation of public health,
safety and morals, which used to be the primary social interests in earlier times. Police power now requires the
State to “assume an affirmative duty to eliminate the excesses and injustices that are the concomitants of an
unrestrained industrial economy.” Police power is not exerted “to further the public welfare – a concept as
vast as the good of society itself.” When the police power is delegated to administrative bodies with regulatory
functions, its exercise should be given a wide latitude. Police power takes on an even broader dimension in
developing countries such as ours, where the State must take a more active role in balancing the many
conflicting interests in society. The Questioned Order was issued by the ERC, acting as an agent of the State in
the exercise of police power. We should have exceptionally good grounds to curtail its exercise. This approach
is more compelling in the field of rate-regulation of electric power rates. Electric power generation and
distribution is a traditional instrument of economic growth that affects not only a few but the entire nation. It
is an important factor in encouraging investment and promoting business. The engines of progress may come
to a screeching halt if the delivery of electric power is impaired. Billions of pesos would be lost as a result of
power outrages or unreliable electric power services. The State thru the ERC should be able to exercise its
police power with great flexibility, when the need arises.

This was reiterated in National Association of Electricity Consumers for Reforms v. Energy Regulatory
Commission, G.R. No. 163935, February 2, 2006, 481 SCRA 480, where it was held that the ERC, as regulator,
should have sufficient power to respond in real time to changes wrought by multifarious factors affecting
public utilities.

From the foregoing disquisitions, we there fore hold there is no undue delegation of legislative power to the
ERC.

Petitioners failed to pursue in their Memorandum the contention in the Complaint that the imposition of the
Universal Charge on all end-users is oppressive and confiscatory, and amounts to taxation without
representation. Hence, such contention is deemed waived or abandoned per Resolution of August 3, 2004.
Moreover, the determination of whether or not a tax is excessive, oppressive or confiscatory is an issue which
essentially involves questions of fact, and thus, the Court is precluded from reviewing the same.

Note:
One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA. It established a new
policy, legal structure and regulatory framework for the electric power industry. The new thrust is to tap
private capital for the expansion and improvement of the industry as the large government debt and the highly
 21

capital-intensive character of the industry itself have long been acknowledged as the critical constraints to the
program. To attract private investment, largely foreign, the jaded structure of the industry had to be
addressed. While the generation and transmission sectors were centralized and monopolistic, the distribution
side was fragmented with over 10 utilities, mostly small and uneconomic. The pervasive flaws have caused a
low utilization of existing generation capacity; extremely high and uncompetitive power rates; poor quality of
service to consumers; dismal to forgettable performance of the government power sector; high system losses;
and an inability to develop a clear strategy for overcoming these shortcomings.

Thus, the EPIRA provides a framework for the restructuring of the industry, including the privatization of the
assets of the National Power Corporation (NPC), the transition to a competitive structure, and the delineation
of the roles of various government agencies and the private entities. The law ordains the division of the
industry into four (4) distinct sectors, namely: generation, transmission, distribution and supply. Corollarily, the
NPC generating plants have to privatized and its transmission business spun off and privatized thereafter.
(Freedom from Debt Coalition v. ERC, G.R. No. 161113, June 15, 2004, 432 SCRA 157)

People vs. Cayat (G.R. No. L-45987)

FACTS:
The accused, Cayat, a native of Baguio, Benguet, Mountain Province was sentenced by the justice of the peace
of court of Baguio for violation of Act No. 1639 (secs. 2 and 3)

SEC. 2. It shall be unlawful for any native of the Philippine Islands who is a member of a non-Christian tribe
within the meaning of the Act Numbered Thirteen hundred and ninety-seven, to buy, receive, have in his
possession, or drink any ardent spirits, ale, beer, wine, or intoxicating liquors of any kind, other than the so-
called native wines and liquors which the members of such tribes have been accustomed themselves to make
prior to the passage of this Act, except as provided in section one hereof; and it shall be the duty of any police
officer or other duly authorized agent of the Insular or any provincial, municipal or township government to
seize and forthwith destroy any such liquors found unlawfully in the possession of any member of a non-
Christian tribe.

SEC. 3. Any person violating the provisions of section one or section two of this Act shall, upon conviction
thereof, be punishable for each offense by a fine of not exceeding two hundred pesos or by imprisonment for
a term not exceeding six months, in the discretion of the court.

At the trial, cayat admitted all the facts alleged in the information that on or about the January 25, 1937, in
the City of Baguio, Philippines, and within the jurisdiction of this court, the accused, Cayat, being a member of
the non-Christian tribes, did receive, acquire, and have in his possession and under his control or custody, one
bottle of A gin, an intoxicating liquor, other than the so-called native wines and liquors which the members of
such tribes have been accustomed themselves to make prior to the passage of Act No. 1639, but pleaded not
guilty to the charge for the reasons adduced in his demurrer and submitted the case on the pleadings. The trial
court found him guilty of the crime charged and sentenced him,

The case was appealed and the accused challenges the constitutionality of the Act on the following ground:
(1) That it is discriminatory and denies the equal protection of the laws;

Issue:
WON the Act violates the equal protection of the laws
WON the Act violates due process of law
WON it is an invalid exercise of police power

Held:
 22

The Legislature has passed Act No. 1639 undoubtedly to secure for them the blessings of peace and harmony;
to facilitate, and not to mar, their rapid and steady march to civilization and culture. It is, therefore, in this light
that the Act must be understood and applied.

It is an established principle of constitutional law that the guaranty of the equal protection of the laws is not
violated by a legislation if based on reasonable classification. And the classification, to be reasonable,

(1) Must rest on substantial distinctions;

(2) Must be germane to the purposes of the law;
(3) Must not be limited to existing conditions only; and
(4) Must apply equally to all members of the same class.

Act No. 1639 satisfies these requirements. The classification rests on real and substantial, not merely
imaginary or whimsical, distinctions. It is not based upon "accident of birth or parentage, but upon the degree
of civilization and culture.

"The term 'non-Christian tribes' refers, not to religious belief, but, in a way, to the geographical area, and,
more directly, to natives of the Philippine Islands of a low grade of civilization, usually living in tribal
relationship apart from settled communities."

The Act was intended to meet the peculiar conditions existing in the non-Christian tribes. The exceptional
cases of certain members thereof who at present have reached a position of cultural equality with their
Christian brothers, cannot affect the reasonableness of the classification thus established.

That it is germane (relevant/ apropos) to the purposes of law cannot be doubted. The prohibition "to buy,
receive, have in his possession, or drink any ardent spirits, ale, beer, wine, or intoxicating liquors of any kind,
other than the so-called native wines and liquors which the members of such tribes have been accustomed
themselves to make prior to the passage of this Act.

It is designed to insure peace and order in and among the non-Christian tribes. It has been the sad experience
of the past, as the observations of the lower court disclose, that the free use of highly intoxicating liquors by
the non-Christian tribes have often resulted in lawlessness and crimes, thereby hampering the efforts of the
government to raise their standard of life and civilization.

The law is not limited in its application to conditions existing at the time of its enactment. It is intended to
apply for all times as long as those conditions exist.

Appellants contends that that provision of the law empowering any police officer or other duly authorized
agent of the government to seize and forthwith destroy any prohibited liquors found unlawfully in the
possession of any member of the non-Christian tribes is violative of the due process of law provided in the
Constitution. To constitute due process of law, notice and hearing are not always necessary. This rule is
especially true where much must be left to the discretion of the administrative officials in applying a law to
particular cases.
 23

Due process of law means simply:

(1) that there shall be a law prescribed in harmony with the general powers of the legislative department of
the government;
(2) that it shall be reasonable in its operation;
(3) that it shall be enforced according to the regular methods of procedure prescribed; and
(4) that it shall be applicable alike to all citizens of the state or to all of the class.

Thus, a person's property may be seized by the government in payment of taxes without judicial hearing; or
property used in violation of law may be confiscated or when the property constitutes corpus delicti.

Neither is the Act an improper exercise of the police power of the state. It has been said that the police power
is the most insistent and least limitable of all powers of the government. It has been aptly described as a
power coextensive with self protection and constitutes the law of overruling necessity. Any measure intended
to promote the health, peace, morals, education and good order of the people or to increase the industries of
the state, develop its resources and add to its wealth and prosperity is a legitimate exercise of the police
power, unless shown to be whimsical or capricious as to unduly interfere with the rights of an individual, the
same must be upheld.

Act No. 1639, as above stated, is designed to promote peace and order in the non Christian tribes so as to
remove all obstacles to their moral and intellectual growth and, eventually, to hasten their equalization and
unification with the rest of their Christian brothers. Its ultimate purpose can be no other than to unify the
Filipino people with a view to a greater Philippines.

Judgment is affirmed.
 24

EN BANC G.R No. 187167 August 16, 2011

PROF. MERLIN M. MAGALLONA, AKBAYAN PARTY-LIST REP. RISA HONTIVEROS, PROF. HARRY C. ROQUE, JR.,
AND UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW STUDENTS, ALITHEA BARBARA ACAS, VOLTAIRE
ALFERES, CZARINA MAY ALTEZ, FRANCIS ALVIN ASILO, SHERYL BALOT, RUBY AMOR BARRACA, JOSE JAVIER
BAUTISTA, ROMINA BERNARDO, VALERIE PAGASA BUENAVENTURA, EDAN MARRI CAÑETE, VANN ALLEN DELA
CRUZ, RENE DELORINO, PAULYN MAY DUMAN, SHARON ESCOTO, RODRIGO FAJARDO III, GIRLIE FERRER,
RAOULLE OSEN FERRER, CARLA REGINA GREPO, ANNA MARIE CECILIA GO, IRISH KAY KALAW, MARY ANN JOY
LEE, MARIA LUISA MANALAYSAY, MIGUEL RAFAEL MUSNGI, MICHAEL OCAMPO, JAKLYN HANNA PINEDA,
WILLIAM RAGAMAT, MARICAR RAMOS, ENRIK FORT REVILLAS, JAMES MARK TERRY RIDON, JOHANN FRANTZ
RIVERA IV, CHRISTIAN RIVERO, DIANNE MARIE ROA, NICHOLAS SANTIZO, MELISSA CHRISTINA SANTOS,
CRISTINE MAE TABING, VANESSA ANNE TORNO, MARIA ESTER VANGUARDIA, and MARCELINO VELOSO
III, Petitioners, vs. HON. EDUARDO ERMITA, IN HIS CAPACITY AS EXECUTIVE SECRETARY, HON. ALBERTO
ROMULO, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF FOREIGN AFFAIRS, HON. ROLANDO
ANDAYA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT, HON. DIONY
VENTURA, IN HIS CAPACITY AS ADMINISTRATOR OF THE NATIONAL MAPPING & RESOURCE INFORMATION
AUTHORITY, and HON. HILARIO DAVIDE, JR., IN HIS CAPACITY AS REPRESENTATIVE OF THE PERMANENT
MISSION OF THE REPUBLIC OF THE PHILIPPINES TO THE UNITED NATIONS, Respondents.
D E C I S I O N - CARPIO, J.:

The Case

This original action for the writs of certiorari and prohibition assails the constitutionality of Republic Act
No. 95221(RA 9522) adjusting the country’s archipelagic baselines and classifying the baseline regime of
nearby territories.

The Antecedents

In 1961, Congress passed Republic Act No. 3046 (RA 3046)2 demarcating the maritime baselines of the
Philippines as an archipelagic State.3 This law followed the framing of the Convention on the Territorial Sea
and the Contiguous Zone in 1958 (UNCLOS I),4 codifying, among others, the sovereign right of States
parties over their "territorial sea," the breadth of which, however, was left undetermined. Attempts to fill this
void during the second round of negotiations in Geneva in 1960 (UNCLOS II) proved futile. Thus,
domestically, RA 3046 remained unchanged for nearly five decades, save for legislation passed in 1968
(Republic Act No. 5446 [RA 5446]) correcting typographical errors and reserving the drawing of baselines
around Sabah in North Borneo.

In March 2009, Congress amended RA 3046 by enacting RA 9522, the statute now under scrutiny. The
change was prompted by the need to make RA 3046 compliant with the terms of the United Nations
Convention on the Law of the Sea (UNCLOS III),5 which the Philippines ratified on 27 February
1984.6 Among others, UNCLOS III prescribes the water-land ratio, length, and contour of baselines of
archipelagic States like the Philippines7 and sets the deadline for the filing of application for the extended
continental shelf.8 Complying with these requirements, RA 9522 shortened one baseline, optimized the
location of some basepoints around the Philippine archipelago and classified adjacent territories, namely,
the Kalayaan Island Group (KIG) and the Scarborough Shoal, as "regimes of islands" whose islands
generate their own applicable maritime zones.

Petitioners, professors of law, law students and a legislator, in their respective capacities as "citizens,
taxpayers or x x x legislators,"9 as the case may be, assail the constitutionality of RA 9522 on two
principal grounds, namely:

(1) RA 9522 reduces Philippine maritime territory, and logically, the reach of the Philippine state’s
sovereign power, in violation of Article 1 of the 1987 Constitution,10 embodying the terms of the Treaty
of Paris11 and ancillary treaties,12and
(2) RA 9522 opens the country’s waters landward of the baselines to maritime passage by all
vessels and aircrafts, undermining (damaging) Philippine sovereignty and national security,
 25

contravening the country’s nuclear-free policy, and damaging marine resources, in violation of
relevant constitutional provisions.13

In addition, petitioners contend that RA 9522’s treatment of the KIG as "regime of islands" not only results
in the loss of a large maritime area but also prejudices (distorts) the livelihood of subsistence
fishermen.14 To buttress their argument of territorial diminution, petitioners facially attack RA 9522 for
what it excluded and included – its failure to reference either the Treaty of Paris or Sabah and its use of
UNCLOS III’s framework of regime of islands to determine the maritime zones of the KIG and the
Scarborough Shoal.

Commenting on the petition, respondent officials raised threshold issues questioning

(1) the petition’s compliance with the case or controversy requirement for judicial review grounded on
petitioners’ alleged lack of locus standi and
(2) the propriety of the writs of certiorari and prohibition to assail the constitutionality of RA 9522. On
the merits, respondents defended RA 9522 as the country’s compliance with the terms of UNCLOS III,
preserving Philippine territory over the KIG or Scarborough Shoal. Respondents add that RA 9522
does not undermine the country’s security, environment and economic interests or relinquish the
Philippines’ claim over Sabah.

Respondents also question the normative force, under international law, of petitioners’ assertion that what
Spain ceded to the United States under the Treaty of Paris were the islands and all the waters found within
the boundaries of the rectangular area drawn under the Treaty of Paris.

We left unacted petitioners’ prayer for an injunctive writ.

The Issues
The petition raises the following issues:

1. Preliminarily –

1. Whether petitioners possess locus standi to bring this suit; and

2. Whether the writs of certiorari and prohibition are the proper remedies to assail the constitutionality of
RA 9522.

2. On the merits, whether RA 9522 is unconstitutional.

The Ruling of the Court

On the threshold issues, we hold that (1) petitioners possess locus standi to bring this suit as citizens and
(2) the writs of certiorari and prohibition are proper remedies to test the constitutionality of RA 9522.

On the merits, we find no basis to declare RA 9522 unconstitutional.

On the Threshold Issues: Petitioners Possess Locus Standi as Citizens

Petitioners themselves undermine their assertion of locus standi as legislators and taxpayers because the
petition alleges neither infringement of legislative prerogative15 nor misuse of public funds,16 occasioned by
the passage and implementation of RA 9522. Nonetheless, we recognize petitioners’ locus standi as
citizens with constitutionally sufficient interest in the resolution of the merits of the case which
undoubtedly raises issues of national significance necessitating urgent resolution. Indeed, owing to the
peculiar nature of RA 9522, it is understandably difficult to find other litigants possessing "a more direct
and specific interest" to bring the suit, thus satisfying one of the requirements for granting citizenship
standing.17
 26

The Writs of Certiorari and ProhibitionAre Proper Remedies to Test the Constitutionality of Statutes

In praying for the dismissal of the petition on preliminary grounds, respondents seek a strict observance of the
offices of the writs of certiorari and prohibition, noting that the writs cannot issue absent any showing of grave
abuse of discretion in the exercise of judicial, quasi-judicial or ministerial powers on the part of respondents
and resulting prejudice on the part of petitioners.18

Respondents’ submission holds true in ordinary civil proceedings. When this Court exercises its constitutional
power of judicial review, however, we have, by tradition, viewed the writs of certiorari and prohibition as
proper remedial vehicles to test the constitutionality of statutes,19 and indeed, of acts of other branches of
government.20 Issues of constitutional import are sometimes crafted out of statutes which, while having no
bearing on the personal interests of the petitioners, carry such relevance in the life of this nation that the
Court inevitably finds itself constrained to take cognizance of the case and pass upon the issues raised, non-
compliance with the letter of procedural rules notwithstanding. The statute sought to be reviewed here is one
such law.

RA 9522 is Not Unconstitutional. RA 9522 is a Statutory Tool to Demarcate the Country’s

Maritime Zones and Continental Shelf Under UNCLOS III, not to Delineate Philippine Territory

Petitioners submit that RA 9522 "dismembers a large portion of the national territory"21 because it discards
the pre-UNCLOS III demarcation of Philippine territory under the Treaty of Paris and related treaties,
successively encoded in the definition of national territory under the 1935, 1973 and 1987 Constitutions.
Petitioners theorize that this constitutional definition trumps any treaty or statutory provision denying the
Philippines’ sovereign control over waters, beyond the territorial sea recognized at the time of the Treaty of
Paris, that Spain supposedly ceded to the United States. Petitioners argue that from the Treaty of Paris’
technical description, Philippine sovereignty over territorial waters extends hundreds of nautical miles around
the Philippine archipelago, embracing the rectangular area delineated in the Treaty of Paris.22
Petitioners’ theory fails to persuade us.

UNCLOS III has nothing to do with the acquisition (or loss) of territory. It is a multilateral treaty regulating,
among others, sea-use rights over maritime zones (i.e., the territorial waters [12 nautical miles from the
baselines], contiguous zone [24 nautical miles from the baselines], exclusive economic zone [200 nautical miles
from the baselines]), and continental shelves that UNCLOS III delimits.23 UNCLOS III was the culmination of
decades-long negotiations among United Nations members to codify norms regulating the conduct of States in
the world’s oceans and submarine areas, recognizing coastal and archipelagic States’ graduated authority over
a limited span of waters and submarine lands along their coasts.

On the other hand, baselines laws such as RA 9522 are enacted by UNCLOS III States parties to mark-out
specific basepoints along their coasts from which baselines are drawn, either straight or contoured, to serve as
geographic starting points to measure the breadth of the maritime zones and continental shelf. Article 48 of
UNCLOS III on archipelagic States like ours could not be any clearer:

Article 48. Measurement of the breadth of the territorial sea, the contiguous zone, the exclusive economic zone
and the continental shelf. – The breadth of the territorial sea, the contiguous zone, the exclusive economic
zone and the continental shelf shall be measured from archipelagic baselines drawn in accordance with article
47. (Emphasis supplied) (continental shelf - the area of seabed around a large landmass where the sea is
relatively shallow compared with the open ocean. The continental shelf is geologically part of the continental
crust.)

Thus, baselines laws are nothing but statutory mechanisms for UNCLOS III States parties to delimit with
precision the extent of their maritime zones and continental shelves. In turn, this gives notice to the rest of
the international community of the scope of the maritime space and submarine areas within which States
parties exercise treaty-based rights, namely, the exercise of sovereignty over territorial waters (Article 2),
 27

the jurisdiction to enforce customs, fiscal, immigration, and sanitation laws in the contiguous zone (Article
33), and the right to exploit the living and non-living resources in the exclusive economic zone (Article 56)
and continental shelf (Article 77).

Even under petitioners’ theory that the Philippine territory embraces the islands and all the waters within the
rectangular area delimited in the Treaty of Paris, the baselines of the Philippines would still have to be drawn
in accordance with RA 9522 because this is the only way to draw the baselines in conformity with UNCLOS III.
The baselines cannot be drawn from the boundaries or other portions of the rectangular area delineated in the
Treaty of Paris, but from the "outermost islands and drying reefs of the archipelago."24

UNCLOS III and its ancillary baselines laws play no role in the acquisition, enlargement or, as petitioners claim,
diminution of territory. Under traditional international law typology, States acquire (or conversely, lose)
territory through occupation, accretion, cession and prescription,25 not by executing multilateral treaties on
the regulations of sea-use rights or enacting statutes to comply with the treaty’s terms to delimit maritime
zones and continental shelves. Territorial claims to land features are outside UNCLOS III, and are instead
governed by the rules on general international law.26

RA 9522’s Use of the Framework of Regime of Islands to Determine the Maritime Zones of the KIG
and the Scarborough Shoal, not Inconsistent with the Philippines’ Claim of Sovereignty Over these
Areas

Petitioners next submit that RA 9522’s use of UNCLOS III’s regime of islands framework to draw the baselines,
and to measure the breadth of the applicable maritime zones of the KIG, "weakens our territorial claim" over
that area.27Petitioners add that the KIG’s (and Scarborough Shoal’s) exclusion from the Philippine archipelagic
baselines results in the loss of "about 15,000 square nautical miles of territorial waters," prejudicing the
livelihood of subsistence fishermen.28 A comparison of the configuration of the baselines drawn under RA 3046
and RA 9522 and the extent of maritime space encompassed by each law, coupled with a reading of the text of
RA 9522 and its congressional deliberations, vis-à-vis the Philippines’ obligations under UNCLOS III, belie this
view.1avvphi1

The configuration of the baselines drawn under RA 3046 and RA 9522 shows that RA 9522 merely followed the
basepoints mapped by RA 3046, save for at least nine basepoints that RA 9522 skipped to optimize the
location of basepoints and adjust the length of one baseline (and thus comply with UNCLOS III’s limitation on
the maximum length of baselines). Under RA 3046, as under RA 9522, the KIG and the Scarborough Shoal lie
outside of the baselines drawn around the Philippine archipelago. This undeniable cartographic fact takes the
wind out of petitioners’ argument branding RA 9522 as a statutory renunciation of the Philippines’ claim over
the KIG, assuming that baselines are relevant for this purpose.

Petitioners’ assertion of loss of "about 15,000 square nautical miles of territorial waters" under RA 9522 is
similarly unfounded both in fact and law. On the contrary, RA 9522, by optimizing the location of
basepoints, increased the Philippines’ total maritime space (covering its internal waters, territorial sea and
exclusive economic zone) by 145,216 square nautical miles, as shown in the table below:29

Extent of maritime area

Extent of maritime area using
using RA 3046, as amended,
RA 9522, taking into account
taking into account the
UNCLOS III (in square nautical
Treaty of Paris’ delimitation
miles)
(in square nautical miles)
Exclusive Economic Zone 382,669
 28

Internal or archipelagic waters 166,858 171,435

Territorial Sea 274,136 32,106
TOTAL 440,994 586,210
Thus, as the map below shows, the reach of the exclusive economic zone drawn under RA 9522 even extends
way beyond the waters covered by the rectangular demarcation under the Treaty of Paris. Of course, where
there are overlapping exclusive economic zones of opposite or adjacent States, there will have to be a
delineation of maritime boundaries in accordance with UNCLOS III.30

Further, petitioners’ argument that the KIG now lies outside Philippine territory because the baselines that
RA 9522 draws do not enclose the KIG is negated by RA 9522 itself. Section 2 of the law commits to text
the Philippines’ continued claim of sovereignty and jurisdiction over the KIG and the Scarborough Shoal:

SEC. 2. The baselines in the following areas over which the Philippines likewise exercises
sovereignty and jurisdiction shall be determined as "Regime of Islands" under the Republic of the
Philippines consistent with Article 121 of the United Nations Convention on the Law of the Sea (UNCLOS):

a) The Kalayaan Island Group as constituted under Presidential Decree No. 1596 and
 29

b) Bajo de Masinloc, also known as Scarborough Shoal. (Emphasis supplied)

Had Congress in RA 9522 enclosed the KIG and the Scarborough Shoal as part of the Philippine archipelago,
adverse legal effects would have ensued. The Philippines would have committed a breach of two provisions of
UNCLOS III.
First, Article 47 (3) of UNCLOS III requires that "[t]he drawing of such baselines shall not depart to any
appreciable extent from the general configuration of the archipelago."
Second, Article 47 (2) of UNCLOS III requires that "the length of the baselines shall not exceed 100 nautical
miles," save for three per cent (3%) of the total number of baselines which can reach up to 125 nautical miles.31

Although the Philippines has consistently claimed sovereignty over the KIG32 and the Scarborough Shoal for
several decades, these outlying areas are located at an appreciable distance from the nearest shoreline of the
Philippine archipelago,33 such that any straight baseline loped around them from the nearest basepoint will
inevitably "depart to an appreciable extent from the general configuration of the archipelago."

The principal sponsor of RA 9522 in the Senate, Senator Miriam Defensor-Santiago, took pains to
emphasize the foregoing during the Senate deliberations:

What we call the Kalayaan Island Group or what the rest of the world call[] the Spratlys and the
Scarborough Shoal are outside our archipelagic baseline because if we put them inside our baselines
we might be accused of violating the provision of international law which states: "The drawing of such
baseline shall not depart to any appreciable extent from the general configuration of the archipelago." So
sa loob ng ating baseline, dapat magkalapit ang mga islands. Dahil malayo ang Scarborough Shoal, hindi
natin masasabing malapit sila sa atin although we are still allowed by international law to claim them as our
own.

This is called contested islands outside our configuration. We see that our archipelago is defined by the
orange line which [we] call[] archipelagic baseline. Ngayon, tingnan ninyo ang maliit na circle doon sa
itaas, that is Scarborough Shoal, itong malaking circle sa ibaba, that is Kalayaan Group or the
Spratlys. Malayo na sila sa ating archipelago kaya kung ilihis pa natin ang dating archipelagic baselines
para lamang masama itong dalawang circles, hindi na sila magkalapit at baka hindi na tatanggapin ng
United Nations because of the rule that it should follow the natural configuration of the
archipelago.34 (Emphasis supplied)

Similarly, the length of one baseline that RA 3046 drew exceeded UNCLOS III’s limits. The need to shorten
this baseline, and in addition, to optimize the location of basepoints using current maps, became
imperative as discussed by respondents:

[T]he amendment of the baselines law was necessary to enable the Philippines to draw the outer limits
of its maritime zones including the extended continental shelf in the manner provided by Article 47 of
[UNCLOS III]. As defined by R.A. 3046, as amended by R.A. 5446, the baselines suffer from some
technical deficiencies, to wit:

1. The length of the baseline across Moro Gulf (from Middle of 3 Rock Awash to Tongquil Point) is
140.06 nautical miles x x x. This exceeds the maximum length allowed under Article 47(2) of the
[UNCLOS III], which states that "The length of such baselines shall not exceed 100 nautical miles,
except that up to 3 per cent of the total number of baselines enclosing any archipelago may exceed
that length, up to a maximum length of 125 nautical miles."
2. The selection of basepoints is not optimal. At least 9 basepoints can be skipped or deleted from the
baselines system. This will enclose an additional 2,195 nautical miles of water.
3. Finally, the basepoints were drawn from maps existing in 1968, and not established by geodetic
survey methods. Accordingly, some of the points, particularly along the west coasts of Luzon down to
Palawan were later found to be located either inland or on water, not on low-water line and drying
reefs as prescribed by Article 47.35
 30

Hence, far from surrendering the Philippines’ claim over the KIG and the Scarborough Shoal, Congress’ decision
to classify the KIG and the Scarborough Shoal as "‘Regime[s] of Islands’ under the Republic of the Philippines
consistent with Article 121"36 of UNCLOS III manifests the Philippine State’s responsible observance of its pacta
sunt servanda obligation under UNCLOS III. Under Article 121 of UNCLOS III, any "naturally formed area of
land, surrounded by water, which is above water at high tide," such as portions of the KIG, qualifies under the
category of "regime of islands," whose islands generate their own applicable maritime zones.37

Statutory Claim Over Sabah under RA 5446 Retained

Petitioners’ argument for the invalidity of RA 9522 for its failure to textualize the Philippines’ claim over Sabah
in North Borneo is also untenable. Section 2 of RA 5446, which RA 9522 did not repeal, keeps open the door
for drawing the baselines of Sabah:

Section 2. The definition of the baselines of the territorial sea of the Philippine Archipelago as provided in this
Act is without prejudice to the delineation of the baselines of the territorial sea around the territory of
Sabah, situated in North Borneo, over which the Republic of the Philippines has acquired dominion and
sovereignty. (Emphasis supplied)

UNCLOS III and RA 9522 not Incompatible with the Constitution’s Delineation of Internal Waters

As their final argument against the validity of RA 9522, petitioners contend that the law unconstitutionally
"converts" internal waters into archipelagic waters, hence subjecting these waters to the right of innocent
and sea lanes passage under UNCLOS III, including overflight. Petitioners extrapolate that these passage
rights indubitably expose Philippine internal waters to nuclear and maritime pollution hazards, in violation
of the Constitution.38

Whether referred to as Philippine "internal waters" under Article I of the Constitution 39 or as "archipelagic
waters" under UNCLOS III (Article 49 [1]), the Philippines exercises sovereignty over the body of water
lying landward of the baselines, including the air space over it and the submarine areas underneath.
UNCLOS III affirms this:

Article 49. Legal status of archipelagic waters, of the air space over archipelagic waters and of their bed
and subsoil. –

1. The sovereignty of an archipelagic State extends to the waters enclosed by the archipelagic
baselines drawn in accordance with article 47, described as archipelagic waters, regardless of their
depth or distance from the coast.
2. This sovereignty extends to the air space over the archipelagic waters, as well as to their bed
and subsoil, and the resources contained therein.

xxxx

3. The regime of archipelagic sea lanes passage established in this Part shall not in other respects affect
the status of the archipelagic waters, including the sea lanes, or the exercise by the archipelagic State of
its sovereignty over such waters and their air space, bed and subsoil, and the resources contained
therein. (Emphasis supplied)

The fact of sovereignty, however, does not preclude the operation of municipal and international law norms
subjecting the territorial sea or archipelagic waters to necessary, if not marginal, burdens in the interest of
maintaining unimpeded, expeditious international navigation, consistent with the international law principle of
freedom of navigation. Thus, domestically, the political branches of the Philippine government, in the
competent discharge of their constitutional powers, may pass legislation designating routes within the
archipelagic waters to regulate innocent and sea lanes passage.40 Indeed, bills drawing nautical highways for
sea lanes passage are now pending in Congress.41
 31

In the absence of municipal legislation, international law norms, now codified in UNCLOS III, operate to grant
innocent passage rights over the territorial sea or archipelagic waters, subject to the treaty’s limitations and
conditions for their exercise.42 Significantly, the right of innocent passage is a customary international
law,43 thus automatically incorporated in the corpus of Philippine law.44 No modern State can validly invoke its
sovereignty to absolutely forbid innocent passage that is exercised in accordance with customary international
law without risking retaliatory measures from the international community.

The fact that for archipelagic States, their archipelagic waters are subject to both the right of innocent passage
and sea lanes passage45 does not place them in lesser footing vis-à-vis continental coastal States which are
subject, in their territorial sea, to the right of innocent passage and the right of transit passage through
international straits. The imposition of these passage rights through archipelagic waters under UNCLOS III was
a concession by archipelagic States, in exchange for their right to claim all the waters landward of their
baselines, regardless of their depth or distance from the coast, as archipelagic waters subject to their territorial
sovereignty. More importantly, the recognition of archipelagic States’ archipelago and the waters enclosed by
their baselines as one cohesive entity prevents the treatment of their islands as separate islands under
UNCLOS III.46 Separate islands generate their own maritime zones, placing the waters between islands
separated by more than 24 nautical miles beyond the States’ territorial sovereignty, subjecting these waters to
the rights of other States under UNCLOS III.47

Petitioners’ invocation of non-executory constitutional provisions in Article II (Declaration of Principles and

State Policies)48 must also fail. Our present state of jurisprudence considers the provisions in Article II as
mere legislative guides, which, absent enabling legislation, "do not embody judicially enforceable
constitutional rights x x x."49 Article II provisions serve as guides in formulating and interpreting
implementing legislation, as well as in interpreting executory provisions of the Constitution.
Although Oposa v. Factoran50 treated the right to a healthful and balanced ecology under Section 16 of
Article II as an exception, the present petition lacks factual basis to substantiate the claimed constitutional
violation. The other provisions petitioners cite, relating to the protection of marine wealth (Article XII,
Section 2, paragraph 251 ) and subsistence fishermen (Article XIII, Section 752 ), are not violated by RA
9522.

In fact, the demarcation of the baselines enables the Philippines to delimit its exclusive economic zone,
reserving solely to the Philippines the exploitation of all living and non-living resources within such zone.
Such a maritime delineation binds the international community since the delineation is in strict observance
of UNCLOS III. If the maritime delineation is contrary to UNCLOS III, the international community will of
course reject it and will refuse to be bound by it.

UNCLOS III favors States with a long coastline like the Philippines. UNCLOS III creates a sui
generis maritime space – the exclusive economic zone – in waters previously part of the high seas.
UNCLOS III grants new rights to coastal States to exclusively exploit the resources found within this zone
up to 200 nautical miles.53 UNCLOS III, however, preserves the traditional freedom of navigation of other
States that attached to this zone beyond the territorial sea before UNCLOS III.

RA 9522 and the Philippines’ Maritime Zones

Petitioners hold the view that, based on the permissive text of UNCLOS III, Congress was not bound to
pass RA 9522.54 We have looked at the relevant provision of UNCLOS III55 and we find petitioners’ reading
plausible. Nevertheless, the prerogative of choosing this option belongs to Congress, not to this Court.
Moreover, the luxury of choosing this option comes at a very steep price. Absent an UNCLOS III compliant
baselines law, an archipelagic State like the Philippines will find itself devoid of internationally acceptable
baselines from where the breadth of its maritime zones and continental shelf is measured. This is recipe
for a two-fronted disaster: first, it sends an open invitation to the seafaring powers to freely enter and
exploit the resources in the waters and submarine areas around our archipelago; and second, it weakens
the country’s case in any international dispute over Philippine maritime space. These are consequences
Congress wisely avoided.
 32

The enactment of UNCLOS III compliant baselines law for the Philippine archipelago and adjacent areas,
as embodied in RA 9522, allows an internationally-recognized delimitation of the breadth of the Philippines’
maritime zones and continental shelf. RA 9522 is therefore a most vital step on the part of the Philippines
in safeguarding its maritime zones, consistent with the Constitution and our national interest.

WHEREFORE, we DISMISS the petition.

SO ORDERED.

ANTONIO T. CARPIO Associate Justice

40 Mandated under Articles 52 and 53 of UNCLOS III:

Article 52. Right of innocent passage. —

1. Subject to article 53 and without prejudice to article 50, ships of all States enjoy the right of
innocent passage through archipelagic waters, in accordance with Part II, section 3.

2. The archipelagic State may, without discrimination in form or in fact among foreign ships, suspend
temporarily in specified areas of its archipelagic waters the innocent passage of foreign ships if such
suspension is essential for the protection of its security. Such suspension shall take effect only after
having been duly published. (Emphasis supplied)

Article 53. Right of archipelagic sea lanes passage. —

1. An archipelagic State may designate sea lanes and air routes thereabove, suitable for the continuous
and expeditious passage of foreign ships and aircraft through or over its archipelagic waters and the
adjacent territorial sea.

2. All ships and aircraft enjoy the right of archipelagic sea lanes passage in such sea lanes and air
routes.

3. Archipelagic sea lanes passage means the exercise in accordance with this Convention of the rights of
navigation and overflight in the normal mode solely for the purpose of continuous, expeditious and
unobstructed transit between one part of the high seas or an exclusive economic zone and another
part of the high seas or an exclusive economic zone.

4. Such sea lanes and air routes shall traverse the archipelagic waters and the adjacent territorial sea and
shall include all normal passage routes used as routes for international navigation or overflight through
or over archipelagic waters and, within such routes, so far as ships are concerned, all normal
navigational channels, provided that duplication of routes of similar convenience between the same
entry and exit points shall not be necessary.

5. Such sea lanes and air routes shall be defined by a series of continuous axis lines from the entry points
of passage routes to the exit points. Ships and aircraft in archipelagic sea lanes passage shall not
deviate more than 25 nautical miles to either side of such axis lines during passage, provided that such
ships and aircraft shall not navigate closer to the coasts than 10 per cent of the distance between the
nearest points on islands bordering the sea lane.

6. An archipelagic State which designates sea lanes under this article may also prescribe traffic
separation schemes for the safe passage of ships through narrow channels in such sea lanes.

7. An archipelagic State may, when circumstances require, after giving due publicity thereto, substitute
other sea lanes or traffic separation schemes for any sea lanes or traffic separation schemes
previously designated or prescribed by it.
 33

8. Such sea lanes and traffic separation schemes shall conform to generally accepted international
regulations.

9. In designating or substituting sea lanes or prescribing or substituting traffic separation schemes, an

archipelagic State shall refer proposals to the competent international organization with a view to their
adoption. The organization may adopt only such sea lanes and traffic separation schemes as may be
agreed with the archipelagic State, after which the archipelagic State may designate, prescribe or
substitute them.

10. The archipelagic State shall clearly indicate the axis of the sea lanes and the traffic separation
schemes designated or prescribed by it on charts to which due publicity shall be given.

11. Ships in archipelagic sea lanes passage shall respect applicable sea lanes and traffic separation
schemes established in accordance with this article.

12. If an archipelagic State does not designate sea lanes or air routes, the right of archipelagic sea lanes
passage may be exercised through the routes normally used for international navigation. (Emphasis
supplied)

42 The relevant provision of UNCLOS III provides:

Article 17. Right of innocent passage. —

Subject to this Convention, ships of all States, whether coastal or land-locked, enjoy the right of
innocent passage through the territorial sea. (Emphasis supplied)

Article 19. Meaning of innocent passage. —

1. Passage is innocent so long as it is not prejudicial to the peace, good order or security of the coastal
State. Such passage shall take place in conformity with this Convention and with other rules of
international law.

2. Passage of a foreign ship shall be considered to be prejudicial to the peace, good order or security of
the coastal State if in the territorial sea it engages in any of the following activities:

(a) any threat or use of force against the sovereignty, territorial integrity or political independence of the
coastal State, or in any other manner in violation of the principles of international law embodied in the
Charter of the United Nations;

(b) any exercise or practice with weapons of any kind;

(c) any act aimed at collecting information to the prejudice of the defence or security of the coastal
State;

(d) any act of propaganda aimed at affecting the defence or security of the coastal State;

(e) the launching, landing or taking on board of any aircraft;

(f) the launching, landing or taking on board of any military device;

(g) the loading or unloading of any commodity, currency or person contrary to the customs, fiscal,
immigration or sanitary laws and regulations of the coastal State;

(h) any act of willful and serious pollution contrary to this Convention;
 34

(i) any fishing activities;

(j) the carrying out of research or survey activities;

(k) any act aimed at interfering with any systems of communication or any other facilities or
installations of the coastal State;

(l) any other activity not having a direct bearing on passage

Article 21. Laws and regulations of the coastal State relating to innocent passage. —

1. The coastal State may adopt laws and regulations, in conformity with the provisions of this
Convention and other rules of international law, relating to innocent passage through the territorial sea,
in respect of all or any of the following:

(a) the safety of navigation and the regulation of maritime traffic;

(b) the protection of navigational aids and facilities and other facilities or installations;
(c) the protection of cables and pipelines;
(d) the conservation of the living resources of the sea;
(e) the prevention of infringement of the fisheries laws and regulations of the coastal State;
(f) the preservation of the environment of the coastal State and the prevention, reduction and control
of pollution thereof;
(g) marine scientific research and hydrographic surveys;
(h) the prevention of infringement of the customs, fiscal, immigration or sanitary laws and regulations
of the coastal State.

2. Such laws and regulations shall not apply to the design, construction, manning or equipment of
foreign ships unless they are giving effect to generally accepted international rules or standards.

3. The coastal State shall give due publicity to all such laws and regulations.

4. Foreign ships exercising the right of innocent passage through the territorial sea shall comply with all
such laws and regulations and all generally accepted international regulations relating to the prevention
of collisions at sea.

43The right of innocent passage through the territorial sea applies only to ships and not to aircrafts
(Article 17, UNCLOS III). The right of innocent passage of aircrafts through the sovereign territory
of a State arises only under an international agreement. In contrast, the right of innocent passage
through archipelagic waters applies to both ships and aircrafts (Article 53 (12), UNCLOS III).

44Following Section 2, Article II of the Constitution: "Section 2. The Philippines renounces war as
an instrument of national policy, adopts the generally accepted principles of international law
as part of the law of the land and adheres to the policy of peace, equality, justice, freedom,
cooperation, and amity with all nations." (Emphasis supplied)

45"Archipelagic sea lanes passage is essentially the same as transit passage through straits" to
which the territorial sea of continental coastal State is subject. R.R. Churabill and A.V. Lowe, The
Law of the Sea 127 (1999).

47 Within the exclusive economic zone, other States enjoy the following rights under UNCLOS III:

Article 58. Rights and duties of other States in the exclusive economic zone. —

 In the exclusive economic zone, all States, whether coastal or land-locked, enjoy, subject to the
relevant provisions of this Convention, the freedoms referred to in article 87 of navigation and
 35

overflight and of the laying of submarine cables and pipelines, and other internationally lawful
uses of the sea related to these freedoms, such as those associated with the operation of
ships, aircraft and submarine cables and pipelines, and compatible with the other provisions of
this Convention.

2. Articles 88 to 115 and other pertinent rules of international law apply to the exclusive economic zone in
so far as they are not incompatible with this Part.

xxxx
Beyond the exclusive economic zone, other States enjoy the freedom of the high seas, defined under
UNCLOS III as follows:

Article 87. Freedom of the high seas. —

1. The high seas are open to all States, whether coastal or land-locked. Freedom of the high seas is
exercised under the conditions laid down by this Convention and by other rules of international law. It
comprises, inter alia, both for coastal and land-locked States:

a. freedom of navigation;
b. freedom of overflight;
c. freedom to lay submarine cables and pipelines, subject to Part VI;
d. freedom to construct artificial islands and other installations permitted under international law,
subject to Part VI;
e. freedom of fishing, subject to the conditions laid down in section 2;
f. freedom of scientific research, subject to Parts VI and XIII.

2. These freedoms shall be exercised by all States with due regard for the interests of other States in their
exercise of the freedom of the high seas, and also with due regard for the rights under this Convention with
respect to activities in the Area.

51"The State shall protect the nation’s marine wealth in its archipelagic waters, territorial sea, and exclusive
economic zone, and reserve its use and enjoyment exclusively to Filipino citizens."

52"The State shall protect the rights of subsistence fishermen, especially of local communities, to the
preferential use of the communal marine and fishing resources, both inland and offshore. It shall provide
support to such fishermen through appropriate technology and research, adequate financial, production,
and marketing assistance, and other services. The State shall also protect, develop, and conserve such
resources. The protection shall extend to offshore fishing grounds of subsistence fishermen against foreign
intrusion. Fishworkers shall receive a just share from their labor in the utilization of marine and fishing
resources."

53This can extend up to 350 nautical miles if the coastal State proves its right to claim an extended
continental shelf (see UNCLOS III, Article 76, paragraphs 4(a), 5 and 6, in relation to Article 77).

54 Rollo, pp. 67-69.

55Article 47 (1) provides: "An archipelagic State may draw straight archipelagic baselines joining the
outermost points of the outermost islands and drying reefs of the archipelago provided that within such
baselines are included the main islands and an area in which the ratio of the area of the water to the area
of the land, including atolls, is between 1 to 1 and 9 to 1." (Emphasis supplied) in the Area.
 36

EN BANC G.R. No. L-36409 October 26, 1973

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. LORETA GOZO, defendant-appellant.
Office of the Solicitor General Felix Q. Antonio, Assistant Solicitor General Jaime M. Lantin and Solicitor
Norberto P. Eduardo for plaintiff-appellee.
Jose T. Nery for defendant-appellant.
FERNANDO, J.:

Appellant seeks to set aside a judgment of the Court of First Instance of Zambales, convicting her of a
violation of an ordinance of Olongapo, Zambales, requiring a permit from the municipal mayor for the
construction or erection of a building, as well as any modification, alteration, repair or demolition thereof.
She questions its validity, or at the very least, its applicability to her, by invoking due process, 1 a contention
she would premise on what for her is the teaching of People v. Fajardo.2 If such a ground were far from
being impressed with solidity, she stands on quicksand when she would deny the applicability of the
ordinance to her, on the pretext that her house was constructed within the naval base leased to the
American armed forces. While yielding to the well-settled doctrine that it does not thereby cease to be
Philippine territory, she would, in effect, seek to emasculate our sovereign rights by the assertion that we
cannot exercise therein administrative jurisdiction. To state the proposition is to make patent how much it is
tinged with unorthodoxy. Clearly then, the lower court decision must be affirmed with the sole modification
that she is given thirty days from the finality of a judgment to obtain a permit, failing which, she is required
to demolish the same.

The facts are undisputed. As set forth in the decision of the lower court: "The accused bought a house and
lot located inside the United States Naval Reservation within the territorial jurisdiction of Olongapo City.
She demolished the house and built another one in its place, without a building permit from the City Mayor
of Olongapo City, because she was told by one Ernesto Evalle, an assistant in the City Mayor's office, as
well as by her neighbors in the area, that such building permit was not necessary for the construction of the
house. On December 29, 1966, Juan Malones, a building and lot inspector of the City Engineer's Office,
Olongapo City, together with Patrolman Ramon Macahilas of the Olongapo City police force apprehended
four carpenters working on the house of the accused and they brought the carpenters to the Olongapo City
police headquarters for interrogation. ... After due investigation, Loreta Gozo was charged with violation of
Municipal Ordinance No. 14, S. of 1964 with the City Fiscal's Office."3 The City Court of Olongapo City
found her guilty of violating Municipal Ordinance No. 14, Series of 1964 and sentenced her to an
imprisonment of one month as well as to pay the costs. The Court of Instance of Zambales, on appeal,
found her guilty on the above facts of violating such municipal ordinance but would sentence her merely to
pay a fine of P200.00 and to demolish the house thus erected. She elevated the case to the Court of
Appeals but in her brief, she would put in issue the validity of such an ordinance on constitutional ground or
at the very least its applicability to her in view of the location of her dwelling within the naval base.
Accordingly, the Court of Appeals, in a resolution of January 29, 1973, noting the constitutional question
raised, certified the case to this Court.

There is, as mentioned in the opening paragraph of this petition, no support in law for the stand taken by
appellant.

1. It would be fruitless for her to assert that local government units are devoid of authority to require
building permits. This Court, from Switzer v. Municipality of Cebu, decided in 1911, has sanctioned the
validity of such measures. It is much too late in the day to contend that such a requirement cannot be
validly imposed. Even appellant, justifiably concerned about the unfavorable impression that could be
created if she were to deny that such competence is vested in municipal corporations and chartered cities,
had to concede in her brief: "If, at all; the questioned ordinance may be predicated under the general
welfare clause ... ."5 Its scope is wide, well-nigh all embracing, covering every aspect of public health,
public morals, public safety, and the well-being and good order of the community.6

It goes without saying that such a power is subject to limitations. Certainly, if its exercise is violative of any
constitutional right, then its validity could be impugned, or at the very least, its applicability to the person
adversely affected could be questioned. So much is settled law. Apparently, appellant has adopted the
view that a due process question may indeed be raised in view of what for her is its oppressive character.
 37

She is led to such a conclusion, relying on People v. Fajardo.7 A more careful scrutiny of such a decision
would not have led her astray, for that case is easily distinguishable. The facts as set forth in the opinion
follow: "It appears that on August 15, 1950, during the incumbency of defendant-appellant Juan F. Fajardo
as mayor of the municipality of Baao, Camarines Sur, the municipal council passed the ordinance in
question providing as follows: "... 1. Any person or persons who will construct or repair a building should,
before constructing or repairing, obtain a written permit from the Municipal Mayor. ... 2. A fee of not less
than P2.00 should be charged for each building permit and P1.00 for each repair permit issued. ... 3.
[Penalty]-Any violation of the provisions of the above, this ordinance, shall make the violator liable to pay a
fine of not less than P25 nor more than P50 or imprisonment of not less than 12 days nor more than 24
days or both, at the discretion of the court. If said building destroys the view of the Public Plaza or occupies
any public property, it shall be removed at the expense of the owner of the building or house. ... ." Four
years later, after the term of appellant Fajardo as mayor had expired, he and his son-in-law, appellant
Babilonia, filed a written request with the incumbent municipal mayor for a permit to construct a building
adjacent to their gasoline station on a parcel of land registered in Fajardo's name, located along the
national highway and separated from the public plaza by a creek ... . On January 16, 1954, the request
was denied, for the reason among others that the proposed building would destroy the view or beauty of
the public plaza ... . On January 18, 1954, defendants reiterated their request for a building permit ..., but
again the request was turned down by the mayor. Whereupon, appellants proceeded with the construction
of the building without a permit, because they needed a place of residence very badly, their former house
having been destroyed by a typhoon and hitherto they had been living on leased property."8

Clearly then, the application of such an ordinance to Fajardo was oppressive. A conviction therefore for a
violation thereof both in the justice of the peace court of Baao, Camarines Sur as well as in the Court of
First Instance could not be sustained. In this case, on the contrary, appellant never bothered to comply
with the ordinance. Perhaps aware of such a crucial distinction, she would assert in her brief: "The
evidence showed that even if the accused were to secure a permit from the Mayor, the same would not
have been granted. To require the accused to obtain a permit before constructing her house would be an
exercise in futility. The law will not require anyone to perform an impossibility, neither in law or in fact:
...."9 It would be from her own version, at the very least then, premature to anticipate such an adverse
result, and thus to condemn an ordinance which certainly lends itself to an interpretation that is neither
oppressive, unfair, or unreasonable. That kind of interpretation suffices to remove any possible question of
its validity, as was expressly announced in Primicias v. Fugoso. 10 So it appears from this portion of the
opinion of Justice Feria, speaking for the Court: "Said provision is susceptible of two constructions: one is
that the Mayor of the City of Manila is vested with unregulated discretion to grant or refuse to grant permit
for the holding of a lawful assembly or meeting, parade, or procession in the streets and other public
places of the City of Manila; and the other is that the applicant has the right to a permit which shall be
granted by the Mayor, subject only to the latter's reasonable discretion to determine or specify the streets
or public places to be used for the purpose, with a view to prevent confusion by overlapping, to secure
convenient use of the streets and public places by others, and to provide adequate and proper policing to
minimize the risk of disorder. After a mature deliberation, we have arrived at the conclusion that we must
adopt the second construction, that is, construe the provisions of the said ordinance to mean that it does
not confer upon the Mayor the power to refuse to grant the permit, but only the discretion, in issuing the
permit, to determine or specify the streets or public places where the parade or procession may pass or
the meeting may be held." 11 If, in a case affecting such a preferred freedom as the right to assembly, this
Court could construe an ordinance of the City of Manila so as to avoid offending against a constitutional
provision, there is nothing to preclude it from a similar mode of approach in order to show the lack of merit
of an attack against an ordinance requiring a permit. Appellant cannot therefore take comfort from any
broad statement in the Fajardo opinion, which incidentally is taken out of context, considering the admitted
oppressive application of the challenged measure in that litigation. So much then for the contention that
she could not have been validly convicted for a violation of such ordinance. Nor should it be forgotten that
she did suffer the same fate twice, once from the City Court and thereafter from the Court of First Instance.
The reason is obvious.Such ordinance applies to her.

2. Much less is a reversal indicated because of the alleged absence of the rather novel concept of
administrative jurisdiction on the part of Olongapo City. Nor is novelty the only thing that may be said
against it. Far worse is the assumption at war with controlling and authoritative doctrines that the mere
existence of military or naval bases of a foreign country cuts deeply into the power to govern. Two leading
cases may be cited to show how offensive is such thinking to the juristic concept of sovereignty, People v.
 38

Acierto, 12 and Reagan v. Commissioner of Internal Revenue. 13 As was so emphatically set forth by Justice
Tuason in Acierto: "By the Agreement, it should be noted, the Philippine Government merely consents that
the United States exercise jurisdiction in certain cases. The consent was given purely as a matter of
comity, courtesy, or expediency. The Philippine Government has not abdicated its sovereignty over the
bases as part of the Philippine territory or divested itself completely of jurisdiction over offenses committed
therein. Under the terms of the treaty, the United States Government has prior or preferential but not
exclusive jurisdiction of such offenses. The Philippine Government retains not only jurisdictional rights not
granted, but also all such ceded rights as the United States Military authorities for reasons of their own
decline to make use of. The first proposition is implied from the fact of Philippine sovereignty over the
bases; the second from the express provisions of the treaty." 14 There was a reiteration of such a view in
Reagan. Thus: "Nothing is better settled than that the Philippines being independent and sovereign, its
authority may be exercised over its entire domain. There is no portion thereof that is beyond its power.
Within its limits, its decrees are supreme, its commands paramount. Its laws govern therein, and everyone
to whom it applies must submit to its terms. That is the extent of its jurisdiction, both territorial and
personal. Necessarily, likewise, it has to be exclusive. If it were not thus, there is a diminution of
sovereignty." 15 Then came this paragraph dealing with the principle of auto-limitation: "It is to be admitted
any state may, by its consent, express or implied, submit to a restriction of its sovereign rights. There may
thus be a curtailment of what otherwise is a power plenary in character. That is the concept of sovereignty
as auto-limitation, which, in the succinct language of Jellinek, "is the property of a state-force due to which
it has the exclusive capacity of legal self-determination and self-restriction." A state then, if it chooses to,
may refrain from the exercise of what otherwise is illimitable competence." 16 The opinion was at pains to
point out though that even then, there is at the most diminution of jurisdictional rights, not its
disappearance. The words employed follow: "Its laws may as to some persons found within its territory no
longer control. Nor does the matter end there. It is not precluded from allowing another power to participate
in the exercise of jurisdictional right over certain portions of its territory. If it does so, it by no means follows
that such areas become impressed with an alien character. They retain their status as native soil. They are
still subject to its authority. Its jurisdiction may be diminished, but it does not disappear. So it is with the
bases under lease to the American armed forces by virtue of the military bases agreement of 1947. They
are not and cannot be foreign territory." 17

Can there be anything clearer, therefore, than that only a turnabout, unwarranted and unjustified, from
what is settled and orthodox law can lend the slightest degree of plausibility to the contention of absence of
administrative jurisdiction. If it were otherwise, what was aptly referred to by Justice Tuason "as a matter of
comity, courtesy, or expediency" becomes one of obeisance and submission. If on a concern purely
domestic in its implications, devoid of any connection with national security, the Military-Bases Agreement
could be thus interpreted, then sovereignty indeed becomes a mockery and an illusion. Nor does
appellant's thesis rest on less shaky foundation by the mere fact that Acierto and Reagan dealt with the
competence of the national government, while what is sought to be emasculated in this case is the so-
called administrative jurisdiction of a municipal corporation. Within the limits of its territory, whatever
statutory powers are vested upon it may be validly exercised. Any residual authority and therein conferred,
whether expressly or impliedly, belongs to the national government, not to an alien country. What is even
more to be deplored in this stand of appellant is that no such claim is made by the American naval
authorities, not that it would do them any good if it were so asserted. To quote from Acierto anew: "The
carrying out of the provisions of the Bases Agreement is the concern of the contracting parties alone.
Whether, therefore, a given case which by the treaty comes within the United States jurisdiction should be
transferred to the Philippine authorities is a matter about which the accused has nothing to do or say. In
other words, the rights granted to the United States by the treaty insure solely to that country and can not
be raised by the offender." 18 If an accused would suffer from such disability, even if the American armed
forces were the beneficiary of a treaty privilege, what is there for appellant to take hold of when there is
absolutely no showing of any alleged grant of what is quaintly referred to as administrative jurisdiction?
That is all, and it is more than enough, to make manifest the futility of seeking a reversal.

WHEREFORE, the appealed decision of November 11, 1969 is affirmed insofar as it found the accused, Loreta Gozo, guilty
beyond reasonable doubt of a violation of Municipal Ordinance No. 14, series of 1964 and sentencing her to pay a fine of
P200.00 with subsidiary imprisonment in case of insolvency, and modified insofar as she is required to demolish the house
that is the subject matter of the case, she being given a period of thirty days from the finality of this decision within which
to obtain the required permit. Only upon her failure to do so will that portion of the appealed decision
requiringdemolition be enforced. Costs against the accused.
 39

THIRD DIVISION G.R. Nos. 151373-74 November 17, 2005

DEPARTMENT OF HEALTH, Petitioner, -versus-
C.V. CANCHELA & ASSOCIATES, ARCHITECTS (CVCAA), IN ASSOCIATION WITH MCS ENGINEERS CO., AND A.O.
MANSUETO IV ELECTRICAL ENGINEERING SERVICES, AND LUIS ALINA, SHERIFF IV, RTC, MANILA,
Respondents.
D E C I S I O N - CARPIO-MORALES, J.:

The Department of Health assails, via petition for review on certiorari,[1] the consolidated June 28, 2000
decision of the Court of Appeals affirming that of the Sole Arbitrator of the Construction Industry Arbitration
Commission (CIAC)[2] which granted the monetary claim of herein private respondents.

The following facts are not undisputed.

Petitioner entered into three Owner-Consultant Agreements (Agreements) with private respondents covering
infrastructure projects for the Baguio General Hospital and Medical Center (Baguio Project), the Batangas
Regional Hospital (Batangas Project) and the Corazon L. Montelibano Memorial Regional Hospital in Bacolod
City (Bacolod Project).

The first Agreement[3] dated October 7, 1996 was signed by Dr. Jesus del Prado, Chief of Hospital of the
Baguio General Hospital and Medical Center; the second,[4] dated October 8, 1996, by Dr. Vicente Gahol, Chief
of Hospital of the Batangas Regional Hospital; and the third,[5] dated October 7, 1996, by Dr. Lourdes Espina,
Officer-in-Charge of the Bacolod Regional Hospital.

The Agreements, which contained almost identical language, required the preparation by private respondents
of the following documents: detailed architectural and engineering design plans; technical specifications and
detailed estimates of cost of construction of the hospital, including the preparation of bid documents and
requirements; and construction supervision until completion of hand-over and issuance of final certificate.

Work on the projects was generally divided into: architectural and engineering (A & E) services, and
construction supervision (CS).

The Agreements contained a common provision stating that private respondents consultancy or professional
fees would be 7.5% of the project fund allocation, broken down into detailed architectural and engineering
services (6%), and full-time construction supervision (1.5%).[6]

Thus, in the first Agreement involving the Baguio Project, petitioner agreed to pay private respondents a
professional fee in the amount of P1,444,875.00 or 7.5% of the project fund allocation of P19,265,000.00.[7]

In the second agreement involving the Batangas Project, petitioner agreed to pay private respondents a
professional fee of P1,318,020.00 or 7.5% of the project fund allocation of P17,575,000.00.[8]

In the third agreement, petitioner agreed to pay private respondents the amount of P890,549.00 which is
equivalent to 7.5% of the P11,875,000.00 fund allocated for the Bacolod Project.[9]

While the Agreements were witnessed by the respective chief accountants of the hospitals and were duly
approved by the Secretary of Health,[10] the former did not issue corresponding certificates of availability of
funds to cover the professional or consultancy fees.[11]

Petitioner, acting through its representative Architect Ma. Rebecca M. Peafiel, by separate letters[12] to the
respective chiefs of hospitals, all dated October 15, 1996, confirmed its acceptance of private respondents
complete Contract or Bid Documents including the A & E Design Plans and Technical Specifications and the
Detailed Cost Estimates for each project, and accordingly recommended the payment of 7.5% of the project
allocation to private respondents as consultancy fees in accordance with the Agreements.[13] In the same
 40

letters, petitioner advised that private respondents performance of full-time construction supervision services
shall commence upon issuance of the Notices to Proceed to the winning contractors.

Before the Notices to Proceed could be issued to the winning contractors, however, petitioner amended the
three Agreements on December 10, 1996 by deleting from private respondents scope of work the item full-
time construction supervision and replacing it with periodic visits, thus:

1.5 Periodic Visits

The CONSULTANT shall make periodic visits to the project site to familiarize himself with the general progress
and quality of the work and to determine whether, the work is proceeding in accordance with the Contract
Documents. During such project site visits and on the basis of his observations he shall report to the OWNER
defects and deficiencies noted in the work of contractors and shall condemn work found failing to conform to
the Contract Documents.[14]

The Amendment to each of the three Agreements was likewise duly witnessed and signed by the hospitals
respective chief accountants and approved by the Secretary of Health. Just the same, no certifications of
availability of funds for the purpose were issued.[15]

Full-time construction supervision having been excluded from private respondent’s scope of work, their
professional fee was correspondingly reduced from 7.5% of the project fund allocation to 6% of the project
contract cost, payable as follows:

5.2 Payment Schedule

a. Upon the completion and submission of the Contract Documents, SEVENTY percent (70%) of the fee will
be made computed upon estimated project construction cost;
b. Upon fifty percent completion of the construction of the project, the payment shall be adjusted and made
so that it will amount to a sum equivalent to EIGHTY percent (80%) of the fee, computed upon the Project
Contract Cost
c. Upon completion and final acceptance of the project, the remaining balance will be paid computed on the
Project Contract Cost.
d. The payments arising from this Agreement, as amended shall be subject to the usual accounting and
auditing rules and regulations.[16] (Emphasis supplied)

During the construction of the projects, various deficiencies in the performance of the agreed scope of private
respondents work were allegedly discovered[17] which were not, however, communicated to private
respondents.[18] Due to such deficiencies, petitioner withheld payment of the consultancy fees due to private
respondents. And petitioner did not return the documents, plans, specifications and estimates submitted by
private respondents.

As despite written demands for payment,[19] petitioner continued to withhold payment of their professional
fees, private respondents appealed, by letter dated August 29, 1997, to then Department of Health Secretary
Carmencita C. Reodica, they stating that their appeal was purposely done as our ultimate administrative
remedy before resorting to arbitration under E.O. 1008.

In a demand letter (undated) for payment addressed to Secretary Reodica and the chiefs of hospital
concerned, private respondents expressed their intention to resort to arbitration in accordance with Article 12
of each of the Agreements.[20]
Still later, private respondents sent another letter dated February 19, 1998 to Secretary Reodica stating that it
would be submitting the dispute to the CIAC.
 41

The demands for payment remained unheeded, prompting private respondents to file on September 21, 1998
with the CIAC their request for adjudication of their claim for payment of professional fees, escalation costs,
attorneys’ fees and costs of arbitration. The case was docketed as CIAC Case No. 31-98.

Acting on private respondents petition, the CIAC appointed a Sole Arbitrator, Atty. Custodio O. Parlade, from a
list of three nominees to preside over the arbitration proceedings.[21]

In its Answer dated January 21, 1999,[22] petitioner alleged, inter alia, that payment was withheld because the
hospitals concerned were not satisfied with the performance of private respondents who did not fulfill the
terms and conditions of the contracts; withholding of payment is sanctioned by Section 8.2 of the NEDA Board
Approval Guidelines on the Procurement of Consultancy Services for government projects (Implementing Rules
and Regulations) which provides:

To guarantee the faithful performance of the consultant under Contract, the final payment shall be withheld
until after a Certificate of Completion indicating satisfactory completion of the Consultancy Services shall have
been issued by the concerned government agency. (Emphasis supplied);

the delay in the implementation of the project, as well as the payment of fees, is not due to the fault of the
hospitals but to private respondents failure to rectify its unsatisfactory work; and the consultancy fees shall
be on a per project basis and at 6% of the project contract cost.

In the parties’ Terms of Reference,[23] the following facts were stipulated, inter alia:

4. The A & E services were completed, and the Contract Documents (CD) submitted by Claimant, on 15
October 1996 for the Consultancy Contracts for:

4.1 Baguio Project, with CD accepted/approved by Respondent for Project Fund Allocation (PFA) or Project
Construction Cost (PCC) of P19,719,376;
4.2 Batangas Project, with CD accepted/approved by Respondent for PFA/PCC of P20,373,565;
4.3 Bacolod Project, with CD accepted/approved by Respondent for PFA/PCC of P20,118,940.

5. Claimants allege that they are entitled to 6% for A & E Fees, as follows, for:

5.1 the Consultancy Contract for Baguio Project in the amount of P1,183,163;
5.2 the Consultancy Contract for Batangas Project in the amount of P1,222,414; and
5.3 the Consultancy Contract for Bacolod Project in the amount of P1,207,136.

The Respondent, however, maintains that the 6% payment must be based upon the actual project contract cost
of each building which is defined as the cost of the winning bid price of the contractor which performed the
work. (Italics supplied)

And defined as issues were as follows:

1. Did the Claimants complete their work under the contract on time so as to entitle them to their claims for A
& E fees for:
[a] Baguio Project P 1,183,163.00
[b] Batangas Project 1,222,414.00
[c] Bacolod Project 1,207,136.00
------------------------
Total P 3,612,713.00

1.1 Was the work of the Claimants satisfactory so as to entitle them to their claims?
 42

1.2 How should the project cost be defined:

a. Should it be based on the detailed cost estimate for A & E services as provided in the bid documents; or
b. Should it be based on the actual contract cost for each building?

2. Was the payment of the claims of the Claimant so delayed so as to entitle the Claimants to interest? If so, by
how much, and what rate of interest should be applied?
3. Was the implementation of the project delayed so as to entitle the Claimants to escalation? If so, how
much?
4. Are the Claimants entitled to their claims for attorneys’ fees and cost of arbitration?

After the presentation of evidence and submission of memoranda by the parties, the Sole Arbitrator rendered
a decision of March 30, 1999, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, award is hereby made in favor of the claimants sentencing the respondent to
pay the claimants the amount of P3,492,713 for A & E services performed and completed for and accepted by
DOH. This amount shall earn interest at 6% per annum from the date of this award until this decision
becomes final. Thereafter, the principal and the interest accrued as of such time shall earn interest at 12% per
annum.

The claim for escalation is denied. No award as to attorneys’ fees and costs.

SO ORDERED.[24]

Petitioner elevated the case to the Court of Appeals via petition for review under Rule 43 of the Rules of
Court, docketed as CA-G.R. No. 52538,[25] citing the following grounds in support thereof:
(a) the CIAC has no jurisdiction to hear and decide Case No. 31-98;
(b) the Sole Arbitrator acted with grave abuse of discretion amounting to lack or excess of jurisdiction when,
despite absence of factual and legal basis, he awarded to private respondents the monetary award of
P3,492,713 for A & E services, with interest at 6% per annum from the date of award until the decision
becomes final, and at 12% on the principal and accrued interest thereafter; and
(c) the Sole Arbitrator exceeded his powers and was partial to petitioner.

By Resolution of May 19, 1999, the Court of Appeals dismissed the petition for having been filed out of
time.[26]

Meanwhile, on May 31, 1999, the Sole Arbitrator, acting on private respondents’ Motion for Execution which
was filed soon after his decision as promulgated, directed the issuance of a writ of execution.[27]

On June 10, 1999, the Office of the Solicitor General (OSG), counsel for petitioner, filed a Motion for
Reconsideration of the Court of Appeals Resolution dated May 19, 1999[28] which was, by Resolution of June
29, 1999, denied, the appellate court noting that no Motion for Extension to file petition for review was
received prior to the filing of the petition for review.[29]

Petitioner subsequently filed on July 8, 1999 through the OSG, another petition before the Court of Appeals
under Rule 65 of the Rules of Court with urgent prayer for the issuance of a Temporary Restraining Order
and/or a Writ of Preliminary Injunction, docketed as CA-G.R. No. 53632,[30] assailing the Sole Arbitrators
Order dated May 31, 1999 directing the issuance of a writ of execution of the March 30, 1999 decision, as well
as the Writ of Execution and the Order denying petitioners motion for reconsideration of the Order dated May
31, 1999, upon the following grounds:
 the petition questioning the Sole Arbitrators decision subject of the assailed order dated May 31, 1999 was
still pending with the Court of Appeals;
 the CIAC has no jurisdiction to hear and decide Case No. 31-98;
 43

 and government funds and properties may not be seized under writs of execution or garnishment to
satisfy such judgments, following Commissioner of Public Highways v. San Diego[31] and Republic v.
Villasor.[32]

On July 16, 1999, the OSG filed a Motion for Reconsideration of the appellate courts Resolution of June 29,
1999 but it was, by Resolution of June 29, 1999, denied.

By Resolution issued on July 20, 1999, the Court of Appeals required private respondents to comment on
petitioners second petition.[33] On even date, the OSG filed a motion for the issuance of a temporary
restraining order and/or writ of preliminary injunction[34] to restrain the enforcement of the writ of
execution, which motion was, by Resolution of July 23, 1999, granted.

On July 27, 1999, the Court of Appeals issued a resolution in the first petition granting petitioners Motion for
Reconsideration and accordingly reinstating said first petition. By the same Resolution, private respondents
were directed to file their comment[35] thereon.

The two petitions were later consolidated on motion of the OSG.

Following the filing by private respondents of their Comments on the two petitions, the Court of Appeals, by
the assailed consolidated decision dated June 20, 2000, affirmed the decision of the Sole Arbitrator, it finding
that the CIAC, which has original and exclusive jurisdiction over the dispute pursuant to Executive Order No.
1008,[36] did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in the
promulgation of its assailed decision, the same being well-supported by evidence and it containing a just
interpretation and application of the provisions of the consultancy agreements.[37]

The Court of Appeals having denied petitioners Motion for Reconsideration[38] for being barren of merit,[39]
petitioner now comes before this Court on petition for review by certiorari under Rule 45 on the following
assigned errors:

I THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE CLAIMS FILED BY RESPONDENT C.V. CANCHELA
WERE PREMATURE
II THE COURT OF APPEALS ERRED IN HOLDING THAT THE MONETARY AWARD BY RESPONDENT ARBITRATOR
WAS IN ACCORD WITH THE TENOR OF THE AGREEMENT AS THERE WAS NO BASIS AT ALL FOR THE AWARD
THEREOF

Petitioner asserts that the claims of private respondents are premature as they failed to obtain the decision of
the Secretary of Health prior to arbitration, a mandatory requirement under Article 12 of the Agreements.[40]

But even granting that the claims were ripe for arbitration, petitioner asserts that the CIAC should have
dismissed the petition on the ground that the State is immune from suits, the Agreements, being to promote
the health and well-being of the citizens, having been entered into pursuant to the States’ sovereign and
governmental power.

With respect to the monetary award, petitioner contends that private respondents are only entitled to the A &
E services it rendered in the amount of P2,749,960.40 which is 6% of the total cost of the project, taking into
account the deletion of the provision on construction supervision; and no interest on the principal is due as it
did not incur any delay and the Agreements contained no express stipulation on interest.

Private respondents, on the other hand, counter that, as correctly held by the Court of Appeals and the Sole
Arbitrator, they did not fail in their duty to go through the mode of settling their claims for payment as
stipulated in the Agreements and that the records clearly establish the factual and legal bases for the award in
their favor.
 44

In compliance with the Resolution[41] of this Court requiring the parties to submit their respective
memoranda, petitioner filed its Memorandum[42] raising for the very first time the argument that the
Agreements are void from the beginning for failure to include therein a certification of availability of funds
which is required under existing law. As such, petitioner concludes that the consultancy fees cannot be based
on the project fund allocation but on the basis of the reasonable value or on the principle of quantum meruit.

Petitioner thus additionally prays that the Sole Arbitrators Decision be nullified.

As reflected above, the failure of the respective chief accountants to issue a certification of availability of funds
for respondents’ services subject of the Agreements was not raised before the CIAC or the Court of Appeals. It
is settled that an issue which was neither averred in the complaint nor raised during the trial cannot be raised
for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process,[43]
save on exceptional circumstances.[44] The paramount and overriding public policy is that no money shall be
paid out of the Treasury except upon an appropriation made by law.[45] That public funds are involved in the
present controversy thus justifies a relaxation of technical rules of procedure in order to serve the demands of
substantial justice.[46]

An inquiry into the fundamental issue of nullity of the Agreements is then warranted to determine if
petitioner duly observed the constitutional prescription for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of public funds and
properties.[47]

Proceeding from the foregoing consideration, the Court finds merit in the petition.

The Agreements, it bears noting, expressly stated that payments arising therefrom shall be subject to the
usual accounting and auditing rules and regulations.[48] Being government contracts, they are governed and
regulated by special laws, failure to comply with which renders them void.

P.D. 1445 (The Auditing Code of the Philippines) provides that no contract involving the expenditure of public
funds shall be entered into unless there is an appropriation therefor[49] and unless the proper accounting
official of the agency concerned shall have certified to the officer entering into the obligation that funds have
been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the
current fiscal year is available for expenditure on account thereof, subject to verification by the auditor
concerned. The certificate signed by the proper accounting official and the auditor who verified it shall be
attached to and become an integral part of the proposed contract.[50] Any contract entered into contrary to
the foregoing requirements is void.[51]

E.O. 292 (The Administrative Code of 1987) provides too that no funds shall be disbursed without first
securing the certification of a government agency’s chief accountant or head of the accounting unit as to the
availability of funds.[52] The issuance of such certification is thus a condition sine qua non to entering into any
contract or incurring any obligation that may be chargeable against the authorized allotment in any
department, office or agency. Unless the certification is issued, the contract cannot be considered final or
binding.[53]

The formalities expressly required by the Auditing Code of the Philippines and The Administrative Code of 1987
not having been complied with, the subject three Agreements are null and void from the very beginning. The
signatures of the chief accountants as instrumental witnesses do not constitute substantial compliance with
the explicit requirements of said Codes. As Melchor v. Commission on Audit[54] teaches, the certification, not
the accountants signature as contract witness, is the basic and more important validating document, and the
more reliable indicium of fund availability, notwithstanding paragraph 2 of Letter of Instructions No. 968[55]
(LOI No. 968) which considers the signature of the chief accountant as itself constituting a certification that
 45

funds are indeed available.[56] For LOI No. 968, being an administrative issuance, must yield to the explicit
provisions of The Auditing Code of the Philippines and Revised Administrative Code of 1987.[57]

Even if each of the Agreements did not incorporate the provision calling for compliance with the above-said
Codes, the provisions thereof, as well as those of the 1987 Constitution and LOI No. 968, must be deemed to
form part of, and co-exist with, the Agreements. Applicable peremptory provisions of law of this nature,
affecting as they do public policy or impressed as they are with public interest, are held to be written into the
contract.[58]

The illegality of the subject Agreements proceeds, it bears emphasis, from an express declaration or
prohibition by law,[59] not from any intrinsic illegality. As such, the Agreements are not illegal per se[60] and
the party claiming thereunder may recover what had been paid or delivered.[61]

The Court thus finds that private respondents are entitled to be compensated for the services they actually
performed for the benefit of petitioner, as shown by petitioners acceptance and use[62] of the complete
Contract or Bid Documents including the A & E Design Plans and Technical Specifications and the Detailed Cost
Estimates for each project that private respondents promptly submitted, as in fact petitioner itself
recommends that private respondents be paid therefor.

The compensation must, however, exclude services for periodic visits which the records irrefutably show not to
have been rendered.

With respect to the stipulation in each of the Agreements that private respondents professional fees would be
7.5% of the project fund allocation, which was amended to 6% of the project contract cost, the same patently
contravenes Section 525 of the Government Accounting and Auditing (GAA) Manual directing that fees for
architectural, engineering design, and similar professional services should be fixed in monetary or peso
amounts, instead of as percentage of the project cost.

Section 525 of GAA Manual provides:

Sec. 525. Contract fees for architectural, engineering design, and similar professional services. Professional
fees for architectural, engineering design and similar professional services shall be stipulated in the contract in
fixed monetary or peso amounts instead of as percentage of the project cost. Professional fees in terms of
percent of the project cost is inconsistent with our national goal of economy in fiscal operations because the
percentage fee motivates the architect or designer to design a project so as to maximize its cost since his fees
will be computed as a direct proportion to the resulting cost (COA Cir. 82-191, July 5, 1982). (Emphasis and
italics supplied)

Thus, on top of the chief accountants unexplained failure to issue the requisite certificates of availability of
funds[63] and the unjustified omission of the chiefs of hospital to secure such certification before even
entering into the Agreements with private respondents, these officers failed to heed the guidelines embodied
in above-quoted Section 525 of the GAA Manual. The records do not show any explanation for these lapses.

Paragraph 2 of LOI 968 provides:

2. It shall be the responsibility of the Chief Accountant to verify the availability of funds, as duly evidenced by
programmed appropriations released by the Ministry of the Budget and received by the agency, from which
such contract shall be ultimately payable. (Emphasis supplied)

And Book VI, Chapter 5, Section 40 of the Revised Administrative Code of 1987 provides:
SECTION 40. Certification of Availability of Funds. No funds shall be disbursed, and no expenditures or
obligations chargeable against any authorized allotment shall be incurred or authorized in any department,
office or agency without first securing the certification of its Chief Accountant or head of accounting unit as to
the availability of funds and the allotment to which the expenditure or obligation may be properly charged.
 46

No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is
properly supported by sufficient evidence and unless there is proper authority for its incurrence. xxx (Emphasis
supplied)

As the immediately-quoted provisions of law mandate, the issuance of a certification that funds are available
is a legal duty imposed on the chief accountant or the head of the accounting unit. And ascertainment that
such certification exists prior to entering into any government contract or incurring any obligation chargeable
against public funds is a responsibility which devolves on the officer concerned.

For their failure to discharge their duties under the law, The Revised Administrative Code of 1987 provides
that the officer or officers entering into the contract shall be liable to the Government or other contracting
party for any consequent damage to the same extent as if the transaction had been wholly between private
parties.[64]

On the other hand, COA Circular No. 76-34[65] directs the COA to call the attention of management, within
five days from receipt of a copy of the contract, any defects or deficiencies therein and to suggest corrective
measures as appropriate and warranted to facilitate the processing of the claim upon presentation. The
records do not show that COA complied with said directive. It was thus negligent.[66]

The Court believes, however, that declaring the individual officers of petitioner who entered into the
Agreements personally liable for the unpaid professional fees due to private respondents would be highly
unjust, the government having already received and accepted the benefits of the services rendered. En passant,
it is, however, non sequitor to let these officers go scot-free from their negligence.

Since the questioned Agreements are null and void for want of the requisite covering certificates of
appropriation, the teachings in Eslao v. Commission on Audit[67] and in Royal Trust Construction v. Commission
on Audit[68] must be heeded.

In Eslao, this Court, directed payment to the contractor on a quantum meruit basis despite the failure to
undertake a public bidding, it holding that to deny payment to the contractor of the two buildings which are
almost fully completed and presently occupied by the university would be to allow the government to unjustly
enrich itself at the expense of another.
In Royal Trust, this Court, in the interest of substantial justice and equity, allowed payment to the contractor
on a quantum meruit basis despite the absence of a written contract and a covering appropriation.

In the case at bar then, the nullity of the herein Agreements notwithstanding, the ends of substantial justice
and equity will be better served if payment to private respondents for their consultancy services is allowed on
a quantum meruit basis.

The measure of recovery under the principle of quantum meruit should relate to the reasonable value of the
services performed,[69] taking into account the standard of practice in the profession, the architectural and
engineering skills of private respondents, and their professional expertise and standing.[70]

Respecting petitioner’s argument that the State is immune from suit, the same deserves scant consideration.
To sustain the argument would not only perpetuate a grave injustice on private respondents who performed
their services in good faith and were given the run-around for over eight years, but would sanction as well
unjust enrichment on the part of the State.

Such conduct by petitioner and its officers, in addition, derogates against the salutary policies enunciated in
Presidential Decree No. 1746 CREATING THE CONSTRUCTION INDUSTRY AUTHORITY OF THE PHILIPPINES
(CIAP)[71] and E.O. 1008 CONSTRUCTION INDUSTRY ARBITRATION LAW.[72] As expressed therein, these
 47

statutes contain provisions for the promotion of the healthy partnership between the government and the
private sector and encourage the optimum development and growth of the local construction industry.

As EPG Construction Company v. Vigilar[73] holds, this Court as the staunch guardian of the citizens’ rights and
welfare cannot sanction an injustice so patent on its face, and allow itself to be an instrument in the
perpetration thereof. Justice and equity sternly demand that the States’ cloak of invincibility against suit be
shred in this particular instance, and that petitioners-contractors be duly compensated on the basis of
quantum meruit for construction done on the public works housing project.[74]

In light of the foregoing discussions, addressing the question of jurisdiction and other collateral issues raised in
the petition is rendered unnecessary.

WHEREFORE, the petition is GRANTED. The Owner-Consultant Agreements entered into between petitioner
Department of Health, through the respective chiefs of hospitals, and private respondents are declared null
and void ab initio.

The assailed consolidated decision of the Court of Appeals dated June 28, 2000 and its Resolution dated
November 23, 2001 in CA-G.R. SP Nos. 52538 and 53632 are REVERSED AND SET ASIDE.

The Commission on Audit is hereby directed to determine and ascertain with dispatch, on a quantum meruit
basis, the total compensation due to private respondents for the performance of consultancy services and to
allow payment thereof upon the completion of said determination.

SO ORDERED.
 48

EN BANC G.R. No. 159796 July 17, 2007

ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST CONSUMERS NETWORK, INC.
(ECN), Petitioners, -versus-
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), NATIONAL POWER
CORPORATION (NPC), POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT GROUP (PSALM Corp.),
STRATEGIC POWER UTILITIES GROUP (SPUG), and PANAY ELECTRIC COMPANY INC. (PECO),Respondents.

DECISION - NACHURA, J.:

Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist Consumers Network, Inc. (ECN)
(petitioners), come before this Court in this original action praying that Section 34 of Republic Act (RA) 9136,
otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), imposing the Universal
Charge,[1] and Rule 18 of the Rules and Regulations (IRR)[2] which seeks to implement the said imposition, be
declared unconstitutional. Petitioners also pray that the Universal Charge imposed upon the consumers be
refunded and that a preliminary injunction and/or temporary restraining order (TRO) be issued directing the
respondents to refrain from implementing, charging, and collecting the said charge.[3] The assailed provision of
law reads:

SECTION 34. Universal Charge. Within one (1) year from the effectivity of this Act, a universal charge to be
determined, fixed and approved by the ERC, shall be imposed on all electricity end-users for the following
purposes:
(a) Payment for the stranded debts[4] in excess of the amount assumed by the National Government
and stranded contract costs of NPC[5] and as well as qualified stranded contract costs of
distribution utilities resulting from the restructuring of the industry;
(b) Missionary electrification;[6]
(c) The equalization of the taxes and royalties applied to indigenous or renewable sources of energy
vis--vis imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one centavo per kilowatt-hour
(P0.0025/kWh), which shall accrue to an environmental fund to be used solely for watershed
rehabilitation and management. Said fund shall be managed by NPC under existing
arrangements; and
(e) A charge to account for all forms of cross-subsidies for a period not exceeding three (3) years.

The universal charge shall be a non-bypassable charge which shall be passed on and collected from all
end-users on a monthly basis by the distribution utilities. Collections by the distribution utilities and
the TRANSCO in any given month shall be remitted to the PSALM Corp. on or before the fifteenth
(15th) of the succeeding month, net of any amount due to the distribution utility. Any end-user or self-
generating entity not connected to a distribution utility shall remit its corresponding universal charge
directly to the TRANSCO. The PSALM Corp., as administrator of the fund, shall create a Special Trust
Fund which shall be disbursed only for the purposes specified herein in an open and transparent
manner. All amount collected for the universal charge shall be distributed to the respective
beneficiaries within a reasonable period to be provided by the ERC.
The Facts
Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took effect.[7]
On April 5, 2002, respondent National Power Corporation-Strategic Power Utilities Group[8] (NPC-SPUG) filed
with respondent Energy Regulatory Commission (ERC) a petition for the availment from the Universal Charge
of its share for Missionary Electrification, docketed as ERC Case No. 2002-165.[9]

On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case No. 2002-194, praying that the
proposed share from the Universal Charge for the Environmental charge of P0.0025 per kilowatt-hour (/kWh),
or a total of P119,488,847.59, be approved for withdrawal from the Special
 49

Trust Fund (STF) managed by respondent Power Sector Assets and Liabilities Management Group (PSALM)
[10]
for the rehabilitation and management of watershed areas.[11]

On December 20, 2002, the ERC issued an Order[12] in ERC Case No. 2002-165 provisionally approving the
computed amount of P0.0168/kWh as the share of the NPC-SPUG from the Universal Charge for Missionary
Electrification and authorizing the National Transmission Corporation (TRANSCO) and Distribution Utilities to
collect the same from its end-users on a monthly basis.

On June 26, 2003, the ERC rendered its Decision[13] (for ERC Case No. 2002-165) modifying its Order of
December 20, 2002, thus:

WHEREFORE, the foregoing premises considered, the provisional authority granted to petitioner National
Power Corporation-Strategic Power Utilities Group (NPC-SPUG) in the Order dated December 20, 2002 is
hereby modified to the effect that an additional amount of P0.0205 per kilowatt-hour should be added to
the P0.0168 per kilowatt-hour provisionally authorized by the Commission in the said Order. Accordingly, a
total amount of P0.0373 per kilowatt-hour is hereby APPROVED for withdrawal from the Special Trust Fund
managed by PSALM as its share from the Universal Charge for Missionary Electrification (UC-ME) effective on
the following billing cycles:

(a) June 26-July 25, 2003 for National Transmission Corporation (TRANSCO); and
(b) July 2003 for Distribution Utilities (Dus).

Relative thereto, TRANSCO and Dus are directed to collect the UC-ME in the amount of P0.0373 per kilowatt-
hour and remit the same to PSALM on or before the 15th day of the succeeding month.

In the meantime, NPC-SPUG is directed to submit, not later than April 30, 2004, a detailed report to include
Audited Financial Statements and physical status (percentage of completion) of the projects using the
prescribed format.

Let copies of this Order be furnished petitioner NPC-SPUG and all distribution utilities (Dus).
SO ORDERED.

On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the ERC, among others,[14] to set
aside the above-mentioned Decision, which the ERC granted in its Order dated October 7, 2003, disposing:

WHEREFORE, the foregoing premises considered, the Motion for Reconsideration filed by petitioner
National Power Corporation-Small Power Utilities Group (NPC-SPUG) is hereby GRANTED. Accordingly, the
Decision dated June 26, 2003 is hereby modified accordingly.

Relative thereto, NPC-SPUG is directed to submit a quarterly report on the following:

1. Projects for CY 2002 undertaken;

2. Location
3. Actual amount utilized to complete the project;
4. Period of completion;
5. Start of Operation; and
6. Explanation of the reallocation of UC-ME funds, if any.
SO ORDERED.[15]
 50

Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194, authorizing the NPC to draw up
to P70,000,000.00 from PSALM for its 2003 Watershed Rehabilitation Budget subject to the availability of
funds for the Environmental Fund component of the Universal Charge.[16]

On the basis of the said ERC decisions, respondent Panay Electric Company, Inc. (PECO)
charged petitioner Romeo P. Gerochi and all other end-users with the Universal Charge as reflected in their
respective electric bills starting from the month of July 2003.[17]
Hence, this original action.

Petitioners submit that the assailed provision of law and its IRR which sought to implement the same are
unconstitutional on the following grounds:

1) The universal charge provided for under Sec. 34 of the EPIRA and sought to be implemented under Sec.
2, Rule 18 of the IRR of the said law is a tax which is to be collected from all electric end-users and self-
generating entities. The power to tax is strictly a legislative function and as such, the delegation of said
power to any executive or administrative agency like the ERC is unconstitutional, giving the same
unlimited authority. The assailed provision clearly provides that the Universal Charge is to be
determined, fixed and approved by the ERC, hence leaving to the latter complete discretionary
legislative authority.
2) The ERC is also empowered to approve and determine where the funds collected should be used.
3) The imposition of the Universal Charge on all end-users is oppressive and confiscatory and amounts to
taxation without representation as the consumers were not given a chance to be heard and
represented.[18]

Petitioners contend that the Universal Charge has the characteristics of a tax and is collected to fund the
operations of the NPC. They argue that the cases[19] invoked by the respondents clearly show the regulatory
purpose of the charges imposed therein, which is not so in the case at bench. In said cases, the respective
funds[20] were created in order to balance and stabilize the prices of oil and sugar, and to act as buffer to
counteract the changes and adjustments in prices, peso devaluation, and other variables which cannot be
adequately and timely monitored by the legislature. Thus, there was a need to delegate powers to
administrative bodies.[21] Petitioners posit that the Universal Charge is imposed not for a similar purpose.
On the other hand, respondent PSALM through the Office of the Government Corporate Counsel (OGCC)
contends that unlike a tax which is imposed to provide income for public purposes, such as support of the
government, administration of the law, or payment of public expenses, the assailed Universal Charge is levied
for a specific regulatory purpose, which is to ensure the viability of the country's electric power industry. Thus,
it is exacted by the State in the exercise of its inherent police power. On this premise, PSALM submits that
there is no undue delegation of legislative power to the ERC since the latter merely exercises a limited
authority or discretion as to the execution and implementation of the provisions of the EPIRA.[22]

Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the Solicitor General (OSG),
share the same view that the Universal Charge is not a tax because it is levied for a specific regulatory purpose,
which is to ensure the viability of the country's electric power industry, and is, therefore, an exaction in the
exercise of the State's police power. Respondents further contend that said Universal Charge does not possess
the essential characteristics of a tax, that its imposition would redound to the benefit of the electric power
industry and not to the public, and that its rate is uniformly levied on electricity end-users, unlike a tax which is
imposed based on the individual taxpayer's ability to pay. Moreover, respondents deny that there is undue
delegation of legislative power to the ERC since the EPIRA sets forth sufficient determinable standards which
would guide the ERC in the exercise of the powers granted to it. Lastly, respondents argue that the imposition
of the Universal Charge is not oppressive and confiscatory since it is an exercise of the police power of the
State and it complies with the requirements of due process.[23]
 51

On its part, respondent PECO argues that it is duty-bound to collect and remit the amount pertaining to the
Missionary Electrification and Environmental Fund components of the Universal Charge, pursuant to Sec. 34 of
the EPIRA and the Decisions in ERC Case Nos. 2002-194 and 2002-165. Otherwise, PECO could be held liable
under Sec. 46[24] of the EPIRA, which imposes fines and penalties for any violation of its provisions or its IRR.[25]

The Issues
The ultimate issues in the case at bar are:
1) Whether or not, the Universal Charge imposed under Sec. 34 of the EPIRA is a tax; and
2) Whether or not there is undue delegation of legislative power to tax on the part of the ERC.[26]

Before we discuss the issues, the Court shall first deal with an obvious procedural lapse.

Petitioners filed before us an original action particularly denominated as a Complaint assailing the
constitutionality of Sec. 34 of the EPIRA imposing the Universal Charge and Rule 18 of the EPIRA's IRR. No
doubt, petitioners have locus standi. They impugn the constitutionality of Sec. 34 of the EPIRA because they
sustained a direct injury as a result of the imposition of the Universal Charge as reflected in their electric bills.

However, petitioners violated the doctrine of hierarchy of courts when they filed this Complaint directly with
us. Furthermore, the Complaint is bereft of any allegation of grave abuse of discretion on the part of the ERC
or any of the public respondents, in order for the Court to consider it as a petition for certiorari or prohibition.

Article VIII, Section 5(1) and (2) of the 1987 Constitution[27] categorically provides that:

SECTION 5. The Supreme Court shall have the following powers:

1. Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and
over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus.
2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the rules of court may
provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in
question.

But this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, and habeas
corpus, while concurrent with that of the regional trial courts and the Court of Appeals, does not give litigants
unrestrained freedom of choice of forum from which to seek such relief.[28] It has long been established that
this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate
courts, or where exceptional and compelling circumstances justify availment of a remedy within and call for
the exercise of our primary jurisdiction.[29] This circumstance alone warrants the outright dismissal of the
present action.

This procedural infirmity notwithstanding, we opt to resolve the constitutional issue raised herein. We are
aware that if the constitutionality of Sec. 34 of the EPIRA is not resolved now, the issue will certainly resurface
in the near future, resulting in a repeat of this litigation, and probably involving the same parties. In the public
interest and to avoid unnecessary delay, this Court renders its ruling now.

The instant complaint is bereft of merit.

The First Issue

To resolve the first issue, it is necessary to distinguish the States power of taxation from the police power.
 52

The power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no
limits, so that security against its abuse is to be found only in the responsibility of the legislature which
imposes the tax on the constituency that is to pay it.[30] It is based on the principle that taxes are the lifeblood
of the government, and their prompt and certain availability is an imperious (authoritative/ domineering)
need.[31] Thus, the theory behind the exercise of the power to tax emanates from necessity; without taxes,
government cannot fulfill its mandate of promoting the general welfare and well-being of the people.[32]

On the other hand, police power is the power of the state to promote public welfare by restraining and
regulating the use of liberty and property.[33] It is the most pervasive, the least limitable, and the most
demanding of the three fundamental powers of the State. The justification is found in the Latin maxims salus
populi est suprema lex (the welfare of the people is the supreme law) and sic utere tuo ut alienum non
laedas (so use your property as not to injure the property of others). As an inherent attribute of sovereignty
which virtually extends to all public needs, police power grants a wide panoply of instruments through which
the State, as parens patriae, gives effect to a host of its regulatory powers.[34] We have held that the power to
"regulate" means the power to protect, foster, promote, preserve, and control, with due regard for the
interests, first and foremost, of the public, then of the utility and of its patrons.[35]

The conservative and pivotal distinction between these two powers rests in the purpose for which the charge
is made. If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a
tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the
imposition a tax.[36]

In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police power, particularly its
regulatory dimension, is invoked. Such can be deduced from Sec. 34 which enumerates the purposes for which
the Universal Charge is imposed[37] and which can be amply discerned as regulatory in character. The EPIRA
resonates such regulatory purposes, thus:

SECTION 2. Declaration of Policy. It is hereby declared the policy of the State:

(a) To ensure and accelerate the total electrification of the country;

(b) To ensure the quality, reliability, security and affordability of the supply of electric power;
(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair
competition and full public accountability to achieve greater operational and economic
efficiency and enhance the competitiveness of Philippine products in the global market;
(d) To enhance the inflow of private capital and broaden the ownership base of the power
generation, transmission and distribution sectors;
(e) To ensure fair and non-discriminatory treatment of public and private sector entities in the
process of restructuring the electric power industry;
(f) To protect the public interest as it is affected by the rates and services of electric utilities and
other providers of electric power;
(g) To assure socially and environmentally compatible energy sources and infrastructure;
(h) To promote the utilization of indigenous and new and renewable energy resources in power
generation in order to reduce dependence on imported energy;
(i) To provide for an orderly and transparent privatization of the assets and liabilities of the
National Power Corporation (NPC);
(j) To establish a strong and purely independent regulatory body and system to ensure consumer
protection and enhance the competitive operation of the electricity market; and
(k) To encourage the efficient use of energy and other modalities of demand side management.

From the aforementioned purposes, it can be gleaned that the assailed Universal Charge is not a tax, but an
exaction in the exercise of the State's police power. Public welfare is surely promoted.
 53

Moreover, it is a well-established doctrine that the taxing power may be used as an implement of police
power.[38] In Valmonte v. Energy Regulatory Board, et al.[39] and in Gaston v. Republic Planters Bank,[40] this
Court held that the Oil Price Stabilization Fund (OPSF) and the Sugar Stabilization Fund (SSF) were exactions
made in the exercise of the police power. The doctrine was reiterated in Osmea v. Orbos[41] with respect to the
OPSF. Thus, we disagree with petitioners that the instant case is different from the aforementioned
cases. With the Universal Charge, a Special Trust Fund (STF) is also created under the administration of
PSALM.[42] The STF has some notable characteristics similar to the OPSF and the SSF, viz.:

1) In the implementation of stranded cost recovery, the ERC shall conduct a review to determine whether
there is under-recovery or over recovery and adjust (true-up) the level of the stranded cost recovery
charge. In case of an over-recovery, the ERC shall ensure that any excess amount shall be remitted to the
STF. A separate account shall be created for these amounts which shall be held in trust for any future
claims of distribution utilities for stranded cost recovery. At the end of the stranded cost recovery period,
any remaining amount in this account shall be used to reduce the electricity rates to the end-users.[43]
2) With respect to the assailed Universal Charge, if the total amount collected for the same is greater than
the actual availments against it, the PSALM shall retain the balance within the STF to pay for periods where
a shortfall occurs.[44]
3) Upon expiration of the term of PSALM, the administration of the STF shall be transferred to the DOF or any
of the DOF attached agencies as designated by the DOF Secretary.[45]

The OSG is in point when it asseverates:

Evidently, the establishment and maintenance of the Special Trust Fund, under the last paragraph of
Section 34, R.A. No. 9136, is well within the pervasive and non-waivable power and responsibility of the
government to secure the physical and economic survival and well-being of the community, that
comprehensive sovereign authority we designate as the police power of the State.[46]

This feature of the Universal Charge further boosts the position that the same is an exaction imposed primarily
in pursuit of the State's police objectives. The STF reasonably serves and assures the attainment and
perpetuity of the purposes for which the Universal Charge is imposed, i.e., to ensure the viability of the
country's electric power industry.

The Second Issue

The principle of separation of powers ordains that each of the three branches of government has exclusive
cognizance of and is supreme in matters falling within its own constitutionally allocated sphere. A logical
corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as expressed in
the Latin maxim potestas delegata non delegari potest (what has been delegated cannot be delegated). This is
based on the ethical principle that such delegated power constitutes not only a right but a duty to be
performed by the delegate through the instrumentality of his own judgment and not through the intervening
mind of another. [47]

In the face of the increasing complexity of modern life, delegation of legislative power to various specialized
administrative agencies is allowed as an exception to this principle.[48] Given the volume and variety of
interactions in today's society, it is doubtful if the legislature can promulgate laws that will deal adequately
with and respond promptly to the minutiae (details and intricacies) of everyday life.
 54

****
Hence, the need to delegate to administrative bodies - the principal agencies tasked to execute laws in their
specialized fields - the authority to promulgate rules and regulations to implement a given statute and
effectuate its policies. All that is required for the valid exercise of this power of subordinate legislation is that
the regulation be germane to the objects and purposes of the law and that the regulation be not in
contradiction to, but in conformity with, the standards prescribed by the law. These requirements are
denominated as the completeness test and the sufficient standard test.

Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature
such that when it reaches the delegate, the only thing he will have to do is to enforce it.
The second test mandates adequate guidelines or limitations in the law to determine the boundaries of the
delegate's authority and prevent the delegation from running riot.[49]

The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is complete
in all its essential terms and conditions, and that it contains sufficient standards.

Although Sec. 34 of the EPIRA merely provides that within one (1) year from the effectivity thereof, a Universal
Charge to be determined, fixed and approved by the ERC, shall be imposed on all electricity end-users, and
therefore, does not state the specific amount to be paid as Universal Charge, the amount nevertheless is made
certain by the legislative parameters provided in the law itself. For one, Sec. 43(b)(ii) of the EPIRA provides:

SECTION 43. Functions of the ERC. The ERC shall promote competition, encourage market development,
ensure customer choice and penalize abuse of market power in the restructured electricity industry. In
appropriate cases, the ERC is authorized to issue cease and desist order after due notice and hearing.
Towards this end, it shall be responsible for the following key functions in the restructured industry:

xxxx
(b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance with law, a
National Grid Code and a Distribution Code which shall include, but not limited to the following:

xxxx
(ii) Financial capability standards for the generating companies, the TRANSCO, distribution utilities and
suppliers: Provided, That in the formulation of the financial capability standards, the nature and
function of the entity shall be considered: Provided, further, That such standards are set to ensure that
the electric power industry participants meet the minimum financial standards to protect the public
interest. Determine, fix, and approve, after due notice and public hearings the universal charge, to be
imposed on all electricity end-users pursuant to Section 34 hereof;

Moreover, contrary to the petitioners contention, the ERC does not enjoy a wide latitude of discretion in the
determination of the Universal Charge. Sec. 51(d) and (e) of the EPIRA[50] clearly provides:

SECTION 51. Powers. The PSALM Corp. shall, in the performance of its functions and for the attainment of its
objective, have the following powers:

xxxx

(d) To calculate the amount of the stranded debts and stranded contract costs of NPC which shall form the
basis for ERC in the determination of the universal charge;

(e) To liquidate the NPC stranded contract costs, utilizing the proceeds from sales and other property
contributed to it, including the proceeds from the universal charge.
 55

Thus, the law is complete and passes the first test for valid delegation of legislative power.

As to the second test, this Court had, in the past, accepted as sufficient standards the following: "interest of
law and order;"[51] "adequate and efficient instruction;"[52] "public interest;"[53] "justice and equity;"[54] "public
convenience and welfare;"[55] "simplicity, economy and efficiency;"[56] "standardization and regulation of
medical education;"[57] and "fair and equitable employment practices."[58] Provisions of the EPIRA such as,
among others, to ensure the total electrification of the country and the quality, reliability, security and
affordability of the supply of electric power[59] and watershed rehabilitation and management[60] meet the
requirements for valid delegation, as they provide the limitations on the ERCs power to formulate the IRR.
These are sufficient standards.

It may be noted that this is not the first time that the ERC's conferred powers were challenged. In Freedom
from Debt Coalition v. Energy Regulatory Commission,[61] the Court had occasion to say:

In determining the extent of powers possessed by the ERC, the provisions of the EPIRA must
not be read in separate parts. Rather, the law must be read in its entirety, because a statute is
passed as a whole, and is animated by one general purpose and intent. Its meaning cannot to
be extracted from any single part thereof but from a general consideration of the statute as a
whole. Considering the intent of Congress in enacting the EPIRA and reading the statute in its
entirety, it is plain to see that the law has expanded the jurisdiction of the regulatory body, the
ERC in this case, to enable the latter to implement the reforms sought to be accomplished by
the EPIRA. When the legislators decided to broaden the jurisdiction of the ERC, they did not
intend to abolish or reduce the powers already conferred upon ERC's predecessors. To sustain
the view that the ERC possesses only the powers and functions listed under Section 43 of the
EPIRA is to frustrate the objectives of the law.

In his Concurring and Dissenting Opinion[62] in the same case, then Associate Justice, now Chief Justice,
Reynato S. Puno described the immensity of police power in relation to the delegation of powers to the ERC
and its regulatory functions over electric power as a vital public utility, to wit:

Over the years, however, the range of police power was no longer limited to the preservation of public
health, safety and morals, which used to be the primary social interests in earlier times. Police power now
requires the State to "assume an affirmative duty to eliminate the excesses and injustices that are the
concomitants of an unrestrained industrial economy." Police power is now exerted "to further the public
welfare a concept as vast as the good of society itself." Hence, "police power is but another name for the
governmental authority to further the welfare of society that is the basic end of all government." When
police power is delegated to administrative bodies with regulatory functions, its exercise should be given a
wide latitude. Police power takes on an even broader dimension in developing countries such as ours,
where the State must take a more active role in balancing the many conflicting interests in society. The
Questioned Order was issued by the ERC, acting as an agent of the State in the exercise of police power.
We should have exceptionally good grounds to curtail its exercise. This approach is more compelling in the
field of rate-regulation of electric power rates. Electric power generation and distribution is a traditional
instrument of economic growth that affects not only a few but the entire nation. It is an important factor in
encouraging investment and promoting business. The engines of progress may come to a screeching halt if
the delivery of electric power is impaired. Billions of pesos would be lost as a result of power outages or
unreliable electric power services. The State thru the ERC should be able to exercise its police power with
great flexibility, when the need arises.

This was reiterated in National Association of Electricity Consumers for Reforms v. Energy Regulatory
Commission[63] where the Court held that the ERC, as regulator, should have sufficient power to respond in real
time to changes wrought by multifarious factors affecting public utilities.
 56

From the foregoing disquisitions, we therefore hold that there is no undue delegation of legislative power to
the ERC.

Petitioners failed to pursue in their Memorandum the contention in the Complaint that the imposition of the
Universal Charge on all end-users is oppressive and confiscatory, and amounts to taxation without
representation. Hence, such contention is deemed waived or abandoned per Resolution[64] of August 3,
2004.[65] Moreover, the determination of whether or not a tax is excessive, oppressive or confiscatory is an
issue which essentially involves questions of fact, and thus, this Court is precluded from reviewing the same.[66]
As a penultimate statement, it may be well to recall what this Court said of EPIRA:

One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA. It
established a new policy, legal structure and regulatory framework for the electric power industry.
The new thrust is to tap private capital for the expansion and improvement of the industry as the
large government debt and the highly capital-intensive character of the industry itself have long
been acknowledged as the critical constraints to the program. To attract private investment,
largely foreign, the jaded structure of the industry had to be addressed. While the generation and
transmission sectors were centralized and monopolistic, the distribution side was fragmented with
over 130 utilities, mostly small and uneconomic. The pervasive flaws have caused a low utilization
of existing generation capacity; extremely high and uncompetitive power rates; poor quality of
service to consumers; dismal to forgettable performance of the government power sector; high
system losses; and an inability to develop a clear strategy for overcoming these shortcomings.

Thus, the EPIRA provides a framework for the restructuring of the industry, including the
privatization of the assets of the National Power Corporation (NPC), the transition to a competitive
structure, and the delineation of the roles of various government agencies and the private entities.
The law ordains the division of the industry into four (4) distinct
sectors, namely: generation, transmission, distribution and supply.
Corollarily, the NPC generating plants have to privatized and its transmission business spun off and
privatized thereafter.[67]

Finally, every law has in its favor the presumption of constitutionality, and to justify its nullification, there must
be a clear and unequivocal breach of the Constitution and not one that is doubtful, speculative, or
argumentative.[68] Indubitably, petitioners failed to overcome this presumption in favor of the EPIRA. We find
no clear violation of the Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA and
Rule 18 of its IRR are unconstitutional and void.

WHEREFORE, the instant case is hereby DISMISSED for lack of merit.

SO ORDERED
 57

PEOPLE vs GOZO [53 SCRA 476] (G.R. No. L-36409) Oct. 26, 1973
Principle of Sovereignty as Auto-Limitation

Facts:
Loreta Gozo seeks to set aside a judgment of the Court of First Instance of Zambales, convicting her of a
violation of an ordinance of Olongapo, Zambales, requiring a permit from the municipal mayor for the
construction or erection of a building, as well as any modification, alteration, repair or demolition thereof. She
questions its validity, or at the very least, its applicability to her, by invoking due process citing the case of
People v. Fajardo

She contends that her house was constructed within the naval base leased to the American armed forces
located inside the United States Naval Reservation within the territorial jurisdiction of Olongapo City and
therefore shall be exempted from the Municipal Ordinance No. 14.

Issue:
WON the property of the Appellant shall be exempted from the application of the Municipal Ordinance.

Ruling:
Yes. The appellant’s contention that because her property was located within the naval base leased to the
American armed forces located inside the United States Naval Reservation, she must be entitled of the
exemption from complying with the ordinance was given no merit.
Though the property yielded within the Naval base of US, it is a clear doctrine that the Philippines still
possesses the sovereignty over that area – given the record that it is still a part of its territory. Thus, it can still
enforce its administrative jurisdiction by virtue of its government instrumetalities which the people sojourning
to that territory must always adhere and respect. Citing the case of Reagan vs CIR it states that,
“By the Agreement, it should be noted, the Philippine Government merely consents that the United States
exercises jurisdiction in certain cases. The consent was given purely as a matter of comity, courtesy, or
expediency. The Philippine Government has not abdicated its sovereignty over the bases as part of the
Philippine territory or divested itself completely of jurisdiction over offenses committed therein.
Under the terms of the treaty, the United States Government has prior or preferential but not exclusive
jurisdiction of such offenses. The Philippine Government retains not only jurisdictional rights not granted, but
also all such ceded rights as the United States Military authorities for reasons of their own decline to make use
of. The first proposition is implied from the fact of Philippine sovereignty over the bases; the second from the
express provisions of the treaty.
"Thus, the Philippine jurisdictional right might be diminished but will never disappear.

This manifests the principle of Sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is
the property of a state-force due to which it has the exclusive capacity of legal self-determination and self-
restriction."

A state then, if it chooses to, may refrain from the exercise of what otherwise is illimitable competence.

"WHEREFORE, the appealed decision of November 11, 1969 is affirmed insofar as it found the accused, Loreta
Gozo, guilty beyond reasonable doubt of a violation of Municipal Ordinance No.14, series of 1964 and
sentencing her to pay a fine of P200.00 with subsidiary imprisonment in case of insolvency, and modified
insofar as she is required to demolish the house that is the subject matter of the case, she being given a period
of thirty days from the finality of this decision within which to obtain the required permit. Only upon her
failure to do so will that portion of the appealed decision requiring demolition be enforced. Costs against the
accused.