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G.R. No. 127685 July 23, 1998 NOW, THEREFORE, I, FIDEL V.

RAMOS, President of the


Republic of the Philippines, by virtue of the powers
BLAS F. OPLE, petitioner,
vested in me by law, do hereby direct the following:
vs.
Sec. 1. Establishment of a National Compoterized
RUBEN D. TORRES, ALEXANDER AGUIRRE, HECTOR Identification Reference System. A decentralized
VILLANUEVA, CIELITO HABITO, ROBERT BARBERS, Identification Reference System among the key basic
CARMENCITA REODICA, CESAR SARINO, RENATO services and social security providers is hereby
VALENCIA, TOMAS P. AFRICA, HEAD OF THE NATIONAL established.
COMPUTER CENTER and CHAIRMAN OF THE
Sec. 2. Inter-Agency Coordinating Committee. An Inter-
COMMISSION ON AUDIT, respondents.
Agency Coordinating Committee (IACC) to draw-up the
PUNO, J.: implementing guidelines and oversee the
implementation of the System is hereby created, chaired
The petition at bar is a commendable effort on the part by the Executive Secretary, with the following as
of Senator Blas F. Ople to prevent the shrinking of the members:
right to privacy, which the revered Mr. Justice Brandeis
considered as "the most comprehensive of rights and the Head, Presidential Management Staff
right most valued by civilized men." 1 Petitioner Ople
Secretary, National Economic Development Authority
prays that we invalidate Administrative Order No. 308
entitled "Adoption of a National Computerized Secretary, Department of the Interior and Local
Identification Reference System" on two important Government
constitutional grounds, viz: one, it is a usurpation of the
Secretary, Department of Health
power of Congress to legislate, and two, it impermissibly
intrudes on our citizenry's protected zone of privacy. We Administrator, Government Service Insurance System,
grant the petition for the rights sought to be vindicated
by the petitioner need stronger barriers against further Administrator, Social Security System,
erosion. Administrator, National Statistics Office
A.O. No. 308 was issued by President Fidel V. Ramos On Managing Director, National Computer Center.
December 12, 1996 and reads as follows:
Sec. 3. Secretariat. The National Computer Center (NCC)
ADOPTION OF A NATIONAL COMPUTERIZED is hereby designated as secretariat to the IACC and as
IDENTIFICATION REFERENCE SYSTEM such shall provide administrative and technical support
to the IACC.
WHEREAS, there is a need to provide Filipino citizens and
foreign residents with the facility to conveniently Sec. 4. Linkage Among Agencies. The Population
transact business with basic service and social security Reference Number (PRN) generated by the NSO shall
providers and other government instrumentalities; serve as the common reference number to establish a
linkage among concerned agencies. The IACC Secretariat
WHEREAS, this will require a computerized system to shall coordinate with the different Social Security and
properly and efficiently identify persons seeking basic Services Agencies to establish the standards in the use of
services on social security and reduce, if not totally Biometrics Technology and in computer application
eradicate fraudulent transactions and designs of their respective systems.
misrepresentations;
Sec. 5. Conduct of Information Dissemination
WHEREAS, a concerted and collaborative effort among Campaign. The Office of the Press Secretary, in
the various basic services and social security providing coordination with the National Statistics Office, the GSIS
agencies and other government intrumentalities is and SSS as lead agencies and other concerned agencies
required to achieve such a system; shall undertake a massive tri-media information
dissemination campaign to educate and raise public
awareness on the importance and use of the PRN and the B. A.O. NO. 308 [1996] WAS ISSUED WITHIN THE
Social Security Identification Reference. EXECUTIVE AND ADMINISTRATIVE POWERS OF THE
PRESIDENT WITHOUT ENCROACHING ON THE
Sec. 6. Funding. The funds necessary for the
LEGISLATIVE POWERS OF CONGRESS;
implementation of the system shall be sourced from the
respective budgets of the concerned agencies. C. THE FUNDS NECESSARY FOR THE
IMPLEMENTATION OF THE IDENTIFICATION REFERENCE
Sec. 7. Submission of Regular Reports. The NSO, GSIS
SYSTEM MAY BE SOURCED FROM THE BUDGETS OF THE
and SSS shall submit regular reports to the Office of the
CONCERNED AGENCIES;
President through the IACC, on the status of
implementation of this undertaking. D. A.O. NO. 308 [1996] PROTECTS AN INDIVIDUAL'S
INTEREST IN PRIVACY. 3
Sec. 8. Effectivity. This Administrative Order shall take
effect immediately. We now resolve.

DONE in the City of Manila, this 12th day of December in I


the year of Our Lord, Nineteen Hundred and Ninety-Six.
As is usual in constitutional litigation, respondents raise
(SGD.) FIDEL V. RAMOS the threshold issues relating to the standing to sue of the
petitioner and the justiciability of the case at bar. More
A.O. No. 308 was published in four newspapers of
specifically, respondents aver that petitioner has no legal
general circulation on January 22, 1997 and January 23,
interest to uphold and that the implementing rules of
1997. On January 24, 1997, petitioner filed the instant
A.O. No. 308 have yet to be promulgated.
petition against respondents, then Executive Secretary
Ruben Torres and the heads of the government agencies, These submissions do not deserve our sympathetic ear.
who as members of the Inter-Agency Coordinating Petitioner Ople is a distinguished member of our Senate.
Committee, are charged with the implementation of A.O. As a Senator, petitioner is possessed of the requisite
No. 308. On April 8, 1997, we issued a temporary standing to bring suit raising the issue that the issuance
restraining order enjoining its implementation. of A.O. No. 308 is a usurpation of legislative power. 4 As
taxpayer and member of the Government Service
Petitioner contends:
Insurance System (GSIS), petitioner can also impugn the
A. THE ESTABLISNMENT OF A NATIONAL legality of the misalignment of public funds and the
COMPUTERIZED IDENTIFICATION REFERENCE SYSTEM misuse of GSIS funds to implement A.O. No. 308. 5
REQUIRES A LEGISLATIVE ACT. THE ISSUANCE OF A.O.
The ripeness for adjudication of the Petition at bar is not
NO. 308 BY THE PRESIDENT OF THE REPUBLIC OF THE
affected by the fact that the implementing rules of A.O.
PHILIPPINES IS, THEREFORE, AN UNCONSTITUTIONAL
No. 308 have yet to be promulgated. Petitioner Ople
USURPATION OF THE LEGISLATIVE POWERS OF THE
assails A.O. No. 308 as invalid per se and as infirmed on
CONGRESS OF THE REPUBLIC OF THE PHILIPPINES.
its face. His action is not premature for the rules yet to
B. THE APPROPRIATION OF PUBLIC FUNDS BY THE be promulgated cannot cure its fatal defects. Moreover,
PRESIDENT FOR THE IMPLEMENTATION OF A.O. NO. 308 the respondents themselves have started the
IS AN UNCONSTITUTIONAL USURPATION OF THE implementation of A.O. No. 308 without waiting for the
EXCLUSIVE RIGHT OF CONGRESS TO APPROPRIATE rules. As early as January 19, 1997, respondent Social
PUBLIC FUNDS FOR EXPENDITURE. Security System (SSS) caused the publication of a notice
to bid for the manufacture of the National Identification
C. THE IMPLEMENTATION OF A.O. NO. 308 (ID) card. 6 Respondent Executive Secretary Torres has
INSIDIOUSLY LAYS THE GROUNDWORK FOR A SYSTEM publicly announced that representatives from the GSIS
WHICH WILL VIOLATE THE BILL OF RIGHTS ENSHRINED IN and the SSS have completed the guidelines for the
THE CONSTITUTION. 2 national identification system. 7 All signals from the
Respondents counter-argue: respondents show their unswerving will to implement
A.O. No. 308 and we need not wait for the formality of
A. THE INSTANT PETITION IS NOT A JUSTICIABLE the rules to pass judgment on its constitutionality. In this
CASE AS WOULD WARRANT A JUDICIAL REVIEW;
light, the dissenters insistence that we tighten the rule whole and sees to it that all laws are enforced by the
on standing is not a commendable stance as its result officials and employees of his department. 18 He has
would be to throttle an important constitutional control over the executive department, bureaus and
principle and a fundamental right. offices. This means that he has the authority to assume
directly the functions of the executive department,
II
bureau and office or interfere with the discretion of its
We now come to the core issues. Petitioner claims that officials.19 Corollary to the power of control, the
A.O. No. 308 is not a mere administrative order but a law President also has the duty of supervising the
and hence, beyond the power of the President to issue. enforcement of laws for the maintenance of general
He alleges that A.O. No. 308 establishes a system of peace and public order. Thus, he is granted
identification that is all-encompassing in scope, affects administrative power over bureaus and offices under his
the life and liberty of every Filipino citizen and foreign control to enable him to discharge his duties effectively.
resident, and more particularly, violates their right to 20
privacy.
Administrative power is concerned with the work of
Petitioner's sedulous concern for the Executive not to applying policies and enforcing orders as determined by
trespass on the lawmaking domain of Congress is proper governmental organs. 21 It enables the President
understandable. The blurring of the demarcation line to fix a uniform standard of administrative efficiency and
between the power of the Legislature to make laws and check the official conduct of his agents. 22 To this end,
the power of the Executive to execute laws will disturb he can issue administrative orders, rules and regulations.
their delicate balance of power and cannot be allowed.
Prescinding from these precepts, we hold that A.O. No.
Hence, the exercise by one branch of government of
308 involves a subject that is not appropriate to be
power belonging to another will be given a stricter
covered by an administrative order. An administrative
scrutiny by this Court.
order is:
The line that delineates Legislative and Executive power
Sec. 3. Administrative Orders. — Acts of the President
is not indistinct. Legislative power is "the authority,
which relate to particular aspects of governmental
under the Constitution, to make laws, and to alter and
operation in pursuance of his duties as administrative
repeal them." 8 The Constitution, as the will of the
head shall be promulgated in administrative orders. 23
people in their original, sovereign and unlimited capacity,
has vested this power in the Congress of the Philippines. An administrative order is an ordinance issued by the
9 The grant of legislative power to Congress is broad, President which relates to specific aspects in the
general and comprehensive. 10 The legislative body administrative operation of government. It must be in
possesses plenary power for all purposes of civil harmony with the law and should be for the sole purpose
government. 11 Any power, deemed to be legislative by of implementing the law and carrying out the legislative
usage and tradition, is necessarily possessed by policy. 24 We reject the argument that A.O. No. 308
Congress, unless the Constitution has lodged it implements the legislative policy of the Administrative
elsewhere. 12 In fine, except as limited by the Code of 1987. The Code is a general law and
Constitution, either expressly or impliedly, legislative "incorporates in a unified document the major structural,
power embraces all subjects and extends to matters of functional and procedural principles of governance." 25
general concern or common interest. 13 and "embodies changes in administrative structure and
procedures designed to serve the
While Congress is vested with the power to enact laws,
the President executes the laws. 14 The executive power people." 26 The Code is divided into seven (7) Books:
is vested in the Presidents. 15 It is generally defined as Book I deals with Sovereignty and General
the power to enforce and administer the laws. 16 It is the Administration, Book II with the Distribution of Powers of
power of carrying the laws into practical operation and the three branches of Government, Book III on the Office
enforcing their due observance. 17 of the President, Book IV on the Executive Branch, Book
V on Constitutional Commissions, Book VI on National
As head of the Executive Department, the President is
Government Budgeting, and Book VII on Administrative
the Chief Executive. He represents the government as a
Procedure. These Books contain provisions on the make laws. This is contrary to the established approach
organization, powers and general administration of the defining the traditional limits of administrative
executive, legislative and judicial branches of legislation. As well stated by Fisher: ". . . Many
government, the organization and administration of regulations however, bear directly on the public. It is
departments, bureaus and offices under the executive here that administrative legislation must he restricted in
branch, the organization and functions of the its scope and application. Regulations are not supposed
Constitutional Commissions and other constitutional to be a substitute for the general policy-making that
bodies, the rules on the national government budget, as Congress enacts in the form of a public law. Although
well as guideline for the exercise by administrative administrative regulations are entitled to respect, the
agencies of quasi-legislative and quasi-judicial powers. authority to prescribe rules and regulations is not an
The Code covers both the internal administration of independent source of power to make laws." 28
government, i.e, internal organization, personnel and
III
recruitment, supervision and discipline, and the effects
of the functions performed by administrative officials on Assuming, arguendo, that A.O. No. 308 need not be the
private individuals or parties outside government. 27 subject of a law, still it cannot pass constitutional muster
as an administrative legislation because facially it violates
It cannot be simplistically argued that A.O. No. 308
the right to privacy. The essence of privacy is the "right
merely implements the Administrative Code of 1987. It
to be let alone." 29 In the 1965 case of Griswold v.
establishes for the first time a National Computerized
Connecticut, 30 the United States Supreme Court gave
Identification Reference System. Such a System requires
more substance to the right of privacy when it ruled that
a delicate adjustment of various contending state
the right has a constitutional foundation. It held that
policies — the primacy of national security, the extent of
there is a right of privacy which can be found within the
privacy interest against dossier-gathering by
penumbras of the First, Third, Fourth, Fifth and Ninth
government, the choice of policies, etc. Indeed, the
Amendments, 31 viz:
dissent of Mr. Justice Mendoza states that the A.O. No.
308 involves the all-important freedom of thought. As Specific guarantees in the Bill of Rights have penumbras
said administrative order redefines the parameters of formed by emanations from these guarantees that help
some basic rights of our citizenry vis-a-vis the State as give them life and substance . . . various guarantees
well as the line that separates the administrative power create zones of privacy. The right of association
of the President to make rules and the legislative power contained in the penumbra of the First Amendment is
of Congress, it ought to be evident that it deals with a one, as we have seen. The Third Amendment in its
subject that should be covered by law. prohibition against the quartering of soldiers "in any
house" in time of peace without the consent of the
Nor is it correct to argue as the dissenters do that A.D.
owner is another facet of that privacy. The Fourth
No. 308 is not a law because it confers no right, imposes
Amendment explicitly affirms the ''right of the people to
no duty, affords no proctection, and creates no office.
be secure in their persons, houses and effects, against
Under A.O. No. 308, a citizen cannot transact business
unreasonable searches and seizures." The Fifth
with government agencies delivering basic services to
Amendment in its Self-Incrimination Clause enables the
the people without the contemplated identification card.
citizen to create a zone of privacy which government may
No citizen will refuse to get this identification card for no
not force him to surrender to his detriment. The Ninth
one can avoid dealing with government. It is thus clear as
Amendment provides: "The enumeration in the
daylight that without the ID, a citizen will have difficulty
Constitution, of certain rights, shall not be construed to
exercising his rights and enjoying his privileges. Given this
deny or disparage others retained by the people."
reality, the contention that A.O. No. 308 gives no right
and imposes no duty cannot stand.

In the 1968 case of Morfe v. Mutuc, 32 we adopted the


Griswold ruling that there is a constitutional right to
Again, with due respect, the dissenting opinions unduly
privacy. Speaking thru Mr. Justice, later Chief Justice,
expand the limits of administrative legislation and
Enrique Fernando, we held:
consequently erodes the plenary power of Congress to
xxx xxx xxx Sec. 2. The right of the people to be secure in their
persons, houses papers, and effects against
The Griswold case invalidated a Connecticut statute
unreasonable searches and seizures of whatever nature
which made the use of contraceptives a criminal offence
and for any purpose shall be inviolable, and no search
on the ground of its amounting to an unconstitutional
warrant or warrant of arrest shall issue except upon
invasion of the right of privacy of married persons;
probable cause to be determined personally by the judge
rightfully it stressed "a relationship lying within the zone
after examination under oath or affirmation of the
of privacy created by several fundamental constitutional
complainant and the witnesses he may produce, and
guarantees." It has wider implications though. The
particularly describing the place to be searched and the
constitutional right to privacy has come into its own.
persons or things to be seized.
So it is likewise in our jurisdiction. The right to privacy as
xxx xxx xxx
such is accorded recognition independently of its
identification with liberty; in itself, it is fully deserving of Sec. 6. The liberty of abode and of changing the same
constitutional protection. The language of Prof. Emerson within the limits prescribed by law shall not be impaired
is particularly apt: "The concept of limited government except upon lawful order of the court. Neither shall the
has always included the idea that governmental powers right to travel be impaired except in the interest of
stop short of certain intrusions into the personal life of national security, public safety, or public health as may
the citizen. This is indeed one of the basic distinctions be provided by law.
between absolute and limited government. Ultimate and
xxx xxx xxx
pervasive control of the individual, in all aspects of his
life, is the hallmark of the absolute state. In contrast, a Sec. 8. The right of the people, including those
system of limited government safeguards a private employed in the public and private sectors, to form
sector, which belongs to the individual, firmly unions, associations, or societies for purposes not
distinguishing it from the public sector, which the state contrary to law shall not be abridged.
can control. Protection of this private sector —
protection, in other words, of the dignity and integrity of Sec. 17. No person shall be compelled to be a witness
the individual — has become increasingly important as against himself.
modern society has developed. All the forces of a Zones of privacy are likewise recognized and protected in
technological age — industrialization, urbanization, and our laws. The Civil Code provides that "[e]very person
organization — operate to narrow the area of privacy shall respect the dignity, personality, privacy and peace
and facilitate intrusion into it. In modern terms, the of mind of his neighbors and other persons" and
capacity to maintain and support this enclave of private punishes as actionable torts several acts by a person of
life marks the difference between a democratic and a meddling and prying into the privacy of another. 35 It
totalitarian society." also holds a public officer or employee or any private
Indeed, if we extend our judicial gaze we will find that the individual liable for damages for any violation of the
right of privacy is recognized and enshrined in several rights and liberties of another person, 36 and recognizes
provisions of our Constitution. 33 It is expressly the privacy of letters and other private communications.
recognized in section 3 (1) of the Bill of Rights: 37 The Revised Penal Code makes a crime the violation
of secrets by an officer, 38 the revelation of trade and
Sec. 3. (1) The privacy of communication and industrial secrets, 39 and trespass to dwelling. 40
correspondence shall be inviolable except upon lawful Invasion of privacy is an offense in special laws like the
order of the court, or when public safety or order Anti-Wiretapping Law, 41 the Secrecy of Bank Deposits
requires otherwise as prescribed by law. Act 42 and the Intellectual Property Code. 43 The Rules
of Court on privileged communication likewise recognize
Other facets of the right to privacy are protectad in
the privacy of certain information. 44
various provisions of the Bill of Rights, viz: 34
Unlike the dissenters, we prescind from the premise that
Sec. 1. No person shall be deprived of life, liberty, or
the right to privacy is a fundamental right guaranteed by
property without due process of law, nor shall any
the Constitution, hence, it is the burden of government
person be denied the equal protection of the laws.
to show that A.O. No. 308 is justified by some compelling the eye. This technology produces a unique print similar
state interest and that it is narrowly drawn. A.O. No. 308 to a finger print. 51 Another biometric method is known
is predicated on two considerations: (1) the need to as the "artificial nose." This device chemically analyzes
provides our citizens and foreigners with the facility to the unique combination of substances excreted from the
conveniently transact business with basic service and skin of people. 52 The latest on the list of biometric
social security providers and other government achievements is the thermogram. Scientists have found
instrumentalities and (2) the need to reduce, if not totally that by taking pictures of a face using infra-red cameras,
eradicate, fraudulent transactions and a unique heat distribution pattern is seen. The different
misrepresentations by persons seeking basic services. It densities of bone, skin, fat and blood vessels all
is debatable whether these interests are compelling contribute to the individual's personal "heat signature."
enough to warrant the issuance of A.O. No. 308. But what 53
is not arguable is the broadness, the vagueness, the
In the last few decades, technology has progressed at a
overbreadth of A.O. No. 308 which if implemented will
galloping rate. Some science fictions are now science
put our people's right to privacy in clear and present
facts. Today, biometrics is no longer limited to the use of
danger.
fingerprint to identify an individual. It is a new science
The heart of A.O. No. 308 lies in its Section 4 which that uses various technologies in encoding any and all
provides for a Population Reference Number (PRN) as a biological characteristics of an individual for
"common reference number to establish a linkage identification. It is noteworthy that A.O. No. 308 does not
among concerned agencies" through the use of state what specific biological characteristics and what
"Biometrics Technology" and "computer application particular biometrics technology shall be used to identify
designs." people who will seek its coverage. Considering the
banquest of options available to the implementors of
Biometry or biometrics is "the science of the applicatin
A.O. No. 308, the fear that it threatens the right to
of statistical methods to biological facts; a mathematical
privacy of our people is not groundless.
analysis of biological data." 45 The term "biometrics" has
evolved into a broad category of technologies which A.O. No. 308 should also raise our antennas for a further
provide precise confirmation of an individual's identity look will show that it does not state whether encoding of
through the use of the individual's own physiological and data is limited to biological information alone for
behavioral characteristics. 46 A physiological identification purposes. In fact, the Solicitor General
characteristic is a relatively stable physical characteristic claims that the adoption of the Identification Reference
such as a fingerprint, retinal scan, hand geometry or System will contribute to the "generation of population
facial features. A behavioral characteristic is influenced data for development planning." 54 This is an admission
by the individual's personality and includes voice print, that the PRN will not be used solely for identification but
signature and keystroke. 47 Most biometric idenfication the generation of other data with remote relation to the
systems use a card or personal identificatin number (PIN) avowed purposes of A.O. No. 308. Clearly, the
for initial identification. The biometric measurement is indefiniteness of A.O. No. 308 can give the government
used to verify that the individual holding the card or the roving authority to store and retrieve information for
entering the PIN is the legitimate owner of the card or a purpose other than the identification of the individual
PIN. 48 through his PRN.

A most common form of biological encoding is finger- The potential for misuse of the data to be gathered under
scanning where technology scans a fingertip and turns A.O. No. 308 cannot be undarplayed as the dissenters do.
the unique pattern therein into an individual number Pursuant to said administrative order, an individual must
which is called a biocrypt. The biocrypt is stored in present his PRN everytime he deals with a government
computer data banks 49 and becomes a means of agency to avail of basic services and security. His
identifying an individual using a service. This technology transactions with the government agency will necessarily
requires one's fingertip to be scanned every time service be recorded — whether it be in the computer or in the
or access is provided. 50 Another method is the retinal documentary file of the agency. The individual's file may
scan. Retinal scan technology employs optical include his transactions for loan availments, income tax
technology to map the capillary pattern of the retina of returns, statement of assets and liabilities,
reimbursements for medication, hospitalization, etc. The graphic threats of the computer revolution. 64 The
more frequent the use of the PRN, the better the chance computer is capable of producing a comprehensive
of building a huge formidable informatin base through dossier on individuals out of information given at
the electronic linkage of the files. 55 The data may be different times and for varied purposes. 65 It can
gathered for gainful and useful government purposes; continue adding to the stored data and keeping the
but the existence of this vast reservoir of personal information up to date. Retrieval of stored date is simple.
information constitutes a covert invitation to misuse, a When information of a privileged character finds its way
temptation that may be too great for some of our into the computer, it can be extracted together with
authorities to resist. 56 other data on the subject. 66 Once extracted, the
information is putty in the hands of any person. The end
We can even grant, arguendo, that the computer data
of privacy begins.
file will be limited to the name, address and other basic
personal infomation about the individual. 57 Even that Though A.O. No. 308 is undoubtedly not narrowly drawn,
hospitable assumption will not save A.O. No. 308 from the dissenting opinions would dismiss its danger to the
constitutional infirmity for again said order does not tell right to privacy as speculative and hypothetical. Again,
us in clear and categorical terms how these information we cannot countenance such a laidback posture. The
gathered shall he handled. It does not provide who shall Court will not be true to its role as the ultimate guardian
control and access the data, under what circumstances of the people's liberty if it would not immediately
and for what purpose. These factors are essential to smother the sparks that endanger their rights but would
safeguard the privacy and guaranty the integrity of the rather wait for the fire that could consume them.
information. 58 Well to note, the computer linkage gives
We reject the argument of the Solicitor General that an
other government agencies access to the information.
individual has a reasonable expectation of privacy with
Yet, there are no controls to guard against leakage of
regard to the Natioal ID and the use of biometrics
information. When the access code of the control
technology as it stands on quicksand. The
programs of the particular computer system is broken,
reasonableness of a person's expectation of privacy
an intruder, without fear of sanction or penalty, can
depends on a two-part test: (1) whether by his conduct,
make use of the data for whatever purpose, or worse,
the individual has exhibited an expectation of privacy;
manipulate the data stored within the system. 59
and (2) whether this expectation is one that society
It is plain and we hold that A.O. No. 308 falls short of recognizes as reasonable. 67 The factual circumstances
assuring that personal information which will be of the case determines the reasonableness of the
gathered about our people will only be processed for expectation. 68 However, other factors, such as customs,
unequivocally specified purposes. 60 The lack of proper physical surroundings and practices of a particular
safeguards in this regard of A.O. No. 308 may interfere activity, may serve to create or diminish this expectation.
with the individual's liberty of abode and travel by 69 The use of biometrics and computer technology in
enabling authorities to track down his movement; it may A.O. No. 308 does not assure the individual of a
also enable unscrupulous persons to access confidential reasonable expectation of privacy. 70 As technology
information and circumvent the right against self- advances, the level of reasonably expected privacy
incrimination; it may pave the way for "fishing decreases. 71 The measure of protection granted by the
expeditions" by government authorities and evade the reasonable expectation diminishes as relevant
right against unreasonable searches and seizures. 61 The technology becomes more widely accepted. 72 The
possibilities of abuse and misuse of the PRN, biometrics security of the computer data file depends not only on
and computer technology are accentuated when we the physical inaccessibility of the file but also on the
consider that the individual lacks control over what can advances in hardware and software computer
be read or placed on his ID, much less verify the technology. A.O. No. 308 is so widely drawn that a
correctness of the data encoded. 62 They threaten the minimum standard for a reasonable expectation of
very abuses that the Bill of Rights seeks to prevent. 63 privacy, regardless of technology used, cannot be
inferred from its provisions.
The ability of sophisticated data center to generate a
comprehensive cradle-to-grave dossier on an individual The rules and regulations to be by the IACC cannot
and transmit it over a national network is one of the most remedy this fatal defect. Rules and regulations merely
implement the policy of the law or order. On its face, A.O. for the authorities to invoke the presumption of
No. gives the IACC virtually infettered discretion to regularity in the performance of official duties. Nor is it
determine the metes and bounds of the ID System. enough for the authorities to prove that their act is not
irrational for a basic right can be diminished, if not
Nor do your present laws prvide adequate safeguards for
defeated, even when the government does not act
a reasonable expectation of privacy. Commonwealth Act.
irrationally. They must satisfactorily show the presence
No. 591 penalizes the disclosure by any person of data
of compelling state interests and that the law, rule or
furnished by the individual to the NSO with
regulation is narrowly drawn to preclude abuses. This
imprisonment and fine. 73 Republic Act. No. 1161
approach is demanded by the 1987 Constitution whose
prohibits public disclosure of SSS employment records
entire matrix is designed to protect human rights and to
and reports. 74 These laws, however, apply to records
prevent authoritarianism. In case of doubt, the least we
and data with the NSO and the SSS. It is not clear whether
can do is to lean towards the stance that will not put in
they may be applied to data with the other government
danger the rights protected by the Constitutions.
agencies forming part of the National ID System. The
need to clarify the penal aspect of A.O. No. 308 is another The case of Whalen v. Roe 79 cited by the Solicitor
reason why its enactment should be given to Congress. General is also off-line. In Whalen, the United States
Supreme Court was presented with the question of
Next, the Solicitor General urges us to validate A.O. No.
whether the State of New York could keep a centralized
308's abridgment of the right of privacy by using the
computer record of the names and addresses of all
rational relationship test. 75 He stressed that the
persons who obtained certain drugs pursuant to a
purposes of A.O. No. 308 are: (1) to streamline and speed
doctor's prescription. The New York State Controlled
up the implementation of basic government services, (2)
Substance Act of 1972 required physicians to identify
eradicate fraud by avoiding duplication of services, and
parties obtaining prescription drugs enumerated in the
(3) generate population data for development planning.
statute, i.e., drugs with a recognized medical use but with
He cocludes that these purposes justify the incursions
a potential for abuse, so that the names and addresses
into the right to privacy for the means are rationally
of the patients can be recorded in a centralized computer
related to the end. 76
file of the State Department of Health. The plaintiffs, who
We are not impressed by the argument. In Morfe v. were patients and doctors, claimed that some people
Mutuc, 77 we upheld the constitutionality of R.A. 3019, might decline necessary medication because of their fear
the Anti-Graft and Corrupt Practices Act, as a valid police that the computerized data may be readily available and
power measure. We declared that the law, in compelling open to public disclosure; and that once disclosed, it may
a public officer to make an annual report disclosing his stigmatize them as drug addicts. 80 The plaintiffs alleged
assets and liabilities, his sources of income and expenses, that the statute invaded a constitutionally protected
did not infringe on the individual's right to privacy. The zone of privacy, i.e., the individual interest in avoiding
law was enacted to promote morality in public disclosure of personal matters, and the interest in
administration by curtailing and minimizing the independence in making certain kinds of important
opportunities for official corruption and maintaining a decisions. The U.S. Supreme Court held that while an
standard of honesty in the public service. 78 individual's interest in avoiding disclosuer of personal
matter is an aspect of the right to privacy, the statute did
The same circumstances do not obtain in the case at bar. not pose a grievous threat to establish a constitutional
For one, R.A. 3019 is a statute, not an administrative violation. The Court found that the statute was necessary
order. Secondly, R.A. 3019 itself is sufficiently detailed. to aid in the enforcement of laws designed to minimize
The law is clear on what practices were prohibited and the misuse of dangerous drugs. The patient-
penalized, and it was narrowly drawn to avoid abuses. IN identification requirement was a product of an orderly
the case at bar, A.O. No. 308 may have been impelled by and rational legislative decision made upon
a worthy purpose, but, it cannot pass constitutional recommmendation by a specially appointed commission
scrutiny for it is not narrowly drawn. And we now hod which held extensive hearings on the matter. Moreover,
that when the integrity of a fundamental right is at stake, the statute was narrowly drawn and contained
this court will give the challenged law, administrative numerous safeguards against indiscriminate disclosure.
order, rule or regulation a stricter scrutiny. It will not do The statute laid down the procedure and requirements
for the gathering, storage and retrieval of the informatin. of the individual, in all aspects of his life, is the hallmark
It ebumerated who were authorized to access the data. of the absolute state. In contrast, a system of limited
It also prohibited public disclosure of the data by government safeguards a private sector, which belongs
imposing penalties for its violation. In view of these to the individual, firmly distinguishing it from the public
safeguards, the infringement of the patients' right to sector, which the state can control. Protection of this
privacy was justified by a valid exercise of police power. private sector — protection, in other words, of the
As we discussed above, A.O. No. 308 lacks these vital dignity and integrity of the individual — has become
safeguards. increasingly important as modern society has developed.
All the forces of a technological age — industrialization,
Even while we strike down A.O. No. 308, we spell out in
urbanization, and organization — operate to narrow the
neon that the Court is not per se agains the use of
area of privacy and facilitate intrusion into it. In modern
computers to accumulate, store, process, retvieve and
terms, the capacity to maintain and support this enclave
transmit data to improve our bureaucracy. Computers
of private life marks the difference between a
work wonders to achieve the efficiency which both
democratic and a totalitarian society. 87
government and private industry seek. Many
information system in different countries make use of IV
the computer to facilitate important social objective,
The right to privacy is one of the most threatened rights
such as better law enforcement, faster delivery of public
of man living in a mass society. The threats emanate from
services, more efficient management of credit and
various sources — governments, journalists, employers,
insurance programs, improvement of
social scientists, etc. 88 In th case at bar, the threat
telecommunications and streamlining of financial
comes from the executive branch of government which
activities. 81 Used wisely, data stored in the computer
by issuing A.O. No. 308 pressures the people to surrender
could help good administration by making accurate and
their privacy by giving information about themselves on
comprehensive information for those who have to frame
the pretext that it will facilitate delivery of basic services.
policy and make key decisions. 82 The benefits of the
Given the record-keeping power of the computer, only
computer has revolutionized information technology. It
the indifferent fail to perceive the danger that A.O. No.
developed the internet, 83 introduced the concept of
308 gives the government the power to compile a
cyberspace 84 and the information superhighway where
devastating dossier against unsuspecting citizens. It is
the individual, armed only with his personal computer,
timely to take note of the well-worded warning of Kalvin,
may surf and search all kinds and classes of information
Jr., "the disturbing result could be that everyone will live
from libraries and databases connected to the net.
burdened by an unerasable record of his past and his
In no uncertain terms, we also underscore that the right limitations. In a way, the threat is that because of its
to privacy does not bar all incursions into individual record-keeping, the society will have lost its benign
privacy. The right is not intended to stifle scientific and capacity to forget." 89 Oblivious to this counsel, the
technological advancements that enhance public service dissents still say we should not be too quick in labelling
and the common good. It merely requires that the law be the right to privacy as a fundamental right. We close with
narrowly focused 85 and a compelling interest justify the statement that the right to privacy was not engraved
such intrusions. 86 Intrusions into the right must be in our Constitution for flattery.
accompanied by proper safeguards and well-defined
IN VIEW WHEREOF, the petition is granted and
standards to prevent unconstitutional invasions. We
Adminisrative Order No. 308 entitled "Adoption of a
reiterate that any law or order that invades individual
National Computerized Identification Reference System"
privacy will be subjected by this Court to strict scrutiny.
declared null and void for being unconstitutional.
The reason for this stance was laid down in Morfe v.
Mutuc, to wit: SO ORDERED.
The concept of limited government has always included
the idea that governmental powers stop short of certain
intrusions into the personal life of the citizen. This is
indeed one of the basic disctinctions between absolute
and limited government. Ultimate and pervasive control
In a disclosure letter dated 5 July 2004, BCI
THIRD DIVISION informed the Philippine Stock Exchange (PSE) that it and
CEMCO HOLDINGS, INC., G.R. No.
its 171815
subsidiary ACC had passed resolutions to sell
Petitioner,
to Cemco BCIsstocks in UCHC equivalent to 21.31% and
- versus - Present:
NATIONAL LIFE INSURANCE COMPANY OF ACCs stocks in UCHC
YNARES-SANTIAGO, J., equivalent to 29.69%.
THE PHILIPPINES, INC., Chairperson,
Respondent. In the PSE Circular for Brokers No. 3146-2004
AUSTRIA-MARTINEZ,
dated 8 July
CHICO-NAZARIO, 2004, it was stated that as a result of
and
NACHURA, JJ.
petitioner Cemcos acquisition of BCI and ACCs shares in
UCHC, petitioners total beneficial ownership, direct and
Promulgated:
indirect, in UCC has increased by 36% and amounted to
at least 53% of the shares of UCC, to wit[4]:
August 7, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Particulars Percentage
- - - - - - - - -x
Existing shares of Cemco in 9%
UCHC
Acquisition 51%
DECISION
by Cemco of BCIs and ACCs
shares in UCHC
Total stocks of Cemco in 60%
CHICO-NAZARIO, J.:
UCHC
Percentage of UCHC 60%
ownership in UCC
This Petition for Review under Rule 45 of the Indirect ownership 36%
Rules of Court seeks to reverse and set aside the 24 of Cemco in UCC
October 2005 Decision[1] and the 6 March 2006 Direct ownership 17%
Resolution[2] of the Court of Appeals in CA-G.R. SP No. of Cemco in UCC
88758 which affirmed the judgment[3] dated 14 February Total ownership of Cemco in 53%
2005 of the Securities and Exchange Commission (SEC) UCC
finding that the acquisition of
petitioner Cemco Holdings, Inc. (Cemco) of the shares of
stock of Bacnotan Consolidated Industries, Inc. (BCI) and As a consequence of this disclosure, the PSE, in a
Atlas Cement Corporation (ACC) in Union Cement letter to the SEC dated 15 July 2004, inquired as to
Holdings Corporation (UCHC) was covered by the whether the Tender Offer Rule under Rule 19 of the
Mandatory Offer Rule under Section 19 of Republic Act Implementing Rules of the Securities Regulation Code is
No. 8799, otherwise known as the Securities Regulation not applicable to the purchase by petitioner of the
Code. majority of shares of UCC.

The Facts In a letter dated 16 July 2004,


Director Justina Callangan of the SECs Corporate Finance
Union Cement Corporation (UCC), a publicly- Department responded to the query of the PSE that
listed company, has two principal stockholders UCHC, a while it was the stance of the department that the tender
non-listed company, with shares amounting to 60.51%, offer rule was not applicable, the matter must still have
and petitioner Cemco with 17.03%. Majority to be confirmed by the SEC en banc.
of UCHCs stocks were owned by BCI with 21.31% and Thereafter, in a subsequent letter dated 27 July
ACC with 29.69%. Cemco, on the other hand, owned 9% 2004, Director Callangan confirmed that the SEC en
of UCHC stocks. banc had resolved that the Cemco transaction was not
covered by the tender offer rule.
On 28 July 2004, feeling aggrieved by the jurisdiction to render the questioned decision and, in any
transaction, respondent National Life Insurance event, Cemcowas barred by estoppel from questioning
Company of the Philippines, Inc., a minority stockholder the SECs jurisdiction. It, likewise, held that the tender
of UCC, sent a letter to Cemco demanding the latter to offer requirement under the Securities Regulation Code
comply with the rule on mandatory tender offer. Cemco, and its Implementing Rules applies to Cemcos purchase
however, refused. of UCHC stocks. The decretal portion of the said Decision
reads:
On 5 August 2004, a Share Purchase Agreement
was executed by ACC and BCI, as sellers, and Cemco, as IN VIEW OF THE FOREGOING,
buyer. the assailed decision of the SEC is
AFFIRMED, and the preliminary
injunction issued by the Court LIFTED.[5]
On 12 August 2004, the transaction was
consummated and closed.
Cemco filed a motion for reconsideration which
was denied by the Court of Appeals.
On 19 August 2004, respondent National Life
Insurance Company of the Philippines, Inc. filed a
Hence, the instant petition.
complaint with the SEC asking it to reverse its 27 July
2004 Resolution and to declare the purchase agreement
In its memorandum, petitioner Cemco raises the
of Cemco void and praying that the mandatory tender
following issues:
offer rule be applied to its UCC shares. Impleaded in the
complaint were Cemco, UCC, UCHC, BCI and ACC, which
I.
were then required by the SEC to file their respective
ASSUMING ARGUENDO THAT THE SEC
comment on the complaint. In their comments, they HAS JURISDICTION OVER NATIONAL
were uniform in arguing that the tender offer rule LIFES COMPLAINT AND THAT THE SECS
applied only to a direct acquisition of the shares of the RE-INTERPRETATION OF THE TENDER
listed company and did not extend to an indirect OFFER RULE IS CORRECT, WHETHER OR
acquisition arising from the purchase of the shares of a NOT THAT REINTERPRETATION CAN BE
holding company of the listed firm. APPLIED RETROACTIVELY TO CEMCOS
PREJUDICE.
In a Decision dated 14 February 2005, the SEC
ruled in favor of the respondent by reversing and setting II.
WHETHER OR NOT THE SEC HAS
aside its 27 July 2004 Resolution and directed
JURISDICTION TO ADJUDICATE THE
petitioner Cemco to make a tender offer for UCC shares DISPUTE BETWEEN THE PARTIES A QUO
to respondent and other holders of UCC shares similar to OR TO RENDER JUDGMENT REQUIRING
the class held by UCHC in accordance with Section 9(E), CEMCO TO MAKE A TENDER OFFER FOR
Rule 19 of the Securities Regulation Code. UCC SHARES.

Petitioner filed a petition with the Court of III.


Appeals challenging the SECs jurisdiction to take
WHETHER OR NOT CEMCOS PURCHASE
cognizance of respondents complaint and its authority to
OF UCHC SHARES IS SUBJECT TO THE
require Cemco to make a tender offer for UCC shares,
TENDER OFFER REQUIREMENT.
and arguing that the tender offer rule does not apply, or
that the SECs re-interpretation of the rule could not be IV.
made to retroactively apply to Cemcos purchase of UCHC WHETHER OR NOT THE SEC DECISION,
shares. AS AFFIRMED BY THE CA DECISION, IS AN
INCOMPLETE JUDGMENT WHICH
The Court of Appeals rendered a decision PRODUCED NO EFFECT.[6]
affirming the ruling of the SEC. It ruled that the SEC has
Petitioner further contends that in the absence
Simply stated, the following are the issues: of any specific grant of jurisdiction by Congress, the SEC
cannot, by mere administrative regulation, confer on
1. Whether or not the SEC has itself that jurisdiction.
jurisdiction over respondents
complaint and to
Petitioners stance fails to persuade.
require Cemco to make a tender
offer for respondents UCC
shares. In taking cognizance of respondents complaint
against petitioner and eventually rendering a judgment
2. Whether or not the rule on which ordered the latter to make a tender offer, the SEC
mandatory tender offer applies was acting pursuant to Rule 19(13) of the Amended
to the indirect acquisition of Implementing Rules and Regulations of the Securities
shares in a listed company, in Regulation Code, to wit:
this case, the indirect acquisition 13. Violation
by Cemco of 36% of UCC, a
publicly-listed company, If there shall be violation of this
through its purchase of the Rule by pursuing a purchase of equity
shares in UCHC, a non-listed shares of a public company at threshold
company. amounts without the required tender
offer, the Commission, upon complaint,
3. Whether or not the may nullify the said acquisition and
questioned ruling of the SEC can direct the holding of a tender offer. This
be applied retroactively shall be without prejudice to the
to Cemcos transaction which imposition of other sanctions under the
was consummated under the Code.
authority of the SECs prior
resolution.
The foregoing rule emanates from the SECs
power and authority to regulate, investigate or supervise
On the first issue, petitioner Cemco contends
the activities of persons to ensure compliance with the
that while the SEC can take cognizance of respondents
Securities Regulation Code, more specifically the
complaint on the alleged violation by
provision on mandatory tender offer under Section 19
petitioner Cemco of the mandatory tender offer
thereof.[7]
requirement under Section 19 of Republic Act No. 8799,
the same statute does not vest the SEC with jurisdiction
Another provision of the statute, which provides
to adjudicate and determine the rights and obligations of
the basis of Rule 19(13) of the Amended Implementing
the parties since, under the same statute, the SECs
Rules and Regulations of the Securities Regulation Code,
authority is purely administrative. Having been vested
is Section 5.1(n), viz:
with purely administrative authority, the SEC can only
impose administrative sanctions such as the imposition [T]he Commission shall have, among
of administrative fines, the suspension or revocation of others, the following powers and
registrations with the SEC, and the like. Petitioner functions:
stresses that there is nothing in the statute which
authorizes the SEC to issue orders granting xxxx
affirmative reliefs. Since the SECs order commanding it
(n) Exercise such other powers
to make a tender offer is an affirmative relief fixing the
as may be provided by law as well as
respective rights and obligations of parties, such order is
those which may be implied from, or
void. which are necessary or incidental to the
carrying out of, the express powers
granted the Commission to achieve the For sure, the SEC has the authority to promulgate
objectives and purposes of these laws. rules and regulations, subject to the limitation that the
same are consistent with the declared policy of the
Code. Among them is the protection of the investors and
The foregoing provision bestows upon the SEC
the minimization, if not total elimination, of fraudulent
the general adjudicative power which is implied from the
and manipulative devises. Thus, Subsection 5.1(g) of the
express powers of the Commission or which is incidental
law provides:
to, or reasonably necessary to carry out, the
performance of the administrative duties entrusted to Prepare, approve, amend or
it. As a regulatory agency, it has the incidental power to repeal rules, regulations and orders, and
conduct hearings and render decisions fixing the rights issue opinions and provide guidance on
and obligations of the parties. In fact, to deprive the SEC and supervise compliance with such
of this power would render the agency inutile, because it rules, regulations and orders.
would become powerless to regulate and implement the
law. As correctly held by the Court of Appeals:
Also, Section 72 of the Securities Regulation
We are nonetheless convinced Code reads:
that the SEC has the competence to
render the particular decision it made in 72.1. x x x To effect the
this case. A definite inference may be provisions and purposes of this Code,
drawn from the provisions of the SRC the Commission may issue, amend, and
that the SEC has the authority not only rescind such rules and regulations and
to investigate complaints of violations of orders necessary or appropriate, x x x.
the tender offer rule, but to adjudicate
certain rights and obligations of the 72.2. The Commission shall
contending parties and grant promulgate rules and regulations
appropriate reliefs in the exercise of its providing for reporting, disclosure and
regulatory functions under the the prevention of fraudulent, deceptive
SRC. Section 5.1 of the SRC allows a or manipulative practices in connection
general grant of adjudicative powers to with the purchase by an issuer, by tender
the SEC which may be implied from or offer or otherwise, of and equity security
are necessary or incidental to the of a class issued by it that satisfies the
carrying out of its express powers to requirements of Subsection 17.2. Such
achieve the objectives and purposes of rules and regulations may require such
the SRC. We must bear in mind in issuer to provide holders of equity
interpreting the powers and functions of securities of such dates with such
the SEC that the law has made the SEC information relating to the reasons for
primarily a regulatory body with the such purchase, the source of funds, the
incidental power to conduct number of shares to be purchased, the
administrative hearings and make price to be paid for such securities, the
decisions. A regulatory body like the SEC method of purchase and such additional
may conduct hearings in the exercise of information as the Commission deems
its regulatory powers, and if the case necessary or appropriate in the public
involves violations or conflicts in interest or for the protection of
connection with the performance of its investors, or which the Commission
regulatory functions, it will have the duty deems to be material to a determination
and authority to resolve the dispute for by holders whether such security should
the best interests of the public.[8] be sold.

The power conferred upon the SEC to


promulgate rules and regulations is a legislative
recognition of the complexity and the constantly- Honorable Commission rendered the
fluctuating nature of the market and the impossibility of Ruling that the acquisition
foreseeing all the possible contingencies that cannot be of Cemco Holdings of the majority
shares of Union Cement Holdings, Inc., a
addressed in advance. As enunciated in Victorias Milling
substantial stockholder of a listed
Co., Inc. v. Social Security Commission[9]: company, Union Cement Corporation, is
not covered by the mandatory tender
Rules and regulations when offer requirement of the SRC Rule 19, it
promulgated in pursuance of the was well within its powers and expertise
procedure or authority conferred upon to do so. Such ruling shall be respected,
the administrative agency by law, unless there has been an abuse or
partake of the nature of a statute, and improvident exercise of authority.[10]
compliance therewith may be enforced
by a penal sanction provided in the
law. This is so because statutes are
Petitioner did not question the jurisdiction of the
usually couched in general terms, after
SEC when it rendered an opinion favorable to it, such as
expressing the policy, purposes,
objectives, remedies and sanctions the 27 July 2004 Resolution, where the SEC opined that
intended by the legislature. The details the Cemco transaction was not covered by the
and the manner of carrying out the law mandatory tender offer rule. It was only when the case
are often times left to the administrative was before the Court of Appeals and after the SEC
agency entrusted with its rendered an unfavorable judgment against it that
enforcement. In this sense, it has been petitioner challenged the SECs competence. As
said that rules and regulations are the articulated in Ceroferr Realty Corporation v. Court of
product of a delegated power to create
Appeals[11]:
new or additional legal provisions that
have the effect of law.
While the lack of jurisdiction of a
court may be raised at any stage of an
action, nevertheless, the party raising
Moreover, petitioner is barred from questioning
such question may be estopped if he has
the jurisdiction of the SEC. It must be pointed out that actively taken part in the very
petitioner had participated in all the proceedings before proceedings which he questions and he
the SEC and had prayed for affirmative relief. In fact, only objects to the courts jurisdiction
petitioner defended the jurisdiction of the SEC in its because the judgment or the order
Comment dated 15 September 2004, filed with the SEC subsequently rendered is adverse to
wherein it asserted: him.

This Honorable Commission is a


highly specialized body created for the On the second issue, petitioner asserts that the
purpose of administering, overseeing, mandatory tender offer rule applies only to direct
and managing the corporate industry, acquisition of shares in the public company.
share investment and securities market
in the Philippines. By the very nature of This contention is not meritorious.
its functions, it dedicated to the study
and administration of the corporate and
Tender offer is a publicly announced intention by
securities laws and has necessarily
developed an expertise on the a person acting alone or in concert with other persons to
subject. Based on said functions, the acquire equity securities of a public company.[12] A public
Honorable Commission is necessarily company is defined as a corporation which is listed on an
tasked to issue rulings with respect to exchange, or a corporation with assets
matters involving corporate matters and exceeding P50,000,000.00 and with 200 or more
share acquisitions. Verily when this stockholders, at least 200 of them holding not less than
100 shares of such company.[13] Stated differently, a Under existing SEC Rules,[16] the 15% and 30%
tender offer is an offer by the acquiring person to threshold acquisition of shares under the foregoing
stockholders of a public company for them to tender provision was increased to thirty-five percent (35%). It is
their shares therein on the terms specified in the further provided therein that mandatory tender offer is
offer.[14] Tender offer is in place to protect minority still applicable even if the acquisition is less than 35%
shareholders against any scheme that dilutes the share when the purchase would result in ownership of over
value of their investments. It gives the minority 51% of the total outstanding equity securities of the
shareholders the chance to exit the company under public company.[17]
reasonable terms, giving them the opportunity to sell
their shares at the same price as those of the majority The SEC and the Court of Appeals ruled that the
shareholders.[15] indirect acquisition by petitioner of 36% of UCC shares
through the acquisition of the non-listed UCHC shares is
Under Section 19 of Republic Act No. 8799, it is covered by the mandatory tender offer rule.
stated: This interpretation given by the SEC and the
Court of Appeals must be sustained.
Tender Offers. 19.1. (a) Any
person or group of persons acting in The rule in this jurisdiction is that the
concert who intends to acquire at least construction given to a statute by an administrative
fifteen percent (15%) of any class of any
agency charged with the interpretation and application
equity security of a listed corporation or
of any class of any equity security of a of that statute is entitled to great weight by the courts,
corporation with assets of at least Fifty unless such construction is clearly shown to be in sharp
million pesos (P50,000,000.00) and contrast with the governing law or statute.[18] The
having two hundred (200) or more rationale for this rule relates not only to the emergence
stockholders with at least one hundred of the multifarious needs of a modern or modernizing
(100) shares each or who intends to society and the establishment of diverse administrative
acquire at least thirty percent (30%) of agencies for addressing and satisfying those needs; it
such equity over a period of twelve (12)
also relates to accumulation of experience and growth of
months shall make a tender offer to
specialized capabilities by the administrative agency
stockholders by filing with the
Commission a declaration to that effect; charged with implementing a particular statute.[19]
and furnish the issuer, a statement
containing such of the information The SEC and the Court of Appeals accurately
required in Section 17 of this Code as the pointed out that the coverage of the mandatory tender
Commission may prescribe. Such person offer rule covers not only direct acquisition but also
or group of persons shall publish all indirect acquisition or any type of acquisition. This is
requests or invitations for tender, or clear from the discussions of the Bicameral Conference
materials making a tender offer or
Committee on the Securities Act of 2000, on 17 July
requesting or inviting letters of such a
2000.
security. Copies of any additional
material soliciting or requesting such
tender offers subsequent to the initial SEN. S.
solicitation or request shall contain such OSMEA. Eto ang mangyayari diyan,
information as the Commission may eh. Somebody controls 67% of the
prescribe, and shall be filed with the Company. Of course, he will pay a
Commission and sent to the issuer not premium for the first 67%. Control yan,
later than the time copies of such eh. Eh, kawawa yung mgamaiiwan, ang
materials are first published or sent or 33% because the value of the stock
given to security holders. market could go down, could go down
after that, because there will (p. 41) be
no more
market. Wala nang gustong bumenta.
Wala nang I company and for the purpose of protecting the minority
mean maraming gustong bumenta, wal stockholders of a listed corporation. Whatever may be
ang gustong bumili kung hindi yung maj the method by which control of a public company is
ority owner. And they will not buy. They
obtained, either through the direct purchase of its stocks
already have 67%. They already have
control. And this protects the or through an indirect means, mandatory tender offer
minority.And we have had a case applies. As appropriately held by the Court of Appeals:
in Cebu wherein Ayala A who already
owned 40% of Ayala B made an offer for The petitioner posits that what it
another 40% of Ayala B without offering acquired were stocks of UCHC and not
the UCC. By happenstance, as a result of the
20%. Kawawa naman yung nakahawakn transaction, it became an indirect owner
gayon ng 20%. Ang baba ng share sa ma of UCC. We are constrained, however, to
rket. But we did not have a law construe ownership acquisition to mean
protecting them at that time. both direct and indirect. What is decisive
is the determination of the power of
CHAIRMAN ROCO. So what is it control. The legislative intent behind the
that you want to achieve? tender offer rule makes clear that the
SEN. S. OSMEA. That if a certain type of activity intended to be regulated
group achieves a certain amount of is the acquisition of control of the listed
ownership in a corporation, yeah, he is company through the purchase of
obligated to buy anybody who wants to shares. Control may [be] effected
sell. through a direct and indirect acquisition
of stock, and when this takes place,
CHAIRMAN ROCO. Pro-rata lang. irrespective of the means, a tender offer
(p. 42). must occur. The bottomline of the law is
to give the shareholder of the listed
xxxx company the opportunity to decide
whether or not to sell in connection with
REP. TEODORO. As long as it a transfer of control. x x x.[21]
reaches 30, ayan na. Any type of
acquisition just as long as it will result in
30 (p.50) reaches 30, ayan na. Any type As to the third issue, petitioner stresses that the
of acquisition just as long as it will result ruling on mandatory tender offer rule by the SEC and the
in 30, general tender, pro- Court of Appeals should not have retroactive effect or be
[20]
rata. (Emphasis supplied.) made to apply to its purchase of the UCHC shares as it
relied in good faith on the letter dated 27 July 2004 of the
SEC which opined that the proposed acquisition of the
Petitioner counters that the legislators reference
UCHC shares was not covered by the mandatory offer
to any type of acquisition during the deliberations on the
rule.
Securities Regulation Code does not indicate that
congress meant to include the indirect acquisition of
The argument is not persuasive.
shares of a public corporation to be covered by the
tender offer rule. Petitioner also avers that it did not
The action of the SEC on the PSE request for
directly acquire the shares in UCC and the incidental
opinion on the Cemco transaction cannot be construed
benefit of having acquired the control of the said public
as passing merits or giving approval to the questioned
company must not be taken against it.
transaction. As aptly pointed out by the respondent, the
letter dated 27 July 2004 of the SEC was nothing but an
These arguments are not convincing. The
approval of the draft letter prepared by
legislative intent of Section 19 of the Code is to regulate
Director Callanga. There was no public hearing where
activities relating to acquisition of control of the listed
interested parties could have been heard. Hence, it was
not issued upon a definite and concrete controversy mere academic exercise with the result
affecting the legal relations of parties thereby making it that the doctrine laid down would be no
a judgment conclusive on all the parties. Said letter was more than a dictum and would deprive
the holding in the case of any force.
merely advisory. Jurisprudence has it that an advisory
opinion of an agency may be stricken down if it deviates Indeed, when the Court
from the provision of the statute.[22] Since the letter formulated the Wenphil doctrine, which
dated 27 July 2004 runs counter to the Securities we reversed in this case, the Court did
Regulation Code, the same may be disregarded as what not defer application of the rule laid
the SEC has done in its decision dated 14 February 2005. down imposing a fine on the employer
for failure to give notice in a case of
Assuming arguendo that the letter dated 27 July dismissal for cause. To the contrary, the
2004 constitutes a ruling, the same cannot be utilized to new rule was applied right then and
there. x x x.
determine the rights of the parties. What is to be applied
in the present case is the subsequent ruling of the SEC
dated 14 February 2005 abandoning the opinion Lastly, petitioner alleges that the decision of the
embodied in the letter dated 27 July 2004. In Serrano v. SEC dated 14 February 2005 is incomplete and produces
National Labor Relations Commission,[23] an argument no effect.
was raised similar to the case under
consideration. Private respondent therein argued that This contention is baseless.
the new doctrine pronounced by the Court should only
be applied prospectively. Said postulation was ignored The decretal portion of the SEC decision states:
by the Court when it ruled:
In view of the foregoing, the
While a judicial interpretation letter of the Commission, signed by
becomes a part of the law as of the date Director Justina F. Callangan, dated July
that law was originally passed, this is 27, 2004, addressed to the Philippine
subject to the qualification that when a Stock Exchange is hereby REVERSED and
doctrine of this Court is overruled and a SET ASIDE. Respondent Cemco is hereby
different view is adopted, and more so directed to make a tender offer for UCC
when there is a reversal thereof, the new shares to complainant and other holders
doctrine should be applied prospectively of UCC shares similar to the class held by
and should not apply to parties who respondent UCHC, at the highest price it
relied on the old doctrine and acted in paid for the beneficial ownership in
good faith. To hold otherwise would be respondent UCC, strictly in accordance
to deprive the law of its quality of with SRC Rule 19, Section 9(E).[24]
fairness and justice then, if there is no
recognition of what had transpired prior
to such adjudication. A reading of the above ruling of the SEC reveals
that the same is complete. It orders the conduct of a
It is apparent that private
respondent misconceived the import of mandatory tender offer pursuant to the procedure
the ruling. The decision in Columbia provided for under Rule 19(E) of the Amended
Pictures does not mean that if a new rule Implementing Rules and Regulations of the Securities
is laid down in a case, it should not be Regulation Code for the highest price paid for the
applied in that case but that said rule beneficial ownership of UCC shares. The price, on the
should apply prospectively to cases basis of the SEC decision, is determinable. Moreover, the
arising afterwards. Private respondents implementing rules and regulations of the Code are
view of the principle of prospective
sufficient to inform and guide the parties on how to
application of new judicial doctrines
proceed with the mandatory tender offer.
would turn the judicial function into a
WHEREFORE, the Decision and Resolution of the and contractual employees paid from the regular lump-
sum appropriation are covered under RA 8291,
Court of Appeals dated 24 October 2005 and 6 March contractual employees who were hired co-terminus with
2006, respectively, affirming the Decision dated 14 projects and are receiving additional 20% pay were
not.2 The GSIS communicated SVP Patag's view to the
February 2005 of the Securities and Exchange DENR in a letter dated January 12, 1998.3 cralawredna d

Commission En Banc, are hereby AFFIRMED. Costs


On April 30, 1999, the GSIS and the Department of
against petitioner. Budget and Management (DBM) issued Joint Circular No.
99-3 ("JC No. 99-3") which set forth the guidelines in the
SO ORDERED. payment of the government statutory expenditures on
personal services of contractual employees.4 JC No. 99-3
provided:Cha nRoblesv irt ual Lawlib rary

THIRD DIVISION xxx

G.R. No. 153810, August 12, 2015 4.0 Guidelines

4.1 Effective January 1, 1999, the required


WINSTON R. GARCIA, IN HIS CAPACITY AS government share of premiums on RLIP, ECIP,
PRESIDENT AND GENERAL MANAGER OF THE MEDICARE and PAG-IBIG of contractual personnel
GOVERNMENT SERVICE INSURANCE SYSTEM shall be paid out of the 20% premium given them
(GSIS), Petitioners, v. ANGELITA TOLENTINO, pursuant to Section 44 of the 1999 GAA.
EDELITO ZOLLO EDRALINDA, KATHLYN A. UMALI,
VIVIAN ROSIELLE CERVANTES, EDITH MEDINA, 4.2 No additional funds shall be released by the DBM for
ROMELO CABANGON, ET AL., Respondents. the purpose. The premium pay to be received by a
contractual employee shall be adjusted accordingly net of
[G.R. NO. 167297] the government statutory expenditures on Personal
Services consistent with Item 4.1 above.
MELINA I. GARCIA, CECILIA V. LAS, NIMFA
PENALOSA, ROSANA R. ZEPEDA, RACHELLE L. 4.3 It is understood that the employee's share for RLIP,
JACOB, MARIBEL B. TENA, AND EDUVIGIS S. MEDICARE and PAG-IBIG shall be paid by the individual
ANGELES (IN LIEU OF ANGELITA TOLENTINO FOR contractual employees.
THE NATIONAL FORESTATION DEVELOPMENT
OFFICE-DEPARTMENT OF ENVIRONMENT AND xxx
NATURAL RESOURCES, ET
AL.), Petitioners, v. WINSTON GARCIA, ET (Emphasis supplied.)
AL., Respondents.

The DENR, through a Memorandum dated September 16,


DECISION
1999, accordingly informed its Project/Program Directors
that deductions from the premium pay shall be "reflected
JARDELEZA, J.: in the payroll starting October 1999 to include arrearages
for the months of January to September 1999."5 On
Before us are consolidated cases originating from October 4, 1999, Tolentino et al., again, wrote to the
the Decision1 dated March 11, 2002 rendered by Branch GSIS6 and the DENR7 requesting the deferment of the
88 of the Regional Trial Court of Quezon City in Civil Case deduction of the monthly GSIS contributions pending
No. Q-99-39153 which annulled Joint Circular No. 99-3 for resolution of the issue regarding their membership
violating Republic Act No. 8291, otherwise known as "The coverage.
Government Service Insurance System Act of 1997" (RA
8291). Before the concerned government agencies could act on
their letters, Tolentino et al., on October 28, 1999, filed a
Case Antecedents Petition for Certiorari and Prohibition with very Urgent
Prayer for a Temporary Restraining Order and Writ of
Enacted by Congress on May 30, 1997, RA 8291 provided Preliminary Injunction8 against then GSIS President and
for, among others, the compulsory Government Service General Manager Frederico C. Pascual ("Pascual"), then
Insurance System (GSIS) coverage of all government Secretary of Budget and Management Benjamin E. Diokno
employees, regardless of employment status. ("Diokno") and then Secretary of Environment and Natural
Resources Antonio H. Cerilles (Cerilles), among others.
Tolentino et al., all contractual employees of the various This case, entitled Angelita Tolentino, et al., v. Frederico
projects and programs within and under the control and Pascual et al.,9 was docketed as Civil Case No. Q-99-
supervision of the Department of Environment and Natural 39153.
Resources (DENR), wrote the GSIS to inquire about their
standing, since, prior to RA 8291, they were not under In their petition before the trial court, Tolentino et
compulsory GSIS coverage. al. essentially argued that "the GSIS and the DBM
committed grave abuse of discretion in ordering the
The GSIS, in a letter dated January 8, 1998 through its government's share on GSIS contributions to be paid out
Senior Vice President for the Social Insurance Group of the 20% premium on the monthly salary of contractual
Lourdes G. Patag ("SVP Patag"), advised that while casual employees."10 cra lawredna d
In his Answer11 and Motion to Dismiss,12 Pascual pleaded WHEREFORE, premises considered, the GSIS-DBM Joint
that the trial court did not have jurisdiction over the case Circular No. 99-3 is hereby annulled for being contrary to
because RA 8291 vests in the GSIS the original and law. The preliminary injunction previously issued is hereby
exclusive jurisdiction to settle any dispute arising under made permanent.
the said Act.13 This motion was, however, denied by the
RTC in an Order dated July 24, 2000.14 Meanwhile, the SO ORDERED.17 cralawrednad

concerned DENR officials argued that they cannot be held


to have acted with grave abuse of discretion because they (Emphasis and underscoring supplied.)
merely implemented JC No. 99-3.15 cra lawredna d

The DBM and the GSIS each filed their respective Motions
Ruling of the trial court for Reconsideration18 but these were denied by the RTC in
an Order dated May 27, 2002.19 The DBM filed a Notice of
On August 29, 2000, the trial court issued a writ of Appeal20 of the trial court'sDecision. Its appeal was
preliminary injunction restraining the concerned docketed with the Court of Appeals as CA-G.R. SP No.
government agencies from implementing JC No. 99- 72089. The GSIS, on the other hand, filed a Petition for
3.16 Subsequently, or on March 11, 2001, the trial court Review on Certiorari, docketed as G.R.No. 153810, before
rendered a Decision making permanent the preliminary this Court.21 In a Resolution dated November 10,
injunction it issued earlier. It ruled thus: ChanRoblesvi rt ualLaw lib rary

2003,22 we referred G.R. No. 153810 to the Court of


Appeals for consolidation with CA-G.R. SP No. 72089.
xxx the Court finds merit in the petitioners'
contention that indeed the joint circular runs afoul of Proceedings before the Court of Appeals
the provisions of RA 8291. xxx
On February 7, 2003, the Court of Appeals issued a
Under this circular, the contractual personnel shall in Resolution directing the Office of the Solicitor General
effect be paying the government's share of the (OSG) to comment on whether the DBM's appeal may be
contributions inasmuch as no additional funds shall be given due course.23
appropriated for the purpose. This is a clear contravention
c ralawred nad

of the very law it seeks to implement. The OSG, in its Manifestation and Motion (In Lieu of
Comment) dated July 1, 2003,24 argued that the trial
GSIS as an administrative agency vested with quasi court exceeded its jurisdiction in taking cognizance of
legislative powers shall exercise such delegated legislative Tolentino et al.'s petition "considering the subject matter
power with no discretion as to what the law shall be, but thereof pertains to the original and exclusive jurisdiction
merely the authority to fix the details in the execution of of the GSIS."25 Moreover, the OSG asserted that even
enforcement of a policy set out in the law itself.
cralawred

assuming arguendo that the trial court had jurisdiction


over the subject matter of Tolentino et al.'s petition, the
xxx government could legally "rechannel" the funds provided
for said purpose in the 1999 General Appropriations Act
Clearly, the joint circular had been issued with grave (GAA) "to answer the government share of the GSIS
abuse of discretion amounting to lack or excess of contributions for that same year."26 cralawredna d

jurisdiction for being violative of the letter of the law it


seeks to implement. "Indeed, administrative regulations On February 10, 2004, the Court of Appeals rendered
must not override, but must remain consistent with the its Decision27 reversing that of the trial court. The decretal
law they seek to apply and implement. They are intended portion of its Decision reads: ChanRoblesvi rt ualLaw lib rary

to carry out, not to supplant nor to modify the law."


(Commissioner of Internal Revenue vs. Court of Appeals, WHEREFORE, the assailed Decision dated March 11, 2002,
240 SCRA 149) and the Order dated May 27, 2002 denying the Motion for
Reconsideration of the said Decision, in Civil Case No. Q-
Finally, respondents assail the jurisdiction of this Court 99-39153 of Branch 88 of the Regional Trial Court of
citing Sec. 30 of RA 8291 and Sec. 14.1 and 14.3 of the Quezon City are hereby ANNULLED and SET ASIDE, and a
Implementing Rules. Granting arguendo tbat the GSIS new one is entered DISMISSING the petition for lack of
has primary jurisdiction over the instant case as it merit, prematurity and lack of cause of action.
appears that petitioners did not avail nor exhaust
the administrative remedies by not moving for the SO ORDERED.28
reconsideration of their coverage under RA
8291, the Court, however, deemed it just and
equitable under the circumstances to give due Tolentino et al. sought reconsideration,29 but their motion
course to the instant petition because the was denied by the Court of Appeals in
petitioners bad no other speedy and adequate its Resolution30 dated February 23, 2005. Hence, G.R. No.
remedy available to them in view of the impending 16729731 was filed before this Court seeking the review,
implementation of the questioned circular. on certiorari, of the Court of
Appeals' Decision and Resolution.
Moreover, the Court's act to take cognizance of the instant
case finds justification in the provisions of the (sic) par. 2, Issues
Sec. 1, Article II of the 1987 Constitution which
provides:Cha nRoblesvi rtua lLaw lib rary The issues, as raised in the pleadings, are as follows: ChanRoble svirtual Lawlib rary

xxx
1. Whether or not the GSIS is guilty of jurisdiction. The four other banks which were part of the
forum-shopping;32 c ralawre dnad consortium, filed their notice of appeal under date of
March 16, 1990, furnishing a copy thereof upon the
2. Whether or not the trial court had lawyers of petitioner. The petition for certiorari in the
jurisdiction to resolve the petition filed by present case was tiled on April 10, 1990, long after
Tolentino et al. in Civil Case No. Q-99- the other members of the consortium had appealed
39153;33 and from the assailed order of December 19, 1989.

3. Whether or not JC No. 99-3 is valid xxx


(assuming the trial court has jurisdiction
to hear Tolentino et al.'s petition).34 PCIB cannot hide behind the subterfuge that Supreme
Court Circular 28-91 was not yet m force when it filed the
certiorari proceedings in the Court of Appeals. The rule
against forum-shopping has long been established.
Ruling of the Court
Supreme Court Circular 28-91 merely formalized the
prohibition and provided the appropriate penalties against
The GSIS committed forum shopping in this case
transgressors.
In their comment on the GSIS's Petition for Review,
Tolentino et al. argued that GSIS committed forum xxx
shopping in this case.35 At the time GSIS filed its petition
on July 23, 2002, it already had knowledge that a co- Forum-shopping or the act of a party against whom an
party (DBM) had already filed an appeal36 (docketed as CA adverse judgment has been rendered in one forum, of
GR No. 720894) before the Court of Appeals. Despite this seeking another (and possibly favorable) opinion in
knowledge, the GSIS filed G.R. No. 153810;37 more, another forum (other than by appeal or the special civil
contrary to its undertaking in its certification against action of certiorari), or the institution of two (2) or more
forum-shopping, the GSIS did not inform this Honorable actions or proceedings grounded on the san1e cause on
Court of the pending case before the Court of Appeals.38 the supposition that one or the other court would make a
favorable disposition, has been characterized as an act of
cralaw rednad

The GSIS vehemently denied that there is forum malpractice that is prohibited and condemned as trifling
shopping. It argued that while the GSIS has already with the Courts and abusing their processes. It constitutes
decided that it will be filing a Petition for Review before improper conduct which tends to degrade the
the Supreme Court as early as June 20, 2002,39its counsel administration of justice. It has also been aptly described
only received a copy of the DBM's Notice of Appeal on as deplorable because it adds to the congestion of the
June 21, 2002.40 cralawre dnad
already heavily burdened dockets of the courts.42
(Emphasis and underscoring supplied.)
This argument fails to persuade.

Applying the logic and analysis used in Chemphil v. Here, the commonality of interests among the DBM, the
CA,41 it is clear that the GSIS committed forum shopping GSIS and the DENR cannot be denied. The pleadings filed
in this case. In Chemphil, a bank consortium (which from the inception of the case will show that they have
includes PCIB) on the one hand, and CEIC on the other, essentially the same arguments and defenses and seek
vied for the ownership of the disputed shares of stock of the same reliefs. More, in terms of the issuance of JC No.
the Chemical Industries of the Philippines. The Regional 99-3, these agencies have equal stakes should the
Trial Court ruled in favor of the bank consortium, but challenged circular be declared invalid. Without a doubt,
dismissed their counter-claims against CEIC. Thus, the the different modes of appeal taken by the GSIS and the
bank consortium, with the exception of PCIB, appealed, DBM will, in the process, create the possibility of
via a Notice of Appeal, the dismissal before the Court of conflicting decisions being rendered by different fora upon
Appeals. PCIB separately filed with the Court of Appeals a the same issue. Indeed, a final decision in one would
petition for certiorari, prohibition and mandamus with a constitute res judicata in the other.43 For this reason, we
prayer for the issuance of a writ of preliminary injunction. dismiss the petition in GR. No. 153810,44 with a warning
The two separate actions assailed the very same orders of to the GSIS that a repetition of the same or similar acts in
the Regional Trial Court. In holding PCIB guilty of forum- the future shall be dealt with more severely.
shopping, we held:
The trial court has no jurisdiction to
ChanRob lesvi rtua lLawl ibra ry

resolve Tolentino et al.'s petition


We uphold the decision of the Court of Appeals finding
PCIB guilty of forum-shopping.
Citing Section 30 of RA 8291,45 the Court of Appeals
chanrob leslaw

The Court of Appeals opined:


reversed the trial court's finding of jurisdiction, to wit:
cralawlaw lib rary

True it is, that petitioner PCIB was not a party to the


ChanRoble svirtual Lawlib rary

appeal made by the four other banks belonging to the


consortium, but equally true is the rule that where the xxx
rights equally true is the rule that where the rights and
liabilities of the parties appealing are so interwoven Basic is the rule in statutory construction that where the
and dependent on each other as to be inseparable, a law is clear and categorical, there is no room for
reversal of the appealed decision as to those who construction, only application. xxx
appealed, operates as a reversal to all and will inure
to the benefit of those who did not join the appeal. Thus, [the concerned government agencies] are correct in
Such principal, premised upon communality of their contention that the GSIS has the original and
interest of the parties, is recognized in this exclusive jurisdiction to settle any dispute arising
from the implementation of R.A. No. 8291.
Section 14.1 Quasi-Judicial Functions of the GSIS. -The
Indeed, the doctrine of primary jurisdiction or prior settle any dispute arising under Republic Act No. 8291,
resort and, its corollary doctrine, exhaustion of Commonwealth Act No. 186, as amended, and other laws
administrative remedies, are applicable in the administered by the GSIS with respect to:
instant case.
1. Coverage of employers and employees;
xxx 2. Entitlement of members to the following
benefits under these rules:
[Tolentino et al], therefore, should have first ventilated
their complaint or grievance before the GSIS as R.A. No.
xxx
8291 expressly provides that it is the agency which has
the primary jurisdiction to rule on any dispute arising from
the implementation of the said law and other laws
administered by the GSIS. The jurisdiction includes the
determination of the employees covered by the GSIS, 3. Collection and payment of contributions;
which the law itself delimited under Section 3 thereof. 4. xxx;
5. Any other matter related to any or all of
xxx the foregoing which is necessary for their
determination.
Be it noted that [Tolentino et al] did not at the first
instance bring their grievance to the proper government
xxx
agency, which is the GSIS. They did not even bother to
have the matter resolved within their department (DENR).
Section 14.3 Body vested with quasi-judicial
Thus, their failure to resort to administrative remedies
functions. The quasi-judicial function of the GSIS shall be
available to them belies the pronouncement of the court a
vested in its Board of Trustees.50
quo that there was no other speedy and adequate remedy
cralaw rednad

available to them.46
(Emphasis supplied.)
cralawre dnad

(Emphasis supplied.)
In case a party feels aggrieved by an order, ruling or
decision of the GSIS Board, he may file a petition for
We agree with the Court of Appeals.
review under Rule 43 of the Rules of Court before the
Court of Appeals.51
Jurisdiction over subject matter is determined by
cralawrednad

law.47 In Bank of Commerce v. Planters Development


The main issue raised by Tolentino et al. in their petition
Bank, we stated:
before the trial court was the validity of JC No. 99-3
ChanRoblesvirtua lLawl ibra ry

insofar as it provided for the deduction of the


In the exercise of its plenary legislative power, Congress government's share on GSIS contributions from the 20%
may create administrative agencies endowed with quasi premium given to contractual employees, in lieu of leave
legislative and quasi-judicial powers. Necessarily, benefits. Such issue, pertaining as it does to the coverage,
Congress likewise defines the limits of an agency's collection and payment of GSIS contributions, is a dispute
jurisdiction in the same manner as it defines the over which the GSIS exercises exclusive and original
jurisdiction of courts. As a result, it may happen that jurisdiction. This jurisdiction of the GSIS was also
either a court or an administrative agency has recognized by this Court in Government Service Insurance
exclusive jurisdiction over a specific matter or both System v. Commission on Audit.52 It was therefore error
have concurrent jurisdiction on the same. xxx48 cralawrednad

for the trial court, though it is a court of general


jurisdiction,53 to assume jurisdiction over the same.
(Emphasis supplied.)
Tolentino et al. nevertheless claim that, in view of Section
A statute may vest exclusive original jurisdiction in an 21 of Batas Pambansa Blg. 129 ("BP 129"), the trial court
administrative agency over certain disputes and correctly exercised jurisdiction over their petition (which
controversies falling within the agency's special is, admittedly, one for certiorari and prohibition) based on
expertise.49 In this case, the law vested exclusive and the doctrine of primary jurisdiction.54 Section 21 of BP 129
original jurisdiction over disputes arising from RA 8291 or reads:ChanRoblesvi rt ualLaw lib rary

related laws with the GSIS. Section 30 of RA 8291


provides:Cha nRoblesvi rtua lLaw lib rary
Sec. 21. Original jurisdiction in other cases. - Regional
Trial Courts shall exercise original jurisdiction:
SEC. 30. Settlement of Disputes. - The GSIS shall
have original and exclusive jurisdiction to settle any (1) In the issuance of writs of certiorari,
dispute arising under this Act and any other laws prohibition, mandamus, quo warranto, habeas
administered by the GSIS. xxx corpus and injunction which may be enforced in any part
of their respective regions; xxx
(Emphasis supplied.)
(Emphasis supplied.)

Sections 14.1 and 14.3 of the 1997 Implementing Rules


and Regulations (IRR) of RA 8291 also read: ChanRoblesvi rtua lLawl ibra ry
Tolentino's et al.'s reliance on Section 21 of BP 129 and
the doctrine of primary jurisdiction is misplaced.
First. Under the doctrine of primary jurisdiction, a remedy resolve the merits of the controversy.
within the administrative machinery must be resorted to
give the administrative officer every opportunity to decide On the Validity of JC No. 99-3
a matter that comes within his jurisdiction. Such remedy
must be exhausted first before the court's power of RA 8291 mandates that the sources of funds for
judicial review can be sought.55 Thus, under this doctrine, contributions to the GSIS should be taken from
Tolentino et al. should have first brought the dispute employees' and employers' share as follows: ChanRoblesvi rtual Lawli bra ry

regarding the validity of a circular implementing the GSIS


Law to the GSIS Board (and not the courts) for resolution SEC. 5. Contributions. (a) It shall be mandatory for the
as required by law. Contrary to what Tolentino et al. member and employer to pay the monthly contributions
assert, the doctrine of primary jurisdiction precludes the specified in the following schedule:
ChanRob lesvi rtual Lawli bra ry

courts from resolving a controversy over which jurisdiction


has initially been lodged with an administrative body of
special competence.56 c ralawred nad
Monthly Compensation Compensation
Payable by
Second. While it is true that the trial court had jurisdiction
over the petition for certiorari and prohibition filed by Member Employer
Tolentino et al., the issue in the case was not whether the I. Maximum Average 9.0% 12.0%
trial court had jurisdiction over such class of actions. The
issue, rather, was whether the government's share in the Monthly
GSIS contributions for contractual employees can be Compensation
validly sourced from the 20% premium pay given to such
employees, in lieu of leave benefits. The validity of JC No.
(AMC) Limit and
99-3, which directed such deduction, is a dispute arising Below
under (or at the very least, related to) the GSIS Law.
Resolution of this issue comes within the ambit of the
II. Over the Maximum
quasi-judicial powers of the GSIS as provided under AMC Limit
Section 30 of RA 8291 and its implementing rules.
-Up to the 9.0% 12.0%
Ruling on the substantive legal issue Maximum AMC Limit
The primary substantive issue in this case calls for a
-In Excess of the 2.0% 12.0%
determination of whether the deduction of the AMC Limit
government share in the GSIS contributions, as provided
under JC No. 99-3, is repugnant to RA 8291. The doctrine Members of the judiciary and constitutional commissioners
of primary jurisdiction would ordinarily preclude this Court shall pay three percent (3%) of their monthly
from resolving a matter which calls for a ruling to first be compensation as personal share and their employers a
made by the GSIS Board. corresponding three percent (3%) share for their life
insurance coverage.
We note, however, our ruling in China Banking
Corporation v. Court of Appeals,57 where we held: Cha nRoblesvi rt ualLawlib rary
(b) The employer shall include in its annual
appropriation the necessary amounts for its share of
At the outset, the Court's attention is drawn to the fact the contributions indicated above, plus any additional
that since the filing ofthis suit before the trial court, none premiums that may be required on account of the hazards
of the substantial issues have been resolved. To avoid and or risks of its employee's occupation.
gloss over the issues raised by the parties, as what the
trial court and respondent Court of Appeals did, would (c) It shall be mandatory and compulsory for all
unduly prolong this litigation involving a rather simple employers to include the payment of contributions
case of foreclosure of mortgage. Undoubtedly, this will run in their annual appropriations. Penal sanctions shall be
counter to the avowed purpose of the rules, i.e., to assist imposed upon employers who fail to include the payment
the parties in obtaining just, speedy and inexpensive of contributions in their annual appropriations or
determination of every action or proceeding. The Court, otherwise fail to remit the accurate/exact amount of
therefore, feels that the central issues of the case, xxx, contributions on time, or delay the remittance of premium
should now be settled specially as they involved pure contributions to the GSIS. The heads of offices and
questions of law. Furthermore, the pleadings of the agencies shall be administratively liable for non-
respective parties on file have amply ventilated their remittance or delayed remittance of premium
various positions and arguments on the matter contributions to the GSIS.
necessitating prompt adjudication.
(Emphasis and underscoring supplied.)

Thus, considering (1) the long period of time that the


JC No. 99-3, on the other hand, directs the payment of
issue has been pending, (2) the remaining issue left to be
the government share in GSIS contributions to be sourced
resolved is a purely legal question,58 (3) the concerned
from the twenty percent (20%) premium pay. Tolentino et
parties have extensively discussed the merits of the case
al. argue that (1) the government, being the employer,
in their respective pleadings and did not confine their
must pay for its share of the contribution and not charge
arguments to the issue of jurisdiction,59 and finally, (4) no
this to the 20% premium on the monthly compensation of
useful purpose would be served if we remand the matter
contractual employees; (2) Section 4.261 in JC No. 99-3 is
to the board only for its decision to be elevated to the
in direct contravention of Section 5(b) of RA 8291; and
Court of Appeals and subsequently to this Court,60 we
(3) the deduction is prohibited under Section 3.3.2 of the
deem it sound and more in the interest of justice to
1997 IRR62 of RA 8291. their employment, employees hired on contractual basis
are not entitled to vacation, sick, and other special leave
Premium pay was granted in lieu privileges. To offset their non-entitlement to leave
of leave benefits benefits, contractual employees may be paid
compensation twenty percent (20%) higher than the
The OSG, in its Manifestation and Motion (In Lieu of salaries of regular employees occupying equivalent
Comment), argued for the validity of JC No. 99-3, positions. If contractual employees are not given the
stating:
ChanRoblesvi rtual Lawl ibra ry 20% premium, they should be entitled to vacation
and sick leave.
Before dealing on the issue of whether payment of the
government share corresponding to the GSIS (Emphasis supplied.)
contributions of [Tolentino et al.] can be validly sourced
from the twenty percent (20%) of their premium pay, it is Thus, and consistent with the grant of premium pay to
imperative to revisit the origin of the twenty percent contractual employees, Section 44 of the 1999
(20%) premium pay and the rationale for the grant GAA64 provided that such personnel may be paid
thereof. compensation, inclusive of fees, honoraria, per diems and
allowances not exceeding 120% of the minimum salary of
xxx a regular employee in an equivalent position: ChanRoble svi rtual Lawli bra ry

xxx the rationale behind the grant of the twenty percent SEC. 44. Employment of Contractual Personnel. Heads of
(20%) premium pay to contractual employees was that departments, bureaus, offices or agencies, when
they were not then entitled as a matter of right to authorized in their respective appropriations provided in
vacation, sick and other special leave privileges like the this Act, may hire contractual personnel as part of the
regular government personnel. xxx organization to perform regular Agency functions and
specific vital activities or services which cannot be
Subsequently, however, or on August 23, 1999, the Civil provided by the regular or permanent staff of the hiring
Service Commission (CSC) issued Memorandum Circular agency.
No. 14, Series of 1999, granting contractual employees
the same special and privilege leave benefits being The contractual personnel employed pursuant to this
granted to regular personnel in the government service. Section shall be considered as an employee of the hiring
xxx agency, limited to such period when their services are
reasonably required. Such contractual
Of necessity, therefore, the rationale for the grant of personnel may be paid compensation, inclusive of
the twenty percent (20%) premium pay to fees, honoraria, per diems and allowances not
contractual employees ceased to exist with the exceeding 120% of the minimum salary of an
issuance of the aforesaid resolution. equivalent position in the Position Classification and
Compensation System, but not to exceed the salary of his
xxx immediate superior, chargeable against the Personal
Services funds of the Agency in accordance with the
There is no dimunition of benefits to speak of in this case National Government Chart of Accounts.
because effective August 23, 1999, all contractual
employees were already entitled to leave benefits in lieu (Emphasis and underscoring supplied.)
of the twenty percent (20%) premium pay. In fact,
pursuant to CSC Memorandum Circular No. 14, Series of
1999, the DENR granted its contractual employees leave Similar provisions can also be found in the GAA for the
benefits starting September 1999. Thus, the previous years.65 cra lawredna d

government share on the GSIS contributions could


be validly sourced from the twenty percent (20%) On August 23, 1999, the Omnibus Rules on Leave were
premium pay effective September of 1999.63 c ralaw rednad
amended, which included the grant of leave privileges not
previously given to contractual personnel.66 Perforce,
(Emphasis supplied.) contractual employees who are now granted leave
benefits are no longer entitled as a matter of right to the
twenty percent (20%) premium pay. This position finds
We agree. support in the GAAs passed by Congress for the years
subsequent, which no longer included provisions for said
Due to the nature of their employment, contractual premium pay.67 cralaw rednad

employees (unlike their counterparts in the regular


government service) were previously not entitled to leave Since the expense for premium pay was rendered
credits as a matter of right. To balance this seemingly unnecessary by the grant of leave benefits to contractual
inequitable situation, contractual employees, under CSC employees, funds initially set aside under the 1999 GAA
Resolution No. 983142 (otherwise known as the Omnibus for said purpose remain public funds (under the
Rules on Leave) were allowed to receive compensation appropriation for DENR Personal Services) and may, as
twenty percent (20%) higher than the salaries of regular correctly argued by the DBM and the DENR,68 be legally
employees occupying equivalent positions. The grant of rechanneled to answer for other personnel benefits costs,
one benefit, however, appears to preclude entitlement to including government share in GSIS contributions. This is
the other: ChanRoblesvi rt ualLaw lib rary
supported by Section 34 of the 1999 GAA which reads: ChanRoblesvi rtu alLawli bra ry

SEC. 4. Contractual employees are not entitled to leave SEC. 34. Funding of Personnel Benefits. - The personnel
credits as a matter of right.— In view of the nature of benefits costs of government officials and
employees shall be charged against the respective credits of contract-based project employees, the removal
funds from which their compensations are paid. All thereof should be made prospectively on new or renewed
authorized supplemental or additional compensation, contracts and not retroactively as Respondents GSIS, DBM
fringe benefits and other personal services costs xxx shall and
similarly be charged against the corresponding fund from
which their basic salaries are drawn and in no case shall DENR intend to do or worst, have already done. What is
such personnel benefits costs be charged against the disturbing is, respondent GSIS required petitioners to pay
General Fund of the National Government. Officials and their contributions, including penalties and surcharges to
employees on detail with other offices, including the the GSIS retroactive to the year 1997 even when
representatives and support personnel of auditing units petitioners were exempted by the GSIS from the coverage
assigned to serve other offices or agencies, shall be paid of RA 8291 xxx Individually, petitioners were being denied
their salaries, emoluments, allowances and the foregoing by the GSIS to avail of benefits unless they would pay for
supplemental compensation, fringe benefits and other their contributions retroactive to year 1997. It must be
personal services costs from the appropriations of their noted that as of October 25, 1999, the exemption granted
parent agencies, and in no case shall such be charged to petitioners has not been revoked.
against the appropriations of the agencies where they are
assigned or detailed, except when authorized by law. xxx

(Emphasis and underscoring supplied.) Based on the foregoing, to give retroactive effect to
the assailed circular is prejudicial to the substantial
rights of herein petitioners.
Laws and regulations read into contracts
The antecedent facts show that the government exempted
Tolentino et al. argue that they are contract-based
herein petitioners from the coverage of RA 8291 xxx as
employees with salaries (pegged at a maximum of 120%
early as January 8, 1998 and the unnumbered
of the minimum salary of an equivalent position)
Memorandum that will enforce the GSIS-DBM circular was
stipulated in their respective employment contracts and
disseminated to the contractual employees concerned only
whose tenure is coterminous with the project. They claim
on September 16, 1999. Thus, the circular, if valid,
that the withdrawal of the grant cannot be done by simply
should only be made to apply prospectively - that is
issuing a Memorandum taking it away without violating
on the date the contract-based project employees
the terms of the employment contract.69
were informed that they are now being covered by
cralawrednad

the circular and with a new contract indicating the


Tolentino et al. err.
changes in their compensation package. Assuming
without admitting that the said exemption had been
While they claim entitlement to the twenty percent (20%)
revoked, the GSIS-DBM failed to inform the DENR
premium pay based on their employments contracts, it
administrative services of the alleged revocation. In fact,
does not appear that the employees presented the
the DENR was officially informed about the GSIS-DBM
contracts in evidence. There is thus nothing on the
circular sometime in September 1999. Thus, it would be
available record by which this Court can validate their
contrary to due process and fair play if the circular is
alleged contractual entitlement to premium pay. In any
implemented retroactively as the contract-based
case, it is already well-settled that provisions of existing
employees are not at fault. xxx
laws and regulations are read into and form an integral
part of contracts, more so in the case of government
contracts.70 They cannot invoke exemption from the (Emphasis supplied.)
application of RA 8291, JC No. 99-3 and the relevant CSC
Memoranda based on their contracts with their employer We reject Tolentino et al.'s claim of exemption from RA
agencies. 8291. Section 3 of RA 8291 is clear that, save for specified
officials of the Government, membership in the GSIS shall
Prospective application of JC No. 99-3 be compulsory for all employees, regardless of
employment status. Neither can they claim exemption
While Tolentino et al. do not dispute the rationale behind based on the letter dated January 8, 1998 sent by then
the grant of premium pay (as set forth in the Omnibus GSIS SVP Patag advising them of their non-coverage. We
Rules on Leave)71 they claim that JC No. 99-3 providing agree with the OSG's argument thus: ChanRoblesvirtual Lawlib rary

for the deduction of the government share from their


premium pay should be made prospectively on new or [Tolentino et al.] cannot invoke the letter dated January
renewed contracts.72 cralawre dnad

12, 1998 of Atty. Quilatan citing the letter-opinion of


Senior Vice President Lourdes G. Patag of the GSIS as
What respondents had done was, effective the basis for claiming that they are exempted from the
October 1999 payroll, the 20% premium pay would coverage of compulsory membership with the GSIS.
be deducted and applied retroactively for the
months of January to September 1999 when, during To begin with, R.A. No. 8291 does not provide any
said period, petitioners were not entitled to leave exception to the applicability of the compulsory
credits. This situation "undeniably created an absurdity" membership of government employees with the GSIS.
because petitioners did not enjoy leave credits and yet
they are being made to return the 20% premium pay Assuming arguendo that such an issue may be
contrary to CSC Resolution No. 983142. legitimately raised, the same can only be passed upon by
the GSIS Board of Trustees pursuant to Section 30 of R.A.
In order to give justice to the rationale for the grant of the No. 8291: ChanRoblesvi rtua lLawl ibra ry

20% premium pay vis-a-vis the entitlement to leave


xxx employee. The pertinent CSC rules, on the other hand,
show a clear policy to equitably balance the benefits given
Thus, Senior Vice President Patag is absolutely to regular and contractual personnel of the government.
devoid of authority to make an official This was evident, first, in the provision of premium pay to
determination of whether [Tolentino et al.] are contractual employees in lieu of leave benefits and,
exempt from compulsory membership with the ultimately, in the eventual grant of leave benefits to such
GSIS.73 cralawre dnad personnel.

(Emphasis supplied.) In light of the above policies, JC No. 99-3 should be


understood to have meant to apply prospectively, that is,
payment of the government share out of the twenty
Tolentino et al.'s arguments on the prospective application percent (20%) premium pay should start only after the
of JC No. 99-3, however, are partly meritorious. contractual employees entitlement to said pay was
considered withdrawn with the grant of leave
JC No. 99-3 (effective January 1, 1999), which directed benefits. Thus, payment of the government share in GSIS
the payment of the required government share of GSIS contributions from the premium pay of contractual
premiums out of the 20% premium given to contractual employees cannot be made earlier than the effectivity of
employees under Section 44 of the 1999 GAA, was issued CSC Memorandum Circular No. 14, s. 1999.
on April 30, 1999. CSC Memorandum Circular No. 14,
which granted leave benefits to contractual personnel, WHEREFORE, premises considered, the petition in G.R.
was issued only on August 23, 1999 or nearly four months No. 153810 is hereby DISMISSED on the ground of
after the JC No. 99-3 was issued. forum shopping, with a warning to the GSIS that a
repetition of the same or similar acts in the future shall be
At the time of the issuance of JC No. 99-3, Tolentino et al. dealt with more severely. This Court also resolves to DENY
did not as yet have leave credits and were still entitled to the petition in G.R. No. 167297. Consequently, the
the twenty percent (20%) premium pay. To deduct the appealed Decision in CAG.R. 72089 is
government share in GSIS contributions from the hereby AFFIRMED with MODIFICATION that the
premium pay of said contractual employees even before deduction of the government share in GSIS contributions
they were granted leave benefits would effectively make from the twenty percent (20%) premium pay granted to
the employees "assume the payment of the full contractual employees may only be made upon the
contribution in violation of law."74 cralawred nad

effectivity of SC Memorandum Circular No. 14, s. 1999


granting leave benefits to sue employees.
Every statute must be so construed and harmonized with
other statutes as to form a uniform system of SO ORDERED.
jurisprudence.75 In Vda. de Urbano v. Government Service
chanrobles virtuallawlibrary

Insurance System,76 citing our earlier ruling in C&C Velasco, Jr., (Chairperson) Peralta, Villarama,
Commercial Corporation v. National Waterworks and Jr., and Perez,* JJ., concur.
Sewerage Authority,77 we held:
ChanRoblesVi rtualaw lib rary

ChanRob lesvi rtua lLawl ibra ry

Endnotes:
On the presumption that whenever the legislature enacts
a provision it has in mind tl1e previous statutes relating to
the same subject matter, it is held that in the absence of EN BANC
any express repeal or amendment therein, the new
provision was enacted in accord with the legislative policy G.R. No. 217725, May 31, 2016
embodied in those prior statutes, and they all should be
construed together. Provisions in an act which are omitted
in another act relating to the same subject matter will be GLENN A. CHONG AND ANG KAPATIRAN PARTY,
applied in a proceeding under the other act, when not REPRESENTED BY NORMAN V.
inconsistent with its purpose. Prior statutes relating to CABRERA, Petitioners, v. SENATE OF THE
the same subject matter are to be compared with PHILIPPINES, REPRESENTED BY SENATE
the new provisions; and if possible by reasonable PRESIDENT FRANKLIN M. DRILON; HOUSE OF
construction, both are to be construed that effect is REPRESENTATIVES, REPRESENTED BY SPEAKER
given to every provision of each. Statutes in pan (sic) FELICIANO S. BELMONTE, JR.; COMMISSION ON
materia, although in apparent conflict, are so far as ELECTIONS, REPRESENTED BY ACTING
reasonable possible construed to be m harmony with each CHAIRPERSON CHRISTIAN ROBERT S. LIM;
other.78 ADVISORY COUNCIL, REPRESENTED BY
UNDERSECRETARY LOUIS NAPOLEON C. CASAMBRE;
cralaw rednad

TECHNICAL EVALUATION COMMITTEE,


(Emphasis supplied.)
REPRESENTED BY DOST SECRETARY MARIO G.
MONTEJO; DEPARTMENT OF BUDGET AND
We rule that the same principle is applicable to MANAGEMENT, HEADED BY SECRETARY FLORENCIO
administrative rules and regulations issued by government B. ABAD, Respondents.
agencies in their duty to implement laws.
DECISION
The policies behind the pertinent laws and regulations in
this case show that the same can be harmonized to give
effect to every relevant provision of law or regulation. REYES, J.:
Section 5 of RA 8291 shows a clear intent to divide
responsibility for· payment of the required GSIS premiums This petition for certiorari1 and/or prohibition with prayer
between the government employer and the covered for the issuance of a writ of preliminary injunction and/or
a temporary restraining order, assails the constitutionality and the TEC, are unconstitutional for allegedly being
of Sections 8, 9, 10 and 11 of Republic Act (R.A.) No. violative of Section 2(1), Article IX-C of the 1987
8436,2 as amended by Section 93 of R.A. No. Constitution.
9369,4 providing for the creation of an Advisory Council
(AC) and a Technical Evaluation Committee (TEC), on the Ruling of the Court
ground that it encroaches on the Commission on Elections'
(COMELEC) mandate to administer and enforce all laws The petition has no merit.
relating to the elections as provided for in Section
2(1),5 Article IX-C of the 1987 Constitution. The petitioners conclude that with the creation of the AC
and the TEC, pursuant to Sections 8, 9, 10 and 11 of R.A.
The Facts No. 8436, the Congress undermine the independence of
the COMELEC and infringe upon its power.
The factual background of this case dates back to the
enactment of R.A. No. 8436 on December 22, 1997 The Court, however, finds that the petitioners' thesis finds
authorizing the adoption of an automated election system no support in the evidence presented. A careful
(AES) in the May 11, 1998 national and local elections and examination of the assailed provisions would reveal that
onwards. On January 23, 2007, R.A. No. 9369 was signed the AC and the TEC's functions are merely advisory and
into law, amending R.A. No. 8436. Of particular relevance recommendatory in nature. The AC's primordial task is to
in R.A. No. 9369 are Sections 8, 9, 10 and 11 which calls recommend the most appropriate technology to the AES,
for the creation of the AC and the TEC. while the TEC's sole function is to certify that the AES,
including its hardware and software components, is
In Roque, Jr., et al. v. COMELEC, et al.,6 the Court stated operating properly, securely and accurately, in accordance
that the AC is to recommend, among other functions, the with the provisions of law.
most appropriate, secure, applicable and cost-effective
technology to be applied to the AES; while the TEC is The functions of the AC are recommendatory, as can be
tasked to certify, through an established international gleaned from the assailed provision itself in Section 9 of
certification committee, not later than three months R.A. No. 8436 which provides that the functions of the AC
before the elections, by categorically stating that the AES, are merely to recommend, to provide advice and/or
inclusive of its hardware and software components, is assistance, and to participate as nonvoting members with
operating properly and accurately based on defined and respect to the COMELEC s fulfillment of its mandate and
documented standards.7 ChanRoblesVi rtualaw lib rary authority to use the AES, and which in all instances, is
subject to the approval and final decision of the COMELEC.
Nevertheless, almost eight years after the passage of R.A. On the other hand, the TEC's exclusive function is to
No. 9369, and almost six years after the conclusion of the certify, through an established international certification
2010 elections, and just several months before the 2016 entity to be chosen by the COMELEC from the
elections, Glenn Chong and Ang Kapatiran Party recommendations of the AC that the AES, including its
(petitioners) came to this Court to assail the hardware and software components, is operating properly,
constitutionality of the creation of the AC and the TEC. securely, and accurately, in accordance with the
According to the petitioners: (1) the AC and the TEC are provisions of law.
so patently incompatible with a functioning COMELEC; (2)
a mere AC should not be allowed to dictate upon the The Court has conspicuously observed that the petitioners
COMELEC in regard with the technology to be applied in expediently removed in their petition the following
the AES; and (3) the recommendation of the AC for the paragraph when they quoted Section 9 of R.A. No. 9369
COMELEC to re-use the Precinct Count Optical Scan which amended Section 9 of R.A. No. 8436, which
machines, Consolidation and Canvassing System, recognizes the authority of the COMELEC to enforce the
peripherals, laptops, equipment, software, etcetera, in the said laws: chanRoblesv irtual Lawlib rary

2016 elections, as well as its past actions, are patent Nothing in the role of the Council or any outside
nullities. intervention or influence shall be construed as an
abdication or diminution of the Commission's authority
In compliance with the Court's Resolution8 dated June 16, and responsibility for the effective development,
2015, the respondents submitted its Comment.9 Summing management and implementation of the AES and this
up the arguments of the respondents, they essentially Act.cralawred

stated that: (1) the existence of the AC and the TEC does
Evidently, the AC and the TEC were created to aid the
not limit or prevent the exercise of the COMELEC s
COMELEC in fulfilling its mandate and authority to use an
constitutional mandate to enforce election laws; (2) the
effective AES for free, orderly, honest, peaceful, credible
AC and the TEC merely ensure that the COMELEC will put
and informed elections. The actions of the AC and the TEC
in place an effective AES that will clearly and accurately
neither bind nor prohibit the COMELEC from enforcing and
reflect the will of the sovereign people; (3) the power to
administering election laws.
provide these safeguards is within the authority of the
Congress, whose power includes the power to ensure the
Moreso, the AC and the TEC are not permanent in nature.
faithful execution of its policies; and (4) the assailed
This is evident in Sections 8 and 11 of R.A. No. 8436, as
provisions of R.A. No. 8436, as amended by Section 9 of
amended. The AC shall be convened not later than 18
R.A. No. 9369 enjoys the presumption of constitutionality.
months prior to the next scheduled electoral exercise, and
deactivated six months after completion of canvassing,
The Issue while the TEC shall be immediately convened within 10
days after the effectivity of R.A. No. 9369; however, the
The crux of this petition is whether Sections 8, 9, 10 and TEC shall make the certification not later than three
11 of R.A. No. 8436, as amended by Section 9 of R.A. No. months before the date of the electoral exercises.
9369, insofar as they provide for the creation of the AC
Lastly, the petitioners have failed to discharge the burden Leonardo-De Castro, and Perlas-Bernabe, JJ., on official
of overcoming the presumption that the assailed business.
provisions are valid and constitutional since they failed to Jardeleza, J., on official leave.
present substantial evidence to support their claim.
Endnotes:
Besides, the constitutionality of R.A. No. 9369 has already
been upheld by this Court in Barangay Association for
National Advancement and Transparency (BANAT) Party- G.R. No. 112497 August 4, 1994
List v. COMELEC.10 In the said case, therein petitioners
alleged that R.A. No. 9369 violates Section 26(1), Article HON. FRANKLIN M. DRILON, in his capacity as
VI of the 1987 Constitution, claiming that the title of R.A.
No. 9369 is misleading because it speaks of poll
SECRETARY OF JUSTICE, petitioner,
automation but contains substantial provisions dealing vs.
with the manual canvassing of election returns. They MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L.
further alleged that Sections 34, 37, 38, and 43 are ATIENZA, CITY TREASURER ANTHONY
neither embraced in the title nor germane to the subject ACEVEDO, SANGGUNIANG PANGLUNSOD AND
matter of R.A. No. 9369. The Court then sustained the THE CITY OF MANILA, respondents.
constitutionality of R.A. No. 9369 holding that a title which
declares a statute to be an act to amend a specified code
is sufficient and the precise nature of the amendatory act The City Legal Officer for petitioner.
need not be further stated. Moreso, the assailed
provisions dealing with the amendments to specific Angara, Abello, Concepcion, Regala & Cruz for Caltex
provisions of R.A. No. 716611 and Batas Pambansa Bilang
88112 are likewise germane to the subject matter of R.A.
(Phils.).
No. 9369.
Joseph Lopez for Sangguniang Panglunsod of Manila.
Settled is the rule that every law is presumed
valid.13 Courts are to adopt a liberal interpretation in favor
of the constitutionality of legislation, as Congress is L.A. Maglaya for Petron Corporation.
deemed to have enacted a valid, sensible, and just
law.14 To strike down a law as unconstitutional, the
petitioners have the burden to prove a clear and
unequivocal breach of the Constitution. In case of doubt in
the sufficiency of proof establishing unconstitutionality, CRUZ, J.:
the Court must sustain legislation because to invalidate a
law based on baseless supposition is an affront to the The principal issue in this case is the constitutionality
wisdom not only of the legislature that passed it but also of Section 187 of the Local Government Code reading
of the executive which approved it.15 ChanRoble sVirt ualawli bra ry

as follows:
All told, the Court finds no clear violation of the
Constitution which would warrant a pronouncement that Procedure For Approval And
Sections 8, 9, 10 and 11 of R.A. No. 8436, as amended by Effectivity Of Tax Ordinances And
Section 9 of R.A. No. 9369, are unconstitutional and void. Revenue Measures; Mandatory Public
The power to enforce and administer R.A. No. 8436, as
Hearings. — The procedure for
amended by R.A. No. 9369, is still exclusively lodged in
the COMELEC, and the AC and the TEC may not substitute approval of local tax ordinances and
its own opinion for the judgment of the COMELEC, revenue measures shall be in
thus:chanRoblesvi rt ualLaw lib rary accordance with the provisions of this
In sum, the Congress created the [AC] and the TEC not to Code: Provided, That public hearings
encroach upon the exclusive power of the COMELEC to shall be conducted for the purpose
enforce and administer laws relating to the conduct of the
elections, but to (1) ensure that the COMELEC is guided
prior to the enactment thereof;
and assisted by experts in the field of technology in Provided, further, That any question
adopting the most effective and efficient [AES]; and (2) to on the constitutionality or legality of
ensure clean elections by having disinterested parties tax ordinances or revenue measures
closely monitor the COMELEC in procuring systems that may be raised on appeal within thirty
operate properly, securely, and accurately. As such, it is (30) days from the effectivity thereof to
apparent that, through the [AC] and the TEC, the
Congress merely checks and balances the power of the
the Secretary of Justice who shall
COMELEC to enforce and administer R.A. No. 8436, as render a decision within sixty (60)
amended by R.A. No. 9369. It does not, however, days from the date of receipt of the
substitute its own wisdom for that of the COMELEC.16 cralawred appeal: Provided, however, That such
WHEREFORE, the instant petition is hereby DISMISSED. appeal shall not have the effect of
suspending the effectivity of the
SO ORDERED. chanroblesvi rtua llawli bra ry
ordinance and the accrual and
payment of the tax, fee, or charge
Sereno, C.J., Carpio, Velasco, Jr., Brion, Peralta, levied therein: Provided, finally, That
Bersamin, Del Castillo, Perez, Mendoza, Leonen,
and Caguioa, JJ., concur.
within thirty (30) days after receipt of
the decision or the lapse of the sixty- Rights. Moreover, Article X, Section 5(2), of the
day period without the Secretary of Constitution vests in the Supreme Court appellate
Justice acting upon the appeal, the jurisdiction over final judgments and orders of lower
aggrieved party may file appropriate courts in all cases in which the constitutionality or
proceedings with a court of competent validity of any treaty, international or executive
jurisdiction. agreement, law, presidential decree, proclamation,
order, instruction, ordinance, or regulation is in
Pursuant thereto, the Secretary of Justice had, on question.
appeal to him of four oil companies and a taxpayer,
declared Ordinance No. 7794, otherwise known as In the exercise of this jurisdiction, lower courts are
the Manila Revenue Code, null and void for non- advised to act with the utmost circumspection, bearing
compliance with the prescribed procedure in the in mind the consequences of a declaration of
enactment of tax ordinances and for containing unconstitutionality upon the stability of laws, no less
certain provisions contrary to law and public policy.1 than on the doctrine of separation of powers. As the
questioned act is usually the handiwork of the
In a petition for certiorari filed by the City of Manila, legislative or the executive departments, or both, it will
the Regional Trial Court of Manila revoked the be prudent for such courts, if only out of a becoming
Secretary's resolution and sustained the ordinance, modesty, to defer to the higher judgment of this Court
holding inter alia that the procedural requirements had in the consideration of its validity, which is better
been observed. More importantly, it declared Section determined after a thorough deliberation by a
187 of the Local Government Code as collegiate body and with the concurrence of the
unconstitutional because of its vesture in the majority of those who participated in its discussion.5
Secretary of Justice of the power of control over local
governments in violation of the policy of local It is also emphasized that every court, including this
autonomy mandated in the Constitution and of the Court, is charged with the duty of a purposeful
specific provision therein conferring on the President hesitation before declaring a law unconstitutional, on
of the Philippines only the power of supervision over the theory that the measure was first carefully studied
local governments.2 by the executive and the legislative departments and
determined by them to be in accordance with the
The present petition would have us reverse that fundamental law before it was finally approved. To
decision. The Secretary argues that the annulled doubt is to sustain. The presumption of
Section 187 is constitutional and that the procedural constitutionality can be overcome only by the clearest
requirements for the enactment of tax ordinances as showing that there was indeed an infraction of the
specified in the Local Government Code had indeed Constitution, and only when such a conclusion is
not been observed. reached by the required majority may the Court
pronounce, in the discharge of the duty it cannot
Parenthetically, this petition was originally dismissed escape, that the challenged act must be struck down.
by the Court for non-compliance with Circular 1-88,
the Solicitor General having failed to submit a certified In the case before us, Judge Rodolfo C. Palattao
true copy of the challenged decision.3 However, on declared Section 187 of the Local Government Code
motion for reconsideration with the required certified unconstitutional insofar as it empowered the
true copy of the decision attached, the petition was Secretary of Justice to review tax ordinances and,
reinstated in view of the importance of the issues inferentially, to annul them. He cited the familiar
raised therein. distinction between control and supervision, the first
being "the power of an officer to alter or modify or set
We stress at the outset that the lower court had aside what a subordinate officer had done in the
jurisdiction to consider the constitutionality of Section performance of his duties and to substitute the
187, this authority being embraced in the general judgment of the former for the latter," while the
definition of the judicial power to determine what are second is "the power of a superior officer to see to it
the valid and binding laws by the criterion of their that lower officers perform their functions in
conformity to the fundamental law. Specifically, BP accordance with law."6 His conclusion was that the
129 vests in the regional trial courts jurisdiction over challenged section gave to the Secretary the power of
all civil cases in which the subject of the litigation is control and not of supervision only as vested by the
incapable of pecuniary estimation,4 even as the Constitution in the President of the Philippines. This
accused in a criminal action has the right to question was, in his view, a violation not only of Article X,
in his defense the constitutionality of a law he is specifically Section 4 thereof, 7 and of Section 5 on
charged with violating and of the proceedings taken the taxing powers of local governments,8 and the
against him, particularly as they contravene the Bill of policy of local autonomy in general.
We do not share that view. The lower court was rather otherwise: Provided, however, That
hasty in invalidating the provision. the Secretary of Finance shall have
authority to suspend the effectivity of
Section 187 authorizes the Secretary of Justice to any ordinance within one hundred and
review only the constitutionality or legality of the tax twenty days after receipt by him of a
ordinance and, if warranted, to revoke it on either or copy thereof, if, in his opinion, the tax
both of these grounds. When he alters or modifies or or fee therein levied or imposed is
sets aside a tax ordinance, he is not also permitted to unjust, excessive, oppressive, or
substitute his own judgment for the judgment of the confiscatory, or when it is contrary to
local government that enacted the measure. declared national economy policy, and
Secretary Drilon did set aside the Manila Revenue when the said Secretary exercises this
Code, but he did not replace it with his own version of authority the effectivity of such
what the Code should be. He did not pronounce the ordinance shall be suspended, either
ordinance unwise or unreasonable as a basis for its in part or as a whole, for a period of
annulment. He did not say that in his judgment it was thirty days within which period the
a bad law. What he found only was that it was illegal. local legislative body may either
All he did in reviewing the said measure was modify the tax ordinance to meet the
determine if the petitioners were performing their objections thereto, or file an appeal
functions in accordance with law, that is, with the with a court of competent jurisdiction;
prescribed procedure for the enactment of tax otherwise, the tax ordinance or the
ordinances and the grant of powers to the city part or parts thereof declared
government under the Local Government Code. As suspended, shall be considered as
we see it, that was an act not of control but of mere revoked. Thereafter, the local
supervision. legislative body may not reimpose the
same tax or fee until such time as the
An officer in control lays down the rules in the doing of grounds for the suspension thereof
an act. If they are not followed, he may, in his shall have ceased to exist.
discretion, order the act undone or re-done by his
subordinate or he may even decide to do it himself. That section allowed the Secretary of Finance to
Supervision does not cover such authority. The suspend the effectivity of a tax ordinance if, in his
supervisor or superintendent merely sees to it that the opinion, the tax or fee levied was unjust,
rules are followed, but he himself does not lay down excessive, oppressive or confiscatory. Determination
such rules, nor does he have the discretion to modify of these flaws would involve the exercise
or replace them. If the rules are not observed, he may of judgment or discretion and not merely an
order the work done or re-done but only to conform to examination of whether or not the requirements or
the prescribed rules. He may not prescribe his own limitations of the law had been observed; hence, it
manner for the doing of the act. He has no judgment would smack of control rather than mere supervision.
on this matter except to see to it that the rules are That power was never questioned before this Court
followed. In the opinion of the Court, Secretary Drilon but, at any rate, the Secretary of Justice is not given
did precisely this, and no more nor less than this, and the same latitude under Section 187. All he is
so performed an act not of control but of mere permitted to do is ascertain the constitutionality or
supervision. legality of the tax measure, without the right to declare
that, in his opinion, it is unjust, excessive, oppressive
The case of Taule v. Santos 9 cited in the decision has or confiscatory. He has no discretion on this matter. In
no application here because the jurisdiction claimed fact, Secretary Drilon set aside the Manila Revenue
by the Secretary of Local Governments over election Code only on two grounds, to with, the inclusion
contests in the Katipunan ng Mga Barangay was held therein of certain ultra vires provisions and non-
to belong to the Commission on Elections by compliance with the prescribed procedure in its
constitutional provision. The conflict was over enactment. These grounds affected the legality, not
jurisdiction, not supervision or control. the wisdom or reasonableness, of the tax measure.

Significantly, a rule similar to Section 187 appeared in The issue of non-compliance with the prescribed
the Local Autonomy Act, which provided in its Section procedure in the enactment of the Manila Revenue
2 as follows: Code is another matter.

A tax ordinance shall go into effect on In his resolution, Secretary Drilon declared that there
the fifteenth day after its passage, were no written notices of public hearings on the
unless the ordinance shall provide proposed Manila Revenue Code that were sent to
interested parties as required by Art. 276(b) of the
Implementing Rules of the Local Government Code AFFIRMING its finding that the procedural
nor were copies of the proposed ordinance published requirements in the enactment of the Manila Revenue
in three successive issues of a newspaper of general Code have been observed. No pronouncement as to
circulation pursuant to Art. 276(a). No minutes were costs.
submitted to show that the obligatory public hearings
had been held. Neither were copies of the measure as SO ORDERED.
approved posted in prominent places in the city in
accordance with Sec. 511(a) of the Local Government Narvasa, C.J., Feliciano, Padilla, Bidin,
Code. Finally, the Manila Revenue Code was not Regalado, Davide, Jr., Romero, Bellosillo,
translated into Pilipino or Tagalog and disseminated Melo, Quiason, Puno, Vitug, Kapunan and
among the people for their information and guidance, Mendoza, JJ., concur.
conformably to Sec. 59(b) of the Code.

Judge Palattao found otherwise. He declared that all


the procedural requirements had been observed in
the enactment of the Manila Revenue Code and that
the City of Manila had not been able to prove such
compliance before the Secretary only because he had
given it only five days within which to gather and
present to him all the evidence (consisting of 25
exhibits) later submitted to the trial court.

To get to the bottom of this question, the Court


acceded to the motion of the respondents and called
for the elevation to it of the said exhibits. We have
carefully examined every one of these exhibits and
agree with the trial court that the procedural
requirements have indeed been observed. Notices of
the public hearings were sent to interested parties as
evidenced by Exhibits G-1 to 17. The minutes of the
hearings are found in Exhibits M, M-1, M-2, and M-3.
Exhibits B and C show that the proposed ordinances
were published in the Balita and the Manila Standard
on April 21 and 25, 1993, respectively, and the
approved ordinance was published in the July 3, 4, 5,
1993 issues of the Manila Standard and in the July 6,
1993 issue of Balita, as shown by Exhibits Q, Q-1, Q-
2, and Q-3.

The only exceptions are the posting of the ordinance


as approved but this omission does not affect its
validity, considering that its publication in three
successive issues of a newspaper of general
circulation will satisfy due process. It has also not
been shown that the text of the ordinance has been
translated and disseminated, but this requirement
applies to the approval of local development plans
and public investment programs of the local
government unit and not to tax ordinances.

We make no ruling on the substantive provisions of


the Manila Revenue Code as their validity has not
been raised in issue in the present petition.

WHEREFORE, the judgment is hereby rendered


REVERSING the challenged decision of the Regional
Trial Court insofar as it declared Section 187 of the
Local Government Code unconstitutional but