Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 17122

February 27, 1922

THE UNITED STATES, plaintiff-appellee,

vs.
ANG TANG HO, defendant-appellant.
Williams & Ferrier for appellant.
Acting Attorney-General Tuason for appellee.
JOHNS, J.:
At its special session of 1919, the Philippine Legislature passed Act No. 2868, entitled "An Act penalizing the monopoly and holding of, and speculation in, palay, rice, and corn
under extraordinary circumstances, regulating the distribution and sale thereof, and authorizing the Governor-General, with the consent of the Council of State, to issue the
necessary rules and regulations therefor, and making an appropriation for this purpose," the material provisions of which are as follows:
Section 1. The Governor-General is hereby authorized, whenever, for any cause, conditions arise resulting in an extraordinary rise in the price of palay, rice or
corn, to issue and promulgate, with the consent of the Council of State, temporary rules and emergency measures for carrying out the purpose of this Act, to wit:
(a) To prevent the monopoly and hoarding of, and speculation in, palay, rice or corn.
(b) To establish and maintain a government control of the distribution or sale of the commodities referred to or have such distribution or sale made by the
Government itself.
(c) To fix, from time to time the quantities of palay rice, or corn that a company or individual may acquire, and the maximum sale price that the industrial or
merchant may demand.
(d) . . .
SEC. 2. It shall be unlawful to destroy, limit, prevent or in any other manner obstruct the production or milling of palay, rice or corn for the purpose of raising the
prices thereof; to corner or hoard said products as defined in section three of this Act; . . .
Section 3 defines what shall constitute a monopoly or hoarding of palay, rice or corn within the meaning of this Act, but does not specify the price of rice or define any basic for
fixing the price.
SEC. 4. The violations of any of the provisions of this Act or of the regulations, orders and decrees promulgated in accordance therewith shall be punished by a
fine of not more than five thousands pesos, or by imprisonment for not more than two years, or both, in the discretion of the court: Provided, That in the case of
companies or corporations the manager or administrator shall be criminally liable.
SEC. 7. At any time that the Governor-General, with the consent of the Council of State, shall consider that the public interest requires the application of the
provisions of this Act, he shall so declare by proclamation, and any provisions of other laws inconsistent herewith shall from then on be temporarily suspended.
Upon the cessation of the reasons for which such proclamation was issued, the Governor-General, with the consent of the Council of State, shall declare the
application of this Act to have likewise terminated, and all laws temporarily suspended by virtue of the same shall again take effect, but such termination shall not
prevent the prosecution of any proceedings or cause begun prior to such termination, nor the filing of any proceedings for an offense committed during the period
covered by the Governor-General's proclamation.
August 1, 1919, the Governor-General issued a proclamation fixing the price at which rice should be sold.
August 8, 1919, a complaint was filed against the defendant, Ang Tang Ho, charging him with the sale of rice at an excessive price as follows:
The undersigned accuses Ang Tang Ho of a violation of Executive Order No. 53 of the Governor-General of the Philippines, dated the 1st of August, 1919, in
relation with the provisions of sections 1, 2 and 4 of Act No. 2868, committed as follows:
That on or about the 6th day of August, 1919, in the city of Manila, Philippine Islands, the said Ang Tang Ho, voluntarily, illegally and criminally sold to Pedro
Trinidad, one ganta of rice at the price of eighty centavos (P.80), which is a price greater than that fixed by Executive Order No. 53 of the Governor-General of the
Philippines, dated the 1st of August, 1919, under the authority of section 1 of Act No. 2868. Contrary to law.
Upon this charge, he was tried, found guilty and sentenced to five months' imprisonment and to pay a fine of P500, from which he appealed to this court, claiming that the
lower court erred in finding Executive Order No. 53 of 1919, to be of any force and effect, in finding the accused guilty of the offense charged, and in imposing the sentence.
The official records show that the Act was to take effect on its approval; that it was approved July 30, 1919; that the Governor-General issued his proclamation on the 1st of
August, 1919; and that the law was first published on the 13th of August, 1919; and that the proclamation itself was first published on the 20th of August, 1919.
The question here involves an analysis and construction of Act No. 2868, in so far as it authorizes the Governor-General to fix the price at which rice should be sold. It will be
noted that section 1 authorizes the Governor-General, with the consent of the Council of State, for any cause resulting in an extraordinary rise in the price of palay, rice or
corn, to issue and promulgate temporary rules and emergency measures for carrying out the purposes of the Act. By its very terms, the promulgation of temporary rules and
emergency measures is left to the discretion of the Governor-General. The Legislature does not undertake to specify or define under what conditions or for what reasons the
Governor-General shall issue the proclamation, but says that it may be issued "for any cause," and leaves the question as to what is "any cause" to the discretion of the
Governor-General. The Act also says: "For any cause, conditions arise resulting in an extraordinary rise in the price of palay, rice or corn." The Legislature does not specify or
define what is "an extraordinary rise." That is also left to the discretion of the Governor-General. The Act also says that the Governor-General, "with the consent of the Council
of State," is authorized to issue and promulgate "temporary rules and emergency measures for carrying out the purposes of this Act." It does not specify or define what is a
temporary rule or an emergency measure, or how long such temporary rules or emergency measures shall remain in force and effect, or when they shall take effect. That is to
say, the Legislature itself has not in any manner specified or defined any basis for the order, but has left it to the sole judgement and discretion of the Governor-General to say
what is or what is not "a cause," and what is or what is not "an extraordinary rise in the price of rice," and as to what is a temporary rule or an emergency measure for the
carrying out the purposes of the Act. Under this state of facts, if the law is valid and the Governor-General issues a proclamation fixing the minimum price at which rice should

be sold, any dealer who, with or without notice, sells rice at a higher price, is a criminal. There may not have been any cause, and the price may not have been extraordinary,
and there may not have been an emergency, but, if the Governor-General found the existence of such facts and issued a proclamation, and rice is sold at any higher price, the
seller commits a crime.
By the organic law of the Philippine Islands and the Constitution of the United States all powers are vested in the Legislative, Executive and Judiciary. It is the duty of the
Legislature to make the law; of the Executive to execute the law; and of the Judiciary to construe the law. The Legislature has no authority to execute or construe the law, the
Executive has no authority to make or construe the law, and the Judiciary has no power to make or execute the law. Subject to the Constitution only, the power of each branch
is supreme within its own jurisdiction, and it is for the Judiciary only to say when any Act of the Legislature is or is not constitutional. Assuming, without deciding, that the
Legislature itself has the power to fix the price at which rice is to be sold, can it delegate that power to another, and, if so, was that power legally delegated by Act No. 2868? In
other words, does the Act delegate legislative power to the Governor-General? By the Organic Law, all Legislative power is vested in the Legislature, and the power conferred
upon the Legislature to make laws cannot be delegated to the Governor-General, or any one else. The Legislature cannot delegate the legislative power to enact any law. If
Act no 2868 is a law unto itself and within itself, and it does nothing more than to authorize the Governor-General to make rules and regulations to carry the law into effect,
then the Legislature itself created the law. There is no delegation of power and it is valid. On the other hand, if the Act within itself does not define crime, and is not a law, and
some legislative act remains to be done to make it a law or a crime, the doing of which is vested in the Governor-General, then the Act is a delegation of legislative power, is
unconstitutional and void.
The Supreme Court of the United States in what is known as the Granger Cases (94 U.S., 183-187; 24 L. ed., 94), first laid down the rule:
Railroad companies are engaged in a public employment affecting the public interest and, under the decision in Munn vs. Ill., ante, 77, are subject to legislative
control as to their rates of fare and freight unless protected by their charters.
The Illinois statute of Mar. 23, 1874, to establish reasonable maximum rates of charges for the transportation of freights and passengers on the different railroads
of the State is not void as being repugnant to the Constitution of the United States or to that of the State.
It was there for the first time held in substance that a railroad was a public utility, and that, being a public utility, the State had power to establish reasonable maximum freight
and passenger rates. This was followed by the State of Minnesota in enacting a similar law, providing for, and empowering, a railroad commission to hear and determine what
was a just and reasonable rate. The constitutionality of this law was attacked and upheld by the Supreme Court of Minnesota in a learned and exhaustive opinion by Justice
Mitchell, in the case of State vs. Chicago, Milwaukee & St. Paul ry. Co. (38 Minn., 281), in which the court held:
Regulations of railway tariffs Conclusiveness of commission's tariffs. Under Laws 1887, c. 10, sec. 8, the determination of the railroad and warehouse
commission as to what are equal and reasonable fares and rates for the transportation of persons and property by a railway company is conclusive, and, in
proceedings by mandamus to compel compliance with the tariff of rates recommended and published by them, no issue can be raised or inquiry had on that
question.
Same constitution Delegation of power to commission. The authority thus given to the commission to determine, in the exercise of their discretion and
judgement, what are equal and reasonable rates, is not a delegation of legislative power.
It will be noted that the law creating the railroad commission expressly provides
That all charges by any common carrier for the transportation of passengers and property shall be equal and reasonable.
With that as a basis for the law, power is then given to the railroad commission to investigate all the facts, to hear and determine what is a just and reasonable rate. Even then
that law does not make the violation of the order of the commission a crime. The only remedy is a civil proceeding. It was there held
That the legislative itself has the power to regulate railroad charges is now too well settled to require either argument or citation of authority.
The difference between the power to say what the law shall be, and the power to adopt rules and regulations, or to investigate and determine the facts, in order to
carry into effect a law already passed, is apparent. The true distinction is between the delegation of power to make the law, which necessarily involves a discretion
as to what it shall be, and the conferring an authority or discretion to be exercised under and in pursuance of the law.
The legislature enacts that all freights rates and passenger fares should be just and reasonable. It had the undoubted power to fix these rates at whatever it
deemed equal and reasonable.
They have not delegated to the commission any authority or discretion as to what the law shall be, which would not be allowable, but have merely conferred
upon it an authority and discretion, to be exercised in the execution of the law, and under and in pursuance of it, which is entirely permissible. The legislature itself
has passed upon the expediency of the law, and what is shall be. The commission is intrusted with no authority or discretion upon these questions. It can neither
make nor unmake a single provision of law. It is merely charged with the administration of the law, and with no other power.
The delegation of legislative power was before the Supreme Court of Wisconsin in Dowling vs. Lancoshire Ins. Co. (92 Wis., 63). The opinion says:
"The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made."
The act, in our judgment, wholly fails to provide definitely and clearly what the standard policy should contain, so that it could be put in use as a uniform policy required to take
the place of all others, without the determination of the insurance commissioner in respect to maters involving the exercise of a legislative discretion that could not be
delegated, and without which the act could not possibly be put in use as an act in confirmity to which all fire insurance policies were required to be issued.
The result of all the cases on this subject is that a law must be complete, in all its terms and provisions, when it leaves the legislative branch of the government, and nothing
must be left to the judgement of the electors or other appointee or delegate of the legislature, so that, in form and substance, it is a law in all its details in presenti, but which
may be left to take effect in futuro, if necessary, upon the ascertainment of any prescribed fact or event.
The delegation of legislative power was before the Supreme Court in United States vs. Grimaud (220 U.S., 506; 55 L. ed., 563), where it was held that the rules and
regulations of the Secretary of Agriculture as to a trespass on government land in a forest reserve were valid constitutional. The Act there provided that the Secretary of
Agriculture ". . . may make such rules and regulations and establish such service as will insure the object of such reservations; namely, to regulate their occupancy and use,
and to preserve the forests thereon from destruction;and any violation of the provisions of this act or such rules and regulations shall be punished, . . ."
The brief of the United States Solicitor-General says:
In refusing permits to use a forest reservation for stock grazing, except upon stated terms or in stated ways, the Secretary of Agriculture merely assert and
enforces the proprietary right of the United States over land which it owns. The regulation of the Secretary, therefore, is not an exercise of legislative, or even of
administrative, power; but is an ordinary and legitimate refusal of the landowner's authorized agent to allow person having no right in the land to use it as they will.
The right of proprietary control is altogether different from governmental authority.

The opinion says:

From the beginning of the government, various acts have been passed conferring upon executive officers power to make rules and regulations, not for the
government of their departments, but for administering the laws which did govern. None of these statutes could confer legislative power. But when Congress had
legislated power. But when Congress had legislated and indicated its will, it could give to those who were to act under such general provisions "power to fill up the
details" by the establishment of administrative rules and regulations, the violation of which could be punished by fine or imprisonment fixed by Congress, or by
penalties fixed by Congress, or measured by the injury done.
That "Congress cannot delegate legislative power is a principle universally recognized as vital to the integrity and maintenance of the system of government
ordained by the Constitution."
If, after the passage of the act and the promulgation of the rule, the defendants drove and grazed their sheep upon the reserve, in violation of the regulations, they
were making an unlawful use of the government's property. In doing so they thereby made themselves liable to the penalty imposed by Congress.
The subjects as to which the Secretary can regulate are defined. The lands are set apart as a forest reserve. He is required to make provisions to protect them from
depredations and from harmful uses. He is authorized 'to regulate the occupancy and use and to preserve the forests from destruction.' A violation of reasonable rules
regulating the use and occupancy of the property is made a crime, not by the Secretary, but by Congress."
The above are leading cases in the United States on the question of delegating legislative power. It will be noted that in the "Granger Cases," it was held that a railroad
company was a public corporation, and that a railroad was a public utility, and that, for such reasons, the legislature had the power to fix and determine just and reasonable
rates for freight and passengers.
The Minnesota case held that, so long as the rates were just and reasonable, the legislature could delegate the power to ascertain the facts and determine from the facts what
were just and reasonable rates,. and that in vesting the commission with such power was not a delegation of legislative power.
The Wisconsin case was a civil action founded upon a "Wisconsin standard policy of fire insurance," and the court held that "the act, . . . wholly fails to provide definitely and
clearly what the standard policy should contain, so that it could be put in use as a uniform policy required to take the place of all others, without the determination of the
insurance commissioner in respect to matters involving the exercise of a legislative discretion that could not be delegated."
The case of the United States Supreme Court, supra dealt with rules and regulations which were promulgated by the Secretary of Agriculture for Government land in the forest
reserve.
These decisions hold that the legislative only can enact a law, and that it cannot delegate it legislative authority.
The line of cleavage between what is and what is not a delegation of legislative power is pointed out and clearly defined. As the Supreme Court of Wisconsin says:
That no part of the legislative power can be delegated by the legislature to any other department of the government, executive or judicial, is a fundamental
principle in constitutional law, essential to the integrity and maintenance of the system of government established by the constitution.
Where an act is clothed with all the forms of law, and is complete in and of itself, it may be provided that it shall become operative only upon some certain act or
event, or, in like manner, that its operation shall be suspended.
The legislature cannot delegate its power to make a law, but it can make a law to delegate a power to determine some fact or state of things upon which the law
makes, or intends to make, its own action to depend.
The Village of Little Chute enacted an ordinance which provides:
All saloons in said village shall be closed at 11 o'clock P.M. each day and remain closed until 5 o'clock on the following morning, unless by special permission of
the president.
Construing it in 136 Wis., 526; 128 A. S. R., 1100,1 the Supreme Court of that State says:
We regard the ordinance as void for two reasons; First, because it attempts to confer arbitrary power upon an executive officer, and allows him, in executing the
ordinance, to make unjust and groundless discriminations among persons similarly situated; second, because the power to regulate saloons is a law-making power
vested in the village board, which cannot be delegated. A legislative body cannot delegate to a mere administrative officer power to make a law, but it can make a
law with provisions that it shall go into effect or be suspended in its operations upon the ascertainment of a fact or state of facts by an administrative officer or
board. In the present case the ordinance by its terms gives power to the president to decide arbitrary, and in the exercise of his own discretion, when a saloon shall
close. This is an attempt to vest legislative discretion in him, and cannot be sustained.
The legal principle involved there is squarely in point here.
It must be conceded that, after the passage of act No. 2868, and before any rules and regulations were promulgated by the Governor-General, a dealer in rice could sell it at
any price, even at a peso per "ganta," and that he would not commit a crime, because there would be no law fixing the price of rice, and the sale of it at any price would not be
a crime. That is to say, in the absence of a proclamation, it was not a crime to sell rice at any price. Hence, it must follow that, if the defendant committed a crime, it was
because the Governor-General issued the proclamation. There was no act of the Legislature making it a crime to sell rice at any price, and without the proclamation, the sale
of it at any price was to a crime.
The Executive order2 provides:
(5) The maximum selling price of palay, rice or corn is hereby fixed, for the time being as follows:
In Manila
Palay at P6.75 per sack of 57 kilos, or 29 centavos per ganta.
Rice at P15 per sack of 57 kilos, or 63 centavos per ganta.
Corn at P8 per sack of 57 kilos, or 34 centavos per ganta.

In the provinces producing palay, rice and corn, the maximum price shall be the Manila price less the cost of transportation from the source of supply and
necessary handling expenses to the place of sale, to be determined by the provincial treasurers or their deputies.
In provinces, obtaining their supplies from Manila or other producing provinces, the maximum price shall be the authorized price at the place of supply or the
Manila price as the case may be, plus the transportation cost, from the place of supply and the necessary handling expenses, to the place of sale, to be
determined by the provincial treasurers or their deputies.
(6) Provincial treasurers and their deputies are hereby directed to communicate with, and execute all instructions emanating from the Director of Commerce and
Industry, for the most effective and proper enforcement of the above regulations in their respective localities.
The law says that the Governor-General may fix "the maximum sale price that the industrial or merchant may demand." The law is a general law and not a local or special law.
The proclamation undertakes to fix one price for rice in Manila and other and different prices in other and different provinces in the Philippine Islands, and delegates the power
to determine the other and different prices to provincial treasurers and their deputies. Here, then, you would have a delegation of legislative power to the Governor-General,
and a delegation by him of that power to provincial treasurers and their deputies, who "are hereby directed to communicate with, and execute all instructions emanating from
the Director of Commerce and Industry, for the most effective and proper enforcement of the above regulations in their respective localities." The issuance of the proclamation
by the Governor-General was the exercise of the delegation of a delegated power, and was even a sub delegation of that power.
Assuming that it is valid, Act No. 2868 is a general law and does not authorize the Governor-General to fix one price of rice in Manila and another price in Iloilo. It only purports
to authorize him to fix the price of rice in the Philippine Islands under a law, which is General and uniform, and not local or special. Under the terms of the law, the price of rice
fixed in the proclamation must be the same all over the Islands. There cannot be one price at Manila and another at Iloilo. Again, it is a mater of common knowledge, and of
which this court will take judicial notice, that there are many kinds of rice with different and corresponding market values, and that there is a wide range in the price, which
varies with the grade and quality. Act No. 2868 makes no distinction in price for the grade or quality of the rice, and the proclamation, upon which the defendant was tried and
convicted, fixes the selling price of rice in Manila "at P15 per sack of 57 kilos, or 63 centavos per ganta," and is uniform as to all grades of rice, and says nothing about grade
or quality. Again, it will be noted that the law is confined to palay, rice and corn. They are products of the Philippine Islands. Hemp, tobacco, coconut, chickens, eggs, and
many other things are also products. Any law which single out palay, rice or corn from the numerous other products of the Islands is not general or uniform, but is a local or
special law. If such a law is valid, then by the same principle, the Governor-General could be authorized by proclamation to fix the price of meat, eggs, chickens, coconut,
hemp, and tobacco, or any other product of the Islands. In the very nature of things, all of that class of laws should be general and uniform. Otherwise, there would be an
unjust discrimination of property rights, which, under the law, must be equal and inform. Act No. 2868 is nothing more than a floating law, which, in the discretion and by a
proclamation of the Governor-General, makes it a floating crime to sell rice at a price in excess of the proclamation, without regard to grade or quality.
When Act No. 2868 is analyzed, it is the violation of the proclamation of the Governor-General which constitutes the crime. Without that proclamation, it was no crime to sell
rice at any price. In other words, the Legislature left it to the sole discretion of the Governor-General to say what was and what was not "any cause" for enforcing the act, and
what was and what was not "an extraordinary rise in the price of palay, rice or corn," and under certain undefined conditions to fix the price at which rice should be sold,
without regard to grade or quality, also to say whether a proclamation should be issued, if so, when, and whether or not the law should be enforced, how long it should be
enforced, and when the law should be suspended. The Legislature did not specify or define what was "any cause," or what was "an extraordinary rise in the price of rice, palay
or corn," Neither did it specify or define the conditions upon which the proclamation should be issued. In the absence of the proclamation no crime was committed. The alleged
sale was made a crime, if at all, because the Governor-General issued the proclamation. The act or proclamation does not say anything about the different grades or qualities
of rice, and the defendant is charged with the sale "of one ganta of rice at the price of eighty centavos (P0.80) which is a price greater than that fixed by Executive order No.
53."
We are clearly of the opinion and hold that Act No. 2868, in so far as it undertakes to authorized the Governor-General in his discretion to issue a proclamation, fixing the price
of rice, and to make the sale of rice in violation of the price of rice, and to make the sale of rice in violation of the proclamation a crime, is unconstitutional and void.
It may be urged that there was an extraordinary rise in the price of rice and profiteering, which worked a severe hardship on the poorer classes, and that an emergency
existed, but the question here presented is the constitutionality of a particular portion of a statute, and none of such matters is an argument for, or against, its constitutionality.
The Constitution is something solid, permanent an substantial. Its stability protects the life, liberty and property rights of the rich and the poor alike, and that protection ought
not to change with the wind or any emergency condition. The fundamental question involved in this case is the right of the people of the Philippine Islands to be and live under
a republican form of government. We make the broad statement that no state or nation, living under republican form of government, under the terms and conditions specified
in Act No. 2868, has ever enacted a law delegating the power to any one, to fix the price at which rice should be sold. That power can never be delegated under a republican
form of government.
In the fixing of the price at which the defendant should sell his rice, the law was not dealing with government property. It was dealing with private property and private rights,
which are sacred under the Constitution. If this law should be sustained, upon the same principle and for the same reason, the Legislature could authorize the GovernorGeneral to fix the price of every product or commodity in the Philippine Islands, and empower him to make it a crime to sell any product at any other or different price.
It may be said that this was a war measure, and that for such reason the provision of the Constitution should be suspended. But the Stubborn fact remains that at all times the
judicial power was in full force and effect, and that while that power was in force and effect, such a provision of the Constitution could not be, and was not, suspended even in
times of war. It may be claimed that during the war, the United States Government undertook to, and did, fix the price at which wheat and flour should be bought and sold, and
that is true. There, the United States had declared war, and at the time was at war with other nations, and it was a war measure, but it is also true that in doing so, and as a
part of the same act, the United States commandeered all the wheat and flour, and took possession of it, either actual or constructive, and the government itself became the
owner of the wheat and flour, and fixed the price to be paid for it. That is not this case. Here the rice sold was the personal and private property of the defendant, who sold it to
one of his customers. The government had not bought and did not claim to own the rice, or have any interest in it, and at the time of the alleged sale, it was the personal,
private property of the defendant. It may be that the law was passed in the interest of the public, but the members of this court have taken on solemn oath to uphold and
defend the Constitution, and it ought not to be construed to meet the changing winds or emergency conditions. Again, we say that no state or nation under a republican form of
government ever enacted a law authorizing any executive, under the conditions states, to fix the price at which a price person would sell his own rice, and make the broad
statement that no decision of any court, on principle or by analogy, will ever be found which sustains the constitutionality of the particular portion of Act No. 2868 here in
question. By the terms of the Organic Act, subject only to constitutional limitations, the power to legislate and enact laws is vested exclusively in the Legislative, which is
elected by a direct vote of the people of the Philippine Islands. As to the question here involved, the authority of the Governor-General to fix the maximum price at which palay,
rice and corn may be sold in the manner power in violation of the organic law.
This opinion is confined to the particular question here involved, which is the right of the Governor-General, upon the terms and conditions stated in the Act, to fix the price of
rice and make it a crime to sell it at a higher price, and which holds that portions of the Act unconstitutional. It does not decide or undertake to construe the constitutionality of
any of the remaining portions of the Act.
The judgment of the lower court is reversed, and the defendant discharged. So ordered.
Araullo, C.J., Johnson, Street and Ostrand, JJ., concur.
Romualdez, J., concurs in the result.

EN BANC

[G.R. No. 159357. April 28, 2004]

Brother MARIANO MIKE

SOCIETY, respondent.

Z.

VELARDE, petitioner,

vs. SOCIAL

JUSTICE

DECISION
PANGANIBAN, J.:

A decision that does not conform to the form and substance required by the Constitution and the
law is void and deemed legally inexistent. To be valid, decisions should comply with the form, the
procedure and the substantive requirements laid out in the Constitution, the Rules of Court and
relevant circulars/orders of the Supreme Court. For the guidance of the bench and the bar, the Court
hereby discusses these forms, procedures and requirements.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the June 12,
2003 Decision and July 29, 2003 Order of the Regional Trial Court (RTC) of Manila (Branch 49).
[1]

[2]

[3]

[4]

The challenged Decision was the offshoot of a Petition for Declaratory Relief filed before the
RTC-Manila by herein Respondent Social Justice Society (SJS) against herein Petitioner Mariano
Mike Z. Velarde, together with His Eminence, Jaime Cardinal Sin, Executive Minister Erao Manalo,
Brother Eddie Villanueva and Brother Eliseo F. Soriano as co-respondents. The Petition prayed for
the resolution of the question whether or not the act of a religious leader like any of herein
respondents, in endorsing the candidacy of a candidate for elective office or in urging or requiring the
members of his flock to vote for a specified candidate, is violative of the letter or spirit of the
constitutional provisions x x x.
[5]

[6]

Alleging that the questioned Decision did not contain a statement of facts and a dispositive
portion, herein petitioner filed a Clarificatory Motion and Motion for Reconsideration before the trial
court. Soriano, his co-respondent, similarly filed a separate Motion for Reconsideration. In response,
the trial court issued the assailed Order, which held as follows:

x x x [T]his Court cannot reconsider, because what it was asked to do, was only to clarify a
Constitutional provision and to declare whether acts are violative thereof. The Decision did not

make a dispositive portion because a dispositive portion is required only in coercive reliefs, where a
redress from wrong suffered and the benefit that the prevailing party wronged should get. The step
that these movants have to take, is direct appeal under Rule 45 of the Rules of Court, for a
conclusive interpretation of the Constitutional provision to the Supreme Court.
[7]

The Antecedent Proceedings

On January 28, 2003, SJS filed a Petition for Declaratory Relief (SJS Petition) before the RTCManila against Velarde and his aforesaid co-respondents. SJS, a registered political party, sought the
interpretation of several constitutional provisions, specifically on the separation of church and state;
and a declaratory judgment on the constitutionality of the acts of religious leaders endorsing a
candidate for an elective office, or urging or requiring the members of their flock to vote for a specified
candidate.
[8]

The subsequent proceedings were recounted in the challenged Decision in these words:

x x x. Bro. Eddie Villanueva submitted, within the original period [to file an Answer], a Motion to
Dismiss. Subsequently, Executive Minister Erao Manalo and Bro. Mike Velarde, filed their Motions
to Dismiss. While His Eminence Jaime Cardinal L. Sin, filed a Comment and Bro. Eli Soriano,
filed an Answer within the extended period and similarly prayed for the dismissal of the
Petition. All sought the dismissal of the Petition on the common grounds that it does not state a
cause of action and that there is no justiciable controversy. They were ordered to submit a pleading
by way of advisement, which was closely followed by another Order denying all the Motions to
Dismiss. Bro. Mike Velarde, Bro. Eddie Villanueva and Executive Minister Erao Manalo moved to
reconsider the denial. His Eminence Jaime Cardinal L. Sin, asked for extension to file
memorandum. Only Bro. Eli Soriano complied with the first Order by submitting his
Memorandum. x x x.
x x x the Court denied the Motions to Dismiss, and the Motions for Reconsideration filed by Bro.
Mike Velarde, Bro. Eddie Villanueva and Executive Minister Erao Manalo, which raised no new
arguments other than those already considered in the motions to dismiss x x x.
[9]

After narrating the above incidents, the trial court said that it had jurisdiction over the Petition,
because in praying for a determination as to whether the actions imputed to the respondents are
violative of Article II, Section 6 of the Fundamental Law, [the Petition] has raised only a question of
law. It then proceeded to a lengthy discussion of the issue raised in the Petition the separation of
church and state even tracing, to some extent, the historical background of the principle. Through its
discourse, the court a quo opined at some point that the [e]ndorsement of specific candidates in an
election to any public office is a clear violation of the separation clause.
[10]

[11]

After its essay on the legal issue, however, the trial court failed to include a dispositive portion in
its assailed Decision. Thus, Velarde and Soriano filed separate Motions for Reconsideration which, as
mentioned earlier, were denied by the lower court.
Hence, this Petition for Review.

[12]

This Court, in a Resolution dated September 2, 2003, required SJS and the Office of the
Solicitor General (OSG) to submit their respective comments. In the same Resolution, the Court gave
the other parties -- impleaded as respondents in the original case below --the opportunity to
comment, if they so desired.
[13]

On April 13, 2004, the Court en banc conducted an Oral Argument.

[14]

The Issues
In his Petition, Brother Mike Velarde submits the following issues for this Courts resolution:
1. Whether or not the Decision dated 12 June 2003 rendered by the court a quo was proper and valid;

2. Whether or not there exists justiceable controversy in herein respondents Petition for declaratory
relief;
3. Whether or not herein respondent has legal interest in filing the Petition for declaratory relief;
4. Whether or not the constitutional question sought to be resolved by herein respondent is ripe for
judicial determination;
5. Whether or not there is adequate remedy other than the declaratory relief; and,
6. Whether or not the court a quo has jurisdiction over the Petition for declaratory relief of herein
respondent.[15]

During the Oral Argument, the issues were narrowed down and classified as follows:

A. Procedural Issues
Did the Petition for Declaratory Relief raise a justiciable controversy? Did it state
a cause of action? Did respondent have any legal standing to file the Petition for
Declaratory Relief?
B. Substantive Issues
1. Did the RTC Decision conform to the form and substance required by the
Constitution, the law and the Rules of Court?
2. May religious leaders like herein petitioner, Bro. Mike Velarde, be prohibited from
endorsing candidates for public office? Corollarily, may they be banned from
campaigning against said candidates?
The Courts Ruling
The Petition of Brother Mike Velarde is meritorious.
Procedural Issues:
Requisites of Petitions
for Declaratory Relief
Section 1 of Rule 63 of the Rules of Court, which deals with petitions for declaratory relief,
provides in part:

Section 1. Who may file petition.- Any person interested under a deed, will, contract or other written
instrument, whose rights are affected by a statute, executive order or regulation, ordinance, or any
other governmental regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or validity arising, and
for a declaration of his rights or duties thereunder.
Based on the foregoing, an action for declaratory relief should be filed by a person interested
under a deed, a will, a contract or other written instrument, and whose rights are affected by a statute,
an executive order, a regulation or an ordinance. The purpose of the remedy is to interpret or to
determine the validity of the written instrument and to seek a judicial declaration of the parties rights
or duties thereunder. The essential requisites of the action are as follows: (1) there is a justiciable
controversy; (2) the controversy is between persons whose interests are adverse; (3) the party
seeking the relief has a legal interest in the controversy; and (4) the issue is ripe for judicial
determination.
[16]

[17]

Justiciable Controversy

Brother Mike Velarde contends that the SJS Petition failed to allege, much less establish before
the trial court, that there existed a justiciable controversy or an adverse legal interest between them;
and that SJS had a legal right that was being violated or threatened to be violated by petitioner. On
the contrary, Velarde alleges that SJS premised its action on mere speculations, contingent events,
and hypothetical issues that had not yet ripened into an actual controversy. Thus, its Petition for
Declaratory Relief must fail.
A justiciable controversy refers to an existing case or controversy that is appropriate or ripe for
judicial determination, not one that is conjectural or merely anticipatory. [18] The SJS Petition for
Declaratory Relief fell short of this test. It miserably failed to allege an existing controversy or dispute
between the petitioner and the named respondents therein. Further, the Petition did not sufficiently
state what specific legal right of the petitioner was violated by the respondents therein; and what
particular act or acts of the latter were in breach of its rights, the law or the Constitution.
As pointed out by Brother Eliseo F. Soriano in his Comment, what exactly has he done that
merited the attention of SJS? He confesses that he does not know the answer, because the SJS
Petition (as well as the assailed Decision of the RTC) yields nothing in this respect. His Eminence,
Jaime Cardinal Sin, adds that, at the time SJS filed its Petition on January 28, 2003, the election
season had not even started yet; and that, in any event, he has not been actively involved in partisan
politics.
[19]

An initiatory complaint or petition filed with the trial court should contain a plain, concise and
direct statement of the ultimate facts on which the party pleading relies for his claim x x x. Yet, the
SJS Petition stated no ultimate facts.
[20]

Indeed, SJS merely speculated or anticipated without factual moorings that, as religious leaders,
the petitioner and his co-respondents below had endorsed or threatened to endorse a candidate or
candidates for elective offices; and that such actual or threatened endorsement will enable [them] to
elect men to public office who [would] in turn be forever beholden to their leaders, enabling them to
control the government[;] and pos[ing] a clear and present danger of serious erosion of the peoples
faith in the electoral process[;] and reinforc[ing] their belief that religious leaders determine the
ultimate result of elections, which would then be violative of the separation clause.
[21]

[22]

Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not
suffice to constitute a justiciable controversy. The Petition does not even allege any indication or
manifest intent on the part of any of the respondents below to champion an electoral candidate, or to
urge their so-called flock to vote for, or not to vote for, a particular candidate. It is a time-honored rule
that sheer speculation does not give rise to an actionable right.
Obviously, there is no factual allegation that SJS rights are being subjected to any threatened,
imminent and inevitable violation that should be prevented by the declaratory relief sought. The
judicial power and duty of the courts to settle actual controversies involving rights that are legally
demandable and enforceable cannot be exercised when there is no actual or threatened violation of
a legal right.
[23]

All that the 5-page SJS Petition prayed for was that the question raised in paragraph 9 hereof be
resolved. In other words, it merely sought an opinion of the trial court on whether the speculated
acts of religious leaders endorsing elective candidates for political offices violated the constitutional
principle on the separation of church and state. SJS did not ask for a declaration of its rights and
duties; neither did it pray for the stoppage of any threatened violation of its declared rights. Courts,
however, are proscribed from rendering an advisory opinion.
[24]

[25]

Cause of Action
Respondent SJS asserts that in order to maintain a petition for declaratory relief, a cause of
action need not be alleged or proven. Supposedly, for such petition to prosper, there need not be any
violation of a right, breach of duty or actual wrong committed by one party against the other.
Petitioner, on the other hand, argues that the subject matter of an action for declaratory relief
should be a deed, a will, a contract (or other written instrument), a statute, an executive order, a
regulation or an ordinance. But the subject matter of the SJS Petition is the constitutionality of an act
of a religious leader to endorse the candidacy of a candidate for elective office or to urge or require
the members of the flock to vote for a specified candidate. According to petitioner, this subject
matter is beyond the realm of an action for declaratory relief. Petitioner avers that in the absence of
[26]

[27]

a valid subject matter, the Petition fails to state a cause of action and, hence, should have been
dismissed outright by the court a quo.
A cause of action is an act or an omission of one party in violation of the legal right or rights of
another, causing injury to the latter. Its essential elements are the following: (1) a right in favor of the
plaintiff; (2) an obligation on the part of the named defendant to respect or not to violate such right;
and (3) such defendants act or omission that is violative of the right of the plaintiff or constituting a
breach of the obligation of the former to the latter.
[28]

[29]

The failure of a complaint to state a cause of action is a ground for its outright dismissal.
However, in special civil actions for declaratory relief, the concept of a cause of action under
ordinary civil actions does not strictly apply. The reason for this exception is that an action for
declaratory relief presupposes that there has been no actual breach of the instruments involved or of
rights arising thereunder. Nevertheless, a breach or violation should be impending, imminent or at
least threatened.
[30]

[31]

A perusal of the Petition filed by SJS before the RTC discloses no explicit allegation that the
former had any legal right in its favor that it sought to protect. We can only infer the interest,
supposedly in its favor, from its bare allegation that it has thousands of members who are citizenstaxpayers-registered voters and who are keenly interested in a judicial clarification of the
constitutionality of the partisan participation of religious leaders in Philippine politics and in the
process to insure adherence to the Constitution by everyone x x x.
[32]

Such general averment does not, however, suffice to constitute a legal right or interest. Not only
is the presumed interest not personal in character; it is likewise too vague, highly speculative and
uncertain. The Rules require that the interest must be material to the issue and affected by the
questioned act or instrument, as distinguished from simple curiosity or incidental interest in the
question raised.
[33]

[34]

To bolster its stance, SJS cites the Corpus Juris Secundum and submits that the [p]laintiff in a
declaratory judgment action does not seek to enforce a claim against [the] defendant, but seeks a
judicial declaration of [the] rights of the parties for the purpose of guiding [their] future conduct, and
the essential distinction between a declaratory judgment action and the usual action is that no actual
wrong need have been committed or loss have occurred in order to sustain the declaratory judgment
action, although there must be no uncertainty that the loss will occur or that the asserted rights will be
invaded.
[35]

SJS has, however, ignored the crucial point of its own reference that there must be no uncertainty
that the loss will occur or that the asserted rights will be invaded. Precisely, as discussed earlier, it
merely conjectures that herein petitioner (and his co-respondents below) might actively participate in
partisan politics, use the awesome voting strength of its faithful flock [to] enable it to elect men to
public office x x x, enabling [it] to control the government.
[36]

During the Oral Argument, though, Petitioner Velarde and his co-respondents below all strongly
asserted that they had not in any way engaged or intended to participate in partisan politics. They all
firmly assured this Court that they had not done anything to trigger the issue raised and to entitle SJS
to the relief sought.
Indeed, the Court finds in the Petition for Declaratory Relief no single allegation of fact upon
which SJS could base a right of relief from the named respondents. In any event, even granting that it
sufficiently asserted a legal right it sought to protect, there was nevertheless no certainty that such
right would be invaded by the said respondents. Not even the alleged proximity of the elections to the
time the Petition was filed below (January 28, 2003) would have provided the certainty that it had a
legal right that would be jeopardized or violated by any of those respondents.
Legal Standing
Legal standing or locus standi has been defined as a personal and substantial interest in the
case, such that the party has sustained or will sustain direct injury as a result of the challenged act.
Interest means a material interest in issue that is affected by the questioned act or instrument, as
distinguished from a mere incidental interest in the question involved.
[37]

[38]

Petitioner alleges that [i]n seeking declaratory relief as to the constitutionality of an act of a
religious leader to endorse, or require the members of the religious flock to vote for a specific

candidate, herein Respondent SJS has no legal interest in the controversy;

how the resolution of the proffered question would benefit or injure it.

[39]

it has failed to establish

Parties bringing suits challenging the constitutionality of a law, an act or a statute must show not
only that the law [or act] is invalid, but also that [they have] sustained or [are] in immediate or
imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that
[they] suffer thereby in some indefinite way. They must demonstrate that they have been, or are
about to be, denied some right or privilege to which they are lawfully entitled, or that they are about to
be subjected to some burdens or penalties by reason of the statute or act complained of.
[40]

[41]

First, parties suing as taxpayers must specifically prove that they have sufficient interest in
preventing the illegal expenditure of money raised by taxation. A taxpayers action may be properly
brought only when there is an exercise by Congress of its taxing or spending power. In the present
case, there is no allegation, whether express or implied, that taxpayers money is being illegally
disbursed.
[42]

[43]

Second, there was no showing in the Petition for Declaratory Relief that SJS as a political party or
its members as registered voters would be adversely affected by the alleged acts of the respondents
below, if the question at issue was not resolved. There was no allegation that SJS had suffered or
would be deprived of votes due to the acts imputed to the said respondents. Neither did it allege that
any of its members would be denied the right of suffrage or the privilege to be voted for a public office
they are seeking.
Finally, the allegedly keen interest of its thousands of members who are citizens-taxpayersregistered voters is too general and beyond the contemplation of the standards set by our
jurisprudence. Not only is the presumed interest impersonal in character; it is likewise too vague,
highly speculative and uncertain to satisfy the requirement of standing.
[44]

[45]

Transcendental Importance
In any event, SJS urges the Court to take cognizance of the Petition, even sans legal standing,
considering that the issues raised are of paramount public interest.
In not a few cases, the Court has liberalized the locus standi requirement when a petition raises
an issue of transcendental significance or paramount importance to the people. Recently, after
holding that the IBP had no locus standi to bring the suit, the Court in IBP v. Zamora nevertheless
entertained the Petition therein. It noted that the IBP has advanced constitutional issues which
deserve the attention of this Court in view of their seriousness, novelty and weight as precedents.
[46]

[47]

[48]

Similarly in the instant case, the Court deemed the constitutional issue raised in the SJS Petition
to be of paramount interest to the Filipino people. The issue did not simply concern a delineation of
the separation between church and state, but ran smack into the governance of our country.The issue
was both transcendental in importance and novel in nature, since it had never been decided before.
The Court, thus, called for Oral Argument to determine with certainty whether it could resolve the
constitutional issue despite the barren allegations in the SJS Petition as well as the abbreviated
proceedings in the court below. Much to its chagrin, however, counsels for the parties -- particularly
for Respondent SJS -- made no satisfactory allegations or clarifications that would supply the
deficiencies hereinabove discussed. Hence, even if the Court would exempt this case from the
stringent locus standi requirement, such heroic effort would be futile because the transcendental
issue cannot be resolved anyway.
Proper Proceedings Before
the Trial Court
To prevent a repetition of this waste of precious judicial time and effort, and for the guidance of
the bench and the bar, the Court reiterates theelementary procedure that must be followed by trial
courts in the conduct of civil cases.
[49]

[50]

Prefatorily, the trial court may -- motu proprio or upon motion of the defendant -- dismiss a
complaint (or petition, in a special civil action) that does not allege the plaintiffs (or petitioners) cause
or causes of action. A complaint or petition should contain a plain, concise and direct statement of
[51]

[52]

the ultimate facts on which the party pleading relies for his claim or defense. It should likewise
clearly specify the relief sought.
[53]

[54]

Upon the filing of the complaint/petition and the payment of the requisite legal fees, the clerk of
court shall forthwith issue the corresponding summons to the defendants or the respondents, with a
directive that the defendant answer within 15 days, unless a different period is fixed by the court.
The summons shall also contain a notice that if such answer is not filed, the plaintiffs/petitioners
shall take a judgment by default and may be granted the relief applied for. The court, however, may
-- upon such terms as may be just -- allow an answer to be filed after the time fixed by the Rules.
[55]

[56]

[57]

[58]

If the answer sets forth a counterclaim or cross-claim, it must be answered within ten (10) days
from service. A reply may be filed within ten (10) days from service of the pleading responded to.
[59]

[60]

When an answer fails to tender an issue or admits the material allegations of the adverse partys
pleading, the court may, on motion of that party, direct judgment on such pleading (except in actions
for declaration of nullity or annulment of marriage or for legal separation). Meanwhile, a party
seeking to recover upon a claim, a counterclaim or crossclaim -- or to obtain a declaratory relief -may, at any time after the answer thereto has been served, move for a summary judgment in its favor.
Similarly, a party against whom a claim, a counterclaim or crossclaim is asserted -- or a declaratory
relief sought -- may, at any time, move for a summary judgment in its favor. After the motion is
heard, the judgment sought shall be rendered forthwith if there is a showing that, except as to the
amount of damages, there is no genuine issue as to any material fact; and that the moving party is
entitled to a judgment as a matter of law.
[61]

[62]

[63]

[64]

Within the time for -- but before -- filing the answer to the complaint or petition, the defendant may
file a motion to dismiss based on any of the grounds stated in Section 1 of Rule 16 of the Rules of
Court. During the hearing of the motion, the parties shall submit their arguments on the questions of
law, and their evidence on the questions of fact. After the hearing, the court may dismiss the action
or claim, deny the motion, or order the amendment of the pleadings. It shall not defer the resolution of
the motion for the reason that the ground relied upon is not indubitable. In every case, the resolution
shall state clearly and distinctly the reasons therefor.
[65]

[66]

If the motion is denied, the movant may file an answer within the balance of the period originally
prescribed to file an answer, but not less than five (5) days in any event, computed from the receipt of
the notice of the denial. If the pleading is ordered to be amended, the defendant shall file an answer
within fifteen (15) days, counted from the service of the amended pleading, unless the court provides
a longer period.
[67]

After the last pleading has been served and filed, the case shall be set for pretrial, which is a
mandatory proceeding. A plaintiffs/ petitioners (or its duly authorized representatives) nonappearance at the pretrial, if without valid cause, shall result in the dismissal of the action with
prejudice, unless the court orders otherwise. A similar failure on the part of the defendant shall be a
cause for allowing the plaintiff/petitioner to present evidenceex parte, and the court to render
judgment on the basis thereof.
[68]

[69]

[70]

The parties are required to file their pretrial briefs; failure to do so shall have the same effect as
failure to appear at the pretrial. Upon the termination thereof, the court shall issue an order reciting
in detail the matters taken up at the conference; the action taken on them, the amendments allowed
to the pleadings; and the agreements or admissions, if any, made by the parties regarding any of the
matters considered. The parties may further avail themselves of any of the modes of discovery, if
they so wish.
[71]

[72]

[73]

Thereafter, the case shall be set for trial, in which the parties shall adduce their respective
evidence in support of their claims and/or defenses.By their written consent or upon the application of
either party, or on its own motion, the court may also order any or all of the issues to be referred to a
commissioner, who is to be appointed by it or to be agreed upon by the parties. The trial or hearing
before the commissioner shall proceed in all respects as it would if held before the court.
[74]

[75]

[76]

Upon the completion of such proceedings, the commissioner shall file with the court a written
report on the matters referred by the parties. The report shall be set for hearing, after which the
court shall issue an order adopting, modifying or rejecting it in whole or in part; or recommitting it with
instructions; or requiring the parties to present further evidence before the commissioner or the court.
[77]

[78]

Finally, a judgment or final order determining the merits of the case shall be rendered. The
decision shall be in writing, personally and directly prepared by the judge, stating clearly and distinctly

the facts and the law on which it is based, signed by the issuing magistrate, and filed with the clerk of
court.
[79]

Based on these elementary guidelines, let us examine the proceedings before the trial court in
the instant case.
First, with respect to the initiatory pleading of the SJS. Even a cursory perusal of the Petition
immediately reveals its gross inadequacy. It contained no statement of ultimate facts upon which the
petitioner relied for its claim. Furthermore, it did not specify the relief it sought from the court, but
merely asked it to answer a hypothetical question.
Relief, as contemplated in a legal action, refers to a specific coercive measure prayed for as a
result of a violation of the rights of a plaintiff or a petitioner. As already discussed earlier, the Petition
before the trial court had no allegations of fact or of any specific violation of the petitioners rights,
which the respondents had a duty to respect. Such deficiency amounted to a failure to state a cause
of action; hence, no coercive relief could be sought and adjudicated. The Petition evidently lacked
substantive requirements and, we repeat, should have been dismissed at the outset.
[80]

[81]

Second, with respect to the trial court proceedings. Within the period set to file their respective
answers to the SJS Petition, Velarde, Villanueva and Manalo filed Motions to Dismiss; Cardinal Sin, a
Comment; and Soriano, within a priorly granted extended period, an Answer in which he likewise
prayed for the dismissal of the Petition. SJS filed a Rejoinder to the Motion of Velarde, who
subsequently filed a Sur-Rejoinder. Supposedly, there were several scheduled settings, in which the
[c]ourt was apprised of the respective positions of the parties. The nature of such settings -- whether
pretrial or trial hearings -- was not disclosed in the records. Before ruling on the Motions to Dismiss,
the trial court issued an Order dated May 8, 2003, directing the parties to submit their
memoranda. Issued shortly thereafter was another Order dated May 14, 2003, denying all the
Motions to Dismiss.
[82]

[83]

[84]

[85]

In the latter Order, the trial court perfunctorily ruled:

The Court now resolves to deny the Motions to Dismiss, and after all the memoranda are submitted,
then, the case shall be deemed as submitted for resolution.
[86]

Apparently, contrary to the requirement of Section 2 of Rule 16 of the Rules of Court, the Motions
were not heard. Worse, the Order purportedly resolving the Motions to Dismiss did not state any
reason at all for their denial, in contravention of Section 3 of the said Rule 16. There was not even
any statement of the grounds relied upon by the Motions; much less, of the legal findings and
conclusions of the trial court.
Thus, Velarde, Villanueva and Manalo moved for reconsideration. Pending the resolution of these
Motions for Reconsideration, Villanueva filed a Motion to suspend the filing of the parties
memoranda. But instead of separately resolving the pending Motions fairly and squarely, the trial
court again transgressed the Rules of Court when it immediately proceeded to issue its Decision,
even before tackling the issues raised in those Motions.
Furthermore, the RTC issued its Decision without allowing the parties to file their answers. For
this reason, there was no joinder of the issues. If only it had allowed the filing of those answers, the
trial court would have known, as the Oral Argument revealed, that the petitioner and his corespondents below had not committed or threatened to commit the act attributed to them (endorsing
candidates) -- the act that was supposedly the factual basis of the suit.
Parenthetically, the court a quo further failed to give a notice of the Petition to the OSG, which
was entitled to be heard upon questions involving the constitutionality or validity of statutes and other
measures.
[87]

Moreover, as will be discussed in more detail, the questioned Decision of the trial court was
utterly wanting in the requirements prescribed by the Constitution and the Rules of Court.
All in all, during the loosely abbreviated proceedings of the case, the trial court indeed acted with
inexplicable haste, with total ignorance of the law -- or, worse, in cavalier disregard of the rules of
procedure -- and with grave abuse of discretion.
Contrary to the contentions of the trial judge and of SJS, proceedings for declaratory relief must
still follow the process described above -- the petition must state a cause of action; the proceedings
must undergo the procedure outlined in the Rules of Court; and the decision must adhere to
constitutional and legal requirements.

First Substantive Issue:

Fundamental Requirements
of a Decision
The Constitution commands that [n]o decision shall be rendered by any court without expressing
therein clearly and distinctly the facts and the law on which it is based. No petition for review or
motion for reconsideration of a decision of the court shall be refused due course or denied without
stating the basis therefor.
[88]

Consistent with this constitutional mandate, Section 1 of Rule 36 of the Rules on Civil Procedure
similarly provides:

Sec. 1. Rendition of judgments and final orders. A judgment or final order determining the merits of
the case shall be in writing personally and directly prepared by the judge, stating clearly and
distinctly the facts and the law on which it is based, signed by him and filed with the clerk of court.
In the same vein, Section 2 of Rule 120 of the Rules of Court on Criminal Procedure reads as
follows:

Sec. 2. Form and contents of judgments. -- The judgment must be written in the official language,
personally and directly prepared by the judge and signed by him and shall contain clearly and
distinctly a statement of the facts proved or admitted by the accused and the law upon which the
judgment is based.
x x x x x x x x x.
Pursuant to the Constitution, this Court also issued on January 28, 1988, Administrative Circular
No. 1, prompting all judges to make complete findings of facts in their decisions, and scrutinize
closely the legal aspects of the case in the light of the evidence presented. They should avoid the
tendency to generalize and form conclusions without detailing the facts from which such conclusions
are deduced.
In many cases, this Court has time and time again reminded magistrates to heed the demand of
Section 14, Article VIII of the Constitution. The Court, through Chief Justice Hilario G. Davide Jr.
in Yao v. Court of Appeals, discussed at length the implications of this provision and strongly
exhorted thus:
[89]

[90]

Faithful adherence to the requirements of Section 14, Article VIII of the Constitution is
indisputably a paramount component of due process and fair play. It is likewise demanded by the
due process clause of the Constitution. The parties to a litigation should be informed of how it was
decided, with an explanation of the factual and legal reasons that led to the conclusions of the
court. The court cannot simply say that judgment is rendered in favor of X and against Y and just
leave it at that without any justification whatsoever for its action. The losing party is entitled to
know why he lost, so he may appeal to the higher court, if permitted, should he believe that the
decision should be reversed. A decision that does not clearly and distinctly state the facts and the
law on which it is based leaves the parties in the dark as to how it was reached and is precisely
prejudicial to the losing party, who is unable to pinpoint the possible errors of the court for review
by a higher tribunal. More than that, the requirement is an assurance to the parties that, in reaching
judgment, the judge did so through the processes of legal reasoning. It is, thus, a safeguard against
the impetuosity of the judge, preventing him from deciding ipse dixit. Vouchsafed neither the sword
nor the purse by the Constitution but nonetheless vested with the sovereign prerogative of passing
judgment on the life, liberty or property of his fellowmen, the judge must ultimately depend on the
power of reason for sustained public confidence in the justness of his decision.
In People v. Bugarin, the Court also explained:
[91]

The requirement that the decisions of courts must be in writing and that they must set forth clearly
and distinctly the facts and the law on which they are based serves many functions. It is intended,
among other things, to inform the parties of the reason or reasons for the decision so that if any of

them appeals, he can point out to the appellate court the finding of facts or the rulings on points of
law with which he disagrees. More than that, the requirement is an assurance to the parties that, in
reaching judgment, the judge did so through the processes of legal reasoning. x x x.
Indeed, elementary due process demands that the parties to a litigation be given information on
how the case was decided, as well as an explanation of the factual and legal reasons that led to the
conclusions of the court.
[92]

In Madrid v. Court of Appeals, this Court had instructed magistrates to exert effort to ensure that
their decisions would present a comprehensive analysis or account of the factual and legal findings
that would substantially address the issues raised by the parties.
[93]

In the present case, it is starkly obvious that the assailed Decision contains no statement of facts
-- much less an assessment or analysis thereof -- or of the courts findings as to the probable
facts. The assailed Decision begins with a statement of the nature of the action and the question or
issue presented. Then follows a brief explanation of the constitutional provisions involved, and what
the Petition sought to achieve. Thereafter, the ensuing procedural incidents before the trial court are
tracked. The Decision proceeds to a full-length opinion on the nature and the extent of the separation
of church and state. Without expressly stating the final conclusion she has reached or specifying the
relief granted or denied, the trial judge ends her Decision with the clause SO ORDERED.
What were the antecedents that necessitated the filing of the Petition? What exactly were the
distinct facts that gave rise to the question sought to be resolved by SJS? More important, what were
the factual findings and analysis on which the trial court based its legal findings and conclusions?
None were stated or implied. Indeed, the RTCs Decision cannot be upheld for its failure to express
clearly and distinctly the facts on which it was based. Thus, the trial court clearly transgressed the
constitutional directive.
The significance of factual findings lies in the value of the decision as a precedent. How can it be
so if one cannot apply the ruling to similar circumstances, simply because such circumstances are
unknown? Otherwise stated, how will the ruling be applied in the future, if there is no point of factual
comparison?
Moreover, the court a quo did not include a resolutory or dispositive portion in its so-called
Decision. The importance of such portion was explained in the early case Manalang v. Tuason de
Rickards, from which we quote:
[94]

The resolution of the Court on a given issue as embodied in the dispositive part of the decision or
order is the investitive or controlling factor that determines and settles the rights of the parties and
the questions presented therein, notwithstanding the existence of statements or declaration in the
body of said order that may be confusing.
The assailed Decision in the present case leaves us in the dark as to its final resolution of the
Petition. To recall, the original Petition was for declaratory relief. So, what relief did the trial court
grant or deny? What rights of the parties did it conclusively declare? Its final statement says, SO
ORDERED. But what exactly did the court order? It had the temerity to label its issuance a Decision,
when nothing was in fact decided.
Respondent SJS insists that the dispositive portion can be found in the body of the assailed
Decision. It claims that the issue is disposed of and the Petition finally resolved by the statement of
the trial court found on page 10 of its 14-page Decision, which reads: Endorsement of specific
candidates in an election to any public office is a clear violation of the separation clause.
[95]

We cannot agree.
In Magdalena Estate, Inc. v. Caluag, the obligation of the party imposed by the Court was
allegedly contained in the text of the original Decision. The Court, however, held:
[96]

x x x The quoted finding of the lower court cannot supply deficiencies in the dispositive portion. It
is a mere opinion of the court and the rule is settled that where there is a conflict between
the dispositive part and the opinion, the former must prevail over the latter on the theory that the
dispositive portion is the final order while the opinion is merely a statement ordering
nothing. (Italics in the original)

Thus, the dispositive portion cannot be deemed to be the statement quoted by SJS and
embedded in the last paragraph of page 10 of the assailed 14-page Decision. If at all, that statement
is merely an answer to a hypothetical legal question and just a part of the opinion of the trial court.It
does not conclusively declare the rights (or obligations) of the parties to the Petition. Neither does it
grant any -- much less, the proper -- relief under the circumstances, as required of a dispositive
portion.
Failure to comply with the constitutional injunction is a grave abuse of discretion amounting to
lack or excess of jurisdiction. Decisions or orders issued in careless disregard of the constitutional
mandate are a patent nullity and must be struck down as void.
[97]

Parts of a Decision
In general, the essential parts of a good decision consist of the following: (1) statement of the
case; (2) statement of facts; (3) issues or assignment of errors; (4) court ruling, in which each issue
is, as a rule, separately considered and resolved; and, finally, (5) dispositive portion. Theponente may
also opt to include an introduction or a prologue as well as an epilogue, especially in cases in which
controversial or novel issues are involved.
[98]

An introduction may consist of a concise but comprehensive statement of the principal factual or
legal issue/s of the case. In some cases -- particularly those concerning public interest; or involving
complicated commercial, scientific, technical or otherwise rare subject matters -- a longer introduction
or prologue may serve to acquaint readers with the specific nature of the controversy and the issues
involved. An epilogue may be a summation of the important principles applied to the resolution of the
issues of paramount public interest or significance. It may also lay down an enduring philosophy of
law or guiding principle.
Let us now, again for the guidance of the bench and the bar, discuss the essential parts of a good
decision.
1. Statement of the Case
The Statement of the Case consists of a legal definition of the nature of the action. At the first
instance, this part states whether the action is a civil case for collection, ejectment, quieting of title,
foreclosure of mortgage, and so on; or, if it is a criminal case, this part describes the specific charge -quoted usually from the accusatory portion of the information -- and the plea of the accused. Also
mentioned here are whether the case is being decided on appeal or on a petition for certiorari, the
court of origin, the case number in the trial court, and the dispositive portion of the assailed decision.
In a criminal case, the verbatim reproduction of the criminal information serves as a guide in
determining the nature and the gravity of the offense for which the accused may be found
culpable. As a rule, the accused cannot be convicted of a crime different from or graver than that
charged.
Also, quoting verbatim the text of the information is especially important when there is a question
on the sufficiency of the charge, or on whether qualifying and modifying circumstances have been
adequately alleged therein.
To ensure that due process is accorded, it is important to give a short description of the
proceedings regarding the plea of the accused. Absence of an arraignment, or a serious irregularity
therein, may render the judgment void, and further consideration by the appellate court would be
futile. In some instances, especially in appealed cases, it would also be useful to mention the fact of
the appellants detention, in order to dispose of the preliminary query -- whether or not they have
abandoned their appeal by absconding or jumping bail.
Mentioning the court of origin and the case number originally assigned helps in facilitating the
consolidation of the records of the case in both the trial and the appellate courts, after entry of final
judgment.
Finally, the reproduction of the decretal portion of the assailed decision informs the reader of how
the appealed case was decided by the court a quo.
2. Statement of Facts
There are different ways of relating the facts of the case. First, under the objective or reportorial
method, the judge summarizes -- without comment -- the testimony of each witness and the contents

of each exhibit. Second, under the synthesis method, the factual theory of the plaintiff or prosecution
and then that of the defendant or defense is summarized according to the judges best light. Third, in
the subjective method, the version of the facts accepted by the judge is simply narrated without
explaining what the parties versions are. Finally, through a combination of objective and subjective
means, the testimony of each witness is reported and the judge then formulates his or her own
version of the facts.
In criminal cases, it is better to present both the version of the prosecution and that of the
defense, in the interest of fairness and due process. A detailed evaluation of the contentions of the
parties must follow. The resolution of most criminal cases, unlike civil and other cases, depends to a
large extent on the factual issues and the appreciation of the evidence. The plausibility or the
implausibility of each version can sometimes be initially drawn from a reading of the facts. Thereafter,
the bases of the court in arriving at its findings and conclusions should be explained.
On appeal, the fact that the assailed decision of the lower court fully, intelligently and correctly
resolved all factual and legal issues involved may partly explain why the reviewing court finds no
reason to reverse the findings and conclusions of the former. Conversely, the lower courts patent
misappreciation of the facts or misapplication of the law would aid in a better understanding of why its
ruling is reversed or modified.
In appealed civil cases, the opposing sets of facts no longer need to be presented. Issues for
resolution usually involve questions of law, grave abuse of discretion, or want of jurisdiction; hence,
the facts of the case are often undisputed by the parties. With few exceptions, factual issues are not
entertained in non-criminal cases. Consequently, the narration of facts by the lower court, if
exhaustive and clear, may be reproduced; otherwise, the material factual antecedents should be
restated in the words of the reviewing magistrate.
In addition, the reasoning of the lower court or body whose decision is under review should be
laid out, in order that the parties may clearly understand why the lower court ruled in a certain way,
and why the reviewing court either finds no reason to reverse it or concludes otherwise.
3. Issues or Assignment of Errors
Both factual and legal issues should be stated. On appeal, the assignment of errors, as
mentioned in the appellants brief, may be reproduced in toto and tackled seriatim, so as to avoid
motions for reconsideration of the final decision on the ground that the court failed to consider all
assigned errors that could affect the outcome of the case. But when the appellant presents repetitive
issues or when the assigned errors do not strike at the main issue, these may be restated in clearer
and more coherent terms.
Though not specifically questioned by the parties, additional issues may also be included, if
deemed important for substantial justice to be rendered. Note that appealed criminal cases are
given de novo review, in contrast to noncriminal cases in which the reviewing court is generally limited
to issues specifically raised in the appeal. The few exceptions are errors of jurisdiction; questions not
raised but necessary in arriving at a just decision on the case; or unassigned errors that are closely
related to those properly assigned, or upon which depends the determination of the question properly
raised.
4. The Courts Ruling
This part contains a full discussion of the specific errors or issues raised in the complaint, petition
or appeal, as the case may be; as well as of other issues the court deems essential to a just
disposition of the case. Where there are several issues, each one of them should be separately
addressed, as much as practicable. The respective contentions of the parties should also be
mentioned here. When procedural questions are raised in addition to substantive ones, it is better to
resolve the former preliminarily.
5. The Disposition or Dispositive Portion
In a criminal case, the disposition should include a finding of innocence or guilt, the specific crime
committed, the penalty imposed, the participation of the accused, the modifying circumstances if any,
and the civil liability and costs. In case an acquittal is decreed, the court must order the immediate
release of the accused, if detained, (unless they are being held for another cause) and order the
director of the Bureau of Corrections (or wherever the accused is detained) to report, within a
maximum of ten (10) days from notice, the exact date when the accused were set free.
In a civil case as well as in a special civil action, the disposition should state whether the
complaint or petition is granted or denied, the specific relief granted, and the costs. The following test

of completeness may be applied. First, the parties should know their rights and
obligations. Second,they should know how to execute the decision under alternative
contingencies. Third, there should be no need for further proceedings to dispose of the
issues. Fourth, the case should be terminated by according the proper relief. The proper relief usually
depends upon what the parties seek in their pleadings. It may declare their rights and duties,
command the performance of positive prestations, or order them to abstain from specific acts. The
disposition must also adjudicate costs.
The foregoing parts need not always be discussed in sequence. But they should all be present
and plainly identifiable in the decision. Depending on the writers character, genre and style, the
language should be fresh and free-flowing, not necessarily stereotyped or in a fixed form; much less
highfalutin, hackneyed and pretentious. At all times, however, the decision must be clear, concise,
complete and correct.
Second Substantive Issue:
Religious Leaders Endorsement
of Candidates for Public Office
The basic question posed in the SJS Petition -- WHETHER ENDORSEMENTS OF
CANDIDACIES BY RELIGIOUS LEADERS IS UNCONSTITUTIONAL -- undoubtedly deserves
serious consideration. As stated earlier, the Court deems this constitutional issue to be of paramount
interest to the Filipino citizenry, for it concerns the governance of our country and its people. Thus,
despite the obvious procedural transgressions by both SJS and the trial court, this Court still called for
Oral Argument, so as not to leave any doubt that there might be room to entertain and dispose of the
SJS Petition on the merits.
Counsel for SJS has utterly failed, however, to convince the Court that there are enough factual
and legal bases to resolve the paramount issue.On the other hand, the Office of the Solicitor General
has sided with petitioner insofar as there are no facts supporting the SJS Petition and the assailed
Decision.
We reiterate that the said Petition failed to state directly the ultimate facts that it relied upon for its
claim. During the Oral Argument, counsel for SJS candidly admitted that there were no factual
allegations in its Petition for Declaratory Relief. Neither were there factual findings in the assailed
Decision. At best, SJS merely asked the trial court to answer a hypothetical question. In effect, it
merely sought an advisory opinion, the rendition of which was beyond the courts constitutional
mandate and jurisdiction.
[99]

Indeed, the assailed Decision was rendered in clear violation of the Constitution, because it made
no findings of facts and final disposition.Hence, it is void and deemed legally
inexistent. Consequently, there is nothing for this Court to review, affirm, reverse or even just modify.
Regrettably, it is not legally possible for the Court to take up, on the merits, the paramount
question involving a constitutional principle. It is a time-honored rule that the constitutionality of a
statute [or act] will be passed upon only if, and to the extent that, it is directly and necessarily involved
in a justiciable controversy and is essential to the protection of the rights of the parties concerned.
[100]

WHEREFORE, the Petition for Review of Brother Mike Velarde is GRANTED. The assailed June
12, 2003 Decision and July 29, 2003 Order of the Regional Trial Court of Manila (Branch 49) are
hereby DECLARED NULL AND VOID and thus SET ASIDE. The SJS Petition for Declaratory Relief
is DISMISSED for failure to state a cause of action.
Let a copy of this Decision be furnished the Office of the Court Administrator to evaluate and
recommend whether the trial judge may, after observing due process, be held administratively liable
for rendering a decision violative of the Constitution, the Rules of Court and relevant circulars of this
Court. No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez, CarpioMorales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.
Vitug, J., in the result.
Ynares-Santiago, J., no part.
Corona, J., on leave.

EN BANC
RODOLFO S. BELTRAN, doing G.R. No. 133640
business under the name and style, OUR LADY
OF FATIMA BLOOD BANK, FELY G. MOSALE, doing
business under the name and style, MOTHER
SEATON BLOOD BANK; PEOPLES BLOOD BANK,
INC.; MARIA VICTORIA T. VITO, M.D., doing
business under the name and style, AVENUE
BLOOD BANK; JESUS M. GARCIA, M.D., doing
business under the name and style, HOLY
REDEEMER BLOOD BANK, ALBERT L. LAPITAN,
doing business under the name and style, BLUE
CROSS
BLOOD
TRANSFUSION
SERVICES;
EDGARDO R. RODAS, M.D., doing business
under the name and style, RECORD BLOOD
BANK, in their individual capacities and for and
in behalf of PHILIPPINE ASSOCIATION OF BLOOD
BANKS,
Petitioners,
-

versus

THE SECRETARY OF HEALTH,

Respondent.
x ------------------------------------------------ x

DOCTORS BLOOD CENTER, G.R. No. 133661

Petitioner,
- versus
DEPARTMENT OF HEALTH.
Respondent.
x --------------------------------------------- x
RODOLFO S. BELTRAN, doing G.R. No. 139147
business under the name and style, OUR LADY
OF FATIMA BLOOD
BANK, FELY G. MOSALE, doing Present:
business under the name and style,
MOTHER SEATON BLOOD BANK; DAVIDE, JR., C.J.,
PEOPLES BLOOD BANK, INC.; PUNO,
MARIA VICTORIA T. VITO, M.D., PANGANIBAN,
doing business under the name and QUISUMBING,
style, AVENUE BLOOD BANK; YNARES-SANTIAGO,
JESUS M. GARCIA, M.D., doing SANDOVAL-GUTIERREZ,
business under the name and style, CARPIO,
HOLY REDEEMER BLOOD BANK, AUSTRIA-MARTINEZ,
ALBERT L. LAPITAN, doing CORONA,
business under the name and style, CARPIO-MORALES,
BLUE CROSS BLOOD CALLEJO, SR.,
TRANSFUSION SERVICES; AZCUNA,
EDGARDO R. RODAS, M.D., doing TINGA,
business under the name and style, CHIZO-NAZARIO, * and
RECORD BLOOD BANK, in their GARCIA, JJ.
Individual capacities and for
and in behalf of PHILIPPINE Promulgated:
ASSOCIATION OF BLOOD BANKS,
Petitioners, November 25, 2005
- versus
THE SECRETARY OF HEALTH,
Respondent.
x ---------------------------------------------------------------------------------------- x

DECISION
AZCUNA, J.:
Before this Court are petitions assailing primarily the constitutionality of
Section 7 of Republic Act No. 7719, otherwise known as the National Blood
Services Act of 1994, and the validity of Administrative Order (A.O.) No. 9,
series of 1995 or the Rules and Regulations Implementing Republic Act No.
7719.
G.R. No. 133640,[1] entitled Rodolfo S. Beltran, doing business under the
name and style, Our Lady of Fatima Blood Bank, et al., vs. The Secretary of
Health and G.R. No. 133661,[2] entitled Doctors Blood Bank Center vs.
Department of Health are petitions for certiorari and mandamus,
respectively, seeking the annulment of the following: (1) Section 7 of
Republic Act No. 7719; and, (2) Administrative Order (A.O.) No. 9, series of
1995. Both petitions likewise pray for the issuance of a writ of prohibitory
injunction enjoining the Secretary of Health from implementing and
enforcing the aforementioned law and its Implementing Rules and
Regulations; and, for a mandatory injunction ordering and commanding the
Secretary of Health to grant, issue or renew petitioners license to operate
free standing blood banks (FSBB).
The above cases were consolidated in a resolution of the Court En
Banc dated June 2, 1998.[3]
G.R. No. 139147,[4] entitled Rodolfo S. Beltran, doing business under the
name and style, Our Lady of Fatima Blood Bank, et al., vs. The Secretary of
Health, on the other hand, is a petition to show cause why respondent
Secretary of Health should not be held in contempt of court.
This case was originally assigned to the Third Division of this Court and
later consolidated with G.R. Nos. 133640 and 133661 in a resolution
dated August 4, 1999.[5]
Petitioners comprise the majority of the Board of Directors of the
Philippine Association of Blood Banks, a duly registered non-stock and nonprofit association composed of free standing blood banks.
Public respondent Secretary of Health is being sued in his capacity as the
public official directly involved and charged with the enforcement and
implementation of the law in question.
The facts of the case are as follows:
Republic Act No. 7719 or the National Blood Services Act of 1994 was
enacted into law on April 2, 1994. The Act seeks to provide
an adequate supply of safe blood by promoting voluntary blood donation
and by regulating blood banks in the country. It was approved by then
President Fidel V. Ramos on May 15, 1994 and was subsequently published

in the Official Gazette on August 18, 1994. The law took effect on August 23,
1994.
On April 28, 1995, Administrative Order No. 9, Series of 1995,
constituting the Implementing Rules and Regulations of said law was
promulgated by respondent Secretary of the Department of Health (DOH). [6]
Section 7 of R.A. 7719

[7]

provides:

Section 7. Phase-out of Commercial Blood Banks - All commercial

blood banks shall be phased-out over a period of two (2) years after the
effectivity of this Act, extendable to a maximum period of two (2) years by
the Secretary.

Section 23 of Administrative Order No. 9 provides:

Section 23. Process of Phasing Out. -- The Department shall effect the
phasing-out of all commercial blood banks over a period of two (2) years,
extendible for a maximum period of two (2) years after the effectivity of R.A.
7719. The decision to extend shall be based on the result of a careful study
and review of the blood supply and demand and public safety.[8]

Blood banking and blood transfusion services in the country have been
arranged in four (4) categories: blood centers run by the Philippine National
Red Cross (PNRC), government-run blood services, private hospital blood
banks, and commercial blood services.
Years prior to the passage of the National Blood Services Act of 1994,
petitioners have already been operating commercial blood banks under
Republic Act No. 1517, entitled An Act Regulating the Collection, Processing
and Sale of Human Blood, and the Establishment and Operation of Blood
Banks and Blood Processing Laboratories. The law, which was enacted
on June 16, 1956, allowed the establishment and operation by licensed
physicians of blood banks and blood processing laboratories. The Bureau of
Research and Laboratories (BRL) was created in 1958 and was given the
power to regulate clinical laboratories in 1966 under Republic Act No. 4688.
In 1971, the Licensure Section was created within the BRL. It was given the
duty to enforce the licensure requirements for blood banks as well as clinical
laboratories. Due to this development, Administrative Order No. 156, Series
of 1971, was issued. The new rules and regulations triggered a stricter
enforcement of the Blood Banking Law, which was characterized by frequent
spot checks, immediate suspension and communication of such suspensions
to hospitals, a more systematic record-keeping and frequent communication
with blood banks through monthly information bulletins. Unfortunately, by
the 1980s, financial difficulties constrained the BRL to reduce the frequency
of its supervisory visits to the blood banks. [9]
Meanwhile, in the international scene, concern for the safety of blood and
blood products intensified when the dreaded disease Acute Immune
Deficiency Syndrome (AIDS) was first described in 1979. In 1980, the
International Society of Blood Transfusion (ISBT) formulated the Code of
Ethics for Blood Donation and Transfusion. In 1982, the first case of

transfusion-associated AIDS was described in an infant. Hence, the ISBT

drafted in 1984, a model for a national blood policy outlining certain
principles that should be taken into consideration. By 1985, the ISBT had
disseminated guidelines requiring AIDS testing of blood and blood products
for transfusion.[10]
In 1989, another revision of the Blood Banking Guidelines was made. The
DOH issued Administrative Order No. 57, Series of 1989, which classified
banks into primary, secondary and tertiary depending on the services they
provided. The standards were adjusted according to this classification. For
instance, floor area requirements varied according to classification level.
The new guidelines likewise required Hepatitis B and HIV testing, and that
the blood bank be headed by a pathologist or a hematologist. [11]
In 1992, the DOH issued Administrative Order No. 118-A institutionalizing
the National Blood Services Program (NBSP). The BRL was designated as the
central office primarily responsible for the NBSP. The program paved the
way for the creation of a committee that will implement the policies of the
program and the formation of the Regional Blood Councils.
In August 1992, Senate Bill No. 1011, entitled An Act Promoting Voluntary
Blood Donation, Providing for an Adequate Supply of Safe Blood, Regulating
Blood Banks and Providing Penalties for Violations Thereof, and for other
Purposes was introduced in the Senate. [12]
Meanwhile, in the House of Representatives, House Bills No. 384, 546,
780 and 1978 were being deliberated to address the issue of safety of the
Philippine blood bank system. Subsequently, the Senate and House Bills
were referred to the appropriate committees and subsequently
consolidated.[13]
In January of 1994, the New Tropical Medicine Foundation, with the
assistance of the U.S. Agency for International Development (USAID)
released its final report of a study on the Philippine blood banking system
entitled Project to Evaluate the Safety of the Philippine Blood Banking
System. It was revealed that of the blood units collected in 1992, 64.4 %
were supplied by commercial blood banks, 14.5% by the PNRC, 13.7% by
government hospital-based blood banks, and 7.4% by private hospitalbased blood banks. During the time the study was made, there were only
twenty-four (24) registered or licensed free-standing or commercial blood
banks in the country. Hence, with these numbers in mind, the study
deduced that each commercial blood bank produces five times more blood
than the Red Cross and fifteen times more than the government-run blood
banks. The study, therefore, showed that the Philippines heavily relied on
commercial sources of blood. The study likewise revealed that 99.6% of the
donors of commercial blood banks and 77.0% of the donors of privatehospital based blood banks are paid donors. Paid donors are those who
receive remuneration for donating their blood. Blood donors of the PNRC
and government-run hospitals, on the other hand, are mostly voluntary. [14]
It was further found, among other things, that blood sold by persons to
blood commercial banks are three times more likely to have any of the four
(4) tested infections or blood transfusion transmissible diseases, namely,
malaria, syphilis, Hepatitis B and Acquired Immune Deficiency Syndrome
(AIDS) than those donated to PNRC.[15]

Commercial blood banks give paid donors varying rates around P50
to P150, and because of this arrangement, many of these donors are poor,
and often they are students, who need cash immediately. Since they need
the money, these donors are not usually honest about their medical or
social history. Thus, blood from healthy, voluntary donors who give their
true medical and social history are about three times much safer than blood
from paid donors.[16]
What the study also found alarming is that many Filipino doctors are not yet
fully trained on the specific indications for blood component transfusion.
They are not aware of the lack of blood supply and do not feel the need to
adjust their practices and use of blood and blood products. It also does not
matter to them where the blood comes from. [17]
On August 23, 1994, the National Blood Services Act providing for the phase
out of commercial blood banks took effect. OnApril 28, 1995, Administrative
Order No. 9, Series of 1995, constituting the Implementing Rules and
Regulations of said law was promulgated by DOH.
The phase-out period was extended for two years by the DOH pursuant to
Section 7 of Republic Act No. 7719 and Section 23 of its Implementing Rules
and Regulations. Pursuant to said Act, all commercial blood banks should
have been phased out byMay 28, 1998. Hence, petitioners were granted by
the Secretary of Health their licenses to open and operate a blood bank only
until May 27, 1998.
On May 20, 1998, prior to the expiration of the licenses granted to
petitioners, they filed a petition for certiorari with application for the
issuance of a writ of preliminary injunction or temporary restraining order
under Rule 65 of the Rules of Court assailing the constitutionality and
validity of the aforementioned Act and its Implementing Rules and
Regulations. The case was entitled Rodolfo S. Beltran, doing business under
the name and style, Our Lady of Fatima Blood Bank, docketed as G.R. No.
133640.
On June 1, 1998, petitioners filed an Amended Petition for Certiorari
with Prayer for Issuance of a Temporary Restraining Order, writ of
preliminary mandatory injunction and/or status quo ante order.[18]
In the aforementioned petition, petitioners assail the constitutionality
of the questioned legal provisions, namely, Section 7 of Republic Act No.
7719 and Section 23 of Administrative Order No. 9, Series of 1995, on the
following grounds: [19]
1. The questioned legal provisions of the National Blood Services Act and its
Implementing Rules violate the equal protection clause for irrationally
discriminating against free standing blood banks in a manner which is
not germane to the purpose of the law;
2.
The questioned provisions of the National Blood Services Act and its
Implementing Rules represent undue delegation if not outright
abdication of the police power of the state; and,
3.

The questioned provisions of the National Blood Services Act and its
Implementing Rules are unwarranted deprivation of personal liberty.

On May 22, 1998, the Doctors Blood Center filed a similar petition for
mandamus with a prayer for the issuance of a temporary restraining order,
preliminary prohibitory and mandatory injunction before this Court
entitled Doctors Blood Centervs. Department of Health, docketed as G.R.
No. 133661. [20] This was consolidated with G.R. No. 133640. [21]
Similarly, the petition attacked the constitutionality of Republic Act No.
7719 and its implementing rules and regulations, thus, praying for the
issuance of a license to operate commercial blood banks beyond May 27,
1998. Specifically, with regard to Republic Act No. 7719, the petition
submitted the following questions[22] for resolution:
1.

Was it passed in the exercise of police power, and was it a valid

exercise of such power?

2.

Does it not amount to deprivation of property without due

process?

3.

Does it not unlawfully impair the obligation of contracts?

4. With the commercial blood banks being abolished and with no ready
machinery to deliver the same supply and services, does R.A. 7719
truly serve the public welfare?

On June 2, 1998, this Court issued a Resolution directing respondent DOH to

file a consolidated comment. In the same Resolution, the Court issued a
temporary restraining order (TRO) for respondent to cease and desist from
implementing and enforcing Section 7 of Republic Act No. 7719 and its
implementing rules and regulations until further orders from the Court. [23]
On August 26, 1998, respondent Secretary of Health filed a Consolidated
Comment on the petitions for certiorari and mandamus in G.R. Nos. 133640
and 133661, with opposition to the issuance of a temporary restraining
order.[24]
In the Consolidated Comment, respondent Secretary of Health submitted
that blood from commercial blood banks is unsafe and therefore the State,
in the exercise of its police power, can close down commercial blood banks
to protect the public. He cited the record of deliberations on Senate Bill No.
1101 which later became Republic Act No. 7719, and the sponsorship
speech of Senator Orlando Mercado.
The rationale for the closure of these commercial blood banks can be found
in the deliberations of Senate Bill No. 1011, excerpts of which are quoted
below:
Senator Mercado: I am providing over a period of two years to phase out
all commercial blood banks. So that in the end, the new section would have a
provision that states:
ALL COMMERCIAL BLOOD BANKS SHALL BE PHASED OUT OVER A
PERIOD OF TWO YEARS AFTER THE EFFECTIVITY OF THIS ACT. BLOOD SHALL
BE COLLECTED FROM VOLUNTARY DONORS ONLY AND THE SERVICE FEE TO
BE CHARGED FOR EVERY BLOOD PRODUCT ISSUED SHALL BE LIMITED TO

THE NECESSARY EXPENSES ENTAILED IN COLLECTING AND PROCESSING OF

BLOOD. THE SERVICE FEE SHALL BE MADE UNIFORM THROUGH GUIDELINES
TO BE SET BY THE DEPARTMENTOF HEALTH.
I am supporting Mr. President, the finding of a study called Project to
Evaluate the Safety of the Philippine Blood Banking System. This has been
taken note of. This is a study done with the assistance of the USAID by
doctors under the New Tropical Medicine Foundation in Alabang.
Part of the long-term measures proposed by this particular study is to
improve laws, outlaw buying and selling of blood and legally define good
manufacturing processes for blood. This goes to the very heart of my
amendment which seeks to put into law the principle that blood should not
be subject of commerce of man.
The Presiding Officer Senator Aquino: What does the sponsor say?
Senator Webb: Mr. President, just for clarity, I would like to find out
how the Gentleman defines a commercial blood bank. I am at a loss at times
what a commercial blood bank really is.
Senator Mercado: We have a definition, I believe, in the measure, Mr.
President.
The Presiding Officer [Senator Aquino]: It is a business where
profit is considered.
Senator Mercado: If the Chairman of the Committee would accept it, we
can put a provision on Section 3, a definition of a commercial blood bank,
which, as defined in this law, exists for profit and engages in the buying and
selling of blood or its components.
Senator Webb: That is a good description, Mr. President.
Senator Mercado: I refer, Mr. President, to a letter written by Dr.
Jaime Galvez-Tan, the Chief of Staff, Undersecretary of Health, to the good
Chairperson of the Committee on Health.
In recommendation No. 4, he says:
The need to phase out all commercial blood banks within a two-year
period will give the Department of Health enough time to build up
governments capability to provide an adequate supply of blood for the needs
of the nation...the use of blood for transfusion is a medical service and not a
sale of commodity.
Taking into consideration the experience of the National Kidney
Institute, which has succeeded in making the hospital 100 percent
dependent on voluntary blood donation, here is a success story of a hospital
that does not buy blood. All those who are operated on and need blood have
to convince their relatives or have to get volunteers who would donate blood
If we give the responsibility of the testing of blood to those commercial
blood banks, they will cut corners because it will protect their profit.
In the first place, the people who sell their blood are the people who
are normally in the high-risk category. So we should stop the system of
selling and buying blood so that we can go into a national voluntary blood
program.
It has been said here in this report, and I quote:
Why is buying and selling of blood not safe? This is not safe because a
donor who expects payment for his blood will not tell the truth about his
illnesses and will deny any risky social behavior such as sexual promiscuity
which increases the risk of having syphilis or AIDS or abuse of intravenous
addictive drugs. Laboratory tests are of limited value and will not detect
early infections. Laboratory tests are required only for four diseases in
the Philippines. There are other blood transmissible diseases we do not yet
screen for and there could be others where there are no tests available yet.
A blood bank owner expecting to gain profit from selling blood will also
try his best to limit his expenses. Usually he tries to increase his profit by
buying cheaper reagents or test kits, hiring cheaper manpower or skipping
some tests altogether. He may also try to sell blood even though these have

infections in them. Because there is no existing system of counterchecking

these, the blood bank owner can usually get away with many unethical
practices.
The experience of Germany, Mr. President is illustrative of this issue.
The reason why contaminated blood was sold was that there were corners
cut by commercial blood banks in the testing process. They were protecting
their profits.[25]

The sponsorship speech of Senator Mercado further elucidated his stand on

the issue:
Senator Mercado: Today, across the country, hundreds of poverty-stricken,
sickly and weak Filipinos, who, unemployed, without hope and without
money to buy the next meal, will walk into a commercial blood bank, extend
their arms and plead that their blood be bought. They will lie about their age,
their medical history. They will lie about when they last sold their blood. For
doing this, they will receive close to a hundred pesos. This may tide them
over for the next few days. Of course, until the next bloodletting.
This same blood will travel to the posh city hospitals and urbane medical
centers. This same blood will now be bought by the rich at a price over 500%
of the value for which it was sold. Between this buying and selling, obviously,
someone has made a very fast buck.
Every doctor has handled at least one transfusion-related disease in an
otherwise normal patient. Patients come in for minor surgery of the hand or
whatever and they leave with hepatitis B. A patient comes in for an
appendectomy and he leaves with malaria. The worst nightmare: A patient
comes in for a Caesarian section and leaves with AIDS.
We do not expect good blood from donors who sell their blood because of
poverty. The humane dimension of blood transfusion is not in the act of
receiving blood, but in the act of giving it
For years, our people have been at the mercy of commercial blood banks
that lobby their interests among medical technologists, hospital
administrators and sometimes even physicians so that a proactive system
for collection of blood from healthy donors becomes difficult, tedious and
unrewarding.
The Department of Health has never institutionalized a comprehensive
national program for safe blood and for voluntary blood donation even if this
is a serious public health concern and has fallen for the linen of commercial
blood bankers, hook, line and sinker because it is more convenient to tell the
patient to buy blood.
Commercial blood banks hold us hostage to their threat that if we are to
close them down, there will be no blood supply. This is true if the
Government does not step in to ensure that safe supply of blood. We cannot
allow commercial interest groups to dictate policy on what is and what
should be a humanitarian effort. This cannot and will never work because
their interest in blood donation is merely monetary. We cannot expect
commercial blood banks to take the lead in voluntary blood donation. Only
the Government can do it, and the Government must do it.[26]

On May 5, 1999, petitioners filed a Motion for Issuance of Expanded

Temporary Restraining Order for the Court to order respondent Secretary of
Health to cease and desist from announcing the closure of commercial blood
banks, compelling the public to source the needed blood from voluntary

donors only, and committing similar acts that will ultimately cause the
shutdown of petitioners blood banks.[27]
On July 8, 1999, respondent Secretary filed his Comment and/or
Opposition to the above motion stating that he has not ordered the closure
of commercial blood banks on account of the Temporary Restraining Order
(TRO) issued on June 2, 1998 by the Court. In compliance with the TRO, DOH
had likewise ceased to distribute the health advisory leaflets, posters and
flyers to the public which state that blood banks are closed or will be closed.
According to respondent Secretary, the same were printed and circulated in
anticipation of the closure of the commercial blood banks in accordance
with R.A. No. 7719, and were printed and circulated prior to the issuance of
the TRO.[28]
On July 15, 1999, petitioners in G.R. No. 133640 filed a Petition to Show
Cause Why Public Respondent Should Not be Held in Contempt of Court,
docketed as G.R. No. 139147, citing public respondents willful disobedience
of or resistance to the restraining order issued by the Court in the said case.
Petitioners alleged that respondents act constitutes circumvention of the
temporary restraining order and a mockery of the authority of the Court and
the orderly administration of justice. [29]Petitioners added that despite the
issuance of the temporary restraining order in G.R. No. 133640, respondent,
in his effort to strike down the existence of commercial blood banks,
disseminated misleading information under the guise of health advisories,
press releases, leaflets, brochures and flyers stating, among others, that this
year [1998] all commercial blood banks will be closed by 27 May. Those who
need blood will have to rely on government blood banks. [30] Petitioners
further claimed that respondent Secretary of Health announced in a press
conference during the Blood Donors Week that commercial blood banks are
illegal and dangerous and that they are at the moment protected by a
restraining order on the basis that their commercial interest is more
important than the lives of the people. These were all posted in bulletin
boards and other conspicuous places in all government hospitals as well as
other medical and health centers.[31]
In respondent Secretarys Comment to the Petition to Show Cause Why
Public Respondent Should Not Be Held in Contempt of Court, dated January
3, 2000, it was explained that nothing was issued by the department
ordering the closure of commercial blood banks. The subject health advisory
leaflets pertaining to said closure pursuant to Republic Act No. 7719 were
printed and circulated prior to the Courts issuance of a temporary
restraining order on June 21, 1998.[32]
Public respondent further claimed that the primary purpose of the
information campaign was to promote the importance and safety of
voluntary blood donation and to educate the public about the hazards of
patronizing blood supplies from commercial blood banks. [33] In doing so, he
was merely performing his regular functions and duties as the Secretary of
Health to protect the health and welfare of the public. Moreover, the DOH is
the main proponent of the voluntary blood donation program espoused by
Republic Act No. 7719, particularly Section 4 thereof which provides that, in
order to ensure the adequate supply of human blood, voluntary blood
donation shall be promoted through public education, promotion in schools,
professional education, establishment of blood services network,
and walking blood donors.

Hence, by authority of the law, respondent Secretary contends that he

has the duty to promote the program of voluntary blood donation. Certainly,
his act of encouraging the public to donate blood voluntarily and educating
the people on the risks associated with blood coming from a paid donor
promotes general health and welfare and which should be given more
importance than the commercial businesses of petitioners. [34]
On July 29, 1999, interposing personal and substantial interest in the case
as taxpayers and citizens, a Petition-in-Intervention was filed interjecting the
same arguments and issues as laid down by petitioners in G.R. No. 133640
and 133661, namely, the unconstitutionality of the Acts, and, the issuance
of a writ of prohibitory injunction. The intervenors are the immediate
relatives of individuals who had died allegedly because of shortage of blood
supply at a critical time.[35]
The intervenors contended that Republic Act No. 7719 constitutes
undue delegation of legislative powers and unwarranted deprivation of
personal liberty.[36]
In a resolution, dated September 7, 1999, and without giving due
course to the aforementioned petition, the Court granted the Motion for
Intervention that was filed by the above intervenors on August 9, 1999.
In his Comment to the petition-in-intervention, respondent Secretary of
Health stated that the sale of blood is contrary to the spirit and letter of the
Act that blood donation is a humanitarian act and blood transfusion is a
professional medical service and not a sale of commodity (Section 2[a] and
[b] of Republic Act No. 7719). The act of selling blood or charging fees other
than those allowed by law is even penalized under Section 12. [37]
Thus, in view of these, the Court is now tasked to pass upon the
constitutionality of Section 7 of Republic Act No. 7719 or the National Blood
Services Act of 1994 and its Implementing Rules and Regulations.
In resolving the controversy, this Court deems it necessary to address
the issues and/or questions raised by petitioners concerning the
constitutionality of the aforesaid Act in G.R. No. 133640 and 133661 as
summarized hereunder:
I
WHETHER OR NOT SECTION 7 OF R.A. 7719 CONSTITUTES UNDUE
DELEGATION OF LEGISLATIVE POWER;
II
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND ITS IMPLEMENTING
RULES AND REGULATIONS VIOLATE THE EQUAL PROTECTION CLAUSE;
III
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND ITS IMPLEMENTING
RULES AND REGULATIONS VIOLATE THE NON-IMPAIRMENT CLAUSE;

IV
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND ITS IMPLEMENTING
RULES
AND
REGULATIONS
CONSTITUTE
DEPRIVATION
OF
PERSONAL LIBERTY AND PROPERTY;
V
WHETHER OR NOT R.A. 7719 IS A VALID EXERCISE OF POLICE POWER;
and,
VI
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND ITS IMPLEMENTING
RULES AND REGULATIONS TRULY SERVE PUBLIC WELFARE.

As to the first ground upon which the constitutionality of the Act is being
challenged, it is the contention of petitioners that the phase out of
commercial or free standing blood banks is unconstitutional because it is an
improper and unwarranted delegation of legislative power. According to
petitioners, the Act was incomplete when it was passed by the Legislature,
and the latter failed to fix a standard to which the Secretary of Health must
conform in the performance of his functions. Petitioners also contend that
the two-year extension period that may be granted by the Secretary of
Health for the phasing out of commercial blood banks pursuant to Section 7
of the Act constrained the Secretary to legislate, thus constituting undue
delegation of legislative power.
In testing whether a statute constitutes an undue delegation of
legislative power or not, it is usual to inquire whether the statute was
complete in all its terms and provisions when it left the hands of the
Legislature so that nothing was left to the judgment of the administrative
body or any other appointee or delegate of the Legislature. [38] Except as to
matters of detail that may be left to be filled in by rules and regulations to
be adopted or promulgated by executive officers and administrative boards,
an act of the Legislature, as a general rule, is incomplete and hence invalid
if it does not lay down any rule or definite standard by which the
administrative board may be guided in the exercise of the discretionary
powers delegated to it.[39]
Republic Act No. 7719 or the National Blood Services Act of 1994 is
complete in itself. It is clear from the provisions of the Act that the
Legislature intended primarily to safeguard the health of the people and has
mandated several measures to attain this objective. One of these is the
phase out of commercial blood banks in the country. The law has sufficiently
provided a definite standard for the guidance of the Secretary of Health in
carrying out its provisions, that is, the promotion of public health by
providing a safe and adequate supply of blood through voluntary blood
donation. By its provisions, it has conferred the power and authority to the
Secretary of Health as to its execution, to be exercised under and in
pursuance of the law.
Congress may validly delegate to administrative agencies the authority
to promulgate rules and regulations to implement a given legislation and
effectuate its policies.[40] The Secretary of Health has been given, under
Republic Act No. 7719, broad powers to execute the provisions of said Act.
Section 11 of the Act states:
SEC. 11. Rules and Regulations. The implementation of the provisions of the
Act shall be in accordance with the rules and regulations to be promulgated
by the Secretary, within sixty (60) days from the approval hereof

This is what respondent Secretary exactly did when DOH, by virtue of

the administrative bodys authority and expertise in the matter, came out
with Administrative Order No.9, series of 1995 or the Rules and Regulations
Implementing Republic Act No. 7719. Administrative Order. No. 9 effectively
filled in the details of the law for its proper implementation.
Specifically, Section 23 of Administrative Order No. 9 provides that the
phase-out period for commercial blood banks shall be extended for another
two years until May 28, 1998 based on the result of a careful study and
review of the blood supply and demand and public safety. This power to
ascertain the existence of facts and conditions upon which the Secretary
may effect a period of extension for said phase-out can be delegated by
Congress. The true distinction between the power to make laws and
discretion as to its execution is illustrated by the fact that the delegation of
power to make the law, which necessarily involves a discretion as to what it
shall be, and conferring an authority or discretion as to its execution, to be
exercised under and in pursuance of the law. The first cannot be done; to
the latter no valid objection can be made. [41]
In this regard, the Secretary did not go beyond the powers granted to
him by the Act when said phase-out period was extended in accordance
with the Act as laid out in Section 2 thereof:
SECTION 2. Declaration of Policy In order to promote public health, it is
hereby declared the policy of the state:
a)

to promote and encourage voluntary blood donation by the

citizenry and to instill public consciousness of the principle that
blood donation is a humanitarian act;

b)

to lay down the legal principle that the provision of blood for
transfusion is a medical service and not a sale of commodity;
to provide for adequate, safe, affordable and equitable distribution
of blood supply and blood products;

c)
d)

to inform the public of the need for voluntary blood donation to

curb the hazards caused by the commercial sale of blood;

e)

to teach the benefits and rationale of voluntary blood donation in

the existing health subjects of the formal education system in all
public and private schools as well as the non-formal system;

f)

to mobilize all sectors of the community to participate in

mechanisms for voluntary and non-profit collection of blood;

g)

to mandate the Department of Health to establish and organize a

National Blood Transfusion Service Network in order to rationalize
and improve the provision of adequate and safe supply of blood;

h)

to provide for adequate assistance to institutions promoting

voluntary blood donation and providing non-profit blood services,
either through a system of reimbursement for costs from patients
who can afford to pay, or donations from governmental and nongovernmental entities;

i)

to require all blood collection units and blood banks/centers to

operate on a non-profit basis;

j)

to establish scientific and professional standards for the operation

of blood collection units and blood banks/centers in thePhilippines;

k)

to regulate and ensure the safety of all activities related to the

collection, storage and banking of blood; and,

l)

to require upgrading of blood banks/centers to include preventive

services and education to control spread of blood transfusion
transmissible diseases.

Petitioners also assert that the law and its implementing rules and
regulations violate the equal protection clause enshrined in the Constitution
because it unduly discriminates against commercial or free standing blood
banks in a manner that is not germane to the purpose of the law. [42]
What may be regarded as a denial of the equal protection of the laws is a
question not always easily determined. No rule that will cover every case
can be formulated. Class legislation, discriminating against some and
favoring others is prohibited but classification on a reasonable basis and not
made arbitrarily or capriciously is permitted. The classification, however, to
be reasonable: (a) must be based on substantial distinctions which make
real differences; (b) must be germane to the purpose of the law; (c) must
not be limited to existing conditions only; and, (d) must apply equally to
each member of the class.[43]
Republic Act No. 7719 or The National Blood Services Act of 1994, was
enacted for the promotion of public health and welfare. In the
aforementioned study conducted by the New Tropical Medicine Foundation,
it was revealed that the Philippine blood banking system is disturbingly
primitive and unsafe, and with its current condition, the spread of infectious
diseases such as malaria, AIDS, Hepatitis B and syphilis chiefly from blood
transfusion is unavoidable. The situation becomes more distressing as the
study showed that almost 70% of the blood supply in the country is sourced
from paid blood donors who are three times riskier than voluntary blood
donors because they are unlikely to disclose their medical or social history
during the blood screening.[44]
The above study led to the passage of Republic Act No. 7719, to instill
public consciousness of the importance and benefits of voluntary blood
donation, safe blood supply and proper blood collection from healthy
donors. To do this, the Legislature decided to order the phase out of
commercial blood banks to improve the Philippine blood banking system, to
regulate the supply and proper collection of safe blood, and so as not to
derail the implementation of the voluntary blood donation program of the
government. In lieu of commercial blood banks, non-profit blood banks or
blood centers, in strict adherence to professional and scientific standards to
be established by the DOH, shall be set in place. [45]
Based on the foregoing, the Legislature never intended for the law to
create a situation in which unjustifiable discrimination and inequality shall
be allowed. To effectuate its policy, a classification was made between
nonprofit blood banks/centers and commercial blood banks.
We deem the classification to be valid and reasonable for the following
reasons:

One, it was based on substantial distinctions. The former operates for purely
humanitarian reasons and as a medical service while the latter is motivated
by profit. Also, while the former wholly encourages voluntary blood
donation, the latter treats blood as a sale of commodity.
Two, the classification, and the consequent phase out of commercial
blood banks is germane to the purpose of the law, that is, to provide the
nation with an adequate supply of safe blood by promoting voluntary blood
donation and treating blood transfusion as a humanitarian or medical
service rather than a commodity. This necessarily involves the phase out of
commercial blood banks based on the fact that they operate as a business
enterprise, and they source their blood supply from paid blood donors who
are considered unsafe compared to voluntary blood donors as shown by the
USAID-sponsored study on the Philippine blood banking system.
Three, the Legislature intended for the general application of the law.
Its enactment was not solely to address the peculiar circumstances of the
situation nor was it intended to apply only to the existing conditions.
Lastly, the law applies equally to all commercial blood banks without
exception.
Having said that, this Court comes to the inquiry as to whether or not
Republic Act No. 7719 constitutes a valid exercise of police power.
The promotion of public health is a fundamental obligation of the State. The
health of the people is a primordial governmental concern. Basically, the
National Blood Services Act was enacted in the exercise of the States police
power in order to promote and preserve public health and safety.
Police power of the state is validly exercised if (a) the interest of the
public generally, as distinguished from those of a particular class, requires
the interference of the State; and, (b) the means employed are reasonably
necessary to the attainment of the objective sought to be accomplished and
not unduly oppressive upon individuals.[46]
In the earlier discussion, the Court has mentioned of the avowed policy
of the law for the protection of public health by ensuring an adequate
supply of safe blood in the country through voluntary blood donation.
Attaining this objective requires the interference of the State given the
disturbing condition of the Philippine blood banking system.
In serving the interest of the public, and to give meaning to the
purpose of the law, the Legislature deemed it necessary to phase out
commercial blood banks. This action may seriously affect the owners and
operators, as well as the employees, of commercial blood banks but their
interests must give way to serve a higher end for the interest of the public.
The Court finds that the National Blood Services Act is a valid exercise
of the States police power. Therefore, the Legislature, under the
circumstances, adopted a course of action that is both necessary and
reasonable for the common good. Police power is the State authority to
enact legislation that may interfere with personal liberty or property in order
to promote the general welfare.[47]
It is in this regard that the Court finds the related grounds and/or issues
raised by petitioners, namely, deprivation of personal liberty and property,
and violation of the non-impairment clause, to be unmeritorious.
Petitioners are of the opinion that the Act is unconstitutional and void
because it infringes on the freedom of choice of an individual in connection
to what he wants to do with his blood which should be outside the domain of
State intervention. Additionally, and in relation to the issue of classification,

petitioners asseverate that, indeed, under the Civil Code, the human body
and its organs like the heart, the kidney and the liver are outside the
commerce of man but this cannot be made to apply to human blood
because the latter can be replenished by the body. To treat human blood
equally as the human organs would constitute invalid classification. [48]
Petitioners likewise claim that the phase out of the commercial blood
banks will be disadvantageous to them as it will affect their businesses and
existing contracts with hospitals and other health institutions, hence Section
7 of the Act should be struck down because it violates the non-impairment
clause provided by the Constitution.
As stated above, the State, in order to promote the general welfare,
may interfere with personal liberty, with property, and with business and
occupations. Thus, persons may be subjected to certain kinds of restraints
and burdens in order to secure the general welfare of the State and to this
fundamental aim of government, the rights of the individual may be
subordinated.[49]
Moreover, in the case of Philippine Association of Service Exporters, Inc. v. Drilon,
[50]
settled is the rule that the non-impairment clause of the Constitution
must yield to the loftier purposes targeted by the government. The right
granted by this provision must submit to the demands and necessities of
the States power of regulation. While the Court understands the grave
implications of Section 7 of the law in question, the concern of the
Government in this case, however, is not necessarily to maintain profits of
business firms. In the ordinary sequence of events, it is profits that suffer as
a result of government regulation.
Furthermore, the freedom to contract is not absolute; all contracts and
all rights are subject to the police power of the State and not only may
regulations which affect them be established by the State, but all such
regulations must be subject to change from time to time, as the general
well-being of the community may require, or as the circumstances may
change, or as experience may demonstrate the necessity. [51] This doctrine
was reiterated in the case of Vda. de Genuino v. Court of Agrarian
Relations[52] where the Court held that individual rights to contract and to
property have to give way to police power exercised for public welfare.
As for determining whether or not the shutdown of commercial blood banks
will truly serve the general public considering the shortage of blood supply
in the country as proffered by petitioners, we maintain that the wisdom of
the Legislature in the lawful exercise of its power to enact laws cannot be
inquired into by the Court. Doing so would be in derogation of the principle
of separation of powers.[53]
That, under the circumstances, proper regulation of all blood banks without
distinction in order to achieve the objective of the law as contended by
petitioners is, of course, possible; but, this would be arguing on what the
law may
be or should
be and
not
what
the
law is.
Between is and ought there is a far cry. The wisdom and propriety of
legislation is not for this Court to pass upon. [54]
Finally, with regard to the petition for contempt in G.R. No. 139147, on the
other hand, the Court finds respondent Secretary of Healths explanation

satisfactory. The statements in the flyers and posters were not aimed at
influencing or threatening the Court in deciding in favor of the
constitutionality of the law.
Contempt of court presupposes a contumacious attitude, a flouting or
arrogant belligerence in defiance of the court. [55]There is nothing
contemptuous about the statements and information contained in the
health advisory that were distributed by DOH before the TRO was issued by
this Court ordering the former to cease and desist from distributing the
same.
In sum, the Court has been unable to find any constitutional infirmity in
the questioned provisions of the National Blood Services Act of 1994 and its
Implementing Rules and Regulations.
The fundamental criterion is that all reasonable doubts should be
resolved in favor of the constitutionality of a statute. Every law has in its
favor the presumption of constitutionality. For a law to be nullified, it must
be shown that there is a clear and unequivocal breach of the Constitution.
The ground for nullity must be clear and beyond reasonable doubt. [56] Those
who petition this Court to declare a law, or parts thereof, unconstitutional
must clearly establish the basis therefor. Otherwise, the petition must fail.
Based on the grounds raised by petitioners to challenge the
constitutionality of the National Blood Services Act of 1994 and its
Implementing Rules and Regulations, the Court finds that petitioners have
failed to overcome the presumption of constitutionality of the law. As to
whether the Act constitutes a wise legislation, considering the issues being
raised by petitioners, is for Congress to determine. [57]
WHEREFORE, premises considered, the Court renders judgment as follows:
1.

In G.R. Nos. 133640 and 133661, the Court UPHOLDS

THE VALIDITY of Section 7 of Republic Act No. 7719, otherwise
known as the National Blood Services Act of 1994, and
Administrative Order No. 9, Series of 1995 or the Rules and
Regulations Implementing Republic Act No. 7719. The petitions
are DISMISSED. Consequently, the Temporary Restraining Order
issued by this Court on June 2, 1998, is LIFTED.

2.

In G.R. No. 139147, the petition seeking to cite the

Secretary of Health in contempt of court is DENIED for lack of
merit.

No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 102782 December 11, 1991

THE SOLICITOR GENERAL, RODOLFO A. MALAPIRA, STEPHEN A. MONSANTO, DAN R. CALDERON, and GRANDY N. TRIESTE, petitioners
vs.
THE METROPOLITAN MANILA AUTHORITY and the MUNICIPALITY OF MANDALUYONG, respondents.

CRUZ, J.:p
In Metropolitan Traffic Command, West Traffic District vs. Hon. Arsenio M. Gonong, G.R. No. 91023, promulgated on July 13, 1990, 1 the Court held that the confiscation of

the license plates of motor vehicles for traffic violations was not among the sanctions that could be imposed by the Metro Manila Commission under PD 1605 and
was permitted only under the conditions laid dowm by LOI 43 in the case of stalled vehicles obstructing the public streets. It was there also observed that even the
confiscation of driver's licenses for traffic violations was not directly prescribed by the decree nor was it allowed by the decree to be imposed by the Commission.
No motion for reconsideration of that decision was submitted. The judgment became final and executory on August 6, 1990, and it was duly entered in the Book of
Entries of Judgments on July 13, 1990.
Subsequently, the following developments transpired:
In a letter dated October 17, 1990, Rodolfo A. Malapira complained to the Court that when he was stopped for an alleged traffic violation, his driver's license was confiscated
by Traffic Enforcer Angel de los Reyes in Quezon City.
On December 18,1990, the Caloocan-Manila Drivers and Operators Association sent a letter to the Court asking who should enforce the decision in the above-mentioned
case, whether they could seek damages for confiscation of their driver's licenses, and where they should file their complaints.
Another letter was received by the Court on February 14, 1991, from Stephen L. Monsanto, complaining against the confiscation of his driver's license by Traffic Enforcer A.D.
Martinez for an alleged traffic violation in Mandaluyong.
This was followed by a letter-complaint filed on March 7, 1991, from Dan R. Calderon, a lawyer, also for confiscation of his driver's license by Pat. R.J. Tano-an of the Makati
Police Force.
Still another complaint was received by the Court dated April 29, 1991, this time from Grandy N. Trieste, another lawyer, who also protested the removal of his front license
plate by E. Ramos of the Metropolitan Manila Authority-Traffic Operations Center and the confiscation of his driver's license by Pat. A.V. Emmanuel of the Metropolitan Police
Command-Western Police District.
Required to submit a Comment on the complaint against him, Allan D. Martinez invoked Ordinance No. 7, Series of 1988, of Mandaluyong, authorizing the confiscation of
driver's licenses and the removal of license plates of motor vehicles for traffic violations.
For his part, A.V. Emmanuel said he confiscated Trieste's driver's license pursuant to a memorandum dated February 27, 1991, from the District Commander of the Western
Traffic District of the Philippine National Police, authorizing such sanction under certain conditions.
Director General Cesar P. Nazareno of the Philippine National Police assured the Court in his own Comment that his office had never authorized the removal of the license
plates of illegally parked vehicles and that he had in fact directed full compliance with the above-mentioned decision in a memorandum, copy of which he attached, entitled
Removal of Motor Vehicle License Plates and dated February 28, 1991.
Pat. R.J. Tano-an, on the other hand, argued that the Gonong decision prohibited only the removal of license plates and not the confiscation of driver's licenses.
On May 24, 1990, the Metropolitan Manila Authority issued Ordinance No. 11, Series of 1991, authorizing itself "to detach the license plate/tow and impound attended/
unattended/ abandoned motor vehicles illegally parked or obstructing the flow of traffic in Metro Manila."
On July 2, 1991, the Court issued the following resolution:
The attention ofthe Court has been called to the enactment by the Metropolitan Manila Authority of Ordinance No. 11, Series of 1991, providing inter
alia that:
Section 2. Authority to Detach Plate/Tow and Impound. The Metropolitan Manila Authority, thru the Traffic Operatiom Center, is
authorized to detach the license plate/tow and impound attended/unattended/abandoned motor vehicles illegally parked or
obstructing the flow of traffic in Metro Manila.

The provision appears to be in conflict with the decision of the Court in the case at bar (as reported in 187 SCRA 432), where it was held that the
license plates of motor vehicles may not be detached except only under the conditions prescribed in LOI 43. Additionally, the Court has received
several complaints against the confiscation by police authorities of driver's licenses for alleged traffic violations, which sanction is, according to the said
decision, not among those that may be imposed under PD 1605.
To clarify these matters for the proper guidance of law-enforcement officers and motorists, the Court resolved to require the Metropolitan Manila
Authority and the Solicitor General to submit, within ten (10) days from notice hereof, separate COMMENTS on such sanctions in light of the said
decision.
In its Comment, the Metropolitan Manila Authority defended the said ordinance on the ground that it was adopted pursuant to the powers conferred upon it by EO 392. It
particularly cited Section 2 thereof vesting in the Council (its governing body) the responsibility among others of:
1. Formulation of policies on the delivery of basic services requiring coordination or consolidation for the
Authority; and
2. Promulgation of resolutions and other issuances of metropolitan wide application, approval of a code
of basic services requiring coordination, andexercise of its rule-making powers. (Emphasis supplied)
The Authority argued that there was no conflict between the decision and the ordinance because the latter was meant to supplement and not supplant the latter. It stressed
that the decision itself said that the confiscation of license plates was invalid in the absence of a valid law or ordinance, which was why Ordinance No. 11 was enacted. The
Authority also pointed out that the ordinance could not be attacked collaterally but only in a direct action challenging its validity.
For his part, the Solicitor General expressed the view that the ordinance was null and void because it represented an invalid exercise of a delegated legislative power. The
flaw in the measure was that it violated existing law, specifically PD 1605, which does not permit, and so impliedly prohibits, the removal of license plates and the confiscation
of driver's licenses for traffic violations in Metropolitan Manila. He made no mention, however, of the alleged impropriety of examining the said ordinance in the absence of a
formal challenge to its validity.
On October 24, 1991, the Office of the Solicitor General submitted a motion for the early resolution of the questioned sanctions, to remove once and for all the uncertainty of
their vahdity. A similar motion was filed by the Metropolitan Manila Authority, which reiterated its contention that the incidents in question should be dismissed because there
was no actual case or controversy before the Court.
The Metropolitan Manila Authority is correct in invoking the doctrine that the validity of a law or act can be challenged only in a direct action and not collaterally. That is indeed
the settled principle. However, that rule is not inflexible and may be relaxed by the Court under exceptional circumstances, such as those in the present controversy.
The Solicitor General notes that the practices complained of have created a great deal of confusion among motorists about the state of the law on the questioned sanctions.
More importantly, he maintains that these sanctions are illegal, being violative of law and the Gonong decision, and should therefore be stopped. We also note the disturbing
report that one policeman who confiscated a driver's license dismissed the Gonong decision as "wrong" and said the police would not stop their "habit" unless they received
orders "from the top." Regrettably, not one of the complainants has filed a formal challenge to the ordinances, including Monsanto and Trieste, who are lawyers and could
have been more assertive of their rights.
Given these considerations, the Court feels it must address the problem squarely presented to it and decide it as categorically rather than dismiss the complaints on the basis
of the technical objection raised and thus, through its inaction, allow them to fester.
The step we now take is not without legal authority or judicial precedent. Unquestionably, the Court has the power to suspend procedural rules in the exercise of its inherent
power, as expressly recognized in the Constitution, to promulgate rules concerning "pleading, practice and procedure in all courts." 2 In proper cases, procedural rules may

be relaxed or suspended in the interest of substantial justice, which otherwise may be miscarried because of a rigid and formalistic adherence to such rules.
The Court has taken this step in a number of such cases, notably Araneta vs. Dinglasan, 3 where Justice Tuason justified the deviation on the ground that "the

transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of
procedure."
We have made similar rulings in other cases, thus:
Be it remembered that rules of procedure are but mere tools designed to facilitate the attainment ofjustice. Their strict and rigid application, which
would result in technicalities that tend to frustrate rather than promote substantial justice, must always be avoided. (Aznar III vs. Bernad, G.R. No.
81190, May 9, 1988, 161 SCRA 276.) Time and again, this Court has suspended its own rules and excepted a particular case from their operation
whenever the higher interests of justice so require. In the instant petition, we forego a lengthy disquisition of the proper procedure that should have
been taken by the parties involved and proceed directly to the merits of the case. (Piczon vs. Court of Appeals, 190 SCRA 31).
Three of the cases were consolidated for argument and the other two were argued separately on other dates. Inasmuch as all of them present the
same fundamental question which, in our view, is decisive, they will be disposed of jointly. For the same reason we will pass up the objection to the
personality or sufficiency of interest of the petitioners in case G.R. No. L-3054 and case G.R. No. L-3056 and the question whether prohibition lies in
cases G.R. Nos. L-2044 and L2756. No practical benefit can be gained from a discussion of these procedural matters, since the decision in the cases
wherein the petitioners'cause of action or the propriety of the procedure followed is not in dispute, will be controlling authority on the others. Above all,
the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside, if we must,
technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L-2821 cited in Araneta vs. Dinglasan, 84 Phil. 368.)
Accordingly, the Court will consider the motion to resolve filed by the Solicitor General a petition for prohibition against the enforcement of Ordinance No. 11, Series of 1991, of
the Metropohtan Manila Authority, and Ordinance No. 7, Series of 1988, of the Municipality of Mandaluyong. Stephen A. Monsanto, Rodolfo A. Malapira, Dan R. Calderon, and
Grandy N. Trieste are considered co-petitioners and the Metropolitan Manila Authority and the Municipality of Mandaluyong are hereby impleaded as respondents. This
petition is docketed as G.R. No. 102782. The comments already submitted are duly noted and shall be taken into account by the Court in the resolution of the substantive
issues raised.
It is stressed that this action is not intended to disparage procedural rules, which the Court has recognized often enough as necessary to the orderly administration of justice. If
we are relaxing them in this particular case, it is because of the failure of the proper parties to file the appropriate proceeding against the acts complained of, and the necessity
of resolving, in the interest of the public, the important substantive issues raised.
Now to the merits.
The Metro Manila Authority sustains Ordinance No. 11, Series of 1991, under the specific authority conferred upon it by EO 392, while Ordinance No. 7, Series of 1988, is
justified on the basis of the General Welfare Clause embodied in the Local Government Code. 4 It is not disputed that both measures were enacted to promote the

comfort and convenience of the public and to alleviate the worsening traffic problems in Metropolitan Manila due in large part to violations of traffic rules.

The Court holds that there is a valid delegation of legislative power to promulgate such measures, it appearing that the requisites of such delegation are present. These
requisites are. 1) the completeness of the statute making the delegation; and 2) the presence of a sufficient standard. 5
Under the first requirement, the statute must leave the legislature complete in all its terms and provisions such that all the delegate will have to do when the statute reaches it
is to implement it. What only can be delegated is not the discretion to determine what the law shall be but the discretion to determine how the law shall be enforced. This has
been done in the case at bar.
As a second requirement, the enforcement may be effected only in accordance with a sufficient standard, the function of which is to map out the boundaries of the delegate's
authority and thus "prevent the delegation from running riot." This requirement has also been met. It is settled that the "convenience and welfare" of the public, particularly the
motorists and passengers in the case at bar, is an acceptable sufficient standard to delimit the delegate's authority. 6
But the problem before us is not the validity of the delegation of legislative power. The question we must resolve is the validity of the exercise of such delegated power.
The measures in question are enactments of local governments acting only as agents of the national legislature. Necessarily, the acts of these agents must reflect and
conform to the will of their principal. To test the validity of such acts in the specific case now before us, we apply the particular requisites of a valid ordinance as laid down by
the accepted principles governing municipal corporations.
According to Elliot, a municipal ordinance, to be valid: 1) must not contravene the Constitution or any statute; 2) must not be unfair or oppressive; 3) must not be partial or
discriminatory; 4) must not prohibit but may regulate trade; 5) must not be unreasonable; and 6) must be general and consistent with public policy. 7
A careful study of the Gonong decision will show that the measures under consideration do not pass the first criterion because they do not conform to existing law. The
pertinent law is PD 1605. PD 1605 does not allow either the removal of license plates or the confiscation of driver's licenses for traffic violations committed in Metropolitan
Manila. There is nothing in the following provisions of the decree authorizing the Metropolitan Manila Commission (and now the Metropolitan Manila Authority) to impose such
sanctions:
Section 1. The Metropolitan Manila Commission shall have the power to impose fines and otherwise discipline drivers and operators of motor vehicles
for violations of traffic laws, ordinances, rules and regulations in Metropolitan Manila in such amounts and under such penalties as are herein
prescribed. For this purpose, the powers of the Land Transportation Commission and the Board of Transportation under existing laws over such
violations and punishment thereof are hereby transferred to the Metropolitan Manila Commission. When the proper penalty to be imposed
issuspension or revocation of driver's license or certificate of public convenience, the Metropolitan Manila Commission or its representatives shall
suspend or revoke such license or certificate. The suspended or revoked driver's license or the report of suspension or revocation of the certificate of
public convenience shall be sent to the Land Transportation Commission or the Board of Transportation, as the case may be, for their records update.
xxx xxx xxx
Section 3.` Violations of traffic laws, ordinances, rules and regulations, committed within a twelve-month period, reckoned from the date of birth of the
licensee, shall subject the violator to graduated fines as follows: P10.00 for the first offense, P20.00 for the and offense, P50.00 for the third offense,
aone-year suspension of driver's license for the fourth offense, and a revocation of the driver's license for the fifth offense: Provided, That the
Metropolitan Manila Commission may impose higher penalties as it may deem proper for violations of its ordinances prohibiting or regulating the use of
certain public roads, streets and thoroughfares in Metropolitan Manila.
xxx xxx xxx
Section 5. In case of traffic violations, the driver's license shall not be confiscated but the erring driver shall be immediately issued a traffic citation ticket
prescribed by the Metropolitan Manila Commission which shall state the violation committed, the amount of fine imposed for the violation and an advice
that he can make payment to the city or municipal treasurer where the violation was committed or to the Philippine National Bank or Philippine
Veterans Bank or their branches within seven days from the date of issuance of the citation ticket.
If the offender fails to pay the fine imposed within the period herein prescribed, the Metropolitan Manila Commission or the law-enforcement agency
concerned shall endorse the case to the proper fiscal for appropriate proceedings preparatory to the filing of the case with the competent traffic court,
city or municipal court.
If at the time a driver renews his driver's license and records show that he has an unpaid fine, his driver's license shall not be renewed until he has paid
the fine and corresponding surcharges.
xxx xxx xxx
Section 8. Insofar as the Metropolitan Manila area is concerned, all laws, decrees, orders, ordinances, rules and regulations, or parts thereof
inconsistent herewith are hereby repealed or modified accordingly. (Emphasis supplied).
In fact, the above provisions prohibit the imposition of such sanctions in Metropolitan Manila. The Commission was allowed to "impose fines and otherwise discipline" traffic
violators only "in such amounts and under such penalties as are herein prescribed," that is, by the decree itself. Nowhere is the removal of license plates directly imposed by
the decree or at least allowed by it to be imposed by the Commission. Notably, Section 5 thereof expressly provides that "in case of traffic violations, the driver's license shall
not be confiscated." These restrictions are applicable to the Metropolitan Manila Authority and all other local political subdivisions comprising Metropolitan Manila, including the
Municipality of Mandaluyong.
The requirement that the municipal enactment must not violate existing law explains itself. Local political subdivisions are able to legislate only by virtue of a valid delegation of
legislative power from the national legislature (except only that the power to create their own sources of revenue and to levy taxes is conferred by the Constitution
itself). 8 They are mere agents vested with what is called the power of subordinate legislation. As delegates of the Congress, the local government unit cannot

contravene but must obey at all times the will of their principal. In the case before us, the enactments in question, which are merely local in origin, cannot prevail
against the decree, which has the force and effect of a statute.
The self-serving language of Section 2 of the challenged ordinance is worth noting. Curiously, it is the measure itself, which was enacted by the Metropolitan Manila Authority,
that authorizes the Metropolitan Manila Authority to impose the questioned sanction.
In Villacorta vs, Bemardo, 9 the Court nullified an ordinance enacted by the Municipal Board of Dagupan City for being violative of the Land Registration Act. The

decision held in part:

In declaring the said ordinance null and void, the court a quo declared:
From the above-recited requirements, there is no showing that would justify the enactment of the questioned ordinance. Section
1 of said ordinance clearly conflicts with Section 44 of Act 496, because the latter law does not require subdivision plans to be

submitted to the City Engineer before the same is submitted for approval to and verification by the General Land Registration
Office or by the Director of Lands as provided for in Section 58 of said Act. Section 2 of the same ordinance also contravenes
the provisions of Section 44 of Act 496, the latter being silent on a service fee of P0.03 per square meter of every lot subject of
such subdivision application; Section 3 of the ordinance in question also conflicts with Section 44 of Act 496, because the latter
law does not mention of a certification to be made by the City Engineer before the Register of Deeds allows registration of the
subdivision plan; and the last section of said ordinance impose a penalty for its violation, which Section 44 of Act 496 does not
impose. In other words, Ordinance 22 of the City of Dagupan imposes upon a subdivision owner additional conditions.
xxx xxx xxx
The Court takes note of the laudable purpose of the ordinance in bringing to a halt the surreptitious registration of lands
belonging to the government. But as already intimated above, the powers of the board in enacting such a laudable ordinance
cannot be held valid when it shall impede the exercise of rights granted in a general law and/or make a general law
subordinated to a local ordinance.
We affirm.
To sustain the ordinance would be to open the floodgates to other ordinances amending and so violating national laws in the guise of implementing
them. Thus, ordinances could be passed imposing additional requirements for the issuance of marriage licenses, to prevent bigamy; the registration of
vehicles, to minimize carnapping; the execution of contracts, to forestall fraud; the validation of parts, to deter imposture; the exercise of freedom of
speech, to reduce disorder; and so on. The list is endless, but the means, even if the end be valid, would be ultra vires.
The measures in question do not merely add to the requirement of PD 1605 but, worse, impose sanctions the decree does not allow and in fact actually prohibits. In so doing,
the ordinances disregard and violate and in effect partially repeal the law.
We here emphasize the ruling in the Gonong case that PD 1605 applies only to the Metropolitan Manila area. It is an exception to the general authority conferred by R.A. No.
413 on the Commissioner of Land Transportation to punish violations of traffic rules elsewhere in the country with the sanction therein prescribed, including those here
questioned.
The Court agrees that the challenged ordinances were enacted with the best of motives and shares the concern of the rest of the public for the effective reduction of traffic
problems in Metropolitan Manila through the imposition and enforcement of more deterrent penalties upon traffic violators. At the same time, it must also reiterate the public
misgivings over the abuses that may attend the enforcement of such sanction in eluding the illicit practices described in detail in the Gonong decision. At any rate, the fact is
that there is no statutory authority for and indeed there is a statutory prohibition against the imposition of such penalties in the Metropolitan Manila area. Hence,
regardless of their merits, they cannot be impose by the challenged enactments by virtue only of the delegated legislative powers.
It is for Congress to determine, in the exercise of its own discretion, whether or not to impose such sanctions, either directly through a statute or by simply delegating authority
to this effect to the local governments in Metropolitan Manila. Without such action, PD 1605 remains effective and continues prohibit the confiscation of license plates of motor
vehicles (except under the conditions prescribed in LOI 43) and of driver licenses as well for traffic violations in Metropolitan Manila.
WHEREFORE, judgment is hereby rendered:
(1) declaring Ordinance No.11, Seriesof l991,of theMetropolitan Manila Authority and Ordinance No. 7, Series of 1988 of the Municipality of Mandaluyong, NULL and VOID;
and
(2) enjoining all law enforcement authorities in Metropolitan Manila from removing the license plates of motor vehicles (except when authorized under LOI 43) and confiscating
driver licenses for traffic violations within the said area.
SO ORDERED.

EN BANC
BUREAU OF CUSTOMS
EMPLOYEES ASSOCIATION
(BOCEA), represented by its
National President (BOCEA
National Executive Council) Mr.
Romulo A. Pagulayan,
Petitioner,

- versus -

HON. MARGARITO B. TEVES, in

his capacity as Secretary of the
Department of Finance, HON.
NAPOLEON L. MORALES, in his
capacity as Commissioner of the
Bureau of Customs, HON. LILIAN
B. HEFTI, in her capacity as
Commissioner of the Bureau of
Internal Revenue,
Respondents.

G.R. No. 181704

Present:
CORONA,C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.

Promulgated:
December 6, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
VILLARAMA, JR., J.:
Before this Court is a petition [1] for certiorari and prohibition with prayer for injunctive
relief/s under Rule 65 of the 1997 Rules of Civil Procedure, as amended, to declare Republic
Act (R.A.) No. 9335,[2] otherwise known as the Attrition Act of 2005, and its Implementing
Rules and Regulations[3] (IRR) unconstitutional, and the implementation thereof be enjoined
permanently.
The Facts
On January 25, 2005, former President Gloria Macapagal-Arroyo signed into law R.A. No.
9335 which took effect on February 11, 2005.
In Abakada Guro Party List v. Purisima[4] (Abakada), we said of R.A. No. 9335:
RA [No.] 9335 was enacted to optimize the revenue-generation capability and collection
of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). The law intends to
encourage BIR and BOC officials and employees to exceed their revenue targets by providing a
system of rewards and sanctions through the creation of a Rewards and Incentives Fund (Fund)
and a Revenue Performance Evaluation Board (Board). It covers all officials and employees of
the BIR and the BOC with at least six months of service, regardless of employment status.
The Fund is sourced from the collection of the BIR and the BOC in excess of their
revenue targets for the year, as determined by the Development Budget and Coordinating
Committee (DBCC). Any incentive or reward is taken from the fund and allocated to the BIR
and the BOC in proportion to their contribution in the excess collection of the targeted amount of
tax revenue.
The Boards in the BIR and the BOC are composed of the Secretary of the Department of
Finance (DOF) or his/her Undersecretary, the Secretary of the Department of Budget and
Management (DBM) or his/her Undersecretary, the Director General of the National Economic
Development Authority (NEDA) or his/her Deputy Director General, the Commissioners of the
BIR and the BOC or their Deputy Commissioners, two representatives from the rank-and-file
employees and a representative from the officials nominated by their recognized organization.
Each Board has the duty to (1) prescribe the rules and guidelines for the allocation,
distribution and release of the Fund; (2) set criteria and procedures for removing from the service
officials and employees whose revenue collection falls short of the target; (3) terminate
personnel in accordance with the criteria adopted by the Board; (4) prescribe a system for
performance evaluation; (5) perform other functions, including the issuance of rules and
regulations and (6) submit an annual report to Congress.
The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were tasked to
promulgate and issue the implementing rules and regulations of RA [No.] 9335, to be approved
by a Joint Congressional Oversight Committee created for such purpose.[5]

The Joint Congressional Oversight Committee approved the assailed IRR on May 22,
2006. Subsequently, the IRR was published on May 30, 2006 in two newspapers of general
circulation, the Philippine Star and the Manila Standard, and became effective fifteen (15) days
later.[6]
Contending that the enactment and implementation of R.A. No. 9335 are tainted with
constitutional infirmities in violation of the fundamental rights of its members, petitioner
Bureau of Customs Employees Association (BOCEA), an association of rank-and-file
employees of the Bureau of Customs (BOC), duly registered with the Department of Labor and

Employment (DOLE) and the Civil Service Commission (CSC), and represented by its National
President, Mr. Romulo A. Pagulayan (Pagulayan), directly filed the present petition before this
Court against respondents Margarito B. Teves, in his capacity as Secretary of the Department of
Finance (DOF), Commissioner Napoleon L. Morales (Commissioner Morales), in his capacity
as BOC Commissioner, and Lilian B. Hefti, in her capacity as Commissioner of the Bureau of
Internal Revenue (BIR). In its petition, BOCEA made the following averments:
Sometime in 2008, high-ranking officials of the BOC pursuant to the mandate of R.A. No. 9335
and its IRR, and in order to comply with the stringent deadlines thereof, started to disseminate
Collection District Performance Contracts[7] (Performance Contracts) for the lower ranking
officials and rank-and-file employees to sign. The Performance Contract pertinently provided:
xxxx
WHEREAS, pursuant to the provisions of Sec. 25 (b) of the Implementing Rules and
Regulations (IRR) of the Attrition Act of 2005, that provides for the setting of criteria and
procedures for removing from the service Officials and Employees whose revenue collection fall
short of the target in accordance with Section 7 of Republic Act 9335.
xxxx
NOW, THEREFORE, for and in consideration of the foregoing premises, parties unto this
Agreement hereby agree and so agreed to perform the following:
xxxx
2. The Section 2, PA/PE hereby accepts the allocated Revenue Collection Target and further
accepts/commits to meet the said target under the following conditions:
a.)
That he/she will meet the allocated Revenue Collection Target and thereby undertakes
and binds himself/herself that in the event the revenue collection falls short of the target with
due consideration of all relevant factors affecting the level of collection as provided in the
rules and regulations promulgated under the Act and its IRR, he/she will voluntarily
submit to the provisions of Sec. 25 (b) of the IRR and Sec. 7 of the Act; and
b.)
That he/she will cascade and/or allocate to respective Appraisers/Examiners or
Employees under his/her section the said Revenue Collection Target and require them to execute
a Performance Contract, and direct them to accept their individual target. The Performance
Contract executed by the respective Examiners/Appraisers/Employees shall be submitted to the
Office of the Commissioner through the LAIC on or before March 31, 2008.

x x x x[8]

BOCEA opined that the revenue target was impossible to meet due to the Governments
own policies on reduced tariff rates and tax breaks to big businesses, the occurrence of natural
calamities and because of other economic factors. BOCEA claimed that some BOC employees
were coerced and forced to sign the Performance Contract. The majority of them, however, did
not sign. In particular, officers of BOCEA were summoned and required to sign the
Performance Contracts but they also refused. To ease the brewing tension, BOCEA claimed that
its officers sent letters, and sought several dialogues with BOC officials but the latter refused to
heed them.
In addition, BOCEA alleged that Commissioner Morales exerted heavy pressure on the
District Collectors, Chiefs of Formal Entry Divisions, Principal Customs Appraisers and
Principal Customs Examiners of the BOC during command conferences to make them sign their
Performance Contracts. Likewise, BOC Deputy Commissioner Reynaldo Umali (Deputy

Commissioner Umali) individually spoke to said personnel to convince them to sign said
contracts. Said personnel were threatened that if they do not sign their respective Performance
Contracts, they would face possible reassignment, reshuffling, or worse, be placed on floating
status. Thus, all the District Collectors, except a certain Atty. Carlos So of the Collection
District III of the Ninoy Aquino International Airport (NAIA), signed the Performance
Contracts.
BOCEA further claimed that Pagulayan was constantly harassed and threatened with
lawsuits. Pagulayan approached Deputy Commissioner Umali to ask the BOC officials to stop
all forms of harassment, but the latter merely said that he would look into the matter.
On February 5, 2008, BOCEA through counsel wrote the Revenue Performance Evaluation
Board (Board) to desist from implementing R.A. No. 9335 and its IRR and from requiring rankand-file employees of the BOC and BIR to sign Performance Contracts. [9] In his letterreply[10] dated February 12, 2008, Deputy Commissioner Umali denied having coerced any
BOC employee to sign a Performance Contract. He also defended the BOC, invoking its
mandate of merely implementing the law. Finally, Pagulayan and BOCEAs counsel, on separate
occasions, requested for a certified true copy of the Performance Contract from Deputy
Commissioner Umali but the latter failed to furnish them a copy.[11]
This petition was filed directly with this Court on March 3, 2008. BOCEA asserted that in view
of the unconstitutionality of R.A. No. 9335 and its IRR, and their adverse effects on the
constitutional rights of BOC officials and employees, direct resort to this Court is justified.
BOCEA argued, among others, that its members and other BOC employees are in great danger
of losing their jobs should they fail to meet the required quota provided under the law, in clear
violation of their constitutional right to security of tenure, and at their and their respective
families prejudice.
In their Comment,[12] respondents, through the Office of the Solicitor General (OSG), countered
that R.A. No. 9335 and its IRR do not violate the right to due process and right to security of
tenure of BIR and BOC employees. The OSG stressed that the guarantee of security of tenure
under the 1987 Constitution is not a guarantee of perpetual employment. R.A. No. 9335 and its
IRR provided a reasonable and valid ground for the dismissal of an employee which is germane
to the purpose of the law. Likewise, R.A. No. 9335 and its IRR provided that an employee may
only be separated from the service upon compliance with substantive and procedural due
process. The OSG added that R.A. No. 9335 and its IRR must enjoy the presumption of
constitutionality.
In its Reply,[13] BOCEA claimed that R.A. No. 9335 employs means that are unreasonable to
achieve its stated objectives; that the law is unduly oppressive of BIR and BOC employees as it
shifts the extreme burden upon their shoulders when the Government itself has adopted
measures that make collection difficult such as reduced tariff rates to almost zero percent and
tax exemption of big businesses; and that the law is discriminatory of BIR and BOC employees.
BOCEA manifested that only the high-ranking officials of the BOC benefited largely from the
reward system under R.A. No. 9335 despite the fact that they were not the ones directly toiling
to collect revenue. Moreover, despite the BOCEAs numerous requests, [14] BOC continually
refused to provide BOCEA the Expenditure Plan on how such reward was distributed.
Since BOCEA was seeking similar reliefs as that of the petitioners in Abakada Guro
Party List v. Purisima, BOCEA filed a Motion to Consolidate[15] the present case
with Abakada on April 16, 2008. However, pending action on said motion, the Court rendered
its decision in Abakada on August 14, 2008. Thus, the consolidation of this case
with Abakada was rendered no longer possible.[16]

In Abakada, this Court, through then Associate Justice, now Chief Justice Renato C.
Corona, declared Section 12[17] of R.A. No. 9335 creating a Joint Congressional Oversight
Committee to approve the IRR as unconstitutional and violative of the principle of separation of
powers. However, the constitutionality of the remaining provisions of R.A. No. 9335 was
upheld pursuant to Section 13[18] of R.A. No. 9335. The Court also held that until the contrary is
shown, the IRR of R.A. No. 9335 is presumed valid and effective even without the approval of
the Joint Congressional Oversight Committee.[19]
Notwithstanding our ruling in Abakada, both parties complied with our
Resolution[20] dated February 10, 2009, requiring them to submit their respective Memoranda.

The Issues
BOCEA raises the following issues:
I.
WHETHER OR NOT THE ATTRITION LAW, REPUBLIC ACT [NO.] 9335, AND ITS
IMPLEMENTING RULES AND REGULATIONS ARE UNCONSTITUTIONAL AS THESE
VIOLATE THE RIGHT TO DUE PROCESS OF THE COVERED BIR AND BOC OFFICIALS
AND EMPLOYEES[;]
II.
WHETHER OR NOT THE ATTRITION LAW, REPUBLIC ACT [NO.] 9335, AND ITS
IMPLEMENTING RULES AND REGULATIONS ARE UNCONSTITUTIONAL AS THESE
VIOLATE THE RIGHT OF BIR AND BOC OFFICIALS AND EMPLOYEES TO THE EQUAL
PROTECTION OF THE LAWS[;]
III.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 AND ITS IMPLEMENTING RULES AND
REGULATIONS VIOLATE THE RIGHT TO SECURITY OF TENURE OF BIR AND BOC
OFFICIALS AND EMPLOYEES AS ENSHRINED UNDER SECTION 2 (3), ARTICLE IX (B)
OF THE CONSTITUTION[;]
IV.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 AND ITS IMPLEMENTING RULES AND
REGULATIONS ARE UNCONSTITUTIONAL AS THEY CONSTITUTE UNDUE
DELEGATION OF LEGISLATIVE POWERS TO THE REVENUE PERFORMANCE
EVALUATION BOARD IN VIOLATION OF THE PRINCIPLE OF SEPARATION OF
POWERS ENSHRINED IN THE CONSTITUTION[; AND]
V.
WHETHER OR NOT REPUBLIC ACT [NO.] 9335 IS A BILL OF ATTAINDER AND
HENCE[,] UNCONSTITUTIONAL BECAUSE IT INFLICTS PUNISHMENT THROUGH
LEGISLATIVE FIAT UPON A PARTICULAR GROUP OR CLASS OF OFFICIALS AND
EMPLOYEES WITHOUT TRIAL.[21]

BOCEA manifested that while waiting for the Court to give due course to its petition, events
unfolded showing the patent unconstitutionality of R.A. No. 9335. It narrated that during the
first year of the implementation of R.A. No. 9335, BOC employees exerted commendable
efforts to attain their revenue target of P196 billion which they surpassed by as much as P2

billion for that year alone. However, this was attained only because oil companies made
advance tax payments to BOC. Moreover, BOC employees were given their reward for
surpassing said target only in 2008, the distribution of which they described as unjust, unfair,
dubious and fraudulent because only top officials of BOC got the huge sum of reward while the
employees, who did the hard task of collecting, received a mere pittance of around P8,500.00.
In the same manner, the Bonds Division of BOC-NAIA collected 400+% of its designated target
but the higher management gave out to the employees a measly sum of P8,500.00 while the top
level officials partook of millions of the excess collections. BOCEA relies on a piece of
information revealed by a newspaper showing the list of BOC officials who apparently earned
huge amounts of money by way of reward. [22] It claims that the recipients thereof included
lawyers, support personnel and other employees, including a dentist, who performed no
collection functions at all. These alleged anomalous selection, distribution and allocation of
rewards was due to the failure of R.A. No. 9335 to set out clear guidelines.[23]
In addition, BOCEA avers that the Board initiated the first few cases of attrition for the Fiscal
Year 2007 by subjecting five BOC officials from the Port of Manila to attrition despite the fact
that the Port of Manila substantially complied with the provisions of R.A. No. 9335. It is thus
submitted that the selection of these officials for attrition without proper investigation was
nothing less than arbitrary. Further, the legislative and executive departments promulgation of
issuances and the Governments accession to regional trade agreements have caused a significant
diminution of the tariff rates, thus, decreasing over-all collection. These unrealistic settings of
revenue targets seriously affect BIR and BOC employees tasked with the burden of collection,
and worse, subjected them to attrition.[24]
BOCEA assails the constitutionality of R.A. No. 9335 and its IRR on the following grounds:
1. R.A. No. 9335 and its IRR violate the BIR and BOC employees right to due
process because the termination of employees who had not attained their
revenue targets for the year is peremptory and done without any form of hearing
to allow said employees to ventilate their side. Moreover, R.A. No. 9335 and its
IRR do not comply with the requirements under CSC rules and regulations as
the dismissal in this case is immediately executory. Such immediately executory
nature of the Boards decision negates the remedies available to an employee as
provided under the CSC rules.
2. R.A. No. 9335 and its IRR violate the BIR and BOC employees right to equal
protection of the law because R.A. No. 9335 and its IRR unduly discriminates
against BIR and BOC employees as compared to employees of other revenue
generating government agencies like the Philippine Amusement and Gaming
Corporation, Department of Transportation and Communication, the Air
Transportation Office, the Land Transportation Office, and the Philippine
Charity Sweepstakes Office, among others, which are not subject to attrition.
3. R.A. No. 9335 and its IRR violate the BIR and BOC employees right to
security of tenure because R.A. No. 9335 and its IRR effectively removed
remedies provided in the ordinary course of administrative procedure afforded
to government employees. The law likewise created another ground for
dismissal, i.e., non-attainment of revenue collection target, which is not
provided under CSC rules and which is, by its nature, unpredictable and
therefore arbitrary and unreasonable.
4. R.A. No. 9335 and its IRR violate the 1987 Constitution because Congress
granted to the Revenue Performance Evaluation Board (Board) the unbridled

discretion of formulating the criteria for termination, the manner of allocating

targets, the distribution of rewards and the determination of relevant factors
affecting the targets of collection, which is tantamount to undue delegation of
legislative power.
5. R.A. No. 9335 is a bill of attainder because it inflicts punishment upon a
particular group or class of officials and employees without trial. This is evident
from the fact that the law confers upon the Board the power to impose the
penalty of removal upon employees who do not meet their revenue targets; that
the same is without the benefit of hearing; and that the removal from service is
immediately executory. Lastly, it disregards the presumption of regularity in the
performance of the official functions of a public officer.[25]
On the other hand, respondents through the OSG stress that except for Section 12 of R.A. No.
9335, R.A. No. 9335 and its IRR are constitutional, as per our ruling in Abakada. Nevertheless,
the OSG argues that the classification of BIR and BOC employees as public officers under R.A.
No. 9335 is based on a valid and substantial distinction since the revenue generated by the BIR
and BOC is essentially in the form of taxes, which is the lifeblood of the State, while the
revenue produced by other agencies is merely incidental or secondary to their governmental
functions; that in view of their mandate, and for purposes of tax collection, the BIR and BOC
are sui generis; that R.A. No. 9335 complies with the completeness and sufficient standard tests
for the permissive delegation of legislative power to the Board; that the Board exercises its
delegated power consistent with the policy laid down in the law, that is, to optimize the revenue
generation capability and collection of the BIR and the BOC; that parameters were set in order
that the Board may identify the officials and employees subject to attrition, and the proper
procedure for their removal in case they fail to meet the targets set in the Performance Contract
were provided; and that the rights of BIR and BOC employees to due process of law and
security of tenure are duly accorded by R.A. No. 9335. The OSG likewise maintains that there
was no encroachment of judicial power in the enactment of R.A. No. 9335 amounting to a bill
of attainder since R.A. No. 9335 and its IRR merely defined the offense and provided for the
penalty that may be imposed. Finally, the OSG reiterates that the separation from the service of
any BIR or BOC employee under R.A. No. 9335 and its IRR shall be done only upon due
consideration of all relevant factors affecting the level of collection, subject to Civil Service
laws, rules and regulations, and in compliance with substantive and procedural due process. The
OSG opines that the Performance Contract, far from violating the BIR and BOC employees
right to due process, actually serves as a notice of the revenue target they have to meet and the
possible consequences of failing to meet the same. More, there is nothing in the law which
prevents the aggrieved party from appealing the unfavorable decision of dismissal.[26]
In essence, the issues for our resolution are:
1. Whether there is undue delegation of legislative power to the Board;

2. Whether R.A. No. 9335 and its IRR violate the rights of BOCEAs members
to: (a) equal protection of laws, (b) security of tenure and (c) due process; and

3. Whether R.A. No. 9335 is a bill of attainder.

Our Ruling
Prefatorily, we note that it is clear, and in fact uncontroverted, that BOCEA has locus standi.
BOCEA impugns the constitutionality of R.A. No. 9335 and its IRR because its members, who
are rank-and-file employees of the BOC, are actually covered by the law and its IRR. BOCEAs
members have a personal and substantial interest in the case, such that they have sustained or
will sustain, direct injury as a result of the enforcement of R.A. No. 9335 and its IRR.[27]
However, we find no merit in the petition and perforce dismiss the same.
It must be noted that this is not the first time the constitutionality of R.A. No. 9335 and its IRR
are being challenged. The Court already settled the majority of the same issues raised by
BOCEA in our decision in Abakada, which attained finality on September 17, 2008. As such,
our ruling therein is worthy of reiteration in this case.
We resolve the first issue in the negative.
The principle of separation of powers ordains that each of the three great branches of
government has exclusive cognizance of and is supreme in matters falling within its own
constitutionally allocated sphere.[28] Necessarily imbedded in this doctrine is the principle of
non-delegation of powers, as expressed in the Latin maxim potestas delegata non delegari
potest, which means what has been delegated, cannot be delegated. This doctrine is based on the
ethical principle that such delegated power constitutes not only a right but a duty to be
performed by the delegate through the instrumentality of his own judgment and not through the
intervening mind of another.[29] However, this principle of non-delegation of powers admits of
numerous exceptions,[30] one of which is the delegation of legislative power to various
specialized administrative agencies like the Board in this case.
The rationale for the aforementioned exception was clearly explained in our ruling in Gerochi v.
Department of Energy,[31] to wit:
In the face of the increasing complexity of modern life, delegation of legislative power to various
specialized administrative agencies is allowed as an exception to this principle. Given the
volume and variety of interactions in todays society, it is doubtful if the legislature can
promulgate laws that will deal adequately with and respond promptly to the minutiae of everyday
life. Hence, the need to delegate to administrative bodies the principal agencies tasked to execute
laws in their specialized fields the authority to promulgate rules and regulations to implement a
given statute and effectuate its policies. All that is required for the valid exercise of this power of
subordinate legislation is that the regulation be germane to the objects and purposes of the law
and that the regulation be not in contradiction to, but in conformity with, the standards prescribed
by the law. These requirements are denominated as the completeness test and the sufficient
standard test.[32]

Thus, in Abakada, we held,

Two tests determine the validity of delegation of legislative power: (1) the completeness
test and (2) the sufficient standard test. A law is complete when it sets forth therein the policy to
be executed, carried out or implemented by the delegate. It lays down a sufficient standard when
it provides adequate guidelines or limitations in the law to map out the boundaries of the
delegates authority and prevent the delegation from running riot. To be sufficient, the standard
must specify the limits of the delegates authority, announce the legislative policy and identify the
conditions under which it is to be implemented.
RA [No.] 9335 adequately states the policy and standards to guide the President in fixing
revenue targets and the implementing agencies in carrying out the provisions of the law. Section
2 spells out the policy of the law:

SEC. 2. Declaration of Policy. It is the policy of the State to optimize the

revenue-generation capability and collection of the Bureau of Internal Revenue (BIR) and
the Bureau of Customs (BOC) by providing for a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund and a Revenue Performance
Evaluation Board in the above agencies for the purpose of encouraging their officials and
employees to exceed their revenue targets.
Section 4 canalized within banks that keep it from overflowing the delegated power to the
President to fix revenue targets:
SEC. 4. Rewards and Incentives Fund. A Rewards and Incentives Fund,
hereinafter referred to as the Fund, is hereby created, to be sourced from the collection of
the BIR and the BOC in excess of their respective revenue targets of the year, as
determined by the Development Budget and Coordinating Committee (DBCC), in
the following percentages:
Excess
[Over]
Targets

of Collection
the
Revenue

Percent (%) of the Excess

Collection to Accrue to the
Fund

30% or below

15%

More than 30%

15% of the first 30% plus

20% of the remaining excess

The Fund shall be deemed automatically appropriated the year immediately

following the year when the revenue collection target was exceeded and shall be released
on the same fiscal year.
Revenue targets shall refer to the original estimated revenue collection
expected of the BIR and the BOC for a given fiscal year as stated in the Budget of
Expenditures and Sources of Financing (BESF) submitted by the President to
Congress. The BIR and the BOC shall submit to the DBCC the distribution of the
agencies revenue targets as allocated among its revenue districts in the case of the BIR,
and the collection districts in the case of the BOC.
xxxxxxxxx
Revenue targets are based on the original estimated revenue collection expected
respectively of the BIR and the BOC for a given fiscal year as approved by the DBCC and stated
in the BESF submitted by the President to Congress. Thus, the determination of revenue targets
does not rest solely on the President as it also undergoes the scrutiny of the DBCC.
On the other hand, Section 7 specifies the limits of the Boards authority and identifies the
conditions under which officials and employees whose revenue collection falls short of the target
by at least 7.5% may be removed from the service:
SEC. 7. Powers and Functions of the Board. The Board in the agency shall have
the following powers and functions:
xxxxxxxxx
(b) To set the criteria and procedures for removing from service officials and
employees whose revenue collection falls short of the target by at least seven and a
half percent (7.5%), with due consideration of all relevant factors affecting the level
of collection as provided in the rules and regulations promulgated under this Act, subject
to civil service laws, rules and regulations and compliance with substantive and
procedural due process: Provided, That the following exemptions shall apply:
1. Where the district or area of responsibility is newly-created, not exceeding
two years in operation, and has no historical record of collection performance that can
be used as basis for evaluation; and

2. Where the revenue or customs official or employee is a recent transferee

in the middle of the period under consideration unless the transfer was due to
nonperformance of revenue targets or potential nonperformance of revenue
targets: Provided, however, That when the district or area of responsibility covered by
revenue or customs officials or employees has suffered from economic difficulties
brought about by natural calamities or force majeure or economic causes as may be
determined by the Board, termination shall be considered only after careful and
proper review by the Board.
(c) To terminate personnel in accordance with the criteria adopted in the
preceding paragraph: Provided, That such decision shall be immediately
executory: Provided, further, That the application of the criteria for the separation of
an official or employee from service under this Act shall be without prejudice to the
application of other relevant laws on accountability of public officers and
employees, such as the Code of Conduct and Ethical Standards of Public Officers
and Employees and the Anti-Graft and Corrupt Practices Act;
xxxxxxxxx
At any rate, this Court has recognized the following as sufficient standards: public
interest, justice and equity, public convenience and welfare and simplicity, economy and
welfare. In this case, the declared policy of optimization of the revenue-generation capability and
collection of the BIR and the BOC is infused with public interest.[33]

We could not but deduce that the completeness test and the sufficient standard test were fully
satisfied by R.A. No. 9335, as evident from the aforementioned Sections 2, 4 and 7 thereof.
Moreover, Section 5[34] of R.A. No. 9335 also provides for the incentives due to District
Collection Offices. While it is apparent that the last paragraph of Section 5 provides that [t]he
allocation, distribution and release of the district reward shall likewise be prescribed by the
rules and regulations of the Revenue Performance and Evaluation Board, Section 7 (a)[35] of
R.A. No. 9335 clearly mandates and sets the parameters for the Board by providing that such
rules and guidelines for the allocation, distribution and release of the fund shall be in
accordance with Sections 4 and 5 of R.A. No. 9335. In sum, the Court finds that R.A. No. 9335,
read and appreciated in its entirety, is complete in all its essential terms and conditions, and that
it contains sufficient standards as to negate BOCEAs supposition of undue delegation of
legislative power to the Board.
Similarly, we resolve the second issue in the negative.
Equal protection simply provides that all persons or things similarly situated should be treated
in a similar manner, both as to rights conferred and responsibilities imposed. The purpose of the
equal protection clause is to secure every person within a states jurisdiction against intentional
and arbitrary discrimination, whether occasioned by the express terms of a statute or by its
improper execution through the states duly constituted authorities. In other words, the concept
of equal justice under the law requires the state to govern impartially, and it may not draw
distinctions between individuals solely on differences that are irrelevant to a legitimate
governmental objective.[36]
Thus, on the issue on equal protection of the laws, we held in Abakada:
The equal protection clause recognizes a valid classification, that is, a classification that
has a reasonable foundation or rational basis and not arbitrary. With respect to RA [No.] 9335, its
expressed public policy is the optimization of the revenue-generation capability and collection of
the BIR and the BOC. Since the subject of the law is the revenue-generation capability and
collection of the BIR and the BOC, the incentives and/or sanctions provided in the law should
logically pertain to the said agencies. Moreover, the law concerns only the BIR and the BOC

because they have the common distinct primary function of generating revenues for the national
government through the collection of taxes, customs duties, fees and charges.
The BIR performs the following functions:
Sec. 18. The Bureau of Internal Revenue. The Bureau of Internal Revenue, which
shall be headed by and subject to the supervision and control of the Commissioner of
Internal Revenue, who shall be appointed by the President upon the recommendation of
the Secretary [of the DOF], shall have the following functions:
(1) Assess and collect all taxes, fees and charges and account for all
revenues collected;
(2) Exercise duly delegated police powers for the proper performance of its
functions and duties;
(3) Prevent and prosecute tax evasions and all other illegal economic
activities;
(4) Exercise supervision and control over its constituent and subordinate units;
and
(5) Perform such other functions as may be provided by law.
xxxxxxxxx
On the other hand, the BOC has the following functions:
Sec. 23. The Bureau of Customs. The Bureau of Customs which shall be headed
and subject to the management and control of the Commissioner of Customs, who shall
be appointed by the President upon the recommendation of the Secretary [of the DOF]
and hereinafter referred to as Commissioner, shall have the following functions:
(1) Collect custom duties, taxes and the corresponding fees, charges and
penalties;
(2) Account for all customs revenues collected;
(3) Exercise police authority for the enforcement of tariff and customs laws;
(4) Prevent and suppress smuggling, pilferage and all other economic frauds
within all ports of entry;
(5) Supervise and control exports, imports, foreign mails and the clearance of
vessels and aircrafts in all ports of entry;
(6) Administer all legal requirements that are appropriate;
(7) Prevent and prosecute smuggling and other illegal activities in all ports
under its jurisdiction;
(8) Exercise supervision and control over its constituent units;
(9) Perform such other functions as may be provided by law.
xxxxxxxxx
Both the BIR and the BOC are bureaus under the DOF. They principally perform the special
function of being the instrumentalities through which the State exercises one of its great inherent
functions taxation. Indubitably, such substantial distinction is germane and intimately related to
the purpose of the law. Hence, the classification and treatment accorded to the BIR and the BOC
under RA [No.] 9335 fully satisfy the demands of equal protection.[37]

As it was imperatively correlated to the issue on equal protection, the issues on the security of
tenure of affected BIR and BOC officials and employees and their entitlement to due process
were also settled in Abakada:

Clearly, RA [No.] 9335 in no way violates the security of tenure of officials and
employees of the BIR and the BOC. The guarantee of security of tenure only means that an
employee cannot be dismissed from the service for causes other than those provided by law and
only after due process is accorded the employee. In the case of RA [No.] 9335, it lays down a
reasonable yardstick for removal (when the revenue collection falls short of the target by at least
7.5%) with due consideration of all relevant factors affecting the level of collection. This
standard is analogous to inefficiency and incompetence in the performance of official duties, a
ground for disciplinary action under civil service laws. The action for removal is also subject to
civil service laws, rules and regulations and compliance with substantive and procedural due
process.[38]

In addition, the essence of due process is simply an opportunity to be heard, or as applied to

administrative proceedings, a fair and reasonable opportunity to explain ones side. [39] BOCEAs
apprehension of deprivation of due process finds its answer in Section 7 (b) and (c) of R.A. No.
9335.[40] The concerned BIR or BOC official or employee is not simply given a target revenue
collection and capriciously left without any quarter. R.A. No. 9335 and its IRR clearly give due
consideration to all relevant factors[41] that may affect the level of collection. In the same
manner, exemptions[42] were set, contravening BOCEAs claim that its members may be
removed for unattained target collection even due to causes which are beyond their control.
Moreover, an employees right to be heard is not at all prevented and his right to appeal is not
deprived of him.[43] In fine, a BIR or BOC official or employee in this case cannot be arbitrarily
removed from the service without according him his constitutional right to due process. No less
than R.A. No. 9335 in accordance with the 1987 Constitution guarantees this.
We have spoken, and these issues were finally laid to rest. Now, the Court proceeds to resolve
the last, but new issue raised by BOCEA, that is, whether R.A. No. 9335 is a bill of attainder
proscribed under Section 22,[44] Article III of the 1987 Constitution.
On this score, we hold that R.A. No. 9335 is not a bill of attainder. A bill of attainder is a
legislative act which inflicts punishment on individuals or members of a particular group
without a judicial trial. Essential to a bill of attainder are a specification of certain individuals or
a group of individuals, the imposition of a punishment, penal or otherwise, and the lack of
judicial trial.[45]
In his Concurring Opinion in Tuason v. Register of Deeds, Caloocan City,[46] Justice Florentino
P. Feliciano traces the roots of a Bill of Attainder, to wit:
Bills of attainder are an ancient instrument of tyranny. In England a few centuries back,
Parliament would at times enact bills or statutes which declared certain persons attainted and
their blood corrupted so that it lost all heritable quality (Ex Parte Garland, 4 Wall. 333, 18 L.Ed.
366 [1867]). In more modern terms, a bill of attainder is essentially a usurpation of judicial
power by a legislative body. It envisages and effects the imposition of a penalty the deprivation
of life or liberty or property not by the ordinary processes of judicial trial, but by legislative
fiat. While cast in the form of special legislation, a bill of attainder (or bill of pains and
penalties, if it prescribed a penalty other than death) is in intent and effect a penal
judgment visited upon an identified person or group of persons (and not upon the general
community) without a prior charge or demand, without notice and hearing, without an
opportunity to defend, without any of the civilized forms and safeguards of the judicial
process as we know it (People v. Ferrer, 48 SCRA 382 [1972]; Cummings and Missouri, 4 Wall.
277, 18 L. Ed. 356 [1867]; U.S. v. Lovett, 328, U.S. 303, 90 L.Ed. 1252 [1945]; U.S. v. Brown,
381 U.S. 437, 14 L.Ed. 2d. 484 [1965]. Such is the archetypal bill of attainder wielded as a
means of legislative oppression. x x x[47]

R.A. No. 9335 does not possess the elements of a bill of attainder. It does not seek to inflict
punishment without a judicial trial. R.A. No. 9335 merely lays down the grounds for the
termination of a BIR or BOC official or employee and provides for the consequences thereof.

The democratic processes are still followed and the constitutional rights of the concerned
employee are amply protected.
A final note.
We find that BOCEAs petition is replete with allegations of defects and anomalies in allocation,
distribution and receipt of rewards. While BOCEA intimates that it intends to curb graft and
corruption in the BOC in particular and in the government in general which is nothing but
noble, these intentions do not actually pertain to the constitutionality of R.A. No. 9335 and its
IRR, but rather in the faithful implementation thereof. R.A. No. 9335 itself does not tolerate
these pernicious acts of graft and corruption.[48] As the Court is not a trier of facts, the
investigation on the veracity of, and the proper action on these anomalies are in the hands of the
Executive branch. Correlatively, the wisdom for the enactment of this law remains within the
domain of the Legislative branch. We merely interpret the law as it is. The Court has no
discretion to give statutes a meaning detached from the manifest intendment and language
thereof.[49] Just like any other law, R.A. No. 9335 has in its favor the presumption of
constitutionality, and to justify its nullification, there must be a clear and unequivocal breach of
the Constitution and not one that is doubtful, speculative, or argumentative. [50] We have so
declared in Abakada, and we now reiterate that R.A. No. 9335 and its IRR are constitutional.
WHEREFORE, the present petition for certiorari and prohibition with prayer for injunctive
relief/s is DISMISSED.
No costs.

Today is Tuesday, August 25, 2015

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Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 74457

March 20, 1987

RESTITUTO YNOT, petitioner,

vs.
INTERMEDIATE APPELLATE COURT, THE STATION COMMANDER, INTEGRATED NATIONAL POLICE,
BAROTAC NUEVO, ILOILO and THE REGIONAL DIRECTOR, BUREAU OF ANIMAL INDUSTRY, REGION
IV, ILOILO CITY, respondents.

Ramon A. Gonzales for petitioner.

CRUZ, J.:

The essence of due process is distilled in the immortal cry of Themistocles to Alcibiades "Strike
but hear me first!" It is this cry that the petitioner in effect repeats here as he challenges the
constitutionality of Executive Order No. 626-A.

The said executive order reads in full as follows:

WHEREAS, the President has given orders prohibiting the interprovincial movement of carabaos
and the slaughtering of carabaos not complying with the requirements of Executive Order No.
626 particularly with respect to age;

WHEREAS, it has been observed that despite such orders the violators still manage to circumvent
the prohibition against inter-provincial movement of carabaos by transporting carabeef instead;
and

WHEREAS, in order to achieve the purposes and objectives of Executive Order No. 626 and the
prohibition against interprovincial movement of carabaos, it is necessary to strengthen the said
Executive Order and provide for the disposition of the carabaos and carabeef subject of the
violation;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers
vested in me by the Constitution, do hereby promulgate the following:

SECTION 1. Executive Order No. 626 is hereby amended such that henceforth, no carabao
regardless of age, sex, physical condition or purpose and no carabeef shall be transported from
one province to another. The carabao or carabeef transported in violation of this Executive Order
as amended shall be subject to confiscation and forfeiture by the government, to be distributed
to charitable institutions and other similar institutions as the Chairman of the National Meat
Inspection Commission may ay see fit, in the case of carabeef, and to deserving farmers through
dispersal as the Director of Animal Industry may see fit, in the case of carabaos.

SECTION 2. This Executive Order shall take effect immediately.

Done in the City of Manila, this 25th day of October, in the year of Our Lord, nineteen hundred
and eighty.

(SGD.) FERDINAND E. MARCOS

President

Republic of the Philippines

The petitioner had transported six carabaos in a pump boat from Masbate to Iloilo on January 13,
1984, when they were confiscated by the police station commander of Barotac Nuevo, Iloilo, for
violation of the above measure. 1 The petitioner sued for recovery, and the Regional Trial Court
of Iloilo City issued a writ of replevin upon his filing of a supersedeas bond of P12,000.00. After
considering the merits of the case, the court sustained the confiscation of the carabaos and,
since they could no longer be produced, ordered the confiscation of the bond. The court also
declined to rule on the constitutionality of the executive order, as raise by the petitioner, for lack
of authority and also for its presumed validity. 2

The petitioner appealed the decision to the Intermediate Appellate Court,* 3 which upheld the
trial court, ** and he has now come before us in this petition for review on certiorari.

The thrust of his petition is that the executive order is unconstitutional insofar as it authorizes
outright confiscation of the carabao or carabeef being transported across provincial boundaries.
His claim is that the penalty is invalid because it is imposed without according the owner a right
to be heard before a competent and impartial court as guaranteed by due process. He complains
that the measure should not have been presumed, and so sustained, as constitutional. There is
also a challenge to the improper exercise of the legislative power by the former President under
Amendment No. 6 of the 1973 Constitution. 4

While also involving the same executive order, the case of Pesigan v. Angeles 5 is not applicable
here. The question raised there was the necessity of the previous publication of the measure in
the Official Gazette before it could be considered enforceable. We imposed the requirement then
on the basis of due process of law. In doing so, however, this Court did not, as contended by the
Solicitor General, impliedly affirm the constitutionality of Executive Order No. 626-A. That is an
entirely different matter.

This Court has declared that while lower courts should observe a becoming modesty in
examining constitutional questions, they are nonetheless not prevented from resolving the same
whenever warranted, subject only to review by the highest tribunal. 6 We have jurisdiction under
the Constitution to "review, revise, reverse, modify or affirm on appeal or certiorari, as the law or
rules of court may provide," final judgments and orders of lower courts in, among others, all
cases involving the constitutionality of certain measures. 7 This simply means that the resolution
of such cases may be made in the first instance by these lower courts.

And while it is true that laws are presumed to be constitutional, that presumption is not by any
means conclusive and in fact may be rebutted. Indeed, if there be a clear showing of their
invalidity, and of the need to declare them so, then "will be the time to make the hammer fall,
and heavily," 8 to recall Justice Laurel's trenchant warning. Stated otherwise, courts should not
follow the path of least resistance by simply presuming the constitutionality of a law when it is
questioned. On the contrary, they should probe the issue more deeply, to relieve the abscess,
paraphrasing another distinguished jurist, 9 and so heal the wound or excise the affliction.

Judicial power authorizes this; and when the exercise is demanded, there should be no shirking of
the task for fear of retaliation, or loss of favor, or popular censure, or any other similar inhibition
unworthy of the bench, especially this Court.

The challenged measure is denominated an executive order but it is really presidential decree,
promulgating a new rule instead of merely implementing an existing law. It was issued by
President Marcos not for the purpose of taking care that the laws were faithfully executed but in
the exercise of his legislative authority under Amendment No. 6. It was provided thereunder that
whenever in his judgment there existed a grave emergency or a threat or imminence thereof or
whenever the legislature failed or was unable to act adequately on any matter that in his
judgment required immediate action, he could, in order to meet the exigency, issue decrees,
orders or letters of instruction that were to have the force and effect of law. As there is no
showing of any exigency to justify the exercise of that extraordinary power then, the petitioner
has reason, indeed, to question the validity of the executive order. Nevertheless, since the
determination of the grounds was supposed to have been made by the President "in his
judgment, " a phrase that will lead to protracted discussion not really necessary at this time, we
reserve resolution of this matter until a more appropriate occasion. For the nonce, we confine
ourselves to the more fundamental question of due process.

It is part of the art of constitution-making that the provisions of the charter be cast in precise and
unmistakable language to avoid controversies that might arise on their correct interpretation.
That is the Ideal. In the case of the due process clause, however, this rule was deliberately not
followed and the wording was purposely kept ambiguous. In fact, a proposal to delineate it more
clearly was submitted in the Constitutional Convention of 1934, but it was rejected by Delegate
Jose P. Laurel, Chairman of the Committee on the Bill of Rights, who forcefully argued against it.
He was sustained by the body. 10

The due process clause was kept intentionally vague so it would remain also conveniently
resilient. This was felt necessary because due process is not, like some provisions of the
fundamental law, an "iron rule" laying down an implacable and immutable command for all
seasons and all persons. Flexibility must be the best virtue of the guaranty. The very elasticity of
the due process clause was meant to make it adapt easily to every situation, enlarging or
constricting its protection as the changing times and circumstances may require.

Aware of this, the courts have also hesitated to adopt their own specific description of due
process lest they confine themselves in a legal straitjacket that will deprive them of the elbow
room they may need to vary the meaning of the clause whenever indicated. Instead, they have
preferred to leave the import of the protection open-ended, as it were, to be "gradually
ascertained by the process of inclusion and exclusion in the course of the decision of cases as
they arise." 11 Thus, Justice Felix Frankfurter of the U.S. Supreme Court, for example, would go
no farther than to define due process and in so doing sums it all up as nothing more and
nothing less than "the embodiment of the sporting Idea of fair play." 12

When the barons of England extracted from their sovereign liege the reluctant promise that that
Crown would thenceforth not proceed against the life liberty or property of any of its subjects
except by the lawful judgment of his peers or the law of the land, they thereby won for
themselves and their progeny that splendid guaranty of fairness that is now the hallmark of the
free society. The solemn vow that King John made at Runnymede in 1215 has since then
resounded through the ages, as a ringing reminder to all rulers, benevolent or base, that every
person, when confronted by the stern visage of the law, is entitled to have his say in a fair and
open hearing of his cause.

The closed mind has no place in the open society. It is part of the sporting Idea of fair play to
hear "the other side" before an opinion is formed or a decision is made by those who sit in
judgment. Obviously, one side is only one-half of the question; the other half must also be
considered if an impartial verdict is to be reached based on an informed appreciation of the
issues in contention. It is indispensable that the two sides complement each other, as unto the
bow the arrow, in leading to the correct ruling after examination of the problem not from one or
the other perspective only but in its totality. A judgment based on less that this full appraisal, on
the pretext that a hearing is unnecessary or useless, is tainted with the vice of bias or
intolerance or ignorance, or worst of all, in repressive regimes, the insolence of power.

The minimum requirements of due process are notice and hearing 13 which, generally speaking,
may not be dispensed with because they are intended as a safeguard against official
arbitrariness. It is a gratifying commentary on our judicial system that the jurisprudence of this
country is rich with applications of this guaranty as proof of our fealty to the rule of law and the
ancient rudiments of fair play. We have consistently declared that every person, faced by the
awesome power of the State, is entitled to "the law of the land," which Daniel Webster described
almost two hundred years ago in the famous Dartmouth College Case, 14 as "the law which
hears before it condemns, which proceeds upon inquiry and renders judgment only after trial." It
has to be so if the rights of every person are to be secured beyond the reach of officials who, out
of mistaken zeal or plain arrogance, would degrade the due process clause into a worn and
empty catchword.

This is not to say that notice and hearing are imperative in every case for, to be sure, there are a
number of admitted exceptions. The conclusive presumption, for example, bars the admission of
contrary evidence as long as such presumption is based on human experience or there is a
rational connection between the fact proved and the fact ultimately presumed therefrom. 15
There are instances when the need for expeditions action will justify omission of these requisites,
as in the summary abatement of a nuisance per se, like a mad dog on the loose, which may be
killed on sight because of the immediate danger it poses to the safety and lives of the people.
Pornographic materials, contaminated meat and narcotic drugs are inherently pernicious and
may be summarily destroyed. The passport of a person sought for a criminal offense may be
cancelled without hearing, to compel his return to the country he has fled. 16 Filthy restaurants
may be summarily padlocked in the interest of the public health and bawdy houses to protect the
public morals. 17 In such instances, previous judicial hearing may be omitted without violation of
due process in view of the nature of the property involved or the urgency of the need to protect
the general welfare from a clear and present danger.

The protection of the general welfare is the particular function of the police power which both
restraints and is restrained by due process. The police power is simply defined as the power
inherent in the State to regulate liberty and property for the promotion of the general welfare. 18
By reason of its function, it extends to all the great public needs and is described as the most
pervasive, the least limitable and the most demanding of the three inherent powers of the State,
far outpacing taxation and eminent domain. The individual, as a member of society, is hemmed
in by the police power, which affects him even before he is born and follows him still after he is
dead from the womb to beyond the tomb in practically everything he does or owns. Its
reach is virtually limitless. It is a ubiquitous and often unwelcome intrusion. Even so, as long as
the activity or the property has some relevance to the public welfare, its regulation under the
police power is not only proper but necessary. And the justification is found in the venerable Latin
maxims, Salus populi est suprema lex and Sic utere tuo ut alienum non laedas, which call for the
subordination of individual interests to the benefit of the greater number.

It is this power that is now invoked by the government to justify Executive Order No. 626-A,
amending the basic rule in Executive Order No. 626, prohibiting the slaughter of carabaos except
under certain conditions. The original measure was issued for the reason, as expressed in one of
its Whereases, that "present conditions demand that the carabaos and the buffaloes be
conserved for the benefit of the small farmers who rely on them for energy needs." We affirm at
the outset the need for such a measure. In the face of the worsening energy crisis and the
increased dependence of our farms on these traditional beasts of burden, the government would
have been remiss, indeed, if it had not taken steps to protect and preserve them.

A similar prohibition was challenged in United States v. Toribio, 19 where a law regulating the
registration, branding and slaughter of large cattle was claimed to be a deprivation of property
without due process of law. The defendant had been convicted thereunder for having slaughtered
his own carabao without the required permit, and he appealed to the Supreme Court. The
conviction was affirmed. The law was sustained as a valid police measure to prevent the
indiscriminate killing of carabaos, which were then badly needed by farmers. An epidemic had
stricken many of these animals and the reduction of their number had resulted in an acute
decline in agricultural output, which in turn had caused an incipient famine. Furthermore,
because of the scarcity of the animals and the consequent increase in their price, cattle-rustling
had spread alarmingly, necessitating more effective measures for the registration and branding
of these animals. The Court held that the questioned statute was a valid exercise of the police
power and declared in part as follows:

To justify the State in thus interposing its authority in behalf of the public, it must appear, first,
that the interests of the public generally, as distinguished from those of a particular class, require
such interference; and second, that the means are reasonably necessary for the accomplishment
of the purpose, and not unduly oppressive upon individuals. ...

From what has been said, we think it is clear that the enactment of the provisions of the statute
under consideration was required by "the interests of the public generally, as distinguished from
those of a particular class" and that the prohibition of the slaughter of carabaos for human
consumption, so long as these animals are fit for agricultural work or draft purposes was a
"reasonably necessary" limitation on private ownership, to protect the community from the loss
of the services of such animals by their slaughter by improvident owners, tempted either by
greed of momentary gain, or by a desire to enjoy the luxury of animal food, even when by so
doing the productive power of the community may be measurably and dangerously affected.

In the light of the tests mentioned above, we hold with the Toribio Case that the carabao, as the
poor man's tractor, so to speak, has a direct relevance to the public welfare and so is a lawful
subject of Executive Order No. 626. The method chosen in the basic measure is also reasonably
necessary for the purpose sought to be achieved and not unduly oppressive upon individuals,
again following the above-cited doctrine. There is no doubt that by banning the slaughter of
these animals except where they are at least seven years old if male and eleven years old if
female upon issuance of the necessary permit, the executive order will be conserving those still
fit for farm work or breeding and preventing their improvident depletion.

But while conceding that the amendatory measure has the same lawful subject as the original
executive order, we cannot say with equal certainty that it complies with the second
requirement, viz., that there be a lawful method. We note that to strengthen the original
measure, Executive Order No. 626-A imposes an absolute ban not on the slaughter of the
carabaos but on their movement, providing that "no carabao regardless of age, sex, physical
condition or purpose (sic) and no carabeef shall be transported from one province to another."

The object of the prohibition escapes us. The reasonable connection between the means
employed and the purpose sought to be achieved by the questioned measure is missing

We do not see how the prohibition of the inter-provincial transport of carabaos can prevent their
indiscriminate slaughter, considering that they can be killed anywhere, with no less difficulty in
one province than in another. Obviously, retaining the carabaos in one province will not prevent
their slaughter there, any more than moving them to another province will make it easier to kill
them there. As for the carabeef, the prohibition is made to apply to it as otherwise, so says
executive order, it could be easily circumvented by simply killing the animal. Perhaps so.
However, if the movement of the live animals for the purpose of preventing their slaughter
cannot be prohibited, it should follow that there is no reason either to prohibit their transfer as,
not to be flippant dead meat.

Even if a reasonable relation between the means and the end were to be assumed, we would still
have to reckon with the sanction that the measure applies for violation of the prohibition. The
penalty is outright confiscation of the carabao or carabeef being transported, to be meted out by
the executive authorities, usually the police only. In the Toribio Case, the statute was sustained
because the penalty prescribed was fine and imprisonment, to be imposed by the court after trial
and conviction of the accused. Under the challenged measure, significantly, no such trial is
prescribed, and the property being transported is immediately impounded by the police and
declared, by the measure itself, as forfeited to the government.

In the instant case, the carabaos were arbitrarily confiscated by the police station commander,
were returned to the petitioner only after he had filed a complaint for recovery and given a
supersedeas bond of P12,000.00, which was ordered confiscated upon his failure to produce the
carabaos when ordered by the trial court. The executive order defined the prohibition, convicted
the petitioner and immediately imposed punishment, which was carried out forthright. The
measure struck at once and pounced upon the petitioner without giving him a chance to be
heard, thus denying him the centuries-old guaranty of elementary fair play.

It has already been remarked that there are occasions when notice and hearing may be validly
dispensed with notwithstanding the usual requirement for these minimum guarantees of due
process. It is also conceded that summary action may be validly taken in administrative
proceedings as procedural due process is not necessarily judicial only. 20 In the exceptional
cases accepted, however. there is a justification for the omission of the right to a previous
hearing, to wit, the immediacy of the problem sought to be corrected and the urgency of the
need to correct it.

In the case before us, there was no such pressure of time or action calling for the petitioner's
peremptory treatment. The properties involved were not even inimical per se as to require their
instant destruction. There certainly was no reason why the offense prohibited by the executive
order should not have been proved first in a court of justice, with the accused being accorded all
the rights safeguarded to him under the Constitution. Considering that, as we held in Pesigan v.
Angeles, 21 Executive Order No. 626-A is penal in nature, the violation thereof should have been
pronounced not by the police only but by a court of justice, which alone would have had the
authority to impose the prescribed penalty, and only after trial and conviction of the accused.

We also mark, on top of all this, the questionable manner of the disposition of the confiscated
property as prescribed in the questioned executive order. It is there authorized that the seized
property shall "be distributed to charitable institutions and other similar institutions as the

Chairman of the National Meat Inspection Commission may see fit, in the case of carabeef, and
to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case
of carabaos." (Emphasis supplied.) The phrase "may see fit" is an extremely generous and
dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and
abuse, and even corruption. One searches in vain for the usual standard and the reasonable
guidelines, or better still, the limitations that the said officers must observe when they make
their distribution. There is none. Their options are apparently boundless. Who shall be the
fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the
officers named can supply the answer, they and they alone may choose the grantee as they see
fit, and in their own exclusive discretion. Definitely, there is here a "roving commission," a wide
and sweeping authority that is not "canalized within banks that keep it from overflowing," in
short, a clearly profligate and therefore invalid delegation of legislative powers.

To sum up then, we find that the challenged measure is an invalid exercise of the police power
because the method employed to conserve the carabaos is not reasonably necessary to the
purpose of the law and, worse, is unduly oppressive. Due process is violated because the owner
of the property confiscated is denied the right to be heard in his defense and is immediately
condemned and punished. The conferment on the administrative authorities of the power to
adjudge the guilt of the supposed offender is a clear encroachment on judicial functions and
militates against the doctrine of separation of powers. There is, finally, also an invalid delegation
of legislative powers to the officers mentioned therein who are granted unlimited discretion in
the distribution of the properties arbitrarily taken. For these reasons, we hereby declare
Executive Order No. 626-A unconstitutional.

We agree with the respondent court, however, that the police station commander who
confiscated the petitioner's carabaos is not liable in damages for enforcing the executive order in
accordance with its mandate. The law was at that time presumptively valid, and it was his
obligation, as a member of the police, to enforce it. It would have been impertinent of him, being
a mere subordinate of the President, to declare the executive order unconstitutional and, on his
own responsibility alone, refuse to execute it. Even the trial court, in fact, and the Court of
Appeals itself did not feel they had the competence, for all their superior authority, to question
the order we now annul.

The Court notes that if the petitioner had not seen fit to assert and protect his rights as he saw
them, this case would never have reached us and the taking of his property under the challenged
measure would have become a fait accompli despite its invalidity. We commend him for his spirit.
Without the present challenge, the matter would have ended in that pump boat in Masbate and
another violation of the Constitution, for all its obviousness, would have been perpetrated,
allowed without protest, and soon forgotten in the limbo of relinquished rights.

The strength of democracy lies not in the rights it guarantees but in the courage of the people to
invoke them whenever they are ignored or violated. Rights are but weapons on the wall if, like
expensive tapestry, all they do is embellish and impress. Rights, as weapons, must be a promise
of protection. They become truly meaningful, and fulfill the role assigned to them in the free
society, if they are kept bright and sharp with use by those who are not afraid to assert them.

WHEREFORE, Executive Order No. 626-A is hereby declared unconstitutional. Except as affirmed
above, the decision of the Court of Appeals is reversed. The supersedeas bond is cancelled and
the amount thereof is ordered restored to the petitioner. No costs.

EN BANC
ABAKADA GURO PARTY LIST
(Formerly AASJAS) OFFICERS
SAMSON S. ALCANTARA and ED
VINCENT S. ALBANO,
Petitioners,

- versus -

G.R. No. 168056

Present:
DAVIDE, JR., C.J.,
PUNO,
PANGANIBAN,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO-MORALES,
CALLEJO, SR.,
AZCUNA,
TINGA,
CHICO-NAZARIO, and
GARCIA, JJ.

THE HONORABLE EXECUTIVE

SECRETARY EDUARDO ERMITA;
HONORABLE SECRETARY OF
THE DEPARTMENT OF FINANCE
CESAR
PURISIMA;
and
HONORABLE
COMMISSIONER
OF
INTERNAL
REVENUE
GUILLERMO PARAYNO, JR.,
Respondents.
x-------------------------x
AQUILINO Q. PIMENTEL, JR.,
LUISA P. EJERCITO-ESTRADA,

G.R. No. 168207

JINGGOY E. ESTRADA, PANFILO

M. LACSON, ALFREDO S. LIM,
JAMBY A.S. MADRIGAL, AND
SERGIO R. OSMEA III,
Petitioners,
- versus EXECUTIVE
SECRETARY
EDUARDO R. ERMITA, CESAR V.
PURISIMA,
SECRETARY
OF
FINANCE,
GUILLERMO
L.
PARAYNO, JR., COMMISSIONER
OF THE BUREAU OF INTERNAL
REVENUE,
Respondents.
x-------------------------x
ASSOCIATION OF PILIPINAS
SHELL DEALERS, INC. represented
by
its
President,
ROSARIO
ANTONIO; PETRON DEALERS
ASSOCIATION represented by its
President, RUTH E. BARBIBI;
ASSOCIATION
OF
CALTEX
DEALERS OF THE PHILIPPINES
represented
by
its
President,
MERCEDITAS
A.
GARCIA;
ROSARIO ANTONIO doing business
under the name and style of ANB
NORTH
SHELL
SERVICE
STATION; LOURDES MARTINEZ
doing business under the name and
style
of
SHELL
GATE
N.
DOMINGO; BETHZAIDA TAN
doing business under the name and
style
of
ADVANCE
SHELL
STATION;
REYNALDO
P.
MONTOYA doing business under the
name and style of NEW LAMUAN
SHELL
SERVICE
STATION;
EFREN SOTTO doing business under
the name and style of RED FIELD
SHELL
SERVICE
STATION;
DONICA
CORPORATION
represented by its President, DESI
TOMACRUZ; RUTH E. MARBIBI
doing business under the name and
style of R&R PETRON STATION;
PETER M. UNGSON doing business
under the name and style of
CLASSIC
STAR
GASOLINE

G.R. No. 168461

SERVICE
STATION;
MARIAN
SHEILA A. LEE doing business
under the name and style of NTE
GASOLINE & SERVICE STATION;
JULIAN CESAR P. POSADAS doing
business under the name and style of
STARCARGA
ENTERPRISES;
ADORACION
MAEBO
doing
business under the name and style of
CMA
MOTORISTS
CENTER;
SUSAN M. ENTRATA doing business
under the name and style of LEONAS
GASOLINE
STATION
and
SERVICE CENTER; CARMELITA
BALDONADO doing business under
the name and style of FIRST
CHOICE
SERVICE
CENTER;
MERCEDITAS A. GARCIA doing
business under the name and style of
LORPED
SERVICE
CENTER;
RHEAMAR A. RAMOS doing
business under the name and style of
RJRAM PTT GAS STATION; MA.
ISABEL VIOLAGO doing business
under the name and style of
VIOLAGO-PTT
SERVICE
CENTER; MOTORISTS HEART
CORPORATION represented by its
Vice-President
for
Operations,
JOSELITO
F.
FLORDELIZA;
MOTORISTS
HARVARD
CORPORATION represented by its
Vice-President
for
Operations,
JOSELITO
F.
FLORDELIZA;
MOTORISTS
HERITAGE
CORPORATION represented by its
Vice-President
for
Operations,
JOSELITO
F.
FLORDELIZA;
PHILIPPINE
STANDARD
OIL
CORPORATION represented by its
Vice-President
for
Operations,
JOSELITO
F.
FLORDELIZA;
ROMEO MANUEL doing business
under the name and style of
ROMMAN GASOLINE STATION;
ANTHONY ALBERT CRUZ III
doing business under the name and
style of TRUE SERVICE STATION,
Petitioners,
- versus CESAR

V.

PURISIMA,

in

his

capacity as Secretary of the

Department
of
Finance
and
GUILLERMO L. PARAYNO, JR., in
his capacity as Commissioner of
Internal Revenue,
Respondents.
x-------------------------x
FRANCIS JOSEPH G. ESCUDERO,
VINCENT
CRISOLOGO,
EMMANUEL
JOEL
J.
VILLANUEVA,
RODOLFO
G.
PLAZA, DARLENE ANTONINOCUSTODIO,
OSCAR
G.
MALAPITAN,
BENJAMIN
C.
AGARAO, JR. JUAN EDGARDO M.
ANGARA, JUSTIN MARC SB.
CHIPECO, FLORENCIO G. NOEL,
MUJIV S. HATAMAN, RENATO B.
MAGTUBO,
JOSEPH
A.
SANTIAGO,
TEOFISTO
DL.
GUINGONA III, RUY ELIAS C.
LOPEZ, RODOLFO Q. AGBAYANI
and TEODORO A. CASIO,
Petitioners,

G.R. No. 168463

- versus CESAR V. PURISIMA, in his

capacity as Secretary of Finance,
GUILLERMO L. PARAYNO, JR., in
his capacity as Commissioner of
Internal Revenue, and EDUARDO R.
ERMITA, in his capacity as Executive
Secretary,
Respondents.
x-------------------------x
BATAAN GOVERNOR ENRIQUE T.
GARCIA, JR.
Petitioner,
- versus HON. EDUARDO R. ERMITA, in his
capacity as the Executive Secretary;
HON. MARGARITO TEVES, in his
capacity as Secretary of Finance;
HON. JOSE MARIO BUNAG, in his
capacity as the OIC Commissioner of
the Bureau of Internal Revenue; and

G.R. No. 168730

HON. ALEXANDER AREVALO, in

his capacity as the OIC Commissioner
of the Bureau of Customs,
Respondents.

Promulgated:
September 1, 2005

x-----------------------------------------------------------x

DECISION
AUSTRIA-MARTINEZ, J.:
The expenses of government, having for their object the interest of all, should be borne
by everyone, and the more man enjoys the advantages of society, the more he ought to hold
himself honored in contributing to those expenses.
-Anne Robert Jacques Turgot (1727-1781)
French statesman and economist

Mounting budget deficit, revenue generation, inadequate fiscal allocation for education,
increased emoluments for health workers, and wider coverage for full value-added tax benefits
these are the reasons why Republic Act No. 9337 (R.A. No. 9337) [1] was enacted. Reasons, the
wisdom of which, the Court even with its extensive constitutional power of review, cannot
probe. The petitioners in these cases, however, question not only the wisdom of the law, but also
perceived constitutional infirmities in its passage.
Every law enjoys in its favor the presumption of constitutionality. Their arguments
notwithstanding, petitioners failed to justify their call for the invalidity of the law. Hence, R.A.
No. 9337 is not unconstitutional.
LEGISLATIVE HISTORY
R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555
and 3705, and Senate Bill No. 1950.
House Bill No. 3555[2] was introduced on first reading on January 7, 2005. The House
Committee on Ways and Means approved the bill, in substitution of House Bill No. 1468, which
Representative (Rep.) Eric D. Singson introduced on August 8, 2004. The President certified the
bill on January 7, 2005 for immediate enactment. On January 27, 2005, the House of
Representatives approved the bill on second and third reading.
House Bill No. 3705[3] on the other hand, substituted House Bill No. 3105 introduced by
Rep. Salacnib F. Baterina, and House Bill No. 3381 introduced by Rep. Jacinto V. Paras. Its
mother bill is House Bill No. 3555. The House Committee on Ways and Means approved the
bill on February 2, 2005. The President also certified it as urgent on February 8, 2005. The
House of Representatives approved the bill on second and third reading on February 28, 2005.
Meanwhile, the Senate Committee on Ways and Means approved Senate Bill No.
1950 on March 7, 2005, in substitution of Senate Bill Nos. 1337, 1838 and 1873, taking into
consideration House Bill Nos. 3555 and 3705. Senator Ralph G. Recto sponsored Senate Bill
No. 1337, while Senate Bill Nos. 1838 and 1873 were both sponsored by Sens. Franklin M.
Drilon, Juan M. Flavier and Francis N. Pangilinan. The President certified the bill on March 11,
2005, and was approved by the Senate on second and third reading on April 13, 2005.
[4]

On the same date, April 13, 2005, the Senate agreed to the request of the House of
Representatives for a committee conference on the disagreeing provisions of the proposed bills.
Before long, the Conference Committee on the Disagreeing Provisions of House Bill No.
3555, House Bill No. 3705, and Senate Bill No. 1950, after having met and discussed in full
free and conference, recommended the approval of its report, which the Senate did on May 10,
2005, and with the House of Representatives agreeing thereto the next day, May 11, 2005.
On May 23, 2005, the enrolled copy of the consolidated House and Senate version was
transmitted to the President, who signed the same into law on May 24, 2005. Thus, came R.A.
No. 9337.
July 1, 2005 is the effectivity date of R.A. No. 9337. [5] When said date came, the Court
issued a temporary restraining order, effective immediately and continuing until further orders,
enjoining respondents from enforcing and implementing the law.
Oral arguments were held on July 14, 2005. Significantly, during the hearing, the Court
speaking through Mr. Justice Artemio V. Panganiban, voiced the rationale for its issuance of the
temporary restraining order on July 1, 2005, to wit:
J. PANGANIBAN : . . . But before I go into the details of your presentation, let me just tell you a
little background. You know when the law took effect on July 1, 2005, the
Court issued a TRO at about 5 oclock in the afternoon. But before that,
there was a lot of complaints aired on television and on radio. Some
people in a gas station were complaining that the gas prices went up by
10%. Some people were complaining that their electric bill will go up by
10%. Other times people riding in domestic air carrier were complaining
that the prices that theyll have to pay would have to go up by 10%. While
all that was being aired, per your presentation and per our own
understanding of the law, thats not true. Its not true that the e-vat law
necessarily increased prices by 10% uniformly isnt it?
ATTY. BANIQUED : No, Your Honor.
J. PANGANIBAN : It is not?
ATTY. BANIQUED : Its not, because, Your Honor, there is an Executive Order that granted the
Petroleum companies some subsidy . . . interrupted
J. PANGANIBAN : Thats correct . . .
ATTY. BANIQUED : . . . and therefore that was meant to temper the impact . . . interrupted
J. PANGANIBAN : . . . mitigating measures . . .
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : As a matter of fact a part of the mitigating measures would be the
elimination of the Excise Tax and the import duties. That is why, it is not
correct to say that the VAT as to petroleum dealers increased prices by
10%.
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : And therefore, there is no justification for increasing the retail price by 10%
to cover the E-Vat tax. If you consider the excise tax and the import duties,
the Net Tax would probably be in the neighborhood of 7%? We are not

going into exact figures I am just trying to deliver a point that different
industries, different products, different services are hit differently. So its
not correct to say that all prices must go up by 10%.
ATTY. BANIQUED : Youre right, Your Honor.
J. PANGANIBAN : Now. For instance, Domestic Airline companies, Mr. Counsel, are at present
imposed a Sales Tax of 3%. When this E-Vat law took effect the Sales Tax
was also removed as a mitigating measure. So, therefore, there is no
justification to increase the fares by 10% at best 7%, correct?
ATTY. BANIQUED : I guess so, Your Honor, yes.
J. PANGANIBAN : There are other products that the people were complaining on that first day,
were being increased arbitrarily by 10%. And thats one reason among
many others this Court had to issue TRO because of the confusion in the
implementation. Thats why we added as an issue in this case, even if its
tangentially taken up by the pleadings of the parties, the confusion in the
implementation of the E-vat. Our people were subjected to the mercy of
that confusion of an across the board increase of 10%, which you yourself
now admit and I think even the Government will admit is incorrect. In
some cases, it should be 3% only, in some cases it should be 6%
depending on these mitigating measures and the location and situation of
each product, of each service, of each company, isnt it?
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : Alright. So thats one reason why we had to issue a TRO pending the
clarification of all these and we wish the government will take time to
clarify all these by means of a more detailed implementing rules, in case
the law is upheld by this Court. . . .[6]

The Court also directed the parties to file their respective Memoranda.
G.R. No. 168056
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a
petition for prohibition on May 27, 2005. They question the constitutionality of Sections 4, 5
and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National
Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties,
Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on
sale of services and use or lease of properties. These questioned provisions contain a
uniform proviso authorizing the President, upon recommendation of the Secretary of Finance, to
raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions have
been satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of
the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1 %).

Petitioners argue that the law is unconstitutional, as it constitutes abandonment by

Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the
1987 Philippine Constitution.
G.R. No. 168207
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition
for certiorari likewise assailing the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337.
Aside from questioning the so-called stand-by authority of the President to increase the
VAT rate to 12%, on the ground that it amounts to an undue delegation of legislative power,
petitioners also contend that the increase in the VAT rate to 12% contingent on any of the two
conditions being satisfied violates the due process clause embodied in Article III, Section 1 of
the Constitution, as it imposes an unfair and additional tax burden on the people, in that: (1) the
12% increase is ambiguous because it does not state if the rate would be returned to the original
10% if the conditions are no longer satisfied; (2) the rate is unfair and unreasonable, as the
people are unsure of the applicable VAT rate from year to year; and (3) the increase in the VAT
rate, which is supposed to be an incentive to the President to raise the VAT collection to at least
2 4/5 of the GDP of the previous year, should only be based on fiscal adequacy.
Petitioners further claim that the inclusion of a stand-by authority granted to the President
by the Bicameral Conference Committee is a violation of the no-amendment rule upon last
reading of a bill laid down in Article VI, Section 26(2) of the Constitution.
G.R. No. 168461
Thereafter, a petition for prohibition was filed on June 29, 2005, by the Association
of Pilipinas Shell Dealers, Inc., et al., assailing the following provisions of R.A. No. 9337:
1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input tax on
depreciable goods shall be amortized over a 60-month period, if the acquisition,
excluding the VAT components, exceeds One Million Pesos (P1, 000,000.00);
2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on the amount of
input tax to be credited against the output tax; and
3) Section 12, amending Section 114 (c) of the NIRC, authorizing the Government or any of its
political subdivisions, instrumentalities or agencies, including GOCCs, to deduct a 5%
final withholding tax on gross payments of goods and services, which are subject to 10%
VAT under Sections 106 (sale of goods and properties) and 108 (sale of services and use
or lease of properties) of the NIRC.

Petitioners contend that these provisions are unconstitutional for being arbitrary,
oppressive, excessive, and confiscatory.
Petitioners argument is premised on the constitutional right of non-deprivation of life,
liberty or property without due process of law under Article III, Section 1 of the Constitution.
According to petitioners, the contested sections impose limitations on the amount of input tax
that may be claimed. Petitioners also argue that the input tax partakes the nature of a property
that may not be confiscated, appropriated, or limited without due process of law. Petitioners
further contend that like any other property or property right, the input tax credit may be
transferred or disposed of, and that by limiting the same, the government gets to tax a profit or
value-added even if there is no profit or value-added.
Petitioners also believe that these provisions violate the constitutional guarantee of equal
protection of the law under Article III, Section 1 of the Constitution, as the limitation on the

creditable input tax if: (1) the entity has a high ratio of input tax; or (2) invests in capital
equipment; or (3) has several transactions with the government, is not based on real and
substantial differences to meet a valid classification.
Lastly, petitioners contend that the 70% limit is anything but progressive, violative of
Article VI, Section 28(1) of the Constitution, and that it is the smaller businesses with higher
input tax to output tax ratio that will suffer the consequences thereof for it wipes out whatever
meager margins the petitioners make.
G.R. No. 168463
Several members of the House of Representatives led by Rep. Francis Joseph G.
Escudero filed this petition for certiorari on June 30, 2005. They question the constitutionality
of R.A. No. 9337 on the following grounds:
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue delegation of legislative power, in
violation of Article VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted without jurisdiction in deleting the no pass
on provisions present in Senate Bill No. 1950 and House Bill No. 3705; and
3) Insertion by the Bicameral Conference Committee of Sections 27, 28, 34, 116, 117, 119, 121,
125,[7] 148, 151, 236, 237 and 288, which were present in Senate Bill No. 1950, violates
Article VI, Section 24(1) of the Constitution, which provides that all appropriation,
revenue or tariff bills shall originate exclusively in the House of Representatives

G.R. No. 168730

On the eleventh hour, Governor Enrique T. Garcia filed a petition for certiorari and
prohibition on July 20, 2005, alleging unconstitutionality of the law on the ground that the
limitation on the creditable input tax in effect allows VAT-registered establishments to retain a
portion of the taxes they collect, thus violating the principle that tax collection and revenue
should be solely allocated for public purposes and expenditures. Petitioner Garcia further claims
that allowing these establishments to pass on the tax to the consumers is inequitable, in
violation of Article VI, Section 28(1) of the Constitution.
RESPONDENTS COMMENT
The Office of the Solicitor General (OSG) filed a Comment in behalf of respondents.
Preliminarily, respondents contend that R.A. No. 9337 enjoys the presumption of
constitutionality and petitioners failed to cast doubt on its validity.
Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA
630 (1994), respondents argue that the procedural issues raised by petitioners, i.e., legality of
the bicameral proceedings, exclusive origination of revenue measures and the power of the
Senate concomitant thereto, have already been settled. With regard to the issue of undue
delegation of legislative power to the President, respondents contend that the law is complete
and leaves no discretion to the President but to increase the rate to 12% once any of the two
conditions provided therein arise.
Respondents also refute petitioners argument that the increase to 12%, as well as the 70%
limitation on the creditable input tax, the 60-month amortization on the purchase or importation
of capital goods exceeding P1,000,000.00, and the 5% final withholding tax by government
agencies, is arbitrary, oppressive, and confiscatory, and that it violates the constitutional
principle on progressive taxation, among others.

Finally, respondents manifest that R.A. No. 9337 is the anchor of the governments fiscal
reform agenda. A reform in the value-added system of taxation is the core revenue measure that
will tilt the balance towards a sustainable macroeconomic environment necessary for economic
growth.
ISSUES
The Court defined the issues, as follows:
PROCEDURAL ISSUE
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
SUBSTANTIVE ISSUES
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the
NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC;
and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following
provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1

RULING OF THE COURT

As a prelude, the Court deems it apt to restate the general principles and concepts of
value-added tax (VAT), as the confusion and inevitably, litigation, breeds from a fallacious
notion of its nature.
The VAT is a tax on spending or consumption. It is levied on the sale, barter, exchange or
lease of goods or properties and services. [8]Being an indirect tax on expenditure, the seller of
goods or services may pass on the amount of tax paid to the buyer, [9] with the seller acting
merely as a tax collector.[10] The burden of VAT is intended to fall on the immediate buyers and
ultimately, the end-consumers.
In contrast, a direct tax is a tax for which a taxpayer is directly liable on the transaction or
business it engages in, without transferring the burden to someone else. [11] Examples are
individual and corporate income taxes, transfer taxes, and residence taxes.[12]
In the Philippines, the value-added system of sales taxation has long been in existence,
albeit in a different mode. Prior to 1978, the system was a single-stage tax computed under the
cost deduction method and was payable only by the original sellers. The single-stage system
was subsequently modified, and a mixture of the cost deduction method and tax credit method
was used to determine the value-added tax payable. [13] Under the tax credit method, an entity
can credit against or subtract from the VAT charged on its sales or outputs the VAT paid on its
purchases, inputs and imports.[14]

It was only in 1987, when President Corazon C. Aquino issued Executive Order No. 273,
that the VAT system was rationalized by imposing a multi-stage tax rate of 0% or 10% on all
sales using the tax credit method.[15]
E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT Law,[16] R.A. No.
8241 or the Improved VAT Law,[17] R.A. No. 8424 or the Tax Reform Act of 1997,[18] and finally,
the presently beleaguered R.A. No. 9337, also referred to by respondents as the VAT Reform
Act.
The Court will now discuss the issues in logical sequence.
PROCEDURAL ISSUE
I.
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
A. The Bicameral Conference Committee
Petitioners Escudero, et al., and Pimentel, et al., allege that the Bicameral Conference
Committee exceeded its authority by:
1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and 6 of R.A. No.
9337;
2) Deleting entirely the no pass-on provisions found in both the House and Senate bills;
3) Inserting the provision imposing a 70% limit on the amount of input tax to be credited against
the output tax; and
4) Including the amendments introduced only by Senate Bill No. 1950 regarding other kinds of
taxes in addition to the value-added tax.

Petitioners now beseech the Court to define the powers of the Bicameral Conference
Committee.
It should be borne in mind that the power of internal regulation and discipline are
intrinsic in any legislative body for, as unerringly elucidated by Justice Story, [i]f the power did
not exist, it would be utterly impracticable to transact the business of the nation, either at
all, or at least with decency, deliberation, and order.[19] Thus, Article VI, Section 16 (3) of the
Constitution provides that each House may determine the rules of its proceedings. Pursuant to
this inherent constitutional power to promulgate and implement its own rules of procedure, the
respective rules of each house of Congress provided for the creation of a Bicameral Conference
Committee.
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of Representatives provides as
follows:
Sec. 88. Conference Committee. In the event that the House does not agree with the
Senate on the amendment to any bill or joint resolution, the differences may be settled by the
conference committees of both chambers.

In resolving the differences with the Senate, the House panel shall, as much as possible,
adhere to and support the House Bill. If the differences with the Senate are so substantial that
they materially impair the House Bill, the panel shall report such fact to the House for the latters
appropriate action.
Sec. 89. Conference Committee Reports. . . . Each report shall contain a detailed,
sufficiently explicit statement of the changes in or amendments to the subject measure.
...
The Chairman of the House panel may be interpellated on the Conference Committee
Report prior to the voting thereon. The House shall vote on the Conference Committee Report in
the same manner and procedure as it votes on a bill on third and final reading.

Rule XII, Section 35 of the Rules of the Senate states:

Sec. 35. In the event that the Senate does not agree with the House of Representatives on
the provision of any bill or joint resolution, the differences shall be settled by a conference
committee of both Houses which shall meet within ten (10) days after their composition. The
President shall designate the members of the Senate Panel in the conference committee with the
approval of the Senate.
Each Conference Committee Report shall contain a detailed and sufficiently explicit
statement of the changes in, or amendments to the subject measure, and shall be signed by a
majority of the members of each House panel, voting separately.
A comparative presentation of the conflicting House and Senate provisions and a
reconciled version thereof with the explanatory statement of the conference committee shall be
attached to the report.
...

The creation of such conference committee was apparently in response to a problem, not
addressed by any constitutional provision, where the two houses of Congress find themselves in
disagreement over changes or amendments introduced by the other house in a legislative bill.
Given that one of the most basic powers of the legislative branch is to formulate and implement
its own rules of proceedings and to discipline its members, may the Court then delve into the
details of how Congress complies with its internal rules or how it conducts its business of
passing legislation? Note that in the present petitions, the issue is not whether provisions of the
rules of both houses creating the bicameral conference committee are unconstitutional, but
whether the bicameral conference committee has strictly complied with the rules of both
houses, thereby remaining within the jurisdiction conferred upon it by Congress.
In the recent case of Farias vs. The Executive Secretary,[20] the Court En
Banc, unanimously reiterated and emphasized its adherence to the enrolled bill doctrine, thus,
declining therein petitioners plea for the Court to go behind the enrolled copy of the bill.
Assailed in said case was Congresss creation of two sets of bicameral conference committees,
the lack of records of said committees proceedings, the alleged violation of said committees of
the rules of both houses, and the disappearance or deletion of one of the provisions in the
compromise bill submitted by the bicameral conference committee. It was argued that such
irregularities in the passage of the law nullified R.A. No. 9006, or the Fair Election Act.
Striking down such argument, the Court held thus:

Under the enrolled bill doctrine, the signing of a bill by the Speaker of the House and the
Senate President and the certification of the Secretaries of both Houses of Congress that it was
passed are conclusive of its due enactment. A review of cases reveals the Courts consistent
adherence to the rule. The Court finds no reason to deviate from the salutary rule in this
case where the irregularities alleged by the petitioners mostly involved the internal rules of
Congress, e.g., creation of the 2nd or 3rd Bicameral Conference Committee by the House.This
Court is not the proper forum for the enforcement of these internal rules of Congress,
whether House or Senate. Parliamentary rules are merely procedural and with their
observance the courts have no concern. Whatever doubts there may be as to the formal
validity of Rep. Act No. 9006 must be resolved in its favor. The Court reiterates its ruling
in Arroyo vs. De Venecia, viz.:
But the cases, both here and abroad, in varying forms of expression,
all deny to the courts the power to inquire into allegations that, in enacting a
law, a House of Congress failed to comply with its own rules, in the absence
of showing that there was a violation of a constitutional provision or the
rights of private individuals. In Osmea v. Pendatun, it was held: At any rate,
courts have declared that the rules adopted by deliberative bodies are subject to
revocation, modification or waiver at the pleasure of the body adopting
them. And it has been said that Parliamentary rules are merely procedural,
and with their observance, the courts have no concern. They may be waived
or disregarded by the legislative body. Consequently, mere failure to conform
to parliamentary usage will not invalidate the action (taken by a deliberative
body) when the requisite number of members have agreed to a particular
measure.[21] (Emphasis supplied)

The foregoing declaration is exactly in point with the present cases, where petitioners
allege irregularities committed by the conference committee in introducing changes or deleting
provisions in the House and Senate bills. Akin to the Farias case,[22] the present petitions also
raise an issue regarding the actions taken by the conference committee on matters regarding
Congress compliance with its own internal rules. As stated earlier, one of the most basic and
inherent power of the legislature is the power to formulate rules for its proceedings and the
discipline of its members. Congress is the best judge of how it should conduct its own business
expeditiously and in the most orderly manner. It is also the sole
concern of Congress to instill discipline among the members of its conference committee if it
believes that said members violated any of its rules of proceedings. Even the expanded
jurisdiction of this Court cannot apply to questions regarding only the internal operation of
Congress, thus, the Court is wont to deny a review of the internal proceedings of a co-equal
branch of government.
Moreover, as far back as 1994 or more than ten years ago, in the case of Tolentino vs.
Secretary of Finance,[23] the Court already made the pronouncement that [i]f a change is
desired in the practice [of the Bicameral Conference Committee] it must be sought in
Congress since this question is not covered by any constitutional provision but is only an
internal rule of each house. [24] To date, Congress has not seen it fit to make such changes
adverted to by the Court. It seems, therefore, that Congress finds the practices of the bicameral
conference committee to be very useful for purposes of prompt and efficient legislative action.
Nevertheless, just to put minds at ease that no blatant irregularities tainted the
proceedings of the bicameral conference committees, the Court deems it necessary to dwell on
the issue. The Court observes that there was a necessity for a conference committee because a
comparison of the provisions of House Bill Nos. 3555 and 3705 on one hand, and Senate Bill
No. 1950 on the other, reveals that there were indeed disagreements. As pointed out in the
petitions, said disagreements were as follows:

House Bill No. 3555

House Bill No.3705

Senate Bill No. 1950

With regard to Stand-By Authority in favor of President

Provides for 12% VAT on
every sale of goods or
properties (amending Sec.
106 of NIRC); 12% VAT on
importation
of
goods
(amending Sec. 107 of
NIRC); and 12% VAT on sale
of services and use or lease
of properties (amending Sec.
108 of NIRC)

Provides for 12% VAT in general

on sales of goods or properties
and reduced rates for sale of
certain locally manufactured
goods and petroleum products
and raw materials to be used in
the
manufacture
thereof
(amending Sec. 106 of NIRC);
12% VAT on importation of goods
and reduced rates for certain
imported products including
petroleum products (amending
Sec. 107 of NIRC); and 12% VAT
on sale of services and use or
lease of properties and a reduced
rate for certain services including
power generation (amending Sec.
108 of NIRC)

Provides for a single rate of 10%

VAT on sale of goods or properties
(amending Sec. 106 of NIRC),
10% VAT on sale of services
including sale of electricity by
generation
companies,
transmission
and
distribution
companies, and use or lease of
properties (amending Sec. 108 of
NIRC)

With regard to the no pass-on provision

No similar provision

Provides that the VAT imposed on

power generation and on the sale
of petroleum products shall be
absorbed
by
generation
companies or sellers, respectively,
and shall not be passed on to
consumers

Provides that the VAT imposed on

sales of electricity by generation
companies and services of
transmission
companies
and
distribution companies, as well as
those of franchise grantees of
electric utilities shall not apply to
residential
end-users. VAT shall be absorbed
by generation, transmission, and
distribution companies.
With regard to 70% limit on input tax credit

Provides that the input tax

credit for capital goods on
which a VAT has been paid
shall be equally distributed
over 5 years or the
depreciable life of such
capital goods; the input tax
credit for goods and services
other than capital goods shall
not exceed 5% of the total
amount of such goods and
services; and for persons
engaged in retail trading of
goods, the allowable input
tax credit shall not exceed
11% of the total amount of
goods purchased.

No similar provision

Provides that the input tax credit

for capital goods on which a VAT
has been paid shall be equally
distributed over 5 years or the
depreciable life of such capital
goods; the input tax credit for
goods and services other than
capital goods shall not exceed 90%
of the output VAT.

With regard to amendments to be made to NIRC provisions regarding income and excise taxes
No similar provision

No similar provision

Provided for amendments to

several NIRC provisions regarding
corporate income, percentage,
franchise and excise taxes

The disagreements between the provisions in the House bills and the Senate bill were
with regard to (1) what rate of VAT is to be imposed; (2) whether only the VAT imposed on
electricity generation, transmission and distribution companies should not be passed on to
consumers, as proposed in the Senate bill, or both the VAT imposed on electricity generation,
transmission and distribution companies and the VAT imposed on sale of petroleum products
should not be passed on to consumers, as proposed in the House bill; (3) in what manner input
tax credits should be limited; (4) and whether the NIRC provisions on corporate income taxes,
percentage, franchise and excise taxes should be amended.
There being differences and/or disagreements on the foregoing provisions of the House
and Senate bills, the Bicameral Conference Committee was mandated by the rules of both
houses of Congress to act on the same by settling said differences and/or disagreements. The
Bicameral Conference Committee acted on the disagreeing provisions by making the following
changes:
1. With regard to the disagreement on the rate of VAT to be imposed, it would appear
from the Conference Committee Report that the Bicameral Conference Committee tried to
bridge the gap in the difference between the 10% VAT rate proposed by the Senate, and the
various rates with 12% as the highest VAT rate proposed by the House, by striking a
compromise whereby the present 10% VAT rate would be retained until certain conditions
arise, i.e., the value-added tax collection as a percentage of gross domestic product (GDP) of
the previous year exceeds 2 4/5%, or National Government deficit as a percentage of GDP of
the previous year exceeds 1%, when the President, upon recommendation of the Secretary of
Finance shall raise the rate of VAT to 12% effective January 1, 2006.
2. With regard to the disagreement on whether only the VAT imposed on electricity
generation, transmission and distribution companies should not be passed on to consumers or
whether both the VAT imposed on electricity generation, transmission and distribution
companies and the VAT imposed on sale of petroleum products may be passed on to consumers,
the Bicameral Conference Committee chose to settle such disagreement by altogether deleting
from its Report any no pass-on provision.
3. With regard to the disagreement on whether input tax credits should be limited or not,
the Bicameral Conference Committee decided to adopt the position of the House by putting a
limitation on the amount of input tax that may be credited against the output tax, although it
crafted its own language as to the amount of the limitation on input tax credits and the manner
of computing the same by providing thus:
(A) Creditable Input Tax. . . .
...
Provided, The input tax on goods purchased or imported in a calendar month for
use in trade or business for which deduction for depreciation is allowed under this

Code, shall be spread evenly over the month of acquisition and the fifty-nine (59)
succeeding months if the aggregate acquisition cost for such goods, excluding the
VAT component thereof, exceeds one million Pesos (P1,000,000.00):
PROVIDED, however, that if the estimated useful life of the capital good is less
than five (5) years, as used for depreciation purposes, then the input VAT shall be
spread over such shorter period: . . .
(B) Excess Output or Input Tax. If at the end of any taxable quarter the output tax
exceeds the input tax, the excess shall be paid by the VAT-registered person. If the
input tax exceeds the output tax, the excess shall be carried over to the succeeding
quarter or quarters: PROVIDED that the input tax inclusive of input VAT carried
over from the previous quarter that may be credited in every quarter shall not
exceed seventy percent (70%) of the output VAT: PROVIDED, HOWEVER,
THAT any input tax attributable to zero-rated sales by a VAT-registered person
may at his option be refunded or credited against other internal revenue taxes, . . .

4. With regard to the amendments to other provisions of the NIRC on corporate income
tax, franchise, percentage and excise taxes, the conference committee decided to include such
amendments and basically adopted the provisions found in Senate Bill No. 1950, with some
changes as to the rate of the tax to be imposed.
Under the provisions of both the Rules of the House of Representatives and Senate Rules,
the Bicameral Conference Committee is mandated to settle the differences between the
disagreeing provisions in the House bill and the Senate bill. The term settle is synonymous to
reconcile and harmonize.[25] To reconcile or harmonize disagreeing provisions, the Bicameral
Conference Committee may then (a) adopt the specific provisions of either the House bill or
Senate bill, (b) decide that neither provisions in the House bill or the provisions in the Senate
bill would
be carried into the final form of the bill, and/or (c) try to arrive at a compromise between the
disagreeing provisions.
In the present case, the changes introduced by the Bicameral Conference Committee on
disagreeing provisions were meant only to reconcile and harmonize the disagreeing provisions
for it did not inject any idea or intent that is wholly foreign to the subject embraced by the
original provisions.
The so-called stand-by authority in favor of the President, whereby the rate of 10% VAT
wanted by the Senate is retained until such time that certain conditions arise when the 12% VAT
wanted by the House shall be imposed, appears to be a compromise to try to bridge the
difference in the rate of VAT proposed by the two houses of Congress. Nevertheless, such
compromise is still totally within the subject of what rate of VAT should be imposed on
taxpayers.
The no pass-on provision was deleted altogether. In the transcripts of the proceedings of
the Bicameral Conference Committee held onMay 10, 2005, Sen. Ralph Recto, Chairman of the
Senate Panel, explained the reason for deleting the no pass-on provision in this wise:
. . . the thinking was just to keep the VAT law or the VAT bill simple. And we were
thinking that no sector should be a beneficiary of legislative grace, neither should any sector be
discriminated on. The VAT is an indirect tax. It is a pass on-tax. And lets keep it plain and
simple. Lets not confuse the bill and put a no pass-on provision. Two-thirds of the world have a
VAT system and in this two-thirds of the globe, I have yet to see a VAT with a no pass-though
provision. So, the thinking of the Senate is basically simple, lets keep the VAT simple.
[26]
(Emphasis supplied)

Rep. Teodoro Locsin further made the manifestation that the no pass-on provision never
really enjoyed the support of either House.[27]
With regard to the amount of input tax to be credited against output tax, the Bicameral
Conference Committee came to a compromise on the percentage rate of the limitation or cap on
such input tax credit, but again, the change introduced by the Bicameral Conference Committee
was totally within the intent of both houses to put a cap on input tax that may be
credited against the output tax. From the inception of the subject revenue bill in the House of
Representatives, one of the major objectives was to plug a glaring loophole in the tax policy and
administration by creating vital restrictions on the claiming of input VAT tax credits . . . and
[b]y introducing limitations on the claiming of tax credit, we are capping a major leakage that
has placed our collection efforts at an apparent disadvantage.[28]
As to the amendments to NIRC provisions on taxes other than the value-added tax
proposed in Senate Bill No. 1950, since said provisions were among those referred to it, the
conference committee had to act on the same and it basically adopted the version of the Senate.
Thus, all the changes or modifications made by the Bicameral Conference Committee
were germane to subjects of the provisions referred
to it for reconciliation. Such being the case, the Court does not see any grave abuse of discretion
amounting to lack or excess of jurisdiction committed by the Bicameral Conference Committee.
In the earlier cases of Philippine Judges Association vs. Prado[29] and Tolentino vs. Secretary of
Finance,[30] the Court recognized the long-standing legislative practice of giving said conference
committee ample latitude for compromising differences between the Senate and the House.
Thus, in the Tolentino case, it was held that:
. . . it is within the power of a conference committee to include in its report an entirely
new provision that is not found either in the House bill or in the Senate bill. If the committee can
propose an amendment consisting of one or two provisions, there is no reason why it cannot
propose several provisions, collectively considered as an amendment in the nature of a substitute,
so long as such amendment is germane to the subject of the bills before the committee. After all,
its report was not final but needed the approval of both houses of Congress to become valid as an
act of the legislative department. The charge that in this case the Conference Committee
acted as a third legislative chamber is thus without any basis.[31] (Emphasis supplied)

B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the
Constitution on the No-Amendment Rule
Article VI, Sec. 26 (2) of the Constitution, states:
No bill passed by either House shall become a law unless it has passed three readings on
separate days, and printed copies thereof in its final form have been distributed to its Members
three days before its passage, except when the President certifies to the necessity of its
immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no
amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter,
and the yeas and nays entered in the Journal.

Petitioners argument that the practice where a bicameral conference committee is allowed
to add or delete provisions in the House bill and the Senate bill after these had passed three
readings is in effect a circumvention of the no amendment rule (Sec. 26 (2), Art. VI of the 1987
Constitution), fails to convince the Court to deviate from its ruling in the Tolentino case that:

Nor is there any reason for requiring that the Committees Report in these cases must have
undergone three readings in each of the two houses. If that be the case, there would be no end to
negotiation since each house may seek modification of the compromise bill. . . .
Art. VI. 26 (2) must, therefore, be construed as referring only to bills introduced for
the first time in either house of Congress, not to the conference committee report.
[32]
(Emphasis supplied)

The Court reiterates here that the no-amendment rule refers only to the procedure to
be followed by each house of Congress with regard to bills initiated in each of said
respective houses, before said bill is transmitted to the other house for its concurrence or
amendment. Verily, to construe said provision in a way as to proscribe any further changes to a
bill after one house has voted on it would lead to absurdity as this would mean that the other
house of Congress would be deprived of its constitutional power to amend or introduce changes
to said bill. Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be taken to mean that the
introduction by the Bicameral Conference Committee of amendments and modifications to
disagreeing provisions in bills that have been acted upon by both houses of Congress is
prohibited.
C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the
Constitution on Exclusive Origination of Revenue Bills
Coming to the issue of the validity of the amendments made regarding the NIRC
provisions on corporate income taxes and percentage, excise taxes. Petitioners refer to the
following provisions, to wit:
Section 27
Rates of Income Tax on Domestic Corporation
28(A)(1)

Tax on Resident Foreign Corporation

28(B)(1)

Inter-corporate Dividends

34(B)(1)

Inter-corporate Dividends

116

Tax on Persons Exempt from VAT

117

Percentage Tax on domestic carriers and keepers of Garage

119

Tax on franchises

121

Tax on banks and Non-Bank Financial Intermediaries

148

Excise Tax on manufactured oils and other fuels

151

Excise Tax on mineral products

236

Registration requirements

237

Issuance of receipts or sales or commercial invoices

288

Disposition of Incremental Revenue

Petitioners claim that the amendments to these provisions of the NIRC did not at all
originate from the House. They aver that House Bill No. 3555 proposed amendments only
regarding Sections 106, 107, 108, 110 and 114 of the NIRC, while House Bill No. 3705
proposed amendments only to Sections 106, 107,108, 109, 110 and 111 of the NIRC; thus, the
other sections of the NIRC which the Senate amended but which amendments were not found in
the House bills are not intended to be amended by the House of Representatives. Hence, they

argue that since the proposed amendments did not originate from the House, such amendments
are a violation of Article VI, Section 24 of the Constitution.
The argument does not hold water.
Article VI, Section 24 of the Constitution reads:
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public
debt, bills of local application, and private bills shall originate exclusively in the House of
Representatives but the Senate may propose or concur with amendments.

In the present cases, petitioners admit that it was indeed House Bill Nos. 3555 and 3705
that initiated the move for amending provisions of the NIRC dealing mainly with the valueadded tax. Upon transmittal of said House bills to the Senate, the Senate came out with Senate
Bill No. 1950 proposing amendments not only to NIRC provisions on the value-added tax but
also amendments to NIRC provisions on other kinds of taxes. Is the introduction by the Senate
of provisions not dealing directly with the value- added tax, which is the only kind of tax being
amended in the House bills, still within the purview of the constitutional provision authorizing
the Senate to propose or concur with amendments to a revenue bill that originated from the
House?
The foregoing question had been squarely answered in the Tolentino case, wherein the
Court held, thus:
. . . To begin with, it is not the law but the revenue bill which is required by the
Constitution to originate exclusively in the House of Representatives. It is important to
emphasize this, because a bill originating in the House may undergo such extensive changes in
the Senate that the result may be a rewriting of the whole. . . . At this point, what is important to
note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a
revenue statute and not only the bill which initiated the legislative process culminating in
the enactment of the law must substantially be the same as the House bill would be to deny
the Senates power not only to concur with amendments but also to propose amendments. It
would be to violate the coequality of legislative power of the two houses of Congress and in fact
make the House superior to the Senate.
Given, then, the power of the Senate to propose amendments, the Senate can
propose its own version even with respect to bills which are required by the Constitution to
originate in the House.
...
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff
or tax bills, bills authorizing an increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the theory that, elected as they are
from the districts,the members of the House can be expected to be more sensitive to the local
needs and problems. On the other hand, the senators, who are elected at large, are expected
to approach the same problems from the national perspective. Both views are thereby made
to bear on the enactment of such laws.[33] (Emphasis supplied)

Since there is no question that the revenue bill exclusively originated in the House of
Representatives, the Senate was acting within its
constitutional power to introduce amendments to the House bill when it included provisions in
Senate Bill No. 1950 amending corporate income taxes, percentage, excise and franchise taxes.
Verily, Article VI, Section 24 of the Constitution does not contain any prohibition or limitation

on the extent of the amendments that may be introduced by the Senate to the House revenue
bill.
Furthermore, the amendments introduced by the Senate to the NIRC provisions that had
not been touched in the House bills are still in furtherance of the intent of the House in initiating
the subject revenue bills. The Explanatory Note of House Bill No. 1468, the very first House
bill introduced on the floor, which was later substituted by House Bill No. 3555, stated:
One of the challenges faced by the present administration is the urgent and daunting task
of solving the countrys serious financial problems. To do this, government expenditures must be
strictly monitored and controlled and revenues must be significantly increased. This may be
easier said than done, but our fiscal authorities are still optimistic the government will be
operating on a balanced budget by the year 2009. In fact, several measures that will result to
significant expenditure savings have been identified by the administration. It is supported with
a credible package of revenue measures that include measures to improve tax
administration and control the leakages in revenues from income taxes and the value-added
tax (VAT). (Emphasis supplied)

Rep. Eric D. Singson, in his sponsorship speech for House Bill No. 3555, declared that:
In the budget message of our President in the year 2005, she reiterated that we all
acknowledged that on top of our agenda must be the restoration of the health of our fiscal
system.
In order to considerably lower the consolidated public sector deficit and eventually
achieve a balanced budget by the year 2009, we need to seize windows of opportunities which
might seem poignant in the beginning, but in the long run prove effective and beneficial to
the overall status of our economy. One such opportunity is a review of existing tax rates,
evaluating the relevance given our present conditions.[34](Emphasis supplied)

Notably therefore, the main purpose of the bills emanating from the House of
Representatives is to bring in sizeable revenues for the government
to supplement our countrys serious financial problems, and improve tax administration and
control of the leakages in revenues from income taxes and value-added taxes. As these house
bills were transmitted to the Senate, the latter, approaching the measures from the point of
national perspective, can introduce amendments within the purposes of those bills. It can
provide for ways that would soften the impact of the VAT measure on the consumer, i.e., by
distributing the burden across all sectors instead of putting it entirely on the shoulders of the
consumers. The sponsorship speech of Sen. Ralph Recto on why the provisions on income tax
on corporation were included is worth quoting:
All in all, the proposal of the Senate Committee on Ways and Means will raise P64.3
billion in additional revenues annually even while by mitigating prices of power, services and
petroleum products.
However, not all of this will be wrung out of VAT. In fact, only P48.7 billion amount is
from the VAT on twelve goods and services. The rest of the tab P10.5 billion- will be picked by
corporations.
What we therefore prescribe is a burden sharing between corporate Philippines and the
consumer. Why should the latter bear all the pain? Why should the fiscal salvation be only on the
burden of the consumer?
The corporate worlds equity is in form of the increase in the corporate income tax from
32 to 35 percent, but up to 2008 only. This will raiseP10.5 billion a year. After that, the rate will
slide back, not to its old rate of 32 percent, but two notches lower, to 30 percent.

Clearly, we are telling those with the capacity to pay, corporations, to bear with this
emergency provision that will be in effect for 1,200 days, while we put our fiscal house in order.
This fiscal medicine will have an expiry date.
For their assistance, a reward of tax reduction awaits them. We intend to keep the length
of their sacrifice brief. We would like to assure them that not because there is a light at the end of
the tunnel, this government will keep on making the tunnel long.
The responsibility will not rest solely on the weary shoulders of the small man. Big
business will be there to share the burden.[35]

As the Court has said, the Senate can propose amendments and in fact, the amendments
made on provisions in the tax on income of corporations are germane to the purpose of the
house bills which is to raise revenues for the government.
Likewise, the Court finds the sections referring to other percentage and excise taxes
germane to the reforms to the VAT system, as these sections would cushion the effects of VAT
on consumers. Considering that certain goods and services which were subject to percentage tax
and excise tax would no longer be VAT-exempt, the consumer would be burdened more as they
would be paying the VAT in addition to these taxes. Thus, there is a need to amend these
sections to soften the impact of VAT. Again, in his sponsorship speech, Sen. Recto said:
However, for power plants that run on oil, we will reduce to zero the present excise tax
on bunker fuel, to lessen the effect of a VAT on this product.
For electric utilities like Meralco, we will wipe out the franchise tax in exchange for a
VAT.
And in the case of petroleum, while we will levy the VAT on oil products, so as not to
destroy the VAT chain, we will however bring down the excise tax on socially sensitive products
such as diesel, bunker, fuel and kerosene.
...
What do all these exercises point to? These are not contortions of giving to the left hand
what was taken from the right. Rather, these sprang from our concern of softening the impact of
VAT, so that the people can cushion the blow of higher prices they will have to pay as a result of
VAT.[36]

The other sections amended by the Senate pertained to matters of tax administration
which are necessary for the implementation of the changes in the VAT system.
To reiterate, the sections introduced by the Senate are germane to the subject matter and
purposes of the house bills, which is to supplement our countrys fiscal deficit, among others.
Thus, the Senate acted within its power to propose those amendments.
SUBSTANTIVE ISSUES
I.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the
NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
A. No Undue Delegation of Legislative Power

Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et
al. contend in common that Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107
and 108, respectively, of the NIRC giving the President the stand-by authority to raise the VAT
rate from 10% to 12% when a certain condition is met, constitutes undue delegation of the
legislative power to tax.
The assailed provisions read as follows:
SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended to read as
follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties.
(A) Rate and Base of Tax. There shall be levied, assessed and collected on every
sale, barter or exchange of goods or properties, a value-added tax equivalent to
ten percent (10%) of the gross selling price or gross value in money of the goods
or properties sold, bartered or exchanged, such tax to be paid by the seller or
transferor: provided, that the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006, raise the rate of valueadded tax to twelve percent (12%), after any of the following conditions has
been satisfied.
(i)

value-added tax collection as a percentage of Gross Domestic

Product (GDP) of the previous year exceeds two and four-fifth percent
(2 4/5%) or

(ii) national government deficit as a percentage of GDP of the previous year

exceeds one and one-half percent (1 %).
SEC. 5. Section 107 of the same Code, as amended, is hereby further amended to read as
follows:
SEC. 107. Value-Added Tax on Importation of Goods.
(A) In General. There shall be levied, assessed and collected on every importation
of goods a value-added tax equivalent to ten percent (10%) based on the total
value used by the Bureau of Customs in determining tariff and customs duties,
plus customs duties, excise taxes, if any, and other charges, such tax to be paid by
the importer prior to the release of such goods from customs custody: Provided,
That where the customs duties are determined on the basis of the quantity or
volume of the goods, the value-added tax shall be based on the landed cost plus
excise taxes, if any: provided, further, that the President, upon the
recommendation of the Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to twelve percent (12%) after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2
4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 %).
SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as
follows:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties

(A) Rate and Base of Tax. There shall be levied, assessed and collected, a valueadded tax equivalent to ten percent (10%) of gross receipts derived from the sale
or exchange of services: provided, that the President, upon the
recommendation of the Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2
4/5%) or
(ii) national government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 %). (Emphasis supplied)

Petitioners allege that the grant of the stand-by authority to the President to increase the
VAT rate is a virtual abdication by Congress of its exclusive power to tax because such
delegation is not within the purview of Section 28 (2), Article VI of the Constitution, which
provides:
The Congress may, by law, authorize the President to fix within specified limits, and may
impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development program of the government.

They argue that the VAT is a tax levied on the sale, barter or exchange of goods and
properties as well as on the sale or exchange of services, which cannot be included within the
purview of tariffs under the exempted delegation as the latter refers to customs duties, tolls or
tribute payable upon merchandise to the government and usually imposed on goods or
merchandise imported or exported.
Petitioners ABAKADA GURO Party List, et al., further contend that delegating to the
President the legislative power to tax is contrary to republicanism. They insist that
accountability, responsibility and transparency should dictate the actions of Congress and they
should not pass to the President the decision to impose taxes. They also argue that the law also
effectively nullified the Presidents power of control, which includes the authority to set aside
and nullify the acts of her subordinates like the Secretary of Finance, by mandating the fixing of
the tax rate by the President upon the recommendation of the Secretary of Finance.
Petitioners Pimentel, et al. aver that the President has ample powers to cause, influence or
create the conditions provided by the law to bring about either or both the conditions precedent.
On the other hand, petitioners Escudero, et al. find bizarre and revolting the situation that
the imposition of the 12% rate would be subject to the whim of the Secretary of Finance, an
unelected bureaucrat, contrary to the principle of no taxation without representation. They
submit that the Secretary of Finance is not mandated to give a favorable recommendation and
he may not even give his recommendation. Moreover, they allege that no guiding standards are
provided in the law on what basis and as to how he will make his recommendation. They claim,
nonetheless, that any recommendation of the Secretary of Finance can easily be brushed aside
by the President since the former is a mere alter ego of the latter, such that, ultimately, it is the
President who decides whether to impose the increased tax rate or not.
A brief discourse on the principle of non-delegation of powers is instructive.
The principle of separation of powers ordains that each of the three great branches of
government has exclusive cognizance of and is supreme in matters falling within its own
constitutionally allocated sphere.[37] A logical

corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as

expressed in the Latin maxim: potestas delegata non delegari potest which means what has
been delegated, cannot be delegated.[38] This doctrine is based on the ethical principle that such
as delegated power constitutes not only a right but a duty to be performed by the delegate
through the instrumentality of his own judgment and not through the intervening mind of
another.[39]
With respect to the Legislature, Section 1 of Article VI of the Constitution provides
that the Legislative power shall be vested in the Congress of the Philippines which shall consist
of a Senate and a House of Representatives. The powers which Congress is prohibited from
delegating are those which are strictly, or inherently and exclusively, legislative. Purely
legislative power, which can never be delegated, has been described as the authority to make a
complete law complete as to the time when it shall take effect and as to whom it shall be
applicable and to determine the expediency of its enactment.[40] Thus, the rule is that in order
that a court may be justified in holding a statute unconstitutional as a delegation of legislative
power, it must appear that the power involved is purely legislative in nature that is, one
appertaining exclusively to the legislative department. It is the nature of the power, and not the
liability of its use or the manner of its exercise, which determines the validity of its delegation.
Nonetheless, the general rule barring delegation of legislative powers is subject to the
following recognized limitations or exceptions:
(1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the
Constitution;
(2) Delegation of emergency powers to the President under Section 23 (2) of Article VI of the
Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.

In every case of permissible delegation, there must be a showing that the delegation itself
is valid. It is valid only if the law (a) is complete in itself, setting forth therein the policy to be
executed, carried out, or implemented by the delegate; [41] and (b) fixes a standard the limits of
which are sufficiently determinate and determinable to which the delegate must conform in the
performance of his functions.[42] A sufficient standard is one which defines legislative policy,
marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates
the circumstances under which the legislative command is to be effected. [43] Both tests are
intended to prevent a total transference of legislative authority to the delegate, who is not
allowed to step into the shoes of the legislature and exercise a power essentially legislative.[44]
In People vs. Vera,[45] the Court, through eminent Justice Jose P. Laurel, expounded on the
concept and extent of delegation of power in this wise:
In testing whether a statute constitutes an undue delegation of legislative power or not, it
is usual to inquire whether the statute was complete in all its terms and provisions when it left the
hands of the legislature so that nothing was left to the judgment of any other appointee or
delegate of the legislature.
...
The true distinction, says Judge Ranney, is between the delegation of power to make
the law, which necessarily involves a discretion as to what it shall be, and conferring an

authority or discretion as to its execution, to be exercised under and in pursuance of the

law. The first cannot be done; to the latter no valid objection can be made.
...
It is contended, however, that a legislative act may be made to the effect as law after it
leaves the hands of the legislature. It is true that laws may be made effective on certain
contingencies, as by proclamation of the executive or the adoption by the people of a particular
community. In Wayman vs. Southard, the Supreme Court of the United States ruled that the
legislature may delegate a power not legislative which it may itself rightfully exercise. The
power to ascertain facts is such a power which may be delegated. There is nothing
essentially legislative in ascertaining the existence of facts or conditions as the basis of the
taking into effect of a law. That is a mental process common to all branches of the
government. Notwithstanding the apparent tendency, however, to relax the rule prohibiting
delegation of legislative authority on account of the complexity arising from social and economic
forces at work in this modern industrial age, the orthodox pronouncement of Judge Cooley in his
work on Constitutional Limitations finds restatement in Prof. Willoughby's treatise on the
Constitution of the United States in the following language speaking of declaration of legislative
power to administrative agencies: The principle which permits the legislature to provide that
the administrative agent may determine when the circumstances are such as require the
application of a law is defended upon the ground that at the time this authority is granted,
the rule of public policy, which is the essence of the legislative act, is determined by the
legislature. In other words, the legislature, as it is its duty to do, determines that, under
given circumstances, certain executive or administrative action is to be taken, and that,
under other circumstances, different or no action at all is to be taken. What is thus left to
the administrative official is not the legislative determination of what public policy
demands, but simply the ascertainment of what the facts of the case require to be done
according to the terms of the law by which he is governed. The efficiency of an Act as a
declaration of legislative will must, of course, come from Congress, but the ascertainment
of the contingency upon which the Act shall take effect may be left to such agencies as it
may designate. The legislature, then, may provide that a law shall take effect upon the
happening of future specified contingencies leaving to some other person or body the power
to determine when the specified contingency has arisen. (Emphasis supplied).[46]

In Edu vs. Ericta,[47] the Court reiterated:

What cannot be delegated is the authority under the Constitution to make laws and to
alter and repeal them; the test is the completeness of the statute in all its terms and provisions
when it leaves the hands of the legislature. To determine whether or not there is an undue
delegation of legislative power, the inquiry must be directed to the scope and definiteness of the
measure enacted. The legislative does not abdicate its functions when it describes what job
must be done, who is to do it, and what is the scope of his authority. For a complex economy,
that may be the only way in which the legislative process can go forward. A distinction has
rightfully been made between delegation of power to make the laws which necessarily
involves a discretion as to what it shall be, which constitutionally may not be done, and
delegation of authority or discretion as to its execution to be exercised under and in
pursuance of the law, to which no valid objection can be made. The Constitution is thus not
to be regarded as denying the legislature the necessary resources of flexibility and practicability.
(Emphasis supplied).[48]

Clearly, the legislature may delegate to executive officers or bodies the power to
determine certain facts or conditions, or the happening of contingencies, on which the operation
of a statute is, by its terms, made to depend, but the legislature must prescribe sufficient
standards, policies or limitations on their authority.[49] While the power to tax cannot be
delegated to executive agencies, details as to the enforcement and administration of an exercise
of such power may be left to them, including the power to determine the existence of facts on
which its operation depends.[50]

The rationale for this is that the preliminary ascertainment of facts as basis for the
enactment of legislation is not of itself a legislative function, but is simply ancillary to
legislation. Thus, the duty of correlating information and making recommendations is the kind
of subsidiary activity which the legislature may perform through its members, or which it may
delegate to others to perform. Intelligent legislation on the complicated problems of modern
society is impossible in the absence of accurate information on the part of the legislators, and
any reasonable method of securing such information is proper.[51] The Constitution as a
continuously operative charter of government does not require that Congress find for itself
every fact upon which it desires to base legislative action or that it make for itself detailed
determinations which it has declared to be prerequisite to application of legislative policy to
particular facts and circumstances impossible for Congress itself properly to investigate.[52]
In the present case, the challenged section of R.A. No. 9337 is the common proviso in
Sections 4, 5 and 6 which reads as follows:
That the President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of
the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous
year exceeds one and one-half percent (1 %).

The case before the Court is not a delegation of legislative power. It is simply a
delegation of ascertainment of facts upon which enforcement and administration of the increase
rate under the law is contingent. The legislature has made the operation of the 12% rate
effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire
operation or non-operation of the 12% rate upon factual matters outside of the control of the
executive.
No discretion would be exercised by the President. Highlighting the absence of discretion
is the fact that the word shall is used in the common proviso. The use of the
word shall connotes a mandatory order. Its use in a statute denotes an imperative obligation and
is inconsistent with the idea of discretion.[53] Where the law is clear and unambiguous, it must be
taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is
obeyed.[54]
Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon
the existence of any of the conditions specified by Congress. This is a duty which cannot be
evaded by the President. Inasmuch as the law specifically uses the word shall, the exercise of
discretion by the President does not come into play. It is a clear directive to impose the 12%
VAT rate when the specified conditions are present. The time of taking into effect of the 12%
VAT rate is based on the happening of a certain specified contingency, or upon the
ascertainment of certain facts or conditions by a person or body other than the legislature itself.
The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et
al. that the law effectively nullified the Presidents power of control over the Secretary of
Finance by mandating the fixing of the tax rate by the President upon the recommendation of
the Secretary of Finance. The Court cannot also subscribe to the position of petitioners
Pimentel, et al. that the word shall should be interpreted to mean may in view of the phrase
upon the recommendation of the Secretary of Finance. Neither does the Court find persuasive

the submission of petitioners Escudero, et al. that any recommendation by the Secretary of
Finance can easily be brushed aside by the President since the former is a mere alter ego of the
latter.
When one speaks of the Secretary of Finance as the alter ego of the President, it simply
means that as head of the Department of Finance he is the assistant and agent of the Chief
Executive. The multifarious executive and administrative functions of the Chief Executive are
performed by and through the executive departments, and the acts of the secretaries of such
departments, such as the Department of Finance, performed and promulgated in the regular
course of business, are, unless disapproved or reprobated by the Chief Executive, presumptively
the acts of the Chief Executive. The Secretary of Finance, as such, occupies a political position
and holds office in an advisory capacity, and, in the language of Thomas Jefferson, "should be
of the President's bosom confidence" and, in the language of Attorney-General Cushing, is
subject to the direction of the President."[55]
In the present case, in making his recommendation to the President on the existence of
either of the two conditions, the Secretary of Finance is not acting as the alter ego of the
President or even her subordinate. In such instance, he is not subject to the power of control and
direction of the President. He is acting as the agent of the legislative department, to determine
and declare the event upon which its expressed will is to take effect. [56] The Secretary of Finance
becomes the means or tool by which legislative policy is determined and implemented,
considering that he possesses all the facilities to gather data and information and has a much
broader perspective to properly evaluate them. His function is to gather and collate statistical
data and other pertinent information and verify if any of the two conditions laid out by Congress
is present. His personality in such instance is in reality but a projection of that of
Congress. Thus, being the agent of Congress and not of the President, the President cannot alter
or modify or nullify, or set aside the findings of the Secretary of Finance and to substitute the
judgment of the former for that of the latter.
Congress simply granted the Secretary of Finance the authority to ascertain the existence
of a fact, namely, whether by December 31, 2005, the value-added tax collection as a
percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth
percent (24/5%) or the national government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1%). If either of these two instances has occurred, the
Secretary of Finance, by legislative mandate, must submit such information to the President.
Then the 12% VAT rate must be imposed by the President effective January 1, 2006. There is
no undue delegation of legislative power but only of the discretion as to the execution of a
law. This is constitutionally permissible.[57] Congress does not abdicate its functions or unduly
delegate power when it describes what job must be done, who must do it, and what is the scope
of his authority; in our complex economy that is frequently the only way in which the
legislative process can go forward.[58]
As to the argument of petitioners ABAKADA GURO Party List, et al. that delegating to
the President the legislative power to tax is contrary to the principle of republicanism, the same
deserves scant consideration. Congress did not delegate the power to tax but the mere
implementation of the law. The intent and will to increase the VAT rate to 12% came from
Congress and the task of the President is to simply execute the legislative policy. That Congress
chose to do so in such a manner is not within the province of the Court to inquire into, its task
being to interpret the law.[59]
The insinuation by petitioners Pimentel, et al. that the President has ample powers to cause,
influence or create the conditions to bring about either or both the conditions precedent does not

deserve any merit as this argument is highly speculative. The Court does not rule on allegations
which are manifestly conjectural, as these may not exist at all. The Court deals with facts, not
fancies; on realities, not appearances. When the Court acts on appearances instead of realities,
justice and law will be short-lived.
B. The 12% Increase VAT Rate Does Not Impose an Unfair and
Unnecessary Additional Tax Burden

Petitioners Pimentel, et al. argue that the 12% increase in the VAT rate imposes an unfair
and additional tax burden on the people. Petitioners also argue that the 12% increase, dependent
on any of the 2 conditions set forth in the contested provisions, is ambiguous because it does not
state if the VAT rate would be returned to the original 10% if the rates are no longer satisfied.
Petitioners also argue that such rate is unfair and unreasonable, as the people are unsure of the
applicable VAT rate from year to year.
Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the two
conditions set forth therein are satisfied, the President shall increase the VAT rate to 12%. The
provisions of the law are clear. It does not provide for a return to the 10% rate nor does it
empower the President to so revert if, after the rate is increased to 12%, the VAT collection goes
below the 24/5 of the GDP of the previous year or that the national government deficit as a
percentage of GDP of the previous year does not exceed 1%.
Therefore, no statutory construction or interpretation is needed. Neither can conditions or
limitations be introduced where none is provided for. Rewriting the law is a forbidden ground
that only Congress may tread upon.[60]
Thus, in the absence of any provision providing for a return to the 10% rate, which in this
case the Court finds none, petitioners argument is, at best, purely speculative. There is no basis
for petitioners fear of a fluctuating VAT rate because the law itself does not provide that the rate
should go back to 10% if the conditions provided in Sections 4, 5 and 6 are no longer present.
The rule is that where the provision of the law is clear and unambiguous, so that there is no
occasion for the court's seeking the legislative intent, the law must be taken as it is, devoid of
judicial addition or subtraction.[61]
Petitioners also contend that the increase in the VAT rate, which was allegedly an
incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of the previous
year, should be based on fiscal adequacy.
Petitioners obviously overlooked that increase in VAT collection is not the only condition.
There is another condition, i.e., the national government deficit as a percentage of GDP of the
previous year exceeds one and one-half percent (1 %).
Respondents explained the philosophy behind these alternative conditions:
1. VAT/GDP Ratio > 2.8%
The condition set for increasing VAT rate to 12% have economic or fiscal meaning. If
VAT/GDP is less than 2.8%, it means that government has weak or no capability of
implementing the VAT or that VAT is not effective in the function of the tax collection.
Therefore, there is no value to increase it to 12% because such action will also be ineffectual.
2. Natl Govt Deficit/GDP >1.5%

The condition set for increasing VAT when deficit/GDP is 1.5% or less means the fiscal
condition of government has reached a relatively sound position or is towards the direction of a
balanced budget position. Therefore, there is no need to increase the VAT rate since the fiscal
house is in a relatively healthy position. Otherwise stated, if the ratio is more than 1.5%, there is
indeed a need to increase the VAT rate.[62]

That the first condition amounts to an incentive to the President to increase the VAT
collection does not render it unconstitutional so long as there is a public purpose for which the
law was passed, which in this case, is mainly to raise revenue. In fact, fiscal adequacy dictated
the need for a raise in revenue.
The principle of fiscal adequacy as a characteristic of a sound tax system was originally
stated by Adam Smith in his Canons of Taxation (1776), as:
IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the
people as little as possible over and above what it brings into the public treasury of the
state.[63]

It simply means that sources of revenues must be adequate to meet government

expenditures and their variations.[64]
The dire need for revenue cannot be ignored. Our country is in a quagmire of financial
woe. During the Bicameral Conference Committee hearing, then Finance Secretary Purisima
bluntly depicted the countrys gloomy state of economic affairs, thus:
First, let me explain the position that the Philippines finds itself in right now. We are in a
position where 90 percent of our revenue is used for debt service. So, for every peso of revenue
that we currently raise, 90 goes to debt service. Thats interest plus amortization of our debt. So
clearly, this is not a sustainable situation. Thats the first fact.
The second fact is that our debt to GDP level is way out of line compared to other peer
countries that borrow money from that international financial markets. Our debt to GDP is
approximately equal to our GDP. Again, that shows you that this is not a sustainable situation.
The third thing that Id like to point out is the environment that we are presently operating
in is not as benign as what it used to be the past five years.
What do I mean by that?
In the past five years, weve been lucky because we were operating in a period of
basically global growth and low interest rates. The past few months, we have seen an inching up,
in fact, a rapid increase in the interest rates in the leading economies of the world. And,
therefore, our ability to borrow at reasonable prices is going to be challenged. In fact, ultimately,
the question is our ability to access the financial markets.
When the President made her speech in July last year, the environment was not as bad as
it is now, at least based on the forecast of most financial institutions. So, we were assuming that
raising 80 billion would put us in a position where we can then convince them to improve our
ability to borrow at lower rates. But conditions have changed on us because the interest rates
have gone up. In fact, just within this room, we tried to access the market for a billion dollars
because for this year alone, the Philippines will have to borrow 4 billion dollars. Of that amount,
we have borrowed 1.5 billion. We issued last January a 25-year bond at 9.7 percent cost. We
were trying to access last week and the market was not as favorable and up to now we have not
accessed and we might pull back because the conditions are not very good.
So given this situation, we at the Department of Finance believe that we really need to
front-end our deficit reduction. Because it is deficit that is causing the increase of the debt and
we are in what we call a debt spiral. The more debt you have, the more deficit you have because

interest and debt service eats and eats more of your revenue. We need to get out of this debt
spiral. And the only way, I think, we can get out of this debt spiral is really have a front-end
adjustment in our revenue base.[65]

The image portrayed is chilling. Congress passed the law hoping for rescue from an
inevitable catastrophe. Whether the law is indeed sufficient to answer the states economic
dilemma is not for the Court to judge. In the Farias case, the Court refused to consider the
various arguments raised therein that dwelt on the wisdom of Section 14 of R.A. No. 9006 (The
Fair Election Act), pronouncing that:
. . . policy matters are not the concern of the Court. Government policy is within the
exclusive dominion of the political branches of the government. It is not for this Court to look
into the wisdom or propriety of legislative determination. Indeed, whether an enactment is wise
or unwise, whether it is based on sound economic theory, whether it is the best means to achieve
the desired results, whether, in short, the legislative discretion within its prescribed limits should
be exercised in a particular manner are matters for the judgment of the legislature, and the
serious conflict of opinions does not suffice to bring them within the range of judicial
cognizance.[66]

In the same vein, the Court in this case will not dawdle on the purpose of Congress or the
executive policy, given that it is not for the judiciary to "pass upon questions of wisdom, justice
or expediency of legislation.[67]
II.
Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC;
and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following
provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A. Due Process and Equal Protection Clauses
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. argue that Section 8 of R.A.
No. 9337, amending Sections 110 (A)(2), 110 (B), and Section 12 of R.A. No. 9337, amending
Section 114 (C) of the NIRC are arbitrary, oppressive, excessive and confiscatory. Their
argument is premised on the constitutional right against deprivation of life, liberty of property
without due process of law, as embodied in Article III, Section 1 of the Constitution.
Petitioners also contend that these provisions violate the constitutional guarantee of equal
protection of the law.
The doctrine is that where the due process and equal protection clauses are invoked,
considering that they are not fixed rules but rather broad standards, there is a need for proof of
such persuasive character as would lead to such a conclusion. Absent such a showing, the
presumption of validity must prevail.[68]
Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation
on the amount of input tax that may be credited against the output tax. It states, in part:
[P]rovided, that the input tax inclusive of the input VAT carried over from the previous quarter
that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT:

Input Tax is defined under Section 110(A) of the NIRC, as amended, as the value-added
tax due from or paid by a VAT-registered person on the importation of goods or local purchase
of good and services, including lease or use of property, in the course of trade or business, from
a VAT-registered person, and Output Tax is the value-added tax due on the sale or lease of
taxable goods or properties or services by any person registered or required to register under the
law.
Petitioners claim that the contested sections impose limitations on the amount of input tax
that may be claimed. In effect, a portion of the input tax that has already been paid cannot now
be credited against the output tax.
Petitioners argument is not absolute. It assumes that the input tax exceeds 70% of the
output tax, and therefore, the input tax in excess of 70% remains uncredited. However, to the
extent that the input tax is less than 70% of the output tax, then 100% of such input tax is still
creditable.
More importantly, the excess input tax, if any, is retained in a businesss books of accounts
and remains creditable in the succeeding quarter/s. This is explicitly allowed by Section 110(B),
which provides that if the input tax exceeds the output tax, the excess shall be carried over to
the succeeding quarter or quarters. In addition, Section 112(B) allows a VAT-registered person
to apply for the issuance of a tax credit certificate or refund for any unused input taxes, to the
extent that such input taxes have not been applied against the output taxes. Such unused input
tax may be used in payment of his other internal revenue taxes.
The non-application of the unutilized input tax in a given quarter is not ad infinitum, as
petitioners exaggeratedly contend. Their analysis of the effect of the 70% limitation is
incomplete and one-sided. It ends at the net effect that there will be unapplied/unutilized inputs
VAT for a given quarter. It does not proceed further to the fact that such unapplied/unutilized
input tax may be credited in the subsequent periods as allowed by the carry-over provision of
Section 110(B) or that it may later on be refunded through a tax credit certificate under Section
112(B).
Therefore, petitioners argument must be rejected.
On the other hand, it appears that petitioner Garcia failed to comprehend the operation of
the 70% limitation on the input tax. According to petitioner, the limitation on the creditable
input tax in effect allows VAT-registered establishments to retain a portion of the taxes they
collect, which violates the principle that tax collection and revenue should be for public
purposes and expenditures
As earlier stated, the input tax is the tax paid by a person, passed on to him by the seller,
when he buys goods. Output tax meanwhile is the tax due to the person when he sells goods. In
computing the VAT payable, three possible scenarios may arise:
First, if at the end of a taxable quarter the output taxes charged by the seller are equal to
the input taxes that he paid and passed on by the suppliers, then no payment is required;
Second, when the output taxes exceed the input taxes, the person shall be liable for the
excess, which has to be paid to the Bureau of Internal Revenue (BIR);[69] and
Third, if the input taxes exceed the output taxes, the excess shall be carried over to the
succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively

zero-rated transactions, any excess over the output taxes shall instead be refunded to the
taxpayer or credited against other internal revenue taxes, at the taxpayers option.[70]
Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the input tax. Thus, a
person can credit his input tax only up to the extent of 70% of the output tax. In laymans term,
the value-added taxes that a person/taxpayer paid and passed on to him by a seller can only be
credited up to 70% of the value-added taxes that is due to him on a taxable transaction. There is
no retention of any tax collection because the person/taxpayer has already previously paid the
input tax to a seller, and the seller will subsequently remit such input tax to the BIR. The party
directly liable for the payment of the tax is the seller. [71] What only needs to be done is for the
person/taxpayer to apply or credit these input taxes, as evidenced by receipts, against his output
taxes.
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. also argue that the input tax
partakes the nature of a property that may not be confiscated, appropriated, or limited without
due process of law.
The input tax is not a property or a property right within the constitutional purview of the
due process clause. A VAT-registered persons entitlement to the creditable input tax is a mere
statutory privilege.
The distinction between statutory privileges and vested rights must be borne in mind for
persons have no vested rights in statutory privileges. The state may change or take away rights,
which were created by the law of the state, although it may not take away property, which was
vested by virtue of such rights.[72]
Under the previous system of single-stage taxation, taxes paid at every level of
distribution are not recoverable from the taxes payable, although it becomes part of the cost,
which is deductible from the gross revenue. When Pres. Aquino issued E.O. No. 273 imposing a
10% multi-stage tax on all sales, it was then that the crediting of the input tax paid on purchase
or importation of goods and services by VAT-registered persons against the output tax was
introduced.[73] This was adopted by the Expanded VAT Law (R.A. No. 7716), [74] and The Tax
Reform Act of 1997 (R.A. No. 8424).[75] The right to credit input tax as against the output tax is
clearly a privilege created by law, a privilege that also the law can remove, or in this case, limit.
Petitioners also contest as arbitrary, oppressive, excessive and confiscatory, Section 8 of
R.A. No. 9337, amending Section 110(A) of the NIRC, which provides:
SEC. 110. Tax Credits.
(A) Creditable Input Tax.
Provided, That the input tax on goods purchased or imported in a calendar month for use in trade
or business for which deduction for depreciation is allowed under this Code, shall be spread
evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate
acquisition cost for such goods, excluding the VAT component thereof, exceeds One million
pesos (P1,000,000.00): Provided, however, That if the estimated useful life of the capital goods
is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread
over such a shorter period: Provided, finally, That in the case of purchase of services, lease or use
of properties, the input tax shall be creditable to the purchaser, lessee or license upon payment of
the compensation, rental, royalty or fee.

The foregoing section imposes a 60-month period within which to amortize the creditable
input tax on purchase or importation of capital goods with acquisition cost of P1 Million pesos,

exclusive of the VAT component. Such spread out only poses a delay in the crediting of the
input tax. Petitioners argument is without basis because the taxpayer is not permanently
deprived of his privilege to credit the input tax.
It is worth mentioning that Congress admitted that the spread-out of the creditable input
tax in this case amounts to a 4-year interest-free loan to the government. [76] In the same breath,
Congress also justified its move by saying that the provision was designed to raise an annual
revenue of 22.6 billion.[77] The legislature also dispelled the fear that the provision will fend off
foreign investments, saying that foreign investors have other tax incentives provided by law,
and citing the case of China, where despite a 17.5% non-creditable VAT, foreign investments
were not deterred.[78] Again, for whatever is the purpose of the 60-month amortization, this
involves executive economic policy and legislative wisdom in which the Court cannot
intervene.
With regard to the 5% creditable withholding tax imposed on payments made by the
government for taxable transactions, Section 12 of R.A. No. 9337, which amended Section 114
of the NIRC, reads:
SEC. 114. Return and Payment of Value-added Tax.
(C) Withholding of Value-added Tax. The Government or any of its political subdivisions,
instrumentalities or agencies, including government-owned or controlled corporations (GOCCs)
shall, before making payment on account of each purchase of goods and services which are
subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and
withhold a final value-added tax at the rate of five percent (5%) of the gross payment thereof:
Provided, That the payment for lease or use of properties or property rights to nonresident
owners shall be subject to ten percent (10%) withholding tax at the time of payment. For
purposes of this Section, the payor or person in control of the payment shall be considered as the
withholding agent.
The value-added tax withheld under this Section shall be remitted within ten (10) days
following the end of the month the withholding was made.

Section 114(C) merely provides a method of collection, or as stated by respondents, a

more simplified VAT withholding system. The government in this case is constituted as a
withholding agent with respect to their payments for goods and services.
Prior to its amendment, Section 114(C) provided for different rates of value-added taxes
to be withheld -- 3% on gross payments for purchases of goods; 6% on gross payments for
services supplied by contractors other than by public works contractors; 8.5% on gross
payments for services supplied by public work contractors; or 10% on payment for the lease or
use of properties or property rights to nonresident owners. Under the present Section 114(C),
these different rates, except for the 10% on lease or property rights payment to nonresidents,
were deleted, and a uniform rate of 5% is applied.
The Court observes, however, that the law the used the word final. In tax usage, final, as
opposed to creditable, means full. Thus, it is provided in Section 114(C): final value-added tax
at the rate of five percent (5%).
In Revenue Regulations No. 02-98, implementing R.A. No. 8424 (The Tax Reform Act of
1997), the concept of final withholding tax on income was explained, to wit:
SECTION 2.57. Withholding of Tax at Source

(A) Final Withholding Tax. Under the final withholding tax system the amount of income
tax withheld by the withholding agent is constituted as full and final payment of the income tax
due from the payee on the said income. The liability for payment of the tax rests primarily on the
payor as a withholding agent. Thus, in case of his failure to withhold the tax or in case of
underwithholding, the deficiency tax shall be collected from the payor/withholding agent.
(B) Creditable Withholding Tax. Under the creditable withholding tax system, taxes
withheld on certain income payments are intended to equal or at least approximate the tax due of
the payee on said income. Taxes withheld on income payments covered by the expanded
withholding tax (referred to in Sec. 2.57.2 of these regulations) and compensation income
(referred to in Sec. 2.78 also of these regulations) are creditable in nature.

As applied to value-added tax, this means that taxable transactions with the government
are subject to a 5% rate, which constitutes as full payment of the tax payable on the transaction.
This represents the net VAT payable of the seller. The other 5% effectively accounts for the
standard input VAT (deemed input VAT), in lieu of the actual input VAT directly or attributable
to the taxable transaction.[79]
The Court need not explore the rationale behind the provision. It is clear that Congress
intended to treat differently taxable transactions with the government. [80] This is supported by
the fact that under the old provision, the 5% tax withheld by the government remains creditable
against the tax liability of the seller or contractor, to wit:
SEC. 114. Return and Payment of Value-added Tax.
(C) Withholding of Creditable Value-added Tax. The Government or any of its
political subdivisions, instrumentalities or agencies, including government-owned or controlled
corporations (GOCCs) shall, before making payment on account of each purchase of goods from
sellers and services rendered by contractors which are subject to the value-added tax imposed in
Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of
three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross
receipts for services rendered by contractors on every sale or installment payment which shall
be creditable against the value-added tax liability of the seller or contractor: Provided,
however, That in the case of government public works contractors, the withholding rate shall be
eight and one-half percent (8.5%): Provided, further, That the payment for lease or use of
properties or property rights to nonresident owners shall be subject to ten percent (10%)
withholding tax at the time of payment. For this purpose, the payor or person in control of the
payment shall be considered as the withholding agent.
The valued-added tax withheld under this Section shall be remitted within ten (10) days
following the end of the month the withholding was made. (Emphasis supplied)

As amended, the use of the word final and the deletion of the word creditable exhibits
Congresss intention to treat transactions with the government differently. Since it has not been
shown that the class subject to the 5% final withholding tax has been unreasonably narrowed,
there is no reason to invalidate the provision. Petitioners, as petroleum dealers, are not the only
ones subjected to the 5% final withholding tax. It applies to all those who deal with the
government.
Moreover, the actual input tax is not totally lost or uncreditable, as petitioners
believe. Revenue Regulations No. 14-2005 or the Consolidated Value-Added Tax Regulations
2005 issued by the BIR, provides that should the actual input tax exceed 5% of gross payments,
the excess may form part of the cost. Equally, should the actual input tax be less than 5%, the
difference is treated as income.[81]

Petitioners also argue that by imposing a limitation on the creditable input tax, the
government gets to tax a profit or value-added even if there is no profit or value-added.
Petitioners stance is purely hypothetical, argumentative, and again, one-sided. The Court
will not engage in a legal joust where premises are what ifs, arguments, theoretical and facts,
uncertain. Any disquisition by the Court on this point will only be, as Shakespeare describes life
in Macbeth,[82] full of sound and fury, signifying nothing.
Whats more, petitioners contention assumes the proposition that there is no profit or
value-added. It need not take an astute businessman to know that it is a matter of exception that
a business will sell goods or services without profit or value-added. It cannot be overstressed
that a business is created precisely for profit.
The equal protection clause under the Constitution means that no person or class of
persons shall be deprived of the same protection of laws which is enjoyed by other persons or
other classes in the same place and in like circumstances.[83]
The power of the State to make reasonable and natural classifications for the purposes of
taxation has long been established. Whether it relates to the subject of taxation, the kind of
property, the rates to be levied, or the amounts to be raised, the methods of assessment,
valuation and collection, the States power is entitled to presumption of validity. As a rule, the
judiciary will not interfere with such power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.[84]
Petitioners point out that the limitation on the creditable input tax if the entity has a high
ratio of input tax, or invests in capital equipment, or has several transactions with the
government, is not based on real and substantial differences to meet a valid classification.
The argument is pedantic, if not outright baseless. The law does not make any
classification in the subject of taxation, the kind of property, the rates to be levied or the
amounts to be raised, the methods of assessment, valuation and collection. Petitioners alleged
distinctions are based on variables that bear different consequences. While the implementation
of the law may yield varying end results depending on ones profit margin and value-added, the
Court cannot go beyond what the legislature has laid down and interfere with the affairs of
business.
The equal protection clause does not require the universal application of the laws on all
persons or things without distinction. This might in fact sometimes result in unequal protection.
What the clause requires is equality among equals as determined according to a valid
classification. By classification is meant the grouping of persons or things similar to each other
in certain particulars and different from all others in these same particulars.[85]
Petitioners brought to the Courts attention the introduction of Senate Bill No. 2038 by
Sens. S.R. Osmea III and Ma. Ana Consuelo A.S. Madrigal on June 6, 2005, and House Bill No.
4493 by Rep. Eric D. Singson. The proposed legislation seeks to amend the 70% limitation by
increasing the same to 90%. This, according to petitioners, supports their stance that the 70%
limitation is arbitrary and confiscatory. On this score, suffice it to say that these are still
proposed legislations. Until Congress amends the law, and absent any unequivocal basis for its
unconstitutionality, the 70% limitation stays.
B. Uniformity and Equitability of Taxation

Article VI, Section 28(1) of the Constitution reads:

The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.

Uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. Different articles may be taxed at different amounts
provided that the rate is uniform on the same class everywhere with all people at all times.[86]
In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%)
on all goods and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107
and 108, respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and
properties, importation of goods, and sale of services and use or lease of properties. These same
sections also provide for a 0% rate on certain sales and transaction.
Neither does the law make any distinction as to the type of industry or trade that will bear
the 70% limitation on the creditable input tax, 5-year amortization of input tax paid on purchase
of capital goods or the 5% final withholding tax by the government. It must be stressed that the
rule of uniform taxation does not deprive Congress of the power to classify subjects of taxation,
and only demands uniformity within the particular class.[87]
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT
rate of 0% or 10% (or 12%) does not apply to sales of goods or services with gross annual sales
or receipts not exceeding P1,500,000.00.[88] Also, basic marine and agricultural food products in
their original state are still not subject to the tax, [89] thus ensuring that prices at the grassroots
level will remain accessible. As was stated in Kapatiran ng mga Naglilingkod sa Pamahalaan
ng Pilipinas, Inc. vs. Tan:[90]
The disputed sales tax is also equitable. It is imposed only on sales of goods or services
by persons engaged in business with an aggregate gross annual sales exceeding P200,000.00.
Small corner sari-sari stores are consequently exempt from its application. Likewise exempt
from the tax are sales of farm and marine products, so that the costs of basic food and other
necessities, spared as they are from the incidence of the VAT, are expected to be relatively lower
and within the reach of the general public.

It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins,
and unduly favors those with high profit margins. Congress was not oblivious to this. Thus, to
equalize the weighty burden the law entails, the law, under Section 116, imposed a 3%
percentage tax on VAT-exempt persons under Section 109(v), i.e., transactions with gross
annual sales and/or receipts not exceeding P1.5 Million. This acts as a equalizer because in
effect, bigger businesses that qualify for VAT coverage and VAT-exempt taxpayers stand on
equal-footing.
Moreover, Congress provided mitigating measures to cushion the impact of the
imposition of the tax on those previously exempt. Excise taxes on petroleum products [91] and
natural gas[92] were reduced. Percentage tax on domestic carriers was removed. [93] Power
producers are now exempt from paying franchise tax.[94]
Aside from these, Congress also increased the income tax rates of corporations, in order
to distribute the burden of taxation. Domestic, foreign, and non-resident corporations are now
subject to a 35% income tax rate, from a previous 32%. [95] Intercorporate dividends of nonresident foreign corporations are still subject to 15% final withholding tax but the tax credit

allowed on the corporations domicile was increased to 20%.[96] The Philippine Amusement and
Gaming Corporation (PAGCOR) is not exempt from income taxes anymore. [97] Even the sale by
an artist of his works or services performed for the production of such works was not spared.
All these were designed to ease, as well as spread out, the burden of taxation, which
would otherwise rest largely on the consumers. It cannot therefore be gainsaid that R.A. No.
9337 is equitable.
C.

Progressivity of Taxation

Lastly, petitioners contend that the limitation on the creditable input tax is anything but
regressive. It is the smaller business with higher input tax-output tax ratio that will suffer the
consequences.
Progressive taxation is built on the principle of the taxpayers ability to pay. This principle
was also lifted from Adam Smiths Canons of Taxation, and it states:
I. The subjects of every state ought to contribute towards the support of the government, as
nearly as possible, in proportion to their respective abilities; that is, in proportion to the
revenue which they respectively enjoy under the protection of the state.

Taxation is progressive when its rate goes up depending on the resources of the person
affected.[98]
The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The
principle of progressive taxation has no relation with the VAT system inasmuch as the VAT paid
by the consumer or business for every goods bought or services enjoyed is the same regardless
of income. In
other words, the VAT paid eats the same portion of an income, whether big or small. The
disparity lies in the income earned by a person or profit margin marked by a business, such that
the higher the income or profit margin, the smaller the portion of the income or profit that is
eaten by VAT. A converso, the lower the income or profit margin, the bigger the part that the
VAT eats away. At the end of the day, it is really the lower income group or businesses with
low-profit margins that is always hardest hit.
Nevertheless, the Constitution does not really prohibit the imposition of indirect taxes,
like the VAT. What it simply provides is that Congress shall "evolve a progressive system of
taxation." The Court stated in the Tolentino case, thus:
The Constitution does not really prohibit the imposition of indirect taxes which, like the
VAT, are regressive. What it simply provides is that Congress shall evolve a progressive system
of taxation. The constitutional provision has been interpreted to mean simply that direct taxes are
. . . to be preferred [and] as much as possible, indirect taxes should be minimized. (E.
FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed. 1977)) Indeed,
the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise,
sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with
the proclamation of Art. VIII, 17 (1) of the 1973 Constitution from which the present Art. VI, 28
(1) was taken. Sales taxes are also regressive.
Resort to indirect taxes should be minimized but not avoided entirely because it is
difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers'
ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition
by providing for zero rating of certain transactions (R.A. No. 7716, 3, amending 102 (b) of the
NIRC), while granting exemptions to other transactions. (R.A. No. 7716, 4 amending 103 of the
NIRC)[99]

CONCLUSION
It has been said that taxes are the lifeblood of the government. In this case, it is just an
enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor
is it turning a deaf ear on the plight of the masses. But it does not have the panacea for the
malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as
unconstitutional simply because of its yokes.
Let us not be overly influenced by the plea that for every wrong there is a remedy, and
that the judiciary should stand ready to afford relief. There are undoubtedly many wrongs the
judicature may not correct, for instance, those involving political questions. . . .
Let us likewise disabuse our minds from the notion that the judiciary is the repository of
remedies for all political or social ills; We should not forget that the Constitution has judiciously
allocated the powers of government to three distinct and separate compartments; and that judicial
interpretation has tended to the preservation of the independence of the three, and a zealous
regard of the prerogatives of each, knowing full well that one is not the guardian of the others
and that, for official wrong-doing, each may be brought to account, either by impeachment, trial
or by the ballot box.[100]

The words of the Court in Vera vs. Avelino[101] holds true then, as it still holds true now.
All things considered, there is no raison d'tre for the unconstitutionality of R.A. No. 9337.
WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R.
Nos. 168056, 168207, 168461, 168463, and 168730, are hereby DISMISSED.
There being no constitutional impediment to the full enforcement and implementation of
R.A. No. 9337, the temporary restraining order issued by the Court on July 1, 2005
is LIFTED upon finality of herein decision.
SO ORDERED.

EN BANC

[G.R. No. 138810. September 29, 2004]

BATANGAS CATV, INC., petitioner, vs. THE COURT OF APPEALS, THE

BATANGAS CITY SANGGUNIANG PANLUNGSOD and BATANGAS CITY
MAYOR, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:

In the late 1940s, John Walson, an appliance dealer in Pennsylvania, suffered a decline in the
sale of television (tv) sets because of poor reception of signals in his community. Troubled, he built an
antenna on top of a nearby mountain. Using coaxial cable lines, he distributed the tv signals from the
antenna to the homes of his customers. Walsons innovative idea improved his sales and at the same
time gave birth to a new telecommunication system -- the Community Antenna Television (CATV) or
Cable Television.
[1]

This technological breakthrough found its way in our shores and, like in its country of origin, it
spawned legal controversies, especially in the field of regulation. The case at bar is just another
occasion to clarify a shady area. Here, we are tasked to resolve the inquiry -- may a local government
unit (LGU) regulate the subscriber rates charged by CATV operators within its territorial jurisdiction?
This is a petition for review on certiorari filed by Batangas CATV, Inc. (petitioner herein) against
the Sangguniang Panlungsod and the Mayor of Batangas City (respondents herein) assailing the
Court of Appeals (1) Decision dated February 12, 1999 and (2) Resolution dated May 26, 1999, in
CA-G.R. CV No. 52361. The Appellate Court reversed and set aside the Judgment dated October
29, 1995 of the Regional Trial Court (RTC), Branch 7, Batangas City in Civil Case No. 4254, holding
that neither of the respondents has the power to fix the subscriber rates of CATV operators, such
being outside the scope of the LGUs power.
[2]

[3]

[4]

[5]

[6]

The antecedent facts are as follows:

On July 28, 1986, respondent Sangguniang Panlungsod enacted Resolution No. 210 granting
petitioner a permit to construct, install, and operate a CATV system in Batangas City. Section 8 of the
Resolution provides that petitioner is authorized to charge its subscribers the maximum rates
specified therein, provided, however, that any increase of rates shall be subject to the approval of
the Sangguniang Panlungsod.
[7]

[8]

Sometime in November 1993, petitioner increased its subscriber rates from P88.00 to P180.00
per month. As a result, respondent Mayor wrote petitioner a letter threatening to cancel its permit
unless it secures the approval of respondent Sangguniang Panlungsod, pursuant to Resolution No.
210.
[9]

Petitioner then filed with the RTC, Branch 7, Batangas City, a petition for injunction docketed as
Civil Case No. 4254. It alleged that respondentSangguniang Panlungsod has no authority to regulate
the subscriber rates charged by CATV operators because under Executive Order No. 205, the
National Telecommunications Commission (NTC) has the sole authority to regulate the CATV
operation in the Philippines.
On October 29, 1995, the trial court decided in favor of petitioner, thus:

WHEREFORE, as prayed for, the defendants, their representatives, agents, deputies or other
persons acting on their behalf or under their instructions, are hereby enjoined from canceling
plaintiffs permit to operate a Cable Antenna Television (CATV) system in the City of
Batangas or its environs or in any manner, from interfering with the authority and power of
the National Telecommunications Commission to grant franchises to operate CATV systems
to qualified applicants, and the right of plaintiff in fixing its service rates which needs no
prior approval of the Sangguniang Panlungsod of Batangas City.
The counterclaim of the plaintiff is hereby dismissed. No pronouncement as to costs.
IT IS SO ORDERED.

[10]

The trial court held that the enactment of Resolution No. 210 by respondent violates the States
deregulation policy as set forth by then NTC Commissioner Jose Luis A. Alcuaz in his Memorandum
dated August 25, 1989. Also, it pointed out that the sole agency of the government which can regulate

CATV operation is the NTC, and that the LGUs cannot exercise regulatory power over it without
appropriate legislation.
Unsatisfied, respondents elevated the case to the Court of Appeals, docketed as CA-G.R. CV No.
52361.
On February 12, 1999, the Appellate Court reversed and set aside the trial courts Decision,
ratiocinating as follows:

Although the Certificate of Authority to operate a Cable Antenna Television (CATV) System
is granted by the National Telecommunications Commission pursuant to Executive Order No.
205, this does not preclude the Sangguniang Panlungsod from regulating the operation of the
CATV in their locality under the powers vested upon it by Batas Pambansa Bilang 337,
otherwise known as the Local Government Code of 1983. Section 177 (now Section 457
paragraph 3 (ii) of Republic Act 7160) provides:
Section 177. Powers and Duties The Sangguniang Panlungsod shall:
a) Enact such ordinances as may be necessary to carry into effect and discharge the responsibilities
conferred upon it by law, and such as shall be necessary and proper to provide for health and safety,
comfort and convenience, maintain peace and order, improve the morals, and promote the
prosperity and general welfare of the community and the inhabitants thereof, and the protection of
property therein;
xxx
d) Regulate, fix the license fee for, and tax any business or profession being carried on and
exercised within the territorial jurisdiction of the city, except travel agencies, tourist guides,
tourist transports, hotels, resorts, de luxe restaurants, and tourist inns of international
standards which shall remain under the licensing and regulatory power of the Ministry of
Tourism which shall exercise such authority without infringement on the taxing and
regulatory powers of the city government;
Under cover of the General Welfare Clause as provided in this section, Local Government Units
can perform just about any power that will benefit their constituencies. Thus, local government
units can exercise powers that are: (1) expressly granted; (2) necessarily implied from the power
that is expressly granted; (3)necessary, appropriate or incidental for its efficient and effective
governance; and (4) essential to the promotion of the general welfare of their inhabitants.
(Pimentel, The Local Government Code of 1991, p. 46)
Verily, the regulation of businesses in the locality is expressly provided in the Local
Government Code. The fixing of service rates is lawful under the General Welfare Clause.
Resolution No. 210 granting appellee a permit to construct, install and operate a community
antenna television (CATV) system in Batangas City as quoted earlier in this decision, authorized
the grantee to impose charges which cannot be increased except upon approval of the Sangguniang
Bayan. It further provided that in case of violation by the grantee of the terms and
conditions/requirements specifically provided therein, the City shall have the right to withdraw the
franchise.
Appellee increased the service rates from EIGHTY EIGHT PESOS (P88.00) to ONE HUNDRED
EIGHTY PESOS (P180.00) (Records, p. 25) without the approval of appellant. Such act breached
Resolution No. 210 which gives appellant the right to withdraw the permit granted to
appellee.
[11]

Petitioner filed a motion for reconsideration but was denied.

[12]

Hence, the instant petition for review on certiorari anchored on the following assignments of error:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE GENERAL WELFARE

CLAUSE OF THE LOCAL GOVERNMENT CODE AUTHORIZES RESPONDENT
SANGGUNIANG PANLUNGSOD TO EXERCISE THE REGULATORY FUNCTION
SOLELY LODGED WITH THE NATIONAL TELECOMMUNICATIONS COMMISSION
UNDER EXECUTIVE ORDER NO. 205, INCLUDING THE AUTHORITY TO FIX
AND/OR APPROVE THE SERVICE RATES OF CATV OPERATORS; AND
II

THE COURT OF APPEALS ERRED IN REVERSING THE DECISION APPEALED FROM

AND DISMISSING PETITIONERS COMPLAINT.
[13]

Petitioner contends that while Republic Act No. 7160, the Local Government Code of 1991,
extends to the LGUs the general power to perform any act that will benefit their constituents,
nonetheless, it does not authorize them to regulate the CATV operation. Pursuant to E.O. No. 205,
only the NTC has the authority to regulate the CATV operation, including the fixing of subscriber
rates.
Respondents counter that the Appellate Court did not commit any reversible error in rendering the
assailed Decision. First, Resolution No. 210 was enacted pursuant to Section 177(c) and (d) of Batas
Pambansa Bilang 337, the Local Government Code of 1983, which authorizes LGUs to regulate
businesses. The term businesses necessarily includes the CATV industry. And second, Resolution
No. 210 is in the nature of a contract between petitioner and respondents, it being a grant to the
former of a franchise to operate a CATV system. To hold that E.O. No. 205 amended its terms would
violate the constitutional prohibition against impairment of contracts.
[14]

The petition is impressed with merit.

Earlier, we posed the question -- may a local government unit (LGU) regulate the subscriber rates
charged by CATV operators within its territorial jurisdiction? A review of pertinent laws and
jurisprudence yields a negative answer.
President Ferdinand E. Marcos was the first one to place the CATV industry under the regulatory
power of the national government. On June 11, 1978, he issued Presidential Decree (P.D.) No.
1512 establishing a monopoly of the industry by granting Sining Makulay, Inc., an exclusive
franchise to operate CATV system in any place within the Philippines. Accordingly, it terminated all
franchises, permits or certificates for the operation of CATV system previously granted by
local governments or by any instrumentality or agency of the national government. Likewise, it
prescribed the subscriber rates to be charged by Sining Makulay, Inc. to its customers.
[15]

[16]

[17]

[18]

On July 21, 1979, President Marcos issued Letter of Instruction (LOI) No. 894 vesting upon the
Chairman of the Board of Communications direct supervision over the operations of Sining Makulay,
Inc. Three days after, he issued E.O. No. 546 integrating the Board of Communications and the
Telecommunications Control Bureau to form a single entity to be known as the National
Telecommunications Commission. Two of its assigned functions are:
[19]

[20]

[21]

a. Issue Certificate of Public Convenience for the operation of communications utilities and
services, radio communications systems, wire or wireless telephone or telegraph systems, radio
and television broadcasting system and other similar public utilities;
b. Establish, prescribe and regulate areas of operation of particular operators of public
service communications; and determine and prescribe charges or rates pertinent to the
operation of such public utility facilities and services except in cases where charges or rates are
established by international bodies or associations of which the Philippines is a participating
member or by bodies recognized by the Philippine Government as the proper arbiter of such
charges or rates;
Although Sining Makulay Inc.s exclusive franchise had a life term of 25 years, it was cut short by
the advent of the 1986 Revolution. Upon President Corazon C. Aquinos assumption of power, she
issued E.O. No. 205 opening the CATV industry to all citizens of the Philippines. It mandated the
[22]

NTC to grant Certificates of Authority to CATV operators and to issue the necessary
implementing rules and regulations.
On September 9, 1997, President Fidel V. Ramos issued E.O. No. 436 prescribing policy
guidelines to govern CATV operation in the Philippines. Cast in more definitive terms, it restated the
NTCs regulatory powers over CATV operations, thus:
[23]

SECTION 2. The regulation and supervision of the cable television industry in the Philippines
shall remain vested solely with the National Telecommunications Commission (NTC).
SECTION 3. Only persons, associations, partnerships, corporations or cooperatives, granted
a Provisional Authority or Certificate of Authority by the Commission may install, operate and
maintain a cable television system or render cable television service within a service area.
Clearly, it has been more than two decades now since our national government, through the NTC,
assumed regulatory power over the CATV industry. Changes in the political arena did not alter the
trend. Instead, subsequent presidential issuances further reinforced the NTCs power. Significantly,
President Marcos and President Aquino, in the exercise of their legislative power, issued P.D. No.
1512, E.O. No. 546 and E.O. No. 205. Hence, they have the force and effect of statutes or laws
passed by Congress. That the regulatory power stays with the NTC is also clear from President
Ramos E.O. No. 436 mandating that the regulation and supervision of the CATV industry shall remain
vested solely in the NTC. Blacks Law Dictionary defines sole as without another or others. The
logical conclusion, therefore, is that in light of the above laws and E.O. No. 436, the NTC
exercises regulatory power over CATV operators to the exclusion of other bodies.
[24]

[25]

But, lest we be misunderstood, nothing herein should be interpreted as to strip LGUs of their
general power to prescribe regulations under the general welfare clause of the Local Government
Code. It must be emphasized that when E.O. No. 436 decrees that the regulatory power shall be
vested solely in the NTC, it pertains to the regulatory power over those matters which are peculiarly
within the NTCs competence, such as, the: (1)determination of rates, (2) issuance of certificates of
authority, (3) establishment of areas of operation, (4) examination and assessment of the legal,
technical and financial qualifications of applicant operators, (5) granting of permits for the use of
frequencies, (6) regulation of ownership and operation, (7) adjudication of issues arising from its
functions, and (8) other similar matters. Within these areas, the NTC reigns supreme as it
possesses the exclusive power to regulate -- a power comprising varied acts, such as to fix, establish,
or control; to adjust by rule, method or established mode; to direct by rule or restriction; or to subject
to governing principles or laws.
[26]

[27]

Coincidentally, respondents justify their exercise of regulatory power over petitioners CATV
operation under the general welfare clause of the Local Government Code of 1983. The Court of
Appeals sustained their stance.
There is no dispute that respondent Sangguniang Panlungsod, like other local legislative bodies,
has been empowered to enact ordinances and approve resolutions under the general welfare clause
of B.P. Blg. 337, the Local Government Code of 1983. That it continues to posses such power is clear
under the new law, R.A. No. 7160 (the Local Government Code of 1991). Section 16 thereof provides:

SECTION 16. General Welfare. Every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental
for its efficient and effective governance, and those which are essential to the promotion of the
general welfare. Within their respective territorial jurisdictions, local government units shall
ensure and support, among others, the preservation and enrichment of culture, promote health and
safety, enhance the right of the people to a balanced ecology, encourage and support the
development of appropriate and self-reliant, scientific and technological capabilities, improve
public morals, enhance economic prosperity and social justice, promote full employment among
their residents, maintain peace and order, and preserve the comfort and convenience of their
inhabitants.
In addition, Section 458 of the same Code specifically mandates:

SECTION 458. Powers, Duties, Functions and Compensation. (a) The Sangguniang Panlungsod,
as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate

funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this
Code and in the proper exercise of the corporate powers of the city as provided for under Section
22 of this Code, x x x:
The general welfare clause is the delegation in statutory form of the police power of the
State to LGUs. Through this, LGUs may prescribe regulations to protect the lives, health, and
property of their constituents and maintain peace and order within their respective territorial
jurisdictions. Accordingly, we have upheld enactments providing, for instance, the regulation of
gambling, the occupation of rig drivers, the installation and operation of pinball machines, the
maintenance and operation of cockpits, the exhumation and transfer of corpses from public burial
grounds, and the operation of hotels, motels, and lodging houses as valid exercises by local
legislatures of the police power under the general welfare clause.
[28]

[29]

[30]

[31]

[32]

[33]

[34]

Like any other enterprise, CATV operation maybe regulated by LGUs under the general welfare
clause. This is primarily because the CATV system commits the indiscretion of crossing public
properties. (It uses public properties in order to reach subscribers.) The physical realities of
constructing CATV system the use of public streets, rights of ways, the founding of
structures, and the parceling of large regions allow an LGU a certain degree of regulation over
CATV operators. This is the same regulation that it exercises over all private enterprises within its
territory.
[35]

But, while we recognize the LGUs power under the general welfare clause, we cannot sustain
Resolution No. 210. We are convinced that respondents strayed from the well recognized limits of its
power. The flaws in Resolution No. 210 are: (1) it violates the mandate of existing laws and (2) it
violates the States deregulation policy over the CATV industry.
I.

Resolution No. 210 is an enactment of an LGU acting only as agent of the national legislature.
Necessarily, its act must reflect and conform to the will of its principal. To test its validity, we must
apply the particular requisites of a valid ordinance as laid down by the accepted principles governing
municipal corporations.
[36]

Speaking for the Court in the leading case of United States vs. Abendan, Justice Moreland said:
An ordinance enacted by virtue of the general welfare clause is valid, unless it contravenes the
fundamental law of the Philippine Islands, or an Act of the Philippine Legislature, or unless it is
against public policy, or is unreasonable, oppressive, partial, discriminating, or in derogation of
common right. In De la Cruz vs. Paraz, we laid the general rule that ordinances passed by virtue of
the implied power found in the general welfare clause must be reasonable, consonant with the
general powers and purposes of the corporation, and not inconsistent with the laws or policy of
the State.
[37]

[38]

The apparent defect in Resolution No. 210 is that it contravenes E.O. No. 205 and E.O. No. 436
insofar as it permits respondent Sangguniang Panlungsod to usurp a power exclusively vested in the
NTC, i.e., the power to fix the subscriber rates charged by CATV operators. As earlier discussed, the
fixing of subscriber rates is definitely one of the matters within the NTCs exclusive domain.
In this regard, it is appropriate to stress that where the state legislature has made provision for
the regulation of conduct, it has manifested its intention that the subject matter shall be fully covered
by the statute, and that a municipality, under its general powers, cannot regulate the same conduct.
In Keller vs. State, it was held that: Where there is no express power in the charter of a
municipality authorizing it to adopt ordinances regulating certain matters which are
specifically covered by a general statute, a municipal ordinance, insofar as it attempts to
regulate the subject which is completely covered by a general statute of the legislature, may
be rendered invalid. x x x Where the subject is of statewide concern, and the legislature has
appropriated the field and declared the rule, its declaration is binding throughout the State. A
reason advanced for this view is that such ordinances are in excess of the powers granted to the
municipal corporation.
[39]

[40]

[41]

Since E.O. No. 205, a general law, mandates that the regulation of CATV operations shall be
exercised by the NTC, an LGU cannot enact an ordinance or approve a resolution in violation of the
said law.
It is a fundamental principle that municipal ordinances are inferior in status and subordinate to the
laws of the state. An ordinance in conflict with a state law of general character and statewide
application is universally held to be invalid. The principle is frequently expressed in the declaration
[42]

that municipal authorities, under a general grant of power, cannot adopt ordinances which infringe the
spirit of a state law or repugnant to the general policy of the state. In every power to pass
ordinances given to a municipality, there is an implied restriction that the ordinances shall be
consistent with the general law. In the language of Justice Isagani Cruz (ret.), this Court,
in Magtajas vs. Pryce Properties Corp., Inc., ruled that:
[43]

[44]

[45]

The rationale of the requirement that the ordinances should not contravene a statute is obvious.
Municipal governments are only agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts of Congress, from which they
have derived their power in the first place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly from the
legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so
it may destroy. As it may destroy, it may abridge and control. Unless there is some constitutional
limitation on the right, the legislature might, by a single act, and if we can suppose it capable of so
great a folly and so great a wrong, sweep from existence all of the municipal corporations in the
State, and the corporation could not prevent it. We know of no limitation on the right so far as to the
corporation themselves are concerned. They are, so to phrase it, the mere tenants at will of the
legislature.
This basic relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy.
Without meaning to detract from that policy, we here confirm that Congress retains control of the
local government units although in significantly reduced degree now than under our previous
Constitutions. The power to create still includes the power to destroy. The power to grant still
includes the power to withhold or recall. True, there are certain notable innovations in the
Constitution, like the direct conferment on the local government units of the power to tax, which
cannot now be withdrawn by mere statute. By and large, however, the national legislature is still
the principal of the local government units, which cannot defy its will or modify or violate it.
Respondents have an ingenious retort against the above disquisition. Their theory is that the
regulatory power of the LGUs is granted by R.A. No. 7160 (the Local Government Code of 1991), a
handiwork of the national lawmaking authority. They contend that R.A. No. 7160 repealed E.O. No.
205 (issued by President Aquino). Respondents argument espouses a bad precedent. To say that
LGUs exercise the same regulatory power over matters which are peculiarly within the NTCs
competence is to promote a scenario of LGUs and the NTC locked in constant clash over the
appropriate regulatory measure on the same subject matter. LGUs must recognize that technical
matters concerning CATV operation are within the exclusive regulatory power of the NTC.
At any rate, we find no basis to conclude that R.A. No. 7160 repealed E.O. No. 205, either
expressly or impliedly. It is noteworthy that R.A. No. 7160 repealing clause, which painstakingly
mentions the specific laws or the parts thereof which are repealed, does not include E.O. No. 205,
thus:

SECTION 534. Repealing Clause. (a) Batas Pambansa Blg. 337, otherwise known as the Local
Government Code." Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are
hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions,
memoranda and issuances related to or concerning the barangay are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund;
Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the Special Education Fund;
Presidential Decree No. 144 as amended by Presidential Decree Nos. 559 and 1741; Presidential
Decree No. 231 as amended; Presidential Decree No. 436 as amended by Presidential Decree No.

558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed
and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.
(e) The following provisions are hereby repealed or amended insofar as they are inconsistent with
the provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704; Section 12 of
Presidential Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of
Presidential Decree No. 463, as amended; and Section 16 of Presidential Decree No. 972, as
amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions
of this Code are hereby repealed or modified accordingly.
Neither is there an indication that E.O. No. 205 was impliedly repealed by R.A. No. 7160. It is a
settled rule that implied repeals are not lightly presumed in the absence of a clear and unmistakable
showing of such intentions. In Mecano vs. Commission on Audit, we ruled:
[46]

Repeal by implication proceeds on the premise that where a statute of later date clearly reveals an
intention on the part of the legislature to abrogate a prior act on the subject, that intention must be
given effect. Hence, before there can be a repeal, there must be a clear showing on the part of the
lawmaker that the intent in enacting the new law was to abrogate the old one. The intention to
repeal must be clear and manifest; otherwise, at least, as a general rule, the later act is to be
construed as a continuation of, and not a substitute for, the first act and will continue so far as the
two acts are the same from the time of the first enactment.
As previously stated, E.O. No. 436 (issued by President Ramos) vests upon the NTC the power
to regulate the CATV operation in this country. So also Memorandum Circular No. 8-9-95, the
Implementing Rules and Regulations of R.A. No. 7925 (the Public Telecommunications Policy Act of
the Philippines). This shows that the NTCs regulatory power over CATV operation is continuously
recognized.
It is a canon of legal hermeneutics that instead of pitting one statute against another in an
inevitably destructive confrontation, courts must exert every effort to reconcile them, remembering
that both laws deserve a becoming respect as the handiwork of coordinate branches of the
government. On the assumption of a conflict between E.O. No. 205 and R.A. No. 7160, the proper
action is not to uphold one and annul the other but to give effect to both by harmonizing them if
possible. This recourse finds application here. Thus, we hold that the NTC, under E.O. No. 205, has
exclusive jurisdiction over matters affecting CATV operation, including specifically the fixing of
subscriber rates, but nothing herein precludes LGUs from exercising its general power, under R.A.
No. 7160, to prescribe regulations to promote the health, morals, peace, education, good order or
safety and general welfare of their constituents. In effect, both laws become equally effective and
mutually complementary.
[47]

The grant of regulatory power to the NTC is easily understandable. CATV system is not a mere
local concern. The complexities that characterize this new technology demand that it be regulated by
a specialized agency. This is particularly true in the area of rate-fixing. Rate fixing involves a series of
technical operations. Consequently, on the hands of the regulatory body lies the ample discretion in
the choice of such rational processes as might be appropriate to the solution of its highly complicated
and technical problems. Considering that the CATV industry is so technical a field, we believe that the
NTC, a specialized agency, is in a better position than the LGU, to regulate it. Notably, in United
States vs. Southwestern Cable Co., the US Supreme Court affirmed the Federal Communications
Commissions (FCCs) jurisdiction over CATV operation. The Court held that the FCCs authority over
cable systems assures the preservation of the local broadcast service and an equitable distribution of
broadcast services among the various regions of the country.
[48]

[49]

II.

Resolution No. 210 violated the States deregulation policy.

Deregulation is the reduction of government regulation of business to permit freer markets and
competition. Oftentimes, the State, through its regulatory agencies, carries out a policy of
deregulation to attain certain objectives or to address certain problems. In the field of
telecommunications, it is recognized that many areas in the Philippines are still unserved or
underserved. Thus, to encourage private sectors to venture in this field and be partners of the
government in stimulating the growth and development of telecommunications, the State promoted
the policy of deregulation.
[50]

In the United States, the country where CATV originated, the Congress observed, when it
adopted the Telecommunications Act of 1996, that there was a need to provide a pro-competitive,
deregulatory national policy framework designed to accelerate rapidly private sector deployment of
advanced telecommunications and information technologies and services to all Americans by opening
all telecommunications markets to competition. The FCC has adopted regulations to implement the
requirements of the 1996 Act and the intent of the Congress.
Our country follows the same policy. The fifth Whereas Clause of E.O. No. 436 states:

WHEREAS, professionalism and self-regulation among existing operators, through a nationally

recognized cable television operators association, have enhanced the growth of the cable television
industry and must therefore be maintained along with minimal reasonable government
regulations;
This policy reaffirms the NTCs mandate set forth in the Memorandum dated August 25, 1989 of
Commissioner Jose Luis A. Alcuaz, to wit:

In line with the purpose and objective of MC 4-08-88, Cable Television System or Community
Antenna Television (CATV) is made part of the broadcast media to promote the orderly growth of
the Cable Television Industry it being in its developing stage. Being part of the Broadcast Media,
the service rates of CATV are likewise considered deregulated in accordance with MC 06-2-81
dated 25 February 1981, the implementing guidelines for the authorization and operation of
Radio and Television Broadcasting stations/systems.
Further, the Commission will issue Provisional Authority to existing CATV operators to authorize
their operations for a period of ninety (90) days until such time that the Commission can issue the
regular Certificate of Authority.
When the State declared a policy of deregulation, the LGUs are bound to follow. To rule otherwise
is to render the States policy ineffective. Being mere creatures of the State, LGUs cannot defeat
national policies through enactments of contrary measures. Verily, in the case at bar, petitioner may
increase its subscriber rates without respondents approval.
At this juncture, it bears emphasizing that municipal corporations are bodies politic and corporate,
created not only as local units of local self-government, but as governmental agencies of the state.
The legislature, by establishing a municipal corporation, does not divest the State of any of its
sovereignty; absolve itself from its right and duty to administer the public affairs of the entire state; or
divest itself of any power over the inhabitants of the district which it possesses before the charter was
granted.
[51]

[52]

Respondents likewise argue that E.O. No. 205 violates the constitutional prohibition against
impairment of contracts, Resolution No. 210 of Batangas City Sangguniang Panlungsod being a grant
of franchise to petitioner.
We are not convinced.
There is no law specifically authorizing the LGUs to grant franchises to operate CATV system.
Whatever authority the LGUs had before, the same had been withdrawn when President Marcos
issued P.D. No. 1512 terminating all franchises, permits or certificates for the operation of
CATV system previously granted by local governments. Today, pursuant to Section 3 of E.O. No.
436, only persons, associations, partnerships, corporations or cooperatives granted a
Provisional Authority or Certificate of Authority by the NTC may install, operate and maintain a
cable television system or render cable television service within a service area. It is clear that in
the absence of constitutional or legislative authorization, municipalities have no power to grant
franchises. Consequently, the protection of the constitutional provision as to impairment of the
[53]

obligation of a contract does not extend to privileges, franchises and grants given by a municipality in
excess of its powers, or ultra vires.
[54]

One last word. The devolution of powers to the LGUs, pursuant to the Constitutional mandate of
ensuring their autonomy, has bred jurisdictional tension between said LGUs and the State. LGUs
must be reminded that they merely form part of the whole. Thus, when the Drafters of the 1987
Constitution enunciated the policy of ensuring the autonomy of local governments, it was never their
intention to create an imperium in imperio and install an intra-sovereign political subdivision
independent of a single sovereign state.
[55]

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals dated
February 12, 1999 as well as its Resolution dated May 26, 1999 in CA-G.R. CV No. 52461, are
hereby REVERSED. The RTC Decision in Civil Case No. 4254 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

FIRST DIVISION

[G.R. No. 131082. June 19, 2000]

ROMULO, MABANTA, BUENAVENTURA, SAYOC & DE LOS ANGELES, petitioner,

vs. HOME DEVELOPMENT MUTUAL FUND, respondent.
DECISION
DAVIDE, JR., C.J.: CODES
Once again, this Court is confronted with the issue of the validity of the Amendments to the Rules and
Regulations Implementing Republic Act No. 7742, which require the existence of a plan providing for
both provident/retirement and housing benefits for exemption from the Pag~IBIG Fund coverage
under Presidential Decree No. 1752, as amended.
Pursuant to Section 19 of P.D. No. 1752, as amended by R.A. No. 7742, petitioner Romulo,
Mabanta, Buenaventura, Sayoc and De Los Angeles (hereafter PETITIONER), a law firm, was
exempted for the period 1 January to 31 December 1995 from the Pag~IBIG Fund coverage by
respondent Home Development Mutual Fund (hereafter HDMF) because of a superior retirement
plan.
[1]

[2]

On 1 September 1995, the HDMF Board of Trustees, pursuant to Section 5 of Republic Act No. 7742,
issued Board Resolution No. 1011, Series of 1995, amending and modifying the Rules and
Regulations Implementing R.A. No. 7742. As amended, Section 1 of Rule VII provides that for a
company to be entitled to a waiver or suspension of Fund coverage, it must have a plan providing for
both provident/ retirement and housing benefits superior to those provided under the Pag~IBIG Fund.
[3]

On 16 November 1995, PETITIONER filed with the respondent an application for Waiver or
Suspension of Fund Coverage because of its superior retirement plan. In support of said application,
PETITIONER submitted to the HDMF a letter explaining that the 1995 Amendments to the Rules are
invalid. Jksm
[4]

[5]

In a letter dated 18 March 1996, the President and Chief Executive Officer of HDMF disapproved
PETITIONER's application on the ground that the requirement that there should be both a provident
retirement fund and a housing plan is clear in the use of the phrase "and/or," and that the Rules
Implementing R.A. No. 7742 did not amend nor repeal Section 19 of P.D. No. 1752 but merely
implement the law.
[6]

PETITIONER's appeal with the HDMF Board of Trustees was denied for having been rendered moot
and academic by Board Resolution No. 1208, Series of 1996, removing the availment of waiver of the
mandatory coverage of the Pag~IBIG Fund, except for distressed employers.
[7]

[8]

On 31 March 1997, PETITIONER filed a petition for review before the Court of Appeals. On motion
by HDMF, the Court of Appeals dismissed the petition on the ground that the coverage of employers
and employees under the Home Development Mutual Fund is mandatory in character as clearly
worded in Section 4 of P.D. No. 1752, as amended by R.A. No. 7742. There is no allegation that
petitioner is a distressed employer to warrant its exemption from the Fund coverage. As to the
amendments to the Rules and Regulations Implementing R.A. No. 7742, the same are valid. Under
P.D. No. 1752 and R.A. No. 7742 the Board of Trustees of the HDMF is authorized to promulgate
rules and regulations, as well as amendments thereto, concerning the extension, waiver or
suspension of coverage under the Pag~IBIG Fund. And the publication requirement was amply met,
since the questioned amendments were published in the 21 October 1995 issue of the Philippine
Star, which is a newspaper of general circulation.
[9]

[10]

PETITIONER's motion for reconsideration was denied. Hence, on 6 November 1997,

PETITIONER filed a petition before this Court assailing the 1995 and the 1996 Amendments to the
Rules and Regulations Implementing Republic Act No. 7742 for being contrary to law. In support
thereof, PETITIONER contends that the subject 1995 Amendments issued by HDMF are inconsistent
with the enabling law, P.D. No. 1752, as amended by R.A. No. 7742, which merely requires as a
pre~condition for exemption from coverage the existence of either a superior provident/ retirement
plan or a superior housing plan, and not the concurrence of both plans. Hence, considering that
PETITIONER has a provident plan superior to that offered by the HDMF, it is entitled to exemption
from the coverage in accordance with Section 19 of P.D. No. 1752. The 1996 Amendment are also
[11]

[12]

void insofar as they abolished the exemption granted by Section 19 of P.D. 1752, as amended. The
repeal of such exemption involves the exercise of legislative power, which cannot be delegated to
HMDF. Kycalr
PETITIONER also cites Section 9 (1), Chapter 2, Book VII of the Administrative Code of 1987, which
provides:
SEC. 9. Public Participation ~~ (1) If not otherwise required by law, an agency shall, as
far as practicable, publish or circulate notices of proposed rules and afford interested
parties the opportunity to submit their views prior to the adoption of any rule.
Since the Amendments to the Rules and Regulations Implementing Republic Act No. 7742 involve an
imposition of an additional burden, a public hearing should have first been conducted to give chance
to the employers, like PETITIONER, to be heard before the HDMF adopted the said Amendments.
Absent such public hearing, the amendments should be voided.
Finally, PETITIONER contends that HDMF did not comply with Section 3, Chapter 2, Book VII of the
Administrative Code of 1987, which provides that "[e]very agency shall file with the University of the
Philippines Law Center three (3) certified copies of every rule adopted by it."
On the other hand, the HDMF contends that in promulgating the amendments to the rules and
regulations which require the existence of a plan providing for both provident and housing benefits for
exemption from the Fund Coverage, the respondent Board was merely exercising its rule-making
power under Section 13 of P.D. No. 1752. It had the option to use "and" only instead of "or" in the
rules on waiver in order to effectively implement the Pag-IBIG Fund Law. By choosing "and," the
Board has clarified the confusion brought about by the use of "and/or" in Section 19 of P.D. No. 1752,
as amended.
As to the public hearing, HDMF maintains that as can be clearly deduced from Section 9(1), Chapter
2, book VII of the Revised Administrative Code of 1987, public hearing is required only when the law
so provides, and if not, only if the same is practicable. It follows that public hearing is only optional or
discretionary on the part of the agency concerned, except when the same is required by law. P.D. No.
1752 does not require that pubic hearing be first conducted before the rules and regulations
implementing it would become valid and effective. What it requires is the publication of said rules and
regulations at least once in a newspaper of general circulation. Having published said 1995 and 1996
Amendments through the Philippine Star on 21 October 1995 and 15 November 1996,
respectively, HDMF has complied with the publication requirement.
[13]

[14]

Finally, HDMF claims that as early as 18 October 1996, it had already filed certified true copies of the
Amendments to the Rules and Regulations with the University of the Philippines Law Center. This fact
is evidenced by certified true copies of the Certification from the Office of the National Administrative
Register of the U.P. Law Center.
[15]

We find for the PETITIONER. Calrky

The issue of the validity of the 1995 Amendments to the Rules and Regulations Implementing R.A.
No. 7742, specifically Section I, Rule VII on Waiver and Suspension, has been squarely resolved in
the relatively recent case of China Banking Corp. v. The Members of the Board of Trustees of the
HDMF. We held in that case that Section 1 of Rule VII of the Amendments to the Rules and
Regulations Implementing R.A. No. 7742, and HDMF Circular No. 124~B prescribing the Revised
Guidelines and Procedure for Filing Application for Waiver or Suspension of Fund Coverage under
P.D. No. 1752, as amended by R.A. No. 7742, are null and void insofar as they require that an
employer should have both a provident/ retirement plan and a housing plan superior to the benefits
offered by the Fund in order to qualify for waiver or suspension of the Fund coverage. In arriving at
said conclusion, we ruled:
[16]

The controversy lies in the legal signification of the words "and/or."

In the instant case, the legal meaning of the words "and/or" should be taken in its
ordinary signification, i.e., "either and or; e.g. butter and/or eggs means butter and eggs
or butter or eggs.

"The term and/or means that the effect shall be given to both the
conjunctive "and" and the disjunctive "or"; or that one word or the other
may be taken accordingly as one or the other will best effectuate the
purpose intended by the legislature as gathered from the whole statute.
The term is used to avoid a construction which by the use of the
disjunctive "or" alone will exclude the combination of several of the
alternatives or by the use of the conjunctive "and" will exclude the efficacy
of any one of the alternatives standing alone."
It is accordingly ordinarily held that the intention of the legislature in using the term
"and/or" is that the word "and" and the word "or" are to be used interchangeably.
It ... seems to us clear from the language of the enabling law that Section 19 of P.D. No.
1752 intended that an employer with a provident plan or an employee housing plan
superior to that of the fund may obtain exemption from coverage. If the law had
intended that the employee [sic] should have both a superior provident plan and a
housing plan in order to qualify for exemption, it would have used the words "and"
instead of "and/or." Notably, paragraph (a) of Section 19 requires for annual certification
of waiver or suspension, that the features of the plan or plans are superior to the fund or
continue to be so. The law obviously contemplates that the existence of either plan is
considered as sufficient basis for the grant of an exemption; needless to state, the
concurrence of both plans is more than sufficient. To require the existence of both plans
would radically impose a more stringent condition for waiver which was not clearly
envisioned by the basic law. By removing the disjunctive word "or" in the implementing
rules the respondent Board has exceeded its authority. Slx
It is without doubt that the HDMF Board has rule~making power as provided in Section 5 of R.A. No.
7742 and Section 13 of P.D. No. 1752. However, it is well~settled that rules and regulations, which
are the product of a delegated power to create new and additional legal provisions that have the
effect of law, should be within the scope of the statutory authority granted by the legislature to the
administrative agency. It is required that the regulation be germane to the objects and purposes of
the law, and be not in contradiction to, but in conformity with, the standards prescribed by law.
[17]

[18]

[19]

[20]

In the present case, when the Board of Trustees of the HDMF required in Section 1, Rule VII of the
1995 Amendments to the Rules and Regulations Implementing R.A. No. 7742 that employers should
have both provident/retirement and housing benefits for all its employees in order to qualify for
exemption from the Fund, it effectively amended Section 19 of P.D. No. 1752. And when the Board
subsequently abolished that exemption through the 1996 Amendments, it repealed Section 19 of P.D.
No. 1752. Such amendment and subsequent repeal of Section 19 are both invalid, as they are not
within the delegated power of the Board. The HDMF cannot, in the exercise of its rule~making power,
issue a regulation not consistent with the law it seeks to apply. Indeed, administrative issuances must
not override, supplant or modify the law, but must remain consistent with the law they intend to carry
out. Only Congress can repeal or amend the law. Scslx
[21]

While it may be conceded that the requirement of having both plans to qualify for an exemption, as
well as the abolition of the exemption, would enhance the interest of the working group and further
strengthen the Home Development Mutual Fund in its pursuit of promoting public welfare through
ample social services as mandated by the Constitution, we are of the opinion that the basic law
should prevail. A department zeal may not be permitted to outrun the authority conferred by the
statute.
[22]

Considering the foregoing conclusions, it is unnecessary to dwell on the other issues raised.
WHEREFORE, the petition is GRANTED. The assailed decision of 31 July 1997 of the Court of
Appeals in CA~G.R. No. SP~43668 and its Resolution of 15 October 1997 are hereby REVERSED
and SET ASIDE. The disapproval by the Home Development Mutual Fund of the application of the
petitioner for waiver or suspension of Fund coverage is SET ASIDE, and the Home Development
Mutual Fund is hereby directed to refund to petitioner all sums of money it collected from the latter.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 94571

April 22, 1991

TEOFISTO T. GUINGONA, JR. and AQUILINO Q. PIMENTEL, JR., petitioners,

vs.
HON. GUILLERMO CARAGUE, in his capacity as Secretary, Budget & Management, HON. ROZALINA S. CAJUCOM in her capacity as National Treasurer and
COMMISSION ON AUDIT, respondents.
Ramon A. Gonzales for petitioners.

GANCAYCO, J.:
This is a case of first impression whereby petitioners question the constitutionality of the automatic appropriation for debt service in the 1990 budget.
As alleged in the petition, the facts are as follows:
The 1990 budget consists of P98.4 Billion in automatic appropriation (with P86.8 Billion for debt service) and P155.3 Billion appropriated under Republic Act No. 6831,
otherwise known as the General Appropriations Act, or a total of P233.5 Billion, while the appropriations for the Department of Education, Culture and Sports amount to
P27,017,813,000.00.
1

The said automatic appropriation for debt service is authorized by P.D. No. 81, entitled "Amending Certain Provisions of Republic Act Numbered Four Thousand Eight
Hundred Sixty, as Amended (Re: Foreign Borrowing Act)," by P.D. No. 1177, entitled "Revising the Budget Process in Order to Institutionalize the Budgetary Innovations of the
New Society," and by P.D. No. 1967, entitled "An Act Strenghthening the Guarantee and Payment Positions of the Republic of the Philippines on Its Contingent Liabilities
Arising out of Relent and Guaranteed Loan by Appropriating Funds For The Purpose.
There can be no question that petitioners as Senators of the Republic of the Philippines may bring this suit where a constitutional issue is raised. Indeed, even a taxpayer has
personality to restrain unlawful expenditure of public funds.
3

The petitioner seek the declaration of the unconstitutionality of P.D. No. 81, Sections 31 of P.D. 1177, and P.D. No. 1967. The petition also seeks to restrain the disbursement
for debt service under the 1990 budget pursuant to said decrees.
Respondents contend that the petition involves a pure political question which is the repeal or amendment of said laws addressed to the judgment, wisdom and patriotism of
the legislative body and not this Court.
In Gonzales, the main issue was the unconstitutionality of the presidential veto of certain provision particularly Section 16 of the General Appropriations Act of 1990, R.A. No.
6831. This Court, in disposing of the issue, stated
5

The political question doctrine neither interposes an obstacle to judicial determination of the rival claims. The jurisdiction to delimit constitutional boundaries has
been given to this Court. It cannot abdicate that obligation mandated by the 1987 Constitution, although said provision by no means does away with the
applicability of the principle in appropriate cases.
Sec. 1. The judicial power shad be vested in one Supreme Court and in such lower courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable,
and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
With the Senate maintaining that the President's veto is unconstitutional and that charge being controverted, there is an actual case or justiciable
controversy between the Upper House of Congress and the executive department that may be taken cognizance of by this Court.
The questions raised in the instant petition are
I. IS THE APPROPRIATION OF P86 BILLION IN THE P233 BILLION 1990 BUDGET VIOLATIVE OF SECTION 5, ARTICLE XIV OF THE CONSTITUTION?
II. ARE PD No. 81, PD No. 1177 AND PD No. 1967 STILL OPERATIVE UNDER THE CONSTITUTION?
III. ARE THEY VIOLATIVE OF SECTION 29(l), ARTICLE VI OF THE CONSTITUTION?

There is thus a justiciable controversy raised in the petition which this Court may properly take cognizance of On the first issue, the petitioners aver
According to Sec. 5, Art. XIV of the Constitution:
(5) The State shall assign the highest budgetary priority to education and ensure that teaching will attract and retain its rightful share of the best
available talents through adequate remuneration and other means of job satisfaction and fulfillment.
The reason behind the said provision is stated, thus:
In explaining his proposed amendment, Mr. Ople stated that all the great and sincere piety professed by every President and every Congress of the
Philippines since the end of World War II for the economic welfare of the public schoolteachers always ended up in failure and this failure, he stated,
had caused mass defection of the best and brightest teachers to other careers, including menial jobs in overseas employment and concerted actions
by them to project their grievances, mainly over low pay and abject working conditions.
He pointed to the high expectations generated by the February Revolution, especially keen among public schoolteachers, which at present exacerbate
these long frustrated hopes.
Mr. Ople stated that despite the sincerity of all administrations that tried vainly to respond to the needs of the teachers, the central problem that always
defeated their pious intentions was really the one budgetary priority in the sense that any proposed increase for public schoolteachers had to be
multiplied many times by the number of government employees in general and their equitable claims to any pay standardization such that the pay rate
of teachers is hopelessly pegged to the rate of government workers in general. This, he stated, foredoomed the prospect of a significant pay increase
for teachers.
Mr. Ople pointed out that the recognition by the Constitution of the highest priority for public schoolteachers, and by implication, for all teachers, would
ensure that the President and Congress would be strongly urged by a constitutional mandate to grant to them such a level of remuneration and other
incentives that would make teaching competitive again and attractive to the best available talents in the nation.

Finally, Mr. Ople recalled that before World War II, teaching competed most successfully against all other career choices for the best and the brightest
of the younger generation. It is for this reason, he stated, that his proposed amendment if approved, would ensure that teaching would be restored to
its lost glory as the career of choice for the most talented and most public-spirited of the younger generation in the sense that it would become the
countervailing measure against the continued decline of teaching and the wholesale desertion of this noble profession presently taking place. He
further stated that this would ensure that the future and the quality of the population would be asserted as a top priority against many clamorous and
importunate but less important claims of the present. (Journal of the Constitutional Commission, Vol. II, p. 1172)
However, as against this constitutional intention, P86 Billion is appropriated for debt service while only P27 Billion is appropriated for the Department of Education in the 1990
budget. It plain, therefore, that the said appropriation for debt services is inconsistent with the Constitution, hence, viod (Art. 7, New Civil Code).
7

While it is true that under Section 5(5), Article XIV of the Constitution Congress is mandated to "assign the highest budgetary priority to education" in order to "insure that
teaching will attract and retain its rightful share of the best available talents through adequate remuneration and other means of job satisfaction and fulfillment," it does not
thereby follow that the hands of Congress are so hamstrung as to deprive it the power to respond to the imperatives of the national interest and for the attainment of other
state policies or objectives.
As aptly observed by respondents, since 1985, the budget for education has tripled to upgrade and improve the facility of the public school system. The compensation of
teachers has been doubled. The amount of P29,740,611,000.00 set aside for the Department of Education, Culture and Sports under the General Appropriations Act (R.A. No.
6831), is the highest budgetary allocation among all department budgets. This is a clear compliance with the aforesaid constitutional mandate according highest priority to
education.
8

Having faithfully complied therewith, Congress is certainly not without any power, guided only by its good judgment, to provide an appropriation, that can reasonably service
our enormous debt, the greater portion of which was inherited from the previous administration. It is not only a matter of honor and to protect the credit standing of the country.
More especially, the very survival of our economy is at stake. Thus, if in the process Congress appropriated an amount for debt service bigger than the share allocated to
education, the Court finds and so holds that said appropriation cannot be thereby assailed as unconstitutional.
Now to the second issue. The petitioners made the following observations:
To begin with, Rep. Act 4860 entitled "AN ACT AUTHORIZING THE PRESIDENT OF THE PHILIPPINES TO OBTAIN SUCH FOREIGN LOANS AND
CREDITS, OR TO INCUR SUCH FOREIGN INDEBTEDNESS, AS MAY BE NECESSARY TO FINANCE APPROVED ECONOMIC DEVELOPMENT PURPOSES
OR PROJECTS, AND TO GUARANTEE, IN BEHALF OF THE REPUBLIC OF THE PHILIPPINES, FOREIGN LOANS OBTAINED OR BONDS ISSUED BY
CORPORATIONS OWNED OR CONTROLLED BY THE GOVERNMENT OF THE PHILIPPINES FOR ECONOMIC DEVELOPMENT PURPOSES INCLUDING
THOSE INCURRED FOR PURPOSES OF RELENDING TO THE PRIVATE SECTOR, APPROPRIATING THE NECESSARY FUNDS THEREFOR, AND FOR
OTHER PURPOSES, provides:
Sec. 2. The total amount of loans, credits and indebtedness, excluding interests, which the President of the Philippines is authorized to incur under this
Act shall not exceed one billion United States dollarsor its equivalent in other foreign currencies at the exchange rate prevailing at the time the loans,
credits and indebtedness are incurred: Provided, however, That the total loans, credits and indebtedness incurred under this Act shall not exceed two
hundred fifty million in the fiscal year of the approval of this Act, and two hundred fifty million every fiscal year thereafter, all in United States dollars or
its equivalent in other currencies.
Sec. 5. It shall be the duty of the President, within thirty days after the opening of every regular session, to report to the Congress the amount of loans,
credits and indebtedness contracted, as well as the guarantees extended, and the purposes and projects for which the loans, credits and indebtedness
were incurred, and the guarantees extended, as well as such loans which may be reloaned to Filipino owned or controlled corporations and similar
purposes.
Sec. 6. The Congress shall appropriate the necessary amount out of any funds in the National Treasury not otherwise appropriated, to cover the
payment of the principal and interest on such loans, credits or indebtedness as and when they shall become due.
However, after the declaration of martial law, President Marcos issued PD 81 amending Section 6, thus:
Sec. 7. Section six of the same Act is hereby further amended to read as follows:
Sec. 6. Any provision of law to the contrary notwithstanding, and in order to enable the Republic of the Philippines to pay the principal, interest, taxes
and other normal banking charges on the loans, credits or indebtedness, or on the bonds, debentures, securities or other evidences of indebtedness
sold in international markets incurred under the authority of this Act, the proceeds of which are deemed appropriated for the projects, all the revenue
realized from the projects financed by such loans, credits or indebtedness, or on the bonds, debentures, securities or other evidences of indebtedness,
shall be turned over in full, after deducting actual and necessary expenses for the operation and maintenance of said projects, to the National Treasury
by the government office, agency or instrumentality, or government-owned or controlled corporation concerned, which is hereby appropriated for the
purpose as and when they shall become due. In case the revenue realized is insufficient to cover the principal, interest and other charges, such portion
of the budgetary savings as may be necessary to cover the balance or deficiency shall be set aside exclusively for the purpose by the government
office, agency or instrumentality, or government-owned or controlled corporation concerned: Provided, That, if there still remains a deficiency, such
amount necessary to cover the payment of the principal and interest on such loans, credit or indebtedness as and when they shall become due is
hereby appropriated out of any funds in the national treasury not otherwise appropriated: . . .
President Marcos also issued PD 1177, which provides:
Sec. 31. Automatic appropriations. All expenditures for (a) personnel retirement premiums, government service insurance, and other similar fixed
expenditures, (b) principal and interest on public debt, (c) national government guarantees of obligations which are drawn upon, are automatically
appropriated; Provided, that no obligations shall be incurred or payments made from funds thus automatically appropriated except as issued in the
form of regular budgetary allotments.
and PD 1967, which provides:
Sec. 1. There is hereby appropriated, out of any funds in the National Treasury not otherwise appropriated, such amounts as may be necessary to
effect payments on foreign or domestic loans,or foreign or domestic loans whereon creditors make a call on the direct and indirect guarantee of the
Republic of the Philippines, obtained by:
a. The Republic of the Philippines the proceeds of which were relent to government-owned or controlled corporations and/or government
financial institutions;
b. government-owned or controlled corporations and/or government financial institutions the proceeds of which were relent to public or
private institutions;
c. government-owned or controlled corporations and/or financial institutions and guaranteed by the Republic of the Philippines;
d. other public or private institutions and guaranteed by government-owned or controlled corporations and/or government financial
institutions.
Sec. 2. All repayments made by borrower institutions on the loans for whose account advances were made by the National Treasury will revert to the
General Fund.

Sec. 3. In the event that any borrower institution is unable to settle the advances made out of the appropriation provided therein, the Treasurer of the
Philippines shall make the proper recommendation to the Minister of Finance on whether such advances shall be treated as equity or subsidy of the
National Government to the institution concerned, which shall be considered in the budgetary program of the Government.
In the "Budget of Expenditures and Sources of Financing Fiscal Year 1990," which accompanied her budget message to Congress, the President of the
Philippines, Corazon C. Aquino, stated:
Sources Appropriation
The P233.5 billion budget proposed for fiscal year 1990 will require P132.1 billion of new programmed appropriations out of a total P155.3 billion in new legislative
authorization from Congress. The rest of the budget, totalling P101.4 billion, will be sourced from existing appropriations: P98.4 billion from Automatic
Appropriations and P3.0 billion from Continuing Appropriations (Fig. 4).
And according to Figure 4, . . ., P86.8 billion out of the P98.4 Billion are programmed for debt service. In other words, the President had, on her own, determined and set aside
the said amount of P98.4 Billion with the rest of the appropriations of P155.3 Billion to be determined and fixed by Congress, which is now Rep. Act 6831.
9

Petitioners argue that the said automatic appropriations under the aforesaid decrees of then President Marcos became functus oficio when he was ousted in February, 1986;
that upon the expiration of the one-man legislature in the person of President Marcos, the legislative power was restored to Congress on February 2, 1987 when the
Constitution was ratified by the people; that there is a need for a new legislation by Congress providing for automatic appropriation, but Congress, up to the present, has not
approved any such law; and thus the said P86.8 Billion automatic appropriation in the 1990 budget is an administrative act that rests on no law, and thus, it cannot be
enforced.
Moreover, petitioners contend that assuming arguendo that P.D. No. 81, P.D. No. 1177 and P.D. No. 1967 did not expire with the ouster of President Marcos, after the adoption
of the 1987 Constitution, the said decrees are inoperative under Section 3, Article XVIII which provides
Sec. 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and other executive issuances not inconsistent with this Constitution shall
remain operative until amended, repealed, or revoked." (Emphasis supplied.)
They then point out that since the said decrees are inconsistent with Section 24, Article VI of the Constitution, i.e.,
Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in
the House of Representatives, but the Senate may propose or concur with amendments. (Emphasis supplied.)
whereby bills have to be approved by the President, then a law must be passed by Congress to authorize said automatic appropriation. Further, petitioners state said decrees
violate Section 29(l) of Article VI of the Constitution which provides as follows
10

Sec. 29(l). No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.
They assert that there must be definiteness, certainty and exactness in an appropriation, otherwise it is an undue delegation of legislative power to the President who
determines in advance the amount appropriated for the debt service.
11

12

The Court is not persuaded.

Section 3, Article XVIII of the Constitution recognizes that "All existing laws, decrees, executive orders, proclamations, letters of instructions and other executive issuances not
inconsistent with the Constitution shall remain operative until amended, repealed or revoked."
This transitory provision of the Constitution has precisely been adopted by its framers to preserve the social order so that legislation by the then President Marcos may be
recognized. Such laws are to remain in force and effect unless they are inconsistent with the Constitution or, are otherwise amended, repealed or revoked.
An examination of the aforecited presidential decrees show the clear intent that the amounts needed to cover the payment of the principal and interest on all foreign loans,
including those guaranteed by the national government, should be made available when they shall become due precisely without the necessity of periodic enactments of
separate laws appropriating funds therefor, since both the periods and necessities are incapable of determination in advance.
The automatic appropriation provides the flexibility for the effective execution of debt management policies. Its political wisdom has been convincingly discussed by the
Solicitor General as he argues
. . . First, for example, it enables the Government to take advantage of a favorable turn of market conditions by redeeming high-interest securities and borrowing at
lower rates, or to shift from short-term to long-term instruments, or to enter into arrangements that could lighten our outstanding debt burden debt-to-equity, debt to
asset, debt-to-debt or other such schemes. Second, the automatic appropriation obviates the serious difficulties in debt servicing arising from any deviation from
what has been previously programmed. The annual debt service estimates, which are usually made one year in advance, are based on a mathematical set or
matrix or, in layman's parlance, "basket" of foreign exchange and interest rateassumptions which may significantly differ from actual rates not even in proportion to
changes on the basis of the assumptions. Absent an automatic appropriation clause, the Philippine Government has to await and depend upon Congressional
action, which by the time this comes, may no longer be responsive to the intended conditions which in the meantime may have already drastically changed. In the
meantime, also, delayed payments and arrearages may have supervened, only to worsen our debt service-to-total expenditure ratio in the budget due to penalties
and/or demand for immediate payment even before due dates.
Clearly, the claim that payment of the loans and indebtedness is conditioned upon the continuance of the person of President Marcos and his legislative power
goes against the intent and purpose of the law. The purpose is foreseen to subsist with or without the person of Marcos.
13

The argument of petitioners that the said presidential decrees did not meet the requirement and are therefore inconsistent with Sections 24 and 27 of Article VI of the
Constitution which requires, among others, that "all appropriations, . . . bills authorizing increase of public debt" must be passed by Congress and approved by the President is
untenable. Certainly, the framers of the Constitution did not contemplate that existing laws in the statute books including existing presidential decrees appropriating public
money are reduced to mere "bills" that must again go through the legislative million The only reasonable interpretation of said provisions of the Constitution which refer to
"bills" is that they mean appropriation measures still to be passed by Congress. If the intention of the framers thereof were otherwise they should have expressed their
decision in a more direct or express manner.
Well-known is the rule that repeal or amendment by implication is frowned upon. Equally fundamental is the principle that construction of the Constitution and law is generally
applied prospectively and not retrospectively unless it is so clearly stated.
On the third issue that there is undue delegation of legislative power, in Edu vs. Ericta, this Court had this to say
14

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

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

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

The Court finds that in this case the questioned laws are complete in all their essential terms and conditions and sufficient standards are indicated therein.
The legislative intention in R.A. No. 4860, as amended, Section 31 of P.D. No. 1177 and P.D. No. 1967 is that the amount needed should be automatically set aside in order to
enable the Republic of the Philippines to pay the principal, interest, taxes and other normal banking charges on the loans, credits or indebtedness incurred as guaranteed by it
when they shall become due without the need to enact a separate law appropriating funds therefor as the need arises. The purpose of these laws is to enable the government
to make prompt payment and/or advances for all loans to protect and maintain the credit standing of the country.
Although the subject presidential decrees do not state specific amounts to be paid, necessitated by the very nature of the problem being addressed, the amounts nevertheless
are made certain by the legislative parameters provided in the decrees. The Executive is not of unlimited discretion as to the amounts to be disbursed for debt servicing. The
mandate is to pay only the principal, interest, taxes and other normal banking charges on the loans, credits or indebtedness, or on the bonds, debentures or security or other
evidences of indebtedness sold in international markets incurred by virtue of the law, as and when they shall become due. No uncertainty arises in executive implementation
as the limit will be the exact amounts as shown by the books of the Treasury.
The Government budgetary process has been graphically described to consist of four major phases as aptly discussed by the Solicitor General:
The Government budgeting process consists of four major phases:
1. Budget preparation. The first step is essentially tasked upon the Executive Branch and covers the estimation of government revenues, the determination of
budgetary priorities and activities within the constraints imposed by available revenues and by borrowing limits, and the translation of desired priorities and
activities into expenditure levels.
Budget preparation starts with the budget call issued by the Department of Budget and Management. Each agency is required to submit agency budget estimates
in line with the requirements consistent with the general ceilings set by the Development Budget Coordinating Council (DBCC).
With regard to debt servicing, the DBCC staff, based on the macro-economic projections of interest rates (e.g. LIBOR rate) and estimated sources of domestic and
foreign financing, estimates debt service levels. Upon issuance of budget call, the Bureau of Treasury computes for the interest and principal payments for the year
for all direct national government borrowings and other liabilities assumed by the same.
2. Legislative authorization. At this stage, Congress enters the picture and deliberates or acts on the budget proposals of the President, and Congress in the
exercise of its own judgment and wisdomformulates an appropriation act precisely following the process established by the Constitution, which specifies that no
money may be paid from the Treasury except in accordance with an appropriation made by law.
Debt service is not included in the General Appropriation Act, since authorization therefor already exists under RA No. 4860 and 245, as amended and PD 1967.
Precisely in the fight of this subsisting authorization as embodied in said Republic Acts and PD for debt service, Congress does not concern itself with details for
implementation by the Executive, but largely with annual levels and approval thereof upon due deliberations as part of the whole obligation program for the year.
Upon such approval, Congress has spoken and cannot be said to have delegated its wisdom to the Executive, on whose part lies
the implementation or executionof the legislative wisdom.
3. Budget Execution. Tasked on the Executive, the third phase of the budget process covers the variousoperational aspects of budgeting. The establishment of
obligation authority ceilings, the evaluation of work and financial plans for individual activities, the continuing review of government fiscal position, the regulation of
funds releases, the implementation of cash payment schedules, and other related activities comprise this phase of the budget cycle.
Release from the debt service fired is triggered by a request of the Bureau of the Treasury for allotments from the Department of Budget and Management, one
quarter in advance of payment schedule, to ensure prompt payments. The Bureau of Treasury, upon receiving official billings from the creditors, remits payments
to creditors through the Central Bank or to the Sinking Fund established for government security issues (Annex F).
4. Budget accountability. The fourth phase refers to the evaluation of actual performance and initially approved work targets, obligations incurred, personnel hired
and work accomplished are compared with the targets set at the time the agency budgets were approved.
There being no undue delegation of legislative power as clearly above shown, petitioners insist nevertheless that subject presidential decrees constitute undue
delegation of legislative power to the executive on the alleged ground that the appropriations therein are not exact, certain or definite, invoking in support therefor
the Constitution of Nebraska, the constitution under which the case of State v. Moore, 69 NW 974, cited by petitioners, was decided. Unlike the Constitution of
Nebraska, however, our Constitution does not require a definite, certain, exact or "specific appropriation made by law." Section 29, Article VI of our 1987
Constitution omits any of these words and simply states:
Section 29(l). No money shall be paid out of the treasury except in pursuance of an appropriation made by law.
More significantly, there is no provision in our Constitution that provides or prescribes any particular form of words or religious recitals in which an authorization or
appropriation by Congress shall be made, except that it be "made by law," such as precisely the authorization or appropriation under the questioned presidential
decrees. In other words, in terms of time horizons, an appropriation may be made impliedly (as by past but subsisting legislations) as well as expressly for the
current fiscal year (as by enactment of laws by the present Congress), just as said appropriation may be made in general as well as in specific terms. The
Congressional authorization may be embodied in annual laws, such as a general appropriations act or in special provisions of laws of general or special
application which appropriate public funds for specific public purposes, such as the questioned decrees. An appropriation measure is sufficient if the legislative
intention clearly and certainly appears from the language employed (In re Continuing Appropriations, 32 P. 272), whether in the past or in the present.
17

Thus, in accordance with Section 22, Article VII of the 1987 Constitution, President Corazon C. Aquino submitted to Congress the Budget of Expenditures and Sources of
Financing for the Fiscal Year 1990. The proposed 1990 expenditure program covering the estimated obligation that will be incurred by the national government during the
fiscal year amounts to P233.5 Billion. Of the proposed budget, P86.8 is set aside for debt servicing as follows:
1wphi1

National Government Debt

Service Expenditures, 1990
(in million pesos)
Domestic
RA 245, as
amended
Interest
Payments

Foreign
RA 4860
as amended,
PD 1967
P36,861

Total

P18,570

P55,431

Principal
Amortization

Total

16,310

15,077

P53,171
========

P33,647
========

31,387

P86,818
========

18

as authorized under P.D. 1967 and R.A. 4860 and 245, as amended.
The Court, therefor, finds that R.A. No. 4860, as amended by P.D. No. 81, Section 31 of P.D. 1177 and P.D. No. 1967 constitute lawful authorizations or appropriations, unless
they are repealed or otherwise amended by Congress. The Executive was thus merely complying with the duty to implement the same.
There can be no question as to the patriotism and good motive of petitioners in filing this petition. Unfortunately, the petition must fail on the constitutional and legal issues
raised. As to whether or not the country should honor its international debt, more especially the enormous amount that had been incurred by the past administration, which
appears to be the ultimate objective of the petition, is not an issue that is presented or proposed to be addressed by the Court. Indeed, it is more of a political decision for
Congress and the Executive to determine in the exercise of their wisdom and sound discretion.
WHEREFORE, the petition is DISMISSED, without pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Feliciano, Bidin, Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ.,

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 124360 November 5, 1997

FRANCISCO S. TATAD, petitioner,

vs.
THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY OF THE DEPARTMENT OF FINANCE, respondents.
G.R. No. 127867 November 5, 1997
EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA, WIGBERTO TANADA, FLAG HUMAN RIGHTS FOUNDATION, INC., FREEDOM FROM DEBT COALITION
(FDC), SANLAKAS, petitioners,
vs.
HON. RUBEN TORRES in his capacity as the Executive Secretary, HON. FRANCISCO VIRAY, in his capacity as the Secretary of Energy, CALTEX Philippines, Inc.,
PETRON Corporation and PILIPINAS SHELL Corporation, respondents.

PUNO, J.:

R.A. No.
8180 ends twenty six (26) years of government regulation of the downstream oil industry. Few cases carry a surpassing
importance on the life of every Filipino as these petitions for the upswing and downswing of our economy materially
depend on the oscillation of oil.
The petitions at bar challenge the constitutionality of Republic Act No. 8180 entitled "An Act Deregulating the Downstream Oil Industry and For Other Purposes". 1

First, the facts without the fat. Prior to 1971, there was no government agency regulating the oil industry other than those dealing with ordinary commodities. Oil companies
were free to enter and exit the market without any government interference. There were four (4) refining companies (Shell, Caltex, Bataan Refining Company and Filoil
Refining) and six (6) petroleum marketing companies (Esso, Filoil, Caltex, Getty, Mobil and Shell), then operating in the country. 2
In 1971, the country was driven to its knees by a crippling oil crisis. The government, realizing that petroleum and its products are vital to national security and that their

It created the Oil Industry

Commission (OIC) to regulate the business of importing, exporting, re-exporting, shipping, transporting, processing,
refining, storing, distributing, marketing and selling crude oil, gasoline, kerosene, gas and other refined petroleum
products. The OIC was vested with the power to fix the market prices of petroleum products, to regulate the capacities of
refineries, to license new refineries and to regulate the operations and trade practices of the industry.
continued supply at reasonable prices is essential to the general welfare, enacted the Oil Industry Commission Act. 3

In addition to the creation of the OIC, the government saw the imperious need for a more active role of Filipinos in the oil industry. Until the early seventies, the downstream oil
industry was controlled by multinational companies. All the oil refineries and marketing companies were owned by foreigners whose economic interests did not always
coincide with the interest of the Filipino. Crude oil was transported to the country by foreign-controlled tankers. Crude processing was done locally by foreign-owned refineries
and petroleum products were marketed through foreign-owned retail outlets. On November 9, 1973, President Ferdinand E. Marcos boldly created the Philippine National Oil

PNOC engaged in the business of refining, marketing, shipping,

transporting, and storing petroleum. It acquired ownership of ESSO Philippines and Filoil to serve as its marketing arm. It
bought the controlling shares of Bataan Refining Corporation, the largest refinery in the country. PNOC later put up its
own marketing subsidiary Petrophil. PNOC operated under the business name PETRON Corporation. For the first time,
there was a Filipino presence in the Philippine oil market.
Corporation (PNOC) to break the control by foreigners of our oil industry. 5

In 1984, President Marcos through Section 8 of Presidential Decree No. 1956, created the Oil Price Stabilization Fund (OPSF) to cushion the effects of frequent changes in
the price of oil caused by exchange rate adjustments or increase in the world market prices of crude oil and imported petroleum products. The fund is used (1) to reimburse
the oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustment and/or increase in world market prices of crude oil,
and (2) to reimburse oil companies for cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products. Under the law, the OPSF may be
sourced from:
1. any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under P.D. No. 1956 arising
from exchange rate adjustment,
2. any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of
Finance in consultation with the Board of Energy,
3. any additional amount to be imposed on petroleum products to augment the resources of the fund through an appropriate order that may be issued
by the Board of Energy requiring payment of persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum
products, or
4. any resulting peso costs differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is
less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. 7
By 1985, only three (3) oil companies were operating in the country Caltex, Shell and the government-owned PNOC.
In May, 1987, President Corazon C. Aquino signed Executive Order No. 172 creating the Energy Regulatory Boardto regulate the business of importing, exporting, reexporting, shipping, transporting, processing, refining, marketing and distributing energy resources "when warranted and only when public necessity requires." The Board had
the following powers and functions:
1. Fix and regulate the prices of petroleum products;
2. Fix and regulate the rate schedule or prices of piped gas to be charged by duly franchised gas companies which
distribute gas by means of underground pipe system;
3. Fix and regulate the rates of pipeline concessionaries under the provisions of R.A. No. 387, as amended . . . ;
4. Regulate the capacities of new refineries or additional capacities of existing refineries and license refineries that
may be organized after the issuance of (E.O. No. 172) under such terms and conditions as are consistent with the
national interest; and

5. Whenever the Board has determined that there is a shortage of any petroleum product, or when public interest so
requires, it may take such steps as it may consider necessary, including the temporary adjustment of the levels of
prices of petroleum products and the payment to the Oil Price Stabilization Fund . . . by persons or entities engaged
in the petroleum industry of such amounts as may be determined by the Board, which may enable the importer to
recover its cost of importation. 8
On December 9, 1992, Congress enacted R.A. No. 7638 which created the Department of Energy to prepare, integrate, coordinate, supervise and control all plans, programs,

The thrust of the Philippine

energy program under the law was toward privatization of government agencies related to energy, deregulation of the
power and energy industry and reduction of dependency on oil-fired plants. The law also aimed to encourage free and
active participation and investment by the private sector in all energy activities. Section 5(e) of the law states that "at the
end of four (4) years from the effectivity of this Act, the Department shall, upon approval of the President, institute the
programs andtimetable of deregulation of appropriate energy projects and activities of the energy industry."
projects, and activities of the government in relation to energy exploration, development, utilization, distribution and conservation. 9

10

Pursuant to the policies enunciated in R.A. No. 7638, the government approved the privatization of Petron Corporation in 1993. On December 16, 1993, PNOC sold 40% of its
equity in Petron Corporation to the Aramco Overseas Company.
In March 1996, Congress took the audacious step of deregulating the downstream oil industry. It enacted R.A. No.8180, entitled the "Downstream Oil Industry Deregulation
Act of 1996." Under the deregulated environment, "any person or entity may import or purchase any quantity of crude oil and petroleum products from a foreign or domestic
source, lease or own and operate refineries and other downstream oil facilities and market such crude oil or use the same for his own requirement," subject only to monitoring
by the Department of
Energy. 11
The deregulation process has two phases: the transition phase and the full deregulation phase. During the transition phase, controls of the non-pricing aspects of the oil
industry were to be lifted. The following were to be accomplished: (1) liberalization of oil importation, exportation, manufacturing, marketing and distribution, (2) implementation
of an automatic pricing mechanism, (3) implementation of an automatic formula to set margins of dealers and rates of haulers, water transport operators and pipeline
concessionaires, and (4) restructuring of oil taxes. Upon full deregulation, controls on the price of oil and the foreign exchange cover were to be lifted and the OPSF was to be
abolished.
The first phase of deregulation commenced on August 12, 1996.
On February 8, 1997, the President implemented the full deregulation of the Downstream Oil Industry through E.O.No. 372.
The petitions at bar assail the constitutionality of various provisions of R.A No. 8180 and E.O. No. 372.
In G.R. No. 124360, petitioner Francisco S. Tatad seeks the annulment of section 5(b) of R.A. No. 8180. Section 5(b) provides:
b) Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at the rate of
three percent (3%) and imported refined petroleum products at the rate of seven percent (7%), except fuel oil and LPG, the rate for which shall be the same as that
for imported crude oil: Provided, That beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the
same: Provided, further, That this provision may be amended only by an Act of Congress.
The petition is anchored on three arguments:
First, that the imposition of different tariff rates on imported crude oil and imported refined petroleum products violates the equal protection clause. Petitioner contends that the
3%-7% tariff differential unduly favors the three existing oil refineries and discriminates against prospective investors in the downstream oil industry who do not have their own
refineries and will have to source refined petroleum products from abroad.
Second, that the imposition of different tariff rates does not deregulate the downstream oil industry but instead controls the oil industry, contrary to the avowed policy of the
law. Petitioner avers that the tariff differential between imported crude oil and imported refined petroleum products bars the entry of other players in the oil industry because it
effectively protects the interest of oil companies with existing refineries. Thus, it runs counter to the objective of the law "to foster a truly competitive market."
Third, that the inclusion of the tariff provision in section 5(b) of R.A. No. 8180 violates Section 26(1) Article VI of the Constitution requiring every law to have only one subject
which shall be expressed in its title. Petitioner contends that the imposition of tariff rates in section 5(b) of R.A. No. 8180 is foreign to the subject of the law which is the
deregulation of the downstream oil industry.
In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P. Arroyo, Enrique Garcia, Wigberto Tanada, Flag Human Rights Foundation, Inc., Freedom from Debt Coalition
(FDC) and Sanlakas contest the constitutionality of section 15 of R.A. No. 8180 and E.O. No. 392. Section 15 provides:
Sec. 15. Implementation of Full Deregulation. Pursuant to Section 5(e) of Republic Act No. 7638, the DOE shall, upon approval of the President, implement the
full deregulation of the downstream oil industry not later than March 1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude
oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable. Upon the implementation
of the full deregulation as provided herein, the transition phase is deemed terminated and the following laws are deemed repealed:
xxx xxx xxx
E.O. No. 372 states in full, viz.:
WHEREAS, Republic Act No. 7638, otherwise known as the "Department of Energy Act of 1992," provides that, at the end of four years from its effectivity last
December 1992, "the Department (of Energy) shall, upon approval of the President, institute the programs and time table of deregulation of appropriate energy
projects and activities of the energy sector;"
WHEREAS, Section 15 of Republic Act No. 8180, otherwise known as the "Downstream Oil Industry Deregulation Act of 1996," provides that "the DOE shall, upon
approval of the President, implement full deregulation of the downstream oil industry not later than March, 1997. As far as practicable, the DOE shall time the full
deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US
dollar is stable;"
WHEREAS, pursuant to the recommendation of the Department of Energy, there is an imperative need to implement the full deregulation of the downstream oil
industry because of the following recent developments: (i) depletion of the buffer fund on or about 7 February 1997 pursuant to the Energy Regulatory Board's
Order dated 16 January 1997; (ii) the prices of crude oil had been stable at $21-$23 per barrel since October 1996 while prices of petroleum products in the world

market had been stable since mid-December of last year. Moreover, crude oil prices are beginning to soften for the last few days while prices of some petroleum
products had already declined; and (iii) the exchange rate of the peso in relation to the US dollar has been stable for the past twelve (12) months, averaging at
around P26.20 to one US dollar;
WHEREAS, Executive Order No. 377 dated 31 October 1996 provides for an institutional framework for the administration of the deregulated industry by defining
the functions and responsibilities of various government agencies;
WHEREAS, pursuant to Republic Act No. 8180, the deregulation of the industry will foster a truly competitive market which can better achieve the social policy
objectives of fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by the powers vested in me by law, do hereby declare the full deregulation
of the downstream oil industry.
In assailing section 15 of R.A. No. 8180 and E.O. No. 392, petitioners offer the following submissions:
First, section 15 of R.A. No. 8180 constitutes an undue delegation of legislative power to the President and the Secretary of Energy because it does not provide a determinate
or determinable standard to guide the Executive Branch in determining when to implement the full deregulation of the downstream oil industry. Petitioners contend that the law
does not define when it is practicable for the Secretary of Energy to recommend to the President the full deregulation of the downstream oil industry or when the President
may consider it practicable to declare full deregulation. Also, the law does not provide any specific standard to determine when the prices of crude oil in the world market are
considered to be declining nor when the exchange rate of the peso to the US dollar is considered stable.
Second, petitioners aver that E.O. No. 392 implementing the full deregulation of the downstream oil industry is arbitrary and unreasonable because it was enacted due to the
alleged depletion of the OPSF fund a condition not found in R.A. No. 8180.
Third, section 15 of R.A. No. 8180 and E.O. No. 392 allow the formation of a de facto cartel among the three existing oil companies Petron, Caltex and Shell in violation
of the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition.
Respondents, on the other hand, fervently defend the constitutionality of R.A. No. 8180 and E.O. No. 392. In addition, respondents contend that the issues raised by the
petitions are not justiciable as they pertain to the wisdom of the law. Respondents further aver that petitioners have no locus standi as they did not sustain nor will they sustain
direct injury as a result of the implementation of R.A. No. 8180.
The petitions were heard by the Court on September 30, 1997. On October 7, 1997, the Court ordered the private respondents oil companies "to maintain the status quo and
to cease and desist from increasing the prices of gasoline and other petroleum fuel products for a period of thirty (30) days . . . subject to further orders as conditions may
warrant."
We shall now resolve the petitions on the merit. The petitions raise procedural and substantive issues bearing on the constitutionality of R.A. No. 8180 and E.O. No. 392.
The procedural issues are: (1) whether or not the petitions raise a justiciable controversy, and (2) whether or not the petitioners have the standing to assail the validity of the
subject law and executive order. The substantive issues are: (1) whether or not section 5 (b) violates the one title one subject requirement of the Constitution; (2) whether or
not the same section violates the equal protection clause of the Constitution; (3) whether or not section 15 violates the constitutional prohibition on undue delegation of power;
(4) whether or not E.O. No. 392 is arbitrary and unreasonable; and (5) whether or not R.A. No. 8180 violates the constitutional prohibition against monopolies, combinations in
restraint of trade and unfair competition.
We shall first tackle the procedural issues. Respondents claim that the avalanche of arguments of the petitioners assail the wisdom of R.A. No. 8180. They aver that
deregulation of the downstream oil industry is a policy decision made by Congress and it cannot be reviewed, much less be reversed by this Court. In constitutional parlance,
respondents contend that the petitions failed to raise a justiciable controversy.
Respondents' joint stance is unnoteworthy. Judicial power includes not only the duty of the courts to settle actual controversies involving rights which are legally demandable
and enforceable, but also the duty to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch

The courts, as guardians of the Constitution, have the inherent authority to determine whether
a statute enacted by the legislature transcends the limit imposed by the fundamental law. Where a statute violates the
Constitution, it is not only the right but the duty of the judiciary to declare such act as unconstitutional and void. We held
in the recent case of Tanada v. Angara:
or instrumentality of the government. 12

13

14

xxx xxx xxx

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where
an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle
the dispute. The question thus posed is judicial rather than political. The duty to adjudicate remains to assure that the supremacy of the Constitution is upheld.
Once a controversy as to the application or interpretation of a constitutional provision is raised before this Court, it becomes a legal issue which the Court is bound
by constitutional mandate to decide.
Even a sideglance at the petitions will reveal that petitioners have raised constitutional issues which deserve the resolution of this Court in view of their seriousness and their
value as precedents. Our statement of facts and definition of issues clearly show that petitioners are assailing R.A. No. 8180 because its provisions infringe the Constitution
and not because the law lacks wisdom. The principle of separation of power mandates that challenges on the constitutionality of a law should be resolved in our courts of
justice while doubts on the wisdom of a law should be debated in the halls of Congress. Every now and then, a law may be denounced in court both as bereft of wisdom and
constitutionally infirmed. Such denunciation will not deny this Court of its jurisdiction to resolve the constitutionality of the said law while prudentially refusing to pass on its
wisdom.
The effort of respondents to question the locus standi of petitioners must also fall on barren ground. In language too lucid to be misunderstood, this Court has brightlined its
liberal stance on a petitioner's locus standi where the petitioner is able to craft an issue of transcendental significance to the people. 15

In Kapatiran ng mga

Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, we stressed:

16

xxx xxx xxx

Objections to taxpayers' suit for lack of sufficient personality, standing or interest are, however, in the main procedural matters. Considering the importance to the
public of the cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to determine whether or not the other branches of government have
kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Court has brushed aside
technicalities of procedure and has taken cognizance of these petitions.

There is not a dot of disagreement between the petitioners and the respondents on the far reaching importance of the validity of RA No. 8180 deregulating our downstream oil
industry. Thus, there is no good sense in being hypertechnical on the standing of petitioners for they pose issues which are significant to our people and which deserve our
forthright resolution.
We shall now track down the substantive issues. In G.R. No. 124360 where petitioner is Senator Tatad, it is contended that section 5(b) of R.A. No. 8180 on tariff differential

of the Constitution requiring every law to have only one subject which should be expressed in its title. We
do not concur with this contention. As a policy, this Court has adopted a liberal construction of the one title one subject
rule. We have consistently ruled that the title need not mirror, fully index or catalogue all contents and minute details of a
law. A law having a single general subject indicated in the title may contain any number of provisions, no matter how
diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method and means of carrying out the general subject. We hold that
section 5(b) providing for tariff differential is germane to the subject of R.A. No. 8180 which is the deregulation of the
downstream oil industry. The section is supposed to sway prospective investors to put up refineries in our country and
make them rely less on imported petroleum. We shall, however, return to the validity of this provision when we examine
its blocking effect on new entrants to the oil market.
violates the provision 17

18

19

20

We shall now slide to the substantive issues in G.R. No. 127867. Petitioners assail section 15 of R.A. No. 8180 which fixes the time frame for the full deregulation of the
downstream oil industry. We restate its pertinent portion for emphasis, viz.:
Sec. 15. Implementation of Full Deregulation Pursuant to section 5(e) of Republic Act No. 7638, the DOE shall, upon approval of the President, implement the
full deregulation of the downstream oil industry not later than March 1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude
oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable . . .
Petitioners urge that the phrases "as far as practicable," "decline of crude oil prices in the world market" and "stability of the peso exchange rate to the US dollar" are
ambivalent, unclear and inconcrete in meaning. They submit that they do not provide the "determinate or determinable standards" which can guide the President in his
decision to fully deregulate the downstream oil industry. In addition, they contend that E.O. No. 392 which advanced the date of full deregulation is void for it illegally
considered the depletion of the OPSF fund as a factor.
The power of Congress to delegate the execution of laws has long been settled by this Court. As early as 1916 inCompania General de Tabacos de Filipinas vs. The Board of

this Court thru, Mr. Justice Moreland, held that "the true distinction is between the delegation of
power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion
as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid
objection can be made." Over the years, as the legal engineering of men's relationship became more difficult, Congress
has to rely more on the practice of delegating the execution of laws to the executive and other administrative agencies.
Two tests have been developed to determine whether the delegation of the power to execute laws does not involve the
abdication of the power to make law itself. We delineated the metes and bounds of these tests in Eastern Shipping Lines,
Inc. VS. POEA, thus:
Public Utility Commissioners, 21

22

There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz: the completeness test and the sufficient standard test.
Under the first test, the law must be complete in all its terms and conditions when it leaves the legislative such that when it reaches the delegate the only thing he
will have to do is to enforce it. Under the sufficient standard test, there must be adequate guidelines or limitations in the law to map out the boundaries of the
delegate's authority and prevent the delegation from running riot. Both tests are intended to prevent a total transference of legislative authority to the delegate, who
is not allowed to step into the shoes of the legislature and exercise a power essentially legislative.
The validity of delegating legislative power is now a quiet area in our constitutional landscape. As sagely observed, delegation of legislative power has become an inevitability
in light of the increasing complexity of the task of government. Thus, courts bend as far back as possible to sustain the constitutionality of laws which are assailed as unduly

as authority, Mr. Justice Isagani A. Cruz states "that even if the law does
not expressly pinpoint the standard, the courts will bend over backward to locate the same elsewhere in order to spare the
statute, if it can, from constitutional infirmity."
delegating legislative powers. Citing Hirabayashi v. United States 23

24

Given the groove of the Court's rulings, the attempt of petitioners to strike down section 15 on the ground of undue delegation of legislative power cannot prosper. Section 15
can hurdle both the completeness test and the sufficient standard test. It will be noted that Congress expressly provided in R.A. No. 8180 that full deregulation will start at the
end of March 1997, regardless of the occurrence of any event. Full deregulation at the end of March 1997 is mandatory and the Executive has no discretion to postpone it for
any purported reason. Thus, the law is complete on the question of the final date of full deregulation. The discretion given to the President is to advance the date of full
deregulation before the end of March 1997. Section 15 lays down the standard to guide the judgment of the President he is to time it as far as practicable when the prices
of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable.
Petitioners contend that the words "as far as practicable," "declining" and "stable" should have been defined in R.A. No. 8180 as they do not set determinate or determinable
standards. The stubborn submission deserves scant consideration. The dictionary meanings of these words are well settled and cannot confuse men of reasonable
intelligence. Webster defines "practicable" as meaning possible to practice or perform, "decline" as meaning to take a downward direction, and "stable" as meaning firmly

The fear of petitioners that these words will result in the exercise of executive discretion that will run riot is thus
groundless. To be sure, the Court has sustained the validity of similar, if not more general standards in other cases.
established. 25

26

It ought to follow that the argument that E.O. No. 392 is null and void as it was based on indeterminate standards set by R.A. 8180 must likewise fail. If that were all to the
attack against the validity of E.O. No. 392, the issue need not further detain our discourse. But petitioners further posit the thesis that the Executive misapplied R.A. No. 8180
when it considered the depletion of the OPSF fund as a factor in fully deregulating the downstream oil industry in February 1997. A perusal of section 15 of R.A. No. 8180 will
readily reveal that it only enumerated two factors to be considered by the Department of Energy and the Office of the President, viz.: (1) the time when the prices of crude oil
and petroleum products in the world market are declining, and (2) the time when the exchange rate of the peso in relation to the US dollar is stable. Section 15 did not mention
the depletion of the OPSF fund as a factor to be given weight by the Executive before ordering full deregulation. On the contrary, the debates in Congress will show that some

We therefore hold that the

Executive department failed to follow faithfully the standards set by R.A. No. 8180 when it considered the extraneous
factor of depletion of the OPSF fund. The misappreciation of this extra factor cannot be justified on the ground that the
Executive department considered anyway the stability of the prices of crude oil in the world market and the stability of the
exchange rate of the peso to the dollar. By considering another factor to hasten full deregulation, the Executive
department rewrote the standards set forth in R.A. 8180. The Executive is bereft of any right to alter either by subtraction
of our legislators wanted to impose as a pre-condition to deregulation a showing that the OPSF fund must not be in deficit. 27

or addition the standards set in R.A. No. 8180 for it has no power to make laws. To cede to the Executive the power to
make law is to invite tyranny, indeed, to transgress the principle of separation of powers. The exercise of delegated power
is given a strict scrutiny by courts for the delegate is a mere agent whose action cannot infringe the terms of agency. In
the cases at bar, the Executive co-mingled the factor of depletion of the OPSF fund with the factors of decline of the price
of crude oil in the world market and the stability of the peso to the US dollar. On the basis of the text of E.O. No. 392, it is
impossible to determine the weight given by the Executive department to the depletion of the OPSF fund. It could well be
the principal consideration for the early deregulation. It could have been accorded an equal significance. Or its importance
could be nil. In light of this uncertainty, we rule that the early deregulation under E.O. No. 392 constitutes a misapplication
of R.A. No. 8180.
We now come to grips with the contention that some provisions of R.A. No. 8180 violate section 19 of Article XII of the 1987 Constitution. These provisions are:
(1) Section 5 (b) which states "Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on
imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%) except fuel oil and LPG, the rate for
which shall be the same as that for imported crude oil. Provided, that beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum
products shall be the same. Provided, further, that this provision may be amended only by an Act of Congress."
(2) Section 6 which states "To ensure the security and continuity of petroleum crude and products supply, the DOE shall require the refiners and importers to
maintain a minimum inventory equivalent to ten percent (10%) of their respective annual sales volume or forty (40) days of supply, whichever is lower," and
(3) Section 9 (b) which states "To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following acts shall be
prohibited:
xxx xxx xxx
(b) Predatory pricing which means selling or offering to sell any product at a price unreasonably below the industry average cost so as to
attract customers to the detriment of competitors.
On the other hand, section 19 of Article XII of the Constitution allegedly violated by the aforestated provisions of R.A. No. 8180 mandates: "The State shall regulate or prohibit
monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed."
A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or
trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a form of market structure in which one or only a few firms

On the other hand, a combination in restraint of trade is an agreement or

understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of
association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity,
controlling its, production, distribution and price, or otherwise interfering with freedom of trade without statutory
authority. Combination in restraint of trade refers to the means while monopoly refers to the end.
dominate the total sales of a product or service. 28

29

30

Article 186 of the Revised Penal Code and Article 28 of the New Civil Code breathe life to this constitutional policy. Article 186 of the Revised Penal Code penalizes
monopolization and creation of combinations in restraint of

while Article 28 of the New Civil Code makes any person who shall engage in unfair competition liable for
damages.
trade, 31

32

Respondents aver that sections 5(b), 6 and 9(b) implement the policies and objectives of R.A. No. 8180. They explain that the 4% tariff differential is designed to encourage
new entrants to invest in refineries. They stress that the inventory requirement is meant to guaranty continuous domestic supply of petroleum and to discourage fly-by-night
operators. They also submit that the prohibition against predatory pricing is intended to protect prospective entrants. Respondents manifested to the Court that new players
have entered the Philippines after deregulation and have now captured 3% 5% of the oil market.
The validity of the assailed provisions of R.A. No. 8180 has to be decided in light of the letter and spirit of our Constitution, especially section 19, Article XII. Beyond doubt, the
Constitution committed us to the free enterprise system but it is a system impressed with its own distinctness. Thus, while the Constitution embraced free enterprise as an

Thus too, our free enterprise

system is not based on a market of pure and unadulterated competition where the State pursues a strict hands-off policy
and follows the let-the-devil devour the hindmost rule. Combinations in restraint of trade and unfair competitions are
absolutely proscribed and the proscription is directed both against the State as well as the private sector. This distinct
free enterprise system is dictated by the need to achieve the goals of our national economy as defined by section 1,
Article XII of the Constitution which are: more equitable distribution of opportunities, income and wealth; a sustained
increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the underprivileged. It also calls for the State to protect
Filipino enterprises against unfair competition and trade practices.
economic creed, it did not prohibit per se the operation of monopolies which can, however, be regulated in the public interest. 33

34

Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the reason for the prohibition against
restraint of trade, the reason for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies. Competition is thus the underlying principle of
section 19, Article XII of our Constitution which cannot be violated by R.A. No. 8180. We subscribe to the observation of Prof. Gellhorn that the objective of anti-trust law is "to
assure a competitive economy, based upon the belief that through competition producers will strive to satisfy consumer wants at the lowest price with the sacrifice of the

He
adds with appropriateness that there is a reliance upon "the operation of the 'market' system (free enterprise) to decide
what shall be produced, how resources shall be allocated in the production process, and to whom the various products
will be distributed. The market system relies on the consumer to decide what and how much shall be produced, and on
competition, among producers to determine who will manufacture it."
fewest resources. Competition among producers allows consumers to bid for goods and services, and thus matches their desires with society's opportunity costs." 35

Again, we underline in scarlet that the fundamental principle espoused by section 19, Article XII of the Constitution is competition for it alone can release the creative forces of
the market. But the competition that can unleash these creative forces is competition that is fighting yet is fair. Ideally, this kind of competition requires the presence of not one,

not just a few but several players. A market controlled by one player (monopoly) or dominated by a handful of players (oligopoly) is hardly the market where honest-togoodness competition will prevail. Monopolistic or oligopolistic markets deserve our careful scrutiny and laws which barricade the entry points of new players in the market
should be viewed with suspicion.
Prescinding from these baseline propositions, we shall proceed to examine whether the provisions of R.A. No. 8180 on tariff differential, inventory reserves, and predatory
prices imposed substantial barriers to the entry and exit of new players in our downstream oil industry. If they do, they have to be struck down for they will necessarily inhibit
the formation of a truly competitive market. Contrariwise, if they are insignificant impediments, they need not be stricken down.
In the cases at bar, it cannot be denied that our downstream oil industry is operated and controlled by an oligopoly, a foreign oligopoly at that. Petron, Shell and Caltex stand
as the only major league players in the oil market. All other players belong to the lilliputian league. As the dominant players, Petron, Shell and Caltex boast of existing
refineries of various capacities. The tariff differential of 4% therefore works to their immense benefit. Yet, this is only one edge of the tariff differential. The other edge cuts and
cuts deep in the heart of their competitors. It erects a high barrier to the entry of new players. New players that intend to equalize the market power of Petron, Shell and Caltex
by building refineries of their own will have to spend billions of pesos. Those who will not build refineries but compete with them will suffer the huge disadvantage of increasing
their product cost by 4%. They will be competing on an uneven field. The argument that the 4% tariff differential is desirable because it will induce prospective players to invest
in refineries puts the cart before the horse. The first need is to attract new players and they cannot be attracted by burdening them with heavy disincentives. Without new
players belonging to the league of Petron, Shell and Caltex, competition in our downstream oil industry is an idle dream.
The provision on inventory widens the balance of advantage of Petron, Shell and Caltex against prospective new players. Petron, Shell and Caltex can easily comply with the
inventory requirement of R.A. No. 8180 in view of their existing storage facilities. Prospective competitors again will find compliance with this requirement difficult as it will
entail a prohibitive cost. The construction cost of storage facilities and the cost of inventory can thus scare prospective players. Their net effect is to further occlude the entry
points of new players, dampen competition and enhance the control of the market by the three (3) existing oil companies.
Finally, we come to the provision on predatory pricing which is defined as ". . . selling or offering to sell any product at a price unreasonably below the industry average cost so
as to attract customers to the detriment of competitors." Respondents contend that this provision works against Petron, Shell and Caltex and protects new entrants. The ban
on predatory pricing cannot be analyzed in isolation. Its validity is interlocked with the barriers imposed by R.A. No. 8180 on the entry of new players. The inquiry should be to
determine whether predatory pricing on the part of the dominant oil companies is encouraged by the provisions in the law blocking the entry of new players. Text-writer
Hovenkamp, 36

gives the authoritative answer and we quote:

xxx xxx xxx

The rationale for predatory pricing is the sustaining of losses today that will give a firm monopoly profits in the future. The monopoly profits will never materialize,
however, if the market is flooded with new entrants as soon as the successful predator attempts to raise its price. Predatory pricing will be profitable only if the
market contains significant barriers to new entry.
As aforediscsussed, the 4% tariff differential and the inventory requirement are significant barriers which discourage new players to enter the market. Considering these
significant barriers established by R.A. No. 8180 and the lack of players with the comparable clout of PETRON, SHELL and CALTEX, the temptation for a dominant player to
engage in predatory pricing and succeed is a chilling reality. Petitioners' charge that this provision on predatory pricing is anti-competitive is not without reason.
Respondents belittle these barriers with the allegation that new players have entered the market since deregulation. A scrutiny of the list of the alleged new players will,
however, reveal that not one belongs to the class and category of PETRON, SHELL and CALTEX. Indeed, there is no showing that any of these new players intends to install
any refinery and effectively compete with these dominant oil companies. In any event, it cannot be gainsaid that the new players could have been more in number and more
impressive in might if the illegal entry barriers in R.A. No. 8180 were not erected.
We come to the final point. We now resolve the total effect of the untimely deregulation, the imposition of 4% tariff differential on imported crude oil and refined petroleum
products, the requirement of inventory and the prohibition on predatory pricing on the constitutionality of R.A. No. 8180. The question is whether these offending provisions
can be individually struck down without invalidating the entire R.A. No. 8180. The ruling case law is well stated by author Agpalo, 37

viz.:

xxx xxx xxx

The general rule is that where part of a statute is void as repugnant to the Constitution, while another part is valid, the valid portion, if separable from the invalid,
may stand and be enforced. The presence of a separability clause in a statute creates the presumption that the legislature intended separability, rather than
complete nullity of the statute. To justify this result, the valid portion must be so far independent of the invalid portion that it is fair to presume that the legislature
would have enacted it by itself if it had supposed that it could not constitutionally enact the other. Enough must remain to make a complete, intelligible and valid
statute, which carries out the legislative intent. . . .
The exception to the general rule is that when the parts of a statute are so mutually dependent and connected, as conditions, considerations, inducements, or
compensations for each other, as to warrant a belief that the legislature intended them as a whole, the nullity of one part will vitiate the rest. In making the parts of
the statute dependent, conditional, or connected with one another, the legislature intended the statute to be carried out as a whole and would not have enacted it if
one part is void, in which case if some parts are unconstitutional, all the other provisions thus dependent, conditional, or connected must fall with them.
R.A. No. 8180 contains a separability clause. Section 23 provides that "if for any reason, any section or provision of this Act is declared unconstitutional or invalid, such parts
not affected thereby shall remain in full force and effect." This separability clause notwithstanding, we hold that the offending provisions of R.A. No. 8180 so permeate its
essence that the entire law has to be struck down. The provisions on tariff differential, inventory and predatory pricing are among the principal props of R.A. No. 8180.
Congress could not have deregulated the downstream oil industry without these provisions. Unfortunately, contrary to their intent, these provisions on tariff differential,
inventory and predatory pricing inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces. R.A. No. 8180 needs provisions
to vouchsafe free and fair competition. The need for these vouchsafing provisions cannot be overstated. Before deregulation, PETRON, SHELL and CALTEX had no real
competitors but did not have a free run of the market because government controls both the pricing and non-pricing aspects of the oil industry. After deregulation, PETRON,
SHELL and CALTEX remain unthreatened by real competition yet are no longer subject to control by government with respect to their pricing and non-pricing decisions. The
aftermath of R.A. No. 8180 is a deregulated market where competition can be corrupted and where market forces can be manipulated by oligopolies.
The fall out effects of the defects of R.A. No. 8180 on our people have not escaped Congress. A lot of our leading legislators have come out openly with bills seeking the
repeal of these odious and offensive provisions in R.A. No. 8180. In the Senate, Senator Freddie Webb has filed S.B. No. 2133 which is the result of the hearings conducted
by the Senate Committee on Energy. The hearings revealed that (1) there was a need to level the playing field for the new entrants in the downstream oil industry, and (2)
there was no law punishing a person for selling petroleum products at unreasonable prices. Senator Alberto G. Romulo also filed S.B. No. 2209 abolishing the tariff differential
beginning January 1, 1998. He declared that the amendment ". . . would mean that instead of just three (3) big oil companies there will be other major oil companies to
provide more competitive prices for the market and the consuming public." Senator Heherson T . Alvarez, one of the principal proponents of R.A. No. 8180, also filed S.B. No.
2290 increasing the penalty for violation of its section 9. It is his opinion as expressed in the explanatory note of the bill that the present oil companies are engaged in
cartelization despite R.A. No. 8180, viz,:
xxx xxx xxx
Since the downstream oil industry was fully deregulated in February 1997, there have been eight (8) fuel price adjustments made by the three oil majors, namely:
Caltex Philippines, Inc.; Petron Corporation; and Pilipinas Shell Petroleum Corporation. Very noticeable in the price adjustments made, however, is the uniformity
in the pump prices of practically all petroleum products of the three oil companies. This, despite the fact, that their selling rates should be determined by a

combination of any of the following factors: the prevailing peso-dollar exchange rate at the time payment is made for crude purchases, sources of crude, and
inventory levels of both crude and refined petroleum products. The abovestated factors should have resulted in different, rather than identical prices.
The fact that the three (3) oil companies' petroleum products are uniformly priced suggests collusion, amounting to cartelization, among Caltex Philippines, Inc.,
Petron Corporation and Pilipinas Shell Petroleum Corporation to fix the prices of petroleum products in violation of paragraph (a), Section 9 of R.A. No. 8180.
To deter this pernicious practice and to assure that present and prospective players in the downstream oil industry conduct their business with conscience and
propriety, cartel-like activities ought to be severely penalized.
Senator Francisco S. Tatad also filed S.B. No. 2307 providing for a uniform tariff rate on imported crude oil and refined petroleum products. In the explanatory note of the bill,
he declared in no uncertain terms that ". . . the present set-up has raised serious public concern over the way the three oil companies have uniformly adjusted the prices of oil
in the country, an indication of a possible existence of a cartel or a cartel-like situation within the downstream oil industry. This situation is mostly attributed to the foregoing
provision on tariff differential, which has effectively discouraged the entry of new players in the downstream oil industry."
In the House of Representatives, the moves to rehabilitate R.A. No. 8180 are equally feverish. Representative Leopoldo E. San Buenaventura has filed H.B. No. 9826
removing the tariff differential for imported crude oil and imported refined petroleum products. In the explanatory note of the bill, Rep. Buenaventura explained:
xxx xxx xxx
As we now experience, this difference in tariff rates between imported crude oil and imported refined petroleum products, unwittingly provided a built-in-advantage
for the three existing oil refineries in the country and eliminating competition which is a must in a free enterprise economy. Moreover, it created a disincentive for
other players to engage even initially in the importation and distribution of refined petroleum products and ultimately in the putting up of refineries. This tariff
differential virtually created a monopoly of the downstream oil industry by the existing three oil companies as shown by their uniform and capricious pricing of their
products since this law took effect, to the great disadvantage of the consuming public.
Thus, instead of achieving the desired effects of deregulation, that of free enterprise and a level playing field in the downstream oil industry, R.A. 8180 has created
an environment conducive to cartelization, unfavorable, increased, unrealistic prices of petroleum products in the country by the three existing refineries.
Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981 to prevent collusion among the present oil companies by strengthening the oversight function of the government,
particularly its ability to subject to a review any adjustment in the prices of gasoline and other petroleum products. In the explanatory note of the bill, Rep. Punzalan, Jr., said:
xxx xxx xxx
To avoid this, the proposed bill seeks to strengthen the oversight function of government, particularly its ability to review the prices set for gasoline and other
petroleum products. It grants the Energy Regulatory Board (ERB) the authority to review prices of oil and other petroleum products, as may be petitioned by a
person, group or any entity, and to subsequently compel any entity in the industry to submit any and all documents relevant to the imposition of new prices. In
cases where the Board determines that there exist collusion, economic conspiracy, unfair trade practice, profiteering and/or overpricing, it may take any step
necessary to protect the public, including the readjustment of the prices of petroleum products. Further, the Board may also impose the fine and penalty of
imprisonment, as prescribed in Section 9 of R.A. 8180, on any person or entity from the oil industry who is found guilty of such prohibited acts.
By doing all of the above, the measure will effectively provide Filipino consumers with a venue where their grievances can be heard and immediately acted upon
by government.
Thus, this bill stands to benefit the Filipino consumer by making the price-setting process more transparent and making it easier to prosecute those who perpetrate
such prohibited acts as collusion, overpricing, economic conspiracy and unfair trade.
Representative Sergio A.F . Apostol filed H.B. No. 10039 to remedy an omission in R.A. No. 8180 where there is no agency in government that determines what is
"reasonable" increase in the prices of oil products. Representative Dente O. Tinga, one of the principal sponsors of R.A. No. 8180, filed H.B. No. 10057 to strengthen its antitrust provisions. He elucidated in its explanatory note:
xxx xxx xxx
The definition of predatory pricing, however, needs to be tightened up particularly with respect to the definitive benchmark price and the specific anti-competitive
intent. The definition in the bill at hand which was taken from the Areeda-Turner test in the United States on predatory pricing resolves the questions. The definition
reads, "Predatory pricing means selling or offering to sell any oil product at a price below the average variable cost for the purpose of destroying competition,
eliminating a competitor or discouraging a competitor from entering the market."
The appropriate actions which may be resorted to under the Rules of Court in conjunction with the oil deregulation law are adequate. But to stress their availability
and dynamism, it is a good move to incorporate all the remedies in the law itself. Thus, the present bill formalizes the concept of government intervention and
private suits to address the problem of antitrust violations. Specifically, the government may file an action to prevent or restrain any act of cartelization or predatory
pricing, and if it has suffered any loss or damage by reason of the antitrust violation it may recover damages. Likewise, a private person or entity may sue to
prevent or restrain any such violation which will result in damage to his business or property, and if he has already suffered damage he shall recover treble
damages. A class suit may also be allowed.
To make the DOE Secretary more effective in the enforcement of the law, he shall be given additional powers to gather information and to require reports.
Representative Erasmo B. Damasing filed H.B. No. 7885 and has a more unforgiving view of R.A. No. 8180. He wants it completely repealed. He explained:
xxx xxx xxx
Contrary to the projections at the time the bill on the Downstream Oil Industry Deregulation was discussed and debated upon in the plenary session prior to its
approval into law, there aren't any new players or investors in the oil industry. Thus, resulting in practically a cartel or monopoly in the oil industry by the three (3)
big oil companies, Caltex, Shell and Petron. So much so, that with the deregulation now being partially implemented, the said oil companies have succeeded in
increasing the prices of most of their petroleum products with little or no interference at all from the government. In the month of August, there was an increase of
Fifty centavos (50) per liter by subsidizing the same with the OPSF, this is only temporary as in March 1997, or a few months from now, there will be full
deregulation (Phase II) whereby the increase in the prices of petroleum products will be fully absorbed by the consumers since OPSF will already be abolished by
then. Certainly, this would make the lives of our people, especially the unemployed ones, doubly difficult and unbearable.
The much ballyhooed coming in of new players in the oil industry is quite remote considering that these prospective investors cannot fight the existing and well
established oil companies in the country today, namely, Caltex, Shell and Petron. Even if these new players will come in, they will still have no chance to compete
with the said three (3) existing big oil companies considering that there is an imposition of oil tariff differential of 4% between importation of crude oil by the said oil

refineries paying only 3% tariff rate for the said importation and 7% tariff rate to be paid by businessmen who have no oil refineries in the Philippines but will import
finished petroleum/oil products which is being taxed with 7% tariff rates.
So, if only to help the many who are poor from further suffering as a result of unmitigated increase in oil products due to deregulation, it is a must that the
Downstream Oil Industry Deregulation Act of 1996, or R.A.8180 be repealed completely.
Various resolutions have also been filed in the Senate calling for an immediate and comprehensive review of R.A. No. 8180 to prevent the downpour of its ill effects on the
people. Thus, S. Res. No. 574 was filed by Senator Gloria M. Macapagal entitled Resolution "Directing the Committee on Energy to Inquire Into The Proper Implementation of
the Deregulation of the Downstream Oil Industry and Oil Tax Restructuring As Mandated Under R.A. Nos. 8180 and 8184, In Order to Make The Necessary Corrections In the
Apparent Misinterpretation Of The Intent And Provision Of The Laws And Curb The Rising Tide Of Disenchantment Among The Filipino Consumers And Bring About The Real
Intentions And Benefits Of The Said Law." Senator Blas P. Ople filed S. Res. No. 664 entitled resolution "Directing the Committee on Energy To Conduct An Inquiry In Aid Of
Legislation To Review The Government's Oil Deregulation Policy In Light Of The Successive Increases In Transportation, Electricity And Power Rates, As well As Of Food And
Other Prime Commodities And Recommend Appropriate Amendments To Protect The Consuming Public." Senator Ople observed:
xxx xxx xxx
WHEREAS, since the passage of R.A. No. 8180, the Energy Regulatory Board (ERB) has imposed successive increases in oil prices which has triggered
increases in electricity and power rates, transportation fares, as well as in prices of food and other prime commodities to the detriment of our people, particularly
the poor;
WHEREAS, the new players that were expected to compete with the oil cartel-Shell, Caltex and Petron-have not come in;
WHEREAS, it is imperative that a review of the oil deregulation policy be made to consider appropriate amendments to the existing law such as an extension of
the transition phase before full deregulation in order to give the competitive market enough time to develop;
WHEREAS, the review can include the advisability of providing some incentives in order to attract the entry of new oil companies to effect a dynamic competitive
market;
WHEREAS, it may also be necessary to defer the setting up of the institutional framework for full deregulation of the oil industry as mandated under Executive
Order No. 377 issued by President Ramos last October 31, 1996 . . .
Senator Alberto G. Romulo filed S. Res. No. 769 entitled resolution "Directing the Committees on Energy and Public Services In Aid Of Legislation To Assess The Immediate
Medium And Long Term Impact of Oil Deregulation On Oil Prices And The Economy." Among the reasons for the resolution is the finding that "the requirement of a 40-day
stock inventory effectively limits the entry of other oil firms in the market with the consequence that instead of going down oil prices will rise."
Parallel resolutions have been filed in the House of Representatives. Representative Dante O. Tinga filed H. Res. No. 1311 "Directing The Committee on Energy To Conduct
An Inquiry, In Aid of Legislation, Into The Pricing Policies And Decisions Of The Oil Companies Since The Implementation of Full Deregulation Under the Oil Deregulation Act
(R.A. No. 8180) For the Purpose of Determining In the Context Of The Oversight Functions Of Congress Whether The Conduct Of The Oil Companies, Whether Singly Or
Collectively, Constitutes Cartelization Which Is A Prohibited Act Under R.A. No. 8180, And What Measures Should Be Taken To Help Ensure The Successful Implementation
Of The Law In Accordance With Its Letter And Spirit, Including Recommending Criminal Prosecution Of the Officers Concerned Of the Oil Companies If Warranted By The
Evidence, And For Other Purposes." Representatives Marcial C. Punzalan, Jr. Dante O. Tinga and Antonio E. Bengzon III filed H.R. No. 894 directing the House Committee
on Energy to inquire into the proper implementation of the deregulation of the downstream oil industry. House Resolution No. 1013 was also filed by Representatives Edcel
C. Lagman, Enrique T . Garcia, Jr. and Joker P. Arroyo urging the President to immediately suspend the implementation of E.O. No. 392.
In recent memory there is no law enacted by the legislature afflicted with so much constitutional deformities as R.A. No. 8180. Yet, R.A. No. 8180 deals with oil, a commodity
whose supply and price affect the ebb and flow of the lifeblood of the nation. Its shortage of supply or a slight, upward spiral in its price shakes our economic foundation.

At a time when our

economy is in a dangerous downspin, the perpetuation of R.A. No. 8180 threatens to multiply the number of our people
with bent backs and begging bowls. R.A. No. 8180 with its anti-competition provisions cannot be allowed by this Court to
stand even while Congress is working to remedy its defects.
Studies show that the areas most impacted by the movement of oil are food manufacture, land transport, trade, electricity and water. 38

The Court, however, takes note of the plea of PETRON, SHELL and CALTEX to lift our restraining order to enable them to adjust upward the price of petroleum and petroleum
products in view of the plummeting value of the peso. Their plea, however, will now have to be addressed to the Energy Regulatory Board as the effect of the declaration of

The length of our return to the regime of regulation depends on

Congress which can fasttrack the writing of a new law on oil deregulation in accord with the Constitution.
unconstitutionality of R.A. No. 8180 is to revive the former laws it repealed. 39

With this Decision, some circles will chide the Court for interfering with an economic decision of Congress. Such criticism is charmless for the Court is annulling R.A. No. 8180
not because it disagrees with deregulation as an economic policy but because as cobbled by Congress in its present form, the law violates the Constitution. The right call
therefor should be for Congress to write a new oil deregulation law that conforms with the Constitution and not for this Court to shirk its duty of striking down a law that offends
the Constitution. Striking down R.A. No. 8180 may cost losses in quantifiable terms to the oil oligopolists. But the loss in tolerating the tampering of our Constitution is not
quantifiable in pesos and centavos. More worthy of protection than the supra-normal profits of private corporations is the sanctity of the fundamental principles of the
Constitution. Indeed when confronted by a law violating the Constitution, the Court has no option but to strike it down dead. Lest it is missed, the Constitution is a covenant
that grants and guarantees both the political and economic rights of the people. The Constitution mandates this Court to be the guardian not only of the people's political rights
but their economic rights as well. The protection of the economic rights of the poor and the powerless is of greater importance to them for they are concerned more with the
exoterics of living and less with the esoterics of liberty. Hence, for as long as the Constitution reigns supreme so long will this Court be vigilant in upholding the economic
rights of our people especially from the onslaught of the powerful. Our defense of the people's economic rights may appear heartless because it cannot be half-hearted.
IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is declared unconstitutional and E.O. No. 372 void.
SO ORDERED.
Regalado, Davide, Jr., Romero, Bellosillo and Vitug, JJ., concur.
Mendoza, J., concurs in the result.
Narvasa, C.J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-34674

October 26, 1931

MAURICIO CRUZ, petitioner-appellant,

vs.
STANTON YOUNGBERG, Director of the Bureau of Animal Industry, respondent-appellee.
Jose Yulo for appellant.
Office of the Solicitor-General Reyes for appellee.

OSTRAND, J.:
This is a petition brought originally before the Court of First Instance of Manila for the issuance of a writ of mandatory injunction against the respondent, Stanton Youngberg,
as Director of the Bureau of Animal Industry, requiring him to issue a permit for the landing of ten large cattle imported by the petitioner and for the slaughter thereof. The
petitioner attacked the constitutionality of Act No. 3155, which at present prohibits the importation of cattle from foreign countries into the Philippine Islands.
Among other things in the allegation of the petition, it is asserted that "Act No. 3155 of the Philippine Legislature was enacted for the sole purpose of preventing the
introduction of cattle diseases into the Philippine Islands from foreign countries, as shown by an explanatory note and text of Senate Bill No. 328 as introduced in the
Philippine Legislature, ... ." The Act in question reads as follows:

SECTION 1. After March thirty-first, nineteen hundred and twenty-five existing contracts for the importation of cattle into this country to the contrary
notwithstanding, it shall be strictly prohibited to import, bring or introduce into the Philippine Islands any cattle from foreign countries: Provided, however, That at
any time after said date, the Governor-General, with the concurrence of the presiding officers of both Houses, may raise such prohibition entirely or in part if the
conditions of the country make this advisable or if decease among foreign cattle has ceased to be a menace to the agriculture and live stock of the lands.
SEC. 2. All acts or parts of acts inconsistent with this Act are hereby repealed.
SEC. 3. This Act shall take effect on its approval.
Approved, March 8, 1924.
The respondent demurred to the petition on the ground that it did not state facts sufficient to constitute a cause of action. The demurrer was based on two reasons, namely, (1)
that if Act No. 3155 were declared unconstitutional and void, the petitioner would not be entitled to the relief demanded because Act No. 3052 would automatically become
effective and would prohibit the respondent from giving the permit prayed for; and (2) that Act No. 3155 was constitutional and, therefore, valid.
The court sustained the demurrer and the complaint was dismissed by reason of the failure of the petitioner to file another complaint. From that order of dismissal, the
petitioner appealed to this court.
The appellee contends that even if Act No. 3155 be declared unconstitutional by the fact alleged by the petitioner in his complaint, still the petitioner can not be allowed to
import cattle from Australia for the reason that, while Act No. 3155 were declared unconstitutional, Act No. 3052 would automatically become effective. Act No. 3052 reads as
follows:
SECTION 1. Section seventeen hundred and sixty-two of Act Numbered Twenty-seven hundred and eleven, known as the Administrative Code, is hereby
amended to read as follows:
"SEC. 1762. Bringing of animals imported from foreign countries into the Philippine Islands. It shall be unlawful for any person or corporation to
import, bring or introduce live cattle into the Philippine Islands from any foreign country. The Director of Agriculture may, with the approval of the head
of the department first had, authorize the importation, bringing or introduction of various classes of thoroughbred cattle from foreign countries for
breeding the same to the native cattle of these Islands, and such as may be necessary for the improvement of the breed, not to exceed five hundred
head per annum: Provided, however, That the Director of Agriculture shall in all cases permit the importation, bringing or introduction of draft cattle and
bovine cattle for the manufacture of serum:Provided, further, That all live cattle from foreign countries the importation, bringing or introduction of which
into the Islands is authorized by this Act, shall be submitted to regulations issued by the Director of Agriculture, with the approval of the head of the
department, prior to authorizing its transfer to other provinces.
"At the time of the approval of this Act, the Governor-General shall issue regulations and others to provide against a raising of the price of both fresh
and refrigerated meat. The Governor-General also may, by executive order, suspend, this prohibition for a fixed period in case local conditions require
it."
SEC. 2. This Act shall take effect six months after approval.
Approved, March 14, 1922.
The petitioner does not present any allegations in regard to Act No. 3052 to show its nullity or unconstitutionality though it appears clearly that in the absence of Act No. 3155
the former act would make it impossible for the Director of the Bureau of Animal Industry to grant the petitioner a permit for the importation of the cattle without the approval of
the head of the corresponding department.
An unconstitutional statute can have no effect to repeal former laws or parts of laws by implication, since, being void, it is not inconsistent with such former laws. (I
Lewis Sutherland, Statutory Construction 2nd ed., p. 458, citing McAllister vs. Hamlin, 83 Cal., 361; 23 Pac., 357; Orange Country vs. Harris, 97 Cal., 600; 32 Pac.,
594; Carr vs. State, 127 Ind., 204; 11 L.R.A., 370, etc.)
This court has several times declared that it will not pass upon the constitutionality of statutes unless it is necessary to do so (McGirr vs. Hamilton and Abreu, 30 Phil., 563,
568; Walter E. Olsen & Co. vs. Aldanese and Trinidad, 43 Phil., 259) but in this case it is not necessary to pass upon the validity of the statute attacked by the petitioner
because even if it were declared unconstitutional, the petitioner would not be entitled to relief inasmuch as Act No. 3052 is not in issue.
But aside from the provisions of Act No. 3052, we are of the opinion that Act No. 3155 is entirely valid. As shown in paragraph 8 of the amended petition, the Legislature
passed Act No. 3155 to protect the cattle industry of the country and to prevent the introduction of cattle diseases through importation of foreign cattle. It is now generally
recognized that the promotion of industries affecting the public welfare and the development of the resources of the country are objects within the scope of the police power
(12 C.J., 927; 6 R.C.L., 203-206 and decisions cited therein; Reid vs. Colorado, 187 U.S., 137, 147, 152; Yeazel vs. Alexander, 58 Ill., 254). In this connection it is said in the
case of Punzalan vs. Ferriols and Provincial Board of Batangas (19 Phil., 214), that the provisions of the Act of Congress of July 1, 1902, did not have the effect of denying to
the Government of the Philippine Islands the right to the exercise of the sovereign police power in the promotion of the general welfare and the public interest. The facts
recited in paragraph 8 of the amended petition shows that at the time the Act No. 3155 was promulgated there was reasonable necessity therefor and it cannot be said that the
Legislature exceeded its power in passing the Act. That being so, it is not for this court to avoid or vacate the Act upon constitutional grounds nor will it assume to determine
whether the measures are wise or the best that might have been adopted. (6 R.C.L., 243 and decisions cited therein.)
1awphil.net

In his third assignment of error the petitioner claims that "The lower court erred in not holding that the power given by Act No. 3155 to the Governor-General to suspend or not,
at his discretion, the prohibition provided in the act constitutes an unlawful delegation of the legislative powers." We do not think that such is the case; as Judge Ranney of the
Ohio Supreme Court in Cincinnati, Wilmington and Zanesville Railroad Co. vs. Commissioners of Clinton County (1 Ohio St., 77, 88) said in such case:
The true distinction, therefore, is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an
authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made.
Under his fourth assignment of error the appellant argues that Act No. 3155 amends section 3 of the Tariff Law, but it will be noted that Act No. 3155 is not an absolute
prohibition of the importation of cattle and it does not add any provision to section 3 of the Tariff Law. As stated in the brief of the Attorney-General: "It is a complete statute in
itself. It does not make any reference to the Tariff Law. It does not permit the importation of articles, whose importation is prohibited by the Tariff Law. It is not a tariff measure
but a quarantine measure, a statute adopted under the police power of the Philippine Government. It is at most a `supplement' or an `addition' to the Tariff Law. (See
MacLeary vs. Babcock, 82 N.E., 453, 455; 169 Ind., 228 for distinction between `supplemental' and `amendatory' and O'Pry vs. U.S., 249 U.S., 323; 63 Law. ed., 626, for
distinction between `addition' and `amendment.')"
The decision appealed from is affirmed with the costs against the appellant. So ordered.
Avancea, C.J., Johnson, Street, Malcolm, Villamor, Romualdez, Villa-Real, and Imperial, JJ., concur.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

COMMISSIONER
OF
CUSTOMS
and
the
DISTRICT COLLECTOR OF
THE PORT OF SUBIC,

G.R. No. 179579

Present:

Petitioners,
CARPIO, J., Chairperson,
BRION,
PEREZ,
- versus -

SERENO, and
REYES, JJ.

Promulgated:
HYPERMIX FEEDS
CORPORATION,

Respondent.

February 1, 2012

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
SERENO, J.:
Before us is a Petition for Review under Rule 45,[1] assailing the
Decision[2] and the Resolution[3] of the Court of Appeals (CA), which nullified
the Customs Memorandum Order (CMO) No. 27-2003 [4] on the tariff
classification of wheat issued by petitioner Commissioner of Customs.
The antecedent facts are as follows:
On 7 November 2003, petitioner Commissioner of Customs issued CMO
27-2003. Under the Memorandum, for tariff purposes, wheat was classified
according to the following: (1) importer or consignee; (2) country of origin;
and (3) port of discharge.[5] The regulation provided an exclusive list of
corporations, ports of discharge, commodity descriptions and countries of
origin. Depending on these factors, wheat would be classified either as food
grade or feed grade. The corresponding tariff for food grade wheat was 3%,
for feed grade, 7%.
CMO 27-2003 further provided for the proper procedure for protest or
Valuation and Classification Review Committee (VCRC) cases. Under this
procedure, the release of the articles that were the subject of protest
required the importer to post a cash bond to cover the tariff differential. [6]
A month after the issuance of CMO 27-2003, on 19 December 2003,
respondent filed a Petition for Declaratory Relief [7] with the Regional Trial
Court (RTC) of Las Pias City. It anticipated the implementation of the
regulation on its imported and perishable Chinese milling wheat in transit
from China.[8] Respondent contended that CMO 27-2003 was issued without

following the mandate of the Revised Administrative Code on public

participation, prior notice, and publication or registration with the University
of the Philippines Law Center.
Respondent also alleged that the regulation summarily adjudged it to
be a feed grade supplier without the benefit of prior assessment and
examination; thus, despite having imported food grade wheat, it would be
subjected to the 7% tariff upon the arrival of the shipment, forcing them to
pay 133% more than was proper.
Furthermore, respondent claimed that the equal protection clause of
the Constitution was violated when the regulation treated non-flour millers
differently from flour millers for no reason at all.
Lastly, respondent asserted that the retroactive application of the
regulation was confiscatory in nature.
On 19 January 2004, the RTC issued a Temporary Restraining Order
(TRO) effective for twenty (20) days from notice. [9]
Petitioners thereafter filed a Motion to Dismiss. [10] They alleged that: (1)
the RTC did not have jurisdiction over the subject matter of the case,
because respondent was asking for a judicial determination of the
classification of wheat; (2) an action for declaratory relief was improper; (3)
CMO 27-2003 was an internal administrative rule and not legislative in
nature; and (4) the claims of respondent were speculative and premature,
because the Bureau of Customs (BOC) had yet to examine respondents
products. They likewise opposed the application for a writ of preliminary
injunction on the ground that they had not inflicted any injury through the
issuance of the regulation; and that the action would be contrary to the rule
that administrative issuances are assumed valid until declared otherwise.
On 28 February 2005, the parties agreed that the matters raised in the
application for preliminary injunction and the Motion to Dismiss would just
be resolved together in the main case. Thus, on 10 March 2005, the RTC
rendered its Decision[11] without having to resolve the application for
preliminary injunction and the Motion to Dismiss.
The trial court ruled in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, the Petition is GRANTED and the
subject Customs Memorandum Order 27-2003 is declared INVALID and OF NO
FORCE AND EFFECT. Respondents Commissioner of Customs, the District Collector of
Subic or anyone acting in their behalf are to immediately cease and desist from
enforcing the said Customs Memorandum Order 27-2003.
SO ORDERED.[12]

The RTC held that it had jurisdiction over the subject matter, given that
the issue raised by respondent concerned the quasi-legislative powers of
petitioners. It likewise stated that a petition for declaratory relief was the
proper remedy, and that respondent was the proper party to file it. The
court considered that respondent was a regular importer, and that the latter

would be subjected to the application of the regulation in future

transactions.
With regard to the validity of the regulation, the trial court found that
petitioners had not followed the basic requirements of hearing and
publication in the issuance of CMO 27-2003. It likewise held that petitioners
had substituted the quasi-judicial determination of the commodity by a
quasi-legislative predetermination.[13] The lower court pointed out that a
classification based on importers and ports of discharge were violative of
the due process rights of respondent.
Dissatisfied with the Decision of the lower court, petitioners appealed
to the CA, raising the same allegations in defense of CMO 27-2003. [14] The
appellate court, however, dismissed the appeal. It held that, since the
regulation affected substantial rights of petitioners and other importers,
petitioners should have observed the requirements of notice, hearing and
publication.
Hence, this Petition.
Petitioners raise the following issues for the consideration of this Court:
I.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE WHICH IS NOT IN

ACCORD WITH THE LAW AND PREVAILING JURISPRUDENCE.

II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE TRIAL COURT
HAS JURISDICTION OVER THE CASE.

The Petition has no merit.

We shall first discuss the propriety of an action for declaratory relief.
Rule 63, Section 1 provides:
Who may file petition. Any person interested under a deed, will, contract or
other written instrument, or whose rights are affected by a statute, executive order
or regulation, ordinance, or any other governmental regulation may, before breach
or violation thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a declaration of
his rights or duties, thereunder.

The requirements of an action for declaratory relief are as follows: (1)

there must be a justiciable controversy; (2) the controversy must be
between persons whose interests are adverse; (3) the party seeking
declaratory relief must have a legal interest in the controversy; and (4) the
issue involved must be ripe for judicial determination. [15] We find that the
Petition filed by respondent before the lower court meets these
requirements.
First, the subject of the controversy is the constitutionality of CMO 272003 issued by petitioner Commissioner of Customs. In Smart
Communications v. NTC,[16] we held:
The determination of whether a specific rule or set of rules issued by an
administrative agency contravenes the law or the constitution is within the
jurisdiction of the regular courts. Indeed, the Constitution vests the power of

judicial review or the power to declare a law, treaty, international or

executive agreement, presidential decree, order, instruction, ordinance, or
regulation in the courts, including the regional trial courts. This is within
the scope of judicial power, which includes the authority of the courts to
determine in an appropriate action the validity of the acts of the political
departments. Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and enforceable,
and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Emphasis supplied)

Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v.

Department of Finance Secretary,[17] we said:
xxx [A] legislative rule is in the nature of subordinate legislation, designed to
implement a primary legislation by providing the details thereof. xxx

In addition such rule must be published. On the other hand, interpretative rules are designed to
provide guidelines to the law which the administrative agency is in charge of enforcing.
Accordingly, in considering a legislative rule a court is free to make
three inquiries: (i) whether the rule is within the delegated authority of
the administrative agency; (ii) whether it is reasonable; and (iii) whether
it was issued pursuant to proper procedure. But the court is not free to
substitute its judgment as to the desirability or wisdom of the rule for the legislative
body, by its delegation of administrative judgment, has committed those questions
to administrative judgments and not to judicial judgments. In the case of an
interpretative rule, the inquiry is not into the validity but into the correctness or
propriety of the rule. As a matter of power a court, when confronted with an
interpretative rule, is free to (i) give the force of law to the rule; (ii) go to the
opposite extreme and substitute its judgment; or (iii) give some intermediate
degree of authoritative weight to the interpretative rule. (Emphasis supplied)

Second, the controversy is between two parties that have adverse

interests. Petitioners are summarily imposing a tariff rate that respondent is
refusing to pay.
Third, it is clear that respondent has a legal and substantive interest in
the implementation of CMO 27-2003. Respondent has adequately shown
that, as a regular importer of wheat, on 14 August 2003, it has actually
made shipments of wheat from China to Subic. The shipment was set to
arrive in December 2003. Upon its arrival, it would be subjected to the
conditions of CMO 27-2003. The regulation calls for the imposition of
different tariff rates, depending on the factors enumerated therein. Thus,
respondent alleged that it would be made to pay the 7% tariff applied to
feed grade wheat, instead of the 3% tariff on food grade wheat. In addition,
respondent would have to go through the procedure under CMO 27-2003,
which would undoubtedly toll its time and resources. The lower court
correctly pointed out as follows:
xxx As noted above, the fact that petitioner is precisely into the business of
importing wheat, each and every importation will be subjected to constant
disputes which will result into (sic) delays in the delivery, setting aside of
funds as cash bond required in the CMO as well as the resulting expenses

thereof. It is easy to see that business uncertainty will be a constant

occurrence for petitioner. That the sums involved are not minimal is shown
by the discussions during the hearings conducted as well as in the
pleadings filed. It may be that the petitioner can later on get a refund but such
has been foreclosed because the Collector of Customs and the Commissioner of
Customs are bound by their own CMO. Petitioner cannot get its refund with the said
agency. We believe and so find that Petitioner has presented such a stake in the
outcome of this controversy as to vest it with standing to file this petition.
[18]
(Emphasis supplied)

Finally, the issue raised by respondent is ripe for judicial determination,

because litigation is inevitable[19] for the simple and uncontroverted reason
that respondent is not included in the enumeration of flour millers classified
as food grade wheat importers. Thus, as the trial court stated, it would have
to file a protest case each time it imports food grade wheat and be
subjected to the 7% tariff.
It is therefore clear that a petition for declaratory relief is the right
remedy given the circumstances of the case.
Considering that the questioned regulation would affect the
substantive rights of respondent as explained above, it therefore follows
that petitioners should have applied the pertinent provisions of Book VII,
Chapter 2 of the Revised Administrative Code, to wit:
Section 3. Filing. (1) Every agency shall file with the University of the
Philippines Law Center three (3) certified copies of every rule adopted by it. Rules in
force on the date of effectivity of this Code which are not filed within three (3)
months from that date shall not thereafter be the bases of any sanction against any
party of persons.
xxx xxx xxx

Section 9. Public Participation. - (1) If not otherwise required by law, an

agency shall, as far as practicable, publish or circulate notices of proposed rules and
afford interested parties the opportunity to submit their views prior to the adoption of
any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless the
proposed rates shall have been published in a newspaper of general circulation at least
two (2) weeks before the first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be observed.

When an administrative rule is merely interpretative in nature, its

applicability needs nothing further than its bare issuance, for it gives no real
consequence more than what the law itself has already prescribed. When,
on the other hand, the administrative rule goes beyond merely providing for
the means that can facilitate or render least cumbersome the
implementation of the law but substantially increases the burden of those
governed, it behooves the agency to accord at least to those directly

affected a chance to be heard, and thereafter to be duly informed, before

that new issuance is given the force and effect of law. [20]
Likewise, in Taada v. Tuvera,[21] we held:
The clear object of the above-quoted provision is to give the general
public adequate notice of the various laws which are to regulate their
actions and conduct as citizens. Without such notice and publication, there
would be no basis for the application of the maxim ignorantia legis non excusat. It
would be the height of injustice to punish or otherwise burden a citizen for
the transgression of a law of which he had no notice whatsoever, not even
a constructive one.

Perhaps at no time since the establishment of the Philippine Republic has the
publication of laws taken so vital significance that at this time when the people have
bestowed upon the President a power heretofore enjoyed solely by the legislature.
While the people are kept abreast by the mass media of the debates and
deliberations in the Batasan Pambansa and for the diligent ones, ready access to
the legislative records no such publicity accompanies the law-making process of the
President. Thus, without publication, the people have no means of knowing
what presidential decrees have actually been promulgated, much less a
definite way of informing themselves of the specific contents and texts of
such decrees. (Emphasis supplied)

Because petitioners failed to follow the requirements enumerated by

the Revised Administrative Code, the assailed regulation must be struck
down.
Going now to the content of CMO 27-3003, we likewise hold that it is
unconstitutional for being violative of the equal protection clause of the
Constitution.
The equal protection clause means that no person or class of persons
shall be deprived of the same protection of laws enjoyed by other persons
or other classes in the same place in like circumstances. Thus, the
guarantee of the equal protection of laws is not violated if there is a
reasonable classification. For a classification to be reasonable, it must be
shown that (1) it rests on substantial distinctions; (2) it is germane to the
purpose of the law; (3) it is not limited to existing conditions only; and (4) it
applies equally to all members of the same class. [22]
Unfortunately, CMO 27-2003 does not meet these requirements. We do
not see how the quality of wheat is affected by who imports it, where it is
discharged, or which country it came from.
Thus, on the one hand, even if other millers excluded from CMO 272003 have imported food grade wheat, the product would still be declared
as feed grade wheat, a classification subjecting them to 7% tariff. On the
other hand, even if the importers listed under CMO 27-2003 have imported
feed grade wheat, they would only be made to pay 3% tariff, thus depriving
the state of the taxes due. The regulation, therefore, does not become
disadvantageous to respondent only, but even to the state.
It is also not clear how the regulation intends to monitor more closely
wheat importations and thus prevent their misclassification. A careful study

of CMO 27-2003 shows that it not only fails to achieve this end, but results
in the opposite. The application of the regulation forecloses the possibility
that other corporations that are excluded from the list import food grade
wheat; at the same time, it creates an assumption that those who meet the
criteria do not import feed grade wheat. In the first case, importers are
unnecessarily burdened to prove the classification of their wheat imports;
while in the second, the state carries that burden.
Petitioner Commissioner of Customs also went beyond his powers
when the regulation limited the customs officers duties mandated by
Section 1403 of the Tariff and Customs Law, as amended. The law provides:
Section 1403. Duties of Customs Officer Tasked to Examine, Classify, and
Appraise Imported Articles. The customs officer tasked to examine, classify, and
appraise imported articles shall determine whether the packages designated
for examination and their contents are in accordance with the declaration
in the entry, invoice and other pertinent documents and shall make return
in such a manner as to indicate whether the articles have been truly and
correctly declared in the entry as regard their quantity, measurement,
weight, and tariff classification and not imported contrary to law. He shall
submit samples to the laboratory for analysis when feasible to do so and when such
analysis is necessary for the proper classification, appraisal, and/or admission into
the Philippines of imported articles.
Likewise, the customs officer shall determine the unit of quantity in
which they are usually bought and sold, and appraise the imported
articles in accordance with Section 201 of this Code.
Failure on the part of the customs officer to comply with his duties shall
subject him to the penalties prescribed under Section 3604 of this Code.

The provision mandates that the customs officer must first assess and
determine the classification of the imported article before tariff may be
imposed. Unfortunately, CMO 23-2007 has already classified the article even
before the customs officer had the chance to examine it. In effect, petitioner
Commissioner of Customs diminished the powers granted by the Tariff and
Customs Code with regard to wheat importation when it no longer required
the customs officers prior examination and assessment of the proper
classification of the wheat.
It is well-settled that rules and regulations, which are the product of a
delegated power to create new and additional legal provisions that have the
effect of law, should be within the scope of the statutory authority granted
by the legislature to the administrative agency. It is required that the
regulation be germane to the objects and purposes of the law; and that it be
not in contradiction to, but in conformity with, the standards prescribed by
law.[23]
In summary, petitioners violated respondents right to due process in
the issuance of CMO 27-2003 when they failed to observe the requirements
under the Revised Administrative Code. Petitioners likewise violated
respondents right to equal protection of laws when they provided for an
unreasonable classification in the application of the regulation. Finally,
petitioner Commissioner of Customs went beyond his powers of delegated
authority when the regulation limited the powers of the customs officer to
examine and assess imported articles.

WHEREFORE, in view of the foregoing, the Petition is DENIED.

SO ORDERED.