LEGAL RESEARCH

MANILA PRINCE HOTEL VS. GSIS

Note: The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the
grant of rights, privileges, and concessions covering the national economy
and patrimony, the State shall give preference to qualified Filipinos,

Pursuant to the privatization program of the government, GSIS decided to

sell 30-51% of the Manila Hotel Corporation. Two bidders participated, MPH
and Malaysian Firm Renong Berhad. MPHs bid was at P41.58/per share
while RBs bid was at P44.00/share. RB was the highest bidder hence it was
logically considered as the winning bidder but is yet to be declared so.
Pending declaration, MPH matches RBs bid and invoked the Filipino First
policy enshrined under par. 2, Sec. 10, Art. 12 of the 1987 Constitution**,
but GSIS refused to accept. In turn MPH filed a TRO to avoid the
perfection/consummation of the sale to RB.
RB then assailed the TRO issued in favor of MPH arguing among others that:
Par. 2, Sec. 10, Art. 12 of the 1987 Constitution needs an implementing law
because it is merely a statement of principle and policy (not self-executing);
Even if said passage is self-executing, Manila Hotel does not fall under
national patrimony.
ISSUE: Whether or not RB should be admitted as the highest bidder and
hence be proclaimed as the legit buyer of shares.
HELD: No. MPH should be awarded the sale pursuant to Art 12 of the 1987
Const. This is in light of the Filipino First Policy.
Par. 2, Sec. 10, Art. 12 of the 1987 Constitution is self executing. The
Constitution is the fundamental, paramount and supreme law of the nation,
it is deemed written in every statute and contract.

Manila Hotel falls under national patrimony. Patrimony in its plain and
ordinary meaning pertains to heritage. When the Constitution speaks of
national patrimony, it refers not only to the natural resources of the
Philippines, as the Constitution could have very well used the term natural
resources, but also to the cultural heritage of the Filipinos. It also refers to
our intelligence in arts, sciences and letters. Therefore, we should develop
not only our lands, forests, mines and other natural resources but also the
mental ability or faculty of our people. Note that, for more than 8 decades
(9 now) Manila Hotel has bore mute witness to the triumphs and failures,
loves and frustrations of the Filipinos; its existence is impressed with public
interest; its own historicity associated with our struggle for sovereignty,
independence and nationhood.
Herein resolved as well is the term Qualified Filipinos which not only pertains
to individuals but to corporations as well and other juridical
entities/personalities. The term qualified Filipinos simply means that
preference shall be given to those citizens who can make a viable
contribution to the common good, because of credible competence and
efficiency. It certainly does NOT mandate the pampering and preferential
treatment to Filipino citizens or organizations that are incompetent or
inefficient, since such an indiscriminate preference would be
counterproductive and inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a
choice has to be made between a qualified foreigner and a qualified
Filipino, the latter shall be chosen over the former.
**Section 10. The Congress shall, upon recommendation of the economic
and planning agency, when the national interest dictates, reserve to citizens
of the Philippines or to corporations or associations at least sixty per centum
of whose capital is owned by such citizens, or such higher percentage as
Congress may prescribe, certain areas of investments. The Congress shall
enact measures that will encourage the formation and operation of
enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national
economy and patrimony, the State shall give preference to qualified
Filipinos.

The State shall regulate and exercise authority over foreign investments
within its national jurisdiction and in accordance with its national goals and
priorities.

Article 7of the Civil Code

Laws are repealed only by subsequent ones, and their violation or non
observance shall not be excused by disuse or custom or practice to the
contrary.
When the courts declared a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid
only when they are not contrary to the laws of the Constitution.
Statues
A statute is a written law passed by a legislature on the state or federal leve
l. Statutes setforth general propositions of law that courts apply to specific s
ituations. A statute mayforbid certain act, direct a certain act, make a declar
ation, or set forth governmental mechanisms to aid society.

SOURCE OF LEGISLATIVE POWERS ?

Article 2 of the Civil Code

Laws shall take effect after 15 days following the completion of their
publication either in the official gazette or in the newspapers of general
circulation in the Philippines, unless it is otherwise provided (as amended by
E.O. No. 200)

Gonzales vs COMELEC
G.R. No. L-28196 = 21 SCRA 774
November 9, 1967

Petitioner: Ramon A. Gonzalez / Philippine Constitution Association

(PHILCONSA)
Respondent: Commission on Elections (COMELEC)
FACTS: This case is composed of consolidated cases filed separately by
Petitioner Gonzalez and PHILCONSA assailing for the declaration of nullity of
RA. No. 4913 and R.B.H. No. 1 and 3. On March 16, 1967, the Senate and the
House of Representatives passed the following resolutions (Resolution of
Both Houses/R.B.H.):
1. R.B.H No. 1: Proposes that Sec 5, Art VI of Constitution be amended so as
to increase the membership of the House of Representatives from a
maximum of 120 in accordance with the present Constitution, to a
maximum of 180, to be apportioned among several provinces and that each
province shall have at least one (1) member.
2. R.B.H. No. 2: Calls for a convention to propose amendments to the
Constitution, which will be composed of two (2) elective delegates from
each representative district, to be "elected in the general elections to be
held on the second Tuesday of November 1971.
3. R.B.H. No. 3: Proposes that Sec 16, Art VI of the Constitution be amended
so as to authorize Senators and Members of the House of Representatives to
become delegates to the aforementioned constitutional convention, without
the need to forfeit their respective seats in Congress.

Subsequently, Congress passed a bill, which became RA No. 4913, providing

that the amendments to the Constitution proposed in the aforementioned
Resolutions No. 1 and 3 be submitted, for approval by the people at the
general elections on November 14, 1967. This act fixes the date and
manner of election for the proposed amendments to be voted upon by the
people, and appropriates funds for said election.
Petitioners assail the validity/constitutionality of RA No. 4913 and for the
prohibition with preliminary injunction to restrain COMELEC from
implementing or complying with the said law. PHILCONSA also assails R.B.H
No. 1 and 3.
ISSUE:
1.) Whether or not RA No. 4913 ( act submitting to the filipino people for
approval the amendments to the constitution of the Philippines proposed by
the congress of the Philippines in resolutions of both houses numbered one
and three adopted on march sixteen, nineteen hundred and sixty-seven)is
unconstitutional.
2.) Whether or not the issue involves a political question.
HELD:
1.) Pursuant to Article XV of the 1935 Constitution, SC held that there is
nothing in this provision that states that the election referred to is special,
different from the general election. The Congress deemed it best to submit
the amendments for ratification in accordance with the provisions of the
Constitution. It does not negate its authority to submit proposed
amendments for ratification in general elections. Petition is
therefore DENIED.
2.) SC also noted that the issue is a political question because it attacks
the wisdom of the action taken by Congress and not the authority to take it.
A political question is not subject to review by the Court.

GR. NO 85481
TAN VS. BAR

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 85481-82 October 18, 1990

WILLIAM TAN, JOAQUIN TAN LEH and VICENTE TAN, petitioners,
vs.
HERNANI T. BARRIOS, in his capacity as State Prosecutor, Department of
Justice, THE CITY FISCAL OF CAGAYAN DE ORO CITY, THE HONORABLE
LEONARDO N. DEMECILLO, Presiding Judge of the Regional Trial Court,
Branch 24, Cagayan De Oro City, and THE PEOPLE OF THE
PHILIPPINES, respondents.

GRIO-AQUINO, J.:
On the basis of Proclamation No. 1081 dated September 21, 1972, then
President Ferdinand E. Marcos, thru General Order No. 8 dated September
27, 1972, authorized the AFP Chief of Staff to create military tribunals "to try
and decide cases of military personnel and such other cases as may be
referred to them."
In General Order No. 21 dated September 30, 1972, the military tribunals,
"exclusive of the civil courts," were vested with jurisdiction among others,
over violations of the law on firearms, and other crimes which were directly
related to the quelling of rebellion and the preservation of the safety and
security of the Republic.
In General Order No. 12-b dated November 7, 1972, "crimes against persons
. . . as defined and penalized in the Revised Penal Code" were added to the
jurisdiction of military tribunals/commissions.

Subsequently, General Order No. 49, dated October 11, 1974, redefined the
jurisdiction of the Military Tribunals. The enumeration of offenses cognizable
by such tribunals excluded crimes against persons as defined and penalized
in the Revised Penal Code. However, although civil courts should have
exclusive jurisdiction over such offenses not mentioned in Section 1 of G.O.
No. 49, Section 2 of the same general order provided that "the President
may, in the public interest, refer to a Military Tribunal a case falling under
the exclusive jurisdiction of the civil courts" and vice versa.
On April 17, 1975, the three petitioners, with twelve (12) others, were
arrested and charged in Criminal Case No. MC-1-67 entitled, "People of the
Philippines vs. Luis Tan alias Tata alias Go Bon Hoc, et al." before the Military
Commission No. 1, for the crimes of:
(1) murder through the use of an unlicensed or illegally possessed firearm,
penalized under Article 248 of the Revised Penal Code, in relation to Section
1, par. 6 of General Order No. 49, for the killing on August 25, 1973 of
Florentino Lim of tile wealthy Lim Ket Kai family of Cagayan de Oro City; and
(2) unlawful possession, control, and custody of a pistol, caliber .45 SN1283521 with ammunition, in violation of General Orders Nos. 6 and 7 in
relation to Presidential Decree No. 9.
The accused were:
1. Luis Tan alias Tata alias Go Bon Hoc
2. Ang Tiat Chuan alias Chuana
3. Mariano Velez, Jr.
4. Antonio Occaciones
5. Leopoldo Nicolas
6. Enrique Labita
7. Oscar Yaun
8. Joaquin Tan Leh alias Go Bon Huat alias Taowie
9. Eusebio Tan alias Go Bon Ping
10. Vicente Tan alias Go Bon Beng alias Donge

11. Alfonso Tan alias Go Bon Tiak

12. Go E Kuan alias Kunga
13. William Tan alias Go Bon Ho
14. Marciano Benemerito alias Marcing alias Dodong
15. Manuel Beleta, and
16. John Doe (Annex A, Petition).
(Names italicized are the petitioners herein.)
Because the case was a "cause clbre" in Cagayan de Oro City, President
Marcos, pursuant to the recommendation of Defense Secretary Juan Ponce
Enrile, withdrew his earlier order (issued in response to the requests of the
defendants' lawyers) to transfer the case to the civil courts. Hence, the case
was retained in the military court (Annexes A to C of
Supplemental/Amended Petition, pp. 72-88, Rollo). All the accused were
detained without bail in the P.C. Stockade in Camp Crame.
Upon arraignment on May 6, 1975, all the accused pleaded "not guilty."
Manuel Beleta was discharged to be used as a state witness. He was
released from detention on May 5, 1975 (p. 4, Rollo).
Almost daily trials were held for more than thirteen (13) months.
The testimonies of 45 prosecution witnesses and 35 defense witnesses filled
up twenty-one (21) volumes of transcripts consisting of over 10,000 pages
(p. 75, Rollo).
On June 10, 1976, a decision entitled "Findings and Sentence," was
promulgated by the Military Commission finding five (5) of the accused
namely:
1. Luis Tan
2. Ang Tiat Chuan
3. Mariano Velez, Jr.
4. Antonio Occaciones, and
5. Leopoldo Nicolas

Guilty of MURDER. Each of them was sentenced to suffer an indeterminate

prison term of from seventeen (17) years, four (4) months, and twenty-one
(21) days, to twenty (20) years.
A sixth accused, Marciano Benemerito, was found guilty of both MURDER
and ILLEGAL POSSESSION OF FIREARM, and was sentenced to suffer the
penalty of death by electrocution (Annex B, Petition).
Eight (8) of the accused, namely:
1. Oscar Yaun
2. Enrique Labita
3. Eusebio Tan
4. Alfonso Tan
5. Go E Kuan
6. William Tan (petitioner herein)
7. Joaquin Tan Leh (petitioner herein) and
8. Vicente Tan (petitioner herein)
Were acquitted of the charges, and released on June 11, 1976 (p. 8, Rollo).
On January 17, 1981, Proclamation No. 2045 ended martial rule and
abolished the military tribunals and commissions.
On May 22, 1987, this Court promulgated a decision in Olaguer vs. Military
Commission No. 34, et al. (150 SCRA 144), vacating the sentence rendered
on December 4, 1984 by Military Commission No. 34 against Olaguer, et al.
and declaring that military commissions and tribunals have no jurisdiction,
even during the period of martial law, over civilians charged with criminal
offenses properly cognizable by civil courts, as long as those courts are
open and functioning as they did during the period of martial law. This Court
declared unconstitutional the creation of the military commissions to try
civilians, and annulled all their proceedings as follows:

Due process of law demands that in all criminal prosecutions

(where the accused stands to lose either his life or his liberty), the
accused shall be entitled to, among others, a trial. The trial
contemplated by the due process clause of the Constitution, in relation to
the Charter as a whole, is a trial by judicial process, not by executive or
military process, Military commissions or tribunals, by whatever name they
are called, are not courts within the Philippine judicial system. ...
xxx xxx xxx
Moreover, military tribunals pertain to the Executive Department of the
Government and are simply instrumentalities of the executive power,
provided by the legislature for the President as Commander in-Chief to aid
him in properly commanding the army and navy and enforcing discipline
therein, and utilized under his orders or those of his authorized military
representatives. Following the principle of separation of powers
underlying the existing constitutional organization of the
Government of the Philippines, the power and the duty of
interpreting the laws (as when an individual should be considered
to have violated the law) is primarily a function of the judiciary. It is
not, and it cannot be the function of the Executive Department, through the
military authorities. And as long as the civil courts in the land remain open
and are regularly functioning, as they do so today and as they did during
the period of martial law in the country, military tribunals cannot try and
exercise jurisdiction over civilians for offenses committed by them and
which are properly cognizable by the civil courts. To have it otherwise
would be a violation of the constitutional right to due process of
the civilian concerned. (Olaguer, et al. vs. Military Commission No. 34,
150 SCRA 144, 158-160.)
In October 1986, several months after the EDSA revolution, six (6) habeas
corpus petitions were filed in this Court by some 217 prisoners 1 in the
national penitentiary, who had been tried for common crimes and convicted
by the military commissions during the nine-year span of official martial rule
(G.R. Nos. 75983, 79077, 79599-79600, 79862 and 80565 consolidated and
entitled Manuel R. Cruz, et al. vs. Minister Juan Ponce Enrile, et al., 160
SCRA 700). The petitioners asked the Court to declare unconstitutional
General Order No. 8 creating the military tribunals, annul the proceedings
against them before these bodies, and grant them a retrial in the civil courts
where their right to due process may be accorded respect.

Conformably with the ruling in Olaguer, this Court in Cruz vs. Enrile (160
SCRA 700), nullified the proceedings leading to the conviction of nonpolitical detainees who should have been brought before the courts of
justice as their offenses were totally unrelated to the insurgency sought to
be controlled by martial rule.
The Court
(1) Granted the petition for habeas corpus and ordered the release
of those of some who had fully served their sentences, or had been
acquitted, or had been granted amnesty;
(2) dismissed the petitions of those who were military personnel;
and
(3) Nullified the proceedings against those who were convicted and
still serving the sentences meted to them by the military courts,
but, without ordering their release, directed the Department of
Justice to file the necessary informations against them in the
proper civil courts. The dispositive part of the decision reads:
Wherefore the petition is hereby GRANTED insofar as petitioners
Virgilio Alejandrino, 2Domingo Reyes, Antonio Pumar, Teodoro
Patono, Andres Parado, Daniel Campus, 3 Reynaldo C. Reyes and
Rosalino de los Santos, 4 are concerned. The Director of the Bureau
of Prisons is hereby ordered to affect the immediate release of the
abovementioned petitioners, unless there are other legal causes
that may warrant their detention.
The petition is DISMISSED as to petitioners Elpidio Cacho, William
Lorenzana, Benigno Bantolino, Getulio G. Braga, Jr., Tomas C. Amarte,
Rogelio L. Caricungan, Ernesto Baradiel, Isabelo Narne, Eric F. Pichay, Pablo
Callejo, Russel A. Paulino, Laurel Lamaca, Tirso F. Bala, Calixto Somera,
Edulino Lacsina (Draftee), Ronnie A. Celiz, Elpidio Urbano, Sofronio Galo,
Aquilino Leyran, Leopoldo Arcadio, Rolando Tudin Rosendo I. Ramos Pacifico
Batacan, Edilberto Liberato, Jimmy C. Realis. Democrito Lorana who are all
military personnel.

As to the other petitioners, the Department of Justice is hereby

DIRECTED TO FILE the necessary informations against them in the
courts having jurisdiction over the offenses involved, within one
hundred eighty (180) days from notice of this decision, without
prejudice to the reproduction of the evidence submitted by the
parties and admitted by the Military Commission. If eventually
convicted, the period of the petitioners' detention shall be credited in their
favor.
The Courts wherein the necessary informations are filed are DIRECTED TO
CONDUCT with dispatch the necessary proceedings inclusive of those for the
grant of bail which may be initiated by the accused. (Cruz, et al. vs. Enrile,
et al., 160 SCRA 700, 711-712.)
On September 15, 1988, Secretary of Justice Sedfrey Ordoez issued
Department Order No. 226 designating State Prosecutor Hernani Barrios "to
collaborate with the City Fiscal of Cagayan de Oro City in the
investigation/reinvestigation of Criminal Case No. MC-1-67 and, if the
evidence warrants, to prosecute the case in the court of competent
jurisdiction" (Annex C, Petition). On November 15, 1988, State Prosecutor
Barrios was designated Acting City Fiscal of Cagayan de Oro City in hell of
the regular fiscal who inhibited himself (p. 66, Rollo).
Without conducting an investigation/reinvestigation, Fiscal Barrios filed on
December 9, 1988, in the Regional Trial Court of Cagayan de Oro City two
(2) informations for:
1. Illegal Possession of Firearm docketed as Crim. Case No. 88-824; and
2. Murder docketed as Crim. Case No. 88-825 against all the 15 original
defendants in Criminal Case No. MC-1-67 including those who had already
died 5 (Annexes D and E, Petition)
The State Prosecutor incorrectly certified in the informations that:
This case is filed in accordance with the Supreme Court Order in the case
of Cruz, et al. vs. Ponce Enrile in G.R. Nos. 75983, 79077, 79599, 79600,
79862 and 80565 as all accused are detained 6 except those that are
already dead. (p. 7, Rollo.)

He recommended bail of P50,000 for each of the accused in the two cases
(p. 8, Rollo). Later, he increased the recommended bail to P140,000 for each
accused in the firearm case (Crim. Case No. 88-824). In the murder case
(Crim. Case No. 88-825), he recommended that the bail be increased to
P250,000 for each of the accused, except Luis Tan, Ang Tiat Chuan, and
Mariano Velez, Jr., for whom he recommended no bail. Still later, on October
28, 1988, he recommended no bail for all the accused (pp. 8-9,
Rollo) because of the presence of two aggravating circumstances;
(1) prize or reward; and (2) use of a motor vehicle (p. 65, Rollo).
Criminal Cases Nos. 88-824 and 88-825 of the RTC, Cagayan de Oro City,
were assigned by raffle to the sala of RTC Judge Leonardo N. Demecillo.
Before issuing warrants for the arrest of the accused, Judge Demecillo
issued an order on October 26, 1988, requiring State Prosecutor Barrios to
submit certified copies of "the supporting affidavits of the previous cases
wherever they are now," and of the Supreme Court order "which is the basis
of filing the above-entitled cases, within five (5) days from receipt" of his
said order (Annex F, Petition). The State Prosecutor has not complied
with that order for, as a matter of fact, there is no Supreme Court
order to re-file the criminal cases against the herein petitioners
and their twelve (12) co accused in Crim. Case No. MC-1-67 of the
now defunct Military Commission No. 1, because none of them,
except Antonio Occaciones, were parties in theCruz vs.
Enrile habeas corpus cases (160 SCRA 700).
On November 7, 1988, William Tan, Joaquin Tan Leh and Vicente Tan filed
this petition for certiorari and prohibition praying that the informations in
Crim. Cases Nos. 88-824 and 88-825, and the order of respondent Judge
dated October 26, 1988 be annulled, and that the public respondents or any
other prosecution officer "be permanently enjoined from indicting,
prosecuting and trying them anew for the offenses charged therein because
they had already been acquitted of the same by Military Commission No. 1
in Crim. Case No. MC-1-67" (p. 23, Rollo).
On November 23, 1988, the First Division of this Court dismissed the
petition for being premature as:

... the petitioners have not yet filed a motion to quash the allegedly invalid
informations in Criminal Cases Nos. 88-824 and 88825 (Annexes D and E)
whose annulment they seek from this Court (Sec. 3, Rule 117, 1985 Rules on
Criminal Procedure). The filing in the lower court of such motion is the plain,
speedy and adequate remedy of the petitioners. The existence of that
remedy (which they have not yet availed of) bars their recourse to the
special civil actions of certiorari and prohibition in this Court (Sec. 1, Rule
65, Rules of Court (p. 41, Rollo.)
Upon the petitioners' filing a motion for reconsideration informing this Court
that the lower court had issued warrants for their arrest (p. 48, Rollo), we
issued a temporary restraining order on January 16, 1989 enjoining the
respondents from implementing the orders of arrest and ordering them to
comment on the petition (p. 50, Rollo).
The petitioners allege that State Prosecutor Barrios exceeded his jurisdiction
and gravely abused his discretion in reprosecuting them upon the supposed
authority of Cruz vs. Enrile for the following reasons:
1. The decision in Cruz vs. Enrile does not in fact direct the filing of
informations by the Secretary of Justice against THOSE who, like the
petitioners, WERE ACQUITTED after court martial proceedings during the
period of martial law.
2. The decision in Cruz vs. Enrile does not apply to the petitioners who were
not parties in that case, who were not heard, and over whom the court did
not acquire jurisdiction.
3. The reprosecuting of the petitioners would violate their right to protection
against double jeopardy.
4. The State is estopped from reprosecuting the petitioners after they had
been acquitted by the military tribunal which the State itself had clothed
with jurisdiction to try and decide the criminal cases against them. The
State may not retroactively divest of jurisdiction the military tribunal that
tried and acquitted them (pp. 14-15, Petition).
5. The retroactive invalidation of the jurisdiction of the military court that
acquitted the petitioners would amount to an ex post facto ruling (p. 81,
Rollo, Supplemental Petition).

6. The information against the petitioners in Crim. Case No. 88-825 is null
and void because it was filed without a prior preliminary investigation, nor a
finding of probable cause, nor the written approval of the Chief State
Prosecutor (Secs. 3 and 4, Rule 112, 1985 Rules on Criminal Procedure).
In his Comment dated February 1, 1985 (should be 1989), Fiscal Barrios
disclosed that the information in Criminal Case No. 88-824 for illegal
possession of firearm was "already withdrawn by the prosecution at a
hearing on January 27, 1988" (should be 1989?) (pp. 66-68, Rollo). The
reason for dropping the charge is not stated. It may be because Benemerito,
the gunman who was convicted of this felony and sentenced to death by the
Military Commission, is already dead-possibly executed. Hence, only the
information for murder (Crim. Case No. 88-825) against the petitioners and
twelve (12) others, including those already dead, is pending in the lower
court (p. 37, Rollo). He defended the reprosecuting of the petitioners on the
ground that it will not constitute double jeopardy because the nullity of the
jurisdiction of the military tribunal that acquitted them prevented the first
jeopardy from attaching, thereby nullifying their acquittal. For the same
reason, res judicata is not applicable. Neither prescription, because "it had
been interrupted by the filing of the earlier charge sheets with the Military
Commission" (p. 67, Rollo).
The Solicitor General, in his separate comment, argued that the proceedings
involving civilians before a military commission were null and void because
we ruled in Olaguer that military tribunals are bereft of jurisdiction over
civilians, hence, their decisions, whether of conviction or acquittal, do not
bar re-prosecution for the same crime before a civil court (p. 102, Rollo).
The petition is meritorious. The public respondents gravely abused their
discretion and acted without or in excess of their jurisdiction in
misconstruing the third paragraph of the dispositive portion of this Court's
decision in Cruz vs. Enrile as their authority to refile in the civil court the
criminal actions against petitioners who had been tried and acquitted by
Military Commission No. 1 during the period of martial law. It is an
unreasonable application of Cruz vs. Enrile, for the decision therein will be
searched in vain for such authority to reprosecuting every civilian who had
ever faced a court martial, much less those who had been acquitted by such
bodies more than a decade ago like the petitioners Tan, et al. herein.

The decision in Cruz vs. Enrile would be an instrument of oppression and

injustice unless given a limited application only to the parties/petitioners
therein who sought the annulment of the court martial proceedings against
themselves and prayed for a retrial in the civil courts of the criminal cases
against them. They alone are affected by the judgment in Cruz vs. Enrile,
not all and sundry who at one time or another had been tried and sentenced
by a court martial during the period of martial law.
Res inter alios judicatae nullum aliis praejudicium faciunt. "Matters
adjudged in a cause do not prejudice those who were not parties to it." (54
C.J. 719.) It is a cardinal rule of procedure that a court's judgment or order in
a case shall not adversely affect persons who were not parties to the self
same case (Icasiano vs. Tan, 84 Phil. 860). Hence, this court's
pronouncement in Cruz vs. Enrile nullifying the proceedings in military
courts against the civilian petitioners therein and ordering the refiling of
informations against them in the proper civil courts, may not affect the
rights of persons who were not parties in that case and who, not having
submitted to the court's jurisdiction, did not have their day in court
(Busacay vs. Buenaventura, 94 Phil, 1033). Their reprosecution, based on
the decision in Cruz vs. Enrile in which they took no part and were not
heard, would be violative of their right to due process, the same right of the
petitioners in Cruz vs. Enrile that this Court endeavored to protect when it
nullified the proceedings against them in the military tribunals by applying
the Olaguer doctrine that the trial of civilians by military process was not
due process. 7
There is, however, a perceptible lack of consistency in the application of the
Olaguer doctrine to Cruz vs. Enrilewhich needs to be rectified. For, although
the Court nullified the proceedings against the civilians-petitioners who
were still serving their sentences after conviction by the military courts and
commissions, and we directed the Secretary of Justice to file the necessary
informations against them in the proper civil courts, we did not nullify the
court martial proceedings against the other civilians petitioners who: (1) had
finished serving their sentences; (2) had been granted amnesty; or (3) had
been acquitted by the military courts. We did not order their reprosecution,
retrial, and resentencing by the proper civil courts. We set them free.

In effect, the Court applied one rule for those civilians who were
convicted by the military courts and were still serving their
sentences, and another rule for those who were acquitted, or
pardoned, or had finished the service of their sentences. The Court
applied a rule of retroactive invalidity to the first group (whom the
Court ordered to be reprosecuted before the proper civil courts)
and another of prospective invalidity for the others (whom the
Court ordered to be released from custody).
In the interest of justice and consistency, we hold
that Olaguer should, in principle, be applied prospectively only to
future cases and cases still ongoing or not yet final when that
decision was promulgated. Hence, there should be no retroactive
nullification of final judgments, whether of conviction or acquittal,
rendered by military courts against civilians before the
promulgation of the Olaguer decision. Such final sentences should
not be disturbed by the State. Only in particular cases where the
convicted person or the State shows that there was serious denial
of the Constitutional rights of the accused should the nullity of the
sentence be declared and a retrial be ordered based on the
violation of the constitutional rights of the accused, and not on the
Olaguer doctrine. If a retrial, is no longer possible, the accused should be
released since the judgment against him is null on account of the violation
of his constitutional rights and denial of due process.

It may be recalled that Olaguer was rescued from a court martial

which sentenced him to death without receiving evidence in his
defense. It would be a cruel distortion of the Olaguer decision to use it as
authority for reprosecuting civilians regardless of whether, unlike Olaguer,
they had been accorded a fair trial and regardless of whether they have
already been acquitted and released, or have accepted the sentences
imposed on them and commenced serving the same. Not everybody who
was convicted by a military court, much less those who were acquitted and
released, desires to undergo the ordeal of a second trial for the same
offense, albeit in a civil court. Indeed, why should one who has accepted the
justness of the verdict of a military court, who is satisfied that he had a fair
hearing, and who is willing to serve his sentence in full, be dragged through
the harrow of another hearing in a civil court to risk being convicted a
second time perchance to serve a heavier penalty? Even if there is a chance
of being acquitted the second time around, it would be small comfort for the
accused if he is held without bail pending the completion of his second trial
which may take as long as, if not longer than, the sentence he has been
serving or already served.
The trial of thousands of civilians for common crimes before
military tribunals and commissions during the ten-year period of
martial rule (1971-1981) which were created under general orders
issued by President Marcos in the exercise of his legislative powers, is
an operative fact that may not be justly ignored. The belated declaration in
1987 of the unconstitutionality and invalidity of those proceedings did not
erase the reality of their consequences which occurred long before our
decision in Olaguer was promulgated and which now prevent us from
carryingOlaguer to the limit of its logic. Thus, did this Court rule
in Municipality of Malabang vs. Benito, 27 SCRA 533, where the question
arose as to whether the declaration of nullity of the creation of a
municipality by executive order wiped out all the acts of the local
government thus abolished:
In Norton vs. Shelby Count, Mr. Justice Field said: 'An unconstitutional act is
not a law; it confers no rights; it imposes no duties; it affords no protection;
it creates no office; it is, in legal contemplation, as inoperative as though it
had never been passed.' Accordingly, he held that bonds issued by a board
of commissioners created under an invalid statute were unenforceable.

Executive Order 386 'created no office.' This is not to say, however, that the
acts done by the municipality of Balabagan in the exercise of its corporate
powers are a nullity because the executive order is, in legal contemplation,
as inoperative as though it had never been passed.' For the existence of
Executive Order 386 is 'an operative fact which cannot justly be ignored.' As
Chief Justice Hughes explained in Chicot County Drainage District vs. Baxter
State Bank:
'The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no duties, and hence
affording no basis for the challenged decree. Norton vs. Shelby County, 118
U.S. 425, 442; Chicago, I. & L. Ry. Co. vs. Hackett, 228 U.S. 559, 566. It is
quite clear, however, that such broad statements as to the effect of a
determination of unconstitutionality must be taken with qualifications. The
actual existence of a statute, prior to such a determination, is an operative
fact and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various
aspects-with respect to particular relations, individual and corporate, and
particular conduct, private and official. Questions of rights claimed to have
become vested, of status, of prior determinations deemed to have finality
and acted upon accordingly, of public policy in the light of the nature both
of the statute and of its previous application, demand examination. These
questions are among the most difficult of those which have engaged the
attention of courts, state and federal, and it is manifest from numerous
decisions that an all-inclusive statement of a principle of absolute
retroactive invalidity, cannot be justified.
There is then no basis for the respondents' apprehension that the
invalidation of the executive order creating Balabagan would have the effect
of unsettling many an act done in reliance upon the validity of the creation
of that municipality. (Municipality of Malabang vs. Benito, 27 SCRA 533)

The doctrine of "operative facts" applies to the proceedings against the

petitioners and their co-accused before Military Commission No. 1. The
principle of absolute invalidity of the jurisdiction of the military courts over
civilians should not be allowed to obliterate the "operative facts" that in the
particular case of the petitioners, the proceedings were fair, that there were
no serious violations of their constitutional right to due process, and that the
jurisdiction of the military commission that heard and decided the charges
against them during the period of martial law, had been affirmed by this
Court (Aquino vs. Military Commission No. 2, 63 SCRA 546) years before the
Olaguer case arose and came before us.
Because of these established operative facts, the refilling of the information
against the petitioners would place them in double jeopardy, in hard fact if
not in constitutional logic.

The doctrine of double jeopardy protects the accused from

harassment by the strong arm of the State:
The constitutional mandate is (thus) a rule of finality. A single prosecution
for any offense is all the law allows. It protects an accused from harassment,
enables him to treat what had transpired as a closed chapter in his life,
either to exult in his freedom or to be resigned to whatever penalty is
imposed, and is a bar to unnecessary litigation, in itself time-consuming and
expense-producing for the state as well. It has been referred to as 'res
judicata in prison grey.' The ordeal of a criminal prosecution is inflicted only
once, not whenever it pleases the state to do so. (Fernando, The
Constitution of the Philippines, 2nd Ed., pp. 722-723.)
Furthermore, depriving the petitioners of the protection of the judgment of
acquittal rendered by the military commission in their particular case by
retroactively divesting the military commission of the jurisdiction it had
exercised over them would amount to an ex post facto law or ruling, again,
in sharp reality if not in strict constitutional theory. An ex-post facto law or
rule, is one which
1. Makes criminal an act done before the passage of the law and which was
innocent when done, and punishes such an act;

2. aggravates a crime, or makes it greater than it was, when committed;

3. Changes the punishment and inflicts a greater punishment than the law
annexed to the crime when committed;
4. alters the legal rules of evidence, and authorizes conviction upon less or
different testimony than the law required at the time of the commission of
the offense;
5. assuming to regulate civil rights and remedies only, in effect imposes
penalty or deprivation of a right for something which when done was lawful;
and,
6. Deprives a person accused of a crime of some lawful protection to which
he has become entitled, such as the protection of a former conviction or
acquittal, or a proclamation of amnesty. (In re: Kay Villegas Kami, Inc., 35
SCRA 428, 431)

Article IV, Section 22, of the 1987 Constitution prohibits the

enactment of an ex post facto law or bill of attainder.
We need not discuss the petitioners' final argument that the information
against them is invalid because there was no preliminary investigation, no
finding of probable cause by the investigating fiscal and no prior approval of
the information by the City Fiscal before it was filed.
WHEREFORE, the petition for certiorari and prohibition is granted.
Respondent State Prosecutor and the Presiding Judge of the
Regional Trial Court, Branch 24, at Cagayan de Oro City, are hereby
ordered to discharge the petitioners from the information in
Criminal Case No. 88-825. The temporary restraining order which
we issued on January 16, 1989 is hereby made permanent. No
costs.
SO ORDERED.
Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Cortes, Medialdea and Regalado, JJ., concur.

Fernan, C.J., took no part.

GR NO. 166006
PLANTERS PRODUCTS (PETITIONER) VS. FERTIPHIL CORP
(RESPONDENT)

THE Regional Trial Courts (RTC) have the authority and jurisdiction to
consider the constitutionality of statutes, executive orders, presidential
decrees and other issuances. The Constitution vests that power not only in
the Supreme Court but in all Regional Trial Courts.

The principle is relevant in this petition for review on certiorari of the

Decision[1] of the Court of Appeals (CA) affirming with modification that
of the RTC in Makati City,[2] finding petitioner Planters Products, Inc.
(PPI) liable to private respondent Fertiphil Corporation (Fertiphil)
for the levies it paid under Letter of Instruction (LOI) No. 1465.

The Facts
Petitioner PPI and private respondent Fertiphil are private corporations
incorporated under Philippine laws.[3] They are both engaged in the
importation and distribution of fertilizers, pesticides and
agricultural chemicals.

On June 3, 1985, then President Ferdinand Marcos, exercising his

legislative powers, issued LOI No. 1465 which provided, among
others, for the imposition of a capital recovery component (CRC) on
the domestic sale of all grades of fertilizers in the Philippines.
[4]
The LOI provides:

3. The Administrator of the Fertilizer Pesticide Authority to include in its

fertilizer pricing formula a capital contribution component of not less
thanP10 per bag. This capital contribution shall be collected until
adequate capital is raised to make PPI viable. Such capital
contribution shall be applied by FPA to all domestic sales of fertilizers in
the Philippines.

Pursuant to the LOI, Fertiphil paid P10 for every bag of fertilizer it sold in the
domestic market to the Fertilizer and Pesticide Authority (FPA). FPA then
remitted the amount collected to the Far East Bank and Trust Company, the
depositary bank of PPI. Fertiphil paid P6,689,144 to FPA from July 8,
1985 to January 24, 1986.[6]
After the 1986 Edsa Revolution, FPA voluntarily stopped the
imposition of the P10 levy. With the return of democracy, Fertiphil
demanded from PPI a refund of the amounts it paid under LOI No.
1465, but PPI refused to accede to the demand.

Fertiphil filed a complaint for collection and damages against FPA

and PPI with the RTC in Makati. It questioned the constitutionality
of LOI No. 1465 for being unjust, unreasonable, oppressive, and
invalid and an unlawful imposition that amounted to a denial of due
process of law. Fertiphil alleged that the LOI solely favored PPI, a privately
owned corporation, which used the proceeds to maintain its monopoly of
the fertilizer industry.
In its Answer, FPA, through the Solicitor General, countered that the
issuance of LOI No. 1465 was a valid exercise of the police power of the
State in ensuring the stability of the fertilizer industry in the country. It also
averred that Fertiphil did not sustain any damage from the LOI because the
burden imposed by the levy fell on the ultimate consumer, not the seller.
RTC Disposition. On November 20, 1991, the RTC rendered judgment in
favor of Fertiphil, disposing as follows:
WHEREFORE, in view of the foregoing, the Court hereby renders
judgment in favor of the plaintiff and against the defendant
Planters Product, Inc., ordering the latter to pay the former:
1) the sum of P6,698,144.00 with interest at 12% from the time of judicial
demand;
2)

the sum of P100,000 as attorneys fees;

3)

the cost of suit.

SO ORDERED.
Ruling that the imposition of the P10 CRC was an exercise of the States
inherent power of taxation, the RTC invalidated the levy for violating the
basic principle that taxes can only be levied for public purpose, viz.:

It is apparent that the imposition of P10 per fertilizer bag sold in the country
by LOI 1465 is purportedly in the exercise of the power of taxation. It is a
settled principle that the power of taxation by the state is
plenary. Comprehensive and supreme, the principal check upon its abuse
resting in the responsibility of the members of the legislature to their
constituents. However, there are two kinds of limitations on the power
of taxation: the inherent limitations and the constitutional
limitations.
One of the inherent limitations is that a tax may be levied only for public
purposes: The power to tax can be resorted to only for a
constitutionally valid public purpose. By the same token, taxes may
not be levied for purely private purposes, for building up of private fortunes,
or for the redress of private wrongs. They cannot be levied for the
improvement of private property, or for the benefit, and promotion of
private enterprises, except where the aid is incident to the public benefit. It
is well-settled principle of constitutional law that no general tax can be
levied except for the purpose of raising money which is to be expended for
public use. Funds cannot be exacted under the guise of taxation to promote
a purpose that is not of public interest. Without such limitation, the
power to tax could be exercised or employed as an authority to
destroy the economy of the people. A tax, however, is not held void on
the ground of want of public interest unless the want of such interest is
clear. (71 Am. Jur. pp. 371-372)

In the case at bar, the plaintiff paid the amount

of P6,698,144.00 to the Fertilizer and Pesticide Authority pursuant
to the P10 per bag of fertilizer sold imposition under LOI 1465
which, in turn, remitted the amount to the defendant Planters
Products, Inc. thru the latters depository bank, Far East Bank and
Trust Co. Thus, by virtue of LOI 1465 the plaintiff, Fertiphil
Corporation, which is a private domestic corporation, became
poorer by the amount of P6,698,144.00 and the defendant, Planters
Product, Inc., another private domestic corporation, became richer
by the amount of P6,698,144.00.

Tested by the standards of constitutionality as set forth in the aforequoted jurisprudence, it is quite evident that LOI 1465 insofar as it imposes
the amount of P10 per fertilizer bag sold in the country and orders that the
said amount should go to the defendant Planters Product, Inc. is unlawful
because it violates the mandate that a tax can be levied only for a public
purpose and not to benefit, aid and promote a private enterprise such as
Planters Product, Inc.[12]

PPI moved for reconsideration but its motion was denied. PPI
then filed a notice of appeal with the RTC but it failed to pay the
requisite appeal docket fee. In a separate but related proceeding,
this Court allowed the appeal of PPI and remanded the case to the
CA for proper disposition.
LIS MOTA
Latin term meaning the cause or motivation of a legal action or
lawsuit. The literal translation is "litigation moved".
The cause of the suit or action. By this term is understood the commen
cement ofthe controversy, and the beginning of the suit.
CA Decision
On November 28, 2003, the CA handed down its decision affirming with
modification that of the RTC, with the following fallo:
IN VIEW OF ALL THE FOREGOING, the decision appealed from is
hereby AFFIRMED, subject to the MODIFICATION that the award of attorneys
fees is hereby DELETED.
In affirming the RTC decision, the CA ruled that the lis mota of the
complaint for collection was the constitutionality of LOI No. 1465, thus:
The question then is whether it was proper for the trial court to
exercise its power to judicially determine the constitutionality of the subject
statute in the instant case.
As a rule, where the controversy can be settled on other grounds, the
courts will not resolve the constitutionality of a law (Lim v. Pacquing, 240
SCRA 649 [1995]). The policy of the courts is to avoid ruling on
constitutional questions and to presume that the acts of political

departments are valid, absent a clear and unmistakable showing to the

contrary.
However, the courts are not precluded from exercising such power
when the following requisites are obtaining in a controversy before it:
First, there must be before the court an actual case calling for the
exercise of judicial review. Second, the question must be ripe for
adjudication. Third, the person challenging the validity of the act must
have standing to challenge. Fourth, the question of constitutionality must
have been raised at the earliest opportunity; and lastly, the issue of
constitutionality must be the very lis mota of the case (Integrated Bar of the
Philippines v. Zamora,338 SCRA 81 [2000]).

Indisputably, the present case was primarily instituted for collection and
damages. However, a perusal of the complaint also reveals that the instant
action is founded on the claim that the levy imposed was an unlawful and
unconstitutional special assessment. Consequently, the requisite that the
constitutionality of the law in question be the very lis mota of the case is
present, making it proper for the trial court to rule on the constitutionality of
LOI 1465.
The CA held that even on the assumption that LOI No. 1465
was issued under the police power of the state, it is still
unconstitutional because it did not promote public welfare. The CA
explained:
In declaring LOI 1465 unconstitutional, the trial court held that the
levy imposed under the said law was an invalid exercise of the
States power of taxation inasmuch as it violated the inherent and
constitutional prescription that taxes be levied only for public
purposes. It reasoned out that the amount collected under the levy
was remitted to the depository bank of PPI, which the latter used
to advance its private interest.

On the other hand, appellant submits that the subject statutes

passage was a valid exercise of police power. In addition, it disputes the
courta quos findings arguing that the collections under LOI 1465 was for
the benefit of Planters Foundation, Incorporated (PFI), a foundation created
by law to hold in trust for millions of farmers, the stock ownership of PPI.

Of the three fundamental powers of the State, the exercise of police

power has been characterized as the most essential, insistent and the least
limitable of powers, extending as it does to all the great public needs. It
may be exercised as long as the activity or the property sought to be
regulated has some relevance to public welfare (Constitutional Law, by
Isagani A. Cruz, p. 38, 1995 Edition).

Vast as the power is, however, it must be exercised within the limits
set by the Constitution, which requires the concurrence of a lawful subject
and a lawful method. Thus, our courts have laid down the test to determine
the validity of a police measure as follows: (1) the interests of the public
generally, as distinguished from those of a particular class,
requires its exercise; and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly
oppressive upon individuals (National Development Company v.
Philippine Veterans Bank, 192 SCRA 257 [1990]).

It is upon applying this established tests that we sustain the trial

courts holding LOI 1465 unconstitutional. To be sure, ensuring the
continued supply and distribution of fertilizer in the country is an
undertaking imbued with public interest. However, the method by which
LOI 1465 sought to achieve this is by no means a measure that will
promote the public welfare. The governments commitment to support
the successful rehabilitation and continued viability of PPI, a private
corporation, is an unmistakable attempt to mask the subject statutes
impartiality. There is no way to treat the self-interest of a favored
entity, like PPI, as identical with the general interest of the countrys farmers
or even the Filipino people in general. Well to stress, substantive due
process exacts fairness and equal protection disallows distinction where
none is needed. When a statutes public purpose is spoiled by private
interest, the use of police power becomes a travesty which must be struck
down for being an arbitrary exercise of government power. To rule in favor
of appellant would contravene the general principle that revenues derived
from taxes cannot be used for purely private purposes or for the exclusive
benefit of private individuals.[17]

The CA did not accept PPIs claim that the levy imposed under LOI No.
1465 was for the benefit of Planters Foundation, Inc., a foundation created
to hold in trust the stock ownership of PPI. The CA stated:

Appellant next claims that the collections under LOI 1465 was for the
benefit of Planters Foundation, Incorporated (PFI), a foundation created by
law to hold in trust for millions of farmers, the stock ownership of PFI on the
strength of Letter of Undertaking (LOU) issued by then Prime Minister Cesar
Virata on April 18, 1985 and affirmed by the Secretary of Justice in an
Opinion dated October 12, 1987, to wit:
Upon the effective date of this Letter of Undertaking, the Republic shall
cause FPA to include in its fertilizer pricing formula a capital recovery
component, the proceeds of which will be used initially for the purpose of
funding the unpaid portion of the outstanding capital stock of Planters
presently held in trust by Planters Foundation, Inc. (Planters Foundation),
which unpaid capital is estimated at approximately P206 million (subject to
validation by Planters and Planters Foundation) (such unpaid portion of the
outstanding capital stock of Planters being hereafter referred to as the
Unpaid Capital), and subsequently for such capital increases as may be
required for the continuing viability of Planters.

The capital recovery component shall be in the minimum amount

of P10 per bag, which will be added to the price of all domestic sales of
fertilizer in the Philippines by any importer and/or fertilizer mother company.
In this connection, the Republic hereby acknowledges that the advances by
Planters to Planters Foundation which were applied to the payment of the
Planters shares now held in trust by Planters Foundation, have been
assigned to, among others, the Creditors. Accordingly, the Republic,
through FPA, hereby agrees to deposit the proceeds of the capital recovery
component in the special trust account designated in the notice dated April
2, 1985, addressed by counsel for the Creditors to Planters
Foundation. Such proceeds shall be deposited by FPA on or before the
15th day of each month.

The capital recovery component shall continue to be charged and

collected until payment in full of (a) the Unpaid Capital and/or (b) any
shortfall in the payment of the Subsidy Receivables, (c) any carrying cost
accruing from the date hereof on the amounts which may be outstanding
from time to time of the Unpaid Capital and/or the Subsidy Receivables and
(d) the capital increases contemplated in paragraph 2 hereof. For the
purpose of the foregoing clause (c), the carrying cost shall be at such rate
as will represent the full and reasonable cost to Planters of servicing its
debts, taking into account both its peso and foreign currency-denominated
obligations. (Records, pp. 42-43)

Appellants proposition is open to question, to say the least. The

LOU issued by then Prime Minister Virata taken together with the Justice
Secretarys Opinion does not preponderantly demonstrate that the
collections made were held in trust in favor of millions of
farmers. Unfortunately for appellant, in the absence of sufficient evidence
to establish its claims, this Court is constrained to rely on what is explicitly
provided in LOI 1465 that one of the primary aims in imposing the levy is
to support the successful rehabilitation and continued viability of PPI.
PPI moved for reconsideration but its motion was denied. It then
filed the present petition with this Court.

Issues

Petitioner PPI raises four issues for Our consideration, viz.:

- THE CONSTITUTIONALITY OF LOI 1465 CANNOT BE COLLATERALLY
ATTACKED AND BE DECREED VIA A DEFAULT JUDGMENT IN A CASE FILED
FOR COLLECTION AND DAMAGES WHERE THE ISSUE OF
CONSTITUTIONALITY IS NOT THE VERY LIS MOTA OF THE CASE. NEITHER
CAN LOI 1465 BE CHALLENGED BY ANY PERSON OR ENTITY
WHICH HAS NO STANDING TO DO SO.

- LOI 1465, BEING A LAW IMPLEMENTED FOR THE PURPOSE OF

ASSURING THE FERTILIZER SUPPLY AND DISTRIBUTION IN THE
COUNTRY, AND FOR BENEFITING A FOUNDATION CREATED BY LAW TO
HOLD IN TRUST FOR MILLIONS OF FARMERS THEIR STOCK OWNERSHIP IN
PPI CONSTITUTES A VALID LEGISLATION PURSUANT TO THE EXERCISE OF
TAXATION AND POLICE POWER FOR PUBLIC PURPOSES.
- THE AMOUNT COLLECTED UNDER THE CAPITAL RECOVERY COMPONENT
WAS REMITTED TO THE GOVERNMENT, ANDBECAME GOVERNMENT
FUNDS PURSUANT TO AN EFFECTIVE AND VALIDLY ENACTED LAW WHICH
IMPOSED DUTIESAND CONFERRED RIGHTS BY VIRTUE OF THE PRINCIPLE
OF OPERATIVE FACT PRIOR TO ANY DECLARATION OF
UNCONSTITUTIONALITY OF LOI 1465.
- THE PRINCIPLE OF UNJUST VEXATION (SHOULD BE ENRICHMENT) FINDS
NO APPLICATION IN THE INSTANT CASE.
OUR RULING
We shall first tackle the procedural issues of locus standi and the
jurisdiction of the RTC to resolve constitutional issues.
Fertiphil has locus standi because it suffered direct injury; doctrine
of standing is a mere procedural technicality which may be waived.
PPI argues that Fertiphil has no locus standi to question the
constitutionality of LOI No. 1465 because it does not have a
personal and substantial interest in the case or will sustain direct
injury as a result of its enforcement. It asserts that Fertiphil did not
suffer any damage from the CRC imposition because incidence of the levy
fell on the ultimate consumer or the farmers themselves, not on the seller
fertilizer company.

We cannot agree. The doctrine of locus standi or the right of appearance in

a court of justice has been adequately discussed by this Court in a catena of
cases. Succinctly put, the doctrine requires a litigant to have a material
interest in the outcome of a case. In private suits, locus standi requires a
litigant to be a real party in interest, which is defined as the party who
stands to be benefited or injured by the judgment in the suit or the party
entitled to the avails of the suit.[23]

In public suits, this Court recognizes the difficulty of applying the doctrine
especially when plaintiff asserts a public right on behalf of the general
public because of conflicting public policy issues. On one end, there is the
right of the ordinary citizen to petition the courts to be freed from unlawful
government intrusion and illegal official action. At the other end, there is
the public policy precluding excessive judicial interference in official acts,
which may unnecessarily hinder the delivery of basic public services.
In this jurisdiction, we have adopted the direct injury test to
determine locus standi in public suits. In People v. Vera ]it was held that
a person who impugns the validity of a statute must have a
personal and substantial interest in the case such that he has
sustained, or will sustain direct injury as a result. The direct injury
test in public suits is similar to the real party in interest rule for private
suits under Section 2, Rule 3 of the 1997 Rules of Civil Procedure.
Recognizing that a strict application of the direct injury test may hamper
public interest, this Court relaxed the requirement in cases of
transcendental importance or with far reaching implications. Being a
mere procedural technicality, it has also been held that locus standi may be
waived in the public interest.
Whether or not the complaint for collection is characterized as a
private or public suit, Fertiphil has locus standi to file it. Fertiphil
suffered a direct injury from the enforcement of LOI No. 1465. It
was required, and it did pay, the P10 levy imposed for every bag of
fertilizer sold on the domestic market. It may be true that Fertiphil has
passed some or the entire levy to the ultimate consumer, but that does not
disqualify it from attacking the constitutionality of the LOI or from seeking a
refund. As seller, it bore the ultimate burden of paying the levy. It faced the
possibility of severe sanctions for failure to pay the levy. The fact of
payment is sufficient injury to Fertiphil.

Moreover, Fertiphil suffered harm from the enforcement of the LOI because
it was compelled to factor in its product the levy. The levy certainly rendered
the fertilizer products of Fertiphil and other domestic sellers much more
expensive. The harm to their business consists not only in fewer clients
because of the increased price, but also in adopting alternative corporate
strategies to meet the demands of LOI No. 1465. Fertiphil and other
fertilizer sellers may have shouldered all or part of the levy just to be
competitive in the market. The harm occasioned on the business of Fertiphil
is sufficient injury for purposes of locus standi.
Even assuming arguendo that there is no direct injury, We find that the
liberal policy consistently adopted by this Court onlocus standi must
apply. The issues raised by Fertiphil are of paramount public importance. It
involves not only the constitutionality of a tax law but, more importantly,
the use of taxes for public purpose. Former President Marcos issued LOI No.
1465 with the intention of rehabilitating an ailing private company. This is
clear from the text of the LOI. PPI is expressly named in the LOI as the
direct beneficiary of the levy. Worse, the levy was made dependent and
conditional upon PPI becoming financially viable. The LOI provided that the
capital contribution shall be collected until adequate capital is raised to
make PPI viable.
The constitutionality of the levy is already in doubt on a plain
reading of the statute. It is Our constitutional duty to squarely
resolve the issue as the final arbiter of all justiciable
controversies. The doctrine of standing, being a mere procedural
technicality, should be waived, if at all, to adequately thresh out an
important constitutional issue.
RTC may resolve constitutional issues; the constitutional issue was
adequately raised in the complaint; it is the lis mota of the case.
PPI insists that the RTC and the CA erred in ruling on the constitutionality of
the LOI. It asserts that the constitutionality of the LOI cannot be collaterally
attacked in a complaint for collection. Alternatively, the resolution of the
constitutional issue is not necessary for a determination of the complaint for
collection.

Fertiphil counters that the constitutionality of the LOI was adequately

pleaded in its complaint. It claims that the constitutionality of LOI No. 1465
is the very lis mota of the case because the trial court cannot determine its
claim without resolving the issue.[30]
It is settled that the RTC has jurisdiction to resolve the constitutionality of a
statute, presidential decree or an executive order. This is clear from Section
5, Article VIII of the 1987 Constitution, which provides:

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

(2)
Review, revise, reverse, modify, or affirm on appeal or certiorari, as
the law or the Rules of Court may provide, final judgments and orders of
lower courts in:

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

In Mirasol v. Court of Appeals,[31] this Court recognized the power of

the RTC to resolve constitutional issues, thus:
On the first issue. It is settled that Regional Trial Courts have the authority
and jurisdiction to consider the constitutionality of a statute, presidential
decree, or executive order. 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
not only in this Court, but in all Regional Trial Courts. [32]
In the recent case of Equi-Asia Placement, Inc. v. Department of Foreign
Affairs,[33] this Court reiterated:

There is no denying that regular courts have jurisdiction over cases

involving the validity or constitutionality of a rule or regulation issued by
administrative agencies. Such jurisdiction, however, is not limited to the
Court of Appeals or to this Court alone for even the regional trial courts can
take cognizance of actions assailing a specific rule or set of rules
promulgated by administrative bodies. 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. [34]
Judicial review of official acts on the ground of unconstitutionality may be
sought or availed of through any of the actions cognizable by courts of
justice, not necessarily in a suit for declaratory relief. Such review may be
had in criminal actions, as inPeople v. Ferrer[35] involving the
constitutionality of the now defunct Anti-Subversion law, or in ordinary
actions, as in Krivenko v. Register of Deeds[36] involving the constitutionality
of laws prohibiting aliens from acquiring public lands. The constitutional
issue, however, (a) must be properly raised and presented in the
case, and (b) its resolution is necessary to a determination of the case, i.e.,
the issue of constitutionality must be the very lis mota presented.[37]

Contrary to PPIs claim, the constitutionality of LOI No. 1465 was properly
and adequately raised in the complaint for collection filed with the RTC. The
pertinent portions of the complaint allege:

6. The CRC of P10 per bag levied under LOI 1465 on domestic sales of all
grades of fertilizer in the Philippines, is unlawful, unjust, uncalled for,
unreasonable, inequitable and oppressive because:
(c) It favors only one private domestic corporation, i.e., defendant PPPI,
and imposed at the expense and disadvantage of the other fertilizer
importers/distributors who were themselves in tight business situation and
were then exerting all efforts and maximizing management and marketing
skills to remain viable;

(e) It was a glaring example of crony capitalism, a forced program through

which the PPI, having been presumptuously masqueraded as the fertilizer
industry itself, was the sole and anointed beneficiary;
7. The CRC was an unlawful; and unconstitutional special
assessment and its imposition is tantamount to illegal exaction
amounting to a denial of due process since the persons of entities
which had to bear the burden of paying the CRC derived no benefit
therefrom; that on the contrary it was used by PPI in trying to
regain its former despicable monopoly of the fertilizer industry to
the detriment of other distributors and importers. [38] (Underscoring
supplied)

The constitutionality of LOI No. 1465 is also the very lis mota of the
complaint for collection. Fertiphil filed the complaint to compel PPI to refund
the levies paid under the statute on the ground that the law imposing the
levy is unconstitutional. The thesis is that an unconstitutional law is void. It
has no legal effect. Being void, Fertiphil had no legal obligation to pay the
levy. Necessarily, all levies duly paid pursuant to an unconstitutional law
should be refunded under the civil code principle against unjust
enrichment. The refund is a mere consequence of the law being declared
unconstitutional. The RTC surely cannot order PPI to refund Fertiphil if it
does not declare the LOI unconstitutional. It is the unconstitutionality of the
LOI which triggers the refund. The issue of constitutionality is the very lis
mota of the complaint with the RTC.

The P10 levy under LOI No. 1465 is an exercise of the power of taxation.
At any rate, the Court holds that the RTC and the CA did not err in ruling
against the constitutionality of the LOI.
PPI insists that LOI No. 1465 is a valid exercise either of the police power or
the power of taxation. It claims that the LOI was implemented for the
purpose of assuring the fertilizer supply and distribution in the country and
for benefiting a foundation created by law to hold in trust for millions of
farmers their stock ownership in PPI.

Fertiphil counters that the LOI is unconstitutional because it was

enacted to give benefit to a private company. The levy was
imposed to pay the corporate debt of PPI. Fertiphil also argues
that, even if the LOI is enacted under the police power, it is still
unconstitutional because it did not promote the general welfare of
the people or public interest.

Police power and the power of taxation are inherent powers of the
State. These powers are distinct and have different tests for
validity. Police power is the power of the State to enact legislation
that may interfere with personal liberty or property in order to
promote the general welfare, while the power of taxation is the
power to levy taxes to be used for public purpose. The main
purpose of police power is the regulation of a behavior or conduct,
while taxation is revenue generation. The lawful subjects and lawful
means tests are used to determine the validity of a law enacted under the
police power.[40] The power of taxation, on the other hand, is circumscribed
by inherent and constitutional limitations.

We agree with the RTC that the imposition of the levy was an exercise by
the State of its taxation power. While it is true that the power of taxation
can be used as an implement of police power, [41] the primary purpose of the
levy is revenue generation. If the purpose is primarily revenue, or if
revenue is, at least, one of the real and substantial purposes, then the
exaction is properly called a tax.[42]
In Philippine Airlines, Inc. v. Edu,[43] it was held that the imposition of a
vehicle registration fee is not an exercise by the State of its police power,
but of its taxation power, thus:

It is clear from the provisions of Section 73 of Commonwealth Act 123 and

Section 61 of the Land Transportation and Traffic Code that the legislative
intent and purpose behind the law requiring owners of vehicles to pay for
their registration is mainly to raise funds for the construction and
maintenance of highways and to a much lesser degree, pay for the
operating expenses of the administering agency. x x x Fees may be properly
regarded as taxes even though they also serve as an instrument of
regulation.

Taxation may be made the implement of the state's police power (Lutz v.
Araneta, 98 Phil. 148). If the purpose is primarily revenue, or if revenue is,
at least, one of the real and substantial purposes, then the exaction is
properly called a tax. Such is the case of motor vehicle registration
fees. The same provision appears as Section 59(b) in the Land
Transportation Code. It is patent therefrom that the legislators had in mind
a regulatory tax as the law refers to the imposition on the registration,
operation or ownership of a motor vehicle as a tax or fee. x x x Simply
put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the
imposition in Rep. Act 5448 need not be an additional tax. Rep. Act 4136
also speaks of other fees such as the special permit fees for certain types
of motor vehicles (Sec. 10) and additional fees for change of registration
(Sec. 11). These are not to be understood as taxes because such fees are
very minimal to be revenue-raising. Thus, they are not mentioned by Sec.
59(b) of the Code as taxes like the motor vehicle registration fee and
chauffeurs license fee. Such fees are to go into the expenditures of the
Land Transportation Commission as provided for in the last proviso of Sec.
61.[44] (Underscoring supplied)

The P10 levy under LOI No. 1465 is too excessive to serve a mere regulatory
purpose. The levy, no doubt, was a big burden on the seller or the ultimate
consumer. It increased the price of a bag of fertilizer by as much as five
percent.[45] A plain reading of the LOI also supports the conclusion that the
levy was for revenue generation. The LOI expressly provided that the levy
was imposed until adequate capital is raised to make PPI viable.

Taxes are exacted only for a public purpose. The P10 levy is
unconstitutional because it was not for a public purpose. The levy was
imposed to give undue benefit to PPI.

An inherent limitation on the power of taxation is public purpose. Taxes are

exacted only for a public purpose. They cannot be used for purely private
purposes or for the exclusive benefit of private persons. [46] The reason for
this is simple. The power to tax exists for the general welfare; hence,
implicit in its power is the limitation that it should be used only for a public
purpose. It would be a robbery for the State to tax its citizens and use the
funds generated for a private purpose. As an old United States case bluntly
put it: To lay with one hand, the power of the government on the property
of the citizen, and with the other to bestow it upon favored individuals to aid
private enterprises and build up private fortunes, is nonetheless a robbery
because it is done under the forms of law and is called taxation. [47]

The term public purpose is not defined. It is an elastic concept

that can be hammered to fit modern standards. Jurisprudence
states that public purpose should be given a broad
interpretation. It does not only pertain to those purposes which
are traditionally viewed as essentially government functions, such
as building roads and delivery of basic services, but also includes
those purposes designed to promote social justice. Thus, public
money may now be used for the relocation of illegal settlers, lowcost housing and urban or agrarian reform.
While the categories of what may constitute a public purpose are
continually expanding in light of the expansion of government functions, the
inherent requirement that taxes can only be exacted for a public purpose
still stands. Public purpose is the heart of a tax law. When a tax law is only
a mask to exact funds from the public when its true intent is to give undue
benefit and advantage to a private enterprise, that law will not satisfy the
requirement of public purpose.

The purpose of a law is evident from its text or inferable from other
secondary sources. Here, We agree with the RTC and that CA that the levy
imposed under LOI No. 1465 was not for a public purpose.

First, the LOI expressly provided that the levy be imposed to benefit PPI, a
private company. The purpose is explicit from Clause 3 of the law, thus:

3. The Administrator of the Fertilizer Pesticide Authority to include in its

fertilizer pricing formula a capital contribution component of not less
thanP10 per bag. This capital contribution shall be collected until adequate
capital is raised to make PPI viable. Such capital contribution shall be
applied by FPA to all domestic sales of fertilizers in the Philippines.
[48]
(Underscoring supplied)

It is a basic rule of statutory construction that the text of a statute should be

given a literal meaning. In this case, the text of the LOI is plain that the levy
was imposed in order to raise capital for PPI. The framers of the LOI did not
even hide the insidious purpose of the law. They were cavalier enough to
name PPI as the ultimate beneficiary of the taxes levied under the LOI. We
find it utterly repulsive that a tax law would expressly name a private
company as the ultimate beneficiary of the taxes to be levied from the
public. This is a clear case of crony capitalism.

Second, the LOI provides that the imposition of the P10 levy was conditional
and dependent upon PPI becoming financially viable. This suggests that
the levy was actually imposed to benefit PPI. The LOI notably does not fix a
maximum amount when PPI is deemed financially viable. Worse, the
liability of Fertiphil and other domestic sellers of fertilizer to pay the levy is
made indefinite. They are required to continuously pay the levy until
adequate capital is raised for PPI.

Third, the RTC and the CA held that the levies paid under the LOI were
directly remitted and deposited by FPA to Far East Bank and Trust Company,
the depositary bank of PPI.[49] This proves that PPI benefited from the LOI. It
is also proves that the main purpose of the law was to give undue benefit
and advantage to PPI.

Fourth, the levy was used to pay the corporate debts of PPI. A reading of
the Letter of Understanding[50] dated May 18, 1985 signed by then Prime
Minister Cesar Virata reveals that PPI was in deep financial problem because
of its huge corporate debts. There were pending petitions for rehabilitation
against PPI before the Securities and Exchange Commission. The
government guaranteed payment of PPIs debts to its foreign creditors. To
fund the payment, President Marcos issued LOI No. 1465. The pertinent
portions of the letter of understanding read:

Republic of the Philippines

Office of the Prime Minister
Manila

LETTER OF UNDERTAKING

May 18, 1985

TO: THE BANKING AND FINANCIAL INSTITUTIONS

LISTED IN ANNEX A HERETO WHICH ARE
CREDITORS (COLLECTIVELY, THE CREDITORS)
OF PLANTERS PRODUCTS, INC. (PLANTERS)

Gentlemen:

This has reference to Planters which is the principal importer and

distributor of fertilizer, pesticides and agricultural chemicals in the
Philippines. As regards Planters, the Philippine Government confirms its
awareness of the following: (1) that Planters has outstanding obligations in
foreign currency and/or pesos, to the Creditors, (2) that Planters is currently
experiencing financial difficulties, and (3) that there are presently pending
with the Securities and Exchange Commission of the Philippines a petition
filed at Planters own behest for the suspension of payment of all its
obligations, and a separate petition filed by Manufacturers Hanover Trust
Company, Manila Offshore Branch for the appointment of a rehabilitation
receiver for Planters.

In connection with the foregoing, the Republic of the Philippines (the

Republic) confirms that it considers and continues to consider Planters as
a major fertilizer distributor. Accordingly, for and in consideration of your
expressed willingness to consider and participate in the effort to rehabilitate
Planters, the Republic hereby manifests its full and unqualified support of
the successful rehabilitation and continuing viability of Planters, and to that
end, hereby binds and obligates itself to the creditors and Planters, as
follows:

2. Upon the effective date of this Letter of Undertaking, the Republic shall
cause FPA to include in its fertilizer pricing formula a capital recovery
component, the proceeds of which will be used initially for the purpose of
funding the unpaid portion of the outstanding capital stock of Planters
presently held in trust by Planters Foundation, Inc. (Planters Foundation),
which unpaid capital is estimated at approximately P206 million (subject to
validation by Planters and Planters Foundation) such unpaid portion of the
outstanding capital stock of Planters being hereafter referred to as the
Unpaid Capital), and subsequently for such capital increases as may be
required for the continuing viability of Planters.

The capital recovery component shall continue to be charged and collected

until payment in full of (a) the Unpaid Capital and/or (b) any shortfall in the
payment of the Subsidy Receivables, (c) any carrying cost accruing from the
date hereof on the amounts which may be outstanding from time to time of
the Unpaid Capital and/or the Subsidy Receivables, and (d) the capital
increases contemplated in paragraph 2 hereof. For the purpose of the
foregoing clause (c), the carrying cost shall be at such rate as will
represent the full and reasonable cost to Planters of servicing its debts,
taking into account both its peso and foreign currency-denominated
obligations.

REPUBLIC OF THE PHILIPPINES

By:
(signed)
CESAR E. A. VIRATA
Prime Minister and Minister of Finance

It is clear from the Letter of Understanding that the levy was imposed
precisely to pay the corporate debts of PPI. We cannot agree with PPI that
the levy was imposed to ensure the stability of the fertilizer industry in the
country. The letter of understanding and the plain text of the LOI clearly
indicate that the levy was exacted for the benefit of a private corporation.

All told, the RTC and the CA did not err in holding that the levy imposed
under LOI No. 1465 was not for a public purpose. LOI No. 1465 failed to
comply with the public purpose requirement for tax laws.

The LOI is still unconstitutional even if enacted under the police power; it
did not promote public interest.

Even if We consider LOI No. 1695 enacted under the police power of
the State, it would still be invalid for failing to comply with the test of lawful
subjects and lawful means. Jurisprudence states the test as follows: (1)
the interest of the public generally, as distinguished from those of particular
class, requires its exercise; and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly oppressive
upon individuals.[52]
For the same reasons as discussed, LOI No. 1695 is invalid because it
did not promote public interest. The law was enacted to give undue
advantage to a private corporation. We quote with approval the CA
ratiocination on this point, thus:

It is upon applying this established tests that We sustain the trial courts
holding LOI 1465 unconstitutional. To be sure, ensuring the continued supply
and distribution of fertilizer in the country is an undertaking imbued with
public interest. However, the method by which LOI 1465 sought to achieve
this is by no means a measure that will promote the public welfare. The
governments commitment to support the successful rehabilitation and
continued viability of PPI, a private corporation, is an unmistakable attempt
to mask the subject statutes impartiality. There is no way to treat the selfinterest of a favored entity, like PPI, as identical with the general interest of
the countrys farmers or even the Filipino people in general. Well to stress,
substantive due process exacts fairness and equal protection disallows
distinction where none is needed. When a statutes public purpose is
spoiled by private interest, the use of police power becomes a travesty
which must be struck down for being an arbitrary exercise of government
power. To rule in favor of appellant would contravene the general principle
that revenues derived from taxes cannot be used for purely private
purposes or for the exclusive benefit of private individuals. (Underscoring
supplied)

The general rule is that an unconstitutional law is void; the doctrine of

operative fact is inapplicable.

PPI also argues that Fertiphil cannot seek a refund even if LOI No. 1465 is
declared unconstitutional. It banks on the doctrine of operative fact, which
provides that an unconstitutional law has an effect before being declared
unconstitutional. PPI wants to retain the levies paid under LOI No. 1465
even if it is subsequently declared to be unconstitutional.

We cannot agree. It is settled that no question, issue or argument will be

entertained on appeal, unless it has been raised in the court a quo.[53] PPI
did not raise the applicability of the doctrine of operative fact with
the RTC and the CA. It cannot belatedly raise the issue with Us in order to
extricate itself from the dire effects of an unconstitutional law.

At any rate, We find the doctrine inapplicable. The general rule is that an
unconstitutional law is void. It produces no rights, imposes no duties and
affords no protection. It has no legal effect. It is, in legal contemplation,
inoperative as if it has not been passed. [54] Being void, Fertiphil is not
required to pay the levy. All levies paid should be refunded in accordance
with the general civil code principle against unjust enrichment. The general
rule is supported by Article 7 of the Civil Code, which provides:

ART. 7. Laws are repealed only by subsequent ones, and their

violation or non-observance shall not be excused by disuse or
custom or practice to the contrary.

When the courts declare a law to be inconsistent with the Constitution, the
former shall be void and the latter shall govern.

The doctrine of operative fact, as an exception to the general rule, only

applies as a matter of equity and fair play. [55] It nullifies the effects of an
unconstitutional law by recognizing that the existence of a statute prior to a
determination of unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be
erased by a new judicial declaration. [56]

The doctrine is applicable when a declaration of unconstitutionality will

impose an undue burden on those who have relied on the invalid law. Thus,
it was applied to a criminal case when a declaration of unconstitutionality
would put the accused in double jeopardy [57] or would put in limbo the acts
done by a municipality in reliance upon a law creating it. [58]

Here, We do not find anything iniquitous in ordering PPI to refund the

amounts paid by Fertiphil under LOI No. 1465. It unduly benefited from the
levy. It was proven during the trial that the levies paid were remitted and
deposited to its bank account. Quite the reverse, it would be inequitable and
unjust not to order a refund. To do so would unjustly enrich PPI at the
expense of Fertiphil. Article 22 of the Civil Code explicitly provides that
every person who, through an act of performance by another comes into
possession of something at the expense of the latter without just or legal
ground shall return the same to him. We cannot allow PPI to profit from an
unconstitutional law. Justice and equity dictate that PPI must refund the
amounts paid by Fertiphil.

WHEREFORE, the petition is DENIED. The Court of Appeals

Decision dated November 28, 2003 is AFFIRMED.

SO ORDERED.