I. In General 6. The defendant has remained in possession of the property up respect to the defendant.
the property up respect to the defendant. He did not accept the new rate of
G.R. No. L-32743 February 15, 1974
PRIMITIVO ESPIRITU and LEONORA A. DE ESPIRITU, petitioners,
vs.
RICARDO CIPRIANO and THE COURT OF FIRST INSTANCE, RIZAL,
BRANCH XV, respondents.
ESGUERRA, J.:p
In this petition for certiorari, petitioners seek the review and
nullification of two orders of the Court of First Instance of Rizal, Branch
XV, the first, dated August 4, 1970 sustaining private respondent Ricardo
Cipriano's motion to dismiss "on the authority of Republic Act 6126",
and the second, dated October 16, 1970, denying the motion for
reconsideration of the first order. The question before Us involves the
retroactive application of the provisions of Republic Act 6126, otherwise
known as the Rental Law.
The case originated as one for unlawful detainer instituted on May 30,
1969, by plaintiffs, now petitioners, in the Municipal Court of Pasig,
Rizal, against private respondent Ricardo Cipriano for the latter's alleged
failure to pay rentals. An adverse judgment having been rendered
against said respondent, he appealed to the Court of First Instance of
Rizal where the case was docketed as Civil Case No. 338-M. In the said
Court private respondent sought to amend his Answer filed in the
Municipal Court on the grounds that (1) for lack of time he was not able
to disclose to his former counsel all the material facts surrounding his
case and, therefore, he was not able to fully determine his defenses; and
(2) that prior to the hearing of the case in the lower court he wanted to
cause the filing of an amended answer but was not able to do so for his
alleged failure to contact his counsel. The motion to file amended answer
was denied by the Court. The parties eventually submitted a stipulation
of facts, the salient provisions of which read as follows:
1. The plaintiffs are the owners of the property in question,
leased to the defendant since 1954;
2. The house of the defendant was built on the property with
the knowledge and consent of the plaintiff pursuant to an oral
contract of lease;
3. Before 1969 the lease of the property was on year-to-year
arrangement, rentals being then payable at or before the end of
the year;
4. The following are the rates of rentals:
(a) 1954 to 1957 P12.00 a year
(b) 1968 to 1959 P13.20 a year
(c) 1960 to 1961 P14.00 a year
(d) 1962 P16.00 a year
(e) 1963 to 1965 P24.70 a year
(f) 1967 to 1968 P48.00 a year
5. Effective January 1969 the lease was converted to a month-
to-month basis and rental was increased to P30.00 a month by
the plaintiffs;
to the present;
7. Since January 1969 the defendant has not paid rental at the
present monthly rate;
8. A formal notice to vacate, dated March 22, 1969, was sent by
registered mail to, and received by, defendant.
On July 7, 1970, Judge Vivencio Ruiz of the Court of First Instance of
Rizal issued an order giving private respondent herein seven days
within which to file his motion to dismiss. Subsequently, on July 13,
1970, respondent moved to dismiss petitioner's complaint, invoking the
prohibitory provision of Republic Act 6126, entitled "An Act To Regulate
Rentals of Dwelling Units or of Land On Which Another's Dwelling Is
Located For One Year And Penalizing Violations Thereof.
Petitioners opposed the motion to dismiss but respondent Judge issued
an order on August 4, 1970, which reads:
On the Authority of Republic Act 6126, this Court hereby
sustains the Motion for Dismissal filed by the defendant
through counsel, dated July 13, 1970.
A motion for reconsideration of said order was likewise denied by
respondent Judge. Hence this petition.
Thrust upon Us, therefore, for resolution is the problem of whether
Republic Act 6126 may be held applicable the case at bar. For
convenience We reproduce the pertinent provisions of law in question:
Section 1. No lessor of a dwelling unit or of land on which
another's dwelling is located shall, during the period of one
year from March 31, 1970, increase the monthly rental agreed
upon between the lessor and the lessee prior to the approval of
this Act when said rental does not exceed three hundred pesos
(P300.00) a month.
Section 6. This Act shall take effect upon its approval.
Approved June 17, 1970.
It is the contention of respondent which was upheld by the trial court
that the case at bar is covered by the aforecited law. We rule otherwise.
Established and undisputed is the fact that the increase in the rental of
the lot involved was effected in January, 1969,1 while the law in question
took effect on June 17, 1970, or after a period of one year and a half after
the increase in rentals had been effected. Private respondent, however,
puts forward the argument that there was no perfected contract
covering the increased rate of rentals and conversion thereof into
monthly payments of P30.00 effective January 1969, as he did not give
his consent thereto. In his brief he alleges:
Defendant (respondent) herein also begs to disagree with the
contention of plaintiffs. We believe and respectfully submit that
there would be no impairment of obligation of contract if
Republic Act 6126 were to be applied to the present case. The
alleged new contract of lease and subsequent increase in the
amount of rental were not effected as of January 1969 with
rental. The eloquent testimonies on record to show that
defendant never accepted the new rate of rental imposed upon
him by the plaintiffs were the pretrials on the case wherein
defendant offered to accept the increase to the tone of 100%.
Hence, the new contract of lease increasing the rental had never
been agreed upon by both the plaintiffs and the defendant
because the defendant never gave his consent to the new rate of
rental. In effect, therefore, the alleged new contract of lease was
not a contract at all since it did not have the consent of the
other party, the defendant.
Private respondent's contention is devoid of merit. There is nothing in
the stipulation of facts to show that his consent to the increase in rentals
and change in the manner of payment was essential to its validity. There
was no more subsisting yearly contract of lease at a fixed amount. It had
already expired when the increase and conversion into monthly
payments took effect in January, 1969. The lessor was free to fix a higher
amount than that previously paid by the lessee (private respondent
herein) and if the latter did not agree to the increased amount, he could
have vacated the premises and thus rendered himself free from liability.
Respondent Cipriano, therefore, cannot invoke lack of consent on his
part as basis for declaring the contract of lease ineffective.
Likewise the claim of private respondent that the act is remedial and
may, therefore, be given retroactive effect is untenable. A close study of
the provisions discloses that far from being remedial, the statute affects
substantive rights and hence a strict and prospective construction
thereof is in order. Article 4 of the New Civil Code ordains that laws shall
have no retroactive effect unless the contrary is provided and that where
the law is clear, Our duty is equally plain. We must apply it to the facts as
found.2 The law being a "temporary measure designed to meet a
temporary situation",3 it had a limited period of operation as in fact it
was so worded in clear and unequivocal language that "No lessor of a
dwelling unit or land ... shall, during the period of one year from March 31,
1970, increase the monthly rental agreed upon between the lessor and
lessee prior to the approval of this Act." Hence the prohibition against
the increase in rentals was effective on March, 1970, up to March, 1971.
Outside and beyond that period, the law did not, by the express mandate
of the Act itself, operate. The said law, did not, by its express terms,
purport to give a retroactive operation. It is a well-established rule of
statutory construction that "Expressium facit cessare tacitum"4 and,
therefore, no reasonable implication that the Legislature ever intended
to give the law in question a retroactive effect may be accorded to the
same. A perusal of the deliberations of Congress on House Bill 953 which
became Republic Act No. 6126, as recorded its Congressional Records of
March 5, 1970 reveals the sponsors of the Rental Law did not entertain
for a moment that a retroactive operation would be given to this
enactment. We quote pertinent portions of the discussion:
Remarks of sponsor, Mr. Roces:
Mr. Roces — Mr. Speaker, the President is still observing the
effect of the newly established floating rate. In the meantime we
feel that, in line with the policy that those who have less in life
should have more in law, apartment dwellers are entitled to
protection. Therefore this bill proposes that the rentals paid
today will not be increased in the next 18 months.
and on pages 66 and 72 respectively of the same Congressional Record
We likewise find the following:
Mr. Gonzales — Will the gentleman from Manila interpret for us
the phrase "during the period of 6 months preceding the
approval of this Act" in Section 2?5
Mr. Roces. — My interpretation is that the rent being paid
during that period not before will be the one considered.
Mr. Montano — ... The term moratorium as utilized by the
gentleman from Manila at the start of his sponsorship was
applied not in its legal acceptance but generally. For purposes
of the bill, the term is construed as suspension of increasing
rents in the meantime that we have not yet determined the real
value of the currency ... .
Respondent's tenacious insistence On the retroactive operation of
Republic Act 6126 represents a last ditch effort on his part to hold on to
the premises while at the same time escaping the obligation to pay the
increased rate. We can not countenance such a situation, for to permit
the same to obtain would be sanctioning a sheer absurdity and causing
injustice to the petitioner herein. Well-settled is the principle that while
the Legislature has the power to pass retroactive laws which do not
impair the obligation of contracts, or affect injuriously vested rights, it is
equally true that statutes are not to be construed as intended to have a
retroactive effect so as to affect pending proceedings, unless such intent
in expressly declared or clearly and necessarily implied from the
language of the enactment,6 Similarly, in the case of La Previsora Filipina,
Mutual Building and Loan Association v. Felix Ledda, 66 Phil. 573, 577,
this Court said:
It is a principle generally recognized that civil laws have no
retroactive effect unless it is otherwise provided therein
(Manila Trading & Supply Co. v. Santos, G.R. No. 43861). Act No.
4118 does not state that its provisions shall have retroactive
effect, wherefore, it follows, as it is hereby declared, that it is
not applicable to the contracts entered into by the parties, and,
hence the trial court erred in granting possession to the
petitioner.
The petitioner contends that said law is applicable because
when the property in question was sold at public auction said
law was already in force. This contention is in our opinion
untenable. The date which should be taken into account in
order to determine the applicability of the law is the date when
the contracts were entered into by the parties and not the date
of the public sale, ... .
Under the circumstances of this case, We, therefore, rule that Republic
Act 6126 is not applicable to the case at bar. As the language of the law is
clear and unambiguous, it must be held to mean what it plainly says.
WHEREFORE, the assailed orders of August 4 and October 16, 1970, are
hereby nullified and set aside. The court a quo shall proceed with the
prompt disposition of Civil Case No. 338-M (12285) on the merits in
accordance with Republic Act 6031 if applicable, otherwise under the
prevailing procedure prescribed by the Rules of Court.
Costs against respondent.
Makalintal, C.J., Castro, Teehankee, Makasiar and Muñoz Palma, JJ., concur.
G.R. No. L-23979 August 30, 1968
HOMEOWNERS' ASSOCIATION OF THE PHILIPPINES, INC. and
VICENTE A. RUFINO, petitioners-appellees,
vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL.,
respondents,
ANTONIO J. VILLEGAS, Mayor of the City of Manila, respondent-
appellant.
Ambrosio Padilla Law Offices for petitioners-appellees.
Gregorio A. Ejercito and Felix C. Chavez for respondent respondent-
appellant.
CONCEPCION, C.J.:
This is an action, against the Municipal Board and the Mayor of the City
of Manila, for a declaratory relief. It was brought by the Homeowners'
Association of the Philippines, Inc. and its President, Vicente A. Rufino, to
nullify Municipal Ordinance No. 4841 of the City of Manila, approved on
December 31, 1963, to take effect on January 1, 1964. After appropriate
proceedings, the Court of First Instance of Manila rendered judgment
declaring said ordinance "ultra vires, unconstitutional, illegal and void ab
initio without pronouncement as to costs. Hence, this appeal by the
Mayor of Manila Said Ordinance reads:
AN ORDINANCE REGULATING RENTALS OF LOTS AND
BUILDING FOR RESIDENTIAL PURPOSES.
WHEREAS, in view of the prevailing scarcity of lands and
buildings for residential purposes in the City of Manila and
the present high cost of living, a state of emergency in the the
matter of providing housing accommodations especially for
poor at reasonable rates is hereby declared to exist:
Now, therefore.
SECTION 1. Lessors or sublessors of lands, or parts thereof,
primarily devoted to residential purposes, and persons
claiming title or color of title thereto from such lessors or
sublessors, are hereby prohibited from increasing the rental
to an amount in excess of the proportion, percentage wise, in
the increase of the assessed value of the land leased or
subleased. If only a portion of the land is leased or subleased,
the proportionate value of the leased premises shall be the
basis for determining the maximum rental to which the same
may be increased.
SEC. 2. Lessors or sublessors of buildings, or parts thereof,
primarily devoted to residential purposes, and persons
claiming title or color of title thereto from such lessors or
sublessors, are hereby prohibited from increasing the rentals
to an amount in excess of ten (10) percentum per annum of
the assessed value of the building leased or subleased and of
the land on which the building stands. If only a portion of the
building is leased or subleased, the proportionate assessed
value of the building and the land on which the building
stands shall be the basis for determining the maximum rental
to which the same may be increased.
SEC. 3. This Ordinance shall not apply to contracts of lease or
sublease existing upon its approval and to lands used by, or
to rooms of, boarding house, and lodging houses; PROVIDED,
HOWEVER, That renewals or modifications of such contracts
made on or after the approval of this Ordinance shall be
governed by the provisions hereof.
SEC. 4. Any person violating the provisions of this Ordinance
shall, upon conviction, be punished by a fine of not less than
one hundred (P100.00) pesos nor more than two hundred
(P200.00) pesos and imprisonment for not less than one (1)
month nor more than six (6) months. In the case of juridical
persons, the general manager, director, or any other person
in control thereof shall be liable.
SEC. 5. This Ordinance shall take effect on January 1, 1964.
The lower court struck down the questioned ordinance upon the ground
that the power to "declare a state of emergency ... exclusively pertains to
Congress"; that "there is no longer any state of emergency" which may
justify the regulation of house rentals; that said ordinance disconstitutes
an unreasonable and unjustified limitation on the use of private
properties and arbitrarily encroaches on the constitutional rights of
property owners"; that the power of the City of Manila to "regulate the
business of ... letting or subletting of lands and buildings" does not
include the authority to prohibit what is forbidden in said ordinance;
and that the same cannot be deemed sanctioned by the general welfare
clause in the City Charter.
Although some members of the Court are not prepared either to concede
the alleged power of the City of Manila to declare a state of emergency or
to acknowledge the existence thereof, as a fact, we do not deem it
necessary to pass upon these questions or upon the soundness of the
other points relied upon by His Honor, the trial Judge, on which we
express here no opinion whatsoever. Even if the City had said power and
a state of emergency really existed, the ordinance under consideration
would still be illegal and unconstitutional, for the reasons presently to be
stated.
The authority of municipal corporations to regulate is essentially police
power. Inasmuch as the same generally entails a curtailment of the
liberty, the rights and/or the property of persons, which are protected
and even guaranteed by the Constitution, the exercise of police power is
necessarily subject to a qualification, limitation or restriction demanded
by the regard, the respect and the obedience due to the prescriptions of
the fundamental law, particularly those forming part of the Constitution
of Liberty, otherwise known as the Bill of Rights — the police power
measure must be "reasonable". In other words, individual rights may be
adversely affected by the exercise of police power to the extent only —
and only to the extent — that may fairly be required by the legitimate
demands of public interest or public welfare. If such demands are
brought about by a state of emergency, the interference upon individual
rights, resulting from the regulations adopted to meet the situation,
must be, by and large, co-extensive, co-equal or co-terminous with the
existence thereof. And, since an emergency is by nature temporary in
character, so must the regulations promulgated therefor be. In the
language of Justice Holmes,1 "circumstances may so change in time or
differ in space as to clothe with such an interest2 what at other times or
in other places would be a matter of purely private concern." Or, as the
American Jurisprudence puts it, "a limit in time to tide over a passing
trouble may justify a law that could not be upheld as a permanent
change."3
As a consequence a law or ordinance affecting the rights of individuals,
as a means to tide over a critical condition, to be valid and legal, must be
for a "definite" period of time, the length of which must be "reasonable",
in relation to the nature and duration of the crisis it seeks to overcome
or surmount. Hence, in Rutter v. Esteban4 we declared, on May 18, 1953,
that a moratorium of eight (8) years, given by Republic Act No. 342 to
war damage claimants, from and after the settlement of their war
damage claims, for the payment of their pre-war obligations5 is
"unreasonable, if not oppressive", in the light of "the conditions" then
"prevailing in our country", and that, accordingly said Act was "null and
void and without effect". We further held that "what we say here with
respect to said Act holds true as regards Executive Orders Nos. 256 and
32,7 perhaps with greater force and reason as to the latter, considering
that said Orders contain no limitation whatsoever in point of time as
regards the suspension of the enforcement and effectivity of monetary
obligations". This ruling, it should be noted, was made deliberately and
does not constitute an obiter dictum, for, in the language of the Court,
"there is need to make this pronouncement in view of the revival clause
embodied in said Act if and when it is declared unconstitutional or
invalid".8
The practical reason for the requirement that a statute passed to meet a
given emergency, should limit the period of its effectivity, is that,
otherwise, a new and different law would be necessary to repeal it, and
said period would, accordingly, be "unlimited, indefinite, negative and
uncertain", so that "that which was intended to meet a temporary
emergency may become a permanent law",9 because "Congress might
not enact the repeal, and, even if it would, the repeal might not meet
with the approval of the President, and the Congress might not be able to
override the veto". In line with the basic philosophy underlying the
authority to affect individual rights, this Court felt that Commonwealth
Act No. 671, otherwise known as the Emergency Powers Act, was meant
to be and "became inoperative when Congress met in regular session on
May 25, 1946," and that Executive Orders Nos. 62, 192, 225 and 226 —
promulgated subsequently thereto — "were issued without authority of
law", because, otherwise, said emergency regulations would purport to
be in force for an indefinite and unlimited period of time, and, hence,
would be unconstitutional. 10
The same considerations impelled the Court to invalidate Executive
Order Nos. 545 and 546, issued on November 10, 1952. Indeed,
otherwise "the result would be obvious unconstitutionality", by making
permanent a law intended to afford a relief for a temporary emergency,
the length of which should be "fixed in the law itself and not dependent
upon the arbitrary or elastic will of either Congress or the President". 11
We have not overlooked the fact that the cases adverted to refer
particularly to the constitutional provision 12 authorizing Congress, "in
times of war or other national emergency", to delegate to the President,
"for a limited period", and subject to specified "restrictions", the power
"to promulgate rules and regulations to carry out a declared national
policy". We are inclined to believe, however, that in providing that the
lifetime of the authority given must be "for a limited period", the framers
of our Charter were influenced by the fact that powers were being
delegated to the Executive, as much as by the circumstance that, since
the cause for the grant of power was temporary, so should the grant be,
for the effect cannot remain in existence upon the removal of its cause.
In fact, Congress has, in actual practice, accepted this limitation upon its
exercise of police power to meet a condition of emergency. Thus,
Commonwealth Act No. 499 13 regulated the transfer of vessels and of
shipping facilities, effective until adjournment of the next regular session
of the National Assembly. This was followed by Commonwealth Act No.
689 14 which penalized speculation on rents of buildings destined for
dwelling purposes, but only "for a period of two (2) years after its
approval." This Act was amended by Republic Act No. 6615 which, inter
alia, extended its period of effectivity to "four (4) years after it
approval."
Needless to say, the powers of municipal corporations delegated thereto
by the National Government cannot escape the inherent limitations to
which the latter — as the source of said powers — is subject. Then,
again, since our law on municipal corporations is, in principle, patterned
after that of the United States, the rule therein, to the effect that "in a
proper case, emergency legislation, limited in time, may be enacted
under the police power" of a municipal corporation, 16 should be
considered a part of our legal system.
Appellant assails the validity of the proceedings in the lower court upon
the round that, although petitioners herein had assailed Municipal
Ordinance No. 4841, not merely as ultra vires, but, also, as
unconstitutional, the Solicitor General had been neither heard nor
notified in connection therewith, in violation of Section 4 of Rule 64 of
the Rules of Court.17
It should be noted, however, that appellant did not raise this question or
invoke said Section 4, either in his answer or in a motion to dismiss in
the lower court. Upon the other hand, the City Fiscal of Manila was
notified therein. In fact, he filed a memorandum, apart from the
memorandum submitted by counsel for appellant herein. Neither did his
motion for reconsideration of the appealed decision touch upon said
question, which was raised, for the first time, in a "supplement" to said
motion for reconsideration.
At any rate, the determination of the question whether or not the
Solicitor General should be required to appear "in any action involving
the validity of any treaty, law, ordinance or executive order, rules or
regulation" is a matter left to the "discretion" of the Court, pursuant to
Section 23 of Rule 3 of the Rules of Court. 18 Inasmuch as said
requirement is not mandatory, but discretionary, non-compliance
therewith and with Section 4 of Rule 64 — the interpretation of which
should be harmonized with said Section 23 of Rule 3 — affected neither
the jurisdiction of the trial court nor the validity of the proceedings
therein, in connection with the present case. Thus, in San Buenaventura
vs. Municipality of San Jose, 19 we held:
... that the requirement regarding notification to the
Provincial Fiscal of the pendency of an action involving the
validity of a municipal ordinance, as provided in Sec. 5, Rule
66 of the Rules of Court (now See. 4, Rule 64 of the Revised
Rules of Court), is not jurisdictional; and failure on the part of
petitioner to notify the Provincial Fiscal will not be a
sufficient ground to throw the case out of court. We believe
the purpose of the above-quoted rule is simply to give the
Provincial Fiscal, who is the legal officer of the local
governments, a chance to participate in the deliberation to
determine the validity of a questioned municipal ordinance
before the competent court. If it appears, however, that the
ordinance in question is patently illegal, as in the present
case, and the matter had already been passed upon by a
competent court, the requirements of Sec. 5 of Rule 66 of the
Rules of Court (now See. 4 of Rule 64 of the Revised Rules of
Court) may be dispensed with.
WHEREFORE, the decision appealed from should be as it is hereby
affirmed, with costs against the appellant. It is so ordered. 1äwphï1.ñët
Tolentino vs. Secretary of Finance
G.R. No. L-7995 May 31, 1957
LAO H. ICHONG, in his own behalf and in behalf of other alien
residents, corporations and partnerships adversely affected. by
Republic Act No. 1180, petitioner,
vs.
JAIME HERNANDEZ, Secretary of Finance, and MARCELINO
SARMIENTO, City Treasurer of Manila, respondents.
LABRADOR, J.:
I. The case and issue, in general
This Court has before it the delicate task of passing upon the validity and
constitutionality of a legislative enactment, fundamental and far-
reaching in significance. The enactment poses questions of due process,
police power and equal protection of the laws. It also poses an important
issue of fact, that is whether the conditions which the disputed law
purports to remedy really or actually exist. Admittedly springing from a
deep, militant, and positive nationalistic impulse, the law purports to
protect citizen and country from the alien retailer. Through it, and
within the field of economy it regulates, Congress attempts to translate
national aspirations for economic independence and national security,
rooted in the drive and urge for national survival and welfare, into a
concrete and tangible measures designed to free the national retailer
from the competing dominance of the alien, so that the country and the
nation may be free from a supposed economic dependence and bondage.
Do the facts and circumstances justify the enactment?
II. Pertinent provisions of Republic Act No. 1180
Republic Act No. 1180 is entitled "An Act to Regulate the Retail
Business." In effect it nationalizes the retail trade business. The main
provisions of the Act are: (1) a prohibition against persons, not citizens
of the Philippines, and against associations, partnerships, or
corporations the capital of which are not wholly owned by citizens of the
Philippines, from engaging directly or indirectly in the retail trade; (2)
an exception from the above prohibition in favor of aliens actually
engaged in said business on May 15, 1954, who are allowed to continue
to engaged therein, unless their licenses are forfeited in accordance with
the law, until their death or voluntary retirement in case of natural
persons, and for ten years after the approval of the Act or until the
expiration of term in case of juridical persons; (3) an exception
therefrom in favor of citizens and juridical entities of the United States;
(4) a provision for the forfeiture of licenses (to engage in the retail
business) for violation of the laws on nationalization, control weights
and measures and labor and other laws relating to trade, commerce and
industry; (5) a prohibition against the establishment or opening by
aliens actually engaged in the retail business of additional stores or
branches of retail business, (6) a provision requiring aliens actually
engaged in the retail business to present for registration with the proper
authorities a verified statement concerning their businesses, giving,
among other matters, the nature of the business, their assets and
liabilities and their offices and principal offices of judicial entities; and
(7) a provision allowing the heirs of aliens now engaged in the retail
business who die, to continue such business for a period of six months
for purposes of liquidation.
III. Grounds upon which petition is based-Answer thereto
Petitioner, for and in his own behalf and on behalf of other alien
residents corporations and partnerships adversely affected by the
provisions of Republic Act. No. 1180, brought this action to obtain a
judicial declaration that said Act is unconstitutional, and to enjoin the
Secretary of Finance and all other persons acting under him, particularly
city and municipal treasurers, from enforcing its provisions. Petitioner
attacks the constitutionality of the Act, contending that: (1) it denies to
alien residents the equal protection of the laws and deprives of their
liberty and property without due process of law ; (2) the subject of the
Act is not expressed or comprehended in the title thereof; (3) the Act
violates international and treaty obligations of the Republic of the
Philippines; (4) the provisions of the Act against the transmission by
aliens of their retail business thru hereditary succession, and those
requiring 100% Filipino capitalization for a corporation or entity to
entitle it to engage in the retail business, violate the spirit of Sections 1
and 5, Article XIII and Section 8 of Article XIV of the Constitution.
In answer, the Solicitor-General and the Fiscal of the City of Manila
contend that: (1) the Act was passed in the valid exercise of the police
power of the State, which exercise is authorized in the Constitution in
the interest of national economic survival; (2) the Act has only one
subject embraced in the title; (3) no treaty or international obligations
are infringed; (4) as regards hereditary succession, only the form is
affected but the value of the property is not impaired, and the institution
of inheritance is only of statutory origin.
IV. Preliminary consideration of legal principles involved
a. The police power. —
There is no question that the Act was approved in the exercise of the
police power, but petitioner claims that its exercise in this instance is
attended by a violation of the constitutional requirements of due process
and equal protection of the laws. But before proceeding to the
consideration and resolution of the ultimate issue involved, it would be
well to bear in mind certain basic and fundamental, albeit preliminary,
considerations in the determination of the ever recurrent conflict
between police power and the guarantees of due process and equal
protection of the laws. What is the scope of police power, and how are
the due process and equal protection clauses related to it? What is the
province and power of the legislature, and what is the function and duty
of the courts? These consideration must be clearly and correctly
understood that their application to the facts of the case may be brought
forth with clarity and the issue accordingly resolved.
It has been said the police power is so far - reaching in scope, that it has
become almost impossible to limit its sweep. As it derives its existence
from the very existence of the State itself, it does not need to be
expressed or defined in its scope; it is said to be co-extensive with self-
protection and survival, and as such it is the most positive and active of
all governmental processes, the most essential, insistent and illimitable.
Especially is it so under a modern democratic framework where the
demands of society and of nations have multiplied to almost
unimaginable proportions; the field and scope of police power has
become almost boundless, just as the fields of public interest and public
welfare have become almost all-embracing and have transcended human
foresight. Otherwise stated, as we cannot foresee the needs and
demands of public interest and welfare in this constantly changing and
progressive world, so we cannot delimit beforehand the extent or scope
of police power by which and through which the State seeks to attain or
achieve interest or welfare. So it is that Constitutions do not define the
scope or extent of the police power of the State; what they do is to set
forth the limitations thereof. The most important of these are the due
process clause and the equal protection clause.
b. Limitations on police power. —
The basic limitations of due process and equal protection are found in
the following provisions of our Constitution:
SECTION 1.(1) No person shall be deprived of life, liberty or
property without due process of law, nor any person be denied
the equal protection of the laws. (Article III, Phil. Constitution)
These constitutional guarantees which embody the essence of individual
liberty and freedom in democracies, are not limited to citizens alone but
are admittedly universal in their application, without regard to any
differences of race, of color, or of nationality. (Yick Wo vs. Hopkins, 30, L.
ed. 220, 226.)
c. The, equal protection clause. —
The equal protection of the law clause is against undue favor and
individual or class privilege, as well as hostile discrimination or the
oppression of inequality. It is not intended to prohibit legislation, which
is limited either in the object to which it is directed or by territory within
which is to operate. It does not demand absolute equality among
residents; it merely requires that all persons shall be treated alike, under
like circumstances and conditions both as to privileges conferred and
liabilities enforced. The equal protection clause is not infringed by
legislation which applies only to those persons falling within a specified
class, if it applies alike to all persons within such class, and reasonable
grounds exists for making a distinction between those who fall within
such class and those who do not. (2 Cooley, Constitutional Limitations,
824-825.)
d. The due process clause. —
The due process clause has to do with the reasonableness of legislation
enacted in pursuance of the police power. Is there public interest, a
public purpose; is public welfare involved? Is the Act reasonably
necessary for the accomplishment of the legislature's purpose; is it not
unreasonable, arbitrary or oppressive? Is there sufficient foundation or
reason in connection with the matter involved; or has there not been a
capricious use of the legislative power? Can the aims conceived be
achieved by the means used, or is it not merely an unjustified
interference with private interest? These are the questions that we ask
when the due process test is applied.
The conflict, therefore, between police power and the guarantees of due
process and equal protection of the laws is more apparent than real.
Properly related, the power and the guarantees are supposed to coexist.
The balancing is the essence or, shall it be said, the indispensable means
for the attainment of legitimate aspirations of any democratic society.
There can be no absolute power, whoever exercise it, for that would be
tyranny. Yet there can neither be absolute liberty, for that would mean
license and anarchy. So the State can deprive persons of life, liberty and
property, provided there is due process of law; and persons may be
classified into classes and groups, provided everyone is given the equal
protection of the law. The test or standard, as always, is reason. The
police power legislation must be firmly grounded on public interest and
welfare, and a reasonable relation must exist between purposes and
means. And if distinction and classification has been made, there must be
a reasonable basis for said distinction.
e. Legislative discretion not subject to judicial review. —
Now, in this matter of equitable balancing, what is the proper place and
role of the courts? It must not be overlooked, in the first place, that the
legislature, which is the constitutional repository of police power and
exercises the prerogative of determining the policy of the State, is by
force of circumstances primarily the judge of necessity, adequacy or
reasonableness and wisdom, of any law promulgated in the exercise of
the police power, or of the measures adopted to implement the public
policy or to achieve public interest. On the other hand, courts, although
zealous guardians of individual liberty and right, have nevertheless
evinced a reluctance to interfere with the exercise of the legislative
prerogative. They have done so early where there has been a clear,
patent or palpable arbitrary and unreasonable abuse of the legislative
prerogative. Moreover, courts are not supposed to override legitimate
policy, and courts never inquire into the wisdom of the law.
V. Economic problems sought to be remedied
With the above considerations in mind, we will now proceed to delve
directly into the issue involved. If the disputed legislation were merely a
regulation, as its title indicates, there would be no question that it falls
within the legitimate scope of legislative power. But it goes further and
prohibits a group of residents, the aliens, from engaging therein. The
problem becomes more complex because its subject is a common, trade
or occupation, as old as society itself, which from the immemorial has
always been open to residents, irrespective of race, color or citizenship.
a. Importance of retail trade in the economy of the nation. —
In a primitive economy where families produce all that they consume
and consume all that they produce, the dealer, of course, is unknown.
But as group life develops and families begin to live in communities
producing more than what they consume and needing an infinite
number of things they do not produce, the dealer comes into existence.
As villages develop into big communities and specialization in
production begins, the dealer's importance is enhanced. Under modern
conditions and standards of living, in which man's needs have multiplied
and diversified to unlimited extents and proportions, the retailer comes
as essential as the producer, because thru him the infinite variety of
articles, goods and needed for daily life are placed within the easy reach The best evidence are the statistics on the retail trade, which put down :
of consumers. Retail dealers perform the functions of capillaries in the the figures in black and white. Between the constitutional convention
human body, thru which all the needed food and supplies are ministered year (1935), when the fear of alien domination and control of the retail Filipino 119,352 224,053,6 61.09 466,058,0 53.07
to members of the communities comprising the nation. trade already filled the minds of our leaders with fears and misgivings, ......... 20 52
and the year of the enactment of the nationalization of the retail trade
There cannot be any question about the importance of the retailer in the act (1954), official statistics unmistakably point out to the ever- Chinese 17,429 134,325,3 36.60 404,481,3 46.06
life of the community. He ministers to the resident's daily needs, food in increasing dominance and control by the alien of the retail trade, as .......... 03 84
all its increasing forms, and the various little gadgets and things needed witness the following tables: Others 347 8,614,025 2.31 7,645,327 87
for home and daily life. He provides his customers around his store with ..........
the rice or corn, the fish, the salt, the vinegar, the spices needed for the Assets Gross Sales
daily cooking. He has cloths to sell, even the needle and the thread to
sew them or darn the clothes that wear out. The retailer, therefore, from Per Per AVERAGE
Year and No.-
the lowly peddler, the owner of a small sari-sari store, to the operator of cent cent ASSETS AND GROSS SALES PER
Retailers Establis Pesos Pesos
a department store or, a supermarket is so much a part of day-to-day Distrib Distrib ESTABLISHMENT
Nationality hments
existence. ution ution

b. The alien retailer's trait. — 1941 Item

Gross
: Year and Retailer's Assets
Sales
The alien retailer must have started plying his trades in this country in Nationality (Pesos
Filipino 106,671 200,323,1 55.82 174,181,9 51.74 (Pesos)
the bigger centers of population (Time there was when he was unknown )
.......... 38 24
in provincial towns and villages). Slowly but gradually be invaded towns
and villages; now he predominates in the cities and big centers of Chinese 15,356 118,348,6 32.98 148,813,2 44.21 1941:
population. He even pioneers, in far away nooks where the beginnings of ........... 92 39
community life appear, ministering to the daily needs of the residents Filipino 1,878 1,633
Others 1,646 40,187,09 11.20 13,630,23 4.05
and purchasing their agricultural produce for sale in the towns. It is an
............ 0 9
undeniable fact that in many communities the alien has replaced the
Chinese 7,707 9,691
native retailer. He has shown in this trade, industry without limit, and 1947
the patience and forbearance of a slave. :
Others 24,415 8,281
Derogatory epithets are hurled at him, but he laughs these off without Filipino 111,107 208,658,9 65.05 279,583,3 57.03
murmur; insults of ill-bred and insolent neighbors and customers are .......... 46 33 1947:
made in his face, but he heeds them not, and he forgets and forgives. The Chinese 13,774 106,156,2 33.56 205,701,1 41.96
community takes note of him, as he appears to be harmless and ........... 18 34 Filipino 1,878 2,516
extremely useful.
Others 354 8,761,260 .49 4,927,168 1.01
c. Alleged alien control and dominance. — ........... Chinese 7,707 14,934

There is a general feeling on the part of the public, which appears to be 1948 (Census
Others 24,749 13,919
true to fact, about the controlling and dominant position that the alien : )
retailer holds in the nation's economy. Food and other essentials, Filipino 113,631 213,342,2 67.30 467,161,6 60.51 1948: (Census)
clothing, almost all articles of daily life reach the residents mostly .......... 64 67
through him. In big cities and centers of population he has acquired not
only predominance, but apparent control over distribution of almost all Chinese 12,087 93,155,45 29.38 294,894,2 38.20 Filipino . 1,878 4,111
kinds of goods, such as lumber, hardware, textiles, groceries, drugs, .......... 9 27
sugar, flour, garlic, and scores of other goods and articles. And were it Chinese 7,707 24,398
Others 422 10,514,67 3.32 9,995,402 1.29
not for some national corporations like the Naric, the Namarco, the
.......... 5
Facomas and the Acefa, his control over principal foods and products Others 24,916 23,686
would easily become full and complete. 1949
:
Petitioner denies that there is alien predominance and control in the 1949:
retail trade. In one breath it is said that the fear is unfounded and the Filipino 113,659 213,451,6 60.89 462,532,9 53.47
threat is imagined; in another, it is charged that the law is merely the .......... 02 01 Filipino 1,878 4,069
result of radicalism and pure and unabashed nationalism. Alienage, it is Chinese 16,248 125,223,3 35.72 392,414,8 45.36
said, is not an element of control; also so many unmanageable factors in .......... 36 75 Chinese 7,707 24,152
the retail business make control virtually impossible. The first argument
which brings up an issue of fact merits serious consideration. The others Others 486 12,056,36 3.39 10,078,36 1.17
Others 24,807 20,737
are matters of opinion within the exclusive competence of the legislature .......... 5 4
and beyond our prerogative to pass upon and decide.
1951

1951:
Filipino 1,877 3,905
Chinese 7,707 33,207
Others . 24,824 22,033
(Estimated Assets and Gross Sales of Retail Establishments, By
Year and Nationality of Owners, Benchmark: 1948 Census,
issued by the Bureau of Census and Statistics, Department of
Commerce and Industry; pp. 18-19 of Answer.)
The above statistics do not include corporations and partnerships, while
the figures on Filipino establishments already include mere market
vendors, whose capital is necessarily small..
The above figures reveal that in percentage distribution of assests and
gross sales, alien participation has steadily increased during the years. It
is true, of course, that Filipinos have the edge in the number of retailers,
but aliens more than make up for the numerical gap through their
assests and gross sales which average between six and seven times those
of the very many Filipino retailers. Numbers in retailers, here, do not
imply superiority; the alien invests more capital, buys and sells six to
seven times more, and gains much more. The same official report,
pointing out to the known predominance of foreign elements in the
retail trade, remarks that the Filipino retailers were largely engaged in
minor retailer enterprises. As observed by respondents, the native
investment is thinly spread, and the Filipino retailer is practically
helpless in matters of capital, credit, price and supply.
d. Alien control and threat, subject of apprehension in Constitutional
convention. —
It is this domination and control, which we believe has been sufficiently
shown to exist, that is the legislature's target in the enactment of the
disputed nationalization would never have been adopted. The framers of
our Constitution also believed in the existence of this alien dominance
and control when they approved a resolution categorically declaring
among other things, that "it is the sense of the Convention that the public
interest requires the nationalization of the retail trade; . . . ." (II Aruego,
The Framing of the Philippine Constitution, 662-663, quoted on page 67
of Petitioner.) That was twenty-two years ago; and the events since then
have not been either pleasant or comforting. Dean Sinco of the
University of the Philippines College of Law, commenting on the
patrimony clause of the Preamble opines that the fathers of our
Constitution were merely translating the general preoccupation of
Filipinos "of the dangers from alien interests that had already brought
under their control the commercial and other economic activities of the
country" (Sinco, Phil. Political Law, 10th ed., p. 114); and analyzing the
concern of the members of the constitutional convention for the
economic life of the citizens, in connection with the nationalistic
provisions of the Constitution, he says:
But there has been a general feeling that alien dominance over
the economic life of the country is not desirable and that if such
a situation should remain, political independence alone is no
guarantee to national stability and strength. Filipino private
capital is not big enough to wrest from alien hands the control
of the national economy. Moreover, it is but of recent formation
and hence, largely inexperienced, timid and hesitant. Under
such conditions, the government as the instrumentality of the
national will, has to step in and assume the initiative, if not the
leadership, in the struggle for the economic freedom of the
nation in somewhat the same way that it did in the crusade for
political freedom. Thus . . . it (the Constitution) envisages an
organized movement for the protection of the nation not only
against the possibilities of armed invasion but also against its
economic subjugation by alien interests in the economic field.
(Phil. Political Law by Sinco, 10th ed., p. 476.)
Belief in the existence of alien control and predominance is felt in other
quarters. Filipino businessmen, manufacturers and producers believe so;
they fear the dangers coming from alien control, and they express
sentiments of economic independence. Witness thereto is Resolution No.
1, approved on July 18, 1953, of the Fifth National convention of Filipino
Businessmen, and a similar resolution, approved on March 20, 1954, of
the Second National Convention of Manufacturers and Producers. The
man in the street also believes, and fears, alien predominance and
control; so our newspapers, which have editorially pointed out not only
to control but to alien stranglehold. We, therefore, find alien domination
and control to be a fact, a reality proved by official statistics, and felt by
all the sections and groups that compose the Filipino community.
e. Dangers of alien control and dominance in retail. —
But the dangers arising from alien participation in the retail trade does
not seem to lie in the predominance alone; there is a prevailing feeling
that such predominance may truly endanger the national interest. With
ample capital, unity of purpose and action and thorough organization,
alien retailers and merchants can act in such complete unison and
concert on such vital matters as the fixing of prices, the determination of
the amount of goods or articles to be made available in the market, and
even the choice of the goods or articles they would or would not
patronize or distribute, that fears of dislocation of the national economy
and of the complete subservience of national economy and of the
consuming public are not entirely unfounded. Nationals, producers and
consumers alike can be placed completely at their mercy. This is easily
illustrated. Suppose an article of daily use is desired to be prescribed by
the aliens, because the producer or importer does not offer them
sufficient profits, or because a new competing article offers bigger
profits for its introduction. All that aliens would do is to agree to refuse
to sell the first article, eliminating it from their stocks, offering the new
one as a substitute. Hence, the producers or importers of the prescribed
article, or its consumers, find the article suddenly out of the prescribed
article, or its consumers, find the article suddenly out of circulation.
Freedom of trade is thus curtailed and free enterprise correspondingly
suppressed.
We can even go farther than theoretical illustrations to show the
pernicious influences of alien domination. Grave abuses have
characterized the exercise of the retail trade by aliens. It is a fact within
judicial notice, which courts of justice may not properly overlook or
ignore in the interests of truth and justice, that there exists a general
feeling on the part of the public that alien participation in the retail trade
has been attended by a pernicious and intolerable practices, the mention
of a few of which would suffice for our purposes; that at some time or
other they have cornered the market of essential commodities, like corn
and rice, creating artificial scarcities to justify and enhance profits to
unreasonable proportions; that they have hoarded essential foods to the
inconvenience and prejudice of the consuming public, so much so that
the Government has had to establish the National Rice and Corn
Corporation to save the public from their continuous hoarding practices
and tendencies; that they have violated price control laws, especially on
foods and essential commodities, such that the legislature had to enact a
law (Sec. 9, Republic Act No. 1168), authorizing their immediate and
automatic deportation for price control convictions; that they have
secret combinations among themselves to control prices, cheating the
operation of the law of supply and demand; that they have connived to
boycott honest merchants and traders who would not cater or yield to
their demands, in unlawful restraint of freedom of trade and enterprise.
They are believed by the public to have evaded tax laws, smuggled goods
and money into and out of the land, violated import and export
prohibitions, control laws and the like, in derision and contempt of
lawful authority. It is also believed that they have engaged in corrupting
public officials with fabulous bribes, indirectly causing the prevalence of
graft and corruption in the Government. As a matter of fact appeals to
unscrupulous aliens have been made both by the Government and by
their own lawful diplomatic representatives, action which impliedly
admits a prevailing feeling about the existence of many of the above
practices.
The circumstances above set forth create well founded fears that worse
things may come in the future. The present dominance of the alien
retailer, especially in the big centers of population, therefore, becomes a
potential source of danger on occasions of war or other calamity. We do
not have here in this country isolated groups of harmless aliens retailing
goods among nationals; what we have are well organized and powerful
groups that dominate the distribution of goods and commodities in the
communities and big centers of population. They owe no allegiance or
loyalty to the State, and the State cannot rely upon them in times of crisis
or emergency. While the national holds his life, his person and his
property subject to the needs of his country, the alien may even become
the potential enemy of the State.
f. Law enacted in interest of national economic survival and security. —
We are fully satisfied upon a consideration of all the facts and
circumstances that the disputed law is not the product of racial hostility,
prejudice or discrimination, but the expression of the legitimate desire
and determination of the people, thru their authorized representatives,
to free the nation from the economic situation that has unfortunately
been saddled upon it rightly or wrongly, to its disadvantage. The law is
clearly in the interest of the public, nay of the national security itself, and
indisputably falls within the scope of police power, thru which and by
which the State insures its existence and security and the supreme
welfare of its citizens.
VI. The Equal Protection Limitation
a. Objections to alien participation in retail trade. — The next question
that now poses solution is, Does the law deny the equal protection of the
laws? As pointed out above, the mere fact of alienage is the root and
cause of the distinction between the alien and the national as a trader.
The alien resident owes allegiance to the country of his birth or his
adopted country; his stay here is for personal convenience; he is
attracted by the lure of gain and profit. His aim or purpose of stay, we
admit, is neither illegitimate nor immoral, but he is naturally lacking in
that spirit of loyalty and enthusiasm for this country where he
temporarily stays and makes his living, or of that spirit of regard,
sympathy and consideration for his Filipino customers as would prevent
him from taking advantage of their weakness and exploiting them. The
faster he makes his pile, the earlier can the alien go back to his beloved
country and his beloved kin and countrymen. The experience of the
country is that the alien retailer has shown such utter disregard for his
customers and the people on whom he makes his profit, that it has been
found necessary to adopt the legislation, radical as it may seem.
Another objection to the alien retailer in this country is that he never
really makes a genuine contribution to national income and wealth. He
undoubtedly contributes to general distribution, but the gains and
profits he makes are not invested in industries that would help the
country's economy and increase national wealth. The alien's interest in
this country being merely transient and temporary, it would indeed be
ill-advised to continue entrusting the very important function of retail
distribution to his hands.
The practices resorted to by aliens in the control of distribution, as
already pointed out above, their secret manipulations of stocks of
commodities and prices, their utter disregard of the welfare of their
customers and of the ultimate happiness of the people of the nation of
which they are mere guests, which practices, manipulations and
disregard do not attend the exercise of the trade by the nationals, show
the existence of real and actual, positive and fundamental differences
between an alien and a national which fully justify the legislative
classification adopted in the retail trade measure. These differences are
certainly a valid reason for the State to prefer the national over the alien
in the retail trade. We would be doing violence to fact and reality were
we to hold that no reason or ground for a legitimate distinction can be
found between one and the other.
b. Difference in alien aims and purposes sufficient basis for distinction. —
The above objectionable characteristics of the exercise of the retail trade
by the aliens, which are actual and real, furnish sufficient grounds for
legislative classification of retail traders into nationals and aliens. Some
may disagree with the wisdom of the legislature's classification. To this
we answer, that this is the prerogative of the law-making power. Since
the Court finds that the classification is actual, real and reasonable, and
all persons of one class are treated alike, and as it cannot be said that the
classification is patently unreasonable and unfounded, it is in duty
bound to declare that the legislature acted within its legitimate
prerogative and it can not declare that the act transcends the limit of
equal protection established by the Constitution.
Broadly speaking, the power of the legislature to make distinctions and
classifications among persons is not curtailed or denied by the equal
protection of the laws clause. The legislative power admits of a wide
scope of discretion, and a law can be violative of the constitutional
limitation only when the classification is without reasonable basis. In
addition to the authorities we have earlier cited, we can also refer to the
case of Linsey vs. Natural Carbonic Fas Co. (1911), 55 L. ed., 369, which
clearly and succinctly defined the application of equal protection clause
to a law sought to be voided as contrary thereto:
. . . . "1. The equal protection clause of the Fourteenth
Amendment does not take from the state the power to classify
in the adoption of police laws, but admits of the exercise of the
wide scope of discretion in that regard, and avoids what is done
only when it is without any reasonable basis, and therefore is
purely arbitrary. 2. A classification having some reasonable
basis does not offend against that clause merely because it is
not made with mathematical nicety, or because in practice it
results in some inequality. 3. When the classification in such a
law is called in question, if any state of facts reasonably can be
conceived that would sustain it, the existence of that state of
facts at the time the law was enacted must be assumed. 4. One
who assails the classification in such a law must carry the
burden of showing that it does not rest upon any reasonable
basis but is essentially arbitrary."
c. Authorities recognizing citizenship as basis for classification. —
The question as to whether or not citizenship is a legal and valid ground
for classification has already been affirmatively decided in this
jurisdiction as well as in various courts in the United States. In the case
of Smith Bell & Co. vs. Natividad, 40 Phil. 136, where the validity of Act
No. 2761 of the Philippine Legislature was in issue, because of a
condition therein limiting the ownership of vessels engaged in coastwise
trade to corporations formed by citizens of the Philippine Islands or the
United States, thus denying the right to aliens, it was held that the
Philippine Legislature did not violate the equal protection clause of the
Philippine Bill of Rights. The legislature in enacting the law had as
ultimate purpose the encouragement of Philippine shipbuilding and the
safety for these Islands from foreign interlopers. We held that this was a
valid exercise of the police power, and all presumptions are in favor of
its constitutionality. In substance, we held that the limitation of domestic
ownership of vessels engaged in coastwise trade to citizens of the
Philippines does not violate the equal protection of the law and due
process or law clauses of the Philippine Bill of Rights. In rendering said
decision we quoted with approval the concurring opinion of Justice
Johnson in the case of Gibbons vs. Ogden, 9 Wheat., I, as follows:
"Licensing acts, in fact, in legislation, are universally restraining
acts; as, for example, acts licensing gaming houses, retailers of
spirituous liquors, etc. The act, in this instance, is distinctly of
that character, and forms part of an extensive system, the object
of which is to encourage American shipping, and place them on
an equal footing with the shipping of other nations. Almost
every commercial nation reserves to its own subjects a
monopoly of its coasting trade; and a countervailing privilege in
favor of American shipping is contemplated, in the whole
legislation of the United States on this subject. It is not to give
the vessel an American character, that the license is granted;
that effect has been correctly attributed to the act of her
enrollment. But it is to confer on her American privileges, as
contra distinguished from foreign; and to preserve the
Government from fraud by foreigners; in surreptitiously
intruding themselves into the American commercial marine, as
well as frauds upon the revenue in the trade coastwise, that this
whole system is projected."
The rule in general is as follows:
Aliens are under no special constitutional protection which
forbids a classification otherwise justified simply because the
limitation of the class falls along the lines of nationality. That
would be requiring a higher degree of protection for aliens as a
class than for similar classes than for similar classes of
American citizens. Broadly speaking, the difference in status
between citizens and aliens constitutes a basis for reasonable
classification in the exercise of police power. (2 Am., Jur. 468-
469.)
In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a statute
on the licensing of hawkers and peddlers, which provided that no one
can obtain a license unless he is, or has declared his intention, to become
a citizen of the United States, was held valid, for the following reason: It
may seem wise to the legislature to limit the business of those who are
supposed to have regard for the welfare, good order and happiness of
the community, and the court cannot question this judgment and
conclusion. In Bloomfield vs. State, 99 N. E. 309 (Ohio, 1912), a statute
which prevented certain persons, among them aliens, from engaging in
the traffic of liquors, was found not to be the result of race hatred, or in
hospitality, or a deliberate purpose to discriminate, but was based on the
belief that an alien cannot be sufficiently acquainted with "our
institutions and our life as to enable him to appreciate the relation of
this particular business to our entire social fabric", and was not,
therefore, invalid. In Ohio ex rel. Clarke vs. Deckebach, 274 U. S. 392, 71 L.
ed. 115 (1926), the U.S. Supreme Court had under consideration an
ordinance of the city of Cincinnati prohibiting the issuance of licenses
(pools and billiard rooms) to aliens. It held that plainly irrational
discrimination against aliens is prohibited, but it does not follow that
alien race and allegiance may not bear in some instances such a relation
to a legitimate object of legislation as to be made the basis of permitted
classification, and that it could not state that the legislation is clearly
wrong; and that latitude must be allowed for the legislative
appraisement of local conditions and for the legislative choice of
methods for controlling an apprehended evil. The case of State vs. Carrol,
124 N. E. 129 (Ohio, 1919) is a parallel case to the one at bar. In Asakura
vs. City of Seattle, 210 P. 30 (Washington, 1922), the business of pawn
brooking was considered as having tendencies injuring public interest,
and limiting it to citizens is within the scope of police power. A similar
statute denying aliens the right to engage in auctioneering was also
sustained in Wright vs. May, L.R.A., 1915 P. 151 (Minnesota, 1914). So
also in Anton vs. Van Winkle, 297 F. 340 (Oregon, 1924), the court said
that aliens are judicially known to have different interests, knowledge,
attitude, psychology and loyalty, hence the prohibitions of issuance of
licenses to them for the business of pawnbroker, pool, billiard, card
room, dance hall, is not an infringement of constitutional rights. In
Templar vs. Michigan State Board of Examiners, 90 N.W. 1058 (Michigan,
1902), a law prohibiting the licensing of aliens as barbers was held void,
but the reason for the decision was the court's findings that the exercise
of the business by the aliens does not in any way affect the morals, the
health, or even the convenience of the community. In Takahashi vs. Fish
and Game Commission, 92 L. ed. 1479 (1947), a California statute
banning the issuance of commercial fishing licenses to person ineligible
to citizenship was held void, because the law conflicts with Federal
power over immigration, and because there is no public interest in the
mere claim of ownership of the waters and the fish in them, so there was
no adequate justification for the discrimination. It further added that the
law was the outgrowth of antagonism toward the persons of Japanese
ancestry. However, two Justices dissented on the theory that fishing
rights have been treated traditionally as natural resources. In Fraser vs.
McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a state law
which imposed a tax on every employer of foreign-born unnaturalized
male persons over 21 years of age, was declared void because the court
found that there was no reason for the classification and the tax was an
arbitrary deduction from the daily wage of an employee.
d. Authorities contra explained. —
It is true that some decisions of the Federal court and of the State courts
in the United States hold that the distinction between aliens and citizens
is not a valid ground for classification. But in this decision the laws
declared invalid were found to be either arbitrary, unreasonable or
capricious, or were the result or product of racial antagonism and
hostility, and there was no question of public interest involved or
pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059 (1925), the United
States Supreme Court declared invalid a Philippine law making unlawful
the keeping of books of account in any language other than English,
Spanish or any other local dialect, but the main reasons for the decisions
are: (1) that if Chinese were driven out of business there would be no
other system of distribution, and (2) that the Chinese would fall prey to
all kinds of fraud, because they would be deprived of their right to be
advised of their business and to direct its conduct. The real reason for
the decision, therefore, is the court's belief that no public benefit would
be derived from the operations of the law and on the other hand it would
deprive Chinese of something indispensable for carrying on their
business. In Yick Wo vs. Hopkins, 30 L. ed 220 (1885) an ordinance
conferring powers on officials to withhold consent in the operation of
laundries both as to persons and place, was declared invalid, but the
court said that the power granted was arbitrary, that there was no
reason for the discrimination which attended the administration and
implementation of the law, and that the motive thereof was mere racial
hostility. In State vs. Montgomery, 47 A. 165 (Maine, 1900), a law
prohibiting aliens to engage as hawkers and peddlers was declared void,
because the discrimination bore no reasonable and just relation to the
act in respect to which the classification was proposed.
The case at bar is radically different, and the facts make them so. As we
already have said, aliens do not naturally possess the sympathetic
consideration and regard for the customers with whom they come in
daily contact, nor the patriotic desire to help bolster the nation's
economy, except in so far as it enhances their profit, nor the loyalty and
allegiance which the national owes to the land. These limitations on the
qualifications of the aliens have been shown on many occasions and
instances, especially in times of crisis and emergency. We can do no
better than borrow the language of Anton vs. Van Winkle, 297 F. 340,
342, to drive home the reality and significance of the distinction between
the alien and the national, thus:
. . . . It may be judicially known, however, that alien coming into
this country are without the intimate knowledge of our laws,
customs, and usages that our own people have. So it is likewise
known that certain classes of aliens are of different psychology
from our fellow countrymen. Furthermore, it is natural and
reasonable to suppose that the foreign born, whose allegiance is
first to their own country, and whose ideals of governmental
environment and control have been engendered and formed
under entirely different regimes and political systems, have not
the same inspiration for the public weal, nor are they as well
disposed toward the United States, as those who by citizenship,
are a part of the government itself. Further enlargement, is
unnecessary. I have said enough so that obviously it cannot be
affirmed with absolute confidence that the Legislature was
without plausible reason for making the classification, and
therefore appropriate discriminations against aliens as it
relates to the subject of legislation. . . . .
VII. The Due Process of Law Limitation.
a. Reasonability, the test of the limitation; determination by legislature
decisive. —
We now come to due process as a limitation on the exercise of the police
power. It has been stated by the highest authority in the United States
that:
. . . . And the guaranty of due process, as has often been held,
demands only that the law shall not be unreasonable, arbitrary
or capricious, and that the means selected shall have a real and
substantial relation to the subject sought to be attained. . . . .
xxx xxx xxx
So far as the requirement of due process is concerned and in the
absence of other constitutional restriction a state is free to
adopt whatever economic policy may reasonably be deemed to
promote public welfare, and to enforce that policy by legislation
adapted to its purpose. The courts are without authority either
to declare such policy, or, when it is declared by the legislature,
to override it. If the laws passed are seen to have a reasonable
relation to a proper legislative purpose, and are neither
arbitrary nor discriminatory, the requirements of due process
are satisfied, and judicial determination to that effect renders a
court functus officio. . . . (Nebbia vs. New York, 78 L. ed. 940,
950, 957.)
Another authority states the principle thus:
. . . . Too much significance cannot be given to the word
"reasonable" in considering the scope of the police power in a
constitutional sense, for the test used to determine the
constitutionality of the means employed by the legislature is to
inquire whether the restriction it imposes on rights secured to
individuals by the Bill of Rights are unreasonable, and not
whether it imposes any restrictions on such rights. . . .
xxx xxx xxx
. . . . A statute to be within this power must also be reasonable in
its operation upon the persons whom it affects, must not be for
the annoyance of a particular class, and must not be unduly
oppressive. (11 Am. Jur. Sec. 302., 1:1)- 1074-1075.)
In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held:
. . . . 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. . . .
Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389, 395,
fixes this test of constitutionality:
In determining whether a given act of the Legislature, passed in
the exercise of the police power to regulate the operation of a
business, is or is not constitutional, one of the first questions to
be considered by the court is whether the power as exercised
has a sufficient foundation in reason in connection with the
matter involved, or is an arbitrary, oppressive, and capricious
use of that power, without substantial relation to the health,
safety, morals, comfort, and general welfare of the public.
b. Petitioner's argument considered. —
Petitioner's main argument is that retail is a common, ordinary
occupation, one of those privileges long ago recognized as essential to
the orderly pursuant of happiness by free men; that it is a gainful and
honest occupation and therefore beyond the power of the legislature to
prohibit and penalized. This arguments overlooks fact and reality and
rests on an incorrect assumption and premise, i.e., that in this country
where the occupation is engaged in by petitioner, it has been so engaged
by him, by the alien in an honest creditable and unimpeachable manner,
without harm or injury to the citizens and without ultimate danger to
their economic peace, tranquility and welfare. But the Legislature has
found, as we have also found and indicated, that the privilege has been
so grossly abused by the alien, thru the illegitimate use of pernicious
designs and practices, that he now enjoys a monopolistic control of the
occupation and threatens a deadly stranglehold on the nation's economy
endangering the national security in times of crisis and emergency.
The real question at issue, therefore, is not that posed by petitioner,
which overlooks and ignores the facts and circumstances, but this, Is the
exclusion in the future of aliens from the retail trade unreasonable.
Arbitrary capricious, taking into account the illegitimate and pernicious
form and manner in which the aliens have heretofore engaged therein?
As thus correctly stated the answer is clear. The law in question is
deemed absolutely necessary to bring about the desired legislative
objective, i.e., to free national economy from alien control and
dominance. It is not necessarily unreasonable because it affects private
rights and privileges (11 Am. Jur. pp. 1080-1081.) The test of
reasonableness of a law is the appropriateness or adequacy under all
circumstances of the means adopted to carry out its purpose into effect
(Id.) Judged by this test, disputed legislation, which is not merely
reasonable but actually necessary, must be considered not to have
infringed the constitutional limitation of reasonableness.
The necessity of the law in question is explained in the explanatory note
that accompanied the bill, which later was enacted into law:
This bill proposes to regulate the retail business. Its purpose is
to prevent persons who are not citizens of the Philippines from
having a strangle hold upon our economic life. If the persons
who control this vital artery of our economic life are the ones
who owe no allegiance to this Republic, who have no profound
devotion to our free institutions, and who have no permanent
stake in our people's welfare, we are not really the masters of
 our destiny. All aspects of our life, even our national security,
will be at the mercy of other people.
In seeking to accomplish the foregoing purpose, we do not
propose to deprive persons who are not citizens of the
Philippines of their means of livelihood. While this bill seeks to
take away from the hands of persons who are not citizens of the
Philippines a power that can be wielded to paralyze all aspects
of our national life and endanger our national security it
respects existing rights.
The approval of this bill is necessary for our national survival.
If political independence is a legitimate aspiration of a people, then
economic independence is none the less legitimate. Freedom and liberty
are not real and positive if the people are subject to the economic
control and domination of others, especially if not of their own race or
country. The removal and eradication of the shackles of foreign
economic control and domination, is one of the noblest motives that a
national legislature may pursue. It is impossible to conceive that
legislation that seeks to bring it about can infringe the constitutional
limitation of due process. The attainment of a legitimate aspiration of a
people can never be beyond the limits of legislative authority.
c. Law expressly held by Constitutional Convention to be within the sphere
of legislative action. —
The framers of the Constitution could not have intended to impose the
constitutional restrictions of due process on the attainment of such a
noble motive as freedom from economic control and domination, thru
the exercise of the police power. The fathers of the Constitution must
have given to the legislature full authority and power to enact legislation
that would promote the supreme happiness of the people, their freedom
and liberty. On the precise issue now before us, they expressly made
their voice clear; they adopted a resolution expressing their belief that
the legislation in question is within the scope of the legislative power.
Thus they declared the their Resolution:
That it is the sense of the Convention that the public interest
requires the nationalization of retail trade; but it abstain from
approving the amendment introduced by the Delegate for
Manila, Mr. Araneta, and others on this matter because it is
convinced that the National Assembly is authorized to
promulgate a law which limits to Filipino and American citizens
the privilege to engage in the retail trade. (11 Aruego, The
Framing of the Philippine Constitution, quoted on pages 66 and
67 of the Memorandum for the Petitioner.)
It would do well to refer to the nationalistic tendency manifested in
various provisions of the Constitution. Thus in the preamble, a principle
objective is the conservation of the patrimony of the nation and as
corollary the provision limiting to citizens of the Philippines the
exploitation, development and utilization of its natural resources. And in
Section 8 of Article XIV, it is provided that "no franchise, certificate, or
any other form of authorization for the operation of the public utility
shall be granted except to citizens of the Philippines." The
nationalization of the retail trade is only a continuance of the
nationalistic protective policy laid down as a primary objective of the
Constitution. Can it be said that a law imbued with the same purpose and
spirit underlying many of the provisions of the Constitution is
unreasonable, invalid and unconstitutional?
The seriousness of the Legislature's concern for the plight of the
nationals as manifested in the approval of the radical measures is,
therefore, fully justified. It would have been recreant to its duties
towards the country and its people would it view the sorry plight of the
nationals with the complacency and refuse or neglect to adopt a remedy
commensurate with the demands of public interest and national
survival. As the repository of the sovereign power of legislation, the
Legislature was in duty bound to face the problem and meet, through
adequate measures, the danger and threat that alien domination of retail
trade poses to national economy.
d. Provisions of law not unreasonable. —
A cursory study of the provisions of the law immediately reveals how
tolerant, how reasonable the Legislature has been. The law is made
prospective and recognizes the right and privilege of those already
engaged in the occupation to continue therein during the rest of their
lives; and similar recognition of the right to continue is accorded
associations of aliens. The right or privilege is denied to those only upon
conviction of certain offenses. In the deliberations of the Court on this
case, attention was called to the fact that the privilege should not have
been denied to children and heirs of aliens now engaged in the retail
trade. Such provision would defeat the law itself, its aims and purposes.
Beside, the exercise of legislative discretion is not subject to judicial
review. It is well settled that the Court will not inquire into the motives
of the Legislature, nor pass upon general matters of legislative judgment.
The Legislature is primarily the judge of the necessity of an enactment or
of any of its provisions, and every presumption is in favor of its validity,
and though the Court may hold views inconsistent with the wisdom of
the law, it may not annul the legislation if not palpably in excess of the
legislative power. Furthermore, the test of the validity of a law attacked
as a violation of due process, is not its reasonableness, but its
unreasonableness, and we find the provisions are not unreasonable.
These principles also answer various other arguments raised against the
law, some of which are: that the law does not promote general welfare;
that thousands of aliens would be thrown out of employment; that prices
will increase because of the elimination of competition; that there is no
need for the legislation; that adequate replacement is problematical; that
there may be general breakdown; that there would be repercussions
from foreigners; etc. Many of these arguments are directed against the
supposed wisdom of the law which lies solely within the legislative
prerogative; they do not import invalidity.
VIII. Alleged defect in the title of the law
A subordinate ground or reason for the alleged invalidity of the law is
the claim that the title thereof is misleading or deceptive, as it conceals
the real purpose of the bill which is to nationalize the retail business and
prohibit aliens from engaging therein. The constitutional provision
which is claimed to be violated in Section 21 (1) of Article VI, which
reads:
No bill which may be enacted in the law shall embrace more
than one subject which shall be expressed in the title of the bill.
What the above provision prohibits is duplicity, that is, if its title
completely fails to appraise the legislators or the public of the nature,
scope and consequences of the law or its operation (I Sutherland,
Statutory Construction, Sec. 1707, p. 297.) A cursory consideration of the
title and the provisions of the bill fails to show the presence of duplicity.
It is true that the term "regulate" does not and may not readily and at
first glance convey the idea of "nationalization" and "prohibition", which
terms express the two main purposes and objectives of the law. But
"regulate" is a broader term than either prohibition or nationalization.
Both of these have always been included within the term regulation.
Under the title of an act to "regulate", the sale of intoxicating
liquors, the Legislature may prohibit the sale of intoxicating
liquors. (Sweet vs. City of Wabash, 41 Ind., 7; quoted in page 41
of Answer.)
Within the meaning of the Constitution requiring that the
subject of every act of the Legislature shall be stated in the tale,
the title to regulate the sale of intoxicating liquors, etc."
sufficiently expresses the subject of an act prohibiting the sale
of such liquors to minors and to persons in the habit of getting
intoxicated; such matters being properly included within the
subject of regulating the sale. (Williams vs. State, 48 Ind. 306,
308, quoted in p. 42 of Answer.)
The word "regulate" is of broad import, and necessarily implies
some degree of restraint and prohibition of acts usually done in
connection with the thing to be regulated. While word regulate
does not ordinarily convey meaning of prohibit, there is no
absolute reason why it should not have such meaning when
used in delegating police power in connection with a thing the
best or only efficacious regulation of which involves
suppression. (State vs. Morton, 162 So. 718, 182 La. 887, quoted
in p. 42 of Answer.)
The general rule is for the use of general terms in the title of a bill; it has
also been said that the title need not be an index to the entire contents of
the law (I Sutherland, Statutory Construction, See. 4803, p. 345.) The
above rule was followed the title of the Act in question adopted the more
general term "regulate" instead of "nationalize" or "prohibit".
Furthermore, the law also contains other rules for the regulation of the
retail trade which may not be included in the terms "nationalization" or
"prohibition"; so were the title changed from "regulate" to "nationalize"
or "prohibit", there would have been many provisions not falling within
the scope of the title which would have made the Act invalid. The use of
the term "regulate", therefore, is in accord with the principle governing
the drafting of statutes, under which a simple or general term should be
adopted in the title, which would include all other provisions found in
the body of the Act.
One purpose of the constitutional directive that the subject of a bill
should be embraced in its title is to apprise the legislators of the
purposes, the nature and scope of its provisions, and prevent the
enactment into law of matters which have received the notice, action
and study of the legislators or of the public. In the case at bar it cannot
be claimed that the legislators have been appraised of the nature of the
law, especially the nationalization and the prohibition provisions. The
legislators took active interest in the discussion of the law, and a great
many of the persons affected by the prohibitions in the law conducted a
campaign against its approval. It cannot be claimed, therefore, that the
reasons for declaring the law invalid ever existed. The objection must
therefore, be overruled.
IX. Alleged violation of international treaties and obligations
Another subordinate argument against the validity of the law is the
supposed violation thereby of the Charter of the United Nations and of
the Declaration of the Human Rights adopted by the United Nations
General Assembly. We find no merit in the Nations Charter imposes no
strict or legal obligations regarding the rights and freedom of their
subjects (Hans Kelsen, The Law of the United Nations, 1951 ed. pp. 29-
32), and the Declaration of Human Rights contains nothing more than a
mere recommendation or a common standard of achievement for all
peoples and all nations (Id. p. 39.) That such is the import of the United
Nations Charter aid of the Declaration of Human Rights can be inferred
the fact that members of the United Nations Organizations, such as
Norway and Denmark, prohibit foreigners from engaging in retail trade,
and in most nations of the world laws against foreigners engaged in
domestic trade are adopted.
The Treaty of Amity between the Republic of the Philippines and the
Republic of China of April 18, 1947 is also claimed to be violated by the
law in question. All that the treaty guarantees is equality of treatment to
the Chinese nationals "upon the same terms as the nationals of any other
country." But the nationals of China are not discriminating against
because nationals of all other countries, except those of the United
States, who are granted special rights by the Constitution, are all
prohibited from engaging in the retail trade. But even supposing that the
law infringes upon the said treaty, the treaty is always subject to
qualification or amendment by a subsequent law (U. S. vs. Thompson,
258, Fed. 257, 260), and the same may never curtail or restrict the scope
of the police power of the State (plaston vs. Pennsylvania, 58 L. ed. 539.)
X. Conclusion
Resuming what we have set forth above we hold that the disputed law
was enacted to remedy a real actual threat and danger to national
economy posed by alien dominance and control of the retail business
and free citizens and country from dominance and control; that the
enactment clearly falls within the scope of the police power of the State,
thru which and by which it protects its own personality and insures its
security and future; that the law does not violate the equal protection
clause of the Constitution because sufficient grounds exist for the
distinction between alien and citizen in the exercise of the occupation
regulated, nor the due process of law clause, because the law is
prospective in operation and recognizes the privilege of aliens already
engaged in the occupation and reasonably protects their privilege; that
the wisdom and efficacy of the law to carry out its objectives appear to
us to be plainly evident — as a matter of fact it seems not only
appropriate but actually necessary — and that in any case such matter
falls within the prerogative of the Legislature, with whose power and
discretion the Judicial department of the Government may not interfere;
that the provisions of the law are clearly embraced in the title, and this
suffers from no duplicity and has not misled the legislators or the
segment of the population affected; and that it cannot be said to be void
for supposed conflict with treaty obligations because no treaty has
actually been entered into on the subject and the police power may not
be curtailed or surrendered by any treaty or any other conventional
agreement.
Some members of the Court are of the opinion that the radical effects of
the law could have been made less harsh in its impact on the aliens. Thus
it is stated that the more time should have been given in the law for the
liquidation of existing businesses when the time comes for them to close.
Our legal duty, however, is merely to determine if the law falls within the
scope of legislative authority and does not transcend the limitations of
due process and equal protection guaranteed in the Constitution.
Remedies against the harshness of the law should be addressed to the
Legislature; they are beyond our power and jurisdiction.
G.R. No. 105371 November 11, 1993
THE PHILIPPINE JUDGES ASSOCIATION, duly rep. by its President,
BERNARDO P. ABESAMIS, Vice-President for Legal Affairs, MARIANO
M. UMALI, Director for Pasig, Makati, and Pasay, Metro Manila,
ALFREDO C. FLORES, and Chairman of the Committee on Legal Aid,
JESUS G. BERSAMIRA, Presiding Judges of the Regional Trial Court,
Branch 85, Quezon City and Branches 160, 167 and 166, Pasig,
Metro Manila, respectively: the NATIONAL CONFEDERATION OF
THE JUDGES ASSOCIATION OF THE PHILIPPINES, composed of the
METROPOLITAN TRIAL COURT JUDGES ASSOCIATION rep. by its
President. REINATO QUILALA of the MUNICIPAL TRIAL CIRCUIT
COURT, Manila; THE MUNICIPAL JUDGES LEAGUE OF THE
PHILIPPINES rep. by its President, TOMAS G. TALAVERA; by
themselves and in behalf of all the Judges of the Regional Trial and
Shari'a Courts, Metropolitan Trial Courts and Municipal Courts
throughout the Country, petitioners,
vs.
HON. PETE PRADO, in his capacity as Secretary of the Department
of Transportation and Communications, JORGE V. SARMIENTO, in
his capacity as Postmaster General, and the PHILIPPINE POSTAL
CORP., respondents.
CRUZ, J.:
The basic issue raised in this petition is the independence of the
Judiciary. It is asserted by the petitioners that this hallmark of
republicanism is impaired by the statute and circular they are here
challenging. The Supreme Court is itself affected by these measures and
is thus an interested party that should ordinarily not also be a judge at
the same time. Under our system of government, however, it cannot
inhibit itself and must rule upon the challenge, because no other office
has the authority to do so. We shall therefore act upon this matter not
with officiousness but in the discharge of an unavoidable duty and, as
always, with detachment and fairness.
The main target of this petition is Section 35 of R.A. No. 7354 as
implemented by the Philippine Postal Corporation through its Circular
No. 92-28. These measures withdraw the franking privilege from the
Supreme Court, the Court of Appeals, the Regional Trial Courts, the
Metropolitan Trial Courts, the Municipal Trial Courts, and the Land
Registration Commission and its Registers of Deeds, along with certain
other government offices.
The petitioners are members of the lower courts who feel that their
official functions as judges will be prejudiced by the above-named
measures. The National Land Registration Authority has taken common
cause with them insofar as its own activities, such as sending of requisite
notices in registration cases, affect judicial proceedings. On its motion, it
has been allowed to intervene.
The petition assails the constitutionality of R.A. No. 7354 on the grounds
that: (1) its title embraces more than one subject and does not express
its purposes; (2) it did not pass the required readings in both Houses of
Congress and printed copies of the bill in its final form were not
distributed among the members before its passage; and (3) it is
discriminatory and encroaches on the independence of the Judiciary.
We approach these issues with one important principle in mind, to wit,
the presumption of the constitutionality of statutes. The theory is that as
the joint act of the Legislature and the Executive, every statute is
supposed to have first been carefully studied and determined to be
constitutional before it was finally enacted. Hence, unless it is clearly
shown that it is constitutionally flawed, the attack against its validity
must be rejected and the law itself upheld. To doubt is to sustain.
I
We consider first the objection based on Article VI, Sec. 26(l), of the
Constitution providing that "Every bill passed by the Congress shall
embrace only one subject which shall be expressed in the title thereof."
The purposes of this rule are: (1) to prevent hodge-podge or "log-
rolling" legislation; (2) to prevent surprise or fraud upon the legislature
by means of provisions in bills of which the title gives no intimation, and
which might therefore be overlooked and carelessly and unintentionally
adopted; and (3) to fairly apprise the people, through such publication of
legislative proceedings as is usually made, of the subject of legislation
that is being considered, in order that they may have opportunity of
being heard thereon, by petition or otherwise, if they shall so desire.1
It is the submission of the petitioners that Section 35 of R.A. No. 7354
which withdrew the franking privilege from the Judiciary is not
expressed in the title of the law, nor does it reflect its purposes.
R.A. No. 7354 is entitled "An Act Creating the Philippine Postal
Corporation, Defining its Powers, Functions and Responsibilities,
Providing for Regulation of the Industry and for Other Purposes
Connected Therewith."
The objectives of the law are enumerated in Section 3, which provides:
The State shall pursue the following objectives of a nationwide
postal system:
a) to enable the economical and speedy transfer of mail and
other postal matters, from sender to addressee, with full
recognition of their privacy or confidentiality;
b) to promote international interchange, cooperation and
understanding through the unhampered flow or exchange of
postal matters between nations;
c) to cause or effect a wide range of postal services to cater to
different users and changing needs, including but not limited to,
philately, transfer of monies and valuables, and the like;

d) to ensure that sufficient revenues are generated by and
within the industry to finance the overall cost of providing the
varied range of postal delivery and messengerial services as
well as the expansion and continuous upgrading of service
standards by the same.
Sec. 35 of R.A. No. 7354, which is the principal target of the petition,
reads as follows:
Sec. 35. Repealing Clause. — All acts, decrees, orders, executive
orders, instructions, rules and regulations or parts thereof
inconsistent with the provisions of this Act are repealed or
modified accordingly.
All franking privileges authorized by law are hereby repealed,
except those provided for under Commonwealth Act No. 265,
Republic Acts Numbered 69, 180, 1414, 2087 and 5059. The
Corporation may continue the franking privilege under Circular
No. 35 dated October 24, 1977 and that of the Vice President,
under such arrangements and conditions as may obviate abuse
or unauthorized use thereof.
The petitioners' contention is untenable. We do not agree that the title of
the challenged act violates the Constitution.
The title of the bill is not required to be an index to the body of the act,
or to be as comprehensive as to cover every single detail of the measure.
It has been held that if the title fairly indicates the general subject, and
reasonably covers all the provisions of the act, and is not calculated to
mislead the legislature or the people, there is sufficient compliance with
the constitutional requirement. 2
To require every end and means necessary for the accomplishment of
the general objectives of the statute to be expressed in its title would not
only be unreasonable but would actually render legislation impossible. 3
As has been correctly explained:
The details of a legislative act need not be specifically stated in
its title, but matter germane to the subject as expressed in the
title, and adopted to the accomplishment of the object in view,
may properly be included in the act. Thus, it is proper to create
in the same act the machinery by which the act is to be
enforced, to prescribe the penalties for its infraction, and to
remove obstacles in the way of its execution. If such matters are
properly connected with the subject as expressed in the title, it
is unnecessary that they should also have special mention in the
title (Southern Pac. Co. v. Bartine, 170 Fed. 725).
This is particularly true of the repealing clause, on which Cooley writes:
"The repeal of a statute on a given subject is properly connected with the
subject matter of a new statute on the same subject; and therefore a
repealing section in the new statute is valid, notwithstanding that the
title is silent on the subject. It would be difficult to conceive of a matter
more germane to an act and to the object to be accomplished thereby
than the repeal of previous legislations connected therewith."4
The reason is that where a statute repeals a former law, such repeal is
the effect and not the subject of the statute; and it is the subject, not the
effect of a law, which is required to be briefly expressed in its title.5 As
observed in one case,6 if the title of an act embraces only one subject, we
apprehend it was never claimed that every other act which repeals it or
alters by implication must be mentioned in the title of the new act. Any
such rule would be neither within the reason of the Constitution, nor
practicable.
We are convinced that the withdrawal of the franking privilege from
some agencies is germane to the accomplishment of the principal
objective of R.A. No. 7354, which is the creation of a more efficient and
effective postal service system. Our ruling is that, by virtue of its nature
as a repealing clause, Section 35 did not have to be expressly
included in the title of the said law.
II
The petitioners maintain that the second paragraph of Sec. 35 covering
the repeal of the franking privilege from the petitioners and this Court
under E.O. 207, PD 1882 and PD 26 was not included in the original
version of Senate Bill No. 720 or House Bill No. 4200. As this paragraph
appeared only in the Conference Committee Report, its addition, violates
Article VI, Sec. 26(2) of the Constitution, reading as follows:
(2) 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.
The petitioners also invoke Sec. 74 of the Rules of the House of
Representatives, requiring that amendment to any bill when the House
and the Senate shall have differences thereon may be settled by a
conference committee of both chambers. They stress that Sec. 35 was
never a subject of any disagreement between both Houses and so the
second paragraph could not have been validly added as an amendment.
These argument are unacceptable.
While it is true that a conference committee is the mechanism for
compromising differences between the Senate and the House, it is not
limited in its jurisdiction to this question. Its broader function is
described thus:
A conference committee may, deal generally with the subject
matter or it may be limited to resolving the precise differences
between the two houses. Even where the conference committee
is not by rule limited in its jurisdiction, legislative custom
severely limits the freedom with which new subject matter can
be inserted into the conference bill. But occasionally a
conference committee produces unexpected results, results
beyond its mandate, These excursions occur even where the
rules impose strict limitations on conference committee
jurisdiction. This is symptomatic of the authoritarian power of
conference committee (Davies, Legislative Law and Process: In
a Nutshell, 1986 Ed., p.81).
It is a matter of record that the conference Committee Report on the bill
in question was returned to and duly approved by both the Senate and
the House of Representatives. Thereafter, the bill was enrolled with its
certification by Senate President Neptali A. Gonzales and Speaker Ramon
V. Mitra of the House of Representatives as having been duly passed by
both Houses of Congress. It was then presented to and approved by
President Corazon C. Aquino on April 3, 1992.
Under the doctrine of separation powers, the Court may not inquire
beyond the certification of the approval of a bill from the presiding
officers of Congress. Casco Philippine Chemical Co. v. Gimenez7 laid down
the rule that the enrolled bill, is conclusive upon the Judiciary (except in
matters that have to be entered in the journals like the yeas and nays on
the final reading of the bill).8 The journals are themselves also binding
on the Supreme Court, as we held in the old (but still valid) case of U.S.
vs. Pons,9 where we explained the reason thus:
To inquire into the veracity of the journals of the Philippine
legislature when they are, as we have said, clear and explicit,
would be to violate both the, letter and spirit of the organic laws
by which the Philippine Government was brought into
existence, to invade a coordinate and independent department
of the Government, and to interfere with the legitimate powers
and functions, of the Legislature.
Applying these principles, we shall decline to look into the petitioners'
charges that an amendment was made upon the last reading of the bill
that eventually became R.A. No. 7354 and that copies thereof in its final
form were not distributed among the members of each House. Both the
enrolled bill and the legislative journals certify that the measure was
duly enacted i.e., in accordance with Article VI, Sec. 26(2) of the
Constitution. We are bound by such official assurances from a coordinate
department of the government, to which we owe, at the very least, a
becoming courtesy.
III
The third and most serious challenge of the petitioners is based on the
equal protection clause.
It is alleged that R.A. No. 7354 is discriminatory because while
withdrawing the franking privilege from the Judiciary, it retains the
same for the President of the Philippines, the Vice President of the
Philippines; Senators and Members of the House of Representatives, the
Commission on Elections; former Presidents of the Philippines; the
National Census and Statistics Office; and the general public in the filing
of complaints against public offices and officers.10
The respondents counter that there is no discrimination because the law
is based on a valid classification in accordance with the equal protection
clause. In fact, the franking privilege has been withdrawn not only from
the Judiciary but also the Office of Adult Education, the Institute of
National Language; the Telecommunications Office; the Philippine
Deposit Insurance Corporation; the National Historical Commission; the
Armed Forces of the Philippines; the Armed Forces of the Philippines
Ladies Steering Committee; the City and Provincial Prosecutors; the
Tanodbayan (Office of Special Prosecutor); the Kabataang Barangay; the
Commission on the Filipino Language; the Provincial and City Assessors;
and the National Council for the Welfare of Disabled Persons.11

The equal protection of the laws is embraced in the concept of due
process, as every unfair discrimination offends the requirements of
justice and fair play. It has nonetheless been embodied in a separate
clause in Article III Sec. 1., of the Constitution to provide for a more,
specific guaranty against any form of undue favoritism or hostility from
the government. Arbitrariness in general may be challenged on the basis
of the due process clause. But if the particular act assailed partakes of an
unwarranted partiality or prejudice, the sharper weapon to cut it down
is the equal protection clause.
According to a long line of decisions, equal protection simply requires
that all persons or things similarly situated should be treated alike, both
as to rights conferred and responsibilities imposed, 12 Similar subjects,
in other words, should not be treated differently, so as to give undue
favor to some and unjustly discriminate against others.
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, as where, for example, a law
prohibiting mature books to all persons, regardless of age, would benefit
the morals of the youth but violate the liberty of adults. 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. 13
What is the reason for the grant of the franking privilege in the first
place? Is the franking privilege extended to the President of the
Philippines or the Commission on Elections or to former Presidents of
the Philippines purely as a courtesy from the lawmaking body? Is it
offered because of the importance or status of the grantee or because of
its need for the privilege? Or have the grantees been chosen pell-mell, as
it were, without any basis at all for the selection?
We reject outright the last conjecture as there is no doubt that the
statute as a whole was carefully deliberated upon, by the political
departments before it was finally enacted. There is reason to suspect,
however, that not enough care or attention was given to its repealing
clause, resulting in the unwitting withdrawal of the franking privilege
from the Judiciary.
We also do not believe that the basis of the classification was mere
courtesy, for it is unimaginable that the political departments would
have intended this serious slight to the Judiciary as the third of the major
and equal departments the government. The same observations are
made if the importance or status of the grantee was the criterion used
for the extension of the franking privilege, which is enjoyed by the
National Census and Statistics Office and even some private individuals
but not the courts of justice.
In our view, the only acceptable reason for the grant of the franking
privilege was the perceived need of the grantee for the accommodation,
which would justify a waiver of substantial revenue by the Corporation
in the interest of providing for a smoother flow of communication
between the government and the people.
Assuming that basis, we cannot understand why, of all the departments
of the government, it is the Judiciary, that has been denied the franking
privilege. There is no question that if there is any major branch of the
government that needs the privilege, it is the Judicial Department, as the
respondents themselves point out. Curiously, the respondents would
justify the distinction on the basis precisely of this need and, on this
basis, deny the Judiciary the franking privilege while extending it to
others less deserving.
In their Comment, the respondents point out that available data from the
Postal Service Office show that from January 1988 to June 1992, the total
volume of frank mails amounted to P90,424,175.00. Of this amount,
frank mails from the Judiciary and other agencies whose functions
include the service of judicial processes, such as the intervenor, the
Department of Justice and the Office of the Ombudsman, amounted to
P86,481,759. Frank mails coming fromthe Judiciary amounted to
P73,574,864.00, and those coming from the petitioners reached the total
amount of P60,991,431.00. The respondents' conclusion is that because
of this considerable volume of mail from the Judiciary, the franking
privilege must be withdrawn from it.
The argument is self-defeating. The respondents are in effect saying that
the franking privilege should be extended only to those who do not need
it very much, if at all, (like the widows of former Presidents) but not to
those who need it badly (especially the courts of justice). It is like saying
that a person may be allowed cosmetic surgery although it is not really
necessary but not an operation that can save his life.
If the problem of the respondents is the loss of revenues from the
franking privilege, the remedy, it seems to us, is to withdraw it
altogether from all agencies of government, including those who do not
need it. The problem is not solved by retaining it for some and
withdrawing it from others, especially where there is no substantial
distinction between those favored, which may or may not need it at all,
and the Judiciary, which definitely needs it. The problem is not solved by
violating the Constitution.
In lumping the Judiciary with the other offices from which the franking
privilege has been withdrawn, Section 35 has placed the courts of justice
in a category to which it does not belong. If it recognizes the need of the
President of the Philippines and the members of Congress for the
franking privilege, there is no reason why it should not recognize a
similar and in fact greater need on the part of the Judiciary for such
privilege. While we may appreciate the withdrawal of the franking
privilege from the Armed Forces of the Philippines Ladies Steering
Committee, we fail to understand why the Supreme Court should be
similarly treated as that Committee. And while we may concede the need
of the National Census and Statistics Office for the franking privilege, we
are intrigued that a similar if not greater need is not recognized in the
courts of justice.
(On second thought, there does not seem to be any justifiable need for
withdrawing the privilege from the Armed Forces of the Philippines
Ladies Steering Committee, which, like former Presidents of the
Philippines or their widows, does not send as much frank mail as the
Judiciary.)
It is worth observing that the Philippine Postal Corporation, as a
government-controlled corporation, was created and is expected to
operate for the purpose of promoting the public service. While it may
have been established primarily for private gain, it cannot excuse itself
from performing certain functions for the benefit of the public in
exchange for the franchise extended to it by the government and the
many advantages it enjoys under its charter.14 Among the services it
should be prepared to extend is free carriage of mail for certain offices of
the government that need the franking privilege in the discharge of their
own public functions.
We also note that under Section 9 of the law, the Corporation is
capitalized at P10 billion pesos, 55% of which is supplied by the
Government, and that it derives substantial revenues from the sources
enumerated in Section 10, on top of the exemptions it enjoys. It is not
likely that the retention of the franking privilege of the Judiciary will
cripple the Corporation.
At this time when the Judiciary is being faulted for the delay in the
administration of justice, the withdrawal from it of the franking privilege
can only further deepen this serious problem. The volume of judicial
mail, as emphasized by the respondents themselves, should stress the
dependence of the courts of justice on the postal service for
communicating with lawyers and litigants as part of the judicial process.
The Judiciary has the lowest appropriation in the national budget
compared to the Legislative and Executive Departments; of the P309
billion budgeted for 1993, only .84%, or less than 1%, is alloted for the
judiciary. It should not be hard to imagine the increased difficulties of
our courts if they have to affix a purchased stamp to every process they
send in the discharge of their judicial functions.
We are unable to agree with the respondents that Section 35 of R.A. No.
7354 represents a valid exercise of discretion by the Legislature under
the police power. On the contrary, we find its repealing clause to be a
discriminatory provision that denies the Judiciary the equal protection
of the laws guaranteed for all persons or things similarly situated. The
distinction made by the law is superficial. It is not based on substantial
distinctions that make real differences between the Judiciary and the
grantees of the franking privilege.
This is not a question of wisdom or power into which the Judiciary may
not intrude. It is a matter of arbitrariness that this Court has the duty
and power to correct.
IV
In sum, we sustain R.A. No. 7354 against the attack that its subject is not
expressed in its title and that it was not passed in accordance with the
prescribed procedure. However, we annul Section 35 of the law as
violative of Article 3, Sec. 1, of the Constitution providing that no person
shall "be deprived of the equal protection of laws."
We arrive at these conclusions with a full awareness of the criticism it is
certain to provoke. While ruling against the discrimination in this case,
we may ourselves be accused of similar discrimination through the
exercise of our ultimate power in our own favor. This is inevitable.
Criticism of judicial conduct, however undeserved, is a fact of life in the
political system that we are prepared to accept.. As judges, we cannot
debate with our detractors. We can only decide the cases before us as
law imposes on us the duty to be fair and our own conscience gives us
the light to be right.
ACCORDINGLY, the petition is partially GRANTED and Section 35 of R.A.
No. 7354 is declared UNCONSTITUTIONAL. Circular No. 92-28 is SET
ASIDE insofar as it withdraws the franking privilege from the Supreme
Court, the Court of Appeals, the Regional trail Courts, the Municipal trial
Courts, and the National Land Registration Authority and its Register of
Deeds to all of which offices the said privilege shall be RESTORED. The
temporary restraining order dated June 2, 1992, is made permanent.
SO ORDERED.
In re Cunanan 94 Phil. 534 (1954)
NATIONAL ELECTRIFICATION ADMINISTRATION, petitioner, vs.
COMMISSION ON AUDIT, respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure with prayer for preliminary injunction and temporary
restraining order, to reverse and set aside Decision No. 2000-132 dated
May 16, 2000 of the Commission on Auditi (Commission for brevity) in
RE: Appeal of Mr. Conrado Estrella III, Administrator, National
Electrification Administration (NEA) Quezon City, for the lifting of the
disallowance on the payment of accelerated increases under Joint
Resolution No. 01 totaling P14,155,342.00. The dispositive portion of the
Decision reads:
Premises considered, the instant appeal has to be, as it is hereby denied
for lack of legal basis. Consequently, the Notice of Disallowance issued
by the NEA Auditor covering the subject disbursement is hereby
sustained. Accordingly, all NEA officials and employees who received
compensation and allowances in violation of the provisions of Executive
Order No. 389 and National Budget Circular No. 458 are hereby directed
to refund the same within a period of one year after the promulgation of
this decision. NEA management is enjoined to effect said refund under
the supervision of the NEA Auditor who shall ensure the proper and
strict implementation of this decision.ii
The Antecedent Facts
Petitioner National Electrification Administration (NEA for brevity) is a
government-owned and controlled corporation created under
Presidential Decree No. 269, as amended. NEA is charged with the
responsibility of organizing, financing and regulating electric
cooperatives throughout the country.
On July 1, 1989, Republic Act No. 6758 (RA 6758), entitled An Act
Prescribing A Revised Compensation and Position Classification System in
the Government and For Other Purposes, took effect. RA 6758 provided,
among others, a salary schedule for all government positions, appointive
or elective, including positions in government-owned or controlled
corporations and government financial institutions.
In response to pressing economic difficulties and the need to alleviate
the plight of government personnel, the Senate and the House of
Representatives passed on March 3, 1994 Joint Resolution No. 01
entitled Urging the President of the Philippines to Revise the Existing
Compensation and Position Classification System in the Government and to
Implement the Same Initially Effective January 1, 1994. Approved by then
President Fidel V. Ramos on March 7, 1994, Joint Resolution No. 01
adjusted the salary schedule of all officials and employees of the
government. Paragraph 10 of Joint Resolution No. 01 provides that the
new salary schedule shall be implemented within four (4) years
beginning in 1994.
On December 28, 1996, then President Fidel V. Ramos issued Executive
Order No. 389 (EO 389) entitled Implementing the Fourth and Final Year
Salary Increases Authorized by Joint Senate and House of Representatives
Resolution No. 01, Series of 1994. EO 389 directed payment of the fourth
and final salary increases authorized under Joint Resolution No. 01 in
two tranches, as follows:
SEC. 2. Full Implementation. The Department of Budget and
Management is hereby directed to implement in full in FY 1997 the
remaining balance of said Salary Schedule after the partial
implementation made of the same in 1994, 1995 and 1996 to civilian
and uniformed personnel, as follows:
1. For Civilian Personnel
a. Effective January 1, 1997 = in accordance with the Fourth
Interim Salary Schedule hereto attached and marked as Annex
A of this Order. The adjustment shall be to the designated salary
step of the employee in the salary grade allocation of his
position as of December 31, 1996;
b. Effective November 1, 1997 = in accordance with the
attached Salary Schedule marked as Annex B of this Order. The
adjustment shall be to the designated salary step of the
employee in the salary grade allocation of his position as of
October 31, 1997.
x x x.
The Department of Budget and Management (DBM for brevity) issued
Implementing Guidelines under National Budget Circular No. 458 (NBC
No. 458), series of 1997, reiterating the schedule of payments in EO
389.
In January 1997, NEA implemented the salary increases prescribed for
the year 1997 pursuant to Joint Resolution No. 01. However, NEA did not
implement the salary increases in accordance with the schedule of
payment specified in EO 389 and NBC No. 458. Instead, NEA
implemented in one lump sum beginning January 1, 1997 the salary
increases required to be paid in two tranches, the first tranche on
January 1, 1997 and the second tranche on November 1, 1997.
Otherwise stated, NEA accelerated the implementation of the salary
increase by paying the second tranche starting January 1, 1997
instead of November 1, 1997.
On September 26, 1997, the Commissions resident auditor in NEA issued
a Notice of Suspension requiring the submission of the legal basis for the
full implementation of the new salary schedule effective January 1, 1997
instead of November 1, 1997. The NEA failed to submit the basis for its
advance implementation of the prescribed salary rates. Thus, the
Commissions resident auditor issued on May 14 and 27, 1998, Notices of
Disallowance Nos. 98-010-101 and 98-011-101, respectively. The
resident auditor issued another Notice of Disallowance on September
18, 1998. On September 28, 1998 the resident auditor denied NEAs
September 23, 1998 request to reconsider the disallowance.
Consequently, NEA appealed to the Corporate Audit Office II of the
Commission but the appeal was denied on February 5, 1999. On March
12, 1999, NEA filed an appeal with the Commission en banc but the latter
denied the same on May 16, 2000 and sustained the disallowance made
by the resident auditor.
Hence, this Petition.
Ruling of the Commission on Audit
In sustaining the disallowance made by the resident auditor, the
Commission explained thus:
After a careful evaluation of the facts and pertinent laws obtaining in this
case, this Commission finds the instant appeal bereft of merit. Pursuant
to Article 29 (1) of the 1987 Constitution No money shall be paid out of
the Treasury except in pursuance of an appropriation made by law. Also,
under R.A. 8244, a law appropriating twenty-seven billion pesos for the
fourth and final year of implementation of the salary increases pursuant
to the Senate-House of Representatives Resolution No. 01 Series of 1994
for all National Government civilian and uniformed personnel, it is
specifically provided that the salary increases shall be effective on the
following schedule of payments:
1. Effective January 1, 1997 for the first 50% of the unimplemented
balance as of December 31, 1996; and
2. Effective November 1, 1997 the remaining fifty percent (50%) of said
unimplemented balance to effect full salary adjustment.
Perusal of the provision of E.O. No. 389 and National Budget Circular No.
458 Series of 1997 would show the same effectivity dates or schedule of
payments. Suffice it to say, that the aforequoted provisions of law
treating on the subject salary implementation is clear and unequivocal
such that there could never be any room for a different interpretation
regarding the effectivity dates except that which is explicitly stated
therein. Thus, when the NEA effected full implementation of the new
salary schedule on January 1, 1997, instead of November 1, 1997, NEA
was, then, clearly acting in violation of the mandates of the law.
Consequently, said wrongful implementation must be struck down for
being baseless and unlawful, and all its employees who received the
undue increases must necessarily return the amount thus received.
The Issues
In its Memorandum,iii NEA avers that the Commission committed grave
abuse of discretion amounting to lack or excess of jurisdiction in
disallowing the increased salaries of NEAs officials and employees for
the period January 1, 1997 to October 31, 1997 for the following
reasons:
1. NEAs accelerated implementation of SSL II is in accordance
with law, Joint Senate-House of Representatives Resolution No. 01 dated
March 3, 1994, particularly Section 10 thereof x x x.
2. The fund to pay such increase had the imprimatur of the DBM
and was included in the General Appropriations Act of 1997 (R.A. 8250)
x x x.iv
In the main, NEA argues that it may accelerate the implementation of the
salary increases for the year 1997 due to the availability of funds.
The Courts Ruling
The Petition has no merit.
First, we find that NEAs accelerated implementation of the Salary
Standardization Law II is not in accordance with law.
We reject NEAs claim that Republic Act No. 8250, otherwise known as
the General Appropriations Act of 1997 (1997 GAA), serves as legal basis
for NEAs accelerated implementation of the last phase of the Salary
Standardization Law II. The 1997 GAA is not self-executory so as to
serve as outright legal authority for NEA to spend what had been
appropriated for NEAs Personal Services under the 1997 GAA.
Budgetary appropriations under the GAA do not constitute unbridled
authority to government agencies to spend the appropriated amounts as
they may wish.
Pursuant to the provisions on National Government Budgetingv found in
the Revised Administrative Code of 1987 (Administrative Code),
appropriations for Personal Services are not itemized. Thus, the 1997
GAA contains a lump sum appropriation of P210,766,000.00 for NEAs
Personal Services, broken down into P37,476,000.00 for General
Administration and Support, P103,855,000.00 for Support to Operations,
and P69,435,000.00 for Operations. There is no itemization of Personal
Services in the 1997 GAA, and nothing is mentioned therein about the
acceleration or full payment of the Salary Standardization Law II.
The itemization of Personal Services is prepared after the enactment of
the annual GAA and requires the approval of the President. Thus, Section
23, Chapter 4, Book IV of the Administrative Code provides that:
SEC. 23. Content of the General Appropriations Act. The General
Appropriations Act shall be presented in the form of budgetary
programs and projects for each agency of the government, with the
corresponding appropriations for each program and project, including
statutory provisions of specific agency or general applicability. The
General Appropriations Act shall not contain any itemization of
personal services, which shall be prepared by the Secretary after
enactment of the General Appropriations Act, for consideration and
approval of the President. (Emphasis supplied)
Further, the execution of the annual GAA is subject to a program of
expenditure to be approved by the President and this approved program
of expenditure is the basis for the fund release. Thus, Section 34, Chapter
5, Book IV of the Administrative Code states that
Sec. 34. Program of Expenditure - The Secretary of Budget shall
recommend to the President the years program of expenditure for each
agency of the government on the basis of authorized appropriations. The
approved expenditure program shall constitute the basis for fund
release during the fiscal period, subject to such policies, rules and
regulations as may be approved by the President. (Emphasis
supplied)
Moreover, Section 60, Chapter 7, Book VI of the Administrative Code
provides that no portion of the appropriations in the GAA shall be used
for payment of any salary increase or adjustment unless specifically
authorized by law or appropriate budget circular. It reads:
SEC. 60. Restrictions on Salary Increases. No portion of the
appropriations provided in the General Appropriations Act shall be
used for payment of any salary increase or adjustment unless
specifically authorized by law or appropriate budget circular nor
shall any appropriation for salaries authorized in the General
Appropriations Act, save as otherwise provided for under the
Compensation and Position Classification Act, be paid unless the
positions have been classified by the Budget Commission. (Emphasis
supplied)
Finally, Section 33 of the 1997 GAA itself expressly provides that the
salary increases authorized by the Senate-House of Representatives
Joint Resolution No. 01 or the Salary Standardization Law II are subject
to approval by the President. It reads:
Sec. 33. Compensation Adjustment and Productivity Incentive Benefits.
The amount authorized for Compensation Adjustment and Productivity
Incentive Benefits shall be used for the adjustment in basic salary and
associated benefits of national government personnel pursuant to Joint
Resolution No. 01, s. 1994 of Congress, as well as Productivity Incentive
Benefits as may be approved by the President: PROVIDED, That such
compensation adjustment shall be fully implemented within FY 1997:
PROVIDED, FURTHER, That transportation allowance, if any, shall be
deducted from or reduced by the salary adjustment: PROVIDED,
FURTHERMORE, That compensation adjustment for government-owned
or controlled corporations and local government units shall be charged
to their corporate and local funds, respectively: xxx. (Emphasis supplied)
Clearly, NEA cannot automatically spend its authorized appropriation
for Personal Services under the 1997 GAA. The Budget Secretary must
first prepare an itemization of the Personal Services, and submit the
same for approval of the President. Next, the Budget Secretary must
recommend to the President NEAs program of expenditure for the
current year based on NEAs authorized appropriation. The President
may approve the expenditure program subject to certain policies and
rules. The salary adjustments as well as the associated benefits granted
by the Salary Standardization Law II are, under the 1997 GAA, expressly
subject to the Presidents approval. Appropriations for salary increases
or adjustments shall be released as specifically authorized by law or
appropriate budget circular, which in this case is National Budget
Circular No. 458. Hence, compliance with said budget circular is
mandatory.
The rules on National Government Budgeting as prescribed by the
Administrative Code are not idle or empty exercises. The mere approval
by Congress of the GAA does not instantly make the funds available for
spending by the Executive Department. The funds authorized for
disbursement under the GAA are usually still to be collected during the
fiscal year. The revenue collections of the government, largely from
taxes, may fall short of the approved budget, as has been the normal
occurrence almost every year.
This puts the Executive Department in a dilemma: borrow money to
bridge the deficit, or cut down on spending even if the expenditure is
authorized by the general appropriations law. Borrowing money locally
puts an upward pressure on interest rates, while borrowing from abroad
increases our foreign debt stock and eventually puts a downward
pressure on the peso. On the other hand, cutting down on spending
impairs the delivery of basic services and dampens the economy. The
Executive Department must balance carefully these economic and social
factors, and to do this it must calibrate government disbursements to
match, as much as possible, receipt of revenues. This is the rationale
behind the rules on National Government Budgeting.
Next, NEA argues that an intention to exempt adequately funded
government-owned or controlled corporations (GOCCs for brevity) from
the two-tranche payment can be gleaned from the last paragraph of
Section 10 of EO 389 which reads:
GOCCs, GFIs and LGUs which do not have adequate or sufficient funds to
pay the salary increases prescribed herein, may only partially implement
the established rate; Provided, That, any partial implementation should
be fixed at a uniform percentage such that no official or employee shall
receive a percentage adjustment higher than that of any other
official/employee in the same corporate entity and local government
unit.
The interpretation placed by NEA on Section 10 does not find support in
the text thereof expressium facit cessare tacitum what is expressed puts
an end to that which is implied.vi Section 10 refers only to GOCCs with
insufficient funds to pay the salary increases. Section 10 expressly
authorizes GOCCs with insufficient funds to partially implement the
prescribed salary increases in a uniform and non-discriminatory
manner. Nothing in Section 10 authorizes GOCCs with sufficient funds to
accelerate the prescribed schedule of salary increases. Clearly, Section
10 of EO 389 does not authorize, expressly or impliedly, the advance
implementation of the salary increases just because a GOCC has the
available funds.
NEA also contends that its accelerated implementation of the salary
increases is supported by the Memorandum of the Office of the President
dated November 7, 1995, the subject of which reads, xxx: Authorizing the
Acceleration of the Implementation of the Revised Compensation and
Position Classification Plan provided in Senate-House of Representatives
Joint Resolution No. 01 Adopted and Approved on 07 March 1994 to
Government-Owned and/or Controlled Corporations (GOCCs) and
Government Financial Institutions (GFIs). According to NEA, the
Memorandum allows full implementation of salary increases x x x not
earlier than November 1, 1996. The specific provision referred to by
NEA reads as follows:
The three tranches scheme for GOCCs are as follows:
FIRST - effective not earlier than 01 November 1997 at an amount as
may be determined by the governing Board of the GOCC concerned,
provided such amount shall not exceed 30% of the unimplemented
balance of said Salary Schedule;
SECOND - the 30% of the said balance or any lower amount as may be
determined by the governing Board of the concerned GOCC may be
implemented not earlier than 01 April 1996; and
THIRD the remaining balance may be implemented not earlier than
01 November 1996. (Emphasis supplied)
The Memorandum, which allows full implementation of the salary
increases [n]ot earlier than November 1, 1996, does not automatically
accelerate the staggered salary increases for 1997. On the contrary, the
Memorandum specifically provides that accelerated implementation can
be availed of by GOCCs and GFIs x x x only upon prior approval of the
DBM. In order to secure such prior approval from the DBM, GOCCs and
GFIs must submit an application for acceleration to the DBM which will
evaluate and act on the same on the basis of nine terms and conditions
specifically enumerated in the Memorandum. The Memorandum
provides thus:
The GOCC and GFI can avail of the above accelerated implementation
only upon prior approval by the DBM. For this purpose, GOCC and GFI
will submit an application for acceleration to DBM which will evaluate
and act on same on the basis of the following terms and conditions:
1. the GOCC and GFI shall have never been seriously/critically assailed to
have caused or contributed to the economic problems of the country as
evidenced by duly verified/proven facts presented in a responsible
published public criticism;
2. that it must not have received any subsidy or other forms of financial
support from the national government in financing its operation or in
the implementation of projects for the last three (3) years;
3. that its operational performance for the same period, as well as its
present financial position, is indicative that the concerned GOCC and GFI
will remain financially viable and capable of financing its operations;
4. that it has actually remitted all mandatory dividends to the national
government through the National Treasury equivalent to 50% of its net
income pursuant to R.A. No. 7656, dated 09 November 1993, and has no
unpaid taxes due the national government or local government units,
and their respective agencies and instrumentalities;
5. that all advances made by the national government for debt service
and other obligations shall have been accordingly liquidated;
6. that it has not incurred any losses from operations for the last three
(3) years;
7. that the financial position and earning performance of the GOCC and
GFI shall in no case be affected by SSL acceleration;
8. that the accelerated implementation herein authorized shall strictly be
based on the Position Allocation List (PAL) specifically approved by the
DBM for such GOCC and GFI pursuant to R.A. No. 6758, or Organizational
Structure and Staffing Pattern pursuant to existing budgeting laws, and
shall be based on the 33-grade Salary Schedule; and
9. that no funding support shall be required from the national
government nor funds already released and earmarked for a specific
purpose be used therefore. Funds for the purpose shall solely be sourced
from corporate funds:
x x x. (Emphasis supplied)
Evidently, in order to avail of the benefits of accelerated implementation,
NEA must secure the approval of the DBM by complying with the terms
and conditions prescribed by the Memorandum. NEA failed to do this.
Absent any authority or approval from the DBM or the President
authorizing NEA to accelerate implementation of the last phase of the
salary increase, NEAs accelerated payment is without legal basis.
Neither could NEA successfully assail the authority of the President to
issue EO 389. The Administrative Code has unequivocally vested the
President with rule-making powers in the form of executive orders,
administrative orders, proclamations, memorandum orders and
circulars and general or special orders.vii An executive order, like the
one prescribing the salary schedules, is defined in the Administrative
Code as follows:
Sec. 2. Executive Orders. Acts of the President providing for rules of a
general or permanent character in implementation or execution of
constitutional or statutory powers shall be promulgated in executive
orders.viii (Italics supplied)
Joint Resolution No. 01 expressly acknowledges the authority of the
President to revise the existing compensation and position classification
under the standards and guidelines provided by said Resolution.ix
Further, paragraph 13 of the Resolution states that:
(13) Implementing Guidelines - The Department of Budget and
Management shall prepare and issue the necessary guidelines for the
implementation of the revised compensation and position classification
system consistent with the governing executive order to be issued by
the Office of the President. (Emphasis supplied)
As the administrative head of the government, the President is vested
with the power to execute, administer and carry out laws into practical
operation. Hence, the Court has held that –
While Congress is vested with the power to enact laws, the President
executes the laws. The executive power is vested in the President. It is
generally defined as the power to enforce and administer the laws. It is
the power of carrying (out) the laws into practical operation and
enforcing their due observance.x
There could be no doubt that EO 389 has been issued on authority and
within the confines of the law. Joint Resolution No. 01 established a time
frame of four yearsxi for the implementation of the Salary
Standardization Law II. Consonant with this time frame, the initial
implementation was effected in 1994 through Executive Order No. 164;
in 1995 through Executive Order No. 218; in 1996 through Executive
Order No. 290 and clarified by Presidential Memorandum to the
Secretary of Budget and Management dated November 7, 1995. For the
fourth and final year, Executive Order No. 389 dated December 28, 1996
was issued by the President. Oddly, NEA does not question the authority
of the President to issue the executive orders implementing the Salary
Standardization Law II previous to EO 389. Apparently, NEA complied
with the previous executive orders implementing Joint Resolution No.
01.
NEA argues that the Commission failed to take note that RA 8244, which
provides for the same schedule of payment as EO 389 and NBC No. 458,
is intended only for all national government civilian and uniformed
personnel and not GOCCs and GFIs. A reading of the decision of the
Commission would show that reference to RA 8244 by the Commission
was resorted to give effect to the relevant law and rules. Since RA 8244
and EO 389 are in pari materia, relating as they are to the fourth year
implementation of the salary increases authorized by Joint Resolution
No. 01, the Commission applied said law and rules in harmony with each
other. The Commission thus stated that a perusal of RA 8244, EO 389
and NBC No. 458 would show the same effectivity dates or schedule of
payments.
Similarly untenable is NEAs contention that the Commission acted
beyond the scope of its functions in determining whether or not NEA
violated the law. According to NEA, the Commission exceeded its
authority in inquiring whether NEAs advance release of the salary
increases violated certain laws considering that the Commissions power
is limited to a determination of whether or not there is a law
appropriating funds for that purpose. To support this theory, NEA cites
Guevara vs. Gimenez,xii wherein the Supreme Court allegedly outlined
the scope of authority of the Commission as follows:
Under the Constitution, the authority of the Auditor General in
connection with the expenditures of the government is limited to the
auditing of expenditures of fund or property pertaining to, or held in
trust by, the government or the provinces or municipalities thereof. xxx
xxx Such function is limited to a determination of whether there is a law
appropriating funds for a given purpose.
The ruling in Guevara has already been overturned by the Court in Caltex
Philippines, Inc. vs. Commission on Audit,xiii as follows:
The ruling on this particular point, quoted by petitioner from the cases
of Guevara vs. Gimenez and Ramos vs. Aquino, are no longer controlling as
the two (2) were decided in the light of the 1935 Constitution.
xxx. As observed by one of the Commissioners of the 1986 Constitutional
Commission, Fr. Joaquin G. Bernas:
It should be noted, however, that whereas under Article XI, Section 2, of
the 1935 Constitution the Auditor General could not correct irregular,
unnecessary, excessive or extravagant expenditures of public funds but
could only bring [the matter] to the attention of the proper
administrative officer, under the 1987 Constitution, as also under the
1973 Constitution, the Commission on Audit can promulgate accounting
and auditing rules and regulations including those for the prevention
and disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures or uses of government funds and
properties. Hence, since the Commission on Audit must ultimately be
responsible for the enforcement of these rules and regulations, the
failure to comply with these regulations can be a ground for
disapproving the payment of a proposed expenditure.
Indeed, the powers of the Commission as provided in the 1987
Constitution are broader and more extensive. Section 2, Paragraph D,
Article IX of the 1987 Constitution reads:
Sec. 2. (1) The Commission on Audit shall have the power, authority and
duty to examine, audit, and settle all accounts pertaining to the revenue
and receipts of, and expenditures or uses of funds and property, owned
or held in trust by, or pertaining to, the government, or any of its
subdivisions, agencies, or instrumentalities, including government-
owned and controlled corporations with original charters and on a post-
audit basis: (a) constitutional bodies, commissions and offices that have
been granted fiscal autonomy under this Constitution; (b) autonomous
state colleges and universities; (c) other government-owned or
controlled corporations and their subsidiaries; and (d) such non-
governmental entities receiving subsidy or equity, directly or indirectly,
from or through the Government, which are required by law or the
granting institution to submit to such audit as a condition of subsidy or
equity. x x x.
(2) The Commission shall have exclusive authority, subject to the
limitations in the Article, to define the scope of its audit and
examination, establish the techniques and methods required therefor,
and promulgate accounting and auditing rules and regulations, including
those for the prevention and disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable expenditures, or uses of
government funds and properties.
The Constitution and existing lawsxiv mandate the Commission to audit
all government agencies, including government-owned or controlled
corporations. The Constitution specifically vests in the Commission the
authority to determine whether government entities comply with laws
and regulations in the disbursement of government funds and to
disallow illegal or irregular disbursements of government funds.
Second, there is no merit in NEAs contention that the DBM, upon its
approval of NEAs proposed budget, had effectively stamped its
imprimatur on the accelerated implementation of the salary increases
starting January 1, 1997 because NEAs proposed budget for 1997
included funds for such accelerated implementation. This is not the
approval contemplated by the Presidential Memorandum dated
November 7, 1995, which requires compliance with specific terms and
conditions. The DBMs approval of NEAs proposed budget cannot be
deemed sufficient authority to execute the same in disregard of the
relevant orders and circulars providing for its manner of execution. The
budget process is a cycle of sequential and interrelated budget activities
regularly recurring within a specific time frame (a twelve-month period
called fiscal year).xv
Philippines. This precept is embodied in Article VII, Section 17 of the
Constitution which provides as follows:
Sec. 17. The President shall have control of all the executive
departments, bureaus and offices. He shall ensure that the laws be
faithfully executed.
The presidential power of control over the executive branch of
government extends to all executive employees from Cabinet Secretary
to the lowliest clerk.[18] The constitutional vesture of this power in the
President is self-executing and does not require statutory
implementation, nor may its exercise be limited, much less withdrawn,
by the legislature.[19]
Executive officials who are subordinate to the President should
not trifle with the Presidents constitutional power of control over the
executive branch. There is only one Chief Executive who directs and
controls the entire executive branch[20], and all other executive officials
must implement in good faith his directives and orders. This is necessary
to provide order, efficiency and coherence in carrying out the plans,
policies and programs of the executive branch.
This case would not have arisen had NEA complied in good faith
with the directives and orders of the President in the implementation of
the last phase of the Salary Standardization Law II. The directives and
orders are clearly and manifestly in accordance with all relevant laws.
The reasons advanced by NEA in disregarding the Presidents directives
and orders are patently flimsy, even ill-conceived. This cannot be
countenanced as it will result in chaos and disorder in the executive
branch to the detriment of public service.
WHEREFORE, the instant petition is DISMISSED for lack of merit
and the Decision of the Commission on Audit dated May 16, 2000 is
AFFIRMED in toto.
SO ORDERED.

The DBMs approval of NEAs proposed budget is only a part of the first
phase of the entire budget process which consists of four major phases,
namely: Budget Preparation, Budget Authorization, Budget Execution
and Budget Accountability.xvi After approval of the proposed budget by
the DBM, the same is submitted to Congress for evaluation and inclusion
in the appropriations law which sets forth the authorized appropriations
of the departments and agencies. However, this authorization does not
include the authority to disburse. A program of expenditures is first
prepared showing approved programs and projects. An itemization of
personal services is also prepared listing authorized itemized positions
and their corresponding classifications and authorized salaries. As
clearly stated in Section 60, Chapter 7, Book VI of the Administrative
Code, no portion of the appropriations in the GAA shall be used for
payment of any salary increase or adjustment unless specifically
authorized by law or appropriate budget circular.xvii NBC No. 458 is the
appropriate budget circular referred to by the law with respect to the
payment of the last phase of the Salary Standardization Law II.

Third, under our system of government all executive departments,

bureaus and offices are under the control of the President of the