G.R. No. 95832 August 10, 1992
21 October 1989 — Saturday
MAYNARD R. PERALTA, petitioner,
vs.
CIVIL SERVICE COMMISSION, respondent.
Tranquilino F. Meris Law Office for petitioner.
PADILLA, J.:
Petitioner was appointed Trade-Specialist II on 25 September
1989 in the Department of Trade and Industry (DTI). His
appointment was classified as "Reinstatement/Permanent".
Before said appointment, he was working at the Philippine Cotton
Corporation, a government-owned and controlled corporation
under the Department of Agriculture.
On 8 December 1989, petitioner received his initial salary,
covering the period from 25 September to 31 October 1989.
Since he had no accumulated leave credits, DTI deducted from
his salary the amount corresponding to his absences during the
covered period, namely, 29 September 1989 and 20 October
1989, inclusive of Saturdays and Sundays. More specifically, the
dates of said absences for which salary deductions were made,
are as follows:
1. 29 September 1989 — Friday
2. 30 September 1989 — Saturday
3. 01 October 1989 — Sunday
4. 20 October 1989 — Friday
5.
6. 22 October 1989 — Sunday
Petitioner sent a memorandum to Amando T. Alvis (Chief,
General Administrative Service) on 15 December 1989 inquiring
as to the law on salary deductions, if the employee has no leave
credits.
Amando T. Alvis answered petitioner's query in a memorandum
dated 30 January 1990 citing Chapter 5.49 of the Handbook of
Information on the Philippine Civil Service which states that
"when an employee is on leave without pay on a day before or on
a day immediately preceding a Saturday, Sunday or Holiday, such
Saturday, Sunday, or Holiday shall also be without pay (CSC, 2nd
Ind., February 12, 1965)."
Petitioner then sent a latter dated 20 February 1990 addressed to
Civil Service Commission (CSC) Chairman Patricia A. Sto. Tomas
raising the following question:
Is an employee who was on leave of absence without pay on a
day before or on a day time immediately preceding a Saturday,
Sunday or Holiday, also considered on leave of absence without
pay on such Saturday, Sunday or Holiday? 1
Petitioner in his said letter to the CSC Chairman argued that a
reading of the General Leave Law as contained in the Revised
Administrative Code, as well as the old Civil Service Law
(Republic Act No. 2260), the Civil Service Decree (Presidential
Decree No. 807), and the Civil Service Rules and Regulation fails
to disclose a specific provision which supports the CSC rule at
issue. That being the case, the petitioner contented that he
cannot be deprived of his pay or salary corresponding to the
intervening Saturdays, Sundays or Holidays (in the factual
situation posed), and that the withholding (or deduction) of the
same is tantamount to a deprivation of property without due
process of law.
On 25 May 1990, respondent Commission promulgated
Resolution No. 90-497, ruling that the action of the DTI in
deducting from the salary of petitioner, a part thereof
corresponding to six (6) days (September 29, 30, October 1, 20,
21, 22, 1989) is in order. 2 The CSC stated that:
In a 2nd Indorsement dated February 12, 1965 of this
Commission, which embodies the policy on leave of absence
without pay incurred on a Friday and Monday, reads:
Mrs. Rosalinda Gonzales is not entitled to payment of salary
corresponding to January 23 and 24, 1965, Saturday and
Sunday, respectively, it appearing that she was present on Friday,
January 22, 1965 but was on leave without pay beginning
January 25, the succeeding Monday. It is the view of this Office
that an employee who has no more leave credit in his favor is not
entitled to the payment of salary on Saturdays, Sundays or
holidays unless such non-working days occur within the period of
service actually rendered. (Emphasis supplied)
The rationale for the above ruling which applies only to those
employees who are being paid on monthly basis, rests on the
assumption that having been absent on either Monday or Friday,
one who has no leave credits, could not be favorably credited
with intervening days had the same been working days. Hence,
the above policy that for an employee on leave without pay to be
entitled to salary on Saturdays, Sundays or holidays, the same
must occur between the dates where the said employee actually
renders service. To rule otherwise would allow an employee who
is on leave of absent (sic) without pay for a long period of time to
be entitled to payment of his salary corresponding to Saturdays,
Sundays or holidays. It also discourages the employees who
have exhausted their leave credits from absenting themselves
on a Friday or Monday in order to have a prolonged weekend,
resulting in the prejudice of the government and the public in
general. 3
Petitioner filed a motion for reconsideration and in Resolution No.
90-797, the respondent Commission denied said motion for lack
of merit. The respondent Commission in explaining its action
held:
The Primer on the Civil Service dated February 21, 1978,
embodies the Civil Service Commission rulings to be observed
whenever an employee of the government who has no more
leave credits, is absent on a Friday and/or a Monday is enough
basis for the deduction of his salaries corresponding to the
intervening Saturdays and Sundays. What the Commission
perceived to be without basis is the demand of Peralta for the
payment of his salaries corresponding to Saturdays and Sundays
when he was in fact on leave of absence without pay on a
Friday prior to the said days. A reading of Republic Act No. 2260
(sic) does not show that a government employee who is on leave
of absence without pay on a day before or immediately preceding
Saturdays, Sunday or legal holiday is entitled to payment of his
salary for said days. Further, a reading of Senate Journal No. 67
dated May 4, 1960 of House Bill No. 41 (Republic Act No. 2625)
reveals that while the law excludes Saturdays, Sundays and
holidays in the computation of leave credits, it does not, however,
include a case where the leave of absence is without pay. Hence,
applying the principle of inclusio unius est exclusio alterius, the
claim of Peralta has no merit. Moreover, to take a different
posture would be in effect giving more premium to employees
who are frequently on leave of absence without pay, instead of
discouraging them from incurring further absence without
pay. 4
Petitioner's motion for reconsideration having been denied,
petitioner filed the present petition.
What is primarily questioned by the petitioner is the validity of the
respondent Commission's policy mandating salary deductions
corresponding to the intervening Saturdays, Sundays or Holidays
where an employee without leave credits was absent on the
immediately preceding working day.
During the pendency of this petition, the respondent Commission
promulgated Resolution No. 91-540 dated 23 April 1991
amending the questioned policy, considering that employees paid
on a monthly basis are not required to work on Saturdays,
Sunday or Holidays. In said amendatory Resolution, the
respondent Commission resolved "to adopt the policy that when
an employee, regardless of whether he has leave credits or not,
is absent without pay on day immediately preceding or
succeeding Saturday, Sunday or holiday, he shall not be
considered absent on those days." Memorandum Circular No. 16
Series of 1991 dated 26 April 1991, was also issued by CSC
Chairman Sto. Tomas adopting and promulgating the new policy
and directing the Heads of Departments, Bureaus and Agencies
in the national and local governments, including government-
owned or controlled corporations with original charters, to
oversee the strict implementation of the circular.
Because of these developments, it would seem at first blush that
this petition has become moot and academic since the very CSC
policy being questioned has already been amended and, in effect,
Resolutions No. 90-497 and 90-797, subject of this petition
for certiorari, have already been set aside and superseded. But
the issue of whether or not the policy that had been adopted and
in force since 1965 is valid or not, remains unresolved. Thus, for
reasons of public interest and public policy, it is the duty of the
Court to make a formal ruling on the validity or invalidity of such
questioned policy.
The Civil Service Act of 1959 (R.A. No. 2260) conferred upon the
Commissioner of Civil Service the following powers and duties:
Sec. 16 (e) with the approval by the President to
prescribe, amend and enforce suitable rules and
regulations for carrying into effect the provisions
of this Civil Service Law, and the rules prescribed
pursuant to the provisions of this law shall
become effective thirty days after publication in
the Official Gazette;
xxx xxx xxx
(k) To perform other functions that properly belong
to a central personnel agency. 5
Pursuant to the foregoing provisions, the Commission
promulgated the herein challenged policy. Said policy was
embodied in a 2nd Indorsement dated 12 February 1965 of the
respondent Commission involving the case of a Mrs. Rosalinda
Gonzales. The respondent Commission ruled that an employee
who has no leave credits in his favor is not entitled to the
payment of salary on Saturdays, Sundays or Holidays unless
such non-working days occur within the period of service actually
rendered. The same policy is reiterated in the Handbook of
Information on the Philippine Civil Service. 6 Chapter Five on leave
of absence provides that:
5.51. When intervening Saturday, Sunday or holiday considered
as leave without pay — when an employee is on leave without
pay on a day before or on a day immediately preceding a
Saturday, Sunday or holiday, such Saturday, Sunday or holiday
shall also be without pay. (CSC, 2nd Ind., Feb. 12, 1965).
It is likewise illustrated in the Primer on the Civil Service 7 in the
section referring to Questions and Answers on Leave of Absences,
which states the following:
27. How is leave of an employee who has no
more leave credits computed if:
(1) he is absent on a Friday and the following Monday?
 (2)if he is absent on Friday but reports to work the following
Monday?
(3) if he is absent on a Monday but present the preceding Friday?
(1) He is considered on leave without pay for 4 days covering
Friday to Monday;
(2) He is considered on leave without pay for 3 days from Friday
to Sunday;
(3) He is considered on leave without pay for 3 days from
Saturday to Monday.
When an administrative or executive agency renders an opinion
or issues a statement of policy, it merely interprets a pre-existing
law; and the administrative interpretation of the law is at best
advisory, for it is the courts that finally determine what the law
means. 8 It has also been held that interpretative regulations need not be published. 9
In promulgating as early as 12 February 1965 the questioned
policy, the Civil Service Commission interpreted the provisions of
Republic Act No. 2625 (which took effect on 17 June 1960)
amending the Revised Administrative Code, and which stated as
follows:
Sec. 1. Sections two hundred eighty-four and two hundred eighty-
five-A of the Administrative Code, as amended, are further
amended to read as follows:
Sec. 284. After at least six months' continues (sic) faithful, and
satisfactory service, the President or proper head of department,
or the chief of office in the case of municipal employees may, in
his discretion, grant to an employee or laborer, whether
permanent or temporary, of the national government, the
provincial government, the government of a chartered city, of a
municipality, of a municipal district or of government-owned or
controlled corporations other than those mentioned in Section two
hundred sixty-eight, two hundred seventy-one and two hundred
seventy-four hereof, fifteen days vacation leave of absence with
full pay, exclusive of Saturdays, Sundays and holidays, for each
calendar year of service.
Sec. 285-A. In addition to the vacation leave provided in the two
preceding sections each employee or laborer, whether permanent
or temporary, of the national government, the provincial
government, the government of a chartered city, of a municipality
or municipal district in any regularly and specially organized
province, other than those mentioned in Section two hundred
sixty-eight, two hundred seventy-one and two hundred seventy-
four hereof, shall be entitled to fifteen days of sick leave for each
year of service with full pay, exclusive of Saturdays, Sundays and
holidays: Provided, That such sick leave will be granted by the
President, Head of Department or independent office concerned,
or the chief of office in case of municipal employees, only on
account of sickness on the part of the employee or laborer
concerned or of any member of his immediate family.
The Civil Service Commission in its here questioned Resolution
No. 90-797 construed R.A. 2625 as referring only to government
employees who have earned leave credits against which their
absences may be charged with pay, as its letters speak only
of leaves of absence with full pay. The respondent Commission
ruled that a reading of R.A. 2625 does not show that a
government employee who is on leave of absence without pay on
a day before or immediately preceding a Saturday, Sunday or
legal holiday is entitled to payment of his salary for said days.
Administrative construction, if we may repeat, is not necessarily
binding upon the courts. Action of an administrative agency may
be disturbed or set aside by the judicial department if there is an
error of law, or abuse of power or lack of jurisdiction or grave
abuse of discretion clearly conflicting with either the letter or the
spirit of a legislative enactment. 10
We find this petition to be impressed with merit.
As held in Hidalgo vs. Hidalgo: 11
. . . . where the true intent of the law is clear that
calls for the application of the cardinal rule of
statutory construction that such intent or spirit
must prevail over the letter thereof, for whatever is
within the spirit of a statute is within the statute,
since adherence to the letter would result in
absurdity, injustice and contradictions and would
defeat the plain and vital purpose of the statute.
The intention of the legislature in the enactment of R.A. 2625 may
be gleaned from, among others, the sponsorship speech of
Senator Arturo M. Tolentino during the second reading of House
Bill No. 41 (which became R.A. 2625). He said:
The law actually provides for sick leave and vacation leave of 15
days each year of service to be with full pay. But under the
present law, in computing these periods of leaves, Saturday,
Sunday and holidays are included in the computation so that if an
employee should become sick and absent himself on a Friday
and then he reports for work on a Tuesday, in the computation of
the leave the Saturday and Sunday will be included, so that he
will be considered as having had a leave of Friday, Saturday,
Sunday and Monday, or four days.
The purpose of the present bill is to exclude from the computation
of the leave those days, Saturdays and Sundays, as well as
holidays, because actually the employee is entitled not to go to
office during those days. And it is unfair and unjust to him that
those days should be counted in the computation of leaves. 12
With this in mind, the construction by the respondent Commission
of R.A. 2625 is not in accordance with the legislative intent. R.A.
2625 specifically provides that government employees
are entitled to fifteen (15) days vacation leave of absence with full
pay and fifteen (15) days sick leave with full pay, exclusive of
Saturdays, Sundays and Holidays in both cases. Thus, the law
speaks of the granting of a right and the law does not provide for
a distinction between those who have accumulated leave credits
and those who have exhausted their leave credits in order to
enjoy such right. Ubi lex non distinguit nec nos distinguere
debemus. The fact remains that government employees, whether
or not they have accumulated leave credits, are not required by
law to work on Saturdays, Sundays and Holidays and thus they
can not be declared absent on such non-working days. They
cannot be or are not considered absent on non-working days;
they cannot and should not be deprived of their salary
corresponding to said non-working days just because they were
absent without pay on the day immediately prior to, or after said
non-working days. A different rule would constitute a deprivation
of property without due process.
Furthermore, before their amendment by R.A. 2625, Sections 284
and 285-A of the Revised Administrative Code applied to all
government employee without any distinction. It follows that the
effect of the amendment similarly applies to all employees
enumerated in Sections 284 and 285-A, whether or not they have
accumulated leave credits.
As the questioned CSC policy is here declared invalid, we are
next confronted with the question of what effect such invalidity will
have. Will all government employees on a monthly salary basis,
deprived of their salaries corresponding to Saturdays, Sundays or
legal holidays (as herein petitioner was so deprived) since 12
February 1965, be entitled to recover the amounts corresponding
to such non-working days?
The general rule vis-a-vis legislation is that an unconstitutional act
is not a law; it confers no rights; it imposes no duties; it affords no
protection; it creates no office; it is in legal contemplation as
inoperative as though it had never been passed. 13
But, as held in Chicot County Drainage District vs. Baxter State
Bank: 14
. . . . It is quite clear, however, that such broad statements as to
the effect of a determination of unconstitutionality must be taken
with qualifications. The actual existence of a statute, prior to such
determination is an operative fact and may have consequences
which cannot always be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent
ruling as to invalidity may have to be considered in various
aspects — with respect to particular relations, individual and
corporate; and particular conduct, private and official.
To allow all the affected government employees, similarly situated
as petitioner herein, to claim their deducted salaries resulting
from the past enforcement of the herein invalidated CSC policy,
would cause quite a heavy financial burden on the national and
local governments considering the length of time that such policy
has been effective. Also, administrative and practical
considerations must be taken into account if this ruling will have a
strict restrospective application. The Court, in this connection,
calls upon the respondent Commission and the Congress of the
Philippines, if necessary, to handle this problem with justice and
equity to all affected government employees.
It must be pointed out, however, that after CSC Memorandum
Circular No. 16 Series of 1991 — amending the herein invalidated
policy — was promulgated on 26 April 1991, deductions from
salaries made after said date in contravention of the new CSC
policy must be restored to the government employees concerned.
WHEREFORE, the petition is GRANTED, CSC Resolutions No.
90-497 and 90-797 are declared NULL and VOID. The
respondent Commission is directed to take the appropriate action
so that petitioner shall be paid the amounts previously but
unlawfully deducted from his monthly salary as above indicated.
No costs.
SO ORDERED.
G.R. No. 124360 November 5, 1997
FRANCISCO S. TATAD, petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF ENERGY AND
THE SECRETARY OF THE DEPARTMENT OF
FINANCE, respondents.
G.R. No. 127867 November 5, 1997
EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA,
WIGBERTO TANADA, FLAG HUMAN RIGHTS FOUNDATION,
INC., FREEDOM FROM DEBT COALITION (FDC),
SANLAKAS, petitioners,
vs.
HON. RUBEN TORRES in his capacity as the Executive
Secretary, HON. FRANCISCO VIRAY, in his capacity as the
Secretary of Energy, CALTEX Philippines, Inc., PETRON
Corporation and PILIPINAS SHELL Corporation, respondents.
PUNO, J.:
The petitions at bar challenge the constitutionality of Republic Act
No. 8180 entitled "An Act Deregulating the Downstream Oil
Industry and For Other Purposes". 1 R.A. No. 8180 ends twenty six
(26) years of government regulation of the downstream oil industry.
Few cases carry a surpassing importance on the life of every Filipino
as these petitions for the upswing and downswing of our economy
materially depend on the oscillation of oil.
First, the facts without the fat. Prior to 1971, there was no
government agency regulating the oil industry other than those
dealing with ordinary commodities. Oil companies were free to
enter and exit the market without any government interference.
There were four (4) refining companies (Shell, Caltex, Bataan
Refining Company and Filoil Refining) and six (6) petroleum
marketing companies (Esso, Filoil, Caltex, Getty, Mobil and
Shell), then operating in the country. 2
In 1971, the country was driven to its knees by a crippling oil
crisis. The government, realizing that petroleum and its products
are vital to national security and that their continued supply at
reasonable prices is essential to the general welfare, enacted the
Oil Industry Commission Act. 3 It created the Oil Industry
Commission (OIC) to regulatethe business of importing, exporting,
re-exporting, shipping, transporting, processing, refining, storing,
distributing, marketing and selling crude oil, gasoline, kerosene, gas
and other refined petroleum products. The OIC was vested with
the power to fix the market prices of petroleum products, to regulate
the capacities of refineries, to license new refineries and to regulate
the operations and trade practices of the industry. 4
In addition to the creation of the OIC, the government saw the
imperious need for a more active role of Filipinos in the oil
industry. Until the early seventies, the downstream oil industry
was controlled by multinational companies. All the oil refineries
and marketing companies were owned by foreigners whose
economic interests did not always coincide with the interest of the
Filipino. Crude oil was transported to the country by foreign-
controlled tankers. Crude processing was done locally by foreign-
owned refineries and petroleum products were marketed through
foreign-owned retail outlets. On November 9, 1973, President
Ferdinand E. Marcos boldly created the Philippine National Oil
Corporation (PNOC) to break the control by foreigners of our oil
industry. 5 PNOC engaged in the business of refining, marketing,
shipping, transporting, and storing petroleum. It acquired ownership
of ESSO Philippines and Filoil to serve as its marketing arm. It
bought the controlling shares of Bataan Refining Corporation, the
largest refinery in the country. 6 PNOC later put up its own marketing
subsidiary — Petrophil. PNOC operated under the business name
PETRON Corporation. For the first time, there was a Filipino
presence in the Philippine oil market.
In 1984, President Marcos through Section 8 of Presidential
Decree No. 1956, created the Oil Price Stabilization Fund (OPSF)
to cushion the effects of frequent changes in the price of oil
caused by exchange rate adjustments or increase in the world
market prices of crude oil and imported petroleum products. The
fund is used (1) to reimburse the oil companies for cost increases
in crude oil and imported petroleum products resulting from
exchange rate adjustment and/or increase in world market prices
of crude oil, and (2) to reimburse oil companies for cost
underrecovery incurred as a result of the reduction of domestic
prices of petroleum products. Under the law, the OPSF may be
sourced from:
1. any increase in the tax collection from ad
valorem tax or customs duty imposed on
petroleum products subject to tax under P.D. No.
1956 arising from exchange rate adjustment,
2. any increase in the tax collection as a result of
the lifting of tax exemptions of government
corporations, as may be determined by the
Minister of Finance in consultation with the Board
of Energy,
3. any additional amount to be imposed on
petroleum products to augment the resources of
the fund through an appropriate order that may be
issued by the Board of Energy requiring payment
of persons or companies engaged in the business
of importing, manufacturing and/or marketing
petroleum products, or
4. any resulting peso costs differentials in case
the actual peso costs paid by oil companies in the
importation of crude oil and petroleum products is
less than the peso costs computed using the
reference foreign exchange rate as fixed by the
Board of Energy. 7
By 1985, only three (3) oil companies were operating in the
country — Caltex, Shell and the government-owned PNOC.
In May, 1987, President Corazon C. Aquino signed Executive
Order No. 172 creating the Energy Regulatory Board to regulate
the business of importing, exporting, re-exporting, shipping,
transporting, processing, refining, marketing and distributing
energy resources "when warranted and only when public
necessity requires." The Board had the following powers and
functions:
1. Fix and regulate the
prices of petroleum
products;
2. Fix and regulate the rate
schedule or prices of piped
gas to be charged by duly
franchised gas companies
which distribute gas by
means of underground
pipe system;
3. Fix and regulate the
rates of pipeline
concessionaries under the
provisions of R.A. No. 387,
as amended . . . ;
4. Regulate the capacities
of new refineries or
additional capacities of
existing refineries and
license refineries that may
be organized after the
issuance of (E.O. No. 172)
under such terms and
conditions as are
consistent with the
national interest; and
5. Whenever the Board
has determined that there
is a shortage of any
petroleum product, or
when public interest so
requires, it may take such
steps as it may consider
necessary, including the
temporary adjustment of
the levels of prices of
petroleum products and
the payment to the Oil
Price Stabilization
Fund . . . by persons or
entities engaged in the
petroleum industry of such
amounts as may be
determined by the Board,
which may enable the
importer to recover its cost
of importation. 8
On December 9, 1992, Congress enacted R.A. No. 7638 which
created the Department of Energy to prepare, integrate,
coordinate, supervise and control all plans, programs, projects,
and activities of the government in relation to energy exploration,
development, utilization, distribution and conservation. 9 The thrust
of the Philippine energy program under the law was
toward privatization of government agencies related to
energy, deregulation of the power and energy industry and reduction
of dependency on oil-fired plants. 10 The law also aimed to encourage
free and active participation and investment by the private sector in
all energy activities. Section 5(e) of the law states that "at the end of
four (4) years from the effectivity of this Act, the Department shall,
upon approval of the President, institute the programs and timetable
of deregulation of appropriate energy projects and activities of the
energy industry."
Pursuant to the policies enunciated in R.A. No. 7638, the
government approved the privatization of Petron Corporation in
1993. On December 16, 1993, PNOC sold 40% of its equity in
Petron Corporation to the Aramco Overseas Company.
In March 1996, Congress took the audacious step of deregulating
the downstream oil industry. It enacted R.A.No. 8180, entitled the
"Downstream Oil Industry Deregulation Act of 1996." Under the
deregulated environment, "any person or entity may import or
purchase any quantity of crude oil and petroleum products from a
foreign or domestic source, lease or own and operate refineries
and other downstream oil facilities and market such crude oil or
use the same for his own requirement," subject only to monitoring
by the Department of
Energy. 11
The deregulation process has two phases: the transition phase
and the full deregulation phase. During the transition
phase, controls of the non-pricing aspects of the oil industry were
to be lifted. The following were to be accomplished: (1)
liberalization of oil importation, exportation, manufacturing,
marketing and distribution, (2) implementation of an automatic
pricing mechanism, (3) implementation of an automatic formula to
set margins of dealers and rates of haulers, water transport
operators and pipeline concessionaires, and (4) restructuring of
oil taxes. Upon full deregulation, controls on the price of oil and
the foreign exchange cover were to be lifted and the OPSF was
to be abolished.
The first phase of deregulation commenced on August 12, 1996.
On February 8, 1997, the President implemented the full
deregulation of the Downstream Oil Industry through
E.O. No. 372.
The petitions at bar assail the constitutionality of various
provisions of R.A No. 8180 and E.O. No. 372.
In G.R. No. 124360, petitioner Francisco S. Tatad seeks the
annulment of section 5(b) of R.A. No. 8180. Section 5(b)
provides:
b) Any law to the contrary notwithstanding and starting
with the effectivity of this Act, tariff duty shall be imposed
and collected on imported crude oil at the rate of three
percent (3%) and imported refined petroleum products at
the rate of seven percent (7%), except fuel oil and LPG,
the rate for which shall be the same as that for imported
crude oil: Provided, That beginning on January 1, 2004
the tariff rate on imported crude oil and refined petroleum
products shall be the same: Provided, further, That this
provision may be amended only by an Act of Congress.
The petition is anchored on three arguments:
First, that the imposition of different tariff rates on imported crude
oil and imported refined petroleum products violates the equal
protection clause. Petitioner contends that the 3%-7% tariff
differential unduly favors the three existing oil refineries and
discriminates against prospective investors in the downstream oil
industry who do not have their own refineries and will have to
source refined petroleum products from abroad.
Second, that the imposition of different tariff rates does not
deregulate the downstream oil industry but instead controls the oil
industry, contrary to the avowed policy of the law. Petitioner avers
that the tariff differential between imported crude oil and imported
refined petroleum products bars the entry of other players in the
oil industry because it effectively protects the interest of oil
companies with existing refineries. Thus, it runs counter to the
objective of the law "to foster a truly competitive market."
Third, that the inclusion of the tariff provision in section 5(b) of
R.A. No. 8180 violates Section 26(1) Article VI of the Constitution
requiring every law to have only one subject which shall be
expressed in its title. Petitioner contends that the imposition of
tariff rates in section 5(b) of R.A. No. 8180 is foreign to the
subject of the law which is the deregulation of the downstream oil
industry.
In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P.
Arroyo, Enrique Garcia, Wigberto Tanada, Flag Human Rights
Foundation, Inc., Freedom from Debt Coalition (FDC) and
Sanlakas contest the constitutionality of section 15 of R.A. No.
8180 and E.O. No. 392. Section 15 provides:
Sec. 15. Implementation of Full Deregulation. — Pursuant
to Section 5(e) of Republic Act No. 7638, the DOE shall,
upon approval of the President, implement the full
deregulation of the downstream oil industry not later than
March 1997. As far as practicable, the DOE shall time the
full deregulation when the prices of crude oil and
petroleum products in the world market are declining and
when the exchange rate of the peso in relation to the US
dollar is stable. Upon the implementation of the full
deregulation as provided herein, the transition phase is
deemed terminated and the following laws are deemed
repealed:
xxx xxx xxx
E.O. No. 372 states in full, viz.:
WHEREAS, Republic Act No. 7638, otherwise known as
the "Department of Energy Act of 1992," provides that, at
the end of four years from its effectivity last December
1992, "the Department (of Energy) shall, upon approval of
the President, institute the programs and time table of
deregulation of appropriate energy projects and activities
of the energy sector;"
WHEREAS, Section 15 of Republic Act No. 8180,
otherwise known as the "Downstream Oil Industry
Deregulation Act of 1996," provides that "the DOE shall,
upon approval of the President, implement full
deregulation of the downstream oil industry not later than
March, 1997. As far as practicable, the DOE shall time the
full deregulation when the prices of crude oil and
petroleum products in the world market are declining and
when the exchange rate of the peso in relation to the US
dollar is stable;"
WHEREAS, pursuant to the recommendation of the
Department of Energy, there is an imperative need to
implement the full deregulation of the downstream oil
industry because of the following recent developments: (i)
depletion of the buffer fund on or about 7 February 1997
pursuant to the Energy Regulatory Board's Order dated
16 January 1997; (ii) the prices of crude oil had been
stable at $21-$23 per barrel since October 1996 while
prices of petroleum products in the world market had
been stable since mid-December of last year. Moreover,
crude oil prices are beginning to soften for the last few
days while prices of some petroleum products had
already declined; and (iii) the exchange rate of the peso in
relation to the US dollar has been stable for the past
twelve (12) months, averaging at around P26.20 to one
US dollar;
WHEREAS, Executive Order No. 377 dated 31 October
1996 provides for an institutional framework for the
administration of the deregulated industry by defining the
functions and responsibilities of various government
agencies;
 WHEREAS, pursuant to Republic Act No. 8180, the
deregulation of the industry will foster a truly competitive
market which can better achieve the social policy
objectives of fair prices and adequate, continuous supply
of environmentally-clean and high quality petroleum
products;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of
the Republic of the Philippines, by the powers vested in
me by law, do hereby declare the full deregulation of the
downstream oil industry.
In assailing section 15 of R.A. No. 8180 and E.O. No. 392,
petitioners offer the following submissions:
First, section 15 of R.A. No. 8180 constitutes an undue delegation
of legislative power to the President and the Secretary of Energy
because it does not provide a determinate or determinable
standard to guide the Executive Branch in determining when to
implement the full deregulation of the downstream oil industry.
Petitioners contend that the law does not define when it is
practicable for the Secretary of Energy to recommend to the
President the full deregulation of the downstream oil industry or
when the President may consider it practicable to declare full
deregulation. Also, the law does not provide any specific standard
to determine when the prices of crude oil in the world market are
considered to be declining nor when the exchange rate of the
peso to the US dollar is considered stable.
Second, petitioners aver that E.O. No. 392 implementing the full
deregulation of the downstream oil industry is arbitrary and
unreasonable because it was enacted due to the alleged
depletion of the OPSF fund — a condition not found in R.A. No.
8180.
Third, section 15 of R.A. No. 8180 and E.O. No. 392 allow the
formation of a de facto cartel among the three existing oil
companies — Petron, Caltex and Shell — in violation of the
constitutional prohibition against monopolies, combinations in
restraint of trade and unfair competition.
Respondents, on the other hand, fervently defend the
constitutionality of R.A. No. 8180 and E.O. No. 392. In addition,
respondents contend that the issues raised by the petitions are
not justiciable as they pertain to the wisdom of the law.
Respondents further aver that petitioners have no locus standi as
they did not sustain nor will they sustain direct injury as a result of
the implementation of R.A. No. 8180.
The petitions were heard by the Court on September 30, 1997.
On October 7, 1997, the Court ordered the private respondents
oil companies "to maintain the status quo and to cease and desist
from increasing the prices of gasoline and other petroleum fuel
products for a period of thirty (30) days . . . subject to further
orders as conditions may warrant."
We shall now resolve the petitions on the merit. The petitions
raise procedural and substantive issues bearing on the
constitutionality of R.A. No. 8180 and E.O. No. 392.
The procedural issues are: (1) whether or not the petitions raise a
justiciable controversy, and (2) whether or not the petitioners
have the standing to assail the validity of the subject law and
executive order. The substantive issues are: (1) whether or not
section 5 (b) violates the one title — one subject requirement of
the Constitution; (2) whether or not the same section violates the
equal protection clause of the Constitution; (3) whether or not
section 15 violates the constitutional prohibition on undue
delegation of power; (4) whether or not E.O. No. 392 is arbitrary
and unreasonable; and (5) whether or not R.A. No. 8180 violates
the constitutional prohibition against monopolies, combinations in
restraint of trade and unfair competition.
We shall first tackle the procedural issues. Respondents claim
that the avalanche of arguments of the petitioners assail the
wisdom of R.A. No. 8180. They aver that deregulation of the
downstream oil industry is a policy decision made by Congress
and it cannot be reviewed, much less be reversed by this Court.
In constitutional parlance, respondents contend that the petitions
failed to raise a justiciable controversy.
Respondents' joint stance is unnoteworthy. Judicial power
includes not only the duty of the courts to settle actual
controversies involving rights which are legally demandable and
enforceable, but also the duty to determine whether or not there
has been grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the
government. 12 The courts, as guardians of the Constitution, have the
inherent authority to determine whether a statute enacted by the
legislature transcends the limit imposed by the fundamental law.
Where a statute violates the Constitution, it is not only the right but
the duty of the judiciary to declare such act as unconstitutional and
void. 13 We held in the recent case of Tanada v. Angara: 14
xxx xxx xxx
In seeking to nullify an act of the Philippine Senate on the
ground that it contravenes the Constitution, the petition no
doubt raises a justiciable controversy. Where an action of
the legislative branch is seriously alleged to have
infringed the Constitution, it becomes not only the right
but in fact the duty of the judiciary to settle the dispute.
The question thus posed is judicial rather than political.
The duty to adjudicate remains to assure that the
supremacy of the Constitution is upheld. Once a
controversy as to the application or interpretation of a
constitutional provision is raised before this Court, it
becomes a legal issue which the Court is bound by
constitutional mandate to decide.
Even a sideglance at the petitions will reveal that petitioners have
raised constitutional issues which deserve the resolution of this
Court in view of their seriousness and their value as precedents.
Our statement of facts and definition of issues clearly show that
petitioners are assailing R.A. No. 8180 because its provisions
infringe the Constitution and not because the law lacks wisdom.
The principle of separation of power mandates that challenges on
the constitutionality of a law should be resolved in our courts of
justice while doubts on the wisdom of a law should be debated in
the halls of Congress. Every now and then, a law may be
denounced in court both as bereft of wisdom and constitutionally
infirmed. Such denunciation will not deny this Court of its
jurisdiction to resolve the constitutionality of the said law while
prudentially refusing to pass on its wisdom.
The effort of respondents to question the locus standi of
petitioners must also fall on barren ground. In language too lucid
to be misunderstood, this Court has brightlined its liberal stance
on a petitioner's locus standi where the petitioner is able to craft
an issue of transcendental significance to the
people. 15 In Kapatiran ng mga Naglilingkod sa Pamahalaan ng
Pilipinas, Inc. v. Tan, 16 we stressed:
xxx xxx xxx
Objections to taxpayers' suit for lack of sufficient
personality, standing or interest are, however, in the main
procedural matters. Considering the importance to the
public of the cases at bar, and in keeping with the Court's
duty, under the 1987 Constitution, to determine whether
or not the other branches of government have kept
themselves within the limits of the Constitution and the
laws and that they have not abused the discretion given
to them, the Court has brushed aside technicalities of
procedure and has taken cognizance of these petitions.
There is not a dot of disagreement between the petitioners and
the respondents on the far reaching importance of the validity of
RA No. 8180 deregulating our downstream oil industry. Thus,
there is no good sense in being hypertechnical on the standing of
petitioners for they pose issues which are significant to our
people and which deserve our forthright resolution.
We shall now track down the substantive issues. In G.R. No.
124360 where petitioner is Senator Tatad, it is contended that
section 5(b) of R.A. No. 8180 on tariff differential violates the
provision 17 of the Constitution requiring every law to have only one
subject which should be expressed in its title. We do not concur with
this contention. As a policy, this Court has adopted a liberal
construction of the one title — one subject rule. We have consistently
ruled 18that the title need not mirror, fully index or catalogue all
contents and minute details of a law. A law having a single general
subject indicated in the title may contain any number of provisions,
no matter how diverse they may be, so long as they are not
inconsistent with or foreign to the general subject, and may be
considered in furtherance of such subject by providing for the
method and means of carrying out the general subject. 19 We hold
that section 5(b) providing for tariff differential is germane to the
subject of R.A. No. 8180 which is the deregulation of the
downstream oil industry. The section is supposed to sway
prospective investors to put up refineries in our country and make
them rely less on imported petroleum. 20 We shall, however, return to
the validity of this provision when we examine its blocking effect on
new entrants to the oil market.
We shall now slide to the substantive issues in G.R. No. 127867.
Petitioners assail section 15 of R.A. No. 8180 which fixes the time
frame for the full deregulation of the downstream oil industry. We
restate its pertinent portion for emphasis, viz.:
Sec. 15. Implementation of Full Deregulation — Pursuant
to section 5(e) of Republic Act No. 7638, the DOE shall,
upon approval of the President, implement the full
deregulation of the downstream oil industry not later than
March 1997. As far as practicable, the DOE shall time the
full deregulation when the prices of crude oil and
petroleum products in the world market are declining and
when the exchange rate of the peso in relation to the US
dollar is stable . . .
Petitioners urge that the phrases "as far as practicable," "decline
of crude oil prices in the world market" and "stability of the peso
exchange rate to the US dollar" are ambivalent, unclear and
inconcrete in meaning. They submit that they do not provide the
"determinate or determinable standards" which can guide the
President in his decision to fully deregulate the downstream oil
industry. In addition, they contend that E.O. No. 392 which
advanced the date of full deregulation is void for it illegally
considered the depletion of the OPSF fund as a factor.
The power of Congress to delegate the execution of laws has
long been settled by this Court. As early as 1916 inCompania
General de Tabacos de Filipinas vs. The Board of Public Utility
Commissioners, 21 this Court thru, Mr. Justice Moreland, held that
"the true distinction is between the delegation of power to make the
law, which necessarily involves a discretion as to what it shall be,
and conferring authority or discretion as to its execution, to be
exercised under and in pursuance of the law. The first cannot be
done; to the latter no valid objection can be made." Over the years,
as the legal engineering of men's relationship became more difficult,
Congress has to rely more on the practice of delegating the
execution of laws to the executive and other administrative agencies.
Two tests have been developed to determine whether the delegation
of the power to execute laws does not involve the abdication of the
power to make law itself. We delineated the metes and bounds of
these tests in Eastern Shipping Lines, Inc. VS. POEA, 22 thus:
There are two accepted tests to determine whether or not
there is a valid delegation of legislative power,viz: the
completeness test and the sufficient standard test. Under
the first test, the law must be complete in all its terms and
conditions when it leaves the legislative such that when it
reaches the delegate the only thing he will have to do is to
enforce it. Under the sufficient standard test, there must
be adequate guidelines or limitations in the law to map
out the boundaries of the delegate's authority and prevent
the delegation from running riot. Both tests are intended
to prevent a total transference of legislative authority to
the delegate, who is not allowed to step into the shoes of
 the legislature and exercise a power essentially
legislative.
The validity of delegating legislative power is now a quiet area in
our constitutional landscape. As sagely observed, delegation of
legislative power has become an inevitability in light of the
increasing complexity of the task of government. Thus, courts
bend as far back as possible to sustain the constitutionality of
laws which are assailed as unduly delegating legislative powers.
Citing Hirabayashi v. United States 23 as authority, Mr. Justice
Isagani A. Cruz states "that even if the law does not expressly
pinpoint the standard, the courts will bend over backward to locate
the same elsewhere in order to spare the statute, if it can, from
constitutional infirmity." 24
Given the groove of the Court's rulings, the attempt of petitioners
to strike down section 15 on the ground of undue delegation of
legislative power cannot prosper. Section 15 can hurdle both the
completeness test and the sufficient standard test. It will be noted
that Congress expressly provided in R.A. No. 8180 that full
deregulation will start at the end of March 1997, regardless of the
occurrence of any event. Full deregulation at the end of March
1997 is mandatory and the Executive has no discretion to
postpone it for any purported reason. Thus, the law is complete
on the question of the final date of full deregulation. The
discretion given to the President is to advance the date of full
deregulation before the end of March 1997. Section 15 lays down
the standard to guide the judgment of the President — he is to
time it as far as practicable when the prices of crude oil and
petroleum products in the world market are declining and when
the exchange rate of the peso in relation to the US dollar isstable.
Petitioners contend that the words "as far as practicable,"
"declining" and "stable" should have been defined in R.A. No.
8180 as they do not set determinate or determinable standards.
The stubborn submission deserves scant consideration. The
dictionary meanings of these words are well settled and cannot
confuse men of reasonable intelligence. Webster defines
"practicable" as meaning possible to practice or perform,
"decline" as meaning to take a downward direction, and "stable"
as meaning firmly established. 25 The fear of petitioners that these
words will result in the exercise of executive discretion that will run
riot is thus groundless. To be sure, the Court has sustained the
validity of similar, if not more general standards in other cases. 26
It ought to follow that the argument that E.O. No. 392 is null and
void as it was based on indeterminate standards set by R.A. 8180
must likewise fail. If that were all to the attack against the validity
of E.O. No. 392, the issue need not further detain our discourse.
But petitioners further posit the thesis that the Executive
misapplied R.A. No. 8180 when it considered the depletion of the
OPSF fund as a factor in fully deregulating the downstream oil
industry in February 1997. A perusal of section 15 of R.A. No.
8180 will readily reveal that it only enumerated two factors to be
considered by the Department of Energy and the Office of the
President, viz.: (1) the time when the prices of crude oil and
petroleum products in the world market are declining, and (2) the
time when the exchange rate of the peso in relation to the US
dollar is stable. Section 15 did not mention the depletion of the
OPSF fund as a factor to be given weight by the Executive before
ordering full deregulation. On the contrary, the debates in
Congress will show that some of our legislators wanted to impose
as a pre-condition to deregulation a showing that the OPSF fund
must not be in deficit. 27 We therefore hold that the Executive
department failed to follow faithfully the standards set by R.A. No.
8180 when it considered the extraneous factor of depletion of the
OPSF fund. The misappreciation of this extra factor cannot be
justified on the ground that the Executive department considered
anyway the stability of the prices of crude oil in the world market and
the stability of the exchange rate of the peso to the dollar. By
considering another factor to hasten full deregulation, the Executive
department rewrote the standards set forth in R.A. 8180. The
Executive is bereft of any right to alter either by subtraction or
addition the standards set in R.A. No. 8180 for it has no power to
make laws. To cede to the Executive the power to make law is to
invite tyranny, indeed, to transgress the principle of separation of
powers. The exercise of delegated power is given a strict scrutiny by
courts for the delegate is a mere agent whose action cannot infringe
the terms of agency. In the cases at bar, the Executive co-mingled
the factor of depletion of the OPSF fund with the factors of decline of
the price of crude oil in the world market and the stability of the peso
to the US dollar. On the basis of the text of E.O. No. 392, it is
impossible to determine the weight given by the Executive
department to the depletion of the OPSF fund. It could well be the
principal consideration for the early deregulation. It could have been
accorded an equal significance. Or its importance could be nil. In
light of this uncertainty, we rule that the early deregulation under E.O.
No. 392 constitutes a misapplication of R.A. No. 8180.
We now come to grips with the contention that some provisions of
R.A. No. 8180 violate section 19 of Article XII of the 1987
Constitution. These provisions are:
(1) Section 5 (b) which states — "Any law to the contrary
notwithstanding and starting with the effectivity of this Act,
tariff duty shall be imposed and collected on imported
crude oil at the rate of three percent (3%) and imported
refined petroleum products at the rate of seven percent
(7%) except fuel oil and LPG, the rate for which shall be
the same as that for imported crude oil. Provided, that
beginning on January 1, 2004 the tariff rate on imported
crude oil and refined petroleum products shall be the
same. Provided, further, that this provision may be
amended only by an Act of Congress."
(2) Section 6 which states — "To ensure the security and
continuity of petroleum crude and products supply, the
DOE shall require the refiners and importers to maintain a
minimum inventory equivalent to ten percent (10%) of
their respective annual sales volume or forty (40) days of
supply, whichever is lower," and
(3) Section 9 (b) which states — "To ensure fair
competition and prevent cartels and monopolies in the
downstream oil industry, the following acts shall be
prohibited:
xxx xxx xxx
(b) Predatory pricing which means selling
or offering to sell any product at a price
unreasonably below the industry average
cost so as to attract customers to the
detriment of competitors.
On the other hand, section 19 of Article XII of the Constitution
allegedly violated by the aforestated provisions of R.A. No. 8180
mandates: "The State shall regulate or prohibit monopolies when
the public interest so requires. No combinations in restraint of
trade or unfair competition shall be allowed."
A monopoly is a privilege or peculiar advantage vested in one or
more persons or companies, consisting in the exclusive right or
power to carry on a particular business or trade, manufacture a
particular article, or control the sale or the whole supply of a
particular commodity. It is a form of market structure in which one
or only a few firms dominate the total sales of a product or
service. 28 On the other hand, a combination in restraint of trade is an
agreement or understanding between two or more persons, in the
form of a contract, trust, pool, holding company, or other form of
association, for the purpose of unduly restricting competition,
monopolizing trade and commerce in a certain commodity,
controlling its, production, distribution and price, or otherwise
interfering with freedom of trade without statutory
authority. 29 Combination in restraint of trade refers to the means
while monopoly refers to the end. 30
Article 186 of the Revised Penal Code and Article 28 of the New
Civil Code breathe life to this constitutional policy. Article 186 of
the Revised Penal Code penalizes monopolization and creation
of combinations in restraint of
trade, 31 while Article 28 of the New Civil Code makes any person
who shall engage in unfair competition liable for damages. 32
Respondents aver that sections 5(b), 6 and 9(b) implement the
policies and objectives of R.A. No. 8180. They explain that the
4% tariff differential is designed to encourage new entrants to
invest in refineries. They stress that the inventory requirement is
meant to guaranty continuous domestic supply of petroleum and
to discourage fly-by-night operators. They also submit that the
prohibition against predatory pricing is intended to protect
prospective entrants. Respondents manifested to the Court that
new players have entered the Philippines after deregulation and
have now captured 3% — 5% of the oil market.
The validity of the assailed provisions of R.A. No. 8180 has to be
decided in light of the letter and spirit of our Constitution,
especially section 19, Article XII. Beyond doubt, the Constitution
committed us to the free enterprise system but it is a system
impressed with its own distinctness. Thus, while the Constitution
embraced free enterprise as an economic creed, it did not prohibit
per se the operation of monopolies which can, however, be
regulated in the public interest. 33 Thus too, our free enterprise
system is not based on a market of pure and unadulterated
competition where the State pursues a strict hands-off policy and
follows the let-the-devil devour the hindmost rule. Combinations in
restraint of trade and unfair competitions are absolutely proscribed
and the proscription is directed both against the State as well as the
private sector. 34 This distinct free enterprise system is dictated by the
need to achieve the goals of our national economy as defined by
section 1, Article XII of the Constitution which are: more equitable
distribution of opportunities, income and wealth; a sustained increase
in the amount of goods and services produced by the nation for the
benefit of the people; and an expanding productivity as the key to
raising the quality of life for all, especially the underprivileged. It also
calls for the State to protect Filipino enterprises against unfair
competition and trade practices.
Section 19, Article XII of our Constitution is anti-trust in history
and in spirit. It espouses competition. The desirability of
competition is the reason for the prohibition against restraint of
trade, the reason for the interdiction of unfair competition, and the
reason for regulation of unmitigated monopolies. Competition is
thus the underlying principle of section 19, Article XII of our
Constitution which cannot be violated by R.A. No. 8180. We
subscribe to the observation of Prof. Gellhorn that the objective of
anti-trust law is "to assure a competitive economy, based upon
the belief that through competition producers will strive to satisfy
consumer wants at the lowest price with the sacrifice of the
fewest resources. Competition among producers allows
consumers to bid for goods and services, and thus matches their
desires with society's opportunity costs." 35 He adds with
appropriateness that there is a reliance upon "the operation of the
'market' system (free enterprise) to decide what shall be produced,
how resources shall be allocated in the production process, and to
whom the various products will be distributed. The market system
relies on the consumer to decide what and how much shall be
produced, and on competition, among producers to determine who
will manufacture it."
Again, we underline in scarlet that the fundamental principle
espoused by section 19, Article XII of the Constitution is
competition for it alone can release the creative forces of the
market. But the competition that can unleash these creative
forces is competition that is fighting yet is fair. Ideally, this kind of
competition requires the presence of not one, not just a few but
several players. A market controlled by one player (monopoly) or
dominated by a handful of players (oligopoly) is hardly the market
where honest-to-goodness competition will prevail. Monopolistic
or oligopolistic markets deserve our careful scrutiny and laws
which barricade the entry points of new players in the market
should be viewed with suspicion.
Prescinding from these baseline propositions, we shall proceed to
examine whether the provisions of R.A. No. 8180 on tariff
differential, inventory reserves, and predatory prices imposed
substantial barriers to the entry and exit of new players in our
downstream oil industry. If they do, they have to be struck down
for they will necessarily inhibit the formation of a truly competitive
market. Contrariwise, if they are insignificant impediments, they
need not be stricken down.
In the cases at bar, it cannot be denied that our downstream oil
industry is operated and controlled by an oligopoly, a foreign
oligopoly at that. Petron, Shell and Caltex stand as the only major
league players in the oil market. All other players belong to the
lilliputian league. As the dominant players, Petron, Shell and
Caltex boast of existing refineries of various capacities. The tariff
differential of 4% therefore works to their immense benefit. Yet,
this is only one edge of the tariff differential. The other edge cuts
and cuts deep in the heart of their competitors. It erects a high
barrier to the entry of new players. New players that intend to
equalize the market power of Petron, Shell and Caltex by building
refineries of their own will have to spend billions of pesos. Those
who will not build refineries but compete with them will suffer the
huge disadvantage of increasing their product cost by 4%. They
will be competing on an uneven field. The argument that the 4%
tariff differential is desirable because it will induce prospective
players to invest in refineries puts the cart before the horse. The
first need is to attract new players and they cannot be attracted
by burdening them with heavy disincentives. Without new players
belonging to the league of Petron, Shell and Caltex, competition
in our downstream oil industry is an idle dream.
The provision on inventory widens the balance of advantage of
Petron, Shell and Caltex against prospective new players. Petron,
Shell and Caltex can easily comply with the inventory requirement
of R.A. No. 8180 in view of their existing storage facilities.
Prospective competitors again will find compliance with this
requirement difficult as it will entail a prohibitive cost. The
construction cost of storage facilities and the cost of inventory can
thus scare prospective players. Their net effect is to further
occlude the entry points of new players, dampen competition and
enhance the control of the market by the three (3) existing oil
companies.
Finally, we come to the provision on predatory pricing which is
defined as ". . . selling or offering to sell any product at a price
unreasonably below the industry average cost so as to attract
customers to the detriment of competitors." Respondents contend
that this provision works against Petron, Shell and Caltex and
protects new entrants. The ban on predatory pricing cannot be
analyzed in isolation. Its validity is interlocked with the barriers
imposed by R.A. No. 8180 on the entry of new players. The
inquiry should be to determine whether predatory pricing on the
part of the dominant oil companies is encouraged by the
provisions in the law blocking the entry of new players. Text-
writer
Hovenkamp, 36 gives the authoritative answer and we quote:
xxx xxx xxx
The rationale for predatory pricing is the sustaining of
losses today that will give a firm monopoly profits in the
future. The monopoly profits will never materialize,
however, if the market is flooded with new entrants as
soon as the successful predator attempts to raise its
price. Predatory pricing will be profitable only if the
market contains significant barriers to new entry.
As aforediscsussed, the 4% tariff differential and the inventory
requirement are significant barriers which discourage new players
to enter the market. Considering these significant barriers
established by R.A. No. 8180 and the lack of players with the
comparable clout of PETRON, SHELL and CALTEX, the
temptation for a dominant player to engage in predatory pricing
and succeed is a chilling reality. Petitioners' charge that this
provision on predatory pricing is anti-competitive is not without
reason.
Respondents belittle these barriers with the allegation that new
players have entered the market since deregulation. A scrutiny of
the list of the alleged new players will, however, reveal that not
one belongs to the class and category of PETRON, SHELL and
CALTEX. Indeed, there is no showing that any of these new
players intends to install any refinery and effectively compete with
these dominant oil companies. In any event, it cannot be gainsaid
that the new players could have been more in number and more
impressive in might if the illegal entry barriers in R.A. No. 8180
were not erected.
We come to the final point. We now resolve the total effect of the
untimely deregulation, the imposition of 4% tariff differential on
imported crude oil and refined petroleum products, the
requirement of inventory and the prohibition on predatory pricing
on the constitutionality of R.A. No. 8180. The question is whether
these offending provisions can be individually struck down without
invalidating the entire R.A. No. 8180. The ruling case law is well
stated by author Agpalo, 37 viz.:
xxx xxx xxx
The general rule is that where part of a statute is void as
repugnant to the Constitution, while another part is valid,
the valid portion, if separable from the invalid, may stand
and be enforced. The presence of a separability clause in
a statute creates the presumption that the legislature
intended separability, rather than complete nullity of the
statute. To justify this result, the valid portion must be so
far independent of the invalid portion that it is fair to
presume that the legislature would have enacted it by
itself if it had supposed that it could not constitutionally
enact the other. Enough must remain to make a complete,
intelligible and valid statute, which carries out the
legislative intent. . . .
The exception to the general rule is that when the parts of
a statute are so mutually dependent and connected, as
conditions, considerations, inducements, or
compensations for each other, as to warrant a belief that
the legislature intended them as a whole, the nullity of
one part will vitiate the rest. In making the parts of the
statute dependent, conditional, or connected with one
another, the legislature intended the statute to be carried
out as a whole and would not have enacted it if one part
is void, in which case if some parts are unconstitutional,
all the other provisions thus dependent, conditional, or
connected must fall with them.
R.A. No. 8180 contains a separability clause. Section 23 provides
that "if for any reason, any section or provision of this Act is
declared unconstitutional or invalid, such parts not affected
thereby shall remain in full force and effect." This separability
clause notwithstanding, we hold that the offending provisions of
R.A. No. 8180 so permeate its essence that the entire law has to
be struck down. The provisions on tariff differential, inventory and
predatory pricing are among the principal props of R.A. No. 8180.
Congress could not have deregulated the downstream oil industry
without these provisions. Unfortunately, contrary to their intent,
these provisions on tariff differential, inventory and predatory
pricing inhibit fair competition, encourage monopolistic power and
interfere with the free interaction of market forces. R.A. No. 8180
needs provisions to vouchsafe free and fair competition. The
need for these vouchsafing provisions cannot be
overstated. Before deregulation, PETRON, SHELL and CALTEX
had no real competitors but did not have a free run of the market
because government controls both the pricing and non-pricing
aspects of the oil industry. After deregulation, PETRON, SHELL
and CALTEX remain unthreatened by real competition yet are no
longer subject to control by government with respect to their
pricing and non-pricing decisions. The aftermath of R.A. No. 8180
is a deregulated market where competition can be corrupted and
where market forces can be manipulated by oligopolies.
The fall out effects of the defects of R.A. No. 8180 on our people
have not escaped Congress. A lot of our leading legislators have
come out openly with bills seeking the repeal of these odious and
offensive provisions in R.A. No. 8180. In the Senate, Senator
Freddie Webb has filed S.B. No. 2133 which is the result of the
hearings conducted by the Senate Committee on Energy. The
hearings revealed that (1) there was a need to level the playing
field for the new entrants in the downstream oil industry, and (2)
there was no law punishing a person for selling petroleum
products at unreasonable prices. Senator Alberto G. Romulo also
filed S.B. No. 2209 abolishing the tariff differential beginning
January 1, 1998. He declared that the amendment ". . . would
mean that instead of just three (3) big oil companies there will be
other major oil companies to provide more competitive prices for
the market and the consuming public." Senator Heherson
T . Alvarez, one of the principal proponents of R.A. No. 8180, also
filed S.B. No. 2290 increasing the penalty for violation of its
section 9. It is his opinion as expressed in the explanatory note of
the bill that the present oil companies are engaged in
cartelization despite R.A. No. 8180,viz,:
xxx xxx xxx
Since the downstream oil industry was fully deregulated in
February 1997, there have been eight (8) fuel price
adjustments made by the three oil majors, namely: Caltex
Philippines, Inc.; Petron Corporation; and Pilipinas Shell
Petroleum Corporation. Very noticeable in the price
adjustments made, however, is the uniformity in the pump
prices of practically all petroleum products of the three oil
companies. This, despite the fact, that their selling rates
should be determined by a combination of any of the
following factors: the prevailing peso-dollar exchange rate
at the time payment is made for crude purchases,
sources of crude, and inventory levels of both crude and
refined petroleum products. The abovestated factors
should have resulted in different, rather than identical
prices.
The fact that the three (3) oil companies' petroleum
products are uniformly priced suggests collusion,
amounting to cartelization, among Caltex Philippines, Inc.,
Petron Corporation and Pilipinas Shell Petroleum
Corporation to fix the prices of petroleum products in
violation of paragraph (a), Section 9 of R.A. No. 8180.
To deter this pernicious practice and to assure that
present and prospective players in the downstream oil
industry conduct their business with conscience and
propriety, cartel-like activities ought to be severely
penalized.
Senator Francisco S. Tatad also filed S.B. No. 2307 providing for
a uniform tariff rate on imported crude oil and refined petroleum
products. In the explanatory note of the bill, he declared in no
uncertain terms that ". . . the present set-up has raised serious
public concern over the way the three oil companies have
uniformly adjusted the prices of oil in the country, an indication of
a possible existence of a cartel or a cartel-like situation within the
downstream oil industry. This situation is mostly attributed to the
foregoing provision on tariff differential, which has effectively
discouraged the entry of new players in the downstream oil
industry."
In the House of Representatives, the moves to rehabilitate R.A.
No. 8180 are equally feverish. Representative Leopoldo E. San
Buenaventura has filed H.B. No. 9826 removing the tariff
differential for imported crude oil and imported refined petroleum
products. In the explanatory note of the bill, Rep. Buenaventura
explained:
xxx xxx xxx
As we now experience, this difference in tariff rates
between imported crude oil and imported refined
petroleum products, unwittingly provided a built-in-
 advantage for the three existing oil refineries in the
country and eliminating competition which is a must in a
free enterprise economy. Moreover, it created a
disincentive for other players to engage even initially in
the importation and distribution of refined petroleum
products and ultimately in the putting up of
refineries. This tariff differential virtually created a
monopoly of the downstream oil industry by the existing
three oil companies as shown by their uniform and
capricious pricing of their products since this law took
effect, to the great disadvantage of the consuming public.
Thus, instead of achieving the desired effects of
deregulation, that of free enterprise and a level playing
field in the downstream oil industry, R.A. 8180 has
created an environment conducive to cartelization,
unfavorable, increased, unrealistic prices of petroleum
products in the country by the three existing refineries.
Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981 to
prevent collusion among the present oil companies by
strengthening the oversight function of the government,
particularly its ability to subject to a review any adjustment in the
prices of gasoline and other petroleum products. In the
explanatory note of the bill, Rep. Punzalan, Jr., said:
xxx xxx xxx
To avoid this, the proposed bill seeks to strengthen the
oversight function of government, particularly its ability to
review the prices set for gasoline and other petroleum
products. It grants the Energy Regulatory Board (ERB)
the authority to review prices of oil and other petroleum
products, as may be petitioned by a person, group or any
entity, and to subsequently compel any entity in the
industry to submit any and all documents relevant to the
imposition of new prices. In cases where the Board
determines that there exist collusion, economic
conspiracy, unfair trade practice, profiteering and/or
overpricing, it may take any step necessary to protect the
public, including the readjustment of the prices of
petroleum products. Further, the Board may also impose
the fine and penalty of imprisonment, as prescribed in
Section 9 of R.A. 8180, on any person or entity from the
oil industry who is found guilty of such prohibited acts.
By doing all of the above, the measure will effectively
provide Filipino consumers with a venue where their
grievances can be heard and immediately acted upon by
government.
Thus, this bill stands to benefit the Filipino consumer by
making the price-setting process more transparent and
making it easier to prosecute those who perpetrate such
prohibited acts as collusion, overpricing, economic
conspiracy and unfair trade.
Representative Sergio A.F . Apostol filed H.B. No. 10039 to
remedy an omission in R.A. No. 8180 where there is no agency in
government that determines what is "reasonable" increase in the
prices of oil products.Representative Dente O. Tinga, one of
the principal sponsors of R.A. No. 8180, filed H.B. No. 10057 to
strengthen its anti-trust provisions. He elucidated in its
explanatory note:
xxx xxx xxx
The definition of predatory pricing, however, needs to be
tightened up particularly with respect to the definitive
benchmark price and the specific anti-competitive intent.
The definition in the bill at hand which was taken from
the Areeda-Turner test in the United States on predatory
pricing resolves the questions. The definition reads,
"Predatory pricing means selling or offering to sell any oil
product at a price below the average variable cost for the
 purpose of destroying competition, eliminating a
competitor or discouraging a competitor from entering the
market."
The appropriate actions which may be resorted to under
the Rules of Court in conjunction with the oil deregulation
law are adequate. But to stress their availability and
dynamism, it is a good move to incorporate all the
remedies in the law itself. Thus, the present bill formalizes
the concept of government intervention and private suits
to address the problem of antitrust violations. Specifically,
the government may file an action to prevent or restrain
any act of cartelization or predatory pricing, and if it has
suffered any loss or damage by reason of the antitrust
violation it may recover damages. Likewise, a private
person or entity may sue to prevent or restrain any such
violation which will result in damage to his business or
property, and if he has already suffered damage he shall
recover treble damages. A class suit may also be allowed.
To make the DOE Secretary more effective in the
enforcement of the law, he shall be given additional
powers to gather information and to require reports.
Representative Erasmo B. Damasing filed H.B. No. 7885 and has
a more unforgiving view of R.A. No. 8180. He wants it completely
repealed. He explained:
xxx xxx xxx
Contrary to the projections at the time the bill on the
Downstream Oil Industry Deregulation was discussed and
debated upon in the plenary session prior to its approval
into law, there aren't any new players or investors in the
oil industry. Thus, resulting in practically a cartel or
monopoly in the oil industry by the three (3) big oil
companies, Caltex, Shell and Petron. So much so, that
with the deregulation now being partially implemented,
the said oil companies have succeeded in increasing the
prices of most of their petroleum products with little or no
interference at all from the government. In the month of
August, there was an increase of Fifty centavos (50¢) per
liter by subsidizing the same with the OPSF, this is only
temporary as in March 1997, or a few months from now,
there will be full deregulation (Phase II) whereby the
increase in the prices of petroleum products will be fully
absorbed by the consumers since OPSF will already be
abolished by then. Certainly, this would make the lives of
our people, especially the unemployed ones, doubly
difficult and unbearable.
The much ballyhooed coming in of new players in the oil
industry is quite remote considering that these
prospective investors cannot fight the existing and well
established oil companies in the country today, namely,
Caltex, Shell and Petron. Even if these new players will
come in, they will still have no chance to compete with the
said three (3) existing big oil companies considering that
there is an imposition of oil tariff differential of 4%
between importation of crude oil by the said oil refineries
paying only 3% tariff rate for the said importation and 7%
tariff rate to be paid by businessmen who have no oil
refineries in the Philippines but will import finished
petroleum/oil products which is being taxed with 7% tariff
rates.
So, if only to help the many who are poor from further
suffering as a result of unmitigated increase in oil
products due to deregulation, it is a must that the
Downstream Oil Industry Deregulation Act of 1996, or
R.A. 8180 be repealed completely.
Various resolutions have also been filed in the Senate calling for
an immediate and comprehensive review of R.A. No. 8180 to
prevent the downpour of its ill effects on the people. Thus, S.
Res. No. 574 was filed by Senator Gloria M. Macapagal entitled
Resolution "Directing the Committee on Energy to Inquire Into
The Proper Implementation of the Deregulation of the
Downstream Oil Industry and Oil Tax Restructuring As Mandated
Under R.A. Nos. 8180 and 8184, In Order to Make The
Necessary Corrections In the Apparent Misinterpretation Of The
Intent And Provision Of The Laws And Curb The Rising Tide Of
Disenchantment Among The Filipino Consumers And Bring About
The Real Intentions And Benefits Of The Said Law." Senator Blas
P. Ople filed S. Res. No. 664 entitled resolution "Directing the
Committee on Energy To Conduct An Inquiry In Aid Of Legislation
To Review The Government's Oil Deregulation Policy In Light Of
The Successive Increases In Transportation, Electricity And
Power Rates, As well As Of Food And Other Prime Commodities
And Recommend Appropriate Amendments To Protect The
Consuming Public." Senator Ople observed:
xxx xxx xxx
WHEREAS, since the passage of R.A. No. 8180, the
Energy Regulatory Board (ERB) has imposed successive
increases in oil prices which has triggered increases in
electricity and power rates, transportation fares, as well
as in prices of food and other prime commodities to the
detriment of our people, particularly the poor;
WHEREAS, the new players that were expected to
compete with the oil cartel-Shell, Caltex and Petron-have
not come in;
WHEREAS, it is imperative that a review of the oil
deregulation policy be made to consider appropriate
amendments to the existing law such as an extension of
the transition phase before full deregulation in order to
give the competitive market enough time to develop;
WHEREAS, the review can include the advisability of
providing some incentives in order to attract the entry of
new oil companies to effect a dynamic competitive
market;
WHEREAS, it may also be necessary to defer the setting
up of the institutional framework for full deregulation of the
oil industry as mandated under Executive Order No. 377
issued by President Ramos last October 31, 1996 . . .
Senator Alberto G. Romulo filed S. Res. No. 769 entitled
resolution "Directing the Committees on Energy and Public
Services In Aid Of Legislation To Assess The Immediate Medium
And Long Term Impact of Oil Deregulation On Oil Prices And The
Economy." Among the reasons for the resolution is the finding
that "the requirement of a 40-day stock inventory effectively limits
the entry of other oil firms in the market with the consequence
that instead of going down oil prices will rise."
Parallel resolutions have been filed in the House of
Representatives. Representative Dante O. Tinga filed H. Res. No.
1311 "Directing The Committee on Energy To Conduct An Inquiry,
In Aid of Legislation, Into The Pricing Policies And Decisions Of
The Oil Companies Since The Implementation of Full
Deregulation Under the Oil Deregulation Act (R.A. No. 8180) For
the Purpose of Determining In the Context Of The Oversight
Functions Of Congress Whether The Conduct Of The Oil
Companies, Whether Singly Or Collectively, Constitutes
Cartelization Which Is A Prohibited Act Under R.A. No. 8180, And
What Measures Should Be Taken To Help Ensure The Successful
Implementation Of The Law In Accordance With Its Letter And
Spirit, Including Recommending Criminal Prosecution Of the
Officers Concerned Of the Oil Companies If Warranted By The
Evidence, And For Other Purposes." Representatives Marcial
C. Punzalan, Jr. Dante O. Tinga and Antonio E. Bengzon III filed
H.R. No. 894 directing the House Committee on Energy to inquire
into the proper implementation of the deregulation of the
downstream oil industry. House Resolution No. 1013 was also
filed by Representatives Edcel C. Lagman, Enrique T . Garcia,
Jr. and Joker P. Arroyo urging the President to immediately
suspend the implementation of E.O. No. 392.
In recent memory there is no law enacted by the legislature
afflicted with so much constitutional deformities as R.A. No. 8180.
Yet, R.A. No. 8180 deals with oil, a commodity whose supply and
price affect the ebb and flow of the lifeblood of the nation. Its
shortage of supply or a slight, upward spiral in its price shakes
our economic foundation. Studies show that the areas most
impacted by the movement of oil are food manufacture, land
transport, trade, electricity and water. 38 At a time when our
economy is in a dangerous downspin, the perpetuation of
R.A. No. 8180 threatens to multiply the number of our people with
bent backs and begging bowls. R.A. No. 8180 with its anti-
competition provisions cannot be allowed by this Court to stand even
while Congress is working to remedy its defects.
The Court, however, takes note of the plea of PETRON, SHELL
and CALTEX to lift our restraining order to enable them to adjust
upward the price of petroleum and petroleum products in view of
the plummeting value of the peso. Their plea, however, will now
have to be addressed to the Energy Regulatory Board as the
effect of the declaration of unconstitutionality of R.A. No. 8180 is
to revive the former laws it repealed. 39 The length of our return to
the regime of regulation depends on Congress which can fasttrack
the writing of a new law on oil deregulation in accord with the
Constitution.
With this Decision, some circles will chide the Court for interfering
with an economic decision of Congress. Such criticism is
charmless for the Court is annulling R.A. No. 8180 not because it
disagrees with deregulation as an economic policy but because
as cobbled by Congress in its present form, the law violates the
Constitution. The right call therefor should be for Congress to
write a new oil deregulation law that conforms with the
Constitution and not for this Court to shirk its duty of striking down
a law that offends the Constitution. Striking down R.A. No. 8180
may cost losses in quantifiable terms to the oil oligopolists. But
the loss in tolerating the tampering of our Constitution is not
quantifiable in pesos and centavos. More worthy of protection
than the supra-normal profits of private corporations is the
sanctity of the fundamental principles of the Constitution. Indeed
when confronted by a law violating the Constitution, the Court has
no option but to strike it down dead. Lest it is missed, the
Constitution is a covenant that grants and guarantees both the
political and economic rights of the people. The Constitution
mandates this Court to be the guardian not only of the people's
political rights but their economic rights as well. The protection of
the economic rights of the poor and the powerless is of greater
importance to them for they are concerned more with the
exoterics of living and less with the esoterics of liberty. Hence, for
as long as the Constitution reigns supreme so long will this Court
be vigilant in upholding the economic rights of our people
especially from the onslaught of the powerful. Our defense of the
people's economic rights may appear heartless because it cannot
be half-hearted.
IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is
declared unconstitutional and E.O. No. 372 void.
SO ORDERED.
Regalado, Davide, Jr., Romero, Bellosillo and Vitug, JJ., concur.
Mendoza, J., concurs in the result.
Narvasa, C.J., is on leave.
 Separate Opinions
PANGANIBAN, J., concurring:
I concur with the lucid and convincing ponencia of Mr.
Justice Reynato S. Puno. I write to stress two points:
1. The Issue Is Whether Oil Companies
May Unilaterally
Fix Prices, Not Whether This Court May
Interfere in Economic Questions
With the issuance of the status quo order on October 7,
1997 requiring the three respondent oil companies —
Petron, Shell and Caltex — "to cease and desist from
increasing the prices of gasoline and other petroleum fuel
products for a period of thirty (30) days," the Court has
been accused of interfering in purely economic policy
matters 1 or, worse, of arrogating unto itself price-regulatory
powers. 2 Let it be emphasized that we have no desire —
nay, we have no power — to intervene in, to change or to
repeal the laws of economics, in the same manner that we
cannot and will not nullify or invalidate the laws of physics or
chemistry.
The issue here is not whether the Supreme Court may fix
the retail prices of petroleum products, Rather, the issue
is whether RA 8180, the law allowing the oil companies to
unilaterally set, increase or decrease their prices, is valid
or constitutional.
Under the Constitution, 3 this Court has — in appropriate
cases — the DUTY, not just the power, to determine whether
a law or a part thereof offends the Constitution and, if so, to
annul and set it aside. 4 Because a serious challenge has
been hurled against the validity of one such law, namely RA
8180 — its criticality having been preliminarily determined
from the petition, comments, reply and, most tellingly, the
oral argument on September 30, 1997 — this Court, in the
exercise of its mandated judicial discretion, issued the status
quo order to prevent the continued enforcement and
implementation of a law that was prima facie found to be
constitutionally infirm. Indeed, after careful final deliberation,
said law is now ruled to be constitutionally defective thereby
disabling respondent oil companies from exercising their
erstwhile power, granted by such defective statute, to
determine prices by themselves.
Concededly, this Court has no power to pass upon the
wisdom, merits and propriety of the acts of its co-equal
branches in government. However, it does have the
prerogative to uphold the Constitution and to strike down
and annul a law that contravenes the Charter. 5 From such
duty and prerogative, it shall never shirk or shy away.
By annulling RA 8180, this Court is not making a policy
statement against deregulation. Quite the contrary, it is
simply invalidating a pseudo deregulation law which in
reality restrains free trade and perpetuates a cartel, an
oligopoly. The Court is merely upholding constitutional
adherence to a truly competitive economy that releases
the creative energy of free enterprise. It leaves to
Congress, as the policy-setting agency of the
government, the speedy crafting of a genuine,
constitutionally justified oil deregulation law.
2. Everyone, Rich or Poor, Must Share
in the Burdens of Economic Dislocation
Much has been said and will be said about the alleged
negative effect of this Court's holding on the oil giants'
profit and loss statements. We are not unaware of the
disruptive impact of the depreciating peso on the retail
prices of refined petroleum products. But such price-
 escalating consequence adversely affects not merely
these oil companies which occupy hallowed places
among the most profitable corporate behemoths in our
country. In these critical times of widespread economic
dislocations, abetted by currency fluctuations not entirely
of domestic origin, all sectors of society agonize and
suffer. Thus, everyone, rich or poor, must share in the
burdens of such economic aberrations.
I can understand foreign investors who see these price
adjustments as necessary consequences of the country's
adherence to the free market, for that, in the first place, is
the magnet for their presence here. Understandably, their
concern is limited to bottom lines and market share. But in
all these mega companies, there are also Filipino
entrepreneurs and managers. I am sure there are patriots
among them who realize that, in times of economic
turmoil, the poor and the underprivileged proportionately
suffer more than any other sector of society. There is a
certain threshold of pain beyond which the disadvantaged
cannot endure. Indeed, it has been wisely said that "if the
rich who are few will not help the poor who are many,
there will come a time when the few who are filled cannot
escape the wrath of the many who are hungry." Kaya't sa
mga kababayan nating kapitalista at may kapangyarihan,
nararapat lamang na makiisa tayo sa mga walang palad
at mahihirap sa mga araw ng pangangailangan. Huwag
na nating ipagdiinan ang kawalan ng tubo, o maging and
panandaliang pagkalugi. At sa mga mangangalakal na
ganid at walang puso: hirap na hirap na po ang ating mga
kababayan. Makonsiyensya naman kayo!
KAPUNAN, J., separate opinion:
Lately, the Court has been perceived (albeit erroneously)
to be an unwelcome interloper in affairs and concerns
best left to legislators and policy-makers. Admittedly, the
wisdom of political and economic decisions are outside
the scrutiny of the Court. However, the political question
doctrine is not some mantra that will automatically cloak
executive orders and laws (or provisions thereof) with
legitimacy. It is this Court's bounden duty under Sec. 4(2),
Art. VIII of the 1987 Constitution to decide all cases
involving the constitutionality of laws and under Sec. 1 of
the same article, "to determine whether or not there has
been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or
instrumentality of the Government."
In the instant case, petitioners assail the constitutionality
of certain provisions found in R.A. No 8180, otherwise
known as the "Downstream Oil Industry Deregulation Act
of 1996" To avoid accusations of undue interference with
the workings of the two other branches of government,
this discussion is limited to the issue of whether or not the
assailed provisions are germane to the law or serve the
purpose for which it was enacted.
The objective of the deregulation law is quite simple. As
aptly enunciated in Sec. 2 thereof, it is to "foster a truly
competitive market which can better achieve the social
policy objectives of fair prices and adequate, continuous
supply of environmentally-clean and high quality
petroleum products." The key, therefore, is free
competition which is commonly defined as:
The act or action of seeking to gain what another
is seeking to gain at the same time and usually
under or as if under fair or equitable rules and
circumstances: a common struggle for the same
object especially among individuals of relatively
equal standing . . . a market condition in which a
large number of independent buyers and sellers
compete for identical commodity, deal freely with
each other, and retain the right of entry and exit
 from the market. (Webster's Third International
Dictionary.)
and in a landscape where our oil industry is dominated by
only three major oil firms, this translates primarily into the
establishment of a free market conducive to the entry
of new and several and oil companies in the business.
Corollarily, it means the removal of any and all barriers
that will hinder the influx of prospective players. It is a
truism in economics that if there are many players in the
market, healthy competition will ensue and in order to
survive and profit the competitors will try to outdo each
other in terms of quality and price. The result: better
quality products and competitive prices. In the end, it will
be the public that benefits (which is ultimately the most
important goal of the law). Thus, it is within this framework
that we must determine the validity of the assailed
provisions.
I differential a barrier to the entry of new oil companies in
The 4% Tariff Differential
Sec. 5. Liberalization of Downstream Oil Industry
and Tariff Treatment.—
xxx xxx xxx
b) Any law to the contrary notwithstanding and
starting with the effectivity of this Act, tariff duty
shall be imposed and collected on imported crude
oil at the rate of three percent (3%) and imported
refined petroleum products at the rate of seven
percent (7%), except fuel oil and LPG, the rate for
which shall be the same as that for imported
crude oil: Provided, That beginning on January 1,
2004 the tariff rate on imported crude oil and
refined petroleum products shall be the
same: Provided, further, That this provision may
be amended only by an Act of Congress;
Respondents are one in asserting that the 4% tariff
differential between imported crude oil and imported
refined petroleum products is intended to encourage the
new entrants to put up their own refineries in the country.
The advantages of domestic refining cannot be
discounted, but we must view this intent in the proper
perspective. The primary purpose of the deregulation law
is to open up the market and establish free competition.
The priority of the deregulation law, therefore, is to
encourage new oil companies to come in first. Incentives
to encourage the building of local refineries should be
provided after the new oil companies have entered the
Philippine market and are actively participating therein.
The threshold question therefore is, is the 4% tariff
the Philippine market?
It is. Since the prospective oil companies do not (as yet)
have local refineries, they would have to import refined
petroleum products, on which a 7% tariff duty is imposed.
On the other hand, the existing oil companies already
have domestic refineries and, therefore, only import crude
oil which is taxed at a lower rate of 3%. Tariffs are part of
the costs of production. Hence, this means that with the
4% tariff differential (which becomes an added cost) the
prospective players would have higher production costs
compared to the existing oil companies and it is precisely
this factor which could seriously affect its decision to enter
the market.
Viewed in this light, the tariff differential between imported
crude oil and refined petroleum products becomes an
obstacle to the entry of new players in the Philippine oil
market. It defeats the purpose of the law and should thus
be struck down.
Public respondents contend that ". . . a higher tariff rate is
not the overriding factor confronting a prospective
trader/importer but, rather, his ability to generate the
desired internal rate of return (IRR) and net present value
(NPV). In other words, if said trader/importer, after some
calculation, finds that he can match the price of locally
refined petroleum products and still earn the desired profit
margin, despite a higher tariff rate, he will be attracted to
embark in such business. A tariff differential does not per
se make the business of importing refined petroleum
product a losing proposition." 1
The problem with this rationale, however, is that it is
highly speculative. The opposite may well hold true. The
point is to make the prospect of engaging in the oil
business in the Philippines appealing, so why create a
barrier in the first place?
There is likewise no merit in the argument that the
removal of the tariff differential will revive the 10% (for
crude oil) and 20% (for refined petroleum products) tariff
rates that prevailed before the enactment of R.A. No.
8180. What petitioners are assailing is the tariff
differential. Phrased differently, why is the tariff duty
imposed on imported petroleum products not the same as
that imposed on imported crude oil? Declaring the tariff
differential void is not equivalent to declaring the tariff
itself void. The obvious consequence thereof would be
that imported refined petroleum products would now be
taxed at the same rate as imported crude oil which R.A.
No. 8180 has specifically set at 3%. The old rates have
effectively been repealed by Sec. 24 of the same law. 2
II
The Minimum Inventory Requirement
and the Prohibition Against Predatory Pricing
Sec. 6. Security of Supply. — To ensure the
security and continuity of petroleum crude and
products supply, the DOE shall require the
refiners and importers to maintain a minimum
inventory equivalent to ten percent (10%) of their
respective annual sales volume or forty (40) days
of supply, whichever is lower.
xxx xxx xxx
Sec. 9. Prohibited Acts. — To ensure fair
competition and prevent cartels and monopolies
in the downstream oil industry, the following acts
are hereby prohibited:
xxx xxx xxx
b) Predatory pricing which means selling or
offering to sell any product at a price
unreasonably below the industry average cost so
as to attract customers to the detriment of
competitors.
The same rationale holds true for the two other assailed
provisions in the Oil Deregulation law. The primordial
purpose of the law, I reiterate, is to create a truly free and
competitive market. To achieve this goal, provisions that
show the possibility, or even the merest hint, of deterring
or impeding the ingress of new blood in the market should
be eliminated outright. I am confident that our lawmakers
can formulate other measures that would accomplish the
same purpose (insure security and continuity of petroleum
crude products supply and prevent fly by night operators,
in the case of the minimum inventory requirement, for
instance) but would not have on the downside the effect
of seriously hindering the entry of prospective traders in
the market.
The overriding consideration, which is the public interest
and public benefit, calls for the levelling of the playing
fields for the existing oil companies and the prospective
new entrants. Only when there are many players in the
market will free competition reign and economic
development begin.
Consequently, Section 6 and Section 9(b) of R. A. No.
8180 should similarly be struck down.
III
MELO, J., dissenting:
Conclusion
Respondent oil companies vehemently deny the
"cartelization" of the oil industry. Their parallel business
behaviour and uniform pricing are the result of
competition, they say, in order to keep their share of the
market. This rationale fares well when oil prices are
lowered, i.e. when one oil company rolls back its prices,
the others follow suit so as not to lose its market. But how
come when one increases its prices the others likewise
follow? Is this competition at work?
Respondent oil companies repeatedly assert that due to
the devaluation of the peso, they had to increase the
prices of their oil products, otherwise, they would lose, as
they have allegedly been losing specially with the
issuance of a temporary restraining order by the Court.
However, what we have on record are only the self-
serving lamentations of respondent oil companies. Not
one has presented hard data, independently verified, to
attest to these losses. Mere allegations are not sufficient
but must be accompanied by supporting evidence. What
probably is nearer the truth is that respondent oil
companies will not make as much profits as they have in
the past if they are not allowed to increase the prices of
their products everytime the value of the peso slumps.
But in the midst of worsening economic difficulties and
hardships suffered by the people, the very customers who
have given them tremendous profits throughout the years,
is it fair and decent for said companies not to bear a bit of
the burden by forgoing a little of their profits?
PREMISES CONSIDERED, I vote that Section 5(b),
Section 6 and Section 9(b) of R.A. No. 8180 be declared
unconstitutional.
With all due respect to my esteemed colleague, Mr.
Justice Puno, who has, as usual, prepared a well-written
and comprehensive ponencia, I regret I cannot share the
view that Republic Act No. 8180 should be struck down as
violative of the Constitution.
The law in question, Republic Act No. 8180, otherwise
known as the Downstream Oil Deregulation Act of 1996,
contains, inter alia, the following provisions which have
become the subject of the present controversy, to wit:
Sec. 5. Liberalization of Downstream Oil Industry
and Tariff Treatment. —
xxx xxx xxx
(b). — Any law to the contrary notwithstanding
and starting with the effectivity of this act, tariff
duty shall be imposed and collected on imported
crude oil at the rate of (3%) and imported refined
petroleum products at the rate of seven percent
(7%), except fuel oil and LPG, the rate for which
shall be the same as that for imported crude
oil: Provided, That beginning on January 1, 2004
the tariff rate on imported crude oil and refined
petroleum products shall be the same: Provided,
further, That this provision may be amended only
by an Act of Congress. . .
Sec. 6. Security of Supply. — To ensure the
security and continuity of petroleum crude and
products supply, the DOE shall require the
refiners and importers to maintain a minimum
inventory equivalent to ten percent (10%) of their
respective annual sales volume or forty (40) days
of supply, whichever is lower.
xxx xxx xxx
Sec. 9. Prohibited Acts. — To ensure fair
competition and prevent cartels and monopolies
in the downstream oil industry, the following acts
are hereby prohibited:
xxx xxx xxx
b) Predatory pricing which means selling or
offering to sell any product at a price
unreasonably below the industry average cost so
as to attract customers to the detriment of
competitors.
xxx xxx xxx
Sec. 15. Implementation of Full Deregulation. —
Pursuant to Section 5(e) of Republic Act No.
7638, the DOE [Department of Energy] shall,
upon approval of the President, implement the full
deregulation of the downstream oil industry not
later than March 1997. As far as practicable, the
DOE shall time the full deregulation when the
prices of crude oil and petroleum products in the
world market are declining and when the
exchange rate of the peso in relation to the US
Dollar is stable. . .
In G. R. No. 124360, petitioners therein pray that the
aforequoted Section 5(b) be declared null and void.
However, despite its pendency, President Ramos,
pursuant to the above-cited Section 15 of the assailed
law, issued Executive Order No. 392 on 22 January 1997
declaring the full deregulation of the downstream oil
industry effective February 8, 1997. A few days after the
implementation of said Executive Order, the second
consolidated petition was filed (G.R. No. 127867),
seeking, inter alia, the declaration of the
unconstitutionality of Section 15 of the law on various
grounds.
I submit that the instant consolidated petitions should be
denied. In support of my view, I shall discuss the
arguments of the parties point by point.
1. The instant petitions do not raise a justiciable
controversy as the issues raised therein pertain to the
wisdom and reasonableness of the provisions of the
assailed law. The contentions made by petitioners, that
the "imposition of different tariff rates on imported crude
oil and imported refined petroleum products will not foster
a truly competitive market, nor will it level the playing
fields" and that said imposition "does not deregulate the
downstream oil industry, instead, it controls the oil
industry, contrary to the avowed policy of the law," are
clearly policy matters which are within the province of the
political departments of the government. These
submissions require a review of issues that are in the
nature of political questions, hence, clearly beyond the
ambit of judicial inquiry.
A political question refers to a question of policy or to
issues which, under the Constitution, are to be decided by
the people in their sovereign capacity, or in regard to
which full discretionary authority has been delegated to
the legislative or executive branch of the government.
Generally, political questions are concerned with issues
dependent upon the wisdom, not the legality, of a
particular measure (Tañada vs. Cuenco, 100 Phil 101
[1957]).
Notwithstanding the expanded judicial power of this Court
under Section 1, Article VIII of the Constitution, an inquiry
on the above-stated policy matters would delve on
matters of wisdom which are exclusively within the
legislative powers of Congress.
2. The petitioners do not have the necessary locus standi
to file the instant consolidated petitions. Petitioners
Lagman, Arroyo, Garcia, Tanada, and Tatad assail the
constitutionality of the above-stated laws through the
instant consolidated petitions in their capacity as
members of Congress, and as taxpayers and concerned
citizens. However, the existence of a constitutional issue
in a case does not per se confer or clothe a legislator
with locus standi to bring suit. In Phil. Constitution
Association (PHILCONSA) v. Enriquez(235 SCRA 506
[1994]), we held that members of Congress may properly
challenge the validity of an official act of any department
of the government only upon showing that the assailed
official act affects or impairs their rights and prerogatives
as legislators. In Kilosbayan, Inc., et al. vs. Morato, et
al. (246 SCRA 540 [1995]), this Court further clarified that
"if the complaint is not grounded on the impairment of the
power of Congress, legislators do not have standing to
question the validity of any law or official action."
Republic Act No. 8180 clearly does not violate or impair
prerogatives, powers, and rights of Congress, or the
individual members thereof, considering that the assailed
official act is the very act of Congress itself authorizing
the full deregulation of the downstream oil industry.
Neither can petitioners sue as taxpayers or concerned
citizens. A condition sine qua non for the institution of a
taxpayer's suit is an allegation that the assailed action is
an unconstitutional exercise of the spending powers of
Congress or that it constitutes an illegal disbursement of
public funds. The instant consolidated petitions do not
allege that the assailed provisions of the law amount to an
illegal disbursement of public money. Hence, petitioners
cannot, even as taxpayers or concerned citizens, invoke
this Court's power of judicial review.
Further, petitioners, including Flag, FDC, and Sanlakas,
can not be deemed proper parties for lack of a
particularized interest or elemental substantial injury
necessary to confer on them locus standi. The interest of
the person assailing the constitutionality of a statute must
be direct and personal. He must be able to show, not only
that the jaw is invalid, but also that he has sustained or is
in immediate danger of sustaining some direct injury as a
result of its enforcement, and not merely that he suffers
thereby in some indefinite way. It must appear that the
person complaining has been or is about to be denied
some right or privilege to which he is lawfully entitled or
that he is about to be subjected to some burdens or
penalties by reason of the statute complained of
Petitioners have not established such kind of interest.
3. Section 5 (b) of Republic Act No. 8180 is not violative
of the "one title-one subject" rule under Section 26 (1),
Article VI of the Constitution. It is not required that a
provision of law be expressed in the title thereof as long
as the provision in question is embraced within the
subject expressed in the title of the law. The "title of a bill
does not have to be a catalogue of its contents and will
suffice if the matters embodied in the text are relevant to
each other and may be inferred from the title."
(Association of Small Landowners in the Phils., Inc. vs.
Sec. of Agrarian Reform, 175 SCRA 343 [1989]) An "act
having a single general subject, indicated in the title, may
contain any number of provisions, no matter how diverse
they may be, so long as they are not inconsistent with or
foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method
and means of carrying out the general object." (Sinco,
Phil. Political Law, 11th ed., p. 225).
The questioned tariff provision in Section 5 (b) was
provided as a means to implement the deregulation of the
downstream oil industry and hence, is germane to the
purpose of the assailed law. The general subject of
Republic Act No. 8180, as expressed in its title, "An Act
Deregulating the Downstream Oil Industry, and for the
Other Purposes", necessarily implies that the law
provides for the means for such deregulation. One such
means is the imposition of the differential tariff rates which
are provided to encourage new investors as well as
existing players to put up new refineries. The aforesaid
provision is thus germane to, and in furtherance of, the
object of deregulation. The trend of jurisprudence, ever
since Sumulong vs. COMELEC(73 Phil. 288 [1941]), is to
give the above-stated constitutional requirement a liberal
interpretation. Hence, there is indeed substantial
compliance with said requirement.
Petitioners claim that because the House version of the
assailed law did not impose any tariff rates but merely set
the policy of "zero differential" and that the Senate version
did not set or fix any tariff, the tariff changes being
imposed by the assailed law was never subject of any
deliberations in both houses nor the Bicameral
Conference Committee. I believe that this argument is
bereft of merit.
The report of the Bicameral Conference Committee,
which was precisely formed to settle differences between
the two houses of Congress, was approved by members
thereof only after a full deliberation on the conflicting
provisions of the Senate version and the House version of
the assailed law. Moreover, the joint explanatory
statement of said Committee which was submitted to both
houses, explicitly states that "while sub-paragraph (b) is a
modification, its thrust and style were patterned after the
House's original sub-paragraph (b)." Thus, it cannot be
denied that both houses were informed of the changes in
the aforestated provision of the assailed law. No legislator
can validly state that he was not apprised of the
purposes, nature, and scope of the provisions of the law
since the inclusion of the tariff differential was clearly
mentioned in the Bicameral Conference Committee's
explanatory note.
As regards the power of the Bicameral Conference
Committee to include in its report an entirely new
provision that is neither found in the House bill or Senate
bill, this Court already upheld such power inTolentino
vs. Sec. of Finance (235 SCRA 630 [1994]), where we
ruled that the conference committee can even include an
amendment in the nature of a substitute so long as such
amendment is germane to the subject of the bill before it.
Lastly, in view of the "enrolled bill theory" pronounced by
this Court as early as 1947 in the case ofMabanag
vs. Lopez Vito (78 Phil. 1 [1947]), the duly authenticated
copy of the bill, signed by the proper officers of each
house, and approved by the President, is conclusive upon
the courts not only of its provisions but also of its due
enactment.
4. Section 15 of Republic Act No. 8180 does not
constitute undue delegation of legislative power.
Petitioners themselves admit that said section provides
the Secretary of Energy and the President with the bases
of (1) "practicability", (2) "the decline of crude oil prices in
the world market", and (3) "the stability of the Peso
exchange rate in relation to the US Dollar", in determining
the effectivity of full deregulation. To my mind, said bases
are determinate and determinable guidelines, when
examined in the light of the tests for permissible
delegation.
The assailed law satisfies the completeness test as it is
complete and leaves nothing more for the Executive
Branch to do but to enforce the same. Section 2 thereof
expressly provides that "it shall be the policy of the State
to deregulate the downstream oil industry to foster a truly
competitive market which can better achieve the social
policy objectives of fair prices and adequate, continuous
supply of environmentally-clean and high-quality
petroleum products." This provision manifestly declares
the policy to be achieved through the delegate, that is, the
full deregulation of the downstream oil industry toward the
end of full and free competition. Section 15 further
provides for all the basic terms and conditions for its
execution and thus belies the argument that the Executive
Branch is given complete liberty to determine whether or
not to implement the law. Indeed, Congress did not only
make full deregulation mandatory, but likewise set a
deadline (that is, not later than March 1997), within which
full deregulation should be achieved.
Congress may validly provide that a statute shall take
effect or its operation shall be revived or suspended or
shall terminate upon the occurrence of certain events or
contingencies the ascertainment of which may be left to
some official agency. In effect, contingent legislation may
be issued by the Executive Branch pursuant to a
delegation of authority to determine some fact or state of
things upon which the enforcement of a law depends
(Cruz, Phil. Political Law, 1996 ed., p. 96; Cruz vs.
Youngberg, 56 Phil. 234 [1931]). This is a valid delegation
since what the delegate performs is a matter of detail
whereas the statute remains complete in all essential
matters. Section 15 falls under this kind of delegated
authority. Notably, the only aspect with respect to which
the President can exercise "discretion" is the
determination of whether deregulation may be
implemented on or before March, 1997, the deadline set
by Congress. If he so decides, however, certain
conditions must first be satisfied, to wit: (1) the prices of
crude oil and petroleum products in the world market are
declining, and (2) the exchange rate of the peso in
relation to the US Dollar is stable. Significantly, the so-
called "discretion" pertains only to the ascertainment of
the existence of conditions which are necessary for the
effectivity of the law and not a discretion as to what the
law shall be.
In the same vein, I submit that the President's issuance of
Executive Order No. 392 last January 22, 1997 is valid as
contingent legislation. All the Chief Executive did was to
exercise his delegated authority to ascertain and
recognize certain events or contingencies which
prompted him to advance the deregulation to a date
earlier than March, 1997. Anyway, the law does not
prohibit him from implementing the deregulation prior to
March, 1997, as long as the standards of the law are met.
Further, the law satisfies the sufficient standards test. The
words "practicable", "declining", and "stable", as used in
Section 15 of the assailed law are sufficient standards
that saliently "map out the boundaries of the delegate's
authority by defining the legislative policy and indicating
the circumstances under which it is to be pursued and
effected." (Cruz, Phil. Political Law, 1996 ed., p. 98).
Considering the normal and ordinary definitions of these
standards, I believe that the factors to be considered by
the President and/or Secretary of Energy in implementing
full deregulation are, as mentioned, determinate and
determinable.
It is likewise noteworthy that the above-mentioned factors
laid down by the subject law are not solely dependent on
Congress. Verily, oil pricing and the peso-dollar exchange
rate are dependent on the various forces working within
the consumer market. Accordingly, it would have been
unreasonable, or even impossible, for the legislature to
have provided for fixed and specific oil prices and
exchange rates. To require Congress to set forth specifics
in the law would effectively deprive the legislature of the
flexibility and practicability which subordinate legislation is
ultimately designed to provide. Besides, said specifics are
precisely the details which are beyond the competence of
Congress, and thus, are properly delegated to appropriate
administrative agencies and executive officials to "fill in". It
cannot be gainsaid that the detail of the timing of full
deregulation has been "filled in" by the President, upon
the recommendation of the DOE, when he issued
Executive Order No. 329.
5. Republic Act No. 8180 is not violative of the
constitutional prohibition against monopolies,
combinations in restraint of trade, and unfair competition.
The three provisions relied upon by petitioners (Section 5
[b] on tariff differential; Section 6 on the 40-day minimum
inventory requirement; and Section 9 [b] on the prohibited
act of predatory pricing) actually promote, rather than
restrain, free trade and competition.
The tariff differential provided in the assailed law does not
necessarily make the business of importing refined
petroleum products a losing proposition for new players.
First, the decision of a prospective trader/importer
(subjected to the 7% tariff rate) to compete in the
downstream oil industry as a new player is based solely
on whether he can, based on his computations, generate
the desired internal rate of return (IRR) and net present
value (NPV) notwithstanding the imposition of a higher
tariff rate. Second, such a difference in tax treatment does
not necessarily provide refiners of imported crude oil with
a significant level of economic advantage considering the
huge amount of investments required in putting up
refinery plants which will then have to be added to said
refiners' production cost. It is not unreasonable to
suppose that the additional cost imputed by higher tariff
can anyway be overcome by a new player in the business
of importation due to lower operating costs, lower capital
infusion, and lower capital carrying costs. Consequently,
the resultant cost of imported finished petroleum and that
of locally refined petroleum products may turn out to be
approximately the same.
The existence of a tariff differential with regard to
imported crude oil and imported finished products is
nothing new or novel. In fact, prior to the passage of
Republic Act No. 8180, there existed a 10% tariff
differential resulting from the imposition of a 20% tariff
rate on imported finished petroleum products and 10% on
imported crude oil (based on Executive Order No. 115).
Significantly, Section 5 (b) of the assailed law effectively
lowered the tariff rates from 20% to 7% for imported
refined petroleum products, and 10% to 3% for imported
crude oil, or a reduction of the differential from 10% to
4%. This provision is certainly favorable to all in the
downstream oil industry, whether they be existing or new
players. It thus follows that the 4% tariff differential aims
to ensure the stable supply of petroleum products by
encouraging new entrants to put up oil refineries in the
Philippines and to discourage fly-by-night importers.
Further, the assailed tariff differential is likewise not
violative of the equal protection clause of the Constitution.
It is germane to the declared policy of Republic Act No.
8180 which is to achieve (1) fair prices; and (2) adequate
and continuous supply of environmentally-clean and high
quality petroleum products. Said adequate and
continuous supply of petroleum products will be achieved
if new investors or players are enticed to engage in the
business of refining crude oil in the country. Existing
refining companies, are similarly encouraged to put up
additional refining companies. All of this can be made
possible in view of the lower tariff duty on imported crude
oil than that levied on imported refined petroleum
products. In effect, the lower tariff rates will enable the
refiners to recoup their investments considering that they
will be investing billions of pesos in putting up their
refineries in the Philippines. That incidentally the existing
refineries will be benefited by the tariff differential does
not negate the fact that the intended effect of the law is
really to encourage the construction of new refineries,
whether by existing players or by new players.
As regards the 40-day inventory requirement, it must be
emphasized that the 10% minimum requirement is based
on the refiners' and importers' annual sales volume, and
hence, obviously inapplicable to new entrants as they do
not have an annual sales volume yet. Contrary to
petitioners' argument, this requirement is not intended to
discourage new or prospective players in the downstream
oil industry. Rather, it guarantees "security and continuity
of petroleum crude and products supply." (Section 6,
Republic Act No. 8180) This legal requirement is meant to
weed out entities not sufficiently qualified to participate in
the local downstream oil industry. Consequently, it is
meant to protect the industry from fly-by-night business
operators whose sole interest would be to make quick
profits and who may prove unrealiable in the effort to
provide an adequate and steady supply of petroleum
products in the country. In effect, the aforestated provision
benefits not only the three respondent oil companies but
all entities serious and committed to put up storage
facilities and to participate as serious players in the local
oil industry. Moreover, it benefits the entire consuming
public by its guarantee of an "adequate continuous supply
of environmentally-clean and high quality petroleum
products." It ensures that all companies in the
downstream oil industry operate according to the same
high standards, that the necessary storage and
distribution facilities are in place to support the level of
business activities involved, and that operations are
conducted in a safe and environmentally sound manner
for the benefit of the consuming public.
Regarding the prohibition against predatory pricing, I
believe that petitioners' argument is quite misplaced. The
provision actually protects new players by preventing,
under pain of criminal sanction, the more established oil
firms from driving away any potential or actual competitor
by taking undue advantage of their size and relative
financial stability. Obviously, the new players are the ones
susceptible to closing down on account of intolerable
losses which will be brought about by fierce competition
with rival firms. The petitioners are merely working under
the presumption that it is the new players which would
succumb to predatory pricing, and not the more
established oil firms. This is not a factual assertion but a
rather baseless and conjectural assumption.
As to the alleged cartel among the three respondent oil
companies, much as we suspect the same, its existence
calls for a finding of fact which this Court is not in the
position to make. We cannot be called to try facts and
resolve factual issues such as this (Trade Unions of the
 Phils. vs. Laguesma, 236 SCRA 586 [1994]); Ledesma
vs. NLRC, 246 SCRA 247 [1995]).
With respect to the amendatory bills filed by various
Congressmen aimed to modify the alleged defects of
Republic Act No. 8180, I submit that such bills are the
correct remedial steps to pursue, instead of the instant
petitions to set aside the statute sought to be amended.
The proper forum is Congress, not this Court.
Finally, as to the ponencia's endnote which cites the plea
of respondent oil companies for the lifting of the
restraining order against them to enable them to adjust
the prices of petroleum and petroleum products in view of
the devaluation of our currency, I am pensive as to how
the matter can be addressed to the obviously defunct
Energy Regulatory Board. There has been a number of
price increase in the meantime. Too much water has
passed under the bridge. It is too difficult to turn back the
hands of time.
For all the foregoing reasons, I, therefore, vote for the
outright dismissal of the instant consolidated petitions for
lack of merit.
FRANCISCO, J., dissenting:
The continuing peso devaluation and the spiraling cost of
commodities have become hard facts of life nowadays.
And the wearies are compounded by the ominous
prospects of very unstable oil prices. Thus, with the goal
of rationalizing the oil scheme, Congress enacted
Republic Act No. 8180, otherwise known as the
Downstream Oil Deregulation Act of 1996, the policy of
which is "to foster a truly competitive market which can
better achieve the social policy objectives of fair prices
and adequate, continuous supply of environmentally-
clean and high quality petroleum products". 1 But if the
noble and laudable objective of this enactment is not
accomplished, as to date oil prices continue to rise, can this
Court be called upon to declare the statute unconstitutional
or must the Court desist from interfering in a matter which is
best left to the other branch/es of government?
The apparent thrust of the consolidated petitions is to
declare, not the entirety, but only some isolated portions
of Republic Act No. 8180 unconstitutional. This is clear
from the grounds enumerated by the petitioners, to wit:
G.R. No. 124360
4.0. Grounds:
4.1.
THE IMPOSITION OF DIFFERENT TARIFF
RATES ON IMPORTED CRUDE OIL AND
IMPORTED REFINED PETROLEUM
PRODUCTS VIOLATES THE EQUAL
PROTECTION OF THE LAWS.
4.2.
THE IMPOSITION OF DIFFERENT TARIFF
RATES DOES NOT DEREGULATE THE
DOWNSTREAM OIL INDUSTRY, INSTEAD, IT
CONTROLS THE OIL INDUSTRY, CONTRARY
TO THE AVOWED POLICY OF THE LAW.
4.3.
THE INCLUSION OF A TARIFF PROVISION IN
SECTION 5(b) OF THE DOWNSTREAM OIL
INDUSTRY DEREGULATION LAW VIOLATES
 THE "ONE SUBJECT-ONE TITLE" RULE
EMBODIED IN ARTICLE VI, SECTION 26 (1) OF
THE CONSTITUTION. 2
G.R. No. 127867
GROUNDS
THE IMPLEMENTATION OF FULL
DEREGULATION PRIOR TO THE EXISTENCE
OF A TRULY COMPETITIVE MARKET VIOLATES
THE CONSTITUTION PROHIBITING
MONOPOLIES, UNFAIR COMPETITION AND
PRACTICES IN RESTRAINT OF TRADE.
R.A. No. 8180 CONTAINS DISGUISED
REGULATIONS IN A SUPPOSEDLY
DEREGULATED INDUSTRY WHICH CREATE
OR PROMOTE MONOPOLY OF THE INDUSTRY
BY THE THREE EXISTING OIL COMPANIES.
THE REGULATORY AND PENAL PROVISIONS
OF R.A. NO. 8180 VIOLATE THE EQUAL
PROTECTION OF THE LAWS, DUE PROCESS
OF LAW AND THE CONSTITUTIONAL RIGHTS
OF AN ACCUSED TO BE INFORMED OF THE
NATURE AND CAUSE OF THE ACCUSATION
AGAINST HIM. 3
And culled from petitioners' arguments in support of the
above grounds the provisions of Republic Act No. 8180
which they now impugn are:
A. Section 5(b) on the imposition of tariff which
provides: "Any law to the contrary notwithstanding
and starting with the effectivity of this Act, tariff
duty shall be imposed and collected on imported
crude oil at the rate of three percent (3%), and
imported refined petroleum products at the rate of
seven percent (7%), except fuel oil and LPB, the
rate for which shall be the same as that for
imported crude oil: Provided, That beginning on
January 1, 2004 the tariff rate on imported crude
oil and refined petroleum products shall be the
same: Provided further, That this provision may
be amended only by an Act of Congress."
[Emphasis added].
B. Section 6 on the minimum inventory
requirement, thus: "Security of Supply. — To
ensure the security and continuity of petroleum
crude and products supply, the DOE shall require
the refiners and importers to maintain a minimum
inventory equivalent to ten percent (10%) of their
respective annual sales volume or forty (40) days
of supply, whichever is lower."
C. Section 9(b) on predatory pricing: "Predatory
pricing which means selling or offering to sell any
product at a price unreasonably below the
industry average cost so as to attract customers
to the detriment of competitors.
Any person, including but not limited to the chief
operating officer or chief executive officer of the
corporation involved, who is found guilty of any of
the said prohibited acts shall suffer the penalty of
imprisonment for three (3) years and fine ranging
from Five hundred thousand pesos (P500,000) to
One million pesos (P1,000,000).
D. Section 10 on the other prohibited acts which
states: "Other Prohibited Acts. — To ensure
compliance with the provisions of this Act, the
failure to comply with any of the following shall
likewise be prohibited: 1) submission of any
reportorial requirements; 2) maintenance of the
minimum inventory; and, 3) use of clean and safe
(environment and worker-benign) technologies.
Any person, including but not limited to the chief
operating officer or chief executive officer of the
corporation involved, who is found guilty of any of
the said prohibited acts shall suffer the penalty of
imprisonment for two (2) years and fine ranging
from Two hundred fifty thousand pesos
(P250,000) to Five hundred thousand pesos
(P500,000).
E. Section 15 on the implementation of full
deregulation, thus: "Implementation of Full
Deregulation. — Pursuant to Section 5(e) of
Republic Act No. 7683, the DOE shall, upon
approval of the President, implement the full
deregulation of the downstream oil industry not
later than March, 1997. As far as practicable, the
DOE shall time the full deregulation when the
prices of crude oil and petroleum products in the
world market are declining and when the
exchange rate of the peso in relation to the US
dollar is stable. Upon the implementation of the
full deregulation as provided herein, the transition
phase is deemed terminated and the following
laws are deemed repealed: . . . [Emphasis
added].
F. Section 20 on the imposition of administrative
fine: "Administrative Fine. — The DOE may, after
due notice and hearing impose a fine in the
amount of not less than One hundred thousand
pesos (P100,000) but not more than One million
pesos (P1,000,000) upon any person or entity
who violates any of its reportorial and minimum
inventory requirements, without prejudice to
criminal sanctions."
Executive Order No. 392, entitled "Declaring Full
Deregulation Of The Downstream Oil Industry" which
declared the full deregulation effective February 8, 1997,
is also sought to be declared unconstitutional.
A careful scrutiny of the arguments proffered against the
constitutionality of Republic Act No. 8180 betrays the
petitioners' underlying motive of calling upon this Court to
determine the wisdom and efficacy of the enactment
rather than its adherence to the Constitution.
Nevertheless, I shall address the issues raised if only to
settle the alleged constitutional defects afflicting some
provisions of Republic Act No. 8180. To elaborate:
A. On the imposition of tariff . Petitioners argue that the
existence of a tariff provision violated the "one subject-
one title" 4 rule under Article VI, Section 26 (1) as the
imposition of tariff rates is "inconsistent with" 5 and not at all
germane to the deregulation of the oil industry. They also
stress that the variance between the seven percent (7%)
duty on imported gasoline and other refined petroleum
products and three percent (3%) duty on crude oil gives a
"4% tariff protection in favor of Petron, Shell and Caltex
which own and operate refineries here". 6 The provision,
petitioners insist, "inhibits prospective oil players to do
business here because it will unnecessarily increase their
product cost by 4%." 7 In other words, the tariff rates "does
not foster 'a truly competitive market'." 8Also petitioners claim
that both Houses of Congress never envisioned imposing
the seven percent (7%) and three percent (3%) tariff on
refined and crude oil products as both Houses advocated,
prior to the holding of the bicameral conference committee, a
"zero differential". Moreover, petitioners insist that the tariff
rates violate "the equal protection of the laws enshrined in
Article III, Section 1 of the Constitution" 9 since the rates and
their classification are not relevant in attaining the avowed
policy of the law, not based on substantial distinctions and
limited to the existing condition.
The Constitution mandates that "every bill passed by
Congress shall embrace only one subject which shall be
expressed in the title thereof". 10 The object sought to be
accomplished by this mandatory requirement has been
explained by the Court in the vintage case of Central Capiz
v. Ramirez, 11 thus:
The object sought to be accomplished and the
mischief proposed to be remedied by this
provision are well known. Legislative assemblies,
for the dispatch of business, often pass bills by
their titles only without requiring them to be read.
A specious title sometimes covers legislation
which, if its real character had been disclosed,
would not have commanded assent. To prevent
surprise and fraud on the legislature is one of the
purposes this provision was intended to
accomplish. Before the adoption of this provision
the title of a statute was often no indication of its
subject or contents.
An evil this constitutional requirement was
intended to correct was the blending in one and
the same statute of such things as were diverse in
their nature, and were connected only to combine
in favor of all the advocates of each, thus often
securing the passage of several measures no one
of which could have succeeded on its own merits.
Mr. Cooley thus sums up in his review of the
authorities defining the objects of this provision: "It
may therefore be assumed as settled that the
purpose of this provision was: First, to
prevent hodge-podge or log-rolling
legislation; second, to prevent surprise or fraud
upon the legislature by means of provisions in
bills of which the titles gave no information, and
which might therefore be overlooked and
carelessly and unintentionally adopted; and, third,
to fairly apprise the people, through such
publication of legislative proceedings as is usually
made, of the subjects of legislation that are being
considered, in order that they may have
opportunity of being heard thereon by petition or
otherwise if they shall so desire." (Cooley's
Constitutional Limitations, p. 143). 12
The interpretation of "one subject-one title" rule, however,
is never intended to impede or stifle legislation. The
requirement is to be given a practical rather than a
technical construction and it would be sufficient
compliance if the title expresses the general subject and
all the provisions of the enactment are germane and
material to the general subject. 13 Congress is not required
to employ in the title of an enactment, language of such
precision as to mirror, fully index or catalogue all the
contents and the minute details therein. 14 All that is required
is that the title should not cover legislation incongruous in
itself, and which by no fair intendment can be considered as
having a necessary or proper connection. 15 Hence, the title
"An Act Amending Certain Sections of Republic Act
Numbered One Thousand One Hundred Ninety-Nine,
otherwise known as the Agricultural Tenancy Act of the
Philippines" was declared by the Court sufficient to contain a
provision empowering the Secretary of Justice, acting
through a tenancy mediation division, to carry out a national
enforcement program, including the mediation of tenancy
disputes. 16 The title "An Act Creating the Videogram
Regulatory Board" was similarly declared valid and sufficient
to embrace a regulatory tax provision, i.e., the imposition of
a thirty percent (30%) tax on the purchase price or rental
rate, as the case may be, for every sale, lease or disposition
of a videogram containing a reproduction of any motion
picture or audiovisual program with fifty percent (50%) of the
proceeds of the tax collected accruing to the province and
the other fifty percent (50%) to the municipality where the tax
is collected. 17 Likewise, the title "An Act To Further Amend
Commonwealth Act Numbered One Hundred Twenty, as
amended by Republic Act Numbered Twenty Six Hundred
and Forty One" was declared sufficient to cover a provision
limiting the allowable margin of profit to not more than twelve
percent (12%) annually of its investments plus two-month
operating expenses for franchise holder receiving at least
fifty percent (50%) of its power from the National Power
Corporation. 18
In the case at bar, the title "An Act Deregulating The
Downstream Oil Industry, And For Other Purposes" is
adequate and comprehensive to cover the imposition of
tariff rates. The tariff provision under Section 5 (b) is one
of the means of effecting deregulation. It must be
observed that even prior to the passage of Republic Act
No. 8180 oil products have always been subject to tariff
and surely Congress is cognizant of such fact. The
imposition of the seven percent (7%) and three percent
(3%) duties on imported gasoline and refined petroleum
products and on crude oil, respectively, are germane to
the deregulation of the oil industry. The title, in fact, even
included the broad and all-encompassing phrase "And
For Other Purposes" thereby indicating the legislative
intent to cover anything that has some relation to or
connection with the deregulation of the oil industry. The
tax provision is a mere tool and mechanism considered
essential by Congress to fulfill Republic Act No. 8180's
objective of fostering a competitive market and achieving
the social policy objectives of a fair prices. To curtail any
adverse impact which the tariff treatment may cause by
its application, and perhaps in answer to petitioners'
apprehension Congress included under the assailed
section a proviso that will effectively eradicate the tariff
difference in the treatment of refined petroleum products
and crude oil by stipulating "that beginning on January 1,
2004 the tariff rate on imported crude oil and refined
petroleum products shall be the same."
The contention that tariff "does not foster a truly
competitive market" 19 and therefore restrains trade and
does not help achieve the purpose of deregulation is an
issue not within the power of the Court to resolve.
Nonetheless, the Court's pronouncement in Tio
vs. Videogram Regulatory Board appears to be worth
reiterating:
Petitioner also submits that the thirty percent
(30%) tax imposed is harsh and oppressive,
confiscatory, and in restraint of trade. However, it
is beyond serious question that a tax does not
cease to be valid merely because it regulates,
discourages, or even definitely deters the
activities taxed. The power to impose taxes is one
so unlimited in force and so searching in extent,
that the courts scarcely venture to declare that it
is subject to any restrictions whatever, except
such as rest in the discretion of the authority
which exercise it. In imposing a tax, the legislature
acts upon its constituents. This is, in general, a
sufficient security against erroneous and
oppressive taxation. 20[Emphasis added]
Anent petitioners' claim that both House Bill No. 5264 and
Senate Bill No. 1253, [the precursor bills of Republic Act
No. 8180], "did not impose any tariff rates but merely set
the policy of 'zero differential' in the House version, and
nothing in the Senate version" 21 is inconsequential. Suffice
it to state that the bicameral conference committee report
was approved by the conferees thereof only "after full and
free conference" on the disagreeing provisions of Senate Bill
No. 1253 and House Bill No. 5264. Indeed, the "zero
differential" on the tariff rates imposed in the House version
was embodied in the law, save for a slight delay in its
implementation to January 1, 2004. Moreover, any objection
on the validity of provisions inserted by the legislative
bicameral conference committee has
been passed upon by the Court in the recent case
of Tolentino v. Secretary of Finance, 22 which, in my view, laid
to rest any doubt as to the validity of the bill emerging out of
a Conference Committee. The Court in that case, speaking
through Mr. Justice Mendoza, said:
As to the possibility of an entirely new bill
emerging out of a Conference Committee, it has
been explained:
Under congressional rules of procedure,
conference committees are not expected to make
any material change in the measure at issue,
either by deleting provisions to which both houses
have already agreed or by inserting new
provisions. But this is a difficult provision to
enforce. Note the problem when one house
amends a proposal originating in either house by
striking out everything following the enacting
clause and substituting provisions which make it
an entirely new bill. The versions are now
altogether different, permitting a conference
committee to draft essentially a new bill. . .
The result is a third version, which is considered
an "amendment in the nature of a substitute," the
only requirement for which being that the third
version be germane to the subject of the House
and Senate bills:
Indeed, this Court recently held that it is within the
power of a conference committee to include in its
report an entirely new provision that is not found
either in the House bill or in the Senate bill. If the
committee can propose an amendment consisting
of one or two provisions, there is no reason why it
cannot propose several provisions, collectively
considered as an "amendment in the nature of a
substitute," so long as such amendment is
germane to the subject of the bills before the
committee. After all, its report was not final but
needed the approval of both houses of Congress
to become valid as an act of the legislative
department. The charge that in this case the
Conference Committee acted as a third legislative
chamber is thus without any basis.
xxx xxx xxx
To be sure, nothing in the Rules [of the Senate
and the House of Representatives] limits a
conference committee to a consideration of
conflicting provisions. But Rule XLVI, (Sec.) 112 of
the Rules of the Senate is cited to the effect that
"If there is no Rule applicable to a specific case
the precedents of the Legislative Department of
the Philippines shall be resorted to, and as a
supplement of these, the Rules contained in
Jefferson's Manual." The following is then quoted
from the Jefferson's Manual:
The managers of a conference must confine
themselves to the differences committed to them .
. . and may not include subjects not within
disagreements, even though germane to a
question in issue.
Note that, according to Rule XLIX, (Sec.) 112, in
case there is no specific rule applicable, resort
must be to the legislative practice. The Jefferson's
Manual is resorted to only as supplement. It is
common place in Congress that conference
committee reports include new matters which,
though germane, have not been committed to the
committee. This practice was admitted by Senator
Raul S. Roco, petitioner in G.R. No. 115543,
during the oral argument in these cases.
 Whatever, then, may be provided in the
Jefferson's Manual must be considered to have
been modified by the legislative practice. If a
change is desired in the practice it must be sought
in Congress since this question is not covered by
any constitutional provision but is only an internal
rule of each house. Thus, Art. VI, (Sec.) 16(3) of
the Constitution provides that "Each House may
determine the rules of its proceedings . . ."
This observation applies to the other contention
that the Rules of the two chambers were likewise
disregarded in the preparation of the Conference
Committee Report because the Report did not
contain a "detailed and sufficiently explicit
statement of changes in, or amendments to, the
subject measure." The Report used brackets and
capital letters to indicate the changes. This is a
standard practice in bill-drafting. We cannot say
that in using these marks and symbols the
Committee violated the Rules of the Senate and
the House. Moreover, this Court is not the proper
forum for the enforcement of these internal Rules.
To the contrary, as we have already ruled,
"parliamentary rules are merely procedural and
with their observance the courts have no
concern." Our concern is with the procedural
requirements of the Constitution for the enactment
of laws. As far as these requirements are
concerned, we are satisfied that they have been
faithfully observed in these cases.23
The other contention of petitioners that Section 5(b)
"violates the equal protection of the laws enshrined in
Article III, Section 1 of the Constitution" 24 deserves a short
shrift for the equal protection clause does not forbid
reasonable classification based upon substantial distinctions
where the classification is germane to the purpose of the law
and applies equally to all the members of the class. The
imposition of three percent (3%) tariff on crude oil, which is
four percent (4%) lower than those imposed on refined oil
products, as persuasively argued by the Office of the
Solicitor General, is based on the substantial distinction that
importers of crude oil, by necessity, have to establish and
maintain refinery plants to process and refine the crude oil
thereby adding to their production costs. To encourage these
importers to set up refineries involving huge expenditures
and investments which peddlers and importers of refined
petroleum products do not shoulder, Congress deemed it
appropriate to give a lower tariff rate to foster the entry of
new "players" and investors in line with the law's policy to
create a competitive market. The residual contention that
there is no substantial distinction in the imposition of seven
percent (7%) and three percent (3%) tariff since the law itself
will level the tariff rates between the imported crude oil and
refined petroleum products come January 1, 2004, to my
mind, is addressed more to the legislative's prerogative to
provide for the duration and period of effectivity of the
imposition. If Congress, after consultation, analysis of
material data and due deliberations, is convinced that by
January 1, 2004, the investors and importers of crude oil
would have already recovered their huge investments and
expenditures in establishing refineries and plants then it is
within its prerogative to lift the tariff differential. Such matter
is well within the pale of legislative power which the Court
may not fetter. Besides, this again is in line with Republic Act
No. 8180's avowed policy to foster a truly competitive market
which can achieve the social policy objectives of fair, if not
lower, prices.
B. On the minimum inventory requirement. Petitioners'
attack on Section 6 is premised upon their belief that the
inventory requirement is hostile and not conducive for
new oil companies to operate here, and unduly favors
Petron, Shell and Caltex, companies which according to
them can easily hurdle the requirement. I fail to see any
legal or constitutional issue here more so as it is not
raised by a party with legal standing for petitioners do not
claim to be the owners or operators of new oil companies
affected by the requirement. Whether or not the
requirement is advantageous, disadvantageous or
conducive for new oil companies hinges on presumptions
and speculations which is not within the realm of judicial
adjudication. It may not be amiss to mention here that
according to the Office of the Solicitor General "there are
about thirty (30) new entrants in the downstream activities
. . . , fourteen (14) of which have started operation . . . ,
eight (8) having commenced operation last March 1997,
and the rest to operate between the second quarter of
1997 and the year 2000" 25. Petitioners did not controvert
this averment which thereby cast serious doubt over their
claim of "hostile" environment.
C. On predatory pricing. What petitioners bewail the most
in Section 9(b) is "the definition of 'predatory pricing'
[which] is too broad in scope and indefinite in
meaning" 26 and the penal sanction imposed for its violation.
Petitioners maintain that it would be the new oil companies
or "players" which would lower their prices to gain a foothold
on the market and not Petron, Shell or Caltex, an occasion
for these three big oil "companies" to control the prices by
keeping their average cost at a level which will ensure their
desired profit margin. 27 Worse, the penal sanction, they add,
deters new "players" from entering the oil market and the
practice of lowering prices is now condemned as a criminal
act.
Petitioners' contentions are nebulous if not speculative. In
the absence of any concrete proof or evidence, the
assertion that it will only be the new oil companies which
will lower oil prices remains a mere guess or suspicion.
And then again petitioners are not the proper party to
raise the issue. The query on why lowering of prices
should be penalized and the broad scope of predatory
pricing is not for this Court to traverse the same being
reserved for Congress. The Court should not lose sight of
the fact that its duty under Article 5 of the Revised Penal
Code is not to determine, define and legislate what act or
acts should be penalized, but simply to report to the Chief
Executive the reasons why it believes an act should be
penalized, as well as why it considers a penalty
excessive, thus:
Art. 5. Duty of the court in connection with acts
which should be repressed but which are nor
covered by the law, and in cases of excessive
penalties. — Whenever a court has knowledge of
any act which it may deem proper to repress and
which is not punishable by law, it shall render the
proper decision, and shall report to the Chief
Executive, through the Department of Justice, the
reasons which induce the court to believe that
said act should be made the subject of legislation.
In the same way the court shall submit to the
Chief Executive, through the Department of
Justice, such statement as may be deemed
proper, without suspending the execution of the
sentence, when a strict enforcement of the
provisions of this Code would result in the
imposition of a clearly excessive penalty, taking
into consideration the degree of malice and the
injury caused by the offense.
Furthermore, in the absence of an actual conviction for
violation of Section 9 (b) and the appropriate appeal to
this Court, I fail to see the need to discuss any longer the
issue as it is not ripe for judicial adjudication. Any
pronouncement on the legality of the sanction will only be
advisory.
D. On other prohibited acts. In discussing their objection
to Section 10, together with Section 20, petitioners assert
that these sanctions "even provide stiff criminal and
administrative penalties for failure to maintain said
minimum requirement and other regulations" and posed
this query: "Are these provisions consistent with the policy
objective to level the playing [field] in a truly competitive
answer?" 28 A more circumspect analysis of petitioners'
grievance, however, does not present any legal controversy.
At best, their objection deals on policy considerations that
can be more appropriately and effectively addressed not by
this Court but by Congress itself.
E. On the implementation of full deregulation under
Section 15, and the validity of Executive Order No. 392.
Petitioners stress that "Section 15 of Republic Act No.
8180 delegates to the Secretary of Energy and to the
President of the Philippines the power to determine when
to fully deregulate the downstream oil industry" 29without
providing for any standards "to determine when the prices of
crude oil in the world market are considered to be
'declining'" 30 and when may the exchange rate be
considered "stable" for purposes of determining when it is
"practicable" to declare full deregulation. 31 In the absence of
standards, Executive Order No. 392 which implemented
Section 15 constitute "executive lawmaking," 32 hence the
same should likewise be struck down as invalid. Petitioners
additionally decry the brief seven (7) month transition period
under Section 15 of Republic Act No. 8180. The premature
full deregulation declared in Executive Order No. 392
allowed Caltex, Petron, and Shell oil companies "to define
the conditions under which any 'new players' will have to
adhere to in order to become competitive in the new
deregulated market even before such a market has been
created." 33 Petitioners are emphatic that Section 15 and
Executive Order No. 392 "have effectively legislated a cartel
among respondent oil companies, directly violating the
Constitutional prohibition against unfair trade practices and
combinations in restraint of trade". 34
Section 15 of Republic Act No. 8180 provides for the
implementation of full deregulation. It states:
Section 15 on the implementation of full
deregulation, thus: "Implementation of Full
Deregulation. — Pursuant to Section 5(e) of
Republic Act No. 7683, the DOE shall, upon
approval of the President, implement the full
deregulation of the downstream oil industry not
later than March, 1997. As far as practicable, the
DOE shall time the full deregulation when the
prices of crude oil and petroleum products in the
world market are declining and when the
exchange rate of the peso in relation to the US
dollar is stable. Upon the implementation of the
full deregulation as provided herein, the transition
phase is deemed terminated and the following
laws are deemed repealed: . . . [Emphasis
added].
It appears from the foregoing that deregulation has to be
implemented "not later than March 1997." The provision is
unequivocal, i.e., deregulation must be implemented on or
before March 1997. The Secretary of Energy and the
President is devoid of any discretion to move the date of
full deregulation to any day later than March 1997. The
second sentence which provides that "[a]s far as
practicable, the DOE shall time the full deregulation when
the prices of crude oil and petroleum products in the world
market are declining and when the exchange rate of the
peso in relation to the US dollar is stable" did not modify
or reset to any other date the full deregulation of
downstream oil industry. Not later than March 1997 is a
complete and definite period for full deregulation. What is
conferred to the Department of Energy in the
implementation of full deregulation, with the approval of
the President, is not the power and discretion on what the
law should be. The provision of Section 15 gave the
President the authority to proceed with deregulation on or
before, but not after, March 1997, and if implementation is
made before March, 1997, to execute the same, if
possible, when the prices of crude oil and petroleum
products in the world market are declining and the peso-
dollar exchange rate is stable. But if the implementation is
made on March, 1997, the President has no option but to
implement the law regardless of the conditions of the
prices of oil in the world market and the exchange rates.
The settled rule is that the legislative department may not
delegate its power. Any attempt to abdicate it is
unconstitutional and void, based on the principle
of potestas delegata non delegare potest. In testing
whether a statute constitutes an undue delegation of
legislative power or not, it is usual to inquire whether the
statute was complete in all its terms and provisions when
it left the hands of the legislative so that nothing was left
to the judgment of any other appointee or delegate of the
legislature. 35 An enactment is said to be incomplete and
invalid if it does not lay down any rule or definite standard by
which the administrative officer may be guided in the
exercise of the discretionary powers delegated to
it. 36 In People v. Vera, 37 the Court laid down a guideline on
how to distinguish which power may or may not be
delegated by Congress, to wit:
"The true distinction", says Judge Ranney, "is
between the delegation of power to make the law,
which necessarily involves a discretion as to what
it shall be, and conferring an authority or
discretion as to its execution, to be exercised
under and in pursuance of the law. The first
cannot done; to the latter no valid objection can
be made." (Cincinnati, W. & Z.R. Co. vs. Clinton
County Comrs. [1852]; 1 Ohio St., 77,
88 See also, Sutherland on Statutory
Construction, sec. 68.)
Applying these parameters, I fail to see any taint of
unconstitutionality that could vitiate the validity of Section
15. The discretion to ascertain when may the prices of
crude oil in the world market be deemed "declining" or
when may the peso-dollar exchange rate be considered
"stable" relates to the assessment and appreciation of
facts. There is nothing essentially legislative in
ascertaining the existence of facts or conditions as the
basis of the taking into effect of a
law 38 so as to make the provision an undue delegation of
legislative power. The alleged lack of definitions of the terms
employed in the statute does not give rise to undue
delegation either for the words of the statute, as a rule, must
be given its literal meaning. 39 Petitioners' contentions are
concerned with the details of execution by the executive
officials tasked to implement deregulation. No proviso in
Section 15 may be construed as objectionable for the
legislature has the latitude to provide that a law may take
effect upon the happening of future specified contingencies
leaving to some other person or body the power to
determine when the specified contingency has arisen. 40 The
instant petition is similarly situated with the past cases, as
summarized in the case of People v. Vera, where the Court
ruled for the validity of several assailed statutes, to wit:
To the same effect are decisions of this court in
Municipality of Cardona vs. Municipality of
Binangonan ([1917], 36 Phil. 547); Rubi
vs. Provincial Board of Mindoro ([1919], 39 Phil.
660), andCruz vs. Youngberg ([1931], 56 Phil.
234). In the first of these cases, this court
sustained the validity of a law conferring upon the
Governor-General authority to adjust provincial
and municipal boundaries. In the second case,
this court held it lawful for the legislature to direct
non-Christian inhabitants to take up their
habitation on unoccupied lands to be selected by
the provincial governor and approved by the
provincial board. In the third case, it was held
proper for the legislature to vest in the Governor-
General authority to suspend or not, at his
 discretion, the prohibition of the importation of
foreign cattle, such prohibition to be raised "if the
conditions of the country make this advisable or if
disease among foreign cattle has ceased to be a
menace to the agriculture and livestock of the
lands." 41
If the Governor-General in the case of Cruz
v. Youngberg 42 can "suspend or not, at his discretion, the
prohibition of the importation of cattle, such prohibition to be
raised 'if the conditions of the country make this advisable or
if disease among foreign cattles has ceased to be a menace
to the agriculture and livestock of the lands" then with more
reason that Section 15 of Republic Act No. 8180 can pass
the constitutional challenge as it has mandatorily fixed the
effectivity date of full deregulation to not later than March
1997, with or without the occurrence of stable peso-dollar
exchange rate and declining oil prices. Contrary to
petitioners' protestations, therefore, Section 15 is complete
and contains the basic conditions and terms for its
execution.
To restate, the policy of Republic Act No. 8180 is to
deregulate the downstream oil industry and to foster a
truly competitive market which could lead to fair prices
and adequate supply of environmentally clean and high-
quality petroleum products. This is the guiding principle
installed by Congress upon which the executive
department of the government must conform. Section 15
of Republic Act No. 8180 sufficiently supplied the metes
and bounds for the execution of full deregulation. In fact,
a cursory reading of Executive Order No. 392 43 which
advanced deregulation to February 8, 1997 convincingly
shows the determinable factors or standards, enumerated
under Section 15, which were taken into account by the
Chief Executive in declaring full deregulation. I cannot see
my way clear on how or why Executive Order No. 392, as
professed by petitioners, may be declared unconstitutional
for adding the "depletion of buffer fund" as one of the
grounds for advancing the deregulation. The enumeration of
factors to be considered for full deregulation under Section
15 did not proscribe the Chief Executive from acknowledging
other instances that can equally assuage deregulation. What
is important is that the Chief Executive complied with and
met the minimum standards supplied by the law. Executive
Order No. 392 may not, therefore, be branded as
unconstitutional.
Petitioners' vehement objections on the short seven (7)
month transition period under Section 15 and the alleged
resultant de facto formation of cartel are matters which
fundamentally strike at the wisdom of the law and the
policy adopted by Congress. These are outside the power
of the courts to settle; thus I fail to see the need to digress
any further.
F . On the imposition of administrative fine. The
administrative fine under Section 20 is claimed to be
inconsistent with deregulation. The imposition of
administrative fine for failure to meet the reportorial and
minimum inventory requirements, far from petitioners'
submission, are geared towards accomplishing the noble
purpose of the law. The inventory requirement ensures
the security and continuity of petroleum crude and
products supply, 44 while the reportorial requirement is a
mere devise for the Department of Energy to monitor
compliance with the law. In any event, the issue pertains to
the efficacy of incorporating in the law the administrative
sanctions which lies outside the Court's sphere and
competence.
In fine, it seems to me that the petitions dwell on the
insistent and recurrent arguments that the imposition of
different tariff rates on imported crude oil and imported
petroleum products is violative of the equal protection
clause of the constitution; is not germane to the purpose
of the law; does not foster a truly competitive market;
extends undue advantage to the existing oil refineries or
companies; and creates a cartel or a monopoly of sort
among Shell, Caltex and Petron in clear contravention of
the Constitutional proscription against unfair trade
practices and combinations in restraint of trade.
Unfortunately, this Court, in my view, is not at liberty to
tread upon or even begin to discuss the merits and
demerits of petitioners' stance if it is to be faithful to the
time honored doctrine of separation of powers — the
underlying principle of our republican state. 45 Nothing is so
fundamental in our system of government than its division
into three distinct and independent branches, the executive,
the legislative and the judiciary, each branch having
exclusive cognizance of matters within its jurisdiction, and
supreme within its own sphere. It is true that there is
sometimes an inevitable overlapping and interlacing of
functions and duties between these departments. But this
elementary tenet remains: the legislative is vested with the
power to make law, the judiciary to apply and interpret it. In
cases like this, "the judicial branch of the government has
only one duty-to lay the article of the Constitution which is
invoked beside the statute which is challenged and to decide
whether the letter squares with the former." 46 This having
been done and finding no constitutional infirmity therein, the
Court's task is finished. Now whether or not the law fails to
achieve its avowed policy because Congress did not
carefully evaluate the long term effects of some of its
provisions is a matter clearly beyond this Court's domain.
Perhaps it bears reiterating that the question of validity of
every statute is first determined by the legislative
department of the government, and the courts will resolve
every presumption in favor of its validity. The courts will
assume that the validity of the statute was fully
considered by the legislature when adopted. The wisdom
or advisability of a particular statute is not a question for
the courts to determine. If a particular statute is within the
constitutional power of the legislature to enact, it should
be sustained whether the courts agree or not in the
wisdom of its enactment. 47 This Court continues to
recognize that in the determination of actual cases and
controversies, it must reflect the wisdom and justice of the
people as expressed through their representatives in the
executive and legislative branches of government. Thus, the
presumption is always in favor of constitutionality for it is
likewise always presumed that in the enactment of a law or
the adoption of a policy it is the people who speak through
their representatives. This principle is one of caution and
circumspection in the exercise of the grave and delicate
function of judicial review 48. Explaining this principle Thayer
said,
It can only disregard the Act when those who
have the right to make laws have not merely
made a mistake, but have made a very clear one-
so clear that it is not open to rational question.
That is the standard of duty to which the courts
bring legislative acts; that is the test which they
apply-not merely their own judgment as to
constitutionality, but their conclusion as to what
judgment is permissible to another department
which the constitution has charged with the duty
of making it. This rule recognizes that, having to
the great, complex, ever-unfolding exigencies of
regard government, much will seem
unconstitutional to one man, or body of men, may
reasonably not seem so to another; that the
constitution often admits of different
interpretations; that there is often a range of
choice and judgment; that in such cases the
constitution does not impose upon the legislature
any one specific opinion, but leaves open their
range of choice; and that whatever choice is
rational is constitutional.49
The petitions discuss rather extensively the adverse
economic implications of Republic Act No. 8180. They put
forward more than anything else, an assertion that an
error of policy has been committed. Reviewing the
wisdom of the policies adopted by the executive and
legislative departments is not within the province of the
Court.
It is safe to assume that the legislative branch of the
government has taken into consideration and has
carefully weighed all points pertinent to the law in
question. We cannot doubt that these matters have been
the object of intensive research and study nor that they
have been subject of comprehensive consultations with
experts and debates in both houses of Congress. Judicial
review at this juncture will at best be limited and myopic.
For admittedly, this Court cannot ponder on the points
raised in the petitions with the same technical
competence as that of the economic experts who have
contributed valuable hours of study and deliberation in the
passage of this law.
I realize that to invoke the doctrine of separation of
powers at this crucial time may be viewed by some as an
act of shirking from our duty to uphold the Constitution at
all cost. Let it be remembered, however, that the doctrine
of separation of powers is likewise enshrined in our
Constitution and deserves the same degree of fealty. In
fact, it carries more significance now in the face of an
onslaught of similar cases brought before this Court by
the opponents of almost every enacted law of major
importance. It is true that this Court is the last bulwark of
justice and it is our task to preserve the integrity of our
fundamental law. But we cannot become, wittingly or
unwittingly, instruments of every aggrieved minority and
losing legislator. While the laudable objectives of the law
are put on hold, this Court is faced with the unnecessary
burden of disposing of issues merely contrived to fall
within the ambit of judicial review. All that is achieved is
delay which is perhaps, sad to say, all that may have
been intended in the first place.
Indeed, whether Republic Act No. 8180 or portions
thereof are declared unconstitutional, oil prices may
continue to rise, as they depend not on any law but on the
volatile market and economic forces. It is therefore the
political departments of government that should address
the issues raised herein for the discretion to allow a
deregulated oil industry and to determine its viability is
lodged with the people in their primary political capacity,
which as things stand, has been delegated to Congress.
In the end, petitioners are not devoid of a remedy. To paraphrase
the words of Justice Padilla in Kapatiran ng mga Naglilingkod sa
Pamahalaan ng Pilipinas v. Tan, 50 if petitioners seriously believe
that the adoption and continued application of Republic Act No. 8180
are prejudicial to the general welfare or the interests of the majority
of the people, they should seek recourse and relief from the political
branches of government, as they are now doing by moving for an
amendment of the assailed provisions in the correct forum which is
Congress or for the exercise of the people's power of initiative on
legislation. The Court following the time honored doctrine of
separation of powers, cannot substitute its judgment for that of the
Congress as to the wisdom, justice and advisability of Republic Act
No. 8180. 51
ACCORDINGLY, finding no merit in the instant petitions I vote for
their outright dismissal.
Separate Opinions
PANGANIBAN, J., concurring:
I concur with the lucid and convincing ponencia of Mr.
Justice Reynato S. Puno. I write to stress two points:
 1. The Issue Is Whether Oil Companies
May Unilaterally
Fix Prices, Not Whether This Court May
Interfere in Economic Questions
With the issuance of the status quo order on October 7,
1997 requiring the three respondent oil companies —
Petron, Shell and Caltex — "to cease and desist from
increasing the prices of gasoline and other petroleum fuel
products for a period of thirty (30) days," the Court has
been accused of interfering in purely economic policy
matters 1 or, worse, of arrogating unto itself price-regulatory
powers. 2 Let it be emphasized that we have no desire —
nay, we have no power — to intervene in, to change or to
repeal the laws of economics, in the same manner that we
cannot and will not nullify or invalidate the laws of physics or
chemistry.
The issue here is not whether the Supreme Court may fix
the retail prices of petroleum products, Rather, the issue
is whether RA 8180, the law allowing the oil companies to
unilaterally set, increase or decrease their prices, is valid
or constitutional.
Under the Constitution, 3 this Court has — in appropriate
cases — the DUTY, not just the power, to determine whether
a law or a part thereof offends the Constitution and, if so, to
annul and set it aside. 4 Because a serious challenge has
been hurled against the validity of one such law, namely RA
8180 — its criticality having been preliminarily determined
from the petition, comments, reply and, most tellingly, the
oral argument on September 30, 1997 — this Court, in the
exercise of its mandated judicial discretion, issued the status
quo order to prevent the continued enforcement and
implementation of a law that was prima facie found to be
constitutionally infirm. Indeed, after careful final deliberation,
said law is now ruled to be constitutionally defective thereby
disabling respondent oil companies from exercising their
erstwhile power, granted by such defective statute, to
determine prices by themselves.
Concededly, this Court has no power to pass upon the
wisdom, merits and propriety of the acts of its co-equal
branches in government. However, it does have the
prerogative to uphold the Constitution and to strike down
and annul a law that contravenes the Charter. 5 From such
duty and prerogative, it shall never shirk or shy away.
By annulling RA 8180, this Court is not making a policy
statement against deregulation. Quite the contrary, it is
simply invalidating a pseudo deregulation law which in
reality restrains free trade and perpetuates a cartel, an
oligopoly. The Court is merely upholding constitutional
adherence to a truly competitive economy that releases
the creative energy of free enterprise. It leaves to
Congress, as the policy-setting agency of the
government, the speedy crafting of a genuine,
constitutionally justified oil deregulation law.
2. Everyone, Rich or Poor, Must Share
in the Burdens of Economic Dislocation
Much has been said and will be said about the alleged
negative effect of this Court's holding on the oil giants'
profit and loss statements. We are not unaware of the
disruptive impact of the depreciating peso on the retail
prices of refined petroleum products. But such price-
escalating consequence adversely affects not merely
these oil companies which occupy hallowed places
among the most profitable corporate behemoths in our
country. In these critical times of widespread economic
dislocations, abetted by currency fluctuations not entirely
of domestic origin, all sectors of society agonize and
suffer. Thus, everyone, rich or poor, must share in the
burdens of such economic aberrations.
 I can understand foreign investors who see these price
adjustments as necessary consequences of the country's
adherence to the free market, for that, in the first place, is
the magnet for their presence here. Understandably, their
concern is limited to bottom lines and market share. But in
all these mega companies, there are also Filipino
entrepreneurs and managers. I am sure there are patriots
among them who realize that, in times of economic
turmoil, the poor and the underprivileged proportionately
suffer more than any other sector of society. There is a
certain threshold of pain beyond which the disadvantaged
cannot endure. Indeed, it has been wisely said that "if the
rich who are few will not help the poor who are many,
there will come a time when the few who are filled cannot
escape the wrath of the many who are hungry." Kaya't sa
mga kababayan nating kapitalista at may kapangyarihan,
nararapat lamang na makiisa tayo sa mga walang palad
at mahihirap sa mga araw ng pangangailangan. Huwag
na nating ipagdiinan ang kawalan ng tubo, o maging and
panandaliang pagkalugi. At sa mga mangangalakal na
ganid at walang puso: hirap na hirap na po ang ating mga
kababayan. Makonsiyensya naman kayo!
KAPUNAN, J., separate opinion:
Lately, the Court has been perceived (albeit erroneously)
to be an unwelcome interloper in affairs and concerns
best left to legislators and policy-makers. Admittedly, the
wisdom of political and economic decisions are outside
the scrutiny of the Court. However, the political question
doctrine is not some mantra that will automatically cloak
executive orders and laws (or provisions thereof) with
legitimacy. It is this Court's bounden duty under Sec. 4(2),
Art. VIII of the 1987 Constitution to decide all cases
involving the constitutionality of laws and under Sec. 1 of
the same article, "to determine whether or not there has
been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or
instrumentality of the Government."
In the instant case, petitioners assail the constitutionality
of certain provisions found in R.A. No 8180, otherwise
known as the "Downstream Oil Industry Deregulation Act
of 1996" To avoid accusations of undue interference with
the workings of the two other branches of government,
this discussion is limited to the issue of whether or not the
assailed provisions are germane to the law or serve the
purpose for which it was enacted.
The objective of the deregulation law is quite simple. As
aptly enunciated in Sec. 2 thereof, it is to "foster a truly
competitive market which can better achieve the social
policy objectives of fair prices and adequate, continuous
supply of environmentally-clean and high quality
petroleum products." The key, therefore, is free
competition which is commonly defined as:
The act or action of seeking to gain what another
is seeking to gain at the same time and usually
under or as if under fair or equitable rules and
circumstances: a common struggle for the same
object especially among individuals of relatively
equal standing . . . a market condition in which a
large number of independent buyers and sellers
compete for identical commodity, deal freely with
each other, and retain the right of entry and exit
from the market. (Webster's Third International
Dictionary.)
and in a landscape where our oil industry is dominated by
only three major oil firms, this translates primarily into the
establishment of a free market conducive to the entry
of new and several and oil companies in the business.
Corollarily, it means the removal of any and all barriers
that will hinder the influx of prospective players. It is a
truism in economics that if there are many players in the
market, healthy competition will ensue and in order to
survive and profit the competitors will try to outdo each
other in terms of quality and price. The result: better
quality products and competitive prices. In the end, it will
be the public that benefits (which is ultimately the most
important goal of the law). Thus, it is within this framework
that we must determine the validity of the assailed
provisions.
I differential a barrier to the entry of new oil companies in
The 4% Tariff Differential
Sec. 5. Liberalization of Downstream Oil Industry
and Tariff Treatment.—
xxx xxx xxx
b) Any law to the contrary notwithstanding and
starting with the effectivity of this Act, tariff duty
shall be imposed and collected on imported crude
oil at the rate of three percent (3%) and imported
refined petroleum products at the rate of seven
percent (7%), except fuel oil and LPG, the rate for
which shall be the same as that for imported
crude oil: Provided, That beginning on January 1,
2004 the tariff rate on imported crude oil and
refined petroleum products shall be the
same: Provided, further, That this provision may
be amended only by an Act of Congress;
Respondents are one in asserting that the 4% tariff
differential between imported crude oil and imported
refined petroleum products is intended to encourage the
new entrants to put up their own refineries in the country.
The advantages of domestic refining cannot be
discounted, but we must view this intent in the proper
perspective. The primary purpose of the deregulation law
is to open up the market and establish free competition.
The priority of the deregulation law, therefore, is to
encourage new oil companies to come in first. Incentives
to encourage the building of local refineries should be
provided after the new oil companies have entered the
Philippine market and are actively participating therein.
The threshold question therefore is, is the 4% tariff
the Philippine market?
It is. Since the prospective oil companies do not (as yet)
have local refineries, they would have to import refined
petroleum products, on which a 7% tariff duty is imposed.
On the other hand, the existing oil companies already
have domestic refineries and, therefore, only import crude
oil which is taxed at a lower rate of 3%. Tariffs are part of
the costs of production. Hence, this means that with the
4% tariff differential (which becomes an added cost) the
prospective players would have higher production costs
compared to the existing oil companies and it is precisely
this factor which could seriously affect its decision to enter
the market.
Viewed in this light, the tariff differential between imported
crude oil and refined petroleum products becomes an
obstacle to the entry of new players in the Philippine oil
market. It defeats the purpose of the law and should thus
be struck down.
Public respondents contend that ". . . a higher tariff rate is
not the overriding factor confronting a prospective
trader/importer but, rather, his ability to generate the
desired internal rate of return (IRR) and net present value
(NPV). In other words, if said trader/importer, after some
calculation, finds that he can match the price of locally
refined petroleum products and still earn the desired profit
margin, despite a higher tariff rate, he will be attracted to
embark in such business. A tariff differential does not per
se make the business of importing refined petroleum
product a losing proposition." 1
The problem with this rationale, however, is that it is
highly speculative. The opposite may well hold true. The
point is to make the prospect of engaging in the oil
business in the Philippines appealing, so why create a
barrier in the first place?
There is likewise no merit in the argument that the
removal of the tariff differential will revive the 10% (for
crude oil) and 20% (for refined petroleum products) tariff
rates that prevailed before the enactment of R.A. No.
8180. What petitioners are assailing is the tariff
differential. Phrased differently, why is the tariff duty
imposed on imported petroleum products not the same as
that imposed on imported crude oil? Declaring the tariff
differential void is not equivalent to declaring the tariff
itself void. The obvious consequence thereof would be
that imported refined petroleum products would now be
taxed at the same rate as imported crude oil which R.A.
No. 8180 has specifically set at 3%. The old rates have
effectively been repealed by Sec. 24 of the same law. 2
II
The Minimum Inventory Requirement
and the Prohibition Against Predatory Pricing
Sec. 6. Security of Supply. — To ensure the
security and continuity of petroleum crude and
products supply, the DOE shall require the
refiners and importers to maintain a minimum
inventory equivalent to ten percent (10%) of their
respective annual sales volume or forty (40) days
of supply, whichever is lower.
xxx xxx xxx
Sec. 9. Prohibited Acts. — To ensure fair
competition and prevent cartels and monopolies
in the downstream oil industry, the following acts
are hereby prohibited:
xxx xxx xxx
b) Predatory pricing which means selling or
offering to sell any product at a price
unreasonably below the industry average cost so
as to attract customers to the detriment of
competitors.
The same rationale holds true for the two other assailed
provisions in the Oil Deregulation law. The primordial
purpose of the law, I reiterate, is to create a truly free and
competitive market. To achieve this goal, provisions that
show the possibility, or even the merest hint, of deterring
or impeding the ingress of new blood in the market should
be eliminated outright. I am confident that our lawmakers
can formulate other measures that would accomplish the
same purpose (insure security and continuity of petroleum
crude products supply and prevent fly by night operators,
in the case of the minimum inventory requirement, for
instance) but would not have on the downside the effect
of seriously hindering the entry of prospective traders in
the market.
The overriding consideration, which is the public interest
and public benefit, calls for the levelling of the playing
fields for the existing oil companies and the prospective
new entrants. Only when there are many players in the
market will free competition reign and economic
development begin.
Consequently, Section 6 and Section 9(b) of R. A. No.
8180 should similarly be struck down.
III
MELO, J., dissenting:
Conclusion
Respondent oil companies vehemently deny the
"cartelization" of the oil industry. Their parallel business
behaviour and uniform pricing are the result of
competition, they say, in order to keep their share of the
market. This rationale fares well when oil prices are
lowered, i.e. when one oil company rolls back its prices,
the others follow suit so as not to lose its market. But how
come when one increases its prices the others likewise
follow? Is this competition at work?
Respondent oil companies repeatedly assert that due to
the devaluation of the peso, they had to increase the
prices of their oil products, otherwise, they would lose, as
they have allegedly been losing specially with the
issuance of a temporary restraining order by the Court.
However, what we have on record are only the self-
serving lamentations of respondent oil companies. Not
one has presented hard data, independently verified, to
attest to these losses. Mere allegations are not sufficient
but must be accompanied by supporting evidence. What
probably is nearer the truth is that respondent oil
companies will not make as much profits as they have in
the past if they are not allowed to increase the prices of
their products everytime the value of the peso slumps.
But in the midst of worsening economic difficulties and
hardships suffered by the people, the very customers who
have given them tremendous profits throughout the years,
is it fair and decent for said companies not to bear a bit of
the burden by forgoing a little of their profits?
PREMISES CONSIDERED, I vote that Section 5(b),
Section 6 and Section 9(b) of R.A. No. 8180 be declared
unconstitutional.
With all due respect to my esteemed colleague, Mr.
Justice Puno, who has, as usual, prepared a well-written
and comprehensive ponencia, I regret I cannot share the
view that Republic Act No. 8180 should be struck down as
violative of the Constitution.
The law in question, Republic Act No. 8180, otherwise
known as the Downstream Oil Deregulation Act of 1996,
contains, inter alia, the following provisions which have
become the subject of the present controversy, to wit:
Sec. 5. Liberalization of Downstream Oil Industry
and Tariff Treatment. —
xxx xxx xxx
(b). — Any law to the contrary notwithstanding
and starting with the effectivity of this act, tariff
duty shall be imposed and collected on imported
crude oil at the rate of (3%) and imported refined
petroleum products at the rate of seven percent
(7%), except fuel oil and LPG, the rate for which
shall be the same as that for imported crude
oil: Provided, That beginning on January 1, 2004
the tariff rate on imported crude oil and refined
petroleum products shall be the same: Provided,
further, That this provision may be amended only
by an Act of Congress. . .
Sec. 6. Security of Supply. — To ensure the
security and continuity of petroleum crude and
products supply, the DOE shall require the
refiners and importers to maintain a minimum
inventory equivalent to ten percent (10%) of their
respective annual sales volume or forty (40) days
of supply, whichever is lower.
xxx xxx xxx
Sec. 9. Prohibited Acts. — To ensure fair
competition and prevent cartels and monopolies
in the downstream oil industry, the following acts
are hereby prohibited:
xxx xxx xxx
b) Predatory pricing which means selling or
offering to sell any product at a price
unreasonably below the industry average cost so
as to attract customers to the detriment of
competitors.
xxx xxx xxx
Sec. 15. Implementation of Full Deregulation. —
Pursuant to Section 5(e) of Republic Act No.
7638, the DOE [Department of Energy] shall,
upon approval of the President, implement the full
deregulation of the downstream oil industry not
later than March 1997. As far as practicable, the
DOE shall time the full deregulation when the
prices of crude oil and petroleum products in the
world market are declining and when the
exchange rate of the peso in relation to the US
Dollar is stable. . .
In G. R. No. 124360, petitioners therein pray that the
aforequoted Section 5(b) be declared null and void.
However, despite its pendency, President Ramos,
pursuant to the above-cited Section 15 of the assailed
law, issued Executive Order No. 392 on 22 January 1997
declaring the full deregulation of the downstream oil
industry effective February 8, 1997. A few days after the
implementation of said Executive Order, the second
consolidated petition was filed (G.R. No. 127867),
seeking, inter alia, the declaration of the
unconstitutionality of Section 15 of the law on various
grounds.
I submit that the instant consolidated petitions should be
denied. In support of my view, I shall discuss the
arguments of the parties point by point.
1. The instant petitions do not raise a justiciable
controversy as the issues raised therein pertain to the
wisdom and reasonableness of the provisions of the
assailed law. The contentions made by petitioners, that
the "imposition of different tariff rates on imported crude
oil and imported refined petroleum products will not foster
a truly competitive market, nor will it level the playing
fields" and that said imposition "does not deregulate the
downstream oil industry, instead, it controls the oil
industry, contrary to the avowed policy of the law," are
clearly policy matters which are within the province of the
political departments of the government. These
submissions require a review of issues that are in the
nature of political questions, hence, clearly beyond the
ambit of judicial inquiry.
A political question refers to a question of policy or to
issues which, under the Constitution, are to be decided by
the people in their sovereign capacity, or in regard to
which full discretionary authority has been delegated to
the legislative or executive branch of the government.
Generally, political questions are concerned with issues
dependent upon the wisdom, not the legality, of a
particular measure (Tañada vs. Cuenco, 100 Phil 101
[1957]).
Notwithstanding the expanded judicial power of this Court
under Section 1, Article VIII of the Constitution, an inquiry
on the above-stated policy matters would delve on
matters of wisdom which are exclusively within the
legislative powers of Congress.
2. The petitioners do not have the necessary locus standi
to file the instant consolidated petitions. Petitioners
Lagman, Arroyo, Garcia, Tanada, and Tatad assail the
constitutionality of the above-stated laws through the
instant consolidated petitions in their capacity as
members of Congress, and as taxpayers and concerned
citizens. However, the existence of a constitutional issue
in a case does not per se confer or clothe a legislator
with locus standi to bring suit. In Phil. Constitution
Association (PHILCONSA) v. Enriquez(235 SCRA 506
[1994]), we held that members of Congress may properly
challenge the validity of an official act of any department
of the government only upon showing that the assailed
official act affects or impairs their rights and prerogatives
as legislators. In Kilosbayan, Inc., et al. vs. Morato, et
al. (246 SCRA 540 [1995]), this Court further clarified that
"if the complaint is not grounded on the impairment of the
power of Congress, legislators do not have standing to
question the validity of any law or official action."
Republic Act No. 8180 clearly does not violate or impair
prerogatives, powers, and rights of Congress, or the
individual members thereof, considering that the assailed
official act is the very act of Congress itself authorizing
the full deregulation of the downstream oil industry.
Neither can petitioners sue as taxpayers or concerned
citizens. A condition sine qua non for the institution of a
taxpayer's suit is an allegation that the assailed action is
an unconstitutional exercise of the spending powers of
Congress or that it constitutes an illegal disbursement of
public funds. The instant consolidated petitions do not
allege that the assailed provisions of the law amount to an
illegal disbursement of public money. Hence, petitioners
cannot, even as taxpayers or concerned citizens, invoke
this Court's power of judicial review.
Further, petitioners, including Flag, FDC, and Sanlakas,
can not be deemed proper parties for lack of a
particularized interest or elemental substantial injury
necessary to confer on them locus standi. The interest of
the person assailing the constitutionality of a statute must
be direct and personal. He must be able to show, not only
that the jaw is invalid, but also that he has sustained or is
in immediate danger of sustaining some direct injury as a
result of its enforcement, and not merely that he suffers
thereby in some indefinite way. It must appear that the
person complaining has been or is about to be denied
some right or privilege to which he is lawfully entitled or
that he is about to be subjected to some burdens or
penalties by reason of the statute complained of
Petitioners have not established such kind of interest.
3. Section 5 (b) of Republic Act No. 8180 is not violative
of the "one title-one subject" rule under Section 26 (1),
Article VI of the Constitution. It is not required that a
provision of law be expressed in the title thereof as long
as the provision in question is embraced within the
subject expressed in the title of the law. The "title of a bill
does not have to be a catalogue of its contents and will
suffice if the matters embodied in the text are relevant to
each other and may be inferred from the title."
(Association of Small Landowners in the Phils., Inc. vs.
Sec. of Agrarian Reform, 175 SCRA 343 [1989]) An "act
having a single general subject, indicated in the title, may
contain any number of provisions, no matter how diverse
they may be, so long as they are not inconsistent with or
foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method
and means of carrying out the general object." (Sinco,
Phil. Political Law, 11th ed., p. 225).
The questioned tariff provision in Section 5 (b) was
provided as a means to implement the deregulation of the
downstream oil industry and hence, is germane to the
purpose of the assailed law. The general subject of
Republic Act No. 8180, as expressed in its title, "An Act
Deregulating the Downstream Oil Industry, and for the
Other Purposes", necessarily implies that the law
provides for the means for such deregulation. One such
means is the imposition of the differential tariff rates which
are provided to encourage new investors as well as
existing players to put up new refineries. The aforesaid
provision is thus germane to, and in furtherance of, the
object of deregulation. The trend of jurisprudence, ever
since Sumulong vs. COMELEC(73 Phil. 288 [1941]), is to
give the above-stated constitutional requirement a liberal
interpretation. Hence, there is indeed substantial
compliance with said requirement.
Petitioners claim that because the House version of the
assailed law did not impose any tariff rates but merely set
the policy of "zero differential" and that the Senate version
did not set or fix any tariff, the tariff changes being
imposed by the assailed law was never subject of any
deliberations in both houses nor the Bicameral
Conference Committee. I believe that this argument is
bereft of merit.
The report of the Bicameral Conference Committee,
which was precisely formed to settle differences between
the two houses of Congress, was approved by members
thereof only after a full deliberation on the conflicting
provisions of the Senate version and the House version of
the assailed law. Moreover, the joint explanatory
statement of said Committee which was submitted to both
houses, explicitly states that "while sub-paragraph (b) is a
modification, its thrust and style were patterned after the
House's original sub-paragraph (b)." Thus, it cannot be
denied that both houses were informed of the changes in
the aforestated provision of the assailed law. No legislator
can validly state that he was not apprised of the
purposes, nature, and scope of the provisions of the law
since the inclusion of the tariff differential was clearly
mentioned in the Bicameral Conference Committee's
explanatory note.
As regards the power of the Bicameral Conference
Committee to include in its report an entirely new
provision that is neither found in the House bill or Senate
bill, this Court already upheld such power inTolentino
vs. Sec. of Finance (235 SCRA 630 [1994]), where we
ruled that the conference committee can even include an
amendment in the nature of a substitute so long as such
amendment is germane to the subject of the bill before it.
Lastly, in view of the "enrolled bill theory" pronounced by
this Court as early as 1947 in the case ofMabanag
vs. Lopez Vito (78 Phil. 1 [1947]), the duly authenticated
copy of the bill, signed by the proper officers of each
house, and approved by the President, is conclusive upon
the courts not only of its provisions but also of its due
enactment.
4. Section 15 of Republic Act No. 8180 does not
constitute undue delegation of legislative power.
Petitioners themselves admit that said section provides
the Secretary of Energy and the President with the bases
of (1) "practicability", (2) "the decline of crude oil prices in
the world market", and (3) "the stability of the Peso
exchange rate in relation to the US Dollar", in determining
the effectivity of full deregulation. To my mind, said bases
are determinate and determinable guidelines, when
examined in the light of the tests for permissible
delegation.
The assailed law satisfies the completeness test as it is
complete and leaves nothing more for the Executive
Branch to do but to enforce the same. Section 2 thereof
expressly provides that "it shall be the policy of the State
to deregulate the downstream oil industry to foster a truly
competitive market which can better achieve the social
policy objectives of fair prices and adequate, continuous
supply of environmentally-clean and high-quality
petroleum products." This provision manifestly declares
the policy to be achieved through the delegate, that is, the
full deregulation of the downstream oil industry toward the
end of full and free competition. Section 15 further
provides for all the basic terms and conditions for its
execution and thus belies the argument that the Executive
Branch is given complete liberty to determine whether or
not to implement the law. Indeed, Congress did not only
make full deregulation mandatory, but likewise set a
deadline (that is, not later than March 1997), within which
full deregulation should be achieved.
Congress may validly provide that a statute shall take
effect or its operation shall be revived or suspended or
shall terminate upon the occurrence of certain events or
contingencies the ascertainment of which may be left to
some official agency. In effect, contingent legislation may
be issued by the Executive Branch pursuant to a
delegation of authority to determine some fact or state of
things upon which the enforcement of a law depends
(Cruz, Phil. Political Law, 1996 ed., p. 96; Cruz vs.
Youngberg, 56 Phil. 234 [1931]). This is a valid delegation
since what the delegate performs is a matter of detail
whereas the statute remains complete in all essential
matters. Section 15 falls under this kind of delegated
authority. Notably, the only aspect with respect to which
the President can exercise "discretion" is the
determination of whether deregulation may be
implemented on or before March, 1997, the deadline set
by Congress. If he so decides, however, certain
conditions must first be satisfied, to wit: (1) the prices of
crude oil and petroleum products in the world market are
declining, and (2) the exchange rate of the peso in
relation to the US Dollar is stable. Significantly, the so-
called "discretion" pertains only to the ascertainment of
the existence of conditions which are necessary for the
effectivity of the law and not a discretion as to what the
law shall be.
In the same vein, I submit that the President's issuance of
Executive Order No. 392 last January 22, 1997 is valid as
contingent legislation. All the Chief Executive did was to
exercise his delegated authority to ascertain and
recognize certain events or contingencies which
prompted him to advance the deregulation to a date
earlier than March, 1997. Anyway, the law does not
prohibit him from implementing the deregulation prior to
March, 1997, as long as the standards of the law are met.
Further, the law satisfies the sufficient standards test. The
words "practicable", "declining", and "stable", as used in
Section 15 of the assailed law are sufficient standards
that saliently "map out the boundaries of the delegate's
authority by defining the legislative policy and indicating
the circumstances under which it is to be pursued and
effected." (Cruz, Phil. Political Law, 1996 ed., p. 98).
Considering the normal and ordinary definitions of these
standards, I believe that the factors to be considered by
the President and/or Secretary of Energy in implementing
full deregulation are, as mentioned, determinate and
determinable.
It is likewise noteworthy that the above-mentioned factors
laid down by the subject law are not solely dependent on
Congress. Verily, oil pricing and the peso-dollar exchange
rate are dependent on the various forces working within
the consumer market. Accordingly, it would have been
unreasonable, or even impossible, for the legislature to
have provided for fixed and specific oil prices and
exchange rates. To require Congress to set forth specifics
in the law would effectively deprive the legislature of the
flexibility and practicability which subordinate legislation is
ultimately designed to provide. Besides, said specifics are
precisely the details which are beyond the competence of
Congress, and thus, are properly delegated to appropriate
administrative agencies and executive officials to "fill in". It
cannot be gainsaid that the detail of the timing of full
deregulation has been "filled in" by the President, upon
the recommendation of the DOE, when he issued
Executive Order No. 329.
5. Republic Act No. 8180 is not violative of the
constitutional prohibition against monopolies,
combinations in restraint of trade, and unfair competition.
The three provisions relied upon by petitioners (Section 5
[b] on tariff differential; Section 6 on the 40-day minimum
inventory requirement; and Section 9 [b] on the prohibited
act of predatory pricing) actually promote, rather than
restrain, free trade and competition.
The tariff differential provided in the assailed law does not
necessarily make the business of importing refined
petroleum products a losing proposition for new players.
First, the decision of a prospective trader/importer
(subjected to the 7% tariff rate) to compete in the
downstream oil industry as a new player is based solely
on whether he can, based on his computations, generate
the desired internal rate of return (IRR) and net present
value (NPV) notwithstanding the imposition of a higher
tariff rate. Second, such a difference in tax treatment does
not necessarily provide refiners of imported crude oil with
a significant level of economic advantage considering the
huge amount of investments required in putting up
refinery plants which will then have to be added to said
refiners' production cost. It is not unreasonable to
suppose that the additional cost imputed by higher tariff
can anyway be overcome by a new player in the business
of importation due to lower operating costs, lower capital
infusion, and lower capital carrying costs. Consequently,
the resultant cost of imported finished petroleum and that
of locally refined petroleum products may turn out to be
approximately the same.
The existence of a tariff differential with regard to
imported crude oil and imported finished products is
nothing new or novel. In fact, prior to the passage of
Republic Act No. 8180, there existed a 10% tariff
differential resulting from the imposition of a 20% tariff
rate on imported finished petroleum products and 10% on
imported crude oil (based on Executive Order No. 115).
Significantly, Section 5 (b) of the assailed law effectively
lowered the tariff rates from 20% to 7% for imported
refined petroleum products, and 10% to 3% for imported
crude oil, or a reduction of the differential from 10% to
4%. This provision is certainly favorable to all in the
downstream oil industry, whether they be existing or new
players. It thus follows that the 4% tariff differential aims
to ensure the stable supply of petroleum products by
encouraging new entrants to put up oil refineries in the
Philippines and to discourage fly-by-night importers.
Further, the assailed tariff differential is likewise not
violative of the equal protection clause of the Constitution.
It is germane to the declared policy of Republic Act No.
8180 which is to achieve (1) fair prices; and (2) adequate
and continuous supply of environmentally-clean and high
quality petroleum products. Said adequate and
continuous supply of petroleum products will be achieved
if new investors or players are enticed to engage in the
business of refining crude oil in the country. Existing
refining companies, are similarly encouraged to put up
additional refining companies. All of this can be made
possible in view of the lower tariff duty on imported crude
oil than that levied on imported refined petroleum
products. In effect, the lower tariff rates will enable the
refiners to recoup their investments considering that they
will be investing billions of pesos in putting up their
refineries in the Philippines. That incidentally the existing
refineries will be benefited by the tariff differential does
not negate the fact that the intended effect of the law is
really to encourage the construction of new refineries,
whether by existing players or by new players.
As regards the 40-day inventory requirement, it must be
emphasized that the 10% minimum requirement is based
on the refiners' and importers' annual sales volume, and
hence, obviously inapplicable to new entrants as they do
not have an annual sales volume yet. Contrary to
petitioners' argument, this requirement is not intended to
discourage new or prospective players in the downstream
oil industry. Rather, it guarantees "security and continuity
of petroleum crude and products supply." (Section 6,
Republic Act No. 8180) This legal requirement is meant to
weed out entities not sufficiently qualified to participate in
the local downstream oil industry. Consequently, it is
meant to protect the industry from fly-by-night business
operators whose sole interest would be to make quick
profits and who may prove unrealiable in the effort to
provide an adequate and steady supply of petroleum
products in the country. In effect, the aforestated provision
benefits not only the three respondent oil companies but
all entities serious and committed to put up storage
facilities and to participate as serious players in the local
oil industry. Moreover, it benefits the entire consuming
public by its guarantee of an "adequate continuous supply
of environmentally-clean and high quality petroleum
products." It ensures that all companies in the
downstream oil industry operate according to the same
high standards, that the necessary storage and
distribution facilities are in place to support the level of
business activities involved, and that operations are
conducted in a safe and environmentally sound manner
for the benefit of the consuming public.
Regarding the prohibition against predatory pricing, I
believe that petitioners' argument is quite misplaced. The
provision actually protects new players by preventing,
under pain of criminal sanction, the more established oil
firms from driving away any potential or actual competitor
by taking undue advantage of their size and relative
financial stability. Obviously, the new players are the ones
susceptible to closing down on account of intolerable
losses which will be brought about by fierce competition
with rival firms. The petitioners are merely working under
the presumption that it is the new players which would
succumb to predatory pricing, and not the more
established oil firms. This is not a factual assertion but a
rather baseless and conjectural assumption.
As to the alleged cartel among the three respondent oil
companies, much as we suspect the same, its existence
calls for a finding of fact which this Court is not in the
position to make. We cannot be called to try facts and
resolve factual issues such as this (Trade Unions of the
Phils. vs. Laguesma, 236 SCRA 586 [1994]); Ledesma
vs. NLRC, 246 SCRA 247 [1995]).
With respect to the amendatory bills filed by various
Congressmen aimed to modify the alleged defects of
Republic Act No. 8180, I submit that such bills are the
correct remedial steps to pursue, instead of the instant
petitions to set aside the statute sought to be amended.
The proper forum is Congress, not this Court.
 Finally, as to the ponencia's endnote which cites the plea G.R. No. 124360
of respondent oil companies for the lifting of the
restraining order against them to enable them to adjust 4.0. Grounds:
the prices of petroleum and petroleum products in view of
the devaluation of our currency, I am pensive as to how 4.1.
the matter can be addressed to the obviously defunct
Energy Regulatory Board. There has been a number of
THE IMPOSITION OF DIFFERENT TARIFF
price increase in the meantime. Too much water has
RATES ON IMPORTED CRUDE OIL AND
passed under the bridge. It is too difficult to turn back the
IMPORTED REFINED PETROLEUM
hands of time.
PRODUCTS VIOLATES THE EQUAL
PROTECTION OF THE LAWS.
For all the foregoing reasons, I, therefore, vote for the
outright dismissal of the instant consolidated petitions for
4.2.
lack of merit.
THE IMPOSITION OF DIFFERENT TARIFF
FRANCISCO, J., dissenting:
RATES DOES NOT DEREGULATE THE
DOWNSTREAM OIL INDUSTRY, INSTEAD, IT
The continuing peso devaluation and the spiraling cost of CONTROLS THE OIL INDUSTRY, CONTRARY
commodities have become hard facts of life nowadays. TO THE AVOWED POLICY OF THE LAW.
And the wearies are compounded by the ominous
prospects of very unstable oil prices. Thus, with the goal
4.3.
of rationalizing the oil scheme, Congress enacted
Republic Act No. 8180, otherwise known as the
Downstream Oil Deregulation Act of 1996, the policy of THE INCLUSION OF A TARIFF PROVISION IN
which is "to foster a truly competitive market which can SECTION 5(b) OF THE DOWNSTREAM OIL
better achieve the social policy objectives of fair prices INDUSTRY DEREGULATION LAW VIOLATES
and adequate, continuous supply of environmentally- THE "ONE SUBJECT-ONE TITLE" RULE
clean and high quality petroleum products". 1 But if the EMBODIED IN ARTICLE VI, SECTION 26 (1) OF
noble and laudable objective of this enactment is not THE CONSTITUTION. 2
accomplished, as to date oil prices continue to rise, can this
Court be called upon to declare the statute unconstitutional G.R. No. 127867
or must the Court desist from interfering in a matter which is
best left to the other branch/es of government? GROUNDS

The apparent thrust of the consolidated petitions is to THE IMPLEMENTATION OF FULL

declare, not the entirety, but only some isolated portions DEREGULATION PRIOR TO THE EXISTENCE
of Republic Act No. 8180 unconstitutional. This is clear OF A TRULY COMPETITIVE MARKET VIOLATES
from the grounds enumerated by the petitioners, to wit: THE CONSTITUTION PROHIBITING
 MONOPOLIES, UNFAIR COMPETITION AND
PRACTICES IN RESTRAINT OF TRADE.
R.A. No. 8180 CONTAINS DISGUISED
REGULATIONS IN A SUPPOSEDLY
DEREGULATED INDUSTRY WHICH CREATE
OR PROMOTE MONOPOLY OF THE INDUSTRY
BY THE THREE EXISTING OIL COMPANIES.
THE REGULATORY AND PENAL PROVISIONS
OF R.A. NO. 8180 VIOLATE THE EQUAL
PROTECTION OF THE LAWS, DUE PROCESS
OF LAW AND THE CONSTITUTIONAL RIGHTS
OF AN ACCUSED TO BE INFORMED OF THE
NATURE AND CAUSE OF THE ACCUSATION
AGAINST HIM. 3
And culled from petitioners' arguments in support of the
above grounds the provisions of Republic Act No. 8180
which they now impugn are:
A. Section 5(b) on the imposition of tariff which
provides: "Any law to the contrary notwithstanding
and starting with the effectivity of this Act, tariff
duty shall be imposed and collected on imported
crude oil at the rate of three percent (3%), and
imported refined petroleum products at the rate of
seven percent (7%), except fuel oil and LPB, the
rate for which shall be the same as that for
imported crude oil: Provided, That beginning on
January 1, 2004 the tariff rate on imported crude
oil and refined petroleum products shall be the
same: Provided further, That this provision may
be amended only by an Act of Congress."
[Emphasis added].
B. Section 6 on the minimum inventory
requirement, thus: "Security of Supply. — To
ensure the security and continuity of petroleum
crude and products supply, the DOE shall require
the refiners and importers to maintain a minimum
inventory equivalent to ten percent (10%) of their
respective annual sales volume or forty (40) days
of supply, whichever is lower."
C. Section 9(b) on predatory pricing: "Predatory
pricing which means selling or offering to sell any
product at a price unreasonably below the
industry average cost so as to attract customers
to the detriment of competitors.
Any person, including but not limited to the chief
operating officer or chief executive officer of the
corporation involved, who is found guilty of any of
the said prohibited acts shall suffer the penalty of
imprisonment for three (3) years and fine ranging
from Five hundred thousand pesos (P500,000) to
One million pesos (P1,000,000).
D. Section 10 on the other prohibited acts which
states: "Other Prohibited Acts. — To ensure
compliance with the provisions of this Act, the
failure to comply with any of the following shall
likewise be prohibited: 1) submission of any
reportorial requirements; 2) maintenance of the
minimum inventory; and, 3) use of clean and safe
(environment and worker-benign) technologies.
Any person, including but not limited to the chief
operating officer or chief executive officer of the
corporation involved, who is found guilty of any of
the said prohibited acts shall suffer the penalty of
imprisonment for two (2) years and fine ranging
from Two hundred fifty thousand pesos
 (P250,000) to Five hundred thousand pesos
(P500,000).
E. Section 15 on the implementation of full
deregulation, thus: "Implementation of Full
Deregulation. — Pursuant to Section 5(e) of
Republic Act No. 7683, the DOE shall, upon
approval of the President, implement the full
deregulation of the downstream oil industry not
later than March, 1997. As far as practicable, the
DOE shall time the full deregulation when the
prices of crude oil and petroleum products in the
world market are declining and when the
exchange rate of the peso in relation to the US
dollar is stable. Upon the implementation of the
full deregulation as provided herein, the transition
phase is deemed terminated and the following
laws are deemed repealed: . . . [Emphasis
added].
F. Section 20 on the imposition of administrative
fine: "Administrative Fine. — The DOE may, after
due notice and hearing impose a fine in the
amount of not less than One hundred thousand
pesos (P100,000) but not more than One million
pesos (P1,000,000) upon any person or entity
who violates any of its reportorial and minimum
inventory requirements, without prejudice to
criminal sanctions."
Executive Order No. 392, entitled "Declaring Full
Deregulation Of The Downstream Oil Industry" which
declared the full deregulation effective February 8, 1997,
is also sought to be declared unconstitutional.
A careful scrutiny of the arguments proffered against the
constitutionality of Republic Act No. 8180 betrays the
petitioners' underlying motive of calling upon this Court to
determine the wisdom and efficacy of the enactment
rather than its adherence to the Constitution.
Nevertheless, I shall address the issues raised if only to
settle the alleged constitutional defects afflicting some
provisions of Republic Act No. 8180. To elaborate:
A. On the imposition of tariff . Petitioners argue that the
existence of a tariff provision violated the "one subject-
one title" 4 rule under Article VI, Section 26 (1) as the
imposition of tariff rates is "inconsistent with" 5 and not at all
germane to the deregulation of the oil industry. They also
stress that the variance between the seven percent (7%)
duty on imported gasoline and other refined petroleum
products and three percent (3%) duty on crude oil gives a
"4% tariff protection in favor of Petron, Shell and Caltex
which own and operate refineries here". 6 The provision,
petitioners insist, "inhibits prospective oil players to do
business here because it will unnecessarily increase their
product cost by 4%." 7 In other words, the tariff rates "does
not foster 'a truly competitive market'." 8Also petitioners claim
that both Houses of Congress never envisioned imposing
the seven percent (7%) and three percent (3%) tariff on
refined and crude oil products as both Houses advocated,
prior to the holding of the bicameral conference committee, a
"zero differential". Moreover, petitioners insist that the tariff
rates violate "the equal protection of the laws enshrined in
Article III, Section 1 of the Constitution" 9 since the rates and
their classification are not relevant in attaining the avowed
policy of the law, not based on substantial distinctions and
limited to the existing condition.
The Constitution mandates that "every bill passed by
Congress shall embrace only one subject which shall be
expressed in the title thereof". 10 The object sought to be
accomplished by this mandatory requirement has been
explained by the Court in the vintage case of Central Capiz
v. Ramirez, 11 thus:
The object sought to be accomplished and the
mischief proposed to be remedied by this
provision are well known. Legislative assemblies,
for the dispatch of business, often pass bills by
their titles only without requiring them to be read.
A specious title sometimes covers legislation
which, if its real character had been disclosed,
would not have commanded assent. To prevent
surprise and fraud on the legislature is one of the
purposes this provision was intended to
accomplish. Before the adoption of this provision
the title of a statute was often no indication of its
subject or contents.
An evil this constitutional requirement was
intended to correct was the blending in one and
the same statute of such things as were diverse in
their nature, and were connected only to combine
in favor of all the advocates of each, thus often
securing the passage of several measures no one
of which could have succeeded on its own merits.
Mr. Cooley thus sums up in his review of the
authorities defining the objects of this provision: "It
may therefore be assumed as settled that the
purpose of this provision was: First, to
prevent hodge-podge or log-rolling
legislation; second, to prevent surprise or fraud
upon the legislature by means of provisions in
bills of which the titles gave no information, and
which might therefore be overlooked and
carelessly and unintentionally adopted; and, third,
to fairly apprise the people, through such
publication of legislative proceedings as is usually
made, of the subjects of legislation that are being
considered, in order that they may have
opportunity of being heard thereon by petition or
otherwise if they shall so desire." (Cooley's
Constitutional Limitations, p. 143). 12
The interpretation of "one subject-one title" rule, however,
is never intended to impede or stifle legislation. The
requirement is to be given a practical rather than a
technical construction and it would be sufficient
compliance if the title expresses the general subject and
all the provisions of the enactment are germane and
material to the general subject. 13 Congress is not required
to employ in the title of an enactment, language of such
precision as to mirror, fully index or catalogue all the
contents and the minute details therein. 14 All that is required
is that the title should not cover legislation incongruous in
itself, and which by no fair intendment can be considered as
having a necessary or proper connection. 15 Hence, the title
"An Act Amending Certain Sections of Republic Act
Numbered One Thousand One Hundred Ninety-Nine,
otherwise known as the Agricultural Tenancy Act of the
Philippines" was declared by the Court sufficient to contain a
provision empowering the Secretary of Justice, acting
through a tenancy mediation division, to carry out a national
enforcement program, including the mediation of tenancy
disputes. 16 The title "An Act Creating the Videogram
Regulatory Board" was similarly declared valid and sufficient
to embrace a regulatory tax provision, i.e., the imposition of
a thirty percent (30%) tax on the purchase price or rental
rate, as the case may be, for every sale, lease or disposition
of a videogram containing a reproduction of any motion
picture or audiovisual program with fifty percent (50%) of the
proceeds of the tax collected accruing to the province and
the other fifty percent (50%) to the municipality where the tax
is collected. 17 Likewise, the title "An Act To Further Amend
Commonwealth Act Numbered One Hundred Twenty, as
amended by Republic Act Numbered Twenty Six Hundred
and Forty One" was declared sufficient to cover a provision
limiting the allowable margin of profit to not more than twelve
percent (12%) annually of its investments plus two-month
operating expenses for franchise holder receiving at least
fifty percent (50%) of its power from the National Power
Corporation. 18
In the case at bar, the title "An Act Deregulating The
Downstream Oil Industry, And For Other Purposes" is
adequate and comprehensive to cover the imposition of
tariff rates. The tariff provision under Section 5 (b) is one
of the means of effecting deregulation. It must be
observed that even prior to the passage of Republic Act
No. 8180 oil products have always been subject to tariff
and surely Congress is cognizant of such fact. The
imposition of the seven percent (7%) and three percent
(3%) duties on imported gasoline and refined petroleum
products and on crude oil, respectively, are germane to
the deregulation of the oil industry. The title, in fact, even
included the broad and all-encompassing phrase "And
For Other Purposes" thereby indicating the legislative
intent to cover anything that has some relation to or
connection with the deregulation of the oil industry. The
tax provision is a mere tool and mechanism considered
essential by Congress to fulfill Republic Act No. 8180's
objective of fostering a competitive market and achieving
the social policy objectives of a fair prices. To curtail any
adverse impact which the tariff treatment may cause by
its application, and perhaps in answer to petitioners'
apprehension Congress included under the assailed
section a proviso that will effectively eradicate the tariff
difference in the treatment of refined petroleum products
and crude oil by stipulating "that beginning on January 1,
2004 the tariff rate on imported crude oil and refined
petroleum products shall be the same."
The contention that tariff "does not foster a truly
competitive market" 19 and therefore restrains trade and
does not help achieve the purpose of deregulation is an
issue not within the power of the Court to resolve.
Nonetheless, the Court's pronouncement in Tio
vs. Videogram Regulatory Board appears to be worth
reiterating:
Petitioner also submits that the thirty percent
(30%) tax imposed is harsh and oppressive,
confiscatory, and in restraint of trade. However, it
is beyond serious question that a tax does not
cease to be valid merely because it regulates,
discourages, or even definitely deters the
activities taxed. The power to impose taxes is one
so unlimited in force and so searching in extent,
that the courts scarcely venture to declare that it
is subject to any restrictions whatever, except
such as rest in the discretion of the authority
which exercise it. In imposing a tax, the legislature
acts upon its constituents. This is, in general, a
sufficient security against erroneous and
oppressive taxation. 20[Emphasis added]
Anent petitioners' claim that both House Bill No. 5264 and
Senate Bill No. 1253, [the precursor bills of Republic Act
No. 8180], "did not impose any tariff rates but merely set
the policy of 'zero differential' in the House version, and
nothing in the Senate version" 21 is inconsequential. Suffice
it to state that the bicameral conference committee report
was approved by the conferees thereof only "after full and
free conference" on the disagreeing provisions of Senate Bill
No. 1253 and House Bill No. 5264. Indeed, the "zero
differential" on the tariff rates imposed in the House version
was embodied in the law, save for a slight delay in its
implementation to January 1, 2004. Moreover, any objection
on the validity of provisions inserted by the legislative
bicameral conference committee has
been passed upon by the Court in the recent case
of Tolentino v. Secretary of Finance, 22 which, in my view, laid
to rest any doubt as to the validity of the bill emerging out of
a Conference Committee. The Court in that case, speaking
through Mr. Justice Mendoza, said:
As to the possibility of an entirely new bill
emerging out of a Conference Committee, it has
been explained:
Under congressional rules of procedure,
conference committees are not expected to make
any material change in the measure at issue,
either by deleting provisions to which both houses
have already agreed or by inserting new
provisions. But this is a difficult provision to
enforce. Note the problem when one house
amends a proposal originating in either house by
striking out everything following the enacting
clause and substituting provisions which make it
an entirely new bill. The versions are now
altogether different, permitting a conference
committee to draft essentially a new bill. . .
The result is a third version, which is considered
an "amendment in the nature of a substitute," the
only requirement for which being that the third
version be germane to the subject of the House
and Senate bills:
Indeed, this Court recently held that it is within the
power of a conference committee to include in its
report an entirely new provision that is not found
either in the House bill or in the Senate bill. If the
committee can propose an amendment consisting
of one or two provisions, there is no reason why it
cannot propose several provisions, collectively
considered as an "amendment in the nature of a
substitute," so long as such amendment is
germane to the subject of the bills before the
committee. After all, its report was not final but
needed the approval of both houses of Congress
to become valid as an act of the legislative
department. The charge that in this case the
Conference Committee acted as a third legislative
chamber is thus without any basis.
xxx xxx xxx
To be sure, nothing in the Rules [of the Senate
and the House of Representatives] limits a
conference committee to a consideration of
conflicting provisions. But Rule XLVI, (Sec.) 112 of
the Rules of the Senate is cited to the effect that
"If there is no Rule applicable to a specific case
the precedents of the Legislative Department of
the Philippines shall be resorted to, and as a
supplement of these, the Rules contained in
Jefferson's Manual." The following is then quoted
from the Jefferson's Manual:
The managers of a conference must confine
themselves to the differences committed to them .
. . and may not include subjects not within
disagreements, even though germane to a
question in issue.
Note that, according to Rule XLIX, (Sec.) 112, in
case there is no specific rule applicable, resort
must be to the legislative practice. The Jefferson's
Manual is resorted to only as supplement. It is
common place in Congress that conference
committee reports include new matters which,
though germane, have not been committed to the
committee. This practice was admitted by Senator
Raul S. Roco, petitioner in G.R. No. 115543,
during the oral argument in these cases.
Whatever, then, may be provided in the
Jefferson's Manual must be considered to have
been modified by the legislative practice. If a
change is desired in the practice it must be sought
in Congress since this question is not covered by
any constitutional provision but is only an internal
rule of each house. Thus, Art. VI, (Sec.) 16(3) of
the Constitution provides that "Each House may
determine the rules of its proceedings . . ."
 This observation applies to the other contention
that the Rules of the two chambers were likewise
disregarded in the preparation of the Conference
Committee Report because the Report did not
contain a "detailed and sufficiently explicit
statement of changes in, or amendments to, the
subject measure." The Report used brackets and
capital letters to indicate the changes. This is a
standard practice in bill-drafting. We cannot say
that in using these marks and symbols the
Committee violated the Rules of the Senate and
the House. Moreover, this Court is not the proper
forum for the enforcement of these internal Rules.
To the contrary, as we have already ruled,
"parliamentary rules are merely procedural and
with their observance the courts have no
concern." Our concern is with the procedural
requirements of the Constitution for the enactment
of laws. As far as these requirements are
concerned, we are satisfied that they have been
faithfully observed in these cases.23
The other contention of petitioners that Section 5(b)
"violates the equal protection of the laws enshrined in
Article III, Section 1 of the Constitution" 24 deserves a short
shrift for the equal protection clause does not forbid
reasonable classification based upon substantial distinctions
where the classification is germane to the purpose of the law
and applies equally to all the members of the class. The
imposition of three percent (3%) tariff on crude oil, which is
four percent (4%) lower than those imposed on refined oil
products, as persuasively argued by the Office of the
Solicitor General, is based on the substantial distinction that
importers of crude oil, by necessity, have to establish and
maintain refinery plants to process and refine the crude oil
thereby adding to their production costs. To encourage these
importers to set up refineries involving huge expenditures
and investments which peddlers and importers of refined
petroleum products do not shoulder, Congress deemed it
appropriate to give a lower tariff rate to foster the entry of
new "players" and investors in line with the law's policy to
create a competitive market. The residual contention that
there is no substantial distinction in the imposition of seven
percent (7%) and three percent (3%) tariff since the law itself
will level the tariff rates between the imported crude oil and
refined petroleum products come January 1, 2004, to my
mind, is addressed more to the legislative's prerogative to
provide for the duration and period of effectivity of the
imposition. If Congress, after consultation, analysis of
material data and due deliberations, is convinced that by
January 1, 2004, the investors and importers of crude oil
would have already recovered their huge investments and
expenditures in establishing refineries and plants then it is
within its prerogative to lift the tariff differential. Such matter
is well within the pale of legislative power which the Court
may not fetter. Besides, this again is in line with Republic Act
No. 8180's avowed policy to foster a truly competitive market
which can achieve the social policy objectives of fair, if not
lower, prices.
B. On the minimum inventory requirement. Petitioners'
attack on Section 6 is premised upon their belief that the
inventory requirement is hostile and not conducive for
new oil companies to operate here, and unduly favors
Petron, Shell and Caltex, companies which according to
them can easily hurdle the requirement. I fail to see any
legal or constitutional issue here more so as it is not
raised by a party with legal standing for petitioners do not
claim to be the owners or operators of new oil companies
affected by the requirement. Whether or not the
requirement is advantageous, disadvantageous or
conducive for new oil companies hinges on presumptions
and speculations which is not within the realm of judicial
adjudication. It may not be amiss to mention here that
according to the Office of the Solicitor General "there are
about thirty (30) new entrants in the downstream activities
. . . , fourteen (14) of which have started operation . . . ,
eight (8) having commenced operation last March 1997,
and the rest to operate between the second quarter of
1997 and the year 2000" 25. Petitioners did not controvert
this averment which thereby cast serious doubt over their
claim of "hostile" environment.
C. On predatory pricing. What petitioners bewail the most
in Section 9(b) is "the definition of 'predatory pricing'
[which] is too broad in scope and indefinite in
meaning" 26 and the penal sanction imposed for its violation.
Petitioners maintain that it would be the new oil companies
or "players" which would lower their prices to gain a foothold
on the market and not Petron, Shell or Caltex, an occasion
for these three big oil "companies" to control the prices by
keeping their average cost at a level which will ensure their
desired profit margin. 27 Worse, the penal sanction, they add,
deters new "players" from entering the oil market and the
practice of lowering prices is now condemned as a criminal
act.
Petitioners' contentions are nebulous if not speculative. In
the absence of any concrete proof or evidence, the
assertion that it will only be the new oil companies which
will lower oil prices remains a mere guess or suspicion.
And then again petitioners are not the proper party to
raise the issue. The query on why lowering of prices
should be penalized and the broad scope of predatory
pricing is not for this Court to traverse the same being
reserved for Congress. The Court should not lose sight of
the fact that its duty under Article 5 of the Revised Penal
Code is not to determine, define and legislate what act or
acts should be penalized, but simply to report to the Chief
Executive the reasons why it believes an act should be
penalized, as well as why it considers a penalty
excessive, thus:
Art. 5. Duty of the court in connection with acts
which should be repressed but which are nor
covered by the law, and in cases of excessive
penalties. — Whenever a court has knowledge of
any act which it may deem proper to repress and
which is not punishable by law, it shall render the
proper decision, and shall report to the Chief
Executive, through the Department of Justice, the
reasons which induce the court to believe that
said act should be made the subject of legislation.
In the same way the court shall submit to the
Chief Executive, through the Department of
Justice, such statement as may be deemed
proper, without suspending the execution of the
sentence, when a strict enforcement of the
provisions of this Code would result in the
imposition of a clearly excessive penalty, taking
into consideration the degree of malice and the
injury caused by the offense.
Furthermore, in the absence of an actual conviction for
violation of Section 9 (b) and the appropriate appeal to
this Court, I fail to see the need to discuss any longer the
issue as it is not ripe for judicial adjudication. Any
pronouncement on the legality of the sanction will only be
advisory.
D. On other prohibited acts. In discussing their objection
to Section 10, together with Section 20, petitioners assert
that these sanctions "even provide stiff criminal and
administrative penalties for failure to maintain said
minimum requirement and other regulations" and posed
this query: "Are these provisions consistent with the policy
objective to level the playing [field] in a truly competitive
answer?" 28 A more circumspect analysis of petitioners'
grievance, however, does not present any legal controversy.
At best, their objection deals on policy considerations that
can be more appropriately and effectively addressed not by
this Court but by Congress itself.
E. On the implementation of full deregulation under
Section 15, and the validity of Executive Order No. 392.
Petitioners stress that "Section 15 of Republic Act No.
8180 delegates to the Secretary of Energy and to the
President of the Philippines the power to determine when
to fully deregulate the downstream oil industry" 29without
providing for any standards "to determine when the prices of
crude oil in the world market are considered to be
'declining'" 30 and when may the exchange rate be
considered "stable" for purposes of determining when it is
"practicable" to declare full deregulation. 31 In the absence of
standards, Executive Order No. 392 which implemented
Section 15 constitute "executive lawmaking," 32 hence the
same should likewise be struck down as invalid. Petitioners
additionally decry the brief seven (7) month transition period
under Section 15 of Republic Act No. 8180. The premature
full deregulation declared in Executive Order No. 392
allowed Caltex, Petron, and Shell oil companies "to define
the conditions under which any 'new players' will have to
adhere to in order to become competitive in the new
deregulated market even before such a market has been
created." 33 Petitioners are emphatic that Section 15 and
Executive Order No. 392 "have effectively legislated a cartel
among respondent oil companies, directly violating the
Constitutional prohibition against unfair trade practices and
combinations in restraint of trade". 34
Section 15 of Republic Act No. 8180 provides for the
implementation of full deregulation. It states:
Section 15 on the implementation of full
deregulation, thus: "Implementation of Full
Deregulation. — Pursuant to Section 5(e) of
Republic Act No. 7683, the DOE shall, upon
approval of the President, implement the full
deregulation of the downstream oil industry not
later than March, 1997. As far as practicable, the
DOE shall time the full deregulation when the
prices of crude oil and petroleum products in the
world market are declining and when the
exchange rate of the peso in relation to the US
dollar is stable. Upon the implementation of the
full deregulation as provided herein, the transition
phase is deemed terminated and the following
laws are deemed repealed: . . . [Emphasis
added].
It appears from the foregoing that deregulation has to be
implemented "not later than March 1997." The provision is
unequivocal, i.e., deregulation must be implemented on or
before March 1997. The Secretary of Energy and the
President is devoid of any discretion to move the date of
full deregulation to any day later than March 1997. The
second sentence which provides that "[a]s far as
practicable, the DOE shall time the full deregulation when
the prices of crude oil and petroleum products in the world
market are declining and when the exchange rate of the
peso in relation to the US dollar is stable" did not modify
or reset to any other date the full deregulation of
downstream oil industry. Not later than March 1997 is a
complete and definite period for full deregulation. What is
conferred to the Department of Energy in the
implementation of full deregulation, with the approval of
the President, is not the power and discretion on what the
law should be. The provision of Section 15 gave the
President the authority to proceed with deregulation on or
before, but not after, March 1997, and if implementation is
made before March, 1997, to execute the same, if
possible, when the prices of crude oil and petroleum
products in the world market are declining and the peso-
dollar exchange rate is stable. But if the implementation is
made on March, 1997, the President has no option but to
implement the law regardless of the conditions of the
prices of oil in the world market and the exchange rates.
The settled rule is that the legislative department may not
delegate its power. Any attempt to abdicate it is
unconstitutional and void, based on the principle
of potestas delegata non delegare potest. In testing
whether a statute constitutes an undue delegation of
legislative power or not, it is usual to inquire whether the
statute was complete in all its terms and provisions when
it left the hands of the legislative so that nothing was left
to the judgment of any other appointee or delegate of the
legislature. 35 An enactment is said to be incomplete and
invalid if it does not lay down any rule or definite standard by
which the administrative officer may be guided in the
exercise of the discretionary powers delegated to
it. 36 In People v. Vera, 37 the Court laid down a guideline on
how to distinguish which power may or may not be
delegated by Congress, to wit:
"The true distinction", says Judge Ranney, "is
between the delegation of power to make the law,
which necessarily involves a discretion as to what
it shall be, and conferring an authority or
discretion as to its execution, to be exercised
under and in pursuance of the law. The first
cannot done; to the latter no valid objection can
be made." (Cincinnati, W. & Z.R. Co. vs. Clinton
County Comrs. [1852]; 1 Ohio St., 77,
88 See also, Sutherland on Statutory
Construction, sec. 68.)
Applying these parameters, I fail to see any taint of
unconstitutionality that could vitiate the validity of Section
15. The discretion to ascertain when may the prices of
crude oil in the world market be deemed "declining" or
when may the peso-dollar exchange rate be considered
"stable" relates to the assessment and appreciation of
facts. There is nothing essentially legislative in
ascertaining the existence of facts or conditions as the
basis of the taking into effect of a
law 38 so as to make the provision an undue delegation of
legislative power. The alleged lack of definitions of the terms
employed in the statute does not give rise to undue
delegation either for the words of the statute, as a rule, must
be given its literal meaning. 39 Petitioners' contentions are
concerned with the details of execution by the executive
officials tasked to implement deregulation. No proviso in
Section 15 may be construed as objectionable for the
legislature has the latitude to provide that a law may take
effect upon the happening of future specified contingencies
leaving to some other person or body the power to
determine when the specified contingency has arisen. 40 The
instant petition is similarly situated with the past cases, as
summarized in the case of People v. Vera, where the Court
ruled for the validity of several assailed statutes, to wit:
To the same effect are decisions of this court in
Municipality of Cardona vs. Municipality of
Binangonan ([1917], 36 Phil. 547); Rubi
vs. Provincial Board of Mindoro ([1919], 39 Phil.
660), andCruz vs. Youngberg ([1931], 56 Phil.
234). In the first of these cases, this court
sustained the validity of a law conferring upon the
Governor-General authority to adjust provincial
and municipal boundaries. In the second case,
this court held it lawful for the legislature to direct
non-Christian inhabitants to take up their
habitation on unoccupied lands to be selected by
the provincial governor and approved by the
provincial board. In the third case, it was held
proper for the legislature to vest in the Governor-
General authority to suspend or not, at his
discretion, the prohibition of the importation of
foreign cattle, such prohibition to be raised "if the
conditions of the country make this advisable or if
disease among foreign cattle has ceased to be a
menace to the agriculture and livestock of the
lands." 41
If the Governor-General in the case of Cruz
v. Youngberg 42 can "suspend or not, at his discretion, the
prohibition of the importation of cattle, such prohibition to be
raised 'if the conditions of the country make this advisable or
if disease among foreign cattles has ceased to be a menace
to the agriculture and livestock of the lands" then with more
reason that Section 15 of Republic Act No. 8180 can pass
the constitutional challenge as it has mandatorily fixed the
effectivity date of full deregulation to not later than March
1997, with or without the occurrence of stable peso-dollar
exchange rate and declining oil prices. Contrary to
petitioners' protestations, therefore, Section 15 is complete
and contains the basic conditions and terms for its
execution.
To restate, the policy of Republic Act No. 8180 is to
deregulate the downstream oil industry and to foster a
truly competitive market which could lead to fair prices
and adequate supply of environmentally clean and high-
quality petroleum products. This is the guiding principle
installed by Congress upon which the executive
department of the government must conform. Section 15
of Republic Act No. 8180 sufficiently supplied the metes
and bounds for the execution of full deregulation. In fact,
a cursory reading of Executive Order No. 392 43 which
advanced deregulation to February 8, 1997 convincingly
shows the determinable factors or standards, enumerated
under Section 15, which were taken into account by the
Chief Executive in declaring full deregulation. I cannot see
my way clear on how or why Executive Order No. 392, as
professed by petitioners, may be declared unconstitutional
for adding the "depletion of buffer fund" as one of the
grounds for advancing the deregulation. The enumeration of
factors to be considered for full deregulation under Section
15 did not proscribe the Chief Executive from acknowledging
other instances that can equally assuage deregulation. What
is important is that the Chief Executive complied with and
met the minimum standards supplied by the law. Executive
Order No. 392 may not, therefore, be branded as
unconstitutional.
Petitioners' vehement objections on the short seven (7)
month transition period under Section 15 and the alleged
resultant de facto formation of cartel are matters which
fundamentally strike at the wisdom of the law and the
policy adopted by Congress. These are outside the power
of the courts to settle; thus I fail to see the need to digress
any further.
F . On the imposition of administrative fine. The
administrative fine under Section 20 is claimed to be
inconsistent with deregulation. The imposition of
administrative fine for failure to meet the reportorial and
minimum inventory requirements, far from petitioners'
submission, are geared towards accomplishing the noble
purpose of the law. The inventory requirement ensures
the security and continuity of petroleum crude and
products supply, 44 while the reportorial requirement is a
mere devise for the Department of Energy to monitor
compliance with the law. In any event, the issue pertains to
the efficacy of incorporating in the law the administrative
sanctions which lies outside the Court's sphere and
competence.
In fine, it seems to me that the petitions dwell on the
insistent and recurrent arguments that the imposition of
different tariff rates on imported crude oil and imported
petroleum products is violative of the equal protection
clause of the constitution; is not germane to the purpose
of the law; does not foster a truly competitive market;
extends undue advantage to the existing oil refineries or
companies; and creates a cartel or a monopoly of sort
among Shell, Caltex and Petron in clear contravention of
the Constitutional proscription against unfair trade
practices and combinations in restraint of trade.
Unfortunately, this Court, in my view, is not at liberty to
tread upon or even begin to discuss the merits and
demerits of petitioners' stance if it is to be faithful to the
time honored doctrine of separation of powers — the
underlying principle of our republican state. 45 Nothing is so
fundamental in our system of government than its division
into three distinct and independent branches, the executive,
the legislative and the judiciary, each branch having
exclusive cognizance of matters within its jurisdiction, and
supreme within its own sphere. It is true that there is
sometimes an inevitable overlapping and interlacing of
functions and duties between these departments. But this
elementary tenet remains: the legislative is vested with the
power to make law, the judiciary to apply and interpret it. In
cases like this, "the judicial branch of the government has
only one duty-to lay the article of the Constitution which is
invoked beside the statute which is challenged and to decide
whether the letter squares with the former." 46 This having
been done and finding no constitutional infirmity therein, the
Court's task is finished. Now whether or not the law fails to
achieve its avowed policy because Congress did not
carefully evaluate the long term effects of some of its
provisions is a matter clearly beyond this Court's domain.
Perhaps it bears reiterating that the question of validity of
every statute is first determined by the legislative
department of the government, and the courts will resolve
every presumption in favor of its validity. The courts will
assume that the validity of the statute was fully
considered by the legislature when adopted. The wisdom
or advisability of a particular statute is not a question for
the courts to determine. If a particular statute is within the
constitutional power of the legislature to enact, it should
be sustained whether the courts agree or not in the
wisdom of its enactment. 47 This Court continues to
recognize that in the determination of actual cases and
controversies, it must reflect the wisdom and justice of the
people as expressed through their representatives in the
executive and legislative branches of government. Thus, the
presumption is always in favor of constitutionality for it is
likewise always presumed that in the enactment of a law or
the adoption of a policy it is the people who speak through
their representatives. This principle is one of caution and
circumspection in the exercise of the grave and delicate
function of judicial review 48. Explaining this principle Thayer
said,
It can only disregard the Act when those who
have the right to make laws have not merely
made a mistake, but have made a very clear one-
so clear that it is not open to rational question.
That is the standard of duty to which the courts
bring legislative acts; that is the test which they
apply-not merely their own judgment as to
constitutionality, but their conclusion as to what
judgment is permissible to another department
which the constitution has charged with the duty
of making it. This rule recognizes that, having to
the great, complex, ever-unfolding exigencies of
regard government, much will seem
unconstitutional to one man, or body of men, may
reasonably not seem so to another; that the
constitution often admits of different
interpretations; that there is often a range of
choice and judgment; that in such cases the
constitution does not impose upon the legislature
any one specific opinion, but leaves open their
range of choice; and that whatever choice is
rational is constitutional.49
The petitions discuss rather extensively the adverse
economic implications of Republic Act No. 8180. They put
forward more than anything else, an assertion that an
error of policy has been committed. Reviewing the
wisdom of the policies adopted by the executive and
legislative departments is not within the province of the
Court.
It is safe to assume that the legislative branch of the
government has taken into consideration and has
carefully weighed all points pertinent to the law in
question. We cannot doubt that these matters have been
the object of intensive research and study nor that they
have been subject of comprehensive consultations with
experts and debates in both houses of Congress. Judicial
review at this juncture will at best be limited and myopic.
For admittedly, this Court cannot ponder on the points
raised in the petitions with the same technical
competence as that of the economic experts who have
contributed valuable hours of study and deliberation in the
passage of this law.
I realize that to invoke the doctrine of separation of
powers at this crucial time may be viewed by some as an
act of shirking from our duty to uphold the Constitution at
all cost. Let it be remembered, however, that the doctrine
of separation of powers is likewise enshrined in our
Constitution and deserves the same degree of fealty. In
fact, it carries more significance now in the face of an
onslaught of similar cases brought before this Court by
the opponents of almost every enacted law of major
importance. It is true that this Court is the last bulwark of
justice and it is our task to preserve the integrity of our
fundamental law. But we cannot become, wittingly or
unwittingly, instruments of every aggrieved minority and
losing legislator. While the laudable objectives of the law
are put on hold, this Court is faced with the unnecessary
burden of disposing of issues merely contrived to fall
within the ambit of judicial review. All that is achieved is
delay which is perhaps, sad to say, all that may have
been intended in the first place.
Indeed, whether Republic Act No. 8180 or portions
thereof are declared unconstitutional, oil prices may
continue to rise, as they depend not on any law but on the
volatile market and economic forces. It is therefore the
political departments of government that should address
the issues raised herein for the discretion to allow a
deregulated oil industry and to determine its viability is
lodged with the people in their primary political capacity,
which as things stand, has been delegated to Congress.
In the end, petitioners are not devoid of a remedy. To paraphrase
the words of Justice Padilla in Kapatiran ng mga Naglilingkod sa
Pamahalaan ng Pilipinas v. Tan, 50 if petitioners seriously believe
that the adoption and continued application of Republic Act No. 8180
are prejudicial to the general welfare or the interests of the majority
of the people, they should seek recourse and relief from the political
branches of government, as they are now doing by moving for an
amendment of the assailed provisions in the correct forum which is
Congress or for the exercise of the people's power of initiative on
legislation. The Court following the time honored doctrine of
separation of powers, cannot substitute its judgment for that of the
Congress as to the wisdom, justice and advisability of Republic Act
No. 8180. 51
ACCORDINGLY, finding no merit in the instant petitions I vote for
their outright dismissal.
Footnotes
1 Downstream oil industry refers to the business
of importing, exporting, re-exporting, shipping,
transporting, processing, refining, storing,
distributing, marketing and/or selling crude oil,
gasoline, diesel, liquefied petroleum gas,
kerosene and other petroleum and crude oil
products.
2 Paderanga & Paderanga, Jr., The Oil Industry in
the Philippines, Philippine Economic Journal, No.
65, Vol. 27, pp. 27-98 [1988].
3 Section 3, R.A. No. 6173.
4 Section 7, R.A. No. 6173.
5 P.D. No. 334.
6 Makasiar, G., Structural Response to the
Energy Crisis: The Philippine Case. Energy and
Structural Change in the Asia Pacific Region:
Papers and Proceedings of the 13th Pacific Trade
and Development Conference. Published by the
Philippine Institute for Development Studies/Asian
Development Bank and edited by Romeo M.
Bautista and Seiji Nava, pp. 311-312 (1984).
7 P.D. 1956 as amended by E.O. 137.
8 Section 3, E.O. No. 172.
9 R.A. No. 7638.
10 Section 5(b), R.A. No. 7638.
11 Section 5, R.A. No. 8180.
12 Section 1, Article VIII, 1987 Constitution.
13 Bondoc v. Pineda, 201 SCRA 792 (1991);
Osmena v. COMELEC, 199 SCRA 750 (1991).
14 G.R. No. 118295, May 2, 1997.
15 E.g. Garcia v. Executive Secretary, 211 SCRA
219 (1922); Osmena v. COMELEC, 199 SCRA
(1991); Basco v. Pagcor, 197 SCRA 52 (1991);
Daza v. Singson, 180 SCRA 496 (1989), Araneta
v. Dinglasan, 84 Phil. 368 (1949).
16 163 SCRA 371 (1988).
17 Section 26(1) Article VI of the 1987
Constitution provides that "every bill passed by
the Congress shall embrace only one subject
which shall be expressed in the title thereof."
18 Tobias v. Abalos, 239 SCRA 106 (1994);
Philippine Judges Association v. Prado, 227
SCRA 703 (1993); Lidasan v. COMELEC, 21
SCRA 496 (1967).
19 Tio v. Videogram Regulatory Board, 151 SCRA
208 (1987).
20 Journal of the House of Representatives,
December 13, 1995, p. 32.
21 34 Phil. 136 citing Cincinnati, W. & Z. R.R. Co.
vs. Clinton Country Commrs. (1 Ohio St. 77).
22 166 SCRA 533, 543-544.
23 320 US 99.
24 Philippine Political Law, 1995 ed., p. 99.
25 Webster, New third International Dictionary,
1993 ed., pp. 1780, 586 and 2218.
26 See e.g., Balbuena v. Secretary of Education,
110 Phil. 150 used the standard "simplicity and
dignity." People v. Rosenthal, 68 Phil. 328 ("public
interest"); Calalang v. Williams, 70 Phil. 726
("public welfare"); Rubi v. Provincial Board of
Mindoro, 39 Phil. 669 ("interest of law and order").
27 See for example TSN of the Session of the
Senate on November 14, 1995, p. 19, view of
Senator Gloria M. Arroyo.
28 Black's Law Dictionary, 6th edition, p. 1007.
29 Id., p. 266.
30 54 Am Jur 2d 669.
31 Art. 186. Monopolies and combinations in
restraint of trade. — The penalty of prision
correccionalin its minimum period or a fine
ranging from 200 to 6,000 pesos, or both, shall be
imposed upon:
1. Any person who shall enter into any contract or
agreement or shall take part in any conspiracy or
combination in the form of a trust or otherwise, in
restraint of trade or commerce to prevent by
artificial means free competition in the market.
2. Any person who shall monopolize any
merchandise or object of trade or commerce, or
shall combine with any other person or persons to
monopolize said merchandise or object in order to
alter the price thereof by spreading false rumors
or making use of any other article to restrain free
competition in the market;
3. Any person who, being a manufacturer,
producer, or processor of any merchandise or
object of commerce or an importer of any
merchandise or object of commerce from any
foreign country, either as principal or agent,
wholesaler or retailer, shall combine, conspire or
agree in any manner with any person likewise
engaged in the manufacture, production,
processing, assembling or importation of such
merchandise or object of commerce or with any
other persons not so similarly engaged for the
purpose of making transactions prejudicial to
lawful commerce, or of increasing the market
price in any part of the Philippines, or any such
merchandise or object of commerce
manufactured, produced, or processed,
assembled in or imported into the Philippines, or
of any article in the manufacture of which such
manufactured, produced, processed, or imported
merchandise or object of commerce is used.
If the offense mentioned in this article affects any
food substance, motor fuel or lubricants, or other
articles of prime necessity the penalty shall be
that of prision mayor in its maximum and medium
periods, it being sufficient for the imposition
thereof that the initial steps have been taken
toward carrying out the purposes of the
combination.
xxx xxx xxx
Whenever any of the offenses described above is
committed by a corporation or association, the
president and each one of the directors or
managers of said corporation or association, who
shall have knowingly permitted or failed to prevent
the commission of such offenses, shall be held
liable as principals thereof.
32 Art. 28. Unfair competition in agricultural,
commercial or industrial enterprises or in labor
through the use of force, intimidation, deceit,
machination or any other unjust, oppressive or
highhanded method shall give rise to a right of
action by the person who thereby suffers damage.
33 Bernas, The Intent of the 1986 Constitution
Writers (1995), p. 877; Philippine Long Distance
Telephone Co. v. National Telecommunications
Commission, 190 SCRA 717 (1990); Northern
Cement Corporation v. Intermediate Appellate
Court, 158 SCRA 408 (1988); Philippine Ports
Authority v. Mendoza, 138 SCRA 496 (1985);
Anglo-Fil Trading Corporation v. Lazaro, 124
SCRA 494 (1983).
34 Record of the Constitutional Commission,
Volume III, p. 258.
35 Gellhorn, Anti Trust Law and Economics in a
Nutshell, 1986 ed. p. 45.
36 Economics and Federal Anti-Trust Law,
Hornbook Series, Student ed., 1985 ed., p. 181.
37 Statutory Construction, 1986 ed., pp. 28-29.
38 IBON Facts and Figures, Vol. 18, No. 7, p. 5,
April 15, 1995.
39 Cruz v. Youngberg, 56 Phil. 234 (1931).
PANGANIBAN, J., concurring:
1 Consolidated Memorandum of Public
Respondents, dated October 14, 1997.
2 Petron Corporation's Motion to Lift Temporary
Restraining Order, dated October 9, 1997, p. 16;
Pilipinas Shell Corporation's Memorandum, dated
October 15, 1997, pp. 36-37.
3 Sections 1 & 5 of Article VIII of the Constitution
provides:
Sec. 1. . . .
Judicial power includes the duty of the courts of
justice to settle actual controversies involving
rights which are legally demandable and
enforceable, and to determine whether or not
there has been a grave abuse of discretion
amounting to lack of or excess of jurisdiction on
the part of any branch or instrumentality of the
Government.
Sec. 5. The Supreme Court shall have the
following powers:
(1) Exercise original jurisdiction over . . . petitions
for certiorari, prohibition, mandamus, quo
warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on
appeal or certiorari, as the law or Rules of Court
may provide, final judgments and orders of lower
courts in:
(a) All cases in which the
constitutionality or validity of any
treaty, international or executive
agreement, law, presidential
decree, proclamation, order,
instruction, ordinance, or
regulation is in question.
 xxx xxx xxx 7 Id.

4 Osmeña vs. Comelec, 199 SCRA 750, July 30, 8 Id.

1991; Angara vs. Electoral Commission, 63 Phil.
139, July 15, 1936. 9 Petition in G.R. No. 124360, p. 11.

5 Tañada vs. Angara, G.R. No. 118295, May 2,
1997, p. 26.
KAPUNAN, J., separate opinion:
1 Public respondents' Comment, G.R. No.
127867, p. 39.
2 Sec. 24. Repealing Clause. — All laws,
presidential decrees, executive orders, issuances,
rules and regulations or parts thereof, which are
inconsistent with the provisions of this Act are
hereby repealed or modified accordingly.
FRANCISCO, J., dissenting:
1 Section 2, Republic Act No. 8180.
2 Petition in G.R. No. 124360, p. 8.
10 Article VI, Section 26(1), Constitution.
11 40 Phil. 883.
12 40 Phil. at p. 891.
13 Sumulong v. Commission on Elections, 73 Phil.
288, 291.
14 Lidasan v. Commission on Elections, 21 SCRA
496, 501.
15 Blair v. Chicago, 26 S. Ct. 427, 201 U.S. 400,
50 L. Ed. 801.
16 Cordero v. Cabatuando, 6 SCRA 418.
17 Tio V. Videogram Regulatory Board, 151 SCRA
208.

3 Supplement to the Petition in G.R. No. 127867, 18 Alalayan v. National Power Corp., 24 SCRA
p. 2. 172.

4 Petition in G.R. No. 124360, p. 14. 19 Petition in G.R. No. 124360, p. 14.

5 Id. 20 151 SCRA at 215.

6 Supplement to the Petition in G.R. No. 127867, 21 Petition in G.R. No. 124360, p. 15.
p. 6.
22 235 SCRA 632.
23 235 SCRA at pp. 667-671.
24 Petition in G.R. No. 124360, p. 11.
25 Comment of the Office of the Solicitor General
in G.R. No. 127867, p. 33; Rollo, p. 191.
26 Supplement to the Petition in G.R. No. 127867,
p. 8.
27 Id.
28 Supplement to the Petition in G.R. No. 127867,
p. 7.
29 Petition in G.R. No. 127867, p.8.
30 Id.
31 Id.
32 Id., p. 10.
33 Petition in G.R. No. 127867, p. 13.
34 Id.
35 People v. Vera, 65 Phil. 56, 115, citing 6,
R.C.L., p. 165.
36 Id., at p. 116, citing Scheter v. U.S., 295 U.S.,
495; 79 L. Ed., 1570; 55 Supt. Ct. Rep. 837; 97
A.L.R. 947; People ex rel.; Rice vs. Wilson Oil
Co., 364 III, 406; 4 N.E. [2d], 847; 107 A.L.R.,
1500.
37 Id., at p. 117.
38 Id., at p. 118.
39 Globe-Mackay Cable and Radio Corporation v.
NLRC, 206 SCRA 701, 711.
40 People v. Vera, supra, at pp. 119-120.
41 Id., at pp. 117-118.
42 56 Phil. 234.
43 Executive Order No. 392 provides in full as
follows:
EXECUTIVE ORDER NO. 392
DECLARING FULL DEREGULATION OF THE
DOWNSTREAM OIL INDUSTRY
WHEREAS, Republic Act No. 7638, otherwise
known as the "Department of Energy Act of 1992,"
provides that, at the end of four years from its
effectivity last December 1992, "the Department
[of Energy] shall, upon approval of the President,
institute the programs and timetable of
deregulation of appropriate energy projects and
activities of the energy sector;"
WHEREAS, Section 15 of Republic Act No. 8180,
otherwise known as the "Downstream Oil Industry
Deregulation Act of 1996," provides that "the DOE
shall, upon approval of the President, implement
the full deregulation of the downstream oil
industry not later than March, 1997. As far as
practicable, the DOE shall time the full
deregulation when the prices of crude oil and NOW, THEREFORE, I, FIDEL V. RAMOS,
petroleum products in the world market are President of the Republic of the Philippines, by
declining and when the exchange rate of the peso the powers vested in me by law, do hereby
in relation to the US dollar is stable;" declare the full deregulation, of the downstream
oil industry.
WHEREAS, pursuant to the recommendation of
the Department of Energy, there is an imperative This Executive Order shall take effect on 8
need to implement the full deregulation of the February 1997.
downstream oil industry because of the following
recent developments; (i) depletion of the buffer DONE in the City of Manila, this 22nd day of
fund on or about 7 February 1997 pursuant to the January in the year of Our Lord, Nineteen
Energy Regulator Board's Order dated 16 January Hundred and Ninety-Seven.
1997; (ii) the prices of crude oil had been stable at
$21 — $23 per barrel since October 1996 while
prices of petroleum products in the world market
had been stable since mid-December of last year.
Moreover, crude oil prices are beginning to soften
for the last few days while prices of some
petroleum products had already declined; and (iii) 44 Section 6, Republic Act No. 8180.
the exchange rate of the peso in relation to the
US dollar has been stable for the past twelve (12) 45 Article II, Section 1, 1987 Constitution.
months, averaging at around P26.20 to one US
dollar; 46 United States vs. Butler, 297 U.S. 1.

WHEREAS, Executive Order No. 377 dated 31 47 Case v. Board of Health, 24 Phil. 250, 276.
October 1996 provides for an institutional
framework for the administration of the 48 The Lawyers Journal, January 31, 1949, p. 8.
deregulated industry by defining the functions and
responsibilities of various government agencies; 49 Id., citing Thayer, James B., "The Origin and
Scope of the American Doctrine of Constitutional
WHEREAS, pursuant to Republic Act No. 8180, Law", p. 9.
the deregulation of the industry will foster a truly
competitive market which can better achieve the 50 163 SCRA 371.
social policy objectives of fair prices and
adequate, continuous supply of environmentally- 51 Id., at p. 385.
clean and high quality petroleum products;
G.R. No. 191761 November 14, 2012
CAGAYAN ELECTRIC POWER AND LIGHT CO.,
INC., Petitioner,
vs.
CITY OF CAGAYAN DE ORO, Respondent.
DECISION
CARPIO, J.:
The Case
G.R. No. 191761 is a petition for review1 assailing the
Decision2 promulgated on 28 May 2009 as well as the
Resolution3 promulgated on 24 March 2010 by the Court of
Appeals (appellate court) in CA-G.R. CV No. 01105-Min. The
appellate court affirmed the 8 January 2007 Decision4 of Branch
18 of the Regional Trial Court of Misamis Oriental (trial court) in
Civil Case No. 2005-207.
The trial court upheld the validity of the City of Cagayan de Oro’s
Ordinance No. 9503-2005 and denied Cagayan Electric Power
and Light Co., Inc.’s (CEPALCO) claim of exemption from the
said ordinance.
The Facts
The appellate court narrated the facts as follows:
On January 10, 2005, the Sangguniang Panlungsod of Cagayan
de Oro (City Council) passed Ordinance No. 9503-2005 imposing
a tax on the lease or rental of electric and/or telecommunication
posts, poles or towers by pole owners to other pole users at ten
percent (10%) of the annual rental income derived from such
lease or rental.
The City Council, in a letter dated 15 March 2005, informed
appellant Cagayan Electric Power and Light Company, Inc.
(CEPALCO), through its President and Chief Operation Manager,
Ms. Consuelo G. Tion, of the passage of the subject ordinance.
On September 30, 2005, appellant CEPALCO, purportedly on
pure question of law, filed a petition for declaratory relief assailing
the validity of Ordinance No. 9503-2005 before the Regional Trial
Court of Cagayan de Oro City, Branch 18, on the ground that the
tax imposed by the disputed ordinance is in reality a tax on
income which appellee City of Cagayan de Oro may not impose,
the same being expressly prohibited by Section 133(a) of
Republic Act No. 7160 (R.A. 7160) otherwise known as the Local
Government Code (LGC) of 1991. CEPALCO argues that,
assuming the City Council can enact the assailed ordinance, it is
nevertheless exempt from the imposition by virtue of Republic Act
No. 9284 (R.A. 9284) providing for its franchise. CEPALCO
further claims exemplary damages of PhP200,000.00 alleging
that the passage of the ordinance manifests malice and bad faith
of the respondent-appellee towards it.
In its Answer, appellee raised the following affirmative defenses:
(a) the enactment and implementation of the subject ordinance
was a valid and lawful exercise of its powers pursuant to the 1987
Constitution, the Local Government Code, other applicable
provisions of law, and pertinent jurisprudence; (b) non-exemption
of CEPALCO because of the express withdrawal of the exemption
provided by Section 193 of the LGC; (c) the subject ordinance is
legally presumed valid and constitutional; (d) prescription of
respondent-appellee’s action pursuant to Section 187 of the LGC;
(e) failure of respondent-appellee to exhaust administrative
remedies under the Local Government Code; (f) CEPALCO’s
action for declaratory relief cannot prosper since no breach or
violation of the subject ordinance was yet committed by the City.5
Ordinance No. 9503-2005 reads:
ORDINANCE IMPOSING A TAX ON THE LEASE OR RENTAL
OF ELECTRIC AND/OR TELECOMMUNICATION POSTS,
POLES OR TOWERS BY POLE OWNERS TO OTHER POLE
USERS AT THE RATE OF TEN (10) PERCENT OF THE
ANNUAL RENTAL INCOME DERIVED THEREFROM AND FOR
OTHER PURPOSES BE IT ORDAINED by the City Council
(Sangguniang Panlungsod) of the City of Cagayan de Oro in
session assembled that:
SECTION 1. - Whenever used in this Ordinance, the following
terms shall be construed as:
a. Electric companies include all public utility companies
whether corporation or cooperative engaged in the
distribution and sale of electricity;
b. Telecommunication companies refer to establishments
or entities that are holders of franchise through an Act of
Congress to engage, maintain, and operate
telecommunications, voice and data services, under
existing Philippine laws, rules and regulations;
c. Pole User includes any person, natural or juridical,
including government agencies and entities that use and
rent poles and towers for the installation of any cable,
wires, service drops and other attachments;
d. Pole Owner includes electric and telecommunication
company or corporation that owns poles, towers and
other accessories thereof.
SECTION 2. - There shall be imposed a tax on the lease or rental
of electric and/or telecommunication posts, poles or towers by
pole owners to other pole users at the rate of ten (10) percent of
the annual rental income derived therefrom.
SECTION 3. - The tax imposed herein shall not be passed on by
pole owners to the bills of pole users in the form of added rental
rates.
SECTION 4. (a) Pole owners herein defined engaged in the
business of renting their posts, poles and/or towers shall secure a
separate business permit therefor as provided under Article (P),
Section 62(a) of Ordinance No. 8847-2003, otherwise known as
the Cagayan de Oro City Revenue Code of 2003.
(b) Pertinent provisions of Ordinance No. 8847-2003, covering
situs of the tax, payment of taxes and administrative provisions
shall apply in the imposition of the tax under this Ordinance.
SECTION 5. - This Ordinance shall take effect after 15 days
following its publication in a local newspaper of general circulation
for at least three (3) consecutive issues.
UNANIMOUSLY APPROVED.6
Ordinance No. 9503-2005 was unanimously approved by the City
Council of Cagayan de Oro on 10 January 2005.
The Trial Court’s Ruling
On 8 January 2007, the trial court rendered its Decision 7 in favor
of the City of Cagayan de Oro. The trial court identified three
issues for its resolution: (1) whether Ordinance No. 9503-2005 is
valid; (2) whether CEPALCO should be exempted from tax; and
(3) whether CEPALCO’s action is barred for non-exhaustion of
administrative remedies and for prescription.
In ruling for the validity of Ordinance No. 9503-2005, the trial
court rejected CEPALCO’s claim that the ordinance is an
imposition of income tax prohibited by Section 133(a) of the Local
Government Code.8 The trial court reasoned that since
CEPALCO’s business of leasing its posts to pole users is what is
directly taxed, the tax is not upon the income but upon the
privilege to engage in business. Moreover, Section 143(h), in
relation to Section 151, of the Local Government Code authorizes
a city to impose taxes, fees and charges on any business which
is not specified as prohibited under Section 143(a) to (g) and
which the city council may deem proper to tax.
The trial court also rejected CEPALCO’s claim of exemption from
tax. The trial court noted that Republic Act (R.A.) Nos.
3247,9 357010 and 6020,11 which previously granted CEPALCO’s
franchise, expressly stated that CEPALCO would pay a three
percent franchise tax in lieu of all assessments of whatever
authority. However, there is no similar provision in R.A. No. 9284,
which gave CEPALCO its current franchise.
Finally, the trial court found that CEPALCO’s action is barred by
prescription as it failed to raise an appeal to the Secretary of
Justice within the thirty-day period provided in Section 187 of the
Local Government Code.
The dispositive portion of the trial court’s decision reads:
WHEREFORE, it is crystal clear that Petitioner CEPALCO failed
not only in proving its allegations that City Ordinance 9503-2005
is illegal and contrary to law, and that [it] is exempted from the
imposition of tax, but also in convincing the Court that its action is
not barred for non-exhaustion of administrative remedy [sic] and
by prescription. Hence, the instant petition is DENIED.
SO ORDERED.12
CEPALCO filed a brief with the appellate court and raised the
following errors of the trial court:
A. The lower court manifestly erred in concluding that the
instant action is barred for non-exhaustion of
administrative remedies and by prescription.
B. The lower court gravely erred in finding that Ordinance
No. 9503-2005 of the City of Cagayan de Oro does not
partake of the nature of an income tax.
C. The lower court gravely erred in finding that Ordinance
No. 9503-2005 of the City of Cagayan de Oro is valid.
D. The lower court seriously erred in finding that herein
appellant is not exempted from payment of said tax.13
The Appellate Court’s Ruling
On 28 May 2009, the appellate court rendered its Decision14 and
affirmed the trial court’s decision.
The appellate court stated that CEPALCO failed to file a timely
appeal to the Secretary of Justice, and did not exhaust its
administrative remedies. The appellate court agreed with the trial
court’s ruling that the assailed ordinance is valid and declared
that the subject tax is a license tax for the regulation of business
in which CEPALCO is engaged. Finally, the appellate court found
that CEPALCO’s claim of tax exemption rests on a strained
interpretation of R.A. No. 9284.
In a Resolution15 dated 24 March 2010, the appellate court denied
CEPALCO’s motion for reconsideration for lack of merit. The
resolution also denied CEPALCO’s 3 August 2009 supplemental
motion for reconsideration for being filed out of time.
CEPALCO filed the present petition for review before this Court
on 27 May 2010.
The Issues
CEPALCO enumerated the following reasons for warranting
review:
1. In spite of its patent illegality, a City Ordinance passed
in violation or in excess of the city’s delegated power to
tax was upheld;
 2. In a case involving pure questions of law, the Court of
Appeals still insisted on a useless administrative remedy
before resort to the court may be made; and
3. Recent legislation affirming CEPALCO’s tax
exemptions was disregarded.16
In a Resolution dated 6 July 2011,17 this Court required both
parties to discuss whether the amount of tax imposed by Section
2 of Ordinance No. 9503-2005 complies with or violates, as the
case may be, the limitation set by Section 151, in relation to
Sections 137 and 143(h), of the Local Government Code.
The Court’s Ruling
Failure to Exhaust Administrative Remedies
Ordinance No. 9503-2005 is a local revenue measure. As such,
the Local Government Code applies.
SEC. 187. Procedure for Approval and Effectivity of Tax
Ordinances and Revenue Measures; Mandatory Public Hearings.
– The procedure for approval of local tax ordinances and revenue
measures shall be in accordance with the provisions of this Code:
Provided, That public hearings shall be conducted for the purpose
prior to the enactment thereof: Provided, further, That any
question on the constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal within thirty (30)
days from the effectivity thereof to the Secretary of Justice who
shall render a decision within sixty (60) days from the date of
receipt of the appeal: Provided, however, That such appeal shall
not have the effect of suspending the effectivity of the ordinance
and the accrual and payment of the tax, fee, or charge levied
therein: Provided, finally, That within thirty (30) days after receipt
of the decision or the lapse of the sixty-day period without the
Secretary of Justice acting upon the appeal, the aggrieved party
may file appropriate proceedings with a court of competent
jurisdiction.
SEC. 188. Publication of Tax Ordinances and Revenue
Measures. – Within ten (10) days after their approval, certified
true copies of all provincial, city, and municipal tax ordinances or
revenue measures shall be published in full for three (3)
consecutive days in a newspaper of local circulation: Provided,
however, That in provinces, cities and municipalities where there
are no newspapers of local circulation, the same may be posted
in at least two (2) conspicuous and publicly accessible places.
The Sangguniang Panlungsod of Cagayan de Oro approved
Ordinance No. 9503-2005 on 10 January 2005. Section 5 of said
ordinance provided that the "Ordinance shall take effect after 15
days following its publication in a local newspaper of general
circulation for at least three (3) consecutive issues." Gold Star
Daily published Ordinance No. 9503-2005 on 1 to 3 February
2005. Ordinance No. 9503-2005 thus took effect on 19 February
2005. CEPALCO filed its petition for declaratory relief before the
Regional Trial Court on 30 September 2005, clearly beyond the
30-day period provided in Section 187. CEPALCO did not file
anything before the Secretary of Justice. CEPALCO ignored our
ruling in Reyes v. Court of Appeals18 on the mandatory nature of
the statutory periods:
Clearly, the law requires that the dissatisfied taxpayer who
questions the validity or legality of a tax ordinance must file his
appeal to the Secretary of Justice, within 30 days from effectivity
thereof. In case the Secretary decides the appeal, a period also
of 30 days is allowed for an aggrieved party to go to court. But if
the Secretary does not act thereon, after the lapse of 60 days, a
party could already proceed to seek relief in court. These three
separate periods are clearly given for compliance as a
prerequisite before seeking redress in a competent court. Such
statutory periods are set to prevent delays as well as enhance the
orderly and speedy discharge of judicial functions. For this reason
the courts construe these provisions of statutes as mandatory.
A municipal tax ordinance empowers a local government unit to
impose taxes. The power to tax is the most effective instrument to
raise needed revenues to finance and support the myriad
activities of local government units for the delivery of basic
services essential to the promotion of the general welfare and
enhancement of peace, progress, and prosperity of the people.
Consequently, any delay in implementing tax measures would be
to the detriment of the public. It is for this reason that protests
over tax ordinances are required to be done within certain time
frames. In the instant case, it is our view that the failure of
petitioners to appeal to the Secretary of Justice within 30 days as
required by Sec. 187 of R.A. 7160 is fatal to their cause.
As in Reyes, CEPALCO’s failure to appeal to the Secretary of
Justice within the statutory period of 30 days from the effectivity
of the ordinance should have been fatal to its cause. However, we
relax the application of the rules in view of the more substantive
matters.
City of Cagayan de Oro’s Power to Create Sources of Revenue
vis-a-vis CEPALCO’s Claim of Exemption
Section 5, Article X of the 1987 Constitution provides that "each
local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees, and charges subject
to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes,
fees, and charges shall accrue exclusively to the local
government." The Local Government Code supplements the
Constitution with Sections 151 and 186:
SEC. 151. Scope of Taxing Powers. ‒ Except as otherwise
provided in this Code, the city may levy the taxes, fees and
charges which the province or municipality may impose:
Provided, however, That the taxes, fees and charges levied and
collected by highly urbanized and independent component cities
shall accrue to them and distributed in accordance with the
provisions of this Code.
The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality by not
more than fifty percent (50%) except the rates of professional and
amusement taxes.
SEC. 186. Power to Levy Other Taxes, Fees or Charges. ‒ Local
government units may exercise the power to levy taxes, fees or
charges on any base or subject not otherwise specifically
enumerated herein or taxed under the provisions of the National
Internal Revenue Code, as amended, or other applicable laws:
Provided, That the taxes, fees, or charges shall not be unjust,
excessive, oppressive, confiscatory or contrary to declared
national policy: Provided, further, That the ordinance levying such
taxes, fees, or charges shall not be enacted without any prior
public hearing conducted for the purpose.
Although CEPALCO does not question the authority of the
Sangguniang Panlungsod of Cagayan de Oro to impose a tax or
to enact a revenue measure, CEPALCO insists that Ordinance
No. 9503-2005 is an imposition of an income tax which is
prohibited by Section 133(a)19 of the Local Government Code.
Unfortunately for CEPALCO, we agree with the ruling of the trial
and appellate courts that Ordinance No. 9503-2005 is a tax on
business. CEPALCO’s act of leasing for a consideration the use
of its posts, poles or towers to other pole users falls under the
Local Government Code’s definition of business. Business is
defined by Section 131(d) of the Local Government Code as
"trade or commercial activity regularly engaged in as a means of
livelihood or with a view to profit." In relation to Section
131(d),20 Section 143(h)21 of the Local Government Code provides
that the city may impose taxes, fees, and charges on any
business which is not specified in Section 143(a) to (g) 22 and
which the sanggunian concerned may deem proper to tax.
In contrast to the express statutory provisions on the City of
Cagayan de Oro’s power to tax, CEPALCO’s claim of tax
exemption of the income from its poles relies on a strained
interpretation.23 Section 1 of R.A. No. 9284 added Section 9 to
R.A. No. 3247, CEPALCO’s franchise:
SEC. 9. Tax Provisions. ‒ The grantee, its successors or assigns,
shall be subject to the payment of all taxes, duties, fees or
charges and other impositions applicable to private electric
utilities under the National Internal Revenue Code (NIRC) of
1997, as amended, the Local Government Code and other
applicable laws: Provided, That nothing herein shall be construed
as repealing any specific tax exemptions, incentives, or privileges
granted under any relevant law: Provided, further, That all rights,
privileges, benefits and exemptions accorded to existing and
future private electric utilities by their respective franchises shall
likewise be extended to the grantee.
The grantee shall file the return with the city or province where its
facility is located and pay the taxes due thereon to the
Commissioner of Internal Revenue or his duly authorized
representative in accordance with the NIRC and the return shall
be subject to audit by the Bureau of Internal Revenue.
The Local Government Code withdrew tax exemption privileges
previously given to natural or juridical persons, and granted local
government units the power to impose franchise tax, 24 thus:
SEC. 137. Franchise Tax. – Notwithstanding any exemption
granted by any law or other special law, the province may impose
a tax on businesses enjoying a franchise, at a rate not exceeding
fifty percent (50%) of one percent (1%) of the gross annual
receipts for the preceding calendar year based on the incoming
receipt, or realized, within its territorial jurisdiction.
xxxx
SEC. 193. Withdrawal of Tax Exemption Privileges. – Unless
otherwise provided in this Code, tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations,
except local water districts, cooperatives duly registered under
R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity
of this Code.
SEC. 534. Repealing Clause. – x x x.
(f) All general and special laws, acts, city charters, decrees,
executive orders, proclamations and administrative regulations, or
part or parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified
accordingly.
It is hornbook doctrine that tax exemptions are strictly construed
against the claimant. For this reason, tax exemptions must be
based on clear legal provisions. The separate opinion in PLDT v.
City of Davao25 is applicable to the present case, thus:
Tax exemptions must be clear and unequivocal. A taxpayer
claiming a tax exemption must point to a specific provision of law
conferring on the taxpayer, in clear and plain terms, exemption
from a common burden. Any doubt whether a tax exemption
exists is resolved against the taxpayer. Tax exemptions cannot
arise by mere implication, much less by an implied re-enactment
of a repealed tax exemption clause.
CEPALCO’s claim of exemption under the "in lieu of all taxes"
clause must fail in light of Section 193 of the Local Government
Code as well as Section 9 of its own franchise.
Ordinance No. 9503-2005’s Compliance with
the Local Government Code
In our Resolution dated 6 July 2011,26 we asked both parties to
discuss whether the amount of tax imposed by Section 2 of
Ordinance No. 9503-2005 complies with or violates, as the case
may be, the limitation set by Section 151, in relation to Sections
137 and 143(h), of the Local Government Code.
CEPALCO argues that Ordinance No. 9503-2005 should be
invalidated because the City of Cagayan de Oro exceeded its
authority in enacting it. CEPALCO argued thus:
5. Thus, the taxes imposable under either Section 137 or
Section 143(h) are not unbridled but are restricted as to
the amount which may be imposed. This is the first
limitation. Furthermore, if it is a city which imposes the
same, it can impose only up to one-half of what the
province or municipality may impose. This is the second
limitation.
6. Let us now examine Ordinance No. 9503-2005 of the
respondent City of Cagayan de Oro in the light of the twin
limitations mentioned above.
7. Ordinance No. 9503-2005 of the respondent City of
Cagayan de Oro imposes a tax on the lease or rental of
electric and/or telecommunication posts, poles or towers
by pole owners to other pole users "at the rate of ten (10)
percent of the annual rental income derived therefrom."
8. With respect to Section 137, considering that the tax
allowed provinces "shall not exceed fifty percent (50%) of
one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt,
or realized, within its territorial jurisdiction," the tax
imposed by Ordinance No. 9503-2005 "at the rate of ten
(10) percent of the annual rental income derived
therefrom" is too much. There is a whale of a difference
between the allowable 50% of 1% and the 10% tax
imposed by the respondent. To illustrate: assuming that
the gross annual receipt is Php100, the maximum tax that
a province may impose under Section 137 (50% of 1%)
shall be Php0.5 or only fifty centavos. Therefore, the
maximum tax that the City may impose shall only be one-
half of this, which is Php0.25 or only twenty-five centavos.
But the questioned Ordinance imposes a tax amounting
to 10% of the gross annual receipt of Php100, which is
Php10, or Ten Pesos. This a whooping [sic] 40 times
more than that allowed for the province! The violation
made by respondent city of its delegated taxing authority
is all too patent.
9. With respect to Section 143(h), the rate of tax which
the municipality may impose "shall not exceed two
percent (2%) of gross sales or receipts of the preceding
calendar year." On the other hand, the tax imposed by
Ordinance No. 9503-2005 is "at the rate of ten (10)
percent of the annual rental income derived therefrom."
Again, it is obvious that the respondent City’s questioned
tax ordinance is way too much. Using the same tax base
of Php100 to illustrate, let us compute:
Under Section 143(h), the maximum tax that a municipality may
impose is 2% of Php100, which is Php2 or Two Pesos. Therefore,
the maximum tax that the City may impose shall be one-half of
this, which is Php1 or One Peso. But the tax under Ordinance No.
9503-2005 is Php10, or Ten Pesos. This is a whooping [sic] 10
times more than that allowed for the municipality! As in the earlier
instance discussed above, the violation made by the respondent
city of its delegated taxing authority is all too patent.27 (Boldfacing
and underscoring in the original)
The interpretation of the City of Cagayan de Oro is diametrically
opposed to that of CEPALCO. The City of Cagayan de Oro points
out that under Section 151 of the Local Government Code, cities
not only have the power to levy taxes, fees and charges which
the provinces or municipalities may impose, but the maximum
rate of taxes imposable by cities may exceed the maximum rate
of taxes imposable by provinces or municipalities by as much as
50%. The City of Cagayan de Oro goes on to state:
6. Thus, Section 30 of City of Cagayan de Oro’s
Ordinance No. 8847-2003, otherwise known as the
Revenue Code of Cagayan de Oro, imposes a franchise
tax on the gross receipts realized from the preceding year
by a business enjoying a franchise, at the rate of 75% of
1%. The increase of 25% over that which is prescribed
under Section 137 of the LGC is in accordance with
Section 151 thereof prescribing the allowable increase on
the rate of tax on the businesses duly identified and
enumerated under Section 143 of the LGC or those
defined and categorized in the preceding sections thereof;
7. Section 143 of the LGC prescribes the rate of taxes on
the identified categories of business enumerated therein
which were determined to be existing at the time of its
enactment. On the other hand, Section 151 of the LGC
prescribes the allowable rate of increase over the rate of
taxes imposed on businesses identified under Section
143 and the preceding sections thereof. It is [City of
Cagayan de Oro’s humble opinion that the allowable rate
of increase provided under Section 151 of the LGC
applies only to those businesses identified and
enumerated under Section 143 thereof. Thus, it is
respectfully submitted by City of Cagayan de Oro that the
2% limitation prescribed under Section 143(h) applies
only to the tax rates on the businesses identified
thereunder and does not apply to those that may
thereafter be deemed taxable under Section 186 of the
LGC, such as the herein assailed Ordinance No. 9503-
2005. On the same vein, it is the respectful submission of
City of Cagayan de Oro that the limitation under Section
151 of the LGC likewise does not apply in our particular
instance, otherwise it will run counter to the intent and
purpose of Section 186 of the LGC;
8. Be it strongly emphasized here that CEPALCO is
differently situated vis-á-vis the rest of the businesses
identified under Section 143 of the LGC. The imposition of
a tax "xxx on the lease or rental of electric and/or
telecommunications posts, poles or towers by pole
owners to other pole users at the rate of ten (10%) of the
annual rental income derived therefrom" as provided
under Section 2 of the questioned Ordinance No. 9503-
2005 is based on a reasonable classification, to wit: (a) It
is based on substantial distinctions which make a real
difference; (b) these are germane to the purpose of the
law; (c) the classification applies not only to the present
conditions but also to future conditions which are
substantially identical to those of the present; and (d) the
classification applies only to those belonging to the same
class;
9. Furthermore, Section 186 of the LGC allow [sic] local
government units to exercise their taxing power to levy
taxes, fees or charges on any base or subject not
otherwise specifically enumerated in the preceding
sections, more particularly Section 143 thereof, or under
the provisions of the National Internal Revenue Code, as
long as they are not unjust, excessive, oppressive,
confiscatory or contrary to declared national policy.
Moreover, a public hearing is required before the
Ordinance levying such taxes, fees or charges can be
enacted;
10. It is respectfully submitted by City of Cagayan de Oro
that the tax rate imposed under Section 2 of the herein
assailed Ordinance is not unjust, excessive, oppressive,
confiscatory or contrary to a declared national policy;
11. A reading of Section 143 of the LGC reveals that it has
neither identified the operation of a business engaged in
leasing nor prescribed its tax rate. Moreover, a Lessor, in
any manner, is not included among those defined as
Contractor under Section 131(h) of the LGC. However, a
Lessor, in its intended general application in City of
Cagayan de Oro (one who rents out real estate
 properties), was identified, categorized and included as
one of the existing businesses operating in the city, and
thus falling under the provisions of Ordinance No. 8847-
2003 (the Revenue Code of Cagayan de Oro) and,
therefore, imposed only a tax rate of 2% on their gross
annual receipts;
12. While the herein assailed Ordinance similarly
identifies that the base of the tax imposed therein are
receipts and/or revenue derived from rentals of poles and
posts, CEPALCO cannot be considered under the
definition of Lessor under the spirit, essence and intent of
Section 58(h) of the Revenue Code of Cagayan de Oro,
because the same refers only to "Real Estate Lessors,
Real Estate Dealers and Real Estate Developers." Thus,
CEPALCO should be, as it has been, categorized as a
(Distinct) Lessor where it enjoys not only a tremendous
and substantial edge but also an absolute advantage in
the rental of poles, posts and/or towers to other
telecommunication and cable TV companies and the like
over and above all others in view of its apparent
monopoly by allowing the use of their poles, posts and/or
towers by, leasing them out to, telecommunication and
cable TV companies operating within the city and
suburbs. Furthermore, CEPALCO has neither competition
in this field nor does it expect one since there are no other
persons or entities who are engaged in this particular
business activity;
x x x x28
CEPALCO is mistaken when it states that a city can impose a tax
up to only one-half of what the province or city may impose. A
more circumspect reading of the Local Government Code could
have prevented this error. Section 151 of the Local Government
Code states that, subject to certain exceptions, a city may exceed
by "not more than 50%" the tax rates allowed to provinces and
municipalities.29 A province may impose a franchise tax at a rate
"not exceeding 50% of 1% of the gross annual
receipts."30 Following Section 151, a city may impose a franchise
tax of up to 0.0075 (or 0.75%) of a business’ gross annual
receipts for the preceding calendar year based on the incoming
receipt, or realized, within its territorial jurisdiction. A municipality
may impose a business tax at a rate not exceeding "two percent
of gross sales or receipts."31 Following Section 151, a city may
impose a business tax of up to 0.03 (or 3%) of a business’ gross
sales or receipts of the preceding calendar year.
CEPALCO also erred when it equates Section 137’s "gross
annual receipts" with Ordinance No. 9503-2005’s "annual rental
income." Section 2 of Ordinance No. 9503-2005 imposes "a tax
on the lease or rental of electric and/or telecommunication posts,
poles or towers by pole owners to other pole users at the rate of
ten (10) percent of the annual rental income derived therefrom,"
and not on CEPALCO’s gross annual receipts. Thus, although the
tax rate of 10% is definitely higher than that imposable by cities
as franchise or business tax, the tax base of annual rental income
of "electric and/or telecommunication posts, poles or towers by
pole owners to other pole users" is definitely smaller than that
used by cities in the computation of franchise or business tax. In
effect, Ordinance No. 9503-2005 wants a slice of a smaller pie.
However, we disagree with the City of Cagayan de Oro’s
submission that Ordinance No. 9503-2005 is not subject to the
limits imposed by Sections 143 and 151 of the Local Government
Code. On the contrary, Ordinance No. 9503-2005 is subject to the
limitation set by Section 143(h). Section 143 recognizes separate
lines of business and imposes different tax rates for different lines
of business. Let us suppose that one is a brewer of liquor and, at
the same time, a distributor of articles of commerce. The brewery
business is subject to the rates established in Section 143(a)
while the distribution business is subject to the rates established
in Section 143(b). The City of Cagayan de Oro’s imposition of a
tax on the lease of poles falls under Section 143(h), as the lease
of poles is CEPALCO’s separate line of business which is not
covered by paragraphs (a) to (g) of Section 143. The treatment of
the lease of poles as a separate line of business is evident in
Section 4(a) of Ordinance No. 9503-2005. The City of Cagayan
de Oro required CEPALCO to apply for a separate business
permit.
1âwphi1

More importantly, because "any person, who in the course of

trade or business x x x leases goods or properties x x x shall be
subject to the value-added tax,"32 the imposable tax rate should
not exceed two percent of gross receipts of the lease of poles of
the preceding calendar year. Section 143(h) states that "on any
business subject to x x x value-added x x x tax under the National
Internal Revenue Code, as amended, the rate of tax shall not
exceed two percent (2%) of gross sales or receipts of the
preceding calendar year" from the lease of goods or properties.
Hence, the 10% tax rate imposed by Ordinance No. 9503-2005
clearly violates Section 143(h) of the Local Government Code.

Finally, in view of the lack of a separability clause, we declare

void the entirety of Ordinance No. 9503-2005. Any payment made
by reason of the tax imposed by Ordinance No. 9503-2005
should, therefore, be refunded to CEPALCO. Our ruling, however,
is made without prejudice to the enactment by the City of
Cagayan de Oro of a tax ordinance that complies with the limits
set by the Local Government Code.

WHEREFORE, we GRANT the petition. The Decision of the Court

of Appeals in CA-G.R. CV No. 01105-Min promulgated on 28 May
2009 and the Resolution promulgated on 24 March 2010 are
REVERSED and SET ASIDE Ordinance No. 9503-2005 is
declared void.

SO ORDERED.