parties to file their respective memoranda (Rollo, p. 119).

EN BANC
The petitioner filed its Memorandum on September 6, 1989 (Rollo, pp. 131-168).
[G.R. No. 86889 : December 4, 1990.]
On December 22, 1989, the Solicitor General adopted his Comment to the
192 SCRA 51 petition as his Memorandum (Rollo, pp. 186-187).
LUZ FARMS, Petitioner, vs. THE HONORABLE SECRETARY OF THE Luz Farms questions the following provisions of R.A. 6657, insofar as they are
DEPARTMENT OF AGRARIAN REFORM, Respondent. made to apply to it:
(a) Section 3(b) which includes the "raising of livestock (and poultry)" in
DECISION the definition of "Agricultural, Agricultural Enterprise or Agricultural
Activity."
PARAS, J.:
(b) Section 11 which defines "commercial farms" as "private agricultural
This is a petition for prohibition with prayer for restraining order and/or lands devoted to commercial, livestock, poultry and swine raising . . ."
preliminary and permanent injunction against the Honorable Secretary of the
Department of Agrarian Reform for acting without jurisdiction in enforcing the (c) Section 13 which calls upon petitioner to execute a production-
assailed provisions of R.A. No. 6657, otherwise known as the Comprehensive sharing plan.
Agrarian Reform Law of 1988 and in promulgating the Guidelines and Procedure (d) Section 16(d) and 17 which vest on the Department of Agrarian
Implementing Production and Profit Sharing under R.A. No. 6657, insofar as the Reform the authority to summarily determine the just compensation to
same apply to herein petitioner, and further from performing an act in violation of be paid for lands covered by the Comprehensive Agrarian Reform Law.
the constitutional rights of the petitioner.
(e) Section 32 which spells out the production-sharing plan mentioned in
As gathered from the records, the factual background of this case, is as follows: Section 13
On June 10, 1988, the President of the Philippines approved R.A. No. 6657, which ". . . (W)hereby three percent (3%) of the gross sales from the
includes the raising of livestock, poultry and swine in its coverage (Rollo, p. 80). production of such lands are distributed within sixty (60) days of the end
On January 2, 1989, the Secretary of Agrarian Reform promulgated the of the fiscal year as compensation to regular and other farmworkers in
Guidelines and Procedures Implementing Production and Profit Sharing as such lands over and above the compensation they currently receive:
embodied in Sections 13 and 32 of R.A. No. 6657 (Rollo, p. 80). Provided, That these individuals or entities realize gross sales in excess
of five million pesos per annum unless the DAR, upon proper application,
On January 9, 1989, the Secretary of Agrarian Reform promulgated its Rules and determine a lower ceiling.
Regulations implementing Section 11 of R.A. No. 6657 (Commercial Farms).
(Rollo, p. 81). In the event that the individual or entity realizes a profit, an additional
ten (10%) of the net profit after tax shall be distributed to said regular
Luz Farms, petitioner in this case, is a corporation engaged in the livestock and and other farmworkers within ninety (90) days of the end of the fiscal
poultry business and together with others in the same business allegedly stands year . . ."
to be adversely affected by the enforcement of Section 3(b), Section 11, Section
13, Section 16(d) and 17 and Section 32 of R.A. No. 6657 otherwise known as The main issue in this petition is the constitutionality of Sections 3(b), 11, 13 and
Comprehensive Agrarian Reform Law and of the Guidelines and Procedures 32 of R.A. No. 6657 (the Comprehensive Agrarian Reform Law of 1988), insofar
Implementing Production and Profit Sharing under R.A. No. 6657 promulgated on as the said law includes the raising of livestock, poultry and swine in its coverage
January 2, 1989 and the Rules and Regulations Implementing Section 11 thereof as well as the Implementing Rules and Guidelines promulgated in accordance
as promulgated by the DAR on January 9, 1989 (Rollo, pp. 2-36).: rd therewith.:-cralaw

Hence, this petition praying that aforesaid laws, guidelines and rules be declared The constitutional provision under consideration reads as follows:
unconstitutional. Meanwhile, it is also prayed that a writ of preliminary injunction ARTICLE XIII
or restraining order be issued enjoining public respondents from enforcing the
same, insofar as they are made to apply to Luz Farms and other livestock and x x x
poultry raisers.
AGRARIAN AND NATURAL RESOURCES REFORM
This Court in its Resolution dated July 4, 1939 resolved to deny, among others,
Luz Farms' prayer for the issuance of a preliminary injunction in its Manifestation Section 4. The State shall, by law, undertake an agrarian reform
dated May 26, and 31, 1989. (Rollo, p. 98). program founded on the right of farmers and regular farmworkers, who
are landless, to own directly or collectively the lands they till or, in the
Later, however, this Court in its Resolution dated August 24, 1989 resolved to case of other farmworkers, to receive a just share of the fruits thereof.
grant said Motion for Reconsideration regarding the injunctive relief, after the To this end, the State shall encourage and undertake the just
filing and approval by this Court of an injunction bond in the amount of distribution of all agricultural lands, subject to such priorities and
P100,000.00. This Court also gave due course to the petition and required the reasonable retention limits as the Congress may prescribe, taking into
 account ecological, developmental, or equity considerations, and subject It is generally held that, in construing constitutional provisions which are
to the payment of just compensation. In determining retention limits, ambiguous or of doubtful meaning, the courts may consider the debates in the
the State shall respect the rights of small landowners. The State shall constitutional convention as throwing light on the intent of the framers of the
further provide incentives for voluntary land-sharing. Constitution. It is true that the intent of the convention is not controlling by itself,
but as its proceeding was preliminary to the adoption by the people of the
x x x" Constitution the understanding of the convention as to what was meant by the
Luz Farms contended that it does not seek the nullification of R.A. 6657 terms of the constitutional provision which was the subject of the deliberation,
in its entirety. In fact, it acknowledges the correctness of the decision of goes a long way toward explaining the understanding of the people when they
this Court in the case of the Association of Small Landowners in the ratified it (Aquino, Jr. v. Enrile, 59 SCRA 183 [1974]).
Philippines, Inc. vs. Secretary of Agrarian Reform (G.R. 78742, 14 July The transcripts of the deliberations of the Constitutional Commission of 1986 on
1989) affirming the constitutionality of the Comprehensive Agrarian the meaning of the word "agricultural," clearly show that it was never the
Reform Law. It, however, argued that Congress in enacting the said law intention of the framers of the Constitution to include livestock and poultry
has transcended the mandate of the Constitution, in including land industry in the coverage of the constitutionally-mandated agrarian reform
devoted to the raising of livestock, poultry and swine in its coverage program of the Government.
(Rollo, p. 131). Livestock or poultry raising is not similar to crop or tree
farming. Land is not the primary resource in this undertaking and The Committee adopted the definition of "agricultural land" as defined under
represents no more than five percent (5%) of the total investment of Section 166 of R.A. 3844, as laud devoted to any growth, including but not
commercial livestock and poultry raisers. Indeed, there are many owners limited to crop lands, saltbeds, fishponds, idle and abandoned land (Record,
of residential lands all over the country who use available space in their CONCOM, August 7, 1986, Vol. III, p. 11).
residence for commercial livestock and raising purposes, under
"contract-growing arrangements," whereby processing corporations and The intention of the Committee is to limit the application of the word
other commercial livestock and poultry raisers (Rollo, p. 10). Lands "agriculture." Commissioner Jamir proposed to insert the word "ARABLE" to
support the buildings and other amenities attendant to the raising of distinguish this kind of agricultural land from such lands as commercial and
animals and birds. The use of land is incidental to but not the principal industrial lands and residential properties because all of them fall under the
factor or consideration in productivity in this industry. Including backyard general classification of the word "agricultural". This proposal, however, was not
raisers, about 80% of those in commercial livestock and poultry considered because the Committee contemplated that agricultural lands are
production occupy five hectares or less. The remaining 20% are mostly limited to arable and suitable agricultural lands and therefore, do not include
corporate farms (Rollo, p. 11). commercial, industrial and residential lands (Record, CONCOM, August 7, 1986,
Vol. III, p. 30).
On the other hand, the public respondent argued that livestock and poultry
raising is embraced in the term "agriculture" and the inclusion of such enterprise In the interpellation, then Commissioner Regalado (now a Supreme Court
under Section 3(b) of R.A. 6657 is proper. He cited that Webster's International Justice), posed several questions, among others, quoted as follows:
Dictionary, Second Edition (1954), defines the following words: x x x
"Agriculture the art or science of cultivating the ground and raising "Line 19 refers to genuine reform program founded on the primary right
and harvesting crops, often, including also, feeding, breeding and of farmers and farmworkers. I wonder if it means that leasehold tenancy
management of livestock, tillage, husbandry, farming. is thereby proscribed under this provision because it speaks of the
It includes farming, horticulture, forestry, dairying, sugarmaking . . . primary right of farmers and farmworkers to own directly or collectively
the lands they till. As also mentioned by Commissioner Tadeo,
Livestock domestic animals used or raised on a farm, especially for profit. farmworkers include those who work in piggeries and poultry projects.
Farm a plot or tract of land devoted to the raising of domestic or other I was wondering whether I am wrong in my appreciation that if
animals." (Rollo, pp. 82-83). somebody puts up a piggery or a poultry project and for that purpose
hires farmworkers therein, these farmworkers will automatically have the
The petition is impressed with merit. right to own eventually, directly or ultimately or collectively, the land on
The question raised is one of constitutional construction. The primary task in which the piggeries and poultry projects were constructed. (Record,
constitutional construction is to ascertain and thereafter assure the realization of CONCOM, August 2, 1986, p. 618).
the purpose of the framers in the adoption of the Constitution (J.M. Tuazon & Co. x x x
vs. Land Tenure Administration, 31 SCRA 413 [1970]).: rd
The questions were answered and explained in the statement of then
Ascertainment of the meaning of the provision of Constitution begins with the Commissioner Tadeo, quoted as follows:
language of the document itself. The words used in the Constitution are to be
given their ordinary meaning except where technical terms are employed in which x x x
case the significance thus attached to them prevails (J.M. Tuazon & Co. vs. Land
Tenure Administration, 31 SCRA 413 [1970]). "Sa pangalawang katanungan ng Ginoo ay medyo hindi kami
nagkaunawaan. Ipinaaalam ko kay Commissioner Regalado na hindi
 namin inilagay ang agricultural worker sa kadahilanang kasama rito ang Guidelines promulgated in accordance therewith, are hereby DECLARED null and
piggery, poultry at livestock workers. Ang inilagay namin dito ay farm void for being unconstitutional and the writ of preliminary injunction issued is
worker kaya hindi kasama ang piggery, poultry at livestock workers hereby MADE permanent.
(Record, CONCOM, August 2, 1986, Vol. II, p. 621).
SO ORDERED.
It is evident from the foregoing discussion that Section II of R.A. 6657 which
includes "private agricultural lands devoted to commercial livestock, poultry and Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Gancayco,
swine raising" in the definition of "commercial farms" is invalid, to the extent that Padilla, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.
the aforecited agro-industrial activities are made to be covered by the agrarian Feliciano, J., is on leave.
reform program of the State. There is simply no reason to include livestock and
poultry lands in the coverage of agrarian reform. (Rollo, p. 21). Separate Opinions

Hence, there is merit in Luz Farms' argument that the requirement in Sections 13 SARMIENTO, J., concurring:
and 32 of R.A. 6657 directing "corporate farms" which include livestock and
I agree that the petition be granted.
poultry raisers to execute and implement "production-sharing plans" (pending
final redistribution of their landholdings) whereby they are called upon to It is my opinion however that the main issue on the validity of the assailed
distribute from three percent (3%) of their gross sales and ten percent (10%) of provisions of R.A. 6657 (the Comprehensive Agrarian Reform Law of 1988) and
their net profits to their workers as additional compensation is unreasonable for its Implementing Rules and Guidelines insofar as they include the raising of
being confiscatory, and therefore violative of due process (Rollo, p. 21).:-cralaw livestock, poultry, and swine in their coverage cannot be simplistically reduced to
a question of constitutional construction.
It has been established that this Court will assume jurisdiction over a
constitutional question only if it is shown that the essential requisites of a judicial It is a well-settled rule that construction and interpretation come only after it has
inquiry into such a question are first satisfied. Thus, there must be an actual case been demonstrated that application is impossible or inadequate without them. A
or controversy involving a conflict of legal rights susceptible of judicial close reading however of the constitutional text in point, specifically, Sec. 4, Art.
determination, the constitutional question must have been opportunely raised by XIII, particularly the phrase, ". . . in case of other farmworkers, to receive a just
the proper party, and the resolution of the question is unavoidably necessary to share of the fruits thereof," provides a basis for the clear and possible coverage of
the decision of the case itself (Association of Small Landowners of the Philippines, livestock, poultry, and swine raising within the ambit of the comprehensive
Inc. v. Secretary of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; agrarian reform program. This accords with the principle that every presumption
Pabico v. Juico, G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989, 175 should be indulged in favor of the constitutionality of a statute and the court in
SCRA 343). considering the validity of a statute should give it such reasonable construction as
can be reached to bring it within the fundamental law. 1
However, despite the inhibitions pressing upon the Court when confronted with
constitutional issues, it will not hesitate to declare a law or act invalid when it is The presumption against unconstitutionality, I must say, assumes greater weight
convinced that this must be done. In arriving at this conclusion, its only criterion when a ruling to the contrary would, in effect, defeat the laudable and noble
will be the Constitution and God as its conscience gives it in the light to probe its purpose of the law, i.e., the welfare of the landless farmers and farmworkers in
meaning and discover its purpose. Personal motives and political considerations the promotion of social justice, by the expedient conversion of agricultural lands
are irrelevancies that cannot influence its decisions. Blandishment is as ineffectual into livestock, poultry, and swine raising by scheming landowners, thus, rendering
as intimidation, for all the awesome power of the Congress and Executive, the the comprehensive nature of the agrarian program merely illusory.
Court will not hesitate "to make the hammer fall heavily," where the acts of these
departments, or of any official, betray the people's will as expressed in the The instant controversy, I submit, boils down to the question of whether or not
Constitution (Association of Small Landowners of the Philippines, Inc. v. Secretary the assailed provisions violate the equal protection clause of the Constitution
of Agrarian Reform, G.R. 78742; Acuna v. Arroyo, G.R. 79310; Pabico v. Juico, (Article II, section 1) which teaches simply that all persons or things similarly
G.R. 79744; Manaay v. Juico, G.R. 79777, 14 July 1989). situated should be treated alike, both as to rights conferred and responsibilities
imposed. 2
Thus, where the legislature or the executive acts beyond the scope of its
constitutional powers, it becomes the duty of the judiciary to declare what the There is merit in the contention of the petitioner that substantial distinctions exist
other branches of the government had assumed to do, as void. This is the between land directed purely to cultivation and harvesting of fruits or crops and
essence of judicial power conferred by the Constitution "(I)n one Supreme Court land exclusively used for livestock, poultry and swine raising, that make real
and in such lower courts as may be established by law" (Art. VIII, Section 1 of differences, to wit:
the 1935 Constitution; Article X, Section I of the 1973 Constitution and which was x x x
adopted as part of the Freedom Constitution, and Article VIII, Section 1 of the
1987 Constitution) and which power this Court has exercised in many instances No land is tilled and no crop is harvested in livestock and poultry farming. There
(Demetria v. Alba, 148 SCRA 208 [1987]). are no tenants nor landlords, only employers and employees.

PREMISES CONSIDERED, the instant petition is hereby GRANTED. Sections 3(b), Livestock and poultry do not sprout from land nor are they "fruits of the land."
11, 13 and 32 of R.A. No. 6657 insofar as the inclusion of the raising of livestock,
Land is not even a primary resource in this industry. The land input is
poultry and swine in its coverage as well as the Implementing Rules and
inconsequential that all the commercial hog and poultry farms combined occupy
less than one percent (1%) (0.4% for piggery, 0.2% for poultry) of the 5.45 CIRILO ROY G. MONTEJO, petitioner,
million hectares of land supposedly covered by the CARP. And most farms utilize vs.
only 2 to 5 hectares of land.: nad COMMISSION ON ELECTIONS, respondent.
SERGIO A.F. APOSTOL, intervenor.
In every respect livestock and poultry production is an industrial activity. Its use
of an inconsequential portion of land is a mere incident of its operation, as in any
other undertaking, business or otherwise. PUNO, J.:

The fallacy of defining livestock and poultry production as an agricultural

More than political fortunes are at stake in the case at bench. Petitioner Cirilo Roy G. Montejo,
enterprise is nowhere more evident when one considers that at least 95% of total
representing the First District of Leyte, pleads for the annulment of section 1 of Resolution No.
investment in these farms is in the form of fixed assets which are industrial in
2736 of the COMELEC, redistricting certain municipalities in Leyte, on the ground that it violates
nature. the principle of equality of representation. To remedy the alleged inequity, petitioner seeks to
These include (1) animal housing structures and facilities complete with drainage, transfer the municipality of Tolosa from his district to the Second District of the province.
waterers, blowers, misters and in some cases even piped-in music; (2) feedmills Intervenor Sergio A.F. Apostol, representing the Second District, vigorously opposed the
inclusion of Tolosa in his district. We gave due course to the petition considering that, at bottom,
complete with grinders, mixers, conveyors, exhausts, generators, etc.; (3)
it involves the validity of the unprecedented exercise by the COMELEC of the legislative
extensive warehousing facilities for feeds and other supplies; (4) anti-pollution
power of redistricting and reapportionment.
equipment such as bio-gas and digester plants augmented by lagoons and
concrete ponds; (5) deepwells, elevated water tanks, pumphouses and accessory
facilities; (6) modern equipment such as sprayers, pregnancy testers, etc.; (7) The province of Leyte with the cities of Tacloban and Ormoc is composed of five (5) legislative
laboratory facilities complete with expensive tools and equipment; and a myriad districts.1
other such technologically advanced appurtances.
The first district2 covers Tacloban City and the municipalities of Alangalang, Babatngon, Palo,
How then can livestock and poultry farmlands be arable when such are almost
San Miguel, Sta. Fe, Tanauan and Tolosa.
totally occupied by these structures?
The fallacy of equating the status of livestock and poultry farmworkers with that The second district3 is composed of the municipalities of Barugo, Barauen, Capoocan, Carigara,
of agricultural tenants surfaces when one considers contribution to output. Labor Dagami, Dulag, Jaro, Julita, La Pat, Mayorga, MacArthur, Pastrana, Tabontabon, and Tunga.
cost of livestock and poultry farms is no more than 4% of total operating cost.
The 98% balance represents inputs not obtained from the land nor provided by
the farmworkers inputs such as feeds and biochemicals (80% of the total cost), The third district4 is composed of the municipalities of Almeria, Biliran, Cabucgayan, Caibiran,
Calubian, Culaba, Kawayan, Leyte, Maripipi, Naval, San Isidro, Tabango, and Villaba.
power cost, cost of money and several others.
Moreover, livestock and poultry farmworkers are covered by minimum wage law The fourth district5 is composed of Ormoc City and the municipalities of Albuera, Isabel,
rather than by tenancy law. They are entitled to social security benefits where Kananga, Matagob, Merida, and Palompon.
tenant-farmers are not. They are paid fixed wages rather than crop shares. And
as in any other industry, they receive additional benefits such as allowances,
bonuses, and other incentives such as free housing privileges, light and water. The fifth district6 is composed of the municipalities of Abuyog, Bate, Baybay, Hilongos, Hindang,
Inopacan, Javier, Mahaplag, and Matalom.
Equating livestock and poultry farming with other agricultural activities is also
fallacious in the sense that like the manufacturing sector, it is a market for, rather Biliran, located in the third district of Leyte , was made its sub-province by virtue of Republic Act
than a source of agricultural output. At least 60% of the entire domestic supply of No. 2141 Section 1 of the law spelled out enacted on April 8, 1959. 7
corn is absorbed by livestock and poultry farms. So are the by-products of rice
(rice-bran), coconut (copra meal), banana (banana pulp meal), and fish (fish
meal). 3 Section 1 of the law spelled out the municipalities comprising the sub-province, viz.: "Almeria,
Biliran, Cabucgayan, Caibiran, Culaba, Kawayan, Maripipi and Naval and all the territories
x x x comprised therein."
In view of the foregoing, it is clear that both kinds of lands are not similarly
situated and hence, cannot be treated alike. Therefore, the assailed provisions On January 1, 1992, the Local Government Code took effect. Pursuant to its Section 462, the
which allow for the inclusion of livestock and poultry industry within the coverage sub-province of Biliran became a regular province. It provides:
of the agrarian reform program constitute invalid classification and must
accordingly be struck down as repugnant to the equal protection clause of the Existing sub-provinces are hereby converted into regular provinces upon approval by
Constitution.chanrobles virtual law librar a majority of the votes cast in a plebiscite to be held in the sub-provinces and the
original provinces directly affected. The plebiscite shall be conducted by the
COMELEC simultaneously with the national elections following the effectivity of this
------------------------------------------------------------------------------------------------------------------------------------------ code. The new legislative districts created as a result of such conversion shall
EN BANC continue to be represented in Congress by the duly-elected representatives of the
G.R. No. 118702 March 16, 1995 original districts out of which said new provinces or districts were created until their
 own representatives shall have been elected in the next regular congressional To remedy the resulting inequality in the distribution of inhabitants, voters and municipalities in
elections and qualified. the province of Leyte, respondent COMELEC held consultation meetings with the incumbent
representatives of the province and other interested parties. On December 29, 1994, it
promulgated Resolution No. 2736 where, among others, it transferred the municipality of
The conversion of Biliran into a regular province was approved by a majority of the votes cast in
Capoocan of the Second District and the municipality of Palompon of the Fourth District to the
a plebiscite held on May 11, 1992. As a consequence of the conversion, eight (8) municipalities
Third District of Leyte. The composition of the First District which includes the municipality
of the Third District composed the new province of Biliran, i.e., Almeria, Biliran, Cabucgayan,
of Tolosa and the composition of the Fifth District were not disturbed. After the movement of
Caibiran, Culaba, Kawayan, Maripipi, and Naval. A further consequence was to reduce the Third
municipalities, the composition of the five (5) legislative districts appeared as follow:
District to five (5) municipalities with a total population of 145,067 as per the 1990 census.

Petitioner Montejo filed a motion for reconsideration calling the attention of respondent Sec. 3. Any province that may hereafter be created, or any city whose population may
COMELEC, among others, to the inequitable distribution of inhabitants and voters between the hereafter increase to more than two hundred fifty thousand shall be entitled in the
First and Second Districts. He alleged that the First District has 178,688 registered voters while immediately following election to at least one Member or such number of Members as
the Second District has 156,462 registered voters or a difference of 22,226 registered voters. To it may be entitled to on the basis of the number of its inhabitants and according to the
diminish the difference, he proposed that the municipality of Tolosa with 7,7000 registered voters standards set forth in paragraph (3), Section 5 of Article VI of the Constitution.
be transferred from the First to the Second District. The motion was opposed by intervenor, The number of Members apportioned to the province out of which such new province
Sergio A.F. Apostol. Respondent Commission denied the motion ruling that: (1) its adjustment of was created or where the city, whose population has so increased, is geographically
municipalities involved the least disruption of the territorial composition of each district; and (2) located shall be correspondingly adjusted by the Commission on Elections but such
said adjustment complied with the constitutional requirement that each legislative district shall adjustment shall not be made within one hundred and twenty days before the election.
comprise, as far as practicable, contiguous, compact and adjacent territory. (Emphasis supplied)

In this petition, petitioner insists that Section I of Resolution No. 2736 violates the principle of The Ordinance was made necessary because Proclamation No. 3 10 of President Corazon C.
equality of representation ordained in the Constitution. Citing Wesberry v. Sanders,8 he argues Aquino, ordaining the Provisional Constitution of the Republic of the Philippines, abolished
that respondent COMELEC violated "the constitutional precept that as much as practicable one the Batasang Pambansa. 11 She then exercised legislative powers under the Provisional
man's vote in a congressional election is to be worth as much as another's." The Solicitor Constitution.12
General, in his Comment, concurred with the views of the petitioner. The intervenor, however,
opposed the petition on two (2) grounds: (1) COMELEC has no jurisdiction to promulgate
The Ordinance was the principal handiwork of then Commissioner Hilario G. Davide, Jr., 13 now
Resolution No. 2736; and (2) assuming it has jurisdiction, said Resolution is in accord with the
a distinguished member of this Court. The records reveal that the Constitutional Commission
Constitution. Respondent COMELEC filed its own Comment alleging that it acted within the
had to resolve several prejudicial issues before authorizing the first congressional elections
parameters of the Constitution.
under the 1987 Constitution. Among the vital issues were: whether the members of the House of
Representatives would be elected by district or by province; who shall undertake the
We find section 1 of Resolution No. 2736 void. apportionment of the legislative districts; and, how the apportionment should be
made.14Commissioner Davide, Jr. offered three (3) options for the Commission to consider: (1)
allow President Aquino to do the apportionment by law; (2) empower the COMELEC to make the
While the petition at bench presents a significant issue, our first inquiry will relate to the
apportionment; or (3) let the Commission exercise the power by way of an Ordinance appended
constitutional power of the respondent COMELEC9 to transfer municipalities from one legislative
to the Constitution. 15 The different dimensions of the options were discussed by Commissioners
district to another legislative district in the province of Leyte. The basic powers of respondent
Davide, Felicitas S. Aquino and Blas F. Ople. We quote the debates in extenso, viz.:16
COMELEC, as enforcer and administrator of our election laws, are spelled out in black and white
in section 2(c), Article IX of the Constitution. Rightly, respondent COMELEC does not invoke this
provision but relies on the Ordinance appended to the 1987 Constitution as the source of xxx xxx xxx
its power of redistricting which is traditionally regarded as part of the power to make laws. The
Ordinance is entitled "Apportioning the Seats of the House of Representatives of the Congress
MR. PADILLA. Mr. Presiding Officer.
of the Philippines to the Different Legislative Districts in Provinces and Cities and the
Metropolitan Manila Area." Its substantive sections state:
THE PRESIDING OFFICER (Mr. Jamir). Commissioner Padilla is
recognized.
Sec. 1. For purposes of the election of Members of the House of Representatives of
the First Congress of the Philippines under the Constitution proposed by the 1986
Constitutional Commission and subsequent elections, and until otherwise provided by MR. PADILLA. I think I have filed a very simple motion by way of
law, the Members thereof shall be elected from legislative districts apportioned among amendment by substitution and this was, I believe, a prior or a proposed
the provinces, cities, and the Metropolitan Manila Area as follows: amendment. Also, the chairman of the Committee on the Legislative said
that he was proposing a vote first by the Chamber on the concept of
whether the election is by province and cities on the one hand, or by
xxx xxx xxx
legislative districts on the other. So I propose this simple formulation which
reads: "FOR THE FIRST ELECTION UNDER THIS CONSTITUTION THE
Sec. 2. The Commission on Elections is hereby empowered to make minor LEGISLATIVE DISTRICTS SHALL BE APPORTIONED BY THE
adjustments of the reapportionment herein made. COMMISSION ON ELECTIONS." I hope the chairman will accept the
proposed amendment.
SUSPENSION OF SESSION THE PRESIDING OFFICER (Mr. Jamir). Commissioner Aquino is
recognized.
MR. DAVIDE. The effect is, more or less, the same insofar as the
apportionment is concerned, but the Bernas-Sarmiento et al. proposal would MS. AQUINO. I have to object to the provision which will give mandate to
also provide for a mandate for the apportionment later, meaning after the COMELEC to do the redistricting. Redistricting is vitally linked to the baneful
first election, which will in effect embody what the Commission had practices of cutting up areas or spheres of influence; in other words,
approved, reading as follows: "Within three years following the return of gerrymandering. This Commission, being a nonpartisan, a nonpolitical
every census, the Congress shall make a reapportionment of legislative deliberative body, is in the best possible situation under the circumstances
districts based on the standards provided in this section." to undertake that responsibility. We are not wanting in expertise and in time
because in the first place, the Committee on the Legislative has prepared
the report on the basis of the recommendation of the COMELEC.
So, Mr. Presiding Officer, may I request for a suspension of the session, so
that all the proponents can work together.
MR. OPLE. Mr. Presiding Officer.
THE PRESIDING OFFICER (Mr. Jamir). The session is suspended.
THE PRESIDING OFFICER (Mr. Jamir). Commissioner Ople is recognized.
It was 3:33 p.m.
MR. OPLE. I would like to support the position taken by Commissioner
Aquino in this respect. We know that the reapportionment of provinces and
RESUMPTION OF SESSION
cities for the purpose of redistricting is generally inherent in the constituent
power or in the legislative power. And I would feel very uncertain about
At 3:40 p.m., the session was resumed. delegating this to a quasi-judicial body even if it is one of the constitutional
offices created under this Constitution. We have the assurance of
Commissioner Davide, as chairman of the Committee on the Legislative,
THE PRESIDING OFFICER (Mr. Jamir). The session is resumed. that even given the very short time remaining in the life of this Commission,
there is no reason why we cannot complete the work of reapportionment on
Commissioner Davide is recognized. the basis of the COMELEC plan which the committee has already
thoroughly studied and which remains available to the Constitutional
Commission.
MR. DAVIDE. Mr. Presiding Officer, as a compromise, I wonder if the
Commission will allow this. We will just delete the proposed subparagraph
(4) and all the capitalized words in paragraph (5). So that in paragraph (5), So, I support the position taken by Commissioner Aquino, Mr. Presiding
what would be left would only be the following: "Within three years following Officer. I think, it is the safest, the most reasonable, and the most workable
the return of every census, the Congress shall make a reapportionment of approach that is available to this Commission.
legislative districts based on the standards provided in this section."
THE PRESIDING OFFICER (Mr. Jamir). What does Commissioner Davide
But we shall have an ordinance appended to the new Constitution indicating say:
specifically the following: "FOR PURPOSES OF THE ELECTION OF
MEMBERS OF THE HOUSE OF REPRESENTATIVES IN THE FIRST MR. DAVIDE. The issue now is whether this body will make the
CONGRESSIONAL ELECTION IMMEDIATELY FOLLOWING THE apportionment itself or whether we will leave it to the COMELEC. So, there
RATIFICATION OF THIS CONSTITUTION PROPOSED BY THE 1986 arises, therefore, a prejudicial question for the body to decide. I would
CONSTITUTIONAL COMMISSION AND SUBSEQUENT ELECTIONS AND
propose that the Commission should now decide what body should make
UNTIL OTHERWISE PROVIDED BY LAW, THE MEMBERS OF THE the apportionment. Should it be the Commission or should it be the
HOUSE OF REPRESENTATIVES SHALL BE ELECTED FROM COMELEC? And the Committee on the Legislative will act accordingly on
LEGISLATIVE DISTRICTS APPORTIONED AMONG THE PROVINCES,
the basis of the decision.
CITIES AND THE METROPOLITAN MANILA AREA AS FOLLOWS."

MR. BENGZON. Mr. Presiding Officer.

And what will follow will be the allocation of seats to Metropolitan Manila
Area, to the provinces and to the cities, without indicating the municipalities
comprising each of the districts. Then, under Section 2, we will mandate the THE PRESIDING OFFICER (Mr. Jamir). Commissioner Bengzon is
COMELEC to make the actual apportionment on the basis of the number of recognized.
seats provided for and allocated to each province by us.
MR. BENGZON. Apropos of that, I would like to inform the body that I
MS. AQUINO. Mr. Presiding Officer. believe the Committee on the Legislative has precisely worked on this
matter and they are ready with a list of apportionment. They have, in fact,
apportioned the whole country into various districts based on the
recommendation of the COMELEC. So they are ready with the list and if this MR. REGALADO. On the basis of the Commissioner's proposed
body would wish to apportion the whole country by district itself, then I apportionment and considering the fact that there will be a corresponding
believe we have the time to do it because the Committee on the Legislative reduction to 183 seats, would there be instances representation of under
is ready with that particular report which need only to be appended to the non-representation?
Constitution. So if this body is ready to accept the work of the Committee on
the Legislative we would have no problem. I just would like to give that
MR. DAVIDE. None at all, Mr. Presiding Officer. I can assure the
information so that the people here would be guided accordingly when they
Commission that there will be no case of inequitable distribution. It will come
vote.
out to be one for every 350 to 400,000 inhabitants.

MR. RODRIGO. Mr. Presiding Officer.

MR. REGALADO. And that would be within the standard that we refer.

THE PRESIDING OFFICER (Mr. Jamir) Commissioner Rodrigo is

MR. DAVIDE. Yes, Mr. Presiding Officer.
recognized.

MR. REGALADO. Thank you.

MR. RODRIGO. I just would like to ask Commissioner Davide some
questions.
MR. RAMA. Mr. Presiding Officer.
THE PRESIDING OFFICER (Mr. Jamir). Commissioner Davide may yield if
he so desires. THE PRESIDING OFFICER (Mr. Jamir). The Floor Leader is recognized.

MR. DAVIDE. Gladly. MR. RAMA. The parliamentary situation is that there was a motion by
Commissioner Sarmiento to mandate COMELEC to do the redistricting. This
was also almost the same motion by Commissioner Padilla and I think we
MR. RODRIGO. Will this apportionment which we are considering apply
have had some kind of meeting of minds. On the other hand, there seems to
only to the first election after the enactment of the Constitution?
be a prejudicial question, an amendment to the amendment as suggested
by Commissioner Aquino, that instead of the COMELEC, it should be this
MR. DAVIDE. On the basis of the Padilla proposal, it will be for the first Commission that shall make the redistricting. So may I ask Commissioner
election; on the basis of the Sarmiento proposal, it will only apply to the first Aquino, if she insists on that idea, to please formulate it into a motion so we
election. can vote on that first as an amendment to the amendment.

MR. RODRIGO. And after that, Congress will have the power to THE PRESIDING OFFICER (Mr. Jamir).Commissioner Aquino is
reapportion. recognized.

MR. DAVIDE. Yes. MS . AQUINO. The motion is for this Commission to undertake the
apportionment of the legislative districts instead of the proposal that
COMELEC be given the mandate to undertake the responsibility.
MR. RODRIGO. So, if we attach this to the Constitution the
reapportionment based on the COMELEC study and between the approval
of the Constitution and the first election the COMELEC no longer has the xxx xxx xxx
power to change that even a bit.
MR. SARMIENTO. May I be clarified, Mr. Presiding Officer. Is it the motion
xxx xxx xxx or the proposed amendment?

THE PRESIDING OFFICER (Mr. Jamir) Commissioner Regalado is THE PRESIDING OFFICER (Mr. Jamir). The proposed amendment.
recognized.
MR. SARMIENTO. May we move for the approval of this proposed
MR. REGALADO. May I address a clarificatory question to Commissioner amendment which we substitute for paragraphs 4 and 5.
Davide?
MR. DAVIDE. May I request that it should be treated merely as a motion to
THE PRESIDING OFFICER (Mr. Jamir). Gentleman will please proceed. be followed by a deletion of paragraph 4 because that should not really
appear as a paragraph in Section 5; otherwise, it will appear very ugly in the
Constitution where we mandate a Commission that will become functus
officio to have the authority. As a matter of fact, we cannot exercise that THE PRESIDING OFFICER (Mr. Jamir). Let us proceed to vote.
authority until after the ratification of the new Constitution.
As many as are in favor, please raise their hand. (Several Members raised
THE PRESIDING OFFICER (Mr. Jamir). What does Commissioner their hand.)
Sarmiento say?
As many as are against, please raise their hand. (No Member raised his
MR. SARMIENTO. It is accepted, Mr. Presiding Officer. So, may I move for hand.)
the approval of this proposed amendment.
The results show 30 votes in favor and none against; the motion is
MS. AQUINO. Mr. Presiding Officer. approved.

THE PRESIDING OFFICER (Mr. Jamir). Commissioner Aquino is Clearly then, the Constitutional Commission denied to the COMELEC the major power of
recognized. legislative apportionment as it itself exercised the power. Section 2 of the Ordinance only
empowered the COMELEC "to make minoradjustments of the reapportionment herein made."
The meaning of the phrase "minor adjustments was again clarified in the debates 17 of the
MS. AQUINO. Would that require a two-thirds vote or a simple plurality to
Commission, viz.:
adopt that motion?

xxx xxx xxx

THE PRESIDING OFFICER (Mr. Jamir). That will require a two-thirds vote.

MR. GUINGONA. This is just clarificatory, Mr. Presiding Officer. In Section

MS. AQUINO. Thank you. Mr. Presiding Officer.
2, the Commission on Elections is empowered to make minor adjustments
on the apportionment made here.
MR. SARMIENTO. May I restate the motion, Mr. Presiding Officer.
MR. DAVIDE. Yes, Mr. Presiding Officer.
THE PRESIDING OFFICER (Mr. Jamir) The Gentleman may proceed.
MR. GUINGONA. We have not set any time limit for this.
MR. SARMIENTO. May I move that this Commission do the
reapportionment legislative districts.
MR. DAVIDE. We should not set a time limit unless during the period of
amendments a proposal is made. The authority conferred would be on
MS. AQUINO. Mr. Presiding Officer. minor corrections or amendments, meaning to say, for instance, that we
may have forgotten an intervening municipality in the enumeration, which
ought to be included in one district. That we shall consider a minor
THE PRESIDING OFFICER (Mr. Jamir). What is the pleasure of amendment.
Commissioner Aquino?

MR. GUINGONA. Thank you.

MS. AQUINO. May I be clarified again on the motion. Is Commissioner
Sarmiento, therefore, adopting my motion? Would it not be right for him to
move that the COMELEC be mandated? xxx xxx xxx

MR. SARMIENTO. No, we accepted the amendment. It is already the THE PRESIDING OFFICER (Mr. Romulo). Commissioner de Castro is
Commission that will be mandated. recognized.

MS. AQUINO. So, the Gentlemen has accepted the amendment the MR. DE CASTRO. Thank you.
amendment.
I was about to ask the committee the meaning of minor adjustment. Can it
Thank you. be possible that one municipality in a district be transferred to another
district and call it a minor adjustment?
MR. SARMIENTO. I am voting that this Commission do the
reapportionment. MR. DAVIDE. That cannot be done, Mr. Presiding Officer. Minor, meaning,
that there should be no change in the allocations per district. However, it
may happen that we have forgotten a municipality in between which is still in
VOTING
 the territory of one assigned district, or there may be an error in the correct praying for the transfer of the municipality of Tolosa from the First District to the Second District
name of a particular municipality because of changes made by the interim of the province of Leyte. No costs.
Batasang Pambansa and the Regular Batasang Pambansa. There were
many batas pambansa enacted by both the interim and the Regular
SO ORDERED.
Batasang Pambansa changing the names of municipalities.

Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo,
MR. DE CASTRO. So, the minor adjustment may be made only if one of the
Quiason, Vitug, Kapunan, Mendoza and Francisco, JJ., concur.
municipalities is not mentioned in the ordinance appended to, and it will be
up for the COMELEC now to adjust or to put such municipality to a certain
district. Republic of the Philippines
SUPREME COURT
MR. DAVIDE. Yes, Mr. Presiding Officer. For instance, we may not have the Manila
data regarding a division of a municipality by the interim Batasang
Pambansa or the Regular Batasang Pambansa into two municipalities, EN BANC
meaning, a mother municipality and the new municipality, but still actually
these are within the geographical district area.
G.R. No. L-34964 January 31, 1973

MR. DE CASTRO. So the minor adjustment which the COMELEC cannot do

is that, if, for example, my municipality is in the First District of Laguna, they CHINA BANKING CORPORATION and TAN KIM LIONG, petitioners-appellants,
cannot put that in any other district. vs.
HON. WENCESLAO ORTEGA, as Presiding Judge of the Court of First Instance of Manila,
Branch VIII, and VICENTE G. ACABAN, respondents-appellees.
MR. DAVIDE. That is not even a minor correction. It is a substantive one.
Sy Santos, Del Rosario and Associates for petitioners-appellants.
MR. DE CASTRO. Thank you.

Tagalo, Gozar and Associates for respondents-appellees.

Consistent with the limits of its power to make minor adjustments, Section 3 of the Ordinance did
not also give the respondent COMELEC any authority to transfer municipalities from one
legislative district to another district. The power granted by Section 3 to the respondent
COMELEC is to adjust the number of members (not municipalities) "apportioned to the province
out of which such new province was created. . . ." MAKALINTAL, J.:

Prescinding from these premises, we hold that respondent COMELEC committed grave abuse The only issue in this petition for certiorari to review the orders dated March 4, 1972 and March
of discretion amounting to lack of jurisdiction when it promulgated section 1 of its Resolution No. 27, 1972, respectively, of the Court of First Instance of Manila in its Civil Case No. 75138, is
2736 transferring the municipality of Capoocan of the Second District and the municipality of whether or not a banking institution may validly refuse to comply with a court process garnishing
Palompon of the Fourth District to the Third District of Leyte. the bank deposit of a judgment debtor, by invoking the provisions of Republic Act No. 1405. *

It may well be that the conversion of Biliran from a sub-province to a regular province brought On December 17, 1968 Vicente Acaban filed a complaint in the court a quo against Bautista
about an imbalance in the distribution of voters and inhabitants in the five (5) legislative districts Logging Co., Inc., B & B Forest Development Corporation and Marino Bautista for the collection
of the province of Leyte. This imbalance, depending on its degree, could devalue a citizen's vote of a sum of money. Upon motion of the plaintiff the trial court declared the defendants in default
in violation of the equal protection clause of the Constitution. Be that as it may, it is not proper at for failure to answer within the reglementary period, and authorized the Branch Clerk of Court
this time for petitioner to raise this issue using the case at bench as his legal vehicle. The issue and/or Deputy Clerk to receive the plaintiff's evidence. On January 20, 1970 judgment by default
involves a problem of reapportionment of legislative districts and petitioner's remedy lies with was rendered against the defendants.
Congress. Section 5(4), Article VI of the Constitution categorically gives Congress the power to
reapportion, thus: "Within three (3) years following the return of every census, the Congress
shall make a reapportionment of legislative districts based on the standards provided in this To satisfy the judgment, the plaintiff sought the garnishment of the bank deposit of the defendant
section." In Macias v. COMELEC, 18 we ruled that the validity of a legislative apportionment is a B & B Forest Development Corporation with the China Banking Corporation. Accordingly, a
justiciable question. But while this Court can strike down an unconstitutional reapportionment, it notice of garnishment was issued by the Deputy Sheriff of the trial court and served on said bank
cannot itself make the reapportionment as petitioner would want us to do by directing through its cashier, Tan Kim Liong. In reply, the bank' cashier invited the attention of the Deputy
respondent COMELEC to transfer the municipality of Tolosa from the First District to the Second Sheriff to the provisions of Republic Act No. 1405 which, it was alleged, prohibit the disclosure of
District of the province of Leyte. any information relative to bank deposits. Thereupon the plaintiff filed a motion to cite Tan Kim
Liong for contempt of court.
IN VIEW WHEREOF, section 1 of Resolution No. 2736 insofar as it transferred the municipality
of Capoocan of the Second District and the municipality of Palompon of the Fourth District to the In an order dated March 4, 1972 the trial court denied the plaintiff's motion. However, Tan Kim
Third District of the province of Leyte, is annulled and set aside. We also deny the Petition Liong was ordered "to inform the Court within five days from receipt of this order whether or not
there is a deposit in the China Banking Corporation of defendant B & B Forest Development to determine whether he has a bank deposit in order to bring about a proper
Corporation, and if there is any deposit, to hold the same intact and not allow any withdrawal assessment by the Bureau of Internal Revenue, such inquiry is not
until further order from this Court." Tan Kim Liong moved to reconsider but was turned down by authorized by this proposed law.
order of March 27, 1972. In the same order he was directed "to comply with the order of this
Court dated March 4, 1972 within ten (10) days from the receipt of copy of this order, otherwise
Mr. MARCOS. But under our rules of procedure and under the Civil Code,
his arrest and confinement will be ordered by the Court." Resisting the two orders, the China
the attachment or garnishment of money deposited is allowed. Let us
Banking Corporation and Tan Kim Liong instituted the instant petition.
assume, for instance, that there is a preliminary attachment which is for
garnishment or for holding liable all moneys deposited belonging to a certain
The pertinent provisions of Republic Act No. 1405 relied upon by the petitioners reads: individual, but such attachment or garnishment will bring out into the open
the value of such deposit. Is that prohibited by this amendment or by this
law?
Sec. 2. All deposits of whatever nature with banks or banking institutions in
the Philippines including investments in bonds issued by the Government of
the Philippines, its political subdivisions and its instrumentalities, are hereby Mr. RAMOS. It is only prohibited to the extent that the inquiry is limited, or
considered as of absolutely confidential nature and may not be examined, rather, the inquiry is made only for the purpose of satisfying a tax liability
inquired or looked into by any person, government official, bureau or office, already declared for the protection of the right in favor of the government;
except upon written permission of the depositor, or in cases of but when the object is merely to inquire whether he has a deposit or not for
impeachment, or upon order of a competent court in cases of bribery or purposes of taxation, then this is fully covered by the law.
dereliction of duty of public officials, or in cases where the money deposited
or invested is the subject matter of the litigation.
Mr. MARCOS. And it protects the depositor, does it not?

Sec 3. It shall be unlawful for any official or employee of a banking

Mr. RAMOS. Yes, it protects the depositor.
institution to disclose to any person other than those mentioned in Section
two hereof any information concerning said deposits.
Mr. MARCOS. The law prohibits a mere investigation into the existence and
the amount of the deposit.
Sec. 5. Any violation of this law will subject offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court. Mr. RAMOS. Into the very nature of such deposit.

The petitioners argue that the disclosure of the information required by the court does not fall Mr. MARCOS. So I come to my original question. Therefore, preliminary
within any of the four (4) exceptions enumerated in Section 2, and that if the questioned orders garnishment or attachment of the deposit is not allowed?
are complied with Tan Kim Liong may be criminally liable under Section 5 and the bank exposed
to a possible damage suit by B & B Forest Development Corporation. Specifically referring to
this case, the position of the petitioners is that the bank deposit of judgment debtor B & B Forest Mr. RAMOS. No, without judicial authorization.
Development Corporation cannot be subject to garnishment to satisfy a final judgment against it
in view of the aforequoted provisions of law. Mr. MARCOS. I am glad that is clarified. So that the established rule of
procedure as well as the substantive law on the matter is amended?
We do not view the situation in that light. The lower court did not order an examination of or
inquiry into the deposit of B & B Forest Development Corporation, as contemplated in the law. It Mr. RAMOS. Yes. That is the effect.
merely required Tan Kim Liong to inform the court whether or not the defendant B & B Forest
Development Corporation had a deposit in the China Banking Corporation only for purposes of
the garnishment issued by it, so that the bank would hold the same intact and not allow any Mr. MARCOS. I see. Suppose there has been a decision, definitely
withdrawal until further order. It will be noted from the discussion of the conference committee establishing the liability of an individual for taxation purposes and this
report on Senate Bill No. 351 and House Bill No. 3977, which later became Republic Act 1405, judgment is sought to be executed ... in the execution of that judgment,
that it was not the intention of the lawmakers to place bank deposits beyond the reach of does this bill, or this proposed law, if approved, allow the investigation or
execution to satisfy a final judgment. Thus: scrutiny of the bank deposit in order to execute the judgment?

Mr. MARCOS. Now, for purposes of the record, I should like the Chairman Mr. RAMOS. To satisfy a judgment which has become executory.
of the Committee on Ways and Means to clarify this further. Suppose an
individual has a tax case. He is being held liable by the Bureau of Internal Mr. MARCOS. Yes, but, as I said before, suppose the tax liability is
Revenue for, say, P1,000.00 worth of tax liability, and because of this the P1,000,000 and the deposit is half a million, will this bill allow scrutiny into
deposit of this individual is attached by the Bureau of Internal Revenue. the deposit in order that the judgment may be executed?

Mr. RAMOS. The attachment will only apply after the court has pronounced
sentence declaring the liability of such person. But where the primary aim is
 Mr. RAMOS. Merely to determine the amount of such money to satisfy that J.V. BAUTISTA, Petitioner,
obligation to the Government, but not to determine whether a deposit has
been made in evasion of taxes. vs.
COMMISSION ON ELECTIONS, Respondent.
xxx xxx xxx
DECISION
Mr. MACAPAGAL. But let us suppose that in an ordinary civil action for the
recovery of a sum of money the plaintiff wishes to attach the properties of VELASCO, JR., J.:
the defendant to insure the satisfaction of the judgment. Once the judgment
is rendered, does the gentleman mean that the plaintiff cannot attach the
bank deposit of the defendant? Before the Court is the consolidated case for Petition for Certiorari and Prohibition with prayer for
injunctive relief, docket as G.R. No. 203974, assailing Minute Resolution No. 12-07971 and
Minute Resolution No. 12-09252 dated September 11, 2012 and October 16, 2012, respectively,
Mr. RAMOS. That was the question raised by the gentleman from both promulgated by public respondent Commission on Elections (COMELEC), and Petition for
Pangasinan to which I replied that outside the very purpose of this law it Mandamus, docketed G.R. No. 204371, seeking to compel public respondent to implement the
could be reached by attachment. same.

Mr. MACAPAGAL. Therefore, in such ordinary civil cases it can be The Facts
attached?

On July 11, 2011, the Sangguniang Panglungsod of Cabanatuan City passed Resolution No.
Mr. RAMOS. That is so. 183-2011, requesting the President to declare the conversion of Cabanatuan City from a
component city of the province of Nueva Ecija into a highly urbanized city (HUC). Acceding to
(Vol. II, Congressional Record, House of Representatives, No. 12, pp. 3839- the request, the President issued Presidential Proclamation No. 418, Series of 2012, proclaiming
3840, July 27, 1955). the City of Cabanatuan as an HUC subject to "ratification in a plebiscite by the qualified voters
therein, as provided for in Section 453 of the Local Government Code of 1991."
It is sufficiently clear from the foregoing discussion of the conference committee report of the two
houses of Congress that the prohibition against examination of or inquiry into a bank deposit Respondent COMELEC, acting on the proclamation, issued the assailed Minute Resolution No.
under Republic Act 1405 does not preclude its being garnished to insure satisfaction of a 12-0797 which reads:
judgment. Indeed there is no real inquiry in such a case, and if the existence of the deposit is
disclosed the disclosure is purely incidental to the execution process. It is hard to conceive that it WHEREFORE, the Commission RESOLVED, as it hereby RESOLVES, that for purposes of the
was ever within the intention of Congress to enable debtors to evade payment of their just debts, plebiscite for the conversion of Cabanatuan City from component city to highly-urbanized city,
even if ordered by the Court, through the expedient of converting their assets into cash and only those registered residents of Cabanatuan City should participate in the said plebiscite.
depositing the same in a bank.

The COMELEC based this resolution on Sec. 453 of the Local Government Code of 1991
WHEREFORE, the orders of the lower court dated March 4 and 27, 1972, respectively, are (LGC), citing conversion cases involving Puerto Princesa City in Palawan, Tacloban City in
hereby affirmed, with costs against the petitioners-appellants. Southern Leyte, and Lapu-Lapu City in Cebu, where only the residents of the city proposed to be
converted were allowed to vote in the corresponding plebiscite.
Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.
In due time, petitioner Aurelio M. Umali, Governor of Nueva Ecija, filed a Verified Motion for
Concepcion, C.J. and Teehankee, J., took no part. Reconsideration, maintaining that the proposed conversion in question will necessarily and
directly affect the mother province of Nueva Ecija. His main argument is that Section 453 of the
LGC should be interpreted in conjunction with Sec. 10, Art. X of the Constitution. He argues that
G.R. No. 203974 April 22, 2014 while the conversion in question does not involve the creation of a new or the dissolution of an
existing city, the spirit of the Constitutional provision calls for the people of the local government
AURELIO M. UMALI, Petitioner, unit (LGU) directly affected to vote in a plebiscite whenever there is a material change in their
vs. rights and responsibilities. The phrase "qualified voters therein" used in Sec. 453 of the LGC
should then be interpreted to refer to the qualified voters of the units directly affected by the
COMMISSION ON ELECTIONS, JULIUS CESAR V. VERGARA, and THE CITY conversion and not just those in the component city proposed to be upgraded. Petitioner Umali
GOVERNMENT OF CABANATUAN, Respondents. justified his position by enumerating the various adverse effects of the Cabanatuan Citys
conversion and how it will cause material change not only in the political and economic rights of
x-----------------------x the city and its residents but also of the province as a whole.
G.R. No. 204371
To the Verified Motion for Reconsideration, private respondent Julius Cesar Vergara, city mayor
of Cabanatuan, interposed an opposition on the ground that Sec. 10, Art. X does not apply to
conversions, which is the meat of the matter. He likewise argues that a specific provision of the the plebiscite was once again rescheduled to give way to the May 13, 2013 national, local and
LGC, Sec. 453, as couched, allows only the qualified voters of Cabanatuan City to vote in the ARMM regional elections as per Resolution No. 9563.
plebiscite. Lastly, private respondent pointed out that when Santiago City was converted in 1994
from a municipality to an independent component city pursuant to Republic Act No. (RA) 7720,
After this development, petitioner J.V. Bautista, on December 3, 2012, filed a case before this
the plebiscite held was limited to the registered voters of the then municipality of Santiago.
Court for Mandamus, docketed as G.R. No. 204371, praying that public respondent be ordered
to schedule the plebiscite either on December 15 or 22, 2012. Petitioner Bautista argued that
Following a hearing conducted on October 4, 2012,3 the COMELEC En Banc on October 16, since the TRO issued by the RTC has already expired, the duty of the public respondent to hold
2012, in E.M No. 12-045 (PLEB), by a vote of 5-24 ruled in favor of respondent Vergara through the plebiscite has become mandatory and ministerial. Petitioner Bautista also alleged that the
the assailed Minute Resolution 12-0925. The dispositive portion reads: delay in holding the plebiscite is inexcusable given the requirement that it should be held within a
period of 120 days form the date of the Presidents declaration.
The Commission, taking into consideration the arguments of counsels including the Reply-
memorandum of Oppositor, after due deliberation, RESOLVED, as it hereby RESOLVES, as In its Comment to the Bautista petition, public respondent justified its position by arguing that
follows: mandamus will not issue to enforce a right which is in substantial dispute. With all the legal
conflicts surrounding the case, it cannot be said that there is a clear showing of petitioner
Bautistas entitlement to the relief sought. Respondent COMELEC likewise relied on Sec. 5 of
1) To DENY the Motion for Reconsideration of oppositor Governor Aurelio M. Umali;
the Omnibus Election Code to justify the postponements, citing incidents of violence that ensued
and
in the locality during the plebiscite period.

2) To SCHEDULE the conduct of Plebiscite for the conversion of Cabanatuan City

After the conclusion of the 2013 elections, public respondent issued Resolution No. 1353
from component city into highly-urbanized city with registered residents only of
scheduling the plebiscite to January 25, 2014. However, a TRO was issued by this Court on
Cabanatuan City to participate in said plebiscite.
January 15, 2014 in G.R. No. 203974 to suspend the conduct of the plebiscite for Cabanatuan
Citys conversion. Given the intertwining factual milieu of the two petitions before the Court, both
Let the Deputy Executive Director for Operations implement this resolution. cases were consolidated on March 18, 2014.

SO ORDERED. The Issue

Hence, the Petition for Certiorari with prayer for injunctive relief, docketed as G.R. No. 203974, The bone of contention in the present controversy boils down to whether the qualified registered
on substantially the same arguments earlier taken by petitioner Umali before the poll body. On voters of the entire province of Nueva Ecija or only those in Cabanatuan City can participate in
the other hand, public respondent COMELEC, through the Office of the Solicitor General, the plebiscite called for the conversion of Cabanatuan City from a component city into an HUC.
maintained in its Comment that Cabanatuan City is merely being converted from a component
city into an HUC and that the political unit directly affected by the conversion will only be the city
Resolving the Petition for Certiorari either way will necessarily render the Petition for Mandamus
itself. It argues that in this instance, no political unit will be created, merged with another, or will
moot and academic for ultimately, the public respondent will be ordered to hold the plebiscite.
be removed from another LGU, and that no boundaries will be altered. The conversion would
The only variation will be as regards its participants.
merely reinforce the powers and prerogatives already being exercised by the city, with the
political units probable elevation to that of an HUC as demanded by its compliance with the
criteria established under the LGC. Thus, the participation of the voters of the entire province in The Courts Ruling
the plebiscite will not be necessary.
The Petition for Certiorari is meritorious.
Private respondent will later manifest that it is adopting the Comment of the COMELEC.
Sec. 453 of the LGC should be interpreted in accordance with Sec. 10, Art. X of the Constitution
Meanwhile, on October 25, 2012, respondent COMELEC promulgated Resolution No. 9543,
which adopted a calendar of activities and periods of prohibited acts in connection with the
Petitioner Umali asseverates that Sec. 10, Art. X of the Constitution should be the basis for
conversion of Cabanatuan City into an HUC. The Resolution set the conduct of the plebiscite on
determining the qualified voters who will participate in the plebiscite to resolve the issue. Sec.
December 1, 2012. Thereafter, a certain Dr. Rodolfo B. Punzalan filed a Petition for Declaratory
10, Art. X reads:
Relief which was raffled to the Regional Trial Court (RTC), Branch 40 in Palayan City. In the said
case, Punzalan prayed that Minute Resolution No. 12-0797 be declared unconstitutional, that
the trial court decree that all qualified voters of the province of Nueva Ecija be included in the Section 10, Article X. No province, city, municipality, or barangay may be created, divided,
plebiscite, and that a Temporary Restraining Order (TRO) be issued enjoining public respondent merged, abolished, or its boundary substantially altered, except in accordance with the criteria
from implementing the questioned resolution. On October 19, 2012, the RTC granted the prayer established in the local government code and subject to approval by a majority of the votes cast
for a TRO. in a plebiscite in the political units directly affected. (emphasis supplied)

On November 6, 2012, public respondent through Minute Resolution No. 12-0989 suspended Petitioner Umali elucidates that the phrase "political units directly affected" necessarily
the preparations for the event in view of the TRO issued by the RTC. On November 27, 2012, encompasses not only Cabanatuan City but the entire province of Nueva Ecija. Hence, all the
registered voters in the province are qualified to cast their votes in resolving the proposed and provinces9. Moreover, compliance with the plebiscite requirement under the Constitution has
conversion of Cabanatuan City. also been directed by the LGC under its Sec. 10, which reads:

On the other hand, respondents invoke Sec. 453 of the LGC to support their claim that only the Section 10. Plebiscite Requirement. No creation, division, merger, abolition, or substantial
City of Cabanatuan should be allowed to take part in the voting. Sec. 453 states: alteration of boundaries of local government units shall take effect unless approved by a majority
of the votes cast in a plebiscite called for the purpose in the political unit or units directly
affected." (emphasis supplied)
Section 453. Duty to Declare Highly Urbanized Status. It shall be the duty of the President to
declare a city as highly urbanized within thirty (30) days after it shall have met the minimum
requirements prescribed in the immediately preceding Section, upon proper application therefor With the twin criteria of standard and plebiscite satisfied, the delegation to LGUs of the power to
and ratification in a plebiscite by the qualified voters therein. (emphasis supplied) create, divide, merge, abolish or substantially alter boundaries has become a recognized
exception to the doctrine of non-delegation of legislative powers.
Respondents take the phrase "registered voters therein" in Sec. 453 as referring only to the
registered voters in the city being converted, excluding in the process the voters in the remaining Likewise, legislative power was delegated to the President under Sec. 453 of the LGC quoted
towns and cities of Nueva Ecija. earlier, which states:

Before proceeding to unravel the seeming conflict between the two provisions, it is but proper Section 453. Duty to Declare Highly Urbanized Status. It shall be the duty of the President to
that we ascertain first the relationship between Sec. 10, Art. X of the Constitution and Sec. 453 declare a city as highly urbanized within thirty (30) days after it shall have met the minimum
of the LGC. requirements prescribed in the immediately preceding Section, upon proper application therefor
and ratification in a plebiscite by the qualified voters therein.
First of all, we have to restate the general principle that legislative power cannot be delegated.
Nonetheless, the general rule barring delegation is subject to certain exceptions allowed in the In this case, the provision merely authorized the President to make a determination on whether
Constitution, namely: or not the requirements under Sec. 45210 of the LGC are complied with. The provision makes it
ministerial for the President, upon proper application, to declare a component city as highly
urbanized once the minimum requirements, which are based on certifiable and measurable
(1) Delegation by Congress to the President of the power to fix "tariff rates, import and
indices under Sec. 452, are satisfied. The mandatory language "shall" used in the provision
export quotas, tonnage and wharfage dues, and other duties or imposts within the
leaves the President with no room for discretion.
framework of the national development program of the Government" under Section
28(2) of Article VI of the Constitution; and
In so doing, Sec. 453, in effect, automatically calls for the conduct of a plebiscite for purposes of
conversions once the requirements are met. No further legislation is necessary before the city
(2) Delegation of emergency powers by Congress to the President "to exercise powers
proposed to be converted becomes eligible to become an HUC through ratification, as the basis
necessary and proper to carry out a declared national policy" in times of war and other
for the delegation of the legislative authority is the very LGC.
national emergency under Section 23(2) of Article VI of the Constitution.

In view of the foregoing considerations, the Court concludes that the source of the delegation of
The power to create, divide, merge, abolish or substantially alter boundaries of provinces, cities,
power to the LGUs under Sec. 6 of the LGC and to the President under Sec. 453 of the same
municipalities or barangays, which is pertinent in the case at bar, is essentially legislative in
code is none other than Sec. 10, Art. X of the Constitution.
nature.5 The framers of the Constitution have, however, allowed for the delegation of such power
in Sec. 10, Art. X of the Constitution as long as (1) the criteria prescribed in the LGC is met and
(2) the creation, division, merger, abolition or the substantial alteration of the boundaries is Respondents, however, posit that Sec. 453 of the LGC is actually outside the ambit of Sec. 10,
subject to the approval by a majority vote in a plebiscite. Art. X of the Constitution, considering that the conversion of a component city to an HUC is not
"creation, division, merge, abolition or substantial alternation of boundaries" encompassed by
the said constitutional provision.
True enough, Congress delegated such power to the Sangguniang Panlalawigan or
Sangguniang Panlungsod to create barangays pursuant to Sec. 6 of the LGC, which provides:
This proposition is bereft of merit.
Section 6. Authority to Create Local Government Units. - A local government unit may be
created, divided, merged, abolished, or its boundaries substantially altered either by law enacted First, the Courts pronouncement in Miranda vs. Aguirre11 is apropos and may be applied by
by Congress in the case of a province, city, municipality, or any other political subdivision, or by analogy. While Miranda involves the downgrading, instead of upgrading, as here, of an
ordinance passed by the sangguniang panlalawigan or sangguniang panlungsod concerned in independent component city into a component city, its application to the case at bar is
the case of a barangay located within its territorial jurisdiction, subject to such limitations and nonetheless material in ascertaining the proper treatment of conversions. In that seminal case,
requirements prescribed in this Code." (emphasis supplied) the Court held that the downgrading of an independent component city into a component city
comes within the purview of Sec. 10, Art. X of the Constitution.
The guidelines for the exercise of this authority have sufficiently been outlined by the various
LGC provisions detailing the requirements for the creation of barangays6, municipalities7, cities8, In Miranda, the rationale behind the afore-quoted constitutional provision and its application to
cases of conversion were discussed thusly:
A close analysis of the said constitutional provision will reveal that the creation, division, merger, part of Nueva Ecija will no longer be subject to supervision by the province. In more concrete
abolition or substantial alteration of boundaries of local government units involve a common terms, Nueva Ecija stands to lose 282.75 sq. km. of its territorial jurisdiction with Cabanatuan
denominator - - - material change in the political and economic rights of the local government Citys severance from its mother province. This is equivalent to carving out almost 5% of Nueva
units directly affected as well as the people therein. It is precisely for this reason that the Ecijas 5,751.3 sq. km. area. This sufficiently satisfies the requirement that the alteration be
Constitution requires the approval of the people "in the political units directly affected." It is not "substantial."
difficult to appreciate the rationale of this constitutional requirement. The 1987 Constitution,
more than any of our previous Constitutions, gave more reality to the sovereignty of our people
Needless to stress, the alteration of boundaries would necessarily follow Cabanatuan Citys
for it was borne out of the people power in the 1986 EDSA revolution. Its Section 10, Article X
conversion in the same way that creations, divisions, mergers, and abolitions generally cannot
addressed the undesirable practice in the past whereby local government units were created,
take place without entailing the alteration. The enumerated acts, after all, are not mutually
abolished, merged or divided on the basis of the vagaries of politics and not of the welfare of the
exclusive, and more often than not, a combination of these acts attends the reconfiguration of
people. Thus, the consent of the people of the local government unit directly affected was
LGUs.
required to serve as a checking mechanism to any exercise of legislative power creating,
dividing, abolishing, merging or altering the boundaries of local government units. It is one
instance where the people in their sovereign capacity decide on a matter that affects them - - - In light of the foregoing disquisitions, the Court rules that conversion to an HUC is substantial
direct democracy of the people as opposed to democracy thru peoples representatives. This alternation of boundaries governed by Sec. 10, Art. X and resultantly, said provision applies,
plebiscite requirement is also in accord with the philosophy of the Constitution granting more governs and prevails over Sec. 453 of the LGC.
autonomy to local government units.12
Moreover, the rules of statutory construction dictate that a particular provision should be
It was determined in the case that the changes that will result from the conversion are too interpreted with the other relevant provisions in the law The Court finds that it is actually Sec. 10
substantial that there is a necessity for the plurality of those that will be affected to approve it. of the LGC which is undeniably the applicable provision on the conduct of plebiscites. The title of
Similar to the enumerated acts in the constitutional provision, conversions were found to result in the provision itself, "Plebiscite Requirement", makes this obvious. It requires a majority of the
material changes in the economic and political rights of the people and LGUs affected. Given the votes cast in a plebiscite called for the purpose in the political unit or units directly affected. On
far-reaching ramifications of converting the status of a city, we held that the plebiscite the other hand, Sec. 453 of the LGC, entitled "Duty to Declare Highly Urbanized Status", is only
requirement under the constitutional provision should equally apply to conversions as well. Thus, on the duty to declare a city as highly urbanized. It mandates the Office of the President to make
RA 852813 was declared unconstitutional in Miranda on the ground that the law downgraded the declaration after the city has met the requirements under Sec. 452, and upon proper
Santiago City in Isabela without submitting it for ratification in a plebiscite, in contravention of application and ratification in a plebiscite. The conduct of a plebiscite is then a requirement
Sec. 10, Art. X of the Constitution. before a declaration can be made. Thus, the Court finds that Sec. 10 of the LGC prevails over
Sec. 453 of the LGC on the plebiscite requirement.
Second, while conversion to an HUC is not explicitly provided in Sec. 10, Art. X of the
Constitution we nevertheless observe that the conversion of a component city into an HUC is We now take the bull by the horns and resolve the issue whether Sec. 453 of the LGC trenches
substantial alteration of boundaries. on Sec. 10, Art. X of the Constitution.

As the phrase implies, "substantial alteration of boundaries" involves and necessarily entails a Hornbook doctrine is that neither the legislative, the executive, nor the judiciary has the power to
change in the geographical configuration of a local government unit or units. However, the act beyond the Constitutions mandate. The Constitution is supreme; any exercise of power
phrase "boundaries" should not be limited to the mere physical one, referring to the metes and beyond what is circumscribed by the Constitution is ultra vires and a nullity. As elucidated by
bounds of the LGU, but also to its political boundaries. It also connotes a modification of the former Chief Justice Enrique Fernando in Fernandez v. Cuerva:14
demarcation lines between political subdivisions, where the LGUs exercise of corporate power
ends and that of the other begins. And as a qualifier, the alteration must be "substantial" for it to
be within the ambit of the constitutional provision. Where the assailed legislative or executive act is found by the judiciary to be contrary to the
Constitution, it is null and void. As the new Civil Code puts it: "When the courts declare a law to
be inconsistent with the Constitution, the former shall be void and the latter shall govern."
Pertinent is Art. 12(c) of the LGCs Implementing Rules and Regulations, which reads: Administrative or executive acts, orders and regulations shall be valid only when they are not
contrary to the laws or the Constitution. The above provision of the civil Code reflects the
orthodox view that an unconstitutional act, whether legislative or executive, is not a law, confers
Art. 12. Conversion of a Component City into a Highly Urbanized City.
no rights, imposes no duties, and affords no protection. x x x

xxxx
Applying this orthodox view, a law should be construed in harmony with and not in violation of
the Constitution.15 In a long line of cases, the cardinal principle of construction established is that
(c) Effect of Conversion The conversion of a component city into a highly-urbanized city shall a statute should be interpreted to assure its being in consonance with, rather than repugnant to,
make it independent of the province where it is geographically located. (emphasis added) any constitutional command or prescription.16 If there is doubt or uncertainty as to the meaning
of the legislative, if the words or provisions are obscure or if the enactment is fairly susceptible of
two or more constitution, that interpretation which will avoid the effect of unconstitutionality will
Verily, the upward conversion of a component city, in this case Cabanatuan City, into an HUC
be adopted, even though it may be necessary, for this purpose, to disregard the more usual or
will come at a steep price. It can be gleaned from the above-cited rule that the province will
apparent import of the language used.17
inevitably suffer a corresponding decrease in territory brought about by Cabanatuan Citys gain
of independence. With the citys newfound autonomy, it will be free from the oversight powers of
the province, which, in effect, reduces the territorial jurisdiction of the latter. What once formed
Pursuant to established jurisprudence, the phrase "by the qualified voters therein" in Sec. 453 The first would be the parent province of Negros Occidental because its boundaries would be
should be construed in a manner that will avoid conflict with the Constitution. If one takes the substantially altered. The other affected entity would be composed of those in the area
plain meaning of the phrase in relation to the declaration by the President that a city is an HUC, subtracted from the mother province to constitute the proposed province of Negros del Norte. 21
then, Sec. 453 of the LGC will clash with the explicit provision under Sec. 10, Art. X that the
voters in the "political units directly affected" shall participate in the plebiscite. Such construction
xxxx
should be avoided in view of the supremacy of the Constitution. Thus, the Court treats the
phrase "by the qualified voters therein" in Sec. 453 to mean the qualified voters not only in the
city proposed to be converted to an HUC but also the voters of the political units directly affected To form the new province of Negros del Norte no less than three cities and eight municipalities
by such conversion in order to harmonize Sec. 453 with Sec. 10, Art. X of the Constitution. will be subtracted from the parent province of Negros Occidental. This will result in the removal
of approximately 2,768.4 square kilometers from the land area of an existing province whose
boundaries will be consequently substantially altered. It becomes easy to realize that the
The Court finds that respondents are mistaken in construing Sec. 453 in a vacuum. Their
consequent effects of the division of the parent province necessarily will affect all the people
interpretation of Sec. 453 of the LGC runs afoul of Sec. 10, Art. X of the Constitution which
living in the separate areas of Negros Occidental and the proposed province of Negros del
explicitly requires that all residents in the "political units directly affected" should be made to
Norte. The economy of the parent province as well as that of the new province will be inevitably
vote.
affected, either for the better or for the worse. Whatever be the case, either or both of these
political groups will be affected and they are, therefore, the unit or units referred to in Section 3
Respondents make much of the plebiscites conducted in connection with the conversion of of Article XI of the Constitution which must be included in the plebiscite contemplated
Puerto Princesa City, Tacloban City and Lapu-Lapu City where the ratification was made by the therein.22 (emphasis added)
registered voters in said cities alone. It is clear, however, that the issue of who are entitled to
vote in said plebiscites was not properly raised or brought up in an actual controversy. The issue
Sec. 3, Art. XI of the 1973 Constitution, as invoked in Tan, states:
on who will vote in a plebiscite involving a conversion into an HUC is a novel issue, and this is
the first time that the Court is asked to resolve the question. As such, the past plebiscites in the
aforementioned cities have no materiality or relevance to the instant petition. Suffice it to say that SEC. 3. No province, city, municipality or barrio may be created, divided, merged abolished, or
conversion of said cities prior to this judicial declaration will not be affected or prejudiced in any its boundary substantially altered, except in accordance with the criteria established in the local
manner following the operative fact doctrinethat the actual existence of a statute prior to such government code, and subject to the approval by a majority of the votes in a plebiscite in the unit
a determination is an operative fact and may have consequences which cannot always be or units affected. (emphasis added)
erased by a new judicial declaration.18
Despite the change in phraseology compared to what is now Sec. 10, Art. X, we affirmed our
The entire province of Nueva Ecija will be directly ruling in Tan in the latter case of Padilla. As held, the removal of the phrase "unit or" only served
affected by Cabanatuan Citys conversion to sustain the earlier finding that what is contemplated by the phase "political units directly
affected" is the plurality of political units which would participate in the plebiscite. As reflected in
the journal of the Constitutional Commission:23
After the Court has resolved the seeming irreconcilability of Sec. 10, Art. X of the Constitution
and Sec. 453 of the LGC, it is now time to elucidate the meaning of the phrase "political units
directly affected" under Sec. 10, Art. X. Mr. Maambong: While we have already approved the deletion of "unit or," I would like to inform
the Committee that under the formulation in the present Local Government Code, the words
used are actually "political unit or units." However, I do not know the implication of the use of
a. "Political units directly affected" defined
these words. Maybe there will be no substantial difference, but I just want to inform the
Committee about this.
In identifying the LGU or LGUs that should be allowed to take part in the plebiscite, what should
primarily be determined is whether or not the unit or units that desire to participate will be
Mr. Nolledo: Can we not adhere to the original "unit or units"? Will there be no objection on the
"directly affected" by the change. To interpret the phrase, Tan v. COMELEC19 and Padilla v.
part of the two Gentlemen from the floor?
COMELEC20 are worth revisiting.

Mr. Davide: I would object. I precisely asked for the deletion of the words "unit or" because in the
We have ruled in Tan, involving the division of Negros Occidental for the creation of the new
plebiscite to be conducted, it must involve all the units affected. If it is the creation of a barangay
province of Negros del Norte, that the LGUs whose boundaries are to be altered and whose
plebiscite because it is affected. It would mean a loss of a territory. (emphasis added)
economy would be affected are entitled to participate in the plebiscite. As held:

The same sentiment was shared by the Senate during its deliberations on Senate Bill No. 155
It can be plainly seen that the aforecited constitutional provision makes it imperative that there
the predecessor of the LGCthus:
be first obtained "the approval of a majority of votes in the plebiscite in the unit or units affected"
whenever a province is created, divided or merged and there is substantial alteration of the
boundaries. It is thus inescapable to conclude that the boundaries of the existing province of Senator Guingona. Can we make that clearer by example? Let us assume that a province has
Negros Occidental would necessarily be substantially altered by the division of its existing municipalities and there is a merger of two municipalities. Would this therefore mean that the
boundaries in order that there can be created the proposed new province of Negros del Norte. plebiscite will be conducted within the two merged municipalities and not in the eight other
Plain and simple logic will demonstrate than that two political units would be affected. municipalities?
Senator Pimentel. The whole province, Mr. President, will be affected, and that is the reason we Often raised is that Cabanatuan Citys conversion into an HUC and its severance from Nueva
probably have to involve the entire province. Ecija will result in the reduction of the Internal Revenue Allotment (IRA) to the province based on
Sec. 285 of the LGC. The law states:
Senator Guingona. So the plebiscite will not be held only in the two municipalities which are
being merged, but the entire province will now have to undergo. Section 285. Allocation to Local Government Units. - The share of local government units in the
internal revenue allotment shall be collected in the following manner:
Senator Pimentel. I suppose that was the ruling in the Negros del Norte case.
(a) Provinces - Twenty-three percent (23%);
Senator Guingona. Supposing it refers to barangays, will the entire municipality have to vote?
There are two barangays being merged, say, out of 100 barangays. Would the entire (b) Cities - Twenty-three percent (23%);
municipality have to participate in the plebiscite?
(c) Municipalities - Thirty-four percent (34%); and
Senator Pimentel. Yes, Mr. President, because the municipality is affected directly by the merger
of two of its barangay.
(d) Barangays - Twenty percent (20%)

Senator Guingona. And, if, out of 100 barangay, 51 are being merged, abolished, whatever,
Provided, however, That the share of each province, city, and municipality shall be determined
would the rest of the municipality not participate in the plebiscite?
on the basis of the following formula:

Senator Pimentel. Do all the 51 barangay that the Gentleman mentioned, Mr. President, belong
(a) Population - Fifty percent (50%);
to one municipality?

(b) Land Area - Twenty-five percent (25%); and

Senator Guingona. Yes.

(c) Equal sharing - Twenty-five percent (25%)

Senator Pimentel. Then it will only involve the municipality where the 51 barangays belong.

In our earlier disquisitions, we have explained that the conversion into an HUC carries the
Senator Guingona. Yes. So, the entire municipality will now have to undergo a plebiscite.
accessory of substantial alteration of boundaries and that the province of Nueva Ecija will,
without a doubt, suffer a reduction in territory because of the severance of Cabanatuan City. The
Senator Pimentel. That is correct, Mr. President. residents of the city will cease to be political constituencies of the province, effectively reducing
the latters population. Taking this decrease in territory and population in connection with the
above formula, it is conceded that Nueva Ecija will indeed suffer a reduction in IRA given the
Senator Guingona. In the earlier example, if it is only a merger of two municipalities, let us say,
decrease of its multipliers values. As assessed by the Regional Director of the Department of
in a province with 10 municipalities the entire province will the other municipalities although
Budget and Management (DBM) for Region III:25
not affected also have to participate in the plebiscite?

Clear as crystal is that the province of Nueva Ecija will suffer a substantial reduction of its share
Senator Pimentel. Yes. The reason is that the municipalities are within the territorial boundaries
in IRA once Cabanatuan City attains autonomy. In view of the economic impact of Cabanatuan
of the province itself, it will have to be altered as a result of the two municipalities that the
Citys conversion, petitioner Umalis contention, that its effect on the province is not only direct
Gentleman mentioned.24
but also adverse, deserves merit.

In the more recent case of Miranda, the interpretation in Tan and Padilla was modified to include
Moreover, his claim that the province will lose shares in provincial taxes imposed in Cabanatuan
not only changes in economic but also political rights in the criteria for determining whether or
City is well-founded. This is based on Sec. 151 of the LGC, which states:
not an LGU shall be considered "directly affected." Nevertheless, the requirement that the
plebiscite be participated in by the plurality of political units directly affected remained.
SECTION 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,
b. Impact on Economic Rights
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
To recall, it was held in Miranda that the changes that will result in the downgrading of an LGU provisions of this Code. (emphasis added)
from an independent component city to a component city cannot be categorized as insubstantial,
thereby necessitating the conduct of a plebiscite for its ratification. In a similar fashion, herein
Once converted, the taxes imposed by the HUC will accrue to itself. Prior to this, the province
petitioner Umali itemized the adverse effects of Cabanatuan Citys conversion to the province of
enjoys the prerogative to impose and collect taxes such as those on sand, gravel and other
Nueva Ecija to justify the provinces participation in the plebiscite to be conducted.
quarry resources,26 professional taxes,27 and amusement taxes28 over the component city.
While, it may be argued that this is not a derogation of the provinces taxing power because it is
in no way deprived of its right to collect the mentioned taxes from the rest of its territory, the municipalities with respect to component barangays shall ensure that the acts of their
conversion will still reduce the provinces taxing jurisdiction, and corollary to this, it will component units are within the scope of their prescribed powers and functions.
experience a corresponding decrease in shares in local tax collections. This reduction in both
taxing jurisdiction and shares poses a material and substantial change to the provinces
Sec 12. Cities that are highly urbanized, as determined by law, and component cities whose
economic rights, warranting its participation in the plebiscite.
charters prohibit their voters from voting for provincial elective officials, shall be independent of
the province. The voters of component cities within a province, whose charters contain no such
To further exemplify the impact of these changes, a perusal of Secs. 452(a) and 461(a) of the prohibition, shall not be deprived of their right to vote for elective provincial officials.
LGC is in order, viz:
Duties, privileges and obligations appertaining to HUCs will attach to Cabanatuan City if it is
Section 452. Highly Urbanized Cities. converted into an HUC. This includes the right to be outside the general supervision of the
province and be under the direct supervision of the President. An HUC is not subject to
provincial oversight because the complex and varied problems in an HUC due to a bigger
(a) Cities with a minimum population of two hundred thousand (200,000) inhabitants
population and greater economic activity require greater autonomy. 29 The provincial government
as certified by the National Statistics Office, and within the latest annual income of at
stands to lose the power to ensure that the local government officials of Cabanatuan City act
least Fifty Million Pesos (50,000,000.00) based on 1991 constant prices, as certified
within the scope of its prescribed powers and functions, 30 to review executive orders issued by
by the city treasurer, shall be classified as highly urbanized cities.
the city mayor, and to approve resolutions and ordinances enacted by the city council. 31 The
province will also be divested of jurisdiction over disciplinary cases concerning the elected city
Section 461. Requisites for Creation. officials of the new HUC, and the appeal process for administrative case decisions against
barangay officials of the city will also be modified accordingly. 32 Likewise, the registered voters of
the city will no longer be entitled to vote for and be voted upon as provincial officials. 33
(a) A province may be created if it has an average annual income, as certified by the
Department of Finance, of not less than Twenty million pesos (20,000,000.00) based on 1991
constant prices and either of the following requisites: In cutting the umbilical cord between Cabanatuan City and the province of Nueva Ecija, the city
will be separated from the territorial jurisdiction of the province, as earlier explained. The
provincial government will no longer be responsible for delivering basic services for the city
(i) a contiguous territory of at least two thousand (2,000) square kilometers, as residents benefit. Ordinances and resolutions passed by the provincial council will no longer
certified by the Lands Management Bureau; or
cover the city. Projects queued by the provincial government to be executed in the city will also
be suspended if not scrapped to prevent the LGU from performing functions outside the bounds
(ii) a population of not less than two hundred fifty thousand (250,000) inhabitants as of its territorial jurisdiction, and from expending its limited resources for ventures that do not
certified by the National Statistics Office: cater to its constituents.1wphi1

Provided, That, the creation thereof shall not reduce the land area, population, and income of In view of these changes in the economic and political rights of the province of Nueva Ecija and
the original unit or units at the time of said creation to less than the minimum requirements its residents, the entire province certainly stands to be directly affected by the conversion of
prescribed herein. Cabanatuan City into an HUC. Following the doctrines in Tan and Padilla, all the qualified
registered voters of Nueva Ecija should then be allowed to participate in the plebiscite called for
that purpose.
A component citys conversion into an HUC and its resultant autonomy from the province is a
threat to the latters economic viability. Noteworthy is that the income criterion for a component
city to be converted into an HUC is higher than the income requirement for the creation of a Respondents apprehension that requiring the entire province to participate in the plebiscite will
province. The ensuing reduction in income upon separation would clearly leave a crippling effect set a dangerous precedent leading to the failure of cities to convert is unfounded. Their fear that
on the provinces operations as there would be less funding to finance infrastructure projects and provinces will always be expected to oppose the conversion in order to retain the citys
to defray overhead costs. Moreover, the quality of services being offered by the province may dependence is speculative at best. In any event, any vote of disapproval cast by those directly
suffer because of looming austerity measures. These are but a few of the social costs of the affected by the conversion is a valid exercise of their right to suffrage, and our democratic
decline in the provinces economic performance, which Nueva Ecija is bound to experience once processes are designed to uphold the decision of the majority, regardless of the motive behind
its most progressive city of Cabanatuan attains independence. the vote. It is unfathomable how the province can be deprived of the opportunity to exercise the
right of suffrage in a matter that is potentially deleterious to its economic viability and could
diminish the rights of its constituents. To limit the plebiscite to only the voters of the areas to be
c. Impact on Political Rights partitioned and seceded from the province is as absurd and illogical as allowing only the
secessionists to vote for the secession that they demanded against the wishes of the majority
Aside from the alteration of economic rights, the political rights of Nueva Ecija and those of its and to nullify the basic principle of majority rule.34
residents will also be affected by Cabanatuans conversion into an HUC. Notably, the
administrative supervision of the province over the city will effectively be revoked upon WHEREFORE, premises considered, the Petition for Certiorari, docketed as G.R. No. 203974, is
conversion. Secs. 4 and 12, Art. X of the Constitution read: hereby GRANTED. COMELEC Minute Resolution No. 12-0797 dated September 11, 2012 and
Minute Resolution No. 12-0925 dated October 16, 2012 are hereby declared NULL and VOID.
Sec. 4. The President of the Philippines shall exercise general supervision over local Public respondent COMELEC is hereby enjoined from implementing the said Resolutions.
governments. Provinces with respect to component cities and municipalities, and cities and Additionally, COMELEC is hereby ordered to conduct a plebiscite for the purpose of converting
Cabanatuan City into a Highly Urbanized City to be participated in by the qualified registered
voters of Nueva Ecij a within 120 days from the finality of this Decision. The Petition for RESOLUTION
Mandamus, docketed as G.R. No. 204371, is hereby DISMISSED.
PANGANIBAN, J.:

SO ORDERED
All mineral resources are owned by the State. Their exploration, development and
utilization (EDU) must always be subject to the full control and supervision of the State. More
EN BANC specifically, given the inadequacy of Filipino capital and technology in large-scale EDU activities,
the State may secure the help of foreign companies in all relevant matters -- especially financial
and technical assistance -- provided that, at all times, the State maintains its right of full control.
The foreign assistor or contractor assumes all financial, technical and entrepreneurial risks in the
EDU activities; hence, it may be given reasonable management, operational, marketing, audit
[G.R. No. 127882. December 1, 2004] and other prerogatives to protect its investments and to enable the business to succeed.

Full control is not anathematic to day-to-day management by the contractor, provided that
the State retains the power to direct overall strategy; and to set aside, reverse or modify plans
and actions of the contractor. The idea of full control is similar to that which is exercised by the
LA BUGAL-BLAAN TRIBAL ASSOCIATION, INC., Represented by its Chairman FLONG board of directors of a private corporation: the performance of managerial, operational, financial,
MIGUEL M. LUMAYONG; WIGBERTO E. TAADA; PONCIANO BENNAGEN; JAIME marketing and other functions may be delegated to subordinate officers or given to contractual
TADEO; RENATO R. CONSTANTINO JR.; FLONG AGUSTIN M. DABIE; entities, but the board retains full residual control of the business.
ROBERTO P. AMLOY; RAQIM L. DABIE; SIMEON H. DOLOJO; IMELDA M.
GANDON; LENY B. GUSANAN; MARCELO L. GUSANAN; QUINTOL A. Who or what organ of government actually exercises this power of control on behalf of the
LABUAYAN; LOMINGGES D. LAWAY; BENITA P. TACUAYAN; Minors JOLY L. State? The Constitution is crystal clear: the President. Indeed, the Chief Executive is the official
BUGOY, Represented by His Father UNDERO D. BUGOY and ROGER M. constitutionally mandated to enter into agreements with foreign owned corporations. On the
DADING; Represented by His Father ANTONIO L. DADING; ROMY M. LAGARO, other hand, Congress may review the action of the President once it is notified of every contract
Represented by His Father TOTING A. LAGARO; MIKENY JONG B. LUMAYONG, entered into in accordance with this [constitutional] provision within thirty days from its execution.
Represented by His Father MIGUEL M. LUMAYONG; RENE T. MIGUEL, In contrast to this express mandate of the President and Congress in the EDU of natural
Represented by His Mother EDITHA T. MIGUEL; ALDEMAR L. SAL, Represented resources, Article XII of the Constitution is silent on the role of the judiciary. However, should the
by His Father DANNY M. SAL; DAISY RECARSE, Represented by Her Mother President and/or Congress gravely abuse their discretion in this regard, the courts may -- in
LYDIA S. SANTOS; EDWARD M. EMUY; ALAN P. MAMPARAIR; MARIO L. a proper case -- exercise their residual duty under Article VIII. Clearly then, the judiciary should
MANGCAL; ALDEN S. TUSAN; AMPARO S. YAP; VIRGILIO CULAR; MARVIC not inordinately interfere in the exercise of this presidential power of control over the EDU of our
M.V.F. LEONEN; JULIA REGINA CULAR, GIAN CARLO CULAR, VIRGILIO CULAR natural resources.
JR., Represented by Their Father VIRGILIO CULAR; PAUL ANTONIO P.
VILLAMOR, Represented by His Parents JOSE VILLAMOR and ELIZABETH PUA- The Constitution should be read in broad, life-giving strokes. It should not be used to
VILLAMOR; ANA GININA R. TALJA, Represented by Her Father MARIO JOSE B. strangulate economic growth or to serve narrow, parochial interests. Rather, it should be
TALJA; SHARMAINE R. CUNANAN, Represented by Her Father ALFREDO M. construed to grant the President and Congress sufficient discretion and reasonable leeway to
CUNANAN; ANTONIO JOSE A. VITUG III, Represented by His Mother ANNALIZA enable them to attract foreign investments and expertise, as well as to secure for our people and
A. VITUG, LEAN D. NARVADEZ, Represented by His Father MANUEL E. our posterity the blessings of prosperity and peace.
NARVADEZ JR.; ROSERIO MARALAG LINGATING, Represented by Her Father On the basis of this control standard, this Court upholds the constitutionality of the Philippine
RIO OLIMPIO A. LINGATING; MARIO JOSE B. TALJA; DAVID E. DE VERA; Mining Law, its Implementing Rules and Regulations -- insofar as they relate to financial and
MARIA MILAGROS L. SAN JOSE; Sr. SUSAN O. BOLANIO, OND; LOLITA G. technical agreements -- as well as the subject Financial and Technical Assistance Agreement
DEMONTEVERDE; BENJIE L. NEQUINTO;[1] ROSE LILIA S. ROMANO; ROBERTO (FTAA).[5]
S. VERZOLA; EDUARDO AURELIO C. REYES; LEAN LOUEL A. PERIA,
Represented by His Father ELPIDIO V. PERIA; [2] GREEN FORUM PHILIPPINES;
GREEN FORUM WESTERN VISAYAS (GF-WV); ENVIRONMENTAL LEGAL
ASSISTANCE CENTER (ELAC); KAISAHAN TUNGO SA KAUNLARAN NG
KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN); [3] PARTNERSHIP Background
FOR AGRARIAN REFORM and RURAL DEVELOPMENT SERVICES, INC.
(PARRDS); PHILIPPINE PARTNERSHIP FOR THE DEVELOPMENT OF HUMAN
RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA); WOMENS LEGAL The Petition for Prohibition and Mandamus before the Court challenges the
BUREAU (WLB); CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its
INC. (CADI); UPLAND DEVELOPMENT INSTITUTE (UDI); KINAIYAHAN Implementing Rules and Regulations (DENR Administrative Order No. [DAO] 96-40); and (3) the
FOUNDATION, INC.; SENTRO NG ALTERNATIBONG LINGAP PANLIGAL FTAA dated March 30, 1995,[6] executed by the government with Western Mining Corporation
(SALIGAN); and LEGAL RIGHTS AND NATURAL RESOURCES CENTER, INC. (Philippines), Inc. (WMCP).[7]
(LRC), petitioners, vs. VICTOR O. RAMOS, Secretary, Department of
Environment and Natural Resources (DENR); HORACIO RAMOS, Director, Mines On January 27, 2004, the Court en banc promulgated its Decision[8] granting the Petition and
and Geosciences Bureau (MGB-DENR); RUBEN TORRES, Executive Secretary; declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire
and WMC (PHILIPPINES), INC.,[4] respondents. FTAA executed between the government and WMCP, mainly on the finding that FTAAs are service
contracts prohibited by the 1987 Constitution.
 The Decision struck down the subject FTAA for being similar to service contracts,[9] which, though In declaring unconstitutional certain provisions of RA 7942, DAO 96-40, and the WMCP
permitted under the 1973 Constitution,[10] were subsequently denounced for being antithetical to the FTAA, the majority Decision agreed with petitioners contention that the subject FTAA had been
principle of sovereignty over our natural resources, because they allowed foreign control over the executed in violation of Section 2 of Article XII of the 1987 Constitution. According to petitioners,
exploitation of our natural resources, to the prejudice of the Filipino nation. the FTAAs entered into by the government with foreign-owned corporations are limited by the
fourth paragraph of the said provision to agreements involving only technical or financial
The Decision quoted several legal scholars and authors who had criticized service assistance for large-scale exploration, development and utilization of minerals, petroleum and
contracts for, inter alia, vesting in the foreign contractor exclusive management and control of other mineral oils. Furthermore, the foreign contractor is allegedly permitted by the FTAA in
the enterprise, including operation of the field in the event petroleum was discovered; control of question to fully manage and control the mining operations and, therefore, to acquire beneficial
production, expansion and development; nearly unfettered control over the disposition and sale ownership of our mineral resources.
of the products discovered/extracted; effective ownership of the natural resource at the point of
extraction; and beneficial ownership of our economic resources. According to the Decision, the The Decision merely shrugged off the Manifestation by WMPC informing the Court (1) that
1987 Constitution (Section 2 of Article XII) effectively banned such service contracts. on January 23, 2001, WMC had sold all its shares in WMCP to Sagittarius Mines, Inc., 60
percent of whose equity was held by Filipinos; and (2) that the assailed FTAA had likewise been
Subsequently, respondents filed separate Motions for Reconsideration. In a Resolution transferred from WMCP to Sagittarius.[11] The ponencia declared that the instant case
dated March 9, 2004, the Court required petitioners to comment thereon. In the Resolution of had not been rendered moot by the transfer and registration of the FTAA to a Filipino-owned
June 8, 2004, it set the case for Oral Argument on June 29, 2004. corporation, and that the validity of the said transfer remained in dispute and awaited final
judicial determination.[12] Patently therefore, the Decision is anchored on the assumption that
After hearing the opposing sides, the Court required the parties to submit their respective
WMCP had remained a foreign corporation.
Memoranda in amplification of their arguments. In a Resolution issued later the same day, June
29, 2004, the Court noted, inter alia, the Manifestation and Motion (in lieu of comment) filed by The crux of this issue of mootness is the fact that WMCP, at the time it entered into the
the Office of the Solicitor General (OSG) on behalf of public respondents. The OSG said that it FTAA, happened to be wholly owned by WMC Resources International Pty., Ltd. (WMC), which
was not interposing any objection to the Motion for Intervention filed by the Chamber of Mines of in turn was a wholly owned subsidiary of Western Mining Corporation Holdings Ltd., a publicly
the Philippines, Inc. (CMP) and was in fact joining and adopting the latters Motion for listed major Australian mining and exploration company.
Reconsideration.
The nullity of the FTAA was obviously premised upon the contractor being
Memoranda were accordingly filed by the intervenor as well as by petitioners, public a foreign corporation. Had the FTAA been originally issued to a Filipino-owned corporation,
respondents, and private respondent, dwelling at length on the three issues discussed below. there would have been no constitutionality issue to speak of. Upon the other hand, the
Later, WMCP submitted its Reply Memorandum, while the OSG -- in obedience to an Order of conveyance of the WMCP FTAA to a Filipino corporation can be likened to the sale of land to a
this Court -- filed a Compliance submitting copies of more FTAAs entered into by the foreigner who subsequently acquires Filipino citizenship, or who later resells the same land to a
government. Filipino citizen. The conveyance would be validated, as the property in question would no longer
be owned by a disqualified vendee.

And, inasmuch as the FTAA is to be implemented now by a Filipino corporation, it is no

Three Issues Identified by the Court longer possible for the Court to declare it unconstitutional. The case pending in the Court of
Appeals is a dispute between two Filipino companies (Sagittarius and Lepanto), both claiming
the right to purchase the foreign shares in WMCP. So, regardless of which side eventually wins,
the FTAA would still be in the hands of a qualified Filipino company. Considering that there is no
During the Oral Argument, the Court identified the three issues to be resolved in the
longer any justiciable controversy, the plea to nullify the Mining Law has become a virtual
present controversy, as follows:
petition for declaratory relief, over which this Court has no original jurisdiction.
1. Has the case been rendered moot by the sale of WMC shares in WMCP to Sagittarius
In their Final Memorandum, however, petitioners argue that the case has not become
(60 percent of Sagittarius equity is owned by Filipinos and/or Filipino-owned corporations while
moot, considering the invalidity of the alleged sale of the shares in WMCP from WMC to
40 percent is owned by Indophil Resources NL, an Australian company) and by the subsequent
Sagittarius, and of the transfer of the FTAA from WMCP to Sagittarius, resulting in the change of
transfer and registration of the FTAA from WMCP to Sagittarius?
contractor in the FTAA in question. And even assuming that the said transfers were valid, there
2. Assuming that the case has been rendered moot, would it still be proper to resolve the still exists an actual case predicated on the invalidity of RA 7942 and its Implementing Rules and
constitutionality of the assailed provisions of the Mining Law, DAO 96-40 and the WMCP FTAA? Regulations (DAO 96-40). Presently, we shall discuss petitioners objections to the transfer of
both the shares and the FTAA. We shall take up the alleged invalidity of RA 7942 and DAO 96-
3. What is the proper interpretation of the phrase Agreements Involving Either Technical or 40 later on in the discussion of the third issue.
Financial Assistance contained in paragraph 4 of Section 2 of Article XII of the Constitution?
No Transgression of the Constitution
Should the Motion for Reconsideration by the Transfer of the WMCP Shares
Be Granted?
Petitioners claim, first, that the alleged invalidity of the transfer of the WMCP shares to
Respondents and intervenors Motions for Reconsideration should be granted, for the Sagittarius violates the fourth paragraph of Section 2 of Article XII of the
reasons discussed below. The foregoing three issues identified by the Court shall now be taken Constitution; second,that it is contrary to the provisions of the WMCP FTAA itself; and third, that
up seriatim. the sale of the shares is suspect and should therefore be the subject of a case in which its
validity may properly be litigated.
First Issue:
Mootness On the first ground, petitioners assert that paragraph 4 of Section 2 of Article XII permits
the government to enter into FTAAs only with foreign-owned corporations. Petitioners insist that
the first paragraph of this constitutional provision limits the participation of Filipino corporations in of an FTAA. In this situation, such approval and notification are appropriate safeguards,
the exploration, development and utilization of natural resources to only three species of considering that the new contractor is the subject of a foreign government.
contracts -- production sharing, co-production and joint venture -- to the exclusion of all other
arrangements or variations thereof, and the WMCP FTAA may therefore not be validly assumed On the other hand, when the transferee of the FTAA happens to be a Filipino corporation,
and implemented by Sagittarius. In short, petitioners claim that a Filipino corporation is not the need for such safeguard is not critical; hence, the lack of prior approval and notification may
allowed by the Constitution to enter into an FTAA with the government. not be deemed fatal as to render the transfer invalid. Besides, it is not as if approval by the
President is entirely absent in this instance. As pointed out by private respondent in its
However, a textual analysis of the first paragraph of Section 2 of Article XII does not Memorandum,[13] the issue of approval is the subject of one of the cases brought by Lepanto
support petitioners argument. The pertinent part of the said provision states: Sec. 2. x x x The against Sagittarius in GR No. 162331. That case involved the review of the Decision of the Court
exploration, development and utilization of natural resources shall be under the full control and of Appeals dated November 21, 2003 in CA-GR SP No. 74161, which affirmed the DENR Order
supervision of the State. The State may directly undertake such activities, or it may enter into co- dated December 31, 2001 and the Decision of the Office of the President dated July 23, 2002,
production, joint venture, or production-sharing agreements with Filipino citizens, or corporations both approving the assignment of the WMCP FTAA to Sagittarius.
or associations at least sixty per centum of whose capital is owned by such citizens. x x
x. Nowhere in the provision is there any express limitation or restriction insofar as arrangements Petitioners also question the sale price and the financial capacity of the transferee.
other than the three aforementioned contractual schemes are concerned. According to the Deed of Absolute Sale dated January 23, 2001, executed between WMC and
Sagittarius, the price of the WMCP shares was fixed at US$9,875,000, equivalent to P553
Neither can one reasonably discern any implied stricture to that effect. Besides, there is no million at an exchange rate of 56:1. Sagittarius had an authorized capital stock of P250 million
basis to believe that the framers of the Constitution, a majority of whom were obviously and a paid up capital of P60 million. Therefore, at the time of approval of the sale by the DENR,
concerned with furthering the development and utilization of the countrys natural resources, the debt-to-equity ratio of the transferee was over 9:1 -- hardly ideal for an FTAA contractor,
could have wanted to restrict Filipino participation in that area. This point is clear, especially in according to petitioners.
the light of the overarching constitutional principle of giving preference and priority to Filipinos
and Filipino corporations in the development of our natural resources. However, private respondents counter that the Deed of Sale specifically provides that the
payment of the purchase price would take place only after Sagittarius commencement of
Besides, even assuming (purely for arguments sake) that a constitutional limitation barring commercial production from mining operations, if at all. Consequently, under the circumstances,
Filipino corporations from holding and implementing an FTAA actually exists, nevertheless, such we believe it would not be reasonable to conclude, as petitioners did, that the transferees high
provision would apply only to the transfer of the FTAA to Sagittarius, but definitely not to the sale debt-to-equity ratio per se necessarily carried negative implications for the enterprise; and it
of WMCs equity stake in WMCP to Sagittarius. Otherwise, an unreasonable curtailment of would certainly be improper to invalidate the sale on that basis, as petitioners propose.
property rights without due process of law would ensue. Petitioners argument must therefore fail.
FTAA Not Void,
FTAA Not Intended Thus Transferrable
Solely for Foreign Corporation
To bolster further their claim that the case is not moot, petitioners insist that the FTAA is
Equally barren of merit is the second ground cited by petitioners -- that the FTAA was void and, hence cannot be transferred; and that its transfer does not operate to cure the
intended to apply solely to a foreign corporation, as can allegedly be seen from the provisions constitutional infirmity that is inherent in it; neither will a change in the circumstances of one of
therein. They manage to cite only one WMCP FTAA provision that can be regarded as clearly the parties serve to ratify the void contract.
intended to apply only to a foreign contractor: Section 12, which provides for international
commercial arbitration under the auspices of the International Chamber of Commerce, after local While the discussion in their Final Memorandum was skimpy, petitioners in their Comment
remedies are exhausted. This provision, however, does not necessarily imply that the WMCP (on the MR) did ratiocinate that this Court had declared the FTAA to be void because, at the time
FTAA cannot be transferred to and assumed by a Filipino corporation like Sagittarius, in which it was executed with WMCP, the latter was a fully foreign-owned corporation, in which the former
event the said provision should simply be disregarded as a superfluity. vested full control and management with respect to the exploration, development and utilization
of mineral resources, contrary to the provisions of paragraph 4 of Section 2 of Article XII of the
No Need for a Separate Constitution. And since the FTAA was per se void, no valid right could be transferred; neither
Litigation of the Sale of Shares could it be ratified, so petitioners conclude.

Petitioners claim as third ground the suspicious sale of shares from WMC to Sagittarius; Petitioners have assumed as fact that which has yet to be established. First and foremost,
hence, the need to litigate it in a separate case. Section 40 of RA 7942 (the Mining Law) the Decision of this Court declaring the FTAA void has not yet become final. That was precisely
allegedly requires the Presidents prior approval of a transfer. the reason the Court still heard Oral Argument in this case. Second, the FTAA does not vest in
the foreign corporation full control and supervision over the exploration, development and
A re-reading of the said provision, however, leads to a different conclusion. Sec. utilization of mineral resources, to the exclusion of the government. This point will be dealt with
40. Assignment/Transfer -- A financial or technical assistance agreement may be assigned or in greater detail below; but for now, suffice it to say that a perusal of the FTAA provisions will
transferred, in whole or in part, to a qualified person subject to the prior approval of the prove that the government has effective overall direction and control of the mining operations,
President: Provided, That the President shall notify Congress of every financial or technical including marketing and product pricing, and that the contractors work programs and budgets
assistance agreement assigned or converted in accordance with this provision within thirty (30) are subject to its review and approval or disapproval.
days from the date of the approval thereof.
As will be detailed later on, the government does not have to micro-manage the mining
Section 40 expressly applies to the assignment or transfer of the FTAA, not to the sale and operations and dip its hands into the day-to-day management of the enterprise in order to be
transfer of shares of stock in WMCP. Moreover, when the transferee of an FTAA is considered as having overall control and direction. Besides, for practical and pragmatic reasons,
another foreign corporation, there is a logical application of the requirement of prior approval by there is a need for government agencies to delegate certain aspects of the management work to
the President of the Republic and notification to Congress in the event of assignment or transfer the contractor. Thus the basis for declaring the FTAA void still has to be revisited, reexamined
and reconsidered.
 Petitioners sniff at the citation of Chavez v. Public Estates Authority,[14] and Halili v. All the protagonists are in agreement that the Court has jurisdiction to decide this
CA,[15] claiming that the doctrines in these cases are wholly inapplicable to the instant case. controversy, even assuming it to be moot.

Chavez clearly teaches: Thus, the Court has ruled consistently that where a Filipino citizen Petitioners stress the following points. First, while a case becomes moot and academic
sells land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is when there is no more actual controversy between the parties or no useful purpose can be
corrected by the subsequent sale to a citizen. Similarly, where the alien who buys the land served in passing upon the merits,[18] what is at issue in the instant case is not only the validity of
subsequently acquires Philippine citizenship, the sale is validated since the purpose of the the WMCP FTAA, but also the constitutionality of RA 7942 and its Implementing Rules and
constitutional ban to limit land ownership to Filipinos has been achieved. In short, the law Regulations. Second, the acts of private respondent cannot operate to cure the law of its alleged
disregards the constitutional disqualification of the buyer to hold land if the land is subsequently unconstitutionality or to divest this Court of its jurisdiction to decide. Third, the Constitution
transferred to a qualified party, or the buyer himself becomes a qualified party. [16] imposes upon the Supreme Court the duty to declare invalid any law that offends the
Constitution.
In their Comment, petitioners contend that in Chavez and Halili, the object of the transfer
(the land) was not what was assailed for alleged unconstitutionality. Rather, it was the Petitioners also argue that no amendatory laws have been passed to make the Mining Act
transaction that was assailed; hence subsequent compliance with constitutional provisions would of 1995 conform to constitutional strictures (assuming that, at present, it does not); that public
cure its infirmity. In contrast, in the instant case it is the FTAA itself, the object of the transfer, respondents will continue to implement and enforce the statute until this Court rules otherwise;
that is being assailed as invalid and unconstitutional. So, petitioners claim that the subsequent and that the said law continues to be the source of legal authority in accepting, processing and
transfer of a void FTAA to a Filipino corporation would not cure the defect. approving numerous applications for mining rights.

Petitioners are confusing themselves. The present Petition has been filed, precisely Indeed, it appears that as of June 30, 2002, some 43 FTAA applications had been filed
because the grantee of the FTAA was a wholly owned subsidiary of a foreign corporation. It with the Mines and Geosciences Bureau (MGB), with an aggregate area of 2,064,908.65
cannot be gainsaid that anyone would have asserted that the same FTAA was void if it had at hectares -- spread over Luzon, the Visayas and Mindanao[19] -- applied for. It may be a bit far-
the outset been issued to a Filipino corporation. The FTAA, therefore, is not per se defective or fetched to assert, as petitioners do, that each and every FTAA that was entered into under the
unconstitutional. It was questioned only because it had been issued to an allegedly non- provisions of the Mining Act invites potential litigation for as long as the constitutional issues are
qualified, foreign-owned corporation. not resolved with finality. Nevertheless, we must concede that there exists the distinct possibility
that one or more of the future FTAAs will be the subject of yet another suit grounded on
We believe that this case is clearly analogous to Halili, in which the land acquired by a constitutional issues.
non-Filipino was re-conveyed to a qualified vendee and the original transaction was thereby
cured. Paraphrasing Halili, the same rationale applies to the instant case: But of equal if not greater significance is the cloud of uncertainty hanging over the mining
assuming arguendo the invalidity of its prior grant to a foreign corporation, the disputed FTAA -- industry, which is even now scaring away foreign investments. Attesting to this climate of anxiety
being now held by a Filipino corporation -- can no longer be assailed; the objective of the is the fact that the Chamber of Mines of the Philippines saw the urgent need to intervene in the
constitutional provision -- to keep the exploration, development and utilization of our natural case and to present its position during the Oral Argument; and that Secretary General Romulo
resources in Filipino hands -- has been served. Neri of the National Economic Development Authority (NEDA) requested this Court to allow him
to speak, during that Oral Argument, on the economic consequences of the Decision of January
More accurately speaking, the present situation is one degree better than that obtaining 27, 2004.[20]
in Halili, in which the original sale to a non-Filipino was clearly and indisputably violative of the
constitutional prohibition and thus void ab initio. In the present case, the issuance/grant of the We are convinced. We now agree that the Court must recognize the exceptional character
subject FTAA to the then foreign-owned WMCP was not illegal, void or unconstitutional at the of the situation and the paramount public interest involved, as well as the necessity for a ruling to
time. The matter had to be brought to court, precisely for adjudication as to whether the FTAA put an end to the uncertainties plaguing the mining industry and the affected communities as a
and the Mining Law had indeed violated the Constitution. Since, up to this point, the decision of result of doubts cast upon the constitutionality and validity of the Mining Act, the subject FTAA
this Court declaring the FTAA void has yet to become final, to all intents and purposes, the and future FTAAs, and the need to avert a multiplicity of suits. Paraphrasing Gonzales v.
FTAA must be deemed valid and constitutional.[17] Commission on Elections,[21] it is evident that strong reasons of public policy demand that the
constitutionality issue be resolved now.[22]
At bottom, we find completely outlandish petitioners contention that an FTAA could be
entered into by the government only with a foreign corporation, never with a Filipino enterprise. In further support of the immediate resolution of the constitutionality issue, public
Indeed, the nationalistic provisions of the Constitution are all anchored on the protection of respondents cite Acop v. Guingona,[23] to the effect that the courts will decide a question --
Filipino interests. How petitioners can now argue that foreigners have the exclusive right to otherwise moot and academic -- if it is capable of repetition, yet evading review.[24] Public
FTAAs totally overturns the entire basis of the Petition -- preference for the Filipino in the respondents ask the Court to avoid a situation in which the constitutionality issue may again
exploration, development and utilization of our natural resources. It does not take deep arise with respect to another FTAA, the resolution of which may not be achieved until after it has
knowledge of law and logic to understand that what the Constitution grants to foreigners should become too late for our mining industry to grow out of its infancy. They also recall Salonga v.
be equally available to Filipinos. Cruz Pao,[25] in which this Court declared that (t)he Court also has the duty to formulate guiding
and controlling constitutional principles, precepts, doctrines or rules. It has the symbolic function
of educating the bench and bar on the extent of protection given by constitutional guarantees. x
x x.
Second Issue:
Whether the Court Can Still Decide the Case, The mootness of the case in relation to the WMCP FTAA led the undersigned ponente to
Even Assuming It Is Moot state in his dissent to the Decision that there was no more justiciable controversy and the plea to
nullify the Mining Law has become a virtual petition for declaratory relief. [26] The entry of the
Chamber of Mines of the Philippines, Inc., however, has put into focus the seriousness of the
allegations of unconstitutionality of RA 7942 and DAO 96-40 which converts the case to one for
prohibition[27] in the enforcement of the said law and regulations.
 Indeed, this CMP entry brings to fore that the real issue in this case is whether paragraph The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well
4 of Section 2 of Article XII of the Constitution is contravened by RA 7942 and DAO 96-40, not as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays
whether it was violated by specific acts implementing RA 7942 and DAO 96-40. [W]hen an act of and lagoons.
the legislative department is seriously alleged to have infringed the Constitution, settling the
controversy becomes the duty of this Court. By the mere enactment of the questioned law or the
The President may enter into agreements with foreign-owned corporations involving either technical or
approval of the challenged action, the dispute is said to have ripened into a judicial controversy
financial assistance for large-scale exploration, development, and utilization of minerals, petroleum,
even without any other overt act.[28] This ruling can be traced from Taada v. Angara,[29] in which
and other mineral oils according to the general terms and conditions provided by law, based on real
the Court said:
contributions to the economic growth and general welfare of the country. In such agreements, the State
shall promote the development and use of local scientific and technical resources.
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
The President shall notify the Congress of every contract entered into in accordance with this provision,
alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary
within thirty days from its execution.[31]
to settle the dispute.

No Restriction of Meaning by
xxxxxxxxx
a Verba Legis Interpretation

As this Court has repeatedly and firmly emphasized in many cases, it will not shirk, digress from or To interpret the foregoing provision, petitioners adamantly assert that the language of the
abandon its sacred duty and authority to uphold the Constitution in matters that involve grave abuse of Constitution should prevail; that the primary method of interpreting it is to seek the ordinary
discretion brought before it in appropriate cases, committed by any officer, agency, instrumentality or meaning of the words used in its provisions. They rely on rulings of this Court, such as the
department of the government.[30] following:

Additionally, the entry of CMP into this case has also effectively forestalled any possible The fundamental principle in constitutional construction however is that the primary source from which to
objections arising from the standing or legal interest of the original parties. ascertain constitutional intent or purpose is the language of the provision itself. The presumption is that
the words in which the constitutional provisions are couched express the objective sought to be attained.
For all the foregoing reasons, we believe that the Court should proceed to a resolution of In other words, verba legis prevails. Only when the meaning of the words used is unclear and equivocal
the constitutional issues in this case. should resort be made to extraneous aids of construction and interpretation, such as the proceedings of
the Constitutional Commission or Convention to shed light on and ascertain the true intent or purpose of
the provision being construed.[32]

Third Issue: Very recently, in Francisco v. The House of Representatives,[33] this Court indeed had the
The Proper Interpretation of the Constitutional Phrase occasion to reiterate the well-settled principles of constitutional construction:
Agreements Involving Either Technical or Financial Assistance

First, verba legis, that is, wherever possible, the words used in the Constitution must be given
The constitutional provision at the nucleus of the controversy is paragraph 4 of Section 2 their ordinary meaning except where technical terms are employed. x x x.
of Article XII of the 1987 Constitution. In order to appreciate its context, Section 2 is reproduced
in full: xxxxxxxxx

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces Second, where there is ambiguity, ratio legis est anima. The words of the Constitution should be
of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are interpreted in accordance with the intent of its framers. x x x.
owned by the State. With the exception of agricultural lands, all other natural resources shall not be
alienated. The exploration, development and utilization of natural resources shall be under the full control
and supervision of the State. The State may directly undertake such activities, or it may enter into co- xxxxxxxxx
production, joint venture or production-sharing agreements with Filipino citizens or corporations or
associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be Finally, ut magis valeat quam pereat. The Constitution is to be interpreted as a whole.[34]
for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under
such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power, beneficial use may be the measure For ease of reference and in consonance with verba legis, we reconstruct and stratify the
and limit of the grant. aforequoted Section 2 as follows:

The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive 1. All natural resources are owned by the State. Except for agricultural lands, natural resources cannot be
economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. alienated by the State.

2. The exploration, development and utilization (EDU) of natural resources shall be under the full control
and supervision of the State.
3. The State may undertake these EDU activities through either of the following: opted to use involving when they could have simply said agreements for financial or technical
assistance, if that was their intention to begin with. In this case, the limitation would be very clear
and no further debate would ensue.
(a) By itself directly and solely
In contrast, the use of the word involving signifies the possibility of the inclusion of
(b) By (i) co-production; (ii) joint venture; or (iii) production sharing agreements with Filipino citizens or other forms of assistance or activities having to do with, otherwise related to or compatible
corporations, at least 60 percent of the capital of which is owned by such citizens with financial or technical assistance. The word involving as used in this context has three
connotations that can be differentiated thus: one, the sense of concerning, having to do with, or
affecting; two, entailing, requiring, implying or necessitating; and three, including, containing or
4. Small-scale utilization of natural resources may be allowed by law in favor of Filipino citizens. comprising.[38]

Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the word
5. For large-scale EDU of minerals, petroleum and other mineral oils, the President may enter into
involving, when understood in the sense of including, as in including technical or financial
agreements with foreign-owned corporations involving either technical or financial assistance according to
assistance, necessarily implies that there are activities other than those that are being included.
the general terms and conditions provided by law x x x.
In other words, if an agreement includes technical or financial assistance, there is apart from
such assistance -- something else already in, and covered or may be covered by, the said
Note that in all the three foregoing mining activities -- exploration, development and agreement.
utilization -- the State may undertake such EDU activities by itself or in tandem with Filipinos or
Filipino corporations, except in two instances: first, in small-scale utilization of natural resources, In short, it allows for the possibility that matters, other than those explicitly mentioned,
which Filipinos may be allowed by law to undertake; and second, in large-scale EDU of minerals, could be made part of the agreement. Thus, we are now led to the conclusion that the use of the
petroleum and mineral oils, which may be undertaken by the State via agreements with foreign- word involving implies that these agreements with foreign corporations are not limited to mere
owned corporations involving either technical or financial assistance as provided by law. financial or technical assistance. The difference in sense becomes very apparent when we
juxtapose agreements for technical or financial assistance against
Petitioners claim that the phrase agreements x x x involving either technical or financial agreements including technical or financial assistance. This much is unalterably clear in
assistance simply means technical assistance or financial assistance agreements, nothing more a verba legis approach.
and nothing else. They insist that there is no ambiguity in the phrase, and that a plain reading of
paragraph 4 quoted above leads to the inescapable conclusion that what a foreign-owned Second, if the real intention of the drafters was to confine foreign corporations to financial
corporation may enter into with the government is merely an agreement or technical assistance and nothing more, their language would have certainly been
for either financial or technical assistance only, for the large-scale exploration, development and so unmistakably restrictive and stringent as to leave no doubt in anyones mind about their
utilization of minerals, petroleum and other mineral oils; such a limitation, they argue, excludes true intent. For example, they would have used the sentence foreign corporations
foreign management and operation of a mining enterprise.[35] are absolutely prohibited from involvement in the management or operation of mining or
similar ventures or words of similar import. A search for such stringent wording yields negative
This restrictive interpretation, petitioners believe, is in line with the general policy results. Thus, we come to the inevitable conclusion that there was a conscious and
enunciated by the Constitution reserving to Filipino citizens and corporations the use and deliberate decision to avoid the use of restrictive wording that bespeaks an intent not to
enjoyment of the countrys natural resources. They maintain that this Courts Decision[36] of use the expression agreements x x x involving either technical or financial assistance in
January 27, 2004 correctly declared the WMCP FTAA, along with pertinent provisions of RA an exclusionary and limiting manner.
7942, void for allowing a foreign contractor to have direct and exclusive management of a mining
enterprise. Allowing such a privilege not only runs counter to the full control and supervision that
the State is constitutionally mandated to exercise over the exploration, development and
utilization of the countrys natural resources; doing so also vests in the foreign company Deletion of Service Contracts to
beneficial ownership of our mineral resources. It will be recalled that the Decision of January 27, Avoid Pitfalls of Previous Constitutions,
2004 zeroed in on management or other forms of assistance or other activities associated with Not to Ban Service Contracts Per Se
the service contracts of the martial law regime, since the management or operation of mining
activities by foreign contractors, which is the primary feature of service contracts, was precisely
the evil that the drafters of the 1987 Constitution sought to eradicate. Third, we do not see how a verba legis approach leads to the conclusion that the
On the other hand, the intervenor[37] and public respondents argue that the FTAA allowed management or operation of mining activities by foreign contractors, which is the primary feature
by paragraph 4 is not merely an agreement for supplying limited and specific financial or of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to
technical services to the State. Rather, such FTAA is a comprehensive agreement for the eradicate. Nowhere in the above-quoted Section can be discerned the objective to keep out of
foreign-owned corporations integrated exploration, development and utilization of mineral, foreign hands the management or operation of mining activities or the plan to eradicate service
petroleum or other mineral oils on a large-scale basis. The agreement, therefore, authorizes the contracts as these were understood in the 1973 Constitution. Still, petitioners maintain that the
foreign contractors rendition of a whole range of integrated and comprehensive services, ranging deletion or omission from the 1987 Constitution of the term service contracts found in the 1973
from the discovery to the development, utilization and production of minerals or petroleum Constitution sufficiently proves the drafters intent to exclude foreigners from the management of
products. the affected enterprises.

We do not see how applying a strictly literal or verba legis interpretation of paragraph 4 To our mind, however, such intent cannot be definitively and conclusively established from
could inexorably lead to the conclusions arrived at in the ponencia. First, the drafters choice of the mere failure to carry the same expression or term over to the new Constitution, absent a
words -- their use of the phrase agreements x x x involving either technical or financial more specific, explicit and unequivocal statement to that effect. What petitioners seek (a
assistance -- does not indicate the intent to exclude other modes of assistance. The drafters complete ban on foreign participation in the management of mining operations, as previously
allowed by the earlier Constitutions) is nothing short of bringing about a momentous sea change
in the economic and developmental policies; and the fundamentally capitalist, free-enterprise assisted? If the answer is The State, then it necessarily implies that the State itself is the
philosophy of our government. We cannot imagine such a radical shift being undertaken by our one directly and solely undertaking the large-scale exploration, development and utilization of a
government, to the great prejudice of the mining sector in particular and our economy in general, mineral resource, so it follows that the State must itself bear the liability and cost of repaying the
merely on the basis of the omission of the terms service contract from or the failure to carry them financing sourced from the foreign lender and/or of paying compensation to the foreign entity
over to the new Constitution. There has to be a much more definite and even unarguable basis rendering technical assistance.
for such a drastic reversal of policies.
However, it is of common knowledge, and of judicial notice as well, that the government is
Fourth, a literal and restrictive interpretation of paragraph 4, such as that proposed by and has for many many years been financially strapped, to the point that even the most essential
petitioners, suffers from certain internal logical inconsistencies that generate ambiguities in the services have suffered serious curtailments -- education and health care, for instance, not to
understanding of the provision. As the intervenor pointed out, there has never been any mention judicial services -- have had to make do with inadequate budgetary allocations. Thus,
constitutional or statutory provision that reserved to Filipino citizens or corporations, at least 60 government has had to resort to build-operate-transfer and similar arrangements with the private
percent of which is Filipino-owned, the rendition of financial or technical assistance to companies sector, in order to get vital infrastructure projects built without any governmental outlay.
engaged in mining or the development of any other natural resource. The taking out of foreign-
currency or peso-denominated loans or any other kind of financial assistance, as well as the The very recent brouhaha over the gargantuan fiscal crisis or budget deficit merely
rendition of technical assistance -- whether to the State or to any other entity in the Philippines -- confirms what the ordinary citizen has suspected all along. After the reality check, one will have
has never been restricted in favor of Filipino citizens or corporations having a certain minimum to admit the implausibility of a direct undertaking -- by the State itself -- of large-
percentage of Filipino equity. Such a restriction would certainly be preposterous and scale exploration, development and utilization of minerals, petroleum and other mineral oils.
unnecessary. As a matter of fact, financial, and even technical assistance, regardless of the Such an undertaking entails not only humongous capital requirements, but also the attendant
nationality of its source, would be welcomed in the mining industry anytime with open arms, on risk of never finding and developing economically viable quantities of minerals, petroleum and
account of the dearth of local capital and the need to continually update technological know-how other mineral oils.[40]
and improve technical skills.
It is equally difficult to imagine that such a provision restricting foreign companies to the
There was therefore no need for a constitutional provision specifically allowing foreign- rendition of only financial or technical assistance to the government was deliberately crafted by
owned corporations to render financial or technical assistance, whether in respect of mining or the drafters of the Constitution, who were all well aware of the capital-intensive and technology-
some other resource development or commercial activity in the Philippines. The last point oriented nature of large-scale mineral or petroleum extraction and the countrys deficiency in
needs to be emphasized: if merely financial or technical assistance agreements are precisely those areas.[41] To say so would be tantamount to asserting that the provision was
allowed, there would be no need to limit them to large-scale mining operations, as there purposely designed to ladle the large-scale development and utilization of mineral, petroleum
would be far greater need for them in the smaller-scale mining activities (and even in non- and related resources with impossible conditions; and to remain forever and permanently
mining areas). Obviously, the provision in question was intended to refer to agreements reserved for future generations of Filipinos.
other than those for mere financial or technical assistance.

In like manner, there would be no need to require the President of the Republic to report to
Congress, if only financial or technical assistance agreements are involved. Such agreements A More Reasonable Look
are in the nature of foreign loans that -- pursuant to Section 20 of Article VII[39] of the 1987 at the Charters Plain Language
Constitution -- the President may contract or guarantee, merely with the prior concurrence of the
Monetary Board. In turn, the Board is required to report to Congress within thirty days from the
end of every quarter of the calendar year, not thirty days after the agreement is entered into.
Sixth, we shall now look closer at the plain language of the Charter and examining the
And if paragraph 4 permits only agreements for loans and other forms of financial, or logical inferences. The drafters chose to emphasize and highlight agreements x x x involving
technical assistance, what is the point of requiring that they be based on real contributions to the either technical or financial assistance in relation to foreign corporations participation in large-
economic growth and general welfare of the country? For instance, how is one to measure and scale EDU. The inclusion of this clause on technical or financial assistance recognizes the fact
assess the real contributions to the economic growth and general welfare of the country that that foreign business entities and multinational corporations are the ones with the resources and
may ensue from a foreign-currency loan agreement or a technical-assistance agreement for, know-how to provide technical and/or financial assistance of the magnitude and type required for
say, the refurbishing of an existing power generating plant for a mining operation somewhere in large-scale exploration, development and utilization of these resources.
Mindanao? Such a criterion would make more sense when applied to a major business
The drafters -- whose ranks included many academicians, economists, businessmen,
investment in a principal sector of the industry.
lawyers, politicians and government officials -- were not unfamiliar with the practices of foreign
The conclusion is clear and inescapable -- a verba legis construction shows that corporations and multinationals.
paragraph 4 is not to be understood as one limited only to foreign loans (or other forms of
Neither were they so nave as to believe that these entities would provide assistance
financial support) and to technical assistance. There is definitely more to it than that. These are
without conditionalities or some quid pro quo. Definitely, as business persons well know and as
provisions permitting participation by foreign companies; requiring the Presidents report
a matter of judicial notice, this matter is not just a question of signing a promissory note or
to Congress; and using, as yardstick, contributions based on economic growth and
executing a technology transfer agreement. Foreign corporations usually require that they be
general welfare. These were neither accidentally inserted into the Constitution nor
given a say in the management, for instance, of day-to-day operations of the joint venture. They
carelessly cobbled together by the drafters in lip service to shallow nationalism. The
would demand the appointment of their own men as, for example, operations managers,
provisions patently have significance and usefulness in a context that allows agreements with
technical experts, quality control heads, internal auditors or comptrollers. Furthermore, they
foreign companies to include more than mere financial or technical assistance.
would probably require seats on the Board of Directors -- all these to ensure the success of the
Fifth, it is argued that Section 2 of Article XII authorizes nothing more than a rendition of enterprise and the repayment of the loans and other financial assistance and to make certain
specific and limited financial service or technical assistance by a foreign company. This that the funding and the technology they supply would not go to waste. Ultimately, they would
argument begs the question To whom or for whom would it be rendered? or Who is being also want to protect their business reputation and bottom lines.[42]
 In short, the drafters will have to be credited with enough pragmatism and savvy to know A sequestration or freeze order shall be issued only upon showing of a prima facie case. The order and the
that these foreign entities will not enter into such agreements involving assistance without list of the sequestered or frozen properties shall forthwith be registered with the proper court. For orders
requiring arrangements for the protection of their investments, gains and benefits. issued before the ratification of this Constitution, the corresponding judicial action or proceeding shall be
filed within six months from its ratification. For those issued after such ratification, the judicial action or
Thus, by specifying such agreements involving assistance, the drafters necessarily gave proceeding shall be commenced within six months from the issuance thereof.
implied assent to everything that these agreements necessarily entailed; or that could
reasonably be deemed necessary to make them tenable and effective, including management
authority with respect to the day-to-day operations of the enterprise and measures for the The sequestration or freeze order is deemed automatically lifted if no judicial action or proceeding is
protection of the interests of the foreign corporation, PROVIDED THAT Philippine sovereignty commenced as herein provided. [43]
over natural resources and full control over the enterprise undertaking the EDU activities remain
firmly in the State. It is inconceivable that the drafters of the Constitution would leave such an important
matter -- an expression of sovereignty as it were -- indefinitely hanging in the air in a formless
and ineffective state. Indeed, the complete absence of even a general framework only serves to
further deflate petitioners theory, like a childs balloon losing its air.
Petitioners Theory Deflated by the
Absence of Closing-Out Rules or Guidelines Under the circumstances, the logical inconsistencies resulting from petitioners literal and
purely verba legis approach to paragraph 4 of Section 2 of Article XII compel a resort to other
aids to interpretation.
Seventh and final point regarding the plain-language approach, one of the practical
difficulties that results from it is the fact that there is nothing by way of transitory provisions that
would serve to confirm the theory that the omission of the term service contract from the 1987
Constitution signaled the demise of service contracts. Petitioners Posture Also Negated
by Ratio Legis Et Anima
The framers knew at the time they were deliberating that there were various service
contracts extant and in force and effect, including those in the petroleum industry. Many of these
service contracts were long-term (25 years) and had several more years to run. If they had Thus, in order to resolve the inconsistencies, incongruities and ambiguities encountered
meant to ban service contracts altogether, they would have had to provide for the termination or and to supply the deficiencies of the plain-language approach, there is a need for recourse to the
pretermination of the existing contracts. Accordingly, they would have supplied the specifics and proceedings of the 1986 Constitutional Commission. There is a need for ratio legis et anima.
the when and how of effecting the extinguishment of these existing contracts (or at least the
mechanics for determining them); and of putting in place the means to address the just claims of
the contractors for compensation for their investments, lost opportunities, and so on, if not for the
recovery thereof. Service Contracts Not
If the framers had intended to put an end to service contracts, they would have at least left Deconstitutionalized
specific instructions to Congress to deal with these closing-out issues, perhaps by way of
general guidelines and a timeline within which to carry them out. The following are some extant
examples of such transitory guidelines set forth in Article XVIII of our Constitution: Pertinent portions of the deliberations of the members of the Constitutional Commission
(ConCom) conclusively show that they discussed agreements involving either technical or
financial assistance in the same breadth as service contracts and used the terms
Section 23. Advertising entities affected by paragraph (2), Section 11 of Article XVI of this Constitution
interchangeably. The following exchange between Commissioner Jamir (sponsor of the
shall have five years from its ratification to comply on a graduated and proportionate basis with the
provision) and Commissioner Suarez irrefutably proves that the agreements involving technical
minimum Filipino ownership requirement therein.
or financial assistance were none other than service contracts.

xxxxxxxxx THE PRESIDENT. Commissioner Jamir is recognized. We are still on Section 3.

MR. JAMIR. Yes, Madam President. With respect to the second paragraph of
Section 25. After the expiration in 1991 of the Agreement between the Republic of the Philippines and the Section 3, my amendment by substitution reads: THE PRESIDENT MAY
United States of America concerning military bases, foreign military bases, troops, or facilities shall not ENTER INTO AGREEMENTS WITH FOREIGN-OWNED CORPORATIONS
be allowed in the Philippines except under a treaty duly concurred in by the Senate and, when the INVOLVING EITHER TECHNICAL OR FINANCIAL ASSISTANCE FOR
Congress so requires, ratified by a majority of the votes cast by the people in a national referendum held LARGE-SCALE EXPLORATION, DEVELOPMENT AND UTILIZATION OF
for that purpose, and recognized as a treaty by the other contracting State. NATURAL RESOURCES ACCORDING TO THE TERMS AND CONDITIONS
PROVIDED BY LAW.
Section 26. The authority to issue sequestration or freeze orders under Proclamation No. 3 dated March MR. VILLEGAS. The Committee accepts the amendment. Commissioner Suarez will
25, 1986 in relation to the recovery of ill-gotten wealth shall remain operative for not more than eighteen give the background.
months after the ratification of this Constitution. However, in the national interest, as certified by the
President, the Congress may extend such period. MR. JAMIR. Thank you.

THE PRESIDENT. Commissioner Suarez is recognized.

 MR. SUAREZ. Thank you, Madam President. MR. GASCON. The proposed amendment of Commissioner Jamir is in indirect
contrast to my proposed amendment, so I would like to object and present my
Will Commissioner Jamir answer a few clarificatory questions? proposed amendment to the body.
MR. JAMIR. Yes, Madam President.
xxxxxxxxx
MR. SUAREZ. This particular portion of the section has reference to what was
popularly known before as service contracts, among other things, is that
correct? MR. GASCON. Yes, it will be up to the body.

MR. JAMIR. Yes, Madam President. I feel that the general law to be set by Congress as regard service contract
agreements which the President will enter into might be too general or since
MR. SUAREZ. As it is formulated, the President may enter into service we do not know the content yet of such a law, it might be that certain
contracts but subject to the guidelines that may be promulgated by agreements will be detrimental to the interest of the Filipinos. This is in direct
Congress? contrast to my proposal which provides that there be effective constraints in
the implementation of service contracts.
MR. JAMIR. That is correct.
So instead of a general law to be passed by Congress to serve as a guideline to the
MR. SUAREZ. Therefore, that aspect of negotiation and consummation will fall on President when entering into service contract agreements, I propose that
the President, not upon Congress? every service contract entered into by the President would need the
concurrence of Congress, so as to assure the Filipinos of their interests with
MR. JAMIR. That is also correct, Madam President. regard to the issue in Section 3 on all lands of the public domain. My
MR. SUAREZ. Except that all of these contracts, service or otherwise, must be alternative amendment, which we will discuss later, reads: THAT THE
made strictly in accordance with guidelines prescribed by Congress? PRESIDENT SHALL ENTER INTO SUCH AGREEMENTS ONLY WITH THE
CONCURRENCE OF TWO-THIRDS VOTE OF ALL THE MEMBERS OF
MR. JAMIR. That is also correct. CONGRESS SITTING SEPARATELY.

MR. SUAREZ. And the Gentleman is thinking in terms of a law that uniformly covers
xxxxxxxxx
situations of the same nature?

MR. JAMIR. That is 100 percent correct. MR. BENGZON. The reason we made that shift is that we realized the original
proposal could breed corruption. By the way, this is not just confined
MR. SUAREZ. I thank the Commissioner.
to service contracts but also to financial assistance. If we are going to
MR. JAMIR. Thank you very much.[44] make every single contract subject to the concurrence of Congress which,
according to the Commissioners amendment is the concurrence of two-thirds
The following exchange leaves no doubt that the commissioners knew exactly what they of Congress voting separately then (1) there is a very great chance that each
were dealing with: service contracts. contract will be different from another; and (2) there is a great temptation that
it would breed corruption because of the great lobbying that is going to
THE PRESIDENT. Commissioner Gascon is recognized. happen. And we do not want to subject our legislature to that.
MR. GASCON. Commissioner Jamir had proposed an amendment with regard to
special service contracts which was accepted by the Committee. Since the Now, to answer the Commissioners apprehension, by general law, we do not mean statements of
Committee has accepted it, I would like to ask some questions. motherhood. Congress can build all the restrictions that it wishes into that general law so that every
contract entered into by the President under that specific area will have to be uniform. The President has
THE PRESIDENT. Commissioner Gascon may proceed. no choice but to follow all the guidelines that will be provided by law.
MR. GASCON. As it is proposed now, such service contracts will be entered into
by the President with the guidelines of a general law on service contract to MR. GASCON. But my basic problem is that we do not know as of yet the contents
be enacted by Congress. Is that correct? of such a general law as to how much constraints there will be in it. And to my
mind, although the Committees contention that the regular concurrence from
MR. VILLEGAS. The Commissioner is right, Madam President. Congress would subject Congress to extensive lobbying, I think that is a risk
we will have to take since Congress is a body of representatives of the people
MR. GASCON. According to the original proposal, if the President were to enter into whose membership will be changing regularly as there will be changing
a particular agreement, he would need the concurrence of Congress. Now that circumstances every time certain agreements are made. It would be best then
it has been changed by the proposal of Commissioner Jamir in that Congress to keep in tab and attuned to the interest of the Filipino people, whenever the
will set the general law to which the President shall comply, the President will, President enters into any agreement with regard to such an important matter
therefore, not need the concurrence of Congress every time he enters as technical or financial assistance for large-scale exploration,
into service contracts. Is that correct? development and utilization of natural resources or service contracts,
the peoples elected representatives should be on top of it.
MR. VILLEGAS. That is right.
xxxxxxxxx MR. NOLLEDO. Madam President, I have the permission of the Acting Floor Leader
to speak for only two minutes in favor of the amendment of Commissioner
Gascon.
MR. OPLE. Madam President, we do not need to suspend the session. If
Commissioner Gascon needs a few minutes, I can fill up the remaining time THE PRESIDENT. Commissioner Nolledo may proceed.
while he completes his proposed amendment. I just wanted to ask
Commissioner Jamir whether he would entertain a minor amendment to his MR. NOLLEDO. With due respect to the members of the Committee and
amendment, and it reads as follows: THE PRESIDENT SHALL Commissioner Jamir, I am in favor of the objection of Commissioner Gascon.
SUBSEQUENTLY NOTIFY CONGRESS OF EVERY SERVICE
CONTRACT ENTERED INTO IN ACCORDANCE WITH THE GENERAL
Madam President, I was one of those who refused to sign the 1973 Constitution, and one of the reasons is
LAW. I think the reason is, if I may state it briefly, as Commissioner Bengzon
that there were many provisions in the Transitory Provisions therein that favored aliens. I was shocked
said, Congress can always change the general law later on to conform to new
perceptions of standards that should be built into service contracts. But the when I read a provision authorizing service contracts while we, in this Constitutional Commission,
provided for Filipino control of the economy. We are, therefore, providing for exceptional instances where
only way Congress can do this is if there were a notification requirement from
aliens may circumvent Filipino control of our economy. And one way of circumventing the rule in favor
the Office of the President that such service contracts had been entered
of Filipino control of the economy is to recognize service contracts.
into, subject then to the scrutiny of the Members of Congress. This pertains to
a situation where the service contracts are already entered into, and all that
this amendment seeks is the reporting requirement from the Office of the As far as I am concerned, if I should have my own way, I am for the complete deletion of this
President. Will Commissioner Jamir entertain that? provision. However, we are presenting a compromise in the sense that we are requiring a two-thirds
vote of all the Members of Congress as a safeguard. I think we should not mistrust the future Members of
MR. JAMIR. I will gladly do so, if it is still within my power. Congress by saying that the purpose of this provision is to avoid corruption. We cannot claim that they are
less patriotic than we are. I think the Members of this Commission should know that entering into service
MR. VILLEGAS. Yes, the Committee accepts the amendment.
contracts is an exception to the rule on protection of natural resources for the interest of the nation, and
therefore, being an exception it should be subject, whenever possible, to stringent rules. It seems to me
xxxxxxxxx that we are liberalizing the rules in favor of aliens.

SR. TAN. Madam President, may I ask a question? I say these things with a heavy heart, Madam President. I do not claim to be a nationalist, but I love my
country. Although we need investments, we must adopt safeguards that are truly reflective of the
THE PRESIDENT. Commissioner Tan is recognized. sentiments of the people and not mere cosmetic safeguards as they now appear in the Jamir amendment.
(Applause)
SR. TAN. Am I correct in thinking that the only difference between these
future service contracts and the past service contracts under Mr. Marcos is
the general law to be enacted by the legislature and the notification of Thank you, Madam President.[46]
Congress by the President? That is the only difference, is it not?

MR. VILLEGAS. That is right. Another excerpt, featuring then Commissioner (now Chief Justice) Hilario G. Davide Jr.,
indicates the limitations of the scope of such service contracts -- they are valid only in regard to
SR. TAN. So those are the safeguards. minerals, petroleum and other mineral oils, not to all natural resources.

MR. VILLEGAS. Yes. There was no law at all governing service contracts before. THE PRESIDENT. Commissioner Davide is recognized.
[45] MR. DAVIDE. Thank you, Madam President. This is an amendment to the Jamir
SR. TAN. Thank you, Madam President.
amendment and also to the Ople amendment. I propose to delete NATURAL
RESOURCES and substitute it with the following: MINERALS, PETROLEUM
AND OTHER MINERAL OILS. On the Ople amendment, I propose to add:
More Than Mere Financial THE NOTIFICATION TO CONGRESS SHALL BE WITHIN THIRTY DAYS
and Technical Assistance FROM THE EXECUTION OF THE SERVICE CONTRACT.
Entailed by the Agreements
THE PRESIDENT. What does the Committee say with respect to the first
amendment in lieu of NATURAL RESOURCES?

The clear words of Commissioner Jose N. Nolledo quoted below explicitly and eloquently MR. VILLEGAS. Could Commissioner Davide explain that?
demonstrate that the drafters knew that the agreements with foreign corporations were going to
entail not mere technical or financial assistance but, rather, foreign investment in and MR. DAVIDE. Madam President, with the use of NATURAL RESOURCES here, it
management of an enterprise involved in large-scale exploration, development and utilization of would necessarily include all lands of the public domain, our marine
minerals, petroleum, and other mineral oils. resources, forests, parks and so on. So we would like to limit the scope of
these service contracts to those areas really where these may be needed,
THE PRESIDENT. Commissioner Nolledo is recognized. the exploitation, development and exploration of minerals, petroleum and
other mineral oils. And so, we believe that we should really, if we want to
grant service contracts at all, limit the same to only those particular areas
 where Filipino capital may not be sufficient, and not to all natural commissioners understanding of the agreements involving either technical or financial
resources. assistance.

MR. SUAREZ. Just a point of clarification again, Madam President. When the
Commissioner made those enumerations and specifications, I suppose he
deliberately did not include agricultural land? Summation of the
MR. DAVIDE. That is precisely the reason we have to enumerate what these Concom Deliberations
resources are into which service contracts may enter. So, beyond the reach
of any service contract will be lands of the public domain, timberlands,
forests, marine resources, fauna and flora, wildlife and national parks. [47] At this point, we sum up the matters established, based on a careful reading of the
ConCom deliberations, as follows:
After the Jamir amendment was voted upon and approved by a vote of 21 to 10 with 2
abstentions, Commissioner Davide made the following statement, which is very relevant to our In their deliberations on what was to become paragraph 4, the framers
quest: used the term service contracts in referring to agreements x x x involving
either technical or financial assistance.
THE PRESIDENT. Commissioner Davide is recognized.
They spoke of service contracts as the concept was understood in the
MR. DAVIDE. I am very glad that Commissioner Padilla emphasized minerals, 1973 Constitution.
petroleum and mineral oils. The Commission has just approved the possible
foreign entry into the development, exploration and utilization of these It was obvious from their discussions that they were not about to ban or
minerals, petroleum and other mineral oils by virtue of the Jamir amendment. I eradicate service contracts.
voted in favor of the Jamir amendment because it will eventually give way to
vesting in exclusively Filipino citizens and corporations wholly owned by Instead, they were plainly crafting provisions to put in place safeguards
Filipino citizens the right to utilize the other natural resources. This means that that would eliminate or minimize the abuses prevalent during the marital
as a matter of policy, natural resources should be utilized and exploited only law regime. In brief, they were going to permit service contracts with
by Filipino citizens or corporations wholly owned by such citizens. But by foreign corporations as contractors, but with safety measures to prevent
virtue of the Jamir amendment, since we feel that Filipino capital may not be abuses, as an exception to the general norm established in the first
enough for the development and utilization of minerals, petroleum and other paragraph of Section 2 of Article XII. This provision reserves or limits to
mineral oils, the President can enter into service contracts with foreign Filipino citizens -- and corporations at least 60 percent of which is owned
corporations precisely for the development and utilization of such resources. by such citizens -- the exploration, development and utilization of natural
And so, there is nothing to fear that we will stagnate in the development of resources.
minerals, petroleum and mineral oils because we now allow service
This provision was prompted by the perceived insufficiency of Filipino
contracts. x x x. [48]
capital and the felt need for foreign investments in the EDU of minerals
The foregoing are mere fragments of the framers lengthy discussions of the provision and petroleum resources.
dealing with agreements x x x involving either technical or financial assistance, which ultimately
The framers for the most part debated about the sort of safeguards that
became paragraph 4 of Section 2 of Article XII of the Constitution. Beyond any doubt, the
would be considered adequate and reasonable. But some of them,
members of the ConCom were actually debating about the martial-law-era service contracts for
having more radical leanings, wanted to ban service contracts altogether;
which they were crafting appropriate safeguards.
for them, the provision would permit aliens to exploit and benefit from the
In the voting that led to the approval of Article XII by the ConCom, the explanations given nations natural resources, which they felt should be reserved only for
by Commissioners Gascon, Garcia and Tadeo indicated that they had voted to reject this Filipinos.
provision on account of their objections to the constitutionalization of the service contract
In the explanation of their votes, the individual commissioners were heard
concept.
by the entire body. They sounded off their individual opinions, openly
Mr. Gascon said, I felt that if we would constitutionalize any provision on service enunciated their philosophies, and supported or attacked the provisions
contracts, this should always be with the concurrence of Congress and not guided only by a with fervor. Everyones viewpoint was heard.
general law to be promulgated by Congress.[49] Mr. Garcia explained, Service contracts are
In the final voting, the Article on the National Economy and Patrimony --
given constitutional legitimization in Sec. 3, even when they have been proven to be inimical to
including paragraph 4 allowing service contracts with foreign corporations
the interests of the nation, providing, as they do, the legal loophole for the exploitation of our
as an exception to the general norm in paragraph 1 of Section 2 of the
natural resources for the benefit of foreign interests.[50] Likewise, Mr. Tadeo cited inter alia the
same article -- was resoundingly approved by a vote of 32 to 7, with 2
fact that service contracts continued to subsist, enabling foreign interests to benefit from our
abstentions.
natural resources.[51] It was hardly likely that these gentlemen would have objected so
strenuously, had the provision called for mere technical or financial assistance and
nothing more.

The deliberations of the ConCom and some commissioners explanation of their votes Agreements Involving Technical
leave no room for doubt that the service contract concept precisely underpinned the or Financial Assistance Are
Service Contracts With Safeguards
 From the foregoing, we are impelled to conclude that the phrase agreements involving value or usefulness of the record of the ConCom, simply because certain members chose
either technical or financial assistance, referred to in paragraph 4, are in fact service not to speak out.
contracts.But unlike those of the 1973 variety, the new ones are between foreign corporations
acting as contractors on the one hand; and on the other, the government as principal or owner of It is contended that the deliberations therein did not necessarily reflect the thinking of the
the works. In the new service contracts, the foreign contractors provide capital, technology and voting population that participated in the referendum and ratified the Constitution. Verily, whether
technical know-how, and managerial expertise in the creation and operation of large-scale we like it or not, it is a bit too much to assume that every one of those who voted to ratify the
mining/extractive enterprises; and the government, through its agencies (DENR, MGB), actively proposed Charter did so only after carefully reading and mulling over it, provision by provision.
exercises control and supervision over the entire operation.
Likewise, it appears rather extravagant to assume that every one of those who did in fact
Such service contracts may be entered into only with respect to minerals, petroleum and bother to read the draft Charter actually understood the import of its provisions, much less
other mineral oils. The grant thereof is subject to several safeguards, among which are these analyzed it vis--vis the previous Constitutions. We believe that in reality, a good percentage of
requirements: those who voted in favor of it did so more out of faith and trust. For them, it was the product of
the hard work and careful deliberation of a group of intelligent, dedicated and trustworthy men
and women of integrity and conviction, whose love of country and fidelity to duty could not be
(1) The service contract shall be crafted in accordance with a general law that will set standard or uniform questioned.
terms, conditions and requirements, presumably to attain a certain uniformity in provisions and avoid the
possible insertion of terms disadvantageous to the country. In short, a large proportion of the voters voted yes because the drafters, or a majority of
them, endorsed the proposed Constitution. What this fact translates to is the inescapable
conclusion that many of the voters in the referendum did not form their own isolated judgment
(2) The President shall be the signatory for the government because, supposedly before an agreement is
about the draft Charter, much less about particular provisions therein. They only relied or fell
presented to the President for signature, it will have been vetted several times over at different levels to
back and acted upon the favorable endorsement or recommendation of the framers as a group.
ensure that it conforms to law and can withstand public scrutiny.
In other words, by voting yes, they may be deemed to have signified their voluntary adoption of
the understanding and interpretation of the delegates with respect to the proposed Charter and
(3) Within thirty days of the executed agreement, the President shall report it to Congress to give that its particular provisions. If its good enough for them, its good enough for me; or, in many
branch of government an opportunity to look over the agreement and interpose timely objections, if any. instances, If its good enough for President Cory Aquino, its good enough for me.

And even for those who voted based on their own individual assessment of the proposed
Charter, there is no evidence available to indicate that their assessment or understanding of its
Use of the Record of the provisions was in fact different from that of the drafters. This unwritten assumption seems to be
ConCom to Ascertain Intent petitioners as well. For all we know, this segment of voters must have read and understood the
provisions of the Constitution in the same way the framers had, an assumption that would
account for the favorable votes.
At this juncture, we shall address, rather than gloss over, the use of the framers intent Fundamentally speaking, in the process of rewriting the Charter, the members of the
approach, and the criticism hurled by petitioners who quote a ruling of this Court: ConCom as a group were supposed to represent the entire Filipino people. Thus, we cannot but
regard their views as being very much indicative of the thinking of the people with respect to the
While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional matters deliberated upon and to the Charter as a whole.
convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may It is therefore reasonable and unavoidable to make the following conclusion, based
be had only when other guides fail as said proceedings are powerless to vary the terms of the Constitution on the above arguments. As written by the framers and ratified and adopted by the
when the meaning is clear. Debates in the constitutional convention are of value as showing the views of people, the Constitution allows the continued use of service contracts with foreign
the individual members, and as indicating the reason for their votes, but they give us no light as to the corporations -- as contractors who would invest in and operate and manage extractive
views of the large majority who did not talk, much less the mass of our fellow citizens whose votes at the enterprises, subject to the full control and supervision of the State -- sans the abuses of
polls gave that instrument the force of fundamental law. We think it safer to construe the constitution from the past regime. The purpose is clear: to develop and utilize our mineral, petroleum and
what appears upon its face. The proper interpretation therefore depends more on how it was understood other resources on a large scale for the immediate and tangible benefit of the Filipino
by the people adopting it than in the framers understanding thereof.[52] people.

The notion that the deliberations reflect only the views of those members who spoke out In view of the foregoing discussion, we should reverse the Decision of January 27, 2004,
and not the views of the majority who remained silent should be clarified. We must never forget and in fact now hold a view different from that of the Decision, which had these findings: (a)
that those who spoke out were heard by those who remained silent and did not react. If the latter paragraph 4 of Section 2 of Article XII limits foreign involvement in the local mining industry to
were silent because they happened not to be present at the time, they are presumed to have agreements strictly for either financial or technical assistance only; (b) the same paragraph
read the minutes and kept abreast of the deliberations. By remaining silent, they are deemed to precludes agreements that grant to foreign corporations the management of local mining
have signified their assent to and/or conformity with at least some of the views propounded or operations, as such agreements are purportedly in the nature of service contracts as these were
their lack of objections thereto. It was incumbent upon them, as representatives of the entire understood under the 1973 Constitution; (c) these service contracts were supposedly de-
Filipino people, to follow the deliberations closely and to speak their minds on the matter if they constitutionalized and proscribed by the omission of the term service contracts from the 1987
did not see eye to eye with the proponents of the draft provisions. Constitution; (d) since the WMCP FTAA contains provisions permitting the foreign contractor to
manage the concern, the said FTAA is invalid for being a prohibited service contract; and (e)
In any event, each and every one of the commissioners had the opportunity to speak out provisions of RA 7942 and DAO 96-40, which likewise grant managerial authority to the foreign
and to vote on the matter. Moreover, the individual explanations of votes are on record, and they contractor, are also invalid and unconstitutional.
show where each delegate stood on the issues. In sum, we cannot completely denigrate the
Ultimate Test: States Control The question to be answered, then, is whether RA 7942 and its Implementing Rules
Determinative of Constitutionality enable the government to exercise that degree of control sufficient to direct and regulate
the conduct of affairs of individual enterprises and restrain undesirable activities.

On the resolution of these questions will depend the validity and constitutionality of certain
But we are not yet at the end of our quest. Far from it. It seems that we are confronted with
provisions of the Philippine Mining Act of 1995 (RA 7942) and its Implementing Rules and
a possible collision of constitutional provisions. On the one hand, paragraph 1 of Section 2 of Regulations (DAO 96-40), as well as the WMCP FTAA.
Article XII explicitly mandates the State to exercise full control and supervision over the
exploration, development and utilization of natural resources. On the other hand, paragraph 4 Indeed, petitioners charge[54] that RA 7942, as well as its Implementing Rules and
permits safeguarded service contracts with foreign contractors. Normally, pursuant thereto, the Regulations, makes it possible for FTAA contracts to cede full control and management of
contractors exercise management prerogatives over the mining operations and the enterprise as mining enterprises over to fully foreign-owned corporations, with the result that the State is
a whole. There is thus a legitimate ground to be concerned that either the States full control and allegedly reduced to a passive regulator dependent on submitted plans and reports, with weak
supervision may rule out any exercise of management authority by the foreign contractor; or, the review and audit powers. The State does not supposedly act as the owner of the natural
other way around, allowing the foreign contractor full management prerogatives may ultimately resources for and on behalf of the Filipino people; it practically has little effective say in the
negate the States full control and supervision. decisions made by the enterprise. Petitioners then conclude that the law, the implementing
regulations, and the WMCP FTAA cede beneficial ownership of the mineral resources to the
foreign contractor.

Ut Magis Valeat A careful scrutiny of the provisions of RA 7942 and its Implementing Rules belies
Quam Pereat petitioners claims. Paraphrasing the Constitution, Section 4 of the statute clearly affirms the
States control thus:

Under the third principle of constitutional construction laid down in Francisco -- ut magis Sec. 4. Ownership of Mineral Resources. Mineral resources are owned by the State and the exploration,
valeat quam pereat -- every part of the Constitution is to be given effect, and the Constitution is development, utilization and processing thereof shall be under its full control and supervision. The State
to be read and understood as a harmonious whole. Thus, full control and supervision by the may directly undertake such activities or it may enter into mineral agreements with contractors.
State must be understood as one that does not preclude the legitimate exercise of management
prerogatives by the foreign contractor. Before any further discussion, we must stress the primacy
The State shall recognize and protect the rights of the indigenous cultural communities to their ancestral
and supremacy of the principle of sovereignty and State control and supervision over all aspects
lands as provided for by the Constitution.
of exploration, development and utilization of the countrys natural resources, as mandated in the
first paragraph of Section 2 of Article XII.
The aforequoted provision is substantively reiterated in Section 2 of DAO 96-40 as follows:
But in the next breadth we have to point out that full control and supervision cannot be
taken literally to mean that the State controls and supervises everything involved, down to the
minutest details, and makes all decisions required in the mining operations. This strained Sec. 2. Declaration of Policy. All mineral resources in public and private lands within the territory and
concept of control and supervision over the mining enterprise would render impossible the exclusive economic zone of the Republic of the Philippines are owned by the State. It shall be the
legitimate exercise by the contractors of a reasonable degree of management prerogative and responsibility of the State to promote their rational exploration, development, utilization and conservation
authority necessary and indispensable to their proper functioning. through the combined efforts of the Government and private sector in order to enhance national growth in
a way that effectively safeguards the environment and protects the rights of affected communities.
For one thing, such an interpretation would discourage foreign entry into large-scale
exploration, development and utilization activities; and result in the unmitigated stagnation of this
sector, to the detriment of our nations development. This scenario renders paragraph 4
inoperative and useless. And as respondents have correctly pointed out, the government does Sufficient Control Over Mining
not have to micro-manage the mining operations and dip its hands into the day-to-day affairs of Operations Vested in the State
the enterprise in order for it to be considered as having full control and supervision. by RA 7942 and DAO 96-40
The concept of control[53] adopted in Section 2 of Article XII must be taken to mean less
than dictatorial, all-encompassing control; but nevertheless sufficient to give the State the power
to direct, restrain, regulate and govern the affairs of the extractive enterprises. Control by the RA 7942 provides for the States control and supervision over mining operations. The
State may be on a macro level, through the establishment of policies, guidelines, regulations, following provisions thereof establish the mechanism of inspection and visitorial rights over
industry standards and similar measures that would enable the government to control the mining operations and institute reportorial requirements in this manner:
conduct of affairs in various enterprises and restrain activities deemed not desirable or
beneficial. 1. Sec. 8 which provides for the DENRs power of over-all supervision and periodic review
for the conservation, management, development and proper use of the States
The end in view is ensuring that these enterprises contribute to the economic development
mineral resources;
and general welfare of the country, conserve the environment, and uplift the well-being of the
affected local communities. Such a concept of control would be compatible with permitting the
foreign contractor sufficient and reasonable management authority over the enterprise it 2. Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the DENR to
invested in, in order to ensure that it is operating efficiently and profitably, to protect its exercise direct charge in the administration and disposition of mineral resources,
investments and to enable it to succeed. and empowers the MGB to monitor the compliance by the contractor of the terms
 and conditions of the mineral agreements, confiscate surety and performance bonds, An FTAA contractor is obliged to open its books of accounts and records for
and deputize whenever necessary any member or unit of the Phil. National Police, inspection by the government (Section 56-m, DAO 96-40).
barangay, duly registered non-governmental organization (NGO) or any qualified
person to police mining activities; An FTAA contractor has to dispose of the minerals and by-products at the
highest market price and register with the MGB a copy of the sales agreement
(Section 56-n, DAO 96-40).
3. Sec. 66 which vests in the Regional Director exclusive jurisdiction over safety inspections
of all installations, whether surface or underground, utilized in mining operations. MGB is mandated to monitor the contractors compliance with the terms and
conditions of the FTAA; and to deputize, when necessary, any member or unit of
the Philippine National Police, the barangay or a DENR-accredited
4. Sec. 35, which incorporates into all FTAAs the following terms, conditions and
nongovernmental organization to police mining activities (Section 7-d and -f,
warranties:
DAO 96-40).

(g) Mining operations shall be conducted in accordance with the An FTAA cannot be transferred or assigned without prior approval by the
provisions of the Act and its IRR. President (Section 40, RA 7942; Section 66, DAO 96-40).

A mining project under an FTAA cannot proceed to the

(h) Work programs and minimum expenditures commitments. construction/development/utilization stage, unless its Declaration of Mining
Project Feasibility has been approved by government (Section 24, RA 7942).
xxxxxxxxx The Declaration of Mining Project Feasibility filed by the contractor cannot be
approved without submission of the following documents:
(k) Requiring proponent to effectively use appropriate anti-pollution
technology and facilities to protect the environment and restore 1. Approved mining project feasibility study (Section 53-d, DAO
or rehabilitate mined-out areas. 96-40)
2. Approved three-year work program (Section 53-a-4, DAO 96-
40)
(l) The contractors shall furnish the Government records of geologic, 3. Environmental compliance certificate (Section 70, RA 7942)
accounting and other relevant data for its mining operation, and 4. Approved environmental protection and enhancement
that books of accounts and records shall be open for inspection program (Section 69, RA 7942)
by the government. x x x. 5. Approval by the Sangguniang Panlalawigan/Bayan/Barangay
(Section 70, RA 7942; Section 27, RA 7160)
6. Free and prior informed consent by the indigenous peoples
(m) Requiring the proponent to dispose of the minerals at the highest price
concerned, including payment of royalties through a
and more advantageous terms and conditions.
Memorandum of Agreement (Section 16, RA 7942;
Section 59, RA 8371)
(n) x x x x x x x x x
The FTAA contractor is obliged to assist in the
development of its mining community, promotion of the general welfare of its
(o) Such other terms and conditions consistent with the Constitution and inhabitants, and development of science and mining technology (Section 57, RA
with this Act as the Secretary may deem to be for the best 7942).
interest of the State and the welfare of the Filipino people.
The FTAA contractor is obliged to submit reports (on
quarterly, semi-annual or annual basis as the case may be; per Section 270,
The foregoing provisions of Section 35 of RA 7942 are also reflected and implemented in
DAO 96-40), pertaining to the following:
Section 56 (g), (h), (l), (m) and (n) of the Implementing Rules, DAO 96-40.
1. Exploration
Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the
2. Drilling
governments control over mining enterprises:
3. Mineral resources and reserves
The contractor is to relinquish to the government those portions of the contract 4. Energy consumption
area not needed for mining operations and not covered by any declaration of 5. Production
mining feasibility (Section 35-e, RA 7942; Section 60, DAO 96-40). 6. Sales and marketing
7. Employment
The contractor must comply with the provisions pertaining to mine safety, health 8. Payment of taxes, royalties, fees and other Government Shares
and environmental protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO 9. Mine safety, health and environment
96-40). 10. Land use
11. Social development
For violation of any of its terms and conditions, government may cancel an 12. Explosives consumption
FTAA. (Chapter XVII, RA 7942; Chapter XXIV, DAO 96-40).
 An FTAA pertaining to areas within government than a sufficient degree of control and supervision over the conduct of mining
reservations cannot be granted without a written clearance from the operations.
government agencies concerned (Section 19, RA 7942; Section 54, DAO 96-
40).

An FTAA contractor is required to post a financial Section 3(aq) of RA 7942

guarantee bond in favor of the government in an amount equivalent to its Not Unconstitutional
expenditures obligations for any particular year. This requirement is apart from
the representations and warranties of the contractor that it has access to all
the financing, managerial and technical expertise and technology necessary to
carry out the objectives of the FTAA (Section 35-b, -e, and -f, RA 7942). An objection has been expressed that Section 3(aq)[55] of RA 7942 -- which allows a
foreign contractor to apply for and hold an exploration permit -- is unconstitutional. The
Other reports to be submitted by the contractor, as reasoning is that Section 2 of Article XII of the Constitution does not allow foreign-owned
required under DAO 96-40, are as follows: an environmental report on the corporations to undertake mining operations directly. They may act only as contractors of the
rehabilitation of the mined-out area and/or mine waste/tailing covered area, State under an FTAA; and the State, as the party directly undertaking exploitation of its natural
and anti-pollution measures undertaken (Section 35-a-2); annual reports of the resources, must hold through the government all exploration permits and similar authorizations.
mining operations and records of geologic accounting (Section 56-m); annual Hence, Section 3(aq), in permitting foreign-owned corporations to hold exploration permits, is
progress reports and final report of exploration activities (Section 56-2). unconstitutional.

Other programs required to be submitted by the The objection, however, is not well-founded. While the Constitution mandates the State to
contractor, pursuant to DAO 96-40, are the following: a safety and health exercise full control and supervision over the exploitation of mineral resources, nowhere does it
program (Section 144); an environmental work program (Section 168); an require the government to hold all exploration permits and similar authorizations. In fact, there is
annual environmental protection and enhancement program (Section 171). no prohibition at all against foreign or local corporations or contractors holding exploration
permits. The reason is not hard to see.
The foregoing gamut of requirements, regulations, restrictions and limitations imposed
upon the FTAA contractor by the statute and regulations easily overturns petitioners contention. Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a qualified
The setup under RA 7942 and DAO 96-40 hardly relegates the State to the role of a passive person the right to conduct exploration for all minerals in specified areas. Such a permit does not
regulator dependent on submitted plans and reports. On the contrary, the government agencies amount to an authorization to extract and carry off the mineral resources that may be
concerned are empowered to approve or disapprove -- hence, to influence, direct and change -- discovered. This phase involves nothing but expenditures for exploring the contract area and
the various work programs and the corresponding minimum expenditure commitments for each locating the mineral bodies. As no extraction is involved, there are no revenues or incomes to
of the exploration, development and utilization phases of the mining enterprise. speak of. In short, the exploration permit is an authorization for the grantee to spend its own
funds on exploration programs that are pre-approved by the government, without any right to
Once these plans and reports are approved, the contractor is bound to comply with its recover anything should no minerals in commercial quantities be discovered. The State risks
commitments therein. Figures for mineral production and sales are regularly monitored and nothing and loses nothing by granting these permits to local or foreign firms; in fact, it stands to
subjected to government review, in order to ensure that the products and by-products are gain in the form of data generated by the exploration activities.
disposed of at the best prices possible; even copies of sales agreements have to be submitted
to and registered with MGB. And the contractor is mandated to open its books of accounts and Pursuant to Section 24 of RA 7942, an exploration permit grantee who determines the
records for scrutiny, so as to enable the State to determine if the government share has been commercial viability of a mining area may, within the term of the permit, file with the MGB a
fully paid. declaration of mining project feasibility accompanied by a work program for development. The
approval of the mining project feasibility and compliance with other requirements of RA 7942
The State may likewise compel the contractors compliance with mandatory requirements vests in the grantee the exclusive right to an MPSA or any other mineral agreement, or to an
on mine safety, health and environmental protection, and the use of anti-pollution technology FTAA.
and facilities. Moreover, the contractor is also obligated to assist in the development of the
mining community and to pay royalties to the indigenous peoples concerned. Thus, the permit grantee may apply for an MPSA, a joint venture agreement, a co-
production agreement, or an FTAA over the permit area, and the application shall be approved if
Cancellation of the FTAA may be the penalty for violation of any of its terms and the permit grantee meets the necessary qualifications and the terms and conditions of any such
conditions and/or noncompliance with statutes or regulations. This general, all-around, agreement. Therefore, the contractor will be in a position to extract minerals and earn revenues
multipurpose sanction is no trifling matter, especially to a contractor who may have yet to only when the MPSA or another mineral agreement, or an FTAA, is granted. At that point, the
recover the tens or hundreds of millions of dollars sunk into a mining project. contractors rights and obligations will be covered by an FTAA or a mineral agreement.
Overall, considering the provisions of the statute and the regulations just discussed, we But prior to the issuance of such FTAA or mineral agreement, the exploration permit
believe that the State definitely possesses the means by which it can have the ultimate word in grantee (or prospective contractor) cannot yet be deemed to have entered into any contract or
the operation of the enterprise, set directions and objectives, and detect deviations and agreement with the State, and the grantee would definitely need to have some document or
noncompliance by the contractor; likewise, it has the capability to enforce compliance and to instrument as evidence of its right to conduct exploration works within the specified area. This
impose sanctions, should the occasion therefor arise. need is met by the exploration permit issued pursuant to Sections 3(aq), 20 and 23 of RA 7942.
In other words, the FTAA contractor is not free to do whatever it pleases and get In brief, the exploration permit serves a practical and legitimate purpose in that it
away with it; on the contrary, it will have to follow the government line if it wants to stay protects the interests and preserves the rights of the exploration permit grantee (the
in the enterprise. Ineluctably then, RA 7942 and DAO 96-40 vest in the government more would-be contractor) -- foreign or local -- during the period of time that it is spending
heavily on exploration works, without yet being able to earn revenues to recoup any of its
investments and expenditures. Minus this permit and the protection it affords, the exploration 14. The contractor is obliged to complete the development of the mine, including
works and expenditures may end up benefiting only claim-jumpers. Such a possibility tends to construction of the production facilities, within the period stated in the
discourage investors and contractors. Thus, Section 3(aq) of RA 7942 may not be deemed approved work program (Clause 6.1).
unconstitutional.
15. The contractor is obligated to submit for approval of the DENR secretary a work
program covering each period of three fiscal years (Clause 6.2).

16. The contractor is to submit reports to the DENR secretary on the production, ore
The Terms of the WMCP FTAA reserves, work accomplished and work in progress, profile of its work force
A Deference to State Control
and management staff, and other technical information (Clause 6.3).

17. Any expansions, modifications, improvements and replacements of mining

A perusal of the WMCP FTAA also reveals a slew of stipulations providing for State control facilities shall be subject to the approval of the secretary (Clause 6.4).
and supervision:
18. The State has control with respect to the amount of funds that the contractor
1. The contractor is obligated to account for the value of production and sale of may borrow within the Philippines (Clause 7.2).
minerals (Clause 1.4).
19. The State has supervisory power with respect to technical, financial and
2. The contractors work program, activities and budgets must be approved by/on marketing issues (Clause 10.1-a).
behalf of the State (Clause 2.1).
20. The contractor is required to ensure 60 percent Filipino equity in the contractor,
3. The DENR secretary has the power to extend the exploration period (Clause 3.2- within ten years of recovering specified expenditures, unless not so required
a). by subsequent legislation (Clause 10.1).

4. Approval by the State is necessary for incorporating lands into the FTAA contract 21. The State has the right to terminate the FTAA for the contractors unremedied
area (Clause 4.3-c). substantial breach thereof (Clause 13.2);

5. The Bureau of Forest Development is vested with discretion in regard to 22. The States approval is needed for any assignment of the FTAA by the contractor
approving the inclusion of forest reserves as part of the FTAA contract area to an entity other than an affiliate (Clause 14.1).
(Clause 4.5).
We should elaborate a little on the work programs and budgets, and what they mean with
6. The contractor is obliged to relinquish periodically parts of the contract area not respect to the States ability to exercise full control and effective supervision over the enterprise.
needed for exploration and development (Clause 4.6). For instance, throughout the initial five-year exploration and feasibility phase of the project, the
contractor is mandated by Clause 5.1 of the WMCP FTAA to submit a series of work programs
7. A Declaration of Mining Feasibility must be submitted for approval by the State (copy furnished the director of MGB) to the DENR secretary for approval. The programs will
(Clause 4.6-b). detail the contractors proposed exploration activities and budget covering each subsequent
period of two fiscal years.
8. The contractor is obligated to report to the State its exploration activities (Clause
4.9). In other words, the concerned government officials will be informed beforehand of the
proposed exploration activities and expenditures of the contractor for each succeeding two-year
9. The contractor is required to obtain State approval of its work programs for the period, with the right to approve/disapprove them or require changes or adjustments therein if
succeeding two-year periods, containing the proposed work activities and deemed necessary.
expenditures budget related to exploration (Clause 5.1).
Likewise, under Clause 5.2(a), the amount that the contractor was supposed to spend for
10. The contractor is required to obtain State approval for its proposed expenditures exploration activities during the first contract year of the exploration period was fixed at not less
for exploration activities (Clause 5.2). than P24 million; and then for the succeeding years, the amount shall be as agreed between the
DENR secretary and the contractor prior to the commencement of each subsequent fiscal year.
11. The contractor is required to submit an annual report on geological, geophysical,
If no such agreement is arrived upon, the previous years expenditure commitment shall apply.
geochemical and other information relating to its explorations within the FTAA
area (Clause 5.3-a). This provision alone grants the government through the DENR secretary a very big say in
the exploration phase of the project. This fact is not something to be taken lightly, considering
12. The contractor is to submit within six months after expiration of exploration
that the government has absolutely no contribution to the exploration expenditures or work
period a final report on all its findings in the contract area (Clause 5.3-b).
activities and yet is given veto power over such a critical aspect of the project. We cannot but
13. The contractor, after conducting feasibility studies, shall submit a declaration of construe as very significant such a degree of control over the project and, resultantly, over the
mining feasibility, along with a description of the area to be developed and mining enterprise itself.
mined, a description of the proposed mining operations and the technology to
Following its exploration activities or feasibility studies, if the contractor believes that any
be employed, and a proposed work program for the development phase, for
part of the contract area is likely to contain an economic mineral resource, it shall submit to the
approval by the DENR secretary (Clause 5.4).
DENR secretary a declaration of mining feasibility (per Clause 5.4 of the FTAA), together with a
technical description of the area delineated for development and production, a description of the
proposed mining operations including the technology to be used, a work program for
development, an environmental impact statement, and a description of the contributions to the within 30 days from delivery of the Rejection Notice then the Work
economic and general welfare of the country to be generated by the mining operations (pursuant Programme or Budget or variation thereof proposed by the Contractor shall
to Clause 5.5). be deemed approved, so as not to unnecessarily delay the performance of
the Agreement.
The work program for development is subject to the approval of the DENR
secretary. Upon its approval, the contractor must comply with it and complete the development 8.4. x x x x x x x x x
of the mine, including the construction of production facilities and installation of machinery and
equipment, within the period provided in the approved work program for development (per 8.5. So far as is practicable, the Contractor shall comply with any approved Work
Clause 6.1). Programme and Budget. It is recognized by the Secretary and the
Contractor that the details of any Work Programmes or Budgets may
Thus, notably, the development phase of the project is likewise subject to the control and require changes in the light of changing circumstances. The Contractor
supervision of the government. It cannot be emphasized enough that the proper and timely may make such changes without approval of the Secretary provided they
construction and deployment of the production facilities and the development of the mine are of do not change the general objective of any Work Programme, nor entail a
pivotal significance to the success of the mining venture. Any missteps here will potentially be downward variance of more than twenty per centum (20percent) of the
very costly to remedy. Hence, the submission of the work program for development to the DENR relevant Budget. All other variations to an approved Work Programme or
secretary for approval is particularly noteworthy, considering that so many millions of dollars Budget shall be submitted for approval of the Secretary.
worth of investments -- courtesy of the contractor -- are made to depend on the States
consideration and action. From the provisions quoted above, petitioners generalize by asserting that the government
does not participate in making critical decisions regarding the operations of the mining firm.
Throughout the operating period, the contractor is required to submit to the DENR Furthermore, while the State can require the submission of work programs and budgets, the
secretary for approval, copy furnished the director of MGB, work programs covering each period decision of the contractor will still prevail, if the parties have a difference of opinion with regard to
of three fiscal years (per Clause 6.2). During the same period (per Clause 6.3), the contractor is matters affecting operations and management.
mandated to submit various quarterly and annual reports to the DENR secretary, copy furnished
the director of MGB, on the tonnages of production in terms of ores and concentrates, with We hold, however, that the foregoing provisions do not manifest a relinquishment of
corresponding grades, values and destinations; reports of sales; total ore reserves, total tonnage control. For instance, Clause 8.2 merely provides a mechanism for preventing the business or
of ores, work accomplished and work in progress (installations and facilities related to mining mining operations from grinding to a complete halt as a result of possibly over-long and
operations), investments made or committed, and so on and so forth. unjustified delays in the governments handling, processing and approval of submitted work
programs and budgets. Anyway, the provision does give the DENR secretary more than
Under Section VIII, during the period of mining operations, the contractor is also required sufficient time (60 days) to react to submitted work programs and budgets. It cannot be
to submit to the DENR secretary (copy furnished the director of MGB) the work program and supposed that proper grounds for objecting thereto, if any exist, cannot be discovered within a
corresponding budget for the contract area, describing the mining operations that are proposed period of two months.
to be carried out during the period covered. The secretary is, of course, entitled to grant or deny
approval of any work program or budget and/or propose revisions thereto. Once the On the other hand, Clause 8.3 seeks to provide a temporary, stop-gap solution in the
program/budget has been approved, the contractor shall comply therewith. event a disagreement over the submitted work program or budget arises between the State and
the contractor and results in a stalemate or impasse, in order that there will be no unreasonably
In sum, the above provisions of the WMCP FTAA taken together, far from constituting a long delays in the performance of the works.
surrender of control and a grant of beneficial ownership of mineral resources to the contractor in
question, bestow upon the State more than adequate control and supervision over the These temporary or stop-gap solutions are not necessarily evil or wrong. Neither does it
activities of the contractor and the enterprise. follow that the government will inexorably be aggrieved if and when these temporary remedies
come into play. First, avoidance of long delays in these situations will undoubtedly redound to
the benefit of the State as well as the contractor. Second, who is to say that the work program or
budget proposed by the contractor and deemed approved under Clause 8.3 would not be the
No Surrender of Control better or more reasonable or more effective alternative? The contractor, being the insider, as it
Under the WMCP FTAA were, may be said to be in a better position than the State -- an outsider looking in -- to
determine what work program or budget would be appropriate, more effective, or more suitable
under the circumstances.
Petitioners, however, take aim at Clause 8.2, 8.3, and 8.5 of the WMCP FTAA which, they All things considered, we take exception to the characterization of the DENR secretary as
say, amount to a relinquishment of control by the State, since it cannot truly impose its own a subservient nonentity whom the contractor can overrule at will, on account of Clause 8.3. And
discretion in respect of the submitted work programs. neither is it true that under the same clause, the DENR secretary has no authority whatsoever to
disapprove the work program. As Respondent WMCP reasoned in its Reply-Memorandum, the
8.2. The Secretary shall be deemed to have approved any Work Programme or State -- despite Clause 8.3 -- still has control over the contract area and it may, as sovereign
Budget or variation thereof submitted by the Contractor unless within sixty authority, prohibit work thereon until the dispute is resolved. And ultimately, the State may
(60) days after submission by the Contractor the Secretary gives notice terminate the agreement, pursuant to Clause 13.2 of the same FTAA, citing substantial breach
declining such approval or proposing a revision of certain features and thereof. Hence, it clearly retains full and effective control of the exploitation of the mineral
specifying its reasons therefor (the Rejection Notice). resources.
8.3. If the Secretary gives a Rejection Notice, the Parties shall promptly meet and On the other hand, Clause 8.5 is merely an acknowledgment of the parties need for
endeavor to agree on amendments to the Work Programme or Budget. If flexibility, given that no one can accurately forecast under all circumstances, or predict how
the Secretary and the Contractor fail to agree on the proposed revision situations may change. Hence, while approved work programs and budgets are to be followed
and complied with as far as practicable, there may be instances in which changes will have to be latters commitment that the acquisition shall be at such terms as may be acceptable to the
effected, and effected rapidly, since events may take shape and unfold with suddenness and contractor.
urgency. Thus, Clause 8.5 allows the contractor to move ahead and make changes without the
express or implicit approval of the DENR secretary. Such changes are, however, subject to However, private respondent has proffered a logical explanation for the
certain conditions that will serve to limit or restrict the variance and prevent the contractor from provision.[58] Section 10.2(e) contemplates a situation applicable to foreign-owned corporations.
straying very far from what has been approved. WMCP, at the time of the execution of the FTAA, was a foreign-owned corporation and therefore
not qualified to own land. As contractor, it has at some future date to construct the infrastructure
Clause 8.5 provides the contractor a certain amount of flexibility to meet unexpected -- the mine processing plant, the camp site, the tailings dam, and other infrastructure -- needed
situations, while still guaranteeing that the approved work programs and budgets are not for the large-scale mining operations. It will then have to identify and pinpoint, within the FTAA
abandoned altogether. Clause 8.5 does not constitute proof that the State has relinquished contract area, the particular surface areas with favorable topography deemed ideal for such
control. And ultimately, should there be disagreement with the actions taken by the contractor in infrastructure and will need to acquire the surface rights. The State owns the mineral deposits in
this instance as well as under Clause 8.3 discussed above, the DENR secretary may resort to the earth, and is also qualified to own land.
cancellation/termination of the FTAA as the ultimate sanction.
Section 10.2(e) sets forth the mechanism whereby the foreign-owned contractor,
disqualified to own land, identifies to the government the specific surface areas within the FTAA
contract area to be acquired for the mine infrastructure. The government then acquires
Discretion to Select Contract ownership of the surface land areas on behalf of the contractor, in order to enable the latter to
Area Not an Abdication of Control proceed to fully implement the FTAA.

The contractor, of course, shoulders the purchase price of the land. Hence, the provision
allows it, after termination of the FTAA, to be reimbursed from proceeds of the sale of the
Next, petitioners complain that the contractor has full discretion to select -- and the surface areas, which the government will dispose of through public bidding. It should be noted
government has no say whatsoever as to -- the parts of the contract area to be relinquished that this provision will not be applicable to Sagittarius as the present FTAA contractor, since it is
pursuant to Clause 4.6 of the WMCP FTAA.[56] This clause, however, does not constitute a Filipino corporation qualified to own and hold land. As such, it may therefore freely negotiate
abdication of control. Rather, it is a mere acknowledgment of the fact that the contractor will with the surface rights owners and acquire the surface property in its own right.
have determined, after appropriate exploration works, which portions of the contract area do not
contain minerals in commercial quantities sufficient to justify developing the same and ought Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being
therefore to be relinquished. The State cannot just substitute its judgment for that of the aware of the rationale for the said provision. That provision does not call for the exercise of the
contractor and dictate upon the latter which areas to give up. power of eminent domain -- and determination of just compensation is not an issue -- as much
as it calls for a qualified party to acquire the surface rights on behalf of a foreign-owned
Moreover, we can be certain that the contractors self-interest will propel proper and efficient contractor.
relinquishment. According to private respondent,[57] a mining company tries to relinquish as much non-
mineral areas as soon as possible, because the annual occupation fees paid to the government are Rather than having the foreign contractor act through a dummy corporation, having the
based on the total hectarage of the contract area, net of the areas relinquished. Thus, the larger the State do the purchasing is a better alternative. This will at least cause the government to be
remaining area, the heftier the amount of occupation fees to be paid by the contractor. Accordingly, aware of such transaction/s and foster transparency in the contractors dealings with the local
relinquishment is not an issue, given that the contractor will not want to pay the annual occupation property owners. The government, then, will not act as a subcontractor of the contractor; rather,
fees on the non-mineral parts of its contract area. Neither will it want to relinquish promising sites, it will facilitate the transaction and enable the parties to avoid a technical violation of the Anti-
which other contractors may subsequently pick up. Dummy Law.

Government Not Absence of Provision

a Subcontractor Requiring Sale at Posted
Prices Not Problematic

Petitioners further maintain that the contractor can compel the government to exercise its
power of eminent domain to acquire surface areas within the contract area for the contractors The supposed absence of any provision in the WMCP FTAA directly and explicitly
use. Clause 10.2 (e) of the WMCP FTAA provides that the government agrees that the requiring the contractor to sell the mineral products at posted or market prices is not a problem.
contractor shall (e) have the right to require the Government at the Contractors own cost, to Apart from Clause 1.4 of the FTAA obligating the contractor to account for the total value of
purchase or acquire surface areas for and on behalf of the Contractor at such price and terms as mineral production and the sale of minerals, we can also look to Section 35 of RA 7942, which
may be acceptable to the contractor. At the termination of this Agreement such areas shall be incorporates into all FTAAs certain terms, conditions and warranties, including the following:
sold by public auction or tender and the Contractor shall be entitled to reimbursement of the
costs of acquisition and maintenance, adjusted for inflation, from the proceeds of sale. (l) The contractors shall furnish the Government records of geologic, accounting and
other relevant data for its mining operation, and that books of accounts and
According to petitioners, government becomes a subcontractor to the contractor and may, records shall be open for inspection by the government. x x x
on account of this provision, be compelled to make use of its power of eminent domain, not for
public purposes but on behalf of a private party, i.e., the contractor. Moreover, the power of the (m) Requiring the proponent to dispose of the minerals at the highest price and
courts to determine the amount corresponding to the constitutional requirement of just more advantageous terms and conditions.
compensation has allegedly also been contracted away by the government, on account of the
 For that matter, Section 56(n) of DAO 99-56 specifically obligates an FTAA contractor to to take an equity position in the company -- the foreign-owned contractor is always in a position
dispose of the minerals and by-products at the highest market price and to register with the MGB to render the services required under the FTAA, under the direction and control of the
a copy of the sales agreement. After all, the provisions of prevailing statutes as well as rules and government.
regulations are deemed written into contracts.

Contractors Right to Ask

Contractors Right to Mortgage For Amendment Not Absolute
Not Objectionable Per Se

With respect to Clauses 10.4(e) and (i), petitioners complain that these provisions bind
Petitioners also question the absolute right of the contractor under Clause 10.2 (l) to government to allow amendments to the FTAA if required by banks and other financial
mortgage and encumber not only its rights and interests in the FTAA and the infrastructure and institutions as part of the conditions for new lendings. However, we do not find anything wrong
improvements introduced, but also the mineral products extracted. Private respondents do not with Clause 10.4(e), which only states that if the Contractor seeks to obtain financing
touch on this matter, but we believe that this provision may have to do with the conditions contemplated herein from banks or other financial institutions, (the Government shall) cooperate
imposed by the creditor-banks of the then foreign contractor WMCP to secure the lendings made with the Contractor in such efforts provided that such financing arrangements will in no event
or to be made to the latter. Ordinarily, banks lend not only on the security of mortgages on fixed reduce the Contractors obligations or the Governments rights hereunder. The colatilla obviously
assets, but also on encumbrances of goods produced that can easily be sold and converted into safeguards the States interests; if breached, it will give the government cause to object to the
cash that can be applied to the repayment of loans. Banks even lend on the security of accounts proposed amendments.
receivable that are collectible within 90 days.[59]
On the other hand, Clause 10.4(i) provides that the Government shall favourably consider
It is not uncommon to find that a debtor corporation has executed deeds of assignment by any request from [the] Contractor for amendments of this Agreement which are necessary in
way of security over the production for the next twelve months and/or the proceeds of the sale order for the Contractor to successfully obtain the financing. Petitioners see in this provision a
thereof -- or the corresponding accounts receivable, if sold on terms -- in favor of its creditor- complete renunciation of control. We disagree.
banks. Such deeds may include authorizing the creditors to sell the products themselves and to
collect the sales proceeds and/or the accounts receivable. The proviso does not say that the government shall grant any request for amendment.
Clause 10.4(i) only obliges the State to favorably consider any such request, which is not at all
Seen in this context, Clause 10.2(l) is not something out of the ordinary or objectionable. unreasonable, as it is not equivalent to saying that the government must automatically consent
In any case, as will be explained below, even if it is allowed to mortgage or encumber the to it. This provision should be read together with the rest of the FTAA provisions instituting
mineral end-products themselves, the contractor is not freed of its obligation to pay the government control and supervision over the mining enterprise. The clause should not be given
government its basic and additional shares in the net mining revenue, which is the essential an interpretation that enables the contractor to wiggle out of the restrictions imposed upon it by
thing to consider. merely suggesting that certain amendments are requested by the lenders.

In brief, the alarum raised over the contractors right to mortgage the minerals is simply Rather, it is up to the contractor to prove to the government that the requested changes to
unwarranted. Just the same, the contractor must account for the value of mineral production and the FTAA are indispensable, as they enable the contractor to obtain the needed financing; that
the sales proceeds therefrom. Likewise, under the WMCP FTAA, the government remains without such contract changes, the funders would absolutely refuse to extend the loan; that there
entitled to its sixty percent share in the net mining revenues of the contractor. The latters right to are no other sources of financing available to the contractor (a very unlikely scenario); and that
mortgage the minerals does not negate the States right to receive its share of net mining without the needed financing, the execution of the work programs will not proceed. But the
revenues. bottom line is, in the exercise of its power of control, the government has the final say on
whether to approve or disapprove such requested amendments to the FTAA. In short, approval
thereof is not mandatory on the part of the government.

Shareholders Free In fine, the foregoing evaluation and analysis of the aforementioned FTAA
to Sell Their Stocks provisions sufficiently overturns petitioners litany of objections to and criticisms of the
States alleged lack of control.

Petitioners likewise criticize Clause 10.2(k), which gives the contractor authority to change
its equity structure at any time. This provision may seem somewhat unusual, but considering
Financial Benefits Not
that WMCP then was 100 percent foreign-owned, any change would mean that such percentage Surrendered to the Contractor
would either stay unaltered or be decreased in favor of Filipino ownership. Moreover, the
foreign-held shares may change hands freely. Such eventuality is as it should be.

We believe it is not necessary for government to attempt to limit or restrict the freedom of One of the main reasons certain provisions of RA 7942 were struck down was the finding
the shareholders in the contractor to freely transfer, dispose of or encumber their shareholdings, mentioned in the Decision that beneficial ownership of the mineral resources had been
consonant with the unfettered exercise of their business judgment and discretion. Rather, what conveyed to the contractor. This finding was based on the underlying assumption, common to
is critical is that, regardless of the identity, nationality and percentage ownership of the various the said provisions, that the foreign contractor manages the mineral resources in the same way
shareholders of the contractor -- and regardless of whether these shareholders decide to take that foreign contractors in service contracts used to. By allowing foreign contractors to manage
the company public, float bonds and other fixed-income instruments, or allow the creditor-banks or operate all the aspects of the mining operation, the above-cited provisions of R.A. No. 7942
have in effect conveyed beneficial ownership over the nations mineral resources to these The said DAO spells out the financial benefits the government will receive from an FTAA,
contractors, leaving the State with nothing but bare title thereto. [60] As the WMCP FTAA referred to as the Government Share, composed of a basic government share and
contained similar provisions deemed by the ponente to be abhorrent to the Constitution, the an additional government share.
Decision struck down the Contract as well.
The basic government share is comprised of all direct taxes, fees and royalties, as well
Beneficial ownership has been defined as ownership recognized by law and capable of as other payments made by the contractor during the term of the FTAA. These are amounts paid
being enforced in the courts at the suit of the beneficial owner.[61] Blacks Law directly to (i) the national government (through the Bureau of Internal Revenue, Bureau of
Dictionary indicates that the term is used in two senses: first, to indicate the interest of a Customs, Mines & Geosciences Bureau and other national government agencies imposing taxes
beneficiary in trust property (also called equitable ownership); and second, to refer to the power or fees), (ii) the local government units where the mining activity is conducted, and (iii) persons
of a corporate shareholder to buy or sell the shares, though the shareholder is not registered in and communities directly affected by the mining project. The major taxes and other payments
the corporations books as the owner.[62] Usually, beneficial ownership is distinguished from constituting the basic government share are enumerated below:[65]
naked ownership, which is the enjoyment of all the benefits and privileges of ownership, as
against possession of the bare title to property. Payments to the National Government:

An assiduous examination of the WMCP FTAA uncovers no indication that it confers upon Excise tax on minerals - 2 percent of the gross output of mining
WMCP ownership, beneficial or otherwise, of the mining property it is to develop, the minerals to operations
be produced, or the proceeds of their sale, which can be legally asserted and enforced as
Contractor income tax - maximum of 32 percent of taxable income for
against the State.
corporations
As public respondents correctly point out, any interest the contractor may have in the
Customs duties and fees on imported capital equipment -the rate is set by
proceeds of the mining operation is merely the equivalent of the consideration the government
has undertaken to pay for its services. All lawful contracts require such mutual prestations, and the Tariff and Customs Code (3-7 percent for chemicals; 3-10 percent for
the WMCP FTAA is no different. The contractor commits to perform certain services for the explosives; 3-15 percent for mechanical and electrical equipment; and 3-
government in respect of the mining operation, and in turn it is to be compensated out of the net 10 percent for vehicles, aircraft and vessels
mining revenues generated from the sale of mineral products. What would be objectionable is a VAT on imported equipment, goods and services 10 percent of value
contractual provision that unduly benefits the contractor far in excess of the service rendered or
value delivered, if any, in exchange therefor. Royalties due the government on minerals extracted from mineral
reservations, if applicable 5 percent of the actual market value of the
A careful perusal of the statute itself and its implementing rules reveals that neither RA minerals produced
7942 nor DAO 99-56 can be said to convey beneficial ownership of any mineral resource or
product to any foreign FTAA contractor. Documentary stamp tax - the rate depends on the type of transaction

Capital gains tax on traded stocks - 5 to 10 percent of the value of the

shares
Equitable Sharing
of Financial Benefits Withholding tax on interest payments on foreign loans -15 percent of the
amount of interest

Withholding tax on dividend payments to foreign stockholders 15 percent

On the contrary, DAO 99-56, entitled Guidelines Establishing the Fiscal Regime of of the dividend
Financial or Technical Assistance Agreements aims to ensure an equitable sharing of the
benefits derived from mineral resources. These benefits are to be equitably shared among the Wharfage and port fees
government (national and local), the FTAA contractor, and the affected communities. The
purpose is to ensure sustainable mineral resources development; and a fair, equitable, Licensing fees (for example, radio permit, firearms permit, professional
competitive and stable investment regime for the large-scale exploration, development and fees)
commercial utilization of minerals. The general framework or concept followed in crafting the Other national taxes and fees.
fiscal regime of the FTAA is based on the principle that the government expects real
contributions to the economic growth and general welfare of the country, while the contractor Payments to Local Governments:
expects a reasonable return on its investments in the project.[63]
Local business tax - a maximum of 2 percent of gross sales or receipts
Specifically, under the fiscal regime, the governments expectation is, inter alia, the receipt (the rate varies among local government units)
of its share from the taxes and fees normally paid by a mining enterprise. On the other hand, the
FTAA contractor is granted by the government certain fiscal and non-fiscal incentives[64] to help Real property tax - 2 percent of the fair market value of the property,
support the formers cash flow during the most critical phase (cost recovery) and to make the based on an assessment level set by the local government
Philippines competitive with other mineral-producing countries. After the contractor has
recovered its initial investment, it will pay all the normal taxes and fees comprising the basic Special education levy - 1 percent of the basis used for the real property
share of the government, plus an additional share for the government based on the options and tax
formulae set forth in DAO 99-56.
Occupation fees - PhP50 per hectare per year; PhP100 per hectare per
year if located in a mineral reservation
 Community tax - maximum of PhP10,500 per year term among other things; and the Office of the Solicitor General, in its Motion for
Reconsideration, appears to have erroneously claimed that the phrase refers to indirect taxes.
All other local government taxes, fees and imposts as of the effective date
of the FTAA - the rate and the type depend on the local government The law provides no definition of the term among other things, for the reason that
Congress deliberately avoided setting unnecessary limitations as to what may constitute
Other Payments: compensation to the State for the exploitation and use of mineral resources. But the inclusion of
that phrase clearly and unmistakably reveals the legislative intent to have the State collect more
Royalty to indigenous cultural communities, if any 1 percent of gross
than just the usual taxes, duties and fees. Certainly, there is nothing in that phrase -- or in the
output from mining operations second paragraph of Section 81 -- that would suggest that such phrase should be interpreted as
Special allowance - payment to claim owners and surface rights holders referring only to taxes, duties, fees and the like.

Apart from the basic share, an additional government share is also collected from the Precisely for that reason, to fulfill the legislative intent behind the inclusion of the
FTAA contractor in accordance with the second paragraph of Section 81 of RA 7942, which phrase among other things in the second paragraph of Section 81,[67] the DENR structured and
provides that the government share shall be comprised of, among other things, certain taxes, formulated in DAO 99-56 the said additional government share. Such a share was to consist
duties and fees. The subject proviso reads: not of taxes, but of a share in the earnings or cash flows of the mining enterprise. The
additional government share was to be paid by the contractor on top of the basic share, so as to
achieve a fifty-fifty sharing -- between the government and the contractor -- of net benefits from
The Government share in a financial or technical assistance agreement shall consist of, among other mining. In the Ramos-DeVera paper, the explanation of the three options or formulas[68] --
things, the contractors corporate income tax, excise tax, special allowance, withholding tax due from the presented in DAO 99-56 for the computation of the additional government share -- serves to
contractors foreign stockholders arising from dividend or interest payments to the said foreign debunk the claim that the governments take from an FTAA consists solely of taxes, fees and
stockholder in case of a foreign national, and all such other taxes, duties and fees as provided for under duties.
existing laws. (Bold types supplied.)
Unfortunately, the Office of the Solicitor General -- although in possession of the relevant
data -- failed to fully replicate or echo the pertinent elucidation in the Ramos-DeVera paper
The government, through the DENR and the MGB, has interpreted the insertion of the regarding the three schemes or options for computing the additional government share presented in
phrase among other things as signifying that the government is entitled to an additional DAO 99-56. Had due care been taken by the OSG, the Court would have been duly apprised of
government share to be paid by the contractor apart from the basic share, in order to attain a the real nature and particulars of the additional share.
fifty-fifty sharing of net benefits from mining.
But, perhaps, on account of the esoteric discussion in the Ramos-DeVera paper, and the
The additional government share is computed by using one of three options or schemes even more abstruse mathematical jargon employed in DAO 99-56, the OSG omitted any
presented in DAO 99-56: (1) a fifty-fifty sharing in the cumulative present value of cash flows; (2) mention of the three options. Instead, the OSG skipped to a side discussion of the effect
the share based on excess profits; and (3) the sharing based on the cumulative net mining of indirect taxes, which had nothing at all to do with the additional government share, to begin
revenue. The particular formula to be applied will be selected by the contractor, with a written with. Unfortunately, this move created the wrong impression, pointed out in Justice Antonio T.
notice to the government prior to the commencement of the development and construction Carpios Opinion, that the OSG had taken the position that the additional government share
phase of the mining project.[66] consisted of indirect taxes.
Proceeds from the government shares arising from an FTAA contract are distributed to In any event, what is quite evident is the fact that the additional government share, as
and received by the different levels of government in the following proportions: formulated, has nothing to do with taxes -- direct or indirect -- or with duties, fees or charges. To
National Government 50 percent repeat, it is over and above the basic government share composed of taxes and duties. Simply
Provincial Government 10 percent put, the additional share may be (a) an amount that will result in a 50-50 sharing of the
Municipal Government 20 percent cumulative present value of the cash flows[69] of the enterprise; (b) an amount equivalent to 25
Affected Barangays 20 percent percent of the additional or excess profits of the enterprise, reckoned against a benchmark
return on investments; or (c) an amount that will result in a fifty-fifty sharing of the cumulative net
The portion of revenues remaining after the deduction of the basic and additional mining revenue from the end of the recovery period up to the taxable year in question. The
government shares is what goes to the contractor. contractor is required to select one of the three options or formulae for computing the additional
share, an option it will apply to all of its mining operations.

As used above, net mining revenue is defined as the gross output from mining operations
for a calendar year, less deductible expenses (inclusive of taxes, duties and fees). Such revenue
Governments Share in an
would roughly be equivalent to taxable income or income before income tax. Definitely, as
FTAA Not Consisting Solely
compared with, say, calculating the additional government share on the basis of net income
of Taxes, Duties and Fees
(after income tax), the net mining revenue is a better and much more reasonable basis for such
computation, as it gives a truer picture of the profitability of the company.

In connection with the foregoing discussion on the basic and additional To demonstrate that the three options or formulations will operate as intended, Messrs.
government shares, it is pertinent at this juncture to mention the criticism leveled at the second Ramos and de Vera also performed some quantifications of the government share via a financial
paragraph of Section 81 of RA 7942, quoted earlier. The said proviso has been denounced, modeling of each of the three options discussed above. They found that the government would
because, allegedly, the States share in FTAAs with foreign contractors has been limited to taxes, get the highest share from the option that is based on the net mining revenue, as compared with
fees and duties only; in effect, the State has been deprived of a share in the after-tax income of the other two options, considering only the basic and the additional shares; and that, even
the enterprise. In the face of this allegation, one has to consider that the law does not define the
though production rate decreases, the government share will actually increase when the net peculiar to the mining industry. Besides, with developments and advances in technology and in
mining revenue and the additional profit-based options are used. the geosciences, we cannot discount the possibility of shorter recovery periods. At any rate, the
concerned agencies have not been remiss in this area. The 1995 and 1996 Implementing Rules
Furthermore, it should be noted that the three options or formulae do not yet take into and Regulations of RA 7942 specify that the period of recovery, reckoned from the date of
account the indirect taxes[70] and other financial contributions[71] of mining projects. These indirect commercial operation, shall be for a period not exceeding five years, or until the date
taxes and other contributions are real and actual benefits enjoyed by the Filipino people and/or of actual recovery, whichever comes earlier.
government. Now, if some of the quantifiable items are taken into account in the computations,
the financial modeling would show that the total government share increases to 60 percent or
higher -- in one instance, as much as 77 percent and even 89 percent -- of the net present value
of total benefits from the project. As noted in the Ramos-DeVera paper, these results are not at Approval of Pre-Operating
all shabby, considering that the contractor puts in all the capital requirements and assumes all Expenses Required by RA 7942
the risks, without the government having to contribute or risk anything.

Despite the foregoing explanation, Justice Carpio still insisted during the Courts
deliberations that the phrase among other things refers only to taxes, duties and fees. We are Still, RA 7942 is criticized for allegedly not requiring government approval of pre-operating,
bewildered by his position. On the one hand, he condemns the Mining Law for allegedly limiting exploration and development expenses of the foreign contractors, who are in effect given
the governments benefits only to taxes, duties and fees; and on the other, he refuses to allow unfettered discretion to determine the amounts of such expenses. Supposedly, nothing prevents
the State to benefit from the correct and proper interpretation of the DENR/MGB. To remove all the contractors from recording such expenses in amounts equal to the mining revenues
doubts then, we hold that the States share is not limited to taxes, duties and fees only and that anticipated for the first 10 or 15 years of commercial production, with the result that the share of
the DENR/MGB interpretation of the phrase among other things is correct. Definitely, this the State will be zero for the first 10 or 15 years. Moreover, under the circumstances, the
DENR/MGB interpretation is not only legally sound, but also greatly advantageous to the government would be unable to say when it would start to receive its share under the FTAA.
government.
We believe that the argument is based on incorrect information as well as speculation.
One last point on the subject. The legislature acted judiciously in not defining the Obviously, certain crucial provisions in the Mining Law were overlooked. Section 23, dealing with
terms among other things and, instead, leaving it to the agencies concerned to devise and the rights and obligations of the exploration permit grantee, states: The permittee shall
develop the various modes of arriving at a reasonable and fair amount for the additional undertake exploration work on the area as specified by its permit based on an approved work
government share. As can be seen from DAO 99-56, the agencies concerned did an admirable program. The next proviso reads: Any expenditure in excess of the yearly budget of
job of conceiving and developing not just one formula, but three different formulae for arriving at the approved work program may be carried forward and credited to the succeeding years
the additional government share. Each of these options is quite fair and reasonable; and, as covering the duration of the permit. x x x. (underscoring supplied)
Messrs. Ramos and De Vera stated, other alternatives or schemes for a possible improvement
of the fiscal regime for FTAAs are also being studied by the government. Clearly, even at the stage of application for an exploration permit, the applicant is required
to submit -- for approval by the government -- a proposed work program for exploration,
Besides, not locking into a fixed definition of the term among other things will ultimately be containing a yearly budget of proposed expenditures. The State has the opportunity to pass
more beneficial to the government, as it will have that innate flexibility to adjust to and cope with upon (and approve or reject) such proposed expenditures, with the foreknowledge that -- if
rapidly changing circumstances, particularly those in the international markets. Such flexibility is approved -- these will subsequently be recorded as pre-operating expenses that the contractor
especially significant for the government in terms of helping our mining enterprises remain will have to recoup over the grace period. That is not all.
competitive in world markets despite challenging and shifting economic scenarios.
Under Section 24, an exploration permit holder who determines the commercial viability of
In conclusion, we stress that we do not share the view that in FTAAs with foreign a project covering a mining area may, within the term of the permit, file with the Mines and
contractors under RA 7942, the governments share is limited to taxes, fees and duties. Geosciences Bureau a declaration of mining project feasibility. This declaration is to be
Consequently, we find the attacks on the second paragraph of Section 81 of RA 7942 accompanied by a work program for development for the Bureaus approval, the necessary
totally unwarranted. prelude for entering into an FTAA, a mineral production sharing agreement (MPSA), or some
other mineral agreement. At this stage, too, the government obviously has the opportunity to
approve or reject the proposed work program and budgeted expenditures for development
works on the project. Such expenditures will ultimately become the pre-operating and
Collections Not Made Uncertain development costs that will have to be recovered by the contractor.
by the Third Paragraph of Section 81
Naturally, with the submission of approved work programs and budgets for the exploration
and the development/construction phases, the government will be able to scrutinize and approve
or reject such expenditures. It will be well-informed as to the amounts of pre-operating and other
The third or last paragraph of Section 81[72] provides that the government share in FTAAs expenses that the contractor may legitimately recover and the approximate period of time
shall be collected when the contractor shall have recovered its pre-operating expenses and needed to effect such a recovery. There is therefore no way the contractor can just randomly
exploration and development expenditures. The objection has been advanced that, on account post any amount of pre-operating expenses and expect to recover the same.
of the proviso, the collection of the States share is not even certain, as there is no time limit in
RA 7942 for this grace period or recovery period. The aforecited provisions on approved work programs and budgets have counterparts in
Section 35, which deals with the terms and conditions exclusively applicable to FTAAs. The said
We believe that Congress did not set any time limit for the grace period, preferring to leave provision requires certain terms and conditions to be incorporated into FTAAs; among them, a
it to the concerned agencies, which are, on account of their technical expertise and training, in a firm commitment x x x of an amount corresponding to the expenditure obligation that will be
better position to determine the appropriate durations for such recovery periods. After all, these invested in the contract area and representations and warranties x x x to timely deploy
recovery periods are determined, to a great extent, by technical and technological factors these [financing, managerial and technical expertise and technological] resources under its
supervision pursuant to the periodic work programs and related budgets x x x, as well as work bit of a stretch to insist that it covers FTAAs as well. Second, mineral agreements, of which there
programs and minimum expenditures commitments. (underscoring supplied) are three types -- MPSAs, co-production agreements, and joint venture agreements -- are
covered by Chapter V of RA 7942. On the other hand, FTAAs are covered by and in fact are the
Unarguably, given the provisions of Section 35, the State has every opportunity to pass subject of Chapter VI, an entirely different chapter altogether. The law obviously intends to treat
upon the proposed expenditures under an FTAA and approve or reject them. It has access to all them as a breed apart from mineral agreements, since Section 35 (found in Chapter VI) creates
the information it may need in order to determine in advance the amounts of pre-operating and a long list of specific terms, conditions, commitments, representations and warranties -- which
developmental expenses that will have to be recovered by the contractor and the amount of time have not been made applicable to mineral agreements -- to be incorporated into FTAAs.
needed for such recovery.a
Third, under Section 39, the FTAA contractor is given the option to downgrade -- to
In summary, we cannot agree that the third or last paragraph of Section 81 of RA convert the FTAA into a mineral agreement at any time during the term if the economic viability
7942 is in any manner unconstitutional. of the contract area is inadequate to sustain large-scale mining operations. Thus, there is no
reason to think that the law through Section 112 intends to exact from FTAA contractors merely
the same government share (a 2 percent excise tax) that it apparently demands from contractors
under the three forms of mineral agreements. In brief, Section 112 does not apply to FTAAs.
No Deprivation of
Beneficial Rights Notwithstanding the foregoing explanation, Justices Carpio and Morales maintain that the
Court must rule now on the constitutionality of Sections 80, 84 and 112, allegedly because the
WMCP FTAA contains a provision which grants the contractor unbridled and automatic authority
to convert the FTAA into an MPSA; and should such conversion happen, the State would be
It is also claimed that aside from the second and the third paragraphs of Section 81
prejudiced since its share would be limited to the 2 percent excise tax. Justice Carpio adds that
(discussed above), Sections 80, 84 and 112 of RA 7942 also operate to deprive the State of
there are five MPSAs already signed just awaiting the judgment of this Court on respondents
beneficial rights of ownership over mineral resources; and give them away for free to private
and intervenors Motions for Reconsideration. We hold however that, at this point, this argument
business enterprises (including foreign owned corporations). Likewise, the said provisions have
is based on pure speculation. The Court cannot rule on mere surmises and hypothetical
been construed as constituting, together with Section 81, an ingenious attempt to resurrect the
assumptions, without firm factual anchor. We repeat: basic due process requires that we hear
old and discredited system of license, concession or lease.
the parties who have a real legal interest in the MPSAs (i.e. the parties who executed them)
Specifically, Section 80 is condemned for limiting the States share in a mineral production- before these MPSAs can be reviewed, or worse, struck down by the Court. Anything less than
sharing agreement (MPSA) to just the excise tax on the mineral product. Under Section 151(A) that requirement would be arbitrary and capricious.
of the Tax Code, such tax is only 2 percent of the market value of the gross output of the
In any event, the conversion of the present FTAA into an MPSA is problematic. First, the
minerals. The colatilla in Section 84, the portion considered offensive to the Constitution,
contractor must comply with the law, particularly Section 39 of RA 7942; inter alia, it must
reiterates the same limitation made in Section 80.[73]
convincingly show that the economic viability of the contract is found to be inadequate to justify
It should be pointed out that Section 80 and the colatilla in Section 84 pertain only to large-scale mining operations; second, it must contend with the Presidents exercise of the power
MPSAs and have no application to FTAAs. These particular statutory provisions do not come of State control over the EDU of natural resources; and third, it will have to risk a possible
within the issues that were defined and delineated by this Court during the Oral Argument -- declaration of the unconstitutionality (in a proper case) of Sections 80, 84 and 112.
particularly the third issue, which pertained exclusively to FTAAs. Neither did the parties argue
The first requirement is not as simple as it looks. Section 39 contemplates a situation in
upon them in their pleadings. Hence, this Court cannot make any pronouncement in this
which an FTAA has already been executed and entered into, and is presumably being
case regarding the constitutionality of Sections 80 and 84 without violating the fundamental rules
implemented, when the contractor discovers that the mineral ore reserves in the contract area are
of due process. Indeed, the two provisos will have to await another case specifically placing
not sufficient to justify large-scale mining, and thus the contractor requests the conversion of the
them in issue.
FTAA into an MPSA. The contractor in effect needs to explain why, despite its exploration
On the other hand, Section 112[74] is disparaged for allegedly reverting FTAAs and all activities, including the conduct of various geologic and other scientific tests and procedures in
mineral agreements to the old and discredited license, concession or lease system. This Section the contract area, it was unable to determine correctly the mineral ore reserves and the
states in relevant part that the provisions of Chapter XIV [which includes Sections 80 to 82] on economic viability of the area. The contractor must explain why, after conducting such
government share in mineral production-sharing agreement x x x shall immediately govern exploration activities, it decided to file a declaration of mining feasibility, and to apply for an
and apply to a mining lessee or contractor. (underscoring supplied) This provision is construed FTAA, thereby leading the State to believe that the area could sustain large-scale mining. The
as signifying that the 2 percent excise tax which, pursuant to Section 80, comprises the contractor must justify fully why its earlier findings, based on scientific procedures, tests and
government share in MPSAs shall now also constitute the government share in FTAAs -- as well data, turned out to be wrong, or were way off. It must likewise prove that its new findings, also
as in co-production agreements and joint venture agreements -- to the exclusion of revenues of based on scientific tests and procedures, are correct. Right away, this puts the contractors
any other nature or from any other source. technical capabilities and expertise into serious doubt. We wonder if anyone would relish being
in this situation. The State could even question and challenge the contractors qualification and
Apart from the fact that Section 112 likewise does not come within the issues delineated competence to continue the activity under an MPSA.
by this Court during the Oral Argument, and was never touched upon by the parties in their
pleadings, it must also be noted that the criticism hurled against this Section is rooted in All in all, while there may be cogent grounds to assail the aforecited Sections, this
unwarranted conclusions made without considering other relevant provisions in the statute. Court -- on considerations of due process -- cannot rule upon them here. Anyway, if later
Whether Section 112 may properly apply to co-production or joint venture agreements, the fact on these Sections are declared unconstitutional, such declaration will not affect the other
of the matter is that it cannot be made to apply to FTAAs. portions since they are clearly separable from the rest.

First, Section 112 does not specifically mention or refer to FTAAs; the only reason it is
being applied to them at all is the fact that it happens to use the word contractor. Hence, it is a
Our Mineral Resources Not the economy, which is critical and contributory to the general welfare of the people. Even
Given Away for Free by RA 7942 government corporations must recoup their investments in order to survive and continue in
operation. And, as the preceding discussion has shown, there is no business that gets ahead or
earns profits without any cost to it.
Nevertheless, if only to disabuse our minds, we should address the contention that our
It must also be stressed that, though the State owns vast mineral wealth, such wealth is
mineral resources are effectively given away for free by the law (RA 7942) in general and by not readily accessible or transformable into usable and negotiable currency without the
Sections 80, 81, 84 and 112 in particular. intervention of the credible mining companies. Those untapped mineral resources, hidden
Foreign contractors do not just waltz into town one day and leave the next, taking away beneath tons of earth and rock, may as well not be there for all the good they do us right now.
mineral resources without paying anything. In order to get at the minerals, they have to invest They have first to be extracted and converted into marketable form, and the country needs the
huge sums of money (tens or hundreds of millions of dollars) in exploration works first. If the foreign contractors funds, technology and know-how for that.
exploration proves unsuccessful, all the cash spent thereon will not be returned to the foreign
After about eleven years of pre-operation and another five years for cost recovery, the
investors; rather, those funds will have been infused into the local economy, to remain there foreign contractors will have just broken even. Is it likely that they would at that point stop their
permanently. The benefits therefrom cannot be simply ignored. And assuming that the foreign operations and leave? Certainly not. They have yet to make profits. Thus, for the remainder of
contractors are successful in finding ore bodies that are viable for commercial exploitation, they
the contract term, they must strive to maintain profitability. During this period, they pay the whole
do not just pluck out the minerals and cart them off. They have first to build camp sites and of the basic government share and the additional government share which, taken together with
roadways; dig mine shafts and connecting tunnels; prepare tailing ponds, storage areas and indirect taxes and other contributions, amount to approximately 60 percent or more of the entire
vehicle depots; install their machinery and equipment, generator sets, pumps, water tanks and
financial benefits generated by the mining venture.
sewer systems, and so on.
In sum, we can hardly talk about foreign contractors taking our mineral resources for free.
In short, they need to expend a great deal more of their funds for facilities, equipment and It takes a lot of hard cash to even begin to do what they do. And what they do in this country
supplies, fuel, salaries of local labor and technical staff, and other operating expenses. In the
ultimately benefits the local economy, grows businesses, generates employment, and creates
meantime, they also have to pay taxes,[75] duties, fees, and royalties. All told, the exploration, infrastructure, as discussed above. Hence, we definitely disagree with the sweeping claim that
pre-feasibility, feasibility, development and construction phases together add up to as many as no FTAA under Section 81 will ever make any real contribution to the growth of the economy or
eleven years.[76] The contractors have to continually shell out funds for the duration of over a
to the general welfare of the country. This is not a plea for foreign contractors. Rather, this is a
decade, before they can commence commercial production from which they would eventually question of focusing the judicial spotlight squarely on all the pertinent facts as they bear upon
derive revenues. All that money translates into a lot of pump-priming for the local economy. the issue at hand, in order to avoid leaping precipitately to ill-conceived conclusions not solidly
Granted that the contractors are allowed subsequently to recover their pre-operating grounded upon fact.
expenses, still, that eventuality will happen only after they shall have first put out the cash and
fueled the economy. Moreover, in the process of recouping their investments and costs, the
foreign contractors do not actually pull out the money from the economy. Rather, they recover or
recoup their investments out of actual commercial production by not paying a portion of the basic Repatriation of
government share corresponding to national taxes, along with the additional government share, After-Tax Income
for a period of not more than five years[77] counted from the commencement of commercial
production.
Another objection points to the alleged failure of the Mining Law to ensure real
It must be noted that there can be no recovery without commencing actual commercial contributions to the economic growth and general welfare of the country, as mandated by
production. In the meantime that the contractors are recouping costs, they need to continue Section 2 of Article XII of the Constitution. Pursuant to Section 81 of the law, the entire after-tax
operating; in order to do so, they have to disburse money to meet their various needs. In short, income arising from the exploitation of mineral resources owned by the State supposedly
money is continually infused into the economy. belongs to the foreign contractors, which will naturally repatriate the said after-tax income to their
The foregoing discussion should serve to rid us of the mistaken belief that, since the home countries, thereby resulting in no real contribution to the economic growth of this country.
Clearly, this contention is premised on erroneous assumptions.
foreign contractors are allowed to recover their investments and costs, the end result is that they
practically get the minerals for free, which leaves the Filipino people none the better for it. First, as already discussed in detail hereinabove, the concerned agencies have correctly
interpreted the second paragraph of Section 81 of RA 7942 to mean that the government is
entitled to an additional share, to be computed based on any one of the following factors: net
mining revenues, the present value of the cash flows, or excess profits reckoned against a
All Businesses Entitled benchmark rate of return on investments. So it is not correct to say that all of the after-tax
to Cost Recovery income will accrue to the foreign FTAA contractor, as the government effectively receives a
significant portion thereof.

Let it be put on record that not only foreign contractors, but all businessmen and all Second, the foreign contractors can hardly repatriate the entire after-tax income to their
business entities in general, have to recoup their investments and costs. That is one of the first home countries. Even a bit of knowledge of corporate finance will show that it will be impossible
things a student learns in business school. Regardless of its nationality, and whether or not a to maintain a business as a going concern if the entire net profit earned in any particular year will
business entity has a five-year cost recovery period, it will -- must -- have to recoup its be taken out and repatriated. The net income figure reflected in the bottom line is a mere
investments, one way or another. This is just common business sense. Recovery of investments accounting figure not necessarily corresponding to cash in the bank, or other quick assets. In
is absolutely indispensable for business survival; and business survival ensures soundness of order to produce and set aside cash in an amount equivalent to the bottom line figure, one may
need to sell off assets or immediately collect receivables or liquidate short-term investments; but monetary benefits of which we wish to take the lions share. Fairness is a credo not only in
doing so may very likely disrupt normal business operations. law, but also in business.

In terms of cash flows, the funds corresponding to the net income as of a particular point in Third, the 60 percent rule in the petroleum industry cannot be insisted upon at all times in
time are actually in use in the normal course of business operations. Pulling out such net the mining business. The reason happens to be the fact that in petroleum operations, the bulk of
income disrupts the cash flows and cash position of the enterprise and, depending on the expenditures is in exploration, but once the contractor has found and tapped into the deposit,
amount being taken out, could seriously cripple or endanger the normal operations and financial subsequent investments and expenditures are relatively minimal. The crude (or gas) keeps
health of the business enterprise. In short, no sane business person, concerned with gushing out, and the work entailed is just a matter of piping, transporting and storing. Not so in
maintaining the mining enterprise as a going concern and keeping a foothold in its mineral mining. The ore body does not pop out on its own. Even after it has been located, the
market, can afford to repatriate the entire after-tax income to the home country. contractor must continually invest in machineries and expend funds to dig and build tunnels in
order to access and extract the minerals from underneath hundreds of tons of earth and rock.

As already stated, the numerous intrinsic differences involved in their respective

The States Receipt of Sixty operations and requirements, cost structures and investment needs render it highly
Percent of an FTAA Contractors inappropriate to use petroleum operations FTAAs as benchmarks for mining FTAAs. Verily, we
After-Tax Income Not Mandatory cannot just ignore the realities of the distinctly different situations and stubbornly insist on the
minimum 60 percent.

We now come to the next objection which runs this way: In FTAAs with a foreign
contractor, the State must receive at least 60 percent of the after-tax income from the The Mining and the Oil Industries
exploitation of its mineral resources. This share is the equivalent of the constitutional
Different From Each Other
requirement that at least 60 percent of the capital, and hence 60 percent of the income, of
mining companies should remain in Filipino hands.

First, we fail to see how we can properly conclude that the Constitution mandates the To stress, there is no independent showing that the taking of at least a 60 percent share in
State to extract at least 60 percent of the after-tax income from a mining company run by a the after-tax income of a mining company operated by a foreign contractor is fair and reasonable
foreign contractor. The argument is that the Charter requires the States partner in a co- under most if not all circumstances. The fact that some petroleum companies like Shell acceded
production agreement, joint venture agreement or MPSA to be a Filipino corporation (at least 60 to such percentage of sharing does not ipso facto mean that it is per se reasonable and
percent owned by Filipino citizens). applicable to non-petroleum situations (that is, mining companies) as well. We can take judicial
notice of the fact that there are, after all, numerous intrinsic differences involved in their
We question the logic of this reasoning, premised on a supposedly parallel or analogous respective operations and equipment or technological requirements, costs structures and capital
situation. We are, after all, dealing with an essentially different equation, one that involves investment needs, and product pricing and markets.
different elements. The Charter did not intend to fix an iron-clad rule on the 60 percent
share, applicable to all situations at all times and in all circumstances. If ever such was the There is no showing, for instance, that mining companies can readily cope with a 60
intention of the framers, they would have spelt it out in black and white. Verba legis will serve to percent government share in the same way petroleum companies apparently can. What we have
dispel unwarranted and untenable conclusions. is a suggestion to enforce the 60 percent quota on the basis of a disjointed analogy. The only
factor common to the two disparate situations is the extraction of natural resources.
Second, if we would bother to do the math, we might better appreciate the impact (and
reasonableness) of what we are demanding of the foreign contractor. Let us use Indeed, we should take note of the fact that Congress made a distinction between mining
a simplifiedillustration. Let us base it on gross revenues of, say, P500. After deducting operating firms and petroleum companies. In Republic Act No. 7729 -- An Act Reducing the Excise Tax
expenses, but prior to income tax, suppose a mining firm makes a taxable income of P100. A Rates on Metallic and Non-Metallic Minerals and Quarry Resources, Amending for the Purpose
corporate income tax of 32 percent results in P32 of taxable income going to the government, Section 151(a) of the National Internal Revenue Code, as amended -- the lawmakers fixed the
leaving the mining firm with P68. Government then takes 60 percent thereof, equivalent excise tax rate on metallic and non-metallic minerals at two percent of the actual market value of
to P40.80, leaving only P27.20 for the mining firm. the annual gross output at the time of removal. However, in the case of petroleum, the
lawmakers set the excise tax rate for the first taxable sale at fifteen percent of the fair
At this point the government has pocketed P32.00 plus P40.80, or a total of P72.80 for international market price thereof.
every P100 of taxable income, leaving the mining firm with only P27.20. But that is not all. The
government has also taken 2 percent excise tax off the top, equivalent to another P10. Under There must have been a very sound reason that impelled Congress to impose two very
the minimum 60 percent proposal, the government nets around P82.80 (not counting other dissimilar excise tax rate. We cannot assume, without proof, that our honorable legislators acted
taxes, duties, fees and charges) from a taxable income of P100 (assuming gross revenues arbitrarily, capriciously and whimsically in this instance. We cannot just ignore the reality of two
of P500, for purposes of illustration). On the other hand, the foreign contractor, which provided distinctly different situations and stubbornly insist on going minimum 60 percent.
all the capital, equipment and labor, and took all the entrepreneurial risks -- receives P27.20.
One cannot but wonder whether such a distribution is even remotely equitable and reasonable, To repeat, the mere fact that gas and oil exploration contracts grant the State 60 percent
considering the nature of the mining business. The amount of P82.80 out of P100.00 is really a of the net revenues does not necessarily imply that mining contracts should likewise yield a
lot it does not matter that we call part of it excise tax or income tax, and another portion minimum of 60 percent for the State. Jumping to that erroneous conclusion is like comparing
thereof income from exploitation of mineral resources. Some might think it wonderful to be able apples with oranges. The exploration, development and utilization of gas and oil are simply
to take the lions share of the benefits. But we have to ask ourselves if we are really serious in different from those of mineral resources.
attracting the investments that are the indispensable and key element in generating the
 To stress again, the main risk in gas and oil is in the exploration. But once oil in subsequent criminal action"; thus, this element is missing in this case, the criminal case having
commercial quantities is struck and the wells are put in place, the risk is relatively over and black preceded the civil case.
gold simply flows out continuously with comparatively less need for fresh investments and tech
Later, the MTC issued its Order dated October 16, 2007, granting the Motion to Suspend
G.R. No. 184861 Proceedings, and reasoned that:

DREAMWORK CONSTRUCTION, INC., Petitioner, Should the trial court declare the rescission of contract and the nullification of the checks issued
vs. as the same are without consideration, then the instant criminal cases for alleged violation of BP
CLEOFE S. JANIOLA and HON. ARTHUR A. FAMINI, Respondents. 22 must be dismissed. The belated filing of the civil case by the herein accused did not detract
from the correctness of her cause, since a motion for suspension of a criminal action may be
filed at any time before the prosecution rests (Section 6, Rule 111, Revised Rules of Court). 8
DECISION

In an Order dated March 12, 2008,9 the MTC denied petitioners Motion for Reconsideration
VELASCO, JR., J.: dated November 29, 2007.

The Case Petitioner appealed the Orders to the RTC with a Petition dated May 13, 2008. Thereafter, the
RTC issued the assailed decision dated August 26, 2008, denying the petition. On the issue of
Petitioner Dreamwork Construction, Inc. seeks the reversal of the August 26, 2008 Decision 1 in the existence of a prejudicial question, the RTC ruled:
SCA No. 08-0005 of the Regional Trial Court (RTC), Branch 253 in Las Pias City. The Decision
affirmed the Orders dated October 16, 20072 and March 12, 20083 in Criminal Case Nos. 55554- Additionally, it must be stressed that the requirement of a "previously" filed civil case is intended
61 issued by the Metropolitan Trial Court (MTC), Branch 79 in Las Pias City. merely to obviate delays in the conduct of the criminal proceedings. Incidentally, no clear
evidence of any intent to delay by private respondent was shown. The criminal proceedings are
The Facts still in their initial stages when the civil action was instituted. And, the fact that the civil action
was filed after the criminal action was instituted does not render the issues in the civil action any
less prejudicial in character.10
On October 18, 2004, petitioner, through its President, Roberto S. Concepcion, and Vice-
President for Finance and Marketing, Normandy P. Amora, filed a Complaint Affidavit dated
October 5, 20044 for violation of Batas Pambansa Bilang 22 (BP 22) against private respondent Hence, we have this petition under Rule 45.
Cleofe S. Janiola with the Office of the City Prosecutor of Las Pias City. The case was
docketed as I.S. No. 04-2526-33. Correspondingly, petitioner filed a criminal information for The Issue
violation of BP 22 against private respondent with the MTC on February 2, 2005 docketed as
Criminal Case Nos. 55554-61, entitled People of the Philippines v. Cleofe S. Janiola.
WHETHER OR NOT THE COURT A QUO SERIOUSLY ERRED IN NOT PERCEIVING GRAVE
ABUSE OF DISCRETION ON THE PART OF THE INFERIOR COURT, WHEN THE LATTER
On September 20, 2006, private respondent, joined by her husband, instituted a civil complaint RULED TO SUSPEND PROCEEDINGS IN CRIM. CASE NOS. 55554-61 ON THE BASIS OF
against petitioner by filing a Complaint dated August 20065 for the rescission of an alleged "PREJUDICIAL QUESTION" IN CIVIL CASE NO. LP-06-0197.11
construction agreement between the parties, as well as for damages. The case was filed with
the RTC, Branch 197 in Las Pias City and docketed as Civil Case No. LP-06-0197. Notably, the
checks, subject of the criminal cases before the MTC, were issued in consideration of the The Courts Ruling
construction agreement.
This petition must be granted.
Thereafter, on July 25, 2007, private respondent filed a Motion to Suspend Proceedings dated
July 24, 20076 in Criminal Case Nos. 55554-61, alleging that the civil and criminal cases The Civil Action Must Precede the Filing of the
involved facts and issues similar or intimately related such that in the resolution of the issues in
the civil case, the guilt or innocence of the accused would necessarily be determined. In other
words, private respondent claimed that the civil case posed a prejudicial question as against the Criminal Action for a Prejudicial Question to Exist
criminal cases.
Under the 1985 Rules on Criminal Procedure, as amended by Supreme Court Resolutions dated
Petitioner opposed the suspension of the proceedings in the criminal cases in an undated June 17, 1988 and July 7, 1988, the elements of a prejudicial question are contained in Rule
Comment/Opposition to Accuseds Motion to Suspend Proceedings based on Prejudicial 111, Sec. 5, which states:
Question7 on the grounds that: (1) there is no prejudicial question in this case as the rescission
of the contract upon which the bouncing checks were issued is a separate and distinct issue SEC. 5. Elements of prejudicial question. The two (2) essential elements of a prejudicial
from the issue of whether private respondent violated BP 22; and (2) Section 7, Rule 111 of the question are: (a) the civil action involves an issue similar or intimately related to the issue raised
Rules of Court states that one of the elements of a prejudicial question is that "the previously in the criminal action; and (b) the resolution of such issue determines whether or not the criminal
instituted civil action involves an issue similar or intimately related to the issue raised in the action may proceed.
Thus, the Court has held in numerous cases 12 that the elements of a prejudicial question, as in denying their omnibus motion for the suspension of the proceedings pending final judgment in
stated in the above-quoted provision and in Beltran v. People,13 are: Civil Case No. 7160. Section 6, Rule lll of the Rules of Criminal Procedure, as amended, reads:

The rationale behind the principle of prejudicial question is to avoid two conflicting decisions. It Sec. 6. Suspension by reason of prejudicial question. - A petition for suspension of the criminal
has two essential elements: (a) the civil action involves an issue similar or intimately related to action based upon the pendency of a prejudicial question in a civil action may be filed in the
the issue raised in the criminal action; and (b) the resolution of such issue determines whether or office of the prosecutor or the court conducting the preliminary investigation. When the criminal
not the criminal action may proceed. action has been filed in court for trial, the petition to suspend shall be filed in the same criminal
action at any time before the prosecution rests.
On December 1, 2000, the 2000 Rules on Criminal Procedure, however, became effective and
the above provision was amended by Sec. 7 of Rule 111, which applies here and now provides: Sec. 7. Elements of prejudicial question. - The elements of a prejudicial question are: (a) the
previously instituted civil action involves an issue similar or intimately related to the issue raised
in the subsequent criminal action, and (b) the resolution of such issue determines whether or not
SEC. 7. Elements of prejudicial question.The elements of a prejudicial question are: (a) the
the criminal action may proceed.
previously instituted civil action involves an issue similar or intimately related to the issue raised
in the subsequent criminal action, and (b) the resolution of such issue determines whether or not
the criminal action may proceed. (Emphasis supplied.) Under the amendment, a prejudicial question is understood in law as that which must precede
the criminal action and which requires a decision before a final judgment can be rendered in the
criminal action with which said question is closely connected. The civil action must be instituted
Petitioner interprets Sec. 7(a) to mean that in order for a civil case to create a prejudicial
prior to the institution of the criminal action. In this case, the Information was filed with the
question and, thus, suspend a criminal case, it must first be established that the civil case was
Sandiganbayan ahead of the complaint in Civil Case No. 7160 filed by the State with the RTC in
filed previous to the filing of the criminal case. This, petitioner argues, is specifically to guard
Civil Case No. 7160. Thus, no prejudicial question exists. (Emphasis supplied.)
against the situation wherein a party would belatedly file a civil action that is related to a pending
criminal action in order to delay the proceedings in the latter.
Additionally, it is a principle in statutory construction that "a statute should be construed not only
to be consistent with itself but also to harmonize with other laws on the same subject matter, as
On the other hand, private respondent cites Article 36 of the Civil Code which provides:
to form a complete, coherent and intelligible system." 16 This principle is consistent with the
maxim, interpretare et concordare leges legibus est optimus interpretandi modus or every
Art. 36. Pre-judicial questions which must be decided before any criminal prosecution may be statute must be so construed and harmonized with other statutes as to form a uniform system of
instituted or may proceed, shall be governed by rules of court which the Supreme Court shall jurisprudence.171 a vv p h i l
promulgate and which shall not be in conflict with the provisions of this Code. (Emphasis
supplied.)
In other words, every effort must be made to harmonize seemingly conflicting laws. It is only
when harmonization is impossible that resort must be made to choosing which law to apply.
Private respondent argues that the phrase "before any criminal prosecution may be instituted or
may proceed" must be interpreted to mean that a prejudicial question exists when the civil action
In the instant case, Art. 36 of the Civil Code and Sec. 7 of Rule 111 of the Rules of Court are
is filed either before the institution of the criminal action or during the pendency of the criminal
susceptible of an interpretation that would harmonize both provisions of law. The phrase
action. Private respondent concludes that there is an apparent conflict in the provisions of the
"previously instituted civil action" in Sec. 7 of Rule 111 is plainly worded and is not susceptible of
Rules of Court and the Civil Code in that the latter considers a civil case to have presented a
alternative interpretations. The clause "before any criminal prosecution may be instituted or may
prejudicial question even if the criminal case preceded the filing of the civil case.
proceed" in Art. 36 of the Civil Code may, however, be interpreted to mean that the motion to
suspend the criminal action may be filed during the preliminary investigation with the public
We cannot agree with private respondent. prosecutor or court conducting the investigation, or during the trial with the court hearing the
case.
First off, it is a basic precept in statutory construction that a "change in phraseology by
amendment of a provision of law indicates a legislative intent to change the meaning of the This interpretation would harmonize Art. 36 of the Civil Code with Sec. 7 of Rule 111 of the
provision from that it originally had."14 In the instant case, the phrase, "previously instituted," was Rules of Court but also with Sec. 6 of Rule 111 of the Civil Code, which provides for the
inserted to qualify the nature of the civil action involved in a prejudicial question in relation to the situations when the motion to suspend the criminal action during the preliminary investigation or
criminal action. This interpretation is further buttressed by the insertion of "subsequent" directly during the trial may be filed. Sec. 6 provides:
before the term criminal action. There is no other logical explanation for the amendments except
to qualify the relationship of the civil and criminal actions, that the civil action must precede the
SEC. 6. Suspension by reason of prejudicial question.A petition for suspension of the criminal
criminal action.
action based upon the pendency of a prejudicial question in a civil action may be filed in the
office of the prosecutor or the court conducting the preliminary investigation. When the criminal
Thus, this Court ruled in Torres v. Garchitorena15 that: action has been filed in court for trial, the petition to suspend shall be filed in the same criminal
action at any time before the prosecution rests.
Even if we ignored petitioners procedural lapse and resolved their petition on the merits, we
hold that Sandiganbayan did not abuse its discretion amounting to excess or lack of jurisdiction Thus, under the principles of statutory construction, it is this interpretation of Art. 36 of the Civil
Code that should govern in order to give effect to all the relevant provisions of law.
It bears pointing out that the circumstances present in the instant case indicate that the filing of (1) the making, drawing, and issuance of any check to apply for account or for value;
the civil action and the subsequent move to suspend the criminal proceedings by reason of the
presence of a prejudicial question were a mere afterthought and instituted to delay the criminal
(2) the knowledge of the maker, drawer, or issuer that at the time of issue there are no
proceedings.
sufficient funds in or credit with the drawee bank for the payment of such check in full
upon its presentment; and
In Sabandal v. Tongco,18 we found no prejudicial question existed involving a civil action for
specific performance, overpayment, and damages, and a criminal complaint for BP 22, as the
(3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds
resolution of the civil action would not determine the guilt or innocence of the accused in the
or credit, or dishonor for the same reason had not the drawer, without any valid cause,
criminal case. In resolving the case, we said:
ordered the bank to stop payment.20

Furthermore, the peculiar circumstances of the case clearly indicate that the filing of the civil
Undeniably, the fact that there exists a valid contract or agreement to support the issuance of
case was a ploy to delay the resolution of the criminal cases. Petitioner filed the civil case three
the check/s or that the checks were issued for valuable consideration does not make up the
years after the institution of the criminal charges against him. Apparently, the civil action was
elements of the crime. Thus, this Court has held in a long line of cases21 that the agreement
instituted as an afterthought to delay the proceedings in the criminal cases. 19
surrounding the issuance of dishonored checks is irrelevant to the prosecution for violation of BP
22. In Mejia v. People,22 we ruled:
Here, the civil case was filed two (2) years after the institution of the criminal complaint and from
the time that private respondent allegedly withdrew its equipment from the job site. Also, it is
It must be emphasized that the gravamen of the offense charge is the issuance of a bad check.
worth noting that the civil case was instituted more than two and a half (2 ) years from the time
The purpose for which the check was issued, the terms and conditions relating to its issuance, or
that private respondent allegedly stopped construction of the proposed building for no valid
any agreement surrounding such issuance are irrelevant to the prosecution and conviction of
reason. More importantly, the civil case praying for the rescission of the construction agreement
petitioner. To determine the reason for which checks are issued, or the terms and conditions for
for lack of consideration was filed more than three (3) years from the execution of the
their issuance, will greatly erode the faith the public reposes in the stability and commercial
construction agreement.
value of checks as currency substitutes, and bring havoc in trade and in banking communities.
The clear intention of the framers of B.P. 22 is to make the mere act of issuing a worthless check
Evidently, as in Sabandal, the circumstances surrounding the filing of the cases involved here malum prohibitum.
show that the filing of the civil action was a mere afterthought on the part of private respondent
and interposed for delay. And as correctly argued by petitioner, it is this scenario that Sec. 7 of
Lee v. Court of Appeals23 is even more poignant. In that case, we ruled that the issue of lack of
Rule 111 of the Rules of Court seeks to prevent. Thus, private respondents positions cannot be
valuable consideration for the issuance of checks which were later on dishonored for insufficient
left to stand.
funds is immaterial to the success of a prosecution for violation of BP 22, to wit:

The Resolution of the Civil Case Is Not

Third issue. Whether or not the check was issued on account or for value.
Determinative of the Prosecution of the Criminal Action

Petitioners claim is not feasible. We have held that upon issuance of a check, in the absence of
In any event, even if the civil case here was instituted prior to the criminal action, there is, still,
evidence to the contrary, it is presumed that the same was issued for valuable consideration.
no prejudicial question to speak of that would justify the suspension of the proceedings in the
Valuable consideration, in turn, may consist either in some right, interest, profit or benefit
criminal case.
accruing to the party who makes the contract, or some forbearance, detriment, loss or some
responsibility, to act, or labor, or service given, suffered or undertaken by the other side. It is an
To reiterate, the elements of a prejudicial question under Sec. 7 of Rule 111 of the Rules of obligation to do, or not to do in favor of the party who makes the contract, such as the maker or
Court are: (1) the previously instituted civil action involves an issue similar or intimately related to indorser.
the issue raised in the subsequent criminal action; and (2) the resolution of such issue
determines whether or not the criminal action may proceed.
In this case, petitioner himself testified that he signed several checks in blank, the subject check
included, in exchange for 2.5% interest from the proceeds of loans that will be made from said
Petitioner argues that the second element of a prejudicial question, as provided in Sec. 7 of Rule account. This is a valuable consideration for which the check was issued. That there was neither
111 of the Rules, is absent in this case. Thus, such rule cannot apply to the present controversy. a pre-existing obligation nor an obligation incurred on the part of petitioner when the subject
check was given by Bautista to private complainant on July 24, 1993 because petitioner was no
longer connected with Unlad or Bautista starting July 1989, cannot be given merit since, as
Private respondent, on the other hand, claims that if the construction agreement between the
earlier discussed, petitioner failed to adequately prove that he has severed his relationship with
parties is declared null and void for want of consideration, the checks issued in consideration of
Bautista or Unlad.
such contract would become mere scraps of paper and cannot be the basis of a criminal
prosecution.
At any rate, we have held that what the law punishes is the mere act of issuing a bouncing
check, not the purpose for which it was issued nor the terms and conditions relating to its
We find for petitioner.
issuance. This is because the thrust of the law is to prohibit the making of worthless checks and
putting them into circulation.24 (Emphasis supplied.)
It must be remembered that the elements of the crime punishable under BP 22 are as follows:
Verily, even if the trial court in the civil case declares that the construction agreement between as they have stated, the Philippine Charity Sweepstakes Office is using their premises
the parties is void for lack of consideration, this would not affect the prosecution of private and equipment under separate contracts of lease voluntarily and willingly entered into
respondent in the criminal case. The fact of the matter is that private respondent indeed issued by the parties upon payment of a corresponding rental. There is therefore no
checks which were subsequently dishonored for insufficient funds. It is this fact that is subject of deprivation of property without due process of law.
prosecution under BP 22.lawphil.net
Wherefore, the court is of the opinion and so holds that once a month on a Sunday not
Therefore, it is clear that the second element required for the existence of a prejudicial question, reserved for the Anti-Tuberculosis Society, the White Cross and other charitable
that the resolution of the issue in the civil action would determine whether the criminal action institutions by Section 4 of Republic Act No. 309, the Philippine Charity Sweepstakes
may proceed, is absent in the instant case. Thus, no prejudicial question exists and the rules on Office is authorized to hold one regular sweepstakes draw and races, pursuant to
it are inapplicable to the case before us. Section 9 of Republic Act No. 1502, thus reducing the number of Sundays which may
be alloted to private entities by the Games and Amusements Board. . . .
WHEREFORE, we GRANT this petition. We hereby REVERSE and SET ASIDE the August 26,
2008 Decision in SCA No. 08-0005 of the RTC, Branch 253 in Las Pias City and the Orders From this judgment, petitioner and intervenor interposed the present appeal.
dated October 16, 2007 and March 12, 2008 in Criminal Case Nos. 55554-61 of the MTC,
Branch 79 in Las Pias City. We order the MTC to continue with the proceedings in Criminal
The issue is the proper placement of the six (6) additional racing days given to the Philippine
Case Nos. 55554-61 with dispatch.
Charity Sweepstakes Office, in virtue of Republic Act No. 1502, approved on June 16, 1956.

SO ORDERED.
The authorized racing days specifically designated and distributed in Section 4 of Republic Act
No. 309, the basic law on horse racing in the Philippines, as later amended by Republic Act No.
G.R. No. L-12727 February 29, 1960 983, are as follows:

MANILA JOCKEY CLUB, INC., petitioner-appellant, C. Legal Holidays: All, except Thursday and Friday of the Holy Week, July 4th and
vs. December 30th, have been reserved for private individuals and entities duly licensed
GAMES AND AMUSEMENTS BOARD, ET AL., respondents-appellees. by the GAB.
PHILIPPINE RACING CLUB, INC., petitioner-intervenor-appellant.
As stated, Republic Act No. 1502 increased the sweepstakes draw and races of the PCSO to
BARRERA, J.: twelve, but without specifying the days on which they are to be run. To accommodate these
additional races, the GAB resolved to reduce the number of Sundays assigned to private
individuals and entities by six. Appellants protested, contending that the said increased should
This is a petition for declaratory relief filed by petitioner Manila Jockey Club, Inc., in the Court of be taken from the 12 Saturdays reserved to the President, for charitable, relief, or civic
First Instance Manila (Civil Case No. 31274), in which the Philippine Racing Club, Inc., purposes, or should be assigned to any other day of the week besides Sunday, Saturday, and
intervened as party in interest with leave of court, praying that judgment be rendered against legal holiday.
respondents Games and Amusements Board (GAB), Philippine Charity Sweepstakes Office
(PCSO), and Executive Secretary Fortunato de Leon:
Appellants' contention cannot be sustained. Section 4 Republic Act No. 309, as amended by
Republic Act No. 983, by express terms, specifically reserved 23 Sundays and 16 Saturdays for
(a) Interpreting Republic Acts Nos. 309 and 1502 in such a manner that the 30 the Philippine Anti-Tuberculosis Society, the White Cross, Inc. and the PCSO, and 12 Saturdays
Sundays unreserved for charitable institutions and therefore belonging to the private to the President for other charitable, relief, or civic purposes. These days can not be disposed of
racing clubs under Section 4 of Republic Act No. 309 continue to pertain to said by the GAB without authority of law. As to the remaining racing days, the law provides:
private entities, and that the 6 additional sweepstakes races authorized under
Republic Act No. 1502 should be held on 6 of the 12 Saturdays not reserved for any
private entity or particular charitable institution under Section 4 of Republic Act No. SEC. 4. Racing days.Private individuals and entities duly licensed by the
309, or on any other day of the week besides Sunday, Saturday and legal holiday; Commission on Races (now GAB) may hold horse races on Sundays not reserved
under this Act, on twenty-four Saturdays as may be determined by the said
Commission (GAB), and on legal holidays, except Thursday and Friday of Holy Week,
(b) Holding that respondent PCSO does not have the right or power to appropriate or July fourth, commonly known as Independence Day, and December thirtieth,
use the race tracks and equipment of petitioner without its consent, nor can commonly known as Rizal Day.
respondents compel petitioner to so allow such use of its race tracks and equipment
under pain of having its license revoked.
It is clear from the above-quoted provision that appellants have no vested right to the unreserved
Sundays, or even to the 24 Saturdays (except, perhaps, on the holidays), because their holding
Respondents duly filed their respective answers to said petition and the case was heard. After of races on these days is merely permissive, subject to the licensing and determination by the
hearing, the court, on July 5, 1957, rendered a decision which, in part, reads: GAB. When, therefore, Republic Act No. 1502 was enacted increasing by six (6) the
sweepstakes draw and races, but without specifying the days for holding them, the GAB had no
The court does not deem it necessary to rule on the deprivation of property of the alternative except to make room for the additional races, as it did, form among the only available
petitioner and the intervenor without due process of law, as feared by them, because racing days unreserved by any law the Sundays on which the private individuals and entities
have been permitted to hold their races, subject to licensing and determination by the GAB.
It is suggested that the GAB should have chosen any week days or Saturday afternoons. In the statute, unlike in the interpretation of an ordinary written document, it is not enough to obtain
first place, week days are out of the question. The law does not authorize the holding of horse information to the intention or meaning of the author or authors, but also to see whether the
races with betting on week days (See Article 198 of the Revised Penal Code). Secondly, intention or meaning has been expressed in such a way as to give it legal effect and validity. In
sweepstakes races have always been held on Sundays. Besides, it is not possible to hold them short, the purpose of the inquiry, is not only to know what the author meant by the language he
on Saturday afternoons as, it is claimed, a whole day is necessary for the mixing of the used, but also to see that the language used sufficiently expresses that meaning. The legal act,
sweepstakes balls, the drawing of winning sweepstakes numbers, and the running of the so to speak, is made up of two elements an internal and an external one; it originates in
sweepstakes races. Be that as it may, since the law has given certain amount of discretion to the intention and is perfected by expression. Failure of the latter may defeat the former. The
GAB in determining and allocating racing days not specifically reserved, and since the court following, taken from 59 Corpus Juris 1017, is in the line with this theory:
does not find that a grave abuse of this discretion has been committed, there seems to be no
reason, legal or otherwise, to set aside the resolution of the GAB.
The intention of the legislature to which effect must be given is that expressed in the
statute and the courts will not inquire into the motives which influence the legislature,
Furthermore, appellants contend that even granting that the six (6) additional sweepstakes races or individual members, in voting for its passage; nor indeed as to the intention of the
should be run on Sundays, yet if they are held on a club race day, the GAB should only insert draftsman, or the legislature, so far as it has been expressed in the act. So, in
them in the club races and not given the whole day to the PCSO, to the exclusion of appellants. ascertaining the meaning of a statute the court will not be governed or influenced by
In support of this contention, the following quotation from the debate in the House of the views or opinions of any or all members of the legislature or its legislative
Representatives before voting on House Bill No. 5732, which became Republic Act No. 1502, is committees or any other persons.
cited:
Upon the other hand, at the time of the enactment of Republic Act No. 1502 in June, 1956, the
Mr. ABELEDA. If there are no more amendments, I move that we vote on the long, continuous, and uniform practice was that all sweepstakes draws and races were held on
measure. Sundays and during the whole day. With this background, when Congress chose not to specify
in express terms how the additional sweepstakes draws and races would be held, it is safe to
conclude that it did not intend to disturb the then prevailing situation and practice.
Mr. MARCOS. Mr. Speaker, before we proceed to vote on this bill, I want to make it of
record that it is the clear intention of the House to increase by two the ten regular and
special Sweepstakes races making it all in all, twelve, and that in cases where a "On the principle of contemporaneous exposition, common usage and practice under the statute,
sweepstakes race falls in a club race days the Sweepstakes races should be inserted or a course of conduct indicating a particular undertaking of it, will frequently be of great value in
in the club race. determining its real meaning, especially where the usage has been acquired in by all parties
concerned and has extended over a long period of time; . . . (59 C. J. 1023).
Mr. ABELEDA. The gentleman from Ilocos Norte is correct. . . . (t.s.n., Proceedings in
House of Representatives, Congress, May 17, 1956; emphasis supplied.) Likewise, the language of Republic Act No. 1502 in authorizing the increase, clearly speaks of
regular sweepstakes draws and races. If the intention of Congress were to authorize additional
sweepstakes draws only which could, admittedly, be inserted in the club races, the law would
Appellants cite in their briefs a number of authorities sustaining the view that in the interpretation
not have included regular races; and since regular sweepstakes races were specifically
of statutes susceptible of widely differing constructions, legislative debates and explanatory
authorized, and it would be confusing, inconvenient, if not impossible to mix these sweepstakes
statements by members of the legislature may be resorted to, to throw light on the meaning of
races with the regular club races all on the same day (and it has never been done before), the
the words used in the statutes. Upon the other hand, the appellees, likewise, quote in their briefs
conclusion seems inevitable that the additional sweepstakes draws and races were intended to
other authorities to the effect that statements made by the individual members of the legislature
be held on a whole day, separate and apart from the club races.
as to the meaning of provisions in the bill subsequently enacted into law, made during the
general debate on the bill on the floor of each legislative house, following its presentation by a
standing committee, are generally held to be in admissable as an aid in construing the statute. Appellants' contention that to compel them to permit the PCSO to use their premises and
Legislative debates are expressive of the views and motives of individual members and are not equipment against their will would constitute deprivation of property without due process of law,
safe guides and, hence, may not be resorted to in ascertaining the meaning and purpose of the deserves no serious consideration. As the lower court has found, every time the PCSO uses
lawmaking body. It is impossible to determine with certainty what construction was put upon an appellants' premises and equipment, they are paid rentals in accordance with the terms of
act by the members of the legislative body that passed the bill, by resorting to the speeches of separate contracts of lease existing between them and the PCSO.
the members thereof. Those who did not speak, may not have agreed with those who did; and
those who spoke, might differ from each other.1
The decision appealed from, being in consonance with the above findings and considerations of
this Court, the same is hereby affirmed, with costs against the appellants. So ordered.
In view of these conflicting authorities, no appreciable reliance can safely be placed on any of
them. It is to be noted in the specific case before us, that while Congressmen Marcos and
Paras, C. J., Bengzon, Labrador, Concepcion, Reyes, J. B. L., Endencia, and Gutierrez David,
Abeleda were, admittedly, of the view that the additional sweepstakes races may be inserted in
JJ., concur.
the club races, still there is nothing in Republic Act No. 1502, as it was finally enacted, which
would indicate that such an understanding on the part of these two members of the Lower
House of Congress were received the sanction or conformity of their colleagues, for the law is
absolutely devoid of any such indication. This is, therefore, not a case where a doubtful wording
is sought to be interpreted; rather, if we adopt appellants' theory, we would be supplying
something that does not appear in the statute. It is pertinent to observe here that, as pointed out
by one of appellants' own cited authorities,2 in the interpretation of a legal document, especially a
DAVID V. COMELEC 3. The budgetary appropriation of P400 million contained in Republic Act No. 8250 otherwise known as
the General Appropriations Act of 1997 intended to defray the costs and expenses in holding the 1997
barangay elections;[2]
DECISION

PANGANIBAN, J.: Comelec Resolution 2880,[3] promulgated on December 27, 1996 and referred to above,
adopted a Calendar of Activities and List and Periods of Certain Prohibited Acts for the May 12,
The two petitions before us raise a common question: How long is the term of office of 1997 Barangay Elections. On the other hand, Comelec Resolution 2887 promulgated on
barangay chairmen and other barangay officials who were elected to their respective offices on February 5, 1997 moved certain dates fixed in Resolution 2880.[4]
the second Monday of May 1994? Is it three years, as provided by RA 7160 (the Local Acting on the petition, the Court on February 25, 1997 required respondents to submit
Government Code) or five years, as contained in RA 6679? Contending that their term is five their comment thereon within a non-extendible period of ten days ending on March 7, 1997. The
years, petitioners ask this Court to order the cancellation of the scheduled barangay election this Court further resolved to consolidate the two cases inasmuch as they raised basically the same
coming May 12, 1997 and to reset it to the second Monday of May, 1999. issue. Respondent Commission filed its Comment on March 6, 1997[5] and the Solicitor General,
The Antecedents in representation of the other respondent, filed his on March 6, 1997. Petitioners Urgent
Omnibus Motion for oral argument and temporary restraining order was noted but not
G.R. No. 127116 granted. The petition was deemed submitted for resolution by the Court without need of
memoranda.
In his capacity as barangay chairman of Barangay 77, Zone 7, Kalookan City and as president of
the Liga ng mga Barangay sa Pilipinas, Petitioner Alex L. David filed on December 2, 1996
a petition for prohibition docketed in this Court as G.R. No. 127116, under Rule 65 of the Rules The Issues
of Court, to prohibit the holding of the barangay election scheduled on the second Monday of
May 1997. On January 14, 1997, the Court resolved to require the respondents to comment on Both petitions though worded differently raise the same ultimate issue: How long is the
the petition within a non-extendible period of fifteen days ending on January 29, 1997. term of office of barangay officials?
On January 29, 1997, the Solicitor General filed his four-page Comment siding with
petitioner and praying that the election scheduled on May 12, 1997 be held in Petitioners[6] contend that under Sec. 2 of Republic Act No. 6653, approved on May 6,
abeyance.Respondent Commission on Elections filed a separate Comment, dated February 1, 1988, (t)he term of office of barangay officials shall be for five (5) years x x x. This is reiterated in
1997 opposing the petition. On February 11, 1997, the Court issued a Resolution giving due Republic Act No. 6679, approved on November 4, 1988, which reset the barangay elections
course to the petition and requiring the parties to file simultaneous memoranda within a non- from the second Monday of November 1988 to March 28, 1989 and provided in Sec. 1 thereof
extendible period of twenty days from notice. It also requested former Senator Aquilino Q. that such five-year term shall begin on the first day of May 1989 and ending on the thirty-first day
Pimentel, Jr.[1]to act as amicus curiae and to file a memorandum also within a non-extendible of May 1994. Petitioners further aver[7] that although Sec. 43 of RA 7160 reduced the term of
period of twenty days. It noted but did not grant petitioners Urgent Motion for Issuance of office of all local elective officials to three years, such reduction does not apply to barangay
Temporary Restraining Order and/or Writ of Preliminary Injunction dated January 31, 1997 (as officials because (1) RA 6679 is a special law applicable only to barangays while RA 7160 is a
well as his Urgent Ex-Parte Second Motion to the same effect, dated March 6, general law which applies to all other local government units; (2) RA 7160 does not expressly or
1997). Accordingly, the parties filed their respective memoranda. The Petition for Leave to impliedly repeal RA 6679 insofar as the term of barangay officials is concerned; (3) while Sec. 8
Intervene filed on March 17, 1997 by Punong Barangay Rodson F. Mayor was denied as it of Article X of the 1987 Constitution fixes the term of elective local officials at three years, the
would just unduly delay the resolution of the case, his interest like those of all other barangay same provision states that the term of barangay officials shall be determined by law;and (4) thus,
officials being already adequately represented by Petitioner David who filed this petition as it follows that the constitutional intention is to grant barangay officials any term, except three
president of the Liga ng mga Barangay sa Pilipinas. years; otherwise, there would be no rhyme or reason for the framers of the Constitution to
except barangay officials from the three year term found in Sec. 8 (of) Article X of the
G.R. No. 128039 Constitution. Petitioners conclude (1) that the Commission on Elections committed grave abuse
of discretion when it promulgated Resolution Nos. 2880 and 2887 because it substituted its own
On February 20, 1997, Petitioner Liga ng mga Barangay Quezon City Chapter will for that of the legislative and usurped the judicial function x x x by interpreting the conflicting
represented by its president Bonifacio M. Rillon filed a petition, docketed as G.R. No. 128039, to provisions of Sec. 1 of RA 6679 and Sec. 43 (c) of RA 7160; and (2) that the appropriation
seek a judicial review by certiorari to declare as unconstitutional: of P400 million in the General Appropriation Act of 1997 (RA 8250) to be used in the conduct of
the barangay elections on May 12, 1997 is itself unconstitutional and a waste of public funds.
1. Section 43(c) of R.A. 7160 which reads as follows:
The Solicitor General agrees with petitioners, arguing that RA 6679 was not repealed by
RA 7160 and thus he believes that the holding of the barangay elections (o)n the second
(c) The term of office of barangay officials and members of the sangguniang kabataan shall be for three Monday of May 1997 is without sufficient legal basis.
(3) years, which shall begin after the regular election of barangay officials on the second Monday of May
1994. Respondent Commission on Elections, through Chairman Bernardo P. Pardo, defends its
assailed Resolutions and maintains that the repealing clause of RA 7160 includes all laws,
whether general or special, inconsistent with the provisions of the Local Government Code,
2. COMELEC Resolution Nos. 2880 and 2887 fixing the date of the holding of the barangay elections on citing this Courts dictum in Paras vs. Comelec[8] that the next regular election involving the
May 12, 1997 and other activities related thereto; barangay office is barely seven (7) months away, the same having been scheduled in May
1997. Furthermore, RA 8250 (the General Appropriations Act for 1997) and RA 8189 (providing
for a general registration of voters) both indicate that Congress considered that the barangay
elections shall take place in May, 1997, as provided for in RA 7160, Sec. 43 (c).[9] Besides,
petitioners cannot claim a term of more than three years since they were elected under respectively were first elected on May 17, 1982. They had a term of six years which began on
the aegis of the Local Government Code of 1991 which prescribes a term of only three June 7, 1982.
years. Finally, Respondent Comelec denies the charge of grave abuse of discretion stating that
the question presented x x x is a purely legal one involving no exercise of an act without or in The Local Government Code of 1983[19] also fixed the term of office of local
excess of jurisdiction or with grave abuse of discretion.[10] elective officials at six years.[20] Under this Code, the chief officials of the barangay were the
punong barangay, six elective sangguniang barangay members, the kabataang barangay
As amicus curiae, former Senator Aquilino Q. Pimentel, Jr. urges the Court to deny the chairman, a barangay secretary and a barangay treasurer.[21]
petitions because (1) the Local Autonomy Code repealed both RA 6679 and 6653 not only by
implication but by design as well; (2) the legislative intent is to shorten the term of barangay B.P. Blg. 881, the Omnibus Election Code,[22] reiterated that barangay officials shall hold
officials to three years; (3) the barangay officials should not have a term longer than that of their office for six years, and stated that their election was to be held on the second Monday of May
administrative superiors, the city and municipal mayors; and (4) barangay officials are estopped nineteen hundred and eighty eight and on the same day every six years thereafter. [23]
from contesting the applicability of the three-year term provided by the Local Government Code
as they were elected under the provisions of said Code. This election scheduled by B.P. Blg. 881 on the second Monday of May 1988 was reset to
the second Monday of November 1988 and every five years thereafter[24] by RA 6653. Under this
From the foregoing discussions of the parties, the Court believes that the issues can be law, the term of office of the barangay officials was cut to five years[25] and the punong barangay
condensed into three, as follows: was to be chosen from among themselves by seven kagawads, who in turn were to be elected
at large by the barangay electorate.[26]
1. Which law governs the term of office of barangay officials: RA 7160 or RA
6679? But the election date set by RA 6653 on the second Monday of November 1988 was again
postponed and reset to March 28, 1989 by RA 6679, [27] and the term of office of barangay
2. Is RA 7160 insofar as it shortened such term to only three years constitutional? officials was to begin on May 1, 1989 and to end on May 31, 1994. RA 6679 further provided
that there shall be held a regular election of barangay officials on the second Monday of May
3. Are petitioners estopped from claiming a term other than that provided under RA 1994 and on the same day every five (5) years thereafter. Their term shall be for five years x x
7160? x.[28] Significantly, the manner of election of the punong barangay was changed. Sec. 5 of said
law ordained that while the seven kagawads were to be elected by the registered voters of the
The Courts Ruling barangay, (t)he candidate who obtains the highest number of votes shall be the punong
The petitions are devoid of merit. barangay and in the event of a tie, there shall be a drawing of lots under the supervision of the
Commission on Elections.
Brief Historical Background of Barangay Elections
Under the Local Government Code of 1991, RA 7160,[29] several provisions concerning
For a clear understanding of the issues, it is necessary to delve briefly into the history of barangay officials were introduced:
barangay elections.

As a unit of government, the barangay antedated the Spanish conquest of the (1) The term of office was reduced to three years, as follows:
Philippines. The word barangay is derived from the Malay balangay, a boat which transported
them (the Malays) to these shores.[11] Quoting from Juan de Plasencia, a Franciscan missionary SEC. 43. Term of Office. --
in 1577, Historian Conrado Benitez[12] wrote that the barangay was ruled by a dato who
exercised absolute powers of government. While the Spaniards kept the barangay as the basic
structure of government, they stripped the dato or rajah of his powers.[13] Instead, power was xxxxxxxxx
centralized nationally in the governor general and locally in the encomiendero and later, in
the alcalde mayor and the gobernadorcillo. The dato or rajah was much later renamed cabeza (c) The term of office of barangay officials and members of the sangguniang kabataan shall be for three
de barangay, who was elected by the local citizens possessing property. The position (3) years, which shall begin after the regular election of barangay officials on the second Monday of May,
degenerated from a title of honor to that of a mere government employee. Only the poor who 1994 (Underscoring supplied.)
needed a salary, no matter how low, accepted the post.[14]

After the Americans colonized the Philippines, the barangays became known as (2) The composition of the Sangguniang Barangay and the manner of electing its officials were altered,
barrios.[15] For some time, the laws governing barrio governments were found in the Revised inter alia, the barangay chairman was to be elected directly by the electorate, as follows:
Administrative Code of 1916 and later in the Revised Administrative Code of 1917.[16] Barrios
were granted autonomy by the original Barrio Charter, RA 2370, and formally recognized as SEC. 387. Chief Officials and Offices. -- (a) There shall be in each barangay a punong barangay, seven (7)
quasi-municipal corporations[17] by the Revised Barrio Charter, RA 3590. During the martial law sanggunian barangay members, the sanggunian kabataan chairman, a barangay secretary and a barangay
regime, barrios were declared or renamed barangays -- a reversion really to their pre-Spanish treasurer.
names -- by PD. No. 86 and PD No. 557. Their basic organization and functions under RA 3590,
which was expressly adopted as the Barangay Charter, were retained. However, the titles of the
officials were changed to barangay captain, barangay councilman, barangay secretary and xxxxxxxxx
barangay treasurer.

Pursuant to Sec. 6 of Batas Pambansa Blg. 222, [18] a Punong Barangay (Barangay SEC. 390. Composition. -- The Sangguniang barangay, the legislative body of the barangay, shall be
Captain) and six Kagawads ng Sangguniang Barangay (Barangay Councilmen), who shall composed of the punong barangay as presiding officer, and the seven (7) regular sanguniang barangay
constitute the presiding officer and members of the Sangguniang Barangay (Barangay Council) members elected at large and the sanguniang kabataan chairman as members.
SEC. 41. Manner of Election. -- (a) The x x x punong barangay shall be elected at large x x x by the Sixth. Petitioners pompously claim that RA 6679, being a special law, should prevail over
qualified voters in the barangay. (Underscoring supplied.) RA 7160, an alleged general law pursuant to the doctrine of generalia specialibus non
derogant. Petitioners are wrong. RA 7160 is a codified set of laws that specifically applies to
local government units. It specifically and definitively provides in its Sec. 43-c that the term of
Pursuant to the foregoing mandates of the Local Autonomy Code, the qualified barangay
office of barangay officials x x x shall be for three years. It is a special provision that applies only
voters actually voted for one punong barangay and seven (7) kagawads during the barangay
to the term of barangay officials who were elected on the second Monday of May 1994.With
elections held on May 9, 1994. In other words, the punong barangay was elected directly and
such particularity, the provision cannot be deemed a general law. Petitioner may be correct in
separately by the electorate, and not by the seven (7) kagawads from among themselves.
alleging that RA 6679 is a special law, but they are incorrect in stating (without however giving
The First Issue: Clear Legislative Intent and Design to Limit Term to Three Years the reasons therefor) that RA 7160 is necessarily a general law. [35] It is a special law insofar as it
governs the term of office of barangay officials. In its repealing clause,[36] RA 7160 states that all
In light of the foregoing brief historical background, the intent and design of the legislature general and special laws x x x which are inconsistent with any of the provisions of this Code are
to limit the term of barangay officials to only three (3) years as provided under the Local hereby repealed or modified accordingly. There being a clear repugnance and incompatibility
Government Code emerges as bright as the sunlight. The cardinal rule in the interpretation of all between the two specific provisions, they cannot stand together. The later law, RA 7160, should
laws is to ascertain and give effect to the intent of the law. [30] And three years is the obvious thus prevail in accordance with its repealing clause. When a subsequent law encompasses
intent. entirely the subject matter of the former enactments, the latter is deemed repealed. [37]

First. RA 7160, the Local Government Code, was enacted later than RA 6679. It is basic The Second Issue: Three-Year Term Not Repugnant to Constitution
that in case of an irreconciliable conflict between two laws of different vintages, the later
enactment prevails.[31] Legis posteriores priores contrarias abrogant. The rationale is simple: a Sec. 8, Article X of the Constitution states:
later law repeals an earlier one because it is the later legislative will. It is to be presumed that the
lawmakers knew the older law and intended to change it. In enacting the older law, the SEC. 8. The term of office of elective local officials, except barangay officials, which shall be determined
legislators could not have known the newer one and hence could not have intended to change by law, shall be three years, and no such official shall serve for more than three consecutive
what they did not know. Under the Civil Code, laws are repealed only by subsequent ones -- terms.Voluntary renunciation of the office for any length of time shall not be considered as an interruption
[32]
and not the other way around. in the continuity of his service for the full term for which he was elected.
Under Sec. 43-c of RA 7160, the term of office of barangay officials was fixed at three (3)
years which shall begin after the regular election of barangay officials on the second Monday of Petitioner Liga ng mga Barangay Quezon City Chapter posits that by excepting barangay
May 1994. This provision is clearly inconsistent with and repugnant to Sec. 1 of RA 6679 which officials whose term shall be determined by law from the general provision fixing the term of
states that such term shall be for five years. Note that both laws refer to the same officials who elective local officials at three years, the Constitution thereby impliedly prohibits Congress from
were elected on the second Monday of May 1994. legislating a three-year term for such officers. We find this theory rather novel but nonetheless
logically and legally flawed.
Second. RA 6679 requires the barangay voters to elect seven kagawads and the
candidate obtaining the highest number of votes shall automatically be the punong Undoubtedly, the Constitution did not expressly prohibit Congress from fixing any term of
barangay. RA 6653 empowers the seven elected barangay kagawads to select the punong office for barangay officials. It merely left the determination of such term to the lawmaking body,
barangay from among themselves. On the other hand, the Local Autonomy Code mandates a without any specific limitation or prohibition, thereby leaving to the lawmakers full discretion to fix
direct vote on the barangay chairman by the entire barangay electorate, separately from the such term in accordance with the exigencies of public service. It must be remembered that every
seven kagawads. Hence, under the Code, voters elect eight barangay officials, namely, the law has in its favor the presumption of constitutionality.[38] For a law to be nullified, it must be
punong barangay plus the seven kagawads. Under both RA 6679 and 6653, they vote for only shown that there is a clear and unequivocal (not just implied) breach of the Constitution. [39] To
seven kagawads, and not for the barangay chairman. strike down a law as unconstitutional, there must be a clear and unequivocal showing that what
the fundamental law prohibits, the statute permits.[40] The petitioners have miserably failed to
Third. During the barangay elections held on May 9, 1994 (second Monday), the voters discharge this burden and to show clearly the unconstitutionality they aver.
actually and directly elected one punong barangay and seven kagawads. If we agree with the
thesis of petitioners, it follows that all the punong barangays were elected illegally and thus, There is absolutely no doubt in our mind that Sec. 43-c of RA 7160 is constitutional. Sec.
Petitioner Alex David cannot claim to be a validly elected barangay chairman, much less 8, Article X of the Constitution -- limiting the term of all elective local officials to three years,
president of the national league of barangays which he purports to represent in this petition. It except that of barangay officials which shall be determined by law -- was an amendment
then necessarily follows also that he is not the real party-in-interest and on that ground, his proposed by Constitutional Commissioner (now Supreme Court Justice) Hilario G. Davide,
petition should be summarily dismissed. Jr.According to Fr. Joaquin G. Bernas, S.J., the amendment was readily accepted without much
discussion and formally approved. Indeed, a search into the Record of the Constitutional
Fourth. In enacting the general appropriations act of 1997,[33] Congress appropriated the Commission yielded only a few pages[41] of actual deliberations, the portions pertinent to the
amount of P400 million to cover expenses for the holding of barangay elections this Constitutional Commissions intent being the following:
year.Likewise, under Sec. 7 of RA 8189, Congress ordained that a general registration of voters
shall be held immediately after the barangay elections in 1997. These are clear and express MR. NOLLEDO. One clarificatory question, Madam President. What will be the term of the
contemporaneous statements of Congress that barangay officials shall be elected this May, in office of barangay officials as provided for?
accordance with Sec. 43-c of RA 7160.
MR. DAVIDE. As may be determined by law.
Fifth. In Paras vs. Comelec,[34] this Court said that the next regular election involving the
barangay office concerned is barely seven (7) months away, the same having been scheduled in MR. NOLLEDO. As provided for in the Local Government Code?
May, 1997. This judicial decision, per Article 8 of the Civil Code, is now a part of the legal system
MR. DAVIDE. Yes.
of the Philippines.
xxxxxxxxx 3. Ramon, Dolores Z. 120
4. Dela Pena, Roberto T. 115
THE PRESIDENT. Is there any other comment? Is there any objection to this proposed 5. Castillo, Luciana 114
new section as submitted by Commissioner Davide and accepted by the 6. Lorico, Amy A. 107
Committee? 7. Valencia, Arnold 102
8. Ang, Jose 97
MR. RODRIGO. Madam President, does this prohibition to serve for more than three 9. Dequilla, Teresita D. 58
consecutive terms apply to barangay officials? 10.Primavera, Marcelina 52
MR. DAVIDE. Madam President, the voting that we had on the terms of office did not
include the barangay officials because it was then the stand of the Chairman of the If, as claimed by petitioners, the applicable law is RA 6679, then (1) Petitioner David
Committee on Local Governments that the term of barangay officials must be should not have run and could not have been elected chairman of his barangay because under
determined by law. So it is now for the law to determine whether the restriction on RA 6679, there was to be no direct election for the punong barangay; the kagawad candidate
the number of reelections will be included in the Local Government Code. who obtained the highest number of votes was to be automatically elected barangay chairman;
(2) thus, applying said law, the punong barangay should have been Ruben Magalona, who
MR. RODRIGO. So that is up to Congress to decide. obtained the highest number of votes among the kagawads -- 150, which was much more than
MR. DAVIDE. Yes. Davids 112; (3) the electorate should have elected only seven kagawads and not one punong
barangay plus seven kagawads.
MR. RODRIGO. I just wanted that clear in the record.
In other words, following petitioners own theory, the election of Petitioner David as well as
Although the discussions in the Constitutional Commission were very brief, they all the barangay chairmen of the two Liga petitioners was illegal.
nonetheless provide the exact answer to the main issue. To the question at issue here on how
long the term of barangay officials is, the answer of the Commission was simple, clear and The sum total of these absurdities in petitioners theory is that barangay officials are
quick: As may be determined by law; more precisely, (a)s provided for in the Local Autonomy estopped from asking for any term other than that which they ran for and were elected to, under
Code. And the Local Autonomy Code, in its Sec. 43-c, limits their term to three years. the law governing their very claim to such offices: namely, RA 7160, the Local Government
Code. Petitioners belated claim of ignorance as to what law governed their election to office in
The Third Issue: Petitioners Estopped From Challenging Their Three-Year Terms 1994 is unacceptable because under Art. 3 of the Civil Code, (i)gnorance of the law excuses no
one from compliance therewith.
We have already shown that constitutionally, statutorily, logically, historically and
commonsensically, the petitions are completely devoid of merit. And we could have ended our Epilogue
Decision right here. But there is one last point why petitioners have no moral ascendancy for
their dubious claim to a longer term of office: the equities of their own petition militate against It is obvious that these two petitions must fail. The Constitution and the laws do not
them. As pointed out by Amicus Curiae Pimentel,[42] petitioners are barred by estoppel from support them. Extant jurisprudence militates against them. Reason and common sense reject
pursuing their petitions. them.Equity and morality abhor them. They are subtle but nonetheless self-serving propositions
to lengthen governance without a mandate from the governed. In a democracy, elected leaders
Respondent Commission on Elections submitted as Annex A of its memorandum,[43] a can legally and morally justify their reign only by obtaining the voluntary consent of the
machine copy of the certificate of candidacy of Petitioner Alex L. David in the May 9, 1994 electorate. In this case however, petitioners propose to extend their terms not by seeking the
barangay elections, the authenticity of which was not denied by said petitioner. In said certificate peoplesvote but by faulty legal argumentation. This Court cannot and will not grant its imprimatur
of candidacy, he expressly stated under oath that he was announcing his candidacy for the to such untenable proposition. If they want to continue serving, they must get a new mandate in
office of punong barangay for Barangay 77, Zone 7 of Kalookan City and that he was eligible for the elections scheduled on May 12, 1997.
said office. The Comelec also submitted as Annex B[44] to its said memorandum, a certified
statement of the votes obtained by the candidates in said elections, thus: WHEREFORE, the petitions are DENIED for being completely devoid of merit.

BARANGAY 77 SO ORDERED
CERTIFIED LIST OF CANDIDATES
VOTES OBTAINED G.R. No. L-19337 September 30, 1969

May 9, 1994 BARANGAY ELECTIONS ASTURIAS SUGAR CENTRAL, INC., petitioner,

vs.
COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents.
PUNONG BARANGAY VOTES OBTAINED
CASTRO, J.:
1. DAVID, ALEX L. 112
This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961,
KAGAWAD which denied recovery of the sum of P28,629.42, paid by the petitioner, under protest, in the
concept of customs duties and special import tax, as well as the petitioner's alternative remedy
to recover the said amount minus one per cent thereof by way of a drawback under sec. 106 (b)
1. Magalona, Ruben 150
of the Tariff and Customs Code.
2. Quinto, Nelson L. 130
The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal 2. In not declaring that it is within the power of the Collector of Customs and/or the
sugar for exert, the sugar so produced being placed in containers known as jute bags. In 1957 it Commissioner of Customs to extend the period of one (1) year within which the jute
made two importations of jute bags. The first shipment consisting of 44,800 jute bags and bags should be exported.
declared under entry 48 on January 8, 1967, entered free of customs duties and special import
tax upon the petitioner's filing of Re-exportation and Special Import Tax Bond no. 1 in the
3. In not declaring that the petitioner is entitled to a refund by way of a drawback under
amounts of P25,088 and P2,464.50, conditioned upon the exportation of the jute bags within one
the provisions of section 106, par. (b), of the Tariff and Customs Code.
year from the date of importation. The second shipment consisting of 75,200 jute bags and
declared under entry 243 on February 8, 1957, likewise entered free of customs duties and
special import tax upon the petitioner's filing of Re-exportation and Special Import Tax Bond no. 1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested,
6 in the amounts of P42,112 and P7,984.44, with the same conditions as stated in bond no. 1. under the Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the
period of one year provided for in section 23 of the Act. Section 23 reads:
Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year from
the date of importation as containers of centrifugal sugar. Of the 75,200 jute bags declared SEC. 23. That containers, such as casks, large metal, glass, or other receptacles
under entry 243, only 25,000 were exported within the said period of one year. In other words, of which are, in the opinion of the collector of customs, of such a character as to be
the total number of imported jute bags only 33,647 bags were exported within one year after readily identifiable may be delivered to the importer thereof upon identification and the
their importation. The remaining 86,353 bags were exported after the expiration of the one-year giving of a bond with sureties satisfactory to the collector of customs in an amount
period but within three years from their importation. equal to double the estimated duties thereon, conditioned for the exportation thereof
or payment of the corresponding duties thereon within one year from the date of
importation, under such rules and regulations as the Insular Collector of Customs shall
On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd.,
provide.1
requested the Commissioner of Customs for a week's extension of Re-exportation and Special
Import Tax Bond no. 6 which was to expire the following day, giving the following as the reasons
for its failure to export the remaining jute bags within the period of one year: (a) typhoons and To implement the said section 23, Customs Administrative Order 389 dated December 6, 1940
severe floods; (b) picketing of the Central railroad line from November 6 to December 21, 1957 was promulgated, paragraph XXVIII of which provides that "bonds for the re-exportation of
by certain union elements in the employ of the Philippine Railway Company, which hampered cylinders and other containers are good for 12 months without extension," and paragraph XXXI,
normal operations; and (c) delay in the arrival of the vessel aboard which the petitioner was to that "bonds for customs brokers, commercial samples, repairs and those filed to guarantee the
ship its sugar which was then ready for loading. This request was denied by the Commissioner re-exportation of cylinders and other containers are not extendible."
per his letter of April 15, 1958.
And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated
Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags August 25, 1948 was issued, prescribing rules and regulations governing the importation,
within one year from their importation, the Collector of Customs of Iloilo, on March 17, 1958, exportation and identification thereof under section 23 of the Philippine Tariff Act of 1909. Said
required it to pay the amount of P28,629.42 representing the customs duties and special import administrative order provides:
tax due thereon, which amount the petitioner paid under protest.
That importation of jute bags intended for use as containers of Philippine products for
In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner exportation to foreign countries shall be declared in a regular import entry supported
demanded the refund of the amount it had paid, on the ground that its request for extension of by a surety bond in an amount equal to double the estimated duties, conditioned for
the period of one year was filed on time, and that its failure to export the jute bags within the the exportation or payment of the corresponding duties thereon within one year from
required one-year period was due to delay in the arrival of the vessel on which they were to be the date of importation.
loaded and to the picketing of the Central railroad line. Alternatively, the petitioner asked for
refund of the same amount in the form of a drawback under section 106(b) in relation to section
It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec.
105(x) of the Tariff and Customs Code.
105(x) of the Tariff and Customs Code, while fixing at one year the period within which the
containers therein mentioned must be exported, are silent as to whether the said period may be
After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying extended. It was surely by reason of this silence that the Bureau of Customs issued
the claim for refund. From his action, appeal was taken to the Commissioner of Customs who Administrative Orders 389 and 66, already adverted to, to eliminate confusion and provide a
upheld the decision of the Collector. Upon a petition for review the Court of Tax Appeals affirmed guide as to how it shall apply the law, 2 and, more specifically, to make officially known its policy
the decision of the Commissioner of Customs. to consider the one-year period mentioned in the law as non-extendible.

The petitioner imputes three errors to the Court of Tax Appeals, namely: Considering that the statutory provisions in question have not been the subject of previous
judicial interpretation, then the application of the doctrine of "judicial respect for administrative
construction," 3 would, initially, be in order.
1. In not declaring that force majeure and/or fortuitous event is a sufficient justification
for the failure of the petitioner to export the jute bags in question within the time
required by the bonds. Only where the court of last resort has not previously interpreted the statute is the rule applicable
that courts will give consideration to construction by administrative or executive departments of
the state.41awphl.nt
 The formal or informal interpretation or practical construction of an ambiguous or the jute bags within the required one-year period. In point of fact nowhere in the record does the
uncertain statute or law by the executive department or other agency charged with its petitioner convincingly show that the so-called fortuitous events or force majeure referred to by it
administration or enforcement is entitled to consideration and the highest respect from precluded the timely exportation of the jute bags. In the second place, assuming, arguendo, that
the courts, and must be accorded appropriate weight in determining the meaning of the one-year period is extendible, the jute bags were not actually exported within the one-week
the law, especially when the construction or interpretation is long continued and extension the petitioner sought. The record shows that although of the remaining 86,353 jute
uniform or is contemporaneous with the first workings of the statute, or when the bags 21,944 were exported within the period of one week after the request for extension was
enactment of the statute was suggested by such agency. 5 filed, the rest of the bags, amounting to a total of 64,409, were actually exported only during the
period from February 16 to May 24, 1958, long after the expiration of the one-week extension
sought by the petitioner. Finally, it is clear from the record that the typhoons and floods which,
The administrative orders in question appear to be in consonance with the intention of the
according to the petitioner, helped render impossible the fulfillment of its obligation to export
legislature to limit the period within which to export imported containers to one year, without
within the one-year period, assuming that they may be placed in the category of fortuitous
extension, from the date of importation. Otherwise, in enacting the Tariff and Customs Code to
events or force majeure, all occurred prior to the execution of the bonds in question, or prior to
supersede the Philippine Tariff Act of 1909, Congress would have amended section 23 of the
the commencement of the one-year period within which the petitioner was in law required to
latter law so as to overrule the long-standing view of the Commissioner of Customs that the one-
export the jute bags.
year period therein mentioned is not extendible.

2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is
Implied legislative approval by failure to change a long-standing administrative
valid and binding, yet "jute bags" cannot be included in the phrase "cylinders and other
construction is not essential to judicial respect for the construction but is an element
containers" mentioned therein. It will be noted, however, that the Philippine Tariff Act of 1909
which greatly increases the weight given such construction. 6
and the Tariff and Customs Code, which Administrative Order 389 seeks to implement, speak of
"containers" in general. The enumeration following the word "containers" in the said statutes
The correctness of the interpretation given a statute by the agency charged with serves merely to give examples of containers and not to specify the particular kinds thereof.
administering its provision is indicated where it appears that Congress, with full Thus, sec. 23 of the Philippine Tariff Act states, "containers such as casks large metals, glass
knowledge of the agency's interpretation, has made significant additions to the statute or other receptacles," and sec. 105 (x) of the Tariff and Customs Code mentions "large
without amending it to depart from the agency's view.7 containers," giving as examples "demijohn cylinders, drums, casks and other similar
receptacles of metal, glass or other materials." (emphasis supplied) There is, therefore, no
reason to suppose that the customs authorities had intended, in Customs Administrative Order
Considering that the Bureau of Customs is the office charged with implementing and enforcing 389 to circumscribe the scope of the word "container," any more than the statures sought to be
the provisions of our Tariff and Customs Code, the construction placed by it thereon should be implemented actually intended to do.
given controlling weight.1awphl.nt

3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of
In applying the doctrine or principle of respect for administrative or practical construction, the section 106 (b) of the Tariff and Customs Code, 11 which reads:
courts often refer to several factors which may be regarded as bases of the principle, as factors
leading the courts to give the principle controlling weight in particular instances, or as
independent rules in themselves. These factors are the respect due the governmental agencies SEC. 106. Drawbacks: ...
charged with administration, their competence, expertness, experience, and informed judgment
and the fact that they frequently are the drafters of the law they interpret; that the agency is the
b. On Articles Made from Imported Materials or Similar Domestic Materials and
one on which the legislature must rely to advise it as to the practical working out of the statute,
Wastes Thereof. Upon the exportation of articles manufactured or produced in the
and practical application of the statute presents the agency with unique opportunity and
Philippines, including the packing, covering, putting up, marking or labeling thereof,
experiences for discovering deficiencies, inaccuracies, or improvements in the statute; ... 8
either in whole or in part of imported materials, or from similar domestic materials of
equal quantity and productive manufacturing quality and value, such question to be
If it is further considered that exemptions from taxation are not favored, 9 and that tax statutes determined by the Collector of Customs, there shall be allowed a drawback equal in
are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing amount to the duties paid on the imported materials so used, or where similar
authority, 10 then we are hard put to sustain the petitioner's stand that it was entitled to an domestic materials are used, to the duties paid on the equivalent imported similar
extension of time within which to export the jute bags and, consequently, to a refund of the materials, less one per cent thereof: Provided, That the exportation shall be made
amount it had paid as customs duties. within three years after the importation of the foreign material used or constituting the
basis for drawback ... .
In the light of the foregoing, it is our considered view that the one-year period prescribed in
section 23 of the Philippine Tariff Act of 1909 is non-extendible and compliance therewith is The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of
mandatory. the Tariff and Customs Code due to its failure to export the jute bags within one year, it is
nevertheless, by authority of the above-quoted provision, entitled to a 99% drawback of the
duties it had paid, averring further that sec. 106(b) does not presuppose immediate payment of
The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting duties and taxes at the time of importation.
the jute bags within the one-year period cannot be accorded credit, for several reasons. In the
first place, in its decision of November 20, 1961, the Court of Tax Appeals made absolutely no
mention of or reference to this argument of the petitioner, which can only be interpreted to mean The contention is palpably devoid of merit.
that the court did not believe that the "typhoons, floods and picketing" adverted to by the
petitioner in its brief were of such magnitude or nature as to effectively prevent the exportation of
The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an GUTIERREZ, JR., J.:
importer. The first, under sec. 105 (x), gives him the privilege of importing, free from import
duties, the containers mentioned therein as long as he exports them within one year from the
This is a petition for certiorari seeking to annul the decision of the respondent Secretary, now
date of acceptance of the import entry, which period as shown above, is not extendible. The
Minister of Labor which denied the petitioner's claim for holiday pay and its claim for premium
second, presented by sec. 106 (b), contemplates a case where import duties are first paid,
and overtime pay differentials. The petitioner claims that the respondent Minister of Labor acted
subject to refund to the extent of 99% of the amount paid, provided the articles mentioned
contrary to law and jurisprudence and with grave abuse of discretion in promulgating Sec. 2,
therein are exported within three years from importation.
Rule IV, Book III of the Integrated Rules and in issuing Policy Instruction No. 9, both referring to
holidays with pay.
It would seem then that the Government would forego collecting duties on the articles mentioned
in section 105(x) of Tariff and Customs Code as long as it is assured, by the filing of a bond, that
On May 20, 1975, the Chartered Bank Employees Association, in representation of its monthly
the same shall be exported within the relatively short period of one year from the date of
paid employees/members, instituted a complaint with the Regional Office No. IV, Department of
acceptance of the import entry. Where an importer cannot provide such assurance, then the
Labor, now Ministry of Labor and Employment (MOLE) against private respondent Chartered
Government, under sec. 106(b) of said Code, would require payment of the corresponding
Bank, for the payment of ten (10) unworked legal holidays, as well as for premium and overtime
duties first. The basic purpose of the two provisions is the same, which is, to enable a local
differentials for worked legal holidays from November 1, 1974.
manufacturer to compete in foreign markets, by relieving him of the disadvantages resulting from
having to pay duties on imported merchandise, thereby building up export trade and
encouraging manufacture in the country. 12 But there is a difference, and it is this: under section The memorandum for the respondents summarizes the admitted and/or undisputed facts as
105(x) full exemption is granted to an importer who justifies the grant of exemption by exporting follows:
within one-year. The petitioner, having opted to take advantage of the provisions of section
105(x), may not, after having failed to comply with the conditions imposed thereby, avoid the
consequences of such failure by being allowed a drawback under section 106(b) of the same Act l. The work force of respondent bank consists of 149 regular employees, all
without having complied with the conditions of the latter section. of whom are paid by the month;

For it is not to be supposed that the legislature had intended to defeat compliance with the terms 2. Under their existing collective bargaining agreement, (Art. VII thereof)
of section 105(x) thru a refuge under the provisions of section 106(b). A construction should be said monthly paid employees are paid for overtime work as follows:
avoided which affords an opportunity to defeat compliance with the terms of a statute. 13 Rather
courts should proceed on the theory that parts of a statute may be harmonized and reconciled Section l. The basic work week for all employees excepting security guards
with each other. who by virtue of the nature of their work are required to be at their posts for
365 days per year, shall be forty (40) hours based on five (5) eight (8) hours
A construction of a statute which creates an inconsistency should be avoided when a reasonable days, Monday to Friday.
interpretation can be adopted which will not do violence to the plain words of the act and will
carry out the intention of Congress. Section 2. Time and a quarter hourly rate shall be paid for authorized work
performed in excess of eight (8) hours from Monday through Friday and for
In the construction of statutes, the courts start with the assumption that the legislature any hour of work performed on Saturdays subject to Section 5 hereof.
intended to enact an effective law, and the legislature is not to be presumed to have
done a vain thing in the enactment of a statute. Hence, it is a general principle, Section 3. Time and a half hourly rate shall be paid for authorized work
embodied in the maxim, "ut res magis valeat quam pereat," that the courts should, if performed on Sundays, legal and special holidays.
reasonably possible to do so without violence to the spirit and language of an act, so
interpret the statute to give it efficient operation and effect as a whole. An
interpretation should, if possible, be avoided under which a statute or provision being xxx xxx xxx
construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated,
repealed, explained away, or rendered insignificant, meaningless, inoperative, or xxx xxx xxx
nugatory. 14
Section 5. The provisions of Section I above notwithstanding the BANK may
ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at revert to the six (6) days work week, to include Saturday for a four (4) hour
petitioner's cost. day, in the event the Central Bank should require commercial banks to open
for business on Saturday.
G.R. No. L-44717 August 28, 1985
3. In computing overtime pay and premium pay for work done during regular
holidays, the divisor used in arriving at the daily rate of pay is 251 days
THE CHARTERED BANK EMPLOYEES ASSOCIATION, petitioner, although formerly the divisor used was 303 days and this was when the
vs. respondent bank was still operating on a 6-day work week basis. However,
HON. BLAS F. OPLE, in his capacity as the Incumbent Secretary of Labor, and THE for purposes of computing deductions corresponding to absences without
CHARTERED BANK, respondents. pay the divisor used is 365 days.
 4. All regular monthly paid employees of respondent bank are receiving First Error
salaries way beyond the statutory or minimum rates and are among the
highest paid employees in the banking industry.
Whether or not the Secretary of Labor erred and acted contrary to law in promulgating
Sec. 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9.
5. The salaries of respondent bank's monthly paid employees suffer no
deduction for holidays occurring within the month.
Second Error

On the bases of the foregoing facts, both the arbitrator and the National Labor Relations
Whether or not the respondent Secretary of Labor abused his discretion and acted
Commission (NLRC) ruled in favor of the petitioners ordering the respondent bank to pay its
contrary to law in applying Sec. 2, Rule IV of the Integrated Rules and Policy
monthly paid employees, holiday pay for the ten (10) legal holidays effective November 1, 1974
Instruction No. 9 abovestated to private respondent's monthly-paid employees.
and to pay premium or overtime pay differentials to all employees who rendered work during
said legal holidays. On appeal, the Minister of Labor set aside the decision of the NLRC and
dismissed the petitioner's claim for lack of merit basing its decision on Section 2, Rule IV, Book Third Error
Ill of the Integrated Rules and Policy Instruction No. 9, which respectively provide:
Whether or not the respondent Secretary of Labor, in not giving due credence to the
Sec. 2. Status of employees paid by the month. Employees who are uniformly paid respondent bank's practice of paying its employees base pay of 100% and premium
by the month, irrespective of the number of working days therein, with a salary of not pay of 50% for work done during legal holidays, acted contrary to law and abused his
less than the statutory or established minimum wage shall be presumed to be paid for discretion in denying the claim of petitioners for unworked holidays and premium and
all days in the month whether worked or not. overtime pay differentials for worked holidays.

POLICY INSTRUCTION NO. 9 The petitioner contends that the respondent Minister of Labor gravely abused his discretion in
promulgating Section 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9 as
guidelines for the implementation of Articles 82 and 94 of the Labor Code and in applying said
TO: All Regional Directors
guidelines to this case. It maintains that while it is true that the respondent Minister has the
authority in the performance of his duty to promulgate rules and regulations to implement,
SUBJECT: PAID LEGAL HOLIDAYS construe and clarify the Labor Code, such power is limited by provisions of the statute sought to
be implemented, construed or clarified. According to the petitioner, the so-called "guidelines"
promulgated by the respondent Minister totally contravened and violated the Code by excluding
The rules implementing PD 850 have clarified the policy in the implementation of the
the employees/members of the petitioner from the benefits of the holiday pay, when the Code
ten (10) paid legal holidays. Before PD 850, the number of working days a year in a
itself did not provide for their expanding the Code's clear and concise conclusion and
firm was considered important in determining entitlement to the benefit. Thus, where
notwithstanding the Code's clear and concise phraseology defining those employees who are
an employee was working for at least 313 days, he was considered definitely already
covered and those who are excluded from the benefits of holiday pay.
paid. If he was working for less than 313, there was no certainty whether the ten (10)
paid legal holidays were already paid to him or not.
On the other hand, the private respondent contends that the questioned guidelines did not
deprive the petitioner's members of the benefits of holiday pay but merely classified those
The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily
monthly paid employees whose monthly salary already includes holiday pay and those whose do
employees. In the case of monthly, only those whose monthly salary did not yet
not, and that the guidelines did not deprive the employees of holiday pay. It states that the
include payment for the ten (10) paid legal holidays are entitled to the benefit.
question to be clarified is whether or not the monthly salaries of the petitioner's members already
includes holiday pay. Thus, the guidelines were promulgated to avoid confusion or
Under the rules implementing PD 850, this policy has been fully clarified to eliminate misconstruction in the application of Articles 82 and 94 of the Labor Code but not to violate
controversies on the entitlement of monthly paid employees. The new determining rule them. Respondent explains that the rationale behind the promulgation of the questioned
is this: 'If the monthly paid employee is receiving not less than P240, the maximum guidelines is to benefit the daily paid workers who, unlike monthly-paid employees, suffer
monthly minimum wage, and his monthly pay is uniform from January to December, deductions in their salaries for not working on holidays. Hence, the Holiday Pay Law was
he is presumed to be already paid the ten (10) paid legal holidays. However, if enacted precisely to countervail the disparity between daily paid workers and monthly-paid
deductions are made from his monthly salary on account of holidays in months where employees.
they occur, then he is still entitled to the ten (10) paid legal holidays.
The decision in Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong (132
These new interpretations must be uniformly and consistently upheld. SCRA 663) resolved a similar issue. Significantly, the petitioner in that case was also a union of
bank employees. We ruled that Section 2, Rule IV, Book III of the Integrated Rules and Policy
Instruction No. 9, are contrary to the provisions of the Labor Code and, therefore, invalid This
This issuance shall take effect immediately. Court stated:

The issues are presented in the form of the following assignments of errors:
It is elementary in the rules of statutory construction that when the language
of the law is clear and unequivocal the law must be taken to mean exactly
what it says. In the case at bar, the provisions of the Labor Code on the
 entitlement to the benefits of holiday pay are clear and explicit it provides for both the which must be in the law if it is to be valid. An administrative interpretation which diminishes the
coverage of and exclusion from the benefit. In Policy Instruction No. 9, the then benefits of labor more than what the statute delimits or withholds is obviously ultra vires.
Secretary of Labor went as far as to categorically state that the benefit is principally
intended for daily paid employees, when the law clearly states that every worker shall
It is argued that even without the presumption found in the rules and in the policy instruction, the
be paid their regular holiday pay. This is flagrant violation of the mandatory directive of
company practice indicates that the monthly salaries of the employees are so computed as to
Article 4 of the Labor Code, which states that 'All doubts in the implementation and
include the holiday pay provided by law. The petitioner contends otherwise.
interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.' Moreover, it shall always be presumed
that the legislature intended to enact a valid and permanent statute which would have One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in
the most beneficial effect that its language permits (Orlosky v. Hasken, 155 A. 112) computing overtime compensation for its employees, employs a "divisor" of 251 days. The 251
working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal
holidays from the total number of calendar days in a year. If the employees are already paid for
Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority
all non-working days, the divisor should be 365 and not 251.
granted by Article 5 of the Labor Code authorizing him to promulgate the necessary
implementing rules and regulations.
The situation is muddled somewhat by the fact that, in computing the employees' absences from
work, the respondent bank uses 365 as divisor. Any slight doubts, however, must be resolved in
We further ruled:
favor of the workers. This is in keeping with the constitutional mandate of promoting social
justice and affording protection to labor (Sections 6 and 9, Article II, Constitution). The Labor
While it is true that the contemporaneous construction placed upon a statute by Code, as amended, itself provides:
executive officers whose duty is to enforce it should be given great weight by the
courts, still if such construction is so erroneous, as in the instant case, the same must
ART. 4. Construction in favor of labor. All doubts in the implementation and
be declared as null and void. It is the role of the Judiciary to refine and, when
interpretation of the provisions of this Code, including its implementing rules
necessary correct constitutional (and/or statutory) interpretation, in the context of the
and regulations, shall be resolved in favor of labor.
interactions of the three branches of the government, almost always in situations
where some agency of the State has engaged in action that stems ultimately from
some legitimate area of governmental power (The Supreme Court in Modern Role, Any remaining doubts which may arise from the conflicting or different divisors used in the
C.B. Swisher 1958, p. 36). computation of overtime pay and employees' absences are resolved by the manner in which
work actually rendered on holidays is paid. Thus, whenever monthly paid employees work on a
holiday, they are given an additional 100% base pay on top of a premium pay of 50%. If the
xxx xxx xxx
employees' monthly pay already includes their salaries for holidays, they should be paid only
premium pay but not both base pay and premium pay.
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the
Labor Code and Policy Instruction No. 9 issued by the then Secretary of Labor must
The contention of the respondent that 100% base pay and 50% premium pay for work actually
be declared null and void. Accordinglyl public respondent Deputy Minister of Labor
rendered on holidays is given in addition to monthly salaries only because the collective
Amado G. Inciong had no basis at all to deny the members of petitioner union their
bargaining agreement so provides is itself an argument in favor of the petitioner stand. It shows
regular holiday pay as directed by the Labor Code.
that the Collective Bargaining Agreement already contemplated a divisor of 251 days for holiday
pay computations before the questioned presumption in the Integrated Rules and the Policy
Since the private respondent premises its action on the invalidated rule and policy instruction, it Instruction was formulated. There is furthermore a similarity between overtime pay, which is
is clear that the employees belonging to the petitioner association are entitled to the payment of computed on the basis of 251 working days a year, and holiday pay, which should be similarly
ten (10) legal holidays under Articles 82 and 94 of the Labor Code, aside from their monthly treated notwithstanding the public respondents' issuances. In both cases overtime work and
salary. They are not among those excluded by law from the benefits of such holiday pay. holiday work- the employee works when he is supposed to be resting. In the absence of an
express provision of the CBA or the law to the contrary, the computation should be similarly
handled.
Presidential Decree No. 850 states who are excluded from the holiday provisions of that law. It
states:
We are not unmindful of the fact that the respondent's employees are among the highest paid in
the industry. It is not the intent of this Court to impose any undue burdens on an employer which
ART. 82. Coverage. The provision of this Title shall apply to employees in all
is already doing its best for its personnel. we have to resolve the labor dispute in the light of the
establishments and undertakings, whether for profit or not, but not to government
parties' own collective bargaining agreement and the benefits given by law to all workers. When
employees, managerial employees, field personnel members of the family of the
the law provides benefits for "employees in all establishments and undertakings, whether for
employer who are dependent on him for support, domestic helpers, persons in the
profit or not" and lists specifically the employees not entitled to those benefits, the administrative
personal service of another, and workers who are paid by results as determined by the
agency implementing that law cannot exclude certain employees from its coverage simply
Secretary of Labor in appropriate regulations. (Emphasis supplied).
because they are paid by the month or because they are already highly paid. The remedy lies in
a clear redrafting of the collective bargaining agreement with a statement that monthly pay
The questioned Section 2, Rule IV, Book III of the Integrated Rules and the Secretary's Policy already includes holiday pay or an amendment of the law to that effect but not an administrative
Instruction No. 9 add another excluded group, namely, "employees who are uniformly paid by rule or a policy instruction.
the month." While the additional exclusion is only in the form of a presumption that all monthly
paid employees have already been paid holiday pay, it constitutes a taking away or a deprivation
 embraces "not only an increase in the authorized capital stock but also the issuance of additional shares to existing stockholders of the unissued portion of
WHEREFORE, the September 7, 1976 order of the public respondent is hereby REVERSED
the unissued capital stock". 3
and SET ASIDE. The March 24, 1976 decision of the National Labor Relations Commission Nestle urged that interpretation upon the following argument.
which affirmed the October 30, 1975 resolution of the Labor Arbiter but deleted interest The use of the term "increased capital stock" should be interpreted to refer to additional capital
payments is REINSTATED. stock or equity participation of the existing stockholders as a consequence of either an increase
of the authorized capital stock or the issuance of unissued capital stock. If the intention of the
pertinent legal provision [were] to limit the exemption to subscription to proposed increases in
SO ORDERED.
the authorized capital stock of a corporation, we see no reason why the law should not have
been more specific or accurate about it. It certainly should have mentioned "increase in the
G.R. No. 86738 November 13, 1991 authorized capital stock of the corporation" rather than merely the expression "the issuance of
additional capital stock 4 (Emphasis supplied)

NESTLE PHILIPPINES, INC., petitioner, Nestle expressly represented in the same letter that all the additional shares proposed to be issued would be issued only to San Miguel Corporation and
vs. Nestle S.A. and that no commission or other form of remuneration had been given, directly or indirectly, in connection with the issuance or distribution of
COURT OF APPEALS and SECURITIES AND EXCHANGE COMMISSION, respondents. such additional shares of stock.
In respect of its claimed exemption from the fee provided for in Section 6(c) of the Revised Securities Act, Nestle contended that since Section 6 (a) (4) of
the statute declares (in Nestle's view) the proposed issuance of 344,500 previously authorized but unissued shares of Nestle's capital stock to its existing
Nepomuceno, Hofilena & Guingona for petitioner. shareholders as an exempt transaction, the SEC could not collect fees for "the same transaction" twice. Nestle adverted to its payment back in 21
February 1983 of the amount of P50,000.00 as filing fees to the SEC when it applied for and eventually received approval of the increase of its authorized

FELICIANO, J. capital stock effected by Board and shareholder action last 16 December 1983.

Sometime in February 1983, the authorized capital stock of petitioner Nestle Philippines Inc. In a letter dated 26 June 1986, the SEC through its then Chairman Julio A. Sulit, Jr. responded adversely to petitioner's requests and ruled that the

("Nestle") was increased from P300 million divided into 3 million shares with a par value of proposed issuance of shares did not fall under Section 6 (a) (4) of the Revised Securities Act, since Section 6 (a) (4) is applicable only where there is an

P100.00 per share, to P600 million divided into 6 million shares with a par value of P100.00 per increase in the authorized capital stock of a corporation. Chairman Sulit held, however, that the proposed transaction could be considered by the

share. Nestle underwent the necessary procedures involving Board and stockholders approvals Commission under the provisions of Section 6 (b) of the Revised Securities Act which reads as follows:

and effected the necessary filings to secure the approval of the increase of authorized capital (b) The Commission may, from time to time and subject to such terms and conditions as it may prescribe, exempt transactions other than those provided in

stock by respondent Securities and Exchange Commission ("SEC"), which approval was in fact the preceding paragraph, if it finds that the enforcement of the requirements of registration under this Act with respect to such transactions is not

granted. Nestle also paid to the SEC the amount of P50,000.00 as filing fee in accordance with necessary in the public interest and for the protection of the investors by reason of the small amount involved or the limited character of the public offering.

the Schedule of Fees and Charges being implemented by the SEC under the Corporation The Commission then advised petitioner to file the appropriate request for exemption and to pay the fee required under Section 6 (c) of the statute, which

Code. 1 provides:
Nestle has only two (2) principal stockholders: San Miguel Corporation and Nestle S.A. The other stockholders, who are individual natural persons, own (c) A fee equivalent to one-tenth of one per centum of the maximum aggregate price or issued value of the securities shall be collected by the Commission
only one (1) share each, for qualifying purposes, i.e., to qualify them as members of the Board of Directors being elected thereto on the strength of the for granting a general or particular exemption from the registration requirements of this Act.
votes of one or the other principal shareholder. Petitioner moved for reconsideration of the SEC ruling, without success.
On 16 December 1983, the Board of Directors and stockholders of Nestle approved resolutions authorizing the issuance of 344,500 shares out of the On 3 July 1987, petitioner sought review of the SEC ruling before this Court which, however, referred the petition to the Court of Appeals.
previously authorized but unissued capital stock of Nestle, exclusively to San Miguel Corporation and to Nestle S.A. San Miguel Corporation subscribed to In a decision dated 13 January 1989, the Court of Appeals sustained the ruling of the SEC.
and completely paid up 168,800 shares, while Nestle S.A. subscribed to and paid up the balance of 175,700 shares of stock. Dissatisfied with the Decision of the Court of Appeals, Nestle is now before this Court on a Petition for Review, raising the very same issues that it had
On 28 March 1985, petitioner Nestle filed a letter signed by its Corporate Secretary, M.L. Antonio, with the SEC seeking exemption of its proposed raised before the SEC and the Court of Appeals.
issuance of additional shares to its existing principal shareholders, from the registration requirement of Section 4 of the Revised Securities Act and from Examining the words actually used in Section 6 (a) (4) of the Revised Securities Act, and bearing in mind common corporate usage in this jurisdiction, it
payment of the fee referred to in Section 6(c) of the same Act. In that letter, Nestle requested confirmation of the correctness of two (2) propositions will be seen that the statutory phrase "issuance of additional capital stock" is indeed infected with a certain degree of ambiguity. This phrase may refer
submitted by it: either to: a) the issuance of capital stock as part of and in the course of increasing the authorized capital stock of a corporation; or (b) issuance of already
authorized but still unissued capital stock. By the same token, the phrase "increased capital stock" found at the end of Section 6 (a) (4), may refer either: 1)
to newly or contemporaneously authorized capital stock issued in the course of increasing the authorized capital stock of a corporation; or 2) to previously
1. That there is no need to file a petition for exemption under Section 6(b) of the Revised Securities Act with respect to the issuance of the said 344,600 authorized but unissued capital stock.
additional shares to our existing stockholders out of our unissued capital stock; and Under Section 38 of the Corporation Code, a corporation engaged in increasing its authorized capital stock, with the required vote of its Board of Directors
and of its stockholders, must file a sworn statement of the treasurer of the corporation showing that at least twenty-five percent (25%) of "such increased
2. That the fee provided in Section 6(c) of [the Revised Securities] Act is not applicable to the said issuance of additional shares. 2 capital stock" has been subscribed and that at least twenty-five percent (25%) of the amount subscribed has been paid either in actual cash or in property
transferred to the corporation. In other words, the corporation must issue at least twenty-five percent (25%) of the newly or contemporaneously authorized
The principal, indeed the only, argument presented by Nestlewas that Section 6(a) (4) of the Revised Securities Act which provides as follows: capital stock in the course of complying with the requirements of the Corporation Code for increasing its authorized capital stock.
Sec. 6. Exempt transactions. a) The requirement of registration under subsection (a) of Section four of this Act shall not apply to the sale of any security
in any of the following transactions: In contrast, after approval by the SEC of the increase of its authorized capital stock, and from time to time thereafter, the corporation, by a vote of its Board
xxx xxx xxx of Directors, and without need of either stockholder or SEC approval, may issue and sell shares of its already authorized but still unissued capital stock to
(4) The distribution by a corporation, actively engaged in the business authorized by its articles of incorporation, of securities to its stockholders or other existing shareholders or to members of the general public. 5
security holders as a stock dividend or other distribution out of surplus; or the issuance of securities to the security holder or other creditors of a
corporation in the process of a bona fide reorganization of such corporation made in good faith and not for the purpose of avoiding the provisions of this Both the SEC and the Court of Appeals resolved the ambiguity by construing Section 6 (a) (4) as referring only to the issuance of shares of stock as part of
Act, either in exchange for the securities of such security holders or claims of such creditors or partly for cash and partly in exchange for the securities or and in the course of increasing the authorized capital stock of Nestle. In the case at bar, since the 344,500 shares of Nestle capital stock are proposed to
claims of such security holders or creditors; or the issuance of additional capital stock of a corporation sold or distributed by it among its own stockholders be issued from already authorized but still unissued capital stock and since the present authorized capital stock of 6,000,000 shares with a par value of
exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale or distribution of such increased P100.00 per share is not proposed to be further increased, the SEC and the Court of Appeals rejected Nestle's petition.
capital stock. (Emphasis supplied) We believe and so hold that the construction thus given by the SEC and the Court of Appeals to Section 6 (a) (4) of the Revised Securities Act must be
upheld.
In the first place, it is a principle too well established to require extensive documentation that the construction given to a statute by an administrative
In contrast, under the ruling issued by the SEC, an issuance of previously authorized but still
agency charged with the interpretation and application of that statute is entitled to great respect and should be accorded great weight by the courts, unless
unissued capital stock may, in a particular instance, be held to be an exempt transaction by the
such construction is clearly shown to be in sharp conflict with the governing statute or the Constitution and other laws. As long ago as 1903, this Court said
SEC under Section 6(b) so long as the SEC finds that the requirements of registration under the
in In re Allen 6
that Revised Securities Act are "not necessary in the public interest and for the protection of the
[t]he principle that the contemporaneous construction of a statute by the executive officers of the investors" by reason, inter alia, of the small amount of stock that is proposed to be issued or
government, whose duty is to execute it, is entitled to great respect, and should ordinarily control because the potential buyers are very limited in number and are in a position to protect
the construction of the statute by the courts, is so firmly embedded in our jurisdiction that no themselves. In fine, petitioner Nestle's proposed construction of Section 6(a) (4) would establish
authorities need be cited to support it. 7 an inflexible rule of automatic exemption of issuances of additional, previously authorized but
The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse
unissued, capital stock. We must reject an interpretation which may disable the SEC from
administrative agencies for addressing and satisfying those needs; it also relates to accumulation of experience and growth of specialized capabilities by
rendering protection to investors, in the public interest, precisely when such protection may be
the administrative agency charged with implementing a particular statute. 8
In Asturias Sugar Central, Inc. v. Commissioner most needed.
of Customs 9 the Court stressed that executive officials are presumed to have familiarized Petitioner Nestle's second claim for exemption is from payment of the fee provided for in Section
themselves with all the considerations pertinent to the meaning and purpose of the law, and to 6 (c) of the Revised Securities Act, a claim based upon petitioner's contention that Section 6 (a)
have formed an independent, conscientious and competent expert opinion thereon. The courts (4) covers both issuance of stock in the course of complying with the statutory requirements of
give much weight to contemporaneous construction because of the respect due the government increase of authorized capital stock and issuance of previously authorized and unissued capital
agency or officials charged with the implementation of the law, their competence, expertness, stock. Petitioner claims that to require it now to pay one-tenth of one percent (1%) of the issued
experience and informed judgment, and the fact that they frequently are the drafters of the law value of the 344,500 shares of stock proposed to be issued, is to require it to pay a second time
they interpret. 10 for the same service on the part of the SEC. Since we have above rejected petitioner's reading
of Section 6 (a) (4), last clause, petitioner's claim about the additional fee of one-tenth of one
In the second place, and more importantly, consideration of the underlying statutory purpose of Section 6(a) (4) compels us to sustain the view taken by
percent (1%) of the issue value of the proposed issuance of stock (amounting to P34,450 plus
the SEC and the Court of Appeals. The reading by the SEC of the scope of application of Section 6(a) (4) permits greater opportunity for the SEC to
P344.50 for other fees or a total of P37,794.50) need not detain us for long. We think it clear that
implement the statutory objective of protecting the investing public by requiring proposed issuers of capital stock to inform such public of the true financial
the fee collected in 21 February 1983 by the SEC was assessed in connection with the
conditions and prospects of the corporation. By limiting the class of exempt transactions contemplated by the last clause of Section 6(a) (4) to issuances of
examination and approval of the certificate of increase of authorized capital stock then submitted
stock done in the course of and as part of the process of increasing the authorized capital stock of a corporation, the SEC is enabled to examine issuances
by petitioner. The fee, upon the other hand, provided for in Section 6 (c) which petitioner will be
by a corporation of previously authorized but theretofore unissued capital stock, on a case-to-case basis, under Section 6(b); and thereunder, to grant or
required to pay if it does file an application for exemption under Section 6 (b), is quite different;
withhold exemption from the normal registration requirements depending upon the perceived level of need for protection by the investing public in
this is a fee specifically authorized by the Revised Securities Act, (not the Corporation Code) in
particular cases.
connection with the grant of an exemption from normal registration requirements imposed by
that Act. We do not find such fee either unreasonable or exorbitant.
When capital stock is issued in the course of and in compliance with the requirements of increasing its authorized capital stock under Section 38 of the
WHEREFORE, for all the foregoing, the Petition for Review on Certiorari is hereby DENIED for
Corporation Code, the SEC as a matter of course examines the financial condition of the corporation, and hence there is no real need for exercise of SEC
lack of merit and the Decision of the Court of Appeals dated 13 January 1989 in C.A.-G.R. No.
authority under the Revised Securities Act. Thus, one of the multiple documentation requirements under the current regulations of the SEC in respect of
SP-13522, is hereby AFFIRMED. Costs against petitioner.
filing a certificate of increase of authorized capital stock, is submission of "a financial statement duly certified by an independent Certified Public
Accountant (CPA) as of the latest date possible or as of the date of the meeting when stockholders approved the increase/decrease in capital stock or
thereabouts. 11 SO ORDERED.
When all or part of the newly authorized capital stock is proposed to be issued as
stock dividends, the SEC requirements are even more exacting; they require, in addition to the
regular audited financial statements, the submission by the corporation of a "detailed or Long [G.R. No. 144256. June 8, 2005]
Form Report of the certifying Auditor." Moreover, since approval of an increase in authorized
capital stock by the stockholders holding two-thirds (2/3) of the outstanding capital stock is
required by Section 38 of the Corporation Code, at a stockholders meeting held for that purpose, ACCORD v Zamora
the directors and officers of the corporation may be expected to take pains to inform the
shareholders of the financial condition and prospects of the corporation and of the proposed DECISION
utilization of the fresh capital sought to be raised.
Upon the other hand, as already noted, issuance of previously authorized but theretofore CARPIO MORALES, J.:
unissued capital stock by the corporation requires only Board of Directors approval. Neither
notice to nor approval by the shareholders or the SEC is required for such issuance. There
would, accordingly, under the view taken by petitioner Nestle, no opportunity for the SEC to see Pursuant to Section 22, Article VII of the Constitution[1] mandating the President to submit
to it that shareholders (especially the small stockholders) have a reasonable opportunity to to Congress a budget of expenditures within thirty days before the opening of every regular
inform themselves about the very fact of such issuance and about the condition of the session, then President Joseph Ejercito Estrada submitted the National Expenditures Program
corporation and the potential value of the shares of stock being offered. for Fiscal Year 2000. In the said Program, the President proposed an Internal Revenue
Under the reading urged by petitioner Nestle of the reach and scope of the third clause of Allotment (IRA) in the amount of P121,778,000,000 following the formula provided for in Section
Section 6(a) (4), the issuance of previously authorized but unissued capital stock 284 of the Local Government Code of 1992, viz:
would automatically constitute an exempt transaction,without regard to the length of time which
may have intervened between the last increase in authorized capital stock and the proposed SECTION 284. Allotment of Internal Revenue Taxes. Local government units shall have a share in the
issuance during which time the condition of the corporation may have substantially changed, national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal
and without regard to whether the existing stockholders to whom the shares are proposed to be year as follows:
issued are only two giant corporations as in the instant case, or are individuals numbering in the
hundreds or thousands.
(a) On the first year of the effectivity of this Code, thirty percent (30%);
(b) On the second year, thirty-five percent (35%); and assessment to be conducted by certain committees which the GAA specifies, namely, the
Development Budget Coordinating Committee, the Committee on Finance of the Senate, and
the Committee on Appropriations of the House of Representatives.
(c) On the third year and thereafter, forty percent (40%).

LIV. UNPROGRAMMED FUND

x x x (Emphasis supplied)

For fund requirements in accordance with the purposes indicated hereunder P48,681,831,000
On February 16, 2000, the President approved House Bill No. 8374 a bill sponsored in the
Senate by then Senator John H. Osmea who was the Chairman of the Committee on Finance.
This bill became Republic Act No. 8760, AN ACT APPROPRIATING FUNDS FOR THE A. PURPOSE(S)
OPERATION OF THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES FROM
JANUARY ONE TO DECEMBER THIRTY-ONE, TWO THOUSAND, AND FOR OTHER
xxxx
PURPOSES.

The act, otherwise known as the General Appropriations Act (GAA) for the Year 2000, 6. Additional
provides under the heading ALLOCATIONS TO LOCAL GOVERNMENT UNITS that the IRA for Operational
local government units shall amount to P111,778,000,000: Requirements
and Projects of P14,788,764,000
XXXVII. ALLOCATIONS TO LOCAL Agencies
GOVERNMENT UNITS
xxxx
A. INTERNAL REVENUE ALLOTMENT
Special Provisions
For apportionment of the shares of local government units in the internal revenue taxes in accordance with
the purpose indicated hereunder ... P111,778,000,000 1. Release of the Fund. The amounts herein appropriated shall be released only when the
revenue collections exceed the original revenue targets submitted by the President of the
New Appropriations, by Purpose Philippines to Congress pursuant to Section 22, Article VII of the Constitution or when the
corresponding funding or receipts for the purpose have been realized except in the special
cases covered by specific procedures in Special Provision Nos. 2, 3, 4, 5, 7, 8, 9, 13 and 14
Current Operating Expenditures herein: PROVIDED, That in cases of foreign-assisted projects, the existence of a perfected
loan agreement shall be sufficient compliance for the issuance of a Special Allotment
Maintenance Release Order covering the loan proceeds: PROVIDED, FURTHER, That no amount of the
and Other Unprogrammed Fund shall be funded out of the savings generated from programmed items
Personal Operating Capital in this Act.
Services Expenses Outlays Total
xxxx
A. PURPOSE(S)
4. Additional Operational Requirements and Projects of Agencies. The appropriations for
a. Internal Revenue Purpose 6 Additional Operational Requirements and Projects of Agencies herein indicated
shall be released only when the original revenue targets submitted by the President of the
Philippines to Congress pursuant to Section 22, Article VII of the Constitution can be
Allotment P111,778,000,000 P111,778,000,000 realized based on a quarterly assessment of the Development Budget Coordinating
Committee, the Committee on Finance of the Senate and the Committee on Appropriations
xxx of the House of Representatives and shall be used to fund the following:

TOTAL NEW xxxx

APPROPRIATIONS P111,778,000,000 Internal Revenue Allotments

In another part of the GAA, under the heading UNPROGRAMMED FUND, it is provided Maintenance and
that an amount of P10,000,000,000 (P10 Billion), apart from the P111,778,000,000 mentioned Other Operating
above, shall be used to fund the IRA, which amount shall be released only when the original Expenses P10,000,000,000
revenue targets submitted by the President to Congress can be realized based on a quarterly
 -------------------- 4. SECTION 1, XXXVII (A) AND LIV, SPECIAL PROVISIONS 1 AND 4, OF THE
YEAR 2000 GAA ARE NULL AND VOID FOR BEING UNCONSTITUTIONAL
AS THE PLACING OF P10 BILLION PESOS OF THE IRA UNDER
Total, IRA P10,000,000,000
UNPROGRAMMED FUNDS CONSTITUTES AN AMENDMENT OF THE LOCAL
GOVERNMENT CODE OF 1991, WHICH CANNOT BE DONE IN A GENERAL
xxxx APPROPRIATIONS ACT AND WHICH PURPOSE WAS NOT REFLECTED IN
THE TITLE OF THE YEAR 2000 GAA.
Total P14,788,764,000
5. THE YEAR 2000 GAAS REDUCTION OF THE IRA UNDERMINES THE
FOUNDATION OF OUR LOCAL GOVERNANCE SYSTEM WHICH IS
x x x x (Emphasis supplied)
ESSENTIAL TO THE EFFICIENT OPERATION OF THE GOVERNMENT AND
THE DEVELOPMENT OF THE NATION.
Thus, while the GAA appropriates P111,778,000,000 of IRA as Programmed Fund, it
appropriates a separate amount of P10 Billion of IRA under the classification of Unprogrammed
6. THE CONGRESS AND THE EXECUTIVE, IN PASSING AND APPROVING,
Fund, the latter amount to be released only upon the occurrence of the condition stated in the RESPECTIVELY, THE YEAR 2000 GAA, AND THE RESPONDENTS, IN
GAA. IMPLEMENTING THE SAID YEAR 2000 GAA, INSOFAR AS SECTION 1,
On August 22, 2000, a number of non-governmental organizations (NGOs) and peoples XXXVII (A) AND LIV, SPECIAL PROVISIONS 1 AND 4, ARE CONCERNED,
organizations, along with three barangay officials filed with this Court the petition at bar, ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
for Certiorari, Prohibition and Mandamus With Application for Temporary Restraining Order, EXCESS OF JURISDICTION AS THEY TRANSGRESSED THE CONSTITUTION
against respondents then Executive Secretary Ronaldo Zamora, then Secretary of the AND THE LOCAL GOVERNMENT CODES PROHIBITION ON ANY INVALID
Department of Budget and Management Benjamin Diokno, then National Treasurer Leonor REDUCTION AND WITHHOLDING OF THE LOCAL GOVERNMENTS IRA.
Magtolis-Briones, and the Commission on Audit, challenging the constitutionality of above- (Underscoring supplied)
quoted provision of XXXVII (ALLOCATIONS TO LOCAL GOVERNMENT UNITS) referred to by
petitioners as Section 1, XXXVII (A), and LIV (UNPROGRAMMED FUND) Special Provisions 1 After the parties had filed their respective memoranda, a MOTION FOR
and 4 of the GAA (the GAA provisions). INTERVENTION/MOTION TO ADMIT ATTACHED PETITION FOR INTERVENTION was filed
on October 22, 2001 by the Province of Batangas, represented by then Governor Hermilando I.
Petitioners contend that: Mandanas.

On November 6, 2001, the Province of Nueva Ecija, represented by Governor Tomas N.

1. SECTION 1, XXXVII (A) AND LIV, SPECIAL PROVISIONS 1 AND 4, OF THE Joson III, likewise filed a MOTION FOR LEAVE OF COURT TO INTERVENE AND FILE
YEAR 2000 GAA ARE NULL AND VOID FOR BEING UNCONSTITUTIONAL PETITION-IN-INTERVENTION.
AS THEY VIOLATE THE AUTONOMY OF LOCAL GOVERNMENTS BY
UNLAWFULLY REDUCING BY TEN BILLION PESOS (P10 BILLION) THE The motions for intervention, both of which adopted the arguments of the main
INTERNAL REVENUE ALLOTMENTS DUE TO THE LOCAL GOVERNMENTS petition,[2] were granted by this Court.[3]
AND WITHHOLDING THE RELEASE OF SUCH AMOUNT BY PLACING THE
Although the effectivity of the Year 2000 GAA has ceased, this Court shall nonetheless
SAME UNDER UNPROGRAMMED FUNDS. THIS VIOLATES THE
proceed to resolve the issues raised in the present case, it being impressed with public interest.
CONSTITUTIONAL MANDATE IN ART. X, SEC. 6, THAT THE LOCAL
The ruling of this Court in the case of The Province of Batangas v. Romulo,[4] wherein GAA
GOVERNMENT UNITS JUST SHARE IN THE NATIONAL TAXES SHALL BE
provisions relating to the IRA were likewise challenged, is in point, to wit:
AUTOMATICALLY RELEASED TO THEM. IT ALSO VIOLATES THE LOCAL
GOVERNMENT CODE, SPECIFICALLY, SECS. 18, 284, AND 286.
Granting arguendo that, as contended by the respondents, the resolution of the case had already been
overtaken by supervening events as the IRA, including the LGSEF, for 1999, 2000 and 2001, had already
2. SECTION 1, XXXVII (A) AND LIV, SPECIAL PROVISIONS 1 AND 4, OF THE
been released and the government is now operating under a new appropriations law, still, there is
YEAR 2000 GAA ARE NULL AND VOID FOR BEING UNCONSTITUTIONAL
compelling reason for this Court to resolve the substantive issue raised by the instant petition. Supervening
AS THEY VIOLATE THE AUTONOMY OF LOCAL GOVERNMENTS BY
events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a
PLACING TEN BILLION PESOS (P10 BILLION) OF THE INTERNAL REVENUE
grave violation of the Constitution. Even in cases where supervening events had made the cases moot, the
ALLOTMENTS DUE TO THE LOCAL GOVERNMENTS, EFFECTIVELY AND
Court did not hesitate to resolve the legal or constitutional issues raised to formulate controlling principles
PRACTICALLY, WITHIN THE CONTROL OF THE CENTRAL AUTHORITIES.
to guide the bench, bar and public.

3. SECTION 1, XXXVII (A) AND LIV, SPECIAL PROVISIONS 1 AND 4, OF THE

Another reason justifying the resolution by this Court of the substantive issue now before it is the rule that
YEAR 2000 GAA ARE NULL AND VOID FOR BEING UNCONSTITUTIONAL
courts will decide a question otherwise moot and academic if it is capable of repetition, yet evading
AS THE PLACING OF P10 BILLION PESOS OF THE IRA UNDER
review. For the GAAs in the coming years may contain provisos similar to those now being sought to be
UNPROGRAMMED FUNDS CONSTITUTES AN UNDUE DELEGATION OF
invalidated, and yet, the question may not be decided before another GAA is enacted. It, thus, behooves
LEGISLATIVE POWER TO THE RESPONDENTS.
this Court to make a categorical ruling on the substantive issue now.[5]
 Passing on the arguments of all parties, bearing in mind the dictum that the court should It must also be kept in mind that while the requirement of the certificate of non-forum shopping is
not form a rule of constitutional law broader than is required by the precise facts to which it is mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the objective
applied,[6] this Court finds that only the following issues need to be resolved in the present of preventing the undesirable practice of forum-shopping (Bernardo v. NLRC, 255 SCRA 108 [1996]).
petition: (1) whether the petition contains proper verifications and certifications against forum- Lastly, technical rules of procedure should be used to promote, not frustrate justice. While the swift
shopping, (2) whether petitioners have the requisite standing to file this suit, and (3) whether the unclogging of court dockets is a laudable objective, the granting of substantial justice is an even more
questioned provisions violate the constitutional injunction that the just share of local urgent ideal. (Underscoring supplied),
governments in the national taxes or the IRA shall be automatically released.
a too literal interpretation must be avoided if it defeats the objective of preventing the practice of
forum shopping.
Sufficiency of Verification and Certification Against Forum-Shopping

Standing
Respondents assail as improperly executed petitioners verifications and certifications
against forum-shopping as they merely state that the allegations of the Petition are true of our
knowledge and belief instead of true and correct of our personal knowledge or based on
Respondents assail petitioners standing in this controversy, proffering that it is the local
authentic records as required under Rule 7, Section 4 of the Rules of Court.[7]
government units each having a separate juridical entity which stand to be injured.
Jurisprudence is on petitioners side. In Decano v. Edu,[8] this Court held:
The subsequent intervention of the provinces of Batangas and Nueva Ecija which have
adopted the arguments of petitioners has, however, made the question of standing academic. [11]
Respondents finally raise a technical point referring to the allegedly defective verification of the petition
filed in the trial court, contending that the clause in the verification statement "that I have read the contents Respondents, contending that petitioners have no cause of action against them as they
of the said petition; and that [to] the best of my knowledge are true and correct" is insufficient since under claim to have no responsibility with respect to the mandate of the GAA provisions, proffer that
section 6 of Rule 7, it is required that the person verifying must have read the pleading and that the the committees mentioned in the GAA provisions, namely, the Development Budget
allegations thereof are true of his own knowledge. We do not see any reason for rendering the said Coordinating Committee, Committee on Finance of the Senate, and Committee on
verification void. The statement to the best of my knowledge are true and correct referring to the Appropriations of the House of Representatives, should instead have been impleaded.
allegations in the petition does not mean mere knowledge, information and belief. It
constitutes substantial compliance with the requirement of section 6 of Rule 7, as held in Madrigal vs. Respondents position does not lie.
Rodas (80 Phil. 252.). At any rate, this petty technicality deserves scant consideration where the question The GAA provisions being challenged were not to be implemented solely by the
at issue is one purely of law and there is no need of delving into the veracity of the allegations in the committees specifically mentioned therein, for they being in the nature of appropriations
petition, which are not disputed at all by respondents. As we have held time and again, imperfections of provisions, they were also to be implemented by the executive branch, particularly the
form and technicalities of procedure are to be disregarded except where substantial rights would otherwise Department of Budget and Management (DBM) and the National Treasurer. The task of the
be prejudiced. (Emphasis and underscoring supplied) committees related merely to the conduct of the quarterly assessment required in the provisions,
and not in the actual release of the IRA which is the duty of the executive. Since the present
Respondents go on to claim that the same verifications were signed by persons who were controversy centers on the proper manner of releasing the IRA, the impleaded respondents are
not authorized by the incorporated cause-oriented groups which they claim to represent, hence, the proper parties to this suit.
the Petition should be treated as an unsigned pleading.
In fact in earlier petitions likewise involving the constitutionality of provisions of previous
Indeed, only duly authorized natural persons may execute verifications in behalf of juridical general appropriations acts which this Court granted, the therein respondent officials were the
entities such as petitioners NGOs and peoples organizations. As this Court held in Santos v. same as those in the present case, e.g., Guingona v. Carague[12] and PHILCONSA v.
CA, In fact, physical actions, e.g., signing and delivery of documents, may be performed on Enriquez.[13]
behalf of the corporate entity only by specifically authorized individuals. [9]

Nonetheless, the present petition cannot be treated as an unsigned pleading. For even if
the rule that representatives of corporate entities must present the requisite authorization were Constitutionality of the GAA Provisions
to be strictly applied, there would remain among the multi-group-petitioners the individuals who
validly executed verifications in their own names, namely, petitioners Adelino C. Lavador,
Punong Barangay Isabel Mendez, and Punong Barangay Carolina Romanos.
Article X, Section 6 of the Constitution provides:
At all events, in light of the following ruling of this Court in Shipside Inc. v. CA:[10]
SECTION 6. Local government units shall have a just share, as determined by law, in the national taxes
. . . in Loyola, Roadway, and Uy, the Court excused non-compliance with the requirement as to the which shall be automatically released to them.
certificate of non-forum shopping. With more reason should we allow the instant petition since petitioner
herein did submit a certification on non-forum shopping, failing only to show proof that the signatory was Petitioners argue that the GAA violated this constitutional mandate when it made the
authorized to do so. That petitioner subsequently submitted a secretarys certificate attesting that Balbin release of IRA contingent on whether revenue collections could meet the revenue targets
was authorized to file an action on behalf of petitioner likewise mitigates this oversight. originally submitted by the President, rather than making the release automatic.
 Respondents counterargue that the above constitutional provision is addressed not to In the above exchange of statements, it is clear that although Commissioners Davide and
the legislature but to the executive, hence, the same does not prevent the legislature from Nolledo held different views with regard to the proper wording of the constitutional provision,
imposing conditions upon the release of the IRA. They cite the exchange between they shared a common assumption that the entity which would execute the automatic release of
Commissioner (now Chief Justice) Davide and Commissioner Nolledo in the deliberations of the internal revenue was the executive department.
Constitutional Commission on the above-quoted Sec. 6, Art. X of the Constitution, to wit:
Commissioner Davide referred to the national government as the entity that collects and
remits internal revenue. Similarly, Commissioner Nolledo alluded to the Budget Officer, who is
THE PRESIDENT. How about the second sentence? clearly under the executive branch.

Respondents thus infer that the subject constitutional provision merely prevents the
MR. DAVIDE. The second sentence would be a new section that would be Section 13. As modified it will
executive branch of the government from unilaterally withholding the IRA, but not the legislature
read as follows: LOCAL GOVERNMENT UNITS SHALL HAVE A JUST SHARE, AS DETERMINED
from authorizing the executive branch to withhold the same. In the words of respondents, This
BY LAW, in the national taxes WHICH SHALL BE automatically PERIODICALLY released to them.
essentially means that the President or any member of the Executive Department cannot
unilaterally, i.e., without the backing of statute, withhold the release of the IRA.[15]
MR. NOLLEDO. That will be Section 12, subsection (1) in the amendment.
Respondents position does not lie.
MR. DAVIDE. No, we will just delete that because the second would be another section so Section 12 As the Constitution lays upon the executive the duty to automatically release the just share
would only be this: LOCAL GOVERNMENT UNITS SHALL HAVE A JUST SHARE, AS of local governments in the national taxes, so it enjoins the legislature not to pass laws that
DETERMINED BY LAW, in the national taxes WHICH SHALL BE automatically PERIODICALLY might prevent the executive from performing this duty. To hold that the executive branch may
released to them. disregard constitutional provisions which define its duties, provided it has the backing of statute,
is virtually to make the Constitution amendable by statute a proposition which is patently absurd.
MR. NOLLEDO. But the word PERIODICALLY may mean possibly withholding the automatic release Moreover, there is merit in the argument of the intervenor Province of Batangas that, if
to them by adopting certain periods of automatic release. If we use the word automatically without indeed the framers intended to allow the enactment of statutes making the release of IRA
PERIODICALLY, the latter may be already contemplated by automatically. So, the Committee objects to conditional instead of automatic, then Article X, Section 6 of the Constitution would have been
the word PERIODICALLY. worded differently. Instead of reading Local government units shall have a just share, as
determined by law, in the national taxes which shall be automatically released to them (italics
MR. DAVIDE. If we do not say PERIODICALLY, it might be very, very difficult to comply with it supplied), it would have read as follows, so the Province of Batangas posits:
because these are taxes collected and actually released by the national government every quarter. It is not
that upon collection a portion should immediately be released. It is quarterly. Otherwise, the national Local government units shall have a just share, as determined by law, in the national taxes which shall be
government will have to remit everyday and that would be very expensive. [automatically] released to them as provided by law, or,

MR. NOLLEDO. That is not hindered by the word automatically. But if we put automatically and Local government units shall have a just share in the national taxes which shall be [automatically] released
PERIODICALLY at the same time, that means certain periods have to be observed as will be set forth by to them as provided by law, or
the Budget Officer thereby negating the meaning of automatically.

Local government units shall have a just share, as determined by law, in the national taxes which shall be
MR. DAVIDE. On the other hand, if we do not state PERIODICALLY, it may be done every semester; it automatically released to them subject to exceptions Congress may provide.[16] (Italics supplied)
may be done at the end of the year. It is still automatic release.

Since, under Article X, Section 6 of the Constitution, only the just share of local
MR. NOLLEDO. As far as the Committee is concerned, we vigorously object to the word governments is qualified by the words as determined by law, and not the release thereof, the
PERIODICALLY. plain implication is that Congress is not authorized by the Constitution to hinder or impede the
automatic release of the IRA.
MR. DAVIDE. Only the word PERIODICALLY?
Indeed, that Article X, Section 6 of the Constitution did bind the legislative just as much as
the executive branch was presumed in the ruling of this Court in the case of The Province of
MR. NOLLEDO. If the Commissioner is amenable to deleting that, we will accept the amendment. Batangas v. Romulo[17] which is analogous in many respects to the one at bar.

In Batangas, the petitioner therein challenged the constitutionality of certain provisos of the
MR. DAVIDE. I will agree to the deletion of the word PERIODICALLY. GAAs for FY 1999, 2000, and 2001 which set up the Local Government Service Equalization
Fund (LGSEF). The LGSEF was a portion of the IRA which was to be released only upon a
MR. NOLLEDO. Thank you. finding of the Oversight Committee on Devolution that the LGU concerned had complied with the
guidelines issued by said committee. This Court measured the challenged legislative acts
against Article X, Section 6 and declared them unconstitutional a ruling which presupposes that
The Committee accepts the amendment. (Emphasis supplied)[14] the legislature, like the executive, is mandated by said constitutional provision to ensure that the
just share of local governments in the national taxes are automatically released.
 Respondents, in further support of their claim that the automatic release requirement in the an imperative obligation and is inconsistent with the idea of discretion. x x x (Emphasis and underscoring
Constitution constrains only the executive branch and not the legislature, cite three statutory supplied)[25]
provisions whereby the legislature authorized the executive branch to withhold the IRA in certain
circumstances, namely, Section 70 of the Philippine National Police Reform and Reorganization
While automatic release implies that the just share of the local governments determined by
Act of 1998,[18] Section 531(e) of the Local Government Code,[19] and Section 10 of Republic Act
law should be released to them as a matter of course, the GAA provisions, on the other hand,
7924 (1995).[20] Towards the same end, respondents also cite Rule XXXII, Article 383(c) of the
withhold its release pending an event which is not even certain of occurring. To rule that the term
Rules and Regulations Implementing the Local Government Code.[21]
automatic release contemplates such conditional release would be to strip the term automatic of
While statutes and implementing rules are entitled to great weight in constitutional all meaning.
construction as indicators of contemporaneous interpretation, such interpretation is not
Additionally, to interpret the term automatic release in such a broad manner would be
necessarily binding or conclusive on the courts. In Taada v. Cuenco, the Court held:
inconsistent with the ruling in Pimentel v. Aguirre.[26] In the said case, the executive withheld the
release of the IRA pending an assessment very similar to the one provided in the GAA. This
As a consequence, where the meaning of a constitutional provision is clear, a contemporaneous or Court ruled that such withholding contravened the constitutional mandate of an automatic
practical . . . executive interpretation thereof is entitled to no weight and will not be allowed to distort or in release, viz:
any way change its natural meaning. The reason is that the application of the doctrine of contemporaneous
construction is more restricted as applied to the interpretation of constitutional provisions than when
Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal autonomy is
applied to statutory provisions, and that except as to matters committed by the constitution itself to the
the automatic release of the shares of LGUs in the national internal revenue. This is mandated by no less
discretion of some other department, contemporaneous or practical construction is not necessarily binding
than the Constitution. The Local Government Code specifies further that the release shall be made directly
upon the courts, even in a doubtful case. Hence, if in the judgment of the court, such construction is
to the LGU concerned within five (5) days after every quarter of the year and shall not be subject to any
erroneous and its further application is not made imperative by any paramount considerations of public
lien or holdback that may be imposed by the national government for whatever purpose. As a rule, the
policy, it may be rejected. (Emphasis and underscoring supplied, citations omitted) [22]
term shall is a word of command that must be given a compulsory meaning. The provision is, therefore,
imperative.
The validity of the legislative acts assailed in the present case should, therefore, be
assessed in light of Article X, Section 6 of the Constitution.
Section 4 of AO 372, however, orders the withholding, effective January 1, 1998, of 10 percent of the
Again, in Batangas,[23] this Court interpreted the subject constitutional provision as follows: LGUs' IRA pending the assessment and evaluation by the Development Budget Coordinating Committee
of the emerging fiscal situation in the country. Such withholding clearly contravenes the Constitution and
the law. x x x[27] (Italics in the original; underscoring supplied)
When parsed, it would be readily seen that this provision mandates that (1) the LGUs shall have a just
share in the national taxes; (2) the just share shall be determined by law; and (3) the just share shall be
automatically released to the LGUs. There is no substantial difference between the withholding of IRA involved in Pimentel and
that in the present case, except that here it is the legislature, not the executive, which has
authorized the withholding of the IRA. The distinction notwithstanding, the ruling
xxx in Pimentel remains applicable. As explained above, Article X, Section 6 of the Constitution the
same provision relied upon in Pimentel enjoins both the legislative and executive branches of
Websters Third New International Dictionary defines automatic as involuntary either wholly or to a major government. Hence, as in Pimentel, under the same constitutional provision, the legislative is
extent so that any activity of the will is largely negligible; of a reflex nature; without volition; mechanical; barred from withholding the release of the IRA.
like or suggestive of an automaton. Further, the word automatically is defined as in an automatic manner:
It bears stressing, however, that in light of the proviso in Section 284 of the Local
without thought or conscious intention. Being automatic, thus, connotes something mechanical,
Government Code which reads:
spontaneous and perfunctory. x x x (Emphasis and underscoring supplied)[24]

Provided, That in the event that the national government incurs an unmanageable public sector deficit, the
Further on, the Court held:
President of the Philippines is hereby authorized, upon the recommendation of Secretary of Finance,
Secretary of Interior and Local Government and Secretary of Budget and Management, and subject to
To the Courts mind, the entire process involving the distribution and release of the LGSEF is consultation with the presiding officers of both Houses of Congress and the presidents of the "liga,"
constitutionally impermissible. The LGSEF is part of the IRA or just share of the LGUs in the national to make the necessary adjustments in the internal revenue allotment of local government units but in no
taxes. To subject its distribution and release to the vagaries of the implementing rules and regulations, case shall the allotment be less than thirty percent (30%) of the collection of national internal revenue
including the guidelines and mechanisms unilaterally prescribed by the Oversight Committee from time to taxes of the third fiscal year preceding the current fiscal year: Provided, further, That in the first year of
time, as sanctioned by the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD the effectivity of this Code, the local government units shall, in addition to the thirty percent (30%)
resolutions, makes the release not automatic, a flagrant violation of the constitutional and statutory internal revenue allotment which shall include the cost of devolved functions for essential public services,
mandate that the just share of the LGUs shall be automatically released to them. The LGUs are, thus, be entitled to receive the amount equivalent to the cost of devolved personal services. (Underscoring
placed at the mercy of the Oversight Committee. supplied),

Where the law, the Constitution in this case, is clear and unambiguous, it must be taken to mean exactly the only possible exception to mandatory automatic release of the IRA is, as held in Batangas:
what it says, and courts have no choice but to see to it that the mandate is obeyed. Moreover, as correctly
posited by the petitioner, the use of the word shall connotes a mandatory order. Its use in a statute denotes
if the national internal revenue collections for the current fiscal year is less than 40 percent of the
collections of the preceding third fiscal year, in which case what should be automatically released shall be
a proportionate amount of the collections for the current fiscal year. The adjustment may even be made on another assignment. Santos refused to vacate the office, and when the City Mayor and the other
a quarterly basis depending on the actual collections of national internal revenue taxes for the quarter of officials named as Mallare's co-defendants ignored him and paid Mallare the salary
the current fiscal year. x x x[28] corresponding to the position, he commenced these proceedings.

A final word. This Court recognizes that the passage of the GAA provisions by Congress The petitioner rests his case on Article XII of the Constitution, section 4 of which reads: "No
was motivated by the laudable intent to lower the budget deficit in line with prudent fiscal officer or employee in the Civil Service shall be removed or suspended except for cause as
management.[29] The pronouncement in Pimentel, however, must be echoed: [T]he rule of law provided by law."
requires that even the best intentions must be carried out within the parameters of the
Constitution and the law. Verily, laudable purposes must be carried out by legal methods. [30]
It is admitted in respondents' answer that the City Engineer of Baguio "belongs to the
WHEREFORE, the petition is GRANTED. XXXVII and LIV Special Provisions 1 and 4 of unclassified service." And this Court, in an exhaustive opinion by Mr. Justice Montemayor in the
the Year 2000 GAA are hereby declared unconstitutional insofar as they set apart a portion of case of Lacson vs. Romero, 47 Off. Gaz., 1778, involving the office of provincial fiscal, ruled that
the IRA, in the amount of P10 Billion, as part of the UNPROGRAMMED FUND. officers or employees in the unclassified as well as those in the classified service are protected
by the above-cited provision of the organic law. But there is this difference between the Lacson
SO ORDERED. case and the case at bar: Section 2545 of the Revised Administrative Code, which falls under
Chapter 61 entitled "City of Baguio," authorizes the Governor General (now the President) to
remove at pleasure any of the officers enumerated therein, one of whom is the city engineer.
Republic of the Philippines The first question that presents itself is, is this provision still in force?
SUPREME COURT
Manila
Section 2 of Article XVI of the Constitution declares that "All laws of the Philippine Islands shall
continue in force until the inauguration of the Commonwealth of the Philippines; thereafter, such
EN BANC laws shall remain operative, unlessinconsistent with this Constitution, until amended, altered,
modified, or repealed by the Congress of the Philippines, . . . ."
G.R. No. L-3881 August 31, 1950
It seems plain beyond doubt that the provision of section 2545 of the Revised Administrative
EDUARDO DE LOS SANTOS, petitioner, Code, he (Governor-General now President) may remove at pleasure any of the said appointive
vs. officers," is incompatible with the constitutional inhibition that "No officer or employee in the Civil
GIL R. MALLARE, LUIS P. TORRES, in his capacity as City Mayor, PANTALEON Service shall be removed or suspended except for cause as provided by law." The two
PIMENTEL, in his capacity as City Treasurer and RAFAEL USON, in his capacity as City provisions are mutually repugnant and absolutely irreconcilable. One in express terms permits
Auditor, respondents. what the other in similar terms prohibits.

Francisco S. Reyes for petitioner. The Constitution leaves it to the Congress to provide for the cause of removal, and it is
Office of the Solicitor General Felix Bautista Angelo and Solicitor Augusto Luciano for suggested that the President's pleasure is itself a cause. The phrase "for cause" in connection
respondents. with the removals of public officers has acquired a well-defined concept. "It means for reasons
Jose P. Laurel and Abelardo Subido as amici curiae. which the law and sound public policy recognized as sufficient warrant for removal, that is, legal
cause, and not merely causes which the appointing power in the exercise of discretion may
deem sufficient. It is implied that officers may not be removed at the mere will of those vested
TUASON, J.: with the power of removal, or without any cause. Moreover, the cause must relate to and affect
the administration of the office, and must be restricted to something of a substantial nature
This is an original action of quo warranto questioning the legality of the appointment of directly affecting the rights and interests of the public."(43 Am. Jur., 47, 48.)
respondent Gil R. Mallare to the office of city engineer for the City of Baguio which the petitioner
occupied and claims to be still occupying. The real issue however is the legality of the Reconsideration of the decision in Lacson vs. Romero as far as officers in the unclassified
petitioner's removal from the same office which would be the effect of Mallare's appointment if service are concerned is urged. It is contended that only officers and employees in the classified
the same be allowed to stand. It is the petitioner's contention that under the Constitution he can service should be brought within the purview of Article XII of the Constitution.
not be removed against his will and without cause. The complaint against the other respondents
has to do merely with their recognition of Mallare as the lawful holder of the disputed office and
is entirely dependent upon the result of the basic action against the last-mentioned respondent Section 1 of this article ordains: "A Civil Service embracing all branches and subdivisions of the
(Mallare). Government shall be provided by law. Appointments in the Civil Service, except as those which
are policy-determining, primarily confidential or highly technical in nature, shall be made only
according to merit and fitness, to be determined as far as practicable by competitive
Stripped of details unessential to the solution of the case, the facts are that Eduardo de los examination." The first clause is a definition of the scope of Civil Service, the men and women
Santos, the petitioner, was appointed City Engineer of Baguio on July 16, 1946, by the which section 4 protects. It seems obvious from that definition that the entire Civil Service is
President, appointment which was confirmed by the Commission on Appointments on August 6, contemplated, except positions "which are policy-determining, primarily confidential or highly
and on the 23rd of that month, he qualified for and began to exercise the duties and functions of technical in nature." This theory is confirmed by the enactment of Commonwealth Act No. 177
the position. On June 1, 1950, Gil R. Mallare was extended an ad interim appointment by the on November 30, 1936 to implement Article XII of the Constitution. Commonwealth Act No. 177
President to the same position, after which, on June 3, the Undersecretary of the Department of explains Civil Service almost in the identical words of that article of the organic law. As a
Public Works and Communications directed Santos to report to the Bureau of Public Works for contemporaneous construction, this Act affords an index to the meaning of Civil Service as
conceived by the framers of the Constitution. "The principle of contemporaneous construction The adoption of the "merit system" in government service has secured efficiency and
may be applied to the construction given by the legislature to the constitutional provisions social justice. It eliminates the political factor in the selection of civil employees which
dealing with legislative powers and procedure. Though not conclusive, such interpretation is is the first essential to an efficient personnel system. It insures equality of opportunity
generally conceded as being entitled to great weight." (U.S. vs.Sprague, 282 U.S., 716; 75 L. ed. to all deserving applicants desirous of a career in the public service. It advocates a
640; 51 S. Ct., 220; 71 A.L.R., 1381; Den ex dem. Murray vs. Hoboken Land and Improv. Co., new concept of the public office as a career open to all and not the exclusive
18 How. [U.S.], 272; 15 L. ed., 372; Clark vs. Boyce, 20 Ariz., 544; 185 P., 136, citing R.C.L.; 11 patrimony of any party or faction to be doled out as a reward for party service.
Am. Jur. 699.) The principle of express mention and implied exclusion may be made use of also
to drive home this point.
The "merit system" was adopted only after the nations of the world took cognizance of
its merits. Political patronage in the government service was sanctioned in 1879 by the
We are led to the same conclusion by the existing provisions at the time of the adoption of the Constitutional right of President of the United States to act alone in the matter of
Constitution. Civil Service as embracing both classes of officers and employees possessed removals. From the time of Andrew Jackson the principle of the "To the victor belongs
definite legal and statutory meaning when the Constitution was approved. Section 670 of the the spoils' dominated the Federal Government. The system undermined moral values
Revised Administrative Code already provided that "Persons in the Philippine civil service and destroyed administrative efficiency.
pertain either to the classified service," and went on to say that "The classified service embraces
all not expressly declared to be in the unclassified service." Then section 671 described persons
Since the establishment of the American Regime in the Philippines we have enjoyed
in the unclassified service as "officers, other than the provincial treasurers and assistant
the benefits of the "merit system." The Schurmann Commission advocated in its
directors of bureaus or offices, appointed by the President of the Philippines, with the consent of
reports that "the greatest care should be taken in the selection of the officials for
the Commission on Appointments of the National Assembly, and all other officers of the
administration. They should be men of the highest character and fitness, and partisan
government whose appointments are by law vested in the President of the Philippines alone."
politics should be entirely separated from the government." The fifth act passed by the
Philippine Commission created a Board of Civil Service. It instituted a system here
The rules of the construction inform us that the words use in the constitution are to be given the that was far more radical and thorough than that in the United States. The Governor-
sense they have in common use. (Okanogan Indians vs. United States, 279, U.S., 665; 64 General after William Taft adopted the policy of appointing Filipinos in the government
A.L.R., 1434; 73 Law ed., 894.) It has been said that we must look to the history of the times, regardless of their party affiliation. As the result of these the personnel of the Civil
examine the state of things existing when the Constitution was framed and adopted, (Rhode Service had gradually come to be one of which the people of the United States could
Islands vs. Massachusetts, 12 Pet., 657; 9 Law ed., 1233), and interpret it in the light of the law feel justly proud.
then in operation. (Mattox vs. United States, 156, U.S., 237; 39 Law ed., 409.)
Necessity for Constitutional provision. The inclusion in the constitution of provisions
Attention is drawn to supposed inconveniences of tying the hands of the appointing power in regarding the "merit system" is a necessity of modern times. As its establishment
changing and shifting officers in the unclassified service. "If it is argued all important secures good government the citizens have a right to accept its guarantee as a
officers and employees of the government falling within the unclassified service as enumerated permanent institution.
in section 671 of the Revised Administrative Code as amended by Commonwealth Act No. 177,
may not be removed by the President except for cause as provided by law, . . . the President
Separation, suspension, demotions and transfers. The "merit system" will be
would be seriously crippled in the discharge of the grave duty and responsibility laid upon him by
ineffective if no safeguards are placed around the separation and removal of public
the Constitution to take care that the laws faithfully executed."
employees. The Committee's report requires that removals shall be made only for
"causes and in the manner provided by law. This means that there should be bona
Questions of expediency are, of course, beyond the province of the court to take into account in fide reasons and action maybe taken only after the employee shall have been given a
the interpretation of laws or of the Constitution where the language is otherwise clear. But the fair hearing. This affords the public employees reasonable security of tenure. (II
argument is, we think, unsound even if the case be approached from this angle. It contains its Aruego's Framing of the Constitution, 886, 887, 890.)
own refutation. The Constitution and the law implementing it afford adequate safeguards against
such consequences as have been painted.
As has been seen, three specified classes of positions policy-determining, primarily
confidential and highly technical are excluded from the merit system and dismissal at
The argument proceeds, contrary to its context, on the assumption that removes of civil service pleasure of officers and employees appointed therein is allowed by the Constitution. These
officers and employees are absolutely prohibited, which is not the case. The Constitution positions involved the highest degree of confidence, or are closely bound out with and
authorizes removals and only requires that they be for cause. And the occasions for removal dependent on other positions to which they are subordinate, or are temporary in nature. It may
would be greatly diminished if the injunction of section 1 of Article XII of the Constitution that truly be said that the good of the service itself demands that appointments coming under this
appointments in the civil service shall be made only according to merit and fitness, to be category determinable at the will of the officer that makes them.
determined as far as practicable by competitive examination would be adhered of
meticulously in the first place.
The office of city engineer is neither primarily confidential, policy-determining, nor highly
technical.
By far greater mischiefs would be fomented by an unbridled authority to remove. Such license
would thwart the very aims of the Constitution which are expounded by Dean Aruego, himself a
Every appointment implies confidence, but much more than ordinary confidence is reposed in
member of the Constitutional Convention, in the following remarks copied with approval
the occupant of a position that is primarily confidential. The latter phrase denotes not only
in Lacson vs. Romero, supra:
confidence in the aptitude of the appointee for the duties of the office but primarily close intimacy
which insures freedom of intercourse without embarrassment or freedom from misgivings of
betrayals of personal trust or confidential matters of state. Nor is the position of city engineer
policy-determining. A city engineer does not formulate a method of action for the government or for the first time (following the mandate of the Constitution),that "no officer or employee in the
any its subdivisions. His job is to execute policy, not to make it. With specific reference to the civil service shall be removed or suspended except for cause as provided by law."
City Engineer of Baguio, his powers and duties are carefully laid down for him be section 2557 of
the Revised Administrative Code and are essentially ministerial in character. Finally, the position
I must decline to go into the matter of alleged conflict with the Constitution, first, because plaintiff
of city engineer is technical but not highly so. A city engineer is not required nor is he supposed
is precluded from raising that question (Zandueta vs. De la Costa, 66 Phil., 615); second,
to possess a technical skill or training in the supreme or superior degree, which is the sense in
because every law is presumed to be constitutional unless eight Justices of this Court are clearly
which "highly technical" is, we believe, employed in the Constitution. There are hundreds of
of a contrary opinion,1 and third, because that subject need not be inquired into, except when
technical men in the classified civil service whose technical competence is not lower than that of
absolutely necessary for the disposition of the controversy.
a city engineer. As a matter of fact, the duties of a city engineer are eminently administrative in
character and could very well be discharged by non-technical men possessing executive ability.
REYES, J.:
Section 10 of Article VIII of the Constitution requires that "All cases involving the constitutionality
of a treaty or law shall be heard and decided by the Supreme Court in banc," and warns that "no I concur in this opinion of Mr. Justice Bengzon.
treaty or law may be declared unconstitutional without the concurrence of two-thirds of all the
members of the Court." The question arises as to whether this judgment operates as invalidation
of section 2545 of the Revised Administrative Code or a part of it so as to need at least eight
votes to make effective. The answer should be in negative.

We are not declaring any part of section 2545 of the Revised Administrative Code
unconstitutional. What we declare is that the particular provision thereof which gave the Chief
Executive power to remove officers at pleasure has been repealed by the Constitution and
ceased to be operative from the time that instrument went into effect. Unconstitutionally, as we
understand it, denotes life and vigor, and unconstitutional legislation presupposes posteriority in
point of time to the Constitution. It is a statute that "attempts to validate and legalize a course of
conduct the effect of which the Constitution specifically forbids (State ex-
rel. Mack vs. Guckenberger, 139 Ohio St., 273; 39 NE. [2d], 840.) A law that has been repealed
is as good as if it had never been enacted, and can not, in the nature of things, contravene or
pretend to contravene constitutional inhibition. So, unlike legislation that is passed in defiance of
the Constitution, assertive and menacing, the questioned part of section 2545 of the Revised
Administrative Code does not need a positive declaration of nullity by the court to put it out of the
way. To all intents and purposes, it is non-existent, outlawed and eliminated from the statute
book by the Constitution itself by express mandate before this petitioner was appointed.

Incidentally, the last discussion answers and disposes of the proposition that in accepting
appointment under section 2545 of the Revised Administrative Code, the petitioner must be
deemed to have accepted the conditions and limitations attached to the appointment. If the
clause of section 2545 which authorized the President to remove officers of the City of Baguio at
pleasure had been abrogated when petitioner's appointment was issued, the appointee can not
presumed to have abided by this condition.

We therefore hold that the petitioner is entitled to remain in office as City Engineer of Baguio
with all the emoluments, rights and privileges appurtenant thereto, until he resigns or is removed
for cause, and that respondent Mallare's appointment is ineffective in so far as it may adversely
affect those emoluments, rights and privileges. Without costs.

Moran, C.J., Ozaeta, Paras, Pablo, and Montemayor, JJ., concur.

Separate Opinions

BENGZON, J., concurring:

I concur in the result solely upon the ground that section 2545 of the Baguio Charter
(Administrative Code) empowering the President to remove the City Engineer at pleasure has
been impliedly repealed by section 22 of Commonwealth Act No. 177 which expressly provides