198. Hontiveros-Baraquel v.

TRB
G.R. No. 181293, 2015.

Topic: Executive Deptartment; Powers; Control; Reorganization; Sec. 31 1 in relation to Secs. 21-23 2 3 4
, Book III,
Administrative Code

Nachura: See p. 365

Doctrine on Qualified Political Agency:

 The act of the Department secretary is the act of the President, unless repudiated by the latter.
 Definition: Doctrine of qualified political agency – save in matters on which the Constitution or the
circumstances require the President to act personally, executive and administrative functions are exercised
through executive departments headed by cabinet secretaries, whose acts are presumptively the acts of the
President unless disapproved by the latter.
 See also “Discussion on Qualified Political Agency” Below

Recit Ready: PNCC, pursuant to P.D. 1113 with the right, privilege, and authority to construct, and operate toll
facilities Toll Expressways, in a series of agreements transferred authority to perform operations of the South Metro
Manila Skyway to SOMCO. Legislators and the Union of PNCC oppose the said transfer. They argue that the Toll
Operation Certificate issued by the TRB) to SOMCO is highly irregular, given that P.D. 1113 specifically says
“without approval of the President.” Petitioners believe that the TRB needs to ask the President for approval.
Respondents allege that TRB has qualified political agency, as an executive agency hence the approval of the TRB
is tantamount to approval by the President. SC: Respondents are correct. Petitioners simply made a mistake in
interpreting the phrase “without approval of the President.” The phrase, when looking at the law, actually means that
the powers granted to TRB must have approval of the President. However, the choices of TRB in exercising its
powers do not need Presidential approval.

Facts: Two laws were passed:

1. P.D. 1112 – created the Toll Regulatory Board (TRB); purpose was to supervise and regulate, on behalf of the
government, the collection of toll fees and the operation of toll facilities by the private sector.
2. P.D. 1113 – granting to the Philippine National Construction Corporation (PNCC) the right, privilege, and
authority to construct, operate, and maintain toll facilities in the North and South Luzon Toll Expressways for a
period of 30 years starting 1 May 1977.

1
Section 31. Continuing Authority of the President to Reorganize his Office . - The President, subject to the policy in the Executive Office
and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office
of the President. For this purpose, he may take any of the ff. actions:
(1) Restructure the internal organization of the Office of the President Proper, including the immediate Offices, the Presidential Special
Assistants/Advisers System and the Common staff Support System, by abolishing, consolidating or merging units thereof or transferring
functions from one unit to another;
(2) Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions to the Office of
the President from other Departments and Agencies; and
(3) Transfer any agency under the Office of the President to any other department or agency as well as transfer agencies to the Office of the
President from other departments or agencies
2
Section 21. Organization. - The Office of the President shall consist of the Office of the President Proper and the agencies under it.
3
Section 22. Office of the President Proper. -
(1) The Office of the President Proper shall consist of the Private Office, the Executive Office, the Common Staff Support System, and the
Presidential Special Assistants/Advisers System;
(2) The Executive Office refers to the Offices of the Executive Secretary, Deputy Executive Secretaries and Assistant Executive Secretaries;
(3) The Common Staff Support System embraces the offices or units under the general categories of development and management, general
government administration and internal administration; and
(4) The President Special Assistants/Advisers System includes such special assistants or advisers as may be needed by the President.
4
Section 23. The Agencies under the Office of the President. - The agencies under the Office of the President refer to those offices placed
under the chairmanship of the President, those under the supervision and control of the President, those under the administrative supervision of
the Office of the President, those attached to it for policy and program coordination, and those that are not placed by law or order creating them
under any specific department.
TRB and PNCC entered into a Toll Operation Agreement (TOA) which prescribed the operating conditions of the
right granted to PNCC under P.D. 1113. In 1995, the ff. parties executed a Supplemental Toll Operation Agreement
(STOA), for the different phases of the South Metro Manila Skyway:

Party Designation Privileges and Duties under STOA

PH Govt — through the TRB Grantor
CMMTC Investor Design and construction of the project roads
PNCC Operator The operation and maintenance of the project roads would
be undertaken by PNCC Skyway Corporation (PSC), a
wholly owned subsidiary of PNCC

The 3 abovementioned parties, amended the agreement, so from STOA, it became Amended STOA (ASTOA).
Department of Transportation and Communications (DOTC) Secretary Leandro Mendoza approved the ASTOA
through a 2007 Memorandum.

The ASTOA is assailed in this case because under the ASTOA, Skyway O & M Corporation (SOMCO) replaced
PSC in performing the operations and maintenance of Stage 1 of the South Metro Manila Skyway. Thus, The TRB
issued a Toll Operation Certificate (TOC) to SOMCO on 28 December 2007, authorizing the latter to operate and
maintain Stage 1 of the South Metro Manila Skyway.

Petitioners are employees of PNCC. Petitioner Hontiveros-Baraquel filed as a legislator (party-list rep of
AKBAYAN). The Petitioners filed a TRO seeking to prohibit the implementation of the ASTOA and the MOA, as
well as the assumption of the toll operations by SOMCO. Eventually, they amended their complaint asking the court
to declare the said agreements as contrary to law.

Argument of petitioners: Petitioners insist that based on P.D. 1113, it is the President who should give personal
approval considering that the power to grant franchises was exclusively vested in Congress. Hence, to allow the
DOTC Secretary to exercise the power of approval would supposedly dilute that legislative prerogative. The TRB
did not get the approval of the President, which is necessary under P.D. 1113 to wit:

SECTION 8. The GRANTEE shall not lease, transfer, grant the usufruct of, sell or
assign this franchise nor the rights or privileges acquired hereby, to any person, firm,
company, corporation or other commercial or legal entity, nor merge with any other
company or corporation without the prior approval of the President of the
Philippines.

Issue: Whether or not the approval of the ASTOA by the DOTC Secretary was valid – Approval of the
ASTOA by the DOTC Secretary was approval by the President.

Ruling:

Mistakes of
The petitioners

SC had to correct all the mistakes that petitioner made. First, SC clarified that the power to grant franchises or issue
authorizations for the operation of a public utility is not exclusively exercised by Congress.

Second, SC clarified that except where the situation falls within that special class that demands the exclusive and
personal exercise by the President of constitutionally vested power, the President acts through alter egos whose acts
are as if the Chief Executive's own.
Third, no lease, transfer, grant of usufruct, sale, or assignment of franchise by PNCC or its merger with another
company ever took place. The creation of the TRB and the grant of franchise to PNCC were made in the light of the
recognition on the part of the government that the private sector had to be involved as an alternative source of
financing for the pursuance of national infrastructure projects. As the franchise holder for the construction,
maintenance and operation of infrastructure toll facilities, PNCC was equipped with the right and privilege, but not
necessarily the means, to undertake the project. This is where joint ventures with private investors become
necessary.

A joint venture is an association of companies jointly undertaking a commercial endeavor, with all of them
contributing assets and sharing risks, profits, and losses. It is hardly distinguishable from a partnership considering
that their elements are similar and, thus, generally governed by the law on partnership. In joint ventures with
investor companies, PNCC contributes the franchise it possesses, while the partner contributes the financing — both
necessary for the construction, maintenance, and operation of the toll facilities. PNCC did not thereby lease, transfer,
grant the usufruct of, sell, or assign its franchise or other rights or privileges. This remains true even though the
partnership acquires a distinct and separate personality from that of the joint venturers or leads to the formation of a
new company that is the product of such joint venture, such as PSC and SOMCO in this case.

Hence, when we say that the approval by the DOTC Secretary in this case was approval by the President, it was not
in connection with the franchise of PNCC, as required under Section 8 of P.D. 1113 and Section 13 of P.D. 1894.
Rather, the approval was in connection with the powers of the TRB to enter into contracts on behalf of the
government as provided under Section 3 (a) of P.D. 1112, which states:

SECTION 3. Powers and Duties of the Board. — The Board shall have in addition to
its general powers of administration the following powers and duties:

Subject to the approval of the President of the Philippines, to enter into contracts in
behalf of the Republic of the Philippines with persons, natural or juridical, for the
construction, operation and maintenance of toll facilities such as but not limited to
national highways, roads, bridges, and public thoroughfares. Said contract shall be open
to citizens of the Philippines and/or to corporations or associations qualified under the
Constitution and authorized by law to engage in toll operations.

There can be no question that the act of the secretary is the act of the President, unless repudiated by the latter.
In this case, approval of the ASTOA by the DOTC Secretary had the same effect as approval by the President. The
same would be true even without the issuance of E.O. 497, in which the President, on 24 January 2006, specifically
delegated to the DOTC Secretary the authority to approve contracts entered into by the TRB.

Discussion on
Qualified Political
Agency

Doctrine of qualified political agency – save in matters on which the Constitution or the circumstances require the
President to act personally, executive and administrative functions are exercised through executive departments
headed by cabinet secretaries, whose acts are presumptively the acts of the President unless disapproved by the
latter.

With reference to the Executive Department of the government, there is one purpose which is crystal-clear and is
readily visible without the projection of judicial searchlight, and that is, the establishment of a single, not plural,
Executive. The first section of Article VII of the Constitution, dealing with the Executive Department, begins with
the enunciation of the principle that "The executive power shall be vested in a President of the Philippines." This
means that the President of the Philippines is the Executive of the Government of the Philippines, and no
other. The heads of the executive departments occupy political positions and hold office in an advisory
capacity, and, in the language of Thomas Jefferson, "should be of the President's bosom confidence," and, in
the language of Attorney-General Cushing, "are subject to the direction of the President." Without
minimizing the importance of the heads of the various departments, their personality is in reality but the projection
of that of the President. Stated otherwise, and as forcibly characterized by Chief Justice Taft, "each head of a
department is, and must be, the President's alter ego in the matters of that department where the President is
required by law to exercise authority." Secretaries of departments, of course, exercise certain powers under the
law but the law cannot impair or in any way affect the constitutional power of control and direction of the President.
As a matter of executive policy, they may be granted departmental autonomy as to certain matters but this is by mere
concession of the executive, in the absence of valid legislation in the particular field. If the President, then, is the
authority in the Executive Department, he assumes the corresponding responsibility. The head of a
department is a man of his confidence; he controls and directs his acts; he appoints him and can remove him
at pleasure; he is the executive, not any of his secretaries.

Application of the doctrine in other cases:

 Secretary of Environment and Natural Resources can validly order the transfer of a regional office by virtue of
the power of the President to reorganize the national government (DENR v. DENR, 2003).
 The Court upheld the authority of the Secretary of Finance to execute debt-relief contracts. The authority
emanates from the power of the President to contract foreign loans under Section 20, Article VII of the
Constitution (Constantino v. Cuisia, G.R. No. 106064, October 13, 2005).
 The Court ruled that there can be no issue with regard to the President's act of limiting his power to review
decisions and orders of the Secretary of Justice, especially since the decision or order was issued by the
secretary, the President's "own alter ego” Angeles v. Gaite, G.R. No. 165276, November 25, 2009).

Other Issues:
1. Whether or not the TRB has the power to grant authority to operate a toll facility - TRB has the
power to grant authority to operate a toll facility. P.D. 1112 vested the TRB with power to grant a qualified
person or entity the authority to construct, maintain, and operate a toll facility and to issue the TOC.
2. Whether or not the TOC issued to SOMCO was valid – The TOC issued to SOMCO was not irregular.
All procedures (public notices, hearings, etc.) were followed and the Filipino ownership rule (grandfather
rule) showed that the requisite Filipino ownership was satisfied.
3. Whether or not the assumption of toll operations by SOMCO is disadvantageous to the government –
Petitioners have not shown that the transfer of toll operations to SOMCO was grossly disadvantageous to
the government. Petitioners merely said that the initial investment of SOMCO was small, but it didn’t show
how it was grossly disadvantageous. Note, it had to be GROSSLY disadvantageous.