Civil Actions Plus Digests

7/26/2019 Civil Actions Plus Digests

1/470

A.Interpleader [Rule 62]

MESINA V. IAC 145 SCRA 497 -

Holder in due course

MESINA V. IAC

145 SCRA 497

FACTS:Jose Go purchased from Associate Bank a Cashiers Check, which he left on top of the managers

desk when left the bank. The bank manager then had it kept for safekeeping by one of its

employees. The employee was then in conference with one Alexander Lim. He left the check in

his desk

and upon his return, Lim and the check were gone. When Go inquired about his check, the

same couldn't be found and Go was advised to request for the stoppage of payment which he did.

He executed also an affidavit of loss as well as reported it to the police.

The bank then received the check twice for clearing. For these two times, they dishonored the

payment by saying that payment has been stopped. After the second time, a lawyer

contacted it demanding payment. He refused to disclose the name of his client and threatened to

sue. Later, the

name of Mesina was revealed. When asked by the police on how he possessed the check,

he said it was paid to him Lim. An information for theft was then filed against Lim.

A case of interpleader was filed by the bank and Go moved to participate as intervenor in the

complaint for damages. Mesina moved for the dismissal of the case but was denied. The

trial court ruled in the interpleader case ordering the bank to replace the cashiers check in favor of
http://www.batasnatin.com/law-library/mercantile-law/jurisprudence1/1013-mesina-v-iac-145-scra-497-holder-in-due-course.htmlhttp://www.batasnatin.com/law-library/mercantile-law/jurisprudence1/1013-mesina-v-iac-145-scra-497-holder-in-due-course.htmlhttp://www.batasnatin.com/law-library/mercantile-law/jurisprudence1/1013-mesina-v-iac-145-scra-497-holder-in-due-course.htmlhttp://www.batasnatin.com/law-library/mercantile-law/jurisprudence1/1013-mesina-v-iac-145-scra-497-holder-in-due-course.html


2/470

Go.

HELD:Petitioner cannot raise as arguments that a cashiers check cannot be countermanded from

the hands of a holder in due course and that a cashiers check is a check drawn by the

bank against itself. Petitioner failed to substantiate that he was a holder in due course.

Upon

questioning, he admitted that he got the check from Lim who stole the check. He refused to

disclose how and why it has passed to him. It simply means that he has notice of the defect of his

title over the check from the start. The holder of a cashiers check who is not a holder in

due course

cannot enforce payment against the issuing bank which dishonors the same. If a payee of a

cashiers check obtained it from the issuing bank by fraud, or if there is some other reason why

the payee is not entitled to collect the check, the bank would of course have the right to

refuse

payment of the check when presented by payee, since the bank was aware of the facts surrounding

the loss of the check in question.

SUPREME COURTManila

SECOND DIVISION

G.R. No. 70145 November 13, 1986

MARCELO A. MESNA, petitioner,vs.T!E !ONORA"LE NTERME#ATE APPELLATE COURT, !ON. ARSENO M. GONONG, $% &$'()*)($+ )' -/e o Re$o%)2 Tr$)2 Cor+ M)%$2) "r)%(& , -OSE GO, )%/ AL"ERT U,respondents.

PARAS, J.:

This is an appeal by certiorari from the decision of the then Intermediate ppellate Co!rt "IC forshort#, no$ the Co!rt of ppeals "C# in C%&.'. S.(. )*+), dated -an. , /01, $hich dismissedthe petition for certiorari and prohibition filed by Marcelo . Mesina a2ainst the trial co!rt in CivilCase No. 0*%11. Said case "an Interpleader# $as filed by ssociated 3an4 a2ainst -ose &o and


3/470

Marcelo . Mesina re2ardin2 their conflictin2 claims over ssociated 3an4 Cashier5s Chec4 No.)6) for (0)),))).)), dated December /, /06.

3riefly, the facts and statement of the case are as follo$s7

'espondent -ose &o, on December /, /06, p!rchased from ssociated 3an4 Cashier5s Chec4

No. )6) for (0)),))).)). 8nfort!nately, -ose &o left said chec4 on the top of the des4 of theban4 mana2er $hen he left the ban4. The ban4 mana2er entr!sted the chec4 for safe4eepin2 to aban4 official, a certain lbert 8y, $ho had then a visitor in the person of le9ander :im. 8y had toans$er a phone call on a nearby telephone after $hich he proceeded to the men5s room. ;hen heret!rned to his des4, his visitor :im $as already 2one. ;hen -ose &o inMENT= order, $hich s!22estion -ose &oimmediately follo$ed. ?e also e9ec!ted an affidavit of loss. lbert 8y $ent to the police to report theloss of the chec4, pointin2 to the person of le9ander :im as the one $ho co!ld shed li2ht on it.

The records of the police sho$ that ssociated 3an4 received the lost chec4 for clearin2 onDecember 6, /06, comin2 from (r!dential 3an4, Escolta 3ranch. The chec4 $as immediately

dishonored by ssociated 3an4 by sendin2 it bac4 to (r!dential 3an4, $ith the $ords =(aymentStopped= stamped on it. ?o$ever, the same $as a2ain ret!rned to ssociated 3an4 on -an!ary *,/0* and for the second time it $as dishonored. Several days later, respondent ssociated 3an4received a letter, dated -an!ary /, /0*, from a certain tty. :oren@o Navarro demandin2 paymenton the cashier5s chec4 in

le9ander :im and the correspondin2 $arrant for his arrest $as iss!ed "nne9 B%# $hich !p to thedate of the filin2 of this instant petition remains !nserved beca!se of le9ander :im5s s!ccessf!l

evation thereof.

Mean$hile, -ose &o filed his ans$er on Aebr!ary *, /0* in the Interpleader Case and moved toparticipate as intervenor in the complain for dama2es. lbert 8y filed a motion of intervention andans$er in the complaint for Interpleader. On the Sched!led date of pretrial conference intheinterpleader case, it $as disclosed that the =-ohn Doe= impleaded as one of the defendants isact!ally petitioner Marcelo . Mesina. (etitioner instead of filin2 his ans$er to the complaint in theinterpleader filed on May +, /0* an Omnib!s Motion to DismissEx Abudante Cautela alle2in2 lac4of !risdiction in vie$ of the absence of an order to liti2ate, fail!re to state a ca!se of action and lac4


4/470

of personality to s!e. 'espondent ban4 in the other civil case "CC%6/# for dama2es moved todismiss s!it in vie$ of the e9istence already of the Interpleader case.

The trial co!rt in the interpleader case iss!ed an order dated -!ly 6, /0*, denyin2 the motion todismiss of petitioner Mesina and r!lin2 that respondent ban45s complaint s!fficiently pleaded a ca!seof action for itnerpleader. (etitioner filed his motion for reconsideration $hich $as denied by the trial

co!rt on September B, /0*. 8pon motion for respondent -ose &o dated October 6, /0*,respondent !d2e iss!ed an order on November B, /0*, declarin2 petitioner in defa!lt since hisperiod to ans$er has already e9pirecd and set the ex-partepresentation of respondent ban45sevidence on November +, /0*.

(etitioner Mesina filed a petition for certioari $ith preliminary in!nction $ith IC to set aside # orderof respondent co!rt denyin2 his omnib!s Motion to Dismiss # order of 6# the order of defa!lt a2ainsthim.

On -an!ary , /01, IC rendered its decision dimissin2 the petition for certiorari. (etitionerMesina filed his Motion for 'econsideration $hich $as also denied by the same co!rt in itsresol!tion dated Aebr!ary 0, /01.

Mean$hile, on same date "Aebr!ary 0, /01#, the trial co!rt in Civil Case 0*%11 "Interpleader#rendered a decisio, the dispositive portion readin2 as follo$s7

;?E'EAO'E, in vie$ of the fore2oin2, !d2ment is hereby renderedorderin2 plaintiff ssociate 3an4 to replace Cashier5s Chec4 No. )6) infavor of -ose &o or its cas e

SO O'DE'ED.

On March /, /01, the trial co!rt in Civil Case No. C%6/, for dama2es,

iss!ed an order, the pertinent portion of $hich states7

The records of this case sho$ that on !2!st ), /0* proceedin2s in thiscase $as "$ere# ordered s!spended beca!se the main iss!e in Civil CaseNo. 0*%11 and in this instant case are the same $hich is7 $ho bet$eenMarcelo Mesina and -ose &o is entitled to payment of ssociated 3an45sCashier5s Chec4 No. CC%)6) Said iss!e havin2 been resolved already inCivil casde No. 0*%11, really this instant case has become moot andacademic.

;?E'EAO'E, in vie$ of the fore2oin2, the motion shol!d be as it is hereby2ranted and this case is ordered dismissed.

In vie$ of the fore2oin2 r!lin2 no more action sho!ld be ta4en on the =MotionAor 'econsideration "of the order admittin2 the Intervention#= dated -!ne ,/0* as $ell as the Motion Aor 'econsideration dated September ), /0*.

SO O'DE'ED.

(etitioner no$ comes to 8s, alle2in2 that7


5/470

. IC erred in r!lin2 that a cashier5s chec4 can be co!ntermanded even in the hands of a holder ind!e co!rse.

. IC erred in co!ntenancin2 the filin2 and maintenance of an interpleader s!it by a party $ho hadearlier been s!ed on the same claim.

6. IC erred in !pholdin2 the trial co!rt5s order declarin2 petitioner as in defa!lt $hen there $as noproper order for him to plead in the interpleader complaint.

*. IC $ent beyond the scope of its certiorari !risdiction by ma4in2 findin2s of facts in advance oftrial.

(etitioner no$ interposes the follo$in2 prayer7

. 'everse the decision of the IC, dated -an!ary , /01 and set aside the Aebr!ary 0, /01resol!tion denyin2 the Motion for 'econsideration.

. nn!l the orders of respondent -!d2e of 'TC Manila 2ivin2 d!e co!rse to the interpleader s!it

and declarin2 petitioner in defa!lt.

(etitioner5s alle2ations hold no $ater. Theories and e9amples advanced by petitioner on ca!ses andeffects of a cashier5s chec4 s!ch as # it cannot be co!ntermanded in the hands of a holder in d!eco!rse and # a cashier5s chec4 is a bill of e9chan2e dra$n by the ban4 a2ainst itself%are 2eneralprinciples $hich cannot be aptly applied to the case at bar, $itho!t considerin2 other thin2s.(etitioner failed to s!bstantiate his claim that he is a holder in d!e co!rse and for consideration orval!e as sho$n by the established facts of the case. dmittedly, petitioner became the holder of thecashier5s chec4 as endorsed by le9ander :im $ho stole the chec4. ?e ref!sed to say ho$ and $hyit $as passed to him. ?e had therefore notice of the defect of his title over the chec4 from the start.The holder of a cashier5s chec4 $ho is not a holder in d!e co!rse cannot enforce s!ch chec4 a2ainstthe iss!in2 ban4 $hich dishonors the same. If a payee of a cashier5s chec4 obtained it from the

iss!in2 ban4 by fra!d, or if there is some other reason $hy the payee is not entitled to collect thechec4, the respondent ban4 $o!ld, of co!rse, have the ri2ht to ref!se payment of the chec4 $henpresented by the payee, since respondent ban4 $as a$are of the facts s!rro!ndin2 the loss of thechec4 in


6/470

Considerin2 the aforementioned facts and circ!mstances, respondent ban4 merely too4 thenecessary preca!tion not to ma4e a mista4e as to $hom to pay and therefore interpleader $as itsproper remedy. It has been sho$n that the interpleader s!it $as filed by respondent ban4 beca!sepetitioner and -ose &o $ere both layin2 their claims on the chec4, petitioner as4in2 payment thereonand -ose &o as the p!rchaser or o$ner. The alle2ation of petitioner that respondent ban4 hadeffectively relieved itself of its primary liability !nder the chec4 by simply filin2 a complaint for

interpleader is belied by the $illin2ness of respondent ban4 to iss!e a certificate of time deposit inthe amo!nt of (0)),))) representin2 the cashier5s chec4 in

In his third assi2nment of error, petitioner assails the then respondent IC in !pholdin2 the trialco!rt5s order declarin2 petitioner in defa!lt $hen there $as no proper order for him to plead in theinterpleader case. 2ain, s!ch contention is !ntenable. The trial co!rt iss!ed an order, compellin2petitioner and respondent -ose &o to file theirAnswerssettin2 forth their respective claims.S!bse

The records of the case sho$ that respondent ban4 had to resort to details in s!pport of its action forInterpleader. 3efore it resorted to Interpleader, respondent ban4 too4 an preca!tionary andnecessary meas!res to brin2 o!t the tr!th. On the other hand, petitioner concealed thecirc!mstances 4no$n to him and no$ that private respondent ban4 bro!2ht these circ!mstances o!tin co!rt "$hich event!ally rendered its decision in the li2ht of these facts#, petitioner char2es it $ith=2rat!ito!s e9c!rsions into these non%iss!es.= 'espondent IC cannot r!le on $hether respondent'TC committed an ab!se of discretion or not, $itho!t bein2 apprised of the facts and reasons $hyrespondent ssociated 3an4 instit!ted the Interpleader case. 3oth parties $ere 2iven an opport!nityto present their sides. (etitioner chose to $ithhold s!bstantial facts. 'espondents $ere not forbiddento present their side%this is the p!rpose of the Comment of respondent to the petition. IC decidedthe

;?E'EAO'E, findin2 that the instant petition is merely dilatory, the same is hereby denied and theassailed orders of the respondent co!rt are hereby AAI'MED in toto.

SO O'DE'ED.

Feria (Chairan!" Fernan" Alapa# and Gutierre$" Jr." JJ." concur.


7/470

Arreza vs. Diaz, Jr, GR 133113, 30 August 2001[interpleading parties may file counter-

claim, cross-claims or third party complaint for complete adjudication of the case]

Facts: Bliss Development Corporation is the owner of a housing unit located at Lot 27. Block 3!ew Capitol "states #$ Baranga% &atandang Balara$ 'ue(on Cit%. #n the course of a caseinvolving a conflict of ownership )etween petitioner "dgar *. +rre(a and respondent &ontano&. Dia(. Bliss Development Corporation filed a complaint for interpleader. ,etitioner +rre(afiled a &otion to Dismiss the case$ citing as grounds res adjudicataor conclusiveness of the-udgment in the interpleader case as well as lack of cause of action. he petition was dismissedfor lack of merit. he Court of +ppeals said:

he decision invoked )% the petitioner as res adjudicataresolved onl% the issue of who )etween

"dgar *. +rre(a and &ontano Dia( has the )etter right over the propert% under litigation. #t didnot resolve the rights and o)ligations of the parties

#//0":

where petitioner raises the following grounds for review:

#

*" C+0/" 1F +C#1! "&B1D#"D #! *" ,"/"! C C+/" ,"+#!#!1 &. D#+45/ CL+#&/ F1 "#&B0/"&"! 1F +&10!/ 6*#C* *"

+LL""DL ,+#D 1 BL#// B 6+ 1F ,"& 1 #!/+LL&"!,+&"!/ F1 *" +C'0#/##1! 1F *" ,1," 6+/ "1!"10/LB10* ++#!/ &. +"4+. +L/1$ /+#D CL+#&/ +" B+"D B "/+D80D#C++ 1 C1!CL0/#9"!"// 1F + ,#1 80D&"! #! *" ,#1C C+/" 6*#C* 6+/ 0L#&+"L +FF#&"D B *#/ *1!1+BL"C10 #! .. !1. 2;72


8/470

*" 0L#! #! *" ,#1 C+ ,"##1! >C+?.. /,. !1. @A7@ 6*#C* 6+/0L#&+"L +FF#&"D B *#/ *1!1+BL" C10 #! .. !1. 2;72a that the former -udgment must )e final >) the courtwhich rendered -udgment had -urisdiction over the parties and the su)-ect matter >c it must )e a-udgment on the merits and >d there must )e )etween the first and second causes of actionidentit% of the parties$ su)-ect matter$ and cause of action.;

6orth% of note$ the prior case for interpleader filed with Branch @< of the egional rial Courtof &akati$ Civil Case !o. A@?2;


9/470

his demand into specifc claims or reimbursement by petitioner Arreza. his he

ailed to do.

epu)lic of the ,hilippinesSUPREME COURT

&anila

/"C1!D D#9#/#1!

G.R. No. 133113 August 30, 2001

EDGAR H. ARREZA,petitioner$ >conflicting claims of the ownership of house in Balaraue(on cit%vs.MONTANO M. DIAZ, JR., respondent.

QUISUMBING,J.

his petition assails the decision promulgated on Decem)er 2@$ AA7$ and the resolution 2dated &arch


10/470

&a%


11/470

/1 1D""D.E

,etitioner5s motion to reconsider the decision of the Court of +ppeals was denied.C+?.. /,. !1. @A7@ 6*#C* 6+/0L#&+"L +FF#&"D B *#/ *1!1+BL" C10 #! .. !1. 2;72)$ ule 7 of the evisedules of Court$ #n the event of her failure to compl% as directed$ private respondent was orderedto show cause wh% she should not )e cited for contempt and wh% she should not )e charged foro)struction.3

#//0": he onl% uestion raised )% petitioner for resolution is whether or not pu)lic respondentacted without -urisdiction andJor with grave a)use of discretion in entertaining the cited petitionfor declarator% relief.

*"LD: /imilarl%$ the ules of Court is eGplicit that such action shall )e )rought )efore theappropriate egional rial Court. /ection $ ule


35/470

he reuisites of an action for declarator% relief are:

> there must )e a -usticia)le controvers% must )e )etween persons whose interests are adverse

>3 that the part% seeking the relief has a legal interest in the controvers% and >@ that the issue isripe for -udicial determination.7#n this case$ the controvers% concerns the eGtent of the power ofpetitioner to eGamine )ank accounts under /ection E >; of .+.


36/470

R E S O * U T I O N

QUISUMBING,J.

his special civil action for certiorari seeks to annul the 1rders of pu)lic respondent dated

+ugust A$ AA; and Decem)er 22$ AA;$ and to dismiss the proceedings in Civil Case !o. A;?E;E.

he factual antecedents of this case are as follows: la!phil#net

/ometime in AA;$ petitioner conducted an investigation on the alleged scam on the ,u)lic"states +uthorit%?+mari Coastal Ba% Development Corporation. he case$ entitled-act1-indingand Intelligence "ureau vs# Amadeo 'agdameo% et al#%was docketed as 1&B??A7?@. #nitialresult of the investigation revealed that the alleged anomal% was committed through the issuanceof checks which were su)seuentl% deposited in several financial institutions. 1n +pril 2A$ AA;$petitioner issued an 1rder directing private respondent Lourdes &arue($ )ranch manager of

0nion Bank of the ,hilippines )ranch at 8ulia 9argas +venue$ ,asig Cit%$ to produce several)ank documents for inspection relative to +ccount !os. ?3727?E$ 2@?27;$ 2@E?337?3and 2@E?333;?$ reportedl% maintained in the said )ranch. he documents referred to include)ank account application forms$ signature cards$ transactions histor%$ )ank statements$ )ankledgers$ de)it and credit memos$ deposit and withdrawal slips$ application for purchase ofmanager5s checks$ used manager5s checks and check microfilms. he inspection would )e donein camera wherein the )ank records would )e eGamined without )ringing the documentsoutside the )ank premises. #ts purpose was to identif% the specific )ank records prior to theissuance of the reuired information not in an% manner needed in or relevant to theinvestigation.

,rivate respondent failed to compl% with petitioner5s order. /he eGplained that the su)-ectaccounts pertain to #nternational Corporate Bank >#nter)ank which merged with 0nion Bank inAA@. /he added that despite diligent efforts$ the )ank could not identif% these accounts since thechecks were issued in cash or )earer forms. /he informed petitioner that she had to first verif%from the #nter)ank records in its archives the wherea)outs of said accounts.2

,etitioner found private respondent5s eGplanation unaccepta)le. ,etitioner reminded privaterespondent that her acts constitute diso)edience or resistance to a lawful order and is punisha)leas indirect contempt under /ection 3 >)$ ule 7 of the evised ules of Court$ in relation to/ection E >A of .+. 1m)udsman +ct of A;A. he same might also constitute willfulo)struction of the lawful eGercise of the functions of the 1m)udsman$ which is punisha)le under

/ection 3< of .+.


37/470

8udge Francisco #)a%. he petition was docketed as Civil Case !o. A;?E;E. #n her petition$private respondent averred that under /ections 2 and 3 of .+. @E >Law on /ecrec% of BankDeposits$ she had the legal o)ligation not to divulge an% information relative to all deposits ofwhatever nature with )anks in the ,hilippines. But petitioner5s 1rder cited /ection E >; of .+.


38/470

uestions of law are involved.3 that the part% seeking the relief has alegal interest in the controvers% and >@ that the issue is ripe for -udicial determination.7#n this

case$ the controvers% concerns the eGtent of the power of petitioner to eGamine )ank accountsunder /ection E >; of .+.


39/470


40/470

Commisioner of Customs vs. Hyper Mix Feeds Corp., GR 179579, 1 February 2012

[necessary facts for an action for declaratory relief]

!A"#$

0nder the &emorandum$ for tariff purposes$ wheat was classified according to the following: >importer or consignee >2 countr% of origin and >3 port of discharge.Ehe regulation providedan eGclusive list of corporations$ ports of discharge$ commodit% descriptions and countries oforigin. Depending on these factors$ wheat would )e classified either as food grade or feed grade.he corresponding tariff for food grade wheat was 3H$ for feed grade$ 7H.

he C held that it had -urisdiction over the su)-ect matter$ given that the issue raised )%respondent concerned the uasi?legislative powers of petitioners. #t likewise stated that a petitionfor declarator% relief was the proper remed%$ and that respondent was the proper part% to file it.

he court considered that respondent was a regular importer$ and that the latter would )esu)-ected to the application of the regulation in future transactions.

6ith regard to the validit% of the regulation$ the trial court found that petitioners had notfollowed the )asic reuirements of hearing and pu)lication in the issuance of C&1 27?23. #tlikewise held that petitioners had su)stituted the uasi?-udicial determination of the commodit%)% a uasi?legislative predetermination.3he lower court pointed out that a classification )asedon importers and ports of discharge were violative of the due process rights of respondent.

#//0": . *" C10 1F +,,"+L/ D"C#D"D + '0"/#1! 1F /0B/+!C"6*#C* #/ !1 #! +CC1D 6#* *" L+6 +!D ,"9+#L#!80#/,0D"!C".

H%&D$

he ,etition has no merit.

6e shall first discuss the propriet% of an action for declarator% relief.

ule


41/470

he reuirements of an action for declarator% relief are as follows: > there must )e a -usticia)lecontrovers% >2 the controvers% must )e )etween persons whose interests are adverse >3 thepart% seeking declarator% relief must have a legal interest in the controvers% and >@ the issueinvolved must )e ripe for -udicial determination.E6e find that the ,etition filed )% respondent)efore the lower court meets these reuirements.

First$ the su)-ect of the controvers% is the constitutionalit% of C&1 27?23 issued )% petitionerCommissioner of Customs. #n /mart Communications v. !C$


42/470

Before us is a ,etition for eview under ule @E$assailing the Decision2and the esolution3ofthe Court of +ppeals >C+$ which nullified the Customs &emorandum 1rder >C&1 !o. 27?23@on the tariff classification of wheat issued )% petitioner Commissioner of Customs.

he antecedent facts are as follows:

1n 7 !ovem)er 23$ petitioner Commissioner of Customs issued C&1 27?23. 0nder the&emorandum$ for tariff purposes$ wheat was classified according to the following: > importeror consignee >2 countr% of origin and >3 port of discharge.Ehe regulation provided aneGclusive list of corporations$ ports of discharge$ commodit% descriptions and countries of origin.Depending on these factors$ wheat would )e classified either as food grade or feed grade. hecorresponding tariff for food grade wheat was 3H$ for feed grade$ 7H.

C&1 27?23 further provided for the proper procedure for protest or 9aluation andClassification eview Committee >9CC cases. 0nder this procedure$ the release of the articlesthat were the su)-ect of protest reuired the importer to post a cash )ond to cover the tariff

differential.

C of Las ,iPas Cit%. #t anticipated theimplementation of the regulation on its imported and perisha)le Chinese milling wheat in transitfrom China.;espondent contended that C&1 27?23 was issued without following themandate of the evised +dministrative Code on pu)lic participation$ prior notice$ andpu)lication or registration with the 0niversit% of the ,hilippines Law Center.

espondent also alleged that the regulation summaril% ad-udged it to )e a feed grade supplierwithout the )enefit of prior assessment and eGamination thus$ despite having imported food

grade wheat$ it would )e su)-ected to the 7H tariff upon the arrival of the shipment$ forcing themto pa% 33H more than was proper.

Furthermore$ respondent claimed that the eual protection clause of the Constitution wasviolated when the regulation treated non?flour millers differentl% from flour millers for no reasonat all.

Lastl%$ respondent asserted that the retroactive application of the regulation was confiscator% innature.

1n A 8anuar% 2@$ the C issued a emporar% estraining 1rder >1 effective for twent%

>2 da%s from notice.

A

,etitioners thereafter filed a &otion to Dismiss.he% alleged that: > the C did not have-urisdiction over the su)-ect matter of the case$ )ecause respondent was asking for a -udicialdetermination of the classification of wheat >2 an action for declarator% relief was improper >3C&1 27?23 was an internal administrative rule and not legislative in nature and >@ theclaims of respondent were speculative and premature$ )ecause the Bureau of Customs >B1Chad %et to eGamine respondentNs products. he% likewise opposed the application for a writ of
http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt1http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt1http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt2http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt3http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt4http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt5http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt6http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt7http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt8http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt9http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt10http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt1http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt2http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt3http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt4http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt5http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt6http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt7http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt8http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt9http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt10


43/470

preliminar% in-unction on the ground that the% had not inflicted an% in-ur% through the issuanceof the regulation and that the action would )e contrar% to the rule that administrative issuancesare assumed valid until declared otherwise.

1n 2; Fe)ruar% 2E$ the parties agreed that the matters raised in the application for preliminar%

in-unction and the &otion to Dismiss would -ust )e resolved together in the main case. hus$ on &arch 2E$ the C rendered its Decisionwithout having to resolve the application forpreliminar% in-unction and the &otion to Dismiss.

he trial court ruled in favor of respondent$ to wit:

6*""F1"$ in view of the foregoing$ the ,etition is +!"D and the su)-ect Customs&emorandum 1rder 27?23 is declared #!9+L#D and 1F !1 F1C" +!D "FF"C.espondents Commissioner of Customs$ the District Collector of /u)ic or an%one acting in their)ehalf are to immediatel% cease and desist from enforcing the said Customs &emorandum 1rder27?23.

/1 1D""D.2

he C held that it had -urisdiction over the su)-ect matter$ given that the issue raised )%respondent concerned the uasi?legislative powers of petitioners. #t likewise stated that a petitionfor declarator% relief was the proper remed%$ and that respondent was the proper part% to file it.he court considered that respondent was a regular importer$ and that the latter would )esu)-ected to the application of the regulation in future transactions.

6ith regard to the validit% of the regulation$ the trial court found that petitioners had notfollowed the )asic reuirements of hearing and pu)lication in the issuance of C&1 27?23. #t

likewise held that petitioners had su)stituted the uasi?-udicial determination of the commodit%)% a uasi?legislative predetermination.3he lower court pointed out that a classification )asedon importers and ports of discharge were violative of the due process rights of respondent.

Dissatisfied with the Decision of the lower court$ petitioners appealed to the C+$ raising thesame allegations in defense of C&1 27?23.@he appellate court$ however$ dismissed theappeal. #t held that$ since the regulation affected su)stantial rights of petitioners and otherimporters$ petitioners should have o)served the reuirements of notice$ hearing and pu)lication.

*ence$ this ,etition.

,etitioners raise the following issues for the consideration of this Court:

#. *" C10 1F +,,"+L/ D"C#D"D + '0"/#1! 1F /0B/+!C" 6*#C* #/!1 #! +CC1D 6#* *" L+6 +!D ,"9+#L#! 80#/,0D"!C".

##. *" C10 1F +,,"+L/ +9"L ""D #! D"CL+#! *+ *"#+L C10 *+/ 80#/D#C#1! 19" *" C+/".
http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt11http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt11http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt12http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt13http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt14http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt11http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt12http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt13http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt14


44/470

he ,etition has no merit.

6e shall first discuss the propriet% of an action for declarator% relief.

ule there must )e a -usticia)lecontrovers% >2 the controvers% must )e )etween persons whose interests are adverse >3 thepart% seeking declarator% relief must have a legal interest in the controvers% and >@ the issueinvolved must )e ripe for -udicial determination.E6e find that the ,etition filed )% respondent

)efore the lower court meets these reuirements.

First$ the su)-ect of the controvers% is the constitutionalit% of C&1 27?23 issued )% petitionerCommissioner of Customs. #n /mart Communications v. !C$"mphasissupplied

&eanwhile$ in(isamis 6riental Association o Coco Traders% Inc# v# Department o -inanceSecretary%7we said:

GGG +M legislative rule is in the nature of su)ordinate legislation$ designed to implement aprimar% legislation )% providing the details thereof. GGG

#n addition such rule must )e pu)lished. 1n the other hand$ interpretative rules are designed toprovide guidelines to the law which the administrative agenc% is in charge of enforcing.

+ccordingl%$ in considering a legislative rule a court is free to make three inuiries: 7i8whetherthe rule is within the delegated authorit% of the administrative agenc% 7ii8 whether it isreasona)le and 7iii8whether it was issued pursuant to proper procedure. But the court is not freeto su)stitute its -udgment as to the desira)ilit% or wisdom of the rule for the legislative )od%$ )%
http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt15http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt16http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt17http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt15http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt16http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt17


45/470


46/470

this Code which are not filed within three >3 months from that date shall not thereafter )e the)ases of an% sanction against an% part% of persons.

G G G G G G G G G

/ection A. ,u)lic ,articipation. ? > #f not otherwise reuired )% law$ an agenc% shall$ as far aspractica)le$ pu)lish or circulate notices of proposed rules and afford interested parties theopportunit% to su)mit their views prior to the adoption of an% rule.

>2 #n the fiGing of rates$ no rule or final order shall )e valid unless the proposed ratesshall have )een pu)lished in a newspaper of general circulation at least two >2 weeks)efore the first hearing thereon.

>3 #n case of opposition$ the rules on contested cases shall )e o)served.

6hen an administrative rule is merel% interpretative in nature$ its applica)ilit% needs nothing

further than its )are issuance$ for it gives no real conseuence more than what the law itself hasalread% prescri)ed. 6hen$ on the other hand$ the administrative rule goes )e%ond merel%providing for the means that can facilitate or render least cum)ersome the implementation of thelaw )ut su)stantiall% increases the )urden of those governed$ it )ehooves the agenc% to accord atleast to those directl% affected a chance to )e heard$ and thereafter to )e dul% informed$ )eforethat new issuance is given the force and effect of law.2

Likewise$ in aPada v. uvera$2we held:

he clear o)-ect of the a)ove?uoted provision is to give the general pu)lic adeuate notice ofthe various laws which are to regulate their actions and conduct as citi(ens. 6ithout such notice

and pu)lication$ there would )e no )asis for the application of the maGim ignorantia legis noneGcusat. #t would )e the height of in-ustice to punish or otherwise )urden a citi(en for thetransgression of a law of which he had no notice whatsoever$ not even a constructive one.

,erhaps at no time since the esta)lishment of the ,hilippine epu)lic has the pu)lication of lawstaken so vital significance that at this time when the people have )estowed upon the ,resident apower heretofore en-o%ed solel% )% the legislature. 6hile the people are kept a)reast )% the massmedia of the de)ates and deli)erations in the Batasan ,am)ansa O and for the diligent ones$read% access to the legislative records O no such pu)licit% accompanies the law?making processof the ,resident. hus$ without pu)lication$ the people have no means of knowing whatpresidential decrees have actuall% )een promulgated$ much less a definite wa% of informing

themselves of the specific contents and teGts of such decrees. >"mphasis supplied

Because petitioners failed to follow the reuirements enumerated )% the evised +dministrativeCode$ the assailed regulation must )e struck down.

oing now to the content of C&1 27?33$ we likewise hold that it is unconstitutional for )eingviolative of the eual protection clause of the Constitution.
http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt20http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt20http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt21http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt20http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt21


47/470

he eual protection clause means that no person or class of persons shall )e deprived of thesame protection of laws en-o%ed )% other persons or other classes in the same place in likecircumstances. hus$ the guarantee of the eual protection of laws is not violated if there is areasona)le classification. For a classification to )e reasona)le$ it must )e shown that > it restson su)stantial distinctions >2 it is germane to the purpose of the law >3 it is not limited to

eGisting conditions onl% and >@ it applies euall% to all mem)ers of the same class.22

0nfortunatel%$ C&1 27?23 does not meet these reuirements. 6e do not see how the ualit%of wheat is affected )% who imports it$ where it is discharged$ or which countr% it came from.

hus$ on the one hand$ even if other millers eGcluded from C&1 27?23 have imported foodgrade wheat$ the product would still )e declared as feed grade wheat$ a classification su)-ectingthem to 7H tariff. 1n the other hand$ even if the importers listed under C&1 27?23 haveimported feed grade wheat$ the% would onl% )e made to pa% 3H tariff$ thus depriving the state ofthe taGes due. he regulation$ therefore$ does not )ecome disadvantageous to respondent onl%$)ut even to the state.

#t is also not clear how the regulation intends to monitor more closel% wheat importations andthus prevent their misclassification. + careful stud% of C&1 27?23 shows that it not onl% failsto achieve this end$ )ut results in the opposite. he application of the regulation forecloses thepossi)ilit% that other corporations that are eGcluded from the list import food grade wheat at thesame time$ it creates an assumption that those who meet the criteria do not import feed gradewheat. #n the first case$ importers are unnecessaril% )urdened to prove the classification of theirwheat imports while in the second$ the state carries that )urden.

,etitioner Commissioner of Customs also went )e%ond his powers when the regulation limitedthe customs officerNs duties mandated )% /ection @3 of the ariff and Customs Law$ as

amended. he law provides:

/ection @3. O Duties of Customs 1fficer asked to "Gamine$ Classif%$ and +ppraise #mported+rticles. O he customs officer tasked to eGamine$ classif%$ and appraise imported articles shalldetermine whether the packages designated for eGamination and their contents are in accordancewith the declaration in the entr%$ invoice and other pertinent documents and shall make return insuch a manner as to indicate whether the articles have )een trul% and correctl% declared in theentr% as regard their uantit%$ measurement$ weight$ and tariff classification and not importedcontrar% to law. *e shall su)mit samples to the la)orator% for anal%sis when feasi)le to do so andwhen such anal%sis is necessar% for the proper classification$ appraisal$ andJor admission into the,hilippines of imported articles.

Likewise$ the customs officer shall determine the unit of uantit% in which the% are usuall%)ought and sold$ and appraise the imported articles in accordance with /ection 2 of this Code.

Failure on the part of the customs officer to compl% with his duties shall su)-ect him to thepenalties prescri)ed under /ection 3


48/470

he provision mandates that the customs officer must first assess and determine the classificationof the imported article )efore tariff ma% )e imposed. 0nfortunatel%$ C&1 23?27 has alread%classified the article even )efore the customs officer had the chance to eGamine it. #n effect$petitioner Commissioner of Customs diminished the powers granted )% the ariff and CustomsCode with regard to wheat importation when it no longer reuired the customs officerNs prior

eGamination and assessment of the proper classification of the wheat.

#t is well?settled that rules and regulations$ which are the product of a delegated power to createnew and additional legal provisions that have the effect of law$ should )e within the scope of thestatutor% authorit% granted )% the legislature to the administrative agenc%. #t is reuired that theregulation )e germane to the o)-ects and purposes of the law and that it )e not in contradictionto$ )ut in conformit% with$ the standards prescri)ed )% law.23

#n summar%$ petitioners violated respondentNs right to due process in the issuance of C&1 27?23 when the% failed to o)serve the reuirements under the evised +dministrative Code.,etitioners likewise violated respondentNs right to eual protection of laws when the% provided

for an unreasona)le classification in the application of the regulation. Finall%$ petitionerCommissioner of Customs went )e%ond his powers of delegated authorit% when the regulationlimited the powers of the customs officer to eGamine and assess imported articles.

6*""F1"$ in view of the foregoing$ the ,etition is D"!#"D.

/1 1D""D.
http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt23http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt23http://www.lawphil.net/judjuris/juri2012/feb2012/gr_179579_2012.html#fnt23


49/470

Macasiano vs. NHA, GR 107921, 1 July 1993[treating declaratory relief as one for

prohibition]

!A"#$(etitioner see4s to have this Co!rt declare as !nconstit!tional Sections 0 and ** of 'ep!blic ct No. ++/,

other$ise 4no$n as the 8rban Development and ?o!sin2 ct of //. ?e predicates his locust standi on his bein2 a

cons!ltant of the Department of (!blic ;or4s and ?i2h$ays "D(;?# p!rs!ant to a Contract of Cons!ltancy on

Operation for 'emoval of Obstr!ctions and Encroachments on (roperties of (!blic Domain "e9ec!ted immediately

after his retirement on -an!ary // from the (hilippine National (olice# and his bein2 a ta9payer

In its Comment5filed on 1 -an!ary //6, respondent National Mappin2 and 'eso!rce Information!thority alle2es that the implementation of the assailed sections of the ct does not belon2 to or fall$ithin its !risdiction. It disa2rees $ith the petitioner5s stand that the said sections are !nconstit!tional andavers that Section 0 merely provides for the =h!manitarian approach= to$ards less privile2ed, citi@ensand does not in fact prohibit b!t merely discoura%es eviction or demolition, $hile Section ** only covers

pro2ram beneficiaries.

'##(%$

)*+ It is a r!le firmly entrenched in o!r !rispr!dence that the constit!tionality of an act of the

le2islat!re $ill not be determined by the co!rts !nless that,

appropriate cases and is necessary to a determination of the case, i.e., the iss!e of constit!tionality m!st

be very lis ota presented.

:IS MOT.The ca!se of the s!it or action. 3y this term is !nderstood the commencement of the controve

rsy, and thebe2innin2 of the s!it

?E:D7

8To reiterate, the essential re

It is easily discernible in the instant case that the first t$o "# f!ndamental re

e9ercisin2 his ri2hts as a property o$ner beca!se of the assertion by other parties of any benefit !nderthe challen2ed sections of the said ct. -!dicial revie$ cannot be e9ercised in vacuo.

-!dicial po$er is the =ri2ht to determine act!al controversies arisin2 bet$een adverse liti2ants.= 11

In reality, his petition is one for declaratory relief as he prays therein that, =his ri2hts as $ell as those ofprivate lando$ners be clearly defined and his d!ties !nder the Constit!tion and the pertinent la$s bedearly stated $ith respect to the demolition of ille2al str!ct!res on p!blic and private lands.= 1Even so, itis still not viable since amon2 the essential re


50/470

"a# there m!st be a !sticiable controversy,"b#the controversy m!st be bet$een persons $hose interestsare adverse and "c# the party see4in2 declaratory relief m!st have a le2al interest in the controversy. 13A!rthermore, an action for declaratory relief does not fall $ithin the ori2inal !risdiction of the S!premeCo!rt even if only

The petitioner is not li4e$ise a =proper party.= s a cons!ltant of the D(;? !nder the =Contract for

Cons!ltancy . . .,= he is not vested $ith any a!thority to demolish obstr!ctions and encroachments on

properties of the p!blic domain, m!ch less on private lands

epu)lic of the ,hilippinesSUPREME COURT

&anila

"! B+!C

G.R. No. 10791 -2 1, 1993

POLCE GENERAL LE MACASANO Re+., $% &$' ()*)($+ )' +&e (o%'2+)%+ o +&e #e*)r+me%+ o Pb2$( or:' )%/ !$&;)'#P! T)':


51/470

"a# ;hen persons or entities occ!py dan2er areas s!ch as esteros, railroad trac4s,2arba2e d!mps, riverban4s, shorlines, $ater$ays, and other p!blic places s!ch asside$al4s, roads, par4s and play2ro!ndsF

"b# ;hen 2overnment infrastr!ct!re proects $ith available f!ndin2 are abo!t to beimplementedF or

"c# ;hen there is a co!rt order for eviction and demolition.

In the e9ec!tion of eviction or demolition orders involvin2 !nderprivile2ed and homelessciti@ens, the follo$in2 shall be mandatory7

"# Notice !pon the affected persons or entities at least thirty "6)# days prior to the date ofeviction or demolitionF

"# de

"6# (resence of local 2overnment officials or their representatives d!rin2 eviction ordemolitionF

"*# (roper identification of all persons ta4in2 part in the demolitionF

"1# E9ec!tion of eviction or demolition only d!rin2 re2!lar office ho!rs from Mondays toAridays and d!rin2 2ood $eather, !nless the affected families consent other$iseF

"B# no !se of heavy e

"+# (roper !niforms for members of the (hilippine National (olice $ho shall occ!py the

first line of la$ enforcement and observe proper dist!rbance control proced!resF and

"0# de


52/470

moratori!m shall not apply to those persons $ho have constr!cted their str!ct!res afterthe effectivity of this ct and for cases en!merated in Section 0 hereof.

(etitioner maintains that the said provisions are !nconstit!tional beca!se7

"a# They deprive the 2overnment, and more so, private property o$ners of their property

$itho!t d!e process of la$ and $itho!t compensationF

"b# They re$ard, instead of p!nish, $hat this ?onorable Co!rt has cate2orically declaredas !nla$f!l actsF

"c# They violate the prohibition a2ainst le2islation that= ta4es a$ay one5s property to be2iven to plain interlopersF

"d# They s$eep overbroadly over le2itimate concerns of the police po$er of the StateFand

"e# They encroach !pon the !dicial po$er to its valid !d2ments and orders.4

On ) December //, $e re

In its Comment5filed on 1 -an!ary //6, respondent National Mappin2 and 'eso!rce Information!thority alle2es that the implementation of the assailed sections of the ct does not belon2 to or fall$ithin its !risdiction. It disa2rees $ith the petitioner5s stand that the said sections are !nconstit!tional andavers that Section 0 merely provides for the =h!manitarian approach= to$ards less privile2ed, citi@ensand does not in fact prohibit b!t merely discoura%es eviction or demolition, $hile Section ** only coverspro2ram beneficiaries.

On 1 -an!ary //6, the 'ealty O$ners ssociation of the (hilippines, Inc. filed a motion to intervene6alle2in2 that it has a le2al interest in the s!ccess of the petition and is in f!ll accord $ith it. This Co!rtre

On B Aebr!ary //6, the Office of the &overnment Corporate "O&CC# filed a comment7for therespondent National ?o!sin2 !thority "N?# informin2 this Co!rt that =in a letter of respondent N?addressed to the office of the !ndersi2ned co!nsel, dated / -an!ary //6, . . ., the former cate2oricallye9pressed as its official stand on the instant petition that Sections 0 and ** of 'ep!blic ct No. ++/ areindeed !nconstit!tional,= and that =after a circ!mspect eval!ation of petition. ;e find no co2ent reasonnot to s!pport the position heretofore ta4en by respondent N?.= Said office then prays that the instantpetition be 2iven d!e co!rse.

On * May //6, the Solicitor &eneral filed his Comment to the petition. ?e maintains that, the instantpetition is devoid of merit for non%compliance $ith the essential re

advisory opinion, that the petitioner is not the proper party to

8p to this time, no comment has been s!bmitted by the parties on the motion to intervene. Considerin2,ho$ever, that the iss!es are clear and simple eno!2h, this Co!rt dispenses $ith the need for a commenton the said motion, denies the same and, after deliberatin2 on the iss!es said and the ar2!mentsadd!ced by the parties in the petition and comments, declares this petition to be $itho!t merit.


53/470

It is a r!le firmly entrenched in o!r !rispr!dence that the constit!tionality of an act of the le2islat!re $illnot be determined by the co!rts !nless that,

It is easily discernible in the instant case that the first t$o "# f!ndamental re

In reality, his petition is one for declaratory relief as he prays therein that, =his ri2hts as $ell as those of

private lando$ners be clearly defined and his d!ties !nder the Constit!tion and the pertinent la$s bedearly stated $ith respect to the demolition of ille2al str!ct!res on p!blic and private lands.= 1Even so, itis still not viable since amon2 the essential re

ltho!2h the petitioner li4e$ise anchors his locus standion the fact that he is a ta9payer, it does notmean, ho$ever, that in each and every instance $here s!ch a 2ro!nd is invo4ed, this Co!rt is left $ith noalternative e9cept to hear the parties. In )an vs. acapa%al, 18$e clarified that =as far as a ta9payer5s s!its concerned, this Co!rt is not devoid of the discretion as to $hether or not it sho!ld be entertained.=

;e do not, as $ell, find an ind!bitable 2ro!nd for the constit!tional challen2e. s this Co!rt said thro!2hMr. -!stice Isa2ani . Cr!@ in Garcia vs. Executive *ecretar#.19


54/470

On the merits, ;e find that the constit!tional challen2e m!st be reected for fail!re tosho$ that there is an ind!bitable 2ro!nd for it, not to say even a necessity to resolve it.The policy of the co!rts is to avoid r!lin2 on constit!tional

;e cannot end this resol!tion $itho!t a fe$ $ords on the comment of the O&CC for p!blic respondentNational ?o!sin2 !thority $herein the O&CC merely adopted the stand of the officer%in%char2e of the:e2al Department of the said !thority that the challen2ed sections of '.. No. ++/ are !nconstit!tional.On its o$n, the O&CC did not even attempt to reason o!t $hy this petition sho!ld be 2ranted or denied. Ithas obvio!sly treated this case $itho!t the circ!mspection and serio!sness e9pected of it especially inthe li2ht of the f!nctions, d!ties and responsibilities of the N? !nder the challen2ed ct. The O&CCsho!ld not have c!rsorily adopted the opinion of the officer%in%char2e $ho acted on his o$n and $ho,apparently, did not even refer his opinion to the 3oard of Directors of the N?.

;herefore, for lac4 of merit, the instant petition is DISMISSED $ith costs a2ainst the petitioner.

SO O'DE'ED.


55/470

Wilson Gamboa vs. Finance Secretary, GR 176579, 28 June 2011[treating declaratory

relief as one for mandamus if it has far reaching implications]

!A"#$

he 1ffice of the /olicitor eneral >1/ initiall% filed a motion for reconsideration on)ehalfofthe /"C$Eassailing the 2; 8une 2 Decision. *owever$ it su)seuentl% filed aConsolidated Comment on )ehalf of the /tate$


56/470

G.R. No. 1$" O:to' , 2012

HEIRS O) -I*SON P. GAMBOA,?,etitioners$

vs.)INANCE SECRETAR4MARGARITO B. TE!ES, )INANCEUNDERSECRETAR4JOHN P. SE!I**A, AND COMMISSIONER RICARDO ABCEDEO) THE PRESIDENTIA* COMMISSION ON GOOD GO!ERNMENT@PCGG INTHEIR CAPACITIES AS CHAIR AND MEMBERS, RESPECTI!E*4, O) THEPRI!ATIZATION COUNCI*, CHAIRMAN ANTHONI SA*IM O) )IRST PACI)IC CO.,*TD. IN HIS CAPACIT4 AS DIRECTOR O) METRO PACI)IC ASSET HO*DINGSINC., CHAIRMAN MANUE* !. PANGI*INAN O) PHI*IPPINE *ONG DISTANCETE*EPHONE COMPAN4 @P*DT IN HIS CAPACIT4 AS MANAGING DIRECTOR O))IRST PACI)IC CO., *TD., PRESIDENT NAPO*EON *. NAZARENO O) PHI*IPPINE*ONG DISTANCE TE*EPHONE COMPAN4, CHAIR )E BARIN O) THE

SECURITIES AND E=CHANGE COMMISSION, %&+ PRESIDENT )RANCIS *IM O)THE PHI*IPPINE STOC E=CHANGE, espondents.

PAB*ITO !. SANIDAD %&+ ARNO !. SANIDAD, ,etitioner?in?#ntervention.

" / 1 L 0 # 1 !

CARPIO,J.:

his resolves the motions for reconsideration of the 2; 8une 2 Decision filed )% > the,hilippine /tock "Gchange5s >,/" ,resident$ >2 &anuel 9. ,angilinan >,angilinan$2>3

!apoleon L. !a(areno >!a(areno $

3

and > @ the /ecurities and "Gchange Commission >/"C

@

>collectivel%$ movants .

he 1ffice of the /olicitor eneral >1/ initiall% filed a motion for reconsideration on)ehalfofthe /"C$Eassailing the 2; 8une 2 Decision. *owever$ it su)seuentl% filed aConsolidated Comment on )ehalf of the /tate$


57/470

second?class citi(ens$ in their own countr%. 6hat is at stake here is whether Filipinos orforeigners will have effective control of the ,hilippine national econom%. #ndeed$ if ever there isa legal issue that has far?reaching implications to the entire nation$ and to future generations ofFilipinos$ it is the threshold legal issue presented in this case.

Contrar% to ,angilinanNs narrow view$ the serious economic conseuences resulting in theinterpretation of the term capital in /ection $ +rticle K## of the Constitution undou)tedl%demand an immediate ad-udication of this issue. S8/6( /ut, t5 ;%'9'%:58&g 8/68:%t8o&s o;t58s 8ssu ust8;( t5 t'%t&t o; t5 /t8t8o& %s o& ;o' %&+%us. 7

#n'u*on Stevedoring Corp# v# Anti1Dummy "oard$;the Court deemed it wise and eGpedient toresolve the case although the petition for declarator% relief could )e outrightl% dismissed for)eing procedurall% defective. here$ appellant admittedl% had alread% committed a )reach of the,u)lic /ervice +ct in relation to the +nti?Dumm% Law since it had )een emplo%ing non?+merican aliens long )efore the decision in a prior similar case. *owever$ the main issue in'u*on Stevedoring was of transcendental importance$ involving the eGercise or en-o%ment of

rights$ franchises$ privileges$ properties and )usinesses which onl% Filipinos and ualifiedcorporations could eGercise or en-o% under the Constitution and the statutes. &oreover$ the sameissue could )e raised )% appellant in an appropriate action. hus$ in'u*on Stevedoring the Courtdeemed it necessar% to finall% dispose of the case for the guidance of all concerned$ despite theapparent procedural flaw in the petition.

he circumstances surrounding the present case$ such as the supposed procedural defect of thepetition and the pivotal legal issue involved$ resem)le those in'u*on Stevedoring# Conseuentl%$in the interest of su)stantial -ustice and faithful adherence to the Constitution$ we opted toresolve this case for the guidance of the pu)lic and all concerned parties.

II.o change of any long-standing rule!

thus, no redefinition of the term "capital."

&ovants contend that the term capital in /ection $ +rticle K## of the Constitution has long)een settled and defined to refer to the total outstanding shares of stock$ whether voting or non?voting. #n fact$ movants claim that the /"C$ which is the administrative agenc% tasked to enforcethe


58/470

the purported long?standing definition of the term capital$ which supposedl% refers to the totaloutstanding shares of stock$ whether voting or non?voting. o repeat$ until the present case therehas never )een a Court ruling categoricall% defining the term capital found in the variouseconomic provisions of the A3E$ A73 and A;7 ,hilippine Constitutions.

he opinions of the /"C$ as well as of the Department of 8ustice >D18$ on the definition of theterm capital as referring to )oth voting and non?voting shares >com)ined total of common andpreferred shares are$ in the first place$ conflicting and inconsistent. here is no )asis whatsoeverto the claim that the /"C and the D18 have consistentl% and uniforml% adopted a definition ofthe term capital contrar% to the definition that this Court adopted in its 2; 8une 2 Decision.

#n D18 1pinion !o. 3$ s. A;E$dated 7 1cto)er A;E$ the scope of the term capital in/ection A$ +rticle K#9 of the A73 Constitution was raised$ that is$ whether the term capitalincludes )oth preferred and common stocks. he issue was raised in relation to a stock?swaptransaction )etween a Filipino and a 8apanese corporation$ )oth stockholders of a domesticcorporation that owned lands in the ,hilippines. hen &inister of 8ustice "stelito ,. &endo(a

ruled that the resulting ownership structure of the corporation would )e u&:o&st8tut8o&%6)ecause ot8&g s5%'s 8& t5 J%/%&s g'ou/, 7586 't%8&8&g $0F o; t5 tot%6 /':&t%g o;:oo& %&+ /';''+ s5%'s 8& )868/8&o 5%&+s 7ou6+ %ou&t to :8':u>&t8o& o; t5/'8&:8/6 o; :o&t'o6 ( P5868//8& sto:


59/470

same class of shares regardless of differences in voting rights and privileges. &inister &endo(astressed that the


60/470

/"C. E./o!ers and -unctions o the Commission#1 E.. he Commission shall act withtransparenc% and shall have the powers and functions provided )% this Code$ ,residential Decree!o. A2?+$ the Corporation Code$ the #nvestment *ouses Law$ the Financing Compan% +ct andother eGisting laws. ,ursuant thereto the Commission shall have$ among others$ the followingpowers and functions:

G G G G

@g P'/%', %//'o>, %&+ o' '/%6 'u6s, 'gu6%t8o&s %&+ o'+'s, %&+ 8ssu opinions %&+/'o>8+ gu8+%&: o& %&+ su/'>8s :o/68%&: 78t5 su:5 'u6s, 'gu6%t8o&s %&+ o'+'s

G G G G >"mphasis supplied

hus$ the act of the individual Commissioners or legal officers of the /"C in issuing opinionsthat have the effect of /"C rules or regulations is ultra vires. 0nder /ections @.< and E.>g ofthe Code$ onl% the /"C en banc can issue opinions that have the force and effect of rules or

regulations. /ection @.< of the Code )ars the /"C en banc from delegating to an% individualCommissioner or staff the power to adopt rules or regulations. I& s5o't, %&( o/8&8o& o;8&+8>8+u%6 Co8ss8o&'s o' SEC 6g%6 o;;8:'s +os &ot :o&st8tut % 'u6 o' 'gu6%t8o& o;t5 SEC.

he /"C admits during the 1ral +rguments that onl% the /"C en banc$ and not an% of itsindividual commissioners or legal staff$ is empowered to issue opinions which have the same)inding effect as /"C rules and regulations$ thus:

80/#C" C+,#1:

/o$ under the law$ it is the Commission "n Banc that can issue an

/"C 1pinion$ correctR

C1&//#1!" +#":3

hatNs correct$ our *onor.

80/#C" C+,#1:

Can the Commission "n Banc delegate this function to an /"C officerR

C1&//#1!" +#":

es$ our *onor$ we have delegated it to the eneral Counsel.

80/#C" C+,#1:
http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt13http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt13


61/470

#t can )e delegated. 6hat cannot )e delegated )% the Commission "n Banc to acommissioner or an individual emplo%ee of the CommissionR

C1&//#1!" +#":

!ovel opinions that haveM to )e decided )% the "n Banc...

80/#C" C+,#1:

6hat cannot )e delegated$ among others$ is the power to adopt or amend rulesand regulations$ correctR

C1&//#1!" +#":

hatNs correct$ our *onor.

JUSTICE CARPIO

So, (ou :o8& t5 t7o @2, t5 SEC o;;8:', 8; +6g%t+ t5%t /o7', :%&8ssu %& o/8&8o& ut t5%t o/8&8o& +os &ot :o&st8tut % 'u6 o' 'gu6%t8o&,:o'':t

COMMISSIONER GAITE

Co'':t, 4ou' Ho&o'.

JUSTICE CARPIO

So, %66 o; t5s o/8&8o&s t5%t (ou &t8o&+ t5( %' &ot 'u6s %&+'gu6%t8o&s, :o'':t

COMMISSIONER GAITE

T5( %' &ot 'u6s %&+ 'gu6%t8o&s.

80/#C" C+,#1:

#f the% are not rules and regulations$ the% appl% onl% to that particular situation

and will not constitute a precedent$ correctR

C1&//#1!" +#":

es$ our *onor.@>"mphasis supplied

/ignificantl%$ the /"C en banc$ which is the collegial )od% statutoril% empowered to issue rulesand opinions on )ehalf of the /"C$ has adopted even the randfather ule in determining
http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt14http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt14http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt14


62/470

compliance with the


63/470

&. !1LL"D1. hank %ou. 6ith respect to an investment )% one corporation in anothercorporation$ sa%$ a corporation with ot8&g '8g5ts, 8s 'u8'+. he legal and )eneficial ownershipof "mphasis supplied

Both the 9oting Control est and the Beneficial 1wnership est must )e applied to determinewhether a corporation is a ,hilippine national.

he interpretation )% legal officers of the /"C of the term capital$ em)odied in variousopinions which respondents relied upon$ is merel% preliminar% and an opinion onl% of such

officers. o repeat$ an% such opinion does not constitute an /"C rule or regulation. #n fact$ man%of these opinions contain a disclaimer which eGpressl% states: G G G t5 ;o'go8&g o/8&8o& is)ased solel% on facts disclosed in %our uer% and relevant onl% to the particular issue raisedtherein and s5%66 &ot us+ 8& t5 &%tu' o; % st%&+8&g 'u6 8&+8&g u/o& t5 Co8ss8o&8& ot5' :%ss 75t5' o; s886%' o' +8ss886%' :8':ust%&:s.


64/470

he ,/" ,resident is grossl% mistaken. #n )oth cases of9ational Telecommunications v# Court oAppeals2and/hilippine 'ong Distance Telephone Company v# 9ational TelecommunicationsCommission%2the Court did not define the term capital as found in /ection $ +rticle K## ofthe A;7 Constitution. I& ;%:t, t5s t7o :%ss &>' &t8o&+, +8s:uss+ o' :8t+ S:t8o&11, A't8:6 =II o; t5 Co&st8tut8o& o' %&( o; 8ts :o&o8: /'o>8s8o&s$ %&+ t5us :%&&ot s'>

%s /':+&t 8& t5 8&t'/'t%t8o& o; S:t8o& 11, A't8:6 =II o; t5 Co&st8tut8o& . hese twocases dealt solel% with the determination of the correct regulator% fees under /ection @>e and>f of the ,u)lic /ervice +ct$ to wit:

>e For annual reim)ursement of the eGpenses incurred )% the Commission in the supervision ofother pu)lic services andJor in the regulation or fiGing of their rates$ twent% centavos for eachone hundred pesos or fraction thereof$ of the :%/8t%6 sto:< sus:'8+ o' /%8+$ or if no shareshave )een issued$ of the capital invested$ or of the propert% and euipment whichever is higher.

>f For the issue or increase of :%/8t%6 sto:"mphasis supplied

he CourtNs interpretation in these two cases of the terms capital stock su)scri)ed or paid$capital stock and capital does not pertain to$ and cannot control$ the definition of the termcapital as used in /ection $ +rticle K## of the Constitution$ or an% of the economic provisionsof the Constitution where the term capital is found. he definition of the term capital foundin the Constitution must not )e taken out of conteGt. + careful reading of these two cases revealsthat the terms capital stock su)scri)ed or paid$ capital stock and capital were defined solel%to determine the )asis for computing the supervision and regulation fees under /ection @>e and>f of the ,u)lic /ervice +ct.

III.

Filipini(ation of )ublic *tilities

he ,ream)le of the A;7 Constitution$ as the prologue of the supreme law of the land$ em)odiesthe ideals that the Constitution intends to achieve.22he ,ream)le reads:

6e$ the sovereign Filipino people$ imploring the aid of +lmight% od$ in order to )uild a -ustand humane societ%$ and esta)lish a overnment that shall em)od% our ideals and aspirations$promote the common good$ :o&s'> %&+ +>6o/ ou' /%t'8o&($ and secure to ourselves andour posterit%$ the )lessings of independence and democrac% under the rule of law and a regime oftruth$ -ustice$ freedom$ love$ eualit%$ and peace$ do ordain and promulgate this Constitution.>"mphasis supplied

Consistent with these ideals$ /ection A$ +rticle ## of the A;7 Constitution declares as /tatepolic% the development of a national econom% effectively controlled )% Filipinos:

/ection A. he /tate shall develop a self?reliant and independent national econom% effectivelycontrolled by Filipinos.

Fortif%ing the /tate polic% of a Filipino?controlled econom%$ the Constitution decrees:
http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt20http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt21http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt21http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt22http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt22http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt20http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt21http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt22


65/470

/ection . he Congress shall$ upon recommendation of the economic and planning agenc%$when the national interest dictates$ reserve to citi(ens of the ,hilippines or to corporations orassociations at least siGt%per centum of whose capital is owned )% such citi(ens$ or such higherpercentage as Congress ma% prescri)e$ certain areas of investments. he Congress shall enactmeasures that will encourage the formation and operation of enterprises whose capital is wholl%

owned )% Filipinos.

#n the grant of rights$ privileges$ and concessions covering the national econom% and patrimon%$the /tate shall give preference to ualified Filipinos.

he /tate shall regulate and eGercise authorit% over foreign investments within its national-urisdiction and in accordance with its national goals and priorities.23

0nder /ection $ +rticle K## of the A;7 Constitution$ Congress ma% reserve to citi(ens of the,hilippines or to corporations or associations at least siGt%per centum of whose capital is owned)% such citi(ens$ or such higher percentage as Congress ma% prescri)e$ certain areas of

investments. hus$ in numerous laws Congress has reserved certain areas of investments toFilipino citi(ens or to corporations at least siGt% percent of the :%/8t%6 of which is owned )%Filipino citi(ens. /ome of these laws are: > egulation of +ward of overnment Contracts or.+. !o. E;3 >2 ,hilippine #nventors #ncentives +ct or .+. !o. 3;E >3 &agna Carta for&icro$ /mall and &edium "nterprises or .+. !o. @ ,hilippine 1verseas /hippingDevelopment +ct or .+. !o. 7@7 >E Domestic /hipping Development +ct of 2@ or .+.!o. A2AE >7 /hip&ortgage Decree or ,.D. !o. E2.

6ith respect to pu)lic utilities$ the A;7 Constitution specificall% ordains:

/ection . No ;'%&:58s, :'t8;8:%t, o' %&( ot5' ;o' o; %ut5o'8%t8o& ;o' t5 o/'%t8o& o;% /u68: ut868t( s5%66 g'%&t+ :/t to :8t8&s o; t5 P5868//8&s o' to :o'/o'%t8o&s o'%sso:8%t8o&s o'g%&8+ u&+' t5 6%7s o; t5 P5868//8&s, %t 6%st s8t( per centum o; 75os:%/8t%6 8s o7&+ ( su:5 :8t8&s nor shall such franchise$ certificate$ or authori(ation )eeGclusive in character or for a longer period than fift% %ears. !either shall an% such franchise orright )e granted eGcept under the condition that it shall )e su)-ect to amendment$ alteration$ orrepeal )% the Congress when the common good so reuires. he /tate shall encourage euit%participation in pu)lic utilities )% the general pu)lic. he participation of foreign investors in thegoverning )od% of an% pu)lic utilit% enterprise shall )e limited to their proportionate share in itscapital$ and all the eGecutive and managing officers of such corporation or association must )eciti(ens of the ,hilippines. >"mphasis supplied

his provision$ which mandates the Filipini(ation of pu)lic utilities$ reuires that an% form ofauthori(ation for the operation of pu)lic utilities shall )e granted onl% to citi(ens of the,hilippines or to corporations or associations organi(ed under the laws of the ,hilippines at leastsiGt% per centum of whose capital is owned )% such citi(ens. T5 /'o>8s8o& 8s K%& /'ssL':og&8t8o& o; t5 s&s8t8> %&+ >8t%6 /os8t8o& o; /u68: ut868t8s ot5 8& t5 &%t8o&%6:o&o( %&+ ;o' &%t8o&%6 s:u'8t(.2@
http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt23http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt24http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt23http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt24


66/470

he A;7 Constitution reserves the ownership and operation of pu)lic utilities eGclusivel% to >Filipino citi(ens$ or >2 corporations or associations at least /"C registered enterprise$ at least siGt% percent >Boldfacing$ italici(ation andunderscoring supplied

hus$ the F#+ clearl% and uneuivocall% defines a P5868//8& &%t8o&%6 as a ,hilippine citi(en$or a domestic corporation at least $0F o; t5 :%/8t%6 sto:< outst%&+8&g %&+ entitled to vote isowned )% ,hilippine citi(ens.

he definition of a ,hilippine national in the F#+ reiterated the meaning of such term asprovided in its predecessor statute$ "Gecutive 1rder !o. 22< or the 6mnibus Investments Codeo 0:


67/470

P5868//8&s or a trustee of funds for pension or other emplo%ee retirement or separation)enefits$ where the trustee is a ,hilippine national and at least siGt% per cent >Boldfacing$ italici(ation and underscoring supplied

0nder +rticle @;>32


68/470

>f ,hilippine !ational shall mean a citi(en of the ,hilippines or a partnership or associationwholl% owned )% citi(ens of the ,hilippines or % :o'/o'%t8o& o'g%&8+ u&+' t5 6%7s o; t5P5868//8&s o; 758:5 %t 6%st s8t( /' :&t o; t5 :%/8t%6 sto:< outst%&+8&g and entitled tovote 8s o7&+ %&+ 56+ ( :8t8&s o; t5 P5868//8&s or a trustee of funds for pension or otheremplo%ee retirement or separation )enefits$ where the trustee is a ,hilippine !ational and at least

siGt% per cent of the fund will accrue to the )enefit of ,hilippine !ationals: ,rovided$ hat wherea corporation and its non?Filipino stockholders own stock in a registered enterprise$ at least siGt%per cent of the capital stock outstanding and entitled to vote of )oth corporations must )e ownedand held )% the citi(ens of the ,hilippines and at least siGt% per cent of the mem)ers of the Boardof Directors of )oth corporations must )e citi(ens of the ,hilippines in order that the corporationshall )e considered a ,hilippine !ational. >Boldfacing$ italici(ation and underscoring supplied

0nder /ection 3 of epu)lic +ct !o. E@EE or the-oreign "usiness Regulations Act$ which tookeffect on 3 /eptem)er A-oreign Investment9egative 'ist?# ? he Foreign #nvestment !egative List shall have two 2component lists:A and":

a.ist / s5%66 &u'%t t5 areas of activities reserved to )hilippine nationals by mandate ofthe Constitution %&+ s/:8;8: 6%7s.

).'ist " shall contain the areas of activities and enterprises regulated pursuant to law:

. which are defense?related activities$ reuiring prior clearance and authori(ation from theDepartment of !ational Defense D!DM to engage in such activit%$ such as the manufacture$
http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt31http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt32http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt2http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt31http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt32http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt2


69/470

repair$ storage andJor distri)ution of firearms$ ammunition$ lethal weapons$ militar% ordinance$eGplosives$ p%rotechnics and similar materials unless such manufacturing or repair activit% isspecificall% authori(ed$ with a su)stantial eGport component$ to a non?,hilippine national )% the/ecretar% of !ational Defense or

2. which have implications on pu)lic health and morals$ such as the manufacture and distri)utionof dangerous drugs all forms of gam)ling nightclu)s$ )ars$ )eer houses$ dance halls$ sauna andsteam )athhouses and massage clinics. >Boldfacing$ underscoring and italici(ation supplied

/ection ; of the F#+ enumerates the investment areas reserved to ,hilippine nationals. )o'8g&I&>st&t Ng%t8> *8st A :o&s8sts o; areas of activities reserved to )hilippine nationals bymandate of the Constitution and specific laws, 75' ;o'8g& u8t( /%'t8:8/%t8o& 8& %&(&t'/'8s s5%66 688t+ to t5 %8u /':&t%g /'ss6( /'s:'8+ ( t5Co&st8tut8o& %&+ ot5' s/:8;8: 6%7s. I& s5o't, to o7& %&+ o/'%t % /u68: ut868t( 8& t5P5868//8&s o& ust % P5868//8& &%t8o&%6 %s +;8&+ 8& t5 )IA. T5 )IA 8s %u&+%&t&ot8: to ;o'8g& 8&>sto's to 75%t t&t t5( :%& 8&>st 8& /u68: ut868t8s 8& t5

P5868//8&s.

o repeat$ among the areas of investment covered )% the Foreign #nvestment !egative List + isthe ownership and operation of pu)lic utilities$ which the Constitution eGpressl% reserves toFilipino citi(ens and to corporations at least *8st A o; t5 )IA 's'>s t5 o7&'s58/ %&+ o/'%t8o& o; /u68: ut868t8s o&6( toP5868//8& &%t8o&%6s, +;8&+ 8& S:t8o& 3@% o; t5 )IA %s > a citi(en of the ,hilippinesG G G or >3 % :o'/o'%t8o& o'g%&8+ u&+' t5 6%7s o; t5 P5868//8&s o; 758:5 %t 6%st s8t(/':&t @$0F o; t5 :%/8t%6 sto:< outst%&+8&g and entitled to vote 8s o7&+ %&+ 56+ (:8t8&s o; t5 P5868//8&s or >@ a corporation organi(ed a)road and registered as doing)usiness in the ,hilippines under the Corporation Code of which one hundred percent >H of

the capital stock outstanding and entitled to vote is wholl% owned )% Filipinos or a trustee offunds for pension or other emplo%ee retirement or separation )enefits$ where the trustee is a,hilippine national and at least siGt% percent >


70/470

C1&//#1!" +#":

Correct$ our *onor.

80/#C" C+,#1:

+nd /ection ; of the Foreign #nvestments +ct of AA states that Monl% ,hilippinenationals can own and operate pu)lic utilitiesM$ correctR

C1&//#1!" +#":

es$ our *onor.

80/#C" C+,#1:

+nd the same Foreign #nvestments +ct of AA defines a ,hilippine national

either as a citi(en of the ,hilippines$ or if it is a corporation at least siGt% percent>


71/470


72/470

2. 1pinion of @ +pril AA3$ addressed to Director +ngeles . 6ong of the ,hilippine1verseas "mplo%ment +dministration

3. 1pinion of 23 !ovem)er AA3$ addressed to &essrs. Dominador +lmeda and enato/. Calma

@. 1pinion of 7 Decem)er AA3$ addressed to oco Bunag =apunan &igallos Q8ardele(a

E. /"C 1pinion !o. @A?@$ addressed to omulo &a)anta Buenaventura /a%oc Q DeLos +ngeles

%86&t o; t% %&+ ;8s:%68&:&t8>s ( % &o&9P5868//8& &%t8o&%6 :%&&ot /t 8t ;'o S:t8o& 11, A't8:6 =II o; t5Co&st8tut8o& 'gu6%t8&g ;o'8g& 8&>st&ts 8& /u68: ut868t8s. #n fact$ the Board of#nvestmentsN P'8' o& I&>st&t Po68:8s 8& t5 P5868//8&s$3@which is given out to foreigninvestors$ provides:
http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt34http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt34http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt34


73/470

PART III. )OREIGN IN!ESTMENTS -ITHOUT INCENTI!ES

#nvestors who do not seek incentives andJor whose chosen activities do not ualif% forincentives$ >i.e.$ the activit% is not listed in the #,,$ and the% are not eGporting at least 7H oftheir production ma% go ahead and make the investments without seeking incentives. T5( o&6(

5%> to gu8++ ( t5 )o'8g& I&>st&ts Ng%t8> *8st @)IN*.

he F#!L clearl% defines investment areas reuiring at least "mphasis supplied

+.

'ight to elect directors, coupled with beneficial ownership,

translates to effective control.

he 2; 8une 2 Decision declares that the ot8&g '8g5ts, 8s 'u8'+. he legal and )eneficial ownershipof "mphasis supplied

his is consistent with /ection 3 of the F#+ which provides that where H of the capital stockis held )% a trustee of funds for pension or other emplo%ee retirement or separation )enefits$

the trustee is a ,hilippine national if at least siGt% percent >) of the #mplementing ules of the F#+provides that for stocks to )e deemed owned and held )% ,hilippine citi(ens or ,hilippinenationals$ mere legal title is not enough to meet the reuired Filipino euit%. )u66 &;8:8%6o7&'s58/ o; t5 sto:ot8&g '8g5ts, 8s ss&t8%6.

/ince the constitutional reuirement of at least amendment of articles of incorporation
http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt35http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt35http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt36http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt36http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt35http://www.lawphil.net/judjuris/juri2012/oct2012/gr_176579_2012.html#fnt36


74/470

>2 increase and decrease of capital stock >3 incurring$ creating or increasing )ondedinde)tedness >@ sale$ lease$ mortgage or other disposition of su)stantiall% all corporate assets>E investment of funds in another )usiness or corporation or for a purpose other than the primar%purpose for which the corporation was organi(ed >7 merger and consolidation and >; dissolution of corporation.37

/ince a specific class of shares ma% have rights and privileges or restrictions different from therest of the shares in a corporation$ the ot8&g s5%'s, %t 6%st $0 /':&t o; t5 :oo& s5%'s %&+%t 6%st $0 /':&t o; t5 /';''+ &o&9>ot8&g s5%'s ust o7&+ ( )868/8&os. 1fcourse$ if a corporation issues onl% a single class of shares$ at least o'

o; )868/8&o :8t8&s ust %//6( s/%'%t6( to %:5 :6%ss o; s5%'s, 75t5' :oo&,/';''+ &o&9>ot8&g, /';''+ >ot8&g o' %&( ot5' :6%ss o; s5%'s. his uniform applicationof the


75/470

&. !1LL"D1. #n teaching law$ we are alwa%s faced with this uestion: 6here do we )asethe euit% reuirement$ is it on the authori(ed capital stock$ on the su)scri)ed capital stock$ or onthe paid?up capital stock of a corporationR 6ill the Committee please enlighten me on thisR

&. 9#LL"+/. 6e have -ust had a long discussion with the mem)ers of the team from the 0,

Law Center who provided us a draft. T5 /5'%s t5%t 8s :o&t%8&+ 5' 758:5 7 %+o/t+;'o t5 UP +'%;t 8s $0 /':&t o; >ot8&g sto:


76/470

:o&t'o66+ ( ;o'8g&'s +s/8t 8&g t5 8&o'8t( :%us t5( 5%> t5 >ot8&g :%/8t%6.T5%t 8s t5 %&o%6( t5%t 7ou6+ 'su6t 5'.

MR. BENGZON. No, t5 '%so& 7 688&%t+ t5 7o'+ sto:


77/470


78/470

&. 8+. &adam ,resident$ m% proposed amendment on lines 2 and 2 is to delete thephrase two thirds of whose voting stock or controlling interest$ and instead su)stitute the words/#K ,"C"! 1F 6*1/" C+,#+L so that the sentence will read: !o franchise$certificate$ or an% other form of authori(ation for the operation of a pu)lic utilit% shall )e grantedeGcept to citi(ens of the ,hilippines or to corporations or associations organi(ed under the laws

of the ,hilippines at least /#K ,"C"! 1F 6*1/" C+,#+L is owned )% such citi(ens.

G G G G

*" ,"/#D"!: 6ill Commissioner 8amir first eGplainR

&. 8+. es$ in this +rticle on !ational "conom% and ,atrimon%$ there were two previoussections in which we fiGed the Filipino euit% to


79/470

&/. 1/+#1 B+#D. # have added a clause that will put management in the hands of Filipinociti(ens.

G G G G@ the participation of foreign investors in the governing )od% of the corporationor association shall )e limited to their proportionate share in the capital of such entit% and >2 allofficers of the corporation or association must )e Filipino citi(ens.

Commissioner osario Braid proposed the inclusion of the phrase reuiring the managingofficers of the corporation or association to )e Filipino citi(ens specificall% to preventmanagement contracts$ which were designed primaril% to circumvent the Filipini(ation of pu)licutilities$ and to assure Filipino control of pu)lic utilities$ thus:

&/. 1/+#1 B+#D. G G G he% also like to suggest that we amend this provision )% addinga phrase which states: *" &+!+"&"! B1D 1F "9" C1,1+#1! 1+//1C#+#1! /*+LL #! +LL C+/"/ B" C1!1LL"D B C##4"!/ 1F *",*#L#,,#!"/. # have with me their position paper.

*" ,"/#D"!. he Commissioner ma% proceed.

&/. 1/+#1 B+#D. he three ma-or international record carriers in the ,hilippines$ whichCommissioner omulo mentioned O ,hilippine lo)al Communications$ "asternelecommunications$ lo)e &acka% Ca)le O are @?percent owned )% foreign multinationalcompanies and


80/470


81/470

&. B"!41!. +!D +LL *" "K"C0#9" +!D &+!+#! 1FF#C"/ 1F /0C*C1,1+#1!/ 1 +//1C#+#1!/ &0/ B" C##4"!/ 1F *" ,*#L#,,#!"/. #s thatcorrectR

&. 9#LL"+/. es.

&. B"!41!. &adam ,resident$ # think that was said in a more elegant language. 6e acceptthe amendment. #s that all right with Commissioner osario BraidR

&/. 1/+#1 B+#D. es.

G G G G

&. D" L1/ ""/. he governing )od% refers to the )oard of directors and trustees.

&. 9#LL"+/. hat is right.

&. B"!41!. es$ the governing )od% refers to the )oard of directors.

&. "+L+D1. #t is accepted.

&. +&+. he )od% is now read% to vote$ &adam ,resident.

91#!

G G G G

he results show 2A votes in favor and none against so the proposed amendment is approved.

G G G G

*" ,"/#D"!. +ll right. Can we proceed now to vote on /ection ER

&. +&+. es$ &adam ,resident.

*" ,"/#D"!. 6ill the chairman of the committee please read /ection ER

&. 9#LL"+/. he entire /ection E$ as amended$ reads: !o franchise$ certificate$ or an%

other form of authori(ation for the operation of a pu)lic utilit% shall )e granted eGcept to citi(ensof the ,hilippines or to corporations or associations organi(ed under the laws of the ,hilippinesat least


82/470

+!D &+!+#! 1FF#C"/ 1F /0C* C1,1+#1!/ 1 +//1C#+#1!/ &0/ B"C##4"!/ 1F *" ,*#L#,,#!"/.

&. 9#LL"+/. !1 /*+LL /0C* F+!C*#/"$ C"#F#C+" 1 +0*1#4+#1!B" "KCL0/#9" #! C*++C" 1 F1 + ,"#1D L1!" *+! 6"!?F#9"

"+/ "!"6+BL" F1 !1 &1" *+! 6"!?F#9" "+/. !either shall an%such franchise or right )e granted eGcept under the condition that it shall )e su)-ect toamendment$ alteration$ or repeal )% Congress when the common good so reuires. he /tateshall encourage euit% participation in pu)lic utilities )% the general pu)lic.

91#!

G G G G

he results show 2A votes in favor and @ against /ection E$ as amended$ is approved.@;>"mphasis supplied

he last sentence of /ection $ +rticle K## of the A;7 Constitution$ particularl% the provisionon the limited participation of foreign investors in the governing )od% of pu)lic utilities$ is areiteration of the last sentence of /ection E$ +rticle K#9 of the A73 Constitution$@Asignif%ing itsimportance in reserving ownership and control of pu)lic utilities to Filipino citi(ens.

+III.

2he undisputed facts

here is no dispute$ and respondents do not claim the contrar%$ that > foreigners own 2 Filipinos own onl% 3E.73H of ,LDNscommon shares$ constituting a minorit% of the voting stock$ and thus Filipinos do not control,LD >3 preferred shares$ AA.@@H owned )% Filipinos$ have no voting rights >@ preferredshares earn onl% J7 of the dividends that common shares earnE>E preferred shares have twicethe par value of common shares and >


83/470

#n his petition$ am)oa pra%s$ among others:

G G G G

E. For the *onora)le Court to issue a declarator% relief that ownership of common or voting

shares is the sole )asis in determining foreign euit% in a pu)lic utilit% and that an% othergovernment rulings$ opinions$ and regulations inconsistent with this declarator% relief )edeclared unconstitutional and a violation of the intent and spirit of the A;7 Constitution

the uniue)ackdrop of the case >2 the utmost need to avoid further dela%s and >3 the issue of pu)licinterest involved. he Court held:

he Court ma% )e curing the defect in this case )% adding the B1C as part%?petitioner. hepetition should not )e dismissed )ecause the second action would onl% )e a repetition of the first.#n Salvador% et al#% v# Court o Appeals% et al#$ we held that this Court has full powers$ apart fromthat power and authorit% which is inherent$ to amend the processes$ pleadings$ proceedings anddecisions )% su)stituting as part%?plaintiff the real part%?in?interest. T5 Cou't 5%s t5 /o7' to%>o8+ +6%( 8& t5 +8s/os8t8o& o; t58s :%s, to o'+' 8ts %&+&t %s to 8/6%+ t5 BOC %s/%'t(9's/o&+&t. I&++, 8t %( &o 6o&g' &am

Documents

Civil Actions Plus Digests