RAMIREZ VS VDA RAMIREZ

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-27952 February 15, 1982

TESTATE ESTATE OF JOSE EUGENIO RAMIREZ, MARIA LUISA PALACIOS, Administratrix, petitioner-appellee, vs.MARCELLE D. VDA. DE RAMIREZ, ET AL., oppositors, JORGE and ROBERTO RAMIREZ, legatees, oppositors- appellants.

 

ABAD SANTOS, J.:

The main issue in this appeal is the manner of partitioning the testate estate of Jose Eugenio Ramirez among the principal beneficiaries, namely: his widow Marcelle Demoron de Ramirez; his two grandnephews Roberto and Jorge Ramirez; and his companion Wanda de Wrobleski.

The task is not trouble-free because the widow Marcelle is a French who lives in Paris, while the companion Wanda is an Austrian who lives in Spain. Moreover, the testator provided for substitutions.

Jose Eugenio Ramirez, a Filipino national, died in Spain on December 11, 1964, with only his widow as compulsory heir. His will was admitted to probate by the Court of First Instance of Manila, Branch X, on July 27, 1965. Maria Luisa Palacios was appointed administratrix of the estate. In due time she submitted an inventory of the estate as follows:

INVENTARIO

Una sexta parte (1/6) proindiviso de un te

rreno, con sus mejoras y edificaciones, situadoen

la Escolta, Manila............................................................. P500,000.00

Una sexta parte (1/6) proindiviso de dos

parcelas de terreno situadas en Antipolo, Rizal................... 658.34

Cuatrocientos noventa y uno (491) acciones

de la 'Central Azucarera de la Carlota a P17.00

por accion ................................................................................8,347.00

Diez mil ochocientos seize (10,806) acciones

de la 'Central Luzon Milling Co.', disuelta y en

liquidacion a P0.15 por accion ..............................................1,620.90

Cuenta de Ahorros en el Philippine Trust

Co.............................................................................................. 2,350.73

TOTAL.............................................................. P512,976.97

MENOS:

Deuda al Banco de las Islas Filipinas, garan-

tizada con prenda de las acciones de La Carlota ......... P 5,000,00

VALOR LIQUIDO........................................... P507,976.97

The testamentary dispositions are as follows:

A.—En nuda propiedad, a D. Roberto y D. Jorge Ramirez, ambas menores de edad, residentes en Manila, I.F., calle 'Alright, No. 1818, Malate, hijos de su sobrino D. Jose Ma. Ramirez, con sustitucion vulgar a favor de sus respectivos descendientes, y, en su defecto, con sustitucion vulgar reciprocal entre ambos.

El precedente legado en nuda propiedad de la participacion indivisa de la finca Santa Cruz Building, lo ordena el testador a favor de los legatarios nombrados, en atencion a que dicha propiedad fue creacion del querido padre del otorgante y por ser aquellos continuadores del apellido Ramirez,

B.—Y en usufructo a saber: —

a. En cuanto a una tercera parte, a favor de la esposa del testador, Da. Marcelle Ramirez, domiciliada en IE PECO, calle del General Gallieni No. 33, Seine Francia, con sustitucion vulgar u fideicomisaria a favor de Da. Wanda de Wrobleski, de Palma de Mallorca, Son Rapina Avenida de los Reyes 13,

b.—Y en cuanto a las dos terceras partes restantes, a favor de la nombrada Da. Wanda de Nrobleski con sustitucion vulgar v fideicomisaria a saber:—

En cuanto a la mitad de dichas dos terceras partes, a favor de D. Juan Pablo Jankowski, de Son Rapina Palma de Mallorca; y encuanto a la mitad restante, a favor de su sobrino, D. Horace V. Ramirez, San Luis Building, Florida St. Ermita, Manila, I.F.

A pesar de las sustituciones fideiconiisarias precedentemente ordinadas, las usufiructuarias nombradas conjuntamente con los nudo propietarios, podran en

cualquier memento vender a tercero los bienes objeto delegado, sin intervencion alguna de los titulares fideicomisaarios.

On June 23, 1966, the administratrix submitted a project of partition as follows: the property of the deceased is to be divided into two parts. One part shall go to the widow 'en pleno dominio" in satisfaction of her legitime; the other part or "free portion" shall go to Jorge and Roberto Ramirez "en nuda propriedad." Furthermore, one third (1/3) of the free portion is charged with the widow's usufruct and the remaining two-thirds (2/3) with a usufruct in favor of Wanda.

Jorge and Roberto opposed the project of partition on the grounds: (a) that the provisions for vulgar substitution in favor of Wanda de Wrobleski with respect to the widow's usufruct and in favor of Juan Pablo Jankowski and Horacio V. Ramirez, with respect to Wanda's usufruct are invalid because the first heirs Marcelle and Wanda) survived the testator; (b) that the provisions for fideicommissary substitutions are also invalid because the first heirs are not related to the second heirs or substitutes within the first degree, as provided in Article 863 of the Civil Code; (c) that the grant of a usufruct over real property in the Philippines in favor of Wanda Wrobleski, who is an alien, violates Section 5, Article III of the Philippine Constitution; and that (d) the proposed partition of the testator's interest in the Santa Cruz (Escolta) Building between the widow Marcelle and the appellants, violates the testator's express win to give this property to them Nonetheless, the lower court approved the project of partition in its order dated May 3, 1967. It is this order which Jorge and Roberto have appealed to this Court.

1. The widow's legitime.

The appellant's do not question the legality of giving Marcelle one-half of the estate in full ownership. They admit that the testator's dispositions impaired his widow's legitime. Indeed, under Art. 900 of the Civil Code "If the only survivor is the widow or widower, she or he shall be entitled to one-half of the hereditary estate." And since Marcelle alone survived the deceased, she is entitled to one-half of his estate over which he could impose no burden, encumbrance, condition or substitution of any kind whatsoever. (Art. 904, par. 2, Civil Code.)

It is the one-third usufruct over the free portion which the appellants question and justifiably so. It appears that the court a quo approved the usufruct in favor of Marcelle because the testament provides for a usufruct in her favor of one-third of the estate. The court a quo erred for Marcelle who is entitled to one-half of the estate "en pleno dominio" as her legitime and which is more than what she is given under the will is not entitled to have any additional share in the estate. To give Marcelle more than her legitime will run counter to the testator's intention for as stated above his dispositions even impaired her legitime and tended to favor Wanda.

2. The substitutions.

It may be useful to recall that "Substitution is the appoint- judgment of another heir so that he may enter into the inheritance in default of the heir originally instituted." (Art. 857, Civil Code. And that there are several kinds of substitutions, namely: simple or common, brief or compendious, reciprocal, and fideicommissary (Art. 858, Civil Code.) According to Tolentino, "Although the Code enumerates four classes, there are really only two principal classes of substitutions: the simple and the fideicommissary. The others are merely variations of these two." (111 Civil Code, p. 185 [1973].)

The simple or vulgar is that provided in Art. 859 of the Civil Code which reads:

ART. 859. The testator may designate one or more persons to substitute the heir or heirs instituted in case such heir or heirs should die before him, or should not wish, or should be incapacitated to accept the inheritance.

A simple substitution, without a statement of the cases to which it refers, shall comprise the three mentioned in the preceding paragraph, unless the testator has otherwise provided.

The fideicommissary substitution is described in the Civil Code as follows:

ART. 863. A fideicommissary substitution by virtue of which the fiduciary or first heir instituted is entrusted with the obligation to preserve and to transmit to a second heir the whole or part of inheritance, shall be valid and shall take effect, provided such substitution does not go beyond one degree from the heir originally instituted, and provided further that the fiduciary or first heir and the second heir are living at time of the death of the testator.

It will be noted that the testator provided for a vulgar substitution in respect of the legacies of Roberto and Jorge Ramirez, the appellants, thus: con sustitucion vulgar a favor de sus respectivos descendientes, y, en su defecto, con substitution vulgar reciprocal entre ambos.

The appellants do not question the legality of the substitution so provided. The appellants question the sustitucion vulgar y fideicomisaria a favor de Da. Wanda de Wrobleski" in connection with the one-third usufruct over the estate given to the widow Marcelle However, this question has become moot because as We have ruled above, the widow is not entitled to any usufruct.

The appellants also question the sustitucion vulgar y fideicomisaria in connection with Wanda's usufruct over two thirds of the estate in favor of Juan Pablo Jankowski and Horace v. Ramirez.

They allege that the substitution in its vulgar aspect as void because Wanda survived the testator or stated differently because she did not predecease the testator. But dying before the testator is not the only case for vulgar substitution for it also includes refusal or incapacity to accept the inheritance as provided in Art. 859 of the Civil Code, supra. Hence, the vulgar substitution is valid.

As regards the substitution in its fideicommissary aspect, the appellants are correct in their claim that it is void for the following reasons:

(a) The substitutes (Juan Pablo Jankowski and Horace V. Ramirez) are not related to Wanda, the heir originally instituted. Art. 863 of the Civil Code validates a fideicommissary substitution "provided such substitution does not go beyond one degree from the heir originally instituted."

What is meant by "one degree" from the first heir is explained by Tolentino as follows:

Scaevola Maura, and Traviesas construe "degree" as designation, substitution, or transmission. The Supreme Court of Spain has decidedly adopted this construction. From this point of view, there can be only one tranmission or substitution, and the substitute need not be related to the first heir. Manresa, Morell and Sanchez Roman, however, construe the word "degree" as generation, and the present Code has obviously followed this interpretation. by providing that the substitution shall not go beyond one degree "from the heir originally instituted." The Code thus clearly

indicates that the second heir must be related to and be one generation from the first heir.

From this, it follows that the fideicommissary can only be either a child or a parent of the first heir. These are the only relatives who are one generation or degree from the fiduciary (Op. cit., pp. 193-194.)

(b) There is no absolute duty imposed on Wanda to transmit the usufruct to the substitutes as required by Arts. 865 and 867 of the Civil Code. In fact, the appellee admits "that the testator contradicts the establishment of a fideicommissary substitution when he permits the properties subject of the usufruct to be sold upon mutual agreement of the usufructuaries and the naked owners." (Brief, p. 26.)

3. The usufruct of Wanda.

The appellants claim that the usufruct over real properties of the estate in favor of Wanda is void because it violates the constitutional prohibition against the acquisition of lands by aliens.

The 1935 Constitution which is controlling provides as follows:

SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines. (Art. XIII.)

The court a quo upheld the validity of the usufruct given to Wanda on the ground that the Constitution covers not only succession by operation of law but also testamentary succession. We are of the opinion that the Constitutional provision which enables aliens to acquire private lands does not extend to testamentary succession for otherwise the prohibition will be for naught and meaningless. Any alien would be able to circumvent the prohibition by paying money to a Philippine landowner in exchange for a devise of a piece of land.

This opinion notwithstanding, We uphold the usufruct in favor of Wanda because a usufruct, albeit a real right, does not vest title to the land in the usufructuary and it is the vesting of title to land in favor of aliens which is proscribed by the Constitution.

IN VIEW OF THE FOREGOING, the estate of Jose Eugenio Ramirez is hereby ordered distributed as follows:

One-half (1/2) thereof to his widow as her legitime;

One-half (1/2) thereof which is the free portion to Roberto and Jorge Ramirez in naked ownership and the usufruct to Wanda de Wrobleski with a simple substitution in favor of Juan Pablo Jankowski and Horace V. Ramirez.

The distribution herein ordered supersedes that of the court a quo. No special pronouncement as to costs.

SO ORDERED.

CASE DIGEST:

FACTS:

Jose Eugenio Ramirez, a Filipino national, died in Spain on December 11, 1964, with only his widow as compulsory heir. His will was admitted to probate by the Court of First Instance of Manila, Branch X, on July 27, 1965. Maria Luisa Palacios was appointed administratrix of the estate.

On June 23, 1966, the administratrix submitted a project of partition as follows: the property of the deceased is to be divided into two parts. One part shall go to the widow “en plenodominio” in satisfaction of her legitime; the other part or “free portion” shall go to Jorge and Roberto Ramirez “en nudapropriedad.” Furthermore, one third (1/3) of the free portion is charged with the widow‟s usufruct and the remaining two-third (2/3) with a usufruct in favor of Wanda.

 

-APPEAL for the partitioning of testate estate of Jose Eugenio Ramirez (a Filipino national, died in Spain on December 11, 1964) among principal beneficiaries:

Marcelle Demoron de Ramirez-widow

-French who lives in Paris

-received ½ (as spouse) and usufructuary rights over 1/3 of the free portion

Roberto and Jorge Ramirez-two grandnephews

-lives in Malate

-received the ½ (free portion)

Wanda de Wrobleski-companion

-Austrian who lives in Spain

-received usufructuary rights of 2/3 of the free portion

-vulgar substitution in favor of Juan Pablo Jankowski and Horacio Ramirez

-Maria Luisa Palacios -administratix

-Jorge and Roberto Ramirez opposed because

a. vulgar substitution in favor of Wanda wrt widow’s usufruct and in favor of Juan Pablo Jankowski and Horacio Ramirez, wrt to Wanda’s usufruct is INVALID because first heirs (Marcelle and Wanda) survived the testator

b. fideicommissary substitutions are INVALID because first heirs not related to the second heirs or substitutes within the first degree as provided in Art 863 CC

c. grant of usufruct of real property in favor of an alien, Wanda, violated Art XIII Sec 5

d. proposed partition of the testator’’s interest in the Santa Cruz Building between widow and appellants violates testators express will to give this property to them

-LC: approved partition

ISSUEWON the partition is valid insofar as

a. widow’s legitime

b. substitutions

c. usufruct of Wanda

HELDa. YES, appellants do not question ½ because Marcelle is the widow[1]and over which he could impose no burden, encumbrance, condition or substitution of any kind whatsoever[2]

-the proposed creation by the admininstratix in favor of the testator’s widow of a usufruct over 1/3 of the free portion of the testator’s estate cannot be made where it will run counter to the testator’s express will. The Court erred for Marcelle who is entitled to ½ of the estate “enpleno dominio” as her legitime and which is more than what she is given under the will is not entitled to have any additional share in the estate. To give Marcelle more than her legitime will run counter to the testator’s intention for as stated above his disposition even impaired her legitime and tended to favor Wanda.

b. Vulgar substitutions are valid because dying before the testator is not the only case where a vulgar substitution can be made. Also, according to Art 859 CC, cases also include refusal or incapacity to accept inheritance therefore it is VALID.

BUT fideicommissary substitutions are VOID because Juan Pablo Jankowski and Horace Ramirez are not related to Wande and according to Art 863 CC, it validates a fideicommissary substitution provided that such substitution does not go beyond one degreefrom the heir originally instituted. Another is that there is no absolute duty imposed on Wanda to transmit the usufructuary to the substitutes and in fact the apellee agrees that

the testator contradicts the establishment of the fideicommissary substitution when he permits the properties be subject to usufruct to be sold upon mutual agreement ofthe usufructuaries and naked owners.c. YES, usufruct of Wanda is VALID

-Art XIII[3]Sec 5 (1935): Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except toindividuals, corporations, or associations qualified to acquire or hold land of the public domain in the Philippines.[4]

The lower court upheld the usufruct thinking that the Constitution covers not only succession by operation of law but also testamentary succession BUT SC is of the opinion that this provision does not apply to testamentary succession for otherwise the prohibition will be for naught and meaningless. Any alien would circumvent the prohibition by paying money to a Philippine landowner in exchange for a devise of a piece of land BUT an alien may be bestowed USUFRUCTUARY RIGHTS over a parcel of land in the Philippines. Therefore, the usufruct in favor of Wanda, although a real right, is upheld because it does not vest title to the land in the usufructuary (Wanda) and it is the vesting of title to land in favor of aliens which is proscribed by the Constitution.Decision:½ Marcelle (as legitime), ½ Jorge and Roberto Ramirez (free portion) in naked ownership and the usufruct to Wanda de Wrobleski with simple substitution in favor of Juan Pablo Jankowski and Horace Ramirez

GAMBOA VS TEVES

EN BANC

 

WILSON P. GAMBOA,

Petitioner,

G.R. No. 176579

Present:- versus -

FINANCE SECRETARY MARGARITO B. TEVES, FINANCE UNDERSECRETARY JOHN P. SEVILLA, AND

CORONA, C.J.,

CARPIO,

VELASCO, JR.,

COMMISSIONER RICARDO ABCEDE OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) IN THEIR CAPACITIES AS CHAIR AND MEMBERS, RESPECTIVELY, OF THE PRIVATIZATION COUNCIL,

CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD. IN HIS CAPACITY AS DIRECTOR OF METRO PACIFIC ASSET HOLDINGS INC., CHAIRMAN MANUEL V. PANGILINAN OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (PLDT) IN HIS CAPACITY AS MANAGING DIRECTOR OF FIRST PACIFIC CO., LTD., PRESIDENT NAPOLEON L. NAZARENO OF PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, CHAIR FE BARIN OF THE SECURITIES EXCHANGE COMMISSION, and PRESIDENT FRANCIS LIM OF THE PHILIPPINE STOCK EXCHANGE,

Respondents.

LEONARDO-DE CASTRO,

BRION,

PERALTA,

BERSAMIN,

DEL CASTILLO,

ABAD,

VILLARAMA, JR.,

PEREZ,

MENDOZA, and

SERENO, JJ.

PABLITO V. SANIDAD and

ARNO V. SANIDAD,

Petitioners-in-Intervention.

Promulgated:

June 28, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

 

 

D E C I S I O N

 

 

CARPIO, J.:

 

 

The Case

 

This is an original petition for prohibition, injunction, declaratory relief and declaration of nullity of the sale of shares of stock of Philippine Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific).

 

The Antecedents

 

The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine Long Distance Telephone Company (PLDT), are as follows:1

 

On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which granted PLDT a franchise and the right to engage in telecommunications business. In 1969, General Telephone and Electronics Corporation (GTE), an American company and a major PLDT stockholder, sold 26 percent of the outstanding common shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was incorporated by several persons, including Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the owner of 111,415 shares of stock of PTIC by virtue of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential Commission on Good Government (PCGG). The 111,415 PTIC shares, which represent about 46.125 percent of the outstanding capital stock of PTIC, were later declared by this Court to be owned by the Republic of the Philippines.2

 

In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm, acquired the remaining 54 percent of the outstanding capital stock of PTIC. On 20 November 2006, the Inter-Agency Privatization Council (IPC) of the Philippine Government announced that it would sell the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, through a public bidding to be conducted on 4 December 2006. Subsequently, the public bidding was reset to 8 December 2006, and only two bidders, Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of P25.6 billion or US$510 million.

 

Thereafter, First Pacific announced that it would exercise its right of first refusal as a PTIC stockholder and buy the 111,415 PTIC shares by matching the bid price of Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set by IPC and instead, yielded its right to PTIC itself which was then given by IPC until 2

March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific, through its subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, with the Philippine Government for the price of P25,217,556,000 or US$510,580,189. The sale was completed on 28 February 2007.

 

Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of 46.125 percent of PTIC shares is actually an indirect sale of 12 million shares or about 6.3 percent of the outstanding common shares of PLDT. With the sale, First Pacific’s common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the common shareholdings of foreigners in PLDT to about 81.47 percent. This violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of the capital of a public utility to not more than 40 percent.3

 

On the other hand, public respondents Finance Secretary Margarito B. Teves, Undersecretary John P. Sevilla, and PCGG Commissioner Ricardo Abcede allege the following relevant facts:

 

On 9 November 1967, PTIC was incorporated and had since engaged in the business of investment holdings. PTIC held 26,034,263 PLDT common shares, or 13.847 percent of the total PLDT outstanding common shares. PHI, on the other hand, was incorporated in 1977, and became the owner of 111,415 PTIC shares or 46.125 percent of the outstanding capital stock of PTIC by virtue of three Deeds of Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the 111,415 PTIC shares held by PHI were sequestered by the PCGG, and subsequently declared by this Court as part of the ill-gotten wealth of former President Ferdinand Marcos. The sequestered PTIC shares were reconveyed to the Republic of the Philippines in accordance with this Court’s decision4which became final and executory on 8 August 2006.

The Philippine Government decided to sell the 111,415 PTIC shares, which represent 6.4 percent of the outstanding common shares of stock of PLDT, and designated the Inter-Agency Privatization Council (IPC), composed of the Department of Finance and the PCGG, as the disposing entity. An invitation to bid was published in seven different newspapers from 13 to 24 November 2006. On 20 November 2006, a pre-bid

conference was held, and the original deadline for bidding scheduled on 4 December 2006 was reset to 8 December 2006. The extension was published in nine different newspapers.

 

During the 8 December 2006 bidding, Parallax Capital Management LP emerged as the highest bidder with a bid of P25,217,556,000. The government notified First Pacific, the majority owner of PTIC shares, of the bidding results and gave First Pacific until 1 February 2007 to exercise its right of first refusal in accordance with PTIC’s Articles of Incorporation. First Pacific announced its intention to match Parallax’s bid.

 

On 31 January 2007, the House of Representatives (HR) Committee on Good Government conducted a public hearing on the particulars of the then impending sale of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those who attended the public hearing. The HR Committee Report No. 2270 concluded that: (a) the auction of the government’s 111,415 PTIC shares bore due diligence, transparency and conformity with existing legal procedures; and (b) First Pacific’s intended acquisition of the government’s 111,415 PTIC shares resulting in First Pacific’s 100% ownership of PTIC will not violate the 40 percent constitutional limit on foreign ownership of a public utility since PTIC holds only 13.847 percent of the total outstanding common shares of PLDT.5On 28 February 2007, First Pacific completed the acquisition of the 111,415 shares of stock of PTIC.

 

Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a public bidding for the sale of 111,415 PTIC shares or 46 percent of the outstanding capital stock of PTIC (the remaining 54 percent of PTIC shares was already owned by First Pacific and its affiliates); (b) Parallax offered the highest bid amounting to P25,217,556,000; (c) pursuant to the right of first refusal in favor of PTIC and its shareholders granted in PTIC’s Articles of Incorporation, MPAH, a First Pacific affiliate, exercised its right of first refusal by matching the highest bid offered for PTIC shares on 13 February 2007; and (d) on 28 February 2007, the sale was consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares. Respondent Pangilinandenies the other allegations of facts of petitioner.

 

On 28 February 2007, petitioner filed the instant petition for prohibition, injunction, declaratory relief, and declaration of nullity of sale of the 111,415 PTIC shares. Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result in an increase in First Pacific’s common shareholdings in PLDT from 30.7 percent to 37 percent, and this, combined with Japanese NTT DoCoMo’s common shareholdings in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56 percent which is over the 40 percent constitutional limit.6 Petitioner asserts:

 

If and when the sale is completed, First Pacific’s equity in PLDT will go up from 30.7 percent to 37.0 percent of its common – or voting- stockholdings, x xx. Hence, the consummation of the sale will put the two largest foreign investors in PLDT – First Pacific and Japan’s NTT DoCoMo, which is the world’s largest wireless telecommunications firm, owning 51.56 percent of PLDT common equity. x x x With the completion of the sale, data culled from the official website of the New York Stock Exchange (www.nyse.com) showed that those foreign entities, which own at least five percent of common equity, will collectively own 81.47 percent of PLDT’s common equity. x x x

x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x which PLDT submitted to the New York Stock Exchange for the period 2003-2005, revealed that First Pacific and several other foreign entities breached the constitutional limit of 40 percent ownership as early as 2003. x x x”7

 

Petitioner raises the following issues: (1) whether the consummation of the then impending sale of 111,415 PTIC shares to First Pacific violates the constitutional limit on foreign ownership of a public utility; (2) whether public respondents committed grave abuse of discretion in allowing the sale of the 111,415 PTIC shares to First Pacific; and (3) whether the sale of common shares to foreigners in excess of 40 percent of the entire subscribed common capital stock violates the constitutional limit on foreign ownership of a public utility.8

 

On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave to Intervene and Admit Attached Petition-in-Intervention. In the Resolution of 28 August 2007, the Court granted the motion and noted the Petition-in-Intervention.

 

Petitioners-in-intervention “join petitioner Wilson Gamboa x x x in seeking, among others, to enjoin and/or nullify the sale by respondents of the 111,415 PTIC shares to First Pacific or assignee.” Petitioners-in-intervention claim that, as PLDT subscribers, they have a “stake in the outcome of the controversy x x x where the Philippine Government is completing the sale of government owned assets in [PLDT], unquestionably a public utility, in violation of the nationality restrictions of the Philippine Constitution.”

 

 

The Issue

 

 

This Court is not a trier of facts. Factual questions such as those raised by petitioner,9 which indisputably demand a thorough examination of the evidence of the parties, are generally beyond this Court’s jurisdiction. Adhering to this well-settled principle, the Court shall confine the resolution of the instant controversy solely on the threshold and purely legal issue of whether the term “capital” in Section 11, Article XII of the Constitution refers to the total common shares only or to the total outstanding capital stock (combined total of common and non-voting preferred shares) of PLDT, a public utility.

 

The Ruling of the Court

 

The petition is partly meritorious.

 

Petition for declaratory relief treated as petition for mandamus

 

At the outset, petitioner is faced with a procedural barrier. Among the remedies petitioner seeks, only the petition for prohibition is within the original jurisdiction of this court, which however is not exclusive but is concurrent with the Regional Trial Court and the Court of Appeals. The actions for declaratory relief,10 injunction, and annulment of sale are not embraced within the original jurisdiction of the Supreme Court. On this ground alone, the petition could have been dismissed outright.

 

While direct resort to this Court may be justified in a petition for prohibition,11 the Court shall nevertheless refrain from discussing the grounds in support of the petition for prohibition since on 28 February 2007, the questioned sale was consummated when MPAH paid IPC P25,217,556,000 and the government delivered the certificates for the 111,415 PTIC shares.

 

However, since the threshold and purely legal issue on the definition of the term “capital” in Section 11, Article XII of the Constitution has far-reaching implications to the national economy, the Court treats the petition for declaratory relief as one for mandamus.12

 

In Salvacion v. Central Bank of the Philippines,13 the Court treated the petition for declaratory relief as one for mandamus considering the grave injustice that would result in the interpretation of a banking law. In that case, which involved the crime of rape committed by a foreign tourist against a Filipino minor and the execution of the final judgment in the civil case for damages on the tourist’s dollar deposit with a local bank, the Court declared Section 113 of Central Bank Circular No. 960, exempting foreign currency deposits from attachment, garnishment or any other order or process of any court, inapplicable due to the peculiar circumstances of the case. The Court held that “injustice would result especially to a citizen aggrieved by a foreign guest like accused x x x” that would “negate Article 10 of the Civil Code which provides that ‘in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail.’” The Court therefore required respondents Central Bank of the Philippines, the local bank, and the accused to comply with the writ of execution issued in the civil case for damages and to release the dollar deposit of the accused to satisfy the judgment.

 

In Alliance of Government Workers v. Minister of Labor,14 the Court similarly brushed aside the procedural infirmity of the petition for declaratory relief and treated the same as one for mandamus. In Alliance, the issue was whether the government unlawfully excluded petitioners, who were government employees, from the enjoyment of rights to which they were entitled under the law. Specifically, the question was: “Are the branches, agencies, subdivisions, and instrumentalities of the Government, including government owned or controlled corporations included among the four ‘employers’ under Presidential Decree No. 851 which are required to pay their employees x x x a thirteenth (13th) month pay x x x ?” The Constitutional principle involved therein affected all government employees, clearly justifying a relaxation of the technical rules of procedure, and certainly requiring the interpretation of the assailed presidential decree.

 

In short, it is well-settled that this Court may treat a petition for declaratory relief as one for mandamus if the issue involved has far-reaching implications. As this Court held in Salvacion:

 

The Court has no original and exclusive jurisdiction over a petition for declaratory relief. However, exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for mandamus.15(Emphasis supplied)

 

 

In the present case, petitioner seeks primarily the interpretation of the term “capital” in Section 11, Article XII of the Constitution. He prays that this Court declare that the term “capital” refers to common shares only, and that such shares constitute “the sole basis in determining foreign equity in a public utility.” Petitioner further asks this Court to declare any ruling inconsistent with such interpretation unconstitutional.

 

The interpretation of the term “capital” in Section 11, Article XII of the Constitution has far-reaching implications to the national economy. In fact, a resolution of this issue will determine whether Filipinos are masters, or second class citizens, in their

own country. What is at stake here is whether Filipinos or foreigners will have effective control of the national economy. Indeed, if ever there is a legal issue that has far-reaching implications to the entire nation, and to future generations of Filipinos, it is the threshhold legal issue presented in this case.

 

The Court first encountered the issue on the definition of the term “capital” in Section 11, Article XII of the Constitution in the case ofFernandez v. Cojuangco, docketed as G.R. No. 157360.16 That case involved the same public utility (PLDT) and substantially the same private respondents. Despite the importance and novelty of the constitutional issue raised therein and despite the fact that the petition involved a purely legal question, the Court declined to resolve the case on the merits, and instead denied the same for disregarding the hierarchy of courts.17 There, petitioner Fernandez assailed on a pure question of law the Regional Trial Court’s Decision of 21 February 2003 via a petition for review under Rule 45. The Court’s Resolution, denying the petition, became final on 21 December 2004.

The instant petition therefore presents the Court with another opportunity to finally settle this purely legal issue which is of transcendental importance to the national economy and a fundamental requirement to a faithful adherence to our Constitution. The Court must forthwith seize such opportunity, not only for the benefit of the litigants, but more significantly for the benefit of the entire Filipino people, to ensure, in the words of the Constitution, “a self-reliant and independent national economy effectively controlled by Filipinos.”18 Besides, in the light of vague and confusing positions taken by government agencies on this purely legal issue, present and future foreign investors in this country deserve, as a matter of basic fairness, a categorical ruling from this Court on the extent of their participation in the capital of public utilities and other nationalized businesses.

 

Despite its far-reaching implications to the national economy, this purely legal issue has remained unresolved for over 75 years since the 1935 Constitution. There is no reason for this Court to evade this ever recurring fundamental issue and delay again defining the term “capital,” which appears not only in Section 11, Article XII of the Constitution, but also in Section 2, Article XII on co-production and joint venture agreements for the development of our natural resources,19 in Section 7, Article XII on ownership of private lands,20 in Section 10, Article XII on the reservation of certain investments to Filipino citizens,21 in Section 4(2), Article XIV on the ownership of educational institutions,22 and in Section 11(2), Article XVI on the ownership of advertising companies.23

 

 

Petitioner has locus standi

 

There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right to question the subject sale, which he claims to violate the nationality requirement prescribed in Section 11, Article XII of the Constitution. If the sale indeed violates the Constitution, then there is a possibility that PLDT’s franchise could be revoked, a dire consequence directly affecting petitioner’s interest as a stockholder.

 

More importantly, there is no question that the instant petition raises matters of transcendental importance to the public. The fundamental and threshold legal issue in this case, involving the national economy and the economic welfare of the Filipino people, far outweighs any perceived impediment in the legal personality of the petitioner to bring this action.

 

In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters of transcendental importance to the public, thus:

 

In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners’ legal standing, the Court declared that the right they sought to be enforced ‘is a public right recognized by no less than the fundamental law of the land.’

Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that ‘when a mandamus proceeding involves the assertion of a public right, the requirement of personal

interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general ‘public’ which possesses the right.’

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and operation of the Manila International Container Terminal, ‘public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved.’ We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioner’s standing. (Emphasis supplied)

 

Clearly, since the instant petition, brought by a citizen, involves matters of transcendental public importance, the petitioner has the requisite locus standi.

 

Definition of the Term “Capital” in

Section 11, Article XII of the 1987 Constitution

 

Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution mandates the Filipinization of public utilities, to wit:

 

 

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its

capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. (Emphasis supplied)

 

 

The above provision substantially reiterates Section 5, Article XIV of the 1973 Constitution, thus:

 

Section 5. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of the capital of which is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in the capital thereof. (Emphasis supplied)

 

 

 

The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935 Constitution, viz:

 

Section 8. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or other entities organized under the laws of the Philippines sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years.

No franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the public interest so requires. (Emphasis supplied)

 

 

Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds us that the Filipinization provision in the 1987 Constitution is one of the products of the spirit of nationalism which gripped the 1935 Constitutional Convention.25 The 1987 Constitution “provides for the Filipinization of public utilities by requiring that any form of authorization for the operation of public utilities should be granted only to ‘citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens.’ The provision is [an express] recognition of the sensitive and vital position of public utilities both in the national economy and for national security.”26 The evident purpose of the citizenship requirement is to prevent aliens from assuming control of public utilities, which may be inimical to the national interest.27 This specific provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an overriding economic goal of the 1987 Constitution: to “conserve and develop our patrimony”28 and ensure “a self-reliant and independent national economy effectivelycontrolled by Filipinos.”29

 

Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum nationality requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a corporation to be granted authority to operate a public utility, at least 60 percent of its “capital” must be owned by Filipino citizens.

 

The crux of the controversy is the definition of the term “capital.” Does the term “capital” in Section 11, Article XII of the Constitution refer to common shares or to the total outstanding capital stock (combined total of common and non-voting preferred shares)?

 

Petitioner submits that the 40 percent foreign equity limitation in domestic public utilities refers only to common shares because such shares are entitled to vote and it is through voting that control over a corporation is exercised. Petitioner posits that the term “capital” in Section 11, Article XII of the Constitution refers to “the ownership of common capital stock subscribed and outstanding, which class of shares alone, under the corporate set-up of PLDT, can vote and elect members of the board of directors.” It is undisputed that PLDT’s non-voting preferred shares are held mostly by Filipino citizens.30 This arose from Presidential Decree No. 217,31 issued on 16 June 1973 by then President Ferdinand Marcos, requiring every applicant of a PLDT telephone line to subscribe to non-voting preferred shares to pay for the investment cost of installing the telephone line.32

 

Petitioners-in-intervention basically reiterate petitioner’s arguments and adopt petitioner’s definition of the term “capital.”33 Petitioners-in-intervention allege that “the approximate foreign ownership of common capital stock of PLDT x x x already amounts to at least 63.54% of the total outstanding common stock,” which means that foreigners exercise significant control over PLDT, patently violating the 40 percent foreign equity limitation in public utilities prescribed by the Constitution.

 

Respondents, on the other hand, do not offer any definition of the term “capital” in Section 11, Article XII of the Constitution. More importantly, private respondents Nazareno and Pangilinan of PLDT do not dispute that more than 40 percent of the common shares of PLDT are held by foreigners.

 

In particular, respondent Nazareno’s Memorandum, consisting of 73 pages, harps mainly on the procedural infirmities of the petition and the supposed violation of the due process rights of the “affected foreign common shareholders.” Respondent Nazareno does not deny petitioner’s allegation of foreigners’ dominating the common shareholdings of PLDT. Nazareno stressed mainly that the petition “seeks to divest foreign common shareholders purportedly exceeding 40% of the total common shareholdings in PLDT of their ownership over their shares.” Thus, “the foreign natural and juridical PLDT shareholders must be impleaded in this suit so that they can be heard.”34 Essentially, Nazareno invokes denial of due process on behalf of the foreign common shareholders.

 

While Nazareno does not introduce any definition of the term “capital,” he states that “among the factual assertions that need to be established to counter petitioner’s allegations is the uniform interpretation by government agencies (such as the SEC), institutions and corporations (such as the Philippine National Oil Company-Energy Development Corporation or PNOC-EDC) of including both preferred shares and common shares in “controlling interest” in view of testing compliance with the 40% constitutional limitation on foreign ownership in public utilities.”35

 

Similarly, respondent Manuel V. Pangilinan does not define the term “capital” in Section 11, Article XII of the Constitution. Neither does he refute petitioner’s claim of foreigners holding more than 40 percent of PLDT’s common shares. Instead, respondent Pangilinanfocuses on the procedural flaws of the petition and the alleged violation of the due process rights of foreigners. Respondent Pangilinanemphasizes in his Memorandum (1) the absence of this Court’s jurisdiction over the petition; (2) petitioner’s lack of standing; (3)mootness of the petition; (4) non-availability of declaratory relief; and (5) the denial of due process rights. Moreover, respondentPangilinan alleges that the issue should be whether “owners of shares in PLDT as well as owners of shares in companies holding shares in PLDT may be required to relinquish their shares in PLDT and in those companies without any law requiring them to surrender their shares and also without notice and trial.”

 

Respondent Pangilinan further asserts that “Section 11, [Article XII of the Constitution] imposes no nationality requirement on the shareholders of the utility company as a condition for keeping their shares in the utility company.” According to him, “Section 11 does not authorize taking one person’s property (the shareholder’s stock in the utility company) on the basis of another party’s alleged failure to satisfy a requirement that is a condition only for that other party’s retention of another piece of property (the utility company being at least 60% Filipino-owned to keep its franchise).”36

 

The OSG, representing public respondents Secretary Margarito Teves, Undersecretary John P. Sevilla, Commissioner Ricardo Abcede, and Chairman Fe Barin, is likewise silent on the definition of the term “capital.” In its Memorandum37 dated 24 September 2007, the OSG also limits its discussion on the supposed procedural defects of the petition, i.e. lack of standing, lack of jurisdiction, non-inclusion of

interested parties, and lack of basis for injunction. The OSG does not present any definition or interpretation of the term “capital” in Section 11, Article XII of the Constitution. The OSG contends that “the petition actually partakes of a collateral attack on PLDT’s franchise as a public utility,” which in effect requires a “full-blown trial where all the parties in interest are given their day in court.”38

 

Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of the Philippine Stock Exchange (PSE), does not also define the term “capital” and seeks the dismissal of the petition on the following grounds: (1) failure to state a cause of action against Lim; (2) the PSE allegedly implemented its rules and required all listed companies, including PLDT, to make proper and timely disclosures; and (3) the reliefs prayed for in the petition would adversely impact the stock market.

 

In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be a stockholder of record of PLDT, contended that the term “capital” in the 1987 Constitution refers to shares entitled to vote or the common shares. Fernandez explained thus:

 

The forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares, considering that it is through voting that control is being exercised. x x x

 

Obviously, the intent of the framers of the Constitution in imposing limitations and restrictions on fully nationalized and partially nationalized activities is for Filipino nationals to be always in control of the corporation undertaking said activities. Otherwise, if the Trial Court’s ruling upholding respondents’ arguments were to be given credence, it would be possible for the ownership structure of a public utility corporation to be divided into one percent (1%) common stocks and ninety-nine percent (99%) preferred stocks. Following the Trial Court’s ruling adopting respondents’ arguments, the common shares can be owned entirely by foreigners thus creating an absurd situation wherein foreigners, who are supposed to be minority shareholders, control the public utility corporation.

 

x x x x

 

Thus, the 40% foreign ownership limitation should be interpreted to apply to both the beneficial ownership and the controlling interest.

 

x x x x

 

Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities prescribed by the Constitution refers to ownership of shares of stock entitled to vote, i.e., common shares. Furthermore, ownership of record of shares will not suffice but it must be shown that the legal and beneficial ownership rests in the hands of Filipino citizens. Consequently, in the case of petitioner PLDT, since it is already admitted that the voting interests of foreigners which would gain entry to petitioner PLDT by the acquisition of SMART shares through the Questioned Transactions is equivalent to 82.99%, and the nominee arrangements between the foreign principals and the Filipino owners is likewise admitted, there is, therefore, a violation of Section 11, Article XII of the Constitution.

Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by the Trial Court to support the proposition that the meaning of the word “capital” as used in Section 11, Article XII of the Constitution allegedly refers to the sum total of the shares subscribed and paid-in by the shareholder and it allegedly is immaterial how the stock is classified, whether as common or preferred, cannot stand in the face of a clear legislative policy as stated in the FIA which took effect in 1991 or way after said opinions were rendered, and as clarified by the above-quoted Amendments. In this regard, suffice it to state that as between the law and an opinion rendered by an administrative agency, the law indubitably prevails. Moreover, said Opinions are merely advisory and cannot prevail over the clear intent of the framers of the Constitution.

 

In the same vein, the SEC’s construction of Section 11, Article XII of the Constitution is at best merely advisory for it is the courts that finally determine what a law means.39

 

 

On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan, Carlos A. Arellano, Helen Y. Dee, Magdangal B. Elma, Mariles Cacho-Romulo, Fr. Bienvenido F. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F. Del Rosario, and Orlando B. Vea, argued that the term “capital” in Section 11, Article XII of the Constitution includes preferred shares since the Constitution does not distinguish among classes of stock, thus:

 

16.  The Constitution applies its foreign ownership limitation on the corporation’s “capital,” without distinction as to classes of shares. x x x

 

In this connection, the Corporation Code – which was already in force at the time the present (1987) Constitution was drafted – defined outstanding capital stock as follows:

 

Section 137. Outstanding capital stock defined. – The term “outstanding capital stock”, as used in this Code, means the total shares of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury shares.

 

Section 137 of the Corporation Code also does not distinguish between common and preferred shares, nor exclude either class of shares, in determining the outstanding capital stock (the “capital”) of a corporation. Consequently, petitioner’s suggestion to reckon PLDT’s foreign equity only on the basis of PLDT’s outstanding common shares is without legal basis. The language of the Constitution should be understood in the sense it has in common use.

x x x x

 

17.  But even assuming that resort to the proceedings of the Constitutional Commission is necessary, there is nothing in the Record of the Constitutional Commission (Vol. III) – which petitioner misleadingly cited in the Petition x x x – which supports petitioner’s view that only common shares should form the basis for computing a public utility’s foreign equity.

x x x x

 

18.  In addition, the SEC – the government agency primarily responsible for implementing the Corporation Code, and which also has the responsibility of ensuring compliance with the Constitution’s foreign equity restrictions as regards nationalized activities x x x – has categorically ruled that both common and preferred shares are properly considered in determining outstanding capital stock and the nationality composition thereof.40

 

 

We agree with petitioner and petitioners-in-intervention. The term “capital” in Section 11, Article XII of the Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares,41 and not to the total outstanding capital stock comprising both common and non-voting preferred shares.

The Corporation Code of the Philippines42 classifies shares as common or preferred, thus:

 

Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those classified and issued as “preferred” or “redeemable” shares, unless otherwise provided in this Code: Provided,

further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par value. The Board of Directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with the Securities and Exchange Commission.

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided; That shares without par value may not be issued for a consideration less than the value of five (P5.00) pesos per share: Provided, further, That the entire consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends.

A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share.

Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;

4. Incurring, creating or increasing bonded indebtedness;

5. Increase or decrease of capital stock;

6. Merger or consolidation of the corporation with another corporation or other corporations;

7. Investment of corporate funds in another corporation or business in accordance with this Code; and

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights.

 

 

Indisputably, one of the rights of a stockholder is the right to participate in the control or management of the corporation.43 This is exercised through his vote in the election of directors because it is the board of directors that controls or manages the corporation.44 In the absence of provisions in the articles of incorporation denying voting rights to preferred shares, preferred shares have the same voting rights as common shares. However, preferred shareholders are often excluded from any control, that is, deprived of the right to vote in the election of directors and on other matters, on the theory that the preferred shareholders are merely investors in the corporation for income in the same manner as bondholders.45 In fact, under the Corporation Code only preferred or redeemable shares can be deprived of the right to vote.46 Common shares cannot be deprived of the right to vote in any corporate meeting, and any provision in the articles of incorporation restricting the right of common shareholders to vote is invalid.47

 

Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting rights, the term “capital” in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred shares also have the right to vote in the election of directors, then the term “capital” shall include such preferred shares because the right to participate in the control or management of the corporation is exercised through the right to vote in

the election of directors. In short, the term “capital” in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors.

 

This interpretation is consistent with the intent of the framers of the Constitution to place in the hands of Filipino citizens the control and management of public utilities. As revealed in the deliberations of the Constitutional Commission, “capital” refers to the voting stock orcontrolling interest of a corporation, to wit:

 

MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9 and 2/3-1/3 in Section 15.

 

MR. VILLEGAS. That is right.

 

MR. NOLLEDO. In teaching law, we are always faced with this question: “Where do we base the equity requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid-up capital stock of a corporation”? Will the Committee please enlighten me on this?

 

MR. VILLEGAS. We have just had a long discussion with the members of the team from the UP Law Center who provided us a draft. The phrase that is contained here which we adopted from the UP draft is “60 percent of voting stock.”

 

MR. NOLLEDO. That must be based on the subscribed capital stock, because unless declared delinquent, unpaid capital stock shall be entitled to vote.

 

MR. VILLEGAS. That is right.

 

MR. NOLLEDO. Thank you.

 

With respect to an investment by one corporation in another corporation, say, a corporation with 60-40 percent equity invests in another corporation which is permitted by the Corporation Code, does the Committee adopt the grandfather rule?

 

MR. VILLEGAS. Yes, that is the understanding of the Committee.

 

MR. NOLLEDO. Therefore, we need additional Filipino capital?

 

MR. VILLEGAS. Yes.48

 

x x x x

MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.

 

MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase “voting stock or controlling interest.”

 

MR. AZCUNA. Hence, without the Davide amendment, the committee report would read: “corporations or associations at least sixty percent of whose CAPITAL is owned by such citizens.”

 

MR. VILLEGAS. Yes.

 

MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the capital to be owned by citizens.

 

MR. VILLEGAS. That is right.

 

MR. AZCUNA. But the control can be with the foreigners even if they are the minority. Let us say 40 percent of the capital is owned by them, but it is the voting capital, whereas, the Filipinos own the nonvoting shares. So we can have a situation where the corporation is controlled by foreigners despite being the minority because they have the voting capital. That is the anomaly that would result here.

 

MR. BENGZON. No, the reason we eliminated the word “stock” as stated in the 1973 and 1935 Constitutions is that according to Commissioner Rodrigo, there are associations that do not have stocks. That is why we say “CAPITAL.”

 

MR. AZCUNA. We should not eliminate the phrase “controlling interest.”

 

MR. BENGZON. In the case of stock corporations, it is assumed.49 (Emphasis supplied)

 

 

Thus, 60 percent of the “capital” assumes, or should result in, “controlling interest” in the corporation. Reinforcing this interpretation of the term “capital,” as referring to

controlling interest or shares entitled to vote, is the definition of a “Philippine national” in the Foreign Investments Act of 1991,50 to wit:

 

SEC. 3. Definitions. - As used in this Act:

 

a.  The term “Philippine national” shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstandingand entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a “Philippine national.” (Emphasis supplied)

 

In explaining the definition of a “Philippine national,” the Implementing Rules and Regulations of the Foreign Investments Act of 1991 provide:

 

b. “Philippine national” shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by the citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent [60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee

is a Philippine national and at least sixty percent [60%] of the fund will accrue to the benefit of the Philippine nationals; Provided, that where a corporation its non-Filipino stockholders own stocks in a Securities and Exchange Commission [SEC] registered enterprise, at least sixty percent [60%] of the capital stock outstanding and entitled to vote of both corporations must be owned and held by citizens of the Philippines and at least sixty percent [60%] of the members of the Board of Directors of each of both corporation must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national. The control test shall be applied for this purpose.

 

Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock whether fully paid or not, but only such stocks which are generally entitled to vote are considered.

 

For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.

 

Individuals or juridical entities not meeting the aforementioned qualifications are considered as non-Philippine nationals. (Emphasis supplied)

 

 

 

 

 

 

Mere legal title is insufficient to meet the 60 percent Filipino-owned “capital” required in the Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in accordance with the constitutional mandate. Otherwise, the corporation is “considered as non-Philippine national[s].”

 

Under Section 10, Article XII of the Constitution, Congress may “reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments.” Thus, in numerous laws Congress has reserved certain areas of investments to Filipino citizens or to corporations at least sixty percent of the “capital” of which is owned by Filipino citizens. Some of these laws are: (1) Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055; and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term “capital” in Section 11, Article XII of the Constitution is also used in the same context in numerous laws reserving certain areas of investments to Filipino citizens.

 

To construe broadly the term “capital” as the total outstanding capital stock, including both common and non-voting preferred shares, grossly contravenes the intent and letter of the Constitution that the “State shall develop a self-reliant and independent national economyeffectively controlled by Filipinos.” A broad definition unjustifiably disregards who owns the all-important voting stock, which necessarily equates to control of the public utility.

 

We shall illustrate the glaring anomaly in giving a broad definition to the term “capital.” Let us assume that a corporation has 100 common shares owned by foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both classes of share having a par value of one peso (P1.00) per share. Under the broad definition of the term “capital,” such corporation would be considered compliant with

the 40 percent constitutional limit on foreign equity of public utilities since the overwhelming majority, or more than 99.999 percent, of the total outstanding capital stock is Filipino owned. This is obviously absurd.

 

In the example given, only the foreigners holding the common shares have voting rights in the election of directors, even if they hold only 100 shares. The foreigners, with a minuscule equity of less than 0.001 percent, exercise control over the public utility. On the other hand, the Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of directors and hence, have no control over the public utility. This starkly circumvents the intent of the framers of the Constitution, as well as the clear language of the Constitution, to place the control of public utilities in the hands of Filipinos. It also renders illusory the State policy of an independent national economyeffectively controlled by Filipinos.

 

The example given is not theoretical but can be found in the real world, and in fact exists in the present case.

 

Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of directors. PLDT’s Articles of Incorporation expressly state that “the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the election of directors or for any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or to receive notice of any meeting of stockholders.”51

 

On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDT’s Articles of Incorporation52 state that “each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by him on all matters voted upon by the stockholders, and the holders of Common Capital Stock shall have the exclusive right to vote for the election of directors and for all other purposes.”53

 

In short, only holders of common shares can vote in the election of directors, meaning only common shareholders exercise control over PLDT. Conversely, holders of preferred shares, who have no voting rights in the election of directors, do not have any control over PLDT. In fact, under PLDT’s Articles of Incorporation, holders of common shares have voting rights for all purposes, while holders of preferred shares have no voting right for any purpose whatsoever.

 

It must be stressed, and respondents do not dispute, that foreigners hold a majority of the common shares of PLDT. In fact, based on PLDT’s 2010 General Information Sheet (GIS),54 which is a document required to be submitted annually to the Securities and Exchange Commission,55 foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares.56 In other words, foreigners hold 64.27% of the total number of PLDT’s common shares, while Filipinos hold only 35.73%. Since holding a majority of the common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount of control unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII of the Constitution.

 

Moreover, the Dividend Declarations of PLDT for 2009,57 as submitted to the SEC, shows that per share the SIP58 preferred shares earn a pittance in dividends compared to the common shares. PLDT declared dividends for the common shares at P70.00 per share, while the declared dividends for the preferred shares amounted to a measly P1.00 per share.59 So the preferred shares not only cannot vote in the election of directors, they also have very little and obviously negligible dividend earning capacity compared to common shares.

 

As shown in PLDT’s 2010 GIS,60 as submitted to the SEC, the par value of PLDT common shares is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other words, preferred shares have twice the par value of common shares but cannot elect directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners own only a minuscule 0.56% of the preferred shares.61 Worse, preferred shares constitute 77.85% of the authorized capital stock of PLDT while common shares constitute only 22.15%.62 This undeniably shows that beneficial interest in PLDT is not with the non-voting preferred shares but with the common shares, blatantly

violating the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership in a public utility.

 

The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the voting rights, is constitutionally required for the State’s grant of authority to operate a public utility. The undisputed fact that the PLDT preferred shares, 99.44% owned by Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT common shares earn, grossly violates the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership of a public utility.

In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60 percent of the dividends, of PLDT. This directly contravenes the express command in Section 11, Article XII of the Constitution that “[n]o franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to x x x corporations x x x organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens x x x.”

 

To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the sole right to vote in the election of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDT’s common shares, constituting a minority of the voting stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the dividends that common shares earn;63 (5) preferred shares have twice the par value of common shares; and (6) preferred shares constitute 77.85% of the authorized capital stock of PLDT and common shares only 22.15%. This kind of ownership and control of a public utility is a mockery of the Constitution.

 

Incidentally, the fact that PLDT common shares with a par value of P5.00 have a current stock market value of P2,328.00 per share,64while PLDT preferred shares with a par value of P10.00 per share have a current stock market value ranging from only P10.92 toP11.06 per share,65 is a glaring confirmation by the market that control

and beneficial ownership of PLDT rest with the common shares, not with the preferred shares.

 

Indisputably, construing the term “capital” in Section 11, Article XII of the Constitution to include both voting and non-voting shares will result in the abject surrender of our telecommunications industry to foreigners, amounting to a clear abdication of the State’s constitutional duty to limit control of public utilities to Filipino citizens. Such an interpretation certainly runs counter to the constitutional provision reserving certain areas of investment to Filipino citizens, such as the exploitation of natural resources as well as the ownership of land, educational institutions and advertising businesses. The Court should never open to foreign control what the Constitution has expressly reserved to Filipinos for that would be a betrayal of the Constitution and of the national interest. The Court must perform its solemn duty to defend and uphold the intent and letter of the Constitution to ensure, in the words of the Constitution, “a self-reliant and independent national economy effectively controlled by Filipinos.”

 

Section 11, Article XII of the Constitution, like other provisions of the Constitution expressly reserving to Filipinos specific areas of investment, such as the development of natural resources and ownership of land, educational institutions and advertising business, is self-executing. There is no need for legislation to implement these self-executing provisions of the Constitution. The rationale why these constitutional provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus:

x x x Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are self-executing. If the constitutional provisions are treated as requiring legislation instead of self-executing, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the prevailing view is, as it has always been, that —

 

. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless the contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would give the legislature discretion to determine when, or

whether, they shall be effective. These provisions would be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed implementing statute. (Emphasis supplied)

 

 

 

 

 

In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later Chief Justice, agreed that constitutional provisions are presumed to be self-executing. Justice Puno stated:

 

Courts as a rule consider the provisions of the Constitution as self-executing, rather than as requiring future legislation for their enforcement. The reason is not difficult to discern. For if they are not treated as self-executing, the mandate of the fundamental law ratified by the sovereign people can be easily ignored and nullified by Congress. Suffused with wisdom of the ages is the unyielding rule that legislative actions may give breath to constitutional rights but congressional inaction should not suffocate them.

 

 

Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests, searches and seizures, the rights of a person under custodial investigation, the rights of an accused, and the privilege against self-incrimination. It is recognized that legislation is unnecessary to enable courts to effectuate constitutional provisions guaranteeing the fundamental rights of life, liberty and the protection of property. The same treatment is accorded to constitutional provisions forbidding the taking or damaging of property for public use without just compensation. (Emphasis supplied)

 

 

Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied directly the provisions of the 1935, 1973 and 1987 Constitutions limiting land ownership to Filipinos. In Soriano v. Ong Hoo,68 this Court ruled:

 

x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of his land to an alien, and as both the citizen and the alien have violated the law, none of them should have a recourse against the other, and it should only be the State that should be allowed to intervene and determine what is to be done with the property subject of the violation. We have said that what the State should do or could do in such matters is a matter of public policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et al., 6 G. R. No. L-5996, June 27, 1956.) While the legislature has not definitely decided what policy should be followed in cases of violations against the constitutional prohibition, courts of justice cannot go beyond by declaring the disposition to be null and void as violative of the Constitution. x x x (Emphasis supplied)

 

 

To treat Section 11, Article XII of the Constitution as not self-executing would mean that since the 1935 Constitution, or over the last 75 years, not one of the constitutional provisions expressly reserving specific areas of investments to corporations, at least 60 percent of the “capital” of which is owned by Filipinos, was enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions miserably failed to effectively reserve to Filipinos specific areas of investment, like the operation by corporations of public utilities, the exploitation by corporations of mineral resources, the ownership by corporations of real estate, and the ownership of educational institutions. All the legislatures that convened since 1935 also miserably failed to enact legislations to implement these vital constitutional provisions that determine who will effectively control the national economy, Filipinos or foreigners. This Court cannot allow such an absurd interpretation of the Constitution.

 

This Court has held that the SEC “has both regulatory and adjudicative functions.”69 Under its regulatory functions, the SEC can be compelled by mandamus to perform its statutory duty when it unlawfully neglects to perform the same. Under its adjudicative or quasi-judicial functions, the SEC can be also be compelled by mandamus to hear and decide a possible violation of any law it administers or enforces when it is mandated by law to investigate such violation.

 

Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to reject or disapprove the Articles of Incorporation of any corporation where “the required percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution.” Thus, the SEC is the government agency tasked with the statutory duty to enforce the nationality requirement prescribed in Section 11, Article XII of the Constitution on the ownership of public utilities. This Court, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, can direct the SEC to perform its statutory duty under the law, a duty that the SEC has apparently unlawfully neglected to do based on the 2010 GIS that respondent PLDT submitted to the SEC.

Under Section 5(m) of the Securities Regulation Code,71 the SEC is vested with the “power and function” to “suspend or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law.” The SEC is mandated under Section 5(d) of the same Code with the “power and function” to “investigate x x x the activities of persons to ensure compliance” with the laws and regulations that SEC administers or enforces. The GIS that all corporations are required to submit to SEC annually should put the SEC on guard against violations of the nationality requirement prescribed in the Constitution and existing laws. This Court can compel the SEC, in a petition for declaratory relief that is treated as a petition for mandamus as in the present case, to hear and decide a possible violation of Section 11, Article XII of the Constitution in view of the ownership structure of PLDT’s voting shares, as admitted by respondents and as stated in PLDT’s 2010 GIS that PLDT submitted to SEC.

 

WHEREFORE, we PARTLY GRANT the petition and rule that the term “capital” in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares, and not to the total outstanding capital stock (common and non-

voting preferred shares). Respondent Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition of the term “capital” in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate sanctions under the law.

 

SO ORDERED.

 CASE DIGEST:

 THE FACTS

This is a petition to nullify the sale of shares of stock of Philippine Telecommunications Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting through the Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company Limited (First Pacific), a Hong Kong-based investment management and holding company and a shareholder of the Philippine Long Distance Telephone Company (PLDT).

The petitioner questioned the sale on the ground that it also involved an indirect sale of 12 million shares (or about 6.3 percent of the outstanding common shares) of PLDT owned by PTIC to First Pacific. With the this sale, First Pacific’s common shareholdings in PLDT increased from 30.7 percent to 37 percent, thereby increasing the total common shareholdings of foreigners in PLDT to about 81.47%. This, according to the petitioner, violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of the capital of a public utility to not more than 40%, thus:

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. (Emphasis supplied)

II.    THE ISSUE

Does the term “capital” in Section 11, Article XII of the Constitution refer to the total common shares only, or to the total outstanding capital stock (combined total of common and non-voting preferred shares) of PLDT, a public utility?

III.   THE RULING

[The Court partly granted the petition and held that the term “capital” in Section 11, Article XII of the Constitution refers only to shares of stock entitled to vote in the election of directors of a public utility, i.e., to the total common shares in PLDT.]

Considering that common shares have voting rights which translate to control, as opposed to preferred shares which usually have no voting rights, the term “capital” in Section 11, Article XII of the Constitution refers only to common shares. However, if the preferred shares also have the right to vote in the election of directors, then the term “capital” shall include such preferred shares because the right to participate in the control or management of the corporation is exercised through the right to vote in the election of directors. In short, the term “capital” in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors.

   To construe broadly the term “capital” as the total outstanding capital stock, including both

common and non-voting preferred shares, grossly contravenes the intent and letter of the Constitution that the “State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.” A broad definition unjustifiably disregards who owns the all-important voting stock, which necessarily equates to control of the public utility.

   Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of

directors. PLDT’s Articles of Incorporation expressly state that “the holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the election of directors or for any other purpose or otherwise participate in any action taken by the corporation or its stockholders, or to receive notice of any meeting of stockholders.” On the other hand, holders of common shares are granted the exclusive right to vote in the election of directors. PLDT’s Articles of Incorporation state that “each holder of Common Capital Stock shall have one vote in respect of each share of such stock held by him on all matters voted upon by the stockholders, and  the holders of Common Capital Stock shall have the exclusive right to vote for the election of directors and for all other purposes.”

  It must be stressed, and respondents do not dispute, that foreigners hold a majority of the

common shares of PLDT. In fact, based on PLDT’s 2010 General Information Sheet (GIS),  which is a document required to be submitted annually to the Securities and Exchange Commission, foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common shares. In other words, foreigners hold 64.27% of the total number of PLDT’s common shares, while Filipinos hold only 35.73%. Since holding a majority of the common shares equates to control, it is clear that foreigners exercise control over PLDT. Such amount of control

unmistakably exceeds the allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII of the Constitution.

As shown in PLDT’s 2010 GIS, as submitted to the SEC, the par value of PLDT common shares is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other words, preferred shares have twice the par value of common shares but cannot elect directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners own only a minuscule 0.56% of the preferred shares. Worse, preferred shares constitute 77.85% of the authorized capital stock of PLDT while common shares constitute only 22.15%. This undeniably shows that beneficial interest in PLDT is not with the non-voting preferred shares but with the common shares, blatantly violating the constitutional requirement of 60 percent Filipino control and Filipino beneficial ownership in a public utility.

  In short, Filipinos hold less than 60 percent of the voting stock, and earn less than 60

percent of the dividends, of PLDT. This directly contravenes the express command in Section 11, Article XII of the Constitution that “[n]o franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to x x x corporations x x x organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens x x x.”

To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of shares exercises the sole right to vote in the election of directors, and thus exercise control over PLDT; (2) Filipinos own only 35.73% of PLDT’s common shares, constituting a minority of the voting stock, and thus do not exercise control over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 of the dividends that common shares earn; (5) preferred shares have twice the par value of common shares; and (6) preferred shares constitute 77.85% of the authorized capital stock of PLDT and common shares only 22.15%. This kind of ownership and control of a public utility is a mockery of the Constitution.

[Thus, the Respondent Chairperson of the Securities and Exchange Commission was DIRECTED by the Court to apply the foregoing definition of the term “capital” in determining the extent of allowable foreign ownership in respondent Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article XII of the Constitution, to impose the appropriate sanctions under the law.]

AGAN VS PIATCO

FACTS:On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III).

DOTC constituted the Prequalification Bids and Awards Committee (PBAC) for the implementation of the project and submitted with its endorsement proposal to the NEDA, which approved the project.

On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or comparative proposals on AEDC’s unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended.  

On September 20, 1996, the consortium composed of People’s Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC.  PBAC awarded the project to Paircargo Consortium. Because of that, it was incorporated into Philippine International Airport Terminals Co., Inc.

AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the prequalification of PIATCO.

On July 12, 1997, the Government and PIATCO signed the “Concession Agreement for the Build-Operate-and-Transfer Arrangement of the NAIA Passenger Terminal III” (1997 Concession Agreement).  The Government granted PIATCO the franchise to operate and maintain the said terminal during the concession period and to collect the fees, rentals and other charges in accordance with the rates or schedules stipulated in the 1997 Concession Agreement.  The Agreement provided that the concession period shall be for twenty-five (25) years commencing from the in-service date, and may be renewed at the option of the Government for a period not exceeding twenty-five (25) years.  At the end of the concession period, PIATCO shall transfer the development facility to MIAA.

Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II, had existing concession contracts with various service providers to offer international airline airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other services, to several international airlines at the NAIA.

On September 17, 2002, the workers of the international airline service providers, claiming that they would lose their job upon the implementation of the questioned agreements, filed a petition for prohibition. Several employees of MIAA likewise filed a petition assailing the legality of the various agreements.

During the pendency of the cases, PGMA, on her speech, stated that she will not “honor (PIATCO) contracts which the Executive Branch’s legal offices have concluded (as) null and void.”

ISSUE:Whether or not the State can temporarily take over a business affected with public interest.

RULING:Yes. PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover and obligate the government to pay “reasonable cost for the use of the Terminal and/or Terminal Complex.”

Article XII, Section 17 of the 1987 Constitution provides:Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest.

The above provision pertains to the right of the State in times of national emergency, and in the exercise of its police power, to temporarily take over the operation of any business affected with public interest. The duration of the emergency itself is the determining factor as to how long the temporary takeover by the government would last. The temporary takeover by the government extends only to the operation of the business and not to the ownership thereof. As such thegovernment is not required to compensate the private entity-owner of the said business as there is no transfer of ownership, whether permanent or temporary. The private entity-owner affected by the temporary takeover cannot, likewise, claim just compensation for the use of the said business and its properties as the temporary takeover by the government is in exercise of its police power and not of its power of eminent domain.

Article XII, section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to “temporarily take over or direct the operation of any privately owned public utility or business affected with public interest.” It is the welfare and interest of the public which is the paramount consideration in determining whether or not to

temporarily take over a particular business. Clearly, the State in effecting the temporary takeover is exercising its police power. Police power is the “most essential, insistent, and illimitable of powers.” Its exercise therefore must not be unreasonably hampered nor its exercise be a source of obligation by the government in the absence of damage due to arbitrariness of its exercise. Thus, requiring the government to pay reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution.

CASE DIGEST:

FACTS:On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III).

DOTC constituted the Prequalification Bids and Awards Committee (PBAC) for the implementation of the project and submitted with its endorsement proposal to the NEDA, which approved the project.

On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or comparative proposals on AEDC’s unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended.  

On September 20, 1996, the consortium composed of People’s Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC.  PBAC awarded the project to Paircargo Consortium. Because of that, it was incorporated into Philippine International Airport Terminals Co., Inc.

AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the prequalification of PIATCO.

On July 12, 1997, the Government and PIATCO signed the “Concession Agreement for the Build-Operate-and-Transfer Arrangement of the NAIA Passenger Terminal III” (1997 Concession Agreement).  The Government granted PIATCO the franchise to operate and maintain the said terminal during the concession period and to collect the fees, rentals and other charges in accordance with the rates or schedules stipulated in the 1997 Concession Agreement.  The Agreement provided that the concession period shall be for twenty-five (25) years commencing from the in-service date, and may be renewed at the option of the Government for a period not exceeding

twenty-five (25) years.  At the end of the concession period, PIATCO shall transfer the development facility to MIAA.

Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II, had existing concession contracts with various service providers to offer international airline airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other services, to several international airlines at the NAIA.

On September 17, 2002, the workers of the international airline service providers, claiming that they would lose their job upon the implementation of the questioned agreements, filed a petition for prohibition. Several employees of MIAA likewise filed a petition assailing the legality of the various agreements.

During the pendency of the cases, PGMA, on her speech, stated that she will not “honor (PIATCO) contracts which the Executive Branch’s legal offices have concluded (as) null and void.”

ISSUE:Whether or not the State can temporarily take over a business affected with public interest.

RULING:Yes. PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover and obligate the government to pay “reasonable cost for the use of the Terminal and/or Terminal Complex.”

Article XII, Section 17 of the 1987 Constitution provides:Section 17. In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest.

The above provision pertains to the right of the State in times of national emergency, and in the exercise of its police power, to temporarily take over the operation of any business affected with public interest. The duration of the emergency itself is the determining factor as to how long the temporary

takeover by the government would last. The temporary takeover by the government extends only to the operation of the business and not to the ownership thereof. As such thegovernment is not required to compensate the private entity-owner of the said business as there is no transfer of ownership, whether permanent or temporary. The private entity-owner affected by the temporary takeover cannot, likewise, claim just compensation for the use of the said business and its properties as the temporary takeover by the government is in exercise of its police power and not of its power of eminent domain.

Article XII, section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to “temporarily take over or direct the operation of any privately owned public utility or business affected with public interest.” It is the welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a particular business. Clearly, the State in effecting the temporary takeover is exercising its police power. Police power is the “most essential, insistent, and illimitable of powers.” Its exercise therefore must not be unreasonably hampered nor its exercise be a source of obligation by the government in the absence of damage due to arbitrariness of its exercise. Thus, requiring the government to pay reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution.

PPA VS MENDOZA

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-48304 September 11, 1985

PHILIPPINE PORTS AUTHORITY, petitioners, vs.HON. RAFAEL L. MENDOZA, in his capacity as Presiding Judge of the Court of First Instance of Cebu, Branch VI, PERNITO ARRASTRE SERVICES, INC., APOLONIO BACALLA, doing business under the style "Bacalla Arrastre Services", ARISTON AGUILAR, doing business under the style "Aguilar Arrastre Services", ROMEO CABRAS, doing business under the style "Cabras Arrastre Services", GUERRERO DAJAO, doing business under the style "Dajao Arrastre Services," NIÑO TAMARRA, doing business under the style "Tamarra Arrastre Services", JESUS GARCIA, doing business under the style "Garcia Arrastre Services", FRANCISCO AGUIRRE, doing business under the style "Sto. Rosario Arrastre Services", TEOFILO ESTOCE doing business under the style "E & C Arrastre Services", RAMON P. TECSON, doing business under the style "Tecson Arrastre Services", MARCELO A.

CANSANCIO, doing business under the style "Tabunoc Arrastre Service", SIMEON M. PACA, SR., doing business under the style, "A.O. Paca Arrastres Services", ANDRES ROMARIZ doing business under the style "F. Figueroa Arrastre Service," NILO SERVILA doing business under the style "Servila Arrastre Services", RHODA F. BANGOY, doing business under the style "Tan Arrastre Services", FILOMENO PEPITO, doing business under the style "F. Pepito & Villacruses Arrastre Service", VICTORINO SY, doing business under the style "E. V. Sy Arrastre Services", and ROMEO GADIANO doing business under the style "Cadiano Arrastre Service", respondents.

 

ALAMPAY, J.:

This case relates to a petition for certiorari and prohibition filed by Philippine Ports Authority (PPA) directed principally against the public respondent herein as presiding judge of the Court of First Instance (now Regional Trial Court) of Cebu, Branch VI and naming as private respondents eighteen (18) arrastre groups led by Pernito Arrastre Services, Inc. (hereunder referred to as Pernito, et al.). Petitioner avers that the respondent judge committed a grave abuse of discretion amounting to lack of jurisdiction when it issued in Civil Case No. R-16289, a writ of preliminary injunction prohibiting Philippine Ports Authority, pendente lite, from enforcing its policy of integration in the port of Cebu City and directing it to allow respondent Pernito, et al., to operate individually and independently as arrastre and stevedoring contractors. The dispositive portion of the questioned order, dated March 31, 1978, reads as follows:

WHEREFORE, in view of the foregoing reasons, this Court orders the issuance of a writ of preliminary preventive injunction, prohibiting:

1. The respondent Philippine Ports Authority, through its Cebu City Manager or his representative(s), from enforcing its policy of integration of arrastre operations, or the merger in the City of Cebu, thereby in the meantime allowing petitioners to operate individually as such and the free flow of cargoes serviced by them.

2. The respondent United South Dockhandlers, Inc. from requiring the petitioners to remit to the 100% gross arrastre earnings or any portion thereof and from collecting each charges from said petitioners or from consignees of the cargoes handled by them and from withholding the release of such cargoes; and

3. The respondent United South Dockhandlers, Inc. from appropriating or converting to its own use and operations any equipment belonging to any of the petitioners such as typewriters, adding machines, office machinery, equipment or supplies of any kind, upon petitioners' filing of a bond in the amount of Fifty Thousand (P50,000.00) PESOS executed to the two respondents enjoined, to the effect that petitioners will pay to them such damages as they may sustain by reason of the injunction should this Court finally decide that the petitioners are not entitled thereto. (Petition, Annex 1).

In the aforestated questioned order of March 11, 1978, the respondent judge justified his issuance of the writ of preliminary injunction with the statement that it "preliminary finds that Section 26 of Presidential Decree No. 857 invoked by respondent PPA does not authorize it to order the compulsory merger of arrastre operators into one organization as a sine qua non for the grant of permit" and that "the power of respondent PPA to provide services whether on its own, by contract

or otherwise, within the Port Districts and the approaches thereof, including but not limited to certain enumerated services is not exclusionary in character."

Petitioner herein also assails the April 17, 1978 Order of the respondent judge which allowed, without notice and hearing, a certain Aquino Arrastre Services and Watergate Arrastre Service to intervene any adopt the petition filed in the Court below and extended to them the benefit of the injunction order.

At first, only petitioner PPA questioned the subject orders by filing this petition. United South Dockhandlers, Inc. hereinafter referred to as (USDI) opted to let the effects of the order stay as far as they are concerned on July 8, 1978. However, USDI filed a "Motion to Intervene" (rollo, p. 227) which was granted by this Court on October 24, 1978 (lbid, p. 271). On November 22, 1978, for reasons therein stated USDI filed a Manifestation that it is withdrawing its Motion to Intervene (lbid, p. 274) but the same was denied by this Court in a resolution dated February 1, 1979. USDI filed a Manifestation that it is adopting in toto the Petition of PPA (lbid, p. 327).

The relevant antecedent facts of this case as may be gleaned from the petition are not disputed by the respondents herein and these are as follows:

1. Prior to the declaration of martial law in the Philippines, the operation of arrastre and stevedoring services in the country's various domestic ports was in great disarray. The pernicious "cabo system" ruled by bosses had proliferated and caused untold burdens to legitimate labor groups. Violence and thefts in the ports were rampant and imperilled both human and cargo traffic between the islands.

2. In November 1972, following the proclamation of martial law an Ad Hoc Committee on Waterfront Services was created to study the problems of arrastre and stevedoring operations in these ports. The committee was composed of representatives of the Department of Labor, the shipping community the arrastre and stevedoring labor contractors, the Bureau of Customs, the labor sector and port end-users, under -he chairmanship of the Deputy Commissioner of Customs.

3. On April 23, 1973 the Committee submitted its report and recommendation. It recommended the servicing of such shipping company by only one arrastre and stevedoring contractor in a given port. The objective was the integration of arrastre-stevedoring operations in each port so that ultimately only one contractor would be authorized to service the needs of that port.

4. On August l,1973 and September l, 1974 the Bureau of Customs approved and implemented the recommendation of the Ad Hoc Committee on the initial integration of arrastre and stevedoring services. Two years later, on May 8, 1975, the Bureau of Customs issued Memorandum Order No. 28-75, providing for the merger of all existing cargo handling contractors in each port.

5. At that time, there were in the port of the City of Cebu more than fifty arrastre-stevedoring contractors. The problems, as elsewhere, were the same. The "cabo system" of exploiting labor and the lack of rationality in the handling of cargoes prevailed in the port. To effect the gradual integration of arrastre and stevedoring operations, the Bureau of Customs decided to require the merger of the several contractors in two stages, first into ten corporations, and then to one.

Accordingly, the ten corporations were formed, namely: (1)Masayon Arrastre & Forwarding Corp., (2) Vismin Stevedores & Forwarders, Inc., (3) Cebu Materials Handling Corp. (4) Solid Arrastre & Forwarding Co., Inc., (5) Sto. Nino Stevedoring & Arrastre Corp. (6) Integrated Port Services (Cebu), Inc., (7) Panama Arrastre & Stevedoring Co., Inc., (8) Cebu Allied Maritime Services, Inc., (9) Cebu Integrated Arrastre, Inc., and (10) Cenvis Arrastre Services, Inc.

6. The ten corporations named above were issued separable permits by the Bureau of Customs. In 1977 Bisaya Land Transportation Co., Inc., the eleventh cargo handling contractor, was likewise authorized to do business in the port of the City of Cebu. Apart from these eleven corporations, none other was authorized to perform arrastre and stevedoring services in the port. All the other previously existing contractors were assimilated by the eleven organizations issued credentials and permits by the Bureau of Customs.

Neither respondent Pernito Arrastre Services nor any of the other respondents in this case were issued permits by the Bureau of Customs to operate arrastre services. Respondent Pernito operated under the permit of the Vismin Stevedores & Forwarders, Inc.

7. On July 11, 1974, Presidential Decree No. 505 was promulgated creating the petitioner Philippine Ports Authority (PPA). The Decree was subsequently amended by Presidential Decree No. 857 dated December 23, 1975. Under the Decree, the PPA is entrusted with the function of carrying out an integrated program for the planning, development, financing and operation of ports and port districts throughout the country. The powers, duties, and jurisdiction of the Bureau of Customs concerning arrastre operations were transferred to, and vested in, the petitioner PPA.

8. Upon assumption of its functions, petitioner PPA made a thorough investigation and study of port problems. It found that stevedoring services (on-ship work) in the Philippines were separated from arrastre services (dock work), each one being provided by separate contractors. Furthermore, petitioner PPA found that there were too many companies/organizations supplying stevedoring or arrastre services, or both. This proliferation of services was wasteful and inefficient. As a consequence of which workers were underpaid and did not enjoy regularity of work. Overall port efficiency suffered in the long term and shipping costs unavoidably went up.

Accordingly, on May 4, 1976 the Board of Directors of petitioner PPA passed Resolution No. 10, approving and adopting a set of Policies on Port Administration, Management and Operation. By this action, petitioner PPA adopted as its own the Bureau of Customs policy of placing on only one organization the responsibility for the operation of arrastre and stevedoring services in one port.

9. In order to implement its policy of integration, petitioner PPA issued on May 27, 1977, Memorandum Order No. 21 which provides, in its pertinent parts, as follows:

6. In order to ensure utmost efficiency and economy in cargo handling operations, to provide better service to port users and to amply protect the interest of labor and all other port users, and the government as well, it is the policy of the Authority that there should be only one arrastre-stevedors operator/contractor to engage in cargo handling services in a port.

Conformably with this policy, it is necessary that two or more contractors presently operating within the same port premises who desire to continue or renew their cargo handling services must merge into only one organization within a prescribed period after receipt of due notice from the Authority.

10. Accordingly, the existing eleven arrastre-stevedoring contractors mentioned in paragraphs 7 and 8 above began discussions of plans for merger. Thereafter, they submitted to petitioner PPA a Memorandum Agreement which embodied a plan for total merger.

In October, 1977, the eleven port services contractors in the Cebu City Port formed the United South Dockhandlers, Inc. (hereinafter referred to as USDI). The latter corporation was recognized by petitioner PPA and granted a special permit on November 4, 1977, to handle exclusively the cargo

handling requirements of the entire port in the City of Cebu pending the eventual award of a management contract.

11. On February 27, 1977, private respondents Pernito, et al. (numbering 18 in all) instituted an action for declaratory relief and mandamus with preliminary preventive and mandatory injunction and damages against petitioner PPA and USDI. The case was filed with the Court of First Instance of Cebu (Branch VI), presided over by respondent judge. It was docketed as Civil Case No. R-16829.

12. Pernito, et al., alleged in their pleadings filed in the court below that they were among the more than fifty independent arrastre/stevedoring contractors doing business in the Cebu City port prior to the issuance on May 8, 1975 of Bureau of Customs Memorandum Order No. 28-75; that they joined the merger of contractors into ten arrastre-stevedoring corporations; that following the issuance by the PPA of its Memorandum Order No. 21, the matter of total merger became an issue because the small contractors including respondent Pernito, et al., refused to be assimilated with the big contractors which were allegedly controlled by shipping companies; that after assurances that the interest of small operators would be protected, the eleven licensed corporations agreed to merge their resources and formed the USDI.

Pernito, et al., further alleged that the controlling interests in USDI reneged on their commitments to the small stockholders; that as a result, respondent Pernito, et al., left USDI and applied with PPA for separate permits to operate their services, but their (Pernito, et al.) applications were denied. Apart from questioning the denial of their applications, Pernito, et al. likewise questioned the 10% of gross receipts being collected by PPA from arrastre and stevedoring contractors.

13. On March 3l, 1978, respondent judge issued an injunction order which, among other things, enjoined PPA, pendente lite, from implementing its policy of integration and allowing Pernito, et al, to freely operate arrastre and stevedoring services in the port of Cebu.

14. On April 17, 1978, respondent judge, without notice and hearing, allowed a certain Aquino Arrastre Services and a certain Watergate Arrastre Services to intervene and extended to them the benefits of the injunction. (Petition, pg. 3-12; Rollo, 4-13).

Hence, this petition.

Pending action on the instant petition, this Court on May 30, 1978, issued a temporary restraining order enjoining respondents from effecting the questioned orders of March 31, 1978 and April 17, 1978 (Rollo, pp. 117 and 120). The order was confirmed by this Court in a subsequent order issued on June 6, 1978, "restraining (1) respondent judge from giving effect to his orders dated March 31, 1978 where he issued an injunction against the petitioner Philippine Ports Authority and from hearing Civil Case No. R-16829 until further orders; and (2) private respondent Pernito Arrastre Services, Inc. from performing arrastre and stevedoring services in the port of Cebu" Rollo, P. 124). On July 24, 1979, this Court modified its restraining order of May 30, 1978 by lifting the portion thereof restraining respondent judge from proceeding with the hearing of Civil Case No. R-16829 (Rollo, 329).

Whether or not the respondent judge committed a grave abuse of discretion amounting to lack of jurisdiction when it issued the March 31, 1978 Order can be determined only after the resolution of the various issues in the case. As culled from the petition, the respondents' comments, and the various pleadings in this case, the principal issues to be resolved in this petition are:

1. Whether or not the Petitioner PPA has the power to require integration of arrastre-stevedoring services in Philippine ports.

2. Whether or not PPA's policy of integration through compulsory merger is unconstitutional and void for being violative of

a) Section 2, Article XIV of the 1973 Constitution on private monopolies and combinations in restraint of trade, and

b) Section 20, Act 3518 prohibiting combinations, mergers, or acquisition in restraint of trade.

3. Whether or not the questioned orders restored the status quo before the present controversy.

4. Whether or not the questioned orders constitute a judicial interference in purely administrative functions.

On the first issue, We hold that petitioner PPA has power to regulate and require integration of arrastre and stevedoring services in Philippine ports. The objectives in the creation of PPA is defined in Section 2 of Presidential Decree No. 857, which reads:

a) To coordinate, streamline, improve and optimize the planning, development, financing, construction, maintenance and operation of Ports, port facilities, port physical plants, and all equipment used in connection with the operation of a Port.

b) To ensure the smooth flow of waterborne commerce passing through the country's Ports whether public or private, in the conduct of international and domestic trade.

c) To promote regional development through the dispersal of industries and commercial activities throughout the different regions.

d) To foster inter-island seaborne commerce and foreign trade.

e) To redirect and reorganize port administration beyond its specific and traditional functions of harbor development and cargo handling operations to the broader function of total port district development, including encouraging the full and efficient utilization of the Port's hinterland and tributary areas.

f) To ensure that all income and revenues accruing out of dues, rates and charges for the use of facilities and services provided by the Authority are properly collected and accounted for by the Authority, that all such income and revenues win be adequate to defray the cost of providing the facilities and services (inclusive of operating and maintenance cost, administration and overhead) of the Port Districts, and to ensure that a reasonable return on the assets employed shall be realized.

In line with these objectives, Section 26 of P.D. No. 857 empowered PPA to make rules and regulations governing Philippine ports. Said rules and regulations governing Philippine ports. Said Section 26 provides:

Section 26. Power to Make Regulations—

a) The Authority may, after consultation with relevant Government agencies, make rules or regulations for the planning, development, construction, maintenance, control supervision and management of any port or port District and the services to be provided therein, and for the maintenance of good order therein, and generally for carrying out the purposes of this Decree.

b) The Authority may provide separate regulations for each category of ports or port districts. (Rollo, p. 16).

With respect to the issue at bar, specific power was granted under Section 6, Subsection 2, par. V of P.D. 857. Paragraph V reads:

(V) To provide services (whether on its own by contract or otherwise) within the Port Districts and the approaches thereof, including but not limited to—

—berthing, towing, mooring, moving, slipping, or docking any vessel;

—loading or discharging any vessel

—sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

Under said paragraph (V), the PPA has been granted a wide discretion in adopting and implementing the policy which it deems most effective in the successful attainment of the laws' objectives. It can either provide the necessary services on its own or engage the services of one or more contractors.

After a thorough investigation and study of port problems, it adopted the Bureau of Customs policy of placing in only one organization the responsibility for the operation of arrastre and stevedoring services. The benefits envisioned to be derived from the adopting of policy are the achievement of economies of scale and better supervision and control of ports' operation. As outlined in PPA Resolution No. 10 dated May 4, 1976, the expected advantages are (1) Optimum utilization of equipment, facilities, and labor; (2) Improved and stabilized labor compensation; (3) Larger capital base; (4) Increased borrowing base; (5) Savings in overhead costs; (6) Flexibility of operations; (7) Maintenance program improvement; (8) Uniform reporting and accounting system; and (9) Better dealing with the government.

In the case of Anglo-Fil Trading Corporation vs. Lazaro, G.R. No. 54966, September 2, 1983, this Court already held and so declared that the rationalization and effective utilization of port facilities is to the advantage of the government. We ruled that the discretion in choosing the stevedoring contractor for the South Harbor, Port of Manila belongs by law to PPA. As long as standards are set in determining the contractor and such standards are reasonable and related for the purpose for which they are used, the courts should not inquire into the wisdom of PPA's choice.

In the case at bar, private respondents contend that USDI to which the petitioner PPA has awarded the franchise or special privilege to render the arrastre and stevedoring services has no adequate facilities and equipment. USDI however, is the result of the merger of the eleven (11) biggest arrastre and stevedoring contractors operating in the Port of Cebu. Private respondents themselves admitted that they are "small arrastre-stevedore operators . . while USDI is controlled by the big arrastre corporations". It cannot, therefore, correctly be said that USDI has "no equipment"

and never operated the arrastre and stevedoring services in the port of Cebu" (Comment, p. 22). (lbid, p. 6, Rollo, 158). In the aforecited case of Anglo-Fil Trading Corporation, we held that:

It is settled rule that unless the case justifies it, the judiciary will not interfere in purely administrative matters (Monark International, Inc. vs. Noriel, 83 SCRA 114). Such discretionary power vested in the proper administrative body, in the absence of arbitrariness and grave abuse of discretion so as to go beyond the statutory authority, is not subject to the contrary judgment or control of others (See Meralco Securities Corporation vs. Savellano, 117 SCRA 804). In general, courts have no supervisory power over the proceedings and actions of the administrative departments of the government. This is particularly true with respect to acts involving the exercise of judgment of discretion and to findings of fact. (Pajo vs. Ago, and Ortiz, 108 Phil. 905.

In opposing this petition, the private respondents assail the policy adopted by PPA to grant only one permit to only one group as violative of the constitutional and statutory provision on monopolies and combinations in restraint of trade. Private respondents herein cite Act No. 3518, specifically Sec. 20 thereof, and Section 2, Article XIV of the 1973 Constitution. The aforecited constitutional provision reads:

The state shall regulate or prohibit private monopolies when the public interest so requires. No combination in restraint of trade or unfair competition shall be allowed. (Section 2, Article XIV, 1973 Constitution).

Section 20 of Act No. 3518 provides:

No corporation engaged in commerce may acquire, directly and indirectly, the whole or any part of the stock or other share capital of another corporation or corporations engaged in commerce, where the effect of such acquisition may be to substantially lessen competition between the corporation or corporations whose stock is so acquired and the corporations making the acquisition, or between any of them or to restrain such commerce in any section or community, or tend to create a monopoly with any line of commerce.

Private monopolies are not necessarily prohibited. The use of the word "regulate" in the Constitution indicates that some monopolies, properly regulated, are allowed. Regulate means includes the power to control, to govern, and to restrain, but regulate should not be construed as synonymous with suppress or prohibit (Kwong Sing vs. City of Manila, 41 Phil. 108). "Competition can best regulate a free economy. Like all basic beliefs, however, that principle must accommodate hard practical experience. There are areas where for special reasons the force of competition, when left wholly free, might operate too destructively to safeguard the public interest. Public utilities are an instance of that consideration." (Oleck, Modern Corporation Law, Vol. IV, p. 197). By their very nature, certain public services or public utilities such as those which supply water, electricity, transportation, telegraph, etc. must be given exclusive franchises if public interest is to be served. Such exclusive franchises are not violative of the law against monopolies (Anglo-Fil Trading Corporation vs. Lazaro, supra).

In the case at bar, the area affected is maritime transportation in the port of Cebu. The operations there, particularly arrastre and stevedoring, affect not only the City of Cebu, the principal port in the South, but also the economy of the whole country as well. Any prolonged disjunction of the services being rendered there will prejudice not only inter-island and international trade and commerce. Operations in said port are therefore imbued with public interest and are subject to regulation and

control for the public good and welfare. PPA's policy of integration through compulsory merger may not even be in this instance considered as promoting a monopoly because the fact of the matter is that while the sole operator permitted by PPA to engage in the arrastre and stevedoring operations in the port of Cebu is only USDI, actually USDI is comprised of the eleven (11) port services contractors that previously used said ports but decided to merge and ultimately constituted themselves as USDI.

But over and above the platter of whether the monopoly has been created, the overriding and more significant consideration is public interest. Accordingly, We hold that PPA's policy of integration is not violative of any constitutional and legal provision on monopolies.

In the questioned order, Pernito, et al., were allowed to operate individually and render arrastre and stevedoring services in the port of Cebu while the case is pending because according to the respondent judge, this was the last peaceable uncontested status before the present controversy. His appreciation of the facts is incorrect. The present controversy arose when Pernito, et al., sought, but were denied, permits to operate in the port of Cebu. PPA denied their applications because of its policy of integration. Before the case was filed, therefore, the status quo was that Pernito, et al., had no permit to operate individually. Prior to their application for separate permits, Pernito, et al., operated pursuant to the various and respective licenses of the different arrastre operators, Pernito Arrastre Services, Inc., in particular, operated under the license issued to Vismin Stevedores & Forwarders, Inc, This scheme is what is commonly known in the transportation business as the "kabit-system."

Long before the case below was filed, Pernito, et al., was in conformity with the integration policy of the PPA. They never questioned its validity and legality. In fact, in the petition for declaratory relief and mandamus they filed below, they even admitted having pleaded with PPA for the integration of the eleven (11) arrastre operators into two (2) corporations: one corporation to be composed of the arrastre corporations controlled by shipping magnates and the other one to be composed of the bona fide small arrastre operators to service the needs of small and medium sized vessels or that, in the alternative, the eleven be integrated into one arrastre corporation, 51% to be owned by the bona fide arrastre operators and 49% by shipping magnates (See Rollo, p. 60). Although these alternative proposals were rejected by PPA, Pernito, et al., continued to accede and conform to the integration policy when they agreed to join USDI after obtaining some concessions from its big stockholders. It was only when the controlling interests in USDI allegedly reneged on their alleged commitments to Pernito, et al., that the latter seceded from USDI and applied for separate permits. The actual controversy is not really between PPA and Pernito, et al., but between the latter and the controlling interests of USDI. What petitioners appear to be actually assailing, therefore, is not the integration policy of PPA but the management policies of the integrated or merged corporation, USDI.

The status quo or the last actual peaceable uncontested status preceding the pending controversy, therefore, indicate a time when Pernito, et al., had no permits of their own to operate in the port of Cebu. The questioned orders, therefore, would not return the actual status quo but would resurrect the burdensome situations that prevailed before, when the services were performed by numerous individual operators.

Under the challenged orders of the respondent judge, he would allow 19 individual operators to handle cargoes along with USDI. Worse, he even allowed a certain Aquino Arrastre Services and a certain Watergate Arrastre Services to intervene and avail of the benefits of the injunction granted to Pernito, et al., without notice and benefit of a hearing, thus, raising the number to 20. By so doing, respondent judge had arrogated unto himself PPA's power to regulate arrastre and stevedoring services at the port of Cebu and to determine who are qualified to operate the services mentioned.

We find no hesitancy in holding that the respondent judge's actions are tainted with a grave and manifest abuse of discretion.

The issuance of a preliminary injunction, it is true, rests upon the sound discretion of the court. Sound judicial discretion, however, is no license to undo the law by defeating its objectives (Vivo vs. Cloribel, L-23239, November 23, 1966, 15 SCRA 713).

WHEREFORE, petition is hereby granted. The orders of March 31, 1978 and April 17, 1978 of respondent court enjoining petitioner from enforcing its policy of integration is hereby reversed and set aside. The May 30, 1978 temporary restraining order, as clarified in the June 8, 1978 resolution and as modified in the July 24, 1979 resolution, is hereby made permanent.

No pronouncement as to costs.

SO ORDERED.

CASE DIGEST:

PHILIPPINE PORTS AUTHORITY vs. HON. RAFAEL L. MENDOZA

In the questioned order, Pernito, et al., were allowed to operate individually and render arrastre and stevedoring services in the port of Cebu while the case is pending because according tothe respondent judge, this was the last peaceable uncontested status before the present controversy. His appreciation of the facts is incorrect. The present controversy arose when Pernito, et al., sought, but were denied, permits to operate in the port of Cebu. PPA denied their applications because of its policy of integration. Before the case was filed, therefore, the status quo was that Pernito, et al., had no permit to operate individually. Prior to their application for separate permits, Pernito, et al., operated pursuant to the various andrespective licenses of the different arrastre operators, Pernito Arrastre Services, Inc., inparticular, operated under the license issued to Vismin Stevedores & Forwarders, Inc, This scheme is what is commonly known in the transportation business as the "kabit-system." Long before the case below was filed, Pernito, et al., was in conformity with the integration policy of the PPA. They never questioned its validity and legality. In fact, in the petition for declaratory relief and mandamus they filed below, they even admitted having pleaded withPPA for the integration of the eleven (11) arrastre operators into two (2) corporations: one corporation to be composed of the arrastre corporations controlled by shipping magnates and the other one to be composed of the bona fide small arrastre operators to service the needs of small and medium sized vessels or that, in the alternative, the eleven be integrated into one arrastre corporation, 51% to be owned by the bona fide arrastre operators and 49% by shipping magnates (See Rollo, p. 60). Although these alternative proposals were rejected by PPA, Pernito, et al., continued to accede and conform to the integration policy when they agreed to join USDI after obtaining some concessions from its big stockholders. It was only when the controlling interests in USDI allegedly reneged on their alleged commitments to Pernito, et al., that the latter seceded from USDI and applied for separate permits. The actual controversy is not really between PPA and Pernito, et al., but between the latter and the

controlling interests of USDI. What petitioners appear to be actually assailing, therefore, is notthe integration policy of PPA but the management policies of the integrated or mergedcorporation, USDI

SEMA VS COMELEC

EN BANC  

BAI SANDRA S. A. SEMA,                      G.R. No. 177597                              Petitioner,                                                                      

        - versus -                                           

                                                                          COMMISSION ON ELECTIONS                and DIDAGEN P. DILANGALEN,                   

                               Respondents.                    

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PERFECTO F. MARQUEZ,                 G.R. No. 178628   

                               Petitioner,

                                                                     Present:                                                                      PUNO, C.J.,                                                                                                                                   QUISUMBING,                                                                     YNARES-SANTIAGO,

                                                                  CARPIO,

                                                                  AUSTRIA-MARTINEZ,                                                                      CORONA,                                                                      CARPIO MORALES,              - versus -                                         AZCUNA,                                                                      TINGA,

                                                                  CHICO-NAZARIO,                                                                  VELASCO, JR.,                                                                  NACHURA,                                                                      REYES,

LEONARDO-DE CASTRO, andBRION, JJ.  

  COMMISSION ON ELECTIONS,          Promulgated:                                Respondent.               July 16, 2008

 

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D E C I S I O N  CARPIO, J.:  

The Case  

          These consolidated petitions[1] seek to annul Resolution No. 7902, dated 10 May 2007, of the Commission on Elections (COMELEC) treating Cotabato City as part of the legislative district of the Province of Shariff Kabunsuan.[2]

 The Facts

            The Ordinance appended to the 1987 Constitution apportioned two legislative districts for the Province of Maguindanao. The first legislative district consists of Cotabato City and eight municipalities.[3]  Maguindanao forms part of the Autonomous Region in Muslim Mindanao (ARMM), created under its Organic Act, Republic Act No. 6734 (RA 6734), as amended by Republic Act No. 9054  (RA 9054).[4] Although under the Ordinance, Cotabato City forms part of Maguindanao’s first legislative district, it is not part of the ARMM but of Region

XII, having voted against its inclusion in the ARMM in the plebiscite held in November 1989.           On 28 August 2006, the ARMM’s legislature, the ARMM Regional Assembly, exercising its power to create provinces under Section 19, Article VI of RA 9054,[5] enacted Muslim Mindanao Autonomy Act No. 201 (MMA Act 201) creating the Province ofShariff Kabunsuan composed of the eight municipalities in the first district of Maguindanao.  MMA Act 201 provides:

                         Section 1. The Municipalities of Barira, Buldon, Datu Odin Sinsuat, Kabuntalan, Matanog, Parang, Sultan Kudarat, Sultan Mastura, and Upi are hereby separated from the Province of Maguindanao and constituted into a distinct and independent province, which is hereby created, to be known as the Province of Shariff Kabunsuan.             x x x x 

Sec. 5.  The corporate existence of this province shall commence upon the appointment by the Regional Governor or election of the governor and majority of the regular members of the Sangguniang Panlalawigan.             The incumbent elective provincial officials of the Province of Maguindanao shall continue to serve their unexpired terms in the province that they will choose or where they are residents:  Provided, that where an elective position in both provinces becomes vacant as a consequence of the creation of the Province of Shariff Kabunsuan, all incumbent elective provincial officials shall have preference for appointment to a higher elective vacant position and for the time being be appointed by the Regional Governor, and shall hold office until their successors shall have been elected and qualified in the next local elections; Provided, further, that they shall continue to receive the salaries they are receiving at the time of the approval of this Act until the new readjustment of salaries in accordance with law.  Provided, furthermore, that there shall be no diminution in the number of the members of the Sangguniang Panlalawigan of the mother province. 

            Except as may be provided by national law, the existing legislative district, which includes Cotabato as a part thereof, shall remain.   

Later, three new municipalities[6] were carved out of the original nine municipalities constituting Shariff Kabunsuan, bringing its total number of municipalities to 11. Thus, what was left of Maguindanao were the municipalities constituting its second legislative district.Cotabato City, although part of Maguindanao’s first legislative district, is not part of the Province of Maguindanao. 

The voters of Maguindanao ratified Shariff Kabunsuan’s creation in a plebiscite held on 29 October 2006.         

On 6 February 2007, the Sangguniang Panlungsod of Cotabato City passed Resolution No. 3999 requesting the COMELEC to “clarify the status of Cotabato City in view of the conversion of the First District of Maguindanao into a regular province” under MMA Act 201.           In answer to Cotabato City’s query, the COMELEC issued Resolution No. 07-0407 on 6 March 2007 "maintaining the status quo with Cotabato City as part of Shariff Kabunsuan in the First Legislative District of Maguindanao.” Resolution No. 07-0407, which adopted the recommendation of the COMELEC’s Law Department under a Memorandum dated 27 February 2007,[7]provides in pertinent parts: 

            Considering the foregoing, the Commission RESOLVED, as it hereby resolves, to adopt the recommendation of the Law Department thatpending the enactment of the appropriate law by Congress, to maintain the status quo with Cotabato City as part of Shariff Kabunsuan in the First Legislative District of Maguindanao.  (Emphasis supplied)

  

However, in preparation for the 14 May 2007 elections, the COMELEC promulgated on 29 March 2007 Resolution No. 7845 stating that Maguindanao’s first legislative district is composed only of Cotabato City because of the enactment of MMA Act 201.[8] 

           On 10 May 2007, the COMELEC issued Resolution No. 7902, subject of these petitions, amending Resolution No. 07-0407 by renaming the legislative district in question as “Shariff Kabunsuan Province with Cotabato City (formerly First District of Maguindanao with Cotabato City).”[9]

           In G.R. No. 177597, Sema, who was a candidate in the 14 May 2007 elections for Representative of “Shariff Kabunsuan withCotabato City,” prayed for the nullification of COMELEC Resolution No. 7902 and the exclusion from canvassing of the votes cast in Cotabato City for that office. Sema contended that Shariff Kabunsuan is entitled to one representative in Congress under Section 5 (3), Article VI of the Constitution[10] and Section 3 of the Ordinance appended to the Constitution.[11] Thus, Sema asserted that the COMELEC acted without or in excess of its jurisdiction in issuing Resolution No. 7902 which maintained the status quo in Maguindanao’s first legislative district despite the COMELEC’s earlier directive in Resolution No. 7845 designating Cotabato City as the lone component of Maguindanao’s reapportioned first legislative district.[12] Sema further claimed that in issuing Resolution No. 7902, the COMELEC usurped Congress’ power to create or reapportion legislative districts.

           In its Comment, the COMELEC, through the Office of the Solicitor General (OSG), chose not to reach the merits of the case and merely contended that (1) Sema wrongly availed of the writ of certiorari to nullify COMELEC Resolution No. 7902 because the COMELEC issued the same in the exercise of its administrative, not quasi-judicial, power and (2) Sema’s prayer for the writ of prohibition in G.R. No. 177597 became moot with the proclamation of respondent Didagen P. Dilangalen (respondent Dilangalen) on 1 June 2007 as representative of the legislative district of Shariff Kabunsuan Province with Cotabato City.           In his Comment, respondent Dilangalen countered that Sema is estopped from questioning COMELEC Resolution No. 7902 because in her certificate of candidacy filed on 29 March 2007, Sema indicated that she was seeking election as representative of “Shariff Kabunsuan including Cotabato City.”  Respondent Dilangalen added that COMELEC Resolution No. 7902 is constitutional because it did not apportion a legislative district for Shariff Kabunsuan or reapportion the legislative districts in Maguindanao but merely renamed Maguindanao’s first

legislative district. Respondent Dilangalen further claimed that the COMELEC could not reapportion Maguindanao’s first legislative district to make Cotabato City its sole component unit as the power to reapportion legislative districts lies exclusively with Congress, not to mention that Cotabato City does not meet the minimum population requirement under Section 5 (3), Article VI of the Constitution for the creation of a legislative district within a city.[13]            Sema filed a Consolidated Reply controverting the matters raised in respondents’ Comments and reiterating her claim that the COMELEC acted ultra vires in issuing Resolution No. 7902.

 In the Resolution of 4 September 2007, the Court required the parties in

G.R. No. 177597 to comment on the issue of whether a province created by the ARMM Regional Assembly under Section 19, Article VI of RA 9054 is entitled to one representative in the House of Representatives without need of a national law creating a legislative district for such new province. The parties submitted their compliance as follows:

 

(1) Sema answered the issue in the affirmative on the following grounds: (a) the Court in Felwa v. Salas[14] stated that “when a province is created by statute, the corresponding representative district comes into existence neither by authority of that statute — which cannot provide otherwise — nor by apportionment, but by operation of the Constitution, without a reapportionment”; (b) Section 462 of Republic Act No. 7160 (RA 7160) “affirms” the apportionment of a legislative district incident to the creation of a province; and (c)  Section 5 (3), Article VI of the Constitution and Section 3 of the Ordinance appended to the Constitution mandate the  apportionment of a legislative district in newly created provinces.

 (2) The COMELEC, again represented by the OSG, apparently abandoned

its earlier stance on the propriety of issuing Resolution Nos. 07-0407 and 7902 and joined causes with Sema, contending that Section 5 (3), Article VI of the Constitution is “self-executing.” Thus, every new province created by the ARMM Regional Assembly is ipso facto entitled to one representative in the House of Representatives even in the absence of a national law; and

 

(3) Respondent Dilangalen answered the issue in the negative on the following grounds: (a) the “province” contemplated in Section 5 (3), Article VI of the Constitution is one that is created by an act of Congress taking into account the provisions in RA 7160 on the creation of provinces; (b) Section 3, Article IV of RA 9054 withheld from the ARMM Regional Assembly the power to enact measures relating to national elections, which encompasses the apportionment of legislative districts for members of the House of Representatives; (c) recognizing a legislative district in every province the ARMM Regional Assembly creates will lead to the disproportionate representation of the ARMM in the House of Representatives as the  Regional Assembly can create provinces without regard to the requirements in Section 461 of RA 7160; and (d) Cotabato City, which has a population of less than 250,000, is not entitled to a representative in the House of Representatives.

 On 27 November 2007, the Court heard the parties in G.R.              No.

177597 in oral arguments on the following issues: (1) whether Section 19, Article VI of RA 9054, delegating to the ARMM Regional Assembly the power to create provinces, is constitutional; and (2) if in the affirmative, whether a province created under Section 19, Article VI of RA 9054 is entitled to one representative in the House of Representatives without need of a national law creating a legislative district for such new province.[15]

 In compliance with the Resolution dated 27 November 2007, the parties in

G.R. No. 177597 filed their respective Memoranda on the issues raised in the oral arguments.[16] On the question of the constitutionality of Section 19, Article VI of RA 9054, the parties in G.R. No. 177597 adopted the following positions:

 (1) Sema contended that Section 19, Article VI of RA 9054 is constitutional

(a) as a valid delegation by Congress to the ARMM of the power to create provinces under Section 20 (9), Article X of the Constitution granting to the autonomous regions, through their organic acts, legislative powers over “other matters as may be authorized by law for the promotion of the general welfare of the people of the region” and (b) as an amendment to Section 6 of RA 7160.[17] However, Sema concedes that, if taken literally, the grant in Section 19,  Article VI of RA 9054 to the ARMM Regional Assembly of the power to “prescribe standards lower than those mandated” in RA 7160 in the creation of provinces

contravenes Section 10, Article X of the Constitution.[18] Thus, Sema proposed that Section 19 “should be construed as prohibiting the Regional Assembly from prescribing standards x x x that do not comply with the minimum criteria” under RA 7160.[19]

 (2) Respondent Dilangalen contended that  Section 19,  Article VI of RA

9054 is unconstitutional on the following grounds: (a) the power to create provinces was not among those granted to the autonomous regions under Section 20, Article X of the Constitution and (b) the grant under Section 19, Article VI of RA 9054  to the ARMM Regional Assembly of the power to prescribe standards lower than those mandated in Section 461 of RA 7160 on the creation of provinces contravenes Section 10, Article X of the Constitution and the Equal Protection Clause; and

 (3) The COMELEC, through the OSG, joined causes with respondent

Dilangalen (thus effectively abandoning the position the COMELEC adopted in its Compliance with the Resolution of 4 September 2007) and contended that Section 19, Article VI of RA 9054 is unconstitutional because (a) it contravenes Section 10 and Section 6,[20] Article X of the Constitution and (b) the power to create provinces was withheld from the autonomous regions under Section 20, Article X of the Constitution.

 On the question of whether a province created under Section 19, Article VI

of RA 9054 is entitled to one representative in the House of Representatives without need of a national law creating a legislative district for such new province, Sema and respondent Dilangalen reiterated in their Memoranda the positions they adopted in their Compliance with the Resolution of 4 September 2007. The COMELEC deemed it unnecessary to submit its position on this issue considering its stance that Section 19, Article VI of RA 9054 is unconstitutional.

 The pendency of the petition in G.R. No. 178628 was disclosed during the

oral arguments on 27 November 2007. Thus, in the Resolution of 19 February 2008, the Court ordered G.R. No. 178628 consolidated with G.R. No. 177597.  The petition in G.R. No.178628 echoed Sema's contention that the COMELEC acted ultra vires in issuing Resolution      No. 7902 depriving the voters ofCotabato City of a representative in the House of Representatives.  In its

Comment to the petition in G.R.             No. 178628, the COMELEC, through the OSG, maintained the validity of COMELEC Resolution No. 7902 as a temporary measure pending the enactment by Congress of  the “appropriate law.”

  

The Issues 

         The petitions raise the following issues:

           I. In G.R. No. 177597:          (A) Preliminarily –

(1) whether the writs of Certiorari, Prohibition, and Mandamus are proper to test the constitutionality of COMELEC Resolution No. 7902; and

(2) whether the proclamation of respondent Dilangalen as representative of Shariff Kabunsuan Province with Cotabato Citymooted the petition in G.R. No. 177597.

     (B) On the merits –(1)  whether Section 19, Article VI of RA 9054, delegating to the ARMM

Regional Assembly the power to create provinces, cities, municipalities and barangays, is constitutional; and

(2) if in the affirmative, whether a province created by the ARMM Regional Assembly under MMA Act 201 pursuant to Section 19, Article VI of RA 9054 is entitled to one representative in the House of Representatives without need of a national law creating a legislative district for such province.

 II. In G.R No.  177597 and G.R No.  178628, whether

COMELEC Resolution No. 7902 is valid for maintaining the status quo in the first legislative district of Maguindanao (as “Shariff Kabunsuan Province with Cotabato City [formerly First District of Maguindanao with Cotabato City]”), despite the creation of the Province of Shariff Kabunsuan out of such district (excluding Cotabato City).

  

The Ruling of the Court 

          The petitions have no merit.  We rule that (1) Section 19, Article VI of RA 9054 is unconstitutional insofar as it grants to the ARMM Regional Assembly the power to create provinces and cities; (2) MMA Act 201 creating the Province of Shariff Kabunsuanis void; and (3) COMELEC Resolution No. 7902 is valid. 

 

 

 

 

 

 

 On the Preliminary Matters

  The Writ of Prohibition is Appropriateto Test the Constitutionality ofElection Laws, Rules and Regulations          

The purpose of the writ of Certiorari is to correct grave abuse of discretion by “any tribunal, board, or officer exercising judicial or quasi-judicial functions.”[21] On the other hand, the writ of Mandamus will issue to compel a tribunal, corporation, board, officer, or person to perform an act “which the law specifically enjoins as a duty.”[22] True, the COMELEC did not issue Resolution No. 7902 in the exercise of its judicial or quasi-judicial functions.[23] Nor is there a

law which specifically enjoins the COMELEC to exclude from canvassing the votes cast in Cotabato City for representative of “Shariff Kabunsuan Province with Cotabato City.” These, however, do not justify the outright dismissal of the petition in G.R. No. 177597 because Sema also prayed for the issuance of the writ of Prohibition and we have long recognized this writ as proper for testing the constitutionality of election laws, rules, and regulations.[24]

  Respondent Dilangalen’s ProclamationDoes Not Moot the Petition            There is also no merit in the claim that respondent Dilangalen’s proclamation as winner in the 14 May 2007 elections for representative of “Shariff Kabunsuan Province with Cotabato City” mooted this petition. This case does not concern respondent Dilangalen’s election. Rather, it involves an inquiry into the validity of COMELEC Resolution No. 7902, as well as the constitutionality of MMA Act 201 and Section 19, Article VI of RA 9054.  Admittedly, the outcome of this petition, one way or another, determines whether the votes cast in Cotabato City for representative of the district of “Shariff Kabunsuan Province withCotabato City” will be included in the canvassing of ballots.   However, this incidental consequence is no reason for us not to proceed with the resolution of the novel issues raised here.  The Court’s ruling in these petitions affects not only the recently concluded elections but also all the other succeeding elections for the office in question, as well as the power of the ARMM Regional Assembly to create in the future additional provinces.

  

On the Main Issues 

 

Whether the ARMM Regional AssemblyCan Create the Province of Shariff Kabunsuan             The creation of local government units is governed by Section 10, Article X of the Constitution, which provides: 

Sec. 10. No province, city, municipality, or barangay may be created, divided, merged, abolished or its boundary substantially altered except in accordance with the criteria established in the local government code and subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected.

  Thus, the creation of any of the four local government units – province, city, municipality or barangay – must comply with three conditions. First, the creation of a local government unit must follow the criteria fixed in the Local Government Code.   Second, such creation must not conflict with any provision of the Constitution.  Third, there must be a plebiscite in the political units affected.           There is neither an express prohibition nor an express grant of authority in the Constitution for Congress to delegate to regional or local legislative bodies the power to create local government units. However, under its plenary legislative powers, Congress can delegate to local legislative bodies the power to create local government units, subject to reasonable standards and provided no conflict arises with any provision of the Constitution.  In fact, Congress has delegated to provincial boards, and city and municipal councils, the power to create barangays within their jurisdiction,[25] subject to compliance with the criteria established in the Local Government Code, and the plebiscite requirement in Section 10, Article X of the Constitution.   However, under the Local Government Code, “only x x x an Act of Congress” can create provinces, cities or municipalities.[26]

           Under Section 19, Article VI of RA 9054, Congress delegated to the ARMM Regional Assembly the power to create provinces, cities, municipalities and barangays within the ARMM.   Congress made the delegation under its plenary legislative powers because the power to create local government units is not one of the express legislative powers granted by the Constitution to regional legislative

bodies.[27] In the present case, the question arises whether the delegation to the ARMM Regional Assembly of the power to create provinces, cities, municipalities and barangays conflicts with any provision of the Constitution.            There is no provision in the Constitution that conflicts with the delegation to regional legislative bodies of the power to create municipalities and barangays, provided Section 10, Article X of the Constitution is followed.  However, the creation of provinces and cities is another matter.  Section 5 (3), Article VI of the Constitution provides, “Each city with a population of at least two hundred fifty thousand, or each province, shall have at least one representative” in the House of Representatives. Similarly, Section 3 of the Ordinance appended to the Constitution provides, “Any province that may hereafter be created, or any city whose population may hereafter increase to more than two hundred fifty thousand shall be entitled in the immediately following election to at least one Member x x x.”  

Clearly, a province cannot be created without a legislative district because it will violate Section 5 (3), Article VI of the Constitution as well as Section 3 of the Ordinance appended to the Constitution. For the same reason, a city with a population of 250,000 or more cannot also be created without a legislative district. Thus, the power to create a province, or a city with a population of 250,000 or more, requires also the power to create a legislative district. Even the creation of a city with a population of less than 250,000 involves the power to create a legislative district because once the city’s population reaches 250,000, the city automatically becomes entitled to one representative under Section 5 (3), Article VI of the Constitution and Section 3 of the Ordinance appended to the Constitution. Thus, the power to create a province or city inherently involves the power to create a legislative district. 

 For Congress to delegate validly the power to create a province or city, it

must also validly delegate at the same time the power to create a legislative district.  The threshold issue then is, can Congress validly delegate to the ARMM Regional Assembly the power to create legislative districts for the House of Representatives?  The answer is in the negative. 

Legislative Districts are Created or ReapportionedOnly by an Act of Congress 

Under the present Constitution, as well as in past[28] Constitutions, the power to increase the allowable membership in the House of Representatives, and to reapportion legislative districts, is vested exclusively in Congress.  Section 5, Article VI of the Constitution provides: 

SECTION 5. (1) The House of Representatives shall be composed of not

more than two hundred and fifty members, unless otherwise fixed by law,

who shall be elected from legislative districts apportioned among the provinces,

cities, and the Metropolitan Manila area in accordance with the number of their

respective inhabitants, and on the basis of a uniform and progressive ratio, and

those who, as provided by law, shall be elected through a party-list system of

registered national, regional, and sectoral parties or organizations.

 

             x x x x

 

(3) Each legislative district shall comprise, as far as practicable,

contiguous, compact, and adjacent territory. Each city with a population of at least

two hundred fifty thousand, or each province, shall have at least one

representative.

 

(4) Within three years following the return of every census, the

Congress shall make a reapportionment of legislative districts based on the

standards provided in this section. (Emphasis supplied)

 

 

 

Section 5 (1), Article VI of the Constitution vests in Congress the power to increase, through a law, the allowable membership in the House of Representatives.  Section 5 (4) empowers Congress to reapportion legislative districts.  The power to reapportion legislative districts necessarily includes the power to create legislative districts out of existing ones. Congress exercises these powers through a law that Congress itself enacts, and not through a law that regional or local legislative bodies enact.  The allowable membership of the House of Representatives can be increased, and new legislative districts of Congress can be created, only through a national law passed by Congress.  In Montejo v. COMELEC,[29] we held that the “power of redistricting x x x is traditionally regarded as part of the power (of Congress) to make laws,” and thus is vested exclusively in Congress.

 This textual commitment to Congress of the exclusive power to create or

reapportion legislative districts is logical. Congress is a national legislature and any increase in its allowable membership or in its incumbent membership through the creation of legislative districts must be embodied in a national law. Only Congress can enact such a law.  It would be anomalous for regional or local legislative bodies to create or reapportion legislative districts for a national legislature like Congress. An inferior legislative body, created by a superior legislative body, cannot change the membership of the superior legislative body. 

 The creation of the ARMM, and the grant of legislative powers to its

Regional Assembly under its organic act, did not divest Congress of its exclusive authority to create legislative districts. This is clear from the Constitution and the ARMM Organic Act, as amended. Thus, Section 20, Article X of the Constitution provides:

 

SECTION 20. Within its territorial jurisdiction and subject to the

provisions of this Constitution and national laws, the organic act of autonomous

regions shall provide for legislative powers over:

(1)        Administrative organization;

(2)        Creation of sources of revenues;

(3)        Ancestral domain and natural resources;

(4)        Personal, family, and property relations;

(5)        Regional urban and rural planning development;

(6)        Economic, social, and tourism development;

(7)        Educational policies;

(8)        Preservation and development of the cultural heritage; and

(9)        Such other matters as may be authorized by law for the promotion

of the general welfare of the people of the region.

 Nothing in Section 20, Article X of the Constitution authorizes autonomous regions, expressly or impliedly, to create or reapportion legislative districts for Congress.  

 On the other hand, Section 3, Article IV of RA 9054 amending the ARMM

Organic Act, provides, “The Regional Assembly may exercise legislative power x x x  except on the following matters: x x x (k) National elections. x x x.”  Since the ARMM Regional Assembly has no legislative power to enact laws relating to national elections, it cannot create a legislative district whose representative is elected in national elections. Whenever Congress enacts a law creating a legislative district, the first representative is always elected in the “next national elections” from the effectivity of the law.[30] 

Indeed, the office of a legislative district representative to Congress is a national office, and its occupant, a Member of the House of Representatives, is a national official.[31]  It would be incongruous for a regional legislative body like the ARMM Regional Assembly to create a national office when its legislative

powers extend only to its regional territory.  The office of a district representative is maintained by national funds and the salary of its occupant is paid out of national funds.  It is a self-evident inherent limitation on the legislative powers of every local or regional legislative body that it can only create local or regional offices, respectively, and it can never create a national office. 

 To allow the ARMM Regional Assembly to create a national office is to

allow its legislative powers to operate outside the ARMM’s territorial jurisdiction.   This violates Section 20, Article X of the Constitution which expressly limits the coverage of the Regional Assembly’s legislative powers “[w]ithin its territorial jurisdiction x x x.” 

 The ARMM Regional Assembly itself, in creating Shariff Kabunsuan,

recognized the exclusive nature of Congress’ power to create or reapportion legislative districts by abstaining from creating a legislative district for Shariff Kabunsuan. Section 5 of MMA Act 201 provides that:

 

Except as may be provided by national law, the existing legislative

district, which includes Cotabato City as a part thereof, shall remain. (Emphasis

supplied)

 However, a province cannot legally be created without a legislative district because the Constitution mandates that “each province shall have at least one representative.”   Thus, the creation of the Province of Shariff Kabunsuan without a legislative district is unconstitutional.            Sema, petitioner in G.R. No. 177597, contends that Section 5 (3), Article VI of the Constitution, which provides: 

Each legislative district shall comprise, as far as practicable, contiguous,

compact, and adjacent territory. Each city with a population of at least two

hundred fifty thousand, or each province, shall have at least one

representative. (Emphasis supplied)

 and Section 3 of the Ordinance appended to the Constitution, which states:

 

Any province that may hereafter be created, or any city whose

population may hereafter increase to more than two hundred fifty

thousand shall be entitled in the immediately following election to at least one

Member or such number of Members as it may be entitled to on the basis of

the number of its inhabitants and according to the standards set forth in

paragraph (3), Section 5 of Article VI of the Constitution.  The number of

Members apportioned to the province out of which such new province was

created or where the city, whose population has so increased, is geographically

located shall be correspondingly adjusted by the Commission on Elections but

such adjustment shall not be made within one hundred and twenty days before the

election. (Emphasis supplied)

 serve as bases for the conclusion that the Province of Shariff Kabunsuan, created on 29 October 2006, is automatically entitled to one member in the House of Representatives in the 14 May 2007 elections. As further support for her stance, petitioner invokes the statement in Felwa that “when a province is created by statute, the corresponding representative district comes into existence neither by authority of that statute — which cannot provide otherwise — nor by apportionment, but by operation of the Constitution, without a reapportionment.”            The contention has no merit.           First. The issue in Felwa, among others, was whether Republic Act No. 4695 (RA 4695), creating the provinces of Benguet, Mountain Province, Ifugao, and Kalinga-Apayao and providing for congressional representation in the old and

new provinces, was unconstitutional for “creati[ng] congressional districts without the apportionment provided in the Constitution.” The Court answered in the negative, thus: 

The Constitution ordains:             “The House of Representatives shall be composed of not more than one hundred and twenty Members who shall be apportioned among the several provinces as nearly as may be according to the number of their respective inhabitants, but each province shall have at least one Member. The Congress shall by law make an apportionment within three years after the return of every enumeration, and not otherwise. Until such apportionment shall have been made, the House of Representatives shall have the same number of Members as that fixed by law for the National Assembly, who shall be elected by the qualified electors from the present Assembly districts. Each representative district shall comprise as far as practicable, contiguous and compact territory.”

            Pursuant to this Section, a representative district may come into existence: (a) indirectly, through the creation of a province — for “each province shall have at least one member” in the House of Representatives; or (b) by direct creation of several representative districts within a province. The requirements concerning the apportionment of representative districts and the territory thereof refer only to the second method of creation of representative districts, and do not apply to those incidental to the creation of provinces, under the first method. This is deducible, not only from the general tenor of the provision above quoted, but, also, from the fact that the apportionment therein alluded to refers to that which is made by an Act of Congress. Indeed, when a province is created by statute, the corresponding representative district, comes into existence neither by authority of that statute — which cannot provide otherwise — nor by apportionment, but by operation of the Constitution, without a reapportionment.           

            There is no constitutional limitation as to the time when, territory of, or

other conditions under which a province may be created, except, perhaps, if the

consequence thereof were to exceed the maximum of 120 representative districts

prescribed in the Constitution, which is not the effect of the legislation under

consideration. As a matter of fact, provinces have been created or subdivided into

other provinces, with the consequent creation of additional representative

districts, without complying with the aforementioned requirements.[32]  (Emphasis

supplied)

  

          Thus, the Court sustained the constitutionality of RA 4695 because  (1) it validly created legislative districts “indirectly”through a special law enacted by Congress creating a province and (2) the creation of the legislative districts will not result in breaching the maximum number of legislative districts provided under the 1935 Constitution.   Felwa does not apply to the present case because in Felwa the new provinces were created by a national law enacted by Congress itself.  Here, the new province was created merely by a regional law enacted by the ARMM Regional Assembly.  

What Felwa teaches is that the creation of a legislative district by Congress does not emanate alone from Congress’ power to reapportion legislative districts, but also from Congress’ power to create provinces which cannot be created without a legislative district.  Thus, when a province is created, a legislative district is created by operation of the Constitution because the Constitution provides that “each province shall have at least one representative” in the House of Representatives. This does not detract from the constitutional principle that the power to create legislative districts belongs exclusively to Congress.  It merely prevents any other legislative body, except Congress, from creating provinces because for a legislative body to create a province such legislative body must have the power to create legislative districts.  In short, only an act of Congress can

trigger the creation of a legislative district by operation of the Constitution. Thus, only Congress has the power to create, or trigger the creation of, a legislative district. 

 Moreover, if as Sema claims MMA Act 201 apportioned a legislative district

to Shariff Kabunsuan upon its creation, this will leave Cotabato City as the lone component of the first legislative district of Maguindanao.  However, Cotabato City cannot constitute a legislative district by itself because as of the census taken in 2000, it had a population of only 163,849.  To constitute Cotabato City alone as the surviving first legislative district of Maguindanao will violate Section 5 (3), Article VI of the Constitution which requires that “[E]ach city with a population of at least two hundred fifty thousand x x x, shall have at least one representative.”  

Second. Sema’s theory also undermines the composition and independence of the House of Representatives. Under Section 19,[33] Article VI of RA 9054, the ARMM Regional Assembly can create provinces and cities within the ARMM with or withoutregard to the criteria fixed in Section 461 of RA 7160, namely:  minimum annual income of P20,000,000, and minimum contiguous territory of 2,000 square kilometers or minimum population of 250,000.[34]  The following scenarios thus become distinct possibilities: 

(1) An inferior legislative body like the ARMM Regional Assembly can create 100 or more provinces and thus increase the membership of a superior legislative body, the House of      Representatives, beyond the maximum limit of 250 fixed in the Constitution (unless a national law provides otherwise);

 (2) The proportional representation in the House

of   Representatives based on one representative for at least every 250,000 residents will be negated because the ARMM Regional Assembly need not comply with the requirement in Section 461(a)(ii) of RA 7160 that every province created must have a population of at least 250,000; and

 

(3) Representatives from the ARMM provinces can become the majority in the House of Representatives through the ARMM Regional Assembly’s continuous creation of provinces or cities within the ARMM.  

The following exchange during the oral arguments of the petition in G.R. No. 177597 highlights the absurdity of Sema’s position that the ARMM Regional Assembly can create provinces:

 

 

Justice Carpio:

So, you mean to say [a] Local Government can create legislative district[s]

and pack Congress with their own representatives [?]

 

Atty. Vistan II:[35]  

          Yes, Your Honor, because the Constitution allows that.

Justice Carpio:

So, [the] Regional Assembly of [the] ARMM can create and create x x x

provinces  x x x  and, therefore, they can have thirty-five (35) new

representatives in the House of Representatives without Congress agreeing

to it, is that what you are saying? That can be done, under your theory[?]

 

            Atty. Vistan II:

 

Yes, Your Honor, under the correct factual circumstances.

 

Justice Carpio:

Under your theory, the ARMM legislature can create thirty-five (35) new

provinces, there may be x x x [only] one hundred thousand (100,000)

[population], x x x, and they will each have one representative x x x to

Congress without any national law, is that what you are saying?

 

            Atty. Vistan II:

 

Without law passed by Congress, yes, Your Honor, that is what we are

saying.

 

            x x x x     

Justice Carpio:

So, they can also create one thousand (1000) new provinces, sen[d] one

thousand (1000) representatives to the House of Representatives

without a national law[,] that is legally possible, correct?

 

            Atty. Vistan II:

 

                        Yes, Your Honor.[36]    (Emphasis supplied)

  

Neither the framers of the 1987 Constitution in adopting the provisions in Article X on regional autonomy,[37] nor Congress in enacting RA 9054, envisioned or intended these disastrous consequences that certainly would wreck the tri-branch system of government under our Constitution.  Clearly, the power to create or reapportion legislative districts cannot be delegated by Congress but must be exercised by Congress itself.  Even the ARMM Regional Assembly recognizes this.           The Constitution empowered Congress to create or reapportion legislative districts, not the regional assemblies.  Section 3 of the Ordinance to the Constitution which states, “[A]ny province that may hereafter be created x x x

shall be entitled in the immediately following election to at least one Member,” refers to a province created by Congress itself through a national law. The reason is that the creation of a province increases the actual membership of the House of Representatives, an increase that only Congress can decide.  Incidentally, in the present 14th Congress, there are 219[38] district representatives out of the maximum 250 seats in the House of Representatives.  Since party-list members shall constitute 20 percent of total membership of the House, there should at least be 50 party-list seats available in every election in case 50 party-list candidates are proclaimed winners. This leaves only 200 seats for district representatives, much less than the 219 incumbent district representatives.   Thus, there is a need now for Congress to increase by law the allowable membership of the House, even before Congress can create new provinces.                             It is axiomatic that organic acts of autonomous regions cannot prevail over the Constitution.  Section 20, Article X of the Constitution expressly provides that the legislative powers of regional assemblies are limited “[w]ithin its territorial jurisdiction and subject to the provisions of the Constitution and national laws, x x x.”  The Preamble of the ARMM Organic Act (RA 9054) itself states that the ARMM Government is established “within the framework of the Constitution.”   This follows Section 15, Article X of the Constitution which mandates that the ARMM “shall be created x x x within the framework of this Constitutionand the national sovereignty as well as territorial integrity of the Republic of the Philippines.”   

The present case involves the creation of a local government unit that necessarily involves also the creation of a legislative district.  The Court will not pass upon the constitutionality of the creation of municipalities and barangays that does not comply with the criteria established in Section 461 of RA 7160, as

mandated in Section 10, Article X of the Constitution, because the creation of such municipalities and barangays does not involve the creation of legislative districts.  We leave the resolution of this issue to an appropriate case.           In summary, we rule that Section 19, Article VI of RA 9054, insofar as it grants to the ARMM Regional Assembly the power to create provinces and cities, is void for being contrary to Section 5 of Article VI and Section 20 of Article X of the Constitution, as well as Section 3 of the Ordinance appended to the Constitution.   Only Congress can create provinces and cities because the creation of provinces and cities necessarily includes the creation of legislative districts, a power only Congress can exercise under Section 5, Article VI of the Constitution and Section 3 of the Ordinance appended to the Constitution.  The ARMM Regional Assembly cannot create a province without a legislative district because the Constitution mandates that every province shall have a legislative district.  Moreover, the ARMM Regional Assembly cannot enact a law creating a national office like the office of a district representative of Congress because the legislative powers of the ARMM Regional Assembly operate only within its territorial jurisdiction as provided in Section 20, Article X of the Constitution.  Thus, we rule that MMA Act 201, enacted by the ARMM Regional Assembly and creating the Province of Shariff Kabunsuan, is void.  

 Resolution No. 7902 Complies with the Constitution

 Consequently, we hold that COMELEC Resolution No. 7902, preserving the

geographic and legislative district of the First District of Maguindanao with Cotabato City, is valid as it merely complies with Section 5 of Article VI and Section 20 of Article X of the Constitution, as well as Section 1 of the Ordinance appended to the Constitution.           WHEREFORE, we declare Section 19, Article VI of Republic Act No. 9054 UNCONSTITUTIONAL insofar as it grants to the Regional Assembly of

the Autonomous Region in Muslim Mindanao the power to create provinces and cities.   Thus, we declare VOID Muslim Mindanao Autonomy Act No. 201 creating the Province of Shariff Kabunsuan. Consequently, we rule that COMELEC Resolution No. 7902 is VALID.   

Let a copy of this ruling be served on the President of the Senate and the Speaker of the House of Representatives. 

 SO ORDERED.

  CASE DIGEST: The Province of Maguindanao is part of ARMM. Cotabato City is part of the province of Maguindanao but it is not part or ARMM because Cotabato City voted against its inclusion in a plebiscite held in 1989. Maguindanao has two legislative districts. The 1 st legislative district comprises of Cotabato City and 8 other municipalities.A law (RA 9054) was passed amending ARMM’s Organic Act and vesting it with power to create provinces, municipalities, cities and barangays. Pursuant to this law, the ARMM Regional Assembly created Shariff Kabunsuan (Muslim Mindanao Autonomy Act 201) which comprised of the municipalities of the 1st district of Maguindanao with the exception of Cotabato City.For the purposes of the 2007 elections, COMELEC initially stated that the 1 stdistrict is now only made of Cotabato City (because of MMA 201). But it later amended this stating that status quo should be retained however just for the purposes of the elections, the first district should be called Shariff Kabunsuan with Cotabato City – this is also while awaiting a decisive declaration from Congress as to Cotabato’s status as a legislative district (or part of any).Sema was a congressional candidate for the legislative district of S. Kabunsuan with Cotabato (1st district). Later, Sema was contending that Cotabato City should be a separate legislative district and that votes therefrom should be excluded in the voting (probably because her rival Dilangalen was from there and D was winning – in fact he won). She contended that under the Constitution, upon creation of a province (S. Kabunsuan), that province automatically gains legislative representation and since S. Kabunsuan excludes Cotabato City – so in effect Cotabato is being deprived of a representative in the HOR.COMELEC maintained that the legislative district is still there and that regardless of S. Kabunsuan being created, the legislative district is not affected and so is its representation.ISSUE: Whether or not RA 9054 is unconstitutional. Whether or not ARMM can create validly LGUs.HELD: RA 9054 is unconstitutional. The creation of local government units is governed by Section 10, Article X of the Constitution, which provides:Sec. 10. No province, city, municipality, or barangay may be created, divided, merged, abolished or its boundary substantially altered except in accordance with the criteria established in the local

government code and subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected.

Thus, the creation of any of the four local government units province, city, municipality or barangay must comply with three conditions. First, the creation of a local government unit must follow the criteria fixed in the Local Government Code. Second, such creation must not conflict with any provision of the Constitution. Third, there must be a plebiscite in the political units affected.There is neither an express prohibition nor an express grant of authority in the Constitution for Congress to delegate to regional or local legislative bodies the power to create local government units. However, under its plenary legislative powers, Congress can delegate to local legislative bodies the power to create local government units, subject to reasonable standards and provided no conflict arises with any provision of the Constitution. In fact, Congress has delegated to provincial boards, and city and municipal councils, the power to create barangays within their jurisdiction, subject to compliance with the criteria established in the Local Government Code, and the plebiscite requirement in Section 10, Article X of the Constitution. Hence, ARMM cannot validly create Shariff Kabunsuan province.Note that in order to create a city there must be at least a population of at least 250k, and that a province, once created, should have at least one representative in the HOR. Note further that in order to have a legislative district, there must at least be 250k (population) in said district. Cotabato City did not meet the population requirement so Sema’s contention is untenable. On the other hand, ARMM cannot validly create the province of S. Kabunsuan without first creating a legislative district. But this can never be legally possible because the creation of legislative districts is vested solely in Congress. At most, what ARMM can create are barangays not cities and provinces.

LEAGUE OF CITIES VS COMELEC Republic of the Philippines

Supreme CourtManila

                          EN BANC

 LEAGUE OF CITIES OF THE PHILIPPINES (LCP), represented by LCP National President Jerry P. Treñas; CITY OF CALBAYOG, represented by Mayor Mel Senen S. Sarmiento; and JERRY P. TREÑAS, in his personal capacity as Taxpayer,

Petitioners,

                 - versus -

G.R. No. 176951

COMMISSION ON ELECTIONS; MUNICIPALITY OF BAYBAY, PROVINCE OF LEYTE; MUNICIPALITY OF BOGO, PROVINCE OF CEBU; MUNICIPALITY OF CATBALOGAN, PROVINCE OF WESTERN SAMAR; MUNICIPALITY OF TANDAG, PROVINCE OF SURIGAO DEL SUR; MUNICIPALITY OF BORONGAN, PROVINCE OF EASTERN SAMAR; AND MUNICIPALITY OF TAYABAS, PROVINCE OF QUEZON,

Respondents.

X- - - - - - - - - - - - - - - - - - - - - - X

LEAGUE OF CITIES OF THE PHILIPPINES (LCP), represented by LCP National President Jerry P. Treñas; CITY OF CALBAYOG, represented by Mayor Mel Senen S. Sarmiento; and JERRY P. TREÑAS, in his personal capacity as Taxpayer,

Petitioners,-         versus -

COMMISSION ON ELECTIONS; MUNICIPALITY OF LAMITAN, PROVINCE OF BASILAN; MUNICIPALITY OF TABUK, PROVINCE OF KALINGA; MUNICIPALITY OF BAYUGAN, PROVINCE OF AGUSAN DEL SUR; MUNICIPALITY OF BATAC,

G.R. No. 177499

PROVINCE OF ILOCOS NORTE; MUNICIPALITY OF MATI, PROVINCE OF DAVAO ORIENTAL; AND MUNICIPALITY OF GUIHULNGAN, PROVINCE OF NEGROS ORIENTAL,

Respondents.

X- - - - - - - - - - - - - - - - - - - - - - X

LEAGUE OF CITIES OF THE PHILIPPINES (LCP), represented by LCP National President Jerry P. Treñas; CITY OF CALBAYOG, represented by Mayor Mel Senen S. Sarmiento; and JERRY P. TREÑAS, in his personal capacity as Taxpayer,

Petitioners,

                 - versus -

COMMISSION ON ELECTIONS; MUNICIPALITY OF CABADBARAN, PROVINCE OF AGUSAN DEL NORTE; MUNICIPALITY OF CARCAR, PROVINCE OF CEBU; MUNICIPALITY OF EL SALVADOR, PROVINCE OF MISAMIS ORIENTAL; MUNICIPALITY OF NAGA, CEBU; and DEPARTMENT OF BUDGET AND MANAGEMENT,

Respondents.

G.R. No. 178056

Present:

CORONA, C.J.,CARPIO,CARPIO MORALES,VELASCO, JR.,NACHURA,LEONARDO-DE CASTRO,BRION,PERALTA,BERSAMIN,DEL CASTILLO,ABAD,VILLARAMA, JR.,PEREZ,MENDOZA, andSERENO, JJ.

Promulgated:

February 15, 2011

x-----------------------------------------------------------------------------------------x

  

RESOLUTION BERSAMIN, J.:

 

           For consideration of this Court are the following pleadings: 

1.       Motion for Reconsideration of the “Resolution” dated August 24, 2010 dated and filed on September 14, 2010 by respondents Municipality of Baybay, et al.; and

 2.       Opposition [To the “Motion for Reconsideration of the ‘Resolution’

dated August 24, 2010”]. Meanwhile, respondents also filed on September 20, 2010 a Motion to Set

“Motion for Reconsideration of the ‘Resolution’ dated August 24, 2010” for Hearing.  This motion was, however, already denied by the Court En Banc.

 A brief background — These cases were initiated by the consolidated petitions for prohibition filed

by the League of Cities of the Philippines (LCP), City of Iloilo, City of Calbayog, and Jerry P. Treñas, assailing the constitutionality of the sixteen (16) laws,[1] each converting the municipality covered thereby into a component city (Cityhood Laws), and seeking to enjoin the Commission on Elections (COMELEC) from conducting plebiscites pursuant to the subject laws.

 In the Decision dated November 18, 2008, the Court En Banc, by a 6-5 vote,

[2] granted the petitions and struck down the Cityhood Laws as unconstitutional for violating Sections 10 and 6, Article X, and the equal protection clause.

 In the Resolution dated March 31, 2009, the Court En Banc, by a 7-5 vote,

[3] denied the first motion for reconsideration. 

On April 28, 2009, the Court En Banc issued a Resolution, with a vote of 6-6,[4] which denied the second motion for reconsideration for being a prohibited pleading.

 In its June 2, 2009 Resolution, the Court En Banc clarified its April 28, 2009

Resolution in this wise— 

As a rule, a second motion for reconsideration is a prohibited pleading pursuant to Section 2, Rule 52 of the Rules of Civil Procedure which provides that: “No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained.”  Thus, a decision becomes final and executory after 15 days from receipt of the denial of the first motion for reconsideration.

 However, when a motion for leave to file and admit a second

motion for reconsideration is granted by the Court, the Court therefore allows the filing of the second motion for reconsideration.  In such a case, the second motion for reconsideration is no longer a prohibited pleading.

 In the present case, the Court voted on the second motion for

reconsideration filed by respondent cities.  In effect, the Court allowed the filing of the second motion for reconsideration.  Thus, the second motion for reconsideration was no longer a prohibited pleading.  However, for lack of the required number of votes to overturn the 18 November 2008 Decision and 31 March 2009 Resolution, the Court denied the second motion for reconsideration in its 28 April 2009 Resolution.[5]

  

Then, in another Decision dated December 21, 2009, the Court En Banc, by a vote of 6-4,[6] declared the Cityhood Laws as constitutional.

 On August 24, 2010, the Court En Banc, through a Resolution, by a vote of

7-6,[7] resolved the Ad Cautelam Motion for Reconsideration and Motion to Annul the Decision of December 21, 2009, both filed by petitioners, and the Ad Cautelam Motion for Reconsideration filed by petitioners-in-intervention Batangas City, Santiago City, Legazpi City, Iriga City, Cadiz City, and Oroquieta City,

reinstating the November 18, 2008 Decision.  Hence, the aforementioned pleadings.

 Considering these circumstances where the Court En Banc has twice

changed its position on the constitutionality of the 16 Cityhood Laws, and especially taking note of the novelty of the issues involved in these cases, the Motion for Reconsideration of the “Resolution” dated August 24, 2010 deserves favorable action by this Court on the basis of the following cogent points:

 1.

The 16 Cityhood Bills do not violate Article X, Section 10 of the Constitution.

                   Article X, Section 10 provides—

 Section 10.  No province, city, municipality, or barangay may be

created, divided, merged, abolished, or its boundary substantially altered, except in accordance with the criteria established in the local government code and subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected. The tenor of the ponencias of the November 18, 2008 Decision and the

August 24, 2010 Resolution is that the exemption clauses in the 16 Cityhood Laws are unconstitutional because they are not written in the Local Government Code of 1991 (LGC), particularly Section 450 thereof, as amended by Republic Act (R.A.) No. 9009, which took effect on June 30, 2001, viz.—

 Section 450. Requisites for Creation. –a) A municipality or a

cluster of barangays may be converted into a component city if it has a locally generated annual income, as certified by the Department of Finance, of at least One Hundred Million Pesos (P100,000,000.00) for at least two (2) consecutive years based on 2000 constant prices, and if it has either of the following requisites:

 x x x x 

(c) The average annual income shall include the income accruing to the general fund, exclusive of special funds, transfers, and non-recurring income. (Emphasis supplied)

  

Prior to the amendment, Section 450 of the LGC required only an average annual income, as certified by the Department of Finance, of at least P20,000,000.00 for the last two (2) consecutive years, based on 1991 constant prices.

           Before Senate Bill No. 2157, now R.A. No. 9009, was introduced by Senator Aquilino Pimentel, there were 57 bills filed for conversion of 57 municipalities into component cities.  During the 11th Congress (June 1998-June 2001), 33 of these bills were enacted into law, while 24 remained as pending bills.  Among these 24 were the 16 municipalities that were converted into component cities through the Cityhood Laws.           The rationale for the enactment of R.A. No. 9009 can be gleaned from the sponsorship speech of Senator Pimentel on Senate Bill No. 2157, to wit—

 Senator Pimentel.  Mr. President, I would have wanted this bill

to be included in the whole set of proposed amendments that we have introduced to precisely amend the Local Government Code.  However, it is a fact that there is a mad rush of municipalities wanting to be converted into cities.  Whereas in 1991, when the Local Government was approved, there were only 60 cities, today the number has increased to 85 cities, with 41 more municipalities applying for conversion to the same status.  At the rate we are going, I am apprehensive that before long this nation will be a nation of all cities and no municipalities.

 It is for that reason, Mr. President, that we are proposing among

other things, that the financial requirement, which, under the Local Government Code, is fixed at P20 million, be raised to P100 million to enable a municipality to have the right to be converted into a city, and the P100 million should be sourced from locally generated funds.

 What has been happening, Mr. President, is, the municipalities

aspiring to become cities say that they qualify in terms of financial requirements by incorporating the Internal Revenue share of the taxes of

the nation on to their regularly generated revenue.  Under that requirement, it looks clear to me that practically all municipalities in this country would qualify to become cities.

 It is precisely for that reason, therefore, that we are seeking the

approval of this Chamber to amend, particularly Section 450 of Republic Act No. 7160, the requisite for the average annual income of a municipality to be converted into a city or cluster of barangays which seek to be converted into a city, raising that revenue requirement from P20 million to P100 million for the last two consecutive years based on 2000 constant prices.[8]

 While R.A. No. 9009 was being deliberated upon, Congress was well aware

of the pendency of conversion bills of several municipalities, including those covered by the Cityhood Laws, desiring to become component cities which qualified under the P20 million income requirement of the old Section 450 of the LGC.  The interpellation of Senate President Franklin Drilon of Senator Pimentel is revealing, thus—

 THE PRESIDENT.  The Chair would like to ask for some clarificatory point.SENATOR PIMENTEL.  Yes, Mr. President. THE PRESIDENT.  This is just on the point of the pending bills in the Senate which propose the conversion of a number of municipalities into cities and which qualify under the present standard.             We would like to know the view of the sponsor: Assuming that this bill becomes a law, will the Chamber apply the standard as proposed in this bill to those bills which are pending for consideration? SENATOR PIMENTEL.  Mr. President, it might not be fair to make this bill, on the assumption that it is approved, retroact to the bills that are pending in the Senate conversion from municipalities to cities. THE PRESIDENT.  Will there be an appropriate language crafted to reflect that view? Or does it not become a policy of the Chamber, assuming that this bill becomes a law tomorrow, that it will apply to

those bills which are already approved by the House under the old version of the Local Government Code and are now pending in the Senate?  The Chair does not know if we can craft a language which will limit the application to those which are not yet in the Senate.   Or is that a policy that the Chamber will adopt? SENATOR PIMENTEL.  Mr. President, personally, I do not think it is necessary to put that provision because what we are saying here will form part of the interpretation of this bill.  Besides, if there is no retroactivity clause, I do not think that the bill would have any retroactive effect. THE PRESIDENT.  So the understanding is that those bills which are already pending in the Chamber will not be affected. SENATOR PIMENTEL.  These will not be affected, Mr. President. THE PRESIDENT.  Thank you Mr. Chairman.[9]

  Clearly, based on the above exchange, Congress intended that those with

pending cityhood bills during the 11th Congress would not be covered by the new and higher income requirement of P100 million imposed by R.A. No. 9009.  When the LGC was amended by R.A. No. 9009, the amendment carried with it both the letter and the intent of the law, and such were incorporated in the LGC by which the compliance of the Cityhood Laws was gauged.                   Notwithstanding that both the 11th and 12th Congress failed to act upon the pending cityhood bills, both the letter and intent of Section 450 of the LGC, as amended by R.A. No. 9009, were carried on until the 13th Congress, when the Cityhood Laws were enacted.  The exemption clauses found in the individual Cityhood Laws are the express articulation of that intent to exempt respondent municipalities from the coverage of R.A. No. 9009.           Even if we were to ignore the above quoted exchange between then Senate President Drilon and Senator Pimentel, it cannot be denied that Congress saw the wisdom of exempting respondent municipalities from complying with the higher income requirement imposed by the amendatory R.A. No. 9009.  Indeed, these

municipalities have proven themselves viable and capable to become component cities of their respective provinces.  It is also acknowledged that they were centers of trade and commerce, points of convergence of transportation, rich havens of agricultural, mineral, and other natural resources, and flourishing tourism spots.  In this regard, it is worthy to mention the distinctive traits of each respondent municipality, viz— 

Batac, Ilocos Norte – It is the biggest municipality of the 2nd District of Ilocos Norte, 2nd largest and most progressive town in the province ofIlocos Norte and the natural convergence point for the neighboring towns to transact their commercial ventures and other daily activities.  A growing metropolis, Batac is equipped with amenities of modern living like banking institutions, satellite cable systems, telecommunications systems.  Adequate roads, markets, hospitals, public transport systems, sports, and entertainment facilities. [Explanatory Note of House Bill No. 5941, introduced by Rep. Imee R. Marcos.] El Salvador, Misamis Oriental – It is located at the center of the Cagayan-Iligan Industrial Corridor and home to a number of industrial companies and corporations.  Investment and financial affluence of El Salvador is aptly credited to its industrious and preserving people.  Thus, it has become the growing investment choice even besting nearby cities and municipalities.  It is home to Asia Brewery as distribution port of their product inMindanao.  The Gokongwei Group of Companies is also doing business in the area.  So, the conversion is primarily envisioned to spur economic and financial prosperity to this coastal place in North-Western Misamis Oriental.  [Explanatory Note of House Bill No. 6003, introduced by Rep. Augusto H. Bacullo.]Cabadbaran, Agusan del Norte – It is the largest of the eleven (11) municipalities in the province of Agusan del Norte.  It plays strategic importance to the administrative and socio-economic life and development of Agusan del Norte.  It is the foremost in terms of trade, commerce, and industry.  Hence, the municipality was declared as the new seat and capital of the provincial government of Agusan del Norte pursuant to Republic Act No. 8811 enacted into law on August 16, 2000.  Its conversion will certainly promote, invigorate, and reinforce the economic potential of the province in establishing itself as an agro-industrial center in the Caraga region and accelerate the development of the area.  [Explanatory Note of House Bill No. 3094, introduced by Rep. Ma. Angelica Rosedell M. Amante.]

 Borongan, Eastern Samar – It is the capital town of Eastern Samar and the development of Eastern Samar will depend to a certain degree of its urbanization.  It will serve as a catalyst for the modernization and progress of adjacent towns considering the frequent interactions between the populace.  [Explanatory Note of House Bill No. 2640, introduced by Rep. Marcelino C. Libanan.] Lamitan, Basilan – Before Basilan City was converted into a separate province, Lamitan was the most progressive part of the city.  It has been for centuries the center of commerce and the seat of the Sultanate of the Yakan people of Basilan.  The source of its income is agro-industrial and others notably copra, rubber, coffee and host of income generating ventures.  As the most progressive town in Basilan, Lamitan continues to be the center of commerce catering to the municipalities of Tuburan, Tipo-Tipo and Sumisip.  [Explanatory Note of House Bill No. 5786, introduced by Rep. Gerry A. Salapuddin.] Catbalogan, Samar – It has always been the socio-economic-political capital of the Island of Samar even during the Spanish era.  It is the seat of government of the two congressional districts of Samar.  Ideally located at the crossroad between Northern and Eastern Samar, Catbalogan also hosts trade and commerce activates among the more prosperous cities of the Visayas like Tacloban City, Cebu City and the cities of Bicol region. The numerous banks and telecommunication facilities showcases the healthy economic environment of the municipality.  The preeminent and sustainable economic situation of Catbalogan has further boosted the call of residents for a more vigorous involvement of governance of the municipal government that is inherent in a city government.  [Explanatory Note of House Bill No. 2088, introduced by Rep. Catalino V. Figueroa.] Bogo, Cebu – Bogo is very qualified for a city in terms of income, population and area among others.  It has been elevated to the Hall of Fame being a five-time winner nationwide in the clean and green program.  [Explanatory Note of House Bill No. 3042, introduced by Rep. Clavel A. Martinez.] Tandag, Surigao del Sur – This over 350 year old capital town the province has long sought its conversion into a city that will pave the way not only for its own growth and advancement but also help in the

development of its neighboring municipalities and the province as a whole. Furthermore, it can enhance its role as the province’s trade, financial and government center.  [Explanatory Note of House Bill No. 5940, introduced by Rep. Prospero A. Pichay, Jr.] Bayugan, Agusan del Sur – It is a first class municipality and the biggest in terms of population in the entire province.  It has the most progressive and thickly populated area among the 14 municipalities that comprise the province.  Thus, it has become the center for trade and commerce in Agusan del Sur.  It has a more developed infrastructure and facilities than other municipalities in the province.  [Explanatory Note of House Bill No. 1899, introduced by Rep. Rodolfo “Ompong” G. Plaza.] Carcar, Cebu – Through the years, Carcar metamorphosed from rural to urban and now boast of its manufacturing industry, agricultural farming, fishing and prawn industry and its thousands of large and small commercial establishments contributing to the bulk of economic activities in the municipality.  Based on consultation with multi-sectoral groups, political and non-government agencies, residents and common folk in Carcar, they expressed their desire for the conversion of the municipality into a component city.  [Explanatory Note of House Bill No. 3990, introduced by Rep. Eduardo R. Gullas.] Guihulngan, Negros Oriental – Its population is second highest in the province, next only to the provincial capital and higher than Canlaon Cityand Bais City.  Agriculture contributes heavily to its economy.  There are very good prospects in agricultural production brought about by its favorable climate.  It has also the Tanon Strait that provides a good fishing ground for its numerous fishermen.  Its potential to grow commercially is certain.  Its strategic location brought about by its existing linkage networks and the major transportation corridors traversing the municipality has established Guihulngan as the center of commerce and trade in this part of Negros Oriental with the first congressional district as its immediate area of influence.  Moreover, it has beautiful tourist spots that are being availed of by local and foreign tourists.  [Explanatory Note of House Bill No. 3628, introduced by Rep. Jacinto V. Paras.] Tayabas, Quezon – It flourished and expanded into an important politico-cultural center in [the] Tagalog region.  For 131 years (1179-1910), it served as the cabecera of the province which originally carried

the cabecera’s own name, Tayabas.  The locality is rich in culture, heritage and trade.  It was at the outset one of the more active centers of coordination and delivery of basic, regular and diverse goods and services within the first district of Quezon Province.  [Explanatory Note of House Bill No. 3348, introduced by Rep. Rafael P. Nantes.] Tabuk, Kalinga – It not only serves as the main hub of commerce and trade, but also the cultural center of the rich customs and traditions of the different municipalities in the province.  For the past several years, the income of Tabuk has been steadily increasing, which is an indication that its economy is likewise progressively growing.  [Explanatory Note of House Bill No. 3068, introduced by Rep. Laurence P. Wacnang.] Available information on Baybay, Leyte; Mati, Davao Oriental; and Naga, Cebu shows their economic viability, thus: Covering an area of 46,050 hectares, Baybay [Leyte] is composed of 92 barangays, 23 of which are in the poblacion.  The remaining 69 are ruralbarangays.  Baybay City is classified as a first class city.  It is situated on the western coast of the province of Leyte.  It has a Type 4 climate, which is generally wet.  Its topography is generally mountainous in the eastern portion as it slopes down west towards the shore line.  Generally an agricultural city, the common means of livelihood are farming and fishing.  Some are engaged in hunting and in forestall activities.  The most common crops grown are rice, corn, root crops, fruits, and vegetables.  Industries operating include the Specialty Products Manufacturing, Inc. and the Visayan Oil Mill.  Various cottage industries can also be found in the city such as bamboo and rattan craft, ceramics, dress-making, fiber craft, food preservation, mat weaving, metal craft, fine Philippine furniture manufacturing and other related activities.  Baybay has great potential as a tourist destination, especially for tennis players.  It is not only rich in biodiversity and history, but it also houses the campus of the Visayas State University(formerly the Leyte State University/Visayas State College of Agriculture/Visayas Agricultural College/Baybay National Agricultural School/Baybay Agricultural High School and the Jungle Valley Park.)  Likewise, it has river systems fit for river cruising, numerous caves for spelunking, forests, beaches, and marine treasures.  This richness, coupled with the friendly Baybayanos, will be an element of a successful tourism program. Considering the role of tourism in

development, Baybay City intends to harness its tourism potential. (<http://en.wikipedia.org/wiki/Baybay City> visited September 19, 2008) Mati [Davao Oriental] is located on the eastern part of the island of Mindanao.  It is one hundred sixty-five (165) kilometers away from DavaoCity, a one and a half-hour drive from Tagum City.  Visitors can travel from Davao City through the Madaum diversion road, which is shorter than taking the Davao-Tagum highway.  Travels by air and sea are possible, with the existence of an airport and seaport.  Mati boasts of being the coconut capital of Mindanao if not the whole country.  A large portion of its fertile land is planted to coconuts, and a significant number of its population is largely dependent on it.  Other agricultural crops such as mango, banana, corn, coffee and cacao are also being cultivated, as well as the famous Menzi pomelo and Valencia oranges.  Mati has a long stretch of shoreline and one can find beaches of pure, powder-like white sand.  A number of resorts have been developed and are now open to serve both local and international tourists.  Some of these resorts are situated along the coast of Pujada Bay and the Pacific Ocean.  Along the western coast of the bay lies Mt. Hamiguitan, the home of the pygmy forest, where bonsai plants and trees grow, some of which are believed to be a hundred years old or more.  On its peak is a lake, called “Tinagong Dagat,” or hidden sea, so covered by dense vegetation a climber has to hike trails for hours to reach it.  The mountain is also host to rare species of flora and fauna, thus becoming a wildlife sanctuary for these life forms. (<http://mati.wetpain.com/?t=anon>  accessed on September 19, 2008.) 

Mati is abundant with nickel, chromite, and copper.  Louie Rabat, Chamber President of the Davao Oriental Eastern Chamber of Commerce and Industry, emphasized the big potential of the mining industry in the province of Davao Oriental.  As such, he strongly recommends Mati as the mining hub in the Region.(<http://www.pia.gov.ph/default.asp?m=12&sec=reader&rp=1&fi=p080115.htm&no.=9&date, accessed on September 19, 2008) Naga [Cebu]: Historical Background—In the early times, the place now known as Naga was full of huge trees locally called as “Narra.”  The first settlers referred to this place as Narra, derived from the huge trees, which later simply became Naga.  Considered as one of the oldest

settlements in the Province of Cebu, Naga became a municipality on June 12, 1829.  The municipality has gone through a series of classifications as its economic development has undergone changes and growth.  The tranquil farming and fishing villages of the natives were agitated as the Spaniards came and discovered coal in the uplands.  Coal was the first export of the municipality, as the Spaniards mined and sent it to Spain.  The mining industry triggered the industrial development of Naga.  As the years progressed, manufacturing and other industries followed, making Naga one of the industrialized municipalities in the Province of Cebu.

 Class of Municipality                          1st classProvince                                              CebuDistance from Cebu City                    22 kms.Number of Barangays                         28No. of Registered Voters                    44,643 as of May 14, 2007Total No. of Precincts                         237 (as of May 14, 2007)Ann. Income (as of Dec. 31,

2006)    Php112,219,718.35                                                                       Agricultural, Industrial, Agro-Industrial, Mining Product

(<http://www.nagacebu.com/index.php?option=com.content&view=article id=53:naga-facts-and-figures&catid=51:naga-facts-and-figures&Itemid=75> visited September 19, 2008)  

          The enactment of the Cityhood Laws is an exercise by Congress of its legislative power.  Legislative power is the authority, under the Constitution, to make laws, and to alter and repeal them.[10]  The Constitution, as the expression of the will of the people in their original, sovereign, and unlimited capacity, has vested this power in the Congress of the Philippines.  The grant of legislative power to Congress is broad, general, and comprehensive.  The legislative body possesses plenary powers for all purposes of civil government.  Any power, deemed to be legislative by usage and tradition, is necessarily possessed by Congress, unless the Constitution has lodged it elsewhere.  In fine, except as limited by the Constitution, either expressly or impliedly, legislative power

embraces all subjects, and extends to matters of general concern or common interest.[11]

           Without doubt, the LGC is a creation of Congress through its law-making powers.  Congress has the power to alter or modify it as it did when it enacted R.A. No. 9009.  Such power of amendment of laws was again exercised when Congress enacted the Cityhood Laws.  When Congress enacted the LGC in 1991, it provided for quantifiable indicators of economic viability for the creation of local government units—income, population, and land area.  Congress deemed it fit to modify the income requirement with respect to the conversion  of municipalities into component cities whenit enacted R.A. No. 9009, imposing an amount of P100 million, computed only from locally-generated sources.  However, Congress deemed it wiser to exempt respondent municipalities from such a belatedly imposed modified income requirement in order to uphold its higher calling of putting flesh and blood to the very intent and thrust of the LGC, which is countryside development and autonomy, especially accounting for these municipalities as engines for economic growth in their respective provinces.           Undeniably, R.A. No. 9009 amended the LGC.  But it is also true that, in effect, the Cityhood Laws amended R.A. No. 9009 through the exemption clauses found therein.  Since the Cityhood Laws explicitly exempted the concerned municipalities from the amendatory R.A. No. 9009, such Cityhood Laws are, therefore, also amendments to the LGC itself.  For this reason, we reverse theNovember 18, 2008 Decision and the August 24, 2010 Resolution on their strained and stringent view that the Cityhood Laws, particularly their exemption clauses, are not found in the LGC.   

2.The Cityhood Laws do not violate Section 6, Article X and the

equal protection clause of the Constitution.           Both the November 18, 2008 Decision and the August 24, 2010 Resolution impress that the Cityhood Laws violate the equal protection clause enshrined in the

Constitution.  Further, it was also ruled that Section 6, Article X was violated because the Cityhood Laws infringed on the “just share” that petitioner and petitioners-in-intervention shall receive from the national taxes (IRA) to be automatically released to them.           Upon more profound reflection and deliberation, we declare that there was valid classification, and the Cityhood Laws do not violate the equal protection clause.         

As this Court has ruled, the equal protection clause of the 1987 Constitution permits a valid classification, provided that it: (1) rests on substantial distinctions; (2) is germane to the purpose of the law; (3) is not limited to existing conditions only; and (4) applies equally to all members of the same class.[12]

           The petitioners argue that there is no substantial distinction between municipalities with pending cityhood bills in the 11thCongress and municipalities that did not have pending bills, such that the mere pendency of a cityhood bill in the 11th Congress is not a material difference to distinguish one municipality from another for the purpose of the income requirement.  This contention misses the point.            It should be recalled from the above quoted portions of the interpellation by Senate President Drilon of Senator Pimentel that the purpose of the enactment of R.A. No 9009 was merely to stop the “mad rush of municipalities wanting to be converted into cities” and the apprehension that before long the country will be a country of cities and without municipalities.  It should be pointed out that the imposition of the P100 million average annual income requirement for the creation of component cities was arbitrarily made.  To be sure, there was no evidence or empirical data, such as inflation rates, to support the choice of this amount.  The imposition of a very high income requirement of P100 million, increased from P20 million, was simply to make it extremely difficult for municipalities to become component cities.  And to highlight such arbitrariness and the absurdity of the situation created thereby, R.A. No. 9009 has, in effect, placed component cities at a higher standing than highly urbanized cities under Section 452 of the LGC, to wit—

             Section 452. Highly Urbanized Cities. – (a) Cities with a minimum population of two hundred thousand (200,000) inhabitants, as certified by the National Statistics Office, and with the latest annual income of at least Fifty Million Pesos (P50,000,000.00) based on 1991 constant prices, as certified by the city treasurer, shall be classified as highly urbanized cities.                       (b)  Cities which do not meet above requirements shall be considered component cities of the province in which they are geographically located.  (Emphasis supplied)  

          The P100 million income requirement imposed by R.A. No. 9009, being an arbitrary amount, cannot be conclusively said to be the only amount “sufficient, based on acceptable standards, to provide for all essential    government    facilities    and    services  and    special   functions commensurate with the size of its population,” per Section 7[13] of the LGC.  It was imposed merely because it is difficult to comply with.  While it could be argued that P100 million, being more than P20 million, could, of course, provide the essential government facilities, services, and special functions vis-à-vis the population of a municipality wanting to become a component city, it cannot be said that the minimum amount of P20 million would be insufficient.  This is evident from the existing cities whose income, up to now, do not comply with the P100 million income requirement, some of which have lower than the P20 million average annual income.  Consider the list[14] below— 

CITY AVERAGE ANNUAL INCOME

1.   Marawi City 5,291,522.102.   Palayan City 6,714,651.773.   Sipalay City 9,713,120.004.   Canlaon City 13,552,493.795.   Himamaylan City 15,808,530.006.   Isabela City 16,811,246.797.   Munoz City 19,693,358.618.   Dapitan City 20,529,181.089.   Tangub City 20,943,810.04

10. Bayawan City 22,943,810.0411. Island Garden City of Samal 23,034,731.8312. Tanjay City 23,723,612.4413. Tabaco City 24,152,853.7114. Oroquieta City 24,279,966.5115. Ligao City 28,326,745.8616. Sorsogon City 30,403,324.5917. Maasin City 30,572,113.6518. Escalante City 32,113,970.0019. Iriga City 32,757,871.4420. Gapan City 34,254,986.4721. Candon City 36,327,705.8622. Gingoog City 37,327,705.8623. Masbate City 39,454,508.2824. Passi City 40,314,620.0025. Calbayog City 40,943,128.7326. Calapan City 41,870,239.2127. Cadiz City 43,827,060.0028. Alaminos City 44,352,501.0029. Bais City 44, 646,826.4830. San Carlos City 46,306,129.1331. Silay City 47,351,730.0032. Bislig City 47,360,716.2433. Tacurong City 49,026,281.5634. Talisay City (Negros Occidental) 52,609,790.0035. Kabankalan City 53,560,580.0036. Malaybalay City 54,423,408.5537. La Carlota City 54,760,290.0038. Vigan City 56,831,797.1939. Balanga City 61,556,700.4940. Sagay City 64,266,350.0041. Cavite City 64,566,079.0542. Koronadal City 66,231,717.1943. Cotabato City 66,302,114.5244. Toledo City 70,157,331.1245. San Jose City 70,309,233.4346. Danao City 72,621,955.3047. Bago City 74,305,000.0048. Valencia City 74,557,298.9249. Victorias City 75,757,298.9250. Cauayan City 82,949,135.4651. Santiago City 83,816,025.8952. Roxas City 85,397,830.00

53. Dipolog City 85,503,262.8554. Trece Martires City 87,413,786.6455. Talisay City (Cebu) 87,964,972.9756. Ozamis city 89,054,056.1257. Surigao City 89,960,971.3358. Panabo City 91,425,301.3959. Digos City 92,647,699.13

  The undeniable fact that these cities remain viable as component cities of their respective provinces emphasizes the arbitrariness of the amount of P100 million as the new income requirement for the conversion of municipalities into component cities.  This arbitrariness can also be clearly gleaned from the respective distinctive traits and level of economic development of the individual respondent municipalities as above submitted.           Verily, the determination of the existence of substantial distinction with respect to respondent municipalities does not simply lie on the mere pendency of their cityhood bills during the 11th Congress.  This Court sees the bigger picture.  The existence of substantial distinction with respect to respondent municipalities covered by the Cityhood Laws is measured by the purpose of the law, not by R.A. No. 9009, but by the very purpose of the LGC, as provided in its Section 2 (a), thus— 

            SECTION 2. Declaration of Policy.—(a) It is hereby declared the policy of the State that the territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals.  Toward this end, the State shall provide for a more responsive and accountable local government structure instituted through a system of decentralization whereby local government units shall be given more powers, authority, responsibilities and resources.  The process of decentralization shall proceed from the National Government to the local government units.  

          Indeed, substantial distinction lies in the capacity and viability of respondent municipalities to become component cities of their respective

provinces.  Congress, by enacting the Cityhood Laws, recognized this capacity and viability of respondent municipalities to become the State’s partners in accelerating economic growth and development in the provincial regions, which is the very thrust of the LGC, manifested by the pendency of their cityhood bills during the 11th Congress and their relentless pursuit for cityhood up to the present.  Truly, the urgent need to become a component city arose way back in the 11 th Congress, and such condition continues to exist.           Petitioners in these cases complain about the purported reduction of their “just share” in the IRA.  To be sure, petitioners are entitled to a “just share,” not a specific amount.  But the feared reduction proved to be false when, after the implementation of the Cityhood Laws, their respective shares increased, not decreased.  Consider the table[15] below— 

CITY CY 2006 IRA(Before Implementation of

Sixteen [16] Cityhood Laws)

CY 2008 IRA(Actual Release After

Implementation of Sixteen [16] Cityhood Laws)

Bais 219,338,056.00 242,193,156.00Batangas 334,371,984.00 388,871,770.00Bayawan 353,150,158.00 388,840,062.00Cadiz 329,491,285.00 361,019,211.00Calapan 227,772,199.00 252,587,779.00Calbayog 438,603,378.00 485,653,769.00Cauayan 250,477,157.00 277,120,828.00Gen. Santos 518,388,557.00 631,864,977.00Gingoog 314,425,637.00 347,207,725.00Himamaylan 248,154,381.00 277,532,458.00Iloilo 358,394,268.00 412,506,278.00Iriga 183,132,036.00 203,072,932.00Legaspi 235,314,016.00 266,537,785.00Ligao 215,608,112.00 239,696,441.00Oroquieta 191,803,213.00 211,449,720.00Pagadian 292,788,255.00 327,401,672.00San Carlos 239,524,249.00 260,515,711.00San Fernando 182,320,356.00 204,140,940.00Santiago 508,326,072.00 563,679,572.00Silay 216,372,314.00 241,363,845.00Surigao 233,968,119.00 260,708,071.00Tacurong 179,795,271.00 197,880,665.00

Tagaytay 130,159,136.00 152,445,295.00Tarlac 348,186,756.00 405,611,581.00Tangub 162,248,610.00 180,640,621.00Urdaneta 187,721,031.00 207,129,386.00Victorias 176,367,959.00 194,162,687.00Zamboanga 918,013,016.00 1,009,972,704.00

  What these petitioner cities were stating as a reduction of their respective

IRA shares was based on a computation of what they would receive if respondent municipalities were not to become component cities at all.  Of course, that would mean a bigger amount to which they have staked their claim.  After considering these, it all boils down to money and how much more they would receive if respondent municipalities remain as municipalities and not share in the 23% fixed IRA from the national government for cities. 

 Moreover, the debates in the Senate on R.A. No. 9009, should prove

enlightening: SENATOR SOTTO.  Mr. President, we just want to be enlightened again on the previous qualification and the present one being proposed.  Before there were three… SENATOR PIMENTEL.  There are three requisites for a municipality to become a city.  Let us start with the finance.SENATOR SOTTO.  Will the distinguished sponsor please refresh us?  I used to be the chairman of the Committee on Local Government, but the new job that was given to me by the Senate has erased completely my memory as far as the Local Government Code is concerned. SENATOR PIMENTEL.  Yes, Mr. President, with pleasure.  There are three requirements.  One is financial. SENATOR SOTTO.  All right.  It used to be P20 million. SENATOR PIMENTEL.  It is P20 million.  Now we are raising it to P100 million of locally generated funds. 

SENATOR SOTTO.  In other words, the P20 million before includes the IRA. SENATOR PIMENTEL.  No, Mr. President. SENATOR SOTTO.  It should not have been included? SENATOR PIMENTEL.  The internal revenue share should never have been included.  That was not the intention when we first crafted the Local Government Code.  The financial capacity was supposed to be demonstrated by the municipality wishing to become a city by its own effort, meaning to say, it should not rely on the internal revenue share that comes from the government.  Unfortunately, I think what happened in past conversions of municipalities into cities was, the Department of Budget and Management, along with the Department of Finance, had included the internal revenue share as a part of the municipality, demonstration that they are now financially capable and can measure up to the requirement of the Local Government Code of having a revenue of at least P20 million. SENATOR SOTTO.  I am glad that the sponsor, Mr. President, has spread that into the Record because otherwise, if he did not mention the Department of Finance and the Department of Budget and Management, then I would have been blamed for the misinterpretation.  But anyway, the gentleman is correct.  That was the interpretation given to us during the hearings.                         So now, from P20 million, we make it P100 million from locally generated income as far as population is concerned. SENATOR PIMENTEL.  As far as population is concerned, there will be no change, Mr. President.  Still 150,000. SENATOR SOTTO.  Still 150,000? SENATOR PIMENTEL.  Yes. SENATOR SOTTO.  And then the land area? 

SENATOR PIMENTEL.  As to the land area, there is no change; it is still 100 square kilometers. SENATOR SOTTO.  But before it was “either/or”? SENATOR PIMENTEL.  That is correct.  As long as it has one of the three requirements, basically, as long as it meets the financial requirement, then it may meet the territorial requirement or the population requirement. SENATOR SOTTO.  So, it remains “or”? SENATOR PIMENTEL.  We are now changing it into AND. SENATOR SOTTO.  AND? SENATOR PIMENTEL.  Yes. SENATOR SOTTO.  I see. SENATOR PIMENTEL.  That is the proposal, Mr. President.  In other words… SENATOR SOTTO.  Does the gentleman not think there will no longer be any municipality that will qualify, Mr. President? SENATOR PIMENTEL.  There may still be municipalities which can qualify, but it will take a little time.  They will have to produce more babies.  I do not know—expand their territories, whatever, by reclamation or otherwise.  But the whole proposal is geared towards making it difficult for municipalities to convert into cities.                         On the other hand, I would like to advert to the fact that in the amendments that we are proposing for the entire Local Government Code, we are also raising the internal revenue share of the municipalities. SENATOR SOTTO.  I see. SENATOR PIMENTEL.  So that, more or less, hindi naman sila dehado in this particular instance.

 SENATOR SOTTO.  Well, then, because of that information, Mr. President, I throw my full support behind the measure.                         Thank you, Mr. President. SENATOR PIMENTEL.  Thank you very much, Mr. President. (Emphasis supplied)[16]

  From the foregoing, the justness in the act of Congress in enacting the

Cityhood Laws becomes obvious, especially considering that 33 municipalities were converted into component cities almost immediately prior to the enactment of R.A. No. 9009. In the enactment of the Cityhood Laws, Congress merely took the 16 municipalities covered thereby from the disadvantaged position brought about by the abrupt increase in the income requirement of R.A. No. 9009, acknowledging the “privilege” that they have already given to those newly-converted component cities, which prior to the enactment of R.A. No. 9009, were undeniably in the same footing or “class” as the respondent municipalities.  Congress merely recognized the capacity and readiness of respondent municipalities to become component cities of their respective provinces. 

 Petitioners complain of the projects that they would not be able to pursue

and the expenditures that they would not be able to meet, but totally ignored the respondent municipalities’ obligations arising from the contracts they have already entered into, the employees that they have already hired, and the projects that they have already initiated and completed as component cities. Petitioners have completely overlooked the need of respondent municipalities to become effective vehicles intending to accelerate economic growth in the countryside.  It is like the elder siblings wanting to kill the newly-borns so that their inheritance would not be diminished. 

 Apropos is the following parable: There was a landowner who went out at dawn to hire workmen for his

vineyard.  After reaching an agreement with them for the usual daily wage, he sent them out to his vineyard.  He came out about midmorning and saw other men

standing around the marketplace without work, so he said to them, “You too go along to my vineyard and I will pay you whatever is fair.”  They went. He came out again around noon and mid-afternoon and did the same.  Finally, going out in late afternoon he found still others standing around.  To these he said, “Why have you been standing here idle all day?” “No one has hired us,” they told him.  He said, “You go to the vineyard too.”  When evening came, the owner of the vineyard said to his foreman, “Call the workmen and give them their pay, but begin with the last group and end with the first.”  When those hired late in the afternoon came up they received a full day’s pay, and when the first group appeared they thought they would get more, yet they received the same daily wage.  Thereupon they complained to the owner, “This last group did only an hour’s work, but you have paid them on the same basis as us who have worked a full day in the scorching heat.”  “My friend,” he said to one in reply, “I do you no injustice.  You agreed on the usual wage, did you not?  Take your pay and go home.  I intend to give this man who was hired last the same pay as you.  I am free to do as I please with my money, am I not? Or are you envious because I am generous?”[17]

 Congress, who holds the power of the purse, in enacting the Cityhood Laws,

only sought the well-being of respondent municipalities, having seen their respective capacities to become component cities of their provinces, temporarily stunted by the enactment of R.A. No. 9009.  By allowing respondent municipalities to convert into component cities, Congress desired only to uphold the very purpose of the LGC, i.e., to make the local government units “enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals,” which is the very mandate of the Constitution.

 Finally, we should not be restricted by technical rules of procedure at the

expense of the transcendental interest of justice and equity.  While it is true that litigation must end, even at the expense of errors in judgment, it is nobler rather for this Court of last resort, as vanguard of truth, to toil in order to dispel apprehensions and doubt, as the following pronouncement of this Court instructs:

 The right and power of judicial tribunals to declare whether

enactments of the legislature exceed the constitutional limitations and

are invalid has always been considered a grave responsibility, as well as a solemn duty.  The courts invariably give the most careful consideration to questions involving the interpretation and application of the Constitution, and approach constitutional questions with great deliberation, exercising their power in this respect with the greatest possible caution and even reluctance; and they should never declare a statute void, unless its invalidity is, in their judgment, beyond reasonable doubt.  To justify a court in pronouncing a legislative act unconstitutional, or a provision of a state constitution to be in contravention of the Constitution x x x, the case must be so clear to be free from doubt, and the conflict of the statute with the constitution must be irreconcilable, because it is but a decent respect to the wisdom, the integrity, and the patriotism of the legislative body by which any law is passed to presume in favor of its validity until the contrary is shown beyond reasonable doubt.  Therefore, in no doubtful case will the judiciary pronounce a legislative act to be contrary to the constitution.  To doubt the constitutionality of a law is to resolve the doubt in favor of its validity.[18]

  

WHEREFORE, the Motion for Reconsideration of the “Resolution” dated August 24, 2010, dated and filed on September 14, 2010 by respondents Municipality of Baybay, et al. is GRANTED.  The Resolution dated August 24, 2010 is REVERSED andSET ASIDE.   The Cityhood Laws—Republic Acts Nos. 9389, 9390, 9391, 9392, 9393, 9394, 9398, 9404, 9405, 9407, 9408, 9409, 9434, 9435, 9436, and 9491—are declared CONSTITUTIONAL.

             SO ORDERED.           AMBIL VS SANDIGANBAYAN

FIRST DIVISION 

RUPERTO A. AMBIL, JR.,                                               Petitioner,

                   - versus -

           G.R. No. 175457

SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES,                            Respondent.x- - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

ALEXANDRINO R. APELADO, SR.,                            Petitioner,

                   - versus -

PEOPLE OF THE PHILIPPINES,                            Respondent.

           G.R. No. 175482           Present:

          CORONA,C.J.,                    Chairperson,          CARPIO,*           BERSAMIN,           DEL CASTILLO, and          VILLARAMA, JR., JJ.

          Promulgated:

             July 6, 2011x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

 DECISION

VILLARAMA, JR., J.:

         Before us are two consolidated petitions for review on certiorari filed by petitioner Ruperto A. Ambil, Jr.[1] and petitioner Alexandrino R. Apelado Sr.[2] assailing the Decision[3] promulgated on September 16, 2005 and Resolution[4] dated November 8, 2006 of the Sandiganbayan in Criminal Case No. 25892.

         The present controversy arose from a letter[5] of Atty. David B. Loste, President of the Eastern Samar Chapter of the Integrated Bar of the Philippines (IBP), to the Office of the Ombudsman, praying for an investigation into the alleged transfer of then Mayor Francisco Adalim, an accused in Criminal Case No. 10963 for murder, from the provincial jail of Eastern Samar to the residence of petitioner, then Governor Ruperto A. Ambil, Jr.  In a Report[6] dated January 4, 1999, the National Bureau of Investigation (NBI) recommended the filing of criminal charges against petitioner Ambil, Jr. for violation of Section 3(e)[7] of

Republic Act (R.A.) No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, as amended.  On September 22, 1999, the new President of the IBP, Eastern Samar Chapter, informed the Ombudsman that the IBP is no longer interested in pursuing the case against petitioners.  Thus, he recommended the dismissal of the complaint against petitioners.[8]

         Nonetheless, in an Information[9] dated January 31, 2000, petitioners Ambil, Jr. and Alexandrino R. Apelado, Sr. were charged with violation of Section 3(e) of R.A. No. 3019, together with SPO3 Felipe A. Balano.  Upon reinvestigation, the Office of the Ombudsman issued a Memorandum[10] dated August 4, 2000, recommending the dismissal of the complaint as regards Balano and the amendment of the Information to include the charge of Delivering Prisoners from Jail under Article 156[11] of the Revised Penal Code, as amended, (RPC) against the remaining accused.  The Amended Information[12] reads:

That on or about the 6th day of September 1998, and for sometime prior [or] subsequent thereto, [in] the Municipality of Borongan, Province of Eastern Samar, Philippines, and within the jurisdiction of this Honorable Court, [the] above-named accused, Ruperto A. Ambil, Jr.[,] being then the Provincial Governor of Eastern Samar, and Alexandrino R. Apelado, being then the Provincial Warden of Eastern Samar, both having been public officers, duly elected, appointed and qualified as such, committing the offense in relation to office, conniving and confederating together and mutually helping x x x each other, with deliberate intent, manifest partiality and evident bad faith, did then and there wilfully, unlawfully and criminally order and cause the release from the Provincial Jail of detention prisoner Mayor Francisco Adalim, accused in Criminal Case No. 10963, for Murder, by virtue of a warrant of Arrest issued by Honorable Arnulfo P. Bugtas, Presiding Judge, RTC-Branch 2, Borongan, Eastern Samar, and thereafter placed said detention prisoner (Mayor Francisco Adalim) under accused RUPERTO A. AMBIL, JR.’s custody, by allowing said Mayor Adalim to stay at accused Ambil’s residence for a period of Eighty-Five (85) days, more or less which act was done without any court order, thus accused in the performance of official functions had given unwarranted benefits and advantage to detainee Mayor Francisco Adalim to the prejudice of the government.

CONTRARY TO LAW.

BAIL BOND RECOMMENDED:  P30,000.00 each.[13] 

         On arraignment, petitioners pleaded not guilty and posted bail.

         At the pre-trial, petitioners admitted the allegations in the Information.  They reason, however, that Adalim’s transfer was justified considering the imminent threats upon his person and the dangers posed by his detention at the provincial jail.  According to petitioners, Adalim’s sister, Atty. Juliana A. Adalim-White, had sent numerous prisoners to the same jail where Mayor Adalim was to be held.  

         Consequently, the prosecution no longer offered testimonial evidence and rested its case after the admission of its documentary exhibits.  Petitioners filed a Motion for Leave to File Demurrer to Evidence with Reservation to Present Evidence in Case of Denial[14] but the same was denied.

         At the trial, petitioners presented three witnesses: petitioner Ambil, Jr., Atty. Juliana A. Adalim-White and Mayor Francisco C. Adalim.

         Petitioner Ambil, Jr. testified that he was the Governor of Eastern Samar from 1998 to 2001.  According to him, it was upon the advice of Adalim’s lawyers that he directed the transfer of Adalim’s detention to his home.  He cites poor security in the provincial jail as the primary reason for taking personal custody of Adalim considering that the latter would be in the company of inmates who were put away by his sister and guards identified with his political opponents.[15]   

         For her part, Atty. White stated that she is the District Public Attorney of Eastern Samar and the sister of Mayor Adalim.  She recounted how Mayor Adalim was arrested while they were attending a wedding in Sulat, Eastern Samar, on September 6, 1998. According to Atty. White, she sought the alternative custody of Gov. Ambil, Jr. after Provincial Warden and herein petitioner Apelado, Sr. failed to guarantee the mayor’s safety.[16]

         Meanwhile, Francisco Adalim introduced himself as the Mayor of Taft, Eastern Samar.  He confirmed his arrest on September 6, 1998 in connection with a murder case filed against him in the Regional Trial Court (RTC) of Borongan,

Eastern Samar.  Adalim confirmed Atty. White’s account that he spotted inmates who served as bodyguards for, or who are associated with, his political rivals at the provincial jail.  He also noticed a prisoner, Roman Akyatan, gesture to him with a raised clenched fist.  Sensing danger, he called on his sister for help.  Adalim admitted staying at Ambil, Jr.’s residence for almost three months before he posted bail after the charge against him was downgraded to homicide.[17]

         Petitioner Apelado, Sr. testified that he was the Provincial Jail Warden of Eastern Samar.  He recalls that on September 6, 1998, SPO3 Felipe Balano fetched him at home to assist in the arrest of Mayor Adalim.  Allegedly, Atty. White was contesting the legality of Mayor Adalim’s arrest and arguing with the jail guards against booking him for detention.  At the provincial jail, petitioner was confronted by Atty. White who informed him that he was under the governor, in the latter’s capacity as a provincial jailer.  Petitioner claims that it is for this reason that he submitted to the governor’s order to relinquish custody of Adalim.[18]

         Further, petitioner Apelado, Sr. described the physical condition of the jail to be dilapidated and undermanned.  According to him, only two guards were incharge of looking after 50 inmates.  There were two cells in the jail, each housing 25 inmates, while an isolation cell of 10 square meters was unserviceable at the time.  Also, there were several nipa huts within the perimeter for use during conjugal visits.[19]

         On September 16, 2005, the Sandiganbayan, First Division, promulgated the assailed Decision[20] finding petitioners guilty of violating Section 3(e) of R.A. No. 3019.   The court ruled that in moving Adalim to a private residence, petitioners have conspired to accord him unwarranted benefits in the form of more comfortable quarters with access to television and other privileges that other detainees do not enjoy.  It stressed that under the Rules, no person under detention by legal process shall be released or transferred except upon order of the court or when he is admitted to bail.[21] 

         The Sandiganbayan brushed aside petitioners’ defense that Adalim’s transfer was made to ensure his safety.  It observed that petitioner Ambil, Jr. did not personally verify any actual threat on Adalim’s life but relied simply on the advice of Adalim’s lawyers. The Sandiganbayan also pointed out the availability of an

isolation cell and nipa huts within the 10-meter-high perimeter fence of the jail which could have been used to separate Adalim from other prisoners.  Finally, it cited petitioner Ambil, Jr.’s failure to turn over Adalim despite advice from Assistant Secretary Jesus Ingeniero of the Department of Interior and Local Government.

         Consequently, the Sandiganbayan sentenced petitioner Ambil, Jr. to an indeterminate penalty of imprisonment for nine (9) years, eight (8) months and one (1) day to twelve (12) years and four (4) months.  In favor of petitioner Apelado, Sr., the court appreciated the incomplete justifying circumstance of obedience to a superior order and sentenced him to imprisonment for six (6) years and one (1) month to nine (9) years and eight (8) months.

         Hence, the present petitions.

         Petitioner Ambil, Jr. advances the following issues for our consideration:

I

WHETHER OR NOT SECTION 3(e) REPUBLIC ACT NO. 3019, AS AMENDED, APPLIES TO PETITIONER’S CASE BEFORE THE SANDIGANBAYAN.

II

WHETHER OR NOT A PUBLIC OFFICER SUCH AS PETITIONER IS A PRIVATE PARTY FOR PURPOSES OF SECTION 3(e), REPUBLIC ACT NO. 3019, AS AMENDED.

III

WHETHER OR NOT PETITIONER ACTED WITH DELIBERATE INTENT, MANIFEST PARTIALITY, EVIDENT BAD FAITH OR GROSS INEXCUSABLE NEGLIGENCE IN THE CONTEXT OF SAID SECTION 3(e).

IV

WHETHER OR NOT PETITIONER AS PROVINCIAL GOVERNOR AND JAILER UNDER SECTIONS 1730 AND 1733, ARTICLE III,

CHAPTER 45 OF THE ADMINISTRATIVE CODE OF 1917 AND SECTION 61, CHAPTER V, REPUBLIC ACT 6975 HAS THE AUTHORITY TO TAKE CUSTODY OF A DETENTION PRISONER.

V

WHETHER OR NOT PETITIONER IS ENTITLED TO THE JUSTIFYING CIRCUMSTANCE OF FULFILLMENT OF A DUTY OR THE LAWFUL EXERCISE OF A RIGHT OR OFFICE.

VI

WHETHER OR NOT PETITIONER SHOULD HAVE BEEN ACQUITTED BECAUSE THE PROSECUTION EVIDENCE DID NOT ESTABLISH HIS GUILT BEYOND REASONABLE DOUBT.[22]

         For his part, petitioner Apelado, Sr. imputes the following errors on the Sandiganbayan:

I

THERE WAS MISAPPREHENSION OF FACTS AND/OR MISAPPLICATION OF THE LAW AND JURISPRUDENCE IN CONVICTING ACCUSED APELADO, EITHER AS PRINCIPAL OR IN CONSPIRACY WITH HIS CO-ACCUSED AMBIL.

II

IN THE ABSENCE OF COMPETENT PROOF BEYOND REASONABLE DOUBT OF CONSPIRACY BETWEEN ACCUSED AMBIL AND HEREIN PETITIONER, THE LATTER SHOULD BE ACCORDED FULL CREDIT FOR THE JUSTIFYING CIRCUMSTANCE UNDER PARAGRAPH 6, ARTICLE 11 OF THE REVISED PENAL CODE.    

III

THE COURT A QUO’S BASIS IN CONVICTING BOTH ACCUSED AMBIL AND HEREIN PETITIONER OF HAVING GIVEN MAYOR ADALIM “UNWARRANTED BENEFITS AND ADVANTAGE TO THE PREJUDICE x x x OF THE GOVERNMENT IS, AT THE MOST, SPECULATIVE.[23] 

         The issues raised by petitioner Ambil, Jr. can be summed up into three: (1) Whether he is guilty beyond reasonable doubt of violating Section 3(e), R.A. No. 3019; (2) Whether a provincial governor has authority to take personal custody of a detention prisoner; and (3) Whether he is entitled to the justifying circumstance of fulfillment of duty under Article 11(5)[24] of the RPC.

         Meanwhile, petitioner Apelado, Sr.’s assignment of errors can be condensed into two: (1) Whether he is guilty beyond reasonable doubt of violating Section 3(e), R.A. No. 3019; and (2) Whether he is entitled to the justifying circumstance of obedience to an order issued by a superior for some lawful purpose under Article 11(6)[25] of the RPC.

         Fundamentally, petitioner Ambil, Jr. argues that Section 3(e), R.A. No. 3019 does not apply to his case because the provision contemplates only transactions of a pecuniary nature.  Since the law punishes a public officer who extends unwarranted benefits to a private person, petitioner avers that he cannot be held liable for extending a favor to Mayor Adalim, a public officer.  Further, he claims good faith in taking custody of the mayor pursuant to his duty as a “Provincial Jailer” under the Administrative Code of 1917. Considering this, petitioner believes himself entitled to the justifying circumstance of fulfillment of duty or lawful exercise of duty.

         Petitioner Apelado, Sr., on the other hand, denies allegations of conspiracy between him and petitioner Ambil, Jr.  Petitioner Apelado, Sr. defends that he was merely following the orders of a superior when he transferred the detention of Adalim.  As well, he invokes immunity from criminal liability.  

         For the State, the Office of the Special Prosecutor (OSP) points out the absence of jurisprudence that restricts the application of Section 3(e), R.A. No. 3019 to transactions of a pecuniary nature.  The OSP explains that it is enough to show that in performing their functions, petitioners have accorded undue preference to Adalim for liability to attach under the provision.  Further, the OSP maintains that Adalim is deemed a private party for purposes of applying Section 3(e), R.A. No. 3019 because the unwarranted benefit redounded, not to his person as a mayor, but to his person as a detention prisoner accused of murder.  It suggests further that petitioners were motivated by bad faith as evidenced by their refusal to

turn over Adalim despite instruction from Asst. Sec. Ingeniero.  The OSP also reiterates petitioners’ lack of authority to take custody of a detention prisoner without a court order. Hence, it concludes that petitioners are not entitled to the benefit of any justifying circumstance.

         After a careful review of this case, the Court finds the present petitions bereft of merit. 

         Petitioners were charged with violation of Section 3(e) of R.A. No. 3019 or the Anti-Graft and Corrupt Practices Act which provides:

Section. 3. Corrupt practices of public officers. - In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:

x x x x

(e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official, administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions.

         In order to hold a person liable under this provision, the following elements must concur: (1) the accused must be a public officer discharging administrative, judicial or official functions; (2) he must have acted with manifest partiality, evident bad faith or gross inexcusable negligence; and (3) his action caused any undue injury to any party, including the government, or gave any private party unwarranted benefits, advantage or preference in the discharge of his functions.[26]

         As to the first element, there is no question that petitioners are public officers discharging official functions and that jurisdiction over them lay with the Sandiganbayan.  Jurisdiction of the Sandiganbayan over public officers charged with violation of the Anti-Graft Law is provided under Section 4 of Presidential

Decree No. 1606,[27] as amended by R.A. No. 8249.[28]  The pertinent portions of Section 4, P.D. No. 1606, as amended, read as follows:

SEC. 4. Jurisdiction.—The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving:

a. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII, Book II of the Revised Penal Code, where one or more of the accused are officials occupying the following positions in the government, whether in a permanent, acting or interim capacity, at the time of the commission of the offense:

(1) Officials of the executive branch occupying the positions of regional director and higher, otherwise classified as Grade ‘27’ and higher, of the Compensation and Position Classification Act of 1989 (Republic Act No. 6758), specifically including:

(a) Provincial governors, vice-governors, members of the sangguniang panlalawigan and provincial treasurers, assessors, engineers and other provincial department heads[;]

x x x x

            In cases where none of the accused are occupying positions corresponding to Salary Grade ‘27’ or higher, as prescribed in the said Republic Act No. 6758, or military and PNP officers mentioned above, exclusive original jurisdiction thereof shall be vested in the proper regional trial court, metropolitan trial court,           municipal trial court, and municipal circuit trial court, as the case may be, pursuant to their respective jurisdiction as provided in Batas Pambansa Blg. 129, as amended.

            x x x x

            Thus, the jurisdiction of the Sandiganbayan over petitioner Ambil, Jr. is beyond question.  The same is true as regards petitioner Apelado, Sr.  As to him, a Certification[29] from the Provincial Government Department Head of the HRMO shows that his position as Provincial Warden is classified as Salary Grade

22.  Nonetheless, it is only when none of the accused are occupying positions corresponding to salary grade ‘27’ or higher shall exclusive jurisdiction be vested in the lower courts.  Here, petitioner Apelado, Sr. was charged as a co-principal with Governor Ambil, Jr., over whose position the Sandiganbayan has jurisdiction. Accordingly, he was correctly tried jointly with said public officer in the proper court which had exclusive original jurisdiction over them – the Sandiganbayan.

         The second element, for its part, describes the three ways by which a violation of Section 3(e) of R.A. No. 3019 may be committed, that is, through manifest partiality, evident bad faith or gross inexcusable negligence.

         In Sison v. People,[30] we defined “partiality,” “bad faith” and “gross negligence” as follows:

“Partiality” is synonymous with “bias” which “excites a disposition to see and report matters as they are wished for rather than as they are.” “Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest purpose or some moral obliquity and conscious doing of a wrong; a breach of sworn duty through some motive or intent or ill will; it partakes of the nature of fraud.” “Gross negligence has been so defined as negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but wilfully and intentionally with a conscious indifference to consequences in so far as other persons may be affected. It is the omission of that care which even inattentive and thoughtless men never fail to take on their own property.” x x x[31]

         In this case, we find that petitioners displayed manifest partiality and evident bad faith in transferring the detention of Mayor Adalim to petitioner Ambil, Jr.’s house.  There is no merit to petitioner Ambil, Jr.’s contention that he is authorized to transfer the detention of prisoners by virtue of his power as the “Provincial Jailer” of Eastern Samar. 

         Section 28 of the Local Government Code draws the extent of the power of local chief executives over the units of the Philippine National Police within their jurisdiction:

SEC. 28. Powers of Local Chief Executives over the Units of the Philippine National Police.—The extent of operational supervision and control of local chief executives over the police force, fire protection unit, and jail management personnel assigned in their respective jurisdictions shall be governed by the provisions of Republic Act Numbered Sixty-nine hundred seventy-five (R.A. No. 6975), otherwise known as “The Department of the Interior and Local Government Act of 1990,” and the rules and regulations issued pursuant thereto.

         In particular, Section 61, Chapter 5 of R.A. No. 6975[32] on the Bureau of Jail Management and Penology provides:

            Sec. 61. Powers and Functions. - The Jail Bureau shall exercise supervision and control over all city and municipal jails. The provincial jails shall be supervised and controlled by the provincial government within its jurisdiction, whose expenses shall be subsidized by the National Government for not more than three (3) years after the effectivity of this Act.  

         The power of control is the power of an officer to alter or modify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter.[33]  An officer in control lays down the rules in the doing of an act.  If they are not followed, he may, in his discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself.[34] 

         On the other hand, the power of supervision means “overseeing or the authority of an officer to see to it that the subordinate officers perform their duties.”[35]  If the subordinate officers fail or neglect to fulfill their duties, the official may take such action or step as prescribed by law to make them perform their duties.  Essentially, the power of supervision means no more than the power of ensuring that laws are faithfully executed, or that subordinate officers act within the law.[36]  The supervisor or superintendent merely sees to it that the rules are followed, but he does not lay down the rules, nor does he have discretion to modify or replace them.[37]

         Significantly, it is the provincial government and not the governor alone which has authority to exercise control and supervision over provincial jails.  In any case, neither of said powers authorizes the doing of acts beyond the parameters set by law.  On the contrary, subordinates must be enjoined to act within the bounds of law.  In the event that the subordinate performs an act ultra vires, rules may be laid down on how the act should be done, but always in conformity with the law.

         In a desperate attempt to stretch the scope of his powers, petitioner Ambil, Jr. cites Section 1731, Article III of theAdministrative Code of 1917 on Provincial jails in support.  Section 1731 provides:

SEC. 1731. Provincial governor as keeper of jail.—The governor of the province shall be charged with the keeping of the provincial jail, and it shall be his duty to administer the same in accordance with law and the regulations prescribed for the government of provincial prisons. The immediate custody and supervision of the jail may be committed to the care of a jailer to be appointed by the provincial governor. The position of jailer shall be regarded as within the unclassified civil service but may be filled in the manner in which classified positions are filled, and if so filled, the appointee shall be entitled to all the benefits and privileges of classified employees, except that he shall hold office only during the term of office of the appointing governor and until a successor in the office of the jailer is appointed and qualified, unless sooner separated.The provincial governor shall, under the direction of the provincial board and at the expense of the province, supply proper food and clothing for the prisoners; though the provincial board may, in its discretion, let the contract for the feeding of the prisoners to some other person. (Emphasis supplied.)

         This provision survived the advent of the Administrative Code of 1987.  But again, nowhere did said provision designate the provincial governor as the “provincial jailer,” or even slightly suggest that he is empowered to take personal custody of prisoners. What is clear from the cited provision is that the provincial governor’s duty as a jail keeper is confined to the administration of the jail and the procurement of food and clothing for the prisoners.  After all, administrative acts pertain only to those acts which are necessary to be done to carry out legislative

policies and purposes already declared by the legislative body or such as are devolved upon it[38] by the Constitution.  Therefore, in the exercise of his administrative powers, the governor can only enforce the law but not supplant it.

         Besides, the only reference to a transfer of prisoners in said article is found in Section 1737[39] under which prisoners may be turned over to the jail of the neighboring province in case the provincial jail be insecure or insufficient to accommodate all provincial prisoners.  However, this provision has been superseded by Section 3, Rule 114 of the Revised Rules of Criminal Procedure, as amended.  Section 3, Rule 114 provides:

SEC. 3. No release or transfer except on court order or bail.-No person under detention by legal process shall be released or transferred except upon order of the court or when he is admitted to bail.

         Indubitably, the power to order the release or transfer of a person under detention by legal process is vested in the court, not in the provincial government, much less the governor.  This was amply clarified by Asst. Sec. Ingeniero in his communication[40]dated October 6, 1998 addressed to petitioner Ambil, Jr.  Asst. Sec. Ingeniero wrote:

06 October 1996

GOVERNOR RUPERTO AMBILProvincial CapitolBorongan, Eastern Samar Dear Sir: This has reference to the letter of Atty. Edwin B. Docena, and the reports earlier received by this Department, relative to your alleged action in taking into custody Mayor Francisco “Aising” Adalim of Taft, that province, who has been previously arrested by virtue by a warrant of arrest issued in Criminal Case No. 10963. If the report is true, it appears that your actuation is not in accord with the provision of Section 3, Rule 113 of the Rules of Court, which mandates that an arrested person be delivered to the nearest police station or jail.

 Moreover, invoking Section 61 of RA 6975 as legal basis in taking custody of the accused municipal mayor is misplaced.  Said section merely speaks of the power of supervision vested unto the provincial governor over provincial jails. It does not, definitely, include the power to take in custody any person in detention. In view of the foregoing, you are hereby enjoined to conduct yourself within the bounds of law and to immediately deliver Mayor Adalim to the provincial jail in order to avoid legal complications. Please be guided accordingly. Very truly yours, (SGD.)JESUS I. INGENIEROAssistant Secretary

Still, petitioner Ambil, Jr. insisted on his supposed authority as a “provincial jailer.”  Said petitioner’s usurpation of the court's authority, not to mention his open and willful defiance to official advice in order to accommodate a former political party mate,[41]betray his unmistakable bias and the evident bad faith that attended his actions.

         Likewise amply established beyond reasonable doubt is the third element of the crime.  As mentioned above, in order to hold a person liable for violation of Section 3(e), R.A. No. 3019, it is required that the act constituting the offense consist of either (1) causing undue injury to any party, including the government, or (2) giving any private party any unwarranted benefits, advantage or preference in the discharge by the accused of his official, administrative or judicial functions. 

In the case at hand, the Information specifically accused petitioners of giving unwarranted benefits and advantage to Mayor Adalim, a public officer charged with murder, by causing his release from prison and detaining him instead at the house of petitioner Ambil, Jr.  Petitioner Ambil, Jr. negates the applicability of Section 3(e), R.A. No. 3019 in this case on two points.  First, Section 3(e) is not applicable to him allegedly because the last sentence thereof provides that the

“provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses, permits or other concessions” and he is not such government officer or employee.  Second, the purported unwarranted benefit was accorded not to a private party but to a public officer. 

         However, as regards his first contention, it appears that petitioner Ambil, Jr. has obviously lost sight, if he is not altogether unaware, of our ruling in Mejorada v. Sandiganbayan[42] where we held that a prosecution for violation of Section 3(e) of the Anti-Graft Law will lie regardless of whether or not the accused public officer is “charged with the grant of licenses or permits or other concessions.”  Following is an excerpt of what we said in Mejorada,

            Section 3 cited above enumerates in eleven subsections the corrupt practices of any public officers (sic) declared unlawful.  Its reference to “any public officer” is without distinction or qualification and it specifies the acts declared unlawful.  We agree with the view adopted by the Solicitor General that the last sentence of paragraph [Section 3] (e) is intended to make clear the inclusion of officers and employees of officers (sic) or government corporations which, under the ordinary concept of “public officers” may not come within the term.  It is a strained construction of the provision to read it as applying exclusively to public officers charged with the duty of granting licenses or permits or other concessions.[43] (Italics supplied.)

In the more recent case of Cruz v. Sandiganbayan,[44] we affirmed that a prosecution for violation of said provision will lie regardless of whether the accused public officer is charged with the grant of licenses or permits or other concessions.[45]         

         Meanwhile, regarding petitioner Ambil, Jr.’s second contention, Section 2(b) of R.A. No. 3019 defines a “public officer” to include elective and appointive officials and employees, permanent or temporary, whether in the classified or unclassified or exemption service receiving compensation, even nominal from the government.  Evidently, Mayor Adalim is one.  But considering that Section 3(e) of R.A. No. 3019 punishes the giving by a public officer of unwarranted benefits to a private party, does the fact that Mayor Adalim was the recipient of such benefits take petitioners’ case beyond the ambit of said law?

         We believe not.

         In drafting the Anti-Graft Law, the lawmakers opted to use “private party” rather than “private person” to describe the recipient of the unwarranted benefits, advantage or preference for a reason.  The term “party” is a technical word having a precise meaning in legal parlance[46] as distinguished from “person” which, in general usage, refers to a human being.[47]  Thus, a private person simply pertains to one who is not a public officer.  While a private party is more comprehensive in scope to mean either a private person or a public officer acting in a private capacity to protect his personal interest.

         In the present case, when petitioners transferred Mayor Adalim from the provincial jail and detained him at petitioner Ambil, Jr.’s residence, they accorded such privilege to Adalim, not in his official capacity as a mayor, but as a detainee charged with murder.  Thus, for purposes of applying the provisions of Section 3(e), R.A. No. 3019, Adalim was a private party. 

         Moreover, in order to be found guilty under the second mode, it suffices that the accused has given unjustified favor or benefit to another in the exercise of his official, administrative or judicial functions.[48]  The word “unwarranted” means lacking adequate or official support; unjustified; unauthorized or without justification or adequate reason.  “Advantage” means a more favorable or improved position or condition; benefit, profit or gain of any kind; benefit from some course of action.  “Preference” signifies priority or higher evaluation or desirability; choice or estimation above another.[49]  

         Without a court order, petitioners transferred Adalim and detained him in a place other than the provincial jail.  The latter was housed in much more comfortable quarters, provided better nourishment, was free to move about the house and watch television. Petitioners readily extended these benefits to Adalim on the mere representation of his lawyers that the mayor’s life would be put in danger inside the provincial jail.

         As the Sandiganbayan ruled, however, petitioners were unable to establish the existence of any risk on Adalim’s safety.  To be sure, the latter would not be alone in having unfriendly company in lockup.  Yet, even if we treat Akyatan’s

gesture of raising a closed fist at Adalim as a threat of aggression, the same would still not constitute a special and compelling reason to warrant Adalim’s detention outside the provincial jail.  For one, there were nipa huts within the perimeter fence of the jail which could have been used to separate Adalim from the rest of the prisoners while the isolation cell was undergoing repair.  Anyhow, such repair could not have exceeded the 85 days that Adalim stayed in petitioner Ambil, Jr.’s house.  More importantly, even if Adalim could have proven the presence of an imminent peril on his person to petitioners, a court order was still indispensable for his transfer.

         The foregoing, indeed, negates the application of the justifying circumstances claimed by petitioners.

         Specifically, petitioner Ambil, Jr. invokes the justifying circumstance of fulfillment of duty or lawful exercise of right or office. Under paragraph 5, Article 11 of the RPC, any person who acts in the fulfillment of a duty or in the lawful exercise of a right or office does not incur any criminal liability.  In order for this justifying circumstance to apply, two requisites must be satisfied: (1) the accused acted in the performance of a duty or in the lawful exercise of a right or office; and (2) the injury caused or the offense committed be the necessary consequence of the due performance of duty or the lawful exercise of such right or office.[50]  Both requisites are lacking in petitioner Ambil, Jr.’s case.

         As we have earlier determined, petitioner Ambil, Jr. exceeded his authority when he ordered the transfer and detention of Adalim at his house.  Needless to state, the resulting violation of the Anti-Graft Law did not proceed from the due performance of his duty or lawful exercise of his office.

         In like manner, petitioner Apelado, Sr. invokes the justifying circumstance of obedience to an order issued for some lawful purpose.  Under paragraph 6, Article 11 of the RPC, any person who acts in obedience to an order issued by a superior for some lawful purpose does not incur any criminal liability.  For this justifying circumstance to apply, the following requisites must be present: (1) an order has been issued by a superior; (2) such order must be for some lawful purpose; and (3) the means used by the subordinate to carry out said order is lawful. [51]  Only the first requisite is present in this case.

         While the order for Adalim’s transfer emanated from petitioner Ambil, Jr., who was then Governor, neither said order nor the means employed by petitioner Apelado, Sr. to carry it out was lawful.  In his capacity as the Provincial Jail Warden of Eastern Samar, petitioner Apelado, Sr. fetched Mayor Adalim at the provincial jail and, unarmed with a court order, transported him to the house of petitioner Ambil, Jr.  This makes him liable as a principal by direct participation under Article 17(1)[52] of the RPC.

         An accepted badge of conspiracy is when the accused by their acts aimed at the same object, one performing one part of and another performing another so as to complete it with a view to the attainment of the same object, and their acts although apparently independent were in fact concerted and cooperative, indicating closeness of personal association, concerted action and concurrence of sentiments.[53] 

         Conspiracy was sufficiently demonstrated by petitioner Apelado, Sr.’s willful cooperation in executing petitioner Ambil, Jr.’s order to move Adalim from jail, despite the absence of a court order.  Petitioner Apelado, Sr., a law graduate, cannot hide behind the cloak of ignorance of the law.  The Rule requiring a court order to transfer a person under detention by legal process is elementary. Truth be told, even petitioner governor who is unschooled in the intricacies of the law expressed reservations on his power to transfer Adalim.  All said, the concerted acts of petitioners Ambil, Jr. and Apelado, Sr. resulting in the violation charged, makes them equally responsible as conspirators.

         As regards the penalty imposed upon petitioners, Section 9(a) of R.A. No. 3019 punishes a public officer or a private person who violates Section 3 of R.A. No. 3019 with imprisonment for not less than six (6) years and one (1) month to not more than fifteen (15) years and perpetual disqualification from public office.  Under Section 1 of the Indeterminate Sentence Law or Act No. 4103, as amended by Act No. 4225, if the offense is punished by a special law, the court shall sentence the accused to an indeterminate sentence, the maximum term of which shall not exceed the maximum fixed by said law and the minimum shall not be less than the minimum term prescribed by the same.     

         Thus, the penalty imposed by the Sandiganbayan upon petitioner Ambil, Jr. of imprisonment for nine (9) years, eight (8) months and one (1) day to twelve (12) years and four (4) months is in accord with law.  As a co-principal without the benefit of an incomplete justifying circumstance to his credit, petitioner Apelado, Sr. shall suffer the same penalty.

         WHEREFORE, the consolidated petitions are DENIED.  The Decision of the Sandiganbayan in Criminal Case No. 25892 isAFFIRMED WITH MODIFICATION.  We find petitioners Ruperto A. Ambil, Jr. and Alexandrino R. Apelado, Sr. guilty beyond reasonable doubt of violating Section 3(e), R.A. No. 3019.  Petitioner Alexandrino R. Apelado, Sr. is, likewise, sentenced to an indeterminate penalty of imprisonment for nine (9) years, eight (8) months and one (1) day to twelve (12) years and four (4) months.

         With costs against the petitioners.

SO ORDERED.

CASE DIGEST:  Facts:Eastern Samar Governor Ruperto Ambil and Provincial warden Alexandrino Apelado were found guilty before the Sandiganbayan for violating Section 3(e) of Republic Act No. 3019 otherwise known as the Anti-Graft and Corrupt Practices Act after Governor Ambil, conspiring with Apelado, ordered the release of then criminally-charged and detained mayor Francisco Adalim and had the latter transferred from the provincial jail to the the governor’s residence.

Issues:1.)Whether or not the Sandiganbayan had jurisdiction over a suit where one of the 2 accused has a Salary Grade classified to be cognizable before the lower courts.

2.)Whether or not the transfer of the detainee, who was a mayor, by the governor was a violation in contemplation of Sec3(e) of RA 3019 in relation to sec2(b) of the same act.

Held:

The Sandiganbayan had jurisdiction over the suit where one of the 2 accused held a position with a classification of Salary Grade 27. Only when none of the numerous accused occupies a position with a salary grade “27” or higher can exclusive jurisdiction befall in the lower courts. Sandiganbayan has jurisdiction over Ambil as provincial governor and so as with Apelado for being a co-principal in the perpetration of the offense although he had a salary grade of 22.

The power of control and supervision granted to by the Local Government Code and Administrative Code of 1917 does not include nor permit the usurpation of power duly vested before the courts. Facts showed that transfer by Ambil of Adalim was attended by evident bias and badfaith. Section 3(e) still applies to the case at hand even if the act was not one relative to the “granting of licenses and concessions”. The provision was meant to include officers with such duty to the list already enumerated therein and not necessarily to provide exclusivity. Furthermore, the fact that Andalim, as the reciepient of the benefit, was a public officer, did not preclude application. The act employs the phrase “private party”, which is more comprehensive in scope to mean either a private person or a public officer acting in a private capacity to protect his personal interest.

Thus the verdict by the SAndiganbayan, finding the accused guilty of violating RA 3019 was proper.

ABAS KIDA VS SENATE

Republic of the PhilippinesSupreme Court

Manila 

EN BANC 

 

DATU MICHAEL ABAS KIDA,in his personal capacity, and in representation of MAGUINDANAO FEDERATION OF AUTONOMOUS IRRIGATORS ASSOCIATION, INC., HADJI MUHMINA J. USMAN, JOHN ANTHONY L. LIM, JAMILON T. ODIN, ASRIN TIMBOL JAIYARI, MUJIB M. KALANG, ALIH AL-SAIDI J. SAPI-E, KESSAR DAMSIE ABDIL, and

     G.R. No. 196271

     Present:

       CORONA, C.J.,       CARPIO,       VELASCO, JR.,       LEONARDO-DE CASTRO,       BRION,       PERALTA,       BERSAMIN,

BASSAM ALUH SAUPI,Petitioners,

                 - versus -

SENATE OF THE PHILIPPINES, represented by its President JUAN PONCE ENRILE, HOUSE OF REPRESENTATIVES, thru SPEAKER FELICIANO BELMONTE, COMMISSION ON ELECTIONS, thru its Chairman, SIXTO BRILLANTES, JR., PAQUITO OCHOA, JR., Office of the President Executive Secretary, FLORENCIO ABAD, JR., Secretary of Budget, and ROBERTO TAN, Treasurer of the Philippines,

Respondents.

x----------------------------------------------xBASARI D. MAPUPUNO,                               Petitioner,

                  - versus -

SIXTO BRILLANTES, in his capacity as Chairman of the Commission on Elections, FLORENCIO ABAD, JR. in his capacity as Secretary of the Department of Budget and Management, PACQUITO OCHOA,

       DEL CASTILLO,       ABAD,       VILLARAMA, JR.,       PEREZ,       MENDOZA,       SERENO,       REYES, and       PERLAS-BERNABE, JJ.

      Promulgated:

      October 18, 2011

        G.R. No. 196305

JR., in his capacity as Executive Secretary, JUAN PONCE ENRILE, in his capacity as Senate President, and FELICIANO BELMONTE, in his capacity as Speaker of the House of Representatives,                                     Respondents.x----------------------------------------------x

REP. EDCEL C. LAGMAN,                                    Petitioner,

                  - versus -

PAQUITO N. OCHOA, JR., in his capacity as the Executive Secretary, and the COMMISSION ON ELECTIONS,                                   Respondents.x----------------------------------------------x

ALMARIM CENTI TILLAH, DATUCASAN CONDING CANA, and PARTIDO DEMOKRATIKO PILIPINO LAKAS NG BAYAN (PDP-LABAN),                                    Petitioners,

                     - versus -

THE COMMISSION ON ELECTIONS, through its Chairman,

         G.R. No. 197221

          G.R. No. 197280

SIXTO BRILLANTES, JR., HON. PAQUITO N. OCHOA, JR., in his capacity as Executive Secretary, HON. FLORENCIO B. ABAD, JR., in his capacity as Secretary of the Department of Budget and Management, and HON. ROBERTO B. TAN, in his capacity as Treasurer of the Philippines,                                     Respondents.x----------------------------------------------x

ATTY. ROMULO B. MACALINTAL,                                     Petitioner,

                     - versus -

COMMISSION  ON ELECTIONS and THE OFFICE OF THE PRESIDENT, through EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.,                                     Respondents.x----------------------------------------------x

LUIS “BAROK” BIRAOGO,                                     Petitioner,

                     - versus -

THE  COMMISSION ON

          G.R. No. 197282

             G.R. No. 197392

ELECTIONS and EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.,                                    Respondents.x----------------------------------------------x

JACINTO V. PARAS,                                    Petitioner,

                     - versus -

EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR., and the COMMISSION ON ELECTIONS,                                   Respondents.x--------------------------------------------x

MINORITY RIGHTS FORUM, PHILIPPINES, INC.,                         Respondents-Intervenor.

            G.R. No. 197454

 x------------------------------------------------------------------------------------x  

D E C I S I O N         

BRION, J.:  

On June 30, 2011, Republic Act (RA) No. 10153, entitled “An Act Providing for the Synchronization of the Elections in the Autonomous Region in Muslim Mindanao (ARMM) with the National and Local Elections and for Other Purposes” was enacted. The law reset the ARMM elections from  the 8th  of August 2011, to the second Monday of May 2013 and every three (3) years

thereafter, to coincide with the country’s regular national and local elections. The law as well granted the President the power to “appoint officers-in-charge (OICs) for the Office of the Regional Governor, the Regional Vice-Governor, and the Members of the Regional Legislative Assembly, who shall perform the functions pertaining to the said offices until the officials duly elected in the May 2013 elections shall have qualified and assumed office.”

 Even before its formal passage, the bills that became RA No. 10153 already

spawned petitions against their validity; House Bill No. 4146 and Senate Bill No. 2756 were challenged in petitions filed with this Court.  These petitions multiplied after RA No. 10153 was passed.  

Factual Antecedents 

The State, through Sections 15 to 22, Article X of the 1987 Constitution, mandated the creation of autonomous regions in Muslim Mindanao and the Cordilleras.  Section 15 states:

 Section 15. There shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and cultural heritage, economic and social structures, and other relevant characteristics within the framework of this Constitution and the national sovereignty as well as territorial integrity of the Republic of the Philippines.    Section 18 of the Article, on the other hand, directed Congress to enact an

organic act for these autonomous regions to concretely carry into effect the granted autonomy.

 Section 18. The Congress shall enact an organic act for each autonomous region with the assistance and participation of the regional consultative commission composed of representatives appointed by the President from a list of nominees from multisectoral bodies. The organic act shall define the basic structure of government for the region consisting of the executive department and legislative assembly, both of which shall be elective and representative of the constituent political units. The organic acts shall likewise provide for special courts with personal, family and property law jurisdiction consistent with the provisions of this Constitution and national laws.

 The creation of the autonomous region shall be effective when approved

by a majority of the votes cast by the constituent units in a plebiscite called for the

purpose, provided that only provinces, cities, and geographic areas voting favorably in such plebiscite shall be included in the autonomous region. On August 1, 1989 or two years after the effectivity of the 1987

Constitution, Congress acted through Republic Act (RA) No. 6734 entitled “An Act Providing for an Organic Act for the Autonomous Region in Muslim Mindanao.”  A plebiscite was held onNovember 6, 1990 as required by Section 18(2), Article X of RA No. 6734, thus fully establishing the Autonomous Region of Muslim Mindanao (ARMM).  The initially assenting provinces were Lanao del Sur, Maguindanao, Sulu and Tawi-tawi.  RA No. 6734 scheduled the first regular elections for the regional officials of the ARMM on a date not earlier than 60 days nor later than 90 days after its ratification.           RA No. 9054 (entitled “An Act to Strengthen and Expand the Organic Act for the Autonomous Region in Muslim Mindanao, Amending for the Purpose Republic Act No. 6734, entitled An Act Providing for the Autonomous Region in Muslim Mindanao, as Amended”) was the next legislative act passed.  This law provided further refinement in the basic ARMM structure first defined in the original organic act, and reset the regular elections for the ARMM regional officials to the second Monday of September 2001. 

Congress passed the next law affecting ARMM – RA No. 9140[1] - on June 22, 2001.  This law reset the first regular elections originally scheduled under RA No. 9054, to November 26, 2001.  It likewise set the plebiscite to ratify RA No. 9054 to not later thanAugust 15, 2001.

 RA No. 9054 was ratified in a plebiscite held on August 14, 2001.

The province of Basilan and Marawi City voted to join ARMM on the same date.  

RA No. 9333[2] was subsequently passed by Congress to reset the ARMM regional elections to the 2nd Monday of August 2005, and on the same date every 3 years thereafter. Unlike RA No. 6734 and RA No. 9054, RA No. 9333 was not ratified in a plebiscite.

 Pursuant to RA No. 9333, the next ARMM regional elections should have

been held on August 8, 2011. COMELEC had begun preparations for these elections and had accepted certificates of candidacies for the various regional offices to be elected.  But on June 30, 2011, RA No. 10153 was enacted, resetting

the ARMM elections to May 2013, to coincide with the regular national and local elections of the country.

 RA No. 10153 originated in the House of Representatives as House Bill

(HB) No. 4146, seeking the postponement of the ARMM elections scheduled on August 8, 2011. On March 22, 2011, the House of Representatives passed HB No. 4146, with one hundred ninety one (191) Members voting in its favor.

 After the Senate received HB No. 4146, it adopted its own version, Senate

Bill No. 2756 (SB No. 2756), on June 6, 2011. Thirteen (13) Senators voted favorably for its passage. On June 7, 2011, the House of Representative concurred with the Senate amendments, and on June 30, 2011, the President signed RA No. 10153 into law.

 As mentioned, the early challenge to RA No. 10153 came through a petition

filed with this Court – G.R. No. 196271[3] -assailing the constitutionality of both HB No. 4146 and SB No. 2756, and challenging the validity of  RA No. 9333 as well for non-compliance with the constitutional plebiscite requirement. Thereafter, petitioner Basari Mapupuno in G.R. No. 196305 filed another petition[4] also assailing the validity of RA No. 9333.   

With the enactment into law of RA No. 10153, the COMELEC stopped its preparations for the ARMM elections.  The law gave rise as well to the filing of the following petitions against its constitutionality:

 a)     Petition for Certiorari and Prohibition[5] filed by Rep. Edcel Lagman as a

member of the House of Representatives against Paquito Ochoa, Jr. (in his capacity as the Executive Secretary) and the COMELEC, docketed as G.R. No. 197221; 

b)    Petition for Mandamus and Prohibition[6] filed by Atty. Romulo Macalintal as a taxpayer against the COMELEC, docketed asG.R. No. 197282; 

c)     Petition for Certiorari and Mandamus, Injunction and Preliminary Injunction[7] filed by Louis “Barok” Biraogo against the COMELEC and Executive Secretary Paquito N. Ochoa, Jr., docketed as G.R. No. 197392; and

 

d)    Petition for Certiorari and Mandamus[8] filed by Jacinto Paras as a member of the House of Representatives against Executive Secretary Paquito Ochoa, Jr. and the COMELEC, docketed as G.R. No. 197454.

 Petitioners Alamarim Centi Tillah and Datu Casan Conding Cana as

registered voters from the ARMM, with the Partido Demokratiko Pilipino Lakas ng Bayan (a political party with candidates in the ARMM regional elections scheduled for August 8, 2011), also filed a Petition for Prohibition and Mandamus[9] against the COMELEC, docketed as G.R. No. 197280, to assail the constitutionality of RA No. 9140, RA No. 9333 and RA No. 10153.           Subsequently, Anak Mindanao Party-List, Minority Rights Forum Philippines, Inc. and Bangsamoro Solidarity Movement filed their own  Motion for Leave to Admit their Motion for Intervention and Comment-in-Intervention dated July 18, 2011. On July 26, 2011, the Court granted the motion. In the same Resolution, the Court ordered the consolidation of all the petitions relating to the constitutionality of HB No. 4146, SB No. 2756, RA No. 9333, and RA No. 10153.           Oral arguments were held on August 9, 2011 and August 16, 2011.  Thereafter, the parties were instructed to submit their respective memoranda within twenty (20) days.           On September 13, 2011, the Court issued a temporary restraining order enjoining the implementation of RA No. 10153 and ordering the incumbent elective officials of ARMM to continue to perform their functions should these cases not be decided by the end of their term on September 30, 2011. 

 The Arguments

           The petitioners assailing RA No. 9140, RA No. 9333 and RA No. 10153 assert that these laws amend RA No. 9054 and thus, have to comply with the supermajority vote and plebiscite requirements prescribed under Sections 1 and 3, Article XVII of RA No. 9094 in order to become effective.           The petitions assailing RA No. 10153 further maintain that it is unconstitutional for its failure to comply with the three-reading requirement of Section 26(2), Article VI of the Constitution.  Also cited as grounds are the alleged violations of the right of suffrage of the people of ARMM, as well as the failure to adhere to the “elective and representative” character of the executive and

legislative departments of the ARMM. Lastly, the petitioners challenged the grant to the President of the power to appoint OICs to undertake the functions of the elective ARMM officials until the officials elected under the May 2013 regular elections shall have assumed office. Corrolarily, they also argue that the power of appointment also gave the President the power of control over the ARMM, in complete violation of Section 16, Article X of the Constitution. 

The Issues            From the parties’ submissions, the following issues were recognized and argued by the parties in the oral arguments of August 9 and 16, 2011: 

I.       Whether the 1987 Constitution mandates the synchronization of elections

 II.    Whether the passage of RA No. 10153 violates Section 26(2),

Article VI of the 1987 Constitution 

III. Whether the passage of RA No. 10153 requires a supermajority vote and plebiscite

 A.   Does the postponement of the ARMM regular elections

constitute an amendment to Section 7, Article XVIII of RA No. 9054?

 B.   Does the requirement of a supermajority vote for

amendments or revisions to RA No. 9054 violate Section 1 and Section 16(2), Article VI of the 1987 Constitution and the corollary doctrine on irrepealable laws?

 C.   Does the requirement of a plebiscite apply only in the

creation of autonomous regions under paragraph 2, Section 18, Article X of the 1987 Constitution?

 

IV.            Whether RA No. 10153 violates the autonomy granted to the ARMM 

V.   Whether the grant of the power to appoint OICs violates: 

A.   Section 15, Article X of the 1987 Constitution 

B.   Section 16, Article X of the 1987 Constitution 

C.   Section 18, Article X of the 1987 Constitution 

VI.            Whether the proposal to hold special elections is constitutional and legal. 

We shall discuss these issues in the order they are presented above. 

 OUR RULING

 We resolve to DISMISS the petitions and thereby UPHOLD the

constitutionality of RA No. 10153 in toto. 

I.  Synchronization as a recognized constitutional mandate           The respondent Office of the Solicitor General (OSG) argues that the Constitution mandates synchronization, and in support of this position, cites Sections 1, 2 and 5, Article XVIII (Transitory Provisions) of the 1987 Constitution, which provides: 

Section 1. The first elections of Members of the Congress under this Constitution shall be held on the second Monday of May, 1987.The first local elections shall be held on a date to be determined by the President, which may be simultaneous with the election of the Members of the Congress. It shall include the election of all Members of the city or municipal councils in the Metropolitan Manila area.

Section 2. The Senators, Members of the House of Representatives and the local officials first elected under this Constitution shall serve until noonof June 30, 1992.Of the Senators elected in the election in 1992, the first twelve obtaining the highest number of votes shall serve for six year and the remaining twelve for three years.

xxxSection 5. The six-year term of the incumbent President and Vice President elected in the February 7, 1986 election is, for purposes of synchronization of elections, hereby extended to noon of June 30, 1992.The first regular elections for President and Vice-President under this Constitution shall be held on the second Monday of May, 1992.

 We agree with this position. While the Constitution does not expressly state that Congress has to

synchronize national and local elections, the clear intent towards this objective can be gleaned from the Transitory Provisions (Article XVIII) of the Constitution,[10] which show the extent to which the Constitutional Commission, by deliberately making adjustments to the terms of the incumbent officials, sought to attain synchronization of elections.[11]

 The objective behind setting a common termination date for all elective

officials, done among others through the shortening the terms of the twelve winning senators with the least number of votes, is to synchronize the holding of all future elections – whether national or local – to once every three years. [12] This intention finds full support in the discussions during the Constitutional Commission deliberations.[13]

These Constitutional Commission exchanges, read with the provisions of the Transitory Provisions of the Constitution, all serve as patent indicators of the constitutional mandate to hold synchronized national and local elections, starting the second Monday of May, 1992 and for all the following elections.

 This Court was not left behind in recognizing the synchronization of the

national and local elections as a constitutional mandate. In Osmeña v. Commission on Elections,[14] we explained:

 It is clear from the aforequoted provisions of the 1987

Constitution that the terms of office of Senators, Members of the House of Representatives, the local officials, the President and the Vice-President have been synchronized to end on the same hour, date and year — noon of June 30, 1992.

It is likewise evident from the wording of the above-mentioned Sections that the term of synchronization is used synonymously as the phraseholding simultaneously since this is the precise intent in terminating their Office Tenure on the same day or occasion. This common termination date will synchronize future elections to once every three years (Bernas, the Constitution of the Republic of the Philippines, Vol. II, p. 605).

That the election for Senators, Members of the House of Representatives and the local officials (under Sec. 2, Art. XVIII) will have to be synchronized with the election for President and Vice President (under Sec. 5, Art. XVIII) is likewise evident from the x x x  records of the proceedings in the Constitutional Commission. [Emphasis supplied.] Although called regional elections, the ARMM elections should be included

among the elections to be synchronized as it is a “local” election based on the wording and structure of the Constitution.

 A basic rule in constitutional construction is that the words used should be

understood in the sense that they have in common use and given their ordinary meaning, except when technical terms are employed, in which case the significance thus attached to them prevails.[15] As this Court explained in People v. Derilo,[16] “[a]s the Constitution is not primarily a lawyer’s document, its language should be understood in the sense that it may have in common. Its words should be given their ordinary meaning except where technical terms are employed.”

           Understood in its ordinary sense, the word “local” refers to something that primarily serves the needs of a particular limited district, often a community or minor political subdivision.[17] Regional elections in the ARMM for the positions of governor, vice-governor and regional assembly representatives obviously fall within this classification, since they pertain to the elected officials who will serve within the limited region of ARMM. 

From the perspective of the Constitution, autonomous regions are considered one of the forms of local governments, as evident from Article X  of the Constitution entitled “Local Government.”  Autonomous regions are established and discussed under Sections 15 to 21 of this Article – the article wholly devoted to Local Government. That an autonomous region is considered a form of local government is also reflected in Section 1, Article X of the Constitution, which provides:

 Section 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao, and the Cordilleras as hereinafter provided. 

  

Thus, we find the contention – that the synchronization mandated by  the Constitution does not include the regional elections of the ARMM –unmeritorious.  We shall refer to synchronization in the course of our discussions below, as this concept permeates the consideration of the various issues posed in this case and must be recalled time and again for its complete resolution.  

II.  The President’s Certification on the Urgency of RA No. 10153 

The petitioners in G.R. No. 197280 also challenge the validity of RA No. 10153 for its alleged failure to comply with Section 26(2), Article VI of the Constitution[18] which provides that before bills passed by either the House or the Senate can become laws, they must pass through three readings on separate days. The exception is when the President certifies to the necessity of the bill’s immediate enactment. 

The Court, in Tolentino v. Secretary of Finance,[19] explained the effect of the President’s certification of necessity in the following manner: 

The presidential certification dispensed with the requirement not only of printing but also that of reading the bill on separate days. The phrase "except when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, Section 26[2] qualifies the two stated conditions before a bill can become a law: [i] the bill has passed three readings on separate days and [ii] it has been printed in its final form and distributed three days before it is finally approved.

 

xxx

That upon the certification of a bill by the President, the requirement of three readings on separate days and of printing and distribution can be dispensed with is supported by the weight of legislative practice. For example, the bill defining the certiorari jurisdiction of this Court which, in consolidation with the Senate version, became Republic Act No. 5440, was passed on second and third readings in the House of Representatives on the same day [May 14, 1968] after the bill had been certified by the President as urgent.

 In the present case, the records show that the President wrote to the Speaker

of the House of Representatives to certify the necessity of the immediate enactment of a law synchronizing the ARMM elections with the national and local elections.[20] Following our Tolentino ruling, the President’s certification exempted both the House and the Senate from having to comply with the three separate readings requirement. 

 On the follow-up contention that no necessity existed for the immediate

enactment of these bills since there was no public calamity or emergency that had to be met, again we hark back to our ruling in Tolentino: 

The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declaration of martial law Art. VII, Section 18, or the existence of a national emergency justifying the delegation of extraordinary powers to the President under Art. VI, Section 23(2) is subject to judicial review because basic rights of individuals may be of hazard. But the factual basis of presidential certification of bills, which involves doing away with procedural requirements designed to insure that bills are duly considered by members of Congress, certainly should elicit a different standard of review. [Emphasis supplied.]

   

The House of Representatives and the Senate – in the exercise of their legislative discretion – gave full recognition to the President’s certification and promptly enacted RA No. 10153.  Under the circumstances, nothing short of grave abuse of discretion on the part of the two houses of Congress can justify our intrusion under our power of judicial review.[21]

 

The petitioners, however, failed to provide us with any cause or justification for this course of action.  Hence, while the judicial department and this Court are not bound by the acceptance of the President's certification by both the House of Representatives and the Senate, prudent exercise of our powers and respect due our co-equal branches of government in matters committed to them by the Constitution, caution a stay of the judicial hand.[22]

 In any case, despite the President’s certification, the two-fold purpose that

underlies the requirement for three readings on separate days of every bill must always be observed to enable our legislators and other parties interested in pending bills to intelligently respond to them.  Specifically,  the purpose with respect to Members of Congress is: (1) to inform the legislators of the matters they shall vote on and (2) to give them notice that a measure is in progress through the enactment process.[23]

 We find, based on the records of the deliberations on the law, that both

advocates and the opponents of the proposed measure had sufficient opportunities to present their views. In this light, no reason exists to nullify RA No. 10153 on the cited ground. 

 III.  A.  RA No. 9333 and RA No. 10153 are not amendments to RA No. 9054

The effectivity of RA No. 9333 and RA No. 10153 has also been challenged because they did not comply with Sections 1 and 3, Article XVII of RA No. 9054 in amending this law. These provisions require:

 Section 1. Consistent with the provisions of the Constitution, this Organic Act may be reamended or revised by the Congress of the Philippines upon a vote of two-thirds (2/3) of the Members of the House of Representatives and of the Senate voting separately.

 Section 3. Any amendment to or revision of this Organic Act shall become effective only when approved by a majority of the vote cast in a plebiscite called for the purpose, which shall be held not earlier than sixty (60) days or later than ninety (90) days after the approval of such amendment or revision. We find no merit in this contention. In the first place, neither RA No. 9333 nor RA No. 10153 amends RA No.

9054.  As an examination of these laws will show, RA No. 9054 only provides for the schedule of the first ARMM elections and does not fix the date of the regular

elections.  A need therefore existed for the Congress to fix the date of the subsequent ARMM regular elections, which it did by enacting RA No. 9333 and thereafter, RA No. 10153. Obviously, these subsequent laws – RA No. 9333 and RA No. 10153 – cannot be considered amendments to RA No. 9054 as they did not change or revise any provision in the latter law; they merely filled in a gap in RA No. 9054 or supplemented the law by providing the date of the subsequent regular elections. 

This view – that Congress thought it best to leave the determination of the date of succeeding ARMM elections to legislative discretion – finds support in ARMM’s recent history.

 To recall, RA No. 10153 is not the first law passed that rescheduled the

ARMM elections.  The First Organic Act – RA No. 6734 – not only did not fix the date of the subsequent elections; it did not even fix the specific date of the first ARMM elections,[24]leaving the date to be fixed in another legislative enactment. Consequently, RA No. 7647,[25] RA No. 8176,[26] RA No. 8746,[27]RA No. 8753,[28] and RA No. 9012[29] were all enacted by Congress to fix the dates of the ARMM elections. Since these laws did not change or modify any part or provision of RA No. 6734, they were not amendments to this latter law.  Consequently, there was no need to submit them to any plebiscite for ratification.

 The Second Organic Act – RA No. 9054 – which lapsed into law on March

31, 2001, provided that the first elections would be held on the second Monday of September 2001. Thereafter, Congress passed RA No. 9140[30] to reset the date of the ARMM elections.  Significantly, while RA No. 9140 also scheduled the plebiscite for the ratification of the Second Organic Act (RA No. 9054), the new date of the ARMM regional elections fixed in RA No. 9140 was not among the provisions ratified in the plebiscite held to approve RA No. 9054. Thereafter, Congress passed RA No. 9333,[31] which further reset the date of the ARMM regional elections. Again, this law was not ratified through a plebiscite.

 From these legislative actions, we see the clear intention of Congress to treat

the laws which fix the date of the subsequent ARMM elections as separate and distinct from the Organic Acts. Congress only acted consistently with this intent when it passed RA No. 10153 without requiring compliance with the amendment prerequisites embodied in Section 1 and Section 3, Article XVII of RA No. 9054. 

III. B. Supermajority voting requirement unconstitutional for giving RA No. 9054 the character of an irrepealable law

 Even assuming that RA No. 9333 and RA No. 10153 did in fact amend RA

No. 9054, the supermajority (2/3) voting requirement required under Section 1, Article XVII of RA No. 9054[32] has to be struck down for giving RA No. 9054 the character of an irrepealable law by requiring more than what the Constitution demands.

 Section 16(2), Article VI of the Constitution provides that a “majority of

each House shall constitute a quorum to do business.” In other words, as long as majority of the members of the House of Representatives or the Senate are present, these bodies have the quorum needed to conduct business and hold session.  Within a quorum, a vote of majority is generally sufficient to enact laws or approve acts. 

 In contrast, Section 1, Article XVII of RA No. 9054 requires a vote of no

less than two-thirds (2/3) of the Members of the House of Representatives and of the Senate, voting separately, in order to effectively amend RA No. 9054. Clearly, this 2/3 voting requirement is higher than what the Constitution requires for the passage of bills, and served to restrain the plenary powers of Congress to amend, revise or repeal the laws it had passed.  The Court’s pronouncement in City of Davao v. GSIS[33] on this subject best explains the basis and reason for the unconstitutionality:

 Moreover, it would be noxious anathema to democratic principles for a

legislative body to have the ability to bind the actions of future legislative body, considering that both assemblies are regarded with equal footing, exercising as they do the same plenary powers. Perpetual infallibility is not one of the attributes desired in a legislative body, and a legislature which attempts to forestall future amendments or repeals of its enactments labors under delusions of omniscience.

 xxx

 A state legislature has a plenary law-making power over all subjects, whether

pertaining to persons or things, within its territorial jurisdiction, either to introduce new laws or repeal the old, unless prohibited expressly or by implication by the federal constitution or limited or restrained by its own. It cannot bind itself or its successors by enacting irrepealable laws except when so restrained. Every legislative body may modify or abolish the acts passed by itself or its predecessors.

This power of repeal may be exercised at the same session at which the original act was passed; and even while a bill is in its progress and before it becomes a law. This legislature cannot bind a future legislature to a particular mode of repeal. It cannot declare in advance the intent of subsequent legislatures or the effect of subsequent legislation upon existing statutes.[34](Emphasis ours.)

  Thus, while a supermajority is not a total ban against a repeal, it is a

limitation in excess of what the Constitution requires on the passage of bills and is constitutionally obnoxious because it significantly constricts the future legislators’ room for action and flexibility.III. C. Section 3, Article XVII of RA No. 9054 excessively enlarged the plebiscite

requirement found in Section 18, Article X of the Constitution 

The requirements of RA No. 9054 not only required an unwarranted supermajority, but enlarged as well the plebiscite requirement, as embodied in its Section 3, Article XVII of that Act.  As we did on the supermajority requirement, we find the enlargement of the plebiscite requirement required under Section 18, Article X of the Constitution to be excessive to point of absurdity and, hence, a violation of the Constitution. 

 Section 18, Article X of the Constitution states that the plebiscite is required

only for the creation of autonomous regions and for determining which provinces, cities and geographic areas will be included in the autonomous regions. While the settled rule is that amendments to the Organic Act have to comply with the plebiscite requirement in order to become effective,[35] questions on the extent of the matters requiring ratification may unavoidably arise because of the seemingly general terms of the Constitution and the obvious absurdity that would result if a plebiscite were to be required for every statutory amendment.

 Section 18, Article X of the Constitution plainly states that “The creation of

the autonomous region shall be effective when approved by the majority of the votes case by the constituent units in a plebiscite called for the purpose.”  With these wordings as standard, we interpret the requirement to mean that only amendments to, or revisions of, the Organic Act constitutionally-essential to the creation of autonomous regions – i.e., those aspects specifically mentioned in the Constitution which Congress must provide for in the Organic Act – require ratification through a plebiscite.  These amendments to the Organic Act are those that relate to: (a) the basic structure of the regional government; (b) the region’s

judicial system, i.e., the  special  courts  with  personal, family, and property law jurisdiction; and, (c) the grant and extent of the legislative powers constitutionally conceded to the regional government under Section 20, Article X of the Constitution.[36]

 The date of the ARMM elections does not fall under any of the matters that

the Constitution specifically mandated Congress to provide for in the Organic Act. Therefore, even assuming that the supermajority votes and the plebiscite requirements are valid, any change in the date of elections cannot be construed as a substantial amendment of the Organic Act that would require compliance with these requirements.

 IV.  The synchronization issue

 As we discussed above, synchronization of national and local elections is a

constitutional mandate that Congress must provide for and this synchronization must include the ARMM elections.  On this point, an existing law in fact already exists – RA No. 7166 – as the forerunner of the current RA No. 10153. RA No. 7166 already provides for the synchronization of local elections with the national and congressional elections.  Thus, what RA No. 10153 provides is an old matter for local governments (with the exception of barangay and Sanggunian Kabataan elections where the terms are not constitutionally provided) and is technically a reiteration of what is already reflected in the law, given that regional elections are in reality local elections by express constitutional recognition.[37]

 To achieve synchronization, Congress necessarily has to reconcile the

schedule of the ARMM’s regular elections (which should have been held in August 2011 based on RA No. 9333) with the fixed schedule of the national and local elections (fixed by RA No. 7166 to be held in May 2013). 

 During the oral arguments, the Court identified the three options open to

Congress in order to resolve this problem. These options are: (1) to allow the elective officials in the ARMM to remain in office in a hold over capacity, pursuant to Section 7(1), Article VII of RA No. 9054, until those elected in the synchronized elections assume office;[38] (2) to hold special elections in the ARMM, with the terms of those elected to expire when those elected in the synchronized elections assume office; or (3) to authorize the President to appoint

OICs, pursuant to Section 3 of RA No. 10153, also until those elected in the synchronized elections assume office.

 As will be abundantly clear in the discussion below, Congress, in choosing

to grant the President the power to appoint OICs, chose the correct option and passed RA No. 10153 as a completely valid law. V.                           The Constitutionality of RA No. 10153 

A.             Basic Underlying Premises To fully appreciate the available options, certain underlying material

premises must be fully understood.  The first is the extent of the powers of Congress to legislate; the second is the constitutional mandate for the synchronization of elections; and the third is on the concept of autonomy as recognized and established under the 1987 Constitution. 

 The grant of legislative power to Congress is broad, general and

comprehensive.[39] The legislative body possesses plenary power for all purposes of civil government.[40] Any power, deemed to be legislative by usage and tradition, is necessarily possessed by Congress, unless the Constitution has lodged it elsewhere.[41]  Except as limited by the Constitution, either expressly or impliedly, legislative power embraces all subjects and extends to all matters of general concern or common interest.[42]

 The constitutional limitations on legislative power are either express or

implied. The express limitations are generally provided in some provisions of the Declaration of Principles and State Policies (Article 2) and in the provisions Bill of Rights (Article 3). Other constitutional provisions (such as the initiative and referendum clause of Article 6, Sections 1 and 32, and the autonomy provisions of Article X) provide their own express limitations. The implied limitations are found “in the evident purpose which was in view and the circumstances and historical events which led to the enactment of the particular provision as a part of organic law.”[43] 

 The constitutional provisions on autonomy – specifically, Sections 15 to 21

of Article X of the Constitution – constitute express limitations on legislative

power as they define autonomy, its requirements and its parameters, thus limiting what is otherwise the unlimited power of Congress to legislate on the governance of the autonomous region.

 Of particular relevance to the issues of the present case are the limitations

posed by the prescribed basic structure of government – i.e., that the government must have an executive department and a legislative assembly, both of which must be elective and representative of the constituent political units; national government, too, must not encroach on the legislative powers granted under Section 20, Article X.  Conversely and as expressly reflected in Section 17, Article X, “all powers and functions not granted by this Constitution or by law to the autonomous regions shall be vested in the National Government.”

 The totality of Sections 15 to 21 of Article X should likewise serve as a

standard that Congress must observe in dealing with legislation touching on the affairs of the autonomous regions.  The terms of these sections leave no doubt on what the Constitution intends – the idea of self-rule or self-government, in particular, the power to legislate on a wide array of social, economic and administrative matters.  But equally clear under these provisions are the permeating principles of national sovereignty and the territorial integrity of the Republic, as expressed in the above-quoted Section 17 and in Section 15.[44]  In other words, the Constitution and the supporting jurisprudence, as they now stand, reject the notion of imperium et imperio[45] in the relationship between the national and the regional governments.

 In relation with synchronization, both autonomy and the synchronization of

national and local elections are recognized and established constitutional mandates, with one being as compelling as the other.  If their compelling force differs at all, the difference is in their coverage; synchronization operates on and affects the whole country, while regional autonomy – as the term suggests – directly carries a narrower regional effect although its national effect cannot be discounted.

 These underlying basic concepts characterize the powers and limitations of

Congress when it acted on RA No. 10153.  To succinctly describe the legal

situation that faced Congress then, its decision to synchronize the regional elections with the national, congressional and all other local elections (save for barangay and sangguniang kabataan  elections) left it with the problem of how to provide the ARMM with governance in the intervening period between the expiration of the term of those elected in August 2008 and the assumption to office – twenty-one (21) months away – of those who will win in the synchronized elections on May 13, 2013. 

 The problem, in other words, was for interim measures for this period,

consistent with the terms of the Constitution and its established supporting jurisprudence, and with the respect due to the concept of autonomy.  Interim measures, to be sure, is not a strange phenomenon in the Philippine legal landscape. The Constitution’s Transitory Provisions themselves collectively provide measures for transition from the old constitution to the new[46]  and for the introduction of new concepts.[47]  As previously mentioned, the adjustment of elective terms and of elections towards the goal of synchronization first transpired under the Transitory Provisions.  The adjustments, however, failed to look far enough or deeply enough, particularly into the problems that synchronizing regional autonomous elections would entail; thus, the present problem is with us today.

 The creation of local government units also represents instances when

interim measures are required.  In the creation of Quezon del Sur[48] and Dinagat Islands,[49] the creating statutes authorized the President to appoint an interim governor, vice-governor and members of the sangguniang panlalawigan although these positions are essentially elective in character; the appointive officials were to serve until a new set of provincial officials shall have been elected and qualified.[50]  A similar authority to appoint is provided in the transition of a local government from a sub-province to a province.[51]

 In all these, the need for interim measures is dictated by necessity; out-of-

the-way arrangements and approaches were adopted or used in order to adjust to the goal or objective in sight in a manner that does not do violence to the Constitution and to reasonably accepted norms.  Under these limitations, the choice of measures was a question of wisdom left to congressional discretion.

 To return to the underlying basic concepts, these concepts shall serve as the

guideposts and markers in our discussion of the options available to Congress to address the problems brought about by the synchronization of the ARMM

elections, properly understood as interim measures that Congress had to provide.  The proper understanding of the options as interim measures assume prime materiality as it is under these terms that the passage of RA No. 10153 should be measured, i.e., given the constitutional objective of synchronization that cannot legally be faulted, did Congress gravely abuse its discretion or violate the Constitution when it addressed through RA No. 10153 the concomitant problems that the adjustment of elections necessarily brought with it?  

B. Holdover Option is Unconstitutional 

We rule out the first option – holdover for those who were elected in executive and legislative positions in the ARMM during the 2008-2011 term – as an option that Congress could have chosen because a holdover violates Section 8, Article X of the Constitution.  This provision states:

 Section 8. The term of office of elective local officials, except barangay

officials, which shall be determined by law, shall be three yearsand no such official shall serve for more than three consecutive terms. [emphases ours]

  

Since elective ARMM officials are local officials, they are covered and bound by the three-year term limit prescribed by the Constitution; they cannot extend their term through a holdover. As this Court put in Osmeña v. COMELEC:[52]

 It is not competent for the legislature to extend the term of officers by

providing that they shall hold over until their successors are elected and qualified where the constitution has in effect or by clear implication prescribed the term and when the Constitution fixes the day on which the official term shall begin, there is no legislative authority to continue the office beyond that period, even though the successors fail to qualify within the time.

 In American Jurisprudence it has been stated as follows:

 “It has been broadly stated that the legislature cannot, by

an act postponing the election to fill an office the term of which is limited by the Constitution, extend the term of the incumbent beyond the period as limited by the Constitution.” [Emphasis ours.]

 

Independently of the Osmeña ruling, the primacy of the Constitution as the supreme law of the land dictates that where the Constitution has itself made a determination or given its mandate, then the matters so determined or mandated should be respected until the Constitution itself is changed by amendment or repeal through the applicable constitutional process. A necessary corollary is that none of the three branches of government can deviate from the constitutional mandate except only as the Constitution itself may allow.[53] If at all, Congress may only pass legislation filing in details to fully operationalize the constitutional command or to implement it by legislation if it is non-self-executing; this Court, on the other hand, may only interpret the mandate if an interpretation is appropriate and called for.[54]

           In the case of the terms of local officials, their term has been fixed clearly and unequivocally, allowing no room for any implementing legislation with respect to the fixed term itself and no vagueness that would allow an interpretation from this Court. Thus, the term of three years for local officials should stay at three (3) years as fixed by the Constitution and cannot be extended by holdover by Congress.           If it will be claimed that the holdover period is effectively another term mandated by Congress, the net result is for Congress to create a new term and to appoint the occupant for the new term. This view – like the  extension of the elective term – is constitutionally infirm because Congress cannot do indirectly what it cannot do directly, i.e., to act in a way that would effectively extend the term of the incumbents. Indeed, if acts that cannot be legally done directly can be done indirectly, then all laws would be illusory.[55] Congress cannot also create a new term and effectively appoint the occupant of the position for the new term. This is effectively an act of appointment by Congress and an unconstitutional intrusion into the constitutional appointment power of the President.[56] Hence, holdover – whichever way it is viewed – is a constitutionally infirm option that Congress could not have undertaken.           Jurisprudence, of course, is not without examples of cases where the question of holdover was brought before, and given the imprimatur of approval by, this Court. The present case though differs significantly from past cases with contrary rulings, particularly from Sambarani v. COMELEC,[57] Adap v. Comelec,[58] and Montesclaros v. Comelec,[59]  where the Court ruled that the elective officials could hold on to their positions in a hold over capacity.

 All these past cases refer to elective barangay or sangguniang

kabataan  officials  whose  terms of office are  not explicitly provided for in  the  Constitution;  the present case, on the other hand, refers to local elective officials – the ARMM Governor, the ARMM Vice-Governor, and the members of the Regional Legislative Assembly – whose terms fall within the three-year term limit set by Section 8, Article X of the Constitution. Because of their constitutionally limited term, Congress cannot legislate an extension beyond the term for which they were originally elected.

 Even assuming that holdover is constitutionally permissible, and there had

been statutory basis for it (namely Section 7, Article VII of RA No. 9054) in the past,[60] we have to remember that the rule of holdover can only apply as an available option where no express or implied legislative intent to the contrary exists; it cannot apply where such contrary intent is evident.[61]

 Congress, in passing RA No. 10153, made it explicitly clear that it had the

intention of suppressing the holdover rule that prevailed under RA No. 9054 by completely removing this provision. The deletion is a policy decision that is wholly within the discretion of Congress to make in the exercise of its plenary legislative powers; this Court cannot pass upon questions of wisdom, justice or expediency of legislation,[62] except where an attendant unconstitutionality or grave abuse of discretion results. 

C.  The COMELEC has no authority to order special elections Another option proposed by the petitioner in G.R. No. 197282 is for this

Court to compel COMELEC to immediately conduct special elections pursuant to Section 5 and 6 of Batas Pambansa Bilang (BP) 881.

The power to fix the date of elections is essentially legislative in nature, as evident from, and exemplified by, the following provisions of the Constitution:

 Section 8, Article VI, applicable to the legislature, provides: 

Section 8.  Unless otherwise provided by law, the regular election of the Senators and the Members of the House of Representatives shall be held on the second Monday of May. [Emphasis ours]

            

Section 4(3), Article VII, with the same tenor but applicable solely to the President and Vice-President, states:

xxxx 

Section 4. xxx Unless otherwise provided by law, the regular election for President and Vice-President shall be held on the second Monday of May. [Emphasis ours]  

while Section 3, Article X, on local government, provides: 

Section 3. The Congress shall enact a local government code which shall provide for xxx the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials[.] [Emphases ours] 

 These provisions support the conclusion that no elections may be held on

any other date for the positions of President, Vice President, Members of Congress and local officials, except when so provided by another Act of Congress, or upon orders of a body or officer to whom Congress may have delegated either the power or the authority to ascertain or fill in the details in the execution of that power.[63]

 Notably, Congress has acted on the ARMM elections by postponing the

scheduled August 2011 elections and setting another date – May 13, 2011 – for regional elections synchronized with the presidential, congressional and other local elections.  By so doing, Congress itself has made a policy decision in the exercise of its legislative wisdom that it shall not call special electionsas an adjustment measure in synchronizing the ARMM elections with the other elections.

 After Congress has so acted, neither the Executive nor the Judiciary can act

to the contrary by ordering special elections instead at the call of the COMELEC.  This Court, particularly, cannot make this call without thereby supplanting the legislative decision and effectively legislating.  To be sure, the Court is not without the power to declare an act of Congress null and void for being unconstitutional or for having been exercised in grave abuse of discretion.[64]  But our power rests on very narrow ground and is merely to annul a contravening act of Congress; it is not to supplant the decision of Congress nor to mandate what Congress itself should have done in the exercise of its legislative powers.  Thus, contrary to what the petition in G.R. No. 197282 urges, we cannot compel COMELEC to call for special elections.

 Furthermore, we have to bear in mind that the constitutional power of the

COMELEC, in contrast with the power of Congress to call for, and to set the date of, elections, is limited to enforcing and administering all laws and regulations relative to the conduct of an election.[65] Statutorily, COMELEC has no power to call for the holding of special elections unless pursuant to a specific statutory grant.  True, Congress did grant, via Sections 5 and 6 of BP 881, COMELEC with the power to postpone elections to another date. However, this power is limited to, and can only be exercised within, the specific terms and circumstances provided for in the law. We quote: 

Section 5. Postponement of election. - When for any serious cause such as violence, terrorism, loss or destruction of election paraphernalia or records, force majeure, and other analogous causes of such a nature that the holding of a free, orderly and honest election should become impossible in any political subdivision, the Commission, motu proprio or upon a verified petition by any interested party, and after due notice and hearing, whereby all interested parties are afforded equal opportunity to be heard, shall postpone the election therein to a date which should be reasonably close to the date of the election not held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the cause for such postponement or suspension of the election or failure to elect. 

Section 6. Failure of election. - If, on account of force majeure, violence, terrorism, fraud, or other analogous causes the election in any polling place has not been held on the date fixed, or had been suspended before the hour fixed by law for the closing of the voting, or after the voting and during the preparation and the transmission of the election returns or in the custody or canvass thereof, such election results in a failure to elect, and in any of such cases the failure or suspension of election would affect the result of the election, the Commission shall, on the basis of a verified petition by any interested party and after due notice and hearing, call for the holding or continuation of the election not held, suspended or which resulted in a failure to elect on a date reasonably close to the date of the election not held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the cause of such postponement or suspension of the election or failure to elect. [Emphasis ours]

  A close reading of Section 5 of BP 881 reveals that it is meant to address

instances where elections have already been scheduled to take place but have to be postponed because of (a) violence, (b) terrorism, (c) loss or destruction of

election paraphernalia or records, (d) force majeure, and (e) other analogous causes of such a nature that the holding of a free, orderly and honest election should become impossible in any political subdivision.  Under the principle of ejusdem generis, the term “analogous causes” will be restricted to those unforeseen or unexpected events that prevent the holding of the scheduled elections. These “analogous causes” are further defined by the phrase “of such nature that the holding of a free, orderly and honest election should become impossible.”

 Similarly, Section 6 of BP 881 applies only to those situations where

elections have already been scheduled but do not take place because of (a) force majeure, (b) violence, (c) terrorism, (d) fraud, or (e) other analogous causes the election in any polling place has not been held on the date fixed, or had been suspended before the hour fixed by law for the closing of the voting, or after the voting and during the preparation and the transmission of the election returns or in the custody or canvass thereof,such election results in a failure to elect. As in Section 5 of BP 881, Section 6 addresses instances where the elections do not occur or had to be suspended because of unexpected and unforeseen circumstances.

 In the present case, the postponement of the ARMM elections is by

law – i.e., by congressional policy – and is pursuant to the constitutional mandate of synchronization of national and local elections. By no stretch of the imagination can these reasons be given the same character as the circumstances contemplated by Section 5 or Section 6 of BP 881, which all pertain to extralegal causes that obstruct the holding of elections.  Courts, to be sure, cannot enlarge the scope of a statute under the guise of interpretation, nor include situations not provided nor intended by the lawmakers.[66] Clearly, neither Section 5 nor Section 6 of BP 881 can apply to the present case and this Court has absolutely no legal basis to compel the COMELEC to hold special elections.

 D.  The Court has no power to shorten the terms of elective officials

  Even assuming that it is legally permissible for the Court to compel the

COMELEC to hold special elections, no legal basis likewise exists to rule that the newly elected ARMM officials shall hold office only until the ARMM officials elected in the synchronized elections shall have assumed office. 

In the first place, the Court is not empowered to adjust the terms of elective officials. Based on the Constitution, the power to fix the term of office of elective officials, which can be exercised only in the case of barangay officials,[67] is specifically given to Congress. Even Congress itself may be denied such power, as shown when the Constitution shortened the terms of twelve Senators obtaining the least votes,[68] and extended the terms of the President and the Vice-President[69] in order to synchronize elections; Congress was not granted this same power.  The settled rule is that terms fixed by the Constitution cannot be changed by mere statute.[70]  More particularly, not even Congress and certainly not this Court, has the authority to fix the terms of elective local officials in the ARMM for  less, or more, than the constitutionally mandated three years[71] as this tinkering would directly contravene Section 8, Article X of the Constitution as we ruled in Osmena. 

Thus, in the same way that the term of elective ARMM officials cannot be extended through a holdover, the term cannot be shortened by putting an expiration date earlier than the three (3) years that the Constitution itself commands.  This is what will happen – a term of less than two years – if a call for special elections shall prevail. In sum, while synchronization is achieved, the result is at the cost of a violation of an express provision of the Constitution.  

Neither we nor Congress can opt to shorten the tenure of those officials to be elected in the ARMM elections instead of acting on their term (where the “term” means the time during which the officer may claim to hold office as of right and fixes the interval after which the several incumbents shall succeed one another, while the “tenure” represents the term during which the incumbent actually holds the office).[72] As with the fixing of the elective term, neither Congress nor the Court has any legal basis to shorten the tenure of elective ARMM officials. They would commit an unconstitutional act and gravely abuse their discretion if they do so. 

E.  The President’s Power to Appoint OICs 

The above considerations leave only Congress’ chosen interim measure – RA No. 10153 and the appointment by the President of OICs to govern the ARMM during the pre-synchronization period pursuant to Sections 3, 4 and 5 of this law – as the only measure that Congress can make.  This choice itself, however, should be examined for any attendant constitutional infirmity.

 

At the outset, the power to appoint is essentially executive in nature, and the limitations on or qualifications to the exercise of this power should be strictly construed; these limitations or qualifications must be clearly stated in order to be recognized.[73] The appointing power is embodied in Section 16, Article VII of the Constitution, which states:

 

Section 16. The President shall nominate and, with the consent of the Commission on Appointments, appoint the heads of the executive departments, ambassadors, other public ministers and consuls or officers of the armed forces from the rank of colonel or naval captain, and other officers whose appointments are vested in him in this Constitution. He shall also appoint all other officers of the Government whose appointments are not otherwise provided for by law, and those whom he may be authorized by law to appoint. The Congress may, by law, vest the appointment of other officers lower in rank in the President alone, in the courts, or in the heads of departments, agencies, commissions, or boards. [emphasis ours]

 

This provision classifies into four groups the officers that the President can appoint. These are:

 First, the heads of the executive departments; ambassadors; other public

ministers and consuls; officers of the Armed Forces of the Philippines, from the rank of colonel or naval captain; and other officers whose appointments are vested in the President in this Constitution;

 Second, all other officers of the government whose appointments are not

otherwise provided for by law; Third, those whom the President may be authorized by law to appoint; and Fourth, officers lower in rank whose appointments the Congress may by law

vest in the President alone.[74]

 

Since the President’s authority to appoint OICs emanates from RA No. 10153, it falls under the third group of officials that the President can appoint

pursuant to Section 16, Article VII of the Constitution. Thus, the assailed law facially rests on clear constitutional basis. 

 If at all, the gravest challenge posed by the petitions to the authority to

appoint OICs under Section 3 of RA No. 10153 is the assertion that the Constitution requires that the ARMM executive and legislative officials to be “elective and representative of the constituent political units.” This requirement indeed is an express limitation whose non-observance in the assailed law leaves the appointment of OICs constitutionally defective. 

 After fully examining the issue, we hold that this alleged  constitutional

problem is more apparent than real and becomes very real only if RA No. 10153 were to be mistakenly read as a law that changes the elective and representative character of ARMM positions.  RA No. 10153, however, does not in any way amend what the organic law of the ARMM  (RA No. 9054) sets outs in terms of structure of governance.  What RA No. 10153 in fact only does is to “appoint officers-in-charge for the Office of the Regional Governor, Regional Vice Governor and Members of the Regional Legislative Assembly who shall perform the functions pertaining to the said offices until the officials duly elected in the May 2013 elections shall have qualified and assumed office.” This power is far different from appointing elective ARMM officials for the abbreviated term ending on the assumption to office of the officials elected in the May 2013 elections.

 As we have already established in our discussion of the supermajority and

plebiscite requirements, the legal reality is that RA No. 10153 did not amend RA No. 9054.  RA No. 10153, in fact, provides only for synchronization of elections and for the interim measures that must in the meanwhile prevail.  And this is how RA No. 10153 should be read – in the manner it was written and based on its unambiguous facial terms.[75] Aside from its order for synchronization, it is purely and simply an interim measure responding to the adjustments that the synchronization requires. 

 Thus, the appropriate question to ask is whether the interim measure is an

unreasonable move for Congress to adopt, given the legal situation that the synchronization unavoidably brought with it.  In more concrete terms and based on the above considerations,given the plain unconstitutionality of providing for a holdover and the unavailability of constitutional possibilities for lengthening or shortening the term of the elected ARMM officials, is the choice of the President’s power to appoint – for a fixed and specific period as an interim

measure, and as allowed under Section 16, Article VII of the Constitution – an unconstitutional or unreasonable choice for Congress to make?

 Admittedly, the grant of the power to the President under other

situations or where the power of appointment would extend beyond the adjustment period for synchronization would be to foster a government that is not “democratic and republican.” For then, the people’s right to choose the leaders to govern them may be said to be systemically withdrawn to the point of fostering an undemocratic regime.  This is the grant that would frontally breach the “elective and representative” governance requirement of Section 18, Article X of the Constitution. 

 But this conclusion would not be true under the very limited circumstances

contemplated in RA No. 10153 where the period is fixed and, more importantly, the terms of governance – both under Section 18, Article X of the Constitution and RA No. 9054 – will not systemically be touched nor affected at all.  To repeat what has previously been said, RA No. 9054 will govern unchanged and continuously, with full effect in accordance with the Constitution, save only for the interim and temporary measures that synchronization of elections requires.  

 Viewed from another perspective, synchronization will temporarily disrupt

the election process in a local community, the ARMM, as well as the community’s choice of leaders, but this will take place under a situation of necessity and as an interim measure in the manner that interim measures have been adopted and used in the creation of local government units[76] and the adjustments of sub-provinces to the status of provinces.[77] These measures, too, are used in light of the wider national demand for the synchronization of elections (considered vis-à-vis the regional interests involved).  The adoption of these measures, in other words, is no different from the exercise by Congress of the inherent police power of the State, where one of the essential tests is the reasonableness of the interim measure taken in light of the given circumstances.

 Furthermore, the “representative” character of the chosen leaders need not

necessarily be affected by the appointment of OICs as this requirement is really a function of the appointment process; only the “elective” aspect shall be supplanted by the appointment of OICs.  In this regard, RA No. 10153 significantly seeks to address concerns arising from the appointments by providing, under Sections 3, 4 and 5 of the assailed law, concrete terms in the Appointment of OIC, the Manner and Procedure of Appointing OICs, and their Qualifications.

 Based on these considerations, we hold that RA No. 10153 – viewed in its

proper context – is a law that is not violative of the Constitution (specifically, its autonomy provisions), and one that is reasonable as well under the circumstances.

 VI. Other Constitutional Concerns

 Outside of the above concerns, it has been argued during the oral arguments

that upholding the constitutionality of RA No. 10153 would set a dangerous precedent of giving the President the power to cancel elections anywhere in the country, thus allowing him to replace elective officials with OICs. 

This claim apparently misunderstands that an across-the-board cancellation of elections is a matter for Congress, not for the President, to address. It is a power that falls within the powers of Congress in the exercise of its legislative powers.  Even Congress, as discussed above, is limited in what it can legislatively undertake with respect to elections. 

 If RA No. 10153 cancelled the regular August 2011 elections, it was for a

very specific and limited purpose – the synchronization of elections.  It was a temporary means to a lasting end – the synchronization of elections. Thus, RA No. 10153 and the support that the Court gives this legislation are likewise clear and specific, and cannot be transferred or applied to any other cause for the cancellation of elections. Any other localized cancellation of elections and call for special elections can occur only in accordance with the power already delegated by Congress to the COMELEC, as above discussed.   

 Given that the incumbent ARMM elective officials cannot continue to act in

a holdover capacity upon the expiration of their terms, and this Court cannot compel the COMELEC to conduct special elections, the Court now has to deal with the dilemma of a vacuum in governance in the ARMM.

 To emphasize the dire situation a vacuum brings, it should not be forgotten

that a period of 21 months – or close to 2 years – intervenes from the time that the incumbent ARMM elective officials’ terms expired and the time the new ARMM elective officials begin their terms in 2013. As the lessons of our Mindanao history – past and current – teach us, many developments, some of them critical and adverse, can transpire in the country’s Muslim areas in this span of time in the way they transpired in the past.[78]  Thus, it would be reckless to assume that the presence of an acting ARMM Governor, an acting Vice-Governor and a fully

functioning Regional Legislative Assembly can be done away with even temporarily.  To our mind, the appointment of OICs under the present circumstances is an absolute necessity. 

Significantly, the grant to the President of the power to appoint OICs to undertake the functions of the elective members of the Regional Legislative Assembly is neither novel nor innovative.  We hark back to our earlier pronouncement in Menzon v. Petilla, etc., et al.:[79]

 It may be noted that under Commonwealth Act No. 588 and the Revised

Administrative Code of 1987, the President is empowered to make temporary appointments in certain public offices, in case of any vacancy that may occur. Albeit both laws deal only with the filling of vacancies in appointive positions. However, in the absence of any contrary provision in the Local Government Code and in the best interest of public service, we see no cogent reason why the procedure thus outlined by the two laws may not be similarly applied in the present case. The respondents contend that the provincial board is the correct appointing power. This argument has no merit. As between the President who has supervision over local governments as provided by law and the members of the board who are junior to the vice-governor, we have no problem ruling in favor of the President, until the law provides otherwise.

 A vacancy creates an anomalous situation and finds no approbation under

the law for it deprives the constituents of their right of representation and governance in their own local government.

 In a republican form of government, the majority rules through their

chosen few, and if one of them is incapacitated or absent, etc., the management of governmental affairs is, to that extent, may be hampered. Necessarily, there will be a consequent delay in the delivery of basic services to the people of Leyte if the Governor or the Vice-Governor is missing.[80](Emphasis ours.)

 As in Menzon, leaving the positions of ARMM Governor, Vice Governor,

and members of the Regional Legislative Assembly vacant for 21 months, or almost 2 years, would clearly cause disruptions and delays in the delivery of basic services to the people, in the proper management of the affairs of the regional government, and in responding to critical developments that may arise. When viewed in this context, allowing the President in the exercise of his constitutionally-recognized appointment power to appoint OICs is, in our judgment, a reasonable measure to take. 

B.  Autonomy in the ARMM

 It is further argued that while synchronization may be constitutionally

mandated, it cannot be used to defeat or to impede the autonomy that the Constitution granted to the ARMM. Phrased in this manner, one would presume that there exists a conflict between two recognized Constitutional mandates – synchronization and regional autonomy – such that it is necessary to choose one over the other.

 We find this to be an erroneous approach that violates a basic principle in

constitutional construction – ut magis valeat quam pereat: that the Constitution is to be interpreted as a whole,[81] and one mandate should not be given importance over the other except where the primacy of one over the other is clear. [82]  We refer to the Court’s declaration in Ang-Angco v. Castillo, et al.,[83]thus:

 A provision of the constitution should not be construed in isolation from

the rest. Rather, the constitution must be interpreted as a whole, and apparently, conflicting provisions should be reconciled and harmonized in a manner that may give to all of them full force and effect.[Emphasis supplied.]

 Synchronization is an interest that is as constitutionally entrenched as regional autonomy. They are interests that this Court should reconcile and give effect to, in the way that Congress did in RA No. 10153 which provides the measure to transit to synchronized regional elections with the least disturbance on the interests that must be respected.  Particularly, regional autonomy will be respected instead of being sidelined, as the law does not in any way alter, change or modify its governing features, except in a very temporary manner and only as necessitated by the attendant circumstances.             Elsewhere, it has also been argued that the ARMM elections should not be synchronized with the national and local elections in order to maintain the autonomy of the ARMM and insulate its own electoral processes from the rough and tumble of nationwide and local elections.  This argument leaves us far from convinced of its merits. 

As heretofore mentioned and discussed, while autonomous regions are granted political autonomy, the framers of the Constitution never equated autonomy with independence. The ARMM as a regional entity thus continues to operate within the larger framework of the State and is still subject to the national policies set by the national government, save only for those specific areas reserved

by the Constitution for regional autonomous determination. As reflected during the constitutional deliberations of the provisions on autonomous regions:

 Mr. Bennagen. xxx We do not see here a complete separation from the

central government, but rather an efficient working relationship between the autonomous region and the central government. We see this as an effective partnership, not a separation.

 Mr. Romulo. Therefore, complete autonomy is not really thought of as

complete independence. Mr. Ople. We define it as a measure of self-government within the

larger political framework of the nation.[84] [Emphasis supplied.] 

This exchange of course is fully and expressly reflected in the above-quoted Section 17, Article X of the Constitution, and by the express reservation under Section 1 of the same Article that autonomy shall be “within the framework of this Constitution and the national sovereignty as well as the territorial integrity of the Republic of the Philippines.”

 Interestingly, the framers of the Constitution initially proposed to remove

Section 17 of Article X, believing it to be unnecessary in light of the enumeration of powers granted to autonomous regions in Section 20, Article X of the Constitution. Upon further reflection, the framers decided to reinstate the provision in order to “make it clear, once and for all, that these are the limits of the powers of the autonomous government. Those not enumerated are actually to be exercised by the national government[.]”[85] Of note is the Court’s pronouncement in Pimentel, Jr. v. Hon. Aguirre[86] which we quote: 

Under the Philippine concept of local autonomy, the national government has not completely relinquished all its powers over local governments, including autonomous regions.  Only administrative powers over local affairs are delegated to political subdivisions.  The purpose of the delegation is to make governance more directly responsive and effective at the local levels.  In turn, economic, political and social development at the smaller political units are expected to propel social and economic growth and development.  But to enable the country to develop as a whole, the programs and policies effected locally must be integrated and coordinated towards a common national goal.  Thus, policy-setting for the entire country still lies in the President and Congress. [Emphasis ours.]

 

In other words, the autonomy granted to the ARMM cannot be invoked to defeat national policies and concerns. Since the synchronization of elections is not just a regional concern but a national one, the ARMM is subject to it; the regional autonomy granted to the ARMM cannot be used to exempt the region from having to act in accordance with a national policy mandated by no less than the Constitution.   

Conclusion 

Congress acted within its powers and pursuant to a constitutional mandate – the synchronization of national and local elections – when it enacted RA No. 10153.  This Court cannot question the manner by which Congress undertook this task; the Judiciary does not and cannot pass upon questions of wisdom, justice or expediency of legislation.[87] As judges, we can only interpret and apply the law and, despite our doubts about its wisdom, cannot repeal or amend it.[88]

 Nor can the Court presume to dictate the means by which Congress should

address what is essentially a legislative problem. It is not within the Court’s power to enlarge or abridge laws; otherwise, the Court will be guilty of usurping the exclusive prerogative of Congress.[89] The petitioners, in asking this Court to compel COMELEC to hold special elections despite its lack of authority to do so, are essentially asking us to venture into the realm of judicial legislation, which is abhorrent to one of the most basic principles of a republican and democratic government – the separation of powers. 

 The petitioners allege, too, that we should act because Congress acted with

grave abuse of discretion in enacting RA No. 10153. Grave abuse of discretion is such capricious and whimsical exercise of judgment that is patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law or to act at all in contemplation of the law as where the power is exercised in an arbitrary and despotic manner by reason of passion and hostility.[90]  

We find that Congress, in passing RA No. 10153, acted strictly within its constitutional mandate. Given an array of choices, it acted within due constitutional bounds and with marked reasonableness in light of the necessary adjustments that synchronization demands. Congress, therefore, cannot be accused of any evasion of a positive duty or of a refusal to perform its duty.  We thus find no reason to accord merit to the petitioners’ claims of grave abuse of discretion.

 On the general claim that RA No. 10153 is unconstitutional, we can only

reiterate the established rule that every statute is presumed valid.[91] Congress, thus, has in its favor the presumption of constitutionality of its acts, and the party challenging the validity of a statute has the onerous task of rebutting this presumption.[92] Any reasonable doubt about the validity of the law should be resolved in favor of its constitutionality.[93] As this Court declared in Garcia v. Executive Secretary:[94]

 The policy of the courts is to avoid ruling on constitutional questions and

to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary.  To doubt is to sustain.  This presumption is based on the doctrine of separation of powers which enjoins upon each department a becoming respect for the acts of the other departments.  The theory is that as the joint act of Congress and the President of the Philippines, a law has been carefully studied and determined to be in accordance with the fundamental law before it was finally enacted.[95] [Emphasis ours.]

 Given the failure of the petitioners to rebut the presumption of

constitutionality in favor of RA No. 10153, we must support and confirm its validity.

WHEREFORE, premises considered, we DISMISS the consolidated petitions assailing the validity of RA No. 10153 for lack of merit, and UPHOLD the constitutionality of this law.  We likewise LIFT the temporary restraining order we issued in our Resolution of September 13, 2011.  No costs.

 SO ORDERED.  CASE DIGEST:

Autonomous Region; plebiscite requirement. Section 18, Article X of the Constitution provides that “the creation of the autonomous region shall be effective when approved by majority of the votes cast by the constituent units in a plebiscite called for the purpose.”  The Supreme Court interpreted this to mean that only amendments to, or revisions of, the Organic Act constitutionally-essential to the creation of autonomous regions – i.e., those aspects specifically mentioned in the Constitution which Congress must provide for in the Organic Act– require ratification through a plebiscite.   While it agrees with the petitioners’ underlying premise that sovereignty ultimately resides with the people, it disagrees that this legal reality necessitates compliance with the plebiscite requirement for all amendments to RA No. 9054. For if we were to go by the petitioners’ interpretation of Section 18, Article X of the Constitution that all amendments to the Organic Act

have to undergo the plebiscite requirement before becoming effective, this would lead to impractical and illogical results – hampering the ARMM’s progress by impeding Congress from enacting laws that timely address problems as they arise in the region, as well as weighing down the ARMM government with the costs that unavoidably follow the holding of a plebiscite.  Also, Sec. 3 of R.A. No. 10153 cannot be seen as changing the basic structure of the ARMM regional government. On the contrary, this provision clearly preserves the basic structure of the ARMM regional government when it recognizes the offices of the ARMM regional government and directs the OICs who shall temporarily assume these offices to “perform the functions pertaining to the said offices.” Datu Michael Abas Kida, etc., et al. vs. Senate of the Phil., etc., et al./Basari D. Mapupuno vs. Sixto Brillantes, etc., et al./Rep. Edcel C. Lagman vs. Paquito N. Ochoa, Jr., etc., et al./Almarin Centi Tillah, et al. vs. The Commission on Elections, etc., et al./Atty. Romulo B. Macalintal vs. Commission on Elections, et al./Luis “Barok” Biraogo, G.R. No. 196271, February 28, 2012.

CRUZ VS SECRETARY OF DENR

EN BANC

[G.R. No. 135385.  December 6, 2000]

ISAGANI CRUZ and CESAR EUROPA, petitioners, vs. SECRETARY OF ENVIRONMENT AND NATURAL RESOURCES, SECRETARY OF BUDGET AND MANAGEMENT and CHAIRMAN and COMMISSIONERS OF THE NATIONAL COMMISSION ON INDIGENOUS PEOPLES, respondents.

HON. JUAN M .FLAVIER, HON. PONCIANO BENNAGEN, BAYANI ASCARRAGA, EDTAMI MANSAYANGAN, BASILIO WANDAG, EVELYN DUNUAN, YAOM TUGAS, ALFREMO CARPIANO, LIBERATO A. GABIN, MATERNIDAD M. COLAS, NARCISA M. DALUPINES, BAI KIRAM-CONNIE SATURNO, BAE MLOMO-BEATRIZ T. ABASALA, DATU BALITUNGTUNG-ANTONIO D. LUMANDONG, DATU MANTUMUKAW TEOFISTO SABASALES, DATU EDUAARDO BANDA, DATU JOEL UNAD, DATU RAMON BAYAAN, TIMUAY JOSE ANOY, TIMUAY MACARIO D. SALACAO, TIMUAY EDWIN B. ENDING, DATU SAHAMPONG MALANAW VI, DATU BEN PENDAO CABIGON, BAI NANAPNAY-LIZA SAWAY, BAY INAY DAYA-MELINDA S. REYMUNDO, BAI TINANGHAGA HELINITA T. PANGAN, DATU MAKAPUKAW

ADOLINO L. SAWAY, DATU MAUDAYAW-CRISPEN SAWAY, VICKY MAKAY, LOURDES D. AMOS, GILBERT P. HOGGANG, TERESA GASPAR, MANUEL S. ONALAN, MIA GRACE L. GIRON, ROSEMARIE G. PE, BENITO CARINO, JOSEPH JUDE CARANTES, LYNETTE CARANTES-VIVAL, LANGLEY SEGUNDO, SATUR S. BUGNAY, CARLING DOMULOT, ANDRES MENDIOGRIN, LEOPOLDO ABUGAN, VIRGILIO CAYETANO, CONCHITA G. DESCAGA, LEVY ESTEVES, ODETTE G. ESTEVEZ, RODOLFO C. AGUILAR, MAURO VALONES, PEPE H. ATONG, OFELIA T. DAVI, PERFECTO B. GUINOSAO, WALTER N. TIMOL, MANUEL T. SELEN, OSCAR DALUNHAY, RICO O. SULATAN, RAFFY MALINDA, ALFREDO ABILLANOS, JESSIE ANDILAB, MIRLANDO H. MANGKULINTAS, SAMIE SATURNO, ROMEO A. LINDAHAY, ROEL S. MANSANG-CAGAN, PAQUITO S. LIESES, FILIPE G. SAWAY, HERMINIA S. SAWAY, JULIUS S. SAWAY, LEONARDA SAWAY, JIMMY UGYUB, SALVADOR TIONGSON, VENANCIO APANG, MADION MALID, SUKIM MALID, NENENG MALID, MANGKATADONG AUGUSTO DIANO, JOSEPHINE M. ALBESO, MORENO MALID, MARIO MANGCAL, FELAY DIAMILING, SALOME P. SARZA, FELIPE P. BAGON, SAMMY SALNUNGAN, ANTONIO D. EMBA, NORMA MAPANSAGONOS, ROMEO SALIGA, SR., JERSON P. GERADA, RENATO T. BAGON, JR., SARING MASALONG, SOLEDAD M. GERARDA, ELIZABETH L. MENDI, MORANTE S. TIWAN, DANILO M. MALUDAO, MINORS MARICEL MALID, represented by her father CORNELIO MALID, MARCELINO M. LADRA, represented by her father MONICO D. LADRA, JENNYLYN MALID, represented by her father TONY MALID, ARIEL M. EVANGELISTA, represented by her mother LINAY BALBUENA, EDWARD M. EMUY, SR., SUSAN BOLANIO, OND, PULA BATO B’LAAN TRIBAL FARMER’S ASSOCIATION, INTER-PEOPLE’S EXCHANGE, INC. and GREEN FORUM-WESTERN VISAYAS, intervenors.

COMMISSION ON HUMAN RIGHTS, intervenor.IKALAHAN INDIGENOUS PEOPLE and HARIBON FOUNDATION FOR

THE CONSERVATION OF NATURAL RESOURCES, INC., intervenor.

R E S O L U T I O N

PER CURIAM:

Petitioners Isagani Cruz and Cesar Europa brought this suit for prohibition and mandamus as citizens and taxpayers, assailing the constitutionality of certain provisions of Republic Act No. 8371 (R.A. 8371), otherwise known as the Indigenous Peoples Rights Act of 1997 (IPRA), and its Implementing Rules and Regulations (Implementing Rules).

In its resolution of September 29, 1998, the Court required respondents to comment.[1] In compliance, respondents Chairperson and Commissioners of the National Commission on Indigenous Peoples (NCIP), the government agency created under the IPRA to implement its provisions, filed on October 13, 1998 their Comment to the Petition, in which they defend the constitutionality of the IPRA and pray that the petition be dismissed for lack of merit.

On October 19, 1998, respondents Secretary of the Department of Environment and Natural Resources (DENR) and Secretary of the Department of Budget and Management (DBM) filed through the Solicitor General a consolidated Comment.  The Solicitor General is of the view that the IPRA is partly unconstitutional on the ground that it grants ownership over natural resources to indigenous peoples and prays that the petition be granted in part.

On November 10, 1998, a group of intervenors, composed of Sen. Juan Flavier, one of the authors of the IPRA, Mr. Ponciano Bennagen, a member of the 1986 Constitutional Commission, and the leaders and members of 112 groups of indigenous peoples (Flavier, et. al), filed their Motion for Leave to Intervene.  They join the NCIP in defending the constitutionality of IPRA and praying for the dismissal of the petition.

On March 22, 1999, the Commission on Human Rights (CHR) likewise filed a Motion to Intervene and/or to Appear as Amicus Curiae.  The CHR asserts that IPRA is an expression of the principle of parens patriae and that the State has the responsibility to protect and guarantee the rights of those who are at a serious disadvantage like indigenous peoples.  For this reason it prays that the petition be dismissed.

On March 23, 1999, another group, composed of the Ikalahan Indigenous People and the Haribon Foundation for the Conservation of Natural Resources, Inc. (Haribon, et al.), filed a motion to Intervene with attached Comment-in-Intervention.  They agree with the NCIP and Flavier, et al. that IPRA is consistent with the Constitution and pray that the petition for prohibition and mandamus be dismissed.

The motions for intervention of the aforesaid groups and organizations were granted.

Oral arguments were heard on April 13, 1999.  Thereafter, the parties and intervenors filed their respective memoranda in which they reiterate the arguments adduced in their earlier pleadings and during the hearing.

Petitioners assail the constitutionality of the following provisions of the IPRA and its Implementing Rules on the ground that they amount to an unlawful deprivation of the State’s ownership over lands of the public domain as well as minerals and other natural

resources therein, in violation of the regalian doctrine embodied in Section 2, Article XII of the Constitution:

“(1) Section 3(a) which defines the extent and coverage of ancestral domains, and Section 3(b) which, in turn, defines ancestral lands;

“(2) Section 5, in relation to section 3(a), which provides that ancestral domains including inalienable public lands, bodies of water, mineral and other resources found within ancestral domains are private but community property of the indigenous peoples;

“(3) Section 6 in relation to section 3(a) and 3(b) which defines the composition of ancestral domains and ancestral lands;

“(4) Section 7 which recognizes and enumerates the rights of the indigenous peoples over the ancestral domains;

(5) Section 8 which recognizes and enumerates the rights of the indigenous peoples over the ancestral lands;

“(6) Section 57 which provides for priority rights of the indigenous peoples in the harvesting, extraction, development or exploration of minerals and other natural resources within the areas claimed to be their ancestral domains, and the right to enter into agreements with nonindigenous peoples for the development and utilization of natural resources therein for a period not exceeding 25 years, renewable for not more than 25 years; and

“(7) Section 58 which gives the indigenous peoples the responsibility to maintain, develop, protect and conserve the ancestral domains and portions thereof which are found to be necessary for critical watersheds, mangroves, wildlife sanctuaries, wilderness, protected areas, forest cover or reforestation.”[2]

Petitioners also content that, by providing for an all-encompassing definition of “ancestral domains” and “ancestral lands” which might even include private lands found within said areas, Sections 3(a) and 3(b) violate the rights of private landowners. [3]

In addition, petitioners question the provisions of the IPRA defining the powers and jurisdiction of the NCIP and making customary law applicable to the settlement of disputes involving ancestral domains and ancestral lands on the ground that these provisions violate the due process clause of the Constitution. [4]

These provisions are:

“(1) sections 51 to 53 and 59 which detail the process of delineation and recognition of ancestral domains and which vest on the NCIP the sole authority to delineate ancestral domains and ancestral lands;

“(2) Section 52[i] which provides that upon certification by the NCIP that a particular area is an ancestral domain and upon notification to the following officials, namely, the Secretary of Environment and Natural Resources, Secretary of Interior and Local Governments, Secretary of Justice and Commissioner of the National Development Corporation, the jurisdiction of said officials over said area terminates;

“(3) Section 63 which provides the customary law, traditions and practices of indigenous peoples shall be applied first with respect to property rights, claims of

ownership, hereditary succession and settlement of land disputes, and that any doubt or ambiguity in the interpretation thereof shall be resolved in favor of the indigenous peoples;

“(4) Section 65 which states that customary laws and practices shall be used to resolve disputes involving indigenous peoples; and

“(5) Section 66 which vests on the NCIP the jurisdiction over all claims and disputes involving rights of the indigenous peoples.”[5]

Finally, petitioners assail the validity of Rule VII, Part II, Section 1 of the NCIP Administrative Order No. 1, series of 1998, which provides that “the administrative relationship of the NCIP to the Office of the President is characterized as a lateral but autonomous relationship for purposes of policy and program coordination.”  They contend that said Rule infringes upon the President’s power of control over executive departments under Section 17, Article VII of the Constitution. [6]

Petitioners pray for the following:

“(1) A declaration that Sections 3, 5, 6, 7, 8, 52[I], 57, 58, 59, 63, 65 and 66 and other related provisions of R.A. 8371 are unconstitutional and invalid;

“(2) The issuance of a writ of prohibition directing the Chairperson and Commissioners of the NCIP to cease and desist from implementing the assailed provisions of R.A. 8371 and its Implementing Rules;

“(3) The issuance of a writ of prohibition directing the Secretary of the Department of Environment and Natural Resources to cease and desist from implementing Department of Environment and Natural Resources Circular No. 2, series of 1998;

“(4) The issuance of a writ of prohibition directing the Secretary of Budget and Management to cease and desist from disbursing public funds for the implementation of the assailed provisions of R.A. 8371; and

“(5) The issuance of a writ of mandamus commanding the Secretary of Environment and Natural Resources to comply with his duty of carrying out the State’s constitutional mandate to control and supervise the exploration, development, utilization and conservation of Philippine natural resources.”[7]

After due deliberation on the petition, the members of the Court voted as follows:

Seven (7) voted to dismiss the petition.  Justice Kapunan filed an opinion, which the Chief Justice and Justices Bellosillo, Quisumbing, and Santiago join, sustaining the validity of the challenged provisions of R.A. 8371.  Justice Puno also filed a separate opinion sustaining all challenged provisions of the law with the exception of Section 1, Part II, Rule III of NCIP Administrative Order No. 1, series of 1998, the Rules and Regulations Implementing the IPRA, and Section 57 of the IPRA which he contends should be interpreted as dealing with the large-scale exploitation of natural resources and should be read in conjunction with Section 2, Article XII of the 1987 Constitution.  On the other hand, Justice Mendoza voted to dismiss the petition solely on the ground that it does not raise a justiciable controversy and petitioners do not have standing to question the constitutionality of R.A. 8371.

Seven (7) other members of the Court voted to grant the petition.  Justice Panganiban filed a separate opinion expressing the view that Sections 3 (a)(b), 5, 6, 7 (a)(b), 8, and related provisions of R.A. 8371 are unconstitutional.  He reserves judgment on the constitutionality of Sections 58, 59, 65, and 66 of the law, which he believes must await the filing of specific cases by those whose rights may have been violated by the IPRA.  Justice Vitug also filed a separate opinion expressing the view that Sections 3(a), 7, and 57 of R.A. 8371 are unconstitutional. Justices Melo, Pardo, Buena, Gonzaga-Reyes, and De Leon join in the separate opinions of Justices Panganiban and Vitug.

As the votes were equally divided (7 to 7) and the necessary majority was not obtained, the case was redeliberated upon.  However, after redeliberation, the voting remained the same.  Accordingly, pursuant to Rule 56, Section 7 of the Rules of Civil Procedure, the petition is DISMISSED.

Attached hereto and made integral parts thereof are the separate opinions of Justices Puno, Vitug, Kapunan, Mendoza, and Panganiban.

SO ORDERED.

CHAVEZ VS PCGG

FIRST DIVISION

[G.R. No. 130716.  December 9, 1998]

FRANCISCO I. CHAVEZ, petitioner, vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG) and MAGTANGGOL GUNIGUNDO, (in his capacity as chairman of the PCGG), respondents. GLORIA A. JOPSON, CELNAN A. JOPSON, SCARLET A. JOPSON, and TERESA A. JOPSON, petitioners-in-intervention.

D E C I S I O NPANGANIBAN, J:

Petitioner asks this Court to define the nature and the extent of the people’s constitutional right to information on matters of public concern.  Does this right include access to the terms of government negotiations prior to their consummation or conclusion?  May the government, through the Presidential Commission on Good Government (PCGG), be required to reveal the proposed terms of a compromise agreement with the Marcos heirs as regards their alleged ill-gotten wealth? More specifically, are the “General Agreement” and “Supplemental Agreement,” both dated December 28, 1993 and executed between the PCGG and the Marcos heirs, valid and binding?

The Case

These are the main questions raised in this original action seeking (1) to prohibit and “[e]njoin respondents [PCGG and its chairman] from privately entering into, perfecting and/or executing any agreement with the heirs of the late President Ferdinand E. Marcos  x x x  relating to and concerning the properties and assets of Ferdinand Marcos located in the Philippines and/or abroad -- including the so-called Marcos gold hoard”; and (2) to “[c]ompel respondent[s] to make public all negotiations and agreement, be they ongoing or perfected, and all documents related to or relating to such negotiations and agreement between the PCGG and the Marcos heirs.”[1]

The Facts

Petitioner Francisco I. Chavez, as “taxpayer, citizen and former government official who initiated the prosecution of the Marcoses and their cronies who committed unmitigated plunder of the public treasury and the systematic subjugation of the country’s economy,” alleges that what impelled him to bring this action were several news reports[2] bannered in a number of broadsheets sometime in September 1997.  These news items referred to (1) the alleged discovery of billions of dollars of Marcos assets deposited in various coded accounts in Swiss banks; and (2) the reported execution of a compromise, between the government (through PCGG) and the Marcos heirs, on how to split or share these assets.

Petitioner, invoking his constitutional right to information[3] and the correlative duty of the state to disclose publicly all its transactions involving the national interest, [4] demands that respondents make public any and all negotiations and agreements pertaining to PCGG’s task of recovering the Marcoses’ ill-gotten wealth. He claims that any compromise on the alleged billions of ill-gotten wealth involves an issue of “paramount public interest,” since it has a “debilitating effect on the country’s economy” that would be greatly prejudicial to the national interest of the Filipino people.  Hence, the people in general have a right to know the transactions or deals being contrived and effected by the government.

Respondents, on the other hand, do not deny forging a compromise agreement with the Marcos heirs.  They claim, though, that petitioner’s action is premature, because there is no showing that he has asked the PCGG to disclose the negotiations and the Agreements.  And even if he has, PCGG may not yet be compelled to make any disclosure, since the proposed terms and conditions of the Agreements have not become effective and binding.

Respondents further aver that the Marcos heirs have submitted the subject Agreements to the Sandiganbayan for its approval in Civil Case No. 141, entitledRepublic v. Heirs of Ferdinand E. Marcos, and that the Republic opposed such move on the principal grounds that (1) said Agreements have not been ratified by or even submitted to the President for approval, pursuant to Item No. 8 of the General Agreement; and (2) the Marcos heirs have failed to comply with their undertakings therein, particularly the collation and submission of an inventory of their assets.  The Republic also cited an April 11, 1995 Resolution in Civil Case No. 0165, in which the Sandiganbayan dismissed a similar petition filed by the Marcoses’ attorney-in-fact.

Furthermore, then President Fidel V. Ramos, in his May 4, 1998 Memorandum [5] to then PCGG Chairman Magtanggol Gunigundo, categorically stated:

“This is to reiterate my previous position embodied in the Palace Press Release of 6 April 1995 that I have not authorized you to approve the Compromise Agreements of December 28, 1993 or any agreement at all with the Marcoses, and would have disapproved them had they been submitted to me.

“The Full Powers of Attorney of March 1994 and July 4, 1994, did not authorize you to approve said Agreements, which I reserve for myself as President of the Republic of the Philippines.”

The assailed principal Agreement[6] reads:

“GENERAL AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

This Agreement entered into this 28th day of December, 1993, by and between -

The Republic of the Philippines, through the Presidential Commission on Good Government (PCGG), a governmental agency vested with authority defined under Executive Orders Nos. 1, 2 and 14, with offices at the Philcomcen Building, Pasig, Metro Manila, represented by its Chairman referred to as the FIRST PARTY,

--  and  --

Estate of Ferdinand E. Marcos, represented by Imelda Romualdez Marcos and Ferdinand R. Marcos, Jr., all of legal age, and with address at c/o No. 154 Lopez Rizal St., Mandaluyong, Metro Manila, and Imelda Romualdez Marcos, Imee Marcos Manotoc, Ferdinand E. Marcos, Jr., and Irene Marcos Araneta, hereinafter collectively referred to as the PRIVATE PARTY.

W I T N E S S E T H:

WHEREAS, the PRIVATE PARTY has been impelled by their sense of nationalism and love of country and of the entire Filipino people, and their desire to set up a foundation and finance impact projects like installation of power plants in selected rural areas and initiation of other community projects for the empowerment of the people;

WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss Federal Tribunal of December 21, 1990, that the $356 million belongs in principle to the Republic of the Philippines provided certain conditionalities are met, but even after 7 years, the FIRST PARTY has not been able to procure a final judgment of conviction against the PRIVATE PARTY;

WHEREAS, the FIRST PARTY is desirous of avoiding a long-drawn out litigation which, as proven by the past 7 years, is consuming money, time and effort, and is counter-productive and ties up assets which the FIRST PARTY could otherwise utilize for its Comprehensive Agrarian Reform Program, and other urgent needs;

WHEREAS, His Excellency, President Fidel V. Ramos, has adopted a policy of unity and reconciliation in order to bind the nation’s wounds and start the process of rebuilding this nation as it goes on to the twenty-first century;

WHEREAS, this Agreement settles all claims and counterclaims which the parties may have against one another, whether past, present, or future, matured or inchoate.

NOW, THEREFORE, for and in consideration of the mutual covenants set forth herein, the parties agree as follows:

1.  The parties will collate all assets presumed to be owned by, or held by other parties for the benefit of, the PRIVATE PARTY for purposes of determining the totality of the assets covered by the settlement.  The subject assets shall be classified by the nature thereof, namely:  (a) real estate; (b) jewelry; (c) paintings and other works of art; (d) securities; (e) funds on deposit; (f) precious metals, if any, and (g) miscellaneous assets or assets which could not appropriately fall under any of the preceding classification.  The list shall be based on the full disclosure of the PRIVATE PARTY to insure its accuracy.

2.  Based on the inventory, the FIRST PARTY shall determine which shall be ceded to the FIRST PARTY, and which shall be assigned to/retained by the PRIVATE PARTY.  The assets of the PRIVATE PARTY shall be net of, and exempt from, any form of taxes due the Republic of the Philippines. However, considering the unavailability of all pertinent and relevant documents and information as to balances and ownership, the actual specification of assets to be retained by the PRIVATE PARTY shall be covered by supplemental agreements which shall form part of this Agreement.

3.  Foreign assets which the PRIVATE PARTY shall fully disclose but which are held by trustees, nominees, agents or foundations are hereby waived over by the PRIVATE PARTY in favor of the FIRST PARTY.  For this purpose, the parties shall cooperate in taking the appropriate action, judicial and/or extrajudicial, to recover the same for the FIRST PARTY.

4.  All disclosures of assets made by the PRIVATE PARTY shall not be used as evidence by the FIRST PARTY in any criminal, civil, tax or administrative case, but shall be valid and binding against said PARTY for use by the FIRST PARTY in withdrawing any account and/or recovering any asset.  The PRIVATE PARTY withdraws any objection to the withdrawal by and/or release to the FIRST PARTY by the Swiss banks and/or Swiss authorities of the $356 million, its accrued interests, and/or any other account; over which

the PRIVATE PARTY waives any right, interest or participation in favor of the FIRST PARTY.  However, any withdrawal or release of any account aforementioned by the FIRST PARTY shall be made in the presence of any authorized representative of the PRIVATE PARTY.

5.  The trustees, custodians, safekeepers, depositaries, agents, nominees, administrators, lawyers, or any other party acting in similar capacity in behalf of the PRIVATE PARTY are hereby informed through this General Agreement to insure that it is fully implemented and this shall serve as absolute authority from both parties for full disclosure to the FIRST PARTY of said assets and for the FIRST PARTY to withdraw said account and/or assets and any other assets which the FIRST PARTY on its own or through the help of the PRIVATE PARTY/their trustees, etc., may discover.

6.  Any asset which may be discovered in the future as belonging to the PRIVATE PARTY or is being held by another for the benefit of the PRIVATE PARTY and which is not included in the list per No. 1 for whatever reason shall automatically belong to the FIRST PARTY, and the PRIVATE PARTY in accordance with No. 4 above, waives any right thereto.

7.  This Agreement shall be binding on, and inure to the benefit of, the parties and their respective legal representatives, successors and assigns and shall supersede any other prior agreement.

8.  The PARTIES shall submit this and any other implementing Agreements to the President of the Philippines for approval.  In the same manner, the PRIVATE PARTY shall provide the FIRST PARTY assistance by way of testimony or deposition on any information it may have that could shed light on the cases being pursued by the FIRST PARTY against other parties.  The FIRST PARTY shall desist from instituting new suits already subject of this Agreement against the PRIVATE PARTY and cause the dismissal of all other cases pending in the Sandiganbayan and in other courts.

9.  In case of violation by the PRIVATE PARTY of any of the conditions herein contained, the PARTIES shall be restored automatically to the status quo ante the signing of this Agreement.

For purposes of this Agreement, the PRIVATE PARTY shall be represented by Atty. Simeon M. Mesina, Jr., as their only Attorney-in-Fact.

IN WITNESS WHEREOF, the parties have signed this instrument this 28th day of December, 1993, in Makati, Metro Manila.

PRESIDENTIAL COMMISSION ONGOOD GOVERNMENT

By:

[Sgd.] MAGTANGGOL C. GUNIGUNDO

Chairman

ESTATE OF FERDINAND E. MARCOS, IMELDA R. MARCOS, MA. IMELDA MARCOS-MANOTOC, FERDINAND R. MARCOS, JR., & IRENE MARCOS-ARANETA

By:

[Sgd.]IMELDA ROMUALDEZ-MARCOS

[Sgd.] MA. IMELDA MARCOS-MANOTOC

FERDINAND R. MARCOS, JR.[7]

[Sgd.] IRENE MARCOS-ARANETA

Assisted by:

[Sgd.] ATTY. SIMEON M. MESINA, JR.Counsel & Attorney-in-Fact”

Petitioner also denounces this supplement to the above Agreement: [8]

“SUPPLEMENTAL AGREEMENT

This Agreement entered into this 28th day of December, 1993, by and between --

The Republic of the Philippines, through the Presidential Commission on Good Government (PCGG), a governmental agency vested with authority defined under Executive Orders Nos. 1, 2 and 14, with offices at the Philcomcen Building, Pasig, Metro Manila, represented by its Chairman Magtanggol C. Gunigundo, hereinafter referred to as the FIRST PARTY,

-- and --

Estate of Ferdinand E. Marcos, represented by Imelda Romualdez Marcos and Ferdinand R. Marcos, Jr., all of legal age, and with address at c/o No. 154 Lopez Rizal St., Mandaluyong, Metro Manila, and Imelda Romualdez Marcos, Imee Marcos Manotoc, Ferdinand E. Marcos, Jr., and Irene Marcos Araneta, hereinafter collectively referred to as the PRIVATE PARTY.

W I T N E S S E T H:

The parties in this case entered into a General Agreement dated Dec. 28, 1993;

The PRIVATE PARTY expressly reserve their right to pursue their interest and/or sue over local assets located in the Philippines against parties other than the FIRST PARTY.

The parties hereby agree that all expenses related to the recovery and/or withdrawal of all assets including lawyers’ fees, agents’ fees, nominees’ service fees, bank charges, traveling expenses and all other expenses related thereto shall be for the account of the PRIVATE PARTY.

In consideration of the foregoing, the parties hereby agree that the PRIVATE PARTY shall be entitled to the equivalent of 25% of the amount that may be eventually withdrawn from said $356 million Swiss deposits.

IN WITNESS WHEREOF, the parties have signed this instrument this 28th day of December, 1993, in Makati, Metro Manila.

PRESIDENTIAL COMMISSION ONGOOD GOVERNMENT

By:

[Sgd.] MAGTANGGOL C. GUNIGUNDO

Chairman

ESTATE OF FERDINAND E. MARCOS, IMELDA R. MARCOS, MA. IMELDA MARCOS-MANOTOC, FERDINAND R. MARCOS, JR., & IRENE MARCOS-ARANETA

By:

[Sgd.] IMELDA ROMUALDEZ-MARCOS

[Sgd.] MA. IMELDA MARCOS-MANOTOC

FERDINAND R. MARCOS, JR.[9]

[Sgd.] IRENE MARCOS-ARANETA

Assisted by:

[Sgd.] ATTY. SIMEON M. MESINA, JR.

  Counsel & Attorney-in-Fact”

Acting on a motion of petitioner, the Court issued a Temporary Restraining Order [10] dated March 23, 1998, enjoining respondents, their agents and/or representatives from “entering into, or perfecting and/or executing any agreement with the heirs of the late President Ferdinand E. Marcos relating to and concerning their ill-gotten wealth.”

Issues

The Oral Argument, held on March 16, 1998, focused on the following issues:

“(a)  Procedural:

(1)  Whether or not the petitioner has the personality or legal standing to file the instant petition; and

(2)  Whether or not this Court is the proper court before which this action may be filed.

(b)  Substantive:

(1)  Whether or not this Court could require the PCGG to disclose to the public the details of any agreement, perfected or not, with the Marcoses; and

(2)  Whether or not there exist any legal restraints against a compromise agreement between the Marcoses and the PCGG relative to the Marcoses’ ill-gotten wealth.”[11]

After their oral presentations, the parties filed their respective memoranda.

On August 19, 1998, Gloria, Celnan, Scarlet and Teresa, all surnamed Jopson, filed before the Court a Motion for Intervention, attaching thereto their Petition in Intervention.  They aver that they are “among the 10,000 claimants whose right to claim from the Marcos Family and/or the Marcos Estate is recognized by the decision in In re Estate of Ferdinand Marcos, Human Rights Litigation, Maximo Hilao, et al., Class Plaintiffs No. 92-15526, U.S. Court of Appeals  for the 9th Circuit  US App. Lexis 14796, June 16, 1994 and the Decision of the Swiss Supreme Court of December 10, 1997.”  As such, they claim to have personal and direct interest in the subject matter of the instant case, since a distribution or disposition of the Marcos properties may adversely affect their legitimate claims.  In a minute Resolution issued on August 24, 1998, the Court granted their motion to intervene and required the respondents to comment thereon.  The September 25, 1998 Comment[12] of the solicitor general on said motion merely reiterated his aforecited arguments against the main petition.[13]

The Court’s Ruling

The petition is imbued with merit.

First Procedural Issue:  Petitioner’s Standing

Petitioner, on the one hand, explains that as a taxpayer and citizen, he has the legal personality to file the instant petition.  He submits that since ill-gotten wealth “belongs to the Filipino people and [is], in truth and in fact, part of the public treasury,” any compromise in relation to it would constitute a diminution of the public funds, which can be enjoined by a taxpayer whose interest is for a full, if not substantial, recovery of such assets. 

Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an issue “of transcendental importance to the public.”  He asserts that ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts or orders of government agencies or instrumentalities, if the issues raised are “of paramount public interest;” and if they “immeasurably affect the social, economic, and moral well-being of the people.” 

Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the proceeding involves the assertion of a public right, [14] such as in this case.  He invokes several decisions[15] of this Court which have set aside the procedural matter of locus standi, when the subject of the case involved public interest.

On the other hand, the solicitor general, on behalf of respondents, contends that petitioner has no standing to institute the present action, because no expenditure of public funds is involved and said petitioner has no actual interest in the alleged agreement.  Respondents further insist that the instant petition is premature, since there is no showing that petitioner has requested PCGG to disclose any such negotiations and agreements; or that, if he has, the Commission has refused to do so.

Indeed, the arguments cited by petitioner constitute the controlling decisional rule as regards his legal standing to institute the instant petition.  Access to public documents and records is a public right, and the real parties in interest are the people themselves.[16]

In Tañada v. Tuvera,[17] the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action.[18] In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution,[19] in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated.  In ruling for the petitioners’ legal standing, the Court declared that the right they sought to be enforced “is a public right recognized by no less than the fundamental law of the land.”

Legaspi v. Civil Service Commission,[20] while reiterating Tañada, further declared that “when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general ‘public’ which possesses the right.”[21]

Further, in Albano v. Reyes,[22] we said that while expenditure of public funds may not have been involved under the questioned contract for the development, the management and the operation of the Manila International Container Terminal, “public interest [was] definitely involved considering the important role [of the subject contract]  x x x  in the economic development of the country and the magnitude of the financial consideration involved.”  We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioner’s standing.

Similarly, the instant petition is anchored on the right of the people to information and access to official records, documents and papers -- a right guaranteed under Section 7, Article III of the 1987 Constitution.  Petitioner, a former solicitor general, is a Filipino citizen.  Because of the satisfaction of the two basic requisites laid down by decisional law to sustain petitioner’s legal standing, i.e. (1) the enforcement of a public right (2) espoused by a Filipino citizen,  we rule that the petition at bar should be allowed.

In any event, the question on the standing of Petitioner Chavez is rendered moot by the intervention of the Jopsons, who are among the legitimate claimants to the Marcos wealth.  The standing of the Jopsons is not seriously contested by the solicitor general.  Indeed, said petitioners-intervenors have a legal interest in the subject matter of the instant case, since a distribution or disposition of the Marcoses’ ill-gotten properties may adversely affect the satisfaction of their claims.

Second Procedural Issue:The Court’s Jurisdiction

Petitioner asserts that because this petition is an original action for mandamus and one that is not intended to delay any proceeding in the Sandiganbayan, its having been filed before this Court was proper.  He invokes Section 5, Article VIII of the Constitution, which confers upon the Supreme Court original jurisdiction over petitions for prohibition and mandamus.

The solicitor general, on the other hand, argues that the petition has been erroneously brought before this Court, since there is neither a justiciable controversy nor a violation of petitioner’s rights by the PCGG.  He alleges that the assailed agreements are already the very lis mota in Sandiganbayan Civil Case No. 0141, which has yet to dispose of the issue; thus, this petition is premature.  Furthermore, respondents themselves have opposed the Marcos heirs’ motion, filed in the graft court, for the approval of the subject Agreements.  Such opposition belies petitioner’s claim that the government, through respondents, has concluded a settlement with the Marcoses as regards their alleged ill-gotten assets.

In Tañada and Legaspi, we upheld therein petitioners’ resort to a mandamus proceeding, seeking to enforce a public right as well as to compel performance of a public duty mandated by no less than the fundamental law.[23] Further, Section 5, Article VIII of the Constitution, expressly confers upon the Supreme Courtoriginal jurisdiction over petitions for certiorari, prohibition, mandamus, quo warranto and habeas corpus.

Respondents argue that petitioner should have properly sought relief before the Sandiganbayan, particularly in Civil Case No. 0141, in which the enforcement of the compromise Agreements is pending resolution.  There may seem to be some merit in such

argument, if petitioner is merely seeking to enjoin the enforcement of the compromise and/or to compel the PCGG to disclose to the public the terms contained in said Agreements.  However, petitioner is here seeking the public disclosure of “all negotiations and agreement, be they ongoing or perfected, and documents related to or relating to such negotiations and agreement between the PCGG and the Marcos heirs.” 

In other words, this petition is not confined to the Agreements that have already been drawn, but likewise to any other ongoing or future undertaking towards any settlement on the alleged Marcos loot.  Ineluctably, the core issue boils down to the precise interpretation, in terms of scope, of the twin constitutional provisions on “public transactions.”  This broad and prospective relief sought by the instant petition brings it out of the realm of Civil Case No. 0141.

First Substantive Issue:Public Disclosure of Terms of Any Agreement, Perfected or Not

In seeking the public disclosure of negotiations and agreements pertaining to a compromise settlement with the Marcoses as regards their alleged ill-gotten wealth, petitioner invokes the following provisions of the Constitution:

“Sec. 7 [Article III].  The right of the people to information on matters of public concern shall be recognized.  Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law.”

“Sec. 28 [Article II].  Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest.”

Respondents’ opposite view is that the above constitutional provisions refer to completed and operative official acts, not to those still being considered.  As regards the assailed Agreements entered into by the PCGG with the Marcoses, there is yet no right of action that has accrued, because said Agreements have not been approved by the President, and the Marcos heirs have failed to fulfill their express undertaking therein.  Thus, the Agreements have not become effective. Respondents add that they are not aware of any ongoing negotiation for another compromise with the Marcoses regarding their alleged ill-gotten assets.

The “information” and the “transactions” referred to in the subject provisions of the Constitution have as yet no defined scope and extent.  There are no specific laws prescribing the exact limitations within which the right may be exercised or the correlative state duty may be obliged.  However, the following are some of the recognized restrictions:  (1) national security matters and intelligence information, (2) trade secrets and banking transactions, (3) criminal matters, and (4) other confidential information.

Limitations to the Right: (1) National Security Matters

At the very least, this jurisdiction recognizes the common law holding that there is a governmental privilege against public disclosure with respect to state secrets regarding military, diplomatic and other national security matters.[24] But where there is no need to protect such state secrets, the privilege may not be invoked to withhold documents and other information,[25] provided that they are examined “in strict confidence” and given “scrupulous protection.”

Likewise, information on inter-government exchanges prior to the conclusion of treaties and executive agreements may be subject to reasonable safeguards for the sake of national interest.[26]

(2)  Trade Secrets and Banking Transactions

The drafters of the Constitution also unequivocally affirmed that, aside from national security matters and intelligence information, trade or industrial secrets (pursuant to the Intellectual Property Code[27] and other related laws) as well as banking transactions (pursuant to the Secrecy of Bank Deposits Act[28]) are also exempted from compulsory disclosure.[29]

(3) Criminal Matters

Also excluded are classified law enforcement matters, such as those relating to the apprehension, the prosecution and the detention of criminals, [30] which courts may not inquire into prior to such arrest, detention and prosecution.  Efforts at effective law enforcement would be seriously jeopardized by free public access to, for example, police information regarding rescue operations, the whereabouts of fugitives, or leads on covert criminal activities.

(4) Other Confidential Information

The Ethical Standards Act[31] further prohibits public officials and employees from using or divulging “confidential or classified information officially known to them by reason of their office and not made available to the public.”[32]

Other acknowledged limitations to information access include diplomatic correspondence, closed door Cabinet meetings and executive sessions of either house of Congress, as well as the internal deliberations of the Supreme Court.[33]

Scope:  Matters of Public Concern and Transactions Involving Public Interest

In Valmonte v. Belmonte Jr.,[34] the Court emphasized that the information sought must be “matters of public concern,” access to which may be limited by law.  Similarly, the state policy

of full public disclosure extends  only  to  “transactions  involving public interest” and may also be “subject to reasonable conditions prescribed by law.”  As to the meanings of the terms “public interest” and “public concern,” the Court, in Legaspi v. Civil Service Commission,[35] elucidated:

“In determining whether or not a particular information is of public concern there is no rigid test which can be applied.  ‘Public concern’ like ‘public interest’ is a term that eludes exact definition.  Both terms embrace a broad spectrum of subjects which the public may want to know, either because these directly affect their lives, or simply because such matters naturally arouse the interest of an ordinary citizen.  In the final analysis, it is for the courts to determine on a case by case basis whether the matter at issue is of interest or importance, as it relates to or affects the public.”

Considered a public concern in the above-mentioned case was the “legitimate concern of citizens to ensure that government positions requiring civil service eligibility are occupied only by persons who are eligibles.”  So was the need to give the general public adequate notification of various laws that regulate and affect the actions and conduct of citizens, as held in Tañada.  Likewise did the “public nature of the loanable funds of the GSIS and the public office held by the alleged borrowers (members of the defunct Batasang Pambansa)” qualify the information sought in Valmonte as matters of public interest and concern.  In Aquino-Sarmiento v. Morato,[36] the Court also held that official acts of public officers done in pursuit of their official functions are public in character; hence, the records pertaining to such official acts and decisions are within the ambit of the constitutional right of access to public records.

Under Republic Act No. 6713, public officials and employees are mandated to “provide information on their policies and procedures in clear and understandable language, [and] ensure openness of information, public consultations and hearings whenever appropriate  x x x,” except when “otherwise provided by law or when  required  by  the public interest.”  In particular, the law mandates free public access, at reasonable hours, to the annual performance reports of offices and agencies of government and government-owned or controlled corporations; and the statements of assets, liabilities and financial disclosures of all public officials and employees.[37]

In general, writings coming into the hands of public officers in connection with their official functions must be accessible to the public, consistent with the policy of transparency of governmental affairs.  This principle is aimed at affording the people an opportunity to determine whether those to whom they have entrusted the affairs of the government are honestly, faithfully and competently performing their functions as public servants.[38] Undeniably, the essence of democracy lies in the free flow of thought;[39] but thoughts and ideas must be well-informed so that the public would gain a better perspective of vital issues confronting them and, thus, be able to criticize as well as participate in the affairs of the government in a responsible, reasonable and effective manner.  Certainly, it is by ensuring an unfettered and uninhibited exchange of ideas among a well-informed public that a government remains responsive to the changes desired by the people.[40]

The Nature of the Marcoses’ Alleged Ill-Gotten Wealth

We now come to the immediate matter under consideration.

Upon the departure from the country of the Marcos family and their cronies in February 1986, the new government headed by President Corazon C. Aquino was specifically mandated to “[r]ecover ill-gotten properties amassed by the leaders and supporters of the previous regime and [to] protect the interest of the people through orders of sequestration or freezing of assets or accounts.”[41] Thus, President Aquino’s very first executive orders (which partook of the nature of legislative enactments) dealt with the recovery of these alleged ill-gotten properties. 

Executive Order No. 1, promulgated on February 28, 1986, only two (2) days after the Marcoses fled the country, created the PCGG which was primarily tasked to assist the President in the recovery of vast government resources allegedly amassed by former President Marcos, his immediate family, relatives and close associates both here and abroad. 

Under Executive Order No. 2, issued twelve (12) days later, all persons and entities who had knowledge or possession of ill-gotten assets and properties were warned and, under pain of penalties prescribed by law, prohibited from concealing, transferring or dissipating them or from otherwise frustrating or obstructing the recovery efforts of the government. 

On May 7, 1986, another directive (EO No. 14) was issued giving additional powers to the PCGG which, taking into account the overriding considerations of national interest and national survival, required it to achieve expeditiously and effectively its vital task of recovering ill-gotten wealth.

With such pronouncements of our government, whose authority emanates from the people, there is no doubt that the recovery of the Marcoses’ alleged ill-gotten wealth is a matter of public concern and imbued with public interest.[42] We may also add that “ill-gotten wealth,” by its very nature, assumes a public character. Based on the aforementioned Executive Orders, “ill-gotten wealth” refers to assets and properties purportedly acquired, directly or indirectly, by former President Marcos, his immediate family, relatives and close associates through or as a result of their improper or illegal use of government funds or properties; or their having taken undue advantage of their public office; or their use of powers, influences or relationships, “resulting in their unjust enrichment and causing grave damage and prejudice to the Filipino people and the Republic of the Philippines.”  Clearly, the assets and properties referred to supposedly originated from the government itself. To all intents and purposes, therefore, they belong to the people.  As such, upon reconveyance they will be returned to the public treasury, subject only to the satisfaction of positive claims of certain persons as may be adjudged by competent courts.  Another declared  overriding  consideration for the expeditious recovery of ill-gotten wealth is that it may be used for national economic recovery.

We believe the foregoing disquisition settles the question of whether petitioner has a right to respondents’ disclosure of any agreement that may be arrived at concerning the Marcoses’ purported ill-gotten wealth.

Access to Information on Negotiating Terms

But does the constitutional provision likewise guarantee access to information regarding ongoing negotiations or proposals prior to the final agreement?  This same clarification

was sought and clearly addressed by the constitutional commissioners during their deliberations, which we quote hereunder:[43]

“MR. SUAREZ.  And when we say ‘transactions’ which should be distinguished from contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the consummation of the contract, or does he refer to the contract itself?

“MR. OPLE.  The ‘transactions’ used here, I suppose, is generic and, therefore, it can cover both steps leading to a contract, and already a consummated contract, Mr. Presiding Officer.

“MR. SUAREZ.  This contemplates inclusion of negotiations leading to the consummation of the transaction?

 “MR. OPLE.  Yes, subject to reasonable safeguards on the national interest.”

Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG and its officers, as well as other government representatives, to disclose sufficient public information on any proposed settlement they have decided to take up with the ostensible owners and holders of ill-gotten wealth.  Such information, though, must pertain to definite propositions of the government, not necessarily to intra-agency or inter-agency recommendations or communications[44] during the stage when common assertions are still in the process of being formulated or are in the “exploratory” stage.  There is a need, of course, to observe the same restrictions on disclosure of information in general, as discussed earlier -- such as on matters involving national security, diplomatic or foreign relations, intelligence and other classified information.

Second Substantive Issue: Legal Restraints on a Marcos-PCGG Compromise

Petitioner lastly contends that any compromise agreement between the government and the Marcoses will be a virtual condonation of all the alleged wrongs done by them, as well as an unwarranted permission to commit graft and corruption.

Respondents, for their part, assert that there is no legal restraint on entering into a compromise with the Marcos heirs, provided the agreement does not violate any law.

Prohibited Compromises

In general, the law encourages compromises in civil cases, except with regard to the following matters:  (1) the civil status of persons, (2) the validity of a marriage or a legal separation, (3) any ground for legal separation, (4) future support, (5) the jurisdiction of courts, and (6) future legitime.[45] And like any other contract, the terms and conditions of a compromise

must not be contrary to law, morals, good customs, public policy or public order. [46] A compromise is binding and has the force of law between the parties, [47] unless the consent of a party is vitiated -- such as by mistake, fraud, violence, intimidation or undue influence -- or when there is forgery, or if the terms of the settlement are so palpably unconscionable.  In the latter instances, the agreement may be invalidated by the courts.[48]

Effect of Compromise on Civil Actions

One of the consequences of a compromise, and usually its primary object, is to avoid or to end a litigation.[49] In fact, the law urges courts to persuade the parties in a civil case to agree to a fair settlement.[50] As an incentive, a court may mitigate damages to be paid by a losing party who shows a sincere desire to compromise.[51]

In Republic & Campos Jr. v. Sandiganbayan,[52] which affirmed the grant by the PCGG of civil and criminal immunity to Jose Y. Campos and family, the Court held that in the absence of an express prohibition, the rule on compromises in civil actions under the Civil Code is applicable to PCGG cases.  Such principle is pursuant to the objectives of EO No. 14, particularly the just and expeditious recovery of ill-gotten wealth, so that it may be used to hasten economic recovery.  The same principle was upheld in Benedicto v. Board of Administrators of Television Stations RPN, BBC and IBC[53] and Republic v. Benedicto,[54] which ruled in favor of the validity of the PCGG compromise agreement with Roberto S. Benedicto.

Immunity from Criminal Prosecution

However,  any compromise relating to the civil liability arising from an offense does  not  automatically terminate the criminal proceeding against or extinguish the criminal liability of the malefactor.[55] While a compromise in civil suits is expressly authorized by law, there is no similar general sanction as regards criminal liability.  The authority must be specifically conferred.  In the present case, the power to grant criminal immunity was conferred on PCGG by Section 5 of EO No. 14, as amended by EO No. 14-A, which provides:

“SECTION 5.  The Presidential Commission on Good Government is authorized to grant immunity from criminal prosecution to any person who provides information or testifies in any investigation conducted by such Commission to establish the unlawful manner in which any respondent, defendant or accused has acquired or accumulated the property or properties in question in any case where such information or testimony is necessary to ascertain or prove the latter’s guilt or his civil liability.  The immunity thereby granted shall be continued to protect the witness who repeats such testimony before the Sandiganbayan when required to do so by the latter or by the Commission.”

The above provision specifies that the PCGG may exercise such authority under these conditions:  (1) the person to whom criminal immunity  is  granted provides  information or testifies in an investigation conducted by the Commission; (2) the information or testimony

pertains to the unlawful manner in which the respondent, defendant or accused acquired or accumulated ill-gotten property; and (3) such information or testimony is necessary to ascertain or prove guilt or civil liability of such individual.  From the wording of the law, it can be easily deduced that the  person referred to is a witness in the proceeding, not the principal respondent, defendant or accused.

Thus, in the case of Jose Y. Campos, the grant of both civil and criminal immunity to him and his family was “[i]n consideration of the full cooperation of Mr. Jose Y. Campos [with] this Commission, his voluntary surrender of the properties and assets [--] disclosed and declared by him to belong to deposed President Ferdinand E. Marcos [--] to the Government of the Republic of the Philippines[;] his full, complete and truthful disclosures[;] and his commitment to pay a sum of money as determined by the Philippine Government.” [56] Moreover, the grant of criminal immunity to the Camposes and the Benedictos was limited to acts and omissions prior to February 25, 1996.  At the time such immunity was granted, no criminal cases have yet been filed against them before the competent courts.

Validity of the PCGG-Marcos Compromise Agreements

Going now to the subject General and Supplemental Agreements between the PCGG and the Marcos heirs, a cursory perusal thereof reveals serious legal flaws.  First, the Agreements do not conform to the above requirements of EO Nos. 14 and 14-A.  We believe that criminal immunity under Section 5 cannot be granted to the Marcoses, who are the principal defendants in the spate of ill-gotten wealth cases now pending before the Sandiganbayan.  As stated earlier, the provision is applicable mainly to witnesses who provide information or testify against a respondent, defendant or accused in an ill-gotten wealth case. 

While the General Agreement states that the Marcoses “shall provide the [government] assistance by way of testimony or deposition on any information [they] may have that could shed light on the cases being pursued by the [government] against other parties,” [57] the clause does not fully comply with the law.  Its inclusion in the Agreement may have been only an afterthought, conceived in pro forma compliance with Section 5 of EO  No.  14,  as  amended.  There is no indication whatsoever that any of the Marcos heirs has indeed provided vital information against any respondent or defendant as to the manner in which the latter may have unlawfully acquired public property.

Second, under Item No. 2 of the General Agreement, the PCGG commits to exempt from all forms of taxes the properties to be retained by the Marcos heirs. This is a clear violation of the Constitution.  The power to tax and to grant tax exemptions is vested in the Congress and, to a certain extent, in the local legislative bodies.[58] Section 28 (4), Article VI of the Constitution, specifically provides:  “No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of the Congress.”  The PCGG has absolutely no power to grant tax exemptions, even under the cover of its authority to compromise ill-gotten wealth cases.

Even granting that Congress enacts a law exempting the Marcoses from paying taxes on their properties, such law will definitely not pass the test of the equal protection clause under the Bill of Rights.  Any special grant of tax exemption in favor only of the Marcos heirs will

constitute class legislation.  It will also violate the constitutional rule that “taxation shall be uniform and equitable.”[59]

Neither can the stipulation be construed to fall within the power of the commissioner of internal revenue to compromise taxes.  Such authority may be exercised only when (1) there is reasonable  doubt  as  to  the  validity of  the claim  against the taxpayer, and (2) the taxpayer’s financial position demonstrates a clear inability to pay.[60] Definitely, neither requisite is present in the case of the Marcoses, because under the Agreement they are effectively conceding the validity of the claims against their properties, part of which they will be allowed to retain.   Nor can the PCGG grant of tax exemption fall within the power of the commissioner to abate or cancel a tax liability.  This power can be exercised only when (1) the tax appears to be unjustly or excessively assessed, or (2) the administration and collection costs involved do not justify the collection of the tax due.[61] In this instance, the cancellation of tax liability is done even before the determination of the amount due.  In any event, criminal violations of the Tax Code, for which legal actions have been filed in court or in which fraud is involved, cannot be compromised.[62]

Third, the government binds itself to cause the dismissal of all cases against the Marcos heirs, pending before the Sandiganbayan and other courts.[63] This is a direct encroachment on judicial powers, particularly in regard to criminal jurisdiction.  Well-settled is the doctrine that once a case has been filed before a court of competent jurisdiction, the matter of its dismissal or pursuance lies within the full discretion and control of the judge.  In a criminal case, the manner in which the prosecution is handled, including the matter of whom to present as witnesses, may lie within the sound discretion of the government prosecutor; [64] but the court decides, based on the evidence proffered, in what manner it will dispose of the case.  Jurisdiction, once acquired by the trial court, is not lost despite a resolution, even by the justice secretary, to withdraw the information or to dismiss the complaint.[65] The prosecution’s motion to withdraw or to dismiss is not the least binding upon the court.  On the contrary, decisional rules require the trial court to make its own evaluation of the merits of the case, because granting such motion is equivalent to effecting a disposition of the case itself.[66]

Thus, the PCGG, as the government prosecutor of ill-gotten wealth cases, cannot guarantee the dismissal of all such criminal cases against the Marcoses pending in the courts, for said dismissal is not within its sole power and discretion.

Fourth, the government also waives all claims and counterclaims, “whether past, present, or future, matured or inchoate,” against the Marcoses.[67] Again, this all-encompassing stipulation is contrary to law.  Under the Civil Code, an action for future fraud may not be waived. [68] The stipulation in the Agreement does not specify the exact scope of future claims against the Marcoses that the government thereby relinquishes.  Such vague and broad statement  may  well be interpreted to include all future illegal acts of any of the Marcos heirs, practically giving them a license to perpetrate fraud against the government without any liability at all.  This is a palpable violation of the due process and equal protection guarantees of the Constitution.  It effectively ensconces the Marcoses beyond the reach of the law.  It also sets a dangerous precedent for public accountability.  It is a virtual warrant for public officials to amass public funds illegally, since there is an open option to compromise their liability in exchange for only a portion of their ill-gotten wealth.

Fifth, the Agreements do not provide for a definite or determinable period within which the parties shall fulfill their respective prestations.  It may take a lifetime before the Marcoses submit an inventory of their total assets.

Sixth, the Agreements do not state with specificity the standards for determining which assets shall be forfeited by the government and which shall be retained by the Marcoses.  While the Supplemental Agreement provides that the Marcoses shall be entitled to 25 per cent of the $356 million Swiss deposits (less government recovery expenses), such sharing arrangement pertains only to the said deposits.  No similar splitting scheme is defined with respect to the other properties.  Neither is there, anywhere in the Agreements, a statement of the basis for the 25-75 percent sharing ratio.  Public officers entering into an arrangement appearing to be manifestly and grossly disadvantageous to the government, in violation of the Anti-Graft and Corrupt Practices Act,[69] invite their indictment for corruption under the said law.

Finally, the absence of then President Ramos’ approval of the principal Agreement, an express condition therein, renders the compromise incomplete and unenforceable.  Nevertheless, as detailed above, even if such approval were obtained, the Agreements would still not be valid.

From the foregoing disquisition, it is crystal clear to the Court that the General and Supplemental Agreements, both dated December 28, 1993, which the PCGG entered into with the Marcos heirs, are violative of the Constitution and the laws aforementioned.

WHEREFORE, the petition is GRANTED.  The General and Supplemental Agreements dated December 28, 1993, which PCGG and the Marcos heirs entered into are hereby declared NULL  AND VOID for being contrary to law and the Constitution.  Respondent PCGG, its officers and all government functionaries and officials who are or may be directly  or  indirectly  involved  in  the  recovery  of  the  alleged ill-gotten wealth of the Marcoses and their associates are DIRECTED to disclose to the public the terms of any proposed compromise settlement, as well as the final agreement, relating to such alleged ill-gotten wealth, in accordance with the discussions embodied in this Decision.  No pronouncement as to costs. 

SO ORDERED.

CASE DIGEST:

Chavez v. PCGG, 299 SCRA 744

FACTS: Petitioner asks this Court to define the nature and the extent of the people’s constitutional right to information on matters of public concern. Petitioner, invoking his constitutional right to information and the correlative duty of the state to disclose publicly all its transactions involving the national interest, demands that respondents make public any and all negotiations and agreements pertaining to PCGG’s task of recovering the Marcoses’ ill-gotten wealth. 

ISSUE: Are the negotiations leading to a settlement on ill-gotten wealth of the Marcoses within the scope of the constitutional guarantee of access to information?

HELD: Yes. Considering the intent of the framers of the Constitution, it is incumbent upon the PCGG and its officers, as well as other government representatives, to disclose sufficient public information on any proposed settlement they have decided to

take up with the ostensible owners and holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of the government, not necessarily to intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the “exploratory” stage. There is a need, of course, to observe the same restrictions on disclosure of information in general -- such as on matters involving national security, diplomatic or foreign relations, intelligence and other classified information.

VALMONTE VS BELMONTE

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 74930 February 13, 1989

RICARDO VALMONTE, OSWALDO CARBONELL, DOY DEL CASTILLO, ROLANDO BARTOLOME, LEO OBLIGAR, JUN GUTIERREZ, REYNALDO BAGATSING, JUN "NINOY" ALBA, PERCY LAPID, ROMMEL CORRO and ROLANDO FADUL, petitioners, vs.FELICIANO BELMONTE, JR., respondent.

Ricardo C. Valmonte for and in his own behalf and his co-petitioners.

The Solicitor General for respondent.

 

CORTES, J.:

Petitioners in this special civil action for mandamus with preliminary injunction invoke their right to information and pray that respondent be directed:

 

(a) to furnish petitioners the list of the names of the Batasang Pambansa members belonging to the UNIDO and PDP-Laban who were able to secure clean loans immediately before the February 7 election thru the intercession/marginal note of the then First Lady Imelda Marcos; and/or

(b) to furnish petitioners with certified true copies of the documents evidencing their respective loans; and/or

(c) to allow petitioners access to the public records for the subject information. (Petition, pp. 4-5; paragraphing supplied.]

The controversy arose when petitioner Valmonte wrote respondent Belmonte the following letter:

June 4, 1986

Hon. Feliciano BelmonteGSIS General ManagerArroceros, Manila

Sir:

As a lawyer, member of the media and plain citizen of our Republic, I am requesting that I be furnished with the list of names of the opposition members of (the) Batasang Pambansa who were able to secure a clean loan of P2 million each on guarranty (sic) of Mrs. Imelda Marcos. We understand that OIC Mel Lopez of Manila was one of those aforesaid MPs. Likewise, may we be furnished with the certified true copies of the documents evidencing their loan. Expenses in connection herewith shall be borne by us.

If we could not secure the above documents could we have access to them?

We are premising the above request on the following provision of the Freedom Constitution of the present regime.

The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents and papers pertaining to official acts, transactions or decisions, shall be afforded the citizen subject to such limitation as may be provided by law. (Art. IV, Sec. 6).

We trust that within five (5) days from receipt hereof we will receive your favorable response on the matter.

Very truly yours,

(Sgd.) RICARDO C. VALMONTE

[Rollo, p. 7.]

To the aforesaid letter, the Deputy General Counsel of the GSIS replied:

June 17, 1986

Atty. Ricardo C. Valmonte108 E. Benin StreetCaloocan City

Dear Compañero:

Possibly because he must have thought that it contained serious legal implications, President & General Manager Feliciano Belmonte, Jr. referred to me for study and reply your letter to him of June 4, 1986 requesting a list of the opposition members of Batasang Pambansa who were able to secure a clean loan of P2 million each on guaranty of Mrs. Imelda Marcos.

My opinion in this regard is that a confidential relationship exists between the GSIS and all those who borrow from it, whoever they may be; that the GSIS has a duty to its customers to preserve this confidentiality; and that it would not be proper for the GSIS to breach this confidentiality unless so ordered by the courts.

As a violation of this confidentiality may mar the image of the GSIS as a reputable financial institution, I regret very much that at this time we cannot respond positively to your request.

Very truly yours,

(Sgd.) MEYNARDO A. TIRODeputy General Counsel[Rollo, p. 40.]

On June 20, 1986, apparently not having yet received the reply of the Government Service and Insurance System (GSIS) Deputy General Counsel, petitioner Valmonte wrote respondent another letter, saying that for failure to receive a reply, "(W)e are now considering ourselves free to do whatever action necessary within the premises to pursue our desired objective in pursuance of public interest." [Rollo, p. 8.]

On June 26, 1986, Valmonte, joined by the other petitioners, filed the instant suit.

On July 19, 1986, the Daily Express carried a news item reporting that 137 former members of the defunct interim and regular Batasang Pambansa, including ten (10) opposition members, were granted housing loans by the GSIS [Rollo, p. 41.]

Separate comments were filed by respondent Belmonte and the Solicitor General. After petitioners filed a consolidated reply, the petition was given due course and the parties were required to file their memoranda. The parties having complied, the case was deemed submitted for decision.

In his comment respondent raises procedural objections to the issuance of a writ of mandamus, among which is that petitioners have failed to exhaust administrative remedies.

Respondent claims that actions of the GSIS General Manager are reviewable by the Board of Trustees of the GSIS. Petitioners, however, did not seek relief from the GSIS Board of Trustees. It is therefore asserted that since administrative remedies were not exhausted, then petitioners have no cause of action.

To this objection, petitioners claim that they have raised a purely legal issue, viz., whether or not they are entitled to the documents sought, by virtue of their constitutional right to information. Hence, it is argued that this case falls under one of the exceptions to the principle of exhaustion of administrative remedies.

Among the settled principles in administrative law is that before a party can be allowed to resort to the courts, he is expected to have exhausted all means of administrative redress available under the law. The courts for reasons of law, comity and convenience will not entertain a case unless the available administrative remedies have been resorted to and the appropriate authorities have been given opportunity to act and correct the errors committed in the administrative forum. However, the principle of exhaustion of administrative remedies is subject to settled exceptions, among which is when only a question of law is involved [Pascual v. Provincial Board, 106 Phil. 466 (1959); Aguilar v. Valencia, et al., G.R. No. L-30396, July 30, 1971, 40 SCRA 210; Malabanan v. Ramento, G.R. No. L-2270, May 21, 1984, 129 SCRA 359.] The issue raised by petitioners, which requires the interpretation of the scope of the constitutional right to information, is one which can be passed upon by the regular courts more competently than the GSIS or its Board of Trustees, involving as it does a purely legal question. Thus, the exception of this case from the application of the general rule on exhaustion of administrative remedies is warranted. Having disposed of this procedural issue, We now address ourselves to the issue of whether or not mandamus hes to compel respondent to perform the acts sought by petitioners to be done, in pursuance of their right to information.

We shall deal first with the second and third alternative acts sought to be done, both of which involve the issue of whether or not petitioners are entitled to access to the documents evidencing loans granted by the GSIS.

This is not the first time that the Court is confronted with a controversy directly involving the constitutional right to information. In Tañada v. Tuvera, G.R. No. 63915, April 24,1985, 136 SCRA 27 and in the recent case of Legaspi v. Civil Service Commission, G.R. No. 72119, May 29, 1987,150 SCRA 530, the Court upheld the people's constitutional right to be informed of matters of public interest and ordered the government agencies concerned to act as prayed for by the petitioners.

The pertinent provision under the 1987 Constitution is Art. 111, Sec. 7 which states:

The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law.

The right of access to information was also recognized in the 1973 Constitution, Art. IV Sec. 6 of which provided:

The right of the people to information on 'matters of public concern shall be recognized. Access to official records, and to documents and papers pertaining to official acts, transactions, or decisions, shall be afforded the citizen subject to such limitations as may be provided by law.

An informed citizenry with access to the diverse currents in political, moral and artistic thought and data relative to them, and the free exchange of ideas and discussion of issues thereon, is vital to the democratic government envisioned under our Constitution. The cornerstone of this republican system of government is delegation of power by the people to the State. In this system, governmental agencies and institutions operate within the limits of the authority conferred by the people. Denied access to information on the inner workings of government, the citizenry can become prey to the whims and caprices of those to whom the power had been delegated. The postulate of public office as a public trust, institutionalized in the Constitution (in Art. XI, Sec. 1) to protect the people from abuse of governmental power, would certainly be were empty words if access to such

information of public concern is denied, except under limitations prescribed by implementing legislation adopted pursuant to the Constitution.

Petitioners are practitioners in media. As such, they have both the right to gather and the obligation to check the accuracy of information the disseminate. For them, the freedom of the press and of speech is not only critical, but vital to the exercise of their professions. The right of access to information ensures that these freedoms are not rendered nugatory by the government's monopolizing pertinent information. For an essential element of these freedoms is to keep open a continuing dialogue or process of communication between the government and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the people's will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information relating thereto can such bear fruit.

The right to information is an essential premise of a meaningful right to speech and expression. But this is not to say that the right to information is merely an adjunct of and therefore restricted in application by the exercise of the freedoms of speech and of the press. Far from it. The right to information goes hand-in-hand with the constitutional policies of full public disclosure * and honesty in the public service. ** It is meant to enhance the widening role of the citizenry in governmental decision-making as well as in checking abuse in government.

Yet, like all the constitutional guarantees, the right to information is not absolute. As stated in Legaspi, the people's right to information is limited to "matters of public concern," and is further "subject to such limitations as may be provided by law." Similarly, the State's policy of full disclosure is limited to "transactions involving public interest," and is "subject to reasonable conditions prescribed by law."

Hence, before mandamus may issue, it must be clear that the information sought is of "public interest" or "public concern," and is not exempted by law from the operation of the constitutional guarantee [Legazpi v. Civil Service Commission, supra, at p. 542.]

The Court has always grappled with the meanings of the terms "public interest" and "public concern". As observed in Legazpi:

In determining whether or not a particular information is of public concern there is no rigid test which can be applied. "Public concern" like "public interest" is a term that eludes exact definition. Both terms embrace a broad spectrum of subjects which the public may want to know, either because these directly affect their lives, or simply because such matters naturally arouse the interest of an ordinary citezen. In the final analysis, it is for the courts to determine on a case by case basis whether the matter at issue is of interest or importance, as it relates to or affects the public. [Ibid. at p. 541]

In the Tañada case the public concern deemed covered by the constitutional right to information was the need for adequate notice to the public of the various laws which are to regulate the actions and conduct of citezens. InLegaspi, it was the "legitimate concern of citezensof ensure that government positions requiring civil service eligibility are occupied only by persons who are eligibles" [Supra at p. 539.]

The information sought by petitioners in this case is the truth of reports that certain Members of the Batasang Pambansa belonging to the opposition were able to secure "clean" loans from the GSIS

immediately before the February 7, 1986 election through the intercession of th eformer First Lady, Mrs. Imelda Marcos.

The GSIS is a trustee of contributions from the government and its employees and the administrator of various insurance programs for the benefit of the latter. Undeniably, its funds assume a public character. More particularly, Secs. 5(b) and 46 of P.D. 1146, as amended (the Revised Government Service Insurance Act of 1977), provide for annual appropriations to pay the contributions, premiums, interest and other amounts payable to GSIS by the government, as employer, as well as the obligations which the Republic of the Philippines assumes or guarantees to pay. Considering the nature of its funds, the GSIS is expected to manage its resources with utmost prudence and in strict compliance with the pertinent laws or rules and regulations. Thus, one of the reasons that prompted the revision of the old GSIS law (C.A. No. 186, as amended) was the necessity "to preserve at all times the actuarial solvency of the funds administered by the System" [Second Whereas Clause, P.D. No. 1146.] Consequently, as respondent himself admits, the GSIS "is not supposed to grant 'clean loans.'" [Comment, p. 8.] It is therefore the legitimate concern of the public to ensure that these funds are managed properly with the end in view of maximizing the benefits that accrue to the insured government employees. Moreover, the supposed borrowers were Members of the defunct Batasang Pambansa who themselves appropriated funds for the GSIS and were therefore expected to be the first to see to it that the GSIS performed its tasks with the greatest degree of fidelity and that an its transactions were above board.

In sum, the public nature of the loanable funds of the GSIS and the public office held by the alleged borrowers make the information sought clearly a matter of public interest and concern.

A second requisite must be met before the right to information may be enforced through mandamus proceedings,viz., that the information sought must not be among those excluded by law.

Respondent maintains that a confidential relationship exists between the GSIS and its borrowers. It is argued that a policy of confidentiality restricts the indiscriminate dissemination of information.

Yet, respondent has failed to cite any law granting the GSIS the privilege of confidentiality as regards the documents subject of this petition. His position is apparently based merely on considerations of policy. The judiciary does not settle policy issues. The Court can only declare what the law is, and not what the law should be. Under our system of government, policy issues are within the domain of the political branches of the government, and of the people themselves as the repository of all State power.

Respondent however contends that in view of the right to privacy which is equally protected by the Constitution and by existing laws, the documents evidencing loan transactions of the GSIS must be deemed outside the ambit of the right to information.

There can be no doubt that right to privacy is constitutionally protected. In the landmark case of Morfe v. Mutuc[130 Phil. 415 (1968), 22 SCRA 424], this Court, speaking through then Mr. Justice Fernando, stated:

... The right to privacy as such is accorded recognition independently of its identification with liberty; in itself, it is fully deserving of constitutional protection. The language of Prof. Emerson is particularly apt: "The concept of limited government has always included the idea that governmental powers stop short of certain intrusions into the personal life of the citizen. This is indeed one of the basic distinctions between absolute and limited government. UItimate and pervasive control of the individual, in all aspects of his life, is the hallmark of the absolute. state,

In contrast, a system of limited government safeguards a private sector, which belongs to the individual, firmly distinguishing it from the public sector, which the state can control. Protection of this private sector — protection, in other words, of the dignity and integrity of the individual — has become increasingly important as modem society has developed. All the forces of technological age — industrialization, urbanization, and organization — operate to narrow the area of privacy and facilitate intrusion into it. In modern terms, the capacity to maintain and support this enclave of private life marks the difference between a democratic and a totalitarian society." [at pp. 444-445.]

When the information requested from the government intrudes into the privacy of a citizen, a potential conflict between the rights to information and to privacy may arise. However, the competing interests of these rights need not be resolved in this case. Apparent from the above-quoted statement of the Court in Morfe is that the right to privacy belongs to the individual in his private capacity, and not to public and governmental agencies like the GSIS. Moreover, the right cannot be invoked by juridical entities like the GSIS. As held in the case of Vassar College v. Loose Wills Biscuit Co. [197 F. 982 (1912)], a corporation has no right of privacy in its name since the entire basis of the right to privacy is an injury to the feelings and sensibilities of the party and a corporation would have no such ground for relief.

Neither can the GSIS through its General Manager, the respondent, invoke the right to privacy of its borrowers. The right is purely personal in nature [Cf. Atkinson v. John Doherty & Co., 121 Mich 372, 80 N.W. 285, 46 L.RA. 219 (1899); Schuyler v. Curtis, 147 N.Y. 434, 42 N.E. 22, 31 L.R.A. 286 (1895)), and hence may be invoked only by the person whose privacy is claimed to be violated.

It may be observed, however, that in the instant case, the concerned borrowers themselves may not succeed if they choose to invoke their right to privacy, considering the public offices they were holding at the time the loans were alleged to have been granted. It cannot be denied that because of the interest they generate and their newsworthiness, public figures, most especially those holding responsible positions in government, enjoy a more limited right to privacy as compared to ordinary individuals, their actions being subject to closer public scrutiny [Cf.Ayer Productions Pty. Ltd. v. Capulong, G.R. Nos. 82380 and 82398, April 29, 1988; See also Cohen v. Marx, 211 P. 2d 321 (1949).]

Respondent next asserts that the documents evidencing the loan transactions of the GSIS are private in nature and hence, are not covered by the Constitutional right to information on matters of public concern which guarantees "(a)ccess to official records, and to documents, and papers pertaining to official acts, transactions, or decisions" only.

It is argued that the records of the GSIS, a government corporation performing proprietary functions, are outside the coverage of the people's right of access to official records.

It is further contended that since the loan function of the GSIS is merely incidental to its insurance function, then its loan transactions are not covered by the constitutional policy of full public disclosure and the right to information which is applicable only to "official" transactions.

First of all, the "constituent — ministrant" dichotomy characterizing government function has long been repudiated. In ACCFA v. Confederation of Unions and Government Corporations and Offices (G.R. Nos. L-21484 and L-23605, November 29, 1969, 30 SCRA 6441, the Court said that the government, whether carrying out its sovereign attributes or running some business, discharges the same function of service to the people.

Consequently, that the GSIS, in granting the loans, was exercising a proprietary function would not justify the exclusion of the transactions from the coverage and scope of the right to information.

Moreover, the intent of the members of the Constitutional Commission of 1986, to include government-owned and controlled corporations and transactions entered into by them within the coverage of the State policy of fun public disclosure is manifest from the records of the proceedings:

xxx xxx xxx

THE PRESIDING OFFICER (Mr. Colayco).

Commissioner Suarez is recognized.

MR. SUAREZ. Thank you. May I ask the Gentleman a few question?

MR. OPLE. Very gladly.

MR. SUAREZ. Thank you.

When we declare a "policy of full public disclosure of all its transactions" — referring to the transactions of the State — and when we say the "State" which I suppose would include all of the various agencies, departments, ministries and instrumentalities of the government....

MR. OPLE. Yes, and individual public officers, Mr. Presiding Officer.

MR. SUAREZ. Including government-owned and controlled corporations.

MR. OPLE. That is correct, Mr. Presiding Officer.

MR. SUAREZ. And when we say "transactions" which should be distinguished from contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the consummation of the contract, or does he refer to the contract itself?

MR. OPLE. The "transactions" used here I suppose is generic and, therefore, it can cover both steps leading to a contract, and already a consummated contract, Mr. Presiding Officer.

MR. SUAREZ. This contemplates inclusion of negotiations leading to the consummation of the transaction.

MR. OPLE. Yes, subject only to reasonable safeguards on the national interest.

MR. SUAREZ. Thank you. [V Record of the Constitutional Commission 24-25.] (Emphasis supplied.)

Considering the intent of the framers of the Constitution which, though not binding upon the Court, are nevertheless persuasive, and considering further that government-owned and controlled corporations, whether performing proprietary or governmental functions are accountable to the people, the Court is convinced that transactions entered into by the GSIS, a government-controlled corporation created by special legislation are within the ambit of the people's right to be informed pursuant to the constitutional policy of transparency in government dealings.

In fine, petitioners are entitled to access to the documents evidencing loans granted by the GSIS, subject to reasonable regulations that the latter may promulgate relating to the manner and hours of examination, to the end that damage to or loss of the records may be avoided, that undue interference with the duties of the custodian of the records may be prevented and that the right of other persons entitled to inspect the records may be insured [Legaspi v. Civil Service Commission, supra at p. 538, quoting Subido v. Ozaeta, 80 Phil. 383, 387.] The petition, as to the second and third alternative acts sought to be done by petitioners, is meritorious.

However, the same cannot be said with regard to the first act sought by petitioners, i.e., "to furnish petitioners the list of the names of the Batasang Pambansa members belonging to the UNIDO and PDP-Laban who were able to secure clean loans immediately before the February 7 election thru the intercession/marginal note of the then First Lady Imelda Marcos."

Although citizens are afforded the right to information and, pursuant thereto, are entitled to "access to official records," the Constitution does not accord them a right to compel custodians of official records to prepare lists, abstracts, summaries and the like in their desire to acquire information on matters of public concern.

It must be stressed that it is essential for a writ of mandamus to issue that the applicant has a well-defined, clear and certain legal right to the thing demanded and that it is the imperative duty of defendant to perform the act required. The corresponding duty of the respondent to perform the required act must be clear and specific [Lemi v. Valencia, G.R. No. L-20768, November 29,1968,126 SCRA 203; Ocampo v. Subido, G.R. No. L-28344, August 27, 1976, 72 SCRA 443.] The request of the petitioners fails to meet this standard, there being no duty on the part of respondent to prepare the list requested.

WHEREFORE, the instant petition is hereby granted and respondent General Manager of the Government Service Insurance System is ORDERED to allow petitioners access to documents and records evidencing loans granted to Members of the former Batasang Pambansa, as petitioners may specify, subject to reasonable regulations as to the time and manner of inspection, not incompatible with this decision, as the GSIS may deem necessary.

SO ORDERED.

CASE DIGEST:

This case involves a request by petitioners from the General Manager of the Government Service Insurance System to furnish them a list of names of legislators who were able to secure loans upon the guaranty of then First Lady Imelda Marcos, as

well as certified true copies of documents evidencing the loans

(RICARDO VALMONTE, OSWALDO CARBONELL, DOY DEL CASTILLO, ROLANDO BARTOLOME, LEO OBLIGAR, JUN GUTIERREZ, REYNALDO BAGATSING, JUN "NINOY" ALBA, PERCY LAPID, ROMMEL CORRO and ROLANDO FADUL, petitioners, vs. FELICIANO BELMONTE, JR., respondent. G.R. No. 74930. February 13, 1989)

This case involves a request by petitioners from the General Manager of the Government Service Insurance System to furnish them a list of names of legislators who were able to secure loans upon the guaranty of then First Lady Imelda Marcos, as well as certified true copies of documents evidencing the loans. In granting the petition for mandamus, the Court said that the public nature of the loanable funds of the GSIS and the public office held by the alleged borrowers make the information sought clearly a matter of public interest and concern. However, the right to access such records does not accord them a right to compel custodians of official records to prepare lists, abstracts, summaries and the like in their desire to acquire information or matters of public concern.

CHAVEZ VS PEA

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 133250           July 9, 2002

FRANCISCO I. CHAVEZ, petitioner, vs.PUBLIC ESTATES AUTHORITY and AMARI COASTAL BAY DEVELOPMENT CORPORATION, respondents.

CARPIO, J.:

This is an original Petition for Mandamus with prayer for a writ of preliminary injunction and a temporary restraining order. The petition seeks to compel the Public Estates Authority ("PEA" for brevity) to disclose all facts on PEA's then on-going renegotiations with Amari Coastal Bay and Development Corporation ("AMARI" for brevity) to reclaim portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new agreement with AMARI involving such reclamation.

The Facts

On November 20, 1973, the government, through the Commissioner of Public Highways, signed a contract with the Construction and Development Corporation of the Philippines ("CDCP" for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The contract also included the construction of Phases I and II of the Manila-Cavite Coastal Road. CDCP obligated itself to carry out all the works in consideration of fifty percent of the total reclaimed land.

On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree No. 1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore and submerged areas," and "to develop, improve, acquire, x x x lease and sell any and all kinds of lands."1 On the same date, then President Marcos issued Presidential Decree No. 1085 transferring to PEA the "lands reclaimed in the foreshore and offshore of the Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP).

On December 29, 1981, then President Marcos issued a memorandum directing PEA to amend its contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be funded and owned by PEA." Accordingly, PEA and CDCP executed a Memorandum of Agreement dated December 29, 1981, which stated:

"(i) CDCP shall undertake all reclamation, construction, and such other works in the MCCRRP as may be agreed upon by the parties, to be paid according to progress of works on a unit price/lump sum basis for items of work to be agreed upon, subject to price escalation, retention and other terms and conditions provided for in Presidential Decree No. 1594. All the financing required for such works shall be provided by PEA.

x x x

(iii) x x x CDCP shall give up all its development rights and hereby agrees to cede and transfer in favor of PEA, all of the rights, title, interest and participation of CDCP in and to all the areas of land reclaimed by CDCP in the MCCRRP as of December 30, 1981 which have not yet been sold, transferred or otherwise disposed of by CDCP as of said date, which areas consist of approximately Ninety-Nine Thousand Four Hundred Seventy Three (99,473) square meters in the Financial Center Area covered by land pledge No. 5 and approximately Three Million Three Hundred Eighty Two Thousand Eight Hundred Eighty Eight (3,382,888) square meters of reclaimed areas at varying elevations above Mean Low Water Level located outside the Financial Center Area and the First Neighborhood Unit."3

On January 19, 1988, then President Corazon C. Aquino issued Special Patent No. 3517, granting and transferring to PEA "the parcels of land so reclaimed under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP) containing a total area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters." Subsequently, on April 9, 1988, the Register of Deeds of the Municipality of Parañaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the name of PEA, covering the three reclaimed islands known as the "Freedom Islands" located at the southern portion of the Manila-Cavite Coastal Road, Parañaque City. The Freedom Islands have a total land area of One Million Five Hundred Seventy Eight Thousand Four Hundred and Forty One (1,578,441) square meters or 157.841 hectares.

On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with AMARI, a private corporation, to develop the Freedom Islands. The JVA also required the reclamation of an additional 250 hectares of submerged areas surrounding these islands to complete the configuration in the Master Development Plan of the Southern Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA through negotiation without public bidding.4 On April 28, 1995, the Board of

Directors of PEA, in its Resolution No. 1245, confirmed the JVA.5On June 8, 1995, then President Fidel V. Ramos, through then Executive Secretary Ruben Torres, approved the JVA.6

On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege speech in the Senate and denounced the JVA as the "grandmother of all scams." As a result, the Senate Committee on Government Corporations and Public Enterprises, and the Committee on Accountability of Public Officers and Investigations, conducted a joint investigation. The Senate Committees reported the results of their investigation in Senate Committee Report No. 560 dated September 16, 1997.7 Among the conclusions of their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the public domain which the government has not classified as alienable lands and therefore PEA cannot alienate these lands; (2) the certificates of title covering the Freedom Islands are thus void, and (3) the JVA itself is illegal.

On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative Order No. 365 creating a Legal Task Force to conduct a study on the legality of the JVA in view of Senate Committee Report No. 560. The members of the Legal Task Force were the Secretary of Justice,8 the Chief Presidential Legal Counsel,9 and the Government Corporate Counsel.10 The Legal Task Force upheld the legality of the JVA, contrary to the conclusions reached by the Senate Committees.11

On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that there were on-going renegotiations between PEA and AMARI under an order issued by then President Fidel V. Ramos. According to these reports, PEA Director Nestor Kalaw, PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz composed the negotiating panel of PEA.

On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with Application for the Issuance of a Temporary Restraining Order and Preliminary Injunction docketed as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed the petition "for unwarranted disregard of judicial hierarchy, without prejudice to the refiling of the case before the proper court."12

On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed the instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order. Petitioner contends the government stands to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of the people to information on matters of public concern. Petitioner assails the sale to AMARI of lands of the public domain as a blatant violation of Section 3, Article XII of the 1987 Constitution prohibiting the sale of alienable lands of the public domain to private corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of pesos in properties of the State that are of public dominion.

After several motions for extension of time,13 PEA and AMARI filed their Comments on October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998, petitioner filed an Omnibus Motion: (a) to require PEA to submit the terms of the renegotiated PEA-AMARI contract; (b) for issuance of a temporary restraining order; and (c) to set the case for hearing on oral argument. Petitioner filed a Reiterative Motion for Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution dated June 22, 1999.

In a Resolution dated March 23, 1999, the Court gave due course to the petition and required the parties to file their respective memoranda.

On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement ("Amended JVA," for brevity). On May 28, 1999, the Office of the President under the administration of then President Joseph E. Estrada approved the Amended JVA.

Due to the approval of the Amended JVA by the Office of the President, petitioner now prays that on "constitutional and statutory grounds the renegotiated contract be declared null and void."14

The Issues

The issues raised by petitioner, PEA15 and AMARI16 are as follows:

I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE MOOT AND ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;

II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO OBSERVE THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS;

III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES;

IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;

V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL AGREEMENT;

VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS, RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987 CONSTITUTION; AND

VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE ISSUE OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT.

The Court's Ruling

First issue: whether the principal reliefs prayed for in the petition are moot and academic because of subsequent events.

The petition prays that PEA publicly disclose the "terms and conditions of the on-going negotiations for a new agreement." The petition also prays that the Court enjoin PEA from "privately entering into, perfecting and/or executing any new agreement with AMARI."

PEA and AMARI claim the petition is now moot and academic because AMARI furnished petitioner on June 21, 1999 a copy of the signed Amended JVA containing the terms and conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer for a public disclosure of the renegotiations. Likewise, petitioner's prayer to enjoin the signing of the Amended JVA is now moot because PEA and AMARI have already signed the Amended JVA on March 30, 1999. Moreover, the Office of the President has approved the Amended JVA on May 28, 1999.

Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply fast-tracking the signing and approval of the Amended JVA before the Court could act on the issue. Presidential approval does not resolve the constitutional issue or remove it from the ambit of judicial review.

We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the President cannot operate to moot the petition and divest the Court of its jurisdiction. PEA and AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of the Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the meantime PEA and AMARI have signed one in violation of the Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its violation of Section 3, Article XII of the Constitution, which prohibits the government from alienating lands of the public domain to private corporations. If the Amended JVA indeed violates the Constitution, it is the duty of the Court to enjoin its implementation, and if already implemented, to annul the effects of such unconstitutional contract.

The Amended JVA is not an ordinary commercial contract but one which seeks to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged areas of Manila Bay to a single private corporation. It now becomes more compelling for the Court to resolve the issue to insure the government itself does not violate a provision of the Constitution intended to safeguard the national patrimony. Supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the Constitution. In the instant case, if the Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of title and ownership of alienable lands of the public domain in the name of AMARI. Even in cases where supervening events had made the cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to formulate controlling principles to guide the bench, bar, and the public.17

Also, the instant petition is a case of first impression. All previous decisions of the Court involving Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the 1973 Constitution,18 covered agricultural landssold to private corporations which acquired the lands from private parties. The transferors of the private corporations claimed or could claim the right to judicial confirmation of their imperfect titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant case, AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and submerged areas for non-agricultural purposes by purchase under PD No. 1084 (charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the Amended JVA constitute the consideration for the purchase. Neither AMARI nor PEA can claim judicial confirmation of their titles because the lands covered by the Amended JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title requires open, continuous, exclusive and notorious occupation of agricultural lands of the public domain for at least thirty years since June 12, 1945 or earlier. Besides, the deadline for filing applications for judicial confirmation of imperfect title expired on December 31, 1987.20

Lastly, there is a need to resolve immediately the constitutional issue raised in this petition because of the possible transfer at any time by PEA to AMARI of title and ownership to portions of the reclaimed lands. Under the Amended JVA, PEA is obligated to transfer to AMARI the latter's seventy percent proportionate share in the reclaimed areas as the reclamation progresses. The Amended JVA even allows AMARI to mortgage at any time the entirereclaimed area to raise financing for the reclamation project.21

Second issue: whether the petition merits dismissal for failing to observe the principle governing the hierarchy of courts.

PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly from the Court. The principle of hierarchy of courts applies generally to cases involving factual questions. As it is not a trier of facts, the Court cannot entertain cases involving factual issues. The instant case, however, raises constitutional issues of transcendental importance to the public.22 The Court can resolve this case without determining any factual issue related to the case. Also, the instant case is a petition for mandamus which falls under the original jurisdiction of the Court under Section 5, Article VIII of the Constitution. We resolve to exercise primary jurisdiction over the instant case.

Third issue: whether the petition merits dismissal for non-exhaustion of administrative remedies.

PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose publicly certain information without first asking PEA the needed information. PEA claims petitioner's direct resort to the Court violates the principle of exhaustion of administrative remedies. It also violates the rule that mandamus may issue only if there is no other plain, speedy and adequate remedy in the ordinary course of law.

PEA distinguishes the instant case from Tañada v. Tuvera23 where the Court granted the petition for mandamus even if the petitioners there did not initially demand from the Office of the President the publication of the presidential decrees. PEA points out that in Tañada, the Executive Department had an affirmative statutory duty under Article 2 of the Civil Code24 and Section 1 of Commonwealth Act No. 63825 to publish the presidential decrees. There was, therefore, no need for the petitioners in Tañada to make an initial demand from the Office of the President. In the instant case, PEA claims it has no affirmative statutory duty to disclose publicly information about its renegotiation of the JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of administrative remedies to the instant case in view of the failure of petitioner here to demand initially from PEA the needed information.

The original JVA sought to dispose to AMARI public lands held by PEA, a government corporation. Under Section 79 of the Government Auditing Code,26 the disposition of government lands to private parties requires public bidding. PEA was under a positive legal duty to disclose to the public the terms and conditions for the sale of its lands. The law obligated PEA to make this public disclosure even without demand from petitioner or from anyone. PEA failed to make this public disclosure because the original JVA, like the Amended JVA, was the result of a negotiated contract, not of a public bidding. Considering that PEA had an affirmative statutory duty to make the public disclosure, and was even in breach of this legal duty, petitioner had the right to seek direct judicial intervention.

Moreover, and this alone is determinative of this issue, the principle of exhaustion of administrative remedies does not apply when the issue involved is a purely legal or constitutional question.27 The principal issue in the instant case is the capacity of AMARI to acquire lands held by PEA in view of the constitutional ban prohibiting the alienation of lands of the public domain to private corporations. We rule that the principle of exhaustion of administrative remedies does not apply in the instant case.

Fourth issue: whether petitioner has locus standi to bring this suit

PEA argues that petitioner has no standing to institute mandamus proceedings to enforce his constitutional right to information without a showing that PEA refused to perform an affirmative duty imposed on PEA by the Constitution. PEA also claims that petitioner has not shown that he will suffer any concrete injury because of the signing or implementation of the Amended JVA. Thus, there is no actual controversy requiring the exercise of the power of judicial review.

The petitioner has standing to bring this taxpayer's suit because the petition seeks to compel PEA to comply with its constitutional duties. There are two constitutional issues involved here. First is the right of citizens to information on matters of public concern. Second is the application of a constitutional provision intended to insure the equitable distribution of alienable lands of the public domain among Filipino citizens. The thrust of the first issue is to compel PEA to disclose publicly information on the sale of government lands worth billions of pesos, information which the Constitution and statutory law mandate PEA to disclose. The thrust of the second issue is to prevent PEA from alienating hundreds of hectares of alienable lands of the public domain in violation of the Constitution, compelling PEA to comply with a constitutional duty to the nation.

Moreover, the petition raises matters of transcendental importance to the public. In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on matters of transcendental importance to the public, thus -

"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of the Marcoses is an issue of 'transcendental importance to the public.' He asserts that ordinary taxpayers have a right to initiate and prosecute actions questioning the validity of acts or orders of government agencies or instrumentalities, if the issues raised are of 'paramount public interest,' and if they 'immediately affect the social, economic and moral well being of the people.'

Moreover, the mere fact that he is a citizen satisfies the requirement of personal interest, when the proceeding involves the assertion of a public right, such as in this case. He invokes several decisions of this Court which have set aside the procedural matter of locus standi, when the subject of the case involved public interest.

x x x

In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the object of mandamus is to obtain the enforcement of a public duty, the people are regarded as the real parties in interest; and because it is sufficient that petitioner is a citizen and as such is interested in the execution of the laws, he need not show that he has any legal or special interest in the result of the action. In the aforesaid case, the petitioners sought to enforce their right to be informed on matters of public concern, a right then recognized in Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal standing, the Court declared that the right they sought to be enforced 'is a public right recognized by no less than the fundamental law of the land.'

Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that 'when a mandamus proceeding involves the assertion of a public right, the requirement of personal interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the general 'public' which possesses the right.'

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been involved under the questioned contract for the development, management and operation of the Manila International Container Terminal, 'public interest [was] definitely involved considering the important role [of the subject contract] . . . in the economic development of the country and the magnitude of the financial consideration involved.' We concluded that, as a consequence, the disclosure provision in the Constitution would constitute sufficient authority for upholding the petitioner's standing.

Similarly, the instant petition is anchored on the right of the people to information and access to official records, documents and papers — a right guaranteed under Section 7, Article III of the 1987 Constitution. Petitioner, a former solicitor general, is a Filipino citizen. Because of the satisfaction of the two basic requisites laid down by decisional law to sustain petitioner's legal standing, i.e. (1) the enforcement of a public right (2) espoused by a Filipino citizen, we rule that the petition at bar should be allowed."

We rule that since the instant petition, brought by a citizen, involves the enforcement of constitutional rights - to information and to the equitable diffusion of natural resources - matters of transcendental public importance, the petitioner has the requisite locus standi.

Fifth issue: whether the constitutional right to information includes official information on on-going negotiations before a final agreement.

Section 7, Article III of the Constitution explains the people's right to information on matters of public concern in this manner:

"Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law." (Emphasis supplied)

The State policy of full transparency in all transactions involving public interest reinforces the people's right to information on matters of public concern. This State policy is expressed in Section 28, Article II of the Constitution, thus:

"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest." (Emphasis supplied)

These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations of the government, as well as provide the people sufficient information to exercise effectively other constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If the government does not disclose its official acts, transactions and decisions to citizens, whatever citizens say, even if expressed without any restraint, will be speculative and amount to nothing. These twin provisions are also essential to hold public officials "at all times x x x accountable to the people,"29 for unless citizens have the proper information, they cannot hold public officials accountable for anything. Armed with the right information, citizens can participate in public discussions leading to the formulation of government policies and their effective implementation. An informed citizenry is essential to the existence and proper functioning of any democracy. As explained by the Court inValmonte v. Belmonte, Jr.30 –

"An essential element of these freedoms is to keep open a continuing dialogue or process of communication between the government and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the people's will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information relating thereto can such bear fruit."

PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to information is limited to "definite propositions of the government." PEA maintains the right does not include access to "intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the 'exploratory stage'."

Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage or before the closing of the transaction. To support its contention, AMARI cites the following discussion in the 1986 Constitutional Commission:

"Mr. Suarez. And when we say 'transactions' which should be distinguished from contracts, agreements, or treaties or whatever, does the Gentleman refer to the steps leading to the consummation of the contract, or does he refer to the contract itself?

Mr. Ople: The 'transactions' used here, I suppose is generic and therefore, it can cover both steps leading to a contract and already a consummated contract, Mr. Presiding Officer.

Mr. Suarez: This contemplates inclusion of negotiations leading to the consummation of the transaction.

Mr. Ople: Yes, subject only to reasonable safeguards on the national interest.

Mr. Suarez: Thank you."32 (Emphasis supplied)

AMARI argues there must first be a consummated contract before petitioner can invoke the right. Requiring government officials to reveal their deliberations at the pre-decisional stage will degrade the quality of decision-making in government agencies. Government officials will hesitate to express their real sentiments during deliberations if there is immediate public dissemination of their discussions, putting them under all kinds of pressure before they decide.

We must first distinguish between information the law on public bidding requires PEA to disclose publicly, and information the constitutional right to information requires PEA to release to the public. Before the consummation of the contract, PEA must, on its own and without demand from anyone, disclose to the public matters relating to the disposition of its property. These include the size, location, technical description and nature of the property being disposed of, the terms and conditions of the disposition, the parties qualified to bid, the minimum price and similar information. PEA must prepare all these data and disclose them to the public at the start of the disposition process, long before the consummation of the contract, because the Government Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this information at any time during the bidding process.

Information, however, on on-going evaluation or review of bids or proposals being undertaken by the bidding or review committee is not immediately accessible under the right to information. While the evaluation or review is still on-going, there are no "official acts, transactions, or decisions" on the bids or proposals. However, once the committee makes its official recommendation, there arises a "definite proposition" on the part of the government. From this moment, the public's right to information attaches, and any citizen can access all the non-proprietary information leading to such definite proposition. In Chavez v. PCGG,33 the Court ruled as follows:

"Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG and its officers, as well as other government representatives, to disclose

sufficient public information on any proposed settlement they have decided to take up with the ostensible owners and holders of ill-gotten wealth. Such information, though, must pertain to definite propositions of the government, not necessarily to intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the "exploratory" stage. There is need, of course, to observe the same restrictions on disclosure of information in general, as discussed earlier – such as on matters involving national security, diplomatic or foreign relations, intelligence and other classified information." (Emphasis supplied)

Contrary to AMARI's contention, the commissioners of the 1986 Constitutional Commission understood that the right to information "contemplates inclusion of negotiations leading to the consummation of the transaction." Certainly, a consummated contract is not a requirement for the exercise of the right to information. Otherwise, the people can never exercise the right if no contract is consummated, and if one is consummated, it may be too late for the public to expose its defects. 1âwphi1.nêt

Requiring a consummated contract will keep the public in the dark until the contract, which may be grossly disadvantageous to the government or even illegal, becomes a fait accompli. This negates the State policy of full transparency on matters of public concern, a situation which the framers of the Constitution could not have intended. Such a requirement will prevent the citizenry from participating in the public discussion of any proposedcontract, effectively truncating a basic right enshrined in the Bill of Rights. We can allow neither an emasculation of a constitutional right, nor a retreat by the State of its avowed "policy of full disclosure of all its transactions involving public interest."

The right covers three categories of information which are "matters of public concern," namely: (1) official records; (2) documents and papers pertaining to official acts, transactions and decisions; and (3) government research data used in formulating policies. The first category refers to any document that is part of the public records in the custody of government agencies or officials. The second category refers to documents and papers recording, evidencing, establishing, confirming, supporting, justifying or explaining official acts, transactions or decisions of government agencies or officials. The third category refers to research data, whether raw, collated or processed, owned by the government and used in formulating government policies.

The information that petitioner may access on the renegotiation of the JVA includes evaluation reports, recommendations, legal and expert opinions, minutes of meetings, terms of reference and other documents attached to such reports or minutes, all relating to the JVA. However, the right to information does not compel PEA to prepare lists, abstracts, summaries and the like relating to the renegotiation of the JVA.34 The right only affords access to records, documents and papers, which means the opportunity to inspect and copy them. One who exercises the right must copy the records, documents and papers at his expense. The exercise of the right is also subject to reasonable regulations to protect the integrity of the public records and to minimize disruption to government operations, like rules specifying when and how to conduct the inspection and copying.35

The right to information, however, does not extend to matters recognized as privileged information under the separation of powers.36 The right does not also apply to information on military and diplomatic secrets, information affecting national security, and information on investigations of crimes by law enforcement agencies before the prosecution of the accused, which courts have long recognized as confidential.37 The right may also be subject to other limitations that Congress may impose by law.

There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the separation of powers. The information does not cover Presidential conversations, correspondences, or discussions during closed-door Cabinet meetings which, like internal

deliberations of the Supreme Court and other collegiate courts, or executive sessions of either house of Congress,38 are recognized as confidential. This kind of information cannot be pried open by a co-equal branch of government. A frank exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by interested parties, is essential to protect the independence of decision-making of those tasked to exercise Presidential, Legislative and Judicial power.39 This is not the situation in the instant case.

We rule, therefore, that the constitutional right to information includes official information on on-going negotiations before a final contract. The information, however, must constitute definite propositions by the government and should not cover recognized exceptions like privileged information, military and diplomatic secrets and similar matters affecting national security and public order.40 Congress has also prescribed other limitations on the right to information in several legislations.41

Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of lands, reclaimed or to be reclaimed, violate the Constitution.

The Regalian Doctrine

The ownership of lands reclaimed from foreshore and submerged areas is rooted in the Regalian doctrine which holds that the State owns all lands and waters of the public domain. Upon the Spanish conquest of the Philippines, ownership of all "lands, territories and possessions" in the Philippines passed to the Spanish Crown.42 The King, as the sovereign ruler and representative of the people, acquired and owned all lands and territories in the Philippines except those he disposed of by grant or sale to private individuals.

The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting, however, the State, in lieu of the King, as the owner of all lands and waters of the public domain. The Regalian doctrine is the foundation of the time-honored principle of land ownership that "all lands that were not acquired from the Government, either by purchase or by grant, belong to the public domain."43 Article 339 of the Civil Code of 1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian doctrine.

Ownership and Disposition of Reclaimed Lands

The Spanish Law of Waters of 1866 was the first statutory law governing the ownership and disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine Commission enacted Act No. 1654 which provided for the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. Later, on November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. On November 7, 1936, the National Assembly passed Commonwealth Act No. 141, also known as the Public Land Act, which authorized the lease, but not the sale, of reclaimed lands of the government to corporations and individuals. CA No. 141 continues to this day as the general law governing the classification and disposition of lands of the public domain.

The Spanish Law of Waters of 1866 and the Civil Code of 1889

Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters within the maritime zone of the Spanish territory belonged to the public domain for public use.44 The Spanish Law of Waters of 1866 allowed the reclamation of the sea under Article 5, which provided as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos or private persons, with proper permission, shall become the property of the party constructing such works, unless otherwise provided by the terms of the grant of authority."

Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party undertaking the reclamation, provided the government issued the necessary permit and did not reserve ownership of the reclaimed land to the State.

Article 339 of the Civil Code of 1889 defined property of public dominion as follows:

"Art. 339. Property of public dominion is –

1. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, riverbanks, shores, roadsteads, and that of a similar character;

2. That belonging exclusively to the State which, without being of general public use, is employed in some public service, or in the development of the national wealth, such as walls, fortresses, and other works for the defense of the territory, and mines, until granted to private individuals."

Property devoted to public use referred to property open for use by the public. In contrast, property devoted to public service referred to property used for some specific public service and open only to those authorized to use the property.

Property of public dominion referred not only to property devoted to public use, but also to property not so used but employed to develop the national wealth. This class of property constituted property of public dominion although employed for some economic or commercial activity to increase the national wealth.

Article 341 of the Civil Code of 1889 governed the re-classification of property of public dominion into private property, to wit:

"Art. 341. Property of public dominion, when no longer devoted to public use or to the defense of the territory, shall become a part of the private property of the State."

This provision, however, was not self-executing. The legislature, or the executive department pursuant to law, must declare the property no longer needed for public use or territorial defense before the government could lease or alienate the property to private parties.45

Act No. 1654 of the Philippine Commission

On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the lease of reclaimed and foreshore lands. The salient provisions of this law were as follows:

"Section 1. The control and disposition of the foreshore as defined in existing law, and the title to all Government or public lands made or reclaimed by the Government by dredging or filling or otherwise throughout the Philippine Islands, shall be retained by the Government without prejudice to vested rights and without prejudice to rights conceded to the City of Manila in the Luneta Extension.

Section 2. (a) The Secretary of the Interior shall cause all Government or public lands made or reclaimed by the Government by dredging or filling or otherwise to be divided into lots or blocks, with the necessary streets and alleyways located thereon, and shall cause plats and plans of such surveys to be prepared and filed with the Bureau of Lands.

(b) Upon completion of such plats and plans the Governor-General shall give notice to the public that such parts of the lands so made or reclaimed as are not needed for public purposes will be leased for commercial and business purposes, x x x.

x x x

(e) The leases above provided for shall be disposed of to the highest and best bidder therefore, subject to such regulations and safeguards as the Governor-General may by executive order prescribe." (Emphasis supplied)

Act No. 1654 mandated that the government should retain title to all lands reclaimed by the government. The Act also vested in the government control and disposition of foreshore lands. Private parties could lease lands reclaimed by the government only if these lands were no longer needed for public purpose. Act No. 1654 mandated public bidding in the lease of government reclaimed lands. Act No. 1654 made government reclaimed lands sui generis in that unlike other public lands which the government could sell to private parties, these reclaimed lands were available only for lease to private parties.

Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866. Act No. 1654 did not prohibit private parties from reclaiming parts of the sea under Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private parties with government permission remained private lands.

Act No. 2874 of the Philippine Legislature

On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public Land Act.46 The salient provisions of Act No. 2874, on reclaimed lands, were as follows:

"Sec. 6. The Governor-General, upon the recommendation of the Secretary of Agriculture and Natural Resources, shall from time to time classify the lands of the public domain into –

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands, x x x.

Sec. 7. For the purposes of the government and disposition of alienable or disposable public lands, the Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall from time to time declare what lands are open to disposition or concession under this Act."

Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited or classified x x x.

x x x

Sec. 55. Any tract of land of the public domain which, being neither timber nor mineral land, shall be classified as suitable for residential purposes or for commercial, industrial, or other productive purposes other than agricultural purposes, and shall be open to disposition or concession, shall be disposed of under the provisions of this chapter, and not otherwise.

Sec. 56. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the Government by dredging, filling, or other means;

(b) Foreshore;

(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers;

(d) Lands not included in any of the foregoing classes.

x x x.

Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six shall be disposed of to private parties by lease only and not otherwise, as soon as the Governor-General, upon recommendation by the Secretary of Agriculture and Natural Resources, shall declare that the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied)

Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the public domain into x x x alienable or disposable"47 lands. Section 7 of the Act empowered the Governor-General to "declare what lands are open to disposition or concession." Section 8 of the Act limited alienable or disposable lands only to those lands which have been "officially delimited and classified."

Section 56 of Act No. 2874 stated that lands "disposable under this title48 shall be classified" as government reclaimed, foreshore and marshy lands, as well as other lands. All these lands, however, must be suitable for residential, commercial, industrial or other productive non-agricultural purposes. These provisions vested upon the Governor-General the power to classify inalienable lands of the public domain into disposable lands of the public domain. These provisions also empowered the Governor-General to classify further such disposable lands of the public domain into government reclaimed, foreshore or marshy lands of the public domain, as well as other non-agricultural lands.

Section 58 of Act No. 2874 categorically mandated that disposable lands of the public domain classified as government reclaimed, foreshore and marshy lands "shall be disposed of to private parties by lease only and not otherwise." The Governor-General, before allowing the lease of these lands to private parties, must formally declare that the lands were "not necessary for the public service." Act No. 2874 reiterated the State policy to lease and not to sell government reclaimed, foreshore and marshy lands of the public domain, a policy first enunciated in 1907 in Act No. 1654. Government reclaimed, foreshore and marshy lands remained sui generis, as the only alienable or disposable lands of the public domain that the government could not sell to private parties.

The rationale behind this State policy is obvious. Government reclaimed, foreshore and marshy public lands for non-agricultural purposes retain their inherent potential as areas for public service. This is the reason the government prohibited the sale, and only allowed the lease, of these lands to private parties. The State always reserved these lands for some future public service.

Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore and marshy lands into other non-agricultural lands under Section 56 (d). Lands falling under Section 56 (d) were the only lands for non-agricultural purposes the government could sell to private parties. Thus, under Act No. 2874, the government could not sell government reclaimed, foreshore and marshy lands to private parties, unless the legislature passed a law allowing their sale.49

Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by private parties with government permission remained private lands.

Dispositions under the 1935 Constitution

On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino people. The 1935 Constitution, in adopting the Regalian doctrine, declared in Section 1, Article XIII, that –

"Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and limit of the grant." (Emphasis supplied)

The 1935 Constitution barred the alienation of all natural resources except public agricultural lands, which were the only natural resources the State could alienate. Thus, foreshore lands, considered part of the State's natural resources, became inalienable by constitutional fiat, available only for lease for 25 years, renewable for another 25 years. The government could alienate foreshore lands only after these lands were reclaimed and classified as alienable agricultural lands of the public domain. Government reclaimed and marshy lands of the public domain, being neither timber nor mineral lands, fell under the classification of public agricultural lands.50 However, government reclaimed and marshy lands, although subject to classification as disposable public agricultural lands, could only be leased and not sold to private parties because of Act No. 2874.

The prohibition on private parties from acquiring ownership of government reclaimed and marshy lands of the public domain was only a statutory prohibition and the legislature could therefore remove such prohibition. The 1935 Constitution did not prohibit individuals and corporations from acquiring government reclaimed and marshy lands of the public domain that were classified as agricultural lands under existing public land laws. Section 2, Article XIII of the 1935 Constitution provided as follows:

"Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands in excess of one thousand and twenty four hectares, nor may any individual acquire such lands by purchase in excess of one hundred and forty hectares, or by lease in excess of one thousand and twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing, not exceeding two thousand hectares, may be leased to an individual, private corporation, or association." (Emphasis supplied)

Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58 of Act No. 2874 to open for sale to private parties government reclaimed and marshy lands of the public domain. On the contrary, the legislature continued the long established State policy of retaining for the government title and ownership of government reclaimed and marshy lands of the public domain.

Commonwealth Act No. 141 of the Philippine National Assembly

On November 7, 1936, the National Assembly approved Commonwealth Act No. 141, also known as the Public Land Act, which compiled the then existing laws on lands of the public domain. CA No. 141, as amended, remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands.51

Section 6 of CA No. 141 empowers the President to classify lands of the public domain into "alienable or disposable"52 lands of the public domain, which prior to such classification are inalienable and outside the commerce of man. Section 7 of CA No. 141 authorizes the President to "declare what lands are open to disposition or concession." Section 8 of CA No. 141 states that the government can declare open for disposition or concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of CA No. 141 read as follows:

"Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and Commerce, shall from time to time classify the lands of the public domain into –

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands,

and may at any time and in like manner transfer such lands from one class to another,53 for the purpose of their administration and disposition.

Sec. 7. For the purposes of the administration and disposition of alienable or disposable public lands, the President, upon recommendation by the Secretary of Agriculture and Commerce, shall from time to time declare what lands are open to disposition or concession under this Act.

Sec. 8. Only those lands shall be declared open to disposition or concession which have been officially delimited and classified and, when practicable, surveyed, and which have not been reserved for public or quasi-public uses, nor appropriated by the Government, nor in any manner become private property, nor those on which a private right authorized and recognized by this Act or any other valid law may be claimed, or which, having been reserved or appropriated, have ceased to be so. x x x."

Thus, before the government could alienate or dispose of lands of the public domain, the President must first officially classify these lands as alienable or disposable, and then declare them open to disposition or concession. There must be no law reserving these lands for public or quasi-public uses.

The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy lands of the public domain, are as follows:

"Sec. 58. Any tract of land of the public domain which, being neither timber nor mineral land, is intended to be used for residential purposes or for commercial, industrial, or other productive purposes other than agricultural, and is open to disposition or concession, shall be disposed of under the provisions of this chapter and not otherwise.

Sec. 59. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the Government by dredging, filling, or other means;

(b) Foreshore;

(c) Marshy lands or lands covered with water bordering upon the shores or banks of navigable lakes or rivers;

(d) Lands not included in any of the foregoing classes.

Sec. 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person, corporation, or association authorized to purchase or lease public lands for agricultural purposes. x x x.

Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine shall be disposed of to private parties by lease only and not otherwise, as soon as the President, upon recommendation by the Secretary of Agriculture, shall declare that the same are not necessary for the public service and are open to disposition under this chapter. The lands included in class (d) may be disposed of by sale or lease under the provisions of this Act." (Emphasis supplied)

Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution, Section 58 of Act No. 2874 prohibiting the sale of government reclaimed, foreshore and marshy disposable lands of the public domain. All these lands are intended for residential, commercial, industrial or other non-agricultural purposes. As before, Section 61 allowed only the lease of such lands to private parties. The government could sell to private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for non-agricultural purposes not classified as government reclaimed, foreshore and marshy disposable lands of the public domain. Foreshore lands, however, became inalienable under the 1935 Constitution which only allowed the lease of these lands to qualified private parties.

Section 58 of CA No. 141 expressly states that disposable lands of the public domain intended for residential, commercial, industrial or other productive purposes other than agricultural "shall be disposed of under the provisions of this chapter and not otherwise." Under Section 10 of CA No. 141, the term "disposition" includes lease of the land. Any disposition of government reclaimed, foreshore and marshy disposable lands for non-agricultural purposes must comply with Chapter IX, Title III of CA No. 141,54 unless a subsequent law amended or repealed these provisions.

In his concurring opinion in the landmark case of Republic Real Estate Corporation v. Court of Appeals,55Justice Reynato S. Puno summarized succinctly the law on this matter, as follows:

"Foreshore lands are lands of public dominion intended for public use. So too are lands reclaimed by the government by dredging, filling, or other means. Act 1654 mandated that the control and disposition of the foreshore and lands under water remained in the national government. Said law allowed only the 'leasing' of reclaimed land. The Public Land Acts of 1919 and 1936 also declared that the foreshore and lands reclaimed by the government were to be "disposed of to private parties by lease only and not otherwise." Before leasing, however, the Governor-General, upon recommendation of the Secretary of Agriculture and Natural Resources, had first to determine that the land reclaimed was not necessary for the public service. This requisite must have been met before the land could be disposed of. But even then, the foreshore and lands under water were not to be alienated and sold to private parties. The disposition of the reclaimed land was only by lease. The land remained property of the State." (Emphasis supplied)

As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has remained in effect at present."

The State policy prohibiting the sale to private parties of government reclaimed, foreshore and marshy alienable lands of the public domain, first implemented in 1907 was thus reaffirmed in CA No. 141 after the 1935 Constitution took effect. The prohibition on the sale of foreshore lands, however, became a constitutional edict under the 1935 Constitution. Foreshore lands became inalienable as natural resources of the State, unless reclaimed by the government and classified as agricultural lands of the public domain, in which case they would fall under the classification of government reclaimed lands.

After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of the public domain continued to be only leased and not sold to private parties.56 These lands remained sui generis, as the only alienable or disposable lands of the public domain the government could not sell to private parties.

Since then and until now, the only way the government can sell to private parties government reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law authorizing such sale. CA No. 141 does not authorize the President to reclassify government reclaimed and marshy lands into other non-agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only alienable or disposable lands for non-agricultural purposes that the government could sell to private parties.

Moreover, Section 60 of CA No. 141 expressly requires congressional authority before lands under Section 59 that the government previously transferred to government units or entities could be sold to private parties. Section 60 of CA No. 141 declares that –

"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or lease is requested, and shall not exceed one hundred and forty-four hectares: Provided, however, That this limitation shall not apply to grants, donations, or transfers made to a province, municipality or branch or subdivision of the Government for the purposes deemed by said entities conducive to the public interest;but the land so granted, donated, or transferred to a province, municipality or branch or subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress: x x x." (Emphasis supplied)

The congressional authority required in Section 60 of CA No. 141 mirrors the legislative authority required in Section 56 of Act No. 2874.

One reason for the congressional authority is that Section 60 of CA No. 141 exempted government units and entities from the maximum area of public lands that could be acquired from the State. These government units and entities should not just turn around and sell these lands to private parties in violation of constitutional or statutory limitations. Otherwise, the transfer of lands for non-agricultural purposes to government units and entities could be used to circumvent constitutional limitations on ownership of alienable or disposable lands of the public domain. In the same manner, such transfers could also be used to evade the statutory prohibition in CA No. 141 on the sale of government reclaimed and marshy lands of the public domain to private parties. Section 60 of CA No. 141 constitutes by operation of law a lien on these lands.57

In case of sale or lease of disposable lands of the public domain falling under Section 59 of CA No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA No. 141 provide as follows:

"Sec. 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce (now the Secretary of Natural Resources) for authority to dispose of the same. Upon receipt of such authority, the Director of Lands shall give notice by public advertisement in the same manner as in the case of leases or sales of agricultural public land, x x x.

Sec. 67. The lease or sale shall be made by oral bidding; and adjudication shall be made to the highest bidder. x x x." (Emphasis supplied)

Thus, CA No. 141 mandates the Government to put to public auction all leases or sales of alienable or disposable lands of the public domain.58

Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the Spanish Law of Waters of 1866. Private parties could still reclaim portions of the sea with government permission. However, the reclaimed land could become private land only if classified as alienable agricultural land of the public domain open to disposition under CA No. 141. The 1935 Constitution prohibited the alienation of all natural resources except public agricultural lands.

The Civil Code of 1950

The Civil Code of 1950 readopted substantially the definition of property of public dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950 state that –

"Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.

x x x.

Art. 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State."

Again, the government must formally declare that the property of public dominion is no longer needed for public use or public service, before the same could be classified as patrimonial property of the State.59 In the case of government reclaimed and marshy lands of the public domain, the declaration of their being disposable, as well as the manner of their disposition, is governed by the applicable provisions of CA No. 141.

Like the Civil Code of 1889, the Civil Code of 1950 included as property of public dominion those properties of the State which, without being for public use, are intended for public service or the "development of the national wealth." Thus, government reclaimed and marshy lands of the State, even if not employed for public use or public service, if developed to enhance the national wealth, are classified as property of public dominion.

Dispositions under the 1973 Constitution

The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the Regalian doctrine. Section 8, Article XIV of the 1973 Constitution stated that –

"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State. With the exception of agricultural, industrial or commercial, residential, and resettlement lands of the public domain, natural resources shall not be alienated, and no license, concession, or lease for the exploration, development, exploitation, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for not more than twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases, beneficial use may be the measure and the limit of the grant." (Emphasis supplied)

The 1973 Constitution prohibited the alienation of all natural resources with the exception of "agricultural, industrial or commercial, residential, and resettlement lands of the public domain." In contrast, the 1935 Constitution barred the alienation of all natural resources except "public agricultural lands." However, the term "public agricultural lands" in the 1935 Constitution encompassed industrial, commercial, residential and resettlement lands of the public domain.60 If the land of public domain were neither timber nor mineral land, it would fall under the classification of agricultural land of the public domain. Both the 1935 and 1973 Constitutions, therefore, prohibited the alienation of all natural resources except agricultural lands of the public domain.

The 1973 Constitution, however, limited the alienation of lands of the public domain to individuals who were citizens of the Philippines. Private corporations, even if wholly owned by Philippine citizens, were no longer allowed to acquire alienable lands of the public domain unlike in the 1935 Constitution. Section 11, Article XIV of the 1973 Constitution declared that –

"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological, and development requirements of the natural resources, shall determine by law the size of land of the public domain which may be developed, held or acquired by, or leased to, any qualified individual, corporation, or association, and the conditions therefor. No private corporation or association may hold alienable lands of the public domain except by lease not to exceed one thousand hectares in area nor may any citizen hold such lands by

lease in excess of five hundred hectares or acquire by purchase, homestead or grant, in excess of twenty-four hectares. No private corporation or association may hold by lease, concession, license or permit, timber or forest lands and other timber or forest resources in excess of one hundred thousand hectares. However, such area may be increased by the Batasang Pambansa upon recommendation of the National Economic and Development Authority." (Emphasis supplied)

Thus, under the 1973 Constitution, private corporations could hold alienable lands of the public domain only through lease. Only individuals could now acquire alienable lands of the public domain, and private corporations became absolutely barred from acquiring any kind of alienable land of the public domain. The constitutional ban extended to all kinds of alienable lands of the public domain, while the statutory ban under CA No. 141 applied only to government reclaimed, foreshore and marshy alienable lands of the public domain.

PD No. 1084 Creating the Public Estates Authority

On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No. 1084 creating PEA, a wholly government owned and controlled corporation with a special charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and powers:

"Sec. 4. Purpose. The Authority is hereby created for the following purposes:

(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land;

(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government;

(c) To provide for, operate or administer such service as may be necessary for the efficient, economical and beneficial utilization of the above properties.

Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out the purposes for which it is created, have the following powers and functions:

(a)To prescribe its by-laws.

x x x

(i) To hold lands of the public domain in excess of the area permitted to private corporations by statute.

(j) To reclaim lands and to construct work across, or otherwise, any stream, watercourse, canal, ditch, flume x x x.

x x x

(o) To perform such acts and exercise such functions as may be necessary for the attainment of the purposes and objectives herein specified." (Emphasis supplied)

PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the public domain. Foreshore areas are those covered and uncovered by the ebb and flow of the tide.61 Submerged areas are those permanently under water regardless of the ebb and flow of the tide.62 Foreshore and submerged areas indisputably belong to the public domain63 and are inalienable unless reclaimed, classified as alienable lands open to disposition, and further declared no longer needed for public service.

The ban in the 1973 Constitution on private corporations from acquiring alienable lands of the public domain did not apply to PEA since it was then, and until today, a fully owned government corporation. The constitutional ban applied then, as it still applies now, only to "private corporations and associations." PD No. 1084 expressly empowers PEA "to hold lands of the public domain" even "in excess of the area permitted to private corporations by statute." Thus, PEA can hold title to private lands, as well as title to lands of the public domain.

In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the public domain, there must be legislative authority empowering PEA to sell these lands. This legislative authority is necessary in view of Section 60 of CA No.141, which states –

"Sec. 60. x x x; but the land so granted, donated or transferred to a province, municipality, or branch or subdivision of the Government shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title, except when authorized by Congress; x x x." (Emphasis supplied)

Without such legislative authority, PEA could not sell but only lease its reclaimed foreshore and submerged alienable lands of the public domain. Nevertheless, any legislative authority granted to PEA to sell its reclaimed alienable lands of the public domain would be subject to the constitutional ban on private corporations from acquiring alienable lands of the public domain. Hence, such legislative authority could only benefit private individuals.

Dispositions under the 1987 Constitution

The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the Regalian doctrine. The 1987 Constitution declares that all natural resources are "owned by the State," and except for alienable agricultural lands of the public domain, natural resources cannot be alienated. Sections 2 and 3, Article XII of the 1987 Constitution state that –

"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. x x x.

Section 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the uses which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead, or grant.

Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor." (Emphasis supplied)

The 1987 Constitution continues the State policy in the 1973 Constitution banning private corporations fromacquiring any kind of alienable land of the public domain. Like the 1973 Constitution, the 1987 Constitution allows private corporations to hold alienable lands of the public domain only through lease. As in the 1935 and 1973 Constitutions, the general law governing the lease to private corporations of reclaimed, foreshore and marshy alienable lands of the public domain is still CA No. 141.

The Rationale behind the Constitutional Ban

The rationale behind the constitutional ban on corporations from acquiring, except through lease, alienable lands of the public domain is not well understood. During the deliberations of the 1986 Constitutional Commission, the commissioners probed the rationale behind this ban, thus:

"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5 which says:

`No private corporation or association may hold alienable lands of the public domain except by lease, not to exceed one thousand hectares in area.'

If we recall, this provision did not exist under the 1935 Constitution, but this was introduced in the 1973 Constitution. In effect, it prohibits private corporations from acquiring alienable public lands. But it has not been very clear in jurisprudence what the reason for this is. In some of the cases decided in 1982 and 1983, it was indicated that the purpose of this is to prevent large landholdings. Is that the intent of this provision?

MR. VILLEGAS: I think that is the spirit of the provision.

FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were instances where the Iglesia ni Cristo was not allowed to acquire a mere 313-square meter land where a chapel stood because the Supreme Court said it would be in violation of this." (Emphasis supplied)

In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this way:

"Indeed, one purpose of the constitutional prohibition against purchases of public agricultural lands by private corporations is to equitably diffuse land ownership or to encourage 'owner-cultivatorship and the economic family-size farm' and to prevent a recurrence of cases like the instant case. Huge landholdings by corporations or private persons had spawned social unrest."

However, if the constitutional intent is to prevent huge landholdings, the Constitution could have simply limited the size of alienable lands of the public domain that corporations could acquire. The Constitution could have followed the limitations on individuals, who could acquire not more than 24 hectares of alienable lands of the public domain under the 1973 Constitution, and not more than 12 hectares under the 1987 Constitution.

If the constitutional intent is to encourage economic family-size farms, placing the land in the name of a corporation would be more effective in preventing the break-up of farmlands. If the farmland is registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing break-up of farmlands into smaller and smaller plots from one generation to the next.

In actual practice, the constitutional ban strengthens the constitutional limitation on individuals from acquiring more than the allowed area of alienable lands of the public domain. Without the constitutional ban, individuals who already acquired the maximum area of alienable lands of the public domain could easily set up corporations to acquire more alienable public lands. An individual could own as many corporations as his means would allow him. An individual could even hide his ownership of a corporation by putting his nominees as stockholders of the corporation. The corporation is a convenient vehicle to circumvent the constitutional limitation on acquisition by individuals of alienable lands of the public domain.

The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership of only a limited area of alienable land of the public domain to a qualified individual. This constitutional intent is safeguarded by the provision prohibiting corporations from acquiring alienable lands of the public domain, since the vehicle to circumvent the constitutional intent is removed. The available alienable public lands are gradually decreasing in the face of an ever-growing population. The most effective way to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the public domain only to individuals. This, it would seem, is the practical benefit arising from the constitutional ban.

The Amended Joint Venture Agreement

The subject matter of the Amended JVA, as stated in its second Whereas clause, consists of three properties, namely:

1. "[T]hree partially reclaimed and substantially eroded islands along Emilio Aguinaldo Boulevard in Paranaque and Las Pinas, Metro Manila, with a combined titled area of 1,578,441 square meters;"

2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;" and

3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or less to regularize the configuration of the reclaimed area."65

PEA confirms that the Amended JVA involves "the development of the Freedom Islands and further reclamation of about 250 hectares x x x," plus an option "granted to AMARI to subsequently reclaim another 350 hectares x x x."66

In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84 hectares of the 750-hectare reclamation project have been reclaimed, and the rest of the 592.15 hectares are still submerged areas forming part of Manila Bay.

Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for PEA's "actual cost" in partially reclaiming the Freedom Islands. AMARI will also complete, at its own expense, the reclamation of the Freedom Islands. AMARI will further shoulder all the reclamation costs of all the other areas, totaling 592.15 hectares, still to be reclaimed. AMARI and PEA will share, in the proportion of 70 percent and 30 percent, respectively, the total net usable area which is

defined in the Amended JVA as the total reclaimed area less 30 percent earmarked for common areas. Title to AMARI's share in the net usable area, totaling 367.5 hectares, will be issued in the name of AMARI. Section 5.2 (c) of the Amended JVA provides that –

"x x x, PEA shall have the duty to execute without delay the necessary deed of transfer or conveyance of the title pertaining to AMARI's Land share based on the Land Allocation Plan. PEA, when requested in writing by AMARI, shall then cause the issuance and delivery of the proper certificates of title covering AMARI's Land Share in the name of AMARI, x x x; provided, that if more than seventy percent (70%) of the titled area at any given time pertains to AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the titles pertaining to AMARI, until such time when a corresponding proportionate area of additional land pertaining to PEA has been titled." (Emphasis supplied)

Indisputably, under the Amended JVA AMARI will acquire and own a maximum of 367.5 hectares of reclaimed land which will be titled in its name.

To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint venture PEA's statutory authority, rights and privileges to reclaim foreshore and submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that –

"PEA hereby contributes to the joint venture its rights and privileges to perform Rawland Reclamation and Horizontal Development as well as own the Reclamation Area, thereby granting the Joint Venture the full and exclusive right, authority and privilege to undertake the Project in accordance with the Master Development Plan."

The Amended JVA is the product of a renegotiation of the original JVA dated April 25, 1995 and its supplemental agreement dated August 9, 1995.

The Threshold Issue

The threshold issue is whether AMARI, a private corporation, can acquire and own under the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in Manila Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which state that:

"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. x x x.

x x x

Section 3. x x x Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, x x x."(Emphasis supplied)

Classification of Reclaimed Foreshore and Submerged Areas

PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila Bay are alienable or disposable lands of the public domain. In its Memorandum,67 PEA admits that –

"Under the Public Land Act (CA 141, as amended), reclaimed lands are classified as alienable and disposable lands of the public domain:

'Sec. 59. The lands disposable under this title shall be classified as follows:

(a) Lands reclaimed by the government by dredging, filling, or other means;

x x x.'" (Emphasis supplied)

Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No. 365 admitted in its Report and Recommendation to then President Fidel V. Ramos, "[R]eclaimed lands are classified as alienable and disposable lands of the public domain."69 The Legal Task Force concluded that –

"D. Conclusion

Reclaimed lands are lands of the public domain. However, by statutory authority, the rights of ownership and disposition over reclaimed lands have been transferred to PEA, by virtue of which PEA, as owner, may validly convey the same to any qualified person without violating the Constitution or any statute.

The constitutional provision prohibiting private corporations from holding public land, except by lease (Sec. 3, Art. XVII,70 1987 Constitution), does not apply to reclaimed lands whose ownership has passed on to PEA by statutory grant."

Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas of Manila Bay are part of the "lands of the public domain, waters x x x and other natural resources" and consequently "owned by the State." As such, foreshore and submerged areas "shall not be alienated," unless they are classified as "agricultural lands" of the public domain. The mere reclamation of these areas by PEA does not convert these inalienable natural resources of the State into alienable or disposable lands of the public domain. There must be a law or presidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession. Moreover, these reclaimed lands cannot be classified as alienable or disposable if the law has reserved them for some public or quasi-public use.71

Section 8 of CA No. 141 provides that "only those lands shall be declared open to disposition or concession which have been officially delimited and classified."72 The President has the authority to classify inalienable lands of the public domain into alienable or disposable lands of the public domain, pursuant to Section 6 of CA No. 141. In Laurel vs. Garcia,73 the Executive Department attempted to sell the Roppongi property in Tokyo, Japan, which was acquired by the Philippine Government for use as the Chancery of the Philippine Embassy. Although the Chancery had transferred to another location thirteen years earlier, the Court still ruled that, under Article 42274of the Civil Code, a property of public dominion retains such character until formally declared otherwise. The Court ruled that –

"The fact that the Roppongi site has not been used for a long time for actual Embassy service does not automatically convert it to patrimonial property. Any such conversion happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property continues to be part of the public domain, not available for private appropriation or ownership 'until there is a formal declaration

on the part of the government to withdraw it from being such' (Ignacio v. Director of Lands, 108 Phil. 335 [1960]." (Emphasis supplied)

PD No. 1085, issued on February 4, 1977, authorized the issuance of special land patents for lands reclaimed by PEA from the foreshore or submerged areas of Manila Bay. On January 19, 1988 then President Corazon C. Aquino issued Special Patent No. 3517 in the name of PEA for the 157.84 hectares comprising the partially reclaimed Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title corresponding to land patents. To this day, these certificates of title are still in the name of PEA.

PD No. 1085, coupled with President Aquino's actual issuance of a special patent covering the Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and President Aquino's issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to qualified parties.

At the time then President Aquino issued Special Patent No. 3517, PEA had already reclaimed the Freedom Islands although subsequently there were partial erosions on some areas. The government had also completed the necessary surveys on these islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the land mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public domain into "agricultural, forest or timber, mineral lands, and national parks." Being neither timber, mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall under the classification of agricultural lands of the public domain. Under the 1987 Constitution, agricultural lands of the public domain are the only natural resources that the State may alienate to qualified private parties. All other natural resources, such as the seas or bays, are "waters x x x owned by the State" forming part of the public domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.

AMARI claims that the Freedom Islands are private lands because CDCP, then a private corporation, reclaimed the islands under a contract dated November 20, 1973 with the Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters of 1866, argues that "if the ownership of reclaimed lands may be given to the party constructing the works, then it cannot be said that reclaimed lands are lands of the public domain which the State may not alienate."75 Article 5 of the Spanish Law of Waters reads as follows:

"Article 5. Lands reclaimed from the sea in consequence of works constructed by the State, or by the provinces, pueblos or private persons, with proper permission, shall become the property of the party constructing such works, unless otherwise provided by the terms of the grant of authority." (Emphasis supplied)

Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from the sea only with "proper permission" from the State. Private parties could own the reclaimed land only if not "otherwise provided by the terms of the grant of authority." This clearly meant that no one could reclaim from the sea without permission from the State because the sea is property of public dominion. It also meant that the State could grant or withhold ownership of the reclaimed land because any reclaimed land, like the sea from which it emerged, belonged to the State. Thus, a private person reclaiming from the sea without permission from the State could not acquire ownership of the reclaimed land which would remain property of public dominion like the sea it replaced.76 Article 5 of the Spanish Law of Waters of 1866 adopted the time-honored principle of land

ownership that "all lands that were not acquired from the government, either by purchase or by grant, belong to the public domain."77

Article 5 of the Spanish Law of Waters must be read together with laws subsequently enacted on the disposition of public lands. In particular, CA No. 141 requires that lands of the public domain must first be classified as alienable or disposable before the government can alienate them. These lands must not be reserved for public or quasi-public purposes.78 Moreover, the contract between CDCP and the government was executed after the effectivity of the 1973 Constitution which barred private corporations from acquiring any kind of alienable land of the public domain. This contract could not have converted the Freedom Islands into private lands of a private corporation.

Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing the reclamation of areas under water and revested solely in the National Government the power to reclaim lands. Section 1 of PD No. 3-A declared that –

"The provisions of any law to the contrary notwithstanding, the reclamation of areas under water, whether foreshore or inland, shall be limited to the National Government or any person authorized by it under a proper contract. (Emphasis supplied)

x x x."

PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because reclamation of areas under water could now be undertaken only by the National Government or by a person contracted by the National Government. Private parties may reclaim from the sea only under a contract with the National Government, and no longer by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866.

Executive Order No. 525, issued on February 14, 1979, designated PEA as the National Government's implementing arm to undertake "all reclamation projects of the government," which "shall be undertaken by the PEA or through a proper contract executed by it with any person or entity." Under such contract, a private party receives compensation for reclamation services rendered to PEA. Payment to the contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject to the constitutional ban on private corporations from acquiring alienable lands of the public domain. The reclaimed land can be used as payment in kind only if the reclaimed land is first classified as alienable or disposable land open to disposition, and then declared no longer needed for public service.

The Amended JVA covers not only the Freedom Islands, but also an additional 592.15 hectares which are still submerged and forming part of Manila Bay. There is no legislative or Presidential act classifying these submerged areas as alienable or disposable lands of the public domain open to disposition. These submerged areas are not covered by any patent or certificate of title. There can be no dispute that these submerged areas form part of the public domain, and in their present state are inalienable and outside the commerce of man. Until reclaimed from the sea, these submerged areas are, under the Constitution, "waters x x x owned by the State," forming part of the public domain and consequently inalienable. Only when actually reclaimed from the sea can these submerged areas be classified as public agricultural lands, which under the Constitution are the only natural resources that the State may alienate. Once reclaimed and transformed into public agricultural lands, the government may then officially classify these lands as alienable or disposable lands open to disposition. Thereafter, the government may declare these lands no longer needed for public service. Only then can these reclaimed lands be considered alienable or disposable lands of the public domain and within the commerce of man.

The classification of PEA's reclaimed foreshore and submerged lands into alienable or disposable lands open to disposition is necessary because PEA is tasked under its charter to undertake public services that require the use of lands of the public domain. Under Section 5 of PD No. 1084, the functions of PEA include the following: "[T]o own or operate railroads, tramways and other kinds of land transportation, x x x; [T]o construct, maintain and operate such systems of sanitary sewers as may be necessary; [T]o construct, maintain and operate such storm drains as may be necessary." PEA is empowered to issue "rules and regulations as may be necessary for the proper use by private parties of any or all of the highways, roads, utilities, buildings and/or any of its properties and to impose or collect fees or tolls for their use." Thus, part of the reclaimed foreshore and submerged lands held by the PEA would actually be needed for public use or service since many of the functions imposed on PEA by its charter constitute essential public services.

Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government." The same section also states that "[A]ll reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084, PEA became the primary implementing agency of the National Government to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government entity "to undertake the reclamation of lands and ensure their maximum utilization in promoting public welfare and interests."79 Since large portions of these reclaimed lands would obviously be needed for public service, there must be a formal declaration segregating reclaimed lands no longer needed for public service from those still needed for public service.1âwphi1.nêt

Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or be owned by the PEA," could not automatically operate to classify inalienable lands into alienable or disposable lands of the public domain. Otherwise, reclaimed foreshore and submerged lands of the public domain would automatically become alienable once reclaimed by PEA, whether or not classified as alienable or disposable.

The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No. 525, vests in the Department of Environment and Natural Resources ("DENR" for brevity) the following powers and functions:

"Sec. 4. Powers and Functions. The Department shall:

(1) x x x

x x x

(4) Exercise supervision and control over forest lands, alienable and disposable public lands, mineral resources and, in the process of exercising such control, impose appropriate taxes, fees, charges, rentals and any such form of levy and collect such revenues for the exploration, development, utilization or gathering of such resources;

x x x

(14) Promulgate rules, regulations and guidelines on the issuance of licenses, permits, concessions, lease agreements and such other privileges concerning the development, exploration and utilization of the country's marine, freshwater, and brackish water and over all aquatic resources of the country and shall continue to

oversee, supervise and police our natural resources; cancel or cause to cancel such privileges upon failure, non-compliance or violations of any regulation, order, and for all other causes which are in furtherance of the conservation of natural resources and supportive of the national interest;

(15) Exercise exclusive jurisdiction on the management and disposition of all lands of the public domain and serve as the sole agency responsible for classification, sub-classification, surveying and titling of lands in consultation with appropriate agencies."80 (Emphasis supplied)

As manager, conservator and overseer of the natural resources of the State, DENR exercises "supervision and control over alienable and disposable public lands." DENR also exercises "exclusive jurisdiction on the management and disposition of all lands of the public domain." Thus, DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or in any part of the country.

DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under Sections 681 and 782 of CA No. 141. Once DENR decides that the reclaimed lands should be so classified, it then recommends to the President the issuance of a proclamation classifying the lands as alienable or disposable lands of the public domain open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised Administrative Code and Sections 6 and 7 of CA No. 141.

In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is vested with the power to undertake the physical reclamation of areas under water, whether directly or through private contractors. DENR is also empowered to classify lands of the public domain into alienable or disposable lands subject to the approval of the President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.

Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas does not make the reclaimed lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA. Likewise, the mere transfer by the National Government of lands of the public domain to PEA does not make the lands alienable or disposable lands of the public domain, much less patrimonial lands of PEA.

Absent two official acts – a classification that these lands are alienable or disposable and open to disposition and a declaration that these lands are not needed for public service, lands reclaimed by PEA remain inalienable lands of the public domain. Only such an official classification and formal declaration can convert reclaimed lands into alienable or disposable lands of the public domain, open to disposition under the Constitution, Title I and Title III83of CA No. 141 and other applicable laws.84

PEA's Authority to Sell Reclaimed Lands

PEA, like the Legal Task Force, argues that as alienable or disposable lands of the public domain, the reclaimed lands shall be disposed of in accordance with CA No. 141, the Public Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed lands transferred to a branch or subdivision of the government "shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress: x x x."85 (Emphasis by PEA)

In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of 1987, which states that –

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: x x x."

Thus, the Court concluded that a law is needed to convey any real property belonging to the Government. The Court declared that -

"It is not for the President to convey real property of the government on his or her own sole will. Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires executive and legislative concurrence." (Emphasis supplied)

PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977, provides that –

"The land reclaimed in the foreshore and offshore area of Manila Bay pursuant to the contract for the reclamation and construction of the Manila-Cavite Coastal Road Project between the Republic of the Philippines and the Construction and Development Corporation of the Philippines dated November 20, 1973 and/or any other contract or reclamation covering the same area is hereby transferred, conveyed and assigned to the ownership and administration of the Public Estates Authority established pursuant to PD No. 1084; Provided, however, That the rights and interests of the Construction and Development Corporation of the Philippines pursuant to the aforesaid contract shall be recognized and respected.

Henceforth, the Public Estates Authority shall exercise the rights and assume the obligations of the Republic of the Philippines (Department of Public Highways) arising from, or incident to, the aforesaid contract between the Republic of the Philippines and the Construction and Development Corporation of the Philippines.

In consideration of the foregoing transfer and assignment, the Public Estates Authority shall issue in favor of the Republic of the Philippines the corresponding shares of stock in said entity with an issued value of said shares of stock (which) shall be deemed fully paid and non-assessable.

The Secretary of Public Highways and the General Manager of the Public Estates Authority shall execute such contracts or agreements, including appropriate agreements with the Construction and Development Corporation of the Philippines, as may be necessary to implement the above.

Special land patent/patents shall be issued by the Secretary of Natural Resources in favor of the Public Estates Authority without prejudice to the subsequent transfer to the contractor or his assignees of such portion or portions of the land reclaimed or to be reclaimed as provided for in the above-mentioned contract. On the basis of such patents, the Land Registration Commission shall issue the corresponding certificate of title." (Emphasis supplied)

On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that -

"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the PEA which shall be responsible for its administration, development, utilization or disposition in accordance with the provisions of Presidential Decree No. 1084. Any and all income that the PEA may derive from the sale, lease or use of reclaimed lands shall be used in accordance with the provisions of Presidential Decree No. 1084."

There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its reclaimed lands. PD No. 1085 merely transferred "ownership and administration" of lands reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands reclaimed by PEA "shall belong to or be owned by PEA." EO No. 525 expressly states that PEA should dispose of its reclaimed lands "in accordance with the provisions of Presidential Decree No. 1084," the charter of PEA.

PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands x x x owned, managed, controlled and/or operated by the government."87 (Emphasis supplied) There is, therefore, legislative authority granted to PEA to sell its lands, whether patrimonial or alienable lands of the public domain. PEA may sell to private parties its patrimonial properties in accordance with the PEA charter free from constitutional limitations. The constitutional ban on private corporations from acquiring alienable lands of the public domain does not apply to the sale of PEA's patrimonial lands.

PEA may also sell its alienable or disposable lands of the public domain to private individuals since, with the legislative authority, there is no longer any statutory prohibition against such sales and the constitutional ban does not apply to individuals. PEA, however, cannot sell any of its alienable or disposable lands of the public domain to private corporations since Section 3, Article XII of the 1987 Constitution expressly prohibits such sales. The legislative authority benefits only individuals. Private corporations remain barred from acquiring any kind of alienable land of the public domain, including government reclaimed lands.

The provision in PD No. 1085 stating that portions of the reclaimed lands could be transferred by PEA to the "contractor or his assignees" (Emphasis supplied) would not apply to private corporations but only to individuals because of the constitutional ban. Otherwise, the provisions of PD No. 1085 would violate both the 1973 and 1987 Constitutions.

The requirement of public auction in the sale of reclaimed lands

Assuming the reclaimed lands of PEA are classified as alienable or disposable lands open to disposition, and further declared no longer needed for public service, PEA would have to conduct a public bidding in selling or leasing these lands. PEA must observe the provisions of Sections 63 and 67 of CA No. 141 requiring public auction, in the absence of a law exempting PEA from holding a public auction.88 Special Patent No. 3517 expressly states that the patent is issued by authority of the Constitution and PD No. 1084, "supplemented by Commonwealth Act No. 141, as amended." This is an acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed alienable lands of the public domain unless otherwise provided by law. Executive Order No. 654,89 which authorizes PEA "to determine the kind and manner of payment for the transfer" of its assets and properties, does not exempt PEA from the requirement of public auction. EO No. 654 merely authorizes PEA to decide the mode of payment, whether in kind and in installment, but does not authorize PEA to dispense with public auction.

Moreover, under Section 79 of PD No. 1445, otherwise known as the Government Auditing Code, the government is required to sell valuable government property through public bidding. Section 79 of PD No. 1445 mandates that –

"Section 79. When government property has become unserviceable for any cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected by the head of the agency or his duly authorized representative in the presence of the auditor concerned and, if found to be valueless or unsaleable, it may be destroyed in their presence. If found to be valuable, it may be sold at public auction to the highest bidder under the supervision of the proper committee on award or similar body in the presence of the auditor concerned or other authorized representative of the Commission, after advertising by printed notice in the Official Gazette, or for not less than three consecutive days in any newspaper of general circulation, or where the value of the property does not warrant the expense of publication, by notices posted for a like period in at least three public places in the locality where the property is to be sold. In the event that the public auction fails, the property may be sold at a private sale at such price as may be fixed by the same committee or body concerned and approved by the Commission."

It is only when the public auction fails that a negotiated sale is allowed, in which case the Commission on Audit must approve the selling price.90 The Commission on Audit implements Section 79 of the Government Auditing Code through Circular No. 89-29691 dated January 27, 1989. This circular emphasizes that government assets must be disposed of only through public auction, and a negotiated sale can be resorted to only in case of "failure of public auction."

At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed foreshore and submerged alienable lands of the public domain. Private corporations are barred from bidding at the auction sale of any kind of alienable land of the public domain.

PEA originally scheduled a public bidding for the Freedom Islands on December 10, 1991. PEA imposed a condition that the winning bidder should reclaim another 250 hectares of submerged areas to regularize the shape of the Freedom Islands, under a 60-40 sharing of the additional reclaimed areas in favor of the winning bidder.92No one, however, submitted a bid. On December 23, 1994, the Government Corporate Counsel advised PEA it could sell the Freedom Islands through negotiation, without need of another public bidding, because of the failure of the public bidding on December 10, 1991.93

However, the original JVA dated April 25, 1995 covered not only the Freedom Islands and the additional 250 hectares still to be reclaimed, it also granted an option to AMARI to reclaim another 350 hectares. The original JVA, a negotiated contract, enlarged the reclamation area to 750 hectares.94 The failure of public bidding on December 10, 1991, involving only 407.84 hectares,95 is not a valid justification for a negotiated sale of 750 hectares, almost double the area publicly auctioned. Besides, the failure of public bidding happened on December 10, 1991, more than three years before the signing of the original JVA on April 25, 1995. The economic situation in the country had greatly improved during the intervening period.

Reclamation under the BOT Law and the Local Government Code

The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute and clear: "Private corporations or associations may not hold such alienable lands of the public domain except by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for brevity), cited by PEA and AMARI as legislative authority to sell reclaimed lands to private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states –

"Sec. 6. Repayment Scheme. - For the financing, construction, operation and maintenance of any infrastructure projects undertaken through the build-operate-and-transfer arrangement

or any of its variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in the form of a share in the revenue of the project or other non-monetary payments, such as, but not limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional requirements with respect to the ownership of the land: x x x." (Emphasis supplied)

A private corporation, even one that undertakes the physical reclamation of a government BOT project, cannot acquire reclaimed alienable lands of the public domain in view of the constitutional ban.

Section 302 of the Local Government Code, also mentioned by PEA and AMARI, authorizes local governments in land reclamation projects to pay the contractor or developer in kind consisting of a percentage of the reclaimed land, to wit:

"Section 302. Financing, Construction, Maintenance, Operation, and Management of Infrastructure Projects by the Private Sector. x x x

x x x

In case of land reclamation or construction of industrial estates, the repayment plan may consist of the grant of a portion or percentage of the reclaimed land or the industrial estate constructed."

Although Section 302 of the Local Government Code does not contain a proviso similar to that of the BOT Law, the constitutional restrictions on land ownership automatically apply even though not expressly mentioned in the Local Government Code.

Thus, under either the BOT Law or the Local Government Code, the contractor or developer, if a corporate entity, can only be paid with leaseholds on portions of the reclaimed land. If the contractor or developer is an individual, portions of the reclaimed land, not exceeding 12 hectares96 of non-agricultural lands, may be conveyed to him in ownership in view of the legislative authority allowing such conveyance. This is the only way these provisions of the BOT Law and the Local Government Code can avoid a direct collision with Section 3, Article XII of the 1987 Constitution.

Registration of lands of the public domain

Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to public respondent PEA transformed such lands of the public domain to private lands." This theory is echoed by AMARI which maintains that the "issuance of the special patent leading to the eventual issuance of title takes the subject land away from the land of public domain and converts the property into patrimonial or private property." In short, PEA and AMARI contend that with the issuance of Special Patent No. 3517 and the corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands have become private lands of PEA. In support of their theory, PEA and AMARI cite the following rulings of the Court:

1. Sumail v. Judge of CFI of Cotabato,97 where the Court held –

"Once the patent was granted and the corresponding certificate of title was issued, the land ceased to be part of the public domain and became private property over which the Director of Lands has neither control nor jurisdiction."

2. Lee Hong Hok v. David,98 where the Court declared -

"After the registration and issuance of the certificate and duplicate certificate of title based on a public land patent, the land covered thereby automatically comes under the operation of Republic Act 496 subject to all the safeguards provided therein."3. Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court ruled -

"While the Director of Lands has the power to review homestead patents, he may do so only so long as the land remains part of the public domain and continues to be under his exclusive control; but once the patent is registered and a certificate of title is issued, the land ceases to be part of the public domain and becomes private property over which the Director of Lands has neither control nor jurisdiction."

4. Manalo v. Intermediate Appellate Court,100 where the Court held –

"When the lots in dispute were certified as disposable on May 19, 1971, and free patents were issued covering the same in favor of the private respondents, the said lots ceased to be part of the public domain and, therefore, the Director of Lands lost jurisdiction over the same."

5.Republic v. Court of Appeals,101 where the Court stated –

"Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally effected a land grant to the Mindanao Medical Center, Bureau of Medical Services, Department of Health, of the whole lot, validly sufficient for initial registration under the Land Registration Act. Such land grant is constitutive of a 'fee simple' title or absolute title in favor of petitioner Mindanao Medical Center. Thus, Section 122 of the Act, which governs the registration of grants or patents involving public lands, provides that 'Whenever public lands in the Philippine Islands belonging to the Government of the United States or to the Government of the Philippines are alienated, granted or conveyed to persons or to public or private corporations, the same shall be brought forthwith under the operation of this Act (Land Registration Act, Act 496) and shall become registered lands.'"

The first four cases cited involve petitions to cancel the land patents and the corresponding certificates of titlesissued to private parties. These four cases uniformly hold that the Director of Lands has no jurisdiction over private lands or that upon issuance of the certificate of title the land automatically comes under the Torrens System. The fifth case cited involves the registration under the Torrens System of a 12.8-hectare public land granted by the National Government to Mindanao Medical Center, a government unit under the Department of Health. The National Government transferred the 12.8-hectare public land to serve as the site for the hospital buildings and other facilities of Mindanao Medical Center, which performed a public service. The Court affirmed the registration of the 12.8-hectare public land in the name of Mindanao Medical Center under Section 122 of Act No. 496. This fifth case is an example of a public land being registered under Act No. 496 without the land losing its character as a property of public dominion.

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly government owned corporation performing public as well as proprietary functions. No patent or certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel PEA's patent or certificates of title. In fact, the thrust of the instant petition is that PEA's certificates of title should remain with PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to a private corporation.

Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public ownership of the land. Registration is not a mode of acquiring ownership but is merely evidence of ownership previously conferred by any of the recognized modes of acquiring ownership. Registration does not give the registrant a better right than what the registrant had prior to the registration.102 The registration of lands of the public domain under the Torrens system, by itself, cannot convert public lands into private lands.103

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable land of the public domain automatically becomes private land cannot apply to government units and entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by then President Aquino, to wit:

"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in conformity with the provisions of Presidential Decree No. 1084, supplemented by Commonwealth Act No. 141, as amended, there are hereby granted and conveyed unto the Public Estates Authority the aforesaid tracts of land containing a total area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters; the technical description of which are hereto attached and made an integral part hereof." (Emphasis supplied)

Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084. Section 60 of CA No. 141 prohibits, "except when authorized by Congress," the sale of alienable lands of the public domain that are transferred to government units or entities. Section 60 of CA No. 141 constitutes, under Section 44 of PD No. 1529, a "statutory lien affecting title" of the registered land even if not annotated on the certificate of title.104Alienable lands of the public domain held by government entities under Section 60 of CA No. 141 remain public lands because they cannot be alienated or encumbered unless Congress passes a law authorizing their disposition. Congress, however, cannot authorize the sale to private corporations of reclaimed alienable lands of the public domain because of the constitutional ban. Only individuals can benefit from such law.

The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does not automatically convert alienable lands of the public domain into private or patrimonial lands. The alienable lands of the public domain must be transferred to qualified private parties, or to government entities not tasked to dispose of public lands, before these lands can become private or patrimonial lands. Otherwise, the constitutional ban will become illusory if Congress can declare lands of the public domain as private or patrimonial lands in the hands of a government agency tasked to dispose of public lands. This will allow private corporations to acquire directly from government agencies limitless areas of lands which, prior to such law, are concededly public lands.

Under EO No. 525, PEA became the central implementing agency of the National Government to reclaim foreshore and submerged areas of the public domain. Thus, EO No. 525 declares that –

"EXECUTIVE ORDER NO. 525

Designating the Public Estates Authority as the Agency Primarily Responsible for all Reclamation Projects

Whereas, there are several reclamation projects which are ongoing or being proposed to be undertaken in various parts of the country which need to be evaluated for consistency with national programs;

Whereas, there is a need to give further institutional support to the Government's declared policy to provide for a coordinated, economical and efficient reclamation of lands;

Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall be limited to the National Government or any person authorized by it under proper contract;

Whereas, a central authority is needed to act on behalf of the National Government which shall ensure a coordinated and integrated approach in the reclamation of lands;

Whereas, Presidential Decree No. 1084 creates the Public Estates Authority as a government corporation to undertake reclamation of lands and ensure their maximum utilization in promoting public welfare and interests; and

Whereas, Presidential Decree No. 1416 provides the President with continuing authority to reorganize the national government including the transfer, abolition, or merger of functions and offices.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution and pursuant to Presidential Decree No. 1416, do hereby order and direct the following:

Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. All reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; Provided, that, reclamation projects of any national government agency or entity authorized under its charter shall be undertaken in consultation with the PEA upon approval of the President.

x x x ."

As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands of the public domain, these lands are still public, not private lands.

Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public domain" as well as "any and all kinds of lands." PEA can hold both lands of the public domain and private lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or certificates of title in PEA's name does not automatically make such lands private.

To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as private lands will sanction a gross violation of the constitutional ban on private corporations from acquiring any kind of alienable land of the public domain. PEA will simply turn around, as PEA has now done under the Amended JVA, and transfer several hundreds of hectares of these reclaimed and still to be reclaimed lands to a single private corporation in only one transaction. This scheme will

effectively nullify the constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to diffuse equitably the ownership of alienable lands of the public domain among Filipinos, now numbering over 80 million strong.

This scheme, if allowed, can even be applied to alienable agricultural lands of the public domain since PEA can "acquire x x x any and all kinds of lands." This will open the floodgates to corporations and even individuals acquiring hundreds of hectares of alienable lands of the public domain under the guise that in the hands of PEA these lands are private lands. This will result in corporations amassing huge landholdings never before seen in this country - creating the very evil that the constitutional ban was designed to prevent. This will completely reverse the clear direction of constitutional development in this country. The 1935 Constitution allowed private corporations to acquire not more than 1,024 hectares of public lands.105 The 1973 Constitution prohibited private corporations from acquiring any kind of public land, and the 1987 Constitution has unequivocally reiterated this prohibition.

The contention of PEA and AMARI that public lands, once registered under Act No. 496 or PD No. 1529, automatically become private lands is contrary to existing laws. Several laws authorize lands of the public domain to be registered under the Torrens System or Act No. 496, now PD No. 1529, without losing their character as public lands. Section 122 of Act No. 496, and Section 103 of PD No. 1529, respectively, provide as follows:

Act No. 496

"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x Government of the Philippine Islands are alienated, granted, or conveyed to persons or the public or private corporations, the same shall be brought forthwith under the operation of this Act and shall become registered lands."

PD No. 1529

"Sec. 103. Certificate of Title to Patents. Whenever public land is by the Government alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree." (Emphasis supplied)

Based on its legislative history, the phrase "conveyed to any person" in Section 103 of PD No. 1529 includes conveyances of public lands to public corporations.

Alienable lands of the public domain "granted, donated, or transferred to a province, municipality, or branch or subdivision of the Government," as provided in Section 60 of CA No. 141, may be registered under the Torrens System pursuant to Section 103 of PD No. 1529. Such registration, however, is expressly subject to the condition in Section 60 of CA No. 141 that the land "shall not be alienated, encumbered or otherwise disposed of in a manner affecting its title, except when authorized by Congress." This provision refers to government reclaimed, foreshore and marshy lands of the public domain that have been titled but still cannot be alienated or encumbered unless expressly authorized by Congress. The need for legislative authority prevents the registered land of the public domain from becoming private land that can be disposed of to qualified private parties.

The Revised Administrative Code of 1987 also recognizes that lands of the public domain may be registered under the Torrens System. Section 48, Chapter 12, Book I of the Code states –

"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:

(1) x x x

(2) For property belonging to the Republic of the Philippines, but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality." (Emphasis supplied)

Thus, private property purchased by the National Government for expansion of a public wharf may be titled in the name of a government corporation regulating port operations in the country. Private property purchased by the National Government for expansion of an airport may also be titled in the name of the government agency tasked to administer the airport. Private property donated to a municipality for use as a town plaza or public school site may likewise be titled in the name of the municipality.106 All these properties become properties of the public domain, and if already registered under Act No. 496 or PD No. 1529, remain registered land. There is no requirement or provision in any existing law for the de-registration of land from the Torrens System.

Private lands taken by the Government for public use under its power of eminent domain become unquestionably part of the public domain. Nevertheless, Section 85 of PD No. 1529 authorizes the Register of Deeds to issue in the name of the National Government new certificates of title covering such expropriated lands. Section 85 of PD No. 1529 states –

"Sec. 85. Land taken by eminent domain. Whenever any registered land, or interest therein, is expropriated or taken by eminent domain, the National Government, province, city or municipality, or any other agency or instrumentality exercising such right shall file for registration in the proper Registry a certified copy of the judgment which shall state definitely by an adequate description, the particular property or interest expropriated, the number of the certificate of title, and the nature of the public use. A memorandum of the right or interest taken shall be made on each certificate of title by the Register of Deeds, and where the fee simple is taken, a new certificate shall be issued in favor of the National Government, province, city, municipality, or any other agency or instrumentality exercising such right for the land so taken. The legal expenses incident to the memorandum of registration or issuance of a new certificate of title shall be for the account of the authority taking the land or interest therein." (Emphasis supplied)

Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively private or patrimonial lands. Lands of the public domain may also be registered pursuant to existing laws.

AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the Freedom Islands or of the lands to be reclaimed from submerged areas of Manila Bay. In the words of AMARI, the Amended JVA "is not a sale but a joint venture with a stipulation for reimbursement of the original cost incurred by PEA for the earlier reclamation and construction works performed by the CDCP under its 1973 contract with the Republic." Whether the Amended JVA is a sale or a joint venture, the fact remains that the Amended JVA requires PEA to "cause the issuance and delivery of the certificates of title conveying AMARI's Land Share in the name of AMARI."107

This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which provides that private corporations "shall not hold such alienable lands of the public domain except by lease." The transfer of title and ownership to AMARI clearly means that AMARI will "hold" the reclaimed lands other than by lease. The transfer of title and ownership is a "disposition" of the reclaimed lands, a

transaction considered a sale or alienation under CA No. 141,108 the Government Auditing Code,109 and Section 3, Article XII of the 1987 Constitution.

The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part of the public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also form part of the public domain and are also inalienable, unless converted pursuant to law into alienable or disposable lands of the public domain. Historically, lands reclaimed by the government are sui generis, not available for sale to private parties unlike other alienable public lands. Reclaimed lands retain their inherent potential as areas for public use or public service. Alienable lands of the public domain, increasingly becoming scarce natural resources, are to be distributed equitably among our ever-growing population. To insure such equitable distribution, the 1973 and 1987 Constitutions have barred private corporations from acquiring any kind of alienable land of the public domain. Those who attempt to dispose of inalienable natural resources of the State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to private corporations, do so at their own risk.

We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectares110 of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares111 of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or purpose is contrary to law," or whose "object is outside the commerce of men," are "inexistent and void from the beginning." The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.

Seventh issue: whether the Court is the proper forum to raise the issue of whether the Amended JVA is grossly disadvantageous to the government.

Considering that the Amended JVA is null and void ab initio, there is no necessity to rule on this last issue. Besides, the Court is not a trier of facts, and this last issue involves a determination of factual matters.

WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari Coastal Bay Development Corporation are PERMANENTLY ENJOINED from implementing the Amended Joint Venture Agreement which is hereby declared NULL and VOID ab initio.

SO ORDERED.

CASE DIGEST:

CHAVEZ V PUBLIC ESTATES AUTHORITY AND AMARI COASTAL BAY

FACTS:

Nature: original Petition for Mandamus with prayer for writ of preliminary injunction and a temporary restraining order. Petition also seeks to compel the Public Estates Authority (PEA) to disclose all facts on PEA’s then on-going renegotiations with Amari Coastal Bay and Development Corporation to reclaim portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new agreement with AMARI involving such reclamation.

1973: The government through the Commission of Public Highways signed a contract with the Construction and Development Corporation of the Philippines (CDCP) to reclaim certain foreshore and offshore areas of Manila Bay

1977: President Marcos issued PD No. 1084 creating the PEA, which was tasked to reclaim land, including foreshore and submerged areas and to develop, improve, acquire x xx lease and sell any and all kinds of lands. On the same date, President Marcos issued PD. 1085 transferring to PEA the lands reclaimed in the foreshore and offshore of the Manila Bay under the Manila-Cavite Coastal Road and Reclamation Project (MCCRRP)

1981: Pres. Marcos issued a memorandum ordering PEA to amend its contract with CDCP which stated that CDCP shall transfer in favor of PEA the areas reclaimed by CDCP in the MCCRRP

1988: Pres. Aquino issued Special Patent granting and transferring to PEA parcels of land so reclaimed under the MCCRRP. Subsequently she transferred in the name of PEA the three reclaimed islands known as the “Freedom Islands”

1995: PEA entered into a Joint Venture Agreement (JVA) with AMARI, a private corporation, to develop the Freedom Islands and this was done without public bidding

Pres. Ramos through Executive Secretary Ruben Torres approved the JVA

1996: Senate Pres.Maceda delivered a privileged speech in the Senate and denounced the JVA as the “grandmother of all scams”. As a result, the Senate conducted investigations. Among the conclusions were:

1. The reclaimed lands PEA seeks to transfer to AMARI under the JVA are lands of the public domain which the government has not classified as alienable lands and therefore PEA cannot alienate these lands;

2. The certificates of the title covering the Freedom Islands are thus void, and 3. The JVA itself is illegal

1997: Pres. Ramos created the Legal Task Force to conduct a study on the legality of the JVA in view of the Senate Committee report.

1998: The Philippine Daily Inquirer published reports on on-going renegotiations between PEA and AMARI

PEA Director Nestor Kalaw and PEA Chairman ArsenioYulo and former navy officer Sergio Cruz were members of the negotiating panel

Frank Chavez filed petition for Mandamus stating that the government stands to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI and prays that PEA publicly disclose the terms of the renegotiations of JVA. He cited that the sale to AMARI is in violation of Article 12, Sec. 3 prohibiting sale of alienable lands of the public domain to private corporations and Article 2 Section 28 and Article 3 Sec. 7 of the Constitution on the right to information on matters of public concern

1999: PEA and AMARI signed Amended JVA which Pres. Estrada approved

ISSUES:

1. WON the principal reliefs prayed for in the petition are moot and academic because of the subsequent events

2. WON the petition merits dismissal for failure to observe the principle governing the hierarchy of courts3. WON the petition merits dismissal for non-exhaustion of administrative remedies4. WON petitioner has locus standi to bring this suit5. WON the constitutional right to information includes official information on on-going negotiations before

a final agreement6. WON the stipulations in the amended joint venture agreement for the transfer to AMARI of certain lands,

reclaimed and still to be reclaimed, violate the 1987 constitution; and7. WON the court is the proper forum for raising the issue of whether the amended joint venture agreement

is grossly disadvantageous to the government.o Threshold issue: whether AMARI, a private corporation, can acquire and own under the

amended JVA 367.5 has. of reclaimed foreshore and submerged area in Manila Bay in view of Sections 2 & 3, Art. 12 of the 1987 constitution

HELD

(1) The prayer to enjoin the signing of the Amended JVA on constitutional grounds necessarily includes preventing its implementation if in the meantime PEA and AMARI have signed one in violation of the Constitution and if already implemented, to annul the effects of an unconstitutional contract

(2) The principle of hierarchy of courts applies generally to cases involving factual questions

Reasoning: the instant case raises constitutional issues of transcendental importance to the public

(3) The principle of exhaustion of administrative remedies does not apply when the issue involved is a purely legal or constitutional question

(4) Petitioner has standing if petition is of transcendental public importance and as such, there is the right of a citizen to bring a taxpayer’s suit on these matters of transcendental public importance

(5) The constitutional right to information includes official information on on-going negotiations before a final contract and must therefore constitute definite propositions by the government and should not cover recognized exceptions like privileged information, military and diplomatic secrets and similar matters affecting national security and public order

Reasoning The State policy of full transparency in all transactions involving public interest reinforces the people’s right to information on matters of public concern. PEA must prepare all the data and disclose them to the public at the start of the disposition process, long before the consummation of the contract. While the evaluation or review is on-going, there are no “official acts, transactions, or decisions” on the bids or proposals but once the committee makes its official recommendation, there arises a definite proposition on the part of the government

(6) In a form of a summary:

o The 157.84 has.of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to ownership limitations in the 1987 Constitution and existing laws.

o The 592.15 has.of submerged areas of Manila Bay remain inalienable natural resources of the public domain and outside the commerce of man until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration

only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate

o Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 has.of the Freedom Islands, such transfer is void for being contrary to Section 3, Article 12 of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain

o Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 has.of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article 12 of the 1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public services. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article 12 that prohibits private corporations from acquiring any kind of alienable land of the public domain.

Reasoning:

CA 141 of the Philippine National Assembly empowers the president to classify lands of the public domain into alienable or disposable (Sec. 6).The President, upon recommendation of the Secretary of Agriculture and Commerce, shall from time to time classify the lands of the public domain into—(a) Alienable of disposable, (b) timber, and (c) mineral lands.

The President must first officially classify these lands as alienable or disposable, and then declare them open to disposition or concession.

Sec. 59 states that the lands disposable under this title shall be classified as follows: (a) Lands reclaimed by the Government by dredging, filling, or other means; (b) Foreshore; (c) Marshy lands (d) Lands not included in any of the foregoing classes.

Sec. 61 states that the lands comprised in classes (a), (b) and (c) of section 59 shall be disposed f to private parties by lease only and not otherwise

After the effectivity of the 1935 Constitution, government reclaimed and marshy disposable lands of the public domain continued to be only leased and not sold to private parties. These lands remained suis generic as the only alienable or disposable lands of the public domain the government could not sell to private parties. The only way that the government can sell to private parties government reclaimed and marshy disposable lands of the public domain is for the legislature to pass a law authorizing such sale.

PD No. 1085, coupled with President Aquino’s actual issuance of a special patent covering the Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and President Aquino’s issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to qualified parties.

in case of sale or lease of disposable lands of the public domain, a public bidding is required 1987 Constitution declares that all natural resources are owned by the State. With the exception of

agricultural lands, all other natural resources shall not be alienated. Article 12, Sec. 3 states that alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding 25 years, renewable for not more than 25 years, and not to exceed 1,000 has.in area.

ration behind the ban on corporations from acquiring except through lease is not well understood. If the purpose is to equitably diffuse lands ownership then the Consti could have simply limited the size of alienable lands of the public domain that corporations could acquire. If the intent were to encourage “owner-cultivatorship” and the economic family-size farm and to prevent a recurrence of cases like the instant case, then placing the land in the name of a corporation would be more effective in preventing

the break-up of farmlands. If the farmland were registered in the name of a corporation, upon the death of the owner, his heirs would inherit shares in the corporation instead of subdivided parcels of the farmland. This would prevent the continuing break-up of farmlands into smaller and smaller plots from one generation to the next. In actual practice then, this ban strengthens the consti limitation on individuals from acquiring more than the allowed area of alienable lands of the public domain . Without the ban, individuals who already acquired the maximum area of alienable lands of the public domain could easily set up corporations to acquire more alienable public lands. An individual could own as many corporations as his means would allow him. He could even hide his ownership of a corporation by putting his nominees as stockholders of the corporation.

In the instant case, the only patent and certificates of title issued are those in the name of PEA, a wholly government owned corporation performing public as well as proprietary functions. No patent or certificate of title has been issued to any private party. No one is asking the Director of Lands to cancel PEA’s patent or certificates of title. In fact, the thrust of the instant petition is that PEA’s certificates of title should remain with PEA, and the land covered by these certificates, being alienable lands of the public domain, should not be sold to a private corporation.

Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant private or public ownership of the land. Registration is not a mode of acquiring ownership but is merely evidence of ownership previously conferred by any of the recognized modes of acquiring ownership. Registration does not give the registrant a better right than what the registrant had prior to the registration. i[102] The registration of lands of the public domain under the Torrens system, by itself, cannot convert public lands into private lands. ii[103]

Jurisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable land of the public domain automatically becomes private land cannot apply to government units and entities like PEA. The transfer of the Freedom Islands to PEA was made subject to the provisions of CA No. 141 as expressly stated in Special Patent No. 3517 issued by then President Aquino, to wit:

“NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the Philippines and in conformity with the provisions of Presidential Decree No. 1084, supplemented by Commonwealth Act No. 141, as amended, there are hereby granted and conveyed unto the Public Estates Authority the aforesaid tracts of land containing a total area of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894) square meters; the technical description of which are hereto attached and made an integral part hereof.” (Emphasis supplied)

Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered by PD No. 1084. Section 60 of CA No. 141 prohibits, “except when authorized by Congress,” the sale of alienable lands of the public domain that are transferred to government units or entities. Section 60 of CA No. 141 constitutes, under Section 44 of PD No. 1529, a “statutory lien affecting title” of the registered land even if not annotated on the certificate of title.iii[104] Alienable lands of the public domain held by government entities under Section 60 of CA No. 141 remain public lands because they cannot be alienated or encumbered unless Congress passes a law authorizing their disposition. Congress, however, cannot authorize the sale to private corporations of reclaimed alienable lands of the public domain because of the constitutional ban. Only individuals can benefit from such law.

The grant of legislative authority to sell public lands in accordance with Section 60 of CA No. 141 does not automatically convert alienable lands of the public domain into private or patrimonial lands. The alienable lands of the public domain must be transferred to qualified private parties, or to government entities not tasked to dispose of public lands, before these lands can become private or patrimonial lands. Otherwise, the constitutional ban will become illusory if Congress can declare lands of the public domain as private or patrimonial lands in the hands of a

government agency tasked to dispose of public lands. This will allow private corporations to acquire directly from government agencies limitless areas of lands which, prior to such law, are concededly public lands

As the central implementing agency tasked to undertake reclamation projects nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the government agency charged with leasing or selling reclaimed lands of the public domain. The reclaimed lands being leased or sold by PEA are not private lands, in the same manner that DENR, when it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public domain. Only when qualified private parties acquire these lands will the lands become private lands. In the hands of the government agency tasked and authorized to dispose of alienable of disposable lands of the public domain, these lands are still public, not private lands.

Furthermore, PEA’s charter expressly states that PEA “shall hold lands of the public domain” as well as “any and all kinds of lands.” PEA can hold both lands of the public domain and private lands. Thus, the mere fact that alienable lands of the public domain like the Freedom Islands are transferred to PEA and issued land patents or certificates of title in PEA’s name does not automatically make such lands private.

The Regalian doctrine is deeply implanted in our legal system. Foreshore and submerged areas form part of the public domain and are inalienable. Lands reclaimed from foreshore and submerged areas also form part of the public domain and are also inalienable, unless converted pursuant to law into alienable or disposable lands of the public domain. Historically, lands reclaimed by the government are sui generis, not available for sale to private parties unlike other alienable public lands. Reclaimed lands retain their inherent potential as areas for public use or public service. Alienable lands of the public domain, increasingly becoming scarce natural resources, are to be distributed equitably among our ever-growing population. To insure such equitable distribution, the 1973 and 1987 Constitutions have barred private corporations from acquiring any kind of alienable land of the public domain. Those who attempt to dispose of inalienable natural resources of the State, or seek to circumvent the constitutional ban on alienation of lands of the public domain to private corporations, do so at their own risk.

We can now summarize our conclusions as follows:

1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now covered by certificates of title in the name of PEA, are alienable lands of the public domain. PEA may lease these lands to private corporations but may not sell or transfer ownership of these lands to private corporations. PEA may only sell these lands to Philippine citizens, subject to the ownership limitations in the 1987 Constitution and existing laws.

2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable natural resources of the public domain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The government can make such classification and declaration only after PEA has reclaimed these submerged areas. Only then can these lands qualify as agricultural lands of the public domain, which are the only natural resources the government can alienate. In their present state, the 592.15 hectares of submerged areas are inalienable and outside the commerce of man.

3. Since the Amended JVA seeks to transfer to AMARI, a private corporation, ownership of 77.34 hectaresiv[110] of the Freedom Islands, such transfer is void for being contrary to Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

4. Since the Amended JVA also seeks to transfer to AMARI ownership of 290.156 hectares v[111] of still submerged areas of Manila Bay, such transfer is void for being contrary to Section 2, Article XII of the

1987 Constitution which prohibits the alienation of natural resources other than agricultural lands of the public domain. PEA may reclaim these submerged areas. Thereafter, the government can classify the reclaimed lands as alienable or disposable, and further declare them no longer needed for public service. Still, the transfer of such reclaimed alienable lands of the public domain to AMARI will be void in view of Section 3, Article XII of the 1987 Constitution which prohibits private corporations from acquiring any kind of alienable land of the public domain.

Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987 Constitution. Under Article 1409vi[112] of the Civil Code, contracts whose “object or purpose is contrary to law,” or whose “object is outside the commerce of men,” are “inexistent and void from the beginning.” The Court must perform its duty to defend and uphold the Constitution, and therefore declares the Amended JVA null and void ab initio.

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