Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-29658 November 29, 1968

ENRIQUE V. MORALES, petitioner, vs.ABELARDO SUBIDO, as Commissioner of Civil Service, respondent.

Vicente Rodriguez, for appellant.Office of the Solicitor-General Araneta, for appellee.

CASTRO, J.:

The question for resolution in this case is whether a person who has served as captain in the police department of a city for at least three years but does not possess a bachelor's degree, is qualified for appointment as chief of police. The question calls for an interpretation of the following provisions of section 10 of the Police Act of 1966 (Republic Act 4864):

Minimum qualification for appointment as Chief of Police Agency. — No person may be appointed chief of a city police agency unless he holds a bachelor's degree from a recognized institution of learning and has served either in the Armed Forces of the Philippines or the National Bureau of Investigation, or has served as chief of police with exemplary record, or has served in the police department of any city with the rank of captain or its equivalent therein for at least three years; or any high school graduate who has served as officer in the Armed Forces for at least eight years with the rank of captain and/or higher.

The petitioner Enrique V. Morales is the chief of the detective bureau of the Manila Police Department and holds the rank of lieutenant colonel. He began his career in 1934 as patrolman and gradually rose to his present position. Upon the resignation of Brig. Gen. Ricardo G. Papa on March 14, 1968, the petitioner was designated acting chief of police of Manila and, at the same time, given a provisional appointment to the same position by the mayor of Manila.

On September 24, 1968 the respondent Commissioner of Civil Service Abelardo Subido approved the designation of the petitioner but rejected his appointment for "failure to meet the minimum educational and civil service eligibility requirements for the said position." Instead, the respondent certified other persons as qualified for the post and called the attention of the mayor to section 4 of the Decentralization Act of 1967 which requires the filling of a vacancy within 30 days after its coming into existence. Earlier, on September 5, he announced in the metropolitan newspapers that the position of chief of police of Manila was vacant and listed the qualifications which applicants should possess.

The petitioner's reaction to the announcement was a demand that the respondent include him in a list of eligible and qualified applicants from which the mayor might appoint one as chief of police of the city.

He contended that his service alone as captain for more than three years in the Manila Police Department qualified him for appointment. The demand was contained in a letter which he wrote to the respondent on October 8, 1968. The mayor endorsed the letter favorably, but the respondent refused to reconsider his stand. Hence this petition for mandamus to compel the respondent to include the petitioner in a list of "five next ranking eligible and qualified persons."

The petitioner's reading of section 10 of the Police Act of 1966 is, per his own phrasing, as follows:

NO PERSON may be appointed chief of a city police agency unless HE

(1) holds a bachelor's degree from a recognized institution of learning AND has served in the Armed Forces of the Philippines OR the National Bureau of Investigation, OR

(2) has served as chief of police with exemplary record, OR

(3) has served in the police department of any city with the rank of captain or its equivalent therein for at least three years; OR

(4) any high school graduate who has served as officer in the Armed Forces for at least eight years with the rank of captain and/or higher.

As he has served successively as captain, major and lieutenant colonel in the MPD since 1954, the petitioner's insistence is that he falls under the third class of persons qualified for appointment as chief of a city police department.

In support of this proposition, he adverts to the policy of the Act "to place the local police service on a professional level,"1 and contends that a bachelor's degree does not guarantee that one who possesses it will make a good policeman, but that, on the other hand, one who, like the petitioner, has risen from patrolman to lieutenant colonel "meets the test of professionalism."

Even if we concede the correctness of the petitioner's view still we do not see how the requirement of a college degree as additional qualification can run counter to the avowed policy of the Act. On the contrary, we should think that the requirement of such additional qualification will best carry out that policy. The fallacy of petitioner's argument lies in its assumption that the choice is between one who has served long and loyally in a city police agency and another who, not having so served, has only a bachelor's degree. But that is not the issue in this case. The issue rather is whether, within the meaning and intendment of the law, in addition to service qualification, one should have educational qualification as shown by the possession of a bachelor's degree.

The petitioner invokes the last paragraph of section 9 of the Act which provides:

Persons who at the time of the approval of this Act have rendered at least five years of satisfactory service in a provincial, city or municipal police agency although they have not qualified in an appropriate civil service examination are considered as civil service eligibles for the purpose of this Act.

In effect, he contends that if a person who has rendered at least five years of satisfactory service in a police agency is considered a civil service eligible, so must a person be considered qualified even though he does not possess a bachelor's degree.

The petitioner's argument is fallacious in two respects. First, it fails to distinguish between eligibility and qualification. For the statute may allow the compensation of service for a person's lack of eligibility but not necessarily for his lack of educational qualification. Second, section 9 governs the appointment of members of a police agency only. On the other hand, the appointment of chiefs of police is the precise gravamen of section 10, the last paragraph of which states:

Where no civil service eligible is available, provisional appointment may be made in accordance with Civil Service Law and rules: Provided, that the appointee possesses the above educational qualification: Provided, further, That in no case shall such appointment extend beyond six months, except for a valid cause, and with the approval of the Civil Service Commission.

Thus, while the Act gives credit for service and allows it to compensate for the lack of civil service eligibility in the case of a member of a police agency, it gives no such credit for lack of civil service eligibility in the case of a chief of police. On the contrary, by providing that a person, who is not a civil service eligible, may be provisionally appointed2 chief of police "[ p]rovided, [t]hat the appointee possesses the above educational qualification," the Act makes it unequivocal that the possession of a college degree or a high school diploma (in addition to service) is an indispensable requisite.

It is next contended that to read section 10 as requiring a bachelor's degree, in addition to service either in the Armed Forces of the Philippines or in the National Bureau of Investigation or as chief of police with an exemplary record or as a captain in a city police department for at least three years, would be to create an "absurd situation" in which a person who has served for only one month in the AFP or the NBI is in law considered the equal of another who has been a chief of police or has been a captain in a city police agency for at least three years. From this it is concluded that "the only logical equivalence of these two groups (Chief of Police with exemplary record and Police Captain for at least 3 years in a City Police Agency) is the bachelor's degree."

Section 10, it must be admitted, does not specify in what capacity service in the AFP or in the NBI must have been rendered, but an admission of the existence of the ambiguity in the statute does not necessarily compel acquiescence in the conclusion that it is only in cases where the appointee's service has been in the AFP or in the NBI that he must be required to have a bachelor's degree. The logical implication of the petitioner's argument that a person who has served as captain in a city police department for at least three years need not have a bachelor's degree to qualify, is that such person need not even be a high school graduate. If such be the case would there still be need for a person to be at least a high school graduate provided he has had at least eight years of service as captain in the AFP?

The truth is that, except for the ambiguity referred to (the meaning of which is not in issue in this case), section 10 of the Act needs no interpretation because its meaning is clear. That the purpose is to require both educational and service qualifications of those seeking appointment as chief of police is evidence

from a reading of the original provision of House Bill 6951 and the successive revision it underwent. Thus, section 12 of House Bill 6951 (now section 10 of the Police Act of 1966) read:

Minimum Qualification for Appointment as Chief of a Police Agency. — No chief of a police agency of a province or chartered city shall be appointed unless he is a member of the Philippine Bar, or a holder of a bachelor's degree in police administration. Any holder of a bachelor's degree who served either in the Philippine Constabulary or the police department of any city from the rank of captain or inspector, second class, or its equivalent for at least three years shall be eligible for appointment to the position of chief of the police agency.

No chief of a municipal police force shall be appointed unless he is a holder of a four-year college degree course or a holder of a Bachelor's degree in Police Administration or Criminology.

Where no civil service eligible is available provisional appointment may be made in accordance with Civil Service Law and rules, provided the appointee possesses the above educational qualification but in no case shall such appointment exceed beyond six months.

It was precisely because the bill was clearly understood as requiring both educational and service qualifications that the following exchanges of view were made on the floor of the house of Representatives:

MR. VELOSO (F.). Section 12, Minimum Qualification for Appointment of Chief of a Police Agency, provides that the chief of a police agency of a province or a chartered city should be at least a member of the Philippine Bar or a holder of a bachelor's degree in Police Administration; and the chief of police of a municipality should be at least a holder of a four years' college degree or holder of a bachelor's degree in Police Administration or Criminology.

At first blush, there is no reason why I should object to these minimum requirements; but I find such requirement very rigid because it would not allow a man to rise from the ranks. Take a policeman who rose from the ranks. He became a corporal, a sergeant, a police lieutenant. Shouldn't he be allowed to go higher? If he merited it, he should also be appointed chief of police of a city or municipality.

MR. AMANTE. During our committee discussions, I objected to this provision of the bill because it is a very high qualification. However, somebody insisted that in order to professionalize our police system and also to attain a high standard of police efficiency, we must have a chief of police who has a college degree. The point which the gentleman is now raising was brought up by one Member in the sense that a policeman who rose from the ranks through serious hard work, even after serving for fifteen or twenty years in the police force, cannot become chief of police for lack of a college degree.

The gentleman's objection is a very good and reasonable one. I assure him that if he brings it up during the period of amendments, I will consider it.

MR. VELOSO (F.). I am glad that the Committee will accept my amendment. My only regret, however, is that because I made a number of proposed amendments, I will not be ready to submit them immediately. We should just limit ourselves to the sponsorship this evening.3

Thus it appears that it was because of the educational requirement contained in the bill that objections were expressed, but while it was agreed to delete this requirement during the period of amendment, no motion was ever presented to effect the change.4

In the Senate, the Committee on Government Reorganization, to which House Bill 6951 was referred, reported a substitute measure.5 It is to this substitute bill that section 10 of the Act owes its present form and substance.

Parenthetically, the substitute measure gives light on the meaning of the ambiguous phrase "and who has served either in the Armed Forces of the Philippines or the National Bureau of Investigation." The provision of the substitute bill reads:

No person may be appointed chief of a city police agency unless he holds a bachelor's degree and has served either in the Armed Forces of the Philippines or the National Bureau of Investigation or police department of any city and has held the rank of captain or its equivalent therein for at least three years or any high school graduate who has served the police department of a city for at least 8 years with the rank of captain and/or higher.

Thus, service in the AFP or the NBI was intended to be in the capacity of captain for at least three years.

At the behest of Senator Francisco Rodrigo, the phrase "has served as officer in the Armed Forces" was inserted so as to make the provision read:

No person may be appointed chief of a city police agency unless he holds a bachelor's degree and has served either in the Armed Forces of the Philippines or the National Bureau of Investigation or police department of any city and has held the rank of captain or its equivalent therein for at least three years or any high school graduate who has served the police department of a city or who has served as officer in the Armed Forces for at least 8 years with the rank of captain and/or higher.6

It is to be noted that the Rodrigo amendment was in the nature of an addition to the phrase, "who has served the police department of a city for at least 8 years with the rank of captain and/or higher," under which the petitioner herein, who is at least a high school graduate (both parties agree that the petitioner finished the second year of the law course) could possibly qualify. However, somewhere in the legislative process the phrase was dropped and only the Rodrigo amendment was retained.

Because of the suggested possibility that the deletion was made by mistake, the writer of this opinion personally and painstakingly read and examined the enrolled bill in the possession of the legislative secretary of the Office of the President and found that the text of section 10 of the Act is as set forth in the beginning of this opinion. The text of the Act bears on page 15 thereof the signatures of President of the Senate Arturo M. Tolentino and Speaker of the House of Representatives Cornelio T. Villareal, and on page 16 thereof those of Eliseo M. Tenza, Secretary of the Senate, and Inocencio B. Pareja, Secretary of the House of Representatives, and of President Ferdinand E. Marcos. Under the enrolled bill theory, announced in Mabanag v. Lopez Vito8 this text of the Act must be deemed as importing absolute verity

and as binding on the courts. As the Supreme Court of the United States said in Marshall Field & Co. v. Clark:9

The signing by the Speaker of the House of Representatives and, by the President of the Senate, in open session, of an enrolled bill, is an official attestation by the two houses of such bill as one that has passed Congress. It is a declaration by the two houses, through their presiding officers, to the President that a bill, thus attested, has received in the form, the sanction of the legislative branch of the government, and that it is delivered to him in obedience to the constitutional requirement that all bill which pass Congress shall be presented to him. And when a bill, thus attested, receives his approval, its authentication as a bill that has passed Congress should be deemed complete and unimpeachable. As the President has no authority to approve a bill not passed by Congress, an enrolled Act in the custody of the Secretary of State, and having the official attestations of the Speaker of the house of Representatives, of the President of the Senate, and of the President of the United States, carries, on its face, a solemn assurance by the legislative and executive departments of the government, charged, respectively, with the duty of enacting and executing the laws, that it was passed by Congress. The respect due to co-equal and independent department requires the judicial department to act upon that assurance, and to accept, as having passed Congress, all bills authenticated in the manner stated; leaving the courts to determine, when the question properly arises, whether the Act, so authenticated, is in conformity with the Constitution.10

To proceed with the history of the statute, it appears that, when the two chambers of the legislature met in conference committee, the phrase "has served as chief of police with exemplary record" was added, thereby accounting for its presence in section 10 of the Act.11

What, then, is the significance of this? It logically means that — except for that vagrant phrase "who has served the police department of a city for at least 8 years with the rank of captain and/or higher" — a high school graduate, no matter how long he has served in a city police department, is not qualified for appointment as chief of police.

Still it is insisted that "if a high school graduate who has served as captain in the Armed Forces of the Philippines for eight years irrespective of the branch of service where he served can be Chief of Police of Manila, why not one who holds an A.A. degree, completed two years in Law School, and served as Chief of the Detective Bureau for 14 years, holding the successive ranks of Captain, Major and Lt. Colonel? Not to mention the fact that he was awarded three Presidential Awards, and was given the Congressional Commendation — the highest award ever conferred in the history of the Manila Police Department."

The trouble with such argument is that even if we were to concede its soundness, still we would be hard put reading it in the law because it is not there. The inclusion of desirable enlargements in the statute is addressed to the judgment of Congress and unless such enlargements are by it accepted courts are without power to make them. As Mr. Justice Frankfurter put the matter with lucidity:

An omission at the time of enactment, whether careless or calculated, cannot be judicially supplied however much later wisdom may recomment the inclusion.

The vital difference between initiating policy, often involving a decided break with the past, and merely carrying out a formulated policy, indicates the relatively narrow limits within which choice is fairly open to courts and the extent to which interpreting law is inescapably making law.12

In conclusion, we hold that, under the present state of the law, the petitioner is neither qualified nor eligible for appointment as chief of police of the city of Manila. Consequently, the respondent has no corresponding legal duty — and therefore may not be compelled by mandamus to certify the petitioner as qualified and eligible.

ACCORDINGLY, the petition for mandamus is denied. No pronouncements as to costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Sanchez, Fernando and Capistrano, JJ., concur.Dizon, J., concurs in the result.Zaldivar, J., took no part.

Separate Opinions

DIZON, J., concurring:

As stated in the decision penned by Mr. Justice Fred Ruiz Castro, petitioner Enrique V. Morales began his career in the Manila Police Department in 1934 as patrolman and gradually rose to his present position — that of Chief of the Detective Bureau thereof — and holds the rank of Lieutenant-Colonel.

In my opinion, a man bearing such credentials can be reasonably expected to be a good Chief of the Manila Police Department. But the issue before us is not whether or not his training and experience justify that expectation, but whether or not, under and in accordance with the pertinent law, he is qualified for appointment to such office to the extent that he is entitled to the relief sought, namely, the issuance of a writ of mandamus compelling the respondent Commissioner of Civil Service to include him in a list of eligible and qualified applicants from which the mayor of the City of Manila might choose the appointee who will fill the vacant position of Chief of Police of the City of Manila.

Section 10 of Police Act of 1966 (Republic Act 4864) — which controls the issue before us, reads as follows:

Minimum qualification for appointment as Chief of Police Agency. — No person may be appointed chief of a city police agency unless he holds a bachelor's degree from a recognized institution of learning and has served either in the Armed Forces of the Philippines or the National Bureau of Investigation, or has served as chief of police with exemplary record, or has served in the police department of any city with the rank of captain or its equivalent therein for at least three years; or any high school graduate who has served as officer in the Armed Forces for at least eight years with the rank of captain and/or higher.

The above legal provision may be construed as providing for two different kinds of academic qualification, namely, (1) a bachelor's degree from a recognized institution of learning, and (2) a high

school degree, each of which is coupled with separate and distinct service qualifications. Any one of the latter, joined with either of the aforesaid academic requirements, would qualify a person for appointment as Chief of a city police agency. In other words, an applicant who is a holder of a bachelor's degree from a recognized institution of learning and has served either in the Armed Forces of the Philippines or the National Bureau of Investigation would make the grade, in the same manner as would another applicant with a similar bachelor's degree who has served as chief of police with exemplary record, etc.

In the case of an applicant who is a mere high school graduate, the service qualification is not only different but is higher and more exacting — for obvious reasons.

Petitioner, however, would construe and read the law as follows:

NO PERSON may be appointed chief of a city police agency unless HE

(1) holds a bachelor's degree from a recognized institution of learning AND has served in the Armed Forces of the Philippines OR the National Bureau of Investigation, OR

(2) has served as chief of police with exemplary record, OR

(3) has served in the police department of any city with the rank of captain or its equivalent therein for at least three years; OR

(4) any high school graduate who has served as officer in the Armed Forces for at least eight years with the rank of captain and/or higher.

While, in my view, petitioner's interpretation is not unreasonable, it falls short of showing that it is the true and correct meaning and intent of the law aforesaid. This, in my opinion, must lead to the conclusion that petitioner is not entitled to the issuance of a writ of mandamus for the purpose stated in his petition because to be entitled thereto he must show that, in relation to the matter at issue, he has a clear enforceable right, on the one hand, and that the respondent has an imperative legal duty to perform, on the other. Because of this I am constrained to concur in the result.

Footnotes

1 Sec. 2.

2 Section 24(c) of the Civil Service Act of 1959 provides: Provisional Appointment. — A provisional appointment may be issued upon the prior authorization of the Commissioner in accordance with the provisions of this Act and the rules and standards promulgated in pursuance thereto to a person who has not qualified in an appropriate examination but who otherwise meets the requirements for appointment to a regular position in the competitive service, whenever a vacancy occurs and the filling thereof is necessary in the interest of the service and there is no appropriate register of eligibles at the time of appointment."

3 Cong. R . No. 64, 156-57 (1966) (emphasis added).

4 See 1 Cong. Rec. No. 65, 28-36 (1966).

5 See Committee Report 667.

6 Unpublished Journal of the Proceedings of August 25-26, 1966 of the Senate.

7 Of three copies of an enrolled bill signed into law, one is kept in the Office of the President, a second one in the Senate and a third one in the House of Representatives. See Bernal, The Legislative Process, 27 Phil. L.J. 507, 533 (1952).

8 78 Phil. 1 (1947) (overruled on other points in Gonzales v. Commission on Elections, L-28196, Nov. 9, 1967).

9 143 U.S. 647 (1891).

10 Id. at 672.

11 1 Cong. Rec. No. 7 (special session, Aug. 27, 1966) 45.

12 Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum. L. Rev. 527, 534 (1947).

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-28089 October 25, 1967

BARA LIDASAN, petitioner, vs.COMMISSION ON ELECTIONS, respondent.

Suntay for petitioner. Barrios and Fule for respondent.

SANCHEZ, J.:

The question initially presented to the Commission on Elections,1 is this: Is Republic Act 4790, which is entitled "An Act Creating the Municipality of Dianaton in the Province of Lanao del Sur", but which includes barrios located in another province — Cotabato — to be spared from attack planted upon the constitutional mandate that "No bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title of the bill"? Comelec's answer is in the affirmative. Offshoot is the present original petition for certiorari and prohibition.

On June 18, 1966, the Chief Executive signed into law House Bill 1247, known as Republic Act 4790, now in dispute. The body of the statute, reproduced in haec verba, reads:

Sec. 1. Barrios Togaig, Madalum, Bayanga, Langkong, Sarakan, Kat-bo, Digakapan, Magabo, Tabangao, Tiongko, Colodan, Kabamakawan, Kapatagan, Bongabong, Aipang, Dagowan, Bakikis, Bungabung, Losain, Matimos and Magolatung, in the Municipalities of Butig and Balabagan, Province of Lanao del Sur, are separated from said municipalities and constituted into a distinct and independent municipality of the same province to be known as the Municipality of Dianaton, Province of Lanao del Sur. The seat of government of the municipality shall be in Togaig.

Sec. 2. The first mayor, vice-mayor and councilors of the new municipality shall be elected in the nineteen hundred sixty-seven general elections for local officials.

Sec. 3. This Act shall take effect upon its approval.

It came to light later that barrios Togaig and Madalum just mentioned are within the municipality of Buldon, Province of Cotabato, and that Bayanga, Langkong, Sarakan, Kat-bo, Digakapan, Magabo, Tabangao, Tiongko, Colodan and Kabamakawan are parts and parcel of another municipality, the municipality of Parang, also in the Province of Cotabato and not of Lanao del Sur.

Prompted by the coming elections, Comelec adopted its resolution of August 15, 1967, the pertinent portions of which are:

For purposes of establishment of precincts, registration of voters and for other election purposes, the Commission RESOLVED that pursuant to RA 4790, the new municipality of Dianaton, Lanao del Sur shall comprise the barrios of Kapatagan, Bongabong, Aipang, Dagowan, Bakikis, Bungabung, Losain, Matimos, and Magolatung situated in the municipality of Balabagan, Lanao del Sur, the barrios of Togaig and Madalum situated in the municipality of Buldon, Cotabato, the barrios of Bayanga, Langkong, Sarakan, Kat-bo, Digakapan, Magabo, Tabangao, Tiongko, Colodan and Kabamakawan situated in the municipality of Parang, also of Cotabato.

Doubtless, as the statute stands, twelve barrios — in two municipalities in the province of Cotabato — are transferred to the province of Lanao del Sur. This brought about a change in the boundaries of the two provinces.

Apprised of this development, on September 7, 1967, the Office of the President, through the Assistant Executive Secretary, recommended to Comelec that the operation of the statute be suspended until "clarified by correcting legislation."

Comelec, by resolution of September 20, 1967, stood by its own interpretation, declared that the statute "should be implemented unless declared unconstitutional by the Supreme Court."

This triggered the present original action for certiorari and prohibition by Bara Lidasan, a resident and taxpayer of the detached portion of Parang, Cotabato, and a qualified voter for the 1967 elections. He

prays that Republic Act 4790 be declared unconstitutional; and that Comelec's resolutions of August 15, 1967 and September 20, 1967 implementing the same for electoral purposes, be nullified.

1. Petitioner relies upon the constitutional requirement aforestated, that "[n]o bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title of the bill."2

It may be well to state, right at the outset, that the constitutional provision contains dual limitations upon legislative power. First. Congress is to refrain from conglomeration, under one statute, of heterogeneous subjects. Second. The title of the bill is to be couched in a language sufficient to notify the legislators and the public and those concerned of the import of the single subject thereof.

Of relevance here is the second directive. The subject of the statute must be "expressed in the title" of the bill. This constitutional requirement "breathes the spirit of command."3 Compliance is imperative, given the fact that the Constitution does not exact of Congress the obligation to read during its deliberations the entire text of the bill. In fact, in the case of House Bill 1247, which became Republic Act 4790, only its title was read from its introduction to its final approval in the House of Representatives4 where the bill, being of local application, originated.5

Of course, the Constitution does not require Congress to employ in the title of an enactment, language of such precision as to mirror, fully index or catalogue all the contents and the minute details therein. It suffices if the title should serve the purpose of the constitutional demand that it inform the legislators, the persons interested in the subject of the bill, and the public, of the nature, scope and consequences of the proposed law and its operation. And this, to lead them to inquire into the body of the bill, study and discuss the same, take appropriate action thereon, and, thus, prevent surprise or fraud upon the legislators.6

In our task of ascertaining whether or not the title of a statute conforms with the constitutional requirement, the following, we believe, may be taken as guidelines:

The test of the sufficiency of a title is whether or not it is misleading; and, which technical accuracy is not essential, and the subject need not be stated in express terms where it is clearly inferable from the details set forth, a title which is so uncertain that the average person reading it would not be informed of the purpose of the enactment or put on inquiry as to its contents, or which is misleading, either in referring to or indicating one subject where another or different one is really embraced in the act, or in omitting any expression or indication of the real subject or scope of the act, is bad.

xxx xxx xxx

In determining sufficiency of particular title its substance rather than its form should be considered, and the purpose of the constitutional requirement, of giving notice to all persons interested, should be kept in mind by the court.7

With the foregoing principles at hand, we take a hard look at the disputed statute. The title — "An Act Creating the Municipality of Dianaton, in the Province of Lanao del Sur"8 — projects the impression that solely the province of Lanao del Sur is affected by the creation of Dianaton. Not the slightest intimation

is there that communities in the adjacent province of Cotabato are incorporated in this new Lanao del Sur town. The phrase "in the Province of Lanao del Sur," read without subtlety or contortion, makes the title misleading, deceptive. For, the known fact is that the legislation has a two-pronged purpose combined in one statute: (1) it creates the municipality of Dianaton purportedly from twenty-one barrios in the towns of Butig and Balabagan, both in the province of Lanao del Sur; and (2) it also dismembers two municipalities in Cotabato, a province different from Lanao del Sur.

The baneful effect of the defective title here presented is not so difficult to perceive. Such title did not inform the members of Congress as to the full impact of the law; it did not apprise the people in the towns of Buldon and Parang in Cotabato and in the province of Cotabato itself that part of their territory is being taken away from their towns and province and added to the adjacent Province of Lanao del Sur; it kept the public in the dark as to what towns and provinces were actually affected by the bill. These are the pressures which heavily weigh against the constitutionality of Republic Act 4790.

Respondent's stance is that the change in boundaries of the two provinces resulting in "the substantial diminution of territorial limits" of Cotabato province is "merely the incidental legal results of the definition of the boundary" of the municipality of Dianaton and that, therefore, reference to the fact that portions in Cotabato are taken away "need not be expressed in the title of the law." This posture — we must say — but emphasizes the error of constitutional dimensions in writing down the title of the bill. Transfer of a sizeable portion of territory from one province to another of necessity involves reduction of area, population and income of the first and the corresponding increase of those of the other. This is as important as the creation of a municipality. And yet, the title did not reflect this fact.

Respondent asks us to read Felwa vs. Salas, L-16511, October 29, 1966, as controlling here. The Felwa case is not in focus. For there, the title of the Act (Republic Act 4695) reads: "An Act Creating the Provinces of Benguet, Mountain Province, Ifugao, and Kalinga-Apayao." That title was assailed as unconstitutional upon the averment that the provisions of the law (Section, 8 thereof) in reference to the elective officials of the provinces thus created, were not set forth in the title of the bill. We there ruled that this pretense is devoid of merit "for, surely, an Act creating said provinces must be expected to provide for the officers who shall run the affairs thereof" — which is "manifestly germane to the subject" of the legislation, as set forth in its title. The statute now before us stands altogether on a different footing. The lumping together of barrios in adjacent but separate provinces under one statute is neither a natural nor logical consequence of the creation of the new municipality of Dianaton. A change of boundaries of the two provinces may be made without necessarily creating a new municipality and vice versa.

As we canvass the authorities on this point, our attention is drawn to Hume vs. Village of Fruitport, 219 NW 648, 649. There, the statute in controversy bears the title "An Act to Incorporate the Village of Fruitport, in the County of Muskegon." The statute, however, in its section 1 reads: "The people of the state of Michigan enact, that the following described territory in the counties of Muskegon and Ottawa Michigan, to wit: . . . be, and the same is hereby constituted a village corporate, by the name of the Village of Fruitport." This statute was challenged as void by plaintiff, a resident of Ottawa county, in an action to restraint the Village from exercising jurisdiction and control, including taxing his lands. Plaintiff

based his claim on Section 20, Article IV of the Michigan State Constitution, which reads: "No law shall embrace more than one object, which shall be expressed in its title." The Circuit Court decree voided the statute and defendant appealed. The Supreme Court of Michigan voted to uphold the decree of nullity. The following, said in Hume, may well apply to this case:

It may be that words, "An act to incorporate the village of Fruitport," would have been a sufficient title, and that the words, "in the county of Muskegon" were unnecessary; but we do not agree with appellant that the words last quoted may, for that reason, be disregarded as surplusage.

. . . Under the guise of discarding surplusage, a court cannot reject a part of the title of an act for the purpose of saving the act. Schmalz vs. Woody, 56 N.J. Eq. 649, 39 A. 539.

A purpose of the provision of the Constitution is to "challenge the attention of those affected by the act to its provisions." Savings Bank vs. State of Michigan, 228 Mich. 316, 200 NW 262.

The title here is restrictive. It restricts the operation of the act of Muskegon county. The act goes beyond the restriction. As was said in Schmalz vs. Wooly, supra: "The title is erroneous in the worst degree, for it is misleading."9

Similar statutes aimed at changing boundaries of political subdivisions, which legislative purpose is not expressed in the title, were likewise declared unconstitutional."10

We rule that Republic Act 4790 is null and void.

2. Suggestion was made that Republic Act 4790 may still be salvaged with reference to the nine barrios in the municipalities of Butig and Balabagan in Lanao del Sur, with the mere nullification of the portion thereof which took away the twelve barrios in the municipalities of Buldon and Parang in the other province of Cotabato. The reasoning advocated is that the limited title of the Act still covers those barrios actually in the province of Lanao del Sur.

We are not unmindful of the rule, buttressed on reason and of long standing, that where a portion of a statute is rendered unconstitutional and the remainder valid, the parts will be separated, and the constitutional portion upheld. Black, however, gives the exception to this rule, thus:

. . . But when the parts of the statute are so mutually dependent and connected, as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, and that if all could not be carried into effect, the legislature would not pass the residue independently, then, if some parts are unconstitutional, all the provisions which are thus dependent, conditional, or connected, must fall with them,11

In substantially similar language, the same exception is recognized in the jurisprudence of this Court, thus:

The general rule is that where part of a statute is void, as repugnant to the Organic Law, while another part is valid, the valid portion if separable from the invalid, may stand and be enforced. But in order to

do this, the valid portion must be so far independent of the invalid portion that it is fair to presume that the Legislature would have enacted it by itself if they had supposed that they could not constitutionally enact the other. . . Enough must remain to make a complete, intelligible, and valid statute, which carries out the legislative intent. . . . The language used in the invalid part of the statute can have no legal force or efficacy for any purpose whatever, and what remains must express the legislative will independently of the void part, since the court has no power to legislate, . . . .12

Could we indulge in the assumption that Congress still intended, by the Act, to create the restricted area of nine barrios in the towns of Butig and Balabagan in Lanao del Sur into the town of Dianaton, if the twelve barrios in the towns of Buldon and Parang, Cotabato were to be excluded therefrom? The answer must be in the negative.

Municipal corporations perform twin functions. Firstly. They serve as an instrumentality of the State in carrying out the functions of government. Secondly. They act as an agency of the community in the administration of local affairs. It is in the latter character that they are a separate entity acting for their own purposes and not a subdivision of the State.13

Consequently, several factors come to the fore in the consideration of whether a group of barrios is capable of maintaining itself as an independent municipality. Amongst these are population, territory, and income. It was apparently these same factors which induced the writing out of House Bill 1247 creating the town of Dianaton. Speaking of the original twenty-one barrios which comprise the new municipality, the explanatory note to House Bill 1247, now Republic Act 4790, reads:

The territory is now a progressive community; the aggregate population is large; and the collective income is sufficient to maintain an independent municipality.

This bill, if enacted into law, will enable the inhabitants concerned to govern themselves and enjoy the blessings of municipal autonomy.

When the foregoing bill was presented in Congress, unquestionably, the totality of the twenty-one barrios — not nine barrios — was in the mind of the proponent thereof. That this is so, is plainly evident by the fact that the bill itself, thereafter enacted into law, states that the seat of the government is in Togaig, which is a barrio in the municipality of Buldon in Cotabato. And then the reduced area poses a number of questions, thus: Could the observations as to progressive community, large aggregate population, collective income sufficient to maintain an independent municipality, still apply to a motley group of only nine barrios out of the twenty-one? Is it fair to assume that the inhabitants of the said remaining barrios would have agreed that they be formed into a municipality, what with the consequent duties and liabilities of an independent municipal corporation? Could they stand on their own feet with the income to be derived in their community? How about the peace and order, sanitation, and other corporate obligations? This Court may not supply the answer to any of these disturbing questions. And yet, to remain deaf to these problems, or to answer them in the negative and still cling to the rule on separability, we are afraid, is to impute to Congress an undeclared will. With the known premise that Dianaton was created upon the basic considerations of progressive community, large aggregate population and sufficient income, we may not now say that Congress intended to create Dianaton with

only nine — of the original twenty-one — barrios, with a seat of government still left to be conjectured. For, this unduly stretches judicial interpretation of congressional intent beyond credibility point. To do so, indeed, is to pass the line which circumscribes the judiciary and tread on legislative premises. Paying due respect to the traditional separation of powers, we may not now melt and recast Republic Act 4790 to read a Dianaton town of nine instead of the originally intended twenty-one barrios. Really, if these nine barrios are to constitute a town at all, it is the function of Congress, not of this Court, to spell out that congressional will.

Republic Act 4790 is thus indivisible, and it is accordingly null and void in its totality.14

3. There remains for consideration the issue raised by respondent, namely, that petitioner has no substantial legal interest adversely affected by the implementation of Republic Act 4790. Stated differently, respondent's pose is that petitioner is not the real party in interest.

Here the validity of a statute is challenged on the ground that it violates the constitutional requirement that the subject of the bill be expressed in its title. Capacity to sue, therefore, hinges on whether petitioner's substantial rights or interests are impaired by lack of notification in the title that the barrio in Parang, Cotabato, where he is residing has been transferred to a different provincial hegemony.

The right of every citizen, taxpayer and voter of a community affected by legislation creating a town to ascertain that the law so created is not dismembering his place of residence "in accordance with the Constitution" is recognized in this jurisdiction.15

Petitioner is a qualified voter. He expects to vote in the 1967 elections. His right to vote in his own barrio before it was annexed to a new town is affected. He may not want, as is the case here, to vote in a town different from his actual residence. He may not desire to be considered a part of hitherto different communities which are fanned into the new town; he may prefer to remain in the place where he is and as it was constituted, and continue to enjoy the rights and benefits he acquired therein. He may not even know the candidates of the new town; he may express a lack of desire to vote for anyone of them; he may feel that his vote should be cast for the officials in the town before dismemberment. Since by constitutional direction the purpose of a bill must be shown in its title for the benefit, amongst others, of the community affected thereby,16 it stands to reason to say that when the constitutional right to vote on the part of any citizen of that community is affected, he may become a suitor to challenge the constitutionality of the Act as passed by Congress.

For the reasons given, we vote to declare Republic Act 4790 null and void, and to prohibit respondent Commission from implementing the same for electoral purposes.

No costs allowed. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Castro and Angeles, JJ., concur.

Separate Opinions

FERNANDO, J., dissenting:

With regret and with due recognition of the merit of the opinion of the Court, I find myself unable to give my assent. Hence these few words to express my stand.

Republic Act No. 4790 deals with one subject matter, the creation of the municipality of Dianaton in the province of Lanao del Sur. The title makes evident what is the subject matter of such an enactment. The mere fact that in the body of such statute barrios found in two other municipalities of another province were included does not of itself suffice for a finding of nullity by virtue of the constitutional provision invoked. At the most, the statute to be free from the insubstantial doubts about its validity must be construed as not including the barrios, located not in the municipalities of Butig and Balabagan, Lanao del Sur, but in Parang and Baldon, Cotabato.

The constitutional requirement is that no bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title of the bill.1 This provision is similar to those found in the Constitution of many American States. It is aimed against the evils, of the so-called omnibus bills, and log-rolling legislation, and against surreptitious or unconsidered enactments.2 Where the subject of a bill is limited to a particular matter, the members of the legislature as well as the people should be informed of the subject of proposed legislative measures. This constitutional provision thus precludes the insertion of riders in legislation, a rider being a provision not germane to the subject matter of the bill.

It is not to be narrowly construed though as to cripple or impede proper legislation. The construction must be reasonable and not technical. It is sufficient if the title be comprehensive enough reasonably to include the general object which the statute seeks to effect without expressing each and every end and means necessary for the accomplishment of that object. Mere details need not be set forth. The legislature is not required to make the title of the act a complete index of its contents. The constitutional provision is satisfied if all parts of an act which relates to its subject find expression in its title.3

The first decision of this Court, after the establishment of the Commonwealth of the Philippines, in 1938, construing a provision of this nature, Government v. Hongkong & Shanghai Bank,4 held that the inclusion of Section 11 of Act No. 4007, the Reorganization Law, providing for the mode in which the total annual expenses of the Bureau of Banking may be reimbursed through assessment levied upon all banking institutions subject to inspection by the Bank Commissioner was not violative of such a requirement in the Jones Law, the previous organic act. Justice Laurel, however, vigorously dissented, his view being that while the main subject of the act was reorganization, the provision assailed did not deal with reorganization but with taxation. While the case of Government vs. Hongkong & Shanghai Bank was decided by a bare majority of four justices against three, the present trend seems to be that the constitutional requirement is to be given the liberal test as indicated in the majority opinion penned by Justice Abad Santos, and not the strict test as desired by the majority headed by Justice Laurel.

Such a trend has been reflected in subsequent decisions beginning with Sumulong v. Commission on Elections,5 up to and including Felwa vs. Salas, a 1966 decision,6 the opinion coming from Justice Concepcion.

It is true of course that in Philconsa v. Gimenez,7 one of the grounds on which the invalidity of Republic Act No. 3836 was predicated was the violation of the above constitutional provision. This Retirement Act for senators and representatives was entitled "AN ACT AMENDING SUB-SECTION (c), SECTION TWELVE OF COMMONWEALTH ACT NUMBERED ONE HUNDRED EIGHTY-SIX, AS AMENDED BY REPUBLIC ACT NUMBERED THIRTY HUNDRED NINETY-SIX." As we noted, the paragraph in Republic Act No. 3836 deemed objectionable "refers to members of Congress and to elective officers thereof who are not members of the Government Service Insurance System. To provide retirement benefits, therefore, for these officials, would relate to a subject matter which is not germane to Commonwealth Act No. 186. In other words, this portion of the amendment ( re retirement benefits for Members of Congress and appointive officers, such as the Secretary and Sergeants-at-arms for each house) is not related in any manner to the subject of Commonwealth Act No. 186 establishing the Government Service Insurance System and which provides for both retirement and insurance benefits to its members." Nonetheless our opinion was careful to note that there was no abandonment of the principle of liberality. Thus: "we are not unmindful of the fact that there has been a general disposition in all courts to construe the constitutional provision with reference to the subject and title of the Act, liberally."

It would follow therefore that the challenged legislation Republic Act No. 4790 is not susceptible to the indictment that the constitutional requirement as to legislation having only one subject which should be expressed in his title was not met. The subject was the creation of the municipality of Dianaton. That was embodied in the title.

It is in the light of the aforementioned judicial decisions of this Court, some of the opinions coming from jurists illustrious for their mastery of constitutional law and their acknowledged erudition, that, with all due respect, I find the citation from Corpus Juris Secundum, unnecessary and far from persuasive. The State decisions cited, I do not deem controlling, as the freedom of this Court to accept or reject doctrines therein announced cannot be doubted.

Wherein does the weakness of the statute lie then? To repeat, several barrios of two municipalities outside Lanao del Sur were included in the municipality of Dianaton of that province. That itself would not have given rise to a constitutional question considering the broad, well-high plenary powers possessed by Congress to alter provincial and municipal boundaries. What justified resort to this Court was the congressional failure to make explicit that such barrios in two municipalities located in Cotabato would thereafter form part of the newly created municipality of Dianaton, Lanao del Sur.

To avoid any doubt as to the validity of such statute, it must be construed as to exclude from Dianaton all of such barrios mentioned in Republic Act No. 4790 found in municipalities outside Lanao del Sur. As thus interpreted, the statute can meet the test of the most rigid scrutiny. Nor is this to do violence to the legislative intent. What was created was a new municipality from barrios named as found in Lanao del Sur. This construction assures precisely that.

This mode of interpreting Republic Act No. 4790 finds support in basic principles underlying precedents, which if not precisely controlling, have a persuasive ring. In Radiowealth v. Agregado,8 certain provisions of the Administrative Code were interpreted and given a "construction which would be more in

harmony with the tenets of the fundamental law." In Sanchez v. Lyon Construction,9 this Court had a similar ruling: "Article 302 of the Code of Commerce must be applied in consonance with [the relevant] provisions of our Constitution." The above principle gained acceptance at a much earlier period in our constitutional history. Thus in a 1913 decision, In re Guariña:10 "In construing a statute enacted by the Philippine Commission we deem it our duty not to give it a construction which would be repugnant to an Act of Congress, if the language of the statute is fairly susceptible of another construction not in conflict with the higher law. In doing so, we think we should not hesitate to disregard contentions touching the apparent intention of the legislator which would lead to the conclusion that the Commission intended to enact a law in violation of the Act of Congress. However specious the argument may be in favor of one of two possible constructions, it must be disregarded if on examination it is found to rest on the contention that the legislator designed an attempt to transcend the rightful limits of his authority, and that his apparent intention was to enact an invalid law."

American Supreme Court decisions are equally explicit. The then Justice, later Chief Justice, Stone, construed statutes "with an eye to possible constitutional limitations so as to avoid doubts as to [their] validity."11 From the pen of the articulate jurist, Frankfurter:12 "Accordingly, the phrase "lobbying activities" in the resolution must be given the meaning that may fairly be attributed to it, having special regard for the principle of constitutional adjudication which makes it decisive in the choice of fair alternatives that one construction may raise serious constitutional questions avoided by another." His opinion in the Rumely case continues with the above pronouncement of Stone and two other former Chief Justices: "In the words of Mr. Chief Justice Taft, '(i)t is our duty in the interpretation of federal statutes to reach conclusion which will avoid serious doubt of their constitutionality', Richmond Screw Anchor Co. v. United States, 275 US 331, 346, 48 S. Ct. 194, 198, 72 L. ed. 303. . . . As phrased by Mr. Chief Justice Hughes, "if a serious doubt of constitutionality is raised, it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the question may be avoided.' Crowell v. Benson, 285, 296, 76 L. ed. 598, and cases cited." The prevailing doctrine then as set forth by Justice Clark in a 1963 decision,13 is that courts "have consistently sought an interpretation which supports the constitutionality of legislation." Phrased differently by Justice Douglas, the judiciary favors "that interpretation of legislation which gives it the greater change of surviving the test of constitutionality."14

It would follow then that both Philippine and American decisions unite in the view that a legislative measure, in the language of Van Devanter "should not be given a construction which will imperil its validity where it is reasonably open to construction free from such peril."15 Republic Act No. 4790 as above construed incurs no such risk and is free from the peril of nullity.

So I would view the matter, with all due acknowledgment of the practical considerations clearly brought to light in the opinion of the Court.

Footnotes

1 Hereinafter referred to as Comelec.

2 Article VI, Sec. 21(1), Philippine Constitution.

3 Stiglitz vs. Schiardien, 40 SW 2d 315, 317, 320.

4 Congressional Record, Vol. I, No. 40, p. 8; Vol. I, No. 50, pp. 40-41.

5 Section 18, Article VI of the Constitution, provides:

"Sec. 18. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills, shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments."

6 Vidal de Roces vs. Posadas, 58 Phil. 108, 111-112; Ichong vs. Hernandez, 101 Phil. 1155, 1188-1190.

7 82 C.J.S. pp. 365, 370; emphasis supplied.

8 Emphasis ours.

9 Emphasis supplied.

10 Examples: Wilcox vs. Paddock, 31 NW 609, where the statute entitled "An act making an appropriation of state swamp lands to aid the county of Gratiot in improving the channel of Maple river . . ." but the body of the act affected another county other than Gratiot.

State vs. Burr, 238 P 585, the statute entitled "An act to amend Secs. 4318 and 4327 of the Codes of Montana relating to changing the boundaries of Fergus and Judith Basin countries" was rendered void because the body of the act included the boundaries of Petroleum county.

Atchison vs. Kearney County, 48 P 583, where the title of the act purported to attach Kearney county to Finney county the body of the act attached it to Hamilton county.

State vs. Nelson, 98 So. 715, the title of the act purporting to alter or rearrange the boundaries of Decatur city and the body of the act which actually diminished the boundary lines of the city were considered by the court as dealing with incongruous matters. The reading of the former would give no clear suggestion that the latter would follow and be made the subject of the act. Jackson, Clerk vs. Sherrod, 92 So. 481; City of Ensley vs. Simpson, 52 So. 61, cited.

Fairview vs. City of Detroit, 113 NW 368, where the title gave notice that the entire village of Fairview is annexed to Detroit when the body affected only a portion.

11 Black, Interpretation of Laws, 2d. ed., p. 116.

12 Barrameda vs. Moir, 25 Phil. 44, 47-48, quoted in Government vs. Springer (50 Phil. 259, 292; emphasis supplied).

13 McQuillin, Municipal Corporations, 3d ed., pp. 456-464.

14 In the case of Fuqua vs. City of Mobile, 121 So. 696, it was asserted that the portion of the statute excluding a territory from Mobile which was not express in the title "An act to alter and rearrange the boundary lines of the city of Mobile in the state of Alabama" should be the only portion invalidated. The court, using the test whether or not after the objectionable feature is stricken off there would still remain an act complete in itself, sensible, capable of being executed, ruled that there can be no segregation of that portion dealing with the excluded territory from that dealing with additional territory because these two matters are all embraced and intermingled in one section dealing with the corporate limits of the city.

In the case of Engle vs. Bonnie, 204 SW 2d 963, the statute involved was entitled "An Act relating to cities". Section 4 thereof "requires the creation of a municipality on petition of a majority of voters or 500 voters." But some of the provisions were germane to the title of the law. This statute was declared void in toto. The Court of Appeals of Kentucky ruled as follows:

"The judgment declared only Section 4 [relative to the creation of a municipality on petition of the voters] to be void and the remainder valid. While some of the provisions of the act are germane to the title, since they deal with the classification of cities to be created, they seem merely to harmonize other sections of the statute which they amend with a new creation of cities other than sixth class towns. To remove only Section 4 would be like taking the motor of an automobile which leaves the machine of no use. We are quite sure that these provisions would not have been enacted without Section 4; hence, they too must fall."

15 Macias vs. The Commission on Elections, L-18684, September 14, 1961.

16 Brooks vs. Hydorn, 42 NW 1122, 1123-1124; Fairview vs. City of Detroit, 113 NW 368, 370.

FERNANDO, J., dissenting:

1 Art. VI, Sec. 21, par. 1, Constitution.

2 Government v. Hongkong & Shanghai Bank (1938), 66 Phil. 483.

3 People vs. Carlos (1947), 78 Phil. 535.

4 66 Phil. 483.

5 73 Phil. (1942) 228.

6 L-26511, October 29, 1960. The other cases that may be cited follows People v. Carlos (1947), 78 Phil. 535; Nuval v. de la Fuente (1953), 92 Phil. 1074; Ichong v. Hernandez (1951), 101 Phil. 1155; Cordero v. Cabatuando, L-14542, Oct. 31, 1962; Municipality of Jose Panganiban v. Shell Company, L-18349, July 30, 1966.

7 L-23326, December 18, 1965.

8 86 Phil. 429 (1950).

9 87 Phil. 309 (1950), Cf . City of Manila v. Arellano Law Colleges, Inc. (1950), 85 Phil. 663.

10 24 Phil. 37. Justice Carson who penned the opinion cited Black on Interpretation of Laws to this effect: "Hence it follows that the courts will not so construe the law as to make it conflict with the constitution, but will rather put such an interpretation upon it as will avoid conflict with the constitution and give it full force and effect, if this can be done without extravagance. If there is doubt, or uncertainty as to the meaning of the legislature, if the words or provisions of the statute are obscure, or if the enactment is fairly susceptible of two or more constructions, that interpretation will be adopted which will avoid the effect of unconstitutionality, even though it may be necessary, for this purpose, to disregard the more usual or apparent impact of the language employed."

11 Lucas v. Alexander (1928). 279 US 573, 577-578, citing United States ex rel. Atty. Gen. v. Delaware & H. Co. 213 US 366, 407, 408, 53 L. ed. 836, 848, 849, 29 Sup. Ct. Rep. 527: United States v. Standard Brewery, 251 US 210, 220, 64 L. ed. 229, 235, 40 Sup. Ct. Rep. 139; Texas v. Eastern Texas R. Co. 258 US 204, 217, 66 L. ed. 566, 572, 42 Sup. Ct. Rep. 281; Bratton v. Chandler, 260 US 110, 114, 67 L. ed. 157, 161, 43 Sup. Ct. Rep. 43; Panama R. Co. v. Johnson, 264 US 375, 390, 68 L. ed. 748, 754, 44 Sup. Ct. Rep. 391.

12 United States v. Rumely (1953), 345 US 41, 45.

13 United States v. National Dairy Product Corp. 373 US 29, 32.

14 Ex parte Endo (1944), 323 US 283, 299-300.

15 Chippewa Indians v. United States (1937), 301 US 358, 376.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-114783 December 8, 1994

ROBERT V. TOBIAS, RAMON M. GUZMAN, TERRY T. LIM, GREGORIO D. GABRIEL, and ROBERTO R. TOBIAS, JR. petitioners, vs.HON. CITY MAYOR BENJAMIN S. ABALOS, CITY TREASURER WILLIAM MARCELINO, and THE SANGGUNIANG PANLUNGSOD, all of the City of Mandaluyong, Metro Manila, respondents.

Estrella, Bautista & Associates for petitioners.

BIDIN, J.:

Invoking their rights as taxpayers and as residents of Mandaluyong, herein petitioners assail the constitutionality of Republic Act No. 7675, otherwise known as "An Act Converting the Municipality of Mandaluyong into a Highly Urbanized City to be known as the City of Mandaluyong."

Prior to the enactment of the assailed statute, the municipalities of Mandaluyong and San Juan belonged to only one legislative district. Hon. Ronaldo Zamora, the incumbent congressional representative of this legislative district, sponsored the bill which eventually became R.A. No. 7675. President Ramos signed R.A. No. 7675 into law on February 9, 1994.

Pursuant to the Local Government Code of 1991, a plebiscite was held on April 10, 1994. The people of Mandaluyong were asked whether they approved of the conversion of the Municipality of Mandaluyong into a highly urbanized city as provided under R.A. No. 7675. The turnout at the plebiscite was only 14.41% of the voting population. Nevertheless, 18,621 voted "yes" whereas 7,911 voted "no." By virtue of these results, R.A. No. 7675 was deemed ratified and in effect.

Petitioners now come before this Court, contending that R.A. No. 7675, specifically Article VIII, Section 49 thereof, is unconstitutional for being violative of three specific provisions of the Constitution.

Article VIII, Section 49 of R.A. No. 7675 provides:

As a highly-urbanized city, the City of Mandaluyong shall have its own legislative district with the first representative to be elected in the next national elections after the passage of this Act. The remainder of the former legislative district of San Juan/Mandaluyong shall become the new legislative district of San Juan with its first representative to be elected at the same election.

Petitioner's first objection to the aforequoted provision of R.A. No. 7675 is that it contravenes the "one subject-one bill" rule, as enunciated in Article VI, Section 26(1) of the Constitution, to wit:

Sec. 26(1). Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.

Petitioners allege that the inclusion of the assailed Section 49 in the subject law resulted in the latter embracing two principal subjects, namely: (1) the conversion of Mandaluyong into a highly urbanized city; and (2) the division of the congressional district of San Juan/Mandaluyong into two separate districts.

Petitioners contend that the second aforestated subject is not germane to the subject matter of R.A. No. 7675 since the said law treats of the conversion of Mandaluyong into a highly urbanized city, as expressed in the title of the law. Therefore, since Section 49 treats of a subject distinct from that stated in the title of the law, the "one subject-one bill" rule has not been complied with.

Petitioners' second and third objections involve Article VI, Sections 5(1) and (4) of the Constitution, which provide, to wit:

Sec. 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.

Sec. 5(4). Within three years following the return of every census, the Congress shall make a reapportionment of legislative districts based on the standard provided in this section.

Petitioners argue that the division of San Juan and Mandaluyong into separate congressional districts under Section 49 of the assailed law has resulted in an increase in the composition of the House of Representatives beyond that provided in Article VI, Sec. 5(1) of the Constitution. Furthermore, petitioners contend that said division was not made pursuant to any census showing that the subject municipalities have attained the minimum population requirements. And finally, petitioners assert that Section 49 has the effect of preempting the right of Congress to reapportion legislative districts pursuant to Sec. 5(4) as aforecited.

The contentions are devoid of merit.

Anent the first issue, we agree with the observation of the Solicitor General that the statutory conversion of Mandaluyong into a highly urbanized city with a population of not less than two hundred fifty thousand indubitably ordains compliance with the "one city-one representative" proviso in the Constitution:

. . . Each city with a population of at least two hundred fifty thousand, or each province, shall have at least one representative" (Article VI, Section 5(3), Constitution).

Hence, it is in compliance with the aforestated constitutional mandate that the creation of a separate congressional district for the City of Mandaluyong is decreed under Article VIII, Section 49 of R.A. No. 7675.

Contrary to petitioners' assertion, the creation of a separate congressional district for Mandaluyong is not a subject separate and distinct from the subject of its conversion into a highly urbanized city but is a natural and logical consequence of its conversion into a highly urbanized city. Verily, the title of R.A. No. 7675, "An Act Converting the Municipality of Mandaluyong Into a Highly Urbanized City of Mandaluyong" necessarily includes and contemplates the subject treated under Section 49 regarding the creation of a separate congressional district for Mandaluyong.

Moreover, a liberal construction of the "one title-one subject" rule has been invariably adopted by this court so as not to cripple or impede legislation. Thus, in Sumulong v. Comelec (73 Phil. 288 [1941]), we ruled that the constitutional requirement as now expressed in Article VI, Section 26(1) "should be given

a practical rather than a technical construction. It should be sufficient compliance with such requirement if the title expresses the general subject and all the provisions are germane to that general subject."

The liberal construction of the "one title-one subject" rule had been further elucidated in Lidasan v. Comelec (21 SCRA 496 [1967]), to wit:

Of course, the Constitution does not require Congress to employ in the title of an enactment, language of such precision as to mirror, fully index or catalogue all the contents and the minute details therein. It suffices if the title should serve the purpose of the constitutional demand that it inform the legislators, the persons interested in the subject of the bill and the public, of the nature, scope and consequences of the proposed law and its operation" (emphasis supplied).

Proceeding now to the other constitutional issues raised by petitioners to the effect that there is no mention in the assailed law of any census to show that Mandaluyong and San Juan had each attained the minimum requirement of 250,000 inhabitants to justify their separation into two legislative districts, the same does not suffice to strike down the validity of R.A. No. 7675. The said Act enjoys the presumption of having passed through the regular congressional processes, including due consideration by the members of Congress of the minimum requirements for the establishment of separate legislative districts. At any rate, it is not required that all laws emanating from the legislature must contain all relevant data considered by Congress in the enactment of said laws.

As to the contention that the assailed law violates the present limit on the number of representatives as set forth in the Constitution, a reading of the applicable provision, Article VI, Section 5(1), as aforequoted, shows that the present limit of 250 members is not absolute. The Constitution clearly provides that the House of Representatives shall be composed of not more than 250 members, "unless otherwise provided by law." The inescapable import of the latter clause is that the present composition of Congress may be increased, if Congress itself so mandates through a legislative enactment. Therefore, the increase in congressional representation mandated by R.A. No. 7675 is not unconstitutional.

Thus, in the absence of proof that Mandaluyong and San Juan do not qualify to have separate legislative districts, the assailed Section 49 of R.A.No. 7675 must be allowed to stand.

As to the contention that Section 49 of R.A. No. 7675 in effect preempts the right of Congress to reapportion legislative districts, the said argument borders on the absurd since petitioners overlook the glaring fact that it was Congress itself which drafted, deliberated upon and enacted the assailed law, including Section 49 thereof. Congress cannot possibly preempt itself on a right which pertains to itself.

Aside from the constitutional objections to R.A. No. 7675, petitioners present further arguments against the validity thereof.

Petitioners contend that the people of San Juan should have been made to participate in the plebiscite on R.A. No. 7675 as the same involved a change in their legislative district. The contention is bereft of merit since the principal subject involved in the plebiscite was the conversion of Mandaluyong into a

highly urbanized city. The matter of separate district representation was only ancillary thereto. Thus, the inhabitants of San Juan were properly excluded from the said plebiscite as they had nothing to do with the change of status of neighboring Mandaluyong.

Similarly, petitioners' additional argument that the subject law has resulted in "gerrymandering," which is the practice of creating legislative districts to favor a particular candidate or party, is not worthy of credence. As correctly observed by the Solicitor General, it should be noted that Rep. Ronaldo Zamora, the author of the assailed law, is the incumbent representative of the former San Juan/Mandaluyong district, having consistently won in both localities. By dividing San Juan/Mandaluyong, Rep. Zamora's constituency has in fact been diminished, which development could hardly be considered as favorable to him.

WHEREFORE, the petition is hereby DISMISSED for lack of merit.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.

Feliciano, J., is on leave.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-42050-66 November 20, 1978

THE PEOPLE OF THE PHILIPPINES, petitioner, vs.HONORABLE JUDGE AMANTE P. PURISIMA, COURT OF FIRST INSTANCE OF MANILA, BRANCH VII, and PORFIRIO CANDELOSAS, NESTOR BAES, ELIAS L. GARCIA, SIMEON BUNDALIAN, JR., JOSEPH C. MAISO, EDUARDO A. LIBORDO, ROMEO L. SUGAY, FEDERICO T. DIZON, GEORGE M. ALBINO, MARIANO COTIA, JR., ARMANDO L. DIZON, ROGELIO B. PARENO, RODRIGO V. ESTRADA, ALFREDO A. REYES, JOSE A. BACARRA, REYNALDO BOGTONG, and EDGARDO M. MENDOZA, respondents.

G.R. No. L-46229-32 November 20, 1978

THE PEOPLE OF THE PHILIPPINES, petitioner, vs.JUDGE MAXIMO A. MACEREN, COURT OF FIRST INSTANCE OF MANILA, BRANCH XVIII, and REYNALDO LAQUI Y AQUINO, ELPIDIO ARPON, VICTOR EUGENIO Y ROQUE and ALFREDO VERSOZA, respondents.

G.R. No. L-46313-16 November 20, 1978

THE PEOPLE OF THE PHILIPPINES, petitioner, vs.JUDGE MAXIMO A. MACEREN, COURT OF FIRST INSTANCE OF MANILA, BRANCH XVIII, and JUANITO DE LA CRUZ Y NUNEZ, SABINO BUENO Y CACAL, TIRSO ISAGAN Y FRANCISCO and BEN CASTILLO Y UBALDO, respondents.

G.R. No. L-46997 November 20, 1978

THE PEOPLE OF THE PHILIPPINES, petitioner, vs.THE HONORABLE WENCESLAO M. POLO, Judge of the Court of First Instance of Samar, and PANCHITO REFUNCION, respondents.

Jose L. Gamboa, Fermin Martin, Jr. & Jose D. Cajucom, Office of the City of Fiscal of Manila and the Office of Provincial Fiscal of Samar for petitioners.

Norberto Parto for respondents Candelosas, Baes and Garcia.

Amado C. de la Marced for respondents Simeon Bundalian Jr., et al.

Manuel F. de Jesus for all the respondents in L-46229-32 and L-46313-16.

Norberto L. Apostol for respondent Panchito Refuncion.

Hon. Amante P. Purisima for and in his own behalf.

MUÑOZ PALMA, J.:

These twenty-six (26) Petitions for Review filed by the People of the Philippines represented, respectively, by the Office of the City Fiscal of Manila, the Office of the Provincial Fiscal of Samar, and joined by the Solicitor General, are consolidated in this one Decision as they involve one basic question of law.

These Petitions or appeals involve three Courts of First Instance, namely: the Court of First Instance of Manila, Branch VII, presided by Hon. Amante P. Purisima (17 Petitions), the Court of First Instance of Manila, Branch XVIII, presided by Hon. Maximo A. Maceren (8 Petitions) and, the Court of First Instance of Samar, with Hon. Wenceslao M. Polo, presiding, (1 Petition).

Before those courts, Informations were filed charging the respective accused with "illegal possession of deadly weapon" in violation of Presidential Decree No. 9. On a motion to quash filed by the accused, the three Judges mentioned above issued in the respective cases filed before them — the details of which will be recounted below — an Order quashing or dismissing the Informations, on a common ground, viz, that the Information did not allege facts which constitute the offense penalized by Presidential Decree No. 9 because it failed to state one essential element of the crime.

Thus, are the Informations filed by the People sufficient in form and substance to constitute the offense of "illegal possession of deadly weapon" penalized under Presidential Decree (PD for short) No. 9? This is the central issue which we shall resolve and dispose of, all other corollary matters not being indispensable for the moment.

A — The Information filed by the People —

1. In L-42050-66, one typical Information filed with the Court presided by Judge Purisima follows:

THE PEOPLE OF THE PHILIPPINES, plaintiff, versus PORFIRIO CANDELOSAS Y DURAN, accused.

Crim. Case No. 19639

VIOLATION OF PAR. 3, PRES. DECREE No. 9 OF PROCLAMATION 1081

INFORMATION

The undersigned accuses PORFIRIO CANDELOSAS Y DURAN of a violation of paragraph 3, Presidential Decree No. 9 of Proclamation 1081, committed as follows:

That on or about the 14 th day of December, 1974, in the City of Manila, Philippines, the said accused did then and there wilfully, unlawfully, feloniously and knowingly have in his possession and under his custody and control one (1) carving knife with a blade of 6-½ inches and a wooden handle of 5-1/4 inches, or an overall length of 11-¾ inches, which the said accused carried outside of his residence, the said weapon not being used as a tool or implement necessary to earn his livelihood nor being used in connection therewith.

Contrary to law. (p. 32, rollo of L-42050-66)

The other Informations are similarly worded except for the name of the accused, the date and place of the commission of the crime, and the kind of weapon involved.

2. In L-46229-32 and L-46313-16, the Information filed with the Court presided by Judge Maceren follows:

THE PEOPLE OF THE PHILIPPINES, plaintiff, versus REYNALDO LAQUI Y AQUINO, accused.

CRIM. CASE NO. 29677

VIOL. OF PAR. 3,

PD 9 IN REL. TO LOI

No. 266 of the Chief

Executive dated April 1, 1975

INFORMATION

The undersigned accuses REYNALDO LAQUI Y AQUINO of a VIOLATION OF PARAGRAPH 3, PRESIDENTIAL DECREE NO. 9 in relation to Letter of Instruction No. 266 of the Chief Executive dated April 1, 1975, committed as follows:

That on or about the 28 th day of January, 1977, in the City of Manila, Philippines, the said accused did then and there wilfully, unlawfully and knowingly carry outside of his residence a bladed and pointed weapon, to wit: an ice pick with an overall length of about 8½ inches, the same not being used as a necessary tool or implement to earn his livelihood nor being used in connection therewith.

Contrary to law. (p. 14, rollo of L-46229-32)

The other Informations are likewise similarly worded except for the name of the accused, the date and place of the commission of the crime, and the kind of weapon involved.

3. In L-46997, the Information before the Court of First Instance of Samar is quoted hereunder:

PEOPLE OF THE PHILIPPINES, complainant, versus PANCHITO REFUNCION, accused.

CRIM. CASE NO. 933

For:

ILLEGAL POSSESSION OF

DEADLY WEAPON

(VIOLATION OF PD NO. 9)

INFORMATION

The undersigned First Assistant Provincial Fiscal of Samar, accuses PANCHITO REFUNCION of the crime of ILLEGAL POSSESSION OF DEADLY WEAPON or VIOLATION OF PD NO. 9 issued by the President of the Philippines on Oct. 2, 1972, pursuant to Proclamation No. 1081 dated Sept. 21 and 23, 1972, committed as follows:

That on or about the 6th day of October, 1976, in the evening at Barangay Barruz, Municipality of Matuginao, Province of Samar Philippines, and within the jurisdiction of this Honorabe Court, the abovenamed accused, knowingly, wilfully, unlawfully and feloniously carried with him outside of his residence a deadly weapon called socyatan, an instrument which from its very nature is no such as could be used as a necessary tool or instrument to earn a livelihood, which act committed by the accused is a Violation of Presidential Decree No. 9.

CONTRARY TO LAW. (p. 8, rollo of L-46997)

B. — The Orders of dismissal —

In dismissing or quashing the Informations the trial courts concurred with the submittal of the defense that one essential element of the offense charged is missing from the Information, viz: that the carrying outside of the accused's residence of a bladed, pointed or blunt weapon is in furtherance or on the occasion of, connected with or related to subversion, insurrection, or rebellion, organized lawlessness or public disorder.

1. Judge Purisima reasoned out, inter alia, in this manner:

... the Court is of the opinion that in order that possession of bladed weapon or the like outside residence may be prosecuted and tried under P.D. No. 9, the information must specifically allege that the possession of bladed weapon charged was for the purpose of abetting, or in furtherance of the conditions of rampant criminality, organized lawlessness, public disorder, etc. as are contemplated and recited in Proclamation No. 1081, as justification therefor. Devoid of this specific allegation, not necessarily in the same words, the information is not complete, as it does not allege sufficient facts to constitute the offense contemplated in P.D. No. 9. The information in these cases under consideration suffer from this defect.

xxx xxx xxx

And while there is no proof of it before the Court, it is not difficult to believe the murmurings of detained persons brought to Court upon a charge of possession of bladed weapons under P.D. No. 9, that more than ever before, policemen - of course not all can be so heartless — now have in their hands P.D. No. 9 as a most convenient tool for extortion, what with the terrifying risk of being sentenced to imprisonment of five to ten years for a rusted kitchen knife or a pair of scissors, which only God knows where it came from. Whereas before martial law an extortion-minded peace officer had to have a stock of the cheapest paltik, and even that could only convey the coercive message of one year in jail, now anything that has the semblance of a sharp edge or pointed object, available even in trash cans, may already serve the same purpose, and yet five to ten times more incriminating than the infamous paltik.

For sure, P.D. No. 9 was conceived with the best of intentions and wisely applied, its necessity can never be assailed. But it seems it is back-firing, because it is too hot in the hands of policemen who are inclined to backsliding.

The checkvalves against abuse of P.D. No. 9 are to be found in the heart of the Fiscal and the conscience of the Court, and hence this resolution, let alone technical legal basis, is prompted by the desire of this Court to apply said checkvalves. (pp. 55-57, rollo of L-42050-66)

2. Judge Maceren in turn gave his grounds for dismissing the charges as follows:

xxx xxx xxx

As earlier noted the "desired result" sought to be attained by Proclamation No. 1081 is the maintenance of law and order throughout the Philippines and the prevention and suppression of all forms of lawless violence as well as any act of insurrection or rebellion. It is therefore reasonable to conclude from the foregoing premises that the carrying of bladed, pointed or blunt weapons outside of one's residence

which is made unlawful and punishable by said par. 3 of P.D. No. 9 is one that abets subversion, insurrection or rebellion, lawless violence, criminality, chaos and public disorder or is intended to bring about these conditions. This conclusion is further strengthened by the fact that all previously existing laws that also made the carrying of similar weapons punishable have not been repealed, whether expressly or impliedly. It is noteworthy that Presidential Decree No. 9 does not contain any repealing clause or provisions.

xxx xxx xxx

The mere carrying outside of one's residence of these deadly weapons if not concealed in one's person and if not carried in any of the aforesaid specified places, would appear to be not unlawful and punishable by law.

With the promulgation of Presidential Decree No. 9, however, the prosecution, through Assistant Fiscal Hilario H. Laqui, contends in his opposition to the motion to quash, that this act is now made unlawful and punishable, particularly by paragraph 3 thereof, regardless of the intention of the person carrying such weapon because the law makes it "mala prohibita". If the contention of the prosecution is correct, then if a person happens to be caught while on his way home by law enforcement officers carrying a kitchen knife that said person had just bought from a store in order that the same may be used by one's cook for preparing the meals in one's home, such person will be liable for punishment with such a severe penalty as imprisonment from five to ten years under the decree. Such person cannot claim that said knife is going to be used by him to earn a livelihood because he intended it merely for use by his cook in preparing his meals.

This possibility cannot be discounted if Presidential Decree No. 9 were to be interpreted and applied in the manner that that the prosecution wants it to be done. The good intentions of the President in promulgating this decree may thus be perverted by some unscrupulous law enforcement officers. It may be used as a tool of oppression and tyranny or of extortion.

xxx xxx xxx

It is therefore the considered and humble view of this Court that the act which the President intended to make unlawful and punishable by Presidential Decree No. 9, particularly by paragraph 3 thereof, is one that abets or is intended to abet subversion, rebellion, insurrection, lawless violence, criminality, chaos and public disorder. (pp. 28-30, rollo of L-46229-32)

3. Judge Polo of the Court of First Instance of Samar expounded his order dismissing the Information filed before him, thus:

... We believe that to constitute an offense under the aforcited Presidential decree, the same should be or there should be an allegation that a felony was committed in connection or in furtherance of subversion, rebellion, insurrection, lawless violence and public disorder. Precisely Proclamation No. 1081 declaring a state of martial law throughout the country was issued because of wanton destruction to lives and properties widespread lawlessness and anarchy. And in order to restore the tranquility and

stability of the country and to secure the people from violence anti loss of lives in the quickest possible manner and time, carrying firearms, explosives and deadly weapons without a permit unless the same would fall under the exception is prohibited. This conclusion becomes more compelling when we consider the penalty imposable, which is from five years to ten years. A strict enforcement of the provision of the said law would mean the imposition of the Draconian penalty upon the accused.

xxx xxx xxx

It is public knowledge that in rural areas, even before and during martial law, as a matter of status symbol, carrying deadly weapons is very common, not necessarily for committing a crime nor as their farm implement but for self-preservation or self-defense if necessity would arise specially in going to and from their farm. (pp. 18-19, rollo of L-46997)

In most if not all of the cases, the orders of dismissal were given before arraignment of the accused. In the criminal case before the Court of (First Instance of Samar the accused was arraigned but at the same time moved to quash the Information. In all the cases where the accused were under arrest, the three Judges ordered their immediate release unless held on other charges.

C. — The law under which the Informations in question were filed by the People.

As seen from the Informations quoted above, the accused are charged with illegal possession of deadly weapon in violation of Presidential Decree No. 9, Paragraph 3.

We quote in full Presidential Decree No. 9, to wit:

PRESIDENTIAL DECREE NO. 9

DECLARING VIOLATIONS OF GENERAL ORDERS NO. 6 and NO. 7 DATED SEPTEMBER 22, 1972, AND SEPTEMBER 23, 1972, RESPECTIVELY, TO BE UNLAWFUL AND PROVIDING PENALTIES THEREFORE.

WHEREAS, pursuant to Proclamation No. 1081 dated September 21, 1972, the Philippines has been placed under a state of martial law;

WHEREAS, by virtue of said Proclamation No. 1081, General Order No. 6 dated September 22, 1972 and General Order No. 7 dated September 23, 1972, have been promulgated by me;

WHEREAS, subversion, rebellion, insurrection, lawless violence, criminality, chaos and public disorder mentioned in the aforesaid Proclamation No. 1081 are committed and abetted by the use of firearms, explosives and other deadly weapons;

NOW, THEREFORE, I, FERDINAND E. MARCOS, Commander-in-Chief of all the Armed Forces of the Philippines, in older to attain the desired result of the aforesaid Proclamation No. 1081 and General Orders Nos. 6 and 7, do hereby order and decree that:

1. Any violation of the aforesaid General Orders Nos. 6 and 7 is unlawful and the violator shall, upon conviction suffer:

(a) The mandatory penalty of death by a firing squad or electrocution as a Military, Court/Tribunal/Commission may direct, it the firearm involved in the violation is unlicensed and is attended by assault upon, or resistance to persons in authority or their agents in the performance of their official functions resulting in death to said persons in authority or their agent; or if such unlicensed firearm is used in the commission of crimes against persons, property or chastity causing the death of the victim used in violation of any other General Orders and/or Letters of Instructions promulgated under said Proclamation No. 1081:

(b) The penalty of imprisonment ranging from twenty years to life imprisonment as a Military Court/Tribunal/commission may direct, when the violation is not attended by any of the circumstances enumerated under the preceding paragraph;

(c) The penalty provided for in the preceding paragraphs shall be imposed upon the owner, president, manager, members of the board of directors or other responsible officers of any public or private firms, companies, corporations or entities who shall willfully or knowingly allow any of the firearms owned by such firm, company, corporation or entity concerned to be used in violation of said General Orders Nos. 6 and 7.

2. It is unlawful to posses deadly weapons, including hand grenades, rifle grenades and other explosives, including, but not limited to, "pill box bombs," "molotov cocktail bombs," "fire bombs," or other incendiary device consisting of any chemical, chemical compound, or detonating agents containing combustible units or other ingredients in such proportion, quantity, packing, or bottling that ignites by fire, by friction, by concussion, by percussion, or by detonation of all or part of the compound or mixture which may cause such a sudden generation of highly heated gases that the resultant gaseous pressures are capable of producing destructive effects on continguous objects or of causing injury or death of a person; and any person convicted thereof shall be punished by imprisonment ranging from ten to fifteen years as a Military Court/Tribunal/Commission may direct.

3. It is unlawful to carry outside of residence any bladed, pointed or blunt weapon such as "fan knife," "spear," "dagger," "bolo," "balisong," "barong," "kris," or club, except where such articles are being used as necessary tools or implements to earn a livelihood and while being used in connection therewith; and any person found guilty thereof shall suffer the penalty of imprisonment ranging from five to ten years as a Military Court/Tribunal/Commission may direct.

4. When the violation penalized in the preceding paragraphs 2 and 3 is committed during the commission of or for the purpose of committing, any other crime, the penalty shall be imposed upon the offender in its maximum extent, in addition to the penalty provided for the particular offenses committed or intended to be committed.

Done in the City of Manila, this 2nd day of October in the year of Our Lord, nineteen hundred and seventy-two.

(SGD) FERDINAND E. MARCOS

President

Republic of the Philippines

D. — The arguments of the People —

In the Comment filed in these cases by the Solicitor General who as stated earlier joins the City Fiscal of Manila and the Provincial Fiscal of Samar in seeking the setting aside of the questioned orders of dismissal, the main argument advanced on the issue now under consideration is that a perusal of paragraph 3 of P.D. 9 'shows that the prohibited acts need not be related to subversive activities; that the act proscribed is essentially a malum prohibitum penalized for reasons of public policy. 1

The City Fiscal of Manila in his brief adds further that in statutory offenses the intention of the accused who commits the act is immaterial; that it is enough if the prohibited act is voluntarily perpetuated; that P.D. 9 provides and condemns not only the carrying of said weapon in connection with the commission of the crime of subversion or the like, but also that of criminality in general, that is, to eradicate lawless violence which characterized pre-martial law days. It is also argued that the real nature of the criminal charge is determined not from the caption or preamble of the information nor from the specification of the provision of law alleged to have been violated but by the actual recital of facts in the complaint or information. 2

E. — Our Ruling on the matter —

1. It is a constitutional right of any person who stands charged in a criminal prosecution to be informed of the nature and cause of the accusation against him. 3

Pursuant to the above, Section 5, Rule 110 of the Rules of Court, expressly requires that for a complaint or information to be sufficient it must, inter alia state the designation of the offense by the statute, and the acts or omissions complained of as constituting the offense. This is essential to avoid surprise on the accused and to afford him the opportunity to prepare his defense accordingly. 4

To comply with these fundamental requirements of the Constitution and the Rules on Criminal Procedure, it is imperative for the specific statute violated to be designated or mentioned 4 in the charge. In fact, another compelling reason exists why a specification of the statute violated is essential in these cases. As stated in the order of respondent Judge Maceren the carrying of so-called "deadly weapons" is the subject of another penal statute and a Manila city ordinance. Thus, Section 26 of Act No. 1780 provides:

Section 26. It should be unlawful for any person to carry concealed about his person any bowie knife, dirk dagger, kris, or other deadly weapon: ... Any person violating the provisions of this section shall, upon conviction in a court of competent jurisdiction, be punished by a fine not exceeding five hundred pesos, or by imprisonment for a period not exceeding six months, or both such fine and imprisonment, in the discretion of the court.

Ordinance No. 3820 of the City of Manila as amended by Ordinance No. 3928 which took effect on December 4, 1957, in turn penalizes with a fine of not more than P200.00 or imprisonment for not more than one months, or both, at the discretion of the court, anyone who shall carry concealed in his person in any manner that would disguise its deadly character any kind of firearm, bowie knife, or other deadly weapon ... in any public place. Consequently, it is necessary that the particular law violated be specified as there exists a substantial difference between the statute and city ordinance on the one hand and P.D. 9 (3) on the other regarding the circumstances of the commission of the crime and the penalty imposed for the offense.

We do not agree with petitioner that the above-mentioned statute and the city ordinance are deemed repealed by P.D. 9 (3). 5 P. D. 9(3) does not contain any repealing clause or provision, and repeal by implication is not favored. 6 This principle holds true with greater force with regards to penal statutes which as a rule are to be construed strictly against the state and liberally in favor of the accused. 7 In fact, Article 7 of the New Civil Code provides that laws are repealed only by subsequent ones and their violation or non- observance shall not be excused by disuse, or custom or practice to the contrary.

Thus we are faced with the situation where a particular act may be made to fall, at the discretion of a police officer or a prosecuting fiscal, under the statute, or the city ordinance, or the presidential decree. That being the case, the right becomes more compelling for an accused to be confronted with the facts constituting the essential elements of the offense charged against him, if he is not to become an easy pawn of oppression and harassment, or of negligent or misguided official action — a fear understandably shared by respondent Judges who by the nature of their judicial functions are daily exposed to such dangers.

2. In all the Informations filed by petitioner the accused are charged in the caption as well as in the body of the Information with a violation of paragraph 3, P.D. 9. What then are the elements of the offense treated in the presidential decree in question?

We hold that the offense carries two elements: first, the carrying outside one's residence of any bladed, blunt, or pointed weapon, etc. not used as a necessary tool or implement for a livelihood; and second, that the act of carrying the weapon was either in furtherance of, or to abet, or in connection with subversion, rebellion, insurrection, lawless violence, criminality, chaos, or public disorder.

It is the second element which removes the act of carrying a deadly weapon, if concealed, outside of the scope of the statute or the city ordinance mentioned above. In other words, a simple act of carrying any of the weapons described in the presidential decree is not a criminal offense in itself. What makes the act criminal or punishable under the decree is the motivation behind it. Without that motivation, the act falls within the purview of the city ordinance or some statute when the circumstances so warrant.

Respondent Judges correctly ruled that this can be the only reasonably, logical, and valid construction given to P.D. 9(3).

3. The position taken by petitioner that P.D. 9(3) covers one and all situations where a person carries outside his residence any of the weapons mentioned or described in the decree irrespective of

motivation, intent, or purpose, converts these cases into one of "statutory construction." That there is ambiguity in the presidential decree is manifest from the conflicting views which arise from its implementation. When ambiguity exists, it becomes a judicial task to construe and interpret the true meaning and scope of the measure, guided by the basic principle that penal statutes are to be construed and applied liberally in favor of the accused and strictly against the state.

4. In the construction or interpretation of a legislative measure — a presidential decree in these cases — the primary rule is to search for and determine the intent and spirit of the law. Legislative intent is the controlling factor, for in the words of this Court in Hidalgo v. Hidalgo, per Mr. Justice Claudio Teehankee, whatever is within the spirit of a statute is within the statute, and this has to be so if strict adherence to the letter would result in absurdity, injustice and contradictions. 8

There are certain aids available to Us to ascertain the intent or reason for P.D. 9(3).

First, the presence of events which led to or precipitated the enactment of P.D. 9. These events are clearly spelled out in the "Whereas" clauses of the presidential decree, thus: (1) the state of martial law in the country pursuant to Proclamation 1081 dated September 21, 1972; (2) the desired result of Proclamation 1081 as well as General Orders Nos. 6 and 7 which are particularly mentioned in P.D. 9; and (3) the alleged fact that subversion, rebellion, insurrection, lawless violence, criminality, chaos, aid public disorder mentioned in Proclamation 1081 are committed and abetted by the use of firearms and explosives and other deadly weapons.

The Solicitor General however contends that a preamble of a statute usually introduced by the word "whereas", is not an essential part of an act and cannot enlarge or confer powers, or cure inherent defects in the statute (p. 120, rollo of L-42050-66); that the explanatory note or enacting clause of the decree, if it indeed limits the violation of the decree, cannot prevail over the text itself inasmuch as such explanatory note merely states or explains the reason which prompted the issuance of the decree. (pp. 114-115, rollo of 46997)

We disagree with these contentions. Because of the problem of determining what acts fall within the purview of P.D. 9, it becomes necessary to inquire into the intent and spirit of the decree and this can be found among others in the preamble or, whereas" clauses which enumerate the facts or events which justify the promulgation of the decree and the stiff sanctions stated therein.

A "preamble" is the key of the statute, to open the minds of the makers as to the mischiefs which are to be remedied, and objects which are to be accomplished, by the provisions of the statute." (West Norman Timber v. State, 224 P. 2d 635, 639, cited in Words and Phrases, "Preamble"; emphasis supplied)

While the preamble of a statute is not strictly a part thereof, it may, when the statute is in itself ambiguous and difficult of interpretation, be resorted to, but not to create a doubt or uncertainty which otherwise does not exist." (James v. Du Bois, 16 N.J.L. (1 Har.) 285, 294, cited in Words and Phrases, "Preamble")

In Aboitiz Shipping Corporation, et al. v. The City of Cebu, et al. this Court had occasion to state that '(L)egislative intent must be ascertained from a consideration of the statute as a whole, and not of an isolated part or a particular provision alone. This is a cardinal rule of statutory construction. For taken in the abstract, a word or phrase might easily convey a meaning quite different from the one actually intended and evident when the word or phrase is considered with those with which it is associated. Thus, an apparently general provision may have a limited application if read together with other provisions. 9

Second, the result or effects of the presidential decree must be within its reason or intent.

In the paragraph immediately following the last "Whereas" clause, the presidential decree states:

NOW, THEREFORE, I , FERDINAND E. MARCOS, Commander-in-Chief of an the Armed Forces of the Philippines, in order to attain the desired result of the aforesaid Proclamation No. 1081 and General Orders Nos. 6 and 7, do hereby order and decree that:

xxx xxx xxx

From the above it is clear that the acts penalized in P.D. 9 are those related to the desired result of Proclamation 1081 and General Orders Nos. 6 and 7. General Orders Nos. 6 and 7 refer to firearms and therefore have no relevance to P.D. 9(3) which refers to blunt or bladed weapons. With respect to Proclamation 1081 some of the underlying reasons for its issuance are quoted hereunder:

WHEREAS, these lawless elements having taken up arms against our duly constituted government and against our people, and having committed and are still committing acts of armed insurrection and rebellion consisting of armed raids, forays, sorties, ambushes, wanton acts of murders, spoilage, plunder, looting, arsons, destruction of public and private buildings, and attacks against innocent and defenseless civilian lives and property, all of which activities have seriously endangered and continue to endanger public order and safety and the security of the nation, ...

xxx xxx xxx

WHEREAS, it is evident that there is throughout the land a state of anarchy and lawlessness, chaos and disorder, turmoil and destruction of a magnitude equivalent to an actual war between the forces of our duly constituted government and the New People's Army and their satellite organizations because of the unmitigated forays, raids, ambuscades, assaults, violence, murders, assassinations, acts of terror, deceits, coercions, threats, intimidations, treachery, machinations, arsons, plunders and depredations committed and being committed by the aforesaid lawless elements who have pledged to the whole nation that they will not stop their dastardly effort and scheme until and unless they have fully attained their primary and ultimate purpose of forcibly seizing political and state power in this country by overthrowing our present duly constituted government, ... (See Book I, Vital Documents on the Declaration of Martial Law in the Philippines by the Supreme Court of the Philippines, pp. 13-39)

It follows that it is only that act of carrying a blunt or bladed weapon with a motivation connected with or related to the afore-quoted desired result of Proclamation 1081 that is within the intent of P.D. 9(3), and nothing else.

Statutes are to be construed in the light of purposes to be achieved and the evils sought to be remedied. (U.S. v. American Tracking Association, 310 U.S. 534, cited in LVN Pictures v. Philippine Musicians Guild, 110 Phil. 725, 731; emphasis supplied)

When construing a statute, the reason for its enactment should be kept in mind, and the statute should be construed with reference to its intended scope and purpose. (Statutory Construction by E.T. Crawford, pp. 604-605, cited in Commissioner of Internal Revenue v. Filipinas Compania de Seguros, 107 Phil. 1055, 1060; emphasis supplied)

5. In the construction of P.D. 9(3) it becomes relevant to inquire into the consequences of the measure if a strict adherence to the letter of the paragraph is followed.

It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a construction of which the statute is fairly susceptible is favored, which will avoid all objectionable, mischievous, indefensible, wrongful, evil, and injurious consequences. 9-a

It is to be presumed that when P.D. 9 was promulgated by the President of the Republic there was no intent to work a hardship or an oppressive result, a possible abuse of authority or act of oppression, arming one person with a weapon to impose hardship on another, and so on. 10

At this instance We quote from the order of Judge Purisima the following:

And while there is no proof of it before the Court, it is not difficult to believe the murmurings of detained persons brought to Court upon a charge of possession of bladed weapons under P.D. No. 9, that more than ever before, policemen - of course not all can be so heartless — now have in their hands P.D. No. 9 as a most convenient tool for extortion, what with the terrifying risk of being sentenced to imprisonment of five to ten years for a rusted kitchen knife or a pair of scissors, which only God knows where it came from. Whereas before martial law an extortion-minded peace officer had to have a stock of the cheapest paltik, and even that could only convey the coercive message of one year in jail, now anything that has the semblance of a sharp edge or pointed object, available even in trash cans, may already serve the same purpose, and yet five to ten times more incriminating than the infamous paltik. (pp. 72-73, rollo L-42050-66)

And as respondent Judge Maceren points out, the people's interpretation of P.D. 9(3) results in absurdity at times. To his example We may add a situation where a law-abiding citizen, a lawyer by profession, after gardening in his house remembers to return the bolo used by him to his neighbor who lives about 30 meters or so away and while crossing the street meets a policeman. The latter upon seeing the bolo being carried by that citizen places him under arrest and books him for a violation of P.D.

9(3). Could the presidential decree have been conceived to produce such absurd, unreasonable, and insensible results?

6. Penal statutes are to be construed strictly against the state and liberally in favor of an accused.

American jurisprudence sets down the reason for this rule to be "the tenderness of the law of the rights of individuals; the object is to establish a certain rule by conformity to which mankind would be safe, and the discretion of the court limited." 11 The purpose is not to enable a guilty person to escape punishment through a technicality but to provide a precise definition of forbidden acts. 12

Our own decisions have set down the same guidelines in this manner, viz:

Criminal statutes are to be construed strictly. No person should be brought within their terms who is not clearly within them, nor should any act be pronounced criminal which is not made clearly so by the statute. (U.S. v. Abad Santos, 36 Phil. 243, 246)

The rule that penal statutes are given a strict construction is not the only factor controlling the interpretation of such laws, instead, the rule merely serves as an additional, single factor to be considered as an aid in determining the meaning of penal laws. (People v. Manantan, 5 SCRA 684, 692)

F. The Informations filed by petitioner are fatally defective.

The two elements of the offense covered by P.D. 9(3) must be alleged in the Information in order that the latter may constitute a sufficiently valid charged. The sufficiency of an Information is determined solely by the facts alleged therein. 13 Where the facts are incomplete and do not convey the elements of the crime, the quashing of the accusation is in order.

Section 2(a), Rule 117 of the Rules of Court provides that the defendant may move to quash the complaint or information when the facts charged do not constitute an offense.

In U.S.U. Gacutan, 1914, it was held that where an accused is charged with knowingly rendering an unjust judgment under Article 204 of the Revised Penal Code, failure to allege in the Information that the judgment was rendered knowing it to be unjust, is fatal. 14

In People v. Yadao, 1954, this Court through then Justice Cesar Bengzon who later became Chief Justice of the Court affirmed an order of the trial court which quashed an Information wherein the facts recited did not constitute a public offense as defined in Section 1, Republic Act 145. 15

G. The filing of these Petitions was unnecessary because the People could have availed itself of other available remedies below.

Pertinent provisions of the Rules of Court follow:

Rule 117, Section 7. Effect of sustaining the motion to quash. — If the motion to quash is sustained the court may order that another information be filed. If such order is made the defendant, if in custody, shall remain so unless he shall be admitted to bail. If such order is not made or if having been made

another information is not filed withuntime to be specified in the order, or within such further time as the court may allow for good cause shown, the defendant, if in custody, shall be discharged therefrom, unless he is in custody on some other charge.

Rule 110, Section 13. Amendment. — The information or complaint may be amended, in substance or form, without leave of court, at any time before the defendant pleads; and thereafter and during the trial as to all matters of form, by leave and at the discretion of the court, when the same can be done without prejudice to the rights of the defendant.

xxx xxx xxx

Two courses of action were open to Petitioner upon the quashing of the Informations in these cases, viz:

First, if the evidence on hand so warranted, the People could have filed an amended Information to include the second element of the offense as defined in the disputed orders of respondent Judges. We have ruled that if the facts alleged in the Information do not constitute a punishable offense, the case should not be dismissed but the prosecution should be given an opportunity to amend the Information.

16

Second, if the facts so justified, the People could have filed a complaint either under Section 26 of Act No. 1780, quoted earlier, or Manila City Ordinance No. 3820, as amended by Ordinance No. 3928, especially since in most if not all of the cases, the dismissal was made prior to arraignment of the accused and on a motion to quash.

Section 8. Rule 117 states that:

An order sustaining the motion to quash is not a bar to another prosecution for the same offense unless the motion was based on the grounds specified in section 2, subsections (f) and (h) of this rule.

Under the foregoing, the filing of another complaint or Information is barred only when the criminal action or liability had been extinguished (Section 2[f]) or when the motion to quash was granted for reasons of double jeopardy. (ibid., [h])

As to whether or not a plea of double jeopardy may be successfully invoked by the accused in all these cases should new complaints be filed against them, is a matter We need not resolve for the present.

H. — We conclude with high expectations that police authorities and the prosecuting arm of the government true to the oath of office they have taken will exercise utmost circumspection and good faith in evaluating the particular circumstances of a case so as to reach a fair and just conclusion if a situation falls within the purview of P.D. 9(3) and the prosecution under said decree is warranted and justified. This obligation becomes a sacred duty in the face of the severe penalty imposed for the offense.

On this point, We commend the Chief State Prosecutor Rodolfo A. Nocon on his letter to the City Fiscal of Manila on October 15, 1975, written for the Secretary, now Minister of Justice, where he stated the following:

In any case, please study well each and every case of this nature so that persons accused of carrying bladed weapons, specially those whose purpose is not to subvert the duly constituted authorities, may not be unduly indicted for the serious offenses falling under P.D. No. 9. 17

Yes, while it is not within the power of courts of justice to inquire into the wisdom of a law, it is however a judicial task and prerogative to determine if official action is within the spirit and letter of the law and if basic fundamental rights of an individual guaranteed by the Constitution are not violated in the process of its implementation. We have to face the fact that it is an unwise and unjust application of a law, necessary and justified under prevailing circumstances, which renders the measure an instrument of oppression and evil and leads the citizenry to lose their faith in their government.

WHEREFORE, We DENY these 26 Petitions for Review and We AFFIRM the Orders of respondent Judges dismissing or quashing the Information concerned, subject however to Our observations made in the preceding pages 23 to 25 of this Decision regarding the right of the State or Petitioner herein to file either an amended Information under Presidential Decree No. 9, paragraph 3, or a new one under other existing statute or city ordinance as the facts may warrant.

Without costs.

SO ORDERED.

Fernando, Teehankee, Santos, Fernandez and Guerrero, JJ., concur.

Castro, C.J. and Antonio, J, concur in the result.

Aquino, J, took no part.

Separate Opinions

BARREDO, J., concurring.

I concur with the qualification that under existing jurisprudence conviction is possible, without the need of amending the information, for violation of other laws or ordinances on concealment of deadly weapons.

Makasiar, J, concurs.

CONCEPCION, JR., J, concurring:

I concur with the additional observation that accused could properly be convicted of a violation of Act 1780 of the Philippine Commission or of the ordinance.

Separate Opinions

BARREDO, J., concurring.

I concur with the qualification that under existing jurisprudence conviction is possible, without the need of amending the information, for violation of other laws or ordinances on concealment of deadly weapons.

Makasiar, J, concurs.

CONCEPCION, JR., J, concurring:

I concur with the additional observation that accused could properly be convicted of a violation of Act 1780 of the Philippine Commission or of the ordinance.

Footnotes

1 p. 118, rollo of L-42050-66.

2 pp. 10-11, brief of Petitioner at p. 218, Ibid.

3 Art. IV, Sec. 19, 1973 Constitution.

4 Francisco on the Revised Rules of Court, 1969 Ed., Vol. on Criminal Procedure, p. 86.

5 pp. 33-34 brief of Petitioner filed by the City Fiscal of Manila.

6 Valera v. Tuason, Jr., et al., 80 Phil. 823, citing U.S. v. Palacio, 33 Phil. 208; Quisumbing v. Lachica, 2 SCRA 182; Almeda v. Florentino, 15 SCRA 514; Lechoco v. Civil Aeronautics Board, 43 SCRA 670.

7 People v. Elkanish, 1951, 90 Phil. 53, 57 People v. Yadao, 1954, 94 Phil. 726, 728.

8 33 SCRA 105. See also 73 Am Jur 2d 351 citing United States v. N.E. Rosenblum Truck Lines, Inc., 315 US 50,86 L Ed 671; United States v. Stone & Downer Co., 274 US 225, 71 L Ed 1013; Ebert v. Poston, 266 US 548, 69 L Ed 435; Wisconsin C.R. Co. v. Forsythe, 159 US 46,40 L Ed 71.

9 13 SCRA 449, 453; Emphasis supplied.

9-a 73 Am Jur 2d 428.

10 See 73 Am Jur 2d 432-433 for cases on the foregoing undesirable consequences.

11 United States v. Harris, 177 US 305, 44 L Ed 780, 20 S Ct 609; Braffith v. Virgin Islands (CA3) 26 F2d 646; Caudill v. State, 224 Ind 531, 69 NE2d 549; Jennings v. Commonwealth, 109 Va 821, 63 SE 1080, all cited in 73 Am Jur 2d 452.

12 State v. Zazzaro, 20 A 2d 737, quoted in Martin's Handbook on Statutory Construction, Rev. Ed. pp. 183-184.

13 People v. Supnad, 7 SCRA 603, 606.

14 28 Phil. See Moran, Comments on the Rules of Court, 1970 Ed., Vol. 4, p. 222.

15 94 Phil. 726.

16 People v. Plaza, 7 SCRA 617.

17 This letter which was addressed to the City Fiscal of Manila referred to a decision of the Court of First Instance of Manila, Branch III, in Criminal Case No. 21178, "People vs. Conrado C. Petate, "for violation of Presidential Decree No. 9.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 125955 June 19, 1997

WILMER GREGO, petitioner, vs.COMMISSION ON ELECTIONS and HUMBERTO BASCO, respondents.

ROMERO, J.:

The instant special civil action for certiorari and prohibition impugns the resolution of the Commission on Elections (COMELEC) en banc in SPA No. 95-212 dated July 31, 1996, dismissing petitioner's motion for reconsideration of an earlier resolution rendered by the COMELEC's First Division on October 6, 1995, which also dismissed the petition for disqualification 1 filed by petitioner Wilmer Grego against private respondent Humberto Basco.

The essential and undisputed factual antecedents of the case are as follows:

On October 31, 1981, Basco was removed from his position as Deputy Sheriff by no less than this Court upon a finding of serious misconduct in an administrative complaint lodged by a certain Nena Tordesillas. The Court held:

WHEREFORE, FINDING THE RESPONDENT DEPUTY SHERIFF HUMBERTO BASCO OF THE CITY COURT OF MANILA GUILTY OF SERIOUS MISCONDUCT IN OFFICE FOR THE SECOND TIME, HE IS HEREBY DISMISSED FROM THE SERVICE WITH FORFEITURE OF ALL RETIREMENT BENEFITS AND WITH PREJUDICE TO REINSTATEMENT TO ANY POSITION IN THE NATIONAL OR LOCAL GOVERNMENT, INCLUDING ITS AGENCIES AND INSTRUMENTALITIES, OR GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS.

xxx xxx xxx 2

Subsequently, Basco ran as a candidate for Councilor in the Second District of the City of Manila during the January 18, 1988, local elections. He won and, accordingly, assumed office.

After his term, Basco sought re-election in the May 11, 1992 synchronized national elections. Again, he succeeded in his bid and he was elected as one of the six (6) City Councilors. However, his victory this time did not remain unchallenged. In the midst of his successful re-election, he found himself besieged by lawsuits of his opponents in the polls who wanted to dislodge him from his position.

One such case was a petition for quo warranto 3 filed before the COMELEC by Cenon Ronquillo, another candidate for councilor in the same district, who alleged Basco's ineligibility to be elected councilor on the basis of the Tordesillas ruling. At about the same time, two more cases were also commenced by Honorio Lopez II in the Office of the Ombudsman and in the Department of Interior and Local Government. 4 All these challenges were, however, dismissed, thus, paving the way for Basco's continued stay in office.

Despite the odds previously encountered, Basco remained undaunted and ran again for councilor in the May 8, 1995, local elections seeking a third and final term. Once again, he beat the odds by emerging sixth in a battle for six councilor seats. As in the past, however, his right to office was again contested. On May 13, 1995, petitioner Grego, claiming to be a registered voter of Precinct No. 966, District II, City of Manila, filed with the COMELEC a petition for disqualification, praying for Basco's disqualification, for the suspension of his proclamation, and for the declaration of Romualdo S. Maranan as the sixth duly elected Councilor of Manila's Second District.

On the same day, the Chairman of the Manila City Board of Canvassers (BOC) was duly furnished with a copy of the petition. The other members of the BOC learned about this petition only two days later.

The COMELEC conducted a hearing of the case on May 14, 1995, where it ordered the parties to submit simultaneously their respective memoranda.

Before the parties could comply with this directive, however, the Manila City BOC proclaimed Basco on May 17, 1995, as a duly elected councilor for the Second District of Manila, placing sixth among several candidates who vied for the seats. 5 Basco immediately took his oath of office before the Honorable Ma. Ruby Bithao-Camarista, Presiding Judge, Metropolitan Trial Court, Branch I, Manila.

In view of such proclamation, petitioner lost no time in filing an Urgent Motion seeking to annul what he considered to be an illegal and hasty proclamation made on May 17, 1995, by the Manila City BOC. He reiterated Basco's disqualification and prayed anew that candidate Romualdo S. Maranan be declared the winner. As expected, Basco countered said motion by filing his Urgent Opposition to: Urgent Motion (with Reservation to Submit Answer and/or Motion to Dismiss Against Instant Petition for Disqualification with Temporary Restraining Order).

On June 5, 1995, Basco filed his Motion to Dismiss Serving As Answer pursuant to the reservation he made earlier, summarizing his contentions and praying as follows:

Respondent thus now submits that the petitioner is not entitled to relief for the following reasons:

1. The respondent cannot be disqualified on the ground of Section 40 paragraph b of the Local Government Code because the Tordesillas decision is barred by laches, prescription, res judicata, lis pendens, bar by prior judgment, law of the case and stare decisis;

2. Section 4[0] par. B of the Local Government Code may not be validly applied to persons who were dismissed prior to its effectivity. To do so would make it ex post facto, bill of attainder, and retroactive legislation which impairs vested rights. It is also a class legislation and unconstitutional on the account.

3. Respondent had already been proclaimed. And the petition being a preproclamation contest under the Marquez v. Comelec Ruling, supra, it should be dismissed by virtue of said pronouncement.

4. Respondent's three-time election as candidate for councilor constitutes implied pardon by the people of previous misconduct (Aguinaldo v. Comelec G.R. 105128; Rice v. State 161 SCRA 401; Montgomery v. Newell 40 SW 2d 4181; People v. Bashaw 130 P. 2nd 237, etc.).

5. As petition to nullify certificate of candidacy, the instant case has prescribed; it was premature as an election protest and it was not brought by a proper party in interest as such protest.:

PRAYER

WHEREFORE it is respectfully prayed that the instant case be dismissed on instant motion to dismiss the prayer for restraining order denied (sic). If this Honorable Office is not minded to dismiss, it is respectfully prayed that instant motion be considered as respondent's answer. All other reliefs and remedies just and proper in the premises are likewise hereby prayed for.

After the parties' respective memoranda had been filed, the COMELEC's First Division resolved to dismiss the petition for disqualification on October 6, 1995, ruling that "the administrative penalty imposed by the Supreme Court on respondent Basco on October 31, 1981 was wiped away and condoned by the electorate which elected him" and that on account of Basco's proclamation on May 17, 1995, as the sixth duly elected councilor of the Second District of Manila, "the petition would no longer be viable." 6

Petitioner's motion for reconsideration of said resolution was later denied by the COMELEC en banc in its assailed resolution promulgated on July 31, 1996. 7 Hence, this petition.

Petitioner argues that Basco should be disqualified from running far any elective position since he had been "removed from office as a result of an administrative case" pursuant to Section 40 (b) of Republic Act No. 7160, otherwise known as the Local Government Code (the Code), which took effect on January 1, 1992. 8

Petitioner wants the Court to likewise resolve the following issues, namely:

1. Whether or not Section 40 (b) of Republic Act No. 7160 applies retroactively to those removed from office before it took effect on January 1, 1992;

2. Whether or not private respondent's election in 1988, 1992 and in 1995 as City Councilor of Manila wiped away and condoned the administrative penalty against him;

3. Whether or not private respondent's proclamation as sixth winning candidate on May 17, 1995, while the disqualification case was still pending consideration by COMELEC, is void ab initio; and

4. Whether or not Romualdo S. Maranan, who placed seventh among the candidates for City Councilor of Manila, may be declared a winner pursuant to Section 6 of Republic Act No. 6646.

While we do not necessarily agree with the conclusions and reasons of the COMELEC in the assailed resolution, nonetheless, we find no grave abuse of discretion on its part in dismissing the petition for disqualification. The instant petition must, therefore, fail.

We shall discuss the issues raised by petitioner in seriatim.

I. Does Section 40 (b) of Republic Act No. 7160 apply retroactively to those removed from office before it took effect on January 1, 1992?

Section 40 (b) of the Local Government Code under which petitioner anchors Basco's alleged disqualification to run as City Councilor states:

Sec. 40. Disqualifications. — The following persons are disqualified from running for any elective local position:

xxx xxx xxx

(b) Those removed from office as a result of an administrative case;

xxx xxx xxx

In this regard, petitioner submits that although the Code took effect only on January 1, 1992, Section 40 (b) must nonetheless be given retroactive effect and applied to Basco's dismissal from office which took place in 1981. It is stressed that the provision of the law as worded does not mention or even qualify the date of removal from office of the candidate in order for disqualification thereunder to attach. Hence,

petitioner impresses upon the Court that as long as a candidate was once removed from office due to an administrative case, regardless of whether it took place during or prior to the effectivity of the Code, the disqualification applies. 9 To him, this interpretation is made more evident by the manner in which the provisions of Section 40 are couched. Since the past tense is used in enumerating the grounds for disqualification, petitioner strongly contends that the provision must have also referred to removal from office occurring prior to the effectivity of the Code. 10

We do not, however, subscribe to petitioner's view. Our refusal to give retroactive application to the provision of Section 40 (b) is already a settled issue and there exist no compelling reasons for us to depart therefrom. Thus, in Aguinaldo v. COMELEC, 11 reiterated in the more recent cases of Reyes v. COMELEC 12 and Salalima v. Guingona, Jr., 13 we ruled, thus:

The COMELEC applied Section 40 (b) of the Local Government Code (Republic Act 7160) which provides:

Sec. 40. The following persons are disqualified from running for any elective local positions:

xxx xxx xxx

(b) Those removed from office as a result of an administrative case.

Republic Act 7160 took effect only on January 1, 1992.

The rule is:

xxx xxx xxx

. . . Well-settled is the principle that while the Legislature has the power to pass retroactive laws which do not impair the obligation of contracts, or affect injuriously vested rights, it is equally true that statutes are not to be construed as intended to have a retroactive effect so as to affect pending proceedings, unless such intent is expressly declared or clearly and necessarily implied from the language of the enactment. . . . (Jones v. Summers, 105 Cal. App. 51, 286 Pac. 1093; U.S. v. Whyel 28 (2d) 30; Espiritu v. Cipriano, 55 SCRA 533 [1974], cited in Nilo v. Court of Appeals, 128 SCRA 519 [1974]. See also Puzon v. Abellera, 169 SCRA 789 [1989]; Al-Amanah Islamic Investment Bank of the Philippines v. Civil Service Commission, et al., G.R. No. 100599, April 8, 1992).

There is no provision in the statute which would clearly indicate that the same operates retroactively.

It, therefore, follows that [Section] 40 (b) of the Local Government Code is not applicable to the present case. (Emphasis supplied).

That the provision of the Code in question does not qualify the date of a candidate's removal from office and that it is couched in the past tense should not deter us from applying the law prospectively. The basic tenet in legal hermeneutics that laws operate only prospectively and not retroactively provides the qualification sought by petitioner. A statute, despite the generality in its language, must not be so construed as to overreach acts, events or matters which transpired before its passage. Lex prospicit, non respicit. The law looks forward, not backward. 14

II. Did private respondent's election to office as City Councilor of Manila in the 1988, 1992 and 1995 elections wipe away and condone the administrative penalty against him, thus restoring his eligibility for public office?

Petitioner maintains the negative. He quotes the earlier ruling of the Court in Frivaldo v. COMELEC 15 to the effect that a candidate's disqualification cannot be erased by the electorate alone through the instrumentality of the ballot. Thus:

. . . (T)he qualifications prescribed for elective office cannot be erased by the electorate alone. The will of the people as expressed through the ballot cannot cure the vice of ineligibility, especially if they mistakenly believed, as in this case, that the candidate was qualified. . . .

At first glance, there seems to be a prima facie semblance of merit to petitioner's argument. However, the issue of whether or not Basco's triple election to office cured his alleged ineligibility is actually beside the point because the argument proceeds on the assumption that he was in the first place disqualified when he ran in the three previous elections. This assumption, of course, is untenable considering that Basco was NOT subject to any disqualification at all under Section 40 (b) of the Local Government Code which, as we said earlier, applies only to those removed from office on or after January 1, 1992. In view of the irrelevance of the issue posed by petitioner, there is no more reason for the Court to still dwell on the matter at length.

Anent Basco's alleged circumvention of the prohibition in Tordesillas against reinstatement to any position in the national or local government, including its agencies and instrumentalities, as well as government-owned or controlled corporations, we are of the view that petitioner's contention is baseless. Neither does petitioner's argument that the term "any position" is broad enough to cover without distinction both appointive and local positions merit any consideration.

Contrary to petitioner's assertion, the Tordesillas decision did not bar Basco from running for any elective position. As can be gleaned from the decretal portion of the said decision, the Court couched the prohibition in this wise:

. . . AND WITH PREJUDICE TO REINSTATEMENT TO ANY POSITION IN THE NATIONAL OR LOCAL GOVERNMENT, INCLUDING ITS AGENCIES AND INSTRUMENTALITIES, OR GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS.

In this regard, particular attention is directed to the use of the term "reinstatement." Under the former Civil Service Decree, 16 the law applicable at the time Basco, a public officer, was administratively dismissed from office, the term "reinstatement" had a technical meaning, referring only to an appointive position. Thus:

Art. VIII. PERSONNEL POLICIES AND STANDARDS.

Sec. 24. Personnel Actions. —

xxx xxx xxx

(d) Reinstatement. — Any person who has been permanently APPOINTED to a position in the career service and who has, through no delinquency or misconduct, been separated therefrom, may be reinstated to a position in the same level for which he is qualified.

xxx xxx xxx

(Emphasis supplied).

The Rules on Personnel Actions and Policies issued by the Civil Service Commission on November 10, 1975, 17 provides a clearer definition. It reads:

RULE VI. OTHER PERSONNEL ACTIONS

Sec. 7. Reinstatement is the REAPPOINTMENT of a person who was previously separated from the service through no delinquency or misconduct on his part from a position in the career service to which he was permanently appointed, to a position for which he is qualified. (Emphasis supplied).

In light of these definitions, there is, therefore, no basis for holding that Basco is likewise barred from running for an elective position inasmuch as what is contemplated by the prohibition in Tordesillas is reinstatement to an appointive position.

III. Is private respondent's proclamation as sixth winning candidate on May 17, 1995, while the disqualification case was still pending consideration by COMELEC, void ab initio?

To support its position, petitioner argues that Basco violated the provisions of Section 20, paragraph (i) of Republic Act No. 7166, Section 6 of Republic Act No. 6646, as well as our ruling in the cases of Duremdes v. COMELEC, 18 Benito v. COMELEC 19 and Aguam v. COMELEC. 20

We are not convinced. The provisions and cases cited are all misplaced and quoted out of context. For the sake of clarity, let us tackle each one by one.

Section 20, paragraph (i) of Rep. Act 7166 reads:

Sec. 20. Procedure in Disposition of Contested Election Returns. —

xxx xxx xxx

(i) The board of canvassers shall not proclaim any candidate as winner unless authorized by the Commission after the latter has ruled on the objections brought to it on appeal by the losing party. Any proclamation made in violation hereof shall be void ab initio, unless the contested returns will not adversely affect the results of the election.

xxx xxx xxx

The inapplicability of the abovementioned provision to the present case is very much patent on its face considering that the same refers only to a void proclamation in relation to contested returns and NOT to contested qualifications of a candidate.

Next, petitioner cites Section 6 of Rep. Act 6646 which states:

Sec. 6. Effect of Disqualification Case. — Any candidate who has been declared by final judgment to be disqualified shall not be voted for, and the votes cast for him shall not be counted. If for any reason, a candidate is not declared by final judgment before an election to be disqualified and he is voted for and receives the winning number of votes in such election, the Court or Commission shall continue with the trial and hearing of the action, inquiry or protest and, upon motion of the complainant or any intervenor, may during the pendency thereof order the suspension of the proclamation of such candidate whenever the evidence of his guilt is strong. (Emphasis supplied).

This provision, however, does not support petitioner's contention that the COMELEC, or more properly speaking, the Manila City BOC, should have suspended the proclamation. The use of the word "may" indicates that the suspension of a proclamation is merely directory and permissive in nature and operates to confer discretion. 21 What is merely made mandatory, according to the provision itself, is the continuation of the trial and hearing of the action, inquiry or protest. Thus, in view of this discretion granted to the COMELEC, the question of whether or not evidence of guilt is so strong as to warrant suspension of proclamation must be left for its own determination and the Court cannot interfere therewith and substitute its own judgment unless such discretion has been exercised whimsically and capriciously. 22 The COMELEC, as an administrative agency and a specialized constitutional body charged with the enforcement and administration of all laws and regulations relative to the conduct of an election, plebiscite, initiative, referendum, and recall, 23 has more than enough expertise in its field that its findings or conclusions are generally respected and even given finality. 24 The COMELEC has not found any ground to suspend the proclamation and the records likewise fail to show any so as to warrant a different conclusion from this Court. Hence, there is no ample justification to hold that the COMELEC gravely abused its discretion.

It is to be noted that Section 5, Rule 25 of the COMELEC Rules of Procedure 25 states that:

Sec. 5. Effect of petition if unresolved before completion of canvass. — . . . (H)is proclamation shall be suspended notwithstanding the fact that he received the winning number of votes in such election.

However, being merely an implementing rule, the same must not override, but instead remain consistent with and in harmony with the law it seeks to apply and implement. Administrative rules and regulations are intended to carry out, neither to supplant nor to modify, the law. 26 Thus, in Miners Association of the Philippines, Inc. v. Factoran, Jr., 27 the Court ruled that:

We reiterate the principle that the power of administrative officials to promulgate rules and regulations in the implementation of a statute is necessarily limited only to carrying into effect what is provided in the legislative enactment. The principle was enunciated as early as 1908 in the case of United States v. Barrias. The scope of the exercise of such rule-making power was clearly expressed in the case of United States v. Tupasi Molina, decided in 1914, thus: "Of course, the regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law, and for the sole purpose of carrying into effect its general provisions. By such regulations, of course, the law itself can

not be extended. So long, however, as the regulations relate solely to carrying into effect the provision of the law, they are valid.

Recently, the case of People v. Maceren gave a brief delineation of the scope of said power of administrative officials:

Administrative regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its general provisions. By such regulations, of course, the law itself cannot be extended (U.S. v. Tupasi Molina, supra). An administrative agency cannot amend an act of Congress (Santos v. Estenzo, 109 Phil. 419, 422; Teoxon vs. Members of the Board of Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel vs. General Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao v. Casteel, L-21906, August 29, 1969, 29 SCRA 350).

The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned (University of Santo Tomas v. Board of Tax Appeals, 93 Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see Collector of Internal Revenue v. Villaflor, 69 Phil. 319; Wise & Co. v. Meer, 78 Phil. 655, 676; Del Mar v. Phil. Veterans Administration, L-27299, June 27, 1973, 51 SCRA 340, 349).

xxx xxx xxx

. . . The rule or regulations should be within the scope of the statutory authority granted by the legislature to the administrative agency (Davis, Administrative Law, p. 194, 197, cited in Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555, 558).

In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law prevails because said rule or regulations cannot go beyond the terms and provisions of the basic law (People v. Lim, 108 Phil. 1091).

Since Section 6 of Rep. Act 6646, the law which Section 5 of Rule 25 of the COMELEC Rules of Procedure seeks to implement, employed the word "may," it is, therefore, improper and highly irregular for the COMELEC to have used instead the word "shall" in its rules.

Moreover, there is no reason why the Manila City BOC should not have proclaimed Basco as the sixth winning City Councilor. Absent any determination of irregularity in the election returns, as well as an order enjoining the canvassing and proclamation of the winner, it is a mandatory and ministerial duty of the Board of Canvassers concerned to count the votes based on such returns and declare the result. This has been the rule as early as in the case of Dizon v. Provincial Board of Canvassers of Laguna 28 where we clarified the nature of the functions of the Board of Canvassers, viz.:

The simple purpose and duty of the canvassing board is to ascertain and declare the apparent result of the voting. All other questions are to be tried before the court or other tribunal for contesting elections or in quo warranto proceedings. (9 R.C.L., p. 1110)

To the same effect is the following quotation:

. . . Where there is no question as to the genuineness of the returns or that all the returns are before them, the powers and duties of canvassers are limited to the mechanical or mathematical function of ascertaining and declaring the apparent result of the election by adding or compiling the votes cast for each candidate as shown on the face of the returns before them, and then declaring or certifying the result so ascertained. (20 C.J., 200-201) [Emphasis supplied]

Finally, the cases of Duremdes, Benito and Aguam, supra, cited by petitioner are all irrelevant and inapplicable to the factual circumstances at bar and serve no other purpose than to muddle the real issue. These three cases do not in any manner refer to void proclamations resulting from the mere pendency of a disqualification case.

In Duremdes, the proclamation was deemed void ab initio because the same was made contrary to the provisions of the Omnibus Election Code regarding the suspension of proclamation in cases of contested election returns.

In Benito, the proclamation of petitioner Benito was rendered ineffective due to the Board of Canvassers' violation of its ministerial duty to proclaim the candidate receiving the highest number of votes and pave the way to succession in office. In said case, the candidate receiving the highest number of votes for the mayoralty position died but the Board of Canvassers, instead of proclaiming the deceased candidate winner, declared Benito, a mere second-placer, the mayor.

Lastly, in Aguam, the nullification of the proclamation proceeded from the fact that it was based only on advanced copies of election returns which, under the law then prevailing, could not have been a proper and legal basis for proclamation.

With no precedent clearly in point, petitioner's arguments must, therefore, be rejected.

IV. May Romualdo S. Maranan, a seventh placer, be legally declared a winning candidate?

Obviously, he may not be declared a winner. In the first place, Basco was a duly qualified candidate pursuant to our disquisition above. Furthermore, he clearly received the winning number of votes which put him in sixth place. Thus, petitioner's emphatic reference to Labo v. COMELEC, 29 where we laid down a possible exception to the rule that a second placer may not be declared the winning candidate, finds no application in this case. The exception is predicated on the concurrence of two assumptions, namely: (1) the one who obtained the highest number of votes is disqualified; and (2) the electorate is fully aware in fact and in law of a candidate's disqualification so as to bring such awareness within the realm of notoriety but would nonetheless cast their votes in favor of the ineligible candidate. Both assumptions, however, are absent in this case. Petitioner's allegation that Basco was well-known to have been disqualified in the small community where he ran as a candidate is purely speculative and

conjectural, unsupported as it is by any convincing facts of record to show notoriety of his alleged disqualification. 30

In sum, we see the dismissal of the petition for disqualification as not having been attended by grave abuse of discretion. There is then no more legal impediment for private respondent's continuance in office as City Councilor for the Second District of Manila.

WHEREFORE, the instant petition for certiorari and prohibition is hereby DISMISSED for lack of merit. The assailed resolution of respondent Commission on Elections (COMELEC) in SPA 95-212 dated July 31, 1996 is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Regalado, Davide, Jr., Melo, Puno, Vitug, Mendoza, Hermosisima, Jr., Panganiban and Torres, Jr., JJ., concur.

Padilla, Bellosillo, Kapunan and Francisco, JJ., are on leave.

Footnotes

1 "In re: Petition to Disqualify Candidate for Councilor, Humberto Basco, Second District, City of Manila, in the May 8, 1995 Local Elections," Annex, "A," Rollo, pp. 40-44.

2 Adm. Matter No. P-2363, 108 SCRA 551 (1981).

3 Docketed as SPC No. 92-93, Rollo, p. 183.

4 Rollo, p, 162.

5 Annex "B," Rollo, p. 46. The names of the winning candidates and their corresponding votes are as follows:

(1) NESTOR C. PONCE — 48,088(2) MARLON M. LACSON — 41,611(3) FLAVIANO F. CONCEPCION, JR. — 39,548(4) FRANCISCO B. VARONA, JR. — 37,635(5) ABELARDO C. VICEO — 37,183(6) HUMBERTO B. BASCO — 34,358

6 Rollo, pp. 101-102.

7 Supra, note 1.

8 Both parties made errors in their respective pleadings as to the date of effectivity of Rep. Act 7160.

9 Rollo, p. 14.

10 Id.

11 G.R. Nos. 105128-30, promulgated on June 9, 1992.

12 254 SCRA 514 (1996).

13 257 SCRA 55 (1996).

14 R.E. AGPALO, STATUTORY CONSTRUCTION 254 (2nd ed., 1990), citing Laceste v. Santos, 56 Phil. 472. Cf . also Article 4, Civil Code.

15 174 SCRA 245 (1989).

16 Presidential Decree No. 807, issued on October 6, 1975. This law has been superseded by Subtitle A, Title I, Book V of Executive Order No. 292, otherwise known as the Administrative Code of 1987, which took effect on November 29, 1989, or two years after its publication in the Official Gazette.

17 Implementing Rules of P.D. 807.

18 178 SCRA 746 (1989).

19 235 SCRA 436 (1994).

20 23 SCRA 883 (1968).

21 R.E. AGPALO, STATUTORY CONSTRUCTION 239 (2nd ed., 1990).

22 Provident Tree Farms, Inc. v. Batario, Jr., 231 SCRA 463 (1994).

23 Sec. 2, Sub-title C, Art. IX, 1987 Constitution.

24 Cf . Ting v. Court of Appeals, 237 SCRA 797 (1994); Sesbreno v. Ala, 208 SCRA 359 (1992); San Miguel Corp. v. Javate, Jr., 205 SCRA 469 (1992).

25 Published in the Official Gazette on June 27, 1988, Vol. 84, No. 26.

26 Commissioner of Internal Revenue v. Court of Appeals, 240 SCRA 368 (1995).

27 240 SCRA 100 (1995).

28 52 Phil. 47.

29 211 SCRA 456 (1992).

30 Frivaldo v. COMELEC, 257 SCRA 727 (1996).

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-52245 January 22, 1980

PATRICIO DUMLAO, ROMEO B. IGOT, and ALFREDO SALAPANTAN, JR., petitioners, vs.COMMISSION ON ELECTIONS, respondent.

Raul M. Gonzales for petitioners

Office of the Solicitor General for respondent.

MELENCIO-HERRERA, J:

This is a Petition for Prohibition with Preliminary Injunction and/or Restraining Order filed by petitioners, in their own behalf and all others allegedly similarly situated, seeking to enjoin respondent Commission on Elections (COMELEC) from implementing certain provisions of Batas Pambansa Big. 51, 52, and 53 for being unconstitutional.

The Petition alleges that petitioner, Patricio Dumlao, is a former Governor of Nueva Vizcaya, who has filed his certificate of candidacy for said position of Governor in the forthcoming elections of January 30, 1980. Petitioner, Romeo B. Igot, is a taxpayer, a qualified voter and a member of the Bar who, as such, has taken his oath to support the Constitution and obey the laws of the land. Petitioner, Alfredo Salapantan, Jr., is also a taxpayer, a qualified voter, and a resident of San Miguel, Iloilo.

Petitioner Dumlao specifically questions the constitutionality of section 4 of Batas Pambansa Blg. 52 as discriminatory and contrary to the equal protection and due process guarantees of the Constitution. Said Section 4 provides:

Sec. 4. Special Disqualification in addition to violation of section 10 of Art. XI I-C of the Constitution and disqualification mentioned in existing laws, which are hereby declared as disqualification for any of the elective officials enumerated in section 1 hereof.

Any retired elective provincial city or municipal official who has received payment of the retirement benefits to which he is entitled under the law, and who shall have been 6,5 years of age at the commencement of the term of office to which he seeks to be elected shall not be qualified to run for the same elective local office from which he has retired (Emphasis supplied)

Petitioner Dumlao alleges that the aforecited provision is directed insidiously against him, and that the classification provided therein is based on "purely arbitrary grounds and, therefore, class legislation."

For their part, petitioners igot and Salapantan, Jr. assail the validity of the following statutory provisions:

Sec 7. Terms of Office — Unless sooner removed for cause, all local elective officials hereinabove mentioned shall hold office for a term of six (6) years, which shall commence on the first Monday of March 1980.

.... (Batas Pambansa Blg. 51) Sec. 4.

Sec. 4. ...

Any person who has committed any act of disloyalty to the State, including acts amounting to subversion, insurrection, rebellion or other similar crimes, shall not be qualified to be a candidate for any of the offices covered by this Act, or to participate in any partisan political activity therein:

provided that a judgment of conviction for any of the aforementioned crimes shall be conclusive evidence of such fact and

the filing of charges for the commission of such crimes before a civil court or military tribunal after preliminary investigation shall be prima fascie evidence of such fact.

... (Batas Pambansa Big. 52) (Paragraphing and Emphasis supplied).

Section 1. Election of certain Local Officials — ... The election shall be held on January 30, 1980. (Batas Pambansa, Blg. 52)

Section 6. Election and Campaign Period — The election period shall be fixed by the Commission on Elections in accordance with Section 6, Art. XII-C of the Constitution. The period of campaign shall commence on December 29, 1979 and terminate on January 28, 1980. (ibid.)

In addition to the above-cited provisions, petitioners Igot and Salapantan, Jr. also question the accreditation of some political parties by respondent COMELEC, as authorized by Batas Pambansa Blg. 53, on the ground that it is contrary to section 9(1)Art. XIIC of the Constitution, which provides that a "bona fide candidate for any public office shall be it. from any form of harassment and discrimination. "The question of accreditation will not be taken up in this case but in that of Bacalso, et als. vs. COMELEC et als. No. L-52232) where the issue has been squarely raised,

Petitioners then pray that the statutory provisions they have challenged be declared null and void for being violative of the Constitution.

I . The procedural Aspect

At the outset, it should be stated that this Petition suffers from basic procedural infirmities, hence, traditionally unacceptable for judicial resolution. For one, there is a misjoinder of parties and actions. Petitioner Dumlao's interest is alien to that of petitioners Igot and Salapantan Petitioner Dumlao does not join petitioners Igot and Salapantan in the burden of their complaint, nor do the latter join Dumlao in his. The respectively contest completely different statutory provisions. Petitioner Dumlao has joined this suit in his individual capacity as a candidate. The action of petitioners Igot and Salapantan is more in the nature of a taxpayer's suit. Although petitioners plead nine constraints as the reason of their joint Petition, it would have required only a modicum more of effort tor petitioner Dumlao, on one hand said petitioners lgot and Salapantan, on the other, to have filed separate suits, in the interest of orderly procedure.

For another, there are standards that have to be followed inthe exercise of the function of judicial review, namely (1) the existence of an appropriate case:, (2) an interest personal and substantial by the party raising the constitutional question: (3) the plea that the function be exercised at the earliest opportunity and (4) the necessity that the constiutional question be passed upon in order to decide the case (People vs. Vera 65 Phil. 56 [1937]).

It may be conceded that the third requisite has been complied with, which is, that the parties have raised the issue of constitutionality early enough in their pleadings.

This Petition, however, has fallen far short of the other three criteria.

A. Actual case and controversy.

It is basic that the power of judicial review is limited to the determination of actual cases and controversies.

Petitioner Dumlao assails the constitutionality of the first paragraph of section 4 of Batas Pambansa Blg. 52, quoted earlier, as being contrary to the equal protection clause guaranteed by the Constitution, and seeks to prohibit respondent COMELEC from implementing said provision. Yet, Dumlao has not been adversely affected by the application of that provision. No petition seeking Dumlao's disqualification has been filed before the COMELEC. There is no ruling of that constitutional body on the matter, which this Court is being asked to review on Certiorari. His is a question posed in the abstract, a hypothetical issue, and in effect, a petition for an advisory opinion from this Court to be rendered without the benefit of a detailed factual record Petitioner Dumlao's case is clearly within the primary jurisdiction (see concurring Opinion of now Chief Justice Fernando in Peralta vs. Comelec, 82 SCRA 30, 96 [1978]) of respondent COMELEC as provided for in section 2, Art. XII-C, for the Constitution the pertinent portion of which reads:

"Section 2. The Commission on Elections shall have the following power and functions:

1) xxx

2) Be the sole judge of all contests relating to the elections, returns and qualifications of all members of the National Assembly and elective provincial and city officials. (Emphasis supplied)

The aforequoted provision must also be related to section 11 of Art. XII-C, which provides:

Section 11. Any decision, order, or ruling of the Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from his receipt of a copy thereof.

B. Proper party.

The long-standing rule has been that "the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement" (People vs. Vera, supra).

In the case of petitioners Igot and Salapantan, it was only during the hearing, not in their Petition, that Igot is said to be a candidate for Councilor. Even then, it cannot be denied that neither one has been convicted nor charged with acts of disloyalty to the State, nor disqualified from being candidates for local elective positions. Neither one of them has been calle ed to have been adversely affected by the operation of the statutory provisions they assail as unconstitutional Theirs is a generated grievance. They have no personal nor substantial interest at stake. In the absence of any litigate interest, they can claim no locus standi in seeking judicial redress.

It is true that petitioners Igot and Salapantan have instituted this case as a taxpayer's suit, and that the rule enunciated in People vs. Vera, above stated, has been relaxed in Pascual vs. The Secretary of Public Works (110 Phil. 331 [1960], thus:

... it is well settled that the validity of a statute may be contested only by one who will sustain a direct injury in consequence of its enforcement. Yet, there are many decisions nullifying at the instance of taxpayers, laws providing for the disbursement of public funds, upon the theory that "the expenditure of public funds, by an officer of the State for the purpose of administering an unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the request of a taxpayer.

In the same vein, it has been held:

In the determination of the degree of interest essential to give the requisite standing to attack the constitutionality of a statute, the general rule is that not only persons individually affected, but also taxpayers have sufficient interest in preventing the illegal expenditure of moneys raised by taxation and they may, therefore, question the constitutionality of statutes requiring expenditure of public moneys. (Philippine Constitution Association, Inc., et als., vs. Gimenez, et als., 15 SCRA 479 [1965]).

However, the statutory provisions questioned in this case, namely, sec. 7, BP Blg. 51, and sections 4, 1, and 6 BP Blg. 52, do not directly involve the disbursement of public funds. While, concededly, the elections to be held involve the expenditure of public moneys, nowhere in their Petition do said petitioners allege that their tax money is "being extracted and spent in violation of specific constitutional protections against abuses of legislative power" (Flast v. Cohen, 392 U.S., 83 [1960]), or that there is a misapplication of such funds by respondent COMELEC (see Pascual vs. Secretary of Public Works, 110 Phil. 331 [1960]), or that public money is being deflected to any improper purpose. Neither do petitioners seek to restrain respondent from wasting public funds through the enforcement of an invalid or unconstitutional law. (Philippine Constitution Association vs. Mathay, 18 SCRA 300 [1966]), citing Philippine Constitution Association vs. Gimenez, 15 SCRA 479 [1965]). Besides, the institution of a taxpayer's suit, per se is no assurance of judicial review. As held by this Court in Tan vs. Macapagal (43 SCRA 677 [1972]), speaking through our present Chief Justice, this Court is vested with discretion as to whether or not a taxpayer's suit should be entertained.

C. Unavoidability of constitutional question.

Again upon the authority of People vs. Vera, "it is a wellsettled rule that the constitutionality of an act of the legislature will not be determined by the courts unless that question is properly raised and

presented in appropriate cases and is necessary to a determination of the case; i.e., the issue of constitutionality must be the very lis mota presented."

We have already stated that, by the standards set forth in People vs. Vera, the present is not an "appropriate case" for either petitioner Dumlao or for petitioners Igot and Salapantan. They are actually without cause of action. It follows that the necessity for resolving the issue of constitutionality is absent, and procedural regularity would require that this suit be dismissed.

II. The substantive viewpoint.

We have resolved, however, to rule squarely on two of the challenged provisions, the Courts not being entirely without discretion in the matter. Thus, adherence to the strict procedural standard was relaxed in Tinio vs. Mina (26 SCRA 512 [1968]); Edu vs. Ericta (35 SCRA 481 [1970]); and in Gonzalez vs. Comelec (27 SCRA 835 [1969]), the Opinion in the Tinio and Gonzalez cases having been penned by our present Chief Justice. The reasons which have impelled us are the paramount public interest involved and the proximity of the elections which will be held only a few days hence.

Petitioner Dumlao's contention that section 4 of BP Blg. 52 is discriminatory against him personally is belied by the fact that several petitions for the disqualification of other candidates for local positions based on the challenged provision have already been filed with the COMELEC (as listed in p. 15, respondent's Comment). This tellingly overthrows Dumlao's contention of intentional or purposeful discrimination.

The assertion that Section 4 of BP Blg. 52 is contrary to the safer guard of equal protection is neither well taken. The constitutional guarantee of equal protection of the laws is subject to rational classification. If the groupings are based on reasonable and real differentiations, one class can be treated and regulated differently from another class. For purposes of public service, employees 65 years of age, have been validly classified differently from younger employees. Employees attaining that age are subject to compulsory retirement, while those of younger ages are not so compulsorily retirable.

In respect of election to provincial, city, or municipal positions, to require that candidates should not be more than 65 years of age at the time they assume office, if applicable to everyone, might or might not be a reasonable classification although, as the Solicitor General has intimated, a good policy of the law would be to promote the emergence of younger blood in our political elective echelons. On the other hand, it might be that persons more than 65 years old may also be good elective local officials.

Coming now to the case of retirees. Retirement from government service may or may not be a reasonable disqualification for elective local officials. For one thing, there can also be retirees from government service at ages, say below 65. It may neither be reasonable to disqualify retirees, aged 65, for a 65 year old retiree could be a good local official just like one, aged 65, who is not a retiree.

But, in the case of a 65-year old elective local official, who has retired from a provincial, city or municipal office, there is reason to disqualify him from running for the same office from which he had retired, as provided for in the challenged provision. The need for new blood assumes relevance. The tiredness of

the retiree for government work is present, and what is emphatically significant is that the retired employee has already declared himself tired and unavailable for the same government work, but, which, by virtue of a change of mind, he would like to assume again. It is for this very reason that inequality will neither result from the application of the challenged provision. Just as that provision does not deny equal protection neither does it permit of such denial (see People vs. Vera, 65 Phil. 56 [1933]). Persons similarly situated are sinlilarly treated.

In fine, it bears reiteration that the equal protection clause does not forbid all legal classification. What is proscribes is a classification which is arbitrary and unreasonable. That constitutional guarantee is not violated by a reasonable classification based upon substantial distinctions, where the classification is germane to the purpose of the law and applies to all Chose belonging to the same class (Peralta vs. Comelec, 82 SCRA 30 [1978] citing Felwa vs. Salas, 18 SCRA 606 [1966]; Rafael v. Embroidery and Apparel Control and Inspection Board, 21 SCRA 336 [1967]; Inchong etc., et al. vs. Hernandez 101 Phil. 1155 [1957]). The purpose of the law is to allow the emergence of younger blood in local governments. The classification in question being pursuant to that purpose, it cannot be considered invalid "even it at times, it may be susceptible to the objection that it is marred by theoretical inconsistencies" (Chief Justice Fernando, The Constitution of the Philippines, 1977 ed., p. 547).

There is an additional consideration. Absent herein is a showing of the clear invalidity of the questioned provision. Well accepted is the rule that to justify the nullification of a law, there must be a clear and unequivocal breach of the Constitution, not a doubtful and equivocal breach. Courts are practically unanimous in the pronouncement that laws shall not be declared invalid unless the conflict with the Constitution is clear beyond reasonable doubt (Peralta vs. COMELEC, 82 SCRA 55 [1978], citing Cooper vs. Telfair 4 Dall 14; Dodd, Cases on Constitutional Law, 3rd ed. 1942, 56). Lastly, it is within the compentence of the legislature to prescribe qualifications for one who desires to become a candidate for office provided they are reasonable, as in this case.

In so far as the petition of Igot and Salapantan are concerned, the second paragraph of section 4 of Batas Pambansa Blg. 52, quoted in full earlier, and which they challenge, may be divided in two parts. The first provides:

a. judgment of conviction jor any of the aforementioned crimes shall be conclusive evidence of such fact ...

The supremacy of the Constitution stands out as the cardinal principle. We are aware of the presumption of validity that attaches to a challenged statute, of the well-settled principle that "all reasonable doubts should be resolved in favor of constitutionality," and that Courts will not set aside a statute as constitutionally defective "except in a clear case." (People vs. Vera, supra). We are constrained to hold that this is one such clear case.

Explicit is the constitutional provision that, in all criminal prosecutions, the accused shall be presumed innocent until the contrary is proved, and shall enjoy the right to be heard by himself and counsel (Article IV, section 19, 1973 Constitution). An accusation, according to the fundamental law, is not synonymous with guilt. The challenged proviso contravenes the constitutional presumption of

innocence, as a candidate is disqualified from running for public office on the ground alone that charges have been filed against him before a civil or military tribunal. It condemns before one is fully heard. In ultimate effect, except as to the degree of proof, no distinction is made between a person convicted of acts of dislotalty and one against whom charges have been filed for such acts, as both of them would be ineligible to run for public office. A person disqualified to run for public office on the ground that charges have been filed against him is virtually placed in the same category as a person already convicted of a crime with the penalty of arresto, which carries with it the accessory penalty of suspension of the right to hold office during the term of the sentence (Art. 44, Revised Penal Code).

And although the filing of charges is considered as but prima facie evidence, and therefore, may be rebutted, yet. there is "clear and present danger" that because of the proximity of the elections, time constraints will prevent one charged with acts of disloyalty from offering contrary proof to overcome the prima facie evidence against him.

Additionally, it is best that evidence pro and con of acts of disloyalty be aired before the Courts rather than before an administrative body such as the COMELEC. A highly possible conflict of findings between two government bodies, to the extreme detriment of a person charged, will thereby be avoided. Furthermore, a legislative/administrative determination of guilt should not be allowed to be substituted for a judicial determination.

Being infected with constitutional infirmity, a partial declaration of nullity of only that objectionable portion is mandated. It is separable from the first portion of the second paragraph of section 4 of Batas Pambansa Big. 52 which can stand by itself.

WHEREFORE, 1) the first paragraph of section 4 of Batas pambansa Bilang 52 is hereby declared valid. Said paragraph reads:

SEC. 4. Special disqualification. — In addition to violation of Section 10 of Article XII(C) of the Constitution and disqualifications mentioned in existing laws which are hereby declared as disqualification for any of the elective officials enumerated in Section 1 hereof, any retired elective provincial, city or municipal official, who has received payment of the retirement benefits to which he is entitled under the law and who shall have been 65 years of age at the commencement of the term of office to which he seeks to be elected, shall not be qualified to run for the same elective local office from which he has retired.

2) That portion of the second paragraph of section 4 of Batas Pambansa Bilang 52 providing that "... the filing of charges for the commission of such crimes before a civil court or military tribunal after preliminary investigation shall be prima facie evidence of such fact", is hereby declared null and void, for being violative of the constitutional presumption of innocence guaranteed to an accused.

SO ORDERED.

Makasiar, Antonio, Concepcion, Jr., Fernandez and Guerrero, JJ., concur.

Fernando, C.J., concurs and submits a brief separate opinion.

De Castro, J., abstain as far as petitioner Dumlao is concerned.

Separate Opinions

BARREDO, J., concurring:

But as regards the matter of equal protection, I reiterate my view for Peralta that Sec. 9(1) Art. XI I is more expensive than the equal protection clause.

AQUINO, J, concurring:

concur in the result as to paragraph I of the dispositive part of the decision. I dissent as to paragraph 2. In my opinion, paragraph 2, section 4 of Batas Pambansa Bilang 52 is valid, being similar to certain presumptions in Articles 217 and 315 of the Penal Code, as amended by Republic Act No. 4885. See U.S. v. Luling, 34 Phil. 725 and People v. Mingoa, 92 Phil. 856.

ABAD SANTOS, J., concurring:

concur but wish to add that a judgment of conviction as provided in Sec. 4, par. 2 of Batas Pambansa Big. 52 should be one which is final and unappealable.

FERNANDO, C.J., concurring.

It is particularly gratifying that the reiteration in the ably-written and scholarly opinion of the Court, penned by Justice Melencio-Herrera, of the standard that must be met before the power of judicial review may be availed of, set forth with such lucidity and force by Justice Laurel in the two leading cases of Angara v. Electoral Commission 1 and People v. Vera, 2 did not constitute an obstacle to this Court ruling on the crucial constitutional issues raised. It was a cause for concern, for me at least, that counsel of private parties in not a few cases in the recent past had shown less than full awareness of the doctrines, procedural in character, that call for application whenever the exercise of this awesome and delicate responsibility of adjudging the validity of a statute or presidential decree is invoked. 3 While this Court cannot be accused of being bound by the letters of judicial timidity, it remains true that no cavalier disregard of tried and tested concepts should be given encouragement. A petitioner who bases his claim for relief on asserted constitutional deficiencies deserves to be heard. That goes without saying. For the judiciary must ever endeavor to vindicate rights safeguarded by the fundamental law. In that sense, this Tribunal is not susceptible to the reproach that it has imprisoned itself in its allegiance to the philosophy of judicial self-restraint. There are, however, limits to judicial activism. It cannot be too strongly stressed that a petition of this character must ever remain an orderly proceeding that cannot be oblivious of the requisites to be complied with to justify a pronouncement on constitutional issues. Where there is exuberance in the exercise of judicial power, the forms of litigation are but slight

retaining walls. It is right and proper that the voice of the Solicitor General should be heard in protest against such neglect of rudimentary precepts. Necessarily then, whenever objections based on refusal to abide by the procedural principles are presented, this Court must rule. It would suffice if thereby the petition is dismissed for non-observance of the controlling doctrines. There are times, however, when the controversy is of such a character that to resolve doubts, erase uncertainty, and assure respect for constitutional limitations, this Tribunal must pass on the merits. This is one such case. I therefore concur with the opinion of the Court.

It may be a task of superfluity then to write a concurring opinion. Nonetheless, a few words may not be amiss on what for me is the proper approach to take as to the lack of power of this Court to pass on the motives of the legislative body, on the lack of persuasiveness of petitioner's argument based on the equal protection guarantee, and on the fundamental concept of fairness of which the due process clause is an embodiment, thus calling for the nullification of the disqualification of a candidate upon the mere filing of charges against him.

1. The challenge to the provision in question is predicated on what was referred to as "a known fact in the province of Nueva Vizcaya that the aforesaid provision was concocted and designed precisely to frustrate any bid of herein petitioner to make a political come back [sic] as governor of Nueva Vizcaya. The wordings [sic] of the law is so peculiarly attuned to discriminate against herein petitioner because every condition imposed as disqualification grounds are known to be possessed by him because he was a former elective provincial official who has received his retirement benefits, he desires to run for the same elective office and at the commencement of the term of office to which he now seeks to be elected, he shall have reached 65 years of age. 4 Clearly then, the plea for invalidating such provision is the motive attributed to the Interim Batasang Pambansa. For petitioner, it amounted to a constitutional infirmity fatal in character. The weakness of the petition is thus apparent. No decision of this Tribunal can be cited in support of such a proposition. It would be to extend unduly the concept of judicial review if a court can roam far and wide and range at will over the variety and diversity of the reasons, the promptings that may lead a legislator to cast his vote for or against a proposed legislation. It is not what inspired the introduction of a bill but the effect thereof if duly enacted that is decisive. That would be the test for its validity or lack of it. There is this relevant excerpt from McCray v. United States: 5 "The decisions of this Court [Supreme Court of the United States] from the beginning lend no support whatever to the assumption that the judiciary may restrain the exercise of lawful power on the assumption that a wrongful purpose of motive has caused the power to be exerted. 6 The late Chief Justice Warren, who penned the opinion in United States v. O' Brien 7 put the matter thus: "Inquiries into congressional motives or purposes are a hazardous matter. When the issue is simply the interpretation of legislation, the Court will look to statements by legislators for guidance as to the purpose of the legislature, because the benefit to sound decision-making in this circumstance is thought sufficient to risk the possibility of misreading Congress' purpose. It is entirely a different matter when we are asked to void a statute that is, under well-settled criteria, constitutional on its face, on the basis of what fewer than a handful of Congressmen said about it. What motivates one legislator to make a speech about a statute is not necessarily what motivates scores of others to enact it, and the stakes are sufficiently high for us to eschew guesswork. We decline to void essentially on the ground that it is unwise legislation

which Congress had the undoubted power to enact and which could be reenacted in its exact form if the same or another legislator made a 'wiser' speech about it." 8

2. If, however, the provision in question is susceptible to the reproach that it amounts to a denial of equal protection, then his plea for nullification should be accorded a sympathetic response. As the opinion of the Court makes clear, such imputation is not deserving of credence. The classification cannot be stigmatized as lacking in rationality. It is germane to the subject. Age, as well as the fact of retirement and the receipt of retirement benefits are factors that can enter into any legislative determination of what disqualifications to impose. As was pointed out in J.M. Tuason and Co., Inc. v. Land Tenure Administration: 9 "It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances, which if not Identical, are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest. 10 It cannot be denied that others similarly fall under the same ban. It was not directed at petitioner solely. The most that can be said is that he falls within the-proscribed class. The point was likewise raised as to why should national officials be excluded in the above provision. The answer is simple. There is nothing to prevent the legislative body from following a system of priorities. This it did under the challenged legislative provision. In its opinion, what called for such a measure is the propensity of the local officials having reached the retirement age and having received retirement benefits once again running for public office. Accordingly, the provision in question was enacted. A portion of the opinion in the aforesaid J.M. Tuason and Co., Inc. finds relevance: "It was confronted with a situation that caned for correction, and the legislation that was the result of its deliberation sought to apply the necessary palliative. That it stopped short of possibly attaining the cure of other analogous ills certainly does not stigmatize its effort as a denial of equal protection. We have given our sanction to the principle underlying the exercise of police power and taxation, but certainly not excluding eminent domain, that 'the legislature is not required by the Constitution to adhere to the policy of all "or none." ' Thus, to reiterate, the invocation by petitioner of the equal protection clause is futile and unavailing ." 11

3. That brings us to the assailed provision as to the sufficiency of the filing of charges for the commission of such crimes as subversion, insurrection, rebellion or others of similar nature before a civil court or military tribunal after preliminary investigation, being a prima facie evidence of such fact and therefore justifying the disqualification of a candidate. The opinion of the Court invoked the constitutional presumption of innocence as a basis for its being annulled. That conclusion is well-founded. Such being the case, I am in full agreement. I would add that such a provision is moreover tainted with arbitrariness and therefore is violative of the due process clause. Such a constitutional right, to quote from Luzon Surety Co., Inc. v. Beson, 12 is "not a mere formality that may be dispensed with at will. Its disregard is a matter of serious concern. It is a constitutional safeguard of the highest order. It is a response to man's innate sense of justice." 13 As rightfully stressed in the opinion of the Court, the time element may invariably preclude a full hearing on the charge against him and thus effectively negate the opportunity

of an individual to present himself as a candidate. If, as has been invariably the case, a prosecutor, whether in a civil court or in a military tribunal saddled as he is with so many complaints filed on his desk would give in to the all-too-human propensity to take the easy way out and to file charges, then a candidate Would be hard put to destroy the presumption. A sense of realism for me compels a declaration of nullity of a provision which on its face is patently offensive to the Constitution.

Hence my concurrence.

TEEHANKEE, J., dissenting:

Files a separate opinion dissenting from the adverse ruling on Dumlaos candidacy and declining to rule on the invalidity of the first part of Section 4 of the questioned Law; and concurs with the pronouncement that the mere filing of charges shall be prima facie cause for disqualification is void.

I. I dissent from the majority's dismissal of the petition insofar as it upholds the discriminatory and arbitrary provision of Sec. 4 of Batas Pambansa Blg. 52 which would impose a special disqualification on petitioner Patricio Dumlao from running for the elective local office of governor of his home province of Nueva Vizcaya and would in effect bar the electors of his province from electing him to said office in the January 30 elections, simply because he is a retired provincial governor of said province "who has received payment of the retirement benefits to which he is entitled under the law and who shall have been 65 years of age at the commencement of the term of office to which he seeks to be elected."

To specially and peculiarly ban a 65-year old previously retired elective local official from running for the same elective office (of governor, in this case) previously held by him and from which he has retired is arbitrary, oppressive and unreasonable. Persons similarly situated are not similarly treated, e.g. a retired vice-governor, mayor or councilor of 65 is entitled to run for governor (because the disqualification is for the retiree of 65 to run for the same elective office from which he retired) but petitioner is barred from doing so (although he may run for any other lesser office). Both are 65 and are retirees, yet one is barred from running for the office of governor. What is the valid distinction? Is this not an arbitrary discrimination against petitioner who has cause to that "the aforesaid provision was concocted and designed precisely to frustrate any bid of petition to make a political comeback as governor of Nueva Vizcaya 1 — (since no other case by a former governor similarly barred by virtue of said provision can never be cited 2 ). Is there not here, therefore a gross denial of the cardinal constitutional guarantee that equal protection and security shall be given under the law to every person, under analogous if not Identical circumstances?

Respondent's claim, as accepted by the majority, is that the purpose of the special disqualification is "to infuse new blood in local governments but the classification (that would bar 65-year old retirees from running for the same elective local office) is not rational nor reasonable. It is not germane nor relevant to the alleged purpose of "infusing new blood" because such "old blood" retirees may continue in local governments since they are not disqualified at all to run for any other local elective office such as from provincial governor, vice-governor, city, municipal or district mayor and vice- mayor to member of the Sangguniang Panlalawigan Sangguniang Panglunsod and Sangguniang Bayan, other than the local elective office from which they retired.

Furthermore, other 65-year olds who have likewise retired from the judiciary and other branches of government are not in any manner disqualified to run for any local elective office, as in the case of retired Court of First Instance Judge (former Congressman) Alberto S. Ubay who retired with full substantial retirement benefits as such judge in 1978 at age 70 and now at past 71 years of age, is running as the official KBL candidate for governor of his province. And even in the case of 65-year old local elective officials, they are disqualified only when they have received payment of the retirement benefits to which they are entitled under the law (which amount to very little, compared to retirement benefits of other executive officials and members of the judiciary). If they have not received such retirement benefits, they are not disqualified. Certainly, their disqualification or non-disqualification and consequent classification as "old blood" or "new blood" cannot hinge on such an irrelevant question of whether or not they have received their retirement benefits.

The classification is patently arbitrary and unreasonable and is not based on substantial distinctions which make for real differences that would justify the special disqualification of petitioner, which, it is claimed, "is based on a presumption that elective local officials who have retired and are of advanced age cannot discharge the functions of the office they seek as those who are differently situated." 3 Such presumption is sheer conjecture. The mere fact that a candidate is less than 65 or has "young or new blood" does not mean that he would be more efficient, effective and competent than a mature 65year old like petition er who has had experience on the job and who was observed at the hearing to appear to be most physically fit. Sufice it to city the outstanding case of the incumbent ebullient Minister of Foreign Affairs, General Carlos P. Romulo, who was elected a 80 as a member of the Interim Batasan Pambansa and who has just this month completed 81 years of age and has been hailed by the President himself as "the best foreign minister the Republic has ever had

Age has simply just never been a yardstick for qualification or disqualification. Al. the most, a minimum age to hold public office has been required as a qualification to insure a modicum of maturity 'now reduced to 21 years in the present batas), but no maximum age has ever been imposed as a disqualification for elect public office since the right and win of the people to elect the candidate of their choice for any elective office, no matter his age has always been recognized as supreme.

The disqualification in question therefore is grossly violative of the equal protection clause which mandates that all persons subjected to legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and in the liabilities imposed. The guarantee is meant to proscribe undue favor and individual or class privilege on the one hand and hostile discrimination and the oppression of in quality on the other. The questioned provision should therefore at the least be declared invalid in its application insofar as it would disqualify petitioner from running for the office of governor of his province.

As aptly restated by the Chief Justice, "Persons similarly situated should be similarly treated. Where no valid distinction could be made as to the relevant conditions that call for consideration, there should be none as to the privileges conferred and the liabilities imposed. There can be no undue favoritism or partiality on the one hand or hostility on the other. Arbitrary selection and discrimination against persons in thus ruled out. For the principle is that equal protection and security shall be given to every

person under circumstances, which if not Identical are analogous. If law be looked upon in terms of burden or charges, those that full within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest." 4

Finally, this arbitrary disqualification is likewise grossly violative of Article XII, sub-article C, section 9(1) of the 1973 Constitution that Bona fide candidates for any public office shall be free from any form of harassment and discrimination.

II. I concur with the majority's declaration of invalidity of the portion of the second paragraph of Section 4 of Batas Pambansa Blg. 52 which would make the mere filing of charges of subversion, insurrection, rebellion or other similar crimes before a civil court or military tribunal after preliminary investigation prima facie evidence of the fact of commission of an act of disloyalty to the State on the part of the candidate and disqualify him from his candidacy. Such a provision could be the most insidious weapon to disqualify bona fide candidates who seem to be headed for election and places in the hands of the military and civil prosecutors a dangerous and devastating weapon of cutting off any candidate who may not be to their filing through the filing of last-hour charges against him.

I also concur with the pronouncement made in the majority decision that in order that a judgment of conviction may be deemed "as conclusive evidence" of the candidate's disloyalty to the State and of his disqualification from office, such judgment of conviction must be final and unappealable. This is so specifically provided in Section 22 of the 1978 Election Code. 5 Otherwise, the questioned provision would deny the bona fide candidate substantive due process and would be grossly violative of his constitutional right of presumption of innocence and of the above-quoted provision of the 1973 Constitution protecting candidates for public office from any form of harassment and discrimination.

ADDENDUM

When the case was voted upon a second time last January 21st, there appeared to be a majority in favor of the declarations and pronouncements above referred to in the two preceding paragraphs, in view of the urgency of the matter and the evil sought to be avoided. However, as of this writing, January 23, 1980 in the afternoon, such majority seems to have been dissipated by the view that the action to nullify such second paragraph of section 4 of the Batas in question is premature and has not been properly submitted for ajudication under the strict procedural require . If this be the case, my above views, termed as concurrences, should be taken as dissents against the majority action.

Separate Opinions

BARREDO, J., concurring:

But as regards the matter of equal protection, I reiterate my view for Peralta that Sec. 9(1) Art. XI I is more expensive than the equal protection clause.

AQUINO, J, concurring:

concur in the result as to paragraph I of the dispositive part of the decision. I dissent as to paragraph 2. In my opinion, paragraph 2, section 4 of Batas Pambansa Bilang 52 is valid, being similar to certain presumptions in Articles 217 and 315 of the Penal Code, as amended by Republic Act No. 4885. See U.S. v. Luling, 34 Phil. 725 and People v. Mingoa, 92 Phil. 856.

ABAD SANTOS, J., concurring:

concur but wish to add that a judgment of conviction as provided in Sec. 4, par. 2 of Batas Pambansa Big. 52 should be one which is final and unappealable.

FERNANDO, C.J., concurring.

It is particularly gratifying that the reiteration in the ably-written and scholarly opinion of the Court, penned by Justice Melencio-Herrera, of the standard that must be met before the power of judicial review may be availed of, set forth with such lucidity and force by Justice Laurel in the two leading cases of Angara v. Electoral Commission 1 and People v. Vera, 2 did not constitute an obstacle to this Court ruling on the crucial constitutional issues raised. It was a cause for concern, for me at least, that counsel of private parties in not a few cases in the recent past had shown less than full awareness of the doctrines, procedural in character, that call for application whenever the exercise of this awesome and delicate responsibility of adjudging the validity of a statute or presidential decree is invoked. 3 While this Court cannot be accused of being bound by the letters of judicial timidity, it remains true that no cavalier disregard of tried and tested concepts should be given encouragement. A petitioner who bases his claim for relief on asserted constitutional deficiencies deserves to be heard. That goes without saying. For the judiciary must ever endeavor to vindicate rights safeguarded by the fundamental law. In that sense, this Tribunal is not susceptible to the reproach that it has imprisoned itself in its allegiance to the philosophy of judicial self-restraint. There are, however, limits to judicial activism. It cannot be too strongly stressed that a petition of this character must ever remain an orderly proceeding that cannot be oblivious of the requisites to be complied with to justify a pronouncement on constitutional issues. Where there is exuberance in the exercise of judicial power, the forms of litigation are but slight retaining walls. It is right and proper that the voice of the Solicitor General should be heard in protest against such neglect of rudimentary precepts. Necessarily then, whenever objections based on refusal to abide by the procedural principles are presented, this Court must rule. It would suffice if thereby the petition is dismissed for non-observance of the controlling doctrines. There are times, however, when the controversy is of such a character that to resolve doubts, erase uncertainty, and assure respect for constitutional limitations, this Tribunal must pass on the merits. This is one such case. I therefore concur with the opinion of the Court.

It may be a task of superfluity then to write a concurring opinion. Nonetheless, a few words may not be amiss on what for me is the proper approach to take as to the lack of power of this Court to pass on the motives of the legislative body, on the lack of persuasiveness of petitioner's argument based on the equal protection guarantee, and on the fundamental concept of fairness of which the due process clause is an embodiment, thus calling for the nullification of the disqualification of a candidate upon the mere filing of charges against him.

1. The challenge to the provision in question is predicated on what was referred to as "a known fact in the province of Nueva Vizcaya that the aforesaid provision was concocted and designed precisely to frustrate any bid of herein petitioner to make a political come back [sic] as governor of Nueva Vizcaya. The wordings [sic] of the law is so peculiarly attuned to discriminate against herein petitioner because every condition imposed as disqualification grounds are known to be possessed by him because he was a former elective provincial official who has received his retirement benefits, he desires to run for the same elective office and at the commencement of the term of office to which he now seeks to be elected, he shall have reached 65 years of age. 4 Clearly then, the plea for invalidating such provision is the motive attributed to the Interim Batasang Pambansa. For petitioner, it amounted to a constitutional infirmity fatal in character. The weakness of the petition is thus apparent. No decision of this Tribunal can be cited in support of such a proposition. It would be to extend unduly the concept of judicial review if a court can roam far and wide and range at will over the variety and diversity of the reasons, the promptings that may lead a legislator to cast his vote for or against a proposed legislation. It is not what inspired the introduction of a bill but the effect thereof if duly enacted that is decisive. That would be the test for its validity or lack of it. There is this relevant excerpt from McCray v. United States: 5 "The decisions of this Court [Supreme Court of the United States] from the beginning lend no support whatever to the assumption that the judiciary may restrain the exercise of lawful power on the assumption that a wrongful purpose of motive has caused the power to be exerted. 6 The late Chief Justice Warren, who penned the opinion in United States v. O' Brien 7 put the matter thus: "Inquiries into congressional motives or purposes are a hazardous matter. When the issue is simply the interpretation of legislation, the Court will look to statements by legislators for guidance as to the purpose of the legislature, because the benefit to sound decision-making in this circumstance is thought sufficient to risk the possibility of misreading Congress' purpose. It is entirely a different matter when we are asked to void a statute that is, under well-settled criteria, constitutional on its face, on the basis of what fewer than a handful of Congressmen said about it. What motivates one legislator to make a speech about a statute is not necessarily what motivates scores of others to enact it, and the stakes are sufficiently high for us to eschew guesswork. We decline to void essentially on the ground that it is unwise legislation which Congress had the undoubted power to enact and which could be reenacted in its exact form if the same or another legislator made a 'wiser' speech about it." 8

2. If, however, the provision in question is susceptible to the reproach that it amounts to a denial of equal protection, then his plea for nullification should be accorded a sympathetic response. As the opinion of the Court makes clear, such imputation is not deserving of credence. The classification cannot be stigmatized as lacking in rationality. It is germane to the subject. Age, as well as the fact of retirement and the receipt of retirement benefits are factors that can enter into any legislative determination of

what disqualifications to impose. As was pointed out in J.M. Tuason and Co., Inc. v. Land Tenure Administration: 9 "It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances, which if not Identical, are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest. 10 It cannot be denied that others similarly fall under the same ban. It was not directed at petitioner solely. The most that can be said is that he falls within the-proscribed class. The point was likewise raised as to why should national officials be excluded in the above provision. The answer is simple. There is nothing to prevent the legislative body from following a system of priorities. This it did under the challenged legislative provision. In its opinion, what called for such a measure is the propensity of the local officials having reached the retirement age and having received retirement benefits once again running for public office. Accordingly, the provision in question was enacted. A portion of the opinion in the aforesaid J.M. Tuason and Co., Inc. finds relevance: "It was confronted with a situation that caned for correction, and the legislation that was the result of its deliberation sought to apply the necessary palliative. That it stopped short of possibly attaining the cure of other analogous ills certainly does not stigmatize its effort as a denial of equal protection. We have given our sanction to the principle underlying the exercise of police power and taxation, but certainly not excluding eminent domain, that 'the legislature is not required by the Constitution to adhere to the policy of all "or none." ' Thus, to reiterate, the invocation by petitioner of the equal protection clause is futile and unavailing ." 11

3. That brings us to the assailed provision as to the sufficiency of the filing of charges for the commission of such crimes as subversion, insurrection, rebellion or others of similar nature before a civil court or military tribunal after preliminary investigation, being a prima facie evidence of such fact and therefore justifying the disqualification of a candidate. The opinion of the Court invoked the constitutional presumption of innocence as a basis for its being annulled. That conclusion is well-founded. Such being the case, I am in full agreement. I would add that such a provision is moreover tainted with arbitrariness and therefore is violative of the due process clause. Such a constitutional right, to quote from Luzon Surety Co., Inc. v. Beson, 12 is "not a mere formality that may be dispensed with at will. Its disregard is a matter of serious concern. It is a constitutional safeguard of the highest order. It is a response to man's innate sense of justice." 13 As rightfully stressed in the opinion of the Court, the time element may invariably preclude a full hearing on the charge against him and thus effectively negate the opportunity of an individual to present himself as a candidate. If, as has been invariably the case, a prosecutor, whether in a civil court or in a military tribunal saddled as he is with so many complaints filed on his desk would give in to the all-too-human propensity to take the easy way out and to file charges, then a candidate Would be hard put to destroy the presumption. A sense of realism for me compels a declaration of nullity of a provision which on its face is patently offensive to the Constitution.

Hence my concurrence.

TEEHANKEE, J., dissenting:

Files a separate opinion dissenting from the adverse ruling on Dumlaos candidacy and declining to rule on the invalidity of the first part of Section 4 of the questioned Law; and concurs with the pronouncement that the mere filing of charges shall be prima facie cause for disqualification is void.

I. I dissent from the majority's dismissal of the petition insofar as it upholds the discriminatory and arbitrary provision of Sec. 4 of Batas Pambansa Blg. 52 which would impose a special disqualification on petitioner Patricio Dumlao from running for the elective local office of governor of his home province of Nueva Vizcaya and would in effect bar the electors of his province from electing him to said office in the January 30 elections, simply because he is a retired provincial governor of said province "who has received payment of the retirement benefits to which he is entitled under the law and who shall have been 65 years of age at the commencement of the term of office to which he seeks to be elected."

To specially and peculiarly ban a 65-year old previously retired elective local official from running for the same elective office (of governor, in this case) previously held by him and from which he has retired is arbitrary, oppressive and unreasonable. Persons similarly situated are not similarly treated, e.g. a retired vice-governor, mayor or councilor of 65 is entitled to run for governor (because the disqualification is for the retiree of 65 to run for the same elective office from which he retired) but petitioner is barred from doing so (although he may run for any other lesser office). Both are 65 and are retirees, yet one is barred from running for the office of governor. What is the valid distinction? Is this not an arbitrary discrimination against petitioner who has cause to that "the aforesaid provision was concocted and designed precisely to frustrate any bid of petition to make a political comeback as governor of Nueva Vizcaya 1 — (since no other case by a former governor similarly barred by virtue of said provision can never be cited 2 ). Is there not here, therefore a gross denial of the cardinal constitutional guarantee that equal protection and security shall be given under the law to every person, under analogous if not Identical circumstances?

Respondent's claim, as accepted by the majority, is that the purpose of the special disqualification is "to infuse new blood in local governments but the classification (that would bar 65-year old retirees from running for the same elective local office) is not rational nor reasonable. It is not germane nor relevant to the alleged purpose of "infusing new blood" because such "old blood" retirees may continue in local governments since they are not disqualified at all to run for any other local elective office such as from provincial governor, vice-governor, city, municipal or district mayor and vice- mayor to member of the Sangguniang Panlalawigan Sangguniang Panglunsod and Sangguniang Bayan, other than the local elective office from which they retired.

Furthermore, other 65-year olds who have likewise retired from the judiciary and other branches of government are not in any manner disqualified to run for any local elective office, as in the case of retired Court of First Instance Judge (former Congressman) Alberto S. Ubay who retired with full substantial retirement benefits as such judge in 1978 at age 70 and now at past 71 years of age, is running as the official KBL candidate for governor of his province. And even in the case of 65-year old local elective officials, they are disqualified only when they have received payment of the retirement benefits to which they are entitled under the law (which amount to very little, compared to retirement benefits of other executive officials and members of the judiciary). If they have not received such

retirement benefits, they are not disqualified. Certainly, their disqualification or non-disqualification and consequent classification as "old blood" or "new blood" cannot hinge on such an irrelevant question of whether or not they have received their retirement benefits.

The classification is patently arbitrary and unreasonable and is not based on substantial distinctions which make for real differences that would justify the special disqualification of petitioner, which, it is claimed, "is based on a presumption that elective local officials who have retired and are of advanced age cannot discharge the functions of the office they seek as those who are differently situated." 3 Such presumption is sheer conjecture. The mere fact that a candidate is less than 65 or has "young or new blood" does not mean that he would be more efficient, effective and competent than a mature 65year old like petition er who has had experience on the job and who was observed at the hearing to appear to be most physically fit. Sufice it to city the outstanding case of the incumbent ebullient Minister of Foreign Affairs, General Carlos P. Romulo, who was elected a 80 as a member of the Interim Batasan Pambansa and who has just this month completed 81 years of age and has been hailed by the President himself as "the best foreign minister the Republic has ever had

Age has simply just never been a yardstick for qualification or disqualification. Al. the most, a minimum age to hold public office has been required as a qualification to insure a modicum of maturity 'now reduced to 21 years in the present batas), but no maximum age has ever been imposed as a disqualification for elect public office since the right and win of the people to elect the candidate of their choice for any elective office, no matter his age has always been recognized as supreme.

The disqualification in question therefore is grossly violative of the equal protection clause which mandates that all persons subjected to legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and in the liabilities imposed. The guarantee is meant to proscribe undue favor and individual or class privilege on the one hand and hostile discrimination and the oppression of in quality on the other. The questioned provision should therefore at the least be declared invalid in its application insofar as it would disqualify petitioner from running for the office of governor of his province.

As aptly restated by the Chief Justice, "Persons similarly situated should be similarly treated. Where no valid distinction could be made as to the relevant conditions that call for consideration, there should be none as to the privileges conferred and the liabilities imposed. There can be no undue favoritism or partiality on the one hand or hostility on the other. Arbitrary selection and discrimination against persons in thus ruled out. For the principle is that equal protection and security shall be given to every person under circumstances, which if not Identical are analogous. If law be looked upon in terms of burden or charges, those that full within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest." 4

Finally, this arbitrary disqualification is likewise grossly violative of Article XII, sub-article C, section 9(1) of the 1973 Constitution that Bona fide candidates for any public office shall be free from any form of harassment and discrimination.

II. I concur with the majority's declaration of invalidity of the portion of the second paragraph of Section 4 of Batas Pambansa Blg. 52 which would make the mere filing of charges of subversion, insurrection, rebellion or other similar crimes before a civil court or military tribunal after preliminary investigation prima facie evidence of the fact of commission of an act of disloyalty to the State on the part of the candidate and disqualify him from his candidacy. Such a provision could be the most insidious weapon to disqualify bona fide candidates who seem to be headed for election and places in the hands of the military and civil prosecutors a dangerous and devastating weapon of cutting off any candidate who may not be to their filing through the filing of last-hour charges against him.

I also concur with the pronouncement made in the majority decision that in order that a judgment of conviction may be deemed "as conclusive evidence" of the candidate's disloyalty to the State and of his disqualification from office, such judgment of conviction must be final and unappealable. This is so specifically provided in Section 22 of the 1978 Election Code. 5 Otherwise, the questioned provision would deny the bona fide candidate substantive due process and would be grossly violative of his constitutional right of presumption of innocence and of the above-quoted provision of the 1973 Constitution protecting candidates for public office from any form of harassment and discrimination.

ADDENDUM

When the case was voted upon a second time last January 21st, there appeared to be a majority in favor of the declarations and pronouncements above referred to in the two preceding paragraphs, in view of the urgency of the matter and the evil sought to be avoided. However, as of this writing, January 23, 1980 in the afternoon, such majority seems to have been dissipated by the view that the action to nullify such second paragraph of section 4 of the Batas in question is premature and has not been properly submitted for ajudication under the strict procedural require . If this be the case, my above views, termed as concurrences, should be taken as dissents against the majority action.

Separate Opinions

BARREDO, J., concurring:

But as regards the matter of equal protection, I reiterate my view for Peralta that Sec. 9(1) Art. XI I is more expensive than the equal protection clause.

AQUINO, J, concurring:

concur in the result as to paragraph I of the dispositive part of the decision. I dissent as to paragraph 2. In my opinion, paragraph 2, section 4 of Batas Pambansa Bilang 52 is valid, being similar to certain presumptions in Articles 217 and 315 of the Penal Code, as amended by Republic Act No. 4885. See U.S. v. Luling, 34 Phil. 725 and People v. Mingoa, 92 Phil. 856.

ABAD SANTOS, J., concurring:

concur but wish to add that a judgment of conviction as provided in Sec. 4, par. 2 of Batas Pambansa Big. 52 should be one which is final and unappealable.

FERNANDO, C.J., concurring.

It is particularly gratifying that the reiteration in the ably-written and scholarly opinion of the Court, penned by Justice Melencio-Herrera, of the standard that must be met before the power of judicial review may be availed of, set forth with such lucidity and force by Justice Laurel in the two leading cases of Angara v. Electoral Commission 1 and People v. Vera, 2 did not constitute an obstacle to this Court ruling on the crucial constitutional issues raised. It was a cause for concern, for me at least, that counsel of private parties in not a few cases in the recent past had shown less than full awareness of the doctrines, procedural in character, that call for application whenever the exercise of this awesome and delicate responsibility of adjudging the validity of a statute or presidential decree is invoked. 3 While this Court cannot be accused of being bound by the letters of judicial timidity, it remains true that no cavalier disregard of tried and tested concepts should be given encouragement. A petitioner who bases his claim for relief on asserted constitutional deficiencies deserves to be heard. That goes without saying. For the judiciary must ever endeavor to vindicate rights safeguarded by the fundamental law. In that sense, this Tribunal is not susceptible to the reproach that it has imprisoned itself in its allegiance to the philosophy of judicial self-restraint. There are, however, limits to judicial activism. It cannot be too strongly stressed that a petition of this character must ever remain an orderly proceeding that cannot be oblivious of the requisites to be complied with to justify a pronouncement on constitutional issues. Where there is exuberance in the exercise of judicial power, the forms of litigation are but slight retaining walls. It is right and proper that the voice of the Solicitor General should be heard in protest against such neglect of rudimentary precepts. Necessarily then, whenever objections based on refusal to abide by the procedural principles are presented, this Court must rule. It would suffice if thereby the petition is dismissed for non-observance of the controlling doctrines. There are times, however, when the controversy is of such a character that to resolve doubts, erase uncertainty, and assure respect for constitutional limitations, this Tribunal must pass on the merits. This is one such case. I therefore concur with the opinion of the Court.

It may be a task of superfluity then to write a concurring opinion. Nonetheless, a few words may not be amiss on what for me is the proper approach to take as to the lack of power of this Court to pass on the motives of the legislative body, on the lack of persuasiveness of petitioner's argument based on the equal protection guarantee, and on the fundamental concept of fairness of which the due process clause is an embodiment, thus calling for the nullification of the disqualification of a candidate upon the mere filing of charges against him.

1. The challenge to the provision in question is predicated on what was referred to as "a known fact in the province of Nueva Vizcaya that the aforesaid provision was concocted and designed precisely to frustrate any bid of herein petitioner to make a political come back [sic] as governor of Nueva Vizcaya. The wordings [sic] of the law is so peculiarly attuned to discriminate against herein petitioner because every condition imposed as disqualification grounds are known to be possessed by him because he was a former elective provincial official who has received his retirement benefits, he desires to run for the

same elective office and at the commencement of the term of office to which he now seeks to be elected, he shall have reached 65 years of age. 4 Clearly then, the plea for invalidating such provision is the motive attributed to the Interim Batasang Pambansa. For petitioner, it amounted to a constitutional infirmity fatal in character. The weakness of the petition is thus apparent. No decision of this Tribunal can be cited in support of such a proposition. It would be to extend unduly the concept of judicial review if a court can roam far and wide and range at will over the variety and diversity of the reasons, the promptings that may lead a legislator to cast his vote for or against a proposed legislation. It is not what inspired the introduction of a bill but the effect thereof if duly enacted that is decisive. That would be the test for its validity or lack of it. There is this relevant excerpt from McCray v. United States: 5 "The decisions of this Court [Supreme Court of the United States] from the beginning lend no support whatever to the assumption that the judiciary may restrain the exercise of lawful power on the assumption that a wrongful purpose of motive has caused the power to be exerted. 6 The late Chief Justice Warren, who penned the opinion in United States v. O' Brien 7 put the matter thus: "Inquiries into congressional motives or purposes are a hazardous matter. When the issue is simply the interpretation of legislation, the Court will look to statements by legislators for guidance as to the purpose of the legislature, because the benefit to sound decision-making in this circumstance is thought sufficient to risk the possibility of misreading Congress' purpose. It is entirely a different matter when we are asked to void a statute that is, under well-settled criteria, constitutional on its face, on the basis of what fewer than a handful of Congressmen said about it. What motivates one legislator to make a speech about a statute is not necessarily what motivates scores of others to enact it, and the stakes are sufficiently high for us to eschew guesswork. We decline to void essentially on the ground that it is unwise legislation which Congress had the undoubted power to enact and which could be reenacted in its exact form if the same or another legislator made a 'wiser' speech about it." 8

2. If, however, the provision in question is susceptible to the reproach that it amounts to a denial of equal protection, then his plea for nullification should be accorded a sympathetic response. As the opinion of the Court makes clear, such imputation is not deserving of credence. The classification cannot be stigmatized as lacking in rationality. It is germane to the subject. Age, as well as the fact of retirement and the receipt of retirement benefits are factors that can enter into any legislative determination of what disqualifications to impose. As was pointed out in J.M. Tuason and Co., Inc. v. Land Tenure Administration: 9 "It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances, which if not Identical, are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest. 10 It cannot be denied that others similarly fall under the same ban. It was not directed at petitioner solely. The most that can be said is that he falls within the-proscribed class. The point was likewise raised as to why should national officials be excluded in the above provision. The answer is simple. There is nothing to prevent the legislative body from following a system of priorities. This it did under the challenged legislative provision. In its opinion, what called for such a measure is the propensity of the local officials having reached the retirement age and having

received retirement benefits once again running for public office. Accordingly, the provision in question was enacted. A portion of the opinion in the aforesaid J.M. Tuason and Co., Inc. finds relevance: "It was confronted with a situation that caned for correction, and the legislation that was the result of its deliberation sought to apply the necessary palliative. That it stopped short of possibly attaining the cure of other analogous ills certainly does not stigmatize its effort as a denial of equal protection. We have given our sanction to the principle underlying the exercise of police power and taxation, but certainly not excluding eminent domain, that 'the legislature is not required by the Constitution to adhere to the policy of all "or none." ' Thus, to reiterate, the invocation by petitioner of the equal protection clause is futile and unavailing ." 11

3. That brings us to the assailed provision as to the sufficiency of the filing of charges for the commission of such crimes as subversion, insurrection, rebellion or others of similar nature before a civil court or military tribunal after preliminary investigation, being a prima facie evidence of such fact and therefore justifying the disqualification of a candidate. The opinion of the Court invoked the constitutional presumption of innocence as a basis for its being annulled. That conclusion is well-founded. Such being the case, I am in full agreement. I would add that such a provision is moreover tainted with arbitrariness and therefore is violative of the due process clause. Such a constitutional right, to quote from Luzon Surety Co., Inc. v. Beson, 12 is "not a mere formality that may be dispensed with at will. Its disregard is a matter of serious concern. It is a constitutional safeguard of the highest order. It is a response to man's innate sense of justice." 13 As rightfully stressed in the opinion of the Court, the time element may invariably preclude a full hearing on the charge against him and thus effectively negate the opportunity of an individual to present himself as a candidate. If, as has been invariably the case, a prosecutor, whether in a civil court or in a military tribunal saddled as he is with so many complaints filed on his desk would give in to the all-too-human propensity to take the easy way out and to file charges, then a candidate Would be hard put to destroy the presumption. A sense of realism for me compels a declaration of nullity of a provision which on its face is patently offensive to the Constitution.

Hence my concurrence.

TEEHANKEE, J., dissenting:

Files a separate opinion dissenting from the adverse ruling on Dumlaos candidacy and declining to rule on the invalidity of the first part of Section 4 of the questioned Law; and concurs with the pronouncement that the mere filing of charges shall be prima facie cause for disqualification is void.

I. I dissent from the majority's dismissal of the petition insofar as it upholds the discriminatory and arbitrary provision of Sec. 4 of Batas Pambansa Blg. 52 which would impose a special disqualification on petitioner Patricio Dumlao from running for the elective local office of governor of his home province of Nueva Vizcaya and would in effect bar the electors of his province from electing him to said office in the January 30 elections, simply because he is a retired provincial governor of said province "who has received payment of the retirement benefits to which he is entitled under the law and who shall have been 65 years of age at the commencement of the term of office to which he seeks to be elected.

To specially and peculiarly ban a 65-year old previously retired elective local official from running for the same elective office (of governor, in this case) previously held by him and from which he has retired is arbitrary, oppressive and unreasonable. Persons similarly situated are not similarly treated, e.g. a retired vice-governor, mayor or councilor of 65 is entitled to run for governor (because the disqualification is for the retiree of 65 to run for the same elective office from which he retired) but petitioner is barred from doing so (although he may run for any other lesser office). Both are 65 and are retirees, yet one is barred from running for the office of governor. What is the valid distinction? Is this not an arbitrary discrimination against petitioner who has cause to that "the aforesaid provision was concocted and designed precisely to frustrate any bid of petition to make a political comeback as governor of Nueva Vizcaya 1 — (since no other case by a former governor similarly barred by virtue of said provision can never be cited 2 ). Is there not here, therefore a gross denial of the cardinal constitutional guarantee that equal protection and security shall be given under the law to every person, under analogous if not Identical circumstances?

Respondent's claim, as accepted by the majority, is that the purpose of the special disqualification is "to infuse new blood in local governments but the classification (that would bar 65-year old retirees from running for the same elective local office) is not rational nor reasonable. It is not germane nor relevant to the alleged purpose of "infusing new blood" because such "old blood" retirees may continue in local governments since they are not disqualified at all to run for any other local elective office such as from provincial governor, vice-governor, city, municipal or district mayor and vice- mayor to member of the Sangguniang Panlalawigan Sangguniang Panglunsod and Sangguniang Bayan, other than the local elective office from which they retired.

Furthermore, other 65-year olds who have likewise retired from the judiciary and other branches of government are not in any manner disqualified to run for any local elective office, as in the case of retired Court of First Instance Judge (former Congressman) Alberto S. Ubay who retired with full substantial retirement benefits as such judge in 1978 at age 70 and now at past 71 years of age, is running as the official KBL candidate for governor of his province. And even in the case of 65-year old local elective officials, they are disqualified only when they have received payment of the retirement benefits to which they are entitled under the law (which amount to very little, compared to retirement benefits of other executive officials and members of the judiciary). If they have not received such retirement benefits, they are not disqualified. Certainly, their disqualification or non-disqualification and consequent classification as "old blood" or "new blood" cannot hinge on such an irrelevant question of whether or not they have received their retirement benefits.

The classification is patently arbitrary and unreasonable and is not based on substantial distinctions which make for real differences that would justify the special disqualification of petitioner, which, it is claimed, "is based on a presumption that elective local officials who have retired and are of advanced age cannot discharge the functions of the office they seek as those who are differently situated." 3 Such presumption is sheer conjecture. The mere fact that a candidate is less than 65 or has "young or new blood" does not mean that he would be more efficient, effective and competent than a mature 65year old like petition er who has had experience on the job and who was observed at the hearing to appear to be most physically fit. Sufice it to city the outstanding case of the incumbent ebullient Minister of

Foreign Affairs, General Carlos P. Romulo, who was elected a 80 as a member of the Interim Batasan Pambansa and who has just this month completed 81 years of age and has been hailed by the President himself as "the best foreign minister the Republic has ever had

Age has simply just never been a yardstick for qualification or disqualification. Al. the most, a minimum age to hold public office has been required as a qualification to insure a modicum of maturity 'now reduced to 21 years in the present batas), but no maximum age has ever been imposed as a disqualification for elect public office since the right and win of the people to elect the candidate of their choice for any elective office, no matter his age has always been recognized as supreme.

The disqualification in question therefore is grossly violative of the equal protection clause which mandates that all persons subjected to legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and in the liabilities imposed. The guarantee is meant to proscribe undue favor and individual or class privilege on the one hand and hostile discrimination and the oppression of in quality on the other. The questioned provision should therefore at the least be declared invalid in its application insofar as it would disqualify petitioner from running for the office of governor of his province.

As aptly restated by the Chief Justice, "Persons similarly situated should be similarly treated. Where no valid distinction could be made as to the relevant conditions that call for consideration, there should be none as to the privileges conferred and the liabilities imposed. There can be no undue favoritism or partiality on the one hand or hostility on the other. Arbitrary selection and discrimination against persons in thus ruled out. For the principle is that equal protection and security shall be given to every person under circumstances, which if not Identical are analogous. If law be looked upon in terms of burden or charges, those that full within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest." 4

Finally, this arbitrary disqualification is likewise grossly violative of Article XII, sub-article C, section 9(1) of the 1973 Constitution that Bona fide candidates for any public office shall be free from any form of harassment and discrimination.

II. I concur with the majority's declaration of invalidity of the portion of the second paragraph of Section 4 of Batas Pambansa Blg. 52 which would make the mere filing of charges of subversion, insurrection, rebellion or other similar crimes before a civil court or military tribunal after preliminary investigation prima facie evidence of the fact of commission of an act of disloyalty to the State on the part of the candidate and disqualify him from his candidacy. Such a provision could be the most insidious weapon to disqualify bona fide candidates who seem to be headed for election and places in the hands of the military and civil prosecutors a dangerous and devastating weapon of cutting off any candidate who may not be to their filing through the filing of last-hour charges against him.

I also concur with the pronouncement made in the majority decision that in order that a judgment of conviction may be deemed "as conclusive evidence" of the candidate's disloyalty to the State and of his disqualification from office, such judgment of conviction must be final and unappealable. This is so specifically provided in Section 22 of the 1978 Election Code. 5 Otherwise, the questioned provision

would deny the bona fide candidate substantive due process and would be grossly violative of his constitutional right of presumption of innocence and of the above-quoted provision of the 1973 Constitution protecting candidates for public office from any form of harassment and discrimination.

ADDENDUM

When the case was voted upon a second time last January 21st, there appeared to be a majority in favor of the declarations and pronouncements above referred to in the two preceding paragraphs, in view of the urgency of the matter and the evil sought to be avoided. However, as of this writing, January 23, 1980 in the afternoon, such majority seems to have been dissipated by the view that the action to nullify such second paragraph of section 4 of the Batas in question is premature and has not been properly submitted for ajudication under the strict procedural require . If this be the case, my above views, termed as concurrences, should be taken as dissents against the majority action.

Footnotes

Fernando, CJ.:

1 63 Phil. 139 (1936).

2 65 Phil. 56 (1937).

3 Cf. Sanidad, Commision on Election L-44640, October 12, 1976, 73 SCRA 333; De la T Llana v. Election. L-47245, December 9, 1917, 80 SCRA 525; Hidalgo v. Marcos L-17329, December 9, 1977, 80 SCRA 538; Peralta v. Commission on Elections, L-47771, March 11, 1978, 82 SCRA 30),

4 Petition, 3-4.

5 195 US 27 (1904).

6 Ibid, 56.

7 391 US 367 (1968).

8 lbid, 383-384.

9 L-21064, February 18, 1970, 31 SCRA 413.

10 lbid, 435.

11 Ibid, 439.

12 L-26865-66, January 30, 1970, 31 SCRA 313.

13 Ibid, 318.

Teehankee, K.:

1 Petition at page 4.

2 Respondents cites in its comment (at page 15) a handful of pending cases for disqualification of mayoral candidates.

3 Respondent's Comment, at pages 12-13.

4 E. M. Fernando: The Bill of Rights, 2nd Ed., p. 100, cit. J.M. Tuason & Co., Inc. vs. Land Tenure Administration, 31 SCRA 413 (1970).

5 SEC. 22. Ineligibility of person found disloyal to the Government. — Any person found guilty in a final judgment or order of a competent court or tribunal of any crime involving disloyalty to the duly constituted Government such as rebellion, sedition, violations of the anti-subversion and firearms laws, and crimes against the national security shall not, unless restored to his full civil and political rights in accordance with law, be eligible and his certificate of candidancy shall not be given due course not shall the votes cast in his favor be counted. In the event his final conviction comes after his election, he shall automatically cease in office. (P.D. 1296, decreed February 7, 1978).

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 124360 November 5, 1997

FRANCISCO S. TATAD, petitioner, vs.THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY OF THE DEPARTMENT OF FINANCE, respondents.

G.R. No. 127867 November 5, 1997

EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA, WIGBERTO TANADA, FLAG HUMAN RIGHTS FOUNDATION, INC., FREEDOM FROM DEBT COALITION (FDC), SANLAKAS, petitioners, vs.HON. RUBEN TORRES in his capacity as the Executive Secretary, HON. FRANCISCO VIRAY, in his capacity as the Secretary of Energy, CALTEX Philippines, Inc., PETRON Corporation and PILIPINAS SHELL Corporation, respondents.

PUNO, J.:

The petitions at bar challenge the constitutionality of Republic Act No. 8180 entitled "An Act Deregulating the Downstream Oil Industry and For Other Purposes". 1 R.A. No. 8180 ends twenty six (26) years of government regulation of the downstream oil industry. Few cases carry a surpassing importance on the life of every Filipino as these petitions for the upswing and downswing of our economy materially depend on the oscillation of oil.

First, the facts without the fat. Prior to 1971, there was no government agency regulating the oil industry other than those dealing with ordinary commodities. Oil companies were free to enter and exit the market without any government interference. There were four (4) refining companies (Shell, Caltex, Bataan Refining Company and Filoil Refining) and six (6) petroleum marketing companies (Esso, Filoil, Caltex, Getty, Mobil and Shell), then operating in the country. 2

In 1971, the country was driven to its knees by a crippling oil crisis. The government, realizing that petroleum and its products are vital to national security and that their continued supply at reasonable prices is essential to the general welfare, enacted the Oil Industry Commission Act. 3 It created the Oil Industry Commission (OIC) to regulate the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, storing, distributing, marketing and selling crude oil, gasoline, kerosene, gas and other refined petroleum products. The OIC was vested with the power to fix the market prices of petroleum products, to regulate the capacities of refineries, to license new refineries and to regulate the operations and trade practices of the industry. 4

In addition to the creation of the OIC, the government saw the imperious need for a more active role of Filipinos in the oil industry. Until the early seventies, the downstream oil industry was controlled by multinational companies. All the oil refineries and marketing companies were owned by foreigners whose economic interests did not always coincide with the interest of the Filipino. Crude oil was transported to the country by foreign-controlled tankers. Crude processing was done locally by foreign-owned refineries and petroleum products were marketed through foreign-owned retail outlets. On November 9, 1973, President Ferdinand E. Marcos boldly created the Philippine National Oil Corporation (PNOC) to break the control by foreigners of our oil industry. 5 PNOC engaged in the business of refining, marketing, shipping, transporting, and storing petroleum. It acquired ownership of ESSO Philippines and Filoil to serve as its marketing arm. It bought the controlling shares of Bataan Refining Corporation, the largest refinery in the country. 6 PNOC later put up its own marketing subsidiary — Petrophil. PNOC operated under the business name PETRON Corporation. For the first time, there was a Filipino presence in the Philippine oil market.

In 1984, President Marcos through Section 8 of Presidential Decree No. 1956, created the Oil Price Stabilization Fund (OPSF) to cushion the effects of frequent changes in the price of oil caused by exchange rate adjustments or increase in the world market prices of crude oil and imported petroleum products. The fund is used (1) to reimburse the oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustment and/or increase in world market prices of crude oil, and (2) to reimburse oil companies for cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products. Under the law, the OPSF may be sourced from:

1. any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under P.D. No. 1956 arising from exchange rate adjustment,

2. any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy,

3. any additional amount to be imposed on petroleum products to augment the resources of the fund through an appropriate order that may be issued by the Board of Energy requiring payment of persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products, or

4. any resulting peso costs differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. 7

By 1985, only three (3) oil companies were operating in the country — Caltex, Shell and the government-owned PNOC.

In May, 1987, President Corazon C. Aquino signed Executive Order No. 172 creating the Energy Regulatory Board to regulate the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, marketing and distributing energy resources "when warranted and only when public necessity requires." The Board had the following powers and functions:

1. Fix and regulate the prices of petroleum products;

2. Fix and regulate the rate schedule or prices of piped gas to be charged by duly franchised gas companies which distribute gas by means of underground pipe system;

3. Fix and regulate the rates of pipeline concessionaries under the provisions of R.A. No. 387, as amended . . . ;

4. Regulate the capacities of new refineries or additional capacities of existing refineries and license refineries that may be organized after the issuance of (E.O. No. 172) under such terms and conditions as are consistent with the national interest; and

5. Whenever the Board has determined that there is a shortage of any petroleum product, or when public interest so requires, it may take such steps as it may consider necessary, including the temporary adjustment of the levels of prices of petroleum products and the payment to the Oil Price Stabilization Fund . . . by persons or entities engaged in the petroleum industry of such amounts as may be determined by the Board, which may enable the importer to recover its cost of importation. 8

On December 9, 1992, Congress enacted R.A. No. 7638 which created the Department of Energy to prepare, integrate, coordinate, supervise and control all plans, programs, projects, and activities of the government in relation to energy exploration, development, utilization, distribution and conservation. 9 The thrust of the Philippine energy program under the law was toward privatization of government

agencies related to energy, deregulation of the power and energy industry and reduction of dependency on oil-fired plants. 10 The law also aimed to encourage free and active participation and investment by the private sector in all energy activities. Section 5(e) of the law states that "at the end of four (4) years from the effectivity of this Act, the Department shall, upon approval of the President, institute the programs and timetable of deregulation of appropriate energy projects and activities of the energy industry."

Pursuant to the policies enunciated in R.A. No. 7638, the government approved the privatization of Petron Corporation in 1993. On December 16, 1993, PNOC sold 40% of its equity in Petron Corporation to the Aramco Overseas Company.

In March 1996, Congress took the audacious step of deregulating the downstream oil industry. It enacted R.A. No. 8180, entitled the "Downstream Oil Industry Deregulation Act of 1996." Under the deregulated environment, "any person or entity may import or purchase any quantity of crude oil and petroleum products from a foreign or domestic source, lease or own and operate refineries and other downstream oil facilities and market such crude oil or use the same for his own requirement," subject only to monitoring by the Department of Energy. 11

The deregulation process has two phases: the transition phase and the full deregulation phase. During the transition phase, controls of the non-pricing aspects of the oil industry were to be lifted. The following were to be accomplished: (1) liberalization of oil importation, exportation, manufacturing, marketing and distribution, (2) implementation of an automatic pricing mechanism, (3) implementation of an automatic formula to set margins of dealers and rates of haulers, water transport operators and pipeline concessionaires, and (4) restructuring of oil taxes. Upon full deregulation, controls on the price of oil and the foreign exchange cover were to be lifted and the OPSF was to be abolished.

The first phase of deregulation commenced on August 12, 1996.

On February 8, 1997, the President implemented the full deregulation of the Downstream Oil Industry through E.O. No. 372.

The petitions at bar assail the constitutionality of various provisions of R.A No. 8180 and E.O. No. 372.

In G.R. No. 124360, petitioner Francisco S. Tatad seeks the annulment of section 5(b) of R.A. No. 8180. Section 5(b) provides:

b) Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%), except fuel oil and LPG, the rate for which shall be the same as that for imported crude oil: Provided, That beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same: Provided, further, That this provision may be amended only by an Act of Congress.

The petition is anchored on three arguments:

First, that the imposition of different tariff rates on imported crude oil and imported refined petroleum products violates the equal protection clause. Petitioner contends that the 3%-7% tariff differential unduly favors the three existing oil refineries and discriminates against prospective investors in the downstream oil industry who do not have their own refineries and will have to source refined petroleum products from abroad.

Second, that the imposition of different tariff rates does not deregulate the downstream oil industry but instead controls the oil industry, contrary to the avowed policy of the law. Petitioner avers that the tariff differential between imported crude oil and imported refined petroleum products bars the entry of other players in the oil industry because it effectively protects the interest of oil companies with existing refineries. Thus, it runs counter to the objective of the law "to foster a truly competitive market."

Third, that the inclusion of the tariff provision in section 5(b) of R.A. No. 8180 violates Section 26(1) Article VI of the Constitution requiring every law to have only one subject which shall be expressed in its title. Petitioner contends that the imposition of tariff rates in section 5(b) of R.A. No. 8180 is foreign to the subject of the law which is the deregulation of the downstream oil industry.

In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P. Arroyo, Enrique Garcia, Wigberto Tanada, Flag Human Rights Foundation, Inc., Freedom from Debt Coalition (FDC) and Sanlakas contest the constitutionality of section 15 of R.A. No. 8180 and E.O. No. 392. Section 15 provides:

Sec. 15. Implementation of Full Deregulation. — Pursuant to Section 5(e) of Republic Act No. 7638, the DOE shall, upon approval of the President, implement the full deregulation of the downstream oil industry not later than March 1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable. Upon the implementation of the full deregulation as provided herein, the transition phase is deemed terminated and the following laws are deemed repealed:

xxx xxx xxx

E.O. No. 372 states in full, viz.:

WHEREAS, Republic Act No. 7638, otherwise known as the "Department of Energy Act of 1992," provides that, at the end of four years from its effectivity last December 1992, "the Department (of Energy) shall, upon approval of the President, institute the programs and time table of deregulation of appropriate energy projects and activities of the energy sector;"

WHEREAS, Section 15 of Republic Act No. 8180, otherwise known as the "Downstream Oil Industry Deregulation Act of 1996," provides that "the DOE shall, upon approval of the President, implement full deregulation of the downstream oil industry not later than March, 1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable;"

WHEREAS, pursuant to the recommendation of the Department of Energy, there is an imperative need to implement the full deregulation of the downstream oil industry because of the following recent developments: (i) depletion of the buffer fund on or about 7 February 1997 pursuant to the Energy Regulatory Board's Order dated 16 January 1997; (ii) the prices of crude oil had been stable at $21-$23 per barrel since October 1996 while prices of petroleum products in the world market had been stable since mid-December of last year. Moreover, crude oil prices are beginning to soften for the last few days while prices of some petroleum products had already declined; and (iii) the exchange rate of the peso in relation to the US dollar has been stable for the past twelve (12) months, averaging at around P26.20 to one US dollar;

WHEREAS, Executive Order No. 377 dated 31 October 1996 provides for an institutional framework for the administration of the deregulated industry by defining the functions and responsibilities of various government agencies;

WHEREAS, pursuant to Republic Act No. 8180, the deregulation of the industry will foster a truly competitive market which can better achieve the social policy objectives of fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products;

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by the powers vested in me by law, do hereby declare the full deregulation of the downstream oil industry.

In assailing section 15 of R.A. No. 8180 and E.O. No. 392, petitioners offer the following submissions:

First, section 15 of R.A. No. 8180 constitutes an undue delegation of legislative power to the President and the Secretary of Energy because it does not provide a determinate or determinable standard to guide the Executive Branch in determining when to implement the full deregulation of the downstream oil industry. Petitioners contend that the law does not define when it is practicable for the Secretary of Energy to recommend to the President the full deregulation of the downstream oil industry or when the President may consider it practicable to declare full deregulation. Also, the law does not provide any specific standard to determine when the prices of crude oil in the world market are considered to be declining nor when the exchange rate of the peso to the US dollar is considered stable.

Second, petitioners aver that E.O. No. 392 implementing the full deregulation of the downstream oil industry is arbitrary and unreasonable because it was enacted due to the alleged depletion of the OPSF fund — a condition not found in R.A. No. 8180.

Third, section 15 of R.A. No. 8180 and E.O. No. 392 allow the formation of a de facto cartel among the three existing oil companies — Petron, Caltex and Shell — in violation of the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition.

Respondents, on the other hand, fervently defend the constitutionality of R.A. No. 8180 and E.O. No. 392. In addition, respondents contend that the issues raised by the petitions are not justiciable as they pertain to the wisdom of the law. Respondents further aver that petitioners have no locus standi as they did not sustain nor will they sustain direct injury as a result of the implementation of R.A. No. 8180.

The petitions were heard by the Court on September 30, 1997. On October 7, 1997, the Court ordered the private respondents oil companies "to maintain the status quo and to cease and desist from increasing the prices of gasoline and other petroleum fuel products for a period of thirty (30) days . . . subject to further orders as conditions may warrant."

We shall now resolve the petitions on the merit. The petitions raise procedural and substantive issues bearing on the constitutionality of R.A. No. 8180 and E.O. No. 392. The procedural issues are: (1) whether or not the petitions raise a justiciable controversy, and (2) whether or not the petitioners have the standing to assail the validity of the subject law and executive order. The substantive issues are: (1) whether or not section 5 (b) violates the one title — one subject requirement of the Constitution; (2) whether or not the same section violates the equal protection clause of the Constitution; (3) whether or not section 15 violates the constitutional prohibition on undue delegation of power; (4) whether or not E.O. No. 392 is arbitrary and unreasonable; and (5) whether or not R.A. No. 8180 violates the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition.

We shall first tackle the procedural issues. Respondents claim that the avalanche of arguments of the petitioners assail the wisdom of R.A. No. 8180. They aver that deregulation of the downstream oil industry is a policy decision made by Congress and it cannot be reviewed, much less be reversed by this Court. In constitutional parlance, respondents contend that the petitions failed to raise a justiciable controversy.

Respondents' joint stance is unnoteworthy. Judicial power includes not only the duty of the courts to settle actual controversies involving rights which are legally demandable and enforceable, but also the duty to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government. 12 The courts, as guardians of the Constitution, have the inherent authority to determine whether a statute enacted by the legislature transcends the limit imposed by the fundamental law. Where a statute violates the Constitution, it is not only the right but the duty of the judiciary to declare such act as unconstitutional and void. 13 We held in the recent case of Tanada v. Angara: 14

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In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. The question thus posed is judicial rather than political. The duty to adjudicate remains to assure that the supremacy of the Constitution is upheld. Once a controversy as to the application or interpretation of a constitutional provision is raised before this Court, it becomes a legal issue which the Court is bound by constitutional mandate to decide.

Even a sideglance at the petitions will reveal that petitioners have raised constitutional issues which deserve the resolution of this Court in view of their seriousness and their value as precedents. Our statement of facts and definition of issues clearly show that petitioners are assailing R.A. No. 8180 because its provisions infringe the Constitution and not because the law lacks wisdom. The principle of

separation of power mandates that challenges on the constitutionality of a law should be resolved in our courts of justice while doubts on the wisdom of a law should be debated in the halls of Congress. Every now and then, a law may be denounced in court both as bereft of wisdom and constitutionally infirmed. Such denunciation will not deny this Court of its jurisdiction to resolve the constitutionality of the said law while prudentially refusing to pass on its wisdom.

The effort of respondents to question the locus standi of petitioners must also fall on barren ground. In language too lucid to be misunderstood, this Court has brightlined its liberal stance on a petitioner's locus standi where the petitioner is able to craft an issue of transcendental significance to the people. 15 In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 16 we stressed:

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Objections to taxpayers' suit for lack of sufficient personality, standing or interest are, however, in the main procedural matters. Considering the importance to the public of the cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to determine whether or not the other branches of government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Court has brushed aside technicalities of procedure and has taken cognizance of these petitions.

There is not a dot of disagreement between the petitioners and the respondents on the far reaching importance of the validity of RA No. 8180 deregulating our downstream oil industry. Thus, there is no good sense in being hypertechnical on the standing of petitioners for they pose issues which are significant to our people and which deserve our forthright resolution.

We shall now track down the substantive issues. In G.R. No. 124360 where petitioner is Senator Tatad, it is contended that section 5(b) of R.A. No. 8180 on tariff differential violates the provision 17 of the Constitution requiring every law to have only one subject which should be expressed in its title. We do not concur with this contention. As a policy, this Court has adopted a liberal construction of the one title — one subject rule. We have consistently ruled 18 that the title need not mirror, fully index or catalogue all contents and minute details of a law. A law having a single general subject indicated in the title may contain any number of provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means of carrying out the general subject. 19 We hold that section 5(b) providing for tariff differential is germane to the subject of R.A. No. 8180 which is the deregulation of the downstream oil industry. The section is supposed to sway prospective investors to put up refineries in our country and make them rely less on imported petroleum. 20 We shall, however, return to the validity of this provision when we examine its blocking effect on new entrants to the oil market.

We shall now slide to the substantive issues in G.R. No. 127867. Petitioners assail section 15 of R.A. No. 8180 which fixes the time frame for the full deregulation of the downstream oil industry. We restate its pertinent portion for emphasis, viz.:

Sec. 15. Implementation of Full Deregulation — Pursuant to section 5(e) of Republic Act No. 7638, the DOE shall, upon approval of the President, implement the full deregulation of the downstream oil industry not later than March 1997. As far as practicable, the DOE shall time the full deregulation when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable . . .

Petitioners urge that the phrases "as far as practicable," "decline of crude oil prices in the world market" and "stability of the peso exchange rate to the US dollar" are ambivalent, unclear and inconcrete in meaning. They submit that they do not provide the "determinate or determinable standards" which can guide the President in his decision to fully deregulate the downstream oil industry. In addition, they contend that E.O. No. 392 which advanced the date of full deregulation is void for it illegally considered the depletion of the OPSF fund as a factor.

The power of Congress to delegate the execution of laws has long been settled by this Court. As early as 1916 in Compania General de Tabacos de Filipinas vs. The Board of Public Utility Commissioners, 21 this Court thru, Mr. Justice Moreland, held that "the true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made." Over the years, as the legal engineering of men's relationship became more difficult, Congress has to rely more on the practice of delegating the execution of laws to the executive and other administrative agencies. Two tests have been developed to determine whether the delegation of the power to execute laws does not involve the abdication of the power to make law itself. We delineated the metes and bounds of these tests in Eastern Shipping Lines, Inc. VS. POEA, 22 thus:

There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz: the completeness test and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the legislative such that when it reaches the delegate the only thing he will have to do is to enforce it. Under the sufficient standard test, there must be adequate guidelines or limitations in the law to map out the boundaries of the delegate's authority and prevent the delegation from running riot. Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative.

The validity of delegating legislative power is now a quiet area in our constitutional landscape. As sagely observed, delegation of legislative power has become an inevitability in light of the increasing complexity of the task of government. Thus, courts bend as far back as possible to sustain the constitutionality of laws which are assailed as unduly delegating legislative powers. Citing Hirabayashi v. United States 23 as authority, Mr. Justice Isagani A. Cruz states "that even if the law does not expressly pinpoint the standard, the courts will bend over backward to locate the same elsewhere in order to spare the statute, if it can, from constitutional infirmity." 24

Given the groove of the Court's rulings, the attempt of petitioners to strike down section 15 on the ground of undue delegation of legislative power cannot prosper. Section 15 can hurdle both the completeness test and the sufficient standard test. It will be noted that Congress expressly provided in R.A. No. 8180 that full deregulation will start at the end of March 1997, regardless of the occurrence of any event. Full deregulation at the end of March 1997 is mandatory and the Executive has no discretion to postpone it for any purported reason. Thus, the law is complete on the question of the final date of full deregulation. The discretion given to the President is to advance the date of full deregulation before the end of March 1997. Section 15 lays down the standard to guide the judgment of the President — he is to time it as far as practicable when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the US dollar is stable.

Petitioners contend that the words "as far as practicable," "declining" and "stable" should have been defined in R.A. No. 8180 as they do not set determinate or determinable standards. The stubborn submission deserves scant consideration. The dictionary meanings of these words are well settled and cannot confuse men of reasonable intelligence. Webster defines "practicable" as meaning possible to practice or perform, "decline" as meaning to take a downward direction, and "stable" as meaning firmly established. 25 The fear of petitioners that these words will result in the exercise of executive discretion that will run riot is thus groundless. To be sure, the Court has sustained the validity of similar, if not more general standards in other cases. 26

It ought to follow that the argument that E.O. No. 392 is null and void as it was based on indeterminate standards set by R.A. 8180 must likewise fail. If that were all to the attack against the validity of E.O. No. 392, the issue need not further detain our discourse. But petitioners further posit the thesis that the Executive misapplied R.A. No. 8180 when it considered the depletion of the OPSF fund as a factor in fully deregulating the downstream oil industry in February 1997. A perusal of section 15 of R.A. No. 8180 will readily reveal that it only enumerated two factors to be considered by the Department of Energy and the Office of the President, viz.: (1) the time when the prices of crude oil and petroleum products in the world market are declining, and (2) the time when the exchange rate of the peso in relation to the US dollar is stable. Section 15 did not mention the depletion of the OPSF fund as a factor to be given weight by the Executive before ordering full deregulation. On the contrary, the debates in Congress will show that some of our legislators wanted to impose as a pre-condition to deregulation a showing that the OPSF fund must not be in deficit. 27 We therefore hold that the Executive department failed to follow faithfully the standards set by R.A. No. 8180 when it considered the extraneous factor of depletion of the OPSF fund. The misappreciation of this extra factor cannot be justified on the ground that the Executive department considered anyway the stability of the prices of crude oil in the world market and the stability of the exchange rate of the peso to the dollar. By considering another factor to hasten full deregulation, the Executive department rewrote the standards set forth in R.A. 8180. The Executive is bereft of any right to alter either by subtraction or addition the standards set in R.A. No. 8180 for it has no power to make laws. To cede to the Executive the power to make law is to invite tyranny, indeed, to transgress the principle of separation of powers. The exercise of delegated power is given a strict scrutiny by courts for the delegate is a mere agent whose action cannot infringe the terms of agency. In the cases at bar, the Executive co-mingled the factor of depletion of the OPSF fund with the factors of

decline of the price of crude oil in the world market and the stability of the peso to the US dollar. On the basis of the text of E.O. No. 392, it is impossible to determine the weight given by the Executive department to the depletion of the OPSF fund. It could well be the principal consideration for the early deregulation. It could have been accorded an equal significance. Or its importance could be nil. In light of this uncertainty, we rule that the early deregulation under E.O. No. 392 constitutes a misapplication of R.A. No. 8180.

We now come to grips with the contention that some provisions of R.A. No. 8180 violate section 19 of Article XII of the 1987 Constitution. These provisions are:

(1) Section 5 (b) which states — "Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%) except fuel oil and LPG, the rate for which shall be the same as that for imported crude oil. Provided, that beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same. Provided, further, that this provision may be amended only by an Act of Congress."

(2) Section 6 which states — "To ensure the security and continuity of petroleum crude and products supply, the DOE shall require the refiners and importers to maintain a minimum inventory equivalent to ten percent (10%) of their respective annual sales volume or forty (40) days of supply, whichever is lower," and

(3) Section 9 (b) which states — "To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following acts shall be prohibited:

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(b) Predatory pricing which means selling or offering to sell any product at a price unreasonably below the industry average cost so as to attract customers to the detriment of competitors.

On the other hand, section 19 of Article XII of the Constitution allegedly violated by the aforestated provisions of R.A. No. 8180 mandates: "The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed."

A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a form of market structure in which one or only a few firms dominate the total sales of a product or service. 28 On the other hand, a combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its, production, distribution and price, or otherwise interfering with freedom of trade without statutory authority. 29 Combination in restraint of trade refers to the means while monopoly refers to the end. 30

Article 186 of the Revised Penal Code and Article 28 of the New Civil Code breathe life to this constitutional policy. Article 186 of the Revised Penal Code penalizes monopolization and creation of combinations in restraint oftrade, 31 while Article 28 of the New Civil Code makes any person who shall engage in unfair competition liable for damages. 32

Respondents aver that sections 5(b), 6 and 9(b) implement the policies and objectives of R.A. No. 8180. They explain that the 4% tariff differential is designed to encourage new entrants to invest in refineries. They stress that the inventory requirement is meant to guaranty continuous domestic supply of petroleum and to discourage fly-by-night operators. They also submit that the prohibition against predatory pricing is intended to protect prospective entrants. Respondents manifested to the Court that new players have entered the Philippines after deregulation and have now captured 3% — 5% of the oil market.

The validity of the assailed provisions of R.A. No. 8180 has to be decided in light of the letter and spirit of our Constitution, especially section 19, Article XII. Beyond doubt, the Constitution committed us to the free enterprise system but it is a system impressed with its own distinctness. Thus, while the Constitution embraced free enterprise as an economic creed, it did not prohibit per se the operation of monopolies which can, however, be regulated in the public interest. 33 Thus too, our free enterprise system is not based on a market of pure and unadulterated competition where the State pursues a strict hands-off policy and follows the let-the-devil devour the hindmost rule. Combinations in restraint of trade and unfair competitions are absolutely proscribed and the proscription is directed both against the State as well as the private sector. 34 This distinct free enterprise system is dictated by the need to achieve the goals of our national economy as defined by section 1, Article XII of the Constitution which are: more equitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged. It also calls for the State to protect Filipino enterprises against unfair competition and trade practices.

Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the reason for the prohibition against restraint of trade, the reason for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies. Competition is thus the underlying principle of section 19, Article XII of our Constitution which cannot be violated by R.A. No. 8180. We subscribe to the observation of Prof. Gellhorn that the objective of anti-trust law is "to assure a competitive economy, based upon the belief that through competition producers will strive to satisfy consumer wants at the lowest price with the sacrifice of the fewest resources. Competition among producers allows consumers to bid for goods and services, and thus matches their desires with society's opportunity costs." 35 He adds with appropriateness that there is a reliance upon "the operation of the 'market' system (free enterprise) to decide what shall be produced, how resources shall be allocated in the production process, and to whom the various products will be distributed. The market system relies on the consumer to decide what and how much shall be produced, and on competition, among producers to determine who will manufacture it."

Again, we underline in scarlet that the fundamental principle espoused by section 19, Article XII of the Constitution is competition for it alone can release the creative forces of the market. But the competition that can unleash these creative forces is competition that is fighting yet is fair. Ideally, this kind of competition requires the presence of not one, not just a few but several players. A market controlled by one player (monopoly) or dominated by a handful of players (oligopoly) is hardly the market where honest-to-goodness competition will prevail. Monopolistic or oligopolistic markets deserve our careful scrutiny and laws which barricade the entry points of new players in the market should be viewed with suspicion.

Prescinding from these baseline propositions, we shall proceed to examine whether the provisions of R.A. No. 8180 on tariff differential, inventory reserves, and predatory prices imposed substantial barriers to the entry and exit of new players in our downstream oil industry. If they do, they have to be struck down for they will necessarily inhibit the formation of a truly competitive market. Contrariwise, if they are insignificant impediments, they need not be stricken down.

In the cases at bar, it cannot be denied that our downstream oil industry is operated and controlled by an oligopoly, a foreign oligopoly at that. Petron, Shell and Caltex stand as the only major league players in the oil market. All other players belong to the lilliputian league. As the dominant players, Petron, Shell and Caltex boast of existing refineries of various capacities. The tariff differential of 4% therefore works to their immense benefit. Yet, this is only one edge of the tariff differential. The other edge cuts and cuts deep in the heart of their competitors. It erects a high barrier to the entry of new players. New players that intend to equalize the market power of Petron, Shell and Caltex by building refineries of their own will have to spend billions of pesos. Those who will not build refineries but compete with them will suffer the huge disadvantage of increasing their product cost by 4%. They will be competing on an uneven field. The argument that the 4% tariff differential is desirable because it will induce prospective players to invest in refineries puts the cart before the horse. The first need is to attract new players and they cannot be attracted by burdening them with heavy disincentives. Without new players belonging to the league of Petron, Shell and Caltex, competition in our downstream oil industry is an idle dream.

The provision on inventory widens the balance of advantage of Petron, Shell and Caltex against prospective new players. Petron, Shell and Caltex can easily comply with the inventory requirement of R.A. No. 8180 in view of their existing storage facilities. Prospective competitors again will find compliance with this requirement difficult as it will entail a prohibitive cost. The construction cost of storage facilities and the cost of inventory can thus scare prospective players. Their net effect is to further occlude the entry points of new players, dampen competition and enhance the control of the market by the three (3) existing oil companies.

Finally, we come to the provision on predatory pricing which is defined as ". . . selling or offering to sell any product at a price unreasonably below the industry average cost so as to attract customers to the detriment of competitors." Respondents contend that this provision works against Petron, Shell and Caltex and protects new entrants. The ban on predatory pricing cannot be analyzed in isolation. Its validity is interlocked with the barriers imposed by R.A. No. 8180 on the entry of new players. The inquiry should be to determine whether predatory pricing on the part of the dominant oil companies is

encouraged by the provisions in the law blocking the entry of new players. Text-writer Hovenkamp, 36 gives the authoritative answer and we quote:

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The rationale for predatory pricing is the sustaining of losses today that will give a firm monopoly profits in the future. The monopoly profits will never materialize, however, if the market is flooded with new entrants as soon as the successful predator attempts to raise its price. Predatory pricing will be profitable only if the market contains significant barriers to new entry.

As aforediscsussed, the 4% tariff differential and the inventory requirement are significant barriers which discourage new players to enter the market. Considering these significant barriers established by R.A. No. 8180 and the lack of players with the comparable clout of PETRON, SHELL and CALTEX, the temptation for a dominant player to engage in predatory pricing and succeed is a chilling reality. Petitioners' charge that this provision on predatory pricing is anti-competitive is not without reason.

Respondents belittle these barriers with the allegation that new players have entered the market since deregulation. A scrutiny of the list of the alleged new players will, however, reveal that not one belongs to the class and category of PETRON, SHELL and CALTEX. Indeed, there is no showing that any of these new players intends to install any refinery and effectively compete with these dominant oil companies. In any event, it cannot be gainsaid that the new players could have been more in number and more impressive in might if the illegal entry barriers in R.A. No. 8180 were not erected.

We come to the final point. We now resolve the total effect of the untimely deregulation, the imposition of 4% tariff differential on imported crude oil and refined petroleum products, the requirement of inventory and the prohibition on predatory pricing on the constitutionality of R.A. No. 8180. The question is whether these offending provisions can be individually struck down without invalidating the entire R.A. No. 8180. The ruling case law is well stated by author Agpalo, 37 viz.:

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The general rule is that where part of a statute is void as repugnant to the Constitution, while another part is valid, the valid portion, if separable from the invalid, may stand and be enforced. The presence of a separability clause in a statute creates the presumption that the legislature intended separability, rather than complete nullity of the statute. To justify this result, the valid portion must be so far independent of the invalid portion that it is fair to presume that the legislature would have enacted it by itself if it had supposed that it could not constitutionally enact the other. Enough must remain to make a complete, intelligible and valid statute, which carries out the legislative intent. . . .

The exception to the general rule is that when the parts of a statute are so mutually dependent and connected, as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, the nullity of one part will vitiate the rest. In making the parts of the statute dependent, conditional, or connected with one another, the legislature intended the statute to be carried out as a whole and would not have enacted it if one part is void, in

which case if some parts are unconstitutional, all the other provisions thus dependent, conditional, or connected must fall with them.

R.A. No. 8180 contains a separability clause. Section 23 provides that "if for any reason, any section or provision of this Act is declared unconstitutional or invalid, such parts not affected thereby shall remain in full force and effect." This separability clause notwithstanding, we hold that the offending provisions of R.A. No. 8180 so permeate its essence that the entire law has to be struck down. The provisions on tariff differential, inventory and predatory pricing are among the principal props of R.A. No. 8180. Congress could not have deregulated the downstream oil industry without these provisions. Unfortunately, contrary to their intent, these provisions on tariff differential, inventory and predatory pricing inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces. R.A. No. 8180 needs provisions to vouchsafe free and fair competition. The need for these vouchsafing provisions cannot be overstated. Before deregulation, PETRON, SHELL and CALTEX had no real competitors but did not have a free run of the market because government controls both the pricing and non-pricing aspects of the oil industry. After deregulation, PETRON, SHELL and CALTEX remain unthreatened by real competition yet are no longer subject to control by government with respect to their pricing and non-pricing decisions. The aftermath of R.A. No. 8180 is a deregulated market where competition can be corrupted and where market forces can be manipulated by oligopolies.

The fall out effects of the defects of R.A. No. 8180 on our people have not escaped Congress. A lot of our leading legislators have come out openly with bills seeking the repeal of these odious and offensive provisions in R.A. No. 8180. In the Senate, Senator Freddie Webb has filed S.B. No. 2133 which is the result of the hearings conducted by the Senate Committee on Energy. The hearings revealed that (1) there was a need to level the playing field for the new entrants in the downstream oil industry, and (2) there was no law punishing a person for selling petroleum products at unreasonable prices. Senator Alberto G. Romulo also filed S.B. No. 2209 abolishing the tariff differential beginning January 1, 1998. He declared that the amendment ". . . would mean that instead of just three (3) big oil companies there will be other major oil companies to provide more competitive prices for the market and the consuming public." Senator Heherson T . Alvarez, one of the principal proponents of R.A. No. 8180, also filed S.B. No. 2290 increasing the penalty for violation of its section 9. It is his opinion as expressed in the explanatory note of the bill that the present oil companies are engaged in cartelization despite R.A. No. 8180, viz,:

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Since the downstream oil industry was fully deregulated in February 1997, there have been eight (8) fuel price adjustments made by the three oil majors, namely: Caltex Philippines, Inc.; Petron Corporation; and Pilipinas Shell Petroleum Corporation. Very noticeable in the price adjustments made, however, is the uniformity in the pump prices of practically all petroleum products of the three oil companies. This, despite the fact, that their selling rates should be determined by a combination of any of the following factors: the prevailing peso-dollar exchange rate at the time payment is made for crude purchases, sources of crude, and inventory levels of both crude and refined petroleum products. The abovestated factors should have resulted in different, rather than identical prices.

The fact that the three (3) oil companies' petroleum products are uniformly priced suggests collusion, amounting to cartelization, among Caltex Philippines, Inc., Petron Corporation and Pilipinas Shell Petroleum Corporation to fix the prices of petroleum products in violation of paragraph (a), Section 9 of R.A. No. 8180.

To deter this pernicious practice and to assure that present and prospective players in the downstream oil industry conduct their business with conscience and propriety, cartel-like activities ought to be severely penalized.

Senator Francisco S. Tatad also filed S.B. No. 2307 providing for a uniform tariff rate on imported crude oil and refined petroleum products. In the explanatory note of the bill, he declared in no uncertain terms that ". . . the present set-up has raised serious public concern over the way the three oil companies have uniformly adjusted the prices of oil in the country, an indication of a possible existence of a cartel or a cartel-like situation within the downstream oil industry. This situation is mostly attributed to the foregoing provision on tariff differential, which has effectively discouraged the entry of new players in the downstream oil industry."

In the House of Representatives, the moves to rehabilitate R.A. No. 8180 are equally feverish. Representative Leopoldo E. San Buenaventura has filed H.B. No. 9826 removing the tariff differential for imported crude oil and imported refined petroleum products. In the explanatory note of the bill, Rep. Buenaventura explained:

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As we now experience, this difference in tariff rates between imported crude oil and imported refined petroleum products, unwittingly provided a built-in-advantage for the three existing oil refineries in the country and eliminating competition which is a must in a free enterprise economy. Moreover, it created a disincentive for other players to engage even initially in the importation and distribution of refined petroleum products and ultimately in the putting up of refineries. This tariff differential virtually created a monopoly of the downstream oil industry by the existing three oil companies as shown by their uniform and capricious pricing of their products since this law took effect, to the great disadvantage of the consuming public.

Thus, instead of achieving the desired effects of deregulation, that of free enterprise and a level playing field in the downstream oil industry, R.A. 8180 has created an environment conducive to cartelization, unfavorable, increased, unrealistic prices of petroleum products in the country by the three existing refineries.

Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981 to prevent collusion among the present oil companies by strengthening the oversight function of the government, particularly its ability to subject to a review any adjustment in the prices of gasoline and other petroleum products. In the explanatory note of the bill, Rep. Punzalan, Jr., said:

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To avoid this, the proposed bill seeks to strengthen the oversight function of government, particularly its ability to review the prices set for gasoline and other petroleum products. It grants the Energy Regulatory Board (ERB) the authority to review prices of oil and other petroleum products, as may be petitioned by a person, group or any entity, and to subsequently compel any entity in the industry to submit any and all documents relevant to the imposition of new prices. In cases where the Board determines that there exist collusion, economic conspiracy, unfair trade practice, profiteering and/or overpricing, it may take any step necessary to protect the public, including the readjustment of the prices of petroleum products. Further, the Board may also impose the fine and penalty of imprisonment, as prescribed in Section 9 of R.A. 8180, on any person or entity from the oil industry who is found guilty of such prohibited acts.

By doing all of the above, the measure will effectively provide Filipino consumers with a venue where their grievances can be heard and immediately acted upon by government.

Thus, this bill stands to benefit the Filipino consumer by making the price-setting process more transparent and making it easier to prosecute those who perpetrate such prohibited acts as collusion, overpricing, economic conspiracy and unfair trade.

Representative Sergio A.F . Apostol filed H.B. No. 10039 to remedy an omission in R.A. No. 8180 where there is no agency in government that determines what is "reasonable" increase in the prices of oil products. Representative Dente O. Tinga, one of the principal sponsors of R.A. No. 8180, filed H.B. No. 10057 to strengthen its anti-trust provisions. He elucidated in its explanatory note:

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The definition of predatory pricing, however, needs to be tightened up particularly with respect to the definitive benchmark price and the specific anti-competitive intent. The definition in the bill at hand which was taken from the Areeda-Turner test in the United States on predatory pricing resolves the questions. The definition reads, "Predatory pricing means selling or offering to sell any oil product at a price below the average variable cost for the purpose of destroying competition, eliminating a competitor or discouraging a competitor from entering the market."

The appropriate actions which may be resorted to under the Rules of Court in conjunction with the oil deregulation law are adequate. But to stress their availability and dynamism, it is a good move to incorporate all the remedies in the law itself. Thus, the present bill formalizes the concept of government intervention and private suits to address the problem of antitrust violations. Specifically, the government may file an action to prevent or restrain any act of cartelization or predatory pricing, and if it has suffered any loss or damage by reason of the antitrust violation it may recover damages. Likewise, a private person or entity may sue to prevent or restrain any such violation which will result in damage to his business or property, and if he has already suffered damage he shall recover treble damages. A class suit may also be allowed.

To make the DOE Secretary more effective in the enforcement of the law, he shall be given additional powers to gather information and to require reports.

Representative Erasmo B. Damasing filed H.B. No. 7885 and has a more unforgiving view of R.A. No. 8180. He wants it completely repealed. He explained:

xxx xxx xxx

Contrary to the projections at the time the bill on the Downstream Oil Industry Deregulation was discussed and debated upon in the plenary session prior to its approval into law, there aren't any new players or investors in the oil industry. Thus, resulting in practically a cartel or monopoly in the oil industry by the three (3) big oil companies, Caltex, Shell and Petron. So much so, that with the deregulation now being partially implemented, the said oil companies have succeeded in increasing the prices of most of their petroleum products with little or no interference at all from the government. In the month of August, there was an increase of Fifty centavos (50¢) per liter by subsidizing the same with the OPSF, this is only temporary as in March 1997, or a few months from now, there will be full deregulation (Phase II) whereby the increase in the prices of petroleum products will be fully absorbed by the consumers since OPSF will already be abolished by then. Certainly, this would make the lives of our people, especially the unemployed ones, doubly difficult and unbearable.

The much ballyhooed coming in of new players in the oil industry is quite remote considering that these prospective investors cannot fight the existing and well established oil companies in the country today, namely, Caltex, Shell and Petron. Even if these new players will come in, they will still have no chance to compete with the said three (3) existing big oil companies considering that there is an imposition of oil tariff differential of 4% between importation of crude oil by the said oil refineries paying only 3% tariff rate for the said importation and 7% tariff rate to be paid by businessmen who have no oil refineries in the Philippines but will import finished petroleum/oil products which is being taxed with 7% tariff rates.

So, if only to help the many who are poor from further suffering as a result of unmitigated increase in oil products due to deregulation, it is a must that the Downstream Oil Industry Deregulation Act of 1996, or R.A. 8180 be repealed completely.

Various resolutions have also been filed in the Senate calling for an immediate and comprehensive review of R.A. No. 8180 to prevent the downpour of its ill effects on the people. Thus, S. Res. No. 574 was filed by Senator Gloria M. Macapagal entitled Resolution "Directing the Committee on Energy to Inquire Into The Proper Implementation of the Deregulation of the Downstream Oil Industry and Oil Tax Restructuring As Mandated Under R.A. Nos. 8180 and 8184, In Order to Make The Necessary Corrections In the Apparent Misinterpretation Of The Intent And Provision Of The Laws And Curb The Rising Tide Of Disenchantment Among The Filipino Consumers And Bring About The Real Intentions And Benefits Of The Said Law." Senator Blas P. Ople filed S. Res. No. 664 entitled resolution "Directing the Committee on Energy To Conduct An Inquiry In Aid Of Legislation To Review The Government's Oil Deregulation Policy In Light Of The Successive Increases In Transportation, Electricity And Power Rates, As well As Of Food And Other Prime Commodities And Recommend Appropriate Amendments To Protect The Consuming Public." Senator Ople observed:

xxx xxx xxx

WHEREAS, since the passage of R.A. No. 8180, the Energy Regulatory Board (ERB) has imposed successive increases in oil prices which has triggered increases in electricity and power rates, transportation fares, as well as in prices of food and other prime commodities to the detriment of our people, particularly the poor;

WHEREAS, the new players that were expected to compete with the oil cartel-Shell, Caltex and Petron-have not come in;

WHEREAS, it is imperative that a review of the oil deregulation policy be made to consider appropriate amendments to the existing law such as an extension of the transition phase before full deregulation in order to give the competitive market enough time to develop;

WHEREAS, the review can include the advisability of providing some incentives in order to attract the entry of new oil companies to effect a dynamic competitive market;

WHEREAS, it may also be necessary to defer the setting up of the institutional framework for full deregulation of the oil industry as mandated under Executive Order No. 377 issued by President Ramos last October 31, 1996 . . .

Senator Alberto G. Romulo filed S. Res. No. 769 entitled resolution "Directing the Committees on Energy and Public Services In Aid Of Legislation To Assess The Immediate Medium And Long Term Impact of Oil Deregulation On Oil Prices And The Economy." Among the reasons for the resolution is the finding that "the requirement of a 40-day stock inventory effectively limits the entry of other oil firms in the market with the consequence that instead of going down oil prices will rise."

Parallel resolutions have been filed in the House of Representatives. Representative Dante O. Tinga filed H. Res. No. 1311 "Directing The Committee on Energy To Conduct An Inquiry, In Aid of Legislation, Into The Pricing Policies And Decisions Of The Oil Companies Since The Implementation of Full Deregulation Under the Oil Deregulation Act (R.A. No. 8180) For the Purpose of Determining In the Context Of The Oversight Functions Of Congress Whether The Conduct Of The Oil Companies, Whether Singly Or Collectively, Constitutes Cartelization Which Is A Prohibited Act Under R.A. No. 8180, And What Measures Should Be Taken To Help Ensure The Successful Implementation Of The Law In Accordance With Its Letter And Spirit, Including Recommending Criminal Prosecution Of the Officers Concerned Of the Oil Companies If Warranted By The Evidence, And For Other Purposes." Representatives Marcial C. Punzalan, Jr. Dante O. Tinga and Antonio E. Bengzon III filed H.R. No. 894 directing the House Committee on Energy to inquire into the proper implementation of the deregulation of the downstream oil industry. House Resolution No. 1013 was also filed by Representatives Edcel C. Lagman, Enrique T . Garcia, Jr. and Joker P. Arroyo urging the President to immediately suspend the implementation of E.O. No. 392.

In recent memory there is no law enacted by the legislature afflicted with so much constitutional deformities as R.A. No. 8180. Yet, R.A. No. 8180 deals with oil, a commodity whose supply and price affect the ebb and flow of the lifeblood of the nation. Its shortage of supply or a slight, upward spiral in its price shakes our economic foundation. Studies show that the areas most impacted by the movement of oil are food manufacture, land transport, trade, electricity and water. 38 At a time when our economy

is in a dangerous downspin, the perpetuation of R.A. No. 8180 threatens to multiply the number of our people with bent backs and begging bowls. R.A. No. 8180 with its anti-competition provisions cannot be allowed by this Court to stand even while Congress is working to remedy its defects.

The Court, however, takes note of the plea of PETRON, SHELL and CALTEX to lift our restraining order to enable them to adjust upward the price of petroleum and petroleum products in view of the plummeting value of the peso. Their plea, however, will now have to be addressed to the Energy Regulatory Board as the effect of the declaration of unconstitutionality of R.A. No. 8180 is to revive the former laws it repealed. 39 The length of our return to the regime of regulation depends on Congress which can fasttrack the writing of a new law on oil deregulation in accord with the Constitution.

With this Decision, some circles will chide the Court for interfering with an economic decision of Congress. Such criticism is charmless for the Court is annulling R.A. No. 8180 not because it disagrees with deregulation as an economic policy but because as cobbled by Congress in its present form, the law violates the Constitution. The right call therefor should be for Congress to write a new oil deregulation law that conforms with the Constitution and not for this Court to shirk its duty of striking down a law that offends the Constitution. Striking down R.A. No. 8180 may cost losses in quantifiable terms to the oil oligopolists. But the loss in tolerating the tampering of our Constitution is not quantifiable in pesos and centavos. More worthy of protection than the supra-normal profits of private corporations is the sanctity of the fundamental principles of the Constitution. Indeed when confronted by a law violating the Constitution, the Court has no option but to strike it down dead. Lest it is missed, the Constitution is a covenant that grants and guarantees both the political and economic rights of the people. The Constitution mandates this Court to be the guardian not only of the people's political rights but their economic rights as well. The protection of the economic rights of the poor and the powerless is of greater importance to them for they are concerned more with the exoterics of living and less with the esoterics of liberty. Hence, for as long as the Constitution reigns supreme so long will this Court be vigilant in upholding the economic rights of our people especially from the onslaught of the powerful. Our defense of the people's economic rights may appear heartless because it cannot be half-hearted.

IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is declared unconstitutional and E.O. No. 372 void.

SO ORDERED.

Regalado, Davide, Jr., Romero, Bellosillo and Vitug, JJ., concur.

Mendoza, J., concurs in the result.

Narvasa, C.J., is on leave.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 132593 June 25, 1999

PHILIPPINE INTERNATIONAL TRADING CORPORATION, petitioner, vs.COMMISSION ON AUDIT, respondent.

GONZAGA-REYES, J.:

This is a petition for certiorari under Rule 64 of the 1997 Rules of Civil Procedure to annul Decision No. 2447 dated July 27, 1992 of the Commission on Audit (COA) denying Philippine International Trading Corporation's (PITC) appeal from the disallowances made by the resident COA auditor on PITC's car plan benefits; and Decision No. 98-048 dated January 27, 1998 of the COA denying PITC's motion for reconsideration.

The following facts are undisputed:

The PITC is a government-owned and controlled corporation created under Presidential Decree (PD) No. 252 on July 21, 1973 1, primarily for the purpose of promoting and developing Philippine trade in pursuance of national economic development. On October 19, 1988, the PITC Board of Directors approved a Car Plan Program for qualified PITC officers. 2 Under such car plan program, an eligible officer is entitled to purchase a vehicle, fifty percent (50%) of the value of which shall be shouldered by PITC while the remaining fifty percent (50%) will be shouldered by the officer through salary deduction over a period of five (5) years. Maximum value of the vehicle to be purchased ranges from Two Hundred Thousand Pesos (P200,000.00) to Three Hundred and Fifty Thousand Pesos (P350,000.00), depending on the position of the officer in the corporation. In addition, PITC will reimburse the officer concerned fifty percent (50%) of the annual car registration, insurance premiums and costs of registration of the chattel mortgage over the car for a period of five (5) years from the date the vehicle was purchased. The terms and conditions of the car plan are embodied in a "Car Loan Agreement". 3 Per PITC's car plan guidelines, the purpose of the plan is to provide financial assistance to qualified employees in purchasing their own transportation facilities in the performanced of their work, for representation, and personal use. 4 The plan is envisioned to facilitate greater mobility during official trips especially within Metro Manila or the employee's principal place of assignment, without having to rely on PITC vehicles, taxis or cars for hire. 5

On July 1, 1989, Republic Act No. 6758 (RA 6758), entitled "An Act Prescribing a Revised Compensation and Position Classification System in the Government and For Other Purposes", took effect. Section 12 of said law provides for the consolidation of allowances and additional compensation into standardized salary rates save for certain additional compensation such as representation and transportation allowances which were exempted from consolidation into the standardized rate. Said section likewise provides that other additional compensation being received by incumbents as by of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.

Sec. 12, RA 6758, reads —

Sec. 12. Consolidation of All Allowances and Compensation. — All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.

To implement RA 6758, the Department of Budget and Management (DBM) issued Corporate Compensation Circular No. 10 (DBM-CCC No. 10). Paragraph 5.6 of DBM-CCC No. 10 discontinued effective November 1, 1989, all allowances and fringe benefits granted on top of basic salary, not otherwise enumerated under paragraphs 5.4 and 5.5 thereof.

Paragraph 5.6 of DBM-CCC No. 10 provides:

5.6 Payment of other allowances/fringe benefits and all other forms of compensation granted on top of basic salary, whether in cash or in kind, not mentioned in Sub-paragraphs 5.4 and 5.5 6 above shall be discontinued effective November 1, 1989. Payment made for such allowance/fringe benefits after said date shall be considered as illegal disbursement of public funds.

On post audit, the payment/reimbursement of the above-mentioned expenses (50% of the yearly car registration and insurance premiums and 50% of the costs of registration of the chattel mortgage over the car) made after November 1, 1989 was disallowed by the resident COA auditor. The disallowance was made on the ground that the subject car plan benefits were not one of the fringe benefits or form of compensation allowed to be continued after said date under the aforequoted paragraph 5.6 of DBM-CCC No. 10 7, in relation to Paragraphs 5.4 and 5.5 thereof.

PITC, on its behalf, and that of the affected PITC officials, appealed the decision of the resident COA auditor to the COA. On July 27, 1992, COA denied PITC's appeal and affirmed the disallowance of the said car plan expenses in the assailed Decision No. 2447 dated July 27, 1992. Relevant portions of the decision read thus:

Upon circumspect evaluation thereof, this Commission finds the instant appeal to be devoid of merit. It should be noted that the reimbursement/payment of expenses in question is based on the Car Plan benefit granted under Board Resolution No. 10-88-03 adopted by the PITC Board of Directors on October 19, 1988. The Car Plan is undeniably a fringe benefit as appearing in PITC's "Compensation Policy under the heading "3. Other Fringe Benefits", particularly Item No. 3.13 thereof. Inasmuch as PITC is a government-owned and/or controlled corporation, the grant of the Car Plan (being a fringe benefit) should be governed by the provisions of Corporate Compensation Circular No. 10, implementing RA 6758. Under sub-paragraph 5.6 of said Circular, it explicitly provides:

xxx xxx xxx

Since the Car Plan benefit is not one of those fringe benefits or other forms of compensation mentioned in Sub-paragraphs 5.4 and 5.5 of CCC No. 10, consequently the reimbursement of the 50% share of PITC in the yearly registration and insurance premium of the cars purchased under said Car Plan benefit should not be allowed. . . . 8

PITC's motion for reconsideration was denied by the COA in its Resolution dated January 27, 1998. 9

Hence, the instant petition on the following grounds:

1. That the legislature did not intend to revoke existing benefits being received by incumbent government employees as of July 1, 1989 (including subject car plan benefits) when RA 6758 was passed;

2. That the Car Loan Agreements signed between PITC and its officers pursuant to PITC's Car Plan Program, including the Car Loan Agreements, duly executed prior to the effectivity of RA 6758, constitute the law between the parties and as such, protected by Section 10, Article III of the 1987 Philippine Constitution which prohibits the impairment of contracts; and

3. Finally, that the provisions of PD 985 do not apply to PITC inasmuch as under its Revised Charter, PD 1071, as amended by E.O. 756 and E.O. 1067, PITC is not only expressly exempted from OCPC rules and regulations but its Board of Directors was expressly authorized to adopt compensation policies and other related benefits to its officers/employees without need for further approval thereof by any government office, agency or authority. 10

The petition is meritorious.

First of all, we must mention that this Court has confirmed in Philippine Post Authority vs. Commission on Audit 11 the legislative intent to protect incumbents who are receiving salaries and/or allowances over and above those authorized by RA 6758 to continue to receive the same even after RA 6758 took effect. In reserving the benefit to incumbents, the legislature has manifested its intent to gradually phase out this privilege without upsetting the policy of non-diminution of pay and consistent with the rule that laws should only be applied prospectively in the spirit of fairness and justice. 12 Addressing the issue as to whether the petitioners-officials may still receive their representation and transportation allowance (RATA) at the higher rates provided by Letter of Implementation (LOI) No. 97 in light of Section 12, RA 6758, this Court said:

Now, under the second sentence of Section 12, first paragraph, the RATA enjoyed by these PPA officials shall continue to be authorized only if they are "being received by incumbents only as of July 1, 1989." RA 6758 has therefore, to this extent, amended LOI No. 97. By limiting the benefit of the RATA granted by LOI No. 97 to incumbents, Congress has manifested its intent to gradually phase out this privilege without upsetting its policy of non-diminution of pay.

The legislature has similarly adhered to this policy of non-diminution of pay when it provided for the transition allowance under Section 17 of RA 6758 which reads:

Sec. 17. Salaries of Incumbents. — Incumbents of position presently receiving salaries and additional compensation/fringe benefits including those absorbed from local government units and other emoluments the aggregate of which exceeds the standardized salary rate as herein prescribed, shall continue to receive such excess compensation, which shall be referred to as transition allowance. The transition allowance shall be reduced by the amount of salary adjustment that the incumbent shall receive in the future.

While Section 12 refers to allowances that are not integrated into the standardized salaries whereas Section 17 refers to salaries and additional compensation or fringe benefits, both sections are intended to protect incumbents who are receiving said salaries and/or allowances at the time RA 6758 took effect. 13 (Emphasis supplied.)

Based on the foregoing pronouncement, petitioner correctly pointed out that there was no intention on the part of the legislature to revoke existing benefits being enjoyed by incumbents of government positions at the time of the virtue of Sections 12 and 17 thereof. There is no dispute that the PITC officials who availed of the subject car plan benefits were incumbents of their positions as of July 1, 1989. Thus, it was legal and proper for them to continue enjoying said benefits within the five year period from date of purchase of the vehicle allowed by their Car Loan Agreements with PITC.

Further, we see the rationale for the corporation's fifty percent (50%) participation and contribution to the subject expenses. As to the insurance premium, PITC, at least, up to the extent of 50% of the value of the vehicle, has an insurable interest in said vehicle in case of loss or damage thereto. As to the costs of registration of the vehicle in the employee's name and of the chattel mortgage in favor of PITC, this is to secure PITC of the repayment of the "Car Loan Agreement" and the fulfillment of the other obligations contained therein by the employee.

Still further, the vehicle being utilized by the officer is actually being used for corporate purposes because the officer concerned is no longer entitled to utilize company-owned vehicles for official business once he/she has availed of a car plan. Neither is said officer allowed to reimburse the costs of other land transportation used within his principal place of assignment (i.e. Metro Manila) as the vehicle is presumed to be his official vehicle. 14 In the event that the employee resigns, retires or is separated from the company without cause prior to the completion of the 60-month car plan, the employee shall be given the privilege to buy the car provided he pays the remaining installments of the loan and the amount equivalent to that portion of the company's contribution corresponding to the unexpired period of the car plan. On the other hand, if the employee has been separated from the company for cause, the company has the other option aside from the foregoing to repossess the car from the employee, in which case, the company shall pay back to the employee all amortizations already made by the employee to the company, interest free. 15

Secondly, COA relied on DBM-CCC No. 10 16 as basis for the disallowance of the subject car plan benefits. DBM-CCC No. 10 which was issued by the DBM pursuant to Section 23 17 of RA 6758 mandating the said

agency to issue the necessary guidelines to implement RA 6758 has been declared by this Court in De Jesus, et al. vs. Commission on Audit, et al. 18 as of no force and effect due to the absence of publication thereof in the Official Gazette or in a newspaper of general circulation. Salient portions of said decision read:

On the need publication of subject DBM-CCC No. 10, we rule in the affirmative. Following the doctrine enunciated in Tanada 19, publication in the Official Gazette or in a newspaper of general circulation in the Philippines is required since DBM-CCC No. 10 is in the nature of an administrative circular the purpose of which is to enforce or implement an existing law. Stated differently, to be effective and enforceable, DBM-CCC No. 10 must go through the requisite publication in the Official Gazette or in a newspaper of general circulation in the Philippines.

In the present case under scrutiny, it is decisively clear that DBM-CCC No. 10, which completely disallows payment of allowances and other additional compensation to government officials and employees, starting November 1, 1989, is not a mere interpretative or internal regulation. It is something more than that. And why not, when it tends to deprive government workers of their allowances and additional compensation sorely needed to keep body and soul together. At the very least, before the circular under attack may be permitted to substantially reduce their income, the government officials and employees concerned should be apprised and alerted by the publication of said circular in the Official Gazette or in a newspaper or general circulation in the Philippines — to the end that they be given amplest opportunity to voice out whatever opposition they may have, and to ventilate their stance on the matter. This approach is more in keeping with democratic precepts and rudiments of fairness and transparency.

In the case at bar, the disallowance of the subject car plan benefits would hamper the officials in the performance of their functions to promote and develop trade which requires mobility in the performance of official business. Indeed, the car plan benefits are supportive of the implementation of the objectives and mission of the agency relative to the nature of its operation and responsive to the exigencies of the service.

It has come to our knowledge that DBM-CCC No. 10 has been re-issued in its entirety and submitted for publication in the Official Gazette per letter to the National Printing Office dated March 9, 1999. Would the subsequent publication thereof cure the defect and retroact to the time that the above-mentioned items were disallowed in audit?

The answer is in the negative, precisely, for the reason that publication is required as a condition precedent to the effectivity of a law to inform the public of the contents of the law or rules and regulations before their rights and interests are affected by the same. From the time the COA disallowed the expenses in audit up to the filing of herein petition the subject circular remained in legal limbo due to its non-publication. As was stated in Tanada vs. Tuvera, 21, "prior publication of laws before they become effective cannot be dispensed with, for the reason that such omission would offend due process insofar as it would deny the public knowledge of the laws that are supposed to govern it.

In view of the nullity of DBM-CCC No. 10 relied upon by the COA as basis for the disallowance of the subject car plan benefits, we deem it unnecessary to discuss the second issue raised in the instant petition.

We deem it necessary though to resolve the third issue as to whether PITC is exempt from RA 985 22 as subsequently amended by RA 6758. According to petitioner, PITC's Revised Charter, PD 1071 dated January 25, 1977, as amended by EO 756 dated December 29, 1981, and further amended by EO 1067 dated November 25, 1985, expressly exempted PITC from the Office of the Compensation and Position Classification (OCPC) rules and regulations. Petitioner cites Section 28 of P.D. 1071 23; Section 6 of EO 756 24; and Section 3 of EO 1067. 25

According to the COA in its Decision No. 98-048 dated January 27, 1998, the exemption granted to the PITC has been repealed and revoked by the repealing provisions of RA 6758, particularly Section 16 thereof which provides:

Sec. 16. Repeal of Special Salary Laws and Regulations. — All laws, decrees, executive, orders, corporate charters, and other issuances or parts thereof, that exempt agencies from the coverage of the System, or that authorize and fix position classifications, salaries, pay rates or allowances of specified positions, or groups of officials, and employees or of agencies, which are inconsistent with the System, including the proviso under Section 2 and Section 16 of PD No. 985 are hereby repealed.

To this, petitioner argues that RA 6758 which is a law of general application cannot repeal provisions of the Revised Charter of PITC and its amendatory laws expressly exempting PITC from OCPC coverage being special laws. Our rules on statutory construction provide that a special law cannot be repealed, amended or altered by a subsequent general law by mereimplication 26; that a statute, general in character as to its terms and application, is not to be construed as repealing a special or specific enactment, unless the legislative purpose to do so is manifested 27; that if repeal of particular or specific law or laws is intended, the proper step is to so express it. 28

In the case at bar, the repeal by Section 16 of RA 6758 of "all corporate charters that exempt agencies from the coverage of the System" was clear and expressed necessarily to achieve the purposes for which the law was enacted, that is, the standardization of salaries of all employees in government owned and/or controlled corporations to achieve "equal pay for substantially equal work". Henceforth, PITC should now be considered as covered by laws prescribing a compensation and position classification system in the government including RA 6758. This is without prejudice, however, as discussed above, to the non-diminution of pay of incumbents as of July 1, 1989 as provided in Sections 12 and 17 of said law.

WHEREFORE, the Petition is hereby GRANTED, the assailed Decisions of the Commission on Audit are SET ASIDE.

SO ORDERED.

Davide, Jr., C.J., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Quisumbing, Purisima, Pardo and Ynares-Santiago, JJ., concur.

Panganiban and Buena, JJ., are on leave.

Footnotes

1 Amended by PD 1071 on January 19, 1977, later by Executive Order (EO) No. 756 on December 29, 1981, and EO No. 1067 on November 25, 1985.

2 Resolution No. 10-88-03.

3 Rollo, p. 53.

4 Ibid., p. 43.

5 Id.

6 5.4 The rates of the following allowances/fringe benefits which are not integrated into the basic salary and which are allowed to be continued after June 30, 1989 shall be subject to the condition that the grant of such benefits is covered by statutory authority:

5.4.1 Representation and Transportation Allowances (RATA) of incumbent of the position authorized to receive the same at the highest amount legally authorized as of June 30, 1989 for the level of his position within the particular GOCC/GFI;.

5.4.2 Uniform and Clothing Allowance at a rate as previously authorized;

5.4.3 Hazard pay as authorized by law;

5.4.4 Honoraria/additional compensation for employees on detail with special projects or inter-agency undertakings;

5.4.5 Honoraria for services rendered by researchers, experts and specialists who are of acknowledged authorities in their fields of specialization;

5.4.6 Honoraria for lecturers and resource persons/speakers;

5.4.7 Overtime pay in accordance to Memorandum Order No. 228;

5.4.8 Clothing/laundry allowances and subsistence allowance of marine officers and crew on board GOCCs/GFIs owned vessels and used in their operations, and of hospital personnel who attend directly to patients and who by nature of their duties are required to wear uniforms;

5.4.9 Quarters Allowance of officials and employees who are presently entitled to the same;

5.4.10 Overseas, Living Quarters and other allowances presently authorized for personnel stationed abroad;

5.4.11 Night Differential of personnel on night duty;

5.4.12 Per Diems of members of the governing Boards of GOCCs/GFIs at the rate as prescribed in their respective Charters;

5.4.13 Flying Pay of personnel undertaking serial flights;

5.4.14 Per Diems/Allowances of Chairman and Members/Staff of collegial bodies and Committee; and,

5.4.15 Per Diems/Allowances of officials and employees on official foreign and local travel outside of their official station.

5.5 Other allowances/fringe benefits not likewise integrated into the basic salary and allowed to be continued only for incumbents as of June 30, 1989 subject to the condition that the grant of same is with appropriate authorization either from the DBM, Office of the President or legislative issuances areas follows:

5.5.1 Rice Subsidy

5.5.2 Sugar Subsidy

5.5.3 Death Benefits other than those granted by the GSIS;

5.5.4 Medical/dental/optical allowances/benefits;

5.5.5 Children's allowance;

5.5.6 Special Duty Pay/Allowance;

5.5.7 Meal Subsidy;

5.5.8 Longevity Pay; and

5.5.9 Teller's Allowance

7 Rollo, p. 31.

8 Id., pp. 30-31.

9 Id., p. 23.

10 Id., p. 8.

11 214 SCRA 653.

12 Erectors, Inc. vs. National Labor Relations Commission, 256 SCRA 629.

13 See note 11, p. 660.

14 Rollo, p. 39.

15 Ibid., pp. 49-50.

16 Rules and Regulations for the Implementation of the Revised Compensation and Position Classification System Prescribed Under R.A. No. 6758 for Government Owned And/Or Controlled Corporations (GOCC's) and Government Financial Institutions (GFIs).

17 Sec. 23. Effectivity. — Thin Act shall take effect July 1, 1989. The DBM shall within sixty (60) days after its approval allocate all positions in their appropriate position titles and salary grades and prepare and issue the necessary guidelines to implement the same.

18 G.R. No. 109023, August 12, 1998.

19 Referring to Tanada vs. Tuvera, 146 SCRA 453.

20 Supra, at pp. 7-8.

21 supra.

22 "A Decree Revising The Position Classification and Compensation Systems In The National Government, And Integrating The Same" issued on August 22, 1976, to standardize the compensation of government officials and employees, including those in government-owned and/or controlled corporations.

23 Sec. 28. Personnel Recruitment — The corporation shall adopt a special recruitment and employment scheme that is responsive to the commercial nature of its operations. Further, the corporation is hereby authorized to extend permanent appointment to, or contract the services of, trained and experienced persons, even without civil eligibility, for its manpower building as a competing trading firm. In view of the pioneering nature of its operation, the Corporation shall continue to be exempt from the OCPC rules and regulations.

24 Sec. 6. Exemption from OCPC — In recognition of the special nature of its operations, the Corporation shall continue to be exempt from the application of the rules and regulations of the Office of the Compensation and Position Classification or any other similar agencies that may be established hereafter as provided under Presidential Decree 1071. . . .

25 Sec. 3. Compensation Policies. — The compensation policies including allowances, merit increases and other employee benefits for all officers and employees adopted by the Board of Directors are hereby approved in accordance with P.D. Nos. 1177 and 1597. Any future changes approved by the Board that may be deemed necessary shall not require any referral to or approval of any other authority, agency or office.1âwphi1.nêt

26 Laguna Lake Development Authority vs. Court of Appeals, 251 SCRA 42.

27 Commissioner of Internal Revenue vs. Court of Appeals, 207 SCRA 487.

28 Agujetas vs. Court of Appeals, 258 SCRA 17.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 74851 December 9, 1999

RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.INTERMEDIATE APPELLATE COURT AND BF HOMES, INC., respondents.

R E S O L U T I O N

MELO, J.:

On September 14, 1992, the Court passed upon the case at bar and rendered its decision, dismissing the petition of Rizal Commercial Banking Corporation (RCBC), thereby affirming the decision of the Court of Appeals which canceled the transfer certificate of title issued in favor of RCBC, and reinstating that of respondent BF Homes.

This will now resolve petitioner's motion for reconsideration which, although filed in 1992 was not deemed submitted for resolution until in late 1998. The delay was occasioned by exchange of pleadings, the submission of supplemental papers, withdrawal and change of lawyers, not to speak of the case having been passed from one departing to another retiring justice. It was not until May 3, 1999, when the case was re-raffled to herein ponente, but the record was given to him only sometime in the late October 1999.

By way of review, the pertinent facts as stated in our decision are reproduced herein, to wit:

On September 28, 1984, BF Homes filed a "Petition for Rehabilitation and for Declaration of Suspension of Payments" (SEC Case No. 002693) with the Securities and Exchange Commission (SEC).

One of the creditors listed in its inventory of creditors and liabilities was RCBC.

On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to extra-judicially foreclose its real estate mortgage on some properties of BF Homes. A notice of extra-judicial foreclosure sale was issued by the Sheriff on October 29, 1984, scheduled on November 29, 1984, copies furnished both BF Homes (mortgagor) and RCBC (mortgagee).

On motion of BF Homes, the SEC issued on November 28, 1984 in SEC Case No. 002693 a temporary restraining order (TRO), effective for 20 days, enjoining RCBC and the sheriff from proceeding with the public auction sale. The sale was rescheduled to January 29, 1985.

On January 25, 1985, the SEC ordered the issuance of a writ of preliminary injunction upon petitioner's filing of a bond. However, petitioner did not file a bond until January 29, 1985, the very day of the auction sale, so no writ of preliminary injunction was issued by the SEC. Presumably, unaware of the filing of the bond, the sheriffs proceeded with the public auction sale on January 29, 1985, in which RCBC was the highest bidder for the properties auctioned.

On February 5, 1985, BF Homes filed in the SEC a consolidated motion to annul the auction sale and to cite RCBC and the sheriff for contempt. RCBC opposed the motion

Because of the proceedings in the SEC, the sheriff withheld the delivery to RCBC of a certificate of sale covering the auctioned properties.

On February 13, 1985, the SEC in Case No. 002693 belatedly issued a writ of preliminary injunction stopping the auction sale which had been conducted by the sheriff two weeks earlier.

On March 13, 1985, despite SEC Case No. 002693, RCBC filed with the Regional Trial Court, Br. 140, Rizal (CC 10042) an action for mandamus against the provincial sheriff of Rizal and his deputy to compel them to execute in its favor a certificate of sale of the auctioned properties.

In answer, the sheriffs alleged that they proceeded with the auction sale on January 29, 1985 because no writ of preliminary injunction had been issued by SEC as of that date, but they informed the SEC that they would suspend the issuance of a certificate of sale to RCBC.

On March 18, 1985, the SEC appointed a Management Committee for BF Homes.

On RCBC's motion in the mandamus case, the trial court issued on May 8, 1985 a judgment on the pleadings, the dispositive portion of which states:

WHEREFORE, petitioner's Motion for Judgment on the pleadings is granted and judgment is hereby rendered ordering respondents to execute and deliver to petitioner the Certificate of the Auction Sale of January 29, 1985, involving the properties sold therein, more particularly those described in Annex "C" of their Answer." (p. 87, Rollo.)

On June 4, 1985, B.F. Homes filed an original complaint with the IAC pursuant to Section 9 of B.P. 129 praying for the annulment of the judgment, premised on the following:

. . .: (1) even before RCBC asked the sheriff to extra-judicially foreclose its mortgage on petitioner's properties, the SEC had already assumed exclusive jurisdiction over those assets, and (2) that there was extrinsic fraud in procuring the judgment because the petitioner was not impleaded as a party in the mandamus case, respondent court did not acquire jurisdiction over it, and it was deprived of its right to be heard. (CA Decision, p. 88, Rollo).

On April 8, 1986, the IAC rendered a decision, setting aside the decision of the trial court, dismissing the mandamus case and suspending issuance to RCBC of new land titles, "until the resolution of case by SEC in Case No. 002693," disposing as follows:

WHEREFORE, the judgment dated May 8, 1985 in Civil Case No. 10042 is hereby annulled and set aside and the case is hereby dismissed. In view of the admission of respondent Rizal Commercial Banking Corporation that the sheriff's certificate of sale has been registered on BF Homes' TCT's . . . (here the TCTs were enumerated) the Register of Deeds for Pasay City is hereby ordered to suspend the issuance to the mortgagee-purchaser, Rizal Commercial Banking Corporation, of the owner's copies of the new land titles replacing them until the matter shall have been resolved by the Securities and Exchange Commission in SEC Case No. 002693.

(p. 257-260, Rollo; also pp. 832-834, 213 SCRA 830 [1992]; Emphasis in the original.)

On June 18, 1986, RCBC appealed the decision of the then Intermediate Appellate Court (now, back to its old revered name, the Court of Appeals) to this Court, arguing that:

1. Petitioner did not commit extrinsic fraud in excluding private respondent as party defendant in Special Civil Case No. 10042 as private respondent was not indispensable party thereto, its participation not being necessary for the full resolution of the issues raised in said case.

2. SEC Case No. 2693 cannot be invoked to suspend Special Civil Case No. 10042, and for that matter, the extra-judicial foreclosure of the real estate mortgage in petitioner's favor, as these do not constitute actions against private respondent contemplated under Section 6(c) of Presidential Decree No. 902-A.

3. Even assuming arguendo that the extra-judicial sale constitute an action that may be suspended under Section 6(c) of Presidential Decree No. 902-A, the basis for the suspension thereof did not exist so as to adversely affect the validity and regularity thereof.

4. The Regional Trial court had jurisdiction to take cognizable of Special Civil Case No. 10042.

5. The Regional Trial court had jurisdiction over Special Civil Case No. 10042.

(p. 5, Rollo.)

On November 12, 1986, the Court gave due course to the petition. During the pendency of the case, RCBC brought to the attention of the Court an order issued by the SEC on October 16, 1986 in Case No. 002693, denying the consolidated Motion to Annul the Auction Sale and to cite RCBC and the Sheriff for Contempt, and ruling as follows:

WHEREFORE, the petitioner's "Consolidated Motion to Cite Sheriff and Rizal Commercial Banking Corporation for Contempt and to Annul Proceedings and Sale," dated February 5, 1985, should be as is, hereby DENIED.

While we cannot direct the Register of Deeds to allow the consolidation of the titles subject of the Omnibus Motion dated September 18, 1986 filed by the Rizal Commercial Banking Corporation, and therefore, denies said Motion, neither can this Commission restrain the said bank and the Register of Deeds from effecting the said consolidation.

SO ORDERED.

(p. 143, Rollo.)

By virtue of the aforesaid order, the Register of Deeds of Pasay City effected the transfer of title over subject pieces of property to petitioner RCBC, and the issuance of new titles in its name. Thereafter, RCBC presented a motion for the dismissal of the petition, theorizing that the issuance of said new transfer certificates of title in its name rendered the petition moot and academic.

In the decision sought to be reconsidered, a greatly divided Court (Justices Gutierrez, Nocon, and Melo concurred with the ponente, Justice Medialdea; Chief Justice Narvasa, Justices Bidin, Regalado, and Bellosillo concurred only in the result; while Justice Feliciano dissented and was joined by Justice Padilla, then Justice, now Chief Justice Davide, and Justice Romero; Justices Griño-Aquino and Campos took no part) denied petitioner's motion to dismiss, finding basis for nullifying and setting aside the TCTs in the name of RCBC. Ruling on the merits, the Court upheld the decision of the Intermediate Appellate Court which dismissed the mandamus case filed by RCBC and suspended the issuance of new titles to RCBC. Setting aside RCBC's acquisition of title and nullifying the TCTs issued to it, the Court held that:

. . . whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference, but . . . stand on equal footing with other creditors. Foreclosure shall be disallowed so as not to prejudice other creditors, or cause discrimination among them. If foreclosure is undertaken despite the fact that a petition, for rehabilitation has been filed, the certificate of sale shall not be delivered pending rehabilitation. Likewise, if this has also been done, no transfer of title shall be effected also, within the period of rehabilitation. The rationale behind PD 902-A, as amended to effect a feasible and viable rehabilitation. This cannot be achieved if one creditor is preferred over the others.

In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the petitioner from delaying the creation of a Management Committee and in the meantime dissipate all its assets. The sooner the SEC takes over and imposes a freeze on all the assets, the better for all concerned.

(pp. 265-266, Rollo; also p. 838, 213 SCRA 830 [1992].)

Then Justice Feliciano (joined by three other Justices), dissented and voted to grant the petition. He opined that the SEC acted prematurely and without jurisdiction or legal authority in enjoining RCBC and the sheriff from proceeding with the public auction sale. The dissent maintain that Section 6 (c) of Presidential Decree 902-A is clear and unequivocal that, claims against the corporations, partnerships, or associations shall be suspended only upon the appointment of a management committee, rehabilitation receiver, board or body. Thus, in the case under consideration, only upon the appointment of the Management Committee for BF Homes on March 18, 1985, should the suspension of actions for claims against BF Homes have taken effect and not earlier.

In support of its motion for reconsideration, RCBC contends:

The restraining order and the writ of preliminary injunction issued by the Securities and Exchange Commission enjoining the foreclosure sale of the properties of respondent BF Homes were issued without or in excess of its jurisdiction because it was violative of the clear provision of Presidential Decree No. 902-A, and are therefore null and void; and

Petitioner, being a mortgage creditor, is entitled to rely solely on its security and to refrain from joining the unsecured creditors in SEC Case No. 002693, the petition for rehabilitation filed by private respondent.

We find the motion for reconsideration meritorious.

The issue of whether or not preferred creditors of distressed corporations stand on equal footing with all other creditors gains relevance and materiality only upon the appointment of a management committee, rehabilitation receiver, board, or body. Insofar as petitioner RCBC is concerned, the provisions of Presidential Decree No. 902-A are not yet applicable and it may still be allowed to assert its preferred status because it foreclosed on the mortgage prior to the appointment of the management committee on March 18, 1985. The Court, therefore, grants the motion for reconsideration on this score.

The law on the matter, Paragraph (c), Section 6 of Presidential Decree 902-A, provides:

Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall posses the following powers:

c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases whenever necessary to preserve the rights of the parties litigants to and/or protect the interest of the investing public and creditors; Provided, however, that the Commission may, in appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to the powers of a regular receiver under the provisions of the Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof: Provided, finally, That upon appointment of a management committee rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership, pending before any court, tribunal, board or body shall be suspended accordingly. (As amended by PDs No. 1673, 1758 and by PD No. 1799. Emphasis supplied.)

It is thus adequately clear that suspension of claims against a corporation under rehabilitation is counted or figured up only upon the appointment of a management committee or a rehabilitation receiver. The holding that suspension of actions for claims against a corporation under rehabilitation takes effect as soon as the application or a petition for rehabilitation is filed with the SEC — may, to some, be more logical and wise but unfortunately, such is incongruent with the clear language of the law. To insist on such ruling, no matter how practical and noble, would be to encroach upon legislative prerogative to define the wisdom of the law — plainly judicial legislation.

It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room for application (Cebu Portland Cement Co. vs. Municipality of Naga, 24 SCRA-708 [1968]).

Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the court has no choice but to see to it that its mandate is obeyed (Chartered Bank Employees Association vs. Ople, 138 SCRA 273 [1985]; Luzon Surety Co., Inc. vs. De Garcia, 30 SCRA 111 [1969]; Quijano vs. Development Bank of the Philippines, 35 SCRA 270 [1970]).

Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent. Ambiguity is a condition of admitting two or more meanings, of being understood in more than one way, or of referring to two or more things at the same time. A statute is ambiguous if it is admissible of two or more possible meanings, in which case, the Court is called upon to exercise one of its judicial functions, which is to interpret the law according to its true intent.

Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does nor always result in the appointment of a receiver or the creation of a management committee. The SEC has to initially determine whether such appointment is appropriate and necessary under the circumstances. Under Paragraph (d), Section 6 of Presidential Decree No. 902-A, certain situations must be shown to exist before a management committee may be created or appointed, such as;

1. when there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties; or

2. when there is paralization of business operations of such corporations or entities which may be prejudicial to the interest of minority stockholders, parties-litigants or to the general public.

On the other hand, receivers may be appointed whenever:

1. necessary in order to preserve the rights of the parties-litigants; and/or

2. protect the interest of the investing public and creditors. (Section 6 (c), P.D. 902-A.)

These situations are rather serious in nature, requiring the appointment of a management committee or a receiver to preserve the existing assets and property of the corporation in order to protect the interests of its investors and creditors. Thus, in such situations, suspension of actions for claims against a corporation as provided in Paragraph (c) of Section 6, of Presidential Decree No. 902-A is necessary, and here we borrow the words of the late Justice Medialdea, "so as not to render the SEC management Committee irrelevant and inutile and to give it unhampered "rescue efforts" over the distressed firm" (Rollo, p. 265).

Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger of losing the corporate assets, a management committee or rehabilitation receiver need not be

appointed and suspension of actions for claims may not be ordered by the SEC. When the SEC does not deem it necessary to appoint a receiver or to create a management committee, it may be assumed, that there are sufficient assets to sustain the rehabilitation plan and, that the creditors and investors are amply protected.

Petitioner additionally argues in its motion for reconsideration that, being a mortgage creditor, it is entitled to rely on its security and that it need not join the unsecured creditors in filing their claims before the SEC appointed receiver. To support its position, petitioner cites the Court's ruling in the case of Philippine Commercial International Bank vs. Court of Appeals, (172 SCRA 436 [1989]) that an order of suspension of payments as well as actions for claims applies only to claims of unsecured creditors and cannot extend to creditors holding a mortgage, pledge, or any lien on the property.

Ordinarily, the Court would refrain from discussing additional matters such as that presented in RCBC's second ground, and would rather limit itself only to the relevant issues by which the controversy may be settled with finality.

In view, however, of the significance of such issue, and the conflicting decisions of this Court on the matter, coupled with the fact that our decision of September 14, 1992, if not clarified, might mislead the Bench and the Bar, the Court resolved to discuss further.

It may be recalled that in the herein en banc majority opinion (pp. 256-275, Rollo, also published as RCBC vs. IAC, 213 SCRA 830 [1992]), we held that:

. . . whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference, but . . . stand on equal footing with other creditors. Foreclosure shall be disallowed so as not to prejudice other creditors, or cause discrimination among them. If foreclosure is undertaken despite the fact that a petition for rehabilitation has been filed, the certificate of sale shall not be delivered pending rehabilitation. Likewise, if this has also, been done, no transfer of title shall be effected also, within the period of rehabilitation. The rationale behind PD 902-A, as amended, is to effect a feasible and viable rehabilitation. This cannot be achieved if one creditor is preferred over the others.

In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the petitioner from delaying the creation of a Management Committee and in the meantime dissipate all its assets. The sooner the SEC takes over and imposes a freeze on all the assets, the better for all concerned.

(pp. 265-266, Rollo; also p. 838, 213 SCRA 830 [1992] Emphasis supplied)

The foregoing majority opinion relied upon BF Homes, Inc. vs. Court of Appeals (190 SCRA 262 [1990] — per Cruz, J.: First Division) where it held that "when a corporation threatened by bankruptcy is taken over by a receiver, all the creditors should stand on an equal footing. Not anyone of them should be given preference by paying one or some of them ahead of the others. This is precisely the reason for the suspension of all pending claims against the corporation under receivership. Instead of creditors vexing

the courts with suits against the distressed firm, they are directed to file their claims with the receiver who is a duly appointed officer of the SEC (pp. 269-270; emphasis in the original). This ruling is a reiteration of Alemar's Sibal & Sons, Inc. vs. Hon. Jesus M. Elbinias (pp. 99-100; 186 SCRA 94 [1991] — per Fernan, C.J.: Third Division).

Taking the lead from Alemar's Sibal & Sons, the Court also applied this same ruling in Araneta vs. Court of Appeals (211 SCRA 390 [1992] — per Nocon, J.: Second Division).

All the foregoing cases departed from the ruling of the Court in the much earlier case of PCIB vs. Court of Appeals (172 SCRA 436 [1989] — per Medialdea, J.: First Division) where the Court categorically ruled that:

SEC's order for suspension of payments of Philfinance as well as for all actions of claims against Philfinance could only be applied to claims of unsecured creditors. Such order can not extend to creditors holding a mortgage, pledge or any lien on the property unless they give up the property, security or lien in favor of all the creditors of Philfinance . . .

(p. 440. Emphasis supplied)

Thus, in BPI vs. Court of Appeals (229 SCRA 223 [1994] — per Bellosilio, J.: First Division) the Court explicitly stared that ". . . the doctrine in the PCIB Case has since been abrogated. In Alemar's Sibal & Sons v. Elbinias, BF Homes, Inc. v. Court of Appeals, Araneta v. Court of Appeals and RCBC v. Court of Appeals, we already ruled that whenever a distressed corporation asks SEC for rehabilitation and suspension of payments, preferred creditors may no longer assert such preference, but shall stand on equal footing with other creditors . . ." (pp. 227-228).

It may be stressed, however, that of all the cases cited by Justice Bellosillo in BPI, which abandoned the Court's ruling in PCIB, only the present case satisfies the constitutional requirement that "no doctrine or principle of law laid down by the court in a decision rendered en banc or in division may be modified or reversed except by the court sitting en banc" (Sec 4, Article VIII, 1987 Constitution). The rest were division decisions.

It behooves the Court, therefore, to settle the issue in this present resolution once and for all, and for the guidance of the Bench and the Bar, the following rules of thumb shall are laid down:

1. All claims against corporations, partnerships, or associations that are pending before any court, tribunal, or board, without distinction as to whether or not a creditor is secured or unsecured, shall be suspended effective upon the appointment of a management committee, rehabilitation receiver, board, or body in accordance which the provisions of Presidential Decree No. 902-A.

2. Secured creditors retain their preference over unsecured creditors, but enforcement of such preference is equally suspended upon the appointment of a management committee, rehabilitation receiver, board, or body. In the event that the assets of the corporation, partnership, or association are finally liquidated, however, secured and preferred credits under the applicable provisions of the Civil Code will definitely have preference over unsecured ones.

In other words, once a management committee, rehabilitation receiver, board or body is appointed pursuant to P.D. 902-A, all actions for claims against a distressed corporation pending before any court, tribunal, board or body shall be suspended accordingly.

This suspension shall not prejudice or render ineffective the status of a secured creditor as compared totally unsecured creditor P.D. 902-A does not state anything to this effect. What it merely provides is that all actions for claims against the corporation, partnership or association shall be suspended. This should give the receiver a chance to rehabilitate the corporation if there should still be a possibility of doing so. (This will be in consonance with Alemar's BF Homes, Araneta, and RCBC insofar as enforcing liens by preferred creditors are concerned.)

However, in the event that rehabilitation is no longer feasible and claims against the distressed corporation would eventually have to be settled, the secured creditors shall enjoy preference over the unsecured creditors (still maintaining PCIB ruling), subject only to the provisions of the Civil Code on Concurrence and Preferences of Credit (our ruling in State Investment House, Inc. vs. Court of Appeals, 277 SCRA 209 [1997]).

The Majority ruling in our 1992 decision that preferred creditors of distressed corporations shall, in a way, stand an equal footing with all other creditors, must be read and understood in the light of the foregoing rulings. All claims of both a secured or unsecured creditors, without distinction on this score, are suspended once a management committee is appointed. Secured creditors, in the meantime, shall not be allowed to assert such preference before the Securities and Exchange Commission. It may be stressed, however, that this shall only take effect upon the appointment of a management committee, rehabilitation receiver, board, or body, as opined in the dissent.

In fine, the Court grants the motion for reconsideration for the cogent reason that suspension of actions for claims commences only from the time a management committee or receiver is appointed by the SEC. Petitioner RCBC, therefore, could have rightfully, as it did, move for the extrajudicial foreclosure of its mortgage on October 26, 1984 because a management committee was not appointed by the SEC until March 18, 1985.

WHEREFORE, petitioner's motion for reconsideration is hereby GRANTED. The decision, dated September 14, 1992 is vacated, the decision of Intermediate Appellate Court in AC-G.R. No. SP-06313 REVERSED and SET ASIDE, and the judgment of the Regional Trial Court National Capital Judicial Region, Branch 140, in Civil Case No. 10042 REINSTATED.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago and De Leon, Jr., JJ., concur.

Panganiban, J., please see separate (concuring) opinion.

Separate Opinions

PANGANIBAN, J., separate opinion;

The issue as to when suspension of payments takes effect upon a petition of a distressed corporation is a contentious one. The ponencia in the case under consideration, Rizal Commercial Banking Corporation (RCBC) v. Immediate Appellate Court, 1 has ruled that "the prohibition against foreclosure attaches as soon as a petition for rehabilitation is filed. Were it otherwise, what is to prevent the [creditors] from delaying the creation of the Management Committee and in the meantime [seizing] all [the debtor's] assets. The sooner the SEC takes over and imposes a freeze on all the assets, the better for all concerned." 2

Suspension Takes Effect Only Upon

Constitution of Management Committee

A Dissent debunking the quoted ruling was written by the esteemed Justice Florentino P. Feliciano as follows:

I understand the above quoted portion of the ponencia to be saying that suspension of actions for claims against the corporation which applies for rehabilitation takes effect as soon as the application or a petition for rehabilitation is filed with the SEC.

I would point out with respect, that the actual language used in Section 6 (c) and (d) of P.D. No. 902-A, as amended, does not support the position taken in the ponencia. The pertinent provision of Section 6 (c) is as follows:

Sec. 6. In order to effectively exercise such jurisdiction, the commission shall possess the following powers:

xxx xxx xxx

c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court in such cases whenever necessary to preserve the rights of the parties-litigants to and/or protect the interest of the investing public and creditors; Provided, however, That the Commission may, in appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other government agencies who shall have, in addition to the powers of a regular receiver under the provisions of the Rules of Court, such functions and powers as are provided for in the succeeding paragraph (d) hereof; Provided, further, that the Commission may appoint a rehabilitation receiver of corporations, partnerships or other associations supervised or regulated by other government agencies, such as banks and insurance companies, upon request of the government agency concerned; Provided, finally, that upon appointment of a management committee, rehabilitation receiver, board or body pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly.

It should be pointed out that the appointment of a management committee or a rehabilitation receiver is not ordinarily effected immediately upon the filing of an application for suspension of payments and for rehabilitation. The reason is that the SEC must first determine whether the jurisdictional requirements for the appointment of a management committee are present. There are at least two (2) sets of requirements: (a) the requirements in respect of the petition for declaration of suspension of payments; and (b) the requirements concerning the petition for creation and appointment of a management committee.

xxx xxx xxx

As already noted, SEC took just about six (6) months after the filing of the petition of B.F. Homes to decide to create and appoint a management committee. Only upon such appointment of the management committee did the proviso in Section 6 (c) which decrees suspension of actions for claims against the petitioning corporation take effect.

It is only then that the SEC determines that the circumstances warranting, under the statute, the appointment of a management committee do exist, i.e., that there is "imminent danger of dissipation, loss, wastage or destruction of assets — or paralization of business operations — which [would] be prejudicial to the interest of minority stockholders, parties litigant or the general public." Only when such circumstances have been determined to exist is there justification for suspending actions for claims against the corporation so placed under SEC management. The authority of the SEC to suspend or freeze the judicial enforcement of claims against a corporation is an extraordinary authority, most especially where credits secured by specific liens on property, like real estate mortgages, are involved; such authority cannot lightly be assumed to have arisen simply because the corporation on its own initiative goes to the SEC and there seeks shelter from its lawful creditors. 3

The foregoing Dissent found jural expression in a later case, Barotac Sugar Mills, Inc. v. Court of Appeals, 4 penned by then Associate, now Chief Justice Hilario G. Davide Jr.:

The appointment of a management committee or rehabilitation receiver may only take place after the filing with the SEC of an appropriate petition for suspension of payments. This is clear from a reading of sub-paragraph (d) of Section 5 and sub-paragraph (d) of Section 6 P.D. No. 902-A, as amended by P.D. Nos. 1653 and 1758 . . . .

xxx xxx xxx

The conclusion then is inevitable that pursuant to the underscored proviso in sub-paragraph (c) of the aforementioned Section 6, taken together with sub-paragraph (d) of Section 6, a court action is ipso jure suspended only upon the appointment of a management committee or a rehabilitation receiver.

As a member of the then First Division which promulgated Barotac, I concurred in the aforequoted ruling. To repeat, Barotac and Justice Feliciano's Dissent are clearly supported by Section 6, paragraph (c) of presidential Decree 902-A. It is basic in statutory construction that in the absence of doubt or ambiguity, there is no necessity for construction or interpretation of the law, as in this case. Where the

law speaks in clear and categorical language, there is no room for interpretation. There is only room for application. 5

SEC Retains Power to

Issue Injunctive Relief

Left unsaid in RCBC, Barotac and even in the present Resolution, however, is the existence of two competing economic interests in the determination of the issue. On the one hand, there is the creditor; on the other, the corporation and its stockholders. Under the RCBC ponencia of Justice Medialdea, an unscrupulous company can seek shelter in a petition for suspension of payments in order to evade or at least unfairly delay the payment of just obligations. This course of action would clearly prejudice its creditors, who would be barred from judicially enforcing their rightful claims, simply because a petition for suspension has been filed. Indeed, to paraphrase Justice Medialdea, what is to prevent the debtor from delaying the creation of the management committee, in the meantime dissipating all its assets?

On the other hand, if the bare ruling of Barotac were to be applied strictly, a distressed company would be exposed to grave danger that may precipitate its untimely demise, the very evil sought to be avoided by a suspension of payments. Notably, the appointment of a management committee takes place only after several months, even years, from submission of the petition. The appointment entails hearings and the submission of documentary evidence to determine whether the requisites for suspension of payments have been met. By the time a management committee or receiver is appointed, creditors, upon knowledge of the application for suspension of payments, will have feasted on the distressed corporation.

Money lenders will demand satisfaction of their credits by precipitately foreclosing on their mortgages. Particularly vulnerable are liquid assets which can be attached and rendered useless. Payrolls will be frozen and suppliers will lose faith in the company. Verily, the distressed company's credit standing would be zero-rated. Indeed, after the vultures' feast, the remaining corporate carcass can no longer be resurrected into a viable enterprise. When this happens, there will be no more company left to rehabilitate, thus rendering ineffectual the very law which was enacted precisely to effect such rehabilitation. In the business world, bridge liquidity and credit are sometimes even more important than profits.

The prudent way to avoid the disastrous consequence of a strict application of said law is to call attention to the power of the SEC to issue injunctive reliefs. Herein movant (RCBC) raises the issue of the validity of the restraining order and the writ of preliminary injunction later issued by the Securities and Exchange Commission (SEC) prior to the appointment of the management committee. It contends that the issuance of the injunctive reliefs effectively results, the suspension of actions against the petitioning distressed corporation.

Movant is thus saying that the SEC has no jurisdiction to issue injunctive reliefs in favor of the distressed corporation petitioning for suspension of payments prior to the appointment of a management committee I disagree.

Sec. 5(d) of PD 902-A clearly enumerates the cases over which the SEC has original and exclusive jurisdiction to hear and decide:

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

xxx xxx xxx

d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree.

Sec. 6 (a) of said Decree goes on further to say:

Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:

a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply;

xxx xxx xxx

Thus, it is obvious from the above-quoted provisions that the SEC acquires jurisdiction over the distressed companies upon the submission of a petition for suspension of payments. And when the legal requirements are complied with, it has the authority to issue injunctive reliefs for the effective exercise of its jurisdiction. I would like to emphasize that this power to issue restraining orders or preliminary injunctions, upon the prayer of the petitioning corporation, may be the only buffer that could save a company from being feasted on by any vulture-creditor prior to the appointment of a management committee or a rehabilitation receiver.

WHEREFORE, I vote to GRANT the Motion for Reconsideration, subject to the caveat that the Securities and Exchange Commission, in meritorious cases, may issue injunctive reliefs.

Footnotes

1 213 SCRA 830, September 14, 1992. (Concurring unqualifiedly with Justice Medialdea's ponencia were Gutierrez Jr., Nocon, and Melo, JJ.; concurring in the result were Narvasa, CJ, Bidin, Regalado and Bellosillo, JJ.; dissenting were Feliciano, Padilla, Davide Jr. and Romero, JJ.; Cruz, Griño-Aquino and Campos, JJ., did not take part in the voting.)

2 Ibid., p. 838.

3 Ibid., pp. 839-844.

4 275 SCRA 497, July 15, 1997. (With the concurrence of Narvasa, CJ; Melo, Francisco and Panganiban, JJ., of the Court's First Division).

5 Cebu Portland Cement Co. v. Municipality of Naga, 24 SCRA 708, August 22, 1968, per Fernando, J.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. L-44717 August 28, 1985

THE CHARTERED BANK EMPLOYEES ASSOCIATION, petitioner, vs.HON. BLAS F. OPLE, in his capacity as the Incumbent Secretary of Labor, and THE CHARTERED BANK, respondents.

GUTIERREZ, JR., J.:

This is a petition for certiorari seeking to annul the decision of the respondent Secretary, now Minister of Labor which denied the petitioner's claim for holiday pay and its claim for premium and overtime pay differentials. The petitioner claims that the respondent Minister of Labor acted contrary to law and jurisprudence and with grave abuse of discretion in promulgating Sec. 2, Rule IV, Book III of the Integrated Rules and in issuing Policy Instruction No. 9, both referring to holidays with pay.

On May 20, 1975, the Chartered Bank Employees Association, in representation of its monthly paid employees/members, instituted a complaint with the Regional Office No. IV, Department of Labor, now Ministry of Labor and Employment (MOLE) against private respondent Chartered Bank, for the payment of ten (10) unworked legal holidays, as well as for premium and overtime differentials for worked legal holidays from November 1, 1974.

The memorandum for the respondents summarizes the admitted and/or undisputed facts as follows:

l. The work force of respondent bank consists of 149 regular employees, all of whom are paid by the month;

2. Under their existing collective bargaining agreement, (Art. VII thereof) said monthly paid employees are paid for overtime work as follows:

Section l. The basic work week for all employees excepting security guards who by virtue of the nature of their work are required to be at their posts for 365 days per year, shall be forty (40) hours based on five (5) eight (8) hours days, Monday to Friday.

Section 2. Time and a quarter hourly rate shall be paid for authorized work performed in excess of eight (8) hours from Monday through Friday and for any hour of work performed on Saturdays subject to Section 5 hereof.

Section 3. Time and a half hourly rate shall be paid for authorized work performed on Sundays, legal and special holidays.

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Section 5. The provisions of Section I above notwithstanding the BANK may revert to the six (6) days work week, to include Saturday for a four (4) hour day, in the event the Central Bank should require commercial banks to open for business on Saturday.

3. In computing overtime pay and premium pay for work done during regular holidays, the divisor used in arriving at the daily rate of pay is 251 days although formerly the divisor used was 303 days and this was when the respondent bank was still operating on a 6-day work week basis. However, for purposes of computing deductions corresponding to absences without pay the divisor used is 365 days.

4. All regular monthly paid employees of respondent bank are receiving salaries way beyond the statutory or minimum rates and are among the highest paid employees in the banking industry.

5. The salaries of respondent bank's monthly paid employees suffer no deduction for holidays occurring within the month.

On the bases of the foregoing facts, both the arbitrator and the National Labor Relations Commission (NLRC) ruled in favor of the petitioners ordering the respondent bank to pay its monthly paid employees, holiday pay for the ten (10) legal holidays effective November 1, 1974 and to pay premium or overtime pay differentials to all employees who rendered work during said legal holidays. On appeal, the Minister of Labor set aside the decision of the NLRC and dismissed the petitioner's claim for lack of merit basing its decision on Section 2, Rule IV, Book Ill of the Integrated Rules and Policy Instruction No. 9, which respectively provide:

Sec. 2. Status of employees paid by the month. Employees who are uniformly paid by the month, irrespective of the number of working days therein, with a salary of not less than the statutory or established minimum wage shall be presumed to be paid for all days in the month whether worked or not.

POLICY INSTRUCTION NO. 9

TO: All Regional Directors

SUBJECT: PAID LEGAL HOLIDAYS

The rules implementing PD 850 have clarified the policy in the implementation of the ten (10) paid legal holidays. Before PD 850, the number of working days a year in a firm was considered important in determining entitlement to the benefit. Thus, where an employee was working for at least 313 days, he was considered definitely already paid. If he was working for less than 313, there was no certainty whether the ten (10) paid legal holidays were already paid to him or not.

The ten (10) paid legal holidays law, to start with, is intended to benefit principally daily employees. In the case of monthly, only those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are entitled to the benefit.

Under the rules implementing PD 850, this policy has been fully clarified to eliminate controversies on the entitlement of monthly paid employees. The new determining rule is this: 'If the monthly paid employee is receiving not less than P240, the maximum monthly minimum wage, and his monthly pay is uniform from January to December, he is presumed to be already paid the ten (10) paid legal holidays. However, if deductions are made from his monthly salary on account of holidays in months where they occur, then he is still entitled to the ten (10) paid legal holidays.

These new interpretations must be uniformly and consistently upheld.

This issuance shall take effect immediately.

The issues are presented in the form of the following assignments of errors:

First Error

Whether or not the Secretary of Labor erred and acted contrary to law in promulgating Sec. 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9.

Second Error

Whether or not the respondent Secretary of Labor abused his discretion and acted contrary to law in applying Sec. 2, Rule IV of the Integrated Rules and Policy Instruction No. 9 abovestated to private respondent's monthly-paid employees.

Third Error

Whether or not the respondent Secretary of Labor, in not giving due credence to the respondent bank's practice of paying its employees base pay of 100% and premium pay of 50% for work done during legal holidays, acted contrary to law and abused his discretion in denying the claim of petitioners for unworked holidays and premium and overtime pay differentials for worked holidays.

The petitioner contends that the respondent Minister of Labor gravely abused his discretion in promulgating Section 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9 as guidelines for the implementation of Articles 82 and 94 of the Labor Code and in applying said guidelines to this case. It maintains that while it is true that the respondent Minister has the authority in the performance of his duty to promulgate rules and regulations to implement, construe and clarify the

Labor Code, such power is limited by provisions of the statute sought to be implemented, construed or clarified. According to the petitioner, the so-called "guidelines" promulgated by the respondent Minister totally contravened and violated the Code by excluding the employees/members of the petitioner from the benefits of the holiday pay, when the Code itself did not provide for their expanding the Code's clear and concise conclusion and notwithstanding the Code's clear and concise phraseology defining those employees who are covered and those who are excluded from the benefits of holiday pay.

On the other hand, the private respondent contends that the questioned guidelines did not deprive the petitioner's members of the benefits of holiday pay but merely classified those monthly paid employees whose monthly salary already includes holiday pay and those whose do not, and that the guidelines did not deprive the employees of holiday pay. It states that the question to be clarified is whether or not the monthly salaries of the petitioner's members already includes holiday pay. Thus, the guidelines were promulgated to avoid confusion or misconstruction in the application of Articles 82 and 94 of the Labor Code but not to violate them. Respondent explains that the rationale behind the promulgation of the questioned guidelines is to benefit the daily paid workers who, unlike monthly-paid employees, suffer deductions in their salaries for not working on holidays. Hence, the Holiday Pay Law was enacted precisely to countervail the disparity between daily paid workers and monthly-paid employees.

The decision in Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong (132 SCRA 663) resolved a similar issue. Significantly, the petitioner in that case was also a union of bank employees. We ruled that Section 2, Rule IV, Book III of the Integrated Rules and Policy Instruction No. 9, are contrary to the provisions of the Labor Code and, therefore, invalid This Court stated:

It is elementary in the rules of statutory construction that when the language of the law is clear and unequivocal the law must be taken to mean exactly what it says. In the case at bar, the provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and explicit it provides for both the coverage of and exclusion from the benefit. In Policy Instruction No. 9, the then Secretary of Labor went as far as to categorically state that the benefit is principally intended for daily paid employees, when the law clearly states that every worker shall be paid their regular holiday pay. This is flagrant violation of the mandatory directive of Article 4 of the Labor Code, which states that 'All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.' Moreover, it shall always be presumed that the legislature intended to enact a valid and permanent statute which would have the most beneficial effect that its language permits (Orlosky v. Hasken, 155 A. 112)

Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority granted by Article 5 of the Labor Code authorizing him to promulgate the necessary implementing rules and regulations.

We further ruled:

While it is true that the contemporaneous construction placed upon a statute by executive officers whose duty is to enforce it should be given great weight by the courts, still if such construction is so erroneous, as in the instant case, the same must be declared as null and void. It is the role of the Judiciary to refine and, when necessary correct constitutional (and/or statutory) interpretation, in the

context of the interactions of the three branches of the government, almost always in situations where some agency of the State has engaged in action that stems ultimately from some legitimate area of governmental power (The Supreme Court in Modern Role, C.B. Swisher 1958, p. 36).

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In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the Labor Code and Policy Instruction No. 9 issued by the then Secretary of Labor must be declared null and void. Accordinglyl public respondent Deputy Minister of Labor Amado G. Inciong had no basis at all to deny the members of petitioner union their regular holiday pay as directed by the Labor Code.

Since the private respondent premises its action on the invalidated rule and policy instruction, it is clear that the employees belonging to the petitioner association are entitled to the payment of ten (10) legal holidays under Articles 82 and 94 of the Labor Code, aside from their monthly salary. They are not among those excluded by law from the benefits of such holiday pay.

Presidential Decree No. 850 states who are excluded from the holiday provisions of that law. It states:

ART. 82. Coverage. The provision of this Title shall apply to employees in all establishments and undertakings, whether for profit or not, but not to government employees, managerial employees, field personnel members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations. (Emphasis supplied).

The questioned Section 2, Rule IV, Book III of the Integrated Rules and the Secretary's Policy Instruction No. 9 add another excluded group, namely, "employees who are uniformly paid by the month." While the additional exclusion is only in the form of a presumption that all monthly paid employees have already been paid holiday pay, it constitutes a taking away or a deprivation which must be in the law if it is to be valid. An administrative interpretation which diminishes the benefits of labor more than what the statute delimits or withholds is obviously ultra vires.

It is argued that even without the presumption found in the rules and in the policy instruction, the company practice indicates that the monthly salaries of the employees are so computed as to include the holiday pay provided by law. The petitioner contends otherwise.

One strong argument in favor of the petitioner's stand is the fact that the Chartered Bank, in computing overtime compensation for its employees, employs a "divisor" of 251 days. The 251 working days divisor is the result of subtracting all Saturdays, Sundays and the ten (10) legal holidays from the total number of calendar days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251.

The situation is muddled somewhat by the fact that, in computing the employees' absences from work, the respondent bank uses 365 as divisor. Any slight doubts, however, must be resolved in favor of the workers. This is in keeping with the constitutional mandate of promoting social justice and affording

protection to labor (Sections 6 and 9, Article II, Constitution). The Labor Code, as amended, itself provides:

ART. 4. Construction in favor of labor. All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.

Any remaining doubts which may arise from the conflicting or different divisors used in the computation of overtime pay and employees' absences are resolved by the manner in which work actually rendered on holidays is paid. Thus, whenever monthly paid employees work on a holiday, they are given an additional 100% base pay on top of a premium pay of 50%. If the employees' monthly pay already includes their salaries for holidays, they should be paid only premium pay but not both base pay and premium pay.

The contention of the respondent that 100% base pay and 50% premium pay for work actually rendered on holidays is given in addition to monthly salaries only because the collective bargaining agreement so provides is itself an argument in favor of the petitioner stand. It shows that the Collective Bargaining Agreement already contemplated a divisor of 251 days for holiday pay computations before the questioned presumption in the Integrated Rules and the Policy Instruction was formulated. There is furthermore a similarity between overtime pay, which is computed on the basis of 251 working days a year, and holiday pay, which should be similarly treated notwithstanding the public respondents' issuances. In both cases overtime work and holiday work- the employee works when he is supposed to be resting. In the absence of an express provision of the CBA or the law to the contrary, the computation should be similarly handled.

We are not unmindful of the fact that the respondent's employees are among the highest paid in the industry. It is not the intent of this Court to impose any undue burdens on an employer which is already doing its best for its personnel. we have to resolve the labor dispute in the light of the parties' own collective bargaining agreement and the benefits given by law to all workers. When the law provides benefits for "employees in all establishments and undertakings, whether for profit or not" and lists specifically the employees not entitled to those benefits, the administrative agency implementing that law cannot exclude certain employees from its coverage simply because they are paid by the month or because they are already highly paid. The remedy lies in a clear redrafting of the collective bargaining agreement with a statement that monthly pay already includes holiday pay or an amendment of the law to that effect but not an administrative rule or a policy instruction.

WHEREFORE, the September 7, 1976 order of the public respondent is hereby REVERSED and SET ASIDE. The March 24, 1976 decision of the National Labor Relations Commission which affirmed the October 30, 1975 resolution of the Labor Arbiter but deleted interest payments is REINSTATED.

SO ORDERED.

Makasiar, C.J., Concepcion, Jr., Melencio-Herrera, Plana, Escolin, Relova, De la Fuente, Cuevas, Alampay and Patajo, JJ., concur.

Teehankee, J., in the result.

Aquino, J., took no part.

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

G.R. No. 97973 January 27, 1992

SPOUSES GAUVAIN and BERNARDITA BENZONAN, petitioners, vs.COURT OF APPEALS, BENITO SALVANI PE and DEVELOPMENT BANK OF THE PHILIPPINES, respondents.

G.R. No. 97998 January 27, 1992

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs.COURT OF APPEALS and BENITO SALVANI PE, respondents.

Ruben E. Agpalo for Sps. Gauvain and Bernardita Benzonan.

Vicente R. Acsay for Benito Salvani Pe.

Thomas T. Jacobo for DBP.

GUTIERREZ, JR., J.:

This is a petition to review the August 31, 1990 decision of the Court of Appeals which sustained the right of respondent Benito Salvani Pe to repurchase a parcel of land foreclosed by petitioner Development Bank of the Philippines (DBP) and sold to petitioners Gauvain and Bernardita Benzonan.

Respondent Pe is a businessman in General Santos City who owns extensive commercial and agricultural properties. He is the proprietor of the firm "Dadiangas B.P. Trading." One of the properties he acquired through free patents and miscellaneous sales from the Bureau of Lands is a 26,064 square meters parcel covered by Free Patent No. 46128 issued on October 29, 1969. OCT No. P-2404 was issued on November 24, 1969.

On February 24, 1970 or barely three months after he acquired the land, the respondent mortgaged the lot in question, together with another lot covered by TCT No. 3614 and some chattels to secure a commercial loan of P978,920.00 from the DBP. The lot was developed into a commercial-industrial

complex with ricemill and warehouse facilities, a solar drier, an office and residential building, roadway, garden, depository, and dumping grounds for various materials.

When the private respondent failed to pay his loan after more than seven years had passed, DBP foreclosed the mortgage on June 28, 1977. On that date, the total obligation amounted to P1,114,913.34. DBP was the highest bidder. Certificates of sale were issued in its favor; P452,995.00 was for the two lots and P108,450.00 for the chattels. The certificate covering the disputed lot was registered with the Registry of Deeds on January 24, 1978.

After the foreclosure sale, respondent Pe leased the lot and its improvements from DBP for P1,500.00 a month. Part of the property was also leased by DBP to the then National Grains Authority.

The respondent failed to redeem the property within the one year period. On September 24, 1979 DBP sold the lot to the petitioner for P1,650,000.00 payable in quarterly amortizations over a five year period. The petitioners occupied the purchased lot and introduced further improvements worth P970,000.00.

On July 12, 1983, claiming that he was acting within the legal period given to him to repurchase, respondent Pe offered in writing to repurchase the lot for P327,995.00. DBP countered, however, that over the years a total of P3,056,739.52 had already been incurred in the preservation, maintenance, and introduction of improvements.

On October 4, 1983, Pe filed a complaint for repurchase under Section 119 of Commonwealth Act No. 141 with the Regional Trial Court (RTC) of General Santos City.

On November 27, 1986, the trial court rendered judgment. The dispositive portion reads:

WHEREFORE, in view of the foregoing, the defendant Development Bank of the Philippines is ordered:

1) to reconvey unto the plaintiff the parcel of land in question (Lot No. P-2404) for the repurchase price of P327,995.00 plus legal interest from June 18, 1977 to June 19, 1978 only, and the expenses of extrajudicial foreclosure of mortgage; expenses for registration and ten percent (10%) attorneys fees;

2) ordering the defendants to vacate forever the premises of said property in favor of the plaintiff upon payment of the total repurchase price;

3) ordering the defendants, jointly and solidarily, to pay the plaintiff attorney's fees in the amount of P25,000.00;

4) and to set an example to government banking and lending institutions not to take borrowers for granted by making it hard for them to repurchase by misleading them, the bank is hereby ordered to pay the plaintiff by way of exemplary damages in the amount of P50,000.00;

Ordering further the defendant DBP:

5) to reimburse the co-defendants spouses Benzonan the amount they have paid or advanced the defendant DBP for the purchase of Lot O.C.T. No. P-2404;

6) ordering the defendants to pay the cost of suit. (Rollo of G.R. No. 97973, pp. 74-75)

On appeal, the Court of Appeals affirmed the decision with modifications as follows:

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All the foregoing premises considered, judgment is hereby rendered AFFIRMING the decision rendered by the court a quo with the modification that the defendant DBP shall reimburse to its co-defendant Benzonan spouses all amounts that the latter have paid for the land, minus interest, and that the Benzonan spouses shall be allowed to remove the improvement that they have made on the property under litigation, without impairing or damaging the same. (Rollo of G.R. No. 97973, p. 105)

A motion for reconsideration was denied on March 19, 1991.

The petitioners-spouses in G.R. No. 97973 raise the following "legal issues, reasons, or errors" allegedly committed by the Court of Appeals, to wit:

1. The Court of Appeals erred in holding that conversion and use of the land in question to industrial or commercial purposes, as a result of which it could no longer be used for cultivation, and the fact that respondent Pe has vast holdings whose motive in seeking to repurchase the property is to continue the business or for speculation or greater profits did not deprive him of the right to repurchase under Sec. 119 of CA 141, and, as a result, in ignoring or disregarding Pe's admissions and undisputed facts establishing such circumstances, contrary to what this Court held in Santana v. Mariñas, 94 SCRA 853 [1979], Vargas v. Court of Appeals, 91 SCRA 195 [1979] and Simeon v. Peña, 36 SCRA 610 [1970].

2. Assuming, arguendo, that respondent Pe still had the right to repurchase the land under Sec. 119 of CA 141, the Court of Appeals erred in not counting the 5-year period from the date of foreclosure sale on June 18, 1977 or at the very most from its registration on January 24, 1978, in accordance with the prevailing doctrinal law at the time as enunciated in Monge v. Angeles, 101 Phil. 561 [1957], Oliva v. Lamadrid, 21 SCRA 737 [1967] and Tupas v. Damasco, 132 SCRA 593 [1984], pursuant to which Pe's right to repurchase already expired.

3. The Court of Appeals erred in applying retroactively the ruling in Belisario v. Intermediate Appellate Court, 165 SCRA 101 [1988], which held that the 5-year period is counted from the date after the one-year period to redeem foreclosed homestead expired, to the foreclosure of the land in question in 1977, as its retroactive application revived Pe's lost right of repurchase and defeated petitioners' right of ownership that already accrued under the then prevailing doctrinal law.

4. Assuming, arguendo, that respondent Pe had the right to repurchase the land in question and assuming, further, that the 5-year period is to be counted from the consolidation of ownership after the expiration of the one-year period to redeem, the Court of Appeals erred in not holding that the mere filing of an action for repurchase without tendering or depositing the repurchase price did not satisfy the

requirements of repurchase, Pe's failure to make the tender or deposit even up to the present being confirmatory of speculative motive behind his attempt to repurchase.

5. Assuming, finally, that respondent Pe is entitled to repurchase the property, the Court of Appeals erred in not holding that petitioners are possessors in good faith, similar to a vendee a retro, entitled (a) to reimbursement of necessary and useful expenses under Article 1616 of the Civil Code as held in Calagan v. CFI of Davao, 95 SCRA 498 [1980] and in Lee v. Court of Appeals, 68 SCRA 196 [1975]; and (b) to refund of all amounts paid by them by reason of the sale of the property in their favor, including interest payments, in both instances with right of retention. (Rollo of G.R. No. 97973, pp. 14-16)

In G.R No. 97998, DBP limited its petition to the value of the repurchase price and the nature of the contract between the parties. It framed the issues as follows:

1. The Court of Appeals erred in not holding that Section 31 of Commonwealth Act No. 459 as amended is not applicable in the instant case to determine the repurchase price contrary to decisions of the Honorable Supreme Court in the following cases: DBP v. Jimenez, et al. (36 SCRA 426) and DBP v. Mirang (66 SCRA 141).

2. The Court of Appeals erred in not holding that the law between the contracting parties are the terms and conditions embodied in the contract signed by them. (Rollo of G.R. No. 97998, p. 12)

We find merit in the petitions.

The determination of the main issues raised by the petitioners calls for the proper application of Section 119 of CA 141 as amended which provides: "Every conveyance of land acquired under the free patent or homestead provisions, when proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, within a period of five years from the date of conveyance."

There is no dispute over the fact that the Government awarded the land to respondent Pe so that he could earn a living by farming the land. Did respondent Pe lose his right to repurchase the subject agricultural lot under the aforequoted law considering its conversion for industrial or commercial purposes? The evidence relating to the conversion is sufficiently established and yet was not properly appreciated by the respondent court.

Only three months after getting the free patent and the original certificate of title over the subject lot, it was mortgaged by respondent Pe to get a commercial loan of nearly P1 million from DBP. Pe spent the proceeds of the loan to construct permanent improvements on the lot for his rice-mill and other businesses, i.e., two warehouse buildings; administration-residential building; perimeter fence; solar and concrete drier; shed; machine shop; dirty kitchen; and machineries and equipments such as ricemill (TSN, August 13, 1984, pp. 173-174). The entire lot has been converted to serve commercial and industrial purposes. The testimony of petitioners Gauvain Benzonan on this score has not been successfully challenged, viz:

Q. Out of this 2.6 hectares land area, how much of this is devoted to the solar drier construction?

A. The solar drier is about one thousand (1,000) square meters . . . ah no, about six thousand (6,000) square meters.

Q. What about the area occupied by the warehouse and the ricemill complex?

A. The warehouse and ricemill complex is occupying about one and a half (1 1/2) hectares.

Q. What about the area occupied by the residence as well as the roadways?

A. It covers about another half of a hectare again, Sir.

Q. Is any part of this two point six hectares devoted to agricultural production or production of agricultural crops?

A. None whatsoever because the other portion is occupied as a dumping area for our waste materials. (TSN, PP. 361-362, Sept. 3, 1985).

The conversion of the lot for commercial purposes is understandable considering that the heart of General Santos City developed in that area.

The respondent does not deny that, he is using the land for purely commercial and industrial purposes. His explanation is that the land may be converted into agricultural land in the future. He applies the Krivenko v. Register of Deeds of Manila (79 Phil. 461 [1947]) ruling that lands not mineral or forest are agricultural in nature and may be devoted to business purposes without losing their agricultural classification.

Indeed, the records show that it was never the intention of respondent Pe to utilize the land, given to him for free by the Government, for agricultural purposes. He was not the kind of poor farmer for whom homesteads and free patents were intended by the law.

As stated by the petitioners:

1. Respondent Pe acquired by free patent the land in question with an area of 2.6064 hectares, which was issued Original Certificate of Title No. P-2404 on November 24, 1969. Instead of cultivating it for agricultural purposes, Pe mortgaged the land, along with another land, on February 24, 1970, or only three (3) months from issuance of OCT No. P-2404, with the DBP for P978,920.00. (par. 4, complaint, Annex "A"). Pe testified that his purpose was to construct in the land in question "bodega", an administration-residential building, a perimeter fence, a concrete drier, and for some machineries and equipment." (TSN, p. 95, June 22, 1984). He stated that the improvements and facilities in the land included "the warehouse, the ricemill and a big warehouse housing the palay of stocks of the National Grains Authority and an administration-residential building, a solar drier and a perimeter fence and some sheds or garage . . . a small piggery pen of several compartments, a dirty kitchen . . . a machine shop." (TSN, pp. 173-174, August 13, 1984). Pe used the property for such purposes and operated the ricemill business for a period of about nine (9) years until

September, 1979 (pars. 7 and 8, complaint, Annex "A"), without paying the DBP of his mortgage indebtedness, as a result of which DBP foreclosed the properties. (Annex "F")

2. Respondent Pe testified that the land in question with its improvements has an appraised value of P1,347,860.00 in 1974, and P2,028,030.00 in 1976. (TSN, pp. 176, 177, August 13, 1984). Petitioner Gauvain Benzonan claimed it has a fair market value, as of 1985, of P5,000,000.00. (p. 8, trial court decision, Annex "F"). As against such value of the land and improvements, respondent Pe insisted that the repurchase price should only be the principal sum of P327,995.00. (par. 10, complaint, Annex "A")

3. Respondent Pe, when he testified in 1984, said he was 60 years old; he is now therefore over 66 years old. He is a "businessman and resident of Dadiangas, General Santos City" (TSN, p. 3, June 20, 1984), doing business under the style, "Dadiangas B.P. Trading" (TSN, 144, June 22, 1984). In his sworn declaration dated July 18, 1983, filed with the assessor's office pursuant to P.D. No. 1612, he listed the following real properties and their market value, all situated in General Santos City, to wit (Exh. 11-Benzonan):

(a) 447 sq. m. residential P 28,720.00(b) 11.9980 hectares of agri. lot P 23,880.00(c) 2.000 hectares of agri. lot P 40,000.00(d) 2.000 hectares of agri. lot P 40,000.00(e) 6,064 sq. m. of industrial lot P303,200.00(f) Industrial building P434,130.00(g) Industrial machinery P 96,000.00

On June 22, 1984, when Pe testified, he said that "I own three (3) residential lots," (TSN, p. 153, June 22, 1984) and that he and his wife own in Antique Province "around twenty (20) hectares planted to coconut and sugarcane" (ibid., p. 145); he used to have 30 hectares of agricultural lands and 22 subdivision lots, which he sold to Norma Salvani and Carlos Salvani. (TSN, pp. 166-169, June 22, 1984); Exhs. 1, 1-A, 1-B, 1-C, 3, 6, 6-A-Benzonan). (Rollo of G.R. No. 97973, pp. 17-19)

In the light of the records of these cases, we rule that respondent Pe cannot repurchase the disputed property without doing violence to everything that CA No. 141 (as amended) stands for.

We ruled in Simeon v. Peña, 36 SCRA 610, 617 [1970] through Chief Justice Claudio Teehankee, that:

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These findings of fact of the Court of Appeals that "(E)vidently, the reconveyance sought by the plaintiff (petitioner) is not in accordance with the purpose of the law, that is, "to preserve and keep in the family of the homesteader that portion of public land which the State has gratuitously given to him"" and expressly found by it to "find justification from the evidence of record. . . ."

Under the circumstances, the Court is constrained to agree with the Court of Appeals that petitioners' proposed repurchase of the property does not fall within the purpose, spirit and meaning of section 119 of the Public Land Act, authorizing redemption of the homestead from any vendee thereof.

We reiterated this ruling in Vargas v. Court of Tax Appeals, 91 SCRA 195, 200, [1979] viz:

As regards the case of Simeon v. Peña, petitioners ought to know that petitioner therein was not allowed to repurchase because the lower court found that his purpose was only speculative and for profit. In the present case, the Court of Appeals found that herein petitioners' purposes and motives are also speculative and for profit.

It might be well to note that the underlying principle of Section 119 of Commonwealth Act No. 141 is to give the homesteader or patentee every chance to preserve for himself and his family the land that the State had gratuitously given to him as a reward for his labor in cleaning and cultivating it. (Simeon v. Peña, 36 SCRA 617). As found by the Court of Appeals, the motive of the petitioners in repurchasing the lots in question being one for speculation and profit, the same therefore does not fall within the purpose, spirit and meaning of said section.

and in Santana et al. v. Mariñas, 94 SCRA 853, 861-862 [1979] to wit:

In Simeon v. Peña we analyzed the various cases previously decided, and arrived at the conclusion that the plain intent, the raison d' etre, of Section 119, C.A. No. 141 ". . . is to give the homesteader or patentee every chance to preserve for himself and his family the land that the state had gratuitously given to him as a reward for his labor in cleaning and cultivating it." In the same breath, we agreed with the trial court, in that case, that "it is in this sense that the provision of law in question becomes unqualified and unconditional. And in keeping with such reasons behind the passage of the law, its basic objective is to promote public policy, that is, to provide home and decent living for destitutes, aimed at promoting a class of independent small landholders which is the bulwark of peace and order.

As it was in Simeon v. Peña, respondent Mariñas' intention in exercising the right of repurchase "is not for the purpose of preserving the same within the family fold," but "to dispose of it again for greater profit in violation of the law's policy and spirit." The foregoing conclusions are supported by the trial court's findings of fact already cited, culled from evidence adduced. Thus respondent Mariñas was 71 years old and a widower at the time of the sale in 1956; that he was 78 when he testified on October 24, 1963 (or over 94 years old today if still alive); that . . . he was not living on the property when he sold the same but was residing in the poblacion attending to a hardware store, and that the property was no longer agricultural at the time of the sale, but was a residential and commercial lot in the midst of many subdivisions. The profit motivation behind the effort to repurchase was conclusively shown when the then plaintiff's counsel, in the case below, Atty. Loreto Castillo, in his presence, suggested to herein petitioners' counsel, Atty. Rafael Dinglasan ". . . to just add to the original price so the case would be settled." Moreover, Atty. Castillo manifested in court that an amicable settlement was possible, for which reason he asked for time "within which to settle the terms thereof'" and that "the plaintiff . . . Mr. Mariñas, has manifested to the Court that if the defendants would be willing to pay the sum of One Peso and Fifty Centavos (P1.50) per square meter, he would be willing to accept the offer and dismiss the case."

Our decisions were disregarded by the respondent court which chose to adopt a Court of Appeals ruling in Lim, et al. v. Cruz, et al., CA-G.R. No. 67422, November 25, 1983 that the motives of the homesteader

in repurchasing the land are inconsequential" and that it does not matter even "when the obvious purpose is for selfish gain or personal aggrandizement."

The other major issue is when to count the five-year period for the repurchase by respondent Pe — whether from the date of the foreclosure sale or from the expiration of the one year period to redeem the foreclosed property.

The respondent court ruled that the period of repurchase should be counted from the expiration of the one year period to redeem the foreclosed property. Since the one year period to redeem expired on January 24, 1979 and he filed Case No. 280 on October 4, 1983 to enforce his right to repurchase the disputed property, the Court of Appeals held that Pe exercised his right to repurchase within the five-year period provided by Section 119 of CA 141 as amended.

The respondent court cited Belisario, et al., v. Intermediate Appellate Court, et al., 165 SCRA 101, 107 [1988] where we held:

. . . In addition, Section 119 of Commonwealth Act 141 provides that every conveyance of land acquired under the free patent or homestead patent provisions of the Public Land Act, when proper, shall be subject to repurchase by the applicant, his widow or legal heirs within the period of five years from the date of conveyance. The five-year period of redemption fixed in Section 119 of the Public Land Law of homestead sold at extrajudicial foreclosure begins to run from the day after the expiration of the one-year period of repurchase allowed in an extrajudicial foreclosure. (Manuel v. PNB, et al., 101 Phil. 968) Hence, petitioners still had five (5) years from July 22, 1972 (the expiration of the redemption period under Act 3135) within which to exercise their right to repurchase under the Public Land Act.

As noted by the respondent court, the 1988 case of Belisario reversed the previous rulings of this Court enunciated in Monge, et al., v. Angeles, et al., 101 Phil. 563 [1957] and Tupas v. Damasco, et al., 132 SCRA 593 [1984] to the effect that the five year period of repurchase should be counted from the date of conveyance or foreclosure sale. The petitioners, however, urge that Belisario should only be applied prospectively or after 1988 since it established a new doctrine.

We sustain the petitioners' position. It is undisputed that the subject lot was mortgaged to DBP on February 24, 1970. It was acquired by DBP as the highest bidder at a foreclosure sale on June 18, 1977, and then sold to the petitioners on September 29, 1979.

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines." But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided." This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests

rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).

The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] ". . . when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the old doctrine and acted on the faith thereof."

There may be special cases where weighty considerations of equity and social justice will warrant a retroactive application of doctrine to temper the harshness of statutory law as it applies to poor farmers or their widows and orphans. In the present petitions, however, we find no such equitable considerations. Not only did the private respondent apply for free agricultural land when he did not need it and he had no intentions of applying it to the noble purposes behind the law, he would now repurchase for only P327,995.00, the property purchased by the petitioners in good faith for P1,650,000.00 in 1979 and which, because of improvements and the appreciating value of land must be worth more than that amount now.

The buyers in good faith from DBP had a right to rely on our rulings in Monge and Tupas when they purchased the property from DBP in 1979 or thirteen (13) years ago. Under the rulings in these two cases, the period to repurchase the disputed lot given to respondent Pe expired on June 18, 1982. He failed to exercise his right. His lost right cannot be revived by relying on the 1988 case of Belisario. The right of petitioners over the subject lot had already become vested as of that time and cannot be impaired by the retroactive application of the Belisario ruling.

Considering our above findings, we find no need to resolve the other issues raised by the petitioners in their petitions.

WHEREFORE, the questioned decision of the respondent court is hereby REVERSED and SET ASIDE. The complaint for repurchase under Section 119 of Commonwealth Act No. 141 as amended is DISMISSED. No pronouncement as to costs.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

Republic of the PhilippinesSUPREME COURTBaguio City

THIRD DIVISION

G.R. No. 136921 April 17, 2001

LORNA GUILLEN PESCA, petitioner vs.ZOSIMO A PESCA, respondent.

VITUG, J.:

Submitted for review is the decision of the Court of Appeals, promulgated on 27 May 1998, in C.A. G.R. CV. No. 52374, reversing the decision of the Regional Trial Court ("RTC") of Caloocan City, Branch 130, which has declared the marriage between petitioner and respondent to be null and void ab initio on the ground of psychological incapacity on the part of respondent.

Petitioner Lorna G. Pesca and respondent Zosimo A. Pesca first met sometime in 1975 while on board an inter-island vessel bound for Bacolod City. After a whirlwind courtship, they got married on 03 March 1975. Initially, the young couple did not live together as petitioner was still a student in college and respondent, a seaman, had to leave the country on board an ocean-going vessel barely a month after the marriage. Six months later, the young couple established their residence in Quezon City until they were able to build their own house in Caloocan City where they finally resided. It was blissful marriage for the couple during the two months of the year that they could stay together - when respondent was on vacation. The union begot four children, 19-year old Ruhem, 17-year old Rez, 11-year old Ryan, and 9-year old Richie.

It started in 1988, petitioner said, when she noticed that respondent surprisingly showed signs of "psychological incapacity" to perform his marital covenant. His "true color" of being an emotionally immature and irresponsible husband became apparent. He was cruel and violent. He was a habitual drinker, staying with friends daily from 4:00 o'clock in the afternoon until 1:00 o'clock in the morning. When cautioned to stop or, to at least, minimize his drinking, respondent would beat, slap and kick her. At one time, he chased petitioner with a loaded shotgun and threatened to kill her in the presence of the children. The children themselves were not spared from physical violence.

Finally, on 19 November 1992, petitioner and her children left the conjugal abode to live in the house of her sister in Quezon City as they could no longer bear his violent ways. Two months later, petitioner decided to forgive respondent, and she returned home to give him a chance to change. But, to her dismay, things did not so turn out as expected. Indeed, matters became worse.

On the morning of 22 March 1994, about eight o'clock, respondent assaulted petitioner for about half an hour in the presence of the children. She was battered black and blue. She submitted herself to medical examination at the Quezon City General Hospital, which diagnosed her injuries as contusions and abrasions. Petitioner filed a complaint with the barangay authorities, and a case was filed against respondent for slight physical injuries. He was convicted by the Metropolitan Trial Court of Caloocan City and sentenced to eleven days of imprisonment.

This time, petitioner and her children left the conjugal home for good and stayed with her sister. Eventually, they decided to rent an apartment. Petitioner sued respondent before the Regional Trial Court for the declaration of nullity of their marriage invoking psychological incapacity. Petitioner likewise sought the custody of her minor children and prayed for support pendente lite .

Summons, together with a copy of the complaint, was served on respondent on 25 April 1994 by personal service by the sheriff. As respondent failed to file an answer or to enter his appearance within

the reglementary period, the trial court ordered the city prosecutor to look into a possible collusion between the parties. Prosecutor Rosa C. Reyes, on 03 August 1994, submitted her report to the effect that she found no evidence to establish that there was collusion between the parties. 1âwphi1.nêt

On 11 January 1995, respondent belatedly filed, without leave of court, an answer, and the same, although filed late, was admitted by the court. In his answer, respondent admitted the fact of his marriage with petitioner and the birth of their children. He also confirmed the veracity of Annex "A" of the complaint which listed the conjugal property. Respondent vehemently denied, however, the allegation that he was psychologically incapacitated.

On 15 November 1995, following hearings conducted by it, the trial court rendered its decision declaring the marriage between petitioner and respondent to be null and void ab initio on the basis of psychological incapacity on the part of respondent and ordered the liquidation of the conjugal partnership.

Respondent appealed the above decision to the Court of Appeals, contending that the trial court erred, particularly, in holding that there was legal basis to declare the marriage null and void and in denying his motion to reopen the case.

The Court of Appeals reversed the decision of the trial court and declared the marriage between petitioner and respondent valid and subsisting. The appellate court said:

"Definitely the appellee has not established the following: That the appellant showed signs of mental incapacity as would cause him to be truly incognitive of the basic marital covenant, as so provided for in Article 68 of the Family Code; that the incapacity is grave, has preceded the marriage and is incurable; that his incapacity to meet his marital responsibility is because of a psychological, not physical illness; that the root cause of the incapacity has been identified medically or clinically, and has been proven by an expert; and that the incapacity is permanent and incurable in nature.

"The burden of proof to show the nullity of marriage lies in the plaintiff and any doubt should be resolved in favor of the existence and continuation of the marriage and against its dissolution and nullity."1

Petitioner, in her plea to this Court, would have the decision of the Court of Appeals reversed on the thesis that the doctrine enunciated in Santos vs. Court of Appeals,2 promulgated on 14 January 1995, as well as the guidelines set out in Republic vs. Court of Appeals and Molina,3 promulgated on 13 February 1997, should have no retroactive application and, on the assumption that the Molina ruling could be applied retroactively, the guidelines therein outlined should be taken to be merely advisory and not mandatory in nature. In any case, petitioner argues, the application of the Santos and Molina dicta should warrant only a remand of the case to the trial court for further proceedings and not its dismissal.

Be that as it may, respondent submits, the appellate court did not err in its assailed decision for there is absolutely no evidence that has been shown to prove psychological incapacity on his part as the term has been so defined in Santos.

Indeed, there is no merit in the petition.

The term "psychological incapacity," as a ground for the declaration of nullity of a marriage under Article 36 of the Family Code, has been explained by the Court, in Santos and reiterated in Molina. The Court, in Santos, concluded:

"It should be obvious, looking at all the foregoing disquisitions, including, and most importantly, the deliberations of the Family Code Revision Committee itself, that the use of the phrase 'psychological incapacity' under Article 36 of the Code has not been meant to comprehend all such possible cases of psychoses as, likewise mentioned by some ecclesiastical authorities, extremely low intelligence, immaturity, and like circumstances (cited in Fr. Artemio Balumad's 'Void and Voidable Marriages in the Family Code and their Parallels in Canon Law,' quoting form the Diagnostic Statistical Manuel of Mental Disorder by the American Psychiatric Association; Edward Hudson's 'Handbook II for Marriage Nullity Cases'). Article 36 of the Family. Code cannot be taken and construed independently of, but must stand in conjunction with, existing precepts in our law on marriage. Thus correlated, 'psychological incapacity' should refer to no less than a mental (not physical) incapacity that causes a party to be truly incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the parties to the marriage which, as so expressed by Article 68 of the Family Code, include their mutual obligations to live together, observe love, respect and fidelity and render help and support. There is hardly any doubt that the intendment of the law has been to confine the meaning of 'psychological incapacity' to the most serious cases of personality disorders clearly demonstrative of an utter insensitivity or inability to give meaning and significance to the marriage. This psychologic condition must exist at the time the marriage is celebrated."

The- "doctrine of stare decisis," ordained in Article 8 of the Civil Code, expresses that judicial decisions applying or interpreting the law shall form part of the legal system of the Philippines. The rule follows the settled legal maxim - "legis interpretado legis vim obtinet" - that the interpretation placed upon the written law by a competent court has the force of law.3 The interpretation or construction placed by the courts establishes the contemporaneous legislative intent of the law. The latter as so interpreted and construed would thus constitute a part of that law as of the date the statute is enacted. It is only when a prior ruling of this Court finds itself later overruled, and a different view is adopted, that the new doctrine may have to be applied prospectively in favor of parties who have relied on the old doctrine and have acted in good faith in accordance therewith5 under the familiar rule of "lex prospicit, non respicit."

The phrase "psychological incapacity ," borrowed from Canon law, is an entirely novel provision in our statute books, and, until the relatively recent enactment of the Family Code, the concept has escaped jurisprudential attention. It is in Santos when, for the first time, the Court has given life to the term. Molina, that followed, has additionally provided procedural guidelines to assist the courts and the parties in trying cases for annulment of marriages grounded on psychological incapacity. Molina has strengthened, not overturned, Santos.

At all events, petitioner has utterly failed, both in her allegations in the complaint and in her evidence, to make out a case of psychological incapacity on the part of respondent, let alone at the time of solemnization of the contract, so as to warrant a declaration of nullity of the marriage. Emotional immaturity and irresponsibility, invoked by her, cannot be equated with psychological incapacity.

The Court reiterates its reminder that marriage is an inviolable social institution and the foundation of the family6 that the State cherishes and protects. While the Court commisserates with petitioner in her unhappy marital relationship with respondent, totally terminating that relationship, however, may not necessarily be the fitting denouement to it. In these cases, the law has not quite given up, neither should we.

WHEREFORE, the herein petition is DENIED. No costs.

SO ORDERED.

Vitug, J.C.; Melo, J.A.R; Panganiban, A.V.; Gonzaga-Reyes, M.P.; Sandoval-Gutierez, A., Concur.

Footnotes:

1 Rollo. pp. 42-43

2 240 SCRA 20.

3 268 SCRA 198.

4 People vs. Jabinal, 55 SCRA 607

5 Unciano Paramedical College, Inc. vs. Court of Appeals, 221 SCRA 285; Tanada vs. Guingona, 235 SCRA 507; Columbia Pictures, Inc., vs. Court of Appeals, 261 SCRA 144.

6 See Section 2, Article XV, 1987 Constitution.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 111097 July 20, 1994

MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners, vs.PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING CORPORATION, respondents.

Aquilino G. Pimentel, Jr. and Associates for petitioners.

R.R. Torralba & Associates for private respondent.

CRUZ, J.:

There was instant opposition when PAGCOR announced the opening of a casino in Cagayan de Oro City. Civic organizations angrily denounced the project. The religious elements echoed the objection and so did the women's groups and the youth. Demonstrations were led by the mayor and the city legislators. The media trumpeted the protest, describing the casino as an affront to the welfare of the city.

The trouble arose when in 1992, flush with its tremendous success in several cities, PAGCOR decided to expand its operations to Cagayan de Oro City. To this end, it leased a portion of a building belonging to Pryce Properties Corporation, Inc., one of the herein private respondents, renovated and equipped the same, and prepared to inaugurate its casino there during the Christmas season.

The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and hostile. On December 7, 1992, it enacted Ordinance No. 3353 reading as follows:

ORDINANCE NO. 3353

AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALLOWING TO BE USED ITS PREMISES OR PORTION THEREOF FOR THE OPERATION OF CASINO.

BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in session assembled that:

Sec. 1. — That pursuant to the policy of the city banning the operation of casino within its territorial jurisdiction, no business permit shall be issued to any person, partnership or corporation for the operation of casino within the city limits.

Sec. 2. — That it shall be a violation of existing business permit by any persons, partnership or corporation to use its business establishment or portion thereof, or allow the use thereof by others for casino operation and other gambling activities.

Sec. 3. — PENALTIES. — Any violation of such existing business permit as defined in the preceding section shall suffer the following penalties, to wit:

a) Suspension of the business permit for sixty (60) days for the first offense and a fine of P1,000.00/day

b) Suspension of the business permit for Six (6) months for the second offense, and a fine of P3,000.00/day

c) Permanent revocation of the business permit and imprisonment of One (1) year, for the third and subsequent offenses.

Sec. 4. — This Ordinance shall take effect ten (10) days from publication thereof.

Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93 reading as follows:

ORDINANCE NO. 3375-93

AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR VIOLATION THEREFOR.

WHEREAS, the City Council established a policy as early as 1990 against CASINO under its Resolution No. 2295;

WHEREAS, on October 14, 1992, the City Council passed another Resolution No. 2673, reiterating its policy against the establishment of CASINO;

WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353, prohibiting the issuance of Business Permit and to cancel existing Business Permit to any establishment for the using and allowing to be used its premises or portion thereof for the operation of CASINO;

WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local Government Code of 1991 (Rep. Act 7160) and under Art. 99, No. (4), Paragraph VI of the implementing rules of the Local Government Code, the City Council as the Legislative Body shall enact measure to suppress any activity inimical to public morals and general welfare of the people and/or regulate or prohibit such activity pertaining to amusement or entertainment in order to protect social and moral welfare of the community;

NOW THEREFORE,

BE IT ORDAINED by the City Council in session duly assembled that:

Sec. 1. — The operation of gambling CASINO in the City of Cagayan de Oro is hereby prohibited.

Sec. 2. — Any violation of this Ordinance shall be subject to the following penalties:

a) Administrative fine of P5,000.00 shall be imposed against the proprietor, partnership or corporation undertaking the operation, conduct, maintenance of gambling CASINO in the City and closure thereof;

b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine in the amount of P5,000.00 or both at the discretion of the court against the manager, supervisor, and/or any person responsible in the establishment, conduct and maintenance of gambling CASINO.

Sec. 3. — This Ordinance shall take effect ten (10) days after its publication in a local newspaper of general circulation.

Pryce assailed the ordinances before the Court of Appeals, where it was joined by PAGCOR as intervenor and supplemental petitioner. Their challenge succeeded. On March 31, 1993, the Court of Appeals

declared the ordinances invalid and issued the writ prayed for to prohibit their enforcement. 1 Reconsideration of this decision was denied on July 13, 1993. 2

Cagayan de Oro City and its mayor are now before us in this petition for review under Rule 45 of the Rules of Court. 3 They aver that the respondent Court of Appeals erred in holding that:

1. Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de Oro does not have the power and authority to prohibit the establishment and operation of a PAGCOR gambling casino within the City's territorial limits.

2. The phrase "gambling and other prohibited games of chance" found in Sec. 458, par. (a), sub-par. (1) — (v) of R.A. 7160 could only mean "illegal gambling."

3. The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on that point.

4. The questioned Ordinances are discriminatory to casino and partial to cockfighting and are therefore invalid on that point.

5. The questioned Ordinances are not reasonable, not consonant with the general powers and purposes of the instrumentality concerned and inconsistent with the laws or policy of the State.

6. It had no option but to follow the ruling in the case of Basco, et al. v. PAGCOR, G.R. No. 91649, May 14, 1991, 197 SCRA 53 in disposing of the issues presented in this present case.

PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games of chance, including casinos on land and sea within the territorial jurisdiction of the Philippines. In Basco v. Philippine Amusements and Gaming Corporation, 4 this Court sustained the constitutionality of the decree and even cited the benefits of the entity to the national economy as the third highest revenue-earner in the government, next only to the BIR and the Bureau of Customs.

Cagayan de Oro City, like other local political subdivisions, is empowered to enact ordinances for the purposes indicated in the Local Government Code. It is expressly vested with the police power under what is known as the General Welfare Clause now embodied in Section 16 as follows:

Sec. 16. — General Welfare. — Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants.

In addition, Section 458 of the said Code specifically declares that:

Sec. 458. — Powers, Duties, Functions and Compensation. — (a) The Sangguniang Panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:

(1) Approve ordinances and pass resolutions necessary for an efficient and effective city government, and in this connection, shall:

xxx xxx xxx

(v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and maintenance of houses of ill repute, gambling and other prohibited games of chance, fraudulent devices and ways to obtain money or property, drug addiction, maintenance of drug dens, drug pushing, juvenile delinquency, the printing, distribution or exhibition of obscene or pornographic materials or publications, and such other activities inimical to the welfare and morals of the inhabitants of the city;

This section also authorizes the local government units to regulate properties and businesses within their territorial limits in the interest of the general welfare. 5

The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod may prohibit the operation of casinos because they involve games of chance, which are detrimental to the people. Gambling is not allowed by general law and even by the Constitution itself. The legislative power conferred upon local government units may be exercised over all kinds of gambling and not only over "illegal gambling" as the respondents erroneously argue. Even if the operation of casinos may have been permitted under P.D. 1869, the government of Cagayan de Oro City has the authority to prohibit them within its territory pursuant to the authority entrusted to it by the Local Government Code.

It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in Article II, Section 25, and Article X of the Constitution, as well as various other provisions therein seeking to strengthen the character of the nation. In giving the local government units the power to prevent or suppress gambling and other social problems, the Local Government Code has recognized the competence of such communities to determine and adopt the measures best expected to promote the general welfare of their inhabitants in line with the policies of the State.

The petitioners also stress that when the Code expressly authorized the local government units to prevent and suppress gambling and other prohibited games of chance, like craps, baccarat, blackjack and roulette, it meant all forms of gambling without distinction. Ubi lex non distinguit, nec nos distinguere debemos. 6 Otherwise, it would have expressly excluded from the scope of their power casinos and other forms of gambling authorized by special law, as it could have easily done. The fact that it did not do so simply means that the local government units are permitted to prohibit all kinds of gambling within their territories, including the operation of casinos.

The adoption of the Local Government Code, it is pointed out, had the effect of modifying the charter of the PAGCOR. The Code is not only a later enactment than P.D. 1869 and so is deemed to prevail in case of inconsistencies between them. More than this, the powers of the PAGCOR under the decree are expressly discontinued by the Code insofar as they do not conform to its philosophy and provisions, pursuant to Par. (f) of its repealing clause reading as follows:

(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly.

It is also maintained that assuming there is doubt regarding the effect of the Local Government Code on P.D. 1869, the doubt must be resolved in favor of the petitioners, in accordance with the direction in the Code calling for its liberal interpretation in favor of the local government units. Section 5 of the Code specifically provides:

Sec. 5. Rules of Interpretation. — In the interpretation of the provisions of this Code, the following rules shall apply:

(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted in favor of the local government unit concerned;

xxx xxx xxx

(c) The general welfare provisions in this Code shall be liberally interpreted to give more powers to local government units in accelerating economic development and upgrading the quality of life for the people in the community; . . . (Emphasis supplied.)

Finally, the petitioners also attack gambling as intrinsically harmful and cite various provisions of the Constitution and several decisions of this Court expressive of the general and official disapprobation of the vice. They invoke the State policies on the family and the proper upbringing of the youth and, as might be expected, call attention to the old case of U.S. v. Salaveria, 7 which sustained a municipal ordinance prohibiting the playing of panguingue. The petitioners decry the immorality of gambling. They also impugn the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in creating PAGCOR and authorizing it to operate casinos "on land and sea within the territorial jurisdiction of the Philippines."

This is the opportune time to stress an important point.

The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally considered inimical to the interests of the people, there is nothing in the Constitution categorically proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress to deal with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit gambling altogether or allow it without limitation or it may prohibit some forms of gambling and allow

others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but permits lotteries, cockfighting and horse-racing. In making such choices, Congress has consulted its own wisdom, which this Court has no authority to review, much less reverse. Well has it been said that courts do not sit to resolve the merits of conflicting theories. 8 That is the prerogative of the political departments. It is settled that questions regarding the wisdom, morality, or practicibility of statutes are not addressed to the judiciary but may be resolved only by the legislative and executive departments, to which the function belongs in our scheme of government. That function is exclusive. Whichever way these branches decide, they are answerable only to their own conscience and the constituents who will ultimately judge their acts, and not to the courts of justice.

The only question we can and shall resolve in this petition is the validity of Ordinance No. 3355 and Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod of Cagayan de Oro City. And we shall do so only by the criteria laid down by law and not by our own convictions on the propriety of gambling.

The tests of a valid ordinance are well established. A long line of decisions 9 has held that to be valid, an ordinance must conform to the following substantive requirements:

1) It must not contravene the constitution or any statute.

2) It must not be unfair or oppressive.

3) It must not be partial or discriminatory.

4) It must not prohibit but may regulate trade.

5) It must be general and consistent with public policy.

6) It must not be unreasonable.

We begin by observing that under Sec. 458 of the Local Government Code, local government units are authorized to prevent or suppress, among others, "gambling and other prohibited games of chance." Obviously, this provision excludes games of chance which are not prohibited but are in fact permitted by law. The petitioners are less than accurate in claiming that the Code could have excluded such games of chance but did not. In fact it does. The language of the section is clear and unmistakable. Under the rule of noscitur a sociis, a word or phrase should be interpreted in relation to, or given the same meaning of, words with which it is associated. Accordingly, we conclude that since the word "gambling" is associated with "and other prohibited games of chance," the word should be read as referring to only illegal gambling which, like the other prohibited games of chance, must be prevented or suppressed.

We could stop here as this interpretation should settle the problem quite conclusively. But we will not. The vigorous efforts of the petitioners on behalf of the inhabitants of Cagayan de Oro City, and the earnestness of their advocacy, deserve more than short shrift from this Court.

The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and the public policy embodied therein insofar as they prevent PAGCOR from exercising the power conferred on it to operate

a casino in Cagayan de Oro City. The petitioners have an ingenious answer to this misgiving. They deny that it is the ordinances that have changed P.D. 1869 for an ordinance admittedly cannot prevail against a statute. Their theory is that the change has been made by the Local Government Code itself, which was also enacted by the national lawmaking authority. In their view, the decree has been, not really repealed by the Code, but merely "modified pro tanto" in the sense that PAGCOR cannot now operate a casino over the objection of the local government unit concerned. This modification of P.D. 1869 by the Local Government Code is permissible because one law can change or repeal another law.

It seems to us that the petitioners are playing with words. While insisting that the decree has only been "modified pro tanto," they are actually arguing that it is already dead, repealed and useless for all intents and purposes because the Code has shorn PAGCOR of all power to centralize and regulate casinos. Strictly speaking, its operations may now be not only prohibited by the local government unit; in fact, the prohibition is not only discretionary but mandated by Section 458 of the Code if the word "shall" as used therein is to be given its accepted meaning. Local government units have now no choice but to prevent and suppress gambling, which in the petitioners' view includes both legal and illegal gambling. Under this construction, PAGCOR will have no more games of chance to regulate or centralize as they must all be prohibited by the local government units pursuant to the mandatory duty imposed upon them by the Code. In this situation, PAGCOR cannot continue to exist except only as a toothless tiger or a white elephant and will no longer be able to exercise its powers as a prime source of government revenue through the operation of casinos.

It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause, conveniently discarding the rest of the provision which painstakingly mentions the specific laws or the parts thereof which are repealed (or modified) by the Code. Significantly, P.D. 1869 is not one of them. A reading of the entire repealing clause, which is reproduced below, will disclose the omission:

Sec. 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise known as the "Local Government Code," Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are hereby repealed.

(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions, memoranda and issuances related to or concerning the barangay are hereby repealed.

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the Special Education Fund; Presidential Decree No. 144 as amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential Decree No. 436 as amended by Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.

(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.

(e) The following provisions are hereby repealed or amended insofar as they are inconsistent with the provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704; Sections 12 of Presidential Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No. 463, as amended; and Section 16 of Presidential Decree No. 972, as amended, and

(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly.

Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a clear and unmistakable showing of such intention. In Lichauco & Co. v. Apostol, 10 this Court explained:

The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of later date clearly reveals an intention on the part of the lawmaking power to abrogate the prior law, this intention must be given effect; but there must always be a sufficient revelation of this intention, and it has become an unbending rule of statutory construction that the intention to repeal a former law will not be imputed to the Legislature when it appears that the two statutes, or provisions, with reference to which the question arises bear to each other the relation of general to special.

There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private respondent points out, PAGCOR is mentioned as the source of funding in two later enactments of Congress, to wit, R.A. 7309, creating a Board of Claims under the Department of Justice for the benefit of victims of unjust punishment or detention or of violent crimes, and R.A. 7648, providing for measures for the solution of the power crisis. PAGCOR revenues are tapped by these two statutes. This would show that the PAGCOR charter has not been repealed by the Local Government Code but has in fact been improved as it were to make the entity more responsive to the fiscal problems of the government.

It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably destructive confrontation, courts must exert every effort to reconcile them, remembering that both laws deserve a becoming respect as the handiwork of a coordinate branch of the government. On the assumption of a conflict between P.D. 1869 and the Code, the proper action is not to uphold one and annul the other but to give effect to both by harmonizing them if possible. This is possible in the case before us. The proper resolution of the problem at hand is to hold that under the Local Government Code, local government units may (and indeed must) prevent and suppress all kinds of gambling within their territories except only those allowed by statutes like P.D. 1869. The exception reserved in such laws must be read into the Code, to make both the Code and such laws equally effective and mutually complementary.

This approach would also affirm that there are indeed two kinds of gambling, to wit, the illegal and those authorized by law. Legalized gambling is not a modern concept; it is probably as old as illegal gambling, if not indeed more so. The petitioners' suggestion that the Code authorizes them to prohibit all kinds of gambling would erase the distinction between these two forms of gambling without a clear indication that this is the will of the legislature. Plausibly, following this theory, the City of Manila could, by mere ordinance, prohibit the Philippine Charity Sweepstakes Office from conducting a lottery as authorized by R.A. 1169 and B.P. 42 or stop the races at the San Lazaro Hippodrome as authorized by R.A. 309 and R.A. 983.

In light of all the above considerations, we see no way of arriving at the conclusion urged on us by the petitioners that the ordinances in question are valid. On the contrary, we find that the ordinances

violate P.D. 1869, which has the character and force of a statute, as well as the public policy expressed in the decree allowing the playing of certain games of chance despite the prohibition of gambling in general.

The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal governments are only agents of the national government. Local councils exercise only delegated legislative powers conferred on them by Congress as the national lawmaking body. The delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a heresy to suggest that the local government units can undo the acts of Congress, from which they have derived their power in the first place, and negate by mere ordinance the mandate of the statute.

Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so it may destroy. As it may destroy, it may abridge and control. Unless there is some constitutional limitation on the right, the legislature might, by a single act, and if we can suppose it capable of so great a folly and so great a wrong, sweep from existence all of the municipal corporations in the State, and the corporation could not prevent it. We know of no limitation on the right so far as to the corporation themselves are concerned. They are, so to phrase it, the mere tenants at will of the legislature. 11

This basic relationship between the national legislature and the local government units has not been enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. Without meaning to detract from that policy, we here confirm that Congress retains control of the local government units although in significantly reduced degree now than under our previous Constitutions. The power to create still includes the power to destroy. The power to grant still includes the power to withhold or recall. True, there are certain notable innovations in the Constitution, like the direct conferment on the local government units of the power to tax, 12 which cannot now be withdrawn by mere statute. By and large, however, the national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it.

The Court understands and admires the concern of the petitioners for the welfare of their constituents and their apprehensions that the welfare of Cagayan de Oro City will be endangered by the opening of the casino. We share the view that "the hope of large or easy gain, obtained without special effort, turns the head of the workman" 13 and that "habitual gambling is a cause of laziness and ruin." 14 In People v. Gorostiza, 15 we declared: "The social scourge of gambling must be stamped out. The laws against gambling must be enforced to the limit." George Washington called gambling "the child of avarice, the brother of iniquity and the father of mischief." Nevertheless, we must recognize the power of the legislature to decide, in its own wisdom, to legalize certain forms of gambling, as was done in P.D. 1869 and impliedly affirmed in the Local Government Code. That decision can be revoked by this Court only if it contravenes the Constitution as the touchstone of all official acts. We do not find such contravention here.

We hold that the power of PAGCOR to centralize and regulate all games of chance, including casinos on land and sea within the territorial jurisdiction of the Philippines, remains unimpaired. P.D. 1869 has not

been modified by the Local Government Code, which empowers the local government units to prevent or suppress only those forms of gambling prohibited by law.

Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be amended or nullified by a mere ordinance. Hence, it was not competent for the Sangguniang Panlungsod of Cagayan de Oro City to enact Ordinance No. 3353 prohibiting the use of buildings for the operation of a casino and Ordinance No. 3375-93 prohibiting the operation of casinos. For all their praiseworthy motives, these ordinances are contrary to P.D. 1869 and the public policy announced therein and are therefore ultra vires and void.

WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of Appeals is AFFIRMED, with costs against the petitioners. It is so ordered.

Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. L-33628 December 29, 1987

BIENVENIDO A. EBARLE, SANTIAGO EISMA, MIRUFO CELERIAN, JOSE SAYSON, CESAR TABILIRAN, and MAXIMO ADLAWAN, petitioners, vs.HON. JUDGE MELQUIADES B. SUCALDITO, RUFINO LABANG, MENELEO MESINA, ARTURO GUILLERMO, IN THEIR RESPECTIVE CAPACITIES AS JUDGE OF THE COURT OF FIRST INSTANCE OF ZAMBOANGA DEL SUR, CITY FISCAL OF PAGADIAN CITY AND STATE PROSECUTOR, and ANTI-GRAFT LEAGUE OF THE PHILIPPINES, INC., respondents.

No. L-34162 December 29, 1987

BIENVENIDO A. EBARLE, petitioner, vs.HON. JUDGE ASAALI S. ISNANI, RUFINO LABANG, ALBERTO S. LIM, JR., JESUS ACEBES, IN THEIR RESPECTIVE CAPACITIES AS JUDGE OF THE COURT OF FIRST INSTANCE OF ZAMBOANGA DEL SUR, CITY FISCAL OF PAGADIAN CITY AND STATE PROSECUTORS, ANTI-GRAFT LEAGUE OF THE PHILIPPINES, INC., and ARTEMIO ROMANILLOS, respondents.

SARMIENTO, J.:

The petitioner, then provincial Governor of Zamboanga del Sur and a candidate for reelection in the local elections of 1971, seeks injunctive relief in two separate petitions, to enjoin further proceedings in Criminal Cases Nos. CCC XVI-4-ZDS, CCC XVI-6-ZDS, and CCC XVI-8-ZDS of the then Circuit Criminal Court sitting in Pagadian City, as well as I.S. Nos. 1-70, 2-71, 4-71, 5-71, 6-71, and 7-71 of the respondent Fiscal's office of the said city, all in the nature of prosecutions for violation of certain provisions of the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) and various provisions of the Revised Penal Code, commenced by the respondent Anti-Graft League of the Philippines, Inc.

On June 16, 1971 and October 8, 1971, respectively, we issued temporary restraining orders directing the respondents (in both petitions) to desist from further proceedings in the cases in question until further orders from the Court. At the same time, we gave due course to the petitions and accordingly, required the respondents to answer.

The petitions raise pure question of law. The facts are hence, undisputed.

On September 26, 1970, the private respondent Anti-Graft League of the Philippines, Inc., filed a complaint with the respondent City Fiscal, docketed as Criminal Case No. 1-70 thereof, for violation of the provisions of the Anti-Graft Law as well as Article 171 of the Revised Penal Code, as follows:

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SPECIFICATION NO. I —

That on or about October 10, 1969, above-named respondents, conspiring and confabulating together, allegedly conducted a bidding for the supply of gravel and sand for the Province of Zamboanga del Sur: that it was made to appear that Tabiliran Trucking Company won the bidding; that, thereafter, the award and contract pursuant to the said simulated bidding were effected and executed in favor of Tabiliran Trucking Company; that, in truth and in fact, the said bidding was really simulated and the papers on the same were falsified to favor Tabiliran Trucking Company, represented by the private secretary of respondent Bienvenido Ebarle, formerly confidential secretary of the latter; that said awardee was given wholly unwarranted advantage and preference by means of manifest partiality; that respondent officials are hereby also charged with interest for personal gain for approving said award which was manifestly irregular and grossly unlawful because the same was facilitated and committed by means of falsification of official documents.

SPECIFICATION NO. II

That after the aforecited award and contract, Tabiliran Trucking Company, represented by respondent Cesar Tabiliran, attempted to collect advances under his trucking contract in the under his trucking contract in the amount of P4,823.95 under PTA No. 3654; that the same was not passed in audit by the Provincial Auditor in view of the then subsisting contract with Tecson Trucking Company; which was to

expire on November 2, 1969; that nevertheless the said amount was paid and it was made to appear that it was collected by Tecson Trucking Company, although there was nothing due from tile latter and the voucher was never indorsed or signed by the operator of Tecson Trucking; and that in facilitating and consummating the aforecited collection, respondent officials, hereinabove cited, conspired and connived to the great prejudice and damage of the Provincial Government of Zamboanga del Sur. 1

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On the same date, the private respondent commenced Criminal Case No. 2-71 of the respondent City Fiscal, another proceeding for violation of Republic Act No. 3019 as well as Article 171 of the Revised Penal Code. The complaint reads as follows:

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That on or about April 8, 1970, a bidding was held for the construction of the right wing portion of the Capitol Building of the Province of Zamboanga del Sur, by the Bidding Committee composed of respondents cited hereinabove; that the said building was maliciously manipulated so as to give wholly unwarranted advantage and preference in favor of the, supposed winning bidder, Codeniera Construction, allegedly owned and managed by Wenceslao Codeniera, brother-in-law of the wife of respondent Bienvenido Ebarle; that respondent official is interested for personal gain because he is responsible for the approval of the manifestly irregular and unlawful award and contract aforecited; and that, furthermore, respondent, being a Member of the Bidding Committee, also violated Article 171 of the Revised Penal Code, by making it appear in the very abstract of bids that another interested bidder, was not interested in the bidding, when in truth and in fact, it was not so. 2

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On January 26, 1971, the private respondent instituted I.S. No. 4-71 of the respondent Fiscal, a prosecution for violation of Articles 182, 183, and 318 of the Revised Penal Code, as follows:

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That on or about April 4, 1967, in Pagadian City, said respondent testified falsely under oath in Cadastral Case No. N-17, LRC CAD REC. NO. N-468, for registration of title to Lot No. 2545 in particular;

That respondent BIENVENIDO EBARLE testified falsely under oath during the hearing and reception of evidence that he acquired said lot by purchase from a certain Brigido Sanchez and that he is the owner, when in truth and in fact Lot 2545 had been previously acquired and is owned by the provincial Government of Zamboanga del Sur, where the provincial jail building is now located.

2. That aforesaid deceit, false testimony and untruthful statement of respondent in said Cadastral case were made knowingly to the great damage and prejudice of the Provincial Government of Zamboanga del Sur in violation of aforecited provisions of the Revised Penal Code. 3

On February 10, 1971, finally, the private respondent filed a complaint, docketed as I.S. No. 5-71 of the respondent Fiscal, an action for violation of Republic Act No. 3019 and Articles 171 and 213 of the Revised Penal Code, as follows:

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We hereby respectfully charge the above-named respondents for violation of Sec. 3, R.A. No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, Articles 171 and 213, Revised Penal Code and the rules and regulations of public bidding, committed as follows:

1. That on June 16, 1970, without publication, respondents conducted the so-called "bidding" for the supply of gravel and sand for the province of Zamboanga del Sur; that said respondents, without any valid or legal ground, did not include or even open the bid of one Jesus Teoson that was seasonably submitted, despite the fact that he is a registered duly qualified operator of "Teoson Trucking Service," and notwithstanding his compliance with all the rules and requirements on public bidding; that, instead, aforecited respondents illegally and irregularly awarded said contract to Cesar Tabiliran, an associate of respondent Governor Bienvenido Ebarle; and

2. That in truth and in fact, aforesaid "bidding" was really simulated and papers were falsified or otherwise "doctored" to favor respondent Cesar Tabiliran thereby giving him wholly unwarranted advantage, preference and benefits by means of manifest partiality; and that there is a statutory presumption of interest for personal gain because the transaction and award were manifestly irregular and contrary to applicable law, rules and regulations. 4

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The petitioner initially moved to dismiss the aforesaid preliminary investigations, but the same having been denied, he went to the respondent Court of First Instance of Zamboanga del Sur, the Honorable Melquiades Sucaldito presiding, on prohibition and mandamus (Special Case No. 1000) praying at the same time, for a writ of preliminary injunction to enjoin further proceedings therein. The court granted preliminary injunctive relief (restraining order) for which the Anti-Graft League filed a motion to have the restraining order lifted and to have the petition itself dismissed.

On May 14, 1971, the respondent, Judge Sucaldito, handed down the first of the two challenged orders, granting Anti-Graft League's motion and dismissing Special Case No. 1000.

On June 11, 1971, the petitioner came to this Court on certiorari with prayer for a temporary restraining order (G.R. No. 33628). As we said, we issued a temporary restraining order on June 16, 1971.

Meanwhile, and in what would begin yet another series of criminal prosecutions, the private respondent, on April 26, 1971, filed three complaints, subsequently docketed as Criminal Cases Nos. CCC XVI-4-ZDS, CCC XVI-6-ZDS, and CCC XVI-8-ZDS of the Circuit Criminal Court of Pagadian City for violation of various provisions of the Anti-Graft Law as well as Article 171(4) of the Revised Penal Code, as follows:

xxx xxx xxx

That on or about December 18, 1969, in Pagadian City, and within the jurisdiction of this Honorable Court, BIENVENIDO A. EBARLE, Provincial Governor of Zamboanga del Sur, did then and there unlawfully and feloniously extended and gave ELIZABETH EBARLE MONTESCLAROS, daughter of his brother, his relative by consanguinity within the third degree, and appointment as Private Secretary in the Office of the Provincial Governor of Zamboanga del Sur, although he well know that the latter is related with him within the third degree by consanguinity.

CONTRARY TO LAW. 5

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That on or about December 18, 1969, in Pagadian City, and within the jurisdiction of this Honorable Court, BIENVENIDO A. EBARLE, then and there unlawfully and feloniously made untruthful statements in a narration of facts by accomplishing and issuing a certificate, to wit: ,

c. That the provisions of law and rules on promotion, seniority and nepotism have been observed.

required by law in such cases, in support of the appointment he extended to ELIZABETH EBARLE-MONTESCLAROS as Private Secretary in the Office of the Provincial Governor of Zamboanga del Sur, although he well know that the latter is related with him within the third degree of consanguinity.

CONTRARY TO LAW. 6

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xxx xxx xxx

That on or about December 18, 1969, in Pagadian City, and within the jurisdiction of this Honorable Court, BIENVENIDO A. EBARLE, then and there unlawfully and feloniously made untruthful statements in a narration of facts by accomplishing and issuing a certificate, to wit:

c. That the provisions of law and rules on promotion, seniority and nepotism have been observed.

required by law in such cases, in support of the appointment he extended to TERESITO MONTESCLAROS, husband of his niece Elizabeth Ebarle, as Motor Pool Dispatcher, Office of the Provincial Engineer of Zamboanga del Sur, although he well knew that the latter is related with him within the third degree affinity.

CONTRARY TO LAW. 7

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Subsequently, on August 23, 1971, the private respondent brought I.S. No. 6-71 of the respondent Pagadian City Fiscal against the petitioner, still another proceeding for violation of Republic Act No. 3019 and Article 171 (4) of the Revised Penal Code, thus:

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First Count.

That on or about December 1, 1969, in Pagadian City, BIENVENIDO A. EBARLE, Provincial Governor of Zamboanga del Sur, did then and there unlawfully and feloniously extended and gave MARIO EBARLE, son of his brother, his relative by consanguinity within the third degree, an appointment as SECURITY GUARD in the Office of the Provincial Engineer of Zamboanga del Sur although he well knew that the latter is related with him in the third degree by consanguinity and is not qualified under the Civil Service Law.

Second Count.

That in January, 1970, at Pagadian City, Gov. BIENVENIDO A. EBARLE replaced JOHNNY ABABON who was then the incumbent Motor Pool Dispatcher in the Office of the Provincial Engineer of Zamboanga del Sur with his nephew-in-law TERESITO MONTESCLAROS relative by affinity within the third Civil degree, in violation of the Civil Service Law, this knowingly causing undue injury in the discharge of his administrative function through manifest partiality against said complaining employee.

Third Count:

That on or about December 18, 1969, in Pagadian City, BIENVENIDO A. EBARLE, Provincial Governor of Zamboanga del Sur, did then and there unlawfully and feloniously extended and gave ELIZABETH EBARLE MONTESCLAROS, daughter of his brother, his relative by consanguinity within the third degree, an appointment as Private Secretary in the Office of the Provincial Governor of Zamboanga del Sur, although he well know that the latter is related with him within the third degree of consanguinity, and said appointment is in violation of the Civil Service Law.

Fourth Count.

That on or about January 22, 1970, in Pagadian City, BIENVENIDO A. EBARLE, Provincial Governor of Zamboanga del Sur, did then and there unlawfully and feloniously extended and gave ZACARIAS UGSOD, JR., son of the younger sister of Governor Ebarle, his relative by consanguinity within the third degree, an appointment as Architectural Draftsman in the Office of the Provincial Engineer of Zamboanga del Sur although he well know that the latter is related with him in the third degree of consanguinity.

Fifth Count.

That on February 5, 1970, at Pagadian City, BIENVENIDO A. EBARLE, Provincial Governor of Zamboanga del Sur, did then and there unlawfully and feloniously extended and gave TERESITO MONTESCLAROS, husband of his niece ELIZABETH EBARLE, his relative by affinity within the third degree, an appointment as Motor Pool Dispatcher, Office of the Provincial Engineer of Zamboanga del Sur, although he wen knew then that the latter was not qualified to such appointment as it was in violation of the Civil Service Law, thereby knowingly granting and giving unwarranted advantage and preference in the discharge of his administrative function through manifest partiality.

II. SPECIFICATION FOR VIOLATION OF SECTION 4 (b), R.A. 3019

That on August 19, 1967, respondent BIENVENIDO A. EBARLE, Governor of Zamboanga del Sur, taking advantage of his position caused, persuaded, induced, or influence the Presiding Judge to perform irregular and felonious act in violation of applicable law or constituting an offense into awarding and decreeing Lot 2645 of the Pagadian Public Lands subdivision to him who, according to the records of the case, failed to establish his rights of ownership pursuant to the provisions of the Land Registration law and the Public Land Act, it appearing that the Provincial Government of Zamboanga del Sur as and is a claimant and in adverse possession of Lot 2545 whereon the Provincial Jail Building thereon still stands.

III. SPECIFICATION FOR VIOLATION OF ARTICLE 171 (4), REVISED PENAL CODE

First Count.

That on or about December 18, 1969, in Pagadian City, BIENVENIDO A. EBARLE, then and there unlawfully and feloniously made untruthful statement in a narration of facts by accomplishing and issuing a certificate, to wit:

c. That the provisions of law and rules on promotion, seniority and nepotism have been observed.

required by law in such cases, in support of the appointment he extended to TERESITO MONTESCLAROS, husband of his niece ELIZABETH EBARLE, as Motor Pool Dispatcher, Office of the Provincial Engineer of Zamboanga del Sur, although he wen knew that the latter is related with him within the third degree of affinity and is in violation of the Civil Service Law.

Second Count.

That on or about December 18, 1969, in Pagadian City, BIENVENIDO A. EBARLE, then and there unlawfully and feloniously made untruthful statements a certificate, to wit:

c. That the provisions of the law and rules on promotion, seniority and nepotism have been observed.

required by law in such cases, in support of the appointment he extended to ELIZABETH EBARLE-MONTESCLAROS as Private Secretary in the Office of the Provincial Governor of Zamboanga del Sur, although he well knew that the latter is related with him within the third degree of consanguinity, and is in violation of the Civil Service Law. CONTRARY to aforecited laws. 8

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On September 21, 1971, the private respondent instituted I.S. No. 7-71 of the said City Fiscal, again charging the petitioner with further violations of Republic Act No. 3019 thus:

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First Count.

That on or about December 2, 1969, in Pagadian City, BIENVENIDO EBARLE, Provincial Governor of Zamboanga del Sur, did then and there unlawfully and feloniously extend and give unwarranted benefits and privileges BONINDA EBARLE, wife of his brother Bertuldo Ebarle, the former being his relative by affinity within the second civil degree, an appointment as LABORATORY TECHNICIAN in Pagadian City, although he well knew that the latter is related to him in the second degree by affinity and is not qualified under the Civil Service Law.

Second Count.

That on or about January 1, 1970, at Pagadian City, BIENVENIDO EBARLE, Provincial Governor of Zamboanga del Sur, did then and there unlawfully and feloniously extend and give unwarranted benefits and privileges JESUS EBARLE, nephew of said respondent, an appointment as DRIVER of the Provincial Engineer's Office, Pagadian City, although he well knew that Jesus Ebarle is related to him within the third civil degree by consanguinity and is not qualified under the Civil Service Law.

Third Count.

That on or about November 1, 1969, at Pagadian City, BIENVENIDO EBARLE, Provincial Governor of Zamboanga del Sur, did then and there unlawfully and feloniously extend and give unwarranted benefits and privileges PHENINA CODINERA, sister-in-law of said respondent, an appointment as CONFIDENTIAL ASSISTANT in the Office of the Provincial Governor, Pagadian City, although he well knew that Phenina Codinera is related to him in the second civil degree of consanguinity and is not qualified under the Civil Service Law.

ALL CONTRARY TO AFORECITED LAW.

Please give due course to the above complaint and please set the case for immediate preliminary investigation pursuant to the First Indorsement dated August 27, 1971 of the Secretary of Justice, and in the paramount interest of good government. 9

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The petitioner thereafter went to the respondent Court of First Instance of Zamboanga del Sur, the Honorable Asaali Isnani presiding, on a special civil action (Special Civil Case No. 1048) for prohibition and certiorari with preliminary injunction. The respondent Court issued a restraining order. The respondent Anti-Graft League moved to have the same lifted and the case itself dismissed.

On September 27, 1971, Judge Isnani issued an order, dismissing the case.

On October 6, 1971, the petitioner instituted G.R. No. 34162 of this Court, a special civil action for certiorari with preliminary injunction. As earlier noted, we on October 8, 1971, stayed the implementation of dismissal order.

Subsequently, we consolidated both petitions and considered the same submitted for decision.

Principally, the petitioner relies (in both petitions) on the failure of the respondents City Fiscal and the Anti-Graft League to comply with the provisions of Executive Order No. 264, "OUTLINING THE PROCEDUE BY WHICH COMPLAINANTS CHARGING GOVERNMENT OFFICIALS AND EMPLOYEES WITH COMMISSION OF IRREGULARITIES SHOULD BE GUIDED," 10 preliminary to their criminal recourses. At the same time, he assails the standing of the respondent Anti-Graft League to commence the series of prosecutions below (G.R. No. 33628). He likewise contends that the respondent Fiscal (in G.R. No. 34162), in giving due course to the complaints notwithstanding the restraining order we had issued (in G.R. No. 33628), which he claims applies as well thereto, committed a grave abuse of discretion.

He likewise submits that the prosecutions in question are politically motivated, initiated by his rivals, he being, as we said, a candidate for reelection as Governor of Zamboanga del Sur.

We dismiss these petitions.

The petitioner's reliance upon the provisions of Executive Order No. 264 has no merit. We reproduce the Order in toto:

MALACAÑANG

RESIDENCE OF THE PRESIDENT

OF THE PHILIPPINES

MANILA

BY THE PRESIDENT OF THE PHILIPPINES

EXECUTIVE ORDER NO. 264

OUTLINING THE PROCEDURE BY WHICH COMPLAINANTS CHARGING GOVERNMENT OFFICIALS AND EMPLOYEES WITH COMMISSION OF IRREGULARITIES SHOULD BE GUIDED.

WHEREAS, it is necessary that the general public be duly informed or reminded of the procedure provided by law and regulations by which complaints against public officials and employees should be presented and prosecuted.

WHEREAS, actions on complaints are at times delayed because of the failure to observe the form.91 requisites therefor, to indicate with sufficient clearness and particularity the charges or offenses being aired or denounced, and to file the complaint with the proper office or authority;

WHEREAS, without in any way curtailing the constitutional guarantee of freedom of expression, the Administration believes that many complaints or grievances could be resolved at the lower levels of government if only the provisions of law and regulations on the matter are duly observed by the parties concerned; and

WHEREAS, while all sorts of officials misconduct should be eliminated and punished, it is equally compelling that public officials and employees be given opportunity afforded them by the constitution and law to defend themselves in accordance with the procedure prescribed by law and regulations;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by law, do hereby order:

1. Complaints against public officials and employees shall be in writing, subscribed and sworn to by the complainants, describing in sufficient detail and particularity the acts or conduct complained of, instead of generalizations.

2. Complaints against presidential appointees shag be filed with the Office of the President or the Department Head having direct supervision or control over the official involved.

3. Those against subordinate officials and employees shall be lodged with the proper department or agency head.

4. Those against elective local officials shall be filed with the Office of the President in case of provincial and city officials, with the provincial governor or board secretary in case of municipal officials, and with the municipal or city mayor or secretary in case of barrio officials.

5. Those against members of police forces shall be filed with the corresponding local board of investigators headed by the city or municipal treasurer, except in the case of those appointed by the President which should be filed with the Office of the President.

6. Complaints against public officials and employees shall be promptly acted upon and disposed of by the officials or authorities concerned in accordance with pertinent laws and regulations so that the erring officials or employees can be soonest removed or otherwise disciplined and the innocent, exonerated or vindicated in like manner, and to the end also that other remedies, including court action, may be pursued forthwith by the interested parties after administrative remedies shall have been exhausted.

Done in the City of Manila, this 6th day of October, in the year of Our Lord, nineteen hundred and seventy.

(Sgd.) FERDINAND E. MARCOS

President of the Philippines

By the President:

(Sgd.) ALEJANDRO MELCHOR

Executive Secretary 11

It is plain from the very wording of the Order that it has exclusive application to administrative, not criminal complaints. The Order itself shows why.

The very title speaks of "COMMISSION OF IRREGULARITIES." There is no mention, not even by implication, of criminal "offenses," that is to say, "crimes." While "crimes" amount to "irregularities," the Executive Order could have very well referred to the more specific term had it intended to make itself applicable thereto.

The first perambulatory clause states the necessity for informing the public "of the procedure provided by law and regulations by which complaints against public officials and employees should be presented and prosecuted. 12 To our mind, the "procedure provided by law and regulations" referred to pertains to existing procedural rules with respect to the presentation of administrative charges against erring government officials. And in fact, the aforequoted paragraphs are but restatements thereof. That presidential appointees are subject to the disciplinary jurisdiction of the President, for instance, is a reecho of the long-standing doctrine that the President exercises the power of control over his appointees. 13 Paragraph 3, on the other hand, regarding subordinate officials, is a mere reiteration of Section 33 of Republic Act No. 2260, the Civil Service Act (of 1959) then in force, placing jurisdiction upon "the proper Head of Department, the chief of a bureau or office" 14 to investigate and decide on matters involving disciplinary action.

Paragraph 4, which refers to complaints filed against elective local officials, reiterates, on the other hand, the Decentralization Act of 1967, providing that "charges against any elective provincial and city officials shall be preferred before the President of the Philippines; against any elective municipal official before the provincial governor or the secretary of the provincial board concerned; and against any elective barrio official before the municipal or secretary concerned. 15

Paragraph 5, meanwhile, is a reproduction of the provisions of the Police Act of 1966, vesting upon a "Board of Investigators" 16 the jurisdiction to try and decide complaints against members of the Philippine police.

Clearly, the Executive Order simply consolidates these existing rules and streamlines the administrative apparatus in the matter of complaints against public officials. Furthermore, the fact is that there is no reference therein to judicial or prejudicial (like a preliminary investigation conducted by the fiscal) recourse, not because it makes such a resort a secondary measure, but because it does not intend to serve as a condition precedent to, much less supplant, such a court resort.

To be sure, there is mention therein of "court action[s] [being] pursued forthwith by the interested parties, " 17 but that does not, so we hold, cover proceedings such as criminal actions, which do not require a prior administrative course of action. It will indeed be noted that the term is closely shadowed by the qualification, "after administrative remedies shall have been exhausted," 18 which suggests civil suits subject to previous administrative action.

It is moreover significant that the Executive Order in question makes specific reference to "erring officials or employees ... removed or otherwise vindicated. 19 If it were intended to apply to criminal prosecutions, it would have employed such technical terms as "accused", "convicted," or "acquitted." While this is not necessarily a controlling parameter for all cases, it is here material in construing the intent of the measure.

What is even more compelling is the Constitutional implications if the petitioner's arguments were accepted. For Executive Order No. 264 was promulgated under the 1935 Constitution in which legislative power was vested exclusively in Congress. The regime of Presidential lawmaking was to usher in yet some seven years later. If we were to consider the Executive Order law, we would be forced to say that it is an amendment to Republic Act No. 5180, the law on preliminary investigations then in effect, a situation that would give rise to a Constitutional anomaly. We cannot accordingly countenace such a view.

The challenge the petitioner presents against the personality of the Anti-Graft League of the Philippines to bring suit is equally without merit. That the Anti-Graft League is not an "offended party" within the meaning of Section 2, Rule 110, of the Rules of Court (now Section 3 of the 1985 Rules on Criminal Procedure), cannot abate the complaints in question.

A complaint for purposes of preliminary investigation by the fiscal need not be filed by the "offended party." The rule has been that, unless the offense subject thereof is one that cannot be prosecuted de oficio, the same may be filed, for preliminary investigation purposes, by any competent person. 20 The "complaint" referred to in the Rule 110 contemplates one filed in court, not with the fiscal, In that case, the proceeding must be started by the aggrieved party himself. 21

For as a general rule, a criminal action is commenced by complaint or information, both of which are filed in court. In case of a complaint, it must be filed by the offended party; with respect to an information, it is the fiscal who files it. But a "complaint" filed with the fiscal prior to a judicial action may be filed by any person.

The next question is whether or not the temporary restraining order we issued in G.R. No. 33628 embraced as well the complaint subject of G.R. No. 34162.

It is noteworthy that the charges levelled against the petitioner — whether in G.R. No. 33628 or 34162 — refer invariably to violations of the Anti-Graft Law or the Revised Penal Code. That does not, however, make such charges Identical to one another.

The complaints involved in G.R. No. 34162 are, in general, nepotism under Sections 3(c) and (j) of Republic Act No. 3019; exerting influence upon the presiding Judge of the Court of First Instance of Zamboanga del Sur to award a certain parcel of land in his favor, over which the provincial government itself lays claims, contrary to the provisions of Section 4(b) of Republic Act No. 3019; and making untruthful statements in the certificates of appointment of certain employees in his office. On the other hand, the complaints subject matter of G.R. No. 33628 involve charges of simulating bids for the supply of gravel and sand for certain public works projects, in breach of Section 3 of the Anti-Graft statute; manipulating bids with respect to the construction of the capitol building; testifying falsely in connection with Cadastral Case No. N-17, LRC Cad. Rec. N-468, in which the petitioner alleged that he was the owner of a piece of land, in violation of Articles 182, 183, and 318 of the Revised Penal Code; and simulating bids for the supply of gravel and sand in connection with another public works project.

It is clear that the twin sets of complaints are characterized by major differences. When, therefore, we restrained further proceedings in I.S. Nos. 1-71, 2-71, and 4-71, subject of G.R. No. 33628. we did not consequently stay the proceedings in CCC-XVI-4-ZDS, CCC XVI-6-ZDS, CCC XVI-8-ZDS, and I.S. Nos. 6-71 and 7-71, the same proceedings we did restrain in G.R. No. 34162.

This brings us to the last issue: whether or not the complaints in question are tainted with a political color.

It is not our business to resolve complaints the disposition of which belongs to another agency, in this case, the respondent Fiscal. But more than that, and as a general rule, injunction does not lie to enjoin criminal prosecutions. 22 The rule is subject to exceptions, to wit: (1) for the orderly administration of justice; (2) to prevent the use of the strong arm of the law in an oppressive and vindictive manner; (3) to avoid multiplicity of actions; (4) to afford adequate protection to constitutional rights; and (5) because the statute relied on is constitutionally infirm or otherwise void. 23 We cannot perceive any of the exceptions applicable here. The petitioner cries foul, in a manner of speaking, with respect to the deluge of complaints commenced by the private respondent below, but whether or not they were filed for harassment purposes is a question we are not in a position to decide. The proper venue, we believe, for the petitioner's complaint is precisely in the preliminary investigations he wishes blocked here.

WHEREFORE, the petitions are DISMISSED. The temporary restraining orders are LIFTED and SET ASIDE. Costs against the petitioners.

It is so ORDERED.

Yap (Chairman), Melencio-Herrera, Paras, and Padilla, JJ., concur.

Footnotes

1 Rollo, G.R. No. 33628,40-41.

2 Id, No. 42.

3 Id, No. 43.

4 Id, 45-46.

5 Rollo, G.R. No. 34162,98 (Crim. Case No. CCC XVI-4-ZDS).

6 Id, 99 (Crim. Case No. CCC XVI-6-ZDS).

7 Id, 100 (Crimi. Case No. CCC XVI-8-ZDS).

8 Id, 32-35.

9 Id, 94-95.

10 Exec. Order No. 264 (1970), 66 O.G. 9344 (Oct. 1970).

11 Supra, 9394-9395.

12 Supra, 9394.

13 See supra, par. 2; Ang-Angco v. Castillo, No. L-17169, November 30,1963, 9 SCRA 619 (1963).

14 Rep. Act No. 2260, sec. 33 (1959).

15 Rep. Act No. 5185, sec. 5 (1967).

16 Rep. Act No. 4864, sec. 15 (1966).

17 Supra, par. 6.

18 Supra, 19 Supra

20 Hernandez v. Albano, No. L-17081, May 31, 1961, 2 SCRA 607 (1961).

21 Supra.

22 Asutilla v. Philippine National Bank, No. L-51354, January 15; 1986, 141 SCRA 40 (1986); Guingona, Jr. v. City Fiscal of Manila, No. L- 60033, April 4,1984,128 SCRA 577 (1984).

23 Supra.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. L-21734 September 5, 1975

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs.ABELARDO SUBlDO, defendant-appellant.

Office of the Solicitor General Edilberto Barot and Solicitor Ceferino Padua for plaintiff-appellee. Estanislao A. Fernandez for defendant-appellant.

MARTIN, J.:

Appeal on questions of law from the Orders of the Court of First Instance of Manila in Criminal Case No. 23041, entitled People of the Philippines versus Abelardo Subido, denying defendant-appellant's motion for the cancellation of his appeal bond and declaring him to suffer subsidiary imprisonment in case of failure to pay the fine and indemnity.

From an adverse decision in said case, the dispositive portion of which reads:

From the facts above stated the Court finds the accused guilty of libel and he is hereby sentenced to three (3) months of arresto mayor with the accessory penalties of the law, to pay a fine of five hundred (P500.00) pesos, to indemnify the offended party, Mayor Arsenio Lacson in the sum of ten thousand (P10,000.00) pesos, with subsidiary imprisonment in case of insolvency, and to pay the costs.

defendant-appellant Abelardo Subido has taken an appeal to the Court of Appeals, which modified the said judgment in the following tenor:

However, in the application of the penalty provided for the violation of the libel law, the courts are given discretion of whether or not both fine and imprisonment are to be imposed upon the offender. In the instant case, we believe, considering the attendant circumstances of the case that the imposition of the corresponding penalty should be tempered with judicial discretion. For this reason, we impose upon accused-appellant a fine of P500.00.

Similarly, the amount of the indemnity to be paid by appellant to the offended party is reduced to P5,000.00.

WHEREFORE, with the modifications above indicated, the appealed judgment is hereby affirmed at appellant's costs.

In due time the case was remanded to the trial court for execution of the judgment.

On September 27, 1958, the accused-appellant filed a motion with the trial court praying that (1) the court enter of record that the judgment of the Court of Appeals has been promulgated and (2) that his appeal bond be cancelled. Accused-appellant argued that although he could not pay the fine and the indemnity prescribed in the judgment of the Court of Appeals, he could not be required to serve the amount of fine and indemnity in the form of subsidiary imprisonment because said judgment did not expressly and specifically provide that he should serve the fine and indemnity in form of subsidiary imprisonment in case of insolvency.

On December 20, 1958, upon motion of the offended party the lower court issued a writ of execution of its judgment. However, the writ was returned unsatisfied.

On February 25, 1959, the Sheriff of the City of Manila, armed with an alias writ of execution, attached "whatever rights, interests, or participation, if any, defendant Abelardo Subido may have" in a two-storey building situated at No. 2313 Suter, Sta. Ana, Manila, covered by Transfer Certificate of Title No. 54170 of the Register of Deeds of Manila. However, it turned out that the property levied upon be the sheriff was registered in the name of Agapito Subido who, upon learning of the levy, immediately filed a

Third party claim with the sheriff's office and instituted an action in the lower court (Civil Case No. 41731) to enjoin the Sheriff of Manila from proceeding with the sale of his property. In the meantime the lower court issued a writ of preliminary injunction enjoining the sale of property levied upon by the sheriff.

On December 10, 1959, the offended party registered its opposition to accused-appellant's motion for cancellation of appeal bond and asked the lower court to require accused-appellant to pay the fine of P500.00 and the indemnity of P5,000.00 with subsidiary imprisonment in case of insolvency.

On December 19, 1959, the lower court issued an order denying the accused-appellant's motion and declared that in accordance with the terms of the judgment of the Court of Appeals the accused-appellant has to suffer subsidiary imprisonment in case he could not pay the fine and indemnity prescribed in the decision. Accused-appellant moved for reconsideration, but the same was denied on December 26, 1959.

Hence this appeal from the lower court's orders of December 19 and 26.

In his appeal, accused-appellant presses that the lower court erred

I

IN HOLDING THAT UNDER THE TERMS OF THE DECISION OF THE COURT OF APPEALS ACCUSED-APPELLANT IS LIABLE TO SUBSIDIARY IMPRISONMENT IN CASE OF INSOLVENCY.

II

IN NOT HOLDING THAT THE CIVIL LIABILITY OF ACCUSED-APPELLANT HAS BEEN SATISFIED WITH THE ATTACHMENT SECURED BY THE OFFENDED PARTY. 1

The threshold issue in this appeal is whether or not the accused-appellant can be required to serve the fine and indemnity prescribed in the judgment of the Court of Appeals in form of subsidiary imprisonment in case of insolvency. Under Article 355 of the Revised Penal Code "a libel committed by means of writing, printing, litography, engraving, radio, phonograph, paintings, theatrical exhibition, cinematographic exhibition or any similar means, shall be punished by prision correccional in its minimum and medium period or a fine ranging from 200 to 6000 pesos or both, in addition to the civil action which may be brought by the offended party". It is evident from the foregoing provision that the court is given the discretion to impose the penalty of imprisonment or fine or both for the crime of libel. It will be noted that the lower court chose to impose upon the accused: three months of arresto mayor; a fine of P500.00; indemnification of the offended party in the sum of P10,000.00; subsidiary imprisonment in case of insolvency; and the payment of the costs. On the other hand, the Court of Appeals in the exercise of its discretion decided to eliminate the penalty of three (3) months arresto mayor and to reduce the indemnity of P10,000.00 to P5,000.00.

Thus the Court of Appeals resolved:

However, in the application of the penalty provided for in the violation of the libel law, the courts are given discretion of whether or not both fine and imprisonment are to be imposed upon the offender. In the instant case, we believe, considering the attendant circumstances of the same, that the imposition of the corresponding penalty should be tempered with judicial discretion. For this reason we impose the accused a fine of P500.00.

Similarly, the amount of the indemnity to be paid by appellant to the offended party is reduced to P5,000.00.

WHEREUPON, with the modifications above indicated, the appealed judgment is hereby affirmed at appellant's cost.

To Us it is clear that when the Court of Appeals provided in the concluding portion of its decision:

WHEREUPON, with the modifications above indicated, the appealed judgment is hereby affirmed at appellant's costs

the alluded modifications could mean no less than the elimination of the three months of arresto mayor and the reduction of the indemnity to the offended party, Mayor Arsenio Lacson, from P10,000.00 to P5,000.00. All the rest of the punishment remains including the subsidiary imprisonment in case of insolvency. Had the Court wanted to do away with the subsidiary imprisonment in case of insolvency of accused-appellant to pay the fine and the indemnity it would have so expressly provided.

A careful scrutiny of the decision of the trial court reveals that the clause "with subsidiary imprisonment in case of insolvency" is separated by a comma (,) from the preceding clause" is hereby sentenced to three months of arresto mayor with the accessory penalties of the law, to pay a fine of five hundred (P500.00) pesos, to indemnify the offended party, Mayor Arsenio Lacson, in the sum of Ten Thousand Pesos (P10,000.00) pesos." The use of a comma (,) in the part of the sentence is to make "the subsidiary imprisonment in case of insolvency" refer not only to non-payment of the indemnity, but also to non-payment of the fine.

If the lower court intended to make the phrase "with subsidiary imprisonment in case of insolvency" refer to non-payment of indemnity only and not to the non-payment of the fine, it would have omitted the comma (,), after the phrase "to indemnify the offended party, Mayor Arsenio Lacson in the amount of P10,000.00 pesos," so that the decision of the lower court would read:

From the facts above stated the Court finds the accused guilty of libel and he is hereby sentenced to three (3) months of arresto mayor, to pay a fine of five hundred (P500.00) pesos, to indemnify the offended party, Mayor Arsenio Lacson, in the sum of ten thousand (P10,000.00) pesos with subsidiary imprisonment in case of insolvency, and to pay the costs.

As thus worded and punctuated there would be no doubt that the lower court would want to make accused-appellant serve the subsidiary imprisonment in case of non-payment of the indemnity only.

Besides, We see no plausible reason why the lower court would want accused-appellant to suffer subsidiary imprisonment in case of insolvency to pay the indemnity only and not to suffer subsidiary imprisonment in case of non-payment of the fine. Accordingly if according to the lower court's decision, the accused-appellant should suffer subsidiary imprisonment in case of insolvency to pay the fine and the indemnity and the only modifications made by the Court of Appeals are to eliminate the three (3) months of arresto mayor and to reduce the indemnity to the offended party, Mayor Arsenio Lacson, from P10,000.00 to P5,000.00, then by force of logic and reason, the fine of P5000.00, the reduced indemnity of P5,000.00 and the subsidiary imprisonment in case of insolvency should stand.

Fortunately, however, accused-appellant is favored by the retroactive force of Article 39 of the Revised Penal Code, as amended by Republic Act No. 5465 which exempts an accused person from subsidiary imprisonment in case of insolvency to pay his civil liability. 2

It is a well known rule of legal hermeneutics that penal statutes are to be strictly construed against the government and liberally in favor of the accused. 3 In the interpretation of a penal statute, the tendency is to give it careful scrutiny, and to construe it with such strictness as to safeguard the rights of the defendant. 4 Considering that Article 39 of the Revised Penal Code, as amended, is favorable to the accused-appellant, the same should be made applicable to him. It is so provided in Article 22 of the Revised Penal Code that:

Penal laws shall have a retroactive effect in so far as they favor the person guilty of a felony, who is not a habitual criminal, as this term is defined in Rule 5 of Article 62 of this Code, although at the time of the publication of such laws a final sentence has been pronounced and the convict is serving sentence.

Thus applying Article 39 of the Revised Penal Code, as amended, to the accused-appellant, he cannot also be required to serve his civil liability to the offended party in form of subsidiary imprisonment in case of insolvency because this is no longer required by the aforesaid article.

Accused-appellant contends that he cannot be made to suffer subsidiary imprisonment because his civil liability has been satisfied with the attachment secured by the offended party on the property of Agapito Subido, wherein he is supposed to have an interest. He therefore argues that until the final determinations of Civil Case No. 71731 which Agapito Subido filed to enjoin the Sheriff of Manila from proceeding with the sale of his property, accused-appellant's liability for subsidiary imprisonment cannot attach as the determination of whether the accused is solvent or not is a prejudicial question which must first be determined before subsidiary imprisonment may be imposed.

We cannot agree. Attachment does not operate as a satisfaction of the judgment on civil liability and the accused must suffer subsidiary imprisonment in case of non-payment thereof. Subsidiary imprisonment applies when the offender is insolvent as shown in the present case. There is nothing in the law that before subsidiary imprisonment may attach, there must be prior determination of the question of solvency of the accused. The moment he cannot pay the fine, that means he is insolvent and he must serve the same in form of subsidiary imprisonment. So accused-appellant has to choose to pay the fine or serve in jail.

IN VIEW OF THE FOREGOING except with the modification that accused-appellant may no longer be required to suffer subsidiary imprisonment in case of insolvency to pay the indemnity provided for in the judgment below, the Orders of the lower court dated December 19 and 26, 1959 denying defendant-appellant's motion for cancellation of appeal bond and sentencing him to suffer the subsidiary imprisonment in case of insolvency to pay the fine imposed by said judgment, are hereby affirmed.

SO ORDERED.

Castro, (Chairman), Teehankee, Makasiar, Esguerra and Muñoz Palma, JJ., concur.

Footnotes

1 As the errors assigned involved purely questions of law, the honorable court of Appeals certified the case to Us, pursuant to Section 17, par. 16, in relation to Section 31 of the Judiciary Act of 1948.

2 Art. 39. Subsidiary penalty.-If the convict has no property with which to meet the fine mentioned in paragraph 3 of the next preceding article, he shall be subject to a subsidiary personal liability at the rate of one day for each eight pesos, subject to the following rules:

1. If the principal penalty imposed be prision correccional or arresto and fine, he shall remain under confinement until his fine referred in the preceding paragraph is satisfied, but his subsidiary imprisonment shall not exceed one-third of the term of the sentence, and in no case shall it continue for more than one year, and no fraction or part of a day shall be counted against the prisoner.

2. When the principal penalty imposed be only a fine, the subsidiary imprisonment shall not exceed six months, if the culprit shall have been prosecuted for a grave or less grave felony, and shall not exceed fifteen days, if for a light felony.

3. When the principal penalty imposed is higher than prision correccional no subsidiary imprisonment shall be imposed upon the culprit.

4. If the principal penalty imposed is not to be executed by confinement in a penal institution, but such penalty is of fixed duration, the convict, during the period of time established in the preceding rules, shall continue to suffer the same deprivations as those of which the principal penalty consists.

5. The subsidiary personal liability which the convict may have suffered by reason of his insolvency shall not relieve him from the fine in case his financial circumstances should improve.

3 U.S. vs. Abad Santos, 36 Phil. 243; People vs. Yu Hai, 99 Phil. 728.

4 People vs. Ahearn, 196 N.Y. 221, 89 NE 930, 26 LRA (NS) 1153.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 72873 May 28, 1987

CARLOS ALONZO and CASIMIRA ALONZO, petitioners, vs.INTERMEDIATE APPELLATE COURT and TECLA PADUA, respondents.

Perpetuo L.B. Alonzo for petitioners.

Luis R. Reyes for private respondent.

CRUZ, J.:

The question is sometimes asked, in serious inquiry or in curious conjecture, whether we are a court of law or a court of justice. Do we apply the law even if it is unjust or do we administer justice even against the law? Thus queried, we do not equivocate. The answer is that we do neither because we are a court both of law and of justice. We apply the law with justice for that is our mission and purpose in the scheme of our Republic. This case is an illustration.

Five brothers and sisters inherited in equal pro indiviso shares a parcel of land registered in 'the name of their deceased parents under OCT No. 10977 of the Registry of Deeds of Tarlac. 1

On March 15, 1963, one of them, Celestino Padua, transferred his undivided share of the herein petitioners for the sum of P550.00 by way of absolute sale. 2 One year later, on April 22, 1964, Eustaquia Padua, his sister, sold her own share to the same vendees, in an instrument denominated "Con Pacto de Retro Sale," for the sum of P 440.00. 3

By virtue of such agreements, the petitioners occupied, after the said sales, an area corresponding to two-fifths of the said lot, representing the portions sold to them. The vendees subsequently enclosed the same with a fence. In 1975, with their consent, their son Eduardo Alonzo and his wife built a semi-concrete house on a part of the enclosed area. 4

On February 25, 1976, Mariano Padua, one of the five coheirs, sought to redeem the area sold to the spouses Alonzo, but his complaint was dismissed when it appeared that he was an American citizen . 5 On May 27, 1977, however, Tecla Padua, another co-heir, filed her own complaint invoking the same right of redemption claimed by her brother. 6

The trial court * also dismiss this complaint, now on the ground that the right had lapsed, not having been exercised within thirty days from notice of the sales in 1963 and 1964. Although there was no

written notice, it was held that actual knowledge of the sales by the co-heirs satisfied the requirement of the law. 7

In truth, such actual notice as acquired by the co-heirs cannot be plausibly denied. The other co-heirs, including Tecla Padua, lived on the same lot, which consisted of only 604 square meters, including the portions sold to the petitioners . 8 Eustaquia herself, who had sold her portion, was staying in the same house with her sister Tecla, who later claimed redemption petition. 9 Moreover, the petitioners and the private respondents were close friends and neighbors whose children went to school together. 10

It is highly improbable that the other co-heirs were unaware of the sales and that they thought, as they alleged, that the area occupied by the petitioners had merely been mortgaged by Celestino and Eustaquia. In the circumstances just narrated, it was impossible for Tecla not to know that the area occupied by the petitioners had been purchased by them from the other. co-heirs. Especially significant was the erection thereon of the permanent semi-concrete structure by the petitioners' son, which was done without objection on her part or of any of the other co-heirs.

The only real question in this case, therefore, is the correct interpretation and application of the pertinent law as invoked, interestingly enough, by both the petitioners and the private respondents. This is Article 1088 of the Civil Code, providing as follows:

Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor.

In reversing the trial court, the respondent court ** declared that the notice required by the said article was written notice and that actual notice would not suffice as a substitute. Citing the same case of De Conejero v. Court of Appeals 11 applied by the trial court, the respondent court held that that decision, interpreting a like rule in Article 1623, stressed the need for written notice although no particular form was required.

Thus, according to Justice J.B.L. Reyes, who was the ponente of the Court, furnishing the co-heirs with a copy of the deed of sale of the property subject to redemption would satisfy the requirement for written notice. "So long, therefore, as the latter (i.e., the redemptioner) is informed in writing of the sale and the particulars thereof," he declared, "the thirty days for redemption start running. "

In the earlier decision of Butte v. UY, 12 " the Court, speaking through the same learned jurist, emphasized that the written notice should be given by the vendor and not the vendees, conformably to a similar requirement under Article 1623, reading as follows:

Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendors, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners.

The right of redemption of co-owners excludes that of the adjoining owners.

As "it is thus apparent that the Philippine legislature in Article 1623 deliberately selected a particular method of giving notice, and that notice must be deemed exclusive," the Court held that notice given by the vendees and not the vendor would not toll the running of the 30-day period.

The petition before us appears to be an illustration of the Holmes dictum that "hard cases make bad laws" as the petitioners obviously cannot argue against the fact that there was really no written notice given by the vendors to their co-heirs. Strictly applied and interpreted, Article 1088 can lead to only one conclusion, to wit, that in view of such deficiency, the 30 day period for redemption had not begun to run, much less expired in 1977.

But as has also been aptly observed, we test a law by its results; and likewise, we may add, by its purposes. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge should be to discover in its provisions the in tent of the lawmaker. Unquestionably, the law should never be interpreted in such a way as to cause injustice as this is never within the legislative intent. An indispensable part of that intent, in fact, for we presume the good motives of the legislature, is to render justice.

Thus, we interpret and apply the law not independently of but in consonance with justice. Law and justice are inseparable, and we must keep them so. To be sure, there are some laws that, while generally valid, may seem arbitrary when applied in a particular case because of its peculiar circumstances. In such a situation, we are not bound, because only of our nature and functions, to apply them just the same, in slavish obedience to their language. What we do instead is find a balance between the word and the will, that justice may be done even as the law is obeyed.

As judges, we are not automatons. We do not and must not unfeelingly apply the law as it is worded, yielding like robots to the literal command without regard to its cause and consequence. "Courts are apt to err by sticking too closely to the words of a law," so we are warned, by Justice Holmes again, "where these words import a policy that goes beyond them." 13 While we admittedly may not legislate, we nevertheless have the power to interpret the law in such a way as to reflect the will of the legislature. While we may not read into the law a purpose that is not there, we nevertheless have the right to read out of it the reason for its enactment. In doing so, we defer not to "the letter that killeth" but to "the spirit that vivifieth," to give effect to the law maker's will.

The spirit, rather than the letter of a statute determines its construction, hence, a statute must be read according to its spirit or intent. For what is within the spirit is within the letter but although it is not within the letter thereof, and that which is within the letter but not within the spirit is not within the statute. Stated differently, a thing which is within the intent of the lawmaker is as much within the statute as if within the letter; and a thing which is within the letter of the statute is not within the statute unless within the intent of the lawmakers. 14

In requiring written notice, Article 1088 seeks to ensure that the redemptioner is properly notified of the sale and to indicate the date of such notice as the starting time of the 30-day period of redemption.

Considering the shortness of the period, it is really necessary, as a general rule, to pinpoint the precise date it is supposed to begin, to obviate any problem of alleged delays, sometimes consisting of only a day or two.

The instant case presents no such problem because the right of redemption was invoked not days but years after the sales were made in 1963 and 1964. The complaint was filed by Tecla Padua in 1977, thirteen years after the first sale and fourteen years after the second sale. The delay invoked by the petitioners extends to more than a decade, assuming of course that there was a valid notice that tolled the running of the period of redemption.

Was there a valid notice? Granting that the law requires the notice to be written, would such notice be necessary in this case? Assuming there was a valid notice although it was not in writing. would there be any question that the 30-day period for redemption had expired long before the complaint was filed in 1977?

In the face of the established facts, we cannot accept the private respondents' pretense that they were unaware of the sales made by their brother and sister in 1963 and 1964. By requiring written proof of such notice, we would be closing our eyes to the obvious truth in favor of their palpably false claim of ignorance, thus exalting the letter of the law over its purpose. The purpose is clear enough: to make sure that the redemptioners are duly notified. We are satisfied that in this case the other brothers and sisters were actually informed, although not in writing, of the sales made in 1963 and 1964, and that such notice was sufficient.

Now, when did the 30-day period of redemption begin?

While we do not here declare that this period started from the dates of such sales in 1963 and 1964, we do say that sometime between those years and 1976, when the first complaint for redemption was filed, the other co-heirs were actually informed of the sale and that thereafter the 30-day period started running and ultimately expired. This could have happened any time during the interval of thirteen years, when none of the co-heirs made a move to redeem the properties sold. By 1977, in other words, when Tecla Padua filed her complaint, the right of redemption had already been extinguished because the period for its exercise had already expired.

The following doctrine is also worth noting:

While the general rule is, that to charge a party with laches in the assertion of an alleged right it is essential that he should have knowledge of the facts upon which he bases his claim, yet if the circumstances were such as should have induced inquiry, and the means of ascertaining the truth were readily available upon inquiry, but the party neglects to make it, he will be chargeable with laches, the same as if he had known the facts. 15

It was the perfectly natural thing for the co-heirs to wonder why the spouses Alonzo, who were not among them, should enclose a portion of the inherited lot and build thereon a house of strong materials. This definitely was not the act of a temporary possessor or a mere mortgagee. This certainly

looked like an act of ownership. Yet, given this unseemly situation, none of the co-heirs saw fit to object or at least inquire, to ascertain the facts, which were readily available. It took all of thirteen years before one of them chose to claim the right of redemption, but then it was already too late.

We realize that in arriving at our conclusion today, we are deviating from the strict letter of the law, which the respondent court understandably applied pursuant to existing jurisprudence. The said court acted properly as it had no competence to reverse the doctrines laid down by this Court in the above-cited cases. In fact, and this should be clearly stressed, we ourselves are not abandoning the De Conejero and Buttle doctrines. What we are doing simply is adopting an exception to the general rule, in view of the peculiar circumstances of this case.

The co-heirs in this case were undeniably informed of the sales although no notice in writing was given them. And there is no doubt either that the 30-day period began and ended during the 14 years between the sales in question and the filing of the complaint for redemption in 1977, without the co-heirs exercising their right of redemption. These are the justifications for this exception.

More than twenty centuries ago, Justinian defined justice "as the constant and perpetual wish to render every one his due." 16 That wish continues to motivate this Court when it assesses the facts and the law in every case brought to it for decision. Justice is always an essential ingredient of its decisions. Thus when the facts warrants, we interpret the law in a way that will render justice, presuming that it was the intention of the lawmaker, to begin with, that the law be dispensed with justice. So we have done in this case.

WHEREFORE, the petition is granted. The decision of the respondent court is REVERSED and that of the trial court is reinstated, without any pronouncement as to costs. It is so ordered.

Teehankee, C.J., Yap, Narvasa, Melencio-Herrera Gutierrez, Jr., Paras, Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.

Fernan and Feliciano, JJ., are on leave.

Footnotes

1 Rollo, p. 5.

2 Ibid, p. 6.

3 Id, p. 64,

5 Id. p. 21

6 Id, p. 21.

* Presided by Judge Cezar D. Francisco.

7 Id, p. 65.

8 Id, p. 5.

9 Id, p. 64.

10 Id, p. 26.

** Gaviola, Jr., P.J., ponente, Caguioa, Quetulio-Losa & Luciano, JJ.

11 16 SCRA 775.

12 4 SCRA 527.

13 Dissenting in Olmstead v. U.S., 277 U.S. 438.

14 Statutory Construction, Ruben E. Agpalo, pp. 64-65, 1986, citing Manila Race Horse Trainers' Assn. v. De la Fuente, 88 Phil. 60; Go Chi v. Go Cho, 96 Phil. 622; Hidalgo v. Hidalgo, 33 SCRA 105; Roa v. Collector of Customs, 23 Phil. 315; Villanueva v. City of Iloilo, 26 SCRA 578: People v. Purisima, 86 SCRA 542; US v. Go Chico, 14 Phil. 128.

15 Ater v. Smith 245 111. 57, 19 Am. Cases 105.

16 Institutes 1, 1, pr. as cited in Handbook for Roman Law, Miravite, Lorenzo F., p. 39, 1981,

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 106724 February 9, 1994

THE NATIONAL POLICE COMMISSION, represented by its Acting Chairman, Cesar Sarino, Teodolo C. Natividad, Vice-Chairman and Executive Officer, Brig. Gen. Virgilio H. David, Edgar Dula Torre, Guillermo P. Enriquez, Commissioners, and Chief Supt. Levy D. Macasiano Director for Personnel, petitioners, vs.Honorable Judge Salvador de Guzman, Jr., Chief Supt. Norberto M. Lina, Chief Supt. Ricardo Trinidad, Jr., Sr. Supt. Manuel Suarez, Supt. Justito B. Tagum, Sr. Supt. Tranquilino Aspiras, Sr., Supt. Ramon I. Navarro, Sr. Supt. Ramon I. Navarro, Sr. Supt. Jose P. Suria, Sr. Supt. Agaton Abiera, Chief Insp. Bienvenido

Torres, and the National (ROTC) Alumni Association Inc. (NARRA), represented by its President Col. Benjamin Gundran, and Director Hermogenes Peralta, Jr., respondents.

The Solicitor General for petitioners.

Renecio R. Espiritu for private respondents.

Diosdado P. Peralta for respondent-intervenor.

BIDIN, J.:

The case at bar had its origin in the implementation of the compulsory retirement of PNP officers as mandated in Sec. 39, RA 6975, otherwise known as "An Act Establishing the Philippine National Police Under a Reorganized Department of the Interior and Local Government", which took effect on January 2, 1991. Among others, RA 6975 provides for a uniform retirement system for PNP members. Section 39 thereof reads:

Sec. 39. Compulsory Retirement. — Compulsory retirement, for officer and non-officer, shall be upon the attainment of age fifty-six (56); Provided, That, in case of any officer with the rank of chief superintendent, director or deputy director general, the Commission may allow his retention in the service for an unextendible period of one (1) year.

Based on the above provision, petitioners sent notices of retirement to private respondents who are all members of the defunct Philippine Constabulary and have reached the age of fifty-six (56).

In response, private respondents filed a complaint on December 19, 1991 for declaratory relief with prayer for the issuance of an ex parte restraining order and/or injunction (docketed as Civil Case No. 91-3498) before the Regional Trial Court of Makati, Branch 142. In their complaint, respondents aver that the age of retirement set at fifty-six (56) by Section 39 of RA 6975 cannot be applied to them since they are also covered by Sec. 89 thereof which provides:

Any provision hereof to the contrary notwithstanding, and within the transition period of four (4) years following the effectivity of this Act, the following members of the INP shall be considered compulsorily retired:

a) Those who shall attain the age of sixty (60) on the first year of the effectivity of this Act.

b) Those who shall attain the age of fifty-nine (59) on the second year of the effectivity of this Act.

c) Those who shall attain the age of fifty-eight (58) on the third year of the effectivity of this Act.

d) Those who shall attain the age of fifty-seven (57) on the fourth year of the effectivity of this Act.

It is the submission of respondents that the term "INP" includes both the former members of the Philippine Constabulary and the local police force who were earlier constituted as the Integrated

National Police (INP) by virtue of PD 765 in 1975.

On the other hand, it is the belief of petitioners that the 4-year transition period provided in Section 89 applies only to the local police forces who previously retire, compulsorily, at age sixty (60) for those in the ranks of Police/Fire Lieutenant or higher (Sec. 33, PD 1184); while the retirement age for the PC had already been set at fifty-six (56) under the AFP law.

On December 23, 1991, respondent judge issued a restraining order followed by a writ of injunction on January 8, 1992 upon posting of a P100,000.00 bond by private respondents.

After the parties have submitted their respective pleadings, the case was submitted for resolution and on August 14, 1992, the respondent judge rendered the assailed decision, the decretal portion of which reads:

WHEREFORE, the court hereby declares that the term "INP" in Section 89 of the PNP Law includes all members of the present Philippine National Police, irrespective of the original status of the present members of the Philippine National Police before its creation and establishment, and that Section 39 thereof shall become operative after the lapse of the four-year transition period.

The preliminary injunction issued is made permanent.

SO ORDERED. (Rollo, pp. 29-30)

Petitioners filed the instant petition on October 8, 1992 seeking the reversal of the above judgment. On January 12, 1993, the Court resolved to treat the respondents' Comment as Answer and gave due course to the petition.

In ruling in favor of private respondents, respondent judge observed, among others, that:

It may have been the intention of Congress to refer to the local police forces as the "INP" but the PNP Law failed to define who or what constituted the INP. The natural recourse of the court is to trace the source of the "INP" as courts are permitted to look to prior laws on the same subject and to investigate the antecedents involved. There is nothing extant in the statute books except that which was created and established under PD 765 pursuant to the mandate of Article XV of the 1973 Constitution providing that the "State shall establish and maintain an integrated national police force whose organization, administration and operation shall be provided by law." Heretofore, INP was unknown. And the said law categorically declared the PC "as the principal component of the Integrated National Police" (Sec. 5, PD 765).

The court was supplied by respondents (petitioners herein) with excerpts taken from the discussion amongst the members of Congress concerning the particular provision of Section 89. The court is not persuaded by said discussion; it was a simple matter for the members of the legislature to state precisely in clear and unequivocal terms their meaning, such as "integrated police" as used in PD 765. Instead,

they employed "INP", a generic term that includes the PC as the principal component of the INP, supra. In failing to categorically restrict the application of Section 89 as the members of legislature are said to have intended, it gave rise to the presumption that it has not limited nor intended to limit the meaning of the word when the bill was finally passed into law. It is not difficult for the court to also presume that in drafting the wording of the PNP Law, the legislators were aware of the historical legislative origin of the "INP".

xxx xxx xxx

The court takes particular note of the fact that Section 89 is found in the Transitory Provisions of the law which do not provide for any distinction between the former PC officers and those belonging to the civilian police forces. These provision are specifically enacted to regulate the period covering the dissolution of the PC and the creation of the PNP, a period that necessarily would be attended by imbalances and or confusion occasioned by the wholesale and mass integration. In fact, the retirement payment scheme of the INP is still to be formulated, leaving the impression that nothing is really settled until after the transition of four years has lapsed. Section 89 therefore prevails over Section 39 up to the year 1995 when the retirement age for the members of the PNP shall then be age 56; after the year 1995, Section 39 shall then be the applicable law on retirement of PNP members. (Rollo, pp. 27-28; emphasis supplied)

Petitioners disagree and claim that the use of the term INP in Sec. 89 does not imply the same meaning contemplated under PD 765 wherein it is provided:

Sec. 1. Constitution of the Integrated National Police. — There is hereby established and constituted the Integrated National Police (INP) which shall be composed of the Philippine Constabulary as the nucleus, and the integrated police forces as established by Presidential Decrees Nos. 421, 482, 531, 585 and 641, as components, under the Department of National Defense.

On the other hand, private respondents assert that being the nucleus of the Integrated National Police (INP) under PD 765, former members of the Philippine Constabulary (PC) should not be discriminated against from the coverage of the term "INP" in Sec. 89, RA 6975. Clearly, it is argued, the term "INP" found in Section 89 of RA 6975 refers to the INP in PD 765. Thus, where the law does not distinguish, the courts should not distinguish.

Does the law, RA 6975, distinguish INP from the PC? Petitioners submit that it does and cite Sections 23 and 85 to stress the point, viz.:

Sec. 23. Composition. — Subject to the limitations provided for in this Act, the Philippine National Police, hereinafter referred to as the PNP, is hereby established, initially consisting of the members of the police forces who were integrated into the Integrated National Police (INP) pursuant to Presidential Decree No. 765, and the officers and enlisted personnel of the Philippine Constabulary (PC). . .

xxx xxx xxx

The permanent civilian employees of the present PC, INP, Narcotics Command, CIS and the technical command of the AFP assigned with the PC, including NAPOLCOM hearing officers holding regular items as such, shall be absorbed by the Department as employees thereof, subject to existing laws and regulations.

xxx xxx xxx

Sec. 85. Phase of Implementation. — The implementation of this Act shall be undertaken in three (3) phases, to wit:

Phase I — Exercise of option by the uniformed members of the Philippine Constabulary, the PC elements assigned with the Narcotics Command, CIS, and the personnel of the technical services of the AFP assigned with the PC to include the regular CIS investigating agents and the operatives and agents of the NAPOLCOM Inspection, Investigation and Intelligence Branch, and the personnel of the absorbed National Action Committee on Anti-Hijacking (NACAH) of the Department of National Defense, to be completed within six (6) months from the date of the effectivity of this Act. At the end of this phase, all personnel from the INP, PC, technical Services, NACAH, and NAPOLCOM Inspection, Investigation and Intelligence Branch shall have been covered by official orders assigning them to the PNP . . .

xxx xxx xxx

. . . Any PC-INP officer or enlisted personnel may, within the twelve-month period from the effectivity of this Act, retire . . .

Phase III — . . . To accomplish the tasks of Phase III, the Commission shall create a Board of Officers composed of the following: NAPOLCOM Commissioner as Chairman and one (1) representative each from the PC, INP, Civil Service Commission and the Department of Budget and Management.

Section 86 of the same law further provides:

Sec. 86. Assumption by the PNP of Police Functions. — The PNP shall absorb the functions of the PC, the INP and the Narcotics Command upon the effectivity of this Act.

From a careful perusal of the above provisions, it appears therefore that the use of the term INP is not synonymous with the PC. Had it been otherwise, the statute could have just made a uniform reference to the members of the whole Philippine National Police (PNP) for retirement purposes and not just the INP. The law itself distinguishes INP from the PC and it cannot be construed that "INP" as used in Sec. 89 includes the members of the PC.

And contrary to the pronouncement of respondent judge that the law failed to define who constitutes the INP, Sec. 90 of RA 6975 has in fact defined the same. Thus,

Sec. 90. Status of Present NAPOLCOM, PC-INP. — Upon the effectivity of this Act, the present National Police Commission and the Philippine Constabulary-Integrated National Police shall cease to exist. The Philippine Constabulary, which is the nucleus of the Philippine Constabulary-Integrated National Police

shall cease to be a major service of the Armed Forces of the Philippines. The Integrated National Police, which is the civilian component of the Philippine Constabulary-Integrated National Police, shall cease to be the national police force and lieu thereof, a new police force shall be established and constituted pursuant to this Act. (emphasis supplied)

It is not altogether correct to state, therefore, that the legislature failed to define who the members of the INP are. In this regard, it is of no moment that the legislature failed to categorically restrict the application of the transition period in Sec. 89 specifically in favor of the local police forces for it would be a mere superfluity as the PC component of the INP was already retirable at age fifty-six (56).

Having defined the meaning of INP, the trial court need not have belabored on the supposed dubious meaning of the term. Nonetheless, if confronted with such a situation, courts are not without recourse in determining the construction of the statute with doubtful meaning for they may avail themselves of the actual proceedings of the legislative body. In case of doubt as to what a provision of a statute means, the meaning put to the provision during the legislative deliberations may be adopted (De Villa v. Court of Appeals, 195 SCRA 722 [1991] citing Palanca v. City of Manila, 41 Phil. 125 [1920]; Arenas v. City of San Carlos, 82 SCRA 318 [1978]).

Courts should not give a literal interpretation to the letter of the law if it runs counter to the legislative intent (Yellow Taxi and Pasay Transportation Workers' Association v. Manila Yellow Taxi Cab. Co., 80 Phil. 83 [1948]).

Examining the records of the Bicameral Conference Committee, we find that the legislature did intent to exclude the members of the PC from the coverage of Sec. 89 insofar as the retirement age is concerned, thus:

THE CHAIRMAN. (SEN. MACEDA). Well, it seems what people really want is one common rule, so if it is fifty-six, fifty-six; of course, the PC wants sixty for everybody. Of course, it is not acceptable to us in the sense that we tied this up really to the question of: If you are lax in allowing their (the PC) entry into the PNP, then tighten up the retirement. If we will be strict in, like requiring examinations and other conditions for their original entry, then since we have sifted out a certain amount of undesirables, then we can allow a longer retirement age. That was the rationale, that was the tie-up. Since we are relaxing the entry, we should speed up . . .

THE CHAIRMAN. (REP. GUTANG). Exit.

THE CHAIRMAN. (SEN. MACEDA) . . . the retirement, the exit.

THE CHAIRMAN. (REP. GUTANG). So let me get it very clear, Mr. Chairman. Fifty-six, let's say, that will not make any adjustment in the PC because there (they) are (retirable at age) fifty-six.

THE CHAIRMAN. (SEN. MACEDA). Kaya nga, wala na silang masasabi.

THE CHAIRMAN. (REP. GUTANG). In the case of the Police, since they are retireable now at sixty, for the officers, it will be applicable to them on a one-year every year basis for a total period of four years transition. (Bicameral Conference Committee on National Defense, March 12, 1990)

REP. GUTANG. On the first year of effectivity, the police will retire at 60 years.

THE CHAIRMAN. (SEN. MACEDA). Sixty.

REP. GUTANG. On the second year, 59.

THE CHAIRMAN. (SEN. MACEDA). Oo.

REP. GUTANG. On the third year, 58.

THE CHAIRMAN. (SEN. MACEDA). Fifty-eight. So 'yung 55, on the third year, 58, doon siya re-retire.

REP. GUTANG. Oo.

SEN. SAGUISAG. So kung 55, when the law becomes effective . . .

THE CHAIRMAN. (SEN. MACEDA). He will retire at 58, doon siya aabot.

REP. UNICO. Pwede.

SEN. SAGUISAG. Dahil 'yon, may time to . . .

THE CHAIRMAN. (SEN. MACEDA). Walang problema dito sa transition ng pulis, acceptable ito, eh.

THE CHAIRMAN. (REP. COJUANGCO). Sa PC?

THE CHAIRMAN. (SEN. MACEDA). PC, walang mawawala sa kanila, 56 ang retirement age nilang talaga, eh. Kaya ayaw ko ngang dagdagan 'yung 56 nila at 'yon din ang sa Armed Forces, 56. (Ibid., May 22, 1990)

In applying the provisions of Sec. 89 in favor of the local police force as established in PD 765, the Court does not, in any manner, give any undue preferential treatment in favor of the other group. On the contrary, the Court is merely giving life to the real intent of the legislators based on the deliberations of the Bicameral Conference Committee that preceded the enactment of RA 6975.

The legislative intent to classify the INP in such manner that Section 89 of RA 6975 is applicable only to the local police force is clear. The question now is whether the classification is valid. The test for this is reasonableness such that it must conform to the following requirements: (1) It must be based upon substantial distinctions; (2) It must be germane to the purpose of the law; (3) It must not be limited to existing conditions only; (4) It must apply equally to all members of the same class (People vs. Cayat, 68 Phil. 12 [1939]).

The classification is based upon substantial distinctions. The PC, before the effectivity of the law (RA 6975), were already retirable at age 56 while the local police force were retirable at 60, and governed by different laws (P.D. 1184, Sec. 33 and Sec. 50). The distinction is relevant for the purpose of the statute, which is to enable the local police force to plan for their retirement which would be earlier than usual because of the new law. Section 89 is merely transitory, remedial in nature, and loses its force and effect once the four-year transitory period has elapsed. Finally, it applies not only to some but to all local police officers.

It may be appropriate to state at this point that it seems absurd that a law will grant an extension to PC officers' retirable age from 56 to 60 and then gradually lower it back to 56 without any cogent reason at all. Why should the retirement age of PC officers be increased during the transitory period to the exclusion of other PC officers who would retire at age 56 after such period? Such absurdity was never contemplated by the law and would defeat its purpose of providing a uniform retirement age for PNP members.

WHEREFORE, the petition is GRANTED. The writ of injunction issued on January 8, 1992 is hereby LIFTED and the assailed decision of respondent judge is REVERSED and SET ASIDE.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug and Kapunan, JJ., concur.

Nocon, J., is on leave.

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

G.R. Nos. 48886-88 July 21, 1993

COMMISSIONER OF CUSTOMS, petitioner, vs.COURT OF TAX APPEALS and LITONJUA SHIPPING COMPANY represented by Granexport Corporation as sub-agent, respondent.

The Solicitor General for petitioner.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for private respondent.

MELO, J.:

This refers to a petition for review of the decision dated July 28, 1978 of the Court of Tax Appeals in C. T. A. Cases No. 2785, 2831 and 2832 which was promulgated prior to the issuance on February 27, 1991, of Circular No. 1-91 to the effect that appeals from a final order or decision of the Court of Tax Appeals shall be to the Court of Appeals.

The undisputed facts of the case as established by the evidence and as found by respondent Court of Tax Appeals, are as follows:

The berthing facilities of Iligan Bay Express Corporation at Kiwalan were constructed and improved and are operated and maintained solely by and at the expense of Iligan Express Corporation, a private corporation.

The MS "Chozan Maru", MS "Samuel S", MS "Ero", MS "Messinia", MS "Pavel Rybin", MS "Caledonia", and MS "Leonidas" are vessels engaged in foreign trade and represented in the Philippines by private respondent Litonjua Shipping Company Granexport Corporation as its sub-agent.

On various date, berthing facilities of the Iligan Bay Express Corporation at Kiwalan, Iligan City were used by the above vessels and were assessed berthing fees by the Collector of Customs which were paid by private respondent under protest, to wit:

a) June 27, 1973, MS "Chozan Maru" — P2,551.00 paid on April 17, 1973;

b) April 27, 1973, MS "Samuel S" — P8,000.00 paid on May 9, 1973;

c) May 27, 1973, MS "Ero" — P5,000.00 paid on June 4, 1973;

d) June 2, 1973 MS "Messinia" — P5,000.00 paid on June 11, 1973;

e) March 22-26, 1975, MS "Pavel Rybin" — P4,000.00 paid on April 3, 1975;

f) April 26-May 3, 1975 MS "Caledonia" — P7,000.00 on May 7, 1975; and

g) May 25-June 3, 1975, MS "Caledonia" — P9,000.00 paid on June 7, 1975.

Private respondent filed cases before the Bureau of Customs for refund of the berthing fees paid under protest. The Collector of Customs of the City of Iligan denied the protest, prompting private respondent to appeal to the Commissioner of Customs who, however, affirmed the decision of the Collector of Customs.

Private respondent then resorted to the Court of Tax Appeals. Consolidating the protests, the tax court, thereafter rendered a decision on July 28, 1978, the dispositive portion of which reads as follows:

WHEREFORE, the decisions appealed from are hereby reversed and respondent Commissioner of Customs is ordered to refund to petitioner the amount of P40,551.00. No costs. (p., 51, Rollo)

Hence, the present recourse by the Commissioner of Customs.

The only issue involved in this petition for review is: Whether a vessel engaged in foreign trade, which berths at a privately owned wharf or pier, is liable to the payment of the berthing charge under Section 2901 of the Tariff and Customs Code, which, as amended by Presidential Decree No. 34, reads:

Sec. 2901. Definition. — Berthing charge is the amount assessed against a vessel for mooring or berthing at a pier, wharf, bulk-head-wharf, river or channel marginal wharf at any national port in the Philippines; or for mooring or making fast to a vessel so berthed, or for coming or mooring within any slip, channel, basin, river or canal under the jurisdiction of any national port of the Philippines: Provided, however, That in the last instance, the charge shall be fifty (50%) per cent of rates provided for in cases of piers without cargo shed in the succeeding sections. The owner, agent, operator or master of the vessel is liable for this charge.

Petitioner Commissioner of Customs contends that the government has the authority to impose and collect berthing fees whether a vessel berths at a private pier or at a national port. On the other hand, private respondent argues that the right of the government to impose berthing fees is limited to national ports only.

The governing law classifying ports into national ports and municipal ports is Executive Order No. 72, Series of 1936 (O.G. Vol. 35, No. 6, pp. 65-66). A perusal of said executive order discloses the absence of the port of Kiwalan in the list of national ports mentioned therein.

Furthermore, Paragraph 1 of Executive Order No. 72 expressly provides that "the improvement and maintenance of national ports shall be financed by the Commonwealth Government, and their administration and operation shall be under the direct supervision and control of the Insular Collector of Customs." It is undisputed that the port of Kiwalan was constructed and improved and is operated and maintained solely by and at the expense of the Iligan Express Corporation, and not by the National Government of the Republic or any of its agencies or instrumentalities.

Petitioner insists that Kiwalan is a national port since it is within the jurisdiction of the collection district and territorial limits of the national port of Iligan City. The claim is put forward that "Kiwalan simply cannot claim to be an independent port within a national port without infringing on the territorial jurisdiction of the Port of Iligan", citing the support thereof Customs Administrative Order No. 1-76 dated February 23, 1976. However, a reading of said administrative order shows that it was issued merely for administrative purposes redefining the jurisdictional limits of each Customs Collection District "based on the approved staffing pattern." It has nothing to do with the collection of berthing fees. On this point we quote with approval the following conclusions of respondent Court of Tax Appeals:

. . . we see no significance therefore in the stand of respondent, as averred as affirmative and special defenses of his answers, that it is not necessary to list Kiwalan as a national port being already an integral part of the national port of the city of Iligan, within its territorial limits, jurisdiction or collection district. Such an assertion, besides being violative of the legal basis for the classification of ports into national or municipal under Executive Order No. 72, series of 1936, as implemented by subsequent Republic Acts and Executive Orders, would make all ports in the Philippines national ports. A port is not classified as a national port just because it is located within the territorial limits or boundaries of a city or

municipality where a national port is situated, much less within the jurisdiction or collection district of a national port; otherwise, all ports in the Philippines would be classified as national ports without any municipal ports.

xxx xxx xxx

. . . Customs Administrative Order No. 1-72 dated September 21, 1971, which is entitled as defining the jurisdictional limits of customs collection districts, divided the entire Philippines into thirty-four (34) collection districts. It bears emphasis that no point or locality in the Philippines is not covered by a collection district, or does not fall within the territorial jurisdiction or limits of a collection district, with a principal port of entry which is always national port properly, classified and listed as such by law or executive order. (pp. 47-48, Rollo)

The Bureau of Customs itself in its Customs Memorandum Circular No. 33-73 dated March 29, 1973, does not accord the status of national port to the port of Kiwalan, nor does the list of national ports appended thereto include the port of Kiwalan. Moreover, said memorandum circular indicates the specific law (Public Act, Commonwealth Act, Republic Act or Executive Order) creating a particular national port. Petitioner has not cited or brought to our attention, and we have found none, any law creating Kiwalan Port as a national port or converting it to one.

It is a settled rule of statutory construction that the express mention of one person, thing, act, or consequence excludes all others. This rule is expressed in the familiar maxim expressio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to others. The rule proceeds from the premise that the legislature would not have made specified enumerations in a statute had the intention been not to restrict its meaning and to confine its terms to those expressly mentioned (Agpalo, Statutory Construction, 2nd Ed., 1990, pp. 160-161, and the cases therein cited). The port of Kiwalan not being included in the list of national ports appended to Customs Memorandum Circular No. 33-73 nor in Executive Order No. 72, it follows inevitably as a matter of law and legal principle that this Court may not properly consider said port as a national port. To do otherwise would be to legislate on our part and to arrogate into ourselves powers not conferred on us by the Constitution.

Even the Bureau of Customs in its Customs Memorandum Circular No. 47-73 held —

It appearing that Banago Wharf in Bacolod City is not one of those listed as a national port, the said part should be considered a municipal, pursuant to the provisions of Executive Order No. 72 series of 1936. Berthing charges therefore may not be collected from vessels docking thereat. (p. 3, Customs Memorandum Circular No. 47-73)

Plainly, therefore, the port of Kiwalan is not a national port. However, petitioner maintains that regardless of whether or not the port of Kiwalan is a national port, berthing charges may still be collected by the Bureau of Customs from vessels berthing at said port, citing the case of Luzon Stevedoring Corporation vs. Court of Tax Appeals and Commissioner of Customs (18 SCRA 436 [1966]), where it was held:

Adverting to the terms of the law, it is quite apparent that the government's right to collect berthing charges is not planted upon the condition that the pier be publicly owned. The statute employs the word pier — without more. Nothing there said speaks of private or public pier. Where the law does not exact the nature of ownership as a condition, that condition should not be read into the law. We are not to indulge in statutory construction. Because the law is clear. Our plain duty is to apply the law as it is written. So applying, we rule that, berthing or mooring charges here were properly collected. (at pp. 438-439.)

The above ruling, however, is no longer effective and can not apply in the case at bar for the same was decided before the Tariff and Customs Code was amended by Presidential Decree No. 34 which took effect thirty days from October 27, 1972, the date of promulgation.

Section 2901 of the Tariff and Customs Code prior to its amendment and said section as amended by Presidential Decree No. 34 are hereunder reproduced with the amendments duly highlighted:

Sec. 2901. Definition — Berthing charge is the amount assessed against a vessel for mooring or berthing at a pier, wharf, bulkhead-wharf, river or channel marginal wharf at any port in the Philippines; or for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or canal under the jurisdiction of any port of the Philippines (old TCC)

Sec. 2901. Definition — Berthing charge is the amount assessed a vessel for mooring or berthing at a pier, wharf, bulkhead-wharf, river or, channel marginal wharf AT ANY NATIONAL PORT IN THE PHILIPPINES; for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river, or canal under the jurisdiction of ANY NATIONAL port of the Philippines; Provided, HOWEVER, THAT IN THE LAST INSTANCE, THE CHARGE SHALL BE FIFTY (50%) PER CENT OF RATES PROVIDED FOR IN CASES OF PIERS WITHOUT CARGO SHED IN THE SUCCEEDING SECTIONS.

It will thus be seen that the word "national" before the word "port" is inserted in the amendment. The change in phraseology by amendment of a provision of law indicates a legislative intent to change the meaning of the provision from that it originally had (Agpalo, supra, p. 76). The insertion of the word "national" before the word "port" is a clear indication of the legislative intent to change the meaning of Section 2901 from what it originally meant, and not a mere surplusage as contended by petitioner, in the sense that the change "merely affirms what customs authorities had been observing long before the law was amended" (p. 18, Petition). It is the duty of this Court to give meaning to the amendment. It is, therefore, our considered opinion that under Section 2901 of the Tariff and Customs Code, as amended by Presidential Decree No. 34, only vessels berthing at national ports are liable for berthing fees. It is to be stressed that there are differences between national ports and municipal ports, namely: (1) the maintenance of municipal ports is borne by the municipality, whereas that of the national ports is shouldered by the national government; (2) municipal ports are created by executive order, while national ports are usually created by legislation; (3) berthing fees are not collected by the government from vessels berthing at municipal ports, while such berthing fees are collected by the government from vessels moored a national ports. The berthing fees imposed upon vessels berthing at national ports are applied by the national

government for the maintenance and repair of said ports. The national government does not maintain municipal ports which are solely maintained by the municipalities or private entities which constructed them, as in the case at bar. Thus, no berthing charges may be collected from vessels moored at municipal ports nor may berthing charges be imposed by a municipal council (Tejam's Commentaries on the Revised Tariff and Customs Code, p. 2486, citing Circular Letter No. 2981 dated September 30, 1958 quoting Op. No. 122, s. of 1958 and Op. No. 373, s. of 1940, Sec. of Justice).

The subject vessels, not having berthed at a national port but at the Port of Kiwalan, which was constructed, operated, and continues to be maintained by private respondent Iligan Express Corporation, are not subject to berthing charges, and petitioner should refund the berthing fees paid private respondent.

WHEREFORE, the petition is hereby DENIED and the decision of the Court of Tax Appeals AFFIRMED.

SO ORDERED.

Feliciano, Bidin, Romero and Vitug, JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. L-46908 May 17, 1980

CAROLINA INDUSTRIES, INC., petitioner, vs.CMS STOCK BROKERAGE, INC., (Formerly SISON, LUZ & JALBUENA INC), CARLOS MORAN SISON, LUIS F. SISON, and the HON. COURT OF APPEALS, respondents.

ANTONIO, J.:ñé+.£ªwph!1

Petition for review of the decision of the Court of Appeals in CA-G.R. No. 55680-R, promulgated on April 19, 1977, affirming with modification the judgment of the Court of First Instance of Rizal, Branch VIII, in Civil Case No. 12850, entitled "Carolina Industries, Inc, vs. CMS Stock Brokerage, Inc. (Formerly Sison, Luz & Jalbuena, Inc.), Carlos Moran Sison and Luis F. Sison".

The factual findings of the Court of Appeals are as follows: têñ.£îhqwâ£

Defendant CMS Stock Brokerage, Inc. (formerly Sison, Luz & Jalbuena, Inc.), for the calendar year 1969, was a licensed securities broker and dealer engaged, for compensation, in the business of buying and selling stocks and securities for and in behalf of investors, such as the plaintiff. The CMS Stock Brokerage, Inc. is a member firm of the Makati Stock Exchange. Defendant Carlos Moran Sison is the

president and at the same time the major and controlling stockholder of defendant corporation. Defendants, in admitting the foregoing facts, made the qualification that during the period from January 10 to August 29, 1969, Arsenio N. Luz III was the president of defendant corporation.

On or about June 17, 1969, plaintiff opened a margin account with defendants for purchasing, carrying and selling stocks and securities listed in the Makati Stock Exchange, as evidenced by a "Margin Account Agreement" executed on that date by plaintiff through its treasurer and controlling stockholder, Mariano T. Lim, and approved by defendant corporation, acting through its vice-president and general manager, defendant Luis F. Sison.

In that Margin Account Agreement, it was agreed that: têñ.£îhqwâ£

1. All transactions for my account tinder this agreement shall be subject to the constitution, rules, regulations, customs and usages of the Makati Stock Exchange, Inc. and its clearing house, and, where applicable, to the provisions of the Securities Act and the rules and regulations of the Securities & Exchange Commission, and also to such rules you may adopt from time to time.

xxx xxx xxx

5. I will at all times maintain such margins as you may in your discretion require from time to time and will pay on demand any debit balance of my account with you.

6. I will liquidate in full the margin you extend to me within a period of ninety (90) days from the date of its opening or renewal, as the case may be, and, if I fail to do so, you may without notice to me either: têñ.£îhqwâ£

(a) Close my account by seding so much of my securities held by you sufficient to cover in fun my debit barance; or

(b) Sell and repurchase, at the same price, my securities held by you, thereby liquidating and renewing my margin account for another period of 90 days.

7. I will trade in securities with a volume of at least 150% of my margin line within a period of 90 days and should the volume of my transactions be less, you are hereby authorized on the 90th day, without notice, to effect the sale and repurchase, at the same price, of so much of my securities sufficient to cover the difference between 150% of my margin line and the volume of my transactions.

8. The debit balance of my account shall be charged with daily interest at the rate of twelve per cent (12%) per annum, compounded monthly, plus other charges for servicing my margin account and other expenses incidental thereto. (Exhibit "B").

On the following dates, plaintiff deposited to its margin account with defendant corporation the following sums:

1 June 17, 1969 O.R. No. 2354........... P 10,000.00

2. June 19, 1969 O.R. No. 2385................. 9,796.00

3. June 26, 1969 O.R. No. 2487............... 461,000.00

4. June 26, 1969 O.R. No. 2488................. 79,000.00

5. July 2, 1969 O.R. No. 2580................... 27,000.00

P586,796.00

plus 400 Benguet shares covered by Receipt No. 1636, dated July 10, 1969, by reason of its (Plaintiff's) stock trading transactions. Plaintiff gave the value of P48,000.00 to the 400 Benguet shares. With the 400 Benguet shares, valued at P48,000.00, the total amount deposited is P634,796.00.

Plaintiff engaged in the buying and selling of stocks and securities listed in the Makati Exchange through defendants, utilizing for that purpose the credit or margin extended to it by defendants.

Plaintiff alleged in its complaint, as first alternative cause of action, inter alia, that as of the close of business day on September 12, 1969, it owed defendants the net principal sum of P804,179.69, exclusive of the stipulated daily interest; that on September 15 and 16, 1969, defendants, without its (Plaintiff's) authority, purchased for its account 14,235 shares of the capital stock of the Marinduque Mining & Industrial Corporation at a total price of P2,659,521.19, thereby increasing its liability to P3,463,700.88; that starting September 25, 1969, defendants unilaterally liquidated its margin account by selling, at a tremendous loss, all the stocks and securities credited to its account prior to September 15, 1969, thereby completely wiping out its investment in the total sum of P634,796.00; that in extending to it (plaintiff) excessive credit or margin for purchasing, carrying or selling listed stocks and securities, in advising it in regard to the purchase and/or sale of specific stocks and securities, in managing its margin account, in selling their own stock to it, in unilaterally hquidating its margin account, in preferring their own interest over its interest particularly in the purchase of 14,235 Marinduque shares and the liquidation of its margin account, defendants, as its agents for compensation in the purchase and sale of stocks and securities, acted fraudulently, illegally, recklessly and in gross and evident bad faith, considering the nature of the stock brokerage business, defendants' superior and expert knowledge of the stock market, defendants' duty under the Securities Act to customers, and the highly fiduciary relationship between a broker and a customer; and that as a consequence of defendants' fraudulent, illegal, reckless and improvident conduct, it suffered actual damages in the amount of P634,796.00 in addition to unrealized profits.

Plaintiff alleged, as second alternative cause of action, inter alia, that as of September 12, 1969, the credit or margin that defendants had extended to it is equal to 73.42% of the market; and that defendants' inducement of it to trade heavily on its margin account by extending to it excessive credit or margin was in clear violation of the provisions of Section 18 of the Securities Act and the implementing rules and regulations of the Securities and Exchange Commission.

As third alternative cause of action, plaintiff alleged, inter alia, that after it had protested the unauthorized and improvident purchase of the Marinduque shares, defendants agreed not to charge the

purchase to its (plaintiff's) account and instead to release to it the following stocks and securities: (1) 318,000 shares of Lepanto Consolidated Mining Company, plus a stock dividend of 33-1/3%; (ii) 94,000 shares of Palawan Quicksilver Mines, Inc.; and (iii) 70,000 shares of Copper Belt plus pre-emptive rights declared thereon on the condition that plaintiff would pay its liability as of September 14, 1969; and that pursuant to this agreement, it delivered to defendants its check for P500,000.00 which it subsequently replaced with a Philippine National Bank Cashier's Check No. 211367 for P500,000.00 and its own checks, Manila Banking Corporation Check No. 111790-A for P250,000.00, pending determination of the exact amount of its liability prior to September 15, 1969.

Plaintiff claims that to minimize its loses, it was compelled to instruct the banks concerned to withhold payment on the PNB Cashier's check for P500,000.00 and its own check for P250,000.00.

BY its complaint, plaintiff seeks to order defendants, inter alia, to pay it, jointly and severally, the sum of P634,796.00, with interest thereon from the date of the filing of the complaint; or, in the alternative, inter alia, to order, jointly and severally, defendants to deliver to it (i) 318,000 shares of Lepanto Consolidated Mining Company, plus the stock dividend of 33-1/3% declared thereon in 1969; (ii) 94,000 shares of Palawan Quicksilver Mines, Inc., and (iii) 70,000 shares of Copper Belt plus pre-emptive rights declared thereon upon payment by it (plaintiff) to defendants of the sum of P804,179.00.

Answering with counterclaim, defendants specifically denied the material allegations of the complaint, except those admitted; and alleged, among others, that the facts and surrounding circumstances of the transaction are as follows: (1) that after the trading hours on Friday, September 12, 1969, plaintiff's Mariano T. Lim came to the office of the defendants and placed an order for the purchase, on the cash basis, of 15,000 Marinduque shares for plaintiff's account on the next trading day, September 15, 1969; (2) that on September 15, 1969, in partial execution of said order, defendant corporation purchased for plaintiff's account, 4,260 Marinduque shares worth P749,985.60; (3) that verbal confirmation of these purchases were immediately made that same day to plaintiff's Mariano T. Lim, who forthwith came to defendants' office to reconfirm said purchases, and Mariano T. Lim advised the defendants to continue purchasing the balance of the order at the market price prevailing the following day; (4) that on September 16, 1969, the defendant corporation purchased 9,975 more Marinduque shares worth P1,909,536.30, thereby making a total of 14,235 Marinduque shares already purchased for plaintiff's account; (5) that Purchase Confirmation Slips covering the purchases made on September 15, 1969, were sent to and received by plaintiff on September 16,1969, while the Purchase Confirmation Slips covering the purchases made on September 16, 1969, were sent to and received by plaintiff on September 17, 1969; (6) that on September 19, 1969, plaintiff issued and delivered to the defendant corporation three (3) MBTC checks in the total amount of P500,000.00 as substantial payment on account of the 4,260 Marinduque shares purchased for its account on September 15, 1969, but all these three checks later bounced because of "insufficient funds", a fact which became known to the defendants on September 23, 1969; (7) that after the trading hours on September 22, 1969, because the price of Marinduque ahares had considerably gone down plaintfff's Mariano T. Lim panicked and so he ordered the defendants to immediately sell at market on the next trading days all the 14, 235 Marinduque shares previously purchased for plaintiff's account; (8) that in the execution of the said urgent order to sell the defendant corporation sold on September 23, 1969 9,590 of plaintiff's

Marinduque shares and Sales Confirmation Slips for these transactions were promptly sent to and received by the plaintiff, which suffered tremendous losses amounting to P528,175.65 as a consequence of the erroneous and precipitate order to sell said shares given by its treasurer and controlling stockholder, Mariano T. Lim; (9) that on September 24, 1969, plaintiff's Mariano T. Lim delivered to the defendants a PNB Cashier's check for P500,000.00, as replacement for plaintiff's previously dishonored three MBTC checks which were all returned to him, and at the same time Mariano T. Lim also delivered to them a TMBC check for P250,000.00 in further settlement of plaintiff's account; (10) that on September 25, 1969, with evident bad faith and in fraud of the defendant corporation, plaintiff stopped payment of both the PNB Cashier's check of P500,000.00 and TMBC check of P250,000.00, thereby compelling the defendants to liquidate plaintiff's margin account on September 25 and 26, 1969, with the sale of practically all the securities given as collaterals therefor.

Defendants started to liquidate plaintiff's margin account on September 25, 1969, allegedly on the following considerations: (1) because on September 25, 1969, plaintiff deceitfully stopped payment not only of the PNB Cashier's check of P500,000.00 which it delivered to defendants as replacement for its three (3) previously dishonored MBTC checks for the same amount, but also of its TMBC check for P250,000.00 which it delivered to defendants in further payment on account of the purchase price of the Marinduque shares; (2) because plaintiff reneged in its promise to place its margin account in order; and (3) because the defendants had to comply with the then newly issued SEC rule that "If an account should remain unsettled for a period of five (5) trading days from the date the transaction is effected, the broker must sell-out".

Defendants' counterclaim, under the first cause of action, is based on the fact that the three (3) MBTC checks for a total amount of P500,000.00, as substantial payment for the 4,265 Marinduque shares, were dishonored and returned by the drawee bank for reason of "Insufficient Funds"; and the fact that plaintiff stopped payment of the PNB Cashier's check No. 211367 for P500,000.00, which Mariano T. Lim indorsed as replacement for plaintiff previously dishonored three (3) MBTC checks, and TMBC Makati Branch Check No. G-111790-A for P250,000.00.

Under the second cause of action, it is claimed that for allegedly filing with the Securities and Exchange Conunission by plaintiff of its charges against defendants in S.E.C. Case No. 1101, coupled with the acts of pure harassment it has committed even before the start of the investigation of the charges, they (defendants) suffered actual damages and moral damages, and incurred expenses of litigation. They had to engage the services of counsel in defending their rights and protecting their interest, good name and reputation against the groundless and harassing suit filed by plaintiff in S.E.C. Case No. 1101.

Under the third cause of action, defendants alleged that when they liquidated plaintiff's margin account, and after the collaterals thereof were sold out, leaving only 33 Lepanto Consolidated shares still unsold, plaintiff owes defendant corporation the amount of P463,410.95 as the debit balance of its margin account as of March 17, 1970, excluding "daily interest" on the running period of the account "at the rate of twelve per cent (12%) per annum compounded monthly", compounded beginning March 1, 1970.

Under the fourth cause of action, it is alleged that as a necessary consequence of plaintiff's clearly unwarranted filing of its unfounded and baseless complaint, defendants have suffered and will continue to suffer moral and exemplary or corrective damages.

Plaintiff Carolina Industries, Inc., when it bought shares of stock under the Margin Account Agreement, had to pay only so much as would maintain its debit balance with defendant CMS Stock Brokerage, Inc., to not more than 50% of the current market value of its securities held by defendant corporation on deposit as of the stipulated delivery date.

As stipulated in the Margin Account Agreement, if plaintiff's debit balance on the margin account exceeds the 50% ceiling and the undermargin continues longer than the period of credit stipulated in the agreement, defendant CMS Stock Brokerage, Inc. may sell so much of the securities deposited as would cover the undermargin, or as would be necessary to liquidate the debit balance.

There is no disputed on the following facts:

During the period from June 17, 1969 to July 10, 1969, plaintiff Carolina Industries, Inc. deposited with defendant CMS Stock Brokerage, Inc. various cash amounts totalling P586,796.00, as partial payments to the debit balance, and securities valued at P48,000.00, consisting of 400 shares of Benguet Consolidated.

As of September 12, 1969, the account of plaintiff Carolina Industries, Inc. with defendant CMS Stock Brokerage, Inc. had a debit balance of P804,179.69 against a security deposit with a market value of a little over a million pesos. Its debit balance as of September 12, 1969, was over 70% of its security deposit, or more than 20% over the 50% ceiling set by Section 18(a) (1) of the Securities Act.

On September 15, 1969, defendant corporation purchased for plaintiff's account 4,260 Marinduque shares worth P749,985.00, and on September 16, 1969, defendant corporation purchased also for plaintiff's account 9,975 more Marinduque shares worth P1,909,536.00.

Plaintiff's Mariano T. Lim drew P100,000.00 on Manufacturers Bank on a loose check pre-signed by plaintiff's president, Rafael Alvarez, dated September 19, 1969. Then, Lim drew an additional P250,000.00 on Manufacturers Bank, on a loose check, also pre-signed by Alvarez, dated September 20, 1969. Defendant Luis Sison, vice-president and general manager of defendant corporation, isssued a receipt for the two checks in "payment for deposit". Lim drew a third check, also dated September 20, 1969, on Manufacturers Bank for P150,000.00.

On September 24, 1969, Lim signed his indorsement on a PNB Cashier's check for P500,000.00, payable to plaintiff, and delivered it to defendant Carlos Moran Sison. Defendant Luis Sison returned to Lim the three Manufacturers Bank checks.

Lim drew another check for P250,000.00, also pre-signed by plaintiff's president, on Manila Banking Corporation, dated September 25, 1969. The receipts issued therefore states, "For deposit into his account". The next day, Lim obtained from the PNB a Cashier's check for P250,000.00, payable to

plaintiff and deposited it with the Manila Banking Corporation in time to answer for the September 25, 1969 Manila Banking check which he had delivered to defendant corporation.

Later, plaintiff stopped payment of both PNB Cashier's check of P500,000.00 and TMBC check of P250,000.00.

Defendants liquidated plaintiff's margin account with the sales of the securities given as couaterals therefor. (Annex "A", Petition, pp. 88-99, Rollo).

The Court of First Instance resolved the case on the following issues, namely:

1. Did the defendants extend to plaintiff excessive credit in violation of Section 18 of the Securities Act?

2. Did plaintiff authorize the purchase for its account by the defendant of the 14,235 Marinduque shares on September 15 and 16, 1969?

3. Was the defendants' unilateral liquidation of plaintiff's margin account on September 25, 1969 justified under the circumstances then obtaining?

On the first issue, the court said that: têñ.£îhqwâ£

At first glance ..., it would seem that the defendant brokerage firm extended to plaintiff excessive credit because it is provided under section 18 of the Securities Act that "for the purpose of preventing the excessive use of credit for the purchase or carrying of securities", one of the standards set is that the credit extended should not exceed "fifty per centum of the current market price of the security" (Section 18, par. (a), (1), Securities Act).

In other words, applying the said standard on the maximum limit of allowable credit fixed by law to the case at bar, considering that the value of plaintiff's security position with the defendant brokerage firm was P1,168,478.00 as of September 12, 1969, the maximum credit that could legally be extended to plaintiff should only be fifty per cent of P1,168,478.00 or P584,239.00 at most, instead of the P804,179.69 actually extended by the defendant brokerage firm to plaintiff. Stated in the reverse, since the debit balance of plaintiff's margin account was P804,179.69 as of September 12, 1969, the value of its security position with the defendant brokerage firm should have been at least P1,608,359.38, instead of the P1,168,478.00 that it then had. (Record on Appeal, pp. 191-192).

Notwithstanding the foregoing, the court took into account the stock market boom of the period and the heavy volume of trading resulting therefrom, which prompted the Securities and Exchange Commission to suspend trading at the Manila and Makati Stock Exchanges on Wednesdays in order to enable stock brokers to update their records. I found that, in view of the circumstances obtaining, respondent brokerage firm, applying Sections 28(a) (2) and 40 of the Securities Act, had not wilfully violated the Securities Act. The Court said: têñ.£îhqwâ£

No evidence has been presented by plaintiff to prove that the defendant brokerage firm "willfully" violated Section 18 of the Securities Act ... . On the contrary, the evidence presented by the defendants,

through witness Carlos Moran Sison, proved beyond doubt that if there was any violation of the law at all, it was done in absolute good faith and without malice what soever, considering the circumstances surrounding the case.

To the mind of the Court, the fact that Carlos Moran Sison, upon discovering on September 8 or 9, 1969 that plaintiff's account was undermargin, summoned Mariano T. Lim immediately and told him to put the account of plaintiff in proper order or else it will be liquidated in four days, shows beyond dispute that the defendant brokerage firm did not intend at all to violate Section 18 of the Securities Act. At least, not wilfully. Moreover, there is the testimony of Carlos Moran Sison that one of the reasons why he fired Arsenio N. Luz III as President of the defendant brokerage firm is the fact that its records were in such a mess that it was impossible to ascertain at the time whether a particular account was undermargin or not. Precisely because of this unfortunate situation, the first step that Carlos Moran Sison took when he re-ssumed the presidency of his firm on September 2, 1969, was to hire a special accountant to go over the messy records and give him an accurate report on the status of the margin accounts. And once the report on the margin accounts was submitted to him and he discovered that the plaintiff was undermargin, he lost no time in summoning Mariano T. Lim to his office and informing him to put plaintiff's account in proper order or alse it will be liquidated within four days. If any proof of good faith on the part of Carlos Moran Sison, the controlling stockholder of the defendant brokerage firm is needed at all, this is it.

On the other hand, Mariano T. Lim, plaintiff's treasurer and authorized trader, admitted on cross examination that since July, 1969, he knew all the time that plaintiff's margin account was no longer in proper order. He was already thirty-one years old then a graduate from the University of North Carolina, and has been engaged in business for the past several years. Stock trading on margin was not new to him, for before becoming a customer of the defendant brokerage firm on June 17, 1969, plaintiff was already trading on margin with Philsec since March, 1969, with whom it executed a margin agreement containing the rules on margin trading.

xxx xxx xxx

(Record on Appeal pp. 198-200).

This Court believes that under the time-honored principle of equity — that one who comes into equity must come with clean hands — plaintiff cannot now be allowed to take advantage of defendants' alleged violation of Section 18 of the Securities Act if only because it was itseff guilty of the same act. And "both parties being in pari delicto, they shall have no action against each other" (Art. 1411, New Civil Code). Obviously, defendants could not have been guilty of such violation of the law had not plaintiff cooperated as co-principal; hence, it cannot now be heard to complain of whatever damages it may have suffered as a consequence of such violation. The maxim is that "in pari delicto, potior est conditio defendantis et possidentes", that is, "where both parties are equally in fault, the condition of the defendant is preferable" (Bouvier, L. D.), or, as stated in a case, "among those in equal wrong, the situation of the defendant is the stronger" (Norris v. York, 105 Kan. 448, 450, 185 P 43; 32 CJ 577). (Record on Appeal, p. 209).

On the second issue — whether or not plaintiff authorized the purchase for its account by the defendant brokerage firm of the 14,235 Marinduque shares on September 15 and 16, 1969 — the court concluded from the conflicting testimonies and other evidence that the purchase was authorized by the plaintiff.

The court arrived at said conclusion largely on account of the following: têñ.£îhqwâ£

According to him (Mariano T. Lim), on September 16, 1969, when he was informed that the defendant brokerage firm had bought for plaintiff's account Marinduque shares, he protested and complained (t.s.n., p. 56, July 16, 1970). Yet he did not even bother to ask how many Marinduque shares were bought for the account of plaintiff, or even when they were bought, ... perhaps his protest and his complaint would have been humorous if only 100 Marinduque shares were bought for plaintiff's account and at a price which might have been profitable for the plaintiff then.

Again, on September 19, 1969, according to Mr. Lim, he went to the office of the defendant brokerage firm and delivered to the firm three (3) MBTC checks in the total amount of P500,000.00 (Exhs. XX, YY & AAA, or 4, 5 & 6). These checks were deposited by him with the said firm "to straighten up our margin" (t.s.n., pp. 19, 25, June 25, 1970), that is, to place plaintiff's margin account in proper order, and not to pay on account of the 4,260 Marinduque shares bought for plaintiff by the defendant brokerage firm on September 15, 1969. He presented Exhs. ZZ and BBB, the two official receipts issued by the defendant brokerage firm for the said three checks to show that the amount of P500,000.00 was a deposit. But if, as claimed by Mr. Lim, the above-mentioned amount of P500,000.00 was deposited by him to put plaintiff's margin account in order, then he made an overdeposit because at that time, plaintiff's debit balance was P804,179.69 while its security position was P1,168,478.00. In other words, Mr. Lim did not have to deposit half a million pesos to place plaintiff's margin account in proper order because all he needed then was to deposit only the amount of P219,940.69, to be exact for that would have reduced plaintiff's debit balance of P584,239.00, which is exactly one-half or 50% of plaintiff's security position then of P1,168,478.00, as required under Section 18, paragraphs (a) (1), of the Securities Act. Furthermore, if it were really true, as claimed by Mr. Lim, that the half a million pesos delivered by him to the defendant brokerage firm on September 19, 1969 was to place plaintiff's margin account in proper order, there was no reason at all why it was done that early. For the plaintiff was given one to two weeks from September 8 to 9, 1969, within which to straighten up its margin account or, as testified to by Mr. Lim, "a week from September 16" (t.s.n., p. 64, July 16, 1970), which was until September 23, 1969. And considering the three MBTC checks amounting to P500,000.00 which he delivered to defendant brokerage firm on September 19, 1969, purportedly to place plaintiff's margin account in proper order, bounced for "insufficient funds" (E xhs. 4-A, 5-A, 6-A & 9), it certainly defies human credulity why Mr. Lim should attempt to make payment on something that was not yet due and by checks which had no sufficient funds. (Record on Appeal, pp. 221-223).

The Court of First Instance gave credence to the claim of defendant brokerage firm that the checks for P500,000.00 and P250,000.00 delivered by Mr. Lim were in payment of the purchase price of the 4,260 Marinduque shares bought on September 15, 1969 by defendant on spot cash basis for plaintiff's account, payment for which was due on September 19, 1969, since spot purchases must be paid within four (4) days. 1

On the issue of whether or not CMS Stock Brokerage, Inc. was justified in liquidating petitioner's margin account, the trial court said: têñ.£îhqwâ£

The reason for such a liquidation was testified to by Atty. Teodoro R. Dominguez, the corporate secretary-treasurer and legal counsel of defendant brokerage firm. According to him, between 10:30 and 11:00 o'clock in the morning of September 25, 1969, he went to the Merchants Banking Corporation in Makati, Rizal to deposit in the account of defendant brokerage firm the PNB Cashier's check of P500,000.00 (Exh. CCC or 10) and TMBC check of P250,000.00 (Exh. EEE or 12); that before depositing these two checks, he first asked the branch manager of the Merchants Banking Corporation to find out by telephone from the Manila Banking Corporation if the Manila Banking check for P250,000.00 marked Exhibit 12 was a good check or has funds to support it; that the information received was that Exhibit 12 had no sufficient funds to back it up; and that notwithstanding this information, he still deposited the said check and promptly relayed said information to Carlos Moran Sison, who was on the floor of the Makati Stock Exchange and ordered him to immediately liquidate the account of the Carolina Industries, Inc. (t.s.n., pp. 8-11, Jan. 7, 1971). (Record on Appeal, pp. 283-284).

The Court chose to believe this version as against petitioner's assertion that the payments on the checks were stopped precisely because liquidation of its margin deposit was already being commenced, and thus arrived at the conclusion that the liquidation was justified.

Considering the foregoing, and ruling on the counterclaims of CMS Stock Brokerage, Inc., the court rendered judgment in favor of the latter, the dispositive portion of which reads as follows: têñ.£îhqwâ£

WHEREFORE, the Court hereby renders judgment as follows:

1. dismissing plaintiff's complaint;

2. ordering plaintiff to pay defendants on their counter-claims: têñ.£îhqwâ£

(a) The amount of P507,085.21 as the debit balance of its account with defendants brokerage firm as of December 2, 1970, plus daily interest on the running balance of said amount at the rate of 12% per annum, compounded monthly, computed from December 1, 1970, until the said amount, together with the stipulated interest, shall have been fully paid, pursuant to paragraph 8 of their Margin Account Agreement of June 17, 1969;

(b) The amount of P500,000.00 as actual consequential damages suffered by defendant brokerage firm arising from its loss of many clients which greatly reduced the volume of its business and earnings in 1970 brought about by plaintiff's imputations of fraud and dishonesty, against the said brokerage firm;

(c) The amount of P100,000.00 as reasonable moral damages recoverable under the circumstances of this case;

(d) The amount of P100,000.00 as reasonable exemplary or corrective damages, by way of example or correction for the public good;

(e) The amount of P100,000.00 by way of attorney's fees which defendants have incurred and bound themselves to pay their counsel and which this Court considers reasonable and recoverable;

(f) The amount of P2,447.40 as actual expenses of litigation incurred by defendants; and,

(g) Costs.

3. Ordering the Philippine National Bank, Manila, to honor its Cashier's check No. 211367 in the amount of P500,000.00 dated September 24, 1969, pursuant to the commitment stated in its letter of October 29, 1969, and the amount thereof shall hereby apply in partial stipulation of the judgment herein rendered in favor of defendants.

SO ORDERED. (Record on Appeal, pp. 298-300).

On appeal to the Court of Appeals, the judgment of the trial court was affirmed with modification, as stated above. The dispositive portion of the decision of the Court of Appeals reads as follows: têñ.£îhqwâ£

WHEREFORE, with the modification that the awards of moral damages in the amount of P100,000.00 and exemplary damages in the amount of P100,000.00 should be reduced each to P25,000.00, and the attorney's fees in the amount of P100,000.00 should be reduced also to P25,000.00, the decision appealed from is AFFIRMED in all other respects.

With costs against plaintiff-appellant.

SO ORDERED. (Annex "A", Petition, pp. 110, Rollo)

Petitioner elevated the case to this Court, positing the following issues for resolution: têñ.£îhqwâ£

1. May a broker make valid and binding stock purchases for customers under margin accounts in excess and in violation of the credit ceiling under Section 18 of the Securities Act and Rule 12 of SEC Regulations Governing Securities Exchanges and Their Members, Brokers, Dealers, Salesman and Customers?

2. May a broker make valid and binding stock purchases for customers on verbal and telephone buy or sell orders without complying with the mandatory requirements of Rule B-7 of the SEC Rules and Regulations that verbal buy and sell orders must be entered in buy or sell forms and time-stamped both upon their receipt and their execution?

3. May a broker unilaterally and without notice to customers sell out the shares on deposit and thereby liquidate the margin account in violations of the mandatory provisions of SEC Rules B-19, 14 and 15 implementing the Securities Act?

4. Should not the requirements of the Securities Act and its implementing rules and regulations be construed strictly against the stock broker and liberally in favor of the investors whom the law seek to protect?

5. Is not a stock broker who violated the mandatory provisions of the Securities Act and its implementing SEC Rules and Regulations liable to the customers for consequential damages?

Quite apart from, and independently of, the foregoing important and novel substantial issues, the following legal issues should also be resolved in order to make a complete and just disposition of the case at bar:

6. Whether or not the Court of Appeals erred as a matter of law in drawing conclusions that petitioner was guilty of fraud and bad faith which were not supported by the evidence.

7. Whether or not the Court of Appeals erred as a matter of law in adopting the findings and conclusions of the trial court grounded entirely on speculations, or conjures, which are manifestly absurd or impossible. (Petition, Rollo, pp. 19-20).

While the general rule is that findings of fact of the trial court and the Court of Appeals are binding upon this Court, said rule nevertheless admits of certain exceptions. Thus, this Court retains the power to review and rectify findings of fact of said courts (1) when the conclusion is a finding grounded entirely on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; and (5) when the court, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee. 2 The same rule applies where the lower court manifestly overlook certain relevant facts not disputed by the parties, which if properly considered, would justify a different conclusion. 3

There are facts and circumstances in hie record which render untenable the conclusion of the trial court and the Court of Appeals that petitioner Carolina Industries, Inc., thru its treasurer, authorized tthe disputed purchase of Marinduque shares, It will be recalled that the court a quo arrived at the conclusion that the purchase was authorized by petitioner on the basis of its assumption that the checks issued and endorsed by Carolina Industries, Inc. to CMS Stock Brokerage, Inc. were in payment of the purchase price of the Marinduque shares in question.

It will be noted, however, that all receipts issued by CMS Stock Brokerage, Inc. for the checks afore-mentioned clearly and categorically stated that the same were for deposit. Certaintly, if the said checks were delivered in partial payment for the Marinduque shares, the aforesaid receipts would have so stated, considering that the receipts were prepared and issued by the CMS Stock Brokerage, Inc. The excuse offered by CMS Stock Brokerage, Inc. to the effect that this practice of receipting for all moneys received as deposits is resorted to by brokers to avoid confusion of records during the rush of buying and selling appears unpersuasive, considering that the payments were never denominated even afterwards in the records of said brokerage firm that those were actually partial payments of the Marinduque shares. Thus. as found by the trial court in the criminal cases for estafa against petititioner's officers, 4 the monthly statements of CMS Stock Brokerage, Inc. which should reflect the true purpose of the payments made, still characterize the same as deposits and not payments for the purchase, on cash basis, of the Marinduque shares.

Moreover, on September 29, 1969, after payments on the PNB and TMBC checks had been stopped, Atty. Dominguez of CMS Stock Brokerage, Inc. wrote a letter (Exhibit "19") to petitioner, protesting the stopping of payment of "TMBC Check No. G-111790-A for P250,000.00 dated September 25, 1969, which you delivered to us on that same date to cover your margin account with us." Why should Atty. Dominguez specifically state in his letter for CMS Stock Brokerage, Inc. on September 29, 1969 that the checks were delivered to them to cover the margin account of the petitioner, if such was not the case? Certainly, when the letter was prepared, there was no longer any necessity of "avoiding confusion of records during the rush of buying and selling" of shares.

It would be an imposition on human credulity to believe that Carlos Moran Sison, knowing that petitioner's account was substantially undermargin and that petitioner could not even update the same, would be willing to purchase for petitioner 14,235 Marinduque shares, worth P2,659,521.19 on spot cash basis — meaning payable within four (4) days — when, from all indications and as admitted by Carlos Moran Sison himself, petitioner would be unable to pay for the same. It appears that at the time the alleged order for Marinduque shares was executed, there was substantial unloading of Marinduque shares at the Exchange and very few were buying the same. Thus, on the two trading days of September 15 and 16, 1969, respondent CMS Stock Brokerage, Inc. sold an overall total of 38,660 Marinduque shares with an aggregate value of P7,027,980.30, (Exhibits "SS-8" to "SS-9"; "TT-5" "WWW", "WWW-1" to "WWW-31"; "XXX-11", "XXX-13" to "XXX-17"; "YYY", "YYY-1" to "YYY-14") During the same two days the respondent brokerage purchased only 18,415 Marinduque shares, to wit: 5

DATE NO OF SHARES CHARGED TO PERCENTAGE

(AMOUNT) PETITIONER

(AMOUNT)

Sept. 15 4,360 4,260 97.70%

(P767,660.60) (P749,985.60)

Sept. 16 14,055 9,975 71.14%

(P2,684,347.70) (P1,909,536.30)

What makes the transaction rather suspicious is the admission of Carlos Moran Sison himself that in the afternoon of September 12, 1969 when petitioner Mariano T. Lim came to his office and told him to buy 15,000 Marinduque shares because Lim had a tip that the shares would go up in price, Atty. Carlos

Moran Sison told him that it was not true, saying: "Well, Mr. Jacob Cabarrus must be fooling you because my information is very reliable ... ". Right then and there, respondent Sison phoned Cabarrus who confirmed Sison's previous information. 6 If it were true that respondent Carlos Moran Sison informed Lim to withdraw the enormous stock purchase order because according to the Executive Vice-President of Marinduque Mining and Industrial Corporation himself the information given to Lim was not true, it is rather unusual and inconsistent with the ordinary instincts and promptings of human nature for Lim to have still insisted in his order. If, according to respondent Sison his brokerage firm had serious difficulty with its cash position and was so concerned with the deficiency of petitioner's margin account, why did his brokerage not wait for petitioner to deposit to them half-a-million pesos worth of stocks or the P300,000.00 cash deposit before purchasing for petitioner P2,600,000.00 worth of stocks? And since Lim failed to deliver tile requisite cash and security, why did respondent Sison not demand from Lim the promised P1,000.000.00 in cash, or at least require him to confirm in writing the alleged purchase of more than two million pesos worth of shares when he met Lim in tile afternoon of September 15, 1969? The conclusion ot the Court of Appeals that because of the return only on September 29, 1969 of the fifteen (15) Purchase Confirmation Slips after the price of Marinduque shares had gone done creates the presumption that petitioner authorized the purchase is refuted be the facts of record. The Appellate Court totally ignored the testimony of Lim that in the afternoon of September 16, 1969, Lim disowned the purchases and Carlos Moran Sison said that he was taking back the shares so that there was no need to return the Purchase Confirmation Slips. It was only after Lim was informed by Luis Sison on September 26, 1969 that his father, Carlos Moran Sison, decided to consider the purchases of Marinduque shares for petitioner's account did petitioner consult its lawyers and decided to return the Purchase Confirmation Slips. The Appellate Court did not make any ruling why it did not give credence to this portion of Lim's testimony. Where there are directly conflicting versions of the same incident, the court, in its search for the truth, perforce has to look for some facts or circumstances which can be used as valuable aid in evaluating the probability or improbability of a testimony, for after all, the element of probability is always involved in weighing testimonial evidence. 7

It is undisputed that the alleged orders made by petitioner lor 14,235 shares of Marinduque Mining and Industrial Corporation were neither entered on purchase forms nor time-stamped upon receipt, as required by Rule B-7 of the SEC Implementing Rules and Regulations. There is evidence to the effect that private respondent brokerage firm had the required buying and selling forms and that these were usually filled out by the customers. Thus, it was petitioner's trading practice to utilize these buy and sell order forms. It appears that the disputed Marinduque purchase allegedly for petitioner departed from this trading practice. It is significant to note that, according to the documentary evidence submitted by the Makati Stock Exchange, the sales of respondent brokerage of 14,160 Marinduque shares to various customers on September 15, 1969 were all time-stamped in Exchange Contract Slips (Exhibits "WWW", "WWW-1", to "WWW-31"; "SS-8"). If it were true that Lim or the petitioner gave to respondent brokerage the order to purchase, it is rather unusual why the alleged order of petitioner for 15,000 Marinduque shares were (a) not placed in writing; (b) much less entered in the buying order form; or (c) time-stamped to indicate the date and time of the order. Considering that, as testified to by Carlos Moran Sison, Mariano Lim went to his office several tunes regarding the purchase of Marinduque shares, it seems incredible that he or the respondent brokerage never bothered to have Lim fill out the

required form, considering the magnitude of the purchase and the financial situation of the purchaser. This is significant because even verbal orders are required to be recorded and time-stamped.

Rule B-7 of the SEC Implementing Rules and Regulations provides as follows: têñ.£îhqwâ£

7. Timing of orders and their execution. Verbal and telephone orders received by a member shall be entered on the forms used by him for his customer's buying and selling orders. All buying and selling orders received by him including the forms on which verbal and telephone orders are entered, shall be coursed thru his office and shall be time-stamped upon their receipt and also upon their execution, withdrawal or cancellation so as to indicate the date and time on which they were received, executed, withdrawn or cancelled.

All brokers, who deal for their own account or trade for discretionary account, as well as their partners, floor traders, officials and employees, shall place their orders on the same forms used by such brokers for their customers, and such forms shall also be time-stamped with other buying and selling orders received, as herein required in the case of other buying and selling orders.

All buying and selling orders referring to the same security and under the same terms and conditions, including those placed by the broker for his own account or for discretionary accounts and those placed by his partners, floor traders, officials and employees, shall be executed by him in the order in which they were received.

The obvious purpose of this rule is to safeguard public interest and protect the investing public from fraud and deceit in securities transaction. It is intended to prevent stock brokers from dumping to the account of stock investors unprofitable stock transactions initially purchased by brokers on their own account. It is conceded that the alleged verbal orders of petitioner for the purchase of Marinduque shares were not recorded in accordance with the mandatory requirements of Rule B-7 of the SEC Implementing Rules and Regulations. Rules, regulations and general ordors enacted by administrative authorities pursuant to the powers delegated to them the force and effect of law. 8 Pursuant to Section 1 of the Margin Account Agreement, all transactions shall be subject, among others, "to the provisions of the Securities Act and the Rules and Regulations of the Securities and Exchange Commission."

We have consistently held that under such situation, such rules and regulations become special terms of the contract. It was held in Benett v. Logan, 9 that where a customer orders securities to be purchased "subject to the rules, regulations, and customs of the exchange in which the order is executed", such rules, regulations and customs thereby become special terms of the contract. This very same doctrine has been consistently adopted in interpreting contracts in this jurisdiction and We have never deviated therefrom. 10

Private respondents offered the excuse that non-compliance with the foregoing requirement was due to the stock market boom and the rush of trading which resulted in the near impossibility of complying therewith. It is argued that as a matter of fact, Rule B-7 was suspended, or, at least, not enforced by the Securities and Exchange Commission during the period of the boom.

No proof is presented by private respondent showing the official suspension by the Securities and Exchange Commission of the aforesaid Rule. On the contrary, what appears on record is that the Securities and Exchange Commission took measures to ensure compliance therewith. Thus, it issued the following Memorandum Circular (Exhibit "1") on August 28, 1963: têñ.£îhqwâ£

MEMORANDUM CIRCULAR

TO: The Manila Stock Exchange and The Makati Stock Exchange, Inc.

In view of the heavy volume of transactions in the Manila and Makati Stock Exchanges, the Commission has observed that the member-firms are not up-to-date in their records. Likewise, it has also been observed that transfer agents have plenty of back-logs.

In order to afford stock brokers more time in keeping up-to-date their records and to help transfer agents reduce their back-logs the Commission, pursuant to Section 28(b) of the Securities Act, hereby orders that, effective September 3, 1969 and until further notice, trading in both exchanges be suspended on Wednesday of every week. Trading hours should be from 9:00 in the morning up to 12:00 o'clock noon.

Manila, Philippines, August 28, 1969.

And, as shown by the records of the Makati Stock Exchange adverted to in the preceding paragraphs, the sales of respondent brokerage of Marinduque Mining shares on September 15, 1969 were all recorded in the required form and time-stamped.

Even assuming that the factual findings of the trial court and the Court of Appeals were correct, We are of the view that the resolution of the legal questions determinative of this controversy would not change respondents' situation. The primary legal issue concerns the effect on subsequent transactions of the over-extension of credit made by private respondents in favor of petitioner.

During a period of three months, from June 17, 1969 to September 12, 1969, respondent CMS Stock Brokerage, Inc. extended loans or credit to the petitioner in the purchasing and carrying of securities under an agreement entitled "Margin Account Agreement" (Exhibit "B"). The loans were secured by colla consisting of registered securities which were purchased thru respondent brokerage firm. It is not disputed that the margin account of the petitioner with respondent corporation was consistently undermargin at all times during the period from June 23, to September 12, 1969. In other words, its debit balance was over the 50% ceiling of its security deposit set by Section 18 (a) (1) of the Securities Act. Petitioner's total margin deposit amounted to only P634,796.00 and that from June 23 to September 12, 1969, all credits extended to it were over the ceiling allowed, as a result of which it was consistently undermargin. Thus, the percentage of petitioner's debit balance to the market value of its security deposit deteriorated during the period from June 17 to September 12, 1969, from 49.48% on June 17 to 90.39% on September 8; 90.55% on September 9; 82:93% on September 11; and 78.57 % on

September 12. This was a patent violation of Section 18 (a) of the Securities Act, and Rule 12 of the Implementing Rules and Regulations which provide: têñ.£îhqwâ£

SEC. 18. Margin requirements. — (a) For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Commission shall prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security) registered on a securities exchange. For the initial extension of credit, such rules and regulations shall be based upon the following standard:

An amount not greater than whichever is higher of —

(1) Fifty per centum of the current market price of the security, or

(2) One hundred per centum of the lowest market price of the security during the preceding thirty-six calendar months, but not more than sixty-five per centum of the current market price.

xxx xxx xxx

12. In trading on margin a broker shall not extend credit to his customers beyond the following maximum:

(a) on securities which are duly registered and/or licensed by the Insular Treasurer or by the Commission, but not listed on any exchange, 30 per centum of the current market value of the securities;

(b) on securities duly registered and/or licensed by the Insular Treasurer or by the Commission, and listed on an Exchange, an amount whichever is the higher of: têñ.£îhqwâ£

(1) 40 per centum of the current market price of the securities; or

(2) 100 per centum of the lowest market price of the securities during the preceding 36 months but not more than 50 per centum of the current market price.

The main purpose of Section 18(a) (1) of the Securities Act and Rule 12 of the Implementing Rules and Regulations is "to give a government credit agency an effective method of reducing the aggregate amount of the nation's credit resources which can be directed by speculation into the stock market" and also for the protection of the small speculator by making it impossible for him to spread himself too thin. 11 Such requirements are intended to prevent the excessive use of credit for the purchase and carrying on of securities, and of reducing the aggregate amount of the national credit resources which are directed by speculation into the stock market and of achieving a more balanced use of such resources. The secondary purpose is the protection of the investor. 12

It is noteworthy that the foregoing provisions enjoin the over-extension of credit and not the application for excessive credit. It does not mean that the customer to whom credit has been extended or for whom it has been arranged has acted in violation of the Act or any rule or regulation thereunder. 13 The nature of the brokerage business is such that it is the broker, not the client, who is in a position to verify, at any

time, the status of the client's account. It is only the broker, therefore, who can prevent the over-extension of credit. In the instant case, it should be noted that petitioner did not know the exact amount of its undermargin, and that even after its request for a statement of account (Exhibit "20"), it was only some three months thereafter that private respondents were able to comply.

Neither is private respondents' reason that their records are messy sufficient to exonerate respondent brokerage from the effects of its statutory violations. It is the duty or obligation of respondent brokerage firm to keep its records in proper order. The disorderly or messy condition indicates negligence or lack of genuine concern for the updating of its records and not good faith. There is admission to the effect that Atty. Carlos Moran Sison of the CMS Brokerage, Inc. learned on September 8 or 9, 1969 of the excessive undermargin of petitioner's account. As a matter of fact, according to Sison, he told Lim on September 8 or 9, 1969 that his account was undermargin and gave Lim one week to put his margin account in order. He told Lim to deliver security stocks worth half a million pesos, or to deposit with them in cash P300,000.00. And yet, despite the failure of petitioner to cover its deficiency, private respondent allegedly bought for the account of petitioner on September 15 and 16, 1969 Marinduque shares for P2,659,521.90 and on September 23, 1969, Atlas and Lepanto Consolidated Mining shares for P1,069,991.88, at a time when petitioner's margin account was admittedly undermargin or above the 50% ceiling required by law. This excessive extension of credit by the broker cannot be considered innocent or inadvertent mistake. The kind of error which is considered innocent or inadvertent refers only to mechanical mistake made in good faith in determining, recording or calculating any credit, balance, market price or loan value or due to other similar mechanical mistake, and the broker concerned promptly, upon discovery of the mistake, takes whatever action is practicable to remedy the non-compliance. 14 This is not the case here.

Pursuant to the clear and explicit provision of Section 38(b) of the Securities Act, "(E)very contract made in violation of any provision of this Act or of any rule or regulation thereunder ..., shall be void: (1) As regards the rights of any person who, in violation of any such provision. rule or regulation shall have made or engaged in the performance of any contract ... ." Section 38(b) (1) of the Securities Act is copied from Section 29 of the United States Securities Exchange Act. The aforesaid Section 29 of the Securities Exchange Act of the United States has been uniformly construed, thus: têñ.£îhqwâ£

The statute proscribes the extension and maintenance of credit for the purchase of stock. This does not mean that the customer to whom credit is extended or from whom it is arranged has acted in violation of the Act or any rule or regulation thereunder. As was well stated by Wyzanski J. in Remar v. Clayton Securities Corp. (supra, 81 F. Supp. p. 1017): têñ.£îhqwâ£

... Broadly stated, the rule is that where defendant's violation of a prohibitory statute has caused injury to plaintiff the latter has a right of action if one of the purposes of the enactment was to protect individual interests like the plaintiff's.

xxx xxx xxxtêñ.£îhqwâ£

Plaintiff's right of action is not affected by his participation as borrower in the transaction in which Clayton and the bank violated the statute. Since the statute was passed for the benefit of people like

plaintiff, and since the Legislature regarded him as incapable of protecting himself, he is not disabled from suing for the injury he sustained. ... This principle may be compared with the rule that allows a plaintiff to enforce or rescind a contract made in violation of a statute if the violation was by defendant and the plaintiff belongs to the class for whose benefit the statute was enacted. ... (Myer v. Shields & Company, 267 N.Y.S. 2d. 872, 875).

We have previously stated that in case of laws patterned after or adopted from those of the United States, decisions of United States courts construing similar laws are entitled to great weight. Generally speaking, when a statute has been adopted from another State and such statute has previously been construed by the courts of such State or country, this statute is deemed to have been adopted with the construction so given it. 15 It has been uniformly held that if a broker extends credit to a customer in violation of the Securities Act or the regulations promulgated pursuant thereto, all to induce a customer to purchase securities, then the broker has violated the law and the customer may recover from him any loss proximately resulting therefrom. 16 The customer's right of action is not affected by his participation in the transaction "since the legislation regarded him as incapable of protecting himself." 17 It has been held that such protection was intended to apply only to innocent investors as distinguished from those who lose their innocence and wait to see how their investments turn out before deciding to invoke the act. 18 The acts of protecting of investors extends to corporations as well as to individuals. 19 We hold that such principles are applicable to the case at bar.

The instant controversy is neither an administrative case for willful violation before the Securities and Exchange Commission, in which case Section 28(a) (2) of the Securities Act would properly apply, nor a criminal prosecution for such willful violation, in which case Section 40 of the same Act would be applied for the imposition of the corresponding penalty. The instant case is an ordinary civil case seeking to nullity certain acts, alleged to be contrary to law, arising from violation of the margin agreement between petitioner and private respondent brokerage firm, and relating to acts committed by the latter in the course of their business relationship. Its purpose pose is to recover substantial business losses incurred by petitioner resulting from the assailed acts of respondent broker. Compliance to said requirement cannot be waived. The validity of transactions relative to securities trading is squarely provided for in Section 38, the full context of which reads as follows: têñ.£îhqwâ£

Sec. 38. Validity of Contracts. — (a) Any condition, stipulation, or provision binding any person to waive compliance with any provision of this Act or of any rule or regulation thereunder, or of any rule of an exchange required thereby, shall be void.

(b) Every contract made in violation of any provision of this Act or of any rule or regulation thereunder, and every contract (including any contract for listing a security on an exchange) heretofore or hereafter made, the performance of which involves the violation of, any provision of this Act or any rule or regulation thereunder, shall be void: têñ.£îhqwâ£

(1) As regards the rights of any person who, in violation of any such provision, rule or regulation, shall have made or engaged in the performance of any such contract, and

(2) As regards the rights of any person who, not being a party to such contract, shall have acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation of any such provision, rule or regulation.

(c) Nothing in this Act shall be construed — têñ.£îhqwâ£

(1) To effect the validity of any loan or extension of credit made or of any lien created prior or subsequent to the effectiveness of this Act, unless at the time of the making of such loan or extension of credit or the creating of such lien, the person making such loan or extension of credit or acquiring such lien shall have actual knowledge of the facts by reason of which the making of such loan or extension of credit or the acquisition of such lien is a violation of the provisions of this Act or any rule or regulation thereunder, or

(2) To afford a defense to the collection of any debt, obligation or the enforcement of any lien by any person who shall have acquired such debt, obligation, or lien in good faith for value and without actual knowledge of the violation of any provision of this Act or any rule or regulation thereunder affecting the legality bf such debt, obligation or lien.

It appears also in the record that while petitioner had an outstanding debt to respondent brokerage in the amount of P838,616.73, the same had been fully offset by proceeds of the liquidation sale of petitioner's shares of stock beginning on September 25, 1969, where the total sales proceeds received by respondent brokerage amounted to P999,324.19. It also appears that during the period from June 17, 1969 to September 12, 1969, petitioner deposited to respondent brokerage various sums totalling P586,796.00, plus securities valued at P48,000.00 consisting of 400 shares of Benguet Consolidated stock deposited on July 10, 1969 (Exhibits "VV" to "VV-5") totalling P634,796.00.

On the third issue, it appears that respondent brokerage unilaterally began the liquidation of petitioner's account on September 25, 1969 by selling the securities of the latter even before the two checks of P750.00 were dishonored by the banks. Petitioner's deposits to respondent brokerage in the late afternoon of September 24, 1969 of P750,000.00 were with the specific understanding that the brokerage shall compute the balance of petitioner's indebtedness so that it can pay in full all its margin account. Certainly, petitioner would not have deposited the checks that afternoon if it knew that its margin account was going to be liquidated the following day. The least that private respondent should have done is to have given to petitioner at least forty-eight (48) hours notice prior to liquidation. Pursuant to Rule 14 of the SEC Rules, a broker shall not sell the customer's securities for insufficiency of margin until after the broker has given the customer at least forty-eight (48) hours to maintain the margin. Under these circumstances, the liquidation was, therefore, premature.

In sum, We hold that under the attendant circumstance the over-extension of credit by CMS Stock Brokerage, Inc. to Carolina Industries, Inc. beyond the 50% allowed by law, and the non-compliance with Rule B-7 of the Implementing Rules and Regulations rendered null, insofar as the rights of CMS Stock Brokerage, Inc. are concerned, the purported purchase for petitioner's account on September 15 and 16, 1969 of Marinduque shares worth P2,659.521.90 and on September 23, 1969 of Atlas and Lepanto Consolidated shares for P1,069,991.88. Petitioner is, therefore, entailed to the return of the

P634,796.00 deposited with respondent brokerage and to the amount of P500,000.00 deposited with the Bank of the Philippine Islands, as per PNB Cashier's check No. 211367.

WHEREFORE, the dicision appealed from is REVERSED, and private respondent CMS Stock Brokerage, Inc. is ordered to pay Carolina Industries, Inc. the amount of P634,796.00, representing its liquidated margin deposit, with interest at 12% per annum from the time of the filing of the compt until fully paid, and P20,000.00 as attorney's fees. Private respondents are directed to secure the release from the Bank of the Philippine Islands the amount of P500,000.00 together with all its earnings, in favor of the petitioner. Costs against private respondents.

SO ORDERED.

Barredo (Chairman), Aquino, Concepcion, Jr., and Abad Santos, JJ., concur.1äwphï1.ñët

Footnotestêñ.£îhqwâ£

1 T.s.n., Hearing on Sept. 25, 1970, pp. 84, 86-87.

2 Ramos v. Court of Appeals, L-25463, April 4, 1975, 63 SCRA 331; Philippine American Life Insurance Co. v. Santamaria, L-26719, Feb. 27, 1970, 31 SCRA 798; Aldaba v. Court of Appeals, L-21676, Feb. 28, 1969, 27 SCRA 263; Cui v. Court of Appeals, L-24072, July 29, 1968, 24 SCRA 189.

3 Abellana v. Dosdos, L-19498, Feb. 26, 1965, 13 SCRA 244; Uytiepo v. Aggabao, L-28671, Sept. 30, 1970, 35 SCRA 186.

4 Criminal Cases Nos. 131-M(1202) and 132-M(1203), Annex "D", Petition.

5 Brief for Petitioner, pp. 37-41.

6 Brief for Respondents, pp. 18-19.

7 People v. Boholst-Caballero, L-23249. Nov. 25, 1974, 61 SCRA 180.

8 Columbia Broadcasting System v. United States, 97 L Ed Adv 1066), cited in Geukeko v. Araneta, Etc., L-10182, Dec. 24, 1957, 102 Phil. 706, 713.

9 80 Cal. App. 571, 252 Pac. 662 (1927).

10 De Borja v. CAR, L-24398, Oct. 25, 1977, 79 SCRA 557; Basa, et al. v. FOITAF, et al., L-27113, Nov. 19, 1974, 61 SCRA 93; Central Bank v. Hon. Cloribel and Banco Filipino, L-26971, April 11, 1972, 44 SCRA 307; Maritime Co. of the Phils. v. Reparations Commission, L-29203, July 26, 1971, 40 SCRA 70; Lakas ng mga Manggagawang Makabayan v. Hon. Carlos Abiera, L-29474, Dec. 19, 1970, 36 SCRA 437.

11 Remar v. Clayton Securities Corporation, 81 F. Supp. 1017.

12 69 Am. Jur. 2d, 842-843.

13 Myer v. Shields & Co., 267 N.Y.S. 2d. 872.

14 69 Am. Jur. 2d. 852.

15 Tamayo v. Gsell, No, 10765, Dec. 22, 1916, 35 Phil. 953, citing Cerezo v. Atlantic, Gull & Pacific Co., 33 Phil. Rep. 425, citing in turn 2 Lewis Sutherland on Statutory Construction, sec. 783, See also Campos Rueda Corp. v. Sta Cruz Timber Co., Inc. and Felix, L-6884, March 21, 1956, 98 Phil. 627, 630, wherein the Court, through Justice J.B.L. Reyes ruled that the "jurisdiction of the court depends, not upon the value or demand in each single cause of action, but upon the totality of the demand in all the causes of action", since the rule appears to be, among others, "to be in accord with the weight of American authority including the federal courts and those of the State of California from which our own rules of practice and procedure were mainly taken."

16 Smith v. Bear, 237 F. 2d. 79.

17 Remar v. Clayton Securities Corporation, supra; Myer v. Shields & Co. (1966), 267 N.Y.S. 2d. 872, 874.

18 Hecht v. Harris, Upham & Co., (DC Cal.) 283 F. Supp. 417 mod. on other grounds (CA 9) 430 F. 2d. 1202.

19 Superintendent of Ins. v. Bankers Life & Casualty Co., 404 U.S. 6, 30 L. ed. 2d. 128, 92 S. Ct. 165.

The Lawphil Project - Arellano Law Foundation

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

G.R. No. 121075 July 24, 1997

DELTA MOTORS CORPORATION, petitioner, vs.COURT OF APPEALS, HON. ROBERTO M. LAGMAN, and STATE INVESTMENT HOUSE, INC., respondents.

DAVIDE, JR., J.:

This is a Petition for Certiorari 1 under Rule 65 of the Revised Rules of Court seeking the reversal of the Resolutions of the Court of Appeals in CA-G.R. SP No. 29147 dated 5 January 1995 2 and 14 July 1995. 3 The former denied the Omnibus Motion filed by petitioner Delta Motors Corporation (hereinafter DELTA), while the latter amended the earlier Resolution.

The pleadings and annexes in the record of CA-G.R. SP No. 29147 disclose the following material operative facts:

Private respondent State Investment House, Inc. (hereinafter, SIHI) brought an action for a sum of money against DELTA in the Regional Trial Court (RTC) of Manila, Branch VI. The case was docketed as Civil Case No. 84-23019. DELTA was declared in default, and on 5 December 1984, the RTC, per Judge Ernesto Tengco, rendered a decision 4 the dispositive portion of which reads as follows:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered ordering the defendant to pay unto plaintiff the amount of P20,061,898.97 as its total outstanding obligation and to pay 25% of the total obligation as and for attorney's fees, plus cost of suit.

The decision could not be served on DELTA, either personally or by registered mail, due to its earlier dissolution. However, Delta had been taken over by the Philippine National Bank (PNB) in the meantime. This notwithstanding, SIHI moved, on 4 November 1986, for service of the decision by way of publication, which the trial court allowed in its order of 6 December 1986. The decision was published in the Thunderer, a weekly newspaper published in Manila. After publication, SIHI moved for execution of the judgment, which the trial court granted in its order of 11 March 1987 on the ground that no appeal had been taken by DELTA despite publication of the decision. The writ of execution was issued and pursuant thereto certain properties of DELTA in Iloilo and Bacolod City were levied upon and sold. The sheriff likewise levied on some other properties of DELTA.

DELTA then commenced a special civil action for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 23068, wherein DELTA insisted that: (a) the trial court did not acquire jurisdiction over the person of the defendant (DELTA) since there was no valid/proper service of summons, thus rendering the decision null and void; and (b) the void decision never became final and executory.

In its decision of 22 January 1991 5 the Court of Appeals ruled against DELTA on the first ground, but found that the record before it "is bereft of any showing that a copy of the assailed judgment had been properly served on P.N.B. which assumed DELTA's operation upon the latter's dissolution." Accordingly the Court of Appeals ruled that:

[T]he [decision] did not become executory (Vda. de Espiritu v. CFI, L-30486, Oct. 31, 1972; Tuazon v. Molina, L-55697, Feb. 26, 1981).

If further opined that service by publication did not cure the fatal defect and thus decreed as follows:

WHEREFORE, while the assailed decision was validly rendered by the respondent court, nonetheless it has not attained finality pending service of a copy thereof on petitioner DELTA, which may appeal therefore within the reglementary period. 6

In a motion for reconsideration, DELTA insisted that there was no valid service of summons and the decision of the RTC was not in accordance with the Rules, hence, void. 7 SIHI also filed a motion for reconsideration claiming that DELTA was not dissolved, and even if it were, its corporate personality to

receive service of processes subsisted; moreover, its right to appeal had been lost. 8 These motions were denied by the Court of Appeals in its resolution of 27 May 1991. 9 Unsatisfied, DELTA filed with this Court a petition for review on certiorari (G.R. No. 100366) which was denied in the resolution of 16 September 1991 for non-compliance with Circular No. 1-88. A motion for reconsideration was denied in the resolution of 9 October 1991, a copy of which was received by DELTA on 31 October 1991. 10

On 12 November 1991, DELTA filed a Notice of Appeal 11 with the RTC in Civil Case No. 84-23019, indicating therein that it was appealing from the 5 December 1984 decision, and prayed as follows:

WHEREFORE, it is most respectfully prayed of this Honorable Court that this Notice of Appeal be noted and the records of this case be elevated to the Court of Appeals.

SIHI filed on 2 December 1991 a motion to dismiss DELTA's appeal 12 on the ground that it was filed out of time, since DELTA obtained a certified true copy of the decision from the RTC on 21 September 1990, hence it had only fifteen days therefrom within which to appeal from the decision. Despite DELTA's opposition, 13 the trial court dismissed the Notice of Appeal. 14 DELTA moved to reconsider, 15 which SIHI opposed. 16 In its order 17 of 14 September 1992 the trial court denied Delta's motion.

DELTA then filed with the Court of Appeals a petition for certiorari under Rule 65 of the Rules of Court. The case was docketed as CA-G.R. SP No. 29147. 18 In its petition, Delta prayed for the: (a) annulment of the order of the trial court dated 3 June 1992 dismissing the Notice of Appeal dated 6 November 1991; (b) annulment of the order of the trial court dated 14 September 1992 denying the motion for reconsideration of the former; and (c) elevation of the original records of Civil Case No. 84-23019 to the Court of Appeals.

On 30 October 1992 the Court of Appeals issued in CA-G.R. SP No. 29147 a restraining order enjoining respondents and any and all other persons acting on their behalf "from enforcing or directing the enforcement of the Decision, subject of the petition." 19 Thereafter, in its resolution promulgated on 22 December 1992, 20 the Court of Appeals gave due course to the petition in said case, considered the comments of private respondents therein as its answer and required the parties to submit their respective memoranda.

On 17 June 1993 the Court of Appeals promulgated its decision 21 in CA-G.R. SP No. 29147, the dispositive portion providing:

WHEREFORE, the questioned order of the respondent court dated June 3, 1992, dismissing the notice of appeal dated November 6, 1991; and the order dated September 14, 1992 of the same court denying the motion for reconsideration filed by the petitioner, through counsel, are hereby SET ASIDE; and respondent court hereby ordered to ELEVATE the records of the case to the Court of Appeals, on appeal.

On 18 January 1993, the RTC elevated the record of Civil Case No. 84-23019 to the Court of Appeals.

SIHI appealed to this Court from the decision by way of a petition for review. 22 It contended that DELTA had lost the right to appeal in view of the lapse of more than 15 days from DELTA's receipt of a certified

true copy of the RTC decision in Civil Case No. 84-23019. This petition for review was docketed as G.R. No. 110677. 23

While SIHI's petition in G.R. No. 110677 was pending before this Court, DELTA filed on 14 February 1994, in CA G.R. SP No. 29147 of the Court of Appeals, an Omnibus Motion 24 to:

1) DECLARE AS NULL AND VOID AB INITIO AND WITHOUT ANY FORCE AND EFFECT THE ORDER OF RESPONDENT COURT DATED MARCH 11, 1987 ORDERING THE ISSUANCE OF THE WRIT OF EXECUTION;

2) DECLARE AS NULL AND VOID AB INITIO AND WITHOUT ANY FORCE AND EFFECT THE WRIT OF EXECUTION ISSUED PURSUANT TO THE ORDER DATED MARCH 11, 1987;

3) ALL OTHER PROCEEDINGS HELD, CONDUCTED AND EXECUTED BY RESPONDENT SHERIFF IMPLEMENTING THE AFORESAID WRIT OF EXECUTION.

SIHI opposed the motion 25 on grounds that: a) there was a pending appeal by certiorari with this Court, thus the Court of Appeals was without jurisdiction to entertain the Omnibus Motion; b) the Omnibus Motion was barred by res judicata; and c) the filing of the Omnibus Motion was a clear act of forum-shopping and should then be denied outright.

In its resolution of 7 June 1994, the Court of Appeals merely noted the Omnibus Motion and stated:

It appearing that there is a pending petition for review with the Supreme Court of this Court's Decision dated June 17, 1993, it would be improper for this Court to act on the Omnibus Motion filed by petitioner Delta Motor Corporation . . . . 26

On 18 July 1994 this Court's Second Division issued a resolution 27 in G.R. No. 110677 denying the petition therein for failure to sufficiently show that the Court of Appeals committed reversible error in the questioned judgment. SIHI's motion for reconsideration was denied in the resolution of this Court of 21 September 1994. 28

On 26 October 1994 DELTA filed a manifestation and motion 29 to resolve its Omnibus Motion of February 10, 1994.

In its resolution of 5 January 1995, 30 the Court of Appeals denied DELTA's Omnibus Motion, holding:

[T]he matters prayed for in the Omnibus Motion of petitioner Delta Motor Corporation dated February 10, 1994 and abovequoted are matters which were not raised as issues by petitioner in the instant petition and, therefore, not within the jurisdiction and power of this Court in the instant petition to decide. 31

On 27 January 1995 DELTA filed a motion for reconsideration and/or clarification 32 wherein it alleged that: (a) while it was true that the matters prayed for in the Omnibus Motion of petitioner were not raised in the instant petition, they were, nevertheless, included in the general prayer in the petition "for such other reliefs and remedies just and equitable in the premises;" (b) it could not file the Omnibus Motion with the RTC since the records of Civil Case No. 84-23019 had already been elevated to the

Court of Appeals and upon the perfection of the appeal, the trial court lost jurisdiction over the case; and (c) the matters raised in the Omnibus Motion were incidental to and included in the appellate jurisdiction of the Court of Appeals.

On the other hand, on 2 February 1995, SIHI filed a motion for clarification 33 wherein it asked for the deletion, for being mere obiter dictum, the following paragraph in the Resolution of 5 January 1995, to wit:

While it is true that as a necessary consequence the decision of the Court of Appeals dated January 22, 1991 ruling that the decision in Civil Case No. 84-23019 "has not attained finality pending service of a copy thereof on petitioner Delta, which may appeal therefrom within the reglementary period", all proceedings and/or orders arising from the trial courts decision in Civil Case No. 84-23019 are null and void . . . .

SIHI argued that this paragraph was "not necessary to the decision of the case before it" 34 and "cannot be considered binding for the purpose of establishing precedent;" 35 likewise, the Resolution itself did not decide the incident on its merits or consider and dispose of the issues, nor determine the respective rights of the parties concerned.

In its resolution of 14 July 1995, 36 the Court of Appeals granted SIHI's motion for clarification and denied DELTA's motion for reconsideration. As to the latter, it ruled that:

[P]etitioner DELTA is not without remedy, especially considering the ruling of the Court of Appeals in the first petition for certiorari (CA-G.R. SP No. 23068) which ruled thus:

WHEREFORE, while the assailed decision was validly rendered by the respondent court, nonetheless it has not attained finality pending service of a copy thereof on petitioner DELTA, which may appeal therefrom within the reglementary period.

Clearly, the only issue in this petition (CA-G.R. SP No. 29147) is as to the validity of the questioned orders of respondent court dated June 3, 1992 (dismissing the notice of appeal dated November 6, 1991) and the Order dated September 14, 1992 of the same court (denying the motion for reconsideration filed by the petitioner through counsel). 37

It then decreed to amend its Resolution of 5 January 1995 by deleting the assailed paragraph.

DELTA then filed the instant petition, insisting that the matters raised in the Omnibus Motion were incidental to and included in the appellate jurisdiction of the Court of Appeals; hence, it had jurisdiction to rule on said motion. As regards the grant of SIHI's motion to strike out a paragraph in the resolution of 5 January 1995 for being obiter dictum, DELTA submitted that the latter contained a finding or affirmation of fact, thus could not have constituted obiter dictum.

After SIHI filed its comment, we gave due course to the petition and required the parties to submit their respective memoranda. DELTA and SIHI did so on 16 April 1996 and on 13 May 1996, respectively.

After a painstaking review of the record in CA-G.R. SP No. 29147, we are more than convinced that respondent Court of Appeals committed no reversible error in denying DELTA's Omnibus Motion. The decision of the Court of Appeals of 17 June 1993 in CA-G.R. Sp. No. 29147 had long become final insofar as DELTA was concerned, and it very well knew that the only issues raised therein concerned the trial court's orders of 3 June 1992 and 14 September 1992. As a matter of fact, at the time Delta filed the petition in CA-G.R. SP No. 29147, the orders sought to be declared null and void in the Omnibus Motion had already been issued, they having been so issued at the commencement of CA-G.R. SP No. 23068. In short, if DELTA intended such orders to be challenged in CA-G.R. SP No. 29147, it could have explicitly alleged them as sources of additional causes of action and prayed for the corresponding affirmative relief therefrom, and if this course of action initially proved unavailing then DELTA could and should have moved for reconsideration on that aspect. After the finality of the decision in said case, any attempt to introduce or revive the issue had become procedurally impermissible. Plainly, the issues raised in the Omnibus Motion could have been allowed during the pendency of said case by way of amendments to the petition.

Moreover, the Court of Appeals correctly denied petitioner's Omnibus Motion in keeping with jurisprudence 38 concerning Section 7 of Rule 51 of the Rules of Court on the Procedure in the Court of Appeals, which mandates that:

Sec 7. Questions that may be decided. — No error which does not affect the jurisdiction over the subject matter will be considered unless stated in the assignment of errors and properly argued in the brief, save as the court, at its option, may notice plain errors not specified, and also clerical errors.

Clearly then, the Court of Appeals could only consider errors raised by petitioner in CA-G.R. SP No. 29147, which were limited to the trial court's orders of 3 June 1992 and 14 September 1992. These were the only errors Delta argued extensively in its brief. To allow DELTA's Omnibus Motion which it filed more than eight months from promulgation of the decision in CA-G.R. SP No. 29147, or long after finality of said case, would result in abandonment of sound judicial process.

In light of the dispositive portions of the Court of Appeals' decisions of 22 January 1991 in CA-G.R. SP No. 23068, and of 17 June 1993 in CA-G.R. SP No. 29147, we cannot agree with SIHI that DELTA is barred by res judicata. This conclusion is further fortified by the unequivocal statements of the Court of Appeals in its challenged resolution of 14 July 1995 that:

[P]etitioner DELTA is not without remedy, especially considering the ruling of the Court of Appeals in the first petition for certiorari (CA-G.R. SP No. 23068) . . .

xxx xxx xxx

Clearly, the only issue in this petition (CA-G.R. SP No. 29147) is as to the validity of the questioned orders of respondent court dated June 3, 1992 (dismissing the notice of appeal dated November 6, 1991) and the Order dated September 14, 1992 of the same court (denying the motion for reconsideration filed by the petitioner through counsel.)

The Court of Appeals likewise did not commit reversible error in deleting the phrase SIHI protested as obiter dictum.

An obiter dictum has been defined as an opinion expressed by a court upon some question of law which is not necessary to the decision of the case before it. 39 It is a remark made, or opinion expressed, by a judge, in his decision upon a cause, "by the way," that is, incidentally or collaterally, and not directly upon the question before him, or upon a point not necessarily involved in the determination of the cause, or introduced by way of illustration, or analogy or argument. Such are not binding as precedent. 40

The assailed phrase was indeed obiter dictum as it touched upon a matter not raised by petitioner expressly in its petition assailing the dismissal of its notice of appeal. It was not a prerequisite in disposing of the aforementioned issue. The body of the resolution did not contain any discussion on such matter nor mention any principle of law to support such statement.

WHEREFORE, the instant petition is DISMISSED and the challenged resolutions of 5 January 1995 and 14 July 1995 in C.A. G.R.-SP. NO. 29147 are AFFIRMED.

Cost against petitioner.

SO ORDERED.

Narvasa, C.J., Francisco and Panganiban, JJ., concur.

Melo, J., took no part.

Footnotes

1 Mistakenly captioned "Petition for Review on Certiorari," Rollo, 9.

2 Original Record (OR) CA-G.R. SP No. 29147, 534-538; Imperial, J. J ., with Buena, A. and Verzola, E., JJ.,. concurring.

3 Id., 570 et seq.; Rollo, 29-33.

4 OR, 269-271.

5 Id., 30-37. Per Martinez, A., J., with Melo, J.A.R., (now an Associate Justice of this Court), and Victor, L., JJ., concurring.

6 OR, 36.

7 Id., 38-50.

8 Id., 51-59.

9 Id., 77-78.

10 Decision of 17 June 1993 in CA-G.R. SP No. 29147, 3-4; OR; 225-226.

11 OR, 79-81.

12 OR, 82-84.

13 Id., 85-91.

14 Id., 26-28.

15 Id., 96-110.

16 Id., 111-119.

17 Id., 29

18 Id., 1-25.

19 Id., 139.

20 Id., 162.

21 OR, 223-230.

22 Id., 242-258.

23 Id., 242-257.

24 Id., 393-397.

25 Id., 410-424.

26 OR, 510.

27 Id., 515.

28 Id., 516-517.

29 Id., 511-514.

30 Id., 534-538.

31 Id., 538.

32 Id., 539-542.

33 OR, 545-548.

34 Citing Auyong Hian v. CTA, 59 SCRA 120 [1974].

35 Citing Tobias v. Diaz, 213 SCRA 253 [1992].

36 Supra, note 2.

37 Rollo, 32.

38 Miguel v. Court of Appeals, 29 SCRA 760 [1969]; Bañez v. Court of Appeals, 59 SCRA 15 [1974]; Escaño v. Court of Appeals, 100 SCRA 197 [1980]

39 Auyong Hian v. Court of Tax Appeals, 59 SCRA 110, 120 [1974].

40 BLACK'S LAW DICTIONARY, 967 (5th ed., 1979).

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 96700 November 19, 1996

NATIONAL POWER CORPORATION, petitioner, vs.PROVINCE OF LANAO DEL SUR, LANAO DEL SUR GOVERNOR SAIDAMEN B. PANGARUNGAN and LANAO DEL SUR PROVINCIAL TREASURER HADJI MACMOD L. DALIDIG, respondents.

PANGANIBAN, J.:

Is petitioner National Power Corporation liable for real property taxes for the period June 14, 1984 to December 31, 1989 amounting to more than P154 million? To compel payment of petitioner's alleged delinquency in its realty taxes, did respondents act correctly in selling at publication petitioner's real properties on which is situated its hydroelectric power plant complex?

Petitioner filed the instant special civil action for prohibition to (1) perpetually prohibit and enjoin respondents from disposing and selling, (2) annul the auction sale of, and (3) cancel the registration of the certificate of sale involving the aforesaid real properties of the petitioner.

The Facts

Petitioner National Power Corporation is the owner of certain real properties situated in Saguiaran, Lanao del Sur, more particularly described in Tax Declarations Nos. D-802-A, D-803-A, D-804-A, D-805-A, D-806 and D-807 issued by the Office of the Provincial Assessor of Lanao del Sur. Said properties comprise petitioner's Agus II Hydroelectric Power Plant Complex. Petitioner was assessed real estate taxes on said properties in the amount of one hundred fifty four million one hundred fourteen thousand eight hundred fifty four pesos and eighty two centavos (P154,114,854.82) covering the period from June

14, 1984 to December 31, 1989, 1 allegedly because petitioner's exemption from realty taxes had been withdrawn.

On August 7, 1990, a demand letter was sent by respondent provincial treasurer to the petitioner for the payment of real property taxes due on the abovementioned properties. On August 21, 1990, a second demand letter 2 from respondent provincial treasurer was sent to petitioner with a warning that unless the obligation was settled, legal remedies would be resorted to by the respondent province. On December 14, 1990, a Notice of Auction (Sale) covering the subject properties was served on petitioner.

3 A copy of said notice was posted for one month from December 17, 1990 to January 17, 1991 at the main entrance of the provincial capitol building in Marawi City and at the plant site in Saguiaran, Lanao del Sur. It was also published in the December 17 and 24, 1990 and January 5, 1991 4 issues of the Philippine Daily Inquirer and the December 17 and 24, 1990 issues of the Lake Lanao Times. The auction sale was scheduled to be held at 10:00 A.M. of January 22, 1991 at the Office of the Provincial Treasurer in Marawi City.

On January 18, 1991, petitioner filed directly with this Court the instant petition for prohibition with prayer for a writ of preliminary injunction and/or temporary restraining order. On January 21, 1991, this Court issued a temporary restraining order 5 enjoining respondents from proceeding with and conducting the auction sale of the subject properties.

The auction sale was however held as scheduled with the Province of Lanao del Sur as the sole bidder. A certificate of sale was immediately issued and registered with the Register of Deeds of the province at 1:30 p.m. of the sameday. 6

At 2:30 and 3:00 p.m. of the same day, respondents provincial governor and provincial treasurer respectively 7 received telegraphic notices of this Court's restraining order.

Respondents submitted their comment on February 14, 1991 to which petitioner filed its reply on April 29, 1991. Rejoinder was submitted on October 25, 1993. Thereafter, this Court gave due course to the petition and the parties thus filed their respective memoranda.

Anent the tax exempt status of petitioner for the period up to December 31, 1989, the following are the relevant laws and resolutions:

(1) Commonwealth Act No. 120, which became effective on November 3, 1936, created the petitioner as a non-profit public corporation wholly owned by the government of the Republic of the Philippines tacked to undertake the development of hydraulic power and the production of power from other sources. 8 Section 13 thereof exempted it from the payment of all forms of taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings "to enable the Corporation to pay its indebtedness and obligations."

(2) Section 2 of Republic Act No. 358, which took effect on June 4, 1949, exempted petitioner "from all taxes, duties, fees, imposts, charges and restrictions of the Republic of the Philippines, its provinces, cities and municipalities" in order to facilitate payment of its indebtedness.

(3) Republic Act No. 6395, which took effect on September 10, 1971, revised the charter of the petitioner. To quote the Solicitor General:

Congress declared as a national policy the total electrification of the Philippines through the development of power from all sources to meet the needs of industrial development and rural electrification. The corporate existence of NAPOCOR was extended to carry out this policy, specifically to undertake the development of hydroelectric generation of power and the production of electricity from nuclear, geothermal and other sources, as well as the transmission of electric power on a nationwide basis. And having been declared by legislative fiat as a non-profit public corporation with a responsibility of devoting all its returns from its capital investment as well as excess revenues from its operation for expansion, petitioner was granted exemption from the payment of all forms of taxes, duties, fees, imposts and other charges by the government and its instrumentalities. Thus, Section 13 of RA 6395 provides in detail such exemptions, to wit:

Sec. 13. Non-profit Character of the Corporation; Exemption from All Taxes, Duties, Fees, Imposts and Other Charges by Government and Governmental Instrumentalities. — The Corporation shall be non-profit and shall devote all its returns from its capital investments, as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section One of this Act, the Corporation is hereby declared exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court or administrative proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities;

(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign goods required for its operations' and projects; and

(d) From all taxes, duties, fees, imposts, and all other charges imposed by the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities on all petroleum products used by the Corporation in the generation, transmission, utilization, and sale of electric power. (emphasis supplied).

(4) On January 22, 1974, Presidential Decree No. 380 amended Section 13, paragraphs (a) and (d), of RA 6395 by specifying, among others, the exemption of petitioner from taxes, duties, fees, imposts and other charges imposed, "directly or indirectly", on all petroleum products used by petitioner in its operations.

(5) On June 1, 1974, Presidential Decree No. 464, also known as the Real Property Tax Code, was enacted into law. Section 40(a) thereof provides:

Sec. 40. Exemptions from Real Property Tax. — The exemption shall be as follows:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation so exempt by its charter; . . .

(6) On August 24, 1975, Presidential Decree No. 776 was promulgated, creating the Fiscal Incentives Review Board (FIRB). Among other things, the Board was tasked as follows:

Sec. 2. A Fiscal Incentives Review Board is hereby created for the purpose of determining what subsidies and tax exemptions should be modified, withdrawn, revoked or suspended, which shall be composed of the following officials:

Chairman — Secretary of FinanceMembers — Secretary of Industry— Director General of the NationalEconomic and Development Authority— Commissioner of Internal Revenue— Commissioner of Customs

The Board may recommend to the President of the Philippines and for reasons of compatibility with the declared economic policy, the withdrawal, modification, revocation or suspension of the enforceability of any of the above-cited statutory subsidies or tax exemption grants, except those granted by the Constitution. To attain its objectives, the Board may require the assistance of any appropriate government agency or entity. The Board shall meet once a month, or oftener at the call of the Secretary of Finance.

(7) Section 10 of Presidential Decree No. 938, dated May 27, 1976, further amended the aforestated provisions of Section 13 of RA 6395 by integrating the various tax exemptions therein into a general exemption from "all forms of taxes, duties," etc. under one paragraph, making said on Section 13 read as follows:

Sec. 13. Non-profit Character of the Corporation; Exemption from All Taxes, Duties, Fees, Imposts and Other Charges by the Government and Government Instrumentalities. — The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess revenues from its operation for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section One of this Act, the Corporation, including its subsidiaries, is hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings. (Emphasis supplied).

8 On June 11, 1984, Presidential Decree No. 1931, in its Section 2 withdrew all tax exemption privileges granted to government-owned or controlled corporations. However, Section 2 thereof provided:

The President of the Philippines and/or the Minister of Finance, upon the recommendation of the Fiscal Incentives Review Board (FIRB) . . . is hereby empowered to restore, partially or totally, the exemptions withdrawn by Section 1 . . .

(9) Pursuant to Sec. 2 of PD 1931, on February 7, 1985, the FIRB issued Resolution No. 10-85 9 restoring petitioner's tax and duty exemption privileges enjoyed by it under CA 120 as amended, effective from June 11, 1984 up to June 30, 1985. And, subsequently, FIRB Resolution No. 1-86 10 extended the said tax and duty exemption privileges of petitioner from July 1, 1985 onwards indefinitely.

(10) On December 17, 1986, President Corazon Aquino promulgated Executive Order No. 93 effective March 10, 1987, once again withdrawing all tax and duty incentives of government and private entities. But Section 2 thereof gave FIRB the authority to "restore tax and/or duty exemptions withdrawn hereunder."

(11) On June 24, 1987, the FIRB issued Resolution No. 17-87 11 once again restoring petitioner's tax and duty exemption privileges, effective as of March 10, 1987 (the effectivity date of E.O. 93).

(12) Finally, in a Memorandum dated October 5, 1987 addressed to the Chairman, FIRB, then Acting Executive Secretary Catalino Macaraig, Jr. confirmed and approved, by authority of the President, FIRB Resolution No. 17-87.

The Issues

The main issue in this petition is whether or not respondent province and provincial officials can validly and lawfully assess real property taxes for the period June 14, 1984 to December 31, 1989 against, and thereafter sell at public auction, the subject properties of petitioner to effect collection of alleged deficiencies in the payment of such taxes.

The preliminary but pivotal issue however is whether or not petitioner has ceased to enjoy its tax and duty exemption privileges, including its exemption from payment of real property taxes.

Petitioner's position, simply put, is that it has never been effectively deprived of its tax and duty exemption privileges granted under CA 120, as amended, and RA 6395, as amended, and which, although temporarily withdrawn, were just as quickly restored, such that at no time did it lose its tax-exempt status. Hence, never did it become liable for realty taxes, and therefore, the subject properties were wrongfully levied upon and sold at auction.

On the other hand, respondents' position is that the petitioner's exemption from payment of realty taxes had been withdrawn or revoked by virtue of PD 1931, and had never been validly restored by the FIRB Resolutions aforementioned, nor by the memorandum of Exec. Sec. Macaraig, Jr., thereby rendering petitioner liable for realty taxes for the period June 14, 1984 up to December 31, 1989. Relying on National Power Corporation vs. Province of Albay, 12 which they claim is based on analogous facts, respondents contend that, under Sec. 2 of PD 776 (promulgated August 24, 1975) which created the FIRB, and in line with Sec. 2 of PD 1931, the FIRB is given or granted only a recommendatory power, and is devoid of authority to impose taxes or revoke existing ones, which under the Constitution, only

the legislature may do. Neither could it validly prescribe exemptions nor restore taxability by itself. Respondents argue that FIRB Resolutions No. 10-85 and 1-86 were issued in excess of authority, and constitute an undue delegation of taxing power. Thus, they are constitutionally defective and therefore null and void; and given the same rationale EO 93, insofar as it authorizes, in its Section 2, the FIRB to inter alia restore tax and/or duty exemptions withdrawn under Section 1 thereof, is similarly void and of no force and effect. Respondents also assail the said FIRB resolutions as invalid and ineffective; firstly, because in each case, there was only one signatory thereof (viz., then Acting Minister of Finance Alfredo Pio de Roda, Jr. and then Minister of Finance Cesar E.A. Virata, respectively), emphasizing that the FIRB is not a one-man body; and secondly, because two separate and distinct acts were required — a recommendation and an approval — which could not be combined and performed by a single person acting both as head of the FIRB and as minister of finance.

The Court's Ruling

Preliminary Issue: Valid Restoration of Tax Exemptions

Although Section 1 of PD 1931 withdrew all tax exemptions presumably including those of petitioner, Section 2 thereof authorized and empowered the President and/or the Minister of Finance to restore the same to deserving entities. In order to reinstate the petitioner's tax exemptions, Hon. De Roda, Jr., in his concurrent capacities as Acting Minister of Finance and as Acting Chairman of FIRB, signed FIRB Resolution No. 10-85 which was made effective as of June 11, 1984, the promulgation date of PD 1931, until June 30, 1985. On the other hand, by virtue of FIRB Resolution No. 1-86, Hon. Virata fully restored the tax exemption as of July 1, 1985, to continue for an indefinite period. He also signed the same in his dual capacities as Minister of Finance and as Chairman of the FIRB. The resolution specifically provided that:

2. The NPC as a government corporation is exempt from the real property tax on land and improvements owned by it . . . pursuant to the provisions of Section 40 (a) of the Real Property Tax Code, as amended.

While EO 93 again withdrew the tax exemption of petitioner, through its Section 1, as follows:

Sec. 1. The provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives granted to government and private entities are hereby withdrawn, except:

xxx xxx xxx

f) those approved by the President upon the recommendation of the Fiscal Incentives Review Board.

nevertheless, it also stated:

Sec. 2. The Fiscal Incentives Review Board created under PD 776, as amended, is hereby authorized to:

(a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;

(b) revise the scope and coverage of tax and/or duty exemption that may be restored;

(c) impose conditions for the restoration of tax and/or duty exemption;

(d) prescribe the date or period of effectivity of the restoration of tax and/or duty exemption;

(e) formulate and submit to the President for approval, a complete system for the grant of subsidies to deserving beneficiaries, in lieu of or in combination with the restoration of tax and duty exemptions or preferential treatment in taxation, indicating the source of funding therefor, eligible beneficiaries and the terms and conditions for the grant thereof, taking into consideration the international commitments of the Philippines and the necessary precautions such that the grant of subsidies does not become the basis for countervailing action. (emphasis supplied)

Pursuant thereto, FIRB Resolution No. 17-87 restored the tax exemption privileges of the petitioner effective March 10, 1987. Again, the resolution was signed by De Roda, Jr. in his dual capacities as Acting Secretary of Finance and as Chairman, FIRB. This resolution was confirmed and approved by then Acting Executive Secretary Macaraig, by the authority of the President.

Considering the entire chain of events, it is clear that petitioner's tax exemptions for the period in question (1984-1989) had effectively been preserved intact by virtue of their restoration through FIRB resolutions.

Respondents however vigorously argue that the FIRB, through the above-mentioned resolutions, arrogated unto itself the power to restore tax exemptions which it never possessed under PD 776 and EO 93. Respondents insist that FIRB effectively exercised not merely the power to recommend exemptions but the very authority to grant the same, which was lodged in the Minister of Finance and the President. As proof of this, it did not secure any recommendation from any other body or office. Instead, one and the same individual recommended — in his capacity as FIRB chairman — and then approved — in his capacity as Minister of Finance — the grant of the exemption. For this reason, FIRB Resolution Nos. 10-85 and 1-86 were held by this Court in the Albay case to be null and void:

. . . , the FIRB, under its charter, Presidential Decree No. 776, had been empowered merely to "recommend" tax exemptions. By itself, it could not have validly prescribed exemptions or restore taxability. Hence, as of June 11, 1984 (promulgation of Presidential Decree No. 1931), NAPOCOR had ceased to enjoy tax exemption privileges. 13

Such arguments are no longer tenable. Albay has since been modified and superseded by Maceda vs. Macaraig, Jr., 14 where this Court En Banc expressly ruled that FIRB Resolution Nos. 10-85 and 1-86 are valid:

. . . FIRB Resolution Nos. 10-85 and 1-86 . . . were issued in compliance with the requirement of Section 2, P.D. No. 1931, whereby the FIRB should make the recommendation subject to the approval of "the President of the Philippines and/or the Minister of Finance." While said Resolutions do not appear to have been approved by the President, they were nevertheless approved by the Minister of Finance who is also duly authorized to approve the same. In fact it was the Minister of Finance who signed and promulgated said resolutions.

The observation of Mr. Justice Sarmiento in the dissenting opinion that FIRB Resolution Nos. 10-85 and 1-86 which were promulgated by then Acting Minister of Finance Alfredo de Roda, Jr. and Minister of Finance Cesar E. A. Virata, as Chairman of FIRB, respectively, should be separately approved by said Minister of Finance as required by P.D. 1931 is, a superfluity. An examination of the said resolutions . . . show that the said officials signed said resolutions in the dual capacity of Chairman of FIRB and Minister of Finance.

Mr. Justice Sarmiento also makes reference to the case National Power Corporation vs. Province of Albay, wherein the Court observed that under P.D. No. 776 the power of the FIRB was only recommendatory and requires the approval of the President to be valid. Thus, in said case the Court held that FIRB Resolutions Nos. 10-85 and 1-86 not having been approved by the President were not valid and effective while the validity of FIRB (Resolution No.) 17-87 was upheld as it was duly approved by the Office of the President on October 5, 1987.

However, under Section 2 of P.D. No. 1931 of June 11, 1984, hereinabove reproduced, which amended P.D. No. 776, it is clearly provided for that such FIRB resolution, may be approved by the "President of the Philippines and/or the Minister of Finance." To repeat, as FIRB Resolutions Nos. 10-85 and 1-86 were duly approved by the Minister of Finance, hence they are valid and effective. To this extent, this decision modifies or supersedes the Court's earlier decision in Albay afore-referred to. (emphasis supplied)

There can thus be no question that petitioner's tax exemptions withdrawn by PD 1931 were validly restored by FIRB Resolutions Nos. 10-85 and 1-86. Again withdrawn by EO 93, they were once more restored by FIRB Resolution No. 17-87, effective as of March 10, 1987. Moreover, this Court, in the same case of Maceda vs. Macaraig, Jr., reaffirmed the determination in Albay that EO 93 along with PDs 776 and were 1931 were all valid, and that FIRB Resolution No. 17-87 and the tax exemptions restored thereunder were "valid and effective." 15 The Court in Maceda also held —

True it is that the then Secretary of Justice in Opinion No. 77, dated August 6, 1977 was of the view that the powers conferred upon the FIRB by Sections 2(a), (b), (c) and (d) of Executive Order No. 93 constitute undue delegation of legislative power and is therefore unconstitutional. However, he was overruled by the respondent Executive Secretary in a letter to the Secretary of Finance dated March 30, 1989. The Executive Secretary, by authority of the President, has the power to modify, alter or reverse the construction of a statute given by a department secretary.

and laid emphasis on the fact that EO 93 constituted a valid delegation of legislative power to the FIRB, thus: 16

The latest in our jurisprudence indicates that delegation of legislative power has become the rule and its non-delegation the exception. The reason is the increasing complexity of modern life and many technical fields of governmental functions as in matters pertaining to tax exemptions. This is coupled by the growing inability of the legislature to cope directly with the many problems demanding its attention. The growth of society has ramified its activities and created peculiar and sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has become necessary. To many of the problems attendant upon present day undertakings, the legislature

may not have the competence, let alone the interest and the time, to provide the required direct and efficacious, not to say specific solutions.

The inescapable conclusion is that the tax exemption privileges of petitioner had been validly restored and preserved by said FIRB resolutions.

In passing, since we have delved into Maceda (which happens to involve indirect taxes), we also make mention of the fact that one of the key issues raised in the dissenting opinions (in Maceda) was the fact that the ultimate beneficiaries of that ponencia's affirmance of the tax-exempt status of the National Power Corporation would have been the oil companies, to which the NPC would assign whatever tax refund or credit it became entitled to as a result of such ponencia, and not the NPC itself, nor the government or the public. In fact, it was even anticipated by Mr. Justice Sarmiento in his dissent that the majority ruling in Maceda would set a precedent not only for the oil companies but also for the NPC's other suppliers, importers and contractors. In contrast, the instant case involves direct — taxes — real property taxes — and any tax exemption with respect thereto will obviously not be transmissible nor beneficial to any other entity but only to petitioner NPC and, rightfully, the electricity-consuming public.

Respondents further contend that PD 1177, which was issued for the formulation and implementation of a national budget, repealed the tax exemption privilege granted the petitioner under RA 6395, by virtue of the PD's general repealing clause, worded as follows: 17

(A)ll laws, decrees, executive orders, rules and regulations or parts thereof which are inconsistent with the provisions of the Decree are hereby repealed and/or modified accordingly.

This argument is likewise bereft of merit. It will be noted from the foregoing chronological presentation that Section 10 of PD 938 amended Section 13 of RA 6395, the petitioner's charter, by converting the various tax exemptions therein into a general exemption from all forms of taxes, direct and indirect. This state of exemption from taxes subsisted even with the enactment of PD 1931 in 1984. It cannot then be successfully argued that petitioner's tax-exempt status was revoked in 1977 by PD 1177. Besides, this Court has consistently held that "(r)epeals by implication are not favored, and will not be decreed, unless it is manifest that the legislature so intended. As laws are presumed to be passed with deliberation and with full knowledge of all existing ones on the subject, it is but reasonable to conclude that in passing a statute it was not intended to interfere with or abrogate any former law relating to same matter, unless the repugnancy between the two is not only irreconcilable, but also clear and convincing, and flowing necessarily from the language used, unless the later act fully embraces the subject matter of the earlier, or unless the reason for the earlier act is beyond peradventure removed. Hence, every effort must be used to make all acts stand and if, by any reasonable construction, they can be reconciled, the later act will not operate as a repeal of the earlier." 18

Main Issue: Subject PropertiesExempt From Realty Taxes

Aside from the FIRB Resolutions above discussed, there is yet another cogent reason why the properties in question are not subject to realty tax. Section 40 (a) of the Real Property Tax Code, PD 464, as amended, expressly exempts them from such tax. Said section provides:

Exemptions from Real Property Tax. — The exemption shall be as follows:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation so exempt by its charter. Provided, however, that this exemption shall not apply to real property of the abovenamed entities the beneficial use of which has been granted, for consideration or otherwise, to a taxable person.

xxx xxx xxx

The exemption is not only legally defensible, but also logically unassailable. The properties in question comprise the site of the entire Agus II Hydroelectric Power Plant Complex, which generates and supplies relatively cheap electricity to the island of Mindanao. These are government properties, wholly owned by petitioner and devoted directly and solely for public service and utilized in the implementation of the state policy of bringing about the total electrification of the country at the least cost to the public, through the development of power from all sources to meet the needs of industrial development and rural electrification. It can be noted, from RA 6395, PD 380 and PD 938, that petitioner's non-profit character has been maintained throughout its existence, and that petitioner is mandated to devote all its returns from capital investment and excess revenues from operations to its expansion. 19 On account thereof, and to enable petitioner to pay its indebtedness and obligations and in furtherance of the state policy on electrification and power generation, petitioner has always been exempted from taxes.

Consequently, the assessment and levy on (as well as the sale of) the properties of petitioner by respondents were null and void for having been in made in violation of Section 10 of P.D. 938 and Section 40 (a) of the Real Property Tax Code.

At this juncture, we hasten to point out that the foregoing ruling is solely with respect to the purported realty tax liabilities of petitioner for the period from June 14, 1984 to December 31, 1989. We shall not, in this Decision, rule upon the effect (if any) of Republic Act No. 7160, otherwise) known as the Local Government Code of 1991, upon petitioner's tax-exempt status; we merely make mention of the fact that the exemption claimed by petitioner is partly based on PD 464 which, though repealed by the Local Government Code in its paragraph (c), Section 534, Title Four of Book IV, 20 was still good law during the period the exemption was being claimed in the instant case. 21

Nullity of the Auction Saleof Petitioner's Properties

Inasmuch as the realty tax assessment levied against and auction sale of petitioner's properties had been premised on respondents' erroneous belief that FIRB Resolutions Nos. 10-85, 1-86 and 17-87 are void, the judicial declaration of the validity of said resolutions ipso jure renders such assessment and sale void.

The assessment of realty tax being void, petitioner never became delinquent in the payment of said taxes to respondent province, and the latter never acquired any right to sell nor to purchase the said properties at auction. In short, there were never any taxes, delinquent or otherwise, to satisfy. This is borne out by Section 65 of the Real Property Tax Code, by virtue of which respondent Provincial Treasurer was authorized to sell real property at auction:

Sec. 65. Notice of delinquency in the payment of the real property tax. — Upon the real property tax or any installment thereof becoming delinquent, the provincial or city treasurer shall immediately cause notice of the fact to be posted . . .

Such notice shall specify the date upon which the tax became delinquent, and shall state . . . that unless the tax and penalties be paid before the expiration of the year for which the tax is due, or the tax shall have been judicially set aside, the entire delinquent real property will be sold at public auction, and that thereafter the full title to the property will be and remain with the purchaser, subject only to the right of the delinquent taxpayer or any other person in his behalf to redeem the sold property within one year from the date of sale.

As clearly spelled out above, the power to sell at public auction is premised on the real property tax or any portion thereof first becoming delinquent. The properties in this case being exempt from payment of realty taxes, no such delinquency was possible to begin with.

Further, Section 73 of the Real Property Tax Code, as amended, excludes properties of the petitioner from advertisement of real properties to be sold at public auction. Section 73 provides in part:

Sec. 73. Advertisement of sale of real property at public auction. — After the expiration of the year for which the tax is due, the province or city treasurer shall advertise the sale at public auction of the entire delinquent real property, except real property mentioned in subsection (a) of Section forty hereof , to satisfy all the taxes and penalties due and the costs of sale. . . .

The fact that the telegraphic temporary restraining order issued by this Court was received by the respondent governor of Lanao del Sur at 2:30 p.m. and by respondent provincial treasurer at 3:00 p.m. 22

of January 22, 1991, or an hour and an hour and a half, respectively, after the registration of the sale with the Register of Deeds of the province, and several hours after the close of the auction sale, is of no moment. Ordinarily, this Court would have been overjoyed to hear about said Register of Deeds (or any government functionary for that matter) moving with blinding speed, except that in this case, it is more than patent that such precipitate action was prompted not in the least by respondents' anticipation that this Court was about to act on petitioner's application for a writ of preliminary injunction and/or temporary restraining order. The respondents' all-too-obvious attempt at rendering nugatory and inutile any injunctive relief this Court may grant is useless and brings them only rebuke and condemnation. Clearly, legally and equitably rooted in and proceeding from the foregoing discussion is the ineludible conclusion that the auction sale and registration of subject properties are totally bereft of any legal basis and therefore null and void, and cannot vest title over the said real properties nor the hydroelectric power plant complex built upon them, in favor of respondent province.

Re: Mr. Justice Davide's Dissent

Mr. Justice Hilario G. Davide, Jr. is suggesting in his Dissenting Opinion that we reexamine Maceda vs. Macaraig 23 and revert back to the old doctrine in National Power Corp. vs. Albay. 24 Basically, he is reiterating Mr. Justice Sarmiento's own dissent in Maceda that Resolutions 10-85 and 1-86 were not valid acts of the FIRB and thus could not confer any tax exemption on NPC. As these arguments were extensively passed upon by this Court and sufficiently rebutted by Mr. Justice Emilio A. Gancayco in his ponencia therein, we shall no longer answer them point by point here. 25

In any event, Mr. Justice Gancayco's 7-5-2 ponencia was strengthenedtwo years later by what could be termed as "Maceda — Part II." This was the Resolution 26 penned by Mr. Justice Rodolfo A. Nocon and concurred in by Chief Justice Narvasa and Justices Feliciano, Bidin, Regalado, Romero, Bellosillo and Melo. Promulgated on June 8, 1993, it denied the Motion for Reconsideration of petitioner Maceda for lack of merit, and effectively affirmed the earlier Decision promulgated on May 31, 1991. Among the most significant holdings in the said Resolution are the following:

1. A chronological review of the relevant NPC laws, particularly those affecting its tax exemption privileges, will demonstrate that it has been the lawmaker's intention all throughout that the NPC be made completely tax exempt from all forms of taxes — direct and indirect. Such exemption was deemed necessary to enable it to pay its indebtedness, an indebtedness which mushroomed to P12 billion in total domestic indebtedness and US$4 billion in total foreign loans as of the time of the issuance of PD 938.

2. It is clear that NPC had been granted tax exemption privileges for both direct and indirect taxes under PD 938.

3. While the NPC lost its duty and tax exemptions as a result of the enactment of PD 1177 on July 30, 1977, the same were effectively restored by the Minister of Finance upon recommendation of the FIRB (via Resolutions Nos. 10-85 and 1- 86) pursuant to Sec. 2 of PD 1931 issued on June 11, 1984. FIRB Resolutions Nos. 10-85 and 1-86 were both legally and validly issued by the FIRB pursuant to PD 1931. The FIRB did not create NPC's tax exemption status but merely restored it.

4. Under Amendment No. 6, former President Marcos could issue decrees not only when, for any reason, the Interim Batasang Pambansa failed or was unable to act adequately on any matter which required immediate action, but also when there existed a grave emergency or a threat thereof, such as the economic crisis triggered by the loss of confidence in the Philippine government as a result of the Aquino assassination, which led to the moratorium on and rescheduling of foreign debt payments. NPC, for one, had US$2.1 billion in foreign debt as a result of the construction of the Bataan Nuclear Power Plant. In the context of the serious debt-rescheduling emergency, Marcos was compelled to issue PD 1931 using his Amendment 6 powers. Clearly then, there was no violation of the rule under the 1973 Constitution that "no law granting a tax exemption shall be passed without the concurrence of a majority of all the members of the Batasang Pambansa", inasmuch as PD 1931 was not passed by the

said legislative body but by then President Marcos under his Amendment 6 powers. In brief, then, PD 1931 was validly and properly issued.

5. There is no problem of "violation of due process" when FIRB Resolutions Nos. 10-85 and 1-86 were approved by the Minister of Finance after the same were recommended by him in his capacity as Chairman of FIRB. This was so since NPC was not asking to be granted tax exemption privileges for the first time, but merely to have its previous tax exemptions restored. Thus the same person acting in a dual capacity recommending and approving said tax exemption restorations cannot be deemed to violate procedural due process.

6. When EO 93 (series of 1986) was issued by President Aquino, she was exercising both executive and legislative powers. Thus, there was no power delegated to her; rather, it was she delegating her power to the FIRB, which for purposes of EO 93 is a delegate of the legislature. Indubitably, there was no problem of former President Aquino sub-delegating her power. Moreover, EO 93 as a delegating law was complete in itself and met the standards set in Pelaez vs. Auditor General (15 SCRA 569 [1965]).

7. After all has been said and done, it is clear that the NPC had its tax exemption privileges restored from June 11, 1984 up to the present.

"Maceda Part II", as mentioned earlier, was passed by a majority of eight justices. Two justices (JJ. Padilla and Quiason) took no part, while J. Cruz maintained his original dissent, and JJ. Griño-Aquino and Davide, Jr. joined J. Sarmiento in his original dissent. That makes eight in favor, four against, with two abstaining. This is certainly stronger than the seven-five-two vote in the original Maceda decision. Undoubtedly, the said Decision, as affirmed by the aforementioned Resolution, can no longer be considered to "carry no persuasive weight".

Epilogue

Quite apart from resolving the legal merits of this case, this Court to wishes to emphasize — as a matter of judicial policy — the necessity of upholding the authoritativeness and stability of its pronouncements. While in Albay, we ruled the subject FIRB Resolutions to be null and void, we reversed ourselves in Maceda I and fortified such reversal through Maceda II. While we are not necessarily averse to arguments against, or even criticisms of, our pronouncements, we deem it more important to stress that the decisions of this Court are reached after due deliberation upon and consideration of all relevant issues. Thus it would be apropos to quote Mr. Justice Douglas of the United States Supreme Court:

But beyond that is the problem of stare decisis. The construction given Section 20 (of the Criminal Code) in the Classic Case (supra note 128, No. 11) formulated a rule of law which has become the basis of federal enforcement in this important field. The rule adopted in that case was formulated after mature consideration. It should be good for more than one day only. We do not have a situation here comparable to Mahnich vs. Southern S. S. Co., 321 U.S., 96; 88 Law. ed., 561; 64 Sup. Ct., 455 (1944) (supra note 123, No. 19) where we overuled a decision demonstrated to be a sport in the law and inconsistent with what preceded and what followed. The Classic case was not the product of hasty action or inadvertence. We add only to the instability and uncertainty of the law if we revise the

meaning of Section 20 to meet the exigencies of each case coming before us. (Screws vs. United States, 325 U.S., 112.) 27

Consistent with the above, we frowned upon needless flipflops in Cabagnot vs. Comelec, 28 where we chided the public respondent, thus:

. . . We take this occasion to remind the Commission to be more judicious in its actions and decisions and avoid imprudent volte face moves that the undermine the public's faith and confidence in it.

A denial of the tax-exempt status of NPC, as sought by respondents, would not only be legally untenable and subversive of doctrinal stability but would also lead to disastrous practical consequences. It should be noted that in this case, respondent province has already auctioned off, purchased and caused to be registered in its name the subject real properties of petitioner on which the Agus II Hydroelectric Power Plant Complex is built. Thus, should the FIRB resolutions be deemed void, then the ownership of the auctioned properties including the hydro-electric plant would be legally vested in respondent province. Additionally, other local government entities might even be induced to covet and grab other properties of the NPC in the guise of collecting local taxes. The far-reaching consequence of such eventuality would not be difficult to imagine. Definitely, it would seriously impair the capacity of the National Power Corporation to fulfill its statutory mandate to carry out the "total electrification of the Philippines through the development of power from all sources to meet the needs of industrial development and rural electrification."

In the end, the Supreme Court has the constitutional duty not only of interpreting and applying the law in accordance with prior doctrines but also of protecting society from the improvidence and wantonness wrought by needless upheavals in such interpretations and applications. Interest rei publicae ut finis sit litium. 29

WHEREFORE, the petition is hereby GRANTED. Judgment is hereby rendered:

a) ENJOINING respondents and their agents from selling and disposing of the subject properties of petitioner;

b) DECLARING the auction sale conducted on January 22, 1991 and the registration of the same as NULL AND VOID;

c) ORDERING the Register of Deeds of Lanao del Sur to CANCEL the registration of the auction sale in favor of respondent province; and

d) HOLDING that said properties including the hydroelectric power plant complex thereat remain in petitioner's ownership and control as if the assessment and auction sale never took place.

SO ORDERED.

Narvasa, C.J., Romero, Bellosillo, Melo, Puno, Kapunan, Francisco, Hermosisima, Jr. and Torres, Jr., JJ., concur.

Regalado and Mendoza, JJ., concur in the result.