II.

LAWS
TAADA v. TUVERA
No. L-63915. April 24, 1985.* LORENZO M. TAADA, ABRAHAM F. SARMIENTO, and MOVEMENT OF ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. [MABINI], petitioners, vs. HON. JUAN C. TUVERA, in his capacity as Executive Assistant to the President, HON. JOAQUIN VENUS, in his capacity as Deputy Executive Assistant to the President, MELQUIADES P. DE LA CRUZ, in his capacity as Director, Malacaang Records Office, and FLORENDO S. PABLO, in his capacity as Director, Bureau of Printing, respondents. _______________

* EN BANC. SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera Mandamus; Private individuals who seek to procure the enforcement of a public duty (e.g. the publication in the Official Gazette of Presidential Decrees, LOI, etc.) are real parties in interest in mandamus case.The reasons given by the Court in recognizing a private citizens legal personality in the aforementioned case apply squarely to the present petition. Clearly, the right sought to be enforced by petitioners herein is a public right recognized by no less than the fundamental law of the land. If petitioners were not allowed to institute this proceeding, it would indeed be difficult to conceive of any other person to initiate the same, considering that the Solicitor General, the government officer generally empowered to represent the people, has entered his appearance for respondents in this case. Same; Statutes; Fact that a Presidential Decree or LOI states its date of effectivity does not preclude their publication in the Official Gazette as they constitute important legislative acts, particularly in the present situation where the President may on his own issue laws.The clear object of the abovequoted provision is to give the general public adequate notice of the various laws which are to regulate their actions and conduct as citizens. Without such notice and publication, there would be no basis for the application of the maxim ignorantia legis non excusat. It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one. Same; Same; Same.Perhaps at no time since the establishment of the Philippine Republic has the publication of laws taken so vital significance than at this time when the people have bestowed upon the President a power heretofore enjoyed solely by the legislature. While the people are kept abreast by

the mass media of the debates and deliberations in the Batasan Pambansaand for the diligent ones, ready access to the legislative recordsno such publicity accompanies the law-making process of the President. Thus, without publication, the people have no means of knowing what presidential decrees have actually been promulgated, much less a definite way of informing themselves of the specific contents and texts of such decrees. As the Supreme Court of Spain ruled: Bajo la denoroinacin genrica de leyes, se comprenden tambin los reglamentos, Reales decretos, Instrucciones, Circulares y Reales ordines dictadas de conformidad con las mismas por el Gobierno en uso de su potestad. Same; Same; C.A. 638 imposes a duty for publication of Presidential decrees and issuances as it uses the words shall be 29

VOL. 136, APRIL 24, 1985 29 Taada vs. Tuvera published.The very first clause of Section 1 of Commonwealth Act 638 reads: There shall be published in the Official Gazette x x x. The word shall used therein imposes upon respondent officials an imperative duty. That duty must be enforced if the Constitutional right of the people to be informed on matters of public concern is to be given substance and reality. The law itself makes a list of what should be published in the Official Gazette. Such listing, to our mind, leaves respondents with no discretion whatsoever as to what must be included or excluded from such publication. Same; Same; But administrative and executive orders and those which affect only a particular class of persons need not be published.The publication of all presidential issuances of a public nature or of general applicability is mandated by law. Obviously, presidential decrees that provide for fines, forfeitures or penalties for their violation or otherwise impose a burden on the people, such as tax and revenue measures, fall within this category. Other presidential issuances which apply only to particular persons or class of persons such as administrative and executive orders need not be published on the assumption that they have been circularized to all concerned. Same; Same; Due Process; Publication of Presidential decrees and issuances of general application is a matter of due process.It is needless to add that the publication of presidential issuances of a public nature or of general applicability is a requirement of due process. It is a rule of law that before a person may be bound by law, he must first be officially and specifically informed of its contents. Same; Same; Same; Presidential Decrees and issuances of general application which have not been published shall have no force and effect.The Court therefore declares that presidential issuances of general application, which have not been published, shall have no force and effect. Some members of the Court, quite apprehensive about the possible unsettling effect this decision might have on acts done

in reliance of the validity of those presidential decrees which were published only during the pendency of this petition, have put the question as to whether the Courts declaration of invalidity apply to P.D.s which had been enforced or implemented prior to their publication. The answer is all too familiar. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank. 30

30 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera Same; Same; Same; Implementation of Presidential Decrees prior to their publication in the Official Gazette may have consequences which cannot be ignored.Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is an operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased by a new judicial declaration x x x that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. Same; Same; Same; Only P.D. Nos. 1019 to 1030, 1278 and 1937 to 1939, inclusive, have not been published. It is undisputed that none of them has been implemented.From the report submitted to the Court by the Clerk of Court, it appears that of the presidential decrees sought by petitioners to be published in the Official Gazette, only Presidential Decrees Nos. 1019 to 1030, inclusive. 1278, and 1937 to 1939, inclusive, have not been so published. Neither the subject matters nor the texts of these PDs can be ascertained since no copies thereof are available. But whatever their subject matter may be, it is undisputed that none of these unpublished PDs has ever been implemented or enforced by the government. FERNANDO, C.J., concurring with qualification:

Statutes; Due Process; I am unable to concur insofar as the opinion written by Justice Escolin would unqualifiedly impose the requirement of publication in the Official Gazette for unpublished Presidential issuances to have a binding force and effect.It is of course true that without the requisite publication, a due process question would arise if made to apply adversely to a party who is not even aware of the existence of any legislative or executive act having the force and effect of law. My point is that such publication required need not be confined to the Official Gazette. From the pragmatic standpoint, there is an advantage to be gained. It conduces to certainty. That is to be admitted. It does not follow, however, that failure to do so would in all cases and under all circumstances result in a statute, presidential decree or any other executive act of the same category being bereft of any binding force

and effect. To so hold would, for me, raise a constitutional question. Such a pronouncement would lend itself to the interpretation that such a legislative or presidential act is bereft of the attribute of effectivity unless published in the Official Gazette. There is no such requirement in the Constitution as Justice Plana so aptly pointed out. It is true that what is decided now applies only to past presidential issuances. 31

VOL. 136, APRIL 24, 1985 31 Taada vs. Tuvera Nonetheless, this clarification is, to my mind, needed to avoid any possible misconception as to what is required for any statute or presidential act to be impressed with binding force or effectivity. Same; Same; The Civil Code rule on publication of statutes is only a legislative enactment and does not and cannot have the force of a constitutional command A later executive or legislative act can fix a different rule.Let me make clear therefore that my qualified concurrence goes no further than to affirm that publication is essential to the effectivity of a legislative or executive act of a general application. I am not in agreement with the view that such publication must be in the Official Gazette. The Civil Code itself in its Article 2 expressly recognizes that the rule as to laws taking effect after fifteen days following the completion of their publication in the Official Gazette is subject to this exception, unless it is otherwise provided. Moreover, the Civil Code is itself only a legislative enactment, Republic Act No. 386. It does not and cannot have the juridical force of a constitutional command. A later legislative or executive act which has the force and effect of law can legally provide for a different rule. Same; Same; I am unable to agree that decrees not published are devoid of any legal character.Nor can I agree with the rather sweeping conclusion in the opinion of Justice Escolin that presidential decrees and executive acts not thus previously published in the Official Gazette would be devoid of any legal character. That would be, in my opinion, to go too far. It may be fraught, as earlier noted, with undesirable consequences. I find myself therefore unable to yield assent to such a pronouncement. TEEHANKEE, J., concurring:

Statutes; Unless laws are published there will no basis for the rule that ignorance of the law excuses no one from compliance therewith.Without official publication in the Official Gazette as required by Article 2 of the Civil Code and the Revised Administrative Code, there would be no basis nor justification for the corollary rule of Article 3 of the Civil Code (based on constructive notice that the provisions of

the law are ascertainable from the public and official repository where they are duly published) that Ignorance of the law excuses no one from compliance therewith. 32

32 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera Same; Respondents theory that a Presidential Decree that fixes its date of effectivity need not be published misreads Art. 2 of the Civil Code.Respondents contention based on a misreading of Article 2 of the Civil Code that only laws which are silent as to their effectivity [date] need be published in the Official Gazette for their effectivity is manifestly untenable. The plain text and meaning of the Civil Code is that laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided, i.e. a different effectivity date is provided by the law itself. This proviso perforce refers to a law that has been duly published pursuant to the basic constitutional requirements of due process. The best example of this is the Civil Code itself: the same Article 2 provides otherwise that it shall take effect *only+ one year *not 15 days+ after such publication. To sustain respondents misreading that most laws or decrees specify the date of their effectivity and for this reason, publication in the Official Gazette is not necessary for their effectivity would be to nullify and render nugatory the Civil Codes indispensable and essential requirement of prior publication in the Official Gazette by the simple expedient of providing for immediate effectivity or an earlier effectivity date in the law itself before the completion of 15 days following its publication which is the period generally fixed by the Civil Code for its proper dissemination. MELENCIO-HERRERA, J., concurring:

Statutes; When a date of effectivity is mentioned in the Decree, but becomes effective only 15 days after publication in the Gazette, it will not mean that the Decree can have retroactive effect to the expressed date of effectivity.I agree. There cannot be any question but that even if a decree provides for a date of effectivity, it has to be published. What I would like to state in connection with that proposition is that when a date of effectivity is mentioned in the decree but the decree becomes effective only fifteen (15) days after its publication in the Official Gazette, it will not mean that the decree can have retroactive effect to the date of effectivity mentioned in the decree itself. There should be no retroactivity if the retroactivity will run counter to constitutional rights or shall destroy vested rights. PLANA, J., separate opinion:

Constitutional Law; Statutes; Due Process; The Constitution does not require prior publication for laws to be effective and while 33

VOL. 136, APRIL 24, 1985 33 Taada vs. Tuvera due process require prior notice, such notice is not necessarily publication in the Official Gazette.The Philippine Constitution does not require the publication of laws as a prerequisite for their effectivity, unlike some Constitutions elsewhere. It may be said though that the guarantee of due process requires notice of laws to affected parties before they can be bound thereby; but such notice is not necessarily by publication in the Official Gazette. The due process clause is not that precise. Neither is the publication of laws in the Official Gazette required by any statute as a prerequisite for their effectivity, if said laws already provide for their effectivity date. Same; Same; Same; C.A. 638 does not require Official Gazette publication of laws for their effectivity. Commonwealth Act No. 638, in my opinion, does not support the proposition that for their effectivity, laws must be published in the Official Gazette. The said law is simply An Act to Provide for the Uniform Publication and Distribution of the Official Gazette. Conformably therewith, it authorizes the publication of the Official Gazette, determines its frequency, provides for its sale and distribution, and defines the authority of the Director of Printing in relation thereto. It also enumerates what shall be published in the Official Gazette, among them, important legislative acts and resolutions of a public nature of the Congress of the Philippines and all executive and administrative orders and proclamations, except such as have no general applicability. It is noteworthy that not all legislative acts are required to be published in the Official Gazette but only important ones of a public nature. Moreover, the said law does not provide that publication in the Official Gazette is essential for the effectivity of laws. This is as it should be, for all statutes are equal and stand on the same footing. A law, especially an earlier one of general application such as Commonwealth Act No. 638, cannot nullify or restrict the operation of a subsequent statute that has a provision of its own as to when and how it will take effect. Only a higher law, which is the Constitution, can assume that role. PETITION to review the decision of the Executive Assistant to the President.

The facts are stated in the opinion of the Court. ESCOL1N, J.:

Invoking the peoples right to be informed on matters of public concern, a right recognized in Section 6, Article IV of 34

34 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera the 1973 Philippine Constitution,1 as well as the principle that laws to be valid and enforceable must be published in the Official Gazette or otherwise effectively promulgated, petitioners seek a writ of mandamus to compel respondent public officials to publish, and/or cause the publication in the Official Gazette of various presidential decrees, letters of instructions, general orders, proclamations, executive orders, letter of implementation and administrative orders. Specifically, the publication of the following presidential issuances is sought: a] Presidential Decrees Nos. 12, 22, 37, 38, 59, 64, 103, 171, 179, 184, 197, 200, 234, 265, 286, 298, 303, 312, 324, 325, 326, 337, 355, 358, 359, 360, 361, 368, 404, 406, 415, 427, 429, 445, 447, 473, 486, 491, 503, 504, 521, 528, 551, 566, 573, 574, 594, 599, 644, 658, 661, 718, 731, 733, 793, 800, 802, 835, 836, 923, 935, 961, 1017-1030, 1050, 1060-1061, 1085, 1143, 1165, 1166, 1242, 1246, 1250, 1278, 1279, 1300, 1644, 1772, 1808, 1810, 1813-1817, 1819-1826, 1829-1840, 1842-1847. b] Letter of Instructions Nos.: 10, 39, 49, 72, 107, 108, 116, 130, 136, 141, 150, 153, 155, 161, 173, 180, 187, 188, 192, 193, 199, 202, 204, 205, 209, 211-213, 215-224, 226-228, 231-239, 241-245, 248-251, 253-261, 263-269, 271-273, 275-283, 285-289, 291, 293, 297-299, 301-303, 309, 312-315, 325, 327, 343, 346, 349, 357, 358, 362, 367, 370, 382, 385, 386, 396-397, 405, 438-440, 444-445, 473, 486, 488, 498, 501. 399, 527, 561, 576, 587, 594, 599, 600, 602, 609, 610, 611, 612, 615, 641, 642, 665, 702, 712-713, 726, 837-839, 878-879, 881, 882, 939-940, 964, 997, 1149-1178, 1180-1278. c] General Orders Nos.: 14, 52, 58, 59, 60, 62, 63, 64 & 65. d] Proclamation Nos.: 1126, 1144, 1147, 1151, 1196, 1270, 1281, 1319-1526, 1529, 1532, 1535, 1538, 1540-1547, 1550-1558, 1561-1588, 1590-1595, 1594-1600, 1606-1609, 1612-1628, 1630-1649, 16941695, 1697-1701, 1705-1723, 1731-1734, 1737-1742, 1744, 1746-1751, 1752, 1754, 1762, 1764-1787, 1789-1795, 1797, 1800, 1802-1804, 1806-1807, 1812-1814, 1816, 1825-1826, 1829, 1831-1832, 18351836, 1839_______________

1 Section 6. The right of the people to information on matters of public concern shall be recognized, access to official records, and to documents and papers pertaining to official acts, transactions, or decisions, shall be afforded the citizens subject to such limitation as may be provided by law. 35

VOL. 136, APRIL 24, 1985 35 Taada vs. Tuvera 1840, 1843-1844, 1846-1847, 1849, 1853-1858, 1860, 1866, 1868, 1870, 1876-1889, 1892, 1900, 1918, 1923, 1933, 1952, 1963, 1965-1966, 1968-1984, 1986-2028, 2030-2044, 2046-2145, 2147-2161, 21632244. e] Executive Orders Nos.: 411, 413, 414, 427, 429-454, 457-471, 474-492, 494-507, 509-510, 522, 524528, 531-532, 536, 538, 543-544, 549, 551-553, 560, 563, 567-568, 570, 574, 593, 594, 598-604, 609, 611-647, 649-677, 679-703, 705-707, 712-786, 788-852, 854-857. f] Letters of Implementation Nos.: 7, 8, 9, 10, 11-22, 25-27, 39, 50, 51, 59, 76, 80-81, 92, 94, 95, 107, 120, 122, 123. g] Administrative Orders Nos.: 347, 348, 352-354, 360-378, 380-433, 436-439. The respondents, through the Solicitor General, would have this case dismissed outright on the ground that petitioners have no legal personality or standing to bring the instant petition. The view is submitted that in the absence of any showing that petitioners are personally and directly affected or prejudiced by the alleged non-publication of the presidential issuances in question2 said petitioners are without the requisite legal personality to institute this mandamus proceeding, they are not being aggrieved parties within the meaning of Section 3, Rule 65 of the Rules of Court, which we quote: SEC. 3. Petition for Mandamus.When any tribunal, corporation, board or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file a verified petition in the proper court alleging the facts with certainty and praying that judgment be rendered commanding the defendant, immediately or at some other specified time, to do the act required to be done to protect the rights of the petitioner, and to pay the damages sustained by the petitioner by reason of the wrongful acts of the defendant. _______________

2 Anti-Chinese League vs. Felix, 77 Phil. 1012; Costas vs. Aldanese, 45 Phil. 345; Almario vs. City Mayor, 16 SCRA 151; Palting vs. San Jose Petroleum, 18 SCRA 924; Dumlao vs. Comelec, 95 SCRA 392. 36

36 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera Upon the other hand, petitioners maintain that since the subject of the petition concerns a public right and its object is to compel the performance of a public duty, they need not show any specific interest for their petition to be given due course. The issue posed is not one of first impression. As early as the 1910 case of Severino vs. Governor General,3 this Court held that while the general rule is that a writ of mandamus would be granted to a private individual only in those cases where he has some private or particular interest to be subserved, or some particular right to be protected, independent of that which he holds with the public at large, and it is for the public officers exclusively to apply for the writ when public rights are to be subserved *Mithchell vs. Boardmen, 79 M.e., 469, nevertheless, when the question is one of public right and the object of the mandamus is to procure the enforcement of a public duty, the people are regarded as the real party in interest and the relator at whose instigation the proceedings are instituted need not show that he has any legal or special interest in the result, it being sufficient to show that he is a citizen and as such interested in the execution of the laws *High, Extraordinary Legal Remedies, 3rd ed., sec. 431+. Thus, in said case, this Court recognized the relator Lope Severino, a private individual, as a proper party to the mandamus proceedings brought to compel the Governor General to call a special election for the position of municipal president in the town of Silay, Negros Occidental. Speaking for this Court, Mr. Justice Grant T. Trent said: We are therefore of the opinion that the weight of authority supports the proposition that the relator is a proper party to proceedings of this character when a public right is sought to be enforced. If the general rule in America were otherwise, we think that it would not be applicable to the case at bar for the reason that it is always dangerous to apply a general rule to a particular case without keeping in mind the reason for the rule, because, if under the particular circumstances the reason for the rule does not exist, the rule itself is not applicable and reliance upon the rule may well lead to error. _______________

3 16 Phil. 366, 378.

37

VOL. 136, APRIL 24, 1985 37 Taada vs. Tuvera No reason exists in the case at bar for applying the general rule insisted upon by counsel for the respondent. The circumstances which surround this case are different from those in the United States, inasmuch as if the relator is not a proper party to these proceedings no other person could be, as we have seen that it is not the duty of the law officer of the Government to appear and represent the people in cases of this character. The reasons given by the Court in recognizing a private citizens legal personality in the aforementioned case apply squarely to the present petition. Clearly, the right sought to be enforced by petitioners herein is a public right recognized by no less than the fundamental law of the land. If petitioners were not allowed to institute this proceeding, it would indeed be difficult to conceive of any other person to initiate the same, considering that the Solicitor General, the government officer generally empowered to represent the people, has entered his appearance for respondents in this case. Respondents further contend that publication in the Official Gazette is not a sine qua non requirement for the effectivity of laws where the laws themselves provide for their own effectivity dates. It is thus submitted that since the presidential issuances in question contain special provisions as to the date they are to take effect, publication in the Official Gazette is not indispensable for their effectivity. The point stressed is anchored on Article 2 of the Civil Code: Art. 2. Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided, x x x The interpretation given by respondent is in accord with this Courts construction of said article. In a long line of decisions,4 this Court has ruled that publication in the Official Gazette is necessary in those cases where the legislation itself does not provide for its effectivity datefor then the date of _______________

4 Camacho vs. Court of Industrial Relations, 80 Phil. 848; Mejia vs. Balolong, 81 Phil. 486; Republic of the Philippines vs. Encarnacion, 87 Phil. 843; Philippine Blooming Mills, Inc. vs. Social Security System, 17 SCRA 1077; Askay vs. Cosalan, 46 Phil. 179. 38

38 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera publication is material for determining its date of effectivity, which is the fifteenth day following its publicationbut not when the law itself provides for the date when it goes into effect. Respondents argument, however, is logically correct only insofar as it equates the effectivity of laws with the fact of publication. Considered in the light of other statutes applicable to the issue at hand, the conclusion is easily reached that said Article 2 does not preclude the requirement of publication in the Official Gazette, even if the law itself provides for the date of its effectivity. Thus, Section 1 of Commonwealth Act 638 provides as follows: Section 1. There shall be published in the Official Gazette *1+ all important legislative acts and resolutions of a public nature of tne Congress of the Philippines; [2] all executive and administrative orders and proclamations, except such as have no general applicability: [3] decisions or abstracts of decisions of the Supreme Court and the Court of Appeals as may be deemed by said courts of sufficient importance to be so published; [4] such documents or classes of documents as may be required so to be published by law; and [5] such documents or classes of documents as the President of the Philippines shall determine from time to time to have general applicability and legal effect, or which he may authorize so to be published. x x x The clear object of the above-quoted provision is to give the general public adequate notice of the various laws which are to regulate their actions and conduct as citizens. Without such notice and publication, there would be no basis for the application of the maxim ignorantia legis non excusat. It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one. Perhaps at no time since the establishment of the Philippine Republic has the publication of laws taken so vital significance that at this time when the people have bestowed upon the President a power heretofore enjoyed solely by the legislature. While the people are kept abreast by the mass media of the debates and deliberations in the Batasan Pambansaand for 39

VOL. 136, APRIL 24, 1985 39 Taada vs. Tuvera

the diligent ones, ready access to the legislative recordsno such publicity accompanies the law-making process of the President. Thus, without publication, the people have no means of knowing what presidential decrees have actually been promulgated, much less a definite way of informing themselves of the specific contents and texts of such decrees. As the Supreme Court of Spain ruled: Bajo la denominacin genrica de leyes, se comprenden tambin los reglamentos, Reales decretos, Instrucciones, Circulares y Reales ordines dietadas de conformidad con las mismas por el Gobierno en uso de su potestad.5 The very first clause of Section 1 of Commonwealth Act 638 reads: There shall be published in the Official Gazette x x x. The word shall used therein imposes upon respondent officials an imperative duty. That duty must be enforced if the Constitutional right of the people to be informed on matters of public concern is to be given substance and reality. The law itself makes a list of what should be published in the Official Gazette. Such listing, to our mind, leaves respondents with no discretion whatsoever as to what must be included or excluded from such publication. The publication of all presidential issuances of a public nature or of general applicability is mandated by law. Obviously, presidential decrees that provide for fines, forfeitures or penalties for their violation or otherwise impose a burden on the people, such as tax and revenue measures, fall within this category. Other presidential issuances which apply only to particular persons or class of persons such as administrative and executive orders need not be published on the assumption that they have been circularized to all concerned.6 It is needless to add that the publication of presidential issuances of a public nature or of general applicability is a requirement of due process. It is a rule of law that before a person may be bound by law, he must first be officially and specifically informed of its contents. As Justice Claudio _______________

5 1 Manresa, Codigo Civil, 7th Ed., p. 146. 6 People vs. Que Po Lay, 94 Phil. 640; Balbuena et al. vs. Secretary of Education, et al., 110 Phil. 150. 40

40 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera Teehankee said in Peralta vs. COMELEC7:

In a time of proliferating decrees, orders and letters of instructions which all form part of the law of the land, the requirement of due process and the Rule of Law demand that the Official Gazette as the official government repository promulgate and publish the texts of all such decrees, orders and instructions so that the people may know where to obtain their official and specific contents. The Court therefore declares that presidential issuances of general application, which have not been published, shall have no force and effect. Some members of the Court, quite apprehensive about the possible unsettling effect this decision might have on acts done in reliance of the validity of those presidential decrees which were published only during the pendency of this petition, have put the question as to whether the Courts declaration of invalidity apply to P.D.s which had been enforced or implemented prior to their publication. The answer is all too familiar. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank8 to wit: The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. Norton v. Shelby County, 118 U.S. 425, 442; Chicago, I. & L. Ry. Co. v. Hackett, 228 U.S. 559, 566. It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to such a determination, is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspectswith respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These ques_______________

7 82 SCRA 30, dissenting opinion. 8 308 U.S. 371, 374. 41

VOL. 136, APRIL 24, 1985 41 Taada vs. Tuvera

tions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. Consistently with the above principle, this Court in Rutter vs. Esteban9 sustained the right of a party under the Moratorium Law, albeit said right had accrued in his favor before said law was declared unconstitutional by this Court. Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is an operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased by a new judicial declaration x x x that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. From the report submitted to the Court by the Clerk of Court, it appears that of the presidential decrees sought by petitioners to be published in the Official Gazette, only Presidential Decrees Nos. 1019 to 1030, inclusive, 1278, and 1937 to 1939, inclusive, have not been so published.10 Neither the subject matters nor the texts of these PDs can be ascertained since no copies thereof are available. But whatever their subject matter may be, it is undisputed that none of these unpublished PDs has ever been implemented or enforced by the government. In Pesigan vs. Angeles,11 the Court, through Justice Ramon Aquino, ruled that publication is necessary to apprise the public of the contents of *penal+ regulations and make the said penalties binding on the persons affected thereby. The cogency of this holding is apparently recognized by respondent officials considering the manifestation in their comment that the government, as a matter of policy, refrains _______________

9 93 Phil. 68. 10 The report was prepared by the Clerk of Court after Acting Director Florendo S. Pablo Jr. of the Government Printing Office, failed to respond to her letter-request regarding the respective dates of publication in the Official Gazette of the presidential issuances listed therein. No report has been submitted by the Clerk of Court as to the publication or non-publication of other presidential issuances. 11 129 SCRA 174. 42

42 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera

from prosecuting violations of criminal laws until the same shall have been published in the Official Gazette or in some other publication, even though some criminal laws provide that they shall take effect immediately. WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all unpublished presidential issuances which are of general application, and unless so published, they shall have no binding force and effect. SO ORDERED. Relova, J., concur. Fernando, C.J., concurs in a separate opinion expressing the view that without publication, a due process question may arise but that such publication need not be in the Official Gazette. To that extent he concurs with the opinion of Justice Plana. Teehankee, J., files a brief concurrence. Makasiar, J., concurs in the opinion of Chief Justice Fernando. Aquino, J., no part. Concepcion, Jr., J., on leave. Abad Santos, J., I concur in the separate opinion of the Chief Justice. Melencio-Herrera, J., see separate concurring opinion. Plana, J., see separate opinion. Gutierrez, Jr., J., I concur insofar as publication is necessary but reserve my vote as to the necessity of such publication being in the Official Gazette. De la Fuente, J., Insofar as the opinion declares the unpublished decrees and issuances of a public nature or general applicability ineffective, until due publication thereof. Cuevas, J., I concur in the opinion of the Chief Justice and Justice Plana. Alampay, J., I subscribe to the opinion of Chief Justice Fernando and Justice Plana. 43

VOL. 136, APRIL 24, 1985 43 Taada vs. Tuvera

FERNANDO, C.J., concurring with qualification:

There is on the whole acceptance on my part of the views expressed in the ably written opinion of Justice Escolin. I am unable, however, to concur insofar as it would unqualifiedly impose the requirement of publication in the Official Gazette for unpublished presidential issuances to have binding force and effect. I shall explain why. 1. It is of course true that without the requisite publication, a due process question would arise if made to apply adversely to a party who is not even aware of the existence of any legislative or executive act having the force and effect of law. My point is that such publication required need not be confined to the Official Gazette. From the pragmatic standpoint, there is an advantage to be gained. It conduces to certainty. That is too be admitted. It does not follow, however, that failure to do so would in all cases and under all circumstances result in a statute, presidential decree or any other executive act of the same category being bereft of any binding force and effect. To so hold would, for me, raise a constitutional question. Such a pronouncement would lend itself to the interpretation that such a legislative or presidential act is bereft of the attribute of effectivity unless published in the Official Gazette. There is no such requirement in the Constitution as Justice Plana so aptly pointed out. It is true that what is decided now applies only to past presidential issuances. Nonetheless, this clarification is, to my mind, needed to avoid any possible misconception as to what is required for any statute or presidential act to be impressed with binding force or effectivity. 2. It is quite understandable then why I concur in the separate opinion of Justice Plana. Its first paragraph sets forth what to me is the constitutional doctrine applicable to this case. Thus: The Philippine Constitution does not require the publication of laws as a prerequisite for their effectivity, unlike some Constitutions elsewhere. It may be said though that the guarantee of due process requires notice of laws to affected parties before they can be bound thereby; but such 44

44 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera notice is not necessarily by publication in the Official Gazette. The due process clause is not that precise.1 I am likewise in agreement with its closing paragraph: In fine, I concur in the majority decision to the extent that it requires notice before laws become effective, for no person should be

bound by a law without notice. This is elementary fairness. However, I beg to disagree insofar as it holds that such notice shall be by publication in the Official Gazette.2 3. It suffices, as was stated by Judge Learned Hand, that law as the command of the government must be ascertainable in some form if it is to be enforced at all.3 It would indeed be to reduce it to the level of mere futility, as pointed out by Justice Cardozo, if it is unknown and unknowable.4 Publication, to repeat, is thus essential. What I am not prepared to subscribe to is the doctrine that it must be in the Official Gazette. To be sure once published therein there is the ascertainable mode of determining the exact date of its effectivity. Still for me that does not dispose of the question of what is the jural effect of past presidential decrees or executive acts not so published. For prior thereto, it could be that parties aware of their existence could have conducted themselves in accordance with their provisions. If no legal consequences could attach due to lack of publication in the Official Gazette, then serious problems could arise. Previous transactions based on such Presidential Issuances could be open to question. Matters deemed settled could still be inquired into. I am not prepared to hold that such an effect is contemplated by our decision. Where such presidential decree or executive act is made the basis of a criminal prosecution, then, of course, its ex post facto character becomes evident.5 In civil cases though, retroac_______________

1 Separate Opinion of Justice Plana, first paragraph. He mentioned in this connection Article 7, Sec. 21 of the Wisconsin Constitution and State ex rel. White v. Grand Superior Ct., 71 ALR 1354, citing the Constitution of Indiana, U.S.A. 2 Ibid, closing paragraph. 3 Learned Hand, The Spirit of Liberty 104 (1960). 4 Cardozo, The Growth of the Law, 3 (1924). 5 Cf. Nuez v. Sandiganbayan, G.R. No. 50581-50617, January 30, 1982, 111 SCRA 433. 45

VOL. 136, APRIL 24, 1985 45 Taada vs. Tuvera tivity as such is not conclusive on the due process aspect There must still be a showing of arbitrariness. Moreover, where the challenged presidential decree or executive act was issued under the police power, the non-impairment clause of the Constitution may not always be successfully invoked. There

must still be that process of balancing to determine whether or not it could in such a case be tainted by infirmity.6 In traditional terminology, there could arise then a question of unconstitutional application. That is as far as it goes. 4. Let me make therefore that my qualified concurrence goes no further than to affirm that publication is essential to the effectivity of a legislative or executive act of a general application. I am not in agreement with the view that such publication must be in the Official Gazette. The Civil Code itself in its Article 2 expressly recognizes that the rule as to laws taking effect after fifteen days following the completion of their publication in the Official Gazette is subject to this exception, unless it is otherwise provided. Moreover, the Civil Code is itself only a legislative enactment, Republic Act No. 386. It does not and cannot have the juridical force of a constitutional command. A later legislative or executive act which has the force and effect of law can legally provide for a different rule. 5. Nor can I agree with the rather sweeping conclusion in the opinion of Justice Escolin that presidential decrees and executive acts not thus previously published in the Official Gazette would be devoid of any legal character. That would be, in my opinion, to go too far. It may be fraught, as earlier noted, with undesirable consequences. I find myself therefore unable to yield assent to such a pronouncement. I am authorized to state that Justices Makasiar, Abad Santos, Cuevas, and Alampay concur in this separate opinion. _______________

6 Cf. Alalayan v. National Power Corporation, L-24396, July 29, 1968, 24 SCRA 172. 46

46 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera TEEHANKEE, J., concurring:

I concur with the main opinion of Mr. Justice Escolin and the concurring opinion of Mme. Justice Herrera. The Rule of Law connotes a body of norms and laws published and ascertainable and of equal application to all similarly circumstanced and not subject to arbitrary change but only under certain set procedures. The Court has consistently stressed that it is an elementary rule of fair play and justice that a reasonable opportunity to be informed must be afforded to the people who are commanded to obey before they can be punished for its violation,1 citing the settled principle based on due process

enunciated in earlier cases that before the public is bound by its contents, especially its penal provisions, a law, regulation or circular must first be published and the people officially and specially informed of said contents and its penalties. Without official publication in the Official Gazette as required by Article 2 of the Civil Code and the Revised Administrative Code, there would be no basis nor justification for the corollary rule of Article 3 of the Civil Code (based on constructive notice that the provisions of the law are ascertainable from the public and official repository where they are duly published) that Ignorance of the law excuses no one from compliance therewith. Respondents contention based on a misreading of Article 2 of the Civil Code that only laws which are silent as to their effectivity *date+ need be published in the Official Gazette for their effectivity is manifestly untenable. The plain text and meaning of the Civil Code is that laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided, i.e. a different effectivity date is provided by the law itself. This proviso perforce refers to a law that has been duly published pursuant to the basic constitutional requirements of due process. The best example of this is the Civil Code itself: the same Article 2 provides otherwise that it shall take effect [only] one _______________

1 People vs. de Dios, G.R. No. 11003, Aug. 31, 1959, per the late Chief Justice Paras. 47

VOL. 136, APRIL 24, 1985 47 Taada vs. Tuvera year *not 15 days+ after such publication.2 To sustain respondents misreading that most laws or decrees specify the date of their effectivity and for this reason, publication in the Official Gazette is not necessary for their effectivity3 would be to nullify and render nugatory the Civil Codes indispensable and essential requirement of prior publication in the Official Gazette by the simple expedient of providing for immediate effectivity or an earlier effectivity date in the law itself before the completion of 15 days following its publication which is the period generally fixed by the Civil Code for its proper dissemination. MELENCIO-HERRERA, J., concurring:

I agree. There cannot be any question but that even if a decree provides for a date of effectivity, it has to be published. What I would like to state in connection with that proposition is that when a date of effectivity is mentioned in the decree but the decree becomes effective only fifteen (15) days after its publication in the Official Gazette, it will not mean that the decree can have retroactive effect to the date of effectivity mentioned in the decree itself. There should be no retroactivity if the retroactivity will run counter to constitutional rights or shall destroy vested rights. SEPARATE OPINION PLANA, J.:

The Philippine Constitution does not require the publication of laws as a prerequisite for their effectivity, unlike some Constitutions elsewhere.** It may be said though that the guarantee of due process requires notice of laws to affected op _______________

2 Notes in brackets supplied. 3 Respondents comment, pp. 14-15. ** See e.g., Wisconsin Constitution. Art. 7, Sec. 21: The legislature shall provide publication of all statute laws . . . and no general law shall be in force until published. See also State ex rel. White vs. Grand Superior Ct., 71 ALR 1354, citing the Constitution of Indiana, U.S.A. 48

48 SUPREME COURT REPORTS ANNOTATED Taada vs. Tuvera parties before they can be bound thereby; but such notice is not necessarily by publication in the Official Gazette. The due process clause is not that precise. Neither is the publication of laws in the Official Gazette required by any statute as a prerequisite for their effectivity, if said laws already provide for their effectivity date. Article 2 of the Civil Code provides that laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided. Two things may be said of this provision: Firstly, it obviously does not apply to a law with a built-in provision as to when

it will take effect. Secondly, it clearly recognizes that each law may provide not only a different period for reckoning its effectivity date but also a different mode of notice. Thus, a law may prescribe that it shall be published elsewhere than in the Official Gazette. Commonwealth Act No. 638, in my opinion, does not support the proposition that for their effectivity, laws must be published in the Official Gazette. The said law is simply An Act to Provide for the Uniform Publication and Distribution of the Official Gazette. Conformably therewith, it authorizes the publication of the Official Gazette, determines its frequency, provides for its sale and distribution, and defines the authority of the Director of Printing in relation thereto. It also enumerates what shall be published in the Official Gazette, among them, important legislative acts and resolutions of a public nature of the Congress of the Philippines and all executive and administrative orders and proclamations, except such as have no general applicability. It is noteworthy that not all legislative acts are required to be published in the Official Gazette but only important ones of a public nature. Moreover, the said law does not provide that publication in the Official Gazette is essential for the effectivity of laws. This is as it should be, for all statutes are equal and stand on the same footing. A law, especially an earlier one of general application such as Commonwealth Act No. 638, cannot nullify or restrict the operation of a subsequent statute that has a provision of its own as to when and how it will take effect. Only a higher law, which is the Constitution, can assume that role. [Taada vs. Tuvera, 136 SCRA 27(1985)]

446 SUPREME COURT REPORTS ANNOTATED

Umali vs. Estanislao

G.R. No. 104037. May 29, 1992.* REYNALDO V. UMALI, petitioner, vs. HON. JESUS P. ESTANISLAO, Secretary of Finance, and HON. JOSE U. ONG, Commissioner of Internal Revenue, respondents. G.R. No. 104069. May 29, 1992.* RENE B. GOROSPE, LEIGHTON R. SIAZON, MANUEL M. SUNGA, PAUL D. UNGOS, BIENVENIDO T. JAMORALIN, JR., JOSE D. FLORES, JR., EVELYN G. VILLEGAS, DOMINGO T. LIGOT, HENRY E. LARON, PASTOR M. DALMACION, JR., and, JULIUS NORMAN C. CERRADA, petitioners, vs. COMMISSIONER OF INTERNAL REVENUE, respondent. Constitutional Law; Taxation; Statute; Court rules that Rep. Act 7167 took effect on 30 January 1992 which is after fifteen (15) days following its publication on 14 January 1992 in the "Malaya". Accordingly, the Court rules that Rep. Act 7167 took effect on 30 January 1992, which is after fifteen (15) days following its publication on 14 January 1992 in the "Malaya." Same; Same; Same; Same; The court is of the considered view that Rep. Act 7167 should cover or extend to compensation income earned or received during calendar year 1991.Coming now to the second issue, the Court is of the considered view that Rep. Act 7167 should cover or extend to compensation income earned or received during calendar year 1991. Same; Same; Same; Same; Same; These increased exemptions can be available on 15 April 1992 only in respect of compensation income earned or received during the calendar year 1991.And then, Rep. Act 7167 says that the increased personal exemptions that it provides for shall be available thenceforth, that is, after Rep. Act 7167 shall have become effective. In other words, these exemptions are available upon the filing of personal income tax returns which is, under the National Internal Revenue Code, done not later than the 15th day of April after the end of a calendar year. Thus, under Rep. Act 7167, which became effective, as aforestated, on 30 January 1992, the ________________

* EN BANC. 447

VOL. 209, MAY 29, 1992

447 Umali vs. Estanislao increased exemptions are literally available on or before 15 April 1992 (though not before 30 January 1992). But these increased exemptions can be available on 15 April 1992 only in respect of compensation income earned or received during the calendar year 1991. PETITIONS for mandamus and prohibition to review the decision of the Commissioner of Internal Revenue.

The facts are stated in the opinion of the Court. Rene B. Gorospe, Leighton R, Siazon, Manuel M. Sunga, Bienvenido T. Jamoralin, Jr, and Paul D. Ungos for petitioners. PADILLA, J.:

These consolidated cases are petitions for mandamus and prohibition, premised upon the following undisputed facts: Congress enacted Rep. Act 7167, entitled "AN ACT ADJUSTING THE BASIC PERSONAL AND ADDITIONAL EXEMPTIONS ALLOWABLE TO INDIVIDUALS FOR INCOME TAX PURPOSES TO THE POVERTY THRESHOLD LEVEL, AMENDING FOR THE PURPOSE SECTION 29, PARAGRAPH (L), ITEMS (1) AND (2) (A) OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES." It provides as follows: "SECTION (1). The first paragraph of item (1), paragraph (1) of Section 29 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: (1) Personal Exemptions allowable to individuals(1) Basic personal exemption as follows: 'For single individual or married individual judicially decreed as legally separated with no qualified dependents P9,000 For head of a family P12,000 For married individual P18,000 Provided, That husband and wife electing to compute their income tax separately shall be entitled to a personal exemption of P9,000 each.' SEC. 2. The first paragraph of item (2) (A), paragraph (1) of Section 29 of the same Code, as amended, is hereby further amended to read as follows:

'(2) Additional exemption. 448

448 SUPREME COURT REPORTS ANNOTATED Umali vs. Estanislao (a)Taxpayers with dependents.A married individual or a head of family shall be allowed an additional exemption of Five Thousand Pesos (P5,000) for each dependent: Provided, That the total number of dependents for which additional exemptions may be claimed shall not exceed four dependents: Provided, further, That an additional exemption of One Thousand Pesos (1,000) shall be allowed for each child who otherwise qualified as dependent prior to January 1, 1980: Provided, finally, That the additional exemption for dependents shall be claimed by only one of the spouses in case of married individuals electing to compute their income tax liabilities separately.' SEC. 3. This act shall take effect upon its approval. Approved."1 ________________

1 Before the enactment of Rep, Act 7167, Executive Order No. 37 approved by the President on 31 July 1986, provided for the following personal and additional exemptions for individual taxpayers: (1) Personal exemptions allowable to individuals.(1) Basic personal exemption.For the purpose of determining the tax provided in Section 21(a) of this Title. there shall be allowed basic personal exemption as follows: For single individual or married individual judicially decreed as legally separated with no qualified dependents P6,000 For head of a family P7,500 For married individual

P12,000 Provided, That husband and wife electing to compute their income tax separately shall be entitled to a personal exemption of P6,000 each. For purposes of this paragraph, the term 'Head of Family' means an unmarried or legally separated man or woman with one or both parents, or with one or more brothers or sisters, or with one or more legitimate, recognized natural or legally adopted children living with and dependent upon him for their chief support, where such brothers or sisters or children are not more than twenty-one (21) years of age, unmarried and not gainfully employed or where such children, brothers or sisters, regardless of age are incapable of self-support because of mental or physical defect. (2) Additional exemption (A) Taxpayers with dependents.A married individual or a head of family shall be allowed an additional exemption of Three thousand pesos (P3,000) for each dependent: Provided, That the total number of dependents for which additional exemptions may be claimed 449

VOL. 209, MAY 29, 1992 449 Umali vs. Estanislao The said act was signed and approved by the President on 19 December 1991 and published on 14 January 1992 in "Malaya" a newspaper of general circulation. On 26 December 1991, respondents promulgated Revenue Regulations No. 1-92, the pertinent portions of which read as follows: "SEC. 1. SCOPEPursuant to Sections 245 and 72 of the National Internal Revenue Code in relation to Republic Act No. 7167, these Regulations are hereby promulgated prescribing the collection at source of income tax on compensation income paid on or after January 1, 1992 under the Revised Withholding Tax Tables (ANNEX "A") which take into account the increase of personal and additional exemptions. xxxxx SEC. 3. Section 8 of Revenue Regulations No. 6-82 as amended by Revenue Regulations No. 1-86 is hereby further amended to read as follows: 'Section 8.Right to claim the following exemptions.' x x x

Each employee shall be allowed to claim the following amount of exemption with respect to compensation paid on or after January 1, 1992. _______________

shall not exceed four dependents: Provided, further, That an additional exemption of One thousand pesos (P1,000) shall be allowed for each child who otherwise qualified as dependent prior to January 1, 1980; and Provided, finally, That the additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals electing to compute their income tax liabilities separately. In case of legally separated spouses, additional exemptions may be claimed only by the spouse who was awarded custody of the child or children: Provided, That the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed: For purposes of this paragraph, a dependent means a legitimate, recognized natural or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twentyone (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect 450

450 SUPREME COURT REPORTS ANNOTATED Umali vs. Estanislao xxxxx SEC. 5. EFFECTIVITY.These regulations shall take effect on compensation income from January 1, 1992." On 27 February 1992, the petitioner in G.R. No. 104037, a taxpayer and a resident of Gitnang Bayan Bongabong, Oriental Mindoro, filed a petition for mandamus for himself and in behalf of all individual Filipino taxpayers, to COMPEL the respondents to implement Rep. Act 7167 with respect to taxable income of individual taxpayers earned or received on or after 1 January 1991 or as of taxable year ending 31 December 1991. On 28 February 1992, the petitioners in G.R. No. 104069 likewise filed a petition for mandamus and prohibition on their behalf as well as for those other individual taxpayers who might be similarly situated, to compel the Commissioner of Internal Revenue to implement the mandate of Rep. Act 7167 adjusting the personal and additional exemptions allowable to individuals for income tax purposes in

regard to income earned or received in 1991, and to enjoin the respondents from implementing Revenue Regulations No. 1-92. In the Court's resolution of 10 March 1992, these two (2) cases were consolidated. Respondents were required to comment on the petitions, which they did within the prescribed period. The principal issues to be resolved in these cases are: (1) whether or not Rep. Act 7167 took effect upon its approval by the President on 19 December 1991, or on 30 January 1992, i.e., after fifteen (15) days following its publication on 14 January 1992 in the "Malaya" a newspaper of general circulation; and (2) assuming that Rep. Act 7167 took effect on 30 January 1992, whether or not the said law nonetheless covers or applies to compensation income earned or received during calendar year 1991. In resolving the first issue, it will be recalled that the Court in its resolution in Caltex (Phils.), Inc. vs. The Commissioner of Internal Revenue, G.R. No. 97282,26 June 1991which is on all fours with this case as to the first issueheld: "The central issue presented in the instant petition is the effectivity of R.A. 6965 entitled 'An Act Revising The Form of Taxation on 451

VOL. 209, MAY 29, 1992 451 Umali vs. Estanislao Petroleum Products from Ad Valorem to Specific, Amending For the Purpose Section 145 of the National Internal Revenue Code, As amended by Republic Act Numbered Sixty Seven Hundred Sixty Seven.' Section 3 of R.A. 6965 contains the effectivity clause which provides. This Act shall take effect upon its approval' R.A. 6965 was approved on September 19, 1990. It was published in the Philippine Journal, a newspaper of general circulation in the Philippines, on September 20, 1990. Pursuant to the Act, an implementing regulation was issued by the Commissioner of Internal Revenue, Revenue Memorandum Circular 85-90, stating that R.A. 6965 took effect on October 5, 1990. Petitioner took exception thereof and argued that the law took effect on September 20, 1990 instead. Pertinent is Article 2 of the Civil Code (as amended by Executive Order No. 200) which provides: 'Article 2. Laws shall take effect after fifteen days following the completion of their publication either in the official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided. x x x'

In the case of Tanada vs. Tuvera (L-63915, December 29, 1986, 146 SCRA 446, 452) we construed Article 2 of the Civil Code and laid down the rule: 'x x x: the) clause 'unless it is otherwise provided' refers to the date of effectivity and not to the requirement of publication itself, which cannot in any event be omitted. This clause does not mean that the legislator may make the law effective immediately upon approval, or on any other date without its previous publication/ 'Publication is indispensable in every case, but the legislature may in its discretion provide that the usual fifteen-day period shall be shortened or extended. x x x' Inasmuch as R.A. 6965 has no specific date for its effectivity and neither can it become effective upon its approval notwithstanding its express statement, following Article 2 of the Civil Code and the doctrine enunciated in Tanada, supra, R.A. 6965 took effect fifteen days after September 20, 1990, or specifically, on October 5, 1990." Accordingly, the Court rules that Rep. Act 7167 took effect on 30 January 1992, which is after fifteen (15) days following its publication on 14 January 1992 in the "Malaya." Coming now to the second issue, the Court is of the considered view that Rep. Act 7167 should cover or extend to compen452

452 SUPREME COURT REPORTS ANNOTATED Umali vs, Estanislao sation income earned or received during calendar year 1991. Sec. 29, par. (L), Item No. 4 of the National Internal Revenue Code, as amended, provides: "Upon the recommendation of the Secretary of Finance, the President shall automatically adjust not more often than once every three years, the personal and additional exemptions taking into account, among others, the movement in consumer price indices, levels of minimum wages, and bare subsistence levels." As the personal and additional exemptions of individual taxpayers were last adjusted in 1986, the President, upon the recommendation of the Secretary of Finance, could have adjusted the personal and additional exemptions in 1989 by increasing the same even without any legislation providing for such adjustment. But the President did not.

However, House Bill 28970, which was subsequently enacted by Congress as Rep. Act 7167, was introduced in the House of Representatives in 1989 although its passage was delayed and it did not become effective law until 30 January 1992. A perusal, however, of the sponsorship remarks of Congressman Hernando B. Perez, Chairman of the House Committee on Ways and Means, on House Bill 28970, provides an indication of the intent of Congress in enacting Rep. Act 7167. The pertinent legislative journal contains the following. "At the outset, Mr. Perez explained that the Bill Provides for increased personal additional exemptions to individuals in view of the higher standard of living. "The Bill, he stated, limits the amount of income of individuals subject to income tax to enable them to spend for basic necessities and have more disposable income. xxx xxx xxx

"Mr. Perez added that inflation has raised the basic necessities and that it had been three years since the last exemption adjustment in 1986. xxx xxx xxx

"Subsequently, Mr. Perez stressed the necessity of passing the measure to mitigate the effects of the current inflation and of the implementation of the salary standardization law. Stating that it is imperative for the government to take measures to ease the burden of the individual income tax filers, Mr. Perez then cited specific ex453

VOL. 209, MAY 29, 1992 453 Umali vs. Estanislao amples of how the measure can help assuage the burden to the taxpayers. "He then reiterated that the increase in the prices of commodities has eroded the purchasing power of the peso despite the recent salary increases and emphasized that the Bill will serve to compensate the adverse effects of inflation on the taxpayers. x x x." (Journal of the House of Representatives, May 23, 1990, pp. 32-33). It will also be observed that Rep. Act 7167 speaks of the adjustments that it provides for, as adjustments "to the poverty threshold level." Certainly, "the poverty threshold level" is the poverty threshold level at the time Rep. Act 7167 was enacted by Congress, not poverty threshold levels in futuro, at which time there may be need of further adjustments in personal exemptions, Moreover, the Court can not lose sight of the fact that these personal and additional exemptions are fixed amounts to which an individual

taxpayer is entitled, as a means to cushion the devastating effects of high prices and a depreciated purchasing power of the currency. In the end, it is the lowerincome and the middle-income groups of taxpayers (not the high-income taxpayers) who stand to benefit most from the increase of personal and additional exemptions provided for by Rep. Act 7167. To that extent, the act is a social legislation intended to alleviate in part the present economic plight of the lower income taxpayers. It is intended to remedy the inadequacy of the heretofore existing personal and additional exemptions for individual taxpayers. And then, Rep. Act 7167 says that the increased personal exemptions that it provides for shall be available thenceforth, that is, after Rep. Act 7167 shall have become effective. In other words, these exemptions are available upon the filing of personal income tax returns which is, under the National Internal Revenue Code, done not later than the 15th day of April after the end of a calendar year. Thus, under Rep. Act 7167, which became effective, as aforestated, on 30 January 1992, the increased exemptions are literally available on or before 15 April 1992 (though not before 30 January 1992). But these increased exemptions can be available on 15 April 1992 only in respect of compensation income earned or received during the calendar year 1991. 454

454 SUPREME COURT REPORTS ANNOTATED Umali vs. Estanislao The personal exemptions as increased by Rep. Act 7167 cannot be regarded as available in respect of compensation income received during the 1990 calendar year; the tax due in respect of said income had already accrued, and been presumably paid, by 15 April 1991 and by 15 July 1991, at which time Rep. Act 7167 had not been enacted. To make Rep. Act 7167 refer back to income received during 1990 would require language explicitly retroactive in purport and effect, language that would have to authorize the payment of refunds of taxes paid on 15 April 1991 and 15 July 1991: such language is simply not found in Rep. Act 7167. The personal exemptions as increased by Rep. Act 7167 cannot be regarded as available only in respect of compensation income received during 1992, as the implementing Revenue Regulations No. 1-92 purport to provide. Revenue Regulations No. 1-92 would in effect postpone the availability of the increased exemptions to 1 January-15 April 1993, and thus literally defer the effectivity of Rep. Act 7167 to 1 January 1993. Thus, the implementing regulations collide frontally with Section 3 of Rep, Act 7167 which states that the statute "shall take effect upon its approval." The objective of the Secretary of Finance and the Commissioner of Internal Revenue in postponing through Revenue Regulations No. 1-92 the legal effectivity of Rep. Act 7167 is, of course, entirely understandableto defer to 1993 the reduction of governmental tax revenues which irresistibly follows from the application of Rep. Act 7167.

But the law-making authority has spoken and the Court can not refuse to apply the law-maker's words. Whether or not the government can afford the drop in tax revenues resulting from such increased exemptions was for Congress (not this Court) to decide. WHEREFORE, Sections 1, 3 and 5 of Revenue Regulations No. 1-92 which provide that the regulations shall take effect on compensation income earned or received from 1 January 1992 are hereby SET ASIDE. They should take effect on compensation income earned or received from 1 January 1991. Since this decision is promulgated after 15 April 1992, the individual taxpayers entitled to the increased exemptions on compensation income earned during calendar year 1991 who may have filed their income tax returns on or before 15 April 455

VOL. 209, MAY 29, 1992 455 Umali vs. Estanislao 1992 (later extended to 24 April 1992) without the benefit of such increased exemptions, are entitled to the corresponding tax refunds and/or credits, and respondents are ordered to effect such refunds and/or credits. No costs. SO ORDERED. Narvasa (C.J.), Gutierrez, Jr., Feliciano, Bidin, Grio-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ., concur. Cruz, J., See concurrence. Paras, J., See dissenting and concurring. PARAS, J., Concurring and Dissenting:

I wish to concur with the majority opinion penned in this case by Justice Teodoro Padilla, because I believe that the tax exemptions referred to in the law should be effective already with respect to the income earned for the year 1991. After all, even if We say that the law became effective only in 1992, still this can refer only to the income obtained in 1991 since after all, what should be filed in 1992 is the income tax return of the income earned in 1991. However, I wish to dissent from the part of the decision which affirms the obiter dictum enunciated in the case of Tanada vs. Tuvera (146 SCRA 446,452) to the effect that a law becomes effective not on the date expressly provided for in said law, but on the date after fifteen (15) days from the publication in the Official Gazette or any national

newspaper of general circulation. I say obiter dictum because the doctrine mentioned is not the actual issue in the case of Tanada vs. Tuvera (supra). In that case, several presidential decrees of President Marcos were issued, but they were never published in the Official Gazette or in any national newspaper of general circulation. The real issue therefore in said case was whether or not said presidential decrees ever became effective. The Court ruled with respect to this issue (and not any other issuesince there was no other issue whatsoever), that said presidential decrees never became effective. In other words, the ratio decidendi in that case was the ruling that without publication, there can be 456

456 SUPREME COURT REPORTS ANNOTATED Umali vs. Estanislao no effectivity. Thus, the statement as to which should be applied"after fifteen (15) days from publication". or "unless otherwise provided by law" (Art. 2, Civil Code) was mere obiter. The subsequent ruling in the resolution dated June 26,1991 in Caltex, Inc. vs. Com. of Internal Revenue cannot likewise apply because it was based on the aforesaid obiter in Tanada v. Tuvera (supra). In the instant tax exemptions case, the law says effective upon approval, therefore, since this law was approved by the President in December, 1991, its subsequent publication in the January 1992 issue of the Civil Code is actually immaterial. Art. 2 of the Civil Code which states: "Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided, This Code shall take effect one year after such publication." It is very clear and needs no interpretation or construction. CRUZ, J., Concurring:

As the ponente of Tanada v. Tuvera, 146 SCRA 446,1 should like to make these brief observations on my brother Paras's separate opinion. He says that "the ratio decidendi in that case was the ruling that without publication, there can be no effectivity." Yet, while accepting this, he contends that, pursuant to its terms, R.A. 7167 became effective upon approval (i.e., even without publication). He adds that "since this law was approved by the President in December, 1991, its subsequent publication in the January 1992 issue of the Civil Code is actually immaterial." I confess I am profoundly bemused. Revenue Regulations set aside.

Note.Rule is settled that laws granting exemption from tax are construed strictessimi juris against the taxpayer and liberally construed of the taxing power (Commissioner of lnter-nal Revenue vs. Mitsubishi Metal Corporation, 181 SCRA 214). o0o

457 [Umali vs. Estanislao, 209 SCRA 446(1992)]

VOL. 208, APRIL 15, 1992 133

Bengzon vs. Drilon

G.R. No. 103524. April 15, 1992.* CESAR BENGZON, QUERUBE MAKALINTAL, LINO M. PATAJO, JOSE LEUTERIO, ET AL., petitioners, vs. HON. FRANKLIN N. DRILON in his capacity as Executive Secretary; HON. GUILLERMO CARAGUE in his capacity as Secretary of Department of Budget and Management, and HON. ROSALINA CAJUCOM in her capacity as National Treasurer, respondents. Adm. Matter No. 91-8-225-CA. April 15, 1992.* REQUEST OF RETIRED JUSTICES MANUEL P. BARCELONA, JUAN P. ENRIQUEZ, JUAN O. REYES, JR., and GUARDSON R. LOOD FOR READJUSTMENT OF THEIR MONTHLY PENSION. Constitutional Law; Separation of powers; Under the principle of separation of powers, neither Congress, the President, nor the Judiciary may encroach on fields allocated to the other branches of government.It cannot be overstressed that in a constitutional government such as ours, the rule of law must prevail. The Constitution is the basic and paramount law to which all other laws must conform and to which all persons, including the highest official of this land, must defer. From this cardinal postulate, it follows that the three branches of government must discharge their respective functions within the limits of authority conferred by the Constitution. Under the principle of separation of powers, neither Congress, the President, nor the Judiciary may encroach on fields allocated to the other branches of government. The legislature is generally limited to the enactment of laws, the executive to the enforcement of laws and the judiciary to their interpretation and application to cases and controversies. Same; Same; Veto; The act of the Executive in vetoing the particular provisions is an exercise of a constitutionally vested power; The veto power is not absolute.The act of the Executive in vetoing the particular provisions is an exercise of a constitutionally vested power. But even as the Constitution grants the power, it also provides limitations to its exercise. The veto power is not absolute. _____________

* EN BANC. 134

134

SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon Same; Same; Same; The power to disapprove any item or items in an appropriate bill does not grant the authority to veto a part of an item and to approve the remaining portion of the same item.The Constitution provides that only a particular item or items may be vetoed. The power to disapprove any item or items in an appropriate bill does not grant the authority to veto a part of an item and to approve the remaining portion of the same item. Same; Same; Same; The President cannot set aside or reverse a final and executory judgment of this Court through the exercise of the veto power.We need no lengthy justifications or citations of authorities to declare that no President may veto the provisions of a law enacted thirty-five (35) years before his or her terms of office. Neither may the President set aside or reverse a final and executory judgment of this Court through the exercise of the veto power. Same; Same; Same; The Executive has no authority to set aside and overrule a decision of the Supreme Court.The challenged veto has far-reaching implications which the Court can not countenance as they undermine the principle of separation of powers. The Executive has no authority to set aside and overrule a decision of the Supreme Court. Same; Same; Same; The President has no power to enact or amend statutes promulgated by her predecessors much less to repeal existing laws.Neither may the veto power of the President be exercised as a means of repealing RA 1797. This is arrogating unto the Presidency legislative powers which are beyond its authority. The President has no power to enact or amend statutes promulgated by her predecessors much less to repeal existing laws. The Presidents power is merely to execute the laws as passed by Congress. Same; Retirement; Pension; Retired Justices have a vested right to the accrued pensions due them pursuant to RA 1797.Finally, it can not be denied that the retired Justices have a vested right to the accrued pensions due them pursuant to RA 1797. Same; Same; Same; Where a judge has complied with the statutory prerequisite for retirement with pay, his right to retire and draw salary becomes vested and may not thereafter be revoked or impaired.The right to a public pension is of statutory origin and statutes dealing with pensions have been enacted by practically all the states in the United States (State ex rel. Murray v. Riley, 44 Del. 505, 62 A2d 236), and presumably in most countries of the world. 135

VOL. 208, APRIL 15, 1992 135

Bengzon vs. Drilon Statutory provisions for the support of Judges or Justices on retirement are founded on services rendered to the state. Where a judge has complied with the statutory prerequisite for retirement with pay, his right to retire and draw salary becomes vested and may not, thereafter, be revoked or impaired. PETITION to review the constitutionality of the veto by the President of certain provisions of the General Appropriations Act for the Fiscal Year 1992.

The facts are stated in the opinion of the Court. Lino M. Patajo for petitioners. GUTIERREZ, JR., J.:

The issue in this petition is the constitutionality of the veto by the President of certain provisions in the General Appropriations Act for the Fiscal Year 1992 relating to the payment of the adjusted pensions of retired Justices of the Supreme Court and the Court of Appeals. The petitioners are retired Justices of the Supreme Court and Court of Appeals who are currently receiving monthly pensions under Republic Act No. 910 as amended by Republic Act No. 1797. They filed the instant petition on their own behalf and in representation of all other retired Justices of the Supreme Court and the Court of Appeals similarly situated. Named respondents are Hon. Franklin Drilon the Executive Secretary, Hon. Guillermo Carague as Secretary of the Department of Budget and Management, and Hon. Rosalina Cajucom, the Treasurer of the Philippines. The respondents are sued in their official capacities, being officials of the Executive Department involved in the implementation of the release of funds appropriated in the Annual Appropriations Law. We treat the Comments of the Office of the Solicitor General (OSG) as an Answer and decide the petition on its merits. The factual backdrop of this case is as follows: On June 20, 1953, Republic Act No. 910 was enacted to provide the retirement pensions of Justices of the Supreme Court and of the Court of Appeals who have rendered at least twenty (20) years service either in the Judiciary or in any other branch of the Government or in both, having attained the age of 136

136 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon seventy (70) years or who resign by reason of incapacity to discharge the duties of the office. The retired Justice shall receive during the residue of his natural life the salary which he was receiving at the time of his retirement or resignation. Republic Act No. 910 was amended by Republic Act No. 1797 (approved on June 21, 1957) which provided that: Sec. 3-A. In case the salary of Justices of the Supreme Court or of the Court of Appeals is increased or decreased, such increased or decreased salary shall, for purposes of this Act, be deemed to be the salary or the retirement pension which a Justice who as of June twelve, nineteen hundred fifty-four had ceased to be such to accept another position in the Government or who retired was receiving at the time of his cessation in office. Provided, that any benefits that have already accrued prior to such increase or decrease shall not be affected thereby. Identical retirement benefits were also given to the members of the Constitutional Commissions under Republic Act No. 1568, as amended by Republic Act No. 3595. On November 12, 1974, on the occasion of the Armed Forces Loyalty Day, President Marcos signed Presidential Decree 578 which extended similar retirement benefits to the members of the Armed Forces giving them also the automatic readjustment features of Republic Act No. 1797 and Republic Act No. 3595. Two months later, however President Marcos issued Presidential Decree 644 on January 25, 1975 repealing Section 3-A of Republic Act No. 1797 and Republic Act No. 3595 (amending Republic Act No. 1568 and Presidential Decree No. 578) which authorized the adjustment of the pension of the retired Justices of the Supreme Court, Court of Appeals, Chairman and members of the Constitutional Commissions and the officers and enlisted members of the Armed Forces to the prevailing rates of salaries. Significantly, under Presidential Decree 1638 the automatic readjustment of the retirement pension of officers and enlisted men was subsequently restored by President Marcos. A later decree Presidential Decree 1909 was also issued providing for the automatic readjustment of the pensions of members of the Armed Forces who have retired prior to September 10, 1979. While the adjustment of the retirement pensions for mem137

VOL. 208, APRIL 15, 1992

137 Bengzon vs. Drilon bers of the Armed Forces who number in the tens of thousands was restored, that of the retired Justices of the Supreme Court and Court of Appeals who are only a handful and fairly advanced in years, was not. Realizing the unfairness of the discrimination against the members of the Judiciary and the Constitutional Commissions, Congress approved in 1990 a bill for the reenactment of the repealed provisions of Republic Act No. 1797 and Republic Act No. 3595. Congress was under the impression that Presidential Decree 644 became law after it was published in the Official Gazette on April 7, 1977. In the explanatory note of House Bill No. 16297 and Senate Bill No. 740, the legislature saw the need to reenact Republic Act Nos. 1797 and 3595 to restore said retirement pensions and privileges of the retired Justices and members of the Constitutional Commissions in order to assure those serving in the Supreme Court, Court of Appeals and Constitutional Commissions adequate old age pensions even during the time when the purchasing power of the peso has been diminished substantially by worldwide recession or inflation. This is underscored by the fact that the petitioner retired Chief Justice, a retired Associate Justice of the Supreme Court and the retired Presiding Justice are presently receiving monthly pensions of P3,333.33, P2,666.66 and P2,333.33 respectively. President Aquino, however vetoed House Bill No. 16297 on July 11, 1990 on the ground that according to her it would erode the very foundation of the Governments collective effort to adhere faithfully to and enforce strictly the policy on standardization of compensation as articulated in Republic Act No. 6758 known as Compensation and Position Classification Act of 1989. She further said that the Government should not grant distinct privileges to select group of officials whose retirement benefits under existing laws already enjoy preferential treatment over those of the vast majority of our civil service servants. Prior to the instant petition, however, Retired Court of Appeals Justices Manuel P. Barcelona, Juan P. Enriquez, Juan O. Reyes, Jr. and Guardson R. Lood filed a letter/petition dated April 22, 1991 which we treated as Administrative Matter No. 91-8-225-CA. The petitioners asked this Court for a readjustment of their monthly pensions in accordance with Republic Act 138

138 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon

No. 1797. They reasoned out that Presidential Decree 644 repealing Republic Act No. 1797 did not become law as there was no valid publication pursuant to Taada v. Tuvera, (136 SCRA 27 [1985] and 146 SCRA 446 [1986]). Presidential Decree 644 promulgated on January 24, 1975 appeared for the first time only in the supplemental issue of the Official Gazette, (Vol. 74 No. 14) purportedly dated April 4, 1977 but published only on September 5, 1983. Since Presidential Decree 644 has no binding force and effect of law, it therefore did not repeal Republic Act No. 1797. In a Resolution dated November 28, 1991 the Court acted favorably on the request. The dispositive portion reads as follows: WHEREFORE, the requests of retired Justices Manuel P. Barcelona, Juan P. Enriquez, Juan O. Reyes and Guardson Lood are GRANTED. It is hereby AUTHORIZED that their monthly pensions be adjusted and paid on the basis of RA 1797 effective January 1, 1991 without prejudice to the payment of their pension differentials corresponding to the previous years upon the availability of funds for the purpose. Pursuant to the above resolution, Congress included in the General Appropriations Bill for Fiscal Year 1992 certain appropriations for the Judiciary intended for the payment of the adjusted pension rates due the retired Justices of the Supreme Court and Court of Appeals. The pertinent provisions in House Bill No. 34925 are as follows: XXVIII. THE JUDICIARY

A. Supreme Court of the Philippines and the Lower Courts. For general administration, administration of personnel benefits, supervision of courts, adjudication of constitutional questions appealed and other cases, operation and maintenance of the Judicial and Bar Council in the Supreme Court, and the adjudication of regional court cases, metropolitan court cases, municipal trial court cases in Cities, municipal circuit court cases, municipal court cases, Sharia district court cases and Sharia circuit court cases as indicated hereunder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P2,095,651,000 139

VOL. 208, APRIL 15, 1992 139 Bengzon vs. Drilon xxx xxx xxx

Special Provisions.

1. Augmentation of any Item in the Courts Appropriations. Any savings in the appropriation for the Supreme Court and the Lower Courts may be utilized by the Chief Justice of the Supreme Court to augment any item of the Courts appropriations for: (a) printing of decisions and publications of Philippine Reports; (b) commutable terminal leaves of Justices and other personnel of the Supreme Court and payment of adjusted pension rates to retired Justices entitled thereto pursuant to Administrative Matter No. 91-8-225-CA; (c) repair, maintenance, improvement, and other operating expenses of the courts books and periodicals; (d) purchase, maintenance and improvement of printing equipment; (e) necessary expenses for the employment of temporary employees, contractual and casual employees, for judicial administration; (f) maintenance and improvement of the Courts Electronic Data Processing (g) extraordinary expenses of the Chief Justice, attendance in international conferences and conduct of training programs; (h) commutable transportation and representation allowances and fringe benefits for Justices, Clerks of Court, Court Administrator, Chief of Offices and other Court personnel in accordance with the rates prescribed by law; and (i) compensation of attorneys-de-oficio: PROVIDED, that as mandated by LOI No. 489 any increases in salary and allowances shall be subject to the usual procedures and policies as provided for under P.D. No. 985 and other pertinent laws. (page 1071, General Appropriations Act, FY 1992; Emphasis supplied) xxx xxx xxx

4. Payment of Adjusted Pension Rates to Retired Justices. The amount herein appropriated for payment of pensions to retired judges and justices shall include the payment of pensions at the adjusted rates to retired justices of the Supreme Court entitled thereto pursuant to the ruling of the court in Administrative Matter No. 91-8-225-C.A. page 1071, General Appropriations Act, FY 1992). xxx xxx xxx

Activities and Purposes 1. General Administration and Support Services. a. General administrative services ....................... P43,515,000 b. Payment of retirement gratuity of national government officials and employees .................................................. P206,717,000 c.

Payment of terminal leave benefits to

140

140 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon

officials and employees entitled thereto ........... P55,316,000 d. Payment of pensions to retired judges and justices entitled thereto ..................... P22,500,000 (page 1071, General Appropriations Act, FY 1992) C. COURT OF APPEALS For general administration, administration of personnel benefits and the adjudication of appealed and other cases as indicated hereunder........................................................................

P114,615,000 Special Provisions.

1. Authority to Use Savings. Subject to the approval of the Chief Justice of the Supreme Court in accordance with Section 25 (5), Article VI of the Constitution of the Republic of the Philippines, the Presiding Justice may be authorized to use any savings in any item of the appropriation for the Court of Appeals for purposes of: (1) improving its compound and facilities; and (2) for augmenting any deficiency in any item of its appropriation including its extraordinary expenses and payment of adjusted pension rates to retired justices entitled thereto pursuant to Administrative Matter No. 91-8-225-C.A. (page 1079, General Appropriations Act, FY 1992; Emphasis supplied)

2. Payment of Adjusted Pension Rates to Retired Justices. The amount herein appropriated for payment of pensions to retired judges and justices shall include the payment of pensions at the adjusted rates to retired justices of the Court of Appeals entitled thereto pursuant to the Ruling of the Supreme Court in Administrative Matter No. 91-8-225-C.A. (page 1079 General Appropriations Act, FY 1992). XL. GENERAL FUND ADJUSTMENT

For general fund adjustment for operational and special requirements as indicated hereunder ........................................... P500,000,000 xxx xxx xxx

Special Provision 1. Use of the Fund. This fund shall be used for: xxx xxx xxx

1.3. Authorized overdrafts and/or valid unbooked obligations, including the payment of back salaries and related personnel benefits arising from decision of competent authority in141

VOL. 208, APRIL 15, 1992 141 Bengzon vs. Drilon cluding the Supreme Court decision in Administrative Matter No. 91-8-225-C.A. and COA decision in No. 1704. (page 1164, Gen. Appropriations Act, FY 1992; Emphasis supplied) On January 15, 1992, the President vetoed the underlined portions of Section 1 and the entire Section 4 of the Special Provisions for the Supreme Court of the Philippines and the Lower Courts (General Appropriations Act, FY 1992, page 1071) and the underlined portions of Section 1 and the entire Section 2, of the Special Provisions for the Court of Appeals (page 1079) and the underlined portions of Section 1.3 of Article XLV of the Special Provisions of the General Fund Adjustments (page 1164, General Appropriations Act, FY 1992). The reason given for the veto of said provisions is that the resolution of this Honorable Court in Administrative Matter No. 91-8-225-CA pursuant to which the foregoing appropriations for the payment of the retired justices of the Supreme Court and the Court of Appeals have been enacted effectively

nullified the veto of the President of House Bill No. 16297, the bill which provided for the automatic increase in the retirement pensions of the Justices of the Supreme Court and the Court of Appeals and chairmen of the Constitutional Commissions by reenacting Republic Act No. 1797 and Republic Act No. 3595. The Presidents veto of the aforesaid provisions was further justified by reiterating the earlier reasons for vetoing House Bill No. 16297; they would erode the very foundation of our collective effort to adhere faithfully to and enforce strictly the policy on standardization of compensation. We should not permit the grant of distinct privileges to select group of officials whose retirement pensions under existing laws already enjoy preferential treatment over those of the vast majority of our civil servants. Hence, the instant petition filed by the petitioners with the assertions that: 1) The subject veto is not an item veto; 2) The veto by the Executive is violative of the doctrine of separation of powers; 3) The veto deprives the retired Justices of their rights to the pensions due them; 4) The questioned veto impairs the Fiscal Autonomy 142

142 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon guaranteed by the Constitution. Raising similar grounds, the petitioners in AM-91-8-225-CA, brought to the attention of this Court that the veto constitutes no legal obstacle to the continued payment of the adjusted pensions pursuant to the Courts resolution. On February 14, 1992, the Court resolved to consolidate Administrative Matter No. 91-8-225-CA with G.R. No. 103524. The petitioners contentions are well-taken. I It cannot be overstressed that in a constitutional government such as ours, the rule of law must prevail. The Constitution is the basic and paramount law to which all other laws must conform and to which all persons, including the highest official of this land, must defer. From this cardinal postulate, it follows that the three branches of government must discharge their respective functions within the limits of authority conferred by the Constitution. Under the principle of separation of powers, neither Congress,

the President, nor the Judiciary may encroach on fields allocated to the other branches of government. The legislature is generally limited to the enactment of laws, the executive to the enforcement of laws and the judiciary to their interpretation and application to cases and controversies. The Constitution expressly confers on the judiciary the power to maintain inviolate what it decrees. As the guardian of the Constitution we cannot shirk the duty of seeing to it that the officers in each branch of government do not go beyond their constitutionally allocated boundaries and that the entire Government itself or any of its branches does not violate the basic liberties of the people. The essence of this judicial duty was emphatically explained by Justice Laurel in the leading case of Angara v. Electoral Commission, (63 Phil. 139 [1936]) to wit: The Constitution is a definition of the powers of government. Who is to determine the nature, scope and extent of such powers? The Constitution itself has provided for the instrumentality of the judiciary as the rational way. And when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority over the other department, it does not in reality nullify or invalidate an act of the legislature, but only asserts the solemn and sacred obligation 143

VOL. 208, APRIL 15, 1992 143 Bengzon vs. Drilon assigned to it by the Constitution to determine conflicting claims of authority under the Constitution and to establish for the parties in an actual controversy the rights which that instrument secures and guarantees to them. (Emphasis supplied) The act of the Executive in vetoing the particular provisions is an exercise of a constitutionally vested power. But even as the Constitution grants the power, it also provides limitations to its exercise. The veto power is not absolute. The pertinent provision of the Constitution reads: The President shall have the power to veto any particular item or items in an appropriation, revenue or tariff bill but the veto shall not affect the item or items to which he does not object. (Section 27(2), Article VI, Constitution) The OSG is correct when it states that the Executive must veto a bill in its entirety or not at all. He or she cannot act like an editor crossing out specific lines, provisions, or paragraphs in a bill that he or she dislikes. In the exercise of the veto power, it is generally all or nothing. However, when it comes to appropriation, revenue or tariff bills, the Administration needs the money to run the machinery of government and it can not veto the entire bill even if it may contain objectionable features. The

President is, therefore, compelled to approve into law the entire bill, including its undesirable parts. It is for this reason that the Constitution has wisely provided the item veto power to avoid inexpedient riders being attached to an indispensable appropriation or revenue measure. The Constitution provides that only a particular item or items may be vetoed. The power to disapprove any item or items in an appropriate bill does not grant the authority to veto a part of an item and to approve the remaining portion of the same item. (Gonzales v. Macaraig, Jr., 191 SCRA 452, 464 [1990]) We distinguish an item from a provision in the following manner: The terms item and provision in budgetary legislation and practice are concededly different. An item in a bill refers to the particulars, the details, the distinct and severable parts x x x of the bill (Bengzon, supra, at 916.) It is an indivisible sum of money dedicated to a stated 144

144 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon purpose (Commonwealth v. Dodson, 11 S.E., 2d 120, 124, 125, etc., 176 Va. 281). The United States Supreme Court, in the case of Bengzon v. Secretary of Justice (299 U.S. 410, 414, 57 Ct 252, 81 L. Ed., 312) declared that an item of an appropriation bill obviously means an item which in itself is a specific appropriation of money, not some general provision of law, which happens to be put into an appropriation bill. (id. at page 465) We regret having to state that misimpressions or unfortunately wrong advice must have been the basis of the disputed veto. The general fund adjustment is an item which appropriates P500,000,000.00 to enable the Government to meet certain unavoidable obligations which may have been inadequately funded by the specific items for the different branches, departments, bureaus, agencies, and offices of the government. The President did not veto this item. What were vetoed were methods or systems placed by Congress to insure that permanent and continuing obligations to certain officials would be paid when they fell due. An examination of the entire sections and the underlined portions of the law which were vetoed will readily show that portions of the item have been chopped up into vetoed and unvetoed parts. Less than all of an item has been vetoed. Moreover, the vetoed portions are not items. They are provisions. Thus, the augmentation of specific appropriations found inadequate to pay retirement payments, by transferring savings from other items of appropriation is a provision and not an item. It gives power to

the Chief Justice to transfer funds from one item to another. There is no specific appropriation of money involved. In the same manner, the provision which states that in compliance with decisions of the Supreme Court and the Commission on Audit, funds still undetermined in amount may be drawn from the general fund adjustment is not an item. It is the general fund adjustment itself which is the item. This was not touched. It was not vetoed. More ironic is the fact that misinformation led the Executive to believe that the items in the 1992 Appropriations Act were 145

VOL. 208, APRIL 15, 1992 145 Bengzon vs. Drilon being vetoed when, in fact, the veto struck something else. What were really vetoed are: (1) Republic Act No. 1797 enacted as early as June 21, 1957; and (2) The Resolution of the Supreme Court dated November 28, 1991 in Administrative Matter No. 91-8225-CA. We need no lengthy justifications or citations of authorities to declare that no President may veto the provisions of a law enacted thirty-five (35) years before his or her term of office. Neither may the President set aside or reverse a final and executory judgment of this Court through the exercise of the veto power. A few background facts may be reiterated to fully explain the unhappy situation. Republic Act No. 1797 provided for the adjustment of pensions of retired Justices which privilege was extended to retired members of Constitutional Commissions by Republic Act No. 3595. On January 25, 1975, President Marcos issued Presidential Decree No. 644 which repealed Republic Acts 1797 and 3595. Subsequently, automatic readjustment of pensions for retired Armed Forces officers and men was surreptitiously restored through Presidential Decree Nos. 1638 and 1909. It was the impression that Presidential Decree No. 644 had reduced the pensions of Justices and Constitutional Commissioners which led Congress to restore the repealed provisions through House Bill No. 16297 in 1990. When her finance and budget advisers gave the wrong information that the

questioned provisions in the 1992 General Appropriations Act were simply an attempt to overcome her earlier 1990 veto, she issued the veto now challenged in this petition. It turns out, however, that P.D. No. 644 never became valid law. If P.D. No. 644 was not law, it follows that Rep. Act No. 1797 was not repealed and continues to be effective up to the present. In the same way that it was enforced from 1957 to 1975, so should it be enforced today. House Bill No. 16297 was superfluous as it tried to restore benefits which were never taken away validly. The veto of House Bill No. 16297 in 1990 did not also produce any effect. Both were based on erroneous and non-existent premises. 146

146 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon From the foregoing discussion, it can be seen that when the President vetoed certain provisions of the 1992 General Appropriations Act, she was actually vetoing Republic Act No. 1797 which, of course, is beyond her power to accomplish. Presidential Decree No. 644 which purportedly repealed Republic Act No. 1797 never achieved that purpose because it was not properly published. It never became a law. The case of Taada v. Tuvera (136 SCRA 27 [1985] and 146 SCRA 446 [1986]) specifically requires that all laws shall immediately upon their approval or as soon thereafter as possible, be published in full in the Official Gazette, to become effective only after fifteen days from their publication, or on another date specified by the legislature, in accordance with Article 2 of the Civil Code. This was the Courts answer to the petition of Senator Lorenzo Taada and other opposition leaders who challenged the validity of Marcos decrees which, while never published, were being enforced. Secret decrees are anathema in a free society. In support of their request, the petitioners in Administrative Matter No. 91-8-225-CA secured a certification from Director Lucita C. Sanchez of the National Printing Office that the April 4, 1977 Supplement to the Official Gazette was published only on September 5, 1983 and officially released on September 29, 1983. On the issue of whether or not Presidential Decree 644 became law, the Court has already categorically spoken in a definitive ruling on the matter, to wit: xxx xxx xxx

PD 644 was promulgated by President Marcos on January 24, 1975, but was not immediately or soon thereafter published although preceding and subsequent decrees were duly published in the Official Gazette. It now appears that it was intended as a secret decree NOT FOR PUBLICATION as the notation on the face of the original copy thereof plainly indicated (Annex B). It is also clear that the decree was published in the back-dated Supplement only after it was challenged in the Taada Case as among the presidential decrees that had not become effective for lack of the required publication. The petition was filed on May 7, 1983, four months before the actual publication of the decree. It took more than eight years to publish the decree after its 147

VOL. 208, APRIL 15, 1992 147 Bengzon vs. Drilon promulgation in 1975. Moreover, the publication was made in bad faith insofar as it purported to show that it was done in 1977 when the now demonstrated fact is that the April 4, 1977 supplement was actually published and released only in September 1983. The belated publication was obviously intended to refute the petitioners claim in the Taada Case and to support the Solicitor Generals submission that the petition had become moot and academic. xxx xxx xxx xxx xxx xxx

We agree that PD 644 never became a law because it was not validly published and that, consequently, it did not have the effect of repealing RA 1797. The requesting justices (including Justice Lood, whose request for the upgrading of his pension was denied on January 15, 1991) are therefore entitled to be paid their monthly pensions on the basis of the latter measure, which remains unchanged to date. The Supreme Court has spoken and it has done so with finality, logically and rightly so as to assure stability in legal relations, and avoid confusion. (see Ver v. Quetullo, 163 SCRA 80 [1988]) Like other decisions of this Court, the ruling and principles set out in the Court resolution constitute binding precedent. (Bulig-Bulig Kita Kamaganak Association, et al. v. Sulpicio Lines, Inc. and Regional Trial Court, etc., G.R. 84750, 16 May 89, En Banc, Minute Resolution) The challenged veto has far-reaching implications which the Court can not countenance as they undermine the principle of separation of powers. The Executive has no authority to set aside and overrule a decision of the Supreme Court.

We must emphasize that the Supreme Court did not enact Rep. Act No. 1797. It is not within its powers to pass laws in the first place. Its duty is confined to interpreting or defining what the law is and whether or not it violates a provision of the Constitution. As early as 1953, Congress passed a law providing for retirement pensions to retired Justices of the Supreme Court and the Court of Appeals. This law was amended by Republic Act 1797 in 1957. Funds necessary to pay the retirement pensions under these statutes are deemed automatically appropriated every year. Thus, Congress included in the General Appropriations Act of 1992, provisions identifying funds and savings which may be 148

148 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon Court Resolution. As long as retirement laws remain in the statute book, there is an existing obligation on the part of the government to pay the adjusted pension rate pursuant to RA 1797 and AM-91-8-225CA. Neither may the veto power of the President be exercised as a means of repealing RA 1797. This is arrogating unto the Presidency legislative powers which are beyond its authority. The President has no power to enact or amend statutes promulgated by her predecessors much less to repeal existing laws. The Presidents power is merely to execute the laws as passed by Congress. II There is a matter of greater consequence arising from this petition. The attempt to use the veto power to set aside a Resolution of this Court and to deprive retirees of benefits given them by Rep. Act No. 1797 trenches upon the constitutional grant of fiscal autonomy to the Judiciary. Sec. 3 Art. VIII mandates that: Sec. 3. The Judiciary shall enjoy fiscal autonomy. Appropriations for the Judiciary may not be reduced by the legislature below the amount appropriated for the previous year and, after approval, shall be automatically and regularly released. We can not overstress the importance of and the need for an independent judiciary. The Court has on various past occasions explained the significance of judicial independence. In the case of De la Llana v. Alba (112 SCRA 294 [1982]), it ruled:

It is a cardinal rule of faith of our constitutional regime that it is the people who are endowed with rights, to secure which a government is instituted. Acting as it does through public officials, it has to grant them either expressly or implicitly certain powers. These they exercise not for their own benefit but for the body politic. x x x A public office is a public trust. That is more than a moral adjuration. It is a legal imperative. The law may vest in a public official certain rights. It does so to enable them to perform his functions and fulfill his responsibilities more efficiently. x x x It is an 149

VOL. 208, APRIL 15, 1992 149 Bengzon vs. Drilon added guarantee that justices and judges can administer justice undeterred by any fear of reprisal or untoward consequence. Their judgments then are even more likely to be inspired solely by their knowledge of the law and the dictates of their conscience, free from the corrupting influence of base or unworthy motives. The independence of which they are assured is impressed with a significance transcending that of a purely personal right. (At pp. 338-339) The exercise of the veto power in this case may be traced back to the efforts of the Department of Budget and Management (DBM) to ignore or overlook the plain mandate of the Constitution on fiscal autonomy. The OSG Comment reflects the same truncated view of the provision. We have repeatedly in the past few years called the attention of DBM that not only does it allocate less than one percent (1%) of the national budget annually for the 22,769 Justices, Judges, and court personnel all over the country but it also examines with a fine-toothed comb how we spend the funds appropriated by Congress based on DBM recommendations. The gist of our position papers and arguments before Congress is as follows: The DBM requires the Supreme Court, the Constitutional Commissions, and the Ombudsman to submit budget proposals in accordance with parameters it establishes. DBM evaluates the proposals, asks each agency to defend its proposals during DBM budget hearings, submits its own version of the proposals to Congress without informing the agency of major alterations and mutilations inflicted on their proposals, and expects each agency to defend in Congress proposals not of the agencys making. After the general appropriations bill is passed by Congress and signed into law by the President, the tight and officious control by DBM continues. For the release of appropriated funds, the Judiciary, Constitutional Commissions, and Ombudsman are instructed through guidelines, how to prepare Work and Financial Plans and requests for monthly allotments. The DBM evaluates and approves these plans

and requests and on the basis of its approval authorizes the release of allotments with corresponding notices of cash allocation. These notices specify the maximum withdrawals each month which the Supreme Court, the Commissions, and the Ombudsman may make from the servicing government bank. The above agencies are also required to submit to DBM monthly, quarterly, and year-end budget accounta150

150 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon bility reports to indicate their performance, physical and financial operations, and income. The DBM reserves to itself the power to review the accountability reports and, when importuned for needed funds, to release additional allotments to the agency. Since DBM always prunes the budget proposals to below subsistence levels and since emergency situations usually occur during the fiscal year, the Chief Justice, Chairmen of the Commissions, and Ombudsman are compelled to make pilgrimages to DBM for additional funds to tide their respective agencies over the emergency. What is fiscal autonomy? As envisioned in the Constitution, the fiscal autonomy enjoyed by the Judiciary, the Civil Service Commission, the Commission on Audit, the Commission on Elections, and the Office of the Ombudsman contemplates a guarantee of full flexibility to allocate and utilize their resources with the wisdom and dispatch that their needs require. It recognizes the power and authority to levy, assess and collect fees, fix rates of compensation not exceeding the highest rates authorized by law for compensation and pay plans of the government and allocate and disburse such sums as may be provided by law or prescribed by them in the course of the discharge of their functions. Fiscal autonomy means freedom from outside control. If the Supreme Court says it needs 100 typewriters but DBM rules we need only 10 typewriters and sends its recommendations to Congress without even informing us, the autonomy given by the Constitution becomes an empty and illusory platitude. The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence and flexibility needed in the discharge of their constitutional duties. The imposition of restrictions and constraints on the manner the independent constitutional offices allocate and utilize the funds appropriated for their operations is anathema to fiscal autonomy and violative not only of the express mandate of the Constitution but especially as regards the Supreme Court, of the independence and separation of powers upon which the entire fabric of our constitutional system is based. In the interest

of comity and cooperation, the Supreme Court, Constitutional Commissions, and the Ombudsman have so far limited their objections to constant reminders. We now agree with the petitioners that 151

VOL. 208, APRIL 15, 1992 151 Bengzon vs. Drilon this grant of autonomy should cease to be a meaningless provision. In the case at bar, the veto of these specific provisions in the General Appropriations Act is tantamount to dictating to the Judiciary how its funds should be utilized, which is clearly repugnant to fiscal autonomy. The freedom of the Chief Justice to make adjustments in the utilization of the funds appropriated for the expenditures of the judiciary, including the use of any savings from any particular item to cover deficits or shortages in other items of the judiciary is withheld. Pursuant to the Constitutional mandate, the Judiciary must enjoy freedom in the disposition of the funds allocated to it in the appropriations law. It knows its priorities just as it is aware of the fiscal restraints. The Chief Justice must be given a free hand on how to augment appropriations where augmentation is needed. Furthermore, in the case of Gonzales v. Macaraig, (191 SCRA 452 [1990]), the Court upheld the authority of the President and other key officials to augment any item or any appropriation from savings in the interest of expediency and efficiency. The Court stated that: There should be no question, therefore, that statutory authority has, in fact, been granted. And once given, the heads of the different branches of the Government and those of the Constitutional Commissions are afforded considerable flexibility in the use of public funds and resources (Demetria v. Alba, supra). The doctrine of separation of powers is in no way endangered because the transfer is made within a department (or branch of government) and not from one department (branch) to another. The Constitution, particularly Article VI Section 25(5) also provides: Sec. 25. (5) No law shall be passed authorizing any transfer of appropriations; however, the President, the President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations. 152

152

SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon In the instant case, the vetoed provisions which relate to the use of savings for augmenting items for the payment of the pension differentials, among others, are clearly in consonance with the abovestated pronouncements of the Court. The veto impairs the power of the Chief Justice to augment other items in the Judiciarys appropriation, in contravention of the constitutional provision on fiscal autonomy. III Finally, it can not be denied that the retired Justices have a vested right to the accrued pensions due them pursuant to RA 1797. The right to a public pension is of statutory origin and statutes dealing with pensions have been enacted by practically all the states in the United States (State ex rel. Murray v. Riley, 44 Del. 505, 62 A2d 236), and presumably in most countries of the world. Statutory provisions for the support of Judges or Justices on retirement are founded on services rendered to the state. Where a judge has complied with the statutory prerequisite for retirement with pay, his right to retire and draw salary becomes vested and may not thereafter, be revoked or impaired. (Gay v. Whitehurst 44 So ad 430) Thus, in the Philippines, a number of retirement laws have been enacted, the purpose of which is to entice competent men and women to enter the government service and to permit them to retire therefrom with relative security, not only those who have retained their vigor but, more so, those who have been incapacitated by illness or accident. (In re: Amount of the Monthly Pension of Judges and Justices Starting From the Sixth Year of their Retirement and After the Expiration of the Initial Five-year Period of Retirement, (190 SCRA 315 [1990]) As early as 1953, Rep. Act No. 910 was enacted to grant pensions to retired Justices of the Supreme Court and Court of Appeals. This was amended by RA 1797 which provided for an automatic adjustment of the pension rates. Through the years, laws were enacted and jurisprudence expounded to afford retirees better benefits. P.D. No. 1438, for one, was promulgated on June 10, 1978 153

VOL. 208, APRIL 15, 1992 153 Bengzon vs. Drilon

amending RA 910 providing that the lump sum of 5 years gratuity to which the retired Justices of the Supreme Court and Court of Appeals were entitled was to be computed on the basis of the highest monthly aggregate of transportation, living and representation allowances each Justice was receiving on the date of his resignation. The Supreme Court in a resolution dated October 4, 1990, stated that this law on gratuities covers the monthly pensions of retired Judges and Justices which should include the highest monthly aggregate of transportation, living and representation allowances the retiree was receiving on the date of retirement. (In Re: Amount of the Monthly Pension of Judges and Justices, supra) The rationale behind the veto which implies that Justices and Constitutional officers are unduly favored is, again, a misimpression. Immediately, we can state that retired Armed Forces officers and enlisted men number in the tens of thousands while retired Justices are so few they can be immediately identified. Justices retire at age 70 while military men retire at a much younger agesome retired Generals left the military at age 50 or earlier. Yet, the benefits in Rep. Act No. 1797 are made to apply equally to both groups. Any ideas arising from an alleged violation of the equal protection clause should first be directed to retirees in the military or civil service where the reason for the retirement provision is not based on indubitable and constitutionally sanctioned grounds, not to a handful of retired Justices whose retirement pensions are founded on constitutional reasons. The provisions regarding retirement pensions of Justices arise from the package of protections given by the Constitution to guarantee and preserve the independence of the Judiciary. The Constitution expressly vests the power of judicial review in this Court. Any institution given the power to declare, in proper cases, that acts of both the President and Congress are unconstitutional needs a high degree of independence in the exercise of its functions. Our jurisdiction may not be reduced by Congress. Neither may it be increased without our advice and concurrence. Justices may not be removed until they reach age 70 except through impeachment. All courts and court personnel are under the administrative supervision of the Supreme Court. 154

154 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon The President may not appoint any Judge or Justice unless he or she has been nominated by the Judicial and Bar Council which, in turn, is under the Supreme Courts supervision. Our salaries may not be decreased during our continuance in office. We cannot be designated to any agency performing administrative or quasi-judicial functions. We are specifically given fiscal autonomy. The Judiciary is not

only independent of, but also co-equal and coordinate with the Executive and Legislative Departments. (Article VIII and Section 30, Article VI, Constitution) Any argument which seeks to remove special privileges given by law to former Justices of this Court on the ground that there should be no grant of distinct privileges or preferential treatment to retired Justices ignores these provisions of the Constitution and, in effect, asks that these Constitutional provisions on special protections for the Judiciary be repealed. The integrity of our entire constitutional system is premised to a large extent on the independence of the Judiciary. All these provisions are intended to preserve that independence. So are the laws on retirement benefits of Justices. One last point. The Office of the Solicitor General argues that: xxx Moreover, by granting these benefits to retired Justices implies that public funds, raised from taxes on other citizens, will be paid off to select individuals who are already leading private lives and have ceased performing public service. Said the United States Supreme Court, speaking through Mr. Justice Miller: To lay with one hand the power of the government on the property of the citizen, and with the other to bestow upon favored individuals . . . is nonetheless a robbery because it is done under the forms of law x x x. (Law Association v. Topeka, 20 Wall. 655) (Comment, p. 16) The above arguments are not only specious, impolite and offensive; they certainly are unbecoming of an Office whose top officials are supposed to be, under their charter, learned in the law. Chief Justice Cesar Bengzon and Chief Justice Querube Makalintal, Justices J.B.L. Reyes, Cecilia Muoz Palma, Efren Plana, Vicente Abad Santos, and, in fact, all retired Justices of the Supreme Court and the Court of Appeals may no longer be 155

VOL. 208, APRIL 15, 1992 155 Bengzon vs. Drilon in the active service. Still, the Solicitor General and all lawyers under him who represent the Government before the two courts and whose predecessors themselves appeared before these retirees, should show some continuing esteem and good manners toward these Justices who are now in the evening of their years. All that the retirees ask is to be given the benefits granted by law. To characterize them as engaging in robbery is intemperate, abrasive, and disrespectful more so because the argument is unfounded.

If the Comment is characteristic of OSG pleadings today, then we are sorry to state that the then quality of research in that institution has severely deteriorated. In the first place, the citation of the case is wrong. The title is not LAW Association v. Topeka but Citizens Savings and Loan Association of Cleveland, Ohio v. Topeka City, (20 Wall. 655; 87 U.S. 729; 22 Law. Ed. 455 [1874]. Second, the case involves the validity of a statute authorizing cities and counties to issue bonds for the purpose of building bridges, waterpower, and other public works to aid private railroads improve their services. The law was declared void on the ground that the right of a municipality to impose a tax cannot be used for private interests. The case was decided in 1874. The world has turned over more than 40,000 times since that ancient period. Public use is now equated with public interest. Public money may now be used for slum clearance, low-cost housing, squatter resettlement, urban and agrarian reform where only private persons are the immediate beneficiaries. What was robbery in 1874 is now called social justice. There is nothing about retirement benefits in the cited case. Obviously, the OSG lawyers cited from an old textbook or encyclopedia which could not even spell loan correctly. Good lawyers are expected to go to primary sources and to use only relevant citations. The Court has been deluged with letters and petitions by former colleagues in the Judiciary requesting adjustments in their pensions just so they would be able to cope with the everyday living expenses not to mention the high cost of medical bills that old age entails. As Justice Cruz aptly stated in Teodoro J. Santiago v. COA, (G.R. No. 92284, July 12, 1991): 156

156 SUPREME COURT REPORTS ANNOTATED Bengzon vs. Drilon Retirement laws should be interpreted liberally in favor of the retiree because their intention is to provide for his sustenance, and hopefully even comfort, when he no longer has the stamina to continue earning his livelihood. After devoting the best years of his life to the public service, he deserves the appreciation of a grateful government as best concretely expressed in a generous retirement gratuity commensurate with the value and length of his services. That generosity is the least he should expect now that his work is done and his youth is gone. Even as he feels the weariness in his bones and glimpses the approach of the lengthening shadows, he should be able to luxuriate in the thought that he did his task well, and was rewarded for it. For as long as these retired Justices are entitled under laws which continue to be effective, the government can not deprive them of their vested right to the payment of their pensions.

WHEREFORE, the petition is hereby GRANTED. The questioned veto is SET ASIDE as illegal and unconstitutional. The vetoed provisions of the 1992 Appropriations Act are declared valid and subsisting. The respondents are ordered to automatically and regularly release pursuant to the grant of fiscal autonomy the funds appropriated for the subject pensions as well as the other appropriations for the Judiciary. The resolution in Administrative Matter No. 91-8-225-CA dated November 28, 1991 is likewise ordered to be implemented as promulgated. SO ORDERED. Narvasa (C.J.), Melencio-Herrera, Cruz, Paras, Feliciano, Padilla, Bidin, Grio-Aquino, Medialdea, Regalado, Davide, Jr., Romero and Nocon, JJ., concur. Bellosillo, J., On leave. Petition granted. Note.Retirement laws should be liberally construed and administered in favor of persons intended to be benefitted. (In re: Monthly Pension of Judges and Justices, 190 SCRA 315) o0o

157 [Bengzon vs. Drilon, 208 SCRA 133(1992)]

G.R. No. 147387. December 10, 2003.*

FARIAS v. THE EXECUTIVE SECRETARY

RODOLFO C. FARIAS, MANUEL M. GARCIA, FRANCIS G. ESCUDERO, and AGAPITO A. AQUINO, AS MEMBERS OF THE HOUSE OF REPRESENTATIVES AND ALSO AS TAXPAYERS, IN THEIR OWN BEHALF AND IN REPRESENTATION OF THE MEMBERS OF THE MINORITY IN THE HOUSE OF REPRESENTATIVES, petitioners, vs. THE EXECUTIVE SECRETARY, COMMISSION ON ELECTIONS, HON. FELICIANO R. BELMONTE, JR., SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT, SECRETARY OF THE SENATE, AND SECRETARY GENERAL OF THE HOUSE OF REPRESENTATIVES, respondents. G.R. No. 152161. December 10, 2003.* CONG. GERRY A. SALAPUDDIN, petitioner, vs. COMMISSION ON ELECTIONS, respondent. Judicial Review; Locus Standi; The rationale for requiring a party who challenges the constitutionality of a statute to allege such a personal stake in the outcome of the controversy is to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions.The petitions were filed by the petitioners in their capacities as members of the House of Representatives, and as taxpayers and registered voters. Generally, a party 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. The rationale for requiring a party who challenges the constitutionality of a statute to allege _______________

* EN BANC. 504

504 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary such a personal stake in the outcome of the controversy is to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions. Same; Same; The principal issue posed by the petitions, i.e., whether Section 67 of the Omnibus Election Code, which the Court had declared in Dimaporo v. Mitra, Jr., 202 SCRA 779 (1991), as deriving its

existence from the constitutional provision on accountability of public officers, has been validly repealed by Section 14 of Republic Act No. 9006, is one of overarching significance that justifies the Court's adoption of a liberal stance vis-a-vis the procedural matter on standing.Certainly, the principal issue posed by the petitions, i.e., whether Section 67 of the Omnibus Election Code, which this Court had declared in Dimaporo as deriving its existence from the constitutional provision on accountability of public officers, has been validly repealed by Section 14 of Rep. Act No. 9006, is one of overarching significance that justifies this Courts adoption of a liberal stance vis--vis the procedural matter on standing. Moreover, with the national elections barely seven months away, it behooves the Court to confront the issue now and resolve the same forthrightly. The following pronouncement of the Court is quite apropos: . . . All await the decision of this Court on the constitutional question. Considering, therefore, the importance which the instant case has assumed and to prevent multiplicity of suits, strong reasons of public policy demand that [its] constitutionality . . . be now resolved. It may likewise be added that the exceptional character of the situation that confronts us, the paramount public interest, and the undeniable necessity for a ruling, the national elections being barely six months away, reinforce our stand. Same; Statutory Construction; The presumption is that the legislature intended to enact a valid, sensible and just law and one which operates no further than may be necessary to effectuate the specific purpose of the law.Every statute is presumed valid. The presumption is that the legislature intended to enact a valid, sensible and just law and one which operates no further than may be necessary to effectuate the specific purpose of the law. It is equally well-established, however, that 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. And where the acts of the other branches of government run afoul of the Constitution, it is the judiciarys solemn and sacred duty to nullify the same. Statutes; Riders; The proscription in Section 26(1), Article VI of the Constitution requiring every bill passed to embrace only one subject which shall be expressed in the title thereof is aimed against the evils of the so-called omnibus bills and log-rolling legislation as well as surreptitious 505

VOL. 417, DECEMBER 10, 2003 505 Farias vs. The Executive Secretary and/or unconsidered encroaches; Constitutional provisions relating to the subject matter and titles of statutes should not be so narrowly construed as to cripple or impede the power of legislation.The proscription is aimed against the evils of the so-called omnibus bills and log-rolling legislation as well as surreptitious and/or unconsidered encroaches. The provision merely calls for all parts of an act relating

to its subject finding expression in its title. To determine whether there has been compliance with the constitutional requirement that the subject of an act shall be expressed in its title, the Court laid down the rule thatConstitutional provisions relating to the subject matter and titles of statutes should not be so narrowly construed as to cripple or impede the power of legislation. The requirement that the subject of an act shall be expressed in its title should receive a reasonable and not a technical construction. It is sufficient if the title be comprehensive enough reasonably to include the general object which a statute seeks to effect, without expressing each and every end and means necessary or convenient for the accomplishing of that object. Mere details need not be set forth. The title need not be an abstract or index of the Act. Same; Same; An act 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.The Court is convinced that the title and the objectives of Rep. Act No. 9006 are comprehensive enough to include the repeal of Section 67 of the Omnibus Election Code within its contemplation. To require that the said repeal of Section 67 of the Code be expressed in the title is to insist that the title be a complete index of its content. The purported dissimilarity of Section 67 of the Omnibus Election Code, which imposes a limitation on elective officials who run for an office other than the one they are holding, to the other provisions of Rep. Act No. 9006, which deal with the lifting of the ban on the use of media for election propaganda, does not violate the one subject-one title rule. This Court has held that an act 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. Same; Same; Separation of Powers; Policy matters are not the concern of the Supreme Court government policy is within the exclusive dominion of the political branches of the government.The legislators considered Section 67 of the Omnibus Election Code as a form of harassment or discrimination that had to be done away with and repealed. The executive department found cause with Congress when the President of the 506

SUPREME COURT REPORTS ANNOTATED 506 Farias vs. The Executive Secretary Philippines signed the measure into law. For sure, some sectors of society and in government may believe that the repeal of Section 67 is bad policy as it would encourage political adventurism. But policy matters are not the concern of the Court. Government policy is within the exclusive dominion of the

political branches of the government. It is not for this Court to look into the wisdom or propriety of legislative determination. Indeed, whether an enactment is wise or unwise, whether it is based on sound economic theory, whether it is the best means to achieve the desired results, whether, in short, the legislative discretion within its prescribed limits should be exercised in a particular manner are matters for the judgment of the legislature, and the serious conflict of opinions does not suffice to bring them within the range of judicial cognizance. Same; Same; Same; Congress is not precluded from repealing Section 67 of Omnibus Election Code by the ruling in Dimaporo v. Mitra upholding the validity of the provision and by its pronouncement in the same case that the provision has a laudable purpose.Congress is not precluded from repealing Section 67 by the ruling of the Court in Dimaporo v. Mitra upholding the validity of the provision and by its pronouncement in the same case that the provision has a laudable purpose. Over time, Congress may find it imperative to repeal the law on its belief that the election process is thereby enhanced and the paramount objective of election lawsthe fair, honest and orderly election of truly deserving members of Congressis achieved. Same; Same; The avowed purpose of the constitutional directive that the subject of a bill should be embraced in its title page is to apprise the legislators of the purposes, the nature and scope of its provisions, and prevent the enactment into law of matters which have not received the notice, action and study of the legislators and the public; It cannot be claimed that the legislators were not apprised of the repeal of Section 67 of the Omnibus Election Code as the same was amply and comprehensively deliberated upon by members of the House of Representatives.Moreover, the avowed purpose of the constitutional directive that the subject of a bill should be embraced in its title is to apprise the legislators of the purposes, the nature and scope of its provisions, and prevent the enactment into law of matters which have not received the notice, action and study of the legislators and the public. In this case, it cannot be claimed that the legislators were not apprised of the repeal of Section 67 of the Omnibus Election Code as the same was amply and comprehensively deliberated upon by the members of the House. In fact, the petitioners, as members of the House of Representatives, expressed their reservations regarding its validity prior to casting their votes. Undoubtedly, the legislators were aware of the existence of the provision repealing Section 67 of the Omnibus Election Code. 507

VOL. 417, DECEMBER 10, 2003 507 Farias vs. The Executive Secretary Equal Protection Clause; Public Officers; Administrative Law; Substantial distinctions clearly exist between elective officials and appointive officials.Substantial distinctions clearly exist between elective officials and appointive officials. The former occupy their office by virtue of the mandate of the

electorate. They are elected to an office for a definite term and may be removed therefrom only upon stringent conditions. On the other hand, appointive officials hold their office by virtue of their designation thereto by an appointing authority. Some appointive officials hold their office in a permanent capacity and are entitled to security of tenure while others serve at the pleasure of the appointing authority. Another substantial distinction between the two sets of officials is that under Section 55, Chapter 8, Title I, Subsection A. Civil Service Commission, Book V of the Administrative Code of 1987 (Executive Order No. 292), appointive officials, as officers and employees in the civil service, are strictly prohibited from engaging in any partisan political activity or take part in any election except to vote. Under the same provision, elective officials, or officers or employees holding political offices, are obviously expressly allowed to take part in political and electoral activities. Statutes; Enrolled Bill Doctrine; Words and Phrases; Under the enrolled bill doctrine, the signing of a bill by the Speaker of the House and the Senate President and the certification of the Secretaries of both Houses of Congress that it was passed are conclusive of its due enactment.The petitioners, thus, urge the Court to go behind the enrolled copy of the bill. The Court is not persuaded. Under the enrolled bill doctrine, the signing of a bill by the Speaker of the House and the Senate President and the certification of the Secretaries of both Houses of Congress that it was passed are conclusive of its due enactment. A review of cases reveals the Courts consistent adherence to the rule. The Court finds no reason to deviate from the salutary rule in this case where the irregularities alleged by the petitioners mostly involved the internal rules of Congress, e.g., creation of the 2nd or 3rd Bicameral Conference Committee by the House. This Court is not the proper forum for the enforcement of these internal rules of Congress, whether House or Senate. Parliamentary rules are merely procedural and with their observance the courts have no concern. Whatever doubts there may be as to the formal validity of Rep. Act No 9006 must be resolved in its favor. The Court reiterates its ruling in Arroyo v. De Venecia, viz.: But the cases, both here and abroad, in varying forms of expression, all deny to the courts the power to inquire into allegations that, in enacting a law, a House of Congress failed to comply with its own rules, in the absence of showing that there was a violation of a constitutional provision or the rights of private individuals. In Osmea v. Pendatun, it was held: At any rate, courts have declared that the rules adopted by deliberative bodies are subject to revocation, modification or waiver at the pleasure of the body adopting them. And it has been said that Parliamentary rules are merely procedural, and with their observance, the 508

508 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary

courts have no concern. They may be waived or disregarded by the legislative body. Consequently, mere failure to conform to parliamentary usage will not invalidate the action (taken by a deliberative body) when the requisite number of members have agreed to a particular measure. Same; Effectivity Clauses; An effectivity clause which provides that the law shall take immediately upon its approval is defective, but it does not render the entire law invalidthe law takes effect fifteen days after its publication in the Official Gazzette or a newspaper of general circulation.Finally, the Effectivity clause (Section 16) of Rep. Act No. 9006 which provides that it shall take effect immediately upon its approval, is defective. However, the same does not render the entire law invalid. In Taada v. Tuvera, this Court laid down the rule: . . . the clause unless it is otherwise provided refers to the date of effectivity and not to the requirement of publication itself, which cannot in any event be omitted. This clause does not mean that the legislator may make the law effective immediately upon approval, or on any other date without its previous publication. Publication is indispensable in every case, but the legislature may in its discretion provide that the usual fifteen-period shall be shortened or extended . . . . Following Article 2 of the Civil Code and the doctrine enunciated in Taada, Rep. Act No. 9006 notwithstanding its express statement, took effect fifteen days after its publication in the Official Gazette or a newspaper of general circulation. SPECIAL CIVIL ACTIONS in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court. Rodolfo Farias for petitioners in G.R. No. 147387. Eduardo F. Sanson for petitioner in G.R. No. 152161. CALLEJO, SR., J.:

Before the Court are two Petitions under Rule 65 of the Rules of Court, as amended, seeking to declare as unconstitutional Section 14 of Republic Act No. 9006 (The Fair Election Act), insofar as it expressly repeals Section 67 of Batas Pambansa Blg. 881 (The Omnibus Election Code) which provides: SEC. 67. Candidates holding elective office.Any elective official, whether national or local, running for any office other than the one which he is holding in a permanent capacity, except for President and Vice-President, shall be considered ipso facto resigned from his office upon the filing of his certificate of candidacy. 509

VOL. 417, DECEMBER 10, 2003

509 Farias vs. The Executive Secretary The petition for certiorari and prohibition in G.R. No. 147387 was filed by Rodolfo C. Farias, Manuel M. Garcia, Francis G. Escudero and Agapito A. Aquino. At the time of filing of the petition, the petitioners were members of the minority bloc in the House of Representatives. Impleaded as respondents are: the Executive Secretary, then Speaker of the House of Representatives Feliciano R. Belmonte, Jr., the Commission on Elections, the Secretary of the Department of the Interior and Local Government (DILG), the Secretary of the Senate and the Secretary General of the House of Representatives. The petition for prohibition in G.R. No. 152161 was filed by Gerry A. Salapuddin, then also a member of the House of Representatives. Impleaded as respondent is the COMELEC. Legislative History of Republic Act No. 9006 Rep. Act No. 9006, entitled An Act to Enhance the Holding of Free, Orderly, Honest, Peaceful and Credible Elections through Fair Election Practices, is a consolidation of the following bills originating from the House of Representatives and the Senate, respectively: House Bill (HB) No. 9000 entitled AN ACT ALLOWING THE USE OF MASS MEDIA FOR ELECTION PROPAGANDA, AMENDING FOR THE PURPOSE BATAS PAMBANSA BILANG 881, OTHERWISE KNOWN AS THE OMNIBUS ELECTION CODE, AS AMENDED, AND FOR OTHER PURPOSES;1 ...

Senate Bill (SB) No. 1742 entitled AN ACT TO ENHANCE THE HOLDING OF FREE, ORDERLY, HONEST, PEACEFUL, AND CREDIBLE ELECTIONS THROUGH FAIR ELECTION PRACTICES.2 A Bicameral Conference Committee, composed of eight members of the Senate3 and sixteen (16) members of the House of Represen_______________

1 Annex A, Petition. 2 Annex B, id. 3 Senators Raul S. Roco, Francisco S. Tatad, Vicente C. Sotto III, Gregorio B. Honasan, Robert S. Jaworski, Teresa Aquino-Oreta, Loren Legarda-Leviste and Sergio Osmena III. 510

510 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary tatives,4 was formed to reconcile the conflicting provisions of the House and Senate versions of the bill. On November 29, 2000, the Bicameral Conference Committee submitted its Report,5 signed by its members, recommending the approval of the bill as reconciled and approved by the conferees. During the plenary session of the House of Representatives on February 5, 2001, Rep. Jacinto V. Paras proposed an amendment to the Bicameral Conference Committee Report. Rep. Didagen P. Dilangalen raised a point of order commenting that the House could no longer submit an amendment thereto. Rep. Sergio A.F. Apostol thereupon moved that the House return the report to the Bicameral Conference Committee in view of the proposed amendment thereto. Rep. Dilangalen expressed his objection to the proposal. However, upon viva voce voting, the majority of the House approved the return of the report to the Bicameral Conference Committee for proper action.6 In view of the proposed amendment, the House of Representatives elected anew its conferees7 to the Bicameral Conference Committee.8 Then again, for unclear reasons, upon the motion of Rep. Ignacio R. Bunye, the House elected another set of conferees9 to the Bicameral Conference Committee.10 _______________

4 Representatives Augusto L. Syjuco, Jr., Imee R. Marcos, Benasing O. Macarambon, Jr., Rodolfo C. Farias, Roseller L. Barinaga, Hussin U. Amin, Edmundo O. Reyes, Jr., Constantino G. Jaraula, Alipio Cirilo V. Badelles, Francis Joseph G. Escudero, Eleandro Jesus F. Madrona, Ernesto A. Nieva, Aniceto G. Saludo, Eduardo R. Gullas, Feliciano R. Belmonte, Jr., Sergio Antonio F. Apostol, Prospero A. Pichay, Jr. and Roy Padilla, Jr. 5 Annex C, Petition. 6 Journal of the House of Representatives, Vol. 62, February 5, 2001, pp. 12-13. 7 Representatives Edmundo O. Reyes, Jr., Jacinto V. Paras, Augusto Boboy Syjuco, Prospero A. Pichay, Jr., Carlos M. Padilla, Aniceto G. Saludo, Jr., Gerardo S. Espina, Ricardo V. Quintos and Isidro S. Rodriguez, Jr. 8 See note 6. 9 Representatives Carlos M. Padilla, Salvio B. Fortuno, Dante V. Liban, Roan I. Libarios, Nestor C. Ponce, Jr., Loretta Ann P. Rosales, Magtanggol T. Gunigundo and Edmundo O. Reyes, Jr. 10 See note 6 at p. 20.

511

VOL. 417, DECEMBER 10, 2003 511 Farias vs. The Executive Secretary On February 7, 2001, during the plenary session of the House of Representatives, Rep. Bunye moved that the House consider the Bicameral Conference Committee Report on the contrasting provisions of HB No. 9000 and SB No. 1742. Rep. Dilangalen observed that the report had been recommitted to the Bicameral Conference Committee. The Chair responded that the Bicameral Conference Report was a new one, and was a result of the reconvening of a new Bicameral Conference Committee. Rep. Dilangalen then asked that he be given time to examine the new report. Upon motion of Rep. Apostol, the House deferred the approval of the report until the other members were given a copy thereof.11 After taking up other pending matters, the House proceeded to vote on the Bicameral Conference Committee Report on the disagreeing provisions of HB No. 9000 and SB No. 1742. The House approved the report with 125 affirmative votes, 3 negative votes and no abstention. In explaining their negative votes, Reps. Farias and Garcia expressed their belief that Section 14 thereof was a rider. Even Rep. Escudero, who voted in the affirmative, expressed his doubts on the constitutionality of Section 14. Prior to casting his vote, Rep. Dilangalen observed that no senator signed the Bi-cameral Conference Committee Report and asked if this procedure was regular.12 On the same day, the Senate likewise approved the Bicameral Conference Committee Report on the contrasting provisions of SB No. 1742 and HB No. 9000. Thereafter, Rep. Act No. 9006 was duly signed by then Senate President Aquilino Pimentel, Jr. and then Speaker of the House of Representatives Feliciano R. Belmonte, Jr. and was duly certified by the Secretary of the Senate Lutgardo B. Barbo and the Secretary General of the House of Representatives Robert P. Nazareno as the consolidation of House Bill No. 9000 and Senate Bill No. 1742, and finally passed by both Houses on February 7, 2001. President Gloria Macapagal-Arroyo signed Rep. Act No. 9006 into law on February 12, 2001. _______________

11 Journal of the House of Representatives, Vol. 64, February 7, 2001, p. 29. 12 Id., at pp. 32-35. 512

512 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary The Petitioners Case The petitioners now come to the Court alleging in the main that Section 14 of Rep. Act No. 9006, insofar as it repeals Section 67 of the Omnibus Election Code, is unconstitutional for being in violation of Section 26(1), Article VI of the Constitution, requiring every law to have only one subject which should be expressed in its title. According to the petitioners, the inclusion of Section 14 repealing Section 67 of the Omnibus Election Code in Rep. Act No. 9006 constitutes a proscribed rider. They point out the dissimilarity in the subject matter of Rep. Act No. 9006, on the one hand, and Section 67 of the Omnibus Election Code, on the other. Rep. Act No. 9006 primarily deals with the lifting of the ban on the use of media for election propaganda and the elimination of unfair election practices, while Section 67 of the Omnibus Election Code imposes a limitation on elective officials who run for an office other than the one they are holding in a permanent capacity by considering them as ipso facto resigned therefrom upon filing of the certificate of candidacy. The repeal of Section 67 of the Omnibus Election Code is thus not embraced in the title, nor germane to the subject matter of Rep. Act No. 9006. The petitioners also assert that Section 14 of Rep. Act No. 9006 violates the equal protection clause of the Constitution because it repeals Section 67 only of the Omnibus Election Code, leaving intact Section 66 thereof which imposes a similar limitation to appointive officials, thus: SEC. 66. Candidates holding appointive office or position.Any person holding a public appointive office or position, including active members of the Armed Forces of the Philippines, and officers and employees in government-owned or controlled corporations, shall be considered ipso facto resigned from his office upon the filing of his certificate of candidacy. They contend that Section 14 of Rep. Act No. 9006 discriminates against appointive officials. By the repeal of Section 67, an elective official who runs for office other than the one which he is holding is no longer considered ipso facto resigned therefrom upon filing his certificate of candidacy. Elective officials continue in public office even as they campaign for reelection or election for another elective position. On the other hand, Section 66 has been retained; thus, the limitation on appointive officials remains they are still con513

VOL. 417, DECEMBER 10, 2003

513 Farias vs. The Executive Secretary sidered ipso facto resigned from their offices upon the filing of their certificates of candidacy. The petitioners assert that Rep. Act No. 9006 is null and void in its entirety as irregularities attended its enactment into law. The law, not only Section 14 thereof, should be declared null and void. Even Section 16 of the law which provides that *t+his Act shall take effect upon its approval is a violation of the due process clause of the Constitution, as well as jurisprudence, which require publication of the law before it becomes effective. Finally, the petitioners maintain that Section 67 of the Omnibus Election Code is a good law; hence, should not have been repealed. The petitioners cited the ruling of the Court in Dimaporo v. Mitra, Jr.,13 that Section 67 of the Omnibus Election Code is based on the constitutional mandate on the Accountability of Public Officers:14 Sec. 1. Public office is a public trust.Public officers and employees must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty and efficiency, act with patriotism and justice, and lead modest lives. Consequently, the respondents Speaker and Secretary General of the House of Representatives acted with grave abuse of discretion amounting to excess or lack of jurisdiction for not considering those members of the House who ran for a seat in the Senate during the May 14, 2001 elections as ipso facto resigned therefrom, upon the filing of their respective certificates of candidacy. The Respondents Arguments For their part, the respondents, through the Office of the Solicitor General, urge this Court to dismiss the petitions contending, preliminarily, that the petitioners have no legal standing to institute the present suit. Except for the fact that their negative votes were overruled by the majority of the members of the House of Representatives, the petitioners have not shown that they have suffered harm as a result of the passage of Rep. Act No. 9006. Neither do petitioners have any interest as taxpayers since the as_______________

13 202 SCRA 779 (1991). 14 SECTION 1, ARTICLE XI, CONSTITUTION. 514

514

SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary sailed statute does not involve the exercise by Congress of its taxing or spending power. Invoking the enrolled bill doctrine, the respondents refute the petitioners allegations that irregularities attended the enactment of Rep. Act No. 9006. The signatures of the Senate President and the Speaker of the House, appearing on the bill and the certification signed by the respective Secretaries of both houses of Congress, constitute proof beyond cavil that the bill was duly enacted into law. The respondents contend that Section 14 of Rep. Act No. 9006, as it repeals Section 67 of the Omnibus Election Code, is not a proscribed rider nor does it violate Section 26(1) of Article VI of the Constitution. The title of Rep. Act No. 9006, An Act to Enhance the Holding of Free, Orderly, Honest, Peaceful and Credible Elections through Fair Election Practices, is so broad that it encompasses all the processes involved in an election exercise, including the filing of certificates of candidacy by elective officials. They argue that the repeal of Section 67 is germane to the gen-eral subject of Rep. Act No. 9006 as expressed in its title as it eliminates the effect of prematurely terminating the term of an elective official by his filing of a certificate of candidacy for an office other than the one which he is permanently holding, such that he is no longer considered ipso facto resigned therefrom. The legislature, by including the repeal of Section 67 of the Omnibus Election Code in Rep. Act No. 9006, has deemed it fit to remove the unfairness of considering an elective official ipso facto resigned from his office upon the filing of his certificate of candidacy for another elective office. With the repeal of Section 67, all elective officials are now placed on equal footing as they are allowed to finish their respective terms even if they run for any office, whether the presidency, vice-presidency or other elective positions, other than the one they are holding in a permanent capacity. The respondents assert that the repeal of Section 67 of the Omnibus Election Code need not be expressly stated in the title of Rep. Act No. 9006 as the legislature is not required to make the title of the act a complete index of its contents. It must be deemed sufficient that the title be comprehensive enough reasonably to include the general subject which the statute seeks to effect without expressing each and every means necessary for its accomplishment. Section 26(1) of Article VI of the Constitution merely calls for all 515

VOL. 417, DECEMBER 10, 2003 515 Farias vs. The Executive Secretary

the parts of an act relating to its subject to find expression in its title. Mere details need not be set forth. According to the respondents, Section 14 of Rep. Act No. 9006, insofar as it repeals Section 67, leaving Section 66 of the Omnibus Election Code intact and effective, does not violate the equal protection clause of the Constitution. Section 67 pertains to elective officials while Section 66 pertains to appointive officials. A substantial distinction exists between these two sets of officials; elective officials occupy their office by virtue of their mandate based upon the popular will, while the appointive officials are not elected by popular will. The latter cannot, therefore, be similarly treated as the former. Equal protection simply requires that all persons or things similarly situated are treated alike, both as to rights conferred and responsibilities imposed. Further, Section 16, or the Effectivity clause, of Rep. Act No. 9006 does not run afoul of the due process clause of the Constitution as it does not entail any arbitrary deprivation of life, liberty and property. Specifically, the section providing for penalties in cases of violations thereof presume that the formalities of the law would be observed, i.e., charges would first be filed, and the accused would be entitled to a hearing before judgment is rendered by a court having jurisdiction. In any case, the issue about lack of due process is premature as no one has, as yet, been charged with violation of Rep. Act No. 9006. Finally, the respondents submit that the respondents Speaker and Secretary General of the House of Representatives did not commit grave abuse of discretion in not excluding from the Rolls those members thereof who ran for the Senate during the May 14, 2001 elections. These respondents merely complied with Rep. Act No. 9006, which enjoys the presumption of validity until declared otherwise by the Court. The Courts Ruling Before resolving the petitions on their merits, the Court shall first rule on the procedural issue raised by the respondents, i.e., whether the petitioners have the legal standing or locus standi to file the petitions at bar. 516

516 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary The petitions were filed by the petitioners in their capacities as members of the House of Representatives, and as taxpayers and registered voters. Generally, a party 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 en-forcement.15 The

rationale for requiring a party who challenges the constitutionality of a statute to allege such a personal stake in the outcome of the controversy is to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions.16 However, being merely a matter of procedure, this Court, in several cases involving issues of overarching significance to our society,17 had adopted a liberal stance on standing. Thus, in Tatad v. Secretary of the Department of Energy,18 this Court brushed aside the procedural requirement of standing, took cognizance of, and subsequently granted, the petitions separately filed by then Senator Francisco Tatad and several members of the House of Representatives assailing the constitutionality of Rep. Act No. 8180 (An Act Deregulating the Downstream Oil Industry and For Other Purposes). The Court likewise took cognizance of the petition filed by then members of the House of Representatives which impugned as unconstitutional the validity of a provision of Rep. Act No. 6734 (Organic Act for the Autonomous Region in Muslim Mindanao) in Chiongbian v. Orbos.19 Similarly, the Court took cognizance of the petition filed by then members of the Senate, joined by other petitioners, which challenged the validity of Rep. Act No. 7716 (Ex_______________

15 People v. Vera, 65 Phil. 56 (1937). 16 Baker v. Carr, 369 U.S. 186, 7 L.Ed. 2d 633 (1962). 17 Del Mar v. Philippine Amusement and Gaming Corporation, 346 SCRA 485 (2000); Carpio v. Executive Secretary, 206 SCRA 290 (1992); Osmea v. Commission on Elections, 199 SCRA 750 (1991); Basco v. PAGCOR, 197 SCRA 52 (1991); Guingona v. Carague, 196 SCRA 221 (1991); Civil Liberties Union v. Executive Secretary, 194 SCRA 317 (1991); Philconsa v. Gimenez, 15 SCRA 479 (1965). 18 281 SCRA 330 (1997). 19 245 SCRA 253 (1995). 517

VOL. 417, DECEMBER 10, 2003 517 Farias vs. The Executive Secretary panded Value Added Tax Law) in Tolentino v. Secretary of Finance.20

Members of Congress, such as the petitioners, were likewise allowed by this Court to challenge the validity of acts, decisions, rulings, or orders of various government agencies or instrumentalities in Del Mar v. Philippine Amusement and Gaming Corporation,21 Kilosbayan, Inc. v. Guingona, Jr.,22 Philippine Constitution Association v. Enriquez,23 Albano v. Reyes,24 and Bagatsing v. Committee on Privatization.25 Certainly, the principal issue posed by the petitions, i.e., whether Section 67 of the Omnibus Election Code, which this Court had declared in Dimaporo26 as deriving its existence from the constitutional provision on accountability of public officers, has been validly repealed by Section 14 of Rep. Act No. 9006, is one of overarching significance that justifies this Courts adoption of a liberal stance vis-a-vis the procedural matter on standing. Moreover, with the national elections barely seven months away, it behooves the Court to confront the issue now and resolve the same forthrightly. The following pronouncement of the Court is quite apropos: . . . All await the decision of this Court on the constitutional question. Considering, therefore, the importance which the instant case has assumed and to prevent multiplicity of suits, strong reasons of public policy demand that [its] constitutionality . . . be now resolved. It may likewise be added that the exceptional character of the situation that confronts us, the paramount public interest, and the undeniable necessity for a ruling, the national elections being barely six months away, reinforce our stand.27 Every statute is presumed valid.28 The presumption is that the legislature intended to enact a valid, sensible and just law and one _______________

20 235 SCRA 630 (1994). 21 Supra. 22 232 SCRA 110 (1994). 23 235 SCRA 506 (1994). 24 175 SCRA 264 (1989). 25 246 SCRA 334 (1995). 26 Supra. 27 Gonzales v. Commission on Elections, 27 SCRA 835 (1969). 28 Samson v. Aguirre, 315 SCRA 53 (1999). 518

518 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary which operates no further than may be necessary to effectuate the specific purpose of the law.29 It is equally well-established, however, that 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.30 And where the acts of the other branches of government run afoul of the Constitution, it is the judiciarys solemn and sacred duty to nullify the same.31 Proceeding from these guideposts, the Court shall now resolve the substantial issues raised by the petitions. Section 14 of Rep. Act No. 9006 Is Not a Rider32 At the core of the controversy is Section 14, the repealing clause of Rep. Act No. 9006, which provides: Sec. 14. Sections 67 and 85 of the Omnibus Election Code (Batas Pambansa Blg. 881) and Sections 10 and 11 of Republic Act No. 6646 are hereby repealed. As a consequence, the first proviso in the third paragraph of Section 11 of Republic Act No. 8436 is rendered ineffective. All laws, presidential decrees, executive orders, rules and regulations, or any part thereof inconsistent with the provisions of this Act are hereby repealed or modified or amended accordingly. The repealed provision, Section 67 of the Omnibus Election Code, quoted earlier, reads: _______________

29 In re Guarina, 24 Phil. 37 (1913). 30 Tatad v. Secretary of Department of Energy, supra. 31 SECTION 1, ARTICLE VIII, CONSTITUTION reads: Sec. 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law. Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. 32 A rider is a provision not germane to the subject matter of the bill. (Alalayan v. National Power Corporation, 24 SCRA 172 [1968]).

519

VOL. 417, DECEMBER 10, 2003 519 Farias vs. The Executive Secretary SEC. 67. Candidates holding elective office.Any elective official, whether national or local, running for any office other than the one which he is holding in a permanent capacity, except for President and Vice-President, shall be considered ipso facto resigned from his office upon the filing of his certificate of candidacy. Section 26 (1), Article VI of the Constitution provides: SEC. 26 (1). Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof. The proscription is aimed against the evils of the so-called omnibus bills and log-rolling legislation as well as surreptitious and/or unconsidered encroaches. The provision merely calls for all parts of an act relating to its subject finding expression in its title.33 To determine whether there has been compliance with the constitutional requirement that the subject of an act shall be expressed in its title, the Court laid down the rule that Constitutional provisions relating to the subject matter and titles of statutes should not be so narrowly construed as to cripple or impede the power of legislation. The requirement that the subject of an act shall be expressed in its title should receive a reasonable and not a technical construction. It is sufficient if the title be comprehensive enough reasonably to include the general object which a statute seeks to effect, without expressing each and every end and means necessary or convenient for the accomplishing of that object. Mere details need not be set forth. The title need not be an abstract or index of the Act.34 The title of Rep. Act No. 9006 reads: An Act to Enhance the Holding of Free, Orderly, Honest, Peaceful and Credible Elections through Fair Election Practices. Section 2 of the law provides not only the declaration of principles but also the objectives thereof: Sec. 2. Declaration of Principles.The State shall, during the election period, supervise or regulate the enjoyment or utilization of all franchises or permits for the operation of media of communication or information to guarantee or ensure equal opportunity for public service, including access to media time and space, and the equitable right to reply, for public information campaigns and fora among candidates and assure free, orderly, honest, peaceful and credible elections. _______________

33 Alalayan v. National Power Corporation, supra. 34 Cordero v. Cabatuando, 6 SCRA 418 (1962). 520

520 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary The State shall ensure that bona fide candidates for any public office shall be free from any form of harassment and discrimination.35 The Court is convinced that the title and the objectives of Rep. Act No. 9006 are comprehensive enough to include the repeal of Section 67 of the Omnibus Election Code within its contemplation. To require that the said repeal of Section 67 of the Code be expressed in the title is to insist that the title be a complete index of its content.36 The purported dissimilarity of Section 67 of the Omnibus Election Code, which imposes a limitation on elective officials who run for an office other than the one they are holding, to the other provisions of Rep. Act No. 9006, which deal with the lifting of the ban on the use of media for election propaganda, does not violate the one subject-one title rule. This Court has held that an act 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.37 The deliberations of the Bicameral Conference Committee on the particular matter are particularly instructive: SEN. LEGARDA-LEVISTE:

Yes, Mr. Chairman, I just wanted to clarify.

So all were looking for now is an appropriate title to make it broader so that it would cover this provision *referring to the repeal of Section 67 of the Omnibus Election Code+, is that correct? Thats all. Because I believe . . .

THE CHAIRMAN (REP. SYJUCO):

We are looking for an appropriate coverage which will result in the nomenclature or title. SEN. LEGARDA-LEVISTE:

Because I really do not believe that it is out of place. I think that even with the term fair election practice, it really covers it, because as expressed by Senator Roco, those conditions inserted earlier seemed unfair and it is an election practice and, _______________

35 Italics ours. 36 Tolentino v. Secretary of Finance, supra. 37 Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987). 521

VOL. 417, DECEMBER 10, 2003 521 Farias vs. The Executive Secretary

therefore, I think, Im very comfortable with the title Fair Election Practice so that we can get over with these things so that we dont come back again until we find the title. I mean, its one provision which I think is fair for everybody. It may seem like a limitation but this limitation actually provides for fairness in election practices as the title implies. THE CHAIRMAN (REP. SYJUCO):

Yes. SEN. LEGARDA-LEVISTE:

So I would want to beg the House contingent, lets get it over with. To me, ha, its not a very touchy issue. For me, its even a very correct provision. I feel very comfortable with it and it was voted in the Senate, at least, so I would like to appeal to the. . . para matapos na, then we come back as a Bicam just for the title. Is that what youre. . .? THE CHAIRMAN (REP. SYJUCO):

Its not the title per se, its the coverage. So if you will just kindly bear with us. Im happy that there is already one comfortable senator there among . . . several of us were also comfortable with it. But it would be well that when we rise from this Bicam that were all comfortable with it. THE CHAIRMAN (SEN. ROCO):

Yes. Anyway, lets listen to Congressman Marcos. REP. MARCOS:

Mr. Chairman, may I just make the observation that although it is true that the bulk of provisions deals with the area of propaganda and political advertising, the complete title is actually one that indulge full coverage. It says An Act to enhance the holding of free, orderly, honest . . . elections through fair election practices. But as you said, we will put that aside to discuss later one.

Secondly, I think the Declaration of Principles contained in Section 2, paragraph 2 is perfectly adequate in that it says that it shall ensure candidates for public office that may be free from any form-of harassment and discrimination.

Surely this provision in Section 67 of the old Election Code of the existing Omnibus Election Code is a form of harassment or discrimination. And so I think that in the effort at leveling the playing field, we can cover this and it should not be considered a rider. 522

522

SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary SEN. LEGARDA-LEVISTE:

I agree, Mr. Chairman. I think the Congresswoman from Ilocos had very clearly put it, that it is covered in the Declaration of Principles and in the objective of this bill. And therefore, I hope that the House contingent would agree to this so that we can finish it now. And it expressly provides for fair election practices because . . . THE CHAIRMAN (SEN. ROCO):

Yeah, I think what is on the table is that we are not disputing this, but we are looking for a title that is more generic so that then we have less of an objection on constitutionality. I think thats the theory. So, there is acceptance of this.

Maybe we should not call it na limitation on elected officials.

Maybe we should say the special provision on elected officials. So how is that? Alam mo ito . . . REP. MARCOS:

I think we just change the Section 1, the short title. THE CHAIRMAN (SEN. ROCO):

Also, Then we say - - on the short title of the Act, we say . . . REP. MARCOS:

What if we say fair election practices? Maybe that should be changed. . . THE CHAIRMAN (SEN. ROCO):

O, sige, fine, fine. Lets a brainstorm. Equal . . . REP. PADILLA:

Mr. Chairman, why dont we use An Act rationalizing the holding of free, orderly, honest, peaceful and credible elections, amending for the purpose Batasang Pambansa known as the Omnibus Election Code? THE CHAIRMAN (SEN. ROCO):

Why dont we remove fair and then this shall be cited as Election Practices Act? REP. PICHAY:

Thats not an election practice. Thats a limitation. THE CHAIRMAN (SEN. ROCO):

Ah - - - ayaw mo iyong practice. O, give me another noun. REP. MARCOS:

The Fair Election. THE CHAIRMAN (SEN. ROCO):

O, Fair Election Act. 523

523 VOL. 417, DECEMBER 10, 2003

Farias vs. The Executive Secretary REP. MACARAMBON:

Nagbi-brainstorm tayo dito, eh. How about if we change the title to enhance the holding of free, orderly, honest, peaceful and ensure equal opportunity for public service through fair election practices? REP. PICHAY:

Fair election practices? REP. MACARAMBON:

Yeah. To ensure equal opportunity for public service through fair . . . THE CHAIRMAN (SEN. ROCO):

Wala nang practices nga. REP. PICHAY:

Wala nang practices. THE CHAIRMAN (SEN. ROCO):

It shall be cited as Fair Election Act.

(Informal discussions) REP. PICHAY:

Approve na iyan. THE CHAIRMAN (SEN. ROCO):

Done. So, okay na iyon. The title will be Fair Election Act. The rest wala nang problema ano? VOICES:

Wala na. REP. MACARAMBON:

Wala na iyong practices? THE CHAIRMAN (SEN. ROCO):

Wala na, wala na. Mahina tayo sa practice, eh. O, wala na? We will clean up. REP. MARCOS:

Title? THE CHAIRMAN (SEN. ROCO):

The short title, This Act . . . THE CHAIRMAN (REP. SYJUCO):

Youre back to your No. 21 already. REP. MARCOS:

The full title, the same? 524

524 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary THE CHAIRMAN (SEN. ROCO):

Iyon na nga. The full title is An Act to enhance the holding . . . Thats the House version, eh, dahil pareho, hindi ba? Then the short title This Act shall be known as the Fair Election Act.38 The legislators considered Section 67 of the Omnibus Election Code as a form of harassment or discrimination that had to be done away with and repealed. The executive department found cause with Congress when the President of the Philippines signed the measure into law. For sure, some sectors of society and in government may believe that the repeal of Section 67 is bad policy as it would encourage political adventurism. But policy matters are not the concern of the Court. Government policy is within the exclusive dominion of the political branches of the government.39 It is not for this Court to look into the wisdom or propriety of legislative determination. Indeed, whether an enactment is wise or unwise, whether it is based on sound economic theory, whether it is the best means to achieve the desired results, whether, in short, the legislative discretion within its prescribed limits should be exercised in a particular manner are matters for the judgment of the legislature, and the serious conflict of opinions does not suffice to bring them within the range of judicial cognizance.40 Congress is not precluded from repealing Section 67 by the ruling of the Court in Dimaporo v. Mitra41 upholding the validity of the provision and by its pronouncement in the same case that the provision has a laudable purpose. Over time, Congress may find it imperative to repeal the law on its belief that the election process is thereby enhanced and the paramount objective of election lawsthe fair, honest and orderly election of truly deserving members of Congressis achieved. _______________

38 Records of the Bicameral Conference Committee on the Disagreeing Provisions of Senate Bill No. 1742 and House Bill No. 9000 (Committee on Electoral Reforms), November 23, 2000, pp. 95-99. 39 Valmonte v. Belmonte, Jr., 170 SCRA 256 (1989). 40 Bayside Fish Flour Co. v. Gentry, 297 US 422, 80 L. Ed. 772 (1935). See also Garcia v. Corona, 321 SCRA 218 (1999); Samson v. Aguirre, 315 SCRA 54 (1999); Victoriano v. Elizalde Rope Workers Union, 59 SCRA 54 (1974); Morfe v. Mutuc, 22 SCRA 424 (1968). 41 Supra. 525

VOL. 417, DECEMBER 10, 2003 525 Farias vs. The Executive Secretary Moreover, the avowed purpose of the constitutional directive that the subject of a bill should be embraced in its title is to apprise the legislators of the purposes, the nature and scope of its provisions, and prevent the enactment into law of matters which have not received the notice, action and study of the legislators and the public.42 In this case, it cannot be claimed that the legislators were not apprised of the repeal of Section 67 of the Omnibus Election Code as the same was amply and comprehensively deliberated upon by the members of the House. In fact, the petitioners, as members of the House of Representatives, expressed their reservations regarding its validity prior to casting their votes. Undoubtedly, the legislators were aware of the existence of the provision repealing Section 67 of the Omnibus Election Code. Section 14 of Rep. Act No. 9006 Is Not Violative of the Equal Protection Clause of the Constitution43 The petitioners contention, that the repeal of Section 67 of the Omnibus Election Code pertaining to elective officials gives undue benefit to such officials as against the appointive ones and violates the equal protection clause of the constitution, is tenuous. The equal protection of the law clause in the Constitution is not absolute, but is subject to reasonable classification. If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from the other.44 The Court has explained the nature of the equal protection guarantee in this manner: The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile discrimination or the oppression of inequality. It is not intended to prohibit legislation which is limited either in the object to which it is directed or by territory within which it is to operate. It does not demand absolute equality among residents; it merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities en_______________

42 Ichong v. Hernandez, 101 Phil. 1155 (1957). 43 No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws (SECTION 1, ARTICLE III, CONSTITUTION).

44 Tiu v. Court of Appeals, 301 SCRA 278 (1999). 526

526 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary forced. The equal protection clause is not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within such class, and reasonable grounds exist for making a distinction between those who fall within such class and those who do not.45 Substantial distinctions clearly exist between elective officials and appointive officials. The former occupy their office by virtue of the mandate of the electorate. They are elected to an office for a definite term and may be removed therefrom only upon stringent conditions.46 On the other hand, appointive officials hold their office by virtue of their designation thereto by an appointing authority. Some appointive officials hold their office in a permanent capacity and are entitled to security of tenure47 while others serve at the _______________

45 Ichong v. Hernandez, supra, citing 2 Cooley, Constitutional Limitations, pp. 824-825. 46 For example, under the Constitution, the grounds by which the tenure of the members of the House of Representatives and the Senate may be shortened may be summarized as follows: a) Sec. 16, Art. VI: Forfeiture of his seat by holding any other office or employment in the government or any subdivision, agency or instrumentality thereof, including government-owned or controlled corporations or subsidiaries; b) Sec. 16 (3), Art. VI: Expulsion as a disciplinary action for disorderly behavior; c) Sec. 17, Art. VI: Disqualification as determined by resolution of the appropriate Electoral Tribunal in an election contest; and d) Sec. 7, par. 2, Art. VI: Voluntary renunciation of office. Further, under Sec. 2, Art. XI of the Constitution, the President and the Vice-President, along with other impeachable officers, may be removed from office on impeachment for, and conviction of, culpable violation of the Constitution, treason, bribery, graft and corruption, other high crimes, or betrayal of public trust.

47 Section 46, Chapter 7, Title I, Subtitle A. Civil Service Commission, Book V of the 1987 Administrative Code provides, in part, that No officer or employee in the Civil Service shall be suspended or dismissed except for cause as provided by law and after due process. Further, Section 23, Rule XIV of the Omnibus Rules Implementing Book V of the 1987 Administrative Code enumerates the grave offenses which are grounds for dismissal upon the commission of first offense as follows: dishonesty, 527

VOL. 417, DECEMBER 10, 2003 527 Farias vs. The Executive Secretary pleasure of the appointing authority.48 Another substantial distinction between the two sets of officials is that under Section 55, Chapter 8, Title I, Subsection A. Civil Service Commission, Book V of the Administrative Code of 1987 (Executive Order No. 292), appointive officials, as officers and employees in the civil service, are strictly prohibited from engaging in any partisan political activity or take part in any election except to vote. Under the same provision, elective officials, or officers or employees holding political offices, are obviously expressly allowed to take part in political and electoral activities.49 By repealing Section 67 but retaining Section 66 of the Omnibus Election Code, the legislators deemed it proper to treat these two classes of officials differently with respect to the effect on their tenure in the office of the filing of the certificates of candidacy for any position other than those occupied by them. Again, it is not within the power of the Court to pass upon or look into the wisdom of this classification. Since the classification justifying Section 14 of Rep. Act No. 9006. i.e., elected officials vis-a-vis appointive officials, is anchored _______________

gross neglect of duty, gross misconduct, being notoriously undesirable, conviction of a crime involving moral turpitude, falsification of official document, physical or mental incapacity or disability due to vicious habits, among others. 48 Officers and employees holding primarily confidential positions have terms of office which expire upon loss of confidence in them by the appointing authority. (Hernandez v. Villegas, 14 SCRA 544 [1965]). 49 Section 55, Chapter 8, Title I Subsection A. Civil Service Commission, Book V of the Administrative Code of 1987 (Executive Order No. 292) reads in full:

Sec. 55. Political Activity.No officer or employee in the Civil Service including members of the Armed Forces, shall engage, directly or indirectly, in any partisan political activity or take part in any election except to vote nor shall he use his official authority or influence to coerce the political activity of any other person or body. Nothing herein provided shall be understood to prevent any officer or employee from expressing his views on current political problems or issues, or from mentioning the names of his candidates for public office whom he supports: Provided, That public officers and employees holding political offices may take part in political and electoral activities but it shall be unlawful for them to solicit contributions from their subordinates or subject them to any of the acts involving subordinates prohibited in the Election Code. 528

528 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary upon material and significant distinctions and all the persons belonging under the same classification are similarly treated, the equal protection clause of the Constitution is, thus, not infringed. The Enrolled Bill Doctrine Is Applicable In this Case Not content with their plea for the nullification of Section 14 of Rep. Act No. 9006, the petitioners insist that the entire law should be nullified. They contend that irregularities attended the passage of the said law particularly in the House of Representatives catalogued thus: a. Creation of two (2) sets of BCC (Bicameral Conference Committee) members by the House during its session on February 5, 2001; b. No communication from the Senate for a conference on the compromise bill submitted by the BCC on November 29, 2000; c. The new Report submitted by the 2nd/3rd BCC was presented for approval on the floor without copies thereof being furnished the members; d. The 2nd/3rd BCC has no record of its proceedings, and the Report submitted by it was not signed by the Chairman (Sen. Roco) thereof as well as its senator-members at the time it was presented to and rammed for approval by the House; e. There was no meeting actually conducted by the 2nd/3rd BCC and that its alleged Report was instantly made and passed around for the signature of the BCC members;

f. The Senate has no record of the creation of a 2nd BCC but only of the first one that convened on November 23, 2000; g. The Effectivity clauses of SB No. 1741 and HB No. 9000, as well as that of the compromise bill submitted by the BCC that convened on November 20, 2000, were couched in terms that comply with the publication required by the Civil Code and jurisprudence, to wit: ... However, it was surreptitiously replaced in its final form as it appears in 16, R.A. No. 9006, with the provision that This Act shall take effect immediately upon its approval; h. The copy of the compromise bill submitted by the 2nd/3rd BCC that was furnished the members during its consideration on February 7, 2001, did not have the same 16 as it now appears in RA No. 9006, but 16 of the compromise bill, HB 9000 and SB 1742, reasons for which no objection thereto was made; 529

VOL. 417, DECEMBER 10, 2003 529 Farias vs. The Executive Secretary i. The alleged BCC Report presented to the House on February 7, 2001, did not contain a detailed, sufficiently explicit statement of the changes in or amendments to the subject measure; and j. The disappearance of the Cayetano amendment, which is Section 12 of the compromise bill submitted by the BCC. In fact, this was the subject of the purported proposed amendment to the compromise bill of Member Paras as stated in paragraph 7 hereof. The said provision states, thusly: Sec. 12. Limitation on Elected Officials.Any elected official who runs for president and vice-president shall be considered ipso facto resigned from his office upon the filing of the certificate of candidacy.50 The petitioners, thus, urge the Court to go behind the enrolled copy of the bill. The Court is not persuaded. Under the enrolled bill doctrine, the signing of a bill by the Speaker of the House and the Senate President and the certification of the Secretaries of both Houses of Congress that it was passed are conclusive of its due enactment. A review of cases51 reveals the Courts consistent adherence to the rule. The Court finds no reason to deviate from the salutary rule in this case where the irregularities alleged by the petitioners mostly involved the internal rules of Congress, e.g., creation of the 2nd or 3rd Bicameral Conference Committee by the House. This Court is not the proper forum for the enforcement of these internal rules of Congress, whether House or Senate. Parliamentary rules are merely procedural and with their observance the courts have no concern.52 Whatever doubts there may be as to the

formal validity of Rep. Act No 9006 must be resolved in its favor. The Court reiterates its ruling in Arroyo v. De Venecia,53 viz.: But the cases, both here and abroad, in varying forms of expression, all deny to the courts the power to inquire into allegations that, in enacting a law, a House of Congress failed to comply with its own rules, in the absence of showing that there was a violation of a constitutional provision or the rights of private individuals. In Osmea v. Pendatun, it was held: At any rate, courts have declared that the rules adopted by deliberative _______________

50 MEMORANDUM of the Petitioners in G.R. No. 147387, pp. 19-20. 51 Tolentino v. Secretary of Finance, supra; Morales v. Subido,27 SCRA 131 (1969); Casco (Phils.) Inc. v. Gimenez, 7 SCRA 347 (1963); Mabanag v. Lopez Vito, 78 Phil. 1 (1947). 52 Osmea, Jr. v. Pendatun, 109 Phil. 863 (1960). 53 277 SCRA 268 (1997). 530

530 SUPREME COURT REPORTS ANNOTATED Farias vs. The Executive Secretary bodies are subject to revocation, modification or waiver at the pleasure of the body adopting them. And it has been said that Parliamentary rules are merely procedural, and with their observance, the courts have no concern. They may be waived or disregarded by the legislative body. Consequently, mere failure to conform to parliamentary usage will not invalidate the action (taken by a deliberative body) when the requisite number of members have agreed to a particular measure. The Effectivity Clause Is Defective Finally, the Effectivity clause (Section 16) of Rep. Act No. 9006 which provides that it shall take effect immediately upon its approval, is defective. However, the same does not render the entire law invalid. In Taada v. Tuvera,54 this Court laid down the rule: . . . the clause unless it is otherwise provided refers to the date of effectivity and not to the requirement of publication itself, which cannot in any event be omitted. This clause does not mean that

the legislator may make the law effective immediately upon approval, or on any other date without its previous publication. Publication is indispensable in every case, but the legislature may in its discretion provide that the usual fifteen-period shall be shortened or extended . . . .55 Following Article 2 of the Civil Code56 and the doctrine enunciated in Taada, Rep. Act No. 9006, notwithstanding its express statement, took effect fifteen days after its publication in the Official Gazette or a newspaper of general circulation. In conclusion, it bears reiterating that one of the firmly entrenched principles in constitutional law is that the courts do not involve themselves with nor delve into the policy or wisdom of a statute. That is the exclusive concern of the legislative branch of the government. When the validity of a statute is challenged on constitutional grounds, the sole function of the court is to determine whether it transcends constitutional limitations or the limits _______________

54 146 SCRA 446 (1986). 55 Id., at p. 452. 56 Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is otherwise provided. This Code shall take effect one year after publication. 531

VOL. 417, DECEMBER 10, 2003 531 Farias vs. The Executive Secretary of legislative power.57 No such transgression has been shown in this case. WHEREFORE, the petitions are DISMISSED. No pronouncement as to costs. SO ORDERED. Davide, Jr. (C.J.), Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Azcuna and Tinga, JJ., concur. Petitions dismissed.

Notes.A party bringing a suit challenging the constitutionality of a law, act, or statute must show not only that the law is invalid, but also that he has sustained or is in immediate, or imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. (Bayan *Bagong Alyansang Makabayan+ vs. Zamora, 342 SCRA 449 [2000]) Where a petition for mandamus involves the enforcement of constitutional rightsto information and to the equitable diffusion of natural resourcesmatters of transcendental public importance, a citizen has the requisite locus standi. (Chavez vs. Public Estates Authority, 384 SCRA 152 [2002]) o0o

_______________

57 See Tatad v. Secretary of the Department of Energy, supra; Taada v. Angara, 272 SCRA 18 (1997); Bondoc v. Pineda, 201 SCRA 792 (1991); Osmea v. Commission on Elections, 199 SCRA 750 (1991); Luz Farms v. Secretary of the Department of Agrarian Reform, 192 SCRA 51 (1990); Gonzales v. Commission on Elections, 21 SCRA 774 (1967). 532 [Farias vs. The Executive Secretary, 417 SCRA 503(2003)]

G.R. No. 127882. January 27, 2004.*

La Bugal-BLaan Tribal Association, Inc. vs. Ramos

LA BUGAL-BLAAN TRIBAL ASSOCIATION, INC., represented by its Chairman FLONG MIGUEL M. LUMAYONG, WIGBERTO E. TAADA, PONCIANO BENNAGEN, JAIME TADEO, RENATO R. CONSTANTINO, JR., FLONG AGUSTIN M. DABIE, ROBERTO P. AMLOY, RAQIM L. DABIE, SIMEON H. DOLOJO, IMELDA M. GANDON, LENY B. GUSANAN, MARCELO L. GUSANAN, QUINTOL A. LABUAYAN, LOMINGGES D. LAWAY, BENITA P. TACUAYAN, minors JOLY L. BUGOY, represented by his father UNDERO D. BUGOY, ROGER M. DADING, represented by his father ANTONIO L. DADING, ROMY M. LAGARO, represented by his father TOTING A. LAGARO, MIKENY JONG B. LUMAYONG, represented by his father MIGUEL M. LUMAYONG, RENE T. MIGUEL, represented by his mother EDITHA T. MIGUEL, ALDEMAR L. SAL, represented by his father DANNY M. SAL, DAISY RECARSE, represented by her mother LYDIA S. SANTOS, EDWARD M. EMUY, ALAN P. MAM _______________

* EN BANC. 149

VOL. 421, JANUARY 27, 2004 149 La Bugal-BLaan Tribal Association, Inc. vs. Ramos PARAIR, MARIO L. MANGCAL, ALDEN S. TUSAN, AMPARO S. YAP, VIRGILIO CULAR, MARVIC M.V.F. LEONEN, JULIA REGINA CULAR, GIAN CARLO CULAR, VIRGILIO CULAR, JR., represented by their father VIRGILIO CULAR, PAUL ANTONIO P. VILLAMOR, represented by his parents JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR, ANA GININA R. TALJA, represented by her father MARIO JOSE B. TALJA, SHARMAINE R. CUNANAN, represented by her father ALFREDO M. CUNANAN, ANTONIO JOSE A. VITUG III, represented by his mother ANNALIZA A. VITUG, LEAN D. NARVADEZ, represented by his father MANUEL E. NARVADEZ, JR., ROSERIO MARALAG LINGATING, represented by her father RIO OLIMPIO A. LINGATING, MARIO JOSE B. TALJA, DAVID E. DE VERA, MARIA MILAGROS L. SAN JOSE, SR,, SUSAN O. BOLANIO, OND, LOLITA G. DEMONTEVERDE, BENJIE L. NEQUINTO,1 ROSE LILIA S. ROMANO, ROBERTO S. VERZOLA, EDUARDO AURELIO C. REYES, LEAN LOUEL A. PERIA, represented by his father ELPIDIO V. PERIA,2 GREEN FORUM PHILIPPINES, GREEN FORUM WESTERN VISAYAS, (GF-WV), ENVIRONMENTAL LEGAL ASSISTANCE CENTER (ELAC), PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN),3 KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN), PARTNERSHIP FOR AGRARIAN REFORM and RURAL

DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE PARTNERSHIP FOR THE DEVELOPMENT OF HUMAN RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA), WOMENS LEGAL BUREAU (WLB), CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI), UPLAND DEVELOPMENT INSTITUTE (UDI), KINAIYAHAN FOUNDATION, INC., SENTRO NG ALTERNATIBONG LINGAP PANLIGAL (SALIGAN), LEGAL RIGHTS AND NATURAL RESOURCES _______________

1 Appears as Nequito in the caption of the Petition by Nequinto in the body. (Rollo, p. 12.) 2 As appears in the body of the Petition. (Id., at p. 13.) The caption of the petition does not include Louel A. Peria as one of the petitioners but the name of his father Elpidio V. Peria appears therein. 3 Appears as Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN) in the caption of the Petition by Philippine Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN) in the body. (Id., at p. 14.) 150

150 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos CENTER, INC. (LRC), petitioners, vs. VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR), HORACIO RAMOS, DIRECTOR, MINES AND GEOSCIENCES BUREAU (MGB-DENR), RUBEN TORRES; EXECUTIVE SECRETARY, and WMC (PHILIPPINES), INC.,4 respondents. Judicial Review; Requisites.When an issue of constitutionality is raised, this Court can exercise its power of judicial review only if the following requisites are present: (1) The existence of an actual and appropriate case; (2) A personal and substantial interest of the party raising the constitutional question; (3) The exercise of judicial review is pleaded at the earliest opportunity; and (4) The constitutional question is the lis mota of the case. Same; Same; Words and Phrases; An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination, not conjectural or anticipatory.An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination, not conjectural or anticipatory, lest the decision of the court would amount to an advisory opinion. The power does not extend to hypothetical questions since any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.

Same; Same; Same; Locus Standi; Legal standing or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged, alleging more than a generalized grievance.Legal standing or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged, alleging more than a generalized grievance. The gist of the question of standing is whether a party alleges such personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions. Unless a person is injuriously affected in any of his constitutional rights by the operation of statute or ordinance, he has no standing. _______________

4 Erroneously designated in the Petition as Western Mining Philippines Corporation. (Id., at p. 212.) Subsequently, WMC (Philippines), Inc. was renamed Tampakan Mineral Resources Corporation. (Id., at p. 778.) 151

VOL. 421, JANUARY 27, 2004 151 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Same; Same; As the case involves constitutional questions, this Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal standing.The present action is not merely one for annulment of contract but for prohibition and mandamus. Petitioners allege that public respondents acted without or in excess of jurisdiction in implementing the FTAA, which they submit is unconstitutional. As the case involves constitutional questions, this Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal standing. As held in Kilosbayan v. Morato: x x x. It is important to note . . . that standing because of its constitutional and public policy underpinnings, is very different from questions relating to whether a particular plaintiff is the real party in interest or has capacity to sue. Although all three requirements are directed towards ensuring that only certain parties can maintain an action, standing restrictions require a partial consideration of the merits, as well as broader policy concerns relating to the proper role of the judiciary in certain areas.*+ (FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 *1985+) Standing is a special concern in constitutional law because in some cases suits are brought not by parties who have been personally injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or voters who actually sue in the public interest. Hence, the question in standing is whether such parties have alleged such a personal stake in the outcome of the controversy as to assure that

concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions. (Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 [1962].) Same; Same; The third requisite for judicial review should not be taken to mean that the question of constitutionality must be raised immediately after the execution of the state action complained ofthat the question of constitutionality has not been raised before is not a valid reason for refusing to allow it to be raised later.Misconstruing the application of the third requisite for judicial reviewthat the exercise of the review is pleaded at the earliest opportunityWMCP points out that the petition was filed only almost two years after the execution of the FTAA, hence, not raised at the earliest opportunity. The third requisite should not be taken to mean that the question of constitutionality must be raised immediately after the execution of the state action complained of. That the question of constitutionality has not been raised before is not a valid reason for refusing to allow it to be raised later. A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party to promptly file a case to challenge the same. Same; Prohibition; Words and Phrases; Prohibition is a preventive remedy; While the execution of the contract itself may be fait accompli, its implementation is not.Prohibition is a preventive remedy. It seeks a 152

152 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos judgment ordering the defendant to desist from continuing with the commission of an act perceived to be illegal. The petition for prohibition at bar is thus an appropriate remedy. While the execution of the contract itself may be fait accompli, its implementation is not. Public respondents, in behalf of the Government, have obligations to fulfill under said contract. Petitioners seek to prevent them from fulfilling such obligations on the theory that the contract is unconstitutional and, therefore, void. Same; Hierarchy of Courts; The repercussions of the issues in this case on the Philippine mining industry, if not the national economy, as well as the novelty thereof, constitute exceptional and compelling circumstances to justify resort to the Supreme Court in the first instance.The repercussions of the issues in this case on the Philippine mining industry, if not the national economy, as well as the novelty thereof, constitute exceptional and compelling circumstances to justify resort to this Court in the first instance. In all events, this Court has the discretion to take cognizance of a suit which does not satisfy the requirements of an actual case or legal standing when paramount public interest is involved. When the issues raised are of paramount importance to the public, this Court may brush aside technicalities of procedure.

National Economy and Patrimony; Regalian Doctrine; The first sentence of Section 2, Article XII of the Constitution, embodies the Regalian doctrine or jura regalia; Introduced by Spain into these Islands, this feudal concept is based on the States power of dominium, which is the capacity of the State to own or acquire property.The first sentence of Section 2 embodies the Regalian doctrine or jura regalia. Introduced by Spain into these Islands, this feudal concept is based on the States power of dominium, which is the capacity of the State to own or acquire property. In its broad sense, the term jura regalia refers to royal rights, or those rights which the King has by virtue of his prerogatives. In Spanish law, it refers to a right which the sovereign has over anything in which a subject has a right of property or propriedad. These were rights enjoyed during feudal times by the king as the sovereign. The theory of the feudal system was that title to all lands was originally held by the King, and while the use of lands was granted out to others who were permitted to hold them under certain conditions, the King theoretically retained the title. By fiction of law, the King was regarded as the original proprietor of all lands, and the true and only source of title, and from him all lands were held. The theory of jura regalia was therefore nothing more than a natural fruit of conquest. Same; Same; The Regalian doctrine extends not only to land but also to all natural wealth that may be found in the bowels of the earth.The Philippines having passed to Spain by virtue of discovery and conquest, earlier Spanish decrees declared that all lands were held from the 153

VOL. 421, JANUARY 27, 2004 153 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Crown. The Regalian doctrine extends not only to land but also to all natural wealth that may be found in the bowels of the earth. Spain, in particular, recognized the unique value of natural resources, viewing them, especially minerals, as an abundant source of revenue to finance its wars against other nations. Mining laws during the Spanish regime reflected this perspective. Same; Same; Unlike Spain, the United States considered natural resources as a source of wealth for its nationals and saw fit to allow both Filipino and American citizens to explore and exploit minerals in public lands, and to grant patents to private mineral lands; The Regalian doctrine and the American system, therefore, differ in one essential respectunder the Regalian theory, mineral rights are not included in a grant of land by the state while under the American doctrine, mineral rights are included in a grant of land by the government.Unlike Spain, the United States considered natural resources as a source of wealth for its nationals and saw fit to allow both Filipino and American citizens to explore and exploit minerals in public lands, and to grant patents to private mineral lands. A person who acquired ownership over a parcel of private mineral land pursuant to the laws then prevailing could exclude other persons, even the State, from exploiting minerals within his property. Thus, earlier jurisprudence held

that: A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of the statutes of the United States, has the effect of a grant by the United States of the present and exclusive possession of the lands located, and this exclusive right of possession and enjoyment continues during the entire life of the location. x x x x x x. The discovery of minerals in the ground by one who has a valid mineral location, perfect his claim and his location, not only against third persons but also against the Government. x x x. [Italics in the original.] The Regalian doctrine and the American system, therefore, differ in one essential respect. Under the Regalian theory, mineral rights are not included in a grant of land by the state; under the American doctrine, mineral rights are included in a grant of land by the government. Same; Same; Concession System; Words and Phrases; Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural resource within a given areathe concession amounts to complete control by the concessionaire over the countrys natural resource, for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction.Section 21 also made possible the concession (frequently styled permit, license or lease) system. This was the traditional regime imposed by the colonial administrators for the exploitation of natural resources in the extractive sector (petroleum, hard minerals, timber, etc.). Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural resource within a given area. Thus, the 154

154 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos concession amounts to complete control by the concessionaire over the countrys natural resource, for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction. In consideration for the right to exploit a natural resource, the concessionaire either pays rent or royalty, which is a fixed percentage of the gross proceeds. Same; Same; Same; As adopted in a republican system, the medieval concept of jura regalia is stripped of royal overtones and ownership of the land is vested in the State.The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources of the Philippines, including mineral lands and minerals, to be property belonging to the State. As adopted in a republican system, the medieval concept of jura regalia is stripped of royal overtones and ownership of the land is vested in the State. Same; Same; Same; Nationalization; Objectives of Nationalization; The nationalization and conservation of the natural resources of the country was one of the fixed and dominating objectives of the 1935 Constitutional Convention.The nationalization and conservation of the natural resources of the country was one of the fixed and dominating objectives of the 1935 Constitutional Convention. The

nationalization of the natural resources was intended (1) to insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension to the country of foreign control through peaceful economic penetration; and (3) to avoid making the Philippines a source of international conflicts with the consequent danger to its internal security and independence. Same; Same; Same; Same; Parity Amendments; The swell of nationalism that suffused the 1935 Constitution was radically diluted when in November 1946, the Parity Amendment, which came in the form of an Ordinance Appended to the Constitution, was ratified in a plebiscite.The swell of nationalism that suffused the 1935 Constitution was radically diluted when on November l946, the Parity Amendment, which came in the form of an Ordinance Appended to the Constitution, was ratified in a plebiscite. The Amendment extended, from July 4, 1946 to July 3, 1974, the right to utilize and exploit our natural resources to citizens of the United States and business enterprises owned or controlled, directly or indirectly, by citizens of the United States. The Parity Amendment was subsequently modified by the 1954 Revised Trade Agreement, also known as the Laurel-Langley Agreement, embodied in Republic Act No. 1355. Same; Same; Service Contracts; The Oil Exploration and Development Act of 1972 (Presidential Decree No. 87); Words and Phrases; The Oil Exploration and Development Act of 1972 signaled a transformation from the concession system to the exploration for and production of indigenous 155

VOL. 421, JANUARY 27, 2004 155 La Bugal-BLaan Tribal Association, Inc. vs. Ramos petroleum through service contracts; Service contracts is a term that assumes varying meanings to different people, and it has carried many names in different countries, like work contracts in Indonesia, concession agreements in Africa, production-sharing agreements in the Middle East, and participation agreements in Latin America.The promulgation on December 31, 1972 of Presidential Decree No. 87, otherwise known as THE OIL EXPLORATION AND DEVELOPMENT ACT OF 1972 signaled such a transformation. P.D. No. 87 permitted the government to explore for and produce indigenous petroleum through service contracts. Service contracts is a term that assumes varying meanings to different people, and it has carried many names in different countries, like work contracts in Indonesia, concession agreements in Africa, production-sharing agreements in the Middle East, and participation agreements in Latin America. A functional definition of service contracts in the Philippines is provided as follows: A service contract is a contractual arrangement for engaging in the exploitation and development of petroleum, mineral, energy, land and other natural resources by which a government or its agency, or a private person granted a right or privilege by the government

authorizes the other party (service contractor) to engage or participate in the exercise of such right or the enjoyment of the privilege, in that the latter provides financial or technical resources, undertakes the exploitation or production of a given resource, or directly manages the productive enterprise, operations of the exploration and exploitation of the resources or the disposition of marketing or resources. Same; Same; Same; It has been opined, though, that, in the Philippines, the concept of a service contract, at least in the petroleum industry, was basically a concession regime with a production-sharing element.Ostensibly, the service contract system had certain advantages over the concession regime. It has been opined, though, that, in the Philippines, our concept of a service contract, at least in the petroleum industry, was basically a concession regime with a production-sharing element. Same; Same; Same; While Section 9, Article XIV of the 1973 Constitution maintained the Filipino-only policy in the enjoyment of natural resources, it also allowed Filipinos, upon authority of the Batasang Pambansa, to enter into service contracts with any person or entity for the exploration or utilization of natural resources.On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification of a new Constitution. Article XIV on the National Economy and Patrimony contained provisions similar to the 1935 Constitution with regard to Filipino participation in the nations natural resources. Section 8, Article XIV thereof provides: While Section 9 of the same Article maintained the Filipino-only policy in the enjoyment of natural resources, it also allowed Filipinos, upon authority of the Batasang Pambansa, to enter into service contracts 156

156 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos with any person or entity for the exploration or utilization of natural resources. Same; Same; Same; Conspicuously absent in Section 2, Article XII of the 1987 Constitution is the provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses, concessions, or leases for the exploration, exploitation, development, or utilization of natural resourcesby such omission, the utilization of inalienable lands of public domain through license, concession or lease is no longer allowed under the 1987 Constitution.The 1987 Constitution retained the Regalian doctrine. The first sentence of Section 2, Article XII states: All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second sentence of the same provision, prohibits the alienation of natural resources, except agricultural lands. The third sentence of the same paragraph is new: The exploration, development and utilization of natural resources shall be under the full control

and supervision of the State. The constitutional policy of the States full control and supervision over natural resources proceeds from the concept of jura regalia, as well as the recognition of the importance of the countrys natural resources, not only for national economic development, but also for its security and national defense. Under this provision, the State assumes a more dynamic role in the exploration, development and utilization of natural resources. Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses, concessions, or leases for the exploration, exploitation, development, or utilization of natural resources. By such omission, the utilization of inalienable lands of public domain through license, concession or lease is no longer allowed under the 1987 Constitution. Same; Same; Under the 1987 Constitution, the State itself may undertake the operation of a concession or enter into joint ventures.Having omitted the provision on the concession system, Section 2 proceeded to introduce unfamiliar language: The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Consonant with the States full supervision and control over natural resources, Section 2 offers the State two options. One, the State may directly undertake these activities itself; or two, it may enter into coproduction, joint venture, or production-sharing agreements with Filipino citizens, or entities at least 60% of whose capital is owned-by such citizens. 157

VOL. 421, JANUARY 27, 2004 157 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Same; Same; Same; Limitations on Technical or Financial Assistance Agreements.Although Section 2 sanctions the participation of foreign-owned corporations in the exploration, development, and utilization of natural resources, it imposes certain limitations or conditions to agreements with such corporations. First, the parties to FTAAs. Only the President, in behalf of the State, may enter into these agreements, and only with corporations. By contrast, under the 1973 Constitution, a Filipino citizen, corporation or association may enter into a service contract with a foreign person or entity. Second, the size of the activities: only large-scale exploration, development, and utilization is allowed. The term large-scale usually refers to very capital-intensive activities. Third, the natural resources subject of the activities is restricted to minerals, petroleum and other mineral oils, the intent being to limit service contracts to those areas where Filipino capital may not be sufficient. Fourth, consistency with the provisions of statute. The agreements must be in accordance with the terms and conditions provided by law. Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must be based on real contributions to economic growth and general welfare of the country. Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and use of

local scientific and technical resources. Seventh, the notification requirement. The President shall notify Congress of every financial or technical assistance agreement entered into within thirty days from its execution. Finally, the scope of the agreements. While the 1973 Constitution referred to service contracts for financial, technical, management, or other forms of assistance the 1987 Constitution provides for agreements . . . involving either financial or technical assistance. It bears noting that the phrases service contracts and management or other forms of assistance in the earlier constitution have been omitted. Same; Same; Same; Modes by Which the State May Explore, Develop and Utilize Natural Resources. The State, being the owner of the natural resources, is accorded the primary power and responsibility in the exploration, development and utilization thereof. As such, it may undertake these activities through four modes: The State may directly undertake such activities. (2) The State may enter into coproduction, joint venture or production-sharing agreements with Filipino citizens or qualified corporations. (3) Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens. (4) For the large-scale exploration, development and utilization of minerals, petroleum and other mineral oils, the President may enter into agreements with foreign-owned corporations involving technical or financial assistance. Except to charge the Mines and Geosciences Bureau of the DENR with performing researches and surveys, and a passing mention of government-owned or controlled corporations, R.A. No. 7942 does not specify how the State should go about the first mode. The third mode, on the other hand, is governed by Republic Act No. 158

158 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos 7076 (the Peoples Small-Scale Mining Act of 1991) and other pertinent laws. R.A. No. 7942 primarily concerns itself with the second and fourth modes. Same; Same; Same; Words and Phrases; Production Sharing Agreements, Co-Production Agreements, and Joint Venture Agreements, Explained.Mineral production sharing, co-production and joint venture agreements are collectively classified by R.A. No. 7942 as mineral agreements. The Government participates the least in a mineral production sharing agreement (MPSA). In an MPSA, the Government grants the contractor the exclusive right to conduct mining operations within a contract area and shares in the gross output. The MPSA contractor provides the financing, technology, management and personnel necessary for the agreements implementation. The total government share in an MPSA is the excise tax on mineral products under Republic Act No. 7729, amending Section 151 (a) of the National Internal Revenue Code, as amended. In a co-production agreement (CA), the Government provides inputs to the mining operations other than the mineral resource, while in a joint

venture agreement (JVA), where the Government enjoys the greatest participation, the Government and the JVA contractor organize a company with both parties having equity shares. Aside from earnings in equity, the Government in a JVA is also entitled to a share in the gross output. The Government may enter into a CA or JVA with one or more contractors. Same; Statutes; Statutory Construction; Executive Order (E.O.) No. 279; There is nothing in E.O. No. 200 that prevents a law from taking effect on a date other thaneven beforethe 15-day period after its publication; Where a law provides for its own date of effectivity, such date prevails over that prescribed by E.O. No. 200.It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking effect on a date other thaneven beforethe 15-day period after its publication. Where a law provides for its own date of effectivity, such date prevails over that prescribed by E.O. No. 200. Indeed, this is the very essence, of the phrase unless it is otherwise provided in Section 1 thereof. Section 1, E.O. No. 200, therefore, applies only when a statute does not provide for its own date of effectivity. What is mandatory under E.O. No. 200, and what due process requires, as this Court held in Taada v. Tuvera, is the publication of the law for without such notice and publication, there would be no basis for the application of the maxim ignorantia legis n*eminem+ excusat. It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one. Same; Same; Same; From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Taada v. Tuvera, this Court holds that E.O. No. 279 became effective immediately upon its publication in the 159

VOL. 421, JANUARY 27, 2004 159 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Official Gazette on 3 August 1987.While the effectivity clause of E.O. No. 279 does not require its publication, it is not a ground for its invalidation since the Constitution, being the fundamental, paramount and supreme law of the nation, is deemed written in the law. Hence, the due process clause, which, so Taada held, mandates the publication of statutes, is read into Section 8 of E.O. No. 279. Additionally, Section 1 of E.O. No. 200 which provides for publication either in the Official Gazette or in a newspaper of general circulation in the Philippines, finds suppletory application. It is significant to note that E.O. No. 279 was actually published in the Official Gazette on August 3, 1987. From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Taada v. Tuvera, this Court holds that E.O. No. 279 became effective immediately upon its publication in the Official Gazette on August 3, 1987.

Same; Same; Same; The convening of the first Congress merely precluded the exercise of legislative powers by President Aquinoit did not prevent the effectivity of laws she had previously enacted. That such effectivity took place after the convening of the first Congress is irrelevant. At the time President Aquino issued E.O. No. 279 on July 25, 1987, she was still validly exercising legislative powers under the Provisional Constitution. Article XVIII (Transitory Provisions) of the 1987 Constitution explicitly states: SEC. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is convened. The convening of the first Congress merely precluded the exercise of legislative powers by President Aquino; it did not prevent the effectivity of laws she had previously enacted. There can be no question, therefore, that E.O. No. 279 is an effective, and a validly enacted, statute. Same; Same; It is a cardinal rule in the interpretation of constitutions that the instrument must be so construed as to give effect to the intention of the people who adopted it; Following the literal text of the Constitution, assistance accorded by foreign-owned corporations in the large-scale exploration, development, and utilization of petroleum, minerals and mineral oils should be limited to technical or financial assistance only.It is a cardinal rule in the interpretation of constitutions that the instrument must be so construed as to give effect to the intention of the people who adopted it. This intention is to be sought in the constitution itself, and the apparent meaning of the words is to be taken as expressing it, except in cases where that assumption would lead to absurdity, ambiguity, or contradiction. What the Constitution says according to the text of the provision, therefore, compels acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say. Accordingly, following the literal text of the Constitution, assistance accorded by foreign-owned corporations in the large-scale exploration, development, and utilization of petroleum, minerals and mineral oils should be limited to technical or financial assistance only. 160

160 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Same; Same; The management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate.As priorly pointed out, the phrase management or other forms of assistance in the 1973 Constitution was deleted in the 1987 Constitution, which allows only technical or financial assistance. Casus omisus pro omisso habendus est. A person, object or thing omitted from an enumeration must be held to have been omitted intentionally. As will be shown later, the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate.

Same; Same; Service Contracts; If the Constitutional Commission intended to retain the concept of service contracts under the 1973 Constitution, it could have simply adopted the old terminology (service contracts) instead of employing new and unfamiliar terms (agreements . . . involving either technical or financial assistance).As earlier noted, the phrase service contracts has been deleted in the 1987 Constitutions Article on National Economy and Patrimony. If the CONCOM intended to retain the concept of service contracts under the 1973 Constitution, it could have simply adopted the old terminology (service contracts) instead of employing new and unfamiliar terms (agreements . . . involving either technical or financial assistance). Such a difference between the language of a provision in a revised constitution and that of a similar provision in the preceding constitution is viewed as indicative of a difference in purpose. If, as respondents suggest, the concept of technical or financial assistance agreements is identical to that of service contracts, the CONCOM would not have bothered to fit the same dog with a new collar. To uphold respondents theory would reduce the first to a mere euphemism for the second and render the change in phraseology meaningless. An examination of the reason behind the change confirms that technical or financial assistance agreements are not synonymous to service contracts. [T]he Court in construing a Constitution should bear in mind the object sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or remedied. A doubtful provision will be examined in light of the history of the times, and the condition and circumstances under which the Constitution was framed. The object is to ascertain the reason which induced the framers of the Constitution to enact the particular provision and the purpose sought to be accomplished thereby, in order to construe the whole as to make the words consonant to that reason and calculated to effect that purpose. Same; Same; Same; The insights of the proponents of the U.P. Law Draft are instructive in interpreting the phrase technical or financial assistance.It appears that Proposed Resolution No. 496, which was the draft Article on National Economy and Patrimony, adopted the concept of 161

VOL. 421, JANUARY 27, 2004 161 La Bugal-BLaan Tribal Association, Inc. vs. Ramos agreements . . . involving either technical or financial assistance contained in the Draft of the 1986 U.P. Law Constitution Project (U.P. Law draft) which was taken into consideration during the deliberation of the CONCOM. The former, as well as Article XII, as adopted, employed the same terminology, x x x The insights of the proponents of the U.P. Law draft are, therefore, instructive in interpreting the phrase technical or financial assistance. Same; Same; Same; The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as grants of beneficial ownership of the countrys natural resources to foreign owned

corporations.The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as grants of beneficial ownership of the countrys natural resources to foreign owned corporations. While, in theory, the State owns these natural resourcesand Filipino citizens, their beneficiariesservice contracts actually vested foreigners with the right to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not Filipinos, became the beneficiaries of Philippine natural resources. This arrangement is clearly incompatible with the constitutional ideal of nationalization of natural resources, with the Regalian doctrine, and on a broader perspective, with Philippine sovereignty. Same; Same; Same; The replacement of service contracts with agreements . . . involving either technical or financial assistance, as well as the deletion of the phrase management or other forms of assistance, assumes greater significance when note is taken that the U.P. Law draft proposed other equally crucial changes that were obviously heeded by the CONCOM; In light of the deliberations of the CONCOM, the text of the Constitution, and the adoption of other proposed changes, there is no doubt that the framers considered and shared the intent of the U.P. Law proponents in employing the phrase agreements . . . involving either technical or financial assistance.The proponents nevertheless acknowledged the need for capital and technical know-how in the large-scale exploitation, development and utilization of natural resourcesthe second paragraph of the proposed draft itself being an admission of such scarcity. Hence, they recommended a compromise to reconcile the nationalistic provisions dating back to the 1935 Constitution, which reserved all natural resources exclusively to Filipinos, and the more liberal 1973 Constitution, which allowed foreigners to participate in these resources through service contracts. Such a compromise called for the adoption of a new system in the exploration, development, and utilization of natural resources in the form of technical agreements or financial agreements which, necessity, are distinct concepts from service contracts. The replacement of service contracts with agreements . . . involving either technical or financial assistance, as well as the deletion of the phrase management or other forms of assistance, assumes greater significance when note is taken that the 162

162 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos U.P. Law draft proposed other equally crucial changes that were obviously heeded by the CONCOM. These include the abrogation of the concession system and the adoption of new options for the State in the exploration, development, and utilization of natural resources. The proponents deemed these changes to be more consistent with the States ownership of, and its full control and supervision (a phrase also employed by the framers) over, such resources. In light of the deliberations of the CONCOM, the text of the Constitution, and the adoption of other proposed changes, there is no doubt that the

framers considered and shared the intent of the U.P. Law proponents in employing the phrase agreements . . . involving either technical or financial assistance. Same; Same; Same; Loose statements of some of the Commissioners in the CONCOM do not necessarily translate to the adoption of the 1973 Constitution provision allowing service contracts.While certain commissioners may have mentioned the term service contracts during the CONCOM deliberations, they may not have been necessarily referring to the concept of service contracts under the 1973 Constitution. As noted earlier, service contracts is a term that assumes different meanings to different people. The commissioners may have been using the term loosely, and not in its technical and legal sense, to refer, in general, to agreements concerning natural resources entered into by the Government with foreign corporations. These loose statements do not necessarily translate to the adoption of the 1973 Constitution provision allowing service contracts. Same; Same; Same; Administrative Law; When an administrative or executive agency renders an opinion or issues a statement of policy, it merely interprets a pre-existing law; and the administrative interpretation of the law is at best advisory, for it is the courts that finally determine what the law means.WMCP cites Opinion No. 75, s. 1987, and Opinion No. 175, s. 1990 of the Secretary of Justice, expressing the view that a financial or technical assistance agreement is no different in concept from the service contract allowed under the 1973 Constitution. This Court is not, however, bound by this interpretation. When an administrative or executive agency renders an opinion or issues a statement of policy, it merely interprets a preexisting law; and the administrative interpretation, of the law is at best advisory, for it is the courts that finally determine what the law means. Same; Same; Same; The President may enter into FTAAs with foreign-owned corporation in the exploitation of our natural resources.In any case, the constitutional provision allowing the President to enter into FTAAs with foreign-owned corporations is an exception to the rule that participation in the nations natural resources is reserved exclusively to Filipinos. Accordingly, such provision must be construed strictly against their enjoyment by non-Filipinos. As Commissioner Villegas emphasized, 163

VOL. 421, JANUARY 27, 2004 163 La Bugal-BLaan Tribal Association, Inc. vs. Ramos the provision is very restrictive. Commissioner Nolledo also remarked that entering into service contracts is an exception to the rule on protection of natural resources for the interest of the nation and, therefore, being an exception, it should be subject, whenever possible, to stringent rules. Indeed, exceptions should be strictly but reasonably construed; they extend only so far as their language fairly warrants and all doubts should be resolved in favor of the general provision rather than the exception.

Same; Same; Same; Philippine Mining Act of 1995 (Republic Act No. 7942); With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes service contracts. With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes service contracts. Although the statute employs the phrase financial and technical agreements in accordance with the 1987 Constitution, it actually treats these agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law. Same; Same; Same; Same; The underlying assumption in all some of the provisions of R.A. No. 7942 is that the foreign contractor manages the mineral resources, just like the foreign contractor in a service contract; By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the nations mineral resources to these contractors, leaving the State with nothing but bare title thereto. The underlying assumption in all these provisions is that the foreign contractor manages the mineral resources, just like the foreign contractor in a service contract. Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same auxiliary mining rights that it grants contractors in mineral agreements (MPSA, CA and JV). Parenthetically, Sections 72 to 75 use the term contractor, without distinguishing between FTAA and mineral agreement contractors. And so does holders of mining rights in Section 76. A foreign contractor may even convert its FTAA into a mineral agreement if the economic viability of the contract area is found to be inadequate to justify large-scale mining operations, provided that it reduces its equity in the corporation, partnership, association or cooperative to forty percent (40%). Finally, under the Act, an FTAA contractor warrants that it has or has access to all the financing, managerial, and technical expertise . . . . This suggests that an FTAA contractor is bound to provide some management assistancea form of assistance that has been eliminated and, therefore, proscribed by the present Charter. By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the nations mineral resources to these contractors, leaving the State with nothing but bare title thereto. 164

164 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Same; Same; Same; Same; Provisions of R.A. No. 7942 Violative of Section 2, Article XII of the Constitution.In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of the Constitution: (1) The proviso in Section 3 (aq), which defines qualified person, to wit: Provided, That a legally organized foreign-owned corporation shall be deemed a qualified person for purposes of granting an exploration permit, financial or technical assistance agreement or mineral processing permit. (2) Section 23, which specifies the rights and obligations of an exploration permittee,

insofar as said section applies to a financial or technical assistance agreement; (3) Section 33, which prescribes the eligibility of a contractor in a financial or technical assistance agreement; (4) Section 35, which enumerates the terms and conditions for every financial or technical assistance agreement; (5) Section 39, which allows the contractor in a financial and technical assistance agreement to convert the same into a mineral production-sharing agreement; Section 37, which prescribes the procedure for filing and evaluation of financial or technical assistance agreement proposals; Section 38, which limits the term of financial or technical assistance agreements; Section 40, which allows the assignment or transfer of financial or technical assistance agreements; Section 41, which allows the withdrawal of the contractor in an FTAA; The second and third paragraphs of Section 81, which provide for the Governments share in a financial and technical assistance agreement; and Section 90, which provides for incentives to contractors in FTAAs insofar as it applies to said contractors; Same; Same; Same; Same; 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.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. Same; International Law; Treaties; Equal Protection Clause; The annulment of the FTAA would not constitute a breach of the Agreement on the Promotion and Protection of Investments between the Philippine and Australian Governments, for the decision herein invalidating the subject FTAA forms part of the legal system of the Philippines, and the equal protection clause guarantees that such decision shall apply to all contracts belonging to the same class, hence, upholding rather than violating, the fair and 165

VOL. 421, JANUARY 27, 2004 165 La Bugal-BLaan Tribal Association, Inc. vs. Ramos equitable treatment stipulation in said treaty.The invalidation of the subject FTAA, it is argued, would constitute a breach of said treaty which, in turn, would amount to a violation of Section 3, Article II of the Constitution adopting the generally accepted principles of international law as part of the law of the land. One of these generally accepted principles is pacta sunt servanda, which requires the performance

in good faith of treaty obligations. Even assuming arguendo that WMCP is correct in its interpretation of the treaty and its assertion that the Philippines could not . . . deprive an Australian investor (like *WMCP+) of fair and equitable treatment by invalidating *WMCPs+ FTAA without likewise nullifying the service contracts entered into before the enactment of RA 7942 . . ., the annulment of the FTAA would not constitute a breach of the treaty invoked. For this decision herein invalidating the subject FTAA forms part of the legal system of the Philippines. The equal protection clause guarantees that such decision shall apply to all contracts belonging to the same class, hence, upholding rather than violating, the fair and equitable treatment stipulation in said treaty. Same; Statutory Construction; A constitution is not to be interpreted as demanding the impossible or the impracticableand unreasonable or absurd consequences, if possible, should be avoidedcourts are not to give words a meaning that would lead to absurd or unreasonable consequences and a literal interpretation is to be rejected if it would be unjust or lead to absurd results.One other matter requires clarification. Petitioners contend that, consistent with the provisions of Section 2, Article XII of the Constitution, the President may enter into agreements involving either technical or financial assistance only. The agreement in question, however, is a technical and financial assistance agreement. Petitioners contention does not lie. To adhere to the literal language of the Constitution would lead to absurd consequences. As WMCP correctly put it: x x x such a theory of petitioners would compel the government (through the President) to enter into contract with two (2) foreign-owned corporations, one for financial assistance agreement and with the other, for technical assistance over one and the same mining area or land; or to execute two (2) contracts with only one foreign-owned corporation which has the capability to provide both financial and technical assistance, one for financial assistance and another for technical assistance, over the same mining area. Such an absurd result is definitely not sanctioned under the canons of constitutional construction. [Italics in the original.] Surely, the framers of the 1987 Charter did not contemplate such an absurd result from their use of either/or. A constitution is not to be interpreted as demanding the impossible or the impracticable; and unreasonable or absurd consequences, if possible, should be avoided. Courts are not to give words a meaning that would lead to absurd or unreasonable consequences and a literal interpretation is to be rejected if it would be unjust or lead to absurd results. That 166

166 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos is a strong argument against its adoption. Accordingly, petitioners interpretation must be rejected. VITUG, J., Separate Opinion:

National Economy and Patrimony; Statutory Construction; It could not have been the object of the framers of the Charter to limit the contracts which the President may enter into, to mere agreements for financial and technical assistance; The Constitution has not prohibited the State from itself exploring, developing, or utilizing the countrys natural resources, and, for this purpose, it may, enter into the necessary agreements with individuals or entities in the pursuit of a feasible operation.The majority would cite the emphatic statements of Commissioners Villegas and Davide that the countrys natural resources are exclusively reserved for Filipino citizens and that, according to Commissioner Villegas, the deletion of the phrase service contracts (is the) first attempt to avoid some of the abuses in the past regime in the use of service contracts to go around the 60-40 arrangement. These declarations do not necessarily mean that the Government may no longer enter into service contracts with foreign entities. In order to uphold and strengthen the national policy of preserving and developing the countrys natural resources exclusively for the Filipino people, the present Constitution indeed has provided for safeguards to prevent the execution of service contracts of the old regime, but not of service contracts per se. It could not have been the object of the framers of the Charter to limit the contracts which the President may enter into, to mere agreements for financial and technical assistance. One would take it that the usual terms and conditions recognized and stipulated in agreements of such nature have been contemplated. Basically, the financier and the owner of know-how would understandably satisfy itself with the proper implementation and the profitability of the project. It would be abnormal for the financier and owner of the know-how not to assure itself that all the activities needed to bring the project into fruition are properly implemented, attended to, and carried out. Needless to say, no foreign investor would readily lend financial or technical assistance without the proper incentives, including fair returns, therefor. The Constitution has not prohibited the State from itself exploring, developing, or utilizing the countrys natural resources, and, for this purpose, it may, I submit, enter into the necessary agreements with individuals or entities in the pursuit of a feasible operation. Same; Supreme Court; Judicial Review; Separation of Powers; While I cannot ignore an impression of the business community that the Supreme Court is wont, at times, to interfere with the economic decisions of Congress and the governments economic managers, I must hasten to add, however, that in so voting as above, I have not been unduly overwhelmed by that perception.Just a word. While I cannot ignore an impression of the busi167

VOL. 421, JANUARY 27, 2004 167 La Bugal-BLaan Tribal Association, Inc. vs. Ramos ness community that the Court is wont, at times, to interfere with the economic decisions of Congress and the governments economic managers, I must hasten to add, however, that in so voting as above, I have not been unduly overwhelmed by that perception. Quite the contrary, the Court has always

proceeded with great caution, such as now, in resolving cases that could inextricably involve policy questions thought to be best left to the technical expertise of the legislative and executive departments. PANGANIBAN, J., Separate Opinion:

Moot and Academic Issues; I believe that the Court should dismiss the Petition on the ground of mootnessa decision on the constitutionality issue should await the wisdom of a new day when the Court would have a live case before it.With due respect, I believe that the Court should dismiss the Petition on the ground of mootness. I submit that a decision on the constitutionality issue should await the wisdom of a new day when the Court would have a live case before it. The nullity of the FTAA is unarguably premised upon the contractor being a foreign corporation. Had the FTAA been originally issued to a Filipino-owned corporation, we would have had no constitutionality issue to speak of. Upon the other hand, conveyance of the FTAA to a Filipino corporation can be likened to the sale of land to a foreigner who subsequently acquires Filipino citizenship, or who later re-sells the same land to a Filipino citizen. The conveyance would be validated, as the property in question would no longer be owned by a disqualified vendee. Since the FTAA is now to be implemented by a Filipino corporation, how can the Court still declare it unconstitutional? The CA case is a dispute between two Filipino companies (Sagittarius and Lepanto) both claiming the right to purchase the foreign shares in WMCP. So regardless of which side eventually wins, the FTAA would still be in the hands of a qualified Filipino company. National Economy and Patrimony; Statutory Construction; If the intention of the drafters were strictly to confine foreign corporations to financial or technical assistance and nothing more, their language would have been unmistakably restrictive and stringent.First, the drafters choice of wordstheir use of the phrase agreements x x x involving x x x technical or financial assistancedoes not absolutely indicate the intent to exclude other modes of assistance. Rather, the phrase signifies the possibility of the inclusion of other activities, provided they bear some reasonable relationship to and compatibility with financial or technical assistance. If the intention of the drafters were strictly to confine foreign corporations to financial or technical assistance and nothing more, I am certain that their language would have been unmistakably restrictive and stringent. They would have said, for example: Foreign corporations are prohibited from providing management or other forms of assistance, or words to that effect. The conscious avoidance of restrictive wording bespeaks an intent 168

168 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos

not to employin an exclusionary, inflexible and limiting mannerthe expression agreements involving technical or financial assistance. Same; Same; Service Contracts; The present Constitution still recognizes and allows service contracts (and has not rendered them taboo), albeit subject to several restrictions and modifications aimed at avoiding the pitfalls of the past.Second, I believe the foregoing position is supported by the fact that our present Constitution still recognizes and allows service contracts (and has not rendered them taboo), albeit subject to several restrictions and modifications aimed at avoiding the pitfalls of the past. Below are some excerpts from the deliberations of the Constitutional Commission (Concom), showing that its members discussed technical or financial agreements in the same breath as service contracts and used the terms interchangeably. Same; Same; Same; In the minds of the commissioners, the concept of technical and financial assistance agreements did not exist at all apart from the concept of service contracts duly modified to prevent abusestechnical and financial agreements were understood by the delegates to include service contracts duly modified to prevent abuses.The foregoing is but a small sampling of the lengthy discussions of the constitutional commissioners on the subject of service contracts and technical and financial assistance agreements. Quoting the rest of their discussions would have taken up several more pages, and these have thus been omitted for the sake of brevity. In any event, it would appear that the members of the Concom actually had in mind the Marcos era service contracts that they were familiar with (but which they duly modified and restricted so as to prevent abuses), when they were crafting and polishing the provisions dealing with financial and/or technical assistance agreements. These provisions ultimately became the fourth and the fifth paragraphs of Section 2 of Article XII of the 1987 Constitution. Put differently, technical and financial assistance agreements were understood by the delegates to include service contracts duly modified to prevent abuses. Since the drafters were referring only to service contracts to be granted to foreigners and to nothing else, this fact necessarily implies that we ought not treat the idea of agreements involving either technical or financial assistance as having any significance or existence apart from service contracts. In other words, in the minds of the commissioners, the concept of technical and financial assistance agreements did not exist at all apart from the concept of service contracts duly modified to prevent abuses. Same; Same; Same; Current business practices often require borrowers seeking huge loans to allow creditors access to financial records and other data, and probably a seat or two on the formers board of directors, or at least some participation in certain management decisions that may have an impact on the financial health or long-term viability of the debtor, 169

VOL. 421, JANUARY 27, 2004 169

La Bugal-BLaan Tribal Association, Inc. vs. Ramos which of course will directly affect the latters capacity to repay its loans.Tantamount to closing ones eyes to reality is the insistence that the term agreements involving technical or financial assistance refers only to purely technical or financial assistance to be rendered to the State by a foreign corporation (and must perforce exclude management and other forms of assistance). Nowadays, securing the kind of financial assistance required by large-scale explorations, which involve hundreds of millions of dollars, is not just a matter of signing a simple promissory note in favor of a lender. Current business practices often require borrowers seeking huge loans to allow creditors access to financial records and other data, and probably a seat or two on the formers board of directors; or at least some participation in certain management decisions that may have an impact on the financial health or longterm viability of the debtor, which of course will directly affect the latters capacity to repay its loans. Prudent lending practices necessitate a certain degree of involvement in the borrowers management process. Same; Same; Same; If the Supreme Court closes its doors to international realities and unilaterally sets up its own concepts of strict technical and financial assistance, then it may unwittingly make the country a virtual hermitan economic isolationistin the real world of finance.Given the modern-day reality that even the World Bank (WB) and the International Monetary Fund (IMF) do not lend on the basis merely of bare promissory notes, but on some conditionalities designed to assure the borrowers financial viability, I would like to hear in an Oral Argument in a live, not a moot, case what these international practices are and how they impact on our constitutional restrictions. This is not to say that we should bend our basic law; rather, we should find out what kind of FTAA provisions are realistic vis-vis these international standards and our constitutional protection. Unless there is a live FTAA, the Court would not be able to analyze the provisions vis--vis the Constitution, the Mining Law and these modern day lending practices. I mentioned the WB and the IMF, not necessarily because I agree with their oftentimes stringent policies, but because they set the standards that international and multinational financial institutions often take bearings from. The WB and IMF are akin (though not equivalent) to the Bangko Sentral, which all Philippine banks must abide by. If this Court closes its doors to these international realities and unilaterally sets up its own concepts of strict technical and financial assistance, then it may unwittingly make the country a virtual hermitan economic isolationistin the real world of finance. Constitutions; Statutory Construction; The commissioners fully realized that their work would have to withstand the test of time, that the Charter, though crafted with the wisdom born of past experiences and lessons painfully learned, would have to be a living document that would answer the needs of the nation well into the future.I believe that the 170

170

SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Concom did not mean to tie the hands of the President and restrict the latter only to agreements on rigid financial and technical assistance and nothing else. The commissioners fully realized that their work would have to withstand the test of time; that the Charter, though crafted with the wisdom born of past experiences and lessons painfully learned, would have to be a living document that would answer the needs of the nation well into the future. Thus, the unerring emphasis on flexibility and adaptability. SPECIAL CIVIL ACTION in the Supreme Court. Mandamus and Prohibition.

The facts are stated in the opinion of the Court. Marivic M.V.F. Leonen, Edgar DL Bernal, Ingrid Rosalie L. Gorre and Emily L. Manuel for petitioners. Ma. Paz G. Luna for petitioner David de Vera, et al. Magistrado A. Mendoza for petitioner KAISAHAN. The Solicitor General for public respondents. Factoran and Associates Law Office; Belo, Gozon, Elma, Parel, Asuncion and Lucila; and Azcuna, Yorac, Sarmiento, Arroyo & Chua for private respondent WMC (Phils.). Mario C.V. Jalandoni co-counsel for WMC (Phils.). CARPIO-MORALES, J.:

The present petition for mandamus and prohibition assails the constitutionality of Republic Act No. 7942,5 otherwise known as the PHILIPPINE MINING ACT OF 1995, along with the Implementing Rules and Regulations issued pursuant thereto, Department of Environment and Natural Resources (DENR) Administrative Order 96-40, and of the Financial and Technical Assistance Agreement (FTAA) entered into on March 30, 1995 by the Republic of the Philippines and WMC (Philippines), Inc. (WMCP), a corporation organized under Philippine laws. On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No. 2796 authorizing the DENR Secretary to _______________

5 An Act Instituting A New System of Mineral Resources Exploration, Development, Utilization and Conservation. 6 Authorizing the Secretary of Environment and Natural Resources to Negotiate and Conclude Joint Venture, Co-Production, or Production171

VOL. 421, JANUARY 27, 2004 171 La Bugal-BLaan Tribal Association, Inc. vs. Ramos accept, consider and evaluate proposals from foreign-owned corporations or foreign investors for contracts of agreements involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, which, upon appropriate recommendation of the Secretary, the President may execute with the foreign proponent. In entering into such proposals, the President shall consider the real contributions to the economic growth and general welfare of the country that will be realized, as well as the development and use of local scientific and technical resources that will be promoted by the proposed contract or agreement. Until Congress shall determine otherwise, large-scale mining, for purpose of this Section, shall mean those proposals for contracts or agreements for mineral resources exploration, development, and utilization involving a committed capital in a single mining unit project of at least Fifty Million Dollars in United States currency (US $50,000,000.00).7 On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to govern the exploration, development, utilization and processing of all mineral resources.8 R.A. No. 7942 defines the modes of mineral agreements for mining operations,9 outlines the procedure for their filing and approval,10 assignment/transfer11 and withdrawal,12 and fixes their terms.13 Similar provisions govern financial or technical assistance agreements.14 The law prescribes the qualifications of contractors15 and grants them certain rights, including timber,16 water17 and ease_______________

Sharing Agreements for the Exploration, Development and Utilization of Mineral Resources, and Prescribing the Guidelines for such Agreements and those Agreements involving Technical or Financial Assistance by Foreign-Owned Corporations for Large-Scale Exploration, Development and Utilization of Minerals. 7 Exec. Order No. 279 (1987), sec. 4.

8 Rep. Act No. 7942 (1995), sec. 15. 9Id., sec. 26 (a)-(c). 10 Id., sec. 29. 11 Id., sec. 30. 12 Id., sec. 31. 13 Id., sec. 32. 14 Id., ch. VI. 15 Id., secs. 27 and 33 in relation to sec. 3 (aq). 16 Id., sec. 72. 17 Id., sec. 73. 172

172 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos ment18 rights, and the right to possess explosives.19 Surface owners, occupants, or concessionaires are forbidden from preventing holders of mining rights from entering private lands and concession areas.20 A procedure for the settlement of conflicts is likewise provided for.21 The Act restricts the Conditions for exploration,22 quarry23 and other24 permits. It regulates the transport, sale and processing of minerals,25 and promotes the development of mining communities, science and mining technology,26 and safety and environmental protection.27 The governments share in the agreements is spelled out and allocated,28 taxes and fees are imposed,29 incentives granted.30 Aside from penalizing certain acts,31 the law likewise specifies grounds for the cancellation, revocation and termination of agreements and permits.32 On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and Manila Times, two newspapers of general circulation, R.A. No. 7942 took effect.33 Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995, the President entered into an FTAA with WMCP covering 99,387 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato.34

_______________

18 Id., sec. 75. 19 Id., sec. 74. 20 Id., sec. 76. 21 Id., ch. XIII. 22 Id., secs. 20-22. 23 Id., secs. 43, 45. 24 Id., secs. 46-49, 51-52. 25 Id., ch. IX. 26 Id., ch. X. 27 Id., ch. XI. 28 Id., ch. XIV. 29 Id., ch. XV. 30 Id., ch. XVI. 31 Id., ch. XIX 32 Id., ch. XVII. 33 Section 116, R.A. No. 7942 provides that the Act shall take effect thirty (30) days following its complete publication in two (2) newspapers of general circulation in the Philippines. 34 WMCP FTAA, sec. 4.1. 173

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On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the Implementing Rules and Regulations of R.A. No. 7942. This was later repealed by DAO No. 96-40, s. 1996 which was adopted on December 20, 1996. On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary demanding that the DENR stop the implementation of R.A. No, 7942 and DAO No. 96-40,35 giving the DENR fifteen days from receipt36 to act thereon. The DENR, however, has yet to respond or act on petitioners letter.37 Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary restraining order. They allege that at the time of the filing of the petition, 100 FTAA applications had already been filed, covering an area of 8.4 million hec-tares,38 64 of which applications are by fully foreign-owned corporations covering a total of 5.8 million hectares, and at least one by a fully foreignowned mining company over offshore areas.39 Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction: I

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows fully foreign owned corporations to explore, develop, utilize and exploit mineral resources in a manner contrary to Section 2, paragraph 4, Article XII of the Constitution; II

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows the taking of private property without the determination of public use and for just compensation; _______________

35 Rollo, p. 22. 36 Ibid. 37 Ibid. 38 Ibid. The number has since risen to 129 applications when the petitioners filed their Reply. (Rollo, p. 363.) 39 Id., at p. 22.

174

174 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos III

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it violates Sec. 1, Art. III of the Constitution; IV

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows enjoyment by foreign citizens as well as fully foreign owned corporations of the nations marine wealth contrary to Section 2, paragraph 2 of Article XII of the Constitution; V

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows priority to foreign and fully foreign owned corporations in the exploration, development and utilization of mineral resources contrary to Article XII of the Constitution; VI

x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows the inequitable sharing of wealth contrary to Sections [sic] 1, paragraph 1, and Section 2, paragraph 4[,] [Article XII] of the Constitution; VII

x x x in recommending approval of and implementing the Financial and Technical Assistance Agreement between the President of the Republic of the Philippines and Western Mining Corporation Philippines, Inc. because the same is illegal and unconstitutional.40 They pray that the Court issue an order: (a) Permanently enjoining respondents from acting on any application for Financial or Technical Assistance Agreements; (b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as unconstitutional and null and void; (c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act contained in DENR Administrative Order No. 96-40 and all other similar administrative issuances as unconstitutional and null and void; and _______________

40 Id., at pp. 23-24. 175

VOL. 421, JANUARY 27, 2004 175 La Bugal-BLaan Tribal Association, Inc. vs. Ramos (d) Cancelling the Financial and Technical Assistance Agreement issued to Western Mining Philippines, Inc. as unconstitutional, illegal and null and void.41 Impleaded as public respondents are Ruben Torres, the then Executive Secretary, Victor O. Ramos, the then DENR Secretary, and Horacio Ramos, Director of the Mines and Geosciences Bureau of the DENR. Also impleaded is private respondent WMCP, which entered into the assailed FTAA with the Philippine Government. WMCP is owned by WMC Resources International Pty., Ltd. (WMC), a wholly owned subsidiary of Western Mining Corporation Holdings Limited, a publicly listed major Australian mining and exploration company.42 By WMCPs information, it is a 100% owned subsidiary of WMC LIMITED.43 Respondents, aside from meeting petitioners contentions, argue that the requisites for judicial inquiry have not been met and that the petition does not comply with the criteria for prohibition and mandamus. Additionally, respondent WMCP argues that there has been a violation of the rule on hierarchy of courts.

After petitioners filed their reply, this Court granted due course to the petition. The parties have since filed their respective memoranda. WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that on January 23, 2001 WMC sold all its shares in WMCP to Sagittarius Mines, Inc. (Sagittarius), a corporation organized under Philippine laws.44 WMCP was subsequently renamed Tampakan Mineral Resources Corporation.45 WMCP claims that at least 60% of the equity of Sagittarius is owned by Filipinos and/or Filipino-owned corporations while about 40% is owned by Indophil Resources NL, an Australian company.46 It further claims that by such sale and transfer of shares, WMCP has ceased to be connected in any way with WMC.47 _______________

41 Id., at pp. 52-53. Emphasis and italics supplied. 42 WMCP FTAA, p. 2. 43 Rollo, p. 220. 44 Id., at p. 754. 45 Vide Note 4. 46 Rollo, p. 754. 47 Id., at p. 755. 176

176 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos By virtue of such sale and transfer, the DENR Secretary, by Order of December 18, 2001,48 approved the transfer and registration of the subject FTAA from WMCP to Sagittarius. Said Order, however, was appealed by Lepanto Consolidated Mining Co. (Lepanto) to the Office of the President which upheld it by Decision of July 23, 2002.49 Its motion for reconsideration having been denied by the Office of the President by Resolution of November 12, 2002,50 Lepanto filed a petition for review51 before the Court of Appeals. Incidentally, two other petitions for review related to the approval of the transfer and registration of the FTAA to Sagittarius were recently resolved by this Court.52

It bears stressing that this case has not been rendered moot either by the transfer and registration of the FTAA to a Filipino-owned corporation or by the non-issuance of a temporary restraining order or a preliminary injunction to stay the above-said July 23, 2002 decision of the Office of the President.53 The validity of the transfer remains in dispute and awaits final judicial determination. This assumes, of course, that such transfer cures the FTAAs alleged unconstitutionality, on which question judgment is reserved. WMCP also points out that the original, claimowners of the major mineralized areas included in the WMCP FTAA, namely, Sagittarius, Tampakan Mining Corporation, and Southcot Mining Corporation, are all Filipino-owned corporations,54 each of which was a holder of an approved Mineral Production Sharing Agreement _______________

48 Id., at pp. 761-763. 49 Id., at pp. 764-776. 50 Id., at pp. 782-786. 51 Docketed as C.A.-G.R. No. 74161. 52 G.R. No. 153885, entitled Lepanto Consolidated Mining Company v. WMC Resources International Pty. Ltd., et al., decided September 24, 2003, 412 SCRA 101 and G.R. No. 156214, entitled Lepanto Mining Company v. WMC Resources International Pty. Ltd., WMC (Philippines), Inc., Southcot Mining Corporation, Tampakan Mining Corporation and Sagittarius Mines, Inc., decided September 23, 2003. 53 Section 12, Rule 43 of the Rules of Court, invoked by private respondent, states, The appeal shall not stay the award, judgment, final order or resolution sought to be reviewed unless the Court of Appeals shall direct otherwise upon such terms as it may deem just. 54 WMCPs Reply (dated May 6, 2003) to Petitioners Comment (to the Manifestation and Supplemental Manifestation), p. 3. 177

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awarded in 1994, albeit their respective mineral claims were subsumed in the WMCP FTAA;55 and that these three companies are the same companies that consolidated their interests in Sagittarius to whom WMC sold its 100% equity in WMCP.56 WMCP concludes that in the event that the FTAA is invalidated, the MPSAs of the three corporations would be revived and the mineral claims would revert to their original claimants.57 These circumstances, while informative, are hardly significant in the resolution of this case, it involving the validity of the FTAA, not the possible consequences of its invalidation. Of the above-enumerated seven grounds cited by petitioners, as will be shown later, only the first and the last need be delved into; in the latter, the discussion shall dwell only insofar as it questions the effectivity of E.O. No. 279 by virtue of which order the questioned FTAA was forged. I

Before going into the substantive issues, the procedural questions posed by respondents shall first be tackled. Requisites For Judicial Review When an issue of constitutionality is raised, this Court can exercise its power of judicial review only if the following requisites are present: (1) The existence of an actual and appropriate case; (2) A personal and substantial interest of the party raising the constitutional question; (3) The exercise of judicial review is pleaded at the earliest opportunity; and (4) The constitutional question is the lis mota of the case.58 _______________

55 Ibid. 56 Ibid. 57 WMCPs Reply (dated May 6, 2003) to Petitioners Comment (to the Manifestation and Supplemental Manifestation), p. 4. 58 Philippine Constitution Association v. Enriquez, 235 SCRA 506 (1994); National Economic Protectionism Association v. Ongpin, 171 SCRA 657 (1989); Dumlao v. Commission on Elections, 95 SCRA 392 (1980).

178

178 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Respondents claim that the first three requisites are not present. Section 1, Article VIII of the Constitution states that (j)udicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable. The power of judicial review, therefore, is limited to the determination of actual cases and controversies.59 An actual case or controversy means an existing case or controversy that is appropriate or ripe .for determination, not conjectural or anticipatory,60 lest the decision of the court would amount to an advisory opinion.61 The power does not extend to hypothetical questions62 since any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.63 Legal standing or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged,64 alleging more than a generalized grievance.65 The gist of the question of standing is whether a party alleges such personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions.66 Unless a person is injuriously affected in any of his constitutional rights by the operation of statute or ordinance, he has no standing.67 Petitioners traverse a wide range of sectors. Among them are La Bugal Blaan Tribal Association, Inc., a farmers and indigenous _______________

59 Dumlao v. Commission on Elections, supra. 60 Board of Optometry v. Colet, 260 SCRA 88 (1996). 61 Dumlao v. Commission on Elections, supra. 62 Subic Bay Metropolitan Authority v. Commission on Elections, 262 SCRA 492 (1996). 63 Angara v. Electoral Commission, 63 Phil. 139 (1936).

64 Integrated Bar of the Philippines v. Zamora, 338 SCRA 81, 100 (2000); Dumlao v. Commission on Elections, supra; People v. Vera, 65 Phil. 56 (1937). 65 Dumlao v. Commission on Elections, supra. 66 Integrated Bar of the Philippines v. Zamora, supra. 67 Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila, 21 SCRA 449 (1967). 179

VOL. 421, JANUARY 27, 2004 179 La Bugal-BLaan Tribal Association, Inc. vs. Ramos peoples cooperative organized under Philippine laws representing a community actually affected by the mining activities of WMCP, members of said cooperative,68 as well as other residents of areas also affected by the mining activities of WMCP.69 These petitioners have standing to raise the constitutionality of the questioned FTAA as they allege a personal and substantial injury. They claim that they would suffer irremediable displacement70 as a result of the implementation of the FTAA allowing WMCP to conduct mining activities in their area of residence. They thus meet the appropriate case requirement as they assert an interest adverse to that of respondents who, on the other hand, insist on the FTAAs validity. In view of the alleged impending injury, petitioners also have standing to assail the validity of E.O. No. 279, by authority of which the FTAA was executed. Public respondents maintain that petitioners, being strangers to the FTAA, cannot sue either or both contracting parties to annul it.71 In other words, they contend that petitioners are not real parties in interest in an action for the annulment of contract. Public respondents contention fails. The present action is not merely one for annulment of contract but for prohibition and mandamus. Petitioners allege that public respondents acted without or in excess of jurisdiction in implementing the FTAA, which they submit is unconstitutional. As the case involves constitutional questions, this Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal standing. As held in Kilosbayan v. Morato:72 x x x. It is important to note . . . that standing because of its constitutional and public policy underpinnings, is very different from questions relating to whether a particular plaintiff is the real party in interest or has _______________

68 Petitioners Roberto P. Amloy, Raqim L. Dabie, Simeon H. Dolojo, Imelda Gandon, Leny B. Gusanan, Marcelo L. Gusanan, Quintal A. Labuayan, Lomingges Laway, and Benita P. Tacuayan. 69 Petitioners Flong Agustin M. Dabie, Mario L. Mangcal, Alden S. Tusan, Sr. Susuan O. Bolanio, OND, Lolita G. Demonteverde, Benjie L. Nequinto, Rose Lilia S. Romano and Amparo S. Yap. 70 Rollo, p. 6. 71 Id., at p. 337, citing Malabanan v. Gaw Ching, 181 SCRA 84 (1990). 72 246 SCRA 540 (1995). 180

180 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos capacity to sue. Although all three requirements are directed towards ensuring that only certain parties can maintain an action, standing restrictions require a partial consideration of the merits, as well as broader policy concerns relating to the proper role of the judiciary in certain areas.*+ (FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 [1985]) Standing is a special concern in constitutional law because in some cases suits are brought not by parties who have been personally injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or voters who actually sue in the public interest. Hence, the question in standing is whether such parties have alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions. (Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 [1962].) As earlier stated, petitioners meet this requirement. The challenge against the constitutionality of R.A. No. 7942 and DAO No. 96-40 likewise fulfills the requisites of justiciability. Although these laws were not in force when the subject FTAA was entered into, the question as to their validity is ripe for adjudication. The WMCP FTAA provides: 14.3 Future Legislation

Any term and condition more favourable to Financial & Technical Assistance Agreement contractors resulting from repeal or amendment of any existing law or regulation or from the enactment of a law, regulation or administrative order shall be considered a part of this Agreement. It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions that are more favorable to WMCP, hence, these laws, to the extent that they are favorable to WMCP, govern the FTAA. In addition, R.A. No. 7942 explicitly makes certain provisions apply to pre-existing agreements. SEC. 112. Non-impairment of Existing Mining/Quarrying Rights.x x x That the provisions of Chapter XIV on government share in mineral production-sharing agreement and of Chapter XVI on incentives of this Act shall immediately govern and apply to a mining lessee or contractor unless the mining lessee or contractor indicates his intention to the secretary in writing not to avail of said provisions x x x Provided, finally, 181

VOL. 421, JANUARY 27, 2004 181 La Bugal-BLaan Tribal Association, Inc. vs. Ramos That such leases, production-sharing agreements, financial or technical assistance agreements shall comply with the applicable provisions of this Act and its implementing rules and regulations. As there is no suggestion that WMCP has indicated its intention not to avail of the provisions of Chapter XVI of R.A. No. 7942, it can safely be presumed that they apply to the WMCP FTAA. Misconstruing the application of the third requisite for judicial reviewthat the exercise of the review is pleaded at the earliest opportunityWMCP points out that the petition was filed only almost two years after the execution of the FTAA, hence, not raised at the earliest opportunity. The third requisite should not be taken to mean that the question of constitutionality must be raised immediately after the execution of the state action complained of. That the question of constitutionality has not been raised before is not a valid reason for refusing to allow it to be raised later.73 A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party to promptly file a case to challenge the same. Propriety of Prohibition and Mandamus Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2 of Rule 65 read: SEC. 2. Petition for prohibition.When the proceedings of any tribunal, corporation, board, or person, whether exercising functions judicial or ministerial, are without or in excess of its or his jurisdiction, or

with grave abuse of discretion, and there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court alleging the facts with certainty and praying that judgment be rendered commanding the defendant to desist from proceeding in the action or matter specified therein. Prohibition is a preventive remedy.74 It seeks a judgment ordering the defendant to desist from continuing with the commission of an act perceived to be illegal.75 _______________

73 People v. Vera, supra. 74 Militante v. Court of Appeals, 330 SCRA 318 (2000). 75 Ibid. 182

182 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos The petition for prohibition at bar is thus an appropriate remedy. While the execution of the contract itself may be fait accompli, its implementation is not. Public respondents, in behalf of the Government, have obligations to fulfill under said contract. Petitioners seek to prevent them from fulfilling such obligations on the theory that the contract is unconstitutional and, therefore, void. The propriety of a petition for prohibition, being upheld, discussion of the propriety of the mandamus aspect of the petition is rendered unnecessary. Hierarchy of Courts The contention that the filing of this petition violated the rule on hierarchy of courts does not likewise lie. The rule has been explained thus: Between two courts of concurrent original jurisdiction, it is the lower court that should initially pass upon the issues of a case. That way, as a particular case goes through the hierarchy of courts, it is shorn of all but the important legal issues or those of first impression, which are the proper subject of attention to the appellate court. This is a procedural rule borne of experience and adopted to improve the administration of justice.

This Court has consistently enjoined litigants to respect the hierarchy of courts. Although this Court has concurrent jurisdiction with the Regional Trial Courts and the Court of Appeals to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give a party unrestricted freedom of choice of court forum. The resort to this Courts primary jurisdiction to issue said writs shall be allowed only where the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify such invocation. We held in People v. Cuaresma that: A becoming regard for judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level (inferior) courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Courts original jurisdiction to issue these writs should be allowed only where there are special and important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy necessary to prevent inordinate demands upon the Courts time and attention which are better devoted to those matters within its exclusive jurisdiction, and to pre 183

VOL. 421, JANUARY 27, 2004 183 La Bugal-BLaan Tribal Association, Inc. vs. Ramos vent further over-crowding of the Courts docket x x x.76 *Emphasis supplied.+ The repercussions of the issues in this case on the Philippine mining industry, if not the national economy, as well as the novelty thereof, constitute exceptional and compelling circumstances to justify resort to this Court in the first instance. In all events, this Court has the discretion to take cognizance of a suit which does not satisfy the requirements of an actual case or legal standing when paramount public interest is involved.77 When the issues raised are of paramount importance to the public, this Court may brush aside technicalities of procedure.78 II

Petitioners contend that E.O. No. 279 did not take effect because its supposed date of effectivity came after President Aquino had already lost her legislative powers under the Provisional Constitution. And they likewise claim that the WMC FTAA, which was entered into pursuant to E.O. No. 279, violates Section 2, Article XII of the Constitution because, among other reasons:

(1) It allows foreign-owned companies to extend more than mere financial or technical assistance to the State in the exploitation, development, and utilization of minerals, petroleum, and other mineral oils, and even permits foreign owned companies to operate and manage mining activities. (2) It allows foreign-owned companies to extend both technical and financial assistance, instead of either technical or financial assistance. To appreciate the import of these issues, a visit to the history of the pertinent constitutional provision, the concepts contained therein, and the laws enacted pursuant thereto, is in order. Section 2, Article XII reads in full: _______________

76 Cruz v. Secretary, of Environment and Natural Resources, 347 SCRA 128 (2000), Kapunan, J., Separate Opinion. [Emphasis supplied.] 77 Joya v. Presidential Commission on Good Government, 225 SCRA 568 (1993). 78 Integrated Bar of the Philippines v. Zamora, supra. 184

184 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In case of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons. The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. The Spanish Regime and the Regalian Doctrine The first sentence of Section 2 embodies the Regalian doctrine or jura regalia. Introduced by Spain into these Islands, this feudal concept is based on the States power of dominium, which is the capacity of the State to own or acquire property.79 _______________

79 J. Bernas, S.J., The 1987 Constitution of the Philippines: A Commentary 1009 (1996). 185

VOL. 421, JANUARY 27, 2004 185 La Bugal-BLaan Tribal Association, Inc. vs. Ramos In its broad sense, the term jura regalia refers to royal rights, or those rights which the King has by virtue of his prerogatives. In Spanish law, it refers to a right which the sovereign has over anything in which a subject has a right of property or propriedad. These were rights enjoyed during feudal times by the king as the sovereign. The theory of the feudal system was that title to all lands was originally held by the King, and while the use of lands was granted out to others who were permitted to hold them under certain conditions, the King theoretically retained the title. By fiction of law, the King was regarded as the original proprietor of all lands, and the true and only source of title, and from him all lands were held. The theory of jura regalia was therefore nothing more than a natural fruit of conquest.80

The Philippines having passed to Spain by virtue of discovery and conquest,81 earlier Spanish decrees declared that all lands were held from the Crown.82 The Regalian doctrine extends not only to land but also to all natural wealth that may be found in the bowels of the earth.83 _______________

80 Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion. 81 Id., Puno, J., Separate Opinion, and Panganiban, J., Separate Opinion. 82 Cario v. Insular Government, 212 US 449, 53 L.Ed. 595 (1909). For instance, Law 14, Title 12, Book 4 of the Recopilacion de Leyes de las Indias proclaimed: We having acquired full sovereignty over the Indies, and all lands, territories, and possessions not heretofore ceded away by our royal predecessors, or by us, or in our name, still pertaining to the royal crown and patrimony, it is our will that all lands which are held without proper and true deeds of grant be restored to us according as they belong to us, in order that after reserving before all what to us or to our viceroys, audiencias, and governors may seem necessary for public squares, ways, pastures, and commons in those places which are peopled, taking into consideration not only their present condition, but also their future and their probable increase, and after distributing to the natives what may be necessary for tillage and pasturage, confirming them in what they now have and giving them more if necessary, all the rest of said lands may remain free and unencumbered for us to dispose of as we may wish. 83 Republic v. Court of Appeals, 160 SCRA 228 (1988). It has been noted, however, that the prohibition in the [1935] Constitution against alienation by the state of mineral lands and minerals is not properly a part of the Regalian doctrine but a separate national policy designed to 186

186 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Spain, in particular, recognized the unique value of natural resources, viewing them, especially minerals, as an abundant source of revenue to finance its wars against other nations.84 Mining laws during the Spanish regime reflected this perspective.85 _______________

conserve our mineral resources and prevent the state from being deprived of such minerals as are essential to national defense. (A. Noblejas, Philippine Law on Natural Resources 126-127 [1959 ed.], citing V. Francisco, The New Mining Law.) 84 Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion, citing A. Noblejas, Philippine Law on Natural Resources 6 (1961). Noblejas continues: Thus, they asserted their right of ownership over mines and minerals or precious metals, golds, and silver as distinct from the right of ownership of the land in which the minerals were found. Thus, when on a piece of land mining was more valuable than agriculture, the sovereign retained ownership of mines although the land has been alienated to private ownership. Gradually, the right to the ownership of minerals was extended to base metals. If the sovereign did not exploit the minerals, they grant or sell it as a right separate from the land. (Id., at p. 6.) 85 In the unpublished case of Lawrence v. Garduo (L-10942, quoted in V. FRANCISCO, Philippine Law on Natural Resources 14-15 [1956]), this Court observed: The principle underlying Spanish legislation on mines is that these are subject to the eminent domain of the state. The Spanish law of July 7, 1867, amended by the law of March 4, 1868, in article 2 says: The ownership of the substances enumerated in the preceding article (among them those of inflammable nature), belong*s+ to the state, and they cannot be disposed of without the government authority. The first Spanish mining law promulgated for these Islands (Decree of Superior Civil Government of January 28, 1964), in its Article I, says: The supreme ownership of mines throughout the kingdom belong[s] to the crown and to the king. They shall not be exploited except by persons who obtained special grant from this superior government and by those who may secure it thereafter, subject to this regulation. Article 2 of the royal decree on ownership of mines in the Philippine Islands, dated May 14, 1867, which was the law in force at the time of the cession of these Islands to the Government of the United States, says: The ownership of the substances enumerated in the preceding article (among them those of inflammable nature) 187

VOL. 421, JANUARY 27, 2004 187 La Bugal-BLaan Tribal Association, Inc. vs. Ramos The American Occupation and The Concession Regime

By the Treaty of Paris of December 10, 1898, Spain ceded the archipelago known as the Philippine Islands to the United States. The Philippines was hence governed by means of organic acts that were in the nature of charters serving as a Constitution of the occupied territory from 1900 to 1935.86 Among the principal organic acts of the Philippines was the Act of Congress of July 1, 1902, more commonly known as the Philippine Bill of 1902, through which the United States Congress assumed the administration of the Philippine Islands.87 Section 20 of said Bill reserved the disposition of mineral lands of the public domain from sale. Section 21 thereof allowed the free and open exploration, occupation and purchase of mineral deposits not only to citizens of the Philippine Islands but to those of the United States as well: Sec. 21. That all valuable mineral deposits in public lands in the Philippine Islands, both surveyed and unsurveyed, are hereby declared to be free and open to exploration, occupation and purchase, and the land on _______________

belongs to the state, and they cannot be disposed of without an authorization issued by the Superior Civil Governor. Furthermore, all those laws contained provisions regulating the manner of prospecting, locating and exploring mines in private property by persons other than the owner of the land as well as the granting of concessions, which goes to show that private land did not include, without express grant, the mines that might be found therein. Analogous provisions are found in the Civil Code of Spain determining the ownership of mines. In its Article 339 (Article 420, New Civil Code) enumerating properties of public ownership, the mines are included until specially granted to private individuals. In its article 350 (Art. 437, New Civil Code) declaring that the proprietor of any parcel of land is the owner of its surface and of everything under it, an exception is made as far as mining laws are concerned. Then in speaking of minerals, the Code in its articles 426 and 427 (Art. 519, New Civil Code) provides rules governing the digging of pits by third persons on private-owned lands for the purpose of prospecting for minerals. 86 Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, 261 SCRA 528 (1996). 87 Ibid. 188

188 SUPREME COURT REPORTS ANNOTATED

La Bugal-BLaan Tribal Association, Inc. vs. Ramos which they are found, to occupation and purchase, by citizens of the United States or of said Islands: Provided, That when on any lands in said Islands entered and occupied as agricultural lands under the provisions of this Act, but not patented, mineral deposits have been found, the working of such mineral deposits is forbidden until the person, association, or corporation who or which has entered and is occupying such lands shall have paid to the Government of said Islands such additional sum or sums as will make the total amount paid for the mineral claim or claims in which said deposits are located equal to the amount charged by the Government for the same as mineral claims. Unlike Spain, the United States considered natural resources as a source of wealth for its nationals and saw fit to allow both Filipino and American citizens to explore and exploit minerals in public lands, and to grant patents to private mineral lands.88 A person who acquired ownership over a parcel of private mineral land pursuant to the laws then prevailing could exclude other persons, even the State, from exploiting minerals within his property.89 Thus, earlier jurisprudence90 held that: A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of the statutes of the United States, has the effect of a grant by the United States of the present and exclusive possession of the lands located, and this exclusive right of possession and enjoyment continues during the entire life of the location. x x x. x x x. The discovery of minerals in the ground by one who has a valid mineral location, perfect his claim and his location, not only against third persons but also against the Government. x x x. [Italics in the original.] The Regalian doctrine and the American system, therefore, differ in one essential respect. Under the Regalian theory, mineral rights are not included in a grant of land by the state; under the American doctrine, mineral rights are included in a grant of land by the government.91 _______________

88 Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J., Separate Opinion. 89 Ibid. 90 McDaniel v. Apacible and Cuisia, 42 Phil. 749 (1922). 91 NOBLEJAS, supra, at p. 5. 189

VOL. 421, JANUARY 27, 2004

189 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Section 21 also made possible the concession (frequently styled permit, license or lease)92 system.93 This was the traditional regime imposed by the colonial administrators for the exploitation of natural resources in the extractive sector (petroleum, hard minerals, timber, etc.).94 Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural resource within a given area.95 Thus, the concession amounts to complete control by the concessionaire over the countrys natural resource, for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction.96 In consideration for the right to exploit a natural resource, the concessionaire either pays rent or royalty, which is a fixed percentage of the gross proceeds.97 Later statutory enactments by the legislative bodies set up in the Philippines adopted the contractual framework of the concession.98 For instance, Act No. 2932,99 approved on August 31, 1920, which provided for the exploration, location, and lease of lands containing petroleum and other mineral oils and gas in the Philippines, and Act No. 2719,100 approved on May 14, 1917, which provided for the leasing and development of coal lands in the Philippines, both utilized the concession system.101 _______________

92 V.M.A. Dimagiba, Service Contract Concepts in Energy, 57 PHIL. L. J. 307, 313 (1982). 93 P.A. Agabin, Service Contracts: Old Wine in New Bottles?, in II DRAFT PROPOSAL OF THE 1986 U.P. Law Constitution Project 3. 94 Id., at pp. 2-3. 95 Id., at p. 3. 96 Ibid. 97 Ibid. 98 Ibid. 99 An Act to Provide for the Exploration, Location and Lease of Lands Containing Petroleum and other Mineral Oils and Gas in the Philippine Islands. 100 An Act to Provide for the Leasing and Development of Coal Lands in the Philippine Islands. 101 Agabin, supra, at p. 3. 190

190 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos The 1935 Constitution and the Nationalization of Natural Resources By the Act of United States Congress of March 24, 1934, popularly known as the Tydings-McDuffie Law, the People of the Philippine Islands were authorized to adopt a constitution.102 On July 30, 1934, the Constitutional Convention met for the purpose of drafting a constitution, and the Constitution subsequently drafted was approved by the Convention on February 8, 1935.103 The Constitution was submitted to the President of the United States on March 18, 1935.104 On March 23, 1935, the President of the United States certified that the Constitution conformed substantially with the provisions of the Act of Congress approved on March 24, 1934.105 On May 14, 1935, the Constitution was ratified by the Filipino people.106 The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources of the Philippines, including mineral lands and minerals, to be property belonging to the State.107 As adopted in a republican system, the medieval concept of jura regalia is stripped of royal overtones and ownership of the land is vested in the State.108 Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the 1935 Constitution provided: SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established _______________

102 People v. Linsangan, 62 Phil. 646 (1935). 103 Ibid. 104 Ibid. 105 Ibid.

106 Ibid. 107 Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra. 108 BERNAS, S.J., supra, at pp. 1009-1010, citing Lee Hong Hok v. David, 48 SCRA 372 (1972). 191

VOL. 421, JANUARY 27, 2004 191 La Bugal-BLaan Tribal Association, Inc. vs. Ramos under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and limit of the grant. The nationalization and conservation of the natural resources of the country was one of the fixed and dominating objectives of the 1935 Constitutional Convention.109 One delegate relates: There was an overwhelming sentiment in the Convention in favor of the principle of state ownership of natural resources and the adoption of the Regalian doctrine. State ownership of natural resources was seen as a necessary starting point to secure recognition of the states power to control their disposition, exploitation, development, or utilization. The delegates of the Constitutional Convention very well knew that the concept of State ownership of land and natural resources was introduced by the Spaniards, however, they were not certain whether it was continued and applied by the Americans. To remove all doubts, the Convention approved the provision in the Constitution affirming the Regalian doctrine. The adoption of the principle of state ownership of the natural resources and of the Regalian doctrine was considered to be a necessary starting point for the plan of nationalizing and conserving the natural resources of the country. For with the establishment of the principle of state ownership of the natural resources, it would not be hard to secure the recognition of the power of the State to control their disposition, exploitation, development or utilization.110 The nationalization of the natural resources was intended (1) to insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension to the country of foreign control through peaceful economic penetration; and (3) to avoid making the Philippines a source of international conflicts with the consequent danger to its internal security and independence.111 _______________

109 II J. Aruego, The Framing of the Philippine Constitution 592 (1949). 110 Id., at pp. 600-601. 111 Id., at p. 604. Delegate Aruego expounds: At the time of the framing of the Philippine Constitution, Filipino capital had been known to be rather shy. Filipinos hesitated as 192

192 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos The same Section 1, Article XIII also adopted the concession system, expressly permitting the State to grant licenses, concessions, or leases for the exploitation, development, or utilization of any of the natural resources. Grants, however, were limited to Filipinos or entities at least 60% of the capital of which is owned by Filipinos. The swell of nationalism that suffused the 1935 Constitution was radically diluted when on November l946, the Parity Amendment, which came in the form of an Ordinance Appended to the _______________

a general rule to invest a considerable sum of their capital for the development, exploitation, and utilization of the natural resources of the country. They had not as yet been so used to corporate enterprises as the peoples of the West. This general apathy, the delegates knew, would mean the retardation of the development of the natural resources, unless foreign capital would be encouraged to come in and help in that development. They knew that the nationalization of the natural resources would certainly not encourage the investment of foreign capital into them. But there was a general feeling in the Convention that it was better to have such development retarded or even postponed altogether until such time when the Filipinos would be ready and willing to undertake it rather than permit the natural resources to be placed under the ownership or control of foreigners in order that they might be immediately developed, with the Filipinos of the future serving not as owners but at most as tenants or workers under foreign masters. By all means, the delegates believed, the natural resources should be conserved for Filipino posterity. The nationalization of natural resources was also intended as an instrument of national defense. The Convention felt that to permit foreigner to own or control the natural resources would be to weaken the

national defense. It would be making possible the gradual extension of foreign influence into our politics, thereby increasing the possibility of foreign control. x x x. Not only these. The nationalization of the natural resources, it was believed, would prevent making the Philippines a source of international conflicts with the consequent danger to its internal security and independence. For unless the natural resources were nationalized, with the nationals of foreign countries having the opportunity to own or control them, conflicts of interest among them might arise inviting danger to the safety and independence of the nation. (Id., at pp. 605-606.) 193

VOL. 421, JANUARY 27, 2004 193 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Constitution, was ratified in a plebiscite.112 The Amendment extended, from July 4, 1946 to July 3, 1974, the right to utilize and exploit our natural resources to citizens of the United States and business enterprises owned or controlled, directly or indirectly, by citizens of the United States:113 Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coals, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any person, be open to citizens of the United States and to all forms of business enterprise owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines. The Parity Amendment was subsequently modified by the 1954 Revised Trade Agreement, also known as the Laurel-Langley Agreement, embodied in Republic Act No. 1355.114 _______________

112 Palting v. San Jose Petroleum Inc., 18 SCRA 924 (1966); Republic v. Quasha, 46 SCRA 160 (1972). 113 Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.

114 Article VI thereof provided: 1. The disposition, exploitation, development and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces and of sources of potential energy, and other natural resources of either Party, and the operation of public utilities, shall, if open to any person, be open to citizens of the other Party and to all forms of business enterprise owned or controlled directly or indirectly, by citizens of such other Party in the same manner as to and under the same conditions imposed upon citizens or corporations or associations owned or controlled by citizens of the Party granting the right. 194

194 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos The Petroleum Act of 1949 and The Concession System In the meantime, Republic Act No. 387,115 also known as the Petroleum Act of 1949, was approved on June 18, 1949. The Petroleum Act of 1949 employed the concession system for the exploitation of the nations petroleum resources. Among the kinds of concessions it sanctioned were exploration and exploitation concessions, which respectively granted to the concessionaire the exclusive right to explore for116 or develop117 petroleum within specified areas. Concessions may be granted only to duly qualified persons118 who have sufficient finances, organization, resources, technical compe_______________

2. The rights provided for in Paragraph 1 may be exercised x x x in the case of citizens of the United States, with respect to natural resources in the public domain in the Philippines, only through the medium of a corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is owned and controlled by citizens of the United States x x x. 3. The United States of America reserves the rights of the several States of the United States to limit the extent to which citizens or corporations or associations owned or controlled by citizens of the Philippines may engage in the activities specified in this article. The Republic of the Philippines reserves the power to deny and of the rights specified in this Article to citizens of the United States who are citizens of States, or to corporations or associations at least 60% of whose capital stock or capital is

owned or controlled by citizens of States, which deny like rights to citizens of the Philippines, or to corporations or associations which are owned or controlled by citizens of the Philippines x x x. 115 An Act to Promote the Exploration, Development, Exploitation, and Utilization of the Petroleum Resources of the Philippines; to Encourage the Conservation of such Petroleum Resources; to Authorize the Secretary of Agriculture and Natural Resources to Create an Administration Unit and a Technical Board in the Bureau of Mines; to Appropriate Funds therefor; and for other purposes. 116 Rep. Act No. 387 (1949), as amended, art. 10 (b). 117 Id., art. 10 (c). 118 Id., art. 5. 195

VOL. 421, JANUARY 27, 2004 195 La Bugal-BLaan Tribal Association, Inc. vs. Ramos tence, and skills necessary to conduct the operations to be under-taken.119 Nevertheless, the Government reserved the right to undertake such work itself.120 This proceeded from the theory that all natural deposits or occurrences of petroleum or natural gas in public and/or private lands in the Philippines belong to the State.121 Exploration and exploitation concessions did not confer upon the concessionaire ownership over the petroleum lands and petroleum deposits.122 However, they did grant concessionaires the right to explore, develop, exploit, and utilize them for the period and under the conditions determined by the law.123 Concessions were granted at the complete risk of the concessionaire; the Government did not guarantee the existence of petroleum or undertake, in any case, title warranty.124 Concessionaires were required to submit information as maybe required by the Secretary of Agriculture and Natural Resources, including reports of geological and geophysical examinations, as well as production reports.125 Exploration126 and exploitation127 concessionaires were also required to submit work programs. _______________

119 Id., art. 31. The same provision recognized the rights of American citizens under the Parity Amendment:

During the effectivity and subject to the provisions of the ordinance appended to the Constitution of the Philippines, citizens of the United States and all forms of business enterprises owned and controlled, directly or indirectly, by citizens of the United States shall enjoy the same rights and obligations under the provisions of this Act in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines. 120 Id., art. 10. 121 Id., art 3. 122 Id., art. 9. 123 Ibid. 124 Rep. Act No. 387 (1949), as amended, art. 8. 125 Id., art. 25. 126 Id., art. 47. 127 Id., art. 60. 196

196 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Exploitation concessionaires, in particular, were obliged to pay an annual exploitation tax,128 the object of which is to induce the concessionaire to actually produce petroleum, and not simply to sit on the concession without developing or exploiting it.129 These concessionaires were also bound to pay the Government royalty, which was not less than 12 1/2% of the petroleum produced and saved, less that consumed in the operations of the concessionaire.130 Under Article 66, R.A. No. 387, the exploitation tax may be credited against the royalties so that if the concessionaire shall be actually producing enough oil, it would not actually be paying the exploitation tax.131 Failure to pay the annual exploitation tax for two consecutive years,132 or the royalty due to the Government within one year from the date it becomes due,133 constituted grounds for the cancellation of the concession. In case of delay in the payment of the taxes or royalty imposed by the law or by the concession, a surcharge of 1% per month is exacted until the same are paid.134

As a rule, title rights to all equipment and structures that the concessionaire placed on the land belong to the exploration or exploitation concessionaire.135 Upon termination of such concession, the concessionaire had a right to remove the same.136 The Secretary of Agriculture and Natural Resources was tasked with carrying out the provisions of the law, through the Director of Mines, who acted under the Secretarys immediate supervision and control.137 The Act granted the Secretary the authority to inspect any operation of the concessionaire and to examine all the books _______________

128 Id., art. 64. Article 49, R.A. No. 387 originally imposed an annual exploration tax on exploration concessionaires but this provision was repealed by Section 1, R.A. No. 4304. 129 Francisco, supra, at p. 103. 130 Rep. Act No. 387 (1949), as amended, art. 65. 131 Francisco, supra, at p.103. 132 Rep. Act No. 387 (1949), as amended, art. 90 (b) 3. 133 Id., art. 90 (b) 4. 134 Id., art. 93-A. 135 Id., art. 93. 136 Ibid. 137 Rep. Act No. 387 (1949), as amended, art. 94. 197

VOL. 421, JANUARY 27, 2004 197 La Bugal-BLaan Tribal Association, Inc. vs. Ramos and accounts pertaining to operations or conditions related to payment of taxes and royalties.138 The same law authorized the Secretary to create an Administration Unit and a Technical Board.139 The Administration Unit was charged, inter alia, with the enforcement of the provisions of the law.140 The Technical Board had, among other functions, the duty to check on the performance of concessionaires

and to determine whether the obligations imposed by the Act and its implementing regulations were being complied with.141 Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy Development, analyzed the benefits and drawbacks of the concession system insofar as it applied to the petroleum industry: Advantages of Concession. Whether it emphasizes income tax or royalty, the most positive aspect of the concession system is that the States financial involvement is virtually risk-free and administration is simple and comparatively low in cost. Furthermore, if there is a competitive allocation of the resource leading to substantial bonuses and/or greater royalty coupled with a relatively high level of taxation, revenue accruing to the State under the concession system may compare favorably with other financial arrangements. Disadvantages of Concession. There are, however, major negative aspects to this system. Because the Governments role, in the traditional concession is passive, it is at a distinct disadvantage in managing and developing policy for the nations petroleum resource. This is true for several reasons. First, even though most concession agreements contain covenants requiring diligence in operations and production, this establishes only an indirect and passive control of the host country in resource development. Second, and more importantly, the fact that the host country does not directly participate in resource management decisions inhibits its ability to train and employ its nationals in petroleum development. This factor could delay or prevent the country from effectively engaging in the development of its resources. Lastly, a direct role in management is usually necessary in order to obtain a knowledge of the international petroleum industry which is important to an appreciation of the host countrys resources in relation to those of other countries.142 _______________

138 Id., art. 106. 139 Id., art. 95. 140 Ibid. 141 Rep. Act No. 387 (1949), as amended, art. 95 (e). 142 Dimagiba, supra, at p. 315, citing Fabrikant, Oil Discovery and Technical Change in Southeast Asia, Legal Aspects of Production Sharing 198

198 SUPREME COURT REPORTS ANNOTATED

La Bugal-BLaan Tribal Association, Inc. vs. Ramos Other liabilities of the system have also been noted: x x x there are functional implications which give the concessionaire great economic power arising from its exclusive equity holding. This includes, first, appropriation of the returns of the undertaking, subject to a modest royalty; second, exclusive management of the project; third, control of production in the natural resource, such as volume of production, expansion, research and development; and fourth, exclusive responsibility for downstream operations, like processing, marketing, and distribution. In short, even if nominally, the state is the sovereign and owner of the natural resource being exploited, it has been shorn of all elements of control over such natural resource because of the exclusive nature of the contractual regime of the concession. The concession system, investing as it does ownership of natural resources, constitutes a consistent inconsistency within the principle embodied in our Constitution that natural resources belong to the State and shall not be alienated, not to mention the fact that the concession was the bedrock of the colonial system in the exploitation of natural resources.143 Eventually, the concession system failed for reasons explained by Dimagiba: Notwithstanding the good intentions of the Petroleum Act of 1949, the concession system could not have properly spurred sustained oil exploration activities in the country, since it assumed that such a capital-intensive, high risk venture could be successfully undertaken by a single individual or a small company. In effect, concessionaires funds were easily exhausted. Moreover, since the concession system practically closed its doors to interested foreign investors, local capital was stretched to the limits. The old system also failed to consider the highly sophisticated technology and expertise required, which would be available only to multinational companies.144 A shift to a new regime for the development of natural resources thus seemed imminent. _______________

Contracts in the Indonesian Petroleum Industry, pp. 101-102, sections 13C.24 and 13C.25 (1972). 143 Agabin, supra, at p. 4. 144 Dimagiba, supra, at p. 318. 199

VOL. 421, JANUARY 27, 2004 199

La Bugal-BLaan Tribal Association, Inc. vs. Ramos Presidential Decree No. 87, The 1973 Constitution and the Service Contract System The promulgation on December 31, 1972 of Presidential Decree No. 87,145 otherwise known as THE OIL EXPLORATION AND DEVELOPMENT ACT OF 1972 signaled such a transformation. P.D. No. 87 permitted the government to explore for and produce indigenous petroleum through service contracts.146 Service contracts is a term that assumes varying meanings to different people, and it has carried many names in different countries, like work contracts in Indonesia, concession agreements in Africa, production-sharing agreements in the Middle East, and participation agreements in Latin America.147 A functional definition of service contracts in the Philippines is provided as follows: A service contract is a contractual arrangement for engaging in the exploitation and development of petroleum, mineral, energy, land and other natural resources by which a government or its agency, or a private person granted a right or privilege by the government authorizes the other party (service contractor) to engage or participate in the exercise of such right or the enjoyment of the privilege, in that the latter provides financial or technical resources, undertakes the exploitation or production of a given resource, or directly manages the productive enterprise, operations of the exploration and exploitation of the resources or the disposition of marketing or resources.148 In a service contract under P.D. No. 87, service and technology are furnished by the service contractor for which it shall be entitled to the stipulated service fee.149 The contractor must be technically competent and financially capable to undertake the operations required in the contract.150 _______________

145 Amending Presidential Decree No. 8 issued on October 2, 1972, and Promulgating an Amended Act to Promote the Discovery and Production of Indigenous Petroleum and Appropriate Funds Therefor. 146 Pres. Decree No. 87 (1972), sec. 4. 147 Agabin, supra, at p. 6. 148 M. Magallona, Service Contracts in Philippine Natural Resources, 9 WORLD BULL. 1, 4 (1993). 149 Pres. Decree No. 87 (1972), sec. 6. 150 Id., sec. 4. 200

200 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Financing is supposed to be provided by the Government to which all petroleum produced belongs.151 In case the Government is unable to finance petroleum exploration operations, the contractor may furnish services, technology and financing, and the proceeds of sale of the petroleum produced under the contract shall be the source of funds for payment of the service fee and the operating expenses due the contractor.152 The contractor shall undertake, manage and execute petroleum operations, subject to the government overseeing the management of the operations.153 The contractor provides all necessary services and technology and the requisite financing, performs the exploration work obligations, and assumes all exploration risks such that if no petroleum is produced, it will not be entitled to reimbursement.154 Once petroleum in commercial quantity is discovered, the contractor shall operate the field on behalf of the government.155 P.D. No. 87 prescribed minimum terms and conditions for every service contract.156 It also granted the contractor certain privileges, including exemption from taxes and payment of tariff duties,157 and permitted the repatriation of capital and retention of profits abroad.158 Ostensibly, the service contract system had certain advantages over the concession regime.159 It has been opined, though, that, in _______________

151 Id., sec. 6. 152 Id., sec. 7. 153 Id., sec. 8. 154 Ibid. 155 Ibid. 156 Pres. Decree No. 87 (1972), sec. 9. 157 Id., sec. 12. 158 Id., sec. 13. 159 Dimagiba draws the following comparison between the service contract scheme and the concession system: In both the concession system and the service contract scheme, work and financial obligations are required of the developer. Under Republic Act No. 387 and Presidential Decree No. 87, the

concessionaire and the service contractors are extracted certain taxes in favor of the government. In both arrangements, the explorationist/developer is given incentives in the form of tax exemptions in the importation or disposition of machinery, equipment, materials and spare parts needed in petroleum operations. 201

VOL. 421, JANUARY 27, 2004 201 La Bugal-BLaan Tribal Association, Inc. vs. Ramos the Philippines, our concept of a service contract, at least in the petroleum industry, was basically a concession regime with a production-sharing element.160 On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification of a new Constitution.161 Article XIV on the _______________

The concessionaire and the service contractor are required to keep in their files valuable data and information and may be required to submit needed technological or accounting reports to the Government. Duly authorized representatives of the Government could, under the law, inspect or audit the books of accounts of the contract holder. In both systems, signature, discovery or production bonuses may be given by the developer to the host Government. The concession system, however, differs considerably from the service contract system in important areas of the operations. In the concession system, the Government merely receives fixed royalty which is a certain percentage of the crude oil produced or other units of measure, regardless of whether the concession holder makes profits or not. This is not so in the service contract system. A certain percentage of the gross production is set aside for recoverable expenditures by the contractor. Of the net proceeds the parties are entitled percentages of share that will accrue to each of them. In the royalty system, the concessionaire may be discouraged to produce more for the reason that since the royalty paid to the host country is closely linked to the volume of production, the greater the produce, the more amount or royalty would be allocated to the Government. This is not so in the production sharing system. The share of the Government depends largely on the net proceeds of production after reimbursing the service contractor of its recoverable expenses. As a general rule, the Government plays a passive role in the concession system, more particularly, interested in receiving royalties from the concessionaire. In the production-sharing arrangement, the Government plays a more active role in the management and

monitoring of oil operations and requires the service contractor entertain obligations designed to bring more economic and technological benefits to the host country. (Dimagiba, supra, at pp. 330-331.) 160 Agabin, supra, at p. 6. 161 The antecedents leading to the Proclamation are narrated in Javellana v. Executive Secretary, 50 SCRA 55 (1973): On March 16, 1967, Congress of the Philippines passed Resolution No. 2, which was amended by Resolution No. 4, of said body,adopted on June 17, 1967, calling a convention to propose amend 202

202 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos National Economy and Patrimony contained provisions similar to the 1935 Constitution with regard to Filipino participation in the nations natural resources. Section 8, Article XIV thereof provides: Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State. With the exception of agricultural, industrial or commercial, residential and resettlement lands of the public domain, natural resources shall not be alienated, and no license, concession, or lease for the exploration, development, exploitation, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for not more than twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and limit of the grant. While Section 9 of the same Article maintained the Filipino-only policy in the enjoyment of natural resources, it also allowed Filipinos, upon authority of the Batasang Pambansa, to enter into service contracts with any person or entity for the exploration or utilization of natural resources. _______________

ments to the Constitution of the Philippines. Said Resolution No. 2, as amended, was implemented by Republic Act No. 6132 approved on August 24, 1970, pursuant to the provisions of which the election of delegates to said convention was held on November 10, 1970, and the 1971 Convention began to perform its functions on June 1, 1971. While the Convention was in session on September 21, 1972, the President issued Proclamation No. 1081 placing the entire Philippines under Martial Law. On November 29, 1972, the President of the Philippines issued Presidential Decree No. 73, submitting to the Filipino

people for ratification or rejection the Constitution of the Republic of the Philippines proposed by the 1971 Constitutional Convention, and appropriating funds therefor, as well as setting the plebiscite for such ratification on January 15, 1973. On January 17, 1973, the President issued Proclamation No. 1102 certifying and proclaiming that the Constitution proposed by the 1971 Constitutional Convention has been ratified by an overwhelming majority of all the votes cast by the members of all the Barangays (Citizens Assemblies) throughout the Philippines, and has thereby come into effect. 203

VOL. 421, JANUARY 27, 2004 203 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Sec. 9. The disposition, exploration, development, exploitation, or utilization of any of the natural resources of the Philippines shall be limited to citizens, or to corporations or associations at least sixty per centum of which is owned by such citizens. The Batasang Pambansa, in the national interest, may allow such citizens, corporations or associations to enter into service contracts for financial, technical, management, or other forms of assistance with any person or entity for the exploration, or utilization of any of the natural resources. Existing valid and binding service contracts for financial, technical, management, or other forms of assistance are hereby recognized as such. [Emphasis supplied.] The concept of service contracts, according to one delegate, was borrowed from the methods followed by India, Pakistan and especially Indonesia in the exploration of petroleum and mineral oils.162 The provision allowing such contracts, according to another, was intended to enhance the proper development of our natural resources since Filipino citizens lack the needed capital and technical knowhow which are essential in the proper exploration, development and exploitation of the natural resources of the country.163 The original idea was to authorize the government, not private entities, to enter into service contracts with foreign entities.164 As finally approved, however, a citizen or private entity could be allowed by the National Assembly to enter into such service contract.165 The prior approval of the National Assembly was deemed sufficient to protect the national interest.166 Notably, none of the laws allowing service contracts were passed by the Batasang Pambansa. Indeed, all of them were enacted by presidential decree. On March 13, 1973, shortly after the ratification of the new Constitution, the President promulgated Presidential Decree No. 151.167 The law allowed Filipino citizens or entities which have _______________

162 BERNAS, S.J., supra, at p. 1016, Note 28, citing Session of November 25, 1972. 163 Agabin, supra, at p. 1, quoting Sanvictores, The Economic Provisions in the 1973 Constitution, in Espiritu, 1979 Philconsa Reader on Constitutional and Policy Issues 449. 164 BERNAS, S.J., supra, at p. 1016, Note 28, citing Session of November 25, 1972. 165 Ibid. 166 Ibid. 167 Allowing Citizens of the Philippines or Corporations or Associations at least Sixty Per Centum of the Capital of which is Owned by such Citizens to Enter into Service Contracts with Foreign Persons, Corpora 204

204 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos acquired lands of the public domain or which own, hold or control such lands to enter into service contracts for financial, technical, management or other forms of assistance with any foreign persons or entity for the exploration, development, exploitation or utilization of said lands.168 Presidential Decree No. 463,169 also known as THE MINERAL RESOURCES DEVELOPMENT DECREE OF 1974, was enacted on May 17, 1974. Section 44 of the decree, as amended, provided that a lessee of a mining claim may enter into a service contract with a qualified domestic or foreign contractor for the exploration, development and exploitation of his claims and the processing and marketing of the product thereof. Presidential Decree No. 704170 (THE FISHERIES DECREE OF 1975), approved on May 16, 1975, allowed Filipinos engaged in commercial fishing to enter into contracts for financial, technical or other forms of assistance with any foreign person, corporation or entity for the production, storage, marketing and processing of fish and fishery/aquatic products.171 Presidential Decree No. 705172 (THE REVISED FORESTRY CODE OF THE PHILIPPINES), approved on May 19, 1975, allowed forest products licensees, lessees, or permitees to enter into service contracts for financial, technical, management, or other forms of assistance . . . with any foreign person or entity for the exploration, development, exploitation or utilization of the forest resources.173 _______________

tions for the Exploration, Development, Exploitation or Utilization of Lands of the Public Domain, Amending for the purpose certain provisions of Commonwealth Act No. 141. 168 Pres. Decree No. 151 (1973), sec. 1. 169 Providing for A Modernized System of Administration and Disposition of Mineral Lands and to Promote and Encourage the Development and Exploitation thereof. 170 Revising and Consolidating All Laws and Decrees Affecting Fishing and Fisheries. 171 Pres. Decree No. 704 (1975), sec. 21. 172 Revising Presidential Decree No. 389, otherwise known as The Forestry Reform Code of the Philippines. 173 Pres. Decree No. 705 (1975), sec. 62. 205

VOL. 421, JANUARY 27, 2004 205 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Yet another law allowing service contracts, this time for geothermal resources, was Presidential Decree No. 1442,174 which was signed into law on June 11, 1978. Section 1 thereof authorized the Government to enter into service contracts for the exploration, exploitation and development of geothermal resources with a foreign contractor who must be technically and financially capable of undertaking the operations required in the service contract. Thus, virtually the entire range of the countrys natural resourcesfrom petroleum and minerals to geothermal energy, from public lands and forest resources to fishery productswas well covered by apparent legal authority to engage in the direct participation or involvement of foreign persons or corporations (otherwise disqualified) in the exploration and utilization of natural resources through service contracts.175 The 1987 Constitution and Technical or Financial Assistance Agreements After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of power under a revolutionary government. On March 25, 1986, President Aquino issued Proclamation No. 3,176 promulgating the Provisional Constitution, more popularly referred to as the Freedom Constitution. By

authority of the same Proclamation, the President created a Constitutional Commission (CONCOM) to draft a new constitution, which took effect on the date of its ratification on February 2, 1987.177 The 1987 Constitution retained the Regalian doctrine. The first sentence of Section 2, Article XII states: All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, _______________

174 An Act to Promote the Exploration and Development of Geothermal Resources. 175 Magallona, supra, at p. 6. 176 Declaring a National Policy to Implement the Reforms Mandated by the People, Protecting their Basic Rights, Adopting a Provisional Constitution, and Providing for an Orderly Transition to a Government under a New Constitution. 177 CONST., art. XVIII, sec. 27; De Leon v. Esguerra, 153 SCRA 602 (1987). 206

206 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos flora and fauna, and other natural resources are owned by the State. Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second sentence of the same provision, prohibits the alienation of natural resources, except agricultural lands. The third sentence of the same paragraph is new: The exploration, development and utilization of natural resources shall be under the full control and supervision of the State. The constitutional policy of the States full control and supervision over natural resources proceeds from the concept of jura regalia, as well as the recognition of the importance of the countrys natural resources, not only for national economic development, but also for its security and national defense.178 Under this provision, the State assumes a more dynamic role in the exploration, development and utilization of natural resources.179 Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses, concessions, or leases for the exploration, exploitation, development, or

utilization of natural resources. By such omission, the utilization of inalienable lands of public domain through license, concession or lease is no longer allowed under the 1987 Constitution.180 Having omitted the provision on the concession system, Section 2 proceeded to introduce unfamiliar language:181 The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Consonant with the States full supervision and control over natural resources, Section 2 offers the State two options.182 One, the State may directly undertake these activities itself; or two, it _______________

178 Miners Association of the Philippines, Inc. v. Factoran, Jr., 240 SCRA 100 (1995). 179 Ibid. 180 Ibid. 181 J. Bernas, S.J., The Intent of the 1986 Constitution Writers 812 (1995). 182 Miners Association of the Philippines, Inc. v. Factoran, Jr., supra. 207

VOL. 421, JANUARY 27, 2004 207 La Bugal-BLaan Tribal Association, Inc. vs. Ramos may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or entities at least 60% of whose capital is owned by such citizens. A third option is found in the third paragraph of the same section: The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.

While the second and third options are limited only to Filipino citizens or, in the case of the former, to corporations or associations at least 60% of the capital of which is owned by Filipinos, a fourth allows the participation of foreign-owned corporations. The fourth and fifth paragraphs of Section 2 provide: The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. Although Section 2 sanctions the participation of foreign-owned corporations in the exploration, development, and utilization of natural resources, it imposes certain limitations or conditions to agreements with such corporations. First, the parties to FTAAs. Only the President, in behalf of the State, may enter into these agreements, and only with corporations. By contrast, under the 1973 Constitution, a Filipino citizen, corporation or association may enter into a service contract with a foreign person or entity. Second, the size of the activities: only large-scale exploration, development, and utilization is allowed. The term large-scale usually refers to very capital-intensive activities.183 _______________

183 III Records of the Constitutional Commission 255. 208

208 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Third, the natural resources subject of the activities is restricted to minerals, petroleum and other mineral oils, the intent being to limit service contracts to those areas where Filipino capital may not be sufficient.184 Fourth, consistency with the provisions of statute. The agreements must be in accordance with the terms and conditions provided by law.

Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must be based on real contributions to economic growth and general welfare of the country. Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and use of local scientific and technical resources. Seventh, the notification requirement. The President shall notify Congress of every financial or technical assistance agreement entered into within thirty days from its execution. Finally, the scope of the agreements. While the 1973 Constitution referred to service contracts for financial, technical, management, or other forms of assistance the 1987 Constitution provides for agreements . . . involving either financial or technical assistance. It bears noting that the phrases service contracts and management or other forms of assistance in the earlier constitution have been omitted. By virtue of her legislative powers under the Provisional Constitution,185 President Aquino, on July 10, 1987, signed into law E.O. No. 211 prescribing the interim procedures in the processing and approval of applications for the exploration, development and utilization of minerals. The omission in the 1987 Constitution of the term service contracts notwithstanding, the said E.O. still referred to them in Section 2 thereof: Sec. 2. Applications for the exploration, development and utilization of natural resources, including renewal applications and applications for approval of operating agreements and mining service contracts, shall be accepted and processed and may be approved x x x. [Emphasis supplied.] _______________

184 Id., at pp. 355-356. 185 Const. (1986), art. II, sec. 1. 209

VOL. 421, JANUARY 27, 2004 209 La Bugal-BLaan Tribal Association, Inc. vs. Ramos The same law provided in its Section 3 that the processing, evaluation and approval of all mining applications . . . operating agreements and service contracts . . . shall be governed by Presidential Decree No. 463, as amended, other existing mining laws, and their implementing rules and regulations. . . .

As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279 by authority of which the subject WMCP FTAA was executed on March 30, 1995. On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15 thereof declares that the Act shall govern the exploration, development, utilization, and processing of all mineral resources. Such declaration notwithstanding, R.A. No. 7942 does not actually cover all the modes through which the State may undertake the exploration, development, and utilization of natural resources. The State, being the owner of the natural resources, is accorded the primary power and responsibility in the exploration, development and utilization thereof. As such, it may undertake these activities through four modes: (1) The State may directly undertake such activities. (2) The State may enter into co-production, joint venture or production-sharing agreements with Filipino citizens or qualified corporations. (3) Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens. (4) For the large-scale exploration, development and utilization of minerals, petroleum and other mineral oils, the President may enter into agreements with foreign-owned corporations involving technical or financial assistance.186 Except to charge the Mines and Geosciences Bureau of the DENR with performing researches and surveys,187 and a passing mention of government-owned or controlled corporations,188 R.A. _______________

186 Cruz v. Secretary of Environment and Natural Resources, supra, Puno, J., Separate Opinion. 187 Rep. Act No. 7942 (1995), sec. 9. 188 SEC. 82. Allocation of Government Share.The Government share as referred to in the preceding sections shall be shared and allocated in accordance with Sections 290 and 292 of Republic Act No. 7160 other 210

210 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos

No. 7942 does not specify how the State should go about the first mode. The third mode, on the other hand, is governed by Republic Act No. 7076189 (the Peoples Small-Scale Mining Act of 1991) and other pertinent laws.190 R.A. No. 7942 primarily concerns itself with the second and fourth modes. Mineral production sharing, co-production and joint venture agreements are collectively classified by R.A. No. 7942 as mineral agreements.191 The Government participates the least in a mineral production sharing agreement (MPSA). In an MPSA, the Government grants the contractor192 the exclusive right to conduct mining operations within a contract area193 and shares in the gross output.194 The MPSA contractor provides the financing, technology, management and personnel necessary for the agreements implementation.195 The total government share in an MPSA is the excise tax on mineral products under Republic Act No. 7729,196 amending Section 151 (a) of the National Internal Revenue Code, as amended.197 _______________

wise known as the Local Government Code of 1991. In case the development and utilization of mineral resources is undertaken by a government-owned or controlled corporation, the sharing and allocation shall be in accordance with Sections 291 and 292 of the said Code. 189 An Act Creating A Peoples Small-Scale Mining Program and for other purposes. 190 Rep. Act No. 7942 (1995), sec. 42. 191 Id., secs. 3 (ab) and 26. 192 Contractor means a qualified person acting alone or in consortium who is a party to a mineral agreement or to a financial or technical assistance agreement. (Id., sec. 3[g].) 193 Contract area means land or body of water delineated for purposes of exploration, development, or utilization of the minerals found therein. (Id., sec. 3[f].) 194 Gross output means the actual market value of minerals or mineral products from its mining area as defined in the National Internal Revenue Code (Id., sec. 3[v]). 195 Id., sec. 26 (a). 196 An Act Reducing Excise Tax Rates on Metallic and Non-Metallic Minerals and Quarry Resources, amending for the purpose Section 151 (a) of the National Internal Revenue Code, as amended. 197 Rep. Act No. 7942 (1995), sec. (80). 211

VOL. 421, JANUARY 27, 2004 211 La Bugal-BLaan Tribal Association, Inc. vs. Ramos In a co-production agreement (CA),198 the Government provides inputs to the mining operations other than the mineral resource,199 while in a joint venture agreement (JVA), where the Governments enjoys the greatest participation, the Government and the JVA contractor organize a company with both parties having equity shares.200 Aside from earnings in equity, the Government in a JVA is also entitled to a share in the gross output.201 The Government may enter into a CA202 or JVA203 with one or more contractors. The Governments share in a CA or JVA is set out in Section 81 of the law: The share of the Government in co-production and joint venture agreements shall be negotiated by the Government and the contractor taking into consideration the: (a) capital investment of the project, (b) the risks involved, (c) contribution to the project to the economy, and (d) other factors that will provide for a fair and equitable sharing between the Government and the contractor. The Government shall also be entitled to compensations for its other contributions which shall be agreed upon by the parties, and shall consist, among other things, the contractors income tax, excise tax, special allowance, withholding tax due from the contractors foreign stockholders arising from dividend or interest payments to the said foreign stockholders, in case of a foreign national, and all such other taxes, duties and fees as provided for under existing laws. All mineral agreements grant the respective contractors the exclusive right to conduct mining operations and to extract all mineral resources found in the contract area.204 A qualified person may enter into any of the mineral agreements with the Government.205 A qualified person is any citizen of the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative organized or authorized for the purpose of engaging in mining, with technical and financial capability to undertake mineral resources development and duly registered in accor_______________

198 Id., Sec. 26 (b). 199 Mineral resource means any concentration of minerals/rocks with potential economic value. (Id., sec. 3[ad].) 200 Id., sec. 26 (c). 201 Ibid. 202 Id., sec. 3 (h). 203 Id., sec. 3 (x).

204 Id., sec. 26, last par. 205 Id., sec. 27. 212

212 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos dance with law at least sixty per centum (60%) of the capital of which is owned by citizens of the Philippines x x x.206 The fourth mode involves financial or technical assistance agreements. An FTAA is defined as a contract involving financial or technical assistance for large-scale exploration, development, and utilization of natural resources.207 Any qualified person with technical and financial capability to undertake large-scale exploration, development, and utilization of natural resources in the Philippines may enter into such agreement directly with the Government through the DENR.208 For the purpose of granting an FTAA, a legally organized foreign-owned corporation (any corporation, partnership, association, or cooperative duly registered in accordance with law in which less than 50% of the capital is owned by Filipino citizens)209 is deemed a qualified person.210 Other than the difference in contractors qualifications, the principal distinction between mineral agreements and FTAAs is the maximum contract area to which a qualified person may hold or be granted.211 Large-scale under R.A. No. 7942 is determined by the _______________

206 Id., sec. 3 (aq). 207 Id., sec. 3 (r). 208 Id., sec. 33. 209 Id., sec. 3 (t). 210 Id., sec. 3 (aq). Id., sec. 3 (aq). 211 The maximum areas in cases of mineral agreements are prescribed in Section 28 as follows: SEC. 28. Maximum Areas for Mineral Agreement.The maximum area that a qualified person may hold at any time under a mineral agreement shall be:

(a) Onshore, in any one province (1) For individuals, ten (10) blocks; and (2) For partnerships, cooperatives, associations, or corporations, one hundred (100) blocks. (b) Onshore, in the entire Philippines (1) For individuals, twenty (20) blocks; and (2) For partnerships, cooperatives, associations, or corporations, two hundred (200) blocks. (c) Offshore, in the entire Philippines (1) For individuals, fifty (50) blocks; 213

VOL. 421, JANUARY 27, 2004 213 La Bugal-BLaan Tribal Association, Inc. vs. Ramos size of the contract area, as opposed to the amount invested (US$50,000,000.00), which was the standard under E.O. 279. Like a CA or a JVA, an FTAA is subject to negotiation.212 The Governments contributions, in the form of taxes, in an FTAA is identical to its contributions in the two mineral agreements, save that in an FTAA: The collection of Government share in financial or technical assistance agreement shall commence after the financial or technical assistance agreement contractor has fully recovered its pre-operating expenses, exploration, and development expenditures, inclusive.213 III

Having examined the history of the constitutional provision and statutes enacted pursuant thereto, a consideration of the substantive issues presented by the petition is now in order. _______________

(2) For partnerships, cooperatives, associations, or corporations five hundred (500) blocks; and

(3) For the exclusive economic area, a larger area to be determined by the Secretary. The maximum areas mentioned above that a contractor may hold under a mineral agreement shall not include mining/quarry areas under operating agreements between the contractor and a claimowner/lessee/permittee/licensee entered into under Presidential Decree No. 463. On the other hand, Section 34, which governs the maximum area for FTAAs provides: SEC. 34. Maximum Contract Area.The maximum contract area that may be granted per qualified person, subject to relinquishment shall be: (a) 1,000 meridional blocks onshore; (b) 4,000 meridional blocks offshore; or (c) Combinations of (a) and (b) provided that it shall not exceed the maximum limits for onshore and offshore areas. 212 Id., sec. 33. 213 Id., sec. 81. 214

214 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos The Effectivity of Executive Order No. 279 Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was executed, did not come into effect. E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two days before the opening of Congress on July 27, 1987.214 Section 8 of the E.O. states that the same shall take effect immediately. This provision, according to petitioners, runs counter to Section 1 of E.O. No. 200,215 which provides: SECTION 1. Laws shall take effect after fifteen days following the completion of their publication either in the Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided.216 [Emphasis supplied.]

On that premise, petitioners contend that E.O. No. 279 could have only taken effect fifteen days after its publication at which time Congress had already convened and the Presidents power to legislate had ceased. Respondents, on the other hand, counter that the validity of E.O. No. 279 was settled in Miners Association of the Philippines v. Factoran, supra. This is of course incorrect for the issue in Miners Association was not the validity of E.O. No. 279 but that of DAO Nos. 57 and 82 which were issued pursuant thereto. Nevertheless, petitioners contentions have no merit. It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking effect on a date other thaneven beforethe 15-day period after its publication. Where a law provides for its own date of effectivity, such date prevails over that prescribed by E.O. No. 200. Indeed, this is the very essence, of the phrase unless it is otherwise provided in Section 1 thereof. Section 1, E.O. No. _______________

214 Kapatiran v. Tan, 163 SCRA 371 (1988). 215 Providing for the Publication of Laws either in the Official Gazette or in a Newspaper of General Circulation in the Philippines as a Requirement for their Effectivity. 216 Section 1, E.O. No. 200 was subsequently incorporated in the Administrative Code of 1987 (Executive Order No. 292 as Section 18, Chapter 5 (Operation and Effect of Laws), Book 1 (Sovereignty and General Administration). 215

VOL. 421, JANUARY 27, 2004 215 La Bugal-BLaan Tribal Association, Inc. vs. Ramos 200, therefore, applies only when a statute does not provide for its own date of effectivity. What is mandatory under E.O. No. 200, and what due process requires, as this Court held in Taada v. Tuvera,217 is the publication of the law for without such notice and publication, there would be no basis for the application of the maxim ignorantia legis n*eminem+ excusat. It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one.

While the effectivity clause of E.O. No. 279 does not require its publication, it is not a ground for its invalidation since the Constitution, being the fundamental, paramount and supreme law of the nation, is deemed written in the law.218 Hence, the due process clause,219 which, so Taada held, mandates the publication of statutes, is read into Section 8 of E.O. No. 279. Additionally, Section 1 of E.O. No. 200 which provides for publication either in the Official Gazette or in a newspaper of general circulation in the Philippines, finds suppletory application. It is significant to note that E.O. No. 279 was actually published in the Official Gazette220 on August 3, 1987. From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Taada v. Tuvera, this Court holds that E.O. No. 279 became effective immediately upon its publication in the Official Gazette on August 3, 1987. That such effectivity took place after the convening of the first Congress is irrelevant. At the time President Aquino issued E.O. No. 279 on July 25, 1987, she was still validly exercising legislative powers under the Provisional Constitution.221 Article XVIII (Transitory Provisions) of the 1987 Constitution explicitly states: SEC. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is convened. _______________

217 136 SCRA 27 (1985). 218 Manila Prince Hotel v. Government Service Insurance System, 267 SCRA 408 (1997). 219 CONST., art. 3, sec. 1. 220 83 O.G. (Suppl.) 3528-115 to 3528-117 (August 1987). 221 Miners Association of the Philippines, Inc. v. Factoran, Jr., supra. 216

216 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos The convening of the first Congress merely precluded the exercise of legislative powers by President Aquino; it did not prevent the effectivity of laws she had previously enacted. There can be no question, therefore, that E.O. No. 279 is an effective, and a validly enacted, statute.

The Constitutionality of the WMCP FTAA Petitioners submit that, in accordance with the text of Section 2, Article XII of the Constitution, FTAAs should be limited to technical or financial assistance only. They observe, however, that, contrary to the language of the Constitution, the WMCP FTAA allows WMCP, a fully foreign-owned mining corporation, to extend more than mere financial or technical assistance to the State, for it permits WMCP to manage and operate every aspect of the mining activity.222 _______________

222 Petitioners note in their Memorandum that the FTAA: x x x guarantees that wholly foreign owned *WMCP+ entered into the FTAA in order to facilitate the large scale exploration, development and commercial exploitation of mineral deposits that may be found to exist within the Contract area. *Section 1.1+ As a contractor it also has the exclusive right to explore, exploit, utilize, process and dispose of all mineral products and by-products thereof that may be derived or produced from the Contract Area. *Section 1.3+ Thus, it is divided into an exploration and feasibility phase *Section 3.2 (a)+ and a construction, development and production phase. *Section 3. 2 (b).+ Thus, it is this wholly foreign owned corporation that, among other things: (a) operates within a prescribed contract area [Section 4], (b) opts to apply for a Mining Production Sharing Agreement [Section 4.2], (c) relinquishes control over portions thereof at their own choice [Section 4.6], (d) submits work programs, incurs expenditures, and makes reports during the exploration period [Section 5], (e) submits a Declaration of Mining Feasibility [Sections 5.4 and 5.5], (f) during the development period, determines the timetable, submits work programs, provides the reports and 217

VOL. 421, JANUARY 27, 2004 217 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Petitioners submission is well-taken. It is a cardinal rule in the interpretation of constitutions that the instrument must be so construed as to give effect to the intention of the people who adopted it.223 This

intention is to be sought in the constitution itself, and the apparent meaning of the words is to be taken as expressing it, except in cases where that assumption would lead to absurdity, ambiguity, or contradiction.224 What the Constitution says according to the text of the provision, therefore, compels acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say.225 Accordingly, following the literal text of the Constitution, assistance accorded by foreign-owned corporations in the large-scale exploration, development, and utilization of petroleum, minerals and mineral oils should be limited to technical or financial assistance only. WMCP nevertheless submits that the word technical in the fourth paragraph of Section 2 of E.O. No. 279 encompasses a broad number of possible services, perhaps, scientific and/or technological in basis.226 It thus posits that it may also well include the area of management or operations . . . so long as such assistance requires specialized knowledge or skills, and are related to the exploration, development and utilization of mineral resources.227 _______________

determines and executes expansions, modifications, improvements and replacements of new mining facilities within the area [Section 6], (g) complies with the conditions for environmental protection and industrial safety, posts the necessary bonds and makes representations and warranties to the government [Section 10.5]. The contract subsists for an initial term of twenty-five (25) years from the date of its effectivity [Section 3.1] and renewable for a further period of twenty-five years under the same terms and conditions upon application by private respondent [Section 3.3]. (Rollo, pp. 458-459.) 223 H. C. Black, Handbook on the Construction and Interpretation of the Laws 8. 224 Ibid. 225 J.M. Tuason & Co., Inc. v. Land Tenure Association, 31 SCRA 413 (1970). 226 Rollo, p. 580. 227 Ibid. Emphasis supplied. 218

218 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos

This Court is not persuaded. As priorly pointed out, the phrase management or other forms of assistance in the 1973 Constitution was deleted in the 1987 Constitution, which allows only technical or financial assistance. Casus omisus pro omisso habendus est. A person, object or thing omitted from an enumeration must be held to have been omitted intentionally.228 As will be shown later, the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate. Respondents insist that agreements involving technical or financial assistance is just another term for service contracts. They contend that the proceedings of the CONCOM indicate that although the terminology service contract was avoided *by the Constitution+, the concept it represented was not. They add that *t+he concept is embodied in the phrase agreements involving financial or technical assistance.229 And point out how members of the CONCOM referred to these agreements as service contracts. For instance: SR. TAN. Am I correct in thinking that the only difference between these future service contracts and the past service contracts under Mr. Marcos is the general law to be enacted by the legislature and the notification of Congress by the President? That is the only difference, is it not? MR. VILLEGAS. That is right. SR. TAN. So those are the safeguards? MR. VILLEGAS. Yes. There was no law at all governing service contracts before. SR. TAN. Thank you, Madam President.230 [Emphasis supplied.] WMCP also cites the following statements of Commissioners Gascon, Garcia, Nolledo and Tadeo who alluded to service contracts as they explained their respective votes in the approval of the draft Article: _______________

228 People v. Manantan, 115 Phil. 657; 5 SCRA 684 (1962); Commission on Audit of the Province of Cebu v. Province of Cebu, 371 SCRA 196 (2001). 229 Rollo, p. 569. 230 III Record of the Constitutional Commission pp. 351-352. 219

VOL. 421, JANUARY 27, 2004 219

La Bugal-BLaan Tribal Association, Inc. vs. Ramos MR. GASCON. Mr. Presiding Officer, I vote no primarily because of two reasons: One, the provision on service contracts. I felt that if we would constitutionalize any provision on service contracts, this should always be with the concurrence of Congress and not guided only by a general law to be promulgated by Congress. x x x.231 [Emphasis supplied.] x x x. MR. GARCIA. Thank you. I vote no. x x x. Service contracts are given constitutional Iegitimization in Section 3, even when they have been proven to be inimical to the interests of the nation, providing as they do the legal loophole for the exploitation of our natural resources for the benefit of foreign interests. They constitute a serious negation of Filipino control on the use and disposition of the nation natural resources, especially with regard to those which are nonrenewable.232 [Emphasis supplied.] xxx MR. NOLLEDO. While there are objectionable provisions in the Article on National Economy and Patrimony, going over said provisions meticulously, setting aside prejudice and personalities will reveal that the article contains a balanced set or provisions. I hope the forthcoming Congress will implement such provisions taking into account that Filipinos should have real control over our economy and patrimony, and if foreign equity is permitted, the same must be subordinated to the imperative demands of the national interest. x x x. It is also my understanding that service contracts involving foreign corporations or entities are resorted to only when no Filipino enterprise or Filipino-controlled enterprise could possibly undertake the exploration or exploitation of our natural resources and that compensation under such contracts cannot and should not equal what should pertain to ownership of capital. In other words, the service contract should not be an instrument to circumvent the basic provision, that the exploration and exploitation of natural resources should be truly for the benefit of Filipinos. Thank you, and I vote yes.233 [Emphasis supplied.] x x x. MR. TADEO. Nais ko lamang ipaliwanag ang aking boto. Matapos suriin ang kalagayan ng Pilipinas, ang saligang suliranin, pangunahin ang salitang imperyalismo. Ang ibig sabihin nito ay ang _______________

231 V Record of the Constitutional Commission 844. 232 Id., at p. 841. 233 Id., at p. 842. 220

220 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos sistema ng lipunang pinaghaharian ng iilang monopolyong kapitalista at ang salitang imperyalismo ay buhay na buhay sa National Economy and Patrimony na nating ginawa. Sa pamamagitan ng salitang based on, naroroon na ang free trade sapagkat tayo ay mananatiling tagapagluwas ng hilaw na sangkap at tagaangkat ng yaring produkto. Pangalawa, naroroon pa rin ang parity rights, ang service contract, ang 60-40 equity sa natural resources. Habang naghihirap ang sambayanang Pilipino, ginagalugad naman ng mga dayuhan, ang ating likas na yaman. Kailan man ang Article on National Economy and Patrimony ay hindi nagpaalis sa pagkaalipin ng ating ekonomiya sa kamay ng mga dayuhan. Ang solusyon sa suliranin ng bansa ay dalawa lamang: ang pagpapatupad ng tunay na reporma sa lupa at ang national industrialization. Ito ang tinatawag naming pagsikat ng araw sa Silangan. Ngunit ang mga landlords and big businessmen at ang mga komprador ay nagsasabi na ang free trade na ito, ang kahulugan para sa amin, ay ipinipilit sa ating sambayanan na ang araw ay sisikat sa Kanluran. Kailan man hindi puwedeng sumikat ang araw sa Kanluran. I vote no.234 [Emphasis supplied.] This Court is likewise not persuaded. As earlier noted, the phrase service contracts has been deleted in the 1987 Constitutions Article on National Economy and Patrimony. If the CONCOM intended to retain the concept of service contracts under the 1973 Constitution, it could have simply adopted the old terminology (service contracts) instead of employing new and unfamiliar terms (agreements . . . involving either technical or financial assistance). Such a difference between the language of a provision in a revised constitution and that of a similar provision in the preceding constitution is viewed as indicative of a difference in purpose.235 If, as respondents suggest, the concept of technical or financial assistance agreements is identical to that of service contracts, the CONCOM would not have bothered to fit the same dog with a new collar. To uphold respondents theory would reduce the first to a mere euphemism for the second and render the change in phraseology meaningless. An examination of the reason behind the change confirms that technical or financial assistance agreements are not synonymous to service contracts.

_______________

234 Id., at p. 844. 235 Vide Cherey v. Long Beach, 282 NY 382, 26 NE 2d 945, 127 ALR 1210 (1940), cited in 16 Am Jur 2d Constitutional Law 79. 221

VOL. 421, JANUARY 27, 2004 221 La Bugal-BLaan Tribal Association, Inc. vs. Ramos [T]he Court in construing a Constitution should bear in mind the object sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or remedied. A doubtful provision will be examined in light of the history of the times, and the condition and circumstances under which the Constitution was framed. The object is to ascertain the reason which induced the framers of the Constitution to enact the particular provision and the purpose sought to be accomplished thereby, in order to construe the whole as to make the words consonant to that reason and calculated to effect that purpose.236 As the following question of Commissioner Quesada and Commissioner Villegas answer shows, the drafters intended to do away with service contracts which were used to circumvent the capitalization (60%-40%) requirement: MS. QUESADA. The 1973 Constitution used the words service contracts. In this particular Section 3, is there a safeguard against the possible control of foreign interests if the Filipinos go into co-production with them? MR. VILLEGAS. Yes. In fact, the deletion of the phrase service contracts was our first attempt to avoid some of the abuses in the past regime in the use of service contracts to go around the 60-40 arrangement. The safeguard has been introducedand this, of course can be refinedis found in Section 3, lines 25 to 30, where Congress will have to concur with the President on any agreement entered into between a foreign-owned corporation and the government involving technical or financial assistance for large-scale exploration, development and utilization of natural resources.237 [Emphasis supplied.] In a subsequent discussion, Commissioner Villegas allayed the fears of Commissioner Quesada regarding the participation of foreign interests in Philippine natural resources, which was supposed to be restricted to Filipinos.

MS. QUESADA. Another point of clarification is the phrase and utilization of natural resources shall be under the full control and supervision of the State. In the 1973 Constitution, this was limited to citizens of the Philippines; but it was removed and substituted by shall be under the full control and supervision of the State. Was the concept changed so that these particular resources would be limited to citizens of the Philippines? _______________

236 Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 325 (1991). 237 III Record of the Constitutional Commission 278. 222

222 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Or would these resources only be under the full control and supervision of the State; meaning, noncitizens would have access to these natural resources? Is that the understanding? MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next sentence, it states: Such activities may be directly undertaken by the State, or it may enter into co-production, joint venture, production-sharing agreements with Filipino citizens. So we are still limiting it only to Filipino citizens. x x x. MS. QUESADA. Going back to Section 3, the section suggest that: The exploration, development, and utilization of natural resources . . . may be directly undertaken by the State, or it may enter into coproduction, joint venture, production-sharing agreements with . . . corporations or associations at least sixty percent of whose voting stock or controlling interest is owned by such citizens. Lines 25 to 30, on the other hand, suggest that in the large-scale exploration, development and utilization of natural resources, the President with the concurrence of Congress may enter into agreements with foreign-owned corporations even for technical or financial assistance.

I wonder if this part of Section 3 contradicts the second part. I am raising this point for fear that foreign investors will use their enormous capital resources to facilitate the actual exploitation or exploration, development and effective disposition of our natural resources to the detriment of Filipino investors. I am not saying that we should not consider borrowing money from foreign sources. What I refer to is that foreign interest should be allowed to participate only to the extent that they lend us money and give us technical assistance with the appropriate government permit. In this way, we can insure the enjoyment of our natural resources by our own people. MR. VILLEGAS. Actually, the second provision about the President does not permit foreign investors to participate. It is only technical or financial assistancethey do not own anythingbut on conditions that have to be determined by law with the concurrence of Congress. So, it is very restrictive. If the Commissioner will remember, this removes the possibility for service contracts which we said yesterday were avenues used in the previous regime to go around the 60-40 requirement.238 [Emphasis supplied.] _______________

238 Id., at pp. 316-317. 223

VOL. 421, JANUARY 27, 2004 223 La Bugal-BLaan Tribal Association, Inc. vs. Ramos The present Chief Justice, then a member of the CONCOM, also referred to this limitation in scope in proposing an amendment to the 60-40 requirement: MR. DAVIDE. May I be allowed to explain the proposal? MR. MAAMBONG. Subject to the three-minute rule, Madam President. MR. DAVIDE. It will not take three minutes. The Commission had just approved the Preamble. In the Preamble we clearly stated that the Filipino people are sovereign and that one of the objectives for the creation or establishment of a government is to conserve and develop the national patrimony. The implication is that the national patrimony or our natural resources are exclusively reserved for the Filipino people. No alien must be allowed to enjoy, exploit and develop our natural resources. As a matter of fact, that principle proceeds from the fact that

our natural resources are gifts from God to the Filipino people and it would be a breach of that special blessing from God if we will allow aliens to exploit our natural resources. I voted in favor of the Jamir proposal because it is not really exploitation that we granted to the alien corporations but only for them to render financial or technical assistance. It is not for them to enjoy our natural resources. Madam President, our natural resources are depleting; our population is increasing by leaps and bounds. Fifty years from now, if we will allow these aliens to exploit our natural resources, there will be no more natural resources for the next generations of Filipinos. It may last long if we will begin now. Since 1935 the aliens have been allowed to enjoy to a certain extent the exploitation of our natural resources, and we became victims of foreign dominance and control. The aliens are interested in coming to the Philippines because they would like to enjoy the bounty of nature exclusively intended for Filipinos by God. And so I appeal to all, for the sake of the future generations, that if we have to pray in the Preamble to preserve and develop the national patrimony for the sovereign Filipino people and for the generations to come, we must at this time decide once and for all that our natural resources must be reserved only to Filipino citizens. Thank you.239 [Emphasis supplied.] The opinion of another member of the CONCOM is persuasive240 and leaves no doubt as to the intention of the framers to eliminate service contracts altogether. He writes: _______________

239 III Record of the Constitutional Commission 358-359. 240 Vera v. Avelino, 77 Phil. 192 (1946). 224

224 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly technological undertakings for which the President may enter into contracts with foreign-owned corporations, and enunciates strict conditions that should govern such contracts. x x x.

This provision balances the need for foreign capital and technology with the need to maintain the national sovereignty. It recognizes the fact that as long as Filipinos can formulate their own terms in their own territory, there is no danger of relinquishing; sovereignty to foreign interests. Are service contracts allowed under the new Constitution? No. Under the new Constitution, foreign investors (fully alien-owned) can NOT participate in Filipino enterprises except to provide: (1) Technical Assistance for highly technical enterprises; and (2) Financial Assistance for large-scale enterprises. The intent of this provision, as well as other provisions on foreign investments, is to prevent the practice (prevalent in the Marcos government) of skirting the 60/40 equation using the cover of service contracts.241 [Emphasis supplied.] Furthermore, it appears that Proposed Resolution No. 496,242 which was the draft Article on National Economy and Patrimony, adopted the concept of agreements . . . involving either technical or financial assistance contained in the Draft of the 1986 U.P. Law Constitution Project (U.P. Law draft) which was taken into consideration during the deliberation of the CONCOM.243 The for_______________

241 J. Nolledo, The New Constitution of the Philippines Annotated 924-926 (1990). 242 Resolution to Incorporate in the New Constitution an Article on National Economy and Patrimony. 243 The Chair of the Committee on National Economy and Patrimony, alluded to it in the discussion on the capitalization requirement: MR. VILLEGAS. We just had a long discussion with the members of the team from the UP Law Center who provided us a draft. The phrase that is contained here which we adopted from the UP draft is 60 percent of voting stock. (III Record of the Constitutional Commission 255.) Likewise, in explaining the reasons for the deletion of the term exploitation: MR. VILLEGAS. Madam President, following the recommendation in the UP draft, we omitted exploitation first of all because it is believed to be subsumed under development and secondly because it has a derogatory connotation. (Id., at p. 358.) 225

VOL. 421, JANUARY 27, 2004 225 La Bugal-BLaan Tribal Association, Inc. vs. Ramos

mer, as well as Article XII, as adopted, employed the same terminology, as the comparative table below shows: DRAFT OF THE UP LAW CONSTITUTION PROJECT PROPOSED RESOLUTION NO. 496 OF THE CONSTITUTIONAL COMMISSION ARTICLE XII OF THE 1987 CONSTITUTION Sec. 1. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, flora and fauna and other natural resources of the Philippines are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development and utilization of natural resources shall be under the full control and supervision of the State. Such activities may be directly undertaken by the state, or it may enter into co-production, joint venture, production sharing agreements with Filipino citizens or corporations or associations sixty percent of whose voting stock or controlling interest is owned by such citizens for a period of not more than twenty-five years, renewable for not more than twenty-five years Sec. 3. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries,forests, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. Such activities may be directly undertaken by the State, or it may enter into coproduction, joint venture, production-sharing agreements with Filipino citizens or corporations or associations at least sixty percent of whose voting stock or controlling interest is owned by such citiSec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not ex226

226 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos

and under such terms and conditions as may be provided by law. In case as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. zens. Such agreements shall be for a period of twenty-five years, renewable for not more than twentyfive years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries or industrial uses other than the development for water power, beneficial use may be the measure and limit of the grant. ceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In case of water rights for irrigation, water, supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The National Assembly may by law allow small-scale utilization of natural resources by Filipino citizens. The Congress may by law allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming in rivers, lakes, bays, and lagoons. The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons. The National Assembly, may by two-thirds vote of all its members by special law provide the terms and conditions under which a foreign-owned corpo The President with the concurrence of Congress, by special law, shall provide the terms and conditions under which a foreignThe President may enter into agreements with foreign owned corporations involving either technical or financial assistance for large-scale explo 227

VOL. 421, JANUARY 27, 2004 227 La Bugal-BLaan Tribal Association, Inc. vs. Ramos ration may enter into agreements with the government involving either technical or financial assistance for large-scale exploration, development, or utilizat ion of natural resources. [Emphasis supplied.]

owned corporation may enter into agreements with the government involving either technical or financial assistance for large-scale exploration, development, and utilization of natural resources. [Emphasis supplied.] ration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. [Emphasis supplied.] The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. The insights of the proponents of the U.P. Law draft are, therefore, instructive in interpreting the phrase technical or financial assistance. In his position paper entitled Service Contracts: Old Wine in New Bottles?, Professor Pacifico A. Agabin, who was a member of the working group that prepared the U.P. Law draft, criticized service contracts for they lodge exclusive management and control of the enterprise to the service contractor, which is reminiscent of the old concession regime. Thus, notwithstanding the provision of the Constitution that natural resources belong to the State, and that these shall not be alienated, the service contract system renders nugatory the constitutional provisions cited.244 He elaborates: Looking at the Philippine model, we can discern the following ves-tiges of the concession regime, thus: _______________

244 Id., at p. 12. 228

228 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos 1. Bidding of a selected area, or leasing the choice of the area to the interested party and then negotiating the terms and conditions of the contract; (Sec. 5, P.D. 87) 2. Management of the enterprise vested on the contractor, including operation of the field if petroleum is discovered; (Sec. 8, P.D. 87) 3. Control of production and other matters such as expansion and development; (Sec. 8)

4. Responsibility for downstream operationsmarketing, distribution, and processing may be with the contractor (Sec. 8); 5. Ownership of equipment, machinery, fixed assets, and other properties remain with contractor (Sec. 12, P.D. 87); 6. Repatriation of capital and retention of profits abroad guaranteed to the contractor (Sec. 13, P.D. 87); and 7. While title to the petroleum discovered may nominally be in the name of the government, the contractor has almost unfettered control over its disposition and sale, and even the domestic requirements of the country is relegated to a pro rata basis (Sec. 8). In short, our version of the service contract is just a rehash of the old concession regime x x x. Some people have pulled an old rabbit out of a magicians hat, and foisted it upon us as a new and different animal. The service contract as we know it here is antithetical to the principle of sovereignty over our natural resources restated in the same article of the [1973] Constitution containing the provision for service contracts. If the service contractor happens to be a foreign corporation, the contract would also run counter to the constitutional provision on nationalization or Filipinization, of the exploitation of our natural resources.245 [Emphasis supplied. Italics in the original.] Professor Merlin M. Magallona, also a member of the working group, was harsher in his reproach of the system: x x x the nationalistic phraseology of the 1935 [Constitution] was retained by the [1973] Charter, but the essence of nationalism was reduced to hollow rhetoric. The 1973 Charter still provided that the exploitation or development of the countrys natural resources be limited to Filipino citizens or corporations owned or controlled by them. However, the martial law Constitution allowed them, once these resources are in their name, to enter into service contracts with foreign investors for financial, technical, management, or other forms of assistance. Since foreign investors have the capital resources, the actual exploitation and development, as well as the effective disposition, of the countrys natural resources, would be under _______________

245 Id., at pp. 15-16. 229

VOL. 421, JANUARY 27, 2004

229 La Bugal-BLaan Tribal Association, Inc. vs. Ramos their direction, and control, relegating the Filipino investors to the role of second-rate partners in joint ventures. Through the instrumentality of the service contract, the 1973 Constitution had legitimized at the highest level of state policy that which was prohibited under the 1973 Constitution, namely: the exploitation of the countrys natural resources by foreign nationals. The drastic impact of *this+ constitutional change becomes more pronounced when it is considered that the active party to any service contract may be a corporation wholly owned or foreign interests. In such a case, the citizenship requirement is completely set aside, permitting foreign corporations to obtain actual possession, control, and [enjoyment] of the countrys natural resources.246 *Emphasis supplied.+ Accordingly, Professor Agabin recommends that: Recognizing the service contract for what it is, we have to expunge it from the Constitution and reaffirm ownership over our natural resources. That is the only way we can exercise effective control over our natural resources. This should not mean complete isolation of the countrys natural resources from foreign investment. Other contract forms which are less derogatory to our sovereignty and control over natural resources like technical assistance agreements, financial assistance [agreements], co-production agreements, joint ventures, production-sharingcould still be utilized and adopted without violating constitutional provisions. In other words, we can adopt contract forms which recognize and assert our sovereignty and ownership over natural resources, and where the foreign entity is just a pure contractor instead of the beneficial owner of our economic resources.247 [Emphasis supplied.] Still another member of the working group, Professor Eduardo Labitag, proposed that: 2. Service contracts as practiced under the 1973 Constitution should be discouraged, instead the government may be allowed, subject to authorization by special law passed by an extraordinary majority to enter into either technical or financial assistance. This is justified by the fact that as presently worded in the 1973 Constitution, a service contract gives full control over the contract area to the service contractor, for him to work, manage and dispose of the proceeds or production. It was a subterfuge to _______________

246 M. Magallona, Nationalism and Its Subversion in the Constitution 5, in II DRAFT PROPOSAL OF THE 1986 U.P. Law Constitution Project. 247 Agabin, supra, at p. 16.

230

230 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos get around the nationality requirement of the constitution.248 [Emphasis supplied.] In the annotations on the proposed Article on National Economy and Patrimony, the U.P. Law draft summarized the rationale therefor, thus: 5. The last paragraph is a modification of the service contract provision found in Section 9, Article XIV of the 1973 Constitution as amended. This 1973 provision shattered the framework of nationalism in our fundamental law (see Magallona, Nationalism and its Subversion in the Constitution). Through the service contract, the 1973 Constitution had legitimized that which was prohibited under the 1935 constitutionthe exploitation of the countrys natural resources by foreign nationals. Through the service contract, acts prohibited by the Anti-Dummy Law were recognized as legitimate arrangements. Service contracts lodge exclusive management and control of the enterprise to the service contractor, not unlike the old concession regime where the concessionaire had complete control over the countrys natural resources, having been given exclusive and plenary rights to exploit a particular resource and, in effect, having been assured of ownership of that resource at the point of extraction (see Agabin, Service Contracts: Old Wine in New Bottles). Service contracts, hence, are antithetical to the principle of sovereignty over our natural resources, as well as the constitutional provision on nationalization or Filipinization of the exploitation of our natural resources. Under the proposed provision, only technical assistance or financial assistance agreements may be entered into, and only for large-scale activities. These are contract forms which recognize and assert our sovereignty and ownership over natural resources since the foreign entity is just a pure contractor and not a beneficial owner of our economic resources. The proposal recognizes the need for capital and technology to develop our natural resources without sacrificing our sovereignty and control over such resources by the safeguard of a special law which requires two-thirds vote of all the members of the Legislature. This will ensure that such agreements will be debated upon exhaustively and thoroughly in the National Assembly to avert prejudice to the nation.249 [Emphasis supplied.] The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as grants of beneficial ownership of the _______________

248 E. Labitag, Philippine Natural Resources: Some Problems and Perspectives 17 in II DRAFT PROPOSAL of the 1986 U.P. Law Constitution Project. 249 I Draft Proposal of the 1986 U.P. Law Constitution Project 11-13. 231

VOL. 421, JANUARY 27, 2004 231 La Bugal-BLaan Tribal Association, Inc. vs. Ramos countrys natural resources to foreign owned corporations. While, in theory, the State owns these natural resourcesand Filipino citizens, their beneficiariesservice contracts actually vested foreigners with the right to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not Filipinos, became the beneficiaries of Philippine natural resources. This arrangement is clearly incompatible with the constitutional ideal of nationalization of natural resources, with the Regalian doctrine, and on a broader perspective, with Philippine sovereignty. The proponents nevertheless acknowledged the need for capital and technical know-how in the largescale exploitation, development and utilization of natural resourcesthe second paragraph of the proposed draft itself being an admission of such scarcity. Hence, they recommended a compromise to reconcile the nationalistic provisions dating back to the 1935 Constitution, which reserved all natural resources exclusively to Filipinos, and the more liberal 1973 Constitution, which allowed foreigners to participate in these resources through service contracts. Such a compromise called for the adoption of a new system in the exploration, development, and utilization of natural resources in the form of technical agreements or financial agreements which, necessity, are distinct concepts from service contracts. The replacement of service contracts with agreements . . . involving either technical or financial assistance, as well as the deletion of the phrase management or other forms of assistance, assumes greater significance when note is taken that the U.P. Law draft proposed other equally crucial changes that were obviously heeded by the CONCOM. These include the abrogation of the concession system and the adoption of new options for the State in the exploration, development, and utilization of natural resources. The proponents deemed these changes to be more consistent with the States ownership of, and its full control and supervision (a phrase also employed by the framers) over, such resources. The Project explained: 3. In line with the State ownership of natural resources, the State should take a more active role in the exploration, development, and utilization of natural resources, than the present practice of granting licenses, concessions, or leaseshence the provision that said activities shall be under the full control and supervision of the State. There are three major schemes by which the State could undertake these activities: first, directly

232

232 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos by itself; second, by virtue of co-production, joint venture, production sharing agreements with Filipino citizens or corporations or associations sixty percent (60%) of the voting stock or controlling interests of which are owned by such citizens; or third, with a foreign-owned corporation, in cases of large-scale exploration, development, or utilization of natural resources through agreements involving either technical or financial assistance only. x x x. At present, under the licensing concession or lease schemes, the government benefits from such benefits only through fees, charges, ad valorem taxes and income taxes of the exploiters of our natural resources. Such benefits are very minimal compared with the enormous profits reaped by theses licensees, grantees, concessionaires. Moreover, some of them disregard the conservation of natural resources and do not protect the environment from degradation. The proposed role of the State will enable it to a greater share in the profitsit can also actively husband its natural resources and engage in developmental programs that will be beneficial to them. 4. Aside from the three major schemes for the exploration, development, and utilization of our natural resources, the State may, by law, allow Filipino citizens to explore, develop, utilize natural resources in small-scale. This is in recognition of the plight of marginal fishermen, forest dwellers, gold panners, and others similarly situated who exploit our natural resources for their daily sustenance and survival.250 Professor Agabin, in particular, after taking pains to illustrate the similarities between the two systems, concluded that the service contract regime was but a rehash of the concession system. Old wine in new bottles, as he put it. The rejection of the service contract regime, therefore, is in consonance with the abolition of the concession system. In light of the deliberations of the CONCOM, the text of the Constitution, and the adoption of other proposed changes, there is no doubt that the framers considered and shared the intent of the U.P. Law proponents in employing the phrase agreements . . . involving either technical or financial assistance. _______________

250 Id., at pp. 9-11. Professor Labitag also suggests that: x x x. The concession regime of natural resources disposition should be discontinued. Instead the State shall enter into such arrangements and agreements like co-production, joint ventures, etc. as shall bring about effective control and a larger share in the proceeds, harvest or production. (Labitag, supra, at p. 17.)

233

VOL. 421, JANUARY 27, 2004 233 La Bugal-BLaan Tribal Association, Inc. vs. Ramos While certain commissioners may have mentioned the term service contracts during the CONCOM deliberations, they may not have been necessarily referring to the concept of service contracts under the 1973 Constitution. As noted earlier, service contracts is a term that assumes different meanings to different people.251 The commissioners may have been using the term loosely, and not in its technical and legal sense, to refer, in general, to agreements concerning natural resources entered into by the Government with foreign corporations. These loose statements do not necessarily translate to the adoption of the 1973 Constitution provision allowing service contracts. It is true that, as shown in the earlier quoted portions of the proceedings in CONCOM, in response to Sr. Tans question, Commissioner Villegas commented that, other than congressional notification, the only difference between future and past service contracts is the requirement of a general law as there were no laws previously authorizing the same.252 However, such remark is far outweighed by his more categorical statement in his exchange with Commissioner Quesada that the draft article does not permit foreign investors to participate in the nations natural resourceswhich was exactly what service contracts didexcept to provide technical or financial assistance.253 In the case of the other commissioners, Commissioner Nolledo himself clarified in his work that the present charter prohibits service contracts.254 Commissioner Gascon was not totally averse to foreign participation, but favored stricter restrictions in the form of majority congressional concurrence.255 On the other hand, Commis_______________

251 Vide Note 147. 252 Vide Note 230. The question was posed before the Jamir amendment and subsequent proposals introducing other limitations. Comm. Villegas response that there was no requirement in the 1973 Constitution for a law to govern service contracts and that, in fact, there were then no such laws is inaccurate. The 1973 Charter required similar legislative approval, although it did not specify the form it should take: The Batasang Pambansa, in the national interest, may allow such citizens . . . to enter into service contracts . . . . As previously noted, however, laws authorizing service contracts were actually enacted by presidential decree. 253 Vide Note 238.

254 Vide Note 241. 255 Vide Note 231. 234

234 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos sioners Garcia and Tadeo may have veered to the extreme side of the spectrum and their objections may be interpreted as votes against any foreign participation in our natural resources whatsoever. WMCP cites Opinion No. 75, s. 1987,256 and Opinion No. 175, s. 1990257 of the Secretary of Justice, expressing the view that a financial or technical assistance agreement is no different in concept from the service contract allowed under the 1973 Constitution. This Court is not, however, bound by this interpretation. When an administrative or executive agency renders an opinion or issues a statement of policy, it merely interprets a preexisting law; and the administrative interpretation, of the law is at best advisory, for it is the courts that finally determine what the law means.258 In any case, the constitutional provision allowing the President to enter into FTAAs with foreign-owned corporations is an exception to the rule that participation in the nations natural resources is reserved exclusively to Filipinos. Accordingly, such provision must be construed strictly against their enjoyment by non-Filipinos. As Commissioner Villegas emphasized, the provision is very restrictive.259 Commissioner Nolledo also remarked that entering into service contracts is an exception to the rule on protection of natural resources for the interest of the nation and, therefore, being an exception, it should be subject, whenever possible, to stringent rules.260 Indeed, exceptions should be strictly but reasonably construed; they extend only so far as their language fairly warrants and all doubts should be resolved in favor of the general provision rather than the exception.261 With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes service contracts. Although the statute employs the phrase financial and technical agreements in accordance with the 1987 Constitution, it actually treats these agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law. _______________

256 Dated July 28, 1987. 257 Dated October 3, 1990.

258 Peralta v. Civil Service Commission, 212 SCRA 425 (1992). 259 Vide Note 238. 260 III Record of the Constitutional Commission 354. 261 Salaysay v. Castro, 98 Phil. 364 (1956). 235

VOL. 421, JANUARY 27, 2004 235 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Section 33, which is found under Chapter VI (Financial or Technical Assistance Agreement) of R.A. No. 7942 states: SEC. 33. Eligibility.Any qualified person with technical and financial capability to undertake large-scale exploration, development, and utilization of mineral resources in the Philippines may enter into a financial or technical assistance agreement directly with the Government through the Department. [Emphasis supplied.] Exploration, as defined by R.A. No. 7942, means the searching or prospecting for mineral resources by geological, geochemical or geophysical surveys, remote sensing, test pitting, trenching, drilling, shaft sinking, tunneling or any other means for the purpose of determining the existence, extent, quantity and quality thereof and the feasibility of mining them for profit.262 A legally organized foreign-owned corporation may be granted an exploration permit,263 which vests it with the right to conduct exploration for all minerals in specified areas,264 i.e., to enter, occupy and explore the same.265 Eventually, the foreign-owned corporation, as such permittee, may apply for a financial and technical assistance agreement.266 Development is the work undertaken to explore and prepare an ore body or a mineral deposit for hiring, including the construction of necessary infrastructure and related facilities.267 Utilization means the extraction or disposition of minerals.268 A stipulation that the proponent shall dispose of the minerals and byproducts produced at the highest price and more advantageous terms and conditions as provided for under the implementing rules and regulations is required to be incorporated in every FTAA.269

_______________

262Rep. Act No. 7942 (1995), sec. 3 (q). 263 Id., sec. 3 (aq). 264 Id., sec. 20. 265 Id., sec. 23, first par. 266 Id., sec. 23, last par. 267 Id., sec. 3 (j). 268 Id., sec. 3 (az). 269 Id., sec. 35 (m). 236

236 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos A foreign-owned/controlled corporation may likewise be granted a mineral processing permit.270 Mineral processing is the milling, beneficiation or upgrading of ores or minerals and rocks or by similar means to convert the same into marketable products.271 An FTAA contractor makes a warranty that the mining operations shall be conducted in accordance with the provisions of R.A. No. 7942 and its4 implementing rules272 and for work programs and minimum expenditures and commitments.273 And it obliges itself to furnish the Government records of geologic, accounting, and other relevant data for its mining operation.274 Mining operation, as the law defines it, means mining activities involving exploration, feasibility, development, utilization, and processing.275 The underlying assumption in all these provisions is that the foreign contractor manages the mineral resources, just like the foreign contractor in a service contract. Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same auxiliary mining rights that it grants contractors in mineral agreements (MPSA, CA and JV).276 Parenthetically, _______________

270 Id., secs. 3 (aq) and 56. 271 Id., sec. 3 (y). 272 Id., sec. 35 (g). 273 Id., sec. 35 (h). 274 Id., sec. 35 (1). 275 Id., sec. 3 (af). 276 SEC. 72. Timber Rights.Any provision of the law to the contrary notwithstanding, a contractor may be granted a right to cut trees or timber within his mining areas as may be necessary for his mining operations subject to forestry laws, rules and regulations: Provided, That if the land covered by the mining area is already covered by exiting timber concessions, the volume of timber needed and the manner of cutting and removal thereof shall be determined by the mines regional director, upon consultation with the contractor, the timber concessionaire/permittee and the Forest Management Bureau of the Department: Provided, further, That in case of disagreement between the contractor and the timber concessionaire, the matter shall be submitted to the Secretary whose decision shall be final. The contractor shall perform reforestation work within his mining area in accordance with forestry laws, rules and regulations. [Emphasis supplied.] SEC. 73. Water Rights.A contractor shall have water rights for mining operations upon approval of application with the appropriate gov 237

VOL. 421, JANUARY 27, 2004 237 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Sections 72 to 75 use the term contractor, without distinguishing between FTAA and mineral agreement contractors. And so does holders of mining rights in Section 76. A foreign contractor may even convert its FTAA into a mineral agreement if the economic _______________

ernment agency in accordance with existing water laws, rules and regulations promulgated thereunder: Provided, That water rights already granted or vested through long use, recognized and acknowledged by local customs, laws and decisions of courts shall not thereby be impaired: Provided, further, That the Government reserves the right to regulate water rights and the reasonable and equitable distribution of water supply so as to prevent the monopoly of the use thereof. [Emphasis supplied.] SEC. 74. Right to Possess Explosives.A contractor/exploration permittee shall have the right to possess and use explosives within his contract/permit area as may be necessary for his mining operations upon approval of an application with the appropriate government agency in accordance with existing laws, rules and regulations promulgated thereunder: Provided, That the Government reserves the right to regulate and control the explosive accessories to ensure safe mining operations. [Emphasis supplied.] SEC. 75. Easement Rights.When mining areas are so situated that for purposes of more convenient mining operations it is necessary to build, construct or install on the mining areas or lands owned, occupied or leased by other persons, such infrastructure as roads, railroads, mills, waste dump sites, tailings ponds, warehouses, staging or storage areas and port facilities, tramways, runways, airports, electric transmission, telephone or telegraph lines, dams and their normal flood and catchment areas, sites for water wells, ditches, canals, new river beds, pipelines, flumes, cuts, shafts, tunnels, or mills the contractor, upon payment of just compensation, shall be entitled to enter and occupy said mining areas or lands. [Emphasis supplied.] SEC. 76. Entry into Private Lands and Concession Areas.Subject to prior notification, holders of mining rights shall not be prevented from entry into private lands and concession areas by surface owners, occupants, or concessionaires when conducting mining operations therein: Provided, That any damage done to the property of the surface owner, occupant, or concessionaire as a consequence of such operations shall be properly compensated as may be provided for in the implementing rules and regulations: Provided, further, That to guarantee such compensation, the person authorized to conduct mining operation shall, prior thereto, post a bond with the regional director based on the type of properties, the prevailing prices in and around the area where the mining operations are to be conducted, with surety or sureties satisfactory to the regional director. [Emphasis supplied.] 238

238 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos viability of the contract area is found to be inadequate to justify large-scale mining operations,277 provided that it reduces its equity in the corporation, partnership, association or cooperative to forty percent (40%).278

Finally, under the Act, an FTAA contractor warrants that it has or has access to all the financing, managerial, and technical expertise . . . .279 This suggests that an FTAA contractor is bound to provide some management assistancea form of assistance that has been eliminated and, therefore, proscribed by the present Charter. By allowing foreign contractors to manage or operate all the aspects of the mining operation, the abovecited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the nations mineral resources to these contractors, leaving the State with nothing but bare title thereto. Moreover, the same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally ordained 60%-40% capitalization requirement for corporations or associations engaged in the exploitation, development and utilization of Philippine natural resources. In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of the Constitution: (1) The proviso in Section 3 (aq), which defines qualified person, to wit: Provided, That a legally organized foreign-owned corporation shall be deemed a qualified person for purposes of granting an exploration permit, financial or technical assistance agreement or mineral processing permit. (2) Section 23,280 which specifies the rights and obligations of an exploration permittee, insofar as said section applies to a financial or technical assistance agreement; _______________

277 Id., sec. 39, first par. 278 Id., sec. 39, second par. 279 Id., sec. 35 (e). 280 SEC. 23. Rights and Obligations of the Permittee.x x x. The permittee may apply for a mineral production sharing agreement, joint venture agreement, co-production agreement or financial or technical assistance agreement over the permit area, which application shall be granted if the permittee meets the neces 239

VOL. 421, JANUARY 27, 2004 239

La Bugal-BLaan Tribal Association, Inc. vs. Ramos (3) Section 33, which prescribes the eligibility of a contractor in a financial or technical assistance agreement; (4) Section 35,281 which enumerates the terms and conditions for every financial or technical assistance agreement; _______________

sary qualifications and the terms and conditions of any such agreement: Provided That the exploration period covered by the exploration period of the mineral agreement or financial or technical assistance agreement. 281 SEC. 35. Terms and Conditions.The following terms, conditions, and warranties shall be incorporated in the financial or technical assistance agreement, to wit: (a) A firm commitment in the form of sworn statement, of an amount corresponding to the expenditure obligation that will be invested in the contract area: Provided, That such amount shall be subject to changes as may be provided for in the rules and regulations of this act; (b) A financial guarantee bond shall be posted in favor of the Government in an amount equivalent to the expenditure obligation of the applicant for any year; (c) Submission of proof of technical competence, such as, but not limited to, its track record in mineral resource exploration, development, and utilization; details of technology to be employed in the proposed operation; and details of technical personnel to undertake the operation; (d) Representations and warranties that the applicant has all the qualifications and none of the disqualifications for entering into the agreement; (e) Representations and warranties that the contractor has or has access to all the financing managerial and technical expertise and, if circumstances demand, the technology required to promptly and effectively carry out the objectives of the agreement with the understanding to timely deploy these resources under its supervision pursuant to the periodic work programs and related budgets, when proper, providing an exploration period up to two (2) years, extendible for another two (2) years but subject to annual review by the Secretary in accordance with the implementing rules and regulations of this Act, and further, subject to the relinquishment obligations; (f) Representations and warranties that, except for payments for dispositions for its equity, foreign investments in local enterprises which are qualified for repatriation, and local suppliers credits and such other generally accepted and permissible financial schemes for raising funds for valid business purposes, the contractor

240

240 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos (5) Section 39,282 which allows the contractor in a financial and technical assistance agreement to convert the same into a mineral production-sharing agreement; _______________

shall not raise any form of financing from domestic sources of funds, whether in Philippine or foreign currency, for conducting its mining operations for and in the contract area; (g) The mining operations shall be conducted in accordance with the provisions of this Act and its implementing rules and regulations; (h) Work programs and minimum expenditures commitments; (i) Preferential use of local goods and services to the maximum extent practicable; (j) A stipulation that the contractors are obligated to give preference to Filipinos in all types of mining employment for which they are qualified and that technology shall be transferred to the same; (k) Requiring the proponent to effectively use appropriate anti-pollution technology and facilities to protect the environment and to restore or rehabilitate mined out areas and other areas affected by mine tailings and other forms of pollution or destruction; (l) The contractors shall furnish the Government records of geologic, accounting, and other relevant data for its mining operation, and that book of accounts and records shall be open for inspection by the government; (m) Requiring the proponent to dispose of the minerals and byproducts produced under a financial or technical assistance agreement at the highest price and more advantageous terms and conditions as provided for under the rules and regulations of this Act; (n) Provide for consultation and arbitration with respect to the interpretation and implementation of the terms and conditions of the agreements; and (o) Such other terms and conditions consistent with the Constitution and with this Act as the Secretary may deem to be for the best interest of the State and the welfare of the Filipino people.

282 SEC. 39. Option to Convert into Mineral Agreement.The contractor has the option to convert the financial or technical assistance agreement to a mineral agreement at any time during the term of the agreement, if the economic viability of the contract area is found to be inadequate to justify large-scale mining operations, after proper notice to the Secretary as provided for under the implementing rules and regula241

VOL. 421, JANUARY 27, 2004 241 La Bugal-BLaan Tribal Association, Inc. vs. Ramos (6) Section 56,283 which authorizes the issuance of a mineral processing permit to a contractor in a financial and technical assistance agreement; The following provisions of the same Act are likewise void as they are dependent on the foregoing provisions and cannot stand on their own: (1) Section 3 (g),284 which defines the term contractor, insofar as it applies to a financial or technical assistance agreement. Section 34,285 which prescribes the maximum contract area in a financial or technical assistance agreements; Section 36,286 which allows negotiations for financial or technical assistance agreements; _______________

tions; Provided, That the mineral agreement shall only be for the remaining period of the original agreement. In the case of a foreign contractor, it shall reduce its equity to forty percent (40%) in the corporation, partnership, association, or cooperative. Upon compliance with this requirement by the contractor, the Secretary shall approve the conversion and execute the mineral production-sharing agreement. 283 SEC. 56. Eligibility of Foreign-owned/-controlled Corporation.A foreign owned/-controlled corporation may be granted a mineral processing permit. 284 SEC. 3. Definition of Terms.As used in and for purposes of this Act, the following terms, whether in singular or plural, shall mean: xxx

(g) Contractor means a qualified person acting alone or in consortium who is a party to a mineral agreement or to a financial or technical assistance agreement. 285 SEC. 34. Maximum Contract Area.The maximum contract area that may be granted per qualified person, subject to relinquishment shall be: (a) 1,000 meridional blocks onshore; (b) 4,000 meridional blocks offshore; or (c) Combinations of (a) and (b) provided that it shall not exceed the maximum limits for onshore and offshore areas. 286 SEC. 36. Negotiations.A financial or technical assistance agreement shall be negotiated by the Department and executed and approved by the President. The President shall notify Congress of all financial or technical assistance agreements within thirty (30) days from execution and approval thereof. 242

242 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Section 37,287 which prescribes the procedure for filing and evaluation of financial or technical assistance agreement proposals; Section 38,288 which limits the term of financial or technical assistance agreements; Section 40,289 which allows the assignment or transfer of financial or technical assistance agreements; Section 41,290 which allows the withdrawal of the contractor in an FTAA; The second and third paragraphs of Section 81,291 which provide for the Governments share in a financial and technical assistance agreement; and _______________

287 SEC. 37. Filing and Evaluation of Financial or Technical Assistance Agreement Proposals.All financial or technical assistance agreement proposals shall be filed with the Bureau after payment of the required processing fees. If the proposal is found to be sufficient and meritorious in form and substance after evaluation, it shall be recorded with the appropriate government agency to give the proponent the prior right to the area covered by such proposal: Provided, That existing mineral agreements, financial

or technical assistance agreements and other mining rights are not impaired or prejudiced thereby. The Secretary shall recommend its approval to the President. 288 SEC. 38. Term of Financial or Technical Assistance Agreement.A financial or technical assistance agreement shall have a term not exceeding twenty-five (25) years to start from the execution thereof, renewable for not more than twenty-five (25) years under such terms and conditions as may be provided by law. 289 SEC. 40. Assignment/Transfer.A financial or technical assistance agreement may be assigned or transferred, in whole or in part, to a qualified person subject to the prior approval of the President: Provided, That the President shall notify Congress of every financial or technical assistance agreement assigned or converted in accordance with this provision within thirty (30) days from the date of the approval thereof. 290 SEC. 41. Withdrawal from Financial or Technical Assistance Agreement.The contractor shall manifest in writing to the Secretary his intention to withdraw from the agreement, if in his judgment the mining project is no longer economically feasible, even after he has exerted reasonable diligence to remedy the cause or the situation. The Secretary may accept the withdrawal: Provided, That the contractor has complied or satisfied all his financial, fiscal or legal obligations. 291 SEC. 81. Government Share in Other Mineral Agreements. x x x. 243

VOL. 421, JANUARY 27, 2004 243 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Section 90,292 which provides for incentives to contractors in FTAAs insofar as it applies to said contractors; 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.293 There can be little doubt that the WMCP FTAA itself is a service contract.

Section 1.3 of the WMCP FTAA grants WMCP the exclusive right to explore, exploit, utilise*,+ process and dispose of all Minerals products and by-products thereof that may be produced from the Contract Area.294 The FTAA also imbues WMCP with the following rights: _______________

The Government share in financial or technical assistance agreement shall consist of, among other things, the contractors corporate income tax, excise tax, special allowance, withholding tax due from the contractors foreign stockholders arising from dividend or interest payments to the said foreign stockholder in case of a foreign national and all such other taxes, duties and fees as provided for under existing laws. The collection of Government share in financial or technical assistance agreement shall commence after the financial or technical assistance agreement contractor has fully recovered its pre-operating expenses, exploration, and development expenditures, inclusive. 292 SEC. 90. Incentives.The contractors in mineral agreements, and financial or technical assistance agreements shall be entitled to the applicable fiscal and non-fiscal incentives as provided for under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987: Provided, That holders of exploration permits may register with the Board of Investments and be entitled to the Fiscal incentives granted under the said Code for the duration of the permits or extensions thereof: Provided, further, That mining activities shall always be included in the investment priorities plan. 293 Lidasan v. Commission on Elections, 21 SCRA 496 (1967). 294 Vide also WMCP FTAA, sec. 10.2 (a). 244

244 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos (b) to extract and carry away any Mineral samples from the Contract area for the purpose of conducting tests and studies in respect thereof; (c) to determine the mining and treatment processes to be utilized during the Development/Operating Period and the project facilities to be constructed during the Development and Construction Period; (d) have the right of possession of the Contract Area, with full right of ingress and egress and the right to occupy the same, subject to the provisions of Presidential Decree No. 512 (if applicable) and not be

prevented from entry into private lands by surface owners and/or occupants thereof when prospecting, exploring and exploiting for minerals therein; xxx (f) to construct roadways, mining, drainage, power generation and transmission facilities and all other types of works on the Contract Area; (g) to erect, install or place any type of improvements, supplies, machinery and other equipment relating to the Mining Operations and to use, sell or otherwise dispose of, modify, remove or diminish any and all parts thereof; (h) enjoy, subject to pertinent laws, rules and regulations and the rights of third Parties, easement rights and the use of timber, sand, clay, stone, water and other natural resources in the Contract Area without cost for the purposes of the Mining Operations; xxx (l) have the right to mortgage, charge or encumber all or part of its interest and obligations under this Agreement, the plant, equipment and infrastructure and the Minerals produced from the Mining Operations; x x x.295 All materials, equipment, plant and other installations erected or placed on the Contract Area remain the property of WMCP, which has the right to deal with and remove such items within twelve months from the termination of the FTAA.296 Pursuant to Section 1.2 of the FTAA, WMCP shall provide [all] financing, technology, management and personnel necessary for the Mining Operations. The mining company binds itself to perform all Mining Operations . . . providing all necessary services, _______________

295 WMCP, sec. 10.2. 296 Id., sec. 11. 245

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La Bugal-BLaan Tribal Association, Inc. vs. Ramos technology and financing in connection therewith,297 and to furnish all materials, labour, equipment and other installations that may be required for carrying on all Mining Operations.298 WMCP may make expansions, improvements and replacements of the mining facilities and may add such new facilities as it considers necessary for the mining operations.299 These contractual stipulations, taken together, grant WMCP beneficial ownership over natural resources that properly belong to the State and are intended for the benefit of its citizens. These stipulations are abhorrent to the 1987 Constitution. They are precisely the vices that the fundamental law seeks to avoid, the evils that it aims to suppress. Consequently, the contract from which they spring must be struck down. In arguing against the annulment of the FTAA, WMCP invokes the Agreement on the Promotion and Protection of Investments between the Philippine and Australian Governments, which was signed in Manila on January 25, 1995 and which entered into force on December 8, 1995. x x x. Article 2 (1) of said treaty states that it applies to investments whenever made and thus the fact that *WMCPs+ FTAA was entered into prior to the entry into force of the treaty does not preclude the Philippine Government from protecting *WMCPs+ investment in *that+ FTAA. Likewise, Article 3 (1) of the treaty provides that Each Party shall encourage and promote investments in its area by investors of the other Party and shall [admit] such investments in accordance with its Constitution, Laws, regulations and investment policies and in Article 3 (2), it states that Each Party shall ensure that investments are accorded fair and equitable treatment. The latter stipulation indicates that it was intended to impose an obligation upon a Party to afford fair and equitable treatment to the investments of the other Party and that a failure to provide such treatment by or under the laws of the Party may constitute a breach of the treaty. Simply stated, the Philippines could not, under said treaty, rely upon the inadequacies of its own laws to deprive an Australian investor (like [WMCP]) of fair and equitable treatment by invalidating *WMCPs+ FTAA without likewise nullifying the service contracts entered into before the enactment of RA 7942 such as those mentioned in PD 87 or EO 279. _______________

297 Id., sec. 10.1 (a). 298 Id., sec. 10.1 (c). 299 Id., sec. 6.4. 246

246

SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos This becomes more significant in the light of the fact that *WMCPs+ FTAA was executed not by a mere Filipino citizen, but by the Philippine Government itself, through its President no less, which, in entering into said treaty is assumed to be aware of the existing Philippine laws on service contracts over the exploration, development and utilization of natural resources. The execution of the FTAA by the Philippine Government assures the Australian Government that the FTAA is in accordance with existing Philippine laws.300 [Emphasis and italics by private respondents.] The invalidation of the subject FTAA, it is argued, would constitute a breach of said treaty which, in turn, would amount to a violation of Section 3, Article II of the Constitution adopting the generally accepted principles of international law as part of the law of the land. One of these generally accepted principles is pacta sunt servanda, which requires the performance in good faith of treaty obligations. Even assuming arguendo that WMCP is correct in its interpretation of the treaty and its assertion that the Philippines could not . . . deprive an Australian investor (like *WMCP+) of fair and equitable treatment by invalidating *WMCPs+ FTAA without likewise nullifying the service contracts entered into before the enactment of RA 7942 . . ., the annulment of the FTAA would not constitute a breach of the treaty invoked. For this decision herein invalidating the subject FTAA forms part of the legal system of the Philippines.301 The equal protection clause302 guarantees that such decision shall apply to all contracts belonging to the same class, hence, upholding rather than violating, the fair and equitable treatment stipulation in said treaty. One other matter requires clarification. Petitioners contend that, consistent with the provisions of Section 2, Article XII of the Constitution, the President may enter into agreements involving either technical or financial assistance only. The agreement in question, however, is a technical and financial assistance agreement. _______________

300 Rollo, pp. 563-564. 301 Civil Code, Art. 8. 302 Const., Art III, Sec. 1. 247

VOL. 421, JANUARY 27, 2004 247

La Bugal-BLaan Tribal Association, Inc. vs. Ramos Petitioners contention does not lie. To adhere to the literal language of the Constitution would lead to absurd consequences.303 As WMCP correctly put it: x x x such a theory of petitioners would compel the government (through the President) to enter into contract with two (2) foreign-owned corporations, one for financial assistance agreement and with the other, for technical assistance over one and the same mining area or land; or to execute two (2) contracts with only one foreign-owned corporation which has the capability to provide both financial and technical assistance, one for financial assistance and another for technical assistance, over the same mining area. Such an absurd result is definitely not sanctioned under the canons of constitutional construction.304 [Italics in the original.] Surely, the framers of the 1987 Charter did not contemplate such an absurd result from their use of either/or. A constitution is not to be interpreted as demanding the impossible or the impracticable; and unreasonable or absurd consequences, if possible, should be avoided.305 Courts are not to give words a meaning that would lead to absurd or unreasonable consequences and a literal interpretation is to be rejected if it would be unjust or lead to absurd results.306 That is a strong argument against its adoption.307 Accordingly, petitioners interpretation must be rejected. The foregoing discussion has rendered unnecessary the resolution of the other issues raised by the petition. WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional and void: (1) The following provisions of Republic Act No. 7942: (a) The proviso in Section 3 (aq), (b) Section 23, (c) Section 33 to 41, (d) Section 56, (e) The second and third paragraphs of Section 81, and _______________

303 Vide Note 223. 304 Rollo, p. 243. 305 Civil Liberties Union v. Executive Secretary, supra. 306 Automotive Parts & Equipment Company, Inc. v. Lingad, 30 SCRA 248 (1969).

307 Ibid. 248

248 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos (f) Section 90. (2) All provisions of Department of Environment and Natural Resources Administrative Order 96-40, s. 1996 which are not in conformity with this Decision, and (3) The, Financial and Technical Assistance Agreement between the Government of the Republic of the Philippines and WMC Philippines, Inc. SO ORDERED. Davide, Jr. (C.J.), Puno, Quisumbing, Carpio, Corona, Callejo, Sr. and Tinga, JJ., concur. Vitug, J., Please see separate opinion. Panganiban, J., Please see separate opinion. Ynares-Santiago, I join J. Panganibans separate opinion. Sandoval-Gutierrez, J., I join Mr. Justice Panganiban in his separate opinion. Austria-Martinez, J., I join Justice Panganiban in his separate opinion. Azcuna, J., I take no partone of the parties was a client. SEPARATE OPINION VITUG, J.:

Petitioners, in the instant petition for prohibition and mandamus, assail the constitutionality of Republic Act No. 7942, otherwise also known as the Philippine Mining Act of 1995, as well as its Implementing Rules and Regulations (Administrative Order [DAO] 96-40) issued by the Department of Environment and Natural Resources, and the Financial and Technical Assistance Agreement (FTAA) entered into pursuant to Executive Order (EO) No. 279, by the Republic of the Philippines and Western Mining Corporation (Philippines), Inc. (WMCP). WMCP is owned by WMC Resources International Pty., Ltd, a

wholly owned subsidiary of Western Mining Corporation Holdings Limited, a publicly-listed major Australian mining and exploration company. The premise for the constitutional challenge is Section 2, Article XII, of the 1987 Constitution which provides: 249

VOL. 421, JANUARY 27, 2004 249 La Bugal-BLaan Tribal Association, Inc. vs. Ramos All lands of public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wild life, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. x x x. x x x xxx x x x.

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. The President shall notify the Congress of every contract entered into in accordance with this provision within thirty days from its execution. After a careful reading of the provisions of Republic Act No. 7942, I join the majority in invalidating the following portions of the law: a) Section 3 (aq) which considers a foreign-owned corporation itself qualified, not only to enter into financial or technical assistance agreements, but also for an exploration or mineral processing permit; b) Section 35 (g), (l), (m) which state the rights and obligations of a foreign-owned corporations pursuant to its mining operations; and c) Section 56 which provides that foreign-owned or controlled corporations are eligible to be granted a mineral processing permit. The ponencia, so eloquently expressed and so well ratiocinated, would also say that the Philippine Mining Act and its implementing rules or decrees contain provisions which, in effect, authorize the Government to enter into service contracts with foreign-owned corporations, thereby granting beneficial ownership over natural resources to foreign contractors in violation of the fundamental law.

Thus, it would strike down Sections 3 (aq), 23, 33 to 41, 56, 81, and 90 of the statute and related sections in DAO 96-40. The FTAA executed between the Government and WMCP is being invalidated for being in the nature of a service contract. The ponencia posits 250

250 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos that the adoption of the terms agreements x x x involving either technical or financial assistance in the 1987 Constitution, in lieu of service contracts found in the 1973 Charter, reflects the intention of the framers to disallow the execution of service contracts with foreign entities for the exploration, development, exploitation and utilization of the countrys natural resources. The proposition is one that I, most respectfully, cannot fully share. The deliberations of the Constitutional Commission do not disclose, in any evident manner, such intention on the part of the drafters, viz.: MR. JAMIR. Yes, Madam President. With respect to the second paragraph of Section 3, my amendment by substitution reads: THE PRESIDENT MAY ENTER INTO AGREEMENTS WITH FOREIGN-OWNED CORPORATIONS INVOLVING EITHER TECHNICAL OR FINANCIAL ASSISTANCE FOR LARGE-SCALE EXPLORATION, DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES ACCORDING TO THE TERMS AND CONDITIONS PROVIDED BY LAW. x x x MR. SUAREZ. Thank you, Madam President. Will Commissioner Jamir answer a few clarificatory questions? MR. JAMIR. Yes, Madam President. MR. SUAREZ. This particular portion of the section has reference to what was popularly known before as service contracts, among other things; is that correct? MR. JAMIR. Yes, Madam President. MR. SUAREZ. As it is formulated, the President may enter into service contracts but subject to the guidelines that may be promulgated by Congress? MR. JAMIR. That is correct.

MR. SUAREZ. Therefore, the aspect of negotiation and consummation will fall on the President, not upon Congress? MR. JAMIR. That is also correct, Madam President. MR. SUAREZ. Except that all of these contracts, service or otherwise must be made strictly in accordance with guidelines prescribed by Congress? MR. JAMIR. That is also correct.1 _______________

1 III Record of the Constitutional Commission 348. 251

VOL. 421, JANUARY 27, 2004 251 La Bugal-BLaan Tribal Association, Inc. vs. Ramos The significance of the change in the terminology is clarified in the following exchanges during the deliberations: SR. TAN. Am I correct in thinking that the only difference between these future service contracts and the past service contracts under Mr. Marcos is the general law to be enacted by the legislature and the notification of Congress by the President? That is the only difference, is it not? MR. VILLEGAS. That is right. SR. TAN. So those are the safeguards. MR. VILLEGAS. Yes, there was no law at all governing service contracts before.2 The Constitutional Commission has also agreed to include the additional requirement that said agreements must be based on real contributions to the economic growth and general welfare of the country. Upon the suggestion of then Commissioner Davide, the scope of these service contracts has likewise been limited to large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils. The then Commissioner, explains: And so, we believe that we should really, if we want to grant service contracts at all, limit the same to only those particular areas where Filipino capital may not be sufficient x x x.3

The majority would cite the emphatic statements of Commissioners Villegas and Davide that the countrys natural resources are exclusively reserved for Filipino citizens4 and that, according to Commissioner Villegas, the deletion of the phrase service contracts (is the) first attempt to avoid some of the abuses in the past regime in the use of service contracts to go around the 60-40 arrangement.5 These declarations do not necessarily mean that the Government may no longer enter into service contracts with foreign entities. In order to uphold and strengthen the national policy of preserving and developing the countrys natural resources exclusively for the Filipino people, the present Constitution indeed has provided for safeguards to prevent the execution of service contracts of the old regime, but not of service contracts per se. It could _______________

2Id., p. 352. 3Id., p. 355. 4 Decision, pp. 69-71. 5Id., p. 69. 252

252 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos not have been the object of the framers of the Charter to limit the contracts which the President may enter into, to mere agreements for financial and technical assistance. One would take it that the usual terms and conditions recognized and stipulated in agreements of such nature have been contemplated. Basically, the financier and the owner of know-how would understandably satisfy itself with the proper implementation and the profitability of the project. It would be abnormal for the financier and owner of the know-how not to assure itself that all the activities needed to bring the project into fruition are properly implemented, attended to, and carried out. Needless to say, no foreign investor would readily lend financial or technical assistance without the proper incentives, including fair returns, therefor. The Constitution has not prohibited the State from itself exploring, developing, or utilizing the countrys natural resources, and, for this purpose, it may, I submit, enter into the necessary agreements with individuals or entities in the pursuit of a feasible operation. The fundamental law is deemed written in every contract. The FTAA entered into by the government and WMCP recognizes this vital principle. Thus, two of the agreements whereas clauses provide:

WHEREAS, the 1987 Constitution of the Republic of the Philippines provides in Article XII, Section 2 that all lands of the public domain, waters, minerals, coal, petroleum, and other natural resources are owned by the State, and that the exploration, development and utilization of natural resources shall be under the full control and supervision of the State; and WHEREAS, the Constitution further provides that the Government may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large scale exploration, development and utilization of minerals. The assailed contract or its provisions must then be read in conformity with abovementioned constitutional mandate. Hence, Section 10.2 (a) of the FTAA, for instance, which states that the Contractor shall have the exclusive right to explore for, exploit, utilize, process, market, export and dispose of all minerals and products and by-products thereof that may be derived or produced from the Contract Area and to otherwise conduct Mining Operations in the Contract Area in accordance with the terms and conditions hereof, 253

VOL. 421, JANUARY 27, 2004 253 La Bugal-BLaan Tribal Association, Inc. vs. Ramos must be taken to mean that the foregoing rights are to be exercised by WMCP for and in behalf of the State and that WMCP, as the Contractor, would be bound to carry out the terms and conditions of the agreement acting for and in behalf of the State. In exchange for the financial and technical assistance, inclusive of its services, the Contractor enjoys an exclusivity of the contract and a corresponding compensation therefor. Except as so expressed elsewhere above, I see, therefore, no constitutional impairment in the enactment of Republic Act No. 7942, as well as its implementing rules, and in the execution by the Government of the Financial and Technical Agreement with WMCP; and I so vote accordingly. Just a word. While I cannot ignore an impression of the business community that the Court is wont, at times, to interfere with the economic decisions of Congress and the governments economic managers, I must hasten to add, however, that in so voting as above, I have not been unduly overwhelmed by that perception. Quite the contrary, the Court has always proceeded with great caution, such as now, in resolving cases that could inextricably involve policy questions thought to be best left to the technical expertise of the legislative and executive departments. SEPARATE OPINION PANGANIBAN, J.:

Petitioners challenge the constitutionality of (1) RA 7942 (The Philippine Mining Act of 1995), (2) its Implementing Rules and Regulations (DENR Administrative Order [DAO] 96-40); and (3) the Financial and Technical Assistance Agreement (FTAA) dated March 30, 1995, by and between the government and Western Mining Corporation (Phils.), Inc. (WMCP). Crux of the Controversy The crux of the controversy is the fact that WMCP, at the time it entered into the FTAA, was wholly owned by WMC Resources International Pty., Ltd. (WMC), which in turn was a wholly owned subsidiary of Western Mining Corporation Holdings, Ltd., a publicly listed major Australian mining and exploration company. 254

254 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos Petitioners thus argue that the FTAA was executed in violation of Section 2 of Article XII of the 1987 Constitution. Allegedly, according to the fourth paragraph thereof, FTAAs entered into by the government with foreign-owned corporations are limited to agreements involving merely technical or financial assistance to the State for large-scale exploration, development and utilization of minerals, petroleum and other mineral oils. The FTAA in question supposedly permits the foreign contractor to manage and control the mining operations fully, and is therefore no different from the service contracts that were prevalent under the martial law regime, and that are now disallowed by Section 2 of Article XII of the present Constitution. On January 23, 2001, all the shares of WMC in WMCPaccording to the latters Manifestation subsequently filed with this Courthad been sold to Sagittarius Mines, Inc., in which 60 percent of the equity is Filipino-owned. In the same Manifestation, the Court was further informed that the assailed FTAA had likewise been transferred from WMCP to Sagittarius. The well-researched ponencia of esteemed justice Conchita Carpio-Morales nevertheless declares that the instant case has not been rendered moot by the FTAAs transfer to and registration in the name of a Filipino-owned corporation, and that the validity of that transfer remains in dispute and awaits final judicial determination.1 It then proceeds to decide the instant case on the assumption that WMCP remains a foreign corporation. Controversy Now Moot

With due respect, I believe that the Court should dismiss the Petition on the ground of mootness. I submit that a decision on the constitutionality issue should await the wisdom of a new day when the Court would have a live case before it. The nullity of the FTAA is unarguably premised upon the contractor being a foreign corporation. Had the FTAA been originally issued to a Filipino-owned corporation, we would have had no con_______________

1 That is, the Court of Appeals resolution of the petition for reviewdocketed as CA-G.R. No. 74161 and lodged by Lepanto Consolidated Miningof the Decision of the Office of the President, which upheld the Order of the DENR secretary approving the transfer to, and the registration of the FTAA in the name of, Sagittarius Mines, Inc. 255

VOL. 421, JANUARY 27, 2004 255 La Bugal-BLaan Tribal Association, Inc. vs. Ramos stitutionality issue to speak of. Upon the other hand, conveyance of the FTAA to a Filipino corporation can be likened to the sale of land to a foreigner who subsequently acquires Filipino citizenship, or who later re-sells the same land to a Filipino citizen. The conveyance would be validated, as the property in question would no longer be owned by a disqualified vendee.2 Since the FTAA is now to be implemented by a Filipino corporation, how can the Court still declare it unconstitutional? The CA case is a dispute between two Filipino companies (Sagittarius and Lepanto) both claiming the right to purchase the foreign shares in WMCP. So regardless of which side eventually wins, the FTAA would still be in the hands of a qualified Filipino company. Furthermore, there being no more justiciable controversy, the plea to nullify the Mining Law has become a virtual petition for declaratory relief, over which the Supreme Court has no original jurisdiction.3 At bottom, I rely on the well-settled doctrine that this Court does not decide constitutional issues, unless they are the very lis mota of the case.4 Not Limited to Technical or Financial Assistance Only At any rate, following the literal text of the present Constitution,5 the ponencia limits to strict technical or financial only the assistance to be provided to the State by foreign-owned corporations for the large-

scale exploration, development and utilization of minerals, petroleum, and mineral oils. Such assistance may not _______________

2 Chavez v. Public Estates Authority and Amari, G.R. No. 133250, July 9, 2002, 384 SCRA 152; May 6, 2003, 403 SCRA 1, and November 11, 2003, 415 SCRA 403. 3 United Residents of Dominican Hill, Inc. v. Commission on the Settlement of Land Problems, 353 SCRA 782, March 7, 2001; In Re: Saturnino V. Bermudez, 145 SCRA 163, October 24, 1986; Darnoc Realty Development Corp. v. Ayala Corp., 202 Phil. 865; 117 SCRA 538, September 30, 1982; De la Llana v. Alba, 198 Phil. 1; 112 SCRA 294, March 12, 1982. 4 Mirasol v. Court of Appeals, 351 SCRA 44, February 1, 2001; Lalican v. Hon. Vergara, 342 Phil. 485; 276 SCRA 518, July 31, 1997; Ty v. Trampe, 321 Phil. 103; 250 SCRA 500, December 1, 1995; People v. Vera, 65 Phil. 56, November 16, 1937. 5 Par. 4, Sec. 2 of Art XII. 256

256 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos include management or other forms of assistance or other activities associated with the service contracts of the past unlamented regime. Precisely, the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was x x x the evil that the drafters of the 1987 Constitution sought to eradicate. Again, because of the mootness problem, it would be risky to take a definitive position on this question. The Court would be speculating on the contents of the FTAA of a prospective foreign company. The requirements of case and controversy would be lacking. Suffice it to say, at this point, that the issue even in a live case is not quite that easy to tackle. First, the drafters choice of wordstheir use of the phrase agreements x x x involving x x x technical or financial assistancedoes not absolutely indicate the intent to exclude other modes of assistance. Rather, the phrase signifies the possibility of the inclusion of other activities, provided they bear some reasonable relationship to and compatibility with financial or technical assistance.

If the intention of the drafters were strictly to confine foreign corporations to financial or technical assistance and nothing more, I am certain that their language would have been unmistakably restrictive and stringent. They would have said, for example: Foreign corporations are prohibited from providing management or other forms of assistance, or words to that effect. The conscious avoidance of restrictive wording bespeaks an intent not to employin an exclusionary, inflexible and limiting mannerthe expression agreements involving technical or financial assistance. Second, I believe the foregoing position is supported by the fact that our present Constitution still recognizes and allows service contracts (and has not rendered them taboo), albeit subject to several restrictions and modifications aimed at avoiding the pitfalls of the past. Below are some excerpts from the deliberations of the Constitutional Commission (Concom), showing that its members discussed technical or financial agreements in the same breath as service contracts and used the terms interchangeably: MR. JAMIR: Yes, Madam President. With respect to the second paragraph of Section 3, my amendment by substitution reads: 257

VOL. 421, JANUARY 27, 2004 257 La Bugal-BLaan Tribal Association, Inc. vs. Ramos THE PRESIDENT MAY ENTER INTO AGREEMENTS WITH FOREIGN-OWNED CORPORATIONS INVOLVING EITHER TECHNICAL OR FINANCIAL ASSISTANCE FOR LARGE-SCALE EXPLORATION, DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES ACCORDING TO THE TERMS AND CONDITIONS PROVIDED BY LAW. MR. VILLEGAS: The Committee accepts the amendment. Commissioner Suarez will give the background x x x. MR. SUAREZ: Thank you, Madam President x x x. MR. JAMIR: Yes, Madam President. MR. SUAREZ: This particular portion of the section has reference to what was popularly known before as service contracts, among other things, is that correct? MR. JAMIR: Yes, Madam President. MR. SUAREZ: As it is formulated, the President may enter into service contracts but subject to the guidelines that may be promulgated by Congress?

MR. JAMIR: That is correct. MR. SUAREZ: Therefore, that aspect of negotiation and consummation will fall on the President, not upon Congress? MR. JAMIR: That is also correct, Madam President. MR. SUAREZ: Except that all of these contracts, service or otherwise, must be made strictly in accordance with guidelines prescribed by Congress? MR. JAMIR: That is also correct. MR. SUAREZ: And the Gentleman is thinking in terms of a law that uniformly covers situations of the same nature? MR. JAMIR: That is 100 percent correct x x x xxx xxx xxx

THE PRESIDENT: The amendment has been accepted by the Committee. May we first vote on the last paragraph? MR. GASCON: Madam President, that is the point of my inquiry x x x Commissioner Jamir had proposed an amendment with regard to special service contracts which was accepted by the Committee. Since the Committee has accepted it, I would like to ask some questions x x x As it is proposed now, such service contracts will be entered into by the President with the guidelines of a general law on service contracts to be enacted by Congress. Is that correct? MR. VILLEGAS: The Commissioner is right, Madam President. 258

258 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos MR. GASCON: According to the original proposal, if the President were to enter into a particular agreement, he would need the concurrence of Congress. Now that it has been changed by the proposal of Commissioner Jamir in that Congress will set the general law to which the President shall comply, the President will, therefore, not need the concurrence of Congress every time he enters into service contracts. Is that correct? MR. VILLEGAS: That is right.

MR. GASCON: The proposed amendment of Commissioner Jamir is in direct contrast to my proposed amendment, so I would like to object and present my proposed amendment to the body x x x. xxx xxx xxx

MR. GASCON: Yes, it will be up to the body. I feel that the general law to be set by Congress as regards service contract agreements which the President will enter into might be too general or since we do not know the content yet of such a law, it might be that certain agreements will be detrimental to the interest of the Filipinos. This is in direct contrast to my proposal which provides that there be effective constraints in the implementation of service contracts. So instead of a general law to be passed by Congress to serve as a guideline to the President when entering into service contract agreements, I propose that every service contract entered into by the President would need the concurrence of Congress, so as to assure the Filipinos of their interests with regard to the issue in Section 3 on all lands of the public domain. My alternative amendment, which we will discuss later, reads: THAT THE PRESIDENT SHALL ENTER INTO SUCH AGREEMENTS ONLY WITH THE CONCURRENCE OF TWO-THIRDS VOTE OF ALL THE MEMBERS OF CONGRESS SITTING SEPARATELY x x x MR. BENGZON: The reason we made that shift is that we realized the original proposal could breed corruption. By the way, this is not just confined to service contracts but also to financial assistance. If we are going to make every single contract subject to the concurrence of Congresswhich, according to the Commissioners amendment is the concurrence of two-thirds of Congress voting separatelythen (1) there is a very great chance that each contract will be different from another; and (2) there is a great temptation that it would breed corruption because of the great lobbying that is going to happen. And we do not want to subject our legislature to that. x x x. MR. GASCON: But my basic problem is that we do not know as of yet the contents of such a general law as to how much con259

VOL. 421, JANUARY 27, 2004 259 La Bugal-BLaan Tribal Association, Inc. vs. Ramos straints there will be in it. And to my mind, although the committees contention that the regular concurrence from Congress would subject Congress to extensive lobbying, I think that is a risk we will have to take since Congress is a body of representatives of the people whose membership will be changing regularly as there will be changing circumstances every time certain agreements are made. It would be best then to keep in tab and attuned to the interest of the Filipino people, whenever the President enters into any agreement with regard to such an important matter as technical or financial

assistance for large-scale exploration, development and utilization of natural resources or service contracts, the peoples elected representatives should be on top of it x x x. xxx xxx xxx

MR. OPLE: Madam President, we do not need to suspend the session. If Commissioner Gascon needs a few minutes, I can fill up the remaining time while he completes his proposed amendment. I just wanted to ask Commissioner Jamir whether he would entertain a minor amendment to his amendment, and it reads as follows: THE PRESIDENT SHALL SUBSEQUENTLY NOTIFY CONGRESS OF EVERY SERVICE CONTRACT ENTERED INTO IN ACCORDANCE WITH THE GENERAL LAW. I think the reason is, if I may state it briefly, as Commissioner Bengzon said, Congress can always change the general law later on to conform to new perceptions of standards that should be built into service contracts. But the only way Congress can do this is if there were a notification requirement from the Office of the President that such service contracts had been entered into, subject then to the scrutiny of the Members of Congress. This pertains to a situation where the service contracts are already entered into, and all that this amendment seeks is the reporting requirement from the Office of the President. Will Commissioner Jamir entertain that? MR. JAMIR: I will gladly do so, if it is still within my power. MR.VILLEGAS: Yes, the Committee accepts the amendment. xxx xxx xxx

SR. TAN: Madam President, may I ask a question? x x x Am I correct in thinking that the only difference between these future service contracts and the past service contracts under Mr. Marcos is the general law to be enacted by the legislature and the notification of Congress by the President? That is the only difference, is it not? MR. VILLEGAS: That is right. 260

260 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos SR. TAN: So those are the safeguards. MR. VILLEGAS: Yes. There was no law at all governing service contracts before. x x x. xxx xxx xxx

MR. SARMIENTO: Maybe we can simplify my proposed amendment, so that it will read: IT SHALL BE THE POLICY OF THE STATE TO PROMOTE, DEVELOP AND EMPLOY LOCAL SCIENTIFIC AND TECHNOLOGICAL RESOURCES x x x. MR. DAVIDE: Could it not be properly accommodated either in the Article on Declaration of Principles and State Policies or in the Article on Human Resources because it would not be germane to the Article on National Economy and Patrimony which we are now treating? MR. VILLEGAS: I think the intention here, if I understand the amendment to the amendment, is to make sure that when these technical and scientific services are rendered by foreigners there would be a deliberate attempt to develop local talents so that we are not forever dependent on these foreigners. Am I right? MR. DAVIDE: So it is in relation to the service contracts? x x x Can it not be stated that the general law providing for service contracts shall give priority to the adjective of Commissioner Sarmientos amendment? It should be in the law itself. MR VILLEGAS: That is why it says, IT SHALL BE THE POLICY OF THE STATE immediately following the statement about Congress. xxx xxx xxx

THE PRESIDENT: Does Commissioner Gascon insist on his proposed amendment? MR. GASCON: I objected to that amendment and after listening to it again, I feel that I still object on basic principles, that every service contract to be entered into by the President should be with the concurrence of Congress. I had earlier presented a proposed amendment of CONCURRENCE OF TWOTHIRDS VOTE OF ALL THE MEMBERS OF CONGRESS, but at this point in time, perhaps to simplify choices, since basically the proposal of Commissioner Jamir is to set a general law with regard to service contracts, my proposal is to require concurrence of Congress every time a service contract is to be made. THE PRESIDENT: That is clear now. So can we proceed to vote? 261

VOL. 421, JANUARY 27, 2004 261 La Bugal-BLaan Tribal Association, Inc. vs. Ramos MR. NOLLEDO: x x x Madam President, I have the permission of the Acting Floor Leader to speak for only two minutes in favor of the amendment of Commissioner Gascon x x x x With due respect to the members of the Committee and Commissioner Jamir, I am in favor of the objection of Commissioner

Gascon. Madam President, I was one of those who refused to sign the 1973 Constitution, and one of the reasons is that there were many provisions in the Transitory Provisions therein that favored aliens. I was shocked when I read a provision authorizing service contracts while we, in this Constitutional Commission, provided for Filipino control of the economy. We are, therefore, providing for exceptional instances where aliens may circumvent Filipino control of our economy. And one way of circumventing the rule in favor of Filipino control of the economy is to recognize service contracts. As far as I am concerned, if I should have my own way, I am for the complete deletion of this provision. However, we are presenting a compromise in the sense that we are requiring a two-thirds vote of all the Members of Congress as a safeguard. I think we should not mistrust the future Members of Congress by saying that the purpose of this provision is to avoid corruption. We cannot claim that they are less patriotic than we are. I think the Members of this Commission should know that entering into service contracts is an exception to the rule on protection of natural resources for the interest of the nation, and therefore, being an exception it should be subject whenever possible, to stringent rules. It seems to me that we are liberalizing the rules in favor of aliens. I say these things with a heavy heart, Madam President. I do not claim to be a nationalist, but I love my country. Although we need investments, we must adopt safeguards that are truly reflective of the sentiments of the people and not mere cosmetic safeguards as they now appear in the Jamir amendment. (Applause) x x x. The foregoing is but a small sampling of the lengthy discussions of the constitutional commissioners on the subject of service contracts and technical and financial assistance agreements. Quoting the rest of their discussions would have taken up several more pages, and these have thus been omitted for the sake of brevity. In any event, it would appear that the members of the Concom actually had in mind the Marcos era service contracts that they were familiar with (but which they duly modified and restricted so as to prevent abuses), when they were crafting and polishing the provisions 262

262 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos dealing with financial and/or technical assistance agreements. These provisions ultimately became the fourth and the fifth paragraphs of Section 2 of Article XII of the 1987 Constitution. Put differently, technical and financial assistance agreements were understood by the delegates to include service contracts duly modified to prevent abuses. I respectfully submit that the statements of Commissioner Jose Nolledo, quoted above, are especially pertinent, since they refer specifically to service contracts in favor of aliens. From his perspective, it is clear to me that the Concom discussions in their entirety had to do with service contracts that might be

given to foreign-owned corporations as exceptions to the general principle of Filipino control of the economy. Commissioner Nolledo sums up these statements by saying: We are, therefore, providing for exceptional instances where aliens may circumvent Filipino control of our economy. And one way of circumventing the rule in favor of Filipino control of the economy is to recognize service contracts. As far as I am concerned, if I should have my own way, I am for the complete deletion of this provision. However, we are presenting a compromise in the sense that we are requiring a two-thirds vote of all the Members of Congress as a safeguard. x x x x x x x x x. I think the Members of this Commission should know that entering into service contracts is an exception to the rule on protection of natural resources for the interest of the nation, and therefore, being an exception it should be subject whenever possible, to stringent rules. It seems to me that we are liberalizing the rules in favor of aliens. x x x. Since the drafters were referring only to service contracts to be granted to foreigners and to nothing else, this fact necessarily implies that we ought not treat the idea of agreements involving either technical or financial assistance as having any significance or existence apart from service contracts. In other words, in the minds of the commissioners, the concept of technical and financial assistance agreements did not exist at all apart from the concept of service contracts duly modified to prevent abuses. Interpretation of the Constitution in the Light of Present-Day Realities Tantamount to closing ones eyes to reality is the insistence that the term agreements involving technical or financial assistance 263

VOL. 421, JANUARY 27, 2004 263 La Bugal-BLaan Tribal Association, Inc. vs. Ramos refers only to purely technical or financial assistance to be rendered to the State by a foreign corporation (and must perforce exclude management and other forms of assistance). Nowadays, securing the kind of financial assistance required by large-scale explorations, which involve hundreds of millions of dollars, is not just a matter of signing a simple promissory note in favor of a lender. Current business practices often require borrowers seeking huge loans to allow creditors access to financial records and other data, and probably a seat or two on the formers board of directors; or at least some participation in certain management decisions that may have an impact on the financial health or longterm viability of the debtor, which of course will directly affect the latters capacity to repay its loans.

Prudent lending practices necessitate a certain degree of involvement in the borrowers management process. Likewise, technical assistance, particularly in certain industries like mining and oil exploration, would likely be from the industrys leading players. It may involve the training of personnel and some form of supervision and oversight with respect to the correct and proper implementation of the technical assistance. The purpose is to ensure that the technical assistance rendered will not go to waste, and that the lender's business reputation and successful track record in the industry will be adequately safeguarded. Thus the technical assistance arrangements often necessarily include interface with the management process itself. The mining industry is in the doldrums, precisely because of lack of technical and financial resources in our country. If activated properly, the industry could meaningfully contribute to our economy and lead to the employment of many of our jobless compatriots. A hasty and premature decision on the constitutionality of the herein FTAA and the Philippine Mining Act could unnecessarily burden the recovery of the industry and the employment opportunities it would likely generate. Oral Argument Needed Given the modern-day reality that even the World Bank (WB) and the International Monetary Fund (IMF) do not lend on the basis merely of bare promissory notes, but on some conditionalities designed to assure the borrowers financial viability, I would like to hear in an Oral Argument in a live, not a moot, case what these 264

264 SUPREME COURT REPORTS ANNOTATED La Bugal-BLaan Tribal Association, Inc. vs. Ramos international practices are and how they impact on our constitutional restrictions. This is not to say that we should bend our basic law; rather, we should find out what kind of FTAA provisions are realistic vis-vis these international standards and our constitutional protection. Unless there is a live FTAA, the Court would not be able to analyze the provisions vis--vis the Constitution, the Mining Law and these modern day lending practices. I mentioned the WB and the IMF, not necessarily because I agree with their oftentimes stringent policies, but because they set the standards that international and multinational financial institutions often take bearings from. The WB and IMF are akin (though not equivalent) to the Bangko Sentral, which all Philippine banks must abide by. If this Court closes its doors to these international realities and

unilaterally sets up its own concepts of strict technical and financial assistance, then it may unwittingly make the country a virtual hermitan economic isolationistin the real world of finance. I understand that a live case, challenging the Mining Law and an FTAA relevant thereto, is pending before the Second Division of this Court, where it is docketed as G.R. No. 157882 (Dipdio Earth Savers Multi-Purpose Association v. Hon. Elisea Gozun). Can we not consolidate that case with the current one, call an Oral Argument, and then decide the matter more definitively? During the Oral Argument, I believe that the Court should invite as amici curiae (1) a lawyer versed in international finance like retired Justice Florentino P. Feliciano, (2) a representative of the Bankers Association of the Philippines, and (3) a leader of the University of the Philippines Law Constitution Project. Constitutional Interpretation and the Vagaries of Contemporary Events Finally, I believe that the Concom did not mean to tie the hands of the President and restrict the latter only to agreements on rigid financial and technical assistance and nothing else. The commissioners fully realized that their work would have to withstand the test of time; that the Charter, though crafted with the wisdom born of past experiences and lessons painfully learned, would have to be a living document that would answer the needs of the nation well into the future. Thus, the unerring emphasis on flexibility and adaptability. 265

VOL. 421, JANUARY 27, 2004 265 La Bugal-BLaan Tribal Association, Inc. vs. Ramos Commissioner Joaquin Bernas stressed that he voted in favor of the Article, because it is flexible enough to allow future legislators to correct whatever mistakes we may have made.6 Commissioner Felicitas Aquino noted that unlike the other articles of this Constitution, this article whether we like it or not would have to yield to flexibility and elasticity which inheres in the interpretation of this provision. Why? Precisely because the forces of economics are dynamic and are perpetually in motion.7 Along the same line, the Court, in Taada v. Angara,8 stressed the need to interpret the Constitution to cover refreshing winds of change necessitated by unfolding events: x x x. Constitutions are designed to meet not only the vagaries of contemporary events. They should be interpreted to cover even future and unknown circumstances. It is to the credit of its drafters that a Constitution can withstand the assaults of bigots and infidels but at the same time bend with the refreshing winds of change necessitated by unfolding events.

Accordingly, I vote to DISMISS the Petition. Petition granted. Notes.The provision of Article 9 of Administrative Order No. 57 that all such leases or agreements shall be converted into production sharing agreements could not possibly contemplate a unilateral declaration on the part of the Government that all existing mining leases and agreements are automatically converted into production-sharing agreements, as the use of the term productionsharing agreement implies negotiation between the Government and the applicants, if they are so minded. (Miners Association of the Philippines, Inc. vs. Factoran, Jr., 240 SCRA 100 [1995]) It is not the date of filing of the petition that determines whether the constitutional issue was raised at the earliest opportunitythe earliest opportunity to raise a constitutional issue is to raise it in the pleadings before a competent court that can resolve the same, such that, if it is not raised in the pleadings, it cannot _______________

6Id., p. 840. 7Ibid. 8 272 SCRA 18, May 2, 1997. 266

266 SUPREME COURT REPORTS ANNOTATED Estate of the Late Juliana Diez Vda. de Gabriel vs. Commissioner of Internal Revenue be considered at the trial, and, if not considered at the trial, it cannot be considered on appeal. (Matibag vs. Benipayo, 380 SCRA 49 [2002]) o0o

[La Bugal-BLaan Tribal Association, Inc. vs. Ramos, 421 SCRA 148(2004)]