Republic of the Philippines To said complaint, the defendant demurred, alleging that the facts therein contained did

plaint, the defendant demurred, alleging that the facts therein contained did not
SUPREME COURT constitute an offense. The demurrer was overruled, whereupon the defendant answered and
Manila admitted at the trial all of the allegations contained in the complaint, and contended that the
provisions of said Act No. 3071, upon which the complaint was based were illegal, unconstitutional
EN BANC and void.

G.R. No. L-22008 November 3, 1924 Upon a consideration of the facts charged in the complaint and admitted by the defendant, the
Honorable C. A. Imperial, judge, found the defendant guilty of the alleged offense described in the
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee,
complaint, and sentenced him to pay a fine of P50, in accordance with the provisions of section 15
vs.
of said Act, to suffer subsidiary imprisonment in case of insolvency, and to pay the costs.
JULIO POMAR, defendant-appellant.
From that sentence the defendant appealed, and now makes the following assignments of error:
Araneta and Zaragoza for appellant.
That the court erred in overruling the demurrer; in convicting him of the crime charged in the
Attorney-General Villa-Real for appellee.
information; and in not declaring section 13 of Act No. 3071, unconstitutional:

Section 13 of Act No. 3071 is as follows:

JOHNSON, J.:
The only question presented by this appeal is whether or not the provisions of sections 13 and 15 of
Act No. 3071 are a reasonable and lawful exercise of the police power of the state.
It appears from the record that on the 26th day of October, 1923, the prosecuting attorney of the
City of Manila presented a complaint in the Court of First Instance, accusing the defendant of a
violation of section 13 in connection with section 15 of Act No. 3071 of the Philippine Legislature.
The complaint alleged:
That on or about the 27th day of August, 1923, and sometime prior thereto, in the City of Manila,
Philippine Islands, the said accused, being the manager and person in charge of La Flor de la Isabela,
a tobacco factory pertaining to La Campania General de Tabacos de Filipinas, a corporation duly
authorized to transact business in said city, and having, during the year 1923, in his employ and
service as cigar-maker in said factory, a woman by the name of Macaria Fajardo, whom he granted
vacation leave which began on the 16th day of July, 1923, by reason of her pregnancy, did then and
there willfully, unlawfully, and feloniously fail and refuse to pay to said woman the sum of eighty
pesos (P80), Philippine currency, to which she was entitled as her regular wages corresponding to
thirty days before and thirty days after her delivery and confinement which took place on the 12th
day of August, 1923, despite and over the demands made by her, the said Macaria Fajardo, upon said
accused, to do so.
Every person, firm or corporation owning or managing a factory, shop or place of labor of any
description shall be obliged to grant to any woman employed by it as laborer who may be pregnant,
thirty days vacation with pay before and another thirty days after confinement: Provided, That the
employer shall not discharge such laborer without just cause, under the penalty of being required to
pay to her wages equivalent to the total of two months counted from the day of her discharge.
Section 15 of the same Act is as follows:
Any person, firm or corporation violating any of the provisions of this Act shall be punished by a fine
of not less than fifty pesos nor more than two hundred and fifty, or by imprisonment for not less
than ten days nor more than six months, or both, in the discretion of the court.
In the case of firms or corporations, the presidents, directors or managers thereof or, in their default,
the persons acting in their stead, shall be criminally responsible for each violation of the provisions
of this Act.
Said section 13 was enacted by the Legislature of the Philippine Islands in the exercise of its supposed
police power, with the praiseworthy purpose of safeguarding the health of pregnant women laborers
in "factory, shop or place of labor of any description," and of insuring to them, to a certain extent,
reasonable support for one month before and one month after their delivery. The question
presented for decision by the appeal is whether said Act has been adopted in the reasonable and
lawful exercise of the police power of the state.
In determining whether a particular law promulgated under the police power of the state is, in fact,
within said power, it becomes necessary first, to determine what that power is, its limits and scope.
Literally hundreds of decisions have been promulgated in which definitions of the police power have
been attempted. An examination of all of said decisions will show that the definitions are generally
limited to particular cases and examples, which are as varied as they are numerous.
By reason of the constant growth of public opinion in a developing civilization, the term "police
power" has never been, and we do not believe can be, clearly and definitely defined and
circumscribed. One hundred years ago, for example, it is doubtful whether the most eminent jurist,
or court, or legislature would have for a moment thought that, by any possibility, a law providing for
the destruction of a building in which alcoholic liquors were sold, was within a reasonable and lawful
exercise of the police power. (Mugler vs. Kansas, 123 U. S., 623.) The development of civilization, the
rapidly increasing population, the growth of public opinion, with a desire on the part of the masses
and of the government to look after and care for the interests of the individuals of the state, have
brought within the police power of the state many questions for regulation which formerly were not
so considered. In a republican form of government public sentiment wields a tremendous influence
upon what the state may or may not do, for the protection of the health and public morals of the
people. Yet, neither public sentiment, nor a desire to ameliorate the public morals of the people of
the state will justify the promulgation of a law which contravenes the express provisions of the
fundamental law of the people — the constitutional of the state.
A definition of the police power of the state must depend upon the particular law and the particular
facts to which it is to be applied. The many definitions which have been given by the highest courts
may be examined, however, for the purpose of giving us a compass or guide to assist us in arriving
at a correct conclusion in the particular case before us. Sir William Blackstone, one of the greatest
expounders of the common law, defines the police power as "the due regulation and domestic order
of the kingdom, whereby the inhabitants of a state, like members of a well-governed family, are
bound to conform their general behavior to the rules of propriety, good neighborhood, and good
manners, and to be decent, industrious, and inoffensive in their respective stations." (4 Blackstone's
Commentaries, 162.)
Mr. Jeremy Bentham, in his General View of Public Offenses, gives us the following definition: "Police
is in general a system of precaution, either for the prevention of crimes or of calamities. Its business
may be distributed into eight distinct branches: (1) Police for the prevention of offenses; (2) police
for the prevention of calamities; (3) police for the prevention of endemic diseased; (4) police of
charity; (5) police of interior communications; (6) police of public amusements; (7) police for recent
intelligence; (8) police for registration."
Mr. Justice Cooley, perhaps the greatest expounder of the American Constitution, says: "The police
power is the power vested in the legislature by the constitution to make, ordain, and establish all
manner of wholesome and reasonable laws, statutes, and ordinances, either with penalties or
without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subject of the same. . . ." (Cooley's Constitutional Limitations, p. 830.)
In the case of Commonwealth of Massachusetts vs. Alger (7 Cushing, 53), we find a very
comprehensive definition of the police power of the state. In that case it appears that the colony of
Massachusetts in 1647 adopted an Act to preserve the harbor of Boston and to prevent
encroachments therein. The defendant unlawfully erected, built, and established in said harbor, and
extended beyond said lines and into and over the tide water of the Commonwealth a certain
superstructure, obstruction and encumbrance. Said Act provided a penalty for its violation of a fine
of not less than $1,000 nor more than $5,000 for every offense, and for the destruction of said
buildings, or structures, or obstructions as a public nuisance. Alger was arrested and placed on trial
for violation of said Act. His defense was that the Act of 1647 was illegal and void, because if
permitted the destruction of private property without compensation. Mr. Justice Shaw, speaking for
the court in that said, said: "We think it is a settled principle, growing out of the nature of well-
ordered civil society, that every holder of property, however absolute and unqualified may be his
title, holds it under the implied liability that his use of it may be so regulated, that it shall not be
injurious to the equal environment of others having an equal right to the enjoyment of their property
nor injurious to the rights of the community. All property in this commonwealth, as well that in the
interior as that bordering on tide waters, is derived directly or indirectly from the government and
held subject to those general regulations, which are necessary to the common good and general
welfare. Rights of property, like all other social and conventional rights, are subject to such
reasonable limitations in their enjoyment, as shall prevent them from being injurious, and to such
reasonable restraints and regulations established by law, as the legislature, under the governing and
controlling power vested in them by the constitution, may think necessary and expedient." Mr.
Justice Shaw further adds: ". . . The power we allude to is rather the police power, the power vested
in the legislature by the constitution, to make, ordain and establish all manner of wholesome and
reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the
subjects of the same."
This court has, in the case of Case vs. Board of Health and Heiser (24 Phil., 250), in discussing the
police power of the state, had occasion to say: ". . . It is a well settled principle, growing out of the
nature of well-ordered and civilized society, that every holder of property, however absolute and
unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious
to the equal enjoyment of others having an equal right to the enjoyment of their property, nor
injurious to the rights of the community. All property in the state is held subject to its general
regulations, which are necessary to the common good and general welfare. Rights of property, like to a great variety of restraints, yet none of the exceptional circumstances, which at times justify a
all other social and conventional rights, are subject to such reasonable limitations in their enjoyment limitation upon one's right to contract for his own services, applied in the particular case.
as shall prevent them from being injurious, and to such reasonable restraints and regulations,
established by law, as the legislature, under the governing and controlling power vested in them by In the course of the decision in that case (Adkins vs. Children's Hospital of the District of Columbia,
the constitution, may think necessary and expedient. The state, under the police power is possessed 261 U. S., 525), Mr. Justice Sutherland, after a statement of the fact and making reference to the
with plenary power to deal with all matters relating to the general health, morals, and safety of the particular law, said:
people, so long as it does not contravene any positive inhibition of the organic law and providing that
The statute now under consideration is attacked upon the ground that it authorizes an
such power is not exercised in such a manner as to justify the interference of the courts to prevent
unconstitutional interference with the freedom of contract including within the guarantees of the
positive wrong and oppression."
due process clause of the 5th Amendment. That the right to contract about one's affairs is a part of
Many other definitions have been given not only by the Supreme Court of the United States but by the liberty of the individual protected by this clause is settled by the decision of this court, and is no
the Supreme Court of every state of the Union. The foregoing definitions, however, cover the general longer open to question. Within this liberty are contracts of employment of labor. In making such
field of all of the definitions, found in jurisprudence. From all of the definitions we conclude that it contracts, generally speaking, the parties have an equal right to obtain from each other the best
is much easier to perceive and realize the existence and sources of the police power than to exactly terms they can as the result of private bargaining. (Allgeyer vs.Louisiana, 165 U. S., 578; 591;
mark its boundaries, or prescribe limits to its exercise by the legislative department of the Adair vs. United States, 208 U. S., 161; Muller vs. Oregon, 208 U. S., 412, 421.)
government.
xxx xxx xxx
The most recent definition which has been called to our attention is that found in the case of
The law takes account of the necessities of only one party to the contract. It ignores the necessities
Adkins vs. Children's Hospital of the District of Columbia (261 U. S., 525). In that case the controversy
of the employer by compelling him to pay not less than a certain sum, not only whether the employee
arose in this way: A children's hospital employed a number of women at various rates of wages,
is capable of earning it, but irrespective of the ability of his business to sustain the burden, generously
which were entirely satisfactory to both the hospital and the employees. A hotel company employed
leaving him, of course, the privilege of abandoning his business as an alternative for going on at a
a woman as elevator operator at P35 per month and two meals a day under healthy and satisfactory
loss. Within the limits of the minimum sum, he is precluded, under penalty of fine and imprisonment,
conditions, and she did not risk to lose her position as she could not earn so much anywhere else.
from adjusting compensation to the differing merits of his employees. It compels him to pay at least
Her wages were less than the minimum fixed by a board created under a law for the purpose of fixing
the sum fixed in any event, because the employee needs it, but requires no service of equivalent
a minimum wage for women and children, with a penalty providing a punishment for a failure or
value from the employee. It (the law) therefore undertakes to solve but one-half of the problem. The
refusal to pay the minimum wage fixed. The wage paid by the hotel company of P35 per month and
other half is the establishment of a corresponding standard of efficiency; and this forms no part of
two meals a day was less than the minimum wage fixed by said board. By reason of the order of said
the policy of the legislation, although in practice the former half without the latter must lead to
board, the hotel company, was about to discharge her, as it was unwilling to pay her more and could
ultimate failure, in accordance with the inexorable law that no one can continue indefinitely to take
not give her employment at that salary without risking the penalty of a fine and imprisonment under
out more than he puts in without ultimately exhausting the supply. The law . . . takes no account of
the law. She brought action to enjoin the hotel company from discharging her upon the ground that
periods of distress and business depression, or crippling losses, which may leave the employer
the enforcement of the "Minimum Wage Act" would deprive her of her employment and wages
himself without adequate means of livelihood. To the extent that the sum fixed exceeds the fair
without due process of law, and that she could not get as good a position anywhere else. The
value of the services rendered, it amounts to a compulsory exaction from the employer for the
constitutionality of the Act was squarely presented to the Supreme Court of the United States for
support of a partially indigent person, for whose condition there rests upon him no peculiar
decision.
responsibility, and therefore, in effect, arbitrarily shifts to his shoulders a burden which, if it belongs
The Supreme Court of the United States held that said Act was void on the ground that the right to to anybody, belongs to society as a whole.
contract about one's own affairs was a part of the liberty of the individual under the constitution,
The failure of this state which, perhaps more than any other, puts upon it the stamp of invalidity is
and that while there was no such thing as absolute freedom of contract, and it was necessary subject
that it exacts from the employer an arbitrary payment for a purpose and upon a basis having no
casual connection with his business, or the contract, or the work the employee engages to do. The
declared basis, as already pointed out, is not the value of the service rendered, but the extraneous
circumstances that the employee needs to get a prescribed sum of money to insure her subsistence,
health and morals. . . . The necessities of the employee are alone considered, and these arise outside
of the employment, are the same when there is no employment, and as great in one occupation as
in another. . . . In principle, there can be no difference between the case of selling labor and the case
of selling goods. If one goes to the butcher, the baker, or grocer to buy food, he is morally entitled to
obtain the worth of his money, but he is not entitle to more. If what he gets is worth what he pays,
he is not justified in demanding more simply because he needs more; and the shopkeeper, having
dealt fairly and honestly in that transaction, is not concerned in any peculiar sense with the question
of his customer's necessities. Should a statute undertake to vest in a commission power to determine
the quantity of food necessary for individual support, and require the shopkeeper, if he sell to the
individual at all, to furnish that quantity at not more than a fixed maximum, it would undoubtedly
fall before the constitutional test. The fallacy of any argument in support of the validity of such a
statute would be quickly exposed. The argument in support of that now being considered is equally
fallacious, though the weakness of it may not be so plain. . . .
It has been said that the particular statute before us is required in the interest of social justice for
whose end freedom of contract may lawfully be subjected to restraint. The liberty of the individual
to do as he pleases, even in innocent matters, is not absolute. That liberty must frequently yield to
the common good, and the line beyond which the power of interference may not be pressed is
neither definite nor unalterable, may be made to move, within limits not well defined, with changing
needs and circumstances.
The late Mr. Justice Harlan, in the case of Adair vs. United States (208 U. S., 161, 174), said that the
right of a person to sell his labor upon such terms as he deems proper is, in its essence, the same as
the right of the purchaser of labor to prescribe the conditions upon which he will accept such labor
from the person offering to sell. In all such particulars the employer and the employee have equality
of right, and any legislation that disturbs that equality is an arbitrary interference with the liberty of
contract, which no government can legally justify in a free land, under a constitution which provides
that no person shall be deprived of his liberty without due process of law.
Mr. Justice Pitney, in the case of Coppage vs. Kansas (235 U. S., 1, 14), speaking for the Supreme
Court of the United States, said: ". . . Included in the right of personal liberty and the right of private
property — partaking of the nature of each — is the right to make contracts for the acquisition of
property. Chief among such contracts is that of personal employment, by which labor and other
services are exchange for money or other forms of property. If this right be struck down or arbitrarily
interfered with, there is a substantial impairment of liberty in the long established constitutional
sense. The right is as essential to the laborer as to the capitalist, to the poor as to the rich; for the
vast majority of persons have no other honest way to begin to acquire property, save by working for
money."
The right to liberty includes the right to enter into contracts and to terminate contracts. In the case
of Gillespie vs.People (118 Ill., 176, 183-185) it was held that a statute making it unlawful to discharge
an employee because of his connection with any lawful labor organization, and providing a penalty
therefor, is void, since the right to terminate a contract, subject to liability to respond in a civil action
for an unwarranted termination, is within the protection of the state and Federal constitutions which
guarantee that no person shall be deprived of life, liberty or property without due process of law.
The court said in part: ". . . One citizen cannot be compelled to give employment to another citizen,
nor can anyone be compelled to be employed against his will. The Act of 1893, now under
consideration, deprives the employer of the right to terminate his contract with his employee. The
right to terminate such a contract is guaranteed by the organic law of the state. The legislature is
forbidden to deprive the employer or employee of the exercise of that right. The legislature has no
authority to pronounce the performance of an innocent act criminal when the public health, safety,
comfort or welfare is not interfered with. The statute in question says that, if a man exercises his
constitutional right to terminate a contract with his employee, he shall, without a hearing, be
punished as for the commission of a crime.
xxx xxx xxx
Liberty includes not only the right to labor, but to refuse to labor, and, consequently, the right to
contract to labor or for labor, and to terminate such contracts, and to refuse to make such contracts.
The legislature cannot prevent persons, who are sui juris, from laboring, or from making such
contracts as they may see fit to make relative to their own lawful labor; nor has it any power by penal
laws to prevent any person, with or without cause, from refusing to employ another or to terminate
a contract with him, subject only to the liability to respond in a civil action for an unwarranted refusal
to do that which has been agreed upon. Hence, we are of the opinion that this Act contravenes those
provisions of the state and Federal constitutions, which guarantee that no person shall be deprived
of life, liberty or property without due process of law.
The statute in question is exactly analogous to the "Minimum Wage Act" referred to above. In section
13 it will be seen that no person, firm, or corporation owning or managing a factory shop, or place of
labor of any description, can make a contract with a woman without incurring the obligation,
whatever the contract of employment might be, unless he also promise to pay to such woman
employed as a laborer, who may become pregnant, her wages for thirty days before and thirty days
after confinement. In other words, said section creates a term or condition in every contract made
by every person, firm, or corporation with any woman who may, during the course of her
employment, become pregnant, and a failure to include in said contract the terms fixed to a fine and
imprisonment. Clearly, therefore, the law has deprived, every person, firm, or corporation owning It will also be noted from an examination of said section 13, that it takes no account of contracts for
or managing a factory, shop or place of labor of any description within the Philippine Islands, of his the employment of women by the day nor by the piece. The law is equally applicable to each case. It
right to enter into contracts of employment upon such terms as he and the employee may agree will hardly be contended that the person, firm or corporation owning or managing a factory, shop or
upon. The law creates a term in every such contract, without the consent of the parties. Such persons place of labor, who employs women by the day or by the piece, could be compelled under the law to
are, therefore, deprived of their liberty to contract. The constitution of the Philippine Islands pay for sixty days during which no services were rendered.
guarantees to every citizen his liberty and one of his liberties is the liberty to contract.
It has been decided in a long line of decisions of the Supreme Court of the United States, that the
It is believed and confidently asserted that no case can be found, in civilized society and well- right to contract about one's affairs is a part of the liberty of the individual, protected by the "due
organized governments, where individuals have been deprived of their property, under the police process of law" clause of the constitution. (Allgeyer vs. Louisiana, 165 U. S., 578, 591; New York Life
power of the state, without compensation, except in cases where the property in question was used Ins. Co. vs. Dodge, 246 U. S., 357, 373, 374; Coppage vs. Kansas, 236 U. S., 1, 10, 14; Adair vs. United
for the purpose of violating some legally adopted, or constitutes a nuisance. Among such cases may States, 208 U. S., 161; Lochner vs. New York, 198 U. S.; 45, 49; Muller vs. Oregon, 208 U. S., 412, 421.)
be mentioned: Apparatus used in counterfeiting the money of the state; firearms illegally possessed;
opium possessed in violation of law; apparatus used for gambling in violation of law; buildings and The rule in this jurisdiction is, that the contracting parties may establish any agreements, terms, and
property used for the purpose of violating laws prohibiting the manufacture and sale of intoxicating conditions they may deem advisable, provided they are not contrary to law, morals or public policy.
liquors; and all cases in which the property itself has become a nuisance and dangerous and (Art. 1255, Civil Code.)
detrimental to the public health, morals and general welfare of the state. In all of such cases, and in
For all of the foregoing reasons, we are fully persuaded, under the facts and the law, that the
many more which might be cited, the destruction of the property is permitted in the exercise of the
provisions of section 13, of Act No. 3071 of the Philippine Legislature, are unconstitutional and void,
police power of the state. But it must first be established that such property was used as the
in that they violate and are contrary to the provisions of the first paragraph of section 3 of the Act of
instrument for the violation of a valid existing law. (Mugler vs. Kansas, 123 U. S., 623; Slaughter-
Congress of the United States of August 29, 1916. (Vol. 12, Public Laws, p. 238.)
House Cases, 16 Wall., [U. S.], 36; Butchers' Union, etc., Co. vs.Crescent City, etc., Co., 111 U. S., 746
John Stuart Mill — "On Liberty," 28, 29.) Therefore, the sentence of the lower court is hereby revoked, the complaint is hereby dismissed, and
the defendant is hereby discharged from the custody of the law, with costs de oficio. So ordered.
Without further attempting to define what are the peculiar subjects or limits of the police power, it
may safely be affirmed, that every law for the restraint and punishment of crimes, for the Street, Malcolm, Avanceña, Villamor, Ostrand and Romualdez, JJ., concur.
preservation of the public peace, health, and morals, must come within this category. But the state,
when providing by legislation for the protection of the public health, the public morals, or the public
safety, is subject to and is controlled by the paramount authority of the constitution of the state, and
will not be permitted to violate rights secured or guaranteed by that instrument or interfere with the
execution of the powers and rights guaranteed to the people under their law — the constitution.
(Mugler vs. Kansas, 123 U. S., 623.)

The police power of the state is a growing and expanding power. As civilization develops and public
conscience becomes awakened, the police power may be extended, as has been demonstrated in
the growth of public sentiment with reference to the manufacture and sale of intoxicating liquors.
But that power cannot grow faster than the fundamental law of the state, nor transcend or violate
the express inhibition of the people's law — the constitution. If the people desire to have the police
power extended and applied to conditions and things prohibited by the organic law, they must first
amend that law.1awphil.net
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 78164 July 31, 1987
TERESITA TABLARIN, MA, LUZ CIRIACO, MA NIMFA B. ROVIRA, EVANGELINA S. LABAO, in their behalf
and in behalf of applicants for admission into the Medical Colleges during the school year 1987-88
and future years who have not taken or successfully hurdled tile National Medical Admission Test
(NMAT).petitioners,
vs.
THE HONORABLE JUDGE ANGELINA S. GUTIERREZ, Presiding Judge of Branch XXXVII of the Regional
Trial Court of the National Capital Judicial Region with seat at Manila, THE HONORABLE SECRETARY
LOURDES QUISUMBING, in her capacity as Chairman of the BOARD OF MEDICAL EDUCATION, and
THE CENTER FOR EDUCATIONAL MEASUREMENT (CEM), respondents.
FELICIANO, J.:
The petitioners sought admission into colleges or schools of medicine for the school year 1987-1988.
However, the petitioners either did not take or did not successfully take the National Medical
Admission Test (NMAT) required by the Board of Medical Education, one of the public respondents,
and administered by the private respondent, the Center for Educational Measurement (CEM).
On 5 March 1987, the petitioners filed with the Regional Trial Court, National Capital Judicial Region, a
Petition for Declaratory Judgment and Prohibition with a prayer for Temporary Restraining Order and
Preliminary Injunction. The petitioners sought to enjoin the Secretary of Education, Culture and Sports,
the Board of Medical Education and the Center for Educational Measurement from enforcing Section
5 (a) and (f) of Republic Act No. 2382, as amended, and MECS Order No. 52, series of 1985, dated 23
August 1985 and from requiring the taking and passing of the NMAT as a condition for securing
certificates of eligibility for admission, from proceeding with accepting applications for taking the
NMAT and from administering the NMAT as scheduled on 26 April 1987 and in the future. After hearing
on the petition for issuance of preliminary injunction, the trial court denied said petition on 20 April
1987. The NMAT was conducted and administered as previously scheduled.
Petitioners accordingly filed this Special Civil Action for certiorari with this Court to set aside the Order
of the respondent judge denying the petition for issuance of a writ of preliminary injunction.
Republic Act 2382, as amended by Republic Acts Nos. 4224 and 5946, known as the "Medical Act of
1959" defines its basic objectives in the following manner:
Section 1. Objectives. — This Act provides for and shall govern (a) the standardization and regulation
of medical education (b) the examination for registration of physicians; and (c) the supervision, control
and regulation of the practice of medicine in the Philippines. (Underscoring supplied)
The statute, among other things, created a Board of Medical Education which is composed of (a) the
Secretary of Education, Culture and Sports or his duly authorized representative, as Chairman; (b) the
Secretary of Health or his duly authorized representative; (c) the Director of Higher Education or his
duly authorized representative; (d) the Chairman of the Medical Board or his duly authorized
representative; (e) a representative of the Philippine Medical Association; (f) the Dean of the College
of Medicine, University of the Philippines; (g) a representative of the Council of Deans of Philippine
Medical Schools; and (h) a representative of the Association of Philippine Medical Colleges, as
members. The functions of the Board of Medical Education specified in Section 5 of the statute include
the following:
(a) To determine and prescribe equirements for admission into a recognized college of medicine;
(b) To determine and prescribe requirements for minimum physical facilities of colleges of medicine,
to wit: buildings, including hospitals, equipment and supplies, apparatus, instruments, appliances,
laboratories, bed capacity for instruction purposes, operating and delivery rooms, facilities for
outpatient services, and others, used for didactic and practical instruction in accordance with modern
trends;
(c) To determine and prescribe the minimum number and minimum qualifications of teaching
personnel, including student-teachers ratio;
(d) To determine and prescribe the minimum required curriculum leading to the degree of Doctor of
Medicine;
(e) To authorize the implementation of experimental medical curriculum in a medical school that has
exceptional faculty and instrumental facilities. Such an experimental curriculum may prescribe
admission and graduation requirements other than those prescribed in this Act; Provided, That only
exceptional students shall be enrolled in the experimental curriculum;
(f) To accept applications for certification for admission to a medical school and keep a register of those
issued said certificate; and to collect from said applicants the amount of twenty-five pesos each which
shall accrue to the operating fund of the Board of Medical Education;
(g) To select, determine and approve hospitals or some departments of the hospitals for training which
comply with the minimum specific physical facilities as provided in subparagraph (b) hereof; and
(h) To promulgate and prescribe and enforce the necessary rules and regulations for the proper
implementation of the foregoing functions. (Emphasis supplied)
Section 7 prescribes certain minimum requirements for applicants to medical schools:
Admission requirements. — The medical college may admit any student who has not been convicted by
any court of competent jurisdiction of any offense involving moral turpitude and who presents (a) a
record of completion of a bachelor's degree in science or arts; (b) a certificate of eligibility for entrance
to a medical school from the Board of Medical Education; (c) a certificate of good moral character
issued by two former professors in the college of liberal arts; and (d) birth certificate. Nothing in this
act shall be construed to inhibit any college of medicine from establishing, in addition to the preceding,
other entrance requirements that may be deemed admissible.
xxx xxx x x x (Emphasis supplied)
MECS Order No. 52, s. 1985, issued by the then Minister of Education, Culture and Sports and dated 23
August 1985, established a uniform admission test called the National Medical Admission Test (NMAT)
as an additional requirement for issuance of a certificate of eligibility for admission into medical schools
of the Philippines, beginning with the school year 1986-1987. This Order goes on to state that:
2. The NMAT, an aptitude test, is considered as an instrument toward upgrading the selection of
applicants for admission into the medical schools and its calculated to improve the quality of medical
education in the country. The cutoff score for the successful applicants, based on the scores on the
NMAT, shall be determined every year by the Board of Medical Education after consultation with the
Association of Philippine Medical Colleges. The NMAT rating of each applicant, together with the other
admission requirements as presently called for under existing rules, shall serve as a basis for the
issuance of the prescribed certificate of elegibility for admission into the medical colleges.
3. Subject to the prior approval of the Board of Medical Education, each medical college may give other
tests for applicants who have been issued a corresponding certificate of eligibility for admission that
will yield information on other aspects of the applicant's personality to complement the information
derived from the NMAT.
xxx xxx xxx
8. No applicant shall be issued the requisite Certificate of Eligibility for Admission (CEA), or admitted for
enrollment as first year student in any medical college, beginning the school year, 1986-87, without the
required NMAT qualification as called for under this Order. (Underscoring supplied)
Pursuant to MECS Order No. 52, s. 1985, the private respondent Center conducted NMATs for entrance
to medical colleges during the school year 1986-1987. In December 1986 and in April 1987, respondent
Center conducted the NMATs for admission to medical colleges during the school year
1987.1988.1avvphi1
Petitioners raise the question of whether or not a writ of preliminary injunction may be issued to enjoin
the enforcement of Section 5 (a) and (f) of Republic Act No. 2382, as amended, and MECS Order No.
52, s. 1985, pending resolution of the issue of constitutionality of the assailed statute and
administrative order. We regard this issue as entirely peripheral in nature. It scarcely needs
documentation that a court would issue a writ of preliminary injunction only when the petitioner
assailing a statute or administrative order has made out a case of unconstitutionality strong enough to
overcome, in the mind of the judge, the presumption of constitutionality, aside from showing a clear
legal right to the remedy sought. The fundamental issue is of course the constitutionality of the statute
or order assailed.
1. The petitioners invoke a number of provisions of the 1987 Constitution which are, in their assertion,
violated by the continued implementation of Section 5 (a) and (f) of Republic Act 2381, as amended,
and MECS Order No. 52, s. 1985. The provisions invoked read as follows:
(a) Article 11, Section 11: "The state values the dignity of every human person and guarantees full
respect of human rights. "
(b) ArticleII, Section l3: "The State recognizes the vital role of the youth in nation building and shall
promote and protect their physical, moral, spiritual, intellectual and social well being. It shall inculcate
in the youth patriotism and nationalism, and encourage their involvement in public and civic affairs."
(c) Article II, Section 17: "The State shall give priority to education, science and technology, arts, culture
and sports to foster patriotism and nationalism, accelerate social progress and to promote total human
liberation and development. "
(d) Article XIV, Section l: "The State shall protect and promote the right of all citizens to quality
education at all levels and take appropriate steps to make such education accessible to all. "
(e) Article XIV, Section 5 (3): "Every citizen has a right to select a profession or course of study, subject
to fair, reasonable and equitable admission and academic requirements."
Article II of the 1987 Constitution sets forth in its second half certain "State policies" which the
government is enjoined to pursue and promote. The petitioners here have not seriously undertaken to
demonstrate to what extent or in what manner the statute and the administrative order they assail
collide with the State policies embodied in Sections 11, 13 and 17. They have not, in other words,
discharged the burden of proof which lies upon them. This burden is heavy enough where the
constitutional provision invoked is relatively specific, rather than abstract, in character and cast in
behavioral or operational terms. That burden of proof becomes of necessity heavier where the
constitutional provision invoked is cast, as the second portion of Article II is cast, in language descriptive
of basic policies, or more precisely, of basic objectives of State policy and therefore highly generalized
in tenor. The petitioners have not made their case, even a prima facie case, and we are not compelled
to speculate and to imagine how the legislation and regulation impugned as unconstitutional could
possibly offend the constitutional provisions pointed to by the petitioners.
Turning to Article XIV, Section 1, of the 1987 Constitution, we note that once more petitioners have
failed to demonstrate that the statute and regulation they assail in fact clash with that provision. On
the contrary we may note-in anticipation of discussion infra — that the statute and the regulation
which petitioners attack are in fact designed to promote "quality education" at the level of professional
schools. When one reads Section 1 in relation to Section 5 (3) of Article XIV as one must one cannot
but note that the latter phrase of Section 1 is not to be read with absolute literalness. The State is not
really enjoined to take appropriate steps to make quality education " accessible to all who might for
any number of reasons wish to enroll in a professional school but rather merely to make such education
accessible to all who qualify under "fair, reasonable and equitable admission and academic
requirements. "
2. In the trial court, petitioners had made the argument that Section 5 (a) and (f) of Republic Act No.
2382, as amended, offend against the constitutional principle which forbids the undue delegation of
legislative power, by failing to establish the necessary standard to be followed by the delegate, the
Board of Medical Education. The general principle of non-delegation of legislative power, which both
flows from the reinforces the more fundamental rule of the separation and allocation of powers among
the three great departments of government,1 must be applied with circumspection in respect of
statutes which like the Medical Act of 1959, deal with subjects as obviously complex and technical as
medical education and the practice of medicine in our present day world. Mr. Justice Laurel stressed
this point 47 years ago in Pangasinan Transportation Co., Inc. vs. The Public Service Commission:2
One thing, however, is apparent in the development of the principle of separation of powers and that
is that the maxim of delegatus non potest delegare or delegate potestas non potest delegare, adopted
this practice (Delegibus et Consuetudiniis Anglia edited by G.E. Woodbine, Yale University Press, 1922,
Vol. 2, p. 167) but which is also recognized in principle in the Roman Law (d. 17.18.3) has been made
to adapt itself to the complexities of modern government, giving rise to the adoption, within certain
limits of the principle of "subordinate legislation," not only in the United States and England but in
practically all modern governments. (People vs. Rosenthal and Osmena [68 Phil. 318, 1939].
Accordingly, with the growing complexity of modern life, the multiplication of the subjects of
governmental regulation and the increased difficulty of administering the laws, there is a constantly
growing tendency toward the delegation of greater power by the legislature, and toward the approval
of the practice by the courts." 3
The standards set for subordinate legislation in the exercise of rule making authority by an
administrative agency like the Board of Medical Education are necessarily broad and highly abstract.
As explained by then Mr. Justice Fernando in Edu v. Ericta4 —
The standard may be either expressed or implied. If the former, the non-delegation objection is easily
met. The standard though does not have to be spelled out specifically. It could be implied from the policy
and purpose of the act considered as a whole. In the Reflector Law, clearly the legislative objective is
public safety. What is sought to be attained as in Calalang v. Williams is "safe transit upon the roads. 5
We believe and so hold that the necessary standards are set forth in Section 1 of the 1959 Medical Act:
"the standardization and regulation of medical education" and in Section 5 (a) and 7 of the same Act,
the body of the statute itself, and that these considered together are sufficient compliance with the
requirements of the non-delegation principle.
3. The petitioners also urge that the NMAT prescribed in MECS Order No. 52, s. 1985, is an "unfair,
unreasonable and inequitable requirement," which results in a denial of due process. Again, petitioners
have failed to specify just what factors or features of the NMAT render it "unfair" and "unreasonable"
or "inequitable." They appear to suggest that passing the NMAT is an unnecessary requirement when
added on top of the admission requirements set out in Section 7 of the Medical Act of 1959, and other
admission requirements established by internal regulations of the various medical schools, public or
private. Petitioners arguments thus appear to relate to utility and wisdom or desirability of the NMAT
requirement. But constitutionality is essentially a question of power or authority: this Court has neither
commission or competence to pass upon questions of the desirability or wisdom or utility of legislation
or administrative regulation. Those questions must be address to the political departments of the
government not to the courts.
There is another reason why the petitioners' arguments must fail: the legislative and administrative
provisions impugned by them constitute, to the mind of the Court, a valid exercise of the police power
of the state. The police power, it is commonplace learning, is the pervasive and non-waivable power
and authority of the sovereign to secure and promote an the important interests and needs — in a
word, the public order — of the general community.6 An important component of that public order is
the health and physical safety and well being of the population, the securing of which no one can deny
is a legitimate objective of governmental effort and regulation.7
Perhaps the only issue that needs some consideration is whether there is some reasonable relation
between the prescribing of passing the NMAT as a condition for admission to medical school on the
one hand, and the securing of the health and safety of the general community, on the other hand. This
question is perhaps most usefully approached by recalling that the regulation of the practice of infringes the requirements of equal protection. They assert, in other words, that students seeking
medicine in all its branches has long been recognized as a reasonable method of protecting the health admission during a given school year, e.g., 1987-1988, when subjected to a different cutoff score than
and safety of the public.8 That the power to regulate and control the practice of medicine includes the that established for an, e.g., earlier school year, are discriminated against and that this renders the
power to regulate admission to the ranks of those authorized to practice medicine, is also well MECS Order "arbitrary and capricious." The force of this argument is more apparent than real. Different
recognized. thus, legislation and administrative regulations requiring those who wish to practice cutoff scores for different school years may be dictated by differing conditions obtaining during those
medicine first to take and pass medical board examinations have long ago been recognized as valid years. Thus, the appropriate cutoff score for a given year may be a function of such factors as the
exercises of governmental power.9 Similarly, the establishment of minimum medical educational number of students who have reached the cutoff score established the preceding year; the number of
requirements — i.e., the completion of prescribed courses in a recognized medical school — for places available in medical schools during the current year; the average score attained during the
admission to the medical profession, has also been sustained as a legitimate exercise of the regulatory current year; the level of difficulty of the test given during the current year, and so forth. To establish
authority of the state.10 What we have before us in the instant case is closely related: the regulation of a permanent and immutable cutoff score regardless of changes in circumstances from year to year,
access to medical schools. MECS Order No. 52, s. 1985, as noted earlier, articulates the rationale of may wen result in an unreasonable rigidity. The above language in MECS Order No. 52, far from being
regulation of this type: the improvement of the professional and technical quality of the graduates of arbitrary or capricious, leaves the Board of Medical Education with the measure of flexibility needed
medical schools, by upgrading the quality of those admitted to the student body of the medical schools. to meet circumstances as they change.
That upgrading is sought by selectivity in the process of admission, selectivity consisting, among other
things, of limiting admission to those who exhibit in the required degree the aptitude for medical We conclude that prescribing the NMAT and requiring certain minimum scores therein as a condition
studies and eventually for medical practice. The need to maintain, and the difficulties of maintaining, for admission to medical schools in the Philippines, do not constitute an unconstitutional imposition.
high standards in our professional schools in general, and medical schools in particular, in the current
WHEREFORE, the Petition for certiorari is DISMISSED and the Order of the respondent trial court
stage of our social and economic development, are widely known.
denying the petition for a writ of preliminary injunction is AFFIRMED. Costs against petitioners.
We believe that the government is entitled to prescribe an admission test like the NMAT as a means
SO ORDERED.
for achieving its stated objective of "upgrading the selection of applicants into [our] medical schools"
and of "improv[ing] the quality of medical education in the country." Given the widespread use today
of such admission tests in, for instance, medical schools in the United States of America (the Medical
College Admission Test [MCAT]11 and quite probably in other countries with far more developed
educational resources than our own, and taking into account the failure or inability of the petitioners
to even attempt to prove otherwise, we are entitled to hold that the NMAT is reasonably related to the
securing of the ultimate end of legislation and regulation in this area. That end, it is useful to recall, is
the protection of the public from the potentially deadly effects of incompetence and ignorance in those
who would undertake to treat our bodies and minds for disease or trauma.

4. Petitioners have contended, finally, that MECS Order No. 52, s. 1985, is in conflict with the equal
protection clause of the Constitution. More specifically, petitioners assert that that portion of the MECS
Order which provides that

the cutoff score for the successful applicants, based on the scores on the NMAT, shall be determined
every-year by the Board of Medical 11 Education after consultation with the Association of Philippine
Republic of the Philippines
Medical Colleges. (Emphasis supplied)
SUPREME COURT
Manila
EN BANC In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the declared
national policy of the "new restored democracy" and the people's will as expressed in the 1987
Constitution. The decree is said to have a "gambling objective" and therefore is contrary to Sections
11, 12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of the present Constitution
G.R. No. 91649 May 14, 1991
(p. 3, Second Amended Petition; p. 21, Rollo).
ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN AND LORENZO
The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner Basco being
SANCHEZ,petitioners,
also the Chairman of the Committee on Laws of the City Council of Manila), can question and seek the
vs.
annulment of PD 1869 on the alleged grounds mentioned above.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A
H.B. Basco & Associates for petitioners.
dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 "to
Valmonte Law Offices collaborating counsel for petitioners.
establish, operate and maintain gambling casinos on land or water within the territorial jurisdiction of
Aguirre, Laborte and Capule for respondent PAGCOR.
the Philippines." Its operation was originally conducted in the well known floating casino "Philippine
Tourist." The operation was considered a success for it proved to be a potential source of revenue to
fund infrastructure and socio-economic projects, thus, P.D. 1399 was passed on June 2, 1978 for
PAGCOR to fully attain this objective.
PARAS, J.:
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Government to
A TV ad proudly announces: regulate and centralize all games of chance authorized by existing franchise or permitted by law, under
the following declared policy —
"The new PAGCOR — responding through responsible gaming."
Sec. 1. Declaration of Policy. — It is hereby declared to be the policy of the State to centralize and
But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the
integrate all games of chance not heretofore authorized by existing franchises or permitted by law in
Philippine Amusement and Gaming Corporation (PAGCOR) Charter — PD 1869, because it is allegedly
order to attain the following objectives:
contrary to morals, public policy and order, and because —
(a) To centralize and integrate the right and authority to operate and conduct games of chance into
A. It constitutes a waiver of a right prejudicial to a third person with a right recognized by law. It waived
one corporate entity to be controlled, administered and supervised by the Government.
the Manila City government's right to impose taxes and license fees, which is recognized by law;
(b) To establish and operate clubs and casinos, for amusement and recreation, including sports gaming
B. For the same reason stated in the immediately preceding paragraph, the law has intruded into the
pools, (basketball, football, lotteries, etc.) and such other forms of amusement and recreation including
local government's right to impose local taxes and license fees. This, in contravention of the
games of chance, which may be allowed by law within the territorial jurisdiction of the Philippines and
constitutionally enshrined principle of local autonomy;
which will: (1) generate sources of additional revenue to fund infrastructure and socio-civic projects,
C. It violates the equal protection clause of the constitution in that it legalizes PAGCOR — conducted such as flood control programs, beautification, sewerage and sewage projects, Tulungan ng Bayan
gambling, while most other forms of gambling are outlawed, together with prostitution, drug Centers, Nutritional Programs, Population Control and such other essential public services; (2) create
trafficking and other vices; recreation and integrated facilities which will expand and improve the country's existing tourist
attractions; and (3) minimize, if not totally eradicate, all the evils, malpractices and corruptions that
D. It violates the avowed trend of the Cory government away from monopolistic and crony economy, are normally prevalent on the conduct and operation of gambling clubs and casinos without direct
and toward free enterprise and privatization. (p. 2, Amended Petition; p. 7, Rollo) government involvement. (Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its
Charter's repealing clause, all laws, decrees, executive orders, rules and regulations, inconsistent
therewith, are accordingly repealed, amended or modified.
It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau of
Internal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion, and directly
remitted to the National Government a total of P2.5 Billion in form of franchise tax, government's
income share, the President's Social Fund and Host Cities' share. In addition, PAGCOR sponsored other
socio-cultural and charitable projects on its own or in cooperation with various governmental agencies,
and other private associations and organizations. In its 3 1/2 years of operation under the present
administration, PAGCOR remitted to the government a total of P6.2 Billion. As of December 31, 1989,
PAGCOR was employing 4,494 employees in its nine (9) casinos nationwide, directly supporting the
livelihood of Four Thousand Four Hundred Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is "null and
void" for being "contrary to morals, public policy and public order," monopolistic and tends toward
"crony economy", and is violative of the equal protection clause and local autonomy as well as for
running counter to the state policies enunciated in Sections 11 (Personal Dignity and Human Rights),
12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article XIII and Section 2
(Educational Values) of Article XIV of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most deliberate
consideration by the Court, involving as it does the exercise of what has been described as "the highest
and most delicate function which belongs to the judicial department of the government." (State v.
Manuel, 20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and coordinate branch of
the government We need not be reminded of the time-honored principle, deeply ingrained in our
jurisprudence, that a statute is presumed to be valid. Every presumption must be indulged in favor of
its constitutionality. This is not to say that We approach Our task with diffidence or timidity. Where it
is clear that the legislature or the executive for that matter, has over-stepped the limits of its authority
under the constitution, We should not hesitate to wield the axe and let it fall heavily, as fall it must, on
the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr. Justice Zaldivar
underscored the —
. . . thoroughly established principle which must be followed in all cases where questions of
constitutionality as obtain in the instant cases are involved. All presumptions are indulged in favor of
constitutionality; one who attacks a statute alleging unconstitutionality must prove its invalidity
beyond a reasonable doubt; that a law may work hardship does not render it unconstitutional; that if
any reasonable basis may be conceived which supports the statute, it will be upheld and the challenger
must negate all possible basis; that the courts are not concerned with the wisdom, justice, policy or
expediency of a statute and that a liberal interpretation of the constitution in favor of the
constitutionality of legislation should be adopted. (Danner v. Hass, 194 N.W. 2nd534, 539; Spurbeck v.
Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA 734, 739 [1970];
Peralta v. Commission on Elections, 82 SCRA 30, 55 [1978]; and Heirs of Ordona v. Reyes, 125 SCRA
220, 241-242 [1983] cited in Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162
SCRA 521, 540)
Of course, there is first, the procedural issue. The respondents are questioning the legal personality of
petitioners to file the instant petition.
Considering however the importance to the public of the case at bar, and in keeping with the Court's
duty, under the 1987 Constitution, to determine whether or not the other branches of government
have kept themselves within the limits of the Constitution and the laws and that they have not abused
the discretion given to them, the Court has brushed aside technicalities of procedure and has taken
cognizance of this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163
SCRA 371)
With particular regard to the requirement of proper party as applied in the cases before us, We hold
that the same is satisfied by the petitioners and intervenors because each of them has sustained or is
in danger of sustaining an immediate injury as a result of the acts or measures complained of. And even
if, strictly speaking they are not covered by the definition, it is still within the wide discretion of the
Court to waive the requirement and so remove the impediment to its addressing and resolving the
serious constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were involving
only an indirect and general interest shared in common with the public. The Court dismissed the
objection that they were not proper parties and ruled that "the transcendental importance to the
public of these cases demands that they be settled promptly and definitely, brushing aside, if we must
technicalities of procedure." We have since then applied the exception in many other cases.
(Association of Small Landowners in the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling
does not mean that the Government cannot regulate it in the exercise of its police power.
The concept of police power is well-established in this jurisdiction. It has been defined as the "state
authority to enact legislation that may interfere with personal liberty or property in order to promote
the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or
restraint upon liberty or property, (2) in order to foster the common good. It is not capable of an exact
definition but has been, purposely, veiled in general terms to underscore its all-comprehensive
embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it
could be done, provides enough room for an efficient and flexible response to conditions and
circumstances thus assuming the greatest benefits. (Edu v. Ericta, supra)
It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the charter.
Along with the taxing power and eminent domain, it is inborn in the very fact of statehood and
sovereignty. It is a fundamental attribute of government that has enabled it to perform the most vital
functions of governance. Marshall, to whom the expression has been credited, refers to it succinctly as
the plenary power of the state "to govern its citizens". (Tribe, American Constitutional Law, 323, 1978).
The police power of the State is a power co-extensive with self-protection and is most aptly termed the
"law of overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most
essential, insistent, and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a dynamic
force that enables the state to meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an
appropriate institution all games of chance authorized by existing franchise or permitted by law" (1st
whereas clause, PD 1869). As was subsequently proved, regulating and centralizing gambling
operations in one corporate entity — the PAGCOR, was beneficial not just to the Government but to
society in general. It is a reliable source of much needed revenue for the cash strapped Government. It
provided funds for social impact projects and subjected gambling to "close scrutiny, regulation,
supervision and control of the Government" (4th Whereas Clause, PD 1869). With the creation of
PAGCOR and the direct intervention of the Government, the evil practices and corruptions that go with
gambling will be minimized if not totally eradicated. Public welfare, then, lies at the bottom of the
enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose
taxes and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of local
autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the
franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees, charges
or levies of whatever nature, whether National or Local."
(2) Income and other taxes. — a) Franchise Holder: No tax of any kind or form, income or otherwise as
well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and
collected under this franchise from the Corporation; nor shall any form or tax or charge attach in any
way to the earnings of the Corporation, except a franchise tax of five (5%) percent of the gross revenues
or earnings derived by the Corporation from its operations under this franchise. Such tax shall be due
and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees
or assessments of any kind, nature or description, levied, established or collected by any municipal,
provincial or national government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes (Icard
v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v. Municipality of
Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an intent to confer that power
or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax"
therefore must always yield to a legislative act which is superior having been passed upon by the state
itself which has the "inherent power to tax" (Bernas, the Revised [1973] Philippine Constitution, Vol. 1,
1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that
"municipal corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January 18,
1957) which has the power to "create and abolish municipal corporations" due to its "general legislative
powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has
the power of control over Local governments (Hebron v. Reyes, G.R. No. 9124, July 2, 1950). And if
Congress can grant the City of Manila the power to tax certain matters, it can also provide for
exemptions or even take back the power.
(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as
1975, the power of local governments to regulate gambling thru the grant of "franchise, licenses or
permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the authority of chartered cities and other
local governments to issue license, permit or other form of franchise to operate, maintain and establish
horse and dog race tracks, jai-alai and other forms of gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish, horse and dog race
tracks, jai-alai and other forms of gambling shall be issued by the national government upon proper
application and verification of the qualification of the applicant . . .
Therefore, only the National Government has the power to issue "licenses or permits" for the operation
of gambling. Necessarily, the power to demand or collect license fees which is a consequence of the
issuance of "licenses or permits" is no longer vested in the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is
a government owned or controlled corporation with an original charter, PD 1869. All of its shares of
stocks are owned by the National Government. In addition to its corporate powers (Sec. 3, Title II, PD
1869) it also exercises regulatory powers thus:
Sec. 9. Regulatory Power. — The Corporation shall maintain a Registry of the affiliated entities, and
shall exercise all the powers, authority and the responsibilities vested in the Securities and Exchange
Commission over such affiliating entities mentioned under the preceding section, including, but not
limited to amendments of Articles of Incorporation and By-Laws, changes in corporate term, structure,
capitalization and other matters concerning the operation of the affiliated entities, the provisions of
the Corporation Code of the Philippines to the contrary notwithstanding, except only with respect to
original incorporation.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental,
which places it in the category of an agency or instrumentality of the Government. Being an
instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes.
Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local
government.
The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control
the operation of constitutional laws enacted by Congress to carry into execution the powers vested in
the federal government. (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local governments.
Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on
the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States
(Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate
a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities,
or even to seriously burden it in the accomplishment of them. (Antieau, Modern Constitutional Law,
Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v.
Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which
has the inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D.
1869. This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides:
Sec. 5. Each local government unit shall have the power to create its own source of revenue and to levy
taxes, fees, and other charges subject to such guidelines and limitation as the congress may provide,
consistent with the basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively
to the local government. (emphasis supplied)
The power of local government to "impose taxes and fees" is always subject to "limitations" which
Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or
revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the
exercise of the power of local governments to impose taxes and fees. It cannot therefore be violative
but rather is consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization"
(III Records of the 1987 Constitutional Commission, pp. 435-436, as cited in Bernas, The Constitution
of the Republic of the Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments
sovereign within the state or an "imperium in imperio."
Local Government has been described as a political subdivision of a nation or state which is constituted
by law and has substantial control of local affairs. In a unitary system of government, such as the
government under the Philippine Constitution, local governments can only be an intra sovereign
subdivision of one sovereign nation, it cannot be an imperium in imperio. Local government in such a
system can only mean a measure of decentralization of the function of government. (emphasis
supplied)
As to what state powers should be "decentralized" and what may be delegated to local government
units remains a matter of policy, which concerns wisdom. It is therefore a political question. (Citizens
Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State
concern and hence, it is the sole prerogative of the State to retain it or delegate it to local governments.
As gambling is usually an offense against the State, legislative grant or express charter power is
generally necessary to empower the local corporation to deal with the subject. . . . In the absence of
express grant of power to enact, ordinance provisions on this subject which are inconsistent with the
state laws are void. (Ligan v. Gadsden, Ala App. 107 So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC 757
following in re Ah You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan
Vol. 3 Ibid, p. 548, emphasis supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution,
because "it legalized PAGCOR — conducted gambling, while most gambling are outlawed together with
prostitution, drug trafficking and other vices" (p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners' posture ignores the well-
accepted meaning of the clause "equal protection of the laws." The clause does not preclude
classification of individuals who may be accorded different treatment under the law as long as the
classification is not unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law does not
have to operate in equal force on all persons or things to be conformable to Article III, Section 1 of the
Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from establishing classes of individuals
or objects upon which different rules shall operate (Laurel v. Misa, 43 O.G. 2847). The Constitution
does not require situations which are different in fact or opinion to be treated in law as though they
were the same (Gomez v. Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal protection is
not clearly explained in the petition. The mere fact that some gambling activities like cockfighting (P.D
449) horse racing (R.A. 306 as amended by RA 983), sweepstakes, lotteries and races (RA 1169 as
amended by B.P. 42) are legalized under certain conditions, while others are prohibited, does not
render the applicable laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be overthrown because there are
other instances to which it might have been applied. (Gomez v. Palomar, 25 SCRA 827)
The equal protection clause of the 14th Amendment does not mean that all occupations called by the
same name must be treated the same way; the state may do what it can to prevent which is deemed
as evil and stop short of those cases in which harm to the few concerned is not less than the harm to
the public that would insure if the rule laid down were made mathematically exact. (Dominican Hotel
v. Arizona, 249 US 2651).
Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory Government away
from monopolies and crony economy and toward free enterprise and privatization" suffice it to state
that this is not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the
government's policies then it is for the Executive Department to recommend to Congress its repeal or
amendment.
The judiciary does not settle policy issues. The Court can only declare what the law is and not what the
law should be.1âwphi1 Under our system of government, policy issues are within the domain of the
political branches of government and of the people themselves as the repository of all state power.
(Valmonte v. Belmonte, Jr., 170 SCRA 256).
On the issue of "monopoly," however, the Constitution provides that:
Sec. 19. The State shall regulate or prohibit monopolies when public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed. (Art. XII, National Economy
and Patrimony)
It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by the
Constitution. The state must still decide whether public interest demands that monopolies be regulated
or prohibited. Again, this is a matter of policy for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12 (Family) and 13
(Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values)
of Article XIV of the 1987 Constitution, suffice it to state also that these are merely statements of
principles and, policies. As such, they are basically not self-executing, meaning a law should be passed
by Congress to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for
enforcement through the courts. They were rather directives addressed to the executive and the
legislature. If the executive and the legislature failed to heed the directives of the articles the available
remedy was not judicial or political. The electorate could express their displeasure with the failure of
the executive and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad, 47 Phil. 387;
Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec, 179 SCRA 287).
Therefore, for PD 1869 to be nullified, it must be shown that there is a clear and unequivocal breach of
the Constitution, not merely a doubtful and equivocal one. In other words, the grounds for nullity must
be clear and beyond reasonable doubt. (Peralta v. Comelec, supra) Those who petition this Court to
declare a law, or parts thereof, unconstitutional must clearly establish the basis for such a declaration.
Otherwise, their petition must fail. Based on the grounds raised by petitioners to challenge the
constitutionality of P.D. 1869, the Court finds that petitioners have failed to overcome the
presumption. The dismissal of this petition is therefore, inevitable. But as to whether P.D. 1869 remains
a wise legislation considering the issues of "morality, monopoly, trend to free enterprise, privatization
as well as the state principles on social justice, role of youth and educational values" being raised, is up
for Congress to determine.
As this Court held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA
521 —

Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in any case, in its favor the
presumption of validity and constitutionality which petitioners Valmonte and the KMU have not
overturned. Petitioners have not undertaken to identify the provisions in the Constitution which they
claim to have been violated by that statute. This Court, however, is not compelled to speculate and to
imagine how the assailed legislation may possibly offend some provision of the Constitution. The Court
notes, further, in this respect that petitioners have in the main put in question the wisdom, justice and
expediency of the establishment of the OPSF, issues which are not properly addressed to this Court
and which this Court may not constitutionally pass upon. Those issues should be addressed rather to
the political departments of government: the President and the Congress.

Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so when the
gambling resorted to is excessive. This excessiveness necessarily depends not only on the financial
resources of the gambler and his family but also on his mental, social, and spiritual outlook on life.
However, the mere fact that some persons may have lost their material fortunes, mental control,
physical health, or even their lives does not necessarily mean that the same are directly attributable to
gambling. Gambling may have been the antecedent, but certainly not necessarily the cause. For the
same consequences could have been preceded by an overdose of food, drink, exercise, work, and even
sex.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 120095 August 5, 1996

JMM PROMOTION AND MANAGEMENT, INC., and KARY INTERNATIONAL, INC., petitioner,
vs.
HON. COURT OF APPEALS, HON. MA. NIEVES CONFESSOR, then Secretary of the Department of Labor
and Employment, HON. JOSE BRILLANTES, in his capacity as acting Secretary of the Department of
Labor and Employment and HON. FELICISIMO JOSON, in his capacity as Administrator of the
Philippine Overseas Employment Administration, respondents.
KAPUNAN, J.:p
The limits of government regulation under the State's police power are once again at the vortex of the
instant controversy. Assailed is the government's power to control deployment of female entertainers
to Japan by requiring an Artist Record Book (ARB) as a precondition to the processing by the POEA of
any contract for overseas employment. By contending that the right to overseas employment is a
property right within the meaning of the Constitution, petitioners vigorously aver that deprivation
thereof allegedly through the onerous requirement of an ARB violates the due process clause and
constitutes an invalid exercise of the police power.
The factual antecedents are undisputed.
Following the much-publicized death of Maricris Sioson in 1991, former President Corazon C. Aquino
ordered a total ban against the deployment of performing artists to Japan and other foreign
destinations. The ban was, however, rescinded after leaders of the overseas employment industry
promised to extend full support for a program aimed at removing kinks in the system of deployment.
In its place, the government, through the Secretary of Labor and Employment, subsequently issued
Department Order No. 28, creating the Entertainment Industry Advisory Council (EIAC), which was
tasked with issuing guidelines on the training, testing certification and deployment of performing
artists abroad.
Pursuant to the EIAC's recommendations,1 the Secretary of Labor, on January 6, 1994, issued
Department Order No. 3 establishing various procedures and requirements for screening performing
artists under a new system of training, testing, certification and deployment of the former. Performing
artists successfully hurdling the test, training and certification requirement were to be issued an Artist's
Record Book (ARB), a necessary prerequisite to processing of any contract of employment by the POEA.
Upon request of the industry, implementation of the process, originally scheduled for April 1, 1994,
was moved to October 1, 1994.
Thereafter, the Department of Labor, following the EIAC's recommendation, issued a series of orders
fine-tuning and implementing the new system. Prominent among these orders were the following
issuances:
1. Department Order No. 3-A, providing for additional guidelines on the training, testing, certification
and deployment of performing artists.
2. Department Order No. 3-B, pertaining to the Artist Record Book (ARB) requirement, which could be
processed only after the artist could show proof of academic and skills training and has passed the
required tests.
3. Department Order No. 3-E, providing the minimum salary a performing artist ought to received (not
less than US$600.00 for those bound for Japan) and the authorized deductions therefrom.
4. Department Order No. 3-F, providing for the guidelines on the issuance and use of the ARB by
returning performing artists who, unlike new artists, shall only undergo a Special Orientation Program
(shorter than the basic program) although they must pass the academic test.
In Civil Case No. 95-72750, the Federation of Entertainment Talent Managers of the Philippines
(FETMOP), on January 27, 1995 filed a class suit assailing these department orders, principally
contending that said orders 1) violated the constitutional right to travel; 2) abridged existing contracts
for employment; and 3) deprived individual artists of their licenses without due process of law.
FETMOP, likewise, averred that the issuance of the Artist Record Book (ARB) was discriminatory and
illegal and "in gross violation of the constitutional right... to life liberty and property." Said Federation
consequently prayed for the issuance of a writ of preliminary injunction against the aforestated orders.
On February 2, 1992, JMM Promotion and Management, Inc. Kary International, Inc., herein
petitioners, filed a Motion for Intervention in said civil case, which was granted by the trial court in an
Order dated 15 February, 1995.
However, on February 21, 1995, the trial court issued an Order denying petitioners' prayed for a writ
of preliminary injunction and dismissed the complaint.
On appeal from the trial court's Order, respondent court, in CA G.R. SP No. 36713 dismissed the same.
Tracing the circumstances which led to the issuance of the ARB requirement and the assailed
Department Order, respondent court concluded that the issuance constituted a valid exercise by the
state of the police power.
We agree.
The latin maxim salus populi est surprema lex embodies the character of the entire spectrum of public
laws aimed at promoting the general welfare of the people under the State's police power. As an
inherent attribute of sovereignty which virtually "extends to all public needs,"2 this "least limitable"3 of
governmental powers grants a wide panoply of instruments through which the state, as parens
patriae gives effect to a host of its regulatory powers.
Describing the nature and scope of the police power, Justice Malcolm, in the early case of Rubi
v. Provincial Board of Mindoro4 wrote:
"The police power of the State," one court has said... is a power coextensive with self-protection, and
is not inaptly termed "the law of overruling necessity." It may be said to be that inherent and plenary
power in the state which enables it to prohibit all things hurtful to the comfort, safety and welfare of
society." Carried onward by the current of legislature, the judiciary rarely attempts to dam the
onrushing power of legislative discretion, provided the purposes of the law do not go beyond the great
principles that mean security for the public welfare or do not arbitrarily interfere with the right of the
individual.5
Thus, police power concerns government enactments which precisely interfere with personal liberty
or property in order to promote the general welfare or the common good. As the assailed Department
Order enjoys a presumed validity, it follows that the burden rests upon petitioners to demonstrate that
the said order, particularly, its ARB requirement, does not enhance the public welfare or was exercised
arbitrarily or unreasonably.
A thorough review of the facts and circumstances leading to the issuance of the assailed orders compels
us to rule that the Artist Record Book requirement and the questioned Department Order related to
its issuance were issued by the Secretary of Labor pursuant to a valid exercise of the police power.
In 1984, the Philippines emerged as the largest labor sending country in Asia dwarfing the labor export
of countries with mammoth populations such as India and China. According to the National Statistics
Office, this diaspora was augmented annually by over 450,000 documented and clandestine or illegal
(undocumented) workers who left the country for various destinations abroad, lured by higher salaries,
better work opportunities and sometimes better living conditions.
Of the hundreds of thousands of workers who left the country for greener pastures in the last few
years, women composed slightly close to half of those deployed, constituting 47% between 1987-1991,
exceeding this proportion (58%) by the end of 1991, 6 the year former President Aquino instituted the
ban on deployment of performing artists to Japan and other countries as a result of the gruesome
death of Filipino entertainer Maricris Sioson.
It was during the same period that this Court took judicial notice not only of the trend, but also of the
fact that most of our women, a large number employed as domestic helpers and entertainers, worked
under exploitative conditions "marked by physical and personal abuse." 7 Even then, we noted that
"[t]he sordid tales of maltreatment suffered by migrant Filipina workers, even rape and various forms
of torture, confirmed by testimonies of returning workers" compelled "urgent government action." 8
Pursuant to the alarming number of reports that a significant number of Filipina performing artists
ended up as prostitutes abroad (many of whom were beaten, drugged and forced into prostitution),
and following the deaths of number of these women, the government began instituting measures
aimed at deploying only those individuals who met set standards which would qualify them as
legitimate performing artists. In spite of these measures, however, a number of our countrymen have
nonetheless fallen victim to unscrupulous recruiters, ending up as virtual slaves controlled by foreign
crime syndicates and forced into jobs other than those indicated in their employment contracts. Worse,
some of our women have been forced into prostitution.
Thus, after a number of inadequate and failed accreditation schemes, the Secretary of Labor issued on
August 16, 1993, D.O. No. 28, establishing the Entertainment Industry Advisory Council (EIAC), the
policy advisory body of DOLE on entertainment industry matters.9 Acting on the recommendations of
the said body, the Secretary of Labor, on January 6, 1994, issued the assailed orders. These orders
embodied EIAC's Resolution No. 1, which called for guidelines on screening, testing and accrediting
performing overseas Filipino artists. Significantly, as the respondent court noted, petitioners were duly
represented in the EIAC,10which gave the recommendations on which the ARB and other requirements
were based.
Clearly, the welfare of Filipino performing artists, particularly the women was paramount in the
issuance of Department Order No. 3. Short of a total and absolute ban against the deployment of
performing artists to "high risk" destinations, a measure which would only drive recruitment further
underground, the new scheme at the very least rationalizes the method of screening performing artists
by requiring reasonable educational and artistic skills from them and limits deployment to only those
individuals adequately prepared for the unpredictable demands of employment as artists abroad. It
cannot be gainsaid that this scheme at least lessens the room for exploitation by unscrupulous
individuals and agencies.
Moreover, here or abroad, selection of performing artists is usually accomplished by auditions, where
those deemed unfit are usually weeded out through a process which is inherently subjective and
vulnerable to bias and differences in taste. The ARB requirement goes one step further, however,
attempting to minimize the subjectivity of the process by defining the minimum skills required from
entertainers and performing artists. As the Solicitor General observed, this should be easily met by
experienced artists possessing merely basic skills. The test are aimed at segregating real artists or
performers from those passing themselves off as such, eager to accept any available job and therefore
exposing themselves to possible exploitation.
As to the other provisions of Department Order No. 3 questioned by petitioners, we see nothing wrong
with the requirements for document and booking confirmation (D.O. 3-C), a minimum salary scale (D.O.
3-E), or the requirement for registration of returning performers. The requirement for a venue
certificate or other documents evidencing the place and nature or work allows the government closer
monitoring of foreign employers and helps keep our entertainers away from prostitution fronts and
other worksites associated with unsavory, immoral, illegal or exploitative practices. Parenthetically,
none of these issuances appear to us, by any stretch of the imagination, even remotely unreasonable
or arbitrary. They address a felt need of according greater protection for an oft-exploited segment of
our OCW's. They respond to the industry's demand for clearer and more practicable rules and
guidelines. Many of these provisions were fleshed out following recommendations by, and after
consultations with, the affected sectors and non-government organizations. On the whole, they are
aimed at enhancing the safety and security of entertainers and artists bound for Japan and other
destinations, without stifling the industry's concerns for expansion and growth.
In any event, apart from the State's police power, the Constitution itself mandates government to
extend the fullest protection to our overseas workers. The basic constitutional statement on labor,
embodied in Section 18 of Article II of the Constitution provides:
Sec. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers
and promote their welfare.
More emphatically, the social justice provisions on labor of the 1987 Constitution in its first paragraph
states:
The State shall afford full protection to labor, local and overseas, organized and unorganized and
promote full employment and equality of employment opportunities for all.
Obviously, protection to labor does not indicate promotion of employment alone. Under the welfare
and social justice provisions of the Constitution, the promotion of full employment, while desirable,
cannot take a backseat to the government's constitutional duty to provide mechanisms for the
protection of our workforce, local or overseas. As this Court explained in Philippine Association of
Service Exporters (PASEI) v. Drilon,11 in reference to the recurring problems faced by our overseas
workers:
What concerns the Constitution more paramountly is that such an employment be above all, decent,
just, and humane. It is bad enough that the country has to send its sons and daughters to strange lands
because it cannot satisfy their employment needs at home. Under these circumstances, the
Government is duty-adequate protection, personally and economically, while away from home.
We now go to petitioners' assertion that the police power cannot, nevertheless, abridge the right of
our performing workers to return to work abroad after having earlier qualified under the old process,
because, having previously been accredited, their accreditation became a "property right," protected
by the due process clause. We find this contention untenable.
A profession, trade of calling is a property right within the meaning of our constitutional guarantees.
One cannot be deprived of the right to work and right to make a living because these rights are property
rights, the arbitrary and unwarranted deprivation of which normally constitutes an actionable wrong. 12
Nevertheless, no right is absolute, and the proper regulation of a profession, calling, business or trade
has always been upheld as a legitimate subject of a valid exercise of the police power by the state
particularly when their conduct affects either the execution of legitimate governmental functions, the
preservation of the State, the public health and welfare and public morals. According to the maxim, sic
utere tuo ut alienum non laedas, it must of course be within the legitimate range of legislative action
to define the mode and manner in which every one may so use of his own property so as not to pose
injury to himself or others.13
In any case, where the liberty curtailed affects at most the rights of property, the permissible scope of
regulatory measures is certainly much
14
wider. To pretend that licensing or accreditation requirements violates the due process clause is to
ignore the settled practice, under the mantle of the police power, of regulating entry to the practice of
various trades or professions. Professionals leaving for abroad are required to pass rigid written and
practical exams before they are deemed fit to practice their trade. Seamen are required to take tests
determining their seamanship. Locally, the Professional Regulation Commission has began to require
previously licensed doctors and other professionals to furnish documentary proof that they has either
re-trained or had undertaken continuing education courses as a requirement for renewal of their
licenses. It is not claimed that these requirements pose an unwarranted deprivation of a property right
under the due process clause. So long as professionals and other workers meet reasonable regulatory
standards no such deprivation exists.
Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause of the
Constitution to support their argument that the government cannot enact the assailed regulatory
measures because they abridge the freedom to contract. In Philippine Association of Service Exporters,
Inc. vs. Drilon, we held that "[t]he non-impairment clause of the Constitution... must yield to the loftier
purposes targeted by the government."15 Equally important, into every contract is read provisions of
existing law, and always, a reservation of the police power for so long as the agreement deals with a
subject impressed with the public welfare.
A last point. Petitioners suggest that the singling out of entertainers and performing artists under the
assailed department orders constitutes class legislation which violates the equal protection clause of
the Constitution. We do not agree.
The equal protection clause is directed principally against undue favor and individual or class privilege.
It is not intended to prohibit legislation which is limited to the object to which it is directed or by the
territory in which it is to operate. It does not require absolute equality, but merely that all persons be
treated alike under like conditions both as to privileges conferred and liabilities imposed. 16 We have
held, time and again, that the equal protection clause of the Constitution does not forbid classification
for so long as such classification is based on real and substantial differences having a reasonable
relation to the subject of the particular legislation.17 If classification is germane to the purpose of the
law, concerns all members of the class, and applies equally to present and future conditions, the
classification does not violate the equal protection guarantee.

In the case at bar, the challenged Department Order clearly applies to all performing artists and
entertainers destined for jobs abroad. These orders, we stressed hereinfore, further the Constitutional
mandate requiring government to protect our workforce, particularly those who may be prone to
abuse and exploitation as they are beyond the physical reach of government regulatory agencies. The
tragic incidents must somehow stop, but short of absolutely curtailing the right of these performers
and entertainers to work abroad, the assailed measures enable our government to assume a measure
of control.

WHEREFORE, finding no reversible error in the decision sought to be reviewed, petition is hereby
DENIED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-63419 December 18, 1986

FLORENTINA A. LOZANO, petitioner,

vs.
THE HONORABLE ANTONIO M. MARTINEZ, in his capacity as Presiding Judge, Regional Trial Court,
National Capital Judicial Region, Branch XX, Manila, and the HONORABLE JOSE B. FLAMINIANO, in
his capacity as City Fiscal of Manila, respondents.

G.R. No. L-66839-42 December 18, 1986

LUZVIMINDA F. LOBATON petitioner,

vs.
HONORABLE GLICERIO L. CRUZ, in his capacity as Presiding Executive Judge, Branch V, Region IV,
Regional Trial Court, sitting at Lemery, Batangas, THE PROVINCIAL FISCAL OF BATANGAS, and MARIA
LUISA TORDECILLA, respondents.

G.R No. 71654 December 18, 1986

ANTONIO DATUIN and SUSAN DATUIN, petitioners, HON. DAVID G. NITAFAN, Presiding Judge, Regional Trial Court, National Capital Judicial Region,
vs. Branch 52, Manila and THELMA SARMIENTO, respondents.
HONORABLE JUDGE ERNANI C. PANO, Regional Trial Court, Quezon City, Branch LXXXVIII,
HONORABLE ClTY FISCAL OF QUEZON CITY, respondents. R.R. Nogales Law Office for petitioner in G.R. No. 63419, G.R. Nos. 74524-25, G.R. Nos. 75812-13, G.R.
Nos. 75765-67 and counsel for respondent in G.R. No. 75789.
G.R. No. 74524-25 December 18, 1986
Pio S. Canta for petitioner in G.R. Nos. 66839-42.
OSCAR VIOLAGO, petitioner,
vs. Hermogenes Datuin, Jr. for petitioner in G.R. No. 71654.
HONORABLE JUDGE ERNANI C. PAÑ;O Regional Trial Court, Quezon City, Branch LXXXVIII,
Abinoja, Tabalingcos, Villalon & Associates for petitioner in G.R. Nos. 75122-49.
HONORABLE CITY FISCAL OF QUEZON CITY, respondents.
The Solicitor General for respondent in G.R. No. 63419, G.R. Nos. 66839-42, G.R. No. 71654, G.R. Nos.
G.R. No. 75122-49 December 18, 1986
74524-25, G.R. Nos. 75122-49, G.R. Nos. 75812-13, G.R. Nos. 75765-67 and counsel for petitioner in
ELINOR ABAD, petitioner, G.R. No. 75789.
vs.
THE HONORABLE NICOLAS A. GEROCHI, JR., in his capacity as Presiding Judge, Regional Trial Court,
National Capital Judicial Region, Branch 139, Makati and FEDERICO L. MELOCOTTON JR., in his YAP, J.:
capacity as Trial Fiscal Regional Trial Court, Branch 139, Makati, respondents.
The constitutionality of Batas Pambansa Bilang 22 (BP 22 for short), popularly known as the Bouncing
G.R No. 75812-13 December 18, 1986 Check Law, which was approved on April 3, 1979, is the sole issue presented by these petitions for
decision. The question is definitely one of first impression in our jurisdiction.
AMABLE R. AGUILUZ VII and SYLVIA V. AGUILUZ, spouses, petitioners,
vs. These petitions arose from cases involving prosecution of offenses under the statute. The defendants
HONORABLE PRESIDING JUDGE OF BRANCH 154, now vacant but temporarily presided by in those cases moved seasonably to quash the informations on the ground that the acts charged did
HONORABLE ASAALI S. ISNANI Branch 153, Court of First Instance of Pasig, Metro not constitute an offense, the statute being unconstitutional. The motions were denied by the
Manila, respondent. respondent trial courts, except in one case, which is the subject of G. R. No. 75789, wherein the trial
court declared the law unconstitutional and dismissed the case. The parties adversely affected have
G.R No. 75765-67 December 18, 1986
come to us for relief.
LUIS M. HOJAS, petitioner,
As a threshold issue the former Solicitor General in his comment on the petitions, maintained the
vs.
posture that it was premature for the accused to elevate to this Court the orders denying their motions
HON. JUDGE SENEN PENARANDA, Presiding Judge, Regional Trial Court of Cagayan de Oro City,
to quash, these orders being interlocutory. While this is correct as a general rule, we have in justifiable
Branch XX, HONORABLE JUDGE ALFREDO LAGAMON, Presiding Judge, Regional Trial Court of
cases intervened to review the lower court's denial of a motion to quash. 1 In view of the importance
Cagayan de Oro City, Branch XXII, HONORABLE CITY FISCAL NOLI T. CATHI, City Fiscal of Cagayan de
of the issue involved here, there is no doubt in our mind that the instant petitions should be entertained
Oro City, respondents.
and the constitutional challenge to BP 22 resolved promptly, one way or the other, in order to put to
G.R. No. 75789 December 18, 1986 rest the doubts and uncertainty that exist in legal and judicial circles and the general public which have
unnecessarily caused a delay in the disposition of cases involving the enforcement of the statute.
THE PEOPLE OF THE PHILIPPINES, petitioner,
vs.
For the purpose of resolving the constitutional issue presented here, we do not find it necessary to
delve into the specifics of the informations involved in the cases which are the subject of the petitions
before us. 2 The language of BP 22 is broad enough to cover all kinds of checks, whether present dated
or postdated, or whether issued in payment of pre-existing obligations or given in mutual or
simultaneous exchange for something of value.
I Before the enactment of BP 22, provisions already existed in our statute books which penalize the
BP 22 punishes a person "who makes or draws and issues any check on account or for value, knowing
at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the
payment of said check in full upon presentment, which check is subsequently dishonored by the
drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason
had not the drawer, without any valid reason, ordered the bank to stop payment." The penalty
prescribed for the offense is imprisonment of not less than 30 days nor more than one year or a fine
or not less than the amount of the check nor more than double said amount, but in no case to exceed
P200,000.00, or both such fine and imprisonment at the discretion of the court. 3
The statute likewise imposes the same penalty on "any person who, having sufficient funds in or credit
with the drawee bank when he makes or draws and issues a check, shall fail to keep sufficient funds or
to maintain a credit to cover the full amount of the check if presented within a period of ninety (90)
days from the date appearing thereon, for which reason it is dishonored by the drawee bank. 4
An essential element of the offense is "knowledge" on the part of the maker or drawer of the check of
the insufficiency of his funds in or credit with the bank to cover the check upon its presentment. Since
this involves a state of mind difficult to establish, the statute itself creates a prima facie presumption
of such knowledge where payment of the check "is refused by the drawee because of insufficient funds
in or credit with such bank when presented within ninety (90) days from the date of the check. 5 To
mitigate the harshness of the law in its application, the statute provides that such presumption shall
not arise if within five (5) banking days from receipt of the notice of dishonor, the maker or drawer
makes arrangements for payment of the check by the bank or pays the holder the amount of the check.
Another provision of the statute, also in the nature of a rule of evidence, provides that the introduction
in evidence of the unpaid and dishonored check with the drawee bank's refusal to pay "stamped or
written thereon or attached thereto, giving the reason therefor, "shall constitute prima facie proof of
"the making or issuance of said check, and the due presentment to the drawee for payment and the
dishonor thereof ... for the reason written, stamped or attached by the drawee on such dishonored
check." 6
The presumptions being merely prima facie, it is open to the accused of course to present proof to the
contrary to overcome the said presumptions.
II
BP 22 is aimed at putting a stop to or curbing the practice of issuing checks that are worthless, i.e.
checks that end up being rejected or dishonored for payment. The practice, as discussed later, is
proscribed by the state because of the injury it causes to t public interests.
issuance of bouncing or rubber checks. Criminal law has dealth with the problem within the context of
crimes against property punished as "estafa" or crimes involving fraud and deceit. The focus of these
penal provisions is on the damage caused to the property rights of the victim.
The Penal Code of Spain, which was in force in the Philippines from 1887 until it was replaced by the
Revised Penal Code in 1932, contained provisions penalizing, among others, the act of defrauding
another through false pretenses. Art. 335 punished a person who defrauded another "by falsely
pretending to possess any power, influence, qualification, property, credit, agency or business, or by
means of similar deceit." Although no explicit mention was made therein regarding checks, this
provision was deemed to cover within its ambit the issuance of worthless or bogus checks in exchange
for money. 7
In 1926, an amendment was introduced by the Philippine Legislature, which added a new clause
(paragraph 10) to Article 335 of the old Penal Code, this time referring in explicit terms to the issuance
of worthless checks. The amendment penalized any person who 1) issues a check in payment of a debt
or for other valuable consideration, knowing at the time of its issuance that he does not have sufficient
funds in the bank to cover its amount, or 2) maliciously signs the check differently from his authentic
signature as registered at the bank in order that the latter would refuse to honor it; or 3) issues a
postdated check and, at the date set for its payment, does not have sufficient deposit to cover the
same.8
In 1932, as already adverted to, the old Penal Code was superseded by the Revised Penal Code. 9 The
above provisions, in amended form, were incorporated in Article 315 of the Revised Penal Code
defining the crime of estafa. The revised text of the provision read as follows:
Art. 315. Swindling (estafa).—Any person who shall defraud another by any of the means mentioned
hereinbelow shall be punished by:
xxx xxx xxx
2. By means of any of the following false pretenses or fraudulent acts executed prior to or
simultaneously with the commis sion of the fraud:
(a) By using fictitious name, or falsely pretending to possess power, influence, qualifications, property,
credit, agency, business or imaginary transactions, or by means of other similar deceits;
xxx xxx xxx
(d) By postdating a check, or issuing a check in payment of an obligation the offender knowing that at
the time he had no funds in the bank, or the funds deposited by him were not sufficient to cover the
amount of the cheek without informing the payee of such circumstances.
The scope of paragraph 2 (d), however, was deemed to exclude checks issued in payment of pre-
existing obligations. 10 The rationale of this interpretation is that in estafa, the deceit causing the
defraudation must be prior to or simultaneous with the commission of the fraud. In issuing a check as
payment for a pre-existing debt, the drawer does not derive any material benefit in return or as
consideration for its issuance. On the part of the payee, he had already parted with his money or
property before the check is issued to him hence, he is not defrauded by means of any "prior" or
"simultaneous" deceit perpetrated on him by the drawer of the check.
With the intention of remedying the situation and solving the problem of how to bring checks issued
in payment of pre-existing debts within the ambit of Art. 315, an amendment was introduced by the
Congress of the Philippines in 1967, 11 which was enacted into law as Republic Act No. 4885, revising
the aforesaid proviso to read as follows:
(d) By postdating a check, or issuing a check in payment of an obligation when the offender had no
funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check.
The failure of the drawer of the check to deposit the amount necessary to cover his check within three
(3) days from receipt of notice from the bank and/or the payee or holder that said check has been
dishonored for lack or insufficiency of funds shall be puma facie evidence of deceit constituting false
pretense or fraudulent act.
However, the adoption of the amendment did not alter the situation materially. A divided Court held
in People vs. Sabio, Jr. 12 that Article 315, as amended by Republic Act 4885, does not cover checks
issued in payment of pre-existing obligations, again relying on the concept underlying the crime of
estafa through false pretenses or deceit—which is, that the deceit or false pretense must be prior to
or simultaneous with the commission of the fraud.
Since statistically it had been shown that the greater bulk of dishonored checks consisted of those
issued in payment of pre-existing debts, 13 the amended provision evidently failed to cope with the real
problem and to deal effectively with the evil that it was intended to eliminate or minimize.
With the foregoing factual and legal antecedents as a backdrop, the then Interim Batasan confronted
the problem squarely. It opted to take a bold step and decided to enact a law dealing with the problem
of bouncing or worthless checks, without attaching the law's umbilical cord to the existing penal
provisions on estafa. BP 22 addresses the problem directly and frontally and makes the act of issuing a
worthless check malum prohibitum. 14
The question now arises: Is B P 22 a valid law?
Previous efforts to deal with the problem of bouncing checks within the ambit of the law on estafa did
not evoke any constitutional challenge. In contrast, BP 22 was challenged promptly.
Those who question the constitutionality of BP 22 insist that: (1) it offends the constitutional provision
forbidding imprisonment for debt; (2) it impairs freedom of contract; (3) it contravenes the equal
protection clause; (4) it unduly delegates legislative and executive powers; and (5) its enactment is
flawed in that during its passage the Interim Batasan violated the constitutional provision prohibiting
amendments to a bill on Third Reading.
The constitutional challenge to BP 22 posed by petitioners deserves a searching and thorough scrutiny
and the most deliberate consideration by the Court, involving as it does the exercise of what has been
described as "the highest and most delicate function which belongs to the judicial department of the
government." 15
As we enter upon the task of passing on the validity of an act of a co-equal and coordinate branch of
the government, we need not be reminded of the time-honored principle, deeply ingrained in our
jurisprudence, that a statute is presumed to be valid. Every presumption must be indulged in favor of
its constitutionality. This is not to say that we approach our task with diffidence or timidity. Where it is
clear that the legislature has overstepped the limits of its authority under the constitution we should
not hesitate to wield the axe and let it fall heavily, as fall it must, on the offending statute.
III
Among the constitutional objections raised against BP 22, the most serious is the alleged conflict
between the statute and the constitutional provision forbidding imprisonment for debt. It is contended
that the statute runs counter to the inhibition in the Bill of Rights which states, "No person shall be
imprisoned for debt or non-payment of a poll tax." 16 Petitioners insist that, since the offense under BP
22 is consummated only upon the dishonor or non-payment of the check when it is presented to the
drawee bank, the statute is really a "bad debt law" rather than a "bad check law." What it punishes is
the non-payment of the check, not the act of issuing it. The statute, it is claimed, is nothing more than
a veiled device to coerce payment of a debt under the threat of penal sanction.
First of all it is essential to grasp the essence and scope of the constitutional inhibition invoked by
petitioners. Viewed in its historical context, the constitutional prohibition against imprisonment for
debt is a safeguard that evolved gradually during the early part of the nineteenth century in the various
states of the American Union as a result of the people's revulsion at the cruel and inhumane practice,
sanctioned by common law, which permitted creditors to cause the incarceration of debtors who could
not pay their debts. At common law, money judgments arising from actions for the recovery of a debt
or for damages from breach of a contract could be enforced against the person or body of the debtor
by writ of capias ad satisfaciendum. By means of this writ, a debtor could be seized and imprisoned at
the instance of the creditor until he makes the satisfaction awarded. As a consequence of the popular
ground swell against such a barbarous practice, provisions forbidding imprisonment for debt came to
be generally enshrined in the constitutions of various states of the Union. 17
This humanitarian provision was transported to our shores by the Americans at the turn of t0he century
and embodied in our organic laws. 18 Later, our fundamental law outlawed not only imprisonment for
debt, but also the infamous practice, native to our shore, of throwing people in jail for non-payment of
the cedula or poll tax. 19
The reach and scope of this constitutional safeguard have been the subject of judicial definition, both
by our Supreme Court 20 and by American State courts.21 Mr. Justice Malcolm speaking for the Supreme
Court in Ganaway vs. Queen, 22 stated: "The 'debt' intended to be covered by the constitutional
guaranty has a well-defined meaning. Organic provisions relieving from imprisonment for debt, were
intended to prevent commitment of debtors to prison for liabilities arising from actions ex
contractu The inhibition was never meant to include damages arising in actions ex delicto, for the
reason that damages recoverable therein do not arise from any contract entered into between the
parties but are imposed upon the defendant for the wrong he has done and are considered as
punishment, nor to fines and penalties imposed by the courts in criminal proceedings as punishments
for crime."
The law involved in Ganaway was not a criminal statute but the Code of Procedure in Civil Actions
(1909) which authorized the arrest of the defendant in a civil case on grounds akin to those which
justify the issuance of a writ of attachment under our present Rules of Court, such as imminent
departure of the defendant from the Philippines with intent to defraud his creditors, or concealment,
removal or disposition of properties in fraud of creditors, etc. The Court, in that case, declared the
detention of the defendant unlawful, being violative of the constitutional inhibition against
imprisonment for debt, and ordered his release. The Court, however, refrained from declaring the
statutory provision in question unconstitutional.
Closer to the case at bar is People v. Vera Reyes,23 wherein a statutory provision which made illegal and
punishable the refusal of an employer to pay, when he can do so, the salaries of his employees or
laborers on the fifteenth or last day of every month or on Saturday every week, was challenged for
being violative of the constitutional prohibition against imprisonment for debt. The constitutionality of
the law in question was upheld by the Court, it being within the authority of the legislature to enact
such a law in the exercise of the police power. It was held that "one of the purposes of the law is to
suppress possible abuses on the part of the employers who hire laborers or employees without paying
them the salaries agreed upon for their services, thus causing them financial difficulties. "The law was
viewed not as a measure to coerce payment of an obligation, although obviously such could be its
effect, but to banish a practice considered harmful to public welfare.
IV
Has BP 22 transgressed the constitutional inhibition against imprisonment for debt? To answer the
question, it is necessary to examine what the statute prohibits and punishes as an offense. Is it the
failure of the maker of the check to pay a debt? Or is it the making and issuance of a worthless check
in payment of a debt? What is the gravamen of the offense? This question lies at the heart of the issue
before us.
The gravamen of the offense punished by BP 22 is the act of making and issuing a worthless check or a
check that is dishonored upon its presentation for payment. It is not the non-payment of an obligation
which the law punishes. The law is not intended or designed to coerce a debtor to pay his debt. The
thrust of the law is to prohibit, under pain of penal sanctions, the making of worthless checks and
putting them in circulation. Because of its deleterious effects on the public interest, the practice is
proscribed by the law. The law punishes the act not as an offense against property, but an offense
against public order.
Admittedly, the distinction may seem at first blush to appear elusive and difficult to conceptualize. But
precisely in the failure to perceive the vital distinction lies the error of those who challenge the validity
of BP 22.
It may be constitutionally impermissible for the legislature to penalize a person for non-payment of a
debt ex contractu But certainly it is within the prerogative of the lawmaking body to proscribe certain
acts deemed pernicious and inimical to public welfare. Acts mala in se are not the only acts which the
law can punish. An act may not be considered by society as inherently wrong, hence, not malum in se
but because of the harm that it inflicts on the community, it can be outlawed and criminally punished
as malum prohibitum. The state can do this in the exercise of its police power.
The police power of the state has been described as "the most essential, insistent and illimitable of
powers" which enables it to prohibit all things hurtful to the comfort, safety and welfare of society. 24 It
is a power not emanating from or conferred by the constitution, but inherent in the state, plenary,
"suitably vague and far from precisely defined, rooted in the conception that man in organizing the
state and imposing upon the government limitations to safeguard constitutional rights did not intend
thereby to enable individual citizens or group of citizens to obstruct unreasonably the enactment of
such salutary measures to ensure communal peace, safety, good order and welfare." 25
The enactment of BP 22 is a declaration by the legislature that, as a matter of public policy, the making
and issuance of a worthless check is deemed public nuisance to be abated by the imposition of penal
sanctions.
It is not for us to question the wisdom or impolicy of the statute. It is sufficient that a reasonable nexus
exists between means and end. Considering the factual and legal antecedents that led to the adoption
of the statute, it is not difficult to understand the public concern which prompted its enactment. It had
been reported that the approximate value of bouncing checks per day was close to 200 million pesos,
and thereafter when overdrafts were banned by the Central Bank, it averaged between 50 minion to
80 million pesos a day. 26
By definition, a check is a bill of exchange drawn on a bank and payable on demand. 27 It is a written
order on a bank, purporting to be drawn against a deposit of funds for the payment of all events, of a
sum of money to a certain person therein named or to his order or to cash and payable on
demand. 28 Unlike a promissory note, a check is not a mere undertaking to pay an amount of money. It
is an order addressed to a bank and partakes of a representation that the drawer has funds on deposit
against which the check is drawn, sufficient to ensure payment upon its presentation to the bank. There
is therefore an element of certainty or assurance that the instrument wig be paid upon presentation.
For this reason, checks have become widely accepted as a medium of payment in trade and commerce.
Although not legal tender, checks have come to be perceived as convenient substitutes for currency in
commercial and financial transactions. The basis or foundation of such perception is confidence. If such
confidence is shakes the usefulness of checks as currency substitutes would be greatly diminished or
may become nit Any practice therefore tending to destroy that confidence should be deterred for the
proliferation of worthless checks can only create havoc in trade circles and the banking community.
Recent statistics of the Central Bank show that one-third of the entire money supply of the country,
roughly totalling P32.3 billion, consists of peso demand deposits; the remaining two. 29 These de
deposit thirds consists of currency in circulation. ma deposits in the banks constitute the funds against
which among others, commercial papers like checks, are drawn. The magnitude of the amount involved
amply justifies the legitimate concern of the state in preserving the integrity of the banking system.
Flooding the system with worthless checks is like pouring garbage into the bloodstream of the nation's
economy.
The effects of the issuance of a worthless check transcends the private interests of the parties directly
involved in the transaction and touches the interests of the community at large. The mischief it creates
is not only a wrong to the payee or holder, but also an injury to the public. The harmful practice of
putting valueless commercial papers in circulation, multiplied a thousand fold, can very wen pollute
the channels of trade and commerce, injure the banking system and eventually hurt the welfare of
society and the public interest. As aptly stated — 30
The 'check flasher' does a great deal more than contract a debt; he shakes the pillars of business; and
to my mind, it is a mistaken charity of judgment to place him in the same category with the honest man
who is unable to pay his debts, and for whom the constitutional inhibition against' imprisonment for
debt, except in cases of fraud was intended as a shield and not a sword.
In sum, we find the enactment of BP 22 a valid exercise of the police power and is not repugnant to the
constitutional inhibition against imprisonment for debt.
This Court is not unaware of the conflicting jurisprudence obtaining in the various states of the United
States on the constitutionality of the "worthless check" acts. 31 It is needless to warn that foreign
jurisprudence must be taken with abundant caution. A caveat to be observed is that substantial
differences exist between our statute and the worthless check acts of those states where the
jurisprudence have evolved. One thing to remember is that BP 22 was not lifted bodily from any existing
statute. Furthermore, we have to consider that judicial decisions must be read in the context of the
facts and the law involved and, in a broader sense, of the social economic and political environment—
in short, the milieu—under which they were made. We recognize the wisdom of the old saying that
what is sauce for the goose may not be sauce for the gander.
As stated elsewhere, police power is a dynamic force that enables the state to meet the exigencies of
changing times. There are occasions when the police power of the state may even override a
constitutional guaranty. For example, there have been cases wherein we held that the constitutional
provision on non-impairment of contracts must yield to the police power of the state. 32 Whether the
police power may override the constitutional inhibition against imprisonment for debt is an issue we
do not have to address. This bridge has not been reached, so there is no occasion to cross it.
We hold that BP 22 does not conflict with the constitutional inhibition against imprisonment for debt.
V
We need not detain ourselves lengthily in the examination of the other constitutional objections raised
by petitioners, some of which are rather flimsy.
We find no valid ground to sustain the contention that BP 22 impairs freedom of contract. The freedom
of contract which is constitutionally protected is freedom to enter into "lawful" contracts. Contracts
which contravene public policy are not lawful. 33 Besides, we must bear in mind that checks can not be
categorized as mere contracts. It is a commercial instrument which, in this modem day and age, has
become a convenient substitute for money; it forms part of the banking system and therefore not
entirely free from the regulatory power of the state.
Neither do we find substance in the claim that the statute in question denies equal protection of the
laws or is discriminatory, since it penalizes the drawer of the check, but not the payee. It is contended
that the payee is just as responsible for the crime as the drawer of the check, since without the
indispensable participation of the payee by his acceptance of the check there would be no crime. This
argument is tantamount to saying that, to give equal protection, the law should punish both the
swindler and the swindled. The petitioners' posture ignores the well-accepted meaning of the clause
"equal protection of the laws." The clause does not preclude classification of individuals, who may be
accorded different treatment under the law as long as the classification is no unreasonable or
arbitrary. 34
It is also suggested that BP 22 constitutes undue or improper delegation of legislative powers, on the
theory that the offense is not completed by the sole act of the maker or drawer but is made to depend
on the will of the payee. If the payee does not present the check to the bank for payment but instead
keeps it, there would be no crime. The logic of the argument stretches to absurdity the meaning of
"delegation of legislative power." What cannot be delegated is the power to legislate, or the power to
make laws. 35 which means, as applied to the present case, the power to define the offense sought to
be punished and to prescribe the penalty. By no stretch of logic or imagination can it be said that the
power to define the crime and prescribe the penalty therefor has been in any manner delegated to the
payee. Neither is there any provision in the statute that can be construed, no matter how remotely, as
undue delegation of executive power. The suggestion that the statute unlawfully delegates its
enforcement to the offended party is farfetched.
Lastly, the objection has been raised that Section 9 (2) of Article VII of the 1973 Constitution was
violated by the legislative body when it enacted BP 22 into law. This constitutional provision prohibits
the introduction of amendments to a bill during the Third Reading. It is claimed that during its Third
Reading, the bill which eventually became BP 22 was amended in that the text of the second paragraph
of Section 1 of the bill as adopted on Second Reading was altered or changed in the printed text of the
bill submitted for approval on Third Reading.
A careful review of the record of the proceedings of the Interim Batasan on this matter shows that,
indeed, there was some confusion among Batasan Members on what was the exact text of the
paragraph in question which the body approved on Second Reading. 36 Part of the confusion was due
apparently to the fact that during the deliberations on Second Reading (the amendment period),
amendments were proposed orally and approved by the body or accepted by the sponsor, hence, some
members might not have gotten the complete text of the provisions of the bill as amended and
approved on Second Reading. However, it is clear from the records that the text of the second
paragraph of Section 1 of BP 22 is the text which was actually approved by the body on Second Reading
on February 7, 1979, as reflected in the approved Minutes for that day. In any event, before the bin
was submitted for final approval on Third Reading, the Interim Batasan created a Special Committee to
investigate the matter, and the Committee in its report, which was approved by the entire body on
March 22, 1979, stated that "the clause in question was ... an authorized amendment of the bill and
the printed copy thereof reflects accurately the provision in question as approved on Second
Reading. 37 We therefore, find no merit in the petitioners' claim that in the enactment of BP 22 the
provisions of Section 9 (2) of Article VIII of the 1973 Constitution were violated.
WHEREFORE, judgment is rendered granting the petition in G.R. No. 75789 and setting aside the order
of the respondent Judge dated August 19, 1986. The petitions in G.R. Nos. 63419, 66839-42, 71654,
74524-25, 75122-49, 75812-13 and 75765-67 are hereby dismissed and the temporary restraining
order issued in G.R. Nos. 74524-25 is lifted. With costs against private petitioners.
EN BANC
G.R. No. 158793 June 8, 2006
JAMES MIRASOL, RICHARD SANTIAGO, and LUZON MOTORCYCLISTS FEDERATION, INC., Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLL REGULATORY BOARD, Respondents.
DECISION
CARPIO, J.:
This petition for review on certiorari1 seeks to reverse the Decision dated 10 March 2003 of the
Regional Trial Court, Branch 147, Makati City (RTC) in Civil Case No. 01-034, as well as the RTC’s Order
dated 16 June 2003 which denied petitioners’ Motion for Reconsideration. Petitioners assert that
Department of Public Works and Highways’ (DPWH) Department Order No. 74 (DO 74), Department
Order No. 215 (DO 215), and the Revised Rules and Regulations on Limited Access Facilities of the Toll
Regulatory Board (TRB) violate Republic Act No. 2000 (RA 2000) or the Limited Access Highway Act.
Petitioners also seek to declare Department Order No. 123 (DO 123) and Administrative Order No. 1
(AO 1)2 unconstitutional.
Antecedent Facts
The facts are not in dispute. As summarized by the Solicitor General, the facts are as follows:
1. On January 10, 2001, petitioners filed before the trial court a Petition for Declaratory Judgment with
Application for Temporary Restraining Order and Injunction docketed as Civil Case No. 01-034. The
petition sought the declaration of nullity of the following administrative issuances for being
inconsistent with the provisions of Republic Act 2000, entitled "Limited Access Highway Act" enacted
in 1957:
a. DPWH Administrative Order No. 1, Series of 1968;
b. DPWH Department Order No. 74, Series of 1993;
c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities promulgated in 199[8] by the DPWH
thru the Toll Regulatory Board (TRB).
2. Previously, pursuant to its mandate under R.A. 2000, DPWH issued on June 25, 1998 Department
Order (DO) No. 215 declaring the Manila-Cavite (Coastal Road) Toll Expressway as limited access
facilities.
3. Accordingly, petitioners filed an Amended Petition on February 8, 2001 wherein petitioners sought
the declaration of nullity of the aforesaid administrative issuances. Moreover, petitioners prayed for
the issuance of a temporary restraining order and/or preliminary injunction to prevent the
enforcement of the total ban on motorcycles along the entire breadth of North and South Luzon
Expressways and the Manila-Cavite (Coastal Road) Toll Expressway under DO 215.
4. On June 28, 2001, the trial court, thru then Presiding Judge Teofilo Guadiz, after due hearing, issued
an order granting petitioners’ application for preliminary injunction. On July 16, 2001, a writ of
preliminary injunction was issued by the trial court, conditioned upon petitioners’ filing of cash bond
in the amount of P100,000.00, which petitioners subsequently complied with.
5. On July 18, 2001, the DPWH acting thru the TRB, issued Department Order No. 123 allowing
motorcycles with engine displacement of 400 cubic centimeters inside limited access facilities (toll
ways).
6. Upon the assumption of Honorable Presiding Judge Ma. Cristina Cornejo, both the petitioners and
respondents were required to file their respective Memoranda. Petitioners likewise filed [their]
Supplemental Memorandum. Thereafter, the case was deemed submitted for decision.
7. Consequently, on March 10, 2003, the trial court issued the assailed decision dismissing the petition
but declaring invalid DO 123. Petitioners moved for a reconsideration of the dismissal of their petition;
but it was denied by the trial court in its Order dated June 16, 2003.3
Hence, this petition.
The RTC’s Ruling
The dispositive portion of the RTC’s Decision dated 10 March 2003 reads:
WHEREFORE, [t]he Petition is denied/dismissed insofar as petitioners seek to declare null and void ab
initio DPWH Department Order No. 74, Series of 1993, Administrative Order No. 1, and Art. II, Sec. 3(a)
of the Revised Rules on Limited Access Facilities promulgated by the DPWH thru the TRB, the presumed
validity thereof not having been overcome; but the petition is granted insofar as DPWH Department
Order No. 123 is concerned, declaring the same to be invalid for being violative of the equal protection
clause of the Constitution.
SO ORDERED.4
The Issues
Petitioners seek a reversal and raise the following issues for resolution:
1. WHETHER THE RTC’S DECISION IS ALREADY BARRED BY RES JUDICATA;
2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONS CONTRAVENE RA 2000; AND
3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL.5
The Ruling of the Court
The petition is partly meritorious.
Whether the RTC’s Decision Dismissing Petitioners’ Case is Barred by Res Judicata
Petitioners rely on the RTC’s Order dated 28 June 2001, which granted their prayer for a writ of
preliminary injunction. Since respondents did not appeal from that Order, petitioners argue that the
Order became "a final judgment" on the issues. Petitioners conclude that the RTC erred when it
subsequently dismissed their petition in its Decision dated 10 March 2003.
Petitioners are mistaken. As the RTC correctly stated, the Order dated 28 June 2001 was not an
adjudication on the merits of the case that would trigger res judicata. A preliminary injunction does not
serve as a final determination of the issues. It is a provisional remedy, which merely serves to preserve
the status quo until the court could hear the merits of the case.6 Thus, Section 9 of Rule 58 of the 1997
Rules of Civil Procedure requires the issuance of a final injunction to confirm the preliminary injunction
should the court during trial determine that the acts complained of deserve to be permanently
enjoined. A preliminary injunction is a mere adjunct, an ancillary remedy which exists only as an
incident of the main proceeding.7
Validity of DO 74, DO 215 and the TRB Regulations
Petitioners claim that DO 74,8 DO 215,9 and the TRB’s Rules and Regulations issued under them violate
the provisions of RA 2000. They contend that the two issuances unduly expanded the power of the
DPWH in Section 4 of RA 2000 to regulate toll ways. Petitioners assert that the DPWH’s regulatory
authority is limited to acts like redesigning curbings or central dividing sections. They claim that the
DPWH is only allowed to re-design the physical structure of toll ways, and not to determine "who or
what can be qualified as toll way users."10
Section 4 of RA 200011 reads:
SEC. 4. Design of limited access facility. — The Department of Public Works and Communications is
authorized to so design any limited access facility and to so regulate, restrict, or prohibit access as to
best serve the traffic for which such facility is intended; and its determination of such design shall be
final. In this connection, it is authorized to divide and separate any limited access facility into separate
roadways by the construction of raised curbings, central dividing sections, or other physical
separations, or by designating such separate roadways by signs, markers, stripes, and the proper lane
for such traffic by appropriate signs, markers, stripes and other devices. No person, shall have any right
of ingress or egress to, from or across limited access facilities to or from abutting lands, except at such
designated points at which access may be permitted, upon such terms and conditions as may be
specified from time to time. (Emphasis supplied)
On 19 February 1968, Secretary Antonio V. Raquiza of the Department of Public Works and
Communicationsissued AO 1, which, among others, prohibited motorcycles on limited access
highways. The pertinent provisions of AO 1 read:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary [of] Public Works and Communications under Section
3 of R.A. 2000, otherwise known as the Limited Access Highway Act, the following rules and regulations
governing limited access highways are hereby promulgated for the guidance of all concerned:
xxxx
Section 3 – On limited access highways, it is unlawful for any person or group of persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);
x x x x12 (Emphasis supplied)
On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public Works and
Highways issued DO 74:
SUBJECT: Declaration of the North Luzon Expressway from Balintawak to Tabang and the South Luzon
Expressway from Nichols to Alabang as Limited Access Facilities
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined as "a highway or
street especially designed for through traffic, and over, from, or to which owners or occupants of
abutting land or other persons have no right or easement or only a limited right or easement of access,
light, air or view by reason of the fact that their proper[t]y abuts upon such limited access facility or for
any other reason. Such highways or streets may be parkways, from which trucks, buses, and other
commerical [sic] vehicles shall be excluded; or they may be free ways open to use by all customary
forms of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and Communications (now
Department of Public Works and Highways) "to plan, designate, establish, regulate, vacate, alter,
improve, maintain, and provide limited access facilities for public use wherever it is of the opinion that
traffic conditions, present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public Works and Highways
hereby designates and declares the Balintawak to Tabang Sections of the North Luzon Expressway, and
the Nichols to Alabang Sections of the South Luzon Expressways, to be LIMITED ACCESS
HIGHWAYS/FACILITIES subject to such rules and regulations that may be imposed by the DPWH thru
the Toll Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is hereby ordered, after
consultation with the TRB and in coordination with the Philippine National Police (PNP), to close all
illegal openings along the said Limited Access Highways/Facilities. In this connection, the NCR is
instructed to organize its own enforcement and security group for the purpose of assuring the
continued closure of the right-of-way fences and the implementation of the rules and regulations that
may be imposed by the DPWH thru the TRB.
This Order shall take effect immediately.13
On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO 215:
SUBJECT: Declaration of the R-1 Expressway, from Seaside drive to Zapote, C-5 Link Expressway, from
Zapote to Noveleta, of the Manila Cavite Toll Expressway as Limited Access Facility.
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined as "a highway or
street especially designed for through traffic, and over, from, or to which owners or occupants of
abutting land or other persons have no right or easement or only a limited right or easement of access,
light, air or view by reason of the fact that their property abuts upon such limited access facility or for
any other reason. Such highways or streets may be parkways, from which trucks, buses, and other
commercial vehicles shall be excluded; or they may be free ways open to use by all customary forms of
street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and Communications (now
Department of Public Works and Highways) "to plan, designate, establish, regulate, vacate, alter,
improve, maintain, and provide limited access facilities for public use wherever it is of the opinion that
traffic conditions, present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public Works and Highways
hereby designates and declares the R-1 Expressway, C-5 Link Expressway and the R-1 Extension
Expressway Sections of the Manila Cavite Toll Expressway to be LIMITED ACCESS HIGHWAYS/FACILITIES
subject to such rules and regulations that may be imposed by the DPWH thru the Toll Regulatory Board
(TRB).
In view thereof, the National Capital Region (NCR) of this Department is hereby ordered, after
consultation with the TRB and in coordination with the Philippine National Police (PNP), to close all
illegal openings along the said Limited Access Highways/Facilities. In this connection, the NCR is
instructed to organize its own enforcement and security group for the purpose of assuring the
continued closure of the right-of-way fences and the implementation of the rules and regulations that
may be imposed by the DPWH thru the TRB.
This Order shall take effect immediately.14
The RTC held that Section 4 of RA 2000 expressly authorized the DPWH to design limited access facilities
and to regulate, restrict, or prohibit access as to serve the traffic for which such facilities are intended.
According to the RTC, such authority to regulate, restrict, or prohibit logically includes the
determination of who and what can and cannot be permitted entry or access into the limited access
facilities. Thus, the RTC concluded that AO 1, DO 74, and the Revised Rules and Regulations on Limited
Access Facilities, which ban motorcycles’ entry or access to the limited access facilities, are not
inconsistent with RA 2000.
RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22 June 1957. Section
4 of RA 2000 provides that "[t]he Department of Public Works and Communications is authorized to
so design any limited access facility and to so regulate, restrict, or prohibit access as to best serve the
traffic for which such facility is intended." The RTC construed this authorization to regulate, restrict, or
prohibit access to limited access facilities to apply to the Department of Public Works and Highways
(DPWH).
The RTC’s ruling is based on a wrong premise. The RTC assumed that the DPWH derived its authority
from its predecessor, the Department of Public Works and Communications, which is expressly
authorized to regulate, restrict, or prohibit access to limited access facilities under Section 4 of RA 2000.
However, such assumption fails to consider the evolution of the Department of Public Works and
Communications.
Under Act No. 2711, otherwise known as the Revised Administrative Code, approved on 10 March
1917, there were only seven executive departments, namely: the Department of the Interior, the
Department of Finance, the Department of Justice, the Department of Agriculture and Commerce,
the Department of Public Works and Communications, the Department of Public Instruction, and the
Department of Labor.15 On 20 June 1964, Republic Act No. 413616 created the Land Transportation
Commission under the Department of Public Works and Communications. Later, the Department of
Public Works and Communications was restructured into the Department of Public Works,
Transportation and Communications.
On 16 May 1974, Presidential Decree No. 458 (PD 458) separated the Bureau of Public Highways from
the Department of Public Works, Transportation and Communications and created it as a department
to be known as Department of Public Highways. Under Section 3 of PD 458, the Department of Public
Highways is "responsible for developing and implementing programs on the construction and
maintenance of roads, bridges and airport runways."
With the amendment of the 1973 Philippine Constitution in 1976, resulting in the shift in the form of
government, national agencies were renamed from Departments to Ministries. Thus, the Department
of Public Works, Transportation and Communications became the Ministry of Public Works,
Transportation and Communications.
On 23 July 1979, then President Ferdinand E. Marcos issued Executive Order No. 546 (EO 546), creating
a Ministry of Public Works and a Ministry of Transportation and Communications.17 Under Section 1
of EO 546, the Ministry of Public Works assumed the public works functions of the Ministry of Public
Works, Transportation and Communications. The functions of the Ministry of Public Works were the
"construction, maintenance and repair of port works, harbor facilities, lighthouses, navigational aids,
shore protection works, airport buildings and associated facilities, public buildings and school buildings,
monuments and other related structures, as well as undertaking harbor and river dredging works,
reclamation of foreshore and swampland areas, water supply, and flood control and drainage works." 18
On the other hand, the Ministry of Transportation and Communications became the "primary policy,
planning, programming, coordinating, implementing, regulating and administrative entity of the
executive branch of the government in the promotion, development, and regulation of a dependable
and coordinated network of transportation and communication systems." 19 The functions of
the Ministry of Transportation and Communications were:
a. Coordinate and supervise all activities of the Ministry relative to transportation and communications;
b. Formulate and recommend national policies and guidelines for the preparation and
implementation of an integrated and comprehensive transportation and communications system at
the national, regional and local levels;
c. Establish and administer comprehensive and integrated programs for transportation and
communication, and for this purpose, may call on any agency, corporation, or organization, whether
government or private, whose development programs include transportation and communications as
an integral part to participate and assist in the preparation and implementation of such programs;
d. Regulate, whenever necessary, activities relative to transportation and communications and
prescribe and collect fees in the exercise of such power;
e. Assess, review and provide direction to transportation and communications research and
development programs of the government in coordination with other institutions concerned; and
f. Perform such other functions as may be necessary to carry into effect the provisions of this Executive
Order.20 (Emphasis supplied)
On 27 July 1981, then President Marcos issued Executive Order No. 710 (EO 710), which merged the
Ministry of Public Works and the Ministry of Public Highways for "greater simplicity and economy in
operations."21 The restructured agency became known as the Ministry of Public Works and Highways.
Under Section 1 of EO 710 the functions of the Ministry of Public Works and the Ministry of Public
Highways22 were transferred to the Ministry of Public Works and Highways.
Upon the ratification of the 1987 Constitution in February 1987, the former Ministry of Public Works
and Highways became the Department of Public Works and Highways (DPWH) and the former
Ministry of Transportation and Communications became the Department of Transportation and
Communications (DOTC).
DPWH issued DO 74 and DO 215 declaring certain expressways as limited access facilities on 5 April
1993 and 25 June 1998, respectively. Later, the TRB, under the DPWH, issued the Revised Rules and
Regulations on Limited Access Facilities. However, on 23 July 1979, long before these department
orders and regulations were issued, the Ministry of Public Works, Transportation and
Communications was divided into two agencies – the Ministry of Public Works and the Ministry of
Transportation and Communications – by virtue of EO 546. The question is, which of these two
agencies is now authorized to regulate, restrict, or prohibit access to limited access facilities? 23
Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed the public
works functions of the Ministry of Public Works, Transportation and Communications. On the other
hand, among the functions of the Ministry of Transportation and Communications (now Department
of Transportation and Communications [DOTC]) were to (1) formulate and recommend national
policies and guidelines for the preparation and implementation of an integrated and comprehensive
transportation and communications systems at the national, regional, and local levels; and (2) regulate,
whenever necessary, activities relative to transportation and communications and prescribe and
collect fees in the exercise of such power. Clearly, under EO 546, it is the DOTC, not the DPWH, which
has authority to regulate, restrict, or prohibit access to limited access facilities.
Even under Executive Order No. 125 (EO 125)24 and Executive Order No. 125-A (EO 125-A),25 which
further reorganized the DOTC, the authority to administer and enforce all laws, rules and regulations
relative to transportation is clearly with the DOTC.26
Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare certain expressways
as limited access facilities. Under the law, it is the DOTC which is authorized to administer and enforce
all laws, rules and regulations in the field of transportation and to regulate related activities.
Since the DPWH has no authority to regulate activities relative to transportation, the TRB 27 cannot
derive its power from the DPWH to issue regulations governing limited access facilities. The DPWH
cannot delegate a power or function which it does not possess in the first place. Since DO 74 and DO
215 are void, it follows that the rules implementing them are likewise void.
Whether AO 1 and DO 123 are Unconstitutional
DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July 2001. DO 123 reads in part:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary of Public Works and Highways under Section 3 of
R.A. 2000, otherwise known as the Limited Access Highway Act, the following revised rules and
regulations governing limited access highways are hereby promulgated for the guidance of all
concerned:
1. Administrative Order No. 1 dated February 19, 1968, issued by the Secretary of the then Department
of Public Works and Communications, is hereby amended by deleting the word "motorcycles"
mentioned in Section 3(h) thereof. Therefore, motorcycles are hereby allowed to operate inside the
toll roads and limited access highways, subject to the following:
a. Motorcycles shall have an engine displacement of at least 400 cubic centimeters (cc) provided that:
x x x x28 (Emphasis supplied)
The RTC’s Decision dated 10 March 2003 declared DO 123 unconstitutional on the ground that it
violates the equal protection clause by allowing only motorcycles with at least 400 cubic centimeters
engine displacement to use the toll ways. The RTC reasoned that the creation of a distinction within
the class of motorcycles was not based on real differences.
We need not pass upon the constitutionality of the classification of motorcycles under DO 123. As
previously discussed, the DPWH has no authority to regulate limited access highways since EO 546 has
devolved this function to the DOTC. Thus, DO 123 is void for want of authority of the DPWH to
promulgate it.
On the other hand, the assailed portion of AO 1 states:
Section 3. On limited access highways, it is unlawful for any person or group of persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);
xxxx
Petitioners assail the DPWH’s failure to provide "scientific" and "objective" data on the danger of
having motorcycles plying our highways. They attack this exercise of police power as baseless and
unwarranted. Petitioners belabor the fact that there are studies that provide proof that motorcycles
are safe modes of transport. They also claim that AO 1 introduces an unreasonable classification by
singling-out motorcycles from other motorized modes of transport. Finally, petitioners argue that AO
1 violates their right to travel.
Petitioners’ arguments do not convince us.
We emphasize that the Secretary of the Department of Public Works and Communications issued AO
1 on 19 February 1968.
Section 3 of RA 200029 authorized the issuance of the guidelines. In contrast, DPWH issued DO 74, DO
215 and DO 123 after EO 546 devolved to the DOTC the authority to regulate limited access highways.
We now discuss the constitutionality of AO 1. Administrative issuances have the force and effect of
law.30 They benefit from the same presumption of validity and constitutionality enjoyed by
statutes.31 These two precepts place a heavy burden upon any party assailing governmental
regulations. The burden of proving unconstitutionality rests on such party.32 The burden becomes
heavier when the police power is at issue.
The use of public highways by motor vehicles is subject to regulation as an exercise of the police power
of the state.33 The police power is far-reaching in scope and is the "most essential, insistent and
illimitable" of all government powers.34 The tendency is to extend rather than to restrict the use of
police power. The sole standard in measuring its exercise is reasonableness.35 What is "reasonable" is
not subject to exact definition or scientific formulation. No all-embracing test of reasonableness
exists,36 for its determination rests upon human judgment applied to the facts and circumstances of
each particular case.37
We find that AO 1 does not impose unreasonable restrictions. It merely outlines several precautionary
measures, to which toll way users must adhere. These rules were designed to ensure public safety and
the uninhibited flow of traffic within limited access facilities. They cover several subjects, from what
lanes should be used by a certain vehicle, to maximum vehicle height. The prohibition of certain types
of vehicles is but one of these. None of these rules violates reason. The purpose of these rules and the
logic behind them are quite evident. A toll way is not an ordinary road. The special purpose for which
a toll way is constructed necessitates the imposition of guidelines in the manner of its use and
operation. Inevitably, such rules will restrict certain rights. But the mere fact that certain rights are
restricted does not invalidate the rules.
Consider Section 3(g) of AO 1, which prohibits the conduct of rallies inside toll ways. 38 The regulation
affects the right to peaceably assemble. The exercise of police power involves restriction, restriction
being implicit in the power itself. Thus, the test of constitutionality of a police power measure is limited
to an inquiry on whether the restriction imposed on constitutional rights is reasonable, and not
whether it imposes a restriction on those rights.
None of the rules outlined in AO 1 strikes us as arbitrary and capricious. The DPWH, through the
Solicitor General, maintains that the toll ways were not designed to accommodate motorcycles and
that their presence in the toll ways will compromise safety and traffic considerations. The DPWH points
out that the same study the petitioners rely on cites that the inability of other drivers to detect
motorcycles is the predominant cause of accidents.39 Arguably, prohibiting the use of motorcycles in
toll ways may not be the "best" measure to ensure the safety and comfort of those who ply the toll
ways.
However, the means by which the government chooses to act is not judged in terms of what is "best,"
rather, on simply whether the act is reasonable. The validity of a police power measure does not
depend upon the absolute assurance that the purpose desired can in fact be probably fully
accomplished, or upon the certainty that it will best serve the purpose intended. 40 Reason, not
scientific exactitude, is the measure of the validity of the governmental regulation. Arguments based
on what is "best" are arguments reserved for the Legislature’s discussion. Judicial intervention in such
matters will only be warranted if the assailed regulation is patently whimsical. We do not find the
situation in this case to be so.
Neither do we find AO 1 oppressive. Petitioners are not being deprived of their right to use the limited
access facility. They are merely being required, just like the rest of the public, to adhere to the rules on
how to use the facility. AO 1 does not infringe upon petitioners’ right to travel but merely bars
motorcycles, bicycles, tricycles, pedicabs, and any non-
motorized vehicles as the mode of traveling along limited access highways. 41 Several cheap, accessible
and practical alternative modes of transport are open to petitioners. There is nothing oppressive in
being required to take a bus or drive a car instead of one’s scooter, bicycle, calesa, or motorcycle upon
using a toll way.
Petitioners’ reliance on the studies they gathered is misplaced. Police power does not rely upon the
existence of definitive studies to support its use. Indeed, no requirement exists that the exercise of
police power must first be conclusively justified by research. The yardstick has always been simply
whether the government’s act is reasonable and not oppressive. 42 The use of "reason" in this sense is
simply meant to guard against arbitrary and capricious government action. Scientific certainty and
conclusiveness, though desirable, may not be demanded in every situation. Otherwise, no government
will be able to act in situations demanding the exercise of its residual powers because it will be tied up
conducting studies.
A police power measure may be assailed upon proof that it unduly violates constitutional limitations
like due process and equal protection of the law.43 Petitioners’ attempt to seek redress from the
motorcycle ban under the aegis of equal protection must fail. Petitioners’ contention that AO 1
unreasonably singles out motorcycles is specious. To begin with, classification by itself is not
prohibited.44
A classification can only be assailed if it is deemed invidious, that is, it is not based on real or substantial
differences. As explained by Chief Justice Fernando in Bautista v. Juinio:45
x x x To assure that the general welfare be promoted, which is the end of law, a regulatory measure
may cut into the rights to liberty and property. Those adversely affected may under such circumstances
invoked the equal protection clause only if they can show that the governmental act assailed, far from
being inspired by the attainment of the common weal was prompted by the spirit of hostility, or at the
very least, discrimination that finds no support in reason. It suffices then that the laws operate equally
and uniformly on all persons under similar circumstances or that all persons must be treated in the
same manner, the conditions not being different, both in the privileges conferred and the liabilities
imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection
and security shall be given to every person under circumstances, which if not identical is analogous. If
law be looked upon in terms of burden or charges, those that fall within a class should be treated in
the same fashion, whatever restrictions cast on some in the group equally binding the rest.
We find that it is neither warranted nor reasonable for petitioners to say that the only justifiable
classification among modes of transport is the motorized against the non-motorized. Not all motorized
vehicles are created equal. A 16-wheeler truck is substantially different from other light vehicles. The
first may be denied access to some roads where the latter are free to drive. Old vehicles may be
reasonably differentiated from newer models.46 We find that real and substantial differences exist
between a motorcycle and other forms of transport sufficient to justify its classification among those
prohibited from plying the toll ways. Amongst all types of motorized transport, it is obvious, even to a
child, that a motorcycle is quite different from a car, a bus or a truck. The most obvious and troubling
difference would be that a two-wheeled vehicle is less stable and more easily overturned than a four-
wheeled vehicle.
A classification based on practical convenience and common knowledge is not unconstitutional simply
because it may lack purely theoretical or scientific uniformity. Moreover, we take note that the
Philippines is home to a host of unique motorized modes of transport ranging from modified hand-
carts (kuliglig) to bicycle "sidecars" outfitted with a motor. To follow petitioners’ argument to its logical
conclusion would open up toll ways to all these contraptions. Both safety and traffic considerations
militate against any ruling that would bring about such a nightmare.
Petitioners complain that the prohibition on the use of motorcycles in toll ways unduly deprive them
of their right to travel.
We are not persuaded.
A toll way is not an ordinary road. As a facility designed to promote the fastest access to certain
destinations, its use, operation, and maintenance require close regulation. Public interest and safety
require the imposition of certain restrictions on toll ways that do not apply to ordinary roads. As a
special kind of road, it is but reasonable that not all forms of transport could use it.
The right to travel does not mean the right to choose any vehicle in traversing a toll way. The right to
travel refers to the right to move from one place to another. Petitioners can traverse the toll way any
time they choose using private or public four-wheeled vehicles. Petitioners are not denied the right to
move from Point A to Point B along the toll way. Petitioners are free to access the toll way, much as
the rest of the public can. The mode by which petitioners wish to travel pertains to the manner of using
the toll way, a subject that can be validly limited by regulation.
Petitioners themselves admit that alternative routes are available to them. Their complaint is that these
routes are not the safest and most convenient. Even if their claim is true, it hardly qualifies as an undue
curtailment of their freedom of movement and travel. The right to travel does not entitle a person to
the best form of transport or to the most convenient route to his destination. The obstructions found
in normal streets, which petitioners complain of (i.e., potholes, manholes, construction barriers, etc.),
are not suffered by them alone.

Finally, petitioners assert that their possession of a driver’s license from the Land Transportation Office
(LTO) and the fact that their vehicles are registered with that office entitle them to use all kinds of roads
in the country. Again, petitioners are mistaken. There exists no absolute right to drive. On the contrary, Republic of the Philippines
this privilege, is heavily regulated. Only a qualified group is allowed to drive motor vehicles: those who SUPREME COURT
pass the tests administered by the LTO. A driver’s license issued by the LTO merely allows one to drive Manila
a particular mode of transport. It is not a license to drive or operate any form of transportation on any
type of road. Vehicle registration in the LTO on the other hand merely signifies the roadworthiness of EN BANC
a vehicle. This does not preclude the government from prescribing which roads are accessible to certain
G.R. No. L-54958 September 2, 1983
vehicles.
ANGLO-FIL TRADING CORPORATION, ADUANA STEVEDORING CORPORATION, ANDA STEVEDORING
WHEREFORE, we PARTLY GRANT the petition. We MODIFY the Decision dated 10 March 2003 of the
CORPORATION, BEN PAZ PORT SERVICE, INC., MANILA STEVEDORING CORPORATION, WATERFRONT
Regional Trial Court, Branch 147, Makati City and its Order dated 16 June 2003 in Civil Case No. 01-034.
STEVEDORING AND ARRASTRE SERVICES, INC., VANGUARD STEVEDORING AND ARRASTRE SERVICES,
We declare VOID Department Order Nos. 74, 215, and 123 of the Department of Public Works and
INC., and LUVIMIN STEVEDORING/ARRASTRE & DEVELOPMENT CORPORATION, petitioners,
Highways, and the Revised Rules and Regulations on Limited Access Facilities of the Toll Regulatory
vs.
Board. We declare VALID Administrative Order No. 1 of the Department of Public Works and
HON. ALFREDO LAZARO, in his capacity as Presiding Judge of Branch XXV, of the Court of First
Communications.
Instance of Manila, PHILIPPINE PORTS AUTHORITY, COL. EUSTAQUIO S. BACLIG, JR., CDR. PRIMITIVO
SO ORDERED. SOLIS, JR., and OCEAN TERMINAL SERVICES, INC., respondents.

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

G.R. No. L-54966

PHILIPPINE INTEGRATED PORT SERVICES, INC., petitioner,

vs.
THE HONORABLE ALFREDO M. LAZARO, Judge of the Court of First Instance of Manila, Branch XXV,
PHILIPPINE PORTS AUTHORITY, COL. EUSTAQUIO S. BACLIG, JR., CDR. PRIMITIVO S. SOLIS, JR., and
OCEAN TERMINAL SERVICES, INC., respondents.

GUTIERREZ, JR., J.:

These two petitioners foe certiorari seek to annul the order of the Court of First Instance of Manila
issued ex-parte, lifting the restraining orders it had previously issued. The setting aside of the
restraining orders enabled the implementation of the Management Contract executed by and between
respondents, providing for respondent Ocean Terminal Services, Inc. as the exclusive stevedoring
contractor at the South Harbor, Port of Manila.
Involved in these two petitions is the operation of stevedoring work in the South Harbor of the Port of
Manila. Stevedoring, as the term is understood in the port business, consists of the handling of cargo
from the hold of the ship to the dock, in case of pier-side unloading, or to a barge, in case of unloading
at sea. The loading on the ship of outgoing cargo is also part of stevedoring work. Stevedoring charges
at rates approved by the Government are assessed and collected for the services.
The Philippines Ports Authority (PPA), the government agency charged with the management and
control of all ports, was created by Presidential Decree No. 505, promulgated on July 11, 1974, later
superseded by Presidential Decree No. 857 dated December 23, 1975. The PPA’s function is to carry
out an integrated program for the planning, development, financing, and operation of ports and port
districts throughout the country. Among other things, the powers, duties, and jurisdiction of the Bureau
of Customs concerning arrastre operations were transferred to and vested in the PPA.
The Philippine Integrated Port Services, Inc., (PIPSI), petitioner in G.R. No. 54966, is a stevedoring
operator at the Manila South Harbor. Anglo-Fil Trading Corporation, Aduana Stevedoring Corporation,
Anda Stevedoring Corporation, Ben Paz Port Service, Inc., Manila Stevedoring and Arrastre Services,
Inc., (Anglo-Fil, et al.,) petitioners in G.R. No. 54958, are stevedoring and arrastre operators and
contractors, likewise at Manila South Harbor, Port of Manila. Anglo-Fil, et al., are members of the
Philippine Association of Stevedoring Operators and Contractors, Inc. (PASOC).
Prior to the present controversy which arose as a result of the actions of the PPA, twenty-three (23)
contractors competed at the South Harbor for the performance of stevedoring work. The licenses of
these contractors had long expired when the PPA took over the control and management of ports but
they continued to operate afterwards on the strength of temporary permits and hold-over authorities
issued by PPA.
On May 4, 1976, the Board of Directors of PPA passed Resolution No. 10, approving and adopting and
adopting a set of policies on Port Administration, Management and Operation. The PPA adopted as its
own the own the Bureau of Customs’ policy of placing on only one organization the responsibility for
the operation of arrastre and stevedoring services in one port.
On April 11, 1980, Presidential Ferdinand E. Marcos issued Letter of Instruction No. 1005-A which
among other things, directed PPA;
To expeditiously evaluate all recognized cargo-handling contractors and port-related service operators
doing business in all Port Districts in the country under such criteria as PPA may set and to determine
the qualified contractor or operator under said criteria in order to ensure effective utilization of port
facilities, prevent pilferage and/or pinpoint responsibility for its and provide optimum services to major
ports vital to the country’s trade and economy.
This was followed by the President’s memorandum to respondent Bacling dated April 18, 1980,
directing submission of a report on the integrated of the stevedoring operations in Manila South Harbor
and emphasizing the need for such integration as well as the strengthening of the PPA in order to
remedy the problems therein. In compliance therewith, PPA made a study evaluation of the arrastre
and stevedoring industry in the ports where integration had not yet been achieved. A special
committee was created on April 25, 1980 to make a final evaluation of existing operators in the South
Harbor and to select the most qualified among them.
On April 28, 1980, the committee submitted its report recommending the award of an exclusive
contract for stevedoring services in the South Harbor to respondent Ocean Terminal Services, Inc.
(OTSI) after finding it the best qualified among the existing contractors. The committee report and
recommendation were indorsed by respondent Primitivo Solis, Jr., Port Manager of Manila, to
respondent Baclig on April 30, 1980. On May 14, 1980, the latter approved the recommendation.
In accordance with the President’s memorandum dated April 18, 1980, PPA submitted the committee
report to him. On May 24, 1980, the President approved the recommendation to award an exclusive
management contract to OTSI.
On June 27, 1980, PPA and OTSI entered into a management contract which provided, among others,
for a five-year exclusive operation by OTSI of stevedoring services in the South Harbor, renewable for
another five (5) years. The contract set the commencement of the exclusive operation by OTSI upon
proper determination by PPA which shall not be earlier that two (2) months from the approval of the
contract by the Board of Directors of the PPA. The latter gave its approval on June 27, 1980.
On July 23, 1980, petitioner PIPSI instituted an action against PPA and OTSI for the nullification of the
contract between the two, the annulment of the 10% of gross stevedoring revenue being collected by
PPA, and injunction with preliminary injunction. The case was docketed as Civil Case No. 133477 in the
Court of First Instance of Manila, provided over by respondent Judge Alfredo Lazaro. On July 29, 1980,
the respondent court issued a restraining order ex-parte, enjoining respondents PPA and OTSI from
implementing the exclusive contract of stevedoring between them.
On August 21, 1980, with leave of court, petitioners, Anglo-Fil, et al., filed their complaint in
intervention. The motion was granted and on August 22, 1980, respondent court issued another ex-
parte restraining order in the case to include the petitioners Anglo-Fil et al., under the benefits of such
order.
On August 30, 1980, PPA filed an urgent motion to lift the restraining orders "in view of their long delay
in the resolution of the injunction incident and the countervailing public interest involved." On
September 1, 1980, respondent Judge issued an order, which reads:
"AS PRAYED FOR, the restraining orders issued by the this Court on July 29, 1980 and August 20, 1980,
are hereby dissolved, lifted, and set aside without prejudice to the Court’s resolution on the propriety
of issuing the writ of preliminary injunction prayed for by the petitioners."
On September 5, 1980, PPA sent a letter to the General Manager of PIPSI informing him that due to
the lifting of the temporary restraining order, it was withdrawing PIPSI’s hold-over authority to operate
or provide stevedoring services at South Harbor effective September 7, 1980.
Petitioners Anglo-Fil, et al., and PIPSI, therefore, filed the present petitions for certiorari with
preliminary injunction alleging that the lifting of the retraining orders ex-parte by respondent Judge
was clearly affected with grave abuse of discretion amounting to lack of jurisdiction. They also applied
for the issuance in the meantime of a restraining order.
On September 9, 1980, we ordered the consolidation of the two cases and on August 12, 1980, heard
the petitioners’ motions for a restraining order.
On September 15, 1980, the respondent court issued an order in Civil Case No. 133477 denying the
application of petitioners for a writ of preliminary injunction and affirming its order of September 1,
1980 lifting the temporary restraining orders issued in the case.
On the same day, the Katipunan ng mga Manggagawa sa Daungan (KAMADA), a labor federation and
its thirteen (13) member labor organizations filed a petition to intervene in the consolidated cases.
According to KAMADA, its members would lose their jobs if the contract was implemented. It also
alleged that the collective bargaining contract between OTSI and PWUP would be prejudicial to workers
because KAMADA members received greater benefits from the ousted contractors;
On September 29, 1980, PIPSI filed a supplemental petition to annul the order of the respondent judge
denying the application for preliminary injunction and affirming the orders issued on July 29 and August
22, 1980.1âwphi1
On October 14, 1980, PPA filed its comment with opposition to preliminary injunction stating that the
lifting of the restraining orders by respondent judge was intended to preserve the status quo pending
resolution of the preliminary injunction; that said orders were issued without hearing or bond,
therefore, the dissolution was proper considering that it had been in force for one month and an early
resolution of the motion for injunction was not in sight, and that in dissolving an injunction already
issued, the court cannot be considered as having acted without jurisdiction or in excess thereof even if
dissolution had been made without previous notice to the adverse party and without a hearing.
Furthermore, it argued that when the purpose of an administrative determination is to decide whether
a right or privilege which an applicant does not possess shall be granted to him or withheld in the
exercise of a discretion vested by statute, notice and hearing are not necessary. It also added that the
policy of integration in the award by PPA to OTSI is impressed with public interest while what is involved
as far as petitioners were concerned was merely their alleged right to operate stevedoring services, a
property right the denial of which could easily be restored in the event the respondent court decided
that petitioners are entitled to it.
In their consolidated reply, Anglo-Fil, et al., argued that the temporary order in their favor was not
issued ex-parte for the following reasons: a) it was issued when PIPSI and PPA were already conducting
hearings on the petition for preliminary injunction; b) it was announced in open court; and c) PPA did
not object to such issuance. Likewise, they argued that although a permit to operate is a privilege, its
withdrawal must comply with due process of law just like the practice of law, medicine, or accountancy,
and that not only property rights are involved but their very livelihood, their right to live.
On October 21, 1980, we issued a resolution granting the temporary mandatory restraining order
"effective immediately ordering respondents to allow the workers represented by said petitioner-
intervenors to render the stevedoring services performed by them on foreign vessels in the Manila
South Harbor before the execution of the exclusive stevedoring contract of June 27, 1980 until further
orders of the Court, the order of respondent Judge, dated September 1 and 15, 1980 as well as the
implementing letter of Philippine Ports Authority of September 5, 1980 to the contrary
notwithstanding."
On October 24, 1980, PPA issued Memorandum Order No. 23 providing for guidelines in implementing
the temporary mandatory restraining order of the Supreme Court dated October 21, 1980, to wit:
xxx xxx xxx
(1.) The Office of the Harbor Master shall determine which union has serviced a particular vessel for
the period from January 1, 1980 to June 26, 1980. The number of services performed by a particular
union for a given vessel shall be quantified for the said period after which each union shall be identified
whether they are affiliated with PWUP or KAMADA.
(2.) The most number of times that a union has serviced a particular vessel with its affiliation properly
considered shall continue to service said vessel for its incoming calls or arrivals.
(3.) If there is a tie in the number of services performed by both PWUP and KAMADA affiliated unions,
the last union that serviced said vessel shall be allowed to continue servicing the same on all its
incoming calls or arrivals.
(4.) Once the union has been properly identified during the berthing meeting, the Harbor Master shall
inform Ocean Terminal Services, Inc. accordingly and shall be authorized to negotiate with the union
or the gang leader concerned on the number of gangs as may be required by the vessel or its agent.
(5.) All unions in this order shall refer only to South Harbor stevedoring union.
(6.) KAMADA shall have the duty and responsibility to certify that the stevedores deployed in any given
vessel allowed for their work are bona fide members of their group and that they were the same
stevedores who serviced assigned vessel prior to the stevedoring services integration.
On November 7 and 10, 1980 OTSI and PPA filed their separate answers to KAMADA’s petition in
intervention. They assured this Court that none of the legitimate stevedores who had joined the
KAMADA would be displaced from work provided he joined PWUP. Written guarantees of this
assurance were separately submitted to this Court by both OTSI and PWUP. OTSI further alleged in its
answer that, contrary to the claim of KAMADA, the CBA signed by OTSI with PWUP represented the
best of employment ever offered to the stevedores in the South Harbor.
On November 13, 1980, Anglo-Fil, et al., filed an urgent motion to cite PPA and OTSI in contempt on
the following grounds: 1) issuance of PPA-POM Memorandum No. 23, series of 1980; 2) letter of
October 29, 1980 of PPA to Anglo-Fil, et al., denying a "non-existing" request for permission to operate
by the latter; and 3) refusal of PPA authorities to issue gate passes to KAMADA-affiliated stevedores to
be used and employed by Anglo-Fil, et al., in their resumption of work, pursuant to the Supreme Court
order of October 21, 1980.
On November 20, 1980, PPA filed a motion to lift the temporary mandatory restraining order but the
same was denied by this Court.
On November 26, 1980, an urgent motion for clarification of the resolution of October 21, 1980 was
filed by KAMADA seeking clarification as to which company its workers should work for, alleging that
after Antranco Stevedores Union (Antranco) a KAMADA member, had received a letter from OTSI to
supply the necessary stevedores gang to service the S/S "Success", Anglo-Fil Trading Corporation
prohibited its employees who are members of Antranco from working for OTSI in the light of the
resolution of this Court and the existing collective bargaining agreement between said union and Anglo-
FilTrading Corporation. As a consequence, the union was allegedly unable to service S/S "Success" and
from October 21, 1980 up to the present, OTSI failed to allow members of KAMADA to service several
vessels.
A joint manifestation was filed by respondents PPA and OTSI alleging compliance with the above
resolution to the effect that KAMADA workers have been and are being employed on the vessels they
used to serve prior to June 27, 1980, and justifying issuance of PPA-POM Memorandum No. 23, as a
means to avert possible conflict among the competing union groups (PWUP and KAMADA) involved, to
provide a reasonable and fair system for determining which group had previously worked on a vessel
and should work on its subsequent calls, and to insure that only the bonafide stevedores contemplated
by the order of this Court are allowed to work.
On December 2, 1980, another motion for clarification was filed by KAMADA regarding the phrase
"foreign vessels" which it stated to be inaccurate as KAMADA members also work on vessels of
Philippine registry like those operated by Sweet Lines and Lorenzo Shipping Lines whose vessels also
dock at the Manila South Harbor. It suggested that the basis should not be the foreign vessels but the
shipping agents or charterers and consignees and that the basis for determining and quantifying the
vessels given to PWUP or KAMADA should be from January 1, 1978 to September 7, 1980.
This Court in a resolution dated December 9, 1980, granted the motion of KAMADA to wit:
xxx xxx xxx
x x x (3) GRANT the motion for clarification by petitioners-intervenors issuing a resolution previously
released, the pertinent portion of which reads, ‘for while the order of October 21, 1980 is on its face
quite definite as to what it purports to require, this resolution may remove any doubt as to its purpose
and intent, thus assuring the utmost fidelity in its compliance. The order requires and mandates that
all workers represented by said petitioners-invtervenors can continue rendering stevedoring services
performed by them on foreign vessels, in Manila South Harbor before the execution of the exclusive
stevedoring contract of June 27, 1980, until further orders of the Court, without any reference to any
particular vessel, the decisive factor being shipping lines involved and the fact that they were at that
time rendering stevedoring services, irrespective of the labor unions to which they are affiliated. xxx."
Inspite of our clarificatory order, various problems in its implementation appear to have beset the
parties. Repeated motions and manifestations and countermotions and countermanifestations were
filed with unbroken regularity, swelling the records of these petitions to unusual proportions. After
requiring the parties to submit their respective positions, we issued on January 6, 1983, a resolution
which modified our earlier orders as follows:
"G.R. No. 54958 (Anglo-Fil Trading Corporation, et al. vs. Hon.Alfredo Lazaro, et al.); and G.R. No. 54966
(Philippine Integrated Port Services, Inc. vs. Hon. Alfredo Lazaro, et al.). – Considering the urgent
motion and manifestation of petitioners-intervenors filed on March 20, 1982, the comment of
respondent Ocean Terminal Services, Inc., filed on June 7, 1982, the comment of respondent Philippine
Ports Authority filed on June 8, 1982, the reply of petitioners-intervenors filed on June 28, 1982, the
rejoinder of respondent Ocean Terminal Services, Inc., filed on July 27, 1982, the rejoinder of
respondent Philippine Ports Authority filed on August 6, 1982 and the supplemental motion and
manifestation filed by petitioners-intervenors on September 15, 1982, the Court Resolved to direct the
parties concerned to observe the following guidelines in the allocation of stevedoring assignments: 1.
Any vessel belonging to a shipping line shall be assigned for stevedoring work to the union that had
served that shipping line the greatest number of times as appearing in the PPA records for the six-
month period immediately preceding the execution of the stevedoring contract of OTSI. 2. The above
notwithstanding, whenever a vessel destined to or proceeding from the Port of Manila has been
chartered for a particular voyage by a consignee or any person having interest in the goods carried
therein, such vessel shall be assigned for stevedoring work to the union that served the charterer the
greater number of times as appearing in the PPA records for six-month period immediately preceding
the execution of the stevedoring contract of OTSI. In case there are two or more charterer who pays
the highest freight charges shall be the determining fact in the assignment. 3. Vessels of new shipping
lines calling at the Port of Manila for the first time as well as vessels contracted by new charterers shall
be assigned to the union of choice of the new shipping line or charterer as the case may be."
The main issue in these petitions is whether or not the respondent judge acted with grave abuse of
discretion when he lifted ex-parte the temporary restraining order he had earlier issued also ex-parte.
From the viewpoint of procedure, we see no grave abuse of discretion or want of jurisdiction.
Subsequent to the issuance to the questioned order, the respondent court heard the parties on the
petitioners’ application for a writ of preliminary injunction and, after hearing the parties’ evidence and
arguments, denied the application for the writ. We also agree the with the respondents that it is not
grave abuse of discretion when a court dissolves ex-parte abuse of discretion when a court dissolves
ex-parte a restraining order also issued ex-parte. (Calaya v. Ramos, 79 Phil, 640; Clarke v. Philippine
Ready Mix Concrete Co., 88 Phil. 460; Larap Labor Union v. Victoriano, 97 Phil. 435.)
The restraining orders dated July 29, 1980 and August 22, 1980 respectively provide:
xxx xxx xxx
"Finding the allegations in the complaint to be sufficient in form and in substance, a temporary
restraining order is hereby issued x x x.
xxx xxx xxx
"and to maintain the status quo until further orders from this court.
x x x.
xxx xxx xxx
"It appearing that on July 29, 1980, this Court issued an order granting the prayer of the original plaintiff
for a temporary restraining order, the same order is hereby reiterated and to include Anglo-Fil Trading
Corporation. x x x.
xxx xxx xxx
"plaintiffs-intervenors herein and for the parties to serve the status quo until further orders from this
Court." (Italics supplied)
A restraining order is an order to maintain the subject of controversy in status quo until the hearing of
an application for a temporary injunction. Unless extended by the court, a restraining order ceases to
be operative at the expiration of the time fixed by its terms. In cases where it has been granted ex-
parte, it may be dissolved upon motion before answer. (See the Revised Rules of Court, Francisco, pp.
184-186, citing 43 CJS, 28 Am. Jur)
From the aforequoted dispositive portions, it is beyond doubt that the duration of the restraining
orders was "until further orders from the court." In lifting said restraining orders on September 1, 1980,
respondent judge merely exercised the prerogative he earlier reposed upon himself to terminate such
orders when circumstances so warranted. Considering again that the previous grants of the restraining
orders in favor of petitioners were made ex-parte and without bond, the need for a notice and hearing
in regard to such lifting was not necessary, much less mandatory.
The petitioners’ contention that the lifting of the restraining order had rendered moot and academic
the injunction case in the trial court is likewise untenable. A restraining order is distinguished from an
injunction in that it is intended as a restraint on the defendant until the propriety of granting an
injunction pendente lite can be determined, and it goes no further than to preserve the status quo until
such determination. Therefore, the grant, denial, or lifting of a restraining order does not in anyway
pre-empt the court’s power to decide the issue in the main action which in the case at bar, is the
injunction suit. In fact, the records will show that the trial court proceeded with the main suit for
injunction after the lifting of the restraining orders.
Petitioner PIPSI also maintains that there were no considerations of public interest which supported
the lifting. On the contrary, the lifting allegedly permitted a situation palpably against public interest,
that is, confiscation of petitioners’ business and those similarly situated. This, again, is untenable.
The streamlining of the stevedoring activities in the various ports of the Philippines was undertaken by
PPA to implement LOI No. 1005-A. The public interest, public welfare, and public policy sought to be
subserved by said LOI are clearly set forth in its whereas clauses. They areas follows:
xxx xxx xxx
"WHEREAS, it is a declared national policy to support and accelerate the development of government
port facilities as well as vital port development projects and services;
xxx xxx xxx
"WHEREAS, it is a prime concern of government to protect the interests of legitimate port workers and
port users in the country;
xxx xxx xxx
"WHEREAS, there is need to rationalize and integrate cargo-handling and other port-related services
as may have been contracted out or authorized by the PPA in the various ports of the country;
"WHEREAS, the procedures of voluntary merger, consolidation and/or bidding for the awarding or
contracting of cargo-handling and other port-related services have heretofore proven ineffective and
resulted in prolonged and unproductive wrangling, all to the detriment of efficient port operations and
development; and
"WHEREAS, it now become necessary to revitalize and streamline the PPA to carry out its functions and
duties as a vital link in the governmental machinery and the thrust for national economic
development;"
xxx xxx xxx
Clearly, there is a reasonable relation between the undeniable existence of an undesirable situation
and the statutory attempt to avoid it. "Public welfare, then, lies at the bottom of the enactment of said
law, and the state in order to promote the general welfare may interfere with personal liberty, with
property, and with business and occupations." (See Alalayan v. National Power Corporation, 24 SCRA
172; Ermita-Malate Hotel and Motel Owners Association v. City Mayor, 20 SCRA 849) These
considerations were considered by the respondent judge when he issued his questioned order dated
September 1, 1980. He stated:
xxx xxx xxx
"While in the main this Court is not insensitive to the plight of the petitioners, the overriding
considerations of public interest, as impressed by the Office of the Solicitor General, must be given
greater weight and important. This is compounded by the way and manner by which the parties are
now fashioning and shaping their respective positions. The proceedings, to say the least, have become
accented with a myriad of contentious facts and intercalated with complex legal issues. For the matter
is not a simple determination of right and wrong but a collision of ideas and viewpoints. All these,
indeed, militate against an early resolution of the application for a writ of preliminary injunction.
xxx xxx xxx
The above statement are sufficient bases for the lifting of the order. It is clear that not only did the
respondent judge base the lifting on consideration of public interest but also on the fact that the
restraining orders were issued ex-parte without bond and that the resolution of the motion for
preliminary injunction was still far from being decided.
The statement of the respondent judge that "it cannot sit in judgment, without prejudice to public
interest, on the truth and wisdom of the allegation in support of the Urgent Motion" should not be
interpreted to mean that courts cannot pass upon the greater issue of whether or not public interest
is served or is prejudiced. The determination by PPA that the measure sought to be enforced is justified
by public interest and the PPA manner of implementing a Presidential Decree and Letters of Instruction
are subject to judicial review.
The Constitution defines the powers of government. Who is to determine the nature, scope, and extent
of such powers? The Constitution has provided for the instrumentality of the judiciary as the rational
way. In determining whether or not the exercise of powers vested by the Constitution truly serves the
general welfare or is affected by public interest, the judiciary does not assert any superiority over the
other departments but only fulfills the solemn and sacred obligation assigned to it by the Constitutions
to determine conflicting claims of authority and to establish for the parties in an actual controversy the
rights which that instrument secures and guarantees to them. This is in truth all that is involved in what
is termed "judicial supremacy" which properly is the power of judicial review under the Constitutions.
(See Angara vs. Electoral Commission, 63 Phil. 139) This is why questions of expropriation of private
lands, we have upheld the court’s authority to make inquiry on whether or not lands were private and
whether the purpose was in fact, public. (City of Manila v. Chinese Community of Manila, 40 Phil. 340).
Similarly, in the present cases, the question of whether or not the lifting of the restraining orders will
prejudice public interest and will run counter to the protection to labor provision of the Constitution is
determinable by the judiciary under the power of judicial review.
From the records of these petitions, it is evident that the writ of certiorari cannot be granted. The
respondent judge’s action was not tainted by any capricious or whimsical exercise of judgment
amounting to lack of jurisdiction.
It is settled to the point of being elementary that the only question involved in certiorari is jurisdiction,
either want of jurisdiction or excess thereof, and abuse of discretion shall warrant the issuance of the
extra-ordinary remedy of certiorari only when the same is grave as when the power is exercised in an
arbitrary or despotic manner. . . . (FS. Divinagracia Agro Commercial, Inc. v. Court of Appeals, 104 SCRA
180; Abig v. Constantino, 3 SCRA 299; Abad Santos v. Province of Tarlac, 67 Phil. 480; Alafriz v. Nable,
72 Phil. 278; Travers Luna, Inc. v. Nable, 72 Phil. 278; and Villa Rey Transit, Inc. v. Bello, 75 SCRA 735).
It is not sufficient, however, to resolve these petitions on whether or not there was grave abuse of
discretion tantamount to lack or exercise of jurisdiction.
The larger issue remains. Behind the maneuvering and skirmishing of the parties lies a question of
power. Does the PPA have the power and authority to award an exclusive stevedoring contract in favor
of respondent OTSI? Is the PPA-OTSI Management Contract executed pursuant to P.D. No. 857 and LOI
No. 1005-A, valid?
The facts bearing on this issue are not in dispute and are worth reiterating. They are summarized by
the respondent court as follows:
xxx xxx xxx
"Before the advent of Presidential Decree No. 505, as amended by Presidential Decree No. 857, the
administration and management of the South Harbor, Port of Manila, was under the Bureau of
Customs. It appears that the plaintiffs, among others, were engaged in and allowed to operate
stevedoring services on the basis of special permits granted by the Bureau of Customs (Exhibit ‘A’).
"It further developed that the number of stevedoring operators or contractors made it difficult for the
Bureau of Customs to maintain order and discipline among them to the detriment of efficiency and the
desired performance at the South Harbor. This appears to be true with other ports. Thus, an in-depth
study and analysis of the problems attendant to arrastre and stevedoring operations was initiated. The
only solution appeared to be the integration of contractors engaged in stevedoring services with the
ultimate objective of having only one stevedoring contractor to engage in cargo-handling service in a
given port. Accordingly, on May 8, 1975, the Bureau of Customs issued Customs Memorandum Order
No. 28-75 providing guidelines for the merger of the multi-operators in the same ports (Exhibit ‘1’).
"On December 23, 1975, Presidential Decree No. 857 was promulgated superseding Presidential
Decree No. 505 whereby the jurisdiction of the Bureau of Customs concerning arrastre operations,
among others, were transferred and vested in the PPA.
"On May 4, 1976, the PPA, pursuant to its avowed objectives, approved the PPA policies on port
administration, management and operation, adopting as a policy the horizontal and vertical integration
of existing operators at each port (Exhibit ‘2’ and ‘3’).
"On January 19, 1977, a memorandum order was issued whereby the different port operators or
contractors who have existing permits, licenses, contracts, and other kinds of memorandum agreement
issued by the Bureau of Customs were Temporarily allowed the continuance of their services on a hold-
over capacity until such time when the PPA implements its own pertinent policy guidelines on the
matter (Exhibits ‘5’ and ‘6’).
On May 27, 1977, PPA Memorandum Order No. 21, series of 1977, was passed reiterating the
implementation of the policy on integration to ‘insure efficiency and economic in cargo-handling
operation and provide better service to port users and to amply protect the interest of labor and the
government as well.’ It is the declared policy that there should only be one stevedoring contractor to
engage in cargo-handling services in a given port.
"On April 11, 1980, the Presidential issued Letter of Instruction No. 1005-A (Exhibit ‘7’) which directed
the PPA to accelerate the rationalization of all cargo-handling services and to expeditiously evaluate all
recognized cargo-handling contractors and port related service operators under such criteria as the
PPA may set and to determine the qualified contractor or operator in order to insure effective
utilization of port facilities, prevent pilferage and/or pinpoint responsibility for it and provide services
major ports vital to the country’s trade and economy. This Letter of Instruction was dictated by
experience where the ‘procedures of voluntary mergers, consolidation and/or bidding for the awarding
or contracting of cargo-handling and other port related services have heretofore proven ineffective
and resulted in prolonged and unproductive wrangling, all to the detriment of efficient port operations
and development.’
"On April 18, 1980, the President issued a memorandum to the PPA (Annex ‘B’ of the Answer and
Opposition of OCEAN) to submit its report on the integration and rationalization of the stevedoring
operation in Manila South Harbor and the submission for his approval of the resolution of the board
regarding contracts entered into in connection therewith. This memorandum was dictated by ‘heavy
losses suffered by shippers as well as the smuggling of textiles in the South Harbor.’
"Pursuant to and in compliance with the Letter of Instruction of April 11, 1980 and the Memorandum
of the President dated April 18, 1980, the PPA created a Special Evaluation Committee composed of
Atty. David R. Simon, member of the Legal Department of PPA and concurrently Assistant to the Port
of Manila, as Chairman; Mr. Leonardo Mejia, Chief of the Commercial Development Division, Port of
Manila; and, Capt. Jovito G. Tamayo, Harbor Master and Chief of the Harbor Operations Division of the
Port of Manila, as members. The respective and individual duties of the members of the Committee
taken in their integral entirely could easily sum up to an almost complete overview of the functions of
stevedoring contractors and place them in a vantage position as to provide proper evaluation and
determination of the individual performance, qualification, and compliance of PPA requirements by
each stevedoring operator.
"The Committee took into account certain factors with their corresponding percentage weights in its
determination, who among the existing operators, is most qualified for an award of an exclusive
contract. In connection therewith, OCEAN was rated 95% topping all the rest by a wide margin.
"On April 28, 1980, the Evaluation Committee submitted its report recommending the conclusion of a
management contract with OCEAN being the most qualified (Exhibit ‘8’) which recommendation was
adopted by the PPA.
"On June 27, 1980, a management contract was executed by and between PPA and OCEAN (Exhibit
‘11’).
"On August 19, 1980, the President approved the exclusive management contract between PPA and
OCEAN (Exhibit ‘10’).
"In the meantime, in letters dated July 13, 1980 (Exhibit ‘N’) and July 14, 1980 (Exhibit ‘F’), PIPSI and
INTERVENORS were informed of the management contract with OCEAN as exclusive operator at the
South harbor, Port of Manila, beginning August 27, 1980."
xxx xxx xxx
The petitioners are on extremely shaky grounds when they invoke the non-impairment clause to
sustain their charge of invalidity. According to the petitioners, contracts entered into with local and
foreign clients or customers would be impaired.
Even in the United States during the heyday of the laissez faire philosophy, we are informed that the
American Supreme Court’s interpretations have never allowed the contract clause to be an inflexible
barrier to public regulation. According to Gerald Gunther, Professor of Constitutional Law at Stanford
University, historians have probably exaggerated the impact of the early contract clause decisions on
American economic and legal developments, that the protected position of corporations in the
19th century was due less to any shield supplied by the U.S. Supreme Court than to legislative
unwillingness to impose restraints-an unwillingness reflecting the laissez faire philosophy of the day.
After analyzing the leading cases on the contract clause from 1810 (Fletcher v. Peck, 6 Cranch 87) to
1880 (Stone v. Mississippi, 101 U.S. 814) he cites the 1914 decision in Atlantic Coast Line R. Co. v.
Goldsboro (232 U.S. 548) where the U.S. Court ruled "It is settled that neither the contract clause nor
the due process clause has the effect of overriding the power of the State to establish all regulations
that are reasonably necessary to secure the health, safety, good order, comfort, or general welfare of
the community; that this power can neither be abdicated nor bargained away, and is inalienable even
by express grant; and that all contract and property rights are held subject to its fair exercise"
and Manigault v. Springs (199 U.S. 473) where the same Court stated that "parties by entering itno
contract may not stop the legislature from enacting laws intended for the public good." (See
Gunther, Cases and Materials On Constitutional Law, 1980 Edition, pp. 554-570).
In the Philippines, the subservience of the contract clause to the police power enacting public
regulations intended for the general welfare of the community is even more clearcut.
As pointed out by then Senior Associate, now Chief Justice Enrique M. Fernando, the laissez faire or let
alone philosophy has no place in our scheme of things, not even under the 1935 Constitution. (See
Fernando, The Constitution of the Philippines, Second Edition, pp. 111-114) In his concurring opinion
in Agricultural Credit and Cooperative Financing Administration v. Confederation of Unions (30 SCRA
649, 682-683) Chief Justice Fernando stated:
"xxx With the decision reached by us today, the Government is freed from the compulsion exerted by
the Bacani doctrine of the ‘constituent-ministrant’ test as a criterion for the type of activity in which it
may engage. Its constricting effect is consigned to oblivion. No doubts or misgivings need assail us that
governmental efforts to promote the public weal, whether through regulatory legislation of vast scope
and amplitude or through the undertaking of business activities, would have to face a searching and
rigorous scrutiny. It is clear that their legitimacy cannot be challenged on the ground alone of their
being offensive to the implications of the laissez-faire concept. Unless there be a repugnancy then to
the limitations expressly set forth in the Constitution to protect individual rights, the government
enjoys a much wider latitude of action as to the means it chooses to cope with grave social and
economic problems that urgently press for solution. xxx"
The Manila South Harbor is public property owned by the State. The operations of this premiere port
of the country, including stevedoring work, are affected with public interest. Stevedoring services are
subject to regulation and control for the public good and in the interest of general welfare.
Not only does the PPA, as an agency of the State enjoy the presumption of validity in favor of its official
acts implementing its statutory charter, it has more than adequately proved that the integration of
port services-is far from arbitrary and is related to the stated governmental objective.
A single contractor furnishing the stevedoring requirements of a port has in its favor the economy of
scale and the maximum utilization of equipment and manpower. In turn, effective supervision and
control as well as collection and accounting of the government share of revenues are rendered easier
for PPA than where there are 23 contractors for it to oversee. As respondent court found from the
evidence, the multiple-contractor system has bred cut-throat competitions in the port.
Understandably, most contractors had been unable to acquire sufficient modern facilities, observe
labor standards for their workers, maintain efficiency in services, and pay PPA dues. The questioned
program would accelerate the rationalization and integration of all cargo-handling activities and port-
related services in major ports and the development of vital port facilities, projects, and services.
The contention of petitioners Anglo-Fil, et al., that due process was violated resulting to a confiscatory
effect on private property is likewise without merit.
In the first place, the petitioners were operating merely on "hold-over" permits. These permits which
were based on PPA memorandum Order No. 1, dated January 19, 1977 provided:
xxx xxx xxx
"In view thereof and pending proper evaluation by this Office of all existing permits, licenses, contracts,
and other kinds of memorandum agreements issued by the Bureau of Customs to the different port
operators or contractors, you may temporarily allow the continuance of their services on a hold-over
capacity until such time when the PPA implements its own pertinent policy guidelines on the matter.
xxx xxx xxx
Clearly, all hold-over permits were by nature temporary and subject to subsequent policy guidelines as
may be implemented by PPA. Such should have served as sufficient notice to petitioners that, at any
time, their authorities may be terminated.
Petitioners PIPISI would also impress upon this Court that the certification issued to it and its fellow
contractors by PPA, dated August 30, 1979, showed that they were not only kept in the dark as to PPA’s
subsequent move to award OTSI an exclusive contract, but that they were actually lulled into believing
that their temporary permits were being given pending issuance of their PTO or Permit to Operate.
We do not believe so. The second paragraph of the certification states that the hold-over permit was
still subject to the memorandum quoted above. The certification provided that: "In accordance with
PPA Memo Circular No. I, dated January 9, 1977…, the said firm is allowed to continue operating at the
South Harbor, Port manila." (italics supplied.)
Whether or not the petitioners would be issued a PTO depended on the sound discretion of PPA and
on the policies, rules and regulations that the latter may implement in accordance with the statutory
grant of power. Petitioners, therefore, cannot be said to have been deprived of property without due
process because, in this respect, what was given them was not a property right but a mere privilege
and they should have taken cognizance in the South Harbor, their permits can be withdrawn anytime
the public welfare deems it best to do so.
The absence of arbitrariness or bad faith is manifest in the selection procedure adopted. The award in
fabvor of OTSI was the result of an evaluation of performance of existing contractors made by a special
committee created by the PPA. The respondent court found from the evidence that the members of
that committee were "in a vantage position as to provide proper evaluation and determination of the
individual performance, qualification, and compliance of the PPA requirements by each stevedoring
operator." The committee rated OTSI with the highest grade of 95% in its evaluation.
And significantly, since no less than the President of the Philippines approved the award of the
management contract to OTSI presumptively after through consideration of all factors relevant to
efficient stevedoring services, it is difficult for this Court to find a violation of due process in the
selection procedure. In the language of the Chief Justice in Lim v. Secretary (34 SCRA 751) if the task of
overturning a decision of a department head is attended with difficulty, the burden of persuasion
becomes much heavier when the challenged action is encased in the armor of an explicit presidential
approval. In the case at bar, there is nothing in the record remotely assailing the motives of the
President in giving his imprimatur to the award.
In seeking the nullification of the management contract, the petitioners also invoke the constitutional
provision on monopolies and combination. Section 2, Article XIV of the Constitution provides:
The state shall regulate or prohibit private monopolies when the public interest so
requires.1âwphi1 No combinations in restraint of trade or unfair competition shall be allowed.
Private monopolies are not necessarily prohibited by the Constitution. They may be allowed to exist
but under State regulation. A determination must first be made whether public interest requires that
the State should regulate or prohibit private monopolies. A distinction prevails as regards combinations
in restraint of trade and unfair competition which are prohibited outright by the Constitution.
By their very nature, certain public services or public utilities such those which supply water, electricity,
transportation, telephone, telegraph, etc. must me given exclusive franchises if public interest is to be
served. Such exclusive franchises are not violative of the law against monopolies. (58 Corpus Juris
Segundum 958-964).
Neither is the management contract violative of the Anti-Graft Law. It is a contract executed in
pursuance to law and the instructions of the President to carry out government objectives to promote
public interest. The act did not cause "undue injury" to the petitioners who as explained earlier had no
vested property rights entitled to protection. There is no undue injury to the government nor any
unwarranted benefit to OTSI consideration for PPA which is the payment by OTSI of ten percent (10%)
of its gross income, something which petitioner PIPSI is loathe to pay. The rationalization and effective
utilization of port facilities is to the advantage of the Government. Furthermore, the discretion in
choosing the stevedoring contractor for the south Harbor, Port Manila, belongs by law to PPA. As long
as standards are set in determining the contractor and such standards are reasonable and related to
the purpose for which they are used, the courts should not inquire into the wisdom of PPA’s choice.
The criterion used by PPA namely, the identification of a contractor with the highest potential for
operating an exclusive service, appears reasonable. The factors which were taken into account in
determining the exclusive contractor are indicia of reasonableness. They are:
Productivity…………………. 25%
Equipment Requirement
Capability…………………… 25%
 Financial Capability………… 15% As to the contempt charges, we note that the Order of this Court dated October 21, 1980 allowed
"petitioners-intervenors" meaning KAMADA workers to work at the South Harbor pending resolution
of this case, "the order of respondent judge xxx as well as the implementing letter of Philippine Ports
Promptness in Paying Authority xxx to the contrary notwithstanding." It is not clear from said orders that the petitioners who
are stevedoring operators and contactors were also specifically included. There was no mention of
Government share…………… 25% them being included and allowed with KAMADA workers to resume operations at the South Harbor.
The petitioners read into the order something which was not there. The only clear import of the Order
was that KAMADA workers must be allowed to work notwithstanding any contrary provisions in the
Compliance with other
Management Contract, a situation brought about by the lifting of the restraining orders, the denial of
PPA Requirements…………... 20%
the petition for preliminary injunction, and the implementing letter of PPA. It is a settled rule that a
party cannot be punished for contempt unless the act which is forbidden or required to be done is
100% clearly and exactly defined, so that there can be no reasonable doubt or uncertainty as to what specific
act or thing is forbidden or required. (Lee Yick Hon v. Collector of Customs, 41 Phil. 548, citing U.S. v.
It is settled rule that unless the case justifies it, the judiciary will not interfere in purely administrative Achi-son, etc. R. Co., 146 Fed. 176, 183; 13 CJ 15)
matters. (Monark International, Inc. v. Noriel, 83 SCRA 114) Such discretionary power vested in the
proper administrative body, in the absence of arbitrariness and grave abuse so as to go beyond the WHEREFORE, the petitions in G.R. No. 54958 and G.R. No. 54966 are hereby DISMISSED for lack of
statutory authority, is not subject to the contrary judgment or control of others. (See Meralco Securities merit. The respondents are, however, directed to comply with the guidelines in the above decision on
Corporation v. Savellano, 117 SCRA 804). In general, courts have no supervisory power over the the absorption of bonafide stevedores and as thus modifies, the temporary restraining order dated
proceedings and actions of the administrative departments of the government. This is particularly true October 21, 1980 is made PERMANENT. No costs.
with respect to acts involving the exercise of judgment or discretion, and to findings of fact. (Pajo v.
SO ORDERED
Ago and Ortiz, 108 Phil.905)

In view of the foregoing, we find the PPA-OTSI Management Contract executed on June 27, 1980, valid
and devoid of any constitutional or legal infirmity. The respondents, however, should maintain the
policy of absorption of bona-fide displaced port workers in the integration scheme as mandated not
only by LOI No. 1005-A but by the policy of the State to assure the rights of workers to security of
tenure. (sec. 9, Art. II, Constitution) We note that both PPA and OTSI have given assurance in their
answers that none of the legitimate stevedores would be displaced from work although they added
that their bonafide stevedores should join PWUP. Which union a worker or various workers should join
cannot be ordained by this Court in these petitions where the basic issue is the validity of the exclusive
stevedoring contract given to one operator for one port. This matter will have to be eventually threshed
out by the workers themselves and the Ministry of Labor and Employment before it may be elevated
to us, if ever. However, we reiterate the guidelines earlier issued that no bona fide stevedore or worker
should be deprived of employment he used to enjoy simply because of the execution and
implementation of the disputed Management Contract. This absorption of bona fide workers is an act
of social justice. When a person has no property, his job may possibly be his only possession or means
of livelihood. Therefore, he should be protected against any arbitrary and unjust deprivation of his job.
(See Bondoc v. People’s Bank and Trust Company, 103 SCRA 599)
 THE PHILIPPINE PORTS AUTHORITY, represented by its GENERAL MANAGER JUAN O.
PENA, Petitioners,
vs.
CIPRES STEVEDORING & ARRASTRE, INC., Respondents.

DECISION

CHICO-NAZARIO, J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. SP No.
59553 entitled, "Cipres Stevedoring and Arrastre, Inc. (CISAI) v. The Honorable Alvin L. Tan in his
capacity as Presiding Judge, Regional Trial Court (RTC), Br. 44, Dumaguete City, Philippine Ports
Authority (PPA), Juan Peña2 & Benjamin Cecilio." Said decision declared as null and void the Order
dated 31 May 20003 of Judge Tan and directed the court a quo to issue a writ of preliminary injunction
enjoining petitioner "from conducting the scheduled public bidding of cargo handling operations in the
port of Dumaguete City" until the termination of the main case.

The facts follow.

Petitioner PPA is a government entity created by virtue of Presidential Decree (P.D.) No. 857 and is
tasked to implement an integrated program for the planning, development, financing, and operation
of ports and port districts in the country.4

Respondent CISAI is a domestic corporation primarily engaged in stevedoring, arrastre, and porterage
business, including cargo handling and hauling services, in the province of Negros Oriental and in the
cities of Dumaguete and Bais. Since the commencement of its corporate existence in 1976, respondent
had been granted permits of varied durations to operate the cargo handling operations in Dumaguete
City. In 1991, petitioner awarded an eight-year contract5 to respondent allowing the latter to pursue
its business endeavor in the port of Dumaguete City. This contract expired on 31 December 1998.

At about the time respondent was awarded an eight-year contract in 1991 or, on 12 June 1990, PPA
Administrative Order No. 03-90 (PPA AO No. 03-90) dated 14 May 1990 took effect.6 This administrative
order contained the guidelines and procedures in the selection and award of cargo handling contracts
in all government ports as well as cargo handling services that would be turned over by petitioner to
the private sector. Section 2 of said administrative order states:
Republic of the Philippines
SUPREME COURT Section 2. – Statement of Policies

SECOND DIVISION As a general rule, cargo handling services in all government ports shall be awarded through the system
of public bidding, except in the following cases:
G.R. No. 145742. July 14, 2005
2.1 Cargo handling contractors in ports with existing or expired contracts whose performance is
satisfactory shall be granted renewal of their contracts.
2.2 Cargo handling operators issued one-year permits and have already been in operation for at least
six (6) months prior to the effectivity of this Order shall be audited, and if found satisfactory, awarded
contracts.
2.3 Cargo handling services in ports with low cargo volume and where handling operations are primarily
manual.7
On 29 May 1996, a Memorandum of Understanding (MOU)8 was entered into among the National
Union of Portworkers of the Philippines/Trade Union Congress of the Philippines, 9 the Department of
Transportation and Communications,10 the PPA,11 the Department of Labor and Employment
(DOLE),12 and the Philippine Chamber of Arrastre and Stevedoring Operators (PCASO)13 relative to the
nationwide protests then being conducted by port workers. Among the items agreed upon by the
parties to the MOU were:
3. The DOTC Secretary shall immediately create a tripartite oversight committee to review, assess and
evaluate current and future issuances pertaining to Cargo Handling contracts, portworkers’ contracts
with employers, and the like. The oversight committee shall be composed of equal representatives
from the portworkers, the cargo handling operators and the government including the PPA and the
DOTC Undersecretary who shall act as Chairman.
4. Henceforth, all expiring Cargo Handling contracts shall be reviewed by the oversight committee
referred to in paragraph 3 above for recommendation to the PPA Board of Directors as to whether the
same shall be terminated and subjected to public bidding, or as may be authorized upon consideration
of paragraph 2 hereof.14
Following the expiration of its contract for cargo handling, respondent was able to continue with its
business by virtue of hold-over permits given by petitioner. The first of these permits expired on 17
January 200015 and the last was valid only until 18 April 2000.16 While respondent’s second hold-over
permit was still in effect, petitioner, through its General Manager Juan O. Peña, issued PPA AO No. 03-
200017 dated 15 February 2000 which amended by substitution PPA AO No. 03-90. PPA AO No. 03-2000
expressly provides that all contract for cargo handling services of more than three (3) years shall be
awarded through public bidding. With respect to cargo handling permits for a period of three (3) years
and less in ports where the average yearly cargo throughout for the last five (5) years did not surpass
30,000 metric tons and where the operations are mainly manual, the same shall be awarded through
comparative evaluation.
Pursuant to PPA AO No. 03-2000, petitioner set the deadline for the submission of the technical and
financial bids for the port of Dumaguete City at 12:00 noon of 05 July 2000; the opening of the technical
bids on 05 July 2000 at 1:00 p.m.; and the dropping of the financial bids on 28 July 2000 at 1:00 p.m.
Contending that this action on the part of petitioner was in derogation of its vested right over the
operation of cargo handling enterprise in Dumaguete City, respondent initiated an action for specific
performance, injunction with application for preliminary mandatory injunction and temporary
restraining order before the RTC of Dumaguete City.18 This civil action was filed on 31 March 2000 and
was raffled off to Branch 44 of said court wherein it was docketed as Civil Case No. 12688.
Respondent alleged in its complaint that PPA AO No. 03-90 explicitly provides that cargo handling
contractors with existing or expired contracts but were able to obtain a "satisfactory" performance
rating were entitled to a renewal of their respective cargo handling contracts with petitioner; thus, as
respondent was given a rating of "very satisfactory"19 in 1998, it follows that its cargo handling
agreement should have been renewed after its expiration. Respondent likewise claimed that the
approval and implementation of PPA AO No. 03-2000 was plainly arbitrary as said administrative order
was:
19.1 Obviously unfair to plaintiff and port operators affected because it is an afterthought. It came
about after PCASO20 wrote a letter dated 04 February 2000 demanding for the renewal of the contract
of the members with a rating of Satisfactory…
19.2 Obviously prejudicial to the right to renew the contract vested upon plaintiff (respondent herein)
by virtue of Administrative Order No. 03-90 which was in force and effect during the period of
contractual relations between defendant PPA and plaintiff.
19.3 Obviously repugnant to the Memorandum of Understanding dated May 29, 1996, which has the
force of law between the contracting parties.
19.4 Obviously designed to justify non-compliance of a legal obligation created under Administrative
Order No. 03-90.
19.5 A scheme to accommodate political pressures.
19.6 Arbitrary because it did not treat all port operators alike. For instance the Asian Terminals, Inc.,
the operator of South Harbor, had a negotiated Contract. 21
In addition, respondent stated in its complaint that in the event the bidding would take place as
scheduled, a substantial number of workers in the port of Dumaguete City faced the risk of
displacement. Moreover, the possibility existed that the contract for cargo handling in Dumaguete City
would be awarded to an incompetent and inexperienced participant in the bidding process unlike
respondent which had already invested substantial capital in its operations in the port of said city. To
further support its claim for a preliminary mandatory injunction, respondent alleged that a fellow
PCASO member, Vitas Port Arrastre Service Corporation, operating at Pier 18, Vitas, Tondo, Manila,
successfully obtained a writ of preliminary injunction from the RTC, Branch 46, Manila.22
Immediately after the filing of respondent’s complaint, the RTC, Branch 44 of Dumaguete City, issued
an order23granting respondent’s prayer for a temporary restraining order. The dispositive portion of
the order reads:
WHEREFORE, premises considered, and considering the urgent nature of the plaintiff’s complaint, that
serious and irreparable damage or injury would be suffered by the plaintiff unless said acts of the
defendants complained of, is restrained; said defendants Philippine Ports Authority, Manila, Juan O.
Peña, Benjamin Cecilio, their agents, representatives or persons acting in their behalves, are hereby
ordered to cease and desist from further conducting the scheduled public bidding and awards on April
7, 2000, and April 10, 2000, respectively within twenty (20) days from receipt hereof…24
Petitioner thereafter filed a manifestation with urgent motion for reconsideration 25 to the aforesaid
order of the trial court. Petitioner argued that the court a quo did not have the requisite jurisdiction to
issue the assailed temporary restraining order; that respondent was estopped from seeking refuge
from the court as it had already expressed its intention to join the bidding process involving the
operation of the cargo handling operations in the port of Dumaguete City; that respondent failed to
exhaust administrative remedies by not seeking relief from petitioner prior to initiating this action
before the court; and that it was in the best interest of the public if the bidding process proceeds as
scheduled because of the "internal squabbling" taking place within respondent corporation which
could affect the quality of its service. This motion was denied in the order of the court a quo dated 24
April 2000.26
Petitioner seasonably sought the reconsideration27 of the trial court’s order of 24 April 2000 this time
arguing that:
1. PRESIDENTIAL DECREE NO. 1818 PROHIBITS COURTS FROM ISSUING THE INJUNCTIVE WRIT IN ANY
CASE, DISPUTE OR CONTROVERSY INVOLVING STEVEDORING AND ARRASTRE CONTRACTS.
2. THE ORDER DATED APRIL 24, 2000 ADJUDICATES THE MERITS OF THE COMPLAINT EVEN BEFORE THE
PARTIES ARE HEARD.
3. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 VIOLATES THE LAW IN CONTRACT MAKING.
4. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS BEYOND THE JURISDICTION OF THE
HONORABLE COURT.
5. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS AGAINST PUBLIC INTEREST.
6. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS VIOLATION OF THE 1997 RULES ON CIVIL
PROCEDURE.
7. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS VIOLATIVE OF DUE PROCESS.
8. THE ISSUANCE OF THE ORDER DATED APRIL 24, 2000 IS UNSUPPORTED BY THE FACTS OF THIS CASE.28
In its 31 May 2000 Order, the trial court set aside the injunctive writ it previously issued "to give way
to the pronouncements of P.D. No. 1818" as the "function of the PPA is vested with public interest." 29
It was thereafter the turn of respondent to file its motion for reconsideration 30 of the Order of the trial
court but the court a quo stood firm on its Order setting aside the injunctive writ it issued. 31 From this
adverse ruling, respondent filed a petition for certiorari under Rule 65 before the Court of Appeals. In
said petition, respondent maintained that P.D. No. 1818 did not cover the restraining order and
preliminary injunction formerly issued by the RTC, Branch 44, Dumaguete City. According to
respondent, as there was no assurance that the would-be winner of the bidding process possessed the
capacity to operate the cargo handling services in Dumaguete City, there would have been a cessation
of the cargo handling operations in the port of said city following the expiration of respondent’s second
hold-over permit. This, respondent insisted, was not the situation contemplated by P.D. No. 1818 which
was precisely issued to ensure that essential government projects such as stevedoring and arrastre
services would not be disrupted by the issuance of a temporary restraining order. In this case, the
restraining order and injunction issued by the trial court ensured the continuity of the cargo handling
operations in Dumaguete City. Respondent further argued that as what is involved in this case is
petitioner’s failure to comply with its obligation under PPA AO No. 03-90 and the validity of PPA AO
No. 03-2000, petitioner could not invoke P.D. No. 1818 which should only apply to matters involving
the exercise of discretion by administrative agencies.32
Respondent likewise claimed that the pre-qualification phase of the bidding procedure was attended
by the following irregularities:
1. Respondents (petitioner herein), then defendants (in Civil Case No. 12688), set October 15, 1999 as
the deadline for the submission of the pre-qualification documents of prospective bidders. However,
they pre-qualified DUMAGUETE KING PORTS & ILOILO QUEEN PORTS INC. (DUKIQ), which incidentally
tried to intervene in this case, on April 3, 1999, which was not a juridical entity as of said date. It should
be pointed out that it was only registered with the Securities and Exchange Commission (SEC) on April
4, (2000)… This means that DUKIQ became only (sic) a juridical entity only three days before the
scheduled dropping of the bids on April 7, 2000 and seven (7) days before the supposed opening of the
bids on April 10, 2000. This is certainly irregular and only bolsters petitioner’s (respondent herein)
apprehensions that there exists a preferred bidder. Moreover, DUKIQ was only issued a Mayor’s Permit
on April 18, 2000… This is not also in accordance with the rules of the bidding.
2. The composition of the Pre-qualification, Bids, Awards Committee (PBAC) as composed by the
respondents is not in conformity with AO 03-90.
3. PPA Administrative Orders 03-90 … and 03-2000… emanated from the same PPA Board Resolution
No. 912. It should be pointed out that AO 03-2000 was issued arbitrarily for the purpose of evading the
contractual obligation of respondents to renew the contracts of those cargo handling operators which
obtained a satisfactory performance rating from the PPA. In other words, the most glaring irregularity
committed by respondents here is the issuance of AO 03-2000, which is diametrically opposed to and
inconsistent with AO 03-90 and PPA Board Resolution 912. This is not to mention that said AO 03-2000
will also deprive cargo handling operators in general, and CISAI, in particular, of their proprietary
rights.33
Further, respondent insisted that on the basis of the clear language of PPA AO No. 03-90, it was entitled
to the renewal of its cargo handling agreement as it was able to earn a "very satisfactory" performance
rating. The implementation, therefore, of PPA AO No. 03-2000 transgressed the constitutional
guarantee against non-impairment of contract and ignored respondent’s vested right to the renewal
of its cargo handling pact.
Relying on respondent’s allegation as regards the purported irregularities which occurred during the
pre-qualification part of the bidding process, the Court of Appeals nullified the 31 May 2000 Order of
the trial court. The decretal portion of the appellate court’s decision, now assailed before us, states:
WHEREFORE, premises considered the petition is GRANTED; and the assailed 31 May 2000 Order of
the respondent Judge is hereby declared NULL and VOID. In lieu of the same, the Court orders:
1. Subject to the posting of an injunction bond by herein petitioner in the amount to be determined by
the court a quo, respondent Court is directed to ISSUE a Writ of Preliminary Injunction;
2. Respondent Philippine Ports Authority to (DESIST) from conducting the scheduled public bidding of
cargo handling operations in the port of Dumaguete City, effective until and after the case a quo shall
have been finally decided.34
Petitioner is now before us seeking the reversal of the aforementioned decision of the appellate court
on the following grounds:
IT WAS GRAVE ERROR FOR RESPONDENT COURT OF APPEALS [SECOND DIVISION] TO ISSUE ITS
QUESTIONED DECISION CONSIDERING THAT:
(i) P.D. NO. 1818, LATER AMENDED BY R.A. 8975 AND REITERATED IN ADMINISTRATIVE CIRCULAR NO.
11.2000 OF THIS HONORABLE COURT, BANS THE ISSUANCE OF WRITS OF PRELIMINARY PROHIBITORY
INJUNCTIONS IN CASES INVOLVING GOVERNMENT INFRASTRUCTURE PROJECTS AND SERVICE
CONTRACTS, WHICH INCLUDES (SIC) ARRASTRE AND STEVEDORING CONTRACTS.
(ii) CISAI HAS NO CLEAR LEGAL RIGHT TO AN INJUNCTIVE WRIT. IT ACQUIRED NO VESTED RIGHTS TO
ARRASTRE AND STEVEDORING OPERATIONS AT THE PORT OF DUMAGUETE CITY AS ITS HOLD-OVER
CAPACITY COULD BE REVOKED AT ANY GIVEN TIME.
(iii) CISAI CANNOT COMPEL PPA TO RENEW ITS CONTRACT FOR CARGO HANDLING SERVICES.35
In our resolution of 12 November 2003, we granted petitioner’s prayer for a temporary restraining
order.36
Petitioner insists that the decision of the Court of Appeals failed to take into consideration the
unequivocal language of Republic Act No. 8975 which amended P.D. No. 1818.
The main provision of P.D. No. 1818 provides:
SECTION 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary
injunction, or preliminary mandatory injunction in any case, dispute, or controversy involving an
infrastructure project, or a mining, fishery, forest or other natural resource development project of the
government, or any public utility operated by the government, including among others public utilities
for the transport of the goods or commodities, stevedoring and arrastre contracts, to prohibit any
person or persons, entity or government official from proceeding with, or continuing the execution or
implementation of any such project, or the operation of such public utility, or pursuing any lawful
activity necessary for such execution, implementation or operation.
On the other hand, the pertinent portion of Rep. Act No. 8975 states:
SEC. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions. – No court, except the Supreme Court, shall issue any temporary
restraining order, preliminary injunction or preliminary mandatory injunction against the government,
or any of its subdivision, officials or any person or entity, whether public or private, acting under the
government’s direction, to restrain, prohibit or compel the following acts:
…
(b) Bidding or awarding of contract/project of the national government as defined under Section 2
hereof; . . .37
Concededly, P.D. No. 1818 which was the law in force at the time of the institution of this case, applies
to the operation of arrastre and stevedoring contracts such as the one subject of the present case.
Notably, the Court of Appeals’ ruling was based solely on the perceived irregularities which occurred
during the pre-qualification phase of the bidding process. The veracity of these claimed irregularities,
however, are best left for the consideration of the trial court which has yet to rule on the merits, if
there be any, of the main case.
More than this, as the issue presented before us is whether the appellate court erred in issuing the writ
of preliminary injunction, we hew to the general principles on this subject.
A preliminary injunction is an order granted at any stage of an action prior to judgment of final order,
requiring a party, court, agency, or person to refrain from a particular act or acts. 38 It is a preservative
remedy to ensure the protection of a party’s substantive rights or interests pending the final judgment
in the principal action. A plea for an injunctive writ lies upon the existence of a claimed emergency or
extraordinary situation which should be avoided for otherwise, the outcome of a litigation would be
useless as far as the party applying for the writ is concerned.
At times referred to as the "Strong Arm of Equity,"39 we have consistently ruled that there is no power
the exercise of which is more delicate and which calls for greater circumspection than the issuance of
an injunction.40 It should only be extended in cases of great injury where courts of law cannot afford
an adequate or commensurate remedy in damages;41 "in cases of extreme urgency; where the right is
very clear; where considerations of relative inconvenience bear strongly in complainant’s favor; where
there is a willful and unlawful invasion of plaintiff’s right against his protest and remonstrance, the
injury being a continuing one, and where the effect of the mandatory injunction is rather to reestablish
and maintain a preexisting continuing relation between the parties, recently and arbitrarily interrupted
by the defendant, than to establish a new relation."42
For the writ to issue, two requisites must be present, namely, the existence of the right to be protected,
and that the facts against which the injunction is to be directed are violative of said right. 43 It is
necessary that one must show an unquestionable right over the premises. 44
Petitioner maintains that respondent’s claim of vested rights or proprietary rights over the cargo
handling services at the port of Dumaguete City is baseless. It insists that the contract for cargo handling
operations it formerly had with respondent did not amount to a property right; instead, it should be
considered as a mere privilege which can be recalled by the granting authority at anytime when public
welfare so requires.
On the other hand, respondent anchors its application for preliminary injunction on its alleged vested
right over the cargo handling services in the port of Dumaguete City pursuant to PPA AO No. 03-90. It
insists that under this administrative order, petitioner was bound to renew their cargo handling
services agreement as it was able to meet and, in fact, was able to surpass the "satisfactory"
performance rating requirement contained therein. Further, respondent posits the argument that PPA
AO No. 03-2000 was formulated by petitioner as a device by which it could avoid its obligation under
the superseded administrative order. Respondent, therefore, concludes that PPA AO No. 03-2000
contravenes the constitutional precept that "no law impairing obligations of contracts shall be
passed."45
We agree with petitioner and hold that respondent was not able to establish its claimed right over the
renewal of its cargo handling agreement with the former.
To begin with, stevedoring services are imbued with public interest and subject to the state’s police
power as we have declared in Anglo-Fil Trading Corporation v. Lazaro,46 to wit:
The Manila South Harbor is public property owned by the State. The operations of this premiere port
of the country, including stevedoring work, are affected with public interest. Stevedoring services are
subject to regulation and control for the public good and in the interest of general welfare. 47
As "police power is so far-reaching in scope, that it has become almost impossible to limit its
sweep,"48 whatever proprietary right that respondent may have acquired must necessarily give way to
a valid exercise of police power, thus:49
4. In the interplay between such a fundamental right and police power, especially so where the assailed
governmental action deals with the use of one’s property, the latter is accorded much leeway. That is
settled law…50
In connection with the foregoing, we likewise find no arbitrariness nor irregularity on the part of
petitioner as far as PPA AO No. 03-2000 is concerned. It is worthwhile to remind respondent that
petitioner was created for the purpose of, among other things, promoting the growth of regional port
bodies. In furtherance of this objective, petitioner is empowered, after consultation with relevant
government agencies, to make port regulations particularly to make rules or regulation for the
planning, development, construction, maintenance, control, supervision and management of any port
or port district in the country.51 With this mandate, the decision to bid out the cargo holding services
in the ports around the country is properly within the province and discretion of petitioner which we
cannot simply set aside absent grave abuse of discretion on its part. The discretion to carry out this
policy necessarily required prior study and evaluation and this task is best left to the judgment of
petitioner. While there have been occasions when we have brushed aside actions on the part of
administrative agencies for being beyond the scope of their authority, the situation at the case at bar
does not fall within this exception.
As for respondent’s claim that PPA AO No. 03-2000 violated the constitutional provision of non-
impairment of contract, suffice it to state here that all contracts are "subject to the overriding demands,
needs, and interests of the greater number as the State may determine in the legitimate exercise of its
police power."52
Finally, it is settled that the sole object of a preliminary injunction, may it be prohibitory or mandatory,
is to preserve the status quo until the merits of the case can be heard and the final judgment
rendered.53 The status quo is the last actual peaceable uncontested status which preceded the
controversy.
WHEREFORE, premises considered, the present petition is GRANTED and the Decision of the Court of
Appeals dated 24 October 2000 is hereby REVERSED and SET ASIDE. The 31 May 2000 Order of the
Regional Trial Court, Branch 44, Dumaguete City, setting aside the injuctive relief it previously issued is
hereby REINSTATED and the temporary restraining order We issued in our Resolution dated 12
November 2003, enjoining, ordering, commanding and directing respondent from implementing the
aforesaid decision of the Court of Appeals, is hereby made PERMANENT. No costs.
SO ORDERED.

In the case at bar, respondent sought the issuance of a writ for preliminary injunction in order to
prevent the "cessation of cargo handling services in the port of Dumaguete City to the detriment and
prejudice of the public, shipper, consignees and port workers."54 However, the factual backdrop of this
case establishes that respondent’s eight-year contract for cargo handling was already terminated and
its continued operation in the port of Dumaguete City was merely by virtue of a second hold-over
permit granted by petitioner through a letter dated 27 December 1999, 55 the pertinent portion of
which reads:

This HOP56 extension shall be valid from January 18, 2000 up to April 18, 2000, unless sooner withdrawn
or cancelled or upon the award of the cargo handling contract thru public bidding. 57

By its nature, the hold-over permit was merely temporary in nature and may be revoked by petitioner
at anytime. As we declared in the case of Anglo-Fil Trading Corporation,58 hold-over permits are merely
temporary and subject to the policy and guidelines as may be implemented by petitioner. The
temporary nature of the hold-over permit should have served as adequate notice to respondent that,
at any time, its authority to remain within the premises of the port of Dumaguete City may be
terminated. Unlike the contract for cargo handling services previously entered into by petitioner and
respondent, whose terms and conditions were agreed upon by the parties herein and which clearly
provided for a specific period of effectivity as well as a stipulation regarding the notice of violation, the
hold-over permit was unilaterally granted by petitioner pursuant to its authority under the law.

Based on the foregoing, it is clear that at the time of the institution of this suit, respondent no longer
possessed any contract for its continued operation in Dumaguete City and its stay in the port of said
city was by virtue of a mere permit extended by petitioner revocable at anytime by the latter.
Obviously, the writ of preliminary injunction issued by the Court of Appeals granted respondent the
authority to maintain its cargo handling services despite the absence of a valid cargo handling
agreement between respondent and petitioner. For this reason, we hold that the Court of Appeals
erred in ordering the court a quo to issue the writ of preliminary injunction in favor of respondent.
 G.R. No. 177933

METRO MANILA DEVELOPMENT AUTHORITY, Petitioner,

vs.
JUSTICE EMILIO A. GANCAYCO (Retired), Respondent,

DECISION

SERENO, J.:

Before us are consolidated Petitions for Review under Rule 45 of the Rules of Court assailing the
Decision1promulgated on 18 July 2006 and the Resolution2 dated 10 May 2007 of the Court of Appeals
in CA-G.R. SP No. 84648.

The Facts

In the early 1950s, retired Justice Emilio A. Gancayco bought a parcel of land located at 746 Epifanio
delos Santos Avenue (EDSA),3 Quezon City with an area of 375 square meters and covered by Transfer
Certificate of Title (TCT) No. RT114558.

On 27 March 1956, the Quezon City Council issued Ordinance No. 2904, entitled "An Ordinance
Requiring the Construction of Arcades, for Commercial Buildings to be Constructed in Zones Designated
as Business Zones in the Zoning Plan of Quezon City, and Providing Penalties in Violation Thereof." 4

An arcade is defined as any portion of a building above the first floor projecting over the sidewalk
beyond the first storey wall used as protection for pedestrians against rain or sun. 5

Ordinance No. 2904 required the relevant property owner to construct an arcade with a width of 4.50
Republic of the Philippines meters and height of 5.00 meters along EDSA, from the north side of Santolan Road to one lot after
SUPREME COURT Liberty Avenue, and from one lot before Central Boulevard to the Botocan transmission line.
Manila
At the outset, it bears emphasis that at the time Ordinance No. 2904 was passed by the city council,
EN BANC there was yet no building code passed by the national legislature. Thus, the regulation of the
construction of buildings was left to the discretion of local government units. Under this particular
G.R. No. 177807 October 11, 2011 ordinance, the city council required that the arcade is to be created by constructing the wall of the
ground floor facing the sidewalk a few meters away from the property line. Thus, the building owner is
EMILIO GANCAYCO, Petitioner, not allowed to construct his wall up to the edge of the property line, thereby creating a space or shelter
vs. under the first floor. In effect, property owners relinquish the use of the space for use as an arcade for
CITY GOVERNMENT OF QUEZON CITY AND METRO MANILA DEVELOPMENT pedestrians, instead of using it for their own purposes.
AUTHORITY, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x
The ordinance was amended several times. On 8 August 1960, properties located at the Quezon City-
San Juan boundary were exempted by Ordinance No. 60-4477 from the construction of arcades. This
ordinance was further amended by Ordinance No. 60-4513, extending the exemption to commercial
buildings from Balete Street to Seattle Street. Ordinance No. 6603 dated 1 March 1966 meanwhile
reduced the width of the arcades to three meters for buildings along V. Luna Road, Central District,
Quezon City.
The ordinance covered the property of Justice Gancayco. Subsequently, sometime in 1965, Justice
Gancayco sought the exemption of a two-storey building being constructed on his property from the
application of Ordinance No. 2904 that he be exempted from constructing an arcade on his property.
On 2 February 1966, the City Council acted favorably on Justice Gancayco’s request and issued
Resolution No. 7161, S-66, "subject to the condition that upon notice by the City Engineer, the owner
shall, within reasonable time, demolish the enclosure of said arcade at his own expense when public
interest so demands."6
Decades after, in March 2003, the Metropolitan Manila Development Authority (MMDA) conducted
operations to clear obstructions along the sidewalk of EDSA in Quezon City pursuant to Metro Manila
Council’s (MMC) Resolution No. 02-28, Series of 2002.7 The resolution authorized the MMDA and local
government units to "clear the sidewalks, streets, avenues, alleys, bridges, parks and other public
places in Metro Manila of all illegal structures and obstructions."8
On 28 April 2003, the MMDA sent a notice of demolition to Justice Gancayco alleging that a portion of
his building violated the National Building Code of the Philippines (Building Code) 9 in relation to
Ordinance No. 2904. The MMDA gave Justice Gancayco fifteen (15) days to clear the portion of the
building that was supposed to be an arcade along EDSA.10
Justice Gancayco did not comply with the notice. Soon after the lapse of the fifteen (15) days, the
MMDA proceeded to demolish the party wall, or what was referred to as the "wing walls," of the
ground floor structure. The records of the present case are not entirely clear on the extent of the
demolition; nevertheless, the fact of demolition was not disputed. At the time of the demolition, the
affected portion of the building was being used as a restaurant.
On 29 May 2003, Justice Gancayco filed a Petition 11 with prayer for a temporary restraining order
and/or writ of preliminary injunction before the Regional Trial Court (RTC) of Quezon City, docketed as
Civil Case No. Q03-49693, seeking to prohibit the MMDA and the City Government of Quezon City from
demolishing his property. In his Petition,12 he alleged that the ordinance authorized the taking of
private property without due process of law and just compensation, because the construction of an
arcade will require 67.5 square meters from the 375 square meter property. In addition, he claimed
that the ordinance was selective and discriminatory in its scope and application when it allowed the
owners of the buildings located in the Quezon City-San Juan boundary to Cubao Rotonda, and Balete
to Seattle Streets to construct arcades at their option. He thus sought the declaration of nullity of
Ordinance No. 2904 and the payment of damages. Alternately, he prayed for the payment of just
compensation should the court hold the ordinance valid.
The City Government of Quezon City claimed that the ordinance was a valid exercise of police power,
regulating the use of property in a business zone. In addition, it pointed out that Justice Gancayco was
already barred by estoppel, laches and prescription.
Similarly, the MMDA alleged that Justice Gancayco could not seek the nullification of an ordinance that
he had already violated, and that the ordinance enjoyed the presumption of constitutionality. It further
stated that the questioned property was a public nuisance impeding the safe passage of pedestrians.
Finally, the MMDA claimed that it was merely implementing the legal easement established by
Ordinance No. 2904.13
The RTC rendered its Decision on 30 September 2003 in favor of Justice Gancayco. 14 It held that the
questioned ordinance was unconstitutional, ruling that it allowed the taking of private property for
public use without just compensation. The RTC said that because 67.5 square meters out of Justice
Gancayco’s 375 square meters of property were being taken without compensation for the public’s
benefit, the ordinance was confiscatory and oppressive. It likewise held that the ordinance violated
owners’ right to equal protection of laws. The dispositive portion thus states:
WHEREFORE, the petition is hereby granted and the Court hereby declares Quezon City Ordinance No.
2094,15Series of 1956 to be unconstitutional, invalid and void ab initio. The respondents are hereby
permanently enjoined from enforcing and implementing the said ordinance, and the respondent
MMDA is hereby directed to immediately restore the portion of the party wall or wing wall of the
building of the petitioner it destroyed to its original condition.
IT IS SO ORDERED.
The MMDA thereafter appealed from the Decision of the trial court. On 18 July 2006, the Court of
Appeals (CA) partly granted the appeal.16 The CA upheld the validity of Ordinance No. 2904 and lifted
the injunction against the enforcement and implementation of the ordinance. In so doing, it held that
the ordinance was a valid exercise of the right of the local government unit to promote the general
welfare of its constituents pursuant to its police powers. The CA also ruled that the ordinance
established a valid classification of property owners with regard to the construction of arcades in their
respective properties depending on the location. The CA further stated that there was no taking of
private property, since the owner still enjoyed the beneficial ownership of the property, to wit:
Even with the requirement of the construction of arcaded sidewalks within his commercial lot, appellee
still retains the beneficial ownership of the said property. Thus, there is no "taking" for public use which
must be subject to just compensation. While the arcaded sidewalks contribute to the public good, for
providing safety and comfort to passersby, the ultimate benefit from the same still redounds to
appellee, his commercial establishment being at the forefront of a busy thoroughfare like EDSA. The
arcaded sidewalks, by their nature, assure clients of the commercial establishments thereat some kind
of protection from accidents and other hazards. Without doubt, this sense of protection can be a boon
to the business activity therein engaged. 17
Nevertheless, the CA held that the MMDA went beyond its powers when it demolished the subject
property. It further found that Resolution No. 02-28 only refers to sidewalks, streets, avenues, alleys,
bridges, parks and other public places in Metro Manila, thus excluding Justice Gancayco’s private
property. Lastly, the CA stated that the MMDA is not clothed with the authority to declare, prevent or
abate nuisances. Thus, the dispositive portion stated:
WHEREFORE, the appeals are PARTLY GRANTED. The Decision dated September 30, 2003 of the
Regional Trial Court, Branch 224, Quezon City, is MODIFIED, as follows:
1) The validity and constitutionality of Ordinance No. 2094,18 Series of 1956, issued by the City Council
of Quezon City, is UPHELD; and
2) The injunction against the enforcement and implementation of the said Ordinance is LIFTED.
SO ORDERED.
This ruling prompted the MMDA and Justice Gancayco to file their respective Motions for Partial
Reconsideration.19
On 10 May 2007, the CA denied the motions stating that the parties did not present new issues nor
offer grounds that would merit the reconsideration of the Court. 20
Dissatisfied with the ruling of the CA, Justice Gancayco and the MMDA filed their respective Petitions
for Review before this Court. The issues raised by the parties are summarized as follows:
I. WHETHER OR NOT JUSTICE GANCAYCO WAS ESTOPPED FROM ASSAILING THE VALIDITY OF
ORDINANCE NO. 2904.
II. WHETHER OR NOT ORDINANCE NO. 2904 IS CONSTITUTIONAL.
III. WHETHER OR NOT THE WING WALL OF JUSTICE GANCAYCO’S BUILDING IS A PUBLIC NUISANCE.
IV. WHETHER OR NOT THE MMDA LEGALLY DEMOLISHED THE PROPERTY OF JUSTICE GANCAYCO.
The Court’s Ruling
Estoppel
The MMDA and the City Government of Quezon City both claim that Justice Gancayco was estopped
from challenging the ordinance, because, in 1965, he asked for an exemption from the application of
the ordinance. According to them, Justice Gancayco thereby recognized the power of the city
government to regulate the construction of buildings.
To recall, Justice Gancayco questioned the constitutionality of the ordinance on two grounds: (1)
whether the ordinance "takes" private property without due process of law and just compensation;
and (2) whether the ordinance violates the equal protection of rights because it allowed exemptions
from its application.
On the first ground, we find that Justice Gancayco may still question the constitutionality of the
ordinance to determine whether or not the ordinance constitutes a "taking" of private property
without due process of law and just compensation. It was only in 2003 when he was allegedly deprived
of his property when the MMDA demolished a portion of the building. Because he was granted an
exemption in 1966, there was no "taking" yet to speak of.
Moreover, in Acebedo Optical Company, Inc. v. Court of Appeals, 21 we held:
It is therefore decisively clear that estoppel cannot apply in this case. The fact that petitioner
acquiesced in the special conditions imposed by the City Mayor in subject business permit does not
preclude it from challenging the said imposition, which is ultra vires or beyond the ambit of authority
of respondent City Mayor. Ultra vires acts or acts which are clearly beyond the scope of one's authority
are null and void and cannot be given any effect. The doctrine of estoppel cannot operate to give effect
to an act which is otherwise null and void or ultra vires. (Emphasis supplied.)
Recently, in British American Tobacco v. Camacho,22 we likewise held:
We find that petitioner was not guilty of estoppel. When it made the undertaking to comply with all
issuances of the BIR, which at that time it considered as valid, petitioner did not commit any false
misrepresentation or misleading act. Indeed, petitioner cannot be faulted for initially undertaking to
comply with, and subjecting itself to the operation of Section 145(C), and only later on filing the subject
case praying for the declaration of its unconstitutionality when the circumstances change and the law
results in what it perceives to be unlawful discrimination. The mere fact that a law has been relied upon
in the past and all that time has not been attacked as unconstitutional is not a ground for considering
petitioner estopped from assailing its validity. For courts will pass upon a constitutional question only
when presented before it in bona fide cases for determination, and the fact that the question has not
been raised before is not a valid reason for refusing to allow it to be raised later. (Emphasis supplied.)
Anent the second ground, we find that Justice Gancayco may not question the ordinance on the ground
of equal protection when he also benefited from the exemption. It bears emphasis that Justice
Gancayco himself requested for an exemption from the application of the ordinance in 1965 and was
eventually granted one. Moreover, he was still enjoying the exemption at the time of the demolition
as there was yet no valid notice from the city engineer. Thus, while the ordinance may be attacked with
regard to its different treatment of properties that appears to be similarly situated, Justice Gancayco
is not the proper person to do so.
Zoning and the regulation of the
construction of buildings are valid
exercises of police power .
In MMDA v. Bel-Air Village Association,23 we discussed the nature of police powers exercised by local
government units, to wit:
Police power is an inherent attribute of sovereignty. It has been defined as the power vested by the
Constitution in the legislature to make, ordain, and establish all manner of wholesome and reasonable
laws, statutes and ordinances, either with penalties or without, not repugnant to the Constitution, as
they shall judge to be for the good and welfare of the commonwealth, and for the subjects of the same.
The power is plenary and its scope is vast and pervasive, reaching and justifying measures for public
health, public safety, public morals, and the general welfare.
It bears stressing that police power is lodged primarily in the National Legislature. It cannot be exercised
by any group or body of individuals not possessing legislative power. The National Legislature, however,
may delegate this power to the President and administrative boards as well as the lawmaking bodies
of municipal corporations or local government units. Once delegated, the agents can exercise only such
legislative powers as are conferred on them by the national lawmaking body.
To resolve the issue on the constitutionality of the ordinance, we must first determine whether there
was a valid delegation of police power. Then we can determine whether the City Government of
Quezon City acted within the limits of the delegation.
It is clear that Congress expressly granted the city government, through the city council, police power
by virtue of Section 12(oo) of Republic Act No. 537, or the Revised Charter of Quezon City, 24 which
states:
To make such further ordinances and regulations not repugnant to law as may be necessary to carry
into effect and discharge the powers and duties conferred by this Act and such as it shall deem
necessary and proper to provide for the health and safety, promote the prosperity, improve the morals,
peace, good order, comfort, and convenience of the city and the inhabitants thereof, and for the
protection of property therein; and enforce obedience thereto with such lawful fines or penalties as
the City Council may prescribe under the provisions of subsection (jj) of this section.
Specifically, on the powers of the city government to regulate the construction of buildings, the Charter
also expressly provided that the city government had the power to regulate the kinds of buildings and
structures that may be erected within fire limits and the manner of constructing and repairing them. 25
With regard meanwhile to the power of the local government units to issue zoning ordinances, we
apply Social Justice Society v. Atienza.26 In that case, the Sangguniang Panlungsod of Manila City
enacted an ordinance on 28 November 2001 reclassifying certain areas of the city from industrial to
commercial. As a result of the zoning ordinance, the oil terminals located in those areas were no longer
allowed. Though the oil companies contended that they stood to lose billions of pesos, this Court
upheld the power of the city government to pass the assailed ordinance, stating:
In the exercise of police power, property rights of individuals may be subjected to restraints and
burdens in order to fulfil the objectives of the government. Otherwise stated, the government may
enact legislation that may interfere with personal liberty, property, lawful businesses and occupations
to promote the general welfare. However, the interference must be reasonable and not arbitrary. And
to forestall arbitrariness, the methods or means used to protect public health, morals, safety or welfare
must have a reasonable relation to the end in view.
The means adopted by the Sanggunian was the enactment of a zoning ordinance which reclassified the
area where the depot is situated from industrial to commercial. A zoning ordinance is defined as a local
city or municipal legislation which logically arranges, prescribes, defines and apportions a given political
subdivision into specific land uses as present and future projection of needs. As a result of the zoning,
the continued operation of the businesses of the oil companies in their present location will no longer
be permitted. The power to establish zones for industrial, commercial and residential uses is derived
from the police power itself and is exercised for the protection and benefit of the residents of a locality.
Consequently, the enactment of Ordinance No. 8027 is within the power of the Sangguniang
Panlungsod of the City of Manila and any resulting burden on those affected cannot be said to be
unjust... (Emphasis supplied)
In Carlos Superdrug v. Department of Social Welfare and Development, 27 we also held:
For this reason, when the conditions so demand as determined by the legislature, property rights must
bow to the primacy of police power because property rights, though sheltered by due process, must
yield to general welfare.
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the
provision in question, there is no basis for its nullification in view of the presumption of validity which
every law has in its favor. (Emphasis supplied.)
In the case at bar, it is clear that the primary objectives of the city council of Quezon City when it issued
the questioned ordinance ordering the construction of arcades were the health and safety of the city
and its inhabitants; the promotion of their prosperity; and the improvement of their morals, peace,
good order, comfort, and the convenience. These arcades provide safe and convenient passage along
the sidewalk for commuters and pedestrians, not just the residents of Quezon City. More especially so
because the contested portion of the building is located on a busy segment of the city, in a business
zone along EDSA.
Corollarily, the policy of the Building Code,28 which was passed after the Quezon City Ordinance,
supports the purpose for the enactment of Ordinance No. 2904. The Building Code states:
Section 102. Declaration of Policy. – It is hereby declared to be the policy of the State to safeguard life,
health, property, and public welfare, consistent with the principles of sound environmental
management and control; and to this end, make it the purpose of this Code to provide for all buildings
and structures, a framework of minimum standards and requirements to regulate and control their
location, site, design quality of materials, construction, occupancy, and maintenance.
Section 1004 likewise requires the construction of arcades whenever existing or zoning ordinances
require it. Apparently, the law allows the local government units to determine whether arcades are
necessary within their respective jurisdictions.
Justice Gancayco argues that there is a three-meter sidewalk in front of his property line, and the
arcade should be constructed above that sidewalk rather than within his property line. We do not need
to address this argument inasmuch as it raises the issue of the wisdom of the city ordinance, a matter
we will not and need not delve into.
To reiterate, at the time that the ordinance was passed, there was no national building code enforced
to guide the city council; thus, there was no law of national application that prohibited the city council
from regulating the construction of buildings, arcades and sidewalks in their jurisdiction.
The "wing walls" of the building are not
nuisances per se.
The MMDA claims that the portion of the building in question is a nuisance per se.
We disagree.
The fact that in 1966 the City Council gave Justice Gancayco an exemption from constructing an arcade
is an indication that the wing walls of the building are not nuisances per se. The wing walls do not per
se immediately and adversely affect the safety of persons and property. The fact that an ordinance may
declare a structure illegal does not necessarily make that structure a nuisance.
Article 694 of the Civil Code defines nuisance as any act, omission, establishment, business, condition
or property, or anything else that (1) injures or endangers the health or safety of others; (2) annoys or
offends the senses; (3) shocks, defies or disregards decency or morality; (4) obstructs or interferes with
the free passage of any public highway or street, or any body of water; or, (5) hinders or impairs the
use of property. A nuisance may be per se or per accidens. A nuisance per se is that which affects the
immediate safety of persons and property and may summarily be abated under the undefined law of
necessity.29
Clearly, when Justice Gancayco was given a permit to construct the building, the city council or the city
engineer did not consider the building, or its demolished portion, to be a threat to the safety of persons
and property. This fact alone should have warned the MMDA against summarily demolishing the
structure.
Neither does the MMDA have the power to declare a thing a nuisance. Only courts of law have the
power to determine whether a thing is a nuisance. In AC Enterprises v. Frabelle Properties Corp., 30 we
held:
We agree with petitioner's contention that, under Section 447(a)(3)(i) of R.A. No. 7160, otherwise
known as the Local Government Code, the Sangguniang Panglungsod is empowered to enact
ordinances declaring, preventing or abating noise and other forms of nuisance. It bears stressing,
however, that the Sangguniang Bayan cannot declare a particular thing as a nuisance per se and order
its condemnation. It does not have the power to find, as a fact, that a particular thing is a nuisance
when such thing is not a nuisance per se; nor can it authorize the extrajudicial condemnation and
destruction of that as a nuisance which in its nature, situation or use is not such. Those things must be
determined and resolved in the ordinary courts of law. If a thing be in fact, a nuisance due to the
manner of its operation, that question cannot be determined by a mere resolution of the Sangguniang
Bayan. (Emphasis supplied.)
MMDA illegally demolished
the property of Justice Gancayco.
MMDA alleges that by virtue of MMDA Resolution No. 02-28, Series of 2002, it is empowered to
demolish Justice Gancayco’s property. It insists that the Metro Manila Council authorized the MMDA
and the local government units to clear the sidewalks, streets, avenues, alleys, bridges, parks and other
public places in Metro Manila of all illegal structures and obstructions. It further alleges that it
demolished the property pursuant to the Building Code in relation to Ordinance No. 2904 as amended.
However, the Building Code clearly provides the process by which a building may be demolished. The
authority to order the demolition of any structure lies with the Building Official. The pertinent
provisions of the Building Code provide:
SECTION 205. Building Officials. — Except as otherwise provided herein, the Building Official shall be
responsible for carrying out the provisions of this Code in the field as well as the enforcement of orders
and decisions made pursuant thereto.
Due to the exigencies of the service, the Secretary may designate incumbent Public Works District
Engineers, City Engineers and Municipal Engineers act as Building Officials in their respective areas of
jurisdiction.
The designation made by the Secretary under this Section shall continue until regular positions of
Building Official are provided or unless sooner terminated for causes provided by law or decree.
xxx xxx xxx
SECTION 207. Duties of a Building Official. — In his respective territorial jurisdiction, the Building Official
shall be primarily responsible for the enforcement of the provisions of this Code as well as of the
implementing rules and regulations issued therefor. He is the official charged with the duties of issuing
building permits.
In the performance of his duties, a Building Official may enter any building or its premises at all
reasonable times to inspect and determine compliance with the requirements of this Code, and the
terms and conditions provided for in the building permit as issued.
When any building work is found to be contrary to the provisions of this Code, the Building Official may
order the work stopped and prescribe the terms and/or conditions when the work will be allowed to
resume. Likewise, the Building Official is authorized to order the discontinuance of the occupancy or
use of any building or structure or portion thereof found to be occupied or used contrary to the
provisions of this Code.
xxx xxx xxx
SECTION 215. Abatement of Dangerous Buildings. — When any building or structure is found or
declared to be dangerous or ruinous, the Building Official shall order its repair, vacation or demolition
depending upon the degree of danger to life, health, or safety. This is without prejudice to further
action that may be taken under the provisions of Articles 482 and 694 to 707 of the Civil Code of the
Philippines. (Emphasis supplied.)
MMDA v. Trackworks Rail Transit Advertising, Vending and Promotions, Inc. 31 is applicable to the case
at bar. In that case, MMDA, invoking its charter and the Building Code, summarily dismantled the
advertising media installed on the Metro Rail Transit (MRT) 3. This Court held:
It is futile for MMDA to simply invoke its legal mandate to justify the dismantling of Trackworks'
billboards, signages and other advertising media. MMDA simply had no power on its own to dismantle,
remove, or destroy the billboards, signages and other advertising media installed on the MRT3
structure by Trackworks. In Metropolitan Manila Development Authority v. Bel-Air Village
Association, Inc., Metropolitan Manila Development Authority v. Viron Transportation Co., Inc.,
and Metropolitan Manila Development Authority v. Garin, the Court had the occasion to rule that
MMDA's powers were limited to the formulation, coordination, regulation, implementation,
preparation, management, monitoring, setting of policies, installing a system, and administration.
Nothing in Republic Act No. 7924 granted MMDA police power, let alone legislative power.
Clarifying the real nature of MMDA, the Court held:
...The MMDA is, as termed in the charter itself, a "development authority". It is an agency created for
the purpose of laying down policies and coordinating with the various national government agencies,
people's organizations, non-governmental organizations and the private sector for the efficient and
expeditious delivery of basic services in the vast metropolitan area. All its functions are administrative
in nature and these are actually summed up in the charter itself, viz:
Sec.2. Creation of the Metropolitan Manila Development Authority.- xxx.
The MMDA shall perform planning, monitoring and coordinative functions, and in the process exercise
regulatory and supervisory authority over the delivery of metro-wide services within Metro Manila,
without diminution of the autonomy of local government units concerning purely local matters.
The Court also agrees with the CA's ruling that MMDA Regulation No. 96-009 and MMC Memorandum
Circular No. 88-09 did not apply to Trackworks' billboards, signages and other advertising media. The
prohibition against posting, installation and display of billboards, signages and other advertising media
applied only to public areas, but MRT3, being private property pursuant to the BLT agreement between
the Government and MRTC, was not one of the areas as to which the prohibition applied. Moreover,
MMC Memorandum Circular No. 88-09 did not apply to Trackworks' billboards, signages and other
advertising media in MRT3, because it did not specifically cover MRT3, and because it was issued a year
prior to the construction of MRT3 on the center island of EDSA. Clearly, MMC Memorandum Circular
No. 88-09 could not have included MRT3 in its prohibition.
MMDA’s argument does not hold water. There was no valid delegation of powers to the MMDA.
Contrary to the claim of the MMDA, the City Government of Quezon City washed its hands off the acts
of the former. In its Answer,34 the city government stated that "the demolition was undertaken by the
MMDA only, without the participation and/or consent of Quezon City." Therefore, the MMDA acted
on its own and should be held solely liable for the destruction of the portion of Justice Gancayco’s
building.

MMDA's insistence that it was only implementing Presidential Decree No. 1096 (Building Code) and its WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals in CA-G.R. SP No. 84648 is
implementing rules and regulations is not persuasive. The power to enforce the provisions of the AFFIRMED.
Building Code was lodged in the Department of Public Works and Highways (DPWH), not in MMDA,
considering the law's following provision, thus: SO ORDERED.

Sec. 201. Responsibility for Administration and Enforcement. -

The administration and enforcement of the provisions of this Code including the imposition of penalties
for administrative violations thereof is hereby vested in the Secretary of Public Works, Transportation
and Communications, hereinafter referred to as the "Secretary."

There is also no evidence showing that MMDA had been delegated by DPWH to implement the Building
Code. (Emphasis supplied.)

Additionally, the penalty prescribed by Ordinance No. 2904 itself does not include the demolition of
illegally constructed buildings in case of violations. Instead, it merely prescribes a punishment of "a fine
of not more than two hundred pesos (₱200.00) or by imprisonment of not more than thirty (30) days,
or by both such fine and imprisonment at the discretion of the Court, Provided, that if the violation is
committed by a corporation, partnership, or any juridical entity, the Manager, managing partner, or
any person charged with the management thereof shall be held responsible therefor." The ordinance
itself also clearly states that it is the regular courts that will determine whether there was a violation
of the ordinance.

As pointed out in Trackworks, the MMDA does not have the power to enact ordinances. Thus, it cannot
supplement the provisions of Quezon City Ordinance No. 2904 merely through its Resolution No. 02-
28.

Lastly, the MMDA claims that the City Government of Quezon City may be considered to have approved
the demolition of the structure, simply because then Quezon City Mayor Feliciano R. Belmonte signed
MMDA Resolution No. 02-28. In effect, the city government delegated these powers to the MMDA. The
powers referred to are those that include the power to declare, prevent and abate a nuisance 32 and to
further impose the penalty of removal or demolition of the building or structure by the owner or by
the city at the expense of the owner.33
 The right of individuals to bear arms is not absolute, but is subject to regulation. The maintenance of
peace and order1 and the protection of the people against violence are constitutional duties of the
State, and the right to bear arms is to be construed in connection and in harmony with these
constitutional duties.

Before us is a petition for prohibition and injunction seeking to enjoin the implementation of the
"Guidelines in the Implementation of the Ban on the Carrying of Firearms Outside of
Residence"2 (Guidelines) issued on January 31, 2003, by respondent Hermogenes E. Ebdane, Jr., Chief
of the Philippine National Police (PNP).

The facts are undisputed:

In January 2003, President Gloria Macapagal-Arroyo delivered a speech before the members of the
PNP stressing the need for a nationwide gun ban in all public places to avert the rising crime incidents.
She directed the then PNP Chief, respondent Ebdane, to suspend the issuance of Permits to Carry
Firearms Outside of Residence (PTCFOR), thus:

"THERE IS ALSO NEED TO FOCUS ON THE HIGH PROFILE CRIMES THAT TEND TO DISTURB THE
PSYCHOLOGICAL PERIMETERS OF THE COMMUNITY – THE LATEST BEING THE KILLING OF FORMER NPA
LEADER ROLLY KINTANAR. I UNDERSTAND WE ALREADY HAVE THE IDENTITY OF THE CULPRIT. LET US
BRING THEM TO THE BAR OF JUSTICE.

THE NPA WILL FIND IT MORE DIFFICULT TO CARRY OUT THEIR PLOTS IF OUR LAW ENFORCEMENT
AGENCIES CAN RID THEMSELVES OF RASCALS IN UNIFORM, AND ALSO IF WE ENFORCE A GUN BAN IN
PUBLIC PLACES.

THUS, I AM DIRECTING THE PNP CHIEF TO SUSPEND INDEFINITELY THE ISSUANCE OF PERMIT TO CARRY
FIREARMS IN PUBLIC PLACES. THE ISSUANCE OF PERMITS WILL NOW BE LIMITED ONLY TO OWNERSHIP
AND POSSESSION OF GUNS AND NOT TO CARRYING THEM IN PUBLIC PLACES. FROM NOW ON, ONLY
EN BANC THE UNIFORMED MEN IN THE MILITARY AND AUTHORIZED LAW ENFORCEMENT OFFICERS CAN CARRY
FIREARMS IN PUBLIC PLACES, AND ONLY PURSUANT TO EXISTING LAW. CIVILIAN OWNERS MAY NO
G.R. No. 157036 June 9, 2004 LONGER BRING THEIR FIREARMS OUTSIDE THEIR RESIDENCES. THOSE WHO WANT TO USE THEIR GUNS
FOR TARGET PRACTICE WILL BE GIVEN SPECIAL AND TEMPORARY PERMITS FROM TIME TO TIME ONLY
FRANCISCO I. CHAVEZ Petitioner,
FOR THAT PURPOSE. AND THEY MAY NOT LOAD THEIR GUNS WITH BULLETS UNTIL THEY ARE IN THE
vs.
PREMISES OF THE FIRING RANGE.
HON. ALBERTO G. ROMULO, IN HIS CAPACITY AS EXECUTIVE SECRETARY; DIRECTOR GENERAL
HERMOGENES E. EBDANE, JR., IN HIS CAPACITY AS THE CHIEF OF THE PNP, ET. AL., respondents. WE CANNOT DISREGARD THE PARAMOUNT NEED FOR LAW AND ORDER. JUST AS WE CANNOT BE
HEEDLESS OF OUR PEOPLE’S ASPIRATIONS FOR PEACE."
DECISION

SANDOVAL-GUTIERREZ, J.:
Acting on President Arroyo’s directive, respondent Ebdane issued the assailed Guidelines quoted as
follows:
"TO : All Concerned
FROM : Chief, PNP
SUBJECT : Guidelines in the Implementation of the Ban on the Carrying of Firearms Outside of
Residence.
DATE : January 31, 2003
1. Reference: PD 1866 dated June 29, 1983 and its Implementing Rules and Regulations.
2. General:
The possession and carrying of firearms outside of residence is a privilege granted by the State to its
citizens for their individual protection against all threats of lawlessness and security.
As a rule, persons who are lawful holders of firearms (regular license, special permit, certificate of
registration or MR) are prohibited from carrying their firearms outside of residence. However, the
Chief, Philippine National Police may, in meritorious cases as determined by him and under conditions
as he may impose, authorize such person or persons to carry firearms outside of residence.
3. Purposes:
This Memorandum prescribes the guidelines in the implementation of the ban on the carrying of
firearms outside of residence as provided for in the Implementing Rules and Regulations, Presidential
Decree No. 1866, dated June 29, 1983 and as directed by PGMA. It also prescribes the conditions,
requirements and procedures under which exemption from the ban may be granted.
4. Specific Instructions on the Ban on the Carrying of Firearms:
a. All PTCFOR are hereby revoked. Authorized holders of licensed firearms covered with valid PTCFOR
may re-apply for a new PTCFOR in accordance with the conditions hereinafter prescribed.
b. All holders of licensed or government firearms are hereby prohibited from carrying their firearms
outside their residence except those covered with mission/letter orders and duty detail orders issued
by competent authority pursuant to Section 5, IRR, PD 1866, provided, that the said exception shall
pertain only to organic and regular employees.
5. The following persons may be authorized to carry firearms outside of residence.
a. All persons whose application for a new PTCFOR has been approved, provided, that the persons and
security of those so authorized are under actual threat, or by the nature of their position, occupation
and profession are under imminent danger.
b. All organic and regular employees with Mission/Letter Orders granted by their respective agencies
so authorized pursuant to Section 5, IRR, PD 1866, provided, that such Mission/Letter Orders is valid
only for the duration of the official mission which in no case shall be more than ten (10) days.
c. All guards covered with Duty Detail Orders granted by their respective security agencies so
authorized pursuant to Section 4, IRR, PD 1866, provided, that such DDO shall in no case exceed 24-
hour duration. d. Members of duly recognized Gun Clubs issued Permit to Transport (PTT) by the PNP
for purposes of practice and competition, provided, that such firearms while in transit must not be
loaded with ammunition and secured in an appropriate box or case detached from the person. e.
Authorized members of the Diplomatic Corps. 6. Requirements for issuance of new PTCFOR: a. Written
request by the applicant addressed to Chief, PNP stating his qualification to possess firearm and the
reasons why he needs to carry firearm outside of residence. b. Xerox copy of current firearm license
duly authenticated by Records Branch, FED; c. Proof of actual threat, the details of which should be
issued by the Chief of Police/Provincial or City Directors and duly validated by C, RIID; d. Copy of Drug
Test Clearance, duly authenticated by the Drug Testing Center, if photocopied; e. Copy of DI/ RIID
clearance, duly authenticated by ODI/RIID, if photocopied; f. Copy of Neuro-Psychiatric Clearance duly
authenticated by NP Testing Center, if photocopied; g. Copy of Certificate of Attendance to a Gun Safety
Seminar, duly validated by Chief, Operations Branch, FED; h. NBI Clearance; i. Two (2) ID pictures (2" x
2") taken not earlier than one (1) year from date of filing of application; and j. Proof of Payment
7. Procedures: a. Applications may be filed directly to the Office of the PTCFOR Secretariat in Camp
Crame. In the provinces, the applications may also be submitted to the Police Regional Offices (PROs)
and Provincial/City Police Offices (P/CPOs) for initial processing before they are forwarded to the office
of the PTCFOR Secretariat. The processors, after ascertaining that the documentary requirements are
in order, shall issue the Order of Payment (OP) indicating the amount of fees payable by the applicant,
who in turn shall pay the fees to the Land Bank. b. Applications, which are duly processed and prepared
in accordance with existing rules and regulations, shall be forwarded to the OCPNP for approval. c.
Upon approval of the application, OCPNP will issue PTCFOR valid for one (1) year from date of issue. d.
Applications for renewal of PTCFOR shall be processed in accordance with the provisions of par. 6
above. e. Application for possession and carrying of firearms by diplomats in the Philippines shall be
processed in accordance with NHQ PNP Memo dated September 25, 2000, with Subj: Possession and
Carrying of Firearms by Diplomats in the Philippines. 8. Restrictions in the Carrying of Firearms: a. The
firearm must not be displayed or exposed to public view, except those authorized in uniform and in the
performance of their official duties. b. The firearm shall not be brought inside public drinking and
amusement places, and all other commercial or public establishments."
Petitioner Francisco I. Chavez, a licensed gun owner to whom a PTCFOR has been issued, requested the
Department of Interior and Local Government (DILG) to reconsider the implementation of the assailed
Guidelines. However, his request was denied. Thus, he filed the present petition impleading public
respondents Ebdane, as Chief of PNP; Alberto G. Romulo, as Executive Secretary; and Gerry L. Barias,
as Chief of the PNP-Firearms and Explosives Division. He anchored his petition on the following
grounds:
"I
THE PRESIDENT HAS NO POWER OR AUTHORITY – MUCH LESS BY A MERE SPEECH – TO ALTER, MODIFY
OR AMEND THE LAW ON FIREARMS BY IMPOSING A GUN BAN AND CANCELING EXISTING PERMITS FOR
GUNS TO BE CARRIED OUTSIDE RESIDENCES.
II
OFFICIALLY, THERE IS NO PRESIDENTIAL ISSUANCE ON THE GUN BAN; THE PRESIDENTIAL SPEECH
NEVER INVOKED POLICE POWER TO JUSTIFY THE GUN BAN; THE PRESIDENT’S VERBAL DECLARATION
ON GUN BAN VIOLATED THE PEOPLE’S RIGHT TO PROTECT LIFE AND THEIR PROPERTY RIGHT TO CARRY
FIREARMS.
III
THE PNP CHIEF HAS NO POWER OR AUTHORITY TO ISSUE THE QUESTIONED GUIDELINES BECAUSE:
1) THERE IS NO LAW, STATUTE OR EXECUTIVE ORDER WHICH GRANTS THE PNP CHIEF THE AUTHORITY
TO PROMULGATE THE PNP GUIDELINES.
2) THE IMPLEMENTING RULES AND REGULATIONS OF PD 1866 CANNOT BE THE SUBJECT OF ANOTHER
SET OF IMPLEMENTING GUIDELINES.
3) THE PRESIDENT’S SPEECH CANNOT BE A BASIS FOR THE PROMULGATION OF IMPLEMENTNG
GUIDELINES ON THE GUN BAN.
IV
ASSUMING ARGUENDO, THAT THE PNP GUIDELINES IMPLEMENT PD 1866, AND THE AMENDMENTS
THERETO, THE PNP CHIEF STILL HAS NO POWER OR AUTHORITY TO ISSUE THE SAME BECAUSE –
1) PER SEC 6, RA 8294, WHICH AMENDS PD 1866, THE IRR SHALL BE PROMULGATED JOINTLY BY THE
DOJ AND THE DILG.
2) SEC. 8, PD 1866 STATES THAT THE IRR SHALL BE PROMULGATED BY THE CHIEF OF THE PHILIPPINE
CONSTABULARY.
V
THE PNP GUIDELINES VIOLATE THE DUE PROCESS CLAUSE OF THE CONSTITUTION BECAUSE:
1) THE RIGHT TO OWN AND CARRY A FIREARM IS NECESSARILY INTERTWINED WITH THE PEOPLE’S
INHERENT RIGHT TO LIFE AND TO PROTECT LIFE. THUS, THE PNP GUIDELINES DEPRIVE PETITIONER OF
THIS RIGHT WITHOUT DUE PROCESS OF LAW FOR:
A) THE PNP GUIDELINES DEPRIVE PETITIONER OF HIS MOST POTENT, IF NOT HIS ONLY, MEANS TO
DEFEND HIMSELF.
B) THE QUESTIONED GUIDELINES STRIPPED PETITIONER OF HIS MEANS OF PROTECTION AGAINST
CRIME DESPITE THE FACT THAT THE STATE COULD NOT POSSIBLY PROTECT ITS CITIZENS DUE TO THE
INADEQUACY AND INEFFICIENCY OF THE POLICE FORCE.
2) THE OWNESHIP AND CARRYING OF FIREARMS ARE CONSTITUTIONALLY PROTECTED PROPERTY
RIGHTS WHICH CANNOT BE TAKEN AWAY WITHOUT DUE PROCESS OF LAW AND WITHOUT JUST CAUSE.
VI
ASSUMING ARGUENDO, THAT THE PNP GUIDELINES WERE ISSUED IN THE EXERCISE OF POLICE POWER,
THE SAME IS AN INVALID EXERCISE THEREOF SINCE THE MEANS USED THEREFOR ARE UNREASONABLE
AND UNNCESSARY FOR THE ACCOMPLISHMENT OF ITS PURPOSE – TO DETER AND PREVENT CRIME –
THEREBY BECOMING UNDULY OPPRESSIVE TO LAW-ABIDING GUN-OWNERS.
VII
THE PNP GUIDELINES ARE UNJUST, OPPRESSIVE AND CONFISCATORY SINCE IT REVOKED ALL EXISTING
PERMITS TO CARRY WITHOUT, HOWEVER, REFUNDING THE PAYMENT THE PNP RECEIVED FROM THOSE
WHO ALREADY PAID THEREFOR.
VIII
THE PNP GUIDELINES VIOLATE THE EQUAL PROTECTION CLAUSE OF THE CONSTITUTION BECAUSE THEY
ARE DIRECTED AT AND OPPRESSIVE ONLY TO LAW-ABIDING GUN OWNERS WHILE LEAVING OTHER
GUN-OWNERS – THE LAWBREAKERS (KIDNAPPERS, ROBBERS, HOLD-UPPERS, MNLF, MILF, ABU SAYYAF
COLLECTIVELY, AND NPA) – UNTOUCHED.
IX
THE PNP GUIDELINES ARE UNJUST, OPPRESSIVE AND UNFAIR BECAUSE THEY WERE IMPLEMENTED
LONG BEFORE THEY WERE PUBLISHED.
X We are not persuaded.
THE PNP GUIDELINES ARE EFFECTIVELY AN EX POST FACTO LAW SINCE THEY APPLY RETROACTIVELY
AND PUNISH ALL THOSE WHO WERE ALREADY GRANTED PERMITS TO CARRY OUTSIDE OF RESIDENCE
LONG BEFORE THEIR PROMULGATION."
Petitioner’s submissions may be synthesized into five (5) major issues:
First, whether respondent Ebdane is authorized to issue the assailed Guidelines;
Second, whether the citizens’ right to bear arms is a constitutional right?;
Third, whether the revocation of petitioner’s PTCFOR pursuant to the assailed Guidelines is a violation
of his right to property?;
Fourth, whether the issuance of the assailed Guidelines is a valid exercise of police power?; and
Fifth, whether the assailed Guidelines constitute an ex post facto law?
The Solicitor General seeks the dismissal of the petition pursuant to the doctrine of hierarchy of courts.
Nonetheless, in refutation of petitioner’s arguments, he contends that: (1) the PNP Chief is authorized
to issue the assailed Guidelines; (2) petitioner does not have a constitutional right to own and carry
firearms; (3) the assailed Guidelines do not violate the due process clause of the Constitution; and (4)
the assailed Guidelines do not constitute an ex post facto law.
Initially, we must resolve the procedural barrier.
On the alleged breach of the doctrine of hierarchy of courts, suffice it to say that the doctrine is not an
iron-clad dictum. In several instances where this Court was confronted with cases of national interest
and of serious implications, it never hesitated to set aside the rule and proceed with the judicial
determination of the cases.3 The case at bar is of similar import as it involves the citizens’ right to bear
arms.
I firearms, ammunitions and explosives. Executive Order No. 215,15 issued by President Diosdado
Authority of the PNP Chief
Relying on the principle of separation of powers, petitioner argues that only Congress can withhold his
right to bear arms. In revoking all existing PTCFOR, President Arroyo and respondent Ebdane
transgressed the settled principle and arrogated upon themselves a power they do not possess – the
legislative power.
It is true that under our constitutional system, the powers of government are distributed among three
coordinate and substantially independent departments: the legislative, the executive and the judiciary.
Each has exclusive cognizance of the matters within its jurisdiction and is supreme within its own
sphere.4
Pertinently, the power to make laws – the legislative power – is vested in Congress.5 Congress may not
escape its duties and responsibilities by delegating that power to any other body or authority. Any
attempt to abdicate the power is unconstitutional and void, on the principle that "delegata potestas
non potest delegari" – "delegated power may not be delegated."6
The rule which forbids the delegation of legislative power, however, is not absolute and inflexible. It
admits of exceptions. An exception sanctioned by immemorial practice permits the legislative body to
delegate its licensing power to certain persons, municipal corporations, towns, boards, councils,
commissions, commissioners, auditors, bureaus and directors.7 Such licensing power includes the
power to promulgate necessary rules and regulations.8
The evolution of our laws on firearms shows that since the early days of our Republic, the legislature’s
tendency was always towards the delegation of power. Act No. 1780, 9 delegated upon the Governor-
General (now the President) the authority (1) to approve or disapprove applications of any person for
a license to deal in firearms or to possess the same for personal protection, hunting and other lawful
purposes; and (2) to revoke such license any time. 10 Further, it authorized him to issue regulations
which he may deem necessary for the proper enforcement of the Act. 11 With the enactment of Act No.
2711, the "Revised Administrative Code of 1917," the laws on firearms were integrated. 12 The Act
retained the authority of the Governor General provided in Act No. 1780. Subsequently, the growing
complexity in the Office of the Governor-General resulted in the delegation of his authority to the Chief
of the Constabulary. On January 21, 1919, Acting Governor-General Charles E. Yeater issued Executive
Order No. 813 authorizing and directing the Chief of Constabulary to act on his behalf in approving and
disapproving applications for personal, special and hunting licenses. This was followed by Executive
Order No. 6114 designating the Philippine Constabulary (PC) as the government custodian of all
Macapagal on December 3, 1965, granted the Chief of the Constabulary, not only the authority to
approve or disapprove applications for personal, special and hunting license, but also the authority to
revoke the same. With the foregoing developments, it is accurate to say that the Chief of the
Constabulary had exercised the authority for a long time. In fact, subsequent issuances such as Sections
2 and 3 of the Implementing Rules and Regulations of Presidential Decree No. 1866 16 perpetuate such
authority of the Chief of the Constabulary. Section 2 specifically provides that any person or entity
desiring to possess any firearm "shall first secure the necessary permit/license/authority from the Chief
of the Constabulary." With regard to the issuance of PTCFOR, Section 3 imparts: "The Chief of
Constabulary may, in meritorious cases as determined by him and under such conditions as he may
impose, authorize lawful holders of firearms to carry them outside of residence." These provisions are
issued pursuant to the general power granted by P.D. No. 1866 empowering him to promulgate rules
and regulations for the effective implementation of the decree.17 At this juncture, it bears emphasis
that P.D. No. 1866 is the chief law governing possession of firearms in the Philippines and that it was
issued by President Ferdinand E. Marcos in the exercise of his legislative power. 18 In an attempt to
evade the application of the above-mentioned laws and regulations, petitioner argues that the "Chief
of the PNP" is not the same as the "Chief of the Constabulary," the PC being a mere unit or component
of the newly established PNP. He contends further that Republic Act No. 829419 amended P.D. No. 1866
such that the authority to issue rules and regulations regarding firearms is now jointly vested in the
Department of Justice and the DILG, not the Chief of the Constabulary. 20
Petitioner’s submission is bereft of merit.
By virtue of Republic Act No. 6975,21 the Philippine National Police (PNP) absorbed the Philippine
Constabulary (PC). Consequently, the PNP Chief succeeded the Chief of the Constabulary and,
therefore, assumed the latter’s licensing authority. Section 24 thereof specifies, as one of PNP’s
powers, the issuance of licenses for the possession of firearms and explosives in accordance with
law.22 This is in conjunction with the PNP Chief’s "power to issue detailed implementing policies and
instructions" on such "matters as may be necessary to effectively carry out the functions, powers and
duties" of the PNP.23
Contrary to petitioner’s contention, R.A. No. 8294 does not divest the Chief of the Constabulary (now
the PNP Chief) of his authority to promulgate rules and regulations for the effective implementation of
P.D. No. 1866. For one, R.A. No. 8294 did not repeal entirely P.D. No. 1866. It merely provides for the
reduction of penalties for illegal possession of firearms. Thus, the provision of P.D. No. 1866 granting
to the Chief of the Constabulary the authority to issue rules and regulations regarding firearms remains
effective. Correspondingly, the Implementing Rules and Regulations dated September 15, 1997 jointly
issued by the Department of Justice and the DILG pursuant to Section 6 of R.A. No. 8294 deal only with
the automatic review, by the Director of the Bureau of Corrections or the Warden of a provincial or city
jail, of the records of convicts for violations of P.D. No. 1866. The Rules seek to give effect to the
beneficent provisions of R.A. No. 8294, thereby ensuring the early release and reintegration of the
convicts into the community.
Clearly, both P.D. No. 1866 and R.A. No. 6975 authorize the PNP Chief to issue the assailed guidelines.
Corollarily, petitioner disputes President Arroyo’s declaration of a nationwide gun ban, arguing that
"she has no authority to alter, modify, or amend the law on firearms through a mere speech."
First, it must be emphasized that President Arroyo’s speech was just an expression of her policy and a
directive to her subordinate. It cannot, therefore, be argued that President Arroyo enacted a law
through a mere speech.
Second, at the apex of the entire executive officialdom is the President. Section 17, Article VII of the
Constitution specifies his power as Chief Executive, thus: "The President shall have control of all the
executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed." As
Chief Executive, President Arroyo holds the steering wheel that controls the course of her government.
She lays down policies in the execution of her plans and programs. Whatever policy she chooses, she
has her subordinates to implement them. In short, she has the power of control. Whenever a specific
function is entrusted by law or regulation to her subordinate, she may act directly or merely direct
the performance of a duty.24 Thus, when President Arroyo directed respondent Ebdane to suspend the
issuance of PTCFOR, she was just directing a subordinate to perform an assigned duty. Such act is well
within the prerogative of her office.
II
Right to bear arms: Constitutional or Statutory?
Petitioner earnestly contends that his right to bear arms is a constitutionally-protected right. This, he
mainly anchors on various American authorities. We therefore find it imperative to determine the
nature of the right in light of American jurisprudence.
The bearing of arms is a tradition deeply rooted in the English and American society. It antedates not
only the American Constitution but also the discovery of firearms. 25
A provision commonly invoked by the American people to justify their possession of firearms is the
Second Amendment of the Constitution of the United States of America, which reads:
"A well regulated militia, being necessary for the security of free state, the right of the people to keep
and bear Arms, shall not be infringed."
An examination of the historical background of the foregoing provision shows that it pertains to the
citizens’ "collective right" to take arms in defense of the State, not to the citizens’ "individual right" to
own and possess arms. The setting under which the right was contemplated has a profound connection
with the keeping and maintenance of a militia or an armed citizenry. That this is how the right was
construed is evident in early American cases.
The first case involving the interpretation of the Second Amendment that reached the United States
Supreme Court is United States vs. Miller.26 Here, the indictment charged the defendants with
transporting an unregistered "Stevens shotgun" without the required stamped written order, contrary
to the National Firearms Act. The defendants filed a demurrer challenging the facial validity of the
indictment on the ground that the National Firearms Act offends the inhibition of the Second
Amendment. The District Court sustained the demurrer and quashed the indictment. On appeal, the
Supreme Court interpreted the right to bear arms under the Second Amendment as referring to the
collective right of those comprising the Militia – a body of citizens enrolled for military discipline. It
does not pertain to the individual right of citizen to bear arm. Miller expresses its holding as follows:
"In the absence of any evidence tending to show that possession or use of a ‘shotgun having a barrel
of less than eighteen inches in length’ at this time has some reasonable relationship to the
preservation or efficiency of a well regulated militia, we cannot say that the Second Amendment
guarantees the right to keep and bear such an instrument. Certainly it is not within judicial notice that
this weapon is any part of the ordinary military equipment or that its use could contribute to the
common defense.
The same doctrine was re-echoed in Cases vs. United States.27 Here, the Circuit Court of Appeals held
that the Federal Firearms Act, as applied to appellant, does not conflict with the Second Amendment.
It ruled that:
"While [appellant’s] weapon may be capable of military use, or while at least familiarity with it might
be regarded as of value in training a person to use a comparable weapon of military type and
caliber, still there is no evidence that the appellant was or ever had been a member of any military
organization or that his use of the weapon under the circumstances disclosed was in preparation for
a military career. In fact, the only inference possible is that the appellant at the time charged in the
indictment was in possession of, transporting, and using the firearm and ammunition purely and
simply on a frolic of his own and without any thought or intention of contributing to the efficiency
of the well regulated militia which the Second amendment was designed to foster as necessary to
the security of a free state."
With the foregoing jurisprudence, it is erroneous to assume that the US Constitution grants upon the
American people the right to bear arms. In a more explicit language, the United States vs.
Cruikshank28 decreed: "The right of the people to keep and bear arms is not a right granted by the
Constitution. Neither is it in any way dependent upon that instrument." Likewise, in People vs.
Persce,29 the Court of Appeals said: "Neither is there any constitutional provision securing the right to
bear arms which prohibits legislation with reference to such weapons as are specifically before us for
consideration. The provision in the Constitution of the United States that the right of the people to
keep and bear arms shall not be infringed is not designed to control legislation by the state."
With more reason, the right to bear arms cannot be classified as fundamental under the 1987 Philippine
Constitution. Our Constitution contains no provision similar to the Second Amendment, as we aptly
observed in the early case of United States vs. Villareal:30
"The only contention of counsel which would appear to necessitate comment is the claim that the
statute penalizing the carrying of concealed weapons and prohibiting the keeping and the use of
firearms without a license, is in violation of the provisions of section 5 of the Philippine Bill of Rights.
Counsel does not expressly rely upon the prohibition in the United States Constitution against the
infringement of the right of the people of the United States to keep and bear arms (U. S. Constitution,
amendment 2), which is not included in the Philippine Bill. But it may be well, in passing, to point out
that in no event could this constitutional guaranty have any bearing on the case at bar, not only
because it has not been expressly extended to the Philippine Islands, but also because it has been
uniformly held that both this and similar provisions in State constitutions apply only to arms used in
civilized warfare (see cases cited in 40 Cyc., 853, note 18); x x x."
Evidently, possession of firearms by the citizens in the Philippines is the exception, not the rule. The
right to bear arms is a mere statutory privilege, not a constitutional right. It is a mere statutory
creation. What then are the laws that grant such right to the Filipinos? The first real firearm law is Act
No. 1780 enacted by the Philippine Commission on October 12, 1907. It was passed to regulate the
importation, acquisition, possession, use and transfer of firearms. Section 9 thereof provides:
"SECTION 9. Any person desiring to possess one or more firearms for personal protection, or for use
in hunting or other lawful purposes only, and ammunition therefor, shall make application for a
license to possess such firearm or firearms or ammunition as hereinafter provided. Upon making such
application, and before receiving the license, the applicant shall make a cash deposit in the postal
savings bank in the sum of one hundred pesos for each firearm for which the license is to be issued, or
in lieu thereof he may give a bond in such form as the Governor-General may prescribe, payable to the
Government of the Philippine Islands, in the sum of two hundred pesos for each such
firearm: PROVIDED, HOWEVER, That persons who are actually members of gun clubs, duly formed and
organized at the time of the passage of this Act, who at such time have a license to possess firearms,
shall not be required to make the deposit or give the bond prescribed by this section, and the bond
duly executed by such person in accordance with existing law shall continue to be security for the
safekeeping of such arms."
The foregoing provision was restated in Section 88731 of Act No. 2711 that integrated the firearm laws.
Thereafter, President Ferdinand E. Marcos issued P.D. No. 1866. It codified the laws on illegal
possession, manufacture, dealing in, acquisition of firearms, ammunitions or explosives and imposed
stiffer penalties for their violation. R.A. No. 8294 amended some of the provisions of P.D. No. 1866 by
reducing the imposable penalties. Being a mere statutory creation, the right to bear arms cannot be
considered an inalienable or absolute right.
III
Vested Property Right
Section 1, Article III of the Constitution provides that "no person shall be deprived of life, liberty or
property without due process of law." Petitioner invokes this provision, asserting that the revocation
of his PTCFOR pursuant to the assailed Guidelines deprived him of his "vested property right" without
due process of law and in violation of the equal protection of law.
Petitioner cannot find solace to the above-quoted Constitutional provision.
In evaluating a due process claim, the first and foremost consideration must be whether life, liberty or
property interest exists.32 The bulk of jurisprudence is that a license authorizing a person to enjoy a
certain privilege is neither a property nor property right. In Tan vs. The Director of Forestry,33 we ruled
that "a license is merely a permit or privilege to do what otherwise would be unlawful, and is not a
contract between the authority granting it and the person to whom it is granted; neither is it property
or a property right, nor does it create a vested right." In a more emphatic pronouncement, we held
in Oposa vs. Factoran, Jr.34 that:
"Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a
contract, property or a property right protected by the due process clause of the Constitution."
Petitioner, in arguing that his PTCFOR is a constitutionally protected property right, relied heavily on
Bell vs. Burson35 wherein the U.S. Supreme Court ruled that "once a license is issued, continued
possession may become essential in the pursuit of livelihood. Suspension of issued licenses thus
involves state action that adjudicates important interest of the licensees."
Petitioner’s reliance on Bell is misplaced. This case involves a driver’s license, not a license to bear arms.
The catena of American jurisprudence involving license to bear arms is perfectly in accord with our
ruling that a PTCFOR is neither a property nor a property right. In Erdelyi vs. O’Brien,36 the plaintiff who
was denied a license to carry a firearm brought suit against the defendant who was the Chief of Police
of the City of Manhattan Beach, on the ground that the denial violated her constitutional rights to due
process and equal protection of the laws. The United States Court of Appeals Ninth Circuit ruled that
Erdelyi did not have a property interest in obtaining a license to carry a firearm, ratiocinating as follows:
"Property interests protected by the Due Process Clause of the Fourteenth Amendment do not arise
whenever a person has only ‘an abstract need or desire for’, or ‘unilateral expectation of a benefit. x x
x Rather, they arise from ‘legitimate claims of entitlement… defined by existing rules or understanding
that stem from an independent source, such as state law. x x x Concealed weapons are closely regulated
by the State of California. x x x Whether the statute creates a property interest in concealed weapons
licenses depends ‘largely upon the extent to which the statute contains mandatory language that
restricts the discretion of the [issuing authority] to deny licenses to applicants who claim to meet the
minimum eligibility requirements. x x x Where state law gives the issuing authority broad discretion to
grant or deny license application in a closely regulated field, initial applicants do not have a property
right in such licenses protected by the Fourteenth Amendment. See Jacobson, supra, 627 F.2d at 180
(gaming license under Nevada law);"
Similar doctrine was announced in Potts vs. City of Philadelphia,37 Conway vs. King,38 Nichols vs. County
of Sta. Clara,39 and Gross vs. Norton.40 These cases enunciated that the test whether the statute creates
a property right or interest depends largely on the extent of discretion granted to the issuing authority.
In our jurisdiction, the PNP Chief is granted broad discretion in the issuance of PTCFOR. This is evident
from the tenor of the Implementing Rules and Regulations of P.D. No. 1866 which state that "the Chief
of Constabulary may, in meritorious cases as determined by him and under such conditions as he may
impose, authorize lawful holders of firearms to carry them outside of residence." Following the
American doctrine, it is indeed logical to say that a PTCFOR does not constitute a property right
protected under our Constitution.
Consequently, a PTCFOR, just like ordinary licenses in other regulated fields, may be revoked any time.
It does not confer an absolute right, but only a personal privilege to be exercised under existing
restrictions, and such as may thereafter be reasonably imposed.41 A licensee takes his license subject
to such conditions as the Legislature sees fit to impose, and one of the statutory conditions of this
license is that it might be revoked by the selectmen at their pleasure. Such a license is not a contract,
and a revocation of it does not deprive the defendant of any property, immunity, or privilege within
the meaning of these words in the Declaration of Rights.42 The US Supreme Court, in Doyle vs.
Continental Ins. Co,43 held: "The correlative power to revoke or recall a permission is a necessary
consequence of the main power. A mere license by the State is always revocable."
The foregoing jurisprudence has been resonating in the Philippines as early as 1908. Thus, in The
Government of the Philippine Islands vs. Amechazurra44 we ruled:
"x x x no private person is bound to keep arms. Whether he does or not is entirely optional with himself,
but if, for his own convenience or pleasure, he desires to possess arms, he must do so upon such terms
as the Government sees fit to impose, for the right to keep and bear arms is not secured to him by law.
The Government can impose upon him such terms as it pleases. If he is not satisfied with the terms
imposed, he should decline to accept them, but, if for the purpose of securing possession of the arms
he does agree to such conditions, he must fulfill them."
IV issuance of the assailed Guidelines constitutes a reasonable exercise of police power. The ruling in
United States vs. Villareal,47 is relevant, thus:
Police Power
"We think there can be no question as to the reasonableness of a statutory regulation prohibiting the
At any rate, assuming that petitioner’s PTCFOR constitutes a property right protected by the carrying of concealed weapons as a police measure well calculated to restrict the too frequent resort
Constitution, the same cannot be considered as absolute as to be placed beyond the reach of the to such weapons in moments of anger and excitement. We do not doubt that the strict enforcement
State’s police power. All property in the state is held subject to its general regulations, necessary to the of such a regulation would tend to increase the security of life and limb, and to suppress crime and
common good and general welfare. lawlessness, in any community wherein the practice of carrying concealed weapons prevails, and this
without being unduly oppressive upon the individual owners of these weapons. It follows that its
In a number of cases, we laid down the test to determine the validity of a police measure, thus:
enactment by the legislature is a proper and legitimate exercise of the police power of the state."
(1) The interests of the public generally, as distinguished from those of a particular class, require the
V
exercise of the police power; and
Ex post facto law
(2) The means employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals. In Mekin vs. Wolfe,48 an ex post facto law has been defined as one – (a) which makes an action done
before the passing of the law and which was innocent when done criminal, and punishes such action;
Deeper reflection will reveal that the test merely reiterates the essence of the constitutional
or (b) which aggravates a crime or makes it greater than it was when committed; or (c) which changes
guarantees of substantive due process, equal protection, and non-impairment of property rights.
the punishment and inflicts a greater punishment than the law annexed to the crime when it was
It is apparent from the assailed Guidelines that the basis for its issuance was the need for peace and committed; or (d) which alters the legal rules of evidence and receives less or different testimony than
order in the society. Owing to the proliferation of crimes, particularly those committed by the New the law required at the time of the commission of the offense in order to convict the defendant.
People’s Army (NPA), which tends to disturb the peace of the community, President Arroyo deemed it
We see no reason to devote much discussion on the matter. Ex post facto law prohibits retrospectivity
best to impose a nationwide gun ban. Undeniably, the motivating factor in the issuance of the assailed
of penal laws.49 The assailed Guidelines cannot be considered as an ex post facto law because it is
Guidelines is the interest of the public in general.
prospective in its application. Contrary to petitioner’s argument, it would not result in the punishment
The only question that can then arise is whether the means employed are appropriate and reasonably of acts previously committed.
necessary for the accomplishment of the purpose and are not unduly oppressive. In the instant case,
WHEREFORE, the petition is hereby DISMISSED.
the assailed Guidelines do not entirely prohibit possession of firearms. What they proscribe is merely
the carrying of firearms outside of residence. However, those who wish to carry their firearms outside SO ORDERED.
of their residences may re-apply for a new PTCFOR. This we believe is a reasonable regulation. If the
carrying of firearms is regulated, necessarily, crime incidents will be curtailed. Criminals carry their
weapon to hunt for their victims; they do not wait in the comfort of their homes. With the revocation
of all PTCFOR, it would be difficult for criminals to roam around with their guns. On the other hand, it
would be easier for the PNP to apprehend them.

Notably, laws regulating the acquisition or possession of guns have frequently been upheld as
reasonable exercise of the police power.45 In State vs. Reams,46 it was held that the legislature may
regulate the right to bear arms in a manner conducive to the public peace. With the promotion of public
peace as its objective and the revocation of all PTCFOR as the means, we are convinced that the
 OCHOA, JR., EXECUTIVE SECRETARY; AND FLORENCIO B. ABAD, SECRETARY OF THE DEPARTMENT OF
BUDGET AND MANAGEMENT, Respondents.

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

G.R. No. 209135

AUGUSTO L. SY JUCO JR., Ph.D., Petitioner,

vs.
FLORENCIO B. ABAD, IN HIS CAPACITY AS THE SECRETARY OF DEPARTMENT OF BUDGET AND
MANAGEMENT; AND HON. FRANKLIN MAGTUNAO DRILON, IN HIS CAP A CITY AS THE SENATE
PRESIDENT OF THE PHILIPPINES, Respondents.

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

G.R. No. 209136

MANUELITO R. LUNA, Petitioner,

vs.
SECRETARY FLORENCIO ABAD, IN HIS OFFICIAL CAPACITY AS HEAD OF THE DEPARTMENT OF BUDGET
AND MANAGEMENT; AND EXECUTIVE SECRETARY PAQUITO OCHOA, IN HIS OFFICIAL CAPACITY AS
ALTER EGO OF THE PRESIDENT, Respondents.
Republic of the Philippines
x-----------------------x
SUPREME COURT
Manila G.R. No. 209155

EN BANC ATTY. JOSE MALV AR VILLEGAS, JR., Petitioner,

vs.
G.R. No. 209287 July 1, 2014
THE HONORABLE EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.; AND THE SECRETARY OF BUDGET
MARIA CAROLINA P. ARAULLO, CHAIRPERSON, BAGONG ALYANSANG MAKABAYAN; JUDY M. AND MANAGEMENT FLORENCIO B. ABAD, Respondents.
TAGUIWALO, PROFESSOR, UNIVERSITY OF THE PHILIPPINES DILIMAN, CO-CHAIRPERSON,
x-----------------------x
PAGBABAGO; HENRI KAHN, CONCERNED CITIZENS MOVEMENT; REP. LUZ ILAGAN, GABRIELA
WOMEN'S PARTY REPRESENTATIVE; REP. CARLOS ISAGANI ZARATE, BAY AN MUNA PARTY-LIST G.R. No. 209164
REPRESENTATIVE; RENATO M. REYES, JR., SECRETARY GENERAL OF BAYAN; MANUEL K. DAYRIT,
CHAIRMAN, ANG KAPATIRAN PARTY; VENCER MARI E. CRISOSTOMO, CHAIRPERSON, ANAKBAYAN; PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), REPRESENTED BY DEAN FROILAN M.
VICTOR VILLANUEVA, CONVENOR, YOUTH ACT NOW, Petitioners, BACUNGAN, BENJAMIN E. DIOKNO AND LEONOR M. BRIONES, Petitioners,
vs. vs.
BENIGNO SIMEON C. AQUINO III, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES; PAQUITO N. DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR HON. FLORENCIO B. ABAD, Respondents.

x-----------------------x
G.R. No. 209260 OCHOA, JR., EXECUTIVE SECRETARY; AND HON. FLORENCIO B. ABAD, SECRETARY OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
INTEGRATED BAR OF THE PHILIPPINES (IBP), Petitioner,
vs. x-----------------------x
SECRETARY FLORENCIO B. ABAD OF THE DEPARTMENT OF BUDGET AND MANAGEMENT
(DBM),Respondent. G.R. No. 209569

x-----------------------x VOLUNTEERS AGAINST CRIME AND CORRUPTION (VACC), REPRESENTED BY DANTE L.

G.R. No. 209442
GRECO ANTONIOUS BEDA B. BELGICA; BISHOP REUBEN MABANTE AND REV. JOSE L.
GONZALEZ,Petitioners,
vs.
PRESIDENT BENIGNO SIMEON C. AQUINO III, THE SENATE OF THE PHILIPPINES, REPRESENTED BY
SENATE PRESIDENT FRANKLIN M. DRILON; THE HOUSE OF REPRESENTATIVES, REPRESENTED BY
SPEAKER FELICIANO BELMONTE, JR.; THE EXECUTIVE OFFICE, REPRESENTED BY EXECUTIVE
SECRETARY PAQUITO N. OCHOA, JR.; THE DEPARTMENT OF BUDGET AND MANAGEMENT,
REPRESENTED BY SECRETARY FLORENCIO ABAD; THE DEPARTMENT OF FINANCE, REPRESENTED BY
SECRETARY CESAR V. PURISIMA; AND THE BUREAU OF TREASURY, REPRESENTED BY ROSALIA V. DE
LEON, Respondents.
x-----------------------x
G.R. No. 209517
CONFEDERATION FOR UNITY, RECOGNITION AND ADV AN CEMENT OF GOVERNMENT EMPLOYEES
(COURAGE), REPRESENTED BY ITS 1ST VICE PRESIDENT, SANTIAGO DASMARINAS, JR.; ROSALINDA
NARTATES, FOR HERSELF AND AS NATIONAL PRESIDENT OF THE CONSOLIDATED UNION OF
EMPLOYEES NATIONAL HOUSING AUTHORITY (CUENHA); MANUEL BACLAGON, FOR HIMSELF AND
AS PRESIDENT OF THE SOCIAL WELFARE EMPLOYEES ASSOCIATION OF THE PHILIPPINES,
DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CENTRAL OFFICE (SWEAP-DSWD CO);
ANTONIA PASCUAL, FOR HERSELF AND AS NATIONAL PRESIDENT OF THE DEPARTMENT OF
AGRARIAN REFORM EMPLOYEES ASSOCIATION (DAREA); ALBERT MAGALANG, FOR HIMSELF AND AS
PRESIDENT OF THE ENVIRONMENT AND MANAGEMENT BUREAU EMPLOYEES UNION (EMBEU); AND
MARCIAL ARABA, FOR HIMSELF AND AS PRESIDENT OF THE KAPISANAN PARA SA KAGALINGAN NG
MGA KAW ANI NG MMDA (KKKMMDA), Petitioners,
vs.
BENIGNO SIMEON C. AQUINO Ill, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES; PAQUITO
JIMENEZ,Petitioner,
vs.
PAQUITO N. OCHOA, EXECUTIVE SECRETARY, AND FLORENCIO B. ABAD, SECRETARY OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT, Respondents.
DECISION
BERSAMIN, J.:
For resolution are the consolidated petitions assailing the constitutionality of the Disbursement
Acceleration Program(DAP), National Budget Circular (NBC) No. 541, and related issuances of the
Department of Budget and Management (DBM) implementing the DAP.
At the core of the controversy is Section 29(1) of Article VI of the 1987 Constitution, a provision of the
fundamental law that firmly ordains that "[n]o money shall be paid out of the Treasury except in
pursuance of an appropriation made by law." The tenor and context of the challenges posed by the
petitioners against the DAP indicate that the DAP contravened this provision by allowing the Executive
to allocate public money pooled from programmed and unprogrammed funds of its various agencies
in the guise of the President exercising his constitutional authority under Section 25(5) of the 1987
Constitution to transfer funds out of savings to augment the appropriations of offices within the
Executive Branch of the Government. But the challenges are further complicated by the interjection of
allegations of transfer of funds to agencies or offices outside of the Executive.
Antecedents
What has precipitated the controversy?
On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in the Senate of the
Philippines to reveal that some Senators, including himself, had been allotted an additional ₱50 Million
each as "incentive" for voting in favor of the impeachment of Chief Justice Renato C. Corona.
Responding to Sen. Estrada’s revelation, Secretary Florencio Abad of the DBM issued a public
statement entitled Abad: Releases to Senators Part of Spending Acceleration Program,1 explaining that
the funds released to the Senators had been part of the DAP, a program designed by the DBM to ramp
up spending to accelerate economic expansion. He clarified that the funds had been released to the
Senators based on their letters of request for funding; and that it was not the first time that releases
from the DAP had been made because the DAP had already been instituted in 2011 to ramp up
spending after sluggish disbursements had caused the growth of the gross domestic product (GDP) to
slow down. He explained that the funds under the DAP were usually taken from (1) unreleased
appropriations under Personnel Services;2 (2) unprogrammed funds; (3) carry-over appropriations
unreleased from the previous year; and (4) budgets for slow-moving items or projects that had been
realigned to support faster-disbursing projects.
The DBM soon came out to claim in its website 3 that the DAP releases had been sourced from savings
generated by the Government, and from unprogrammed funds; and that the savings had been derived
from (1) the pooling of unreleased appropriations, like unreleased Personnel Services 4 appropriations
that would lapse at the end of the year, unreleased appropriations of slow-moving projects and
discontinued projects per zero based budgeting findings; 5 and (2) the withdrawal of unobligated
allotments also for slow-moving programs and projects that had been earlier released to the agencies
of the National Government.
The DBM listed the following as the legal bases for the DAP’s use of savings, 6 namely: (1) Section 25(5),
Article VI of the 1987 Constitution, which granted to the President the authority to augment an item
for his office in the general appropriations law; (2) Section 49 (Authority to Use Savings for Certain
Purposes) and Section 38 (Suspension of Expenditure Appropriations), Chapter 5, Book VI of Executive
Order (EO) No. 292 (Administrative Code of 1987); and (3) the General Appropriations Acts (GAAs) of
2011, 2012 and 2013, particularly their provisions on the (a) use of savings; (b) meanings of savings and
augmentation; and (c) priority in the use of savings.
As for the use of unprogrammed funds under the DAP, the DBM cited as legal bases the special
provisions on unprogrammed fund contained in the GAAs of 2011, 2012 and 2013.
The revelation of Sen. Estrada and the reactions of Sec. Abad and the DBM brought the DAP to the
consciousness of the Nation for the first time, and made this present controversy inevitable. That the
issues against the DAP came at a time when the Nation was still seething in anger over Congressional
pork barrel – "an appropriation of government spending meant for localized projects and secured solely
or primarily to bring money to a representative’s district"7 – excited the Nation as heatedly as the pork
barrel controversy.
Nine petitions assailing the constitutionality of the DAP and the issuances relating to the DAP were filed
within days of each other, as follows: G.R. No. 209135 (Syjuco), on October 7, 2013; G.R. No. 209136
(Luna), on October 7, 2013; G.R. No. 209155 (Villegas),8 on October 16, 2013; G.R. No. 209164
(PHILCONSA), on October 8, 2013; G.R. No. 209260 (IBP), on October 16, 2013; G.R. No. 209287
(Araullo), on October 17, 2013; G.R. No. 209442 (Belgica), on October 29, 2013; G.R. No. 209517
(COURAGE), on November6, 2013; and G.R. No. 209569 (VACC), on November 8, 2013.
In G.R. No. 209287 (Araullo), the petitioners brought to the Court’s attention NBC No. 541 (Adoption
of Operational Efficiency Measure – Withdrawal of Agencies’ Unobligated Allotments as of June 30,
2012), alleging that NBC No. 541, which was issued to implement the DAP, directed the withdrawal of
unobligated allotments as of June 30, 2012 of government agencies and offices with low levels of
obligations, both for continuing and current allotments.
In due time, the respondents filed their Consolidated Comment through the Office of the Solicitor
General (OSG).
The Court directed the holding of oral arguments on the significant issues raised and joined.
Issues
Under the Advisory issued on November 14, 2013, the presentations of the parties during the oral
arguments were limited to the following, to wit:
Procedural Issue:
A. Whether or not certiorari, prohibition, and mandamus are proper remedies to assail the
constitutionality and validity of the Disbursement Acceleration Program (DAP), National Budget
Circular (NBC) No. 541, and all other executive issuances allegedly implementing the DAP. Subsumed
in this issue are whether there is a controversy ripe for judicial determination, and the standing of
petitioners.
Substantive Issues:
B. Whether or not the DAP violates Sec. 29, Art. VI of the 1987 Constitution, which provides: "No money
shall be paid out of the Treasury except in pursuance of an appropriation made by law."
C. Whether or not the DAP, NBC No. 541, and all other executive issuances allegedly implementing the
DAP violate Sec. 25(5), Art. VI of the 1987 Constitution insofar as:
(a)They treat the unreleased appropriations and unobligated allotments withdrawn from government
agencies as "savings" as the term is used in Sec. 25(5), in relation to the provisions of the GAAs of 2011,
2012 and 2013;
(b)They authorize the disbursement of funds for projects or programs not provided in the GAAs for the
Executive Department; and
(c)They "augment" discretionary lump sum appropriations in the GAAs.
D. Whether or not the DAP violates: (1) the Equal Protection Clause, (2) the system of checks and
balances, and (3) the principle of public accountability enshrined in the 1987 Constitution considering
that it authorizes the release of funds upon the request of legislators.
E. Whether or not factual and legal justification exists to issue a temporary restraining order to restrain
the implementation of the DAP, NBC No. 541, and all other executive issuances allegedly implementing
the DAP.
In its Consolidated Comment, the OSG raised the matter of unprogrammed funds in order to support
its argument regarding the President’s power to spend. During the oral arguments, the propriety of
releasing unprogrammed funds to support projects under the DAP was considerably discussed. The
petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442 (Belgica) dwelled on unprogrammed funds
in their respective memoranda. Hence, an additional issue for the oral arguments is stated as follows:
F. Whether or not the release of unprogrammed funds under the DAP was in accord with the GAAs.
During the oral arguments held on November 19, 2013, the Court directed Sec. Abad to submit a list of
savings brought under the DAP that had been sourced from (a) completed programs; (b) discontinued
or abandoned programs; (c) unpaid appropriations for compensation; (d) a certified copy of the
President’s directive dated June 27, 2012 referred to in NBC No. 541; and (e) all circulars or orders
issued in relation to the DAP.9
In compliance, the OSG submitted several documents, as follows:
(1) A certified copy of the Memorandum for the President dated June 25, 2012 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment);10
(2) Circulars and orders, which the respondents identified as related to the DAP, namely:
a. NBC No. 528 dated January 3, 2011 (Guidelines on the Release of Funds for FY 2011);
b. NBC No. 535 dated December 29, 2011 (Guidelines on the Release of Funds for FY 2012);
c. NBC No. 541 dated July 18, 2012 (Adoption of Operational Efficiency Measure – Withdrawal of
Agencies’ Unobligated Allotments as of June 30, 2012);
d. NBC No. 545 dated January 2, 2013 (Guidelines on the Release of Funds for FY 2013);
e. DBM Circular Letter No. 2004-2 dated January 26, 2004 (Budgetary Treatment of
Commitments/Obligations of the National Government);
f. COA-DBM Joint Circular No. 2013-1 dated March 15, 2013 (Revised Guidelines on the Submission of
Quarterly Accountability Reports on Appropriations, Allotments, Obligations and Disbursements);
g. NBC No. 440 dated January 30, 1995 (Adoption of a Simplified Fund Release System in the
Government).
(3) A breakdown of the sources of savings, including savings from discontinued projects and unpaid
appropriations for compensation from 2011 to 2013
On January 28, 2014, the OSG, to comply with the Resolution issued on January 21, 2014 directing the
respondents to submit the documents not yet submitted in compliance with the directives of the Court
or its Members, submitted several evidence packets to aid the Court in understanding the factual bases
of the DAP, to wit:
(1) First Evidence Packet11 – containing seven memoranda issued by the DBM through Sec. Abad,
inclusive of annexes, listing in detail the 116 DAP identified projects approved and duly signed by the
President, as follows:
a. Memorandum for the President dated October 12, 2011 (FY 2011 Proposed Disbursement
Acceleration Program (Projects and Sources of Funds);
b. Memorandum for the President dated December 12, 2011 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and its Realignment);
c. Memorandum for the President dated June 25, 2012 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and their Realignment);
d. Memorandum for the President dated September 4, 2012 (Release of funds for other priority
projects and expenditures of the Government);
e. Memorandum for the President dated December 19, 2012 (Proposed Priority Projects and
Expenditures of the Government);
f. Memorandum for the President dated May 20, 2013 (Omnibus Authority to Consolidate
Savings/Unutilized Balances and their Realignment to Fund the Quarterly Disbursement Acceleration
Program); and
g. Memorandum for the President dated September 25, 2013 (Funding for the Task Force Pablo
Rehabilitation Plan).
(2) Second Evidence Packet12 – consisting of 15 applications of the DAP, with their corresponding
Special Allotment Release Orders (SAROs) and appropriation covers;
(3) Third Evidence Packet13 – containing a list and descriptions of 12 projects under the DAP;
G.R. No. 209135 (Syjuco) Certiorari, Prohibition and Mandamus
(4) Fourth Evidence Packet14 – identifying the DAP-related portions of the Annual Financial Report (AFR)
of the Commission on Audit for 2011 and 2012; G.R. No. 209136 (Luna) Certiorariand Prohibition

(5) Fifth Evidence Packet15 – containing a letter of Department of Transportation and

Communications(DOTC) Sec. Joseph Abaya addressed to Sec. Abad recommending the withdrawal of G.R. No. 209155 (Villegas) Certiorariand Prohibition
funds from his agency, inclusive of annexes; and
G.R. No. 209164 (PHILCONSA) Certiorariand Prohibition
(6) Sixth Evidence Packet16 – a print-out of the Solicitor General’s visual presentation for the January
28, 2014 oral arguments.
G.R. No. 209260 (IBP) Prohibition
17 18
On February 5, 2014, the OSG forwarded the Seventh Evidence Packet, which listed the sources of
funds brought under the DAP, the uses of such funds per project or activity pursuant to DAP, and the G.R. No. 209287 (Araullo) Certiorariand Prohibition
legal bases thereof.

On February 14, 2014, the OSG submitted another set of documents in further compliance with the
Resolution dated January 28, 2014, viz:
(1) Certified copies of the certifications issued by the Bureau of Treasury to the effect that the revenue
collections exceeded the original revenue targets for the years 2011, 2012 and 2013, including
collections arising from sources not considered in the original revenue targets, which certifications
were required for the release of the unprogrammed funds as provided in Special Provision No. 1 of
Article XLV, Article XVI, and Article XLV of the 2011, 2012 and 2013 GAAs; and (2) A report on releases
of savings of the Executive Department for the use of the Constitutional Commissions and other
branches of the Government, as well as the fund releases to the Senate and the Commission on
Elections (COMELEC).
RULING
I.
Procedural Issue:
G.R. No. 209442 (Belgica) Certiorari
G.R. No. 209517 (COURAGE) Certiorari and Prohibition
G.R. No. 209569 (VACC) Certiorari and Prohibition
The respondents submit that there is no actual controversy that is ripe for adjudication in the absence
of adverse claims between the parties;19 that the petitioners lacked legal standing to sue because no
allegations were made to the effect that they had suffered any injury as a result of the adoption of the
DAP and issuance of NBC No. 541; that their being taxpayers did not immediately confer upon the
petitioners the legal standing to sue considering that the adoption and implementation of the DAP and
the issuance of NBC No. 541 were not in the exercise of the taxing or spending power of Congress;20 and
that even if the petitioners had suffered injury, there were plain, speedy and adequate remedies in the
ordinary course of law available to them, like assailing the regularity of the DAP and related issuances
before the Commission on Audit (COA) or in the trial courts. 21

a) The petitions under Rule 65 are proper remedies
All the petitions are filed under Rule 65 of the Rules of Court, and include applications for the issuance
of writs of preliminary prohibitory injunction or temporary restraining orders. More specifically, the
nature of the petitions is individually set forth hereunder, to wit:
The respondents aver that the special civil actions of certiorari and prohibition are not proper actions
for directly assailing the constitutionality and validity of the DAP, NBC No. 541, and the other executive
issuances implementing the DAP.22
In their memorandum, the respondents further contend that there is no authorized proceeding under
the Constitution and the Rules of Court for questioning the validity of any law unless there is an actual
case or controversy the resolution of which requires the determination of the constitutional question;
that the jurisdiction of the Court is largely appellate; that for a court of law to pass upon the
constitutionality of a law or any act of the Government when there is no case or controversy is for that
court to set itself up as a reviewer of the acts of Congress and of the President in violation of the
principle of separation of powers; and that, in the absence of a pending case or controversy involving
the DAP and NBC No. 541, any decision herein could amount to a mere advisory opinion that no court
can validly render.23
The respondents argue that it is the application of the DAP to actual situations that the petitioners can
question either in the trial courts or in the COA; that if the petitioners are dissatisfied with the ruling
either of the trial courts or of the COA, they can appeal the decision of the trial courts by petition for
review on certiorari, or assail the decision or final order of the COA by special civil action for certiorari
under Rule 64 of the Rules of Court.24
The respondents’ arguments and submissions on the procedural issue are bereft of merit.
Section 1, Article VIII of the 1987 Constitution expressly provides:
Section 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.
Thus, the Constitution vests judicial power in the Court and in such lower courts as may be established
by law. In creating a lower court, Congress concomitantly determines the jurisdiction of that court, and
that court, upon its creation, becomes by operation of the Constitution one of the repositories of
judicial power.25 However, only the Court is a constitutionally created court, the rest being created by
Congress in its exercise of the legislative power.
The Constitution states that judicial power includes the duty of the courts of justice not only "to settle
actual controversies involving rights which are legally demandable and enforceable" but also "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." It has thereby expanded
the concept of judicial power, which up to then was confined to its traditional ambit of settling actual
controversies involving rights that were legally demandable and enforceable.
The background and rationale of the expansion of judicial power under the 1987 Constitution were laid
out during the deliberations of the 1986 Constitutional Commission by Commissioner Roberto R.
Concepcion (a former Chief Justice of the Philippines) in his sponsorship of the proposed provisions on
the Judiciary, where he said:–
The Supreme Court, like all other courts, has one main function: to settle actual controversies involving
conflicts of rights which are demandable and enforceable. There are rights which are guaranteed by
law but cannot be enforced by a judicial party. In a decided case, a husband complained that his wife
was unwilling to perform her duties as a wife. The Court said: "We can tell your wife what her duties
as such are and that she is bound to comply with them, but we cannot force her physically to discharge
her main marital duty to her husband. There are some rights guaranteed by law, but they are so
personal that to enforce them by actual compulsion would be highly derogatory to human dignity."
This is why the first part of the second paragraph of Section 1 provides that: Judicial power includes
the duty of courts to settle actual controversies involving rights which are legally demandable or
enforceable…
The courts, therefore, cannot entertain, much less decide, hypothetical questions. In a presidential
system of government, the Supreme Court has, also, another important function. The powers of
government are generally considered divided into three branches: the Legislative, the Executive and
the Judiciary. Each one is supreme within its own sphere and independent of the others. Because of
that supremacy power to determine whether a given law is valid or not is vested in courts of justice.
Briefly stated, courts of justice determine the limits of power of the agencies and offices of the
government as well as those of its officers. In other words, the judiciary is the final arbiter on the
question whether or not a branch of government or any of its officials has acted without jurisdiction or
in excess of jurisdiction, or so capriciously as to constitute an abuse of discretion amounting to excess
of jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass judgmenton
matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter evade
the duty to settle matters of this nature, by claiming that such matters constitute a political question.
(Bold emphasis supplied)26
Upon interpellation by Commissioner Nolledo, Commissioner Concepcion clarified the scope of judicial
power in the following manner:–
MR. NOLLEDO. x x x
The second paragraph of Section 1 states: "Judicial power includes the duty of courts of justice to settle
actual controversies…" The term "actual controversies" according to the Commissioner should refer to
questions which are political in nature and, therefore, the courts should not refuse to decide those
political questions. But do I understand it right that this is restrictive or only an example? I know there
are cases which are not actual yet the court can assume jurisdiction. An example is the petition for
declaratory relief.
May I ask the Commissioner’s opinion about that?
MR. CONCEPCION. The Supreme Court has no jurisdiction to grant declaratory judgments.
MR. NOLLEDO. The Gentleman used the term "judicial power" but judicial power is not vested in the
Supreme Court alone but also in other lower courts as may be created by law.
MR. CONCEPCION. Yes.
MR. NOLLEDO. And so, is this only an example?
MR. CONCEPCION. No, I know this is not. The Gentleman seems to identify political questions with
jurisdictional questions. But there is a difference.
MR. NOLLEDO. Because of the expression "judicial power"?
MR. CONCEPCION. No. Judicial power, as I said, refers to ordinary cases but where there is a question
as to whether the government had authority or had abused its authority to the extent of lacking
jurisdiction or excess of jurisdiction, that is not a political question. Therefore, the court has the duty
to decide.27
Our previous Constitutions equally recognized the extent of the power of judicial review and the great
responsibility of the Judiciary in maintaining the allocation of powers among the three great branches
of Government. Speaking for the Court in Angara v. Electoral Commission,28 Justice Jose P. Laurel
intoned:
x x x In times of social disquietude or political excitement, the great landmarks of the Constitution are
apt to be forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial department is
the only constitutional organ which can be called upon to determine the proper allocation of powers
between the several department and among the integral or constituent units thereof.
xxxx
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 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. This is in truth all
that is involved in what is termed "judicial supremacy" which properly is the power of judicial review
under the Constitution. x x x29
What are the remedies by which the grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government may be determined under
the Constitution?
The present Rules of Court uses two special civil actions for determining and correcting grave abuse of
discretion amounting to lack or excess of jurisdiction. These are the special civil actions for certiorari
and prohibition, and both are governed by Rule 65. A similar remedy of certiorari exists under Rule 64,
but the remedy is expressly applicable only to the judgments and final orders or resolutions of the
Commission on Elections and the Commission on Audit.
The ordinary nature and function of the writ of certiorari in our present system are aptly explained in
Delos Santos v. Metropolitan Bank and Trust Company:30
In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out
of Chancery, or the King’s Bench, commanding agents or officers of the inferior courts to return the
record of a cause pending before them, so as to give the party more sure and speedy justice, for the
writ would enable the superior court to determine from an inspection of the record whether the
inferior court’s judgment was rendered without authority. The errors were of such a nature that, if
allowed to stand, they would result in a substantial injury to the petitioner to whom no other remedy
was available. If the inferior court acted without authority, the record was then revised and corrected
in matters of law. The writ of certiorari was limited to cases in which the inferior court was said to be
exceeding its jurisdiction or was not proceeding according to essential requirements of law and would
lie only to review judicial or quasi-judicial acts.
The concept of the remedy of certiorari in our judicial system remains much the same as it has been in
the common law. In this jurisdiction, however, the exercise of the power to issue the writ of certiorari
is largely regulated by laying down the instances or situations in the Rules of Court in which a superior
court may issue the writ of certiorari to an inferior court or officer. Section 1, Rule 65 of the Rules of
Court compellingly provides the requirements for that purpose, viz:
xxxx
The sole office of the writ of certiorari is the correction of errors of jurisdiction, which includes the
commission of grave abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse
of discretion is not enough to warrant the issuance of the writ. The abuse of discretion must be grave,
which means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board
evaded a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation of
law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of jurisdiction. 31
Although similar to prohibition in that it will lie for want or excess of jurisdiction, certiorari is to be
distinguished from prohibition by the fact that it is a corrective remedy used for the re-examination of
some action of an inferior tribunal, and is directed to the cause or proceeding in the lower court and
not to the court itself, while prohibition is a preventative remedy issuing to restrain future action, and
is directed to the court itself.32 The Court expounded on the nature and function of the writ of
prohibition in Holy Spirit Homeowners Association, Inc. v. Defensor: 33
A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a quasi-
legislative function. Prohibition is an extraordinary writ directed against any tribunal, corporation,
board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, ordering
said entity or person to desist from further proceedings when said proceedings are without or in excess
of said entity’s or person’s jurisdiction, or are accompanied with grave abuse of discretion, and there
is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law. Prohibition
lies against judicial or ministerial functions, but not against legislative or quasi-legislative functions.
Generally, the purpose of a writ of prohibition is to keep a lower court within the limits of its jurisdiction
in order to maintain the administration of justice in orderly channels. Prohibition is the proper remedy
to afford relief against usurpation of jurisdiction or power by an inferior court, or when, in the exercise
of jurisdiction in handling matters clearly within its cognizance the inferior court transgresses the
bounds prescribed to it by the law, or where there is no adequate remedy available in the ordinary
course of law by which such relief can be obtained. Where the principal relief sought is to invalidate an
IRR, petitioners’ remedy is an ordinary action for its nullification, an action which properly falls under
the jurisdiction of the Regional Trial Court. In any case, petitioners’ allegation that "respondents are
performing or threatening to perform functions without or in excess of their jurisdiction" may
appropriately be enjoined by the trial court through a writ of injunction or a temporary restraining
order.
With respect to the Court, however, the remedies of certiorari and prohibition are necessarily broader
in scope and reach, and the writ of certiorari or prohibition may be issued to correct errors of
jurisdiction committed not only by a tribunal, corporation, board or officer exercising judicial, quasi-
judicial or ministerial functions but also to set right, undo and restrain any act of grave abuse of
discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the
Government, even if the latter does not exercise judicial, quasi-judicial or ministerial functions. This
application is expressly authorized by the text of the second paragraph of Section 1, supra.
Thus, petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues
and to review and/or prohibit or nullify the acts of legislative and executive officials. 34
Necessarily, in discharging its duty under Section 1, supra, to set right and undo any act of grave abuse
of discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the
Government, the Court is not at all precluded from making the inquiry provided the challenge was
properly brought by interested or affected parties. The Court has been thereby entrusted expressly or
by necessary implication with both the duty and the obligation of determining, in appropriate cases,
the validity of any assailed legislative or executive action. This entrustment is consistent with the
republican system of checks and balances.35
Following our recent dispositions concerning the congressional pork barrel, the Court has become more
alert to discharge its constitutional duty. We will not now refrain from exercising our expanded judicial
power in order to review and determine, with authority, the limitations on the Chief Executive’s
spending power.
b) Requisites for the exercise of the
power of judicial review were
complied with
The requisites for the exercise of the power of judicial review are the following, namely: (1) there must
bean actual case or justiciable controversy before the Court; (2) the question before the Court must be
ripe for adjudication; (3) the person challenging the act must be a proper party; and (4) the issue of
constitutionality must be raised at the earliest opportunity and must be the very litis mota of the case. 36
The first requisite demands that there be an actual case calling for the exercise of judicial power by the
Court.37 An actual case or controversy, in the words of Belgica v. Executive Secretary Ochoa: 38
x x x is one which involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of
judicial resolution as distinguished from a hypothetical or abstract difference or dispute. In other
words, "[t]here must be a contrariety of legal rights that can be interpreted and enforced on the basis
of existing law and jurisprudence." Related to the requirement of an actual case or controversy is the
requirement of "ripeness," meaning that the questions raised for constitutional scrutiny are already
ripe for adjudication. "A question is ripe for adjudication when the act being challenged has had a direct
adverse effect on the individual challenging it. It is a prerequisite that something had then been
accomplished or performed by either branch before a court may come into the picture, and the
petitioner must allege the existence of an immediate or threatened injury to itself as a result of the
challenged action." "Withal, courts will decline to pass upon constitutional issues through advisory
opinions, bereft as they are of authority to resolve hypothetical or moot questions."
An actual and justiciable controversy exists in these consolidated cases. The incompatibility of the
perspectives of the parties on the constitutionality of the DAP and its relevant issuances satisfy the
requirement for a conflict between legal rights. The issues being raised herein meet the requisite
ripeness considering that the challenged executive acts were already being implemented by the DBM,
and there are averments by the petitioners that such implementation was repugnant to the letter and
spirit of the Constitution. Moreover, the implementation of the DAP entailed the allocation and
expenditure of huge sums of public funds. The fact that public funds have been allocated, disbursed or
utilized by reason or on account of such challenged executive acts gave rise, therefore, to an actual
controversy that is ripe for adjudication by the Court.
It is true that Sec. Abad manifested during the January 28, 2014 oral arguments that the DAP as a
program had been meanwhile discontinued because it had fully served its purpose, saying: "In
conclusion, Your Honors, may I inform the Court that because the DAP has already fully served its
purpose, the Administration’s economic managers have recommended its termination to the
President. x x x."39
The Solicitor General then quickly confirmed the termination of the DAP as a program, and urged that
its termination had already mooted the challenges to the DAP’s constitutionality, viz:
DAP as a program, no longer exists, thereby mooting these present cases brought to challenge its
constitutionality. Any constitutional challenge should no longer be at the level of the program, which
is now extinct, but at the level of its prior applications or the specific disbursements under the now
defunct policy. We challenge the petitioners to pick and choose which among the 116 DAP projects
they wish to nullify, the full details we will have provided by February 5. We urge this Court to be
cautious in limiting the constitutional authority of the President and the Legislature to respond to the
dynamic needs of the country and the evolving demands of governance, lest we end up straight
jacketing our elected representatives in ways not consistent with our constitutional structure and
democratic principles.40
A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use or value. 41
The Court cannot agree that the termination of the DAP as a program was a supervening event that
effectively mooted these consolidated cases. Verily, the Court had in the past exercised its power of
judicial review despite the cases being rendered moot and academic by supervening events, like: (1)
when there was a grave violation of the Constitution; (2) when the case involved a situation of
exceptional character and was of paramount public interest; (3) when the constitutional issue raised
required the formulation of controlling principles to guide the Bench, the Bar and the public; and (4)
when the case was capable of repetition yet evading review.42
Assuming that the petitioners’ several submissions against the DAP were ultimately sustained by the
Court here, these cases would definitely come under all the exceptions. Hence, the Court should not
abstain from exercising its power of judicial review.
Did the petitioners have the legal standing to sue?
Legal standing, as a requisite for the exercise of judicial review, refers to "a right of appearance in a
court of justice on a given question."43 The concept of legal standing, or locus standi, was particularly
discussed in De Castro v. Judicial and Bar Council,44 where the Court said:
In public or constitutional litigations, the Court is often burdened with the determination of the locus
standi of the petitioners due to the ever-present need to regulate the invocation of the intervention of
the Court to correct any official action or policy in order to avoid obstructing the efficient functioning
of public officials and offices involved in public service. It is required, therefore, that the petitioner
must have a personal stake in the outcome of the controversy, for, as indicated in Agan, Jr. v. Philippine
International Air Terminals Co., Inc.:
The question on legal 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."
Accordingly, it has been held that the interest of a person assailing the constitutionality of a statute
must be direct and personal. He must be able to show, not only that the law or any government act is
invalid, but also that he sustained or is in imminent danger of sustaining some direct injury as a result
of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that
the person complaining has been or is about to be denied some right or privilege to which he is lawfully
entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or
act complained of.
It is true that as early as in 1937, in People v. Vera, the Court adopted the direct injury test for
determining whether a petitioner in a public action had locus standi. There, the Court held that the
person who would assail 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." Vera was followed in Custodio
v. President of the Senate, Manila Race Horse Trainers’ Association v. De la Fuente, Anti-Chinese League
of the Philippines v. Felix, and Pascual v. Secretary of Public Works.
Yet, the Court has also held that the requirement of locus standi, being a mere procedural technicality,
can be waived by the Court in the exercise of its discretion. For instance, in 1949, in Araneta v.
Dinglasan, the Court liberalized the approach when the cases had "transcendental importance." Some
notable controversies whose petitioners did not pass the direct injury test were allowed to be treated
in the same way as in Araneta v. Dinglasan.
In the 1975 decision in Aquino v. Commission on Elections, this Court decided to resolve the issues
raised by the petition due to their "far reaching implications," even if the petitioner had no personality
to file the suit. The liberal approach of Aquino v. Commission on Elections has been adopted in several
notable cases, permitting ordinary citizens, legislators, and civic organizations to bring their suits
involving the constitutionality or validity of laws, regulations, and rulings.
However, the assertion of a public right as a predicate for challenging a supposedly illegal or
unconstitutional executive or legislative action rests on the theory that the petitioner represents the
public in general. Although such petitioner may not be as adversely affected by the action complained
against as are others, it is enough that he sufficiently demonstrates in his petition that he is entitled to
protection or relief from the Court in the vindication of a public right.
Quite often, as here, the petitioner in a public action sues as a citizen or taxpayer to gain locus standi.
That is not surprising, for even if the issue may appear to concern only the public in general, such
capacities nonetheless equip the petitioner with adequate interest to sue. In David v. Macapagal-
Arroyo, the Court aptly explains why:
Case law in most jurisdiction snow allows both "citizen" and "taxpayer" standing in public actions. The
distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a taxpayer’s
suit is in a different category from the plaintiff in a citizen’s suit. In the former, the plaintiff is affected
by the expenditure of public funds, while in the latter, he is but the mere instrument of the public
concern. As held by the New York Supreme Court in People ex rel Case v. Collins: "In matter of mere
public right, however…the people are the real parties…It is at least the right, if not the duty, of every
citizen to interfere and see that a public offence be properly pursued and punished, and that a public
grievance be remedied." With respect to taxpayer’s suits, Terr v. Jordan held that "the right of a citizen
and a taxpayer to maintain an action in courts to restrain the unlawful use of public funds to his injury
cannot be denied."45
The Court has cogently observed in Agan, Jr. v. Philippine International Air Terminals Co., Inc. 46 that
"[s]tanding is a peculiar concept in constitutional law because in some cases, suits are not brought by
parties who have been personally injured by the operation of a law or any other government act but
by concerned citizens, taxpayers or voters who actually sue in the public interest."
Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners have invoked their capacities as
taxpayers who, by averring that the issuance and implementation of the DAP and its relevant issuances
involved the illegal disbursements of public funds, have an interest in preventing the further dissipation
of public funds. The petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442 (Belgica) also assert
their right as citizens to sue for the enforcement and observance of the constitutional limitations on
the political branches of the Government.47
On its part, PHILCONSA simply reminds that the Court has long recognized its legal standing to bring
cases upon constitutional issues.48 Luna, the petitioner in G.R. No. 209136, cites his additional capacity
as a lawyer. The IBP, the petitioner in G.R. No. 209260, stands by "its avowed duty to work for the rule
of law and of paramount importance of the question in this action, not to mention its civic duty as the
official association of all lawyers in this country."49
Under their respective circumstances, each of the petitioners has established sufficient interest in the
outcome of the controversy as to confer locus standi on each of them.
In addition, considering that the issues center on the extent of the power of the Chief Executive to
disburse and allocate public funds, whether appropriated by Congress or not, these cases pose issues
that are of transcendental importance to the entire Nation, the petitioners included. As such, the
determination of such important issues call for the Court’s exercise of its broad and wise discretion "to
waive the requirement and so remove the impediment to its addressing and resolving the serious
constitutional questions raised."50
II.
Substantive Issues
1.
Overview of the Budget System
An understanding of the Budget System of the Philippines will aid the Court in properly appreciating
and justly resolving the substantive issues.
a) Origin of the Budget System
The term "budget" originated from the Middle English word bouget that had derived from the Latin
word bulga (which means bag or purse).51
In the Philippine setting, Commonwealth Act (CA) No. 246 (Budget Act) defined "budget" as the
financial program of the National Government for a designated fiscal year, consisting of the statements
of estimated receipts and expenditures for the fiscal year for which it was intended to be effective
based on the results of operations during the preceding fiscal years. The term was given a different
meaning under Republic Act No. 992 (Revised Budget Act) by describing the budget as the delineation
of the services and products, or benefits that would accrue to the public together with the estimated
unit cost of each type of service, product or benefit.52 For a forthright definition, budget should simply
be identified as the financial plan of the Government,53 or "the master plan of government."54
The concept of budgeting has not been the product of recent economies. In reality, financing public
goals and activities was an idea that existed from the creation of the State.55 To protect the people, the
territory and sovereignty of the State, its government must perform vital functions that required public
expenditures. At the beginning, enormous public expenditures were spent for war activities,
preservation of peace and order, security, administration of justice, religion, and supply of limited
goods and services.56 In order to finance those expenditures, the State raised revenues through taxes
and impositions.57 Thus, budgeting became necessary to allocate public revenues for specific
government functions.58 The State’s budgeting mechanism eventually developed through the years
with the growing functions of its government and changes in its market economy.
The Philippine Budget System has been greatly influenced by western public financial institutions. This
is because of the country’s past as a colony successively of Spain and the United States for a long period
of time. Many aspects of the country’s public fiscal administration, including its Budget System, have
been naturally patterned after the practices and experiences of the western public financial
institutions. At any rate, the Philippine Budget System is presently guided by two principal objectives
that are vital to the development of a progressive democratic government, namely: (1) to carry on all
government activities under a comprehensive fiscal plan developed, authorized and executed in
accordance with the Constitution, prevailing statutes and the principles of sound public management;
and (2) to provide for the periodic review and disclosure of the budgetary status of the Government in
such detail so that persons entrusted by law with the responsibility as well as the enlightened citizenry
can determine the adequacy of the budget actions taken, authorized or proposed, as well as the true
financial position of the Government.59
b) Evolution of the Philippine Budget System
The budget process in the Philippines evolved from the early years of the American Regime up to the
passage of the Jones Law in 1916. A Budget Office was created within the Department of Finance by
the Jones Law to discharge the budgeting function, and was given the responsibility to assist in the
preparation of an executive budget for submission to the Philippine Legislature.60
As early as under the 1935 Constitution, a budget policy and a budget procedure were established, and
subsequently strengthened through the enactment of laws and executive acts. 61 EO No. 25, issued by
President Manuel L. Quezon on April 25, 1936, created the Budget Commission to serve as the agency
that carried out the President’s responsibility of preparing the budget. 62 CA No. 246, the first budget
law, went into effect on January 1, 1938 and established the Philippine budget process. The law also
provided a line-item budget as the framework of the Government’s budgeting system, 63 with emphasis
on the observance of a "balanced budget" to tie up proposed expenditures with existing revenues.
CA No. 246 governed the budget process until the passage on June 4, 1954 of Republic Act (RA) No.
992,whereby Congress introduced performance-budgeting to give importance to functions, projects
and activities in terms of expected results.64 RA No. 992 also enhanced the role of the Budget
Commission as the fiscal arm of the Government.65
The 1973 Constitution and various presidential decrees directed a series of budgetary reforms that
culminated in the enactment of PD No. 1177 that President Marcos issued on July30, 1977, and of PD
No. 1405, issued on June 11, 1978. The latter decree converted the Budget Commission into the
Ministry of Budget, and gave its head the rank of a Cabinet member.
The Ministry of Budget was later renamed the Office of Budget and Management (OBM) under EO No.
711. The OBM became the DBM pursuant to EO No. 292 effective on November 24, 1989.
c) The Philippine Budget Cycle66
Four phases comprise the Philippine budget process, specifically: (1) Budget Preparation; (2) Budget
Legislation; (3) Budget Execution; and (4) Accountability. Each phase is distinctly separate from the
others but they overlap in the implementation of the budget during the budget year.
c.1.Budget Preparation67
The budget preparation phase is commenced through the issuance of a Budget Call by the DBM. The
Budget Call contains budget parameters earlier set by the Development Budget Coordination
Committee (DBCC) as well as policy guidelines and procedures to aid government agencies in the
preparation and submission of their budget proposals. The Budget Call is of two kinds, namely: (1) a
National Budget Call, which is addressed to all agencies, including state universities and colleges; and
(2) a Corporate Budget Call, which is addressed to all government-owned and -controlled corporations
(GOCCs) and government financial institutions (GFIs).
Following the issuance of the Budget Call, the various departments and agencies submit their
respective Agency Budget Proposals to the DBM. To boost citizen participation, the current
administration has tasked the various departments and agencies to partner with civil society
organizations and other citizen-stakeholders in the preparation of the Agency Budget Proposals, which
proposals are then presented before a technical panel of the DBM in scheduled budget hearings
wherein the various departments and agencies are given the opportunity to defend their budget
proposals. DBM bureaus thereafter review the Agency Budget Proposals and come up with
recommendations for the Executive Review Board, comprised by the DBM Secretary and the DBM’s
senior officials. The discussions of the Executive Review Board cover the prioritization of programs and
their corresponding support vis-à-vis the priority agenda of the National Government, and their
implementation.
The DBM next consolidates the recommended agency budgets into the National Expenditure Program
(NEP)and a Budget of Expenditures and Sources of Financing (BESF). The NEP provides the details of
spending for each department and agency by program, activity or project (PAP), and is submitted in
the form of a proposed GAA. The Details of Selected Programs and Projects is the more detailed
disaggregation of key PAPs in the NEP, especially those in line with the National Government’s independent of the revenue of the people, or, secondly, from the revenue of the people." 78 Adam
development plan. The Staffing Summary provides the staffing complement of each department and Smith’s classification relied on the two aspects of the nature of the State: first, the State as a juristic
agency, including the number of positions and amounts allocated. person with an artificial personality, and, second, the State as a sovereign or entity possessing supreme
power. Under the first aspect, the State could hold property and engage in trade, thereby deriving what
The NEP and BESF are thereafter presented by the DBM and the DBCC to the President and the Cabinet is called its quasi private income or revenues, and which "peculiarly belonged to the sovereign." Under
for further refinements or reprioritization. Once the NEP and the BESF are approved by the President the second aspect, the State could collect by imposing charges on the revenues of its subjects in the
and the Cabinet, the DBM prepares the budget documents for submission to Congress. The budget form of taxes.79
documents consist of: (1) the President’s Budget Message, through which the President explains the
policy framework and budget priorities; (2) the BESF, mandated by Section 22, Article VII of the In the Philippines, public revenues are generally derived from the following sources, to wit: (1) tax
Constitution,68 which contains the macroeconomic assumptions, public sector context, breakdown of revenues(i.e., compulsory contributions to finance government activities); 80 (2) capital revenues(i.e.,
the expenditures and funding sources for the fiscal year and the two previous years; and (3) the NEP. proceeds from sales of fixed capital assets or scrap thereof and public domain, and gains on such sales
like sale of public lands, buildings and other structures, equipment, and other properties recorded as
Public or government expenditures are generally classified into two categories, specifically: (1) capital fixed assets); 81 (3) grants(i.e., voluntary contributions and aids given to the Government for its
expenditures or outlays; and (2) current operating expenditures. Capital expenditures are the expenses operation on specific purposes in the form of money and/or materials, and do not require any
whose usefulness lasts for more than one year, and which add to the assets of the Government, monetary commitment on the part of the recipient); 82 (4) extraordinary income(i.e., repayment of
including investments in the capital of government-owned or controlled corporations and their loans and advances made by government corporations and local governments and the receipts and
subsidiaries.69 Current operating expenditures are the purchases of goods and services in current shares in income of the Banko Sentral ng Pilipinas, and other receipts);83 and (5) public borrowings(i.e.,
consumption the benefit of which does not extend beyond the fiscal year. 70 The two components of proceeds of repayable obligations generally with interest from domestic and foreign creditors of the
current expenditures are those for personal services (PS), and those for maintenance and other Government in general, including the National Government and its political subdivisions). 84
operating expenses(MOOE).
More specifically, public revenues are classified as follows:85
Public expenditures are also broadly grouped according to their functions into: (1) economic
development expenditures (i.e., expenditures on agriculture and natural resources, transportation and General Income Specific Income
communications, commerce and industry, and other economic development efforts); 71 (2) social
services or social development expenditures (i.e., government outlay on education, public health and Subsidy Income from
1. 1. National
Income Taxes
medicare, labor and welfare and others);72 (3) general government or general public services
Government
expenditures (i.e., expenditures for the general government, legislative services, the administration of
2. Property Taxes
justice, and for pensions and gratuities);73 (4) national defense expenditures (i.e., sub-divided into
2. Subsidy from Central Office
national security expenditures and expenditures for the maintenance of peace and order); 74 and (5)
3. Taxes on Goods and Services
public debt.75
3. Subsidy from Regional
Public expenditures may further be classified according to the nature of funds, i.e., general fund, special Office/Staff Bureaus 4. Taxes on International Trade and
fund or bond fund.76 Transactions
4. Income from Government
On the other hand, public revenues complement public expenditures and cover all income or receipts Services 5. Other Taxes 6.Fines and Penalties-Tax Revenue
of the government treasury used to support government expenditures. 77
5. Income from Government
7. Other Specific Income
Classical economist Adam Smith categorized public revenues based on two principal sources, stating: Business Operations
"The revenue which must defray…the necessary expenses of government may be drawn either, first
from some fund which peculiarly belongs to the sovereign or commonwealth, and which is
6. Sales Revenue budget hearings to examine the PAPs of the departments and agencies. Thereafter, the House of
Representatives drafts the General Appropriations Bill (GAB).87
7. Rent Income
The GABis sponsored, presented and defended by the House of Representatives’ Appropriations
Committee and Sub-Committees in plenary session. As with other laws, the GAB is approved on Third
8. Insurance Income
Reading before the House of Representatives’ version is transmitted to the Senate.88

9. Dividend Income After transmission, the Senate conducts its own committee hearings on the GAB. To expedite
proceedings, the Senate may conduct its committee hearings simultaneously with the House of
10. Interest Income Representatives’ deliberations. The Senate’s Finance Committee and its Sub-Committees may submit
the proposed amendments to the GAB to the plenary of the Senate only after the House of
11. Sale of Confiscated Goods and Representatives has formally transmitted its version to the Senate. The Senate version of the GAB is
Properties likewise approved on Third Reading.89

12. Foreign Exchange (FOREX) The House of Representatives and the Senate then constitute a panel each to sit in the Bicameral
Gains Conference Committee for the purpose of discussing and harmonizing the conflicting provisions of their
versions of the GAB. The "harmonized" version of the GAB is next presented to the President for
approval.90 The President reviews the GAB, and prepares the Veto Message where budget items are
13. Miscellaneous Operating and
subjected to direct veto,91 or are identified for conditional implementation.
Service Income
If, by the end of any fiscal year, the Congress shall have failed to pass the GAB for the ensuing fiscal
14. Fines and Penalties-Government year, the GAA for the preceding fiscal year shall be deemed re-enacted and shall remain in force and
Services and Business Operations effect until the GAB is passed by the Congress.92

15. Income from Grants and c.3. Budget Execution93

Donations
With the GAA now in full force and effect, the next step is the implementation of the budget. The
Budget Execution Phase is primarily the function of the DBM, which is tasked to perform the following
procedures, namely: (1) to issue the programs and guidelines for the release of funds; (2) to prepare
an Allotment and Cash Release Program; (3) to release allotments; and (4) to issue disbursement
c.2. Budget Legislation86 authorities.

The Budget Legislation Phase covers the period commencing from the time Congress receives the
President’s Budget, which is inclusive of the NEPand the BESF, up to the President’s approval of the
GAA. This phase is also known as the Budget Authorization Phase, and involves the significant
participation of the Legislative through its deliberations.
Initially, the President’s Budget is assigned to the House of Representatives’ Appropriations Committee
on First Reading. The Appropriations Committee and its various Sub-Committees schedule and conduct
The implementation of the GAA is directed by the guidelines issued by the DBM. Prior to this, the
various departments and agencies are required to submit Budget Execution Documents(BED) to outline
their plans and performance targets by laying down the physical and financial plan, the monthly cash
program, the estimate of monthly income, and the list of obligations that are not yet due and
demandable.
Thereafter, the DBM prepares an Allotment Release Program (ARP)and a Cash Release Program
(CRP).The ARP sets a limit for allotments issued in general and to a specific agency. The CRP fixes the
monthly, quarterly and annual disbursement levels.
Allotments, which authorize an agency to enter into obligations, are issued by the DBM. Allotments are
lesser in scope than appropriations, in that the latter embrace the general legislative authority to
spend. Allotments may be released in two forms – through a comprehensive Agency Budget Matrix
(ABM),94 or, individually, by SARO.95
Armed with either the ABM or the SARO, agencies become authorized to incur obligations 96 on behalf
of the Government in order to implement their PAPs. Obligations may be incurred in various ways, like
hiring of personnel, entering into contracts for the supply of goods and services, and using utilities.
In order to settle the obligations incurred by the agencies, the DBM issues a disbursement authority so
that cash may be allocated in payment of the obligations. A cash or disbursement authority that is
periodically issued is referred to as a Notice of Cash Allocation (NCA),97 which issuance is based upon
an agency’s submission of its Monthly Cash Program and other required documents. The NCA specifies
the maximum amount of cash that can be withdrawn from a government servicing bank for the period
indicated. Apart from the NCA, the DBM may issue a Non-Cash Availment Authority(NCAA) to authorize
non-cash disbursements, or a Cash Disbursement Ceiling(CDC) for departments with overseas
operations to allow the use of income collected by their foreign posts for their operating requirements.
Actual disbursement or spending of government funds terminates the Budget Execution Phase and is
usually accomplished through the Modified Disbursement Scheme under which disbursements
chargeable against the National Treasury are coursed through the government servicing banks.
c.4. Accountability98
Accountability is a significant phase of the budget cycle because it ensures that the government funds
have been effectively and efficiently utilized to achieve the State’s socio-economic goals. It also allows
the DBM to assess the performance of agencies during the fiscal year for the purpose of implementing
reforms and establishing new policies.
An agency’s accountability may be examined and evaluated through (1) performance targets and
outcomes; (2) budget accountability reports; (3) review of agency performance; and (4) audit
conducted by the Commission on Audit(COA).
2.
Nature of the DAP as a fiscal plan
a. DAP was a program designed to
promote economic growth
Policy is always a part of every budget and fiscal decision of any Administration.99 The national budget
the Executive prepares and presents to Congress represents the Administration’s "blueprint for public
policy" and reflects the Government’s goals and strategies. 100 As such, the national budget becomes a
tangible representation of the programs of the Government in monetary terms, specifying therein the
PAPs and services for which specific amounts of public funds are proposed and allocated. 101 Embodied
in every national budget is government spending. 102
When he assumed office in the middle of 2010, President Aquino made efficiency and transparency in
government spending a significant focus of his Administration. Yet, although such focus resulted in an
improved fiscal deficit of 0.5% in the gross domestic product (GDP) from January to July of 2011, it also
unfortunately decelerated government project implementation and payment schedules.103 The World
Bank observed that the Philippines’ economic growth could be reduced, and potential growth could be
weakened should the Government continue with its underspending and fail to address the large
deficiencies in infrastructure.104 The economic situation prevailing in the middle of 2011 thus paved
the way for the development and implementation of the DAP as a stimulus package intended to fast-
track public spending and to push economic growth by investing on high-impact budgetary PAPs to be
funded from the "savings" generated during the year as well as from unprogrammed funds.105 In that
respect, the DAP was the product of "plain executive policy-making" to stimulate the economy by way
of accelerated spending.106The Administration would thereby accelerate government spending by: (1)
streamlining the implementation process through the clustering of infrastructure projects of the
Department of Public Works and Highways (DPWH) and the Department of Education (DepEd),and (2)
front loading PPP-related projects107 due for implementation in the following year.108
Did the stimulus package work?
The March 2012 report of the World Bank, 109 released after the initial implementation of the DAP,
revealed that the DAP was partially successful. The disbursements under the DAP contributed 1.3
percentage points to GDP growth by the fourth quarter of 2011.110 The continued implementation of
the DAP strengthened growth by 11.8% year on year while infrastructure spending rebounded from a
29% contraction to a 34% growth as of September 2013. 111
The DAP thus proved to be a demonstration that expenditure was a policy instrument that the
Government could use to direct the economies towards growth and development. 112 The Government,
by spending on public infrastructure, would signify its commitment of ensuring profitability for
prospective investors.113 The PAPs funded under the DAP were chosen for this reason based on their:
(1) multiplier impact on the economy and infrastructure development; (2) beneficial effect on the poor;
and (3) translation into disbursements.114
 b. History of the implementation of
programs that require Acceleration
the DAP, and sources of funds
immediate funding Program
under the DAP

How the Administration’s economic managers conceptualized and developed the DAP, and finally FY 2011 482 Unreleased
presented it to the President remains unknown because the relevant documents appear to be scarce. Unreleased appropriations (slow
Appropriations moving projects and
The earliest available document relating to the genesis of the DAP was the memorandum of October
programs for
12,2011 from Sec. Abad seeking the approval of the President to implement the proposed DAP. The
discontinuance)
memorandum, which contained a list of the funding sources for ₱72.11 billion and of the proposed
priority projects to be funded,115 reads:
FY 2010 12,336 Supported by the GFI Approve and
MEMORANDUM FOR THE PRESIDENT
Unprogrammed Dividends authorize its use
xxxx Fund for the 2011
Disbursement
SUBJECT: FY 2011 PROPOSED DISBURSEMENT ACCELERATION PROGRAM (PROJECTS AND SOURCES OF Acceleration
FUNDS) Program

DATE: OCTOBER 12, 2011

FY 2010 21,544 Unreleased With prior
Mr. President, this is to formally confirm your approval of the Disbursement Acceleration Program Carryover appropriations (slow approval from
totaling ₱72.11 billion. We are already working with all the agencies concerned for the immediate Appropriation moving projects and the President in
execution of the projects therein. programs for November 2010
discontinuance) and to declare as
A. Fund Sources for the Acceleration Program
savings from Zero-based Budgeting savings and with
Initiative authority to use
Amount for priority
Action
Fund Sources (In million Description projects
Requested
Php)

FY 2011 Budget 7,748 FY 2011 Agency For information

FY 2011 30,000 Unreleased Personnel Declare as items for Budget items that can
Unreleased Services (PS) savings and realignment be realigned within the
Personal appropriations which approve/ agency to fund new fast
Services (PS) will lapse at the end of authorize its use disbursing projects
Appropriations FY 2011 but may be for the 2011 DPWH-3.981 Billion
pooled as savings and Disbursement DA – 2.497 Billion
realigned for priority
 DOT – 1.000 Billion 6. HGC: Equity infusion for credit insurance 400
DepEd – 270 Million and mortgage guaranty operations of HGC

TOTAL 72.110 7. PHIC: Obligations incurred (premium 1,496

subsidy for indigent families) in January-June
2010, booked for payment in Jul[y] – Dec
B. Projects in the Disbursement Acceleration Program
2010. The delay in payment is due to the
(Descriptions of projects attached as Annex A) delay in the certification of the LGU
counterpart. Without it, the NG is obliged to
GOCCs and GFIs pay the full amount.

Agency/Project Allotment 8. Philpost: Purchase of foreclosed property. 644

(SARO and NCA Release) (in Million Php) Payment of Mandatory Obligations, (GSIS,
PhilHealth, ECC), Franking Privilege

1. LRTA: Rehabilitation of LRT 1 and 2 1,868

9. BSP: First equity infusion out of Php 40B 10,000
capitalization under the BSP Law
2. NHA: 11,050

a. Resettlement of North Triangle residents to 10. PCMC: Capital and Equipment Renovation 280
450
Camarin A7
b. Housing for BFP/BJMP 11. LCOP: 105
500
c. On-site development for families living a. Pediatric Pulmonary Program
10,000
along dangerous b. Bio-regenerative Technology Program
35
d. Relocation sites for informal settlers (Stem-Cell Research – subject to legal
100
along Iloilo River and its tributaries review and presentation)
70

3. PHIL. HEART CENTER: Upgrading of 357

ageing physical plant and medical equipment 12. TIDCORP: NG Equity infusion 570

4. CREDIT INFO CORP: Establishment of 75 TOTAL 26,945

centralized credit information system

5. PIDS: purchase of land to relocate the PIDS 100

NGAs/LGUs
office and building construction
Agency/Project Allotment 18. DBM: Conduct of National
(SARO) Cash Survey of
(In Million Requirement Farmers/Fisherfolks/Ips 625 625
Php) (NCA)
19. DOJ: Operating requirements
13. DOF-BIR: NPSTAR of 50 investigation agents and
centralization of data 15 state attorneys 11 11
processing and others (To be
synchronized with GFMIS 20. DOT: Preservation of the Cine
activities) 758 758 Corregidor Complex 25 25

14. COA: IT infrastructure

21. OPAPP: Activities for Peace
program and hiring of
Process (PAMANA- Project
additional litigational experts 144 144 details: budget breakdown,
implementation plan, and
15. DND-PAF: On Base Housing conditions on fund release
Facilities and Communication attached as Annex B) 1,819 1,819
Equipment 30 30
22. DOST 425 425
16. DA: 2,959 2,223 a. Establishment of National
a. Irrigation, FMRs and Meterological and Climate
Integrated Community Based Multi-Species Center 275 275
Hatchery and Aquasilvi b. Enhancement of Doppler
Farming 1,629 1,629 Radar Network for National
b. Mindanao Rural Weather Watch, Accurate
Development Project 919 183 Forecasting and Flood Early
Warning 190 190
c. NIA Agno River Integrated
Irrigation Project 411 411 23. DOF-BOC: To settle the
principal obligations with
17. DAR: 1,293 1,293 PDIC consistent with the
a. Agrarian Reform agreement with the CISS and
Communities Project 2 1,293 132 SGS 2,800 2,800
b. Landowners Compensation 5,432
24. OEO-FDCP: Establishment of 33. Various Other Local Projects 6,500 6,500
the National Film Archive and
local cinematheques, and other 34. Development Assistance to the
local activities 20 20 Province of Quezon 750 750

25. DPWH: Various infrastructure

TOTAL 45,165 44,000
projects 5,500 5,500

C. Summary
26. DepEd/ERDT/DOST: Thin
Client Cloud Computing Fund Sources
Project 270 270 Identified for Allotments Cash
Approval for Release Requirements for
27. DOH: Hiring of nurses and (In Million Release in FY
midwives 294 294 Php) 2011

28. TESDA: Training Program in Total 72,110 72,110 70,895

partnership with BPO industry
and other sectors 1,100 1,100 GOCCs 26,895 26,895

29. DILG: Performance Challenge NGAs/LGUs 45,165 44,000

Fund (People Empowered
Community Driven For His Excellency’s Consideration
Development with DSWD and
NAPC) 250 50 (Sgd.) FLORENCIO B. ABAD

[/] APPROVED
30. ARMM: Comprehensive Peace
and Development Intervention 8,592 8,592 [ ] DISAPPROVED

(Sgd.) H.E. BENIGNO S. AQUINO, III

31. DOTC-MRT: Purchase of
additional MRT cars 4,500 - OCT 12, 2011

The memorandum of October 12, 2011 was followed by another memorandum for the President dated
32. LGU Support Fund 6,500 6,500
December 12, 2011116 requesting omnibus authority to consolidate the savings and unutilized balances
for fiscal year 2011. Pertinent portions of the memorandum of December 12, 2011 read:

MEMORANDUM FOR THE PRESIDENT

xxxx 4.0 It is understood that in the utilization of the pooled savings, the DBM shall secure the corresponding
approval/confirmation of the President. Furthermore, it is assured that the proposed realignments
SUBJECT: Omnibus Authority to Consolidate Savings/Unutilized Balances and its Realignment shall be within the authorized Expenditure level.

DATE: December 12, 2011 5.0 Relative thereto, we have identified some expenditure items that may be sourced from the said
pooled appropriations in FY 2010 that will expire on December 31, 2011 and appropriations in FY 2011
This is to respectfully request for the grant of Omnibus Authority to consolidate savings/unutilized
that may be declared as savings to fund additional expenditures.
balances in FY 2011 corresponding to completed or discontinued projects which may be pooled to fund
additional projects or expenditures. 5.1 The 2010 Continuing Appropriations (pooled savings) is proposed to be spent for the projects that
we have identified to be immediate actual disbursements considering that this same fund source will
In addition, Mr. President, this measure will allow us to undertake projects even if their implementation
expire on December 31, 2011.
carries over to 2012 without necessarily impacting on our budget deficit cap next year.
5.2 With respect to the proposed expenditure items to be funded from the FY 2011 Unreleased
BACKGROUND
Appropriations, most of these are the same projects for which the DBM is directed by the Office of the
1.0 The DBM, during the course of performance reviews conducted on the agencies’ operations, President, thru the Executive Secretary, to source funds.
particularly on the implementation of their projects/activities, including expenses incurred in
6.0 Among others, the following are such proposed additional projects that have been chosen given
undertaking the same, have identified savings out of the 2011 General Appropriations Act. Said savings
their multiplier impact on economy and infrastructure development, their beneficial effect on the poor,
correspond to completed or discontinued projects under certain departments/agencies which may be
and their translation into disbursements. Please note that we have classified the list of proposed
pooled, for the following:
projects as follows:
1.1 to provide for new activities which have not been anticipated during preparation of the budget;
7.0 x x x
1.2 to augment additional requirements of on-going priority projects; and
FOR THE PRESIDENT’S APPROVAL
1.3 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity Fund, Contingent
8.0 Foregoing considered, may we respectfully request for the President’s approval for the following:
Fund
8.1 Grant of omnibus authority to consolidate FY 2011 savings/unutilized balances and its realignment;
1.4 to cover for the modifications of the original allotment class allocation as a result of on-going
and
priority projects and implementation of new activities
8.2 The proposed additional projects identified for funding.
2.0 x x x x
For His Excellency’s consideration and approval.
2.1 x x x
(Sgd.)
2.2 x x x
[/] APPROVED
ON THE UTILIZATION OF POOLED SAVINGS
[ ] DISAPPROVED
3.0 It may be recalled that the President approved our request for omnibus authority to pool
savings/unutilized balances in FY 2010 last November 25, 2010. (Sgd.) H.E. BENIGNO S. AQUINO, III
DEC 21, 2011
Substantially identical requests for authority to pool savings and to fund proposed projects were
contained in various other memoranda from Sec. Abad dated June 25, 2012, 117 September 4,
2012,118 December 19, 2012,119 May 20, 2013,120 and September 25, 2013.121 The President apparently
approved all the requests, withholding approval only of the proposed projects contained in the June
25, 2012 memorandum, as borne out by his marginal note therein to the effect that the proposed
projects should still be "subject to further discussions."122
In order to implement the June25, 2012 memorandum, Sec. Abad issued NBC No. 541 (Adoption of
Operational Efficiency Measure – Withdrawal of Agencies’ Unobligated Allotments as of June 30,
2012),123 reproduced herein as follows:
NATIONAL BUDGET CIRCULAR No. 541
July 18, 2012
TO: All Heads of Departments/Agencies/State Universities and Colleges and other Offices of the
National Government, Budget and Planning Officers; Heads of Accounting Units and All Others
Concerned
SUBJECT : Adoption of Operational Efficiency Measure – Withdrawal of Agencies’ Unobligated
Allotments as of June 30, 2012
1.0 Rationale
The DBM, as mandated by Executive Order (EO) No. 292 (Administrative Code of 1987), periodically
reviews and evaluates the departments/agencies’ efficiency and effectiveness in utilizing budgeted
funds for the delivery of services and production of goods, consistent with the government priorities.
In the event that a measure is necessary to further improve the operational efficiency of the
government, the President is authorized to suspend or stop further use of funds allotted for any agency
or expenditure authorized in the General Appropriations Act. Withdrawal and pooling of unutilized
allotment releases can be effected by DBM based on authority of the President, as mandated under
Sections 38 and 39, Chapter 5, Book VI of EO 292.
For the first five months of 2012, the National Government has not met its spending targets. In order
to accelerate spending and sustain the fiscal targets during the year, expenditure measures have to be
implemented to optimize the utilization of available resources.
Departments/agencies have registered low spending levels, in terms of obligations and disbursements
per initial review of their 2012 performance. To enhance agencies’ performance, the DBM conducts
continuous consultation meetings and/or send call-up letters, requesting them to identify slow-moving
programs/projects and the factors/issues affecting their performance (both pertaining to internal
systems and those which are outside the agencies’ spheres of control). Also, they are asked to
formulate strategies and improvement plans for the rest of 2012.
Notwithstanding these initiatives, some departments/agencies have continued to post low obligation
levels as of end of first semester, thus resulting to substantial unobligated allotments.
In line with this, the President, per directive dated June 27, 2012 authorized the withdrawal of
unobligated allotments of agencies with low levels of obligations as of June 30, 2012, both for
continuing and current allotments. This measure will allow the maximum utilization of available
allotments to fund and undertake other priority expenditures of the national government.
2.0 Purpose
2.1 To provide the conditions and parameters on the withdrawal of unobligated allotments of agencies
as of June 30, 2012 to fund priority and/or fast-moving programs/projects of the national government;
2.2 To prescribe the reports and documents to be used as bases on the withdrawal of said unobligated
allotments; and
2.3 To provide guidelines in the utilization or reallocation of the withdrawn allotments.
3.0 Coverage
3.1 These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 of all
national government agencies (NGAs) charged against FY 2011 Continuing Appropriation (R.A.
No.10147) and FY 2012 Current Appropriation (R.A. No. 10155), pertaining to:
3.1.1 Capital Outlays (CO);
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of programs
and projects, as well as capitalized MOOE; and
3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by the
agencies concerned based on their updated/validated list of pensioners.
3.2 The withdrawal of unobligated allotments may cover the identified programs, projects and
activities of the departments/agencies reflected in the DBM list shown as Annex A or specific programs
and projects as may be identified by the agencies.
4.0 Exemption 5.1 National government agencies shall continue to undertake procurement activities notwithstanding
the implementation of the policy of withdrawal of unobligated allotments until the end of the third
These guidelines shall not apply to the following: quarter, FY 2012. Even without the allotments, the agency shall proceed in undertaking the
procurement processes (i.e., procurement planning up to the conduct of bidding but short of awarding
4.1 NGAs
of contract) pursuant to GPPB Circular Nos. 02-2008 and 01-2009 and DBM Circular Letter No. 2010-9.
4.1.1 Constitutional Offices/Fiscal Autonomy Group, granted fiscal autonomy under the Philippine
5.2 For the purpose of determining the amount of unobligated allotments that shall be withdrawn, all
Constitution; and
departments/agencies/operating units (OUs) shall submit to DBM not later than July 30, 2012, the
4.1.2 State Universities and Colleges, adopting the Normative Funding allocation scheme i.e., following budget accountability reports as of June 30, 2012;
distribution of a predetermined budget ceiling.
• Statement of Allotments, Obligations and Balances (SAOB);
4.2 Fund Sources
• Financial Report of Operations (FRO); and
4.2.1 Personal Services other than pension benefits;
• Physical Report of Operations.
4.2.2 MOOE items earmarked for specific purposes or subject to realignment conditions per General
5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the agency’s latest
Provisions of the GAA:
report available shall be used by DBM as basis for withdrawal of allotment. The DBM shall
• Confidential and Intelligence Fund; compute/approximate the agency’s obligation level as of June 30 to derive its unobligated allotments
as of same period. Example: If the March 31 SAOB or FRO reflects actual obligations of P 800M then
• Savings from Traveling, Communication, Transportation and Delivery, Repair and Maintenance, the June 30 obligation level shall approximate to ₱1,600 M (i.e., ₱800 M x 2 quarters).
Supplies and Materials and Utility which shall be used for the grant of Collective Negotiation Agreement
incentive benefit; 5.4 All released allotments in FY 2011 charged against R.A. No. 10147 which remained unobligated as
of June 30, 2012 shall be immediately considered for withdrawal. This policy is based on the following
• Savings from mandatory expenditures which can be realigned only in the last quarter after taking into considerations:
consideration the agency’s full year requirements, i.e., Petroleum, Oil and Lubricants, Water,
Illumination, Power Services, Telephone, other Communication Services and Rent. 5.4.1 The departments/agencies’ approved priority programs and projects are assumed to be
implementation-ready and doable during the given fiscal year; and
4.2.3 Foreign-Assisted Projects (loan proceeds and peso counterpart);
5.4.2 The practice of having substantial carryover appropriations may imply that the agency has a
4.2.4 Special Purpose Funds such as: E-Government Fund, International Commitments Fund, PAMANA, slower-than-programmed implementation capacity or agency tends to implement projects within a
Priority Development Assistance Fund, Calamity Fund, Budgetary Support to GOCCs and Allocation to two-year timeframe.
LGUs, among others;
5.5. Consistent with the President’s directive, the DBM shall, based on evaluation of the reports cited
4.2.5 Quick Response Funds; and above and results of consultations with the departments/agencies, withdraw the unobligated
allotments as of June 30, 2012 through issuance of negative Special Allotment Release Orders (SAROs).
4.2.6 Automatic Appropriations i.e., Retirement Life Insurance Premium and Special Accounts in the
General Fund. 5.6 DBM shall prepare and submit to the President, a report on the magnitude of withdrawn
allotments. The report shall highlight the agencies which failed to submit the June 30 reports required
5.0 Guidelines
under this Circular.
5.7 The withdrawn allotments may be: 6.0 Effectivity

5.7.1 Reissued for the original programs and projects of the agencies/OUs concerned, from which the This circular shall take effect immediately.
allotments were withdrawn;
(Sgd.) FLORENCIO B. ABAD
5.7.2 Realigned to cover additional funding for other existing programs and projects of the agency/OU; Secretary
or
As can be seen, NBC No. 541 specified that the unobligated allotments of all agencies and departments
5.7.3 Used to augment existing programs and projects of any agency and to fund priority programs and as of June 30, 2012 that were charged against the continuing appropriations for fiscal year 2011 and
projects not considered in the 2012 budget but expected to be started or implemented during the the 2012 GAA (R.A. No. 10155) were subject to withdrawal through the issuance of negative SAROs,
current year. but such allotments could be either: (1) reissued for the original PAPs of the concerned agencies from
which they were withdrawn; or (2) realigned to cover additional funding for other existing PAPs of the
5.8 For items 5.7.1 and 5.7.2 above, agencies/OUs concerned may submit to DBM a Special Budget concerned agencies; or (3) used to augment existing PAPs of any agency and to fund priority PAPs not
Request (SBR), supported with the following: considered in the 2012 budget but expected to be started or implemented in 2012. Financing the other
priority PAPs was made subject to the approval of the President. Note here that NBC No. 541 used
5.8.1 Physical and Financial Plan (PFP);
terminologies like "realignment" and "augmentation" in the application of the withdrawn unobligated
5.8.2 Monthly Cash Program (MCP); and allotments.

5.8.3 Proof that the project/activity has started the procurement processes i.e., Proof of Posting and/or Taken together, all the issuances showed how the DAP was to be implemented and funded, that is —
Advertisement of the Invitation to Bid. (1) by declaring "savings" coming from the various departments and agencies derived from pooling
unobligated allotments and withdrawing unreleased appropriations; (2) releasing unprogrammed
5.9 The deadline for submission of request/s pertaining to these categories shall be until the end of the funds; and (3) applying the "savings" and unprogrammed funds to augment existing PAPs or to support
third quarter i.e., September 30, 2012. After said cut-off date, the withdrawn allotments shall be pooled other priority PAPs.
and form part of the overall savings of the national government.
c. DAP was not an appropriation
5.10 Utilization of the consolidated withdrawn allotments for other priority programs and projects as measure; hence, no appropriation
cited under item 5.7.3 of this Circular, shall be subject to approval of the President. Based on the law was required to adopt or to
approval of the President, DBM shall issue the SARO to cover the approved priority expenditures implement it
subject to submission by the agency/OU concerned of the SBR and supported with PFP and MCP.
Petitioners Syjuco, Luna, Villegas and PHILCONSA state that Congress did not enact a law to establish
5.11 It is understood that all releases to be made out of the withdrawn allotments (both 2011 and 2012 the DAP, or to authorize the disbursement and release of public funds to implement the DAP. Villegas,
unobligated allotments) shall be within the approved Expenditure Program level of the national PHILCONSA, IBP, Araullo, and COURAGE observe that the appropriations funded under the DAP were
government for the current year. The SAROs to be issued shall properly disclose the appropriation not included in the 2011, 2012 and 2013 GAAs. To petitioners IBP, Araullo, and COURAGE, the DAP,
source of the release to determine the extent of allotment validity, as follows: being actually an appropriation that set aside public funds for public use, should require an enabling
law for its validity. VACC maintains that the DAP, because it involved huge allocations that were
• For charges under R.A. 10147 – allotments shall be valid up to December 31, 2012; and
separate and distinct from the GAAs, circumvented and duplicated the GAAs without congressional
• For charges under R.A. 10155 – allotments shall be valid up to December 31, 2013. authorization and control.

5.12 Timely compliance with the submission of existing BARs and other reportorial requirements is
reiterated for monitoring purposes.
The petitioners contend in unison that based on how it was developed and implemented the DAP Notwithstanding our appreciation of the DAP as a plan or strategy validly adopted by the Executive to
violated the mandate of Section 29(1), Article VI of the 1987 Constitution that "[n]o money shall be ramp up spending to accelerate economic growth, the challenges posed by the petitioners constrain
paid out of the Treasury except in pursuance of an appropriation made by law." us to dissect the mechanics of the actual execution of the DAP. The management and utilization of the
public wealth inevitably demands a most careful scrutiny of whether the Executive’s implementation
The OSG posits, however, that no law was necessary for the adoption and implementation of the DAP of the DAP was consistent with the Constitution, the relevant GAAs and other existing laws.
because of its being neither a fund nor an appropriation, but a program or an administrative system of
prioritizing spending; and that the adoption of the DAP was by virtue of the authority of the President a. Although executive discretion
as the Chief Executive to ensure that laws were faithfully executed. and flexibility are necessary in
the execution of the budget, any
We agree with the OSG’s position. transfer of appropriated funds
should conform to Section 25(5),
The DAP was a government policy or strategy designed to stimulate the economy through accelerated
Article VI of the Constitution
spending. In the context of the DAP’s adoption and implementation being a function pertaining to the
Executive as the main actor during the Budget Execution Stage under its constitutional mandate to We begin this dissection by reiterating that Congress cannot anticipate all issues and needs that may
faithfully execute the laws, including the GAAs, Congress did not need to legislate to adopt or to come into play once the budget reaches its execution stage. Executive discretion is necessary at that
implement the DAP. Congress could appropriate but would have nothing more to do during the Budget stage to achieve a sound fiscal administration and assure effective budget implementation. The heads
Execution Stage. Indeed, appropriation was the act by which Congress "designates a particular fund, or of offices, particularly the President, require flexibility in their operations under performance
sets apart a specified portion of the public revenue or of the money in the public treasury, to be applied budgeting to enable them to make whatever adjustments are needed to meet established work goals
to some general object of governmental expenditure, or to some individual purchase or expense."124 As under changing conditions.128 In particular, the power to transfer funds can give the President the
pointed out in Gonzales v. Raquiza:125 ‘"In a strict sense, appropriation has been defined ‘as nothing flexibility to meet unforeseen events that may otherwise impede the efficient implementation of the
more than the legislative authorization prescribed by the Constitution that money may be paid out of PAPs set by Congress in the GAA.
the Treasury,’ while appropriation made by law refers to ‘the act of the legislature setting apart or
assigning to a particular use a certain sum to be used in the payment of debt or dues from the State to Congress has traditionally allowed much flexibility to the President in allocating funds pursuant to the
its creditors.’"126 GAAs,129particularly when the funds are grouped to form lump sum accounts.130 It is assumed that the
agencies of the Government enjoy more flexibility when the GAAs provide broader appropriation
On the other hand, the President, in keeping with his duty to faithfully execute the laws, had sufficient items.131 This flexibility comes in the form of policies that the Executive may adopt during the budget
discretion during the execution of the budget to adapt the budget to changes in the country’s economic execution phase. The DAP – as a strategy to improve the country’s economic position – was one policy
situation.127 He could adopt a plan like the DAP for the purpose. He could pool the savings and identify that the President decided to carry out in order to fulfill his mandate under the GAAs.
the PAPs to be funded under the DAP. The pooling of savings pursuant to the DAP, and the identification
of the PAPs to be funded under the DAP did not involve appropriation in the strict sense because the Denying to the Executive flexibility in the expenditure process would be counterproductive. In
money had been already set apart from the public treasury by Congress through the GAAs. In such Presidential Spending Power,132 Prof. Louis Fisher, an American constitutional scholar whose specialties
actions, the Executive did not usurp the power vested in Congress under Section 29(1), Article VI of the have included budget policy, has justified extending discretionary authority to the Executive thusly:
Constitution.
[T]he impulse to deny discretionary authority altogether should be resisted. There are many number
3. of reasons why obligations and outlays by administrators may have to differ from appropriations by
Unreleased appropriations and withdrawn legislators. Appropriations are made many months, and sometimes years, in advance of expenditures.
unobligated allotments under the DAP Congress acts with imperfect knowledge in trying to legislate in fields that are highly technical and
were not savings, and the use of such constantly undergoing change. New circumstances will develop to make obsolete and mistaken the
appropriations contravened Section 25(5), decisions reached by Congress at the appropriation stage. It is not practicable for Congress to adjust to
Article VI of the 1987 Constitution. each new development by passing separate supplemental appropriation bills. Were Congress to control
expenditures by confining administrators to narrow statutory details, it would perhaps protect its
power of the purse but it would not protect the purse itself. The realities and complexities of public
policy require executive discretion for the sound management of public funds.
xxxx
x x x The expenditure process, by its very nature, requires substantial discretion for administrators.
They need to exercise judgment and take responsibility for their actions, but those actions ought to be
directed toward executing congressional, not administrative policy. Let there be discretion, but channel
it and use it to satisfy the programs and priorities established by Congress.
In contrast, by allowing to the heads of offices some power to transfer funds within their respective
offices, the Constitution itself ensures the fiscal autonomy of their offices, and at the same time
maintains the separation of powers among the three main branches of the Government. The Court has
recognized this, and emphasized so in Bengzon v. Drilon,133 viz:
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 case of the President, the power to transfer funds from one item to another within the Executive
has not been the mere offshoot of established usage, but has emanated from law itself. It has existed
since the time of the American Governors-General.134 Act No. 1902 (An Act authorizing the Governor-
General to direct any unexpended balances of appropriations be returned to the general fund of the
Insular Treasury and to transfer from the general fund moneys which have been returned thereto),
passed on May 18, 1909 by the First Philippine Legislature,135 was the first enabling law that granted
statutory authority to the President to transfer funds. The authority was without any limitation, for the
Act explicitly empowered the Governor-General to transfer any unexpended balance of appropriations
for any bureau or office to another, and to spend such balance as if it had originally been appropriated
for that bureau or office.
From 1916 until 1920, the appropriations laws set a cap on the amounts of funds that could be
transferred, thereby limiting the power to transfer funds. Only 10% of the amounts appropriated for
contingent or miscellaneous expenses could be transferred to a bureau or office, and the transferred
funds were to be used to cover deficiencies in the appropriations also for miscellaneous expenses of
said bureau or office.
In 1921, the ceiling on the amounts of funds to be transferred from items under miscellaneous
expenses to any other item of a certain bureau or office was removed.
During the Commonwealth period, the power of the President to transfer funds continued to be
governed by the GAAs despite the enactment of the Constitution in 1935. It is notable that the 1935
Constitution did not include a provision on the power to transfer funds. At any rate, a shift in the extent
of the President’s power to transfer funds was again experienced during this era, with the President
being given more flexibility in implementing the budget. The GAAs provided that the power to transfer
all or portions of the appropriations in the Executive Department could be made in the "interest of the
public, as the President may determine."136
In its time, the 1971 Constitutional Convention wanted to curtail the President’s seemingly unbounded
discretion in transferring funds.137 Its Committee on the Budget and Appropriation proposed to
prohibit the transfer of funds among the separate branches of the Government and the independent
constitutional bodies, but to allow instead their respective heads to augment items of appropriations
from savings in their respective budgets under certain limitations. 138 The clear intention of the
Convention was to further restrict, not to liberalize, the power to transfer appropriations. 139 Thus, the
Committee on the Budget and Appropriation initially considered setting stringent limitations on the
power to augment, and suggested that the augmentation of an item of appropriation could be made
"by not more than ten percent if the original item of appropriation to be augmented does not exceed
one million pesos, or by not more than five percent if the original item of appropriation to be
augmented exceeds one million pesos."140 But two members of the Committee objected to the
₱1,000,000.00 threshold, saying that the amount was arbitrary and might not be reasonable in the
future. The Committee agreed to eliminate the ₱1,000,000.00 threshold, and settled on the ten percent
limitation.141
In the end, the ten percent limitation was discarded during the plenary of the Convention, which
adopted the following final version under Section 16, Article VIII of the 1973 Constitution, to wit:
(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the Prime
Minister, the Speaker, 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.
The 1973 Constitution explicitly and categorically prohibited the transfer of funds from one item to
another, unless Congress enacted a law authorizing the President, the Prime Minister, the Speaker, the
Chief Justice of the Supreme Court, and the heads of the Constitutional omissions to transfer funds for
the purpose of augmenting any item from savings in another item in the GAA of their respective offices.
The leeway was limited to augmentation only, and was further constricted by the condition that the
funds to be transferred should come from savings from another item in the appropriation of the
office.142
On July 30, 1977, President Marcos issued PD No. 1177, providing in its Section 44 that:
Section 44. Authority to Approve Fund Transfers. The President shall have the authority to transfer any
fund appropriated for the different departments, bureaus, offices and agencies of the Executive
Department which are included in the General Appropriations Act, to any program, project, or activity
of any department, bureau or office included in the General Appropriations Act or approved after its
enactment.
The President shall, likewise, have the authority to augment any appropriation of the Executive
Department in the General Appropriations Act, from savings in the appropriations of another
department, bureau, office or agency within the Executive Branch, pursuant to the provisions of Article
VIII, Section 16 (5) of the Constitution.
In Demetria v. Alba, however, the Court struck down the first paragraph of Section 44 for contravening
Section 16(5)of the 1973 Constitution, ruling:
Paragraph 1 of Section 44 of P.D. No. 1177 unduly over-extends the privilege granted under said Section
16. It empowers the President to indiscriminately transfer funds from one department, bureau, office
or agency of the Executive Department to any program, project or activity of any department, bureau
or office included in the General Appropriations Act or approved after its enactment, without regard
as to whether or not the funds to be transferred are actually savings in the item from which the same
are to be taken, or whether or not the transfer is for the purpose of augmenting the item to which said
transfer is to be made. It does not only completely disregard the standards set in the fundamental law,
thereby amounting to an undue delegation of legislative powers, but likewise goes beyond the tenor
thereof. Indeed, such constitutional infirmities render the provision in question null and void. 143
It is significant that Demetria was promulgated 25 days after the ratification by the people of the 1987
Constitution, whose Section 25(5) of Article VI is identical to Section 16(5), Article VIII of the 1973
Constitution, to wit:
Section 25. x x x
xxxx
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.
xxxx
The foregoing history makes it evident that the Constitutional Commission included Section 25(5),
supra, to keep a tight rein on the exercise of the power to transfer funds appropriated by Congress by
the President and the other high officials of the Government named therein. The Court stated in
Nazareth v. Villar:144
In the funding of current activities, projects, and programs, the general rule should still be that the
budgetary amount contained in the appropriations bill is the extent Congress will determine as
sufficient for the budgetary allocation for the proponent agency. The only exception is found in Section
25 (5), Article VI of the Constitution, by which 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 are authorized to transfer appropriations to augmentany item in the GAA
for their respective offices from the savings in other items of their respective appropriations. The plain
language of the constitutional restriction leaves no room for the petitioner’s posture, which we should
now dispose of as untenable.
It bears emphasizing that the exception in favor of the high officials named in Section 25(5), Article VI
of the Constitution limiting the authority to transfer savings only to augment another item in the GAA
is strictly but reasonably construed as exclusive. As the Court has expounded in Lokin, Jr. v. Commission
on Elections:
When the statute itself enumerates the exceptions to the application of the general rule, the
exceptions are strictly but reasonably construed. The exceptions extend only as far as their language
fairly warrants, and all doubts should be resolved in favor of the general provision rather than the
exceptions. Where the general rule is established by a statute with exceptions, none but the enacting
authority can curtail the former. Not even the courts may add to the latter by implication, and it is a
rule that an express exception excludes all others, although it is always proper in determining the
applicability of the rule to inquire whether, in a particular case, it accords with reason and justice.
The appropriate and natural office of the exception is to exempt something from the scope of the
general words of a statute, which is otherwise within the scope and meaning of such general words.
Consequently, the existence of an exception in a statute clarifies the intent that the statute shall apply
to all cases not excepted. Exceptions are subject to the rule of strict construction; hence, any doubt will
be resolved in favor of the general provision and against the exception. Indeed, the liberal construction
of a statute will seem to require in many circumstances that the exception, by which the operation of
the statute is limited or abridged, should receive a restricted construction.
Accordingly, we should interpret Section 25(5), supra, in the context of a limitation on the President’s Section 53. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the
discretion over the appropriations during the Budget Execution Phase. House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to augment any
b. Requisites for the valid transfer of item in this Act from savings in other items of their respective appropriations.
appropriated funds under Section
25(5), Article VI of the 1987 In fact, the foregoing provisions of the 2011 and 2012 GAAs were cited by the DBM as justification for
Constitution the use of savings under the DAP.145

The transfer of appropriated funds, to be valid under Section 25(5), supra, must be made upon a A reading shows, however, that the aforequoted provisions of the GAAs of 2011 and 2012 were
concurrence of the following requisites, namely: textually unfaithful to the Constitution for not carrying the phrase "for their respective offices"
contained in Section 25(5), supra. The impact of the phrase "for their respective offices" was to
(1) There is a law authorizing the President, the President of the Senate, the Speaker of the House of authorize only transfers of funds within their offices (i.e., in the case of the President, the transfer was
Representatives, the Chief Justice of the Supreme Court, and the heads of the Constitutional to an item of appropriation within the Executive). The provisions carried a different phrase ("to
Commissions to transfer funds within their respective offices; augment any item in this Act"), and the effect was that the 2011 and 2012 GAAs thereby literally
allowed the transfer of funds from savings to augment any item in the GAAs even if the item belonged
(2) The funds to be transferred are savings generated from the appropriations for their respective
to an office outside the Executive. To that extent did the 2011 and 2012 GAAs contravene the
offices; and (3) The purpose of the transfer is to augment an item in the general appropriations law for
Constitution. At the very least, the aforequoted provisions cannot be used to claim authority to transfer
their respective offices.
appropriations from the Executive to another branch, or to a constitutional commission.
b.1. First Requisite–GAAs of 2011 and
Apparently realizing the problem, Congress inserted the omitted phrase in the counterpart provision
2012 lacked valid provisions to
in the 2013 GAA, to wit:
authorize transfers of funds under
the DAP; hence, transfers under the Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the
DAP were unconstitutional House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings in
Section 25(5), supra, not being a self-executing provision of the Constitution, must have an
their respective appropriations to augment actual deficiencies incurred for the current year in any item
implementing law for it to be operative. That law, generally, is the GAA of a given fiscal year. To comply
of their respective appropriations.
with the first requisite, the GAAs should expressly authorize the transfer of funds.
Even had a valid law authorizing the transfer of funds pursuant to Section 25(5), supra, existed, there
Did the GAAs expressly authorize the transfer of funds?
still remained two other requisites to be met, namely: that the source of funds to be transferred were
In the 2011 GAA, the provision that gave the President and the other high officials the authority to savings from appropriations within the respective offices; and that the transfer must be for the purpose
transfer funds was Section 59, as follows: of augmenting an item of appropriation within the respective offices.

Section 59. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the b.2. Second Requisite – There were
House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional no savings from which funds
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to augment any could be sourced for the DAP
item in this Act from savings in other items of their respective appropriations. Were the funds used in the DAP actually savings?

In the 2012 GAA, the empowering provision was Section 53, to wit: The petitioners claim that the funds used in the DAP — the unreleased appropriations and withdrawn
unobligated allotments — were not actual savings within the context of Section 25(5), supra, and the
relevant provisions of the GAAs. Belgica argues that "savings" should be understood to refer to the
excess money after the items that needed to be funded have been funded, or those that needed to be
paid have been paid pursuant to the budget.146 The petitioners posit that there could be savings only
when the PAPs for which the funds had been appropriated were actually implemented and completed,
or finally discontinued or abandoned. They insist that savings could not be realized with certainty in
the middle of the fiscal year; and that the funds for "slow-moving" PAPs could not be considered as
savings because such PAPs had not actually been abandoned or discontinued yet. 147 They stress that
NBC No. 541, by allowing the withdrawn funds to be reissued to the "original program or project from
which it was withdrawn," conceded that the PAPs from which the supposed savings were taken had
not been completed, abandoned or discontinued.148
The OSG represents that "savings" were "appropriations balances," being the difference between the
appropriation authorized by Congress and the actual amount allotted for the appropriation; that the
definition of "savings" in the GAAs set only the parameters for determining when savings occurred;
that it was still the President (as well as the other officers vested by the Constitution with the authority
to augment) who ultimately determined when savings actually existed because savings could be
determined only during the stage of budget execution; that the President must be given a wide
discretion to accomplish his tasks; and that the withdrawn unobligated allotments were savings
inasmuch as they were clearly "portions or balances of any programmed appropriation…free from any
obligation or encumbrances which are (i) still available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized…"
We partially find for the petitioners.
In ascertaining the meaning of savings, certain principles should be borne in mind. The first principle is
that Congress wields the power of the purse. Congress decides how the budget will be spent; what
PAPs to fund; and the amounts of money to be spent for each PAP. The second principle is that the
Executive, as the department of the Government tasked to enforce the laws, is expected to faithfully
execute the GAA and to spend the budget in accordance with the provisions of the GAA. 149 The
Executive is expected to faithfully implement the PAPs for which Congress allocated funds, and to limit
the expenditures within the allocations, unless exigencies result to deficiencies for which augmentation
is authorized, subject to the conditions provided by law. The third principle is that in making the
President’s power to augment operative under the GAA, Congress recognizes the need for flexibility in
budget execution. In so doing, Congress diminishes its own power of the purse, for it delegates a
fraction of its power to the Executive. But Congress does not thereby allow the Executive to override
its authority over the purse as to let the Executive exceed its delegated authority. And the fourth
principle is that savings should be actual. "Actual" denotes something that is real or substantial, or
something that exists presently in fact, as opposed to something that is merely theoretical, possible,
potential or hypothetical.150
The foregoing principles caution us to construe savings strictly against expanding the scope of the
power to augment. It is then indubitable that the power to augment was to be used only when the
purpose for which the funds had been allocated were already satisfied, or the need for such funds had
ceased to exist, for only then could savings be properly realized. This interpretation prevents the
Executive from unduly transgressing Congress’ power of the purse.
The definition of "savings" in the GAAs, particularly for 2011, 2012 and 2013, reflected this
interpretation and made it operational, viz:
Savings refer to portions or balances of any programmed appropriation in this Act free from any
obligation or encumbrance which are: (i) still available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized; (ii) from
appropriations balances arising from unpaid compensation and related costs pertaining to vacant
positions and leaves of absence without pay; and (iii) from appropriations balances realized from the
implementation of measures resulting in improved systems and efficiencies and thus enabled agencies
to meet and deliver the required or planned targets, programs and services approved in this Act at a
lesser cost.
The three instances listed in the GAAs’ aforequoted definition were a sure indication that savings could
be generated only upon the purpose of the appropriation being fulfilled, or upon the need for the
appropriation being no longer existent.
The phrase "free from any obligation or encumbrance" in the definition of savings in the GAAs
conveyed the notion that the appropriation was at that stage when the appropriation was already
obligated and the appropriation was already released. This interpretation was reinforced by the
enumeration of the three instances for savings to arise, which showed that the appropriation referred
to had reached the agency level. It could not be otherwise, considering that only when the
appropriation had reached the agency level could it be determined whether (a) the PAP for which the
appropriation had been authorized was completed, finally discontinued, or abandoned; or (b) there
were vacant positions and leaves of absence without pay; or (c) the required or planned targets,
programs and services were realized at a lesser cost because of the implementation of measures
resulting in improved systems and efficiencies.
The DBM declares that part of the savings brought under the DAP came from "pooling of unreleased
appropriations such as unreleased Personnel Services appropriations which will lapse at the end of the
year, unreleased appropriations of slow moving projects and discontinued projects per Zero-Based
Budgeting findings."
The declaration of the DBM by itself does not state the clear legal basis for the treatment of unreleased
or unalloted appropriations as savings.
The fact alone that the appropriations are unreleased or unalloted is a mere description of the status
of the items as unalloted or unreleased. They have not yet ripened into categories of items from which
savings can be generated. Appropriations have been considered "released" if there has already been
an allotment or authorization to incur obligations and disbursement authority. This means that the
DBM has issued either an ABM (for those not needing clearance), or a SARO (for those needing
clearance), and consequently an NCA, NCAA or CDC, as the case may be. Appropriations remain
unreleased, for instance, because of noncompliance with documentary requirements (like the Special
Budget Request), or simply because of the unavailability of funds. But the appropriations do not
actually reach the agencies to which they were allocated under the GAAs, and have remained with the
DBM technically speaking. Ergo, unreleased appropriations refer to appropriations with allotments but
without disbursement authority.
For us to consider unreleased appropriations as savings, unless these met the statutory definition of
savings, would seriously undercut the congressional power of the purse, because such appropriations
had not even reached and been used by the agency concerned vis-à-vis the PAPs for which Congress
had allocated them. However, if an agency has unfilled positions in its plantilla and did not receive an
allotment and NCA for such vacancies, appropriations for such positions, although unreleased, may
already constitute savings for that agency under the second instance.
Unobligated allotments, on the other hand, were encompassed by the first part of the definition of
"savings" in the GAA, that is, as "portions or balances of any programmed appropriation in this Act free
from any obligation or encumbrance." But the first part of the definition was further qualified by the
three enumerated instances of when savings would be realized. As such, unobligated allotments could
not be indiscriminately declared as savings without first determining whether any of the three
instances existed. This signified that the DBM’s withdrawal of unobligated allotments had disregarded
the definition of savings under the GAAs.
Justice Carpio has validly observed in his Separate Concurring Opinion that MOOE appropriations are
deemed divided into twelve monthly allocations within the fiscal year; hence, savings could be
generated monthly from the excess or unused MOOE appropriations other than the Mandatory
Expenditures and Expenditures for Business-type Activities because of the physical impossibility to
obligate and spend such funds as MOOE for a period that already lapsed. Following this observation,
MOOE for future months are not savings and cannot be transferred.
The DBM’s Memorandum for the President dated June 25, 2012 (which became the basis of NBC No.
541) stated:
ON THE AUTHORITY TO WITHDRAW UNOBLIGATED ALLOTMENTS
5.0 The DBM, during the course of performance reviews conducted on the agencies’ operations,
particularly on the implementation of their projects/activities, including expenses incurred in
undertaking the same, have been continuously calling the attention of all National Government
agencies (NGAs) with low levels of obligations as of end of the first quarter to speedup the
implementation of their programs and projects in the second quarter.
6.0 Said reminders were made in a series of consultation meetings with the concerned agencies and
with call-up letters sent.
7.0 Despite said reminders and the availability of funds at the department’s disposal, the level of
financial performance of some departments registered below program, with the targeted
obligations/disbursements for the first semester still not being met.
8.0 In order to maximize the use of the available allotment, all unobligated balances as of June 30,
2012, both for continuing and current allotments shall be withdrawn and pooled to fund fast moving
programs/projects.
9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow moving
projects to be identified by the agencies and their catch up plans to be evaluated by the DBM.
It is apparent from the foregoing text that the withdrawal of unobligated allotments would be based
on whether the allotments pertained to slow-moving projects, or not. However, NBC No. 541 did not
set in clear terms the criteria for the withdrawal of unobligated allotments, viz:
3.1. These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 ofall
national government agencies (NGAs) charged against FY 2011 Continuing Appropriation (R.A. No.
10147) and FY 2012 Current Appropriation (R.A. No. 10155), pertaining to:
3.1.1 Capital Outlays (CO);
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of programs
and projects, as well as capitalized MOOE; and
3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by the
agencies concerned based on their undated/validated list of pensioners.
A perusal of its various provisions reveals that NBC No. 541 targeted the "withdrawal of unobligated
allotments of agencies with low levels of obligations" 151 "to fund priority and/or fast-moving
programs/projects."152 But the fact that the withdrawn allotments could be "[r]eissued for the original
programs and projects of the agencies/OUs concerned, from which the allotments were
withdrawn"153 supported the conclusion that the PAPs had not yet been finally discontinued or
abandoned. Thus, the purpose for which the withdrawn funds had been appropriated was not yet
fulfilled, or did not yet cease to exist, rendering the declaration of the funds as savings impossible.
Worse, NBC No. 541 immediately considered for withdrawal all released allotments in 2011 charged
against the 2011 GAA that had remained unobligated based on the following considerations, to wit:
5.4.1 The departments/agencies’ approved priority programs and projects are assumed to be
implementation-ready and doable during the given fiscal year; and
5.4.2 The practice of having substantial carryover appropriations may imply that the agency has a
slower-than-programmed implementation capacity or agency tends to implement projects within a
two-year timeframe.
Such withdrawals pursuant to NBC No. 541, the circular that affected the unobligated allotments for
continuing and current appropriations as of June 30, 2012, disregarded the 2-year period of availability
of the appropriations for MOOE and capital outlay extended under Section 65, General Provisions of
the 2011 GAA, viz:
Section 65. Availability of Appropriations. — Appropriations for MOOE and capital outlays authorized
in this Act shall be available for release and obligation for the purpose specified, and under the same
special provisions applicable thereto, for a period extending to one fiscal year after the end of the year
in which such items were appropriated: PROVIDED, That appropriations for MOOE and capital outlays
under R.A. No. 9970 shall be made available up to the end of FY 2011: PROVIDED, FURTHER, That a
report on these releases and obligations shall be submitted to the Senate Committee on Finance and
the House Committee on Appropriations.
and Section 63 General Provisions of the 2012 GAA, viz:
Section 63. Availability of Appropriations. — Appropriations for MOOE and capital outlays authorized
in this Act shall be available for release and obligation for the purpose specified, and under the same
special provisions applicable thereto, for a period extending to one fiscal year after the end of the year
in which such items were appropriated: PROVIDED, That a report on these releases and obligations
shall be submitted to the Senate Committee on Finance and the House Committee on Appropriations,
either in printed form or by way of electronic document.154
Thus, another alleged area of constitutional infirmity was that the DAP and its relevant issuances
shortened the period of availability of the appropriations for MOOE and capital outlays.
Congress provided a one-year period of availability of the funds for all allotment classes in the 2013
GAA (R.A. No. 10352), to wit:
Section 63. Availability of Appropriations.— All appropriations authorized in this Act shall be available
for release and obligation for the purposes specified, and under the same special provisions applicable
thereto, until the end of FY 2013: PROVIDED, That a report on these releases and obligations shall be
submitted to the Senate Committee on Finance and House Committee on Appropriations, either in
printed form or by way of electronic document.
Yet, in his memorandum for the President dated May 20, 2013, Sec. Abad sought omnibus authority to
consolidate savings and unutilized balances to fund the DAP on a quarterly basis, viz:
7.0 If the level of financial performance of some department will register below program, even with
the availability of funds at their disposal, the targeted obligations/disbursements for each quarter will
not be met. It is important to note that these funds will lapse at the end of the fiscal year if these remain
unobligated.
8.0 To maximize the use of the available allotment, all unobligated balances at the end of every quarter,
both for continuing and current allotments shall be withdrawn and pooled to fund fast moving
programs/projects.
9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow moving
projects to be identified by the agencies and their catch up plans to be evaluated by the DBM.
The validity period of the affected appropriations, already given the brief Lifes pan of one year, was
further shortened to only a quarter of a year under the DBM’s memorandum dated May 20, 2013.
The petitioners accuse the respondents of forcing the generation of savings in order to have a larger
fund available for discretionary spending. They aver that the respondents, by withdrawing unobligated
allotments in the middle of the fiscal year, in effect deprived funding for PAPs with existing
appropriations under the GAAs.155
The respondents belie the accusation, insisting that the unobligated allotments were being withdrawn
upon the instance of the implementing agencies based on their own assessment that they could not
obligate those allotments pursuant to the President’s directive for them to spend their appropriations
as quickly as they could in order to ramp up the economy.156
We agree with the petitioners.
Contrary to the respondents’ insistence, the withdrawals were upon the initiative of the DBM itself.
The text of NBC No. 541 bears this out, to wit:
5.2 For the purpose of determining the amount of unobligated allotments that shall be withdrawn, all
departments/agencies/operating units (OUs) shall submit to DBM not later than July 30, 2012, the
following budget accountability reports as of June 30, 2012;
• Statement of Allotments, Obligation and Balances (SAOB);
• Financial Report of Operations (FRO); and
• Physical Report of Operations.
5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the agency’s latest
report available shall be used by DBM as basis for withdrawal of allotment. The DBM shall
compute/approximate the agency’s obligation level as of June 30 to derive its unobligated allotments
as of same period. Example: If the March 31 SAOB or FRO reflects actual obligations of P 800M then
the June 30 obligation level shall approximate to ₱1,600 M (i.e., ₱800 M x 2 quarters).
The petitioners assert that no law had authorized the withdrawal and transfer of unobligated
allotments and the pooling of unreleased appropriations; and that the unbridled withdrawal of
unobligated allotments and the retention of appropriated funds were akin to the impoundment of
appropriations that could be allowed only in case of "unmanageable national government budget
deficit" under the GAAs,157 thus violating the provisions of the GAAs of 2011, 2012 and 2013 prohibiting
the retention or deduction of allotments.158
In contrast, the respondents emphasize that NBC No. 541 adopted a spending, not saving, policy as a
last-ditch effort of the Executive to push agencies into actually spending their appropriations; that such
policy did not amount to an impoundment scheme, because impoundment referred to the decision of
the Executive to refuse to spend funds for political or ideological reasons; and that the withdrawal of
allotments under NBC No. 541 was made pursuant to Section 38, Chapter 5, Book VI of the
Administrative Code, by which the President was granted the authority to suspend or otherwise stop
further expenditure of funds allotted to any agency whenever in his judgment the public interest so
required.
The assertions of the petitioners are upheld. The withdrawal and transfer of unobligated allotments
and the pooling of unreleased appropriations were invalid for being bereft of legal support.
Nonetheless, such withdrawal of unobligated allotments and the retention of appropriated funds
cannot be considered as impoundment.
According to Philippine Constitution Association v. Enriquez: 159 "Impoundment refers to a refusal by
the President, for whatever reason, to spend funds made available by Congress. It is the failure to spend
or obligate budget authority of any type." Impoundment under the GAA is understood to mean the
retention or deduction of appropriations. The 2011 GAA authorized impoundment only in case of
unmanageable National Government budget deficit, to wit:
Section 66. Prohibition Against Impoundment of Appropriations. No appropriations authorized under
this Act shall be impounded through retention or deduction, unless in accordance with the rules and
regulations to be issued by the DBM: PROVIDED, That all the funds appropriated for the purposes,
programs, projects and activities authorized under this Act, except those covered under the
Unprogrammed Fund, shall be released pursuant to Section 33 (3), Chapter 5, Book VI of E.O. No. 292.
Section 67. Unmanageable National Government Budget Deficit. Retention or deduction of
appropriations authorized in this Act shall be effected only in cases where there is an unmanageable
national government budget deficit.
Unmanageable national government budget deficit as used in this section shall be construed to mean
that (i) the actual national government budget deficit has exceeded the quarterly budget deficit targets
consistent with the full-year target deficit as indicated in the FY 2011 Budget of
Expenditures and Sources of Financing submitted by the President and approved by Congress pursuant
to Section 22, Article VII of the Constitution, or (ii) there are clear economic indications of an impending
occurrence of such condition, as determined by the Development Budget Coordinating Committee and
approved by the President.
The 2012 and 2013 GAAs contained similar provisions.
The withdrawal of unobligated allotments under the DAP should not be regarded as impoundment
because it entailed only the transfer of funds, not the retention or deduction of appropriations.
Nor could Section 68 of the 2011 GAA (and the similar provisions of the 2012 and 2013 GAAs) be
applicable. They uniformly stated:
Section 68. Prohibition Against Retention/Deduction of Allotment. Fund releases from appropriations
provided in this Act shall be transmitted intact or in full to the office or agency concerned. No retention
or deduction as reserves or overhead shall be made, except as authorized by law, or upon direction of
the President of the Philippines. The COA shall ensure compliance with this provision to the extent that
sub-allotments by agencies to their subordinate offices are in conformity with the release documents
issued by the DBM.
The provision obviously pertained to the retention or deduction of allotments upon their release from
the DBM, which was a different matter altogether. The Court should not expand the meaning of the
provision by applying it to the withdrawal of allotments.
The respondents rely on Section 38, Chapter 5, Book VI of the Administrative Code of 1987 to justify
the withdrawal of unobligated allotments. But the provision authorized only the suspension or
stoppage of further expenditures, not the withdrawal of unobligated allotments, to wit:
Section 38. Suspension of Expenditure of Appropriations.- Except as otherwise provided in the General
Appropriations Act and whenever in his judgment the public interest so requires, the President, upon
notice to the head of office concerned, is authorized to suspend or otherwise stop further expenditure
of funds allotted for any agency, or any other expenditure authorized in the General Appropriations
Act, except for personal services appropriations used for permanent officials and employees.
Moreover, the DBM did not suspend or stop further expenditures in accordance with Section 38, supra,
but instead transferred the funds to other PAPs.
It is relevant to remind at this juncture that the balances of appropriations that remained unexpended
at the end of the fiscal year were to be reverted to the General Fund.1âwphi1 This was the mandate of
Section 28, Chapter IV, Book VI of the Administrative Code, to wit:
Section 28. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations.-
Unexpended balances of appropriations authorized in the General Appropriation Act shall revert to the
unappropriated surplus of the General Fund at the end of the fiscal year and shall not thereafter be
available for expenditure except by subsequent legislative enactment: Provided, that appropriations
for capital outlays shall remain valid until fully spent or reverted: provided, further, that continuing
appropriations for current operating expenditures may be specifically recommended and approved as
such in support of projects whose effective implementation calls for multi-year expenditure
commitments: provided, finally, that the President may authorize the use of savings realized by an
agency during given year to meet non-recurring expenditures in a subsequent year.
The balances of continuing appropriations shall be reviewed as part of the annual budget preparation
process and the preparation process and the President may approve upon recommendation of the
Secretary, the reversion of funds no longer needed in connection with the activities funded by said
continuing appropriations.
The Executive could not circumvent this provision by declaring unreleased appropriations and
unobligated allotments as savings prior to the end of the fiscal year.
b.3. Third Requisite – No funds from
savings could be transferred under
the DAP to augment deficient items
not provided in the GAA
The third requisite for a valid transfer of funds is that the purpose of the transfer should be "to augment
an item in the general appropriations law for the respective offices." The term "augment" means to
enlarge or increase in size, amount, or degree.160
The GAAs for 2011, 2012 and 2013 set as a condition for augmentation that the appropriation for the
PAP item to be augmented must be deficient, to wit: –
x x x Augmentation implies the existence in this Act of a program, activity, or project with an
appropriation, which upon implementation, or subsequent evaluation of needed resources, is
determined to be deficient. In no case shall a non-existent program, activity, or project, be funded by
augmentation from savings or by the use of appropriations otherwise authorized in this Act.
In other words, an appropriation for any PAP must first be determined to be deficient before it could
be augmented from savings. Note is taken of the fact that the 2013 GAA already made this quite clear,
thus:
Section 52. Use of Savings. The President of the Philippines, the Senate President, the Speaker of the
House of Representatives, the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings in
their respective appropriations to augment actual deficiencies incurred for the current year in any item
of their respective appropriations.
As of 2013, a total of ₱144.4 billion worth of PAPs were implemented through the DAP. 161
Of this amount ₱82.5 billion were released in 2011 and ₱54.8 billion in 2012. 162 Sec. Abad has reported
that 9% of the total DAP releases were applied to the PAPs identified by the legislators. 163
The petitioners disagree, however, and insist that the DAP supported the following PAPs that had not
been covered with appropriations in the respective GAAs, namely:
(i) ₱1.5 billion for the Cordillera People’s Liberation Army;
(ii) ₱1.8 billion for the Moro National Liberation Front;
(iii) ₱700 million for assistance to Quezon Province;164
(iv) ₱50 million to ₱100 (million) each to certain senators;165
(v) ₱10 billion for the relocation of families living along dangerous zones under the National Housing
Authority;
(vi) ₱10 billion and ₱20 billion equity infusion under the Bangko Sentral;
 (vii) ₱5.4 billion landowners’ compensation under the Department of Agrarian Reform;
391,978,387
(viii) ₱8.6 billion for the ARMM comprehensive peace and development program; P 1,600,000,000

(ix) ₱6.5 billion augmentation of LGU internal revenue allotments the pertinent provision of the 2011 GAA (R.A. No. 10147) showed that Congress had appropriated only
₱537,910,000 for MOOE, but nothing for personnel services and capital outlays, to wit:
(x) ₱5 billion for crucial projects like tourism road construction under the Department of Tourism and
the Department of Public Works and Highways;
Personnel Maintenance Capital TOTAL
(xi) ₱1.8 billion for the DAR-DPWH Tulay ng Pangulo; Services and Other Outlays
Operating
(xii) ₱1.96 billion for the DOH-DPWH rehabilitation of regional health units; and Expenditures

(xiii) ₱4 billion for the DepEd-PPP school infrastructure projects.166

III. Operations
In refutation, the OSG argues that a total of 116 DAP-financed PAPs were implemented, had
appropriation covers, and could properly be accounted for because the funds were released following a. Funding Assistance to Science 177,406,000 1,887,365,000 49,090,000 2,113,861,000
and pursuant to the standard practices adopted by the DBM. 167 In support of its argument, the OSG and Technology Activities
has submitted seven evidence packets containing memoranda, SAROs, and other pertinent documents
relative to the implementation and fund transfers under the DAP.168
1. Central Office 1,554,238,000 1,554,238,000
Upon careful review of the documents contained in the seven evidence packets, we conclude that the
"savings" pooled under the DAP were allocated to PAPs that were not covered by any appropriations a. Generation of new
in the pertinent GAAs. knowledge and
technologies and
For example, the SARO issued on December 22, 2011 for the highly vaunted Disaster Risk, Exposure,
research
Assessment and Mitigation (DREAM) project under the Department of Science and Technology (DOST)
capability building in
covered the amount of ₱1.6 Billion,169 broken down as follows:
priority areas identified
as
APPROPRIATION PARTICULARS AMOUNT
strategic to National
CODE AUTHORIZED
Development 537,910,000 537,910,000

A.03.a.01.a Generation of new knowledge and technologies and Aside from this transfer under the DAP to the DREAM project exceeding by almost 300% the
research capability building in priority areas identified appropriation by Congress for the program Generation of new knowledge and technologies and
as strategic to National Development research capability building in priority areas identified as strategic to National Development, the
Personnel Services Executive allotted funds for personnel services and capital outlays. The Executive thereby substituted
Maintenance and Other Operating Expenses P 43,504,024 its will to that of Congress. Worse, the Executive had not earlier proposed any amount for personnel
Capital Outlays 1,164,517,589 services and capital outlays in the NEP that became the basis of the 2011 GAA. 170
 It is worth stressing in this connection that the failure of the GAAs to set aside any amounts for an
expense category sufficiently indicated that Congress purposely did not see fit to fund, much less
implement, the PAP concerned. This indication becomes clearer when even the President himself did
not recommend in the NEP to fund the PAP. The consequence was that any PAP requiring expenditure
that did not receive any appropriation under the GAAs could only be a new PAP, any funding for which
would go beyond the authority laid down by Congress in enacting the GAAs. That happened in some
instances under the DAP.
In relation to the December 22, 2011 SARO issued to the Philippine Council for Industry, Energy and
Emerging Technology Research and Development (DOST-PCIEETRD)171 for Establishment of the
Advanced Failure Analysis Laboratory, which reads:
APPROPRIATION PARTICULARS AMOUNT
CODE AUTHORIZED
Development, integration and coordination of the National Research
System for Industry, Energy and Emerging Technology and Related
A.02.a
Fields
Capital Outlays P 300,000,000
the appropriation code and the particulars appearing in the SARO did not correspond to the program
specified in the GAA, whose particulars were Research and Management Services(inclusive of the
following activities: (1) Technological and Economic Assessment for Industry, Energy and Utilities; (2)
Dissemination of Science and Technology Information; and (3) Management of PCIERD Information
System for Industry, Energy and Utilities. Even assuming that Development, integration and
coordination of the National Research System for Industry, Energy and Emerging Technology and
Related Fields– the particulars stated in the SARO – could fall under the broad program description of
Research and Management Services– as appearing in the SARO, it would nonetheless remain a new
activity by reason of its not being specifically stated in the GAA. As such, the DBM, sans legislative
authorization, could not validly fund and implement such PAP under the DAP.
In defending the disbursements, however, the OSG contends that the Executive enjoyed sound
discretion in implementing the budget given the generality in the language and the broad policy
objectives identified under the GAAs;172 and that the President enjoyed unlimited authority to spend
the initial appropriations under his authority to declare and utilize savings, 173 and in keeping with his
duty to faithfully execute the laws.
Although the OSG rightly contends that the Executive was authorized to spend in line with its mandate
to faithfully execute the laws (which included the GAAs), such authority did not translate to unfettered
discretion that allowed the President to substitute his own will for that of Congress. He was still
required to remain faithful to the provisions of the GAAs, given that his power to spend pursuant to
the GAAs was but a delegation to him from Congress. Verily, the power to spend the public wealth
resided in Congress, not in the Executive. 174 Moreover, leaving the spending power of the Executive
unrestricted would threaten to undo the principle of separation of powers.175
Congress acts as the guardian of the public treasury in faithful discharge of its power of the purse
whenever it deliberates and acts on the budget proposal submitted by the Executive.176 Its power of
the purse is touted as the very foundation of its institutional strength, 177 and underpins "all other
legislative decisions and regulating the balance of influence between the legislative and executive
branches of government."178 Such enormous power encompasses the capacity to generate money for
the Government, to appropriate public funds, and to spend the money. 179 Pertinently, when it exercises
its power of the purse, Congress wields control by specifying the PAPs for which public money should
be spent.
It is the President who proposes the budget but it is Congress that has the final say on matters of
appropriations.180For this purpose, appropriation involves two governing principles, namely: (1) "a
Principle of the Public Fisc, asserting that all monies received from whatever source by any part of the
government are public funds;" and (2) "a Principle of Appropriations Control, prohibiting expenditure
of any public money without legislative authorization."181To conform with the governing principles, the
Executive cannot circumvent the prohibition by Congress of an expenditure for a PAP by resorting to
either public or private funds.182 Nor could the Executive transfer appropriated funds resulting in an
increase in the budget for one PAP, for by so doing the appropriation for another PAP is necessarily
decreased. The terms of both appropriations will thereby be violated.
b.4 Third Requisite – Cross-border
augmentations from savings were
prohibited by the Constitution
By providing that 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 the Constitutional
Commissions may be authorized to augment any item in the GAA "for their respective offices," Section
25(5), supra, has delineated borders between their offices, such that funds appropriated for one office
are prohibited from crossing over to another office even in the guise of augmentation of a deficient
item or items. Thus, we call such transfers of funds cross-border transfers or cross-border
augmentations.
To be sure, the phrase "respective offices" used in Section 25(5), supra, refers to the entire Executive,
with respect to the President; the Senate, with respect to the Senate President; the House of
Representatives, with respect to the Speaker; the Judiciary, with respect to the Chief Justice; the These cross border examples, cross border augmentations were not supported by appropriations…
Constitutional Commissions, with respect to their respective Chairpersons.
SECRETARY ABAD:
Did any cross-border transfers or augmentations transpire?
They were, we were augmenting existing items within their… (interrupted)
During the oral arguments on January 28, 2014, Sec. Abad admitted making some cross-border
augmentations, to wit: JUSTICE BERSAMIN:

JUSTICE BERSAMIN: No, appropriations before you augmented because this is a cross border and the tenor or text of the
Constitution is quite clear as far as I am concerned. It says here, "The power to augment may only be
Alright, the whole time that you have been Secretary of Department of Budget and Management, did made to increase any item in the General Appropriations Law for their respective offices." Did you not
the Executive Department ever redirect any part of savings of the National Government under your feel constricted by this provision?
control cross border to another department?
SECRETARY ABAD:
SECRETARY ABAD:
Well, as the Constitution provides, the prohibition we felt was on the transfer of appropriations, Your
Well, in the Memos that we submitted to you, such an instance, Your Honor Honor. What we thought we did was to transfer savings which was needed by the Commission to
address deficiency in an existing item in both the Commission as well as in the House of
JUSTICE BERSAMIN: Representatives; that’s how we saw…(interrupted)

Can you tell me two instances? I don’t recall having read your material. JUSTICE BERSAMIN:

SECRETARY ABAD: So your position as Secretary of Budget is that you could do that?

Well, the first instance had to do with a request from the House of Representatives. They started SECRETARY ABAD:
building their e-library in 2010 and they had a budget for about 207 Million but they lack about 43
Million to complete its 250 Million requirements. Prior to that, the COA, in an audit observation In an extreme instances because…(interrupted)
informed the Speaker that they had to continue with that construction otherwise the whole building,
as well as the equipments therein may suffer from serious deterioration. And at that time, since the JUSTICE BERSAMIN:
budget of the House of Representatives was not enough to complete 250 Million, they wrote to the
No, no, in all instances, extreme or not extreme, you could do that, that’s your feeling.
President requesting for an augmentation of that particular item, which was granted, Your Honor. The
second instance in the Memos is a request from the Commission on Audit. At the time they were SECRETARY ABAD:
pushing very strongly the good governance programs of the government and therefore, part of that is
a requirement to conduct audits as well as review financial reports of many agencies. And in the Well, in that particular situation when the request was made by the Commission and the House of
performance of that function, the Commission on Audit needed information technology equipment as Representatives, we felt that we needed to respond because we felt…(interrupted). 183
well as hire consultants and litigators to help them with their audit work and for that they requested
The records show, indeed, that funds amounting to ₱143,700,000.00 and ₱250,000,000.00 were
funds from the Executive and the President saw that it was important for the Commission to be
transferred under the DAP respectively to the COA184 and the House of Representatives.185 Those
provided with those IT equipments and litigators and consultants and the request was granted, Your
transfers of funds, which constituted cross-border augmentations for being from the Executive to the
Honor.
COA and the House of Representatives, are graphed as follows: 186
JUSTICE BERSAMIN:
 AMOUNT hours a day, 7 days a week. He’s in charge of the whole operation although six or seven heads of
(In thousand pesos) government offices are given the power to augment. Only the President stationed there and in effect
DATE in-charge and has the responsibility for the failure of any part of the government. You have election,
OFFICE PURPOSE
RELEASED for one reason or another, the money is not enough to hold election. There would be chaos if no money
Reserve Releases
is given as an aid, not to augment, but as an aid to a department like COA. The President is responsible
Imposed
in a way that the other heads, given the power to augment, are not. So, he cannot very well allow this,
if Your Honor please.189
Commission on IT Infrastructure Program and hiring of 11/11/11 143,700
Audit additional litigation experts JUSTICE LEONEN:

May I move to another point, maybe just briefly. I am curious that the position now, I think, of
Congress – Completion of the construction of the 07/23/12 207,034 250,000
government is that some transfers of savings is now considered to be, if I’m not mistaken, aid not
House of Legislative Library and Archives (Savings of
augmentation. Am I correct in my hearing of your argument?
Representatives Building/Congressional e-library HOR)
HONORABLE MENDOZA:
The respondents further stated in their memorandum that the President "made available" to the
"Commission on Elections the savings of his department upon [its] request for funds…" 187 This was That’s our submission, if Your Honor, please.
another instance of a cross-border augmentation.
JUSTICE LEONEN:
The respondents justified all the cross-border transfers thusly:
May I know, Justice, where can we situate this in the text of the Constitution? Where do we actually
99. The Constitution does not prevent the President from transferring savings of his department to derive the concepts that transfers of appropriation from one branch to the other or what happened in
another department upon the latter’s request, provided it is the recipient department that uses such DAP can be considered a said? What particular text in the Constitution can we situate this?
funds to augment its own appropriation. In such a case, the President merely gives the other
HONORABLE MENDOZA:
department access to public funds but he cannot dictate how they shall be applied by that department
whose fiscal autonomy is guaranteed by the Constitution.188 There is no particular provision or statutory provision for that matter, if Your Honor please. It is drawn
from the fact that the Executive is the executive in-charge of the success of the government.
In the oral arguments held on February 18, 2014, Justice Vicente V. Mendoza, representing Congress,
announced a different characterization of the cross-border transfers of funds as in the nature of "aid" JUSTICE LEONEN:
instead of "augmentation," viz:
So, the residual powers labelled in Marcos v. Manglapus would be the basis for this theory of the
HONORABLE MENDOZA: government?

The cross-border transfers, if Your Honors please, is not an application of the DAP. What were these HONORABLE MENDOZA:
cross-border transfers? They are transfers of savings as defined in the various General Appropriations
Act. So, that makes it similar to the DAP, the use of savings. There was a cross-border which appears to Yes, if Your Honor, please.
be in violation of Section 25, paragraph 5 of Article VI, in the sense that the border was crossed. But
never has it been claimed that the purpose was to augment a deficient item in another department of JUSTICE LEONEN:
the government or agency of the government. The cross-border transfers, if Your Honors please, were
in the nature of [aid] rather than augmentations. Here is a government entity separate and
independent from the Executive Department solely in need of public funds. The President is there 24
A while ago, Justice Carpio mentioned that the remedy is might be to go to Congress. That there are The petitioners point out that a condition for the release of the unprogrammed funds was that the
opportunities and there have been opportunities of the President to actually go to Congress and ask revenue collections must exceed revenue targets; and that the release of the unprogrammed funds
for supplemental budgets? was illegal because such condition was not met. 191

HONORABLE MENDOZA: The respondents disagree, holding that the release and use of the unprogrammed funds under the DAP
were in accordance with the pertinent provisions of the GAAs. In particular, the DBM avers that the
If there is time to do that, I would say yes. unprogrammed funds could be availed of when any of the following three instances occur, to wit: (1)
the revenue collections exceeded the original revenue targets proposed in the BESFs submitted by the
JUSTICE LEONEN:
President to Congress; (2) new revenues were collected or realized from sources not originally
So, the theory of aid rather than augmentation applies in extra-ordinary situation? considered in the BESFs; or(3) newly-approved loans for foreign assisted projects were secured, or
when conditions were triggered for other sources of funds, such as perfected loan agreements for
HONORABLE MENDOZA: foreign-assisted projects.192 This view of the DBM was adopted by all the respondents in their
Consolidated Comment.193
Very extra-ordinary situations.
The BESFs for 2011, 2012 and 2013 uniformly defined "unprogrammed appropriations" as
JUSTICE LEONEN:
appropriations that provided standby authority to incur additional agency obligations for priority PAPs
But Counsel, this would be new doctrine, in case? when revenue collections exceeded targets, and when additional foreign funds are
generated.194 Contrary to the DBM’s averment that there were three instances when unprogrammed
HONORABLE MENDOZA: funds could be released, the BESFs envisioned only two instances. The third mentioned by the DBM –
the collection of new revenues from sources not originally considered in the BESFs – was not included.
Yes, if Your Honor please.190 This meant that the collection of additional revenues from new sources did not warrant the release of
the unprogrammed funds. Hence, even if the revenues not considered in the BESFs were collected or
Regardless of the variant characterizations of the cross-border transfers of funds, the plain text of
generated, the basic condition that the revenue collections should exceed the revenue targets must
Section 25(5), supra, disallowing cross border transfers was disobeyed. Cross-border transfers, whether
still be complied with in order to justify the release of the unprogrammed funds.
as augmentation, or as aid, were prohibited under Section 25(5), supra.
The view that there were only two instances when the unprogrammed funds could be released was
4.
bolstered by the following texts of the Special Provisions of the 2011 and 2012 GAAs, to wit:
Sourcing the DAP from unprogrammed
funds despite the original revenue targets 2011 GAA
not having been exceeded was invalid
1. Release of Fund. The amounts authorized herein shall be released only when the revenue collections
Funding under the DAP were also sourced from unprogrammed funds provided in the GAAs for 2011, exceed the original revenue targets submitted by the President of the Philippines to Congress pursuant
2012,and 2013. The respondents stress, however, that the unprogrammed funds were not brought to Section 22, Article VII of the Constitution, including savings generated from programmed
under the DAP as savings, but as separate sources of funds; and that, consequently, the release and appropriations for the year: PROVIDED, That collections arising from sources not considered in the
use of unprogrammed funds were not subject to the restrictions under Section 25(5), supra. aforesaid original revenue targets may be used to cover releases from appropriations in this Fund:
PROVIDED, FURTHER, That in case of newly approved loans for foreign-assisted projects, the existence
The documents contained in the Evidence Packets by the OSG have confirmed that the unprogrammed
of a perfected loan agreement for the purpose shall be sufficient basis for the issuance of a SARO
funds were treated as separate sources of funds. Even so, the release and use of the unprogrammed
covering the loan proceeds: PROVIDED, FURTHERMORE, That if there are savings generated from the
funds were still subject to restrictions, for, to start with, the GAAs precisely specified the instances
programmed appropriations for the first two quarters of the year, the DBM may, subject to the
when the unprogrammed funds could be released and the purposes for which they could be used.
approval of the President, release the pertinent appropriations under the Unprogrammed Fund
corresponding to only fifty percent (50%) of the said savings net of revenue shortfall: PROVIDED, Consequently, that there were additional revenues from sources not considered in the revenue target
FINALLY, That the release of the balance of the total savings from programmed appropriations for the would not be enough. The total revenue collections must still exceed the original revenue targets to
year shall be subject to fiscal programming and approval of the President. justify the release of the unprogrammed funds (other than those from newly-approved foreign loans).

2012 GAA
1. Release of the Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to
Congress pursuant to Section 22, Article VII of the Constitution: PROVIDED, That collections arising from
sources not considered in the aforesaid original revenue targets may be used to cover releases from
appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for foreign-
assisted projects, the existence of a perfected loan agreement for the purpose shall be sufficient basis
for the issuance of a SARO covering the loan proceeds.
The present controversy on the unprogrammed funds was rooted in the correct interpretation of the
phrase "revenue collections should exceed the original revenue targets." The petitioners take the
phrase to mean that the total revenue collections must exceed the total revenue target stated in the
BESF, but the respondents understand the phrase to refer only to the collections for each source of
revenue as enumerated in the BESF, with the condition being deemed complied with once the revenue
collections from a particular source already exceeded the stated target.
The BESF provided for the following sources of revenue, with the corresponding revenue target stated
for each source of revenue, to wit:

As can be noted, the provisos in both provisions to the effect that "collections arising from sources not TAX REVENUES
considered in the aforesaid original revenue targets may be used to cover releases from appropriations
in this Fund" gave the authority to use such additional revenues for appropriations funded from the Taxes on Net Income and Profits
unprogrammed funds. They did not at all waive compliance with the basic requirement that revenue Taxes on Property
collections must still exceed the original revenue targets. Taxes on Domestic Goods and Services

In contrast, the texts of the provisos with regard to additional revenues generated from newly- General Sales, Turnover or VAT
approved foreign loans were clear to the effect that the perfected loan agreement would be in itself Selected Excises on Goods
"sufficient basis" for the issuance of a SARO to release the funds but only to the extent of the amount
Selected Taxes on Services
of the loan. In such instance, the revenue collections need not exceed the revenue targets to warrant
Taxes on the Use of Goods or Property or Permission to Perform Activities
the release of the loan proceeds, and the mere perfection of the loan agreement would suffice.
Other Taxes
It can be inferred from the foregoing that under these provisions of the GAAs the additional revenues Taxes on International Trade and Transactions
from sources not considered in the BESFs must be taken into account in determining if the revenue
NON-TAX REVENUES
collections exceeded the revenue targets. The text of the relevant provision of the 2013 GAA, which
was substantially similar to those of the GAAs for 2011 and 2012, already made this explicit, thus: Fees and Charges
BTR Income
1. Release of the Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to Government Services
Congress pursuant to Section 22, Article VII of the Constitution, including collections arising from Interest on NG Deposits
sources not considered in the aforesaid original revenue target, as certified by the BTr: PROVIDED, That Interest on Advances to Government Corporations
in case of newly approved loans for foreign-assisted projects, the existence of a perfected loan Income from Investments
agreement for the purpose shall be sufficient basis for the issuance of a SARO covering the loan
proceeds. Interest on Bond Holdings
Guarantee Fee Moreover, the National Government accounted for the sale of the right to build and operate the NAIA
Gain on Foreign Exchange expressway amounting to ₱11.0 billion in June 2013. 199
NG Income Collected by BTr
The certifications reflected that by collecting dividends amounting to ₱23.8 billion in 2011, ₱19.419
Dividends on Stocks billion in 2012, and ₱12.438 billion in 2013 the BTr had exceeded only the ₱5.5 billion in target revenues
NG Share from Airport Terminal Fee in the form of dividends from stocks in each of 2011 and 2012, and only the ₱10 billion in target
NG Share from PAGCOR Income revenues in the form of dividends from stocks in 2013.
NG Share from MIAA Profit
However, the requirement that revenue collections exceed the original revenue targets was to be
Privatization construed in light of the purpose for which the unprogrammed funds were incorporated in the GAAs
Foreign Grants as standby appropriations to support additional expenditures for certain priority PAPs should the
revenue collections exceed the resource targets assumed in the budget or when additional foreign
Thus, when the Court required the respondents to submit a certification from the Bureau of Treasury project loan proceeds were realized. The unprogrammed funds were included in the GAAs to provide
(BTr) to the effect that the revenue collections had exceeded the original revenue targets, 195 they ready cover so as not to delay the implementation of the PAPs should new or additional revenue
complied by submitting certifications from the BTr and Department of Finance (DOF) pertaining to only sources be realized during the year.200 Given the tenor of the certifications, the unprogrammed funds
one identified source of revenue – the dividends from the shares of stock held by the Government in were thus not yet supported by the corresponding resources.201
government-owned and controlled corporations.
The revenue targets stated in the BESF were intended to address the funding requirements of the
To justify the release of the unprogrammed funds for 2011, the OSG presented the certification dated proposed programmed appropriations. In contrast, the unprogrammed funds, as standby
March 4, 2011 issued by DOF Undersecretary Gil S. Beltran, as follows: appropriations, were to be released only when there were revenues in excess of what the programmed
appropriations required. As such, the revenue targets should be considered as a whole, not individually;
This is to certify that under the Budget for Expenditures and Sources of Financing for 2011, the
otherwise, we would be dealing with artificial revenue surpluses. The requirement that revenue
programmed income from dividends from shares of stock in government-owned and controlled
collections must exceed revenue target should be understood to mean that the revenue collections
corporations is 5.5 billion.
must exceed the total of the revenue targets stated in the BESF. Moreover, to release the
This is to certify further that based on the records of the Bureau of Treasury, the National Government unprogrammed funds simply because there was an excess revenue as to one source of revenue would
has recorded dividend income amounting to ₱23.8 billion as of 31 January 2011. 196 be an unsound fiscal management measure because it would disregard the budget plan and foster
budget deficits, in contravention of the Government’s surplus budget policy.202
For 2012, the OSG submitted the certification dated April 26, 2012 issued by National Treasurer
Roberto B. Tan, viz: We cannot, therefore, subscribe to the respondents’ view.

This is to certify that the actual dividend collections remitted to the National Government for the period 5.
January to March 2012 amounted to ₱19.419 billion compared to the full year program of ₱5.5 billion Equal protection, checks and balances,
for 2012.197 and public accountability challenges

And, finally, for 2013, the OSG presented the certification dated July 3, 2013 issued by National The DAP is further challenged as violative of the Equal Protection Clause, the system of checks and
Treasurer Rosalia V. De Leon, to wit: balances, and the principle of public accountability.

This is to certify that the actual dividend collections remitted to the National Government for the period With respect to the challenge against the DAP under the Equal Protection Clause, 203 Luna argues that
January to May 2013 amounted to ₱12.438 billion compared to the full year program of ₱10.0 198 billion the implementation of the DAP was "unfair as it [was] selective" because the funds released under the
for 2013. DAP was not made available to all the legislators, with some of them refusing to avail themselves of
the DAP funds, and others being unaware of the availability of such funds. Thus, the DAP practised
"undue favoritism" in favor of select legislators in contravention of the Equal Protection Clause.
Similarly, COURAGE contends that the DAP violated the Equal Protection Clause because no reasonable
classification was used in distributing the funds under the DAP; and that the Senators who supposedly
availed themselves of said funds were differently treated as to the amounts they respectively received.
Anent the petitioners’ theory that the DAP violated the system of checks and balances, Luna submits
that the grant of the funds under the DAP to some legislators forced their silence about the issues and
anomalies surrounding the DAP. Meanwhile, Belgica stresses that the DAP, by allowing the legislators
to identify PAPs, authorized them to take part in the implementation and execution of the GAAs, a
function that exclusively belonged to the Executive; that such situation constituted undue and
unjustified legislative encroachment in the functions of the Executive; and that the President arrogated
unto himself the power of appropriation vested in Congress because NBC No. 541 authorized the use
of the funds under the DAP for PAPs not considered in the 2012 budget.
Finally, the petitioners insist that the DAP was repugnant to the principle of public accountability
enshrined in the Constitution,204 because the legislators relinquished the power of appropriation to the
Executive, and exhibited a reluctance to inquire into the legality of the DAP.
The OSG counters the challenges, stating that the supposed discrimination in the release of funds under
the DAP could be raised only by the affected Members of Congress themselves, and if the challenge
based on the violation of the Equal Protection Clause was really against the constitutionality of the
DAP, the arguments of the petitioners should be directed to the entitlement of the legislators to the
funds, not to the proposition that all of the legislators should have been given such entitlement.
The challenge based on the contravention of the Equal Protection Clause, which focuses on the release
of funds under the DAP to legislators, lacks factual and legal basis. The allegations about Senators and
Congressmen being unaware of the existence and implementation of the DAP, and about some of them
having refused to accept such funds were unsupported with relevant data. Also, the claim that the
Executive discriminated against some legislators on the ground alone of their receiving less than the
others could not of itself warrant a finding of contravention of the Equal Protection Clause. The denial
of equal protection of any law should be an issue to be raised only by parties who supposedly suffer it,
and, in these cases, such parties would be the few legislators claimed to have been discriminated
against in the releases of funds under the DAP. The reason for the requirement is that only such
affected legislators could properly and fully bring to the fore when and how the denial of equal
protection occurred, and explain why there was a denial in their situation. The requirement was not
met here. Consequently, the Court was not put in the position to determine if there was a denial of
equal protection. To have the Court do so despite the inadequacy of the showing of factual and legal
support would be to compel it to speculate, and the outcome would not do justice to those for whose
supposed benefit the claim of denial of equal protection has been made.
The argument that the release of funds under the DAP effectively stayed the hands of the legislators
from conducting congressional inquiries into the legality and propriety of the DAP is speculative. That
deficiency eliminated any need to consider and resolve the argument, for it is fundamental that
speculation would not support any proper judicial determination of an issue simply because nothing
concrete can thereby be gained. In order to sustain their constitutional challenges against official acts
of the Government, the petitioners must discharge the basic burden of proving that the constitutional
infirmities actually existed.205 Simply put, guesswork and speculation cannot overcome the
presumption of the constitutionality of the assailed executive act.
We do not need to discuss whether or not the DAP and its implementation through the various circulars
and memoranda of the DBM transgressed the system of checks and balances in place in our
constitutional system. Our earlier expositions on the DAP and its implementing issuances infringing the
doctrine of separation of powers effectively addressed this particular concern.
Anent the principle of public accountability being transgressed because the adoption and
implementation of the DAP constituted an assumption by the Executive of Congress’ power of
appropriation, we have already held that the DAP and its implementing issuances were policies and
acts that the Executive could properly adopt and do in the execution of the GAAs to the extent that
they sought to implement strategies to ramp up or accelerate the economy of the country.
6.
Doctrine of operative fact was applicable
After declaring the DAP and its implementing issuances constitutionally infirm, we must now deal with
the consequences of the declaration.
Article 7 of the Civil Code provides:
Article 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not
be excused by disuse, or custom or practice to the contrary.
When the courts declared a law to be inconsistent with the Constitution, the former shall be void and
the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not contrary
to the laws or the Constitution.
A legislative or executive act that is declared void for being unconstitutional cannot give rise to any
right or obligation.206 However, the generality of the rule makes us ponder whether rigidly applying the
rule may at times be impracticable or wasteful. Should we not recognize the need to except from the
rigid application of the rule the instances in which the void law or executive act produced an almost
irreversible result?
The need is answered by the doctrine of operative fact. The doctrine, definitely not a novel one, has
been exhaustively explained in De Agbayani v. Philippine National Bank:207
The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an
executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source
of any legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the
fundamental law once judicially declared results in its being to all intents and purposes a mere scrap of
paper. As the new Civil Code puts it: ‘When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern.’ Administrative or executive acts,
orders and regulations shall be valid only when they are not contrary to the laws of the Constitution. It
is understandable why it should be so, the Constitution being supreme and paramount. Any legislative
or executive act contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently
realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative
or executive act must have been in force and had to be complied with. This is so as until after the
judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties
may have acted under it and may have changed their positions. What could be more fitting than that
in a subsequent litigation regard be had to what has been done while such legislative or executive act
was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to
its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that
precisely because the judiciary is the governmental organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have elapsed before it can exercise the
power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what had transpired prior to such
adjudication.
In the language of an American Supreme Court decision: ‘The actual existence of a statute, prior to
such a determination [of unconstitutionality], 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 aspects, with respect to
particular relations, individual and corporate, and particular conduct, private and official.’"
The doctrine of operative fact recognizes the existence of the law or executive act prior to the
determination of its unconstitutionality as an operative fact that produced consequences that cannot
always be erased, ignored or disregarded. In short, it nullifies the void law or executive act but sustains
its effects. It provides an exception to the general rule that a void or unconstitutional law produces no
effect.208 But its use must be subjected to great scrutiny and circumspection, and it cannot be invoked
to validate an unconstitutional law or executive act, but is resorted to only as a matter of equity and
fair play.209 It applies only to cases where extraordinary circumstances exist, and only when the
extraordinary circumstances have met the stringent conditions that will permit its application.
We find the doctrine of operative fact applicable to the adoption and implementation of the DAP. Its
application to the DAP proceeds from equity and fair play. The consequences resulting from the DAP
and its related issuances could not be ignored or could no longer be undone.
To be clear, the doctrine of operative fact extends to a void or unconstitutional executive act. The term
executive act is broad enough to include any and all acts of the Executive, including those that are quasi
legislative and quasi-judicial in nature. The Court held so in Hacienda Luisita, Inc. v. Presidential
Agrarian Reform Council:210
Nonetheless, the minority is of the persistent view that the applicability of the operative fact doctrine
should be limited to statutes and rules and regulations issued by the executive department that are
accorded the same status as that of a statute or those which are quasi-legislative in nature. Thus, the
minority concludes that the phrase ‘executive act’ used in the case of De Agbayani v. Philippine National
Bank refers only to acts, orders, and rules and regulations that have the force and effect of law. The
minority also made mention of the Concurring Opinion of Justice Enrique Fernando in Municipality of
Malabang v. Benito, where it was supposedly made explicit that the operative fact doctrine applies to
executive acts, which are ultimately quasi-legislative in nature.
We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang case elaborates
what ‘executive act’ mean. Moreover, while orders, rules and regulations issued by the President or
the executive branch have fixed definitions and meaning in the Administrative Code and jurisprudence,
the phrase ‘executive act’ does not have such specific definition under existing laws. It should be noted
that in the cases cited by the minority, nowhere can it be found that the term ‘executive act’ is confined
to the foregoing. Contrarily, the term ‘executive act’ is broad enough to encompass decisions of
administrative bodies and agencies under the executive department which are subsequently revoked
by the agency in question or nullified by the Court.
A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as Chairman of the
Presidential Commission on Good Government (PCGG) and as Chief Presidential Legal Counsel (CPLC)
which was declared unconstitutional by this Court in Public Interest Center, Inc. v. Elma. In said case,
this Court ruled that the concurrent appointment of Elma to these offices is in violation of Section 7,
par. 2, Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably, the
appointment of Elma as Chairman of the PCGG and as CPLC is, without a question, an executive act.
Prior to the declaration of unconstitutionality of the said executive act, certain acts or transactions
were made in good faith and in reliance of the appointment of Elma which cannot just be set aside or
invalidated by its subsequent invalidation.
In Tan v. Barrios, this Court, in applying the operative fact doctrine, held that despite the invalidity of
the jurisdiction of the military courts over civilians, certain operative facts must be acknowledged to
have existed so as not to trample upon the rights of the accused therein. Relevant thereto, in Olaguer
v. Military Commission No. 34, it was ruled that ‘military tribunals pertain to the Executive Department
of the Government and are simply instrumentalities of the executive power, provided by the legislature
for the President as Commander-in-Chief to aid him in properly commanding the army and navy and
enforcing discipline therein, and utilized under his orders or those of his authorized military
representatives.’
Evidently, the operative fact doctrine is not confined to statutes and rules and regulations issued by
the executive department that are accorded the same status as that of a statute or those which are
quasi-legislative in nature.
Even assuming that De Agbayani initially applied the operative fact doctrine only to executive issuances
like orders and rules and regulations, said principle can nonetheless be applied, by analogy, to decisions
made by the President or the agencies under the executive department. This doctrine, in the interest
of justice and equity, can be applied liberally and in a broad sense to encompass said decisions of the
executive branch. In keeping with the demands of equity, the Court can apply the operative fact
doctrine to acts and consequences that resulted from the reliance not only on a law or executive act
which is quasi-legislative in nature but also on decisions or orders of the executive branch which were
later nullified. This Court is not unmindful that such acts and consequences must be recognized in the
higher interest of justice, equity and fairness.
Significantly, a decision made by the President or the administrative agencies has to be complied with
because it has the force and effect of law, springing from the powers of the President under the
Constitution and existing laws. Prior to the nullification or recall of said decision, it may have produced
acts and consequences in conformity to and in reliance of said decision, which must be respected. It is
on this score that the operative fact doctrine should be applied to acts and consequences that resulted
from the implementation of the PARC Resolution approving the SDP of HLI. (Bold underscoring supplied
for emphasis)
In Commissioner of Internal Revenue v. San Roque Power Corporation,211 the Court likewise declared
that "for the operative fact doctrine to apply, there must be a ‘legislative or executive measure,’
meaning a law or executive issuance." Thus, the Court opined there that the operative fact doctrine
did not apply to a mere administrative practice of the Bureau of Internal Revenue, viz:
Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time
the rule or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is not given
retroactive effect. This, in essence, is the doctrine of operative fact. There must, however, be a rule or
ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A mere
administrative practice, not formalized into a rule or ruling, will not suffice because such a mere
administrative practice may not be uniformly and consistently applied. An administrative practice, if
not formalized as a rule or ruling, will not be known to the general public and can be availed of only by
those with informal contacts with the government agency.
It is clear from the foregoing that the adoption and the implementation of the DAP and its related
issuances were executive acts.1avvphi1 The DAP itself, as a policy, transcended a merely administrative
practice especially after the Executive, through the DBM, implemented it by issuing various
memoranda and circulars. The pooling of savings pursuant to the DAP from the allotments made
available to the different agencies and departments was consistently applied throughout the entire
Executive. With the Executive, through the DBM, being in charge of the third phase of the budget cycle
– the budget execution phase, the President could legitimately adopt a policy like the DAP by virtue of
his primary responsibility as the Chief Executive of directing the national economy towards growth and
development. This is simply because savings could and should be determined only during the budget
execution phase.
As already mentioned, the implementation of the DAP resulted into the use of savings pooled by the
Executive to finance the PAPs that were not covered in the GAA, or that did not have proper
appropriation covers, as well as to augment items pertaining to other departments of the Government
in clear violation of the Constitution. To declare the implementation of the DAP unconstitutional
without recognizing that its prior implementation constituted an operative fact that produced
consequences in the real as well as juristic worlds of the Government and the Nation is to be impractical
and unfair. Unless the doctrine is held to apply, the Executive as the disburser and the offices under it
and elsewhere as the recipients could be required to undo everything that they had implemented in
good faith under the DAP. That scenario would be enormously burdensome for the Government. Equity
alleviates such burden.
The other side of the coin is that it has been adequately shown as to be beyond debate that the
implementation of the DAP yielded undeniably positive results that enhanced the economic welfare of
the country. To count the positive results may be impossible, but the visible ones, like public
infrastructure, could easily include roads, bridges, homes for the homeless, hospitals, classrooms and
the like. Not to apply the doctrine of operative fact to the DAP could literally cause the physical undoing
of such worthy results by destruction, and would result in most undesirable wastefulness.

Nonetheless, as Justice Brion has pointed out during the deliberations, the doctrine of operative fact
does not always apply, and is not always the consequence of every declaration of constitutional
invalidity. It can be invoked only in situations where the nullification of the effects of what used to be
a valid law would result in inequity and injustice; 212but where no such result would ensue, the general
rule that an unconstitutional law is totally ineffective should apply.

In that context, as Justice Brion has clarified, the doctrine of operative fact can apply only to the PAPs
that can no longer be undone, and whose beneficiaries relied in good faith on the validity of the DAP,
but cannot apply to the authors, proponents and implementors of the DAP, unless there are concrete
findings of good faith in their favor by the proper tribunals determining their criminal, civil,
administrative and other liabilities.

WHEREFORE, the Court PARTIALLY GRANTS the petitions for certiorari and prohibition; and DECLARES
the following acts and practices under the Disbursement Acceleration Program, National Budget
Circular No. 541 and related executive issuances UNCONSTITUTIONAL for being in violation of Section
25(5), Article VI of the 1987 Constitution and the doctrine of separation of powers, namely:

(a) The withdrawal of unobligated allotments from the implementing agencies, and the declaration of
the withdrawn unobligated allotments and unreleased appropriations as savings prior to the end of the
fiscal year and without complying with the statutory definition of savings contained in the General
Appropriations Acts;

(b) The cross-border transfers of the savings of the Executive to augment the appropriations of other
offices outside the Executive; and

(c) The funding of projects, activities and programs that were not covered by any appropriation in the
General Appropriations Act.

The Court further DECLARES VOID the use of unprogrammed funds despite the absence of a
certification by the National Treasurer that the revenue collections exceeded the revenue targets for
non-compliance with the conditions provided in the relevant General Appropriations Acts.
SO ORDERED.
hen President Benigno Aquino III took office, his administration noticed the sluggish growth of the
economy. The World Bank advised that the economy needed a stimulus plan. Budget Secretary
Florencio “Butch” Abad then came up with a program called the Disbursement Acceleration Program
(DAP).
The DAP was seen as a remedy to speed up the funding of government projects. DAP enables the
Executive to realign funds from slow moving projects to priority projects instead of waiting for next
year’s appropriation. So what happens under the DAP was that if a certain government project is being
undertaken slowly by a certain executive agency, the funds allotted therefor will be withdrawn by the
Executive. Once withdrawn, these funds are declared as “savings” by the Executive and said funds will
then be reallotted to other priority projects. The DAP program did work to stimulate the economy as
economic growth was in fact reported and portion of such growth was attributed to the DAP (as noted
by the Supreme Court).
Other sources of the DAP include the unprogrammed funds from the General Appropriations Act (GAA).
Unprogrammed funds are standby appropriations made by Congress in the GAA.
Meanwhile, in September 2013, Senator Jinggoy Estrada made an exposé claiming that he, and other
Senators, received Php50M from the President as an incentive for voting in favor of the impeachment
of then Chief Justice Renato Corona. Secretary Abad claimed that the money was taken from the DAP
but was disbursed upon the request of the Senators.
This apparently opened a can of worms as it turns out that the DAP does not only realign funds within
the Executive. It turns out that some non-Executive projects were also funded; to name a few: Php1.5B
for the CPLA (Cordillera People’s Liberation Army), Php1.8B for the MNLF (Moro National Liberation
Front), P700M for the Quezon Province, P50-P100M for certain Senators each, P10B for Relocation
Projects, etc.
This prompted Maria Carolina Araullo, Chairperson of the Bagong Alyansang Makabayan, and several
other concerned citizens to file various petitions with the Supreme Court questioning the validity of
the DAP. Among their contentions was:
DAP is unconstitutional because it violates the constitutional rule which provides that “no money shall
be paid out of the Treasury except in pursuance of an appropriation made by law.”
Secretary Abad argued that the DAP is based on certain laws particularly the GAA (savings and
augmentation provisions thereof), Sec. 25(5), Art. VI of the Constitution (power of the President to
augment), Secs. 38 and 49 of Executive Order 292 (power of the President to suspend expenditures
and authority to use savings, respectively).
Issues:
I. Whether or not the DAP violates the principle “no money shall be paid out of the Treasury except in
pursuance of an appropriation made by law” (Sec. 29(1), Art. VI, Constitution).
II. Whether or not the DAP realignments can be considered as impoundments by the executive.
III. Whether or not the DAP realignments/transfers are constitutional.
IV. Whether or not the sourcing of unprogrammed funds to the DAP is constitutional.
V. Whether or not the Doctrine of Operative Fact is applicable.
HELD:
I. No, the DAP did not violate Section 29(1), Art. VI of the Constitution. DAP was merely a program by
the Executive and is not a fund nor is it an appropriation. It is a program for prioritizing government
spending. As such, it did not violate the Constitutional provision cited in Section 29(1), Art. VI of the
Constitution. In DAP no additional funds were withdrawn from the Treasury otherwise, an
appropriation made by law would have been required. Funds, which were already appropriated for by
the GAA, were merely being realigned via the DAP.
II. No, there is no executive impoundment in the DAP. Impoundment of funds refers to the President’s
power to refuse to spend appropriations or to retain or deduct appropriations for whatever reason.
Impoundment is actually prohibited by the GAA unless there will be an unmanageable national
government budget deficit (which did not happen). Nevertheless, there’s no impoundment in the case
at bar because what’s involved in the DAP was the transfer of funds.
III. No, the transfers made through the DAP were unconstitutional. It is true that the President (and
even the heads of the other branches of the government) are allowed by the Constitution to make
realignment of funds, however, such transfer or realignment should only be made “within their
respective offices”. Thus, no cross-border transfers/augmentations may be allowed. But under the
DAP, this was violated because funds appropriated by the GAA for the Executive were being transferred
to the Legislative and other non-Executive agencies.
Further, transfers “within their respective offices” also contemplate realignment of funds to an existing
project in the GAA. Under the DAP, even though some projects were within the Executive, these
projects are non-existent insofar as the GAA is concerned because no funds were appropriated to them
in the GAA. Although some of these projects may be legitimate, they are still non-existent under the
GAA because they were not provided for by the GAA. As such, transfer to such projects is
unconstitutional and is without legal basis.
On the issue of what are “savings”
These DAP transfers are not “savings” contrary to what was being declared by the Executive. Under the
definition of “savings” in the GAA, savings only occur, among other instances, when there is an excess
in the funding of a certain project once it is completed, finally discontinued, or finally abandoned. The
GAA does not refer to “savings” as funds withdrawn from a slow moving project. Thus, since the
statutory definition of savings was not complied with under the DAP, there is no basis at all for the
transfers. Further, savings should only be declared at the end of the fiscal year. But under the DAP,
funds are already being withdrawn from certain projects in the middle of the year and then being
declared as “savings” by the Executive particularly by the DBM.

IV. No. Unprogrammed funds from the GAA cannot be used as money source for the DAP because
under the law, such funds may only be used if there is a certification from the National Treasurer to
the effect that the revenue collections have exceeded the revenue targets. In this case, no such
certification was secured before unprogrammed funds were used.

V. Yes. The Doctrine of Operative Fact, which recognizes the legal effects of an act prior to it being
declared as unconstitutional by the Supreme Court, is applicable. The DAP has definitely helped
stimulate the economy. It has funded numerous projects. If the Executive is ordered to reverse all
actions under the DAP, then it may cause more harm than good. The DAP effects can no longer be
undone. The beneficiaries of the DAP cannot be asked to return what they received especially so that
they relied on the validity of the DAP. However, the Doctrine of Operative Fact may not be applicable
to the authors, implementers, and proponents of the DAP if it is so found in the appropriate tribunals
(civil, criminal, or administrative) that they have not acted in good faith

2a) FIRST DIVISION

G.R. No. 149927 March 30, 2004

REPUBLIC OF THE PHILIPPINES, Represented by the Department of Environment and Natural

Resources (DENR)
Under then Minister ERNESTO R. MACEDA; and Former Government Officials CATALINO MACARAIG,
FULGENCIO S. FACTORAN, ANGEL C. ALCALA, BEN MALAYANG, ROBERTO PAGDANGANAN, MARIANO
Z. VALERA and ROMULO SAN JUAN, petitioners,
vs.
ROSEMOOR MINING AND DEVELOPMENT CORPORATION, PEDRO DEL CONCHA, and ALEJANDRO and
RUFO DE GUZMAN, respondents.
DECISION
PANGANIBAN, J.:
A mining license that contravenes a mandatory provision of the law under which it is granted is void.
Being a mere privilege, a license does not vest absolute rights in the holder. Thus, without offending
the due process and the non-impairment clauses of the Constitution, it can be revoked by the State in
the public interest.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the May 29,
2001 Decision2 and the September 6, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR SP No.
46878. The CA disposed as follows:
"WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED in toto." 4
The questioned Resolution denied petitioners’ Motion for Reconsideration.
On the other hand, trial court’s Decision, which was affirmed by the CA, had disposed as follows:
"WHEREFORE, judgment is hereby rendered as follows:
‘1. Declaring that the cancellation of License No. 33 was done without jurisdiction and in gross violation
of the Constitutional right of the petitioners against deprivation of their property rights without due
process of law and is hereby set aside.
‘2. Declaring that the petitioners’ right to continue the exploitation of the marble deposits in the area
covered by License No. 33 is maintained for the duration of the period of its life of twenty-five (25)
years, less three (3) years of continuous operation before License No. 33 was cancelled, unless sooner
terminated for violation of any of the conditions specified therein, with due process.
‘3. Making the Writ of preliminary injunction and the Writ of Preliminary Mandatory Injunction issued
as permanent.
‘4. Ordering the cancellation of the bond filed by the Petitioners in the sum of 1 Million.
‘5. Allowing the petitioners to present evidence in support of the damages they claim to have suffered
from, as a consequence of the summary cancellation of License No. 33 pursuant to the agreement of
the parties on such dates as maybe set by the Court; and
‘6. Denying for lack of merit the motions for contempt, it appearing that actuations of the respondents
were not contumacious and intended to delay the proceedings or undermine the integrity of the Court.
‘No pronouncement yet as to costs.’"5
The Facts
The CA narrated the facts as follows:
"The four (4) petitioners, namely, Dr. Lourdes S. Pascual, Dr. Pedro De la Concha, Alejandro De La
Concha, and Rufo De Guzman, after having been granted permission to prospect for marble deposits
in the mountains of Biak-na-Bato, San Miguel, Bulacan, succeeded in discovering marble deposits of
high quality and in commercial quantities in Mount Mabio which forms part of the Biak-na-Bato
mountain range.
"Having succeeded in discovering said marble deposits, and as a result of their tedious efforts and
substantial expenses, the petitioners applied with the Bureau of Mines, now Mines and Geosciences
Bureau, for the issuance of the corresponding license to exploit said marble deposits.
xxxxxxxxx
"After compliance with numerous required conditions, License No. 33 was issued by the Bureau of
Mines in favor of the herein petitioners.
xxxxxxxxx
"Shortly after Respondent Ernesto R. Maceda was appointed Minister of the Department of Energy and
Natural Resources (DENR), petitioners’ License No. 33 was cancelled by him through his letter to
ROSEMOOR MINING AND DEVELOPMENT CORPORATION dated September 6, 1986 for the reasons
stated therein. Because of the aforesaid cancellation, the original petition was filed and later
substituted by the petitioners’ AMENDED PETITION dated August 21, 1991 to assail the same.
"Also after due hearing, the prayer for injunctive relief was granted in the Order of this Court dated
February 28, 1992. Accordingly, the corresponding preliminary writs were issued after the petitioners
filed their injunction bond in the amount of ONE MILLION PESOS (₱1,000,000.00).
xxxxxxxxx
"On September 27, 1996, the trial court rendered the herein questioned decision." 6
The trial court ruled that the privilege granted under respondents’ license had already ripened into a
property right, which was protected under the due process clause of the Constitution. Such right was
supposedly violated when the license was cancelled without notice and hearing. The cancellation was
said to be unjustified, because the area that could be covered by the four separate applications of
respondents was 400 hectares. Finally, according to the RTC, Proclamation No. 84, which confirmed
the cancellation of the license, was an ex post facto law; as such, it violated Section 3 of Article XVIII of
the 1987 Constitution.
On appeal to the Court of Appeals, herein petitioners asked whether PD 463 or the Mineral Resources
Development Decree of 1974 had been violated by the award of the 330.3062 hectares to respondents
in accordance with Proclamation No. 2204. They also questioned the validity of the cancellation of
respondents’ Quarry License/Permit (QLP) No. 33.
Ruling of the Court of Appeals
Sustaining the trial court in toto, the CA held that the grant of the quarry license covering 330.3062
hectares to respondents was authorized by law, because the license was embraced by four (4) separate
applications -- each for an area of 81 hectares. Moreover, it held that the limitation under Presidential
Decree No. 463 -- that a quarry license should cover not more than 100 hectares in any given province
-- was supplanted by Republic Act No. 7942,7 which increased the mining areas allowed under PD 463.
It also ruled that the cancellation of respondents’ license without notice and hearing was tantamount
to a deprivation of property without due process of law. It added that under the clause in the
Constitution dealing with the non-impairment of obligations and contracts, respondents’ license must
be respected by the State.
Hence, this Petition.8
Issues
Petitioners submit the following issues for the Court’s consideration:
"(1) [W]hether or not QLP No. 33 was issued in blatant contravention of Section 69, P.D. No. 463; and
(2) whether or not Proclamation No. 84 issued by then President Corazon Aquino is valid. The corollary
issue is whether or not the Constitutional prohibition against ex post facto law applies to Proclamation
No. 84"9
The Court’s Ruling
The Petition has merit.
First Issue:
Validity of License
Respondents contend that the Petition has no legal basis, because PD 463 has already been
repealed.10 In effect, they ask for the dismissal of the Petition on the ground of mootness.
PD 463, as amended, pertained to the old system of exploration, development and utilization of natural
resources through licenses, concessions or leases.11 While these arrangements were provided under
the 193512 and the 197313 Constitutions, they have been omitted by Section 2 of Article XII of the 1987
Constitution.14
With the shift of constitutional policy toward "full control and supervision of the State" over natural
resources, the Court in Miners Association of the Philippines v. Factoran Jr. 15 declared the provisions
of PD 463 as contrary to or violative of the express mandate of the 1987 Constitution. The said
provisions dealt with the lease of mining claims; quarry permits or licenses covering privately owned
or public lands; and other related provisions on lease, licenses and permits.
RA 7942 or the Philippine Mining Act of 1995 embodies the new constitutional mandate. It has repealed
or amended all laws, executive orders, presidential decrees, rules and regulations -- or parts thereof --
that are inconsistent with any of its provisions. 16
It is relevant to state, however, that Section 2 of Article XII of the 1987 Constitution does not apply
retroactively to a "license, concession or lease" granted by the government under the 1973
Constitution or before the effectivity of the 1987 Constitution on February 2, 1987. 17 As noted in Miners
Association of the Philippines v. Factoran Jr., the deliberations of the Constitutional
Commission18 emphasized the intent to apply the said constitutional provision prospectively.
While RA 7942 has expressly repealed provisions of mining laws that are inconsistent with its own, it
nonetheless respects previously issued valid and existing licenses, as follows:
"SECTION 5. Mineral Reservations. — When the national interest so requires, such as when there is a
need to preserve strategic raw materials for industries critical to national development, or certain
minerals for scientific, cultural or ecological value, the President may establish mineral reservations
upon the recommendation of the Director through the Secretary. Mining operations in existing mineral
reservations and such other reservations as may thereafter be established, shall be undertaken by the
Department or through a contractor: Provided, That a small scale-mining cooperative covered by
Republic Act No. 7076 shall be given preferential right to apply for a small-scale mining agreement for
a maximum aggregate area of twenty-five percent (25%) of such mineral reservation, subject to valid
existing mining/quarrying rights as provided under Section 112 Chapter XX hereof. All submerged lands
within the contiguous zone and in the exclusive economic zone of the Philippines are hereby declared
to be mineral reservations.
"x x x x x x x x x
"SECTION 7. Periodic Review of Existing Mineral Reservations. — The Secretary shall periodically review
existing mineral reservations for the purpose of determining whether their continued existence is
consistent with the national interest, and upon his recommendation, the President may, by
proclamation, alter or modify the boundaries thereof or revert the same to the public domain without
prejudice to prior existing rights."
"SECTION 18. Areas Open to Mining Operations. — Subject to any existing rights or reservations and
prior agreements of all parties, all mineral resources in public or private lands, including timber or
forestlands as defined in existing laws, shall be open to mineral agreements or financial or technical
assistance agreement applications. Any conflict that may arise under this provision shall be heard and
resolved by the panel of arbitrators."
"SECTION 19. Areas Closed to Mining Applications. -- Mineral agreement or financial or technical
assistance agreement applications shall not be allowed:
(a) In military and other government reservations, except upon prior written clearance by the
government agency concerned;
(b) Near or under public or private buildings, cemeteries, archeological and historic sites, bridges,
highways, waterways, railroads, reservoirs, dams or other infrastructure projects, public or private
works including plantations or valuable crops, except upon written consent of the government agency
or private entity concerned;
(c) In areas covered by valid and existing mining rights;
(d) In areas expressly prohibited by law;
(e) In areas covered by small-scale miners as defined by law unless with prior consent of the small-scale
miners, in which case a royalty payment upon the utilization of minerals shall be agreed upon by the
parties, said royalty forming a trust fund for the socioeconomic development of the community
concerned; and
(f) Old growth or virgin forests, proclaimed watershed forest reserves, wilderness areas, mangrove
forests, mossy forests, national parks, provincial/municipal forests, parks, greenbelts, game refuge and
bird sanctuaries as defined by law and in areas expressly prohibited under the National Integrated
Protected Areas System (NIPAS) under Republic Act No. 7586, Department Administrative Order No.
25, series of 1992 and other laws."
"SECTION 112. Non-impairment of Existing Mining/ Quarrying Rights. — All valid and existing mining
lease contracts, permits/licenses, leases pending renewal, mineral production-sharing agreements
granted under Executive Order No. 279, at the date of effectivity of this Act, shall remain valid, shall
not be impaired, and shall be recognized by the Government: Provided, 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: Provided,
further, That no renewal of mining lease contracts shall be made after the expiration of its term:
Provided, finally, 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.
"SECTION 113. Recognition of Valid and Existing Mining Claims and Lease/Quarry Application.
— Holders of valid and existing mining claims, lease/quarry applications shall be given preferential
rights to enter into any mode of mineral agreement with the government within two (2) years from the
promulgation of the rules and regulations implementing this Act." (Underscoring supplied)
Section 3(p) of RA 7942 defines an existing mining/quarrying right as "a valid and subsisting mining
claim or permit or quarry permit or any mining lease contract or agreement covering a mineralized
area granted/issued under pertinent mining laws." Consequently, determining whether the license of
respondents falls under this definition would be relevant to fixing their entitlement to the rights and/or
preferences under RA 7942. Hence, the present Petition has not been mooted.
Petitioners submit that the license clearly contravenes Section 69 of PD 463, because it exceeds the
maximum area that may be granted. This incipient violation, according to them, renders the license
void ab initio.
Respondents, on the other hand, argue that the license was validly granted, because it was covered by
four separate applications for areas of 81 hectares each.
The license in question, QLP No. 33,19 is dated August 3, 1982, and it was issued in the name of
Rosemoor Mining Development Corporation. The terms of the license allowed the corporation to
extract and dispose of marbleized limestone from a 330.3062-hectare land in San Miguel, Bulacan. The
license is, however, subject to the terms and conditions of PD 463, the governing law at the time it was
granted; as well as to the rules and regulations promulgated thereunder.20 By the same token,
Proclamation No. 2204 -- which awarded to Rosemoor the right of development, exploitation, and
utilization of the mineral site -- expressly cautioned that the grant was subject to "existing policies,
laws, rules and regulations."21
The license was thus subject to Section 69 of PD 463, which reads:
"Section 69. Maximum Area of Quarry License – Notwithstanding the provisions of Section 14 hereof,
a quarry license shall cover an area of not more than one hundred (100) hectares in any one province
and not more than one thousand (1,000) hectares in the entire Philippines." (Italics supplied)
The language of PD 463 is clear. It states in categorical and mandatory terms that a quarry license, like
that of respondents, should cover a maximum of 100 hectares in any given province. This law neither
provides any exception nor makes any reference to the number of applications for a license. Section
69 of PD 463 must be taken to mean exactly what it says. Where the law is clear, plain, and free from
ambiguity, it must be given its literal meaning and applied without attempted interpretation. 22
Moreover, the lower courts’ ruling is evidently inconsistent with the fact that QLP No. 33 was issued
solely in the name of Rosemoor Mining and Development Corporation, rather than in the names of the
four individual stockholders who are respondents herein. It likewise brushes aside a basic postulate
that a corporation has a separate personality from that of its stockholders. 23
The interpretation adopted by the lower courts is contrary to the purpose of Section 69 of PD 463. Such
intent to limit, without qualification, the area of a quarry license strictly to 100 hectares in any one
province is shown by the opening proviso that reads: "Notwithstanding the provisions of Section 14
hereof x x x." The mandatory nature of the provision is also underscored by the use of the word shall.
Hence, in the application of the 100-hectare-per-province limit, no regard is given to the size or the
number of mining claims under Section 14, which we quote:
"SECTION 14. Size of Mining Claim. -- For purposes of registration of a mining claim under this Decree,
the Philippine territory and its shelf are hereby divided into meridional blocks or quadrangles of one-
half minute (1/2) of latitude and longitude, each block or quadrangle containing area of eighty-one (81)
hectares, more or less.
"A mining claim shall cover one such block although a lesser area may be allowed if warranted by
attendant circumstances, such as geographical and other justifiable considerations as may be
determined by the Director: Provided, That in no case shall the locator be allowed to register twice the
area allowed for lease under Section 43 hereof." (Italics supplied)
Clearly, the intent of the law would be brazenly circumvented by ruling that a license may cover an
area exceeding the maximum by the mere expediency of filing several applications. Such ruling would
indirectly permit an act that is directly prohibited by the law.
Second Issue:
Validity of Proclamation No. 84
Petitioners also argue that the license was validly declared a nullity and consequently withdrawn or
terminated. In a letter dated September 15, 1986, respondents were informed by then Minister Ernesto
M. Maceda that their license had illegally been issued, because it violated Section 69 of PD 463; and
that there was no more public interest served by the continued existence or renewal of the license.
The latter reason, they added, was confirmed by the language of Proclamation No. 84. According to
this law, public interest would be served by reverting the parcel of land that was excluded by
Proclamation No. 2204 to the former status of that land as part of the Biak-na-Bato national park.
They also contend that Section 74 of PD 463 would not apply, because Minister Maceda’s letter did not
cancel or revoke QLP No. 33, but merely declared the latter’s nullity. They further argue that
respondents waived notice and hearing in their application for the license.
On the other hand, respondents submit that, as provided for in Section 74 of PD 463, their right to due
process was violated when their license was cancelled without notice and hearing. They likewise
contend that Proclamation No. 84 is not valid for the following reasons: 1) it violates the clause on the
non-impairment of contracts; 2) it is an ex post facto law and/or a bill of attainder; and 3) it was issued
by the President after the effectivity of the 1987 Constitution.
This Court ruled on the nature of a natural resource exploration permit, which was akin to the present
respondents’ license, in Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining
Cooperative,24 which held:
"x x x. As correctly held by the Court of Appeals in its challenged decision, EP No. 133 merely evidences
a privilege granted by the State, which may be amended, modified or rescinded when the national
interest so requires. This is necessarily so since the exploration, development and utilization of the
country’s natural mineral resources are matters impressed with great public interest. Like timber
permits, mining exploration permits do not vest in the grantee any permanent or irrevocable right
within the purview of the non-impairment of contract and due process clauses of the Constitution,
since the State, under its all-encompassing police power, may alter, modify or amend the same, in
accordance with the demands of the general welfare." 25
This same ruling had been made earlier in Tan v. Director of Forestry26 with regard to a timber license,
a pronouncement that was reiterated in Ysmael v. Deputy Executive Secretary, 27 the pertinent portion
of which reads:
"x x x. Timber licenses, permits and license agreements are the principal instruments by which the State
regulates the utilization and disposition of forest resources to the end that public welfare is promoted.
And it can hardly be gainsaid that they merely evidence a privilege granted by the State to qualified
entities, and do not vest in the latter a permanent or irrevocable right to the particular concession area
and the forest products therein. They may be validly amended, modified, replaced or rescinded by the
Chief Executive when national interests so require. Thus, they are not deemed contracts within the
purview of the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree No. 705, as
amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27, 1983, 125 SCRA
302]."28 (Italics supplied)
In line with the foregoing jurisprudence, respondents’ license may be revoked or rescinded by
executive action when the national interest so requires, because it is not a contract, property or a
property right protected by the due process clause of the Constitution.29 Respondents themselves
acknowledge this condition of the grant under paragraph 7 of QLP No. 33, which we quote:
"7. This permit/license may be revoked or cancelled at any time by the Director of Mines and Geo-
Sciences when, in his opinion public interests so require or, upon failure of the permittee/licensee to
comply with the provisions of Presidential Decree No. 463, as amended, and the rules and regulations
promulgated thereunder, as well as with the terms and conditions specified herein; Provided, That if a
permit/license is cancelled, or otherwise terminated, the permittee/licensee shall be liable for all
unpaid rentals and royalties due up to the time of the termination or cancellation of the
permit/license[.]"30 (Italics supplied)
The determination of what is in the public interest is necessarily vested in the State as owner of all
mineral resources. That determination was based on policy considerations formally enunciated in the
letter dated September 15, 1986, issued by then Minister Maceda and, subsequently, by the President
through Proclamation No. 84. As to the exercise of prerogative by Maceda, suffice it to say that while
the cancellation or revocation of the license is vested in the director of mines and geo-sciences, the
latter is subject to the former’s control as the department head. We also stress the clear prerogative
of the Executive Department in the evaluation and the consequent cancellation of licenses in the
process of its formulation of policies with regard to their utilization. Courts will not interfere with the
exercise of that discretion without any clear showing of grave abuse of discretion. 31
Moreover, granting that respondents’ license is valid, it can still be validly revoked by the State in the
exercise of police power.32 The exercise of such power through Proclamation No. 84 is clearly in accord
with jura regalia, which reserves to the State ownership of all natural resources. 33 This Regalian
doctrine is an exercise of its sovereign power as owner of lands of the public domain and of the
patrimony of the nation, the mineral deposits of which are a valuable asset. 34
Proclamation No. 84 cannot be stigmatized as a violation of the non-impairment clause. As pointed out
earlier, respondents’ license is not a contract to which the protection accorded by the non-impairment
clause may extend.35Even if the license were, it is settled that provisions of existing laws and a
reservation of police power are deemed read into it, because it concerns a subject impressed with
public welfare.36 As it is, the non-impairment clause must yield to the police power of the state. 37
We cannot sustain the argument that Proclamation No. 84 is a bill of attainder; that is, a "legislative act
which inflicts punishment without judicial trial."38 Its declaration that QLP No. 33 is a patent nullity39 is
certainly not a declaration of guilt. Neither is the cancellation of the license a punishment within the
purview of the constitutional proscription against bills of attainder.
Too, there is no merit in the argument that the proclamation is an ex post facto law. There are six
recognized instances when a law is considered as such: 1) it criminalizes and punishes an action that
was done before the passing of the law and that was innocent when it was done; 2) it aggravates a
crime or makes it greater than it was when it was committed; 3) it changes the punishment and inflicts
one that is greater than that imposed by the law annexed to the crime when it was committed; 4) it
alters the legal rules of evidence and authorizes conviction upon a less or different testimony than that
required by the law at the time of the commission of the offense; 5) it assumes the regulation of civil
rights and remedies only, but in effect imposes a penalty or a deprivation of a right as a consequence
of something that was considered lawful when it was done; and 6) it deprives a person accused of a
crime of some lawful protection to which he or she become entitled, such as the protection of a former
conviction or an acquittal or the proclamation of an amnesty.40 Proclamation No. 84 does not fall under
any of the enumerated categories; hence, it is not an ex post facto law.
It is settled that an ex post facto law is limited in its scope only to matters criminal in
nature.41 Proclamation 84, which merely restored the area excluded from the Biak-na-Bato national
park by canceling respondents’ license, is clearly not penal in character.
Finally, it is stressed that at the time President Aquino issued Proclamation No. 84 on March 9, 1987,
she was still validly exercising legislative powers under the Provisional Constitution of 1986. 42 Section
1 of Article II of Proclamation No. 3, which promulgated the Provisional Constitution, granted her
legislative power "until a legislature is elected and convened under a new Constitution." The grant of
such power is also explicitly recognized and provided for in Section 6 of Article XVII of the 1987
Constitution.43
WHEREFORE, this Petition is hereby GRANTED and the appealed Decision of the Court of Appeals SET
ASIDE. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 110249 August 21, 1997

ALFREDO TANO, BALDOMERO TANO, DANILO TANO, ROMUALDO TANO, TEOCENES MIDELLO, ANGEL
DE MESA, EULOGIO TREMOCHA, FELIPE ONGONION, JR., ANDRES LINIJAN, ROBERT LIM, VIRGINIA
LIM, FELIMON DE MESA, GENEROSO ARAGON, TEODORICO ANDRE, ROMULO DEL ROSARIO,
CHOLITO ANDRE, ERICK MONTANO, ANDRES OLIVA, VITTORIO SALVADOR, LEOPOLDO ARAGON,
RAFAEL RIBA, ALEJANDRO LEONILA, JOSE DAMACINTO, RAMIRO MANAEG, RUBEN MARGATE,
ROBERTO REYES, DANILO PANGARUTAN, NOE GOLPAN, ESTANISLAO ROMERO, NICANOR DOMINGO,
ROLDAN TABANG, ADRIANO TABANG, FREDDIE SACAMAY, MIGUEL TRIMOCHA, PACENCIO LABABIT,
PABLO H. OMPAD, CELESTINO A. ABANO, ALLAN ALMODAI, BILLY D. BARTOLAY, ALBINO D. LIQUE,
MECHOR J. LAYSON, MELANIE AMANTE, CLARO E. YATOC, MERGELDO B. BALDEO, EDGAR M.
ALMASETA, JOSELITO MANAEG, LIBERATO ANDRADA, JR., ROBERTO BERRY, RONALD VILLANUEVA,
EDUARDO VALMORIA, WILFREDO MENDOZA, NAPOLEON BABANGGA, ROBERTO TADEPA, RUBEN
ASINGUA, SILVERIO GABO, JERRY ROMERO, DAVID PANGGARUTAN, DANIEL PANGGARUTAN,
ROMEO AGAWIN, FERNANDO EQUIZ, DITO LEQUIZ, RONILO MODERABLE, BENEDICTO TORRES,
ROSITO A. VALDEZ, CRESENCIO A. SAYANG, NICOMEDES S. ACOSTA, ERENEO A. SEGARINO, JR.,
WILFREDO A. RAUTO, DIOSDADO A. ACOSTA, BONIFACIO G. SISMO, TACIO ALUBA, DANIEL B.
BATERZAL, ELISEO YBAÑEZ, DIOSDADO E. HANCHIC, EDDIE ESCALICAS, ELEAZAR B. BATERZAL,
DOMINADOR HALICHIC, ROOSEVELT RISMO-AN, ROBERT C. MERCADER, TIRSO ARESGADO, DANIEL
CHAVEZ, DANILO CHAVEZ, VICTOR VILLAROEL, ERNESTO C. YBAÑEZ, ARMANDO T. SANTILLAN, RUDY
S. SANTILLAN, JODJEN ILUSTRISIMO, NESTOR SALANGRON, ALBERTO SALANGRON, ROGER L. ROXAS,
FRANCISCO T. ANTICANO, PASTOR SALANGRON, BIENVENIDO SANTILLAN, GILBUENA LADDY, FIDEL
BENJAMIN, JOVELITO BELGANO, HONEY PARIOL, ANTONIO SALANGRON, NICASIO SALANGRON, &
AIRLINE SHIPPERS ASSOCIATION OF PALAWAN, petitioners,
vs.
HON. GOV. SALVADOR P. SOCRATES, MEMBERS OF SANGGUNIANG PANLALAWIGAN OF PALAWAN,
namely, VICE-GOVERNOR JOEL T. REYES, JOSE D. ZABALA, ROSALINO R. ACOSTA, JOSELITO A.
CADLAON, ANDRES R. BAACO, NELSON P. PENEYRA, CIPRIANO C. BARROMA, CLARO E. ORDINARIO,
ERNESTO A. LLACUNA, RODOLFO C. FLORDELIZA, GILBERT S. BAACO, WINSTON G. ARZAGA,
NAPOLEON F. ORDONEZ and GIL P. ACOSTA, CITY MAYOR EDWARD HAGEDORN, MEMBERS OF
SANGGUNIANG PANLUNGSOD NG PUERTO PRINCESA, ALL MEMBERS OF BANTAY DAGAT, MEMBERS
OF PHILIPPINE NATIONAL POLICE OF PALAWAN, PROVINCIAL AND CITY PROSECUTORS OF PALAWAN
and PUERTO PRINCESA CITY, and ALL JUDGES OF PALAWAN, REGIONAL, MUNICIPAL AND
METROPOLITAN, respondents.
DAVIDE, JR., J.:
Petitioners caption their petition as one for "Certiorari, Injunction With Preliminary and Mandatory
Injunction, with Prayer for Temporary Restraining Order" and pray that this Court: (1) declare as
unconstitutional: (a) Ordinance No. 15-92, dated 15 December 1992, of the Sangguniang Panglungsod
of Puerto Princesa; (b) Office Order No. 23, Series of 1993, dated 22 January 1993, issued by Acting City
Mayor Amado L. Lucero of Puerto Princesa City; and (c) Resolution No. 33, Ordinance No. 2, Series of
1993, dated 19 February 1993, of the Sangguniang Panlalawigan of Palawan; (2) enjoin the
enforcement thereof; and (3) restrain respondents Provincial and City Prosecutors of Palawan and
Puerto Princesa City and Judges of the Regional Trial Courts, Metropolitan Trial Courts 1 and Municipal
Circuit Trial Courts in Palawan from assuming jurisdiction over and hearing cases concerning the
violation of the Ordinances and of the Office Order.
More appropriately, the petition is, and shall be treated as, a special civil action for certiorari and
prohibition.
The following is petitioners' summary of the factual antecedents giving rise to the petition:
1. On December 15, 1992, the Sangguniang Panlungsod ng Puerto Princesa City enacted Ordinance No.
15-92 which took effect on January 1, 1993 entitled: "AN ORDINANCE BANNING THE SHIPMENT OF ALL
LIVE FISH AND LOBSTER OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993 TO JANUARY 1, 1998
AND PROVIDING EXEMPTIONS, PENALTIES AND FOR OTHER PURPOSES THEREOF", the full text of which
reads as follows:
Sec. 1. Title of the Ordinance. — This Ordinance is entitled: AN ORDINANCE BANNING THE SHIPMENT
OF ALL LIVE FISH AND LOBSTER OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993 TO JANUARY
1, 1998 AND PROVIDING EXEMPTIONS, PENALTIES AND FOR OTHER PURPOSES THEREOF.
Sec. 2. Purpose, Scope and Coverage. — To effectively free our City Sea Waters from Cyanide and other
Obnoxious substance[s], and shall cover all persons and/or entities operating within and outside the
City of Puerto Princesa who is are (sic) directly or indirectly in the business or shipment of live fish and
lobster outside the City.
Sec. 3. Definition of terms. — For purpose of this Ordinance the following are hereby defined:
A. SEA BASS — A kind of fish under the family of Centropomidae, better known as APAHAP;
B. CATFISH — A kind of fish under the family of Plotosidae, better known as HITO-HITO;
C. MUDFISH — A kind of fish under the family of Orphicaphalisae better known as DALAG;
D. ALL LIVE FISH — All alive, breathing not necessarily moving of all specie[s] use[d] for food and for
aquarium purposes.
E. LIVE LOBSTER — Several relatively, large marine crusteceans [sic] of the genus Homarus that are alive
and breathing not necessarily moving.
Sec. 4. It shall be unlawful [for] any person or any business enterprise or company to ship out from
Puerto Princesa City to any point of destination either via aircraft or seacraft of any live fish and lobster
except SEA BASS, CATFISH, MUDFISH, AND MILKFISH FRIES.
Sec. 5. Penalty Clause. — Any person/s and or business entity violating this Ordinance shall be penalized
with a fine of not more than P5,000.00 or imprisonment of not more than twelve (12) months,
cancellation of their permit to do business in the City of Puerto Princesa or all of the herein stated
penalties, upon the discretion of the court.
Sec. 6. If the owner and/or operator of the establishment found violating the provisions of this
ordinance is a corporation or a partnership, the penalty prescribed in Section 5 hereof shall be imposed
upon its president and/or General Manager or Managing Partner and/or Manager, as the case maybe
[sic].
Sec. 7. Any existing ordinance or any provision of any ordinance inconsistent to [sic] this ordinance is
deemed repealed.
Sec. 8. This Ordinance shall take effect on January 1, 1993.
SO ORDAINED.
xxx xxx xxx
2. To implement said city ordinance, then Acting City Mayor Amado L. Lucero issued Office Order No.
23, Series of 1993 dated January 22, 1993 which reads as follows:
In the interest of public service and for purposes of City Ordinance No. PD 426-14-74, otherwise known
as "AN ORDINANCE REQUIRING ANY PERSON ENGAGED OR INTENDING TO ENGAGE IN ANY BUSINESS,
TRADE, OCCUPATION, CALLING OR PROFESSION OR HAVING IN HIS POSSESSION ANY OF THE ARTICLES
FOR WHICH A PERMIT IS REQUIRED TO BE HAD, TO OBTAIN FIRST A MAYOR'S PERMIT" and "City
Ordinance No. 15-92, AN ORDINANCE BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER
OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993 TO JANUARY 1, 1998, you are hereby
authorized and directed to check or conduct necessary inspections on cargoes containing live fish and
lobster being shipped out from the Puerto Princesa Airport, Puerto Princesa Wharf or at any port within
the jurisdiction of the City to any point of destinations [sic] either via aircraft or seacraft.
The purpose of the inspection is to ascertain whether the shipper possessed the required Mayor's
Permit issued by this Office and the shipment is covered by invoice or clearance issued by the local
office of the Bureau of Fisheries and Aquatic Resources and as to compliance with all other existing
rules and regulations on the matter.
Any cargo containing live fish and lobster without the required documents as stated herein must be
held for proper disposition.
In the pursuit of this Order, you are hereby authorized to coordinate with the PAL Manager, the PPA
Manager, the local PNP Station and other offices concerned for the needed support and cooperation.
Further, that the usual courtesy and diplomacy must be observed at all times in the conduct of the
inspection.
Please be guided accordingly.
xxx xxx xxx
3. On February 19, 1993, the Sangguniang Panlalawigan, Provincial Government of Palawan enacted
Resolution No. 33 entitled: "A RESOLUTION PROHIBITING THE CATCHING, GATHERING, POSSESSING,
BUYING, SELLING AND SHIPMENT OF LIVE MARINE CORAL DWELLING AQUATIC ORGANISMS, TO WIT:
FAMILY: SCARIDAE (MAMENG), EPINE PHELUS FASCIATUS (SUNO). CROMILEPTES ALTIVELIS(PANTHER
OR SENORITA), LOBSTER BELOW 200 GRAMS AND SPAWNING, TRIDACNA GIGAS(TAKLOBO), PINCTADA
MARGARITEFERA (MOTHER PEARL, OYSTERS, GIANT CLAMS AND OTHER SPECIES), PENAEUS
MONODON (TIGER PRAWN-BREEDER SIZE OR MOTHER), EPINEPHELUS SUILLUS (LOBA OR GREEN
GROUPER) AND FAMILY: BALISTIDAE (TROPICAL AQUARIUM FISHES) FOR A PERIOD FIVE (5) YEARS IN
AND COMING FROM PALAWAN WATERS", the full text of which reads as follows:
WHEREAS, scientific and factual researches [sic] and studies disclose that only five (5) percent of the
corals of our province remain to be in excellent condition as [a] habitat of marine coral dwelling aquatic
organisms;
WHEREAS, it cannot be gainsaid that the destruction and devastation of the corals of our province were
principally due to illegal fishing activities like dynamite fishing, sodium cyanide fishing, use of other
obnoxious substances and other related activities;
WHEREAS, there is an imperative and urgent need to protect and preserve the existence of the
remaining excellent corals and allow the devastated ones to reinvigorate and regenerate themselves
into vitality within the span of five (5) years;
WHEREAS, Sec. 468, Par. 1, Sub-Par. VI of the [sic] R.A. 7160 otherwise known as the Local Government
Code of 1991 empowers the Sangguniang Panlalawigan to protect the environment and impose
appropriate penalties [upon] acts which endanger the environment such as dynamite fishing and other
forms of destructive fishing, among others.
NOW, THEREFORE, on motion by Kagawad Nelson P. Peneyra and upon unanimous decision of all the
members present;
Be it resolved as it is hereby resolved, to approve Resolution No. 33, Series of 1993 of the Sangguniang
Panlalawigan and to enact Ordinance No. 2 for the purpose, to wit:
ORDINANCE NO.
Series of 1993
BE IT ORDAINED BY THE SANGGUNIANG PANLALAWIGAN IN SESSION ASSEMBLED:
Sec. 1. TITLE — This Ordinance shall be known as an "Ordinance Prohibiting the catching, gathering,
possessing, buying, selling and shipment of live marine coral dwelling aquatic organisms, to wit: 1.
Family: Scaridae (Mameng), 2. Epinephelus Fasciatus (Suno) 3. Cromileptes altivelis (Panther or
Senorita), lobster below 200 grams and spawning), 4. Tridacna Gigas (Taklobo), 5. Pinctada
Margaretefera (Mother Pearl, Oysters, Giant Clams and other species), 6. Penaeus Monodon (Tiger
Prawn-breeder size or mother), 7. Epinephelus Suillus (Loba or Green Grouper) and 8. Family: Balistidae
(T[r]opical Aquarium Fishes) for a period of five (5) years in and coming from Palawan Waters.
Sec. II. PRELIMINARY CONSIDERATIONS
1. Sec. 2-A (Rep. Act 7160). It is hereby declared, the policy of the state that the territorial and political
subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain
their fullest development as self-reliant communities and make them more effective partners in the
attainment of national goals. Toward this end, the State shall provide for [a] more responsive and
accountable local government structure instituted through a system of decentralization whereby local
government units shall be given more powers, authority, responsibilities and resources.
2. Sec. 5-A (R.A. 7160). Any provision on a power of [a] local Government Unit shall be liberally
interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of
devolution of powers and of the lower government units. "Any fair and reasonable doubts as to the
existence of the power shall be interpreted in favor of the Local Government Unit concerned."
3. Sec. 5-C (R.A. 7160). The general welfare provisions in this Code shall be liberally interpreted to give
more powers to local government units in accelerating economic development and upgrading the
quality of life for the people in the community.
4. Sec. 16 (R.A. 7160). General Welfare. — Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or
incidental for its efficient and effective governance; and those which are essential to the promotion of
the general welfare.
Sec. III. DECLARATION OF POLICY. — It is hereby declared to be the policy of the Province of Palawan
to protect and conserve the marine resources of Palawan not only for the greatest good of the majority
of the present generation but with [the] proper perspective and consideration of [sic] their prosperity,
and to attain this end, the Sangguniang Panlalawigan henceforth declares that is (sic) shall be unlawful
for any person or any business entity to engage in catching, gathering, possessing, buying, selling and
2 shipment of live marine coral dwelling aquatic organisms as enumerated in Section 1 hereof in and
coming out of Palawan Waters for a period of five (5) years;
Sec. IV. PENALTY CLAUSE. — Any person and/or business entity violating this Ordinance shall be
penalized with a fine of not more than Five Thousand Pesos (P5,000.00), Philippine Currency, and/or
imprisonment of six (6) months to twelve (12) months and confiscation and forfeiture of paraphernalias
[sic] and equipment in favor of the government at the discretion of the Court;
Sec. V. SEPARABILITY CLAUSE. — If for any reason, a Section or provision of this Ordinance shall be held
as unconditional [sic] or invalid, it shall not affect the other provisions hereof.
Sec. VI. REPEALING CLAUSE. — Any existing Ordinance or a provision of any ordinance inconsistent
herewith is deemed modified, amended or repealed.
Sec. VII. EFFECTIVITY — This Ordinance shall take effect ten (10) days after its publication.
SO ORDAINED.
xxx xxx xxx
4. The respondents implemented the said ordinances, Annexes "A" and "C" hereof thereby depriving
all the fishermen of the whole province of Palawan and the City of Puerto Princesa of their only means
of livelihood and the petitioners Airline Shippers Association of Palawan and other marine merchants
from performing their lawful occupation and trade;
5. Petitioners Alfredo Tano, Baldomero Tano, Teocenes Midello, Angel de Mesa, Eulogio Tremocha, and
Felipe Ongonion, Jr. were even charged criminally under criminal case no. 93-05-C in the 1st Municipal
Circuit Trial Court of Cuyo-Agutaya-Magsaysay, an original carbon copy of the criminal complaint dated
April 12, 1993 is hereto attached as Annex "D"; while xerox copies are attached as Annex "D" to the
copies of the petition;
6. Petitioners Robert Lim and Virginia Lim, on the other hand, were charged by the respondent PNP
with the respondent City Prosecutor of Puerto Princess City, a xerox copy of the complaint is hereto
attached as Annex "E";
Without seeking redress from the concerned local government units, prosecutor's office and courts,
petitioners directly invoked our original jurisdiction by filing this petition on 4 June 1993. In sum,
petitioners contend that:
First, the Ordinances deprived them of due process of law, their livelihood, and unduly restricted them
from the practice of their trade, in violation of Section 2, Article XII and Sections 2 and 7 of Article XIII
of the 1987 Constitution.
Second, Office Order No. 23 contained no regulation nor condition under which the Mayor's permit
could be granted or denied; in other words, the Mayor had the absolute authority to determine
whether or not to issue the permit.
Third, as Ordinance No. 2 of the Province of Palawan "altogether prohibited the catching, gathering,
possession, buying, selling and shipping of live marine coral dwelling organisms, without any distinction
whether it was caught or gathered through lawful fishing method," the Ordinance took away the right
of petitioners-fishermen to earn their livelihood in lawful ways; and insofar as petitioners-members of
Airline Shippers Association are concerned, they were unduly prevented from pursuing their vocation
and entering "into contracts which are proper, necessary, and essential to carry out their business
endeavors to a successful conclusion."
Finally, as Ordinance No. 2 of the Sangguniang Panlalawigan is null and void, the criminal cases based
thereon against petitioners Tano and the others have to be dismissed.
In the Resolution of 15 June 1993 we required respondents to comment on the petition, and furnished
the Office of the Solicitor General with a copy thereof.
In their comment filed on 13 August 1993, public respondents Governor Socrates and Members of the
Sangguniang Panlalawigan of Palawan defended the validity of Ordinance No. 2, Series of 1993, as a
valid exercise of the Provincial Government's power under the general welfare clause (Section 16 of
the Local Government Code of 1991 [hereafter, LGC]), and its specific power to protect the
environment and impose appropriate penalties for acts which endanger the environment, such as
dynamite fishing and other forms of destructive fishing under Section 447 (a) (1) (vi), Section 458 (a)
(1) (vi), and Section 468 (a) (1) (vi), of the LGC. They claimed that in the exercise of such powers, the
Province of Palawan had "the right and responsibility . . . to insure that the remaining coral reefs, where
fish dwells [sic], within its territory remain healthy for the future generation." The Ordinance, they
further asserted, covered only live marine coral dwelling aquatic organisms which were enumerated in
the ordinance and excluded other kinds of live marine aquatic organisms not dwelling in coral reefs;
besides the prohibition was for only five (5) years to protect and preserve the pristine coral and allow
those damaged to regenerate.
Aforementioned respondents likewise maintained that there was no violation of the due process and
equal protection clauses of the Constitution. As to the former, public hearings were conducted before
the enactment of the Ordinance which, undoubtedly, had a lawful purpose and employed reasonable
means; while as to the latter, a substantial distinction existed "between a fisherman who catches live
fish with the intention of selling it live, and a fisherman who catches live fish with no intention at all of
selling it live," i.e., "the former uses sodium cyanide while the latter does not." Further, the Ordinance
applied equally to all those belonging to one class.
On 25 October 1993 petitioners filed an Urgent Plea for the Immediate Issuance of a Temporary
Restraining Order, claiming that despite the pendency of this case, Branch 50 of the Regional Trial Court
of Palawan was bent on proceeding with Criminal Case No. 11223 against petitioners Danilo Tano,
Alfredo Tano, Eulogio Tremocha, Romualdo Tano, Baldomero Tano, Andres Linijan and Angel de Mesa
for violation of Ordinance No. 2 of the Sangguniang Panlalawigan of Palawan. Acting on said plea, we
issued on 11 November 1993 a temporary restraining order directing Judge Angel Miclat of said court
to cease and desist from proceeding with the arraignment and pre-trial of Criminal Case No. 11223.
On 12 July 1994, we excused the Office of the Solicitor General from filing a comment, considering that
as claimed by said office in its Manifestation of 28 June 1994, respondents were already represented
by counsel.
The rest of the respondents did not file any comment on the petition.
In the resolution of 15 September 1994, we resolved to consider the comment on the petition as the
Answer, gave due course to the petition and required the parties to submit their respective
memoranda. 2
On 22 April 1997 we ordered impleaded as party respondents the Department of Agriculture and the
Bureau of Fisheries and Aquatic Resources and required the Office of the Solicitor General to comment
on their behalf. But in light of the latter's motion of 9 July 1997 for an extension of time to file the
comment which would only result in further delay, we dispensed with said comment.
After due deliberation on the pleadings filed, we resolved to dismiss this petition for want of merit, and
on 22 July 1997, assigned it to the ponente to write the opinion of the Court.
I
There are actually two sets of petitioners in this case. The first is composed of Alfredo Tano, Baldomero
Tano, Danilo Tano, Romualdo Tano, Teocenes Midello, Angel de Mesa, Eulogio Tremocha, Felipe
Ongonion, Jr., Andres Linijan, and Felimon de Mesa, who were criminally charged with violating
Sangguniang Panlalawigan Resolution No. 33 and Ordinance No. 2, Series of 1993, of the Province of
Palawan, in Criminal Case No. 93-05-C of the 1st Municipal Circuit Trial Court (MCTC) of Palawan; 3 and
Robert Lim and Virginia Lim who were charged with violating City Ordinance No. 15-92 of Puerto
Princesa City and Ordinance No. 2, Series of 1993, of the Province of Palawan before the Office of the
City Prosecutor of Puerto Princesa. 4 All of them, with the exception of Teocenes Midello, Felipe
Ongonion, Jr., Felimon de Mesa, Robert Lim and Virginia Lim, are likewise the accused in Criminal Case
No. 11223 for the violation of Ordinance No. 2 of the Sangguniang Panlalawigan of Palawan, pending
before Branch 50 of the Regional Trial Court of Palawan. 5
The second set of petitioners is composed of the rest of the petitioners numbering seventy-seven (77),
all of whom, except the Airline Shippers Association of Palawan — an alleged private association of
several marine merchants — are natural persons who claim to be fishermen.
The primary interest of the first set of petitioners is, of course, to prevent the prosecution, trial and
determination of the criminal cases until the constitutionality or legality of the Ordinances they
allegedly violated shall have been resolved. The second set of petitioners merely claim that being
fishermen or marine merchants, they would be adversely affected by the ordinance's.
As to the first set of petitioners, this special civil for certiorari must fail on the ground of prematurity
amounting to a lack of cause of action. There is no showing that said petitioners, as the accused in the
criminal cases, have filed motions to quash the informations therein and that the same were denied.
The ground available for such motions is that the facts charged therein do not constitute an offense
because the ordinances in question are unconstitutional. 6It cannot then be said that the lower courts
acted without or in excess of jurisdiction or with grave abuse of discretion to justify recourse to the
extraordinary remedy of certiorari or prohibition. It must further be stressed that even if petitioners
did file motions to quash, the denial thereof would not forthwith give rise to a cause of action under
Rule 65 of the Rules of Court. The general rule is that where a motion to quash is denied, the remedy
therefrom is not certiorari, but for the party aggrieved thereby to go to trial without prejudice to
reiterating special defenses involved in said motion, and if, after trial on the merits an adverse decision
is rendered, to appeal therefrom in the manner authorized by law. 7 And, even where in an exceptional
circumstance such denial may be the subject of a special civil action for certiorari, a motion for
reconsideration must have to be filed to allow the court concerned an opportunity to correct its errors,
unless such motion may be dispensed with because of existing exceptional circumstances. 8 Finally,
even if a motion for reconsideration has been filed and denied, the remedy under Rule 65 is still
unavailable absent any showing of the grounds provided for in Section 1 thereof. 9 For obvious reasons,
the petition at bar does not, and could not have, alleged any of such grounds.
As to the second set of petitioners, the instant petition is obviously one for DECLARATORY RELIEF, i.e.,
for a declaration that the Ordinances in question are a "nullity . . . for being unconstitutional." 10 As
such, their petition must likewise fail, as this Court is not possessed of original jurisdiction over petitions
for declaratory relief even if only questions of law are involved,11 it being settled that the Court merely
exercises appellate jurisdiction over such petitions.12
II
Even granting arguendo that the first set of petitioners have a cause of action ripe for the extraordinary
writ of certiorari, there is here a clear disregard of the hierarchy of courts, and no special and important
reason or exceptional and compelling circumstance has been adduced why direct recourse to us should
be allowed. While we have concurrent jurisdiction with Regional Trial courts and with the Court of
Appeals to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction, such concurrence gives petitioners no unrestricted freedom of choice of court forum, so we
held in People v. Cuaresma.13
This concurrence of jurisdiction is not . . . to be taken as according to parties seeking any of the writs
an absolute unrestrained freedom of choice of the court to which application therefor will be directed.
There is after all hierarchy of courts. That hierarchy is determinative of the venue of appeals, and
should also serve as a general determinant of the appropriate forum for petitions for the extraordinary
writs. A becoming regard for that 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
Court's original jurisdiction to issue these writs should be allowed only when 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 Court's time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding
of the Court's docket. . . .
The Court feels the need to reaffirm that policy at this time, and to enjoin strict adherence thereto in
the light of what it perceives to be a growing tendency on the part of litigants and lawyers to have their
applications for the so-called extraordinary writs, and sometimes even their appeals, passed upon and
adjudicated directly and immediately by the highest tribunal of the land. . . .
In Santiago v. Vasquez,14 this Court forcefully expressed that the propensity of litigants and lawyers to
disregard the hierarchy of courts must be put to a halt, not only because of the imposition upon the
precious time of this Court, but also because of the inevitable and resultant delay, intended or
otherwise, in the adjudication of the case which often has to be remanded or referred to the lower
court, the proper forum under the rules of procedure, or as better equipped to resolve the issues since
this Court is not a trier of facts. We reiterated "the judicial policy that this Court will not entertain direct
resort to it unless the redress desired cannot be obtained in the appropriate courts or where
exceptional and compelling circumstances justify availment of a remedy within and calling for the
exercise of [its] primary jurisdiction."
III
Notwithstanding the foregoing procedural obstacles against the first set of petitioners, we opt to
resolve this case on its merits considering that the lifetime of the challenged Ordinances is about to
end. Ordinance No. 15-92 of the City of Puerto Princesa is effective only up to 1 January 1998, while
Ordinance No. 2 of the Province of Palawan, enacted on 19 February 1993, is effective for only five (5)
years. Besides, these Ordinances were undoubtedly enacted in the exercise of powers under the new
LGC relative to the protection and preservation of the environment and are thus novel and of
paramount importance. No further delay then may be allowed in the resolution of the issues raised.
It is of course settled that laws (including ordinances enacted by local government units) enjoy the
presumption of constitutionality. 15 To overthrow this presumption, there must be a clear and
unequivocal breach of the Constitution, not merely a doubtful or argumentative contradiction. In short,
the conflict with the Constitution must be shown beyond reasonable doubt.16 Where doubt exists, even
if well-founded, there can be no finding of unconstitutionality. To doubt is to sustain.17
After a scrutiny of the challenged Ordinances and the provisions of the Constitution petitioners claim
to have been violated, we find petitioners' contentions baseless and so hold that the former do not
suffer from any infirmity, both under the Constitution and applicable laws.
Petitioners specifically point to Section 2, Article XII and Sections 2 and 7, Article XIII of the Constitution
as having been transgressed by the Ordinances.
The pertinent portion of Section 2 of Article XII reads:
Sec. 2. . . .
The State shall protect the nation's 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 fishworkers in rivers, lakes, bays,
and lagoons.
Sections 2 and 7 of Article XIII provide:
Sec. 2. The promotion of social justice shall include the commitment to create economic opportunities
based on freedom of initiative and self-reliance.
xxx xxx xxx
Sec. 7. The State shall protect the rights of subsistence fishermen, especially of local communities, to
the preferential use of the communal marine and fishing resources, both inland and offshore. It shall
provide support to such fishermen through appropriate technology and research, adequate financial,
production, and marketing assistance, and other services. The State shall also protect, develop, and
conserve such resources. The protection shall extend to offshore fishing grounds of subsistence
fishermen against foreign intrusion. Fishworkers shall receive a just share from their labor in the
utilization of marine and fishing resources.
There is absolutely no showing that any of the petitioners qualifies as a subsistence or marginal
fisherman. In their petition, petitioner Airline Shippers Association of Palawan is self-described as "a
private association composed of Marine Merchants;" petitioners Robert Lim and Virginia Lim, as
"merchants;" while the rest of the petitioners claim to be "fishermen," without any qualification,
however, as to their status.
Since the Constitution does not specifically provide a definition of the terms "subsistence" or
"marginal" fishermen,18 they should be construed in their general and ordinary sense. A marginal
fisherman is an individual engaged in fishing whose margin of return or reward in his harvest of fish as
measured by existing price levels is barely sufficient to yield a profit or cover the cost of gathering the
fish,19 while a subsistence fisherman is one whose catch yields but the irreducible minimum for his
livelihood.20 Section 131(p) of the LGC (R.A. No. 7160) defines a marginal farmer or fisherman as "an
individual engaged in subsistence farming or fishing which shall be limited to the sale, barter or
exchange of agricultural or marine products produced by himself and his immediate family." It bears
repeating that nothing in the record supports a finding that any petitioner falls within these definitions.
Besides, Section 2 of Article XII aims primarily not to bestow any right to subsistence fishermen, but to
lay stress on the duty of the State to protect the nation's marine wealth. What the provision merely
recognizes is that the State may allow, by law, cooperative fish farming, with priority to subsistence
fishermen and fishworkers in rivers, lakes, bays and lagoons. Our survey of the statute books reveals
that the only provision of law which speaks of a preferential right of marginal fishermen is Section 149
of the LGC, which pertinently provides:
Sec. 149. Fishery Rentals, Fees and Charges. — . . .
(b) The sangguniang bayan may:
(1) Grant fishery privileges to erect fish corrals, oyster, mussels or other aquatic beds or bangus fry
areas, within a definite zone of the municipal waters, as determined by it: Provided, however, That duly
registered organizations and cooperatives of marginal fishermen shall have the preferential right to
such fishery privileges . . . .
In a Joint Administrative Order No. 3 dated 25 April 1996, the Secretary of the Department of
Agriculture and the Secretary of the Department of Interior and Local Government prescribed
guidelines concerning the preferential treatment of small fisherfolk relative to the fishery right
mentioned in Section 149. This case, however, does not involve such fishery right.
Anent Section 7 of Article XIII, it speaks not only of the use of communal marine and fishing resources,
but of their protection, development and conservation. As hereafter shown, the ordinances in question
are meant precisely to protect and conserve our marine resources to the end that their enjoyment may
be guaranteed not only for the present generation, but also for the generations to come.
The so-called "preferential right" of subsistence or marginal fishermen to the use of marine resources
is not at all absolute. In accordance with the Regalian Doctrine, marine resources belong to the State,
and, pursuant to the first paragraph of Section 2, Article XII of the Constitution, their "exploration,
development and utilization . . . shall be under the full control and supervision of the State." Moreover,
their mandated protection, development and conservation as necessarily recognized by the framers of
the Constitution, imply certain restrictions on whatever right of enjoyment there may be in favor of
anyone. Thus, as to the curtailment of the preferential treatment of marginal fishermen, the following
exchange between Commissioner Francisco Rodrigo and Commissioner Jose F.S. Bengzon, Jr., took
place at the plenary session of the Constitutional Commission:
MR. RODRIGO:
Let us discuss the implementation of this because I would not raise the hopes of our people, and
afterwards fail in the implementation. How will this be implemented? Will there be a licensing or giving
of permits so that government officials will know that one is really a marginal fisherman? Or if
policeman say that a person is not a marginal fisherman, he can show his permit, to prove that indeed
he is one.
MR. BENGZON:
Certainly, there will be some mode of licensing insofar as this is concerned and this particular question
could be tackled when we discuss the Article on Local Governments — whether we will leave to the
local governments or to Congress on how these things will be implemented. But certainly, I think our
congressmen and our local officials will not be bereft of ideas on how to implement this mandate.
xxx xxx xxx
MR. RODRIGO:
So, once one is licensed as a marginal fisherman, he can go anywhere in the Philippines and fish in any
fishing grounds.
MR. BENGZON:
Subject to whatever rules and regulations and local laws that may be passed, may be existing or will be
passed.21 (emphasis supplied)
What must likewise be borne in mind is the state policy enshrined in the Constitution regarding the
duty of the State to protect and advance the right of the people to a balanced and healthful ecology in
accord with the rhythm and harmony of nature. 22 On this score, in Oposa v. Factoran, 23 this Court
declared:
While the right to a balanced and healthful ecology is to be found under the Declaration of Principles
the State Policies and not under the Bill of Rights, it does not follow that it is less important than any
of the civil and political rights enumerated in the latter. Such a right belongs to a different category of
rights altogether for it concerns nothing less than self-preservation and self-perpetuation — aptly and
fittingly stressed by the petitioners — the advancement of which may even be said to predate all
governments and constitutions. As a matter of fact, these basic rights need not even be written in the
Constitution for they are assumed to exist from the inception of humankind. If they are now explicitly
mentioned in the fundamental charter, it is because of the well-founded fear of its framers that unless
the rights to a balanced and healthful ecology and to health are mandated as state policies by the
Constitution itself, thereby highlighting their continuing importance and imposing upon the state a
solemn obligation to preserve the first and protect and advance the second, the day would not be too
far when all else would be lost not only for the present generation, but also for those to come —
generations which stand to inherit nothing but parched earth incapable of sustaining life.
The right to a balanced and healthful ecology carries with it a correlative duty to refrain from impairing
the environment. . . .
The LGC provisions invoked by private respondents merely seek to give flesh and blood to the right of
the people to a balanced and healthful ecology. In fact, the General Welfare Clause, expressly mentions
this right:
Sec. 16. General Welfare. — Every local government unit shall exercise the powers expressly granted,
those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its
efficient and effective governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government units shall ensure and
support, among other things, the preservation and enrichment of culture, promote health and
safety, enhance the right of the people to a balanced ecology, encourage and support the development
of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience of their inhabitants. (emphasis supplied).
Moreover, Section 5(c) of the LGC explicitly mandates that the general welfare provisions of the LGC
"shall be liberally interpreted to give more powers to the local government units in accelerating
economic development and upgrading the quality of life for the people of the community."
The LGC vests municipalities with the power to grant fishery privileges in municipal waters and impose
rentals, fees or charges therefor; to penalize, by appropriate ordinances, the use of explosives, noxious
or poisonous substances, electricity, muro-ami, and other deleterious methods of fishing; and to
prosecute any violation of the provisions of applicable fishery laws. 24 Further, the sangguniang bayan,
the sangguniang panlungsod and the sangguniang panlalawigan are directed to enact ordinances for
the general welfare of the municipality and its inhabitants, which shall include, inter alia, ordinances
that "[p]rotect the environment and impose appropriate penalties for acts which endanger the
environment such as dynamite fishing and other forms of destructive fishing . . . and such other
activities which result in pollution, acceleration of eutrophication of rivers and lakes, or of ecological
imbalance."25
Finally, the centerpiece of LGC is the system of decentralization 26 as expressly mandated by the
Constitution.27 Indispensable to decentralization is devolution and the LGC expressly provides that
"[a]ny provision on a power of a local government unit shall be liberally interpreted in its favor, and in
case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower
local government unit. Any fair and reasonable doubt as to the existence of the power shall be
interpreted in favor of the local government unit concerned."28 Devolution refers to the act by which
the National Government confers power and authority upon the various local government units to
perform specific functions and responsibilities. 29
One of the devolved powers enumerated in the section of the LGC on devolution is the enforcement
of fishery laws in municipal waters including the conservation of mangroves.30 This necessarily includes
the enactment of ordinances to effectively carry out such fishery laws within the municipal waters.
The term "municipal waters," in turn, includes not only streams, lakes, and tidal waters within the
municipality, not being the subject of private ownership and not comprised within the national parks,
public forest, timber lands, forest reserves, or fishery reserves, but also marine waters included
between two lines drawn perpendicularly to the general coastline from points where the boundary
lines of the municipality or city touch the sea at low tide and a third line parallel with the general
coastline and fifteen kilometers from
it.31 Under P.D. No. 704, the marine waters included in municipal waters is limited to three nautical
miles from the general coastline using the above perpendicular lines and a third parallel line.
These "fishery laws" which local government units may enforce under Section 17(b)(2)(i) in municipal
waters include: (1) P.D. No. 704; (2) P.D. No. 1015 which, inter alia, authorizes the establishment of a
"closed season" in any Philippine water if necessary for conservation or ecological purposes; (3) P.D.
No. 1219 which provides for the exploration, exploitation, utilization and conservation of coral
resources; (4) R.A. No. 5474, as amended by B.P. Blg. 58, which makes it unlawful for any person,
association or corporation to catch or cause to be caught, sell, offer to sell, purchase, or have in
possession any of the fish specie called gobiidae or "ipon" during closed season; and (5) R.A. No. 6451
which prohibits and punishes electrofishing, as well as various issuances of the BFAR.
To those specifically devolved insofar as the control and regulation of fishing in municipal waters and
the protection of its marine environment are concerned, must be added the following:
1. Issuance of permits to construct fish cages within municipal waters;
2. Issuance of permits to gather aquarium fishes within municipal waters;
3. Issuance of permits to gather kapis shells within municipal waters;
4. Issuance of permits to gather/culture shelled mollusks within municipal waters;
5. Issuance of licenses to establish seaweed farms within municipal waters;
6. Issuance of licenses to establish culture pearls within municipal waters;
7. Issuance of auxiliary invoice to transport fish and fishery products; and
8. Establishment of "closed season" in municipal waters.
These functions are covered in the Memorandum of Agreement of 5 April 1994 between the
Department of Agriculture and the Department of Interior and Local Government.
In light then of the principles of decentralization and devolution enshrined in the LGC and the powers
granted therein to local government units under Section 16 (the General Welfare Clause), and under
Sections 149, 447(a) (1) (vi), 458 (a) (1) (vi) and 468 (a) (1) (vi), which unquestionably involve the
exercise of police power, the validity of the questioned Ordinances cannot be doubted.
Parenthetically, we wish to add that these Ordinances find full support under R.A. No. 7611, otherwise
known as the Strategic Environmental Plan (SEP) for Palawan Act, approved on 19 June 1992. This
statute adopts a "comprehensive framework for the sustainable development of Palawan compatible
with protecting and enhancing the natural resources and endangered environment of the province,"
which "shall serve to guide the local government of Palawan and the government agencies concerned
in the formulation and implementation of plans, programs and projects affecting said province."32
At this time then, it would be appropriate to determine the relation between the assailed Ordinances
and the aforesaid powers of the Sangguniang Panlungsod of the City of Puerto Princesa and the
Sangguniang Panlalawigan of the Province of Palawan to protect the environment. To begin, we
ascertain the purpose of the Ordinances as set forth in the statement of purposes or declaration of
policies quoted earlier.
It is clear to the Court that both Ordinances have two principal objectives or purposes: (1) to establish
a "closed season" for the species of fish or aquatic animals covered therein for a period of five years;
and (2) to protect the coral in the marine waters of the City of Puerto Princesa and the Province of
Palawan from further destruction due to illegal fishing activities.
The accomplishment of the first objective is well within the devolved power to enforce fishery laws in
municipal waters, such as P.D. No. 1015, which allows the establishment of "closed seasons." The
devolution of such power has been expressly confirmed in the Memorandum of Agreement of 5 April
1994 between the Department of Agriculture and the Department of Interior and Local Government.
The realization of the second objective clearly falls within both the general welfare clause of the LGC
and the express mandate thereunder to cities and provinces to protect the environment and impose
appropriate penalties for acts which endanger the environment.33
The destruction of coral reefs results in serious, if not irreparable, ecological imbalance, for coral reefs
are among nature's life-support systems.34 They collect, retain and recycle nutrients for adjacent
nearshore areas such as mangroves, seagrass beds, and reef flats; provide food for marine plants and
animals; and serve as a protective shelter for aquatic organisms. 35 It is said that "[e]cologically, the
reefs are to the oceans what forests are to continents: they are shelter and breeding grounds for fish
and plant species that will disappear without them."36
The prohibition against catching live fish stems, in part, from the modern phenomenon of live-fish trade
which entails the catching of so-called exotic species of tropical fish, not only for aquarium use in the
West, but also for "the market for live banquet fish [which] is virtually insatiable in ever more affluent
Asia.37 These exotic species are coral-dwellers, and fishermen catch them by "diving in shallow water
with corraline habitats and squirting sodium cyanide poison at passing fish directly or onto coral
crevices; once affected the fish are immobilized [merely stunned] and then scooped by hand." 38 The
diver then surfaces and dumps his catch into a submerged net attached to the skiff. Twenty minutes
later, the fish can swim normally. Back on shore, they are placed in holding pens, and within a few
weeks, they expel the cyanide from their system and are ready to be hauled. They are then placed in
saltwater tanks or packaged in plastic bags filled with seawater for shipment by air freight to major
markets for live food fish.39 While the fish are meant to survive, the opposite holds true for their former
home as "[a]fter the fisherman squirts the cyanide, the first thing to perish is the reef algae, on which
fish feed. Days later, the living coral starts to expire. Soon the reef loses its function as habitat for the
fish, which eat both the algae and invertebrates that cling to the coral. The reef becomes an underwater
graveyard, its skeletal remains brittle, bleached of all color and vulnerable to erosion from the
pounding of the waves."40 It has been found that cyanide fishing kills most hard and soft corals within
three months of repeated application.41
The nexus then between the activities barred by Ordinance No. 15-92 of the City of Puerto Princesa
and the prohibited acts provided in Ordinance No. 2, Series of 1993 of the Province of Palawan, on one
hand, and the use of sodium cyanide, on the other, is painfully obvious. In sum, the public purpose and
reasonableness of the Ordinances may not then be controverted.
As to Office Order No. 23, Series of 1993, issued by Acting City Mayor Amado L. Lucero of the City of
Puerto Princesa, we find nothing therein violative of any constitutional or statutory provision. The
Order refers to the implementation of the challenged ordinance and is not the Mayor's Permit.
The dissenting opinion of Mr. Justice Josue N. Bellosillo relies upon the lack of authority on the part of
the Sangguniang Panglungsod of Puerto Princesa to enact Ordinance No. 15, Series of 1992, on the
theory that the subject thereof is within the jurisdiction and responsibility of the Bureau of Fisheries
and Aquatic Resources (BFAR) under P.D. No. 704, otherwise known as the Fisheries Decree of 1975;
and that, in any event, the Ordinance is unenforceable for lack of approval by the Secretary of the
Department of Natural Resources (DNR), likewise in accordance with P.D. No. 704.
The majority is unable to accommodate this view. The jurisdiction and responsibility of the BFAR under
P.D. No. 704, over the management, conservation, development, protection, utilization and disposition
of all fishery and aquatic resources of the country is not all-encompassing. First, Section 4 thereof
excludes from such jurisdiction and responsibility municipal waters, which shall be under the municipal
or city government concerned, except insofar as fishpens and seaweed culture in municipal centers are
concerned. This section provides, however, that all municipal or city ordinances and resolutions
affecting fishing and fisheries and any disposition thereunder shall be submitted to the Secretary of the
Department of Natural Resources for appropriate action and shall have full force and effect only upon
his approval.42
Second, it must at once be pointed out that the BFAR is no longer under the Department of Natural
Resources (now Department of Environment and Natural Resources). Executive Order No. 967 of 30
June 1984 transferred the BFAR from the control and supervision of the Minister (formerly Secretary)
Of Natural Resources to the Ministry of Agriculture and Food (MAF) and converted it into a mere staff
agency thereof, integrating its functions with the regional offices of the MAF.
In Executive Order No. 116 of 30 January 1987, which reorganized the MAF, the BFAR was retained as
an attached agency of the MAF. And under the Administrative Code of 1987, 43 the BFAR is placed under
the Title concerning the Department of Agriculture.44
Therefore, it is incorrect to say that the challenged Ordinance of the City of Puerto Princesa is invalid
or unenforceable because it was not approved by the Secretary of the DENR. If at all, the approval that
should be sought would be that of the Secretary of the Department of Agriculture. However, the
requirement of approval by the Secretary of the Department of Agriculture (not DENR) of municipal
ordinances affecting fishing and fisheries in municipal waters has been dispensed with in view of the
following reasons:

(1) Section 534 (Repealing Clause) of the LGC expressly repeals or amends Sections 16 and 29 of P.D.
No. 70445 insofar as they are inconsistent with the provisions of the LGC.

(2) As discussed earlier, under the general welfare clause of the LGC, local government units have the
power, inter alia, to enact ordinances to enhance the right of the people to a balanced ecology. It
likewise specifically vests municipalities with the power to grant fishery privileges in municipal waters,
and impose rentals, fees or charges therefor; to penalize, by appropriate ordinances, the use of
explosives, noxious or poisonous substances, electricity, muro-ami, and other deleterious methods of
fishing; and to prosecute any violation of the provisions of applicable fishery laws.46 Finally, it imposes Republic of the Philippines
upon the sangguniang bayan, the sangguniang panlungsod, and the sangguniang panlalawigan the duty SUPREME COURT
to enact ordinances to "[p]rotect the environment and impose appropriate penalties for acts which Manila
endanger the environment such as dynamite fishing and other forms of destructive fishing . . . and such
EN BANC
other activities which result in pollution, acceleration of eutrophication of rivers and lakes or of
ecological imbalance."47

In closing, we commend the Sangguniang Panlungsod of the City of Puerto Princesa and Sangguniang G.R. No. 111097 July 20, 1994
Panlalawigan of the Province of Palawan for exercising the requisite political will to enact urgently
needed legislation to protect and enhance the marine environment, thereby sharing in the herculean MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners,
task of arresting the tide of ecological destruction. We hope that other local government units shall vs.
now be roused from their lethargy and adopt a more vigilant stand in the battle against the decimation PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING
of our legacy to future generations. At this time, the repercussions of any further delay in their response CORPORATION, respondents.
may prove disastrous, if not, irreversible.
Aquilino G. Pimentel, Jr. and Associates for petitioners.
WHEREFORE, the instant petition is DISMISSED for lack of merit and the temporary restraining order
issued on 11 November 1993 is LIFTED. R.R. Torralba & Associates for private respondent.

No pronouncement as to costs.

SO ORDERED. CRUZ, J.:

There was instant opposition when PAGCOR announced the opening of a casino in Cagayan de Oro City.
Civic organizations angrily denounced the project. The religious elements echoed the objection and so
did the women's groups and the youth. Demonstrations were led by the mayor and the city legislators.
The media trumpeted the protest, describing the casino as an affront to the welfare of the city.

The trouble arose when in 1992, flush with its tremendous success in several cities, PAGCOR decided
to expand its operations to Cagayan de Oro City. To this end, it leased a portion of a building belonging
to Pryce Properties Corporation, Inc., one of the herein private respondents, renovated and equipped
the same, and prepared to inaugurate its casino there during the Christmas season.
The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and hostile. On
December 7, 1992, it enacted Ordinance No. 3353 reading as follows:
ORDINANCE NO. 3353
AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING EXISTING
BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALLOWING TO BE USED ITS PREMISES
OR PORTION THEREOF FOR THE OPERATION OF CASINO.
BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in session assembled
that:
Sec. 1. — That pursuant to the policy of the city banning the operation of casino within its territorial
jurisdiction, no business permit shall be issued to any person, partnership or corporation for the
operation of casino within the city limits.
Sec. 2. — That it shall be a violation of existing business permit by any persons, partnership or
corporation to use its business establishment or portion thereof, or allow the use thereof by others for
casino operation and other gambling activities.
Sec. 3. — PENALTIES. — Any violation of such existing business permit as defined in the preceding
section shall suffer the following penalties, to wit:
a) Suspension of the business permit for sixty (60) days for the first offense and a fine of P1,000.00/day
b) Suspension of the business permit for Six (6) months for the second offense, and a fine of
P3,000.00/day
c) Permanent revocation of the business permit and imprisonment of One (1) year, for the third and
subsequent offenses.
Sec. 4. — This Ordinance shall take effect ten (10) days from publication thereof.
Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93 reading as follows:
ORDINANCE NO. 3375-93
AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR VIOLATION
THEREFOR.
WHEREAS, the City Council established a policy as early as 1990 against CASINO under its Resolution
No. 2295;
WHEREAS, on October 14, 1992, the City Council passed another Resolution No. 2673, reiterating its
policy against the establishment of CASINO;
WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353, prohibiting the issuance
of Business Permit and to cancel existing Business Permit to any establishment for the using and
allowing to be used its premises or portion thereof for the operation of CASINO;
WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local Government Code of 1991
(Rep. Act 7160) and under Art. 99, No. (4), Paragraph VI of the implementing rules of the Local
Government Code, the City Council as the Legislative Body shall enact measure to suppress any activity
inimical to public morals and general welfare of the people and/or regulate or prohibit such activity
pertaining to amusement or entertainment in order to protect social and moral welfare of the
community;
NOW THEREFORE,
BE IT ORDAINED by the City Council in session duly assembled that:
Sec. 1. — The operation of gambling CASINO in the City of Cagayan de Oro is hereby prohibited.
Sec. 2. — Any violation of this Ordinance shall be subject to the following penalties:
a) Administrative fine of P5,000.00 shall be imposed against the proprietor, partnership or corporation
undertaking the operation, conduct, maintenance of gambling CASINO in the City and closure thereof;
b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine in the amount of
P5,000.00 or both at the discretion of the court against the manager, supervisor, and/or any person
responsible in the establishment, conduct and maintenance of gambling CASINO.
Sec. 3. — This Ordinance shall take effect ten (10) days after its publication in a local newspaper of
general circulation.
Pryce assailed the ordinances before the Court of Appeals, where it was joined by PAGCOR as
intervenor and supplemental petitioner. Their challenge succeeded. On March 31, 1993, the Court of
Appeals declared the ordinances invalid and issued the writ prayed for to prohibit their
enforcement. 1 Reconsideration of this decision was denied on July 13, 1993. 2
Cagayan de Oro City and its mayor are now before us in this petition for review under Rule 45 of the
Rules of Court. 3 They aver that the respondent Court of Appeals erred in holding that:
1. Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de Oro does not have the
power and authority to prohibit the establishment and operation of a PAGCOR gambling casino within
the City's territorial limits.
2. The phrase "gambling and other prohibited games of chance" found in Sec. 458, par. (a), sub-par. (1)
— (v) of R.A. 7160 could only mean "illegal gambling."
3. The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on that point.
4. The questioned Ordinances are discriminatory to casino and partial to cockfighting and are therefore
invalid on that point.
5. The questioned Ordinances are not reasonable, not consonant with the general powers and
purposes of the instrumentality concerned and inconsistent with the laws or policy of the State.
6. It had no option but to follow the ruling in the case of Basco, et al. v. PAGCOR, G.R. No. 91649, May
14, 1991, 197 SCRA 53 in disposing of the issues presented in this present case.
PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games of
chance, including casinos on land and sea within the territorial jurisdiction of the Philippines. In Basco
v. Philippine Amusements and Gaming Corporation, 4 this Court sustained the constitutionality of the
decree and even cited the benefits of the entity to the national economy as the third highest revenue-
earner in the government, next only to the BIR and the Bureau of Customs.
Cagayan de Oro City, like other local political subdivisions, is empowered to enact ordinances for the
purposes indicated in the Local Government Code. It is expressly vested with the police power under
what is known as the General Welfare Clause now embodied in Section 16 as follows:
Sec. 16. — General Welfare. — Every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental
for its efficient and effective governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government units shall ensure and
support, among other things, the preservation and enrichment of culture, promote health and safety,
enhance the right of the people to a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience of their inhabitants.
In addition, Section 458 of the said Code specifically declares that:
Sec. 458. — Powers, Duties, Functions and Compensation. — (a) The Sangguniang Panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and effective city government,
and in this connection, shall:
xxx xxx xxx
(v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual
drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and maintenance of
houses of ill repute, gamblingand other prohibited games of chance, fraudulent devices and ways to
obtain money or property, drug addiction, maintenance of drug dens, drug pushing, juvenile
delinquency, the printing, distribution or exhibition of obscene or pornographic materials or
publications, and such other activities inimical to the welfare and morals of the inhabitants of the city;
This section also authorizes the local government units to regulate properties and businesses within
their territorial limits in the interest of the general welfare. 5
The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod may prohibit the
operation of casinos because they involve games of chance, which are detrimental to the people.
Gambling is not allowed by general law and even by the Constitution itself. The legislative power
conferred upon local government units may be exercised over all kinds of gambling and not only over
"illegal gambling" as the respondents erroneously argue. Even if the operation of casinos may have
been permitted under P.D. 1869, the government of Cagayan de Oro City has the authority to prohibit
them within its territory pursuant to the authority entrusted to it by the Local Government Code.
It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in
Article II, Section 25, and Article X of the Constitution, as well as various other provisions therein
seeking to strengthen the character of the nation. In giving the local government units the power to
prevent or suppress gambling and other social problems, the Local Government Code has recognized
the competence of such communities to determine and adopt the measures best expected to promote
the general welfare of their inhabitants in line with the policies of the State.
The petitioners also stress that when the Code expressly authorized the local government units to
prevent and suppress gambling and other prohibited games of chance, like craps, baccarat, blackjack
and roulette, it meant allforms of gambling without distinction. Ubi lex non distinguit, nec nos
distinguere debemos. 6 Otherwise, it would have expressly excluded from the scope of their power
casinos and other forms of gambling authorized by special law, as it could have easily done. The fact
that it did not do so simply means that the local government units are permitted to prohibit all kinds
of gambling within their territories, including the operation of casinos.
The adoption of the Local Government Code, it is pointed out, had the effect of modifying the charter
of the PAGCOR. The Code is not only a later enactment than P.D. 1869 and so is deemed to prevail in
case of inconsistencies between them. More than this, the powers of the PAGCOR under the decree
are expressly discontinued by the Code insofar as they do not conform to its philosophy and provisions,
pursuant to Par. (f) of its repealing clause reading as follows:
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of
this Code are hereby repealed or modified accordingly.
It is also maintained that assuming there is doubt regarding the effect of the Local Government Code
on P.D. 1869, the doubt must be resolved in favor of the petitioners, in accordance with the direction
in the Code calling for its liberal interpretation in favor of the local government units. Section 5 of the
Code specifically provides:
Sec. 5. Rules of Interpretation. — In the interpretation of the provisions of this Code, the following rules
shall apply:
(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in
case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower
local government unit. Any fair and reasonable doubt as to the existence of the power shall be
interpreted in favor of the local government unit concerned;
xxx xxx xxx
(c) The general welfare provisions in this Code shall be liberally interpreted to give more powers to local
government units in accelerating economic development and upgrading the quality of life for the
people in the community; . . . (Emphasis supplied.)
Finally, the petitioners also attack gambling as intrinsically harmful and cite various provisions of the
Constitution and several decisions of this Court expressive of the general and official disapprobation of
the vice. They invoke the State policies on the family and the proper upbringing of the youth and, as
might be expected, call attention to the old case of U.S. v. Salaveria,7 which sustained a municipal
ordinance prohibiting the playing of panguingue. The petitioners decry the immorality of gambling.
They also impugn the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in
creating PAGCOR and authorizing it to operate casinos "on land and sea within the territorial
jurisdiction of the Philippines."
This is the opportune time to stress an important point.
The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally
considered inimical to the interests of the people, there is nothing in the Constitution categorically
proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress to
deal with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit
gambling altogether or allow it without limitation or it may prohibit some forms of gambling and allow
others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but
permits lotteries, cockfighting and horse-racing. In making such choices, Congress has consulted its
own wisdom, which this Court has no authority to review, much less reverse. Well has it been said that
courts do not sit to resolve the merits of conflicting theories. 8 That is the prerogative of the political
departments. It is settled that questions regarding the wisdom, morality, or practicibility of statutes
are not addressed to the judiciary but may be resolved only by the legislative and executive
departments, to which the function belongs in our scheme of government. That function is exclusive.
Whichever way these branches decide, they are answerable only to their own conscience and the
constituents who will ultimately judge their acts, and not to the courts of justice.
The only question we can and shall resolve in this petition is the validity of Ordinance No. 3355 and
Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod of Cagayan de Oro City. And we
shall do so only by the criteria laid down by law and not by our own convictions on the propriety of
gambling.
The tests of a valid ordinance are well established. A long line of decisions 9 has held that to be valid,
an ordinance must conform to the following substantive requirements:
1) It must not contravene the constitution or any statute.
2) It must not be unfair or oppressive.
3) It must not be partial or discriminatory.
4) It must not prohibit but may regulate trade.
5) It must be general and consistent with public policy.
6) It must not be unreasonable.
We begin by observing that under Sec. 458 of the Local Government Code, local government units are
authorized to prevent or suppress, among others, "gambling and other prohibited games of chance."
Obviously, this provision excludes games of chance which are not prohibited but are in fact permitted
by law. The petitioners are less than accurate in claiming that the Code could have excluded such games
of chance but did not. In fact it does. The language of the section is clear and unmistakable. Under the
rule of noscitur a sociis, a word or phrase should be interpreted in relation to, or given the same
meaning of, words with which it is associated. Accordingly, we conclude that since the word "gambling"
is associated with "and other prohibited games of chance," the word should be read as referring to only
illegal gambling which, like the other prohibited games of chance, must be prevented or suppressed.
We could stop here as this interpretation should settle the problem quite conclusively. But we will not.
The vigorous efforts of the petitioners on behalf of the inhabitants of Cagayan de Oro City, and the
earnestness of their advocacy, deserve more than short shrift from this Court.
The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and the public policy
embodied therein insofar as they prevent PAGCOR from exercising the power conferred on it to
operate a casino in Cagayan de Oro City. The petitioners have an ingenious answer to this misgiving.
They deny that it is the ordinances that have changed P.D. 1869 for an ordinance admittedly cannot
prevail against a statute. Their theory is that the change has been made by the Local Government Code
itself, which was also enacted by the national lawmaking authority. In their view, the decree has been,
not really repealed by the Code, but merely "modified pro tanto" in the sense that PAGCOR cannot
now operate a casino over the objection of the local government unit concerned. This modification of
P.D. 1869 by the Local Government Code is permissible because one law can change or repeal another
law.
It seems to us that the petitioners are playing with words. While insisting that the decree has only been
"modifiedpro tanto," they are actually arguing that it is already dead, repealed and useless for all
intents and purposes because the Code has shorn PAGCOR of all power to centralize and regulate
casinos. Strictly speaking, its operations may now be not only prohibited by the local government unit;
in fact, the prohibition is not only discretionary but mandated by Section 458 of the Code if the word
"shall" as used therein is to be given its accepted meaning. Local government units have now no choice
but to prevent and suppress gambling, which in the petitioners' view includes both legal and illegal
gambling. Under this construction, PAGCOR will have no more games of chance to regulate or centralize
as they must all be prohibited by the local government units pursuant to the mandatory duty imposed
upon them by the Code. In this situation, PAGCOR cannot continue to exist except only as a toothless
tiger or a white elephant and will no longer be able to exercise its powers as a prime source of
government revenue through the operation of casinos.
It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause, conveniently
discarding the rest of the provision which painstakingly mentions the specific laws or the parts thereof
which are repealed (or modified) by the Code. Significantly, P.D. 1869 is not one of them. A reading of
the entire repealing clause, which is reproduced below, will disclose the omission:
Sec. 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise known as the "Local Government
Code," Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions, memoranda
and issuances related to or concerning the barangay are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a
(3) and b (2) of Republic Act. No. 5447 regarding the Special Education Fund; Presidential Decree No.
144 as amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended;
Presidential Decree No. 436 as amended by Presidential Decree No. 558; and Presidential Decree Nos.
381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.
(e) The following provisions are hereby repealed or amended insofar as they are inconsistent with the
provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704; Sections 12 of
Presidential Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of
Presidential Decree No. 463, as amended; and Section 16 of Presidential Decree No. 972, as amended,
and
(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of
this Code are hereby repealed or modified accordingly.
Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a clear
and unmistakable showing of such intention. In Lichauco & Co. v. Apostol, 10 this Court explained:
The cases relating to the subject of repeal by implication all proceed on the assumption that if the act
of later date clearly reveals an intention on the part of the lawmaking power to abrogate the prior law,
this intention must be given effect; but there must always be a sufficient revelation of this intention,
and it has become an unbending rule of statutory construction that the intention to repeal a former
law will not be imputed to the Legislature when it appears that the two statutes, or provisions, with
reference to which the question arises bear to each other the relation of general to special.
There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private
respondent points out, PAGCOR is mentioned as the source of funding in two later enactments of
Congress, to wit, R.A. 7309, creating a Board of Claims under the Department of Justice for the benefit
of victims of unjust punishment or detention or of violent crimes, and R.A. 7648, providing for measures
for the solution of the power crisis. PAGCOR revenues are tapped by these two statutes. This would
show that the PAGCOR charter has not been repealed by the Local Government Code but has in fact
been improved as it were to make the entity more responsive to the fiscal problems of the government.
It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably
destructive confrontation, courts must exert every effort to reconcile them, remembering that both
laws deserve a becoming respect as the handiwork of a coordinate branch of the government. On the
assumption of a conflict between P.D. 1869 and the Code, the proper action is not to uphold one and
annul the other but to give effect to both by harmonizing them if possible. This is possible in the case
before us. The proper resolution of the problem at hand is to hold that under the Local Government
Code, local government units may (and indeed must) prevent and suppress all kinds of gambling within
their territories except only those allowed by statutes like P.D. 1869. The exception reserved in such
laws must be read into the Code, to make both the Code and such laws equally effective and mutually
complementary.
This approach would also affirm that there are indeed two kinds of gambling, to wit, the illegal and
those authorized by law. Legalized gambling is not a modern concept; it is probably as old as illegal
gambling, if not indeed more so. The petitioners' suggestion that the Code authorizes them to prohibit
all kinds of gambling would erase the distinction between these two forms of gambling without a clear
indication that this is the will of the legislature. Plausibly, following this theory, the City of Manila could,
by mere ordinance, prohibit the Philippine Charity Sweepstakes Office from conducting a lottery as
authorized by R.A. 1169 and B.P. 42 or stop the races at the San Lazaro Hippodrome as authorized by
R.A. 309 and R.A. 983.
In light of all the above considerations, we see no way of arriving at the conclusion urged on us by the
petitioners that the ordinances in question are valid. On the contrary, we find that the ordinances
violate P.D. 1869, which has the character and force of a statute, as well as the public policy expressed
in the decree allowing the playing of certain games of chance despite the prohibition of gambling in
general.
The rationale of the requirement that the ordinances should not contravene a statute is obvious.
Municipal governments are only agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts of Congress, from which they have
derived their power in the first place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly from the
legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so it
may destroy. As it may destroy, it may abridge and control. Unless there is some constitutional
limitation on the right, the legislature might, by a single act, and if we can suppose it capable of so great
a folly and so great a wrong, sweep from existence all of the municipal corporations in the State, and
the corporation could not prevent it. We know of no limitation on the right so far as to the corporation
themselves are concerned. They are, so to phrase it, the mere tenants at will of the legislature. 11
This basic relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy.
Without meaning to detract from that policy, we here confirm that Congress retains control of the local
government units although in significantly reduced degree now than under our previous Constitutions.
The power to create still includes the power to destroy. The power to grant still includes the power to
withhold or recall. True, there are certain notable innovations in the Constitution, like the direct
conferment on the local government units of the power to tax, 12 which cannot now be withdrawn by
mere statute. By and large, however, the national legislature is still the principal of the local
government units, which cannot defy its will or modify or violate it.
The Court understands and admires the concern of the petitioners for the welfare of their constituents
and their apprehensions that the welfare of Cagayan de Oro City will be endangered by the opening of
the casino. We share the view that "the hope of large or easy gain, obtained without special effort,
turns the head of the workman" 13 and that "habitual gambling is a cause of laziness and
ruin." 14 In People v. Gorostiza, 15 we declared: "The social scourge of gambling must be stamped out.
The laws against gambling must be enforced to the limit." George Washington called gambling "the
child of avarice, the brother of iniquity and the father of mischief." Nevertheless, we must recognize
the power of the legislature to decide, in its own wisdom, to legalize certain forms of gambling, as was
done in P.D. 1869 and impliedly affirmed in the Local Government Code. That decision can be revoked
by this Court only if it contravenes the Constitution as the touchstone of all official acts. We do not find
such contravention here.
We hold that the power of PAGCOR to centralize and regulate all games of chance, including casinos
on land and sea within the territorial jurisdiction of the Philippines, remains unimpaired. P.D. 1869 has
not been modified by the Local Government Code, which empowers the local government units to
prevent or suppress only those forms of gambling prohibited by law.
Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be
amended or nullified by a mere ordinance. Hence, it was not competent for the Sangguniang
Panlungsod of Cagayan de Oro City to enact Ordinance No. 3353 prohibiting the use of buildings for
the operation of a casino and Ordinance No. 3375-93 prohibiting the operation of casinos. For all their
praiseworthy motives, these ordinances are contrary to P.D. 1869 and the public policy announced
therein and are therefore ultra vires and void.
WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of Appeals is
AFFIRMED, with costs against the petitioners. It is so ordered.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-24693 July 31, 1967

ERMITA-MALATE HOTEL AND MOTEL OPERATORS ASSOCIATION, INC., HOTEL DEL MAR INC. and GO
CHIU, petitioners-appellees,
vs.
THE HONORABLE CITY MAYOR OF MANILA, respondent-appellant.
VICTOR ALABANZA, intervenor-appellee.

Panganiban, Abad and Associates Law Office for respondent-appellant.

J. M. Aruego, Tenchavez and Associates for intervenor-appellee.

FERNANDO, J.:

The principal question in this appeal from a judgment of the lower court in an action for prohibition is
whether Ordinance No. 4760 of the City of Manila is violative of the due process clause. The lower
court held that it is and adjudged it "unconstitutional, and, therefore, null and void." For reasons to be
more specifically set forth, such judgment must be reversed, there being a failure of the requisite
showing to sustain an attack against its validity.

The petition for prohibition against Ordinance No. 4760 was filed on July 5, 1963 by the petitioners,
Ermita-Malate Hotel and Motel Operators Association, one of its members, Hotel del Mar Inc., and a
certain Go Chiu, who is "the president and general manager of the second petitioner" against the
respondent Mayor of the City of Manila who was sued in his capacity as such "charged with the general
power and duty to enforce ordinances of the City of Manila and to give the necessary orders for the
faithful execution and enforcement of such ordinances." (par. 1). It was alleged that the petitioner non-
stock corporation is dedicated to the promotion and protection of the interest of its eighteen (18)
members "operating hotels and motels, characterized as legitimate businesses duly licensed by both
national and city authorities, regularly paying taxes, employing and giving livelihood to not less than
2,500 person and representing an investment of more than P3 million." 1 (par. 2). It was then alleged
that on June 13, 1963, the Municipal Board of the City of Manila enacted Ordinance No. 4760, approved
on June 14, 1963 by the then Vice-Mayor Herminio Astorga, who was at the time acting as Mayor of
the City of Manila. (par. 3).
After which the alleged grievances against the ordinance were set forth in detail. There was the
assertion of its being beyond the powers of the Municipal Board of the City of Manila to enact insofar
as it would regulate motels, on the ground that in the revised charter of the City of Manila or in any
other law, no reference is made to motels; that Section 1 of the challenged ordinance is
unconstitutional and void for being unreasonable and violative of due process insofar as it would
impose P6,000.00 fee per annum for first class motels and P4,500.00 for second class motels; that the
provision in the same section which would require the owner, manager, keeper or duly authorized
representative of a hotel, motel, or lodging house to refrain from entertaining or accepting any guest
or customer or letting any room or other quarter to any person or persons without his filling up the
prescribed form in a lobby open to public view at all times and in his presence, wherein the surname,
given name and middle name, the date of birth, the address, the occupation, the sex, the nationality,
the length of stay and the number of companions in the room, if any, with the name, relationship, age
and sex would be specified, with data furnished as to his residence certificate as well as his passport
number, if any, coupled with a certification that a person signing such form has personally filled it up
and affixed his signature in the presence of such owner, manager, keeper or duly authorized
representative, with such registration forms and records kept and bound together, it also being
provided that the premises and facilities of such hotels, motels and lodging houses would be open for
inspection either by the City Mayor, or the Chief of Police, or their duly authorized representatives is
unconstitutional and void again on due process grounds, not only for being arbitrary, unreasonable or
oppressive but also for being vague, indefinite and uncertain, and likewise for the alleged invasion of
the right to privacy and the guaranty against self-incrimination; that Section 2 of the challenged
ordinance classifying motels into two classes and requiring the maintenance of certain minimum
facilities in first class motels such as a telephone in each room, a dining room or, restaurant and laundry
similarly offends against the due process clause for being arbitrary, unreasonable and oppressive, a
conclusion which applies to the portion of the ordinance requiring second class motels to have a dining
room; that the provision of Section 2 of the challenged ordinance prohibiting a person less than 18
years old from being accepted in such hotels, motels, lodging houses, tavern or common inn unless
accompanied by parents or a lawful guardian and making it unlawful for the owner, manager, keeper
or duly authorized representative of such establishments to lease any room or portion thereof more
than twice every 24 hours, runs counter to the due process guaranty for lack of certainty and for its
unreasonable, arbitrary and oppressive character; and that insofar as the penalty provided for in
Section 4 of the challenged ordinance for a subsequent conviction would, cause the automatic
cancellation of the license of the offended party, in effect causing the destruction of the business and
loss of its investments, there is once again a transgression of the due process clause.
There was a plea for the issuance of preliminary injunction and for a final judgment declaring the above
ordinance null and void and unenforceable. The lower court on July 6, 1963 issued a writ of preliminary
injunction ordering respondent Mayor to refrain from enforcing said Ordinance No. 4760 from and
after July 8, 1963.
In the a answer filed on August 3, 1963, there was an admission of the personal circumstances
regarding the respondent Mayor and of the fact that petitioners are licensed to engage in the hotel or
motel business in the City of Manila, of the provisions of the cited Ordinance but a denial of its alleged
nullity, whether on statutory or constitutional grounds. After setting forth that the petition did fail to
state a cause of action and that the challenged ordinance bears a reasonable relation, to a proper
purpose, which is to curb immorality, a valid and proper exercise of the police power and that only the
guests or customers not before the court could complain of the alleged invasion of the right to privacy
and the guaranty against self incrimination, with the assertion that the issuance of the preliminary
injunction ex parte was contrary to law, respondent Mayor prayed for, its dissolution and the dismissal
of the petition.
Instead of evidence being offered by both parties, there was submitted a stipulation of facts dated
September 28, 1964, which reads:
1. That the petitioners Ermita-Malate Hotel and Motel Operators Association, Inc. and Hotel del Mar
Inc. are duly organized and existing under the laws of the Philippines, both with offices in the City of
Manila, while the petitioner Go Chin is the president and general manager of Hotel del Mar Inc., and
the intervenor Victor Alabanza is a resident of Baguio City, all having the capacity to sue and be sued;
2. That the respondent Mayor is the duly elected and incumbent City Mayor and chief executive of the
City of Manila charged with the general power and duty to enforce ordinances of the City of Manila
and to give the necessary orders for the faithful execution and enforcement of such ordinances;
3. That the petitioners are duly licensed to engage in the business of operating hotels and motels in
Malate and Ermita districts in Manila;
4. That on June 13, 1963, the Municipal Board of the City of Manila enacted Ordinance No. 4760, which
was approved on June 14, 1963, by Vice-Mayor Herminio Astorga, then the acting City Mayor of Manila,
in the absence of the respondent regular City Mayor, amending sections 661, 662, 668-a, 668-b and
669 of the compilation of the ordinances of the City of Manila besides inserting therein three new
sections. This ordinance is similar to the one vetoed by the respondent Mayor (Annex A) for the reasons
stated in its 4th Indorsement dated February 15, 1963 (Annex B);
5. That the explanatory note signed by then Councilor Herminio Astorga was submitted with the
proposed ordinance (now Ordinance 4760) to the Municipal Board, copy of which is attached hereto
as Annex C;
6. That the City of Manila derived in 1963 an annual income of P101,904.05 from license fees paid by
the 105 hotels and motels (including herein petitioners) operating in the City of Manila.1äwphï1.ñët
Thereafter came a memorandum for respondent on January 22, 1965, wherein stress was laid on the
presumption of the validity of the challenged ordinance, the burden of showing its lack of conformity
to the Constitution resting on the party who assails it, citing not only U.S. v. Salaveria, but likewise
applicable American authorities. Such a memorandum likewise refuted point by point the arguments
advanced by petitioners against its validity. Then barely two weeks later, on February 4, 1965, the
memorandum for petitioners was filed reiterating in detail what was set forth in the petition, with
citations of what they considered to be applicable American authorities and praying for a judgment
declaring the challenged ordinance "null and void and unenforceable" and making permanent the writ
of preliminary injunction issued.
After referring to the motels and hotels, which are members of the petitioners association, and
referring to the alleged constitutional questions raised by the party, the lower court observed: "The
only remaining issue here being purely a question of law, the parties, with the nod of the Court, agreed
to file memoranda and thereafter, to submit the case for decision of the Court." It does appear obvious
then that without any evidence submitted by the parties, the decision passed upon the alleged infirmity
on constitutional grounds of the challenged ordinance, dismissing as is undoubtedly right and proper
the untenable objection on the alleged lack of authority of the City of Manila to regulate motels, and
came to the conclusion that "the challenged Ordinance No. 4760 of the City of Manila, would be
unconstitutional and, therefore, null and void." It made permanent the preliminary injunction issued
against respondent Mayor and his agents "to restrain him from enforcing the ordinance in question."
Hence this appeal.
As noted at the outset, the judgment must be reversed. A decent regard for constitutional doctrines of
a fundamental character ought to have admonished the lower court against such a sweeping
condemnation of the challenged ordinance. Its decision cannot be allowed to stand, consistently with
what has hitherto been the accepted standards of constitutional adjudication, in both procedural and
substantive aspects.
Primarily what calls for a reversal of such a decision is the absence of any evidence to offset the
presumption of validity that attaches to a challenged statute or ordinance. As was expressed
categorically by Justice Malcolm: "The presumption is all in favor of validity x x x . The action of the
elected representatives of the people cannot be lightly set aside. The councilors must, in the very
nature of things, be familiar with the necessities of their particular municipality and with all the facts
and circumstances which surround the subject and necessitate action. The local legislative body, by
enacting the ordinance, has in effect given notice that the regulations are essential to the well being of
the people x x x . The Judiciary should not lightly set aside legislative action when there is not a clear
invasion of personal or property rights under the guise of police regulation.2
It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence
to rebut it is unavoidable, unless the statute or ordinance is void on its face which is not the case here.
The principle has been nowhere better expressed than in the leading case of O'Gorman & Young v.
Hartford Fire Insurance Co.,3 where the American Supreme Court through Justice Brandeis tersely and
succinctly summed up the matter thus: The statute here questioned deals with a subject clearly within
the scope of the police power. We are asked to declare it void on the ground that the specific method
of regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As
underlying questions of fact may condition the constitutionality of legislation of this character, the
resumption of constitutionality must prevail in the absence of some factual foundation of record for
overthrowing the statute." No such factual foundation being laid in the present case, the lower court
deciding the matter on the pleadings and the stipulation of facts, the presumption of validity must
prevail and the judgment against the ordinance set aside.
Nor may petitioners assert with plausibility that on its face the ordinance is fatally defective as being
repugnant to the due process clause of the Constitution. The mantle of protection associated with the
due process guaranty does not cover petitioners. This particular manifestation of a police power
measure being specifically aimed to safeguard public morals is immune from such imputation of nullity
resting purely on conjecture and unsupported by anything of substance. To hold otherwise would be
to unduly restrict and narrow the scope of police power which has been properly characterized as the
most essential, insistent and the least limitable of powers,4 extending as it does "to all the great public
needs."5 It would be, to paraphrase another leading decision, to destroy the very purpose of the state
if it could be deprived or allowed itself to be deprived of its competence to promote public health,
public morals, public safety and the genera welfare.6 Negatively put, police power is "that inherent and
plenary power in the State which enables it to prohibit all that is hurt full to the comfort, safety, and
welfare of society.7
There is no question but that the challenged ordinance was precisely enacted to minimize certain
practices hurtful to public morals. The explanatory note of the Councilor Herminio Astorga included as
annex to the stipulation of facts, speaks of the alarming increase in the rate of prostitution, adultery
and fornication in Manila traceable in great part to the existence of motels, which "provide a necessary
atmosphere for clandestine entry, presence and exit" and thus become the "ideal haven for prostitutes
and thrill-seekers." The challenged ordinance then proposes to check the clandestine harboring of
transients and guests of these establishments by requiring these transients and guests to fill up a
registration form, prepared for the purpose, in a lobby open to public view at all times, and by
introducing several other amendatory provisions calculated to shatter the privacy that characterizes
the registration of transients and guests." Moreover, the increase in the licensed fees was intended to
discourage "establishments of the kind from operating for purpose other than legal" and at the same
time, to increase "the income of the city government." It would appear therefore that the stipulation
of facts, far from sustaining any attack against the validity of the ordinance, argues eloquently for it.
It is a fact worth noting that this Court has invariably stamped with the seal of its approval, ordinances
punishing vagrancy and classifying a pimp or procurer as a vagrant;8 provide a license tax for and
regulating the maintenance or operation of public dance halls; 9 prohibiting gambling;10 prohibiting
jueteng;11 and monte;12 prohibiting playing of panguingui on days other than Sundays or legal
holidays;13 prohibiting the operation of pinball machines; 14 and prohibiting any person from keeping,
conducting or maintaining an opium joint or visiting a place where opium is smoked or otherwise
used,15 all of which are intended to protect public morals.
On the legislative organs of the government, whether national or local, primarily rest the exercise of
the police power, which, it cannot be too often emphasized, is the power to prescribe regulations to
promote the health, morals, peace, good order, safety and general welfare of the people. In view of
the requirements of due process, equal protection and other applicable constitutional guaranties
however, the exercise of such police power insofar as it may affect the life, liberty or property of any
person is subject to judicial inquiry. Where such exercise of police power may be considered as either
capricious, whimsical, unjust or unreasonable, a denial of due process or a violation of any other
applicable constitutional guaranty may call for correction by the courts.
We are thus led to considering the insistent, almost shrill tone, in which the objection is raised to the
question of due process.16 There is no controlling and precise definition of due process. It furnishes
though a standard to which the governmental action should conform in order that deprivation of life,
liberty or property, in each appropriate case, be valid. What then is the standard of due process which
must exist both as a procedural and a substantive requisite to free the challenged ordinance, or any
governmental action for that matter, from the imputation of legal infirmity sufficient to spell its doom?
It is responsiveness to the supremacy of reason, obedience to the dictates of justice. Negatively put,
arbitrariness is ruled out and unfairness avoided. To satisfy the due process requirement, official action,
to paraphrase Cardozo, must not outrun the bounds of reason and result in sheer oppression. Due
process is thus hostile to any official action marred by lack of reasonableness. Correctly it has been
identified as freedom from arbitrariness. It is the embodiment of the sporting idea of fair play. 17 It
exacts fealty "to those strivings for justice" and judges the act of officialdom of whatever branch "in
the light of reason drawn from considerations of fairness that reflect [democratic] traditions of legal
and political thought."18 It is not a narrow or "technical conception with fixed content unrelated to
time, place and circumstances,"19 decisions based on such a clause requiring a "close and perceptive
inquiry into fundamental principles of our society."20 Questions of due process are not to be treated
narrowly or pedantically in slavery to form or phrases. 21
It would thus be an affront to reason to stigmatize an ordinance enacted precisely to meet what a
municipal lawmaking body considers an evil of rather serious proportion an arbitrary and capricious
exercise of authority. It would seem that what should be deemed unreasonable and what would
amount to an abdication of the power to govern is inaction in the face of an admitted deterioration of
the state of public morals. To be more specific, the Municipal Board of the City of Manila felt the need
for a remedial measure. It provided it with the enactment of the challenged ordinance. A strong case
must be found in the records, and, as has been set forth, none is even attempted here to attach to an
ordinance of such character the taint of nullity for an alleged failure to meet the due process
requirement. Nor does it lend any semblance even of deceptive plausibility to petitioners' indictment
of Ordinance No. 4760 on due process grounds to single out such features as the increased fees for
motels and hotels, the curtailment of the area of freedom to contract, and, in certain particulars, its
alleged vagueness.
Admittedly there was a decided increase of the annual license fees provided for by the challenged
ordinance for hotels and motels, 150% for the former and over 200% for the latter, first-class motels
being required to pay a P6,000 annual fee and second-class motels, P4,500 yearly. It has been the
settled law however, as far back as 1922 that municipal license fees could be classified into those
imposed for regulating occupations or regular enterprises, for the regulation or restriction of non-
useful occupations or enterprises and for revenue purposes only. 22 As was explained more in detail in
the above Cu Unjieng case: (2) Licenses for non-useful occupations are also incidental to the police
power and the right to exact a fee may be implied from the power to license and regulate, but in fixing
amount of the license fees the municipal corporations are allowed a much wider discretion in this class
of cases than in the former, and aside from applying the well-known legal principle that municipal
ordinances must not be unreasonable, oppressive, or tyrannical, courts have, as a general rule, declined
to interfere with such discretion. The desirability of imposing restraint upon the number of persons
who might otherwise engage in non-useful enterprises is, of course, generally an important factor in
the determination of the amount of this kind of license fee. Hence license fees clearly in the nature of
privilege taxes for revenue have frequently been upheld, especially in of licenses for the sale of liquors.
In fact, in the latter cases the fees have rarely been declared unreasonable. 23
Moreover in the equally leading case of Lutz v. Araneta24 this Court affirmed the doctrine earlier
announced by the American Supreme Court that taxation may be made to implement the state's police
power. Only the other day, this Court had occasion to affirm that the broad taxing authority conferred
by the Local Autonomy Act of 1959 to cities and municipalities is sufficiently plenary to cover a wide
range of subjects with the only limitation that the tax so levied is for public purposes, just and
uniform.25
As a matter of fact, even without reference to the wide latitude enjoyed by the City of Manila in
imposing licenses for revenue, it has been explicitly held in one case that "much discretion is given to
municipal corporations in determining the amount," here the license fee of the operator of a massage
clinic, even if it were viewed purely as a police power measure. 26 The discussion of this particular
matter may fitly close with this pertinent citation from another decision of significance: "It is urged on
behalf of the plaintiffs-appellees that the enforcement of the ordinance could deprive them of their
lawful occupation and means of livelihood because they can not rent stalls in the public markets. But
it appears that plaintiffs are also dealers in refrigerated or cold storage meat, the sale of which outside
the city markets under certain conditions is permitted x x x . And surely, the mere fact, that some
individuals in the community may be deprived of their present business or a particular mode of earning
a living cannot prevent the exercise of the police power. As was said in a case, persons licensed to
pursue occupations which may in the public need and interest be affected by the exercise of the police
power embark in these occupations subject to the disadvantages which may result from the legal
exercise of that power."27
Nor does the restriction on the freedom to contract, insofar as the challenged ordinance makes it
unlawful for the owner, manager, keeper or duly authorized representative of any hotel, motel, lodging
house, tavern, common inn or the like, to lease or rent room or portion thereof more than twice every
24 hours, with a proviso that in all cases full payment shall be charged, call for a different conclusion.
Again, such a limitation cannot be viewed as a transgression against the command of due process. It is
neither unreasonable nor arbitrary. Precisely it was intended to curb the opportunity for the immoral
or illegitimate use to which such premises could be, and, according to the explanatory note, are being
devoted. How could it then be arbitrary or oppressive when there appears a correspondence between
the undeniable existence of an undesirable situation and the legislative attempt at correction.
Moreover, petitioners cannot be unaware that every regulation of conduct amounts to curtailment of
liberty which as pointed out by Justice Malcolm cannot be absolute. Thus: "One thought which runs
through all these different conceptions of liberty is plainly apparent. It is this: 'Liberty' as understood
in democracies, is not license; it is 'liberty regulated by law.' Implied in the term is restraint by law for
the good of the individual and for the greater good of the peace and order of society and the general
well-being. No man can do exactly as he pleases. Every man must renounce unbridled license. The right
of the individual is necessarily subject to reasonable restraint by general law for the common good x x
x The liberty of the citizen may be restrained in the interest of the public health, or of the public order
and safety, or otherwise within the proper scope of the police power." 28
A similar observation was made by Justice Laurel: "Public welfare, then, lies at the bottom of the
enactment of said law, and the state in order to promote the general welfare may interfere with
personal liberty, with property, and with business and occupations. Persons and property may be
subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and
prosperity of the state x x x To this fundamental aim of our Government the rights of the individual are
subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made to
prevail over authority because then society will fall into anarchy. Neither should authority be made to
prevail over liberty because then the individual will fall into slavery. The citizen should achieve the
required balance of liberty and authority in his mind through education and personal discipline, so that
there may be established the resultant equilibrium, which means peace and order and happiness for
all.29
It is noteworthy that the only decision of this Court nullifying legislation because of undue deprivation
of freedom to contract, People v. Pomar,30 no longer "retains its virtuality as a living principle. The
policy of laissez faire has to some extent given way to the assumption by the government of the right
of intervention even in contractual relations affected with public interest. 31 What may be stressed
sufficiently is that if the liberty involved were freedom of the mind or the person, the standard for the
validity of governmental acts is much more rigorous and exacting, but where the liberty curtailed
affects at the most rights of property, the permissible scope of regulatory measure is wider. 32 How
justify then the allegation of a denial of due process?
Lastly, there is the attempt to impugn the ordinance on another due process ground by invoking the
principles of vagueness or uncertainty. It would appear from a recital in the petition itself that what
seems to be the gravamen of the alleged grievance is that the provisions are too detailed and specific
rather than vague or uncertain. Petitioners, however, point to the requirement that a guest should give
the name, relationship, age and sex of the companion or companions as indefinite and uncertain in
view of the necessity for determining whether the companion or companions referred to are those
arriving with the customer or guest at the time of the registry or entering the room With him at about
the same time or coming at any indefinite time later to join him; a proviso in one of its sections which
cast doubt as to whether the maintenance of a restaurant in a motel is dependent upon the discretion
of its owners or operators; another proviso which from their standpoint would require a guess as to
whether the "full rate of payment" to be charged for every such lease thereof means a full day's or
merely a half-day's rate. It may be asked, do these allegations suffice to render the ordinance void on
its face for alleged vagueness or uncertainty? To ask the question is to answer it. From Connally v.
General Construction Co.33 to Adderley v. Florida,34 the principle has been consistently upheld that
what makes a statute susceptible to such a charge is an enactment either forbidding or requiring the
doing of an act that men of common intelligence must necessarily guess at its meaning and differ as to
its application. Is this the situation before us? A citation from Justice Holmes would prove illuminating:
"We agree to all the generalities about not supplying criminal laws with what they omit but there is no
canon against using common sense in construing laws as saying what they obviously mean."35
That is all then that this case presents. As it stands, with all due allowance for the arguments pressed
with such vigor and determination, the attack against the validity of the challenged ordinance cannot
be considered a success. Far from it. Respect for constitutional law principles so uniformly held and so
uninterruptedly adhered to by this Court compels a reversal of the appealed decision.
Wherefore, the judgment of the lower court is reversed and the injunction issued lifted forthwith. With
costs.
VICENTE DE LA CRUZ, RENATO ALIPIO, JOSE TORRES III, LEONCIO CORPUZ, TERESITA CALOT, ROSALIA
FERNANDEZ, ELIZABETH VELASCO, NANETTE VILLANUEVA, HONORATO BUENAVENTURA, RUBEN DE
CASTRO, VICENTE ROXAS, RICARDO DAMIAN, DOMDINO ROMDINA, ANGELINA OBLIGACION,
CONRADO GREGORIO, TEODORO REYES, LYDIA ATRACTIVO, NAPOLEON MENDOZA, PERFECTO
GUMATAY, ANDRES SABANGAN, ROSITA DURAN, SOCORRO BERNARDEZ, and PEDRO
GABRIEL, petitioners,
vs.
THE HONORABLE EDGARDO L. PARAS, MATIAS RAMIREZ as the Municipal Mayor, MARIO MENDOZA
as the Municipal Vice-Mayor, and THE MUNICIPAL COUNCIL OF BOCAUE, BULACAN, respondents.

Federico N. Alday for petitioners.

Dakila F. Castro for respondents.

FERNANDO, C.J.:

The crucial question posed by this certiorari proceeding is whether or not a municipal corporation,
Bocaue, Bulacan, represented by respondents, 1 can, prohibit the exercise of a lawful trade, the
operation of night clubs, and the pursuit of a lawful occupation, such clubs employing hostesses. It is
contended that the ordinance assailed as invalid is tainted with nullity, the municipality being devoid
of power to prohibit a lawful business, occupation or calling, petitioners at the same time alleging that
their rights to due process and equal protection of the laws were violated as the licenses previously
given to them was in effect withdrawn without judicial hearing. 2

The assailed ordinance 3 is worded as follows: "Section 1.— Title of Ordinance.— This Ordinance shall
be known and may be cited as the [Prohibition and Closure Ordinance] of Bocaue, Bulacan. Section 2.
— Definitions of Terms — (a) 'Night Club' shall include any place or establishment selling to the public
food or drinks where customers are allowed to dance. (b) 'Cabaret' or 'Dance Hall' shall include any
place or establishment where dancing is permitted to the public and where professional hostesses or
hospitality girls and professional dancers are employed. (c) 'Professional hostesses' or 'hospitality girls'
shall include any woman employed by any of the establishments herein defined to entertain guests
and customers at their table or to dance with them. (d) 'Professional dancer' shall include any woman
Republic of the Philippines
who dances at any of the establishments herein defined for a fee or remuneration paid directly or
SUPREME COURT
indirectly by the operator or by the persons she dances with. (e) 'Operator' shall include the owner,
Manila
manager, administrator or any person who operates and is responsible for the operation of any night
EN BANC club, cabaret or dance hall. Section 3. — Prohibition in the Issuance and Renewal of Licenses, Permits.
— Being the principal cause in the decadence of morality and because of their other adverse effects on
G.R. No. L-42571-72 July 25, 1983 this community as explained above, no operator of night clubs, cabarets or dance halls shall henceforth
be issued permits/licenses to operate within the jurisdiction of the municipality and no license/permit
shall be issued to any professional hostess, hospitality girls and professional dancer for employment in
any of the aforementioned establishments. The prohibition in the issuance of licenses/permits to said
persons and operators of said establishments shall include prohibition in the renewal thereof. Section
4.— Revocation of Permits and Licenses.— The licenses and permits issued to operators of night clubs,
cabarets or dance halls which are now in operation including permits issued to professional hostesses,
hospitality girls and professional dancers are hereby revoked upon the expiration of the thirty-day
period given them as provided in Section 8 hereof and thenceforth, the operation of these
establishments within the jurisdiction of the municipality shall be illegal. Section 5.— Penalty in case of
violation. — Violation of any of the provisions of this Ordinance shall be punishable by imprisonment
not exceeding three (3) months or a fine not exceeding P200.00 or both at the discretion of the Court.
If the offense is committed by a juridical entity, the person charged with the management and/or
operation thereof shall be liable for the penalty provided herein. Section 6. — Separability Clause.— If,
for any reason, any section or provision of this Ordinance is held unconstitutional or invalid, no other
section or provision hereof shall be affected thereby. Section 7.— Repealing Clause.— All ordinance,
resolutions, circulars, memoranda or parts thereof that are inconsistent with the provisions of this
Ordinance are hereby repealed. Section 8.— Effectivity.— This Ordinance shall take effect immediately
upon its approval; provided, however, that operators of night clubs, cabarets and dance halls now in
operation including professional hostesses, hospitality girls and professional dancers are given a period
of thirty days from the approval hereof within which to wind up their businesses and comply with the
provisions of this Ordinance." 4
On November 5, 1975, two cases for prohibition with preliminary injunction were filed with the Court
of First Instance of Bulacan. 5 The grounds alleged follow:
1. Ordinance No. 84 is null and void as a municipality has no authority to prohibit a lawful business,
occupation or calling.
2. Ordinance No. 84 is violative of the petitioners' right to due process and the equal protection of the
law, as the license previously given to petitioners was in effect withdrawn without judicial hearing. 3.
That under Presidential Decree No. 189, as amended, by Presidential Decree No. 259, the power to
license and regulate tourist-oriented businesses including night clubs, has been transferred to the
Department of Tourism." 6 The cases were assigned to respondent Judge, now Associate Justice Paras
of the Intermediate Appellate Court, who issued a restraining order on November 7, 1975. The answers
were thereafter filed. It was therein alleged: " 1. That the Municipal Council is authorized by law not
only to regulate but to prohibit the establishment, maintenance and operation of night clubs invoking
Section 2243 of the RAC, CA 601, Republic Acts Nos. 938, 978 and 1224. 2. The Ordinance No. 84 is not
violative of petitioners' right to due process and the equal protection of the law, since property rights
are subordinate to public interests. 3. That Presidential Decree No. 189, as amended, did not deprive
Municipal Councils of their jurisdiction to regulate or prohibit night clubs." 7 There was the admission
of the following facts as having been established: "l. That petitioners Vicente de la Cruz, et al. in Civil
Case No. 4755-M had been previously issued licenses by the Municipal Mayor of Bocaue-petitioner
Jose Torres III, since 1958; petitioner Vicente de la Cruz, since 1960; petitioner Renato Alipio, since
1961 and petitioner Leoncio Corpuz, since 1972; 2. That petitioners had invested large sums of money
in their businesses; 3. That the night clubs are well-lighted and have no partitions, the tables being near
each other; 4. That the petitioners owners/operators of these clubs do not allow the hospitality girls
therein to engage in immoral acts and to go out with customers; 5. That these hospitality girls are made
to go through periodic medical check-ups and not one of them is suffering from any venereal disease
and that those who fail to submit to a medical check-up or those who are found to be infected with
venereal disease are not allowed to work; 6. That the crime rate there is better than in other parts of
Bocaue or in other towns of Bulacan." 8 Then came on January 15, 1976 the decision upholding the
constitutionality and validity of Ordinance No. 84 and dismissing the cases. Hence this petition for
certiorari by way of appeal.
In an exhaustive as well as scholarly opinion, the lower court dismissed the petitions. Its rationale is set
forth in the opening paragraph thus: "Those who lust cannot last. This in essence is why the
Municipality of Bocaue, Province of Bulacan, stigmatized as it has been by innuendos of sexual titillation
and fearful of what the awesome future holds for it, had no alternative except to order thru its
legislative machinery, and even at the risk of partial economic dislocation, the closure of its night clubs
and/or cabarets. This in essence is also why this Court, obedient to the mandates of good government,
and cognizant of the categorical imperatives of the current legal and social revolution, hereby [upholds]
in the name of police power the validity and constitutionality of Ordinance No. 84, Series of 1975, of
the Municipal Council of Bocaue, Bulacan. The restraining orders heretofore issued in these two cases
are therefore hereby rifted, effective the first day of February, 1976, the purpose of the grace period
being to enable the petitioners herein to apply to the proper appellate tribunals for any contemplated
redress."9 This Court is, however, unable to agree with such a conclusion and for reasons herein set
forth, holds that reliance on the police power is insufficient to justify the enactment of the assailed
ordinance. It must be declared null and void.
1. Police power is granted to municipal corporations in general terms as follows: "General power of
council to enact ordinances and make regulations. - The municipal council shall enact such ordinances
and make such regulations, not repugnant to law, as may be necessary to carry into effect and
discharge the powers and duties conferred upon it by law and such as shall seem necessary and proper
to provide for the health and safety, promote the prosperity, improve the morals, peace, good order,
comfort, and convenience of the municipality and the inhabitants thereof, and for the protection of
property therein." 10 It is practically a reproduction of the former Section 39 of Municipal Code. 11 An
ordinance enacted by virtue thereof, according to Justice Moreland, speaking for the Court in the
leading case of United States v. Abendan 12 "is valid, unless it contravenes the fundamental law of the
Philippine Islands, or an Act of the Philippine Legislature, or unless it is against public policy, or is
unreasonable, oppressive, partial, discriminating, or in derogation of common right. Where the power
to legislate upon a given subject, and the mode of its exercise and the details of such legislation are not
prescribed, the ordinance passed pursuant thereto must be a reasonable exercise of the power, or it
will be pronounced invalid." 13 In another leading case, United States v. Salaveria, 14 the ponente this
time being Justice Malcolm, where the present Administrative Code provision was applied, it was
stated by this Court: "The general welfare clause has two branches: One branch attaches itself to the
main trunk of municipal authority, and relates to such ordinances and regulations as may be necessary
to carry into effect and discharge the powers and duties conferred upon the municipal council by law.
With this class we are not here directly concerned. The second branch of the clause is much more
independent of the specific functions of the council which are enumerated by law. It authorizes such
ordinances as shall seem necessary and proper to provide for the health and safety, promote the
prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality and
the inhabitants thereof, and for the protection of property therein.' It is a general rule that ordinances
passed by virtue of the implied power found in the general welfare clause must be reasonable,
consonant with the general powersand purposes of the corporation, and not inconsistent with the laws
or policy of the State." 15 If night clubs were merely then regulated and not prohibited, certainly the
assailed ordinance would pass the test of validity. In the two leading cases above set forth, this Court
had stressed reasonableness, consonant with the general powers and purposes of municipal
corporations, as well as consistency with the laws or policy of the State. It cannot be said that such a
sweeping exercise of a lawmaking power by Bocaue could qualify under the term reasonable. The
objective of fostering public morals, a worthy and desirable end can be attained by a measure that
does not encompass too wide a field. Certainly the ordinance on its face is characterized by
overbreadth. The purpose sought to be achieved could have been attained by reasonable restrictions
rather than by an absolute prohibition. The admonition in Salaveria should be heeded: "The Judiciary
should not lightly set aside legislative action when there is not a clear invasion of personal or property
rights under the guise of police regulation." 16 It is clear that in the guise of a police regulation, there
was in this instance a clear invasion of personal or property rights, personal in the case of those
individuals desirous of patronizing those night clubs and property in terms of the investments made
and salaries to be earned by those therein employed.
2. The decision now under review refers to Republic Act No. 938 as amended. 17 It was originally
enacted on June 20, 1953. It is entitled: "AN ACT GRANTING MUNICIPAL OR CITY BOARDS AND
COUNCILS THE POWER TO REGULATE THE ESTABLISHMENT, MAINTENANCE AND OPERATION OF
CERTAIN PLACES OF AMUSEMENT WITHIN THEIR RESPECTIVE TERRITORIAL JURISDICTIONS.' 18 Its first
section insofar as pertinent reads: "The municipal or city board or council of each chartered city shall
have the power to regulate by ordinance the establishment, maintenance and operation of night clubs,
cabarets, dancing schools, pavilions, cockpits, bars, saloons, bowling alleys, billiard pools, and other
similar places of amusement within its territorial jurisdiction: ... " 19Then on May 21, 1954, the first
section was amended to include not merely "the power to regulate, but likewise "Prohibit ... " 20 The
title, however, remained the same. It is worded exactly as Republic Act No. 938. It is to be admitted
that as thus amended, if only the above portion of the Act were considered, a municipal council may
go as far as to prohibit the operation of night clubs. If that were all, then the appealed decision is not
devoid of support in law. That is not all, however. The title was not in any way altered. It was not
changed one whit. The exact wording was followed. The power granted remains that of regulation,
not prohibition. There is thus support for the view advanced by petitioners that to construe Republic
Act No. 938 as allowing the prohibition of the operation of night clubs would give rise to a constitutional
question. The Constitution mandates: "Every bill shall embrace only one subject which shall be
expressed in the title thereof. " 21 Since there is no dispute as the title limits the power to regulating,
not prohibiting, it would result in the statute being invalid if, as was done by the Municipality of Bocaue,
the operation of a night club was prohibited. There is a wide gap between the exercise of a regulatory
power "to provide for the health and safety, promote the prosperity, improve the morals, 22 in the
language of the Administrative Code, such competence extending to all "the great public needs, 23 to
quote from Holmes, and to interdict any calling, occupation, or enterprise. In accordance with the well-
settled principle of constitutional construction that between two possible interpretations by one of
which it will be free from constitutional infirmity and by the other tainted by such grave defect, the
former is to be preferred. A construction that would save rather than one that would affix the seal of
doom certainly commends itself. We have done so before We do so again. 24
3. There is reinforcement to the conclusion reached by virtue of a specific provision of the recently-
enacted Local Government Code. 25 The general welfare clause, a reiteration of the Administrative
Code provision, is set forth in the first paragraph of Section 149 defining the powers and duties of
the sangguniang bayan. It read as follows: "(a) Enact such ordinances and issue such regulations as
may be necessary to carry out and discharge the responsibilities conferred upon it by law, and such as
shall be necessary and proper to provide for the health, safety, comfort and convenience, maintain
peace and order, improve public morals, promote the prosperity and general welfare of the
municipality and the inhabitants thereof, and insure the protection of property therein; ..." 26 There are
in addition provisions that may have a bearing on the question now before this Court. Thus
the sangguniang bayanshall "(rr) Regulate cafes, restaurants, beer-houses, hotels, motels, inns,
pension houses and lodging houses, except travel agencies, tourist guides, tourist transports, hotels,
resorts, de luxe restaurants, and tourist inns of international standards which shall remain under the
licensing and regulatory power of the Ministry of Tourism which shall exercise such authority without
infringing on the taxing or regulatory powers of the municipality; (ss) Regulate public dancing schools,
public dance halls, and sauna baths or massage parlors; (tt) Regulate the establishment and operation
of billiard pools, theatrical performances, circuses and other forms of entertainment; ..." 27 It is clear
that municipal corporations cannot prohibit the operation of night clubs. They may be regulated, but
not prevented from carrying on their business. It would be, therefore, an exercise in futility if the
decision under review were sustained. All that petitioners would have to do is to apply once more for
licenses to operate night clubs. A refusal to grant licenses, because no such businesses could legally
open, would be subject to judicial correction. That is to comply with the legislative will to allow the
operation and continued existence of night clubs subject to appropriate regulations. In the meanwhile,
to compel petitioners to close their establishments, the necessary result of an affirmance, would
amount to no more than a temporary termination of their business. During such time, their employees
would undergo a period of deprivation. Certainly, if such an undesirable outcome can be avoided, it
should be. The law should not be susceptible to the reproach that it displays less than sympathetic
concern for the plight of those who, under a mistaken appreciation of a municipal power, were thus
left without employment. Such a deplorable consequence is to be avoided. If it were not thus, then the
element of arbitrariness enters the picture. That is to pay less, very much less, than full deference to
the due process clause with its mandate of fairness and reasonableness.

4. The conclusion reached by this Court is not to be interpreted as a retreat from its resolute stand
sustaining police power legislation to promote public morals. The commitment to such an Ideal forbids
such a backward step. Legislation of that character is deserving of the fullest sympathy from the
judiciary. Accordingly, the judiciary has not been hesitant to lend the weight of its support to measures
that can be characterized as falling within that aspect of the police power. Reference is made by
respondents to Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of
Manila. 28 There is a misapprehension as to what was decided by this Court. That was a regulatory
measure. Necessarily, there was no valid objection on due process or equal protection grounds. It did
not prohibit motels. It merely regulated the mode in which it may conduct business in order precisely
to put an end to practices which could encourage vice and immorality. This is an entirely different case.
What was involved is a measure not embraced within the regulatory power but an exercise of an
assumed power to prohibit. Moreover, while it was pointed out in the aforesaid Ermita-Malate Hotel
and Motel Operators Association, Inc. decision that there must be a factual foundation of invalidity, it
was likewise made clear that there is no need to satisfy such a requirement if a statute were void on
its face. That it certainly is if the power to enact such ordinance is at the most dubious and under the
present Local Government Code non-existent.

WHEREFORE, the writ of certiorari is granted and the decision of the lower court dated January 15,
1976 reversed, set aside, and nullied. Ordinance No. 84, Series of 1975 of the Municipality of Bocaue is
declared void and unconstitutional. The temporary restraining order issued by this Court is hereby
made permanent. No costs
 vs.
HON. ANTONIO J. VILLEGAS, City Mayor of Manila, HON. HERMINIO A. ASTORGA, Vice-Mayor and
Presiding Officer of the Municipal Board in relation to Republic Act 4065, THE MUNICIPAL BOARD OF
THE CITY OF MANILA and EDUARDO QUINTOS SR., Chief of Police of the City of Manila, respondents-
appellees.

Leonardo L. Arguelles for respondent-appellant.

FERNANDO, C.J.:

This is an appeal from an order of the lower court dismissing a suit for declaratory relief challenging
the constitutionality based on Ordinance No. 4964 of the City of Manila, the contention being that it
amounts to a deprivation of property of petitioners-appellants of their means of livelihood without due
process of law. The assailed ordinance is worded thus: "It shall be prohibited for any operator of any
barber shop to conduct the business of massaging customers or other persons in any adjacent room or
rooms of said barber shop, or in any room or rooms within the same building where the barber shop is
located as long as the operator of the barber shop and the room where massaging is conducted is the
same person." 1 As noted in the appealed order, petitioners-appellants admitted that criminal cases for
the violation of this ordinance had been previously filed and decided. The lower court, therefore, held
that a petition for declaratory relief did not lie, its availability being dependent on there being as yet
no case involving such issue having been filed. 2

Even if such were not the case, the attack against the validity cannot succeed. As pointed out in the
brief of respondents-appellees, it is a police power measure. The objectives behind its enactment are:
"(1) To be able to impose payment of the license fee for engaging in the business of massage clinic
under Ordinance No. 3659 as amended by Ordinance 4767, an entirely different measure than the
ordinance regulating the business of barbershops and, (2) in order to forestall possible immorality
Republic of the Philippines which might grow out of the construction of separate rooms for massage of customers." 3 This Court
SUPREME COURT has been most liberal in sustaining ordinances based on the general welfare clause. As far back as U.S.
Manila v. Salaveria, 4 a 1918 decision, this Court through Justice Malcolm made clear the significance and
scope of such a clause, which "delegates in statutory form the police power to a municipality. As above
EN BANC
stated, this clause has been given wide application by municipal authorities and has in its relation to
G.R. No. L-24153 February 14, 1983 the particular circumstances of the case been liberally construed by the courts. Such, it is well to really
is the progressive view of Philippine jurisprudence." 5 As it was then, so it has continued to be. 6 There
TOMAS VELASCO, LOURDES RAMIREZ, SY PIN, EDMUNDO UNSON, APOLONIA RAMIREZ and is no showing, therefore, of the unconstitutionality of such ordinance.
LOURDES LOMIBAO, as component members of the STA. CRUZ BARBERSHOP ASSOCIATION, in their
own behalf and in representation of the other owners of barbershops in the City of WHEREFORE, the appealed order of the lower court is affirmed. No costs.
Manila, petitioners-appellants,
 FLORENCIA CULTURA, MARIA CAMPOS, ERNESTO SARMIENTO SANTIAGO TAMONAN, APOLONIA
TADIAQUE, SIMEON DE LEON, NATIVIDAD J. CRUZ, NATIVIDAD B. LORESCO, FELICIDAD GARCIA, ANA
ANITA TAN, LUCAS SERVILLION, JOSE NARAWAL, represented by their duly authorized Attorney-in-
Fact, CORAZON DE LEON AND SPOUSES LEOPOLDO AND CARMEN SEBASTIAN, respondents.

RESOLUTION

PANGANIBAN, J.:

May a buyer of a property at a foreclosure sale dispossess prior purchasers on installment of individual
lots therein, or compel them to pay again for the lots which they previously bought from the defaulting
mortgagor-subdivision developer, on the theory that P.D. 957, "The Subdivision and Condominium
Buyers' Protective Decree", is not applicable to the mortgage contract in question, the same having
been executed prior to the enactment of P.D. 957? This is the question confronting the Court in this
Petition challenging the Decision dated March 10, 1992 of the Office of the President of the Philippines
in O.P. Case No. 4249, signed by the Executive Secretary, Franklin M. Drilon, "by authority of the
President."

Private respondents were buyers on installment of subdivision lots from Marikina Village, Inc.
(represented by spouses Antonio and Susana Astudillo). Notwithstanding the land purchase
agreements it executed over said lots, the subdivision developer mortgaged the lots in favor of the
petitioner, Philippine National Bank. Unaware of this mortgage, private respondents duly complied
with their obligations as lot buyers and constructed their houses on the lots in question.

Subsequently, the subdivision developer defaulted and PNB foreclosed on the mortgage. As highest
bidder at the foreclosure sale, the bank became owner of the lots.

Acting on suits brought by private respondents (which were later consolidated), the HLURB Office of
Appeals, Adjudication and Legal Affairs (OAALA) in a decision rendered on October 28, 1988 ruled that
Republic of the Philippines PNB - without prejudice to seeking relief against Marikina Village, Inc. - may collect from private
SUPREME COURT respondents only the "remaining amortizations, in accordance with the land purchase agreements they
Manila had previously entered into with" Marikina Village, Inc., and cannot compel private respondents to pay
all over again for the lots they had already bought from said subdivision developer. On May 2, 1989,
THIRD DIVISION the Housing and Land Use Regulatory Board affirmed this decision. On March 10, 1992, the Office of
the President, invoking P.D. 957, likewise concurred with the HLURB. Hence, the present recourse to
G.R. No. 104528 January 18, 1996
this Court.
PHILIPPINE NATIONAL BANK, petitioner,
Under Revised Administrative Circular No. 1-95, "appeals from judgments or final orders of the . . .
vs.
Office of the President . . . may be taken to the Court of Appeals . . ." However, in order to hasten the
OFFICE OF THE PRESIDENT, HOUSING AND LAND USE REGULATORY BOARD, ALFONSO MAGLAYA,
ANGELINA MAGLAYA P. REYES, JORGE C. BERNARDINO, CORAZON DE LEON, VICTORIANO ACAYA,
resolution of this case, which was deemed submitted for decision three years ago, the Court resolved
to make an exception to the said Circular in the interest of speedy justice.
Petitioner bank raised the following issues:
1. The Office of the President erred in applying P.D. 957 because said law was enacted only on July 12,
1976, while the subject mortgage was executed on December 18, 1975; and
2. Petitioner Bank is not privy to the contracts between private respondents and mortgagor-subdivision
developer, hence, the Office of the President erred in ordering petitioner Bank to accept private
respondents' remaining amortizations and issue the corresponding titles after payment thereof.
Normally, pursuant to Article 4 of the Civil Code, "(l)aws shall have no retroactive effect, unless the
contrary is provided." However, it is obvious and indubitable that P.D. 957 was intended to cover even
those real estate mortgages, like the one at issue here, executed prior to its enactment, and such intent
(as succinctly captured in the preamble quoted below) must be given effect if the laudable purpose of
protecting innocent purchasers is to be achieve:
WHEREAS, it is the policy of the State to afford its inhabitants the requirements of decent human
settlement and to provide them with ample opportunities for improving their quality of life;
WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators,
and/or sellers have reneged on their representations and, obligations to provide and maintain properly
subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic
requirements, thus endangering the health and safety of home and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations
perpetrated by unscrupulous subdivision and condominium sellers and operators, such as failure to
deliver titles to the buyers or titles free from liens and encumbrances, and to pay real estate taxes, and
fraudulent sales of the same subdivision lots to different innocent purchasers for value;1 (Emphasis
supplied).
While P.D. 957 did not expressly provide for retroactivity in its entirety, yet the same can be plainly
inferred from the unmistakable intent of the law to protect innocent lot buyers from scheming
subdivision developers. As between these small lot buyers and the gigantic financial institutions which
the developers deal with, it is obvious that the law - as an instrument of social justice - must favors the
weak. Indeed, the petitioner Bank had at its disposal vast resources with which it could adequately
protect its loan activities, and therefore is presumed to have conducted the usual "due diligence"
checking and ascertained (whether thru ocular inspection or other modes of investigation) the actual
status, condition, utilization and occupancy of the property offered as collateral. It could not have been
unaware that the property had been built on by small lot buyers. On the other hand, private
respondents obviously were powerless to discover the attempt of the land developer to hypothecate
the property being sold to them. It was precisely in order to deal with this kind of situation that P.D.
957 was enacted, its very essence and intendment being to provide a protective mantle over helpless
citizens who may fall prey to the razzmatazz of what P.D. 957 termed "unscrupulous subdivision and
condominium sellers."
The intent of the law, as culled from its preamble and from the situation, circumstances and condition
it sought to remedy, must be enforced. Sutherland, in his well-known treatise on Statutory
Construction (quoted with approval by this Court in an old case of consequence, Ongsiako vs.
Gamboa2 ), says:
The intent of a statute is the law. If a statute is valid it is to have effect according to the purpose and
intent of the lawmaker. The intent is the vital part, the essence of the law, and the primary rule of
construction is to ascertain and give effect to the intent. The intention of the legislature in enacting a
law is the law itself, and must be enforced when ascertained, although it may not be consistent with
the strict letter of the statute. Courts will not follow the letter of a statute when it leads away from the
true intent and purpose of the legislature and to conclusions inconsistent with the general purpose of
the act. Intent is the spirit which gives life to a legislative enactment. In construing statutes the proper
course is to start out and follow the true intent of the legislature and to adopt that sense which
harmonizes best with the context and promotes in the fullest manner the apparent policy and objects
of the legislature.3
Truly, this Court cannot allow the injustice that will be wrought by a strictly prospective application of
the law. Little people who have toiled for years through blood and tears would be deprived of their
homes through no fault of their own. As the Solicitor General, in his comment, argues:
Verily, if P.D. 957 were to exclude from its coverage the aforecited mortgage contract, the vigorous
regulation which P.D. 957 seeks to impose on unconscientious subdivision sellers will be translated into
a feeble exercise of police power just because the iron hand of the State cannot particularly touch
mortgage contracts badged with the fortunate accident of having been constituted prior to the
enactment of P.D. 957. Indeed, it would be illogical in the extreme if P.D. 957 is to be given full force
and effect and yet, the fraudulent practices and manipulations it seeks to curb in the first instance can
nevertheless be liberally perpetrated precisely because P.D. 957 cannot be applied to existing
antecedent mortgage contracts. The legislative intent could not have conceivably permitted a loophole
which all along works to the prejudice of subdivision lot buyers (private respondents). 4
Likewise noteworthy are certain provisions of P.D. 957, which themselves constitute strong arguments
in favor of the retroactivity of P.D. 957 as a whole. These are Sections 20, 2l and 23 thereof, which by
their very terms have retroactive effect and will impact upon even those contracts and transactions
entered into prior to P.D. 957's enactment:
Sec. 20. Time of Completion. - Every owner or developer or shall construct and provide the facilities,
improvements, infrastructures and other forms of development, including water supply and lighting
facilities, which are offered and indicated in the approved subdivision or condominiun plans, brochures,
prospectus, printed matters, letters or in any form of advertisement, within one year from the date of
the issuance of the license for the subdivision or condominium project or such other period of time as
may be fixed by the Authority.
Sec. 21. Sales Prior to Decree. - In cases of subdivision lots or condominium units sold or disposed of
prior to the effectivity of this Decree, it shall be incumbent upon the owner or developer of the
subdivision or condominium project to complete compliance with his or its obligations as provided in
the preceding section within two years from the date of this Decree unless otherwise extended by the
Authority or unless an adequate performance bond is filed in accordance with Section 6 hereof.
Failure of the owner or developer to comply with the obligations under this and the preceding
provisions shall constitute a violation punishable under Section 38 and 39 of this Decree.
Sec. 23. Non-Forfeiture of Payments. - No installment payment made by a buyer in a subdivision or
condominium project for, the lot or unit he contracted to buy shall be forfeited in favor, of the owner
or developer when the buyer, after, due notice to the owner or developer, desist from further payment
due to the failure of the owner or developer to develop the subdivision or condominium project
according to the approved plans and within the time limit for complying with the same. Such buyer
may, at this option, be reimbursed the total amount paid including amortization interests but excluding
delinquency interests, with interest thereon at the legal rate. (emphasis supplied)
As for objections about a possible violation of the impairment clause, we find the following statements
of Justice Isagani Cruz enlightening and pertinent to the case at bench:
Despite the impairment clause, a contract valid at the time of its execution may be legally modified or
even completely invalidated by a subsequent law. If the law is a proper exercise of the police power, it
will prevail over the contract.
Into each contract are read the provisions of existing law and, always, a reservation of the police power
as long as the agreement deals with a matter, affecting the public welfare. Such a contract, it has been
held, suffers a congenital infirmity, and this is its susceptibility to change by the legislature as a
postulate of the legal order.5
This Court ruled along similar lines in Juarez vs. Court of Appeals6 :
The petitioner complains that the retroactive application of the law would violate the impairment
clause. The argument does not impress. The impairment clause is now no longer inviolate; in fact, there
are many who now believe it, is an anachronism in the present-day society. It was quite useful before
in protecting the integrity of private agreements from government meddling, but that was when such
agreements did not affect the community in general. They were indeed purely private agreements
then. Any interference with them at that time was really an unwarranted intrusion that could properly
struck down.
But things are different now. More and more, the interests of the public have become involved in what
are supposed to be still private agreements, which have, as a result been removed from the protection
of the impairment clause. These agreements have come within the embrace of the police power, that
obtrusive protector of the public interest. It is a ubiquitous policeman indeed. As long as the contract
affects the public welfare one way or another so as to require the interference of the State, then must
the police power be asserted, and prevail, over the clause.
The decision of the Court of Appeals in Breta and Hamor vs. Lao, et al.7 penned by then Court of Appeals
Associate Justice Jose A. R. Melo, now a respected member of this Court, is persuasive, the factual
circumstances therein being of great similarity to the antecedent facts of the case at bench:
Protection must be afforded small homeowners who toil and save if only to purchase on installment a
tiny home lot they can call their own. The consuming dream of every Filipino is to be able to buy a lot,
no matter how small, so that he may somehow build a house. It has, however, been seen of late that
these honest, hard-living individuals are taken advantage of, with the delivery of titles delayed, the
subdivision facilities, including the most essential such as water installations not completed, or worse
yet, as in the instant case, after almost completing the payments for the property and after constructing
a house, the buyer is suddenly confronted by the stark reality, contrived or otherwise, in which another
person would now appear to be owner.
xxx xxx xxx
We cannot over emphasize the fact that the BANK cannot barefacedly argue that simply because the
title or titles offered as security were clean of any encumbrance or lien, that it was thereby relieved of
taking any other step to verify the over-reaching implications should the subdivision be auctioned on
foreclosure. The BANK could not have closed its eyes that it was dealing over a subdivision where there
were already houses constructed. Did it not enter the mind of the responsible officers of the BANK that
there may even be subdivision residents who have almost completed their installment payments? (id.,
pp. 7 & 9).
By the foregoing citation, this Court, thus adopts by reference the foregoing as part of this Decision.
The real estate mortgage in the above cited case, although constituted in 1975 and outside the
beneficial aegis of P.D. 957, was struck down by the Court of Appeals which found in favor of subdivision
lot buyers when the rights of the latter clashed with the mortgagee bank's right to foreclose the
property. The Court of Appeals in that case upheld the decision of the trial court declaring the real
estate mortgage as null and void.
As to the second issue of non-privity, petitioner avers that, in view of the provisions of Article 1311 of
the Civil Code, PNB, being a "total stranger to the land purchase agreement," cannot be made to take
the developer's place.
stature, with branches and subsidiaries in key financial centers around the world, should be equally as
happy with the disposition of this case as the private respondents, who were almost deprived and
dispossessed of their very homes purchased through their hard work and with their meager savings.
WHEREFORE, in view of the foregoing considerations, the petition is hereby DENIED, petitioner having
failed to show any REVERSIBLE ERROR or GRAVE ABUSE OF DISCRETION in the assailed decision. No
costs.
SO ORDERED.

We disagree, P.D. 957 being applicable, Section 18 of said law obliges petitioner Bank to accept the
payment of the remaining unpaid amortizations tendered by private respondents.

Sec. 18. Mortgages. - No mortgage on any unit or lot shall be made by the owner or developer without
prior written approval of the Authority, Such approval shall not be granted unless it is shown that the
proceeds of the mortgage loan shall be used for the development of the condominium or subdivision
project and effective measures have been provided to ensure such utilization. The loan value of each
lot or unit covered by the mortgage shall be determined and the buyer thereof, if any, shall be notified
before the release of the loan. The buyer may, at his option, pay his installment for the lot or unit
directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness
secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title
over the lot or unit promptly after full payment thereof.(emphasis supplied)

Privity of contracts as a defense does not apply in this case for the law explicitly grants to the buyer the
option to pay the installment payment for his lot or unit directly to the mortgagee (petitioner), which
is required to apply such payments to reduce the corresponding portion of the mortgage indebtedness
secured by the particular lot or unit being paid for. And, as stated earlier, this is without prejudice to
petitioner Bank's seeking relief against the subdivision developer.

Finally, before closing this Resolution, we enjoin petitioner Bank to focus not only on the strictly legal
issues involved in this case but also to take another look at the larger issues including social justice and
the protection of human rights as enshrined in the Constitution; firstly, because legal issues are raised
and decided not in a vacuum but within the context of existing social, economic and political conditions,
law being merely a brick in the up- building of the social edifice; and secondly, petitioner, being THE
state bank, is for all intents and purposes an instrument for the implementation of state policies so
cherished in our fundamental law. These consideration are obviously far more weighty than the
winning of any particular suit or the acquisition of any specific property. Thus, as the country strives to
move ahead towards economic self-sufficiency and to achieve dreams of "NIC-hood" and social well-
being for the majority of our countrymen, we hold that petitioner Bank, the premier bank in the
country, which has in recent years made record earnings and acquired an enviable international