G.R. No.

143855 September 21, 2010

REPRESENTATIVES GERARDO S. ESPINA, ORLANDO FUA, JR., PROSPERO AMATONG, ROBERT

ACE S. BARBERS, RAUL M. GONZALES, PROSPERO PICHAY, JUAN MIGUEL ZUBIRI and FRANKLIN
BAUTISTA,Petitioners,
vs.
HON. RONALDO ZAMORA, JR. (Executive Secretary), HON. MAR ROXAS (Secretary of Trade and
Industry), HON. FELIPE MEDALLA (Secretary of National Economic and Development Authority), GOV.
RAFAEL BUENAVENTURA (Bangko Sentral ng Pilipinas) and HON. LILIA BAUTISTA (Chairman,
Securities and Exchange Commission), Respondents.

ABAD, J.:

This case calls upon the Court to exercise its power of judicial review and determine the constitutionality of the
Retail Trade Liberalization Act of 2000, which has been assailed as in breach of the constitutional mandate for
the development of a self-reliant and independent national economy effectively controlled by Filipinos.

The Facts and the Case

On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, also known as the
Retail Trade Liberalization Act of 2000. It expressly repealed R.A. 1180, which absolutely prohibited foreign
nationals from engaging in the retail trade business. R.A. 8762 now allows them to do so under four categories:

Category A Less than Exclusively for Filipino citizens and

US$2,500,000.00 corporations wholly owned by Filipino
citizens.
Category B US$2,500,000.00 up but less For the first two years of R.A. 8762’s
than US$7,500,000.00 effectivity, foreign ownership is allowed up to
60%. After the two-year period, 100%
foreign equity shall be allowed.
Category C US$7,500,000.00 or more May be wholly owned by foreigners. Foreign
investments for establishing a store in
Categories B and C shall not be less than the
equivalent in Philippine Pesos of
US$830,000.00.
Category D US$250,000.00 per store of May be wholly owned by foreigners.
foreign enterprises
specializing in high-end or
luxury products

R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now reside in the
Philippines, to engage in the retail trade business with the same rights as Filipino citizens.

On October 11, 2000 petitioners ***Magtanggol T. Gunigundo I, Michael T. Defensor, Gerardo S. Espina,
Benjamin S. Lim, Orlando Fua, Jr., Prospero Amatong, Sergio Apostol, Robert Ace S. Barbers, Enrique Garcia,
Jr., Raul M. Gonzales, Jaime Jacob, Apolinario Lozada, Jr., Leonardo Montemayor, Ma. Elena Palma-Gil,
Prospero Pichay, Juan Miguel Zubiri and Franklin Bautista, all members of the House of Representatives, filed
the present petition, assailing the constitutionality of R.A. 8762 on the following grounds:

First, the law runs afoul of Sections 9, 19, and 20 of Article II of the Constitution which enjoins the State
to place the national economy under the control of Filipinos to achieve equal distribution of opportunities,
promote industrialization and full employment, and protect Filipino enterprise against unfair competition
and trade policies.
 Second, the implementation of R.A. 8762 would lead to alien control of the retail trade, which taken
together with alien dominance of other areas of business, would result in the loss of effective Filipino
control of the economy.

Third, foreign retailers like Walmart and K-Mart would crush Filipino retailers and sari-sari store vendors,
destroy self-employment, and bring about more unemployment.

Fourth, the World Bank-International Monetary Fund had improperly imposed the passage of R.A. 8762
on the government as a condition for the release of certain loans.

Fifth, there is a clear and present danger that the law would promote monopolies or combinations in
restraint of trade.

Respondents Executive Secretary Ronaldo Zamora, Jr., Trade and Industry Secretary Mar Roxas, National
Economic and Development Authority (NEDA) Secretary Felipe Medalla, Bangko Sentral ng Pilipinas Gov.
Rafael Buenaventura, and Securities and Exchange Commission Chairman Lilia Bautista countered that:

First, petitioners have no legal standing to file the petition. They cannot invoke the fact that they are
taxpayers since R.A. 8762 does not involve the disbursement of public funds. Nor can they invoke the
fact that they are members of Congress since they made no claim that the law infringes on their right as
legislators.

Second, the petition does not involve any justiciable controversy. Petitioners of course claim that, as
members of Congress, they represent the small retail vendors in their respective districts but the petition
does not allege that the subject law violates the rights of those vendors.

Third, petitioners have failed to overcome the presumption of constitutionality of R.A. 8762. Indeed, they
could not specify how the new law violates the constitutional provisions they cite. Sections 9, 19, and 20
of Article II of the Constitution are not self-executing provisions that are judicially demandable.

Fourth, the Constitution mandates the regulation but not the prohibition of foreign investments. It directs
Congress to reserve to Filipino citizens certain areas of investments upon the recommendation of the
NEDA and when the national interest so dictates. But the Constitution leaves to the discretion of the
Congress whether or not to make such reservation. It does not prohibit Congress from enacting laws
allowing the entry of foreigners into certain industries not reserved by the Constitution to Filipino citizens.

The Issues Presented

Simplified, the case presents two issues:

1. Whether or not petitioner lawmakers have the legal standing to challenge the constitutionality of R.A.
8762; and

2. Whether or not R.A. 8762 is unconstitutional.

The Court’s Ruling

One. The long settled rule is that he who challenges the validity of a law must have a standing to do so. 1 Legal
standing or locus standi refers to the right of a party to come to a court of justice and make such a challenge.
More particularly, standing refers to his personal and substantial interest in that he has suffered or will suffer
direct injury as a result of the passage of that law.2 To put it another way, he must show that he 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 law he complains of. 3
Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act prejudices
petitioners or inflicts damages on them, either as taxpayers 4 or as legislators.5 Still the Court will resolve the
question they raise since the rule on standing can be relaxed for nontraditional plaintiffs like ordinary citizens,
taxpayers, and legislators when as in this case the public interest so requires or the matter is of transcendental
importance, of overarching significance to society, or of paramount public interest. 6

Two. Petitioners mainly argue that R.A. 8762 violates the mandate of the 1987 Constitution for the State to
develop a self-reliant and independent national economy effectively controlled by Filipinos. They invoke the
provisions of the Declaration of Principles and State Policies under Article II of the 1987 Constitution, which read
as follows:

Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that provide adequate social
services, promote full employment, a rising standard of living, and an improved quality of life for all.

xxxx

Section 19. The State shall develop a self-reliant and independent national economy effectively controlled by
Filipinos.

Section 20. The State recognizes the indispensable role of the private sector, encourages private enterprise,
and provides incentives to needed investments.

Petitioners also invoke the provisions of the National Economy and Patrimony under Article XII of the 1987
Constitution, which reads:

Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national
interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum
of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas
of investments. The Congress shall enact measures that will encourage the formation and operation of
enterprises whose capital is wholly owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall
give preference to qualified Filipinos.

The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in
accordance with its national goals and priorities.

xxxx

Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced
goods, and adopt measures that help make them competitive.

Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity.

But, as the Court explained in Tañada v. Angara,7 the provisions of Article II of the 1987 Constitution, the
declarations of principles and state policies, are not self-executing. Legislative failure to pursue such policies
cannot give rise to a cause of action in the courts.

The Court further explained in Tañada that Article XII of the 1987 Constitution lays down the ideals of economic
nationalism: (1) by expressing preference in favor of qualified Filipinos in the grant of rights, privileges and
concessions covering the national economy and patrimony and in the use of Filipino labor, domestic materials
and locally-produced goods; (2) by mandating the State to adopt measures that help make them competitive;
and (3) by requiring the State to develop a self-reliant and independent national economy effectively controlled
by Filipinos.8ten.lihpwal

In other words, while Section 19, Article II of the 1987 Constitution requires the development of a self-reliant and
independent national economy effectively controlled by Filipino entrepreneurs, it does not impose a policy of
Filipino monopoly of the economic environment. The objective is simply to prohibit foreign powers or interests
from maneuvering our economic policies and ensure that Filipinos are given preference in all areas of
development.

Indeed, the 1987 Constitution takes into account the realities of the outside world as it requires the pursuit of a
trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of
equality and reciprocity; and speaks of industries which are competitive in both domestic and foreign markets as
well as of the protection of Filipino enterprises against unfair foreign competition and trade practices. Thus, while
the Constitution mandates a bias in favor of Filipino goods, services, labor and enterprises, it also recognizes
the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits
protection of Filipino enterprises only against foreign competition and trade practices that are unfair. 9

In other words, the 1987 Constitution does not rule out the entry of foreign investments, goods, and services.
While it does not encourage their unlimited entry into the country, it does not prohibit them either. In fact, it allows
an exchange on the basis of equality and reciprocity, frowning only on foreign competition that is unfair. 10 The
key, as in all economies in the world, is to strike a balance between protecting local businesses and allowing the
entry of foreign investments and services.1avvphi1

More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion to reserve to
Filipinos certain areas of investments upon the recommendation of the NEDA and when the national interest
requires. Thus, Congress can determine what policy to pass and when to pass it depending on the economic
exigencies. It can enact laws allowing the entry of foreigners into certain industries not reserved by the
Constitution to Filipino citizens. In this case, Congress has decided to open certain areas of the retail trade
business to foreign investments instead of reserving them exclusively to Filipino citizens. The NEDA has not
opposed such policy.

The control and regulation of trade in the interest of the public welfare is of course an exercise of the police
power of the State. A person’s right to property, whether he is a Filipino citizen or foreign national, cannot be
taken from him without due process of law. In 1954, Congress enacted the Retail Trade Nationalization Act or
R.A. 1180 that restricts the retail business to Filipino citizens. In denying the petition assailing the validity of such
Act for violation of the foreigner’s right to substantive due process of law, the Supreme Court held that the law
constituted a valid exercise of police power. 11 The State had an interest in preventing alien control of the retail
trade and R.A. 1180 was reasonably related to that purpose. That law is not arbitrary.

Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint on the foreigners’
right to property or to engage in an ordinarily lawful business, it cannot be said that the law amounts to a denial
of the Filipinos’ right to property and to due process of law. Filipinos continue to have the right to engage in the
kinds of retail business to which the law in question has permitted the entry of foreign investors.

Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save when it blatantly
violates the Constitution. But as the Court has said, there is no showing that the law has contravened any
constitutional mandate. The Court is not convinced that the implementation of R.A. 8762 would eventually lead
to alien control of the retail trade business. Petitioners have not mustered any concrete and strong argument to
support its thesis. The law itself has provided strict safeguards on foreign participation in that business. Thus –

First, aliens can only engage in retail trade business subject to the categories above-enumerated; Second, only
nationals from, or juridical entities formed or incorporated in countries which allow the entry of Filipino retailers
shall be allowed to engage in retail trade business; and Third, qualified foreign retailers shall not be allowed to
engage in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or
carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores and such other
similar retailing activities.
In sum, petitioners have not shown how the retail trade liberalization has prejudiced and can prejudice the local
small and medium enterprises since its implementation about a decade ago.

WHEREFORE, the Court DISMISSES the petition for lack of merit. No costs.

SO ORDERED.

G.R. No. 158540 July 8, 2004

SOUTHERN CROSS CEMENT CORPORATION, petitioner,

vs.
THE PHILIPPINE CEMENT MANUFACTURERS CORP., THE SECRETARY OF THE DEPARTMENT OF
TRADE & INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE, and THE COMMISSIONER
OF THE BUREAU OF CUSTOMS, respondents.

TINGA, J.:

"Good fences make good neighbors," so observed Robert Frost, the archetype of traditional New England
detachment. The Frost ethos has been heeded by nations adjusting to the effects of the liberalized global
market.1The Philippines, for one, enacted Republic Act (Rep. Act) No. 8751 (on the imposition of countervailing
duties), Rep. Act No. 8752 (on the imposition of anti-dumping duties) and, finally, Rep. Act No. 8800, also known
as the Safeguard Measures Act ("SMA")2 soon after it joined the General Agreement on Tariff and Trade (GATT)
and the World Trade Organization (WTO) Agreement.3

The SMA provides the structure and mechanics for the imposition of emergency measures, including tariffs, to
protect domestic industries and producers from increased imports which inflict or could inflict serious injury on
them.4 The wisdom of the policies behind the SMA, however, is not put into question by the petition at bar. The
questions submitted to the Court relate to the means and the procedures ordained in the law to ensure that the
determination of the imposition or non-imposition of a safeguard measure is proper.

Antecedent Facts

Petitioner Southern Cross Cement Corporation ("Southern Cross") is a domestic corporation engaged in the
business of cement manufacturing, production, importation and exportation. Its principal stockholders are
Taiheiyo Cement Corporation and Tokuyama Corporation, purportedly the largest cement manufacturers in
Japan.5

Private respondent Philippine Cement Manufacturers Corporation 6 ("Philcemcor") is an association of domestic

cement manufacturers. It has eighteen (18) members, 7 per Record. While Philcemcor heralds itself to be an
association of domestic cement manufacturers, it appears that considerable equity holdings, if not controlling
interests in at least twelve (12) of its member-corporations, were acquired by the three largest cement
manufacturers in the world, namely Financiere Lafarge S.A. of France, Cemex S.A. de C.V. of Mexico, and
Holcim Ltd. of Switzerland (formerly Holderbank Financiere Glaris, Ltd., then Holderfin B.V.). 8

On 22 May 2001, respondent Department of Trade and Industry ("DTI") accepted an application from Philcemcor,
alleging that the importation of gray Portland cement 9 in increased quantities has caused declines in domestic
production, capacity utilization, market share, sales and employment; as well as caused depressed local prices.
Accordingly, Philcemcor sought the imposition at first of provisional, then later, definitive safeguard measures
on the import of cement pursuant to the SMA. Philcemcor filed the application in behalf of twelve (12) of its
member-companies.10

After preliminary investigation, the Bureau of Import Services of the DTI, determined that critical circumstances
existed justifying the imposition of provisional measures. 11 On 7 November 2001, the DTI issued
an Order, imposing a provisional measure equivalent to Twenty Pesos and Sixty Centavos (P20.60) per forty
(40) kilogram bag on all importations of gray Portland cement for a period not exceeding two hundred (200) days
from the date of issuance by the Bureau of Customs (BOC) of the implementing Customs Memorandum
Order.12 The corresponding Customs Memorandum Order was issued on 10 December 2001, to take effect that
same day and to remain in force for two hundred (200) days. 13

In the meantime, the Tariff Commission, on 19 November 2001, received a request from the DTI for a formal
investigation to determine whether or not to impose a definitive safeguard measure on imports of gray Portland
cement, pursuant to Section 9 of the SMA and its Implementing Rules and Regulations. A notice of
commencement of formal investigation was published in the newspapers on 21 November 2001. Individual
notices were likewise sent to concerned parties, such as Philcemcor, various importers and exporters, the
Embassies of Indonesia, Japan and Taiwan, contractors/builders associations, industry associations, cement
workers' groups, consumer groups, non-government organizations and concerned government agencies.14 A
preliminary conference was held on 27 November 2001, attended by several concerned parties, including
Southern Cross.15 Subsequently, the Tariff Commission received several position papers both in support and
against Philcemcor's application. 16 The Tariff Commission also visited the corporate offices and manufacturing
facilities of each of the applicant companies, as well as that of Southern Cross and two other cement importers. 17

On 13 March 2002, the Tariff Commission issued its Formal Investigation Report ("Report"). Among the factors
studied by the Tariff Commission in its Report were the market share of the domestic industry,18 production and
sales,19 capacity utilization,20 financial performance and profitability, 21 and return on sales.22 The Tariff
Commission arrived at the following conclusions:

1. The circumstances provided in Article XIX of GATT 1994 need not be demonstrated since the product
under consideration (gray Portland cement) is not the subject of any Philippine obligation or tariff
concession under the WTO Agreement. Nonetheless, such inquiry is governed by the national legislation
(R.A. 8800) and the terms and conditions of the Agreement on Safeguards.

2. The collective output of the twelve (12) applicant companies constitutes a major proportion of the total
domestic production of gray Portland cement and blended Portland cement.

3. Locally produced gray Portland cement and blended Portland cement (Pozzolan) are "like" to imported
gray Portland cement.

4. Gray Portland cement is being imported into the Philippines in increased quantities, both in absolute
terms and relative to domestic production, starting in 2000. The increase in volume of imports is recent,
sudden, sharp and significant.

5. The industry has not suffered and is not suffering significant overall impairment in its condition, i.e.,
serious injury.

6. There is no threat of serious injury that is imminent from imports of gray Portland cement.

7. Causation has become moot and academic in view of the negative determination of the elements of
serious injury and imminent threat of serious injury. 23

Accordingly, the Tariff Commission made the following recommendation, to wit:

The elements of serious injury and imminent threat of serious injury not having been established, it is
hereby recommended that no definitive general safeguard measure be imposed on the importation of
gray Portland cement.24

The DTI received the Report on 14 March 2002. After reviewing the report, then DTI Secretary Manuel Roxas II
("DTI Secretary") disagreed with the conclusion of the Tariff Commission that there was no serious injury to the
local cement industry caused by the surge of imports. 25 In view of this disagreement, the DTI requested an
opinion from the Department of Justice ("DOJ") on the DTI Secretary's scope of options in acting on the
Commission's recommendations. Subsequently, then DOJ Secretary Hernando Perez rendered an opinion
stating that Section 13 of the SMA precluded a review by the DTI Secretary of the Tariff Commission's negative
finding, or finding that a definitive safeguard measure should not be imposed. 26

On 5 April 2002, the DTI Secretary promulgated a Decision. After quoting the conclusions of the Tariff
Commission, the DTI Secretary noted the DTI's disagreement with the conclusions. However, he also cited the
DOJ Opinion advising the DTI that it was bound by the negative finding of the Tariff Commission. Thus, he ruled
as follows:

The DTI has no alternative but to abide by the [Tariff] Commission's recommendations.

IN VIEW OF THE FOREGOING, and in accordance with Section 13 of RA 8800 which states:

"In the event of a negative final determination; or if the cash bond is in excess of the
definitive safeguard duty assessed, the Secretary shall immediately issue, through the
Secretary of Finance, a written instruction to the Commissioner of Customs, authorizing
the return of the cash bond or the remainder thereof, as the case may be, previously
collected as provisional general safeguard measure within ten (10) days from the date a
final decision has been made; Provided, that the government shall not be liable for any
interest on the amount to be returned. The Secretary shall not accept for consideration
another petition from the same industry, with respect to the same imports of the product
under consideration within one (1) year after the date of rendering such a decision."

The DTI hereby issues the following:

The application for safeguard measures against the importation of gray Portland cement filed by
PHILCEMCOR (Case No. 02-2001) is hereby denied.27 (Emphasis in the original)

Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days later, it filed with the Court of Appeals
a Petition for Certiorari, Prohibition and Mandamus 28 seeking to set aside the DTI Decision, as well as the Tariff
Commission's Report. Philcemcor likewise applied for a Temporary Restraining Order/Injunction to enjoin the
DTI and the BOC from implementing the questioned Decision and Report. It prayed that the Court of Appeals
direct the DTI Secretary to disregard the Report and to render judgment independently of the Report. Philcemcor
argued that the DTI Secretary, vested as he is under the law with the power of review, is not bound to adopt the
recommendations of the Tariff Commission; and, that the Report is void, as it is predicated on a flawed
framework, inconsistent inferences and erroneous methodology. 29

On 10 June 2002, Southern Cross filed its Comment.30 It argued that the Court of Appeals had no jurisdiction
over Philcemcor's Petition, for it is on the Court of Tax Appeals ("CTA") that the SMA conferred jurisdiction to
review rulings of the Secretary in connection with the imposition of a safeguard measure. It likewise argued that
Philcemcor's resort to the special civil action of certiorari is improper, considering that what Philcemcor sought
to rectify is an error of judgment and not an error of jurisdiction or grave abuse of discretion, and that a petition
for review with the CTA was available as a plain, speedy and adequate remedy. Finally, Southern Cross echoed
the DOJ Opinion that Section 13 of the SMA precludes a review by the DTI Secretary of a negative finding of the
Tariff Commission.

After conducting a hearing on 19 June 2002 on Philcemcor's application for preliminary injunction, the Court of
Appeals' Twelfth Division31 granted the writ sought in its Resolution dated 21 June 2002.32 Seven days later, on
28 June 2002, the two-hundred (200)-day period for the imposition of the provisional measure expired. Despite
the lapse of the period, the BOC continued to impose the provisional measure on all importations of Portland
cement made by Southern Cross. The uninterrupted assessment of the tariff, according to Southern Cross,
worked to its detriment to the point that the continued imposition would eventually lead to its closure. 33

Southern Cross timely filed a Motion for Reconsideration of the Resolution on 9 September 2002. Alleging that
Philcemcor was not entitled to provisional relief, Southern Cross likewise sought a clarificatory order as to
whether the grant of the writ of preliminary injunction could extend the earlier imposition of the provisional
measure beyond the two hundred (200)-day limit imposed by law. The appeals' court failed to take immediate
action on Southern Cross's motion despite the four (4) motions for early resolution the latter filed between
September of 2002 and February of 2003. After six (6) months, on 19 February 2003, the Court of Appeals
directed Philcemcor to comment on Southern Cross's Motion for Reconsideration.34 After Philcemcor filed
its Opposition35 on 13 March 2003, Southern Cross filed another set of four (4) motions for early resolution.

Despite the efforts of Southern Cross, the Court of Appeals failed to directly resolve the Motion for
Reconsideration. Instead, on 5 June 2003, it rendered a Decision,36 granting in part Philcemcor's petition. The
appellate court ruled that it had jurisdiction over the petition for certiorari since it alleged grave abuse of
discretion. It refused to annul the findings of the Tariff Commission, citing the rule that factual findings of
administrative agencies are binding upon the courts and its corollary, that courts should not interfere in matters
addressed to the sound discretion and coming under the special technical knowledge and training of such
agencies.37 Nevertheless, it held that the DTI Secretary is not bound by the factual findings of the Tariff
Commission since such findings are merely recommendatory and they fall within the ambit of the Secretary's
discretionary review. It determined that the legislative intent is to grant the DTI Secretary the power to make a
final decision on the Tariff Commission's recommendation. 38 The dispositive portion of the Decision reads:

WHEREFORE, based on the foregoing premises, petitioner's prayer to set aside the findings of the Tariff
Commission in its assailed Report dated March 13, 2002 is DENIED. On the other hand, the assailed
April 5, 2002 Decision of the Secretary of the Department of Trade and Industry is hereby SET ASIDE.
Consequently, the case is REMANDED to the public respondent Secretary of Department of Trade and
Industry for a final decision in accordance with RA 8800 and its Implementing Rules and Regulations.

SO ORDERED.39

On 23 June 2003, Southern Cross filed the present petition, assailing the appellate court's Decision for departing
from the accepted and usual course of judicial proceedings, and not deciding the substantial questions in
accordance with law and jurisprudence. The petition argues in the main that the Court of Appeals has no
jurisdiction over Philcemcor's petition, the proper remedy being a petition for review with the CTA conformably
with the SMA, and; that the factual findings of the Tariff Commission on the existence or non-existence conditions
warranting the imposition of general safeguard measures are binding upon the DTI Secretary.

The timely filing of Southern Cross's petition before this Court necessarily prevented the Court of
Appeals Decisionfrom becoming final.40 Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling
this time that that in light of the appellate court's Decision there was no longer any legal impediment to his
deciding Philcemcor's application for definitive safeguard measures. 41 He made a determination that, contrary to
the findings of the Tariff Commission, the local cement industry had suffered serious injury as a result of the
import surges.42 Accordingly, he imposed a definitive safeguard measure on the importation of gray Portland
cement, in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for three years on imported
gray Portland Cement.43

On 7 July 2003, Southern Cross filed with the Court a "Very Urgent Application for a Temporary Restraining
Order and/or A Writ of Preliminary Injunction" ("TRO Application"), seeking to enjoin the DTI Secretary from
enforcing his Decision of 25 June 2003 in view of the pending petition before this Court. Philcemcor filed an
opposition, claiming, among others, that it is not this Court but the CTA that has jurisdiction over the application
under the law.

On 1 August 2003, Southern Cross filed with the CTA a Petition for Review, assailing the DTI Secretary's 25
June 2003 Decision which imposed the definite safeguard measure. Prescinding from this action, Philcemcor
filed with this Court a Manifestation and Motion to Dismiss in regard to Southern Cross's petition, alleging that it
deliberately and willfully resorted to forum-shopping. It points out that Southern Cross's TRO Application seeks
to enjoin the DTI Secretary's second decision, while its Petition before the CTA prays for the annulment of the
same decision.44
Reiterating its Comment on Southern Cross's Petition for Review, Philcemcor also argues that the CTA, being a
special court of limited jurisdiction, could only review the ruling of the DTI Secretary when a safeguard measure
is imposed, and that the factual findings of the Tariff Commission are not binding on the DTI Secretary. 45

After giving due course to Southern Cross's Petition, the Court called the case for oral argument on 18 February
2004.46 At the oral argument, attended by the counsel for Philcemcor and Southern Cross and the Office of the
Solicitor General, the Court simplified the issues in this wise: (i) whether the Decision of the DTI Secretary is
appealable to the CTA or the Court of Appeals; (ii) assuming that the Court of Appeals has jurisdiction, whether
its Decision is in accordance with law; and, (iii) whether a Temporary Restraining Order is warranted.47

During the oral arguments, counsel for Southern Cross manifested that due to the imposition of the general
safeguard measures, Southern Cross was forced to cease operations in the Philippines in November of 2003. 48

Propriety of the Temporary Restraining Order

Before the merits of the Petition, a brief comment on Southern Cross's application for provisional relief. It sought
to enjoin the DTI Secretary from enforcing the definitive safeguard measure he imposed in his 25 June
2003 Decision. The Court did not grant the provisional relief for it would be tantamount to enjoining the collection
of taxes, a peremptory judicial act which is traditionally frowned upon, 49 unless there is a clear statutory basis for
it.50 In that regard, Section 218 of the Tax Reform Act of 1997 prohibits any court from granting an injunction to
restrain the collection of any national internal revenue tax, fee or charge imposed by the internal revenue
code.51 A similar philosophy is expressed by Section 29 of the SMA, which states that the filing of a petition for
review before the CTA does not stop, suspend, or otherwise toll the imposition or collection of the appropriate
tariff duties or the adoption of other appropriate safeguard measures. 52 This evinces a clear legislative intent that
the imposition of safeguard measures, despite the availability of judicial review, should not be enjoined
notwithstanding any timely appeal of the imposition.

The Forum-Shopping Issue

In the same breath, we are not convinced that the allegation of forum-shopping has been duly proven, or that
sanction should befall upon Southern Cross and its counsel. The standard by Section 5, Rule 7 of the 1997
Rules of Civil Procedure in order that sanction may be had is that "the acts of the party or his counsel clearly
constitute willful and deliberate forum shopping." 53 The standard implies a malicious intent to subvert procedural
rules, and such state of mind is not evident in this case.

The Jurisdictional Issue

On to the merits of the present petition.

In its assailed Decision, the Court of Appeals, after asserting only in brief that it had jurisdiction over
Philcemcor's Petition, discussed the issue of whether or not the DTI Secretary is bound to adopt the negative
recommendation of the Tariff Commission on the application for safeguard measure. The Court of Appeals
maintained that it had jurisdiction over the petition, as it alleged grave abuse of discretion on the part of the DTI
Secretary, thus:

A perusal of the instant petition reveals allegations of grave abuse of discretion on the part of the DTI
Secretary in rendering the assailed April 5, 2002 Decision wherein it was ruled that he had no alternative
but to abide by the findings of the Commission on the matter of safeguard measures for the local cement
industry. Abuse of discretion is admittedly within the ambit of certiorari.

Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent
to lack of jurisdiction. It is alleged that, in the assailed Decision, the DTI Secretary gravely abused his
discretion in wantonly evading to discharge his duty to render an independent determination or decision
in imposing a definitive safeguard measure. 54
We do not doubt that the Court of Appeals' certiorari powers extend to correcting grave abuse of discretion on
the part of an officer exercising judicial or quasi-judicial functions.55 However, the special civil action of certiorari
is available only when there is no plain, speedy and adequate remedy in the ordinary course of law. 56 Southern
Cross relies on this limitation, stressing that Section 29 of the SMA is a plain, speedy and adequate remedy in
the ordinary course of law which Philcemcor did not avail of. The Section reads:

Section 29. Judicial Review. – Any interested party who is adversely affected by the ruling of the
Secretary in connection with the imposition of a safeguard measure may file with the CTA, a petition
for review of such ruling within thirty (30) days from receipt thereof. Provided, however, that the filing of
such petition for review shall not in any way stop, suspend or otherwise toll the imposition or collection of
the appropriate tariff duties or the adoption of other appropriate safeguard measures, as the case may
be.

The petition for review shall comply with the same requirements and shall follow the same rules of
procedure and shall be subject to the same disposition as in appeals in connection with adverse rulings
on tax matters to the Court of Appeals. 57 (Emphasis supplied)

It is not difficult to divine why the legislature singled out the CTA as the court with jurisdiction to review the ruling
of the DTI Secretary in connection with the imposition of a safeguard measure. The Court has long recognized
the legislative determination to vest sole and exclusive jurisdiction on matters involving internal revenue and
customs duties to such a specialized court. 58 By the very nature of its function, the CTA is dedicated exclusively
to the study and consideration of tax problems and has necessarily developed an expertise on the subject. 59

At the same time, since the CTA is a court of limited jurisdiction, its jurisdiction to take cognizance of a case
should be clearly conferred and should not be deemed to exist on mere implication. 60 Concededly, Rep. Act No.
1125, the statute creating the CTA, does not extend to it the power to review decisions of the DTI Secretary in
connection with the imposition of safeguard measures.61 Of course, at that time which was before the advent of
trade liberalization the notion of safeguard measures or safety nets was not yet in vogue.

Undeniably, however, the SMA expanded the jurisdiction of the CTA by including review of the rulings of the DTI
Secretary in connection with the imposition of safeguard measures. However, Philcemcor and the public
respondents agree that the CTA has appellate jurisdiction over a decision of the DTI Secretary imposing a
safeguard measure, but not when his ruling is not to impose such measure.

In a related development, Rep. Act No. 9282, enacted on 30 March 2004, expressly vests unto the CTA
jurisdiction over "[d]ecisions of the Secretary of Trade and Industry, in case of nonagricultural product, commodity
or article xxx involving xxx safeguard measures under Republic Act No. 8800, where either party may
appeal the decision to impose or not to impose said duties."62 Had Rep. Act No. 9282 already been in force
at the beginning of the incidents subject of this case, there would have been no need to make any deeper inquiry
as to the extent of the CTA's jurisdiction. But as Rep. Act No. 9282 cannot be applied retroactively to the present
case, the question of whether such jurisdiction extends to a decision not to impose a safeguard measure will
have to be settled principally on the basis of the SMA.

Under Section 29 of the SMA, there are three requisites to enable the CTA to acquire jurisdiction over the petition
for review contemplated therein: (i) there must be a ruling by the DTI Secretary; (ii) the petition must be filed by
an interested party adversely affected by the ruling; and (iii) such ruling must be in connection with the imposition
of a safeguard measure. The first two requisites are clearly present. The third requisite deserves closer scrutiny.

Contrary to the stance of the public respondents and Philcemcor, in this case where the DTI Secretary decides
not to impose a safeguard measure, it is the CTA which has jurisdiction to review his decision. The reasons are
as follows:

First. Split jurisdiction is abhorred.

Essentially, respondents' position is that judicial review of the DTI Secretary's ruling is exercised by two different
courts, depending on whether or not it imposes a safeguard measure, and in either case the court exercising
jurisdiction does so to the exclusion of the other. Thus, if the DTI decision involves the imposition of a safeguard
measure it is the CTA which has appellate jurisdiction; otherwise, it is the Court of Appeals. Such setup is as
novel and unusual as it is cumbersome and unwise. Essentially, respondents advocate that Section 29 of the
SMA has established split appellate jurisdiction over rulings of the DTI Secretary on the imposition of safeguard
measure.

This interpretation cannot be favored, as the Court has consistently refused to sanction split jurisdiction. 63 The
power of the DTI Secretary to adopt or withhold a safeguard measure emanates from the same statutory source,
and it boggles the mind why the appeal modality would be such that one appellate court is qualified if what is to
be reviewed is a positive determination, and it is not if what is appealed is a negative determination. In deciding
whether or not to impose a safeguard measure, provisional or general, the DTI Secretary would be evaluating
only one body of facts and applying them to one set of laws. The reviewing tribunal will be called upon to examine
the same facts and the same laws, whether or not the determination is positive or negative.

In short, if we were to rule for respondents we would be confirming the exercise by two judicial bodies of
jurisdiction over basically the same subject matter¾precisely the split-jurisdiction situation which is anathema to
the orderly administration of justice. 64 The Court cannot accept that such was the legislative motive especially
considering that the law expressly confers on the CTA, the tribunal with the specialized competence over tax
and tariff matters, the role of judicial review without mention of any other court that may exercise corollary or
ancillary jurisdiction in relation to the SMA. The provision refers to the Court of Appeals but only in regard to
procedural rules and dispositions of appeals from the CTA to the Court of Appeals. 65

The principle enunciated in Tejada v. Homestead Property Corporation 66 is applicable to the case at bar:

The Court agrees with the observation of the [that] when an administrative agency or body is conferred
quasi-judicial functions, all controversies relating to the subject matter pertaining to its
specialization are deemed to be included within the jurisdiction of said administrative agency or
body. Split jurisdiction is not favored.67

Second. The interpretation of the provisions of the SMA favors vesting untrammeled appellate jurisdiction on the
CTA.

A plain reading of Section 29 of the SMA reveals that Congress did not expressly bar the CTA from reviewing a
negative determination by the DTI Secretary nor conferred on the Court of Appeals such review authority.
Respondents note, on the other hand, that neither did the law expressly grant to the CTA the power to review a
negative determination. However, under the clear text of the law, the CTA is vested with jurisdiction to review
the ruling of the DTI Secretary "in connection with the imposition of a safeguard measure." Had the law been
couched instead to incorporate the phrase "the ruling imposing a safeguard measure," then respondent's claim
would have indisputable merit. Undoubtedly, the phrase "in connection with" not only qualifies but clarifies the
succeeding phrase "imposition of a safeguard measure." As expounded later, the phrase also encompasses the
opposite or converse ruling which is the non-imposition of a safeguard measure.

In the American case of Shaw v. Delta Air Lines, Inc.,68 the United States Supreme Court, in interpreting a key
provision of the Employee Retirement Security Act of 1974, construed the phrase "relates to" in its normal sense
which is the same as "if it has connection with or reference to."69 There is no serious dispute that the phrase "in
connection with" is synonymous to "relates to" or "reference to," and that all three phrases are broadly expansive.
This is affirmed not just by jurisprudential fiat, but also the acquired connotative meaning of "in connection with"
in common parlance. Consequently, with the use of the phrase "in connection with," Section 29 allows the CTA
to review not only the ruling imposing a safeguard measure, but all other rulings related or have reference to
the application for such measure.

Now, let us determine the maximum scope and reach of the phrase "in connection with" as used in Section 29
of the SMA. A literalist reading or linguistic survey may not satisfy. Even the US Supreme Court in New York
State Blue Cross Plans v. Travelers Ins.70 conceded that the phrases "relate to" or "in connection with" may be
extended to the farthest stretch of indeterminacy for, universally, relations or connections are infinite and stop
nowhere.71 Thus, in the case the US High Court, examining the same phrase of the same provision of law
involved in Shaw, resorted to looking at the statute and its objectives as the alternative to an "uncritical
literalism."72 A similar inquiry into the other provisions of the SMA is in order to determine the scope of review
accorded therein to the CTA.73

The authority to decide on the safeguard measure is vested in the DTI Secretary in the case of non-agricultural
products, and in the Secretary of the Department of Agriculture in the case of agricultural products. 74 Section 29
is likewise explicit that only the rulings of the DTI Secretary or the Agriculture Secretary may be reviewed by the
CTA.75 Thus, the acts of other bodies that were granted some powers by the SMA, such as the Tariff
Commission, are not subject to direct review by the CTA.

Under the SMA, the Department Secretary concerned is authorized to decide on several matters. Within thirty
(30) days from receipt of a petition seeking the imposition of a safeguard measure, or from the date he
made motu proprio initiation, the Secretary shall make a preliminary determination on whether the increased
imports of the product under consideration substantially cause or threaten to cause serious injury to the domestic
industry.76 Such ruling is crucial since only upon the Secretary's positive preliminary determination that a threat
to the domestic industry exists shall the matter be referred to the Tariff Commission for formal investigation, this
time, to determine whether the general safeguard measure should be imposed or not. 77 Pursuant to a positive
preliminary determination, the Secretary may also decide that the imposition of a provisional safeguard measure
would be warranted under Section 8 of the SMA. 78 The Secretary is also authorized to decide, after receipt of
the report of the Tariff Commission, whether or not to impose the general safeguard measure, and if in the
affirmative, what general safeguard measures should be applied. 79 Even after the general safeguard measure is
imposed, the Secretary is empowered to extend the safeguard measure, 80 or terminate, reduce or modify his
previous rulings on the general safeguard measure. 81

With the explicit grant of certain powers involving safeguard measures by the SMA on the DTI Secretary, it
follows that he is empowered to rule on several issues. These are the issues which arise in connection with, or
in relation to, the imposition of a safeguard measure. They may arise at different stages – the preliminary
investigation stage, the post-formal investigation stage, or the post-safeguard measure stage – yet all these
issues do become ripe for resolution because an initiatory action has been taken seeking the imposition of a
safeguard measure. It is the initiatory action for the imposition of a safeguard measure that sets the wheels in
motion, allowing the Secretary to make successive rulings, beginning with the preliminary determination.

Clearly, therefore, the scope and reach of the phrase "in connection with," as intended by Congress, pertain to
all rulings of the DTI Secretary or Agriculture Secretary which arise from the time an application or motu
proprioinitiation for the imposition of a safeguard measure is taken. Indeed, the incidents which require resolution
come to the fore only because there is an initial application or action seeking the imposition of a safeguard
measure. From the legislative standpoint, it was a matter of sense and practicality to lump up the questions
related to the initiatory application or action for safeguard measure and to assign only one court and; that is the
CTA to initially review all the rulings related to such initiatory application or action. Both directions Congress put
in place by employing the phrase "in connection with" in the law.

Given the relative expanse of decisions subject to judicial review by the CTA under Section 29, we do not doubt
that a negative ruling refusing to impose a safeguard measure falls within the scope of its jurisdiction. On a literal
level, such negative ruling is "a ruling of the Secretary in connection with the imposition of a safeguard measure,"
as it is one of the possible outcomes that may result from the initial application or action for a safeguard measure.
On a more critical level, the rulings of the DTI Secretary in connection with a safeguard measure, however
diverse the outcome may be, arise from the same grant of jurisdiction on the DTI Secretary by the SMA. 82 The
refusal by the DTI Secretary to grant a safeguard measure involves the same grant of authority, the same
statutory prescriptions, and the same degree of discretion as the imposition by the DTI Secretary of a safeguard
measure.

The position of the respondents is one of "uncritical literalism" 83 incongruent with the animus of the law. Moreover,
a fundamentalist approach to Section 29 is not warranted, considering the absurdity of the consequences.
Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur Inconveniens Et Absurdum.84

Even assuming arguendo that Section 29 has not expressly granted the CTA jurisdiction to review a negative
ruling of the DTI Secretary, the Court is precluded from favoring an interpretation that would cause inconvenience
and absurdity.85 Adopting the respondents' position favoring the CTA's minimal jurisdiction would unnecessarily
lead to illogical and onerous results.

Indeed, it is illiberal to assume that Congress had intended to provide appellate relief to rulings imposing a
safeguard measure but not to those declining to impose the measure. Respondents might argue that the right to
relief from a negative ruling is not lost since the applicant could, as Philcemcor did, question such ruling through
a special civil action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, in lieu of an appeal to the
CTA. Yet these two reliefs are of differing natures and gravamen. While an appeal may be predicated on errors
of fact or errors of law, a special civil action for certiorari is grounded on grave abuse of discretion or lack of or
excess of jurisdiction on the part of the decider. For a special civil action for certiorari to succeed, it is not enough
that the questioned act of the respondent is wrong. As the Court clarified in Sempio v. Court of Appeals:

A tribunal, board or officer acts without jurisdiction if it/he does not have the legal power to determine the
case. There is excess of jurisdiction where, being clothed with the power to determine the case, the
tribunal, board or officer oversteps its/his authority as determined by law. And there is grave abuse of
discretion where the tribunal, board or officer acts in a capricious, whimsical, arbitrary or despotic manner
in the exercise of his judgment as to be said to be equivalent to lack of jurisdiction. Certiorari is often
resorted to in order to correct errors of jurisdiction. Where the error is one of law or of fact, which is a
mistake of judgment, appeal is the remedy. 86

It is very conceivable that the DTI Secretary, after deliberate thought and careful evaluation of the evidence, may
either make a negative preliminary determination as he is so empowered under Section 7 of the SMA, or refuse
to adopt the definitive safeguard measure under Section 13 of the same law. Adopting the respondents' theory,
this negative ruling is susceptible to reversal only through a special civil action for certiorari, thus depriving the
affected party the chance to elevate the ruling on appeal on the rudimentary grounds of errors in fact or in law.
Instead, and despite whatever indications that the DTI Secretary acted with measure and within the bounds of
his jurisdiction are, the aggrieved party will be forced to resort to a gymnastic exercise, contorting the straight
and narrow in an effort to discombobulate the courts into believing that what was within was actually beyond and
what was studied and deliberate actually whimsical and capricious. What then would be the remedy of the party
aggrieved by a negative ruling that simply erred in interpreting the facts or the law? It certainly cannot be the
special civil action for certiorari, for as the Court held in Silverio v. Court of Appeals: "Certiorari is a remedy
narrow in its scope and inflexible in its character. It is not a general utility tool in the legal workshop."87

Fortunately, this theoretical quandary need not come to pass. Section 29 of the SMA is worded in such a way
that it places under the CTA's judicial review all rulings of the DTI Secretary, which are connected with the
imposition of a safeguard measure. This is sound and proper in light of the specialized jurisdiction of the CTA
over tax matters. In the same way that a question of whether to tax or not to tax is properly a tax matter, so is
the question of whether to impose or not to impose a definitive safeguard measure.

On another note, the second paragraph of Section 29 similarly reveals the legislative intent that rulings of the
DTI Secretary over safeguard measures should first be reviewed by the CTA and not the Court of Appeals. It
reads:

The petition for review shall comply with the same requirements and shall follow the same rules of
procedure and shall be subject to the same disposition as in appeals in connection with adverse rulings
on tax matters to the Court of Appeals.

This is the only passage in the SMA in which the Court of Appeals is mentioned. The express wish of Congress
is that the petition conform to the requirements and procedure under Rule 43 of the Rules of Civil Procedure.
Since Congress mandated that the form and procedure adopted be analogous to a review of a CTA ruling by the
Court of Appeals, the legislative contemplation could not have been that the appeal be directly taken to the Court
of Appeals.
Issue of Binding Effect of Tariff Commission's Factual Determination on DTI Secretary.

The next issue for resolution is whether the factual determination made by the Tariff Commission under the SMA
is binding on the DTI Secretary. Otherwise stated, the question is whether the DTI Secretary may impose general
safeguard measures in the absence of a positive final determination by the Tariff Commission.

The Court of Appeals relied upon Section 13 of the SMA in ruling that the findings of the Tariff Commission do
not necessarily constitute a final decision. Section 13 details the procedure for the adoption of a safeguard
measure, as well as the steps to be taken in case there is a negative final determination. The implication of the
Court of Appeals' holding is that the DTI Secretary may adopt a definitive safeguard measure, notwithstanding
a negative determination made by the Tariff Commission.

Undoubtedly, Section 13 prescribes certain limitations and restrictions before general safeguard measures may
be imposed. However, the most fundamental restriction on the DTI Secretary's power in that respect is
contained in Section 5 of the SMA¾that there should first be a positive final determination of the Tariff
Commission¾which the Court of Appeals curiously all but ignored. Section 5 reads:

Sec. 5. Conditions for the Application of General Safeguard Measures. – The Secretary shall apply a
general safeguard measure upon a positive final determination of the [Tariff] Commission that a
product is being imported into the country in increased quantities, whether absolute or relative to the
domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic
industry; however, in the case of non-agricultural products, the Secretary shall first establish that the
application of such safeguard measures will be in the public interest. (emphasis supplied)

The plain meaning of Section 5 shows that it is the Tariff Commission that has the power to make a "positive
final determination." This power lodged in the Tariff Commission, must be distinguished from the power to impose
the general safeguard measure which is properly vested on the DTI Secretary. 88

All in all, there are two condition precedents that must be satisfied before the DTI Secretary may impose a
general safeguard measure on grey Portland cement. First, there must be a positive final determination by the
Tariff Commission that a product is being imported into the country in increased quantities (whether absolute or
relative to domestic production), as to be a substantial cause of serious injury or threat to the domestic industry.
Second, in the case of non-agricultural products the Secretary must establish that the application of such
safeguard measures is in the public interest. 89 As Southern Cross argues, Section 5 is quite clear-cut, and it is
impossible to finagle a different conclusion even through overarching methods of statutory construction. There
is no safer nor better settled canon of interpretation that when language is clear and unambiguous it must be
held to mean what it plainly expresses: 90 In the quotable words of an illustrious member of this Court, thus:

[I]f a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without
attempted interpretation. The verba legis or plain meaning rule rests on the valid presumption that the
words employed by the legislature in a statute correctly express its intent or will and preclude the court
from construing it differently. The legislature is presumed to know the meaning of the words, to have used
words advisedly, and to have expressed its intent by the use of such words as are found in the statute. 91

Moreover, Rule 5 of the Implementing Rules and Regulations of the SMA, 92 which interprets Section 5 of the law,
likewise requires a positive final determination on the part of the Tariff Commission before the application of the
general safeguard measure.

The SMA establishes a distinct allocation of functions between the Tariff Commission and the DTI Secretary.
The plain meaning of Section 5 shows that it is the Tariff Commission that has the power to make a "positive
final determination." This power, which belongs to the Tariff Commission, must be distinguished from the power
to impose general safeguard measure properly vested on the DTI Secretary. The distinction is vital, as a "positive
final determination" clearly antecedes, as a condition precedent, the imposition of a general safeguard measure.
At the same time, a positive final determination does not necessarily result in the imposition of a general
safeguard measure. Under Section 5, notwithstanding the positive final determination of the Tariff Commission,
the DTI Secretary is tasked to decide whether or not that the application of the safeguard measures is in the
public interest.

It is also clear from Section 5 of the SMA that the positive final determination to be undertaken by the Tariff
Commission does not entail a mere gathering of statistical data. In order to arrive at such determination, it has
to establish causal linkages from the statistics that it compiles and evaluates: after finding there is an importation
in increased quantities of the product in question, that such importation is a substantial cause of serious threat
or injury to the domestic industry.

The Court of Appeals relies heavily on the legislative record of a congressional debate during deliberations on
the SMA to assert a purported legislative intent that the findings of the Tariff Commission do not bind the DTI
Secretary.93 Yet as explained earlier, the plain meaning of Section 5 emphasizes that only if the Tariff
Commission renders a positive determination could the DTI Secretary impose a safeguard measure. Resort to
the congressional records to ascertain legislative intent is not warranted if a statute is clear, plain and free from
ambiguity. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to
have expressed its intent by the use of such words as are found in the statute. 94

Indeed, the legislative record, if at all to be availed of, should be approached with extreme caution, as legislative
debates and proceedings are powerless to vary the terms of the statute when the meaning is clear. 95 Our holding
in Civil Liberties Union v. Executive Secretary 96 on the resort to deliberations of the constitutional convention to
interpret the Constitution is likewise appropriate in ascertaining statutory intent:

While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional
convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may
be had only when other guides fail as said proceedings are powerless to vary the terms of the Constitution
when the meaning is clear. Debates in the constitutional convention "are of value as showing the views
of the individual members, and as indicating the reasons for their votes, but they give us no light as to
the views of the large majority who did not talk xxx. We think it safer to construe the constitution from
what appears upon its face."97

Moreover, it is easy to selectively cite passages, sometimes out of their proper context, in order to assert a
misleading interpretation. The effect can be dangerous. Minority or solitary views, anecdotal ruminations, or even
the occasional crude witticisms, may improperly acquire the mantle of legislative intent by the sole virtue of their
publication in the authoritative congressional record. Hence, resort to legislative deliberations is allowable when
the statute is crafted in such a manner as to leave room for doubt on the real intent of the legislature.

Section 5 plainly evinces legislative intent to restrict the DTI Secretary's power to impose a general safeguard
measure by preconditioning such imposition on a positive determination by the Tariff Commission. Such
legislative intent should be given full force and effect, as the executive power to impose definitive safeguard
measures is but a delegated power¾the power of taxation, by nature and by command of the fundamental law,
being a preserve of the legislature. 98 Section 28(2), Article VI of the 1987 Constitution confirms the delegation of
legislative power, yet ensures that the prerogative of Congress to impose limitations and restrictions on the
executive exercise of this power:

The Congress may, by law, authorize the President to fix within specified limits, and subject to such
limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework of the national development program of the
Government.99

The safeguard measures which the DTI Secretary may impose under the SMA may take the following variations,
to wit: (a) an increase in, or imposition of any duty on the imported product; (b) a decrease in or the imposition
of a tariff-rate quota on the product; (c) a modification or imposition of any quantitative restriction on the
importation of the product into the Philippines; (d) one or more appropriate adjustment measures, including the
provision of trade adjustment assistance; and (e) any combination of the above-described actions. Except for
the provision of trade adjustment assistance, the measures enumerated by the SMA are essentially imposts,
which precisely are the subject of delegation under Section 28(2), Article VI of the 1987 Constitution. 100
This delegation of the taxation power by the legislative to the executive is authorized by the Constitution
itself.101 At the same time, the Constitution also grants the delegating authority (Congress) the right to impose
restrictions and limitations on the taxation power delegated to the President. 102 The restrictions and limitations
imposed by Congress take on the mantle of a constitutional command, which the executive branch is obliged to
observe.

The SMA empowered the DTI Secretary, as alter ego of the President,103 to impose definitive general safeguard
measures, which basically are tariff imposts of the type spoken of in the Constitution. However, the law did not
grant him full, uninhibited discretion to impose such measures. The DTI Secretary authority is derived from the
SMA; it does not flow from any inherent executive power. Thus, the limitations imposed by Section 5 are absolute,
warranted as they are by a constitutional fiat.104

Philcemcor cites our 1912 ruling in Lamb v. Phipps105 to assert that the DTI Secretary, having the final decision
on the safeguard measure, has the power to evaluate the findings of the Tariff Commission and make an
independent judgment thereon. Given the constitutional and statutory limitations governing the present case, the
citation is misplaced. Lamb pertained to the discretion of the Insular Auditor of the Philippine Islands, whom, as
the Court recognized, "[t]he statutes of the United States require[d] xxx to exercise his judgment upon the legality
xxx [of] provisions of law and resolutions of Congress providing for the payment of money, the means of procuring
testimony upon which he may act."106

Thus in Lamb, while the Court recognized the wide latitude of discretion that may have been vested on the
Insular Auditor, it also recognized that such latitude flowed from, and is consequently limited by, statutory grant.
However, in this case, the provision of the Constitution in point expressly recognizes the authority of Congress
to prescribe limitations in the case of tariffs, export/import quotas and other such safeguard measures. Thus, the
broad discretion granted to the Insular Auditor of the Philippine Islands cannot be analogous to the discretion of
the DTI Secretary which is circumscribed by Section 5 of the SMA.

For that matter, Cariño v. Commissioner on Human Rights, 107 likewise cited by Philcemcor, is also inapplicable
owing to the different statutory regimes prevailing over that case and the present petition. In Cariño, the Court
ruled that the constitutional power of the Commission on Human Rights (CHR) to investigate human rights'
violations did not extend to adjudicating claims on the merits. 108 Philcemcor claims that the functions of the Tariff
Commission being "only investigatory," it could neither decide nor adjudicate. 109

The applicable law governing the issue in Cariño is Section 18, Article XIII of the Constitution, which delineates
the powers and functions of the CHR. The provision does not vest on the CHR the power to adjudicate cases,
but only to investigate all forms of human rights violations. 110 Yet, without modifying the thorough disquisition of
the Court in Cariño on the general limitations on the investigatory power, the precedent is inapplicable because
of the difference in the involved statutory frameworks. The Constitution does not repose binding effect on the
results of the CHR's investigation.111 On the other hand, through Section 5 of the SMA and under the authority
of Section 28(2), Article VI of the Constitution, Congress did intend to bind the DTI Secretary to the determination
made by the Tariff Commission.112 It is of no consequence that such determination results from the exercise of
investigatory powers by the Tariff Commission since Congress is well within its constitutional mandate to limit
the authority of the DTI Secretary to impose safeguard measures in the manner that it sees fit.

The Court of Appeals and Philcemcor also rely on Section 13 of the SMA and Rule 13 of the SMA's Implementing
Rules in support of the view that the DTI Secretary may decide independently of the determination made by the
Tariff Commission. Admittedly, there are certain infelicities in the language of Section 13 and Rule 13. But
reliance should not be placed on the textual imprecisions. Rather, Section 13 and Rule 13 must be viewed in
light of the fundamental prescription imposed by Section 5. 113

Section 13 of the SMA lays down the procedure to be followed after the Tariff Commission renders its report.
The provision reads in full:

SEC. 13. Adoption of Definitive Measures. — Upon its positive determination, the Commission shall
recommend to the Secretary an appropriate definitive measure, in the form of:
 (a) An increase in, or imposition of, any duty on the imported product;

(b) A decrease in or the imposition of a tariff-rate quota (MAV) on the product;

(c) A modification or imposition of any quantitative restriction on the importation of the product into the
Philippines;

(d) One or more appropriate adjustment measures, including the provision of trade adjustment
assistance;

(e) Any combination of actions described in subparagraphs (a) to (d).

The Commission may also recommend other actions, including the initiation of international negotiations
to address the underlying cause of the increase of imports of the product, to alleviate the injury or threat
thereof to the domestic industry, and to facilitate positive adjustment to import competition.

The general safeguard measure shall be limited to the extent of redressing or preventing the injury and
to facilitate adjustment by the domestic industry from the adverse effects directly attributed to the
increased imports: Provided, however, That when quantitative import restrictions are used, such
measures shall not reduce the quantity of imports below the average imports for the three (3) preceding
representative years, unless clear justification is given that a different level is necessary to prevent or
remedy a serious injury.

A general safeguard measure shall not be applied to a product originating from a developing country if
its share of total imports of the product is less than three percent (3%): Provided, however, That
developing countries with less than three percent (3%) share collectively account for not more than nine
percent (9%) of the total imports.

The decision imposing a general safeguard measure, the duration of which is more than one (1) year,
shall be reviewed at regular intervals for purposes of liberalizing or reducing its intensity. The industry
benefiting from the application of a general safeguard measure shall be required to show positive
adjustment within the allowable period. A general safeguard measure shall be terminated where the
benefiting industry fails to show any improvement, as may be determined by the Secretary.

The Secretary shall issue a written instruction to the heads of the concerned government agencies to
implement the appropriate general safeguard measure as determined by the Secretary within fifteen (15)
days from receipt of the report.

In the event of a negative final determination, or if the cash bond is in excess of the definitive safeguard
duty assessed, the Secretary shall immediately issue, through the Secretary of Finance, a written
instruction to the Commissioner of Customs, authorizing the return of the cash bond or the remainder
thereof, as the case may be, previously collected as provisional general safeguard measure within ten
(10) days from the date a final decision has been made: Provided, That the government shall not be liable
for any interest on the amount to be returned. The Secretary shall not accept for consideration another
petition from the same industry, with respect to the same imports of the product under consideration
within one (1) year after the date of rendering such a decision.

When the definitive safeguard measure is in the form of a tariff increase, such increase shall not be
subject or limited to the maximum levels of tariff as set forth in Section 401(a) of the Tariff and Customs
Code of the Philippines.

To better comprehend Section 13, note must be taken of the distinction between the investigatory and
recommendatory functions of the Tariff Commission under the SMA.
The word "determination," as used in the SMA, pertains to the factual findings on whether there are increased
imports into the country of the product under consideration, and on whether such increased imports are a
substantial cause of serious injury or threaten to substantially cause serious injury to the domestic
industry.114 The SMA explicitly authorizes the DTI Secretary to make a preliminary determination, 115 and the Tariff
Commission to make the final determination. 116 The distinction is fundamental, as these functions are not
interchangeable. The Tariff Commission makes its determination only after a formal investigation process, with
such investigation initiated only if there is a positive preliminary determination by the DTI Secretary under Section
7 of the SMA.117 On the other hand, the DTI Secretary may impose definitive safeguard measure only if there is
a positive final determination made by the Tariff Commission.118

In contrast, a "recommendation" is a suggested remedial measure submitted by the Tariff Commission under
Section 13 after making a positive final determination in accordance with Section 5. The Tariff Commission is
not empowered to make a recommendation absent a positive final determination on its part. 119 Under Section
13, the Tariff Commission is required to recommend to the [DTI] Secretary an "appropriate definitive
measure."120 The Tariff Commission "may also recommend other actions, including the initiation of international
negotiations to address the underlying cause of the increase of imports of the products, to alleviate the injury or
threat thereof to the domestic industry and to facilitate positive adjustment to import competition."121

The recommendations of the Tariff Commission, as rendered under Section 13, are not obligatory on the DTI
Secretary. Nothing in the SMA mandates the DTI Secretary to adopt the recommendations made by the Tariff
Commission. In fact, the SMA requires that the DTI Secretary establish that the application of such safeguard
measures is in the public interest, notwithstanding the Tariff Commission's recommendation on the appropriate
safeguard measure based on its positive final determination. 122 The non-binding force of the Tariff Commission's
recommendations is congruent with the command of Section 28(2), Article VI of the 1987 Constitution that only
the President may be empowered by the Congress to impose appropriate tariff rates, import/export quotas and
other similar measures.123 It is the DTI Secretary, as alter ego of the President, who under the SMA may impose
such safeguard measures subject to the limitations imposed therein. A contrary conclusion would in essence
unduly arrogate to the Tariff Commission the executive power to impose the appropriate tariff measures. That is
why the SMA empowers the DTI Secretary to adopt safeguard measures other than those recommended by the
Tariff Commission.

Unlike the recommendations of the Tariff Commission, its determination has a different effect on the DTI
Secretary. Only on the basis of a positive final determination made by the Tariff Commission under Section 5
can the DTI Secretary impose a general safeguard measure. Clearly, then the DTI Secretary is bound by
the determinationmade by the Tariff Commission.

Some confusion may arise because the sixth paragraph of Section 13 124 uses the variant word "determined" in
a different context, as it contemplates "the appropriate general safeguard measure as determined by the
Secretary within fifteen (15) days from receipt of the report." Quite plainly, the word "determined" in this context
pertains to the DTI Secretary's power of choice of the appropriate safeguard measure, as opposed to the Tariff
Commission's power to determine the existence of conditions necessary for the imposition of any safeguard
measure. In relation to Section 5, such choice also relates to the mandate of the DTI Secretary to establish that
the application of safeguard measures is in the public interest, also within the fifteen (15) day period. Nothing in
Section 13 contradicts the instruction in Section 5 that the DTI Secretary is allowed to impose the general
safeguard measures only if there is a positive determination made by the Tariff Commission.

Unfortunately, Rule 13.2 of the Implementing Rules of the SMA is captioned "Final Determination by the
Secretary." The assailed Decision and Philcemcor latch on this phraseology to imply that the factual
determination rendered by the Tariff Commission under Section 5 may be amended or reversed by the DTI
Secretary. Of course, implementing rules should conform, not clash, with the law that they seek to implement,
for a regulation which operates to create a rule out of harmony with the statute is a nullity. 125 Yet imperfect
draftsmanship aside, nothing in Rule 13.2 implies that the DTI Secretary can set aside the determination made
by the Tariff Commission under the aegis of Section 5. This can be seen by examining the specific provisions of
Rule 13.2, thus:

RULE 13.2. Final Determination by the Secretary

 RULE 13.2.a. Within fifteen (15) calendar days from receipt of the Report of the Commission, the
Secretary shall make a decision, taking into consideration the measures recommended by the
Commission.

RULE 13.2.b. If the determination is affirmative, the Secretary shall issue, within two (2) calendar
days after making his decision, a written instruction to the heads of the concerned government
agencies to immediately implement the appropriate general safeguard measure as determined
by him. Provided, however, that in the case of non-agricultural products, the Secretary shall first
establish that the imposition of the safeguard measure will be in the public interest.

RULE 13.2.c. Within two (2) calendar days after making his decision, the Secretary shall also
order its publication in two (2) newspapers of general circulation. He shall also furnish a copy of
his Order to the petitioner and other interested parties, whether affirmative or negative. (Emphasis
supplied.)

Moreover, the DTI Secretary does not have the power to review the findings of the Tariff Commission for it is not
subordinate to the Department of Trade and Industry ("DTI"). It falls under the supervision, not of the DTI nor of
the Department of Finance (as mistakenly asserted by Southern Cross), 126 but of the National Economic
Development Authority, an independent planning agency of the government of co-equal rank as the
DTI.127 As the supervision and control of a Department Secretary is limited to the bureaus, offices, and agencies
under him,128 the DTI Secretary generally cannot exercise review authority over actions of the Tariff Commission.
Neither does the SMA specifically authorize the DTI Secretary to alter, amend or modify in any way the
determination made by the Tariff Commission. The most that the DTI Secretary could do to express displeasure
over the Tariff Commission's actions is to ignore its recommendation, but not its determination.

The word "determination" as used in Rule 13.2 of the Implementing Rules is dissonant with the same word as
employed in the SMA, which in the latter case is undeviatingly in reference to the determination made by the
Tariff Commission. Beyond the resulting confusion, however, the divergent use in Rule 13.2 is explicable as the
Rule textually pertains to the power of the DTI Secretary to review the recommendations of the Tariff
Commission, not the latter's determination. Indeed, an examination of the specific provisions show that there is
no real conflict to reconcile. Rule 13.2 respects the logical order imposed by the SMA. The Rule does not remove
the essential requirement under Section 5 that a positive final determination be made by the Tariff Commission
before a definitive safeguard measure may be imposed by the DTI Secretary.

The assailed Decision characterizes the findings of the Tariff Commission as merely recommendatory and points
to the DTI Secretary as the authority who renders the final decision.129 At the same time, Philcemcor asserts that
the Tariff Commission's functions are merely investigatory, and as such do not include the power to decide or
adjudicate. These contentions, viewed in the context of the fundamental requisite set forth by Section 5, are
untenable. They run counter to the statutory prescription that a positive final determination made by the Tariff
Commission should first be obtained before the definitive safeguard measures may be laid down.

Was it anomalous for Congress to have provided for a system whereby the Tariff Commission may preclude the
DTI, an office of higher rank, from imposing a safeguard measure? Of course, this Court does not inquire into
the wisdom of the legislature but only charts the boundaries of powers and functions set in its enactments. But
then, it is not difficult to see the internal logic of this statutory framework.

For one, as earlier stated, the DTI cannot exercise review powers over the Tariff Commission which is not its
subordinate office.

Moreover, the mechanism established by Congress establishes a measure of check and balance involving two
different governmental agencies with disparate specializations. The matter of safeguard measures is of such
national importance that a decision either to impose or not to impose then could have ruinous effects on
companies doing business in the Philippines. Thus, it is ideal to put in place a system which affords all due
deliberation and calls to fore various governmental agencies exercising their particular specializations.
Finally, if this arrangement drawn up by Congress makes it difficult to obtain a general safeguard measure, it is
because such safeguard measure is the exception, rather than the rule. The Philippines is obliged to observe its
obligations under the GATT, under whose framework trade liberalization, not protectionism, is laid down. Verily,
the GATT actually prescribes conditions before a member-country may impose a safeguard measure. The
pertinent portion of the GATT Agreement on Safeguards reads:

2. A Member may only apply a safeguard measure to a product only if that member has determined,
pursuant to the provisions set out below, that such product is being imported into its territory in such
increased quantities, absolute or relative to domestic production, and under such conditions as to cause
or threaten to cause serious injury to the domestic industry that produces like or directly competitive
products.130

3. (a) A Member may apply a safeguard measure only following an investigation by the competent
authorities of that Member pursuant to procedures previously established and made public in consonance
with Article X of the GATT 1994. This investigation shall include reasonable public notice to all interested
parties and public hearings or other appropriate means in which importers, exporters and other interested
parties could present evidence and their views, including the opportunity to respond to the presentations
of other parties and to submit their views, inter alia, as to whether or not the application of a safeguard
measure would be in the public interest. The competent authorities shall publish a report setting forth
their findings and reasoned conclusions reached on all pertinent issues of fact and law. 131

The SMA was designed not to contradict the GATT, but to complement it. The two requisites laid down in Section
5 for a positive final determination are the same conditions provided under the GATT Agreement on Safeguards
for the application of safeguard measures by a member country. Moreover, the investigatory procedure laid down
by the SMA conforms to the procedure required by the GATT Agreement on Safeguards. Congress has chosen
the Tariff Commission as the competent authority to conduct such investigation. Southern Cross stresses that
applying the provision of the GATT Agreement on Safeguards, the Tariff Commission is clearly empowered to
arrive at binding conclusions.132 We agree: binding on the DTI Secretary is the Tariff Commission's
determinations on whether a product is imported in increased quantities, absolute or relative to domestic
production and whether any such increase is a substantial cause of serious injury or threat thereof to the
domestic industry.133

Satisfied as we are with the proper statutory paradigm within which the SMA should be analyzed, the flaws in
the reasoning of the Court of Appeals and in the arguments of the respondents become apparent. To better
understand the dynamics of the procedure set up by the law leading to the imposition of definitive safeguard
measures, a brief step-by-step recount thereof is in order.

1. After the initiation of an action involving a general safeguard measure, 134 the DTI Secretary makes a
preliminary determination whether the increased imports of the product under consideration substantially cause
or threaten to substantially cause serious injury to the domestic industry, 135 and whether the imposition of a
provisional measure is warranted under Section 8 of the SMA. 136 If the preliminary determination is negative, it
is implied that no further action will be taken on the application.

2. When his preliminary determination is positive, the Secretary immediately transmits the records covering the
application to the Tariff Commission for immediate formal investigation. 137

3. The Tariff Commission conducts its formal investigation, keyed towards making a final determination. In the
process, it holds public hearings, providing interested parties the opportunity to present evidence or otherwise
be heard.138 To repeat, Section 5 enumerates what the Tariff Commission is tasked to determine: (a) whether a
product is being imported into the country in increased quantities, irrespective of whether the product is absolute
or relative to the domestic production; and (b) whether the importation in increased quantities is such that it
causes serious injury or threat to the domestic industry. 139 The findings of the Tariff Commission as to these
matters constitute the final determination, which may be either positive or negative.

4. Under Section 13 of the SMA, if the Tariff Commission makes a positive determination, the Tariff Commission
"recommends to the [DTI] Secretary an appropriate definitive measure." The Tariff Commission "may also
recommend other actions, including the initiation of international negotiations to address the underlying cause of
the increase of imports of the products, to alleviate the injury or threat thereof to the domestic industry, and to
facilitate positive adjustment to import competition." 140

5. If the Tariff Commission makes a positive final determination, the DTI Secretary is then to decide, within fifteen
(15) days from receipt of the report, as to what appropriate safeguard measures should he impose.

6. However, if the Tariff Commission makes a negative final determination, the DTI Secretary cannot impose any
definitive safeguard measure. Under Section 13, he is instructed instead to return whatever cash bond was paid
by the applicant upon the initiation of the action for safeguard measure.

The Effect of the Court's Decision

The Court of Appeals erred in remanding the case back to the DTI Secretary, with the instruction that the DTI
Secretary may impose a general safeguard measure even if there is no positive final determination from the
Tariff Commission. More crucially, the Court of Appeals could not have acquired jurisdiction over Philcemcor's
petition for certiorari in the first place, as Section 29 of the SMA properly vests jurisdiction on the CTA.
Consequently, the assailed Decision is an absolute nullity, and we declare it as such.

What is the effect of the nullity of the assailed Decision on the 5 June 2003 Decision of the DTI Secretary
imposing the general safeguard measure? We have recognized that any initial judicial review of a DTI ruling in
connection with the imposition of a safeguard measure belongs to the CTA. At the same time, the Court also
recognizes the fundamental principle that a null and void judgment cannot produce any legal effect. There is
sufficient cause to establish that the 5 June 2003 Decision of the DTI Secretary resulted from the assailed Court
of Appeals Decision, even if the latter had not yet become final. Conversely, it can be concluded that it was
because of the putative imprimatur of the Court of Appeals' Decision that the DTI Secretary issued his ruling
imposing the safeguard measure. Since the 5 June 2003 Decision derives its legal effect from the
void Decision of the Court of Appeals, this ruling of the DTI Secretary is consequently void. The spring cannot
rise higher than the source.

The DTI Secretary himself acknowledged that he drew stimulating force from the appellate court's Decision for
in his own 5 June 2003 Decision, he declared:

From the aforementioned ruling, the CA has remanded the case to the DTI Secretary for a final decision.
Thus, there is no legal impediment for the Secretary to decide on the application. 141

The inescapable conclusion is that the DTI Secretary needed the assailed Decision of the Court of Appeals to
justify his rendering a second Decision. He explicitly invoked the Court of Appeals' Decision as basis for
rendering his 5 June 2003 ruling, and implicitly recognized that without such Decision he would not have the
authority to revoke his previous ruling and render a new, obverse ruling.

It is clear then that the 25 June 2003 Decision of the DTI Secretary is a product of the void Decision, it being an
attempt to carry out such null judgment. There is therefore no choice but to declare it void as well, lest we
sanction the perverse existence of a fruit from a non-existent tree. It does not even matter what the disposition
of the 25 June 2003 Decision was, its nullity would be warranted even if the DTI Secretary chose to uphold his
earlier ruling denying the application for safeguard measures.

It is also an unfortunate spectacle to behold the DTI Secretary, seeking to enforce a judicial decision which is
not yet final and actually pending review on appeal. Had it been a judge who attempted to enforce a decision
that is not yet final and executory, he or she would have readily been subjected to sanction by this Court. The
DTI Secretary may be beyond the ambit of administrative review by this Court, but we are capacitated to allocate
the boundaries set by the law of the land and to exact fealty to the legal order, especially from the
instrumentalities and officials of government.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is DECLARED NULL
AND VOID and SET ASIDE. The Decision of the DTI Secretary dated 25 June 2003 is also DECLARED NULL
AND VOID and SET ASIDE. No Costs.

G.R. No. 86953 November 6, 1990

MARINE RADIO COMMUNICATIONS ASSOCIATION OF THE PHILIPPINES, INC. (MARCAPI), ROBERTO

GAYA, DAVID ZAFRA and SEGUNDO P. LUSTRE, JR., petitioners,
vs.
HON. RAINERIO O. REYES, in his capacity as Secretary of the Department of Transportation and
Communications (DOTC), HON. JOSE LUIS ALCUAZ, as Commissioner of the National
Telecommunications Commission (NTC), and HON. ROSAURO SIBAL, as Chief of the
Telecommunications Office (TELOF) of DOTC, respondents.

F. Reyes Cabigao for petitioners.

SARMIENTO, J.:

The petitioners are self-described "Filipino enterpreneurs deeply involved in the business of marine radio
communications in the country. 1 They are also operators of "shore-to-ship and ship-to-shore public marine
coastal radio stations, 2 and are holders of certificates of public convenience duly issued by the National
Telecommunications Commission. Among other things, they handle correspondence between vessel
passengers or crew and the public. 3

Sometime in July, 1988, the Department of Transportation and Communications unveiled an P880-million
maritime coastal communications system project, designed to "ensure safety of lives at sea (SOLAS) through
the establishment of efficient communication facilities between coast stations and ship stations and the
improvement of safety in navigational routes at sea." 4 It was set out to provide, among other things, ship-to-
shore and shore-to-ship public corresponding, free of charge. 5

On August 1, 1988, Atty. F. Reyes Cabigao, in his capacity as counsel for the petitioner, Marine Radio
Communications Association of the Philippines, Inc., addressed an appeal to then Secretary Rainerio Reyes, in
the tenor as follows:

xxx xxx xxx

But you undoubtedly would understand their fears. It was their feeling that entry of the government
into their line of business would certainly spell for them financial ruin as it would put into serious
doubt the viability of the entire marine radio communications industry. They say that, as it is today,
the industry is not viable enough. What more, they ask, if the government steps in and eventually
dips its strong fingers into the pie? 6

xxx xxx xxx

On August 17, 1988, the Secretary forwarded a reply, denying Atty. Cabigao's request, for the following reasons:

xxx xxx xxx

MARCAPI's main business concern is public correspondence. This means that MARCAPI
handles only correspondence between passengers or crew on board ship and their respective
offices or residences. On the other hand, the Maritime Coastal Communications System Project
to be implemented by 1989 will offer services in watch and distress signal, medical and
meteorological services, port services, and public correspondence, in their order of priority.
 You will note that public correspondence is only fourth in the order of priority of services to be
offered by the present maritime project. Primarily, it will offer distress and safety communications
service which is obligatory in the maritime mobile service. This consists of monitoring by coast
stations of distress signal from ships in trouble and relaying the messages to the Philippine Coast
Guard which will undertake the search and rescue operations. It also includes safety
communication which refers to weather broadcast and typhoon signals that will be broadcast by
the coast stations regularly. These services are offered to the public for free.

It is worth noting, as it is significant, that the confidence of the public in the competence of private
firms to carry out the aforecited objectives has already been eroded. After that tragic incident of
the sinking of MV Dona Paz, the National Telecommunications Commission and MARINA
conducted constant monitoring by sending distress signals. Out of 1,000 licensed private
operators only one (1) responded to the signal. 7

On February 20, 1989, the petitioners brought the instant suit, alleging, in essence, that Secretary Rainerio
Reyes had been guilty of a grave abuse of discretion.

On June 7, 1990, the Court issued a Resolution, in view of the departure of Secretary Rainerio Reyes, requiring
the present incumbent, Secretary Oscar Orbos, to inform the Court whether or not the Department is adopting
the action of Secretary Reyes. On August 16, 1990, Assistant Secretary Wilfredo Trinidad informed us that
Secretary Orbos is adopting the action complained of.

The petitioners hold that the Department can not compete in the business of public correspondence, and rely on
the provisions of Section 20, of Article II, of the Constitution, which states:

Sec. 20. The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.

The Solicitor General, on the other hand, submits that in spite of the above provision, the Government "cannot
abandon its ministerial functions of rendering public services to the citizenry which private capital would not
ordinarily undertake, or which by its very nature is better equipped to administer for the public welfare than by
any private individual or entity. 8

There is no merit in this petition.

The duty of the State is preeminently "to serve . . . the people, 9 and so also, to "promote a just and dynamic
social order . . . through policies that provide adequate social services. . . . and an improved quality of life for
all. 10

The objectives of government, as expressed in the Charter, are, among other things, "a more equitable
distribution of opportunities, income, and wealth . . . [and] a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people . . . " 11 With respect in particular to property, the
Constitution decrees:

Sec. 6. The use of property bears a social function, and all economic agents shall contribute to
the common good. Individuals and private groups, including corporations, cooperatives, and
similar collective organizations, shall have the right to own, establish, and operate economic
enterprises, subject to the duty of the State to promote distributive justice and to intervene when
the common good so demands. 12

There can hardly be any valid argument against providing for public corresponding, free of charge. It is
compatible with State aims to serve the people under the Constitution, and certainly, amid these hard times, the
State can do no less.
The petitioners cannot legitimately rely on the provisions of Section 20, of Article II, of the Constitution, to defeat
the act complained of. The mandate "recogni[zing] the indispensable role of the private sector" is no more than
an acknowledgment of the importance of private initiative in building the nation. However, it is not a call for official
abdication of duty to citizenry.

The novel provisions of the Charter prescribing private sector participation, especially in the field of economic
activity, 13 come, indeed, no more as responses to State monopoly of economic forces which has unfairly kept
individual initiative from the economic processes and has held back competitiveness in the market. The
Constitution does not bar, however, the Government from undertaking its own initiatives, especially in the domain
of public service, and neither does it repudiate its primacy as chief economic caretaker of the nation.

The principle of laissez faire has long been denied validity in this jurisdiction. In 1969, the Court
promulgated Agricultural Credit and Cooperative Financing Administration v. Confederation of Unions in
Government Corporations and offices, 14 where it was held:

xxx xxx xxx

... The areas which used to be left to private enterprise and initiative and which the government
was called upon to enter optionally and only because it was better equipped to administer for the
public welfare than in any private individual or group of individuals," continue to lose their well-
defined boundaries and to be absorbed within activities that the government must undertake in
its sovereign capacity if it is to meet the increasing social challenges of the times. Here as almost
everywhere else the tendency is undoubtedly towards a greater socialization of economic forces.
Here of course this development was envisioned, indeed adopted as a national policy, by the
Constitution itself in its declaration of principle concerning the promotion of social justice. 15

The requirements of social justice and the necessity for a redistribution of the national wealth and economic
opportunity find in fact a greater emphasis in the 1987 Constitution, notwithstanding the novel concepts inscribed
there. 16 And two decades after this Court wrote it, ACCFAs message remains the same and its lesson holds
true as ever.

The Court is not of the thinking that the act complained of is equivalent to a taking without just compensation.
Albeit we have held that "[w]here the owner is deprived of the ordinary and beneficial use of his property or of its
value by its being diverted to public use, there is taking within the constitutional sense, 17 it does not seem to us
that the Department of Transportation and Communication, by providing for free public correspondence, is guilty
of an uncompensated taking. Rather, the Government merely built a bridge that made the boat obsolete, although
not entirely useless. Certainly, the owner of the boat can not charge the builder of the bridge for lost income.
And certainly, the Government has all the right to build the bridge.

WHEREFORE, the petition is DISMISSED. No costs.

G.R. No. L-49109 December 1, 1987

SANTA ROSA MINING COMPANY, INC., petitioner,

vs.
HON. MINISTER OF NATURAL RESOURCES JOSE J. LEIDO, JR. AND DIRECTOR OF MINES JUANITO
C. FERNANDEZ, respondents. PADILLA, J.:

This is a special civil action for certiorari and prohibition with prayer for a writ of preliminary injunction, to declare
Presidential Decree No. 1214 unconstitutional and to enjoin respondent public officials from enforcing it. On 19
October 1978, the Court required the respondents to comment on the petition and issued a temporary restraining
order continuing until otherwise ordered by the Court.

Petitioner Santa Rosa Mining Company, Inc. (petitioner, for short) is a mining corporation duly organized and
existing under the laws of the Philippines. It alleges that it is the holder of fifty (50) valid mining claims situated
in Jose Panganiban, Camarines Norte, acquired under the provisions of the Act of the U.S. Congress dated 1
July 1902 (Philippine Bill of 1902, for short).

On 14 October 1977, Presidential Decree No. 1214 was issued, requiring holders of subsisting and valid
patentable mining claims located under the provisions of the Philippine Bill of 1902 to file a mining lease
application within one (1) year from the approval of the Decree. Petitioner accordingly filed a mining lease
application, but "under protest," on 13 October 1978, with a reservation annotated on the back of its application
that it is not waiving its rights over its mining claims until the validity of Presidential Decree No. 1214 shall have
been passed upon by this Court. 1

On 10 October 1978, or three (3) days before filing the disputed mining lease application, petitioner filed this
special civil action for certiorari and prohibition, alleging that it has no other plain, speedy and adequate remedy
in the ordinary course of law to protect its rights (except by said petition). Petitioner assails Presidential Decree
No. 1214 as unconstitutional in that it amounts to a deprivation of property without due process of law.

Petitioner avers that its fifty (50) mining claims had already been declared as its own private and exclusive
property in final judgments rendered by the Court of First Instance of Camarines Norte (CFI, for short) in land
registration proceedings initiated by third persons, such as, a September 1951 land title application by a certain
Gervacio Liwanag, where the Director of Mines opposed the grant of said application because herein petitioner,
according to him (Director of Mines), had already located and perfected its mining claims over the area applied
for. Petitioner also cites LRC Case No. 240, filed 11 July 1960, by one Antonio Astudillo and decided in 1974
against said applicant, in which, petitioner's mining claims were described as vested property outside the
jurisdiction of the Director of Mines. 2

In answer, the respondents allege that petitioner has no standing to file the instant petition as it failed to fully
exhaust administrative remedies. They cite the pendency of petitioner's appeal, with the Office of the President,
of the ruling of the respondent Secretary of Natural Resources issued on 2 April 1977 in DNR Case No. 4140,
which upheld the decision of the Director of Mines finding that forty four (44) out of petitioner's fifty (50) mining
claims were void for lack of valid "tie points" as required under the Philippine Bill of 1902, and that all the mining
claims had already been abandoned and cancelled, for petitioner's non-compliance with the legal requirements
of the same Phil. Bill of 1902 and Executive Order No. 141. 3

We agree with respondents' contention that it is premature for the Court to now make a finding on the matter of
whether petitioner had abandoned its mining claims. Until petitioner's appeal shall have been decided by the
Office of the President, where it is pending, petitioner's attempt to seek judicial recognition of the continuing
validity of its mining claims, cannot be entertained by the Court. As stated by the Court, through Mr. Justice
Sabino Padilla in Ham v. Bachrach Motor Co., Inc. 4 applying the principle of exhaustion of administrative
remedies: "By its own act of appealing from the decision of the Director of Lands and the Secretary of Agriculture
and Natural Resources to the President of the Philippines, and without waiting for the latter's decision, the
defendant cannot complain if the courts do not take action be fore the President has decided its appeal." 5

The decisions of the Court of First Instance of Camarines Norte in applications for land registration filed by third
persons covering the area over which petitioner had located and registered its mining claims, as cited by
petitioner, are inapplicable. Said decisions merely denied the applications of such third persons for land
registration over areas already covered by petitioner's mining claims, for failure to show titles that were
registrable under the Torrens system; that was all. While the CFI made a statement in one case declaring that
the petitioner's mining claims are its vested property and even patentable at that time, there is nothing in said
CFI decision that squarely passed upon the question of whether petitioner had valid, patentable (but still
unpatented) mining claims which it had continued to maintain, in compliance with the requirements of applicable
laws. This question, which involves a finding of facts, is precisely the issue before the Office of the President in
the petitioner's appeal from the decision of the Secretary of Natural Resources in DNR Case No. 4140 holding
that petitioner's mining claims are considered abandoned cancelled for failure of petitioner to comply with the
requirements of the Philippine Bill of 1902 and Executive Order No. 141. In short, the decisions of the Court of
First Instance of Camarines Norte, relied upon by petitioner, do not foreclose a proceeding, such as DNR Case
No. 4140, to determine whether petitioner's unpatented mining claims have remained valid and subsisting.
Respondents further contend that, even assuming arguendo that petitioner's mining claims were valid at the
outset, if they are deemed abandoned and cancelled due to non-compliance with the legal requirements for
maintaining a perfected mining claim, under the provisions of the Philippine Bill of 1902, 6 petitioner has no valid
and subsisting claim which could be lost through the implementation of Presidential Decree No. 1214, thus giving
it no standing to question the Decree.

Petitioner, on the other hand, would rebut respondents' argument by declaring that it already had a vested right
over its mining claims even before Presidential Decree No. 1214, following the rulings in McDaniel v.
Apacible 7 and Gold Creek Mining Corp. v. Rodriguez. 8

The Court is not impressed that this is so.

The cases cited by petitioner, true enough, recognize the right of a locator of a mining claim as a property right.
This right, however, is not absolute. It is merely a possessory right, more so, in this case, where petitioner's
claims are still unpatented. They can be lost through abandonment or forfeiture or they may be revoked for valid
legal grounds. The statement in McDaniel v. Apacible that "There is no pretense in the present case that the
petitioner has not complied with all the requirements of the law in making the location of the mineral claims in
question, or that the claims in question were ever abandoned or forfeited by him," 9 confirms that a valid mining
claim may still be lost through abandonment or forfeiture.

The petitioner can not successfully plead the ruling in Gold Creek Mining Corp. v. Rodriguez, supra. In that case,
what was in issue was Gold Creek's right to a patent over its mining claim, after compliance with all legal
requirements for a patent. In the present case, no application for patent is in issue, although as a holder
of patentable mining claims petitioner could have applied for one during all these years but inexplicably did not
do so. In Gold Creek, no finding of abandonment was ever made against the mining claimant as to deprive it of
the initial privilege given by virtue of its location; on the other hand, such a finding has been made in petitioner's
case (although the finding among others is on appeal with the President).

We now come to the question of whether or not Presidential Decree No. 1214 is constitutional. Even
assuming arguendo that petitioner was not bound to exhaust administrative remedies on the question of whether
or not its mining claims are still subsisting (not abandoned or cancelled before challenging the constitutionality
of said Decree, we hold that Presidential Decree No. 1214 is not unconstitutional. 10 It is a valid exercise of the
sovereign power of the State, as owner, over lands of the public domain, of which petitioner's mining
claims still form a part, and over the patrimony of the nation, of which mineral deposits are a valuable asset. It
may be underscored, in this connection, that the Decree does not cover all mining claims located under the Phil.
Bill of 1902, but only those claims over which their locators had failed to obtain a patent. And even then, such
locators may still avail of the renewable twenty-five year (25) lease prescribed by Pres. Decree No. 463, the
Mineral Development Resources Decree of 1974.

Mere location does not mean absolute ownership over the affected land or the mining claim. It merely segregates
the located land or area from the public domain by barring other would-be locators from locating the same and
appropriating for themselves the minerals found therein. To rule otherwise would imply that location is all that is
needed to acquire and maintain rights over a located mining claim. This, we cannot approve or sanction because
it is contrary to the intention of the lawmaker that the locator should faithfully and consistently comply with the
requirements for annual work and improvements in the located mining claim.

Presidential Decree No. 1214 is in accord with Sec. 8, Art. XIV of the 1973 Constitution which states:

All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces
of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the
State. With the exception of agricultural, industrial or commercial, residential and resettlement
lands of the public domain, natural resources shall not be alienated, and no license, concession,
or lease for the exploration, development, exploitation, or utilization of any of the natural resources
shall be granted for a period exceeding twenty-five years, renewable for not more than twenty-
five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other
 than the development of water power, in which cases, beneficial use may be the measure and
the limit of the grant.

The same constitutional mandate is found in Sec. 2, Art. XII of the 1987 Constitution, which declares:

All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces
of potential energy, fisheries, forests or timber, wildlife, flora and fauna. and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. ...

WHEREFORE, premises considered, the petition is hereby DISMISSED. The temporary restraining order issued
by the Court on 19 October 1978 is LIFTED and SET ASIDE. Costs against the petitioner.

SO ORDERED.

G.R. No. 57667. May 28, 1990.

SAN MIGUEL CORPORATION, petitioner, vs. COURT OF APPEALS and DIRECTOR OF LANDS, respondents.

Civil Procedure; Evidence; Factual findings of trial courts may nonetheless be reversed by the Court of Appeals if by the
evidence on record, it appears that the trial court involved erred.—Suffice it to state that while trial courts may have the
opportunity to observe the demeanor of witnesses, their factual findings may nonetheless be reversed by the Court of
Appeals, the appellate court vested by law to resolve both legal and factual issues, if, by the evidence on record, it appears
that the trial court involved erred.

Civil Law; Property; Prescription; Such open, continuous, exclusive and notorious occupation of the disputed properties
for more than 30 years must be conclusively established.—Open, exclusive and undisputed possession of alienable public
land for the period prescribed by law creates the legal fiction whereby the land, upon completion of the requisite period
ipso jure and without the need of judicial or other sanction, ceases to be public land and becomes private property. Such
open, continuous, exclusive and notorious occupation of the disputed properties for more than 30 years must, however,
be conclusively established. This quantum of proof is necessary to avoid the erroneous validation of actually fictitious
claims of possession over the property in dispute.

Same; Same; Land Titles; Tax declarations and receipts not conclusive evidence of ownership or right of possession over a
piece of land.—Tax declarations and receipts are not conclusive evidence of ownership or right of possession over a piece
of land. They are merely indicia of a claim of ownership. Tax declarations only become strong evidence of ownership of
land acquired by prescription, a mode of acquisition of ownership relied upon by petitioner in this case, when
accompanied by proof of actual possession.

PETITION for certiorari to review the decision of the Court of Appeals. Asuncion, J.

The facts are stated in the opinion of the Court.

Ciriaco Lopez, Jr. & Associates for petitioner.

FERNAN, C.J.:

In this petition for review on certiorari, San Miguel Corporation seeks the reversal of the decision of the Court of Appeals
denying its application for registration of a parcel of land in view of its failure to show entitlement thereto.

On December 23, 1975, petitioner San Miguel Corporation (SMC for brevity) purchased from Silverio Perez Lot 684, a
14,531-square-meter parcel of land located in Sta. Anastacia, Sto. Tomas, Batangas, in consideration of the sum of
P133,084.80.2 On February 21, 1977, claiming ownership in fee simple of the land, SMC filed before the then Court of First
Instance, now Regional Trial Court of Batangas an application for its registration under the Land Registration Act.

The Solicitor General, appearing for the Republic of the Philippines, opposed the application for registration contending
that SMC’s claim of ownership in fee simple on the basis of a Spanish title or grant could no longer be availed of by the
applicant as the six-month period from February 16, 1976 prescribed by Presidential Decree No. 892 had elapsed; that the
parcel of land in question is part of the public domain, and that SMC, being a private corporation, is disqualified under
Section 11, Article XIV of the Constitution from holding alienable lands of the public domain. The Solicitor General
thereafter authorized the Provincial Fiscal of Batangas to appear in said case, subject to his supervision and control.

At the initial and only hearing held on October 12, 1977, the Court, upon motion of SMC and there being no opposition to
the application except that of the Republic of the Philippines, issued an order of general default. SMC was allowed to mark
documentary evidence to establish jurisdictional facts and to present additional evidence before the Clerk of Court who
was appointed Commissioner for that purpose.

On December 12, 1977, the lower court, presided by Judge Eduardo C. Abaya, rendered a decision granting the application
for registration and adjudicating the property in favor of SMC.

The Solicitor General appealed to the Court of Appeals. In its decision of March 23, 1981, said court reversed the decision
of the lower court and declared the parcel of land involved as public land. Hence, the instant petition with SMC submitting
the following alleged “grave errors” of the Court of Appeals for this Court’s resolution: (1) the Court of Appeals’ failure to
hold that “prescription is a mode of acquiring title or ownership of land and that the title thus acquired is registrable”; (2)
the Court of Appeals’ disregard of SMC’s evidence “not on the basis of controverting evidence but on the basis of
unfounded suppositions and conjectures,” and (3) the Court of Appeals’ reversal of the factual findings of the trial court
which had the opportunity of observing the demeanor and sincerity of the witnesses.

We need not dwell lengthily on the third “error” assigned by petitioner. Suffice it to state that while trial courts may have
the opportunity to observe the demeanor of witnesses, their factual findings may nonetheless be reversed by the Court
of Appeals, the appellate court vested by law to resolve both legal and factual issues, if, by the evidence on record, it
appears that the trial court involved erred. What is of primary concern to us in this case is the issue of whether or not the
evidence presented by the petitioner is sufficient to warrant a ruling that SMC and/ or its predecessor-in-interest has a
registrable right over Lot 684.

Open, exclusive and undisputed possession of alienable public land for the period prescribed by law creates the legal
fiction whereby the land, upon completion of the requisite period ipso jure and without the need of judicial or other
sanction, ceases to be public land and becomes private property. Such open, continuous, exclusive and notorious
occupation of the disputed properties for more than 30 years must, however, be conclusively established.This quantum
of proof is necessary to avoid the erroneous validation of actually fictitious claims of possession over the property in
dispute.

In this case, petitioner’s claim that its predecessor-in-interest had open, exclusive and undisputed possession of Lot 684
for more than thirty years is anchored on certain documentary and testimonial evidence. Its documentary evidence consist
of tax declaration No. 923 wherein it appears that in 1974, Silverio Perez declared as his own for taxation purposes, a
certain riceland with an area of 1.5657 hectares located in Sta. Anastacia, Sto. Tomas, Batangas, and a certification of the
Office of the Treasurer of Sto. Tomas to the effect that in 1977, Silverio Perez paid realty taxes for the land subject of tax
declaration no. 923.

Tax declarations and receipts are not conclusive evidence of ownership or right of possession over a piece of land.8 They
are merely indicia of a claim of ownership. Tax declarations only become strong evidence of ownership of land acquired
by prescription, a mode of acquisition of ownership relied upon by petitioner in this case, when accompanied by proof of
actual possession.
Such proof of actual possession was sought to be provided by the testimony of vendor Silverio Perez that he had been in
possession of the property since 1933 until he sold it to SMC in 1975; that the property was given to him by his parents
when he got married; that no document evidenced that transfer; that it had been in the possession of his parents since
1925; that he had declared the property in his name for taxation purposes; that he had paid taxes therefor, and that he
was in peaceful, continuous and exclusive possession of the property until its sale to SMC.

Petitioner did not present other witnesses to corroborate Perez’ testimony. Its other witness, Antonio M. de las Alas, Jr.,
a lawyer of the petitioner, simply testified that he handled the negotiations for the purchase of the property; that SMC
was authorized to own and acquire property as shown by its articles of incorporation and by-laws; that since its acquisition
in 1975, the property had been used as a hatchery farm of SMC; that SMC’s possession in the concept of an owner had
been continuous, adverse and against the whole world, and that the land was declared for taxation purposes still in the
name of Silverio Perez.

We hold that there is paucity of evidence of actual, notorious and exclusive possession of the property on the part of
vendor Silverio Perez so as to attach to it the character of an express grant from the government. Indeed, as correctly held
by the Court of Appeals, Silverio Perez’s testimony, being uncorroborated, is simply self-serving and hence, undeserving
of any weight.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortés, JJ., concur.

Decision affirmed.

Note.—No title to registered land in derogation of that of the registered owner shall be acquired by prescription or adverse
possession. (Gallardo vs. Intermediate Appellate Court, 155 SCRA 248.) San Miguel Corporation vs. Court of Appeals, 185
SCRA 722, G.R. No. 57667 May 28, 1990

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.

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 Resolution 3 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.

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 1935 12 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 Commission 18 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 Forestry 26 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 nullity 39 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.

G.R. No. 127882 January 27, 2004

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC., represented by its Chairman F'LONG MIGUEL M.

LUMAYONG, WIGBERTO E. TAÑADA, PONCIANO BENNAGEN, JAIME TADEO, RENATO R.
CONSTANTINO, JR., F'LONG AGUSTIN M. DABIE, ROBERTO P. AMLOY, RAQIM L. DABIE, SIMEON H.
DOLOJO, IMELDA M. GANDON, LENY B. GUSANAN, MARCELO L. GUSANAN, QUINTOL A. LABUAYAN,
LOMINGGES D. LAWAY, BENITA P. TACUAYAN, minors JOLY L. BUGOY, represented by his father
UNDERO D. BUGOY, ROGER M. DADING, represented by his father ANTONIO L. DADING, ROMY M.
LAGARO, represented by his father TOTING A. LAGARO, MIKENY JONG B. LUMAYONG, represented by
his father MIGUEL M. LUMAYONG, RENE T. MIGUEL, represented by his mother EDITHA T. MIGUEL,
ALDEMAR L. SAL, represented by his father DANNY M. SAL, DAISY RECARSE, represented by her
mother LYDIA S. SANTOS, EDWARD M. EMUY, ALAN P. MAMPARAIR, MARIO L. MANGCAL, ALDEN S.
TUSAN, AMPARO S. YAP, VIRGILIO CULAR, MARVIC M.V.F. LEONEN, JULIA REGINA CULAR, GIAN
CARLO CULAR, VIRGILIO CULAR, JR., represented by their father VIRGILIO CULAR, PAUL ANTONIO P.
VILLAMOR, represented by his parents JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR, ANA GININA
R. TALJA, represented by her father MARIO JOSE B. TALJA, SHARMAINE R. CUNANAN, represented by
her father ALFREDO M. CUNANAN, ANTONIO JOSE A. VITUG III, represented by his mother ANNALIZA
A. VITUG, LEAN D. NARVADEZ, represented by his father MANUEL E. NARVADEZ, JR., ROSERIO
MARALAG LINGATING, represented by her father RIO OLIMPIO A. LINGATING, MARIO JOSE B. TALJA,
DAVID E. DE VERA, MARIA MILAGROS L. SAN JOSE, SR., SUSAN O. BOLANIO, OND, LOLITA G.
DEMONTEVERDE, BENJIE L. NEQUINTO,1 ROSE LILIA S. ROMANO, ROBERTO S. VERZOLA, EDUARDO
AURELIO C. REYES, LEAN LOUEL A. PERIA, represented by his father ELPIDIO V. PERIA, 2 GREEN
FORUM PHILIPPINES, GREEN FORUM WESTERN VISAYAS, (GF-WV), ENVIRONMETAL LEGAL
ASSISTANCE CENTER (ELAC), PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT
REPORMANG PANSAKAHAN (KAISAHAN), 3 KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT
REPORMANG PANSAKAHAN (KAISAHAN), PARTNERSHIP FOR AGRARIAN REFORM and RURAL
DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE PART`NERSHIP FOR THE DEVELOPMENT OF
HUMAN RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA), WOMEN'S LEGAL BUREAU (WLB),
CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI), UPLAND DEVELOPMENT
INSTITUTE (UDI), KINAIYAHAN FOUNDATION, INC., SENTRO NG ALTERNATIBONG LINGAP PANLIGAL
(SALIGAN), LEGAL RIGHTS AND NATURAL RESOURCES CENTER, INC. (LRC), petitioners,
vs.
VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES
(DENR), HORACIO RAMOS, DIRECTOR, MINES AND GEOSCIENCES BUREAU (MGB-DENR), RUBEN
TORRES, EXECUTIVE SECRETARY, and WMC (PHILIPPINES), INC. 4 respondents.

CARPIO-MORALES, J.:

The present petition for mandamus and prohibition assails the constitutionality of Republic Act No.
7942,5 otherwise known as the PHILIPPINE MINING ACT OF 1995, along with the Implementing Rules and
Regulations issued pursuant thereto, Department of Environment and Natural Resources (DENR) Administrative
Order 96-40, and of the Financial and Technical Assistance Agreement (FTAA) entered into on March 30, 1995
by the Republic of the Philippines and WMC (Philippines), Inc. (WMCP), a corporation organized under Philippine
laws.

On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No. 279 6 authorizing the
DENR Secretary to accept, consider and evaluate proposals from foreign-owned corporations or foreign
investors for contracts or agreements involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, which, upon appropriate recommendation of the Secretary, the
President may execute with the foreign proponent. In entering into such proposals, the President shall consider
the real contributions to the economic growth and general welfare of the country that will be realized, as well as
the development and use of local scientific and technical resources that will be promoted by the proposed
contract or agreement. Until Congress shall determine otherwise, large-scale mining, for purpose of this Section,
shall mean those proposals for contracts or agreements for mineral resources exploration, development, and
utilization involving a committed capital investment in a single mining unit project of at least Fifty Million Dollars
in United States Currency (US $50,000,000.00). 7

On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to "govern the exploration,
development, utilization and processing of all mineral resources." 8 R.A. No. 7942 defines the modes of mineral
agreements for mining operations, 9 outlines the procedure for their filing and
approval, assignment/transfer and withdrawal,12and fixes their terms.13 Similar provisions govern financial or
10 11

technical assistance agreements.14

The law prescribes the qualifications of contractors 15 and grants them certain rights, including
timber,16 water17 and easement18 rights, and the right to possess explosives. 19 Surface owners, occupants, or
concessionaires are forbidden from preventing holders of mining rights from entering private lands and
concession areas.20 A procedure for the settlement of conflicts is likewise provided for. 21
The Act restricts the conditions for exploration, 22 quarry23 and other24 permits. It regulates the transport, sale and
processing of minerals,25 and promotes the development of mining communities, science and mining
technology,26and safety and environmental protection. 27

The government's share in the agreements is spelled out and allocated, 28 taxes and fees are
imposed,29 incentives granted.30 Aside from penalizing certain acts, 31 the law likewise specifies grounds for the
cancellation, revocation and termination of agreements and permits. 32

On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and Manila Times, two
newspapers of general circulation, R.A. No. 7942 took effect. 33 Shortly before the effectivity of R.A. No. 7942,
however, or on March 30, 1995, the President entered into an FTAA with WMCP covering 99,387 hectares of
land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. 34

On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO) No. 95-
23, s. 1995, otherwise known as the Implementing Rules and Regulations of R.A. No. 7942. This was later
repealed by DAO No. 96-40, s. 1996 which was adopted on December 20, 1996.

On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary demanding that the DENR
stop the implementation of R.A. No. 7942 and DAO No. 96-40,35 giving the DENR fifteen days from receipt 36 to
act thereon. The DENR, however, has yet to respond or act on petitioners' letter. 37

Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary restraining
order. They allege that at the time of the filing of the petition, 100 FTAA applications had already been filed,
covering an area of 8.4 million hectares, 38 64 of which applications are by fully foreign-owned corporations
covering a total of 5.8 million hectares, and at least one by a fully foreign-owned mining company over offshore
areas.39

Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:

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

II

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

III

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

IV

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

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

VI

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

VII

x x x in recommending approval of and implementing the Financial and Technical Assistance Agreement
between the President of the Republic of the Philippines and Western Mining Corporation Philippines Inc.
because the same is illegal and unconstitutional. 40

They pray that the Court issue an order:

(a) Permanently enjoining respondents from acting on any application for Financial or Technical
Assistance Agreements;

(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as unconstitutional and null and
void;

(c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act contained in DENR
Administrative Order No. 96-40 and all other similar administrative issuances as unconstitutional and null
and void; and

(d) Cancelling the Financial and Technical Assistance Agreement issued to Western Mining Philippines,
Inc. as unconstitutional, illegal and null and void.41

Impleaded as public respondents are Ruben Torres, the then Executive Secretary, Victor O. Ramos, the then
DENR Secretary, and Horacio Ramos, Director of the Mines and Geosciences Bureau of the DENR. Also
impleaded is private respondent WMCP, which entered into the assailed FTAA with the Philippine Government.
WMCP is owned by WMC Resources International Pty., Ltd. (WMC), "a wholly owned subsidiary of Western
Mining Corporation Holdings Limited, a publicly listed major Australian mining and exploration company."42 By
WMCP's information, "it is a 100% owned subsidiary of WMC LIMITED." 43

Respondents, aside from meeting petitioners' contentions, argue that the requisites for judicial inquiry have not
been met and that the petition does not comply with the criteria for prohibition and mandamus. Additionally,
respondent WMCP argues that there has been a violation of the rule on hierarchy of courts.

After petitioners filed their reply, this Court granted due course to the petition. The parties have since filed their
respective memoranda.

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

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

It bears stressing that this case has not been rendered moot either by the transfer and registration of the FTAA
to a Filipino-owned corporation or by the non-issuance of a temporary restraining order or a preliminary injunction
to stay the above-said July 23, 2002 decision of the Office of the President. 53 The validity of the transfer remains
in dispute and awaits final judicial determination. This assumes, of course, that such transfer cures the FTAA's
alleged unconstitutionality, on which question judgment is reserved.

WMCP also points out that the original claimowners of the major mineralized areas included in the WMCP FTAA,
namely, Sagittarius, Tampakan Mining Corporation, and Southcot Mining Corporation, are all Filipino-owned
corporations,54 each of which was a holder of an approved Mineral Production Sharing Agreement awarded in
1994, albeit their respective mineral claims were subsumed in the WMCP FTAA; 55 and that these three
companies are the same companies that consolidated their interests in Sagittarius to whom WMC sold its 100%
equity in WMCP.56 WMCP concludes that in the event that the FTAA is invalidated, the MPSAs of the three
corporations would be revived and the mineral claims would revert to their original claimants. 57

These circumstances, while informative, are hardly significant in the resolution of this case, it involving the validity
of the FTAA, not the possible consequences of its invalidation.

Of the above-enumerated seven grounds cited by petitioners, as will be shown later, only the first and the last
need be delved into; in the latter, the discussion shall dwell only insofar as it questions the effectivity of E. O. No.
279 by virtue of which order the questioned FTAA was forged.

Before going into the substantive issues, the procedural questions posed by respondents shall first be tackled.

REQUISITES FOR JUDICIAL REVIEW

When an issue of constitutionality is raised, this Court can exercise its power of judicial review only if the following
requisites are present:

(1) The existence of an actual and appropriate case;

(2) A personal and substantial interest of the party raising the constitutional question;

(3) The exercise of judicial review is pleaded at the earliest opportunity; and

58
(4) The constitutional question is the lis mota of the case.

Respondents claim that the first three requisites are not present.

Section 1, Article VIII of the Constitution states that "(j)udicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable." The power of judicial
review, therefore, is limited to the determination of actual cases and controversies. 59

An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination,
not conjectural or anticipatory,60 lest the decision of the court would amount to an advisory opinion. 61 The power
does not extend to hypothetical questions 62 since any attempt at abstraction could only lead to dialectics and
barren legal questions and to sterile conclusions unrelated to actualities. 63
"Legal standing" or locus standi has been defined as a personal and substantial interest in the case such that
the party has sustained or will sustain direct injury as a result of the governmental act that is being
challenged,64alleging more than a generalized grievance. 65 The gist of the question of standing is whether a party
alleges "such personal stake in the outcome of the controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional
questions."66 Unless a person is injuriously affected in any of his constitutional rights by the operation of statute
or ordinance, he has no standing.67

Petitioners traverse a wide range of sectors. Among them are La Bugal B'laan Tribal Association, Inc., a farmers
and indigenous people's cooperative organized under Philippine laws representing a community actually affected
by the mining activities of WMCP, members of said cooperative, 68 as well as other residents of areas also
affected by the mining activities of WMCP. 69 These petitioners have standing to raise the constitutionality of the
questioned FTAA as they allege a personal and substantial injury. They claim that they would suffer "irremediable
displacement"70 as a result of the implementation of the FTAA allowing WMCP to conduct mining activities in
their area of residence. They thus meet the appropriate case requirement as they assert an interest adverse to
that of respondents who, on the other hand, insist on the FTAA's validity.

In view of the alleged impending injury, petitioners also have standing to assail the validity of E.O. No. 279, by
authority of which the FTAA was executed.

Public respondents maintain that petitioners, being strangers to the FTAA, cannot sue either or both contracting
parties to annul it.71 In other words, they contend that petitioners are not real parties in interest in an action for
the annulment of contract.

Public respondents' contention fails. The present action is not merely one for annulment of contract but for
prohibition and mandamus. Petitioners allege that public respondents acted without or in excess of jurisdiction
in implementing the FTAA, which they submit is unconstitutional. As the case involves constitutional questions,
this Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal
standing. As held in Kilosbayan v. Morato: 72

x x x. "It is important to note . . . that standing because of its constitutional and public policy underpinnings, is
very different from questions relating to whether a particular plaintiff is the real party in interest or has capacity
to sue. Although all three requirements are directed towards ensuring that only certain parties can maintain an
action, standing restrictions require a partial consideration of the merits, as well as broader policy concerns
relating to the proper role of the judiciary in certain areas.["] (FRIEDENTHAL, KANE AND MILLER, CIVIL
PROCEDURE 328 [1985])

Standing is a special concern in constitutional law because in some cases suits are brought not by parties who
have been personally injured by the operation of a law or by official action taken, but by concerned citizens,
taxpayers or voters who actually sue in the public interest. Hence, the question in standing is whether such
parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination
of difficult constitutional questions." (Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 [1962].)

As earlier stated, petitioners meet this requirement.

The challenge against the constitutionality of R.A. No. 7942 and DAO No. 96-40 likewise fulfills the requisites of
justiciability. Although these laws were not in force when the subject FTAA was entered into, the question as to
their validity is ripe for adjudication.

The WMCP FTAA provides:

14.3 Future Legislation

Any term and condition more favourable to Financial &Technical Assistance Agreement contractors resulting
from repeal or amendment of any existing law or regulation or from the enactment of a law, regulation or
administrative order shall be considered a part of this Agreement.

It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions that are more favorable to WMCP,
hence, these laws, to the extent that they are favorable to WMCP, govern the FTAA.

In addition, R.A. No. 7942 explicitly makes certain provisions apply to pre-existing agreements.

SEC. 112. Non-impairment of Existing Mining/Quarrying Rights. – x x x That the provisions of Chapter XIV on
government share in mineral production-sharing agreement and of Chapter XVI on incentives of this Act shall
immediately govern and apply to a mining lessee or contractor unless the mining lessee or contractor indicates
his intention to the secretary, in writing, not to avail of said provisions x x x Provided, finally, That such leases,
production-sharing agreements, financial or technical assistance agreements shall comply with the applicable
provisions of this Act and its implementing rules and regulations.

As there is no suggestion that WMCP has indicated its intention not to avail of the provisions of Chapter XVI of
R.A. No. 7942, it can safely be presumed that they apply to the WMCP FTAA.

Misconstruing the application of the third requisite for judicial review – that the exercise of the review is pleaded
at the earliest opportunity – WMCP points out that the petition was filed only almost two years after the execution
of the FTAA, hence, not raised at the earliest opportunity.

The third requisite should not be taken to mean that the question of constitutionality must be raised immediately
after the execution of the state action complained of. That the question of constitutionality has not been raised
before is not a valid reason for refusing to allow it to be raised later. 73 A contrary rule would mean that a law,
otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party to promptly
file a case to challenge the same.

PROPRIETY OF PROHIBITION AND MANDAMUS

Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2 of Rule 65 read:

SEC. 2. Petition for prohibition. – When the proceedings of any tribunal, corporation, board, or person, whether
exercising functions judicial or ministerial, are without or in excess of its or his jurisdiction, or with grave abuse
of discretion, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition in the proper court alleging the facts with certainty
and praying that judgment be rendered commanding the defendant to desist from further proceeding in the action
or matter specified therein.

Prohibition is a preventive remedy. 74 It seeks a judgment ordering the defendant to desist from continuing with
the commission of an act perceived to be illegal. 75

The petition for prohibition at bar is thus an appropriate remedy. While the execution of the contract itself may
be fait accompli, its implementation is not. Public respondents, in behalf of the Government, have obligations to
fulfill under said contract. Petitioners seek to prevent them from fulfilling such obligations on the theory that the
contract is unconstitutional and, therefore, void.

The propriety of a petition for prohibition being upheld, discussion of the propriety of the mandamus aspect of
the petition is rendered unnecessary.

HIERARCHY OF COURTS

The contention that the filing of this petition violated the rule on hierarchy of courts does not likewise lie. The rule
has been explained thus:
Between two courts of concurrent original jurisdiction, it is the lower court that should initially pass upon the
issues of a case. That way, as a particular case goes through the hierarchy of courts, it is shorn of all but the
important legal issues or those of first impression, which are the proper subject of attention of the appellate court.
This is a procedural rule borne of experience and adopted to improve the administration of justice.

This Court has consistently enjoined litigants to respect the hierarchy of courts. Although this Court has
concurrent jurisdiction with the Regional Trial Courts and the Court of Appeals to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give a party
unrestricted freedom of choice of court forum. The resort to this Court's primary jurisdiction to issue said writs
shall be allowed only where the redress desired cannot be obtained in the appropriate courts or where
exceptional and compelling circumstances justify such invocation. We held in People v. Cuaresma that:

A becoming regard for judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary
writs against first level ("inferior") courts should be filed with the Regional Trial Court, and those against the latter,
with the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs
should be allowed only where there are special and important reasons therefor, clearly and specifically set out
in the petition. This is established policy. It is a policy necessary to prevent inordinate demands upon the 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 x x x.76 [Emphasis supplied.]

The repercussions of the issues in this case on the Philippine mining industry, if not the national economy, as
well as the novelty thereof, constitute exceptional and compelling circumstances to justify resort to this Court in
the first instance.

In all events, this Court has the discretion to take cognizance of a suit which does not satisfy the requirements
of an actual case or legal standing when paramount public interest is involved. 77 When the issues raised are of
paramount importance to the public, this Court may brush aside technicalities of procedure. 78

II

Petitioners contend that E.O. No. 279 did not take effect because its supposed date of effectivity came after
President Aquino had already lost her legislative powers under the Provisional Constitution.

And they likewise claim that the WMC FTAA, which was entered into pursuant to E.O. No. 279, violates Section
2, Article XII of the Constitution because, among other reasons:

(1) It allows foreign-owned companies to extend more than mere financial or technical assistance to the
State in the exploitation, development, and utilization of minerals, petroleum, and other mineral oils, and
even permits foreign owned companies to "operate and manage mining activities."

(2) It allows foreign-owned companies to extend both technical and financial assistance, instead of "either
technical or financial assistance."

To appreciate the import of these issues, a visit to the history of the pertinent constitutional provision, the
concepts contained therein, and the laws enacted pursuant thereto, is in order.

Section 2, Article XII reads in full:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of
potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be under the full control and supervision of
the State. The State may directly undertake such activities or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of
whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law.
In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of
water power, beneficial use may be the measure and limit of the grant.

The State shall protect the 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 fish-workers in rivers, lakes, bays, and
lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral
oils according to the general terms and conditions provided by law, based on real contributions to the economic
growth and general welfare of the country. In such agreements, the State shall promote the development and
use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision, within
thirty days from its execution.

THE SPANISH REGIME AND THE REGALIAN DOCTRINE

The first sentence of Section 2 embodies the Regalian doctrine or jura regalia. Introduced by Spain into these
Islands, this feudal concept is based on the State's power of dominium, which is the capacity of the State to own
or acquire property.79

In its broad sense, the term "jura regalia" refers to royal rights, or those rights which the King has by virtue of his
prerogatives. In Spanish law, it refers to a right which the sovereign has over anything in which a subject has a
right of property or propriedad. These were rights enjoyed during feudal times by the king as the sovereign.

The theory of the feudal system was that title to all lands was originally held by the King, and while the use of
lands was granted out to others who were permitted to hold them under certain conditions, the King theoretically
retained the title. By fiction of law, the King was regarded as the original proprietor of all lands, and the true and
only source of title, and from him all lands were held. The theory of jura regalia was therefore nothing more than
a natural fruit of conquest.80

The Philippines having passed to Spain by virtue of discovery and conquest, 81 earlier Spanish decrees declared
that "all lands were held from the Crown."82

The Regalian doctrine extends not only to land but also to "all natural wealth that may be found in the bowels of
the earth."83 Spain, in particular, recognized the unique value of natural resources, viewing them, especially
minerals, as an abundant source of revenue to finance its wars against other nations. 84 Mining laws during the
Spanish regime reflected this perspective. 85

THE AMERICAN OCCUPATION AND THE CONCESSION REGIME

By the Treaty of Paris of December 10, 1898, Spain ceded "the archipelago known as the Philippine Islands" to
the United States. The Philippines was hence governed by means of organic acts that were in the nature of
charters serving as a Constitution of the occupied territory from 1900 to 1935. 86 Among the principal organic acts
of the Philippines was the Act of Congress of July 1, 1902, more commonly known as the Philippine Bill of 1902,
through which the United States Congress assumed the administration of the Philippine Islands. 87 Section 20 of
said Bill reserved the disposition of mineral lands of the public domain from sale. Section 21 thereof allowed the
free and open exploration, occupation and purchase of mineral deposits not only to citizens of the Philippine
Islands but to those of the United States as well:
Sec. 21. That all valuable mineral deposits in public lands in the Philippine Islands, both surveyed and
unsurveyed, are hereby declared to be free and open to exploration, occupation and purchase, and the land in
which they are found, to occupation and purchase, by citizens of the United States or of said Islands: Provided,
That when on any lands in said Islands entered and occupied as agricultural lands under the provisions of this
Act, but not patented, mineral deposits have been found, the working of such mineral deposits is forbidden until
the person, association, or corporation who or which has entered and is occupying such lands shall have paid
to the Government of said Islands such additional sum or sums as will make the total amount paid for the mineral
claim or claims in which said deposits are located equal to the amount charged by the Government for the same
as mineral claims.

Unlike Spain, the United States considered natural resources as a source of wealth for its nationals and saw fit
to allow both Filipino and American citizens to explore and exploit minerals in public lands, and to grant patents
to private mineral lands.88 A person who acquired ownership over a parcel of private mineral land pursuant to
the laws then prevailing could exclude other persons, even the State, from exploiting minerals within his
property.89 Thus, earlier jurisprudence90 held that:

A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of the statutes
of the United States, has the effect of a grant by the United States of the present and exclusive possession of
the lands located, and this exclusive right of possession and enjoyment continues during the entire life of the
location. x x x.

The discovery of minerals in the ground by one who has a valid mineral location perfects his claim and his
location not only against third persons, but also against the Government. x x x. [Italics in the original.]

The Regalian doctrine and the American system, therefore, differ in one essential respect. Under the Regalian
theory, mineral rights are not included in a grant of land by the state; under the American doctrine, mineral rights
are included in a grant of land by the government.91

Section 21 also made possible the concession (frequently styled "permit", license" or "lease") 92 system.93 This
was the traditional regime imposed by the colonial administrators for the exploitation of natural resources in the
extractive sector (petroleum, hard minerals, timber, etc.). 94

Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting
a particular natural resource within a given area.95 Thus, the concession amounts to complete control by the
concessionaire over the country's natural resource, for it is given exclusive and plenary rights to exploit a
particular resource at the point of extraction.96 In consideration for the right to exploit a natural resource, the
concessionaire either pays rent or royalty, which is a fixed percentage of the gross proceeds. 97

Later statutory enactments by the legislative bodies set up in the Philippines adopted the contractual framework
of the concession.98 For instance, Act No. 2932,99 approved on August 31, 1920, which provided for the
exploration, location, and lease of lands containing petroleum and other mineral oils and gas in the Philippines,
and Act No. 2719,100 approved on May 14, 1917, which provided for the leasing and development of coal lands
in the Philippines, both utilized the concession system. 101

THE 1935 CONSTITUTION AND THE NATIONALIZATION OF NATURAL RESOURCES

By the Act of United States Congress of March 24, 1934, popularly known as the Tydings-McDuffie Law, the
People of the Philippine Islands were authorized to adopt a constitution. 102 On July 30, 1934, the Constitutional
Convention met for the purpose of drafting a constitution, and the Constitution subsequently drafted was
approved by the Convention on February 8, 1935. 103 The Constitution was submitted to the President of the
United States on March 18, 1935. 104 On March 23, 1935, the President of the United States certified that the
Constitution conformed substantially with the provisions of the Act of Congress approved on March 24,
1934.105 On May 14, 1935, the Constitution was ratified by the Filipino people. 106
The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources of the Philippines, including
mineral lands and minerals, to be property belonging to the State. 107 As adopted in a republican system, the
medieval concept of jura regalia is stripped of royal overtones and ownership of the land is vested in the State.108

Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the 1935 Constitution provided:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the
Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the
time of the inauguration of the Government established under this Constitution. Natural resources, with
the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for
the exploitation, development, or utilization of any of the natural resources shall be granted for a period
exceeding twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial
uses other than the development of water power, in which cases beneficial use may be the measure and
the limit of the grant.

The nationalization and conservation of the natural resources of the country was one of the fixed and dominating
objectives of the 1935 Constitutional Convention. 109 One delegate relates:

There was an overwhelming sentiment in the Convention in favor of the principle of state ownership of natural
resources and the adoption of the Regalian doctrine. State ownership of natural resources was seen as a
necessary starting point to secure recognition of the state's power to control their disposition, exploitation,
development, or utilization. The delegates of the Constitutional Convention very well knew that the concept of
State ownership of land and natural resources was introduced by the Spaniards, however, they were not certain
whether it was continued and applied by the Americans. To remove all doubts, the Convention approved the
provision in the Constitution affirming the Regalian doctrine.

The adoption of the principle of state ownership of the natural resources and of the Regalian doctrine was
considered to be a necessary starting point for the plan of nationalizing and conserving the natural resources of
the country. For with the establishment of the principle of state ownership of the natural resources, it would not
be hard to secure the recognition of the power of the State to control their disposition, exploitation, development
or utilization.110

The nationalization of the natural resources was intended (1) to insure their conservation for Filipino posterity;
(2) to serve as an instrument of national defense, helping prevent the extension to the country of foreign control
through peaceful economic penetration; and (3) to avoid making the Philippines a source of international conflicts
with the consequent danger to its internal security and independence. 111

The same Section 1, Article XIII also adopted the concession system, expressly permitting the State to grant
licenses, concessions, or leases for the exploitation, development, or utilization of any of the natural resources.
Grants, however, were limited to Filipinos or entities at least 60% of the capital of which is owned by
Filipinos.lawph!l.ne+

The swell of nationalism that suffused the 1935 Constitution was radically diluted when on November 1946, the
Parity Amendment, which came in the form of an "Ordinance Appended to the Constitution," was ratified in a
plebiscite.112 The Amendment extended, from July 4, 1946 to July 3, 1974, the right to utilize and exploit our
natural resources to citizens of the United States and business enterprises owned or controlled, directly or
indirectly, by citizens of the United States: 113

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing
Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines
with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the
provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond
the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of
all agricultural, timber, and mineral lands of the public domain, waters, minerals, coals, petroleum, and other
mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the
operation of public utilities, shall, if open to any person, be open to citizens of the United States and to all forms
of business enterprise owned or controlled, directly or indirectly, by citizens of the United States in the same
manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or
associations owned or controlled by citizens of the Philippines.

The Parity Amendment was subsequently modified by the 1954 Revised Trade Agreement, also known as the
Laurel-Langley Agreement, embodied in Republic Act No. 1355. 114

THE PETROLEUM ACT OF 1949 AND THE CONCESSION SYSTEM

In the meantime, Republic Act No. 387, 115 also known as the Petroleum Act of 1949, was approved on June 18,
1949.

The Petroleum Act of 1949 employed the concession system for the exploitation of the nation's petroleum
resources. Among the kinds of concessions it sanctioned were exploration and exploitation concessions, which
respectively granted to the concessionaire the exclusive right to explore for 116 or develop117 petroleum within
specified areas.

Concessions may be granted only to duly qualified persons118 who have sufficient finances, organization,
resources, technical competence, and skills necessary to conduct the operations to be undertaken. 119

Nevertheless, the Government reserved the right to undertake such work itself. 120 This proceeded from the
theory that all natural deposits or occurrences of petroleum or natural gas in public and/or private lands in the
Philippines belong to the State. 121 Exploration and exploitation concessions did not confer upon the
concessionaire ownership over the petroleum lands and petroleum deposits. 122 However, they did grant
concessionaires the right to explore, develop, exploit, and utilize them for the period and under the conditions
determined by the law.123

Concessions were granted at the complete risk of the concessionaire; the Government did not guarantee the
existence of petroleum or undertake, in any case, title warranty. 124

Concessionaires were required to submit information as maybe required by the Secretary of Agriculture and
Natural Resources, including reports of geological and geophysical examinations, as well as production
reports.125Exploration126 and exploitation127 concessionaires were also required to submit work
programs.lavvphi1.net

Exploitation concessionaires, in particular, were obliged to pay an annual exploitation tax, 128 the object of which
is to induce the concessionaire to actually produce petroleum, and not simply to sit on the concession without
developing or exploiting it.129 These concessionaires were also bound to pay the Government royalty, which was
not less than 12½% of the petroleum produced and saved, less that consumed in the operations of the
concessionaire.130 Under Article 66, R.A. No. 387, the exploitation tax may be credited against the royalties so
that if the concessionaire shall be actually producing enough oil, it would not actually be paying the exploitation
tax.131

Failure to pay the annual exploitation tax for two consecutive years, 132 or the royalty due to the Government
within one year from the date it becomes due,133 constituted grounds for the cancellation of the concession. In
case of delay in the payment of the taxes or royalty imposed by the law or by the concession, a surcharge of 1%
per month is exacted until the same are paid. 134

As a rule, title rights to all equipment and structures that the concessionaire placed on the land belong to the
exploration or exploitation concessionaire. 135 Upon termination of such concession, the concessionaire had a
right to remove the same.136
The Secretary of Agriculture and Natural Resources was tasked with carrying out the provisions of the law,
through the Director of Mines, who acted under the Secretary's immediate supervision and control. 137 The Act
granted the Secretary the authority to inspect any operation of the concessionaire and to examine all the books
and accounts pertaining to operations or conditions related to payment of taxes and royalties. 138

The same law authorized the Secretary to create an Administration Unit and a Technical Board. 139 The
Administration Unit was charged, inter alia, with the enforcement of the provisions of the law. 140 The Technical
Board had, among other functions, the duty to check on the performance of concessionaires and to determine
whether the obligations imposed by the Act and its implementing regulations were being complied with. 141

Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy Development, analyzed the benefits and
drawbacks of the concession system insofar as it applied to the petroleum industry:

Advantages of Concession. Whether it emphasizes income tax or royalty, the most positive aspect of the
concession system is that the State's financial involvement is virtually risk free and administration is simple and
comparatively low in cost. Furthermore, if there is a competitive allocation of the resource leading to substantial
bonuses and/or greater royalty coupled with a relatively high level of taxation, revenue accruing to the State
under the concession system may compare favorably with other financial arrangements.

Disadvantages of Concession. There are, however, major negative aspects to this system. Because the
Government's role in the traditional concession is passive, it is at a distinct disadvantage in managing and
developing policy for the nation's petroleum resource. This is true for several reasons. First, even though most
concession agreements contain covenants requiring diligence in operations and production, this establishes only
an indirect and passive control of the host country in resource development. Second, and more importantly, the
fact that the host country does not directly participate in resource management decisions inhibits its ability to
train and employ its nationals in petroleum development. This factor could delay or prevent the country from
effectively engaging in the development of its resources. Lastly, a direct role in management is usually necessary
in order to obtain a knowledge of the international petroleum industry which is important to an appreciation of
the host country's resources in relation to those of other countries. 142

Other liabilities of the system have also been noted:

x x x there are functional implications which give the concessionaire great economic power arising from its
exclusive equity holding. This includes, first, appropriation of the returns of the undertaking, subject to a modest
royalty; second, exclusive management of the project; third, control of production of the natural resource, such
as volume of production, expansion, research and development; and fourth, exclusive responsibility for
downstream operations, like processing, marketing, and distribution. In short, even if nominally, the state is the
sovereign and owner of the natural resource being exploited, it has been shorn of all elements of control over
such natural resource because of the exclusive nature of the contractual regime of the concession. The
concession system, investing as it does ownership of natural resources, constitutes a consistent inconsistency
with the principle embodied in our Constitution that natural resources belong to the state and shall not be
alienated, not to mention the fact that the concession was the bedrock of the colonial system in the exploitation
of natural resources.143

Eventually, the concession system failed for reasons explained by Dimagiba:

Notwithstanding the good intentions of the Petroleum Act of 1949, the concession system could not have properly
spurred sustained oil exploration activities in the country, since it assumed that such a capital-intensive, high risk
venture could be successfully undertaken by a single individual or a small company. In effect, concessionaires'
funds were easily exhausted. Moreover, since the concession system practically closed its doors to interested
foreign investors, local capital was stretched to the limits. The old system also failed to consider the highly
sophisticated technology and expertise required, which would be available only to multinational companies. 144

A shift to a new regime for the development of natural resources thus seemed imminent.
PRESIDENTIAL DECREE NO. 87, THE 1973 CONSTITUTION AND THE SERVICE CONTRACT SYSTEM

The promulgation on December 31, 1972 of Presidential Decree No. 87, 145 otherwise known as The Oil
Exploration and Development Act of 1972 signaled such a transformation. P.D. No. 87 permitted the government
to explore for and produce indigenous petroleum through "service contracts." 146

"Service contracts" is a term that assumes varying meanings to different people, and it has carried many names
in different countries, like "work contracts" in Indonesia, "concession agreements" in Africa, "production-sharing
agreements" in the Middle East, and "participation agreements" in Latin America. 147 A functional definition of
"service contracts" in the Philippines is provided as follows:

A service contract is a contractual arrangement for engaging in the exploitation and development of petroleum,
mineral, energy, land and other natural resources by which a government or its agency, or a private person
granted a right or privilege by the government authorizes the other party (service contractor) to engage or
participate in the exercise of such right or the enjoyment of the privilege, in that the latter provides financial or
technical resources, undertakes the exploitation or production of a given resource, or directly manages the
productive enterprise, operations of the exploration and exploitation of the resources or the disposition of
marketing or resources.148

In a service contract under P.D. No. 87, service and technology are furnished by the service contractor for which
it shall be entitled to the stipulated service fee. 149 The contractor must be technically competent and financially
capable to undertake the operations required in the contract.150

Financing is supposed to be provided by the Government to which all petroleum produced belongs. 151 In case
the Government is unable to finance petroleum exploration operations, the contractor may furnish services,
technology and financing, and the proceeds of sale of the petroleum produced under the contract shall be the
source of funds for payment of the service fee and the operating expenses due the contractor. 152 The contractor
shall undertake, manage and execute petroleum operations, subject to the government overseeing the
management of the operations. 153 The contractor provides all necessary services and technology and the
requisite financing, performs the exploration work obligations, and assumes all exploration risks such that if no
petroleum is produced, it will not be entitled to reimbursement. 154 Once petroleum in commercial quantity is
discovered, the contractor shall operate the field on behalf of the government. 155

P.D. No. 87 prescribed minimum terms and conditions for every service contract.156 It also granted the contractor
certain privileges, including exemption from taxes and payment of tariff duties, 157 and permitted the repatriation
of capital and retention of profits abroad. 158

Ostensibly, the service contract system had certain advantages over the concession regime. 159 It has been
opined, though, that, in the Philippines, our concept of a service contract, at least in the petroleum industry, was
basically a concession regime with a production-sharing element.160

On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification of a new
Constitution.161Article XIV on the National Economy and Patrimony contained provisions similar to the 1935
Constitution with regard to Filipino participation in the nation's natural resources. Section 8, Article XIV thereof
provides:

Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of
potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State. With the
exception of agricultural, industrial or commercial, residential and resettlement lands of the public domain, natural
resources shall not be alienated, and no license, concession, or lease for the exploration, development,
exploitation, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five
years, renewable for not more than twenty-five years, except as to water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be
the measure and the limit of the grant.
While Section 9 of the same Article maintained the Filipino-only policy in the enjoyment of natural resources, it
also allowed Filipinos, upon authority of the Batasang Pambansa, to enter into service contracts with any person
or entity for the exploration or utilization of natural resources.

Sec. 9. The disposition, exploration, development, exploitation, or utilization of any of the natural resources of
the Philippines shall be limited to citizens, or to corporations or associations at least sixty per centum of which is
owned by such citizens. The Batasang Pambansa, in the national interest, may allow such citizens, corporations
or associations to enter into service contracts for financial, technical, management, or other forms of assistance
with any person or entity for the exploration, or utilization of any of the natural resources. Existing valid and
binding service contracts for financial, technical, management, or other forms of assistance are hereby
recognized as such.

The concept of service contracts, according to one delegate, was borrowed from the methods followed by India,
Pakistan and especially Indonesia in the exploration of petroleum and mineral oils.162 The provision allowing
such contracts, according to another, was intended to "enhance the proper development of our natural resources
since Filipino citizens lack the needed capital and technical know-how which are essential in the proper
exploration, development and exploitation of the natural resources of the country." 163

The original idea was to authorize the government, not private entities, to enter into service contracts with foreign
entities.164 As finally approved, however, a citizen or private entity could be allowed by the National Assembly to
enter into such service contract.165 The prior approval of the National Assembly was deemed sufficient to protect
the national interest.166 Notably, none of the laws allowing service contracts were passed by the Batasang
Pambansa. Indeed, all of them were enacted by presidential decree.

On March 13, 1973, shortly after the ratification of the new Constitution, the President promulgated Presidential
Decree No. 151.167 The law allowed Filipino citizens or entities which have acquired lands of the public domain
or which own, hold or control such lands to enter into service contracts for financial, technical, management or
other forms of assistance with any foreign persons or entity for the exploration, development, exploitation or
utilization of said lands.168

Presidential Decree No. 463,169 also known as The Mineral Resources Development Decree of 1974, was
enacted on May 17, 1974. Section 44 of the decree, as amended, provided that a lessee of a mining claim may
enter into a service contract with a qualified domestic or foreign contractor for the exploration, development and
exploitation of his claims and the processing and marketing of the product thereof.

Presidential Decree No. 704170 (The Fisheries Decree of 1975), approved on May 16, 1975, allowed Filipinos
engaged in commercial fishing to enter into contracts for financial, technical or other forms of assistance with
any foreign person, corporation or entity for the production, storage, marketing and processing of fish and
fishery/aquatic products.171

Presidential Decree No. 705172 (The Revised Forestry Code of the Philippines), approved on May 19, 1975,
allowed "forest products licensees, lessees, or permitees to enter into service contracts for financial, technical,
management, or other forms of assistance . . . with any foreign person or entity for the exploration, development,
exploitation or utilization of the forest resources." 173

Yet another law allowing service contracts, this time for geothermal resources, was Presidential Decree No.
1442,174 which was signed into law on June 11, 1978. Section 1 thereof authorized the Government to enter into
service contracts for the exploration, exploitation and development of geothermal resources with a foreign
contractor who must be technically and financially capable of undertaking the operations required in the service
contract.

Thus, virtually the entire range of the country's natural resources –from petroleum and minerals to geothermal
energy, from public lands and forest resources to fishery products – was well covered by apparent legal authority
to engage in the direct participation or involvement of foreign persons or corporations (otherwise disqualified) in
the exploration and utilization of natural resources through service contracts. 175
THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL ASSISTANCE AGREEMENTS

After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of power under a revolutionary
government. On March 25, 1986, President Aquino issued Proclamation No. 3, 176 promulgating the Provisional
Constitution, more popularly referred to as the Freedom Constitution. By authority of the same Proclamation, the
President created a Constitutional Commission (CONCOM) to draft a new constitution, which took effect on the
date of its ratification on February 2, 1987. 177

The 1987 Constitution retained the Regalian doctrine. The first sentence of Section 2, Article XII states: "All lands
of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State."

Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second sentence of the same
provision, prohibits the alienation of natural resources, except agricultural lands.

The third sentence of the same paragraph is new: "The exploration, development and utilization of natural
resources shall be under the full control and supervision of the State." The constitutional policy of the State's "full
control and supervision" over natural resources proceeds from the concept of jura regalia, as well as the
recognition of the importance of the country's natural resources, not only for national economic development,
but also for its security and national defense. 178 Under this provision, the State assumes "a more dynamic role"
in the exploration, development and utilization of natural resources. 179

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions authorizing the State to
grant licenses, concessions, or leases for the exploration, exploitation, development, or utilization of natural
resources. By such omission, the utilization of inalienable lands of public domain through "license, concession
or lease" is no longer allowed under the 1987 Constitution. 180

Having omitted the provision on the concession system, Section 2 proceeded to introduce "unfamiliar
language":181

The State may directly undertake such activities or it may enter into co-production, joint venture, or production-
sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens.

Consonant with the State's "full supervision and control" over natural resources, Section 2 offers the State two
"options."182 One, the State may directly undertake these activities itself; or two, it may enter into co-production,
joint venture, or production-sharing agreements with Filipino citizens, or entities at least 60% of whose capital is
owned by such citizens.

A third option is found in the third paragraph of the same section:

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as
cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and
lagoons.

While the second and third options are limited only to Filipino citizens or, in the case of the former, to corporations
or associations at least 60% of the capital of which is owned by Filipinos, a fourth allows the participation of
foreign-owned corporations. The fourth and fifth paragraphs of Section 2 provide:

The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral
oils according to the general terms and conditions provided by law, based on real contributions to the economic
growth and general welfare of the country. In such agreements, the State shall promote the development and
use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance with this provision, within
thirty days from its execution.

Although Section 2 sanctions the participation of foreign-owned corporations in the exploration, development,
and utilization of natural resources, it imposes certain limitations or conditions to agreements with such
corporations.

First, the parties to FTAAs. Only the President, in behalf of the State, may enter into these agreements,
and only with corporations. By contrast, under the 1973 Constitution, a Filipino citizen, corporation or
association may enter into a service contract with a "foreign person or entity."

Second, the size of the activities: only large-scale exploration, development, and utilization is allowed.
The term "large-scale usually refers to very capital-intensive activities."183

Third, the natural resources subject of the activities is restricted to minerals, petroleum and other mineral
oils, the intent being to limit service contracts to those areas where Filipino capital may not be sufficient.184

Fourth, consistency with the provisions of statute. The agreements must be in accordance with the terms
and conditions provided by law.

Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must
be based on real contributions to economic growth and general welfare of the country.

Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and
use of local scientific and technical resources.

Seventh, the notification requirement. The President shall notify Congress of every financial or technical
assistance agreement entered into within thirty days from its execution.

Finally, the scope of the agreements. While the 1973 Constitution referred to "service contracts for
financial, technical, management, or other forms of assistance" the 1987 Constitution provides for
"agreements. . . involving either financial or technical assistance." It bears noting that the phrases "service
contracts" and "management or other forms of assistance" in the earlier constitution have been omitted.

By virtue of her legislative powers under the Provisional Constitution, 185 President Aquino, on July 10, 1987,
signed into law E.O. No. 211 prescribing the interim procedures in the processing and approval of applications
for the exploration, development and utilization of minerals. The omission in the 1987 Constitution of the term
"service contracts" notwithstanding, the said E.O. still referred to them in Section 2 thereof:

Sec. 2. Applications for the exploration, development and utilization of mineral resources, including renewal
applications and applications for approval of operating agreements and mining service contracts, shall be
accepted and processed and may be approved x x x. [Emphasis supplied.]

The same law provided in its Section 3 that the "processing, evaluation and approval of all mining applications .
. . operating agreements and service contracts . . . shall be governed by Presidential Decree No. 463, as
amended, other existing mining laws, and their implementing rules and regulations. . . ."

As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279 by authority of which the
subject WMCP FTAA was executed on March 30, 1995.

On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15 thereof declares that the Act
"shall govern the exploration, development, utilization, and processing of all mineral resources." Such declaration
notwithstanding, R.A. No. 7942 does not actually cover all the modes through which the State may undertake
the exploration, development, and utilization of natural resources.
The State, being the owner of the natural resources, is accorded the primary power and responsibility in the
exploration, development and utilization thereof. As such, it may undertake these activities through four modes:

The State may directly undertake such activities.

(2) The State may enter into co-production, joint venture or production-sharing agreements with Filipino
citizens or qualified corporations.

(3) Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens.

(4) For the large-scale exploration, development and utilization of minerals, petroleum and other mineral
oils, the President may enter into agreements with foreign-owned corporations involving technical or
financial assistance.186

Except to charge the Mines and Geosciences Bureau of the DENR with performing researches and
surveys,187 and a passing mention of government-owned or controlled corporations,188 R.A. No. 7942 does not
specify how the State should go about the first mode. The third mode, on the other hand, is governed by Republic
Act No. 7076189(the People's Small-Scale Mining Act of 1991) and other pertinent laws. 190 R.A. No. 7942 primarily
concerns itself with the second and fourth modes.

Mineral production sharing, co-production and joint venture agreements are collectively classified by R.A. No.
7942 as "mineral agreements."191 The Government participates the least in a mineral production sharing
agreement (MPSA). In an MPSA, the Government grants the contractor 192 the exclusive right to conduct mining
operations within a contract area 193 and shares in the gross output. 194 The MPSA contractor provides the
financing, technology, management and personnel necessary for the agreement's implementation. 195 The total
government share in an MPSA is the excise tax on mineral products under Republic Act No. 7729, 196 amending
Section 151(a) of the National Internal Revenue Code, as amended. 197

In a co-production agreement (CA),198 the Government provides inputs to the mining operations other than the
mineral resource,199 while in a joint venture agreement (JVA), where the Government enjoys the greatest
participation, the Government and the JVA contractor organize a company with both parties having equity
shares.200 Aside from earnings in equity, the Government in a JVA is also entitled to a share in the gross
output.201The Government may enter into a CA 202 or JVA203 with one or more contractors. The Government's
share in a CA or JVA is set out in Section 81 of the law:

The share of the Government in co-production and joint venture agreements shall be negotiated by the
Government and the contractor taking into consideration the: (a) capital investment of the project, (b) the risks
involved, (c) contribution of the project to the economy, and (d) other factors that will provide for a fair and
equitable sharing between the Government and the contractor. The Government shall also be entitled to
compensations for its other contributions which shall be agreed upon by the parties, and shall consist, among
other things, the contractor's income tax, excise tax, special allowance, withholding tax due from the contractor's
foreign stockholders arising from dividend or interest payments to the said foreign stockholders, in case of a
foreign national and all such other taxes, duties and fees as provided for under existing laws.

All mineral agreements grant the respective contractors the exclusive right to conduct mining operations and to
extract all mineral resources found in the contract area. 204 A "qualified person" may enter into any of the mineral
agreements with the Government.205 A "qualified person" is

any citizen of the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative
organized or authorized for the purpose of engaging in mining, with technical and financial capability to undertake
mineral resources development and duly registered in accordance with law at least sixty per centum (60%) of
the capital of which is owned by citizens of the Philippines x x x. 206

The fourth mode involves "financial or technical assistance agreements." An FTAA is defined as "a contract
involving financial or technical assistance for large-scale exploration, development, and utilization of natural
resources."207 Any qualified person with technical and financial capability to undertake large-scale exploration,
development, and utilization of natural resources in the Philippines may enter into such agreement directly with
the Government through the DENR. 208 For the purpose of granting an FTAA, a legally organized foreign-owned
corporation (any corporation, partnership, association, or cooperative duly registered in accordance with law in
which less than 50% of the capital is owned by Filipino citizens) 209 is deemed a "qualified person."210

Other than the difference in contractors' qualifications, the principal distinction between mineral agreements and
FTAAs is the maximum contract area to which a qualified person may hold or be granted. 211 "Large-scale" under
R.A. No. 7942 is determined by the size of the contract area, as opposed to the amount invested (US
$50,000,000.00), which was the standard under E.O. 279.

Like a CA or a JVA, an FTAA is subject to negotiation. 212 The Government's contributions, in the form of taxes,
in an FTAA is identical to its contributions in the two mineral agreements, save that in an FTAA:

The collection of Government share in financial or technical assistance agreement shall commence after the
financial or technical assistance agreement contractor has fully recovered its pre-operating expenses,
exploration, and development expenditures, inclusive. 213

III

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

THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279

Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was executed, did not come into
effect.

E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two days before the opening of
Congress on July 27, 1987.214 Section 8 of the E.O. states that the same "shall take effect immediately." This
provision, according to petitioners, runs counter to Section 1 of E.O. No. 200, 215 which provides:

SECTION 1. Laws shall take effect after fifteen days following the completion of their publication either in the
Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise
provided.216 [Emphasis supplied.]

On that premise, petitioners contend that E.O. No. 279 could have only taken effect fifteen days after its
publication at which time Congress had already convened and the President's power to legislate had ceased.

Respondents, on the other hand, counter that the validity of E.O. No. 279 was settled in Miners Association of
the Philippines v. Factoran, supra. This is of course incorrect for the issue in Miners Association was not the
validity of E.O. No. 279 but that of DAO Nos. 57 and 82 which were issued pursuant thereto.

Nevertheless, petitioners' contentions have no merit.

It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking effect on a date other than –
even before – the 15-day period after its publication. Where a law provides for its own date of effectivity, such
date prevails over that prescribed by E.O. No. 200. Indeed, this is the very essence of the phrase "unless it is
otherwise provided" in Section 1 thereof. Section 1, E.O. No. 200, therefore, applies only when a statute does
not provide for its own date of effectivity.

What is mandatory under E.O. No. 200, and what due process requires, as this Court held in Tañada v.
Tuvera,217is the publication of the law for without such notice and publication, there would be no basis for the
application of the maxim "ignorantia legis n[eminem] excusat." It would be the height of injustice to punish or
otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a
constructive one.

While the effectivity clause of E.O. No. 279 does not require its publication, it is not a ground for its invalidation
since the Constitution, being "the fundamental, paramount and supreme law of the nation," is deemed written in
the law.218 Hence, the due process clause,219 which, so Tañada held, mandates the publication of statutes, is
read into Section 8 of E.O. No. 279. Additionally, Section 1 of E.O. No. 200 which provides for publication "either
in the Official Gazette or in a newspaper of general circulation in the Philippines," finds suppletory application. It
is significant to note that E.O. No. 279 was actually published in the Official Gazette 220 on August 3, 1987.

From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Tañada v. Tuvera, this Court
holds that E.O. No. 279 became effective immediately upon its publication in the Official Gazette on August 3,
1987.

That such effectivity took place after the convening of the first Congress is irrelevant. At the time President
Aquino issued E.O. No. 279 on July 25, 1987, she was still validly exercising legislative powers under the
Provisional Constitution.221 Article XVIII (Transitory Provisions) of the 1987 Constitution explicitly states:

Sec. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is
convened.

The convening of the first Congress merely precluded the exercise of legislative powers by President Aquino; it
did not prevent the effectivity of laws she had previously enacted.

There can be no question, therefore, that E.O. No. 279 is an effective, and a validly enacted, statute.

THE CONSTITUTIONALITY OF THE WMCP FTAA

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

Petitioners' submission is well-taken. It is a cardinal rule in the interpretation of constitutions that the instrument
must be so construed as to give effect to the intention of the people who adopted it. 223 This intention is to be
sought in the constitution itself, and the apparent meaning of the words is to be taken as expressing it, except in
cases where that assumption would lead to absurdity, ambiguity, or contradiction. 224 What the Constitution says
according to the text of the provision, therefore, compels acceptance and negates the power of the courts to
alter it, based on the postulate that the framers and the people mean what they say. 225 Accordingly, following the
literal text of the Constitution, assistance accorded by foreign-owned corporations in the large-scale exploration,
development, and utilization of petroleum, minerals and mineral oils should be limited to "technical" or "financial"
assistance only.

WMCP nevertheless submits that the word "technical" in the fourth paragraph of Section 2 of E.O. No. 279
encompasses a "broad number of possible services," perhaps, "scientific and/or technological in basis." 226 It thus
posits that it may also well include "the area of management or operations . . . so long as such assistance
requires specialized knowledge or skills, and are related to the exploration, development and utilization of mineral
resources."227

This Court is not persuaded. As priorly pointed out, the phrase "management or other forms of assistance" in
the 1973 Constitution was deleted in the 1987 Constitution, which allows only "technical or financial assistance."
Casus omisus pro omisso habendus est. A person, object or thing omitted from an enumeration must be held to
have been omitted intentionally. 228 As will be shown later, the management or operation of mining activities by
foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of
the 1987 Constitution sought to eradicate.

Respondents insist that "agreements involving technical or financial assistance" is just another term for service
contracts. They contend that the proceedings of the CONCOM indicate "that although the terminology 'service
contract' was avoided [by the Constitution], the concept it represented was not." They add that "[t]he concept is
embodied in the phrase 'agreements involving financial or technical assistance.'" 229 And point out how members
of the CONCOM referred to these agreements as "service contracts." For instance:

SR. TAN. Am I correct in thinking that the only difference between these future service contracts and the
past service contracts under Mr. Marcos is the general law to be enacted by the legislature and the
notification of Congress by the President? That is the only difference, is it not?

MR. VILLEGAS. That is right.

SR. TAN. So those are the safeguards[?]

MR. VILLEGAS. Yes. There was no law at all governing service contracts before.

SR. TAN. Thank you, Madam President. 230 [Emphasis supplied.]

WMCP also cites the following statements of Commissioners Gascon, Garcia, Nolledo and Tadeo who
alluded to service contracts as they explained their respective votes in the approval of the draft Article:

MR. GASCON. Mr. Presiding Officer, I vote no primarily because of two reasons: One, the provision on
service contracts. I felt that if we would constitutionalize any provision on service contracts, this should
always be with the concurrence of Congress and not guided only by a general law to be promulgated by
Congress. x x x.231 [Emphasis supplied.]

x x x.

MR. GARCIA. Thank you.

I vote no. x x x.

Service contracts are given constitutional legitimization in Section 3, even when they have been proven
to be inimical to the interests of the nation, providing as they do the legal loophole for the exploitation of
our natural resources for the benefit of foreign interests. They constitute a serious negation of Filipino
control on the use and disposition of the nation's natural resources, especially with regard to those which
are nonrenewable.232[Emphasis supplied.]

xxx

MR. NOLLEDO. While there are objectionable provisions in the Article on National Economy and
Patrimony, going over said provisions meticulously, setting aside prejudice and personalities will reveal
that the article contains a balanced set of provisions. I hope the forthcoming Congress will implement
such provisions taking into account that Filipinos should have real control over our economy and
patrimony, and if foreign equity is permitted, the same must be subordinated to the imperative demands
of the national interest.

x x x.

It is also my understanding that service contracts involving foreign corporations or entities are resorted
to only when no Filipino enterprise or Filipino-controlled enterprise could possibly undertake the
exploration or exploitation of our natural resources and that compensation under such contracts cannot
 and should not equal what should pertain to ownership of capital. In other words, the service contract
should not be an instrument to circumvent the basic provision, that the exploration and exploitation of
natural resources should be truly for the benefit of Filipinos.

Thank you, and I vote yes.233 [Emphasis supplied.]

x x x.

MR. TADEO. Nais ko lamang ipaliwanag ang aking boto.

Matapos suriin ang kalagayan ng Pilipinas, ang saligang suliranin, pangunahin ang salitang
"imperyalismo." Ang ibig sabihin nito ay ang sistema ng lipunang pinaghaharian ng iilang monopolyong
kapitalista at ang salitang "imperyalismo" ay buhay na buhay sa National Economy and Patrimony na
nating ginawa. Sa pamamagitan ng salitang "based on," naroroon na ang free trade sapagkat tayo ay
mananatiling tagapagluwas ng hilaw na sangkap at tagaangkat ng yaring produkto. Pangalawa, naroroon
pa rin ang parity rights, ang service contract, ang 60-40 equity sa natural resources. Habang naghihirap
ang sambayanang Pilipino, ginagalugad naman ng mga dayuhan ang ating likas na yaman. Kailan man
ang Article on National Economy and Patrimony ay hindi nagpaalis sa pagkaalipin ng ating ekonomiya
sa kamay ng mga dayuhan. Ang solusyon sa suliranin ng bansa ay dalawa lamang: ang pagpapatupad
ng tunay na reporma sa lupa at ang national industrialization. Ito ang tinatawag naming pagsikat ng araw
sa Silangan. Ngunit ang mga landlords and big businessmen at ang mga komprador ay nagsasabi na
ang free trade na ito, ang kahulugan para sa amin, ay ipinipilit sa ating sambayanan na ang araw ay
sisikat sa Kanluran. Kailan man hindi puwedeng sumikat ang araw sa Kanluran. I vote no. 234 [Emphasis
supplied.]

This Court is likewise not persuaded.

As earlier noted, the phrase "service contracts" has been deleted in the 1987 Constitution's Article on National
Economy and Patrimony. If the CONCOM intended to retain the concept of service contracts under the 1973
Constitution, it could have simply adopted the old terminology ("service contracts") instead of employing new
and unfamiliar terms ("agreements . . . involving either technical or financial assistance"). Such a difference
between the language of a provision in a revised constitution and that of a similar provision in the preceding
constitution is viewed as indicative of a difference in purpose. 235 If, as respondents suggest, the concept of
"technical or financial assistance" agreements is identical to that of "service contracts," the CONCOM would not
have bothered to fit the same dog with a new collar. To uphold respondents' theory would reduce the first to a
mere euphemism for the second and render the change in phraseology meaningless.

An examination of the reason behind the change confirms that technical or financial assistance agreements are
not synonymous to service contracts.

[T]he Court in construing a Constitution should bear in mind the object sought to be accomplished by its adoption,
and the evils, if any, sought to be prevented or remedied. A doubtful provision will be examined in light of the
history of the times, and the condition and circumstances under which the Constitution was framed. The object
is to ascertain the reason which induced the framers of the Constitution to enact the particular provision and the
purpose sought to be accomplished thereby, in order to construe the whole as to make the words consonant to
that reason and calculated to effect that purpose. 236

As the following question of Commissioner Quesada and Commissioner Villegas' answer shows the drafters
intended to do away with service contracts which were used to circumvent the capitalization (60%-40%)
requirement:

MS. QUESADA. The 1973 Constitution used the words "service contracts." In this particular Section 3,
is there a safeguard against the possible control of foreign interests if the Filipinos go into coproduction
with them?
 MR. VILLEGAS. Yes. In fact, the deletion of the phrase "service contracts" was our first attempt to avoid
some of the abuses in the past regime in the use of service contracts to go around the 60-40 arrangement.
The safeguard that has been introduced – and this, of course can be refined – is found in Section 3, lines
25 to 30, where Congress will have to concur with the President on any agreement entered into between
a foreign-owned corporation and the government involving technical or financial assistance for large-
scale exploration, development and utilization of natural resources. 237 [Emphasis supplied.]

In a subsequent discussion, Commissioner Villegas allayed the fears of Commissioner Quesada

regarding the participation of foreign interests in Philippine natural resources, which was supposed to be
restricted to Filipinos.

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

MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next sentence, it states:

Such activities may be directly undertaken by the State, or it may enter into co-production, joint venture,
production-sharing agreements with Filipino citizens.

So we are still limiting it only to Filipino citizens.

x x x.

MS. QUESADA. Going back to Section 3, the section suggests that:

The exploration, development, and utilization of natural resources… may be directly undertaken by the State, or
it may enter into co-production, joint venture or production-sharing agreement with . . . corporations or
associations at least sixty per cent of whose voting stock or controlling interest is owned by such citizens.

Lines 25 to 30, on the other hand, suggest that in the large-scale exploration, development and utilization of
natural resources, the President with the concurrence of Congress may enter into agreements with foreign-
owned corporations even for technical or financial assistance.

I wonder if this part of Section 3 contradicts the second part. I am raising this point for fear that foreign investors
will use their enormous capital resources to facilitate the actual exploitation or exploration, development and
effective disposition of our natural resources to the detriment of Filipino investors. I am not saying that we should
not consider borrowing money from foreign sources. What I refer to is that foreign interest should be allowed to
participate only to the extent that they lend us money and give us technical assistance with the appropriate
government permit. In this way, we can insure the enjoyment of our natural resources by our own people.

MR. VILLEGAS. Actually, the second provision about the President does not permit foreign investors to
participate. It is only technical or financial assistance – they do not own anything – but on conditions that have
to be determined by law with the concurrence of Congress. So, it is very restrictive.

If the Commissioner will remember, this removes the possibility for service contracts which we said yesterday
were avenues used in the previous regime to go around the 60-40 requirement.238 [Emphasis supplied.]

The present Chief Justice, then a member of the CONCOM, also referred to this limitation in scope in proposing
an amendment to the 60-40 requirement:

MR. DAVIDE. May I be allowed to explain the proposal?

 MR. MAAMBONG. Subject to the three-minute rule, Madam President.

MR. DAVIDE. It will not take three minutes.

The Commission had just approved the Preamble. In the Preamble we clearly stated that the Filipino people are
sovereign and that one of the objectives for the creation or establishment of a government is to conserve and
develop the national patrimony. The implication is that the national patrimony or our natural resources are
exclusively reserved for the Filipino people. No alien must be allowed to enjoy, exploit and develop our natural
resources. As a matter of fact, that principle proceeds from the fact that our natural resources are gifts from God
to the Filipino people and it would be a breach of that special blessing from God if we will allow aliens to exploit
our natural resources.

I voted in favor of the Jamir proposal because it is not really exploitation that we granted to the alien corporations
but only for them to render financial or technical assistance. It is not for them to enjoy our natural resources.
Madam President, our natural resources are depleting; our population is increasing by leaps and bounds. Fifty
years from now, if we will allow these aliens to exploit our natural resources, there will be no more natural
resources for the next generations of Filipinos. It may last long if we will begin now. Since 1935 the aliens have
been allowed to enjoy to a certain extent the exploitation of our natural resources, and we became victims of
foreign dominance and control. The aliens are interested in coming to the Philippines because they would like to
enjoy the bounty of nature exclusively intended for Filipinos by God.

And so I appeal to all, for the sake of the future generations, that if we have to pray in the Preamble "to preserve
and develop the national patrimony for the sovereign Filipino people and for the generations to come," we must
at this time decide once and for all that our natural resources must be reserved only to Filipino citizens.

Thank you.239 [Emphasis supplied.]

The opinion of another member of the CONCOM is persuasive 240 and leaves no doubt as to the intention of the
framers to eliminate service contracts altogether. He writes:

Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly technological undertakings for which the
President may enter into contracts with foreign-owned corporations, and enunciates strict conditions that should
govern such contracts. x x x.

This provision balances the need for foreign capital and technology with the need to maintain the national
sovereignty. It recognizes the fact that as long as Filipinos can formulate their own terms in their own territory,
there is no danger of relinquishing sovereignty to foreign interests.

Are service contracts allowed under the new Constitution? No. Under the new Constitution, foreign investors
(fully alien-owned) can NOT participate in Filipino enterprises except to provide: (1) Technical Assistance for
highly technical enterprises; and (2) Financial Assistance for large-scale enterprises.

The intent of this provision, as well as other provisions on foreign investments, is to prevent the practice
(prevalent in the Marcos government) of skirting the 60/40 equation using the cover of service
contracts.241 [Emphasis supplied.]

Furthermore, it appears that Proposed Resolution No. 496, 242 which was the draft Article on National Economy
and Patrimony, adopted the concept of "agreements . . . involving either technical or financial assistance"
contained in the "Draft of the 1986 U.P. Law Constitution Project" (U.P. Law draft) which was taken into
consideration during the deliberation of the CONCOM. 243 The former, as well as Article XII, as adopted,
employed the same terminology, as the comparative table below shows:
DRAFT OF THE UP LAW
CONSTITUTION PROJECT
Sec. 1. All lands of the public
domain, waters, minerals, coal,
petroleum and other mineral
oils, all forces of potential
energy, fisheries, flora and
fauna and other natural
resources of the Philippines
are owned by the State. With
the exception of agricultural
lands, all other natural
resources shall not be
alienated. The exploration,
development and utilization of
natural resources shall be
under the full control and
supervision of the State. Such
activities may be directly
undertaken by the state, or it
may enter into co-production,
joint venture, production
sharing agreements with
Filipino citizens or corporations
or associations sixty per cent of
whose voting stock or
controlling interest is owned by
such citizens for a period of not
more than twenty-five years,
renewable for not more than
twenty-five years and under
such terms and conditions as
may be provided by law. In
case as to water rights for
irrigation, water supply,
fisheries, or industrial uses
other than the development of
water power, beneficial use
may be the measure and limit
of the grant.
The National Assembly may by
law allow small scale utilization
of natural resources by Filipino
citizens.
The National Assembly, may,
by two-thirds vote of all its
members by special law
PROPOSED RESOLUTION
NO. 496 OF THE
CONSTITUTIONAL
COMMISSION
Sec. 3. All lands of the public
domain, waters, minerals, coal,
petroleum and other mineral
oils, all forces of potential
energy, fisheries, forests, flora
and fauna, and other natural
resources are owned by the
State. With the exception of
agricultural lands, all other
natural resources shall not be
alienated. The exploration,
development, and utilization of
natural resources shall be
under the full control and
supervision of the State. Such
activities may be directly
undertaken by the State, or it
may enter into co-production,
joint venture, production-
sharing agreements with
Filipino citizens or corporations
or associations at least sixty
per cent of whose voting stock
or controlling interest is owned
by such citizens. Such
agreements shall be for a
period of twenty-five years,
renewable for not more than
twenty-five years, and under
such term and conditions as
may be provided by law. In
cases of water rights for
irrigation, water supply,
fisheries or industrial uses
other than the development for
water power, beneficial use
may be the measure and limit
of the grant.
The Congress may by law
allow small-scale utilization of
natural resources by Filipino
citizens, as well as cooperative
fish farming in rivers, lakes,
bays, and lagoons.
ARTICLE XII OF THE 1987
CONSTITUTION
Sec. 2. All lands of the public
domain, waters, minerals, coal,
petroleum, and other mineral
oils, all forces of potential
energy, fisheries, forests or
timber, wildlife, flora and fauna,
and other natural resources
are owned by the State. With
the exception of agricultural
lands, all other natural
resources shall not be
alienated. The exploration,
development, and utilization of
natural resources shall be
under the full control and
supervision of the State. The
State may directly undertake
such activities or it may enter
into co-production, joint
venture, or production-sharing
agreements with Filipino
citizens, or corporations or
associations at least sixty per
centum of whose capital is
owned by such citizens. Such
agreements may be for a
period not exceeding twenty-
five years, renewable for not
more than twenty-five years,
and under such terms and
conditions as may be provided
by law. In case of water rights
for irrigation, water supply,
fisheries, or industrial uses
other than the development of
water power, beneficial use
may be the measure and limit
of the grant.
The State shall protect the
nation's marine wealth in its
archipelagic waters, territorial
sea, and exclusive economic
zone, and reserve its use and
enjoyment exclusively to
Filipino citizens.
 provide the terms and The President with the The Congress may, by law,
conditions under which a concurrence of Congress, by allow small-scale utilization of
foreign-owned corporation special law, shall provide the natural resources by Filipino
may enter into agreements terms and conditions under citizens, as well as cooperative
with the government which a foreign-owned fish farming, with priority to
involving either technical or corporation may enter into subsistence fishermen and
financial assistance for large- agreements with the fish-workers in rivers, lakes,
scale exploration, government involving either bays, and lagoons.
development, or utilization of technical or financial
natural resources. [Emphasis assistance for large-scale The President may enter into
supplied.] exploration, development, and agreements with foreign-
utilization of natural resources. owned corporations
[Emphasis supplied.] involving either technical or
financial assistance for large-
scale exploration,
development, and utilization of
minerals, petroleum, and other
mineral oils according to the
general terms and conditions
provided by law, based on real
contributions to the economic
growth and general welfare of
the country. In such
agreements, the State shall
promote the development and
use of local scientific and
technical resources.
[Emphasis supplied.]

The President shall notify the

Congress of every contract
entered into in accordance with
this provision, within thirty days
from its execution.

The insights of the proponents of the U.P. Law draft are, therefore, instructive in interpreting the phrase "technical
or financial assistance."

In his position paper entitled Service Contracts: Old Wine in New Bottles?, Professor Pacifico A. Agabin, who
was a member of the working group that prepared the U.P. Law draft, criticized service contracts for they "lodge
exclusive management and control of the enterprise to the service contractor, which is reminiscent of the old
concession regime. Thus, notwithstanding the provision of the Constitution that natural resources belong to the
State, and that these shall not be alienated, the service contract system renders nugatory the constitutional
provisions cited."244 He elaborates:

Looking at the Philippine model, we can discern the following vestiges of the concession regime, thus:

1. Bidding of a selected area, or leasing the choice of the area to the interested party and then negotiating
the terms and conditions of the contract; (Sec. 5, P.D. 87)

2. Management of the enterprise vested on the contractor, including operation of the field if petroleum is
discovered; (Sec. 8, P.D. 87)
 3. Control of production and other matters such as expansion and development; (Sec. 8)

4. Responsibility for downstream operations – marketing, distribution, and processing may be with the
contractor (Sec. 8);

5. Ownership of equipment, machinery, fixed assets, and other properties remain with contractor (Sec.
12, P.D. 87);

6. Repatriation of capital and retention of profits abroad guaranteed to the contractor (Sec. 13, P.D. 87);
and

7. While title to the petroleum discovered may nominally be in the name of the government, the contractor
has almost unfettered control over its disposition and sale, and even the domestic requirements of the
country is relegated to a pro rata basis (Sec. 8).

In short, our version of the service contract is just a rehash of the old concession regime x x x. Some people
have pulled an old rabbit out of a magician's hat, and foisted it upon us as a new and different animal.

The service contract as we know it here is antithetical to the principle of sovereignty over our natural resources
restated in the same article of the [1973] Constitution containing the provision for service contracts. If the service
contractor happens to be a foreign corporation, the contract would also run counter to the constitutional provision
on nationalization or Filipinization, of the exploitation of our natural resources. 245 [Emphasis supplied.
Underscoring in the original.]

Professor Merlin M. Magallona, also a member of the working group, was harsher in his reproach of the system:

x x x the nationalistic phraseology of the 1935 [Constitution] was retained by the [1973] Charter, but the essence
of nationalism was reduced to hollow rhetoric. The 1973 Charter still provided that the exploitation or
development of the country's natural resources be limited to Filipino citizens or corporations owned or controlled
by them. However, the martial-law Constitution allowed them, once these resources are in their name, to enter
into service contracts with foreign investors for financial, technical, management, or other forms of assistance.
Since foreign investors have the capital resources, the actual exploitation and development, as well as the
effective disposition, of the country's natural resources, would be under their direction, and control, relegating
the Filipino investors to the role of second-rate partners in joint ventures.

Through the instrumentality of the service contract, the 1973 Constitution had legitimized at the highest level of
state policy that which was prohibited under the 1973 Constitution, namely: the exploitation of the country's
natural resources by foreign nationals. The drastic impact of [this] constitutional change becomes more
pronounced when it is considered that the active party to any service contract may be a corporation wholly owned
by foreign interests. In such a case, the citizenship requirement is completely set aside, permitting foreign
corporations to obtain actual possession, control, and [enjoyment] of the country's natural
resources.246 [Emphasis supplied.]

Accordingly, Professor Agabin recommends that:

Recognizing the service contract for what it is, we have to expunge it from the Constitution and reaffirm ownership
over our natural resources. That is the only way we can exercise effective control over our natural resources.

This should not mean complete isolation of the country's natural resources from foreign investment. Other
contract forms which are less derogatory to our sovereignty and control over natural resources – like technical
assistance agreements, financial assistance [agreements], co-production agreements, joint ventures,
production-sharing – could still be utilized and adopted without violating constitutional provisions. In other words,
we can adopt contract forms which recognize and assert our sovereignty and ownership over natural resources,
and where the foreign entity is just a pure contractor instead of the beneficial owner of our economic
resources.247 [Emphasis supplied.]
Still another member of the working group, Professor Eduardo Labitag, proposed that:

2. Service contracts as practiced under the 1973 Constitution should be discouraged, instead the government
may be allowed, subject to authorization by special law passed by an extraordinary majority to enter into either
technical or financial assistance. This is justified by the fact that as presently worded in the 1973 Constitution, a
service contract gives full control over the contract area to the service contractor, for him to work, manage and
dispose of the proceeds or production. It was a subterfuge to get around the nationality requirement of the
constitution.248[Emphasis supplied.]

In the annotations on the proposed Article on National Economy and Patrimony, the U.P. Law draft summarized
the rationale therefor, thus:

5. The last paragraph is a modification of the service contract provision found in Section 9, Article XIV of the
1973 Constitution as amended. This 1973 provision shattered the framework of nationalism in our fundamental
law (see Magallona, "Nationalism and its Subversion in the Constitution"). Through the service contract, the 1973
Constitution had legitimized that which was prohibited under the 1935 constitution—the exploitation of the
country's natural resources by foreign nationals. Through the service contract, acts prohibited by the Anti-Dummy
Law were recognized as legitimate arrangements. Service contracts lodge exclusive management and control
of the enterprise to the service contractor, not unlike the old concession regime where the concessionaire had
complete control over the country's natural resources, having been given exclusive and plenary rights to exploit
a particular resource and, in effect, having been assured of ownership of that resource at the point of extraction
(see Agabin, "Service Contracts: Old Wine in New Bottles"). Service contracts, hence, are antithetical to the
principle of sovereignty over our natural resources, as well as the constitutional provision on nationalization or
Filipinization of the exploitation of our natural resources.

Under the proposed provision, only technical assistance or financial assistance agreements may be entered into,
and only for large-scale activities. These are contract forms which recognize and assert our sovereignty and
ownership over natural resources since the foreign entity is just a pure contractor and not a beneficial owner of
our economic resources. The proposal recognizes the need for capital and technology to develop our natural
resources without sacrificing our sovereignty and control over such resources by the safeguard of a special law
which requires two-thirds vote of all the members of the Legislature. This will ensure that such agreements will
be debated upon exhaustively and thoroughly in the National Assembly to avert prejudice to the
nation.249 [Emphasis supplied.]

The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as grants of beneficial
ownership of the country's natural resources to foreign owned corporations. While, in theory, the State owns
these natural resources – and Filipino citizens, their beneficiaries – service contracts actually vested foreigners
with the right to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not Filipinos, became
the beneficiaries of Philippine natural resources. This arrangement is clearly incompatible with the constitutional
ideal of nationalization of natural resources, with the Regalian doctrine, and on a broader perspective, with
Philippine sovereignty.

The proponents nevertheless acknowledged the need for capital and technical know-how in the large-scale
exploitation, development and utilization of natural resources – the second paragraph of the proposed draft itself
being an admission of such scarcity. Hence, they recommended a compromise to reconcile the nationalistic
provisions dating back to the 1935 Constitution, which reserved all natural resources exclusively to Filipinos, and
the more liberal 1973 Constitution, which allowed foreigners to participate in these resources through service
contracts. Such a compromise called for the adoption of a new system in the exploration, development, and
utilization of natural resources in the form of technical agreements or financial agreements which, necessarily,
are distinct concepts from service contracts.

The replacement of "service contracts" with "agreements… involving either technical or financial assistance," as
well as the deletion of the phrase "management or other forms of assistance," assumes greater significance
when note is taken that the U.P. Law draft proposed other equally crucial changes that were obviously heeded
by the CONCOM. These include the abrogation of the concession system and the adoption of new "options" for
the State in the exploration, development, and utilization of natural resources. The proponents deemed these
changes to be more consistent with the State's ownership of, and its "full control and supervision" (a phrase also
employed by the framers) over, such resources. The Project explained:

3. In line with the State ownership of natural resources, the State should take a more active role in the exploration,
development, and utilization of natural resources, than the present practice of granting licenses, concessions, or
leases – hence the provision that said activities shall be under the full control and supervision of the State. There
are three major schemes by which the State could undertake these activities: first, directly by itself; second, by
virtue of co-production, joint venture, production sharing agreements with Filipino citizens or corporations or
associations sixty per cent (60%) of the voting stock or controlling interests of which are owned by such citizens;
or third, with a foreign-owned corporation, in cases of large-scale exploration, development, or utilization of
natural resources through agreements involving either technical or financial assistance only. x x x.

At present, under the licensing concession or lease schemes, the government benefits from such benefits only
through fees, charges, ad valorem taxes and income taxes of the exploiters of our natural resources. Such
benefits are very minimal compared with the enormous profits reaped by theses licensees, grantees,
concessionaires. Moreover, some of them disregard the conservation of natural resources and do not protect
the environment from degradation. The proposed role of the State will enable it to a greater share in the profits
– it can also actively husband its natural resources and engage in developmental programs that will be beneficial
to them.

4. Aside from the three major schemes for the exploration, development, and utilization of our natural resources,
the State may, by law, allow Filipino citizens to explore, develop, utilize natural resources in small-scale. This is
in recognition of the plight of marginal fishermen, forest dwellers, gold panners, and others similarly situated who
exploit our natural resources for their daily sustenance and survival. 250

Professor Agabin, in particular, after taking pains to illustrate the similarities between the two systems, concluded
that the service contract regime was but a "rehash" of the concession system. "Old wine in new bottles," as he
put it. The rejection of the service contract regime, therefore, is in consonance with the abolition of the concession
system.

In light of the deliberations of the CONCOM, the text of the Constitution, and the adoption of other proposed
changes, there is no doubt that the framers considered and shared the intent of the U.P. Law proponents in
employing the phrase "agreements . . . involving either technical or financial assistance."

While certain commissioners may have mentioned the term "service contracts" during the CONCOM
deliberations, they may not have been necessarily referring to the concept of service contracts under the 1973
Constitution. As noted earlier, "service contracts" is a term that assumes different meanings to different
people.251 The commissioners may have been using the term loosely, and not in its technical and legal sense,
to refer, in general, to agreements concerning natural resources entered into by the Government with foreign
corporations. These loose statements do not necessarily translate to the adoption of the 1973 Constitution
provision allowing service contracts.

It is true that, as shown in the earlier quoted portions of the proceedings in CONCOM, in response to Sr. Tan's
question, Commissioner Villegas commented that, other than congressional notification, the only difference
between "future" and "past" "service contracts" is the requirement of a general law as there were no laws
previously authorizing the same.252 However, such remark is far outweighed by his more categorical statement
in his exchange with Commissioner Quesada that the draft article "does not permit foreign investors to
participate" in the nation's natural resources – which was exactly what service contracts did – except to provide
"technical or financial assistance."253

In the case of the other commissioners, Commissioner Nolledo himself clarified in his work that the present
charter prohibits service contracts.254 Commissioner Gascon was not totally averse to foreign participation, but
favored stricter restrictions in the form of majority congressional concurrence. 255 On the other hand,
Commissioners Garcia and Tadeo may have veered to the extreme side of the spectrum and their objections
may be interpreted as votes against any foreign participation in our natural resources whatsoever.
WMCP cites Opinion No. 75, s. 1987, 256 and Opinion No. 175, s. 1990257 of the Secretary of Justice, expressing
the view that a financial or technical assistance agreement "is no different in concept" from the service contract
allowed under the 1973 Constitution. This Court is not, however, bound by this interpretation. When an
administrative or executive agency renders an opinion or issues a statement of policy, it merely interprets a pre-
existing law; and the administrative interpretation of the law is at best advisory, for it is the courts that finally
determine what the law means.258

In any case, the constitutional provision allowing the President to enter into FTAAs with foreign-owned
corporations is an exception to the rule that participation in the nation's natural resources is reserved exclusively
to Filipinos. Accordingly, such provision must be construed strictly against their enjoyment by non-Filipinos. As
Commissioner Villegas emphasized, the provision is "very restrictive." 259 Commissioner Nolledo also remarked
that "entering into service contracts is an exception to the rule on protection of natural resources for the interest
of the nation and, therefore, being an exception, it should be subject, whenever possible, to stringent
rules."260 Indeed, exceptions should be strictly but reasonably construed; they extend only so far as their
language fairly warrants and all doubts should be resolved in favor of the general provision rather than the
exception.261

With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes
service contracts. Although the statute employs the phrase "financial and technical agreements" in accordance
with the 1987 Constitution, it actually treats these agreements as service contracts that grant beneficial
ownership to foreign contractors contrary to the fundamental law.

Section 33, which is found under Chapter VI (Financial or Technical Assistance Agreement) of R.A. No. 7942
states:

SEC. 33. Eligibility.—Any qualified person with technical and financial capability to undertake large-scale
exploration, development, and utilization of mineral resources in the Philippines may enter into a financial or
technical assistance agreement directly with the Government through the Department. [Emphasis supplied.]

"Exploration," as defined by R.A. No. 7942,

means the searching or prospecting for mineral resources by geological, geochemical or geophysical surveys,
remote sensing, test pitting, trending, drilling, shaft sinking, tunneling or any other means for the purpose of
determining the existence, extent, quantity and quality thereof and the feasibility of mining them for profit. 262

A legally organized foreign-owned corporation may be granted an exploration permit, 263 which vests it with the
right to conduct exploration for all minerals in specified areas,264 i.e., to enter, occupy and explore the
same.265Eventually, the foreign-owned corporation, as such permittee, may apply for a financial and technical
assistance agreement.266

"Development" is the work undertaken to explore and prepare an ore body or a mineral deposit for mining,
including the construction of necessary infrastructure and related facilities. 267

"Utilization" "means the extraction or disposition of minerals." 268 A stipulation that the proponent shall dispose of
the minerals and byproducts produced at the highest price and more advantageous terms and conditions as
provided for under the implementing rules and regulations is required to be incorporated in every FTAA. 269

A foreign-owned/-controlled corporation may likewise be granted a mineral processing permit.270 "Mineral

processing" is the milling, beneficiation or upgrading of ores or minerals and rocks or by similar means to convert
the same into marketable products.271

An FTAA contractor makes a warranty that the mining operations shall be conducted in accordance with the
provisions of R.A. No. 7942 and its implementing rules 272 and for work programs and minimum expenditures and
commitments.273 And it obliges itself to furnish the Government records of geologic, accounting, and other
relevant data for its mining operation. 274
"Mining operation," as the law defines it, means mining activities involving exploration, feasibility, development,
utilization, and processing.275

The underlying assumption in all these provisions is that the foreign contractor manages the mineral resources,
just like the foreign contractor in a service contract.

Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same auxiliary mining rights that it
grants contractors in mineral agreements (MPSA, CA and JV). 276 Parenthetically, Sections 72 to 75 use the term
"contractor," without distinguishing between FTAA and mineral agreement contractors. And so does "holders of
mining rights" in Section 76. A foreign contractor may even convert its FTAA into a mineral agreement if the
economic viability of the contract area is found to be inadequate to justify large-scale mining
operations,277 provided that it reduces its equity in the corporation, partnership, association or cooperative to
forty percent (40%).278

Finally, under the Act, an FTAA contractor warrants that it "has or has access to all the financing, managerial,
and technical expertise. . . ."279 This suggests that an FTAA contractor is bound to provide some management
assistance – a form of assistance that has been eliminated and, therefore, proscribed by the present Charter.

By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above -cited
provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the nation's mineral resources to
these contractors, leaving the State with nothing but bare title thereto.

Moreover, the same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally
ordained 60%-40% capitalization requirement for corporations or associations engaged in the exploitation,
development and utilization of Philippine natural resources.

In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of the
Constitution:

(1) The proviso in Section 3 (aq), which defines "qualified person," to wit:

Provided, That a legally organized foreign-owned corporation shall be deemed a qualified person for
purposes of granting an exploration permit, financial or technical assistance agreement or mineral
processing permit.

(2) Section 23,280 which specifies the rights and obligations of an exploration permittee, insofar as said
section applies to a financial or technical assistance agreement,

(3) Section 33, which prescribes the eligibility of a contractor in a financial or technical assistance
agreement;

(4) Section 35,281 which enumerates the terms and conditions for every financial or technical assistance
agreement;

(5) Section 39,282 which allows the contractor in a financial and technical assistance agreement to convert
the same into a mineral production-sharing agreement;

(6) Section 56,283 which authorizes the issuance of a mineral processing permit to a contractor in a
financial and technical assistance agreement;

The following provisions of the same Act are likewise void as they are dependent on the foregoing provisions
and cannot stand on their own:

(1) Section 3 (g),284 which defines the term "contractor," insofar as it applies to a financial or technical
assistance agreement.
 Section 34,285 which prescribes the maximum contract area in a financial or technical assistance
agreements;

Section 36,286 which allows negotiations for financial or technical assistance agreements;

Section 37,287 which prescribes the procedure for filing and evaluation of financial or technical assistance
agreement proposals;

Section 38,288 which limits the term of financial or technical assistance agreements;

Section 40,289 which allows the assignment or transfer of financial or technical assistance agreements;

Section 41,290 which allows the withdrawal of the contractor in an FTAA;

The second and third paragraphs of Section 81, 291 which provide for the Government's share in a financial
and technical assistance agreement; and

Section 90,292 which provides for incentives to contractors in FTAAs insofar as it applies to said
contractors;

When the parts of the statute are so mutually dependent and connected as conditions, considerations,
inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a
whole, and that if all could not be carried into effect, the legislature would not pass the residue independently,
then, if some parts are unconstitutional, all the provisions which are thus dependent, conditional, or connected,
must fall with them.293

There can be little doubt that the WMCP FTAA itself is a service contract.

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

(b) to extract and carry away any Mineral samples from the Contract area for the purpose of conducting
tests and studies in respect thereof;

(c) to determine the mining and treatment processes to be utilised during the Development/Operating
Period and the project facilities to be constructed during the Development and Construction Period;

(d) have the right of possession of the Contract Area, with full right of ingress and egress and the right to
occupy the same, subject to the provisions of Presidential Decree No. 512 (if applicable) and not be
prevented from entry into private ands by surface owners and/or occupants thereof when prospecting,
exploring and exploiting for minerals therein;

xxx

(f) to construct roadways, mining, drainage, power generation and transmission facilities and all other
types of works on the Contract Area;

(g) to erect, install or place any type of improvements, supplies, machinery and other equipment relating
to the Mining Operations and to use, sell or otherwise dispose of, modify, remove or diminish any and all
parts thereof;

(h) enjoy, subject to pertinent laws, rules and regulations and the rights of third Parties, easement rights
and the use of timber, sand, clay, stone, water and other natural resources in the Contract Area without
cost for the purposes of the Mining Operations;
 xxx

(i) have the right to mortgage, charge or encumber all or part of its interest and obligations under this
Agreement, the plant, equipment and infrastructure and the Minerals produced from the Mining
Operations;

x x x. 295

All materials, equipment, plant and other installations erected or placed on the Contract Area remain the property
of WMCP, which has the right to deal with and remove such items within twelve months from the termination of
the FTAA.296

Pursuant to Section 1.2 of the FTAA, WMCP shall provide "[all] financing, technology, management and
personnel necessary for the Mining Operations." The mining company binds itself to "perform all Mining
Operations . . . providing all necessary services, technology and financing in connection therewith," 297 and to
"furnish all materials, labour, equipment and other installations that may be required for carrying on all Mining
Operations."298> WMCP may make expansions, improvements and replacements of the mining facilities and
may add such new facilities as it considers necessary for the mining operations. 299

These contractual stipulations, taken together, grant WMCP beneficial ownership over natural resources that
properly belong to the State and are intended for the benefit of its citizens. These stipulations are abhorrent to
the 1987 Constitution. They are precisely the vices that the fundamental law seeks to avoid, the evils that it aims
to suppress. Consequently, the contract from which they spring must be struck down.

In arguing against the annulment of the FTAA, WMCP invokes the Agreement on the Promotion and Protection
of Investments between the Philippine and Australian Governments, which was signed in Manila on January 25,
1995 and which entered into force on December 8, 1995.

x x x. Article 2 (1) of said treaty states that it applies to investments whenever made and thus the fact that
[WMCP's] FTAA was entered into prior to the entry into force of the treaty does not preclude the Philippine
Government from protecting [WMCP's] investment in [that] FTAA. Likewise, Article 3 (1) of the treaty provides
that "Each Party shall encourage and promote investments in its area by investors of the other Party and shall
[admit] such investments in accordance with its Constitution, Laws, regulations and investment policies" and in
Article 3 (2), it states that "Each Party shall ensure that investments are accorded fair and equitable treatment."
The latter stipulation indicates that it was intended to impose an obligation upon a Party to afford fair and
equitable treatment to the investments of the other Party and that a failure to provide such treatment by or under
the laws of the Party may constitute a breach of the treaty. Simply stated, the Philippines could not, under said
treaty, rely upon the inadequacies of its own laws to deprive an Australian investor (like [WMCP]) of fair and
equitable treatment by invalidating [WMCP's] FTAA without likewise nullifying the service contracts entered into
before the enactment of RA 7942 such as those mentioned in PD 87 or EO 279.

This becomes more significant in the light of the fact that [WMCP's] FTAA was executed not by a mere Filipino
citizen, but by the Philippine Government itself, through its President no less, which, in entering into said treaty
is assumed to be aware of the existing Philippine laws on service contracts over the exploration, development
and utilization of natural resources. The execution of the FTAA by the Philippine Government assures the
Australian Government that the FTAA is in accordance with existing Philippine laws.300 [Emphasis and italics by
private respondents.]

The invalidation of the subject FTAA, it is argued, would constitute a breach of said treaty which, in turn, would
amount to a violation of Section 3, Article II of the Constitution adopting the generally accepted principles of
international law as part of the law of the land. One of these generally accepted principles is pacta sunt servanda,
which requires the performance in good faith of treaty obligations.

Even assuming arguendo that WMCP is correct in its interpretation of the treaty and its assertion that "the
Philippines could not . . . deprive an Australian investor (like [WMCP]) of fair and equitable treatment by
invalidating [WMCP's] FTAA without likewise nullifying the service contracts entered into before the enactment
of RA 7942 . . .," the annulment of the FTAA would not constitute a breach of the treaty invoked. For this decision
herein invalidating the subject FTAA forms part of the legal system of the Philippines. 301 The equal protection
clause302 guarantees that such decision shall apply to all contracts belonging to the same class, hence, upholding
rather than violating, the "fair and equitable treatment" stipulation in said treaty.

One other matter requires clarification. Petitioners contend that, consistent with the provisions of Section 2,
Article XII of the Constitution, the President may enter into agreements involving "either technical or financial
assistance" only. The agreement in question, however, is a technical and financial assistance agreement.

Petitioners' contention does not lie. To adhere to the literal language of the Constitution would lead to absurd
consequences.303 As WMCP correctly put it:

x x x such a theory of petitioners would compel the government (through the President) to enter into contract
with two (2) foreign-owned corporations, one for financial assistance agreement and with the other, for technical
assistance over one and the same mining area or land; or to execute two (2) contracts with only one foreign-
owned corporation which has the capability to provide both financial and technical assistance, one for financial
assistance and another for technical assistance, over the same mining area. Such an absurd result is definitely
not sanctioned under the canons of constitutional construction.304 [Underscoring in the original.]

Surely, the framers of the 1987 Charter did not contemplate such an absurd result from their use of "either/or."
A constitution is not to be interpreted as demanding the impossible or the impracticable; and unreasonable or
absurd consequences, if possible, should be avoided. 305 Courts are not to give words a meaning that would lead
to absurd or unreasonable consequences and a literal interpretation is to be rejected if it would be unjust or lead
to absurd results.306 That is a strong argument against its adoption. 307 Accordingly, petitioners' interpretation
must be rejected.

The foregoing discussion has rendered unnecessary the resolution of the other issues raised by the petition.

WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional and void:

(1) The following provisions of Republic Act No. 7942:

(a) The proviso in Section 3 (aq),

(b) Section 23,

(c) Section 33 to 41,

(d) Section 56,

(e) The second and third paragraphs of Section 81, and

(f) Section 90.

(2) All provisions of Department of Environment and Natural Resources Administrative Order 96-40, s.
1996 which are not in conformity with this Decision, and

(3) The Financial and Technical Assistance Agreement between the Government of the Republic of the
Philippines and WMC Philippines, Inc.

SO ORDERED.

G.R. No. 144302 May 27, 2004

PHILIPPINE GEOTHERMAL INC., petitioner,
vs.
NATIONAL POWER CORPORATION, respondent.

RESOLUTION

CARPIO MORALES, J.

Before this Court is a petition for review on certiorari seeking to set aside and nullify the March 24, 2000 Decision
and August 2, 2000 Resolution of the Court of Appeals in CA-G.R. SP No. 43853, "Philippine Geothermal
Incorporated v. Hon. Teodoro P. Regino as Presiding Judge of the Regional Trial Court of Quezon City, Branch
84, and the National Power Corp."

The antecedent facts of the case are as follows:

On September 10, 1971, the National Power Corporation (NPC) entered into a service contract1 with
Philippine Geothermal, Inc. (PGI), a corporation organized and existing under the laws of California,
United States of America, for the exploration and exploitation of geothermal resources covering the Tiwi
and Mak-Ban Geothermal Fields. Section 3.1 of said contract provides:

Section 3 – Term

3.1 The term of this contract shall be twenty-five (25) years renewable for another twenty-five (25)
years upon the option of PGI under the same terms and conditions set forth herein.

Albeit the service contract was to expire in 1996, the negotiations for its renewal started as early as 1994.

NPC, however, was doubtful whether a renewal would be constitutional in light of Section 2, Article XII of the
1987 Constitution reading:

SECTION 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources
are owned by the state. With the exception of agricultural lands, all other natural resources shall not be
alienated. The exploration, development, and utilization of natural resources shall be under the
full control and supervision of the state. The state may directly undertake such activities, or it may
enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-
five years, and under such terms and conditions as may be provided by law. In cases of water rights for
irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial
use may be the measure and limit of the grant.

x x x (Emphasis supplied)

As the service contract contained an arbitral clause, PGI filed on July 8, 1996 a request for arbitration 2 with the
International Court of Arbitration (ICA) of the International Chamber of Commerce (ICC).

On August 21, 1996, the NPC filed before the Regional Trial Court (RTC) of Quezon City a petition for declaratory
relief3 against PGI praying for the determination of the constitutionality of Section 3 of the service contract,
specifically the above-quoted provision thereof on the renewal of the contract at the option of PGI.

On October 2, 1996, PGI filed a motion to dismiss 4 the petition for declaratory relief alleging, among other things,
that the trial court has no jurisdiction over it in light of the pending arbitration proceedings it instituted.
By Order5 of December 3, 1996, Branch 84 of the Quezon City RTC denied the motion to dismiss on the ground
that the legality or constitutionality of the renewal of the service contract is an issue which only a regular court of
justice may resolve or settle.

PGI filed a motion for reconsideration 6 which was denied by Order7 of March 6, 1997.

PGI thus assailed the denial by the trial court of its motion to dismiss by certiorari and prohibition before the
Court of Appeals, alleging that:

I. RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR

EXCESS OF ITS JURISDICTION IN NOT GRANTING THE MOTION TO DISMISS RESPONDENT
NPC’S PETITION FOR DECLARATORY RELIEF FILED BY PGI FOR THE REASONS THAT:

(A) BY ESTABLISHED JURISPRUDENCE, THE CASE BELOW SHOULD BE DISMISSED IN

VIEW OF THE PENDING ARBITRATION PROCEEDING OVER THE SAME SUBJECT MATTER
BECAUSE (i) RESPONDENT JUDGE DOES NOT HAVE JURISDICTION TO TAKE
COGNIZANCE OF THE CASE; (ii) THERE IS ANOTHER ACTION PENDING BETWEEN THE
PARTIES FOR THE SAME CAUSE; AND (iii) THE PETITION BELOW STATES NO CAUSE OF
ACTION.

(B) CONSTITUTIONAL AND PUBLIC POLICY ISSUES, IF ANY, SHOULD BE RAISED FIRST
IN THE ARBITRATION PROCEEDING, AND SUBSEQUENTLY, IF WARRANTED, IN THE
PROCEEDING FOR THE ENFORCEMENT OF THE ARBITRAL AWARD.

(C) RESPONDENT NPC HAS ENGAGED IN FORUM SHOPPING.

(D) THE REMEDY OF DECLARATORY RELIEF IS BOTH PREMATURE AND ACADEMIC –

PREMATURE BECAUSE IT SHOULD BE RAISED FIRST IN THE ARBITRATON PROCEEDING
AND IN THE ENFORCEMENT PROCEEDING OF THE ARBITRAL AWARD IF STILL
NECESSARY; AND ACADEMIC BECAUSE BY NPC’S OWN CONDUCT, THERE IS ALREADY
A BREACH OF THE SERVICE CONTRACT; AND

(E) the republic of the philippines, a party in the arbitration case because of its sovereign guaranty,
is a necessary party in this case; and the absence of a necessary party in a case for declaratory
relief, is a jurisdictional defect.8

II. RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION IN DENYING PETITIONER

ITS RIGHT TO PROCEDURAL DUE PROCESS AND IN BEING BIASED IN FAVOR OF NPC TO
SERIOUS PREJUDICE OF PGI.

Pending decision of the petition by the Court of Appeals, PGI and NPC filed on July 10, 1998 a joint
motion to suspend proceedings9 as the parties were exploring the possibility of amicable settlement.

Without resolving the joint motion to suspend, the Court of Appeals rendered a Decision 10 of March 24, 2000
dismissing PGI’s petition.

Hence, the instant petition raising the following arguments:

I.

THE COURT OF APPEALS HAD NO JURISDICTION TO RENDER THE DECISION IN THE LIGHT OF
A PENDING JOINT MOTION TO SUSPEND FILED BY THE PARTIES.

II.
 THE PETITION FOR DECLARATORY RELIEF SHOULD HAVE BEEN DISMISSED BY THE REGIONAL
TRIAL COURT AS WELL AS BY THE COURT OF APPEALS IN VIEW OF THE PENDING
ARBITRATION PROCEEDINGS OVER THE SAME SUBJECT MATTER IN VIEW OF A BREACH OF
THE CONTRACT SUBJECT OF THE PETITION.

III.

THE DECISIONS OF THE COURT OF APPEALS AND OF THE REGIONAL TRIAL COURT ARE NULL
AND VOID FOR BEING MATERIALLY INFECTED, CONSCIOUSLY OR UNCONSCIOUSLY, WITH
OBVIOUS BADGES OF BIAS AND PREJUDICE.11

During the pendency of the instant petition, PGI and the NPC filed several joint motions to suspend
proceedings12upon the ground that they were negotiating for the settlement of the case. The motions were
granted by this Court.13

On December 22, 2003, PGI and NPC filed a Joint Motion to Approve Compromise Agreement and to Dismiss
based on Compromise Agreement alleging that, among others things:

xxx

33. The fact that the Compromise Agreement and its amendment went through such exhaustive review
by different agencies of government and that the same passed thorough scrutiny attests to the validity
and soundness of the terms of compromise contained therein. It must be pointed out that this agreement
was studied and examined by agencies of government directly dealing with the subject of the agreement
and who are in the best position, by their skill and technical expertise, to assess the validity of the terms
and the benefit accruing to the state.

xxx

36. x x x The Compromise Agreement is not contrary to law because it in fact directly addressed to the
very heart of the constitutional issues involved in this controversy. Thus [PGI] and [NPC] have agreed to
terminate the Service Contract subject matter of the dispute, in favor of a new Geothermal Sales
Contract and a PD 1442 Geothermal Service Contract, and PGI has committed to form a Philippine
company for the development and operation of the Tiwi and Mak-Ban steamfields (Sec. 6.1
thereof) on a going-forward basis, thereby effectively erasing any doubt as to the legality of the
compromise.

xxx

38. x x x [The] Compromise Agreement is not contrary to morals. The arrangement is commercially
advantageous to the Government of the Philippines, NPC, PSALM and the consuming public. As above-
stated, no less than the NEDA has confirmed that the government stands to gain over US $256 Million
by entering into this compromise. x x x

39. x x x [The] Compromise Agreement is not contrary to public policy. It has been categorically declared
by the state that private sector participation and privatization of state-owned enterprises and their assets
is encouraged in order to accelerate economic progress and development as evidenced by various laws
and issuances[.] x x x (Emphasis supplied)

The assailed decision of the Court of Appeals dwells on the issue of jurisdiction of the RTC over the NPC petition
for declaratory relief on the constitutionality of the service contract.

Since only the issue of jurisdiction over the constitutionality of a contract was elevated to this Court, it is beyond
its jurisdiction to pass upon and approve the Compromise Agreement of the parties, who have, as therein stated,
"agreed to terminate the service contract subject of the dispute, in favor of" a series of agreements that start with
"Provisional," followed by "Interim," then "Transition," and finally "Geothermal Resources Sales Contract
(GRSC)," the forging of which agreements is intended to "effectively erase any doubt as to the legality of the
compromise."

In light of the foregoing development, while this Court denies the parties’ Joint Motion to Approve the
Compromise Agreement, it finds the Motion to Dismiss well-taken.

WHEREFORE, the Motion to Dismiss the instant petition is hereby GRANTED.

SO ORDERED.

G.R. No. 187850, August 17, 2016

ANITA U. LORENZANA, Petitioner, v. RODOLFO LELINA, Respondent.

DECISION

JARDELEZA, J.:

This is a petition for review on certiorari1 under Rule 45 of the Revised Rules of Court filed by Anita
U. Lorenzana (petitioner) from the Court of Appeals' (CA) Decision 2 dated April 30, 2008 (CA
Decision) and the Resolution3 dated April 27, 2009 in CA-G.R. CV No. 86187. The CA affirmed the
Regional Trial Court (RTC) Decision4 dated March 7, 2005 (RTC Decision) upholding Rodolfo
Lelina's (respondent) ownership over the half of the 16,047 square meters (sq. m.) of land claimed
by petitioner, and cancelling the Deed of Final Conveyance and Tax Declaration in petitioner's
name.5chanrobleslaw

Facts

On April 1, 1975, Ambrosia Lelina (Ambrosia), married to Aquilino Lelina (Aquilino), executed a
Deed of Absolute Sale6 over one-half (1/2) of an undivided parcel of land covered by Tax
Declaration (TD) No. 14324-C (property) in favor of her son, the respondent. The Deed of Absolute
Sale, however, specified only an area of 810 sq. m. as the one-half (1/2) of the property covered
by the tax declaration.7Nevertheless, the Deed of Absolute Sale contained the description of the
land covered by TD No. 14324-C, as follows: "[b]ounded on the: North by Constancio Batac-&
National highway[,] East by Cecilio Lorenzana, South by Cr[ee]k, and West by Andres
Cuaresma."8]

Immediately after the execution of the Deed of Absolute Sale, respondent took possession of the
property. Since then, the tenants of the property, Fidel Labiano, Venancio Lagria, and Magdalena
Lopez, continued to deliver his share of the produce of the property as well as produce of the
remaining half of the land covered by TD No. 14324-C until December 1995.9chanrobleslaw

Around August 1996,10 respondent and his three tenants were invited at the Municipal Agrarian
Office of Tagudin, Ilocos Sur for a conference where they were informed that the property is
already owned by petitioner by virtue of a Deed of Final Conveyance and TD No. 11-21367-A both
in the name of petitioner.11 Alerted by the turn of events, respondent filed a complaint for quieting
of title and cancellation of documents12 on September 24, 1996, with the RTC Branch 25, Tagudin,
Ilocos Sur, claiming that there appears to be a cloud over his ownership and possession of the
property.

In her Answer,13 petitioner alleged that she acquired a land with an area of 16,047 sq. m. through
a foreclosure sale. Petitioner claims that she became the judgment creditor in a case for collection
of sum of money14 (collection case) she filed against Aquilino, and the decision in her favor became
final on March 20, 1975, with an Entry of Judgment issued on April 10, 1975.15 Thereafter, by
virtue of a writ of execution to enforce the decision in the collection case, the sheriff levied on a
land with an area of 16,047 sq. m. covered by the TD No. 11-05370-A16 (levied property) under
the name of Ambrosia. Petitioner claimed that she emerged as the sole and highest bidder when
the levied property was auctioned. An auction sale was conducted on September 29, 1977 and a
Certificate of Sale was issued in favor of petitioner. The same Certificate of Sale was registered
with the Register of Deeds on October 18, 1977.17 No redemption having been made despite the
lapse of the one year period for redemption, a Deed of Final Conveyance18 was issued in her favor
on October 9, 1978. The same was registered with the Register of Deeds of Ilocos Sur on October
16, 1978.19chanrobleslaw

During trial, it was undisputed that the property is found within the levied property. 20 The levied
property has the following boundaries: North by Constancio Batac; East by National Road and
heirs of Pedro Mina & Cecilio Lorenzana; South by Creek; and West by Andres Cuaresma, Eladio
Ma and Creek.21 It was further shown that the Deed of Final Conveyance expressly describes the
levied property as registered and owned by Ambrosia. 22 Petitioner testified that she did not
immediately possess the levied property, but only did so in 1995. 23 On the other hand, respondent
testified that sometime in 1975 and prior to the sale of the property to him, the other half of the
levied property was owned by Godofredo Lorenzana (Godofredo).24 He also claimed that he and
Godofredo have agreed that he will hold in trust the latter's share of produce from the other half
of the land.25cralawredchanrobleslaw

After trial, respondent submitted his Memorandum26 dated December 16, 2004 where he explained
that the land he was claiming was the one-half (1/2) of the 16,047 sq. m. formerly covered by TD
No. 14324-C described in the Deed of Absolute Sale. Thus, he prayed that his title to the property,
i.e. the one-half (1/2) of the levied property, be upheld.

The RTC upheld respondent's ownership over the half of the levied property. 27 It ruled that
the levied property is exclusively owned by Ambrosia, and could not be held to answer for the
obligations of her husband in the collection case. As a result, it declared the Deed of Final
Conveyance dated October 9, 1978, as well as the proceedings taken during the alleged auction
sale of levied property, invalid and without force and effect on Ambrosia's paraphernal
property.29 It also cancelled the TD No. 11-21367-A in the name of petitioner.30]

Petitioner filed a notice of appeal from the RTC Decision. In her Appellant's Brief, 31 petitioner
argued that the trial court erred: (1) in awarding one-half (1/2) of the levied property, which is
more than the 810 sq. m. prayed for in the complaint; (2) in ruling that the Deed of Final
Conveyance in favor of petitioner is invalid; and (3) in awarding litigation expenses and attorney's
fees in favor of respondent.

The CA affirmed the findings of the RTC and upheld respondent's ownership over the property. 32 It
ruled that the power of the court in the execution of its judgment extends only to properties
unquestionably belonging to the judgment debtor. Since Ambrosia exclusively owned the levied
property, the sheriff in the collection case, on behalf of the court, acted beyond its power and
authority when it levied on the property. Consequently, petitioner cannot rely on the execution
sale in proving that she has better right over the property because such execution sale is
void.33 Finding petitioner's claim over the property as invalid, the CA upheld respondent's right to
the removal of the cloud on his title.34 The CA deleted the award of litigation expenses and
attorney's fees, there being no finding of facts in the RTC Decision that warrants the same.35
Hence, this petition.
Arguments
Petitioner argues that respondent's sole basis for his claim of ownership over the property is the
Deed of Absolute Sale, the original of which was not presented in court. Since only the photocopy
of the Deed of Absolute Sale was presented, its contents are inadmissible for violating the best
evidence rule. Thus, respondent's claim of ownership should be denied. 36chanrobleslaw

Petitioner next claims that even if the Deed of Absolute Sale be considered in evidence, it only
proves respondent's ownership over the 810 sq. m., and not the half of the 16,047 sq. m. levied
property. Accordingly, the area of the lot awarded should be limited to what was prayed for in the
Complaint.37chanrobleslaw

Lastly, petitioner assails the finding that Ambrosia is the exclusive owner of the levied property.
She asserts that at the very least, the levied property is jointly owned by the spouses Ambrosia
and Aquilino and therefore, it may be validly held answerable for the obligations incurred by
Aquilino. Accordingly, she asserts that the Deed of Final Conveyance should not have been totally
invalidated but should have been upheld as to the other half of the levied property. 38 In this
connection, she maintains that the lower courts should not have ordered the remaining half of the
levied property be held in trust by respondent because the alleged landholding of Godofredo was
not proven to be the same or even part of the levied property.39chanrobleslaw

Issues

I. Whether respondent is the owner of one-half (1/2) of the levied property comprising of
16,047 sq. m.

II. Whether the Deed of Final Conveyance and TD No. 11- 21367-A, both in the name of
petitioner, were correctly cancelled.

Ruling
We deny the petition.
The issues raised invite a re-determination of questions of fact which is not within the province of
a petition for review on certiorari under Rule 45 of the Revised Rules of Court. Factual findings of
the trial court affirmed by the CA are final and conclusive and may not be reviewed on appeal. 40 In
certain cases, we held that as an exception, a review of such factual findings may be made when
the judgment of the CA is premised on a misapprehension of facts or a failure to consider certain
relevant facts, which, if properly considered, would justify a different conclusion. 41 Petitioner
invokes this exception urging us to pass upon anew the RTC and CA's findings, regarding the
ownership of the property and levied property which led the lower courts to cancel the Deed of
Final Conveyance and TD No. 11-21367-A under petitioner's name.

We find no reversible error committed by the RTC and CA in ruling that the Deed of Absolute Sale
proves respondent's ownership over the property, and that petitioner failed to establish a
registrable title on the property and levied property.

I. Respondent is the owner of half

of the levied property.

We affirm the finding that respondent is the owner of the property equivalent to half of the levied
property.

A. Waiver of objection to the Best

Evidence Rule.
Petitioner claims that the photocopy of the Deed of Absolute Sale should not have been admitted
in evidence to prove respondent's ownership over the property. We disagree.

The best evidence rule requires that when the subject of inquiry is the contents of a document, no
evidence is admissible other than the original document itself except in the instances mentioned
in Section 3, Rule 130 of the Revised Rules of Court. As such, mere photocopies of documents are
inadmissible pursuant to the best evidence rule. 42 Nevertheless, evidence not objected to is
deemed admitted and may be validly considered by the court in arriving at its judgment. 43 Courts
are not precluded to accept in evidence a mere photocopy of a document when no objection was
raised when it was formally offered.44chanrobleslaw

In order to exclude evidence, the objection to admissibility of evidence must be made at the
proper time, and the grounds specified.45 Objection to evidence must be made at the time it is
formally offered.46 In case of documentary evidence, offer is made after all the witnesses of the
party making the offer have testified, specifying the purpose for which the evidence is being
offered.47 It is only at this time, and not at any other, that objection to the documentary evidence
may be made. And when a party failed to interpose a timely objection to evidence at the time they
were offered in evidence, such objection shall be considered as waived.48 This is true even if by
its nature the evidence is inadmissible and would have surely been rejected if it had been
challenged at the proper time.49 Moreover, grounds for objection must be specified in any
case.50 Grounds for objections not raised at the proper time shall be considered waived, even if
the evidence was objected to on some other ground. 51 Thus, even on appeal, the appellate court
may not consider any other ground of objection, except those that were raised at the proper
time.52chanrobleslaw

In this case, the objection to the Deed of Absolute Sale was belatedly raised. Respondent
submitted his Formal Offer of Evidence53 on February 12, 2003 which included the Deed of
Absolute Sale as Exhibit A. While petitioner filed a Comment and Objection54 on February 21, 2003,
she only objected to the Deed of Absolute Sale for being self-serving. In the Order55 dated
February 27, 2003, the RTC admitted the Deed of Absolute Sale, rejecting the objection of
petitioner. Having failed to object on the ground of inadmissibility under the best evidence rule,
petitioner is now deemed to have waived her objection on this ground and cannot raise it for the
first time on appeal.56chanrobleslaw

B. The Deed of Absolute Sale

sufficiently proves respondent's
ownership over the property.

We stress that petitioner does not question the validity of the sale, but merely the admissibility of
the deed. Having been admitted in evidence as to its contents, the Deed of Absolute Sale
sufficiently proves respondent's ownership over the property. The deed, coupled with respondent's
possession over the property since its sale in 1975 until 1995, proves his ownership.

Petitioner maintains that without conceding the correctness of the CA Decision, respondent's
ownership of the land should only be limited to 810 sq. m. in accordance with his complaint and
evidence presented. Thus, the CA went over and beyond the allegations in the complaint making
its finding devoid of factual basis.57chanrobleslaw

We note that petitioner actively participated in the proceedings below. During the course of trial
she was confronted with the issue of ownership of the levied property, and she admitted that the
property is found within the former.58 From the beginning, petitioner was apprised of respondent's
claim over the half of the land described in the Deed of Absolute Sale, which has the same
boundaries as the land described in TD No. 11-05730-A. While respondent in his complaint stated
a claim for an area of only 810 sq. m., he adequately clarified his claim for the one-half (1/2) of
the levied property in his Memorandum59 dated December 16, 2004 before the RTC. Hence, it
could not be said that petitioner was deprived of due process by not being notified or given the
opportunity to oppose the claim over half of the levied property.

At any rate, we have consistently ruled that what really defines a piece of land is not the area,
calculated with more or less certainty mentioned in the description, but its boundaries laid down,
as enclosing the land and indicating its limits.60 Where land is sold for a lump sum and not so
much per unit of measure or number, the boundaries of the land stated in the contract determine
the effects and scope of the sale, and not its area.61 This is consistent with Article 1542 of the Civil
Code which provides:
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for
a unit of measure or number, there shall be no increase or decrease of the price, although there
be a greater or lesser areas or number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a single price; but if,
besides mentioning the boundaries, which is indispensable in every conveyance of real
estate, its area or number should be designated in the contract, the vendor shall be
bound to deliver all that is included within said boundaries, even when it exceeds the
area or number specified in the contract; and, should he not be able to do so, he shall suffer
a reduction in the price, in proportion to what is lacking in the area or number, unless the contract
is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.
(Emphasis supplied.)
In this case, the land covered by TD No. 14324-C in the Deed of Absolute Sale, from where the
one-half (1/2) portion belonging to respondent is taken, has the following boundaries: North by
Constancio Batac & National Highway; East by Cecilio Lorenzana; South by Creek; and West by
Andres Cuaresma.62 This is the same extent and location of the lot covered in the Deed of Final
Conveyance, TD No. 11-05730-A in Ambrosia's name, and petitioner's TD No. 11-21367-A. This
description should prevail over the area specified in the Deed of Absolute Sale. Thus, we agree
with the courts below that respondent owns half of the levied property.

Respondent having been able to make a prima facie case as to his ownership over the property,
it was incumbent upon petitioner to prove her claim of ownership over the levied property by
preponderance of evidence. In Dantis v. Maghinang, Jr.,63 citing Jison v. Court of Appeals,64 we
held:ChanRoblesVirtualawlibrary
Simply put, he who alleges the affirmative of the issue has the burden of proof, and upon the
plaintiff in a civil case, the burden of proof never parts. However, in the course of trial in a civil
case, once plaintiff makes out a prima facie case in his favor, the duty or the burden of evidence
shifts to defendant to controvert plaintiff’s prima facie case, otherwise, a verdict must be returned
in favor of plaintiff. Moreover, in civil cases, the party having the burden of proof must produce a
preponderance of evidence thereon, with plaintiff having to rely on the strength of his own
evidence and not upon the weakness of the defendant's. The concept of "preponderance of
evidence" refers to evidence which is of greater weight, or more convincing, that which is offered
in opposition to it; at bottom, it means probability of truth.65chanroblesvirtuallawlibrary
As correctly found by both the RTC and CA, petitioner failed to establish her claim over the levied
property. Petitioner has been inconsistent in her versions as to how she acquired ownership over
the levied property. In her Answer, she claims that she is the owner of the levied property by
virtue of having been the highest bidder in the public auction to execute the decision in the
collection case.66 During her testimony, however, she contradicts herself by claiming that the
levied property was awarded to her husband by her father-in-law or the brother of Ambrosia, and
the latter's husband Aquilino was merely appointed as administrator of the land. 67 The
inconsistencies between these claims are glaring because if the levied property was truly awarded
to her by her father-in-law, she could have just vindicated her claim in an independent action, and
not participate in the public auction. Moreover, this is inconsistent with her claim that Aquilino was
the owner of the levied property which is answerable for Aquilino's debt.68 Thus, the RTC and CA
correctly did not give credence to these versions but instead considered that her claim of
ownership is anchored only on the Deed of Final Conveyance.

Petitioner's ownership anchored on this Deed of Final Conveyance, however, likewise fails.

II. The Deed of Final

Conveyance and TD No.
11-21367-A were correctly
cancelled.

Money judgments are enforceable only against property unquestionably belonging to the judgment
debtor alone.69 If property belonging to any third person is mistakenly levied upon to answer for
another man's indebtedness, the Rules of Court gives such person all the right to challenge the
levy through any of the remedies provided for under the rules, including an independent "separate
action" to vindicate his or her claim of ownership and/or possession over the foreclosed
property.70chanrobleslaw

The determinative question here is to whom the property belongs at the time of the levy and
execution sale. To recall, respondent acquired the property through the Deed of Absolute Sale
dated April 1, 1975, while petitioner bought the levied property at the public auction held on
September 29, 1977. Obviously, respondent already owned the property at the time petitioner
bought the levied property, and thus cannot be levied and attached for the obligations of Aquilino
in the collection case.

As to the other half of the levied property, we uphold the CA and the RTC's finding that prior to
its transfer to respondent and one Godofredo Lorenzana, the levied property was paraphernal
property of Ambrosia. The records show that Ambrosia owned the levied property as evidenced
by: (1) TD No. 11-05370-A in her name; (2) a provision in the Deed of Final Conveyance that it
is Ambrosia who exclusively owns the land;71 and (3) an admission from petitioner herself in her
Appellant's Brief that Ambrosia is the declared owner of the levied property. 72 These pieces of
evidence vis-a¬vis petitioner's inconsistent theories of ownership, undoubtedly have more weight,
and in fact had been given more weight by the courts below.

As a rule, if at the time of the levy and sale by the sheriff, the property did not belong to the
conjugal partnership, but was paraphernal property, such property may not be answerable for the
obligations of the husband which resulted in the judgment against him in favor of another
person.73 The levied property being exclusive property of Ambrosia, and Ambrosia not being a
party to the collection case, the levied property may not answer for Aquilino's obligations. Even
assuming that the levied property belonged to the conjugal partnership of Ambrosia and Aquilino,
it may still not be levied upon because petitioner did not present proof that the obligation
redounded to the benefit of the family. More importantly, Aquilino's interest over a portion of the
levied property as conjugal property is merely inchoate prior to the liquidation of the conjugal
partnership.74chanrobleslaw

Thus, we find that the levied property may not answer for the obligations of Aquilino because the
latter does not own it at the time of the levy. Hence, the Deed of Final Conveyance and TD No.
11-21367-A were correctly cancelled for being the outcome of an invalid levy.
A final note.
Petitioner does not have a legal claim of ownership over the property because her alleged title
results from an invalid levy and execution. Thus, it is of no moment that respondent never
registered the Deed of Absolute Sale, or that he never declared it for taxation purposes—petitioner
does not have a valid claim over the property that would benefit from respondent's lapses.

This likewise holds true as to the other half of the levied property determined to be the property
of Godofredo. Petitioner's claim that there is no basis in ordering respondent to hold in trust the
other half of the levied property in favor of Godofredo fails. Records show that the CA gave
credence to respondent's testimony that the other half of the levied property was sold to
Godofredo, and that the latter agreed that respondent shall receive the proceeds of the produce
on behalf of Godofredo.75 Upon such findings, it became incumbent upon petitioner to show
otherwise by proving her ownership. This, however, she failed to do. Thus, petitioner cannot claim
that the courts below erred in not awarding Godofredo's portion to her.

From the foregoing, we uphold respondent's ownership over the subject property, as well as the
cancellation of Deed of Final Conveyance and TD No. 11-21367-A under the name of petitioner.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals are hereby AFFIRMED.

SO ORDERED.chanRoblesvirtualLawlibrary

G.R. No. 92024 November 9, 1990

CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,

vs.
THE BOARD OF INVESTMENTS, THE DEPARTMENT OF TRADE AND INDUSTRY, LUZON
PETROCHEMICAL CORPORATION, and PILIPINAS SHELL CORPORATION, respondents.

Abraham C. La Vina for petitioner.

Sycip, Salazar, Hernandez & Gatmaitan for Luzon Petrochemical Corporation.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for Pilipinas Shell Petroleum Corporation.

GUTIERREZ, JR., J.:

This is a petition to annul and set aside the decision of the Board of Investments (BOI)/Department of Trade and
Industry (DTI) approving the transfer of the site of the proposed petrochemical plant from Bataan to Batangas
and the shift of feedstock for that plant from naphtha only to naphtha and/or liquefied petroleum gas (LPG).

This petition is a sequel to the petition in G.R. No. 88637 entitled "Congressman Enrique T. Garcia v. the Board
of Investments", September 7, 1989, where this Court issued a decision, ordering the BOI as follows:

WHEREFORE, the petition for certiorari is granted. The Board of Investments is ordered: (1) to
publish the amended application for registration of the Bataan Petrochemical Corporation, (2) to
allow the petitioner to have access to its records on the original and amended applications for
registration, as a petrochemical manufacturer, of the respondent Bataan Petrochemical
Corporation, excluding, however, privileged papers containing its trade secrets and other
business and financial information, and (3) to set for hearing the petitioner's opposition to the
amended application in order that he may present at such hearing all the evidence in his
possession in support of his opposition to the transfer of the site of the BPC petrochemical plant
to Batangas province. The hearing shall not exceed a period of ten (10) days from the date fixed
 by the BOI, notice of which should be served by personal service to the petitioner through counsel,
at least three (3) days in advance. The hearings may be held from day to day for a period of ten
(10) days without postponements. The petition for a writ of prohibition or preliminary injunction is
denied. No costs. (Rollo, pages 450-451)

However, acting on the petitioner's motion for partial reconsideration asking that we rule on the import of P.D.
Nos. 949 and 1803 and on the foreign investor's claim of right of final choice of plant site, in the light of the
provisions of the Constitution and the Omnibus Investments Code of 1987, this Court on October 24, 1989, made
the observation that P.D. Nos. 949 and 1803 "do not provide that the Limay site should be the only petrochemical
zone in the country, nor prohibit the establishment of a petrochemical plant elsewhere in the country, that the
establishment of a petrochemical plant in Batangas does not violate P.D. No. 949 and P.D. No. 1803.

Our resolution skirted the issue of whether the investor given the initial inducements and other circumstances
surrounding its first choice of plant site may change it simply because it has the final choice on the matter. The
Court merely ruled that the petitioner appears to have lost interest in the case by his failure to appear at the
hearing that was set by the BOI after receipt of the decision, so he may be deemed to have waived the fruit of
the judgment. On this ground, the motion for partial reconsideration was denied.

A motion for reconsideration of said resolution was filed by the petitioner asking that we resolve the basic issue
of whether or not the foreign investor has the right of final choice of plant site; that the non-attendance of the
petitioner at the hearing was because the decision was not yet final and executory; and that the petitioner had
not therefor waived the right to a hearing before the BOI.

In the Court's resolution dated January 17, 1990, we stated:

Does the investor have a "right of final choice" of plant site? Neither under the 1987 Constitution
nor in the Omnibus Investments Code is there such a 'right of final choice.' In the first place, the
investor's choice is subject to processing and approval or disapproval by the BOI (Art. 7, Chapter
II, Omnibus Investments Code). By submitting its application and amended application to the BOI
for approval, the investor recognizes the sovereign prerogative of our Government, through the
BOI, to approve or disapprove the same after determining whether its proposed project will be
feasible, desirable and beneficial to our country. By asking that his opposition to the LPC's
amended application be heard by the BOI, the petitioner likewise acknowledges that the BOI, not
the investor, has the last word or the "final choice" on the matter.

Secondly, as this case has shown, even a choice that had been approved by the BOI may not be
'final', for supervening circumstances and changes in the conditions of a place may dictate a
corresponding change in the choice of plant site in order that the project will not fail. After all, our
country will benefit only when a project succeeds, not when it fails. (Rollo, pp. 538-539)

Nevertheless, the motion for reconsideration of the petitioner was denied.

A minority composed of Justices Melencio-Herrera, Gancayco, Sarmiento and this ponente voted to grant the
motion for reconsideration stating that the hearing set by the BOI was premature as the decision of the Court
was not yet final and executory; that as contended by the petitioner the Court must first rule on whether or not
the investor has the right of final choice of plant site for if the ruling is in the affirmative, the hearing would be a
useless exercise; that in the October 19, 1989 resolution, the Court while upholding validity of the transfer of the
plant site did not rule on the issue of who has the final choice; that they agree with the observation of the majority
that "the investor has no final choice either under the 1987 Constitution or in the Omnibus Investments Code
and that it is the BOI who decides for the government" and that the plea of the petitioner should be granted to
give him the chance to show the justness of his claim and to enable the BOI to give a second hard look at the
matter.
Thus, the herein petition which relies on the ruling of the Court in the resolution of January 17, 1990 in G.R. No.
88637 that the investor has no right of final choice under the 1987 Constitution and the Omnibus Investments
Code.

Under P.D. No. 1803 dated January 16, 1981, 576 hectares of the public domain located in Lamao, Limay,
Bataan were reserved for the Petrochemical Industrial Zone under the administration, management, and
ownership of the Philippine National Oil Company (PNOC).

The Bataan Refining Corporation (BRC) is a wholly government owned corporation, located at Bataan. It
produces 60% of the national output of naphtha.

Taiwanese investors in a petrochemical project formed the Bataan Petrochemical Corporation (BPC) and applied
with BOI for registration as a new domestic producer of petrochemicals. Its application specified Bataan as the
plant site. One of the terms and conditions for registration of the project was the use of "naphtha cracker" and
"naphtha" as feedstock or fuel for its petrochemical plant. The petrochemical plant was to be a joint venture with
PNOC. BPC was issued a certificate of registration on February 24, 1988 by BOI.

BPC was given pioneer status and accorded fiscal and other incentives by BOI, like: (1) exemption from taxes
on raw materials, (2) repatriation of the entire proceeds of liquidation investments in currency originally made
and at the exchange rate obtaining at the time of repatriation; and (3) remittance of earnings on investments. As
additional incentive, the House of Representatives approved a bill introduced by the petitioner eliminating the
48% ad valoremtax on naphtha if and when it is used as raw materials in the petrochemical plant. (G.R. No.
88637, September 7, 1989, pp. 2-3. Rollo, pp. 441-442)

However, in February, 1989, A.T. Chong, chairman of USI Far East Corporation, the major investor in BPC,
personally delivered to Trade Secretary Jose Concepcion a letter dated January 25, 1989 advising him of BPC's
desire to amend the original registration certification of its project by changing the job site from Limay, Bataan,
to Batangas. The reason adduced for the transfer was the insurgency and unstable labor situation, and the
presence in Batangas of a huge liquefied petroleum gas (LPG) depot owned by the Philippine Shell Corporation.

The petitioner vigorously opposed the proposal and no less than President Aquino expressed her preference
that the plant be established in Bataan in a conference with the Taiwanese investors, the Secretary of National
Defense and The Chief of Staff of the Armed Forces.

Despite speeches in the Senate and House opposing the Transfer of the project to Batangas, BPC filed on April
11, 1989 its request for approval of the amendments. Its application is as follows: "(l) increasing the investment
amount from US $220 million to US $320 million; (2) increasing the production capacity of its naphtha cracker,
polythylene plant and polypropylene plant; (3) changing the feedstock from naphtha only to "naphtha and/or
liquefied petroleum gas;" and (4) transferring the job site from Limay, Bataan, to Batangas. (Annex B to Petition;
Rollo, p. 25)

Notwithstanding opposition from any quarters and the request of the petitioner addressed to Secretary
Concepcion to be furnished a copy of the proposed amendment with its attachments which was denied by the
BOI on May 25, 1989, BOI approved the revision of the registration of BPC's petrochemical project. (Petition,
Annex F; Rollo, p. 32; See pp. 4 to 6, Decision in G.R. No. 88637; supra.)

BOI Vice-Chairman Tomas I. Alcantara testifying before the Committee on Ways and Means of the Senate
asserted that:

The BOI has taken a public position preferring Bataan over Batangas as the site of the
petrochemical complex, as this would provide a better distribution of industries around the Metro
Manila area. ... In advocating the choice of Bataan as the project site for the petrochemical
complex, the BOI, however, made it clear, and I would like to repeat this that the BOI made it
clear in its view that the BOI or the government for that matter could only recomend as to where
the project should be located. The BOI recognizes and respect the principle that the final chouce
 is still with the proponent who would in the final analysis provide the funding or risk capital for the
project. (Petition, P. 13; Annex D to the petition)

This position has not been denied by BOI in its pleadings in G.R. No. 88637 and in the present petition.

Section 1, Article VIII of the 1987 Constitution 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.

There is before us an actual controversy whether the petrochemical plant should remain in Bataan or should be
transferred to Batangas, and whether its feedstock originally of naphtha only should be changed to naphtha
and/or liquefied petroleum gas as the approved amended application of the BPC, now Luzon Petrochemical
Corporation (LPC), shows. And in the light of the categorical admission of the BOI that it is the investor who has
the final choice of the site and the decision on the feedstock, whether or not it constitutes a grave abuse of
discretion for the BOI to yield to the wishes of the investor, national interest notwithstanding.

We rule that the Court has a constitutional duty to step into this controversy and determine the paramount issue.
We grant the petition.

First, Bataan was the original choice as the plant site of the BOI to which the BPC agreed. That is why it organized
itself into a corporation bearing the name Bataan. There is available 576 hectares of public land precisely
reserved as the petrochemical zone in Limay, Bataan under P.D. No. 1803. There is no need to buy expensive
real estate for the site unlike in the proposed transfer to Batangas. The site is the result of careful study long
before any covetous interests intruded into the choice. The site is ideal. It is not unduly constricted and allows
for expansion. The respondents have not shown nor reiterated that the alleged peace and order situation in
Bataan or unstable labor situation warrant a transfer of the plant site to Batangas. Certainly, these were taken
into account when the firm named itself Bataan Petrochemical Corporation. Moreover, the evidence proves the
contrary.

Second, the BRC, a government owned Filipino corporation, located in Bataan produces 60% of the national
output of naphtha which can be used as feedstock for the plant in Bataan. It can provide the feedstock
requirement of the plant. On the other hand, the country is short of LPG and there is need to import the same for
use of the plant in Batangas. The local production thereof by Shell can hardly supply the needs of the consumers
for cooking purposes. Scarce dollars will be diverted, unnecessarily, from vitally essential projects in order to
feed the furnaces of the transferred petrochemical plant.

Third, naphtha as feedstock has been exempted by law from the ad valorem tax by the approval of Republic Act
No. 6767 by President Aquino but excluding LPG from exemption from ad valorem tax. The law was enacted
specifically for the petrochemical industry. The policy determination by both Congress and the President is clear.
Neither BOI nor a foreign investor should disregard or contravene expressed policy by shifting the feedstock
from naphtha to LPG.

Fourth, under Section 10, Article XII of the 1987 Constitution, it is the duty of the State to "regulate and exercise
authority over foreign investments within its national jurisdiction and in accordance with its national goals and
priorities." The development of a self-reliant and independent national economy effectively controlled by Filipinos
is mandated in Section 19, Article II of the Constitution.

In Article 2 of the Omnibus Investments Code of 1987 "the sound development of the national economy in
consonance with the principles and objectives of economic nationalism" is the set goal of government.
Fifth, with the admitted fact that the investor is raising the greater portion of the capital for the project from local
sources by way of loan which led to the so-called "petroscam scandal", the capital requirements would be greatly
minimized if LPC does not have to buy the land for the project and its feedstock shall be limited to naphtha which
is certainly more economical, more readily available than LPG, and does not have to be imported.

Sixth, if the plant site is maintained in Bataan, the PNOC shall be a partner in the venture to the great benefit
and advantage of the government which shall have a participation in the management of the project instead of
a firm which is a huge multinational corporation.

In the light of all the clear advantages manifest in the plant's remaining in Bataan, practically nothing is shown
to justify the transfer to Batangas except a near-absolute discretion given by BOI to investors not only to freely
choose the site but to transfer it from their own first choice for reasons which remain murky to say the least.

And this brings us to a prime consideration which the Court cannot rightly ignore.

Section 1, Article XII of the Constitution provides that:

xxx xxx xxx

The State shall promote industrialization and full employment based on sound agricultural
development and agrarian reform, through industries that make full and efficient use of human
and natural resources, and which are competitive in both domestic and foreign markets. However,
the State shall protect Filipino enterprises against unfair foreign competition and trade practices.

xxx xxx xxx

Every provision of the Constitution on the national economy and patrimony is infused with the spirit of national
interest. The non-alienation of natural resources, the State's full control over the development and utilization of
our scarce resources, agreements with foreigners being based on real contributions to the economic growth and
general welfare of the country and the regulation of foreign investments in accordance with national goals and
priorities are too explicit not to be noticed and understood.

A petrochemical industry is not an ordinary investment opportunity. It should not be treated like a garment or
embroidery firm, a shoe-making venture, or even an assembler of cars or manufacturer of computer chips, where
the BOI reasoning may be accorded fuller faith and credit. The petrochemical industry is essential to the national
interest. In other ASEAN countries like Indonesia and Malaysia, the government superintends the industry by
controlling the upstream or cracker facility.

In this particular BPC venture, not only has the Government given unprecedented favors, among them:

(1) For an initial authorized capital of only P20 million, the Central Bank gave an eligible relending
credit or relending facility worth US $50 million and a debt to swap arrangement for US $30 million
or a total accommodation of US $80 million which at current exchange rates is around P2080
million.

(2) A major part of the company's capitalization shall not come from foreign sources but from
loans, initially a Pl Billion syndicated loan, to be given by both government banks and a consortium
of Philippine private banks or in common parlance, a case of 'guiniguisa sa sariling manteca.'

(3) Tax exemptions and privileges were given as part of its 'preferred pioneer status.'

(4) Loan applications of other Philippine firms will be crowded out of the Asian Development Bank
portfolio because of the petrochemical firm's massive loan request. (Taken from the proceedings
before the Senate Blue Ribbon Committee).
but through its regulatory agency, the BOI, it surrenders even the power to make a company abide by its initial
choice, a choice free from any suspicion of unscrupulous machinations and a choice which is undoubtedly in the
best interests of the Filipino people.

The Court, therefore, holds and finds that the BOI committed a grave abuse of discretion in approving the transfer
of the petrochemical plant from Bataan to Batangas and authorizing the change of feedstock from naphtha only
to naphtha and/or LPG for the main reason that the final say is in the investor all other circumstances to the
contrary notwithstanding. No cogent advantage to the government has been shown by this transfer. This is a
repudiation of the independent policy of the government expressed in numerous laws and the Constitution to run
its own affairs the way it deems best for the national interest.

One can but remember the words of a great Filipino leader who in part said he would not mind having a
government run like hell by Filipinos than one subservient to foreign dictation. In this case, it is not even a foreign
government but an ordinary investor whom the BOI allows to dictate what we shall do with our heritage.

WHEREFORE, the petition is hereby granted. The decision of the respondent Board of Investments approving
the amendment of the certificate of registration of the Luzon Petrochemical Corporation on May 23, 1989 under
its Resolution No. 193, Series of 1989, (Annex F to the Petition) is SET ASIDE as NULL and VOID. The original
certificate of registration of BPC' (now LPC) of February 24, 1988 with Bataan as the plant site and naphtha as
the feedstock is, therefore, ordered maintained.

SO ORDERED.

G.R. No. 92024 November 9, 1990

CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,

vs.
THE BOARD OF INVESTMENTS, THE DEPARTMENT OF TRADE AND INDUSTRY, LUZON
PETROCHEMICAL CORPORATION, and PILIPINAS SHELL CORPORATION, respondents.

Abraham C. La Vina for petitioner.

Sycip, Salazar, Hernandez & Gatmaitan for Luzon Petrochemical Corporation.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for Pilipinas Shell Petroleum Corporation.

GUTIERREZ, JR., J.:

This is a petition to annul and set aside the decision of the Board of Investments (BOI)/Department of Trade and
Industry (DTI) approving the transfer of the site of the proposed petrochemical plant from Bataan to Batangas
and the shift of feedstock for that plant from naphtha only to naphtha and/or liquefied petroleum gas (LPG).

This petition is a sequel to the petition in G.R. No. 88637 entitled "Congressman Enrique T. Garcia v. the Board
of Investments", September 7, 1989, where this Court issued a decision, ordering the BOI as follows:

WHEREFORE, the petition for certiorari is granted. The Board of Investments is ordered: (1) to
publish the amended application for registration of the Bataan Petrochemical Corporation, (2) to
allow the petitioner to have access to its records on the original and amended applications for
registration, as a petrochemical manufacturer, of the respondent Bataan Petrochemical
Corporation, excluding, however, privileged papers containing its trade secrets and other
business and financial information, and (3) to set for hearing the petitioner's opposition to the
amended application in order that he may present at such hearing all the evidence in his
possession in support of his opposition to the transfer of the site of the BPC petrochemical plant
 to Batangas province. The hearing shall not exceed a period of ten (10) days from the date fixed
by the BOI, notice of which should be served by personal service to the petitioner through counsel,
at least three (3) days in advance. The hearings may be held from day to day for a period of ten
(10) days without postponements. The petition for a writ of prohibition or preliminary injunction is
denied. No costs. (Rollo, pages 450-451)

However, acting on the petitioner's motion for partial reconsideration asking that we rule on the import of P.D.
Nos. 949 and 1803 and on the foreign investor's claim of right of final choice of plant site, in the light of the
provisions of the Constitution and the Omnibus Investments Code of 1987, this Court on October 24, 1989, made
the observation that P.D. Nos. 949 and 1803 "do not provide that the Limay site should be the only petrochemical
zone in the country, nor prohibit the establishment of a petrochemical plant elsewhere in the country, that the
establishment of a petrochemical plant in Batangas does not violate P.D. No. 949 and P.D. No. 1803.

Our resolution skirted the issue of whether the investor given the initial inducements and other circumstances
surrounding its first choice of plant site may change it simply because it has the final choice on the matter. The
Court merely ruled that the petitioner appears to have lost interest in the case by his failure to appear at the
hearing that was set by the BOI after receipt of the decision, so he may be deemed to have waived the fruit of
the judgment. On this ground, the motion for partial reconsideration was denied.

A motion for reconsideration of said resolution was filed by the petitioner asking that we resolve the basic issue
of whether or not the foreign investor has the right of final choice of plant site; that the non-attendance of the
petitioner at the hearing was because the decision was not yet final and executory; and that the petitioner had
not therefor waived the right to a hearing before the BOI.

In the Court's resolution dated January 17, 1990, we stated:

Does the investor have a "right of final choice" of plant site? Neither under the 1987 Constitution
nor in the Omnibus Investments Code is there such a 'right of final choice.' In the first place, the
investor's choice is subject to processing and approval or disapproval by the BOI (Art. 7, Chapter
II, Omnibus Investments Code). By submitting its application and amended application to the BOI
for approval, the investor recognizes the sovereign prerogative of our Government, through the
BOI, to approve or disapprove the same after determining whether its proposed project will be
feasible, desirable and beneficial to our country. By asking that his opposition to the LPC's
amended application be heard by the BOI, the petitioner likewise acknowledges that the BOI, not
the investor, has the last word or the "final choice" on the matter.

Secondly, as this case has shown, even a choice that had been approved by the BOI may not be
'final', for supervening circumstances and changes in the conditions of a place may dictate a
corresponding change in the choice of plant site in order that the project will not fail. After all, our
country will benefit only when a project succeeds, not when it fails. (Rollo, pp. 538-539)

Nevertheless, the motion for reconsideration of the petitioner was denied.

A minority composed of Justices Melencio-Herrera, Gancayco, Sarmiento and this ponente voted to grant the
motion for reconsideration stating that the hearing set by the BOI was premature as the decision of the Court
was not yet final and executory; that as contended by the petitioner the Court must first rule on whether or not
the investor has the right of final choice of plant site for if the ruling is in the affirmative, the hearing would be a
useless exercise; that in the October 19, 1989 resolution, the Court while upholding validity of the transfer of the
plant site did not rule on the issue of who has the final choice; that they agree with the observation of the majority
that "the investor has no final choice either under the 1987 Constitution or in the Omnibus Investments Code
and that it is the BOI who decides for the government" and that the plea of the petitioner should be granted to
give him the chance to show the justness of his claim and to enable the BOI to give a second hard look at the
matter.
Thus, the herein petition which relies on the ruling of the Court in the resolution of January 17, 1990 in G.R. No.
88637 that the investor has no right of final choice under the 1987 Constitution and the Omnibus Investments
Code.

Under P.D. No. 1803 dated January 16, 1981, 576 hectares of the public domain located in Lamao, Limay,
Bataan were reserved for the Petrochemical Industrial Zone under the administration, management, and
ownership of the Philippine National Oil Company (PNOC).

The Bataan Refining Corporation (BRC) is a wholly government owned corporation, located at Bataan. It
produces 60% of the national output of naphtha.

Taiwanese investors in a petrochemical project formed the Bataan Petrochemical Corporation (BPC) and applied
with BOI for registration as a new domestic producer of petrochemicals. Its application specified Bataan as the
plant site. One of the terms and conditions for registration of the project was the use of "naphtha cracker" and
"naphtha" as feedstock or fuel for its petrochemical plant. The petrochemical plant was to be a joint venture with
PNOC. BPC was issued a certificate of registration on February 24, 1988 by BOI.

BPC was given pioneer status and accorded fiscal and other incentives by BOI, like: (1) exemption from taxes
on raw materials, (2) repatriation of the entire proceeds of liquidation investments in currency originally made
and at the exchange rate obtaining at the time of repatriation; and (3) remittance of earnings on investments. As
additional incentive, the House of Representatives approved a bill introduced by the petitioner eliminating the
48% ad valoremtax on naphtha if and when it is used as raw materials in the petrochemical plant. (G.R. No.
88637, September 7, 1989, pp. 2-3. Rollo, pp. 441-442)

However, in February, 1989, A.T. Chong, chairman of USI Far East Corporation, the major investor in BPC,
personally delivered to Trade Secretary Jose Concepcion a letter dated January 25, 1989 advising him of BPC's
desire to amend the original registration certification of its project by changing the job site from Limay, Bataan,
to Batangas. The reason adduced for the transfer was the insurgency and unstable labor situation, and the
presence in Batangas of a huge liquefied petroleum gas (LPG) depot owned by the Philippine Shell Corporation.

The petitioner vigorously opposed the proposal and no less than President Aquino expressed her preference
that the plant be established in Bataan in a conference with the Taiwanese investors, the Secretary of National
Defense and The Chief of Staff of the Armed Forces.

Despite speeches in the Senate and House opposing the Transfer of the project to Batangas, BPC filed on April
11, 1989 its request for approval of the amendments. Its application is as follows: "(l) increasing the investment
amount from US $220 million to US $320 million; (2) increasing the production capacity of its naphtha cracker,
polythylene plant and polypropylene plant; (3) changing the feedstock from naphtha only to "naphtha and/or
liquefied petroleum gas;" and (4) transferring the job site from Limay, Bataan, to Batangas. (Annex B to Petition;
Rollo, p. 25)

Notwithstanding opposition from any quarters and the request of the petitioner addressed to Secretary
Concepcion to be furnished a copy of the proposed amendment with its attachments which was denied by the
BOI on May 25, 1989, BOI approved the revision of the registration of BPC's petrochemical project. (Petition,
Annex F; Rollo, p. 32; See pp. 4 to 6, Decision in G.R. No. 88637; supra.)

BOI Vice-Chairman Tomas I. Alcantara testifying before the Committee on Ways and Means of the Senate
asserted that:

The BOI has taken a public position preferring Bataan over Batangas as the site of the
petrochemical complex, as this would provide a better distribution of industries around the Metro
Manila area. ... In advocating the choice of Bataan as the project site for the petrochemical
complex, the BOI, however, made it clear, and I would like to repeat this that the BOI made it
clear in its view that the BOI or the government for that matter could only recomend as to where
the project should be located. The BOI recognizes and respect the principle that the final chouce
 is still with the proponent who would in the final analysis provide the funding or risk capital for the
project. (Petition, P. 13; Annex D to the petition)

This position has not been denied by BOI in its pleadings in G.R. No. 88637 and in the present petition.

Section 1, Article VIII of the 1987 Constitution 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.

There is before us an actual controversy whether the petrochemical plant should remain in Bataan or should be
transferred to Batangas, and whether its feedstock originally of naphtha only should be changed to naphtha
and/or liquefied petroleum gas as the approved amended application of the BPC, now Luzon Petrochemical
Corporation (LPC), shows. And in the light of the categorical admission of the BOI that it is the investor who has
the final choice of the site and the decision on the feedstock, whether or not it constitutes a grave abuse of
discretion for the BOI to yield to the wishes of the investor, national interest notwithstanding.

We rule that the Court has a constitutional duty to step into this controversy and determine the paramount issue.
We grant the petition.

First, Bataan was the original choice as the plant site of the BOI to which the BPC agreed. That is why it organized
itself into a corporation bearing the name Bataan. There is available 576 hectares of public land precisely
reserved as the petrochemical zone in Limay, Bataan under P.D. No. 1803. There is no need to buy expensive
real estate for the site unlike in the proposed transfer to Batangas. The site is the result of careful study long
before any covetous interests intruded into the choice. The site is ideal. It is not unduly constricted and allows
for expansion. The respondents have not shown nor reiterated that the alleged peace and order situation in
Bataan or unstable labor situation warrant a transfer of the plant site to Batangas. Certainly, these were taken
into account when the firm named itself Bataan Petrochemical Corporation. Moreover, the evidence proves the
contrary.

Second, the BRC, a government owned Filipino corporation, located in Bataan produces 60% of the national
output of naphtha which can be used as feedstock for the plant in Bataan. It can provide the feedstock
requirement of the plant. On the other hand, the country is short of LPG and there is need to import the same for
use of the plant in Batangas. The local production thereof by Shell can hardly supply the needs of the consumers
for cooking purposes. Scarce dollars will be diverted, unnecessarily, from vitally essential projects in order to
feed the furnaces of the transferred petrochemical plant.

Third, naphtha as feedstock has been exempted by law from the ad valorem tax by the approval of Republic Act
No. 6767 by President Aquino but excluding LPG from exemption from ad valorem tax. The law was enacted
specifically for the petrochemical industry. The policy determination by both Congress and the President is clear.
Neither BOI nor a foreign investor should disregard or contravene expressed policy by shifting the feedstock
from naphtha to LPG.

Fourth, under Section 10, Article XII of the 1987 Constitution, it is the duty of the State to "regulate and exercise
authority over foreign investments within its national jurisdiction and in accordance with its national goals and
priorities." The development of a self-reliant and independent national economy effectively controlled by Filipinos
is mandated in Section 19, Article II of the Constitution.

In Article 2 of the Omnibus Investments Code of 1987 "the sound development of the national economy in
consonance with the principles and objectives of economic nationalism" is the set goal of government.
Fifth, with the admitted fact that the investor is raising the greater portion of the capital for the project from local
sources by way of loan which led to the so-called "petroscam scandal", the capital requirements would be greatly
minimized if LPC does not have to buy the land for the project and its feedstock shall be limited to naphtha which
is certainly more economical, more readily available than LPG, and does not have to be imported.

Sixth, if the plant site is maintained in Bataan, the PNOC shall be a partner in the venture to the great benefit
and advantage of the government which shall have a participation in the management of the project instead of
a firm which is a huge multinational corporation.

In the light of all the clear advantages manifest in the plant's remaining in Bataan, practically nothing is shown
to justify the transfer to Batangas except a near-absolute discretion given by BOI to investors not only to freely
choose the site but to transfer it from their own first choice for reasons which remain murky to say the least.

And this brings us to a prime consideration which the Court cannot rightly ignore.

Section 1, Article XII of the Constitution provides that:

xxx xxx xxx

The State shall promote industrialization and full employment based on sound agricultural
development and agrarian reform, through industries that make full and efficient use of human
and natural resources, and which are competitive in both domestic and foreign markets. However,
the State shall protect Filipino enterprises against unfair foreign competition and trade practices.

xxx xxx xxx

Every provision of the Constitution on the national economy and patrimony is infused with the spirit of national
interest. The non-alienation of natural resources, the State's full control over the development and utilization of
our scarce resources, agreements with foreigners being based on real contributions to the economic growth and
general welfare of the country and the regulation of foreign investments in accordance with national goals and
priorities are too explicit not to be noticed and understood.

A petrochemical industry is not an ordinary investment opportunity. It should not be treated like a garment or
embroidery firm, a shoe-making venture, or even an assembler of cars or manufacturer of computer chips, where
the BOI reasoning may be accorded fuller faith and credit. The petrochemical industry is essential to the national
interest. In other ASEAN countries like Indonesia and Malaysia, the government superintends the industry by
controlling the upstream or cracker facility.

In this particular BPC venture, not only has the Government given unprecedented favors, among them:

(1) For an initial authorized capital of only P20 million, the Central Bank gave an eligible relending
credit or relending facility worth US $50 million and a debt to swap arrangement for US $30 million
or a total accommodation of US $80 million which at current exchange rates is around P2080
million.

(2) A major part of the company's capitalization shall not come from foreign sources but from
loans, initially a Pl Billion syndicated loan, to be given by both government banks and a consortium
of Philippine private banks or in common parlance, a case of 'guiniguisa sa sariling manteca.'

(3) Tax exemptions and privileges were given as part of its 'preferred pioneer status.'

(4) Loan applications of other Philippine firms will be crowded out of the Asian Development Bank
portfolio because of the petrochemical firm's massive loan request. (Taken from the proceedings
before the Senate Blue Ribbon Committee).
but through its regulatory agency, the BOI, it surrenders even the power to make a company abide by its initial
choice, a choice free from any suspicion of unscrupulous machinations and a choice which is undoubtedly in the
best interests of the Filipino people.

The Court, therefore, holds and finds that the BOI committed a grave abuse of discretion in approving the transfer
of the petrochemical plant from Bataan to Batangas and authorizing the change of feedstock from naphtha only
to naphtha and/or LPG for the main reason that the final say is in the investor all other circumstances to the
contrary notwithstanding. No cogent advantage to the government has been shown by this transfer. This is a
repudiation of the independent policy of the government expressed in numerous laws and the Constitution to run
its own affairs the way it deems best for the national interest.

One can but remember the words of a great Filipino leader who in part said he would not mind having a
government run like hell by Filipinos than one subservient to foreign dictation. In this case, it is not even a foreign
government but an ordinary investor whom the BOI allows to dictate what we shall do with our heritage.

WHEREFORE, the petition is hereby granted. The decision of the respondent Board of Investments approving
the amendment of the certificate of registration of the Luzon Petrochemical Corporation on May 23, 1989 under
its Resolution No. 193, Series of 1989, (Annex F to the Petition) is SET ASIDE as NULL and VOID. The original
certificate of registration of BPC' (now LPC) of February 24, 1988 with Bataan as the plant site and naphtha as
the feedstock is, therefore, ordered maintained.

SO ORDERED.

G.R. No. 122156 February 3, 1997

MANILA PRINCE HOTEL petitioner,

vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION, COMMITTEE ON
PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE COUNSEL, respondents.

BELLOSILLO, J.:

The FiIipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges, and concessions
covering the national economy and patrimony, the State shall give preference to qualified Filipinos,1 is in oked
by petitioner in its bid to acquire 51% of the shares of the Manila Hotel Corporation (MHC) which owns the
historic Manila Hotel. Opposing, respondents maintain that the provision is not self-executing but requires an
implementing legislation for its enforcement. Corollarily, they ask whether the 51% shares form part of the
national economy and patrimony covered by the protective mantle of the Constitution.

The controversy arose when respondent Government Service Insurance System (GSIS), pursuant to the
privatization program of the Philippine Government under Proclamation No. 50 dated 8 December 1986, decided
to sell through public bidding 30% to 51% of the issued and outstanding shares of respondent MHC. The winning
bidder, or the eventual "strategic partner," is to provide management expertise and/or an international
marketing/reservation system, and financial support to strengthen the profitability and performance of the Manila
Hotel.2 In a close bidding held on 18 September 1995 only two (2) bidders participated: petitioner Manila Prince
Hotel Corporation, a Filipino corporation, which offered to buy 51% of the MHC or 15,300,000 shares at P41.58
per share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for the same
number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.

Pertinent provisions of the bidding rules prepared by respondent GSIS state —

I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC —

 1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset
to November 3, 1995) or the Highest Bidder will lose the right to purchase the Block of Shares
and GSIS will instead offer the Block of Shares to the other Qualified Bidders:

a. The Highest Bidder must negotiate and execute with the GSIS/MHC the
Management Contract, International Marketing/Reservation System Contract or
other type of contract specified by the Highest Bidder in its strategic plan for the
Manila Hotel. . . .

b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with
GSIS . . . .

K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER —

The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following
conditions are met:

a. Execution of the necessary contracts with GSIS/MHC not later than October 23,
1995 (reset to November 3, 1995); and

b. Requisite approvals from the GSIS/MHC and COP (Committee on

Privatization)/OGCC (Office of the Government Corporate Counsel) are obtained. 3

Pending the declaration of Renong Berhad as the winning bidder/strategic partner and the execution of the
necessary contracts, petitioner in a letter to respondent GSIS dated 28 September 1995 matched the bid price
of P44.00 per share tendered by Renong Berhad. 4 In a subsequent letter dated 10 October 1995 petitioner sent
a manager's check issued by Philtrust Bank for Thirty-three Million Pesos (P33.000.000.00) as Bid Security to
match the bid of the Malaysian Group, Messrs. Renong Berhad . . .5 which respondent GSIS refused to accept.

On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of the matching
bid and that the sale of 51% of the MHC may be hastened by respondent GSIS and consummated with Renong
Berhad, petitioner came to this Court on prohibition and mandamus. On 18 October 1995 the Court issued a
temporary restraining order enjoining respondents from perfecting and consummating the sale to the Malaysian
firm.

On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred to it by the
First Division. The case was then set for oral arguments with former Chief Justice Enrique M. Fernando and Fr.
Joaquin G. Bernas, S.J., as amici curiae.

In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits that the Manila
Hotel has been identified with the Filipino nation and has practically become a historical monument which reflects
the vibrancy of Philippine heritage and culture. It is a proud legacy of an earlier generation of Filipinos who
believed in the nobility and sacredness of independence and its power and capacity to release the full potential
of the Filipino people. To all intents and purposes, it has become a part of the national patrimony.6 Petitioner
also argues that since 51% of the shares of the MHC carries with it the ownership of the business of the hotel
which is owned by respondent GSIS, a government-owned and controlled corporation, the hotel business of
respondent GSIS being a part of the tourism industry is unquestionably a part of the national economy. Thus,
any transaction involving 51% of the shares of stock of the MHC is clearly covered by the term national economy,
to which Sec. 10, second par., Art. XII, 1987 Constitution, applies. 7

It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its business also
unquestionably part of the national economy petitioner should be preferred after it has matched the bid offer of
the Malaysian firm. For the bidding rules mandate that if for any reason, the Highest Bidder cannot be awarded
the Block of Shares, GSIS may offer this to the other Qualified Bidders that have validly submitted bids provided
that these Qualified Bidders are willing to match the highest bid in terms of price per share.8
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987 Constitution is merely
a statement of principle and policy since it is not a self-executing provision and requires implementing
legislation(s) . . . Thus, for the said provision to Operate, there must be existing laws "to lay down conditions
under which business may be done."9

Second, granting that this provision is self-executing, Manila Hotel does not fall under the term national patrimony
which only refers to lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna and all marine wealth in its territorial
sea, and exclusive marine zone as cited in the first and second paragraphs of Sec. 2, Art. XII, 1987 Constitution.
According to respondents, while petitioner speaks of the guests who have slept in the hotel and the events that
have transpired therein which make the hotel historic, these alone do not make the hotel fall under
the patrimony of the nation. What is more, the mandate of the Constitution is addressed to the State, not to
respondent GSIS which possesses a personality of its own separate and distinct from the Philippines as a State.

Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional provision invoked is
still inapplicable since what is being sold is only 51% of the outstanding shares of the corporation, not the hotel
building nor the land upon which the building stands. Certainly, 51% of the equity of the MHC cannot be
considered part of the national patrimony. Moreover, if the disposition of the shares of the MHC is really contrary
to the Constitution, petitioner should have questioned it right from the beginning and not after it had lost in the
bidding.

Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides that if for any
reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified
Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match the highest
bid in terms of price per share, is misplaced. Respondents postulate that the privilege of submitting a matching
bid has not yet arisen since it only takes place if for any reason, the Highest Bidder cannot be awarded the Block
of Shares. Thus the submission by petitioner of a matching bid is premature since Renong Berhad could still
very well be awarded the block of shares and the condition giving rise to the exercise of the privilege to submit
a matching bid had not yet taken place.

Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since respondent GSIS did
not exercise its discretion in a capricious, whimsical manner, and if ever it did abuse its discretion it was not so
patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by
law. Similarly, the petition for mandamus should fail as petitioner has no clear legal right to what it demands and
respondents do not have an imperative duty to perform the act required of them by petitioner.

We now resolve. A constitution is a system of fundamental laws for the governance and administration of a
nation. It is supreme, imperious, absolute and unalterable except by the authority from which it emanates. It has
been defined as the fundamental and paramount law of the nation. 10 It prescribes the permanent framework of
a system of government, assigns to the different departments their respective powers and duties, and establishes
certain fixed principles on which government is founded. The fundamental conception in other words is that it is
a supreme law to which all other laws must conform and in accordance with which all private rights must be
determined and all public authority administered. 11 Under the doctrine of constitutional supremacy, if a law or
contract violates any norm of the constitution that law or contract whether promulgated by the legislative or by
the executive branch or entered into by private persons for private purposes is null and void and without any
force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of the nation, it is
deemed written in every statute and contract.

Admittedly, some constitutions are merely declarations of policies and principles. Their provisions command the
legislature to enact laws and carry out the purposes of the framers who merely establish an outline of government
providing for the different departments of the governmental machinery and securing certain fundamental and
inalienable rights of citizens. 12 A provision which lays down a general principle, such as those found in Art. II of
the 1987 Constitution, is usually not self-executing. But a provision which is complete in itself and becomes
operative without the aid of supplementary or enabling legislation, or that which supplies sufficient rule by means
of which the right it grants may be enjoyed or protected, is self-executing. Thus a constitutional provision is self-
executing if the nature and extent of the right conferred and the liability imposed are fixed by the constitution
itself, so that they can be determined by an examination and construction of its terms, and there is no language
indicating that the subject is referred to the legislature for action. 13

As against constitutions of the past, modern constitutions have been generally drafted upon a different principle
and have often become in effect extensive codes of laws intended to operate directly upon the people in a
manner similar to that of statutory enactments, and the function of constitutional conventions has evolved into
one more like that of a legislative body. Hence, unless it is expressly provided that a legislative act is necessary
to enforce a constitutional mandate, the presumption now is that all provisions of the constitution are self -
executing If the constitutional provisions are treated as requiring legislation instead of self -executing, the
legislature would have the power to ignore and practically nullify the mandate of the fundamental law.14 This can
be cataclysmic. That is why the prevailing view is, as it has always been, that —

. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-
executing . . . . Unless the contrary is clearly intended, the provisions of the Constitution should
be considered self-executing, as a contrary rule would give the legislature discretion to determine
when, or whether, they shall be effective. These provisions would be subordinated to the will of
the lawmaking body, which could make them entirely meaningless by simply refusing to pass the
needed implementing statute. 15

Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not self -executing, as
they quote from discussions on the floor of the 1986 Constitutional Commission —

MR. RODRIGO. Madam President, I am asking this question as the Chairman of

the Committee on Style. If the wording of "PREFERENCE" is given to QUALIFIED
FILIPINOS," can it be understood as a preference to qualified Filipinos vis-a-
vis Filipinos who are not qualified. So, why do we not make it clear? To qualified
Filipinos as against aliens?

THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove

the word "QUALIFIED?".

MR. RODRIGO. No, no, but say definitely "TO QUALIFIED FILIPINOS" as against
whom? As against aliens or over aliens?

MR. NOLLEDO. Madam President, I think that is understood. We use the word
"QUALIFIED" because the existing laws or prospective laws will always lay down
conditions under which business may be done. For example, qualifications on the
setting up of other financial structures, et cetera (emphasis supplied by
respondents)

MR. RODRIGO. It is just a matter of style.

16
MR. NOLLEDO Yes,

Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it appear that it is
non-self-executing but simply for purposes of style. But, certainly, the legislature is not precluded from enacting
other further laws to enforce the constitutional provision so long as the contemplated statute squares with the
Constitution. Minor details may be left to the legislature without impairing the self-executing nature of
constitutional provisions.

In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the exercise of
powers directly granted by the constitution, further the operation of such a provision, prescribe a practice to be
used for its enforcement, provide a convenient remedy for the protection of the rights secured or the
determination thereof, or place reasonable safeguards around the exercise of the right. The mere fact that
legislation may supplement and add to or prescribe a penalty for the violation of a self-executing constitutional
provision does not render such a provision ineffective in the absence of such legislation. The omission from a
constitution of any express provision for a remedy for enforcing a right or liability is not necessarily an indication
that it was not intended to be self-executing. The rule is that a self-executing provision of the constitution does
not necessarily exhaust legislative power on the subject, but any legislation must be in harmony with the
constitution, further the exercise of constitutional right and make it more available. 17 Subsequent legislation
however does not necessarily mean that the subject constitutional provision is not, by itself, fully enforceable.

Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is implied from
the tenor of the first and third paragraphs of the same section which undoubtedly are not self-executing. 18 The
argument is flawed. If the first and third paragraphs are not self-executing because Congress is still to enact
measures to encourage the formation and operation of enterprises fully owned by Filipinos, as in the first
paragraph, and the State still needs legislation to regulate and exercise authority over foreign investments within
its national jurisdiction, as in the third paragraph, then a fortiori, by the same logic, the second paragraph can
only be self-executing as it does not by its language require any legislation in order to give preference to qualified
Filipinos in the grant of rights, privileges and concessions covering the national economy and patrimony. A
constitutional provision may be self-executing in one part and non-self-executing in another. 19

Even the cases cited by respondents holding that certain constitutional provisions are merely statements of
principles and policies, which are basically not self-executing and only placed in the Constitution as moral
incentives to legislation, not as judicially enforceable rights — are simply not in point. Basco v. Philippine
Amusements and Gaming Corporation 20 speaks of constitutional provisions on personal dignity, 21 the sanctity
of family life, 22 the vital role of the youth in nation-building 23 the promotion of social justice, 24 and the values of
education. 25 Tolentino v. Secretary of Finance 26 refers to the constitutional provisions on social justice and
human rights 27 and on education. 28 Lastly, Kilosbayan, Inc. v. Morato 29 cites provisions on the promotion of
general welfare, 30 the sanctity of family life, 31 the vital role of the youth in nation-building 32 and the promotion
of total human liberation and development. 33A reading of these provisions indeed clearly shows that they are
not judicially enforceable constitutional rights but merely guidelines for legislation. The very terms of the
provisions manifest that they are only principles upon which the legislations must be based. Res ipsa loquitur.

On the other hand, Sec. 10, second par., Art. XII of the of the 1987 Constitution is a mandatory, positive command
which is complete in itself and which needs no further guidelines or implementing laws or rules for its
enforcement. From its very words the provision does not require any legislation to put it in operation. It is per
se judicially enforceable When our Constitution mandates that [i]n the grant of rights, privileges, and concessions
covering national economy and patrimony, the State shall give preference to qualified Filipinos, it means just that
— qualified Filipinos shall be preferred. And when our Constitution declares that a right exists in certain specified
circumstances an action may be maintained to enforce such right notwithstanding the absence of any legislation
on the subject; consequently, if there is no statute especially enacted to enforce such constitutional right, such
right enforces itself by its own inherent potency and puissance, and from which all legislations must take their
bearings. Where there is a right there is a remedy. Ubi jus ibi remedium.

As regards our national patrimony, a member of the 1986 Constitutional Commission 34

explains —

The patrimony of the Nation that should be conserved and developed refers not only to out rich
natural resources but also to the cultural heritage of out race. It also refers to our intelligence in
arts, sciences and letters. Therefore, we should develop not only our lands, forests, mines and
other natural resources but also the mental ability or faculty of our people.

We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage. 35 When the Constitution
speaks of national patrimony, it refers not only to the natural resources of the Philippines, as the Constitution
could have very well used the term natural resources, but also to the cultural heritage of the Filipinos.

Manila Hotel has become a landmark — a living testimonial of Philippine heritage. While it was restrictively an
American hotel when it first opened in 1912, it immediately evolved to be truly Filipino, Formerly a concourse for
the elite, it has since then become the venue of various significant events which have shaped Philippine history.
It was called the Cultural Center of the 1930's. It was the site of the festivities during the inauguration of the
Philippine Commonwealth. Dubbed as the Official Guest House of the Philippine Government. it plays host to
dignitaries and official visitors who are accorded the traditional Philippine hospitality. 36

The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and Memory of a
City. 37During World War II the hotel was converted by the Japanese Military Administration into a military
headquarters. When the American forces returned to recapture Manila the hotel was selected by the Japanese
together with Intramuros as the two (2) places fro their final stand. Thereafter, in the 1950's and 1960's, the hotel
became the center of political activities, playing host to almost every political convention. In 1970 the hotel
reopened after a renovation and reaped numerous international recognitions, an acknowledgment of the Filipino
talent and ingenuity. In 1986 the hotel was the site of a failed coup d' etat where an aspirant for vice-president
was "proclaimed" President of the Philippine Republic.

For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures, loves and
frustrations of the Filipinos; its existence is impressed with public interest; its own historicity associated with our
struggle for sovereignty, independence and nationhood. Verily, Manila Hotel has become part of our national
economy and patrimony. For sure, 51% of the equity of the MHC comes within the purview of the constitutional
shelter for it comprises the majority and controlling stock, so that anyone who acquires or owns the 51% will
have actual control and management of the hotel. In this instance, 51% of the MHC cannot be disassociated
from the hotel and the land on which the hotel edifice stands. Consequently, we cannot sustain respondents'
claim that the Filipino First Policy provision is not applicable since what is being sold is only 51% of
the outstanding shares of the corporation, not the Hotel building nor the land upon which the building stands. 38

The argument is pure sophistry. The term qualified Filipinos as used in Our Constitution also includes
corporations at least 60% of which is owned by Filipinos. This is very clear from the proceedings of the 1986
Constitutional Commission

THE PRESIDENT. Commissioner Davide is recognized.

MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment.

And the amendment would consist in substituting the words "QUALIFIED
FILIPINOS" with the following: "CITIZENS OF THE PHILIPPINES OR
CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL OR CONTROLLING
STOCK IS WHOLLY OWNED BY SUCH CITIZENS.

xxx xxx xxx

MR. MONSOD. Madam President, apparently the proponent is agreeable, but we

have to raise a question. Suppose it is a corporation that is 80-percent Filipino, do
we not give it preference?

MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What
about a corporation wholly owned by Filipino citizens?

MR. MONSOD. At least 60 percent, Madam President.

MR. DAVIDE. Is that the intention?

MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the
preference should only be 100-percent Filipino.

MR: DAVIDE. I want to get that meaning clear because "QUALIFIED FILIPINOS"
may refer only to individuals and not to juridical personalities or entities.

39
MR. MONSOD. We agree, Madam President.
 xxx xxx xxx

MR. RODRIGO. Before we vote, may I request that the amendment be read again.

MR. NOLLEDO. The amendment will read: "IN THE GRANT OF RIGHTS,
PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL ECONOMY
AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS." And the word "Filipinos" here, as intended by the proponents, will
include not only individual Filipinos but also Filipino-controlled entities or entities
fully-controlled by Filipinos. 40

The phrase preference to qualified Filipinos was explained thus —

MR. FOZ. Madam President, I would like to request Commissioner Nolledo to

please restate his amendment so that I can ask a question.

MR. NOLLEDO. "IN THE GRANT OF RIGHTS, PRIVILEGES AND

CONCESSIONS COVERING THE NATIONAL ECONOMY AND PATRIMONY,
THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS."

MR FOZ. In connection with that amendment, if a foreign enterprise is qualified

and a Filipino enterprise is also qualified, will the Filipino enterprise still be given a
preference?

MR. NOLLEDO. Obviously.

MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino
enterprise, will the Filipino still be preferred?

MR. NOLLEDO. The answer is "yes."

MR. FOZ. Thank you, 41

Expounding further on the Filipino First Policy provision Commissioner Nolledo continues —

MR. NOLLEDO. Yes, Madam President. Instead of "MUST," it will be "SHALL — THE STATE
SHALL GlVE PREFERENCE TO QUALIFIED FILIPINOS. This embodies the so-called "Filipino
First" policy. That means that Filipinos should be given preference in the grant of concessions,
privileges and rights covering the national patrimony. 42

The exchange of views in the sessions of the Constitutional Commission regarding the subject provision was
still further clarified by Commissioner Nolledo 43 —

Paragraph 2 of Section 10 explicitly mandates the "Pro-Filipino" bias in all economic concerns. It
is better known as the FILIPINO FIRST Policy . . . This provision was never found in previous
Constitutions . . . .

The term "qualified Filipinos" simply means that preference shall be given to those citizens who
can make a viable contribution to the common good, because of credible competence and
efficiency. It certainly does NOT mandate the pampering and preferential treatment to Filipino
citizens or organizations that are incompetent or inefficient, since such an indiscriminate
preference would be counter productive and inimical to the common good.
 In the granting of economic rights, privileges, and concessions, when a choice has to be made
between a "qualified foreigner" end a "qualified Filipino," the latter shall be chosen over the
former."

Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS and selected
as one of the qualified bidders. It was pre-qualified by respondent GSIS in accordance with its own guidelines
so that the sole inference here is that petitioner has been found to be possessed of proven management
expertise in the hotel industry, or it has significant equity ownership in another hotel company, or it has an overall
management and marketing proficiency to successfully operate the Manila Hotel. 44

The penchant to try to whittle away the mandate of the Constitution by arguing that the subject provision is not
self-executory and requires implementing legislation is quite disturbing. The attempt to violate a clear
constitutional provision — by the government itself — is only too distressing. To adopt such a line of reasoning
is to renounce the duty to ensure faithfulness to the Constitution. For, even some of the provisions of the
Constitution which evidently need implementing legislation have juridical life of their own and can be the source
of a judicial remedy. We cannot simply afford the government a defense that arises out of the failure to enact
further enabling, implementing or guiding legislation. In fine, the discourse of Fr. Joaquin G. Bernas, S.J., on
constitutional government is apt —

The executive department has a constitutional duty to implement laws, including the Constitution,
even before Congress acts — provided that there are discoverable legal standards for executive
action. When the executive acts, it must be guided by its own understanding of the constitutional
command and of applicable laws. The responsibility for reading and understanding the
Constitution and the laws is not the sole prerogative of Congress. If it were, the executive would
have to ask Congress, or perhaps the Court, for an interpretation every time the executive is
confronted by a constitutional command. That is not how constitutional government operates. 45

Respondents further argue that the constitutional provision is addressed to the State, not to respondent GSIS
which by itself possesses a separate and distinct personality. This argument again is at best specious. It is
undisputed that the sale of 51% of the MHC could only be carried out with the prior approval of the State acting
through respondent Committee on Privatization. As correctly pointed out by Fr. Joaquin G. Bernas, S.J., this fact
alone makes the sale of the assets of respondents GSIS and MHC a "state action." In constitutional
jurisprudence, the acts of persons distinct from the government are considered "state action" covered by the
Constitution (1) when the activity it engages in is a "public function;" (2) when the government is so significantly
involved with the private actor as to make the government responsible for his action; and, (3) when the
government has approved or authorized the action. It is evident that the act of respondent GSIS in selling 51%
of its share in respondent MHC comes under the second and third categories of "state action." Without doubt
therefore the transaction. although entered into by respondent GSIS, is in fact a transaction of the State and
therefore subject to the constitutional command. 46

When the Constitution addresses the State it refers not only to the people but also to the government as elements
of the State. After all, government is composed of three (3) divisions of power — legislative, executive and
judicial. Accordingly, a constitutional mandate directed to the State is correspondingly directed to the three(3)
branches of government. It is undeniable that in this case the subject constitutional injunction is addressed
among others to the Executive Department and respondent GSIS, a government instrumentality deriving its
authority from the State.

It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning bidder. The
bidding rules expressly provide that the highest bidder shall only be declared the winning bidder after it has
negotiated and executed the necessary contracts, and secured the requisite approvals. Since the "Filipino First
Policy provision of the Constitution bestows preference on qualified Filipinos the mere tending of the highest bid
is not an assurance that the highest bidder will be declared the winning bidder. Resultantly, respondents are not
bound to make the award yet, nor are they under obligation to enter into one with the highest bidder. For in
choosing the awardee respondents are mandated to abide by the dictates of the 1987 Constitution the provisions
of which are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it should be,
impliedly written in the bidding rules issued by respondent GSIS, lest the bidding rules be nullified for being
violative of the Constitution. It is a basic principle in constitutional law that all laws and contracts must conform
with the fundamental law of the land. Those which violate the Constitution lose their reason for being.

Paragraph V. J. 1 of the bidding rules provides that [if] for any reason the Highest Bidder cannot be awarded the
Block of Shares, GSIS may offer this to other Qualified Bidders that have validly submitted bids provided that
these Qualified Bidders are willing to match the highest bid in terms of price per
share. 47 Certainly, the constitutional mandate itself is reason enough not to award the block of shares
immediately to the foreign bidder notwithstanding its submission of a higher, or even the highest, bid. In fact, we
cannot conceive of a stronger reason than the constitutional injunction itself.

In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the grant of rights,
privileges and concessions covering the national economy and patrimony, thereby exceeding the bid of a Filipino,
there is no question that the Filipino will have to be allowed to match the bid of the foreign entity. And if the
Filipino matches the bid of a foreign firm the award should go to the Filipino. It must be so if we are to give life
and meaning to the Filipino First Policy provision of the 1987 Constitution. For, while this may neither be
expressly stated nor contemplated in the bidding rules, the constitutional fiat is, omnipresent to be simply
disregarded. To ignore it would be to sanction a perilous skirting of the basic law.

This Court does not discount the apprehension that this policy may discourage foreign investors. But the
Constitution and laws of the Philippines are understood to be always open to public scrutiny. These are given
factors which investors must consider when venturing into business in a foreign jurisdiction. Any person therefore
desiring to do business in the Philippines or with any of its agencies or instrumentalities is presumed to know his
rights and obligations under the Constitution and the laws of the forum.

The argument of respondents that petitioner is now estopped from questioning the sale to Renong Berhad since
petitioner was well aware from the beginning that a foreigner could participate in the bidding is meritless.
Undoubtedly, Filipinos and foreigners alike were invited to the bidding. But foreigners may be awarded the sale
only if no Filipino qualifies, or if the qualified Filipino fails to match the highest bid tendered by the foreign entity.
In the case before us, while petitioner was already preferred at the inception of the bidding because of the
constitutional mandate, petitioner had not yet matched the bid offered by Renong Berhad. Thus it did not have
the right or personality then to compel respondent GSIS to accept its earlier bid. Rightly, only after it had matched
the bid of the foreign firm and the apparent disregard by respondent GSIS of petitioner's matching bid did the
latter have a cause of action.

Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the award has been
finally made. To insist on selling the Manila Hotel to foreigners when there is a Filipino group willing to match the
bid of the foreign group is to insist that government be treated as any other ordinary market player, and bound
by its mistakes or gross errors of judgment, regardless of the consequences to the Filipino people. The
miscomprehension of the Constitution is regrettable. Thus we would rather remedy the indiscretion while there
is still an opportunity to do so than let the government develop the habit of forgetting that the Constitution lays
down the basic conditions and parameters for its actions.

Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the bidding rules,
respondent GSIS is left with no alternative but to award to petitioner the block of shares of MHC and to execute
the necessary agreements and documents to effect the sale in accordance not only with the bidding guidelines
and procedures but with the Constitution as well. The refusal of respondent GSIS to execute the corresponding
documents with petitioner as provided in the bidding rules after the latter has matched the bid of the Malaysian
firm clearly constitutes grave abuse of discretion.

The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987 Constitution not merely
to be used as a guideline for future legislation but primarily to be enforced; so must it be enforced. This Court as
the ultimate guardian of the Constitution will never shun, under any reasonable circumstance, the duty of
upholding the majesty of the Constitution which it is tasked to defend. It is worth emphasizing that it is not the
intention of this Court to impede and diminish, much less undermine, the influx of foreign investments. Far from
it, the Court encourages and welcomes more business opportunities but avowedly sanctions the preference for
Filipinos whenever such preference is ordained by the Constitution. The position of the Court on this matter could
have not been more appropriately articulated by Chief Justice Narvasa —

As scrupulously as it has tried to observe that it is not its function to substitute its judgment for
that of the legislature or the executive about the wisdom and feasibility of legislation economic in
nature, the Supreme Court has not been spared criticism for decisions perceived as obstacles to
economic progress and development . . . in connection with a temporary injunction issued by the
Court's First Division against the sale of the Manila Hotel to a Malaysian Firm and its partner,
certain statements were published in a major daily to the effect that injunction "again
demonstrates that the Philippine legal system can be a major obstacle to doing business here.

Let it be stated for the record once again that while it is no business of the Court to intervene in
contracts of the kind referred to or set itself up as the judge of whether they are viable or attainable,
it is its bounden duty to make sure that they do not violate the Constitution or the laws, or are not
adopted or implemented with grave abuse of discretion amounting to lack or excess of jurisdiction.
It will never shirk that duty, no matter how buffeted by winds of unfair and ill-informed criticism. 48

Privatization of a business asset for purposes of enhancing its business viability and preventing further losses,
regardless of the character of the asset, should not take precedence over non-material values. A commercial,
nay even a budgetary, objective should not be pursued at the expense of national pride and dignity. For the
Constitution enshrines higher and nobler non-material values. Indeed, the Court will always defer to the
Constitution in the proper governance of a free society; after all, there is nothing so sacrosanct in any economic
policy as to draw itself beyond judicial review when the Constitution is involved. 49

Nationalism is inherent, in the very concept of the Philippines being a democratic and republican state, with
sovereignty residing in the Filipino people and from whom all government authority emanates. In nationalism,
the happiness and welfare of the people must be the goal. The nation-state can have no higher purpose. Any
interpretation of any constitutional provision must adhere to such basic concept. Protection of foreign
investments, while laudible, is merely a policy. It cannot override the demands of nationalism. 50

The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the highest bidder
solely for the sake of privatization. We are not talking about an ordinary piece of property in a commercial district.
We are talking about a historic relic that has hosted many of the most important events in the short history of the
Philippines as a nation. We are talking about a hotel where heads of states would prefer to be housed as a strong
manifestation of their desire to cloak the dignity of the highest state function to their official visits to the
Philippines. Thus the Manila Hotel has played and continues to play a significant role as an authentic repository
of twentieth century Philippine history and culture. In this sense, it has become truly a reflection of the Filipino
soul — a place with a history of grandeur; a most historical setting that has played a part in the shaping of a
country. 51

This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the historical
landmark — this Grand Old Dame of hotels in Asia — to a total stranger. For, indeed, the conveyance of this
epic exponent of the Filipino psyche to alien hands cannot be less than mephistophelian for it is, in whatever
manner viewed, a veritable alienation of a nation's soul for some pieces of foreign silver. And so we ask: What
advantage, which cannot be equally drawn from a qualified Filipino, can be gained by the Filipinos Manila Hotel
— and all that it stands for — is sold to a non-Filipino? How much of national pride will vanish if the nation's
cultural heritage is entrusted to a foreign entity? On the other hand, how much dignity will be preserved and
realized if the national patrimony is safekept in the hands of a qualified, zealous and well-meaning Filipino? This
is the plain and simple meaning of the Filipino First Policy provision of the Philippine Constitution. And this Court,
heeding the clarion call of the Constitution and accepting the duty of being the elderly watchman of the nation,
will continue to respect and protect the sanctity of the Constitution.

WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL

CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE
COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the Manila Hotel Corporation
to RENONG BERHAD, and to ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL
CORPORATION to purchase the subject 51% of the shares of the Manila Hotel Corporation at P44.00 per share
and thereafter to execute the necessary clearances and to do such other acts and deeds as may be necessary
for purpose.

[G.R. No. 118295. May 2, 1997.]

WIGBERTO E. TAÑADA and ANNA DOMINIQUE COSETENG, as members of the

Philippine Senate and as taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as
members of the House of Representatives and as taxpayers; NICANOR P. PERLAS and
HORACIO R. MORALES, both as taxpayers: CIVIL LIBERTIES UNION, NATIONAL
ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT
INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL
RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG
PILIPINAS, INC., and PHILIPPINE PEASANT INSTITUTE, in representation of various
taxpayers and as non-governmental organizations, Petitioners, v. EDGARDO ANGARA,
ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO
AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA,
GLORIA MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEÑA,
SANTANINA RASUL, RAMON REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE
WEBB, in their respective capacities as members of the Philippine Senate who
concurred in the ratification by the President of the Philippines of the Agreement
Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as
Secretary of Budget and Management; CARIDAD VALDEHUESA, in her capacity as
National Treasurer; RIZALINO NAVARRO, in his capacity as Secretary of Trade and
Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture; ROBERTO
DE OCAMPO, in his capacity as Secretary of Finance; ROBERTO ROMULO, in his capacity
as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his capacity as
Executive Secretary, Respondents.

Abelardo T . Domondon, for Petitioners.

The Solicitor General for Respondents.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; ESTOPPEL, SUBJECT TO WAIVER. — The matter of estoppel will not
be taken up because this defense is waivable and the respondents have effectively, waived it by
not pursuing it in any of their pleadings; in any event, this issue, even if ruled in respondents’
favor, will not cause the petition’s dismissal as there are petitioners other than the two senators,
who are not vulnerable to the defense of estoppel.

2. ID.; ID.; PARTIES; LOCUS PROBANDI; SUBJECT TO WAIVER. — During its deliberations on the
case, the Court noted that the respondents did not question the locus standi of petitioners. Hence,
they are also deemed to have waived the benefit of such issue. They probably realized that grave
constitutional issues, expenditures of public funds and serious international commitments of the
nation are involved here, and that transcendental public interest requires that the substantive
issues be met head on and decided on the merits, rather than skirted or deflected by procedural
matters.

3. ID.; ID.; PETITION SEEKING TO NULLIFY ACT OF SENATE ON GROUND THAT IT CONTRAVENES
THE CONSTITUTION, A JUSTICIABLE QUESTION. — In seeking to nullify an act of the Philippine
Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable
controversy. Where an action of the legislative branch is seriously alleged to have infringed the
Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute.
"The question thus posed is judicial rather than political. The duty (to adjudicate) remains to
assure that the supremacy of the Constitution is upheld." Once a "controversy as to the application
or interpretation of a constitutional provision is raised before this Court (as in the instant case), it
becomes a legal issue which the Court is bound by constitutional mandate to decide."cralaw
virtua1aw library

4. ID.; SUPREME COURT; JUDICIAL POWER; SCOPE. — The jurisdiction of this Court to adjudicate
the matters raised in the petition is clearly set out in the 1987 Constitution, as follows: "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." The foregoing text emphasizes the judicial department’s duty
and power to strike down grave abuse of discretion on the part of any branch or instrumentality,
of government including Congress. It is an innovation in our political law. As explained by former
Chief Justice Roberto Concepcion, "the judiciary is the final arbiter on the question of 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. This is not only a judicial power but a duty to pass judgment on matters of this nature."
As this Court has repeatedly and firmly emphasized in many cases, it will not shirk, digress from
or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave
abuse of discretion brought before it in appropriate cases, committed by any officer, agency,
instrumentality or department of the government.

5. ID.; SPECIAL CIVIL ACTIONS; CERTIORARI, PROHIBITION AND MANDAMUS; APPROPRIATE

REMEDIES TO REVIEW ACTS OF LEGISLATIVE AND EXECUTIVE OFFICIALS. — Certiorari,
prohibition and mandamus are appropriate remedies to raise constitutional issues and to review
and/or prohibit/nullify, when proper, acts of legislative and executive officials.

6. POLITICAL LAW; CONSTITUTION; DECLARATION OF PRINCIPLES AND STATE POLICIES; AIDS

OR GUIDES IN THE EXERCISE OF JUDICIAL AND LEGISLATIVE POWERS. — By its very title, Article
II of the Constitution is a "declaration of principles and state policies." The counterpart of this
article in the 1935 Constitution is called the "basic political creed of the nation" by Dean Vicente
Sinco. These principles in Article II are not intended to be self-executing principles ready for
enforcement through the courts. They are used by the judiciary as aids or as guides in the exercise
of its power of judicial review, and by the legislature in its enactment of laws. As held in the leading
case of Kilosbayan, Incorporated v. Morato, the principles and state policies enumerated in Article
II and some sections of Article XII are not "self-executing provisions, the disregard of which can
give rise to a cause of action in the courts. They do not embody judicially enforceable constitutional
rights but guidelines for legislation."cralaw virtua1aw library

7. ID.; ID.; THOUGH IT MANDATES A BIAS IN FAVOR OF FILIPINO GOODS, SERVICES, LABOR
AND ENTERPRISES, IT RECOGNIZES THE NEED FOR BUSINESS EXCHANGE WITH THE REST OF
THE WORLD. — While the Constitution indeed mandates a bias in favor of Filipino goods, services,
labor and enterprises, at the same time, it recognizes the need for business exchange with the
rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises
only against foreign competition and trade practices that are unfair. In other words, the
Constitution did not intend to pursue an isolationist policy. It did not shut out foreign investments,
goods and services in the development of the Philippine economy. While the Constitution does not
encourage the unlimited entry of foreign goods, services and investments into the country, it does
not prohibit them either. In fact, it allows an exchange on the basis of equality and reciprocity,
frowning only on foreign competition that is unfair.

8. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; JOINING THE WORLD TRADE
ORGANIZATION, NOT A GRAVE ABUSE OF DISCRETION. — The basic principles underlying the
WTO Agreement recognize the need of developing countries like the Philippines to "share in the
growth in international trade commensurate with the needs of their economic development." GATT
has provided built-in protection from unfair foreign competition and trade practices including anti-
dumping measures, countervailing measures and safeguards against import surges. Where local
businesses are jeopardized by unfair foreign competition, the Philippines can avail of these
measures. There is hardly therefore any basis for the statement that under the WTO, local
industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the
economy. Quite the contrary, the weaker situations of developing nations like the Philippines have
been taken into account; thus, there would be no basis to say that in joining the WTO, the
respondents have gravely abused their discretion. True, they have made a bold decision to steer
the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot
be set aside on the ground of grave abuse of discretion simply because we disagree with it or
simply because we believe only in other economic policies. As earlier stated, the Court in taking
jurisdiction of this case will not pass upon the advantages and disadvantages of trade liberalization
as an economic policy. It will only, perform its constitutional duty of determining whether the
Senate committed grave abuse of discretion.

9. POLITICAL LAW; CONSTITUTION; DECLARATION OF PRINCIPLES AND STATE POLICIES;

POLICE OF "SELF-RELIANT AND INDEPENDENT NATIONAL ECONOMY" DOES NOT RULE OUT
ENTRY OF FOREIGN INVESTMENTS, GOODS AND SERVICES. — The constitutional policy of a "self-
reliant and independent national economy" does not necessarily rule out the entry, of foreign
investments, goods and services. It contemplates neither "economic seclusion" nor "mendicancy
in the international community."cralaw virtua1aw library

10. POLITICAL LAW; INTERNATIONAL LAW; WORLD TRADE LAW ORGANIZATION/GENERAL

AGREEMENT ON TARIFFS AND TRADE; RELIANCE ON "MOST FAVORED NATIONS",
CONSTITUTIONAL. — The WTO reliance on "most favored nation", "national treatment", and "trade
without discrimination" cannot be struck down as unconstitutional as in fact they are rules of
equality and reciprocity, that apply to all WTO members. Aside from envisioning a trade policy
based on "equality and reciprocal", the fundamental law encourages industries that are
"competitive in both domestic and foreign markets," thereby demonstrating a clear policy against
a sheltered domestic trade environment, but one in favor of the gradual development of robust
industries that can compete with the best in the foreign markets. Indeed, Filipino managers and
Filipino enterprises have shown capability and tenacity to compete internationally. And given a
free trade environment, Filipino entrepreneurs and managers in Hongkong have demonstrated the
Filipino capacity to grow and to prosper against the best offered under a policy of laissez faire.

11. REMEDIAL LAW; ACTIONS; QUESTIONS INVOLVING "JUDGMENT CALLS", NOT SUBJECT TO
JUDICIAL REVIEW. — Will adherence to the WTO treaty bring this ideal (of favoring the general
welfare) to reality? Will WTO/GATT succeed in promoting the Filipinos’ general welfare because it
will — as promised by its promoters — expand the country’s exports and generate more
employment? Will it bring more prosperity, employment, purchasing power and quality products
at the most reasonable rates to the Filipino public? The responses to these questions involve
"judgment calls" by our policy makers, for which they are answerable to our people during
appropriate electoral exercises. Such questions and the answers thereto are not subject to judicial
pronouncements based on grave abuse of discretion.

12. POLITICAL LAW; SOVEREIGNTY; SUBJECT TO RESTRICTIONS AND LIMITATIONS

VOLUNTARILY AGREED TO BY THE STATE; CASE AT BAR. — While sovereignty has traditionally
been deemed absolute and all-encompassing on the domestic level, it is however subject to
restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a
member of the family of nations. In its Declaration of Principles and State Policies, the Constitution
"adopts the generally accepted principles of international law as part of the law of the land, and
adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations."
By the doctrine of incorporation, the country is bound by generally accepted principles of
international law, which are considered to be automatically part of our own laws. One of the oldest
and most fundamental rules in international law is pacta sunt servanda — international agreements
must be performed in good faith. "A treaty engagement is not a mere moral obligation but creates
a legally binding obligation on the parties . . . A state which has contracted valid international
obligations is bound to make in its legislations such modifications as may be necessary to ensure
the fulfillment of the obligations undertaken."cralaw virtua1aw library

13. ID.; ID.; ID.; ID. — When the Philippines joined the United Nations as one of its 51 charter
members, it consented to restrict its sovereign rights under the "concept of sovereignty as auto-
limitation." Under Article 2 of the UN Charter," (a)ll members shall give the United Nations every
assistance in any action it takes in accordance with the present Charter, and shall refrain from
giving assistance to any state against which the United Nations is taking preventive or enforcement
action." Apart from the UN Treaty, the Philippines has entered into many other international pacts
— both bilateral and multilateral — that involve limitations on Philippine sovereignty the Philippines
has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain
and police power. The underlying consideration in this partial surrender of sovereignty is the
reciprocal commitment of the other contracting states in granting the same privilege and
immunities to the Philippines, its officials and its citizens. The same reciprocity characterizes the
Philippine commitments under WTO-GATT. The point is that, as shown by the foregoing treaties,
a portion of sovereignty may be waived without violating the Constitution, based on the rationale
that the Philippines "adopts the generally accepted principles of international law as part of the
law of the land and adheres to the policy of . . . cooperation and amity with all nations."cralaw
virtua1aw library

14. ID.; ID.; ID.; WORLD TRADE ORGANIZATION; PARAGRAPH 1, ARTICLE 34 OF THE GENERAL
PROVISIONS AND BASIC PRINCIPLES OF THE AGREEMENT ON TRADE-RELATED ASPECTS OF
INTELLECTUAL PROPERTY RIGHTS (TRIPS); DOES NOT INTRUDE ON THE POWER OF THE
SUPREME COURT TO PROMULGATE RULES ON PLEADING, PRACTICE AND PROCEDURES. —
Petitioners aver that paragraph 1, Article 34 (Process Patents: Burden of Proof) of the General
Provisions and Basic Principles of the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS) intrudes on the power of the Supreme Court to promulgate rules concerning
pleading, practice and procedures. A WTO Member is required to provide a rule of disputable (note
the words "in the absence of proof to the contrary") presumption that a product shown to be
identical to one produced with the use of a patented process shall be deemed to have been
obtained by the (illegal) use of the said patented process, (1) where such product obtained by the
patented product is new, or (2) where there is "substantial likelihood" that the identical product
was made with the use of the said patented process but the owner of the patent could not
determine the exact process used in obtaining such identical product. Hence, the "burden of proof"
contemplated by Article 34 should actually be understood as the duty of the alleged patent
infringer to overthrow such presumption. Such burden, properly understood, actually refers to the
"burden of evidence" (burden of going forward) placed on the producer of the identical (or fake)
product to show that his product was produced without the use of the patented process. The
foregoing notwithstanding, the patent owner still has the "burden of proof" since, regardless of
the presumption provided under paragraph 1 of Article 34, such owner still has to introduce
evidence of the existence of the alleged identical product, the fact that it is "identical" to the
genuine one produced by the patented process and the fact of "newness" of the genuine product
was made by the patented process. Moreover, it should be noted that the requirement of Article
34 to provide a disputable presumption applies only if (1) the product obtained by the patented
process is NEW or (2) there is a substantial likelihood that the identical product was made by the
process and the process owner has not been able through reasonable effort to determine the
process used. Where either of these two provisos does not obtain, members shall be free to
determine the appropriate method of implementing the provisions of TRIPS within their own
internal systems and processes. By and large, the arguments adduced in connection with our
disposition of the third issue — derogation of a legislative power — will apply to this fourth issue
also. Suffice it to say that the reciprocity clause more than justifies such intrusion, if any actually
exists. Besides, Article 34 does not contain an unreasonable burden, consistent as it is with due
process and the concept of adversarial dispute settlement inherent in our judicial system. So too,
since the Philippine is a signatory to most international conventions on patents, trademarks and
copyrights, the adjustments in legislation and rules of procedure will not be substantial.

15. ID.; ID.; ID.; ID.; MINISTERIAL DECLARATION AND DECISIONS AND THE UNDERSTANDING
ON COMMITMENTS IN FINANCIAL SERVICES, NOT SUBJECT TO CONCURRENCE BY THE SENATE.
— "A final act, sometimes called protocol de cloture, is an instrument which records the winding
up of the proceedings of a diplomatic conference and usually includes a reproduction of the texts
of treaties, conventions, recommendations and other acts agreed upon and signed by the
plenipotentiaries attending the conference." It is not the treaty itself. It is rather a summary of
the proceedings of a protracted conference which may have taken place over several years. The
assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required
from its signatories, namely, concurrence of the Senate in the WTO Agreement. The Ministerial
Declarations and Decisions were deemed adopted without need for ratification. They were
approved by the ministers by virtue of Article XXV: 1 of GATT which provides that representatives
of the members can meet "to give effect to those provision of this Agreement which invoke joint
action, and generally with a view to facilitating the operation and furthering the objectives of this
Agreement." The Understanding on Commitments in Financial Services also approved in Marrakesh
does not apply to the Philippines. It applies only to those 27 Members which "have indicated in
their respective schedules of commitments on standstill, elimination of monopoly, expansion of
operation of existing financial service suppliers, temporary entry of personnel, free transfer and
processing of information, and national treatment with respect to access to payment, clearing
systems and refinancing available in the normal course of business."cralaw virtua1aw library

16. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; RESORT THERETO ON GROUND OF
GRAVE ABUSE OF DISCRETION AVAILABLE ONLY WHERE THERE IS NO PLAIN, SPEEDY AND
ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW. — Procedurally. a writ
of certiorari grounded on grave abuse of discretion may be issued by the Court under Rule 65 of
the Rules of Court when it is amply shown that petitioners have no other plain, speedy and
adequate remedy in the ordinary course of law.

17. ID.; ID.; ID.; GRAVE ABUSE OF DISCRETION, CONSTRUED. — By grave abuse of discretion is
meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction.
Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power
is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must
be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to
perform the duty, enjoined or to act at all in contemplation of law. Failure on the part of the
petitioner to show grave abuse of discretion will result in the dismissal of the petition.

18. ID.; ID.; ID.; CONCURRENCE BY THE SENATE IN THE WORLD TRADE ORGANIZATION, NOT A
GRAVE ABUSE OF DISCRETION. — In rendering this Decision, this Court never forgets that the
Senate, whose act is under review, is one of two sovereign houses of Congress and is thus entitled
to great respect in its actions. It is itself a constitutional body independent and coordinate, and
thus its actions are presumed regular and done in good faith. Unless convincing proof and
persuasive arguments are presented to overthrow such presumptions, this Court will resolve every
doubt in its favor. Using the foregoing well-accepted definition of grave abuse of discretion and
the presumption of regularity in the Senate’s processes, this Court cannot find any cogent reason
to impute grave abuse of discretion to the Senate’s exercise of its power of concurrence in the
WTO Agreement granted it by Sec. 21 of Article VII of the Constitution. That the Senate, after
deliberation and voting, voluntarily and overwhelmingly gave its consent to the WTO Agreement
thereby making it "a part of the law of the land" is a legitimate exercise of its sovereign duty and
power. We find no "patent and gross" arbitrariness or despotism "by reason of passion or personal
hostility" in such exercise. It is not impossible to surmise that this Court, or at least some of its
members, may even agree with petitioners that it is more advantageous to the national interest
to strike down Senate Resolution No. 97. But that is not a legal reason to attribute grave abuse of
discretion to the Senate and to nullify its decision. To do so would constitute grave abuse in the
exercise of our own judicial power and duty. Ineludably, what the Senate did was a valid exercise
of its authority. As to whether such exercise was wise, beneficial or viable is outside the realm of
judicial inquiry and review. That is a matter between the elected policy makers and the people. As
to whether the nation should join the worldwide march toward trade liberalization and economic
globalization is a matter that our people should determine in electing their policy makers. After
all, the WTO Agreement allows withdrawal of membership, should this be the political desire of a
member.

PANGANIBAN, J.:

The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership
thereto of the vast majority of countries, has revolutionized international business and economic
relations amongst states. It has irreversibly propelled the world towards trade liberalization and
economic globalization. Liberalization, globalization, deregulation and privatization, the third-
millennium buzz words, are ushering in a new borderless world of business by sweeping away as
mere historical relics the heretofore traditional modes of promoting and protecting national
economies like tariffs, export subsidies, import quotas, quantitative restrictions, tax exemptions
and currency controls. Finding market niches and becoming the best in specific industries in a
market-driven and export-oriented global scenario are replacing age-old "beggar-thy-neighbor"
policies that unilaterally protect weak and inefficient domestic producers of goods and services.
In the words of Peter Drucker, the well-known management guru, "Increased participation in the
world economy has become the key to domestic economic growth and
prosperity." chanrobles.com : virtual law library

Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the Second World War, plans for
the establishment of three multilateral institutions — inspired by that grand political body, the
United Nations — were discussed at Dumbarton Oaks and Bretton Woods. The first was the
World Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged and
later developing countries; the second, the International Monetary Fund (IMF) which was to deal
with currency problems; and the third, the International Trade Organization (ITO), which was to
foster order and predictability in world trade and to minimize unilateral protectionist policies that
invite challenge, even retaliation, from other states. However, for a variety of reasons, including
its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off. What
remained was only GATT — the General Agreement on Tariffs and Trade. GATT was a collection
of treaties governing access to the economies of treaty adherents with no institutionalized body
administering the agreements or dependable system of dispute settlement.
After half a century and several dizzying rounds of negotiations, principally the Kennedy Round,
the Tokyo Round and the Uruguay Round, the world finally gave birth to that administering body
— the World Trade Organization — with the signing of the "Final Act" in Marrakesh, Morocco and
the ratification of the WTO Agreement by its members. 1 1a 1b 1c

Like many other developing countries, the Philippines joined WTO as a founding member with
the goal, as articulated by President Fidel V. Ramos in two letters to the Senate (infra), of
improving "Philippine access to foreign markets, especially its major trading partners, through
the reduction of tariffs on its exports, particularly agricultural and industrial products." The
President also saw in the WTO the opening of "new opportunities for the services sector . . .,
(the reduction of) costs and uncertainty associated with exporting . . ., and (the attraction of)
more investments into the country." Although the Chief Executive did not expressly mention it in
his letter, the Philippines — and this is of special interest to the legal profession — will benefit
from the WTO system of dispute settlement by judicial adjudication through the independent
WTO settlement bodies called (1) Dispute Settlement Panels and (2) Appellate Tribunal.
Heretofore, trade disputes were settled mainly through negotiations where solutions were
arrived at frequently on the basis of relative bargaining strengths, and where naturally, weak
and underdeveloped countries were at a disadvantage.

The Petition in Brief

Arguing mainly (1) that the WTO requires the Philippines "to place nationals and products of
member-countries on the same footing as Filipinos and local products" and (2) that the WTO
"intrudes, limits and/or impairs" the constitutional powers of both Congress and the Supreme
Court, the instant petition before this Court assails the WTO Agreement for violating the
mandate of the 1987 Constitution to "develop a self-reliant and independent national economy
effectively controlled by Filipinos . . . (to) give preference to qualified Filipinos (and to) promote
the preferential use of Filipino labor, domestic materials and locally produced goods."cralaw
virtua1aw library

Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide
trade liberalization and economic globalization? Does it proscribe Philippine integration into a
global economy that is liberalized, deregulated and privatized? These are the main questions
raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of
Court praying (1) for the nullification, on constitutional grounds, of the concurrence of the
Philippine Senate in the ratification by the President of the Philippines of the Agreement
Establishing the World Trade Organization (WTO Agreement, for brevity) and (2) for the
prohibition of its implementation and enforcement through the release and utilization of public
funds, the assignment of public officials and employees, as well as the use of government
properties and resources by respondent-heads of various executive offices concerned therewith.
This concurrence is embodied in Senate Resolution No. 97, dated December 14, 1994.

The Facts

On April 15, 1994, Respondent Rizalino Navarro, then Secretary of the Department of Trade and
Industry (Secretary Navarro, for brevity), representing the Government of the Republic of the
Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the Results of the Uruguay
Round of Multilateral Negotiations (Final Act, for brevity).

By signing the Final Act, 2 Secretary Navarro on behalf of the Republic of the Philippines,
agreed:jgc:chanrobles.com.ph
"(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective
competent authorities, with a view to seeking approval of the Agreement in accordance with
their procedures; and

(b) to adopt the Ministerial Declarations and Decisions."cralaw virtua1aw library

On August 12, 1994, the members of the Philippine Senate received a letter dated August 11,
1994 from the President of the Philippines, 3 stating among others that "the Uruguay Round
Final Act is hereby submitted to the Senate for its concurrence pursuant to Section 21, Article
VII of the Constitution."cralaw virtua1aw library

On August 13, 1994, the members of the Philippine Senate received another letter from the
President of the Philippines 4 likewise dated August 11, 1994, which stated among others that
"the Uruguay Round Final Act, the Agreement Establishing the World Trade Organization, the
Ministerial Declarations and Decisions, and the Understanding on Commitments in Financial
Services are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article
VII of the Constitution."cralaw virtua1aw library

On December 9, 1994, the President of the Philippines certified the necessity of the immediate
adoption of P.S. 1083, a resolution entitled "Concurring in the Ratification of the Agreement
Establishing the World Trade Organization." 5

On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which "Resolved, as it
is hereby resolved, that the Senate concur, as it hereby concurs, in the ratification by the
President of the Philippines of the Agreement Establishing the World Trade Organization." 6 The
text of the WTO Agreement is written on pages 137 et seq. of Volume I of the 36-volume
Uruguay Round of Multilateral Trade Negotiations and includes various agreements and
associated legal instruments (identified in the said Agreement as Annexes 1, 2 and 3 thereto and
collectively referred to as Multilateral Trade Agreements, for brevity) as
follows:jgc:chanrobles.com.ph

"ANNEX I

Annex 1A: Multilateral Agreement on Trade in Goods

General Agreement on Tariffs and Trade 1994

Agreement on Agriculture

Agreement on the Application of Sanitary and Phytosanitary

Measures

Agreement on Textiles and Clothing

Agreement on Technical Barriers to Trade

Agreement on Trade-Related Investment Measures

Agreement on Implementation of Article VI of the General

Agreement on Tariffs and Trade 1994

Agreement on Implementation of Article VII of the General

on Tariffs and Trade 1994

Agreement on Pre-Shipment Inspection

Agreement on Rules of Origin

Agreement on Imports Licensing Procedures

Agreement on Subsidies and Coordinating Measures

Agreement on Safeguards

Annex 1B: General Agreement on Trade in Services and Annexes

Annex 1C: Agreement on Trade-Related Aspects of Intellectual

Property Rights

ANNEX 2

Understanding on Rules and Procedures Governing the

Settlement of Disputes

ANNEX 3

Trade Policy Review Mechanism"

On December 16, 1994, the President of the Philippines signed 7 the Instrument of Ratification,
declaring:jgc:chanrobles.com.ph

"NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the
Philippines, after having seen and considered the aforementioned Agreement Establishing the
World Trade Organization and the agreements and associated legal instruments included in
Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof,
signed at Marrakesh, Morocco on 15 April 1994, do hereby ratify and confirm the same and
every Article and Clause thereof."cralaw virtua1aw library

To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of
the Agreement Proper and "the associated legal instruments included in Annexes one (1), two
(2) and three (3) of that Agreement which are integral parts thereof."cralaw virtua1aw library

On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO
Agreement (and its integral annexes aforementioned) but also (1) the Ministerial Declarations
and Decisions and (2) the Understanding on Commitments in Financial Services. In his
Memorandum dated May 13, 1996, 8 the Solicitor General describes these two latter documents
as follows:jgc:chanrobles.com.ph

"The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide
range of matters, such as measures in favor of least developed countries, notification
procedures, relationship of WTO with the International Monetary Fund (IMF), and agreements on
technical barriers to trade and on dispute settlement.

The Understanding on Commitments in Financial Services dwell on, among other things,
standstill or limitations and qualifications of commitments to existing non-conforming measures,
market access, national treatment, and definitions of non-resident supplier of financial services,
commercial presence and new financial service." cdti

On December 29, 1994, the present petition was filed. After careful deliberation on respondents’
comment and petitioners’ reply thereto, the Court resolved on December 12, 1995, to give due
course to the petition, and the parties thereafter filed their respective memoranda. The Court
also requested the Honorable Lilia R. Bautista, the Philippine Ambassador to the United Nations
stationed in Geneva, Switzerland, to submit a paper, hereafter referred to as "Bautista Paper," 9
for brevity, (1) providing a historical background of and (2) summarizing the said agreements.

During the Oral Argument held on August 27, 1996, the Court directed:jgc:chanrobles.com.ph

"(a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and
(2) the transcript of proceedings/hearings in the Senate; and

(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed
prior to the Philippine adherence to the WTO Agreement, which derogate from Philippine
sovereignty and (2) copies of the multi-volume WTO Agreement and other documents
mentioned in the Final Act, as soon as possible."cralaw virtua1aw library

After receipt of the foregoing documents, the Court said it would consider the case submitted for
resolution. In a Compliance dated September 16, 1996, the Solicitor General submitted a printed
copy of the 36-volume Uruguay Round of Multilateral Trade Negotiations, and in another
Compliance dated October 24, 1996, he listed the various "bilateral or multilateral treaties or
international instruments involving derogation of Philippine sovereignty." Petitioners, on the
other hand, submitted their Compliance dated January 28, 1997, on January 30, 1997.
The Issues

In their Memorandum dated March 11, 1996, petitioners summarized the issues as
follows:jgc:chanrobles.com.ph

"A. Whether the petition presents a political question or is otherwise not justiciable.

B. Whether the petitioner members of the Senate who participated in the deliberations and voting
leading to the concurrence are estopped from impugning the validity of the Agreement Establishing
the World Trade Organization or of the validity or of the concurrence.

C. Whether the provisions of the Agreement Establishing the World Trade Organization contravene
the provisions of Sec. 19, Article II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine
Constitution.

D. Whether provisions of the Agreement Establishing the World Trade Organization unduly limit,
restrict and impair Philippine sovereignty specifically the legislative power which, under Sec. 2,
Article VI, 1987 Philippine Constitution is ‘vested in the Congress of the Philippines’;

E. Whether provisions of the Agreement Establishing the World Trade Organization interfere with
the exercise of judicial power.
F. Whether the respondent members of the Senate acted in grave abuse of discretion amounting
to lack or excess of jurisdiction when they voted for concurrence in the ratification of the
constitutionally-infirm Agreement Establishing the World Trade Organization.

G. Whether the respondent members of the Senate acted in grave abuse of discretion amounting
to lack or excess of jurisdiction when they concurred only in the ratification of the Agreement
Establishing the World Trade Organization, and not with the Presidential submission which included
the Final Act, Ministerial Declaration and Decisions, and the Understanding on Commitments in
Financial Services."cralaw virtua1aw library

On the other hand, the Solicitor General as counsel for respondents "synthesized the several issues
raised by petitioners into the following" : 10

"1. Whether or not the provisions of the ‘Agreement Establishing the World Trade Organization
and the Agreements and Associated Legal Instruments included in Annexes one (1), two (2) and
three (3) of that agreement’ cited by petitioners directly contravene or undermine the letter, spirit
and intent of Section 19, Article II and Sections 10 and 12, Article XII of the 1987 Constitution.

2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise
of legislative power by Congress.

3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this
Honorable Court in promulgating the rules of evidence.

4. Whether or not the concurrence of the Senate ‘in the ratification by the President of the
Philippines of the Agreement establishing the World Trade Organization’ implied rejection of the
treaty embodied in the Final Act."cralaw virtua1aw library

By raising and arguing only four issues against the seven presented by petitioners, the Solicitor
General has effectively ignored three, namely: (1) whether the petition presents a political
question or is otherwise not justiciable; (2) whether petitioner-members of the Senate (Wigberto
E. Tañada and Anna Dominique Coseteng) are estopped from joining this suit; and (3) whether
the respondent-members of the Senate acted in grave abuse of discretion when they voted for
concurrence in the ratification of the WTO Agreement. The foregoing notwithstanding, this Court
resolved to deal with these three issues thus:chanroblesvirtuallawlibrary

(1) The "political question" issue — being very fundamental and vital, and being a matter that
probes into the very jurisdiction of this Court to hear and decide this case — was deliberated upon
by the Court and will thus be ruled upon as the first issue;

(2) The matter of estoppel will not be taken up because this defense is waivable and the
respondents have effectively waived it by not pursuing it in any of their pleadings; in any event,
this issue, even if ruled in respondents’ favor, will not cause the petition’s dismissal as there are
petitioners other than the two senators, who are not vulnerable to the defense of estoppel; and

(3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be
taken up as an integral part of the disposition of the four issues raised by the Solicitor General.

During its deliberations on the case, the Court noted that the respondents did not question the
locus standi of petitioners. Hence, they are also deemed to have waived the benefit of such issue.
They probably realized that grave constitutional issues, expenditures of public funds and serious
international commitments of the nation are involved here, and that transcendental public interest
requires that the substantive issues be met head on and decided on the merits, rather than skirted
or deflected by procedural matters. 11

To recapitulate, the issues that will be ruled upon shortly are:chanrob1es virtual 1aw library

(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED, DOES
THE PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO
JURISDICTION?

(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE SEC.
19, ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?

(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR IMPAIR
THE EXERCISE OF LEGISLATIVE POWER BY CONGRESS?

(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL
POWER BY THIS COURT IN PROMULGATING RULES ON EVIDENCE?

(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES
SUFFICIENT AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT,
MINISTERIAL DECLARATIONS AND DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS
IN FINANCIAL SERVICES?

The First Issue: Does the Court Have Jurisdiction Over the Controversy?

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of the
legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the
right but in fact the duty of the judiciary to settle the dispute. "The question thus posed is judicial
rather than political. The duty (to adjudicate) remains to assure that the supremacy of the
Constitution is upheld." 12 Once a "controversy as to the application or interpretation of a
constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue
which the Court is bound by constitutional mandate to decide." 13

The jurisdiction of this Court to adjudicate the matters 14 raised in the petition is clearly set out
in the 1987 Constitution, 15 as follows:jgc:chanrobles.com.ph

"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."cralaw virtua1aw library

The foregoing text emphasizes the judicial department’s duty and power to strike down grave
abuse of discretion on the part of any branch or instrumentality of government including Congress.
It is an innovation in our political law. 16 As explained by former Chief Justice Roberto Concepcion,
17 "the judiciary is the final arbiter on the question of 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. This is not only a judicial
power but a duty to pass judgment on matters of this nature."cralaw virtua1aw library

As this Court has repeatedly and firmly emphasized in many cases, 18 it will not shirk, digress
from or abandon its sacred duty and authority to uphold the Constitution in matters that involve
grave abuse of discretion brought before it in appropriate cases, committed by any officer, agency,
instrumentality or department of the government.chanrobles.com:cralaw:red
As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate
remedy in the ordinary course of law, we have no hesitation at all in holding that this petition
should be given due course and the vital questions raised therein ruled upon under Rule 65 of the
Rules of Court. Indeed, certiorari, prohibition and mandamus are appropriate remedies to raise
constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and
executive officials. On this, we have no equivocation.

We should stress that, in deciding to take jurisdiction over this petition, this Court will not review
the wisdom of the decision of the President and the Senate in enlisting the country into the WTO,
or pass upon the merits of trade liberalization as a policy espoused by said international body.
Neither will it rule on the propriety of the government’s economic policy of reducing/removing
tariffs, taxes, subsidies, quantitative restrictions, and other import/trade barriers. Rather, it will
only exercise its constitutional duty "to determine whether or not there had been a grave abuse
of discretion amounting to lack or excess of jurisdiction" on the part of the Senate in ratifying the
WTO Agreement and its three annexes.

Second Issue: The WTO Agreement and Economic Nationalism

This is the lis mota, the main issue, raised by the petition.

Petitioners vigorously argue that the "letter, spirit and intent" of the Constitution mandating
"economic nationalism" are violated by the so-called "parity provisions" and "national treatment"
clauses scattered in various parts not only of the WTO Agreement and its annexes but also in the
Ministerial Decisions and Declarations and in the Understanding on Commitments in Financial
Services.

Specifically, the "flagship" constitutional provisions referred to are Sec. 19, Article II, and Secs.
10 and 12, Article XII, of the Constitution, which are worded as follows:jgc:chanrobles.com.ph

"Article II

DECLARATION OF PRINCIPLES AND STATE POLICIES

x x x

Sec. 19. The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos.

Article XII

NATIONAL ECONOMY AND PATRIMONY

x x x

Sec. 10 . . . The Congress shall enact measures that will encourage the formation and operation
of enterprises whose capital is wholly owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy and patrimony,
the State shall give preference to qualified Filipinos.

x x x

Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and
locally produced goods, and adopt measures that help make them competitive."cralaw virtua1aw
library

Petitioners aver that these sacred constitutional principles are desecrated by the following WTO
provisions quoted in their memorandum: 19

"a) In the area of investment measures related to trade in goods (TRIMS, for
brevity):jgc:chanrobles.com.ph

"Article 2

National Treatment and Quantitative Restrictions.

1. Without prejudice to other rights and obligations under GATT 1994. No Member shall apply
any TRIM that is inconsistent with the provisions of Article III or Article XI of GATT 1994.

2. An Illustrative list of TRIMS that are inconsistent with the obligations of general elimination of
quantitative restrictions provided for in paragraph I of Article XI of GATT 1994 is contained in
the Annex to this Agreement." (Agreement on Trade-Related Investment Measures, Vol. 27,
Uruguay Round, Legal Instruments, p. 22121, Emphasis supplied).

The Annex referred to reads as follows:jgc:chanrobles.com.ph

"ANNEX

Illustrative List

1. TRIMS that are inconsistent with the obligation of national treatment provided for in
paragraph 4 of Article III of GATT 1994 include those which are mandatory or enforceable under
domestic law or under administrative rulings, or compliance with which is necessary to obtain an
advantage, and which require:chanrob1es virtual 1aw library

(a) the purchase or use by an enterprise of products of domestic origin or from any domestic
source, whether specified in terms of particular products, in terms of volume or value of
products, or in terms of proportion of volume or value of its local production; or

(b) that an enterprise’s purchases or use of imported products be limited to an amount related
to the volume or value of local products that it exports.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph

2. TRIMS that are inconsistent with the obligations of general elimination of quantitative
restrictions provided for in paragraph 1 of Article XI of GATT 1994 include those which are
mandatory or enforceable under domestic laws or under administrative rulings, or compliance
with which is necessary to obtain an advantage, and which restrict:chanrob1es virtual 1aw
library

(a) the importation by an enterprise of products used in or related to the local production that it
exports;

(b) the importation by an enterprise of products used in or related to its local production by
restricting its access to foreign exchange inflows attributable to the enterprise; or

(c) the exportation or sale for export specified in terms of particular products, in terms of
volume or value of products, or in terms of a preparation of volume or value of its local
production." (Annex to the Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay
Round Legal Documents, p. 22125, Emphasis supplied).

The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:chanrob1es virtual
1aw library

The products of the territory of any contracting party imported into the territory of any other
contracting party shall be accorded treatment no less favorable than that accorded to like
products of national origin in respect of laws, regulations and requirements affecting their
internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of
this paragraph shall not prevent the application of differential internal transportation charges
which are based exclusively on the economic operation of the means of transport and not on the
nationality of the product." (Article III, GATT 1947, as amended by the Protocol Modifying Part
II, and Article XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in relation to paragraph 1 (a)
of the General Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal Instruments
p. 177, Emphasis supplied).

"b) In the area of trade-related aspects of intellectual property rights (TRIPS, for
brevity):chanrob1es virtual 1aw library

Each Member shall accord to the nationals of other Members treatment no less favourable than
that it accords to its own nationals with regard to the protection of intellectual property . . . (par.
1, Article 3, Agreement on Trade-Related Aspect of Intellectual Property rights, Vol. 31, Uruguay
Round, Legal Instruments, p. 25432 (Emphasis supplied)

"(c) In the area of the General Agreement on Trade in Services:chanrob1es virtual 1aw library

National Treatment

1. In the sectors inscribed in its schedule, and subject to any conditions and qualifications set
out therein, each Member shall accord to services and service suppliers of any other Member, in
respect of all measures affecting the supply of services, treatment no less favourable than it
accords to its own like services and service suppliers.

2. A Member may meet the requirement of paragraph I by according to services and service
suppliers of any other Member, either formally identical treatment or formally different
treatment to that it accords to its own like services and service suppliers.

3. Formally identical or formally different treatment shall be considered to be less favourable if it

modifies the conditions of completion in favour of services or service suppliers of the Member
compared to like services or service suppliers of any other Member. (Article XVII, General
Agreement on Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p. 22610 Emphasis
supplied)."cralaw virtua1aw library

It is petitioners’ position that the foregoing "national treatment" and "parity provisions" of the
WTO Agreement "place nationals and products of member countries on the same footing as
Filipinos and local products," in contravention of the "Filipino First" policy of the Constitution.
They allegedly render meaningless the phrase "effectively controlled by Filipinos." The
constitutional conflict becomes more manifest when viewed in the context of the clear duty
imposed on the Philippines as a WTO member to ensure the conformity of its laws, regulations
and administrative procedures with its obligations as provided in the annexed agreements. 20
Petitioners further argue that these provisions contravene constitutional limitations on the role
exports play in national development and negate the preferential treatment accorded to Filipino
labor, domestic materials and locally produced goods.

On the other hand, respondents through the Solicitor General counter (1) that such Charter
provisions are not self-executing and merely set out general policies; (2) that these nationalistic
portions of the Constitution invoked by petitioners should not be read in isolation but should be
related to other relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that read
properly, the cited WTO clauses do not conflict with the Constitution; and (4) that the WTO
Agreement contains sufficient provisions to protect developing countries like the Philippines from
the harshness of sudden trade liberalization.chanrobles law library

We shall now discuss and rule on these arguments.

Declaration of Principles Not Self-Executing

By its very title, Article II of the Constitution is a "declaration of principles and state policies."
The counterpart of this article in the 1935 Constitution 21 is called the "basic political creed of
the nation" by Dean Vicente Sinco. 22 These principles in Article II are not intended to be self-
executing principles ready for enforcement through the courts. 23 They are used by the judiciary
as aids or as guides in the exercise of its power of judicial review, and by the legislature in its
enactment of laws. As held in the leading case of Kilosbayan, Incorporated v. Morato, 24 the
principles and state policies enumerated in Article II and some sections of Article XII are not
"self-executing provisions, the disregard of which can give rise to a cause of action in the courts.
They do not embody judicially enforceable constitutional rights but guidelines for
legislation."cralaw virtua1aw library

In the same light, we held in Basco v. Pagcor 25 that broad constitutional principles need
legislative enactments to implement them, thus:jgc:chanrobles.com.ph

"On petitioners’ allegation that P.D. 1869 violates Sections 11 (Personal 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 to the legislature. If the executive and the legislature failed to heed the directives
of the article, the available remedy was not judicial but 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)."cralaw virtua1aw library

The reasons for denying a cause of action to an alleged infringement of broad constitutional
principles are sourced from basic considerations of due process and the lack of judicial authority
to wade "into the uncharted ocean of social and economic policy making." Mr. Justice Florentino
P. Feliciano in his concurring opinion in Oposa v. Factoran, Jr., 26 explained these reasons as
follows:jgc:chanrobles.com.ph

"My suggestion is simply that petitioners must, before the trial court, show a more specific legal
right — a right cast in language of a significantly lower order of generality than Article II (15) of
the Constitution — that is or may be violated by the actions, or failures to act, imputed to the
public respondent by petitioners so that the trial court can validly render judgment granting all
or part of the relief prayed for. To my mind, the court should be understood as simply saying
that such a more specific legal right or rights may well exist in our corpus of law, considering the
general policy principles found in the Constitution and the existence of the Philippine
Environment Code, and that the trial court should have given petitioners an effective opportunity
so to demonstrate, instead of aborting the proceedings on a motion to dismiss.

It seems to me important that the legal right which is an essential component of a cause of
action be a specific, operable legal right, rather than a constitutional or statutory policy, for at
least two (2) reasons. One is that unless the legal right claimed to have been violated or
disregarded is given specification in operational terms, defendants may well be unable to defend
themselves intelligently and effectively; in other words, there are due process dimensions to this
matter.

The second is a broader-gauge consideration — where a specific violation of law or applicable

regulation is not alleged or proved, petitioners can be expected to fall back on the expanded
conception of judicial power in the second paragraph of Section 1 of Article VIII of the
Constitution which reads:chanrob1es virtual 1aw library

‘Section 1. . . .

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.’ (Emphasis supplied)

When substantive standards as general as ‘the right to a balanced and healthy ecology’ and ‘the
right to health’ are combined with remedial standards as broad ranging as ‘a grave abuse of
discretion amounting to lack or excess of jurisdiction,’ the result will be, it is respectfully
submitted, to propel courts into the uncharted ocean of social and economic policy making. At
least in respect of the vast area of environmental protection and management, our courts have
no claim to special technical competence and experience and professional qualification. Where
no specific, operable norms and standards are shown to exist, then the policy making
departments — the legislative and executive departments — must be given a real and effective
opportunity to fashion and promulgate those norms and standards, and to implement them
before the courts should intervene." chanroblesvirtuallawlibrary

Economic Nationalism Should Be Read with Other Constitutional Mandates to Attain Balanced
Development of Economy

On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general
principles relating to the national economy and patrimony, should be read and understood in
relation to the other sections in said article, especially Secs. 1 and 13 thereof which
read:jgc:chanrobles.com.ph

"Section 1. The goals of the national economy are a more equitable distribution of opportunities,
income, and wealth; a sustained increase in the amount of goods and services produced by the
nation for the benefit of the people; and an expanding productivity as the key to raising the
quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural
development and agrarian reform, through industries that make full and efficient use of human
and natural resources, and which are competitive in both domestic and foreign markets.
However, the State shall protect Filipino enterprises against unfair foreign competition and trade
practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be
given optimum opportunity to develop. . .

x x x

Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all
forms and arrangements of exchange on the basis of equality and reciprocity."cralaw virtua1aw
library

As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic
development, as follows:chanrob1es virtual 1aw library

1. A more equitable distribution of opportunities, income and wealth;

2. A sustained increase in the amount of goods and services provided by the nation for the
benefit of the people; and

3. An expanding productivity as the key to raising the quality of life for all especially the
underprivileged.

With these goals in context, the Constitution then ordains the ideals of economic nationalism (1)
by expressing preference in favor of qualified Filipinos "in the grant of rights, privileges and
concessions covering the national economy and patrimony" 27 and in the use of "Filipino labor,
domestic materials and locally-produced goods" ; (2) by mandating the State to "adopt
measures that help make them competitive; 28 and (3) by requiring the State to "develop a
self-reliant and independent national economy effectively controlled by Filipinos." 29 In similar
language, the Constitution takes into account the realities of the outside world as it requires the
pursuit of "a trade policy that serves the general welfare and utilizes all forms and arrangements
of exchange on the basis of equality and reciprocity" ; 30 and speaks of industries "which are
competitive in both domestic and foreign markets" as well as of the protection of "Filipino
enterprises against unfair foreign competition and trade practices."cralaw virtua1aw library

It is true that in the recent case of Manila Prince Hotel v. Government Service Insurance System,
Et Al., 31 this Court held that "Sec. 10, second par., Art. XII of the 1987 Constitution is a
mandatory, positive command which is complete in itself and which needs no further guidelines
or implementing laws or rules for its enforcement. From its very words the provision does not
require any legislation to put it in operation. It is per se judicially enforceable." However, as the
constitutional provision itself states, it is enforceable only in regard to "the grants of rights,
privileges and concessions covering national economy and patrimony" and not to every aspect of
trade and commerce. It refers to exceptions rather than the rule. The issue here is not whether
this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a
rule, there are enough balancing provisions in the Constitution to allow the Senate to ratify the
Philippine concurrence in the WTO Agreement. And we hold that there are.

All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor
and enterprises, at the same time, it recognizes the need for business exchange with the rest of
the world on the bases of equality and reciprocity and limits protection of Filipino enterprises
only against foreign competition and trade practices that are unfair. 32 In other words, the
Constitution did not intend to pursue an isolationist policy. It did not shut out foreign
investments, goods and services in the development of the Philippine economy. While the
Constitution does not encourage the unlimited entry of foreign goods, services and investments
into the country, it does not prohibit them either. In fact, it allows an exchange on the basis of
equality and reciprocity, frowning only on foreign competition that is unfair.

WTO Recognizes Need to Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to
protect weak and developing economies, which comprise the vast majority of its members.
Unlike in the UN where major states have permanent seats and veto powers in the Security
Council, in the WTO, decisions are made on the basis of sovereign equality, with each member’s
vote equal in weight to that of any other. There is no WTO equivalent of the UN Security
Council.chanrobles.com : virtual lawlibrary

"WTO decides by consensus whenever possible, otherwise, decisions of the Ministerial

Conference and the General Council shall be taken by the majority of the votes cast, except in
cases of interpretation of the Agreement or waiver of the obligation of a member which would
require three fourths vote. Amendments would require two thirds vote in general. Amendments
to MFN provisions and the Amendments provision will require assent of all members. Any
member may withdraw from the Agreement upon the expiration of six months from the date of
notice of withdrawals." 33

Hence, poor countries can protect their common interests more effectively through the WTO
than through one-on-one negotiations with developed countries. Within the WTO, developing
countries can form powerful blocs to push their economic agenda more decisively than outside
the Organization. This is not merely a matter of practical alliances but a negotiating strategy
rooted in law. Thus, the basic principles underlying the WTO Agreement recognize the need of
developing countries like the Philippines to "share in the growth in international trade
commensurate with the needs of their economic development." These basic principles are found
in the preamble 34 of the WTO Agreement as follows:jgc:chanrobles.com.ph

"The Parties to this Agreement,

Recognizing that their relations in the field of trade and economic endeavour should be
conducted with a view to raising standards of living, ensuring full employment and a large and
steadily growing volume of real income and effective demand, and expanding the production of
and trade in goods and services, while allowing for the optimal use of the world’s resources in
accordance with the objective of sustainable development, seeking both to protect and preserve
the environment and to enhance the means for doing so in a manner consistent with their
respective needs and concerns at different levels of economic development,

Recognizing further that there is need for positive efforts designed to ensure that developing
countries, and especially the least developed among them, secure a share in the growth in
international trade commensurate with the needs of their economic development,

Being desirous of contributing to these objectives by entering into reciprocal and mutually
advantageous arrangements directed to the substantial reduction of tariffs and other barriers to
trade and to the elimination of discriminatory treatment in international trade relations,

Resolved, therefore, to develop an integrated, more viable and durable multilateral trading
system encompassing the General Agreement on Tariffs and Trade, the results of past trade
liberalization efforts, and all of the results of the Uruguay Round of Multilateral Trade
Negotiations,

Determined to preserve the basic principles and to further the objectives underlying this
multilateral trading system, . . ." (Emphasis supplied.)

Specific WTO Provisos Protect Developing Countries

So too, the Solicitor General points out that pursuant to and consistent with the foregoing basic
principles, the WTO Agreement grants developing countries a more lenient treatment, giving
their domestic industries some protection from the rush of foreign competition. Thus, with
respect to tariffs in general, preferential treatment is given to developing countries in terms of
the amount of tariff reduction and the period within which the reduction is to be spread out.
Specifically, GATT requires an average tariff reduction rate of 36% for developed countries to be
effected within a period of six (6) years while developing countries — including the Philippines —
are required to effect an average tariff reduction of only 24% within ten (10) years.

In respect to domestic subsidy, GATT requires developed countries to reduce domestic support
to agricultural products by 20% over six (6) years, as compared to only 13% for developing
countries to be effected within ten (10) years.

In regard to export subsidy for agricultural products, GATT requires developed countries to
reduce their budgetary outlays for export subsidy by 36% and export volumes receiving export
subsidy by 21% within a period of six (6) years. For developing countries, however, the
reduction rate is only two-thirds of that prescribed for developed countries and a longer period
of ten (10) years within which to effect such reduction.

Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade
practices including anti-dumping measures, countervailing measures and safeguards against
import surges. Where local businesses are jeopardized by unfair foreign competition, the
Philippines can avail of these measures. There is hardly therefore any basis for the statement
that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will
be deprived of control of the economy. Quite the contrary, the weaker situations of developing
nations like the Philippines have been taken into account; thus, there would be no basis to say
that in joining the WTO, the respondents have gravely abused their discretion. True, they have
made a bold decision to steer the ship of state into the yet uncharted sea of economic
liberalization. But such decision cannot be set aside on the ground of grave abuse of discretion,
simply because we disagree with it or simply because we believe only in other economic policies.
As earlier stated, the Court in taking jurisdiction of this case will not pass upon the advantages
and disadvantages of trade liberalization as an economic policy. It will only perform its
constitutional duty of determining whether the Senate committed grave abuse of
discretion.chanroblesvirtual|awlibrary

Constitution Does Not Rule Out Foreign Competition

Furthermore, the constitutional policy of a "self-reliant and independent national economy" 35

does not necessarily rule out the entry of foreign investments, goods and services. It
contemplates neither "economic seclusion" nor "mendicancy in the international community." As
explained by Constitutional Commissioner Bernardo Villegas, sponsor of this constitutional
policy:jgc:chanrobles.com.ph

"Economic self reliance is a primary objective of a developing country that is keenly aware of
overdependence on external assistance for even its most basic needs. It does not mean autarky
or economic seclusion; rather, it means avoiding mendicancy in the international community.
Independence refers to the freedom from undue foreign control of the national economy,
especially in such strategic industries as in the development of natural resources and public
utilities." 36
The WTO reliance on "most favored nation," "national treatment," and "trade without
discrimination" cannot be struck down as unconstitutional as in fact they are rules of equality
and reciprocity that apply to all WTO members. Aside from envisioning a trade policy based on
"equality and reciprocity," 37 the fundamental law encourages industries that are "competitive in
both domestic and foreign markets," thereby demonstrating a clear policy against a sheltered
domestic trade environment, but one in favor of the gradual development of robust industries
that can compete with the best in the foreign markets. Indeed, Filipino managers and Filipino
enterprises have shown capability and tenacity to compete internationally. And given a free
trade environment, Filipino entrepreneurs and managers in Hongkong have demonstrated the
Filipino capacity to grow and to prosper against the best offered under a policy of laissez faire.

Constitution Favors Consumers, Not Industries or Enterprises

The Constitution has not really shown any unbalanced bias in favor of any business or
enterprise, nor does it contain any specific pronouncement that Filipino companies should be
pampered with a total proscription of foreign competition. On the other hand, respondents claim
that WTO/GATT aims to make available to the Filipino consumer the best goods and services
obtainable anywhere in the world at the most reasonable prices. Consequently, the question
boils down to whether WTO/GATT will favor the general welfare of the public at large.

Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality?

Will WTO/GATT succeed in promoting the Filipinos’ general welfare because it will — as promised
by its promoters — expand the country’s exports and generate more employment?

Will it bring more prosperity, employment, purchasing power and quality products at the most
reasonable rates to the Filipino public?

The responses to these questions involve "judgment calls" by our policy makers, for which they
are answerable to our people during appropriate electoral exercises. Such questions and the
answers thereto are not subject to judicial pronouncements based on grave abuse of discretion.

Constitution Designed to Meet Future Events and Contingencies

No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and
ratified in 1987. That does not mean however that the Charter is necessarily flawed in the sense
that its framers might not have anticipated the advent of a borderless world of business. By the
same token, the United Nations was not yet in existence when the 1935 Constitution became
effective. Did that necessarily mean that the then Constitution might not have contemplated a
diminution of the absoluteness of sovereignty when the Philippines signed the UN Charter,
thereby effectively surrendering part of its control over its foreign relations to the decisions of
various UN organs like the Security Council?

It is not difficult to answer this question. Constitutions are designed to meet not only the
vagaries of contemporary events. They should be interpreted to cover even future and unknown
circumstances. It is to the credit of its drafters that a Constitution can withstand the assaults of
bigots and infidels but at the same time bend with the refreshing winds of change necessitated
by unfolding events. As one eminent political law writer and respected jurist 38
explains:jgc:chanrobles.com.ph

"The Constitution must be quintessential rather than superficial, the root and not the blossom,
the base and framework only of the edifice that is yet to rise. It is but the core of the dream that
must take shape, not in a twinkling by mandate of our delegates, but slowly ‘in the crucible of
Filipino minds and hearts,’ where it will in time develop its sinews and gradually gather its
strength and finally achieve its substance. In fine, the Constitution cannot, like the goddess
Athena, rise full-grown from the brow of the Constitutional Convention, nor can it conjure by
mere fiat an instant Utopia. It must grow with the society it seeks to re-structure and march
apace with the progress of the race, drawing from the vicissitudes of history the dynamism and
vitality that will keep it, far from becoming a petrified rule, a pulsing, living law attuned to the
heartbeat of the nation." cdtech

Third Issue: The WTO Agreement and Legislative Power

The WTO Agreement provides that" (e)ach Member shall ensure the conformity of its laws,
regulations and administrative procedures with its obligations as provided in the annexed
Agreements." 39 Petitioners maintain that this undertaking "unduly limits, restricts and impairs
Philippine sovereignty, specifically the legislative power which under Sec. 2, Article VI of the
1987 Philippine Constitution is vested in the Congress of the Philippines. It is an assault on the
sovereign powers of the Philippines because this means that Congress could not pass legislation
that will be good for our national interest and general welfare if such legislation will not conform
with the WTO Agreement, which not only relates to the trade in goods . . . but also to the flow of
investments and money . . . as well as to a whole slew of agreements on socio-cultural matters .
. ." 40

More specifically, petitioners claim that said WTO proviso derogates from the power to tax,
which is lodged in the Congress. 41 And while the Constitution allows Congress to authorize the
President to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other
duties or imposts, such authority is subject to "specified limits and . . . such limitations and
restrictions" as Congress may provide, 42 as in fact it did under Sec. 401 of the Tariff and
Customs Code.

Sovereignty Limited by International Law and Treaties

This Court notes and appreciates the ferocity and passion by which petitioners stressed their
arguments on this issue. However, while sovereignty has traditionally been deemed absolute and
all-encompassing on the domestic level, it is however subject to restrictions and limitations
voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of
nations. Unquestionably, the Constitution did not envision a hermit-type isolation of the country
from the rest of the world. In its Declaration of Principles and State Policies, the Constitution
"adopts the generally accepted principles of international law as part of the law of the land, and
adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all
nations." 43 By the doctrine of incorporation, the country is bound by generally accepted
principles of international law, which are considered to be automatically part of our own laws. 44
One of the oldest and most fundamental rules in international law is pacta sunt servanda —
international agreements must be performed in good faith. "A treaty engagement is not a mere
moral obligation but creates a legally binding obligation on the parties . . . A state which has
contracted valid international obligations is bound to make in its legislations such modifications
as may be necessary to ensure the fulfillment of the obligations undertaken." 45

By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their
voluntary act, nations may surrender some aspects of their state power in exchange for greater
benefits granted by or derived from a convention or pact. After all, states, like individuals, live
with coequals, and in pursuit of mutually covenanted objectives and benefits, they also
commonly agree to limit the exercise of their otherwise absolute rights. Thus, treaties have been
used to record agreements between States concerning such widely diverse matters as, for
example, the lease of naval bases, the sale or cession of territory, the termination of war, the
regulation of conduct of hostilities, the formation of alliances, the regulation of commercial
relations, the settling of claims, the laying down of rules governing conduct in peace and the
establishment of international organizations. 46 The sovereignty of a state therefore cannot in
fact and in reality be considered absolute. Certain restrictions enter into the picture: (1)
limitations imposed by the very nature of membership in the family of nations and (2) limitations
imposed by treaty stipulations. As aptly put by John F. Kennedy, "Today, no nation can build its
destiny alone. The age of self-sufficient nationalism is over. The age of interdependence is here."
47

UN Charter and Other Treaties Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter members, it
consented to restrict its sovereign rights under the "concept of sovereignty as auto-limitation."
47-A Under Article 2 of the UN Charter," (a)ll members shall give the United Nations every
assistance in any action it takes in accordance with the present Charter, and shall refrain from
giving assistance to any state against which the United Nations is taking preventive or
enforcement action." Such assistance includes payment of its corresponding share not merely in
administrative expenses but also in expenditures for the peace-keeping operations of the
organization. In its advisory opinion of July 20, 1961, the International Court of Justice held that
money used by the United Nations Emergency Force in the Middle East and in the Congo were
"expenses of the United Nations" under Article 17, paragraph 2, of the UN Charter. Hence, all its
members must bear their corresponding share in such expenses. In this sense, the Philippine
Congress is restricted in its power to appropriate. It is compelled to appropriate funds whether it
agrees with such peace-keeping expenses or not. So too, under Article 105 of the said Charter,
the UN and its representatives enjoy diplomatic privileges and immunities, thereby limiting again
the exercise of sovereignty of members within their own territory. Another example: although
"sovereign equality" and "domestic jurisdiction" of all members are set forth as underlying
principles in the UN Charter, such provisos are however subject to enforcement measures
decided by the Security Council for the maintenance of international peace and security under
Chapter VII of the Charter. A final example: under Article 103," (i)n the event of a conflict
between the obligations of the Members of the United Nations under the present Charter and
their obligations under any other international agreement, their obligation under the present
charter shall prevail," thus unquestionably denying the Philippines — as a member — the
sovereign power to make a choice as to which of conflicting obligations, if any, to
honor.chanroblesvirtuallawlibrary:red

Apart from the UN Treaty, the Philippines has entered into many other international pacts —
both bilateral and multilateral — that involve limitations on Philippine sovereignty. These are
enumerated by the Solicitor General in his Compliance dated October 24, 1996, as
follows:jgc:chanrobles.com.ph

"(a) Bilateral convention with the United States regarding taxes on income, where the
Philippines agreed, among others, to exempt from tax, income received in the Philippines by,
among others, the Federal Reserve Bank of the United States, the Export/Import Bank of the
United States, the Overseas Private Investment Corporation of the United States. Likewise, in
said convention, wages, salaries and similar remunerations paid by the United States to its
citizens for labor and personal services performed by them as employees or officials of the
United States are exempt from income tax by the Philippines.

(b) Bilateral agreement with Belgium, providing, among others, for the avoidance of double
taxation with respect to taxes on income.
(c) Bilateral convention with the Kingdom of Sweden for the avoidance of double taxation.

(d) Bilateral convention with the French Republic for the avoidance of double taxation.

(e) Bilateral air transport agreement with Korea where the Philippines agreed to exempt from all
customs duties, inspection fees and other duties or taxes aircrafts of South Korea and the
regular equipment, spare parts and supplies arriving with said aircrafts.

(f) Bilateral air service agreement with Japan, where the Philippines agreed to exempt from
customs duties, excise taxes, inspection fees and other similar duties, taxes or charges fuel,
lubricating oils, spare parts, regular equipment, stores on board Japanese aircrafts while on
Philippine soil.

(g) Bilateral air service agreement with Belgium where the Philippines granted Belgian air
carriers the same privileges as those granted to Japanese and Korean air carriers under separate
air service agreements.

(h) Bilateral notes with Israel for the abolition of transit and visitor visas where the Philippines
exempted Israeli nationals from the requirement of obtaining transit or visitor visas for a sojourn
in the Philippines not exceeding 59 days.

(i) Bilateral agreement with France exempting French nationals from the requirement of
obtaining transit and visitor visa for a sojourn not exceeding 59 days.

(j) Multilateral Convention on Special Missions, where the Philippines agreed that premises of
Special Missions in the Philippines are inviolable and its agents can not enter said premises
without consent of the Head of Mission concerned. Special Missions are also exempted from
customs duties, taxes and related charges.

(k) Multilateral Convention on the Law of Treaties. In this convention, the Philippines agreed to
be governed by the Vienna Convention on the Law of Treaties.

(l) Declaration of the President of the Philippines accepting compulsory jurisdiction of the
International Court of Justice. The International Court of Justice has jurisdiction in all legal
disputes concerning the interpretation of a treaty, any question of international law, the
existence of any fact which, if established, would constitute a breach of international obligation."
library

In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its
sovereign powers of taxation, eminent domain and police power. The underlying consideration in
this partial surrender of sovereignty is the reciprocal commitment of the other contracting states
in granting the same privilege and immunities to the Philippines, its officials and its citizens. The
same reciprocity characterizes the Philippine commitments under WTO-GATT.

"International treaties, whether relating to nuclear disarmament, human rights, the

environment, the law of the sea, or trade, constrain domestic political sovereignty through the
assumption of external obligations. But unless anarchy in international relations is preferred as
an alternative, in most cases we accept that the benefits of the reciprocal obligations involved
outweigh the costs associated with any loss of political sovereignty. (T)rade treaties that
structure relations by reference to durable, well-defined substantive norms and objective dispute
resolution procedures reduce the risks of larger countries exploiting raw economic power to bully
smaller countries, by subjecting power relations to some form of legal ordering. In addition,
smaller countries typically stand to gain disproportionately from trade liberalization. This is due
to the simple fact that liberalization will provide access to a larger set of potential new trading
relationship than in case of the larger country gaining enhanced success to the smaller country’s
market." 48

The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived
without violating the Constitution, based on the rationale that the Philippines "adopts the
generally accepted principles of international law as part of the law of the land and adheres to
the policy of . . . cooperation and amity with all nations." casia

Fourth Issue: The WTO Agreement and Judicial Power

Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic Principles of the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 49 intrudes on the
power of the Supreme Court to promulgate rules concerning pleading, practice and procedures.
50

To understand the scope and meaning of Article 34, TRIPS, 51 it will be fruitful to restate its full
text as follows:jgc:chanrobles.com.ph

"Article 34

Process Patents: Burden of Proof

1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner
referred to in paragraph 1 (b) of Article 28, if the subject matter of a patent is a process for
obtaining a product, the judicial authorities shall have the authority to order the defendant to
prove that the process to obtain an identical product is different from the patented process.
Therefore, Members shall provide, in at least one of the following circumstances, that any
identical product when produced without the consent of the patent owner shall, in the absence of
proof to the contrary, be deemed to have been obtained by the patented process:chanrob1es
virtual 1aw library

(a) if the product obtained by the patented process is new;

(b) if there is a substantial likelihood that the identical product was made by the process and the
owner of the patent has been unable through reasonable efforts to determine the process
actually used.

2. Any Member shall be free to provide that the burden of proof indicated in paragraph 1 shall be
on the alleged infringer only if the condition referred to in subparagraph (a) is fulfilled or only if
the condition referred to in subparagraph (b) is fulfilled.

3. In the abduction of proof to the contrary, the legitimate interests of defendants in protecting
their manufacturing and business secrets shall be taken into account."cralaw virtua1aw library

From the above, a WTO Member is required to provide a rule of disputable (note the words "in
the absence of proof to the contrary") presumption that a product shown to be identical to one
produced with the use of a patented process shall be deemed to have been obtained by the
(illegal) use of the said patented process, (1) where such product obtained by the patented
product is new, or (2) where there is "substantial likelihood" that the identical product was made
with the use of the said patented process but the owner of the patent could not determine the
exact process used in obtaining such identical product. Hence, the "burden of proof"
contemplated by Article 34 should actually be understood as the duty of the alleged patent
infringer to overthrow such presumption. Such burden, properly understood, actually refers to
the "burden of evidence" (burden of going forward) placed on the producer of the identical (or
fake) product to show that his product was produced without the use of the patented process.

The foregoing notwithstanding, the patent owner still has the "burden of proof" since, regardless
of the presumption provided under paragraph 1 of Article 34, such owner still has to introduce
evidence of the existence of the alleged identical product, the fact that it is "identical" to the
genuine one produced by the patented process and the fact of "newness" of the genuine product
or the fact of "substantial likelihood" that the identical product was made by the patented
process.

The foregoing should really present no problem in changing the rules of evidence as the present
law on the subject, Republic Act No. 165, as amended, otherwise known as the Patent Law,
provides a similar presumption in cases of infringement of patented design or utility model,
thus:jgc:chanrobles.com.ph

"SEC. 60. Infringement. — Infringement of a design patent or of a patent for utility model shall
consist in unauthorized copying of the patented design or utility model for the purpose of trade
or industry in the article or product and in the making, using or selling of the article or product
copying the patented design or utility model. Identity or substantial identity with the patented
design or utility model shall constitute evidence of copying." (Emphasis supplied)

Moreover, it should be noted that the requirement of Article 34 to provide a disputable

presumption applies only if (1) the product obtained by the patented process is NEW or (2) there
is a substantial likelihood that the identical product was made by the process and the process
owner has not been able through reasonable effort to determine the process used. Where either
of these two provisos does not obtain, members shall be free to determine the appropriate
method of implementing the provisions of TRIPS within their own internal systems and
processes.

By and large, the arguments adduced in connection with our disposition of the third issue —
derogation of legislative power — will apply to this fourth issue also. Suffice it to say that the
reciprocity clause more than justifies such intrusion, if any actually exists. Besides, Article 34
does not contain an unreasonable burden, consistent as it is with due process and the concept of
adversarial dispute settlement inherent in our judicial system.

So too, since the Philippine is a signatory to most international conventions on patents,

trademarks and copyrights, the adjustment in legislation and rules of procedure will not be
substantial. 52

Fifth Issue: Concurrence Only in the WTO Agreement and Not in Other Documents Contained in
the Final Act

Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes — but not
in the other documents referred to in the Final Act, namely the Ministerial Declaration and
Decisions and the Understanding on Commitments in Financial Services — is defective and
insufficient and thus constitutes abuse of discretion. They submit that such concurrence in the
WTO Agreement alone is flawed because it is in effect a rejection of the Final Act, which in turn
was the document signed by Secretary Navarro, in representation of the Republic upon authority
of the President. They contend that the second letter of the President to the Senate 53 which
enumerated what constitutes the Final Act should have been the subject of concurrence of the
Senate.chanroblesvirtuallawlibrary
"A final act, sometimes called protocol de clôture, is an instrument which records the winding up
of the proceedings of a diplomatic conference and usually includes a reproduction of the texts of
treaties, conventions, recommendations and other acts agreed upon and signed by the
plenipotentiaries attending the conference." 54 It is not the treaty itself. It is rather a summary
of the proceedings of a protracted conference which may have taken place over several years.
The text of the "Final Act Embodying the Results of the Uruguay Round of Multilateral Trade
Negotiations" is contained in just one page 55 in Vol. I of the 36-volume Uruguay Round of
Multilateral Trade Negotiations. By signing said Final Act, Secretary Navarro as representative of
the Republic of the Philippines undertook:jgc:chanrobles.com.ph

"(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective
competent authorities with a view to seeking approval of the Agreement in accordance with their
procedures; and

(b) to adopt the Ministerial Declarations and Decisions."cralaw virtua1aw library

The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act
required from its signatories, namely, concurrence of the Senate in the WTO Agreement.

The Ministerial Declarations and Decisions were deemed adopted without need for ratification.
They were approved by the ministers by virtue of Article XXV: 1 of GATT which provides that
representatives of the members can meet "to give effect to those provisions of this Agreement
which invoke joint action, and generally with a view to facilitating the operation and furthering
the objectives of this Agreement." 56

The Understanding on Commitments in Financial Services also approved in Marrakesh does not
apply to the Philippines. It applies only to those 27 Members which "have indicated in their
respective schedules of commitments on standstill, elimination of monopoly, expansion of
operation of existing financial service suppliers, temporary entry of personnel, free transfer and
processing of information, and national treatment with respect to access to payment, clearing
systems and refinancing available in the normal course of business." 57

On the other hand, the WTO Agreement itself expresses what multilateral agreements are
deemed included as its integral parts, 58 as follows:
"Article II

Scope of the WTO

1. The WTO shall provide the common institutional framework for the conduct of trade relations
among its Members in matters to the agreements and associated legal instruments included in
the Annexes to this Agreement.

2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3

(hereinafter referred to as "Multilateral Agreements") are integral parts of this Agreement,
binding on all Members.

3. The Agreements and associated legal instruments included in Annex 4 (hereinafter referred to
as "Plurilateral Trade Agreements") are also part of this Agreement for those Members that have
accepted them, and are binding on those Members. The Plurilateral Trade Agreements do not
create either obligation or rights for Members that have not accepted them.

4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A (hereinafter
referred to as "GATT 1994") is legally distinct from the General Agreement on Tariffs and Trade,
dated 30 October 1947, annexed to the Final Act adopted at the conclusion of the Second
Session of the Preparatory Committee of the United Nations Conference on Trade and
Employment, as subsequently rectified, amended or modified (hereinafter referred to as "GATT
1947").

It should be added that the Senate was well-aware of what it was concurring in as shown by the
members’ deliberation on August 25, 1994. After reading the letter of President Ramos dated
August 11, 1994, 59 the senators of the Republic minutely dissected what the Senate was
concurring in, as follows: 60

"THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in the first
day hearing of this Committee yesterday. Was the observation made by Senator Tañada that
what was submitted to the Senate was not the agreement on establishing the World Trade
Organization by the final act of the Uruguay Round which is not the same as the agreement
establishing the World Trade Organization? And on that basis, Senator Tolentino raised a point of
order which, however, he agreed to withdraw upon understanding that his suggestion for an
alternative solution at that time was acceptable. That suggestion was to treat the proceedings of
the Committee as being in the nature of briefings for Senators until the question of the
submission could be clarified.

And so, Secretary Romulo, in effect, is the President submitting a new. . . is he making a new
submission which improves on the clarity of the first submission?

MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no
misunderstanding, it was his intention to clarify all matters by giving this letter.

THE CHAIRMAN: Thank you.

Can this Committee hear from Senator Tañada and later on Senator Tolentino since they were
the ones that raised this question yesterday?

Senator Tañada, please.

SEN. TAÑADA: Thank you, Mr. Chairman.

Based on what Secretary Romulo has read, it would now clearly appear that what is being
submitted to the Senate for ratification is not the Final Act of the Uruguay Round, but rather the
Agreement on the World Trade Organization as well as the Ministerial Declarations and
Decisions, and the Understanding and Commitments in Financial Services.

I am now satisfied with the wording of the new submission of President Ramos.

SEN. TAÑADA. . . . of President Ramos, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Tañada. Can we hear from Senator Tolentino? And after
him Senator Neptali Gonzales and Senator Lina.

SEN. TOLENTINO, Mr. Chairman, I have not seen the new submission actually transmitted to us
but I saw the draft of his earlier, and I think it now complies with the provisions of the
Constitution, and with the Final Act itself . The Constitution does not require us to ratify the Final
Act. It requires us to ratify the Agreement which is now being submitted. The Final Act itself
specifies what is going to be submitted to with the governments of the
participants.chanrobles.com : virtual law library
In paragraph 2 of the Final Act, we read and I quote:chanrob1es virtual 1aw library

‘By signing the present Final Act, the representatives agree: (a) to submit as appropriate the
WTO Agreement for the consideration of the respective competent authorities with a view of
seeking approval of the Agreement in accordance with their procedures.’

In other words, it is not the Final Act that was agreed to be submitted to the governments for
ratification or acceptance as whatever their constitutional procedures may provide but it is the
World Trade Organization Agreement. And if that is the one that is being submitted now, I think
it satisfies both the Constitution and the Final Act itself .

Thank you, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales.

SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of record. And
they had been adequately reflected in the journal of yesterday’s session and I don’t see any
need for repeating the same.

Now, I would consider the new submission as an act ex abudante cautela.

THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make any comment
on this?

SEN. LINA, Mr. President, I agree with the observation just made by Senator Gonzales out of the
abundance of question. Then the new submission is, I believe, stating the obvious and therefore
I have no further comment to make."cralaw virtua1aw library

Epilogue

In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are
invoking this Court’s constitutionally imposed duty "to determine whether or not there has been
grave abuse of discretion amounting to lack or excess of jurisdiction" on the part of the Senate
in giving its concurrence therein via Senate Resolution No. 97. Procedurally, a writ
of certiorari grounded on grave abuse of discretion may be issued by the Court under Rule 65 of
the Rules of Court when it is amply shown that petitioners have no other plain, speedy and
adequate remedy in the ordinary course of law.

By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction. 61 Mere abuse of discretion is not enough. It must be grave
abuse of discretion as when the power is exercised in an arbitrary or despotic manner by reason
of passion or personal hostility, and must be so patent and so gross as to amount to an evasion
of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law. 62 Failure on the part of the petitioner to show grave abuse of discretion
will result in the dismissal of the petition.

In rendering this Decision, this Court never forgets that the Senate, whose act is under review,
is one of two sovereign houses of Congress and is thus entitled to great respect in its actions. It
is itself a constitutional body independent and coordinate, and thus its actions are presumed
regular and done in good faith. Unless convincing proof and persuasive arguments are presented
to overthrow such presumptions, this Court will resolve every doubt in its favor. Using the
foregoing well-accepted definition of grave abuse of discretion and the presumption of regularity
in the Senate’s processes, this Court cannot find any cogent reason to impute grave abuse of
discretion to the Senate’s exercise of its power of concurrence in the WTO Agreement granted it
by Sec. 21 of Article VII of the Constitution.

It is true, as alleged by petitioners, that broad constitutional principles require the State to
develop an independent national economy effectively controlled by Filipinos; and to protect
and/or prefer Filipino labor, products, domestic materials and locally produced goods. But it is
equally true that such principles — while serving as judicial and legislative guides — are not in
themselves sources of causes of action. Moreover, there are other equally fundamental
constitutional principles relied upon by the Senate which mandate the pursuit of a "trade policy
that serves the general welfare and utilizes all forms and arrangements of exchange on the basis
of equality and reciprocity" and the promotion of industries "which are competitive in both
domestic and foreign markets," thereby justifying its acceptance of said treaty. So too, the
alleged impairment of sovereignty in the exercise of legislative and judicial powers is balanced
by the adoption of the generally accepted principles of international law as part of the law of the
land and the adherence of the Constitution to the policy of cooperation and amity with all
nations.c

That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its consent
to the WTO Agreement thereby making it "a part of the law of the land" is a legitimate exercise
of its sovereign duty and power. We find no "patent and gross" arbitrariness or despotism "by
reason of passion or personal hostility" in such exercise. It is not impossible to surmise that this
Court, or at least some of its members, may even agree with petitioners that it is more
advantageous to the national interest to strike down Senate Resolution No. 97. But that is not a
legal reason to attribute grave abuse of discretion to the Senate and to nullify its decision. To do
so would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably,
what the Senate did was a valid exercise of its authority. As to whether such exercise was wise,
beneficial or viable is outside the realm of judicial inquiry and review. That is a matter between
the elected policy makers and the people. As to whether the nation should join the worldwide
march toward trade liberalization and economic globalization is a matter that our people should
determine in electing their policy makers. After all, the WTO Agreement allows withdrawal of
membership, should this be the political desire of a member.

The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian
Renaissance 65 where "the East will become the dominant region of the world economically,
politically and culturally in the next century." He refers to the "free market" espoused by WTO as
the "catalyst" in this coming Asian ascendancy. There are at present about 31 countries
including China, Russia and Saudi Arabia negotiating for membership in the WTO.
Notwithstanding objections against possible limitations on national sovereignty, the WTO
remains as the only viable structure for multilateral trading and the veritable forum for the
development of international trade law. The alternative to WTO is isolation, stagnation, if not
economic self-destruction. Duly enriched with original membership, keenly aware of the
advantages and disadvantages of globalization with its on-line experience, and endowed with a
vision of the future, the Philippines now straddles the crossroads of an international strategy for
economic prosperity and stability in the new millennium. Let the people, through their duly
authorized elected officers, make their free choice.

WHEREFORE, the petition is DISMISSED for lack of merit.

G.R. No. 114222 April 6, 1995

FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON, petitioners,
vs.
HON. JESUS B. GARCIA, JR., in his capacity as the Secretary of the Department of Transportation and
Communications, and EDSA LRT CORPORATION, LTD., respondents. QUIASON, J.:

This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further implementing
and enforcing the "Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System
for EDSA" dated April 22, 1992, and the "Supplemental Agreement to the 22 April 1992 Revised and Restated
Agreement To Build, Lease and Transfer a Light Rail Transit System for EDSA" dated May 6, 1993.

Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are members of the Philippine Senate
and are suing in their capacities as Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent
Secretary of the Department of Transportation and Communications (DOTC), while private respondent EDSA
LRT Corporation, Ltd. is a private corporation organized under the laws of Hongkong.

In 1989, DOTC planned to construct a light railway transit line along EDSA, a major thoroughfare in Metropolitan
Manila, which shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The plan, referred to as
EDSA Light Rail Transit III (EDSA LRT III), was intended to provide a mass transit system along EDSA and
alleviate the congestion and growing transportation problem in the metropolis.

On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc., represented by Elijahu Levin to
DOTC Secretary Oscar Orbos, proposing to construct the EDSA LRT III on a Build-Operate-Transfer (BOT)
basis.

On March 15, 1990, Secretary Orbos invited Levin to send a technical team to discuss the project with DOTC.

On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes," was signed by President
Corazon C. Aquino. Referred to as the Build-Operate-Transfer (BOT) Law, it took effect on October 9, 1990.

Republic Act No. 6957 provides for two schemes for the financing, construction and operation of government
projects through private initiative and investment: Build-Operate-Transfer (BOT) or Build-Transfer (BT).

In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT III project underway, DOTC, on
January 22, 1991 and March 14, 1991, issued Department Orders Nos. 91-494 and 91-496, respectively creating
the Prequalification Bids and Awards Committee (PBAC) and the Technical Committee.

After its constitution, the PBAC issued guidelines for the prequalification of contractors for the financing and
implementation of the project The notice, advertising the prequalification of bidders, was published in three
newspapers of general circulation once a week for three consecutive weeks starting February 21, 1991.

The deadline set for submission of prequalification documents was March 21, 1991, later extended to April 1,
1991. Five groups responded to the invitation namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of
Hongkong, Mansteel International of Mandaue, Cebu, Mitsui & Co., Ltd. of Japan, and EDSA LRT Consortium,
composed of ten foreign and domestic corporations: namely, Kaiser Engineers International, Inc., ACER
Consultants (Far East) Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the Czech and Slovak Federal
Republics, TCGI Engineering All Asia Capital and Leasing Corporation, The Salim Group of Jakarta, E. L.
Enterprises, Inc., A.M. Oreta & Co. Capitol Industrial Construction Group, Inc, and F. F. Cruz & co., Inc.

On the last day for submission of prequalification documents, the prequalification criteria proposed by the
Technical Committee were adopted by the PBAC. The criteria totalling 100 percent, are as follows: (a) Legal
aspects — 10 percent; (b) Management/Organizational capability — 30 percent; and (c) Financial capability —
30 percent; and (d) Technical capability — 30 percent (Rollo, p. 122).
On April 3, 1991, the Committee, charged under the BOT Law with the formulation of the Implementation Rules
and Regulations thereof, approved the same.

After evaluating the prequalification, bids, the PBAC issued a Resolution on May 9, 1991 declaring that of the
five applicants, only the EDSA LRT Consortium "met the requirements of garnering at least 21 points per criteria
[sic], except for Legal Aspects, and obtaining an over-all passing mark of at least 82 points" (Rollo, p. 146). The
Legal Aspects referred to provided that the BOT/BT contractor-applicant meet the requirements specified in the
Constitution and other pertinent laws (Rollo, p. 114).

Subsequently, Secretary Orbos was appointed Executive Secretary to the President of the Philippines and was
replaced by Secretary Pete Nicomedes Prado. The latter sent to President Aquino two letters dated May 31,
1991 and June 14, 1991, respectively recommending the award of the EDSA LRT III project to the sole complying
bidder, the EDSA LRT Consortium, and requesting for authority to negotiate with the said firm for the contract
pursuant to paragraph 14(b) of the Implementing Rules and Regulations of the BOT Law (Rollo, pp. 298-302).

In July 1991, Executive Secretary Orbos, acting on instructions of the President, issued a directive to the DOTC
to proceed with the negotiations. On July 16, 1991, the EDSA LRT Consortium submitted its bid proposal to
DOTC.

Finding this proposal to be in compliance with the bid requirements, DOTC and respondent EDSA LRT
Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered into an "Agreement to Build, Lease and
Transfer a Light Rail Transit System for EDSA" under the terms of the BOT Law (Rollo, pp. 147-177).

Secretary Prado, thereafter, requested presidential approval of the contract.

In a letter dated March 13, 1992, Executive Secretary Franklin Drilon, who replaced Executive Secretary Orbos,
informed Secretary Prado that the President could not grant the requested approval for the following reasons:
(1) that DOTC failed to conduct actual public bidding in compliance with Section 5 of the BOT Law; (2) that the
law authorized public bidding as the only mode to award BOT projects, and the prequalification proceedings was
not the public bidding contemplated under the law; (3) that Item 14 of the Implementing Rules and Regulations
of the BOT Law which authorized negotiated award of contract in addition to public bidding was of doubtful
legality; and (4) that congressional approval of the list of priority projects under the BOT or BT Scheme provided
in the law had not yet been granted at the time the contract was awarded (Rollo, pp. 178-179).

In view of the comments of Executive Secretary Drilon, the DOTC and private respondents re-negotiated the
agreement. On April 22, 1992, the parties entered into a "Revised and Restated Agreement to Build, Lease and
Transfer a Light Rail Transit System for EDSA" (Rollo, pp. 47-78) inasmuch as "the parties [are] cognizant of the
fact the DOTC has full authority to sign the Agreement without need of approval by the President pursuant to the
provisions of Executive Order No. 380 and that certain events [had] supervened since November 7, 1991 which
necessitate[d] the revision of the Agreement" (Rollo, p. 51). On May 6, 1992, DOTC, represented by Secretary
Jesus Garcia vice Secretary Prado, and private respondent entered into a "Supplemental Agreement to the 22
April 1992 Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA"
so as to "clarify their respective rights and responsibilities" and to submit [the] Supplemental Agreement to the
President, of the Philippines for his approval" (Rollo, pp. 79-80).

Secretary Garcia submitted the two Agreements to President Fidel V. Ramos for his consideration and approval.
In a Memorandum to Secretary Garcia on May 6, 1993, approved the said Agreements, (Rollo, p. 194).

According to the agreements, the EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal
Republics and will have a maximum carrying capacity of 450,000 passengers a day, or 150 million a year to be
achieved-through 54 such vehicles operating simultaneously. The EDSA LRT III will run at grade, or street level,
on the mid-section of EDSA for a distance of 17.8 kilometers from F.B. Harrison, Pasay City to North Avenue,
Quezon City. The system will have its own power facility (Revised and Restated Agreement, Sec. 2.3 (ii); Rollo p.
55). It will also have thirteen (13) passenger stations and one depot in 16-hectare government property at North
Avenue (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).
Private respondents shall undertake and finance the entire project required for a complete operational light rail
transit system (Revised and Restated Agreement, Sec. 4.1; Rollo, p. 58). Target completion date is 1,080 days
or approximately three years from the implementation date of the contract inclusive of mobilization, site works,
initial and final testing of the system (Supplemental Agreement, Sec. 5; Rollo, p. 83). Upon full or partial
completion and viability thereof, private respondent shall deliver the use and possession of the completed portion
to DOTC which shall operate the same (Supplemental Agreement, Sec. 5; Revised and Restated Agreement,
Sec. 5.1; Rollo, pp. 61-62, 84). DOTC shall pay private respondent rentals on a monthly basis through an
Irrevocable Letter of Credit. The rentals shall be determined by an independent and internationally accredited
inspection firm to be appointed by the parties (Supplemental Agreement, Sec. 6; Rollo, pp. 85-86) As agreed
upon, private respondent's capital shall be recovered from the rentals to be paid by the DOTC which, in turn,
shall come from the earnings of the EDSA LRT III (Revised and Restated Agreement, Sec. 1, p. 5; Rollo, p. 54).
After 25 years and DOTC shall have completed payment of the rentals, ownership of the project shall be
transferred to the latter for a consideration of only U.S. $1.00 (Revised and Restated Agreement, Sec.
11.1; Rollo, p. 67).

On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled "An Act
Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private
Sector, and for Other Purposes" was signed into law by the President. The law was published in two newspapers
of general circulation on May 12, 1994, and took effect 15 days thereafter or on May 28, 1994. The law expressly
recognizes BLT scheme and allows direct negotiation of BLT contracts.

II

In their petition, petitioners argued that:

(1) THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE SUPPLEMENTAL

AGREEMENT OF MAY 6, 1993, INSOFAR AS IT GRANTS EDSA LRT CORPORATION, LTD.,
A FOREIGN CORPORATION, THE OWNERSHIP OF EDSA LRT III, A PUBLIC UTILITY,
VIOLATES THE CONSTITUTION AND, HENCE, IS UNCONSTITUTIONAL;

(2) THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS NOT

DEFINED NOR RECOGNIZED IN R.A. NO. 6957 OR ITS IMPLEMENTING RULES AND
REGULATIONS AND, HENCE, IS ILLEGAL;

(3) THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R; A. NO. 6957
AND, HENCE, IS UNLAWFUL;

(4) THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA LRT

CORPORATION, LTD. VIOLATES THE REQUIREMENTS PROVIDED IN THE IMPLEMENTING
RULES AND REGULATIONS OF THE BOT LAW AND, HENCE, IS ILLEGAL;

(5) THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR FAILURE TO
BEAR PRESIDENTIAL APPROVAL AND, HENCE, ARE ILLEGAL AND INEFFECTIVE; AND

(6) THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT (Rollo,

pp. 15-16).

Secretary Garcia and private respondent filed their comments separately and claimed that:

(1) Petitioners are not the real parties-in-interest and have no legal standing to institute the present petition;

(2) The writ of prohibition is not the proper remedy and the petition requires ascertainment of facts;

(3) The scheme adopted in the Agreements is actually a build-transfer scheme allowed by the BOT Law;
(4) The nationality requirement for public utilities mandated by the Constitution does not apply to private
respondent;

(5) The Agreements executed by and between respondents have been approved by President Ramos and are
not disadvantageous to the government;

(6) The award of the contract to private respondent through negotiation and not public bidding is allowed by the
BOT Law; and

(7) Granting that the BOT Law requires public bidding, this has been amended by R.A No. 7718 passed by the
Legislature On May 12, 1994, which provides for direct negotiation as a mode of award of infrastructure projects.

III

Respondents claimed that petitioners had no legal standing to initiate the instant action. Petitioners, however,
countered that the action was filed by them in their capacity as Senators and as taxpayers.

The prevailing doctrines in taxpayer's suits are to allow taxpayers to question contracts entered into by the
national government or government-owned or controlled corporations allegedly in contravention of the law
(Kilosbayan, Inc. v. Guingona, 232 SCRA 110 [1994]) and to disallow the same when only municipal contracts
are involved (Bugnay Construction and Development Corporation v. Laron, 176 SCRA. 240 [1989]).

For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to follow it and
uphold the legal standing of petitioners as taxpayers to institute the present action.

IV

In the main, petitioners asserted that the Revised and Restated Agreement of April 22, 1992 and the
Supplemental Agreement of May 6, 1993 are unconstitutional and invalid for the following reasons:

(1) the EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the
Constitution to Filipino citizens and domestic corporations, not foreign corporations like private
respondent;

(2) the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or BT
Scheme under the law;

(3) the contract to construct the EDSA LRT III was awarded to private respondent not through
public bidding which is the only mode of awarding infrastructure projects under the BOT law; and

(4) the agreements are grossly disadvantageous to the government.

1. Private respondent EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III was
awarded by public respondent, is admittedly a foreign corporation "duly incorporated and existing under the laws
of Hongkong" (Rollo, pp. 50, 79). There is also no dispute that once the EDSA LRT III is constructed, private
respondent, as lessor, will turn it over to DOTC, as lessee, for the latter to operate the system and pay rentals
for said use.

The question posed by petitioners is:

Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public
utility? (Rollo, p. 17).

The phrasing of the question is erroneous; it is loaded. What private respondent owns are the rail tracks, rolling
stocks like the coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is
needed to operate these facilities to serve the public, they do not by themselves constitute a public utility. What
constitutes a public utility is not their ownership but their use to serve the public (Iloilo Ice & Cold Storage Co. v.
Public Service Board, 44 Phil. 551, 557 558 [1923]).

The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does
not require a franchise before one can own the facilities needed to operate a public utility so long as it does not
operate them to serve the public.

Section 11 of Article XII of the Constitution provides:

No franchise, certificate or any other form of authorization for the operation of a public utility shall
be granted except to citizens of the Philippines or to corporations or associations organized under
the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens,
nor shall such franchise, certificate or authorization be exclusive character or for a longer period
than fifty years . . . (Emphasis supplied).

In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and
equipment used to serve the public.

Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely
subjected to his will in everything not prohibited by law or the concurrence with the rights of another (Tolentino,
II Commentaries and Jurisprudence on the Civil Code of the Philippines 45 [1992]).

The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated
and used to serve the public as a public utility unless the operator has a franchise. The operation of a rail system
as a public utility includes the transportation of passengers from one point to another point, their loading and
unloading at designated places and the movement of the trains at pre-scheduled times (cf. Arizona Eastern R.R.
Co. v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R. 1149 [1919] ;United States Fire Ins. Co. v. Northern P.R.
Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]).

The right to operate a public utility may exist independently and separately from the ownership of the facilities
thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a
public utility without owning the facilities used to serve the public. The devotion of property to serve the public
may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof.

This dichotomy between the operation of a public utility and the ownership of the facilities used to serve the
public can be very well appreciated when we consider the transportation industry. Enfranchised airline and
shipping companies may lease their aircraft and vessels instead of owning them themselves.

While private respondent is the owner of the facilities necessary to operate the EDSA. LRT III, it admits that it is
not enfranchised to operate a public utility (Revised and Restated Agreement, Sec. 3.2; Rollo, p. 57). In view of
this incapacity, private respondent and DOTC agreed that on completion date, private respondent will
immediately deliver possession of the LRT system by way of lease for 25 years, during which period DOTC shall
operate the same as a common carrier and private respondent shall provide technical maintenance and repair
services to DOTC (Revised and Restated Agreement, Secs. 3.2, 5.1 and 5.2; Rollo, pp. 57-58, 61-62). Technical
maintenance consists of providing (1) repair and maintenance facilities for the depot and rail lines, services for
routine clearing and security; and (2) producing and distributing maintenance manuals and drawings for the
entire system (Revised and Restated Agreement, Annex F).

Private respondent shall also train DOTC personnel for familiarization with the operation, use, maintenance and
repair of the rolling stock, power plant, substations, electrical, signaling, communications and all other equipment
as supplied in the agreement (Revised and Restated Agreement, Sec. 10; Rollo, pp. 66-67). Training consists
of theoretical and live training of DOTC operational personnel which includes actual driving of light rail vehicles
under simulated operating conditions, control of operations, dealing with emergencies, collection, counting and
securing cash from the fare collection system (Revised and Restated Agreement, Annex E, Secs. 2-3).
Personnel of DOTC will work under the direction and control of private respondent only during training (Revised
and Restated Agreement, Annex E, Sec. 3.1). The training objectives, however, shall be such that upon
completion of the EDSA LRT III and upon opening of normal revenue operation, DOTC shall have in their employ
personnel capable of undertaking training of all new and replacement personnel (Revised and Restated
Agreement, Annex E Sec. 5.1). In other words, by the end of the three-year construction period and upon
commencement of normal revenue operation, DOTC shall be able to operate the EDSA LRT III on its own and
train all new personnel by itself.

Fees for private respondent' s services shall be included in the rent, which likewise includes the project cost,
cost of replacement of plant equipment and spare parts, investment and financing cost, plus a reasonable rate
of return thereon (Revised and Restated Agreement, Sec. 1; Rollo, p. 54).

Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common carrier.
For this purpose, DOTC shall indemnify and hold harmless private respondent from any losses, damages,
injuries or death which may be claimed in the operation or implementation of the system, except losses,
damages, injury or death due to defects in the EDSA LRT III on account of the defective condition of equipment
or facilities or the defective maintenance of such equipment facilities (Revised and Restated Agreement, Secs.
12.1 and 12.2; Rollo, p. 68).

In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have
no dealings with the public and the public will have no right to demand any services from it.

It is well to point out that the role of private respondent as lessor during the lease period must be distinguished
from the role of the Philippine Gaming Management Corporation (PGMC) in the case of Kilosbayan Inc. v.
Guingona, 232 SCRA 110 (1994). Therein, the Contract of Lease between PGMC and the Philippine Charity
Sweepstakes Office (PCSO) was actually a collaboration or joint venture agreement prescribed under the charter
of the PCSO. In the Contract of Lease; PGMC, the lessor obligated itself to build, at its own expense, all the
facilities necessary to operate and maintain a nationwide on-line lottery system from whom PCSO was to lease
the facilities and operate the same. Upon due examination of the contract, the Court found that PGMC's
participation was not confined to the construction and setting up of the on-line lottery system. It spilled over to
the actual operation thereof, becoming indispensable to the pursuit, conduct, administration and control of the
highly technical and sophisticated lottery system. In effect, the PCSO leased out its franchise to PGMC which
actually operated and managed the same.

Indeed, a mere owner and lessor of the facilities used by a public utility is not a public utility (Providence and
W.R. Co. v. United States, 46 F. 2d 149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin,
205 N.W. 900, 903, 188 Wis. 246 [1925]; Ellis v. Interstate Commerce Commission, Ill 35 S. Ct. 645, 646, 237
U.S. 434, 59 L. Ed. 1036 [1914]). Neither are owners of tank, refrigerator, wine, poultry and beer cars who supply
cars under contract to railroad companies considered as public utilities (Crystal Car Line v. State Tax
Commission, 174 p. 2d 984, 987 [1946]).

Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as one
operating a public utility. The moment for determining the requisite Filipino nationality is when the entity applies
for a franchise, certificate or any other form of authorization for that purpose (People v. Quasha, 93 Phil. 333
[1953]).

2. Petitioners further assert that the BLT scheme under the Agreements in question is not recognized in the BOT
Law and its Implementing Rules and Regulations.

Section 2 of the BOT Law defines the BOT and BT schemes as follows:

(a) Build-operate-and-transfer scheme — A contractual arrangement whereby the contractor

undertakes the construction including financing, of a given infrastructure facility, and the operation
and maintenance thereof. The contractor operates the facility over a fixed term during which it is
allowed to charge facility users appropriate tolls, fees, rentals and charges sufficient to enable the
 contractor to recover its operating and maintenance expenses and its investment in the project
plus a reasonable rate of return thereon. The contractor transfers the facility to the government
agency or local government unit concerned at the end of the fixed term which shall not exceed
fifty (50) years. For the construction stage, the contractor may obtain financing from foreign and/or
domestic sources and/or engage the services of a foreign and/or Filipino constructor [sic]:
Provided, That the ownership structure of the contractor of an infrastructure facility whose
operation requires a public utility franchise must be in accordance with the Constitution: Provided,
however, That in the case of corporate investors in the build-operate-and-transfer corporation,
the citizenship of each stockholder in the corporate investors shall be the basis for the
computation of Filipino equity in the said corporation: Provided, further, That, in the case of foreign
constructors [sic], Filipino labor shall be employed or hired in the different phases of the
construction where Filipino skills are available: Provided, furthermore, that the financing of a
foreign or foreign-controlled contractor from Philippine government financing institutions shall not
exceed twenty percent (20%) of the total cost of the infrastructure facility or project: Provided,
finally, That financing from foreign sources shall not require a guarantee by the Government or
by government-owned or controlled corporations. The build-operate-and-transfer scheme shall
include a supply-and-operate situation which is a contractual agreement whereby the supplier of
equipment and machinery for a given infrastructure facility, if the interest of the Government so
requires, operates the facility providing in the process technology transfer and training to Filipino
nationals.

(b) Build-and-transfer scheme — "A contractual arrangement whereby the contractor undertakes
the construction including financing, of a given infrastructure facility, and its turnover after
completion to the government agency or local government unit concerned which shall pay the
contractor its total investment expended on the project, plus a reasonable rate of return thereon.
This arrangement may be employed in the construction of any infrastructure project including
critical facilities which for security or strategic reasons, must be operated directly by the
government (Emphasis supplied).

The BOT scheme is expressly defined as one where the contractor undertakes the construction and financing in
infrastructure facility, and operates and maintains the same. The contractor operates the facility for a fixed period
during which it may recover its expenses and investment in the project plus a reasonable rate of return thereon.
After the expiration of the agreed term, the contractor transfers the ownership and operation of the project to the
government.

In the BT scheme, the contractor undertakes the construction and financing of the facility, but after completion,
the ownership and operation thereof are turned over to the government. The government, in turn, shall pay the
contractor its total investment on the project in addition to a reasonable rate of return. If payment is to be effected
through amortization payments by the government infrastructure agency or local government unit concerned,
this shall be made in accordance with a scheme proposed in the bid and incorporated in the contract (R.A. No.
6957, Sec. 6).

Emphasis must be made that under the BOT scheme, the owner of the infrastructure facility must comply with
the citizenship requirement of the Constitution on the operation of a public utility. No such a requirement is
imposed in the BT scheme.

There is no mention in the BOT Law that the BOT and BT schemes bar any other arrangement for the payment
by the government of the project cost. The law must not be read in such a way as to rule out or unduly restrict
any variation within the context of the two schemes. Indeed, no statute can be enacted to anticipate and provide
all the fine points and details for the multifarious and complex situations that may be encountered in enforcing
the law (Director of Forestry v. Munoz, 23 SCRA 1183 [1968]; People v. Exconde, 101 Phil. 1125 [1957]; United
States v. Tupasi Molina, 29 Phil. 119 [1914]).

The BLT scheme in the challenged agreements is but a variation of the BT scheme under the law.
As a matter of fact, the burden on the government in raising funds to pay for the project is made lighter by
allowing it to amortize payments out of the income from the operation of the LRT System.

In form and substance, the challenged agreements provide that rentals are to be paid on a monthly basis
according to a schedule of rates through and under the terms of a confirmed Irrevocable Revolving Letter of
Credit (Supplemental Agreement, Sec. 6; Rollo, p. 85). At the end of 25 years and when full payment shall have
been made to and received by private respondent, it shall transfer to DOTC, free from any lien or encumbrances,
all its title to, rights and interest in, the project for only U.S. $1.00 (Revised and Restated Agreement, Sec. 11.1;
Supplemental Agreement, Sec; 7; Rollo, pp. 67, .87).

A lease is a contract where one of the parties binds himself to give to another the enjoyment or use of a thing for
a certain price and for a period which may be definite or indefinite but not longer than 99 years (Civil Code of the
Philippines, Art. 1643). There is no transfer of ownership at the end of the lease period. But if the parties stipulate
that title to the leased premises shall be transferred to the lessee at the end of the lease period upon the payment
of an agreed sum, the lease becomes a lease-purchase agreement.

Furthermore, it is of no significance that the rents shall be paid in United States currency, not Philippine pesos.
The EDSA LRT III Project is a high priority project certified by Congress and the National Economic and
Development Authority as falling under the Investment Priorities Plan of Government (Rollo, pp. 310-311). It is,
therefore, outside the application of the Uniform Currency Act (R.A. No. 529), which reads as follows:

Sec. 1. — Every provision contained in, or made with respect to, any domestic obligation to wit,
any obligation contracted in the Philippines which provisions purports to give the obligee the right
to require payment in gold or in a particular kind of coin or currency other than Philippine currency
or in an amount of money of the Philippines measured thereby, be as it is hereby declared against
public policy, and null, void, and of no effect, and no such provision shall be contained in, or made
with respect to, any obligation hereafter incurred. The above prohibition shall not apply to (a) . . .;
(b) transactions affecting high-priority economic projects for agricultural, industrial and power
development as may be determined by
the National Economic Council which are financed by or through foreign funds; . . . .

3. The fact that the contract for the construction of the EDSA LRT III was awarded through negotiation and before
congressional approval on January 22 and 23, 1992 of the List of National Projects to be undertaken by the
private sector pursuant to the BOT Law (Rollo, pp. 309-312) does not suffice to invalidate the award.

Subsequent congressional approval of the list including "rail-based projects packaged with commercial
development opportunities" (Rollo, p. 310) under which the EDSA LRT III projects falls, amounts to a ratification
of the prior award of the EDSA LRT III contract under the BOT Law.

Petitioners insist that the prequalifications process which led to the negotiated award of the contract appears to
have been rigged from the very beginning to do away with the usual open international public bidding where
qualified internationally known applicants could fairly participate.

The records show that only one applicant passed the prequalification process. Since only one was left, to conduct
a public bidding in accordance with Section 5 of the BOT Law for that lone participant will be an absurb and
pointless exercise (cf. Deloso v. Sandiganbayan, 217 SCRA 49, 61 [1993]).

Contrary to the comments of the Executive Secretary Drilon, Section 5 of the BOT Law in relation to Presidential
Decree No. 1594 allows the negotiated award of government infrastructure projects.

Presidential Decree No. 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government
Infrastructure Contracts," allows the negotiated award of government projects in exceptional cases. Sections 4
of the said law reads as follows:
 Bidding. — Construction projects shall generally be undertaken by contract after competitive
public bidding. Projects may be undertaken by administration or force account or by negotiated
contract only in exceptional cases where time is of the essence, or where there is lack of qualified
bidders or contractors, or where there is conclusive evidence that greater economy and efficiency
would be achieved through this arrangement, and in accordance with provision of laws and acts
on the matter, subject to the approval of the Minister of Public Works and Transportation and
Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be,
if the project cost is less than P1 Million, and the President of the Philippines, upon
recommendation of the Minister, if the project cost is P1 Million or more (Emphasis supplied).

xxx xxx xxx

Indeed, where there is a lack of qualified bidders or contractors, the award of government infrastructure contracts
may he made by negotiation. Presidential Decree No. 1594 is the general law on government infrastructure
contracts while the BOT Law governs particular arrangements or schemes aimed at encouraging private sector
participation in government infrastructure projects. The two laws are not inconsistent with each other but are
in pari materia and should be read together accordingly.

In the instant case, if the prequalification process was actually tainted by foul play, one wonders why none of the
competing firms ever brought the matter before the PBAC, or intervened in this case before us (cf. Malayan
Integrated Industries Corp. v. Court of Appeals, 213 SCRA 640 [1992]; Bureau Veritas v. Office of the President,
205 SCRA 705 [1992]).

The challenged agreements have been approved by President Ramos himself. Although then Executive
Secretary Drilon may have disapproved the "Agreement to Build, Lease and Transfer a Light Rail Transit System
for EDSA," there is nothing in our laws that prohibits parties to a contract from renegotiating and modifying in
good faith the terms and conditions thereof so as to meet legal, statutory and constitutional requirements. Under
the circumstances, to require the parties to go back to step one of the prequalification process would just be an
idle ceremony. Useless bureaucratic "red tape" should be eschewed because it discourages private sector
participation, the "main engine" for national growth and development (R.A. No. 6957, Sec. 1), and renders the
BOT Law nugatory.

Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof as:

(e) Build-lease-and-transfer — A contractual arrangement whereby a project proponent is

authorized to finance and construct an infrastructure or development facility and upon its
completion turns it over to the government agency or local government unit concerned on a lease
arrangement for a fixed period after which ownership of the facility is automatically transferred to
the government unit concerned.

Section 5-A of the law, which expressly allows direct negotiation of contracts, provides:

Direct Negotiation of Contracts. — Direct negotiation shall be resorted to when there is only one
complying bidder left as defined hereunder.

(a) If, after advertisement, only one contractor applies for prequalification and it meets the
prequalification requirements, after which it is required to submit a bid proposal which is
subsequently found by the agency/local government unit (LGU) to be complying.

(b) If, after advertisement, more than one contractor applied for prequalification but only one
meets the prequalification requirements, after which it submits bid/proposal which is found by the
agency/local government unit (LGU) to be complying.

(c) If, after prequalification of more than one contractor only one submits a bid which is found by
the agency/LGU to be complying.
 (d) If, after prequalification, more than one contractor submit bids but only one is found by the
agency/LGU to be complying. Provided, That, any of the disqualified prospective bidder [sic] may
appeal the decision of the implementing agency, agency/LGUs prequalification bids and awards
committee within fifteen (15) working days to the head of the agency, in case of national projects
or to the Department of the Interior and Local Government, in case of local projects from the date
the disqualification was made known to the disqualified bidder: Provided, furthermore, That the
implementing agency/LGUs concerned should act on the appeal within forty-five (45) working
days from receipt thereof.

Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law
has now been rendered moot and academic by R.A. No. 7718. Section 3 of this law authorizes all government
infrastructure agencies, government-owned and controlled corporations and local government units to enter into
contract with any duly prequalified proponent for the financing, construction, operation and maintenance of any
financially viable infrastructure or development facility through a BOT, BT, BLT, BOO (Build-own-and-operate),
CAO (Contract-add-operate), DOT (Develop-operate-and-transfer), ROT (Rehabilitate-operate-and-transfer),
and ROO (Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-j]).

From the law itself, once and applicant has prequalified, it can enter into any of the schemes enumerated in
Section 2 thereof, including a BLT arrangement, enumerated and defined therein (Sec. 3).

Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives and "a climate of
minimum government regulations and procedures and specific government undertakings in support of the private
sector" (Sec. 1). A curative statute makes valid that which before enactment of the statute was invalid. Thus,
whatever doubts and alleged procedural lapses private respondent and DOTC may have engendered and
committed in entering into the questioned contracts, these have now been cured by R.A. No. 7718
(cf. Development Bank of the Philippines v. Court of Appeals, 96 SCRA 342 [1980]; Santos V. Duata, 14 SCRA
1041 [1965]; Adong V. Cheong Seng Gee, 43 Phil. 43 [1922].

4. Lastly, petitioners claim that the agreements are grossly disadvantageous to the government because the
rental rates are excessive and private respondent's development rights over the 13 stations and the depot will
rob DOTC of the best terms during the most productive years of the project.

It must be noted that as part of the EDSA LRT III project, private respondent has been granted, for a period of
25 years, exclusive rights over the depot and the air space above the stations for development into commercial
premises for lease, sublease, transfer, or advertising (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For
and in consideration of these development rights, private respondent shall pay DOTC in Philippine currency
guaranteed revenues generated therefrom in the amounts set forth in the Supplemental Agreement (Sec.
11; Rollo, p. 93). In the event that DOTC shall be unable to collect the guaranteed revenues, DOTC shall be
allowed to deduct any shortfalls from the monthly rent due private respondent for the construction of the EDSA
LRT III (Supplemental Agreement, Sec. 11; Rollo, pp. 93-94). All rights, titles, interests and income over all
contracts on the commercial spaces shall revert to DOTC upon expiration of the 25-year period. (Supplemental
Agreement, Sec. 11; Rollo, pp. 91-92).

The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the proper
administrative agencies and officials who have acquired expertise, specialized skills and knowledge in the
performance of their functions should be accorded respect absent any showing of grave abuse of discretion
(Felipe Ysmael, Jr. & Co. v. Deputy Executive Secretary, 190 SCRA 673 [1990]; Board of Medical Education v.
Alfonso, 176 SCRA 304 [1989]).

Government officials are presumed to perform their functions with regularity and strong evidence is necessary
to rebut this presumption. Petitioners have not presented evidence on the reasonable rentals to be paid by the
parties to each other. The matter of valuation is an esoteric field which is better left to the experts and which this
Court is not eager to undertake.

That the grantee of a government contract will profit therefrom and to that extent the government is deprived of
the profits if it engages in the business itself, is not worthy of being raised as an issue. In all cases where a party
enters into a contract with the government, he does so, not out of charity and not to lose money, but to gain
pecuniarily.

5. Definitely, the agreements in question have been entered into by DOTC in the exercise of its governmental
function. DOTC is the primary policy, planning, programming, regulating and administrative entity of the
Executive branch of government in the promotion, development and regulation of dependable and coordinated
networks of transportation and communications systems as well as in the fast, safe, efficient and reliable postal,
transportation and communications services (Administrative Code of 1987, Book IV, Title XV, Sec. 2). It is the
Executive department, DOTC in particular that has the power, authority and technical expertise determine
whether or not a specific transportation or communication project is necessary, viable and beneficial to the
people. The discretion to award a contract is vested in the government agencies entrusted with that function
(Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]).

WHEREFORE, the petition is DISMISSED.

SO ORDERED

G.R. No. 144109 February 17, 2003

ASSOCIATED COMMUNICATIONS & WIRELESS SERVICES – UNITED BROADCASTING

NETWORKS, petitioner,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION, respondent.

DECISION

PUNO, J.:

For many years now, there has been a "pervading confusion in the state of affairs of the broadcast industry
brought about by conflicting laws, decrees, executive orders and other pronouncements promulgated during the
Martial Law regime."1 The question that has taken a long life is whether the operation of a radio or television
station requires a congressional franchise. The Court shall now lay to rest the issue.

This is a petition for review on certiorari of the Court of Appeals’ January 31, 2000 decision and February 21,
2000 resolution affirming the January 13, 1999 decision of the National Telecommunications Commission (NTC
for brevity).

First, the facts.

On November 11, 1931, Act No. 3846, entitled "An Act Providing for the Regulation of Radio Stations and Radio
Communications in the Philippines and for Other Purposes," was enacted. Sec. 1 of the law reads, viz:

"Sec. 1. No person, firm, company, association, or corporation shall construct, install, establish, or operate a
radio transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting
station, without having first obtained a franchise therefor from the Congress of the Philippines..."

Pursuant to the above provision, Congress enacted in 1965 R.A. No. 4551, entitled "An Act Granting Marcos J.
Villaverde, Jr. and Winfred E. Villaverde a Franchise to Construct, Install, Maintain and Operate Public
Radiotelephone and Radiotelegraph Coastal Stations, and Public Fixed and Public Based and Land Mobile
Stations within the Philippines for the Reception and Transmission of Radiotelephone and Radiotelegraph for
Domestic Communications and Provincial Telephone Systems in Certain Provinces." It gave the grantees a 50-
year franchise.2 In 1969, the franchise was transferred to petitioner Associated Communications & Wireless
Services – United Broadcasting Network, Inc. (ACWS for brevity) through Congress’ Concurrent Resolution No.
58.3 Petitioner ACWS then engaged in the installation and operation of several radio stations around the country.
In 1974, P.D. No. 576-A, "Regulating the Ownership and Operation of Radio and Television Stations and for
other Purposes" was issued, with the following pertinent provisions on franchise of radio and television
broadcasting systems:

"Sec. 1. No radio station or television channel may obtain a franchise unless it has sufficient capital on the basis
of equity for its operation for at least one year, including purchase of equipment.

xxxxxxxxx

Sec. 6. All franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or
television broadcasting systems shall terminate on December 31, 1981. Thereafter, irrespective of any franchise,
grant, license, permit, certificate or other forms of authority to operate granted by any office, agency or person,
no radio or television station shall be authorized to operate without the authority of the Board of Communications
and the Secretary of Public Works and Communications or their successors who have the right and authority to
assign to qualified parties frequencies, channels or other means of identifying broadcasting system; Provided,
however, that any conflict over, or disagreement with a decision of the aforementioned authorities may be
appealed finally to the Office of the President within fifteen days from the date the decision is received by the
party in interest."

A few years later or in 1979, E.O. No. 546 4 was issued. It integrated the Board of Communications and the
Telecommunications Control Bureau under the Integrated Reorganization Plan of 1972 into the NTC. Among the
powers vested in the NTC under Sec. 15 of E.O. No. 546 are the following:

"a. Issue Certificate of Public Convenience for the operation of communication utilities and services, radio
communications systems, wire or wireless telephone or telegraph system, radio and television broadcasting
system and other similar public utilities;

xxxxxxxxx

c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio
communication systems including amateur radio stations and radio and television broadcasting systems; . . . "

Upon termination of petitioner’s franchise on December 31, 1981 pursuant to P.D. No. 576-A, it continued
operating its radio stations under permits granted by the NTC.

As these presidential issuances relating to the radio and television broadcasting industry brought about confusion
as to whether the NTC could issue permits to radio and television broadcast stations without legislative franchise,
the NTC sought the opinion of the Department of Justice (DOJ) on the matter. On June 20, 1991, the DOJ
rendered Opinion No. 98, Series of 1991, viz:

"We believe that under P.D. No. 576-A dated November 11, 1974 and prior to the issuance of E.O No. 546 dated
July 23, 1979, the NTC, then Board of Communications, had no authority to issue permits or authorizations to
operate radio and television broadcasting systems without a franchise first being obtained pursuant to Section 1
of Act No. 3846, as amended. A close reading of the provisions of Sections 1 and 6 of P.D. No. 576-A, supra,
does not reveal any indication of a legislative intent to do away with the franchising requirement under Section
1 of Act No. 3846. In fact, a mere reading of Section 1 would readily indicate that a franchise was necessary for
the operation of radio and television broadcasting systems as it expressly provided that no such franchise may
be obtained unless the radio station or television channel has ‘sufficient capital on the basis of equity for its
operation for at least one year, including purchase of equipment.’

It is believed that the termination of all franchises granted for the operation of radio and television broadcasting
systems effective December 31, 1981 and the vesting of the power to authorize the operation of any radio or
television station upon the Board of Communications and the Secretary of Public Works and Communications
and their successors under Section 6 of P.D. No. 576-A does not necessarily imply the abrogation of the
requirement of obtaining a franchise under Section 1 of Act No. 3846, as amended, in the absence of a clear
provision in P.D. No. 576-A providing to this effect.

It should be noted that under Act No. 3846, as amended, a person, firm or entity desiring to operate a radio
broadcasting station must obtain the following: (a) a franchise from Congress (Sec. 1); (b) a permit to construct
or install a station from the Secretary of Commerce and Industry (Sec. 2); and (c) a license to operate the station
also from the Secretary of Commerce and Industry (id.). The franchise is the privilege granted by the State
through its legislative body and is subject to regulation by the State itself by virtue of its police power through its
administrative agencies (RCPI vs. NTC, 150 SCRA 450). The permit and license are the administrative
authorizations issued by the administrative agency in the exercise of regulation. It is clear that what was
transferred to the Board of Communications and the Secretary of Commerce and Industry under Section 6 of
P.D. No. 576-A was merely the regulatory powers vested solely in the Secretary of Commerce and Industry
under Section 2 of Act No. 3846, as amended. The franchising authority was retained by the then incumbent
President as repository of legislative power under Martial Law, as is clearly indicated in the first WHEREAS
clause of P.D. No. 576-A to wit:

‘WHEREAS, the President of the Philippines is empowered under the Constitution to review and approve
franchises for public utilities.’

Of course, under the Constitution, said power (the power to review and approve franchises), belongs to the
lawmaking body (Sec. 5, Art. XIV, 1973 Constitution; Sec. 11, Art. XII, 1987 Constitution).

The corollary question to be resolved is: Has E.O. No 546 (which is a law issued pursuant to P.D. No. 1416, as
amended by P.D. No. 1771, granting the then President continuing authority to reorganize the administrative
structure of the national government) modified the franchising and licensing arrangement for radio and television
broadcasting systems under P.D. No. 576-A?

We believe so.

E.O. No. 546 integrated the Board of Communications and the Telecommunications Bureau into a single entity
known as the NTC (See Sec. 14), and vested the new body with broad powers, among them, the power to issue
Certificates of Public Convenience for the operation of communications utilities, including radio and televisions
broadcasting systems and the power to grant permits for the use of radio frequencies (Sec. 14[a] and [c], supra).
Additionally, NTC was vested with broad rule making authority ‘to encourage a larger and more effective use of
communications, radio and television broadcasting facilities, and to maintain effective competition among private
entities in these activities whenever the Commission finds it reasonably feasible’ (Sec. 15[f]).

In the recent case of Albano vs. Reyes (175 SCRA 264), the Supreme Court held that ‘franchises issued by
Congress are not required before each and every public utility may operate.’ Administrative agencies may be
empowered by law ‘to grant licenses for or to authorize the operation of certain public utilities.’ The Supreme
Court stated that the provision in the Constitution (Art. XII, Sec. 11) ‘that the issuance of a franchise, certificate
or other form of authorization for the operation of a public utility shall be subject to amendment, alteration or
repeal by Congress, does not necessarily imply . . . that only Congress has the power to grant such authorization.
Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue
such authorization for certain classes of public utilities.’

We believe that E.O. No. 546 is one law which authorizes an administrative agency, the NTC, to issue
authorizations for the operation of radio and television broadcasting systems without need of a prior franchise
issued by Congress.

Based on all the foregoing, we hold the view that NTC is empowered under E.O. No. 546 to issue authorization
and permits to operate radio and television broadcasting system."5

However, on May 3, 1994, the NTC, the Committee on Legislative Franchises of Congress, and the Kapisanan
ng mga Brodkaster sa Pilipinas of which petitioner is a member of good standing, entered into a Memorandum
of Understanding (MOU) that requires a congressional franchise to operate radio and television stations. The
MOU states, viz:

"WHEREAS, under the provisions of Section 1 of Act No. 3846 (Radio Laws of the Philippines, as amended),
only radio and television broadcast stations with legislative franchise are authorized to operate.

WHEREAS, Executive Order No. 546, which created the National Telecommunications Commission (NTC) and
abolished the Board of Communications (BOC) and the Telecommunications Control Bureau (TCB), and
integrated the functions and prerogative of the latter two agencies into the National Telecommunications
Commission (NTC);

WHEREAS, the National Telecommunications Commission (NTC) is authorized to issue certificate of public
convenience for the operation of radio and television broadcast stations;

WHEREAS, there is a pervading confusion in the state of affairs of the broadcast industry brought about by
conflicting laws, decrees, executive orders and other pronouncements promulgated during the Martial Law
regime, the parties in their common desire to rationalize the broadcast industry, promote the interest of public
welfare, avoid a vacuum in the delivery of broadcast services, and foremost to better serve the ends of press
freedom, the parties hereto have agreed as follows:

‘The NTC shall continue to issue and grant permits or authorizations to operate radio and television broadcast
stations within their mandate under Section 15 of Executive Order No. 546, provided that such temporary permits
or authorization to operate shall be valid for two (2) years within which the permittee shall be required to file an
application for legislative franchise with Congress not later than December 31, 1994; provided finally, that if the
permittee of the temporary permit or authorization to operate fails to secure the legislative franchise with
Congress within this period, the NTC shall not extend or renew its permit or authorization to operate any further.’"6

Prior to the December 31, 1994 deadline set by the MOU, petitioner filed with Congress an application for a
franchise on December 20, 1994. Pending its approval, the NTC issued to petitioner a temporary permit dated
July 7, 1995 to operate a television station via Channel 25 of the UHF Band from June 29, 1995 to June 28,
1997.7 In 1996, the NTC authorized petitioner to increase the power output of Channel 25 from 1.0 kilowatt to 25
kilowatts after finding it financially and technically capable; 8 it also granted petitioner a permit to purchase radio
transmitters/transceivers for use in its television Channel 25 broadcasting. 9 Shortly before the expiration of its
temporary permit, petitioner applied for its renewal on May 14, 1997. 10

On October 28, 1997, the House Committee on Legislative Franchises of Congress replied to an inquiry of the
NTC’s Broadcast Division Chief regarding the franchise application of ACWS filed on December 20, 1994. The
Committee certified that petitioner’s franchise application was not deliberated on by the 9th Congress because
petitioner failed to submit the required supporting documents. In the next Congress, petitioner did not re -file its
application.11

The following month or on November 17, 1997, the NTC’s Broadcast Service Department wrote to petitioner
ordering it to submit a new congressional franchise for the operation of its seven radio stations and informing it
that pending compliance, its application for temporary permits to operate these radio stations would be held in
abeyance.12 Petitioner failed to comply with the franchise requirement; it claims that it did not receive the
November 17, 1997 letter.

Despite the absence of a congressional franchise, the NTC notified petitioner on January 19, 1998 that its May
14, 1997 application for renewal of its temporary permit to operate television Channel 25 was approved and
would be released upon payment of the prescribed fee of ₱3,600.00. 13 After paying said amount,14 however, the
NTC refused to release to petitioner its renewed permit. Instead, the NTC commenced against petitioner
Administrative Case No. 98-009 based on the November 17, 1997 letter. On February 26, 1998, the NTC issued
an Order directing petitioner to show cause why its assigned frequency, television Channel 25, should not be
recalled for lack of the required congressional franchise. Petitioner was also directed to cease and desist from
operating Channel 25 unless subsequently authorized by the NTC. 15
In compliance with the February 26, 1998 Order, petitioner filed its Answer on March 17, 1998. 16 In a hearing on
April 22, 1998, petitioner presented evidence and asked for continuance of the presentation to May 20,
1998.17 On May 4, 1998, however, petitioner filed before the Court of Appeals a Petition for Mandamus,
Prohibition, and Damages to compel the NTC to release its temporary permit to operate Channel 25 which was
approved in January 1998. The appellate court denied the petition on September 30, 1998.

Meantime, on August 17, 1998, the NTC issued Memorandum Circular No. 14-10-98 which reads, viz:

"SUBJECT: Guidelines in the Renewal/Extension of Temporary Permit of Radio/TV Broadcast operators who
failed to secure a legislative franchise conformably with the Memorandum of Understanding (MOU) dated May
3, 1994, entered into by and between the National Telecommunications and the Committee on Legislative
Franchises, House of Representatives, and the Kapisanan ng mga Brodkaster sa Pilipinas (KBP).

In compliance with the MOU and in order to clear the ambiguity surrounding the operation of broadcast operators
who were not able to have their legislative franchise approved during the last congress, the following guidelines
are hereby issued:

1. Existing broadcast operators who were not able to secure a legislative franchise up to this date are
given up to December 31, 1999 within which to have their application for a legislative franchise bill
approved by Congress. The franchise bill must be filed immediately but not later than November 30th of
this year to give both Houses time to deliberate upon and recommend approval/disapproval thereof.

2. Broadcast operators affected by this circular must file their respective applications for
renewal/extension of their Temporary Permits in the prescribed form together with the certification from
the Committee on Legislative Franchises, House of Representatives that a franchise bill has indeed been
filed prior to 30 November 1998.

3. In the event the permittee will not be able to have its franchise bill approved within the prescribed
period, the NTC will no longer renew/extend its Temporary Permit and the Commission shall initiate the
recall of its assigned frequency provided that due process of law is observed.

4. Henceforth, no application/petition for Certificate of Public Convenience (CPC) to establish, maintain

and operate a broadcast station in the broadcast service shall be accepted for filing without showing that
the applicant has an approved Legislative Franchise.

This Memorandum Circular shall be published in one (1) newspaper of general circulation in the Philippines and
shall take effect thirty (30) days from its publication.

August 17, 1998, Quezon City, Philippines."18

The Memorandum Circular was published in the Philippine Star on October 15, 1998.

Well within the November 30, 1998 deadline under the Memorandum Circular, House Bill No. 3216, entitled "An
Act Granting the ACWS-United Broadcasting Network, Inc. a Franchise to Construct, Install, Operate and
Maintain Radio and Television Broadcasting Stations within the Philippines, and for other Purposes," was filed
with the Legislative Calendar Section, Bills and Index Division on September 2, 1998. 19

On January 13, 1999, the NTC rendered a decision on Administrative Case No. 98-009 against petitioner, the
dispositive portion of which reads:

"WHEREFORE, for lack of a legal personality to justify the issuance of any permit or license to the respondent
(ACWS), the respondent not having a valid legislative franchise, the Commission hereby renders judgment as
follows:

1) Channel 25 assigned to herein respondent ACWS is hereby RECALLED;

 2) Respondent’s application for renewal of its temporary permit to operate Channel 25 is hereby DENIED;
and

3) Respondent is hereby ordered to CEASE and DESIST from further operating Channel 25." 20

Petitioner sought recourse at the Court of Appeals which affirmed the NTC decision.

Hence, this petition for review on certiorari on the following grounds:

"I.

THE COURT OF APPEALS ERRED IN UPHOLDING THE RULING OF THE NTC THAT A CONGRESSIONAL
FRANCHISE IS A CONDITION SINE QUA NON IN THE OPERATION OF A RADIO AND TELEVISION
BROADCASTING SYSTEM.

II.

THE COURT OF APPEALS ERRED IN NOT CONSIDERING OPINION 98 SERIES OF 1991 DATED JUNE 20,
1991 OF THE SECRETARY OF JUSTICE HOLDING THAT THE NTC MAY ISSUE AUTHORIZATION FOR THE
OPERATION OF RADIO AND TELEVISION BROADCASTING SYSTEMS, WITHOUT THE NEED OF A PRIOR
FRANCHISE ISSUED BY CONGRESS, AS BINDING ON THE NTC WHO REQUESTED FOR SAID OPINION
AND IS NOT MERELY ADVISORY, AS IT IS PREDICATED ON A DECISION OF THIS HONORABLE COURT.

III.

THE COURT OF APPEALS ERRED IN CONSIDERING ACT NO. 3846 AS REQUIRING A FRANCHISE FROM
CONGRESS FOR THE LAWFUL OPERATION OF RADIO OR TELEVISION BROADCASTING STATIONS
WHEN CLEARLY ITS PROVISIONS COVER ONLY RADIO BUT IT DOES NOT INCLUDE TELEVISION
STATIONS.

IV.

THE COURT OF APPEALS ERRED IN UPHOLDING THE RECALL OF THE FREQUENCY CHANNEL 25
PREVIOUSLY ASSIGNED TO THE PETITIONER AND/OR THE CANCELLATION OF ITS PERMIT TO
OPERATE WHICH IS UNREASONABLE, UNFAIR, OPPRESSIVE, WHIMSICAL AND CONFISCATORY WHEN
IT PREVIOUSLY ISSUED THE SAID PERMIT WITHOUT REQUIRING A LEGISLATIVE FRANCHISE.

V.

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT NTC CASE NO. 98-009 HAD BEEN RENDERED
MOOT AND ACADEMIC WITH THE ADOPTION AND PROMULGATION BY THE NTC OF MEMORANDUM
CIRCULAR NO. 14-10-98 DATED AUGUST 17, 1998 AS PETITIONER FILED THE APPLICATION FOR
LEGISLATIVE FRANCHISE PURSUANT THERETO."21

The petition is devoid of merit.

We shall discuss together the first three assigned errors as they are interrelated.

Petitioner stresses that Act. No. 3846 covers only the operation of radio and not television stations as Section 1
of the said law does not mention television stations in its coverage, viz:

"Sec. 1. No person, firm, company, association or corporation shall construct, install, establish, or operate a radio
transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting station,
without having first obtained a franchise therefor from the Congress of the Philippines…"
Petitioner observes that quite understandably, television stations were not included in Act No. 3846 because the
law was enacted in 1931 when there was yet no television station in the Philippines. Following the rule in statutory
construction that what is not included in the law is deemed excluded, petitioner avers that television stations are
not covered by Act No. 3846. Petitioner notes that in fact, the NTC previously issued to it a temporary permit
dated July 7, 1995 to operate Channel 25 from June 29, 1995 to June 28, 1997 without requiring a congressional
franchise. Likewise, in 1996, the NTC issued to it a permit to increase its television operating power and to
purchase a radio transmitter/transceiver for use in its television broadcasting, again without requiring a
congressional franchise. Petitioner thus argues that, contrary to the January 19, 1999 decision of the NTC, its
application for renewal of its temporary permit to operate television Channel 25 does not require a congressional
franchise.

In upholding the NTC decision, the Court of Appeals held that a congressional franchise is required for the
operation of radio and television broadcasting stations as this requirement under Act No. 3846 was not expressly
repealed by P.D. No. 576-A nor E.O. No. 546. Citing Berces, Sr. v. Guingona, 22 it ruled that without an express
repeal, a subsequent law cannot be construed as repealing a prior law unless there is an irreconcilable
inconsistency and repugnancy in the language of the new and old laws, which petitioner was not able to show. 23

The appellate court correctly ruled that a congressional franchise is necessary for petitioner to operate television
Channel 25. Even assuming that Act No. 3846 applies only to radio stations and not to television stations as
petitioner adamantly insists, the subsequent P.D. No. 576-A clearly shows in Section 1 that a franchise is
required to operate radio as well as television stations, viz:

"Sec. 1. No radio station or television channel may obtain a franchise unless it has sufficient capital on the basis
of equity for its operation for at least one year, including purchase of equipment." (emphasis supplied)

As pointed out in DOJ Opinion No. 98, there is nothing in P.D. No. 576-A that reveals any intention to do away
with the requirement of a franchise for the operation of radio and television stations. Section 6 of P.D. No. 576 -
A merely identifies the regulatory agencies from whom authorizations, in addition to the required congressional
franchise, must be secured after December 31, 1981, viz:

"Sec. 6. All franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or
television broadcasting systems shall terminate on December 31, 1981. Thereafter, irrespective of any franchise,
grant, license, permit, certificate or other forms of authority to operate granted by any office, agency or person,
no radio or television station shall be authorized to operate without the authority of the Board of Communications
and the Secretary of Public Works and Communications or their successors who have the right and authority to
assign to qualified parties frequencies, channels or other means of identifying broadcasting system . . ."
(emphasis supplied)

To understand why it was necessary to identify these agencies, we turn a heedful eye on the laws regarding
authorizations for the operation of radio and television stations that preceded P.D. No. 576-A.

Act No. 3846 of 1931 provides, viz:

"Sec. 1. No person, firm, company, association, or corporation shall construct, install, establish, or operate a
radio transmitting station, or a radio receiving station used for commercial purposes, or a radio broadcasting
station, without having first obtained a franchise therefor from the Congress of the Philippines:

xxxxxxxxx

Sec. 1-A. No person, firm, company, association or corporation shall possess or own transmitters or transceivers
(combination transmitter-receiver), without registering the same with the Secretary of Public Works and
Communications . . . and no person, firm, company, association or corporation shall construct or manufacture,
or purchase radio transmitters or transceivers without a permit issued by the Secretary of Public Works and
Communications.
xxxxxxxxx

Sec. 3. The Secretary of Public Works and Communications is hereby empowered to regulate the construction
or manufacture, possession, control, sale and transfer of radio transmitters or transceivers (combination
transmitter-receiver) and the establishment, use, the operation of all radio stations and of all forms of radio
communications and transmissions within the Philippines. In addition to the above, he shall have the following
specific powers and duties:

xxxxxxxxx

(c) He shall assign call letter and assign frequencies for each station licensed by him and for each station
established by virtue of a franchise granted by the Congress of the Philippines and specify the stations to which
each of such frequencies may be used;. . ."

Shortly after the declaration of Martial Law, then President Marcos issued P.D. No. 1 dated September 24, 1972,
through which the Integrated Reorganization Plan for the executive branch was adopted. Under the Plan, the
Public Service Commission was abolished and its functions transferred to special regulatory boards, among
which was the Board of Communications with the following functions:

"5a. Issue Certificates of Public Convenience for the operation of communications utilities and services, radio
communications systems . . ., radio and television broadcasting systems and other similar public utilities;

xxxxxxxxx

c. Grant permits for the use of radio frequencies for . . . radio and television broadcasting systems including
amateur radio stations."

With the creation of the Board of Communications under the Plan, it was no longer sufficient to secure
authorization from the Secretary of Public Works and Communications as provided in Act No. 3846. The Board’s
authorization was also necessary. Thus, P.D. No. 576-A provides in Section 6 that radio and television station
operators must secure authorization from both the Secretary of Public Works and Communications and the
Board of Communications.

Dispensing with the requirement of a congressional franchise is not in line with the declared purposes of P.D.
No. 576-A, viz:

"WHEREAS, it has been observed that some public utilities, especially radio and television stations, have a
tendency toward monopoly in ownership and operation to such an extent that a region or section of the country
may be covered by any number of such broadcast stations, all or most of which are owned, operated or managed
by one person or corporation;

xxxxxxxxx

WHEREAS, on account of the limited number of frequencies available for broadcasting in the Philippines, it is
necessary to regulate the ownership and operation of radio and television stations and provide measures that
would enhance quality and viability in broadcasting and help serve the public interests; . . ."

A textual interpretation of Section 6 of P.D. No. 576-A yields the same interpretation that after December 31,
1981, a franchise is still necessary to operate radio and television stations. Were it the intention of the law to do
away with the requirement of a franchise after said date, then the phrase "(t)hereafter, irrespective of any
franchise, grant, license, permit, certificate or other forms of authority to operate granted by any office, agency
or person (emphasis supplied)" would not have been necessary because the first sentence of Section 6 already
states that "(a)ll franchises, grants, licenses, permits, certificates or other forms of authority to operate radio or
television broadcasting systems shall terminate on December 31, 1981." It is therefore already understood that
these forms of authority have no more force and effect after December 31, 1981. If the intention were to do away
with the franchise requirement, Section 6 would have simply laid down after the first sentence the requirements
to operate radio and television stations after December 31, 1981, i.e., "no radio or television station shall be
authorized to operate without the authority of the Board of Communications and the Secretary of Public Works
and Communications." Instead, however, the phrase "irrespective of any franchise,…" was inserted to
emphasize that a franchise or any other form of authorization from any office, agency or person does not suffice
to operate radio and television stations because the authorizations of both the Board of Communications and
the Secretary of Public Works and Communications are required as well. This interpretation adheres to the rule
in statutory construction that words in a statute should not be construed as surplusage if a reasonable
construction which will give them some force and meaning is possible. 24

Contrary to the opinion of the Secretary of Justice in DOJ Opinion No. 98, Series of 1991, the appellate court
was correct in ruling that E.O. No. 546 which came after P.D. No. 576-A did not dispense with the requirement
of a congressional franchise. It merely abolished the Board of Communications and the Telecommunications
Control Bureau under the Reorganization Plan and transferred their functions to the NTC, 25 including the power
to issue Certificates of Public Convenience (CPC) and grant permits for the use of frequencies, viz:

"Sec. 15. a. Issue Certificate of Public Convenience for the operation of communication utilities and services,
radio communications systems, wire or wireless telephone or telegraph system, radio and television
broadcasting system and other similar public utilities;

xxxxxxxxx

c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio
communication systems including amateur radio stations and radio and television broadcasting systems; . . . "

E.O. No. 546 defines the regulatory and technical aspect of the legal process preparatory to the full exercise of
the privilege to operate radio and television stations, which is different from the grant of a franchise from
Congress, viz:

"The statutory functions of NTC may then be given effect as Congress’ prerogative to grant franchises under Act
No. 3846 is upheld for they are distinct forms of authority. The former covers matters dealing mostly with the
technical side of radio or television broadcasting, while the latter involves the exercise by the legislature of an
exclusive power resulting in a franchise or a grant under authority of government, conferring a special right to do
an act or series of acts of public concern (37 C.J.S., secs. 1, 14, pp. 144, 157).

In fine, there being no clear showing that the laws here involved cannot stand together, the presumption is
against inconsistency or repugnance, hence, against implied repeal of the earlier law by the later statute
(Agujetas v. Court of Appeals, 261 SCRA 17, 1996)." 26

As we held in Radio Communication of the Philippines, Inc. v. National Telecommunications Commission,27 a

franchise is distinguished from a CPC in that the former is a grant or privilege from the sovereign power, while
the latter is a form of regulation through the administrative agencies, viz:

"A franchise started out as a "royal privilege or (a) branch of the King’s prerogative, subsisting in the hands of a
subject." This definition was given by Finch, adopted by Blackstone, and accepted by every authority since (State
v. Twin Village Water Co., 98 Me 214, 56 A 763 [1903]). Today, a franchise, being merely a privilege emanating
from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state
itself by virtue of its police power through its administrative agencies." 28

Even prior to E.O. No. 546, the NTC’s precursor, i.e., the Board of Communications, already had the function of
issuing CPC under the Integrated Reorganization Plan. The CPC was required by the Board at the same time
that P.D. No. 576-A required a franchise to operate radio and television stations. The function of the NTC to
issue CPC under E.O. No. 546 is thus nothing new and exists alongside the requirement of a congressional
franchise under P.D. No. 576-A. There is no conflict between E.O. No. 546 and P.D. No 576-A; Section 15 of
the former does not dispense with the franchise requirement in the latter. We adhere to the cardinal rule in
statutory construction that statutes in pare materia, although in apparent conflict, or containing apparent
inconsistencies, should, as far as reasonably possible, be construed in harmony with each other, so as to give
force and effect to each.29 The ruling of this Court in Crusaders Broadcasting System, Inc. v. National
Telecommunications Commission,30 buttresses the interpretation that the requirement of a congressional
franchise for the operation of radio and television stations exists alongside the requirement of a CPC. In that
case, we held that under E.O. No. 546, the regulation of radio communications is a function assigned to and
performed by the NTC and at the same time recognized the requirement of a congressional franchise for the
operation of a radio station under Act No. 3846. We did not interpret E.O. No. 546 to have repealed the
congressional franchise requirement under Act No. 3846 as these two laws are not inconsistent and can both
be given effect. Likewise, in Radio Communication of the Philippines, Inc. v. National Telecommunications
Commission,31 we recognized the necessity of both a congressional franchise under Act No. 3846 and a CPC
under E.O. No. 546 to operate a radio communications system.

In buttressing its position that a congressional franchise is not required to operate its television station, petitioner
banks on DOJ Opinion No. 98, Series of 1991 which states that under E.O. No. 546, the NTC may issue a permit
or authorization for the operation of radio and television broadcasting systems without a prior franchise issued
by Congress. Petitioner argues that the opinion is binding and conclusive upon the NTC as the NTC itself
requested the advisory from the Secretary of Justice who is the legal adviser of government. Petitioner claims
that it was precisely because of the above DOJ Opinion No. 98 that the NTC did not previously require a
congressional franchise in all of its applications for permits with the NTC.

Petitioner, however, cannot rely on DOJ Opinion No. 98 as this opinion is merely persuasive and not necessarily
controlling.32 As shown above, the opinion is erroneous insofar as it holds that E.O. No. 546 dispenses with the
requirement of a congressional franchise to operate radio and television stations. The case of Albano v.
Reyes33cited in the DOJ opinion, which allegedly makes it binding upon the NTC, does not lend support to
petitioner’s cause. In that case, we held, viz:

"Franchises issued by Congress are not required before each and every public utility may operate. Thus, the law
has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain
public utilities. (See E.O. Nos. 172 and 202)

That the Constitution provides in Art. XII, Sec. 11 that the issuance of a franchise, certificate or other form of
authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress
does not necessarily imply, as petitioner posits, that only Congress has the power to grant such authorization.
Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue
such authorization for certain classes of public utilities. (footnote omitted)"34

Our ruling in Albano that a congressional franchise is not required before "each and every public utility may
operate" should be viewed in its proper light. Where there is a law such as P.D. No. 576-A which requires a
franchise for the operation of radio and television stations, that law must be followed until subsequently repealed.
As we have earlier shown, however, there is nothing in the subsequent E.O. No. 546 which evinces an intent to
dispense with the franchise requirement. In contradistinction with the case at bar, the law applicable in Albano,
i.e., E.O. No. 30, did not require a franchise for the Philippine Ports Authority to take over, manage and operate
the Manila International Port Complex and undertake the providing of cargo handling and port related services
thereat. Similarly, in Philippine Airlines, Inc. v. Civil Aeronautics Board, et al.,35 we ruled that a legislative
franchise is not necessary for the operation of domestic air transport because "there is nothing in the law nor in
the Constitution which indicates that a legislative franchise is an indispensable requirement for an entity to
operate as a domestic air transport operator." 36 Thus, while it is correct to say that specified agencies in the
Executive Branch have the power to issue authorization for certain classes of public utilities, this does not mean
that the authorization or CPC issued by the NTC dispenses with the requirement of a franchise as this is clearly
required under P.D. No. 576-A.

Petitioner contends that the NTC erroneously denied its application for renewal of its temporary permit to operate
Channel 25 and recalled its Channel 25 frequency based on the May 3, 1994 MOU that requires a congressional
franchise for the operation of television broadcast stations.1a\^/phi1.net The MOU is not an act of Congress and
thus cannot amend Act No. 3846 which requires a congressional franchise for the operation of radio stations
alone, and not television stations.

We find no merit in petitioner’s contention. As we have shown, even assuming that Act No. 3846 requires only
radio stations to secure a congressional franchise for its operation, P.D. No. 576-A was subsequently issued in
1974, which clearly requires a franchise for both radio and television stations. Thus, the 1994 MOU did not
amend any law, but merely clarified the existing law that requires a franchise.

That the legislative intent is to continue requiring a franchise for the operation of radio and television broadcasting
stations is clear from the franchises granted by Congress after the effectivity of E.O. No. 546 in 1979 for the
operation of radio and television stations. Among these are: (1) R.A. No. 9131 dated April 24, 2001, entitled "An
Act Granting the Iddes Broadcast Group, Inc., a Franchise to Construct, Install, Establish, Operate and Maintain
Radio and Television Broadcasting Stations in the Philippines;" (2) R.A. No. 9148 dated July 31, 2001, entitled
"An Act Granting the Hypersonic Broadcasting Center, Inc., a Franchise to Construct, Install, Establish, Operate
and Maintain Radio Broadcasting Stations in the Philippines;" and (3) R.A. No. 7678 dated February 17, 1994,
entitled "An Act Granting the Digital Telecommunication Philippines, Incorporated, a Franchise to Install, Operate
and Maintain Telecommunications Systems Throughout the Philippines." All three franchises require the
grantees to secure a CPCN/license/permit to construct and operate their stations/systems. Likewise, the Tax
Reform Act of 1997 provides in Section 119 for tax on franchise of radio and/or television broadcasting
companies, viz:

"Sec. 119. Tax on Franchises. – Any provision of general or special law to the contrary notwithstanding, there
shall be levied, assessed and collected in respect to all franchises on radio and/or television broadcasting
companies whose annual gross receipts of the preceding year does not exceed Ten million pesos (₱10,000,000),
subject to Section 236 of this Code, a tax of three percent (3%) and on electric, gas and water utilities, a tax of
two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise. . .
" (emphasis supplied)

Undeniably, petitioner is aware that a congressional franchise is necessary to operate its television station
Channel 25 as shown by its actuations. Shortly before the December 31, 1994 deadline set in the MOU, petitioner
filed an application for a franchise with Congress. It was not, however, acted upon in the 9th Congress for
petitioner’s failure to submit the necessary supporting documents; petitioner failed to re-file the application in the
following Congress. Petitioner also filed an application for a franchise with Congress on September 2, 1998,
before the November 30, 1998 deadline under Memorandum Circular No. 14-10-98.37

We now come to the fourth assigned error. Petitioner avers that the Court of Appeals erred in upholding the
recall of frequency Channel 25 previously assigned to it and the cancellation of its permit to operate which was
already approved in January 1998. It claims that these acts of the NTC were unreasonable, unfair, oppressive,
whimsical and confiscatory considering that the NTC previously issued petitioner a temporary permit without
requiring a congressional franchise.

On February 26, 1998, the NTC issued a show cause order to petitioner with the following decretal portion:

"IN VIEW THEREOF, respondents are hereby directed to show cause in writing within ten (10) days from receipt
of this order why their assigned frequency, more specifically Channel 25 in the UHF Band, should not be recalled
for lack of the necessary Congressional Franchise as required by Section 1, Act No. 3846, as amended.

Moreover, respondent is hereby directed to cease and desist from operating DWQH-TV, unless subsequently
authorized by the Commission."38

The order was supposedly based on a letter of the NTC dated November 17, 1997 informing petitioner that its
application for renewal of temporary permits of its seven radio stations were being held in abeyance pending
submission of its new congressional franchise. Petitioner was directed to submit the franchise within thirty days
from expiration of its temporary permits to be renewed and informed that its failure to do so might constitute
denial of its application.
Petitioner is correct that the November 17, 1997 letter referred only to its radio stations and not to its television
Channel 25. Thus, it could not serve as basis for the February 26, 1998 show cause order which referred solely
to its television Channel 25. Besides, petitioner claims that it did not receive the letter. Be that as it may, the
NTC’s February 26, 1998 order for petitioner to cease and desist from operating Channel 25 was not
unreasonable, unfair, oppressive, whimsical and confiscatory. The 1994 MOU states in unmistakable terms that
petitioner’s temporary permit to operate Channel 25 would be valid for only two years, i.e., from June 29, 1995
to June 28, 1997. During these two years, petitioner was supposed to have secured a congressional franchise,
otherwise "the NTC shall not extend or renew its permit or authorization to operate any further." 39 Apparently,
petitioner did not submit a congressional franchise to the NTC in applying for renewal of this temporary permit
on May 14, 1997. The NTC’s approval of petitioner’s application to renew its temporary permit in January 1998
was thus erroneous because under the 1994 MOU, the NTC could not renew petitioner’s temporary permit to
operate Channel 25 without a congressional franchise. In the absence of a renewed temporary permit, the NTC
was correct in ordering petitioner to cease and desist from operating Channel 25, regardless of whether or not
petitioner received the November 17, 1997 letter. The NTC’s erroneous approval of petitioner’s application in
January 1998 did not estop the NTC from ordering petitioner on February 26, 1998 to cease and desist from
operating Channel 25 for failure to comply with the franchise requirement as estoppel does not work against the
government.40

Likewise, the NTC’s denial of petitioner’s application for renewal of its temporary permit to operate Channel 25
and recall of its Channel 25 frequency in its January 13, 1999 decision were not unreasonable, unfair, oppressive,
whimsical and confiscatory so as to offend petitioner’s right to due process. In Crusaders Broadcasting System,
Inc. v. National Telecommunications Commission,41 the Court ruled that although a particular ground for
suspending operations of the broadcasting company was not reflected in the show cause order, the NTC could
nevertheless raise said ground if any basis therefore was gleaned during the administrative proceedings. In the
instant case, the lack of congressional franchise as ground for denial of petitioner’s application for renewal of
temporary permit and recall of its Channel 25 frequency was raised not only during the administrative
proceedings against it, but was even stated in the February 26, 1998 show cause order, viz:

"IN VIEW THEREOF, respondents are hereby directed to show cause in writing within ten (10) days from receipt
of this order why their assigned frequency, more specifically Channel 25 in the UHF Band, should not be recalled
for lack of the necessary Congressional Franchise as required by Section 1, Act No. 3846, as amended.

Moreover, respondent is hereby directed to cease and desist from operating DWQH-TV, unless subsequently
authorized by the Commission." 42 (emphasis supplied)

In Eastern Broadcasting Corporation v. Dans, Jr., et al., 43 we held that the requirements of due process in
administrative proceedings laid down by this Court in Ang Tibay v. Court of Industrial Relations 44 should be
satisfied before a broadcast station may be closed or its operations curtailed. We enumerated these
requirements, viz:

". . . (1) the right to a hearing which includes the right to present one’s case and submit evidence in support
thereof; (2) the tribunal must consider the evidence presented; (3) the decision must have something to support
itself; (4) the evidence must be substantial. Substantial evidence means such reasonable evidence as a
reasonable mind might accept as adequate to support a conclusion; (5) the decision must be based on the
evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected; (6)
the tribunal or body or any of its judges must act on its own independent consideration of the law and facts of
the controversy and not simply accept the views of a subordinate; (7) the board or body should, in all controversial
questions, render its decisions in such a manner that the parties to the proceeding can know the various issues
involved, and the reasons for the decision rendered." 45

Petitioner had the opportunity to present its case and submit evidence on why its assigned frequency Channel
25 should not be recalled and its application for renewal denied. Petitioner filed its Answer to the show cause
order on March 17, 1998.46 A hearing was held on April 22, 1998 wherein petitioner presented its evidence in
compliance with the show cause order. Based on the NTC’s findings that petitioner failed to comply with the
requirement of a congressional franchise, the NTC denied its application for renewal of its temporary permit to
operate Channel 25 and recalled its assigned Channel 25 frequency. The requirements of due process in Ang
Tibay were satisfied, thus petitioner cannot say that the NTC’s actions were unreasonable, unfair, oppressive,
whimsical and confiscatory.

Finally, petitioner contends that the Court of Appeals erred in not holding that Administrative Case No. 98 -009,
the administrative proceeding against it for failure to secure a congressional franchise to operate its tele vision
Channel 25, has been rendered moot and academic by the adoption and promulgation of NTC Memorandum
Circular No. 14-10-98 dated August 17, 1998 which took effect on November 15, 1998. The Memorandum
Circular states, viz:

"In compliance with the MOU and in order to clear the ambiguity surrounding the operation of broadcast operators
who were not able to have their legislative franchise approved during the last Congress, the following guidelines
are hereby issued:

1. Existing broadcast operators who were not able to secure a legislative franchise up to this date (August 17,
1998) are given up to December 31, 1999 within which to have their application for a legislative franchise bill
approved by Congress. The franchise bill must be filed immediately but not later than November 30th of this year
. . ."

Petitioner avers that the NTC erroneously held that this Memorandum Circular is not applicable to it because the
words of the circular are clear that it covers "existing broadcasting operators" including petitioner. In compliance
with the Memorandum Circular, petitioner filed House Bill No. 32 on September 2, 1998, well within the November
30, 1998 deadline. Thus, petitioner argues that the NTC erred in denying its application for renewal of permit to
operate Channel 25 and recalling its assigned Channel 25 frequency on January 13, 1999, long before the
Memorandum Circular’s December 31, 1999 deadline to secure a congressional franchise. Petitioner posits that
the NTC’s premature and arbitrary promulgation of its January 13, 1999 decision "slammed the door for the
petitioner to secure its legislative franchise. The pending application for legislative franchise of petitioner was
effectively struck out by said NTC decision."47

Whether or not the benefits of the Memorandum Circular extend to petitioner, the fact is, as correctly pointed out
by the appellate court, petitioner failed to secure a legislative franchise by December 31, 1999. Consequently,
the NTC’s recall of petitioner’s assigned frequency Channel 25 and denial of its application for renewal of its
permit to operate the said television channel were proper as the Memorandum Circular provides, viz:

"1. Existing broadcast operators who are not able to secure a legislative franchise up to this date (August
17, 1998) are given up to December 31, 1999 within which to have their application for a legislative
franchise approved by Congress. The franchise bill must be filed immediately but not later than November
30th of this year . . .

xxxxxxxxx

3. In the event the permittee will not be able to have its franchise bill approved within the prescribed
period, the NTC will no longer renew/extend its temporary permit and the Commission shall initiate the
recall of its assigned frequency provided that due process of law is observed.

4. Henceforth, no application/petition for Certificate of Public Convenience (CPC) to establish, maintain

and operate a broadcast station in the broadcast service shall be accepted for filing without showing that
the applicant has an approved legislative franchise."(emphasis supplied)

Petitioner’s argument is flawed when it states that the January 13, 1999 decision of the NTC "slammed the door"
on its application for a congressional franchise as the process of securing a congressional franchise is separate
and distinct from the process of applying for renewal of a temporary permit with the NTC. The latter is not a
prerequisite to the former. In fact, in the normal course of securing authorizations to operate a television and
radio station, the application for a CPC with the NTC comes after securing a franchise from Congress. 48 The
CPC is not a condition for the grant of a congressional franchise. 49
The Court is not unmindful that there is a trend towards delegating the legislative power to authorize the operation
of certain public utilities to administrative agencies and dispensing with the requirement of a congressional
franchise as in the Albano case which involved the provision of cargo handling and port related services at the
Manila International Port Complex and the PAL case involving the operation of domestic air transport. The
rationale for this trend was explained in the PAL case, viz:

". . . 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 towards the
delegation of greater powers by the legislature, and towards the approval of the practice by the
courts.1awphi1.nét (Pangasinan Transportation Co., Inc. vs. The Public Service Commission, G.R. No. 47065,
June 26, 1940, 70 Phil 221.) It is generally recognized that a franchise may be derived indirectly from the state
through a duly designated agency, and to this extent, the power to grant franchises has frequently been
delegated, even to agencies other than those of a legislative nature. (Dyer vs. Tuskaloosa Bridge Co., 2 Port.
296, 27 Am. D. 655; Christian-Todd Tel. Co. vs. Commonwealth, 161 S.W. 543, 156 Ky. 557, 37 C.J.S. 158) In
pursuance of this, it has been held that privileges conferred by grant by local authorities as agents for the state
constitute as much a legislative franchise as though the grant had been made by an act of the Legislature.
(Superior Water, Light and Power Co. vs. City of Superior, 181 N.W. 113, 174 Wis. 257, affirmed 183 N.W. 254,
37 C.J.S. 158.)

The trend of modern legislation is to vest the Public Service Commissioner with the power to regulate and control
the operation of public services under reasonable rules and regulations, and as a general rule, courts will not
interfere with the exercise of that discretion when it is just and reasonable and founded upon a legal
right."50 1a\^/phi1.net

The criticism against the requirement of a congressional franchise is incisively expressed by a public utilities
lawyer, viz:

"As will be noted, a legislative franchise is required to install and operate a radio station before an applicant can
apply for a Certificate of Public Convenience to operate a radio station based in any part of the country. Under
Act No. 3846 of 1929, Sec. 1, it was provided that no one may install and operate a radio station ‘without having
first obtained a franchise therefore from the Congress of the Philippines.’ Since then, this has been strictly
followed. And this holds true with respect to application for electric, telephone and many other
telecommunications services. Before, even mere application for authority to operate an ice plant must have prior
congressional franchise. But this was not strictly followed until ice plant operations were eventually deregulated.
Right now, the both houses of the legislature are saddled with House Bill Nos. etc. for the grant of legislative
franchise to operate this and that public utility services in various places in the Philippines. We hear during
sessions in both houses the time wasted on reports and considerations of these house bills for grant of
franchises. The legislature is empowered and has created respective regulatory bodies with requisite expertise
to handle franchising and regulation of such types of public utility services, why not just entrust all these functions
to them?

What exactly is the reason or rationale for imposing a prior congressional franchise? There seems to be no valid
reason for it except to impose added burden and expenses on the part of the applicant. The justification appears
to be simply because this was required in the past so it is now. We are reminded of the forceful denunciation of
Justice Holmes of a stubborn adherence to an anachronistic rule of law:

‘It is revolting to have no better reason for a rule of law that so it was laid down in the time of Henry IV. It is still
more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists
from blind imitation of the past. (The Path of the Law, Collected Legal Papers [1920] 210, 212 quoted f rom The
Justice Holmes Reader, Julius N. Marke, 1955 ed., p. 278.)’" 51

The call to dispense with the requisite legislative franchise must, however, be addressed to Congress as the
lawmaker of the land for the Court’s function is to interpret and not to rewrite the law. As long as the law remains
unchanged, the requirement of a franchise to operate a television station must be upheld.
WHEREFORE, the petition is DENIED and the Court of Appeals’ January 13, 2000 decision and February 21,
2000 resolution are AFFIRMED. No costs.

SO ORDERED.

G.R. No. 149717. October 7, 2003

EASTERN ASSURANCE & SURETY CORPORATION (EASCO), Petitioner, vs. LAND

TRANSPORTATION FRANCHISING and REGULATORY BOARD (LTFRB), respondent.

PANGANIBAN, J.:

The operation of monopolies is not totally banned by the Constitution. However, the State shall
regulate them when public interest so requires. In the present case, the two consortia of insurance
companies that have been authorized to issue passenger insurance policies are adequately
regulated by the Land Transportation Franchising and Regulatory Board (LTFRB) to protect the
riding public. While individual insurance companies may somehow be adversely affected by this
scheme, the paramount public interest involved must be upheld. In any event, all legitimate
insurance companies are allowed to become members of the consortia. Thus, there is no restraint
of trade or unfair competition involved.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the
August 20, 2001 Decision2 of the Court of Appeals3 (CA) in CA-GR SP No. 63149. The dispositive
portion of the assailed Decision reads as follows:

WHEREFORE, in view of the foregoing premises, the Petition is hereby DISMISSED for lack of
merit. No costs.4

The Facts

The factual antecedents of the case are summarized by the CA as follows:

[I]n its desire to improve public service and its assistance to the victims of road accidents involving
PUVs [public utility vehicles], the [Land Transportation Franchising and Regulatory] Board
conducted a thorough investigation on the sufficiency of existing insurance policies for PUVs. In
the course of its investigation, the Board discovered that insurance coverage of PUVs was
only P50,000.00 for the entire vehicle regardless of the number of passengers or persons killed or
injured.

The Board, then, undertook x x x nationwide consultations among the transport operators and
insurance companies and held meetings with the officials of the Insurance Commission.

Thereafter, the Board issued Memorandum Circular No. 99-011 fixing the insurance coverage
of PUVs on the basis of the number of persons that may be killed or injured instead of the entire
vehicle alone. The coverage is denominated as Passenger Accident Insurance Coverage (PAIC),
which fixes the coverage of P50,000.00 per passenger.

During the effectivity of Memorandum Circular No. 99-011, the Board received several complaints
from various transport organizations such as the Federation of Jeepney Operators and Drivers
Association of the Philippines (FEJODAP), Pagkakaisa ng mga Samahan ng Tsuper at Operator
Nationwide (PISTON), and the Philippine Confederation of Drivers Organization, Alliance of
Concerned Transport Operators (PCDO-ACTO). The thrust of their complaints are: (1) the
proliferation of fake insurance policies; (2) the predatory pricing among competing insurance
firms; (3) the proliferation of fixers in the premises of the LTFRB endorsing certain insurance
companies; and (4) the moonlighting by personnel of the LTFRB who induced operators to secure
their policies from favored companies.

To address these complaints, the Board held a series of meetings with the officers of various
transport groups composed of operators of bus, jeepney and taxi as well as representatives of
several insurance companies and officials of the Insurance Commission.

In a meeting held on 12 December 2000, where herein petitioner Eastern Assurance & Surety
Corporation (EASCO, for brevity) was represented by a certain Dante Baronia, the transport
groups proposed the creation of [a] two-group system and of [a] blacklisting scheme.

In a letter dated 19 January 2001, the aforesaid proposal was then referred by the Board to the
Insurance Commission for confirmation, to wit:

1. The Commission interposes no objection to, there being no legal obstacle to the same, x x x
the suggestion of various insurance groups to allow only two (2) groups to participate in the
Passenger Accident Insurance Program (PAIP) of the LTFRB. It is understood that all insurance
companies accredited by the Commission may participate in the program by joining any of the
groups.

2. The Commission interposes no objection, there being no legal obstacle to the same, to the
suggestion of the various transport groups to create an accreditation and de-listing criteria to be
used in the implementation of the PAIP, x x x and

3. The Commission also is of the position that the LTFRB may, on its own set up, require and
implement the two groups system and/or the accreditation and de-listing criteria without need of
prior approval from the Commission. x x x

On 30 January 2001, Insurance Commissioner Eduardo Malinis wrote LTFRB Chairman Dante M.
Lantin, the whole text of which, reads:

We hereby confirm the points enumerated in your letter of January 19, 2001 regarding the
implementation of the Passenger Personal Accident Insurance Program (PAIP) of the LTFRB, as
the same aim to achieve a simple and systematic implementation of said program.

Thus, on 1 February 2001, public respondent LTFRB issued the herein assailed Memorandum
Circular No. 2001-001 that reads, as follows:

MEMORANDUM CIRCULAR NO. 2001-001

SUBJECT: Amending Memorandum Circular No. 99-011

(Passenger Accident Insurance Requirement of PUV Operators)

I. PREFATORY STATEMENT

In response to numerous complaints from passenger accident victims involving public utility
vehicles, the Board passed Memorandum Circular No. 99-011 dated June 22, 1999 requiring all
public utility vehicles to secure a no fault passenger accident insurance. This circular was further
refined with the passage of Memorandum Circular No. 2000-010 dated March 27, 2000.
After a year of implementation, the Board now has received numerous complaints
coming from various transport groups and from its regional offices. These complaints
[range] from non-payment or late payment of claims, fake certificates of cover,
predatory pricing, non-payment or under payment of taxes, graft and corruption, and
the non implementation of the computerized data bank of all public utility vehicles.

In addressing these concerns, the different transport groups proposed the creation of a two (2)
group system whereby all insurance companies who would like to participate in the passenger
accident insurance program of the LTFRB must join any of the two groups, and that the passenger
insurance requirement of the PUV operators be divided between these two groups on the basis of
the number of their respective LTO license plates. The transport group argue that through this
scheme the following objectives will be attained:

1. Fake certificates of cover will be minimized, if not eradicated, due to better

monitoring of operations as there would only be two kinds of certificates that
would be circulating.

2. Payment of the proper taxes can be assured.

3. Graft and corruption will be minimized, if not eliminated, since discretion as to

which insurance company to patronize will be removed.

4. Payment of claims will be prompt due to better monitoring.

5. The proposed computerized data bank of all PUV[,] nationwide will be attained
without a single cost to government.

It must be noted that the passenger accident insurance program of the LTFRB was implemented
after numerous dialogues with all the transport organizations nationwide, and only after all issues
raised have been sufficiently addressed. More importantly, this program is without any cost to the
government. The added insurance expense is shouldered by the PUV operators.

In pursuing this proposal further, the Board conducted meetings and conferences with the
transport operators and with the insurance companies. It also met [with] the Insurance
Commission where the latter, in its letter dated January 30, 2001, confirmed that it has no
objection to the proposal of the various transport groups, there being no legal impediment to the
same.

II. AMENDMENTS

AMENDMENTS TO M.C. NO. 99-011

IN VIEW OF THE FOREGOING PREMISES, and upon the clamor of the transport operators who are
the ones paying the added insurance cost, paragraph seven (7) of Memorandum Circular No. 99-
011 is hereby amended to read as follows:

In order to make sure that future claims of PUV operators and passenger accident
victims are paid within the required time, and in order to minimize, if not eliminate, fake
certificates of cover and graft and corruption, as well as to ensure the payment of the
proper taxes much needed by the government, as well as to create a computerized data
bank without any cost to the government which is necessary for transport planning[,]
the Board will only accept, as proof of compliance of this program, insurance
polic[i]es/certificates of cover duly approved by the Insurance Commission specifically
for this project, and issued by any of the two groups as authorized by the Board.

CREATION OF THE TWO GROUP SYSTEM

Accordingly, as there is already one group duly authorized by the Board to participate in this
program in the person of the Passenger Accident Managers, Inc. (PAMI for brevity), THERE IS A
NEED TO FORM ANOTHER GROUP IN ORDER TO FULLY IMPLEMENT THE PROGRAM. All other
insurance companies who wish to continue participating in the program, therefore, are hereby
required to either join PAMI or form a second group.

In order to maintain their good standing with the Board, each group must maintain and present
to the Board proof of compliance with the following minimum requirements:

1. Membership of at least ten (10) insurance companies with valid and subsisting
license issued by the Insurance Commission;

2. Aggregate paid-up capitalization of P500 Million;

3. Compliance with the computerized dat[a] as required by the Board;

4. Payment of all claims within seven (7) calendar days from submission of all
documents;

5. Issuance of one (1) certificate of cover with the standard form and contents
duly approved by the Insurance Commission and the Board; and

6. Submission and compliance with all other reports x x x and requirements of the
Board.

ODD-EVEN SYSTEM

In order to address the issue of graft and corruption, there is a need to remove discretion on the
part of government officials. Accordingly, the Board supports the proposal of the transport groups
and hereby adopts the following system:

All PUVs covered by this program whose LTO license plate, as per latest LTO Official Receipt, has
an even middle number must have an insurance policy/certificate cover coming from the first
insurance group (in its case PAMI), while those with an odd middle number must have a
policy/cover coming from the second group. This odd-even system shall be interchanged on a year
to year basis in order to ensure equality and fairness in distribution. Accordingly, the Board will
not accept, as proof of compliance with this program, any insurance policy/cover that does not
comply with this odd-even scheme, except in the following cases where the operator may choose
the insurance group of its choice provided if is one of the two authorized by the Board, to wit:

1. Where the operator or franchise holder has 50 or more operating

units registered in its name;
2. Where the operator files a verified petition with the Board justifying
his preference over the other group. In this case, the Board
may allow a switch if it can be shown that there are more
benefits to be attained [from] the insurance group of his
choice, and provided further that these benefits are legal and
 do not result to any form of predatory pricing, such as x x x
unjustified commissions and discounts.

Other than [for] these reasons[,] no switch may be allowed by any officer of the LTFRB unless
otherwise duly approved by the Board en banc.

EFFECTIVITY OF THE TWO GROUP SYSTEM

The effectivity of the two group system will take place on March 1, 2001, unless otherwise
extended by the Board en banc.

III. INTERIM GUIDELINES

In the meantime, in order to immediately address the concerns of the transport groups, the
following should be strictly complied with:

1. No insurance company, its agents and employees shall resort to predatory

pricing[,] which means selling or offering to sell any product at a price
unreasonably below the industry average cost so as to attract customers to
the detriment of competitors.

2. The amount of commission/discount which a company will offer in the market

should be in writing and duly approved by the LTFRB, who, in turn, will
coordinate the same with the Insurance Commission. Any violation of the
declared commission/discount shall be subject to the penalties provided for
herein.

3. Only branch offices duly identified by the company, together with the designated
officer-in-charge, and submitted in writing to the LTFRB shall issue, distribute,
market or release the required policy/certificate of cover.

4. Payment of all claims should be made within seven (7) calendar days from
submission of all the required x x x documents. Accordingly, the company shall
provide the LTFRB with the list of required documents.

Any insurance company found to have violated any of the above prohibitions shall, after notice
and hearing, be banned permanently from participating in the program either directly or indirectly,
including its principal stockholders, key officers and successors-in-interest if evidence warrants.
The Board, may, in the interest of the public, issue a cease and desist order enjoining a company
from participating in the program for not more than thirty (30) days pending full investigation.

All insurance companies who are blacklisted in any government agency or

instrumentality including court and other quasi-judicial agencies are automatically
disallowed to participate in this program. Accordingly, no policy or certificate of cover
shall be accepted from these companies as proof of compliance with this program. The
Board shall issue from time to time the list of the blacklisted or suspended companies.

All insurance policies[/]certificates of cover issued by their insurance companies in their individual
capacities prior to the effectivity of the Two Group System shall remain in full force and effect until
its expiration, and said companies shall be primarily liable for the payment of claims subject of
said policies/certificates of cover.

xxx
For the dissemination and implementation of the aforequoted Memorandum, the LTFRB made a
one month nationwide information campaign on the nature of the two-group system and of the
blacklisting scheme. And in a meeting with the different insurance companies, including the
representative of petitioner EASCO, the Insurance Commission representative [read] before the
participants the insurance firms blacklisted by the Regional Trial Court of Quezon City which
includes petitioner EASCO. The purpose of this information is to afford the blacklisted firms an
opportunity to clear their records and settle the claims against them.5cräläwvirtualibräry

Claiming that Memorandum Circular No. 2001-001 and the implementing Circulars had deprived
it of its right to engage in the passenger accident insurance business, Eastern Assurance & Surety
Corporation (EASCO) filed a Petition for Certiorari and Prohibition with the CA questioning the
validity of those issuances.

Ruling of the Court of Appeals

The CA ruled that Memorandum Circular No. 2001-001 had not been issued ultra vires by the
LTFRB and constituted a valid exercise of police power. Hence, the appellate court ruled:

x x x [T]he Board has the power to require as a condition for the issuance of certificate of public
convenience an insurance policy or certificate provided by a member of one of the two accredited
groups. The clear purpose of the condition is to ensure the benefit of the riding public and
pedestrians who may become victims of accidents involving PUVs. For this purpose, the Board
may, as it did, coordinate with the Insurance Commission, the governmental agency regulating
the insurance business, for the adoption of the two-group and blacklisting system to enhance the
insurance coverage of passengers and persons who become victims of accident for their benefit
or of their heirs.

Without doubt, the imposition of the requirements is germane to the powers, functions and
purpose of the Board as a regulatory body in charge of administering public utilities. x x
x.6cräläwvirtualibräry

Moreover, the CA found that the Circular had not violated the provisions of the Constitution on
free enterprise, equal protection and substantive due process. The appellate court explained that
PAIC II and PAMI merely serve as service arms of their respective members. In other words,
these two (2) groups, strictly speaking, are not engaged in insurance business. Moreover, the two-
group / consortium scheme under the Memorandum Circular No. 2001-001 is open to all insurance
firms [that] want to join any of the two groups. It does not vest any privilege or advantage to any single
firm or group to carry out the business of providing the insurance coverage under the program. The fact
that the program is open to all insurance firms including petitioner negates its pretense of exclusivity. No
firm is discriminated against since the two consortia cannot refuse membership in their respective groups
to any interested firm [that] wants and is qualified to join.7cräläwvirtualibräry

Hence, this Petition.

The Issues

In its Memorandum, petitioner raises the following issues for our consideration:

a) the assailed LTFRB circulars with [their] implementing circulars violat[e] the constitutional
proscription against monopoly, combination in restraint of trade and unfair competition[;] b) there
is a violation of [the] equal protection clause; c) LTFRB exceeded its legal mandate because it
exercised administrative control/jurisdiction over insurance companies which properly and
exclusively belongs to the Insurance Commission[;] d) EASCO, Petitioner, was disenfranchise[d]
of its legitimate insurance business; x x x e) the Court of Appeals erred in ruling that the [P]etition
for [C]ertiorari which raises purely legal issues is not exempt from the rule on exhaustion of
administrative remedies, contrary to existing jurisprudence on the matter[; f)] the Court of
Appeals committed grave abuse in completely disregarding vital facts borne by the records and
admissions by the parties; and x x x [g)] x x x noted the assailed LTFRB memorandum circular
did not comply with publication requirements for its validity. 9cräläwvirtualibräry

The main issue in the case before us, as in the Court of Appeals, is the validity of Memorandum
Circular Nos. 2001-001 and 2001-010.

The Courts Ruling

The Petition has no merit.

Main Issue:

Validity of the LTFRB Memorandum Circulars

Petitioner contends that Memorandum Circular No. 2001-001 and the subsequent implementing
Circulars violate the constitutional proscription against monopoly as well as unfair competition and
combination in restraint of trade. Petitioner further argues that these were issued with grave abuse
of discretion and without jurisdiction on the part of the LTFRB.

Monopoly

The constitutional provision on monopolies is found in Article XII as follows:

Sec. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed.

While embracing free enterprise as an economic creed, the Constitution does not totally prohibit
the operation of monopolies.10 However, it mandates the State to regulate them when public
interest so requires.

Intense competition has led insurance companies/agents offering insurance policies for public
utility vehicles to resort to ruinous tactics to sell their services. Notorious agents of these
companies have engaged in predatory pricing -- selling the compulsory insurance coverage at an
unbelievable discount of sixty to eighty percent (60 to 80%) off the market rate. The huge
coverage and liability under the no-fault clause of the passenger accident insurance are grossly
disproportionate to the small premiums actually being paid.

Moreover, different persons or operators were issued certificates of cover (COC) or policies bearing
the same number. Thus, claims under these policies were not paid, or payments were
unreasonably delayed, resulting in prejudice to the riding public.

The present case shows a clear public necessity to regulate the proliferation of such insurance
companies. Because of the PUV operators complaints, the LTFRB thus assessed the situation. It
found that in order to protect the interests of the riding public and to resolve problems involving
the passenger insurance coverage of PUVs, it had to issue Memorandum Circular No. 2001-001
authorizing the two-group system. Subsequently, it promulgated Memorandum Circular No. 2001-
010 accrediting PAMI and PAIC II as the two groups allowed to participate in the program.
Memorandum Circular No. 2001-010 required that [a]ll public utility vehicles whose LTO license
plate, as per latest LTO Official Receipt, with an EVEN middle number (0, 2, 4, 6 and 8) shall be
insured with UCPB insurance (PAMI), while those with an ODD middle number (1, 3, 5, 7 and 9)
shall be insured with Great Domestic Insurance (PAIC 2) x x x.11cräläwvirtualibräry

Undoubtedly, Memorandum Circular No. 2001-010 authorized and regulated two separate
monopolies. In Garcia v. Corona,12 the Court stated:

The simplest form of monopoly exists when there is only one seller or producer of a product or
service for which there are no substitute. In its more complex form, monopoly is defined as the
joint acquisition or maintenance by members of a conspiracy formed for that purpose, of the power
to control and dominate trade and commerce in a commodity to such an extent that they are able,
as a group, to exclude actual or potential competitors from the field, accompanied with the
intention or purpose to exercise such power.13cräläwvirtualibräry

It should be stressed that PUVs, as common carriers, are engaged in a business affected with
public interest.14 Under Article 1756 of the Civil Code, in cases of death or injuries to passengers,
common carriers are presumed to be at fault and are required to compensate the victims, unless
they observed extraordinary diligence. To assure this compensation, PUVs are required to obtain
insurance policies.15cräläwvirtualibräry

Even with this insurance requirement, the riding public remains at risk of inadequate cover,
because many insurance companies are individually incapable of meeting the compensation
standards. Worse, the pernicious competition and fraudulent practices described above have
resulted in failure to meet the compensation requirements of the law.

Indeed, in authorizing and regulating the two insurance monopolies, the LTFRB acted within its
prerogatives in promoting public interest and protecting the riding public. After all, the consortia
are open to all insurance companies, including petitioner. There is no discrimination against any
legitimate insurer. On the whole, the public is given protection without unfair competition or undue
restraint of trade. As the Court of Appeals pointed out, the two consortia are not engaged in the
insurance business; they merely serve as service arms of their respective members.

At bottom, the subject Memorandum Circulars were issued for the stated purpose of promoting
public interest; and of protecting the riding public and PUV operators from being defrauded by
fake, undervalued or misrepresented insurance policies.

Grave Abuse of Discretion

In alleging grave abuse of discretion on the part of the LTFRB, petitioner describes at length
potential disasters to the insuring public that may result from the two-group system authorized
by the assailed Circulars. Petitioner calls into question the wisdom of those Circulars by projecting
scenarios which, however, cannot be properly addressed and resolved in the present case.
Litigations are limited to resolving actual, not hypothetical, controversies.

Doubts on the capability of the assailed Circulars to provide an adequate long-term solution to
PUV operators insurance problems are not legally sufficient to strike down those Circulars. In our
form of government, courts cannot inquire into the wisdom or the expediency of the acts of the
executive or the legislative branches of government, unless there is a clear showing that those
acts are constitutionally infirm or have been committed with grave abuse of discretion amounting
to lack or excess of jurisdiction.
In Angara v. Electoral Commission, Justice Laurel made it clear that the judiciary does not pass
upon questions of wisdom, justice or expediency of legislation. And fittingly so for in the exercise
of judicial power, we are allowed only to settle actual controversies involving rights which are
legally demandable and enforceable, and may not annul an act of the political departments simply
because we feel it is unwise or impractical. It is true that, under the expanded concept of the
political question, we may now also 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.16cräläwvirtualibräry

By grave abuse of discretion is meant such capricious and whimsical exercise of judgment
equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave, as
when it is exercised arbitrarily or despotically by reason of passion or personal hostility; and such
abuse must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in contemplation of law.17 The jurisprudential
elements of arbitrariness, despotism, passion and hostility have not been shown to exist under
the present circumstances.

Further, petitioner argues that the LTFRBs haste in accrediting PAMI and PAIC II is an indication
of grave abuse of discretion. However, since the two-group system was to take effect starting
March 1, 2001, accrediting the two groups on February 28, 2001 was not unreasonable. In the
absence of contrary evidence, we must uphold the presumption of regularity in the performance
of duties by public officers.18

Authority and Jurisdiction

Petitioner contends that in issuing the assailed Circulars, the LTFRB effectively delimited, regulated
and controlled the business of passenger accident insurance. It argues that the Board acted
without jurisdiction and usurped the exclusive jurisdiction of the Insurance Commission.

Executive Order No. 202,19 which created the LTFRB, conferred the following powers on the Board:

SEC. 5. Powers and Functions of the Land Transportation Franchising and Regulatory Board. The
Board shall have the following powers and functions:

xxx

b. To issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits

authorizing the operation of public land transportation services provided by motorized vehicles,
and to prescribe the appropriate terms and conditions therefore;

xxx

k. To formulate, promulgate, administer, implement and enforce rules and regulations on land
transportation public utilities, standards of measurements and/or design, and rules and regulations
requiring operators of any public land transportation service to equip, install and provide in their
utilities and in their stations such devices, equipment facilities and operating procedures and
techniques as may promote safety, protection, comfort and convenience to persons and property
in their charges as well as the safety of persons and property within their areas of operations;

l. To coordinate and cooperate with other government agencies and entities concerned with any
aspect involving public land transportation services with the end in view of effecting continuing
improvement of such services; and
m. To perform such other functions and duties as may be provided by law, or as may be necessary,
or proper or incidental to the purposes and objectives of this Executive Order. (Italics supplied)

Paragraph b gives the LTFRB the power to prescribe appropriate terms and conditions for the
issuance, amendment, revision, and suspension or cancellation of certificates of public
convenience (CPC) or of permits authorizing the operation of public land transportation services.
Under this paragraph, the Board has the prerogative to require, as a condition for the issuance of
CPCs, that an applicant get insurance coverage from a particular group of insurance companies.

Corollary to this power must necessarily be construed the authority of the LTFRB to require
insurance companies to group themselves for the purpose of providing passenger accident
insurance coverage. Paragraph m directly authorizes it to perform such other functions as may be
necessary or incidental to the purposes and objectives of EO 202.

By providing passenger accident insurance policies to operators of PUVs, insurance companies and
their businesses directly affect public land transportation. By limiting its regulation of such
companies to the segment of their business that directly affects public land transportation, the
LTFRB has acted within its jurisdiction in issuing the assailed Circulars.

Administrative bodies like the LTFRB have expertise in specific matters within the purview of their
respective jurisdictions. Thus, the law concedes to them the power to promulgate rules and
regulations to implement the policies of a given statute -- provided such rules and regulations
conform to the terms and standards prescribed by that statute and purport to carry its general
policies into effect.20cräläwvirtualibräry

It should also be pointed out that before issuing the Circulars, the LTFRB made proper
representation and coordination with the Insurance Commission, which had no objection to the
two-consortia scheme.

EASCOs Business

Since petitioner has failed to show any cogent reason to strike down the assailed Circulars, their
implementation cannot be restrained. They may indeed adversely affect its business, but the
protection of the general welfare is of paramount importance. Petitioners individual business
interests must be subordinated to the benefit of the greater number. Salus populi est suprema
lex. Sic utere tuo ut alienum non laedas.21

Publication

Petitioner raises for the first time in its Memorandum the issue of the alleged noncompliance with
the publication requirement, which must first be met before the assailed Circulars can be deemed
valid. This argument is improper at this stage. Points of law, theories, issues and arguments not
adequately brought to the attention of the lower court need not be -- and ordinarily will not be --
considered by a reviewing court, as they cannot be raised for the first time on appeal. 22 Indeed, it
is settled jurisprudence that an issue that was neither raised in the complaint or in the court below
cannot be raised for the first time on appeal, as to do so would be offensive to the basic rules of
fair play, justice, and due process.23cräläwvirtualibräry

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.

G.R. No. 124360 November 5, 1997

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

G.R. No. 127867 November 5, 1997

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

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

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

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

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

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

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

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

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

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

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

1. Fix and regulate the prices of petroleum products;

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

3. Fix and regulate the rates of pipeline concessionaries under the

provisions of R.A. No. 387, as amended . . . ;

4. Regulate the capacities of new refineries or additional capacities of

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

5. Whenever the Board has determined that there is a shortage of any

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

On December 9, 1992, Congress enacted R.A. No. 7638 which created the Department of Energy to prepare,
integrate, coordinate, supervise and control all plans, programs, projects, and activities of the government in
relation to energy exploration, development, utilization, distribution and conservation. 9 The thrust of the
Philippine energy program under the law was toward privatization of government agencies related to
energy, deregulation of the power and energy industry and reduction of dependency on oil-fired plants.10 The
law also aimed to encourage free and active participation and investment by the private sector in all energy
activities. Section 5(e) of the law states that "at the end of four (4) years from the effectivity of this Act, the
Department shall, upon approval of the President, institute the programs and timetable of deregulation of
appropriate energy projects and activities of the energy industry."
Pursuant to the policies enunciated in R.A. No. 7638, the government approved the privatization of Petron
Corporation in 1993. On December 16, 1993, PNOC sold 40% of its equity in Petron Corporation to the Aramco
Overseas Company.

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

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

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

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

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

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

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

The petition is anchored on three arguments:

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

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

Third, that the inclusion of the tariff provision in section 5(b) of R.A. No. 8180 violates Section 26(1) Article VI of
the Constitution requiring every law to have only one subject which shall be expressed in its title. Petitioner
contends that the imposition of tariff rates in section 5(b) of R.A. No. 8180 is foreign to the subject of the law
which is the deregulation of the downstream oil industry.
In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P. Arroyo, Enrique Garcia, Wigberto Tanada, Flag
Human Rights Foundation, Inc., Freedom from Debt Coalition (FDC) and Sanlakas contest the constitutionality
of section 15 of R.A. No. 8180 and E.O. No. 392. Section 15 provides:

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

xxx xxx xxx

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

xxx xxx xxx

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution,
the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously
alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary
to settle the dispute. The question thus posed is judicial rather than political. The duty to adjudicate
remains to assure that the supremacy of the Constitution is upheld. Once a controversy as to the
application or interpretation of a constitutional provision is raised before this Court, it becomes a legal
issue which the Court is bound by constitutional mandate to decide.
Even a sideglance at the petitions will reveal that petitioners have raised constitutional issues which deserve the
resolution of this Court in view of their seriousness and their value as precedents. Our statement of facts and
definition of issues clearly show that petitioners are assailing R.A. No. 8180 because its provisions infringe the
Constitution and not because the law lacks wisdom. The principle of separation of power mandates that
challenges on the constitutionality of a law should be resolved in our courts of justice while doubts on the wisdom
of a law should be debated in the halls of Congress. Every now and then, a law may be denounced in court both
as bereft of wisdom and constitutionally infirmed. Such denunciation will not deny this Court of its jurisdiction to
resolve the constitutionality of the said law while prudentially refusing to pass on its wisdom.

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

xxx xxx xxx

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

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

We shall now track down the substantive issues. In G.R. No. 124360 where petitioner is Senator Tatad, it is
contended that section 5(b) of R.A. No. 8180 on tariff differential violates the provision 17 of the Constitution
requiring every law to have only one subject which should be expressed in its title. We do not concur with this
contention. As a policy, this Court has adopted a liberal construction of the one title — one subject rule. We have
consistently ruled18 that the title need not mirror, fully index or catalogue all contents and minute details of a law.
A law having a single general subject indicated in the title may contain any number of provisions, no matter how
diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be
considered in furtherance of such subject by providing for the method and means of carrying out the general
subject.19 We hold that section 5(b) providing for tariff differential is germane to the subject of R.A. No. 8180
which is the deregulation of the downstream oil industry. The section is supposed to sway prospective investors
to put up refineries in our country and make them rely less on imported petroleum. 20 We shall, however, return
to the validity of this provision when we examine its blocking effect on new entrants to the oil market.

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

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

Petitioners urge that the phrases "as far as practicable," "decline of crude oil prices in the world market" and
"stability of the peso exchange rate to the US dollar" are ambivalent, unclear and inconcrete in meaning. They
submit that they do not provide the "determinate or determinable standards" which can guide the President in
his decision to fully deregulate the downstream oil industry. In addition, they contend that E.O. No. 392 which
advanced the date of full deregulation is void for it illegally considered the depletion of the OPSF fund as a factor.
The power of Congress to delegate the execution of laws has long been settled by this Court. As early as 1916
in Compania General de Tabacos de Filipinas vs. The Board of Public Utility Commissioners,21 this Court thru,
Mr. Justice Moreland, held that "the true distinction is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution,
to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can
be made." Over the years, as the legal engineering of men's relationship became more difficult, Congress has
to rely more on the practice of delegating the execution of laws to the executive and other administrative
agencies. Two tests have been developed to determine whether the delegation of the power to execute laws
does not involve the abdication of the power to make law itself. We delineated the metes and bounds of these
tests in Eastern Shipping Lines, Inc. VS. POEA,22 thus:

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

The validity of delegating legislative power is now a quiet area in our constitutional landscape. As sagely
observed, delegation of legislative power has become an inevitability in light of the increasing complexity of the
task of government. Thus, courts bend as far back as possible to sustain the constitutionality of laws which are
assailed as unduly delegating legislative powers. Citing Hirabayashi v. United States23 as authority, Mr. Justice
Isagani A. Cruz states "that even if the law does not expressly pinpoint the standard, the courts will bend over
backward to locate the same elsewhere in order to spare the statute, if it can, from constitutional infirmity." 24

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

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

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

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

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

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

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

xxx xxx xxx

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

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

A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the
exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the
sale or the whole supply of a particular commodity. It is a form of market structure in which one or only a few
firms dominate the total sales of a product or service. 28 On the other hand, a combination in restraint of trade is
an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding
company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and
commerce in a certain commodity, controlling its, production, distribution and price, or otherwise interfering with
freedom of trade without statutory authority. 29 Combination in restraint of trade refers to the means while
monopoly refers to the end.30
Article 186 of the Revised Penal Code and Article 28 of the New Civil Code breathe life to this constitutional
policy. Article 186 of the Revised Penal Code penalizes monopolization and creation of combinations in restraint
of
trade, 31 while Article 28 of the New Civil Code makes any person who shall engage in unfair competition liable
for damages.32

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

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

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

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

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

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

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

Finally, we come to the provision on predatory pricing which is defined as ". . . selling or offering to sell any
product at a price unreasonably below the industry average cost so as to attract customers to the detriment of
competitors." Respondents contend that this provision works against Petron, Shell and Caltex and protects new
entrants. The ban on predatory pricing cannot be analyzed in isolation. Its validity is interlocked with the barriers
imposed by R.A. No. 8180 on the entry of new players. The inquiry should be to determine whether predatory
pricing on the part of the dominant oil companies is encouraged by the provisions in the law blocking the entry
of new players. Text-writer
Hovenkamp,36 gives the authoritative answer and we quote:

xxx xxx xxx

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

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

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

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

xxx xxx xxx

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

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

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

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

xxx xxx xxx

Since the downstream oil industry was fully deregulated in February 1997, there have been eight (8) fuel
price adjustments made by the three oil majors, namely: Caltex Philippines, Inc.; Petron Corporation; and
Pilipinas Shell Petroleum Corporation. Very noticeable in the price adjustments made, however, is the
uniformity in the pump prices of practically all petroleum products of the three oil companies. This, despite
the fact, that their selling rates should be determined by a combination of any of the following factors: the
prevailing peso-dollar exchange rate at the time payment is made for crude purchases, sources of crude,
and inventory levels of both crude and refined petroleum products. The abovestated factors should have
resulted in different, rather than identical prices.
 The fact that the three (3) oil companies' petroleum products are uniformly priced suggests collusion,
amounting to cartelization, among Caltex Philippines, Inc., Petron Corporation and Pilipinas Shell
Petroleum Corporation to fix the prices of petroleum products in violation of paragraph (a), Section 9 of
R.A. No. 8180.

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

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

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

xxx xxx xxx

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

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

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

xxx xxx xxx

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

By doing all of the above, the measure will effectively provide Filipino consumers with a venue where
their grievances can be heard and immediately acted upon by government.
 Thus, this bill stands to benefit the Filipino consumer by making the price-setting process more
transparent and making it easier to prosecute those who perpetrate such prohibited acts as collusion,
overpricing, economic conspiracy and unfair trade.

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

xxx xxx xxx

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

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

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

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

xxx xxx xxx

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

The much ballyhooed coming in of new players in the oil industry is quite remote considering that these
prospective investors cannot fight the existing and well established oil companies in the country today,
namely, Caltex, Shell and Petron. Even if these new players will come in, they will still have no chance
to compete with the said three (3) existing big oil companies considering that there is an imposition of oil
tariff differential of 4% between importation of crude oil by the said oil refineries paying only 3% tariff rate
for the said importation and 7% tariff rate to be paid by businessmen who have no oil refineries in the
Philippines but will import finished petroleum/oil products which is being taxed with 7% tariff rates.
 So, if only to help the many who are poor from further suffering as a result of unmitigated increase in oil
products due to deregulation, it is a must that the Downstream Oil Industry Deregulation Act of 1996, or
R.A.8180 be repealed completely.

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

xxx xxx xxx

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

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

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

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

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

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

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

In recent memory there is no law enacted by the legislature afflicted with so much constitutional deformities as
R.A. No. 8180. Yet, R.A. No. 8180 deals with oil, a commodity whose supply and price affect the ebb and flow
of the lifeblood of the nation. Its shortage of supply or a slight, upward spiral in its price shakes our economic
foundation. Studies show that the areas most impacted by the movement of oil are food manufacture, land
transport, trade, electricity and water. 38 At a time when our economy is in a dangerous downspin, the
perpetuation of R.A. No. 8180 threatens to multiply the number of our people with bent backs and begging
bowls. R.A. No. 8180 with its anti-competition provisions cannot be allowed by this Court to stand even while
Congress is working to remedy its defects.

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

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

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

SO ORDERED.

G.R. No. 88404 October 18, 1990

PHILIPPINE LONG-DISTANCE TELEPHONE CO. [PLDT], petitioner,

vs.
THE NATIONAL TELECOMMUNICATIONS COMMISSION AND CELLCOM, INC., (EXPRESS
TELECOMMUNICATIONS CO., INC. [ETCI]), respondents.

MELENCIO-HERRERA, J.:

Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by way of certiorari and Prohibition
under Rule 65, two (2) Orders of public respondent National Telecommunications Commission (NTC), namely,
the Order of 12 December 1988 granting private respondent Express Telecommunications Co., Inc. (ETCI)
provisional authority to install, operate and maintain a Cellular Mobile Telephone System in Metro-Manila (Phase
A) in accordance with specified conditions, and the Order, dated 8 May 1988, denying reconsideration.
On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as "An Act Granting Felix Alberto and
Company, Incorporated, a Franchise to Establish Radio Stations for Domestic and Transoceanic
Telecommunications." Felix Alberto & Co., Inc. (FACI) was the original corporate name, which was changed to
ETCI with the amendment of the Articles of Incorporation in 1964. Much later, "CELLCOM, Inc." was the name
sought to be adopted before the Securities and Exchange Commission, but this was withdrawn and abandoned.

On 13 May 1987, alleging urgent public need, ETCI filed an application with public respondent NTC (docketed
as NTC Case No. 87-89) for the issuance of a Certificate of Public Convenience and Necessity (CPCN) to
construct, install, establish, operate and maintain a Cellular Mobile Telephone System and an Alpha Numeric
Paging System in Metro Manila and in the Southern Luzon regions, with a prayer for provisional authority to
operate Phase A of its proposal within Metro Manila.

PLDT filed an Opposition with a Motion to Dismiss, based primarily on the following grounds: (1) ETCI is not
capacitated or qualified under its legislative franchise to operate a systemwide telephone or network of telephone
service such as the one proposed in its application; (2) ETCI lacks the facilities needed and indispensable to the
successful operation of the proposed cellular mobile telephone system; (3) PLDT has itself a pending application
with NTC, Case No. 86-86, to install and operate a Cellular Mobile Telephone System for domestic and
international service not only in Manila but also in the provinces and that under the "prior operator" or "protection
of investment" doctrine, PLDT has the priority or preference in the operation of such service; and (4) the
provisional authority, if granted, will result in needless, uneconomical and harmful duplication, among others.

In an Order, dated 12 November 1987, NTC overruled PLDT's Opposition and declared that Rep. Act No. 2090
(1958) should be liberally construed as to include among the services under said franchise the operation of a
cellular mobile telephone service.

In the same Order, ETCI was required to submit the certificate of registration of its Articles of Incorporation with
the Securities and Exchange Commission, the present capital and ownership structure of the company and such
other evidence, oral or documentary, as may be necessary to prove its legal, financial and technical capabilities
as well as the economic justifications to warrant the setting up of cellular mobile telephone and paging systems.
The continuance of the hearings was also directed.

After evaluating the reconsideration sought by PLDT, the NTC, in October 1988, maintained its ruling that liberally
construed, applicant's franchise carries with it the privilege to operate and maintain a cellular mobile telephone
service.

On 12 December 1988, NTC issued the first challenged Order. Opining that "public interest, convenience and
necessity further demand a second cellular mobile telephone service provider and finds PRIMA FACIE evidence
showing applicant's legal, financial and technical capabilities to provide a cellular mobile service using the AMPS
system," NTC granted ETCI provisional authority to install, operate and maintain a cellular mobile telephone
system initially in Metro Manila, Phase A only, subject to the terms and conditions set forth in the same Order.
One of the conditions prescribed (Condition No. 5) was that, within ninety (90) days from date of the acceptance
by ETCI of the terms and conditions of the provisional authority, ETCI and PLDT "shall enter into an
interconnection agreement for the provision of adequate interconnection facilities between applicant's cellular
mobile telephone switch and the public switched telephone network and shall jointly submit such interconnection
agreement to the Commission for approval."

In a "Motion to Set Aside the Order" granting provisional authority, PLDT alleged essentially that the
interconnection ordered was in violation of due process and that the grant of provisional authority was
jurisdictionally and procedurally infirm. On 8 May 1989, NTC denied reconsideration and set the date for
continuation of the hearings on the main proceedings. This is the second questioned Order.

PLDT urges us now to annul the NTC Orders of 12 December 1988 and 8 May 1989 and to order ETCI to desist
from, suspend, and/or discontinue any and all acts intended for its implementation.
On 15 June 1989, we resolved to dismiss the petition for its failure to comply fully with the requirements of
Circular No. 1-88. Upon satisfactory showing, however, that there was, in fact, such compliance, we reconsidered
the order, reinstated the Petition, and required the respondents NTC and ETCI to submit their respective
Comments.

On 27 February 1990, we issued a Temporary Restraining Order enjoining NTC to "Cease and Desist from all
or any of its on-going proceedings and ETCI from continuing any and all acts intended or related to or which will
amount to the implementation/execution of its provisional authority." This was upon PLDT's urgent manifestation
that it had been served an NTC Order, dated 14 February 1990, directing immediate compliance with its Order
of 12 December 1988, "otherwise the Commission shall be constrained to take the necessary measures and
bring to bear upon PLDT the full sanctions provided by law."

We required PLDT to post a bond of P 5M. It has complied, with the statement that it was "post(ing) the same
on its agreement and/or consent to have the same forfeited in favor of Private Respondent ETCI/CELLCOM
should the instant Petition be dismissed for lack of merit." ETCI took exception to the sufficiency of the bond
considering its initial investment of approximately P 225M, but accepted the forfeiture proferred.

ETCI moved to have the TRO lifted, which we denied on 6 March 1990. We stated, however, that the inaugural
ceremony ETCI had scheduled for that day could proceed, as the same was not covered by the TRO.

PLDT relies on the following grounds for the issuance of the Writs prayed for:

1. Respondent NTC's subject order effectively licensed and/or authorized a corporate entity
without any franchise to operate a public utility, legislative or otherwise, to establish and operate
a telecommunications system.

2. The same order validated stock transactions of a public service enterprise contrary to and/or in
direct violation of Section 20(h) of the Public Service Act.

3. Respondent NTC adjudicated in the same order a controverted matter that was not heard at all
in the proceedings under which it was promulgated.

As correctly pointed out by respondents, this being a special civil action for certiorari and Prohibition, we only
need determine if NTC acted without jurisdiction or with grave abuse of discretion amounting to lack or excess
of jurisdiction in granting provisional authority to ETCI under the NTC questioned Orders of 12 December 1988
and 8 May 1989.

The case was set for oral argument on 21 August 1990 with the parties directed to address, but not limited to,
the following issues: (1) the status and coverage of Rep. Act No. 2090 as a franchise; (2) the transfer of shares
of stock of a corporation holding a CPCN; and (3) the principle and procedure of interconnection. The parties
were thereafter required to submit their respective Memoranda, with which they have complied.

We find no grave abuse of discretion on the part of NTC, upon the following considerations:

1. NTC Jurisdiction

There can be no question that the NTC is the regulatory agency of the national government with jurisdiction over
all telecommunications entities. It is legally clothed with authority and given ample discretion to grant a provisional
permit or authority. In fact, NTC may, on its own initiative, grant such relief even in the absence of a motion from
an applicant.

Sec. 3. Provisional Relief. — Upon the filing of an application, complaint or petition or at any stage
thereafter, the Board may grant on motion of the pleaders or on its own initiative, the relief prayed
for, based on the pleading, together with the affidavits and supporting documents attached
thereto, without prejudice to a final decision after completion of the hearing which shall be called
 within thirty (30) days from grant of authority asked for. (Rule 15, Rules of Practice and Procedure
Before the Board of Communications (now NTC).

What the NTC granted was such a provisional authority, with a definite expiry period of eighteen (18) months
unless sooner renewed, and which may be revoked, amended or revised by the NTC. It is also limited to Metro
Manila only. What is more, the main proceedings are clearly to continue as stated in the NTC Order of 8 May
1989.

The provisional authority was issued after due hearing, reception of evidence and evaluation thereof, with the
hearings attended by various oppositors, including PLDT. It was granted only after a prima facie showing that
ETCI has the necessary legal, financial and technical capabilities and that public interest, convenience and
necessity so demanded.

PLDT argues, however, that a provisional authority is nothing short of a Certificate of Public Convenience and
Necessity (CPCN) and that it is merely a "distinction without a difference." That is not so. Basic differences do
exist, which need not be elaborated on. What should be borne in mind is that provisional authority would be
meaningless if the grantee were not allowed to operate. Moreover, it is clear from the very Order of 12 December
1988 itself that its scope is limited only to the first phase, out of four, of the proposed nationwide telephone
system. The installation and operation of an alpha numeric paging system was not authorized. The provisional
authority is not exclusive. Its lifetime is limited and may be revoked by the NTC at any time in accordance with
law. The initial expenditure of P130M more or less, is rendered necessary even under a provisional authority to
enable ETCI to prove its capability. And as pointed out by the Solicitor General, on behalf of the NTC, if what
had been granted were a CPCN, it would constitute a final order or award reviewable only by ordinary appeal to
the Court of Appeals pursuant to Section 9(3) of BP Blg. 129, and not by certiorari before this Court.

The final outcome of the application rests within the exclusive prerogative of the NTC. Whether or not a CPCN
would eventually issue would depend on the evidence to be presented during the hearings still to be conducted,
and only after a full evaluation of the proof thus presented.

2. The Coverage of ETCI's Franchise

Rep. Act No. 2090 grants ETCI (formerly FACI) "the right and privilege of constructing, installing, establishing
and operating in the entire Philippines radio stations for reception and transmission of messages on radio
stations in the foreign and domestic public fixed point-to-point and public base, aeronautical and land mobile
stations, ... with the corresponding relay stations for the reception and transmission of wireless messages on
radiotelegraphy and/or radiotelephony ...." PLDT maintains that the scope of the franchise is limited to "radio
stations" and excludes telephone services such as the establishment of the proposed Cellular Mobile Telephone
System (CMTS). However, in its Order of 12 November 1987, the NTC construed the technical term
"radiotelephony" liberally as to include the operation of a cellular mobile telephone system. It said:

In resolving the said issue, the Commission takes into consideration the different definitions of
the term "radiotelephony." As defined by the New International Webster Dictionary the term
"radiotelephony" is defined as a telephone carried on by aid of radiowaves without connecting
wires. The International Telecommunications Union (ITU) defines a "radiotelephone call" as a
"telephone call, originating in or intended on all or part of its route over the radio communications
channels of the mobile service or of the mobile satellite service." From the above definitions, while
under Republic Act 2090 a system-wide telephone or network of telephone service by means of
connecting wires may not have been contemplated, it can be construed liberally that the operation
of a cellular mobile telephone service which carries messages, either voice or record, with the aid
of radiowaves or a part of its route carried over radio communication channels, is one included
among the services under said franchise for which a certificate of public convenience and
necessity may be applied for.

The foregoing is the construction given by an administrative agency possessed of the necessary special
knowledge, expertise and experience and deserves great weight and respect (Asturias Sugar Central, Inc. v.
Commissioner of Customs, et al., L-19337, September 30, 1969, 29 SCRA 617). It can only be set aside on
proof of gross abuse of discretion, fraud, or error of law (Tupas Local Chapter No. 979 v. NLRC, et al., L-60532-
33, November 5, 1985, 139 SCRA 478). We discern none of those considerations sufficient to warrant judicial
intervention.

3. The Status of ETCI Franchise

PLDT alleges that the ETCI franchise had lapsed into nonexistence for failure of the franchise holder to begin
and complete construction of the radio system authorized under the franchise as explicitly required in Section 4
of its franchise, Rep. Act No. 2090. 1 PLDT also invokes Pres. Decree No. 36, enacted on 2 November 1972,
which legislates the mandatory cancellation or invalidation of all franchises for the operation of communications
services, which have not been availed of or used by the party or parties in whose name they were issued.

However, whether or not ETCI, and before it FACI, in contravention of its franchise, started the first of its radio
telecommunication stations within (2) years from the grant of its franchise and completed the construction within
ten (10) years from said date; and whether or not its franchise had remained unused from the time of its issuance,
are questions of fact beyond the province of this Court, besides the well-settled procedural consideration that
factual issues are not subjects of a special civil action for certiorari (Central Bank of the Philippines vs. Court of
Appeals, G.R. No. 41859, 8 March 1989, 171 SCRA 49; Ygay vs. Escareal, G.R. No. 44189, 8 February 1985,
135 SCRA 78; Filipino Merchant's Insurance Co., Inc. vs. Intermediate Appellate Court, G.R. No. 71640, 27 June
1988, 162 SCRA 669). Moreover, neither Section 4, Rep. Act No. 2090 nor Pres. Decree No. 36 should be
construed as self-executing in working a forfeiture. Franchise holders should be given an opportunity to be heard,
particularly so, where, as in this case, ETCI does not admit any breach, in consonance with the rudiments of fair
play. Thus, the factual situation of this case differs from that in Angeles Ry Co. vs. City of Los Angeles (92 Pacific
Reporter 490) cited by PLDT, where the grantee therein admitted its failure to complete the conditions of its
franchise and yet insisted on a decree of forfeiture.

More importantly, PLDT's allegation partakes of a Collateral attack on a franchise Rep. Act No. 2090), which is
not allowed. A franchise is a property right and cannot be revoked or forfeited without due process of law. The
determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been
forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert
which, as a rule, belongs to the State "upon complaint or otherwise" (Sections 1, 2 and 3, Rule 66, Rules of
Court), 2 the reason being that the abuse of a franchise is a public wrong and not a private injury. A forfeiture of
a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a
franchise is granted by law and its unlawful exercise is primarily a concern of Government.

A ... franchise is ... granted by law, and its ... unlawful exercise is the concern primarily of the
Government. Hence, the latter as a rule is the party called upon to bring the action for such ...
unlawful exercise of franchise. (IV-B V. FRANCISCO, 298 [1963 ed.], citing Cruz vs. Ramos, 84
Phil. 226).

4. ETCI's Stock Transactions

ETCI admits that in 1964, the Albertos, as original owners of more than 40% of the outstanding capital stock sold
their holdings to the Orbes. In 1968, the Albertos re-acquired the shares they had sold to the Orbes. In 1987, the
Albertos sold more than 40% of their shares to Horacio Yalung. Thereafter, the present stockholders acquired
their ETCI shares. Moreover, in 1964, ETCI had increased its capital stock from P40,000.00 to P360,000.00;
and in 1987, from P360,000.00 to P40M.

PLDT contends that the transfers in 1987 of the shares of stock to the new stockholders amount
to a transfer of ETCI's franchise, which needs Congressional approval pursuant to Rep. Act No.
2090, and since such approval had not been obtained, ETCI's franchise had been invalidated.
The provision relied on reads, in part, as follows:

SECTION 10. The grantee shall not lease, transfer, grant the usufruct of, sell or assign this
franchise nor the rights and privileges acquired thereunder to any person, firm, company,
 corporation or other commercial or legal entity nor merge with any other person, company or
corporation organized for the same purpose, without the approval of the Congress of the
Philippines first had. ...

It should be noted, however, that the foregoing provision is, directed to the "grantee" of the franchise, which is
the corporation itself and refers to a sale, lease, or assignment of that franchise. It does not include the transfer
or sale of shares of stock of a corporation by the latter's stockholders.

The sale of shares of stock of a public utility is governed by another law, i.e., Section 20(h) of the Public Service
Act (Commonwealth Act No. 146). Pursuant thereto, the Public Service Commission (now the NTC) is the
government agency vested with the authority to approve the transfer of more than 40% of the subscribed capital
stock of a telecommunications company to a single transferee, thus:

SEC. 20. Acts requiring the approval of the Commission. Subject to established stations and
exceptions and saving provisions to the contrary, it shall be unlawful for any public service or for
the owner, lessee or operator thereof, without the approval and authorization of the Commission
previously had

xxx xxx xxx

(h) To sell or register in its books the transfer or sale of shares of its capital stock, if the result of
that sale in itself or in connection with another previous sale, shall be to vest in the transferee
more than forty per centum of the subscribed capital of said public service. Any transfer made in
violation of this provision shall be void and of no effect and shall not be registered in the books of
the public service corporation. Nothing herein contained shall be construed to prevent the holding
of shares lawfully acquired. (As amended by Com. Act No. 454).

In other words, transfers of shares of a public utility corporation need only NTC approval, not Congressional
authorization. What transpired in ETCI were a series of transfers of shares starting in 1964 until 1987. The
approval of the NTC may be deemed to have been met when it authorized the issuance of the provisional
authority to ETCI. There was full disclosure before the NTC of the transfers. In fact, the NTC Order of 12
November 1987 required ETCI to submit its "present capital and ownership structure." Further, ETCI even filed
a Motion before the NTC, dated 8 December 1987, or more than a year prior to the grant of provisional authority,
seeking approval of the increase in its capital stock from P360,000.00 to P40M, and the stock transfers made by
its stockholders.

A distinction should be made between shares of stock, which are owned by stockholders, the sale of which
requires only NTC approval, and the franchise itself which is owned by the corporation as the grantee thereof ,
the sale or transfer of which requires Congressional sanction. Since stockholders own the shares of stock, they
may dispose of the same as they see fit. They may not, however, transfer or assign the property of a corporation,
like its franchise. In other words, even if the original stockholders had transferred their shares to another group
of shareholders, the franchise granted to the corporation subsists as long as the corporation, as an entity,
continues to exist The franchise is not thereby invalidated by the transfer of the shares. A corporation has a
personality separate and distinct from that of each stockholder. It has the right of continuity or perpetual
succession (Corporation Code, Sec. 2).

To all appearances, the stock transfers were not just for the purpose of acquiring the ETCI franchise, considering
that, as heretofore stated, a series of transfers was involved from 1964 to 1987. And, contrary to PLDT's
assertion, the franchise was not the only property of ETCI of meaningful value. The "zero" book value of ETCI
assets, as reflected in its balance sheet, was plausibly explained as due to the accumulated depreciation over
the years entered for accounting purposes and was not reflective of the actual value that those assets would
command in the market.

But again, whether ETCI has offended against a provision of its franchise, or has subjected it to misuse or abuse,
may more properly be inquired into in quo warranto proceedings instituted by the State. It is the condition of
every franchise that it is subject to amendment, alteration, or repeal when the common good so requires (1987
Constitution, Article XII, Section 11).

5. The NTC Interconnection Order

In the provisional authority granted by NTC to ETCI, one of the conditions imposed was that the latter and PLDT
were to enter into an interconnection agreement to be jointly submitted to NTC for approval.

PLDT vehemently opposes interconnection with its own public switched telephone network. It contends: that
while PLDT welcomes interconnections in the furtherance of public interest, only parties who can establish that
they have valid and subsisting legislative franchises are entitled to apply for a CPCN or provisional authority,
absent which, NTC has no jurisdiction to grant them the CPCN or interconnection with PLDT; that the 73
telephone systems operating all over the Philippines have a viability and feasibility independent of any
interconnection with PLDT; that "the NTC is not empowered to compel such a private raid on PLDT's legitimate
income arising out of its gigantic investment;" that "it is not public interest, but purely a private and selfish interest
which will be served by an interconnection under ETCI's terms;" and that "to compel PLDT to interconnect merely
to give viability to a prospective competitor, which cannot stand on its own feet, cannot be justified in the name
of a non-existent public need" (PLDT Memorandum, pp. 48 and 50).

PLDT cannot justifiably refuse to interconnect.

Rep. Act No. 6849, or the Municipal Telephone Act of 1989, approved on 8 February 1990, mandates
interconnection providing as it does that "all domestic telecommunications carriers or utilities ... shall be
interconnected to the public switch telephone network." Such regulation of the use and ownership of
telecommunications systems is in the exercise of the plenary police power of the State for the promotion of the
general welfare. The 1987 Constitution recognizes the existence of that power when it provides.

SEC. 6. The use of property bears a social function, and all economic agents shall contribute to
the common good. Individuals and private groups, including corporations, cooperatives, and
similar collective organizations, shall have the right to own, establish, and operate economic
enterprises, subject to the duty of the State to promote distributive justice and to intervene when
the common good so demands (Article XII).

The interconnection which has been required of PLDT is a form of "intervention" with property rights dictated by
"the objective of government to promote the rapid expansion of telecommunications services in all areas of the
Philippines, ... to maximize the use of telecommunications facilities available, ... in recognition of the vital role of
communications in nation building ... and to ensure that all users of the public telecommunications service have
access to all other users of the service wherever they may be within the Philippines at an acceptable standard
of service and at reasonable cost" (DOTC Circular No. 90-248). Undoubtedly, the encompassing objective is the
common good. The NTC, as the regulatory agency of the State, merely exercised its delegated authority to
regulate the use of telecommunications networks when it decreed interconnection.

The importance and emphasis given to interconnection dates back to Ministry Circular No. 82-81, dated 6
December 1982, providing:

Sec. 1. That the government encourages the provision and operation of public mobile telephone
service within local sub-base stations, particularly, in the highly commercialized areas;

Sec. 5. That, in the event the authority to operate said service be granted to other applicants,
other than the franchise holder, the franchise operator shall be under obligation to enter into an
agreement with the domestic telephone network, under an interconnection agreement;

Department of Transportation and Communication (DOTC) Circular No. 87-188, issued in 1987, also decrees:
 12. All public communications carriers shall interconnect their facilities pursuant to comparatively
efficient interconnection (CEI) as defined by the NTC in the interest of economic efficiency.

The sharing of revenue was an additional feature considered in DOTC Circular No. 90-248, dated 14 June 1990,
laying down the "Policy on Interconnection and Revenue Sharing by Public Communications Carriers," thus:

WHEREAS, it is the objective of government to promote the rapid expansion of

telecommunications services in all areas of the Philippines;

WHEREAS, there is a need to maximize the use of telecommunications facilities available and
encourage investment in telecommunications infrastructure by suitably qualified service
providers;

WHEREAS, in recognition of the vital role of communications in nation building, there is a need
to ensure that all users of the public telecommunications service have access to all other users
of the service wherever they may be within the Philippines at an acceptable standard of service
and at reasonable cost.

WHEREFORE, ... the following Department policies on interconnection and revenue sharing are
hereby promulgated:

1. All facilities offering public telecommunication services shall be interconnected

into the nationwide telecommunications network/s.

xxx xxx xxx

4. The interconnection of networks shall be effected in a fair and non-discriminatory

manner and within the shortest time-frame practicable.

5. The precise points of interface between service operators shall be as defined by

the NTC; and the apportionment of costs and division of revenues resulting from
interconnection of telecommunications networks shall be as approved and/or
prescribed by the NTC.

xxx xxx xxx

Since then, the NTC, on 12 July 1990, issued Memorandum Circular No. 7-13-90 prescribing the "Rules and
Regulations Governing the Interconnection of Local Telephone Exchanges and Public Calling Offices with the
Nationwide Telecommunications Network/s, the Sharing of Revenue Derived Therefrom, and for Other
Purposes."

The NTC order to interconnect allows the parties themselves to discuss and agree upon the specific terms and
conditions of the interconnection agreement instead of the NTC itself laying down the standards of
interconnection which it can very well impose. Thus it is that PLDT cannot justifiably claim denial of clue process.
It has been heard. It will continue to be heard in the main proceedings. It will surely heard in the negotiations
concerning the interconnection agreement.

As disclosed during the hearing, the interconnection sought by ETCI is by no means a "parasitic dependence"
on PLDT. The ETCI system can operate on its own even without interconnection, but it will be limited to its own
subscribers. What interconnection seeks to accomplish is to enable the system to reach out to the greatest
number of people possible in line with governmental policies laid down. Cellular phones can access PLDT units
and vice versa in as wide an area as attainable. With the broader reach, public interest and convenience will be
better served. To be sure, ETCI could provide no mean competition (although PLDT maintains that it has nothing
to fear from the "innocuous interconnection"), and eat into PLDT's own toll revenue cream PLDT revenue," in its
own words), but all for the eventual benefit of all that the system can reach.
6. Ultimate Considerations

The decisive consideration are public need, public interest, and the common good. Those were the overriding
factors which motivated NTC in granting provisional authority to ETCI. Article II, Section 24 of the 1987
Constitution, recognizes the vital role of communication and information in nation building. It is likewise a State
policy to provide the environment for the emergence of communications structures suitable to the balanced flow
of information into, out of, and across the country (Article XVI, Section 10, Ibid.). A modern and dependable
communications network rendering efficient and reasonably priced services is also indispensable for accelerated
economic recovery and development. To these public and national interests, public utility companies must bow
and yield.

Despite the fact that there is a virtual monopoly of the telephone system in the country at present. service is
sadly inadequate. Customer demands are hardly met, whether fixed or mobile. There is a unanimous cry to
hasten the development of a modern, efficient, satisfactory and continuous telecommunications service not only
in Metro Manila but throughout the archipelago. The need therefor was dramatically emphasized by the
destructive earthquake of 16 July 1990. It may be that users of the cellular mobile telephone would initially be
limited to a few and to highly commercialized areas. However, it is a step in the right direction towards the
enhancement of the telecommunications infrastructure, the expansion of telecommunications services in,
hopefully, all areas of the country, with chances of complete disruption of communications minimized. It will thus
impact on, the total development of the country's telecommunications systems and redound to the benefit of
even those who may not be able to subscribe to ETCI.

Free competition in the industry may also provide the answer to a much-desired improvement in the quality and
delivery of this type of public utility, to improved technology, fast and handy mobile service, and reduced user
dissatisfaction. After all, neither PLDT nor any other public utility has a constitutional right to a monopoly position
in view of the Constitutional proscription that no franchise certificate or authorization shall be exclusive in
character or shall last longer than fifty (50) years (ibid., Section 11; Article XIV Section 5, 1973 Constitution;
Article XIV, Section 8, 1935 Constitution). Additionally, the State is empowered to decide whether public interest
demands that monopolies be regulated or prohibited (1987 Constitution. Article XII, Section 19).

WHEREFORE, finding no grave abuse of discretion, tantamount to lack of or excess of jurisdiction, on the part
of the National Telecommunications Commission in issuing its challenged Orders of 12 December 1988 and 8
May 1989 in NTC Case No. 87-39, this Petition is DISMISSED for lack of merit. The Temporary Restraining
Order heretofore issued is LIFTED. The bond issued as a condition for the issuance of said restraining Order is
declared forfeited in favor of private respondent Express Telecommunications Co., Inc. Costs against petitioner.

SO ORDERED.