Hkuuh

418 SUPREME COURT REPORTS ANNOTATED
Legaspi vs. Minister of Finance

No. L-58289. July 24, 1982. *
VALENTINO L. LEGASPI, petitioner, vs. THE HONORABLE MINISTER OF

FINANCE and THE HONORABLE COMMISSIONER and/or THE BUREAU OF
INTERNAL REVENUE; respondents.
Constitutional Law; Constitutional provisions are to be interpreted not only on the basis
of current events, but also on the basis of
_______________
*EN BANC.
419
VOL. 115, JULY 24, 1982 41
9
the historical background of their enactment.Constitutional law is not simply the
literal application of the words of the Charter. The ancient and familiar rule of
constitutional construction that has consistently maintained its intrinsic and
transcendental worth is that the meaning and understanding conveyed by the language,
albeit plain, of any of its provisions do not only portray the influence of current events and
developments but likewise the inescapable imperative considerations rooted in the
historical background and environment at the time of its adoption and thereby caused their
being written as part and parcel thereof. As long as this Court adheres closest to this
perspective in viewing any attack against any part of the Constitution, to the end of
determining what it actually encompasses and how it should be understood, no one can say
We have misguided Ourselves. None can reasonably contend We are treading the wrong
way.
Same; The Batasang Pambansa referred to in Sec. 1, Art VIII of the Constitution is
the Batasan to be elected in May, 1984, not the present interim Batasang Pambansa.True
enough Article VIII, Sec. 1 of the Philippine Constitution as amended in 1981 explicitly
ordains that (T)he legislative power shall be vested in a Batasang Pambansa. Section 2,
however, readily reveals that the Batasang Pambansa contemplated in that Section 1 is the
regular assembly (formerly referred to as National Assembly, now as Batasang
Pambansaevidently to indigenize the nomenclature, which, incidentally should have been
done also with the Pangulo and Pangunang Ministro), to be elected in May 1984, per Sec.
5(1) of the same Article. Thus, to begin with, in the instant case, We must keep in mind
that at least for the present and until 1984, what can be properly discussed here are only
the legislative powers of the interim Batasang Pambansa as such.
Same; The term incumbent President was not included in Amendment No. 2 in the
1981 amendments to the Constitution to separate the Presidency from the parliament.But
examining closely how the 1981 amendments altered Amendment No. 2, it will be readily
seen that the only change consisted of the non-inclusion of the incumbent President as
member of the assembly in pursuance of the fundamental objective to separate the
Presidency from the regular legislative body and thereby establish in our country a
modified form of parliamentary government more appropriate for and suitable to the
peculiar conditions of our political development and the idiosyncrasies of our people, and at
the same time introduce into it features that would strengthen its structure so as to enable
the
420
20
government to cope with emergencies or abnormal situations, not only like those that
presently exist but even those that might arise in the future. Thus, it is characterized with
a presidency more powerful than the idea of a strong President desired by President
Quezon and actually embodied in the 1935 Constitution.
Same; The present Batasan being merely an interim Batasan cannot have more power
now after the 1981 amendments than it has when it was created in 1976.Having arrived
at the ineludible conclusion that the present Batasan is still interim, it also ineluctably
follows that its legislative authority cannot be more exclusive now after 1981 amendments
than when it was originally created in 1976. Thus even as the interim Batasan which came
into being in lieu of the Interim National Assembly by virtue of Amendment No. 2
consequently acquired the same powers and its Membersthe same functions,
responsibilities, rights and privileges, and disqualifications as the regular National
Assembly and the Members thereof, there can be no question that coeval with the creation
of the interim Batasan Amendment No. 6 came into force and effect. And Amendment No. 6
mandates in unequivocal and unambiguous terms the grant of concurrent legislative
authority to an official (the President [Prime Minister]) who is not in the Batasan itself.
Same; Amendment No. 6 made in 1976 authorizing the President to enact legislation
when the interim Batasan or the regular National Assembly fails or is unable to act on
matters that in the Presidents judgment requires immediate action, does not have any tint
or tinge of authoritarianism, but it based on necessity.With reference to Amendment No. 6,
it is of decisive importance that anyone who would try to decipher its true import should be
acquainted with its ration dtre, i.e., the whys and the wherefores thereof. Contrary to the
imputations of petitioner, this amendment is not rooted in the authoritarian, much less
dictatorial tendencies or inclinations of anyone. Any tinge or tint of authoritarianism in it is
not there for the sake of the ideology of dictatorship or authoritarian itself. Such hue of a
one-man authoritarianism it somehow connotes is there only because it is so dictated by
paramount considerations that are need ed in order to safeguard the very existence and
integrity of the nation and all that it stands for. Perhaps the truismalmost a dogmawell
recognized by constitutionalists and political scientists of all persuasions as a convenient
pragmatic rule for survival of nations, namely, that in an emergency, the best form of
government is a dictatorship, might have been in the mind of those who formulate it, but it
is quite obvious, as will be explained anon, that other fundamental factors
421
VOL. 115, JULY 24, 1982 42
1
must have been taken into account in order precisely to minimize the rigors and
generally feared oppressiveness of a dictatorship in an unrestricted martial regime, its
being dubbed as martial law Philippine style notwithstanding.
Same; Scope of Amendment No. 6.At this juncture, it must be emphatically made
clear that explicitly, the power that Amendment No. 6 vest upon the President (Prime
Minister) are to be exercised only on two specified occasions, namely, (1) when in (his
judgment) a grave emergency exists or there is a threat or imminence thereof and (2)
whenever the interim Batasang Pambansa or the regular National Assembly (now regular
Batasang Pambansa) fails or is unable to act adequately on any matter for any reason that
in his judgment requires immediate action. The power is to issue necessary decrees,
orders, or letters of instruction which shall form part of the law of the land. As the tenor of
the amendment readily imparts, such power may be exercised even when the Batasan is in
session. Obviously, therefore, it is a power that is in the nature of the other powers which
the Constitution directly confers upon the President or allows to be delegated to him by the
Batasan in times of crises and emergencies.
Same; Reasons why Amendment No. 6, came aboutWe can definitely say that no one
more than President Marcos was aware of those feelings and sentiments and, in fact, even
of the undercurrents of resistance. And as We visualize the situation he found himself in,
he was faced with no less than a dilemma. He was convinced of the advantages, not
personally to him, but to general welfare of martial law, in any formcall it Philippine
style, smiling, benign or with any other euphemistic adjectivewas growing to be more and
more distasteful. Even the New Society it was supposed to bring about was slowly losing its
splendor. Backsliding was creeping in some ways, discipline was loosening. But over and
above all such adverse developments, the perils to national security and public order still
remained, if in a slightly lesser degree.
Same; Same.It was in the light of the above circumstances and as a means of solving
the dilemma aforementioned that the concept embodied in Amendment No. 6 was born. In
brief, the central idea that emerged was that martial law may be earlier lifted, but to
safeguard our country and people against any abrupt dangerous situation which would
warrant the exercise of some authoritarian powers, the latter must be constitutionally
allowed, thereby to obviate the need to proclaim martial law and its concomitants,
principally the assertion by the military of prerogatives that made them
422
22
appear superior to the civilian authorities below the President. In other words, the
problem was what may be needed for national survival or the restoration of normalcy in the
face of a crisis or an emergency should be reconciled with the popular mentality and
attitude of the people against martial law.
Same; Built in measures in the Constitution to cope with emergencies.We have said
earlier that the Constitution has four built-in measures to cope with crises and emergencies.
To reiterate, they are: (a) emergency powers expressly delegated by the Batasan; (b) call of
the armed forces, who otherwise are supposed to be in the barracks; (c) suspension of the
privilege of the writ of habeas corpus; and (d) martial law. Of these four, the people dislike
martial law most and would, if possible, do away with it in the Constitution. And the
President who first conceived of what is now Amendment No. 6 knew this. Thus, Our
understanding of the development of events and attitudes that led to the adoption of
Amendment No. 6 is that in addition to the four measures authorized in the body of the
charter, this amendment is supposed to be a fifth one purportedly designed to make it
practically unnecessary to proclaim martial law, except in instances of actual surface
warfare or rebellious activities or very sophisticated subversive actions that cannot be
adequately met without martial law itself. Very evidently, the purpose of Amendment No. 6
is that the Philippines be henceforth spared of martial law unless manifest extreme
situations should ever demand it.
Same; Added reasons for enactment of Amendments No. 6.Well, it is to avoid the
necessity of resorting to the proclamation of martial law that Amendment No. 6 was
conceived. Paraphrasing President Marcos himself, martial law is the law of the gun, that
implies coercion and an active and direct role in the government by the military. Thus, the
virtue of Amendment No. 6 is that such undesirable features of martial law do not have to
accompany the exercise of the power thereby conferred on the Executive. To be sure, the
calling out of the armed forces and the suspension of the privilege of the writ of habeas
corpus, which are concomitants of martial law, may be left out or need not be resorted to
when the President acts by virtue of such power. It is, therefore, evident that it is grossly
erroneous to say that Amendment No. 6, is in reality no less than disguised martial law.
Same; Amendment No. 6 is part of our native way of coping with crucial situations.
We cannot close this opinion without underscoring the patent tendency and unrelenting
effort of the
423
VOL. 115, JULY 24, 1982 42
3
leadership of the country to make our government and our way of life indigenously
Filipino as much as it is possible to make them so. It has, of course, tried its utmost to see
what is good in other lands, but it has chosen generally to bring out what is best in our own
traditions, usages, customs and systems that have proven efficacious and beneficial during
the times of our forebears. The sanggunians and barangays which have inherited from the
Filipinos of the past and that have been institutionalized in Constitutional Amendment No.
7 of 1976 have, as everyone can see, proven to be unshakable bedrocks for the foundation of
duly constituted governmental authority with firm nationwide mass base. Our present
government, if in some ways similar to any foreign one, is in truth a product of our own
genius in political science and matters of government. Nowhere else in the world but in the
Philippines are martial law decrees and acts subject to the judicial scrutiny of the Supreme
Court. Amendment No. 6 is of the same strain. It is our native and indigenous way of
coping with crucial situations.
Same; Amendment No. 6 was not modified by the 1981 Constitutional amendments.
All the above premises taken into account, Our considered conclusion and judgment is that
Amendment No. 6 of October 1976 of the Constitution of 1973 has not been in anyway
altered or modified, much less repealed by the Constitutional amendments of 1981.
Abad Santos, J., Concurs in the result:
Constitutional Law; Amendment No. 6 was intended to give the President the powers
therein given even after the lifting of martial law.I concur in the result. I should state that
as Secretary of Justice I participated in the drafting of the 1976 Amendments to the
Constitution; that Amendment No. 6 was intended to give to the President (Prime Minister)
the power to issue decrees, etc. subject to the conditions specified therein even after the
lifting of martial law as shown by the fact that it is not only the interim Batasang
Pambansa which is mentioned but also the regular National Assembly; that the words
President (Prime Minister) were used in Amendment No. 6 (and also in Amendment No. 4)
simply because at that time both positions were occupied by the incumbent President; that
the fact that at present one person is President and another person is Prime Minister does
not mean the President has lost his power under Amendment No. 6 for that power was
intended to be used by the head of government; and that what has to be borne in mind is
that the structure of the government at present is essentially that of the presidential type
424
24
for the President is both head of state and head of government while the Prime
Minister, despite his lofty title, is but an alter egoof the President.
De Castro, Jr., J., separate opinion:
Constitutional Law; Amendment No. 6 was not repealed by the 1981 amendments of the
Constitution Petitioners interpretation is simplistic and does not do justice to the objectives
of the amendments.It is here where I would wish to express my view that in using the
words President (Prime Minister) in Amendment No. 6, the intent is for the President to
exercise the power while he is in possession of the high executive prerogatives, but when
there shall be a regular Prime Minister, it is to the latter that the power would pertain, not
to the President anymore, because under the Constitution at the time the 1976
Amendments were adopted it was envisioned that the President would be vested only with
essentially ceremonial powers, the highest executive powers to be then exercised by the
Prime Minister. The word Prime Minister immediately following the word President,
but enclosed in parenthesis was therefore, meant to indicate that when the change will take
place whereby the Prime Minister takes over the executive powers from the President, then
it is the former, not the latter, who would exercise the power defined in Amendment No. 6,
to obviate thereby the need of a new amendment. The word President would
automatically be replaced by the word Prime Minister, thus continuing in force the
provision of Amendment No. 6.
Same; Same.With the intent as above indicated thus so clearly manifested the 1981
amendment, far from repealing Amendment No. 6 by omission as petitioner contends,
should be construed as having the effect of vesting the power defined therein in the Chief
Executive as now provided in the 1981 amendments. This official is none other than the
President to whom were transferred the powers originally intended to be vested in the
Prime Minister as the chief executive official in a parliamentary system that the 1973
Constitution, at the beginning, intended to establish for our government. The President
would accordingly be the proper official to exercise the power granted by Amendment No. 6
which, by its intrinsic provision, should be maintained in effect by all reasonable
intendment rather than deemed repealed only by implication which is never favored.
PETITION to review the decision of the Minister of Finance.
The facts are stated in the opinion of the Court.

425
VOL. 115, JULY 24, 1982 425
BARREDO, J.:
Petition filed by the Honorable Valentino L. Legaspi, incumbent member of
the interim Batasang Pambansa, praying that this Court declare Presidential
Decree 1840 granting tax amnesty and filing of statement of assets and liabilities
and some other purposes unconstitutional.
The petition contains the following allegations:
1. 5.That said decree was issued by the President under supposed legislative powers
granted him under Amendment No. 6 of the Constitution proclaimed in full force
and effect as of October 27, 1976 pursuant to Proclamation No. 1595 and which is
quoted as follows:
Whenever in the judgment of the President, there exists a grave emergency or a threat or
imminence thereof, or whenever the interim Batasang Pambansa or the regular National Assembly
fails or is unable to act adequately on any matter for any reason that in his judgment requires
immediate action, he may in order to meet the exigency, issue the necessary decrees, orders, or
letters of instruction, which shall form part of the law of the land.
1. 6.That said decree was promulgated despite the fact that under the Constitution
(T)he Legislative power shall be vested in a Batasang Pambansa (Sec. 1, Article
VIII) and the President may grant amnesty only with concurrence of the Batasang
Pambansa (Sec. 11, Art. VII);
2. 7.That Amendment No. 6 is not one of the powers granted the President by the
Constitution as amended in the plebiscite of April 7, 1981; that while Section 16 of
Art. VII of the Constitution provides:
All powers vested in the President of the Philippines under the 1935 Constitution and the laws of
the land which are not herein provided for on conferred upon any official shall be deemed and are
hereby vested in the President unless the Batasang Pambansa provides otherwise.
such re-confirmation of existing powers did not mean to include the Presidents legislative
powers under Amendment No. 6; by the laws of the land which are not herein provided for
or conferred upon any
426
1. official only those laws that have been passed by the existing and/or prior
legislature are intended;
2. 8.That the Respondents are intending and in fact implementing the provisions of
the questioned decree and the same tends to affect all taxpayers in the Philippines
including herein Petitioner; that he is now in a quandary on whether to take
advantage of the benefits of said decree since the same is of doubtful
constitutionality leaving him no protection as guaranteed by the decree and thus
subject him to prosecution for violation of which otherwise would have held him
immune under said decree;
3. 9.That as a member of the Batasang Pambansa he knows that the subject of the
questioned decree has not been brought to the attention of the Batasang Pambansa
requiring immediate attention, the fact being that the original tax amnesty decree
which the questioned decree amended or modified has long been effective and
implemented by the Respondents while the Batasang Pambansa was in session;
4. 10.That Presidential Decree No. 1840 is patently null and void having been passed
without the concurrence of the Batasang Pambansa and it is likewise of public
interest and of the nation that the question of whether the President retained his
legislative power after lifting Martial Law and after the Constitution was amended
on April 7, 1981 be resolved;
5. 11.That the questioned decree being the first dated after the lifting of Martial Law
and the April 7 amendments brings to test the validity of the exercise of standby
emergency powers invoked in Amendment No. 6. (Pp. 3-6, record.)
As the petitioner himself puts it in his memorandum, the issue is: Whether the
1973 Constitution as amended by Plebiscite-Referendum of 1976, retained the same
amendments, more particularly Amendment No. 6, after it was again amended in
the Plebiscite held on April 7, 1981?
On the issue thus formulated by petitioner, it is maintained that Amendment
No. 6 is rendered inoperable, deleted and/or repealed by the amendments of April 7,
1981. Opening his discussion of this proposition thus:
Amendment No. 6 as originally submitted to the people for ratification under Pres. Dec. No.
1033, and thereafter approved reads as follows:
427
VOL. 115, JULY 24, 1982 427
Whenever in the judgment of the President (Prime Minister), there exists a grave emergency or a
threat or imminence thereof, or whenever the Interim Batasang Pambansa or the regular National
Assembly fails or is unable to act adequately on any matter for any reason that in his judgment
requires immediate action, he may, in order to meet the exigency, issue the necessary decrees, orders,
or letters of instruction, which shall form part of the law of the land.
Whether the matter or that there was an exigency which required immediate action, let it be
conceded that in the judgment of the President such facts do exist. (Italics ours)
It is to be observed that the original text mentions President (Prime Minister). This is
so because under No. 3 of the same amendment,
x x x. The incumbent President of the Philippines shall be the Prime Minister and he shall continue
to exercise all his powers even after the interim Batasang Pambansa is organized and ready to
discharge its functions, and likewise he shall continue to exercise his powers and prerogatives under
the 1935 Constitution and the powers vested in the President and the Prime Minister under this
Constitution.
Parenthetically, the term Incumbent President employed in the transitory provisions
could only refer to President Ferdinand E. Marcos (Aquino vs. Commission on Elections, 62
SCRA 275).
After the April 7 amendments there exists no longer a President (Prime Minister) but
A President and A Prime Minister. They are now two different offices which cannot be
held by a single personnot a transitory one but a regular one provided for and governed
by the main provisions of the newly amended Constitution. Subsequent events accept the
reality that we are no longer governed by the transitory provisions of the Constitution. (Pp.
27-28, Record.)
petitioner rationalizes his affirmative position thereon this wise:
Is Amendment No. 6 of the 1973 Constitution as approved in 1976 reproduced or
unaffected by the April 7, 1981 amendment? Or, is it considered repealed by Omission?
The Constitutional provisions of the Presidency do not restate the provisions of
Amendment No. 6 which grants the President
428
(Prime Minister) limited powers to legislate. This is tantamount to a withdrawal or deletion
of such grant.
There is no way by which the incumbent President be referred to anymore as the
incumbent President in the amendment of 1976. While it is true that Amendment No. 6
fails to distinguish between incumbent and regular all provisions with reference to the
powers of the Presidency is deemed foreclosed by Article VII of the newly amended
Constitution. Article VII enumerates presidential powers. To construe that the 1976
Amendments are still applicable, other than that referring to the Interim Batasang
Pambansa would be an incompatibility to the application of the present constitutional
provisions.
Generally taken, the 1976 amendments are amendments to the transitory provisions of
the Constitution. Insofar as the office of the President or the Prime Minister is concerned
they have ceased to be governed by the transitory provisions but under the newly amended
Constitution.
Batas Pambansa Blg. 125 called for the election of a President under the newly
amended Constitution. President Marcos ran as candidate and was proclaimed the duly
elected President of the Philippines by resolution no. 2 of the Batasang Pambansa dated
June 21, 1981. He took his oath of office as the duly elected President. The Prime Minister,
the Members of the Cabinet and the Executive Committee took their oaths after having
been appointed and are now exercising their functions pursuant to the new provisions. We
even consider ourselves the Fourth Republic because of a new system of Government. What
particular part of the newly amended Constitution would Amendment No. 6 fit in?
President Ferdinand E. Marcos ceased to be the incumbent President referred to in the
transitory provisions or in the 1976 Amendments. The Solicitor General argued that
Amendment No. 6 provided for the contingency that the office would be separated
consisting of a ceremonial President and a Prime Minister who will be the executive. Yet,
without express constitutional grant the President now assumes a power intended to be
that of the Prime Minister. The intent of the 1981 amendments could not be interpreted
any other way except that after the amendment it would no longer be proper to exercise
those reposed upon the Prime Minister. Powers previously reposed upon the Prime Minister
were expressly removed from him and given to the President. Amendment No. 6 is not one
of those.
The proposed amendments under Batasan Res. No. 104 became Question No. 1 in the
ballot of April 7, 1981 plebiscite to which the voter was asked (B.P. Blg. 122)
429
VOL. 115, JULY 24, 1982 429
Do you vote for the approval of an amendment to the Constitution and to Amendment No. 2, as
proposed by the Batasang Pambansa in Resolution No. 2, which, in substance, calls for the
establishment of a modified parliamentary system, amending for this purpose Articles VII, VIII and
IX of the Constitution, with the following principal features: x x x
Nowhere in feature (1) was it submitted that the President would enjoy conditional or
qualified legislative powers as modified parliamentary system.
The original intent to set out the original act or section as amended is most commonly
indicated by a statement in the amendatory act that the original law is amended to read as
follows. The new statute is a substitute for the original act or section. Only those provisions
of the original act or section repeated in the amendment are retained (Paras vs. Land
Registration Commission, July 26, 1960, L-16011).
That The Legislative power shall be vested in the Batasang Pambansa is an old
provision which has been retained. This in essence was Question No. 1 in the April 7
Plebiscite as to who exercise legislative powers and who are to execute. Nowhere in the
approved Amendment can it be hinted that the hybrid-type of government also includes a
one-man legislature. The intent to repose legislation only upon the Batasan is very
apparent. The adoption of the new Constitution repeals and supersedes all the provisions of
the older one not continued in force by the new instrument (16 C.J.S. 88). (Pp. 30-33,
Record.)
After mature study and deliberation and considering the peculiar circumstances
that dictated the formulation of Amendment No. 6, the Courts conclusion is that
Assemblyman-Petitioners posture lacks, to say the least, sufficient merit.
Constitutional law is not simply the literal application of the words of the
Charter. The ancient and familiar rule of constitutional construction that has
consistently maintained its intrinsic and transcendental worth is that the meaning
and understanding conveyed by the language, albeit plain, of any of its provisions
do not only portray the influence of current events and developments but likewise
the inescapable imperative considerations rooted in the historical background and
environment at the time of its adoption and thereby
430
caused their being written as part and parcel thereof. As long as this Court adheres
closest to this perspective in viewing any attack against any part of the Constitution,
to the end of determining what it actually encompasses and how it should be
understood, no one can say We have misguided Ourselves. None can reasonably
contend We are treading the wrong way.
True enough Article VIII, Sec. 1 of the Philippine Constitution as amended in
1981 explicitly ordains that (T)he legislative power shall be vested in a Batasang
Pambansa. Section 2, however, readily reveals that the Batasang Pambansa
contemplated in that Section 1 is the regular assembly (formerly referred to as
National Assembly, now as Batasang Pambansaevidently to indigenize the
nomenclature, which, incidentally should have been done also with the Pangulo and
Pangunang Ministro), to be elected in May 1984, per Sec. 5(1) of the same Article.
Thus, to begin with, in the instant case, We must keep in mind that at least for the
present and until 1984, what can be properly discussed here are only the legislative
powers of the interim Batasang Pambansa as such.
Without intending any reflection on any of those responsible for the idea, it may
be that it is for non-essential reasons that the current legislative assembly is being
referred to generally simply as the Batasang Pambansa. For in legal truth and in
actual fact, and as expressly admitted by petitioner, it is inherently no more no less
than the same interim. Batasang Pambansa created by Amendment No. 2 by virtue
of the Referendum-Plebiscite of October 16-17, 1976. And, in this connection, it may
be observed that indubitably, and as a necessary and logical consequence, the
amendment of Amendment No. 2 in 1981 carried with it the corresponding
appropriate adjustments literal and otherwise of Amendment Nos. 3 and 4,
although these latter two were not specifically mentioned in the proposal pursuant
to BP-CA Resolution No. 4 of the Batasan, acting as a constituent body nor in the
Plebiscite Referendum Act itself, much less in the ballots presented to and used by
the voters. This is because it cannot be denied that Amendments 3 and 4 are by
their very nature inseparable parts of amendment No. 2. But examining closely how
the 1981 amendments altered Amendment No. 2, it will be readily seen that the
only change
431
VOL. 115, JULY 24, 1982 431
consisted of the non-inclusion of the incumbent President as member of the
assembly in pursuance of the fundamental ob-jective to separate the Presidency
from the regular legislative body and thereby establish in our country a modified
form of parliamentary government more appropriate for and suitable to the peculiar
conditions of our political development and the idiosyncrasies of our people, and at
the same time introduce into it features that would strengthen its structure so as to
enable the government to cope with emergencies or abnormal situations, not only
like those that presently exist but even those that might arise in the future. Thus, it
is characterized with a presidency more powerful than the idea of a strong
President desired by President Quezon and actually embodied in the 1935
Constitution.
It is, therefore, evident that the reference to Amendment No. 2 in the
amendments of 1981 was not intended at all to convert or upgrade the present
existing assembly into the regular Batasang Pambansa. To repeat, what we have
now is still the interim Batasang Pambansa created in 1976. Importantly, it must
be said that had the present Batasan, acting as a constituent body, ever thought of
making itself the regular National Assembly, the very odious spectacle that the
people rejected when in the referendum of January 10-15, 1973 they repulsed and
repudiated the interimNational Assembly provided for in Sections 1 and 2 of Article
XVII (Transitory Provisions) of the 1973 Constitution whereby the members of the
old Congress of the Philippines made themselves automatically members of the
interim assembly would have resuscitated, and we can readily imagine how the
reaction of our people would have been exactly the same as in 1973 and for sure the
1981 proposed constitutional amendment affecting the Batasang would again have
been denied sanction by our people.
Having arrived at the ineludible that the present Batasan is still interim, it also
ineluctably follows that its legislative authority cannot be more exclusive now after
1981 amendments than when it was originally created in 1976. Thus even as
the interim Batasan which came into being in lieu of the Interim National
Assembly by virtue of Amendment No. 2 consequently acquired the same powers
and its Members
432
the same functions, responsibilities, rights and privileges, and disqualifications as
the regular National Assembly and the members thereof, there can be no question
that coeval with the creation of the interim Batasan, Amendment No. 6 came into
force and effect. And Amendment No. 6 mandates in unequivocal and unambiguous
terms the grant of concurrent legislative authority to an official (the President
[Prime Minister]) who is not in the Batasan itself.
In brief, the inexorable logic of the events that brought forth the present Batasan
leads to no other conclusion than that the legislative authority vested in it by
Amendment No. 2, read together with Section 1, Article XVII and Section 1, of
Article VIII of the 1973 Constitution, is subject to the external concurrent
legislative prerogative that Amendment No. 6 vests on the President (Prime
Minister).
Actually, the insistence of petitioner that Amendment No. 6 has been repealed by
the 1981 amendments springs from another point of view. It is fundamentally based
on analysis and ratiocination related to the language and tenor thereof. Petitioner
maintains that said amendments vested extraordinary legislative powers on the
President (Prime Minister) and on nobody else, and since there is no one who is
President (Prime Minister) under our present governmental set-up pursuant to
1981 amendments, no one in the existing government can exercise said powers.
The persuasive force of such theory is more apparent than real. As We have said
earlier, the Constitution is not merely a literal document to be always read
according to the plain and ordinary signification of its words. Beneath and beyond
the literal terms of the Charter, like a mine of incalculably immense treasures, are
elements and factors radiating from political and economic developments of the
situation prevailing at the time of the inclusion of any particular provision thereof
or amendment thereto. It is only from the light of the implications of such elements
and factors that the real essence and significance of the words of the constitutional
provision under scrutiny can be properly and adequately seen and comprehended.
With reference to Amendment No. 6, it is of decisive importance that anyone who
would try to decipher its true import
433
VOL. 115, JULY 24, 1982 433
should be acquainted with its ration dtre, i.e., the whys and the wherefores thereof.
Contrary to the imputations of petitioner, this amendment is not rooted in the
authoritarian, much less dictatorial tendencies or inclinations of anyone. Any tinge
or tint of authoritarianism in it is not there for the sake of the ideology of
dictatorship or authoritarian itself. Such hue of a one-man authoritarianism it
somehow connotes is there only because it is so dictated by paramount
considerations that are needed in order to safeguard the very existence and
integrity of the nation and all that it stands for. Perhaps the truismalmost a
dogmawell recognized by constitutionalists and political scientists of all
persuasions as a convenient pragmatic rule for survival of nations, namely, that in
an emergency, the best form of government is a dictatorship, might have been in the
mind of those who formulated it, but it is quite obvious, as will be explained anon,
that other fundamental factors must have been taken into account in order
precisely to minimize the rigors and generally feared oppressiveness of a
dictatorship in an unrestricted martial regime, its being dubbed as martial law
Philippine style notwithstanding.
At this juncture, it must be emphatically made clear that explicitly the power
that Amendment No. 6 vests upon the President (Prime Minister) are to be
exercised only on two specified occasions, namely, (1) when in (his judgment) a
grave emergency exists or there is a threat or imminence thereof and (2) whenever
the interim Batasang Pambansa or the regular National Assembly (now regular
Batasang Pam-bansa) fails or is unable to act adequately on any matter for any
reason that in his judgment requires immediate action. The power is to issue
necessary decrees, orders, or letters of instruction which shall form part of the law
of the land. As the tenor of the amendment readily imparts, such power may be
exercised even when the Batasan is in session. Obviously, therefore, it is a power
that is in the nature of the other powers which the Constitution directly confers
upon the President or allows to be delegated to him by the Batasan in times of
crises and emergencies.
Indeed, it is but fitting and proper that in framing the fundamental law of the
land which sets up a form of government
434
and defines and delimits the powers thereof and its officers, reserving as they must
plenary sovereignty to themselves, the people should prudently provide what
powers may and should be exercised by the government and/or its officials in times
of crises and emergencies that could jeopardize the very life and/or territorial
integrity of the country. Even as individual rights and liberties are valued and
enshrined as inviolable, the people, as they write their Charter thru a convention or
other legitimate means, cannot ignore that in the event of war, insurrection,
rebellion or invasion, including any other critical situation, any one of which cannot
but affect the regular course of normal constitutional processes and institutions as
well as the prerogatives and freedoms of individual citizens of and inhabitants
within the country, appropriate protective, defensive and rehabilitative measures
must be provided therein and may be made to function or operate.
Accordingly, both in the 1935 Constitution of the Philip-pines and in that of 1973,
the following provisions were precisely intended to operate during such perilous
situations:
1. 1.In times of war or other national emergency, the Batasang Pambansa may by law
authorize the President for a limited period and subject to such restrictions as it
may prescribe, to exercise powers necessary and proper to carry out a declared
national policy. Unless sooner withdrawn by resolution of the Batasang Pambansa,
such powers shall cease upon its next adjournment. The 1935 version of this
provision differs from it in that what was granted to the President was not the
broad authority to exercise such powers necessary and proper but only to issue
rules and regulations purported to accomplish the same objective.
2. 2.Section 10(2) of Article VII of the 1935 Constitution provided thus:
x x x (2) The President shall be commander-in-chief of all armed forces of the Philippines
and, whenever it becomes necessary, he may call out such armed forces to prevent or
suppress lawless violence, invasion, insurrection, or rebellion. In case of invasion,
insurrection or rebellion or imminent danger thereof, when the public safety requires it, he
may suspend the privileges of the writ of habeas corpus, or place the Philippines or any
part thereof under the martial law. x x x
435
VOL. 115, JULY 24, 1982 435
Under Section 12 of Article IX of the 1973 Constitution, exactly the same powers
were conferred on the Prime Minister.
However, what is now Section 9 of Article VIII under the 1981 amendments
transferred all said powers to the President.
As can be seen, as authorized by the Commander-in-Chief clause of all our
Constitutions, there have been as there still are three other measures that may be
resorted to during an emergency, namely:
1. (1)Call out such armed forces to prevent or suppress lawless violence, invasion,
insurrection or rebellion or imminent danger thereof, when public safety requires it;
2. (2)Suspend the privilege of the writ ot habeas corpus, and
3. (3)Place the Philippines or any part thereof under martial law.
It appears, therefore, that within the four corners of the Constitution itself, whether
that of 1935 or that of 1973, there were four constitutionally designed ways of
coping with abnormal situations in the country, namely: (1) the so-called emergency
powers delegated by the assembly to the President; (2) the calling of the armed
forces; (3) the suspension of the privilege of the writ of habeas corpus and (4) the
placing of the country or any part thereof under martial law. Understandably, it is
to be supposed that these measures are to be resorted to one after the other
according to the degree of gravity of the situation.
A backward glance at our past experiences since the implantation of American
sovereignty in our country at the turn of the century should remind us that at one
time or another all of these four measures have been resorted to, albeit martial law
proclamations in the long past were limited in area and duration because of the
localized nature of the disturbances they were meant to remedy.
Bearing all the foregoing considerations in mind, the question that naturally
arises at this juncture is what need is there for the power contemplated in
Amendment No. 6? Why does the country have to have a one-man legislating
authority concurrent with the Batasang Pambansa? Are the above-discussed
safeguards not enough?
436
At this point, it must be noted that Amendment No. 6 does not refer only to
the interim Batasang Pambansa but also to the regular National Assembly (now
Batasang Pambansa), a consideration which lends force to the conclusion that the
1981 amendments could not have been intended nor understood to do away with it.
What, indeed, is the fundamental ration dtre of Amendment No. 6?
It is to be recalled that the said amendment was formulated in October 1976,
more than fully four years after the whole Philippines was first placed under
martial law pursuant to Proclamation 1081 dated September 21, 1972. True,
without loss of time, President Marcos made it clear that there was no military
take-over of the government, and that much less was there being established a
revolutionary government, even as he declared that said martial law was of a
double-barrelled typed, unfamiliar to traditional constitutionalists and political
scientistsfor two basic and transcendental objectives were intended by it: (1) the
quelling of nation-wide subversive activities characteristic not only of a rebellion
but of a state of war fanned by a foreign power of a different ideology from ours, and
not excluding the stopping effectively of a brewing, if not a strong separatist
movement in Mindanao, and (2) the establishment of a New Society by the
institution of disciplinary measures designed to eradicate the deep-rooted causes of
the rebellion and elevate the standards of living, education and culture of our people,
and most of all the social amelioration of the poor and underprivileged in the farms
and in the barrios, to the end that hopefully insurgency may not rear its head in
this country again.
The immediate reaction of some sectors of the nation was ot astonishment and
dismay, for even if everyone knew that the gravity of the disorder, lawlessness,
social injustice, youth and student activism and other disturbing movements had
reached a point of peril, they felt that martial law over the whole country was not
yet warranted. Worse, political motivations were ascribed to be behind the
proclamation, what with the then constitutionally unextendible term of President
Marcos about to expire, and this suspicion became more credible when opposition
leaders and outspoken anti-administration media people who did not hesitate to
resort even to libel were immediate-
437
VOL. 115, JULY 24, 1982 437
ly placed under indefinite detention in military camps and other unusual
restrictions were imposed on travel, communication, freedom of speech and of the
press, etc. In a word, the martial law regime was anathema to no small portion of
the populace. Criticisms or objections thereto were, of course, mostly covert, but
there were even instances of open resistance.
Truth to tell, martial law is generally unwelcome anywhere in the world. And
when it is prolonged without anyone knowing when it would be lifted, the feeling of
discontent grows and spreads. Indeed, it is difficult to describe fully in an opinion
like this all that many consider obnoxious in martial law. Suffice it to say that the
New Society that came out of it did have its laudatory features appreciated by large
segments of the people, but with many cases of abuses of the military marring such
receptive attitude, the clamor for the early lifting of martial law became more and
more audible.
We can definitely say that no one more than President Marcos was aware of
those feelings and sentiments and, in fact, even of the undercurrents of resistance.
And as We visualize the situation he found himself in, he was faced with no less
than a dilemma. He was convinced of the advantages, not personally to him, but to
general welfare of martial law, but at the same time he was also conscious that
martial law, in any formcall it Philippine style, smiling, benign or with any other
euphemistic adjectivewas growing to be more and more distasteful. Even the New
Society it was supposed to bring about was slowly losing its splendor. Backsliding
was creeping in some ways, discipline was loosening. But over and above all such
adverse developments, the perils to national security and public order still
remained, if in a slightly lesser degree.
It was in the light of the above circumstances and as a means of solving the
dilemma aforementioned that the concept embodied in Amendment No. 6 was born.
In brief, the central idea that emerged was that martial law may be earlier lifted,
but to safeguard our country and people against any abrupt dangerous situation
which would warrant the exercise of some authoritarian powers, the latter must be
constitutionally allowed, thereby to obviate the need to proclaim martial law and its
concomitants, principally the assertion by the military
438
of prerogatives that made them appear superior to the civilian authorities below the
President. In other words, the problem was what may be needed for national
survival or the restoration of normalcy in the face of a crisis or an emergency should
be reconciled with the popular mentality and attitude of the people against martial
law.
We have said earlier that the Constitution has four built-in measures to cope
with crises and emergencies. To reiterate, they are: (a) emergency powers expressly
delegated by the Batasan; (b) call of the armed forces, who otherwise are supposed
to be in the barracks; (c) suspension of the privilege of the writ of habeas corpus;
and (d) martial law. Of these four, the people dislike martial law most and would, if
possible, do away with it in the Constitution. And the President who first conceived
of what is now Amendment No. 6 knew this. Thus, Our understanding of the
development of events and attitudes that led to the adoption of Amendment No. 6 is
that in addition to the four measures authorized in the body of the charter, this
amendment is supposed to be a fifth one purportedly designed to make it practically
unnecessary to proclaim martial law, except in instances of actual surface warfare
or rebellious activities or very sophisticated subversive actions that cannot be
adequately met without martial law itself. Very evidently, the purpose of
Amendment No. 6 is that the Philippines be henceforth spared of martial law unless
manifest extreme situations should ever demand it.
To recapitulate, the amendments of October 1976 were deliberately designed
against martial law. The creation thereby of the interim Batasang Pambansa in lieu
of the interim National Assembly which never came into being because of vehement
and justified popular repudiation thereof was definitely an indispensable step
towards the lifting of martial law. Everyone can understand that martial law could
not be lifted without a legislative body to make the laws. The legislative authority
could not be left in the hands of the President (Prime Minister). It would have been
anachronistic to lift martial law and still leave the law-making authority with the
President (Prime Minister) alone.
Relatedly but more importantly, the vesting of the legislative authority to
the interim Batasang Pambansa,
439
VOL. 115, JULY 24, 1982 439
without more or exclusively, would have maintained the safeguards of national
security only to the four traditional constitutional measures repeatedly discussed
above, including martial law. The framers of the amendment realized only too well
they had to look for a remedy thereto, the dislike of the people, justified or not, of
martial law. And so, to make the proclamation of martial law remotest, but
nevertheless enable the government to meet emergencies effectively, they conceived
the idea of granting to the President (Prime Minister) the power endowed to him by
Amendment No. 6.
Skeptics and hardcore critics of the administration there must be who would
sarcastically allude to Amendment No. 6 as martial law just the same but only like
a dog with merely another collar. A word of explanation is thus called for of the vital
differences between one and the other.
The attitude of those who are opposed to Amendment No. 6 must be due to lack
of sufficient acquaintance with the real essence of the various constitutionally
authorized emergency measures imperatively needed to safeguard the national
security and integrity already discussed above. The delegation of legislative power
thru the issuance of rules and regulations to carry out a national policy declared by
the Batasan has its own virtues as a restrained way of conferring law-making
authority to the Executive during an emergency. It is limited, restricted, subject to
conditions and temporary. It is obviously the simplest remedy to cope with an
abnormal situation resulting in the least violence to revered democratic republican
processes constitutionally established.
But being purely a political and legislative remedy, it cannot be adequate when
lawless violence becomes generalized and public safety is in jeopardy, hence the
need to call out the armed forces. And when such situation still aggravates to the
point of requiring the preventive incarceration or detention of certain leaders or
over active elements, it becomes inevitable to suspend the privilege of the writ of
habeas corpus.
Should matters really go out of hand even after the putting into effect of the
measures aforementioned, under the constitution, without Amendment No. 6, the
only recourse would be to proclaim martial law. But inasmuch as martial law is an
extreme measure that carries with it repressive and restrictive
440
elements unpopular to liberty loving and democratically minded sectors of the
country, it is but natural to think of it only as a very last resort.
Well, it is to avoid the necessity of resorting to the proclamation of martial law
that Amendment No. 6 was conceived. Paraphrasing President Marcos himself,
martial law is the law of the gun, that implies coercion and an active and direct role
in the government by the military. Thus, the virtue of Amendment No. 6 is that
such undesirable features of martial law do not have to accompany the exercise of
the power thereby conferred on the Executive. To be sure, the calling out of the
armed forces and the suspension of the privilege of the writ of habeas corpus, which
are concomitants of martial law, may be left out or need not be resorted to when the
President acts by virtue of such power. It is, therefore, evident that it is grossly
erroneous to say that Amendment No. 6 is in reality no less than disguised martial
law.
Apparently conceding, at least in gratia argumenti, the truth and the logic of all
the foregoing discussion and conclusions, petitioner raises the question of how can
Amendment No. 6 fit into the new set up under the 1981 amendments, which
abolished the dual position of President Marcos of President-Prime Minister
mandated by the 1976 Amendment No. 3. According to petitioner, President Marcos
is President now (no longer President-Prime Minister) pursuant to the 1981
amendments and by virtue of his election as such as proclaimed by the Batasan on
June 21, 1981. Not without a bit of sarcasm, petitioner even refers to the reference
to the status of our government after the inauguration of President Marcos as the
Fourth Republic. How then, petitioner asks, can the President of the Fourth
Philippine Republic exercise powers granted to the President-Prime Minister of the
provisional government established by the Transitory Provisions and conferred
upon him only by Amendment No. 6 of October 1976?
If We go solely by the rules of literature, a considerable degree of plausibility, as
We have intimated earlier in this opinion, may be conceded to the pose of petitioner.
It indeed seems that since the positions of President and Prime Minister have been
separated by the 1981 amendments and the same do not state to whom the power
under Amendment No. 6 would
441
VOL. 115, JULY 24, 1982 441
appertain, neither the present President nor the present Prime Minister can
exercise such power. But again, We hold that petitioner is laboring under a
misconception of facts and of the principles of constitutional construction.
Earlier hereinabove, We discoursed on the inevitability of the conclusion that the
current Batasan, being merely interim in lieu of the interim National Assembly
established under Section 1 of the Transitory Provisions, it is subject to the
provisions of Amendment No. 6 which was approved and ratified together with the
creation of the Batasan. We have also made a rather extensive exposition of the
whys and wherefores behind Amendment No. 6. As may be noted, the ultimate
thrust of Our discussion is to establish as a legal proposition that behind and
beneath the words of the amendment, the literal reference to the President (Prime
Minister) in Amendment No. 6 was the intention to make such reference
descriptive of the person on whom is vested the totality of the executive power
under the system of government established thereby. For as a matter of general
principle in constitutional law, belonging as he does to the political department of
the government, it is only with such official that the high prerogative of policy
determination can be shared. And in this connection, it is very important to note
that the amendment does not speak of the incumbent President only, as in the
other amendments, like Nos. 1, 3 and 5, but of the President, meaning to include all
future presidents. More, Amendment No. 6 makes mention not only of
the interimBatasan but also of the regular one. All these unmistakably imply that
the power conferred upon the President thereby was not for President Marcos alone
but for whoever might be President of the Philippines in the future.
As to the parenthetical mention therein of the Prime Minister, We are of the
considered view that it was necessary to do so because under the governmental
system then, which was markedly Prime Ministerial, the substantive executive
powers were vested in the Prime Minister, the President being merely the
symbolical and ceremonial head of state, and the two positions were being held by
one and the same person. In other words, the power was contemplated to be
conferred upon whomsoever was vested the executive power, and that is as it should
be, for, to reiterate, from the very nature of the power
442
itself, the authority to legislate should be allowed, if at all, to be shared only with
one in the political department, directly deriving power from the vote of the people.
Withal, as the Solicitor General aptly posits, it is neither sound nor in
consonance with well and long settled principles of constitutional construction to
recognize amendments or repeals of constitutional provisions by implications,
specially in regard to a transcendental matter as that herein under discussion.
Indeed, the fact that Amendment No. 6 was not in any way or sense mentioned in
the amendments submitted to the people for ratification in 1981 and there being
nothing in the latter intrinsically inconsistent with the former, it is safe to conclude
that it would be deceiving the people themselves and depriving them of something
they had decided in 1976 to be part of the fundamental law of the land to now
eliminate the power conferred by them upon the Executive of sharing legislative
authority with the Batasan on appropriate occasions of emergency and urgency.
Anent petitioners claim that the President may not constitutionally grant the
amnesty provided for in P.D. 1840, to Our mind, the following well taken brief
answer of the Solicitor General, with whom We fully agree, is more than sufficient
to dispose of the same adversely to petitioners stance:
Petitioner argues that Presidential Decree 1840 is likewise invalid for it did not enjoy the
concurrence of the Batasan. He relies on Article VII, Section 11 of the Constitution which
provides that
The President may, except in cases of impeachment, grant reprieves, commutations and pardons,
remit fines and forfeitures and with the concurrence of the Batasang Pambansa, grant amnesty.
Again, we beg to disagree. Article VII, sec. 11, applies only when the President is
exercising his power of executive clemency. In the case at bar, Presidential Decree 1840 was
issued pursuant to his power to legislate under Amendment No. 6. It ought to be in
dubitable that when the President acts as legislator as in the case at bar, he does not need
the concurrence of the Batasan. Rather, he exercises concurrent authority vested by the
Constitution.
We cannot close this opinion without underscoring the patent tendency and
unrelenting effort of the leadership of the
443
VOL. 115, JULY 24, 1982 443
country to make our government and our way of life indigenously Filipino as much
as it is possible to make them so. It has, of course, tried its utmost to see what is
good in other lands, but it has chosen generally to bring out what is best in our own
traditions, usages, customs and systems that have proven efficacious and beneficial
during the times of our forebears. The sanggunians and barangays, which have
inherited from the Filipinos of the past and that have been institutionalized in
Constitutional Amendment No. 7 of 1976 have, as everyone can see, proven to be
unshakable bedrocks for the foundation of duly constituted governmental authority
with firm nationwide mass base. Our present government, if in some ways similar
to any foreign one, is in truth a product of our own genius in political science and
matters of government. Nowhere else in the world but in the Philippines are
martial law decrees and acts subject to the judicial scrutiny of the Supreme Court.
Amendment No. 6 is of the same strain. It is our native and indigenous way of
coping with crucial situations.
We are Filipinos, so much so that the writer of this opinion has purposely
avoided reference to, much less lifted quotations from alien jurisprudence and
authorities. If only in this particular case, it is but appropriate to use language and
style of ourown.
All the above premises taken into account. Our considered conclusion and
judgment is that Amendment No. 6 of October 1976 of the Constitution of 1973 has
not been in anyway altered or modified, much less repealed by the constitutional
amendments of 1981.
WHEREFORE, the petition is dismissed. No costs.
Makasiar, Concepcion, Jr., Guerrero, Plana, Escolin, Vasquez and Relova,
JJ., concur.
Fernando, C.J., concurs and reserves the right to file a brief statement of his
views.
Teehankee, J., reserves his vote.
444
44
Aquino, J., I concur. Amendment No. 6 qualifies or limits Amendment No. 5,
which provides that the incumbent President shall continue to exercise legislative
powers until martial law shall have been lifted. Hence, Amendment No. 6 should
be read as if it begins with the clause: However, despite the lifting of martial law, x
x x.
Abad Santos, J., see opinion concurring in the result.
De Castro, J., see separate concurring opinion.
Melencio-Herrera, J., in the result.
Gutierrez, Jr., J., is on official leave.
ABAD SANTOS, J.: Concurring
I concur in the result. I should state that as Secretary of Justice I participated in

the drafting of the 1976 Amendment to the Constitution; that Amendment No. 6
was intended to give to the President (Prime Minister) the power to issue decrees,
etc. subject to the conditions specified therein even after the lifting of martial law as
shown by the fact that it is not only the interim Batasang Pambansa which is
mentioned but also the regular National Assembly; that the words President (Prime
Minister) were used in Amendment No. 6 (and also in Amendment No. 4) simply
because at that time both positions were occupied by the incumbent President; that
the fact that at present one person is President and another person is Prime
Minister does not mean the President has lost his power under Amendment No. 6
for that power was intended to be used by the head of government; and that what
has to be borne in mind is that the structure of the government at present is
essentially that of the presidential type for the President is both head of state and
head of government while the Prime Minister, despite his lofty title, is but an alter
ego of the President.
445
VOL. 115, JULY 24, 1982 445
SEPARATE OPINION
DE CASTRO, J.:
The only issue raised by petitioner to which I wish to address myself in this
separate opinion, being in full concurrence with how the other issues are disposed of
in the majority opinion, is whether Amendment No. 6 (1976) is still in force after
the 1981 Amendments to the 1973 Constitution. Amendment No. 6 reads:
Whenever in the judgment of the President (Prime Minister), there exists a grave
emergency or a threat or imminence thereof, or whenever the Interim Batasang Pambansa
or the regular National Assembly fails or is unable to act adequately on any matter for any
reason that in his judgment requires immediate action, he may, in order to meet the
exigency, issue the necessary decrees, orders, or letters of instruction, which shall form part
of the law of the land.
What should be emphatically pointed out is that the effectiveness of this provision
is intended to continue into the future, even beyond the regime of
the interim national assembly (Batasan Pambansa), as a wise and permanent
feature of Our constitutional system. This is clear from the reference made therein
of the regular National Assembly, the life-time of which is without a pre-fixed limit,
as is the very existence of the Republic itself. If for this reason alone, its abrogation
or elimination from the Constitution of which the original intention was to make it
a part and parcel, may be effected only by no less than a clear and express repeal.
No such mode of repeal is discoverable from the 1981 amendments of the
Constitution. Petitioner would, however, see a repeal by omission.
I fail to see such kind of repeal. The power granted by Amendment No. 6 is, by its
language, to be exercised by the President (Prime Minister). These words are
interpreted by petitioner as meaning that only when the President is at the same
time the Prime Minister, which can only refer to President Ferdinand E. Marcos,
may the power granted by Amendment No. 6 be deemed to remain effective. But
when, as it happened after the 1981 amendments and the last presidential
446
elections, the two offices had ceased to be combined or unite in the person, of
President Marcos, the office of Prime Minister being now held by another official,
Prime Minister Cesar Virata, the power conferred by Amendment No. 6 may no
longer be exercised by any official and therefore the amendment is deemed erased
from the Constitution. This is a most simplistic interpretation that does not do
justice to the transcendentally important objectives of the amendment.
It is here where I would wish to express my view that in using the words
President (Prime Minister) in Amendment No. 6, the intent is for the President to
exercise the power while he is in possession of the high executive prerogatives, but
when there shall be a regular Prime Minister, it is to the latter that the power
would pertain, not to the President anymore, because under the Constitution at the
time the 1976 Amendments were adopted it was envisioned that the President
would be vested only with essentially ceremonial powers, the highest executive
powers to be then exercised by the Prime Minister. The word Prime Minister
immediately following the word President, but enclosed in parenthesis was
therefore, meant to indicate that when the change will take place whereby the
Prime Minister takes over the executive powers from the President, then it is the
former, not the latter, who would exercise the power defined in Amendment No. 6,
to obviate thereby the need of a new amendment. The word President would
automatically be replaced by the word Prime Minister, thus continuing in force
the provision of Amendment No. 6.
To my mind, this is the more reasonable interpretation than to say that the
aforementioned words were merely descriptive of the actual nature of the position
held by the incumbent President as, indeed only the incumbent President could
possibly combine the two positions in his single personality. If this were the
intention, there would have been no need to enclose the word Prime Minister in
parenthesis. In doing so, the intention is made clear that it is the Prime Minister
who automatically takes over the exercise of the power when the President is
stripped of real executive power and vested with mainly ceremonial powers, as
obtains in most parliamentary governments.
447
VOL. 115, JULY 24, 1982 447
With the intent as above indicated thus so clearly manifested the 1981 amendment,
far from repealing Amendment No. 6 by omission as petitioner contends, should be
construed as having the effect of vesting the power defined therein in the Chief
Executive as now provided in the 1981 amendments. This official is none other than
the President to whom were transferred the powers originally intended to be vested
in the Prime Minister as the chief executive official in a parliamentary system that
the 1973 Constitution, at the beginning, intended to establish for our government.
The President would accordingly be the proper official to exercise the power granted
by Amendment No. 6 which, by its intrinsic provision, should be maintained in
effect by all reasonable intendment rather than deemed repealed only by
implication which is never favored.
The view herein expressed would, in my humble opinion, accord more to how the
people voted for the amendments of 1981 who, it may be safe to assert, never had
the least intent, to erase Amendment No. 6 from the Constitution which in 1976,
they solemnly resolved to permanently enshrine as anew but wise and
transcendentally desirable concept of constitutional power of legislation, dictated by
the highest interest of national welfare and security. Much less had they any
awareness that by voting for the amendments, they would be voting for the
elimination of Amendment No. 6 from the Constitution, for such a result was never
given to their conscious understanding. It is fundamental in the interpretation of
statutes and Constitutions that what is controlling is the legislative intent, or the
intent of those who enact the law or the Constitution, who, in the case of the latter,
are mainly the people without whose ratification any amendment proposed by the
constituent body would be of no effect. The petitioner himself seems ready to be
counted among those who would not question the wisdom and urgent need of
Amendment No. 6, reason for which the majority opinion may have been needlessly
over-burdened with a lengthy discourse over the reasons behind, and justification
for, the adoption of Amendment No. 6 which were supposed to have been known by
all before the people went to the polls to vote for its ratification. This I say, with
apologies to the learned ponente, and hasten to admit
448
National Bureau of Investigation vs. Ponce
that the disquisition is delectably erudite and scholarly. For the petitioner himself
said: Whether the matter or that there was an emergency which required
immediate action, let it be conceded that in the judgment of the President such facts
do exists. If he now questions the constitutionality of Amendment No. 6, it is more
on ground of form rather than of substance, based merely on his feeling of
skepticism that it no longer fits into the pattern or format of the 1973 Constitution
as amended on April 7, 1981.
Petition dismissed.
Notes.The President of the Philippines, as Commander-in-Chief and enforcer
or administrator of Martial Law, x x x can promulgate proclamations, orders and
decrees during martial law essential to the security and preservation of the
Republic, to the defense of the political and social liberties of the people, and to the
institution of reforms to prevent the resurgence of rebellion or insurrection or
secession or the threat as well as to meet the impact of a world wide rescission,
inflation economic crisis which presently threatens all nations including highly
developed countries. (Gamana vs. Espino, 96 SCRA 402.)
Since the President can legislate as enforcer of martial law, he can also exercise
the power of the Interim National Assembly to propose amendments to the
Constitution. (Sanidad vs. Commission on Elections, 73 SCRA 333.)
o0o
Garcia-Padilla vs. Enrile
No. L-61388. April 20, 1983. *
IN THE MATTER OF THE PETITION FOR THE ISSUANCE OF THE WRIT OF

HABEAS CORPUS FOR DR. AURORA PARONG, NORBERTO PORTUGUESE,
SABINO PADILLA, FRANCIS DIVINAGRACIA, IMELDA DE LOS SANTOS,
BENJAMIN PINEDA, ZENAIDA MALLARI, MARIANO SORIANO, TITO
TANGUILIG, LETTY BALLOGAN, BIENVENIDA GARCIA, EUFRONIO ORTIZ,
JR., JUANITO GRANADA and TOM VASQUEZ. JOSEFINA GARCIA-PADILLA,
petitioner, vs. MINISTER JUAN PONCE ENRILE, GEN. FABIAN C. VER, GEN.
FIDEL V. RAMOS, and LT. COL. MIGUEL CORONEL, respondents.
Criminal Law; Criminal Procedure; Habeas Corpus; Subversion, rebellion, and the like
are continuing offenses. Petitioners who were arrested in connection thereto cannot therefore
claim that their arrest was illegal.From the facts as above narrated, the claim of the
petitioners that they were initially arrested illegally is, therefore, without basis in law and
in fact. The crimes of insurrection or rebellion, subversion, conspiracy or proposal to commit
such crimes, and other crimes and offenses committed in the furtherance on the occasion
thereof, or incident thereto, or in connection therewith under Presidential Proclamation No.
2045, are all in the nature of continuing offenses which set them apart from the common
offenses, aside from their essentially involving a massive conspiracy of nationwide
magnitude. Clearly then, the arrest of the herein detainees was well within the bounds of
the law and existing jurisprudence in our jurisdiction.
Same; Same; Same; A prior judicial warrant is not necessary for arrest of persons
involved in the continuing offense of rebellion.The arrest of persons involved in the
rebellion whether as its fighting armed elements, or for committing non-violent acts but in
furtherance of the rebellion, is more an act of capturing them in the course of an armed
conflict, to quell the rebellion, than for the purpose of immediately prosecuting them in
court for a statutory offense. The arrest, therefore, need not follow the usual procedure in
the prosecution of offenses which requires the determination by a
_______________
*EN BANC.
473
VOL. 121, APRIL 20, 1983 47
3
judge of the existence of probable cause before the issuance of a judicial warrant of
arrest and the granting of bail if the offense is bailable. Obviously, the absence of a judicial
warrant is no legal impediment to arresting or capturing persons committing overt acts of
violence against government forces, or any other milder acts but equally in pursuance of the
rebellious movement. The arrest or capture is thus impelled by the exigencies of the
situation that involves the very survival of society and its government and duly constituted
authorities. If killing and other acts of violence against the rebels find justification in the
exigencies of armed hostilities which is of the essence of waging a rebellion or insurrection,
most assuredly so in case of invasion, merely seizing their persons and detaining them
while any of these contingencies continues cannot be less justified.
Same; Same; Same; Function of a Presidential Commitment Order (PCO) is to validate
detention of persons covered by Proclamation No. 2045 which continues the suspension of
writ of habeas corpus. Its legal affect is to prevent judicial inquiry into legality of
detention.The function of the PCO is to validate, on constitutional ground, the detention
of a person for any of the offenses covered by Proclamation No. 2045 which continues in
force the suspension of the privilege of the writ of habeas corpus, if the arrest has been
made initially without any warrant, Its legal effect is to render the writ unavailing as a
means of judicially inquiring into the legality of the detention in view of the suspension of
the privilege of the writ. The grant of the power to suspend the said privilege provides the
basis for continuing with perfect legality the detention as long as the invasion or rebellion
has not been repelled or quelled, and the need therefor in the interest of public safety
continues.
Constitutional Law; Criminal Procedures; Habeas Corpus; The power to suspend the
writ of habeas corpus has been conferred on the President. Its significance is the judicial
inquiry is prevented as to the legality of the exercise of said power.The significance of the
conferment of this power, constitutionally upon the President as Commander-in-Chief, is
that the exercise thereof is not subject to judicial inquiry, with a view to determining its
legality in the light of the bill of rights guarantee to individual freedom. This must be so
because the suspension of the privilege is a military measure the necessity of which the
President alone may determine as an incident of his grave responsibility as the
Commander-in-Chief of the Armed Forces, of protecting not only public safety but the very
life of the State, the government and duly constituted authorities. This should be clear
beyond doubt in the case of invasion, along which
474
74
rebellion or insurrection is mentioned by the Constitution, which contingency does
not present a legal question on whether there is a violation of the right to personal liberty
when any member of the invading force is captured and detained.
Same; Same; Same; Military Law; To be effective, as a basic military concept in the art
of warfare, the power to suspend the writ of habeas corpus must be left to the exclusive sound
judgment of the President.The suspension of the privilege of the writ of habeas corpus is
one such measure. To be effective, the occasion for its application on specific individuals
should be left to the exclusive and sound judgment of the President, at least while the
exigencies of invasion, rebellion or insurrection persist, and the public safety requires it, a
matter, likewise, which should be left for the sole determination of the President as
Commander-in-Chief of the Nations armed forces. The need for a unified command in such
contingencies is imperativeeven axiomaticas a basic military concept in the art of
warfare.
Same; Same; Same; Same; If members of an enemy invading force cannot be granted
bail, it is obvious that rebels cannot also be granted bail on being charged in court with
bailable offenses.As previously noted, invasion which is not a statutorily-defined offense
and imminent danger thereof as mentioned in the Constitution indicate that rebellion
and insurrection are also mentioned therein not in their concept as statutorily-defined
public crimes, but as a state or condition of extreme emergency resulting from the existence
of the aforesaid events. Now, if captured enemies from the invading force may not be
charged with any statutory offense that would provide the occasion to demand the right to
bail, it is obvious that persons engaged in rebellion or insurrection may not claim the right
to be released on bail when similarly captured or arrested during the continuance of the
aforesaid contingency. They may not even claim the right to be charged immediately in
court, as they may rightfully do so, were they being charged with an ordinary or common
offense. This is so because according to legal writers or publicists, the suspension of the
privilege of the writ of habeas corpus has the sole effect of allowing the executive to defer
the trials of persons charged with certain offenses during the period of emergency. This
clearly means denial of the right to be released on bail on being charged in court with
bailable offenses.
Same; Same; Same; Suspension of habeas corpus writ carries suspension of right to
bail.The suspension of the privilege of the
475
VOL. 121, APRIL 20, 1983 47
5
writ of habeas corpus must, indeed, carry with it the suspension of the right to bail, if
the governments campaign to suppress the rebellion is to be enhanced and rendered
effective. If the right to bail may be demanded during the continuance of the rebellion, and
those arrested, captured and detained in the course thereof will be released, they would,
without the least doubt, rejoin their comrades in the field thereby jeopardizing the success
of government efforts to bring to an end the invasion, rebellion or insurrection.
Same; Same; Same; Rebels do not give their prisoners the right to be free on bail; hence,
the denial to rebels of right to go on bail merely seeks to equalize matters.It is, likewise, all
too well-known that when the rebel forces capture government troopers or kidnap private
individuals, they do not accord to them any of the rights now being demanded by the herein
petitioners, particularly to be set at liberty upon the filing of bail. As a matter of common
knowledge, captives of the rebels or insurgents are not only not given the right to be
released, but also denied trial of any kind. In some instances, they may even be liquidated
unceremoniously. What is then sought by the suspension of the privilege of the writ of
habeas corpus is, among others, to put the government forces on equal fighting terms with
the rebels, by authorizing the detention of their own rebel or dissident captives as the
rebellion goes on. In this way, the advantage the rebellion forces have over those of the
government, as when they resort to guerilla tactics with sophisticated weapons, is, at least,
minimized, thereby enhancing the latters chances of beating their enemy. It would,
therefore, seem to be ignoring realities in the name of misplaced magnanimity and
compassion, and for the sake of humanity, to grant the demand for respect of rights
supposedly guaranteed by the Constitution by those who themselves seek to destroy that
very same instrument, trampling over it already as they are still waging war against the
government. This stark actuality gives added force and substance to the rationale of the
suspension of the privilege of the writ of habeas corpus in case of invasion, insurrection,
rebellion, or imminent danger thereof, when public safety requires it.
Same; Same; Same; Letter of Instruction No. 1211 prescribing guidelines of arrest of
persons thereunder is merely a directive of the President to his commanders and was not
intended to submit the President to the authority of a judge.By its very nature, and clearly
by its language, LOI 1211 is a mere directive of the President as Commander-in-Chief of
the Armed Forces of the Philippines to his subordinates or implementing officers for the
ultimate objective of
476
76
providing guidelines in the arrest and detention of the persons covered by Presidential
Proclamation No. 2045. The purpose is to insure protection to individual liberties without
sacrificing the requirements of public order and safety and the effectiveness of the campaign
against those seeking the forcible overthrow of the government and duly constituted
authorities. LOI 1211 does not, in any manner, limit the authority of the President to
cause the arrest and detention of persons engaged in, or charged with the crimes or offenses
mentioned in said Proclamation in that he (President) would subject himself to the superior
authority of the judge who, under normal judicial processes in the prosecution of the
common offenses, is the one authorized to issue a judicial warrant after a preliminary
investigation is conducted with a finding of probable cause. Those who would read such an
intention on the part of the President in issuing LOI 1211 seems to do so in their view that
LOI forms part of the law of the land under the 1976 amendment of the Constitution. They
would then contend that PCO issued not in compliance with the provisions of the LOI
would be an illegality and of no effect.
Same; Same; Same; Statutes; Not every Letter of Instruction (LOI) issued by the
President, like LOI 1211, is a law.To form part of the law of the land, the decree, order or
LOI must be issued by the President in the exercise of his extraordinary power of
legislation as contemplated in Section 6 of the 1976 amendments to the Constitution,
whenever in his judgment, there exists a grave emergency or a threat or imminence thereof,
or whenever the interim Batasan Pambansa or the regular National Assembly fails or is
unable to act adequately on any matter for any reason that in his judgment requires
immediate action. There can be no pretense, much less a showing, that these conditions
prompted the President to issue LOI 1211. Verily, not all LOI issued by the President
should be dignified into forming part of the law of the land.
Same; Same; Same; Availment by the President of judicial machinery on arrest of
persons does not mean he intended to renounce or curtail his powers.In the event then
that the judge believes no warrant shall issue, the President, under Presidential
Proclamation No. 2045 and Letter of Instruction No. 1211, is not bound by such finding, as
explicitly provided in paragraph 2 of LOI 1211. That the President avails of the facilities of
the judicial machinery, as is the clear intent of LOI 1211, to aid him in exercising his power
to restrain personal liberty, as dictated by the necessities and exigencies of the emergency,
does not indicate any intention on his part to
477
VOL. 121, APRIL 20, 1983 47
7
renounce or to allow even mere curtailment of his power such that the judicial process
will thereupon take its normal course, under which the detainees or accused would then be
entitled to demand their right of due process, particularly in relation to their personal
liberty. The issuance of the PCO by the President necessarily constitutes a finding that the
conditions he has prescribed in LOI 1211 for the issuance of that PCO have been met, and
intends that the detention would be pursuant to the executive process incident to the
government campaign against the rebels, subversives and dissidents waging a rebellion or
insurrection.
Same; Same; Same; The ruling in the Lansang case (42 SCRA 448) should be re-
examined so as to revert to the rule that suspension of habeas corpus is final and not subject
to judicial interference.What has been said above shows the need of reexamining the
Lansang case with a view to reverting to the ruling of Barcelon vs. Baker, 5 Phil. 87, a 1905
decision, and Montenegro vs. Castaeda, 91 Phil. 882 (1952), that the Presidents decision to
suspend the privilege of the writ of habeas corpus is final and conclusive upon the courts,
and all other persons. This well-settled ruling was diluted in the Lansang case which
declared that the function of the Court is merely to checknot to supplantthe Executive,
or ascertain merely whether he has gone beyond the constitutional limits of his jurisdiction
not to exercise the power vested in him or to determine the wisdom of his act. Judicial
interference was thus held as permissible, and the test as laid down therein is not whether
the President acted correctly but whether he acted arbitrarily. This would seem to be pure
semanticism, if We consider that with particular reference to the nature of the actions the
President would take on the occasion of the grave emergency he has to deal with, which, as
clearly indicated in Section 9, Art. VII of the Constitution partakes of military measures,
the judiciary can, with becoming modesty, ill afford to assume the authority to check or
reverse or supplant the presidential actions. On these occasions, the President takes
absolute command, for the very life of the Nation and its government, which, incidentally,
includes the courts, is in grave peril. In so doing, the President is answerable only to his
conscience, the people and to God. For their part, in giving him the supreme mandate as
their President, the people can only trust and pray that, giving him their own loyalty with
utmost patriotism, the President will not fail them.
Same; Same; Same; Same.Accordingly, We hold that in times of war and similar
emergency as expressly provided in the Con-
478
78
stitution, the President may suspend the privilege of the writ of habeas corpus, which
has the effect of allowing the Executive to defer the prosecution of any of the offenses
covered by Proclamation No. 2045, including, as a necessary consequence, the withholding
for the duration of the suspension of the privilege, of the right to bail. The power could have
been vested in Congress, instead of the President, as it was so vested in the United States
for which reason, when President Lincoln himself exercised the power in 1861, Chief
Justice Taney of the U.S. Supreme Court expressed the opinion that Congress alone
possessed this power under the Constitution. Incidentally, it seems unimaginable that the
judiciary could subject the suspension, if decreed through congressional action, to the same
inquiry as our Supreme Court did with the act of the President, in the Lansang case, to
determine if the Congress acted with arbitrariness.
Same; Same; Same; Courts; Presidential Commitment Orders may not be declared void
by the courts.We further hold that under LOI 1211, a Presidential Commitment Order,
the issuance of which is the exclusive prerogative of the President under the Constitution,
may not be declared void by the courts, under the doctrine of political question, as has
been applied in the Bakerand Castaeda cases, on any ground, let alone its supposed
violation of the provision of LOI 1211, thus diluting, if not abandoning, the doctrine of the
Lansang case.
Fernando, C.J., concurring in the result and dissenting:

Constitutional Law; Courts; Criminal Procedure; Habeas Corpus; While as a general
rule, preventive suspension is an obstacle to judicial inquiry the Supreme Court is
empowered for compelling reasons to inquire with the matter.I concur in the ruling that
while as a general rule preventive detention is an obstacle to judicial inquiry, this Court is
empowered where compelling reasons exist to inquire into the matter. Moreover, the
judiciary once a case has been filed has jurisdiction to act on a petition for bail. I dissent
insofar as the decision overrules Lansang v. Garcia.
Same; Same; Same; Same; Statutes; The judiciary can be appealed to annul legislative
and executive acts.Thus the judiciary can be appealed to and in appropriate cases, annul
executive or legislative acts. For as so often stressed, the Constitution is not only law, but
a higher law, to which other land must bow. Professor Black went on to state: Here, I
think, we are laboring the obvious.
479
VOL. 121, APRIL 20, 1983 47
9
The superior status of the Constitution is clearer even than its standing as law. But if
it is of superior status, and if it is law, then it is law of a superior status. Again, the
important thing is not whether some flaw could be found in the logic by which this was
established. The logic of human institutions is a logic of probability. The important thing is
that this concept of the superior status of the Constitution as law very early became and
has since continued to be a standard part of the way in which the American lawyer and
judge and citizen look at their government. This is not to deny the possibility of judicial
interference with policy formulation, better left to the political branches. It is an entirely
differen t matter of course where the question is one of liberty.
Same; Same; Same; Same; A person arrested has the right to petition for release on bail
once a case is filed.Nor is this all. Once a case is filed, the party detained may avail
himself of the right to bail. If there be such a petition, the court has jurisdiction to grant or
to deny bail in accordance with the constitutional provision. Inasmuch as the return to the
writ filed by the Solicitor General states that a warrant of arrest against detainee Dra.
Aurora Parong was issued on August 4, 1982, by the Municipal Court of Bayombong, for
illegal possession of firearm and ammunition, then clearly, she has a right to invoke such
right, notwithstanding the suspension of the privilege of the writ. So I did argue as counsel
in Hernandez v. Montesa, where a majority of this Court with one vote lacking to make
their conclusion doctrinal agreed with such submission. There was adherence to such a
view in my separate opinions in Lansang and in Buscayno v. Enrile. I do so again and to
that extent dissent.
Same; Same; Same; The approach of the Supreme Court of India has much to
recommend it.Nonetheless, the Supreme Court of In-dia, as he stressed, in the interest of
maintaining constitutionalism, has been able to take a somewhat broad view of its
restricted powers, and has given whatever relief it can to the detained persons. For me
that approach has much to recommend it. This is not to deny that in the event there is a
misapprehension as to the actual facts that led to the preventive detention, the plea for
remedial action should, in the first instance, be addressed to the President. Very likely,
there will be an affirmative response. Even then, the assurance to a party feeling aggrieved
that there could still be resort to judicial review, even if utilized only in rate and
exceptional cases, may conduce to a deeper sense of loyalty to the existing constitutional
order on the part of the misguided or disaffected individuals. Hence, to repeat, this
qualified concurrence on my part.
480
80
Same; Same; Same; It is deplorable and unjustifiable for this Court to turn its back on
the Lansang case doctrine which has elicited international praise.the opinion of the Court,
however, did not stop at dismissing the petition on the ground that the issuance of a
presidential commitment order validates the preventive detention of petitioners. It went
further by reexamining the unanimous ruling in Lansang to the effect that the suspension
of the privilege of the writ of habeas corpus raises a judicial rather than a political question
and holding that it is no longer authoritative. With due respect, I cannot agree to such a
conclusion. In the first place, there was no need to go that far. For me, at least, the
rationale that this Court must accord deference to a presidential commitment order suffices
for the decision of this case. Nor would I limit my dissent on that ground alone. It is for me,
and again I say this with due respect, deplorable and unjustifiable for this Court to turn its
back on a doctrine that has elicited praise and commendation from eminent scholars and
jurists here and abroad.
Teehankee, J., dissenting:
Constitutional Law; Criminal Procedure; Habeas Corpus;Statutes; There is no point for

declaring in advance, by overruling the Lansang case on the right of judicial inquiry into the
suspension of the privilege of habeas corpus, that all checks and barriers are down, as the
suspension of the writ has not been challenged in this case.I submit that the resolution of
the issues in this case does not call for the all-encompassing ruling in the main opinion with
its sweeping scope that would reexamine and overturn the benchmark ruling
in Lansang. The limited suspension of the privilege of the writ of habeas corpus in the two
instances provided under Presidential Proclamation No. 2045 has not been challenged in
this case. So, whats the point of an advance declaration that all checks and barriers are
down? Lansang recognizes the greatest deference and respect that is due the Presidents
determination for the necessity of suspending the privilege of the writ of habeas corpus.
Same; Same; Same; The superior mandate of the Constitution guarantees the right to
bail and rest the power to grant it on courts. This remains notwithstanding the suspension of
habeas corpus.I submit that notwithstanding the suspension of the privilege of the writ of
habeas corpus and the issuance on March 9, 1982 of Letter of Instruction No. 1211 that the
Presidential Commitment Order constitutes authority to keep the subject person under
detention until
481
VOL. 121, APRIL 20, 1983 48
1
ordered released by the President or his duly authorized representative (which is a
mere internal instruction to certain agencies), the higher and superior mandate of the
Constitution guarantees the right to bail and vests the courts with the jurisdiction and
judicial power to grant bail which may not be removed nor diminished nor abdicated. We
cannot but so hold, if we are to be true to the fundamental precept that The Constitution is
a law for rulers and for people equally in war and in peace and covers with the shield of its
protection all classes of men at all times and under all circumstances.
Same; Same; Same; Same; The most authoritative pronouncement on the power of
courts to grant bail to persons arrested by virtue of a Presidential Commitment Order is the
President himself.The most authoritative pronouncement in this regard is of course none
other than the Presidents himself. In all the metropolitan newspapers of April 20, 1983,
the President is reported to have said that Pimentel has been charged with rebellion before
the regional trial court of Cebu City and is therefore under the jurisdiction of the civil court
and not only under the jurisdiction of the military by virtue of the PCO. In a telegram in
reply to the appeal of Msgr. Patrick Cronin, Archbishop of Cagayan de Oro and Misamis
Oriental, for lifting of the PCO on Mayor Aquilino Pimentel of Cagayan de Oro City, the
President said that (T)he disposal of the body of the accused, as any lawyer will inform you,
is now within the powers of the regional trial court of Cebu City and not within the powers
of the President.
Same; Same; Same; A PCO cannot cancel the right to bail.The right to bail cannot
just be cancelled out summarily because of the issuance of a PCO. In the case at bar,
detainee Dr. Aurora Parong is charged in the municipal court with the crime of illegal
possession of firearm, which is a clearly bailable offense. The charges filed against the other
detainees are likewise for clearly bailable offenses. It is elementary that the right to bail in
non-capital offenses and even in capital offenses where evidence of guilt is not strong will
be generally granted and respected by the courts, the natural tendency of the courts
(being) towards a fair and liberal appreciation, particularly taking into consideration the
record and standing of the person charged and the unlikelihood of his fleeing the courts
jurisdiction.
Same; Same; Same; On the majoritys statement that judiciary must yield to the
Presidents power to protect the State, one recalls the statement of the Holy Father John Paul
II that even in excep-
482
82
tional circumstances one can never justify any violation of the dignity of the human
person.As to the self-evident submittal of the main opinion that the duty of the
judiciary to protect individual rights must yield to the power of the Executive to protect the
State, for if the State perishes, the Constitution, with the Bill of Rights that guarantees the
right to personal liberty, perishes with it (at page 16), I can only recall the exhortation of
the Holy Father John Paul II in his address to the Philippine nation on February 17, 1981,
thus: Even in exceptional situations that may at times arise, one can never justify any
violation of the fundamental dignity of the human person or of the basic rights that
safeguard this dignity. Legitimate concern for the security of a nation, as demanded by the
common good, could lead to the temptation of subjugating to the State the human being and
his or her dignity and rights. Any apparent conflict between the exigencies of security and
of the citizens basic rights must be resolved according to the fundamental principle
upheld always by the Churchthat social organization exists only for the service of man
and for the protection of his dignity, and that it cannot claim to serve the common good
when human rights are not safeguarded. People will have faith in the safeguarding of their
security and the promotion of their wellbeing only to the extent that they feel truly involved
and supported in their very humanity.
PETITION for a writ of habeas corpus and mandamus.

Lorenzo M. Taada, Jose W. Diokno, Joker P. Arroyo,Efren M.
Mercado and Alexander Padilla for petitioner.
The Solicitor General for respondents.
DE CASTRO, J.:
Petition for a writ of habeas corpus and mandamus seeking the following relief:
WHEREFORE, petitioners pray this Honorable Court:
1. 1.To immediately issue a writ of habeas corpus directing respondents to appear and
produce the bodies of Dr. AURORA PARONG, NORBERTO PORTUGUESE,
SABINO PADILLA, FRANCIS DIVINAGRACIA, IMELDA DE LOS SANTOS,
BENJAMIN PINEDA, ZENAIDA MALLARI, MARIANO SORIANO, TITO
TANGUILIG, LETTY BALLOGAN, BIENVENIDA GAR
483
VOL. 121, APRIL 20, 1983 483
1. CIA, EUFRONIO ORTIZ, JR., JUANITO GRANADA and TOM VASQUEZ,

forthwith before this Honorable Court and to make due return of the writ therewith;
2. 2.To issue, in addition or in the alternative to the writ of habeas corpus, a writ of
mandamus compelling the respondents to disclose the petitioners present place of
detention and to order the respondents to allow counsel and relatives to visit and
confer with the petitioners;
3. 3.Pending the determination of the legality of their continued detention, to
forthwith release the detainees on bail upon such terms and conditions as the
Court may fix, and after hearing, to order petitioners immediate release; and
4. 4.To grant petitioners such other and further relief as may be deemed just and
equitable in the premises.
The records show that nine (9) of the fourteen (14) detainees herein were arrested
on July 6, 1982 at about 1:45 p.m. when three (3) teams of the PC/INP of
Bayombong, Nueva Viscaya led by Lt. Col. Coronel, 1st Lt. de Guzman and 1st Lt.
Baria, after securing a Search Warrant No. S-82 issued by Judge Sofronio Sayo of
the Court of First Instance of Nueva Viscaya conducted a raid at the residence of
Dra. Aurora Parong. Apprehended during the said raid were Dra. Aurora Parong,
Benjamin Pineda, Sabino Padilla, Francisco Divinagracia, Zenaida Mallari, Letty
Ballogan, Norberto Portuguese, and Mariano Soriano who were then having a
conference in the dining room of Dra. Parongs residence which had been doing on
since 10:00 a.m. of that same day.
The other four (4) detainees herein, namely: Imelda de los Santos, Eufronio Ortiz,
Jr., Juanito Granada, and Bienvenida Garcia, were arrested on the following day,
July 7, 1982 by the same PC teams.
On July 15, 1982, Tom Vasquez was arrested, and his Volkswagen car, bearing
Plate No. DAP 347, was seized by the PC authorities.
The herein fourteen (14) detainees (hereafter referred to sometimes as
petitioners) were all detained at the PC/INP Command Headquarters, Bayombong,
Nueva Vizcaya from July 6, 1982 until their transfer on the morning of August 10,
1982 to an undisclosed place reportedly to Camp Crame,
484
Quezon City, to Echague, Isabela, and to Tuguegarao, Cagayan.
Hence, this petition for the writ of habeas corpus and mandamus filed by
Josefina Garcia-Padilla, mother of detained petitioner Sabino G. Padilla, Jr. on
August 13, 1982. The mandamus aspect of the instant petition has, however,
become moot and academic, and whereabouts of petitioners having already become
known to petitioner Josefina Garcia-Padilla.
It is alleged in the petition that the arrest of petitioners was patently unlawful
and illegal since it was effected without any warrant of arrest; that the PC/INP
raiding team which made the arrest were only armed with a search warrant (No. 3-
82) issued by Judge Sofronio G. Sayo of the Court of First Instance of Nueva
Viscaya, and nowhere in said warrant was authority given to make arrests, much
less detention; that the search warrant which authorized respondents to seize
subversive documents, firearms of assorted calibers, medicine and other subversive
paraphernalia in the house and clinic of Dra. Aurora Parong was a roving and
general warrant and is, therefore, illegal per se because it does not state specifically
the things that are to be seized (Stonehill vs. Diokno, 20 SCRA 383); that no
criminal charges have as of yet been filed against any of the detainees; that the
fourteen (14) detainees were initially held at the PC/INP Command in Bayombong,
Nueva Viscaya from July 6 up to August 10, 1982, but were subsequently
transferred by helicopter in the morning of August 10, 1982 to a place or safehouse
known only to respondents; that there is no judgment, decree, decision or order from
a court of law which would validate the continued detention of the petitioner; that
while it is true that a purported telegram stating the issuance of a Presidential
Commitment Order (PCO) was shown to the detainees on or about July 11 and 12,
1982, but counsel and the detainees have not yet been given a copy of such PCO, nor
notified of its contents, raising a doubt whether such commitment order has in fact
been issued.
It is further alleged that respondents are denying the detainees their
constitutional right to counsel, averring that the detainees were allowed regular
visits by counsel and relatives
485
VOL. 121, APRIL 20, 1983 485
during their period of detention from July 6 to August 10, 1982 at the PC/INP
Command in Bayombong, Nueva Viscaya; however, when a certain Major Cristobal
and Lt. Marcos (alleged to be from the Camp Crame Intelligence Units) took full
control of the investigation, counsels were allowed to visit only on weekends; that
when the detainees were transferred on August 10, 1982 to a place known only to
respondents, the detainees counsels and relatives were not notified, raising the
apprehension that petitioners constitutional rights to silence, to counsel and
against self-incrimination are being violated; that counsels have tried to locate if
the detainees were taken to Camp Crame or Camp Bago Bantay but to no avail;
that Major Forondo of the PC Command in Nueva Viscaya informed Mrs. Josefina
Padilla that the detainees were transferred to Tuguegarao, Cagayan, others to
Echague, Isabela; that there seems to be a deliberate and concerted effort by
respondents to conceal from counsel and relatives the detainees place of detention,
raising the apprehension that respondents are using force, violence, threat,
intimidation and other means which vitiate free will to obtain confession and
statements from the detainees in violation of their constitutional rights.
In the resolution of this Court en banc dated August 17, 1982, the writ of habeas
corpus was issued and respondents were required to make a return of the writ.
Hearing on the petition was set on August 26, 1982.
In the return to the writ filed on August 23, 1982, respondents, through the
Solicitor General, alleged, to wit:
I. AS TO HABEAS CORPUS
1. 1.The detainees mentioned in the petition, with the exception of Tom Vasquez who
was temporarily released on July 17, 1982, after his arrest on July 15, 1982, are all
being detained by virtue of a Presidential Commitment Order (PCO) issued on July
12, 1982, pursuant to LOI No. 1211 dated March 9, 1982, in relation to Presidential
Proclamation No. 2045 dated January 17, 1981. The said PCO was issued by
President Ferdinand E. Marcos for violation of P.D. No. 885 x x x.
2. 2.The corresponding charges against the said detainees have been filed in court and
before the Acting Provincial Fiscal of Nueva
486
1. Viscaya where they are pleading. A warrant of arrest against detainee Dr a. Aurora
Parong was issued on August 4, 1982, by the Municipal Court of Bayombong, for
illegal possession of firearm and ammunition x x x.
II. AFFIRMATIVE DEFENSE

ON HABEAS CORPUS
1. 3.The persons named in the above-mentioned Presidential Commitment Order were
arrested and are being detained for offenses with respect to which under
Proclamation No. 2045, the privilege of the writ of habeas corpus continues to be
suspended, thus:
NOW, THEREFORE, I, FERDINAND E. MARCOS, President/Prime Minister of the Philippines, by

virtue of the powers vested in me by the Constitution, do hereby revoke Proclamation No. 1081
(Proclaiming a state of Martial Law in the Philippines) and Proclamation No. 1104 (Declaring the
Continuation of Martial Law) and proclaim the termination of the state of martial law throughout
the Philippines; Provided, that the call to the Armed Forces of the Philippines to prevent or suppress
lawless violence, insurrection, rebellion and subversion shall continue to be in force and effect; and
Provided that in the two autonomous regions in Mindanao, upon the request of the residents therein,
the suspension of the privilege of the writ of habeas corpus shall continue; and in all other places the
suspension of the privilege of the writ shall also continue with respect to persons at present detained
as well as others who may hereafter be similarly detained for the crimes of insurrection or rebellion,
subversion, conspiracy or proposals to commit such crimes, and for all other crimes and offenses
committed by them in furtherance or on the occasion thereof or incident thereto, or in connection
therewith. (Italics supplied)
The privilege of the writ of habeas corpus is unavailing as to them. Courts cannot
inquire into the validity and cause of their arrest and detention.
1. 4.The power of the President in an emergency, such as that which necessitated the
continued suspension of the privilege of the writ of habeas corpus, to order the
detention of persons believed engaged in crimes related to national security is
recognized. (Aquino vs. Enrile, 59 SCRA 83; Luneta, et al. vs. Special Military
Commission No. 1, et al., 102 SCRA 56).
487
VOL. 121, APRIL 20, 1983 487
1. 5.In the instant petition, petitioner Josefina Garcia-Padilla does not appear to have
been authorized by the thirteen (13) other detainees to represent them in the case
at bar.
Accordingly, the petition was duly heard on August 26, 1982. After hearing, the
Court issued the following resolution, to wit:
G.R. No. 61388 (In the Matter of the Petition for the Insurance of the Writ of Habeas
Corpus of Dr. Aurora Parong, Norberto Portuguese, Sabino Padilla, Francis Divinagracia,
Imelda de los Santos, Benjamin Pineda, Zenaida Mallari, Mariano Soriano, Tito Tanguilig,
Letty Ballogan, Bienvenida Garcia, Eufronio Ortiz, Jr., Juanito Granada and Tom Vasquez;
Josefina Garcia-Padilla vs. Minister Juan Ponce Enrile, Gen. Fabian C. Ver, Gen. Fidel V.
Ramos and Lt. Col. Miguel Coronel.)The return of the writ of habeas corpus and answer
to the prayer for mandamus filed by the Solicitor General for respondents in compliance
with the resolution of August 17, 1982 is NOTED.
At the hearing of this case this morning, former Senator Jose W. Diokno, Attorneys
Alexander A. Padilla and Efren H. Mercado appeared for petitioner. Solicitor General
Estelito P. Mendoza and Assistant Solicitor General Ramon A. Barcelona, appeared for the
respondents. All of the detainees, except Tom Vasquez, who was temporarily released on
July 17, 1982, were present in Court; Dr. Aurora Parong, Norberto Portuguese, Sabino
Padilla, Francis Divinagracia, Imelda de los Santos, Benjamin Pineda, Zenaida Mallari,
Mariano Soriano, Tito Tanguilig, Letty Ballogan, Bienvenida Garcia, Eufronio Ortiz, Jr.
and Juanito Granada. Attorney Alexander A. Padilla argued for the petitioner. Solicitor
General Mendoza argued for the respondents. Former Senator Diokno argued in the
rebuttal. The Court Resolved to require the Solicitor General to SUBMIT within five (5)
days from date the documents relevant to the issuance of the Presidential Commitment
Order. Thereafter, the case shall be considered SUBMITTED for resolution.
As required, the Solicitor General submitted the documents relevant to the issuance
of the Presidential Commitment Order on August 27, 1982, after which the case
was submitted for resolution.
The fundamental issue here, as in all petitioner for the writ of habeas corpus, is
whether or not petitioners detention is
488
legal. We have carefully gone over the claims of the parties in their respective
pleadings as well as in the oral argument during the hearing on August 26, 1982,
and We find that petitioners have not been illegally deprived of their constitutional
right to liberty, neither in the manner of their arrest, nor by their continued
detention, and that the circumstances attendant in the herein case do not warrant
their release on a writ of habeas corpus.
1. At the time of the arrest of the nine (9) of the fourteen (14) detainees herein on
July 6, 1982, records reveal that they were then having conference in the dining
room of Dra. Parongs residence from 10:00 a.m. of that same day. Prior thereto, all
the fourteen (14) detainees were under surveillance as they were then identified as
members of the Communist Party of the Philippines (CPP) engaging in subversive
activities and using the house of detainee Dra. Aurora Parong in Bayombong,
Nueva Viscaya, as their headquarters. Caught in flagrante delicto, the nine (9)
detainees mentioned scampered towards different directions leaving on top of their
conference table numerous subversive documents, periodicals, pamphlets, books,
correspondence, stationaries, and other papers, including a plan on how they would
infiltrate the youth and student sector (code-named YORK). Also found were one
(1) .38 cal. revolver with eight (8) live bullets, nineteen (19) rounds of ammunition
for M16 armalite, eighteen thousand six hundred fifty pesos (P18,650.00) cash
believed to be CPP/NPA funds, assorted medicine packed and ready for distribution,
as sizeable quantity of printing paraphernalia, which were then seized. There is no
doubt that circumstances attendant in the arrest of the herein detainees fall under
a situation where arrest is lawful even without a judicial warrant as specifically
provided for under Section 6(a), Rule 113 of the Rules of Court and allowed under
existing jurisprudence on the matter. As provided therein, a peace officer or a
private person may, without a warrant, arrest a person when the person to be
arrested has committed or actually committing, or is about to commit an offense in
his presence.
From the facts as above narrated, the claim of the petitioners that they were
initially arrested illegally is, therefore,
489
VOL. 121, APRIL 20, 1983 489
without basis in law and in fact. The crimes of insurrection or rebellion, subversion,
conspiracy or proposal to commit such crimes, and other crimes and offenses
committed in the furtherance on the occasion thereof, or incident thereto, or in
connection therewith under Presidential Proclamation No. 2045, are all in the
nature of continuing offenses which set them apart from the common offenses, aside
from their essentially involving a massive conspiracy of nationwide magnitude.
Clearly then, the arrest of the herein detainees was well within the bounds of the
law and existing jurisprudence in our jurisdiction.
2. The arrest of persons involved in the rebellion whether as its fighting armed
elements, or for committing non-violent acts but in furtherance of the rebellion, is
more an act of capturing them in the course of an armed conflict, to quell the
rebellion, than for the purpose of immediately prosecuting them in court for a
statutory offense. The arrest, therefore, need not follow the usual procedure in the
prosecution of offenses which requires the determination by a judge of the existence
of probable cause before the issuance of a judicial warrant of arrest and the
granting of bail if the offense is bailable. Obviously, the absence of a judicial
warrant is no legal impediment to arresting or capturing persons committing overt
acts of violence against government forces, or any other milder acts but equally in
pursuance of the rebellious movement. The arrest or capture is thus impelled by the
exigencies of the situation that involves the very survival of society and its
government and duly constituted authorities. If killing and other acts of violence
against the rebels find justification in the exigencies of armed hostilities which is of
the essence of waging a rebellion or insurrection, most assuredly so in case of
invasion, merely seizing their persons and detaining them while any of these
contingencies continues cannot be less justified. In the language of Moyer vs.
Peabody, cited with approval in Aquino, et al. vs. Ponce Enrile, the President shall
1 2
make the ordinary use of the soldiers to that end that he may kill persons who
resist, and, of course, that he may use the milder
_______________
1212 U.S. 416, 417.

259 SCRA 183 (1974).
490
measure of seizing the bodies of those whom he considers to stand in the way of
restoring peace. Such arrests are not necessarily for punishment, but are by way of
precaution, to prevent the exercise of hostile power.
Thus characterized, the arrest and detention of persons ordered by the President
through the issuance of Presidential Commitment Order (PCO) is merely preventive.
When it comes to a decision by the head of the State upon a matter involving its
life, the ordinary rights of individuals must yield to what he deems the necessities
of the moment. Public danger warrants the substitution of executive process for
judicial process. What should be underscored is that if the greater violation
3
against life itself such as killing, will not be the subject of judicial inquiry, as it
cannot be raised as transgressing against the due process clause that protects life,
liberty and property, lesser violations against liberty, such as arrest and detention,
may not be insisted upon as reviewable by the courts.
3. Transcendentally important, therefore, is the question of whether the issuance
of a Presidential Commitment Order (PCO) has provided the legal basis of the
detention of herein detainees following their arrest for Proclamation No. 2045
covered offenses. This question has to be set at rest promptly and decisively, if We
are to break a seemingly continuous flow of petitions for habeas corpus, as what had
been seen lately of such petitioners being filed in this Court one after the other.
The function of the PCO is to validate, on constitutional ground, the detention of
a person for any of the offenses covered by Proclamation No. 2045 which continues
in force the suspension of the privilege of the writ of habeas corpus, if the arrest has
been made initially without any warrant. Its legal effect is to render the writ
unavailing as a means of judicially inquiring into the legality of the detention in
view of the suspension of the privilege of the writ. The grant of the power to
suspend the said privilege provides the basis for continuing with perfect legality the
detention as long as the invasion or rebellion has not been repelled or quelled, and
the need therefor in the interest of public safety continues.
_______________
3Moyer vs. Peabody, 212 U.S. 78, citing Keely vs. Sanders, 99 U.S. 441, 446, 25 L. Ed. 327, 328.
491
VOL. 121, APRIL 20, 1983 491
The significance of the conferment of this power, constitutionally upon the
President as Commander-in-Chief, is that the exercise thereof is not subject to
judicial inquiry, with a view to determining its legality in the light of the bill of
rights guarantee to individual freedom. This must be so because the suspension of
the privilege is a military measure the necessity of which the President alone may
determine as an incident of his grave responsibility as the Commander-in-Chief of
the Armed Forces, of protecting not only public safety but the very life of the State,
the government and duly constituted authorities. This should be clear beyond doubt
in the case of invasion along which rebellion or insurrection is mentioned by
the Constitution, which contingency does not present a legal question on whether
there is a violation of the right to personal liberty when any member of the invading
force is captured and detained.
The presidential responsibility is one attended with all urgency when so grave a
peril to the life of the Nation besets the country in times of the aforementioned
contingencies. In the discharge of this awesome and sacred responsibility, the
President should be free from interference. The existence of warlike conditions as
are created by invasion, rebellion or insurrection, the direst of all emergencies that
can possibly confront a nation, argues, beyond dispute, against subjecting his
actions in this regard to judicial inquiry or interference from whatever source. If
freedom from judicial review is conceded in the exercise of his peacetime powers as
that of appointment and of granting pardon, denominated as political powers of the
President, it should incontestably be more so with his wartime power, as it were, to
adopt any measure in dealing with situations calling for military action as in case of
invasion, rebellion or insurrection.
The suspension of the privilege of the writ of habeas corpus is one such measure.
To be effective, the occasion for its application on specific individuals should be left
to the exclusive and sound judgment of the President, at least while the exigencies
of invasion, rebellion or insurrection persist, and the public safety requires it, a
matter, likewise, which should be left for the sole determination of the President as
Commander-
492
in-Chief of the Nations armed forces. The need for a unified command in such
contingencies is imperativeeven axiomaticas a basic military concept in the art
of warfare.
4. From the clear language of the Lansang case, the function of Court is merely
4
to checknot to supplantthe Executive, or to ascertain merely whether he has

gone beyond the constitutional limits of his jurisdiction, not to exercise the power
vested in him or to determine the wisdom of his act. If, however, the constitutional
right to bail is granted to the herein petitioners by the court, through the procedure
laid down under Rule 114 of the Rules of court, what inevitably results is the
supplanting of the decision of the President to detain pursuant to Proclamation No.
2045, of persons who come under its coverage.
The specific mention in the Constitution of rebellion and insurrection along with
invasion and imminent danger thereof, shows that the terms rebellion and
insurrection are used therein in the sense of a state or condition of the Nation, not
in the concept of a statutory offense. What, therefore, should determine the legality
of imposing what is commonly referred to as preventive detention resulting from
the suspension of the privilege of habeas corpus, is the necessity of its adoption as a
measure to suppress or quell the rebellion, or beat off an invasion. The necessity for
such measure as a means of defense for national survival quite clearly transcends in
importance and urgency the claim of those detained to the right to bail to obtain
their freedom. To hold otherwise would defeat the purpose of the constitutional
grant of the power to suspend the privilege of the writ of habeas corpus on the
occasions expressly mentioned in the charter. For what indeed could the purpose be
of suspending the privilege of the writ of habeas corpus other than to restrict, at
least for the duration of the emergency of invasion or rebellion, the right to personal
liberty, dictated as it is, in the greater interest of public safety and national security.
So it is that Proclamation No. 2045 mentions not only rebellion or insurrection as
coming within the suspension of
_______________
4Lansang vs. Garcia, 42 SCRA 488.

493
VOL. 121, APRIL 20, 1983 493
the privilege of the writ of habeas corpus, but also other offenses, including
subversion which is not mentioned in the Constitution, committed by reason or on
the occasion of the rebellion, or in connection therewith, or in the furtherance
thereof. There need be no alarm over what libertarian jurists fear as violation of the
constitutional right to personal liberty when the President decrees the suspension of
the privilege of habeas corpus. Only those who give cause for it will be subject to
restriction of their liberty, as the necessity therefor arises in the interest of national
defense and survival. The constitutional guarantee of individual freedom is intact in
all its plenitude and sanctity, save only as the Constitution has envisioned the need
for its limitation, and only to a few, in relation to the entire population, as the
Constitution itself permits in case of overwhelming and imperious necessity.
5. Worthy of profound notice and keen appreciation is the fact that the authority
to suspend the privilege of the writ of habeas corpus has been deliberately vested on
the President as the Commander-in-Chief of the armed forces, together with the
related power to call out the armed forces to suppress lawless violence and impose
martial law. The choice could not have been more wise and sound, for no other
5
official may, with equal capability and fitness, be entrusted with the grave
responsibility that goes with the grant of the authority. The legislature was
considered in the alternative upon which to lodge the power, or to share in its
exercise, but the distilled wisdom of the Constitutional Convention finally made its
choice for the President alone.
As previously noted, invasion which is not a statutorily-defined offense and
imminent danger thereof as mentioned in the Constitution indicate that rebellion
and insurrection are also mentioned therein not in their concept as statutorily-
defined public crimes, but as a state or condition of extreme emergency resulting
from the existence of the aforesaid events. Now, if captured enemies from the
invading force may not be charged with any statutory offense that would provide
the occasion to demand the right to bail, it is obvious that persons engaged in
rebellion or insurrection may not claim the
_______________
5Section 9, Article VII, Constitution.

494
right to be released on bail when similarly captured or arrested during the
continuance of the aforesaid contingency. They may not even claim the right to be
charged immediately in court, as they may rightfully do so, were they being charged
with an ordinary or common offense. This is so because according to legal writers or
publicists, the suspension of the privilege of the writ of habeas corpus has the sole
effect of allowing the executive to defer the trials of persons charged with certain
offenses during the period of emergency. This clearly means denial of the right to
6
be released on bail on being charged in court with bailable offenses.

The suspension of the privilege of the writ of habeas corpus must, indeed, carry
with it the suspension of the right to bail, if the governments campaign to suppress
the rebellion is to be enhanced and rendered effective. If the right to bail may be
demanded during the continuance of the rebellion, and those arrested, captured and
detained in the course thereof will be released, they would, without the least doubt,
rejoin their comrades in the field thereby jeopardizing the success of government
efforts to bring to an end the invasion, rebellion or insurrection.
Realistically, a person engaged in the rebellion does not, upon being arrested or
captured, cease to be as committed to the cause of the movement. Through a grand
conspiracy, as is of the essence of how rebellion is committed, involving a great
mass of confederates bound together by a common goal, he remains in a state of
continued participation in the criminal act or design. His heart still beats with the
same emotion for the success of the movement of which he continues to be an ardent
adherent and ally. It is simple logic then to hold that there should be no legal
compulsion for a captured rebel to be charged in court, only to be released on bail,
while he is, realistically and legally, still as much as part and parcel of the
movement, continuing as it is, as those still engaged in carrying on actively to
attain their goal of overthrowing the established regime. Hence, it is easy to
perceive how impressed with absolute verity is the opinion expressed by two
_______________
6Encyclopedia of the Social Sciences, Vol. VIII, p. 236, 1950 Ed.

495
VOL. 121, APRIL 20, 1983 495
acknowledged authorities on Constitutional law in our country, which We quote:
7
. . . . If the return to the writ shows that the person in custody was apprehended and
detained in areas where the privileges of the writ have been suspended or for the crimes
mentioned in the executive proclamation, the court will suspend further proceedings in the
action.
Impeccable as it is, the opinion could not but find a resonant echo as it did in the
recent case of Buscayno vs. Military Commission; decided after Proclamation No.
8
2045 was issued, which in terms clear and categorical, held that the constitutional
right to bail is unavailing when the privilege of the writ of habeas corpus is
suspended with respect to certain crimes as enumerated or described in the
abovementioned Proclamation.
It is, likewise, all too well-known that when the rebel forces capture government
troopers or kidnap private individuals, they do not accord to them any of the rights
now being demanded by the herein petitioners, particularly to be set at liberty upon
the filing of bail. As a matter of common knowledge, captives of the rebels or
insurgents are not only not given the right to be released, but also denied trial of
any kind. In some instances, they may even be liquidated unceremoniously. What is
then sought by the suspension of the privilege of the writ of habeas corpus is, among
others, to put the government forces on equal fighting terms with the rebels, by
authorizing the detention of their own rebel or dissident captives as the rebellion
goes on. In this way, the advantage the rebellion forces have over those of the
government, as when they resort to guerilla tactics with sophisticated weapons, is,
at least, minimized, thereby enhancing the latters chances of beating their enemy.
It would, therefore, seem to be ignoring realities in the name of misplaced
magnanimity and compassion, and for the sake of humanity, to grant the de-
_______________
7 Political Law of the Philippines by Senator Lorenzo Taada and Atty. Francisco Carreon, Vol. II, p.
236.
8109 SCRA 273.
496
mand for respect of rights supposedly guaranteed by the Constitution by those who
themselves seek to destroy that very same instrument, trampling over it already as
they are still waging war against the government. This stark actuality gives added
force and substance to the rationale of the suspension of the privilege of the writ of
habeas corpus in case of invasion, insurrection, rebellion, or imminent danger
thereof, when public safety requires it.
6. Invoking the Lansang case, however, petitioners would ask this Court to
9
review the issuance of the PCO against them, intimating that arbitrariness
attended its issuance because, relying on the evidence supposedly available in the
hands of the military, they claim they are not guilty of rebellion. They also contend
that the provisions of LOI No. 1211 have not been complied with.
The Lansang case went no further than to pronounce the suspension of the writ
of the privilege of habeas corpus on August 21, 1971, valid and constitutional, on a
finding that there was no arbitrariness attendant to the suspension. It never
intended to suggest that for every individual case of arrest and detention, the writ
of habeas corpus is available, even after the suspension of this privilege, to question
the legality of the arrest and detention on ground of arbitrariness. When a person is
charged in court for an ordinary offense, the law does not authorize the filing of a
petition for habeas corpus based on the ground that there is absolutely no evidence
to hold him for trial, which, in effect, constitutes an allegation of arbitrariness in
the filing of the case against him. The law has afforded him adequate safeguards
against arbitrariness, such as the requirement of determining the existence of a
probable cause by the judge before the issuance of the warrant of arrest. The finding
of such probable cause may not be immediately brought for review by this Court in
a habeas corpus proceeding, on the claim of arbitrariness. The matter is to be
decided on the basis of the evidence, and this Court is not the proper forum for the
review sought, not being a trier of facts. If such a procedure were allowed, it would
be easy to delay and obstruct the pro-
_______________
9Lansang vs. Garcia, supra.

497
VOL. 121, APRIL 20, 1983 497
secution of an offense by a resort to a petition for habeas corpus based on
arbitrariness, which most accused, if not all, would be most inclined, specially when
they are out on bail. The petition now before Us is exactly one of this kind. If
granted, the effect is to transfer the jurisdiction of the trial courts in criminal cases
to this Court, which is simply inconceivable. Moreover, arbitrariness, while so easy
to allege, is hard to prove, in the face of the formidable osbtacle built up by the
presumption of regularity in the performance of official duty. Unexhilaratingly, this
is the revealing experience of this Court in the Lansang case, where it doubtlessly
realized how hardly possible it is to adduce evidence or proof upon which to show
the President having acted with arbitrariness.
7. The last question relates to the legality of the Presidential Commitment Order
(PCO) issued by the President on July 12, 1982, tested by the conformity of its
issuance to the procedure laid down under LOI 1211, petitioners insisting that the
LOI limits the authority of the President to cause the arrest and detention of
persons engaged in or charged with, the crimes mentioned in Proclamation No. 2045.
They contend that the procedure prescribed in the LOI not having been observed,
the PCO issued thereunder did not validate the initial illegal arrest of the herein
petitioners as well as their continued detention.
It must be noted that LOI No. 1211, which provides the guidelines in the arrest
and detention of persons engaged in, or charged with, the crimes mentioned in
Proclamation No. 2045, contemplates of three situations when an arrest can be
made, to wit:
1. 1.The arrest and detention effected by virtue of a warrant issued by a judge;

2. 2.The arrest and detention effected by a military commander or the head of a law
enforcement agency after it is determined that the person or persons to be arrested
would probably escape or commit further acts which would endanger public order
and safety. After the arrest, however, the case shall be immediately referred to the
city or provincial fiscal, or to the municipal, city, circuit, or district judge for
preliminary examination or investigation who, if the evidence
498
1. warrants, shall file the corresponding charges and, thereafter, secure a warrant of
arrest;
2. 3.The military commander or the head of the law enforcement agency may apply to
the President thru the Minister of National Defense, for a Presidential
Commitment Order under the following circumstances:
1. (a)When resort to judicial process is not possible or expedient without endangering

public order and safety; or
2. (b)When the release on bail of the person or persons already under arrest by virtue of
a judicial warrant would endanger said public order and safety.
Petitioners appear to place entire reliance on paragraphs 1 and 2 of LOI No. 1211,
ignoring paragraph 3 of LOI No. 1211, which provides:
3. The above notwithstanding, the military commander or the head of the law enforcement
agency may apply to the President thru the Minister of National Defense, for a Presidential
Commitment Order covering the person or persons believed to be participants in the
commission of the crimes referred to in paragraph 1 under the following circumstances:
1. (a)When resort to judicial process is not possible or expedient without endangering

public order and safety; or
2. (b)When the release on bail of the person or persons already under arrest by virtue
of a judicial warrant would endanger said public order and safety.
The reliance of petitioners on paragraphs 1 and 2 of LOI 1211 as to the alleged

necessity of judicial warrant before a person may be arrested and detained is not
well-founded. Neither is the contention that paragraph 3 of LOI 1211 applies only
when judicial process is not possible. This is a narrow and constricted interpretation
of LOI 1211 when viewed in its entirety. Even in instances when a resort to judicial
process is possible, where, in the judgment of the President, a resort thereto would
not be expedient because it would endanger the public order or safety, a PCO is
justified. So, too, when release on bail in the ordinary judicial process will invite the
same danger.
499
VOL. 121, APRIL 20, 1983 499
By its very nature, and clearly by its language, LOI 1211 is a mere directive of the
President as Commander-in-Chief of the Armed Forces of the Philippines to his
subordinates or implementing officers for the ultimate objective of providing
guidelines in the arrest and detention of the persons covered by Presidential
Proclamation No. 2045. The purpose is to insure protection to individual
liberties without sacrificing the requirements of public order and safety and the
effectiveness of the campaign against those seeking the forcible overthrow of the
government and duly constituted authorities. LOI 1211 does not, in any manner,
limit the authority of the President to cause the arrest and detention of persons
engaged in, or charged with the crimes or offenses mentioned in said Proclamation
in that he (President) would subject himself to the superior authority of the judge
who, under normal judicial processes in the prosecution of the common offenses, is
the one authorized to issue a judicial warrant after a preliminary investigation is
conducted with a finding of probable cause. Those who would read such an intention
on the part of the President in issuing LOI 1211 seems to do so in their view that
LOI forms part of the law of the land under the 1976 amendment of the
Constitution. They would then contend that a PCO issued not in compliance with
10
the provisions of the LOI would be an illegality and of no effect.

To form part of the law of the land, the decree, order or LOI must be issued by
the President in the exercise of his extraordinary power of legislation as
contemplated in Section 6 of the 1976 amendments to the Constitution, whenever in
his judgment, there exists a grave emergency or a threat or imminence thereof, or
whenever the interim Batasan Pambansa or the regular National Assembly fails or
is unable to act adequately on any matter for any reason that in his judgment
requires immediate action. There can be no pretense, much less a showing, that
these conditions prompted the President to issue LOI 1211. Verily, not all LOI
issued by the President should be dignified into forming part of the law of the land.
In the event then that the judge believes no warrant shall issue, the President,
under Presidential Proclamation No. 2045
_______________
Section 6, 1976 Amendment to the Constitution.

10
500
and Letter of Instruction No. 1211, is not bound by such finding, as explicitly
provided in paragraph 2 of LOI 1211. That the President avails of the facilities of
the judicial machinery, as is the clear intent of LOI 1211, to aid him in exercising
his power to restrain personal liberty, as dictated by the necessities and exigencies
of the emergency, does not indicate any intention on his part to renounce or to allow
even mere curtailment of his power such that the judicial process will thereupon
take its normal course, under which the detainees or accused would then be entitled
to demand their right of due process, particularly in relation to their personal
liberty. The issuance of the PCO by the President necessarily constitutes a finding
11
that the conditions he has prescribed in LOI 1211 for the issuance of that PCO have
been met, and intends that the detention would be pursuant to the executive
process incident to the government campaign against the rebels, subversives and
dissidents waging a rebellion or insurrection. The ruling in the Nava vs.
Gatmaitan case, as above intimated, must have shown him that to prosecute the
**
offense through the judicial process of forthwith instead of deferring it, would
neither be wise nor expedient if he were to deal effectively with the grave
emergency at hand.
What has been said above shows the need of reexamining the Lansang case with
a view to reverting to the ruling of Barcelon vs. Baker, 5 Phil. 87, a 1905 decision,
and Montenegro vs. Castaeda, 91 Phil. 882 (1952), that the Presidents decision to
suspend the privilege of the writ of habeas corpus is final and conclusive upon the
courts, and all other persons. This well-settled ruling was diluted in the Lansang
case which declared that the function of the Court is merely to checknot to
supplantthe Executive, or ascertain merely whether he has gone beyond the
constitutional limits of his jurisdiction not to exercise the power vested in him or to
determine the wisdom of his act. Judicial interference was thus held as permissible,
and the test as laid down therein is not whether the President acted correctly but
whether he acted arbitrarily. This would seem to be pure semanticism, if We con-
_______________
Nava vs. Gatmaitan, 90 Phil. 172.

11
The ruling was non-doctrinal for lack of the necessary votes.

**
501
VOL. 121, APRIL 20, 1983 501
sider that with particular reference to the nature of the actions the President would
take on the occasion of the grave emergency he has to deal with, which, as clearly
indicated in Section 9, Art. VII of the Constitution partakes of military measures,
the judiciary can, with becoming modesty, ill afford to assume the authority to
check or reverse or supplant the presidential actions. On these occasions, the
President takes absolute command, for the very life of the Nation and its
government, which, incidentally, includes the courts, is in grave peril. In so doing,
the President is answerable only to his conscience, the people and to God. For their
part, in giving him the supreme mandate as their President, the people can only
trust and pray that, giving him their own loyalty with utmost patriotism, the
President will not fail them.
In his separate opinion in the Lansang case, then Justice Fernando, now our
learned Chief Justice, went along with the proposition that the decision of the
Executive in the exercise of his power to suspend the privilege of the writ of habeas
corpus is his alone, and in his own language, is ordinarily beyond the ken of the
Courts. This is so, as the Founding Fathers must have felt that in the particular
situations at hand, the Ex-ecutive and the Judiciary should maintain a mutually
deferential attitude. This is the very essence of the doctrine of political question,
as determining the justiciability of a case. The wisdom of this concept remains well-
recognized in advanced constitutional systems. To erase it from our own system as
seems to be what was done in the Lansang case, may neither be proper nor prudent.
A good example could be given in the exercise of the presidential power of pardon
which is beyond judicial review, specially under the new Constitution where the
condition that it may be granted only after final conviction has been done away with.
True, the Constitution is the law equally in war and in peace, as Chief Justice
12
Fernando cited in his brilliant separate opinion in the same Lansang case. Precisely,
it is the Constitution that gives the President specific military power in times of
warlike conditions as exist on the occasion
_______________
Ex parte Milligan, 4 Wallace 2 (1866).

12
502
of invasion, insurrection or rebellion. Both power and right are constitutionally
granted, with the difference that the guarantee of the right to liberty is for personal
benefit, while the grant of the presidential power is for public safety. Which of the
two enjoys primacy over the other is all too obvious. For the power is intended as a
limitation of the right, in much the same way as individual freedom yields to the
exercise of the police power of the State in the interest of general welfare. The
difference again is that the power comes into being during extreme emergencies the
exercise of which, for complete effectiveness for the purpose it was granted should
not permit intereference, while individual freedom is obviously for full enjoyment in
time of peace, but in time of war or grave peril to the nation, should be limited or
restricted. In a true sense then, our Constitution is for both peacetime and in time
of war; it is not that in time of war the Constitution is silenced. The Founding
Fathers, with admirable foresight and vision, inserted provisions therein that come
into play and application in time of war or similar emergencies. So it is that, as
proclaimed by the Constitution, the defense of the State is a prime duty of
government. Compulsory military service may be imposed, certainly a mandate that
derogates on the right to personal liberty. It, therefore, becomes self-evident that
the duty of the judiciary to protect individual rights must yield to the power of the
Executive to protect the State, for if the State perishes, the Constitution, with the
Bill of Rights that guarantees the right to personal liberty, perishes with it.
In times of war or national emergency, the legislature may surrender a part of its
power of legislation to the President. Would it not be as proper and wholly
13
acceptable to lay down the principle that during such crises, the judiciary should be
less jealous of its power and more trusting of the Executive in the exercise of its
emergency powers in recognition of the same necessity? Verily, the existence of the
emergencies should be left to Presidents sole and unfettered determination. His
exercise of the power to suspend the privilege of the writ of habeas corpus on the
occasion thereof, should also be beyond judicial review. Arbitrariness, as a ground
for judicial inquiry of
_______________
Section 15, Article VIII, 1973 Constitution.

13
503
VOL. 121, APRIL 20, 1983 503
presidential acts and decisions, sounds good in theory but impractical and
unrealistic, considering how well-nigh impossible it is for the courts to contradict
the finding of the President on the existence of the emergency that gives occasion
for the exercise of the power to suspend the privilege of the writ. For the Court to
insist on reviewing Presidential action on the ground of arbitrariness may only
result in a violent collision of two jealous powers with tragic consequences, by all
means to be avoided, in favor of adhering to the more desirable and long-tested
doctrine of political question in reference to the power of judicial review. 14
Amendment No. 6 of the 1973 Constitution, as earlier cited, affords further

reason for the reexamination of the Lansang doctrine and reversion to that
of Barcelon vs. Baker and Montenegro vs. Castaeda.
Accordingly, We hold that in times of war and similar emergency as expressly
provided in the Constitution, the President may suspend the privilege of the writ of
habeas corpus, which has the effect of allowing the Executive to defer the
prosecution of any of the offenses covered by Proclamation No. 2045, including, as a
necessary consequence, the withholding for the duration of the suspension of the
privilege, of the right to bail. The power could have been vested in Congress, instead
of the President, as it was so vested in the United States for which reason, when
President Lincoln himself exercised the power in 1861, Chief Justice Taney of the
U.S. Supreme Court expressed the opinion that Congress alone possessed this
power under the Constitution. Incidentally, it seems unimaginable that the
15
judiciary could subject the suspension, if decreed through congressional action, to

the same inquiry as our Supreme Court did with the act of the President, in the
_______________
14 As explained in Taada, et al. vs. Cuenco, et al. (103 Phil. 1051), term political question connotes,
in legal parlance, what it means in ordinary parlance, namely, a question of policy. It refers to those
questions, which, under the Constitution, are to be decided by the people in their sovereign capacity, or in
regard to which full discretionary authority has been delegated to the Legislature or Executive branch of
the Government (16 C. J.S. 413).
15 Ex parte Merryman, Federal Case No. 9487 (1861).
504
Lansang case, to determine if the Congress acted with arbitrariness.
We further hold that under LOI 1211, a Presidential Commitment Order, the
issuance of which is the exclusive prerogative of the President under the
Constitution, may not be declared void by the courts, under the doctrine of political
question, as has been applied in the Baker and Castaeda cases, on any ground, let
alone its supposed violation of the provision of LOI 1211, thus diluting, if not
abandoning, the doctrine of the Lansang case. The supreme mandate received by
the President from the people and his oath to do justice to every man should be
sufficient guarantee, without need of judicial overseeing, against commission by
him of an act of arbitrariness in the discharge particularly of those duties imposed
upon him for the protection of public safety which in itself includes the protection of
life, liberty and property. This Court is not possessed with the attribute of
infallibility that when it reviews the acts of the President in the exercise of his
exclusive power, for possible fault of arbitrariness, it would not itself go so far as to
commit the self-same fault.
Finally, We hold that upon the issuance of the Presidential Commitment Order
against herein petitioners, their continued detention is rendered valid and legal,
and their right to be released even after the filing of charges against them in court,
to depend on the President, who may order the release of a detainee or his being
placed under house arrest, as he has done in meritorious cases.
WHEREFORE, the instant petition should be, as it is hereby dismissed.
SO ORDERED.
Guerrero, Plana, Escolin, Vasquez, Relova and Gutierrez, Jr., JJ., concur.
Fernando, C.J., in a separate opinion concurs in the result with qualification
primarily on the respect that must be accorded the constitutional right to bail once
a case is filed and dissents as to the overruling of Lansang v. Garcia.
Teehankee, J., files a separate dissenting opinion.
505
VOL. 121, APRIL 20, 1983 50
5
Makasiar, J., in the result and in overruling the Lansang case.
Aquino, J., on leave.
Concepcion, Jr., J., in the result.
Abad Santos, in the result and in overruling Lansang. I reserve my right on
the question of bail.
Melencio-Herrera, J., in the result.
FERNANDO, C.J., concurring in the result with qualification

primarily on the respect that must be accorded the constitutional right to bail once a
case is filed and dissenting as to the overruling of Lansang v. Garcia:
It does not admit of doubt that the question posed in this petition for the writ of
habeas corpus, and in other similar petitions for that matter, is impressed with
significance that calls for the highest degree of care and circumspection. The result
arrived at by the Court is that once a presidential commitment order is issued, the
detention is rendered valid and legal, the right to be released of the person detained
even after the filing of charges being dependent on the President who may order
the release of a detainee or his being placed under house arrest, as he has done in
meritorious cases. The exhaustive opinion of the Court penned by Justice de
1
Castro likewise reexamines the Lansang doctrine which ruled that the suspension
2
of the privilege of the writ of habeas corpus raises a judicial rather than a political
question and reverts to the principle announced in the earlier cases of Barcelon v.
Baker and Montenegro v. Castaeda, both of which held that the question raised
3 4
is political in character.
I concur in the ruling that while as a general rule preventive detention is an
obstacle to judicial inquiry, this Court is empowered where compelling reasons exist
to inquire into the matter. Moreover, the judiciary once a case has been filed has
_______________
1 Decision, 17.
2 L-33964, December 11, 1971, 42 SCRA 448.
3 5 Phil. 87 (1905).
4 91 Phil. 882 (1952).
506
jurisdiction to act on a petition for bail. I dissent insofar as the decision
overrules Lansang v. Garcia.
1. Petitioners in their application for the writ of liberty assert an infringement of
a right that finds shelter in the fundamental law. This Court, both in normal times
and under emergency conditions, is not susceptible to the accusation that it has not
accorded the most careful study to a plea of such character. Petitioners were heard
and their cases decided. In addition to Lansang, People v. Ferrer, Aquino Jr. v. 5
Ponce Enrile and Aquino Jr. v. Military Commission No. 2 may be cited. This
6 7
Tribunal then has not been insensible to its duty to render fealty to the applicable
mandates of the Constitution. That is to be true to the primordial concept first
announced in the landmark decision of Marbury v. Madison, the opinion being 8
rendered by the illustrious Chief Justice Marshall, enunciating the principle of

judicial review. Our Constitution is quite clear on the matter. So it was held
in Angara v. Electoral Tribunal, the first case of transcendental importance under
9
the 1935 Charter. It is quite manifest that judicial review is not only a power but a
duty. 10
2. Thus the judiciary can be appealed to and in appropriate cases, annul

executive or legislative acts. For as so often stressed, the Constitution is not only
law, but a higher law, to which other law must bow. Professor Black went on to
11
state: Here, I think, we are laboring the obvious. The superior status of the
Constitution is clearer even than its standing as law. But if it is of superior status,
and if it is law, then it is law of a superior status. Again, the important thing is not
whether some flaw could be found in the logic by which this was established. The
logic of human institutions is a logic of probability. The important thing is that this
concept of the
_______________
5 L-32613, December 27, 1972, 48 SCRA 382.

6 L-35546, September 17, 1974, 59 SCRA 183.
7 L-37364, May 9, 1975, 63 SCRA 546.
8 1 Cranch 137 (1803).
9 63 Phil. 139 (1936).
10 Cf. In addition to Angara, there is likewise the case of Taada v. Cuenco, 103 Phil. 1051 (1957).
11 Black, The People and the Court, 8 (1960).

507
VOL. 121, APRIL 20, 1983 507
superior status of the Constitution as law very early became and has since
continued to be a standard part of the way in which the American lawyer and judge
and citizen look at their government. This is not to deny the possibility of judicial
12
interference with policy formulation, better left to the political branches. It is an

entirely different matter of course where the question is one of liberty.
3. An inquiry into the validity of executive or legislative act has been fitly
characterized as both awesome and delicate. Nonetheless, for the judiciary, there is
no choice. To repeat, it is a duty to be performed. This is so especially where the
writ of habeas corpus has been invoked. It is then incumbent on a court to pass on
the legality of the detention. As I had occasion to state in my separate opinion
in Aquino Jr. vs. Enrile: This Court has to act then. The liberty enshrined in the
13
Constitution, for the protection of which habeas corpus is the appropriate remedy,
imposes that obligation. Its task is clear. It must be performed. That is a trust to
which it cannot be recreant. Whenever the grievance complained of is deprivation of
liberty, it is its responsibility to inquire into the matter and to render the decision
appropriate under the circumstances. Precisely, a habeas corpus petition calls for
that response. It cannot be overemphasized that the writ of habeas corpus, as a
14
constitutional right, it, for eminent commentators, protean in scope. A reference to

the opinion of the Court in Gumabon v. Director of Bureau of Prisons may not be
15
amiss. Thus: The writ imposes on judges the grave responsibility of ascertaining
whether there is any legal justification for a deprivation of physical freedom. Unless
there be such a showing, the confinement must thereby cease. It continues:
16
Rightly then could Chafee refer to the writ as The most important human rights
provision in the fundamental law. Nor is such praise unique. Cooley spoke of it as
One of the principal safeguards to personal liberty. For Willoughby, it is the
greatest of the safe
_______________
12 12 Ibid, 8-9.
13 L-35546, September 17, 1974, 59 SCRA 183.
14 Ibid, 286.
15 L-30026, January 30, 1971, 37 SCRA 420.
16 Ibid, 423.
508
guards erected by the civil law against arbitrary and illegal imprisonment by
whomsoever detention may be exercised or ordered. Burdick echoed a similar
sentiment, referring to it as One of the most important bulwarks of liberty.
Fraenkel made it unanimous, for to him. without it much else would be of no avail.
Thereby the rule of law is assured. A full awareness of the potentialities of the writ
of habeas corpus in the defense of liberty coupled with its limitations may be
detected in the opinions of former Chief Justices Arellano, Avancea, Abad Santos,
Paras, Bengzon and [Chief Justice Concepcion]. It fell to Justice Malcolms lot,
however to emphasize quite a few times the breadth of its amplitude and of its
reach. 17
4. So it is in the United States. As so well put by Justice Brennan in Fay v.

Noia: We do well to bear in mind the extraordinary prestige of the Great
18
Writ, habeas corpus ad subjiciendum, in Anglo-American jurisprudence: the most

celebrated writ in English Law, 3 Blackstone Commentaries 129. It is a writ
antecedent to statute, and throwing its root deep into the genius of our common law
* * *. It is perhaps the most important writ known to the constitutional law of
England, affording as it does a swift and imperative remedy in all cases of illegal
restraint and confinement. It is of immemorial antiquity, an instance of its use
occurring in the thirty-third year of Edward I. Secretary of State for Home Affairs v.
OBrien [1923] AC 603, 609 (HL). Received into our own law in the colonial period,
given explicit recognition in the Federal Constitution, Art. I, Sec. 9, cl. 2,
incorporated in the first grant of federal court jurisdiction, Act of September 24,
1978, c 20, sec. 14, 1 Stat 81, 82, habeas corpus was earlier confirmed by Chief
Justice John Marshall to be a Great constitutional privilege Ex parte Bollman and
Swartout (US) 4
_______________
17 Ibid, 423-424. The quotation from Chafee is found in The Most Important Human Right in the
Constitution, 32 Boston Univ. Law Rev. 143 (1947); from Cooley in 2 Constitutional Limitations 709
(1927); from Willoughby in 3 on the Constitution 1612 (1929); from Burdick in the Law of the American
Constitution 27 (1922); from Fraenkel in Our Civil Liberties 6 (1944).
18 372 US 391 (1963).
509
VOL. 121, APRIL 20, 1983 509
Cranch 75, 95, 2L ed 554, 561. Only two Terms ago this Court had occasion to
reaffirm the high place of the writ in our jurisprudence: We repeat what has been
so truly said of the federal writ: there is no higher duty than to maintain it
unimpaired, Bowen v. Johnston, 306 US 19, 26, 83 L ed 455, 461, 59 S Ct 442
(1939), and unsuspended, save only in the cases specified in our
Constitution. Smith v. Bennett, 365 US 708, 713, 61 ed 2d 39, 43, 81 s Ct. 895. 19
5. To repeat, it is the ruling of this Court that an issuance of a presidential

commitment order imparts validity to a detention the right to be released of the
person detained even after the filing of charges being dependent on the President
who may order such release or his being placed under house arrest. As I mentioned
at the outset, I yield a qualified concurrence. The power of preventive detention
where the privilege of the writ of habeas corpus is suspended has been
recognized. The lifting of martial law unfortunately has not been followed by a
20
restoration of peace and order in certain sections of the country. In the proclamation
lifting martial law, the last paragraph of the whereas clause spoke of the awareness
of the government and the Filipino people of public safety continuing to require a
degree of capability to deal adequately with elements who persist in endeavoring to
overthrow the government by violent means and exploiting every opportunity to
disrupt [its] peaceful and productive efforts. Accordingly, in terminating the state
21
of martial law throughout the Philippines, it was provided: that the call to the
Armed Forces of the Philippines to prevent or suppress lawless violence,
insurrection, rebellion and subversion shall continue to be in force and effect; and
Provided that in the two autonomous regions in Mindanao, upon the request of the
residents therein, the suspension of the privileges of the writ of habeas corpus shall
continue; and in all other places the suspension of the privilege of the writ shall also
continue with respect to persons at pre
_______________
19 Ibid, 399-400.
20 Cf. Lansang v. Garcia, L-33964, December 11, 1971, 42 SCRA 448; Barcelon v. Baker, 5 Phil.
87 (1905); Montenegro v. Castaeda, 91 Phil. 882 (1952).
21 Proclamation No. 2045 (1981).
510
sent detained as well as others who may hereafter be similarly detained for the
crimes of insurrection or rebellion, subversion; conspiracy or proposal to commit
such crimes and for all other crimes and offenses committed by them in furtherance
or on the occasion thereof, or incident thereto, or in connection therewith; * *
*. That is the basis for the preventive detention of petitioners in this case.
22
6. The President as commander-in-chief may call out the armed forces to prevent
or suppress lawless violence, invasion, insurrection, or rebellion and in case of
invasion, insurrection, or rebellion, or imminent danger thereof, when the public
safety requires it, may suspend the privilege of the writ of habeas corpus, or place
the Philippines or any part thereof under martial law. There are thus three
23
alternatives which may be availed to meet a grave public danger to the security of
the state. As pointed out by Chief Justice Concepcion in Lansang, prior to the
suspension of the privilege of the writ in 1971, the armed forces had been called out,
but such a move proved inadequate to attain the desired result. Of the two (2)
other alternatives, the suspension of the privilege is the least harsh. Even if only
24
the first alternative were resorted to, the executive could still exercise the power of
preventive detention. Moyer v. Peabody decided by the American Supreme Court,
25
the opinion being penned by Justice Holmes, may be cited. According to the
statement of the facts of that case, it appeared that the governor had declared a
county to be in a state of insurrection, had called out troops to put down the trouble,
and had ordered that the plaintiff should be arrested as a leader of the outbreak,
and should be detained until he could be discharged with safety, and that then he
should be delivered to the civil authorities, to be dealt with according to law. On 26
those facts the American Supreme Court held that preventive detention was
allowable, the test of its validity being one of good faith. The state governor then
could make the ordinary
_______________
22 Ibid.
23 Article VII, Sec. 9 of the Constitution.
24 42 SCRA 448, 488.
25 212 US 78.
26 Ibid, 83.
511
VOL. 121, APRIL 20, 1983 511
use of the soldiers to that end; that he may kill persons who resist, and, of course,
that he may use the milder measure of seizing the bodies of those whom he
considers to stand in the way of restoring peace. Such arrests are not necessarily for
punishment, but are by way of precaution, to prevent the exercise of hostile power.
So long as such arrests are made in good faith and in the honest belief that they are
needed in order to head the insurrection off, the governor is the final judge and
cannot be subjected to an action after he is out of office, on the ground that he had
not reasonable ground for his belief. The last paragraph of Justice Holmes opinion
27
was even more emphatic: When it comes to a decision by the head of the state upon
a matter involving its life, the ordinary rights of individuals must yield to what he
deems the necessities of the moment. Public danger warrants the substitution of
executive process for judicial process. See Keely v. Sanders, 99 U.S. 441, 446, 25 L.
ed. 327, 328. This was admitted with regard to killing men in the actual clash of
arms; and we think it obvious, although it was disputed, that the same is true of
temporary detention to prevent apprehended harm. As no one would deny that
there was immunity for ordering a company to fire upon a mob in insurrection, and
that a state law authorizing the governor to deprive citizens of life under such
circumstances was consistent with the 14th Amendment, we are of opinion that the
same is true of a law authorizing by implication that was done in this
case. Nonetheless, while preventive detention is a proper measure to cope with the
28
danger arising from the insurrection or rebellion, it may continue for such length of
time as to make it punitive in character. If such were the case, I am not prepared to
yield concurrence to the view that this Court is devoid of the power in a habeas
corpus proceeding to inquire into the legality of the detention. As to when such a
stage is reached cannot be set forth with precision. The test would be an appraisal
of the environmental facts of each case. This is not to deny that the presumption
must be in favor not only of the good faith characterizing the presidential action but
of the absence of any arbitrary taint in so ordering preven-
_______________
Ibid, 84-85.
27
Ibid, 86.
28
512
tive detention. It is out of excess of caution and due to the belief that habeas corpus
as a writ of liberty should not be unnecessarily curtailed that I feel compelled to
qualify my concurrence in that respect.
7. Nor is this all. Once a case is filed, the party detained may avail himself of the
right to bail. If there be such a petition, the court has jurisdiction to grant or to deny
bail in accordance with the constitutional provision. Inasmuch as the return to the
29
writ filed by the Solicitor General states that a warrant of arrest against detainee
Dra. Aurora Parong was issued on August 4, 1982, by the Municipal Court of
Bayombong, for illegal possession of firearm and ammunition, then clearly, she has
a right to invoke such right, notwithstanding the suspension of the privilege of the
writ. So I did argue as counsel in Hernandez v. Montesa, where a majority of this
30
Court with one vote lacking to make their conclusion doctrinal agreed with such
submission. There was adherence to such a view in my separate opinions in
Lansang and in Buscayno v. Enrile, I do so again and to that extent dissent.
31 32
8. It may be worthwhile to touch briefly on the exercise of power of preventive

detention in other jurisdictions. The retired Lord President of the Federal Court of
Malaysia Tun Mohamed Suffian in his work on the Malaysian constitution, spoke of
the emergency powers of the executive, the Yang Dipertuan Agung in this wise: If
the Yang Dipertuan Agung (acting on Cabinet advice) is satisfied that a grave
emergency exists whereby the security or economic life of the Federation or any part
thereof is threatened, article 150 empowers him to issue a proclamation of
emergency. He has done so thrice: first, to meet the emergency caused by
Indonesian confrontation, secondly, to meet the emergency caused by the political
crisis
_______________
29 According to Article IV, Sec. 18 of the Constitution: All persons, except those charged with capital
offenses when evidence of guilt is strong, shall, before conviction, be bailable by sufficient sureties.
Excessive bail shall not be required.
30 90 Phil. 172 (1951). It is reported along with Nava v. Gatmaitan and Angeles v. Abaya in a single
resolution.
31 42 SCRA 448.
32 L-47185, January 15, 1981, 102 SCRA 7.
513
VOL. 121, APRIL 20, 1983 513
arising out of the position of the Chief Minister of Sarawak and, thirdly, to meet the
emergency caused as a result of the violence that errupted on 13th May, 1969. (The
1948-1960 emergency was proclaimed under pre-independence law, not under the
constitution). If a proclamation of emergency is issued when Parliament is not
sitting, the Yang Dipertuan Agung must summon Parliament as soon as may be
practicable. Until both Houses of Parliament are sitting, he may promulgate
ordinances having the force of law, if satisfied that immediate action is
required. By virtue of such competence, preventive detention may be
33
ordered.34 The power of preventive detention is likewise recognized in India.

According to Professor Jain, in a leading article, it prevails in many democratic
countries and in some form or other, at one time or other, each democratic country
has taken recourse to preventive detention, especially during the war period. He 35
mentioned the United States Internal Security Act enacted by its Congress in 1950
for emergency detention during an emergency of war, invasion or domestic
insurrection of a person about whom there is a reasonable ground to believe that he
would probably engage in acts of sabotage or espionage. The U.S. Constitution also
provides for suspension of habeas corpus during rebellion or invasion if public safety
so requires. He likewise referred to England, citing Regulation 14B of the Defense
36
of Realm Act Regulations, 1914, during World War I
_______________
32 Suffian, (1976), An Introduction to the Constitution of Malaysia, 226.

33 Cf. Malaysia Soo Kua v. Public Prosecutor [1970] 1. Malaysian Law Journal 91; Karam Singh v. The
Minister of Internal Affairs [1969] 2. Malaysian Law Journal 129; Phong Chin Hock v. Public
Prosecutor (1977) 1 Malaysian Law Journal 70. The above provision is likewise applicable to Singapore.
This decision from that jurisdiction may be cited: Lim Hock Siew v. Minister of Interior and
Defense [1918] 2 Malaysian Law Journal 219. There is likewise relevance to these articles: Hickling, The
Prerogative in Malaysia 17 Malaya Law Review 207 (1975) and Jayakumar, Emergency Powers in
Malaysia 18 Malaya Law Review 149 (1976).
35 Jain, Judicial Creativity and Preventive Detention in India, 262.
36 Ibid.
514
and Regulation 18B of the Defense Regulations during World War II which
according to him led to the celebrated case of Liversidge v. Anderson. Then he 37
turned to his own country: In India, because of unstable law and order situation,
preventive detention has been in vogue since its independence in 1947. After the
commencement of the Constitution, Parliament enacted the Preventive Detention
Act, 1950, to lay down a legal framework for preventive detention on certain
grounds. The present day law for the purpose is the Maintenance of Internal
Security Act, 1971. A salient feature of the law of preventive detention in India has
been to confer a very broad discretion on the administrative authority to order
preventive detention of a person in certain circumstances. He spoke of the 38
relevant constitutional provisions having a bearing on preventive detention: A law

for preventive detention can be made by Parliament exclusively under entry 9, List
1, for reasons connected with defensee, foreign affairs or the security of India.
Further, under entry 3, List 111, Parliament and the State Legislatures can
concurrently make a law for preventive detention for reasons connected with the
security of a State, maintenance of public order, or maintenance of supplies and
services essential to the community. Parliament thus has a wide legislative
jurisdiction in the matter as it can enact a law of preventive detention for reasons
connected with all the six heads mentioned above. The Preventive Detention Act,
1950, and now the Maintenance of Internal Security Act, 1971, have been enacted
by Parliament providing for preventive detention for all these six heads. For him 39
the law of preventive detention in India has therefore been too much
administrative-ridden and the scope of judicial review has been very much
limited. He made a careful study of the cases on preventive detention in India. As
40
he pointed out, the range and magnitude of administrative control over the
individuals personal liberty is very vast, and the range of judicial control is very
restrictive, as the basic question,
_______________
37 Ibid. Liversidge is reported in [1942] A.C. 206.

38 Ibid, 263.
39 Ibid, 263-264.
40 Ibid, 263.
515
VOL. 121, APRIL 20, 1983 515
whether a person should be detained or not on the facts and circumstances of the
case, lies within the scope of administrative discretion and beyond judicial
review. Nonetheless, the Supreme Court of India, as he stressed, in the interest of
41
maintaining constitutionalism. has been able to take a somewhat broad view of its
restricted powers, and has given whatever relief it can to the detained
persons. For me that approach has much to recommend it. This is not to deny that
42
in the event there is a misapprehension as to the actual facts that led to the
preventive detention, the plea for remedial action should, in the first instance, be
addressed to the President. Very likely, there will be an affirmative response. Even
then, the assurance to a party feeling aggrieved that there could still be resort to
judicial review, even if utilized only in rare and exceptional cases, may conduce to a
deeper sense of loyalty to the existing constitutional order on the part of the
misguided or disaffected individuals. Hence, to repeat, this qualified concurrence on
my part.
9. The opinion of the Court, however, did not stop at dismissing the petition on
the ground that the issuance of a presidential commitment order validates the
preventive detention of petitioners. It went further by reexamining the unanimous
ruling in Lansang to the effect that the suspension of the privilege of the writ of
habeas corpus raises a judicial rather than a political question and holding that it is
no longer authoritative. With due respect, I cannot agree to such a conclusion. In
the first place, there was no need to go that far. For me, at least, the rationale that
this Court must accord deference to a presidential commitment order suffices for
the decision of this case. Nor would I limit my dissent on that ground alone. It is for
me, and again I say this with due respect, deplorable and unjustifiable for this
Court to turn its back on a doctrine that has elicited praise and commendation from
eminent scholars and jurists here and abroad.
10. That is easily understandable. The learned, comprehension and unanimous
Lansang opinion penned by Chief
_______________
Ibid, 303-304.
41
Ibid, 304.
42
516
Justice Concepcion concurred in by all the Justices, to my mind, explains with
43
lucidity and force why the question is judicial rather than political. Thus: Indeed,
the grant of power to suspend the privilege is neither absolute nor unqualified. The
authority conferred by the Constitution, both under the Bill of Rights and under the
Executive Department, is limited and conditional. The precept in the Bill of Rights
establishes a general rule, as well as an exception thereto. What is more, it
postulates the former in the negative, evidently to stress its importance, by
providing that (t)he privilege of the writ of habeas corpus shall not be suspended * *
*. It is only by way of exception that it permits the suspension of the privilege in
cases of invasion, insurrection, or rebellion-or, under Art. VII of the Constitution,
imminent danger thereof-when the public safety requires it, in any of which events
the same may be suspended wherever during such period the necessity for such
suspension shall exist. For from being full and plenary, the authority to suspend
the privilege of the writ is thus circumscribed, confined and restricted, not only by
the prescribed setting or the conditions essential to its existence, but, also, as
regards the time when and the place where it may be exercised. These factors and
the aforementioned setting or conditions mark, establish and define the extent, the
confines and the limits of said power, beyond which it does not exist. And, like the
limitations and restrictions imposed by the Fundamental Law upon the legislative
department, adherence thereto and compliance therewith may, within proper
bounds, be inquired into by courts of justice. Otherwise, the explicit constitutional
provisions thereon would be meaningless. Surely, the framers of our Constitution
could not have intended to engage in such a wasteful exercise in futility. The then 44
Chief Justice continued: Much less may the assumption be indulged in when we
bear in mind that our political system is essentially democratic and republican in
character and that the suspension of the privilege affects the most fundamental
element of that system, namely, individual freedom. Indeed, such
_______________
43 I had a separate opinion, dissenting in part, but I concurred in the holding that the question is
judicial rather than political.

44 42 SCRA 448, 473-474.
517
VOL. 121, APRIL 20, 1983 517
freedom includes and connotes, as well as demands, the right of every single
member of our citizenry to freely discuss and dissent from, as well as criticize and
denounce, the views, the policies and the practices of the government and the party
in power that he deems unwise, improper or inimical to the commonweal, regardless
of whether his own opinion is objectively correct or not. The untrammelled
enjoyment and exercise of such rightwhich, under certain conditions, may be a
civic duty of the highest orderis vital to the democratic system and essential to its
successful operation and wholesome growth and development. 45
11. One of the merits of the ponencia of Chief Justice Concepcion is that it is
infused with a sense of realism. These are his words: Manifestly, however, the
liberty guaranteed and protected by our Basic Law is one enjoyed and exercised, not
in derogation thereof, but consistently therewith, and, hence, within the framework
of the social order established by the Constitution and the context of the Rules of
Law. Accordingly, when individual freedom is used to destroy that social order, by
means of force and violence, in defiance of the Rule of Lawsuch as by rising
publicly and taking arms against the government to overthrow the same, thereby
committing the crime of rebellionthere emerges a circumstance that may warrant
a limited withdrawal of the aforementioned guarantee or protection, by suspending
the privilege of the writ of habeas corpus, when public safety requires it. Although
we must be forewarned against mistaking mere dissentno matter how emphatic
or intemperate it may befor dissidence amounting to rebellion or insurrection, the
Court cannot hesitate, much less refusewhen the existence of such rebellion or
insurrection has been fairly established or cannot reasonably be deniedto uphold
the finding of the Executive thereon, without, in effect, encroaching upon a power
vested in him by the Supreme Law of the land and depriving him, to this extent, of
such power, and, therefore, without violating the Constitution and jeopardizing the
very Rule of Law the Court is called upon to epitomize. 46
_______________
Ibid, 474-475.
45
Ibid, 475.
46
518
12. After which this Court, as set forth in the Lansang opinion, considered the
precise nature of its function: Article VII of the Constitution vests in the Executive
the power to suspend the privilege of the writ of habeas corpus under specified
conditions. Pursuant to the principle of separation of powers underlying our system
of government, the Executive is supreme within his own sphere. However, the
separation of powers, under the Constitution, is not absolute. What is more, it goes
hand in hand with the system of checks and balances, under which the Executive is
supreme, as regards the suspension of the privilege, but only if and when he acts
within the sphere allotted to him by the Basic Law, and the authority to determine
whether or not he has so acted is vested in the Judicial Department, which, in this
respect, is, in turn, constitutionally supreme. Further: In the exercise of such
47
authority, the function of the Court is merely to checknot to supplantthe

Executive, or to ascertain merely whether he has gone beyond the constitutional
limits of his jurisdiction, not to exercise the power vested in him or to determine the
wisdom of his act. To be sure, the power of the Court to determine the validity of the
contested proclamation is far from being identical to, or even comparable with, its
power over ordinary civil or criminal cases elevated thereto by ordinary appeal from
inferior courts, in which cases the appellate court has all of the powers of the court
of origin. It is clear the competence of this Court to pass upon the validity of the
48
suspension of the privilege of the writ is confined within limits that preclude the
assumption of power that rightfully belongs to the Executive. There would then be,
to my mind, no sufficient justification to retreat from a position that assures judicial
participation on a matter of momentous consequence. Moreover, to the extent that
such a move has had the benefit of judicial appraisal, and thereafter approval, to
that extent there may be less valid opposition and hopefully greater understanding
of why such a step had to be taken.
13. With Lansang overruled, the doctrine that the suspension of the privilege of
the writ announced in Barcelon v.
_______________
Ibid, 479-480.
47
Ibid, 480.
48
519
VOL. 121, APRIL 20, 1983 519
Baker and Montenegro v. Castaeda will be revived. This for me is unfortunate.
49 50
The Montenegro decision, as I had occasion to state owed its existence to the
compulsion exerted by Barcelon v. Baker, a 1905 decision. This Court was partly
misled by an undue reliance in the latter case on what it considered to be
authoritative pronouncements from such illustrious American jurists as Marshall,
Story, and Taney. That is to misread what was said by them. This is most evident in
the case of Chief Justice Marshall, whose epochal Marbury v. Madison was cited.
Why that was so is difficult to understand. For it speaks to the contrary. It was by
virtue of this decision that the function of judicial review owes its origin
notwithstanding the absence of any explicit provision in the American Constitution
empowering the courts to do so. Thus: It is emphatically the province and duty of
the judicial department to say what the law is. Those who apply the rule to
particular cases, must of necessity expound and interpret that rule. If two laws
conflict with each other, the courts must decide on the operation of each. So if a law
be in opposition to the constitution; if both the law and the constitution apply to a
particular case, so that the court must either decide that case conformably to the
law, disregarding the constitution; or conformably to the constitution, disregarding
the law; the court must determine which of these conflicting rules governs the case.
This is of the very essence of judicial duty. If, then, the courts are to regard the
constitution, and the constitution is superior to any ordinary act of the legislature,
the constitution, and not such ordinary act, must govern the case to which they both
apply. The opinion went on to say Nor is the excerpt from Justice Story, speaking
51
for the United States Supreme Court, in Martin v. Mott, as made clear in the
opinion of the Chief Justice, an authority directly in point. There, a militiaman had
been convicted of failing to respond to a call, made under the Act of 1795, to serve
during the War of 1812. His property was taken to satisfy the judgment. He brought
an action of replevin. The American Constitution empowers its
_______________
49 5 Phil. 87.
50 91 Phil. 882 (1952).
51 42 SCRA 448, 505-506.
520
Congress to provide for calling forth the Militia in certain cases, and Congress did
provide that in those cases the President should have authority to make the call. All
that Justice Story did in construing the statute in the light of the language and
purpose of her Constitution was to recognize the authority of the American
President to decide whether the exigency has arisen. In stating that such power was
exclusive and thus had a conclusive effect, he relied on the language employed,
impressed with such a character. The constitutional provision on the suspension of
the privilege of the writ is, as shown, anything but that. Chief Justice Taney, in
Luther v. Borden, likewise had to deal with a situation involving the calling out of
the militia. As a matter of fact, an eminent commentator speaking of the two above
decisions had this apt observation: The common element in these opinions would
seem to be a genuine judicial reluctance to speak in a situation where the voice of
the Court, even if heard, could not have any effect. More than this, both Story and
Taney seem to share the suspicion, unusual in them, that under a popular form of
government there are certain questions that the political branches must be trusted
to answer with finality. What was said next is even more pertinent. Thus: It would
be dangerous and misleading to push the principles of these cases too far, especially
the doctrine of political questions as implied in Luther v. Borden. Given the
opportunity to afford a grievously injured citizen relief from a palpably
unwarranted use of presidential or military power, especially when the question at
issue falls in the penumbra between the political and the justiciable, the Court
will act as if it had never heard of this doctrine and its underlying assumption that
there are some powers against which the judiciary simply cannot be expected to act
as the last line of defense. It would thus seem evident that support for the hitherto
prevailing Montenegro ruling was rather frail. Happily, with our decision, it is no
longer capable of the mischief to which it does lend itself of an undue diminution of
judicial power to the prejudice of constitutional rights.
52
_______________
Ibid, 506-507.
52
521
VOL. 121, APRIL 20, 1983 521
14. An opinion of a court, especially this Tribunal, should not ignore the
environmental facts which gave rise to a litigation where the issues arise from
problems inseparable from national security. There is, in addition, the need to take
into consideration the pressure of contemporary events. For as has so often been
stressed, judicial process does not take place in a social void. The questions before
the Court are to be viewed with full awareness of the consequences attendant to the
decision reached. As so tersely expressed by Justice Tuason in Araneta v.
Dinglasan: We test a rule by its results. More often than not especially during
53 54
times of stress, it is inescapable that efforts be made to reconcile time-tested

principles to contemporary problems. The judiciary is called upon to do its part.
There is wisdom in these words of Justice Tuason from the same opinion: The truth
is that under our concept of constitutional government, in times of extreme perils
more than in normal circumstances, The various branches, executive, legislative,
and judicial, given the ability to act, are called upon to perform the duties and
discharge the responsibilities committed to them respectively. To repeat, I accord
55
the fullest respect to the mode and manner in which my brethren performed their
duty and discharged their responsibility in passing upon the transcendental
question raised in this petition. With the basic premise of robust concern for
individual rights to which I have been committed, however, I have no choice except
to vote the way I did, even if for those whose opinions I value conformity with the
hitherto unquestioned verities may at times prove to be less than adequate to meet
the exigencies of the turbulent present.
_______________
53 84 Phil. 368 (1949).

54 Ibid, 376.
55 Ibid, 383.
522
SEPARATE OPINION
TEEHANKEE, J., dissenting:
I am constrained to dissent from the all-encompassing scope of the main opinion of

Mr. Justice de Castro which would overturn the landmark doctrine of Lansang vs.
Garcia which upheld the Supreme Courts authority to inquire into the existence of
1
factual bases for the Presidents suspension of the privilege of the writ of habeas
corpus in order to determine the constitutional sufficiency thereof and would revert
to the retrogressive and colonial era ruling of Barcelon vs. Baker and Montenegro
2
vs. Castaeda that the Presidents decision to so suspend the privilege of the writ
3
is final and conclusive upon the courts and all other persons, and would further
deny the right to bail even after the filing of charges in court to persons detained
under Presidential Commitment Orders.
This case, as in other like cases, focuses on the grievances that persons detained
or charged for the crimes of insurrection, rebellion, subversion, conspiracy or
proposal to commit such crimes, invariably bring to this Court. They complain, as
petitioners do here, of being arrested without any warrant of arrest; of being
informed of purported telegrams concerning the issuance of a Presidential
Commitment Order (PCO) authorizing their arrest and detention, but that they are
not given a copy of such PCO nor notified of its contents, raising doubts whether
such PCO has in fact been issued; of being kept in isolation or transferred to so-
called safehouses and being denied of their constitutional right to counsel and to
silence; of prolonged detention without charges; of a seeming deliberate and
concerted effort by respondents to conceal from counsel and relatives the detainees
place of detention, raising the apprehension that respondents are using force,
violence, threat, intimidation and other means which vitiate free will to obtain
confessions and statements from the detainees in violation of their constitutional
rights; and of their counsel and families
_______________
1 42 SCRA 448 (1971).

2 5 Phil. 87 (1905).
3 91 Phil. 882 (1952).
523
VOL. 121, APRIL 20, 1983 523
undergoing great difficulties in locating or having access to them (main opinion at p.
3).
The State through the Solicitor General on the other hand invariably denies all
such charges and submits affidavits of the arresting officers and detention
custodian that detainees are afforded decent and humane treatment, further
countering that such claims are merely calculated to arouse sympathy and as
propaganda against the Government and its institutions.
In many such cases, however, the Court in issuing the writ of habeas corpus
requiring respondents to make a return of the writ includes a resolution, in
recognition of the detainees constitutional rights, to allow counsel for petitioners to
visit and confer with the detainee(s) in an atmosphere of confidentiality consistent
with reasonable security measures which respondents may impose, In other cases
4
where respondents military officials have allegedly denied having in their custody
the person(s) detained, the Court has issued its resolution on the assumption that
the detained person is in the custody of respondents, that there be due observance
and respect of his right to counsel and other constitutional rights by respondents. 5
Respondents return through the Solicitor General in the case at bar states that
the detainees are all detained by virtue of a Presidential Commitment Order issued
on July 12, 1982 (several days after their arrest without warrant on July 6 and 7,
1982) and that corresponding charges against the detainees were filed in court and
before the Acting Provincial Fiscal of Nueva Viscaya where they are pending. As to
the detainee Dr. Aurora Parong, the return further states that a warrant of arrest
was issued against her on August 4, 1982 by the Municipal Court of Bayombong for
illegal possession of a firearm and ammunition. As in all other returns in similar
cases, the Solicitor General asserts that the privilege of the writ of habeas corpus is
unavailing as to them. Courts cannot
_______________
4 Resolution of July 30, 1982 in G.R. No. 61016 In re: Petition for Habeas Corpus of Horacio R. Morales,
Jr.
5Resolution of April 4, 1983 in G.R. No. 63581 In re: Petition for Habeas Corpus of Carl Gaspar.
524
inquire into the validity and cause of their arrest and detention by virtue of the
continued suspension, under Presidential Proclamation No. 2045 (which proclaimed
the termination of martial law in the Philippines), of the privilege of the writ of
habeas corpus in the two autonomous regions in Mindanao and in all other places
with respect to persons detained for suspected involvement in crimes related to
national security.
The main opinion confronts the question of whether the issuance of a
Presidential Commitment Order (PCO) has provided the legal basis of the detention
of herein detainees following their arrest for Proclamation No. 2045-covered
offenses, and remarks that this question has to be set at rest promptly and
decisively, if we are to break a seemingly continuous flow of petitions for habeas
corpus, as what had been seen lately of such petitions being filed in this Court one
after the other.
I. I submit that the resolution of the issues in this case does not call for the all-
encompassing ruling in the main opinion with its sweeping scope that would
reexamine and overturn the benchmark ruling in Lansang. The limited suspension
of the privilege of the writ of habeas corpus in the two instances provided under
Presidential Proclamation No. 2045 has not been challenged in this case. So, whats
the point of an advance declaration that all checks and barriers are
down? Lansang recognizes the greatest deference and respect that is due the
Presidents determination for the necessity of suspending the privilege of the writ of
habeas corpus. But Lansang sets at the same time the constitutional confines and
limits of the Presidents power to suspend the privilege of the writ and enunciates
the constitutional test, not of the correctness of the Presidents decision, but that
the Presidents decision to suspend the privilege not suffer from the constitutional
infirmity of arbitrariness. Thus, after laying the premise that every case must
6
depend on its own circumstances, the Court therein thru then Chief Justice
Roberto Concepcion held that:
Indeed, the grant of power to suspend the privilege is neither absolute nor unqualified.
The authority conferred by the Constitution, both under the Bill of Rights and under the
Executive
_______________
6 42 SCRA at page 481.
525
VOL. 121, APRIL 20, 1983 525
Department, is limited and conditional. The precept in the Bill of Rights establishes a
general rule, as well as an exception thereto. What is more, it postulates the former in
the negative, evidently to stress its importance, by providing that (t)he privilege of the writ
of habeas corpus shall not be suspended x x x. It is only by way of exception that it permits
the suspension of the privilege in cases of invasion, insurrection, or rebellion-or, under Art.
VII of the Constitution, imminent danger thereofwhen the public safety requires it, in
any of which events the same may be suspended wherever during such period the necessity
for such suspension shall exist. Far from being full and plenary, the authority to suspend
the privilege of the writ is thus circumscribed, confined and restricted, not only by the
prescribed setting or the conditions essential to its existence, but, also, as regards the time
when an the place where it may be exercised. These factors and the aforementioned setting
or conditions mark, establish and define the extent, the confines and the limits of said
power, beyond which it does not exist. And, like the limitations and restrictions imposed by
the Fundamental Law upon the legislative department, adherence thereto and compliance
therewith may, within proper bounds, be inquired into by courts of justice. Otherwise, the
explicit constitutional provisions thereon would be meaningless. Surely, the framers of our
Constitution could not have intended to engage in such a wasteful exercise in futility.
Much less may the assumption be indulged in when we bear in mind that our political
system is essentially democratic and republican in character and that the suspension of the
privilege affects the most fundamental element of that system, namely, indivdual freedom.
Indeed, such freedom includes and connotes, as well as demands, the right of every single
member of our citizenry to freely discuss and dissent from, as well as criticize and denounce,
the views, the policies and the practices of the government and the party in power that he
deems unwise, improper or inimical to the commonweal, regardless of whether his own
opinion is objectively correct or not. The untrammeled enjoyment and exercise of such
rightwhich, under certain conditions, may be a civic duty of the highest orderis vital to
the democratic system and essential to its successful operation and wholesome growth and
development.
Manifestly, however, the liberty guaranteed and protected by our Basic Law is one
enjoyed and exercise, not in derogation thereof, but consistently therewith, and, hence,
within the framework of the social order established by the Constitution and the context of
the Rule of Law. Accordingly, when individual freedom is used to destroy that social
order, by means of force and violence, in defiance of the
526
Rule of Lawsuch as by rising publicly and taking arms against the government to
overthrow the same, thereby committing the crime of rebellionthere emerges a
circumstance that may warrant a limited withdrawal of the aforementioned guarantee or
protection, by suspending the privilege of the writ of habeas corpus, when public safety
requires it. Although we must be forewarned against mistaking mere dissentno matter
how emphatic or intemperate it may befor dissidence amounting to rebellion or
insurrection, the Court cannot hesitate, much less refusewhen the existence of such
rebellion or insurrection has been fairly established or cannot reasonably be deniedto
uphold the finding of the Executive thereon, without, in effect, encroaching upon a power
vested in him by the Supreme Law of the land and depriving him, to this extent, of such
power, and, therefore, without violating the Constitution and jeopardizing the very Rule of
Law the Court is called upon to epitomize. 7
II. The crucial issue at bar is that adversely decided by the main opinion, denying
petitioners motion that the Court order their release on bail, on the ground that the
suspension of the privilege of the writ of habeas corpus for any of the offenses
covered by Proclamation No. 2045 includes, as a necessary consequence, the
withholding for the duration of the suspension of the privilege of the right to bail
(main opinion, at page 16).
1. I submit that notwithstanding the suspension of the privilege of the writ of
habeas corpus and the issuance on March 9, 1982 of Letter of Instruction No. 1211
that the Presidential Commitment Order constitutes authority to keep the subject
person under detention until ordered released by the President or his duly
authorized representative (which is a mere internal instruction to certain agencies),
the higher and superior mandate of the Constitution guarantees the right to bail
and vests the courts with the jurisdiction and judicial power to grant bail which
may not be removed nor diminished nor abdicated. We cannot but so hold, if we are
to be true to the fundamental precept that The Constitution is a law for rulers and
for people equally in war and in peace and covers with the
_______________
7Idem, at pages 473-475; emphasis copied.

527
VOL. 121, APRIL 20, 1983 527
shield of its protection all classes of men at all times and under all circumstances.
The argument that otherwise the purpose of the suspension of the privilege
would be defeated ignores the overwhelming capability of the State and its military
and police forces to keep suspects under surveillance and the courts imposition of
reasonable conditions in granting bail, such as periodic reports to the authorities
concerned, and prohibiting their going to certain critical areas.
2. The most authoritative pronouncement in this regard is of course none other
than the Presidents himself. In all the metropolitan newspapers of April 20, 1983,
the President is reported to have said that Pimentel has been charged with
rebellion before the regional trial court of Cebu City and is therefore under the
jurisdiction of the civil court and not only under the jurisdiction of the military by
virtue of the PCO. In a telegram in reply to the appeal of Msgr. Patrick Cronin,
Archbishop of Cagayan de Oro and Misamis Oriental, for lifting of the PCO on
Mayor Aquilino Pimentel of Cagayan de Oro City, the President said that (T)he
disposal of the body of the accused, as any lawyer will inform you, is now within the
powers of the regional trial court of Cebu City and not within the powers of the
President.
3. This is but in consonance with the majority holding in the leading 1951 cases
of Nava vs. Gatmaitan and Hernandez vs. Montesa (although it failed one vote
8
short of the required majority of six affirmative votes at the time) as expounded by
then Chief Justice Ricardo Paras and Associate Justice (later Chief Justice) Cesar
Bengzon and Associate Justices Pedro Tuason, Alex Reyes and Fernando Jugo that
after formal indictment in court by the filing against them of an information
charging rebellion with multiple murder, etc., accused persons covered by the
proclamation of suspension of the privilege of the writ of habeas corpus are entitled
to the right to bail.
4. As stressed by then Chief Justice Ricardo Paras, (T)he right to bail, along
with the right of an accused to be heard by
_______________
8Jointly decided with Angeles vs. Abaya and reported in 90 Phil. 172(1951).
528
himself and counsel, to be informed of the nature and cause of the accusation
against him, to have a speedy and publictrial, to meet the witnesses face to face,
and to have compulsory process to secure the attendance of witnesses in his behalf
(Article III, Section 1, Paragraph 17, of the Constitution), tends to aid the accused
to prove his innocence and obtain acquittal. If it be contended that the suspension of
the privilege of the writ of habeas corpus includes the suspension of the distinct
right to bail or to be provisionally at liberty, it would a fortiori imply the suspension
of all his other rights (even the right to be tried by a court) that may win for him
ultimate acquittal and, hence, absolute freedom. The latter result is not insisted
upon for being patently untenable.
Then Chief Justice Paras stressed that x x x The privilege of the writ of habeas
corpus and the right to bail guaranteed under the Bill of Rights are separate and co-
equal. If the intention of the framers of the Constitution was that the suspension of
the privilege of the writ of habeas corpus carries or implies the suspension of the
right to bail, they would have very easily provided that all persons shall before
conviction be bailable by sufficient sureties, except those charged with capital
offenses when evidence of guilt is strong and except when the privilege of the writ of
habeas corpus is suspended. As stated in the case of Ex Parte Milligan, 4 Wall. 2, 18
L. ed. 297, the Constitution limited the suspension to only one great right, leaving
the rest to remain forever inviolable.
5. It is noteworthy and supportive of the prevailing stand since 1951 that the
other great constitutional rights remain forever inviolable since the Constitution
limited the suspension to only one great right (of the privilege of the writ of habeas
corpus), that there has been no amendmentof the Constitution to curtail the right to
bail in case of such suspension notwithstanding the numerous constitutional
amendments adopted after the 1973 Constitution.
6. The late Justice Pedro Tuason emphasized that (T)o the plea that the security
of the State would be jeopardized by the release of the defendants on bail, the
answer is that the existence of danger is never a justification for courts to tamper
with the fundamental rights expressly granted by the Con-
529
VOL. 121, APRIL 20, 1983 529
stitution. These rights are immutable, inflexible, yielding to no pressure of
convenience, expediency or the so-called judicial statesmanship. The Legislature
itself cannot infringe them, and no court conscious of its responsibilities and
limitations would do so. If the Bill of Rights are incompatible with stable
government and a menace to the Nation, let the Constitution be amended, or
abolished. It is trite to say that, while the Constitution stands, the courts of justice
as the repository of civil liberty are bound to protect and maintain undiluted
individual rights.
7. And former Chief Justice Cesar Bengzon then made the same forceful plea
echoed these days by men of goodwill that respect for constitutional and human
rights and adherence to the rule of law would help in the fight against rebellion and
movement for national reconciliation, thus: And in my opinion, one of the surest
means to ease the uprising is a sincere demonstration of this Governments
adherence to the principles of the Constitution together with an impartial
application thereof to all citizens, whether dissidents or not. Let the rebels have no
reason to apprehend that their comrades now under custody are being railroaded
into Muntinglupa, without benefit of those fundamental privileges which the
experience of the ages has deemed essential for the protection of all persons accused
of crime before the tribunal of justice. Give them the assurance that the judiciary,
ever mindful of its sacred mission, will not, thru faulty or misplaced devotion,
uphold any doubtful claims of governmental power in diminution of individual
rights, but will always cling to the principles uttered long ago by Chief Justice
Marshall that when in doubt as to the construction of the Constitution, The Courts
will favor personal liberty.
8. The right to bail cannot just be cancelled out summarily because of the
issuance of a PCO. In the case at bar, detainee Dr. Aurora Parong is charged in the
municipal court with the crime of illegal possession of firearm, which is a clearly
bailable offense. The charges filed against the other detainees are likewise for
clearly bailable offenses. It is elementary that the right to bail in non-capital
offenses and even in capital offenses where evidence of guilt is not strong will be
generally granted
530
and respected by the courts, the natural tendency of the courts (being) towards a
fair and liberal appreciation, particularly taking into consideration the record and
standing of the person charged and the unlikelihood of his fleeing the courts
jurisdiction.
As the Court held in the leading case of Montano vs. Ocampo, wherein the 9
Supreme Court granted bail to Senator Mon-tano who was charged with multiple
murders and frustrated murders:
Brushing aside the charge that the preliminary investigation of this case by the aforesaid
Judge was railroaded, the same having been conducted at midnight, a few hours after the
complaint was filed, we are of the opinion that, upon the evidence adduced in the
application for bail in the lower court, as such evidence is recited lengthily in the present
petition and the answer thereto, and extensively analyzed and discussed in the oral
argument, there is not such clear showing of guilt as would preclude all reasonable
probability of any other conclusion.
Exclusion from bail in capital offenses being an exception to the otherwise absolute
right guaranteed by the constitution, the natural tendency of the courts has been toward
a fair and liberal appreciation, rather than otherwise, of the evidence in the determination
of the degree of proof and presumption of guilt necessary to warrant a deprivation of that
right.
Besides, to deny bail it is not enough that the evidence of guilt is strong; it must also
appear that in case of conviction the defendants criminal liability would probably call for a
capital punishment. No clear or conclusive showing before this Court has been made.
In the evaluation of the evidence the probability of flight is one other important factor
to be taken into account. The sole purpose of confining accused in jail before conviction, it
has been observed, is to assure his presence at the trial. In other words, if denial of bail is
authorized in capital cases, it is only on the theory that the proof being strong, the
defendant would flee, if he has the opportunity, rather than face the verdict of the jury.
Hence the exception to the fundamental right to be bailed should be applied in direct ratio
to the extent of the probability of evasion of prosecution.
_______________
9 G.R. L-6352, Resolution of Jan. 29, 1953, 49 O.G. 1855; emphasis supplied. See Villaseor vs.
Abancio, 21 SCRA 321.

531
VOL. 121, APRIL 20, 1983 531
The possibility of escape in this case, bearing in mind the defendants official and social
standing and his other personal circumstances, seems remote if not nil.
In the recent case of Sobremonte vs. Enrile, the detainee was released upon her
10
filing of the recommended P1,000.00 bail bond for the offense of possession of
subversive literature with which she was charged and the habeas corpus petition,
like many others, although dismissed for having thereby become moot,
accomplished the purpose of securing the accuseds release from prolonged
detention. The Court had occasion to decry therein that all the effort, energy and
manhours expended by the parties and their counsel, including this Court, x x x
could have been avoided had the officers of the AVSECOM and the ISAFP
responded promptly to the inquiries of petitioner instead of giving her the run-
around by referring her from one office to another.
9. The continuous flow of petitions for habeas corpus filed with this Court
should not be decried nor discouraged. The Court stands as the guarantor of the
constitutional and human rights of all persons within its jurisdiction and must see
to it that the rights are respected and enforced. It is settled in his jurisdiction that
once a deprivation of a constitutional right is shown to exist, the court that rendered
the judgment or before whom the case is pending is ousted of jurisdiction and
habeas corpus is the appropriate remedy to assail the legality of the detention. So 11
accused persons deprived of the constitutional right of speedy trial have been set
free. And likewise persons detained indefinitely without charges so much so that
12
the detention becomes punitive and not merely preventive in character are entitled
to regain their freedom. The spirit and letter of our Constitution negates as contrary
to the basic precepts of human rights and freedom that a person be detained
indefinitely without any charges.
III. The main opinion invokes a time of war or grave peril to the nation (at page
16), oblivious of the Presidents lifting
_______________
10 G.R. No. 60602, Sept. 30, 1982, per Escolin, J.

11 Gumabon v. Director of Prisons, 37 SCRA 420, 427.
12 Conde vs. Diaz, 45 Phil. 173.
532
of martial law under Proclamation No. 2045 on January 17, 1981 and the specific
premises therein set forth that
WHEREAS, the Filipino people, having subdued threats to the stability of government,
public order and security, are aware that the time has come to consolidate the gains
attained by the nation under a state of martial law by assuming their normal political roles
and shaping the national destiny within the framework of civil government and popular
democracy;
WHEREAS, the experience gained by the nation under martial law in subduing threats
to the stability of the government, public order and security, has enabled the Filipino
people to rediscover their confidence in their ability to command the resources of national
unity, patriotism, discipline and sense of common destiny;
WHEREAS, the government and the people are at the same time also aware that the
public safety continues to require a degree of capability to deal adequately with elements
who persist in endeavoring to overthrow the government by violent means and exploiting
every opportunity to disrupt the peaceful and productive labors of the government; x x x
As to the self-evident submittal of the main opinion that the duty of the judiciary
to protect individual rights must yield to the power of the Executive to protect the
State, for if the State perishes, the Constitution, with the Bill of Rights that
guarantees the right to personal liberty, perishes with it (at page 16), I can only
recall the exhortation of the Holy Father John Paul II in his address to the
Philippine nation on February 17, 1981, thus: Even in exceptional situations that
may at times arise, one can never justify any violation of the fundamental dignity of
the human person or of the basic rights that safeguard this dignity. Legitimate
concern for the security of a nation, as demanded by the common good, could lead to
the temptation of subjugating to the State the human being and his or her dignity
and rights. Any apparent conflict between the exigencies of security and of the
citizens basic rights must be resolved according to the fundamental principle
upheld always by the Churchthat social organization exists only for the service of
man and for the protection of his dignity, and that it cannot claim to serve the
common good when human rights are not safeguarded. People will have faith
533
VOL. 121, APRIL 26, 1983 533
Nava vs. Palma
in the safeguarding of their security and the promotion of their wellbeing only to the
extent that they feel truly involved, and supported in their very humanity.
Petition dismissed.
Notes.Petitioners arrest and detention is lawful where the same was done
under the authority of General Order No. 2-A for alleged robbery in band, with
serious physical injuries and illegal possession of firearms. (Romero vs. Ponce
Enrile, 75 SCRA 429.)
A petition for habeas corpus is rendered moot and academic by the release of
detainees. (Maloles vs. Ramos,78 SCRA 238.)
A petition for habeas corpus will be dismissed where the detention of the
prisoner was in pursuance of a lawful order of the court. (Canos vs. Director of the
Bureau of Prisons, 78 SCRA 272.)
Where a persons detention was later made by virtue of a judicial order in
relation to criminal cases subsequently filed against the detainee, his petition for
habeas corpus becomes moot and academic. (Beltran vs. Garcia, 89 SCRA 717.)
The Supreme Court has adopted the most liberal attitude on applications for
habeas corpus. (Sobremonte vs. Ponce Enrile, 117 SCRA 618.)
o0o
VOL. 62, JANUARY 31, 1975 275
Aquino, Jr. vs. Commission on Elections
No. L-40004. January 31, 1975. *
BENIGNO S. AQUINO, JR., TRINIDAD HERRERA, BISHOP FRANCISCO

CLAVER, S.J., BISHOP ANTONIO NEPOMUCENO, BISHOP JESUS VARELA,
BISHOP FELIX ZAFRA BISHOP TEOTIMO PACIS, EUGENIO LOPEZ, JR.,
SERGIO OSMENA, III, ANTONIO ARANETA, ANTONIO MIRANDA, RAUL
GONZALES, JOKER ARROYO, and EMILIO DE PERALTA,
petitioners, vs. COMMISSION ON ELECTIONS, and NATIONAL TREASURER,
respondents.
Special proceedings; Quo Warranto; Only the Solicitor General can legally file a petition
for quo warranto which would challenge the title of the incumbent President to the office of
President.The first ground upon which the petition is predicated states that Pres.
_______________
*EN BANC.
276
76
Ferdinand E. Marcos does not hold any legal office nor possess any lawful authority
under either the 1935 or the 1973 Constitution and therefore has no authority to issue the
questioned proclamations, decrees and orders. This challenges the title of the incumbent
President to the office of the Presidency and therefore is in the nature of a quo warranto
proceedings, the appropriate action by which the Title of a public officer can be questioned
before the courts. Only the Solicitor General or the person who asserts title to the same
office can legally file such a quo warranto petition. The petitioners do not claim such right
to the office and not one of them is the incumbent Solicitor General. Hence, they have no
personality to file the suit. It is established jurisprudence that the legality of the
appointment or election of a public officer cannot be questioned collaterally through a
petition for prohibition which assails the validity of his official acts.
Constitutional law: 1973 Constitution is in force and effect.This Court already ruled
in the Ratification Cases that there is no further judicial obstacle to the new Constitution
being considered in force and effect.
Same; Proclamation of martial law on September 22, 1972 valid.In the aforesaid
Habeas Corpus cases, We affirmed the validity of Martial Law Proclamation No. 1081
issued on September 22, 1972 by Pres. Marcos because there was no arbitrariness in the
issuance of said proclamation pursuant to the 1935 Constitution; that the factual bases had
not disappeared but had even been exacerbated; that the question as to the validity of the
Martial Law proclamation has been foreclosed by Section 3(2) of Art. XVII of the 1973
Constitution x x x; and that any inquiry by this Court in the present cases into the
constitutional sufficiency of the factual bases for the proclamation of Martial Law, has
become moot and purposeless as a consequence of the general referendum of July 27-28,
1973. The question propounded to the voters was: Under the (1973) Constitution, the
President, if he so desires, can continue in office beyond 1973. Do you want Pres. Marcos to
continue beyond 1973 and finish the reforms he initiated under Martial Law? The
overwhelming majority of those who cast their ballots, including citizens beyond 15 and 18
years, voted affirmatively on the proposal, x x x
Same; Pres. Ferdinand E. Marcos is de jure President of Republic of the Philippines.
While his term of office under the 1935 Constitution should have terminated on Dec. 30,
1973, by general referendum of July 27-28, 1973, the sovereign people expressly authorized
him to continue in office even beyond 1973 under the 1973 Constitution (which was validly
ratified on January 17, 1973 by the sovereign people) in order to finish the reforms he
initiated under
277
VOL. 62, JANUARY 31, 1975 27
7
Martial Law; and as aforestated, as this was the decision of the people, in whom
sovereignty resides x x x and all government authority emanates x x x, it is therefore
beyond scope of judicial inquiry. The logical consequence therefore is that President Marcos
is a de jure President of the Republic of the Philippines.
Same; President Marcos is the incumbent President of the Philippines within the
purview of Section 3 of Art. XVII of the transitory provisions of the new Constitution.Since
Pres. Marcos was the only incumbent President at the time, because his term under the
1935 Constitution has yet to expire on Dec. 30, 1973, the Constitutional Convention, in
approving the new Constitution, had in mind only him when in Section 3(2) of Art. XVII of
the new Constitution it provided that all the proclamations, orders, decrees, instructions
and acts promulgated, issued or done by the incumbent President shall be part of the law of
the land, and shall remain valid, legal, binding and effective even after lifting of Martial
Law or the ratification of this Constitution x x x. This conclusion is further buttressed by
Section 10 of the same Art. XVII which provides that the incumbent members of the
Judiciary may continue in office until they reach the age of 70 years unless sooner replaced
in accordance with the preceding section hereof. There can be no dispute that the phrase
incumbent members of the Judiciary can only refer to those members of the Judiciary who
were already Justices and Judges of the various courts of the country at the time the
Constitutional Convention approved the new Constitution on November 30, 1972 and when
it was ratified.
Same; Martial law; President during martial law can promulgate orders and decrees to
preserve Republic, defend political and social liberties of the people, institute reforms to
prevent rebellion or secession or the threat thereof, and to meet impact of worldwide
recession, inflation or economic crisis.We affirm the proposition that as Commander-in-
Chief and enforcer or administrator of martial law, the incumbent President of the
Philippines can promulgate proclamations, orders and decrees during the period of Martial
Law essential to the security and preservation of the Republic, to the defense of the political
and social liberties of the people and to the institution of reforms to prevent the resurgence
of rebellion or insurrection or secession or the threat thereof as well as to meet the impact
of a worldwide recession, inflation or economic crisis which presently threatens all nations
including highly developed countries (Rossiter, Constitutional Dictatorship, 1948 ed., pp. 7,
303; see also, Chief Justice Stones Concurring Opinion in Duncan vs. Kahanamoku, 327
US 304).
278
78
Same; Section 3(2), Art. XVII of the New Constitution is not a grant of authority to
legislate, but recognition of power of the President.The entire paragraph of Section 3(2) is
not a grant of authority to legislate, but a recognition of such power as already existing in
favor of the incumbent President during the period of Martial Law.
Same; Power of President under Section 3(2), Art. XVII of 1973 Constitution even if
limited to the subject matter of his previous decrees or acts, the challenged proclamations
and decrees are analogous to the referenda of January and July 27-28, 1973.The power
under the 2nd clause of Section 3(2) is not limited merely to modifying, revoking or
superseding all his proclamations, orders, decrees, instructions or other acts promulgated,
issued or done prior to the ratification of the 1973 Constitution. But even if the scope of his
legislative authority thereunder is to be limited to the subject matter of his previous
proclamations, orders, decrees or instructions or acts, the challenged Proclamations Nos.
1366 and 1366-A, as well as Presidential Decrees Nos. 629, 630, 637 and 637-A are
analogous to the referenda of January, 1973 and July 27-28, 1973.
Same; Martial law; Action of President in authorizing appropriations for holding of
referendum even if without express constitutional fiat not without historical precedent.The
actions of the incumbent President are not without historical precedents. It should be
recalled that the American Federal Constitution, unlike the 1935 or 1973 Constitution of
the Philippines, does not confer expressly on the American President the power to proclaim
Martial Law or to suspend the writ of habeas corpus. And yet President Abraham Lincoln
during the Civil War, and President Roosevelt during the Second World War, without
express constitutional or statutory authority, created agencies and offices and appropriated
public funds therefor in connection with the prosecution of the war. Nobody raised a finger
to oppose the same.
Same; There is a distinction between existence of interim assembly and its organization
and functioning.It should be stressed that there is a distinction between the existence of
the interim Assembly and its organization as well as its functioning. The interim Assembly
already existed from the time the new Constitution was ratified; because Section 1 of Art.
XVII states that there shall be an interim National Assembly which shall
exist immediately upon the ratification of this Constitution and shall continue until the
members of the regular National Assembly shall have been elected and shall have assumed
office x x x. However, it cannot function until it is convened and thereafter duly organized
with the election of its interim speaker and other officials.
279
VOL. 62, JANUARY 31, 1975 27
9
Same; Constitution left to President determination of when he shall convene the interim
assembly.The Constitutional Convention intended to leave to the President the
determination of the time when he shall initially convene the interim National Assembly,
consistent with the prevailing conditions of peace and order in the country. This was
revealed by no less than Delegate Jose M. Aruego himself. x x x This was also disclosed by
Delegate Arturo F. Pacificador x x x. It is thus patent that the President is given the
discretion as to when he shall convene the interim National Assembly after determining
whether the conditions warrant the same. His decision to defer the initial convocation of the
interim National Assembly was supported by the sovereign people at the referendum in
January, 1973 when the people voted to postpone the convening of the interim National
Assembly until after at least seven (7) years from the approval of the new Constitution.
Same; Objection that there can be no true expression of peoples will due to climate of
fear generated by martial law is untenable. The first objection is not tenable because
during the senatorial elections 1951 and 1971, the privilege of the writ of habeas corpus
was suspended, during which period of suspension there was fear of arrest and detention.
Yet the election was so free that a majority of the senatorial candidates of the opposition
party were elected and there was no reprisal against or harrassment of any voter thereafter.
The same thing was true in the referendum of July 27-28, 1973, which was done also
through secret ballot. There was no Army, PC, or police truck, bus or other mode of
transportation utilized to transport the voters to the various precincts of the country. x x x
The voting was orderly. There was no buying of votes or buying the right not to vote. x x x
Moreover, as stressed by the Solicitor General, the previous referenda of January and July
1973, were a lot more free than the elections under the Old Society previous to the
proclamation of Martial Law, where the will of the voter was subverted through guns,
goons and gold, as well as through fraud, x x x Even animals and dead persons voted. The
decisions in the electoral contests filed after every election under the Old Society attest to
this very unflattering fact in our history.
Same; the objection that the 2-week period for free debate is too short is addressed to
President.The second objection that the two-week period for free debate is too short, is
addressed to the wisdom of the President who may still amend the proclamation to extend
the period of free discussion. At any rate, such a brief period of discussion has its
counterpart in previous plebiscites for constitutional amendments. Under the Old Society,
15 days were allotted for the
280
80
public in x x x the Official Gazette of the womens suffrage amendment to the
Constitution before the scheduled plebiscite on April 30, 1937 (Com. Act No. 34). The
constitutional amendment to append as ordinance the complicated Tydings-Kocialskowski
Act of the US Federal Congress to the 1935 Constitution was published in only 3
consecutive issues of the Official Gazette for 10 days prior to the scheduled plebiscite (Com.
Act No. 492) x x x. The period of 14 days for free discussion can compare favorably with the
period required for publication of the proposed amendments under the Old Society.
CASTRO, J.:
Constitutional law; Transitory Provisions; Ferdinand E. Marcos the incumbent

President; Sections 2, 3, 9 and 12 of the Transitory Provisions point to and recognize
Ferdinand E. Marcos as the constitutional and lawful President.The Transitory
Provisions (Art. XVII) of the 1973 Constitution, more specifically Secs. 2, 3. 9 and 12 thereof,
even if they do not mention him by name, clearly point to and recognize Ferdinand E.
Marcos as the constitutional and lawful President of the Philippines.
Same; Same; Exercise by President Marcos of legislative powers; Paragraphs 1 and 2 of
Section 3 of the Transitory Provisions are authority for President Marcos to legislate.
President Marcos derives legislative power from the constraints of a regime of martial law.
Paragraphs 1 and 2 of Sec. 3 of the Transitory Provisions are unequivocal authority for
President Marcos to legislate. These provisions constitute an unmistakable constitutional
warrant for the incumbent President (meaning President Marcos) to legislate (until, at
the very earliest, the interim National Assembly shall have been convoked).
FERNANDO, J.:
Constitutional law; Sovereignty resides in the people.It is the fundamental principle

that sovereignty resides in the people with all government authority emanating from them.
It speaks, to recall Cardozo, with a reverberating clang that drowns all weaker sounds.
Same; Political question; Questions raised in instant petition challenging authority of
President to call referendum and appropriate funds therefore not political.The
respondents allege that the questions raised are political and therefore left for the political
sovereign, not the courts. Such an assertion carries overtones of the Taada vs. Cuenco
ruling that a matter to be decided by the people in
281
VOL. 62, JANUARY 31, 1975 28
1
their sovereign capacity is of such a character. It has an aura of plausibility, but it
cannot stand the rigor of analysis. It confuses the end result with the procedure necessary
to bring it about. It is elemental that constitutionalism implies restraints as well on the
process by which lawful and valid state objectives may be achieved. What is challenged
here is the actuation of the incumbent President for alleged failure to comply with
constitutional requisites. It is much too late in the day to assert that a petition of that
character is not appropriate for the courts. This is not to venture into uncharted judicial
territory. There are landmarks all along the way. This is not then to trespass on forbidden
ground. There is no disregard of the political question concept.
Same; Petitioners have legal personality to file instant petition.Then there is the
attack on the standing of petitioners, as vindicating at most what they consider a public
right and not protecting their rights as individuals. This is to conjure the specter of the
public right dogma as an inhibition to parties intent on keeping public officials staying on
the path of constitutionalism. x x x Moreover, petitioners have convincingly shown that in
their capacity as taxpayers, their standing to sue has been amply demonstrated. There
would be a retreat from the liberal approach followed in Pascual vs. Secretary of Public
Works, foreshadowed by the very decision of People v. Vera where the doctrine was first
fully discussed, if we act differently now. I do not think we are prepared to take that step.
Same; Government derives its just powers front consent of governed.Believing as I do
that the opportunity of the people to give expression to their views is implicit in the
fundamental principle that sovereignty resides in them, I am unable to find sufficient merit
in this petition. For all its logical and plausible aspect, it still does not admit of doubt, in my
mind at least, that a conclusion different from that reached by this Court would be attended
by deplorable consequences. For one thing, it would impress with the stigma of illegality
the viable procedure that under the stern realities of the present is the only one in the
horizon for ascertaining the desires of the people. Moreover, under a republican regime,
even under normal times, their role is limited to the choice of public officials, thereafter to
beheld to accountability through their informed, even immoderate, criticism. Now with this
proposed referendum, they will be sounded out on what they think and how they feel on
matters of significance. Even assuming its consultative character, it remains at the very
least a step in the right direction. It may not go far enough, but there is progress of sorts
that hopefully may eventually lead to the goal of complete civilian rule. It stands to reason,
at least from my
282
82
standpoint, that when people are thus allowed to express their wishes and voice their
opinions, the concept of popular sovereignty, more so under crisis conditions, becomes
impressed with a meaning beyond that of lyric liturgy or acrimonious debate devoid of
illumination. Nor is this to discern new waves of hope that may ultimately dissolve in the
sands of actuality. It is merely to manifest fidelity to the fundamental principle of the
Constitution. It dates back to the American Declaration of Independence of 1776. The
government it sets up derives its just powers from the consent of the governed.
Same; Referendum impressed with decisive significance.It follows therefore that the
will of the people given expression, even in an unofficial manner but accurately ascertained,
is impressed with a decisive significance. It is more than just a foundation for societal or
political development. Whenever appropriate, it determines what is to be done. Its
significance is vital, not merely formal. It is understandable then why in Javellana, one of
the issues passed upon by this Court is the effect of acquiescence by the people to the
present Constitution even on the assumption that it was not ratified in accordance with the
1935 Charter.
Same; Questioned presidential decrees do not suffer from substantial constitutional
infractions; Reality cannot be ignored that only Executive performs actual conduct of public
affairs.With such a decisive consideration in mind, it is difficult to conclude that the
infirmities imputed to the challenged Presidential decrees are fatal. They do not suffer from
the corrosion of substantial constitutional infractions. It is in that sense that I do not feel
called upon to inquire into the nature of the authority conferred on the incumbent
President under the Transitory Provisions, whether purely executive as contended by
petitioners or both executive and legislative as argued by respondents. I leave that question
for another day. What cannot be ignored is that with a National Assembly in existence but
not convened, it is only the Executive that can perform those essential and indispensable
functions of dealing with the actual conduct of public affairs. That is the reality that stares
us in the face. To deny his powers to issue decrees and to appropriate public funds is thus to
assure the paralyzation and impotence of government. Precisely then it a referendum may
lend itself to a reappraisal of the situation by all means let it be conducted. This is not to
deny that the judicial power to call a halt exists. It is merely to stress that it should be
exercised with the utmost reluctance as is required by deference to the concept of popular
sovereignty. To be more specific about the matter, this Tribunal should refrain from making
use of that prerogative now.
Same; Acquiescence of people to new Constitution no longer open to doubt.
Parenthetically, it may be observed that in 1973 when the
283
VOL. 62, JANUARY 31, 1975 28
3
Javellana decision was promulgated, I could not detect sufficient evidence as to the
fact of acquiescence to the present Constitution. That was why I had to dissent from the
judgment of the Court dismissing the various petitions assailing the validity of
Proclamation No. 1102. Since then, with well-nigh two years having gone by, it is quite
evident that the matter is no longer open to doubt.
Same; Martial law; Philippine brand of martial law of mild character and there is by
and large confidence in capability and moderation of those in charge of its
implementation.There is finally, according to petitioners, a deficiency that mars the
proposed referendum, It deserves serious consideration. It is their submissions that under
martial law, with people denied their basic freedoms, particularly their freedoms of
expression and assembly, it cannot be validly held. In my concurring and dissenting opinion
in Planas v. Commission on Elections I express the apprehension that voters cannot freely
register their will, as dissent may be fraught with unpleasant consequences. x x x There
is, I would say, still that feeling of insecurity as to what the morrow may bring, not from
high and responsible officials, of course, but from those much lower in the ranks, whether
in the armed forces or in the civilian component. Abuses, in the nature of things, cannot be
completely curbed. In that sense, my misgivings are not unjustified. Nonetheless, I gain
reassurance from the fact that as I did admit in my concurring and dissenting opinion in
Aquino v. Enrile, the Philippine brand of martial law [is] impressed with a mild character.
There is by and large a high degree of confidence in the capabilities and moderation of those
entrusted with its implementation. x x x I am not then in a position to press with the same
degree of conviction my original stand.
Same; Rights of free expression and free assembly are once again enshrined in our Bill
of Rights.I would not be justified though in making such a concession if the constitutional
rights to freedom of expression and the freedom of assembly may not be availed of. They are
once again enshrined in our Bill of Rightsand in the very same language. If the
Constitution is now fully in force, they must be allowed full operation. I do not deny that
they are not absolute in character, but the limitation is supplied by the clear and present
danger test.
Same; Dissent is not disloyalty, much less subversion.What I cannot sufficiently
stress though is that dissent, even during such periods of stress, is not disloyalty, much less
subversion. Thus the citizens can invoke in the exercise of the freedoms of expression and of
assembly not the challenged decrees but their constitutional rights.
284
84
Same; Martial law; It is to credit of President that in these parlous times there is
adherence to compassionate society.It would follow, and to my mind would be to the credit
of the Executive, that even in these trying and parlous times, there is adherence to a
tolerant, compassionate view of life.
Same; Same; One has to reckon with intangibles elusive to our understanding and
disheartening to our deeply-cherished convictions.In constitutional law more than in any
other branch of juristic science, much depends on the immediacy and the reality of the
specific problems to be faced. Hence it has been truly said in days of crisis or of emergency,
to stand still is to lose ground. Nonetheless, one has always to reckon with the
imponderables and the intangibles, ever so often elusive to our understanding and
disheartening to our deeply-cherished convictions. For he has no choice but to comply as
best he can with the duty to decide in accordance with legal norms and roots that go far
deeper than his personal preferences and predilections. So it has to be.
TEEHANKEE, J., Concurring and dissenting:
Constitutional law; Pres. Ferdinand E. Marcos is incumbent President with authority

to exercise powers vested by the 1935 and 1973 constitutions.I concur with the main
opinion insofar as it recognizes Pres. Ferdinand E. Marcos as the incumbent President
and head of government who is vested with authority under Art. XVII, section 3(1) of the
Transitory Provisions of the 1973 Constitution to continue to exercise his powers and
prerogatives under the 1935 Constitution and the powers vested in the President and
Prime Minister under this Constitution.
Same; Martial law; Presidents legislative and appropriation powers under martial law
are confined to the law of necessity of preservation of the state which gave rise to the
proclamation, including appropriations for operations of the government.Petitioners raise
the question as to the scheduled referendum called for Feb. 27, 1975 that the calling of a
referendum and the appropriation of funds therefor are essentially legislative acts while
the transitory powers and prerogatives vested in President Marcos until the election of the
interim Prime Minister and interim President under section 3 (1) of the Transitory
Provisions are executive and not legislative powers, x x x. While the Solicitor General has
cited the Presidents powers under martial law and under section 3(2) of the Transitory
Provisions as vesting him with legislative powers, there is constitutional basis for the
observation
285
VOL. 62, JANUARY 31, 1975 28
5
that his legislative and appropriation powers under martial law are confined to the law
of necessity of preservation of the state which gave rise to its proclamations (including
appropriations for operations of the government and its agencies and instrumentalities).
Same; Same; Constitutional dictatorship; Measures adopted in prosecution of
constitutional dictatorship should never be permanent.Rossiter, as extensively cited by
the Solicitor General, has thus stressed that the measures adopted in the prosecution of a
constitutional dictatorship should never be permanent in character or effect. x x x The
actions directed to this end should therefore be provisional. x x x Permanent laws, whether
adopted in regular or irregular times are for parliaments to enact.
Same; Same; Martial law powers limited to such necessary measures as will safeguard
Republic and suppress rebellion and measures directly connected with removing root causes
thereof.Even from the declared Presidential objective of using Martial Law powers to
institutionalize reforms and to remove the causes of rebellion, such powers by their very
nature and from the plain language of the Constitution are limited to such necessary
measures as will safeguard the Republic and suppress the rebellion (or invasion) and
measures directly connected with removing the root causes thereof, such as the tenant
emancipation proclamation.
Same; Same; Concept of martial law may not be expanded to include threats of
worldwide recession, inflation or economic crisis which threaten all nations.The concept of
martial law may not be expanded, as the main opinion does, to cover the lesser threats of
worldwide recession, inflation or economic crisis which presently threatens all nations in
derogation of the Constitution.
Same; Same; Legislative powers under validating provisions (Section 3(2)) of the 1973
Constitution are limited to modifying or revoking such validated decrees done or issued prior
to the proclaimed ratification of the new Constitution.On the other hand, those legislative
powers granted in the cited section 3(2), known as the validating provision which validated
the Presidents acts and decrees after the proclamation of martial law up to the ratification
of the Constitution are limited to modifying, revoking or superseding such validated acts
and decrees done or issued prior to the proclaimed ratification, since section 7 of the
Transitory Provisions expressly reserves to the National Assembly the legislative power to
amend, modify or repeal all existing laws not inconsistent with this Constitution.
286
86
Same; Same; National Assembly; After the lapse of two years the interim National
Assembly called for in 1973 Constitution should now be convened.The question is thus
reduced as to whether now after the lapse of two years since the adoption of the 1973
Constitution, the mandate of section 3(1) of the Transitory Provisions for the convening of
the existing interim National Assembly should be implemented. x x x The above quoted
pertinent provisions indicate an affirmative answer. It is axiomatic that the primary task in
constitutional construction is to ascertain and assure the realization of the purpose of the
framers and of the people in the adoption of the Constitution and that the courts may not
inquire into the wisdom and efficacy of a constitutional or statutory mandate.
Same; Statutory interpretation; Where language of law is unambiguous, there is no
room for interpretation.Where the language used is plain and unambiguous, there is no
room for interpretation. It is assumed that the words in which constitutional provisions
are couched express the objective sought to be attained. They are to be given ordinary
meaning except where technical terms are employed in which case the significance thus
attached to them prevails. x x x
Same; Same; National Assembly; Interim National Assembly should be convened right
away.The mandate of section 1 of the Transitory Provisions that the interim National
Assembly shall exist immediately upon the ratification of this Constitution calls for its
coming into existence right away as conceded by respondents at the hearing. Likewise, as
affirmed by the Solicitor General, its members as provided in section 2 duly took their oath
of office and qualified thereto, upon the proclamation of ratification. The clear import of
section 3 in order to give meaning and effect to the creation and immediate existence of
the interim National Assembly is that the incumbent President shall then proceed to
initially (i.e. in the first place: at the beginning) convene it and preside over its sessions
until the election of the interim Speaker after which he calls for the election of the interim
President and the interim Prime Minister who shall then exercise their respective powers
vested by this Constitution. This view is further strengthened by the expectations aired in
the debates of the 1971 Constitutional Convention that a parliamentary government would
be more responsible and responsive to the peoples needs and aspirations.
Same; Same; Same; Same.The manifestation of the Solicitor General that the
scheduled referendum is merely consultative and thus includes the participation of voters
below 18 years of age but at
287
VOL. 62, JANUARY 31, 1975 28
7
least 15 years old x x x adds weight to the view that the existing interim National
Assembly be now convened and perform its constitutional functions as the legislative
authority.
Same; Same; Same; Transitory provisions merely provisional.From the very nature
of the transitory provisions which created it, its existence must likewise be interim, i.e.
temporary, provisional, of passing and temporary duration (as opposed to permanent and
the regular institutions provided for in the first 15 Articles of the Constitution) until after it
shall have reapportioned the Assembly seats and called for the election of the members of
the regular National Assembly.
Same; Same; Referendums merely consultative and cannot amend Constitution.While
it has been advanced that the decision to defer the initial convocation of the interim
National Assembly was supported by the results of the referendum in January, 1973 when
the people voted against the convening of the interim National Assembly for at least 7 years,
such sentiment cannot be given any legal force and effect in the light of the States
admission at the hearing that such referendums are merely consultative and cannot amend
the Constitution or any provision or mandate thereof such as the Transitory Provisions x x
x.
Same; Referendum; Elections; Imposition of penalty on those who fail to register and
voted in referendum open to constitutional question.Finally, the imposition of penal
sanctions of imprisonment and fine upon the citizens who fail to register and vote in the
scheduled referendum is open to serious constitutional question. It seems clear that the
calling of consultative referendum is not provided for nor envisaged in the Constitution as
the appropriate vehicle therefore is provided through the interim and regular National
Assemblies.
BARREDO, J.: Concurring
Constitutional law; Transitory Provisions; Ferdinand E. Marcos with authority to

continue exercising the powers of the President under the 1935 Constitution and to exercise
those of the President and the Prime Minister under the 1973 Constitution.President
Marcos authority to continue exercising the powers of the President under the 1935
Constitution and to exercise those of President and Prime Minister under the 1973
Constitution is specifically provided for in Sec. 3(1), Article XVII of the 1973 Constitution.
Same; Same; Ferdinand E. Marcos as the incumbent President expressly granted
authority to continue exercising the powers of the
288
88
President under the 1935 Constitution and to exercise those of the President and the
Prime Minister under the 1973 Constitution.It was precisely because upon the effectivity
of the New Constitution President Marcos would cease to be President under the 1935
Charter and would not then be occupying any office under the New Constitution, and, on
the other hand, there would yet be no new president and no prime minister, that he, as
incumbent President at that time had to be expressly granted the authority to exercise
the powers of the President under the Old Constitution as well as those of the President
and the Prime Minister under the new one, pending election of these officers.
Same; Same; Exercise by President Marcos of legislative powers; Paragraph 2 of Section
3 recognizes legislative power in the incumbent President.The insertion in the Transitory
Provisions of Section 3(2) of Article XVII which makes all the proclamations, decrees, orders
and instructions of the incumbent President part of the law of the land is the Conventions
own contemporary construction that during martial law, the administrator thereof must of
necessity exercise legislative powers particularly those needed to carry out the objectives of
the proclamation, with no evident limitation except that no particular legislation not
demanded by said objectives shall infringe Section 7 of Article XVII which reserves to the
regular National Assembly the power to amend, modify or repeal all existing laws not
inconsistent with this Constitution.
Same; Same; Martial law; Administrator of martial law can appropriate public funds;
Reasons.Once martial law is proclaimed, all the powers of government are of necessity
assumed by the authority that administers the martial law and the operation of the regular
government, including its legislative and its judiciary, is subjected to its imperatives. The
Constitution itself is not ousted, but by the power that the Constitution itself vests in the
Executive to issue the proclamation, it yields the application and effects of some of its
provisions to the demands of the situation, as the administrator may in his bona fide
judgment so determine. Since laws and regulations would be needed to maintain the
government and to provide for the safety and security of the people, the orders of the
administrator are given the force of law. In that sense, the administrator legislates. If he
can legislate, so also he can appropriate public funds.
Same; Same; Determination of the date the interim National Assembly should be
convened left to the judgment of the President.Whereas Section 1 of Article XVII very
explicitly uses the word immediately in reference to the existence of the interim
289
VOL. 62, JANUARY 31, 1975 28
9
Assembly, there is no time fixed as to when the incumbent President should initially
convene it. Withal, even the authority to call for the election of the new President and the
Prime Minister was not lodged in the assembly but again in the incumbent President. Is it
not logical to conclude that the reason behind all these unprecedented provisions is to avoid
putting any hindrance or obstacle to the continued exercise by President Marcos of the
powers he had assumed under his martial law proclamation and his general orders
subsequent thereto? If the Convention were differently minded, it could have easily so
worded the said provisions in the most unequivocal manner.
Same; Referendum; Matter of calling a referendum a political question.Whether a
referendum should be called or not and what questions should be asked therein are purely
political matters as to which it does not appear to be proper and warranted for the Court to
exert its judicial power in the premises. To be sure, the referendum in question could be a
waste of the peoples money in the eyes of some concerned citizens, while it may be a
necessary and fruitful democratic exercise in the view of others, but what is certain is that
considering its nature and declared purposes and the public benefits to be derived from it, it
is the better part of discretion, granted to it by the Constitution for the Court to refrain
from interfering with the decision of the President.
Same; Duties and obligations of citizen; Duty to vote.Under the New Constitution,
every citizen is charged with the duty to vote. To vote in a referendum is no less a sacred
civic obligation than to vote in an election of officials or in a plebiscite. The impugned
decrees cannot therefore be constitutionally faulted just because they provide penalties for
those who fail to comply with their duty prescribed in no uncertain terms by the
fundamental law of the land.
ANTONIO, J.:
Constitutional law; Transitory Provisions; Exercise by President Ferdinand E. Marcos

of legislative powers; Constitutional convention recognized authority of incumbent President
to exercise legislative power.The Constitutional Convention expressly recognized the
authority of the incumbent President during martial law to exercise legislative powers not
merely in the enactment of measures to quell the rebellion but, more important, of
measures urgently required to extirpate the root causes of the social disorder which gave
rise to the exigency. The conferment upon the incumbent President of the extraordinary
powers (provided by paragraphs 1 and 2, Section 3, of Article XVII of the Transitory
Provisions) necessarily implies that in view of the emergency, there might be a deferment
in the convening of
290
90
the interim National Assembly and, therefore, it was necessary that he be equipped
with adequate legal authority and power to carry the body politic through the crisis.
Same; Same; Exercise by President Marcos of extraordinary powers provided by
paragraphs 1 and 2, Section 3 of the Transitory Provisions legitimate; Reasons.Neither
can it be asserted that the exercise by the incumbent President of those extraordinary
powers is necessarily inconsistent with and an absolute contradiction to the existence of a
democracy. When the exercise of such authoritarian powers is expressly conferred upon him
by the Constitution, it represents the will of the sovereign people as the source of all
political power. So long as the power is used to fulfill its true function in realizing the
ethical purposes of the community, which is to ensure the economic and social well-being of
its citizens and to secure to them justice, such power is employed for constructive and moral
purposes. Its exercise is, therefore, legitimate as it represents the collective will of the
people themselves.
Same; Same; Determination of the date of interim National Assembly should be
convened left to the judgment of the President.The impossibility for the Convention to
determine a priori, in view of the emergency situation, the time when conditions shall have
sufficiently normalized to permit the convening of the interim Assembly, precluded them
from fixing in the transitory provisions of the Constitution a definite period when the
incumbent President shall initially convene that body. It was a matter which was wholly
confided by the Constitution to the incumbent President. Since the exercise of this power
was committed to the incumbent President in all the vicissitudes and conditions of the
emergency, it has necessarily given him ample scope for the exercise of his judgment and
discretion. It was a political decision for which he is directly responsible to the people to
whom he is accountable and for whose welfare he is obliged to act.
Same; Referendum; Ascertainment of peoples consensus not a plebiscite but merely a
referendum.It is not a plebiscite contemplated by the aforecited Sections 2 and 3 of Article
XI of the New Constitution but merely a referendum, advisory or consultative in character.
Same; Same; Duty of citizens to participate in the referendum; Reasons.Political
democracy is essentially a government of consensus. The citizen has a right and a duty to
judge his own concerns, his acts and their effects, as they bear on the common good. If they
entail the common acts of the community, he again has the
291
VOL. 62, JANUARY 31, 1975 29
1
duty and right to contribute to the common deliberation by which the acts of the
community are decided. Common deliberation or mutual persuasion occurs on all levels of
society, and as a result thereof a common judgment or consensus is formed on those matters
which affect the democratic polity. This is based on the premise that sovereignty in a
political democracy resides in the people and that their government is founded on their
consent.
FERNANDEZ, J.:
Constitutional law; Transitory Provisions; Ferdinand E. Marcos with authority to

continue exercising the powers of the President under the 1935 Constitution and to exercise
those of the President and the Prime Minister under the 1973 Constitution.The discussion
on the Transitory Provisions in the plenary session of the Constitutional Convention and
the votes thereon clearly show that the incumbent President legally holds office as such
having been authorized to continue in office and to exercise not only the powers of the
President under the 1935 Constitution but also those of the President and Prime Minister
under the 1973 Constitution, from the time the New Constitution was ratified on January
17, 1973 until the election of the interim President and interim Prime Minister. The
wording of the New Constitution is clear. Considering the condition in which the country
was at the time they approved the draft of the Constitution, it would have been unthinkable
for the Constitutional Convention not to have provided for a continuity in the office of the
Chief Executive.
Same; Same; Exercise by President Marcos of legislative powers.The discussion on
the Transitory Provisions in the plenary session of the Constitutional Convention and the
votes thereon clearly show that included in the powers of the President under the 1935
Constitution and the powers of the Prime Minister under the 1973 Constitution is the
power to declare martial law which in turn includes the power to make all needful rules
and regulations with the force and effect of law until the termination of the martial rule.
Same; Same; Same; Paragraph 2, Section 3 of the Transitory Provisions; Use of the
phrase shall be part of the law of the land explained.The original wording of Article
XVII, Section 3(2) was that all proclamations, orders, decrees, instructions and acts
promulgated, issued or done by the present administration are hereby ratified and
confirmed as valid. The words ratified and confirmed had been changed into shall be
part of the law of the land, because under the first clause, it would imply that the
incumbent President did not have the authority to issue the proclamations, orders, decrees,
instructions and acts referred to. The Convention conceded that the
292
92
President had that power; and that is the reason why the phrase shall be part of the
law of the land was the one finally used.
convened left to the judgment of the President.The discussion on the Transitory Provisions
in the plenary session of the Constitutional Convention and the votes thereon clearly show
that the determination of the date the interimNational Assembly should be convened was
left to the judgment of the President, the country being, as it still is, under martial law.
MUOZ PALMA, J.:
Constitutional law; Transitory Provisions; Ferdinand E. Marcos the incumbent

President; Reason.President Ferdinand E. Marcos and no other is the person referred to
as incumbent President in Article XVII or the Transitory Provisions of the 1973
Constitution. That fact is beyond doubt because at the time the draft of the new
Constitution was being prepared and when it was finally signed by the delegates to the
1971 Constitutional Convention on November 30, 1972, it was President Marcos who was
holding the position of President of the Philippines.
Same; Same; President Marcos with authority to continue exercising the powers of the
President under the 1935 Constitution and to exercise those of the President and the Prime
Minister under the 1973 Constitution.As incumbent President, President Marcos was
vested by Section 3(1) of the Transitory Provisions with constitutional authority to continue
as President of the Philippines during the transition period contemplated in said Article
XVII that is, until the interim President and the interim Prime Minister shall have been
elected by the interim National Assembly who shall then exercise their respective powers
vested by the new Constitution, after which the office of the incumbent President ceases.
During that transition period, President Marcos was given extraordinary powers consisting
of the powers and prerogatives of the President under the 1935 Constitution, and the
powers vested in the President and the Prime Minister under the 1973 Constitution.
Same; Same; Exercise by President Marcos of legislative powers; Exercise of legislative
power necessary to fill up vacuum during the transition period.The President is
empowered to issue proclamations, orders, decrees, etc. to carry out and implement the
objectives of the proclamation of martial law be it under the 1935 or 1973 Constitution, and
for the orderly and efficient functioning of the government, its instrumentalities, and
agencies. This grant of
293
VOL. 62, JANUARY 31, 1975 29
3
legislative power is necessary to fill up a vacuum during the transition period when
the interim National Assembly is not yet convened and functioning, for otherwise, there will
be a disruption of official functions resulting in a collapse of the government and of the
existing social order.
convened left to the judgment of the President.While it is true that the convening of
the interim National Assembly cannot be said to be simply at the pleasure and convenience
of the President, however, the matter is one addressed to his sound discretion and
judgment for which he is answerable alone to his conscience, to the people he governs, to
posterity, and to history.
Same; Referendum; Referendum merely a means of assessing public reaction to the
given issues submitted to the people for their consideration.The act of the President in
calling such a referendum is not really in the nature of a legislative act which violates the
present Constitution. There is no prohibition in the Constitution for the Chief Executive or
the President to consult the people on national issues which in his judgment are relevant
and important. In effect, the measure taken by the President is nothing more than
consultative in character and the mere fact that such measure or device is called a
referendum in the Presidential Decrees in question will not affect nor change in any
manner its true nature which is simply a means of assessing public reaction to the given
issues submitted to the people for their consideration. Calling the people to a consultation is
derived from or within the totality of the executive power of the President, and because this
is so, it necessarily follows that he has the authority to appropriate the necessary amount
from public funds which are subject to his executive control and disposition to accomplish
the purpose.
Same; National Assembly with power to enact local government Code.Under Article
XI, Section 2, 1973 Constitution, it is the National Assembly which is empowered to enact a
local government code, and any change in the existing form of local government shall not
take effect until ratified by the majority of the votes cast in a plebiscite called for the
purpose, all of which cannot be complied with for the simple reason that for the present
there is no National Assembly.
ORIGINAL PETITION in the Supreme Court. Prohibition.

Lorenzo M. Taada, Renato E. Taada & Wigberto E. Taada for petitioners.
294
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Hugo E.
Gutierrez, Jr., Assistant Solicitor General Vicente V. Mendoza & Assistant Solicitor
General Reynato S. Puno for respondents.
MAKASIAR, J.:
I
This petition for prohibition, which was filed on January 21, 1975, seeks the
nullification of Presidential Decrees Nos. 1366, 1366-A, calling a referendum for
February 27, 1975, Presidential Decrees Nos. 629 and 630 appropriating funds
therefor, and Presidential Decrees Nos. 637 and 637-A specifying the referendum
questions, as well as other presidential decrees, orders and instructions relative to
the said referendum.
The respondents, through the Solicitor General, filed their comment on January
28, 1975. After the oral argument of over 7 hours on January 30, 1975, the Court
resolved to consider the comment as answer and the case submitted for decision.
The first ground upon which the petition is predicated states that President
Ferdinand E. Marcos does not hold any legal office nor possess any lawful authority
under either the 1935 Constitution or the 1973 Constitution and therefore has no
authority to issue the questioned proclamations, decrees and orders. This challenges
the title of the incumbent President to the office of the Presidency and therefore is
in the nature of a quo warrantoproceedings, the appropriate action by which the
title of a public officer can be questioned before the courts. Only the Solicitor
General or the person who asserts title to the same office can legally file such a quo
warranto petition. The petitioners do not claim such right to the office and not one
of them is the incumbent Solicitor General. Hence, they have no personality to file
the suit (Castro vs. Del Rosario, Jan. 30, 1967, 19 SCRA 197; City of Manila &
Antonio Villegas vs. Abelardo Subido, et. al., May 20, 1966, 17 SCRA 231-232, 235-
236; Nacionalista Party vs. Bautista, 85 Phil. 101; and Nacionalista Party vs.
Vera, 85 Phil. 127). It is established jurisprudence that the legality of the
appointment or election of a public officer cannot be questioned collaterally through
a
295
VOL. 62, JANUARY 31, 1975 295
petition for prohibition which assails the validity of his official acts.
The foregoing governing legal principles on public officers are re-stated in order
to avert any misapprehension that they have been eroded by Our resolution in the
instant petition.
Because of the far-reaching implications of the herein petition, the Court
resolved to pass upon the issues raised.
II
This Court already ruled in the Ratification Cases that there is no further judicial
obstacle to the new Constitution being considered in force and effect. As Chief
Justice Makalintal stressed in the Habeas Corpus cases, the issue as to its
effectivity has been laid to rest by Our decision in Javellana versus Executive
Secretary (L-36142, March 31, 1973, 50 SCRA 30, 141), and of course by the
existing political realities both in the conduct of national affairs and in our relations
with other countries (Aquino, Jr. vs. Enrile and 8 companion cases, L-35546, L-
35538-40, L-35547, L-35556, L-35571 and L-35573, Sept. 17, 1974, 59 SCRA 183,
241).
III
In the aforesaid Habeas Corpus cases, We affirmed the validity of Martial Law
Proclamation No. 1081 issued on September 22, 1972 by President Marcos because
there was no arbitrariness in the issuance of said proclamation pursuant to the
1935 Constitution; that the factual bases had not disappeared but had even been
exacerbated; that the question as to the validity of the Martial Law proclamation
has been foreclosed by Section 3(2) of Article XVII of the 1973 Constitution, which
provides that all proclamations, orders, decrees, instructions and acts promulgated,
issued or done by the incumbent President shall be part of the law of the land and
shall remain valid, legal, binding and effective even after the lifting of Martial Law
or the ratification of this Constitution x x x; and that any inquiry by this Court in
the present cases into the constitutional sufficiency of the factual bases for the
proclamation of Martial Law, has become moot and purposeless as a consequence of
the general referendum of July 27-28, 1973. The question propounded to the voters
was:
296
Under the (1973) Constitution, the President, if he so desires, can continue in office
beyond 1973. Do you want President Marcos to continue beyond 1973 and finish the
reforms he initiated under Martial Law? The overwhelming majority of those who
cast their ballots, including citizens beyond 15 and 18 years, voted affirmatively on
the proposal. The question was thereby removed from the area of presidential power
under the Constitution and transferred to the seat of sovereignty itself. Whatever
may be the nature of the exercise of that power by the President in the beginning
whether or not purely political and therefore non-justiciablethis Court is
precluded from applying its judicial yardstick to the act of the sovereign. (Aquino,
Jr. vs. Enrile, supra, 59 SCRA 183, 240-242).
Under the 1935 Constitution, President Ferdinand E. Marcos was duly reelected
by the vote of the sovereign people in the Presidential elections of 1969 by an
overwhelming vote of over 5,000,000 electors as against 3,000,000 votes for his rival,
garnering a majority of from about 896,498 to 1,436,118 (Osmea vs. Marcos,
Presidential Election Contest No. 3, Jan. 8, 1973). While his term of office under the
1935 Constitution should have terminated on December 30, 1973, by the general
referendum of July 27-28, 1973, the sovereign people expressly authorized him to
continue in office even beyond 1973 under the 1973 Constitution (which was validly
ratified on January 17, 1973 by the Sovereign people) in order to finish the reforms
he initiated under Martial Law; and as aforestated, as this was the decision of the
people, in whom sovereignty resides x x x and all government authority emanates x
x, it is therefore beyond the scope of judicial inquiry (Aquino, Jr. vs. Enrile, et al.,
supra, p. 242).
The logical consequence therefore is that President Marcos is a de jure President
of the Republic of the Philippines.
IV
The next issue is whether he is the incumbent President of the Philippines within
the purview of Section 3 of Article XVII on the transitory provisions of the new or
1973 Constitution. As heretofore stated, by virtue of his reelection in 1969, the term
of President Marcos under the 1935 Constitution was to terminate on December 30,
1973. The new Constitution was
297
VOL. 62, JANUARY 31, 1975 297
approved by the Constitutional Convention on November 30, 1972, still during his
incumbency. Being the only incumbent President of the Philippines at the time of
the approval of the new Constitution by the Constitutional Convention, the
Constitutional Convention had nobody in mind except President Ferdinand E.
Marcos who shall initially convene the interim Assembly. It was the incumbent
President Marcos alone who issued Martial Law Proclamation No. 1081 on
September 22, 1972 and issued orders and decrees as well as instructions and
performed other acts as President prior to the approval on November 30, 1972 of the
new Constitution by the Constitutional Convention and prior to its ratification on
January 17, 1973 by the people. Consequently, since President Marcos was the only
incumbent President at the time, because his term under the 1935 Constitution has
yet to expire on December 30, 1973, the Constitutional Convention, in approving the
new Constitution, had in mind only him when in Section 3(2) of Article XVII of the
new Constitution it provided that all the proclamations, orders, decrees,
instructions and acts promulgated, issued or done by the incumbent President shall
be part of the law of the land, and shall remain valid, legal, binding and effective
even after lifting of Martial Law or the ratification of this Constitution, unless
modified, revoked or superseded by subsequent proclamations, orders, decrees,
instructions or other acts of the incumbent President, or unless expressly and
explicitly modified or repealed by the regular National Assembly.
The term incumbent President of the Philippines employed in Section 9 of the
same Article XVII likewise could only refer to President Ferdinand E. Marcos.
This conclusion is further buttressed by Section 10 of the same Article XVII
which provides that the incumbent members of the Judiciary may continue in office
until they reach the age of 70 years unless sooner replaced in accordance with the
preceding section hereof. There can be no dispute that the phrase incumbent
members of the Judiciary can only refer to those members of the Judiciary who
were already Justices and Judges of the various courts of the country at the time
the Constitutional Convention approved the new Constitution on November 30,
1972 and when it was ratified.
Because President Ferdinand E. Marcos is the incumbent President referred to
in Article XVII of the transitory
298
provisions of the 1973 Constitution, he can continue to exercise the powers and
prerogatives under the nineteen hundred and thirty five Constitution and the
powers vested in the President and the Prime Minister under this Constitution
until he calls upon the interim National Assembly to elect the interim President and
the interimPrime Minister, who shall then exercise their legislative powers vested
by this Constitution (Sec. 3[1], Art. XVII, 1973 Constitution).
Under the 1935 Constitution, the President is empowered to proclaim martial
law. Under the 1973 Constitution, it is the Prime Minister who is vested with such
authority (Sec. 12, Art. IX, 1973 Constitution).
WE affirm the proposition that as Commander-in-Chief and enforcer or
administrator of martial law, the incumbent President of the Philippines can
promulgate proclamations, orders and decrees during the period of Martial Law
essential to the security and preservation of the Republic, to the defense of the
political and social liberties of the people and to the institution of reforms to prevent
the resurgence of rebellion or insurrection or secession or the threat thereof as well
as to meet the impact of a worldwide recession, inflation or economic crisis which
presently threatens all nations including highly developed countries (Rossiter,
Constitutional Dictatorship, 1948 Ed., pp. 7, 303; see also Chief Justice Stones
Concurring Opinion in Duncan vs. Kahanamoku, 327 US 304).
To dissipate all doubts as to the legality of such law-making authority by the
President during the period of Martial Law, Section 3(2) of Article XVII of the New
Constitution expressly affirms that all the proclamations, orders, decrees,
instructions and acts he promulgated, issued or did prior to the approval by the
Constitutional Convention on November 30, 1972 and prior to the ratification by the
people on January 17, 1973 of the new Constitution, are part of the law of the land,
and shall remain valid, legal, binding and effective even after the lifting of Martial
Law or the ratification of this Constitution, unless-modified, revoked or superseded
by subsequent proclamations, orders, decrees, instructions or other acts of the
incumbent President, or unless expressly and specifically modified or repealed by
the regular National Assembly.
The entire paragraph of Section 3(2) is not a grant of authority to legislate, but a
recognition of such power as
299
VOL. 62, JANUARY 31, 1975 299
already existing in favor of the incumbent President during the period of Martial
Law.
Dr. Jose M. Aruego, noted authority in Constitutional Law as well as delegate to
the 1935 and 1971 Constitutional Conventions, shares this view, when he states
thus:
108. x xThese Presidential Proclamations, orders, decrees, instructions, etc. had been
issued by the incumbent President in the exercise of what he considered to be his powers
under martial law, in the same manner that the lawmaking body had enacted several
thousand statutes in the exercise of what it considered to be its power under the Organic
Laws. Both these classes of rules of lawby the President and by the lawmaking body
were, under general principles of constitutional law, presumed to be constitutional until
declared unconstitutional by the agency charged with the power and function to pass upon
constitutional law questionsthe Judiciary, at the apex of which is the Supreme Court.
Hence, the inclusion of both group of rulesPresidential rules and legislative rulesin the
new Constitution for the people to approve or disapprove in the scheduled plebiscite.
(Aruego, The New Constitution, 1973 Ed., p. 230).
Delegate Arturo Pacificador, a Floor Leader of the 1971 Constitutional Convention,
in explaining Section 3(2) of Article XVII, underscores this recognition of the
legislative power of the incumbent President as Commander-in-Chief during
Martial Law, thus:
The second paragraph sets forth the understanding of the Convention of the nature, extent
and scope of the powers of the incumbent President of the Philippines, under martial law. It
expressly recognizes that the commander-in-chief under martial law, can exercise all
necessary powers to meet the perils of invasion, insurrection, rebellion or imminent danger
thereof. This provision complements Section 7, Article XVII of the Constitution that all
existing laws not inconsistent with this Constitution shall remain operative until amended,
modified, or repealed by the National Assembly.
The second paragraph is an express recognition on the part of the framers of the new
Constitution of the wisdom of the proclamations, orders, decrees and instructions by the
incumbent President in the light of the prevailing conditions obtaining in the country.
(Montejo, New Constitution, 1973 Ed., p. 314, italics supplied).
The power under the second clause of Section 3(2) is not limited merely to modifying,
revoking or superseding all his
300
proclamations, orders, decrees, instructions or other acts promulgated, issued or
done prior to the ratification of the 1973 Constitution. But even if the scope of his
legislative authority thereunder is to be limited to the subject matter of his previous
proclamations, orders, decrees or instructions or acts, the challenged Proclamations
Nos. 1366 and 1366-A, as well as Presidential Decrees Nos. 629, 630, 637 and 637-A
are analogous to the referenda of January, 1973 and July 27-28, 1973.
The actions of the incumbent President are not without historical precedents. It
should be recalled that the American Federal Constitution, unlike the 1935 or 1973
Constitution of the Philippines, does not confer expressly on the American President
the power to proclaim Martial Law or to suspend the writ of habeas corpus. And yet
President Abraham Lincoln during the Civil War, and President Roosevelt during
the Second World War, without express constitutional or statutory authority,
created agencies and offices and appropriated public funds therefor in connection
with the prosecution of the war. Nobody raised a finger to oppose the same. In the
case of President Roosevelt, the theater of war was not in the United States. It was
thousands of miles away, in the continents of Europe and Africa and in the Far East.
In the Philippines, military engagements between the government forces and the
rebels and secessionists are going on, emphasizing the immediacy of the peril to the
safety of the Republic itself. There is therefore greater reason to affirm this law-
making authority in favor of the incumbent President during the period of Martial
Law.
Petitioners further argue that the President should call the interim National
Assembly as required of him by Section 3(1) of Article XVII, which National
Assembly alone can exercise legislative powers during the period of transition.
It should be stressed that there is a distinction between the existence of
the interim Assembly and its organization as well as its functioning.
The interim Assembly already existed from the time the new Constitution was
ratified; because Section 1 of Article XVII states that there shall be
an interim National Assembly which shall exist immediately upon the ratification of
this Constitution and shall continue until the members of the regular National
Assembly shall have been elected and shall have assumed office x x x. However, it
cannot function
301
VOL. 62, JANUARY 31, 1975 301
until it is convened and thereafter duly organized with the election of
its interim speaker and other officials. This distinction was clearly delineated in the
case of Mejia, et. al. vs. Balolong, et. al. where We held that from the phrase the
City of Dagupan, which is hereby created, x x x, Dagupan City came into existence
as a legal entity upon the approval of its Charter; but the date of the organization of
the city government was to be fixed by the President of the Philippines., and
necessarily was subsequent to the approval of its organic law (81 Phil. 486, 490-492).
Petitioners likewise urge that the President should have convened
the interim Assembly before the expiration of his term on December 30, 1973. The
Constitutional Convention intended to leave to the President the determination of
the time when he shall initially convene the interim National Assembly, consistent
with the prevailing conditions of peace and order in the country. This was revealed
by no less than Delegate Jose M. Aruego himself, who stated:
109. Convening the interim National Assembly.The Constitutional Convention could
have fixed the date when the interim National Assembly should convene itself as it did with
respect to the regular National Assembly. There would not have been any need for any
Presidential call as there is none, with respect to the regular National Assembly.
But considering that the country had been already placed under martial law rule the
success of which was conditioned upon the unity not only of planning but also in the
execution of plans, many delegates felt that the incumbent President should be given the
discretion to decide when the interim National Assembly should be convened because he
would need its counsel and help in the administration of the affairs of the country.
And in the event that it should convene, why did the interimNational Assembly not fix
its tenure, and state expressly when the election of the members of the regular National
Assembly should be called? Many of the delegates felt that they could not be sure even of
the proximate date when the general conditions of peace and order would make possible
orderly elections, x x x. (The New Philippine Constitution by Aruego, 1973 Ed., p. 230).
This was also disclosed by Delegate Arturo F. Pacificador, who affirmed:
Under the first paragraph of this section, the incumbent President is mandated to initially
convene the interim National Assembly.
302
Note that the word used is shall to indicate the mandatory nature of the desire of the
Constitutional Convention that the interim National Assembly shall be convened by the
incumbent President. The Constitutional Convention, however, did not fix any definite time
at which the incumbent President shall initially convene the interim National Assembly.
This decision was deliberate to allow the incumbent President enough latitude of discretion
to decide whether in the light of the emergency situation now prevailing, conditions have
already normalized to permit the convening of the interim National Assembly. (Montejo,
The New Constitution, 1973 Ed., p. 314).
It is thus patent that the President is given the discretion as to when he shall
convene the interim National Assembly after determining whether the conditions
warrant the same.
His decision to defer the initial convocation of the interim National Assembly was
supported by the sovereign people at the referendum in January, 1973 when the
people voted to postpone the convening of the interim National Assembly until after
at least seven (7) years from the approval of the new Constitution. And the reason
why the same question was eliminated from the questions to be submitted at the
referendum on February 27, 1975, is that even some members of the Congress and
delegates of the Constitutional Convention, who are already ipso factomembers of
the interim National Assembly, are against such inclusion; because the issue was
already decided in the January, 1973 referendum by the sovereign people indicating
thereby their disenchantment with any Assembly as the former Congress failed to
institutionalize the reforms they demanded and had wasted public funds through
the endless debates without relieving the suffering of the general mass of citizenry.
Petitioners likewise impugn the scheduled referendum on the ground that there
can be no true expression of the peoples will due to the climate of fear generated by
Martial Law and that the period of free discussion and debate is limited to two
weeks from February 7 to 21, without right of rebuttal from February 22 until the
day of the referendum.
The first objection is not tenable because during the senatorial elections in 1951
and 1971, the privilege of the writ of habeas corpus was suspended, during which
period of suspension there was fear of arrest and detention. Yet the election was so
free that a majority of the senatorial candidates
303
VOL. 62, JANUARY 31, 1975 303
of the opposition party were elected and there was no reprisal against or
harrassment of any voter thereafter. The same thing was true in the referendum of
July 27-28, 1973, which was done also through secret ballot. There was no Army,
PC, or police truck, bus or other mode of transportation utilized to transport the
voters to the various precincts of the country. There was no PC, Army or police
personnel assigned to each election precinct or voting booth. And such assignment
would be impossible; because the combined membership of the police, PC, and Army
was then as now very much less than the number of precincts, let alone the number
of voting booths. And no one would be left to fight the rebels or to maintain peace
and order. And as heretofore stated, the voting was done in secrecy. Only one voter
at a time entered the voting booth. The voting was orderly. There was no buying of
votes or buying the right not to vote. And as opined by the Solicitor General, every
qualified voter who fails to register or go to the polling place on referendum day is
subject to prosecution; but failure to fill up the ballot is not penalized.
In the Habeas Corpus cases, We declared that the result of the referendum on
July 27-28, 1973 was a decision by the sovereign people which cannot be reviewed
by this Court. Then again, it is too late now for petitioners to challenge the validity
of said referendum.
Moreover, as stressed by the Solicitor General, the previous referenda of January
and July, 1973, were a lot more free than the elections under the Old Society
previous to the proclamation of Martial Law, where the will of the voter was
subverted through guns, goons and gold, as well as through fraud. All modes of
transportation were utilized by the candidates and their leaders to transport the
voters to the precinct. The voters were likewise wined and dined and so prostituted
that they refused to vote until the required monetary persuasion was proffered, if
they were not being subjected to various forms of intimidation. In some areas, the
ballots were filled up and the election returns were accomplished before election day.
Even animals and dead persons voted. The decisions in the electoral contests filed
after every election under the Old Society attest to this very unflattering fact in our
history.
The second objection that the two-week period for free debate is too short, is
addressed to the wisdom of the President
304
who may still amend the proclamation to extend the period of free discussion.
At any rate, such a brief period of discussion has its counterpart in previous
plebiscites for constitutional amendments. Under the Old Society, 15 days were
allotted for the publication in three consecutive issues of the Official Gazette of the
womens suffrage amendment to the Constitution before the scheduled plebiscite on
April 30, 1937 (Com. Act No. 34). The constitutional amendment to append as
ordinance the complicated Tydings-Kocialskowski Act of the US Federal Congress
to the 1935 Constitution was published in only three consecutive issues of the
Official Gazette for 10 days prior to the scheduled plebiscite (Com. Act No. 492). For
the 1940 constitutional amendments providing for the bicameral Congress, the
reelection of the President and Vice-President and the creation of the Commission
on Elections, 20 days of publication in three consecutive issues of the Official
Gazette was fixed (Com. Act No. 517). And the Parity Amendment, an involved
constitutional amendment affecting the economy as well as the independence of the
Republic was publicized in three consecutive issues of the Official Gazette for 20
days prior to the plebiscite (Rep. Act No. 73).
The period of 14 days for free discussion can compare favorably with the period
required for publication of the proposed amendments under the Old Society.
WHEREFORE, PRESIDENT FERDINAND E. MARCOS IS HEREBY
DECLARED DE JUREPRESIDENT OF THE REPUBLIC, PRESIDENTIAL
PROCLAMATIONS NOS. 1366 AND 1366-A AND PRESIDENTIAL DECREES
NOS. 629, 630, 637 AND 637-A ARE HEREBY DECLARED VALID, AND THE
PETITION IS HEREBY DISMISSED. WITHOUT COSTS.
Aquino, J., concur.
Makalintal, C.J., concurs in the result.
Castro, J., states his reasons for concurrence in a separate opinion.
Fernando and Barredo, JJ., concur in their respective separate opinions.
Teehankee, J., concurs and dissents in a separate opinion.
Antonio, Esguerra, Fernandez and Muoz Palma, JJ., without prejudice to
their respective separate concurring opinions.
305
VOL. 62, JANUARY 31, 1975 305
SEPARATE OPINION
CASTRO, J.:
I vote to deny the petition.

At the threshold, and only for the purposes of this separate capsule opinion, I
will assume (a) that this case before us is not in the nature of a quo
warranto proceeding; (b) that the petitioners possess legal standing before the
Court; and (c) that all the petitioners, whatever be the persuasion of their counsel,
recognize the Court as the supreme judicial tribunal operating and functioning
under the 1973 Constitution.
I find no particular difficulty in resolving what I regard as the two crucial
issues posed by the petition.
1. On the matter of whether Ferdinand E. Marcos is still the President of the
Philippines, the Transitory Provisions (Art. XVII) of the 1973 Constitution, more
specifically Secs. 2, 3, 9 and 12 thereof, even if they do not mention him by name,
clearly point to and recognize Ferdinand E. Marcos as the constitutional and lawful
President of the Philippines. If there is any doubt at alland I do not personally
entertain anythat the said Transitory Provisions refer to President Marcos as the
incumbent President, then such doubt should be considered as having been
completely dissipated by the resounding affirmativevote of the people on this
question propounded in general referendum of July 27-28, 1973: Under the [1973]
Constitution, the President, if he so desires, can continue in office beyond 1973. Do
you want President Marcos to continue beyond 1973 and finish the reforms he
initiated under martial law?
2. On the matter of whether President Marcos, at the present time, can
constitutionally exercise legislative power, I do not need to postulate that he derives
legislative power from the constraints of a regime of martial law. To my mind, pars.
1 and 2 of Sec. 3 of the Transitory Provisions are unequivocal authority for
President Marcos to legislate. These paragraphs read:
The incumbent President of the Philippines shall initially convene the interim National
Assembly and shall preside over its sessions until the interim Speaker shall have been
elected. He shall continue to exercise his powers and prerogatives under the nineteen
306
hundred and thirty-five Constitution and the powers vested in the President and the Prime
Minister under this Constitution until he calls upon the interim National Assembly to elect
the interim.President and the interim Prime Minister, who shall then exercise their
respective powers vested by this Constitution.
All proclamations, orders, decrees, instructions, and acts promulgated, issued, or done
by the incumbent President shall be part of the law of the land, and shall remain valid,
legal, binding, and effective even after [the] lifting of martial law or the ratification of this
Constitution, unless modified, revoked, or superseded by subsequent proclamations, orders,
decrees, instructions, or other acts of the incumbent President, or unless expressly and
explicitly modified or repealed by the regular National Assembly.
Stated elsewhere, my reading of these provisions is that they constitute an
unmistakable constitutional warrant for the incumbent President (meaning
President Marcos) to legislate (until, at the very earliest, the interim National
Assembly shall have been convoked).
The peripheral matter of whether President Marcos should now or soon convene
the interim National Assembly is completely outside the competence of the Supreme
Court to resolve, as, in my view, it is a political question addressed principally,
basically, and exclusively to the President and the Filipino people.
Makalintal, C.J., Barredo, Antonio, Esguerra and Fernandez, JJ., concur.
FERNANDO, J., concurring:
It is a crucial question that is posed by this petition to call a halt to the February 27
referendum because of alleged constitutional transgressions. It is one fundamental
in its essence, and what is more, impressed with the sense of immediacy to quiet
doubts and to minimize uncertainties. There has been a quick response, hopefully
not one given in haste, which is the enemy of thought. For all the vigor and the
learning that characterized the advocacy of Senator Lorenzo M. Taada, it did not
suffice to elicit a favorable verdict. The petition did not prosper. So it has been
adjudged, and I concur in the result reached. It is given expression in the notable
opinion penned by Justice Makasiar which, on its face, betrays sensitivity to the
magnitude and the grave implications of the
307
VOL. 62, JANUARY 31, 1975 307
serious problem posed. What is more, it has not avoided subsidiary issues which
reach into vital areas of our constitutional system. To the extent that it reiterates
tried and tested doctrines, I am of course in agreement. Certainly, there is not much
difficulty for me in reaching the conclusion that the term incumbent President in
the Transitory Provisions means what it says. If I submit this brief concurrence, it
is only because of my belief that notwithstanding the brilliant and illuminating
argumentation in depth by both eminent counsel, ranging far and wide in the
domain of constitutionalism, there is no need as yet to express my views on some
collateral matters. It suffices for me that I could rely on a juridical concept that is
decisive. It is the fundamental principle that sovereignty resides in the people with
all government authority emanating from them. It speaks, to recall Cardozo, with a
1
reverberating clang that drowns all weaker sounds.

1. Respondents would interpose obstacles to avoid a decision on the merits. They
are not insurmountable. They allege that the questions raised are political and
therefore left for the political sovereign, not the courts. Such an assertion carries
2
overtones of the Taada v. Cuenco ruling that a matter to be decided by the people
3
in their sovereign capacity is of such a character. It has an aura of plausibility but it

cannot stand the rigor of analysis. It confuses the end result with the procedure
necessary to bring it about. It is elemental that constitutionalism implies restraints
as well on the process by which lawful and valid state objectives may be
achieved. What is challenged here is the actuation of the incumbent President for
4
alleged failure to comply with constitutional requisites. It is much too late in the
day to assert that a petition of that character is not appropriate for the courts. This
is not to venture into unchartered judicial territory. There are landmarks all along
the way. This is not then to trespass on forbidden ground. There is no disregard of
the political question concept.
_______________
1According to Article II, Section 1 of the present Constitution: The Philippines is a republican state.
Sovereignty resides in the people and all government authority emanates from them. There is here a
reiteration of Article II, Section 1 of the 1935 Constitution.
2Respondents Comment, 6.
3Taada v. Cuenco, 103 Phil. 1051 (1957).
4Cf. Angara v. Electoral Commission, 63 Phil. 139 (1936).
308
Then there is the attack on the standing of petitioners, as vindicating at most what
they consider a public right and not protecting their rights as individuals. This is to 5
conjure the specter of the public right dogma as an inhibition to parties intent on
keeping public officials staying on the path of constitutionalism. As was so well put
by Jaffe: The protection of private rights is an essential constituent of public
6
interest and, conversely, without a well-ordered state there could be no enforcement

of private rights. Private and public interests are, both in a substantive and
procedural sense, aspects of the totality of the legal order. Moreover, petitioners
7
have convincingly shown that in their capacity as taxpayers, their standing to sue
has been amply demonstrated. There would be a retreat from the liberal approach
followed in Pascual v. Secretary of Public Works, foreshadowed by the very decision
8
of People v. Vera where the doctrine was first fully discussed, if we act differently
9
now. I do not think we are prepared to take that step, Respondents, however, would
hark back to the American Supreme Court doctrine in Mellon v. Frothingham, with 10
their claim that what petitioners possess is an interest which is shared in common
by other people and is comparatively so minute and indeterminate as to afford any
basis and assurance that the judicial process can act on it. That is to speak in the
11
language of a bygone era, even in the United States. For as Chief Justice Warren
clearly pointed out in the later case of Flast v. Cohen, the barrier thus set up if not
12
breached has definitely been lowered. The weakness of these particular defenses is
13
thus quite apparent. 14
________________
6Standing to Secure Judicial Review, 74 Harvard Law Rev. 1265 (1961).
7 Ibid, 1266. Cf. Berger, Standing to Sue in Public Actions, 78 Yale Law Journal 816 (1969).
8110 Phil. 331 (1960).
965 Phil. 56 (1937).
10262 US 447 (1923).
12391 US 83 (1968).
13Ibid, 92-95.
14Cf. Tan v. Macapagal, L-34161, February 29, 1972, 43 SCRA 677.
309
VOL. 62, JANUARY 31, 1975 309
2. Now as to the merits. The success of petitioners would signify that the
referendum scheduled for February 27 of this year will not take place. Believing as I
do that the opportunity of the people to give expression to their views is implicit in
the fundamental principle that sovereignty resides in them, I am unable to find
sufficient merit in this petition. For all its logical and plausible aspect it still does
not admit of doubt, in my mind at least, that a conclusion different from that
reached by this Court would be attended by deplorable consequences. For one thing,
it would impress with the stigma of illegality the viable procedure that under the
stern realities of the present is the only one in the horizon for ascertaining the
desires of the people. Moreover, under a republican regime, even under normal
times, their role is limited to the choice of public officials, thereafter to be held to
accountability through their informed, even immoderate, criticism. Now with this
proposed referendum, they will be sounded out on what they think and how they
feel on matters of significance. Even assuming its consultative character, it remains
at the very least a step in the right direction. It may not go far enough, but there is
progress of sorts that hopefully may eventually lead to the goal of complete civilian
rule. It stands to reason, at least from my standpoint, that when people are thus
allowed to express their wishes and voice their opinions, the concept of popular
sovereignty, more so under crisis conditions, becomes impressed with a meaning
beyond that of lyric liturgy or acrimonious debate devoid of illumination. Nor is this
to discern new waves of hope that may ultimately dissolve in the sands of actuality.
It is merely to manifest fidelity to the fundamental principle of the Constitution. It
dates back to the American Declaration of Independence of 1776. The government it
sets up derives its just powers from the consent of the governed. The basis of
republicanism, to paraphrase Lerner, is that the majority will shall prevail, the
premise being that an ordinary citizen, the common man, can be trusted to
determine his political destiny. Thereby, as Bryn-Jones pointed out, the controlling
15
power, the governmental authority in the language of the Constitution, is vested in

the entire aggregate of the community. It is in that sense, as Justice
16
________________
Cf. Lerner, Ideas Are Weapons, 470 (1939).

15
Cf. Bryn-Jones, Toward a Democratic New Order 23 (1945).

16
310
Laurel stressed in Moya v. Del Fierro, that an enfranchised citizen [is] a particle
17
of popular sovereignty and [is] the ultimate source of established authority. There
18
is reliance likewise to this excerpt from the eloquent opinion of Justice Jackson in
West Virginia State Board of Education v. Barnette: There is no mysticism in the
19
American concept of the State or of the nature or origin of its authority. We set up
government by consent of the governed, and the Bill of Rights denies those in power
any legal opportunity to coerce that consent. Authority here is to be controlled by
public opinion, not public opinion by authority. If that is true of the United States,
20
so should it be in our land. It caters to mans fundamental yearning for some degree
of participation in the process of reaching fateful decisions. While courts have to
deal with the necessities of their time, the ideal should remain untarnished.
3. It follows therefore that the will of the people given expression, even in an
unofficial manner but accurately ascertained, is impressed with a decisive
significance. It is more than just a foundation for societal or political development.
Whenever appropriate, it determines what is to be done. Its significance is vital, not
merely formal. It is understandable then why in Javellana, one of the issues passed
21
upon by this Court is the effect of acquiescence by the people to the present
Constitution even on the assumption that it was not ratified in accordance with the
1935 Charter. It may not be amiss to recall what I did state on that point in my
separate opinion: Nor is the matter before us solely to be determined by the failure
to comply with the requirements of Article XV. Independently of the lack of validity
of the ratification of the new Constitution, if it be accepted by the people, in whom
sovereignty resides according to the Constitution, then this Court cannot refuse to
yield assent to such a political decision of the utmost gravity, conclusive in its effect.
Such a fundamental principle is meaningless if it does not imply, to follow Laski,
that the nation as a whole
________________
1769 Phil. 199 (1939).

18Ibid, 204.
19319 US 624 (1943).
20Ibid, 641.
21Javellana v. The Executive Secretary, L-36142, March 31, 1973, 50 SCRA 30.
311
VOL. 62, JANUARY 31, 1975 311
constitutes the single center of ultimate reference, necessarily the possessor of that
power that is able to resolve disputes by saying the last word. If the origins of the
democratic polity enshrined in the 1935 Constitution with the declaration that the
Philippines is a republican state could be traced back to Athens and to Rome, it is
no doubt true, as McIver pointed out, that only with the recognition of the nation as
the separate political unit in public law is there the juridical recognition of the
people composing it as the source of political authority. From them, as Corwin did
stress, emanate the highest possible embodiment of human will, which is supreme
and must be obeyed. To avoid any confusion and in the interest of clarity, it should
be expressed in the manner ordained by law. Even if such were not the case,
however, once it is manifested, it is to be accepted as final and authoritative. The
government which is merely an agency to register its commands has no choice but
to submit. Its officials must act accordingly. No agency is exempt from such a duty,
not even this Court. In that sense, the lack of regularity in the method employed to
register its wishes is not fatal in its consequences. Once the fact of acceptance by
the people of a new fundamental law is made evident, the judiciary is left with no
choice but to accord it recognition. The obligation to render it obeisance falls on the
courts as well. 22
To such a cardinal jural postulate is traceable my concurring and dissenting

opinion in Tolentino v. Commission on Elections: It was likewise argued by
23
petitioner that the proposed amendment is provisional and therefore is not such as
was contemplated in this article. I do not find such contention convincing. The fact
that the Constitutional Convention did seek to consult the wishes of the people by
the proposed submission of a tentative amendatory provision is an argument for its
validity. It might be said of course that until impressed with finality, an
amendment is not to be passed upon by the electorate. There is plausibility in such
a view. A literal reading of the Constitution would support it. The spirit that
informs it though would not, for me, be satisfied. From its silence I deduce the
inference that there is no repugnancy to the
________________
22Ibid 327-328. The works cited are Laski, Grammar of Politics, 4th ed., 34 (1937); McIver, the Web of
Government, 84 (1947); and Corwin, The Higher Law Background of American Constitutional Law, in I
Selected Essays on Constitutional Law 3 (1938).
23L-34150, October 16, 1971, 41 SCRA 702.
312
fundamental law when the Constitutional Convention ascertains the popular will.
In that sense, the Constitution, to follow the phraseology of Thomas Reed Powell, is
not silently silent but silently vocal. What I deem the more important consideration
is that while a public official, as an agent, has to locate his source of authority in
either Constitution or statute, the people, as the principal, can only be limited in
the exercise of their sovereign powers by the express terms of the Constitution. A
concept to the contrary would to my way of thinking be inconsistent with the
fundamental principle that it is in the people, and the people alone, that sovereignty
resides. 24
As it was then, so, to my way of thinking, should it be now. With such a decisive
consideration in mind, it is difficult to conclude that the infirmities imputed to the
challenged Presidential decrees are fatal. They do not suffer from the corrosion of
substantial constitutional infractions. It is in that sense that I do not feel called
upon to inquire into the nature of the authority conferred on the incumbent
President under the Transitory Provisions, whether purely executive as contended
by petitioners or both executive and legislative as argued by respondents. I leave
that question for another day. What cannot be ignored is that with a National
Assembly in existence but not convened, it is only the Executive that can perform
those essential and indispensable functions of dealing with the actual conduct of
public affairs. That is the reality that stares us in the face. To deny his power to
issue decrees and to appropriate public funds is thus to assure the paralyzation and
impotence of government. Precisely then, if a referendum may lend itself to a
reappraisal of the situation, by all means let it be conducted. This is not to deny
that the judicial power to call a halt exists. It is merely to stress that it should be
exercised with the utmost reluctance as is required by deference to the concept of
popular sovereignty. To be more specific about the matter, this Tribunal should
refrain from making use of that prerogative now.
Parenthetically, it may be observed that in 1973 when the Javellana decision was
promulgated, I could not detect sufficient evidence as to the fact of acquiescence to
the present Constitution. That was why I had to dissent from the judgment
________________
Ibid, 740-741.
24
313
VOL. 62, JANUARY 31, 1975 313
of the Court dismissing the various petitions assailing the validity of Proclamation
No. 1102. Since then, with well-nigh two years having gone by, it is quite evident
that the matter is no longer open to doubt. Under the standard set forth in the
leading case of Taylor v. Commonwealth, decided at the beginning of the century,
25
no other conclusion is allowable. The present Constitution having been thus

acknowledged and accepted by the officers administering the government and by
the people * * * and being, as a matter of fact, in force throughout * * *, and there
being no government in existence * * * opposing or denying its validity, [it] is the
only rightful, valid, and existing Constitution * * * and that to it all the citizens * *
* owe their obedience and loyal allegiance. 26
4. There is finally, according to petitioners, a deficiency that mars the proposed

referendum. It deserves serious consideration. It is their submission that under
martial law, with people denied their basic freedoms, particularly their freedoms of
expression and assembly, it cannot be validly held. In my concurring and dissenting
opinion in Planas v. Commission on Elections I express the apprehension that
27
voters cannot freely register their will, as dissent may be fraught with
unpleasant consequences. Further: While it is to be admitted that the
28
Administration has done its best to alleviate such a state of mind. I cannot in all
honesty say, although I am prepared to concede that I may labor under a sense of
undue pessimism, that the momentum of fear necessarily incident to such a regime
has been reduced to a minimum. There is, I would say, still that feeling of
29
insecurity as to what the morrow may bring, not from high and responsible officials,
of course, but from those much lower in the ranks, whether in the armed forces or in
the civilian component. Abuses, in the nature of things, cannot be completely curbed.
In that sense, my misgivings are not unjustified. Nonetheless, I gain reassurance
from the fact that
_______________
2544 SE 754 (1903).

26Ibid. Cf. Miller v. Johnson, 92 Ky. 589, 18 SW 522 (1892); Bott v. Wurts, 40 Atlantic, 740 (1898); Arie
v. State, 23 Okl. 166 (1909); Hammond v. Clark, 136 Ga. 313 (1911); Taylor v. King, 130 A. 407
(1925); Wheeler v. Board of Trustees, 37 SE 322 (1946).
27L-35925, January 22, 1973, 49 SCRA 105.
28Ibid, 159.
29Ibid.
314
as I did admit in my concurring and dissenting opinion in Aquino v. Enrile, the 30
Philippine brand of martial law [is] impressed with a mild character. There is by 31
and large a high degree of confidence in the capabilities and moderation of those
entrusted with its implementation. To cite only an instance, it is a rare and
impressive tribute to the Judge Advocate General, Justice Guillermo S. Santos of
the Court of Appeals, that in a manifesto of reputable citizens both from the clergy
and the laity, with a number of civic and political leaders, the suggestion was made
that the conduct of the referendum should be under the auspices of a Committee of
three with him as one of the members. I am not then in a position to press with the
32
same degree of conviction my original stand. I would not be justified though in

making such a concession if the constitutional rights to freedom of expression and
the freedom of assembly may not be availed of. They are once again enshrined in
our Bill of Rightsand in the very same language. If the Constitution is now fully
in force, they must be allowed full operation. I do not deny that they are not
absolute in character, but the limitation is supplied by the clear and present danger
test. Nor do I deny that under emergency conditions, it is not unreasonable to
enlarge the area of state authority, to seek national cohesiveness, and to discourage
dissent. What I cannot sufficiently stress though is that dissent, even during such
periods of stress, is not disloyalty, much less subversion. Thus the citizens can
invoke in the exercise of the freedoms of expression and of assembly not the
challenged decrees but their constitutional rights. Moreover, as thus construed as
they should be to avoid any taint of invalidity, they may be pulled back from the
edge of the constitutional precipice. It would follow, and that to my mind would be
to the credit of the Executive, that even in these trying and parlous times, there is
adherence to a tolerant, compassionate view of life.
5. That is about all. In writing this brief concurrence, I had nothing in mind but
to explain why I had to vote the way I did.
_______________
30 L-35546, September 17, 1974, 59 SCRA 183.
31 Ibid, 300.
32Petition, Annex C. The other two members proposed are the President of the Integrated Bar, former
Justice J.B.L. Reyes, whose reputation for probity and integrity is legendary, as Chairman, and another
retired member of this Court.
315
VOL. 62, JANUARY 31, 1975 315
It is quite obvious that for me the old landmarks of the law are still there to serve
as guides, that precedents do serve as factors for continuity and stability not to be
ignored but also not to be slavishly obeyed. For in constitutional law more than in
any other branch of juristic science, much depends on the immediacy and the reality
of the specific problems to be faced. Hence it has been truly said in days of crisis or
of emergency, to stand still is to lose ground. Nonetheless, one has always to reckon
with the imponderables and the intangibles, ever so often elusive to our
understanding and disheartening to our deeply-cherished convictions. For he has no
choice but to comply as best he can with the duty to decide in accordance with legal
norms with roots that go far deeper than his personal preferences and predilections.
So it has to be.
TEEHANKEE, J., Concurring and dissenting:
I concur with the main opinion insofar as it recognizes President Ferdinand E.

Marcos as the incumbent President and head of government who is vested with
authority under Article XVII, section 3 (1) of the Transitory Provisions of the 1973
Constitution to continue to exercise his powers and prerogatives under the 1935
Constitution and the powers vested in the President and Prime Minister under this
Constitution.
I am constrained, however, to dissent from the remaining portion thereof which
dismisses the petition, on the basis of serious constitutional grounds as briefly
expounded hereinafter.
1. It cannot be gainsaid that the single most important change effected by the
1973 Constitution is the change of our system of government from presidential to
parliamentary wherein the legislative power is vested in a National Assembly and 1
the Executive Power is vested in the Prime Minister who shall be elected by a
majority of all the members of the National Assembly from among themselves. The 2
President who is likewise elected by a majority vote of all the members of the
National Assembly from among themselves shall be the symbolic head of state. 3
_______________
1Art. VIII, sec. 1, 1973 Constitution.

2Art. IX, secs. 1 and 3, idem.
3Art, VII secs. 1 and 2, idem.
316
To carry out the orderly transition from the presidential to the parliamentary
system, section 1 of the Transitory Provisions decreed that:
SECTION 1. There shall be an interim National Assembly which shall exist
immediately upon the ratification of this Constitution and shall continue until the Members
of the regular National Assembly shall have been elected and shall have assumed
officefollowing an election called for the purpose by the interim National Assembly. Except
as otherwise provided in this Constitution, the interim National Assembly shall have the
same powers and its Members shall have the same functions, responsibilities, rights,
privileges, and disqualifications as the regular National Assembly and the Members
thereof. (Art. XVII)
Section 2 of the Transitory Provisions provides for the members of
the interim National Assembly. The Solicitor General stated at the hearing that
the interim National Assembly came into existence after the proclamation on
January 17, 1973 of the ratification of the Constitution per Proclamation No. 1102
when the members thereof took their oath of office and qualified thereto in
accordance with the cited section and continues in existence at the present time
without having been convened.
Petitioners raise the question as to the scheduled referendum called for February
27, 1975 that the calling of a referendum and the appropriation of funds therefor
are essentially legislative acts while the transitory powers and prerogatives vested
in President Marcos until the election of the interim Prime Minister
and interim President under section 3 (1) of the Transitory Provisions are executive
and not legislative powers, since the powers of the President under the 1935
Constitution and those of the Prime Minister under the 1973 Constitution are
essentially executive powers; more so, with respect to the powers of the President
under the 1973 Constitution which are symbolic and ceremonial.
While the Solicitor General has cited the Presidents powers under martial law
and under section 3 (2) of the Transitory Provisions as vesting him with legislative
4
powers, there is constitutional basis for the observation that his legislative and
_______________
4(2) All proclamations, orders, decrees, instructions and acts promulgated, issued, or done by the
incumbent President shall be part of the law of the land, and shall remain valid, legal, binding, and
317
VOL. 62, JANUARY 31, 1975 317
appropriation powers under martial law are confined to the law of necessity of
preservation of the state which gave rise to its proclamation (including 5
appropriations for operations of the government and its agencies and

instrumentalities).
Rossiter, as extensively cited by Solicitor General, has thus stressed that the
measures adopted in the prosecution of a constitutional dictatorship should never
be permanent in character or effect. x x x The actions directed to this end should
therefore be provisional. x x x Permanent laws, whether adopted in regular or
irregular times are for parliaments to enact, and that a radical act of permanent
character, one working lasting changes in the political and social fabric (which) is
indispensable to the successful prosecution of the particular constitutional
dictatorship x x x must be resolutely taken and openly acknowledged [as
exemplified by U.S. President Lincolns emancipation proclamation] x x x
Nevertheless, it is imperative that any action with such lasting effects should
eventually receive the positive approval of the people or of their representatives in
the legislature. 6
Even from the declared Presidential objective of using Martial Law powers to
institutionalize reforms and to remove the causes of rebellion, such powers by their
very nature and from the plain language of the Constitution are limited to such7
necessary measures as will safeguard the Republic and suppress the rebellion (or
invasion) and measures directly connected with removing the root causes thereof,
such as the tenant emancipation proclamation. The concept of martial law may not
8
be expanded, as the main opinion does, to cover the lesser threats of worldwide
recession, inflation or economic crisis which presently threatens all nations in 9
derogation of the Constitution.
_______________
effective even after lifting of martial law or the ratification of this Constitution, unless modified,
revoked, or superseded by subsequent proclamations, orders, decrees, instructions, or other acts of
the incumbent President, or unless expressly and explicitly modified or repealed by the regular National
Assembly. (Art XVII, sec. 3)
5As necessity creates the rule, so it limits its duration.
6Solicitor Generals Comment, at pp. 24-26, citing Constitutional Dictatorship, 1948 ed. by Clinton
Rossiter, 1948 ed.

7Article IX, sec. 12, 1973 Constitution Martial Law provision.
8P.D. No. 27, Oct. 21, 1972 and amendatory decrees.
9Main opinion, at page 5.
318
On the other hand, those legislative powers granted in the cited section 3 (2), known
as the validating provision which validated the Presidents acts and decrees after
the proclamation of martial law up to the ratification of the Constitution are limited
to modifying, revoking or superseding such validated acts and decrees done or
issued prior to the proclaimed ratification, since section 7 of the Transitory
Provisions expressly reserves to the National Assembly the legislative power to
10
amend, modify or repeal all existing laws not inconsistent with this Constitution.
The question is thus reduced as to whether now after the lapse of two years since
the adoption of the 1973 Constitution, the mandate of section 3 (1) of the Transitory
Provisions for the convening of the existing interim National Assembly should be
implementednot for purposes of an action of mandamus which cannot be availed
of because of the separation of powersbut for the present action of prohibition
against respondents officials which asserts that the questioned referendum comes
within the constitutional domain of the interim National Assembly and that after
the coming into immediate existence of the interim National Assembly upon the
proclamation of ratification of the Constitution, the initial convening thereof with
the election of the interim Speaker and the election of the interim President and
the interimPrime Minister should have followed as a matter of course. The cited
provision reads:
SEC. 3. (1) The incumbent President of the Philippines shall initially convene the interim
National Assembly and shall preside over its sessions until the interim Speaker shall have
been elected.He shall continue to exercise his powers and prerogatives under the nineteen
hundred and thirty-five Constitution and the powers vested in the President and the Prime
Minister under this Constitution until he calls upon the interim National Assembly
to elect the interim President and the interim Prime Minister, who shall then
exercise their respective powers vested by thisConstitution. (Art. XVII)
2. The above quoted pertinent provisions indicate an affirmative answer. It is
axiomatic that the primary task in constitutional construction is to ascertain and
assure the realization of the purpose of the framers and of the people in
_______________
10SEC. 7. All existing laws not inconsistent with this Constitution shall remain operative
until amended, modified, or repealed by the National Assembly.(Art. XVII)
319
VOL. 62, JANUARY 31, 1975 319
the adoption of the Constitution and that the courts may not inquire into the
wisdom and efficacy of a constitutional or statutory mandate.
Where the language used is plain and unambiguous, there is no room for
interpretation. It is assumed that the words in which constitutional provisions are
couched express the objective sought to be attained. They are to be given
their ordinary meaning except where technical terms are employed in which case
the significance thus attached to them prevails. As the Constitution is not primarily
a lawyers document, it being essential for the rule of law to obtain that it should
ever be present in the peoples consciousness, its language as much as possible
should be understood in the sense they have in common use. What it says according
to the text of the provision to be construed 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. 11
The mandate of section 1 of the Transitory Provisions that the interim National
Assembly shall exist immediately upon the ratification of this Constitution calls
for its coming into existence right away as conceded by respondents at the hearing.
Likewise, as affirmed by the Solicitor General, its members as provided in section 2
duly took their oath of office and qualified thereto, upon the proclamation of
ratification. The clear import of section 3 in order to give meaning and effect to the
creation and immediate existence of the interim National Assembly is that the
incumbent President shall then proceed to initially (i.e. in the first place: at the
beginning) convene it and preside over its sessions until the election of
12
the interim Speaker after which he calls for the election of the interim President
and the interim Prime Minister who shall then exercise their respective powers
vested by this Constitution. (The incumbent President then bows out and is
succeeded by the Prime Minister who may of course be himself).
This view is further strengthened by the expectations aired in the debates of the
1971 Constitutional Convention that a parliamentary government would be more
responsible and responsive to the peoples needs and aspirations. Thus, in
_______________
J.M. Tuason & Co., Inc. vs. LTC, 31 SCRA 413, 422-423, per Fernando, J.; emphasis supplied.
11
Websters Third Int. Dictionary.

12
320
section 5 of the Transitory Provisions, the interim National Assembly was charged
with the mandate to give priority to measures for the orderly transition from
the presidentialto the parliamentary system,the reorganization of the Government
the eradication of graft and corruption, the effective maintenance of peace and order,
the implementation of declared agrarian reforms,the standardization of
compensation of government employees, and such other measures as shall bridge
the gap between the rich and the poorurgent and long-lasting measures which
the President has single-handedly confronted up to now.
3. The manifestation of the Solicitor General that the scheduled referendum is
merely consultative and thus includes the participation of voters below 18 years of
age but at least 15 years old (who are not qualified enfranchised voters under
Article VI on suffrage of the 1973 Constitution which decrees a minimum age of 18
years for qualified voters) adds weight to the view that the
existing interim National Assembly be now convened and perform its constitutional
functions as the legislative authority. From the very nature of the transitory
provisions which created it, its existence must likewise be interim, i.e. temporary,
provisional, of passing and temporary duration (as opposed to permanent and the
regular institutions provided for in the first 15 Articles of the Constitution) until
after it shall have reapportioned the Assembly seats and called for the election of
13
the members of the regular National Assembly. The convening

14 of
the interim National Assembly with its cross-section of knowledgeable
representatives from all over the country was obviously hopefully conceived to serve
(more than consultative referendums) to apprise the President of the peoples and
their constituencies views as well as to assist him as mandated by the Constitution
in the enactment of priority measures to achieve fundamental and far-reaching
reforms.
4. While it has been advanced that the decision to defer the initial convocation of
the interim National Assembly was supported by the results of the referendum in
January, 1973 when the people voted against the convening of the interim
_______________
13 Art. XVII, sec. 6.

Idem, sec. 1.
14
321
VOL. 62, JANUARY 31, 1975 321
National Assembly for at least seven years, such sentiment cannot be given any
15
legal force and effect in the light of the States admission at the hearing that such
referendums are merely consultative and cannot amend the Constitution or any
provision or mandate thereof such as the Transitory Provisions which call for the
immediate existence and initial convening of the interim National Assembly to
give priority to measures for the orderly transition from the presidential to the
parliamentary system and the other urgent measures enumerated in section 5
thereof. 16
This seems self-evident for the sovereign people through their mutual compact of
a written constitution have themselves thereby set bounds to their own power, as
against the sudden impulse of mere and fleeting majorities, and hence have 17
provided for strict adherence with the mandatory requirements of the amending
process through a fair and proper submission at a plebiscite, with sufficient
information and full debate to assure intelligent consent or rejection. 18
5. Finally, the imposition of penal sanctions of imprisonment and fine upon the
citizens who fail to register and vote in the scheduled referendum is open to serious
constitutional question. It seems clear that the calling of consultative referendum
is not provided for nor envisaged in the Constitution as the appropriate vehicle
therefor is provided through the interim and regular National Assemblies. It should
perhaps be reexamined whether the mandate of the Constitution that it shall be
the obligation of every citizen
________________
15Main opinion, at page 9. See Proc. No. 1103, dated Jan. 17, 1973 wherein the President proclaimed
that the convening of the interim National Assembly . . . shall be suspended on the basis of the therein
stated premise that fourteen million nine hundred seventy six thousand five hundred sixty-one
(14,976,561) members of all the Barangays voted for the adoption of the proposed Constitution, as against
seven hundred forty-three thousand eight hundred sixty-nine (743.869) who voted for its rejection; but a
majority of those who approved the new Constitution conditioned their votes on the demand that the
interim National Assembly provided in its Transitory Provisions should not be convened.
16Supra, at page 5.
17Cf. Duncan vs. McCall, 139 U.S. 449, 35 L. Ed. 219.
18Cf. Tolentino vs. Comelec, 41 SCRA 702 (Oct. 14, 1971) and cases cited.
322
qualified to vote to register and cast his vote (at elections of members of the
National Assembly and elective local officials and at plebiscites, as therein provided
for) and the criminal penalties imposed in the questioned decrees should be deemed
applicable to such extra-constitutional consultative referendums wherein non-
qualified voters (the 15-year olds up to below 18) are asked to participate.
BARREDO, J.: Concurring:
I concur in the judgment dismissing the petition. The following opinion is without
prejudice to a more extended one in due time.
Consistently with my opinion in the habeas corpus or martial law cases, the
Court has jurisdiction over the instant petition even if, as will be shown later, the
matter of calling a referendum is by nature a political matter. Anent the possible
contention that the title of President Marcos as President of the Philippines may
not be collaterally attacked and that the proper remedy is quo warranto, under the
authority of Nacionalista Party vs. Felix Angelo Bautista, 85 Phil. 101, I concede
that the remedy of prohibition is not altogether improper.
The first ground of the petition is that President Marcos does not have any legal
authority to call the referendum because he is not holding any public office. The
specific arguments supporting this contention are that (1) Marcos is no longer
President under the 1935 Constitution; (2) he is not President nor Prime Minister
under the 1973 Constitution; (3) he is not the incumbent President contemplated
in the transitory provisions of the new constitution; and, in any event, his transitory
powers as incumbent President have already lapsed. The second and third
grounds are that President Marcos does not have any power to legislate nor the
authority to issue proclamations, decrees and orders having the force of law, hence
he cannot issue decrees appropriating funds and, therefore, the decree calling for
the referendum is void.
It is my considered conviction that these grounds are untenable.
President Marcos authority to continue exercising the powers of the President
under the 1935 Constitution and to exercise those of President and Prime Minister
under the 1973
323
VOL. 62, JANUARY 31, 1975 323
Constitution is specifically provided for in Sec. 3(1), Article XVII of the 1973
Constitution. It is to me unquestionable that by virtue of these provisions, President
Marcos being the President of the Philippines, is constitutionally indubitable.
It was precisely because upon the effectivity of the New Constitution President
Marcos would cease to be President under the 1935 Charter and would not then be
occupying any office under the New Constitution, and, on the other hand, there
would yet be no new president and no prime minister, that he, as incumbent
President at that time had to be expressly granted the authority to exercise the
powers of the President under the Old Constitution as well as those of the President
and the Prime Minister under the new one, pending the election of these officers.
Necessarily, there had to be a head of government until the new parliamentary
system could be properly installed, and whether or not it would have been wiser to
confer the powers in question on some other official or body is not for the Court to
decide. In the meantime, the title of President is the most appropriate to be held by
him.
The contention that President Marcos may not be considered the incumbent
President referred to in the Constitution because what is contemplated therein is
the one who would be in office at the time of its ratification and that pursuant to the
Javellana decision of the Supreme Court, the constitution has not yet been ratified,
whereas, on the other hand, the term of President Marcos under the 1935
Constitution expired on December 30, 1973, is predicated wholly on the old theory
advanced in the habeas corpus cases and which has already been discarded in the
opinions therein, although perhaps, it is best that the Court made a categorical
ruling which would clear all doubts on the matter and thereby do away with this
issue once and for all. To that end, I would say that as far as the Court is concerned,
its holding in Javellana that there is no more judicial obstacle to the New
Constitution being considered as in force and effect should be understood as
meaning that the charter is as valid and binding for all purposes as if it had been
ratified strictly in accordance with the 1935 Constitution as petitioners would argue
it should have been.
The problem of constitutional construction raised in the petition is, does the
Constitution contemplate that the interim assembly created by it would meet
immediately and forthwith
324
elect the new President and the Prime Minister? If this question were to be
answered in the light of normal conditions, there could be some plausibility in
suggesting an affirmative response, albeit not altogether conclusive. But no one can
ever escape the fact that the Constitution was formulated and approved under
abnormal and exceptional circumstances. The members of the convention were well
cognizant of the fact that the country was then as it still is under martial law and
that normal processes of government have not been in operation since its
proclamation. We must assume that as practical men they knew that the procedure
of shifting from the presidential to the parliamentary system would have to be
reconciled with the demands of the martial law situation then obtaining. Above all
it must have been obvious to the delegates that under martial law, President
Marcos had in fact assumed all the powers of government. In other words, it must
have been evident to them from what was happening that the immediate convening
of the legislative body would not be compatible with the way President Marcos was
exercising martial law powers.
It is but proper, therefore, that these transcendental historical facts be taken
into account in construing the constitutional provisions pertinent to the issue under
discussion. As I see it, given the choice between, on the one hand, delaying the
approval of a new charter until after martial law shall have been lifted and, on the
other, immediately enacting one which would have to give due allowances to the
exercise of martial law powers in the manner being done by President Marcos, the
convention opted for the latter. To my mind, it is only from this point of view that
one should read and try to understand the peculiar and unusual features of the
transitory provisions of the New Constitution.
Otherwise, how can one explain why, instead of giving the interim Assembly
itself the power to convene motu propio as was being done in the regular sessions of
the old legislature and as in the case of the regular National Assembly provided
therein, said power has been granted by the Constitution to the incumbent
President? Very significantly in this connection, whereas Section 1 of Article XVII
very explicitly uses the word immediately in reference to the existence of the
interim Assembly, there is no time fixed as to when the incumbent President should
initially convene it. Withal, even the authority to call for the election of the new
President and the
325
VOL. 62, JANUARY 31, 1975 325
Prime Minister was not lodged in the assembly but again in the incumbent
President. Is it not logical to conclude that the reason behind all these
unprecedented provisions is to avoid putting any hindrance or obstacle to the
continued exercise by President Marcos of the powers he had assumed under his
martial law proclamation and his general orders subsequent thereto? If the
Convention were differently minded, it could have easily so worded the said
provisions in the most unequivocal manner, And what makes this conclusion
definite is precisely the insertion in the transitory provisions of Section 3(2) of
Article XVII which makes all the proclamations, decrees, orders and instructions of
the incumbent President part of the law of the land, which, in my considered view,
is the Conventions own contemporary construction that during martial law, the
administrator thereof must of necessity exercise legislative powers particularly
those needed to carry out the objectives of the proclamation, with no evident
limitation except that no particular legislation not demanded by said objectives
shall infringe Section 7 of Article XVII which reserves to the regular National
Assembly the power to amend, modify or repeal all existing laws not inconsistent
with this Constitution. Neither paragraph (1) nor paragraph (2) of Section 3 of the
same article would have been necessary if the Convention had intended that the
interim National Assembly would be immediately convened and the new President
and the Prime Minister would be forthwith elected. Indeed, it is implicit in the
provisions just mentioned that the delegates had in mind that there would be a
considerable time gap between the going into effect of the New Constitution and the
election of the new President and the Prime Minister. And they could not have been
thinking merely of the possibility of protracted delay in the election of said officers
because the Assembly itself, once convened, could have readily provided in the
exercise of its inherent powers for what might be required in such a contingency.
In support of the foregoing views, I invoke the testimonies of Delegates Aruego,
Tupaz, Ortiz, Pacificador and others which were quoted during the hearing and the
deliberations. I will quote them in my extended opinion.
It must be borne in mind that once martial law is proclaimed, all the powers of
government are of necessity assumed by the authority that administers the martial
law and the operation of
326
the regular government, including its legislature and its judiciary, is subjected to its
imperatives. Of course, the Constitution itself is not ousted, but by the power that
the Constitution itself vests in the Executive to issue the proclamation, it yields the
application and effects of some of its provisions to the demands of the situation, as
the administrator may in his bona fide judgment so determine. Otherwise stated,
since laws and regulations would be needed to maintain the government and to
provide for the safety and security of the people, the orders of the administrator are
given the force of law. In that sense, the administrator legislates. If he can legislate,
so also he can appropriate public funds.
To my mind, these postulates underlie the provisions of Sec. 3(2) of Article XVII.
To reiterate, the said provision recognizes legislative power in the incumbent
President and the scope of said powers is coextensive with what might be needed,
primarily according to his judgment, to achieve the ends of his martial law
proclamation, and in all other respects, they are limited only by the provisions of
Sec. 7 of the same article, but, evidently, even this limitation must be reconciled
with the fundamental criterion that the New Constitution was conceived,
formulated and enacted with the basic objective of establishing the New Society for
which martial law was proclaimed. In other words, since the known broad objective
of Proclamation 1081 is not only to contain or suppress the rebellion but also to
reform our society and recognize and restructure our government and its
institutions as the indispensable means of preventing the resurgence of the causes
of the rebellion, it is obvious that any decree promulgated by the President in line
with these purposes, including those appropriating the necessary funds therefor,
cannot be assailed as beyond the pale of the Constitution.
There is nothing in the letter of the Constitution concerning referendums. But it
would be absurd to think that such paucity may be deemed to indicate that the
government has no authority to call one. If there is anything readily patent in the
Constitution, it is that it has been ordained to secure to the people the blessings of
democracy and that its primordial declared principle is that sovereignty resides in
the people and all government authority emanates from them. Of course, it
establishes a representative democracy, but surely, there is and
327
VOL. 62, JANUARY 31, 1975 327
there could be no prohibition in it against any practice or action that would make
our government approximate as much as possible a direct one, which is the ideal.
On the contrary, it is self-evident that conditions and resources of the country
permitting, any move along such a direction should be welcome. In fact, at this time
when there are fears about what some consider as an emerging dictatorship,
referendums in the manner contemplated in the impugned presidential decrees
provide the means for the most vigorous assertion by the people of their sovereignty,
what with the participation therein of even the fifteen-year olds and non-literates
and the concrete efforts being exerted to insure the most adequate submission and
the utmost freedom of debate and consensus as the emergency situation would
permit and to have the fairest recording and tabulation of the votes. Granting the
good faith of everyone concerned, and there is absolutely no reason why it should be
otherwise, a unique exercise of essential democratic rights may be expected,
unorthodox as the experience may be to those who cannot understand or who refuse
to understand martial law Philippine style. In principle, to oppose the holding of a
referendum under these circumstances could yet be a disservice to the nation.
A plebiscite or election of officials prescribed by the Constitution for specific
occasions must be distinguished from a referendum, which is an inherent
constitutional democratic institution, perhaps not normally convenient to hold
frequently or regularly, but which in certain periods in the life of the nation may be
indispensable to its integrity and preservation. The administration of martial law is
usually considered as nothing more than submission to the will of its administrator.
Certainly, there can be no objection to said administrators holding a dialogue with
the people and adopting ways and means of governing with their full acquiescence
manifested in whatever happens to be the most feasible way of doing it. If it be
assumed that a referendum under the aegis of martial law may not be an ideal
gauge of the genuine will of all the people, no one would deny that if it is
undertaken in good faith, and giving allowances to the imperatives of the situation,
it can somehow reflect their sentiment on the grave issues posed. Besides, whether
or not the people will enjoy sufficient and adequate freedom when they cast their
votes in the challenged referendum is a question that is unfair to all concerned to
328
determine a priori and beforehand. In any event, it is history alone that can pass
judgment on any given referendum.
Upon the other hand, whether a referendum should be called or not and what
questions should be asked therein are purely political matters as to which it does
not appear to be proper and warranted for the Court to exert its judicial power in
the premises. To be sure, the referendum in question could be a waste of the
peoples money in the eyes of some concerned citizens, while it may be a necessary
and fruitful democratic exercise in the view of others, but what is certain is that
considering its nature and declared purposes and the public benefits to be derived
from it, it is the better part of discretion, granted to it by the Constitution for the
Court to refrain from interfering with the decision of the President.
The claim that the Comelec may not be considered as the independent and
impartial guardian of the results of the scheduled referendum has no basis in fact.
From extant circumstances, the recent activities of that body have not been
characterized by any perceptible design to influence such results in any direction.
Referendums being, as they are, in the Philippines today, in the nature of extra-
constitutional innovations, it seems but natural and logical at this stage that the
Comelec has been assigned to undertake the functions of formulating the questions,
which, after all has been done after a more or less nationwide gathering of opinions,
and of subsequently explaining them to the people to best enable them to vote
intelligently and freely.
I see no cause to be apprehensive about the fate of those who might wish to vote
no. To start with, the voting will be secret and is guaranteed to be so. And when I
consider that even a strongly worded petition to enjoin the referendum has been
openly ventilated before the Supreme Court with full mass media coverage giving
due emphasis to the points vehemently and vigorously argued by Senator Taada,
who did not appear to be inhibited in the expression of his views, I cannot but be
confirmed in the conviction that the apprehensions of petitioners are unfounded.
Under the New Constitution, every citizen is charged with the duty to vote. To
vote in a referendum is no less a sacred civic obligation than to vote in an election of
officials or in a plebiscite. The impugned decrees cannot therefore be
constitutionally faulted just because they provide penalties for
329
VOL. 62, JANUARY 31, 1975 329
those who fail to comply with their duty prescribed in no uncertain terms by the
fundamental law of the land.
Makalintal, C.J., Antonio, Esguerra and Fernandez, JJ., concur.
ANTONIO, J., Concurring:
I
The only rational way to ascertain the meaning and intent of paragraphs 1 and 2 of
Section 3 of Article XVII (transitory provisions) of the New Constitution is to read
its language in connection with the known conditions of affairs out of which the
occasion for its adoption had arisen, and then construe it, if there be any doubtful
expression, not in a narrow or technical sense, but liberally, giving effect to the
whole Constitution, in order that it may accomplish the objects of its establishment
For these provisions can never be isolated from the context of its economic, political
and social environment.
The New Constitution was framed and adopted at a time of national emergency.
The delegates to the Constitutional Convention realized that the rebellion,
lawlessness and near anarchy that brought about the declaration of martial law,
were mere symptoms of a serious malady in the social order. They knew that the
revolutionary reforms made by the incumbent President thru his decrees, orders
and letters of instruction, such as the emancipation of the tenant-farmer from his
bondage to the soil, reorganization of government, eradication of graft and
corruption and measures to bridge the gap between the rich and the poor, were
indeed imperative, if the exigency that brought about the military necessity was to
be overcome, civil order restored, and the foundations of genuine democracy
established. The actions of the incumbent President in promulgating those
measures legislative in character during martial law was not without legal and
historical basis. Democratic political theorists traditionally have assumed the need
in time of emergency to disregard for the time being the governmental process
prescribed for peacetime and to rely upon a generically different method of
governmentthe exercise by the Chief Executive of extraordinary or authoritarian
powers, to preserve the State
330
and the permanent freedom of its citizens. 1
Thus, in my concurring opinion in Javellana, et al. v. Executive Secretary, et al. it 2
was stated that to preserve the
_______________
1 John Locke called upon the English doctrine of prerogative to cope with the problem of emergency. He
was of the view, that in times of danger to the nation, positive laws set down by the legislative might be
inadequate or even a fatal obstacle to the promptness of action necessary to avert catastrophe. In these
situations the Crown retained a prerogative power to act according to discretion for the public good,
without the prescription of the law and sometimes even against it. The prerogative can be nothing but
the peoples permitting their rulers to do several things of their own free choice where the law is silent,
and sometimes too against the direct letter of the law, for the public good and their acquiescing in it when
so done. The prerogative was therefore exercisable only for the public good. Rousseau assumed that, in
time of emergency, there is need for temporary suspension of democratic processes of government.
Contemporary political theorists observed that in response to the problems posed by an emergency,
constitutional democracies have employed constitutional dictatorship. The Presidents power as
Commander-in-Chief, wrote Corwin, has been transformed from a simple power of military command to
a vast reservoir of indeterminate powers in time of emergency. (Corwin, The President: Office and
Powers, pp. 312, 318, 1948). Frederick M. Watkins, who made a classic study of the Weimar experience
with emergency powers, places his real faith in a scheme of Constitutional dictatorship provided it
serves to protect established institutions from the danger of permanent injury in a period of temporary
emergency, and is followed by a prompt return to the previous forms of political life. Clinton L. Rossiter,
on the basis of the historical experience of Great Britain, France, Weimar Germany and the United States,
adverts to the scheme of Constitutional dictatorship as solution to the vexing problem presented by
emergency. Charles H. McIlwain clearly recognized the need to repose adequate power in government
during emergency. And in discussing the meaning of constitutionalism he insisted that the historical and
proper test of constitutionalism was the existence of adequate processes for keeping government
responsible. He refused to equate constitutionalism with the enfeebling of government by an exaggerated
emphasis upon separation of powers and substantive limitations on governmental powers. (Smith &
Cotter: Powers of the President During Crisis, 1972 Ed.)
2 L-36142, L-36164, L-36165, L-36236, and L-36283, 50 SCRA 30-392. This was concurred in by
Justices Barredo, Makasiar and Esguerra.
331
VOL. 62, JANUARY 31, 1975 331
independence of the State, the maintenance of the existing constitutional order and
the defense of the political and social liberties of the people, in times of grave
emergency, when the legislative branch of the government is unable to function or
its functioning would itself threaten the public safety, the Chief Executive may
promulgate measures legislative in character, x x x. We considered then that the
proclamation of martial rule marked the commencement of a crisis government and
crisis government in a constitutional democracy entails the concentration and
expansion of governmental power and the release of the government from the
paralysis of constitutional restraints in order to deal effectively with the
emergency. This was the view of the members of the Constitutional Convention
3
when they framed the New Constitution.

In Our concurring opinions in Aquino, et al. v. Enrile, et al., We declared that on
4
the basis of the deliberations of the 166-man Special Committee of the

Constitutional Convention, which was authorized to make the final draft of the
Constitution, during their session on October 24, 1972, the Convention expressly
recognized the authority of the incumbent President during martial law to exercise
legislative powers not merely in the enactment of measures to quell the rebellion
but, more important, of measures urgently required to extirpate the root causes of
the social disorder which gave rise to the exigency.
I was with a view of the continuance of the exercise of these extraordinary
powers that the Convention provided in paragraph 1, Section 3, of Article XVII of
the transitory provisions of the New Constitution that: He (the incumbent
President) shall continue to exercise his powers and prerogatives under the
nineteen hundred thirty-five Constitution x x x and in paragraph 2 thereof also
provided that: All proclamations, orders, decrees, instructions, and acts
promulgated, issued, or done by the incumbent President shall be part of the law of
the land and shall remain valid, legal, binding and effective even after lifting of
martial law or ratification of this Constitution, unless modified, revoked, or
_______________
3Ibid., 361-392.
459 SCRA 183; Separate opinion of Justice Barredo, Ibid., p. 322; Separate opinion of Justice Antonio
with the concurrence of Justices Makasiar, Fernandez and Aquino, Ibid., p. 460; Separate opinion of
Justice Fernandez, Ibid., p. 522.
332
superseded by subsequent proclamations, orders, decrees, instructions, or other acts
of the incumbent President,or unless expressly and explicitly modified or repealed
by the regular National Assembly.
The conferment upon the incumbent President of those extraordinary powers
necessarily implies that in view of the emergency, there might be a deferment in the
convening of the interim National Assembly and, therefore, it was necessary that he
be equipped with adequate legal authority and power to carry the body politic
through the crisis.
Indeed, the need of the times was for a more expeditious mode of decision-
making and policy formulation. The insurgency and the secessionist movement
compounded by a world-wide economic inflation and recession generated problems
which must be solved with immediacy and with policies that are flexible and
responsive to the imperatives of the crisis.
II
The impossibility for the Convention to determine a priori,in view of the emergency
situation, the time when conditions shall have sufficiently normalized to permit the
convening of the interim Assembly, precluded them from fixing in the transitory
provisions of the Constitution a definite period when the incumbent President shall
initially convene that body. It was a matter which was wholly confided by the
Constitution to the incumbent President. Since the exercise of this power was
committed to the incumbent President in all the vicissitudes and conditions of the
emergency, it has necessarily given him ample scope for the exercise of his
judgment and discretion. It was a political decision for which he is directly
responsible to the people to whom he is accountable and for whose welfare he is
obliged to act. As stated in the separate opinion of Justice Castro, concurred in by
the Chief Justice, Justices Barredo, Esguerra, Fernandez and the writer of this
opinion, The peripheral matter whether President Marcos
should now or soon convene the interim National Assembly is completely outside
the competence of the Supreme Court to resolve as x x x it is a political question
addressed principally, basically, and exclusively to the President and the Filipino
people.
333
VOL. 62, JANUARY 31, 1975 333
III
Neither can it be asserted that the exercise by the incumbent President of those
extraordinary powers is necessarily inconsistent with and an absolute contradiction
to the existence of a democracy. When the exercise of such authoritarian powers is
5
expressly conferred upon him by the Constitution, it represents the will of the
sovereign people as the source of ail political power. So long as the power is used to
fulfill its true function in realizing the ethical purposes of the community, which is
to ensure the economic and social well-being of its citizens and to secure to them
justice, such power is employed for constructive and moral purposes. Its exercise is,
therefore, legitimate as it represents the collective will of the people themselves. It
is, therefore, logical that the incumbent President consult the people on issues vital
to the public interest even through a consultative referendum. Such useful and
healthy contact between the government administrator and the citizenry is the
more necessary in a period of martial law, because the equal participation of the
citizenry in the formulation of the will of the State and in its fundamental political
decisions ensures the unity of the people in their efforts to surmount the crisis. The
success then of the political leadership in leading the nation through the emergency
would depend on its ability to convince and persuade, not to dictate and coerce; to
enlist, not to command; to arouse and muster the energies, loyalties, and, if need be,
the sacrifices of the people. As Leibholz aptly observed, the one essential
presupposition
_______________
5 The democracy of Rousseau is also intolerant and absolutist, in that it hands over the individual
completely to the community, refusing to recognize the citizens right to freedom; in this respect it sets
itself in opposition to the democracy of the French Revolution, which proclaimed and took under its
protection the Rights of Man. Even Bonapartism, so far as it is supported by the people and so far as the
latter has not resigned its sovereignty, can appear as democracy; and consequently a Caesar can function
as incarnation and official representative of his people as a whole.
In the same way it is possible to have absolutist and authoritarian democracies which may bear a
conservative, reactionary, collectivist or anti-constitutional character, according to the circumstances.
(Gerhard Leibholz, Politics and Law, 1965 Ed., pp. 28-29.)
334
of democracy is that the people as a political unity retains its sovereignty, and that
the majority of the active citizens can express their will in political freedom and
equality. 6
IV
It is, however, asserted that the questions asked may not logically be the subject of
a referendum. Thus, it is claimed that some of the questions contemplate vital
changes in the existing form of local government, which changes, under Sections 2
and 3 of Article XI of the 1973 Constitution, must be submitted to the electorate for
ratification in a plebiscite called for that purpose. Admittedly, the question of the
coming referendum asked the voters in the Greater Manila Area, do not contain a
full text of the law proposed for the ratification or rejection by the people. It is,
therefore, not a plebiscite contemplated by the aforecited Sections 2 and 3 of Article
XI of the New Constitution but merely a referendum, advisory or consultative in
character.
Political democracy is essentially a government of consensus. The citizen has a
right and a duty to judge his own concerns, his acts arid their effects, as they bear
on the common good. If they entail the common acts of the community, he again has
the duty and right to contribute to the common deliberation by which the acts of the
community are decided. Common deliberation or mutual persuasion occurs on all
7
levels of society, and as a result thereof a common judgment or consensus is formed

on those matters which affect the democratic polity. This is based on the premise
that sovereignty in a political democracy resides in the people and that their
government is founded on their consent. It is in the formulation of this consensus
whether in an election, plebiscite, direct legislation or advisory referendum or
consultation, that the political community manifests its consent or dissent. The
national leadership as the elected representative of the national community has the
duty to be responsive and responsible to this sovereign will. It has been said that
the President speaks and acts as the peoples agent. He lays claim to a mandate
from them for his acts. Authority
_______________
6Ibid., p. 29.
7Scott Buchanan, So Reason Can Rule, The Constitution Revisited.
335
VOL. 62, JANUARY 31, 1975 335
descends upon him from the nation, not from the other organs of government. In 8
his dual role as Chief Executive and Legislator under martial law, the incumbent
President has, therefore, a greater degree of accountability to the political
community. To discharge effectively that responsibility, he has to ascertain the
peoples consensus or common judgment and to act in accordance therewith. Only
then can it be said that his actions represent the peoples collective judgment and,
therefore, entitled to their whole-hearted support. The coming referendum is a
national undertaking affecting the future of the country and the people. It, therefore,
requires the involvement of every Filipino. By participating in the national
consultation or advisory referendum of February 27, 1975, the Filipino people will
prove to the rest of the world their maturity and capability as a people to make
major decisions.
V
It is nevertheless asserted that a referendum held under present existing
circumstances is of no far-reaching significance because it is being undertaken in a
climate of fear. The infirmity of such a priori judgment is evident from the fact that
it is not based on reality. It betrays a lack of awareness of the strength and
character of our people. It is contradicted by past experience. There has been a
deliberate policy to lift gradually the strictures on freedom attendant to a regime of
martial law. Thus, State restrictions on press freedom had been removed, except
over publications which, because of their subversive or seditious character, are
deemed incompatible with the public safety. Freedom of discussion and of assembly
are now encouraged. No less than the incumbent President of the Philippines has
underscored the need for an accurate and honest canvass of the peoples sentiments.
As the nations leader, he is called upon to make bold decisions in the face of the
grave problems confronting the nation, but he is convinced that such decisions
cannot be effective unless rooted in the will and reflective of the true sentiments of
the sovereign people.
Given the determination of the incumbent President to ascertain the true
sentiments of the people, and considering the measures instituted by the
Commission on Elections to
_______________
Joseph Kallenbach, The Presidency and the Constitution.

8
336
safeguard the purity of the ballot, there appears, therefore, no basis for petitioners
apprehension that the forthcoming referendum will not reflect the peoples
untrammeled judgment.
The foregoing opinion contains in brief the reasons for my concurrence with the
main opinion and the separate opinions of Justices Castro and Barredo.
CONCURRING OPINION
FERNANDEZ, J.:
The present case calls for an interpretation of the New Constitution, particularly its
Transitory Provisions. Privileged as I was to be a member of the Constitutional
Convention that drafted the Constitution, I feel it my duty to write this concurring
opinion in the hope that I may be able to shed light, even if only modestly, on the
fundamental questions involved in this case, on the basis of what I personally know
and in the light of the records of the Convention, to show the understanding and
intention of the Delegates when they discussed and voted on the constitutional
provisions involved in this case.
The pertinent provisions of the New Constitution upon which the parties in this
case base their respective claims are:
ARTICLE XVII
TRANSITORY PROVISIONS
SECTION 1. There shall be an interim National Assembly which shall exist immediately
upon the ratification of this Constitution and shall continue until the Members of the
regular National Assembly shall have been elected and shall have assumed office following
an election called for the purpose by the interim National Assembly. Except as otherwise
provided in this Constitution, the interim National Assembly shall have the same powers
and its Members shall have the same functions, responsibilities, rights, privileges, and
disqualifications as the regular National Assembly and the Members thereof.
Sec. 2. The Members of the interim National Assembly shall be the incumbent
President and Vice-President of the Philippines, those who served as President of the
Nineteen hundred and seventy-one Constitutional Convention, those Members of the
Senate and the House of Representatives who shall express in writing to the
337
VOL. 62, JANUARY 31, 1975 337
Commission on Elections within thirty days after the ratification of this Constitution their
option to serve therein, and those Delegates to the nineteen hundred and seventy-one
Constitutional Convention who have opted to serve therein by voting affirmatively for this
Article. They may take their oath of office before any officer authorized to administer oath
and qualify thereto, after the ratification of this Constitution.
Sec. 3. (1) The incumbent President of the Philippines shall initially convene the
interim National Assembly and shall preside over its sessions until the interim Speaker
shall have been elected. He shall continue to exercise his powers and prerogatives under
the nineteen hundred and thirty-five Constitution and the powers vested in the President
and the Prime Minister under this Constitution until he calls upon the interim National
Assembly to elect the interim President and the interim Prime Minister, who shall then
exercise their respective powers vested by this Constitution.
(2) All proclamations, orders, decrees, instructions, and acts promulgated, issued, or
done by the incumbent President shall be part of the law of the land, and shall remain valid,
legal, binding, and effective even after lifting of martial law or the ratification of this
Constitution, unless modified, revoked, or superseded by subsequent promulgations, orders,
decrees, instructions, or other acts of the incumbent President, or unless expressly and
explicitly modified or repealed by the regular National Assembly. x x x .
The discussion on these Transitory Provisions in the plenary session of the 1
Constitutional Convention on October 18, 19 and 20, 1972 and the votes thereon
2
clearly show:
1. That the determination of the date the interimNational Assembly should be
convened was left to the judgment of the President, the country being, as it still is,
under martial law;
2. That the incumbent President legally holds office as such having been
authorized to continue in office and to exercise not only the powers of the President
under the 1935 Constitution but also those of the President and Prime Minister
under the 1973 Constitution, from the time the New Constitution was ratified on
January 17, 1973 until the election of the interim President and interimPrime
Minister which up to now has not yet taken place; and
_______________
1Session of the entire Convention, not only of any of its Committees.

2At the time when martial law was already in effect, the same having been proclaimed on September
21, 1972.
338
3. That included in the powers of the President under the 1935 Constitution and the
powers of the Prime Minister under the 1973 Constitution is the power to declare
martial law which in turn includes the power to make all needful rules and
regulations with the force and effect of law until the termination of the martial rule.
The minutes of the plenary session of the Convention of October 18, 1972 contain
the sponsorship speech of Delegate Yaneza, Chairman of the Committee on
Transitory Provisions. He described the proposed interimgovernment as a practical
response to our abnormal conditions presently obtaining in the country. He
explained that in order to effectively implement reform measures under the New
Constitution, the nation should be relieved of the burden of political and national
elections during the transitory period. The proposed interim National Assembly
should therefore be composed of present elective government officials, together with
members of the Convention who would vote for its creation and who could be of
great help, in view of their familiarity with the provisions of the New Constitution,
in the enactment of reform measures to be approved by the interim National
Assembly pursuant to the mandates of the New Constitution. Delegate Yaneza was
interpellated by Delegates Suarez, Tupaz (A), Jamir, Ledesma (F), Alano, Sanchez,
Molina, Siguion Reyna, Pimentel, Laurel, Encarnacion, Pacificador, Ordoez, Teves.
Gonzales, and his co-sponsor, Delegate Abundo.
The following exchange took place between Delegate Pimentel and Delegate
Yaneza.
DELEGATE PIMENTEL (V): Thank you, Mr. Chairman. Now, Section 3 has been
repeatedly the basis of certain questions. It says: the incumbent President of the
Philippines shall initially convene. Will it not be better if we state here, shall
immediately convene?Or we should provide a certain number of days or months
perhaps after the ratification of the Constitution when the President shall
initially convene the ad interimAssembly?
DELEGATE YANEZA: Yes, Your Honor, we can. We see your point and we have
discussed that in the Committee lengthily, but we arrived at a decision to give
our President flexibility regarding this particular matter, Your Honor. And we
feel that we have decided this matter with some wisdom and with consideration
of the present situation obtaining in our country. (Italics supplied)
339
VOL. 62, JANUARY 31, 1975 339
The minutes of the plenary session of the Convention of October 19, 1972 show,
among others, the following:
Delegate Reyes (J) inquired whether the incumbent President of the Republic
would be at the same time President and the Prime Minister under
the interimGovernment. Delegate Yaneza answered affirmatively, adding that the
President would actually have a triple personality since he would exercise powers
under the two Constitutions.
Delegate Garcia (L.M.) asked whether the interimAssembly could
convene without the approval of the President, to which Delegate Britanico (a co-
sponsor) replied in the negative.
Delegate Barrera (former Supreme Court Justice) was the first to speak against
the approval of Sections 1, 2 and 3 of the Transitory Provisions. He was
interpellated by Delegates Lim, Laggui and Raquiza. He was followed by Delegate
Teves who also spoke against the Transitory Provisions in question. Teves was
interpellated by Delegates Purisima, Adil, and Siguion Reyna. Delegate David (J)
was the next opposition speaker. He was in turn interpellated by Delegate Tupaz
(A.).
On October 20, 1972, Delegate Concordia continued the opposition against the
Transitory Provisions, followed by Delegate Garcia (L.M.) who was interpellated by
Delegates Bersola, Catan and Leido.
The chair then declared the period of rebuttal open and recognized Delegate
Cuaderno as first speaker. Cuaderno said that he favored the article on
the interim Government mainly because of the benefits of martial law.
Delegate Mutuc was the next rebuttal speaker. He confined his speech to the
ratification of all proclamations, orders, decrees/instructions and acts proclaimed,
issued or done by the present administration under martial law, contending that
only the sovereign people could pass judgment with finality on the same.
Delegate Fernandez followed. And the last rebuttal speaker was Delegate
Serrano who maintained that the interim National Assembly was a necessity, to fill
the vacuum of constitutional processes that could arise should the President
continue in office beyond his tenure so that he could see the fruition of his efforts to
restore normalcy in the country.
The strongest attack on the Transitory Provisions was delivered by Delegate
Jesus Barrera of Rizal, a former Justice of the Supreme Court. This was rebutted by
Delegate
340
Estanislao A. Fernandez of Laguna (now a humble member of this Court). Both
speeches covered all the principal points.
Modesty aside, we now beg to summarize their arguments, as follows:
Delegate Barrera: It is immoral for us to vote Yes, because that would be practically
electing ourselves as members of the interim National Assembly when we were
elected by the people only for the purpose of writing a Constitution.
Delegate Fernandez: True, when we were elected, our mandate from the people was
only to write a new Constitution. But then there was no martial law yet. With
martial law, there arose a need for an interimGovernment, specifically,
an interim National Assembly. No one has previously received any mandate from
our people on who should be members of this interimNational Assembly. No one
can say as of now whether it is immoral, and even moral, for us to vote Yes. Por
my part, I will vote Yes because if I vote No, I would foreclose my right to become
a member of this interimNational Assembly. I will vote Yes. Afterwards I will
consult with the people of the second district of Laguna on this matter. If they
say Fernandez, you committed an error, then I will not take my oath. However,
if they say Fernandez, you did well so that we can have an additional
representative in the interim National Assembly, then I will take my oath. By
that time, I think nobody can say it was immoral for me to have voted Yes. But
what is most important is whether or not the members of the interim National
Assembly succeed in the discharge of their duties and responsibilities. If they fail,
then our people and history will condemn them. If they succeed, our people and
history may commend them.
Delegate Barrera: As long as the interim National Assembly does not call for the
election of the regular members of the National Assembly, the members of
this interim Assembly will continue in office. For how long, it is not determined.
In view of the high salary of the members of the National Assembly (P60,000.00
a year), there will be a temptation for them not to call for the election of the
members of the regular National Assembly, for a long, long time.
Delegate Fernandez: I disagree. We must grant that the members of
the interim National Assembly would be possessed with a sense of decency and
patriotism that would make them realize the impropriety of overstaying in office.
And the people will always be there to demonstrate thru the media and the
streets to compel the interim National Assembly to call for a regular election.
Delegate Barrera: But it is wishful thinking on the part of the members of the
convention to vote Yes and thereby become members of the interim National
Assembly because the President may unduly delay the lifting of martial law and
the calling of the National
341
VOL. 62, JANUARY 31, 1975 341
dxuserAssembly into a session. Then he will be President for life.
Delegate Fernandez: What is the premise of the conclusion of the Delegate from
Rizal that the President will unduly delay the lifting of martial law and the
calling of the interim Assembly into a session? Nothing. For my part, I wish to
advance a premise. If it is valid, the conclusion will be valid. I believe President
Marcos will want to go down in history as a good President. If this premise is
good, and I believe it is, then he will not abuse. He will lift martial law and
convene the interimNational Assembly at the proper time, He will not be
President for life.
Delegate Abundo then said that the committee had accepted the following
amendment: (b) the Marino amendment to Section 2 concerning those members of
both the Senate and House of Representatives to express in writing to the
Commission on Elections their option to sit in the assembly within 30 days after the
ratification of the Constitution, etc. There being no objection, the above
amendment was approved.
Delegate Yuzon proposed to fix the date of. the election of the members of the
regular Assembly to not later than May, 1976. Delegate Renulla proposed 1977
instead. Delegate Yuson accepted the amendment, but when submitted to a vote,
the amendment was lost. Other amendments were proposed and were lost.
Delegate Pacificador moved to suspend the rules so that voting on the draft
Transitory Provisions could be considered as voting on second and third reading and
proposed that absent delegates be allowed to cast their votes in writing and deliver
them to the Committee on Credentials within 72 hours from that day.
The voting followed and the chair announced that by a vote of 274 in favor and
14 against the draft Transitory Provisions were approved on second and third
reading. And among the delegates that voted affirmatively in favor of these
Transitory Provisions whose interpretation is now the subject of the present case,
were: Delegate Alonto (former Senator from Lanao), Delegate Aruego (the well-
known author on the framing of the Constitution), Delegate Baradi (former
Ambassador), Delegate Borra (former COMELEC Chairman), Delegate Cuaderno
(Member of the first Constitutional Convention and Economist who recently passed
away), Delegate De las Alas (former Speaker of the House of Representatives),
Delegate Laurel (who was President
342
Protempore of the Convention), Delegate Feliciano Ledesma (Dean of the College of
Law of San Beda), Delegate Oscar Ledesma (former Senator), Delegate Leido
(former Congressman and Secretary of Finance), Delegate Liwag (former Secretary
of Justice and Senator), Delegate Mario (former Executive Secretary and Secretary
of Justice), Delegate Mutuc (former Executive Secretary and Ambassador), Delegate
Father Pacifico Ortiz, Delegate Ceferino Padua (lawyer of former Senator Sergio
Osmea, Jr.), Delegate Jose Ma. Paredes (former Justice of the Supreme Court),
Delegate Godofredo Ramos (veteran legislator), Delegate Sinco (former UP
President and an authority on Constitutional Law), Delegate Serrano (former
Secretary of Foreign Affairs), Delegate Sumulong (former Congressman), Delegate
Sinsuat (former Member of the Cabinet), Delegate Domingo Veloso (former Speaker
Protempore of the House of Representatives), Delegate Concordia (former
Congressman), and Delegate Fernandez.
The foregoing, in our humble opinion, clearly show:
a) That when the Delegates to the Constitutional Convention voted on the
Transitory Provisions, they were aware of the fact that under the same, the
incumbent President was given the discretion as to when he could convene
the interim National Assembly; it was so stated plainly by the sponsor, Delegate
Yaneza; as a matter of fact, the proposal that it be convened immediately, made
by Delegate Pimentel (V), was rejected; and
b) That the incumbent President, or President Marcos to be more specific, was to
continue in the office as President with triple powers, upon and even after the
ratification of the New Constitution (January 17, 1973), and until the election of
the interim President and interim Prime Minister (which has not taken place even
up to now), and even after December 30, 1973 when the term of office of the
incumbent President would have expired under the 1935 Constitution. Hence, the
incumbent President continued and continues to be the constitutional and
therefore de jurePresident of our country.
Subsequent events proved the wisdom of the decision of the Convention to give
the President a wide discretion when to convene the interim National Assembly.
a) For although the peace and order condition of the country has improved, it
suffered a relapse. The rebellion had not been
343
VOL. 62, JANUARY 31, 1975 343
completely quelled. Only last January 29, 1975, for instance, the newspapers
carried the report that according to President MarcosMuslim insurgents had
broken a truce in Mindanao and Sulu resulting in a fresh outbreak of hostilities and
in heavy casualties. x x x Muslim secessionists x x x had taken over three towns in
Mindanao and Sulu. x x x An Armed Forces contingent of 42 men, including three
officers and the battalion commander, were wiped out in a surprise raid.
b) The oil crises which brought about worldwide inflation, recession and
depression, created problems which, according to economic experts, can be solved
effectively only with the President exercising legislative powers. A National
Assembly would take a longer period of time to be able to pass the necessary
legislation to cope with this worsening economic situation.
c) And what is most important is that in addition to the criticisms levelled in the
Convention against the membership of the interim National Assembly, the people
themselves expressed their disfavor against the interimAssembly by voting against
its immediate convening when they ratified the Constitution on January 10-15,
1973. In the July 24, 1973 referendum, the Barangays reiterated their decision of
January, 1973 to suspend the convening of the interim National Assembly. And in
connection with the forthcoming February 27, 1975 referendum, many members of
this interim National, Assembly themselves asked that the question of whether or
not the assembly should immediately-be convened be eliminated, as in fact it was
eliminated, because the people had already decided against the immediate
convening of the interim Assembly.
Perhaps, it was a blessing in disguise that before this interim National Assembly
could be convened, it has been fiscalized in advance by our people. The people
apparently have expressed their distrust of this interimAssembly. This has become
a standing challenge so that when this interim Assembly is finally convened, its
members may discharge their duties and responsibilities in such a manner as to
rebut successfully the basis for the opposition of the people to its being convened in
the meantime.
I have adverted to the proceedings of the Constitutional Convention because it
supports the literal interpretation of the
344
Constitution which I now wish to make. The wording of the New Constitution is, I
believe, clear. Considering the condition in which the country was at the time they
approved the draft of the Constitution, it would have been unthinkable for the
Constitutional Convention not to have provided for a continuity in the office of the
Chief Executive.
It is equally unthinkable that the Constitutional Convention, while giving to the
President the discretion when to call the interim National Assembly to session, and
knowing that it may not be convened soon, would create a vacuum in the exercise of
legislative powers. Otherwise, with no one to exercise the law-making powers, there
would be paralyzation of the entire governmental machinery. Such an
interpretation of the Transitory Provisions is so absurd it should be rejected
outright.
The original wording of Article XVII, Section 3(2) was that all proclamations,
orders, decrees, instructions and acts promulgated, issued or done by the present
administration are hereby ratified and confirmed as valid. The words ratified and
confirmed had been changed into shall be part of the law of the land, because
under the first clause, it would imply that the incumbent President did not have the
authority to issue the proclamations, orders, decrees, instructions and acts referred
to. The Convention conceded that the President had that power; and that is the
reason why the phrase shall be part of the law of the land was the one finally used.
Parenthetically, the Constitutional Convention itself recognized expressly the
legislative power of the incumbent President to enact an appropriation law when it
asked and the same was given by the incumbent President additional funds at the
time when there was already martial law.
I wish to add that this legislative power of the President under martial law
should not be limited to the legislative power under the old classical concept of
martial law rule. For the modern concept of martial law rule includes not only the
power to suppress invasion, insurrection or rebellion and imminent danger thereof,
but also to prevent their resurgence by the removal of the causes which gave rise to
them; in a word, the reform of our society.
In the speech that I delivered as a Delegate from Laguna in the Constitutional
Convention in its plenary session of October 20, 1972, I stated my firm conviction
that President Marcos
345
VOL. 62, JANUARY 31, 1975 345
would want to go down in history as a good President. This was not only a belief but
a challenge to him as well; and I am glad that subsequent events proved the
correctness of my stand. In one of his books, he himself said:
Moreover, we have embarked upon the experiment with the full knowledge that its
outcome will depend on most of us, not just a few who are managing a command society.
The misgivings are large; the most outstanding is the fear of a powerful few holding the
many in subjection. But this fear misses the particularity of Philippine martial law; it
cannot and will not exist without the clear and not manipulated consent of the governed.
Our people will accept only sacrifices which are justifiable to them.
It is more than a homily to assert that the New Society is not a promised land that
patiently awaits our arrival. More than a place in time or space, the New Society is a vision
in our minds: this can be realized only through the strength of our resolution.
I am mindful of the fact that historically authoritarian regimes tend to outlive their
justification. I do not intend to make a permanent authoritarianism as my legacy to the
Filipino people. It is sufficiently clear to them, I believe, that martial law is an interlude to
a new society, that it is, in sum, a Cromwellian phase in our quest for a good and just
society. Certainly, the enterprise is worth a little sacrifice. (Marcos, The Democratic
Revolution in the Philippines, 217-218, [1974]).
And in his speech before government elective officials of Bulacan last January 29,
1975 as reported in the newspapers of last January 30, 1975, he solemnly said that
should the coming referendum fail to give him a vote of confidence, he would call
the interim National Assembly to session and that more than that, he would ask the
Assembly to immediately fix the date for elections of the members of the National
Assembly; and that in such a case, he would run in his district for a seat in the
Assembly.
And so, it is now up for the people to speak in the coming February 27, 1975
referendum. The information campaign should now go in full gear. The Commission
on Elections should emphasize the freedom of debate during the campaign; it should
emphasize the freedom of the people to express themselves not only in the debates
but more so as they cast their ballots, by safeguarding the secrecy of the ballot. And
the Commission should redouble its efforts to assure the people that there will be a
true, correct and accurate reading of the ballots, counting of the votes, and a report
of the results of the referendum.
346
IN VIEW OF ALL THE FOREGOING, I repeat my concurrence in the decision of
this Court and in the separate opinions of Justices Castro and Barredo. The petition
should thus be dismissed, without costs.
SEPARATE OPINION
MUOZ PALMA, J.:
The views I express in this separate opinion will briefly explain my position on the
principal issues posed in this Petition for Prohibition.
1. President Ferdinand E. Marcos and no other is the person referred to as
incumbent President in Article XVII to which we shall refer for short as the
Transitory Provisions of the 1973 Constitution. That fact is beyond doubt because at
the time the draft of the new Constitution was being prepared and when it was
finally signed by the delegates to the 1971 Constitutional Convention on November
30, 1972, it was President Marcos who was holding the position of President of the
Philippines.
2. As such incumbent President, President Marcos was vested by Section 3(1) of
the Transitory Provisions with constitutional authority to continue as President of
the Philippines during the transition period contemplated in said Article XVII that
is, until the interim President and the interim Prime Minister shall have been
elected by the interim National Assembly who shall then exercise their respective
powers vested by the new Constitution, after which the office of the incumbent
President ceases. During that transition period, President Marcos was given
extraordinary powers consisting of the powers and prerogatives of the President
under the 1935 Constitution, and the powers vested in the President and the Prime
Minister under the 1973 Constitution. 1
3. Aside from the vest executive powers granted to the incumbent President as
indicated above, he was granted under Section 3(2) of the same Transitory
Provisions legislative
________________
1Article XVII: Sec. 3(1) The incumbent President of the Philippines shall initially convene the interim
National Assembly and shall preside over its session until the interim Speaker shall have been elected. He
shall continue to exercise his powers and prerogatives
347
VOL. 62, JANUARY 31, 1975 347
powers, in the sense, that all proclamations, orders, decrees, instructions, and acts
which were promulgated, issued, or done by the incumbent President before the
ratification of the Constitution were declared part of the law of the land, to remain
valid, legal, binding or effective even after the lifting of martial law or the
ratification of the Constitution, unless modified, revoked or superseded by
subsequent proclamations, etc., by the incumbent President or unless expressly and
explicitly modified or repealed by the regular National Assembly. As to, whether or
not, this unlimited legislative power of the President continue to exist even after the
ratification of the Constitution is a matter which I am not ready to concede at the
moment, and which at any rate I believe is not essential in resolving this Petition
for reasons to be given later. Nonetheless, I hold the view that the President is
empowered to issue proclamations, orders, decrees, etc. to carry out and implement
the objectives of the proclamation of martial law be it under the 1935 or 1973
Constitution, and for the orderly and efficient functioning of the government, its
instrumentalities, and agencies. This grant of legislative power is necessary to fill
up a vacuum during the transition period when the interim National Assembly is
not yet convened and functioning, for otherwise, there will be a disruption of official
functions resulting in a collapse of the government and of the existing social order.
4. Because the grant of vast executive and legislative powers to the incumbent
President will necessarily result in what the petitioners call a one-man rule as there
is a concentration of power in one person, it is my opinion that it could not have
been the intent of the framers of the new Constitution to grant to the incumbent
President an indefinite period of time within which to initially convene
the interim National Assembly and to set in motion the formation of the
Parliamentary form of government which was one of the purposes of adopting a new
Constitution. I believe that the interim National Assembly came automatically into
existence upon the ratification of the 1973 Constitution. As a matter of
_______________
under the nineteen hundred and thirty-five Constitution and the powers vested in the President and
the Prime Minister under this Constitution until he calls upon the interim National Assembly to elect the
interim President and the interim Prime Minister, who shall then exercise their respective powers vested
by this Constitution.
348
fact, from the submission of the Solicitor General, it appears that many if not all of
those entitled to become members of the interim National Assembly have opted to
serve therein and have qualified thereto in accordance with the requirements of
Section 2 of the Transitory Provisions. 2
We cannot, therefore, reasonably construe the absence of a specific period of time

for the President to initially convene the interim assembly as placing the matter at
his sole pleasure and convenience for to do so would give rise to a situation in which
the incumbent President could keep the interim National Assembly in suspended
animation and prevent it from becoming fully operational as long as he pleases.
This would violate the very spirit and intent of the 1973 Constitution more
particularly its Transitory Provisions to institute a form of government, during the
transition period, based upon the fundamental principle of the separation of
powers, with its checks and balances, by specifically providing that there shall
exist immediately upon the ratification of the 1973 Constitution an interimNational
Assembly in which legislative power shall exercise all the powers and prerogatives
which are executive in character, and that the judicial power shall continue to be
vested in the Judiciary existing at the time of the coming into force and effect of the
1973 Constitution. The situation would also render nugatory the provisions of
Section 5 of the Transitory Provisions which assign to the interim National
Assembly a vital role to perform during the transition period. 3
________________
2Ibid, Section 2. The Members of the interim National Assembly shall be the incumbent President and
Vice-President of the Philippines, those who served as President of the nineteen hundred and seventy-one
Constitutional Convention, those Members of the Senate and the House of Representatives who shall
express in writing to the Commission on Elections within thirty days after the ratification of this
Constitution their option to serve therein, and those Delegates to the nineteen hundred and seventy-one
Constitutional Convention who have opted to serve therein by voting affirmatively for this Article. They
may take their oath of office before any officer authorized to administer oath and qualify thereto after the
ratification of this Constitution.
3Ibid, Section 5. The interim National Assembly shall give priority to measures for the orderly
transition from the presidential to the parliamentary system, the reorganization of the Government,
349
VOL. 62, JANUARY 31, 1975 349
While it is true that the convening of the interim National Assembly cannot be said
to be simply at the pleasure and convenience of the President, however, the matter
is one addressed to his sound discretion and judgment for which he is answerable
alone to his conscience, to the people he governs, to posterity, and to history.
5. Coming now to the particular problem of the coming referendum on February
27, 1975, it is my view that the act of the President in calling such a referendum is
not really in the nature of a legislative act which violates the present Constitution. I
do not see any prohibition in the Constitution for the Chief Executive or the
President to consult the people on national issues which in his judgment are
relevant and important. I use the word consult because in effect the measure
taken by the President is nothing more than consultative in character and the mere
fact that such measure or device is called a referendum in the Presidential Decrees
in question will not affect nor change in any manner its true nature which is simply
a means of assessing public reaction to the given issues submitted to the people for
their consideration. Calling the people to a consultation is, we may say, derived
from or within the totality of the executive power of the President, and because this
is so, it necessarily follows that he has the authority to appropriate the necessary
amount from public funds which are subject to his executive control and disposition
to accomplish the purpose.
6. I am constrained to agree with petitioners that a referendum held under a
regime of martial law can be of no farreaching significance because it is being
accomplished under an atmosphere of climate of fear. There can be no valid
comparison between a situation under martial rule and one where the privilege of
the writ of habeas corpus is suspended, as discussed in the Opinion of Justice
Makasiar, because the former entails a wider area of curtailment and infringement
of individual rights, such as, human liberty, property rights,
_______________
the eradication of graft and corruption, the effective maintenance of peace and order, the
implementation of declared agrarian reforms, the standardization of compensation of government
employees, and such other measures as shall bridge the gap between the rich and the poor.
350
rights of free expression and assembly, protection against unreasonable searches
and seizures, liberty of abode and of travel, etc. 4
7. Finally, whatever maybe the totality of the answers given to the proposed
referendum questions on local government will be of no real value to the President
because under Article XI, Section 2, 1973 Constitution, it is the National Assembly
which is empowered to enact a local government code, and any change in the
existing form of local government shall not take effect until ratified by the majority
of the votes cast in a plebiscite called for the purpose, all of which cannot be
complied with for the simple reason that for the present there is no National
Assembly. Moreover, any vote given on this matter cannot be truly intelligent
considering the vagueness of the question as drafted and the short period of time
given to the citizenry to study the so-called manager or commission type of local
government being submitted to the voters.
8. In conclusion, if I concur in the dismissal of the Petition for prohibition it is for
the simple reason that I believe that calling a referendum of this nature is a valid
exercise of executive power not prohibited by the Constitution as discussed in
number 5 of this Opinion.
o0o
________________
4Aquino, Jr. vs. Enrile, et al., and other cases, L-35546 and others, September 17, 1974 per Opinion
Muoz Palma, J., 59 SCRA, 183, 632.

351
VOL. 432, JUNE 15, 2004 157
Freedom from Debt Coalition vs. Energy Regulatory
Commission
G.R. No. 161113. June 15, 2004. *
FREEDOM FROM DEBT COALITION, ANA MARIA NEMENZO, as President of

FREEDOM FROM DEBT COALITION, MA. TERESA I. DIOKNO-PASCUAL, REP.
LORETTA ANN ROSALES (Party-List Akbayan), REP. JOSE VIRGILIO
BAUTISTA (PartyList Sanlakas), REP. RENATO MAGTUBO (Party-List Partido
Manggagawa), petitioners, vs. ENERGY REGULATORY COMMISSION, MANILA
ELECTRIC COMPANY (MERALCO), respondents.
Administrative Law; Public Utilities; Energy Regulatory Commission; Principal powers
of the ERB transferred to the ERC relative to electric public utilities; The conferment upon
the ERC of the power to grant provisional rate adjustments is not inconsistent with any
provision of the EPIRA.The principal powers of the ERB relative to electric public utilities
transferred to the ERC are the following: 1. To regulate and fix the power rates to be
charged by elective companies; 2. To issue certificates of public convenience for the
operation of electric power utilities; 3. To grant or approve provisional electric rates. It
bears stressing that the conferment upon the ERC of the power to grant provisional rate
adjustments is not inconsistent with any provision of the EPIRA. The powers of the ERB
transferred to the ERC under Section 44 are in addition to the new powers conferred upon
the ERC under Section 43.
Same; Same; Same; The power to approve provisional rate increases is included among
the powers transferred to the ERC by virtue of Section 44 since the grant of that authority is
not inconsistent with the EPIRA.The above-quoted applicability clause is quite clear. It
cannot be argued that the clause could not have referred to the provisions of the prior laws
empowering the Public Service Commission (PSC) and the ERB to grant provisional rate
adjustments on the premise that the lawmakers deliberately deleted the provisions in the
crafting of the EPIRA. Such an argument begs the question. What is clear from Sections 80
and 44 is that the legislators saw the superfluity or needlessness of carrying over in the
EPIRA the same provision found in the previous laws. The power to approve provisional
rate increases is included among the powers transferred to the ERC by virtue of Section 44
since the grant of that authority is not inconsistent with the EPIRA; rather, it is in full
harmony with the thrust of the law which is to strengthen the ERC as the new regulatory
body.
_______________
*EN BANC.
158
58
Commission
Same; Same; Same; The notion of provisional rate adjustment is not incompatible with
the policy to protect public interest, as enunciated in Section 2(f) of the law.Neither is the
notion of provisional rate adjustment incompatible with the policy to protect public interest,
as enunciated in Section 2(f) of the law. The common weal is not relegated to the back-
burner simply by upholding the grant to the ERC of the authority to approve provisional
rate adjustments. Again for one, even if there is a ground to grant the provisional rate
increase, the ERC may do so only after the publication requirement is met and the
consumers affected are given the opportunity to present their side. For another, the rate
increase is provisional in character and therefore may be modified or even recalled anytime.
Still for another, the ERC is mandated to prescribe a rate-setting methodology in the
public interest and to promote efficiency.
Same; Same; Same; The ERC, under Sections 43(u), 44 and 80 of the EPIRA, in
relation to Section 16(c) of the Public Service Act and Section 8 of E.O. No. 172, possesses the
power to grant provisional rate adjustments subject to the procedure laid down in these laws
as well as in the IRR.All the foregoing undeniably lead to the conclusion that the ERC,
under Sections 43(u), 44 and 80 of the EPIRA, in relation to Section 16(c) of the Public
Service Act and Section 8 of E.O. No. 172, possesses the power to grant provisional rate
adjustments subject to the procedure laid down in these laws as well as in the IRR.
Same; Same; Same; ERC is required to conduct a hearing on the propriety of the grant
of provisional rate adjustments within 30 days from the issuance of the provisional order.
Under Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172 in relation to Sections 43 and
80 of the EPIRA, the ERC may grant provisional rate adjustments without first conducting
a hearing prior to such grant. However, it is required to conduct a hearing on the propriety
of the grant of provisional rate adjustments within 30 days from the issuance of the
provisional order. Section 4(e), Rule 3 of the IRR requires the ERC to resolve the motion for
issuance of a provisional order within seventy five (75) calendar days from the filing of the
application or petition. If, within 30 days from the publication of the application or receipt
of a copy thereof, an affected consumer or the Local Government Unit (LGU) concerned files
with the ERC a comment on the prayed for provisional rate adjustment and/or the
application itself, the ERC is mandated to consider such comment in its action on the
prayer for provisional rate adjustment.
Same; Same; Same; ERC may grant provisional rate adjustments on the basis of the
public utilitys application and supporting documents, and the pleadings submitted by other
parties may have filed at that time; Thereafter, it is mandated to hold a full-blown hearing
to resolve the case on the merits.It is suggested that the IRR provision in point should be
159
VOL. 432, JUNE 15, 2004 159
Commission
construed as granting the ERC the power to issue provisional rate adjustments ex
parte. Such power, partaking as it does the nature of the police power of the State, is
conferred on administrative agencies like the ERC to enable them to pursue temporary
measures to address problems that cannot wait until the completion of formal proceedings.
Thus, the ERC may grant provisional rate adjustments on the basis of the public utilitys
application and supporting documents, and the pleadings submitted by other parties may
have filed at that time. Thereafter, it is mandated to hold a full-blown hearing to resolve
the case on the merits.
Same; Same; Same; ERC must wait for thirty (30) days from service of copies of the
application for rate adjustments on interested parties or from the publication of such
application before it can issue a provisional order.In other words, the ERC must wait for
thirty (30) days from service of copies of the application for rate adjustments on interested
parties or from the publication of such application before it can issue a provisional order. If
after the 30th day, no comments are filed by concerned parties, then and only then may the
ERC, if it deems proper under the circumstances, issue a provisional order on the basis of
the application and its supporting documents.
Remedial Law; Certiorari; There is grave abuse of discretion when an act is done
contrary to the Constitution, the law or jurisprudence, or when executed whimsically,
capriciously or arbitrarily out of malice, ill will or personal bias.It is settled that there is
grave abuse of discretion when an act is done contrary to the Constitution, the law or
jurisprudence, or when executed whimsically, capriciously or arbitrarily out of malice, ill
will or personal bias. What makes the challenged Orderparticularly repugnant is that it
involves a blatant and inexcusable breach of the very rules which the ERC is mandated to
observe and implement. The violated provision which is Section 4(e), Rule 3 of the IRR
specifies how the ERC should exercise its power to issue provisional orders pursuant to
Section 44 in relation to Section 80 of the EPIRA. Since the IRR was issued pursuant to the
EPIRA, Section 4(e) of Rule 3 as part of the IRR has the force and effect of law and thus
should have been complied with.
Same; Same; Supreme Court declares void the November 27, 2003 Order of the ERC for
having been issued with grave abuse of discretion.In view of the infirmities which
attended the issuance of the November 27, 2003 Order, particularly: (1) the failure of
MERALCO to publish its Application or at least a summary thereof; (2) the failure of the
ERC to resolve the Motions for Production of Documents filed by the oppositors to
MERALCOs Application before acting on the motion for provisional rate adjustment; and
(3) the failure of the ERC to consider the arguments raised by the oppositors in their
respective pleadings prior to the issuance of the
160
60
Commission
assailed Order; the Court declares void the November 27, 2003 Order of the ERC for
having been issued with grave abuse of discretion.
PUNO, J., Concurring and Dissenting Opinion:
Administrative Law; Public Utilities; Energy Regulatory Commission; The rules do not
require the publication of a summary of the application; The rules require that a certification
of the notice of publication should accompany the application.The majority opines that at
least a summary of the application should have been published. With due respect, the rules
do not require the publication of a summary of the application. The rules require that a
certification of the notice of publication should accompany the application. Indeed, a
summary would not enable anyone to prepare an intelligent opposition to the application.
Rate cases are, by nature, highly technical and dependent on scientific data which do not
easily lend themselves to summarization. Anyone seriously intending to comment or oppose
the application needs to secure a copy of the application and its annexes.
Same; Same; Same; It is not required to wait until all pleadings are submitted nor is its
power to issue provisional orders stayed by pending matters such as motions for production
of documents.The ERC is allowed by the Rules to grant or deny the relief prayed for based
on the application and its supporting documents, and such comments or pleadings the
consumers or the LGU concerned may have filed within thirty (30) calendar days from
receipt of a copy of the application or petition or from the publication thereof as the case
may be. The ERC is mandated to consider only pleadings filed within 30 days counted from
the LGU or consumers receipt of the application or publication thereof, as the case may be.
That is all. It is not required to wait until all pleadings are submitted nor is its power to
issue provisional orders stayed by pending matters such as motions for production of
documents. To rule otherwise as the majority did is to hold ERC hostage by the simple
expedient of filing such motions as motions for production of documents or letters of intent
to file oppositions or comments.
Same; Same; Same; It is therefore purposeless for the majority to annul the questioned
Order and require the republication of MERALCOs application.It is obvious to the eye
that all the possible serious objections to the Questioned Order have been raised by the
consumers. Nobody has raised the argument that he has been denied the opportunity to
oppose MERALCOs application due to its non publication in toto. It is therefore
purposeless for the majority to annul the Questioned Order and require the republication of
MERALCOs application. The better course of action is to remand the case to the ERC so
that it can review its provisional order in light of the opposition to it.
161
VOL. 432, JUNE 15, 2004 161
Commission
SANDOVAL-GUTIERREZ, J., Separate Opinion:
Administrative Law; Public Utilities; Energy Regulatory Commission; An

administrative agency may be empowered to approve provisionally, when demanded by
urgent public need, rates of public utilities without a hearing.It bears stressing that the
issue raised by petitioner is not novel. We have ruled in a catena of cases that an
administrative agency may be empowered to approve provisionally, when demanded by
urgent public need, rates of public utilities without a hearing. The reason is easily
discerned form the fact that provisional rates are by their nature temporary and subject to
adjustment in conformity with the definitive rates approved after final hearing.
Remedial Law; Certiorari; Energy Regulatory Commission; In the absence of a showing
that the ERC has committed grave abuse of discretion amounting to lack of jurisdiction,
there is no occasion for the court to exercise its corrective power.Although this Court,
under Section 4 (p) of the Implementing Rules and Regulations of R.A. No. 9136, has been
given jurisdiction, so to speak, to review all actions taken by the ERC, yet, in the exercise
thereof, the Court is to merely check whether or not the ERC has gone beyond the limits of
its jurisdiction, not that it erred or has a different view. In the absence of a showing that
the ERC has committed grave abuse of discretion amounting to lack of jurisdiction, there is
no occasion for the court to exercise its corrective power. Indeed, we should not decide a
matter which by its nature is for the ERC alone to decide.
AUSTRIA-MARTINEZ, J., Concurring and Dissenting Opinion
Administrative Law; Public Utilities; Energy Regulatory Commission; The authority to

issue provisional orders of rate adjustments cannot be considered as one of the powers that
the legislature intended the ERC to possess, for if it were intention of the lawmakers, there
would not have been a black hole in the law.The authority to issue provisional orders of
rate adjustments cannot be considered as one of the powers that the legislature intended
the ERC to possess, for if it were intention of the lawmakers, there would not have been a
black hole in the law, so to speak. Corollary to this is the doctrine of casus omisus pro
omisso habendus est, or that a person, object or thing omitted from an enumeration must be
held to have been omitted intentionally. Simply put, the absence of such statutory power
shows that the legislature undeniably intended the withdrawal of such authority from the
ERC. To declare otherwise would be supplanting what the legislature intentionally omitted.
The Court should not tread the perilous waters of judicial legislation and arrogate unto
itself the duty of supplying what has been omitted by the legislature.
162
62
Commission
Same; Same; Same; The power to fix prices and make rates cannot be conferred by
implication, but must be conferred under statutory or constitutional language that is free
from doubt, and admits of no other reasonable construction.On the other hand, the EPIRA
is devoid of any indication, express or otherwise, of the legislatures intent to endow the
ERC with authority to issue provisional orders for rate adjustments. We cannot simply
ignore this omission and assume that such provisional ratemaking power is inherent in the
ERCs functions. The power to fix prices and make rates cannot be conferred by implication,
but must be conferred under statutory or constitutional language that is free from doubt,
and admits of no other reasonable construction.
Same; Same; Same; Considering that the EPIRA does not contain the authority to grant
provisional rates, it follows then that to insist that the ERC has such authority, would be to
grant ERC an authority that would be inconsistent with the EPIRA.As clearly provided by
Section 44 itself, the powers and functions of the ERB that are transferred to the ERC are
only those that conform with the provisions of the EPIRA. Considering that the EPIRA does
not contain the authority to grant provisional rates, it follows then that to insist that the
ERC has such authority, would be to grant ERC an authority that would be inconsistent
with the EPIRA. As clearly discussed earlier, administrative agencies, like the ERC, have
no general or inherent powers except those expressly granted to them by law.
Constitutional Law; Due Process; Since the fixing of rates is essentially legislative in
nature, due process of law does not require that interested parties be given notice or an
opportunity for a hearing, unless it is expressly provided by law.Since the fixing of rates is
essentially legislative in nature, due process of law does not require that interested parties
be given notice or an opportunity for a hearing, unless it is expressly so provided by law.
But where the fixing of rates is delegated to officers or commissions, the persons or entities
affected must be afforded procedural due process appropriate to the nature of the case and
consistent with statutory requirements, including, ordinarily, a notice which is adequate
and timely under the circumstances, and a hearing which is fair and open, and which
comports with due process safeguards.
Same; Same; Energy Regulatory Commission; The ERCs failure to accord the
oppositors a reasonable opportunity to obtain relevant evidence and present their oppositions
or comments on the application, clearly denied them due process of law.The undue haste
in which it granted MERALCOs prayer for provisional relief does not speak well of the
procedure followed by the ERC. The ERCs failure to accord the oppositors a reasonable
opportunity to obtain relevant evidence and present their oppositions or comments on the
application, clearly denied them due process of law. The requirement of due process is not
some favor or grace that the ERC
163
VOL. 432, JUNE 15, 2004 163
Commission
may dole out on a bout of whim or on occasion of charity. Rather, it is a statutory right
to which the consuming public is entitled.
Same; Same; The publication made by MERALCO, obviously, does not sufficiently
inform the public of the nature and substance of the application, as intended by the law.
The publication by respondent MERALCO of a notice that an application for the approval of
revised rate schedules and provisional authority will be filed by it falls short of the
requirement. The Rule requires the publication of the application or petition for rate
adjustment itself. The publication made by MERALCO, obviously, does not sufficiently
inform the public of the nature and substance of the application, as intended by the law. If
the application or petition were too long and expensive to be published, then, as suggested
by the OSG, the material allegations or reasons for the proposed increase and the proposed
effective date of increase would have sufficed which MERALCO likewise failed to do.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and Prohibition.

Theodore O. Te and Ricardo Sunga III for petitioners.
The Solicitor General for public respondent.
Benjamin C. Santos, Wigberto E. Taada and Manuel L.M. Torres for
MERALCO.
Marie F.T.J. Yuvienco and Jason S. Lamchek for intervenors.
Ricardo C. Puno, Sr., Roderico V. Puno and Joshua Gilbert F. Paraiso for
movant Phil. Electric Plant Owners Association.
TINGA, J.:
The privately-owned public utility is the substitute for the State in the
performance of . . . (a) public service, thus becoming a public servant, so wrote 1
Justice Louis Brandeis more than eighty years ago. As in the United States, the
provision of public utility services in the Philippine setting is a combination of
private ownership and public control. Such an amalgam of clashing interests is a
formula for inevitable conflicts. At bar here is one such conflict,
_______________
1Southwestern Bell Tel. Co. v. Public Service Commission, 262 U.S. 291(1923).
164
Commission
in fact the current high point of a raging controversy where the public, on one side,
is pitted against the regulatory body and the countrys leading power utility, on the
other.
Before the Court is a Petition for Certiorari, Prohibition and Injunction with
Prayer for the Issuance of a Temporary Restraining Order or a Status Quo
Order. The Petitionassails the Order dated November 27, 2003 of respondent
Energy Regulatory Commission (ERC), provisionally authorizing respondent Manila
Electric Company (MERALCO) to increase its rates by an average amount of twelve
centavos (P0.12) per kilowatt hour.
On October 10, 2003, MERALCO filed with the ERC an Application for an
increase in rates. MERALCO also prayed ex parte for the grant of a provisional
authority to implement the increase according to the schedule attached, to
its Application. The case was docketed as ERC Case No. 2003-480. 2
On October 14, 2003, the National Association of Electricity Consumers for

Reforms, Inc. (NASECORE), in a Letter addressed to then ERC Chairman Manuel R.
Sanchez (Sanchez), informed him of its intention to file an Opposition to
MERALCOs Application. 3
On October 24, 2003, Mr. Genaro Lualhati (Lualhati) sent a Letter to Sanchez
seeking the dismissal of MERALCOs Application. 4
On October 29, 2003, petitioner Freedom from Debt Coalition (FDC) also
expressed its intention to file an opposition to MERALCOs Application. 5
On November 3, 2003, the ERC directed FDC, NASECORE and Lualhati to file
their respective comments on the Application within fifteen (15) days from their
receipt thereof. 6
On November 11, 2003, NASECORE filed a Motion for Production of

Documents to enable it to evaluate MERALCOs Application. 7
_______________
2 Application, Rollo, pp. 131-150.

3 See Ibid., at p. 693.
4 Id.
5 Id.
6 Id.
7 Id., at pp. 444-447. NASECORE prayed for the production by MERALCO of the following:
165
VOL. 432, JUNE 15, 2004 165
Commission
In an Order dated November 13, 2003, the ERC directed MERALCO to file its
comment on NASECOREs Motion for Production of Documents. 8
On November 19, 2003, the ERC issued an Orderdirecting MERALCO to submit

certain documents in connection with the evaluation of its Application. 9
_______________
A. Relative to Personal Services

1. i.Alphabetical list of Salaries and Wages of all Directors, Officers, Staffs and Employees of Meralco;
2. ii.Fees of its Consultants and Retainers;
3. iii.Alphabetical list of all contractual workers with expanded withholding tax;
4. iv.Total compensation and benefit packages of key officers and senior management, from Assistant Vice
Presidents to the Chief Executive Officer, including members of the Board of Directors.
B. Relative to Operating Expenses
1. i.Alphabetical list of all purchases subject to expanded withholding tax;

2. ii.List of all Meralco imported equipment, machineries, and materials purchased from 1994-2002 and the
copies of the corresponding official receipts of purchases, including all motor vehicles acquired.
C. Relative to Recovery on Investments
1. i.Meralcos computation of its Rate of Return on Rate Base from 1994-2002;
D. Relative to Related Investments
1. i.Total amount of Meralcos investment in each of its subsidiaries and other companies, including but not
limited to generation and real estate;
2. ii.The individual yearly return on Meralcos investments on these subsidiaries and other companies;
E. Relative [to] Loans
1. i.List of Meralcos outstanding loans from both local and foreign banks, as well as from multilateral funding
agencies (Id., at pp. 445-446).
8Id., at p. 694.
9Id., at p. 448.
166
Commission
On November 21, Lualhati filed his Opposition to MERALCOs Application.
10
The FDC likewise filed a Motion for Production of Documents on November 27,
2003, adopting NASECOREs list in its Motion, and requesting for other documents
in addition thereto. 11
However, on November 27, 2003, the ERC, without first resolving the Motions for
Production of Documents of NASECORE and FDC and apparently without
considering Lualhatis Opposition, issued an Order provisionally approving
MERALCOs ex parte application for rate increases. The dispositive portion of
the Order states:
_______________
10 In his Opposition, Lualhati stated his reasons for opposing the Application, to wit:
There is no doubt that this application is prejudicial to Court of Appeals Case No. 77559. Whereas, in Case No. 77559
Meralcos excessively inflated distribution and Delivery rates after unbundling that increased to 49% compared to its
Operations and Maintenance Expenses, this instant application still prays for additional rate increase of P0.1358/kwh
allegedly to recover underrecoveries from 2000 to 2002.
Moreover, this application will prejudice the review and correction of the baseless and unreasonable increase of
rate base from P30.1 billion in 1994 per COA audit to P76.8 billion in 2000...
The application is prejudicial as it is intended to contradict and pre-empt the exposure of the approved rates that
exceed Revenue Requirements including its newly inflated RORB of 15.5%
. . . . (Id., at pp. 84-87.)
11 FDC also asked for the production of the following:
4.1 Financial status
4.1.1 Updated Financial Statement as of 31 December 2002, taking into account the Supreme Court decision disallowing income tax as
deductible operating expense
4.2 Rate Base
All assets that Meralco acquired as of 31 December 2002, broken down to costs of each asset and their respective
appraised market value as of 31 December 2002.
Such other documents as may be added in the abovementioned list (Id., at pp. 54-55).
167
VOL. 432, JUNE 15, 2004 167
Commission
WHEREFORE, considering all the foregoing, this Commission, pursuant to Section 8 of
Executive Order No. 172 and Section 4 (e) of the Implementing Rules and Regulations of
the EPIRA (R.A. 9136), hereby provisionally authorizes applicant Manila Electric Company
(MERALCO) to adopt and implement the attached rate schedules embodying a rate
adjustment in the average amount of TWELVE (12) CENTAVOS per kwh, effective with
respect to its billing cycles beginning January 2004. The impact of this approved rate
adjustment will vary from one customer class to another depending on the load cycles.
The rate adjustment authorized herein shall be subject to refund in the event that this
Commission finds, after completion of the hearings of this case, that the same is unjust and
unreasonable.
The hearing of this case is hereby set on December 22, 2003 at nine oclock in the
morning (9:00 A.M.) at the ERC Hearing Room, 15th Floor, Pacific Center Building, San
Miguel Avenue, Ortigas Center, Pasig City. In this connection, MERALCO is hereby
directed to publish, at its own expenses, the attached Notice of Public Hearing at least
twice (2) for two (2) successive weeks in two (2) newspapers of nationwide circulation in the
country, the last date of publication to be made not later than two (2) weeks before the
scheduled date of initial hearing.
Let copies of this Order and the attached Notice of Public Hearing be furnished all the
Municipal/City mayors within the MERALCOs franchise area for appropriate posting
thereof on their respective bulletin boards . . . . 12
Thereafter, the following were filed with the ERC after its issuance of the November
27, 2003 Order:
1. (1)Urgent Motion to Resolve Motion for Production of Documents & Opposition to the
Provisional Authority filed by NASECORE on December 8, 2003;
2. (2)Manifestation Joining the National Association of Electricity Consumers for
Reforms, Inc. in its Opposition to the Provisional Authority and Motion for
Production of Documents filed by the Philippine Consumers Watch on December 11,
2003;
3. (3)Opposition filed by the Philippine Consumers Welfare Union (PCWU) on
December 15, 2003;
4. (4)Urgent Motion to Suspend Implementation and Motion for Reconsideration filed
by the Napocor Industrial Consumers Association, Inc. (NICAI) on December 12,
2003;
_______________
Id., at pp. 25-27.
12
168
Commission
1. (5)Letter requesting for reconsideration of the November 27, 2003 Order of the ERC,
sent by the National Consumer Affairs Council on December 9, 2003;
2. (6)Letter objecting to the November 27, 2003 Order of the ERC, sent by the
Federation of Philippine Industries, Inc. on December 11, 2003; and
3. (7)Motion for Production of Documents and Motion for Production of
Documents (Supplemental) filed by Atty. Ruperto J. Estrada on December 15, 2003
and December 16, 2003, respectively.
On December 19, 2003, MERALCO filed its Comment. It refused to produce the
13
documents requested by the oppositors on the ground that such documents are
immaterial and irrelevant to its application.
On December 22, 2003, the scheduled date of hearing, the ERC did not revoke
the provisional authority granted to MERALCO per its November 27, 2003 Order.
FDC did not move for reconsideration of the Order but on December 23, 2003, it
filed the instant Petition.
FDC argues that the November 27, 2003 Order of the ERC is void for having
been issued without legal or statutory authority. It also contends that Rule 3,
Section 4(e) of the Implementing Rules of the EPIRA is unconstitutional for being
an undue delegation of legislative power. FDC further asserts that the November 27,
2003 Order is void for having been issued by the ERC with grave abuse of discretion
and manifest bias. In support of its prayer for the issuance of injunctive relief, FDC
claims that the implementation by MERALCO of the provisional rate increase will
result in irreparable prejudice to FDC and others similarly situated unless the
Court restrains such implementation. 14
On December 29, 2003, FDC filed with the Court an Urgent Motion to Grant
Restraining or Status Quo Order.
On January 9, 2004, the ERC issued an Order clarifying that the provisional rate
increase granted to MERALCO in its November 27, 2003 Order should be applied
beginning January 1, 2004.
_______________
Id., at pp. 503-511.

13
Id., at pp. 7-14.

14
169
VOL. 432, JUNE 15, 2004 169
Commission
The Court En Banc issued on January 13, 2004, a Resolution ordering ERC and
MERALCO to file their respective Comments on the Petition. The Court also
enjoined ERC and MERALCO to observe the status quoprevailing before the filing
of the Petition and set the case for oral arguments on January 27, 2004.
On January 26, 2004, ERC, MERALCO and the Office of the Solicitor General
(OSG) filed their respective Comments on the Petition.
In its Comment, the ERC concurred with the arguments of the OSG and insists
that it is authorized to issue provisional orders under the law. ERC argues that it
must not have been the intention of Congress to expand the functions of the ERC,
as the successor of the Energy Regulatory Board (ERB), and clip its powers at the
same time. 15
The ERC further asserts that it is authorized to issue provisional rate

increases ex parte, and that it may base its provisional order on the verified
application and supporting documents submitted by the application, and it is not
required to wait for the comments of consumers or local government units (LGUs)
concerned before issuing a provisional order. 16
The ERC likewise denies that the November 27, 2003 Order was issued with
grave abuse of discretion. On the contrary, it claims that the Order is supported by
substantial evidence. 17
Finally, ERC asseverates that the filing of the instant Petition is premature
because it was denied the opportunity to have a full determination of
the Applicationafter trial on the merits, and is violative of the doctrine of primary
jurisdiction. 18
For its part, MERALCO asserts that the November 27, 2003 Order is valid,
because it was issued by the ERC pursuant to Section 44 of the EPIRA which allows
the transfer of powers (not inconsistent with the EPIRA) of the old ERB to the
ERC. It also denies that the assailed Orderwas issued by the ERC with grave
19
abuse of discretion, asserting that on the contrary, the issuance thereof was
_______________
15 ERCs Comment, Id., at pp. 368-370.

16 Id., at pp. 370-373.
17 Id., at pp. 373-374.
18 Id., at pp. 376-378.
19 MERALCOs Comment, Id., at pp. 107-118.
170
Commission
based on the Application, affidavits and other supporting documents which it
submitted earlier. 20
Bayan Muna, Bayan, KMU, Gabriela, Kadamay, Agham, Gabriela Womens

Party and the Anak Pawis(petitioners-in-intervention) filed their Motion to
Intervene,and attached thereto their Petition-in-Intervention. The Court granted
the Motion and admitted the Petition-in-Intervention in its Resolution dated
January 27, 2004. 21
In their Petition-in-Intervention, petitioners-in-intervention argue that the
November 27, 2003 Order is void for having been issued by ERC with manifest bias
in favor of MERALCO and without due regard for the rights of consumers. They
assert further that the ERC committed grave abuse of discretion in considering the
appraisal of MERALCOs assets as of the year 2002, in violation of Section 43(f)(i) of
the EPIRA. Lastly, they claim that the assailed Order is void for unjustifiably
imposing upon the consumers increased rates to fund the 42 major capital projects
of MERALCO for the year 2004. 22
During the oral arguments, the Court defined the issues as follows:
1. (1)Whether the ERC has legal authority to grant provisional rate adjustments under
Republic Act (R.A.) No. 9136, otherwise known as the Electric Power Industry
Reform Act of 2001 (EPIRA); and
2. (2)Assuming that the ERC has the authority to grant provisional orders, whether
the grant by the ERC of the provisional rate adjustment in question was committed
with grave abuse of discretion amounting to lack or excess of jurisdiction.
23
The Court thereafter required the parties to submit their

respective Memoranda within a non-extendible period of twenty days from January
27, 2004. The ERC was likewise ordered to produce certain documents pertinent to
the resolution of the case. 24
We rule in the affirmative on both issues.
_______________
20 Id., at pp. 118-125.

21 Id., at pp. 621-622.
22 Id., at pp. 69-78.
23 TSN, Oral Arguments, January 27, 2004, p. 3.
24 Id., at pp. 365.
171
VOL. 432, JUNE 15, 2004 171
Commission
Overview of the EPIRA
One of the landmark pieces of legislation enacted by Congress in recent years is the
EPIRA. It established a new policy, legal structure and regulatory framework for
25
the electric power industry.

The new thrust is to tap private capital for the expansion and improvement of
the industry as the large government debt and the highly capital-intensive
character of the industry itself have long been acknowledged as the critical
constraints to the program. To attract private investment, largely foreign, the jaded
structure of the industry had to be addressed. While the generation and
transmission sectors were centralized and monopolistic, the distribution side was
fragmented with over 130 utilities, mostly small and uneconomic. The pervasive
flaws have caused a low utilization of existing generation capacity; extremely high
and uncompetitive power rates; poor quality of service to consumers; dismal to
forgettable performance of the government power sector; high system losses; and an
inability to develop a clear strategy for overcoming these shortcomings.
Thus, the EPIRA provides a framework for the restructuring of the industry,
including the privatization of the assets of the National Power Corporation (NPC),
the transition to a competitive structure, and the delineation of the roles of various
government agencies and the private entities. The law ordains the division of the
26
industry into four (4) distinct sectors, namely: generation, transmission,

distribution and supply. Corollarily, the NPC gen-
27
_______________
25 This writer, as Chairman of the House Energy Committee in the 10th Congress, made the studies for
the restructuring of the electric power industry which culminated in his introduction of House Bill No.
1991. He was greatly assisted in the project by Engr. Dennis Carpio who was connected then with the
World Bank. The bill served as the model for House Bill No. 8457 and the 4 Senate Bills introduced,
consolidated and enacted into law in the 11th Congress as R.A. No. 9136. Although many of the provisions
on consumer protection and transparency in rate-fixing, and anti-trust safeguards in House Bill No. 1991
were not carried over in R.A. No. 9136, still said law deserves praise and support for being the first and
most significant enactment passed to address the problems of high electricity prices, consumer protection
and inadequate power supply.
26 Sec. 3, R.A. No. 9136.
27 Sec. 5, R.A. No. 9136.
172
Commission
erating plants have to privatized and its transmission business spun off and
28
privatized thereafter. 29
In tandem with the restructuring of the industry is the establishment of a

strong and purely independent regulatory body. Thus, the law created the ERC in
30
place of the Energy Regulatory Board (ERB). 31
To achieve its aforestated goal, the law has reconfigured the organization of the
regulatory body. It requires the Chairman and four (4) members of the ERC to be
equipped with at least three (3) years of active and distinguished experience in the
fields of energy, law, economics, finance, commerce or engineering, and at least one
of them with ten (10) years or more of experience in the active practice of law and
another one with similar experience as a certified public accountant. Their terms of 32
office were increased to seven (7) years from the four (4) provided in Executive
Order No. 172 (E.O. No. 172) and their security of tenure assured. The Chairman 33
and members were given the same salaries, allowances, benefits and retirement pay
as the Chief Justice and Associate Justices of the Supreme Court, a lot higher than
34
the salary and benefits accorded the Chairman and members of the ERB which
were equivalent only to those of a Department Undersecretary and the official next
in rank, and those of the Chairman and members of the Commission on Elections,
respectively. 35
Statutory Authority To Grant Provisional Increase

FDC posits that the ERC has no power to issue provisional orders because the
EPIRA repealed Commonwealth Act No. 146 (The Public Service Act) and E.O. No.
172 (creating the ERB), which laws expressly conferred upon the precursors of ERC
the power to grant provisional orders. It argues further that while Section 44 of
_______________
28 Sec. 47, R.A. No. 9136.

29 Secs. 3 and 21, R.A. No. 9136
30 Sec. 2(j), R.A. No. 9136.
31 Sec. 38, R.A. No. 9136.
32 Ibid.
33 Id.
34 Sec. 39, R.A. No. 9136.
35 Sec. 1, E.O. No. 172.
173
VOL. 432, JUNE 15, 2004 173
Commission
the EPIRA provides for the transfer of the powers and functions of the ERB to the
ERC, such transfer cannot be deemed to include the power to issue provisional
orders because such power is inconsistent with the policies ordained in Section 2 of
the EPIRA to protect the public interest insofar as it is affected by the rates and
services of electric utilities and other providers of electric power and to ensure
transparency and full accountability in rate-fixing. Considering that the EPIRA
36
itself does not confer upon the ERC the power to issue provisional orders, Section
4(e), Rule 3 of the laws Implementing Rules, which refers to the grant of provisional
authority by the ERC, constitutes an undue delegation of legislative power. 37
The petitioners-in-intervention agree with and adopt the aforementioned

arguments of FDC. 38
MERALCO, on the other hand, claims that the power of the ERB to issue
provisional orders under Section 16(c) of the Public Service Act and Section 8 of E.O.
No. 172 was not repealed by the EPIRA. On the contrary, Section 80 of the EPIRA
expressly mentions that the applicable provisions of the Public Service Act and E.O.
No. 172 that are not inconsistent therewith shall continue to have full force and
effect. It adds that the power of the ERC to approve reasonable rates would be
39
rendered meaningless if it can only do so after a full hearing, and in the meantime
the insufficiency of the applicants rates would result in its inability to supply
quality, reliable and secure electric power.40
The OSG contends that ERC has statutory authority to issue provisional orders,
including provisional rate increases. It points out that the EPIRA expressly states
that the powers of the Energy Regulatory Board (ERB) under E.O. No. 172 shall be
exercised by the ERC. 41
For its part, the ERC maintains that it possesses the authority to grant
provisional orders under Section 16 (c) of the Public Service Act and Section 8 of
E.O. No. 172 in relation to Sections 44
_______________
36 Memorandum for FDC, Rollo, pp. 964-965.

37 Id., at pp. 965-967.
38 Memorandum for Petitioners-in-Intervention, Id., at pp. 628-629.
39 Memorandum for MERALCO, Id., at pp. 658-667.
40 Id., at p. 666.
41 Memorandum of the OSG, Id., at pp. 893-913.
174
Commission
and 80 of the EPIRA. Thus, it claims that Section 4(e), Rule 3 of the Rules and
42
Regulations To Implement Republic Act No. 9031, Entitled Electric Power Industry
Reform Act of 2001 (IRR) is valid. It further argues that its duty to protect the
public interest necessarily requires it to balance the interests of the consumers and
the utilitiesthat is, to maintain reasonable rates while ensuring that the utilities
will be able to remain financially sound and operationally viable. 43
The Court agrees with the respondents and the OSG.

ERC authority is found in Secs. 44 and 80 of the EPIRA
The ERC is endowed with the statutory authority to approve provisional rate
adjustments under the aegis of Sections 44 and 80 of the EPIRA. The sections read,
thus:
SEC. 44. Transfer of Powers and Functions.The powers and functions of the Energy
Regulatory Board not inconsistent with the provisions of this Act are hereby transferred to
the ERC. The foregoing transfer of powers and functions shall include all applicable funds
and appropriations, records, equipment, property and personnel as may be necessary.
Sec. 80. Applicability and Repealing Clause.The applicability provisions of
Commonwealth Act No. 146, as amended, otherwise known as the Public Services Act;
Republic Act 6395, as amended, revising the charter of NPC; Presidential Decree 269, as
amended, referred to as the National Electrification Decree; Republic Act 7638, otherwise
known as the Department of Energy Act of 1992; Executive Order 172, as amended,
creating the ERB; Republic 7832 otherwise known as the Anti-Electricity and Electric
Transmission Lines/Materials Pilferage Act of 1994; shall continue to have full force and
effect except insofar as they are inconsistent with this Act.
The provisions with respect to electric power of Section 11(c) of Republic Act 7916, as
amended, and Section 5(f) of Republic Act 7227 are hereby repealed or modified accordingly.
Presidential Decree No. 40 and all laws, decrees, rules and regulations, or portions
thereof, inconsistent with this Act are hereby repealed or modified accordingly. (Emphasis
supplied)
_______________
Memorandum of the ERC, Id., at pp. 701-714.

42
Id., at p. 718.
43
175
VOL. 432, JUNE 15, 2004 175
Commission
The principal powers of the ERB relative to electric public utilities transferred to
the ERC are the following:
1. 1.To regulate and fix the power rates to be charged by elective companies; 44
2. 2.To issue certificates of public convenience for the operation of electric power
utilities;
45
3. 3.To grant or approve provisional electric rates. 46
It bears stressing that the conferment upon the ERC of the power to grant
provisional rate adjustments is not inconsistent with any provision of the EPIRA.
The powers of the ERB transferred to the ERC under Section 44 are in addition to
the new powers conferred upon the ERC under Section 43.
Section 80 of the EPIRA complements Section 44, as it mandates the continued
efficacy of the applicable provisions of the laws referred to therein. The material
provisions of the Public Service Act which continue to be in full force and effect are
contained in Section 16(c), which states thus:
Section 16. Proceedings of the Commission, upon notice and hearing.The Commission
shall have power, upon proper notice and hearing in accordance with the rules and
provisions of this Act, subject to the limitations and exceptions mentioned and saving
provisions to the contrary:
...
(c) To fix and determine individual or joint rates, toll, charges, classifications, or
schedules thereof, as well as commutation, mileage, kilometrage, and other special rates
which shall be imposed, observed, and followed thereafter by any public
service: Provided, That the Commission may, in its discretion, approve rates proposed by
public services provisionally and without necessity of any hearing; but it shall call a
hearing thereon within thirty days thereafter, upon publication and notice to the concerned
parties operating in the territory affected: Provided, further, That in case the public service
equipment of an operator is used principally or secondarily for the promotion of a private
business, the net profits
_______________
44 Sec. 9(c), P.D. No. 1206. See also Sec. 16(c), Commonwealth Act (C.A.) No. 146.
45 Sec. 9(e), P.D. No. 1206. See also Sec. 15(a), C.A. No. 146.
46 Sec. 8, E.O. No. 172; Sec. 16(c), C.A. No. 146.
176
Commission
of said private business shall be considered in relation with the public service of such
operator for the purposes of fixing the rates.
Similarly, Sections 8 and 14 of E.O. No. 172 or the ERB Charter continue to be in
full force by virtue of Sections 44 and 80 of the EPIRA. Said provisions of the ERB
charter read:
SEC. 8. Authority to Grant Provisional Relief.The Board may, upon the filing of an
application, petition or complaint or at any stage thereafter and without prior hearing, on
the basis of the supporting papers duly verified or authenticated, grant provisional relief on
motion of a party in the case or on its own initiative, without prejudice to a final decision
after hearing, should the Board find that the pleadings, together with such affidavits,
documents and other evidence which may be submitted in support of the motion,
substantially support of the provisional order; Provided, That the Board shall immediately
schedule and conduct a hearing thereon within thirty (30) days thereafter, upon publication
and notice to all affected parties.
SEC. 14. Applicability Clause.The applicability (applicable) provisions of
Commonwealth Act No. 146, as amended, otherwise known as the Public Service Act;
Republic Act No. 6173, as amended, otherwise known as the Oil Industry Commission
Act; Republic Act No. 6395, as amended, revising the charter of the National Power
Corporation under C.A. 120; Presidential Decree No. 269, as amended, also referred to as
the National Electrification Administration Decree; and Presidential Decree No. 1206, as
amended, creating the Department of Energy, shall continue to have full force and effect,
except insofar as inconsistent with this Order. (Word in parenthesis supplied)
The above-quoted applicability clause is quite clear. It cannot be argued that the
clause could not have referred to the provisions of the prior laws empowering the
Public Service Commission (PSC) and the ERB to grant provisional rate
adjustments on the premise that the lawmakers deliberately deleted the provisions
in the crafting of the EPIRA. Such an argument begs the question. What is clear
from Sections 80 and 44 is that the legislators saw the superfluity or needlessness
of carrying over in the EPIRA the same provision found in the previous laws. The
power to approve provisional rate increases is included among the powers
transferred to the ERC by virtue of Section 44 since the grant of that authority is
not inconsistent with the EPIRA; rather, it is in full harmony with the thrust of the
law which is to strengthen the ERC as the new regulatory body.
177
VOL. 432, JUNE 15, 2004 177
Commission
Furthermore, under Section 80, only three (3) specific laws were expressly repealed
or modified. These are Section 11(c) of Republic Act No. 7916, as amended, Section
47
5(f) of Republic Act No. 7227 and Presidential Decree No. 40. Section 8 of E.O. No.
48 49
172 and Section 16(c) of C.A. No. 146 which both grant the regulatory body
concerned the authority to approve provisional rate increases are not among the
provisions expressly repealed or modified. This clearly indicates the laws intent to
transfer the power to the ERC.
Indeed, nary a hint in the EPIRA intimates that the powers of ERCs
predecessors not mentioned therein are revoked or repealed. Be it noted that
implied repeals are not favored in our jurisdiction. The legislature is presumed to
50
know the existing laws; if it intended a repeal of the earlier law, it should have so
expressed that intention in the subsequent statute. 51
Thus, a statute will not be deemed to have been impliedly repealed by another
enacted subsequent thereto unless there is a showing that a plain, unavoidable and
irreconcilable repugnancy exists between the two. 52
Likewise, it may not be asserted with success that the power to grant provisional
rate adjustments runs counter to the statutory construction guide provided in
Section 75 of the law. The section
53
_______________
47 An Act Creating the Philippine Economic Zone Authority (PEZA).

48 An Act Creating the Bases Conversion and Development Authority (BCDA).
49 Establishing Basic Policies for the Electric Power Industry, including making NPC a monopoly and
monopsony by vesting it with sole authority to generate and sell electricity.

50 Jalandoni v. Endaya, G.R. No. L-23894, 24 January 1974, 55 SCRA 262; Villegas v. Subido, G.R. No.
L-31711, 30 September 1971, 41 SCRA 190; Iloilo Palay and Corn Planters Association, Inc. v.
Feliciano, G.R. No. L-24022, 03 March 1965, 13 SCRA 377; United States v. Reyes, 10 Phil. 423 (1908).
51 Iloilo Palay and Corn Planters Association, Inc. v. Feliciano, supra at p. 381.
52 Villegas v. Subido, supra note 50; Lichauco & Co. v. Apostol and Corpus, 44 Phil. 138 (1922).
53 SEC. 75. Statutory Construction.This Act shall, unless the context indicates otherwise, be
construed in favor of the establishment, promotion, preservation of competition and people empowerment
so that the widest participation of the people, whether directly or indirectly, is ensured. With respect to
NPCs debts and IPP and related contracts, nothing
178
Commission
ordains that the EPIRA shall be construed in favor of market competition and
people power empowerment, thereby ensuring the widest participation of the people.
To the Court, the goals of market competition and people empowerment are not
negated by the ERCs exercise of the authority to approve provisional rate
adjustments. The concerns are taken care of by Section 43 of the EPIRA and its IRR.
While Section 43 lays down the publication requirement as regards the rate
application, Section 4(e), Rule 3 of the IRR fleshes out the requirement. 54
Neither is the notion of provisional rate adjustment incompatible with the policy
to protect public interest, as enunciated in Section 2(f) of the law. The common
55
weal is not relegated to the back-burner simply by upholding the grant to the ERC
of the authority to approve provisional rate adjustments. Again for one, even if
there is a ground to grant the provisional rate increase, the ERC may do so only
after the publication requirement is met and the consumers affected are given the
opportunity to present their side. For another, the rate increase is provisional in
character and therefore may be modified or even recalled anytime. Still for an-
_______________
in this Act shall be construed as: (1) an implied waiver of any right, action or claim, against any person
or entity, of NPC or the Philippine Government arising from or relating to any such contracts; (2) a
conferment of new or better rights to creditors and IPP contractors in addition to subsisting rights granted
by the NPC or the Philippine Government under existing contracts.
54 The IRR requires that the petition for rate adjustment or for any relief must be accompanied by an
acknowledgment of receipt of a copy by the legislative bodies of the Local Government Units (LGUs)
concerned, together with a certification of the publication of the notice of hearing as required by law. It
also provides that the ERC may provisionally grant or deny the relief sought not later than 75 calendar
days from the filing of the petition, based thereon and the documents attached thereto, as well as the
comments or pleadings of the consumers affected that may have been filed within 30 calendar days from
receipt of a copy of the petition or the publication thereof, as the case may be.
55 Sec. 2. It is hereby declared the policy of the State.
....
(b) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of
electric power.
179
VOL. 432, JUNE 15, 2004 179
Commission
other, the ERC is mandated to prescribe a rate-setting methodology in the public
interest and to promote efficiency.
56 57
For that matter, there is a plethora of provisions in Section 43 and related

sections which seek to promote public interest, market competition and consumer
protection. 58
_______________
56 Sec. 43(f), R.A. No. 9136.

57 Ibid.
58 The National Grid Code and the Distribution Code are required to include performance and financial
capability standards for the players in all the sectors of the industry to protect the public interest. (Sec.
43[f]). The ERC is tasked to enforce the rules and regulations for the operation of the electricity spot
market and the activities of the participants therein to ensure a greater supply and rational pricing of
electricity. (Sec. 43[i]). In order that the ERC may retain the Return-on-Rate Basis (RORB) as the rate-
setting methodology, it is required to observe certain guidelines to protect the public interest. (Sec. 43[k].
See also Sec. 43[o], [r], [s] and [t]).
The ERC may allow the TRANSCO to charge user fees only after due notice and hearing. (Sec. 43[n]).
The ERC is empowered to punish abuse of market power, cartelization and anti-competitive behavior.
(Sec. 43[o]).
It is required to publish all its decisions involving rates and anti-competitive cases to ensure fair and
unpartial treatment. (Sec. 43[q]).
The promotion of free market competition is at the core of the ERCs task to monitor activities in the
generation and supply sub-sectors. (Sec. 43[u]). The ERC is commanded to act on applications for cost
recovery and return on demand side information projects, (Sec. 73) obviously to spur energy savings and
reduction of power rates. The ERC is given original and exclusive jurisdiction over all cases contesting
power rates and fees or involving intra-industry disputes. (Sec. 69).
It is the ERCs task to set up a socialized pricing mechanism called a lifeline rate for the marginalized
end-users. (Sec. 69). It may extend the cross-subsidies for one (1) year upon a finding that its removal
would have a material adverse effect upon the public interest. In reviewing power purchase and energy
conversion agreements between the Philippine National Oil Company-Energy Development Corporation
(PNOC-EDC) and the NPC concerning geothermal power plants for the purpose of removing hidden costs
or extraordinary markups in the cost of power or steam above their true costs, the ERC shall ensure that
all savings realized from the reduction of the mark-ups shall be shared by all end-users. (Sec. 69).
180
Commission
Sec. 43 of the EPIRA, being a list of ERCs new powers, is not inconsistent with Sec.
44
Although the power to grant provisional rate adjustments is not one of the powers
mentioned in Section 43, this provision itself characterizes the listed powers as the
key functions in the restructured industry. They are not the typical or traditional
prerogatives or functions of regulatory bodies. Reproducing the initial paragraph of
the section is illuminating, viz.:
The ERC shall promote competition, encourage market development, ensure customer
choice and penalize abuse of market power in the restructured electricity industry. In
appropriate cases, the ERC is authorized to issue cease and desist order after due notice
and hearing. Towards this end, it shall be responsible for the following key functions in the
restructured industry: (Emphasis supplied).
....
Significantly, the fundamental power to fix rates is also not one of the functions
enumerated under Section 43. Thus, to deny the power to grant provisional rate
increase to ERC simply because it is not mentioned in Section 43 is also to deny the
power to fix rates to the Commission by the same token. Clearly, the proposition is
absurd.
Moreover, as the OSG correctly pointed out, to interpret the EPIRA as not
retaining the ERCs power to issue provisional orders will wreak havoc on the
regulatory environment, which has been painstakingly built and enhanced since the
enactment of the EPIRA. 59
To repeat, the EPIRA grants unto the ERC both old and new powers. The old
powers are referred to in Section 44 while the new ones are listed in Section 43 of
the law.
The powers enumerated in Section 43 have a common thread. Characterized as
the key functions, they are the new powers granted to the ERC in relation to the
reform and modernization of the electric power industry sought to be achieved by
the law. They are also invariably mentioned with particularity in other provisions of
the law. In other words, Section 43 merely repeats what is
_______________
Memorandum for the OSG, Rollo, p. 906.

59
181
VOL. 432, JUNE 15, 2004 181
Commission
found in the other sections. It is a compendium of powers provided in other
provisions of the same law but were not enjoyed by the previous regulatory bodies.
It is a statutory tool to achieve clarity and convenience, at least with respect to the
new powers.
The powers provided in Section 43 and the corresponding related provisions in
the EPIRA are:
1. 1.Section 43(a) on the power to implement the rules and regulations of the Act, also
provided in Section 177;
2. 2.Section 43(b) on the power to promulgate and enforce the National Grid Code and
Distribution Code, also provided in Sections 9, 11, 19, 20, 21, 22, 23 and 24.
3. 3.Section 43(c) on the power to enforce the rules and regulations on the operation of
the electricity spot market and on the participants in the spot market, also
provided in Sections 30 and 31.
4. 4.Section 43(d) on the power to determine the level of cross-subsidies in the retail
rate until its removal, also provided in Section 74;
5. 5.Section 43(e) on the power to amend or revoke the authority to operate of any
person or entity for failure to comply with the IRR or an order or resolution of the
ERC, also provided in Sections 6, 7, 20, 22, 26, 28, 29 and 30;
6. 6.Section 43(g) on the power to ensure that the charges of the TRANSCO and
distribution utilities do not bear cross-subsidies, also provided in Section 74;
7. 7.Section 43(l) on the power to review and approve changes on the terms and
conditions of service of the TRANSCO and any distribution utility, also provided in
Sections 9, 22 and 23;
8. 8.Section 43(h) on the power to allow the TRANSCO to charge user fees, also
provided in Section 9(b);
9. 9.Section 43(j) on the power to set a lifeline rate for marginalized end-users, also
provided in Section 73;
10. 10.Section 43(k) on the power to penalize abuse of market power, cartelization and
anti-competitive or discriminatory behavior, also provided in Section 45.
11. 11.Section 43(l) on the power to impose fines and penalties, also provided in Section
46.
182
Commission
1. 12.Section 43(o) on the power to monitor activities in the generation and supply of
the electric power industry, also provided in Sections 6 and 29;
2. 13.Section 43(p) on the power to act on application for/or modifications of certificates
of public convenience and/or necessity, etc., also provided in Sections 22 and 23;
3. 14.Section 43(r) on the power to act against any participant or player in the energy
sector for violations of law, rule or regulation, also provided in Sections 46 and 74.
Notably, under Section 43(u) the ERC is granted original and exclusive jurisdiction
over all cases contesting rates, fees, fines and penalties imposed thereby in the
exercise of its functions and responsibilities in Section 43.
In determining the extent of powers possessed by the ERC, the provisions of the
EPIRA must not be read in separate parts. Rather, the law must be read in its
entirety, because a statute is passed as a whole, and is animated by one general
purpose and intent. Its meaning cannot to be extracted from any single part thereof
but from a general consideration of the statute as a whole. 60
Considering the intent of Congress in enacting the EPIRA and reading the
statute in its entirety, it is plain to see that the law has expanded the jurisdiction of
the regulatory body, the ERC in this case, to enable the latter to implement the
reforms sought to be accomplished by the EPIRA. When the legislators decided to
broaden the jurisdiction of the ERC, they did not intend to abolish or reduce the
powers already conferred upon ERCs predecessors. To sustain the view that the
ERC possesses only the powers and functions listed under Section 43 of the EPIRA
is to frustrate the objectives of the law.
All the foregoing undeniably lead to the conclusion that the ERC, under Sections
43(u), 44 and 80 of the EPIRA, in relation to Section 16(c) of the Public Service Act
and Section 8 of E.O. No. 172, possesses the power to grant provisional rate
adjustments subject to the procedure laid down in these laws as well as in the IRR.
_______________
Aisporna v. Court of Appeals, G.R. No. L-39419, April 12, 1982, 113 SCRA 459.
60
183
VOL. 432, JUNE 15, 2004 183
Commission
Legislative history supports ERCs power to grant provisional rate adjustments
A brief review of the legislative history of the regulatory bodies which preceded the
ERC is instructive.
The first regulatory body was the Board of Rate Regulation (BRR) which came
into existence in 1907. It had the power, after a full hearing, to fix, revise, regulate,
61
reduce or increase the rates charged by public service corporations from time to
time. In 1913, the Board of Public Utility Commissioners (BPUC) was created to
62
take over the functions of the BRR. The BPUC was empowered,
63
_______________
61 Act No. 1779 (1907).

62 Section 5 in relation to Section 16, Id. The provisions read:
Sec. 5. The said Board shall exercise a watchful and careful supervision over the rates of every public service
corporation, and the said Board shall have the power and it shall be its duty to fix, revise, regulate, reduce, or increase
the said rates from time to time as justice to the public and the corporation may require. The Board shall have the
power, and it shall be its duty to examine into and keep informed as to the compliance of public service corporations
with the orders of the Board and with all provisions of law and their charters and franchises as to rates.
Sec. 16. The said Board is authorized and empowered and it shall be its duty whenever, after full hearing, it shall
be of the opinion that any of the rates charged by any public-service corporation subject to the provisions of this Act for
any service rendered or to be rendered, or that any regulations or practices whatever of such public-service corporation
affecting such rates, are unjust or unreasonable or unduly discriminative, or unduly preferential or prejudicial, or
otherwise in violation of any of the provisions of this Act, the Board shall determine what should be the just and
reasonable rate or rates to be thereafter observed in such case, and what regulations or practices in respect to such
service are just, fair, and reasonable to be thereafter followed; and to make an order that the said public-service
corporation shall cease and desist from such violation, to the extent to which the Board finds the same to exist, and
shall not thereafter publish, demand, or collect any rate for such service rendered or to be rendered in excess of the
rate so prescribed and shall conform to the regulation or practice so prescribed. (Emphasis supplied)
SEC. 42 of Act No. 2307 provides:
63
184
Commission
after conducting a hearing, to fix rates imposed by any public utility. In addition, it 64
had the power to hear and determine, upon a written complaint or motu
proprio,whether any increase or changes in classification of rates proposed by a
public utility is just and reasonable. Pending such hearing and determination, the
BPUC had the power to order the suspension of the increase or change in
classification for a period not exceeding three (3) months. 65
_______________
All the powers and duties of the Board of Rate Regulation created by Act Numbered Seventeen Hundred and Seventy-
Nine, and all subsequent amendments and additions thereto are hereby transferred to, and become a part of the duties
and powers of, the Board of Public Utility Commissioners, who shall hereafter discharge all the duties that have
heretofore been required of the Board of Rate Regulation; and any Act or part of Act inconsistent with the provisions of
such transfer and the provisions of this Act is hereby repealed.
64 Section 15(c), Act 2307 provides:
The Board shall have the power:
...
(c) After hearing, upon notice by order in writing, to fix just and reasonable individual rates, joint rates, tolls,
charges, or schedules thereof, as well as commutation, mileage, and other special rates which shall be imposed,
observed and followed thereafter by any public utility as herein defined, whenever the Board shall determine any
existing individual rate, joint rate, toll, charge or schedule thereof or commutation, mileage, or other special rate to be
unjust, unreasonable, insufficient, or unjustly discriminatory or preferential. (Emphasis supplied)
65 Section 16(h), Act No. 2307 provides:
When any public utility as herein defined shall increase any existing individual rates, joint rates, tolls, charges, or
schedules thereof, as well as commutation, mileage, and other special rates, or change or alter any existing classification,
the Board shall have the power, either upon written complaint or upon its own initiative to hear and determine whether
the said increase, change or alteration is just and reasonable. The burden of proof to show that the said increase,
change, or alteration is just and reasonable shall be upon the public utility making the same. The Board shall have the
power pending such hearing and determination to order the suspension of the said increase, change, or alteration, not
exceeding three months. It shall be the duty of the said Board to approve any such increase, change, or
185
VOL. 432, JUNE 15, 2004 185
Commission
The BPUC was shortly replaced by the PSC. Under its Charter, the PSC was 66
authorized to fix rates and approve provisional rate adjustments. 67
With the advent of Martial Law, on September 24, 1972, then President Marcos
through Presidential Decree No. 1 reorganized the executive branch of the National
Government and implemented the Integrated Reorganization Plan. Under the Plan,
the Board of Power and Waterworks (BOPW) was created in place of the PSC,
taking over the pertinent regulatory and adjudicatory functions of the latter. 68
Later, President Marcos created the Board of Energy (BOE) through Presidential
Decree No. 1206, transferring to it the powers and functions of the BOPW relative
to power utilities. 69
The Board of Energy had the authority to grant provisional rate adjustments on
the basis of the last paragraph of Section 11 of P.D. No. 1206, which reads:
....
Likewise, the foregoing transfers of powers and functions of the abolished agencies shall
be to the extent that they are not modified by any specific provision of this Decree.
_______________
alteration upon being satisfied that the same is just and reasonable. (Emphasis supplied)
66 C.A. No. 146 (1936).
67 See p. 21, supra.
68 Integrated Reorganization Plan, Art. III, pars. 1 and 6.
Sec. 11(e), P.D. No. 1206. The Board of Power and Waterworks is abolished and its powers and
69
functions are transferred to the Board of Energy, while its powers and functions relative to waterworks
are transferred to the National Water Resources Council. Sec. 9 provides in part:
The Board shall, after due notice and hearing, exercise the following powers and functions, among others:
....
c. Regulate and fix the power rates to be charged by electric companies except (1) electric cooperatives which shall
continue to be governed by Presidential Decree No. 269, as amended, and (2) the National Power Corporation which
shall continue to be governed by Republic Act No. 6395, as amended.
....
186
Commission
This Court, in Bautista v. Board of Energy, held that the Board of Energy derived
70
its prerogative to grant provisional relief not only from Section 11 of P.D. No. 1128,
amending Section 12 of R.A. No. 6173, but also from Section 16(c) of the Public
Service Act. 71
The BOE in turn was replaced by the ERB pursuant to E.O. No. 172. Sections
8 and 14 of the E.O. empowered the ERB to grant provisional rate adjustments.
72 73
Historically, therefore, in this jurisdiction, at least beginning with the Public

Service Act in 1936, the regulatory bodies concerned have exercised the power to
grant provisional rate adjustments only because there was a statutory grant of such
power.
The foregoing recital establishes the following salient points: (1) Section 16(c) of
the Public Service Act authorizing the approval of provisional rate increases has
never been repealed and as such continues to be in full force and effect up to the
present; (2) The BOPW had the power to grant provisional rate increases on the
basis of the provision of the Integrated Reorganization Plan that the pertinent
powers of the PSC were transferred to it; (3) The applicability clause found in
Section 44 of the EPIRA is the same as or similar to the applicability clauses
contained in Sections 11 and 21 of P.D. No. 1206 and Section 14 of E.O. No. 172;
and, (4) The applicability clause or transfer of power provision is sufficient to effect
the transfer of powers from a regulatory agency to its successor.
All told, the provisions of the Public Service Act and E.O. No. 172 which relate
74 75
to the power of the regulatory body to approve provisional rates continue to have
full force and effect, and the power was transferred to the ERC by virtue of Section
80 in relation to Section 44 of the EPIRA. Said provisions are not inconsistent with
the EPIRA except the directives therein dispensing with the need for prior hearing.
They are deemed modified to the extent that the EPIRA imposes a publication
requirement and, through
76
_______________
70 G.R. No. 75016, January 13, 1989, 169 SCRA 167.

71 Id., at pp. 172-173.
72 Supra, pp. 21-22.
73 Supra, p. 22.
74 Supra, p. 21.
75 Supra, pp. 21-22.

Sec. 43, R.A. No. 9136.
76
187
VOL. 432, JUNE 15, 2004 187
Commission
the IRR, assures the customers affected the opportunity to oppose or comment on
the application for provisional rate adjustment before it is acted upon by the ERC.77
Indeed, both the letter and spirit of the law require that the authority of the ERC
to grant provisional power rate adjustments should be upheld. The law is so clear
that it cannot be misread.
Grave Abuse of Discretion
The FDC contends that the issuance of the November 27, 2003 Order provisionally
approving MERALCOs application for rate increase is void because, among others,
the affected sectors were not afforded the opportunity to be heard. Since the
issuance of provisional orders is quasi-judicial in character, the ERC cannot
dispense with the requirements of notice and hearing. It likewise claims that the
78
ERC based the provisional increase only on MERALCOs bare allegation that it was
in dire financial straits, as there was no proof of MERALCOs actual financial
condition. 79
Petitioners-in-intervention, for their part, argue that the ERC issued the
assailed Order in haste, thereby virtually ignoring the opposition expressed by the
oppositors in their pleadings submitted to the Commission. They point out that the
issuance by the ERC of the Order notwithstanding the failure of MERALCO to
comply with the publication requirement under Section 4(e), Rule 3 of the IRR
manifests the Commissions partiality for MERALCO. 80
Significantly, the OSG is also of the view that the proceedings before the ERC
relative to MERALCOs Application is defective. Among the defects, according to the
OSG, are MERALCOs failure to publish its Applicationor at least a summary of the
reasons for its application, as required by Section 4(e), Rule 3 of the IRR; the ERCs
failure to consider the serious objections raised by the oppositors to the application
and the ERCs failure to resolve the motions for production of documents filed by
several oppositors. 81
_______________
77 Sec. 4(e), Rule 3, IRR.

78 Memorandum for the FDC, Rollo, pp. 967-970.
79 Id., at pp. 970-972.
80 Memorandum for Petitioners-in-Intervention, Id., at pp. 629-633.
81 Memorandum for the OSG, Id., at pp. 1015-1027.
188
Commission
Maintaining that FDC and the petitioners-in-intervention have failed to show any
grave abuse of discretion on its part, the ERC stresses that it is authorized under
the law to issue provisional rate adjustments without conducting a prior hearing
and that such issuance may be made permanent, modified or denied in the course of
the main proceeding. 82
The ERC also argues that Section 4(e) of the IRR does not require the publication
of the Application itself, citing in support of its contention the ruling of the Court
in Beautifont, Inc. v. Court of Appeals that Section 7 of the Permissible
83
Investments Law requires the publication of the summary or abstract of the

application, not the application itself. The ERC further asserts that it is premature
84
for the Court to rule on the issue of whether it acted with grave abuse of discretion
in issuing the November 27, 2003 Order considering that MERALCOs main
petition is pending hearing before it. 85
In its Memorandum, MERALCO maintains that the ERC acted not with grave
abuse of discretion but rather in accordance with its duty under Section 43 (f) of the
EPIRA to fix rates that will allow the recovery of just and reasonable costs and a
reasonable return on rate base (RORB) to operate viably. MERALCO insists that
the ERC had substantial basis for issuing the assailed Order. 86
The Court is convinced of the meritoriousness of FDCs position which is the

same stance taken by the petitioners-in-intervention and the OSG.
Under Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172 in relation to
Sections 43 and 80 of the EPIRA, the ERC may grant provisional rate adjustments
without first conducting a hearing prior to such grant. However, it is required to
conduct a hearing on the propriety of the grant of provisional rate adjustments
within 30 days from the issuance of the provisional order. 87
Section 4(e), Rule 3 of the IRR requires the ERC to resolve the motion for
issuance of a provisional order within seventy five (75)
_______________
82 Memorandum for the ERC, Id., at pp. 724-732.

83 G.R. No. L-50141, January 29, 1988, 157 SCRA 481.
84 Memorandum for the ERC, Rollo, pp. 738-740.
85 Id., at pp. 748-750.
86 Memorandum for MERALCO, Id., at pp. 669-675.
189
VOL. 432, JUNE 15, 2004 189
Commission
calendar days from the filing of the application or petition. If, within 30 days from
the publication of the application or receipt of a copy thereof, an affected consumer
or the Local Government Unit (LGU) concerned files with the ERC a comment on
the prayed for provisional rate adjustment and/or the application itself, the ERC is
mandated to consider such comment in its action on the prayer for provisional rate
adjustment. Section 4(e), Rule 3 reads in full:
Any application or petition for rate adjustment or for any relief affecting the consumers
must be verified and accompanied with an acknowledgement of receipt of a copy thereof by
the LGU Legislative body of the locality where the applicant or petitioner principally
operates together with the certification of the notice of publication thereof in a newspaper of
general circulation in the same locality.
The ERC may grant provisionally or deny the relief prayed for not later than seventy five
(75) calendar days from the filing of the application or petition, based on the same or
supporting documents attached thereto and such comments or pleadings the customers or
the LGU concerned may have filed within thirty (30) calendar days from receipt of a copy of
the application or petition or from the publication thereof as the case may be.
Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving
proper notices to all parties concerned, with at least one public hearing in the affected
locality, and shall decide the matter on the merits not later than twelve (12) months from
the issuance of the aforementioned provisional order.
. . . (Emphasis supplied)
Two postulates evidently flow from a reading of Section 4(e), Rule 3. First, the
publication of the application itself is required, not merely the notice of hearing
issued by the ERC. Second, in granting a provisional authority, the ERC must
consider not only the evidence submitted by the applicant in support thereof, but
also the comments of the consumers and the Local Government Units (LGUs)
concerned.
It is suggested that the IRR provision in point should be construed as granting
the ERC the power to issue provisional rate adjustments ex parte. Such power, 88
partaking as it does the nature of the police power of the State, is conferred on
administrative agencies like the ERC to enable them to pursue temporary measures
to address problems that cannot wait until the completion of
_______________
Dissenting Opinion of J. Puno, p. 39.

88
190
Commission
formal proceedings. Thus, the ERC may grant provisional rate adjustments on the
basis of the public utilitys application and supporting documents, and the pleadings
submitted by other parties may have filed at that time. Thereafter, it is mandated to
hold a full-blown hearing to resolve the case on the merits. 89
Concededly, like Section 16(c), C.A. No. 146 and Section 8, E.O. No. 172, Section
4(e), Rule 3 of the IRR does not require the conduct of a hearing prior to the
issuance of a provisional order. However, reading the aforementioned provisions of
the Public Service Act, the ERB Charter and the IRR in relation to one another, as
they should be read, the inexorable conclusion is that the provisional order cannot
be issued under the circumstances based exclusively on the application and
supporting documents thereof. The IRR explicitly requires, as a prerequisite to such
issuance, that the ERC consider also the comments of the consumers and the LGUs
concerned on the application which were filed within thirty (30) days from their
receipt of a copy of the application or the publication thereof.
In other words, the ERC must wait for thirty (30) days from service of copies of
the application for rate adjustments on interested parties or from the publication of
such application before it can issue a provisional order. If after the 30th day, no
comments are filed by concerned parties, then and only then may the ERC, if it
deems proper under the circumstances, issue a provisional order on the basis of the
application and its supporting documents.
To synthesize, the new order on rate adjustments is as follows:
1. (1)The applicant must file with the ERC a verified application/petition for rate
adjustment. It must indicate that a copy thereof was received by the legislative
body of the LGU concerned. It must also include a certification of the notice of
publication thereof in a newspaper of general circulation in the same locality.
2. (2)Within 30 days from receipt of the application/petition or the publication thereof,
any consumer affected by the proposed rate adjustment or the LGU concerned may
file its comment on the application/petition, as well as on the motion for provisional
rate adjustment.
_______________
Id., at pp. 39-48.

89
191
VOL. 432, JUNE 15, 2004 191
Commission
1. (3)If such comment is filed, the ERC must consider it in its action on the motion for
provisional rate adjustment, together with the documents submitted by the
applicant in support of its application/petition. If no such comment is filed within
the 30-day period, then and only then may the ERC resolve the motion for
provisional rate adjustment on the basis of the documents submitted by the
applicant.
2. (4)However, the ERC need not conduct a hearing on the motion for provisional rate
adjustment. It is sufficient that it consider the written comment, if there is any.
3. (5)The ERC must resolve the motion for provisional rate adjustment within 75 days
from the filing of the application/petition.
4. (6)Thereafter, the ERC must conduct a full-blown hearing on the application/petition
not later than 30 days from the date of issuance of the provisional order and must
resolve the application/petition not later than 12 months from the issuance of the
provisional order. Effectively, this provision limits the lifetime of the provisional
90
order to only 12 months.
Section 4(e), Rule 3 of the IRR, outlining as it does the approval process for an
application or petition for provisional rate adjustment, enforces not only Section
43(u) thereof but also Sections 44 and 80 which, as earlier stated, refer to the
powers of the ERB passed on to the ERC and found in other prevailing laws, such as
Section 16(c) of the Public Service Act.
The validity of the IRR, including Section 4(e) under Rule 3 thereof, is not in
dispute.
The IRR was crafted by the Department of Energy (DOE) in consultation with
relevant government agencies in accordance with its mandate under the EPIRA. It 91
was promulgated on the same
_______________
Section 4(e), Rule 3, IRR.

90
The Department of Energy is tasked with the duty of formulating the implementing rules of the
91
EPIRA under Section 37(p) in relation to Section 77 of the law. Sections 37(p) and 77 read:
Section 37. Powers and Functions of the DOE.In addition to its existing powers and functions, the DOE is hereby
mandated, to supervise the restructuring of the electricity industry. In pursuance thereof, Section 5 of RA 7638
otherwise known as The Department of Energy Act of 1992 is hereby amended to read as follows:
...
192
Commission
day that it was approved by the Joint Congressional Power Commission on
February 27, 2002. This Commission is composed of fourteen (14) members of the
92
Senate and the House. 93
It is settled that an administrative agency possesses the power to issue rules and
regulations to implement the statute which it is tasked to enforce, unless another
agency is the one so authorized by the law as in the case of the EPIRA. This is so
because it is impracticable, if not impossible, for the legislature to anticipate and
provide for the multifarious and complex situations that may be encountered in
enforcing the law. So long as the rules and regulations are germane to the objects
and purposes of the law and conforms to the standards prescribed thereby, they are
deemed to have the force and effect of law. 94
In Victorias Milling Co., Inc. v. Social Security Commission, the Court 95
explained:
When an administrative agency promulgates rules and regulations, it makes a new law
with the force and effect of a valid law, . . . Rules and
_______________
(p) formulate such rules and regulations as may be necessary to implement the objectives of this Act;
....
Section 77. Implementing Rules and Regulations.The DOE shall, in consultation with relevant government agencies,
the electric power participants, non-government organizations and end-users, promulgate the Implementing Rules and
Regulations (IRR) of this Act within six months from the effectivity of this Act subject to the approval by the [Joint
Congressional] Power Commission.
92 See Sec. 77, R.A. No. 9136; supra note 91.
93 See Sec. 62, R.A. No. 9136.
94 People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450, citing People v. Exconde, 101 Phil.
1125 (1957); Director of Forestry v. Muoz, G.R. No. L-24786, June 28, 1966, 23 SCRA 1183; and Geukeko v.
Araneta, 102 Phil. 706(1957); Rizal Empire Insurance Group, et al. v. National Labor Relations
Commission, G.R. No. L-73140, May 29, 1987, 150 SCRA 565; Espaol v. Chairman, Philippine Veterans
Association, G.R. No. L-44616, June 28, 1985, 137 SCRA 314; Antique Sawmill, Inc. v. Zayco, et al., G.R. No. L-
250051, May 30, 1966, 17 SCRA 316; Valerio v. Secretary of Agriculture and Natural Resources,G.R. No. L-
18587, April 23, 1963, 7 SCRA 719; Pascual v. Commissioner of Customs, G.R. No. L-12219, April 25, 1962, 4
SCRA 1020.
95 114 Phil. 555; 4 SCRA 627 (1962).
193
VOL. 432, JUNE 15, 2004 193
Commission
regulations when promulgated in pursuance of the procedure or authority conferred upon
the administrative agency by law, partake of the nature of a statute . . . This is so because
statutes are usually couched in general terms, after expressing the policy, purposes,
objectives, remedies and sanctions intended by the legislature. The details and the manner
of carrying out the law are often times (sic) left to the administrative agency entrusted with
its enforcement. In this sense, it has been said that rules and regulations are the product of
a delegated power to create new or additional legal provisions that have the effect of
law . . . .
96
The challenged provisional rate increase transgresses Section 4(e), Rule 3 of the
IRR in two major respects. The violations involve a couple of new requirements
prescribed by the IRR. These are, first, the need to publish the application in a
newspaper of general circulation in the locality where the applicant operates; and
second, the need for ERC to consider the comments or pleadings of the customers
and LGU concerned in its action on the application or motion for provisional rate
adjustment.
Obviously, the new requirements are aimed at protecting the consumers and
diminishing the disparity or imbalance between the utility and the consumers. The
publication requirement gives them enhanced opportunity to consciously weigh the
application in terms of the additional financial burden which the proposed rate
increase entails and the basis for the application. With the publication of the
application itself, the consumers would right from the start be equipped with the
needed information to determine for themselves whether to contest the application
or not and if they so decide, to take the needed further steps to repulse the
application. On the other hand, the imposition on the ERC to consider the
comments of the customers and the LGUs concerned extends the comforting
assurance that their interest will be taken into account. Indeed, the requirements
address the right of the consuming public to due process and at the same advance
the cause of people empowerment which is also a policy goal of the EPIRA along
with consumer protection.
Corollarily, the requirements seek to temper the lack of fairness implicit in the
kind of ex parte modality theretofore followed in regard to applications for
provisional rate increases. Before the adoption of the IRR provision, to secure a
provisional rate adjust-
_______________
Ibid., at p. 558.
96
194
Commission
ment all that a public utility needed to do was to file the corresponding application
with the supporting documents. Without the burden of a hearing and in total
disregard of the opposition, the applicant could press the regulatory body to grant
the application. With the new protocol under the IRR, the ERC is tasked to pass
upon the comments or opposition of the consumers and the LGUs in its resolution of
the application for provisional rate adjustment. Consequently, for the ERC to be
true to its mission and to prevent evisceration of the new requirements, it should
mention in the provisional order the points and arguments of the oppositors which
it adopts or give its reasons if it does not uphold them. In other words, the proof of
its compliance with the requirements should appear in the provisional order itself.
While the system of interim rates cannot be dispensed with since it helps ensure
the financial viability of a public utility which it needs to be able to deliver adequate
service to the consumers, the system may be abused to the detriment of the
consumers if not enough safeguards are put in place. It happened many times
before that after the provisional rate increase had been granted, no action on the
main petition was taken, or if one was taken it was made only after the lapse of a
considerable period of time. The ultimate effect of the inaction or delay was
virtually to make the provisional rate permanent. Thus, the consumers were made
to pay what effectively evolved to be the permanent rate without the benefit of a
hearing. In the meantime, the collections on the provisional rate were spent by the
utility.
In a recent decision, this Court ordered MERALCO to make a refund which
97
remains uncomplied with up to the present, to the prejudice of the consumers. The
consumers will similarly suffer if
_______________
97 Republic of the Philippines, represented by Energy Regulatory Board v. Manila Electric

Company, G.R. No. 141369, November 15, 2000, 391 SCRA 700. In ruling that income tax as operating
expense cannot be allowed for rate-determination purposes which MERALCO did, this Court opened its
decision with a memorable pro-people statement: In third world countries like the Philippines, equal
justice will have a synthetic ring unless the economic rights of the people, especially the poor, are
protected with the same resoluteness as their right to liberty. The cases at bar are of utmost significance
for they concern the right of our people to electricity and to be reasonably charged for their
consumption. Ibid., at p. 704.
195
VOL. 432, JUNE 15, 2004 195
Commission
MERALCO, or any power utility for that matter, is allowed to collect on a
provisional rate increase, the application for which they effectively have no
knowledge of.
The new requirements address the dismal scenario by ensuring dissemination of
information on the application for rate increase and consideration by the ERC of the
written position taken by consumers in its action on the motion for provisional rate
increase.
The publication and comment requirements, like the 30-day period also imposed
in Section 4(e), Rule 3 of the IRR, are in keeping with some of the avowed policies of
the EPIRA. These are to protect the public interest vis--visthe rates and services of
electric utilities and other providers of electric power, to ensure transparent and
98
reasonable prices of electricity in a regime of free and fair competition and full
public accountability for greater operational and economic efficiency, to enhance the
competitiveness of Philippine products in the global market, and to balance the
99
interests of the consumers and the public utilities providing electric power through
the fair and non-discriminatory treatment of the two sectors. 100
Clearly, therefore, although the new requirements are procedural in character,

they represent significant reforms in public utility regulation as they engender
substantial benefits to the consumers. It is in this light that the new requirements
should be appreciated and their observance enforced.
The record shows that MERALCO failed to comply with the publication
requirement prescribed by the IRR. What the IRR requires to be published is the
application itself. In fact, it even requires the applicant to submit the certification
of the notice of publication of the application or petition for rate
adjustment together with the application/petition to the ERC. The Notice, quoted
101
in full hereunder, which MERALCO caused to be published on October 10, 2003 in

the Manila Times, does not comply with the requirement, thus:
_______________
98 Sec. 2(f), R.A. No. 9136.

99 Sec. 2(c), R.A. No. 9136.
100 Sec. 2(e), R.A. No. 9136.
196
Commission
MANILA ELECTRIC COMPANY

Pasig City
NOTICE OF APPLICATION
Pursuant to paragraph (e), Section 4, Rule 3 of the Implementing Rules and Regulations of
R.A. 9136, notice is hereby given that an Application dated October 8, 2003, for the approval
of revised rate schedules and provisional authority, will be filed by the MANILA
ELECTRIC COMPANY with address at Meralco Center, Ortigas Avenue, Pasig City, before
the Energy Regulatory Commission.
Issued this 9th day of October 2003.
(Sgd). GIL S. SAN DIEGO

Vice President and Head
Legal Services (Emphasis, supplied)
102
ERC invokes the case of Beautifont, Inc. v. Court of Appeals, involving the 103
deciphering of the publication requirement in the Permissible Investments Law,

R.A. No. 5455, where this Court held that the law did not require the publication of
the subject application itself with the Board of Investments. The case, however, is
104
not apropos.For one thing, despite some imprecision in a segment of the provision
involved, other parts thereof clearly signify that only the notice of the application is
meant to be published. Here, the IRR provision clearly refers to the application
itself which is required to be published. For another, in Beautifont the Court was
quite explicit that under the provision involved not just the notice of application
but an abstract or summary thereof, comprehending the items mentioned had to 105
be published and it intimated that the item actually published complied with the
law. Here, what was actually published is a mere notice of the intent to file an
application. Nothing more, nothing less.
For its part, MERALCO alleges that it relied on the ERCs interpretation that
what had to be published is simply a notice of the intent to file an application. So, 106
it caused the publication of
_______________
102 Rollo, pp. 753-754.

103 Supra, note 83.
104 Rollo, pp. 738-739.
105 Ibid.
106 Memorandum for MERALCO, Id., at p. 680.
197
VOL. 432, JUNE 15, 2004 197
Commission
such notice before it filed the application. As it is feeble and self-defeating, the
107
claim is also incongruent with the position actually presented by the ERC in this
case. 108
In this regard, the stance taken by the OSG as the Peoples Tribune deserves to
be quoted, thus:
The first paragraph of Section 4(e) of Rule 3 of the EPIRA IRR provides that a petition for
rate adjustment x x x must be x x x accompanied with x x x the certification of the notice
of publication thereof in a newspaper of general circulation in the x x x locality. It is very
clear from the above-cited rule that the application for rate adjustment must be published
in a newspaper of general circulation.
In the case of MERALCO in ERC Case No. 2003-480, it appears that only a notice of
hearing has been published. The notice that was published did not cite the essential
allegations or contain a summary of the reasons in support of the application for rate
increase.
The purpose of the publication of the application or the essential allegations or summary
of the reasons given for the relief sought in the application for rate adjustment contained in
the notice of hearing in a newspaper of general circulation is to inform and enable the
consumers in the applicants franchise area to understand as much as possible the
application as well as the reasons therefore. This is more so because the relief sought will
have an immediate and great impact on the consumers. 109
The November 27, 2003 Order reveals that the ERC did not consider the opposition
to MERALCOs Application and other pleadings filed by several concerned parties
in determining whether the rate increase applied for by MERALCO should be
approved provisionally.
The ERCs provisional approval of MERALCOs application for rate increase was
based on MERALCOs say-so alone, including the purported value of its assets as of
the year 2002 and its claimed financial difficulties, resulting according to it in its
deferral of forty-two (42) major capital projects and failure to meet its maturing
debt obligations. In the assailed Order, the Commission held that MERALCOs
inability to construct its capital projects to meet the growing demand of its
customers and to ensure the reliability
_______________
107 Id.
108 See Memorandum for the ERC, Id., at pp. 734-740.
109 Id., at pp. 914-915.
198
Commission
and efficiency of its existing system would ultimately be to the prejudice of the
consumers. 110
The provisional authority to impose increased rates was approved

notwithstanding the fact that soon after MERALCO filed its Application on October
10, 2003, FDC and NASECORE expressed their intention to file their respective
oppositions to the Application, and later their respective Motions for Production of
111
Documents. Neither did the ERC consider the Letter dated October 24, 2003 of
112
Lualhati (a consumer), seeking the dismissal of the Application.

Although on November 13, 2003, the ERC issued an Order requiring MERALCO
to comment on NASECOREs Motion for Production of Documents, it failed to 113
resolve the same, as well as FDCs similar Motion, before issuing its November 27,
2003 Order. The motions filed by NASECORE and FDC should have been acted
upon by the ERC prior to resolving MERALCOs prayer for provisional rate increase,
because NASECORE and FDC would be able to express their agreement or
opposition to MERALCOs Application only after perusing the documents presented,
if their Motions were granted; or in case the Motions were denied, they could at
least make known their respective positions on the Application on the basis of the
documents submitted by MERALCO. Certainly, the spirit if not the language of the
IRR provision should have led ERC to treat the motions which are preludes to
active opposition to the application in a more favorable light and in a less cavalier
fashion. Without even mentioning the motions in its Order,ERC granted the motion
for provisional rate increase.
The foregoing clearly establish that ERC failed to comply with the requirements
of Rule 4(e), Rule 3 of the IRR publication and comment requirements of Rule 4(e),
Rule 3 of the IRR.
In Benito v. Commission on Elections, we held that:
114
_______________
110 Order, Ibid., at pp. 23-25.

111 NASECORE sent its letter to the ERC expressing its intention on October 14, 2003. FDC expressed
the same intention in its October 29, 2003 letter to the ERC. See Memorandum for the ERC, Id., at p. 693.
112 Id., at pp. 444-447, 54-55.
113 Id., at p. 450.
114 G.R. No. 134913, January 19, 2001, 349 SCRA 705.
199
VOL. 432, JUNE 15, 2004 199
Commission
Grave abuse of discretion means such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, or, in other words where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and it must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined or to act at all in contemplation of law. It is not sufficient that a
tribunal, in the exercise of its power, abused its discretion; such abuse must be grave.
(Citations omitted) 115
It is settled that there is grave abuse of discretion when an act is done contrary to
the Constitution, the law or jurisprudence, or when executed whimsically,
116
capriciously or arbitrarily out of malice, ill will or personal bias. 117
What makes the challenged Order particularly repugnant is that it involves a

blatant and inexcusable breach of the very rules which the ERC is mandated to
observe and implement. The violated provision which is Section 4(e), Rule 3 of the
IRR specifies how the ERC should exercise its power to issue provisional orders
pursuant to Section 44 in relation to Section 80 of the EPIRA. Since the IRR was
issued pursuant to the EPIRA, Section 4(e) of Rule 3 as part of the IRR has the force
and effect of law and thus should have been complied with.
118
In view of the infirmities which attended the issuance of the November 27,
2003 Order, particularly: (1) the failure of MERALCO to publish its Application or
at least a summary thereof; (2) the failure of the ERC to resolve the Motions for
Production of Documents filed by the oppositors to MERALCOs Application before
acting on the motion for provisional rate adjustment; and (3) the failure of the ERC
to consider the arguments raised by the oppositors in their respective pleadings
prior to the issuance of the assailed Order; the Court declares void the November 27,
2003 Order of the ERC for having been issued with grave abuse of discretion.
_______________
115 Id., at pp. 713-714.

116 Republic v. Cocofed, G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462.
117 Taada v. Angara, G.R. No. 118295, May 2, 1997, 272 SCRA 18.
118 Rizal Empire Insurance Group, et al. v. National Labor Relations Commission, supra, note
94; Espaol v. Chairman, Philippine Veterans Association, supra, note 94; Antique Sawmill, Inc. v. Zayco,
et al., supra,note 94; Valerio v. Secretary of Agriculture and Natural Resources, supra,note 94; Pascual v.
Commissioner of Customs, supra, note 94.
200
Commission
One final word. The character of the infirmities which taint the challenged Order is
such that it precludes the remand of the case to the ERC without invalidating
the Order. The defect of the notice as published is deemed of so serious a nature as
to negate the notice altogether and forestall the ERCs assumption of jurisdiction
over MERALCOs Application and its prayer for provisional rate increase. Similarly,
the ERCs failure to consider the oppositions and motions already on record in
issuing the challenged Orderand to act upon other relevant motions has such grave
due process implications that render the Order void, independently of its breach of
its own rules. Thus, should the case be simply remanded to the ERC without further
action by the Court, the defects would not be cleansed and they would retain their
potency and still serve as solid basis to nullify the challenged Order and all other
issuances of the ERC which would be infected by the infirmities. Indeed, such a
denouement would be inescapable once the application is elevated again to this
Court in connection with the infirm issuances. Clearly then, a remand is not in the
best interest of MERALCO and the ERC. Rather, it is to their advantage, same as
with the consumers, that they begin again on a clean slate.
WHEREFORE, the Petition and the Petition-in-Intervention are GRANTED, and
the November 27, 2003 Order of the respondent Energy Regulatory Commission in
ERC Case No. 2003-480, granting provisional rate increases to the respondent
MERALCO, is DECLARED VOID and accordingly SET ASIDE.
Respondent Commission is DIRECTED to comply with Section 4(e), Rule 3 of the
Implementing Rules and Regulations of Republic Act No. 9136, particularly the
publication and comment requirements therein, in conformity with this Decision, in
acting upon and resolving respondent MERALCOs prayer for provisional rate
increase in its Application dated October 8, 2003 in ERC Case No. 2003-480.
SO ORDERED.
Davide, Jr. (C.J.), Panganiban, Quisumbing, Carpio, Carpio-
Morales and Callejo, Sr., JJ., concur.
Puno, J., Pls. See Concurring and Dissenting Opinion.
201
VOL. 432, JUNE 15, 2004 201
Commission
Vitug, J., On Official Leave. (I hereby certify that Mr. Justice Vitug
concurred with the dissenting opinion of Mr. Justice R. S. PunoDavide, Jr., C.J.)
Ynares-Santiago, J., On Leave. (I hereby certify that Mme. Justice C.Y.
Santiago concurred with Mr. Justice R.S. Puno in his dissenting opinionDavide,
Jr., C.J.)
Sandoval-Gutierrez, J., Please see my Separate Opinion wherein I join Mr.
Justice Puno in his Concurring and Dissenting Opinion.
Austria-Martinez, J., Pls. see concurring and dissenting opinion.
Corona, J., On Official Leave. (I hereby certify that Mr. Justice R. C. Corona
voted to concur with the dissenting opinion of Mr. Justice R. S. PunoDavide,
Jr., C.J.).
Azcuna, J., I take no partformer counsel of Meralco.
CONCURRING AND DISSENTING OPINION
PUNO, J.:
The case at bar involves two purely legal issues, one substantive and the other
procedural. The substantive issue is whether the Energy Regulatory Commission
(ERC) has legal authority to grant provisional rate adjustments under the Electric
Power Industry Reform Act of 2001 (EPIRA); the procedural issue is whether the
grant by the ERC of the provisional rate adjustment to the Manila Electric
Company (Meralco) was done in accord with section 4 (e), Rule 3 of the
Implementing Rules and Regulations of the EPIRA law. The reasonability of the
rate increase applied for by Meralco and provisionally granted by the ERC is not an
issue before the Court and should not shade our decision. On the substantive issue,
I join the majority without any hesitation. On the procedural issue, I beg to dissent.
I. Facts
First, the facts without the fat.
On October 10, 2003, Meralco applied for a rate hike with the ERC and sought
the ex-parte grant of provisional authority to increase
202
Commission
such rates in accordance with a schedule attached to its application. On the same
1
date, Meralco published a notice of the filing of the application for a rate hike in the
Manila Times. A day before filing its application with the ERC, Meralco furnished
2
the Sangguniang Panglungsod of Pasig City with a copy of the application. 3
With the public given such notice, the National Association of Electricity
Consumers for Reform (NASECORE), on October 14, 2003, manifested its intent
with the ERC to file an opposition to Meralcos application. 4
Other oppositors followed suit. Mr. Genaro Lualhati filed a letter with the ERC
on October 24, 2003 demanding for the dismissal of Meralcos application. 5
On October 29, 2003, no less than petitioner Freedom from Debt Coalition (FDC)
filed a letter with the ERC expressing its intent to file an opposition to Meralcos
application. The ERC then directed FDC, Mr. Lualhati and NASECORE to file
6
their comments on the application. 7

On November 11, 2003, NASECORE moved for the production of material
documents by Meralco. On November 13, 2003, ERC ordered Meralco to comment
8
on NASECOREs motion. On November 19, 2003, it directed Meralco to submit

9
certain documents. 10
On November 21, 2003, Mr. Lualhati filed his Opposition to Meralcos

application. 11
On November 25, 2003, NASECORE, manifested that it still could not file its
opposition until the documents it had requested from Meralco had been
produced. On the same date, petitioner
12
_______________
1 Application of Meralco dated October 8, 2003; Rollo, p. 33.

2 Comment of the ERC dated January 26, 2004, p. 15; Rollo, p. 372; and Memorandum of Meralco
dated February 16, 2004, p. 29; Rollo, p. 680.
3 Comment of the ERC dated January 26, 2004, p. 15; Rollo, p. 372.
4 Comment of the Office of the Solicitor General (OSG) dated January 23, 2004, p. 7; Rollo, p. 388.
5 Id.
6 Id.
7 Id.
8 Id., Annex 1.
9 Id., at p. 8.
10 Id., Annex 2.
11 Id., Annex 3.
12 Id.
203
VOL. 432, JUNE 15, 2004 203
Commission
FDC filed a Motion for Production of Documents with the ERC to enable it to
submit a comment on Meralcos application and reserved its right to oppose the
same. 13
In an Order dated November 27, 2003 (the Questioned Order) issued ex-
parte, the ERC granted Meralco provisional authority to increase its rates by 12
centavos/kWh effective January 2004, the dispositive portion of which states as
14
follows:
WHEREFORE, considering all the foregoing, this Commission, pursuant to Section 8 of
Executive Order No. 172 and Section 4 (e) of the Implementing Rules and Regulations of
the EPIRA (R.A. 9136), hereby provisionally authorizes applicant Manila Electric Company
(MERALCO) to adopt and implement the attached rate schedules embodying a rate
adjustment in the average amount of TWELVE (12) CENTAVOS per kWh, effective with
respect to its billing cycles beginning January 2004. The impact of this approved rate
adjustment will vary from one customer class to another depending on the load factors.
The rate adjustment authorized herein shall be subject to refund in the event that this
Commission finds, after completion of the hearings of this case, that the same is unjust and
unreasonable.
The hearing of this case is hereby set on December 22, 2003 at nine oclock in the
morning (9:00 A.M.) at the ERC Hearing Room, 15th Floor, Pacific Center Building, San
Miguel Avenue, Ortigas Center, Pasig City. In this connection, MERALCO
is hereby directed to publish, at its own expense, the attached Notice of Public Hearing at
least twice (2) (sic)for two (2) successive weeks in two (2) newspapers of nationwide
circulation in the country, the last date of publication to be made not later than two (2)
weeks before the scheduled date of initial hearing.
Let copies of this Order and the attached Notice of Public Hearing be furnished all the
Municipal/City Mayors within the MERALCOs franchise area for the appropriate posting
thereof on their respective bulletin boards.
Likewise, let copies of this Order and the attached Notice of Public Hearing
be furnished the Office of the Solicitor General (OSG), the Commission on Audit (COA) and
the Committees on Energy of both Houses of Congress who are hereby requested to have
their respective duly author-
_______________
13 Motion for Production of Documents of FDC, et al., filed with the ERC on November 25, 2003 and stamped
received by the ERCs Legal Service Department on November 27, 2003; Rollo, p. 54.
14 The ERC subsequently issued another Order on January 9, 2004 clarifying that the provisional rate
increase granted in the Questioned Order should apply to consumptions beginning January 1, 2004.
204
Commission
ized representatives present at the aforesaid initial hearing . . . (emphasis supplied)
15
On December 2, 2003, Meralco filed a Motion for Extension of Time to submit the
documents indicated in the ERCs Order of November 19, 2003. 16
On December 3, 2003, Mr. Zosimo Yeban, filed a letter with the ERC objecting to
the rate increase granted to Meralco. 17
On December 8, 2003, NASECORE filed with the ERC an Urgent Motion to

Resolve Motion for Production of Documents and Opposition to the Provisional
Authority, while the National Consumer Affairs Council filed a letter seeking
reconsideration of the ERCs Questioned Order. On December 9, 2003, 18
the Federation of Philippine Industries, Inc. likewise filed a letter with the ERC
seeking reconsideration of the Questioned Order. 19
On December 11, 2003, Mr. Lualhati and the Philippine Consumers Watch
(Bantay Mamamayan) Foundation filed with the ERC a Motion to Resolve
Opposition and Manifestation Joining NASECORE in its Opposition and Motion for
Production of Documents, respectively. A day later, Napocor Industrial Consumers
20
Association, Inc. (NICAI) filed an Urgent Motion to Suspend Implementation and

Motion for Reconsideration. 21
On December 15, 2003, the Philippine Consumers Welfare Union, Atty. Ruperto
Estrada, Martsa ng Bayan Contra Meralco, Corazon Villa and Daday Tupay filed
oppositions asking ERC to reconsider the Questioned Order while Atty. Estrada
filed a motion for production of documents. 22
_______________
15 Order of the ERC dated November 27, 2003, pp. 8-9; Rollo, pp. 25-26.
16 Comment of the OSG, dated January 23, 2004, p. 14, Annex 6; Rollo, p. 395.
17 Id., at p. 15, Annex 7.
18 Id., Annexes 8 and 9.
19 Id., Annex 10.
20 Id., at p. 16, Annexes 11 and 12.
21 Id., Annex 13.
22 Id., at pp. 16 and 17, Annexes 14 and 15. Atty. Estrada filed a Supplemental Motion for Production
of Documents on December 16, 2003, Annex 16.

205
VOL. 432, JUNE 15, 2004 205
Commission
On December 19, 2003, Meralco opposed the motion for production of material
documents on the ground that the documents sought by the petitioners were
immaterial and irrelevant to its application. 23
On December 21, 2003, Mr. Arnulfo Paca also raised his objections and
comments on the provisional increase via e-mail sent to the ERC. 24
On December 22, 2003, Mr. Lualhati filed a Motion for Reconsideration of the
Questioned Order. On the same date, Bagong Alyansang Makabayan (BAYAN),
25
Kilusang Mayo Uno (KMU), Gabriela Womens Partylist (GABRIELA), Anakpawis

Partylist, Kalipunan ng Damayang Mahihirap (KADAMAY), and Samahan ng
Nagtataguyod ng Agham at Teknolohiya Para sa Sambayanan (AGHAM) filed an
Opposition with Motion for Reconsideration. 26
In the public hearing held on December 22, 2003, several oppositors, asked the
ERC to reconsider its Questioned Order. The ERC refused insisting it has the power
to issue provisional orders. Instead of seeking reconsideration, FDC filed with this
27
Court on December 23, 2003, a petition for certiorari, prohibition and injunction
with prayer for the issuance of a temporary restraining order or a status quoorder.
Six days later, FDC reiterated its prayer for a temporary restraining or status
quo order. 28
On December 30, 2003, Meralco filed a Consolidated Comment to the various

oppositions with the ERC. 29
On January 13, 2004, this Court ordered the ERC and Meralco to comment on
FDCs petition and enjoined them to observe the status quo prevailing before the
filing of the petition. The case was set for oral arguments on January 27, 2004. 30
_______________
23 Comment of Meralco dated December 17, 2003; Rollo, p. 503.

24 Id., at p. 17, Annex 18.
25 Id., at p. 17, Annex 19.
26 Memorandum of BAYAN, KMU, GABRIELA, KADAMAY and AGHAM dated November 27, 2003, p.
3; Rollo, p. 626.
27 Petition of FDC, et al., dated December 23, 2003, p. 4; Rollo, p. 6.
28 Urgent Motion to Grant Restraining or Status Quo Order of FDC, et al., dated December 29, 2003;
Rollo, p. 57.
29 Comment of the OSG dated January 23, 2004, p. 18, Annex 20; Rollo, p. 399.
30 Resolution of the Supreme Court En Banc dated January 13, 2004; Rollo, unnumbered.
206
Commission
Prior to and shortly after the January 13, 2004 status quoorder of this Court, several
parties had, in the meantime, filed other pleadings with the ERC. The Philippine
Chamber of Commerce and Industry filed a letter on January 5, 2004 requesting for
a public hearing before the grant of the provisional increase. On January 6, 2004,
31
Mr. Lualhati filed a Rejoinder with Motion for Reconsideration, while Mr. Juan
Paqueo III filed a Petition to Suspend the Granting of Electric Power Increase
Against Meralco Company. BAYAN, Bayan Muna Partylist, KMU, GABRIELA,
32
Anakpawis Partylist, KADAMAY, and AGHAM filed a Manifestation with Motion

to Immediately Resolve Motion for Reconsideration and to Suspend Provisional
Authority on January 9, 2004. They also filed their Rejoinder to Meralcos
33
Consolidated Comment on January 13, 2004. In the meantime, NICAI and Mr.
34
Yeban filed their respective Rejoinders to Meralcos Consolidated Comment on

January 12, 2004. On January 15, 2004, NASECORE filed its Rejoinder. The OSG
35 36
filed an Urgent Motion to Resolve Pending Motions filed by the Oppositors on

January 29, 2004. It sent a letter to the Commission on Audit (COA) requesting
37
assistance with regard to Meralcos application on February 4, 2004 and filed a 38
motion with the ERC on February 16, 2004 seeking to direct the COA to conduct a
rate audit. 39
Meralco, ERC and the OSG filed their respective comments with this Court on
January 26, 2004.
The petitioners-in-intervention filed a motion to intervene attaching thereto
40
their petition-in-intervention which this Court
_______________
31 Comment of the OSG dated January 23, 2004, p. 19, Annex 21; Rollo, p. 401.
32 Id., at p. 19, Annexes 22 and 23.
33 Id., Annex 24.
34 Id., at p. 20, Annex 27.
35 Id., at pp. 19 and 20, Annexes 25 and 26.
36 Id., at p. 20, Annex 28.
37 Memorandum of the OSG dated February 16, 2003, p. 12; Rollo, p. 885.
38 Id.
39 Id., at p. 13.
40 Bagong Alyansang Makabayan (BAYAN), Bayan Muna Partylist, Kilusang Mayo Uno (KMU),
Gabriela Womens Partylist, Anakpawis
207
VOL. 432, JUNE 15, 2004 207
Commission
admitted in a Resolution dated January 27, 2004. 41
During the oral arguments on January 27, 2004, the parties were required to file
their respective memoranda within a non-extendible period of twenty days. Counsel
for ERC was ordered in open court to produce certain documents.
The parties (except for petitioner FDC) submitted their respective Memoranda
dated February 16, 2004. 42
It will be noted that several motions assailing the Questioned Order remain
pending before the ERC for resolution as shown by the OSGs Urgent Motion to
Resolve Pending Motions Filed by the Oppositors filed with the ERC on January 29,
2004. These pending motions are the following: a letter-complaint of Zosimo Yeban,
43
Jr. filed on December 3, 2003 objecting to the rate increase granted to Meralco; an 44
Urgent Motion to Resolve Motion for Production of Documents and Opposition to

the Provisional Authority of the NASECORE approved by its President, Pete L.
Ilagan, filed on December 8, 2003; a letter of the National Consumers Affairs
45
_______________
Partylist, Kalipunan ng Damayang Mahihirap (KADAMAY), and Samahan ng Nagtataguyod ng

Agham at Teknolohiya Para sa Sambayanan (AGHAM).
41 Rollo, pp. 621-622.
42 The Memorandum of petitioners FDC, Ana Maria Nemenzo as President of FDC, Ma. Teresa I.
Diokno-Pascual, Rep. Loretta Ann Rosales (Partylist Akbayan), Rep. Jose Virgilio Bautista (Partylist
Sanlakas), and Rep. Renato Magtubo (Partylist Manggagawa), was filed on February 24, 2004 after two
Motions for Extension of Time to File Memorandum were filed with the Court on February 17, 2004 and
February 20, 2004.
43 The Urgent Motion to Resolve Pending Motions of the Office of the Solicitor General dated January
28, 2004, attached as Annex A of the Memorandum of the Office of the Solicitor General dated February
16, 2004 enumerates these pending motions; Rollo, p. 928. Note that Atty. Ruperto J. Estradas Motion for
Production of Documents dated December 15, 2003 has been resolved by the ERC in an Order dated
January 26, 2004. A copy of this order is attached as Annex 2 of the Manifestation of Meralco dated
February 25, 2004; Rollo (temporary), unnumbered.
44 Comment of the Office of the Solicitor General dated January 23, 2004, Annex 7.
45 Id., Annex 8. Note that the various Motions for Production of Documents filed by NASECORE,
FDC, Atty. Ruperto Estrada and The Philippine Consumers Welfare Union have been resolved by the
ERC in an Order dated January 26, 2004. A copy of this order is attached as Annex
208
Commission
Council filed on December 8, 2003 seeking reconsideration of the provisional
authority; a letter of the Federation of Philippine Industries, Inc. filed on
46
December 9, 2003 asking reconsideration of the ERC Order granting the provisional
increase; a Manifestation of the Philippine Consumers Watch (Bantay
47
Mamamayan) Foundation, represented by its Chairman, Juan Ponce Enrile, filed on

December 11, 2003, joining the NASECORE in its opposition to the provisional
authority and Motion for Production of Documents; an Urgent Motion to Suspend
48
Implementation and Motion for Reconsideration of the Napocor Industrial

Consumers Association, Inc. (NICAI) filed on December 12, 2003; an Opposition of 49
the Philippine Consumers Welfare Union (PCWU), Martsa ng Bayan Kontra

Meralco, Corazon Villa and Daday Tupas filed on December 15, 2003 asking the
ERC to reconsider its order granting the provisional increase; an electronic mail
50
message of Michael Paca dated December 21, 2003 (and stamped received by the
ERC on January 8, 2004) with an attached write-up containing comments on the
rate increase; a Motion for Reconsideration of Mr. Genaro C. Lualhati filed on
51
December 22, 2003; a letter of the Philippine Chamber of Commerce and Industry
52
filed on January 5, 2004 asking the ERC to conduct public hearings prior to the
grant of provisional increase; a Petition of Juan B. Paqueo III filed on January 6,
53
2004 to suspend the grant of rate increase to Meralco; and a Manifestation (with
54
motions to immediately resolve motion for reconsideration and to suspend

provisional authority) of BAYAN, KMU, GABRIELA, KADAMAY and AGHAM filed
on January 9, 2004. 55
_______________
2 of the Manifestation of Meralco dated February 25, 2004; Rollo (temporary), unnumbered.
46 Comment of the Office of the Solicitor General dated January 23, 2004, Annex 9.
47 Id., Annex 10.
48 Id., Annex 12.
49 Id., Annex 13.
50 Id., Annex 14.
51 Id., Annex 18.
52 Id., Annex 19.
53 Id., Annex 21.
54 Id., Annex 23.
55 Id., Annex 24.
209
VOL. 432, JUNE 15, 2004 209
Commission
II. Issues
The issues are strictly legal.
First, whether the ERC has legal authority to grant provisional rate adjustments
under the new EPIRA law.
Second, whether the grant by the ERC of the provisional rate adjustment to
Meralco violates the Implementing Rules and Regulations of the EPIRA law and
hence constitutes grave abuse of discretion amounting to lack or excess of
jurisdiction.
Let me start with an overview of the . . .
III. Statutory History of Electric Power
Regulation in the Philippines
Commonwealth Act No. 146 or the Public Service Act was passed into law on
November 7, 1936 creating the Public Service Commission (PSC) with jurisdiction,
supervision and control over public services such as those for electric light, heat and
power. Under the Act, the PSC had authority to fix rates charged by a public
56
service. By express provision of law, the PSC could approve provisional rates ex-
parte.57
Under the reorganization plan effected by Presidential Decree No. 1, as amended

by Presidential Decree No. 458 issued on May 16, 1974, jurisdiction, supervision
and control over public services related to electric light, power and waterworks
vested in the PSC were transferred to the Board of Power and Waterworks.
The Board of Power and Waterworks was abolished under Presidential Decree
No. 1206 enacted on October 6, 1977. Its powers and functions relative to power
utilities, including its authority to grant provisional relief, were transferred to the
58
Board of Energy. 59
On May 8, 1972, institutional reforms were made in the energy sector under
Executive Order No. 172 which created the Energy Regulatory Board (ERB). Under
the law, the Board of Energy (BOE) was reconstituted into the ERB and the powers
and func-
_______________
56 Commonwealth Act No. 146, as amended, Section 13.

57 Id., Section 16 (c).
58 Presidential Decree No. 1206, Section 9.
59 Id., Section 11 (e).
210
Commission
tions of the BOE under Republic Act No. 6173, as amended by Presidential Decree
No. 1206, were transferred to the ERB. The law expressly authorizes the ERB to
60
grant provisional relief. 61
Most recently, Republic Act No. 9136, known as the Electric Power Industry
Reform Act of 2001 (EPIRA), was enacted on June 8, 2001 to provide a framework
for restructuring the electric power industry. One of the purposes of the EPIRA is
62
to establish a strong and purely independent regulatory body. The ERB was
63
abolished and its powers and functions not inconsistent with the provisions of the
64
EPIRA were expressly transferred to the Energy Regulatory Commission (ERC). 65
With due respect to the majority, I submit that. . .

IV. The ERC complied with the rules and did not act
with grave abuse of discretion in issuing the
Questioned Order.
This is the spearhead of my disagreement with the majority and I wish to address it
first. I respectfully make the following submissions: (a) there is no violation of the
procedure set forth in the EPIRAs Implementing Rules and Regulations when ERC
issued its Questioned Order; indeed, the oppositors had full opportunity to assail its
legality and propriety in a public hearing before its effectivity; (b) ex-parte orders
issued to protect the interest of the public are universally recognized as legitimate
exercise of the police power of the State; and (c) it is premature for the Court to
strike down the Questioned Order at this time since it is merely provisional and is
pending reconsideration before the ERC; in fine, there is an effective and available
administrative remedy before the ERC which no party should shortcircuit and
which this Court should allow to flow unimpeded.
_______________
60 Executive Order No. 172, Section 4 (a).

61 Id., Section 8.
62 EPIRA, Section 3.
63 Id., Section 2 (j).
64 Id., Section 38.
65 Id., Section 44.
211
VOL. 432, JUNE 15, 2004 211
Commission
The Questioned Order did not violate
the Implementing Rules and
Regulations of the EPIRA; there is
no denial of procedural due process.
The majority based its holding that the ERC committed grave abuse of discretion in
issuing the Questioned Order on the following ratiocination:
1. 1.Meralco failed to comply with the publication requirement provided in Section 4 (e),
Rule 3 of the Implementing Rules and Regulations. It notes that the Notice of
Application, quoted in full below, which was published on October 10, 2003 in
the Manila Times does not contain the text of Meralcos application, or at least a
summary thereof:
MANILA ELECTRIC COMPANY

Pasig City
NOTICE OF APPLICATION
Pursuant to paragraph (e), Section 4, Rule 3 of the Implementing Rules and Regulations of
R.A. 9136, notice is hereby given that an Application dated October 8, 2003, for the
approval of revised rate schedules and provisional authority, will be filed by the MANILA
ELECTRIC COMPANY with address at Meralco Center, Ortigas Avenue, Pasig City, before
the Energy Regulatory Commission.
Issued this 9th day of October 2003.
(Sgd.) GIL S. SAN DIEGO

Vice-President and Head
Legal Services66
1. 2.The Questioned Order failed to consider the pleadings filed by parties who opposed
Meralcos application, as required by Section 4 (e), Rule 3 of the Implementing
Rules and Regulations, and was based solely on Meralcos application and its
supporting documents.
2. 3.The ERC issued the Questioned Order despite the pendency of several Motions for
Production of Documents filed by various oppositors and despite their
manifestation that they would oppose Meralcos application.
_______________
66 Rollo, pp. 753-754.

212
Commission
These grounds relied upon by the majority cannot stand close scrutiny. Sections 4
(e) and (r), Rule 3 of the EPIRAs Implementing Rules and Regulations set forth the
procedure in rate adjustment cases, viz.:
(e) Any application or petition for rate adjustment or for any relief affecting the consumers
must be verified; and accompanied with an acknowledgment of receipt of a copy thereof by
the LGU Legislative Body of the locality where the applicant or petitioner principally
The ERC may grant provisionally or deny the relief prayed for not later than seventy
five (75) calendar days from the filing of the application or petition, based on the same and
the supporting documents attached thereto and such comments or pleadings the consumers
or the LGU concerned may have filed within thirty (30) calendar days from receipt of a copy
of the application or petition or from the publication thereof as the case may be.
This Section 4(e) shall not apply to those applications or petitions already filed as of 26
December 2001 in compliance with Section 36 of the Act.
xxx xxx xxx
(r) All notices of hearings to be conducted by the ERC for the purpose of fixing rates or
fees shall be published at least twice for two (2) successive weeks in two (2) newspapers of
nationwide circulation.
There are two publication requirements in the aforecited rule. The first is the notice
of publication of the petition or application in a newspaper of general circulation in
the locality where the petitioner principally operates. The certification to this effect
must accompany the petition or application when filed. The second refers to the
publication of all notices of hearing to be conducted by the ERC for the purpose of
fixing rates or fees. The notices shall be published at least twice for two (2) successive
weeks in two (2) newspapers of nationwide circulation.
The majority assails Meralcos failure to comply with the first publication
requirement. It stresses that Meralco did not cause the publication of its petition or
application in its entirety. It merely
213
VOL. 432, JUNE 15, 2004 213
Commission
published a notice of the filing of application. I respectfully submit that the
published notice sufficiently complies with the requirements of the rules. The
application and its 17 annexes are hundreds of pages long and almost an inch thick.
It would be absurd to require Meralco to publish the entirety of its application. As
postulated by the ERC, the rules should not be given an unreasonable
construction, viz.:
Given that rate cases usually entail the filing of applications consisting of hundreds of
pages including all the attachments in support thereof, which often enough are made
integral parts thereof by reference, it is absurd to expect all the applicants to be able to
comply with the publication requirement if it were construed that the entirety of their
application must be the one published and not just the notice of the filing thereof. With a
one-whole page advertisement in a newspaper of general circulation easily costing
hundreds of thousands of pesos, and with one application eating up more than ten pages of
newspaper space even with the smallest of fonts, it is simply too onerous and inconvenient
for the applicants, including the smallest debt-ridden and barely surviving electric
cooperative, to be required to shell out millions of pesos just so that they could apply for some
relief with respondent ERC.
This must not have been the intention of those luminaries that drafted and approved the
EPIRA Implementing Rules. When the legislative intent of informing the public of the filing
of the application with respondent ERC is duly served by mere notice, as this is in fact what
due process requires, it must not have entered the minds of the drafters of the
Implementing Rules to expand such requirement by asking for something close to
impossibility (sic). (emphases supplied)
67
The rationale for the first rule on publication is to ensure that the people in the
locality where the petitioner principally operates is informed of the notice of
application. Once they receive the notice, they can then proceed to obtain copies of
the entire application in order to prepare their opposition or comments thereto. In
the case at bar, it is undeniable that Meralco published its Notice of Application for
provisional rate increase. It is also undeniable that various parties, including the
petitioners in the case at bar, secured copies of Meralcos application after
publication of its Notice of Application. It is also undeniable that various parties
were able to oppose Meralcos application for provisional rate increase. It
_______________
Memorandum of the ERC dated February 14, 2004, p. 49; Rollo, p. 740.
67
214
Commission
cannot be gainsaid therefore that the rationale for the rule has been satisfied.
The majority opines that at least a summary of the application should have been
published. With due respect, the rules do not require the publication of a summary
68
of the application. The rules require that a certification of the notice of publication
should accompany the application. Indeed, a summary would not enable anyone to
prepare an intelligent opposition to the application. Rate cases are, by nature,
highly technical and dependent on scientific data which do not easily lend
themselves to summarization. Anyone seriously intending to comment or oppose the
application needs to secure a copy of the application and its annexes.
I respectfully reject the majority holding that the ERC failed to consider the
pleadings and comments of oppositors as required by the Implementing Rules and
Regulations before it issued its Questioned Order. In the first place, there is no
showing that the ERC did not consider the oppositions filed by various parties to
Meralcos application. In the second place, the Rules do not expressly require any
person to file a comment or pleading on an application for provisional rate increase.
Section 4 (e), Rule 3 of the Implementing Rules and Regulations simply provides
that the ERC should act on the provisional relief (1) not later than seventy-five
calendar days from the filing of the application; (2) based on the application or
petition; (3) based on documents supporting the application or petition; and
(4) based on comments or pleadings the consumers or the LGU concerned may have
filed within thirty (30) calendar days from receipt of a copy of the application or
petition or from the publication thereof as the case may be. In fine, the application
for provisional rate increase can be acted upon by the ERC if there are no comments
or pleadings filed by the consumers or LGUs concerned.
We now determine whether the ERC ignored the comments of the consumers or
the LGUs concerned before it issued its Questioned Order. The records will show
that the comments or pleadings pending before the ERC before it issued the
Questioned Order on November 27, 2003 are the following:
_______________
Memorandum of the OSG dated February 16, 2004, p. 42; Rollo, p. 915.
68
215
VOL. 432, JUNE 15, 2004 215
Commission
1. 1.NASECOREs letter filed on October 14, 2003 placing it on record that it would
oppose Meralcos application, its Motion for Production of Documents filed on
November 11, 2003, and Compliance filed on November 25, 2003 manifesting that
it could not file its opposition until the documents it requested were made available;
2. 2.Mr. Genaro Lualhatis letter filed on October 24, 2003 asking for the dismissal of
the application and his Opposition filed on November 21, 2003;
3. 3.FDCs letter filed on October 29, 2003 expressing its intent to oppose the
application and Motion for Production of Documents filed on November 27, 2003,
the day the Questioned Order was issued.
It will be noted that the only substantive opposition or comment filed with the ERC
from the time of the filing of Meralcos petition on October 10 until the issuance of the
Questioned Order on November 27, 2003, is that filed by Mr. Genaro Lualhati. I
respectfully submit that the ERC correctly gave Mr. Lualhatis Opposition the
significance of a cipher. To begin with, his opposition was filed way beyond the 30-
day period for opposing Meralcos application. And as pointed out by Meralco, Mr.
Lualhatis arguments are mere reiterations of his arguments in ERC Case Nos.
2001-900 and 2001-646, which the ERC had already rejected. There is therefore
69
nothing tectonic about the arguments of Mr. Lualhati which would defeat the
issuance of the Questioned Order.
The majority also holds that the ERC failed to consider other pleadings such as
Motions for Production of Documents or letters of intent to file oppositions before it
issued its Questioned Order. I respectfully reiterate that there is nothing in the
rules requiring the ERC to hold its provisional order in abeyance pending the
resolution of such motions as a Motion for Production of Documents. As
aforestressed, the ERC is allowed by the Rules to grant or deny the relief prayed for
based on the application and its supporting documents, and such comments or
pleadings the consumers or the LGU concerned may have filed within thirty (30)
calendar days from receipt of a copy of the application or petition or from the
publication thereof as the case may be. The ERC is mandated to
70
_______________
Id., at p. 32; Rollo, p. 683.

69
Section 4 (e), Rule 3, EPIRA Implementing Rules and Regulations.

70
216
Commission
consider only pleadings filed within 30 days counted from the LGU or consumers
receipt of the application or publication thereof, as the case may be. That is all. It is
not required to wait until all pleadings are submitted nor is its power to issue
provisional orders stayed by pending matters such as motions for production of
documents. To rule otherwise as the majority did is to hold ERC hostage by the
simple expedient of filing such motions as motions for production of documents or
letters of intent to file oppositions or comments.
It is beyond debate that the standard for interim orders is different from those
used for final orders. The standards for interim orders are less stringent because
such temporary orders are determined expeditiously, without such investigation as
might be deemed necessary to a determination of permanent cases. If the 71
standards for interim orders are as strict as those for final orders, then interim
orders could not be issued summarily. For this reason, the ERC, under the
Implementing Rules and Regulations, has only seventy-five days to provide
provisional relief. It is in this context, that the full ventilation and resolution of a
motion for production of documents should be viewed. A motion for production of
documents is a mode of discovery utilized by one in order to be fully apprised of the
relevant details of a case. Its use is more relevant in opposing a final rate increase
order which must be based on substantial evidence. Consequently, a motion for
production of documents need not hinder the issuance of an order granting a
provisional rate increase.
Under the Rules, the application and its supporting documents, if sufficient, can
provide the basis for the ERC to issue an Order for a provisional rate increase. It
should not be overlooked that the ERC is a special agency with a database of
reliable information which it has accumulated thru experience and its expertise. It
is free to resort to these data without offending procedural due process.
I respectfully submit that the administrative process of rate making should not
be overly judicialized, otherwise, its very reason for existing will be subverted. It
will not be able to address the
_______________
71 Appeal of the Office of the Consumer Advocate (New Hampshire Public Utilities Commission), 597 A.
2d 528 (1991).
217
VOL. 432, JUNE 15, 2004 217
Commission
needs for which it was created and for which the judicial process was found lacking.
There is another reason why the majority cannot hold that ERC violated
procedural due process when it issued its Questioned Order. It is familiar
knowledge that due process only demands opportunity to be heard. The Questioned
Order was issued on November 27, 2003 but the provisional rate increase was to be
effective beginning January 2004. The public hearing on the provisional rate was
set on December 22, 2003. The oppositors were given all the opportunity to assail
Meralcos application in the hearing of December 22, 2003. It cannot therefore be
maintained that the oppositors were denied the opportunity to be heard before the
provisional rate increase order became effective in January 2004. The majority
cannot close its eyes to this reality.
Administrative agencies are allowed
to issue ex-parte orders when
required by public interest and as an
exercise of police power.
Further, the rationale behind the creation of administrative agencies and the
States police power explain the need for allowing them to issue ex-parte orders to
protect public interest.
History tells us that the rise of the administrative process, combining legislative
and judicial powers, was caused by the following:
1. 1.the development of an industrialized and complex society requiring economic

regulation;
2. 2.the need for specialization to develop the necessary expertise, flexible regulation to
parallel the changing needs of the regulated field, and continuity of public policy;
and
3. 3.the evident inability of the judicial process to perform the necessary adjudication
with regard to the vastly expanded scope of governmental activity. 72
With the complexity of modern life, government functions have to multiply as the
areas subject to regulations increased. Differ- 73
_______________
72 Woll, Peter, Administrative Law: The Informal Process (1963), pp. 7-8.
De Leon, Hector, Administrative Law, 2nd edition (1993), p. 12.
73
218
Commission
ent bodies were created to address these various needs - agencies dealing with
public health, transportation, commerce and even the practice of professions were
thus established. In the different areas addressed by these administrative bodies,
subject specialists with expertise in their respective fields have to be developed for
effective regulation. The demands of modern society likewise exposed the
inefficiency of traditional judicial processes to deal with the day-to-day
requirements of government. Administrative processes stepped in as a more flexible
means of speedily and expeditiously dealing with various affairs that the stricter
and more cumbersome judicial processes cannot manage. The advantage of
specialized administrative bodies is their expertise in regulatory adjudication in a
narrowly defined area. For all these reasons, the administrative process has
74
evolved into a more informal procedure characterized by correspondence, conference

and investigation. As stated by President Roosevelt,
75
The administrative tribunal or agency has been evolved in order to handle controversies
arising under particular statutes. It is characteristic of these tribunals that simple and non-
technical hearings take the place of court trials, and informal proceedings supersede rigid
and formal pleadings and processes. . . 76
Corollarily, administrative agencies have also been conceded the power to grant
temporary measures ex-parte which are recognized as essential to take care of
problems that cannot be allowed to wait for the completion of formal
proceedings. As explained by Davis:
77
If the contagion is spreading, or the unfit pilot is about to jeopardize the passengers, or the
harmful medicinal preparation is being sold to the public, summary administrative action
in advance of hearing is appropriate. (emphasis supplied)
78
It is therefore clear that administrative bodies were created to be able to address

the multifarious concerns of society with speed
_______________
74 Woll, Peter, Administrative Law: The Informal Process (1963), p. 5.

75 Id., at p. 29.
76 Id., at p. 25.
77 Davis, Kenneth Culp, Handbook on Administrative Law (1951), p. 260.
78 Id.
219
VOL. 432, JUNE 15, 2004 219
Commission
and efficiency. Thus, if poisoned meat has entered our docks or a disease-carrying
traveler has landed on our shores, it cannot be doubted that the proper
administrative authorities have sufficient power to swiftly address these problems. If
these administrators were hamstrung from taking temporary measures, if they have
to conduct hearings before they could take measures to protect the public, the result
would be tragedy to our people. The power to enact these interim measures is
essential for the daily self-preservation of society. The power is indispensable to
administrative bodies if we expect them to deal with unseen emergencies and
exigencies with effectiveness.
It bears emphasis that the regulatory power of administrative bodies should not
be niggardly given for it is rooted in the States police power. Police power was
originally limited in scope. It was anchored in the limitations that the courts had
79
imposed upon individual rights...as embodied in the common law maxim, sic utere
tuo ut alienum non laedas, meaning, use your own property in such a manner as
not to injure that of another. Over the years, however, the range of police power
80
was no longer limited to the preservation of public health, safety and morals, which
used to be the primary social interests in earlier times. Police power now requires
81
the State to assume an affirmative duty to eliminate the excesses and injustices
that are the concomitants of an unrestrained industrial economy. Police power is
82
now exerted to further the public welfarea concept as vast as the good of society
itself. Hence, police power is but another name for the governmental authority to
83
further the welfare of society that is the basic end of all government. When police84
power is delegated to administrative bodies with regulatory functions, its exercise

should be given a wide latitude. Police power takes on an even broader dimension in
developing countries such as ours, where the State must take a more active role in
balancing the many conflicting interests in society. The Questioned Order was
issued by the ERC, acting as an agent of the State in the exercise of police power.
We
_______________
79 Schwartz, Bernard, Constitutional Law: A Textbook (1972), p. 43.

80 Id.
81 Id., citing Miller v. Board of Public Works, 234 Pac. 381 (1925).
82 Id., at p. 44.
83 Id., citing Noble State Bank v. Haskell, 219 U.S. 104 (1911).
84 Id., at p. 45, citing People v. Willi, 179 N.Y. Supp. 542 (1919).
220
Commission
should have exceptionally good grounds to curtail its exercise. This approach is
more compelling in the field of rate-regulation of electric power rates. Electric power
generation and distribution is a traditional instrument of economic growth that
affects not only a few but the entire nation. It is an important factor in encouraging
investment and promoting business. The engines of progress may come to a
screeching halt if the delivery of electric power is impaired. Billions of pesos would
be lost as a result of power outages or unreliable electric power services. The State
thru the ERC should be able to exercise its police power with great flexibility, when
the need arises. The power of the ERC to issue rate orders ex-parte, pending the
conduct of full-blown hearings for the issuance of final rates, should not be denied
except for the strongest reasons. There is none in the case at bar except its
imagined perception that the Questioned Order denied oppositors procedural due
process.
It is Premature for the Court to
Interfere With the ERCs Ruling at
This Time since the Questioned
Order is Merely Provisional and can
be Corrected.
It should be emphasized that the ERC issued merely a provisional order, one that it
could modify or correct at any time. The said Order is the subject of various motions
for reconsideration. ERC is far from issuing decision on the merits of Meralcos
application. It is too early to fear that the Questioned Order will cause irreparable
injury to the consumers whose interest should be balanced with the interest of
MERALCO. In the balancing of interest, it should be the public interest that should
prevail. It should be noted that there are numerous motions opposing the
Questioned Order currently pending before the ERC. I respectfully submit that the
ERC should first be given the chance to consider the arguments raised by the
oppositors in these motions. A cursory examination of the pleadings and oppositions
to the Questioned Order which are still pending resolution by the ERC shows that
the expertise and specialized knowledge of the ERC is necessary in order to deal
with the various grounds that were raised. These grounds include the following:
221
VOL. 432, JUNE 15, 2004 221
Commission
1. 1.It is the obligation of Meralcos stockholders, not the consumers, to finance

Meralcos expansion projects and pay its financial obligations. 85
2. 2.When Meralco was experiencing difficulties in raising funds for capital projects, it
should have divested its interests in businesses not directly connected to their
primary business as an electric power distribution utility. 86
3. 3.The absence of a public hearing before the issuance of the Questioned Order shows
lack of transparency in the grant of the provisional authority. 87
4. 4.Widespread opposition to the rate increase by the consuming public shows that
they believe that the increase has no legal basis. 88
5. 5.President Gloria Macapagal-Arroyo, herself, has requested the ERC to reconsider

its decision in light of public outrage. 89
_______________
85 Urgent Motion to Resolve Motion for Production of Documents and Opposition to the Provisional
Authority of NASECORE, attached as Annex 8 of the Comment of the Office of the Solicitor General
dated January 23, 2004, pp. 2-3; Rollo, pp. 473-474; Letter of the National Consumers Affairs Council
dated December 5, 2003 seeking reconsideration of the provisional authority, p. 1; Rollo, p. 478;
Manifestation Joining the National Association of Electricity Consumers for Reforms, Inc. in its
Opposition to the Provisional Authority and Motion for Production of Documents of Philippine Consumers
Watch (Bantay Mamamayan) Foundation dated December 12, 2003, attached as Annex 12 of the
Comment of the Office of the Solicitor General dated January 23, 2004, p. 2; Rollo, p. 484.
dated January 23, 2004, p. 3; Rollo, p. 474; Letter of the National Consumers Affairs Council dated
December 5, 2003 seeking reconsideration of the provisional authority, p. 1; Rollo, p. 478.
dated January 23, 2004, p. 4; Rollo, p. 475; Letter of the Federation of Philippine Industries, Inc. dated
December 4, 2003, p. 1; Rollo, p. 480. Id., at p. 4; Rollo, p. 475.
dated January 23, 2004, p. 4; Rollo, p. 475.
89 Id.
222
Commission
1. 6.Any expansion project should be supported by a feasibility study showing the

projected additional revenues which would justify the cost of expansion. 90
2. 7.Increased power rates would make industries and businesses located in Meralcos
franchise area less competitive, resulting in their closure and termination of
employment for their employees. 91
3. 8.Any capital expenditure by Meralco goes into the computation of its rate base,
thereafter, the legal return-on-rate-base (RORB) must be determined after proper
valuation and appraisal. To make its customers advance the needed capital for
Meralcos projects would be doubly injurious to its consumers as they are bound to
subsequently pay for the cost of these projects through their monthly billings
despite the fact that they financed the same in the first place. 92
4. 9.Meralco failed to show proof of the urgent need for the issuance of the provisional
authority, viz.:
1. a.With regard to Meralcos pending application before the ERC (Case No. 2003-389)
to increase capacity in its sub-stations and to redesign/revamp and/or extend its
distribution, it was shown that financial difficulties did not hinder the timely
implementation of such projects. The delay was caused by other factors, such as
coordinating with government agencies in the obtention of construction permits. 93
_______________
90 Id.
91 Letter of the Federation of Philippine Industries, Inc. dated December 4, 2003, attached as Annex
10 of the Comment of the Office of the Solicitor General dated January 23, 2004; Rollo, p. 480; and
Petition to Suspend the Granting of Electric Power Increase Against Meralco Company of Juan B. Paqueo
III dated December 22, 2003, p. 3; Rollo, p. 551.
92 Manifestation Joining NASECORE in its Opposition to the Provisional Authority and Motion for
Production of Documents of Philippine Consumers Watch (Bantay Mamamayan) Foundation dated

December 12, 2003, attached as Annex 12 of the Comment of the Office of the Solicitor General dated
January 23, 2004, p. 2; Rollo, p. 484.
93Urgent Motion to Suspend Implementation and Motion for Reconsideration of Napocor Industrial
Consumers Association (NICAI) dated December 11, 2003, attached as Annex 13 of the Comment of the
Office of the Solicitor General dated January 23, 2004, p. 2; Rollo, p. 488.
223
VOL. 432, JUNE 15, 2004 223
Commission
1. b.Though Meralcos financial statements as audited for the year 2002 indicated a net
loss of P2.015 billion, it was recently granted a rate increase by the ERC in Case
Nos. 2001-646 and 2001-900 resulting in the unbundling of rates. Meralco did not
present any interim audited financial statements to the ERC showing losses in its
utility operations while taking into account the effects of the rate increase as an
aftermath of the unbundling of rates. Further, the use of the year 2002 as a test
year is questionable as the effects of the most recent rate increase adjustments
granted to Meralco are not reflected in the year 2002 audited financial statements. 94
1. 10.The provisional authority was granted by the ERC based on the asset appraisal
report of Meralco dated September 12, 2003, which has not yet been reviewed and
approved on the merits by the ERC. This is a deviation from the accepted practice
of evaluating rate increases on the basis of approved asset appraisal reports. 95
2. 11.The Questioned Order granting the provisional authority failed to present any
computation of Meralcos most recent RORB, which is a basic presentation before
any rate adjustment of a regulated utility is granted.96
3. 12.The provisional authority is based on most of Meralcos rate figures in its Rate
Design 1, which may not be the best rate format to reflect cost. There is no reason
to believe that transmission charges should differ for customer classes when
Meralco is actually paying for the same charge to Transco for whatever class of
customer it serves. 97
4. 13.The ERCs issuance of a provisional authority to Meralco on the basis of the

latters failure to meet its maturing debt obligations indicated a cash-flow approach
which veers away from the RORB methodology for rate adjustments. The ERC
should look into the cash flows to and from the books of Meralco and its sister
companies to make this approach more objective. 98
_______________
94 Id.
95 Id., at p. 3; Rollo, p. 489.
96 Id.
97 Id.
98 Id.
224
Commission
1. 14.Meralco does not have a sincere desire to lower operating costs. In the ERCs
order dated May 30, 2003 approving the unbundling of rates in ERC Case Nos.
2001-646 and 2001-900, the ERC ordered Meralco to exert its best efforts to
renegotiate with its Independent Power Producers in order to mitigate the impact
of increase rates. However, instead of complying with this directive, Meralco
withdrew its application for approval of contract amendments of its Power
Purchase Agreement with Quezon Power (Phils.), Ltd. which could have resulted in
lower purchase power costs. In fact, Meralco is even now applying for upward
adjustments of its power purchase rates with DURACOM in ERC Case No. 2003-
434.99
2. 15.If, as Meralco contends, its financial difficulties are due to the devaluation of the
peso, this can be mitigated by temporary adjustments using the
ICERA mechanism which has been approved by the ERC.
100 101
3. 16.Meralco is unfit to operate a power utility service due to its inability to meets its
financial obligations to its creditors; gross mismanagement of the utility despite its
having a monopoly in the power distribution industry for around 50 years and
providing services to 70% of the country; losses due to pilferages for failure to have
adequate support services; failure to maintain its infrastructure; and having poor
customer relations.102
4. 17.Visayas Electric Company (VECO) charges its customers significantly less than
Meralco despite the inherent advantages of the Napocor-Transco-Meralco system
with its technologically more cost-effective power generation process. VECO
sources its power mainly from thermal generating plants which generate more
expensive electricity compared to Meralco which sources cheaper electricity from
hydroelectric and geothermal plants. It is possible that Meralco-serviced customers
are being overcharged or that
_______________
99 Id., at p. 4; Rollo, p. 490.

100 Incremental Currency Exchange Rate Adjustment.
101 Urgent Motion to Suspend Implementation and Motion for Reconsideration of Napocor Industrial
Consumers Association (NICAI) dated December 11, 2003, attached as Annex 13 of the Comment of the
Office of the Solicitor General dated January 23, 2004, p. 4; Rollo, p. 490.
102 Opposition of Philippine Consumers Welfare Union dated December 9, 2003, attached as Annex 14
of the Comment of the Office of the Solicitor General dated January 23, 2004, p. 2; Rollo, p. 494.
225
VOL. 432, JUNE 15, 2004 225
Commission
1. within the generation/transmission/distribution system of Napocor, Transco and

Meralco there is wastage, inefficiency or unnecessary overheads which are being
passed on to customers. 103
2. 18.Despite Meralcos claim that it has not had a rate increase since 1994, its billings
have increased after the unbundling of its rates. 104
3. 19.Even without any increase, the current rates as approved on May 30, 2003
already exceed Meralcos adjusted revenue requirement for the year 2002 of
P27,474,325,672 by no less than P13,941,541,193even using the lower sales
volume of P21,880,741,000 kWh for the year 2002. 105
4. 20.There is a prejudicial question in Case No. 77559, a petition for review of the
ERCs order approving an allegedly excessive increase in Meralcos rates, which is
pending before the Court of Appeals. 106
5. 21.A hearing should be held prior to the issuance of a provisional authority as there
are issues which should be resolved, to wit:
1. a.the audit, verification and approval of the value of Meralcos assets for the year
2002;
2. b.the basis of the rate increase, i.e., should this be based on actual operating
investments or on the value of investments needed for expansion prior to any
actual investment (in effect, would consumers be funding the expansion);
3. c.the implementation of Meralcos renegotiation with its Independent Power
Producers to remove or significantly reduce the P3.50 per kWh generation bill,
among which is Meralcos application to implement the Generation Rate
Adjustment Mechanism or GRAM in ERC Case No. 2003-566,
_______________
103 Electronic mail message of Michael Paca dated December 21, 2003 (and stamped received by the
ERC on January 8, 2004) with an attached write-up containing comments on the rate increase, attached
as Annex 18 of the Comment of the Office of the Solicitor General dated January 23, 2004, p. 2; Rollo, p.
514.
104 Id.
105 Motion for Reconsideration of Genaro C. Lualhati dated December 22, 2003, attached as Annex 19
of the Comment of the Office of the Solicitor General dated January 23, 2004, p. 1; Rollo, p. 516.
106 Id., at p. 2; Rollo, p. 517.
226
Commission
1. which would reduce the generation charge by P0.1843 per kWh;

2. d.Meralcos refunds due to the industrial and commercial sectors; and
3. e.the review of Meralcos application of a higher rate of systems loss (16.5%) to
residential users compared to the legally allowed 9.5% to all customers across the
board. 107
It is obvious to the eye that all the possible serious objections to the Questioned
Order have been raised by the consumers. Nobody has raised the argument that he
has been denied the opportunity to oppose MERALCOs application due to its non
publication in toto. It is therefore purposeless for the majority to annul the
Questioned Order and require the republication of MERALCOs application. The
better course of action is to remand the case to the ERC so that it can review its
provisional order in light of the opposition to it.
I agree, however, with the majority that
V. The ERC Has Authority To Issue Provisional
Orders under the new EPIRA Law.
The Nature of Rate-Regulation
This Court discussed the nature of rate-regulation in Republic of the Philippines,
represented by the Energy Regulatory Board v. Manila Electric Company, G.R. Nos.
141314 and 141369, promulgated on November 15, 2002, viz.:
The regulation of rates to be charged by public utilities is founded upon the police powers of
the State and statutes prescribing rules for the control and regulation of public utilities are
a valid exercise thereof. When private property is used for a public purpose and is affected
with public interest, it ceases to be juris privati only and becomes subject to regulation. The
regulation is to promote the common good. Submission to regulation may be withdrawn by
the owner by discontinuing use; but as long as use of the property is continued, the same is
subject to public regulation.
_______________
Letter of the Philippine Chamber of Commerce and Industry dated December 12, 2003, attached as
107
Annex 21 of the Comment of the Office of the Solicitor General dated January 23, 2004; Rollo, p. 545.
227
VOL. 432, JUNE 15, 2004 227
Commission
In regulating rates charged by public utilities, the State protects the public against arbitrary
and excessive rates while maintaining the efficiency and quality of services rendered.
However, the power to regulate rates does not give the State the right to prescribe rates
which are so low as to deprive the public utility of a reasonable return on investment. Thus,
the rates prescribed by the State must be one that yields a fair return on the public utility
upon the value of the property performing the service and one that is reasonable to the
public for the services rendered. The fixing of just and reasonable rates involves a balancing
of the investor and the consumer interests. (emphases supplied and footnotes omitted)
It is evident that rate-regulation is one of the more important aspects of public
utility regulation. It allows the regulator sufficient power to protect consumers from
unreasonable charges while ensuring that the utility is able to maintain a viable
business. As explained in Potomac Electric Power Company v. Public Service
Commission of the District of Columbia, (t)his zone is bounded on the one side by
the interests of utility customers in not paying exorbitant rates... On the other side
are the interests of utility investors in achieving a rate of return sufficient to
maintain the utilitys financial integrity, to permit the utility to attract necessary
capital at a reasonable cost, and fairly to compensate themselves for the risks they
have assumed. 108
Interim Rate-Regulation
Interim rate-regulation is a well-entrenched concept in utility regulation. Interim
rates are defined as rates charged by the utility for services or products pending the
establishment of a permanent rate, in emergency situations, or where a bond is
posted that guarantees a refund to consumers for any excess paid by them prior to
the Commissions final determination. It should be emphasized that interim rates
109
are not limited to emergency situations. In one case, interim rates were allowed
pending the imposition of final rates when the previous rates were considered so
low as to be confiscatory. It has also been allowed to alleviate financial prob-
110
_______________
108 425 So. 2d 543 (1982).

109 Pueblo del Sol Water Company v. Arizona Corporation Commission,772 P. 2d 1138 (1988).
110 Id., citing Arizona State Corporation Commission v. Mountain States Tel. & Tel. Co., 228 P. 2d 749
(1951).
228
Commission
lems whose correction cannot safely await a decision on the proper level of
permanent rates. 111
Interim rate-regulation has also been viewed as a solution to the so-called

regulatory lag associated with full-blown hearings. Regulatory lag is defined as
112
the loss of proper earnings claimed by a utility between the time a petition for rate
increase is filed and the rate relief actually becomes effective by administrative or
judicial determination. 113
In the United States, numerous state public utilities commissions have generally
recognized and sanctioned temporary rates to meet emergencies or determine by
experiment or trial what rates would be just. This has been applied to various
114
types of utilities such as those providing services for sanitation, telephone, and 115 116
electric power. 117
To emphasize the importance of a regulators power to grant interim relief, many

states have even taken the position that interim rate-regulation is implied from the
power to fix final rates even in the absence of specific statutory authority. 118
In the case of Far North Sanitation, Inc. v. Alaska Public Utilities, Inc., a 119
company engaged in garbage collection challenged the interim order of the Public
Utilities Commission declaring a rate refund. The Supreme Court of Alaska held
that the broad powers of the Public Utilities Commission to establish fair and just
rates
_______________
111 Potomac Electric Power Company v. Public Service Commission of the District of Columbia, 457 A.
2d 776 (1983).
112 Citizens of the State of Florida v. Public Service Commission and Florida Power Corporation, 425 So.
2d 534 (1982) and Florida Power Corporation v. Hawkins, 367 So. 2d 1011 (1979).
113 Louisiana Power and Light Company v. Louisiana Public Service Commission, 523 So. 2d 850 (1988).
114 Muskogee Gas and Electric Company v. State, 186 P. 730 (1920).
115 Far North Sanitation, Inc. v. Alaska Public Utilities, Inc., 825 P. 2d 867 (1992).
116 Chesapeake and Potomac Telephone Co. v. Public Service Commission of the District of
Columbia, 330 A. 2d 236 (1974).
117 Application of Kauai Electric Division of Citizens Utilities Co., 590 P. 2d 524 (1978).
118 State ex rel. Laclede Gas Co. v. Public Service Commission of Missouri & AFC Industries, Inc., 535 S.
W. 2d 561 (1976).
119 825 P. 2d 867 (1992).
229
VOL. 432, JUNE 15, 2004 229
Commission
implied its authority to declare rates interim and refundable so long as the
Commission provided protection for the interests of both the utility and public.
While the Alaska Supreme Court acknowledged the existence of conflicting case law
on this question citing Electric Dist. No. 1 which held that the plain language of the
relevant law requiring the commission to fix rates meant that it could only fix final
rates, it was persuaded by the weight of jurisprudence upholding the implied power
of regulators to exercise interim rate-regulation:
We think the better view is that the APUC has implied authority to set interim rates.
See Pueblo Del Sol Water Co. v. Arizona Corp. Commn, 160 Ariz. 285, 772 P.2d 1138, 1140
(App.1988) (although no express authority exists, it is only logical that commission can
impose interim rates subject to a decrease); United Tel. Co. of Florida v. Mann, 403 So.2d
962 (Fla.1981); Grindstone Butte Mut. Canal Co. v. Idaho Power Co, 98 Idaho 860, 574 P.2d
902, 906 (1978) (implied in an on-going investigation is the power to set temporary rates);
see also Potomac Elec. Power Co. v. Public Serv. Commn of Dist. of Columbia, 457 A.2d 776,
780 n. 1 (D.C.App.1983) (Commissions power to grant interim rate increases is implied
from Commissions specifically granted statutory powers). AS
42.05.141(a)(1) . . . (emphases supplied)
120
In the 1977 case of Public Utility Commission of Texas et al. v. City of Corpus
Christi, a public utility commission and a power company appealed the decision of a
lower court enjoining the commission from enforcing an interim rate order and
enjoining the power company from imposing the rates arising from such order. The 121
appellate court ruled in favor of the commission and the power company, holding
that the power of the commission to set interim rates is a power necessarily
inferred from or incidental to the express power to fix a permanent rate. The 122
court stressed that this position has been consistently upheld in other states. 123
_______________
120 Id.
121 555 S.W.2d 509 (1977).
122 Id.
123 The decision cited the following cases: State ex rel. Laclede Gas Co. v. Public Service Commission of
Missouri, Mo. App., 535 S.W.2d 561; Muskogee Gas & Elec. Co. v. State, 81 Okl. 176, 186 P. 730,
732; Chicago Rys. Co. v. City of Chicago, 292 Ill. 190, 126 N.E. 585, 590; Omaha & C.B. St. Ry. Co. v.
Nebraska State Railway Comm., 103 Neb. 695, 173 N.W. 690; State ex rel. Puget Sound Navigation Co. v.
Department of Transportation
230
Commission
In the case of State ex rel. Laclede Gas Co. v. Public Service Commission of Missouri,
the issue before the Missouri Court of Appeals was whether the Laclede Gas
Company should have been granted an interim rate increase by the Public Service
Commission of Missouri pending the latters determination of whether a permanent
rate increase should be allowed. The Court noted that the question presented was a
recurring one of great public concern requiring its consideration even though the
Commission subsequently granted a permanent increase. The Court explained the
well-established doctrine of implied interim rate-making powers, viz.:
The very real necessity of recognizing such a power in the regulatory agency has long been
recognized by courts throughout the country. Not a single case has been cited by Jackson
County nor found by independent research which has ever denied such a power to a
regulatory agency such as the Missouri Public Service Commission. On the other hand,
numerous cases from diverse jurisdictions have recognized and given effect to such an
implied power even in the absence of specific statutory authority: Omaha & C.B. St. Ry. Co.
v. Nebraska State Railway Commission, 103 Neb. 695, 173 N.W. 690 (1919) (decided prior
to the present Nebraska statute expressly authorizing temporary increases in an
emergency); Muskogee Gas & Electric Co. v. State, 81 Okl. 176, 186 P. 730 (1920), City
of Bartlesville v. Corporation Commission, 82 Okl. 160, 199 P. 396 (1921), and Oklahoma
Gas & Electric Co. v. State Corporation Commission, 83 Okl. 281, 201 P. 505 (1921) (decided
in the absence of any statute granting express power to make interim increases); State ex
rel. Puget Sound Navigation Co. v. Department of Transportation of Washington, 33
Wash.2d 448, 206 P.2d 456 (banc 1949) (without reliance upon any specific statutory
power); Chesapeake & Potomac Tel. Co. v. Public Service Commission, 330 A.2d 236
(D.C.App.1974) (authority found solely by implication); City of New York v. New York
Telephone Co., 115 Misc. 262, 189 N.Y.S. 701 (1921) (decided before the adoption of the
present New York statute specifically authorizing temporary increases); State ex rel.
Utilities Commission v. Morgan, 16 N.C. App. 445, 192 S.E.2d 842 (1972) and State ex rel.
Utilities Commission v. Edmisten, 26 N.C.App. 662, 217 S.E.2d 201 (1975) (decided under a
file and suspend statute substantially similar to that of Missouri and with no provision
expressly permitting temporary rates); Southern Bell Telephone & Telegraph Co. v. Bevis,
279 So.2d 285 (Fla.1973) (decided before adoption of the present Florida statute specifically
authorizing interim increases); Federal Power Commission v. Tennes-
_______________
of Washington, 33 Wash.2d 448, 206 P.2d 456; and Elliott v. Empire Natural Gas Co., 123 Kan. 558, 256 P.
114.
231
VOL. 432, JUNE 15, 2004 231
Commission
see Gas Transmission Co., 371 U.S. 145, 150, 83 S.Ct. 211, 9 L.Ed.2d 199
(1962). (emphases supplied)
124
The rationale for this position is best explained in the case of Muskogee Gas and
Electric Company v. State, viz.:
The power lodged in the commission to promulgate rates is a legislative power, and its
exercise by the commission involves legislative discretion and policy. Any rule that would
require the commission, before it promulgates any order fixing a rate, to have before it
evidence that would establish to a mathematical certainty the reasonableness of the proposed
rate, would greatly hinder, if not almost entirely prevent, the commission from exercising
that power. (emphases supplied)
125
In Muskogee, the temporary rate schedules for electric service for Muskogee and Ft.
Gibson issued by the Corporation Commission was challenged as it was temporary
and experimental and was put into effect only until such time as the commission
could secure data upon which to make a valuation of the property of the company
and prescribe a permanent rate schedule. In ruling for the public utility, the Court
described the danger arising from a situation where a defanged regulator has no
power to grant provisional relief:
The first contention strikes at the very foundation of the fundamental law creating the
commission and defining its duties, and, if sustained, must work a result quite as
surprising and disastrous to the appellant as to the patrons of the company and the general
public, for, if the commission were limited to prescribing rates to instances where it had
made a complete inventory and valuation, there could be little or no relief from rapidly
fluctuating prices brought about by war conditions and incident to the reconstruction period.
This contention of the appellant fails to take into consideration the purpose for which
the commission was created and the powers conferred upon it through the Constitution and
the laws enacted by the Legislature. (emphases supplied)
126
In the Philippines, interim rate-regulation has been consistently recognized. The

statutory history of Philippine electric power regulation discussed earlier shows
that public utility regulators have
_______________
124 535 S.W.2d 561 (1976).

125 186 P. 730 (1920).
126 Id.
232
Commission
always had statutory authority to grant provisional relief. As early as 1926, in the
case of Madrigal y Compania, et al. v. Cui, G.R. No. 19829, November 28, 1922, the
Court recognized the power of the Public Utility Commission to grant temporary
rate increases to ship owners transporting freight and passengers. The power of
public utility regulators to grant interim rate increases has also been shown in
various regulated industries such as those relating to electric power
distribution, petroleum products, telecommunication services, and toll rates. In
127 128 129 130
terms of provisional relief not related to rate-setting, the Court has upheld the
power of the public utility regulators to grant temporary permits in favor of ice
plant operators, auto-truck operators, and public utility vehicle operations.
131 132 133
As shown by the foregoing discussions, the power to fix interim rates is

necessarily implied from the power to fix permanent rates, hence, the absence of an
express statutory provision in the EPIRA does not negate the ERCs power to fix
interim rates.
It is given that the ERC has the power to fix rates of distribution utilities, such
as Meralco, under the EPIRA by virtue of the following provisions:
Sec. 25. Retail Rate.The retail rates charged by distribution utilities for the supply of
electricity in their captive market shall be subject to regulation by the ERC based on the
principle of full recovery of prudent and reasonable economic costs incurred, or such other
principles
_______________
127 Republic v. Medina, L-32068, October 4, 1971, 41 SCRA 643; and Bautista v. Board of Energy and
Meralco, G.R. No. 75016, January 13, 1989, 169 SCRA 167.
128 Citizens Alliance for Consumer Protection v. Energy Regulatory Board, G.R. Nos. 78888-90, 79501-03,
79590-92, June 23, 1988, 162 SCRA 521; Maceda v. Energy Regulatory Board, et al., G.R. Nos. 95203-05 and
95119-21, December 18, 1990, 192 SCRA 363.
129 Radio Communications of the Philippines, et al. v. National Telecommunications Commission and
Philippine Long Distance Telephone Company, G.R. No. 66683, April 23, 1990, 184 SCRA 517.
130 Padua v. Ranada, et al., G.R. No. 141949, October 14, 2002, 390 SCRA 663.
131 Javellana v. La Paz Ice Plant Co., G.R. No. 45577, October 30, 1937.
132 Halili v. De la Cruz, L-3321, May 16, 1951.
133 Matienzo v. Abellera, L-45839, June 1, 1988, 162 SCRA 1.
233
VOL. 432, JUNE 15, 2004 233
Commission
that will promote efficiency as may be determined by the ERC . . . (emphasis supplied)
Sec. 43. Functions of the ERC.The ERC shall promote competition, encourage market
development, ensure customer choice and penalize abuse of market power in the
restructured electricity industry. In appropriate cases, the ERC is authorized to issue cease
and desist order after due notice and hearing. Towards this end, it shall be responsible for
the following key functions in the restructured industry:
xxx xxx xxx
(f) In the public interest, establish and enforce a methodology for setting transmission
and distribution wheeling rates and retail rates for the captive market of a distribution
utility, taking into account all relevant considerations, including the efficiency or
inefficiency of the regulated entities. The rate must be such as to allow the recovery of just
and reasonable costs and a reasonable return on rate base (RORB) to enable the entity to
operate viably. The ERC may adopt alternative forms of internationally-accepted rate-
setting methodology as it may deem appropriate. The rate-setting methodology so adopted
and applied must ensure a reasonable price of electricity. The rates prescribed shall be non-
discriminatory. To achieve this objective and to ensure the complete removal of cross
subsidies, the cap on the recoverable rate of system losses prescribed in Section 10 of
Republic Act No. 7832, is hereby amended and shall be replaced by caps which shall be
determined by the ERC based on load density, sales mix, cost of service, delivery voltage
and other technical considerations it may promulgate. The ERC shall determine such form
of rate-setting methodology, which shall promote efficiency . . .
xxx xxx xxx
(u) The ERC shall have the original and exclusive jurisdiction over all cases contesting
rates, fees, fines and penalties imposed by the ERC in the exercise of the abovementioned
powers, functions and responsibilities and over all cases involving disputes between and
among participants or players in the energy sector.
All notices of hearings to be conducted by the ERC for the purpose of fixing rates or fees
shall be published at least twice for two successive weeks in two (2) newspapers of
nationwide circulation. (emphases supplied)
In fact, Section 25, supra, does not even distinguish between final and temporary
rates. Hence, this provision can be read as a broad grant of power to the ERC to fix
final and interim rates.
But even granting arguendo that the above-cited provisions of the EPIRA only
contemplate the fixing of permanent rates, the unbending doctrine set forth in the
cases discussed earlier (Far
234
Commission
North Sanitation, Inc. v. Alaska Public Utilities, Public Utility Commission of
134
Texas v. City of Corpus Christi, State ex. Rel. Laclede Gas Co. v. Public Service
135
Commission of Missouri and AFC Industries, Inc., and Muskogee Gas and Elec. Co.
136
v. State ) holds that a Commissions authority to grant interim rates is necessarily

137
implied from the express authority to regulate rates and supervise public utilities. 138
There is no reason to move away from the principle that when the legislature
delegates express powers to an administrative body, all incidental powers necessary
to implement such express powers are also deemed delegated. As well stated in
Matienzo v. Abellera, viz.:
It is a settled principle of law that in determining whether a board or commission has a
certain power, the authority given should be liberally construed in the light of the purposes
for which it was created, and that which is incidentally necessary to a full implementation of
the legislative intent should be upheld as being germane to the law. Necessarily, too, where
the end is required, the appropriate means are deemed given . . . (emphasis supplied)
139
Effective utility regulation requires that a responsive regulator should be able to

swiftly and flexibly respond to the exigencies of the times. As explained in Ft. S. &
W. Ry. Co. v. State:
_______________
134 858 P.2d. 867(1992).

135 555 S.W.2d 509 (1977).
136 535 S.W.2d 561 (1976).
137 186 P. 730 (1920).
138 See Potomac-Electric Power Company v. Public Service Commission of the District of Columbia, 457
A.2d 776 (1983); City of Pittsburgh v. Pennsylvania Public Utility Commission, 423 A.2d 424
(1980); Grindstone Butte Mutual Canal Co. v. Idaho Power Co., 574 P.2d 902 (1978); Chesapeake and
Potomac Telephone Co. v. Public Service Commission, 330 A.2d 236 (1974); Pueblo del Sol Water Company
v. Arizona Corporation Commission, 772 P.2d 1138 (1988); Application of Kauia Elec. Division of Citizens
Utilities Co., 590 P.2d 524 (1978); Kansas-Nebraska Natural Gas Company, Inc. v. The State Corporate
Commission of the State of Kansas,538 P.2d 702 (1975); and Oklahoma Gas and Electric Co. v. State
Corporation Commission, 201 P. 505 (1921).
139 G.R. No. L-45839, June 1, 1988, 162 SCRA 1.
235
VOL. 432, JUNE 15, 2004 235
Commission
Any rule that would require the commission, before it promulgates any order fixing a rate,
to have before it evidence that would establish to a mathematical certainty the
reasonableness of the proposed rate, would greatly hinder, if not almost entirely prevent, the
commission from exercising that power. (emphasis supplied)
140
The dangers emanating from a regulatory environment with a toothless regulator is
illustrated by the Court of Appeals of Missouri in State ex rel. Laclede Gas Co. v.
Public Service Commission of Missouri and AFC Industries, Inc., to wit:
The ravaging inflation of the past few years has demonstrated the practical need for this
power. A striking example of the necessity for granting this type of emergency relief to a
141
utility was demonstrated in Sho-Me Power Corp., Case No. 17,381 (1972), in which the
Commission allowed an interim rate increase where the applicant was operating at a loss of
over $70,000 per month and where it had paid no dividends for a period of five years. So
also in the Missouri Power & Light Co. case, No. 17,815 (1973), the Commission found it
appropriate to grant an interim rate increase to halt a deteriorating financial situation
which constituted a threat to the companys ability to render adequate service. (footnote
142
supplied)
These clear dangers also stare at us in our own regulatory environment. Our
economic history teaches us that the Philippines is vulnerable to the rapid
fluctuations in the exchange rate. In recent years, we saw how numerous industries
failed to survive the Asian financial crisis fueled by the uncertainties of exchange
rates. All these have had adverse financial impact on public utilities such as
Meralco in terms of skyrocketing costs of debt servicing, and maintenance and
operating expenses. A regulator such as the ERC should have sufficient power to
respond in real time to changes wrought by the multifarious factors affecting public
utilities.
This is not all. The transferability clause of the EPIRA can lead to no other
conclusion that the powers of the ERB, the predecessor of the ERC, have been
transferred to the ERC.
SECTION 44. Transfer of Powers and Functions.The powers and functions of the Energy
Regulatory Board not inconsistent with the provi-
_______________
140 108 P. 407 (1910).

141 Referring to the power to grant interim rate increases.
142 535 S.W.2d 561 (1976).
236
Commission
sions of this Act are hereby transferred to the ERC. The foregoing transfer of powers and
functions shall include all applicable funds and appropriations, records, equipment,
property and personnel as may be necessary. (emphasis supplied)
143
It is undisputed that the ERB had the power to grant provisional relief:
SECTION 8. Authority to Grant Provisional Relief.The Board may, upon the filing of an
the basis of supporting papers duly verified or authenticated, grant provisional relief on
substantially support the provisional order: Provided, That the Board shall immediately
schedule and conduct a hearing thereon within thirty (30) days thereafter, upon publication
and notice to all affected parties. 144
The next question is whether such power to grant provisional relief is inconsistent
with the other provisions of the EPIRA. The petitioners argue that the power to
grant provisional rate adjustments is inconsistent with the EPIRA. They contend
145
that the inconsistency lies in the declaration of policy of the EPIRA to protect the
public interest as it is affected by the rates and services of electric and other
providers of electric power and Section 75 of the law requiring a statutory
construction in favor of people empowerment so that the widest participation of the
people, whether directly or indirectly, is ensured vis--visan interpretation to the
effect that the powers transferred to the ERC include the power to issue provisional
orders. They submit that the power to issue provisional orders would defeat the
146
policy of the law to protect and empower the public as such power would limit the
publics right to due process and would be in derogation of the ERCs responsibility
of protecting public interest regarding utility rates. This reveals an unjustified
mindset against interim rate-making. It would appear that interim rate-making is
viewed as undesirable per se. I respect-
_______________
143 EPIRA.
144 Executive Order No. 172 (1987).
145 Petition of FDC, et al., dated December 23, 2003, p. 6; Rollo, p. 8.
146 Id., at p. 21.
237
VOL. 432, JUNE 15, 2004 237
Commission
fully submit, however, that the protection of public interest in utility rate-regulation
and the publics right to due process are not mutually exclusive with the regulatory
bodys power to grant interim rates. Exercised properly, interim rate-making can
ensure that the public utility remains viable yet its service to the consuming public
is unimpaired. Interim rate-making is no hobgoblin which will gobble up unwary
consumers. In the context of proper public utility regulation, this power is meant to
allow the regulator sufficient leeway to act under exigent circumstances.
Further, an examination of the intent of the law supports the thesis that the
legislators did not intend to clip the powers of the ERC. One of the EPIRAs policies
is to establish a strong and purely independent regulatory body and system to
ensure consumer protection. Hence it is illogical to deny the ERCs power to
147
conduct interim rate-regulation because the inability of the ERC to respond to the
needs of public utility services would subvert the policy of the law to protect public
interest under any and all circumstances.
Accordingly, since the ERC has authority to grant interim rates under EPIRA,
then Section 4 (e), Rule 3 of the EPIRAs Implementing Rules and Regulations on
the ERCs power to provisionally grant applications for rate adjustment is valid.
This provision in the Implementing Rules and Regulations is pursuant to the
Department of Energys mandate to formulate such rules and regulations as may be
necessary to implement the objectives of the EPIRA. This is also consistent with
148
the doctrine of subordinate legislation as explained in the case of Free Telephone

Workers Union v. Minister of Labor:
Accordingly, with the growing complexity of modern life, the multiplication of the subjects
of governmental regulation, and the increased difficulty of administering the laws, there is
a constantly growing tendency toward the delegation of greater powers by the legislature
and toward the approval of the practice by the courts. Consistency with the conceptual
approach requires the reminder that what is delegated is authority non-legislative in
character, the completeness of the statute when it leaves the hands of Congress being
assumed . . . Thus from Justice J.B.L. Reyes in People v. Exconde: It is well established in
this jurisdiction that, while the making of laws is a non-delegable activity that corresponds
_______________
147 Section 2 (j), EPIRA.

148 Section 37 (p), EPIRA.
238
Commission
exclusively to Congress, nevertheless the latter may constitutionally delegate authority to
promulgate rules and regulations to implement a given legislation and effectuate its
policies, for the reason that the legislature often finds it impracticable (if not impossible) to
anticipate and provide for the multifarious and complex situations that may be met in
carrying the law into effect. All that is required is that the regulation should be germane to
the objects and purposes of the law; that the regulation be not in contradiction with it; but
conform to the standards that the law pre-scribes. (emphasis supplied) .
149
VI. Summation
On the issue of whether the ERC has legal authority to grant provisional rate
adjustments under the EPIRA law, I concur with the majority. The ERC has
authority to grant provisional adjustments by virtue of the express transfer from
the ERB to the ERC of the formers power to grant provisional relief, the doctrine
that interim rate-regulation is implied from or incidental to the express power to fix
a permanent rate, the broad provisions of the EPIRA which make no distinction
between interim or permanent rate-regulation, and the intent of the EPIRA and
rate-regulation. Further, the provisional relief may be granted even prior to a full
hearing without violating the requirements of due process.
On the issue of whether the grant by the ERC of the provisional rate adjustment
to Meralco was done with grave abuse of discretion amounting to lack or excess of
jurisdiction, I respectfully dissent from the majority. First, there was no violation of
the procedure set forth in the EPIRAs Implementing Rules and Regulation when
ERC issued its Questioned Order. The public was duly notified of Meralcos
application and was able to assail its legality and propriety in a public hearing
before the effectivity of the Questioned Order. Second, the issuance of ex-
parteorders is universally recognized as a legitimate exercise of the police power of
the State and should not be niggardly construed. Third, it is premature for the
Court to strike down the Questioned Order since it is merely provisional and
pending reconsideration before the ERC. The Court should allow the unimpeded
flow of the effective and available administrative remedy before the ERC. Hence,
the case at bar should be remanded to the ERC, which should be allowed to re-
_______________
G.R. No. 58184, October 30, 1981, 108 SCRA 757.

149
239
VOL. 432, JUNE 15, 2004 239
Commission
solve the pending motions assailing the propriety of the provisional rate increase in
favor of Meralco, especially its factual bases.
SEPARATE OPINION
SANDOVAL-GUTIERREZ, J.:
Electricity as the purest form of energy is now the most pervasive energy source
propelling the engines of growth in both developed and developing economies, such
as ours. Its role has been increasingly important as major technology development
in all sectors of the economy has its basis on electric power.
Towards this end, past and present administrations have been exerting efforts to
reform the economy and the power sector is a priority area. The Philippine
government, given the limited resources and the economys growth and
development objectives, has been paving the way for greater private sector capital
investment and participation in the power sector.
Initially, the enactment of the Build-Operate-Transfer (BOT) Law in 1987
marked the beginning of the private sectors participation in major power projects,
thus, resulting to a substantial amount of independent power producers (IPPs)
power capacity coming on-stream. This was followed by the enactment of the
Foreign Investment Act allowing 100% foreign ownership in power generation
projects.
In fact, government encouragement of immediate entry of IPPs in the early
1990s to end the severe power shortages, has resulted in higher tariffs composed of
demand and energy charges as well as foreign currency adjustments.
Now, with the ratification of Republic Act No. 9136, otherwise known as The
Electric Power Industry Reform Act (EPIRA) of 2001, the most impressive
economic reform in the Philippine energy sector, foreign investors and foreign
governments are guardedly optimistic. Their concern, and so should ours is, if
1
such structural reform fails, then electricity prices would not start to moderate
through the pressure of market forces, and most impor-
_______________
1Transcript of Ambassador Francis Ricciardones Interview with Business World Newspaper, U.S.
Supports Privatization, other Reforms in Philippine Energy Sector, December 5, 2002.
240
Commission
tantly, the country would not have a reliable, good supply of electricity, thus, once
more the re-surfacing of severe power shortages or blackouts.
Verily, the essential nature of the service that electricity provides to all sectors of
the economy requires that electricity prices are set prudently and efficiently.
While this Court concedes the primacy of the public interest in an adequate and
efficient service, the same is not necessarily to be equated with non-compensatory
electricity rates or prices. Reasonableness in the rates assumes that the same is fair
to both the public utility and the consumer.
Indeed, we held in Philippine Communications Satellite Corporation vs.
Alcuaz that:
2
The power of the State to regulate the conduct and business of public utilities is limited by
the consideration that it is not the owner of the property of the utility, or clothed with the
general power of management incident to ownership, since the private right of ownership to
such property remains and is not to be destroyed by the regulatory power. The power to
regulate is not the power to destroy useful and harmless enterprises, but is the power to
protect, preserve, and control with due regard for the interest, Gist and foremost, of the
public then of the utility and of its patrons.
But how do we strike a balance between ensuring consumer protection, on the one
hand, and enhancing the competitive operation of the electricity market, on the
other? This is the underlying issue raised in the instant petition.
The ERC has legal and statutory
authority to issue a provisional
order of rate adjustment.
Historically, the Energy Regulatory Board (ERB) was created under Executive
Order No. 172 to regulate, among others, the distribution of energy resources and to
fix rates to be charged by public utilities involved in the distribution of
electricity. Among
3
_______________
2G.R. No. 84818, December 18, 1989, 180 SCRA 218, 231, citing 73 C.J.S. 1005.
3Republic vs. Manila Electric Company, G.R. No. 141314, November 15, 2002, 391 SCRA 700, 708.
241
VOL. 432, JUNE 15, 2004 241
Commission
the key powers of this regulatory body is provisional rate-fixing, thus:
SECTION 8. Authority to Grant Provisional Relief.The Board may, upon the filing of an
the basis of supporting papers duly verified or authenticated, grant provincial relief on
substantially support the provisional order: Provided, That the Board shall immediately
schedule and conduct a hearing thereon within thirty (30) days hereafter, upon publication
and notice to all affected parties.
Later, Republic Act No. 9136 or the EPIRA amended Executive Order No. 172 and
gave impetus to the creation of the Energy Regulatory Commission (ERC). Thus,
Section 38 of the same law provides:
SECTION 38. Creation of the Energy Regulatory Commission.There is hereby created an
independent, quasi-judicial regulatory body to be named the Energy Regulatory
Commission (ERC). For this purpose, the existing Energy Regulatory Board (ERB) created
under Executive Order No. 172, as amended, is hereby abolished.
Despite ERBs abolition, its powers and functions were transferred to the ERC
under Section 44, thus:
SECTION 44. Transfer of Powers and Functions.The powers and functions of the Energy
Regulatory Board not inconsistent with the provisions of this Act are hereby transferred to
the ERC. The foregoing transfer of powers and functions shall include all applicable funds
and appropriations, records, equipment, property and personnel as may be necessary.
Although the EPIRA does not contain an express provision empowering the ERC to
grant provisional orders of rate adjustments, such silence of the law should not ipso
factobe interpreted as an amendment by deletion of such a key function.
To begin with, pursuant to the rules on statutory construction, the general rule
on amendment by deletion is not applicable when
242
Commission
the intent of the legislature to make such change in the meaning of the previous law
is not clear. 4
In In Re: R. McCulloch Dick, we held that: where the question is whether a

5
statute should be interpreted as having impliedly created a power not given in

express words, the preamble may be consulted for the purpose of ascertaining the
legislative intent.
The legislative intent for the ERC to retain the authority to issue provisional
rate adjustments is gleaned from the express reasons for enacting the law which,
under Section 2 of Republic Act No. 9136, are the following:
SECTION 2. Declaration of Policy.It is hereby declared the policy of the State:
1. (a)To ensure and accelerate the total electrification of the country;

2. (b)To ensure the quality, reliability, security and affordability of the supply of electric
power;
3. (c)To ensure transparent and reasonable prices of electricityin a regime of free and
fair competition and full public accountability to achieve greater operational and
economic efficiency and enhance the competitiveness of Philippine products in the
global market;
4. (d)To enhance the inflow of private capital and broaden the ownership base of the
power generation, transmission and distribution sectors;
5. (e)To ensure fair and non-discriminatory treatment of public and private sector
entities in the process of restructuring the electric power industry;
6. (f)To protect the public interest as it is affected by the rates and services of electric
utilities and other providers of electric power;
7. (g)To assure socially and environmentally compatible energy sources and
infrastructure;
8. (h)To promote the utilization of indigenous and new and renewable energy resources
in power generation in order to reduce dependence on imported energy;
9. (i)To provide for an orderly and transparent privatization of the assets and liabilities
of the National Power Corporation (NPC);
_______________
4 See Dissenting Opinion of Justice A. Panganiban in Gloria vs. Court of Appeals, G.R. No. 131012,
April 21, 1999, 306 SCRA 287, 313, citing Agpalo, Statutory Construction, 76-77 (1990).
5 G.R. No. 1384, April 15, 1918, 38 Phil. 224.
243
VOL. 432, JUNE 15, 2004 243
Commission
1. (j)To establish a strong and purely independent regulatory body and system to
ensure consumer protection and enhance the competitive operation of the
electricity market; and
2. (k)To encourage the efficient use of energy and other modalities of demand side
management.
To exclude such key function would certainly emasculate the law itself. A law
should not be so interpreted as to afford an opportunity to defeat compliance with
its terms.
Thus, considering the reasons behind the establishment of the ERC, there is
every indication that the legislative intent is for the ERC to retain its authority to
issue provisional rate adjustments in order to accomplish its role.
The records of the deliberation of the Committee on Energy (House Panel of the
Power Commission) support this position. As early as the deliberation stage in the
Power Commission, the intention to retain the ERCs power to issue provisional rate
adjustments was discussed, thus:
THE CHAIRMAN. Thank you and good morning to all. The meeting of the Members of the
House contingent of the Power Commission is resumed.
xxx
MR. FRANCISCO. Chairman Badelles, Honorable Members of the House Panel of the
Joint Congressional Power Commission, friends and colleagues from the power industry,
good morning.
xxx
The EPIRA is the product of a long, and sometimes impassioned debate on countless
contentious issues. The result law, therefore, embodies a careful balancing of interests, with
the end view of providing all Filipinos, from the smallest household to the largest industrial
user, the benefits of quality power at a competitive price.
xxx
First is the ERCs Power to Grant Provisional Approvals and Fix Rates.
At first glance, we find that Rule 4, Section 4 (e) of the new draft finally gives the ERC
the power to provisionally approve urgent petitions, without prejudicing the promulgation
of a final order following the usual hearings and arguments . . .
xxx
244
Commission
This provision was largely taken from Section 8 of Executive Order 172, creating the ERB,
the now defunct ERB. However, we find that certain phrases and requirements were added
that defeat the purpose of giving ERC the power to act on urgent petitions. We would
recommend that the language found on Section 8 of EO 172 be retained, as follows:
The ERC may, upon the filing of an application, petition or complaint or at any stage
thereafter and without prior hearing on the basis of supporting papers duly verified or
authenticated, grant provisional relief on motion of a party without prejudice to a final
decision after hearing, should the Board find that the pleadings together with such
affidavits, documents and other evidence which may be submitted in support of the motion.
Adopting this is provided for by Section 80 of RA 9136, which stipulates that the EO 172
shall continue to have full force and effect except insofar as it is inconsistent with the Act.
xxx
REP. CONSTANTINO G. JARAULA. Mr. Chairman. I think the first concern refers to
the provisional grant vested on the ERC. I am interested in this as this was the subject that
we went into yesterday;
xxx
MR. FRANCISCO. x x x.
We never used to be worried that the granting of a provisional authority would be as
delayed as we are now currently experiencing and, therefore, we are very happy that
Congressman Jaraula seems to agree with us that there should be a time limit as to the
response of the regulatory body to a petition. Because if there were a time limit, then the
need for a provisional relief will not be as big, but we still think that it would tie the hands
of the regulatory commission if its authority to grant provisional relief in the instances
where it is really very urgent that they would be tied by the requirement to conduct public
hearings. x x x.
xxx
REP. JARAULA. x x x.
The other thing is that, I would agree with you also that it would tie up or it would
hamper your operations if it is delayed in the public hearing. May only interest is that,
when ERC appreciates and evaluates the petition, the side of the consumers should already
be available, if they prefer to have. In other words, by the process of discussion in the local
level knowing that a petition will be filed, they can already draft their position in effect
without having to go through a public hearing.
And so, as you file, they can also immediately comment without being asked to comment.
They can also say, you are going to file today, they will learn of that, they will also
immediately file, so that, in the appreciation, it is not one-sided. We give the authority to
ERC, but ERC will have
245
VOL. 432, JUNE 15, 2004 245
Commission
the opportunity now to see both sides before conducting a public hearing so that they can
determine which is really.
My point here is thatrates, I am primarily interested in rates. It is not on
management level although I am not an expert in management. On management level, it is
only very seldom that 1973 oil crisis would happen, so that management should be able to
already forecast what is to come and, therefore, there is no shocking incident that may
trigger an immediate petition. These are things that are studied through the months or
through the years and, therefore, a petition for a rate increase is not something that is
sudden unless there are, as I said, like 73 oil crisis, there are unusual incidents.
x x x.6
The clear intent and design of the legislature to confer to the ERC the authority to
issue provisional orders is manifest. The cardinal rule in the interpretation of all
laws is to ascertain and give effect to the intent of the law. In Philippine National
7
Bank vs. Office of the President, we ruled:

8
The intent of a statute is the law. If a statute is valid it is to have effect according to the
purpose and intent of the lawmaker. The intent is the vital part, the essence of the law, and
the primary rule of construction is to ascertain and give effect to the intent. The intention of
the legislature in enacting a law is the law itself, and must be enforced when ascertained,
although it may not be consistent with the strict letter of the statute. Courts will not follow
the letter of a statute when it leads away from the true intent and purpose of the
legislature and to conclusions inconsistent with the general purpose of the act. Intent is the
spirit which gives life to a legislative enactment. In construing statutes, the proper course
is to start out and follow the true, intent of the legislature and to adopt that sense which
harmonizes best with the context and promotes in the fullest manner the apparent policy
and objects of the legislature.
_______________
6 Transcripts of the Committee on Energy (House Panel of the Power Commission), November 28, 2001,
IV-4 to VIII-2.
7 David vs. Commission on Elections, G.R. Nos. 127116 & 12809, April 8, 1997, 271 SCRA 90, 100-101,
citing Collector of Internal Revenue vs. Manila Lodge No. 761, 105 Phil. 983; Agpalo, Statutory
Construction, 1990 Ed., 36; Francisco, Statutory Construction, Third Ed., 5 and 106; Martin, Statutory
Construction, 1979 Ed., 40.
8 G.R. No. 104528, January 18, 1996, 252 SCRA 5, 11, citing Ongsiako vs. Gamboa, 86 Phil. 50 (1950);
Vol. II, Sutherland, Statutory Construction, 693-695.

246
Commission
Furthermore, a cardinal rule in statutory construction is that legislative intent
must be ascertained from a consideration of the statute as a whole and not merely
of a particular provision. 9
Courts must give effect to the general legislative intent that can be discovered
from the four corners of the statute, and in order to ascertain such intent, the whole
statute, and not only a particular provision thereof, should be considered.
In resolving the instant case, it is necessary that we consider not only Section 43
of Republic Act No. 9136 but also its other provisions, particularly Section 44 on
Transfers of Powers and Functions (earlier quoted) and Section 80 on Applicability 10
and Repealing Clause, in order to unravel the legislative intent. All these provisions
should be harmonized with each other.
In Gordon vs. Veridiano, we emphasized the courts duty to reconcile and
11
harmonize laws:
Courts of justice, when confronted with apparently conflicting statutes, should endeavor to
reconcile the same instead of declaring outright the invalidity of one as against the other.
Such alacrity should be avoided. The wise policy is for the judge to harmonize them if this is
possible, bearing in mind that they are equally the handiwork of the same legislature, and
so give effect to both while at the same time also according due respect to a coordinate
department of the government.
_______________
9 Philippine Long Distance Telephone Co., Inc. vs. City of Davao, G.R. No. 143867, August 22, 2001, 363
SCRA 522, 531.

10 Sec. 80. Applicability and Repealing Clause.The applicability provisions of Commonwealth Act No.
146, as amended, otherwise known as the Public Services Act; Republic Act 6395, as amended, revising
the charter of NPC; Presidential Decree 269, as amended, referred to as the National Electrification
Decree; Republic Act 7638, otherwise known as the Department of Energy Act of 1992; Executive Order
172, as amended, creating the ERB; Republic Act 7832 otherwise known as the Anti-Electricity and
Electric Transmission Lines/Materials Pilferage Act of 1994, shall continue to have full force and effect
except insofar as they are inconsistent with this Act.
The provisions with respect to electric power of Section 11 (c) of Republic Act 7916, as amended, and
Section 5 (f) of Republic Act 7227, are hereby repealed or modified accordingly.
11 167 SCRA 51, 58-59 (1988), cited in Republic vs. Asuncion, G.R. No. 108208, March 11, 1994, 231
SCRA 211, 230-231.

247
VOL. 432, JUNE 15, 2004 247
Commission
In fine, the pertinent provisions of the EPIRA can well go together with full and
unhampered effect to the other provisions, without doing violence to the law,
thereby giving spirit to the maxim, interpretare et concordare legibus est optimus
interpretandi or every statute must be so construed and harmonized with other
statutes as to form a uniform system of jurisprudence.
Petitioner failed to resort to the
primary administrative jurisdiction
and to exhaust administrative
remedies before the ERC.
At the outset, it bears stressing that only petitioner FDC failed to file a motion for
reconsideration with the ERC. 12
Section 43 (u) of Republic Act No. 9136 explicitly provides:

(u) The ERC shall have the original and exclusive jurisdiction over all cases contesting
rates, fees, fines and penalties imposed by the ERC in the exercise of the abovementioned
powers, functions and responsibilities and over all cases involving disputes between and
among participants or players in the energy sector.
A similar provision is also incorporated in the Implementing Rules and Regulations
of Republic Act No. 9136, particularly in Section 4 (n) thereof. 13
Obviously, the authority conferred upon the ERC is intended to be full, clear and
complete. In fact, the use of the word original and exclusive is synonymous to sole
that emphasizes the unimpaired character of the jurisdiction reposed.
The rationale behind the need for a prior resort to the ERC is highlighted
in Lawyers Against Monopoly and Poverty (LAMP) vs. MERALCO, thus: 14
_______________
12 Records reveal that NASECORE, Lualhati, and other oppositors before the ERC filed their motion
for reconsideration of the challenged Order.

13 (n) The ERC shall have the original and exclusive jurisdiction over all cases contesting rates, fees,
fines and penalties imposed in the exercise of its powers, functions and responsibilities and over all cases
involving disputes between and among participants or players in the energy sector relating to the
foregoing powers, functions and responsibilities.
14 G.R. No. 141369, April 9, 2003, 401 SCRA 130, citing Republic v. Medina, 41 SCRA 643 (1971).
248
Commission
Rate fixing call for a technical examination and a specialized review of specific details
which the courts are ill-equipped to enter, hence, such matters are primarily entrusted to
the administrative or regulating authority.
A careful perusal of the petition reveals that the main thrust of petitioners
argument is that the provisional rate adjustment of 12 centavos per kwh was
granted by the ERC with palpable and manifest bias considering that the only
basis is that respondent MERALCO is in dire economic straits. Definitely, this
intricate question of fact requires technical and specialized knowledge that is within
the province of the ERC alone.
On this score, the Solicitor General correctly observed and recommended that:
The oppositors raised serious grounds in opposition to the application for rate case. The
same grounds were interposed as reasons for the reconsideration of the provisional
authority. Considering the gravity of these grounds, they should be considered by the ERC
not only in the main case but also on the issue of the provisional increase. x x x:
xxx
The Office of the Solicitor General, however, hastens to add that these grounds raise
factual issues which the ERC should be allowed to resolve. x x x.
xxx
There were several oppositors who filed motions for production of certain documents.
Although the ERC directed MERALCO to comment on these motions, the ERC has yet to
rule on said motions. These motions should be resolved as it is intimately related to the
issue of the propriety of the provisional increase.
xxx
The motions for reconsideration of the provisional increase are properly addressed to
the ERC which should be allowed to issue the proper resolution discussing the grounds in
support of and in opposition of the provisional increase x x x based on the [application] and
supporting documents attached thereto and such comments or pleadings the consumers or
the LGU concerned may have filed within thirty (30) calendar days from receipt of a copy of
the application or petition or from publication thereof as the case may be.
xxx
249
VOL. 432, JUNE 15, 2004 249
Commission
RECOMMENDATION
WHEREFORE, it is respectfully prayed that the petition be denied. It is further prayed

that the ERC be allowed to expeditiously proceed and hear MERALCO and the oppositors a
quo on their arguments and counter arguments on the ERC Order dated November 27,
2003 and to resolve the issue on the propriety of the provisional increase as well as the
application on the merits.
x x x.
We take cognizance of the wealth of jurisprudence on the doctrine of primary
administrative jurisdiction and exhaustion of administrative remedies. In this era
of clogged court dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience and capability to hear and
determine promptly disputes on technical matters or intricate questions of facts,
subject to judicial review in case of grave abuse of discretion, is
indispensable. Between the power lodged in an administrative body and a court, the
unmistakable trend is to refer it to the former. In Padua vs. Ranada, this Court
15 16
held:
x x x, if the case is such that its determination requires the expertise, specialized skills and
knowledge of the proper administrative bodies because technical matters or intricate
questions of facts are involved, then relief must first be obtained in an administrative
proceeding before a remedy will be supplied by the courts even though the matter is within
the proper jurisdiction of a court.
The ERC committed no grave abuse
of discretion in granting the
provisional rate of increase.
Even granting that petitioners recourse to the instant remedies is in order, still, we
cannot rule in its favor.
Although this Court, under Section 4 (p) of the Implementing Rules and
Regulations of R.A. No. 9136, has been given jurisdiction, so to speak, to review all
actions taken by the ERC, yet, in the exercise thereof, the Court is to merely check
whether or not the
_______________
15 Padua vs. Ranada, G.R. No. 141949, October 14, 2002, 390 SCRA 663, 677, citing Abejo vs. Dela
Cruz, 149 SCRA 654 (1987).
16 Ibid., citing Industrial Enterprises, Inc. vs. Court of Appeals, 184 SCRA 426 (1990).
250
Commission
ERC has gone beyond the limits of its jurisdiction, not that it erred or has a
different view. In the absence of a showing that the ERC has committed grave
abuse of discretion amounting to lack of jurisdiction, there is no occasion for the
court to exercise its corrective power. Indeed, we should not decide a matter which
by its nature is for the ERC alone to decide.
In the case at bar, we find no improvident use of power on the part of the ERC
which will necessitate the exercise of the courts power of judicial review.
First, the provisional order issued by the ERC did not violate its own
Implementing Rules and Regulations, particularly Section 4 (e), Rule 3 thereof.
To be closer to the truth, Section, 4(e), Rule 3 of the Implementing Rules and
Regulations is reproduced hereunder:
(e) Any application or petition for rate adjustment or for any relief affecting the consumers
must be verified, and accompanied with an acknowledgement of receipt of a copy thereof by
the LGU Legislative Body of the locality where the applicant or petitioner principally
The ERC may grant provisionally or deny the relief prayed for not later than seventy-
x x x.
Records show that the Sangguniang Panlungsod of Pasig City was furnished a copy
of the verified application of MERALCO on October 9, 2003 and then, prior to its
filing with the ERC, a notice (of its filing) was published on October 10, 2003 in a
newspaper of general circulation, particularly the Manila Times.
251
VOL. 432, JUNE 15, 2004 251
Commission
Petitioner however insists that a provisional order may only be issued after
comments submitted by any oppositor within thirty (30) days from notice.
Petitioners interpretation is far from persuasive.
On this score, we find the following discussion of the ERC in its
Comment impressed with merit, thus:
17
The procedure in Section 4(e), Rule 3 of the Implementing Rules for the issuance of
provisional orders does not require the filing of any comments or pleadings by the
consumers or the LGU concerned before respondent ERC may grant provisionally or deny
the relief prayed for. x x x. In arriving at a decision to provisionally grant or deny the relief
prayed for, respondent ERC is authorized to base its decision on the verified application
and the supporting documents attached thereto. Within thirty (30) calendar days from
receipt of a copy of the application or petition or from the publication thereof as the case
may be, the consumers or the LGU concerned may file their comments on the application or
petition. Should they do so before the issuance of any provisional order, respondent ERC
may likewise base its decision thereof. x x x.
The foregoing provision, x x x, merely echoes what is expressly provided for in Section 8
of E.O. No. 172that provisional orders may be issued ex parte. Under said provision, the
only requirements for its issuance are that the pleadings, affidavits, documents and other
evidence must substantially support the provisional order and that a formal hearing must
forthwith conducted within thirty days from issuance of the order.
Indeed, after the filing of MERALCOs verified application on October 10, 2003, the
ERC, in its Order dated November 3, 2003, directed the oppositors NASECORE,
Genario Lualhati, and FDC to file their comments thereon. However, only Lualhati
filed his comment on November 21, 2003 or barely one month after manifesting in a
letter dated October 24, 2003 his intent to file an opposition to the application. On
November 27, 2003 or after forty-eight (48) days from the filing of the application
and six (6) days from receipt of Lualhatis comment, the ERC issued the assailed
provisional order. This provisional order was issued well-within the reglementary
seventy-five (75) day period.
Second, petitioner argues that the ERC has effectively granted MERALCOs
application on the merits without fullblown hearings
_______________
Comment at pp. 13-14.

17
252
Commission
on the matter, in violation of substantive and procedural due process. This
argument is totally misplaced.
It bears stressing that the issue raised by petitioner is not novel. We have ruled
in a catena of cases that an administrative agency may be empowered to approve
provisionally, when demanded by urgent public need, rates of public utilities
without a hearing. The reason is easily discerned form the fact that provisional
rates are by their nature temporary and subject to adjustment in conformity with
the definitive rates approved after final hearing. 18
It may be recalled that Section 16 (c) of the Public Service Law authorizes the
Public Service Commission to approve rates proposed by public services
provisionally and without necessity of any hearing. x x x.
To clarify the intent as well as the extent of the Commissions power, our ruling
in Republic vs. Medina is in point, thus:
19
x x x. The Public Service Commission practice, moreover, is to hear and approve revised
rates without published notices or hearing. The reason is easily discerned: The provisional
rates are by their nature temporary and subject to adjustment in conformity with the
definitive rates approved, and in the case at bar, the Public Service Commission order of 20
May 1970 expressly so provided.
Subsequently, in Padua vs. Ranada, citing Maceda vs. Energy Regulatory
20
Board, we ruled that while the ERB is not precluded from conducting a hearing on
the grant of provisional authoritywhich is of course, the better procedure
however, it can not be stigmatized if it failed to conduct one.
In Citizens Alliance for Consumer Protection vs. Energy Regulatory Board, we 21
also held:
In the light of Section 8 quoted above, public respondent Board need not even have
conducted formal hearings in these cases prior to issuance of its Order of 14 August 1987
granting a provisional increase of prices.
_______________
18 Padua vs. Ranada, supra, at p. 683, citing Radio Communications of the Philippines vs. National
Telecommunications Commission, 184 SCRA 517 (1990).

19 G.R. No. L-32068, October 4, 1971, 41 SCRA 643, 654.
20 Supra, citing Maceda vs. Energy Regulatory Board, 192 SCRA 363(1990).
21 Ibid. 162 SCRA 521 (1988).
253
VOL. 432, JUNE 15, 2004 253
Commission
The Board, upon its own discretion and on the basis of documents and evidence submitted
by private respondents, could have issued an order granting provisional relief immediately
upon filing by private respondents of their respective applications. In this respect, the
Court considers the evidence presented by private respondents in support of their
applicationsi.e., evidence showing that importation costs of petroleum products had gone
up; that the peso had depreciated in value; and that the Oil Price Stabilization Fund
(OPSF) had been depletedas substantial and hence constitutive of at least prima facie
basis for issuance by the Board of a provisional relief order granting an increase in the
prices of petroleum products.
Later, the ERC promulgated, as part of its Implementing Rules, the following
provision:
x x x xxx
The ERC may grant provisionally or deny the relief prayed for not later than seventy-
Thereafter, the ERC shall conduct a formal hearing on the application or petition,
giving proper notices to all parties concerned, with at least one public hearing in the
affected locality, and shall decide the matter on the merits not later than twelve (12)
months from the issuance of the aforementioned provisional order.
x x x.
At this point, it bears reiterating that the reasonableness of the provisional rate
adjustment is best addressed to the ERC.
Petitioner claims that the ERCs unilateral issuance of a provisional rate
adjustment is repugnant to the policy declaration set forth in the EPIRA to protect
the public interest as it is affected by the rates and services of the electric utilities
and other providers of electric power.
We however note that respondent may likely suffer a severe drawback, with the
consequent detriment to the public service, should the assailed Order of the ERC
turn out to be improvident.
At present, respondent claims that it is engaged in 42 major capital projects
aimed at addressing its system overloads. These projects were undertaken on the
premise that its provisional appli-
254
Commission
cation for rate adjustment would be approved. Consequently, a declaration of nullity
of the assailed provisional Order of the ERC would definitely deter such projects
and ultimately impair respondents ability to provide safe, adequate and reliable
service to the consuming public, thus, depriving its patrons and the consumers of a
vital and essential service.
WHEREFORE, I join Mr. Senior Justice Reynato S. Puno in his Dissenting
Opinion that the Energy Regulatory Commission (ERC) has the authority to grant
provisional rate adjustments ex-parte and vote to DISMISS the petition.
CONCURRING AND DISSENTING OPINION
AUSTRIA-MARTINEZ, J.:
I concur with the majority opinion insofar as it rules that the petition should be
granted, as the provisional order of November 27, 2003 was issued by the ERC with
grave abuse of discretion. I do not agree, however, with its position that the ERC
has the inherent power to provisionally grant an application for rate adjustment.
FIRST ISSUE
WHETER OR NOT THE ERC HAS THE LEGAL AUTHORITY TO

GRANT PROVISIONAL RATE ADJUSTMENTS UNDER THE EPIRA
The ERCs authority to fix rates is a non-issue in this case. The power to fix
temporary rates, however, is.
The thrust of the majority opinion is that the provisional rate-making power of
the ERC is necessarily implied from its power to fix permanent rates, hence the
absence of an express provision in the EPIRA does not negate the existence of such
power.
With all due respect, however, I believe that whatever provisional ratemaking
power the ERC possess must emanate from the law that created it, the EPIRA.
The Energy Regulatory Commission (ERC), the Public Service Commission (PSC),
the Energy Regulatory Board (ERB), and all other regulatory bodies for that matter,
are mere creatures of the legislature. As such, the nature and extent of their powers
are derived from the respective statutes that created them. Thus, it is stated:
255
VOL. 432, JUNE 15, 2004 255
Commission
Being creatures of the legislature, administrative agencies have no general, inherent or
common-law powers, but only those powers conferred upon them by the legislature. Apart
from the instances in which an administrative agency is created and empowered by a
provision of a state constitution or an executive order, the source of powers of
administrative agencies lies in statutes, and administrative agencies must find within
statutes warrant for the exercise of any authority which they claim. Absent a constitutional
provision, administrative agencies derive their authority from (1) the enabling legislation
that mandates the particular agencys function and grants powers, and (2) from general
laws affecting administrative bodies. (Emphasis supplied)
1
In the same wise, it is said that:

Public Service Commissions are administrative agencies generally empowered to regulate
public utilities, which are business organizations which regularly supply the public with
some commodity or service, such as electricity, water, gas, and telephone service. Public
Service Commissions have no inherent power; all of their power and jurisdiction must be
found within the statutory or constitutional provisions creating them. The essence of the
power of Public Service Commissions is regulatory. Among the typical powers are setting
rates, promulgating regulations, collecting information, and processing
complaints. (Emphasis supplied)
2
The ERC has no life except as life is given by the Legislature. 3
The EPIRA lays down the multifaceted role of the ERC in the regulation of the
electric power industry. Particularly, Section 43 thereof, which exhaustively
enumerates the functions of the ERC, is explicit in setting forth the various key
functions of the ERC in relation to its administrative, regulatory and quasi-judicial
responsibilities. It is the legislatures unequivocal expression of its intent to limit
the powers of the ERC to those specified in said section. With regard to its
ratemaking power, the last paragraph of Section 43 demonstrates the legislatures
intent for the ERC to exercise its delegated power of setting just and reasonable
rates, provided it conforms with the procedural mandates of publication, notice and
hearing. There is no proviso, or even a whisper, in Section 43 or in
_______________
1 Constantino, Hinck, McCarthy and Stull, J.D.s, Administrative Law, 2 Am. Jur. 2d Administrative
Law 55.
2 Topliff, Mary L., J.D., Public Service Commissions Implied Authority to Order Refund of Public
Utility Revenues, 41 A.L.R. 5th 783.
3 New England Telephone and Telegraph Company vs. Public Utilities Commission, et al., 362 A.2d 741
(1976).
256
Commission
any other provisions of the EPIRA which indicates the legislatures intent to endow
the ERC with authority to issue provisional orders for rate adjustments.
Expressio unius est exclusio alterius, the express inclusion of one implies the
exclusion of all others. 4
The rule of expressio unius est exclusio alterius is formulated in a number of ways. One
variation of the rule is the principle that what is expressed puts an end to that which is
implied. Expressium facit cessare tacitum. Thus, where a statute, by its terms, is expressly
limited to certain matters, it may not, by interpretation or construction, be extended to
other matters.
...
The rule of expressio unius est exclusio alterius and its variations are canons of
restrictive interpretation. They are based on the rules of logic and the natural workings of
the human mind. They are predicated upon ones own voluntary act and not upon that of
others. They proceed from the premise that the legislature would not have made specified
enumeration in a statute had the intention been not to restrict its meaning and confine its
terms to those expressly mentioned. (Emphasis supplied)
5
In South Central Bell Telephone Company vs. Tennessee Public Service

Commission, the Tennessee appellate court used the same principle of statutory
6
construction when it reversed the Tennessee Public Service Commissions order

requiring the plaintiff telephone company to refund to its customers certain sums
collected by them pursuant to the commissions prior order granting a temporary
increase of rates conditioned on a refund. The Tennessee court ruled:
Upon a study of the applicable statutes, especially TCA 65-5-203, this Court concludes
that the Legislature never intended to extend retroactive rate-making power (ordering
refunds) beyond that expressly stated in 65-5-203. This is supported by the maxim
of Inclusio Unius est Exclusio Alterius. The express inclusion of one (person or thing)
(implies) the
_______________
4 Commissioner of Internal Revenue vs. Michel J. Lhuillier Pawnshop, Inc., G.R. No. 150947, July 15,
2003, 406 SCRA 178; South Central Bell Tel. Co. vs. Tennessee Public Service Com. (1984, Tenn App) 675 SW2d
718.
5 Malinias vs. Commission on Elections, G.R. No. 146943, October 4, 2002, 390 SCRA 480, 491.
6 675 S.W.2d 718 (1984).
257
VOL. 432, JUNE 15, 2004 257
Commission
exclusion of all others. The cited statute provides for a narrowly circumscribed power to
grant tentative rates under bond for a limited time under emergency circumstances which
were not found by the Commission and are not shown in this case. It must therefore be
presumed that:
1. (1)the Legislature considered that the Commission had no general or inherent power
to set tentative rates subject to refund, else the special grant of power would have
been unnecessary;
2. (2)if the Legislature had intended that the Commission have broader powers than
those conferred, the statute would have been composed in broader terms.
(Emphasis supplied)
Clearly, therefore, the authority to issue provisional orders of rate adjustments

cannot be considered as one of the powers that the legislature intended the ERC to
possess, for if it were intention of the lawmakers, there would not have been a black
hole in the law, so to speak.
Corollary to this is the doctrine of casus omisus pro omisso habendus est, or that
a person, object or thing omitted from an enumeration must be held to have been
omitted intentionally. Simply put, the absence of such statutory power shows that
7
the legislature undeniably intended the withdrawal of such authority from the ERC.
To declare otherwise would be supplanting what the legislature intentionally
omitted. The Court should not tread the perilous waters of judicial legislation and
arrogate unto itself the duty of supplying what has been omitted by the legislature. 8
The ERCs predecessorsthe Public Service Commission (PSC), the Board of

Energy (BOE) and the Energy Regulatory Board (ERB), and the laws that created
themC.A. No. 146, P.D. No. 1206 and E.O. No. 172, explicitly provided for the
regulatory bodys provisional ratemaking authority.
Thus, Section 16 (c) of C.A. No. 146 expressly vested the PSC with the power to
fix rates and issue provisional orders. When, by virtue of P.D. No. 1206, the BOE
replaced the PSC and the Oil Industry Commission (OIC) in the regulation of the
power and energy industry, it was likewise expressly given the same provi-
_______________
7 Commission on Audit of the Province of Cebu vs. Province of Cebu,G.R. No. 141386, November 29,
2001, 371 SCRA 196, 202.
8 Agpalo, Ruben E., Statutory Construction (1995 edition), p. 111, citing People vs. Garcia, 85 Phil. 657,
662, 663 (1950); Morales vs. Subido, 26 SCRA 150 (1968).

258
Commission
sional authority. The last paragraph of Section 9 of P.D. No. 1206, provided that
Sections 11 and 12 of R.A. No. 6173, as amended by P.D. No. 1128, shall govern the
9
proceedings before the board, including the authority to grant provisional

relief. While Section 11 expressly provided for the transfer of powers of the
10
abolished agencies to the Board of Energy, yet the legislature in Section 12 still
11
provided for a specific authority to grant provisional relief items.

In like manner, when the ERB replaced the BOE, the authority to grant
provisional relief by the ERB was again specifically stated in Section 8 of E.O. No.
172, notwithstanding the fact that E.O. No. 172 also expressly provided for the
transfer of powers of the BOE to the ERB. 12
On the other hand, the EPIRA is devoid of any indication, express or otherwise,
of the legislatures intent to endow the ERC with authority to issue provisional
orders for rate adjustments. We cannot simply ignore this omission and assume
that such provisional ratemaking power is inherent in the ERCs functions. The
power to fix prices and make rates cannot be conferred by implication, but must be
conferred under statutory or constitutional language that is free from doubt, and
admits of no other reasonable construction. 13
Neither could it be implied that Section 44 of the EPIRA, which provides for the
transfer of powers of the former ERB to the ERC, includes the power to issue
provisional orders. Said section is not enough to provide sufficient basis by way of
implication that the ERC has a provisional rate-making power. As clearly provided
by Section 44 itself, the powers and functions of the ERB that are transferred to the
ERC are only those that conform with the provisions of the EPIRA. Considering
that the EPIRA does not contain the authority to grant provisional rates, it follows
then that to insist that the ERC has such authority, would be to grant ERC an
authority that would be inconsistent with the EPIRA. As clearly discussed earlier,
administrative agencies, like the ERC, have no
_______________
9 The Oil Industry Commission Act enacted on April 25, 1977.

10 Id., Section 9, last paragraph.
11 Section 11, P.D. No. 1206.
12 Section 4, E.O. No. 172.
13 Lemming and Dietz, J.D.s, 64 Am. Jur. 2d Public Utilities 167, citing City Public Service Bd. Of
San Antonio vs. Public Utility Commission of Texas, 9 S.W. 3d 868 (Tex. App. Austin 2000).
259
VOL. 432, JUNE 15, 2004 259
Commission
general or inherent powers except those expressly granted to them by law.
Moreover, under Section 2 (f) of the EPIRA, one of the declared policies of the law
is to protect the public interest as it is affected by the rates and services of electric
and other providers of electric power. Another significant provision of the EPIRA is
Section 75, which circumscribes a statutory interpretation in favor of people
empowerment and participation.
In light of the rule that statutes in the derogation of common or general, rights;
are strictly construed and rigidly confined to cases clearly within their scope and
purpose, an interpretation to the effect that the powers transferred to the ERC
14
include the power to issue provisional orders inevitably defeats the policy of the law
to protect and empower the public. Any grant of authority to the ERC to issue
provisional orders of rate adjustments is a limitation on the publics right to due
process and in derogation of the ERCs general responsibility of protecting the
public interest regarding utility rates. Hence, it must be strictly construed against
the grant of such authority. This is bolstered by the fact that the statutes governing
ERCs forebearsthe SC, the BOE and the ERBall contain a specific provision on
the authority of the regulatory body to grant provisional rates, in addition to the
transfer of powers to the successor while the EPIRA does not contain a provision
authorizing the ERC to grant provisional rates.
In stark contrast, there is nothing in EPIRA that confers upon the ERC any
authority to grant provisional rate adjustments although it provides for the transfer
of powers of the ERB to the ERC.
If the provisional ratemaking authority of the ERC is so crucial for the
accomplishment of the goals of utility regulation and supervision, then the question
that begs to be answered is: why did the legislature omit such allegedly
indispensable provisional rate-making authority? The legislature could have easily
crafted the EPIRA to include that authority, but it did not do so; and neither did
they include any other provision or section to express the granting of said authority,
as were conspicuously done in C.A. No. 146, P.D. No. 1206 and E.O. No. 172.
_______________
Republic vs. Sandiganbayan, G.R. No. 119292, July 31, 1998, 293 SCRA 440, 455-456.
14
260
Commission
In enacting a statute, the legislature is presumed to have been aware of, and have
taken into account, prior laws on the subject of legislation. This being so, the 11th
15
Congress is presumed to be aware of the existence of the expressed provisional

ratemaking power as well as the specific enumeration of other powers of the
regulatory bodies under the previous laws. The marked difference in which the
legislature treated the rate-making authority of the PSC under C.A. No. 146, the
BOE under P.D. No. 1206, the ERB under E.O. No. 172, on the one hand and the
ERC under the EPIRA, on the other, in that the latter law does not expressly
provide for such authority in favor of the ERC, demonstrates with absolute
certainty that, indeed, the legislature did not intend to give such power, nor did it
intend that it should be automatically covered by the powers that are transferred
from the ERB to the ERC.
MERALCOs illation on the cases of Citizens Alliance for Consumer Protection vs.
ERB, et al., Valmonte vs. ERB, KMU Labor Center vs. ERB, et al., Maceda vs. ERB,
et al.,and Lozano vs. ERB, et al., where the Court upheld the power of the ERB to
provisionally grant rate adjustments, is misplaced. In all these cases, the Court
recognized the power of the ERC to grant provisional relief because it is so expressly
provided in Section 8 of E.O. No. 172. Said cases are not applicable to the case at
bar for the simple reason that the decisions therein were rendered by the Court at
the time when the applicable laws had expressly authorized the ERB to grant
provisional rate adjustments. At pain of being repetitious, there is nothing in the
EPIRA that bestows upon the ERC any express statutory authority to grant
provisional rate adjustments.
Moreover, the EPIRA created a new regulatory body, the ERC, with an entirely
new set of powers and functions necessary to accomplish the regulatory scheme of
the law. The EPIRA was enacted by the legislature as a framework for the
restructuring of the electric power industry. It divided the electric industry into
16
four sectors, mainly: generation, transmission, distribution and supply. Hence, the 17
EPIRA had the effect of revising the whole statu-
_______________
15 Miller vs. Mardo and Gonzales, G.R. No. L-15138, July 31, 1961, 112 Phil. 792, 803; 2 SCRA 898,
citing Corominas, Jr., et al. vs. Labor Standards Commission, et al., 112 Phil. 551; 2 SCRA 721.
16 Rep. Act No. 9136, Section 3.
17 Id., Section 5.
261
VOL. 432, JUNE 15, 2004 261
Commission
tory system on the electric power industry and substituted a new one in its place.
Consequently, except for those that may not be inconsistent with the EPIRA, the
previous laws had been considered repealed, and the EPIRA, from then on governs
the industry.
The discourse of Agpalo in his book, Statutory Construction, is noteworthy, viz.:
The legislative intent to repeal a prior law is also shown by the enactment of a statute
revising or codifying the former laws on the whole subject matter. The revised statute or
code is in effect a legislative declaration that whatever is embraced in the new statute shall
prevail and whatever is excluded therefrom shall be discarded. The revised statute or code,
as disclosed by its framework and substance, must be intended to cover the whole subject to
be a complete and perfect system in itself in order that the prior statutes or parts thereof
which are not repeated in the new statute will be deemed impliedly repealed. Thus, where a
statute is revised, or a series of legislative acts on the same subject are revised and
consolidated into one, covering the entire field of subject matter, all parts and provisions of
the former act or acts that are omitted from the revised act are deemed repealed. The fact
that the revised statute or code is all-comprehensive and covers the whole field of a
particular subject matter, specially if it provides that all acts inconsistent therewith are
repealed, reveals the intent to establish a uniform system of rules and to nullify existing
laws on the subject.
It has also been held that where a new statute is intended to furnish the exclusive rule
on a certain subject, it repeals by implication the old law on the same subject, or where a
new statute covers the whole subject matter of an old law and adds new provisions and
make changes, and where such law, whether it be in the form of an amendment or
otherwise, is evidently intended to be a revision of the old act, it repeals the old act by
implication. The complete enactment on a subject matter, intended as a substitute for the old
statute, may be regarded as the expression of the whole law thereon, and operates as a repeal
of the prior statute, although the two statutes are not repugnant. (Emphasis supplied)
18
In People vs. Almuete, aptly cited by petitioner FDC, the Court ruled that a
19
subsequent statute, revising the whole subject matter of a former statute, and
evidently intended as a substitute for it, operates to repeal the former statute. The 20
revising statute is in
_______________
18 Third edition (1995), pp. 318-319.

19 G.R. No. L-26551, February 27, 1976, 69 SCRA 410, 414.
20 Id., citing 82 C.J.S. 499.
262
Commission
effect a legislative declaration that whatever is embraced in the new statute shall
prevail, and whatever is excluded therefrom shall be discarded. 21
Such doctrine was adopted by the Court in Alunan III vs. Asuncion, when it 22
ruled that R.A. No. 6975, creating the Philippine National Police (PNP) superseded
R.A. No. 5750, the law governing CIS agents. It was held therein:
Urged by the Constitutional mandate for the establishment and maintenance of one police
force, R.A. No. 6975 was promulgated creating the Philippine National Police. The new
police force absorbed the members of the former National Police Commission, Philippine
Constabulary and Integrated National Police, all three of which were accordingly abolished.
R.A. No. 6975, therefore, had the effect of revising the whole police force system and
substituting a new unified one in its place. This, alone, proves that R.A. No. 5750 has
already been repealed because a subsequent statute revising the whole subject matter of a
former statute, and evidently intended as a substitute for it, operates to repeal the earlier
statute. The revising statute is in effect a legislative declaration that whatever is embraced
in the new statute shall prevail, and whatever is excluded therefrom is
discarded. (Emphasis supplied)
23
Even Section 80 (Applicability and Repealing Clause) of the EPIRA do not indicate
that the provisions of C.A. No. 146 and E.O. No. 172 continue to have full force and
effect insofar as they are not inconsistent with the EPIRA.
As provided by Section 80 itself, the provisions of the pertinent laws that are not
inconsistent with the EPIRA shall continue to have full force and effect. It does not
necessarily follow that the power to grant provisional rate adjustments is included
in such catch-all proviso. These applicability provisions could not have referred to
the particular provisions giving the PSC and the ERB the statutory authority to
grant provisional rate adjustments considering that the lawmakers deliberately
deleted said provision in the enactment of the EPIRA. There exists no valid
justification why the legislature should make a general reference to what is not
inconsistent with EPIRA when the legislature could have provided
_______________
21 Id., citing 82 C.J.S. 500.

22 323 SCRA 623, 627-628 (2000).
23 Id., citing People vs. Almuete.
263
VOL. 432, JUNE 15, 2004 263
Commission
for the authority to grant provisional rates as what has been done in previous laws
creating the predecessors of ERC.
There is no doubt as to the prerogative of the legislature to delegate and confer
on administrative bodies particular quasi-judicial powers, as an incident to the
performance of regulatory functions. But in so doing, the legislature must state its
intention in express terms that is free from ambiguity and leaves no room for
interpretation.
P.D. No. 1206, as amended, and E.O. No. 172 likewise contain applicability
clauses similar to Section 80 of the EPIRA. But these laws, unlike the EPIRA also
expressly provided for the authority of the regulatory bodies to grant provisional
rate adjustments. The legislature knew that the ERCs predecessors all possess
provisional ratemaking powers. The existence of these provisions is certainly not
lost on the framers of the EPIRA. The fact that P.D. No. 1206 and E.O. No. 172 both
expressly granted the BOE and the ERB, respectively, a provisional ratemaking
authority, yet not reproduced in the EPIRA is an evident manifestation of the
intention of the legislature to limit the ERCs powers to those enumerated in
Section 43 of the EPIRA to the exclusion of all others. To construe Section 80 as
including such provisional authority would be extending an authority beyond the
ERCs powers, which the Court does not have the liberty to do as it is evidently not
the legislatures intent.
If the EPIRA is clear in its terms in clothing the ERC with specific
administrative, regulatory and quasi-judicial functions, then certainly a conferment
of its provisional ratemaking power can not be implied from a mere applicability
clause stated in general terms.
Hence, absent an express provision in the EPIRA stating that the ERC has the
authority to grant provisional rate adjustments, I believe that the Court cannot
uphold the questioned grant of provisional rate adjustment by the ERC. A
legislative lacuna cannot be filled by judicial fiat. 24
Even if we assume that the ERC, indeed, possesses such provisional ratemaking
authority, how provisional is provisional? Attention must be brought to the case
of Republic vs. Manila Electric
_______________
Davao Gulf Lumber Corporation vs. Commissioner of Internal Revenue, 293 SCRA 76, 88 (1998).
24
264
Commission
Company. In this case, MERALCOs application for the revision of rate schedules
25
was provisionally granted by the then ERB on January 28, 1994. On February 16,
1998, or more than four (4) years after the provisional grant of the revised rate
schedules, the ERB rendered its decision modifying its order of January 28, 1994.
The decision of the ERC was brought to the Court of Appeals, and eventually to this
Court, which affirmed the ERBs decision on November 15, 2002. By then, eight
years had already elapsed from the time the rate schedule was provisionally
granted by the ERB. It need not be belabored that MERALCO is now facing a tight
situation wherein it cannot fully implement the order of the Court to refund to the
public the billions of pesos it has already collected under such provisional order.
SECOND ISSUE
WHETHER THE GRANT BY THE ERC OF THE PROVISIONAL RATE ADJUSTMENT

WAS COMMITTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION
Even if we assume for the sake of argument, that the ERC has such legal authority,
nevertheless, I concur with the position of the majority that the issuance by the
ERC of the questioned Order dated November 27, 2003 is tainted with grave abuse
of discretion such that it should be annulled and set aside just the same. Said Order
was issued by the ERC in disregard of the due process requirements laid down in
the second paragraph, Section 4 (e), Rule 3, of the EPIRAs Implementing Rules and
Regulations (IRR).
Since the fixing of rates is essentially legislative in nature, due process of law
does not require that interested parties be given notice or an opportunity for a
hearing, unless it is expressly so provided by law. But where the fixing of rates is
26
delegated to officers or commissions, the persons or entities affected must be

afforded procedural due process appropriate to the nature of the case and consistent
with statutory requirements, including, ordinarily, a notice which is adequate and
timely under the circumstances, and a hearing which is fair and open, and which
comports with due process safeguards. 27
_______________
25 G.R. No. 141314, November 15, 2002, 391 SCRA 700.

26 Ibid.
27 16D C.J.S. Constitutional Law 1348.
265
VOL. 432, JUNE 15, 2004 265
Commission
Section 4 (e), Rule 3 of the IRR provides for the procedure how the ERC may grant
provisionally rate adjustment or deny the relief prayed for not later then seventy-
five calendar days from the filing of the application, based on the application and
the supporting documents attached thereto and such comments or pleadings the
consumers or the LGU concerned may have filed within thirty calendar days from
receipt of a copy of the application or petition or from the publication thereof as the
case may be.
Section 4 (e), Rule 3 of the IRR plainly states that: (1) the ERC has the discretion
to provisionally deny or grant the relief prayed for; (2) in assessing the merits of an
application for provisional rate adjustment, the ERC is required to consider the
application and its supporting documents and such comments or pleadings the
consumers or the LGU concerned may have filed; (3) the comments or pleadings
must be filed by the interested parties or the LGU concerned within thirty calendar
days from receipt of a copy of the application or petition, or from publication of the
application or petition, as the case may be; and (4) the ERC has seventy-five days
from the filing of the application within which to decide the provisional relief prayed
for.
When a statute is clear, it must be taken to mean exactly what it says, and
courts have no choice but to see to it that the mandate is obeyed. The rule 28
precludes the ERC from resolving a prayer for a provisional rate adjustment in any
other manner than that provided in the implementing rules. This is not an issue of
discretion but of duty.
The ERCs discussion in the assailed Order dated November 27, 2003, shows that
it solely relied on respondent MERALCOs claims and failed to take into account the
oppositors respective contentions. In fact, as admitted by the ERC during the oral
arguments, it did not wait for the comments of the oppositors since it was of the
impression that it had the authority to act on MERALCOs application ex parte, and
there was already a prima facieshowing that MERALCO was entitled to the relief
prayed for. The ERC had seventy-five days from October 10, 2003, or until
29
December 24, 2003, within which to resolve the prayer for provisional relief. It
_______________
Quisumbing vs. Manila Electric Company, G.R. No. 142943, April 3, 2002, 380 SCRA 195, 206.
28
TSN, January 27, 2004, p. 308.

29
266
Commission
had more than ample time to resolve FDCs motion for production of documents,
and await the parties respective comments on MERALCOs application. The undue
haste in which it granted MERALCOs prayer for provisional relief does not speak
well of the procedure followed by the ERC. The ERCs failure to accord the
oppositors a reasonable opportunity to obtain relevant evidence and present their
oppositions or comments on the application, clearly denied them due process of law. 30
The requirement of due process is not some favor or grace that the ERC may dole
out on a bout of whim or on occasion of charity. Rather, it is a statutory right to
which the consuming public is entitled.
The ERC should have ruled on petitioner FDCs motion for production of
documents, and if it found that the documents to be produced were not material for
the filing of an opposition, then ERC should have declared it to be so categorically.
The parties should not have been left in the dark and determine for themselves by
inference whether the contentions have been disposed of or not. Considering further
the time constraint in the filing of the comments and pleadings, a prompt
disposition of the motion for production of documents would have given FDC enough
period within which to file its comment or opposition for the ERC to consider in
resolving MERALCOs application for a provisional rate adjustment.
It is conceded that the ERC is confronted with the difficult task of balancing the
interest of the affected parties. On one hand, it has to promote and encourage
market development, and maintain MERALCOs financial integrity, and on the
other, it also has to protect public interests. As in the procedure provided by the
second paragraph of Rule 3, Section 4 (e) of the IRR, the filing of comments and
oppositions to the application are deemed sufficient. In no event is due process to be
sacrificed. 31
Moreover, respondent ERC, through its counsel, admitted during the oral
arguments that MERALCO failed to fully comply with
_______________
30Utility Consumer Action Group vs. Public Service Commission, 583 P.2d 605 (1978).
31Friends of the Earth vs. Public Service Commission, 254 N.W.2d 299, 78 Wis.2d 388, 21 P.U.R.4th
201 (1977).
267
VOL. 432, JUNE 15, 2004 267
Commission
the publication requirement of Rule 3, Section 4 (e) of the IRR. It only caused the
32
publication of a mere notice that an application has been filed, and not of the
application itself, contrary to the express provisions of said rule.
The requirement of publication in applications for rate adjustments is not
without reason or purpose. It is ancillary to the due process requirement of notice
and hearing. Its purpose is not merely to inform the consumers that an application
for rate adjustment has been filed by the public utility. It is to adequately inform
them that an application has been made for the adjustment of the rates being
implemented by the public utility in order to afford them the opportunity to be
heard and submit their stand as to the propriety and reasonableness of the rates
within the period allowed by the Rule. Without the publication of the application,
the consumers are left to second-guess the substance and merits of the application.
The publication by respondent MERALCO of a notice that an application for the
approval of revised rate schedules and provisional authority will be filed by it falls
short of the requirement. The Rule requires the publication of the application or
petition for rate adjustment itself. The publication made by MERALCO, obviously,
does not sufficiently inform the public of the nature and substance of the application,
as intended by the law. If the application or petition were too long and expensive to
be published, then, as suggested by the OSG, the material allegations or reasons for
the proposed increase and the proposed effective date of increase would have
sufficed which MERALCO likewise failed to do.
The ruling in the case of Beautifont, Inc. vs. Court of Appeals, cited by the ERC
33
is not applicable in the case at bar. In said case, the questioned provision of R.A. No.
5455 reads:
SEC. 7. Publication and Posting of Notices.Immediately after the filing of any application
under this Act, the Secretary of the Board of Investments shall publish the same at the
expense of the applicant once a week for three consecutive weeks in the Official Gazette and
in one of the newspapers of general circulation in the province or city where the applicant
has its principal office and post copies of said application in conspicuous places, in the office
of the Board of Investments or in the building were
_______________
32 TSN, January 27, 2004, p. 300.

33 G.R. No. L-50141, January 29, 1988, 157 SCRA 491.
268
Commission
said office is located, setting forth in such copies the name of the applicant, the business in
which it is engaged or proposes to engage or invest, and such other data and information as
may be required by the Board of Investments. No approval or certificate shall be valid
without the publication and posting of notices as herein provided.
In interpreting this provision, the Court ruled that what must be published and
posted by the applicant is an abstract or summary of the application and not the
application itself. The Court concluded that other parts of the provision shows that
it is the notice of application that is meant to be published and posted, and in fact,
the provision itself prescribes the matters to be published, i.e., the name of the
applicant, the business in which it is engaged or proposes to engage or invest, and
such other data and information as may be required by the Board of Investments.
There would be no need to itemize these few particulars if it were the application
itself that was meant to be published and posted, the Court stressed.
34
In contrast, there is no ambiguity in the first paragraph of Rule 3, Section 4 (e) of

the EPIRAs IRR. It clearly states that: (A)ny application or petition for rate
adjustment or for any relief affecting the consumers must be . . . accompanied with
an acknowledgment of receipt of a copy thereof . . . together with the certification of
the notice of publication thereof in a newspaper of general circulation in the same
locality. What the Rule requires is a certification of the notice of publication of
the application or petition and not a certification of the publication of notice, as
employed in the Beautifont case. The term thereof as used in the phrase notice of
publication thereof refers to the application or petition itself for rate adjustment or
for any relief, and unlike in the Beautifont case, there is nothing in the provision
that shows that publication is restricted to a notice that an application has been
filed. If the Court were to adopt the ERCs conclusion, then the purpose of the IRR
to adequately inform the consumers would be defeated.
Having failed to conform to the IRR on the publication requirement, the
proceedings before the ERC is ultra vires.Hence, for this reason, I agree with the
majority that the provisional order of rate adjustment is null and void.
_______________
Ibid.
34
269
VOL. 432, JUNE 15, 2004 269
Brillantes, Jr. vs. Commission on Elections
Petition and petition-in-intervention granted, order dated November 27, 2003 of the
Energy Regulatory Commission declared void and set aside.
Note.The regulation and fixing of power rates to be charged by electric
cooperatives remain within the jurisdiction of the National Electrification
Administration, despite the enactment of Executive Order No. 172, creating the
Energy Regulatory Board. (Province of Zamboanga del Norte vs. Court of
Appeals, 342 SCRA 549 [2000])
o0o
VOL. 18, SEPTEMBER 29, 1966 247
Caltex (Philippines), Inc. vs. Palomar
No. L-19650. September 29, 1966.
CALTEX (PHILIPPINES), INC., petitioner and appellee, vs. ENRICO PALOMAR,
in his capacity as THE POSTMASTER GENERAL, respondent and appellant.
Declaratory relief; Conditions sine qua non before relief can be availed of.In order
that a declaratory relief may be available, the following conditions must be present: (1)
there must be a justiciable controversy; (2) the controversy must be between persons whose
interests are adverse; (3) the party seeking: declaratory relief must have a legal interest in
the controversy; and (4) the issue involved must be ripe for judicial determination
(Tolentino vs. Board of Accountancy, 93 Phil. 83; Delumen vs.Republic, 94 Phil. 287;
Edades vs. Edades, 99 Phil. 675).
Same; Element of justiciable controversy.The appellee's insistent assertion of its
claim to the use of the mails for its proposed contest, and the challenge thereto and
consequent denial by the appellant of the privileged demanded, undoubtedly
_______________
3 People v. Tansianco, L-19448, Feb. 28, 1964.
248

48
spawned a live controversy. There is an active antagonistic assertion of a legal right on
the part of the appellee and a denial thereof on the part of appellant concerning a real
question or issue. With the appellee's bent to hold the contest and the appellant's threat to
issue a fraud order therefor if carried out, the contenders are confronted by. the ominous
shadow of an imminent and inevitable litigation unless their differences are settled and
stabilized by a tranquilizing declaration (Pablo Y. Sen vs. Republic, 96 Phil. 987). Doubt, if
any there was, has ripened into a justiciable controversy when it was translated into a
positive claim of right which: is actually contested (III Moran, Comments on the Rules of
Court, 1963 ed., pp. 132-133, citing: Woodward vs. Fox West Theaters, 36 Ariz., 251, 284
Pac. 350).
Statutes; Construction defined.Construction is the art or process of discovering and
expounding the meaning 'and intention of the authors of the law with respect to its applica-
tion to a given case, where that intention is rendered doubtful, amongst others, by reason of
the fact that the given case is not explicitly provided for in the law (Black, Interpretation of
Laws, p. 1). In the present case, the question of whether or not the scheme proposed by the
appellee is within the coverage of the prohibitive provisions of the Postal Law inescapably
requires an inquiry into the intended meaning of the words used therein. This is as much a
question of construction or interpretation as any other.
Same; Weight of judicial decisions.In this jurisdiction, judicial decisions assume the
same authority as the statute itself and, until' authoritatively abandoned, necessarily
become, to the extent that they are applicable, the criteria which must control the
actuations not only of those called upon to abide thereby but also of those in duty-bound to
enforce obedience thereto.
Gambling; Essential elements of lottery.The term "lottery" extends to all schemes for'
the distribution of .prizes by chance, such as policy playing, gift exhibitions, prize concerts,
raffles at fairs, etc., and various forms of gambling. The three essential elements of a
Iottery are: first, consideration; second, prize: and third, chance ("El Debate,"
Inc. vs. Topacio, 44 Phil. 278, 283-284, citing Horner vs. U.S., 147 U.S. 449; Public Clearing
House vs.Coyne, 194 U.S. 497; U.S. vs. Filart and Singson, 30 Phil. 80; U.S. vs. Olsen and
Marker, 36 Phil. 395; U.S. vs. Baguio, 39 Phil. 962).
Same; Gratuitous distribution of property by chance; When element of consideration is
not present.In respect to the element of consideration, the law does not condemn the
gratuitous distribution of property by chance, if no consideration is derived directly or
indirectly from the party receiving the chance, but does condemn as criminal schemes in
which a va-
249
VOL. 18; SEPTEMBER 29, 1966 2

49
luable consideration of some kind is paid directly or indirectly for the chance to draw a
prize ("El Debate", Inc. vs. Topacio, supra).Under the rules of the proposed contest there is
no requirement that any fee be paid, any merchandise be bought, any service be rendered,
or any value whatsoever be given for the privilege to participate. A prospective contestant
has but to go to a Caltex station, request for the entry form which is available on demand,
and accomplish and submit the same for the drawing of the winner. Viewed from all angles,
the contest fails to exhibit any discernible consideration which would brand it as a lottery,
The scheme is but a gratuitous distribution of property by chance
Same; Test to determine presence of consideration.Theelement of consideration does
not consist of the benefit derived by the proponent of the contest. The true test is whether
the participant pays a valuable consideration for the chance, and not whether those
conducting- the enterprise receive something of value in return for the distribution of the
price (People vs, Cardas, 28 P. 2d., 99, 137 Cal. App. [Supp.] 788). The standpoint of the
contestant, not of the sponsor, is all that matters.
Same; Meaning of "gift enterprise"; When proposed scheme is not embraced by me
term.The term "gift enterprise" is commonly applied to a sporting artifice under which
goods are sold for their market value, but by way of inducement each purchaser is given a
chance to win a prize (54 C.J.S. 850; 84 Am. Jur., 654; Black, Law Dictionary, 4th ed., p.
817; Ballantine, Law Dictionary with Pronunciations, 2nd ed., p. 55; Retail Section of
Chamber of Commerce of Plattsmouth vs. Kieck, 257 N.W., 493, 128 Neb. 13;
Barker vs. State, 193 S.E., 605, 56 Ga. App., 705; Bell vs. State, 37 Tenn. 507, 509, 5, Sneed
507, 509). As thus conceived, the term clearly cannot embrace the scheme at bar, where
there is no sale of anything to which the chance offered is attached as an inducement to the
purchaser, and where the contest is open to all qualified contestants irrespective of whether
or not they buy the appellee's products,;
Postal Law; Statutes; Term "gift enterprise" is used in association with word "lottery"
In the Postal Law the term "gift enterprise" is used in association with the word "lottery."
Con-sonant to the well-known principle of legal hermeneutics noscitur a sociis, it is only
logical that the term be accorded no other meaning then that which is consistent with the
nature of the word associated therewith. Hence, if lottery is prohibited only if it involves a
consideration, so also must the term "gift enterprise" be so construed. Significantly, there is
not the slightest indicium in the law of any intent to eliminate the element of consideration
from the "gift enterprise therein included.
250

50
Same; Purpose of mail fraud orders.Mail fraud orders are designed to prevent the
use of the mails as a medium for disseminating printed matters which on grounds of public
policy are declared non-mailable. As applied to lotteries, gift enterprises and similar
schemes, justification lies in the recognized necessity to suppress their tendency to inflame
the gambling spirit and to corrupt public morals (Com. vs. Lund, 15 A. 2d., 839, 143 Pa.
Super. 208). Since in gambling it is inherent that something of value be hazarded for
a .chance to gain a larger amount, it follows ineluctably that where no consideration is paid
by the contestant to participate, the. reason behind the law can hardly be said to obtain.
Same; When gift enterprises are condemnable.Under the prohibitive provisions of the
Postal Law, gift enterprises and similar schemes therein contemplated are condemnable
only if, like lotteries, they involve: the element of consideration. Because there is none in
the contest herein ,in question, the appellee may not be denied the use of the mails for
purposes thereof.
APPEAL from a declaratory judgment of the Manila Court of First Instance.

Solicitor General for respondent and appellant. "..',
Ross, Selph ,& Carrascoso for petitioner and appellee.
CASTRO, J.:
In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex)
conceived and laid the groundwork for a promotional scheme calculated to drum up
par tronage for its oil products. Denominated "Caltex Hooded Pump Contest", it
calls for participants therein to estimate the actual number of liters a hooded gas
pump at each Caltex station will dispense during a, specified period. Employees of
the Caltex (Philippines) Inc., its dealers and its advertising agency, and their
immediate families excepted, participation is to be open indiscriminately to all
"motor vehicle owners and/or licensed drivers". For the privilege to participate, no
fee or consideration is required to be paid, no purchase of Caltex products required
to be made. Entry 'f orms are to be made available upon request at each Caltex
station where a sealed can will be provided for the deposit of accomplished entry
stubs.
251
VOL. 18, SEPTEMBER 29, 1966 251
A three-staged winner selection system is envisioned. At the station level, called
"Dealer Contest", the contestant whose estimate is closest to the actual number of
liters dispensed by the hooded pump thereat is to be awarded the first prize; the
next closest, the second; and the next, the third. Prizes at this level consist of a 3-
burner kerosene stove for first; a thermos bottle and a Ray-O-Vac hunter lantern for
second; and an Everready Magnet-lite flashlight with batteries and a screwdriver
set for third. The first-prize winner in each station will then be qualified to join in
the "Regional Contest" in seven different regions. The winning stubs of the qualified
contestants in each region will be deposited in a sealed can from which the first-
prize, second-prize and third-prize winners of that region will be drawn. The
regional first-prize winners will be entitled to make a three-day all-expenses-paid
round trip to Manila, accompanied by their respective Caltex dealers, in order to
take part in the "National Contest". The regional second-prize and third-prize
winners will receive cash prizes of P500 and P300, respectively. At the national
level, the stubs of the seven regional first-prize winners will be placed inside a
sealed can from which the drawing for the final first-prize, second-prize and third-
prize winners will be made. Cash prizes in store for winners at this final stage are:
P3,000 for first; P2,000 for second; P1,500 for third; and P650 as consolation prize
for each of the remaining four participants.
Foreseeing the extensive use of the mails not only as amongst the media; for
publicizing the contest but also 'f or the transmission 61 communications relative
thereto, representations were made by Caltex with the postal authorities for the
contest to be cleared in advance for mailing, having in view sections 1954 (a), 1982
and 1983 of the Revised Administrative Code, the pertinent provisions 'of which
read as 'f ollows:
"SECTION 1954. Absolutely non-mailable matter. -No matter belonging to any of the
following classes, whether sealed as first-class matter or not, shall be imported into the
Philippines through the mails, or to be deposited in or carried by the mails of the
Philippines, or be delivered to its addressee by any officer or employee of the Bureau of
Posts:
(a) Written or printed matter in any form advertising,
252
describing, or in any manner pertaining to, or conveying or purporting to convey any
information concerning any lottery, gift enterprise, or similar scheme depending in whole or
in part upon lot or chance, or any scheme, device, or enterprise for obtaining any money or
property of any kind by means of false or fraudulent pretenses, representations, or
promises."
''SECTION 1982. Fraud orders.Upon satisfactory evidence that any person or
company is engaged in conducting any lottery, gift enterprise, or scheme for the distribution
of money, or of any real or personal property by lot, chance, or drawing; of any kind, of that
any person or company 'is conducting any scheme, device, or enterprise for obtaining money
or property of any kind through the mails by means of false or fraudulent pretenses,
representations, or promises, the Director of Posts may instruct any postmaster or other
officer or employee of the Bureau to return to the person, depositing the same in the mails,
with the word 'f raudulent' plainly written or stamped upon the outside cover thereof, any
mail matter of whatever class mailed by or addressed to such person or company or the
representative or agent of such person or company."
"SECTION 1983. Deprivation of use of money order system and telegraphic transfer
service.The Director of Posts may, upon evidence satisfactory to him that. any person or
company is engaged in conducting any lottery, gif it enterprise, or scheme for the
distribution of money, or of any real or personal property by lot, chance, or drawing of any
kind, or that any person or company is conducting any scheme, device, or enterprise for
obtaining money or property of any kind through the mails by means of false or fraudulent
pretenses, representations, or promise, forbid the issue or payment by any postmaster of
any postal money order or telegraphic transfer to said person or company or to the agent of
any such person or company, whether such agent is acting as an individual or as a firm,
bank, corporation, or association of any kind, and may provide by regulation for the return
to the remitters of the sums named in money orders or telegraphic transfers drawn in favor
of such person or company or its agent."
The overtures were later formalized in a letter to the Postmaster General, dated
October 31, 1960, in which the Caltex, thru counsel, enclosed a copy of the contest
rules and endeavored to justify its position that the contest does not violate the
anti-lottery provisions of the Postal Law. Unimpressed, the then Acting Postmaster
General opined that scheme falls within the purview of the provisions aforesaid and
declined to grant the requested clearance. In its counsel's letter of December 7,
1960; Caltex sought a reconsideration of the foregoing stand, stressing that
253
VOL. 18 SEPTEMBER 29, 1966 253
there being invloved no consideration ob the part of any contestant, the contest was
not, under controlling authorities, condemnable as a lottery. Relying, however, on
an opinion rendered by the Secretary of Justice on an unrelated case seven years
before (Opinion 217, Series of 1953), the Postmaster General maintained his view
that the contest involves consideration, or that, if it does not, it is nevertheless a
"gift enterprise" which is equally banned by the Postal Law, and in his letter of
December 10, 1960 not only denied the use of the mails for purposes of the proposed
contest but as well threatened that if the contest was conducted, "a fraud order will
have to be issued against it (Caltex) and all its representatives".
Caltex thereupon invoked judicial intervention by filing the present petition for
declatory relief against Postmaster General Enrico Palomar, praying "that
judgmnent be rendered declaring its 'Caltex Hooded Pump Contest' not to be
violative of the Postal Law, and ordering respondent to allow petitioner the use of
the mails to bring the contest to the attention of the public". After issues were
joined and upon the respective memoranda of the parties, the trial court rendered
judgment as follows:
"In view of the foregoing considerations, the Court holds that the proposed 'Caltex Hooded
Pump Contest' announced to be conducted by the petitioner under the rules marked as
Annex B of the petitioner does not violate the Postal Law and the respondents has no right
to bar the publiuc distribution of said rules by the mails."
The respondent appealed.

The parties are now before us, arrayed against each other upon two basic
issues: first, whether the petition states a sufficient cause of action for declaratory
relief; and second, whether the proposed "Caltex Hooded Pump Contest" violates the
Postal Law. We shall take these up in seriatim.
1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which
was the applicable legal basis for the remedy at the time it was invoked, declaratory
relief is available to any person "whose rights are affected by a stature * * * to
determine any question of construction or validity arising under tje * * * statute
and for adecla
254
ration of his rights thereunder" (now section 1, Rule 64, Revised Rules of Court). In
amplification, this Court, conformably to established jurisprudence on the matter,
laid down certain conditions sine qua non therefor, to wit: (1) there must be a
justiciable controversy; (2) the controversy must be between persons whose interests
are adverse; (3) the party seeking declaratory relief must have a legal interest in
the controversy; and (4) the issue involved must be ripe for judicial determination
(Tolentino vs. The Board of Accountancy, et al., G.R. No. L-3062, September 28,
1951; Delumen, et al. vs. Republic of the Philippines, 50 O.G., No. 2, pp. 576, 578-
579; Edades vs. Edades, et al., G.R. No. L-8964, July 31, 1956). The gravamen of the
appellant's stand being that the petition herein states no sufficient cause of action
for declaratory relief, our duty is to assay the factual bases thereof upon the
foregoing crucible.
As we look in retrospect at the incidents that generated the present controversy.
a number of significant points stand out in bold relief. The appellee (Caltex), as a
business enterprise of some consequence, concededly has the unquestioned right to
exploit every legitimate means, and to avail of all appropriate media to advertise
and stimulate increased patronage for its products. In contrast, the appellant, as
the authority charged with the enforcement of the Postal Law, admittedly has the
power and the duty to suppress transgressions thereof -particularly thru the
issuance of fraud orders, under Sections 1982 and 1983 of the Revised
Administrative Code, against legally nonmailable schemes. Obviously pursuing its
right aforesaid, the appellee laid out plans for the sales promotion scheme
hereinbefore detailed. To forestall possible difficulties in the dissemination of
information thereon thru the mails, amongst other media, it was found expedient to
request the appellant for an advance clearance therefor. However, likewise by
virtue of his jurisdiction in the premises and construing the pertinent provisions of
the Postal Law, the appellant saw a violation thereof in the proposed scheme and
accordingly declined the request. A point of difference as to the correct construction
to be given to the applicable statute was thus reached. Communications in
255
which the parties expounded on their respective theories were exchanged. The
confidence with which the appellee insisted upon its position was matched only by
the obstinacy with which the appellant stood his ground. And this impasse was
climaxed by the appellant's open warning to the appellee that if the proposed
contest was "conducted, a fraud order will have to be issued against it and all Its
representatives,"
Against this backdrop, the stage was indeed set for the remedy prayed for. The
appellee's insistent assertion of its claim to the use of the mails for its proposed
contest, and the challenge thereto and consequent denial by the appellant of the
privilege demanded, undoubtedly spawned a live controversy. The justiciability of
the dispute cannot be gainsaid. There is an active antagonistic assertion of a legal
tight on one side and a denial thereof on the other, concerning a realnot a mere
theoreticalquestion or issue. The contenders are as real as their interests are
substantial. To the appellee, the uncertainty occasioned by the divergence of views
on the issue of construction hampers or disturbs its freedom to enhance its business.
To the appellant, the suppression of the appellee's proposed contest believed to
transgress a law he has sworn to uphold and enforce is an unavoidable duty. With
the appellee's bent to hold the contest and the appellant's threat 'to issue a fraud
order therefor if carried out, the contenders are confronted by the ominous shadow
of an imminent and inevitable litigation unless their differences are settled and
stabilized by a tranquilizing declaration (Pablo v. Sen, et al. vs. Republic of the
Philippines, G.R. No. L-6868, April 30, 1955). And, contrary to the insinuation of
the appellant, the time is long past when it can rightly be said that merely the
appellee's "desires are thwarted by its own doubts, or by the fears of others" v.
which admittedly does not confer a cause of action. Doubt, if any there was, has
ripened into a justiciable controversy when, as in the case at bar, it was translated
into a positive claim of right which is actually contested (III Moran, Comments on
the Rules of Court, 1963 ed., pp. 132-133, citing: Woodward vs. Fox West Coast
Theaters, 86 Ariz., 251, 284 Pac. 350).
256
We cannot hospitably entertain the appellant's pretense that there is here no
question of construction: because the said appellant "simply applied the clear
provisions of the law to a given set of facts as embodied in the rules of the contest",
hence, there is no room for declaratory relief. The infirmity of this pose lies in the
fact that it proceeds from the assumption that, if the circumstances here presented,
the construction of the legal provisions can be divorced from the matter of their
application to the appellee's contest. This is not feasible. Construction, verily, is the
art or process of discovering and expounding the meaning and intention of the
authors of the law with respect to its application to a given case, where that
intention is rendered doubtful, amongst others, by reason of the fact that the given
case is not explicitly provided for in the law(Black, Interpretation of Laws, p. 1).
This is precisely the case here. Whether or not the scheme proposed by the appellee
is within the coverage of the prohibitive provisions of the Postal Law inescapably
requires an inquiry into the intended meaning of the words used therein. To our
mind, this is as much a question of construction or interpretation as any other.
Nor is it accurate to say, as the appellant intimates, that a pronouncement on
the matter at hand can amount to nothing more than an advisory opinion the
handing down of which is anathema to a declaratory relief action. Of course, no
breach of the Postal Law has as yet been committed. Yet, the disagreement over the
construction thereof is no longer nebulous or contingent. It has taken a fixed and
final shape, presenting clearly defined legal issues susceptible of immediate
resolution. With the battle lines drawn, in a manner of speaking, the propriety
nay, the necessityof setting the dispute at rest before it accumulates the asperity,
distemper, animosity, passion and violence of a full-blown battle which looms ahead
(III Moran, Comments on the Rules of Court, 1963 ed., p. 132 and cases cited),
cannot but be conceded. Paraphrasing the language in Zeitlin vs. Arnebergh, 59 Cal.,
2d., 901, 31 Cal. Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p, 869, to deny
declaratory relief to the appellee in the situation into which it has been cast, would
be to force
257
it to choose between undesirable alternatives. If it cannot obtain a final and
definitive pronouncement as to whether the anti-lottery provisions of the Postal
Law apply to its proposed contest, it would be faced with these choices: If it
launches the contest and uses the mails for purposes thereof, it not only incurs the
risk, but is also actually threatened with the certain imposition, of a fraud order
with its concomitant stigma which may attach even if the appellee will eventually
be vindicated; if it abandons the contest, it becomes a self-appointed censor, or
permits the appellant to put into eff ect a virtual fiat of previous censorship which is
constitutionally unwarranted. As we weigh these considerations in one equation
and in the spirit of liberality with which the Rules of Court are to be interpreted in
order to promote their object (section 1, Rule 1, Revised Rules of Court)which, in
the instant case, is to settle, and afford relief from uncertainty and insecurity with
respect to, rights and duties under a lawwe can see in the present case any
imposition upon our jurisdiction or any futility or prematurity in our intervention.
The appellant, we apprehend, underrates the force and binding effect of the
ruling we hand down in this case if. he believes that it will not have the final and
pacifying function that a declaratory judgment is calculated to subserve. At the very
least, the appellant will be bound. But more than this, he obviously overlooks that
in this jurisdiction, "Judicial decisions applying or interpreting the law shall form a
part of the.legal system" (Article 8, Civil Code of the Philippines). In effect/judicial
decisions assume the same authority as the statute itself and, until authoritatively
abandoned, necessarily become, to the extent that they are applicable, the criteria
which must control the actuations not only of those called upon to abide thereby but
also of those in duty bound to enforce obedience thereto. Accordingly, we entertain
no misgivings that our resolution of this case will terminate the controversy at hand.
It is not amiss to point out at this juncture that the conclusion we have herein
just reached is not without precedent. In Liberty Calendar Co. vs. Cohen, 19 N.J.,
258
399, 117 A. 2d., 487, where a corporation engaged in promotional advertising was
advised by the county prosecutor that its proposed sales promotion plan had the
characteristics of a lottery, and that if such sales promotion were conducted, the
corporation would be subject to criminal prosecution, it was held that the
corporation was entitled to maintain a declaratory relief action against the county
prosecutor to determine the legality of its sales promotion plan. In pari materia, see
also: Bunis vs. Conway, 17 App. Div. 2d., 207, 234 N.Y.S. 2d., 435; Zeitlin vs.
Arnebergh, supra; Thrillo, Inc. vs. Scott, 15 N.J. Super. 124, 82 A. 2d., 903.
In fine, we hold that the appellee has made out a case for declaratory relief.
2. The Postal Law, chapter 52 of the Revised Administrative Code, using almost
identical terminology in sections 1954(a), 1982 and 1983 thereof, supra, condemns
as absolutely non-mailable, and empowers the Postmaster General to issue fraud
orders against, or otherwise deny the use of the facilities of the postal service to,
any information concerning "any lottery, gift enterprise, or scheme for the
distribution of money, or of any real or personal property by lot, chance, or drawing
of any kind". Upon these words hinges the resolution of the second issue posed in
this appeal.
Happily, this is not an altogether untrodden judicial path. As early as in 1922, in
"El Debate", Inc. vs. Topacio, 44 Phil. 278, 283-284, which significantly dwelt on the
power of the postal authorities under the above-mentioned provisions of the Postal
Law, this Court declared that
"While countless definitions of lottery have been attempted, the authoritative one for this
jurisdiction is that of the United States Supreme Court, in analogous cases having to do
with the power of the United States Postmaster General, viz.: The term 'lottery' extends to
all schemes for the distribution of prizes by chance, such as policy playing, gift exhibitions,
prize concerts, raffles at fairs, etc., and various forms of gambling. The three essential
elements of a lottery are: First, consideration; second, prize; and third, chance. (Horner vs.
States [1892], 147 U.S. 449; Public Clearing House vs. Coyne [1903], 194 U.S., 497; U.S. vs.
Filart and Singson [1915], 30 Phil. 80; U.S. vs. Olsen and Marker [1917], 36 Phil., 395; U.S.
vs.
259
Baguio [1919], 39 Phil., 962; Valhalla Hotel Construction Company vs. Carmona, p.
233, ante.)"
Unanimity there is in all quarters, and we agree, that the elements of prize and
chance are too obvious in the disputed scheme to be the subject of contention.
Consequently, as the appellant himself concedes, the field of inquiry is narrowed
down to the existence of the element of consideration therein. Respecting this
matter, our task is considerably lightened inasmuch as in the same case just cited,
this Court has laid down a definitive yardstick in the 'f ollowing terms
"In respect to the last element of consideration, the law does not condemn the gratuitous
distribution of property by chance, if no consideration is derived directly or indirectly from
the party receiving the \chance, but does condemn as criminal schemes in which a valuable
consideration of some kind is paid directly or indirectly for the chance to draw a prize."
Reverting to the rules of the proposed contest, we are str uck by the clarity of the
language in which the invitation to participate therein is couched. Thus
"No puzzles, no rhymes? You don't need wrappers, labels or boxtops? You don't have to buy
anything? Simply estimate the' actual number of liters the Caltex gas pump with the hood
at your favorite Caltex dealer will dispense fromto , and win valuable prizes x x x."
Nowhere in the said rules is any requirement that any fee be paid; any merchandise
be bought, any service be rendered, or any value whatsoever be given for the
privilege to participate. A prospective contestant has but to go to a Caltex station,
request for the entry form which is available on demand, and accomplish and
submit the same for the drawing of the winner, Viewed from all angles or turned
inside out, the contest fails to exhibit any discernible consideration which would
brand it as a lottery. Indeed, even as we head the stern injunction, "look beyond the
fair exterior, to the substance, in order to unmask the real element and pernicious
tendencies which the law is seeking to prevent" ("El Debate", Inc. vs.
Topacio, supra, p. 291), we find none. In our appraisal, the scheme does not only
appear to be, but actually is, a gratuitous distribution of property by chance.
260
There is no point to the appellant's insistence that nonCaltex customers who may
buy Caltex products simply to win a prize would actually be indirectly paying a
consideration for the privilege to join the contest. Perhaps this would be tenable if
the purchase of any Caltex product or the use of any Caltex service were a pre-
requisite to participation. But it is not. A contestant, it hardly needs reiterating,
does not have to buy anything or to give anything of value.
Off-tangent, too, is the suggestion that the scheme, being admittedly for sales
promotion, would naturally benefit the sponsor in the way of increased patronage
by those who will be encouraged to prefer Caltex products "if only to get the chance
to draw a prize by securing entry blanks". The required element of consideration
does not consist of the benefit derived by the proponent of the contest. The true test,
as laid down in People vs. Cardas, 28 P. 2d., 99, 137 Cal. App. (Supp.) 788, is
whether the participant pays a valuable consideration for the chance,and not
whether those conducting the enterprise receive something of value in return for
the distribution of the prize. Perspective properly oriented, the standpoint of the
contestant is all that matters, not that of the sponsor. The following, culled from
Corpus Juris Secundum, should set the matter at rest:
"The fact that the holder of the drawing expects thereby to receive, or in fact does receive,
some benefit in the way of patronage or otherwise, as a result of the drawing; does not
supply the element of consideration. Griffith Amusement Co. vs. Morgan, Tex. Civ. App., 98
S.W., 2d., 844" (54 C.J.S., p. 849).
Thus enlightened, we join the trial court in declaring that the "Caltex Hooded Pump
Contest" proposed by the appellee is not a lottery that may be administratively and
adversely dealt. with under the Postal Law.
But it may be asked: Is it not at least a "gift enterprise, or scheme for the
distribution of money, or of any real or personal property by lot, chance, or drawing
of any kind", which is equally proscribed ? Incidentally, while the appellant's brief
appears to have concentrated on the issue of consideration, this aspect of the case
cannot be
261
avoided if the remedy here invoked is to achieve its tranquilizing effect as an
instrument of both curative and preventive justice. Recalling that the appellant's
action was predicated, amongst other bases, upon Opinion 217, Series 1953, of the
Secretary of Justice, which opined in effect that a scheme, though not a lottery for
want of consideration, may nevertheless be a gift enterprise in which that element
is not essential, the determination of whether or not the proposed contest -
wanting in consideration as we have found it to be -is a prohibited gift enterprise,
cannot be passed over sub silencio.
While an all-embracing concept of the term "gift enterprise" is yet to be spelled
out in explicit words, there appears to be a consensus among lexicographers and
standard authorities that the term is commonly applied to a sporting artifice under
which goods are sold for their market value but by way of inducement each
purchaser is given a chance to win a prize (54 C.J.S., 850; 34 Am. Jur., 654: Black,
Law Dictionary, 4th ed., p. 817; Ballantine, Law Dictionary with Pronunciations,
2nd ed., p. 55; Retail Section of Chamber of Commerce of Plattsmouth vs. Kieck, 257
N.W., 493, 128 Neb. 13; Barker vs. State, 193 S.E., 605, 56 Ga. App., 705; Bell vs.
State, 37 Tenn. 507, 509, 5, Sneed, 507, 509). As thus conceived, the term clearly
cannot embrace the scheme at bar. As already noted, there is.no sale of anything to
which the chance off ered is attached as an inducement to the purchaser. The
contest is open to all qualified contestants irrespective of whether or not they buy
the appellee's products.
Going a step farther, however, and assuming that the appellee's contest can be
encompassed within the broadest sweep that the term "gift enterprise" is capable of
being extended, we think that the appellant's pose will gain no added comfort. As
stated in the opinion relied upon, rulings there are indeed holding that a gift
enterprise involving an award by chance, even in default of the element of
consideration necessary to' constitute a lottery, is prohibited (E.g.: Crimes vs. States,
235 Ala. 192, 178 So. 73; Russell vs. Equitable Loan ,& Sec. Co., 129 Ga. 154, 58
S.E., 88; State ex rel. Stafford vs. Fox-Great Falls Theater Corporation, 132 P. 2d.,
689, 694, 698, 114 Mont. 52). But
262
this is only one side of the coin. Equally impressive authorities, declare that, like a
lottery, a gift enterprise comes within the prohibitive statutes only if it exhibits the
tripartite elements of prize, chance and consideration (E.g.: Bills vs. People, 157 P.
2d., 139, 142, 113 Colo., 326; D'Orio vs. Jacobs, 275 P. 563, 565, 151 Wash., 297;
People vs. Psallis, 12 N.Y.S., 2d., 796; City and County of Denver vs. Frueauff, 88 P.,
389, 394, 39 Colo., 20, 7, L.R.A., N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S., 851, citing:
Barker vs. State, 193 S.E., 605, 607, 56 Ga. App., 705; 18 Words and Phrases, perm.
ed., pp. 590-594). The apparent conflict of opinions is explained by the fact that the
specific statutory provisions relied upon are not identical. In some cases, as pointed
out in 54 C. J.S., 851, the terms f- "lottery" and "gift enterprise" are used
interchangeably (Bills vs. People, supra); in others, the necessity for the element of
consideration or chance has been specifically eliminated by statute. (54 C.J.S., 351-
352, citing Barker vs. State, supra;State ex rel. Stafford vs. Fox-Great Falls Theater
Corporation, supra). The lesson that we derive from this state of the pertinent
jurisprudence is, therefore, that every case must be resolved upon the particular
phraseology of the applicable statutory provision.
Taking this cue, we note that in the Postal Law, the term in question is used in
association with the word "lottery". With the meaning of lottery settled, and
consonant to the well-known principle of legal hermeneutics noscitur a sociis
which Opinion 217 aforesaid also relied upon although only insofar as the element
of chance is concearned.it is only logical that the term under a construction
should be accorded no other meaning than that which is consistent with the nature
of the word associated therewith. Hence, if lottery is prohibited only if it involves a
consideration, so also must the term "gift enterprise" be so construed. Significantly,
there is not in the law the slightest indicium of any intent to eliminate that element
of consideration from the "gift. enterprise" therein included.
This conclusion firms up in the light of the mischief sought to be remedied by the
law, resort to the determination thereof being an accepted extrinsic aid in statutory
263
construction. Mail fraud orders, it is axiomatic, are designed to prevent the use of
the mails as a medium for disseminating printed matters which on grounds of
public policy are declared non-mailable. As applied to lotteries, gift enterprises and
similar schemes, justification lies in the recognized necessity to suppress their
tendency to inflame the gambling spirit and to corrupt public morals (Com. vs, Lund,
15 A, 2d., 839, 143 Pa. Super, 208). Since in gambling it is inherent that something
of value be hazarded for a chance to gain a larger amount, it follows ineluctably that
where no consideration is paid by the contestant to participate, the reason behind
the law can hardly be said to obtain. If, as it has been held
"Gratuitous distribution of property by lot or chance does not constitute 'lottery', if it is not
resorted to as a device to evade the law and no consideration is derived, directly or
indirectly, from the party receiving the chance, gambling spirit not being cultivated or
stimulated thereby. City of Roswell vs. Jones, 67 P. 2d., 286, 41 N.M., 258." (25 Words and
Phrases, perm. ed., p. 695, italics supplied).
we find no obstacle in saying the same respecting a gift enterprise. In the end, we
are persuaded to hold that, under the prohibitive provisions of the Postal .Law
which we have heretofore examined, gift enterprises and similar schemes therein
contemplated are condemnable only if, like lotteries, they involve the element of
consideration. Finding none in the contest here in question, we rule that the
appellee may not be denied the use of the mails for purposes thereof.
Recapitulating, we hold that the petition herein states a sufficient cause of action
for declaratory relief, and that the "Caltex Hooded Pump Contest as described in
the rules submitted by the appellee does not transgress the provisions of the Postal
Law.
ACCORDINGLY, the judgment appealed from is affirmed. No costs.
Concepcion, C.J., Reyes,
J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez,
JJ., concur.
Judgment affirmed.
264
Yong Sai vs. Republic
Notes.As to propriety of declaratory relief, see annotation under Pilar vs.
Secretary of Public Works and Communications, L-21039, Feb. 18, 1967, 19
Supreme Court Reports Annotated 358, 361.
The Caltex case supra, was cited in Hodges vs. Municipal Board of Iloilo City, L-
18276, Jan. 12, 1967, 19 Supreme Court Reports Annotated 28, in connection with
exhaustion of administrative remedies.
_____________
G.R. No. 186400. October 20, 2010.*
CYNTHIA S. BOLOS, petitioner, vs. DANILO T. BOLOS, respondent.
Husband and Wife; Marriages; Declaration of Nullity of Marriage; The Rule on
Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable Marriages as
contained in A.M. No. 02-11-10-SC, which the Court promulgated on 15 March 2003,
extends only to those marriages entered into during the effectivity of the Family Code which
took effect on 3 August 1988.Petitioner insists that A.M. No. 02-11-10-SC governs this
case. Her stance is unavailing. The Rule on Declaration of Absolute Nullity of Void
Marriages and Annulment of Voidable Marriages as contained in A.M. No. 02-11-10-SC
which the Court promulgated on March 15, 2003, is explicit in its scope. Section 1 of the
Rule, in fact, reads: Section 1. ScopeThis Rule shall govern petitions for declaration of
absolute nullity of void marriages and annulment of voidable marriages under the Family
Code of the Philippines. The Rules of Court shall apply suppletorily. The categorical
language of A.M. No. 02-11-10-SC leaves no room for doubt. The coverage extends only to
those marriages entered into during the effectivity of the Family Code which took effect on
August 3, 1988. The rule sets a demarcation line between marriages covered by the Family
Code and those solemnized under the Civil Code.
Same; Same; Same; Statutory Construction; Verba Legis (Plain Meaning Rule);
A cardinal rule in statutory construction is that when the law is clear and free from any
doubt or ambiguity, there is no room for construction or interpretationthere is only room
for application.The Court finds Itself unable to subscribe to petitioners interpretation
that the phrase under the Family Code in A.M. No. 02-11-10-SC refers to the word
petitions rather than to the word marriages. A cardinal rule in statutory construction is
that when the law is clear and free from any doubt or ambiguity, there is no room for
construction or interpretation. There is only room for application. As the statute is clear,
plain, and free from ambiguity, it must be given its literal meaning and applied without
attempted interpretation. This is what is known as the plain-meaning rule or
_______________
* SECOND DIVISION.
430
30
Bolos vs. Bolos
verba legis. It is expressed in the maxim, index animi sermo, or speech is the index of
intention. Furthermore, there is the maxim verba legis non est recedendum, or from the
words of a statute there should be no departure.
Same; Same; Same; Procedural Rules and Technicalities; Time and again the Court
has stressed that the rules of procedure must be faithfully complied with and should not be
discarded with the mere expediency of claiming substantial merit.There is no basis for
petitioners assertion either that the tenets of substantial justice, the novelty and
importance of the issue and the meritorious nature of this case warrant a relaxation of the
Rules in her favor. Time and again the Court has stressed that the rules of procedure must
be faithfully complied with and should not be discarded with the mere expediency of
claiming substantial merit. As a corollary, rules prescribing the time for doing specific acts
or for taking certain proceedings are considered absolutely indispensable to prevent
needless delays and to orderly and promptly discharge judicial business. By their very
nature, these rules are regarded as mandatory.
Same; Same; Same; Same; Motions for Reconsideration; The rule is and has been that
the period for filing a motion for reconsideration is non-extendible.The appellate court was
correct in denying petitioners motion for extension of time to file a motion for
reconsideration considering that the reglementary period for filing the said motion for
reconsideration is non-extendible. As pronounced in Apex Mining Co., Inc. v. Commissioner
of Internal Revenue, 473 SCRA 490 (2005), the rule is and has been that the period for filing
a motion for reconsideration is non-extendible. The Court has made this clear as early as
1986 in Habaluyas Enterprises vs. Japzon, 142 SCRA 208 (1986). Since then, the Court has
consistently and strictly adhered thereto.
Same; Same; Same; Same; Appeals; While the right to appeal is a statutory, not a
natural right, nonetheless it is an essential part of our judicial system and courts should
proceed with caution so as not to deprive a party of the right to appeal, but rather, ensure
that every party-litigant has the amplest opportunity for the proper and just disposition of
his cause, free from the constraints of technicalities.Appeal is an essential part of our
judicial system. Its purpose is to bring up for review a final judgment of the lower court.
The courts should, thus, proceed with caution so as not to deprive a party of his
431
VOL. 634, OCTOBER 20, 2010 4
31
Bolos vs. Bolos
right to appeal. In the recent case of Almelor v. RTC of Las Pias City, Br. 254, 563
SCRA 447 (2008), the Court reiterated: While the right to appeal is a statutory, not a
natural right, nonetheless it is an essential part of our judicial system and courts should
proceed with caution so as not to deprive a party of the right to appeal, but rather, ensure
that every party-litigant has the amplest opportunity for the proper and just disposition of
his cause, free from the constraints of technicalities.
Same; Same; Same; Our family law is based on the policy that marriage is not a mere
contract, but a social institution in which the State is vitally interestedthe break up of
families weakens our social and moral fabric and, hence, their preservation is not the
concern alone of the family members.This Court is not unmindful of the constitutional
policy to protect and strengthen the family as the basic autonomous social institution and
marriage as the foundation of the family. Our family law is based on the policy that
marriage is not a mere contract, but a social institution in which the State is vitally
interested. The State finds no stronger anchor than on good, solid and happy families. The
break up of families weakens our social and moral fabric and, hence, their preservation is
not the concern alone of the family members.
PETITION for review on certiorari of a decision of the Court of Appeals.
Aileen L. Duremdes for petitioner.
Clarence B. Jandoc for respondent.
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking a review of the December 10, 2008 Decision1 of the Court of Appeals (CA) in
an original action for
_______________
1 Rollo, pp. 43-48. Penned by Associate Justice Arcangelita M. Romilla-Lontok with Associate Justices
Mariano C. Del Castillo (now a member of this Court) and Romeo F. Barza, concurring.
432
Bolos vs. Bolos
certiorari under Rule 65 entitled Danilo T. Bolos v. Hon. Lorifel Lacap Pahimna
and Cynthia S. Bolos, docketed as CA-G.R. SP. No. 97872, reversing the January
16, 2007 Order of the Regional Trial Court of Pasig City, Branch 69 (RTC),
declaring its decision pronouncing the nullity of marriage between petitioner and
respondent final and executory.
On July 10, 2003, petitioner Cynthia Bolos (Cynthia)filed a petition for the
declaration of nullity of her marriage to respondent Danilo Bolos (Danilo) under
Article 36 of the Family Code, docketed as JDRC No. 6211.
After trial on the merits, the RTC granted the petition for annulment in a
Decision, dated August 2, 2006, with the following disposition:
WHEREFORE, judgment is hereby rendered declaring the marriage between petitioner
CYNTHIA S. BOLOS and respondent DANILO T. BOLOS celebrated on February 14, 1980
as null and void ab initio on the ground of psychological incapacity on the part of both
petitioner and respondent under Article 36 of the Family Code with all the legal
consequences provided by law.
Furnish the Local Civil Registrar of San Juan as well as the National Statistics Office
(NSO) copy of this decision.
SO ORDERED.2
A copy of said decision was received by Danilo on August 25, 2006. He timely
filed the Notice of Appeal on September 11, 2006.
In an order dated September 19, 2006, the RTC denied due course to the appeal
for Danilos failure to file the required motion for reconsideration or new trial, in
violation of Section 20 of the Rule on Declaration of Absolute Nullity of Void
Marriages and Annulment of Voidable Marriages.
On November 23, 2006, a motion to reconsider the denial of Danilos appeal was
likewise denied.
_______________
2 See Rollo, p. 8; see also Annex A of petition, Rollo, p. 44.

433
VOL. 634, OCTOBER 20, 2010 433
Bolos vs. Bolos
On January 16, 2007, the RTC issued the order declaring its August 2, 2006
decision final and executory and granting the Motion for Entry of Judgment filed by
Cynthia.
Not in conformity, Danilo filed with the CA a petition for certiorari under Rule 65
seeking to annul the orders of the RTC as they were rendered with grave abuse of
discretion amounting to lack or in excess of jurisdiction, to wit: 1) the September 19,
2006 Order which denied due course to Danilos appeal; 2) the November 23, 2006
Order which denied the motion to reconsider the September 19, 2006 Order; and 3)
the January 16, 2007 Order which declared the August 2, 2006 decision as final and
executory. Danilo also prayed that he be declared psychologically capacitated to
render the essential marital obligations to Cynthia, who should be declared guilty of
abandoning him, the family home and their children.
As earlier stated, the CA granted the petition and reversed and set aside the
assailed orders of the RTC. The appellate court stated that the requirement of a
motion for reconsideration as a prerequisite to appeal under A.M. No. 02-11-10-SC
did not apply in this case as the marriage between Cynthia and Danilo was
solemnized on February 14, 1980 before the Family Code took effect. It relied on the
ruling of this Court in Enrico v. Heirs of Sps. Medinaceli3 to the effect that the
coverage [of A.M. No. 02-11-10-SC] extends only to those marriages entered into
during the effectivity of the Family Code which took effect on August 3, 1988.
Cynthia sought reconsideration of the ruling by filing her Manifestation with
Motion for Extension of Time to File Motion for Reconsideration and Motion for
Partial Reconsideration [of the Honorable Courts Decision dated December 10, 2008].
The CA, however, in its February 11, 2009 Resolution,4 denied the motion for
extension of time considering that the
_______________
3 G.R. No. 173614, September 28, 2007, 534 SCRA 418, 427-428.
4 Annex B of petition; Rollo, p. 49.
434
Bolos vs. Bolos
15-day reglementary period to file a motion for reconsideration is non-extendible,
pursuant to Section 2, Rule 40, 1997 Rules on Civil Procedure citing Habaluyas v.
Japson, 142 SCRA 208. The motion for partial reconsideration was likewise denied.
Hence, Cynthia interposes the present petition via Rule 45 of the Rules of Court
raising the following
ISSUES
I
THE COURT OF APPEALS GRAVELY ERRED IN ISSUING THE
QUESTIONED DECISION DATED DECEMBER 10, 2008 CONSIDERING
THAT:
A. THE PRONOUNCEMENT OF THE HONORABLE COURT IN ENRICO
V. SPS. MEDINACELI IS NOT APPLICABLE TO THE INSTANT CASE
CONSIDERING THAT THE FACTS AND THE ISSUE THEREIN ARE
NOT SIMILAR TO THE INSTANT CASE.
B. ASSUMING ARGUENDO THAT THE PRONOUNCEMENT OF THE
HONORABLE COURT IS APPLICABLE TO THE INSTANT CASE, ITS
RULING IN ENRICO V. SPS. MEDINACELI IS PATENTLY
ERRONEOUS BECAUSE THE PHRASE UNDER THE FAMILY CODE
IN A.M. NO. 02-11-10-SC PERTAINS TO THE WORD PETITIONS
RATHER THAN TO THE WORD MARRIAGES.
C. FROM THE FOREGOING, A.M. NO. 02-11-10-SC ENTITLED RULE
ON DECLARATION OF ABSOLUTE NULLITY OF VOID MARRIAGES
AND ANNULMENT OF VOIDABLE MARRIAGES IS APPLICABLE TO
MARRIAGES SOLEMNIZED BEFORE THE EFFECTIVITY OF THE
FAMILY CODE. HENCE, A MOTION FOR RECONSIDERATION IS A
PRECONDITION FOR AN APPEAL BY HEREIN RESPONDENT.435
VOL. 634, OCTOBER 20, 2010 435
Bolos vs. Bolos
D. CONSIDERING THAT HEREIN RESPONDENT REFUSED TO
COMPLY WITH A PRECONDITION FOR APPEAL, A RELAXATION
OF THE RULES ON APPEAL IS NOT PROPER IN HIS CASE.
II
THE COURT OF APPEALS GRAVELY ERRED IN ISSUING THE
QUESTIONED RESOLUTION DATED FEBRUARY 11, 2009 CONSIDERING
THE FOREGOING AND THE FACTUAL CIRCUMSTANCES OF THIS CASE.
III
THE TENETS OF JUSTICE AND FAIR PLAY, THE NOVELTY AND
IMPORTANCE OF THE ISSUE AND THE SPECIAL CIRCUMSTANCES IN
THIS CASE JUSTIFY AND WARRANT A LIBERAL VIEW OF THE RULES
IN FAVOR OF THE PETITIONER. MOREOVER, THE INSTANT PETITION
IS MERITORIOUS AND NOT INTENDED FOR DELAY.5
From the arguments advanced by Cynthia, the principal question to be resolved
is whether or not A.M. No. 02-11-10-SC entitled Rule on Declaration of Absolute
Nullity of Void Marriages and Annulment of Voidable Marriages, is applicable to
the case at bench.
Petitioner argues that A.M. No. 02-11-10-SC is also applicable to marriages
solemnized before the effectivity of the Family Code. According to Cynthia, the CA
erroneously anchored its decision to an obiter dictum in the aforecited Enrico case,
which did not even involve a marriage solemnized before the effectivity of the
Family Code.
She added that, even assuming arguendo that the pronouncement in the said
case constituted a decision on its merits, still the same cannot be applied because of
the substantial disparity in the factual milieu of the Enricocase from this case. In
the said case, both the marriages sought to be
_______________
5 Rollo, pp. 12-14.

436
Bolos vs. Bolos
declared null were solemnized, and the action for declaration of nullity was filed,
after the effectivity of both the Family Code in 1988 and of A.M. No. 02-11-10-SC in
2003. In this case, the marriage was solemnized before the effectivity of the Family
Code and A.M. No. 02-11-10-SC while the action was filed and decided after the
effectivity of both.
Danilo, in his Comment,6 counters that A.M. No. 02-11-10-SC is not applicable
because his marriage with Cynthia was solemnized on February 14, 1980, years
before its effectivity. He further stresses the meritorious nature of his appeal from
the decision of the RTC declaring their marriage as null and void due to his
purported psychological incapacity and citing the mere failure of the parties who
were supposedly remiss, but not incapacitated, to render marital obligations as
required under Article 36 of the Family Code.
The Court finds the petition devoid of merit.
Petitioner insists that A.M. No. 02-11-10-SC governs this case. Her stance is
unavailing. The Rule on Declaration of Absolute Nullity of Void Marriages and
Annulment of Voidable Marriages as contained in A.M. No. 02-11-10-SC which the
Court promulgated on March 15, 2003, is explicit in its scope. Section 1 of the Rule,
in fact, reads:
Section 1. Scope.This Rule shall govern petitions for declaration of absolute nullity
of void marriages and annulment of voidable marriages under the Family Code of the
Philippines.
The Rules of Court shall apply suppletorily.
The categorical language of A.M. No. 02-11-10-SC leaves no room for doubt. The
coverage extends only to those marriages entered into during the effectivity of the
Family Code which took effect on August 3, 1988.7 The rule sets a demarcation
_______________
6 Id., at p. 329.
7 Supra note 3, citing Modequillo v. Breva, G.R. No. 86355, May 31, 1990, 185 SCRA 766, 722.
437
VOL. 634, OCTOBER 20, 2010 437
Bolos vs. Bolos
line between marriages covered by the Family Code and those solemnized under the
Civil Code.8
The Court finds Itself unable to subscribe to petitioners interpretation that the
phrase under the Family Code in A.M. No. 02-11-10-SC refers to the word
petitions rather than to the word marriages.
A cardinal rule in statutory construction is that when the law is clear and free
from any doubt or ambiguity, there is no room for construction or interpretation.
There is only room for application.9 As the statute is clear, plain, and free from
ambiguity, it must be given its literal meaning and applied without attempted
interpretation. This is what is known as the plain-meaning rule or verba legis. It is
expressed in the maxim, index animi sermo, or speech is the index of intention.
Furthermore, there is the maxim verba legis non est recedendum, or from the words
of a statute there should be no departure.10
There is no basis for petitioners assertion either that the tenets of substantial
justice, the novelty and importance of the issue and the meritorious nature of this
case warrant a relaxation of the Rules in her favor. Time and again the Court has
stressed that the rules of procedure must be faithfully complied with and should not
be discarded with the mere expediency of claiming substantial merit. 11 As a
corollary, rules prescribing the time for doing specific acts or for taking
_______________
8 Carlos v. Sandoval, G.R. No. 179922, December 16, 2008, 574 SCRA 116, 132.
9 Amores v. House of Representatives Electoral Tribunal, G.R. No. 189600, June 29, 2010, 622 SCRA
593, citing Twin Ace Holdings Corporation v. Rufina and Company, G.R. No. 160191, June 8, 2006, 490
SCRA 368, 376.
10 Padua v. People, G.R. No. 168546, July 23, 2008, 559 SCRA 519, 531, citing R. Agpalo, Statutory
Construction 124 (5th ed., 2003).
11 Laguna Metts Corporation v. Court of Appeals, G.R. No. 185220, July 27, 2009, 594 SCRA 139, 143,
citing Yutingco v. Court of Appeals, 435 Phil. 83; 286 SCRA 85 (2002).
438
Bolos vs. Bolos
certain proceedings are considered absolutely indispensable to prevent needless
delays and to orderly and promptly discharge judicial business. By their very nature,
these rules are regarded as mandatory.12
The appellate court was correct in denying petitioners motion for extension of
time to file a motion for reconsideration considering that the reglementary period
for filing the said motion for reconsideration is non-extendible. As pronounced
in Apex Mining Co., Inc. v. Commissioner of Internal Revenue,13
The rule is and has been that the period for filing a motion for reconsideration is non-
extendible. The Court has made this clear as early as 1986 in Habaluyas Enterprises vs.
Japzon. Since then, the Court has consistently and strictly adhered thereto.
Given the above, we rule without hesitation that the appellate courts denial of
petitioners motion for reconsideration is justified, precisely because petitioners earlier
motion for extension of time did not suspend/toll the running of the 15-day reglementary
period for filing a motion for reconsideration. Under the circumstances, the CA decision has
already attained finality when petitioner filed its motion for reconsideration. It follows that
the same decision was already beyond the review jurisdiction of this Court.
In fine, the CA committed no reversible error in setting aside the RTC decision
which denied due course to respondents appeal and denying petitioners motion for
extension of time to file a motion for reconsideration.
Appeal is an essential part of our judicial system. Its purpose is to bring up for
review a final judgment of the lower court. The courts should, thus, proceed with
caution so as not to deprive a party of his right to appeal.14 In the recent case of
_______________
12 Id., citing Gonzales v. Torres, A.M. No. MTJ-06-1653, July 30, 2007, 528 SCRA 490.
13 510 Phil. 268, 274; 473 SCRA 490, 496 (2005).
14 Aguilar v. Court of Appeals, 320 Phil 456, 460; 250 SCRA 371, 373 (1995).
439
VOL. 634, OCTOBER 20, 2010 439
Bolos vs. Bolos
Almelor v. RTC of Las Pinas City, Br. 254,15 the Court reiterated: While the right to
appeal is a statutory, not a natural right, nonetheless it is an essential part of our
judicial system and courts should proceed with caution so as not to deprive a party
of the right to appeal, but rather, ensure that every party-litigant has the amplest
opportunity for the proper and just disposition of his cause, free from the
constraints of technicalities.
In the case at bench, the respondent should be given the fullest opportunity to
establish the merits of his appeal considering that what is at stake is the sacrosanct
institution of marriage.
No less than the 1987 Constitution recognizes marriage as an inviolable social
institution. This constitutional policy is echoed in our Family Code. Article 1 thereof
emphasizes its permanence and inviolability, thus:
Article 1. Marriage is a special contract of permanent union between a man and a
woman entered into in accordance with law for the establishment of conjugal and family life.
It is the foundation of the family and an inviolable social institution whose nature,
consequences, and incidents are governed by law and not subject to stipulation, except that
marriage settlements may fix the property relations during the marriage within the limits
provided by this Code.
This Court is not unmindful of the constitutional policy to protect and strengthen
the family as the basic autonomous social institution and marriage as the
foundation of the family.16
_______________
15 G.R. No. 179620, August 26, 2008, 563 SCRA 447, 460-461, citing Salazar v. Court of Appeals, 426
Phil. 864, 877; 376 SCRA 459, 471 (2002), citing Labad v. University of Southeastern Philippines, 414 Phil
815, 826; 362 SCRA 510, 520 (2001).
16 Almelor v. Regional Trial Court of Las Pinas City, Br. 253, G.R. No. 179620, August 26, 2008, 563
SCRA 447 citing 1987 Philippine Constitution, Art. II, Sec. 12 which provides:
440
Bolos vs. Bolos
Our family law is based on the policy that marriage is not a mere contract, but a
social institution in which the State is vitally interested. The State finds no
stronger anchor than on good, solid and happy families. The break up of families
weakens our social and moral fabric and, hence, their preservation is not the
concern alone of the family members.17
WHEREFORE, the petition is DENIED.
SO ORDERED.
Carpio (Chairperson), Nachura, Leonardo-De Castro**and Peralta, JJ., concur.
Petition denied.
Note.A meaning that does not appear nor is intended or reflected in the very
language of the statute cannot be placed therein by construction. (Government
Service Insurance System vs. Commission on Audit, 441 SCRA 532 [2004])
o0o
_______________
Sec. 12. The State recognizes the sanctity of family life and shall protect and strengthen the family
as a basic autonomous social institution. x x x
Art. XV, Secs. 1-2 which provides:
Sec. 1. The State recognizes the Filipino family as the foundation of the nation.
Accordingly, it shall strengthen its solidarity and actively promote its total development.
Sec. 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be
protected by the State.
17 Azcueta v. Republic, G.R. No. 180668, May 26, 2009, 588 SCRA 196, 205, citing Ancheta v. Ancheta,
G.R. No. 145370, March 4, 2004, 424 SCRA 725, 740; Tuason v. Court of Appeals, 326 Phil. 169, 180-181;
256 SCRA 158, 169 (1996).
** Designated as additional member in lieu of justice Roberto A. abad, per Special oder no. 905 dated
October 5, 2010.
U.S. Supreme Court
United States v. Keitel, 211 U.S. 370 (1908)
United States v. Keitel
No. 286
Argued October 22, 23, 26, 1908
Decided December 14, 1908
211 U.S. 370
ERROR TO THE DISTRICT COURT OF THE UNITED
STATES FOR THE DISTRICT OF COLORADO
Syllabus
Where an indictment is quashed because the facts charged are not within the statute, the government
has an appeal under the Act of March 2, 1907, c. 2564, 34 Stat. 1246.
While abstractly there may be a difference between "interpretation" and "construction," in common
usage, the words have the same significance, and "construction," as employed in the Act of March 2,
1907, c. 2564, 34 Stat. 1246, includes interpretation.
Under 2347-2350, Rev.Stat., a person who is qualified to enter coal lands in his own behalf is
prohibited from making an entry ostensibly for himself but in fact as agent for another who is
disqualified, and an agreement to obtain land for a disqualified person through entries made by
qualified persons constitutes the offense of conspiracy against the United States under 5440, Rev.Stat.
The provisions of the Revised Statutes in regard to coal lands limit the amount of land to be taken by
each person entering, and while there may be no statutory limitation on the right of the entryman to
Page 211 U. S. 371
sell after acquisition, the statute, according to its plain meaning, will be enforced as not permitting a
person to acquire land as agent for a disqualified person, and so defeat the purpose of the statute.
A person cannot enter land through an agent, even though the agency be undisclosed, if he is
disqualified to enter the land himself.
The authoritative construction of a statute in a civil case may be applied in a criminal case subsequently
arising; although United States v. Trinidad Coal Co., 137 U. S. 160, was a suit to annul patents to coal
lands, the decision in that case that qualified persons cannot enter coal lands under 2347-2350,
Rev.Stat., as agents, or on behalf of, disqualified persons, will be followed as to the construction of those
statutes in sustaining indictments under 5440 for conspiracy to defraud the United States by obtaining
coal lands by entries in violation of the statutes as so construed.
A charge of conspiracy to defraud the United States under 5440, Rev.Stat., can be predicated on acts
made criminal after the enactment of the statute. Hyde v. Shine, 199 U. S. 62.
Even though a word may have a common law significance which should control if the word stood alone,
in the construction of a statute, the word must be given the broader meaning resulting from the words
with which it is accompanied, and so held that the word "defraud," in 5440, Rev.Stat., when construed
in connection with the accompanying words "in any manner or for any purpose," includes obtaining
public lands in violation of the statutes as to quantities to be taken by, and qualifications of, entrymen,
notwithstanding the United States be paid the price of the lands. Hyde v. Shine, 199 U. S. 62.
An amendment to a statute will be construed to relate to the present subject thereof, and not to be new
legislation in regard to other subjects, and the Act of July 7, 1898, c. 578, 30 Stat. 718, amending 4746,
Rev.Stat., related solely to the subject of pensions and bounty land claims, and simply extended the
statute to the use of fraudulent papers in regard to such claims, and a violation of its provisions as
amended cannot arise from acts in connection with entries other than those on pensions and bounty
claims.
Under the Act of March 2, 1907, c. 2564, 34 Stat. 1246, this Court, on direct writ of error, only has
jurisdiction to review the particular questions decided by the court below for which the statute provides,
and the whole case is not open to review.
157 F. 396 reversed.
The facts are stated in the opinion.
Page 211 U. S. 379
MR. JUSTICE WHITE delivered the opinion of the Court.
The United States prosecutes this writ of error upon the assumption that the decision of the district
court was based upon an erroneous construction of the statutes upon which the indictment was
founded, and therefore, by virtue of the Act of March 2, 1907, c. 2564, 34 Stat. 1246, [Footnote 1] the
right obtained
Page 211 U. S. 380
to review the decision by writ of error direct from this Court.
The indictment contained two counts. Without quoting them fully, it suffices to say, for the purposes of
the questions which we are called upon to decide, if we have authority to decide them, that the first
count charged that the eleven defendants illegally conspired, in violation of 5440, Rev.Stat., with
certain named persons and others unknown, to illegally obtain the title of certain coal lands belonging
to the United States. The conspiracy was to be effected by procuring various persons as agents to enter
coal lands in their own name, ostensibly for their own benefit, but in reality for the use and benefit of
the accused and a named organization; the purchases being made by the agents as above stated, not
with their own money, but with money of the accused or the corporation, and under agreements to
convey the title, when acquired, to the accused or to the corporation, thus enabling the accused and the
corporation to obtain coal lands belonging to the United States in excess of the quantity which they
were allowed by law to enter. Copious averments were made in the count as to the use of alleged false,
fictitious, and fraudulent papers in making the entries in question, which papers, as filed and entries
made, had for their object and purpose to deceive the land officers of the United States, so as thereby
to cause them to allow the entries in the name of the agents on the supposition that the entries were
for the benefit of the entrymen, and which entries they would not have had the power to allow under
the law, and would not have allowed, had the truth been disclosed. The second count charged an illegal
conspiracy to do acts made criminal by 4746, Rev.Stat., in making and presenting, and causing to be
made and presented, in connection with the entries of coal land, certain false, forged, fictitious, etc.,
affidavits and papers.
To clear the approach to the issues to be decided we bring into view the statutes which must be passed
on. Section 5440, relating to conspiracies, was amended May 17, 1879, by changing
Page 211 U. S. 381
the penalties imposed by the section as primarily enacted. As amended this section is as follows:
"SEC. 5440. If two or more persons conspire either to commit any offense against the United States, or
to defraud the United States in any manner or for any purpose, and one or more of such parties do any
act to effect the object of the conspiracy, all the parties to such conspiracy shall be liable to a penalty of
not more than ten thousand dollars, or to imprisonment for not more than two years, or to both fine
and imprisonment, in the discretion of the court."
The text of 2347, 2348, 2349, and 2350, which provide for the sale of coal lands belonging to the
United States, is as follows:
"SEC. 2347. Every person above the age of twenty-one years, who is a citizen of the United States, or
who has declared his intention to become such, or any association of persons severally qualified as
above, shall, upon application to the register or the proper land office, have the right to enter, by legal
subdivisions, any quantity of vacant coal lands of the United States not otherwise appropriated or
reserved by competent authority, not exceeding one hundred and sixty acres to such individual person,
or three hundred and twenty acres to such association, upon payment to the receiver of not less than
ten dollars per acre for such lands, where the same shall be situated more than fifteen miles from any
completed railroad, and not less than twenty dollars per acre for such lands as shall be within fifteen
miles of such road."
"SEC. 2348. Any person or association of persons severally qualified, as above provided, who have
opened and improved, or shall hereafter open and improve, any coal mine or mines upon the public
lands, and shall be in actual possession of the same, shall be entitled to a preference right of entry,
under the preceding section, of the mines so opened and improved: Provided, That when any
association of not less than four persons, severally qualified as above provided, shall have expended not
less than five thousand dollars in working and improving
Page 211 U. S. 382
any such mine or mines, such association may enter not exceeding six hundred and forty acres, including
such mining improvements."
"SEC. 2349. All claims under the preceding section must be presented to the register of the proper land
district within sixty days after the date of actual possession and the commencement of improvements
on the land, by the filing of a declaratory statement therefor; but when the township plat is not on file
at the date of such improvement, filing must be made within sixty days from the receipt of such plat at
the district office, and where the improvement shall have been made prior to the expiration of three
months from the third day of March, eighteen hundred and seventy-three, sixty days from the
expiration of such three months shall be allowed for the filing of a declaratory statement, and no sale
under the provisions of this section shall be allowed until the expiration of six months from the third day
of March, eighteen hundred and seventy-three."
"SEC. 2350. The three preceding sections shall be held to authorize only one entry by the same person
or association of persons, and no association of persons any member of which shall have taken the
benefit of such sections, either as an individual or as a member of any other association, shall enter or
hold any other lands under the provisions thereof, and no member of any association which shall have
taken the benefit of such sections shall enter or hold any other lands under their provisions, and all
persons claiming under section twenty-three hundred and forty-eight shall be required to prove their
respective rights and pay for the lands filed upon within one year from the time prescribed for filing
their respective claims, and upon failure to file the proper notice, or to pay for the land within the
required period, the same shall be subject to entry by any other qualified applicant."
Section 2351 provides for conflicting claims in designated cases, and thus concludes:
"The Commissioner of the General Land Office is authorized
Page 211 U. S. 383
to issue all needful rules and regulations for carrying into effect the provisions of this and the four
preceding sections."
Section 4746 of the Revised Statutes, embraced in the title "Pensions," was amended by the act of July 7,
1898, 30 Stat. 718, c. 578. The section, as amended, is as follows, the amendments which the law of
1898 enacted being printed in italics:
"That every person who knowingly or willfully makes or aids, or assists in the making, or in any wise
procures the making or presentation of any false or fraudulent affidavit, declaration, certificate, voucher,
or paper, or writing purporting to be such, concerning any claim for pension or payment thereof, or
pertaining to any other matter within the jurisdiction of the Commissioner of Pensions or of the
Secretary of the Interior, or who knowingly or willfully makes or causes to be made, or aids or assists in
the making, or presents or causes to be presented at any pension agency any power of attorney or other
paper required as a voucher in drawing a pension, which paper bears a date subsequent to that, upon
which it was actually signed or acknowledged by the pensioner, and every person before whom any
declaration, affidavit, voucher, or other paper or writing to be used in aid of the prosecution of any claim
for pension or bounty land or payment thereof purports to have been executed who shall knowingly
certify that the declarant, affiant, or witness named in such declaration, affidavit, Voucher, or other
paper or writing personally appeared before him and was sworn thereto or acknowledged the execution
thereof, when, in fact such declarant, affiant, or witness did not personally appear before him or was not
sworn thereto or did not acknowledge the execution thereof, shall be punished by a fine not exceeding
five hundred dollars or by imprisonment for a term of not more than five years."
On behalf of the various defendants, motions to quash the indictment were filed, which the court
granted. The grounds of demurrer were substantially the same, many being addressed to technical
attacks upon the sufficiency of the indictment; but in each of the motions the validity of the indictment
Page 211 U. S. 384
was assailed upon the ground that neither count stated an offense within the statutes when properly
understood.
The court, in the reasons given by it for granting the motions to quash, substantially held as follows:
1st. That the first count related exclusively to cash entries of coal lands under 2347, Rev.Stat. That,
under this section, no affidavits or papers were required other than the application to purchase, and
therefore that all the allegations of the count respecting false and fictitious affidavits, papers, etc.,
related to documents required solely by the rules and regulations of the Land Department, which, not
being expressly authorized by the statute, could not form the basis of a criminal conspiracy. The papers
were therefore put out of view.
2d. That the coal land statutes did not prohibit one who was qualified to enter coal lands from making a
cash entry of such lands in his own name, ostensibly for himself, but really for the benefit of another,
who was disqualified to directly make the entry, even although the ostensible entryman, in making the
purchase in his own name, was really acting as the agent of the disqualified person, paid the price of the
land with the money of such disqualified person, and made the entry under an obligation, on the
completion of the purchase from the United States, to transfer the land to such disqualified person.
3d. From the import of the coal land statutes thus announced, it was decided that a conspiracy to
acquire coal lands from the United States by the means stated was not a violation of 5440, as the acts
alleged did not constitute a defrauding of the United States within the meaning of the word "defraud"
as used in the second clause of the section, because that word must be interpreted in a restricted sense,
and be given only its assumed common law significance, and could not be used so as to embrace acts
not expressly forbidden by law upon the theory that their performance was contrary to a public policy
which it might be assumed caused the enactment of the statutes.
Page 211 U. S. 385
4th. It was directly held that the conclusions just stated were not in conflict with a previous adjudication
of this Court, construing the coal land laws, as the decision had been rendered in a civil controversy, and
could not be extended and carried over so as to control the construction of the statute in a criminal
prosecution, thus "spelling out" a crime where none was expressly declared in the statute.
5th. As to the second count, it was decided that 4746 embraced only affidavits, etc., relating to
pension and bounty land claims, and the charge of a conspiracy to commit a crime in violation of the
section in question could not be based upon allegations of the use of false and fictitious papers, etc., in
connection with entries of coal lands.
At the threshold our jurisdiction is questioned because it is asserted the case does not come within the
Act of March 2, 1907. The grounds of this contention are as follows:
First. That the court below merely held that the facts charged in the indictment were not within the
statute, and therefore the indictment, and not the statute, was interpreted or construed.
Second. Because, in any event, the court below did not construe, but merely interpreted, the statutes.
As to the first ground, we dispose of it simply by saying that the analysis which we have hitherto made
of the decision of the court below demonstrates that the contention is devoid of all merit.
In support of the second ground, it is insisted that the construction of a statute is one thing, and its
interpretation another and different thing. That abstractly there may be a difference between the two
terms is not denied in argument by the United States, and finds support in works of respectable
authority.
But, conceding the abstract distinction, and granting, for the sake of the argument only, that the
conclusion of the
Page 211 U. S. 386
court below might properly be classed, abstractly speaking, as an interpretation, and not a construction,
of the statute, we think the contention without merit. It may not be doubted that, in common usage,
interpretation and construction are usually understood as having the same significance. This was aptly
pointed out in Cooley's Constitutional Limitations, 6th edition, where, after stating the theoretical
difference, it is observed (p. 51):
"In common use, however, the word 'construction' is generally employed in the law in a sense
embracing all that is properly covered by both, when each is used in a sense strictly and technically
correct."
We think, when the context of the Act of March 2, 1907, is taken into view, and the remedial character
of the act is given due weight, it becomes apparent that the word "construction" is employed in the
statute in its common signification, and hence includes both construction and interpretation, although
there may be an abstract difference between them. This being so, it follows that we have jurisdiction to
review the action of the court in quashing the indictment.
Putting aside for the moment technical objections to the sufficiency of the indictment, it is conceded by
both sides that, if the statutes which the court below construed be given the meaning which the United
States, by the assignments of error, assert is the correct one, an offense against the United States was
stated in both counts of the indictment. The construction of the statutes therefore is the real question
for decision. We propose to examine the statutes applicable to each count separately, and, in doing so,
to weigh the conflicting contentions urged in argument bearing on the question of the true construction.
We reserve, however, for final consideration various contentions relating merely to the construction of
the indictment as a pleading, by which the United States contends that the court below was wrong, even
if, for the sake of argument, it be assumed that its construction of the statutes was right, and by which
the defendants in error contend that the order quashing the indictment was right, even if the court was
Page 211 U. S. 387
wrong in its view of the law, because of defects in the indictment.
1. The first count.
This count requires us to consider only the conspiracy provision, 5440, and the coal land provisions,
2347, 2348, 2349, and 2350. As the applicability of 5440 to the facts charged largely depends upon
whether those acts were forbidden by the sections last mentioned, we proceed first to their
consideration. Under these sections, the question is, do they prohibit a person who is disqualified from
acquiring additional coal lands from the United States, because he has already purchased the full
quantity permitted by law, from employing one who would be qualified if he made any entry of coal
land in his own behalf, to make such entry ostensibly for himself, but really as agent for the disqualified
principal, to pay for the land with money of such principal under the obligation, when the title has been
obtained by purchasing from the United States, to turn over the land purchased to the concealed and
disqualified principal? That the statute does expressly prohibit such a transaction we think is foreclosed
by a previous decision of this Court. Before coming to so demonstrate, however, in view of the contrary
conclusion reached by the court below and the earnestness with which the correctness of that
conclusion has been pressed at bar, we shall briefly consider the subject upon the hypothesis that it is
open, and not foreclosed. Beyond question, by 2347, Rev.Stat., everyone possessing the qualifications
of age and citizenship therein stipulated is entitled, upon application and on payment of the price fixed
by law, to purchase in his own behalf one hundred sixty acres of coal land, and every association of
persons possessing the qualifications therein mentioned is entitled to purchase three hundred twenty
acres of such land. This right, however, to thus purchase, is not uncontrolled, since it is limited by the
2350, saying:
"The three preceding sections shall be held to authorize only one entry by the same person or
association of persons,
Page 211 U. S. 388
and no association of persons, any member of which shall have taken the benefit of such sections, either
as an individual or as a member of any other association, shall enter or hold any other lands under the
provisions thereof, and no member of any association which shall have taken the benefit of such
sections shall enter or hold any other lands under their provisions. . . ."
The express command that the preceding sections shall be held to authorize only one entry by the same
person or association of persons causes the grant to purchase not to embrace more than one entry by
the same person, and as the right to purchase the coal land did not exist except by the authority
conferred by the statute, it follows that the express provision excluding the right to do a particular act is,
both in form and substance, a prohibition against the doing of such act. To hold that this prohibition
does not exclude the existence in a disqualified person of a power to employ an agent to make a second
entry, to furnish him with the money to pay for the land, under an obligation, when he has bought from
the United States, to transfer the land to the disqualified person, would require us to say that the power
was given to do that which the statute, in express terms, declares shall not be done. In other words, it
would compel us to decide that an act done for a disqualified person by an agent acting for him and for
his exclusive benefit was not the act of the disqualified principal. But this would be to nullify the
prohibition upon the inconceivable hypothesis that the act of a duly authorized agent was not the act of
his principal. To escape this impossible result, it is insisted in argument that, where a person qualified to
purchase buys in his own name, without disclosing that he is a mere agent for a disqualified person, as
he, the agent, thereby exhausts his individual right, the purchase must be treated as his, and not that of
the undisclosed principal. This, however, does not change the situation, but simply seeks to avoid it by
the statement of a distinction without a difference, since it again but reads the prohibition out of the
statute by
Page 211 U. S. 389
causing it to be inoperative if the disqualified person elects to do by another, his agent, that which the
statute forbids him to do. True, the statute imposes no limitation on the right of a purchaser who has
acquired coal land from the United States to sell the same after he has become the owner of the land.
The absence, however, of a limitation on the power to sell after acquisition affords no ground for saying
that the express prohibition of the statute against more than one entry by the same person should not
be enforced according to its plain meaning. This clearly follows since the right to sell that which one has
lawfully acquired neither directly nor indirectly implies the authority to unlawfully acquire in violation of
an express prohibition.
It is elaborately argued that the laws as to the sale of coal lands were originally embraced in the general
statutes regulating the disposition of mineral lands, in which there were no limitations whatever as to
the number of entries that a single entryman might make. With this genesis in mind, it is urged that the
sole purpose of the prohibition forbidding more than one entry by the same person, inserted in the coal
land laws when that subject came to be separately dealt with, was to secure to every citizen the right, if
he chose, to make one entry; in other words, to prevent the monopolization by one person by means of
many entries of the whole or a vast part of the coal fields belonging to the United States. From this it is
insisted the prohibition forbidding more than one entry by the same person should not be held to
embrace an entry made by a qualified person for the benefit and as the agent of a disqualified one when
the qualified person did not disclose the fact that he was acting as an agent. Conceding, for the sake of
argument, the premise, we do not perceive its relevancy. That is to say, we do not comprehend how
such concession lends support to the proposition that the prohibition against more than one entry by
the same person should be disregarded by allowing more than one entry by the same person, if only
that person chose, after making one entry in his own name,
Page 211 U. S. 390
to cause other and subsequent entries ad libitum to be made for his benefit by his agent, with his money,
and for his exclusive account.
But if the mind could bring itself, upon grounds of the supposed public policy of the statute, to disregard
the prohibition which it expressly contains, the argument here advanced, instead of conducing to that
result, leads directly to the contrary. The purpose of the prohibition being, as the argument insists, to
keep open the opportunity to every citizen to make one entry for himself, thus discouraging monopoly,
it is obvious that that public purpose would be frustrated by allowing a person to make one entry in his
own name and thereafter as many as he chose through his agents and for his exclusive benefit. It is a
misconception to assume that there is any real identity between a purchase made by a qualified person
in his own name and for himself with a purchase made by such person ostensibly for himself but really
as the agent of a disqualified person. In the one case, the person securing coal land from the United
States for himself is free to dispose of the land after acquisition as he may deem best for his interest and
for the development of the property acquired. In the other case, the ostensible purchaser acquires with
no dominion or control over the property, with no power to deal with it free from the control of the
disqualified person for whose benefit the purchase was made.
And the legislation of Congress subsequent to the coal land laws indicates that Congress contemplated,
in enacting the prohibition against more than one entry, the distinction between an entry made by one
for himself, with the full power of disposition after entry, and an entry made by one ostensibly for
himself, but in reality for another. Thus, under the Timber Culture Act of June 14, 1878, c. 190, 20 Stat.
113, which conferred authority upon citizens of the United States, or persons who had declared their
intention to become such, to make one entry of not exceeding one quarter section of land for the
cultivation of timber, the statute was sedulous to require
Page 211 U. S. 391
that the person desiring to hold and cultivate the land should, at the time of making his entry, swear in
his application that his filing and entry was made for his own exclusive use and benefit.
And the public policy lying at the foundation of the prohibition against an entry of land for the conceded
benefit of another, whilst leaving full power of disposition in one who acquired the land in compliance
with the statute, was pointed out in United States v. Budd, 144 U. S. 154, where, in considering the
Timber and Stone Act of June 3, 1878, c. 151, 20 Stat. 89, it was said (p. 144 U. S. 163):
"The act does not in any respect limit the dominion which the purchaser has over the land after its
purchase from the government, or restrict in the slightest his power of alienation. All that it denounces
is a prior agreement -- the acting for another in the purchase. If, when the title passes from the
government, no one save the purchaser has any claim upon it, or any contract or agreement for it, the
act is satisfied."
We shall not further pursue the analysis, as we think it is patent that the whole argument rests upon a
plain disregard of the prohibition which the statute contains, or seeks to render that prohibition
nugatory by contradictory assumptions -- that is to say, by assuming that things which are one and the
same are wholly different; and, on the other hand, by asserting that things which are different are one
and the same. This is said because such is the result of the contention that a purchase made by one
through his agent is, in legal effect, a different thing from a purchase made by the principal; and, on the
other hand, by the proposition that a purchase made by one for his own account is not different from a
purchase made by the same person not for his own account, but for another.
But, as we have hitherto observed, the review of the contentions as an original question was not
essential, because their want of merit affirmatively appears from a prior adjudication of this Court. The
case referred to is United States v. Trinidad Coal Company, 137 U. S. 160. The United States sued to
Page 211 U. S. 392
annul certain patents to coal lands on the ground that the land had been purchased by officers and
employees of a corporation when the corporation itself was disqualified, because it had already made
one entry. The court below had sustained a demurrer to the bill. Its decree was reversed, and it was
expressly decided that the entries made both by the officers of the corporation and its employees were
void. The contention was urged that the employees, having each a right to make an entry for his own
account, it was not unlawful to do so for the benefit of the corporation. This was expressly negatived,
the Court saying (p. 137 U. S. 167):
"It is true in the present case that some of the persons who made the entries in question were not,
strictly speaking, members of the corporation, but only its employees. But, as they were parties to the
alleged scheme, and were, in fact agents of the defendant in obtaining from the government coal lands
that could not rightfully have been entered in its own name, that circumstance is not controlling. . . .
There is consequently, in view of all the allegations of the bill, no escape from the conclusion that the
lands in question were fraudulently obtained from the United States. We say fraudulently obtained
because, if the facts admitted by the demurrer had been set out in the papers filed in the Land Office,
the patent sought to be cancelled could not have been issued without violating the statute. The
defendant would not have been permitted to do indirectly that which it could not do directly."
Because the statute was thus construed in a civil cause affords no reason for saying that the
authoritative construction of the statute is not to be applied in a criminal case. It is true that, in the
reasoning of the opinion, the public policy upon which the prohibition of the statute was founded was
pointed out; but this does not justify the contention that the decision was rested not upon the
prohibition, but upon public policy alone.
The contention that the rules and regulations of the General Land Office or decisions made thereunder
have recognized
Page 211 U. S. 393
the right of a qualified person to enter coal lands in his own name, ostensibly for himself, but really for a
disqualified person, under the obligation to transfer the land after purchase to such person, we think
finds no semblance of support either in the rules and regulations or in the decisions of the Department.
The meaning of the coal land statutes being thus fixed, the consideration of the conspiracy statute,
5440, Rev.Stat., is free from difficulty. It will be observed that the section embraces two classes of
conspiracies -- the first, "to commit any offense against the United States" and the other "to defraud the
United States in any manner or for any purpose." The count we are now considering, it is not disputed,
was framed upon the second clause. The proposition urged in argument that a charge of the commission
of crime cannot constitutionally be predicated upon the averment of a conspiracy to defraud under the
second clause unless the acts charged were antecedently made criminal is without merit, and is
foreclosed by Hyde v. Shine, 199 U. S. 62, wherein it was expressly held that a prosecution would lie
upon the charge of a conspiracy to obtain, by fraudulent practices, public lands of the United States. And,
indeed, the ruling in that case was but the reiteration of the prior rulings in United States v. Hirsch, 100
U. S. 33, and Dealy v. United States, 152 U. S. 539.
The contention that the word "defraud" must be confined to its common law significance, and hence
cannot embrace the acts here charged, is without merit, even if we concede, for the sake of argument,
that the word has a common law meaning, and that that meaning would be implied if the word stood
alone in the statute. This follows because the argument rests upon the assumption that the word
"defraud" stands alone in the statute, and ignores the broader meaning which must result from the
words "in any manner or for any purpose," by which the word "defraud" is accompanied in the statute.
Besides, the contention is foreclosed by United States v. Trinidad Coal Company, where transactions of
the very
Page 211 U. S. 394
nature of those here charged were declared to be a fraudulent obtaining of the lands of the United
States, and, indeed, transactions generally of a like character formed the subject matter of the ruling
in Hyde v. Shine.
The unsoundness of the argument that, as when the prohibited entries were made the price of the lands
was paid to the United States, therefore the United States could not have been defrauded, is refuted by
its mere statement. If it were true, then in every case, however flagrant, where the lands of the United
States were procured in violation of express prohibitions of law, the element of fraud would cease to
exist by the mere payment of the price -- that is to say, the successful operation of the fraud would
deprive the transaction of its fraudulent character. But the inherent weakness of the contention need
not be further pointed out, because its want of merit is conclusively established by the ruling in Hyde v.
Shine, where a like contention was decided to be without foundation.
The attempt to distinguish this case from Hyde v. Shine upon the theory that there, the parties obtaining
the land were disqualified, whilst in this, they were not, rests upon the misconstruction of the coal land
statutes which we have already pointed out -- a misconstruction which we have seen led the Court, in its
ultimate conclusion, erroneously to say that the entrymen who acted as the agents of the disqualified
persons or corporation were not forbidden by the statute to act as they did, because they might have
made an entry for themselves.
Nor do we deem it necessary to do more than briefly refer to the elaborate statements at bar
concerning constructive crimes and the fear which also found expression in the opinion below that, if
the words "to defraud in any manner or for any purpose" receive a broad significance, charges of crime
may be hereafter predicated upon acts not prohibited and innocuous in and of themselves, and which,
when they were committed, might have been deemed by no one to afford the basis of a criminal
prosecution. It will be time enough to
Page 211 U. S. 395
consider such forbodings when a case arises indicating that the dread is real, and not imaginary. That
they are mere phantoms when applied to the case here presented results from the obvious
consideration that the conspiracy charged had for its purpose the doing of acts which were in clear
violation of the direct prohibition of the coal land laws -- a prohibition whose meaning and effect had
been unmistakably announced and applied by a decision of this Court rendered many years before the
formation of the conspiracy here charged. The cogency of these considerations becomes more pointedly
manifest when it is borne in mind that the purpose and necessary effect of the conspiracy complained of
was to obtain the lands of the United States by the suppression of facts which, had they been disclosed,
would have rendered the acquisition impossible.
2. The second count.
The court below considered that the second count was framed solely upon the first clause of 5440 --
that is, it held that the count charged the formation of a conspiracy to commit an offense against the
United States through a violation of 4746, and because of the construction given to that section, it was
decided that the count stated no offense. In testing the count in this aspect, we must primarily fix the
meaning of 4746, as violations of that section were charged to have been the subject of the alleged
conspiracy.
It was conceded by the United States in argument, and indeed it could not have been in reason denied,
that the section in question, as originally embodied under the head of "Pensions" in the Revised Statutes,
related exclusively to pension or bounty land claims. No crime therefore could have been predicated
under the original section upon the affidavits or other papers used in making the coal land entries, as
alleged in the indictment. The contention, therefore, as now made by the United States to sustain the
second count rests upon the proposition that the amendment to 4746 by the Act of July 7, 1898, 30
Stat. 718, c. 578, had the effect of bringing within that section subjects
Page 211 U. S. 396
to which, prior to the amendment, the section in no manner related. Turning to the text, which we have
previously quoted, with the provisions incorporated by the amending act printed therein in italics, it will
be observed that every enumeration or description of new acts or papers in addition to those embraced
in the section prior to the amendment, alone concern pension or bounty land claims. The argument as
to the broad scope of the statute in its present form rests therefore alone upon the proposition that,
because the amendatory statute, in repeating the original words, viz., "concerning any claim for pension
or payment thereof, or pertaining to any other matter within the jurisdiction of the Commissioner of
Pensions," adds to them the following, viz., "or of the Secretary of the Interior," therefore the statute
now embraces not only acts done in connection with pension or bounty land claims, but all acts of the
prohibited character as to any matter coming before the Secretary of the Interior or subject to so come,
entirely without reference to whether they were in pension or bounty land claims or proceedings. But to
adopt this latitudinarian construction would cause the statute to create a multitude of new and
substantive crimes wholly disconnected with claims for pensions or bounty land, with which latter it was
alone evidently the purpose of the original as well as the amendatory statute to deal. We think to state
the proposition is in effect to answer it. When the original text and the amendments which were made
are taken into view, the conclusion inevitably follows that the purpose of the amendment was but to
more specifically define the pension or bounty land papers, etc., with which the statute was concerned,
and to enlarge the operation of the statute in respect to such papers so as to cause it to be criminal to
use the pension or bounty land papers, etc., to which the statute refers, as well before the Secretary of
the Interior as before the Commissioner of Pensions. In other words, that the only purpose of the
amendment was to more fully deal with the subjects with which the provision which was amended
Page 211 U. S. 397
dealt, and not by way of the amendment to legislate concerning every conceivable subject coming
within the jurisdiction of the Secretary of the Interior. To otherwise hold would not only violate the most
elementary rules of construction, but would require the treating as superfluous the new words of
enumeration concerning pension matters which the amendatory act expressed. This follows because if
the adding by way of amendment of the words "or of the Secretary of the Interior" contemplated
bringing within the criminal inhibitions of the statute every act of a like nature to those forbidden, done
in connection with every subject within the jurisdiction of the Secretary of the Interior, then the new
enumerations made in the amendment were wholly unnecessary because, without enumeration, they
would have been embraced in the statute as amended. Indeed, if the purpose intended to be
accomplished by the amendment had been to embrace all acts of the prohibited nature as to every
subject within the jurisdiction of the Secretary of the Interior, no reason can be suggested why the new
legislation should have taken the form of mere amendment to the section of the statutes which was
alone concerned with pension and bounty land claims. Construing the statute as relating only to the
subject of pension and bounty land claims coming within the authority of the Commissioner of Pensions
or the Secretary of the Interior, it follows that a violation of its provisions could not arise from the acts
charged in the indictment concerning the coal land entries.
Finally we come to the two contentions of the government which we have hitherto temporarily put
aside, and to the various contentions on the part of the defendants in error, insisting either that the
court below misconstrued the indictment or that there were such defects in the indictment that it was
rightly quashed, irrespective of the construction of the statutes which led the court below to do so. But
we do not think we have jurisdiction on this writ of error to consider these questions. The right of the
United States to come directly
Page 211 U. S. 398
to this Court because of the construction of the statutes by the court below, as we have previously said
in considering the question of jurisdiction, is solely derived from the act of 1907, the text of which is
printed in the margin. [Footnote 2] That act, we think, plainly shows that, in giving to the United States
the right to invoke the authority of this Court by direct writ of error in the cases for which it provides, it
contemplates vesting this Court with jurisdiction only to review the particular question decided by the
court below for which the statute provides. In other words, that the purpose of the statute was to give
the United States the right to seek a review of decisions of the lower court concerning the subjects
embraced within the clauses of the statute, and not to open here the whole case.
Page 211 U. S. 399
We think this conclusion arises not only because the giving of the exceptional right to review in favor of
the United States is limited by the very terms of the statute to authority to reexamine the particular
decisions which the statute embraces, but also because of the whole context, which clearly indicates
that the purpose was to confine the right given to a review of the decisions enumerated in the statute,
leaving all other questions to be controlled by the general mode of procedure governing the same. It
follows from what we have said that the court erred in its construction of the statutes by which it
quashed the first count of the indictment, and that, from a rightful construction of the statutes, no error
was committed in quashing the second count. The order, therefore, quashing the first count is reversed,
and that quashing the second count is affirmed, and the case is reversed and remanded for further
proceedings in conformity to this opinion.
[Footnote 1]
The act is reproduced in full in note to p 398, post.
[Footnote 2]
"CHAP. 2564 -- An Act Providing for Writs of Error in"

"Certain Instances in Criminal cases"
"Be it enacted by the Senate and House of Representatives of the United States of America in Congress
assembled,That a writ of error may be taken by and on behalf of the United States from the district or
circuit courts direct to the Supreme Court of the United States in all criminal cases, in the following
instances, to-wit:"
"From a decision or judgment quashing, setting aside, or sustaining a demurrer to, any indictment, or
any count thereof, where such decision or judgment is based upon the invalidity or construction of the
statute upon which the indictment is founded."
"From a decision arresting a judgment of conviction for insufficiency of the indictment, where such
decision is based upon the invalidity or construction of the statute upon which the indictment is
founded."
"From the decision or judgment sustaining a special plea in bar, when the defendant has not been put in
jeopardy."
"The writ of error in all such cases shall be taken within thirty days after the decision or judgment has
been rendered, and shall be diligently prosecuted, and shall have precedence over all other cases."
"Pending the prosecution and determination of the writ of error in the foregoing instances, the
defendant shall be admitted to bail on his own recognizance: Provided, That no writ of error shall be
taken by or allowed the United States in any case where there has been a verdict in favor of the
defendant."
"Approved, March 2, 1907"
34 Stat. 1246.
OCTOBER TERM, 1995
Syllabus
NEAL v. UNITED STATES
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT
No. 94-9088. Argued December 4, 1995-Decided January 22,1996
When the District Court first sentenced petitioner Nealon two pleabargained convictions involving
possession of LSD with intent to distribute, the amount of LSD sold by a drug trafficker was determined,
under both the federal statute directing minimum sentences and the United States Sentencing
Commission's Guidelines Manual, by the whole weight of the blotter paper or other carrier medium
containing the drug. Because the combined weight of the blotter paper and LSD actually sold by Neal
was 109.51 grams, the court ruled, among other things, that he was subject to 21 U. S. C.
841(b)(1)(A)(v), which imposes a lO-year mandatory minimum sentence on anyone convicted of
trafficking in more than 10 grams of "a mixture or substance containing a detectable amount" of LSD.
After the Commission revised the Guidelines' calculation method by instructing courts to give each dose
of LSD on a carrier medium a constructive or presumed weight, Neal filed a motion to modify his
sentence, contending that the weight of the LSD attributable to him under the amended Guidelines was
only 4.58 grams, well short of 841(b)(1)(A)(v)'s 10-gram requirement, and that the Guidelines'
presumptive-weight method controlled the mandatory minimum calculation. The District Court
followed Chapman v. United States, 500 U. S. 453, 468, in holding, inter alia, that the actual weight of
the blotter paper, with its absorbed LSD, was determinative of whether Neal crossed the lO-gram
threshold and that the lO-year mandatory minimum sentence still applied to him notwithstanding the
Guidelines. In affirming, the en banc Seventh Circuit agreed with the District Court that a dual system
now prevails in calculating LSD weights in cases like this.
Held: Section 841(b)(1) directs a sentencing court to take into account the actual weight of the blotter
paper with its absorbed LSD, even though the Sentencing Guidelines require a different method of
calculating the weight of an LSD mixture or substance. The Court rejects petitioner's contentions that
the revised Guidelines are entitled to deference as a construction of 841(b)(1) and that those
Guidelines require reconsideration of the method used to determine statutory minimum sentences.
While the Commission's expertise and the Guidelines' design may be of potential weight and relevance
in other contexts, the Commission's choice of an alternative methodology for weighing LSD does not
alter
285
Chapman's interpretation of the statute. In any event, stare decisis requires that the Court adhere
to Chapman in the absence of intervening statutory changes casting doubt on the case's interpretation.
It is doubtful that the Commission intended the Guidelines to displace Chapman's actual-weight method
for statutory minimum sentences, since the Commission's authoritative Guidelines commentary
indicates that the new method is not an interpretation of the statute, but an independent calculation,
and suggests that the statute controls if it conflicts with the Guidelines. Moreover, the Commission's
dose-based method cannot be squared with Chapman. In these circumstances, this Court need not
decide what, if any, deference is owed the Commission in order to reject its contrary interpretation.
Once the Court has determined a statute's meaning, it adheres to its ruling under stare decisis and
assesses an agency's later interpretation of the statute against that settled law. It is the responsibility of
Congress, not this Court, to change statutes that are thought to be unwise or unfair. Pp. 288-296.
46 F.3d 1405, affirmed.
KENNEDY, J., delivered the opinion for a unanimous Court.
Donald Thomas Bergerson, by appointment of the Court, post, p. 963, argued the cause for petitioner.
With him on the briefs was Michael J. Costello.
Paul R. Q. Wolfson argued the cause for the United States. With him on the brief were Solicitor General
Days, Acting Assistant Attorney General Keeney, and Deputy Solicitor General Dreeben. *
JUSTICE KENNEDY delivered the opinion of the Court. The policy of sentencing drug offenders based on
the amount of drugs involved, straightforward enough in its simplest formulation, gives rise to
complexities, requiring us again to address the methods for calculating the weight of LSD sold by a drug
trafficker. We reject petitioner's contention that the revised system for determining LSD amounts under
the United States Sentencing Guidelines requires reconsideration of the method used to determine
*Peter Goldberger and Barbara E. Bergman filed a brief for the National Association of Criminal Defense
Lawyers et al. as amici curiae urging reversal.
286
statutory minimum sentences, and we adhere to our former decision on the subject.
LSD (lysergic acid diethylamide) is such a powerful narcotic that the average dose contains only 0.05
milligrams of the pure drug. The per-dose amount is so minute that in most instances LSD is transferred
to a carrier medium and sold at retail by the dose, not by weight. In the typical case, pure LSD is
dissolved in alcohol or other solvent, and the resulting solution is applied to paper or gelatin. The
solvent evaporates; the LSD remains. The dealer cuts the paper or gel into single-dose squares for sale
on the street. Users ingest the LSD by swallowing or licking the squares or drinking a beverage into
which the squares have been mixed.
In 1988, petitioner Meirl Neal was arrested for selling 11,456 doses of LSD on blotter paper. The
combined weight of the LSD and the paper was 109.51 grams. Following a guilty plea in the United
States District Court for the Central District of Illinois, petitioner was convicted of one count of
possession of LSD with intent to distribute it, in violation of 21 U. S. C. 841, and one count of
conspiracy to possess LSD with intent to distribute it, in violation of 21 U. S. C. 846. At the initial
sentencing, the method for determining the weight of the illegal mixture or substance was the same
under the Guidelines and the statute directing minimum sentences. The determinative amount was the
whole weight of the blotter paper containing the drug. See United States Sentencing Commission,
Guidelines Manual 2D1.1, Drug Quantity Table, n. * (Nov. 1987) (1987 USSG). Because the total weight
of the LSD and blotter paper exceeded 10 grams, the District Court found petitioner subject to the
10year mandatory minimum sentence specified in 21 U. S. C. 841(b)(1)(A)(v). Under the version of the
Sentencing Guidelines then in effect, the indicated sentence was even greater than the statutory
minimum: The quantity of the
287
drugs and petitioner's prior convictions resulted in a Guidelines sentencing range of 188 to 235 months'
imprisonment, even after an adjustment for petitioner's acceptance of responsibility for the crime. The
District Court imposed concurrent sentences of 192 months' imprisonment on each count, to be
followed by five years of supervised release.
In November 1993, the United States Sentencing Commission revised the method of calculating the
weight of LSD in the Sentencing Guidelines. United States Sentencing Commission, Guidelines Manual,
App. C., Amdt. 488 (Nov. 1995) (1995 USSG). Departing from its former approach of weighing the entire
mixture or substance containing LSD, the amended Guideline instructed courts to give each dose of LSD
on a carrier medium a constructive or presumed weight of 0.4 milligrams. Id., 2D1.1(c), n. (H). The
revised Guideline was retroactive, id., App. C, Amdt. 502, and one month later petitioner filed a motion
to modify his sentence, see 18 U. S. C. 3582(c)(2). He contended that the weight of the LSD
attributable to him under the amended Guidelines was 4.58 grams (11,456 doses x 0.4 milligrams). For
that amount, the applicable sentencing range under the Guidelines would be 70 to 87 months of
imprisonment. The 10-year statutory minimum of 841(b)(1)(A)(v) was no bar to a reduced sentence,
petitioner argued, because the presumptive-weight method of the Guidelines should also control the
mandatory minimum calculation. The 4.58 grams attributable to him by the Guidelines method would
be well short of the 10 grams necessitating a 10-year minimum sentence.
The District Court, following our recent decision in Chapman v. United States, 500 U. S. 453 (1991), ruled
that the blotter paper must be weighed in determining whether petitioner crossed the 10-gram
threshold of 841(b)(1)(A)(v). It held that the mandatory minimum sentence of 10 years still applied to
petitioner notwithstanding the sentencing range under the Guidelines. Since the Guidelines no longer
au-
288
thorized a sentence above the statutory minimum, the District Court reduced petitioner's sentence to
120 months on each count.
On appeal, the Court of Appeals for the Seventh Circuit, sitting en bane, agreed with the District Court
that a dual system now prevails in calculating LSD weights in cases like this, and it affirmed petitioner's
sentence. 46 F.3d 1405 (1995).
We granted certiorari to resolve a conflict in the Courts of Appeals over whether the revised Guideline
governs the calculation of the weight of LSD for purposes of 841(b)(1). 515 U. S. 1141 (1995).
Compare United States v. Muschik, 49 F.3d 512, 518 (CA9 1995) (Guideline method should be used
under 841(b)(1)), cert. pending, No. 95-156, with United States v. Boot, 25 F.3d 52, 55 (CA1
1994); United States v. Kinder, 64 F.3d 757, 759 (CA2 1995), cert. pending, No. 95-6746; United
States v. Hanlin, 48 F.3d 121, 124 (CA3 1995); United States v. Pardue, 36 F.3d 429, 431 (CA5 1994), cert.
denied, 514 U. S. 1113 (1995); United States v. Andress, 47 F.3d 839, 840 (CA6 1995) (per curiam);
United States v. Stoneking, 60 F.3d 399, 402 (CA8 1995) (en bane), cert. pending, No. 95-5410; United
States v. Mueller, 27 F.3d 494, 496497 (CAlO 1994); United States v. Pope, 58 F.3d 1567, 1570 (CAll
1995).
II
Congress has tried different punishment schemes to combat the menace of drug trafficking. Under the
Comprehensive Drug Abuse Prevention and Control Act of 1970, Pub. L. 91-513, 84 Stat. 1236, penalties
depended upon whether or not a drug was classified as a narcotic. Chagrined by the resulting sentencing
disparities, Congress amended the narcotics laws in 1984 to calculate penalties by the weight of the
pure drug involved. See Chapman, 500 U. S., at 460461. Focusing on the pure drug, however, often
allowed retail traffickers, who supplied street markets with mixed or diluted drugs ready for
consumption, to receive sentences
289
lighter than what Congress deemed necessary. Id., at 461. In passing the Anti-Drug Abuse Act of 1986,
Pub. L. 99-570, 100 Stat. 3207, "Congress adopted a 'market-oriented' approach to punishing drug
trafficking, under which the total quantity of what is distributed, rather than the amount of pure drug
involved, is used to determine the length of the sentence." Chapman, supra, at 461; H. R. Rep. No.
99845, pt. 1, pp. 11-12, 17 (1986). The Act provided for mandatory minimum sentences based on the
weight of "a mixture or substance containing a detectable amount" of various controlled substances,
including LSD. 21 U. S. C. 841(b)(1)(A)(i)-(viii) and (B)(i)-(viii). Trafficking in 10 grams or more of a
mixture or substance containing LSD earns the offender at least 10 years in prison. 841(b)(1)(A)(v).
In Chapman, we interpreted the provision of the Act that provided a mandatory minimum sentence of
five years for trafficking in an LSD "mixture or substance" that weighed one gram or more, see
841(b)(1)(B)(v). We construed "mixture" and "substance" to have their ordinary meaning, observing that
the terms had not been defined in the statute or the Sentencing Guidelines and had no distinctive
common-law meaning. 500 U. S., at 461-462. Reasoning that the "LSD is diffused among the fibers of the
paper ... [and] cannot be distinguished from the blotter paper, nor easily separated from it," id., at 462,
we held that the actual weight of the blotter paper, with its absorbed LSD, is determinative under the
statute, id., at 468.
Petitioner contends that the method approved in Chapman is no longer appropriate. In his view, the
Commission intended its dose-based method to supplant the actualweight method used
in Chapman, and we should not presume that the Commission would recognize two inconsistent
schemes for sentencing LSD traffickers, cf. 1995 USSG 2D1.1, comment., backg'd (stating purposes of
making offense levels in 2D1.1 "proportional to the levels established
290
by statute" and providing "a logical sentencing structure for drug offenses"). Petitioner concedes, as he
must, that the Commission does not have the authority to amend the statute we construed
in Chapman. He argues, nonetheless, that the Commission is the agency charged with interpretation of
penalty statutes and expert in sentencing matters, so its construction of 841(b)(1) should be given
deference. See Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984).
Congress intended the Commission's rulemaking to respond to judicial decisions in developing a
coherent sentencing regime, see Braxton v. United States, 500 U. S. 344, 348 (1991), so, petitioner
contends, deference is appropriate even though the Commission's interpretation
postdated Chapman. In the alternative, he urges that we reassess Chapman in light of the Commission's
revised method, which was formed from careful study of retail drug markets.
Although Chapman established that the weight of the blotter paper must be taken into account, it did
not address how courts should do so. The Commission has filled the gap, petitioner maintains, by
assigning a constructive weight to the LSD and carrier for each dose.
While acknowledging that the Commission's expertise and the design of the Guidelines may be of
potential weight and relevance in other contexts, we conclude that the Commission's choice of an
alternative methodology for weighing LSD does not alter our interpretation of the statute
in Chapman. In any event, principles of stare decisis require that we adhere to our earlier decision.
The Commission was born of congressional disenchantment with the vagaries of federal sentencing and
of the parole system. Mistretta v. United States, 488 U. S. 361, 366 (1989) (discussing the Sentencing
Reform Act of 1984 and its legislative history). The Commission is directed to "establish sentencing
policies and practices for the Federal criminal justice system" that meet congressional goals set forth in
18
291
u. S. C. 3553(a)(2) and that, within a regime of individualized sentencing, eliminate unwarranted
disparities in punishment of similar defendants who commit similar crimes. See 28 U. S. C.
991(b)(1)(A)-(B). Congress also charged the Commission with the duty to measure and monitor the
effectiveness of various sentencing, penal, and correctional practices. 991(b)(2). In fulfilling its
mandate, the Commission has the authority to promulgate, review, and revise binding guidelines to
"establish a range of determinate sentences for categories of offenses and defendants according to
various specified factors, among others." Mistretta, supra, at 368 (internal quotation marks omitted);
see 28 U. S. C. 994(a), (b), (c), and (0).
Like 21 U. S. C. 841(b)(1), the Sentencing Guidelines calibrate the punishment of drug traffickers
according to the quantity of drugs involved in the offense. From their inception in 1987, the Guidelines
have used a detailed Drug Quantity Table as a first step in determining the sentence. See 1995 USSG
2D1.1(c); 1987 USSG 2D1.1. The current Table has 17 tiers, each with specified weight ranges for
different controlled substances. The weight ranges reflect the Commission's assessment of equivalent
culpability among defendants who traffic in different types of drugs, and so all defendants in the same
tier are assigned the same base offense level. See 1995 USSG 2D1.1(c). Once the base offense level is
adjusted for other factors, it yields a specific sentencing range depending on the defendant's criminal
history. See 1995 USSG 1B1.1.
Although the mandatory-minimum statute and the Guidelines both turn upon drug quantities, the
Commission itself has noted that "mandatory minimums are both structurally and functionally at odds
with sentencing guidelines and the goals the guidelines seek to achieve." United States Sentencing
Commission, Special Report to Congress: Mandatory Minimum Penalties in the Federal Criminal Justice
System 26 (Aug. 1991).
292
"The sentencing guidelines system is essentially a system of finely calibrated sentences. For example, as
the quantity of drugs increases, there is a proportional increase in the sentence. In marked contrast, the
mandatory minimums are essentially a fiat, tariff-like approach to sentencing. Whereas guidelines seek a
smooth continuum, mandatory minimums result in 'cliffs.' The 'cliffs' that result from mandatory
minimums compromise proportionality, a fundamental premise for just punishment, and a primary goal
of the Sentencing Reform Act." Id., at iii.
Despite incongruities between the Guidelines and the mandatory sentencing statute, the Commission
has sought to make the Guidelines parallel to the scheme of 841(b)(1) in most instances. See 1995
USSG 2D1.1, comment., n. 10 ("The Commission has used the sentences provided in, and equivalences
derived from, the statute (21 U. S. C. 841(b)(1)), as the primary basis for the guideline sentences"). As
a general rule, the Commission adopts the same approach to weighing drugs as the statute does:
"Unless otherwise specified, the weight of a controlled substance set forth in the table refers to the
entire weight of any mixture or substance containing a detectable amount of the controlled substance."
1995 USSG 2D1.1(c), n. (A); see also 1995 USSG 2D1.1, comment., n. 1 (" 'Mixture or substance' as
used in this guideline has the same meaning as in 21 U. S. C. 841, except as expressly provided"); 1987
USSG 2D1.1, n. * (weighing rule intended to be "[c]onsistent with the provisions of the Anti-Drug
Abuse Act"). For most narcotics, there will be no inconsistency in the calculations of drug quantities.
After study of the LSD trade, however, the Commission in 1993 decided it could no longer follow that
general rule for LSD offenses and fulfill the statutory directive to promote proportionate sentencing. The
Commission determined that "[b]ecause the weights of LSD carrier media vary
293
widely and typically far exceed the weight of the controlled substance itself, ... basing offense levels on
the entire weight of the LSD and carrier medium would produce unwarranted disparity among offenses
involving the same quantity of actual LSD (but different carrier weights), as well as sentences
disproportionate to those for other, more dangerous controlled substances, such as PCP." 1995 USSG
2D1.1, comment., backg'd. To remedy the problem, the Commission revised its Guideline to provide:
"In the case of LSD on a carrier medium (e. g., a sheet of blotter paper), do not use the weight of the
LSD/carrier medium. Instead, treat each dose of LSD on the carrier medium as equal to 0.4 mg of LSD for
the purposes of the Drug Quantity Table." 1995 USSG 2D1.1(c), n. (H).
Under the amendment, a court determines the defendant's base offense level in the Drug Quantity
Table by multiplying the number of doses of LSD involved by 0.4 milligrams. The Commission submitted
the amendment to Congress, which did not disapprove it in the 180 days allotted by statute. See 28 U. S.
C. 994(p). The amended Guideline took effect on November 1, 1993, and was in force when petitioner
was resentenced.
As a threshold matter, it is doubtful that the Commission intended the constructive-weight method of
the Guidelines to displace the actual-weight method that Chapman requires for statutory minimum
sentences. The commentary, which is the authoritative construction of the Guidelines absent plain
inconsistency or statutory or constitutional infirmity, Stinson v. United States, 508 U. S. 36, 38 (1993),
states that the new method is to be used "for purposes of determining the base offense level." 1995
USSG 2D1.1, comment., backg'd. The next paragraph of the commentary repeats the point: The new
method will make "the offense level for LSD on a carrier medium ... [less than] that for the same
294
number of doses of PCP," "harmonize offense levels for LSD offenses with those for other controlled
substances," and "avoid an undue influence of varied carrier weight on the applicable offense
level." Ibid. This would be obscure language to choose if the Commission were attempting an
interpretation of the statute as well as a revision of the Guidelines, for offense levels are not relevant to
the mandatory-minimum calculation.
Furthermore, after a catalog of reasons for adopting the dose-based method, the Commission ends with
the observation that "[n]onetheless, this approach does not override the applicability of 'mixture or
substance' for the purpose of applying any mandatory minimum sentence (see Chapman;
5G1.1(b))." Ibid. The citation of Chapman in tandem with 5G1.1(b), which advises that "[w]here a
statutorily required minimum sentence is greater than the maximum of the applicable guideline range,
the statutorily required minimum sentence shall be the guideline sentence," suggests that the
Guidelines calculation is independent of the statutory calculation, and that the statute controls if they
conflict. The Commission seems to do no more than acknowledge that, whether or not its method
would be preferable for the statute and Guideline alike, it has no authority to override the statute as we
have construed it.
Were we, for argument's sake, to adopt petitioner's view that the Commission intended the
commentary as an interpretation of 841(b)(1), and that the last sentence of the commentary states
the Commission's view that the dose-based method is consistent with the term "mixture or substance"
in the statute, he still would not prevail. The Commission's dose-based method cannot be squared
with Chapman. The Guideline does take into account some of the weight of the carrier medium
(because the average weight of an LSD dose is 0.05 milligrams, 0.35 of the Commission's constructive
weight per dose of 0.4 milligrams is attributable to the medium, see 1995 USSG 2D1.1, comment.,
backg'd), but we
295
held in Chapman that 841(b)(1) requires "the entire mixture or substance ... to be weighed when
calculating the sentence." 500 U. S., at 459. In these circumstances, we need not decide what, if any,
deference is owed the Commission in order to reject its alleged contrary interpretation. Once we have
determined a statute's meaning, we adhere to our ruling under the doctrine of stare decisis, and we
assess an agency's later interpretation of the statute against that settled law. Lechmere,
Inc. v. NLRB, 502 U. S. 527, 536-537 (1992); Maislin Industries, U. S., Inc. v. Primary Steel, Inc., 497 U. S.
116, 131 (1990).
Our reluctance to overturn precedents derives in part from institutional concerns about the relationship
of the Judiciary to Congress. One reason that we give great weight to stare decisis in the area of
statutory construction is that "Congress is free to change this Court's interpretation of its
legislation." Illinois Brick Co. v. Illinois, 431 U. S. 720, 736 (1977). We have overruled our precedents
when the intervening development of the law has "removed or weakened the conceptual underpinnings
from the prior decision, or where the later law has rendered the decision irreconcilable with competing
legal doctrines or policies." Patterson v. McLean Credit Union, 491 U. S. 164, 173 (1989) (citations
omitted). Absent those changes or compelling evidence bearing on Congress' original
intent, NLRB v. Longshoremen, 473 U. S. 61, 84 (1985), our system demands that we adhere to our prior
interpretations of statutes. Entrusted within its sphere to make policy judgments, the Commission may
abandon its old methods in favor of what it has deemed a more desirable "approach" to calculating LSD
quantities, cf. 1995 USSG 2D1.1, comment., backg'd. We, however, do not have the same latitude to
forsake prior interpretations of a statute. True, there may be little in logic to defend the statute's
treatment of LSD; it results in significant disparity of punishment meted out to LSD offenders relative to
other narcotics traffickers. (Although the number of doses peti-
296
tioner sold seems high, the quantities of other narcotics a defendant would have to sell to receive a
comparable sentence under the statute yield far more doses, see United States v. Marshall, 908 F.2d
1312, 1334 (CA7 1990) (Posner, J., dissenting), aff'd sub nom. Chapman v. United States, 500 U. S. 453
(1991).) Even so, Congress, not this Court, has the responsibility for revising its statutes. Were we to
alter our statutory interpretations from case to case, Congress would have less reason to exercise its
responsibility to correct statutes that are thought to be unwise or unfair.
Like Chapman, this case involves a petitioner who sold LSD on blotter paper, the "carrier of choice"
involved in "the vast majority of cases." 500 U. S., at 466. Just as we declined in Chapman to entertain
"hypothetical cases ... involving very heavy carriers and very little LSD" in resolving a due process
challenge, ibid., we do not address how 841(b)(1) should be applied in those cases.
We hold that 841(b)(1) directs a sentencing court to take into account the actual weight of the blotter
paper with its absorbed LSD, even though the Sentencing Guidelines require a different method of
calculating the weight of an LSD mixture or substance. The judgment of the Court of Appeals is affirmed.
It is so ordered.
U.S. Supreme Court
Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977)
Illinois Brick Co. v. Illinois
No. 76-404
Argued March 23, 1977
Decided June 9, 1977
431 U.S. 720
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Syllabus
Respondents, the State of Illinois and 700 local governmental entities, brought this antitrust treble
damages action under 4 of the Clayton Act alleging that petitioners, concrete block manufacturers
(which sell to masonry contractors, which in turn sell to general contractors, from which respondents
purchase the block in the form of masonry structures) had engaged in a price-fixing conspiracy in
violation of 1 of the Sherman Act. Petitioners, relying on Hanover Shoe, Inc. v. United Shoe Machinery
Corp., 392 U. S. 481, moved for partial summary judgment against all plaintiffs that were indirect
purchasers of block from petitioners, contending that only direct purchasers could sue for the alleged
overcharge. The District Court granted the motion, but the Court of Appeals reversed, holding that
indirect purchasers such as respondents could recover treble damages for an illegal overcharge if they
could prove that the overcharge was passed on to them through the intermediate distribution
channels. Hanover Shoe held that generally the illegally overcharged direct purchaser suing for treble
damages, and not others in the chain of manufacture or distribution, is the party "injured in his business
or property" within the meaning of 4.
Held:
1. If a pass-on theory may not be used defensively by an antitrust violator (defendant) against a direct
purchaser (plaintiff), that theory may not be used offensively by an indirect purchaser (plaintiff) against
an alleged violator (defendant). Therefore, unless Hanover Shoe is to be overruled or limited, it bars
respondents' pass-on theory. Pp. 431 U. S. 729-736.
(a) Allowing offensive but not defensive use of pass-on would create a serious risk of multiple liability for
defendants, since even though an indirect purchaser had already recovered for all or part of an
overcharge passed on to him, the direct purchaser would still automatically recover the full amount of
the overcharge that the indirect purchaser had shown to be passed on, and, similarly, following an
automatic recovery of the full overcharge by the direct purchaser, the indirect purchaser could sue to
recover the same amount. Overlapping recoveries would certainly result from the two lawsuits unless
the indirect purchaser is unable to establish any pass-on whatsoever. Pp. 431 U. S. 730-731.
Page 431 U. S. 721
(b) The Court's perception in Hanover Shoe of the uncertainties and difficulties in analyzing price and
output decisions "in the real economic world, rather than an economist's hypothetical model," applies
with equal force to the assertion of pass-on theories by plaintiffs as it does to such assertion by
defendants. Pp. 431 U. S. 731-733.
(c) Because Hanover Shoe would bar petitioners from using respondents' pass-on theory as a defense to
a treble damages suit by the direct purchasers (the masonry contractors), Hanover Shoe must be
overruled (or narrowly limited), or it must be applied to bar respondents' attempt to use this pass-on
theory offensively. Pp. 431 U. S. 735-736.
2. Hanover Shoe was correctly decided, and its construction of 4 is adhered to. Pp. 431 U. S. 736-747.
(a) Considerations of stare decisis weigh heavily in the area of statutory construction, where Congress is
free to change this Court's interpretation of its legislation. Pp. 431 U. S. 736-737.
(b) Whole new dimensions of complexity would be added to treble damages suits, undermining their
effectiveness, if the use of pass-on theories under 4 were allowed. Even under the optimistic
assumption that joinder of potential plaintiffs would deal satisfactorily with problems of multiple
litigation and liability, 4 actions would be transformed into massive multiparty litigations involving
many distribution levels and including large classes of ultimate consumers remote from the defendant.
The Court's concern in Hanover Shoewith the problems of "massive evidence and complicated theories"
involved in attempting to establish a pass-on defense against a direct purchaser applies a fortiori to the
attempt to trace the effect of the overcharge through each step in the distribution chain from the direct
purchasers to the ultimate consumer. Pp. 431 U. S. 737-744.
(c) Attempts to carve out exceptions to Hanover Shoe for particular types of markets would entail the
very problems that Hanover Shoe sought to avoid. Pp. 431 U. S. 744-745.
(d) The legislative purpose in creating a group of "private attorneys general" to enforce the antitrust
laws under 4, Hawaii v. Standard Oil Co. of California, 405 U. S. 251, 405 U. S. 262, is better served by
holding direct purchasers to be injured to the full extent of the overcharge paid by them than by
attempting to apportion the overcharge among all that may have absorbed a part of it. Pp. 431 U. S.
745-747.
536 F.2d 1163, reversed and remanded.
WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, POWELL,
REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which MARSHALL and
BLACKMUN, JJ.,
Page 431 U. S. 722
joined, post, p. 431 U. S. 748. BLACKMUN, J., filed a dissenting opinion, post, p. 431 U. S. 765.
Page 431 U. S. 723
MR JUSTICE WHITE delivered the opinion of the Court.
Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U. S. 481 (1968), involved an antitrust treble
damages action
Page 431 U. S. 724
brought under 4 of the Clayton Act [Footnote 1] against a manufacturer of shoe machinery by one of
its customers, a manufacturer of shoes. In defense, the shoe machinery manufacturer sought to show
that the plaintiff had not been injured in its business as required by 4 because it had passed on the
claimed illegal overcharge to those who bought shoes from it. Under the defendant's theory, the illegal
overcharge was absorbed by the plaintiff's customers -- indirect purchasers of the defendant's shoe
machinery -- who were the persons actually injured by the antitrust violation.
In Hanover Shoe, this Court rejected as a matter of law this defense that indirect, rather than direct,
purchasers were the parties injured by the antitrust violation. The Court held that, except in certain
limited circumstances, [Footnote 2] a direct purchaser suing for treble damages under 4 of the Clayton
Act is injured within the meaning of 4 by the full amount of the overcharge paid by it, and that the
antitrust defendant is
Page 431 U. S. 725
not permitted to introduce evidence that indirect purchasers were in fact injured by the illegal
overcharge. 392 U.S. at 392 U. S. 494. The first reason for the Court's rejection of this offer of proof was
an unwillingness to complicate treble damages actions with attempts to trace the effects of the
overcharge on the purchaser's prices, sales, costs, and profits, and of showing that these variables would
have behaved differently without the overcharge. Id. at 392 U. S. 492-493. [Footnote 3] A second reason
for barring the pass-on defense was the Court's concern that unless direct purchasers were allowed to
sue for the portion of the overcharge arguably passed on to indirect purchasers, antitrust violators
"would retain the fruits of their illegality"
Page 431 U. S. 726
because indirect purchasers "would have only a tiny stake in the lawsuit," and hence little incentive to
sue. Id. at431 U. S. 494.
In this case, we once again confront the question whether the overcharged direct purchaser should be
deemed for purposes of 4 to have suffered the full injury from the overcharge; but the issue is
presented in the context of a suit in which the plaintiff, an indirect purchaser, seeks to show its injury by
establishing pass-on by the direct purchaser and in which the antitrust defendants rely on Hanover
Shoe's rejection of the pass-on theory. Having decided that, in general, a pass-on theory may not be
used defensively by an antitrust violator against a direct purchaser plaintiff, we must now decide
whether that theory may be used offensively by an indirect purchaser plaintiff against an alleged
violator.
Petitioners manufacture and distribute concrete block in the Greater Chicago area. They sell the block
primarily to masonry contractors, who submit bids to general contractors for the masonry portions of
construction projects. The general contractors, in turn, submit bids for these projects to customers such
as the respondents in this case, the State of Illinois and 700 local governmental entities in the Greater
Chicago area, including counties, municipalities, housing authorities, and school districts. See 67 F.R.D.
461, 463 (ND Ill.1975); App. 16-48. Respondents are thus indirect purchasers of concrete block, which
passes through two separate levels in the chain of distribution before reaching respondents. The block is
purchased directly from petitioners by masonry contractors and used by them to build masonry
structures; those structures are incorporated into entire buildings by general contractors and sold to
respondents'
Respondent State of Illinois, on behalf of itself and respondent local governmental entities, brought this
antitrust treble damages action under 4 of the Clayton Act, alleging that
Page 431 U. S. 727
petitioners had engaged in a combination and conspiracy to fix the prices of concrete block in violation
of 1 of the Sherman Act. [Footnote 4] The complaint alleged that the amounts paid by respondents for
concrete block were more than $3 million higher by reason of this price-fixing conspiracy. The only way
in which the antitrust violation alleged could have injured respondents is if all or part of the overcharge
was passed on by the masonry and general contractors to respondents, rather than being absorbed at
the first two levels of distribution. See Illinois v. Ampress Brick Co., 536 F.2d 1163, 1164 (CA7 1976).
[Footnote 5]
Petitioner manufacturers moved for partial summary judgment against all plaintiffs that were indirect
purchasers of concrete block from petitioners, contending that, as a matter of law, only direct
purchasers could sue for the alleged overcharge. [Footnote 6] The District Court granted petitioners'
motion, but the Court of Appeals reversed, holding that indirect purchasers such as respondents in this
case can recover treble damages for an illegal overcharge if they can prove that the overcharge
Page 431 U. S. 728
was passed on to them through intervening links in the distribution chain. [Footnote 7]
We granted certiorari, 429 U.S. 938 (1976), to resolve a conflict among the Courts of Appeals [Footnote
8] on the question whether the offensive use of pass-on authorized by the decision below is consistent
with Hanover Shoe's restrictions on the defensive use of pass-on. We hold that it is not, and we reverse.
We reach this result in two steps. First, we conclude that, whatever rule is to be adopted regarding pass-
on in antitrust damages actions, it must apply equally to plaintiffs and defendants. Because Hanover
Shoe would bar petitioners from using respondents' pass-on theory as a defense to a treble damages
suit
Page 431 U. S. 729
by the direct purchasers (the masonry contractors), [Footnote 9] we are faced with the choice of
overruling (or narrowly limiting) Hanover Shoe or of applying it to bar respondents' attempt to use this
pass-on theory offensively. Second, we decline to abandon the construction given 4 in Hanover Shoe --
that the overcharged direct purchaser, and not others in the chain of manufacture or distribution, is the
party "injured in his business or property" within the meaning of the section -- in the absence of a
convincing demonstration that the Court was wrong in Hanover Shoe to think that the effectiveness of
the antitrust treble damages action would be substantially reduced by adopting a rule that any party in
the chain may sue to recover the fraction of the overcharge allegedly absorbed by it.
II
The parties in this case agree that however 4 is construed with respect to the pass-on issue, the rule
should apply equally to plaintiffs and defendants -- that an indirect purchaser should not be allowed to
use a pass-on theory to recover damages from a defendant unless the defendant would be allowed to
use a pass-on defense in a suit by a direct purchaser. Respondents, in arguing that they should be
allowed to recover by showing pass-on in this case, have conceded that petitioners should be allowed to
assert a pass-on defense against direct purchasers of concrete block, Tr. of Oral Arg. 33, 48; they ask this
Court to limit Hanover Shoe's bar on pass-on defenses to its "particular factual context" of overcharges
for capital goods used to manufacture new products. Id. at 41; see id. at 36, 47-48.
Before turning to this request to limit Hanover Shoe, we consider the substantially contrary position,
adopted by our dissenting Brethren, by the United States as amicus curiae, and by lower courts that
have allowed offensive use of pass on, that the unavailability of a pass-on theory to a defendant
Page 431 U. S. 730
should not necessarily preclude its use by plaintiffs seeking treble damages against that defendant.
[Footnote 10] Under this view, Hanover Shoe's rejection of pass-on would continue to apply to
defendants unless direct and indirect purchasers were both suing the defendant in the same action; but
it would not bar indirect purchasers from attempting to show that the overcharge had been passed on
to them. We reject this position for two reasons.
First, allowing offensive but not defensive use of pass-on would create a serious risk of multiple liability
for defendants. Even though an indirect purchaser had already recovered for all or part of an overcharge
passed on to it, the direct purchaser would still recover automatically the full amount of the overcharge
that the indirect purchaser had shown to be passed on; similarly, following an automatic recovery of the
full overcharge by the direct purchaser, the indirect purchaser could sue to recover the same amount.
The risk of duplicative recoveries created by unequal application of the Hanover Shoe rule is much more
substantial than in the more usual situation where the defendant is sued in two different lawsuits by
plaintiffs asserting conflicting claims to the same fund. A one-sided application of Hanover
Shoe substantially increases the possibility of inconsistent adjudications -- and therefore of unwarranted
multiple liability for the defendant -- by presuming that one plaintiff (the direct purchaser) is entitled to
full recovery while preventing the defendant from using that presumption against the other plaintiff;
overlapping recoveries are certain to result from the two lawsuits
Page 431 U. S. 731
unless the indirect purchaser is unable to establish any pass-on whatsoever. As in Hawaii v. Standard Oil
Co. of Cal., 405 U. S. 251, 405 U. S. 264 (1972), we are unwilling to "open the door to duplicative
recoveries" under 4. [Footnote 11]
Second, the reasoning of Hanover Shoe cannot justify unequal treatment of plaintiffs and defendants
with respect to the permissibility of pass-on arguments. The principal basis for the decision in Hanover
Shoe was the Court's perception of the uncertainties and difficulties in analyzing price and output
Page 431 U. S. 732
decisions "in the real economic world, rather than an economist's hypothetical model," 392 U.S. at 392
U. S. 493, and of the costs to the judicial system and the efficient enforcement of the antitrust laws of
attempting to reconstruct those decisions in the courtroom. [Footnote 12] This perception that the
attempt to trace the complex economic adjustments to a change in the cost of a particular factor of
production would greatly complicate and reduce the effectiveness of already protracted treble damages
proceedings applies with no less force to the assertion of pass-on theories by plaintiffs than it does to
the assertion by defendants. However "long and complicated" the proceedings would be when
defendants sought to prove pass-on, ibid., they would be equally so when the same evidence was
introduced by plaintiffs. Indeed, the evidentiary complexities and uncertainties involved in the defensive
use of pass-on against a direct purchaser are multiplied in the offensive use of pass-on by a plaintiff
several steps removed from the defendant in the chain of distribution. The demonstration of how much
of the overcharge was passed on by the first purchaser must be repeated at each point at which
Page 431 U. S. 733
the price-fixed goods changed hands before they reached the plaintiff. [Footnote 13]
It is argued, however, that Hanover Shoe rests on a policy of ensuring that a treble damages plaintiff is
available to deprive antitrust violators of "the fruits of their illegality," id. at 392 U. S. 494, a policy that
would be furthered by allowing plaintiffs, but not defendants, to use pass-on theories. See, e.g., In re
Western Liquid Asphalt Cases,487 F.2d 191, 197 (CA9 1973), cert. denied sub nom. Standard Oil Co. of
Cal. v. Alaska, 415 U.S. 919 (1974); Brief for United States as Amicus Curiae 6, 113, 17-19. [Footnote 14]
We do not read the Court's
Page 431 U. S. 734

concern in Hanover Shoe for the effectiveness of the treble damages remedy as countenancing unequal
application of the Court's pass-on rule. Rather, we understand Hanover Shoe
Page 431 U. S. 735
as resting on the judgment that the antitrust laws will be more effectively enforced by concentrating the
full recovery for the overcharge in the direct purchasers, rather than by allowing every plaintiff
potentially affected by the overcharge to sue only for the amount it could show was absorbed by it.
We thus decline to construe 4 to permit offensive use of a pass-on theory against an alleged violator
that could not use the same theory as a defense in an action by direct purchasers. In this case,
respondents seek to demonstrate that masonry contractors, who incorporated petitioners' block into
walls and other masonry structures, passed on the alleged overcharge on the block to general
contractors, who incorporated the masonry structures into entire buildings, and that the general
contractors, in turn, passed on the overcharge to respondents in the bids submitted for those buildings.
We think it clear that, under a fair reading of Hanover Shoe, petitioners would be barred from asserting
this theory in a suit by the masonry contractors.
In Hanover Shoe, this Court did not endorse the broad exception that had been recognized in that case
by the courts below -- permitting the pass-on defense against middlemen who did not alter the goods
they purchased before reselling them. [Footnote 15] The masonry contractors here could not be
included under this exception in any event, because they transform the concrete block purchased from
defendants into the masonry portions of buildings. But this Court, in Hanover Shoe,
Page 431 U. S. 736
indicated the narrow scope it intended for any exception to its rule barring pass-on defenses by citing,
as the only example of a situation where the defense might be permitted, a preexisting cost-plus
contract. In such a situation, the purchaser is insulated from any decrease in its sales as a result of
attempting to pass on the overcharge, because its customer is committed to buying a fixed quantity
regardless of price. The effect of the overcharge is essentially determined in advance, without reference
to the interaction of supply and demand that complicates the determination in the general case. The
competitive bidding process by which the concrete block involved in this case was incorporated into
masonry structures and then into entire buildings can hardly be said to circumvent complex market
interactions as would a cost-plus contract. [Footnote 16]
We are left, then, with two alternatives: either we must overrule Hanover Shoe (or at least narrowly
confine it to its facts), or we must preclude respondents from seeking to recover on their pass-on theory.
We choose the latter course.
III
In considering whether to cut back or abandon the Hanover Shoe rule, we must bear in mind that
considerations of stare decisis weigh heavily in the area of statutory construction, where Congress is
free to change this Court's interpretation of its legislation. See Edelman v. Jordan, 415 U. S. 651, 415 U. S.
671 (1974); Burnet v. Coronado Oil & Gas Co., 285 U. S. 393, 285 U. S. 406-408 (1932) (Brandeis, J.,
dissenting). This presumption of adherence to our prior decisions construing legislative enactments
would support our reaffirmance of the Hanover Shoe
Page 431 U. S. 737
construction of 4, joined by eight Justices without dissent only a few years ago, [Footnote 17] even if
the Court were persuaded that the use of pass-on theories by plaintiffs and defendants in treble
damages actions is more consistent with the policies underlying the treble damages action than is
the Hanover Shoe rule. But we are not so persuaded.
Permitting the use of pass-on theories under 4 essentially would transform treble damages actions
into massive efforts to apportion the recovery among all potential plaintiffs that could have absorbed
part of the overcharge -- from direct purchasers to middlemen to ultimate consumers. However
appealing this attempt to allocate the overcharge might seem in theory, it would add whole new
dimensions of complexity to treble damages suits, and seriously undermine their effectiveness.
As we have indicated, potential plaintiffs at each level in the distribution chain are in a position to assert
conflicting claims to a common fund -- the amount of the alleged overcharge -- by contending that the
entire overcharge was absorbed at that particular level in the chain. [Footnote 18] A treble damages
action brought by one of these potential plaintiffs (or one class of potential plaintiffs) to recover the
overcharge implicates all three of the interests that have traditionally been thought to support
compulsory joinder of absent and potentially adverse claimants: the interest of the defendant in
Page 431 U. S. 738
avoiding multiple liability for the fund; the interest of the absent potential plaintiffs in protecting their
right to recover for the portion of the fund allocable to them; and the social interest in the efficient
administration of justice and the avoidance of multiple litigation. Reed, Compulsory Joinder of Parties in
Civil Actions, 55 Mich.L.Rev. 327, 330 (1957). See Provident Tradesmens Bank & Trust Co. v.
Patterson, 390 U. S. 102, 390 U. S. 110-111 (1968); 7 C. Wright & A. Miller, Federal Practice and
Procedure 1602 (1972).
Opponents of the Hanover Shoe rule have recognized this need for compulsory joinder in suggesting
that the defendant could interplead potential claimants under 28 U.S.C. 1335. [Footnote 19] But if the
defendant, for any of a variety of reasons, [Footnote 20] does not choose to interplead the absent
potential claimants, there would be a strong argument for joining them as "persons needed for just
adjudication" under Fed.Rule Civ.Proc.19(a). [Footnote 21] See Comment, Standing to Sue in Antitrust
Cases:
Page 431 U. S. 739
The Offensive Use of Passing-On, 123 U.Pa.L.Rev. 976, 998 (1975). These absent potential claimants
would seem to fit the classic definition of "necessary parties," for purposes of compulsory joinder, given
in Shield v. Barrow,17 How. 130, 58 U. S. 139 (1855):
"Persons having an interest in the controversy, and who ought to be made parties, in order that the
court may act on that rule which requires it to decide on, and finally determine the entire controversy,
and do complete justice, by adjusting all the rights involved in it."
See Notes of Advisory Committee on 1966 Amendment to Rule 19, 8 U.S.C.App. p. 7760; 7 C. Wright & A.
Miller, supra, 1604, 1618; 3A J. Moore, Federal Practice 19.08 (1974). The plaintiff bringing the treble
damages action would be required, under Fed.Rule Civ.Proc.19(c), to "state the names, if known," of
these absent potential claimants; they should also be notified by some means that the action was
pending. [Footnote 22] Where, as would often be the case, the potential claimants at a particular level
of distribution are so numerous that joinder of all is impracticable, a representative presumably would
have to be found to bring them into the action as a class. See Fed.Rule Civ.Proc.19(d); 3A J.
Moore, supra, 19.21.
It is unlikely, of course, that all potential plaintiffs could or would be joined. Some may not wish to
assert claims to the
Page 431 U. S. 740
overcharge; others may be unmanageable as a class; and still others may be beyond the personal
jurisdiction of the court. We can assume that ordinarily the action would still proceed, the absent parties
not being deemed "indispensable" under Fed.Rule Civ.Proc.19(b). See Provident Tradesmens Bank &
Trust Co. v. Patterson, supra. But allowing indirect purchasers to recover using pass-on theories, even
under the optimistic assumption that joinder of potential plaintiffs will deal satisfactorily with problems
of multiple litigation and liability, would transform treble damages actions into massive multiparty
litigations involving many levels of distribution and including large classes of ultimate consumers remote
from the defendant. In treble damages actions by ultimate consumers, the overcharge would have to be
apportioned among the relevant wholesalers, retailers, and other middlemen, whose representatives
presumably should be joined. [Footnote 23] And in suits
Page 431 U. S. 741
by direct purchasers or middlemen, the interests of ultimate consumers are similarly implicated.
[Footnote 24]
There is thus a strong possibility that indirect purchasers remote from the defendant would be parties to
virtually every treble damages action (apart from those brought against defendants at the retail level).
The Court's concern in Hanover Shoe to avoid weighing down treble damages actions with the "massive
evidence and complicated theories," 392 U.S. at 392 U. S. 493, involved in attempting to establish a
pass-on defense against a direct purchaser applies a fortiori to the attempt to trace the effect of the
overcharge through each step in the distribution chain from the direct purchaser to the ultimate
consumer. We are no more inclined than we were in Hanover Shoe to ignore the burdens that such an
attempt would impose on the effective enforcement of the antitrust laws.
Under an array of simplifying assumptions, economic theory provides a precise formula for calculating
how the overcharge is distributed between the overcharged party (passer) and its customers
(passees). If the market for the passer's product is perfectly competitive; if the overcharge is imposed
equally on all of the passer's competitors; and if the passer maximizes its profits, then the ratio of the
shares of the overcharge borne by passee and passer will equal the ratio of the elasticities of supply and
demand in the market for the passer's product. [Footnote 25]
Page 431 U. S. 742
Even if these assumptions are accepted, there remains a serious problem of measuring the relevant
elasticities -- the percentage change in the quantities of the passer's product demanded and supplied in
response to a one percent change in price. In view of the difficulties that have been encountered, even
in informal adversary proceedings, with the statistical techniques used to estimate these
concepts, see Finkelstein, Regression Models in Administrative Proceedings, 86 Harv.L.Rev. 1442, 1444
(1973), it is unrealistic to think that elasticity studies introduced by expert witnesses will resolve the
pass-on issue. We need look no further than our own difficulties with sophisticated statistical
methodology that were evident last Term in Gregg v. Georgia, 428 U. S. 153 (1976), and its companion
cases. See id. at 428 U. S. 184-185 (joint opinion of STEWART, POWELL, and STEVENS, JJ.); 428 U. S. 233-
236 (MARSHALL, J., dissenting); Roberts v. Louisiana, 428 U. S. 325, 428 U. S. 354-355 (1976) (WHITE, J.,
dissenting).
More important, as the Hanover Shoe Court observed, 392 U.S. at 392 U. S. 493, "in the real economic
world, rather than an economist's hypothetical model," the latter's drastic simplifications generally must
be abandoned. Overcharged direct purchasers often sell in imperfectly competitive markets. They often
compete with other sellers that have not been subject to the overcharge; and their pricing policies often
cannot be explained solely by the convenient assumption of profit maximization. [Footnote 26] As we
concluded in Hanover Shoe, 392 U.S. at 392 U. S. 492,
Page 431 U. S. 743
attention to "sound laws of economics" can only heighten the awareness of the difficulties and
uncertainties involved in determining how the relevant market variables would have behaved had there
been no overcharge. [Footnote 27]
It is quite true that these difficulties and uncertainties will be less substantial in some contexts than in
others. There have been many proposals to allow pass-on theories in some of these contexts while
preserving the Hanover Shoe rule in others. Respondents here argue, not without support from some
lower courts, [Footnote 28] that pass-on theories should be permitted for middlemen that resell goods
without altering them and for contractors that add a fixed percentage markup to the cost of their
materials in submitting bids. Brief for Respondents 9-30; Tr. of Oral Arg. 36 48. Exceptions to
the Hanover Shoe rule have also been urged for other situations in which most of the overcharge is
purportedly passed on -- for example, where a price-fixed good is a small but vital input into a
Page 431 U. S. 744

much larger product, making the demand for the price-fixed good highly inelastic. Compare Philadelphia
Housing Auth. v. American Radiator & Standard Sanitary Corp., 50 F.R.D. 13 (ED Pa.1970), aff'd sub nom.
Mangano v. American Radiator & Standard Sanitary Corp., 438 F.2d 1187 (CA3 1971), with In re Master
Key Antitrust Litigation,1972 Trade Cas. 74,680 (Conn.). See Schaefer, supra, n 25, at 918-925.
We reject these attempts to carve out exceptions to the Hanover Shoe rule for particular types of
markets. [Footnote 29] An exception allowing evidence of pass-on by middlemen that resell the goods
they purchase of course would be of no avail to respondents, because the contractors that allegedly
passed on the overcharge on the block incorporated it into buildings. See supra at 431 U. S. 735. An
exception for the contractors here on the ground that they purport to charge a fixed percentage above
their costs would substantially erode the Hanover Shoe rule without justification. Firms in many sectors
of the economy rely to an extent on cost-based rules of thumb in setting prices. See F. Scherer, Industrial
Market Structure and Economic Performance 176-179 (1970). These rules are not adhered to rigidly,
however; the extent of the markup (or the allocation of costs) is varied to reflect demand
conditions. Id. at 176-177. The intricacies of tracing the effect of an overcharge on the purchaser's prices,
costs, sales, and profits thus are not spared the litigants.
More generally, the process of classifying various market situations according to the amount of pass-on
likely to be
Page 431 U. S. 745
involved and its susceptibility of proof in a judicial forum would entail the very problems that
the Hanover Shoerule was meant to avoid. The litigation over where the line should be drawn in a
particular class of cases would inject the same "massive evidence and complicated theories" into treble
damages proceedings, albeit at a somewhat higher level of generality. As we have noted, supra at 431 U.
S. 735-736, Hanover Shoe itself implicitly discouraged the creation of exceptions to its rule barring pass-
on defenses, and we adhere to the narrow scope of exemption indicated by our decision there.
The concern in Hanover Shoe for the complexity that would be introduced into treble damages suits if
pass-on theories were permitted was closely related to the Court's concern for the reduction in the
effectiveness of those suits if brought by indirect purchasers with a smaller stake in the outcome than
that of direct purchasers suing for the full amount of the overcharge. The apportionment of the recovery
throughout the distribution chain would increase the overall costs of recovery by injecting extremely
complex issues into the case; at the same time, such an apportionment would reduce the benefits to
each plaintiff by dividing the potential recovery among a much larger group. Added to the uncertainty of
how much of an overcharge could be established at trial would be the uncertainty of how that
overcharge would be apportioned among the various plaintiffs. This additional uncertainty would
further reduce the incentive to sue. The combination of increasing the costs and diffusing the benefits of
bringing a treble damages action could seriously impair this important weapon of antitrust enforcement.
We think the longstanding policy of encouraging vigorous private enforcement of the antitrust laws, see,
e.g, Perma Life Mufflers, Inc. v. International Parts Corp., 392 U. S. 134, 392 U. S. 139 (1968), supports
our adherence to the Hanover Shoe rule, under which direct purchasers are not only spared the burden
Page 431 U. S. 746
of litigating the intricacies of pass-on, but also are permitted to recover the full amount of the
overcharge. We recognize that direct purchasers sometimes may refrain from bringing a treble damages
suit for fear of disrupting relations with their suppliers. [Footnote 30] But on balance, and until there are
clear directions from Congress to the contrary, we conclude that the legislative purpose in creating a
group of "private attorneys general'" to enforce the antitrust laws under 4, Hawaii v. Standard Oil Co.
of Cal., 405 U.S. at 405 U. S. 262, is better served by holding direct purchasers to be injured to the full
extent of the overcharge paid by them than by attempting to apportion the overcharge among all that
may have absorbed a part of it.
It is true that, in elevating direct purchasers to a preferred position as private attorneys general,
the Hanover Shoe rule denies recovery to those indirect purchasers who may have been actually injured
by antitrust violations. Of course, as MR. JUSTICE BRENNAN points out in dissent, "from the deterrence
standpoint, it is irrelevant to whom damages are paid, so long as some one redresses the
violation." Post at 431 U. S. 760. But 4 has another purpose in addition to deterring violators and
depriving them of "the fruits of their illegality," Hanover Shoe, 392 U. at 392 U. S. 494; it is also designed
to compensate victims of antitrust violations for their injuries. E.g., Brunswick Corp. v. Pueblo Bowl-O-
Mat, Inc., 429 U. S. 477, 429 U. S. 485-486 (1977). Hanover Shoedoes further the goal of compensation
to the extent that the direct purchaser absorbs at least some, and often most, of the overcharge. In view
of the considerations supporting the Hanover Shoe rule, we are unwilling to carry the compensation
principle to its logical extreme by attempting to allocate damages among all "those within the
defendant's chain of distribution," post at 431 U. S. 761, especially
Page 431 U. S. 747
because we question the extent to which such an attempt would make individual victims whole for
actual injuries suffered, rather than simply depleting the overall recovery in litigation over pass-on issues.
Many of the indirect purchasers barred from asserting pass-on claims under the Hanover Shoe rule have
such a small stake in the lawsuit that even if they were to recover as part of a class, only a small fraction
would be likely to come forward to collect their damages. [Footnote 31] And given the difficulty of
ascertaining the amount absorbed by any particular indirect purchaser, there is little basis for believing
that the amount of the recovery would reflect the actual injury suffered.
Page 431 U. S. 748
For the reasons stated, the judgment is reversed, and the case is remanded for further proceedings
consistent with this opinion.
So ordered.
[Footnote 1]
Section 4 of the Clayton Act, 38 Stat. 731, 15 U.S.C. 15, provides:

"Any person who shall be injured in his business or property by reason of anything forbidden in the
antitrust laws may sue therefor in any district court of the United States in the district in which the
defendant resides or is found or has an agent, without respect to the amount in controversy, and shall
recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's
fee."
[Footnote 2]
The Court cited, as an example of when a pass-on defense might be permitted, the situation where "an
overcharged buyer has a preexisting "cost-plus" contract, thus making it easy to prove that he has not
been damaged. . . ." 392 U.S. at 392 U. S. 494. See infra at 431 U. S. 735-736.
[Footnote 3]
The Court explained the economic uncertainties and complexities involved in proving pass-on as follows:
"A wide range of factors influence a company's pricing policies. Normally the impact of a single change
in the relevant conditions cannot be measured after the fact; indeed a businessman may be unable to
state whether, had one fact ben different (a single supply less expensive, general economic conditions
more buoyant, or the labor market tighter, for example), he would have chosen a different price. Equally
difficult to determine, in the real economic world rather than an economist's hypothetical model, is
what effect a change in a company's price will have on its total sales. Finally, costs per unit for a
different volume of total sales are hard to estimate. Even if it could be shown that the buyer raised his
price in response to, and in the amount of, the overcharge and that his margin of profit and total sales
had not thereafter declined, there would remain the nearly insuperable difficulty of demonstrating that
the particular plaintiff could not or would not have raised his prices absent the overcharge or
maintained the higher price had the overcharge been discontinued. Since establishing the applicability
of the passing-on defense would require a convincing showing of each of these virtually unascertainable
figures, the task would normally prove insurmountable. On the other hand, it is not unlikely that, if the
existence of the defense is generally confirmed, antitrust defendants will frequently seek to establish its
applicability. Treble damage actions would often require additional long and complicated proceedings
involving massive evidence and complicated theories."
392 U.S. at 392 U. S. 492-493. (Footnote omitted.)
[Footnote 4]
Section 1 of the Sherman Act, c. 647, 26 Stat. 209, as amended, 15 U.S.C. 1, provides in relevant part:
"Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with foreign nations, is hereby declared to be illegal. . . ."
[Footnote 5]
Private treble damages actions brought by masonry contractors, general contractors, and private
builders were settled, without prejudice to this suit. 536 F.2d at 1164.
[Footnote 6]
The responses to petitioners' interrogatories indicated that only four of the plaintiffs represented by the
State purchased concrete block directly from one of the petitioners. 67 F.R.D. 461, 463 (ND Ill.1975).
Only 7% of the 700 public entities named as plaintiffs were apparently able to state the cost of the
concrete block used in their building projects. Brief for Petitioners 5 n. **. In the only example cited to
us by the parties, the cost of the concrete block was reported as less than one-half of one percent of the
total cost of the project. Id. at 21 n. *.
[Footnote 7]
The District Court based its grant of summary judgment against the indirect purchaser plaintiffs not on
the ground that this Court's construction of 4 in Hanover Shoe barred their attempt to show that the
masonry and general contractors passed on the overcharge to them, but rather on the ground that
these indirect purchasers lacked standing to sue for an overcharge on one product -- concrete block --
that was incorporated by the masonry and general contractors into an entirely new and different
product -- a building. 67 F.R.D. at 467-468. Although the Court of Appeals held that these indirect
purchasers did have standing to sue for damages under 4, it agreed with the District Court's reading
of Hanover Shoe. 536 F.2d at 1164-1167. Because we find Hanover Shoe dispositive here, we do not
address the standing issue, except to note, as did the Court of Appeals below, 536 F.2d at 1166, that the
question of which persons have been injured by an illegal overcharge for purposes of 4 is analytically
distinct from the question of which persons have sustained injuries too remote to give them standing to
sue for damages under 4. See Handler & Blechman, Antitrust and the Consumer Interest: The Fallacy
of Parens Patriae and A Suggested New Approach, 85 Yale L.J. 626, 644-645 (1976).
[Footnote 8]
Compare Mangano v. American Radiator & Standard Sanitary Corp., 438 F.2d 1187 (CA3 1971), aff'g
Philadelphia Housing Auth. v. American Radiator & Standard Sanitary Corp., 50 F.R.D. 13 (ED
Pa.1970), with In re Western Liquid Asphalt Cases, 487 F.2d 191 (CA9 1973), cert. denied sub nom.
Standard Oil Co. of Cal. v. Alaska, 415 U.S. 919 (1974); West Virginia v. Chas. Pfizer & Co., 440 F.2d 1079
(CA2), cert. denied sub nom. Cotler Drugs, Inc. v. Chas. Pfizer & Co., 404 U.S. 871 (1971), and the decision
below, Illinois v. Ampress Brick Co., 536 F.2d 1163.
[Footnote 9]
See infra at 431 U. S. 734-735
[Footnote 10]
Post at 431 U. S. 753 (BRENNAN, J., dissenting); post at 431 U. S. 765-766 (BLACKMUN, J., dissenting);
Brief for United States as Amicus Curiae 4-6, 15-21; Tr. of Oral Arg. 50-54, 57-60; West Virginia v. Chas.
Pfizer & Co., 440 F.2d at 1086-1088; Boshes v. General Motors Corp., 59 F.R. D. 589, 592-598 (ND
Ill.1973); In re Master Key Antitrust Litigation, 1973-2 Trade Cas. 74,680, p. 94,978 (Conn.); Carnivale
Bag Co. v. Slide-Rite Mfg. Corp., 395 F.Supp. 287, 290-291 (SDNY 1975). See also Brief for State of
California as Amicus Curiae 6-12.
[Footnote 11]
In recognition of the need to avoid duplicative recoveries, courts adopting the view that pass-on
theories should not be equally available to plaintiffs and defendants have agreed that defendants should
be allowed to assert a pass-on defense against a direct purchaser if an indirect purchaser is also
attempting to recover on a pass-on theory in the same lawsuit. E.g., In re Western Liquid Asphalt
Cases, 487 F.2d at 200-201; West Virginia v. Chas. Pfizer & Co., 440 F.2d at 1088. See also Comment,
Standing to Sue in Antitrust Cases: The Offensive Use of Passing-On, 123 U.Pa.L.Rev. 976, 995-998 (1975);
Comment, Mangano and Ultimate-Consumer Standing: The Misuse of the Hanover Doctrine, 72
Colum.L.Rev. 394, 410 (1972); Brief for United States as Amicus Curiae 25. Various procedural devices,
such as the Multidistrict Litigation Act, 28 U.S.C. 1407, and statutory interpleader, 28 U.S.C. 1335, are
relied upon to bring indirect and direct purchasers together in one action in order to apportion damages
among them and thereby reduce the risk of duplicative recovery. These procedural devices cannot
protect against multiple liability where the direct purchasers have already recovered by obtaining a
judgment or by settling, as is more likely (and as occurred here, see n 5, supra); acknowledging that the
risk of multiple recoveries is inevitably increased by allowing offensive but not defensive use of pass-
on, e.g.,Comment, 123 U.Pa.L.Rev. supra at 994, proponents of this approach ultimately fall back on the
argument that it is better for the defendant to pay six-fold or more damages than for an injured party to
go uncompensated.E.g., Comment, 72 Colum.L.Rev. supra at 411; Tr. of Oral Arg. 58 ("a little slopover on
the shoulders of the wrongdoers . . . is acceptable"). We do not find this risk acceptable.
Moreover, even if ways could be found to bring all potential plaintiffs together in one huge action, the
complexity thereby introduced into treble damages proceedings argues strongly for retaining
the Hanover Shoerule. See 431 U. S. infra.
[Footnote 12]
That this rationale was more important in the decision to bar the pass-on defense than the second
reason -- the concern that, if pass-on defenses were permitted, indirect purchasers would lack the
incentive to sue and antitrust violators would retain their ill-gotten gains, see supra at 431 U. S. 725-726,
is shown by the fact that the Court recognized an exception for preexisting cost-plus contracts, which
"mak[e] it easy to prove that [the direct purchaser] has not been damaged." 392 U.S. at 392 U. S. 494.
(Emphasis added.) The amount of the stake that the customers of the direct purchaser have in a lawsuit
against the overcharger is not likely to depend on whether they buy under a cost-plus contract or in a
competitive market, but the Court allowed a pass-on defense in the former situation because the
preexisting cost-plus contract makes easy the normally complicated task of demonstrating that the
overcharge has not been absorbed by the direct purchaser. SeeNote, The Effect of Hanover Shoe on the
Offensive Use of the Passing-on Doctrine, 46 So.Cal.L.Rev. 98, 108 (1972).
[Footnote 13]
Offensive use of pass-on by the last purchaser in the distribution chain is simpler in one respect than
defensive use of pass-on against a direct purchaser that sells a product to other customers. In the latter
case, even if the defendant shows that, as a result of the overcharge, the direct purchaser increased its
price by the full amount of the overcharge, the direct purchaser may still claim injury from a reduction in
the volume of its sales caused by its higher prices. This additional element of injury from reduced
volume is not present in the suit by the final purchaser of the overcharged goods, where the issue
regarding injury will be whether the defendant's overcharge caused the plaintiff to pay a higher price for
whatever it purchased. But the final purchaser still will have to trace the overcharge through each step
in the distribution chain. In our view, the difficulty of reconstructing the pricing decisions of
intermediate purchasers at each step in the chain beyond the direct purchaser generally will outweigh
any gain in simplicity from not having to litigate the effects of the passed-on overcharge on the direct
purchaser's volume.
[Footnote 14]
We are urged to defer to evidence in the legislative history of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, 90 Stat. 1394-1396, 15 U.S.C. 15c et seq. (1976 ed.), that Congress
understood Hanover Shoe as applying only to defendants. Post at 431 U. S. 756-758 (BRENNAN, J.,
dissenting); Brief for 47 States as Amici Curiae 14-15, n. 6; Brief for United States as Amicus Curiae 14-15,
and n. 12. The House Report (apparently viewing the issue as one of standing, cf. n 7, supra) endorsed
the Ninth Circuit's view of "the pro-enforcement thrust of Hanover Shoe" in In re Western Liquid Asphalt
Cases, supra, and criticized lower court decisions barring pass-on arguments by plaintiffs. H.R.Rep. No.
94-499, p. 6 n. 4 (1975). In addition, one of the sponsors of this legislation, Representative Rodino,
clearly assumed that the issue of offensive use of pass-on under 4 would be resolved favorably to
plaintiffs by this Court. See 122 Cong.Rec. H10295 (daily ed., Sept. 16, 1976).
Congress made clear, however, that this legislation did not alter the definition of which overcharged
persons were injured within the meaning of 4. It simply created a new procedural device -- parens
patriae actions by States on behalf of their citizens -- to enforce existing rights of recovery under 4.
The House Report quoted above stated that the parens patriae provision "creates no new substantive
liability"; the relevant language of the newly enacted 4C(a) of the Clayton Act tracks that of existing 4,
showing that it was intended only as "an alternative means . . . for the vindication of existing substantive
claims." H.R.Rep. No. 94-499, supra at 9. "The establishment of an alternative remedy does not increase
any defendant's liability." Ibid. Representative Rodino himself acknowledged in the remarks cited above
that this legislation did not create a right of recovery for consumers where one did not already exist.
We thus cannot agree with the dissenters that the legislative history of the 1976 Antitrust
Improvements Act is dispositive as to the interpretation of 4 of the Clayton Act, enacted in 1914, or
the predecessor section of the Sherman Act, enacted in 1890. Post at 431 U. S. 756-758. The cases cited
by MR. JUSTICE BRENNAN, post at 431 U. S. 765 n. 24, to support his reliance on this legislation all
involved specific statutory language that was thought to clarify the meaning of an earlier statute. E.g.,
Red Lion Broadcasting Co. v. FCC, 395 U. S. 367, 395 U. S. 380-381 (1969) (language in 1959 amendment
to 315 of the Communications Act approved fairness doctrine adopted by FCC under the "public
interest" standard of the original Act). Here, by contrast, Congress borrowed the language of 4 in
adding the parens patriae section. The views expressed by particular legislators as to the meaning of
that language in 4 "cannot serve to change the legislative intent of Congress . . . since the statements
were [made] after passage of the [Clayton] Act.'" Regional Rail Reorganization Act Cases, 419 U. S.
102, 419 U. S. 132 (1974), quoting National Woodwork Mfrs. Assn. v. NLRB, 386 U. S. 612, 386 U. S. 639 n.
34 (1967).
While we do not lightly disagree with the reading of Hanover Shoe urged by these legislators, we think
the construction of 4 adopted in that decision cannot be applied for the exclusive benefit of plaintiffs.
Should Congress disagree with this result, it may, of course, amend the section to change it. But it has
not done so in the recent parens patriae legislation.
[Footnote 15]
In a separate trial pursuant to Fed.Rule Civ.Proc. 42(b), the District Court held that the defendant shoe
machinery manufacturer was not permitted to assert a pass-on defense against its customer. 185 F.Supp.
826 (MD Pa.), aff'd, 281 F.2d 481 (CA3), cert. denied, 364 U.S. 901 (1960). The District Court indicated
that pass-on defenses were barred against "consumers" who use the defendant's product to make their
own but not against "middlemen" who simply resell the defendant's product. 185 F.Supp. at 830-831.
Both on interlocutory appeal and after trial on the merits, the Court of Appeals affirmed on the basis of
the District Court's reasoning. See392 U.S. at 392 U. S. 488 n. 6.
[Footnote 16]
Another situation in which market forces have been superseded and the pass-on defense might be
permitted is where the direct purchaser is owned or controlled by its customer. Cf. Perkins v. Standard
Oil Co., 395 U. S. 642,395 U. S. 648 (1969); In re Western Liquid Asphalt Cases, 487 F.2d at 197, 199.
[Footnote 17]
The sole dissenting Justice in Hanover Shoe did not reach the pass on question. 392 U.S. at 392 U. S. 513.
[Footnote 18]
In this Part, we assume that use of pass-on will be permitted symmetrically; if at all. This assumption, of
course, reduces the substantial risk of multiple liability for defendants that is posed by allowing indirect
purchasers to recover for the overcharge passed on to them while at the same time allowing direct
purchasers automatically to collect the entire overcharge. See supra at 431 U. S. 730-731. But the
possibility of inconsistent judgments obtained by conflicting claimants remains nonetheless. Even this
residual possibility justifies bringing potential and actual claimants together in one action if possible.
[Footnote 19]
See n 11, supra. Interpleader under Fed.Rule Civ.Proc. 22(1) often would be unavailable, because service
of process for rule interpleader, as contrasted with statutory interpleader, does not run
nationwide. See 3A J. Moore, Federal Practice 22.04[2] (1974).
[Footnote 20]
For example, a condition precedent for invoking statutory interpleader is the posting of a bond for the
amount in dispute, 28 U.S.C. 1336(a)(2), see 3A J. Moore, supra, 22.10, and a defendant may be
unwilling to put up a bond for the huge amounts normally claimed in multiple-party treble damage suits.
For a discussion of other circumsnces in which statutory interpleader may be "impractical," see McGuire,
The Passing-On Defense and the Right of Remote Purchasers to Recover Treble Damages under Hanover
Shoe, 33 U.Pltt.L.Rev. 177, 197-198 (1971).
[Footnote 21]
Rule 19(a) provides in part:
"A person who is subject to service of process and whose joinder will not deprive the court of
jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his
absence, complete relief cannot be accorded among those already parties, or (2) he claims an interest
relating to the subject of the action, and is so situated that the disposition of the action in his absence
may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the
persons already parties subject to a substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of his claimed interest."
[Footnote 22]
See the comment of the Advisory Committee on the 1966 Amendment to Rule 19:
"In some situations, it may be desirable to advise a person who has not been joined of the fact that the
action is pending, and, in particular cases, the court, in its discretion, may itself convey this information
by directing a letter or other informal notice to the absentee."
28 U.S.C. App. p. 7760.
[Footnote 23]
E.g., Philadelphia Housing Auth. v. American Radiator & Standard Sanitary Corp., 50 F.R.D. 13 (ED
Pa.1970), aff'd sub nom. Mangano v. American Radiator & Standard Sanitary Corp., 438 F.2d 1187 (CA3
1971) (suit against manufacturers of plumbing fixtures on behalf of all homeowners in the United States).
There often will be more levels of distribution or manufacture between the defendant and the ultimate
consumers than the two levels (masonry and general contractors) in this case. For example,
in Philadelphia Housing Auth., supra, the plaintiffs included homeowners who had bought used, rather
than new, homes, and who therefore had to show that, each time their houses changed hands, the
sellers passed on part of the plumbing manufacturers' original overcharge. 50 F.R.D. at 19-20, 25-
26. ,Treble damages suits by ultimate consumers against any of the manufacturers of industrial raw
materials or equipment that have been charged in recent Government price-fixing suits would involve
not only several levels within a distribution chain, but also several separate chains of distribution; for
example, chromite sand is used to make ingots, ingots are used to make steel, and steel is used to make
consumer products. Handler & Blechman, supra, n 7, at 640 n. 77, and see id. at 636-637 (citing Justice
Department price-fixing suits against defendants far removed from consumers).
[Footnote 24]
E.g., Donson Stores, Inc. v. American Bakeries Co., 58 F.R.D. 481 (SDNY 1973) (motion to intervene by a
putative class of 20 million consumers of bread in treble damages action against bread
manufacturers). Cf. Handler & Blechman, supra, n 7, at 653 (arguing that the effect of legislation
authorizing States to bring treble damages actions on behalf of their citizens, see n 14, supra, will be to
intereject claims on behalf of large classes of consumers into treble damages suits brought by
middlemen). Thus, in this case, the plaintiff housing authorities, App. 20, presumably have passed on
part of the alleged overcharge to their tenants and subtenants, who would have to be brought into the
suit before damages could be fairly apportioned.
[Footnote 25]
An overcharge imposed by an antitrust violator or group of violators on their customers is analytically

equivalent to an excise tax imposed on the violator's product in the amount of the overcharge. The
effect of such an overcharge can be calculated using the economic theorems for the incidence of an
excise tax. SeeSchaefer, Passing-On Theory in Antitrust Treble Damage Actions: An Economic and Legal
Analysis, 16 Wm. & Mary L.Rev. 883, 887, 893 (1975), and sources cited in id. at 887 n. 21.
[Footnote 26]
Thus, in the instant case respondents have offered to prove that general and masonry contractors
calculate their bids by adding a percentage markup to the cost of their materials, Brief for Respondents
223, rather than by attempting to equate marginal cost and marginal revenue as required by an explicit
profit-maximizing strategy.
[Footnote 27]
MR. JUSTICE BRENNAN, in dissent, argues that estimating a passee's damages requires nothing more
than estimating what the passer's price would have been absent the violation, and suggests that
apportioning the overcharge throughout the distribution chain is "no different from and no more
complicated" than the initial task of estimating the amount of the overcharge itself. Post at 431 U. S.
758-759, and n. 14. But as the dissent recognizes, post at 431 U. S. 749 n. 3, unless the indirect
purchaser is at the end of the distribution chain, it can claim damages not only from the portion of the
overcharge it absorbs but also from the portion it passes on, which causes a reduction in sales volume
under less than perfectly inelastic demand conditions. See n 13, supra.The difficulties of the task urged
upon us by the dissenters cannot be so easily brushed aside.
In any event, as we understand the dissenters' argument, it reduces to the proposition that, because
antitrust cases are already complicated, there is little harm in making them more so. We disagree.
[Footnote 28]
See, e.g., West Virginia v. Chas. Pfizer & Co., 314 F.Supp. 710, 745-746 (SDNY 1970), aff'd, 440 F.2d 1079
(CA2 1971); Boshes v. General Motors Corp., 59 F.R.D. at 597.
[Footnote 29]
We note that supporters of the offensive use of pass-on, other than litigants in particular cases,
generally have not contended for a halfway rejection of Hanover Shoe that would permit offensive use
of pass-on in some types of market situations, but not in others. See, e.g., Tr. of Oral Arg. 57 (United
States as amicus curiae); Note, The Defense of "Passing On" in Treble Damage Suits Under the Antitrust
Laws, 70 Yale L.J. 469, 476, 478 (1961); commentators cited in n 11, supra.
[Footnote 30]
See, e.g., In re Western Liquid Asphalt Cases, 487 F.2d at 198; Wheeler, Antitrust Treble-Damage Action:
Do They Work?, 61 Calif.L.Rev. 1319, 1325 (1973).
[Footnote 31]
Commentators have noted that recoveries in treble damages actions aggregating large numbers of small
claims often have failed to compensate the individuals on behalf of whom the suits have been
brought. E.g., Handler, The Shift from Substantive to Procedural Innovations in Antitrust Suits -- the
Twenty-Third Annual Antitrust Review, 71 Colum.L.Rev. 1, 9-10 (1971); Wheeler, supra, n 30, at 1339;
Kirkham, Complex Civil Litigation -- Have Good Intentions Gone Awry?, 70 F.R.D.199, 206-207 (1976).
The dissenting opinion of MR JUSTICE BRENNAN appears to suggest that the 1976 parens
patriae legislation, seen 14, supra, provides an answer to this problem of compensating indirect
purchasers for small injuries. Post at431 U. S. 764 n. 23. Quite to the contrary, the Act "recognizes that
rarely, if ever, will all potential claimants actually come forward to secure their share of the recovery,"
and that "the undistributed portion of the fund . . . will often be substantial." H.R.Rep. No. 94-499, p. 16
(1975). The portion of the fund recovered in a parens patriae action that is not used to compensate the
actual injuries of antitrust victims is to be used as "a civil penalty . . . deposited with the State as general
revenues," Clayton Act 4E(2), 15 U.S.C. 15e(2) (1976 ed.), enacted by the 1976 Act, or "for some
public purposes benefiting, as closely as possible, the class of injured persons," such as reducing the
price of the overcharged goods in future sales. H.R.Rep. No. 94-499, supra at 16. That Congress chose to
provide such innovative methods of distributing damages awarded in a parens patriaeaction under
newly enacted 4C of the Clayton Act, 15 U.S.C. 15c (1976 ed.), does not eliminate the obstacles to
compensating indirect purchasers bringing traditional suits under 4.
MR. JUSTICE BRENNAN, with whom MR. JUSTICE MARSHALL and MR. JUSTICE BLACKMUN join,
dissenting.
Respondent State of Illinois brought this treble damages civil antitrust action under 4 of the Clayton
Act on behalf of itself and various local governmental entities in the Greater Chicago area alleging that
an overcharge in the price of concrete block used in the construction of public buildings was made by
the petitioners, manufacturers and sellers of concrete block, pursuant to a price-fixing conspiracy in
violation of 1 of the Sherman Act, 15 U.S.C. 1. [Footnote 2/1] Section 4 of the Clayton Act, 38 Stat.
731, 15 U.S.C. 15, broadly provides:
"[A]ny person who shall be injured in his business or property by reason of anything forbidden in the
antitrust laws may sue therefor . . . and shall recover threefold the damages by him sustained. . . ."
Decisions of the Court defining the reach of 4 have been consistent with its broad objectives: to
compensate victims of antitrust violations and to deter future violations. The Court has stated that 4
"does not confine its protection to consumers, or to purchasers, or to competitors, or to sellers . . . , [but]
is comprehensive in its terms and coverage, protecting all who are made victims of the forbidden
practices by whomever they may be perpetrated."
Mandevlle Island Farms, Inc. v. American Crystal Sugar Co., 334 U. S. 219, 334 U. S. 236 (1948).
[Footnote 2/2]
Page 431 U. S. 749
Today's decision that 4 affords a remedy only to persons who purchase directly from an antitrust
offender is a regrettable retreat from that line of cases. Section 4 was cearly intended to operate to
protect individual consumers who purchase through middlemen. Indeed, Congress acted on the premise
that 4 gave a cause of action to indirect as well as direct purchasers when it recently enacted the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, 90 Stat. 1394-1396, 15 U.S.C. 15c et seq. (1976 ed.),
and authorized state attorneys general to sue as parens patriae to recover damages on behalf of citizens
of their various States.
Today's decision outs Congress' purpose and severely undermines the effectiveness of the private treble
damages action as an instrument of antitrust enforcement. For in many instances, the brunt of antitrust
injuries is borne by indirect purchasers, often ultimate consumers of a product, as increased costs are
passed along the chain of distribution. [Footnote 2/3] In these instances, the Court's decision frustrates
both the compensation and deterrence objectives of the treble damages action. Injured consumers are
precluded from recovering damages from manufacturers, and direct purchasers who act as middlemen
have little incentive to sue suppliers so long as they may pass on the bulk of the illegal overcharges to
the ultimate consumers. This frustration of the congressional scheme is in no way mandated by Hanover
Shoe, Inc. v. United Shoe Machinery Corp., 392 U. S. 481 (1968). To the contrary, the same
considerations that Hanover Shoe held
Page 431 U. S. 750
required rejection of the defendant's argument there, that, because plaintiff had passed on cost
increases to consumers in the form of higher prices defendant should be relieved of liability especially
the consideration that it is essential to the public interest to preserve the effectiveness of the private
treble damages action -- require affirmance of the decision below construing 4 to authorize
respondents' suit.
In Hanover Shoe, supra, the Court held that a defendant in a treble damages action could not escape
liability, except in very limited circumstances, [Footnote 2/4] by proof that the plaintiff had passed on
illegal overcharges to others farther along in the chain of distribution. [Footnote 2/5] The defendant
in Hanover Shoe,United Shoe, argued that Hanover was not entitled to recover damages because the
increased price it had paid for United's equipment [Footnote 2/6] had, in turn, been reflected in the
increased price at which Hanover had sold its shoes to the consuming public. The Court held that several
reasons supported its conclusion that this defense was not available to United despite "the argument
that sound laws of economics require" its recognition, 392 U.S. at 392 U. S. 492. First, the Court followed
earlier cases holding that the "victim of an overcharge is [immediately]
Page 431 U. S. 751
damaged within the meaning of 4 to the extent of that overcharge." Id. at 392 U. S. 491. The
particularly apt precedent supporting this proposition was Southern Pacific Co. v. Darnel-Taenzer Lumber
Co., 245 U. S. 531(1918), [Footnote 2/7] where a pass-on defense had been rejected because of "[t]he
general tendency of the law, in regard to damages at least, . . . not to go beyond the first step," and the
Court's belief that
"[t]he carrier ought not to be allowed to retain his illegal profit, and the only one who can take it from
him is the one that alone was in relation with him, and from whom the carrier took the sum. . . ."
Id. at 245 U. S. 533-534. In other words, the requirement of privity between plaintiff and defendant was
a reason to deny defendant the pass-on defense, since otherwise the defendant would be able to profit
by his own wrong. Hanover Shoe cannot be read, however, as limiting actions to parties in privity with
one another. That was made clear in Perkins v. Standard Oil Co., 395 U. S. 642, 395 U. S. 648 (1969),
decided the next Term, a price discrimination case in which the Court traced an illegal overcharge
through several levels in the chain of distribution, ultimately holding that a plaintiff seeking to recover
damages need show only a
"causal connection between the price discrimination in violation of the [antitrust laws] and the injury
suffered. . . . If there is sufficient evidence in the record to support an inference of causation, the
ultimate conclusion as to what that evidence proves is for the jury."
Darnell-Taenzer does, however, support Hanover Shoe's denial of the pass-on defense for the other
reasons relied upon in Hanover Shoe: the difficulty of proving and quantifying a pass-on, and the role of
the treble damages action as the most effective means of antitrust enforcement. 392 U.S. at 392 U. S.
492-494. The Court correctly discerned that the difficulty of reconstructing
Page 431 U. S. 752

hypothetical pricing decisions, [Footnote 2/8] would aggravate the already complex nature of antitrust
litigation, since pass-on defenses would become commonplace whenever the chain of distribution
extended beyond the plaintiff. This would lessen the effectiveness of the treble damages action, since
ultimate consumers individually often suffer only minor damages, and therefore have little incentive to
bring suit. Limiting defendants' liability to the loss of profits suffered by direct purchasers would thus
allow the antitrust offender to avoid having to pay the full social cost of his illegal conduct in many cases
in which indirect purchasers failed to bring suit. Consequently,
"those who violate the antitrust laws by price-fixing or monopolizing would retain the fruits of their
illegality because no one was available who would bring suit against them. Treble damage actions, the
importance of which the Court has many times emphasized, would be substantially reduced in
effectiveness."
Id. at 392 U. S. 494. Hanover Shoe thus confronted the Court with the choice, as had been true
in Darnell-Taenzer,of interpreting 4 in a way that might overcompensate the plaintiff, who had
certainly suffered some injury, or of defining it in a way that under-deters the violator by allowing him to
retain a portion of his ill-gotten overcharges. The Court chose to interpret 4 so as to allow the plaintiff
to recover for the entire overcharge. This choice was consistent with recognition of the importance
Page 431 U. S. 753
of the treble damages action in deterring antitrust violations. [Footnote 2/9] But Hanover Shoe certainly
did not imply that an indirect purchaser would not also have a cause of action under 4 when the illegal
overcharges were passed on to him.
Despite the superficial appeal of the argument that Hanover Shoe should be applied "consistently," thus
precluding plaintiffs and defendants alike from proving that increased costs were passed along the chain
of distribution, there are sound reasons for treating offensive and defensive passing-on cases differently.
The interests at stake in "offensive" passing-on cases, where the indirect purchasers sue for damages for
their injuries, are simply not the same as the interests at stake in the Hanover Shoe, or "defensive"
passing-on situation. There is no danger in this case, for example, as there was in Hanover Shoe, that the
defendant will escape liability and frustrate the objectives of the treble damages action. Rather, the
same policies of insuring the continued effectiveness of the treble damages action and preventing
wrongdoers from retaining the spoils of their misdeeds favor allowing indirect purchasers to prove that
overcharges were passed on to them.Hanover Shoe thus can and should be limited to cases of defensive
assertion of the passing-on defense to antitrust liability, where direct and indirect purchasers are not
parties in the same action. [Footnote 2/10] I fully agree with the observation:
"The attempt to transform a rejection of a defense
Page 431 U. S. 754

because it unduly hampers antitrust enforcement into a reason for a complete refusal to entertain the
claims of a certain class of plaintiffs seems an ingenious attempt to turn the decision [in Hanover Shoe]
and its underlying rationale on its head."
In re Master Key Antitrust Litigation, 1973-2 Trade Cas. 74,680, pp. 94,9794,979 (Conn.).
II
Today's decision goes far to frustrate Congress' objectives in creating the treble damages action. Treble
damages actions were first authorized under 7 of the Sherman Act, 26 Stat. 210. The legislative history
of this section shows that it was conceived primarily as a remedy for "[t]he people of the United States
as individuals," especially for consumers. See, e.g., 21 Cong.Rec. 1767-1768 (1890) (remarks of Sen.
George); see also id. at 2612 (Sens. Teller and Reagan), 2615 (Sen. Coke), 2640 (Sen. Spooner). [Footnote
2/11] In the Clayton Act of
Page 431 U. S. 755
1914, Congress extended the 7 remedy to persons injured by "any violation of the antitrust laws." See
Brunswick Corp v. Pueblo Bowl-O-Mat, Inc., 429 U. S. 477, 429 U. S. 486 n. 10 (1977), citing H. R. Rep. No.
627, 63d Cong., 2d Sess., 14 (1914). These actions were conceived primarily as
"'open[ing] the door of justice to every man, whenever he may be injured by those who violate the
antitrust laws, and giv[ing] the injured party ample damages for the wrong suffered.' [Footnote 2/12]"
Brunswick, supra, at 429 U. S. 486 n. 10, quoting 51 Cong. Rec. 9073 (1914) (remarks of Rep. Webb); see,
e.g., id.at 9079 (Rep. Volstead), 9270 (Rep. Carlin), 9414-9417, 9466-9467, 9487-9495. See also the
House debates following the conference committee report. Id. at 16274-16275 (Rep. Webb), 16317-
16319 (Rep. Floyd).
The Court has interpreted 4 broadly, this in recognition of the plainly stated congressional
objective, Northern Pacific R. Co. v. United States, 356 U. S. 1, 356 U. S. 4 (1958), that the private treble
damages action play a paramount role in the enforcement of the fundamental economic policy of the
Nation, Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S. 100, 395 U. S. 130-131
(1969); Minnesota Mining & Mfg. Co. v. New Jersey Wood Finishing Co., 381 U. S. 311, 381 U. S.
318 (1965), and has concluded that
"the purposes of the antitrust laws are best served by insuring that the private action will be an ever-
present threat to deter anyone contemplating business behavior in violation of the antitrust laws."
Perma Life Mufflers, Inc. v. International Parts Corp., 392 U. S. 134, 392 U. S. 139 (1968). The federal
courts have accordingly been cautioned "not [to]
Page 431 U. S. 756

add requirements to burden the private litigant beyond what is specifically set forth by Congress in [the
antitrust] laws," Radovich v. National Football League, 352 U. S. 445, 352 U. S. 454 (1957), and express
approval has been given the
"'tendency of the courts . . . to find some way in which damages can be awarded where a wrong has
been done. Difficulty of ascertainment is no longer confused with right of recovery' for a proven invasion
of the plaintiff's rights."
Bigelow v. RKO Radio Pictures, 327 U. S. 251, 327 U. S. 265-266 (1946). See also Zenith Radio Corp. v.
Hazeltine Research, Inc., supra at 395 U. S. 130-131; Perma Life Mufflers, Inc. v. International Parts Corp.,
supra; Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. at 392 U. S. 494. And Radiant Burners,
Inc. v. Peoples Gas Light & Coke Co., 364 U. S. 656, 364 U. S. 660 (1961), emphasized that, to plead a
cause of action under 4, "allegations adequate to show a violation and . . . that plaintiff was damaged
thereby are all the law requires."
The recently enacted Hart-Scott-Rodino Antitrust Improvements Act of 1976 was expressly adopted to
create
"an effective mechanism to permit consumers to recover damages for conduct which is prohibited by
the Sherman Act by giving State attorneys general a cause of action [to sue as parens patriae on behalf
of the States' citizens] against antitrust violators."
S.Rep. No. 94-803, p. 6 (1976). Title III of the new Act responded to the holding of Hawaii v. Standard Oil
Co. of Cal., 405 U. S. 251 (1972), that the Clayton Act does not authorize a State to sue for damages for
an injury to its general economy allegedly attributable to a violation of the antitrust laws. The Senate
Report accompanying the new Act expressly found that "[t]he economic burden of most antitrust
violations is borne by the consumer in the form of higher prices for goods and services," S.Rep. No. 94-
803, supra at 39, and it is clear that the new Act is intended to provide a remedy
Page 431 U. S. 757
for injured consumers whether or not they purchased directly from the violator. The Senate Report
states, id. at 42:
"A direct cause of action is granted the States to avoid the inequities and inconsistencies of restrictive
judicial interpretations. . . . Section 4C is intended to assure that consumers are not precluded from the
opportunity of proving the amount of their damage and to avoid problems with respect to
manageability [of class actions], standing, privity, target area, remoteness, and the like. [Footnote 2/13]"
(Emphasis supplied.)
Representative Rodino, a sponsor, stated during the House debates:

"[A]ssuming the State attorney general proves a violation, and proves that an overcharge was 'passed
on' to the consumers, injuring them 'in their property' -- that is, their pocketbooks -- recoveries are
authorized by the compromise bill whether or not the consumes purchased directly, from the price-fixer,
or indirectly, from intermediaries, retailers, or middlemen. The technical and procedural argument that
consumers have no 'standing' whenever they are not 'in privity' with the price-fixer, and have not
purchased directly from him, is rejected by the compromise bill. Opinions relying on this procedural
Page 431 U. S. 758
technicality . . . are squarely rejected by the compromise bill."
122 Cong.Rec. H10295 (daily ed. Sept. 16, 1976).
It is difficult to see how Congress could have expressed itself more clearly. Even if the question whether
indirect purchasers could recover for damages passed on to them was open before passage of the 1976
Act, and I do not believe that it was, Congress' interpretation of 4 in enacting the parens
patriae provision should resolve it in favor of their authority to sue. Indeed, the House Report
accompanying the bill actually referred to the opinion of the District Court in this case as an example of
the correct answer. N. 13, supra. The Court's tortuous efforts to impose a "consistency" upon this area
of the law that Congress has so clearly rejected is a return to the "legal somersaults and twistings and
turnings" of the Court's earlier opinions that ultimately led to the passage of the Clayton Act in 1914 to
salvage the ailing Sherman Act. See 51 Cong.Rec. 9086 (1914) (remarks of Rep. Kelly).
III
Hanover Shoe correctly observed that the necessity of tracing a cost increase through several levels of a
chain of distribution "would often require additional long and complicated proceedings involving
massive evidence and complicated theories." 392 U.S. at 392 U. S. 493. But this may be said of almost all
antitrust cases. Hanover Shoeitself highlights this unavoidable complication, in that it requires the
plaintiff to prove a probable course of events which would have occurred but for the violation. [Footnote
2/14] In essence, estimating the amount of
Page 431 U. S. 759
damages passed on to an indirect purchaser is no different from and no more complicated than
estimating what the middleman's selling price would have been, absent the violation. See ante at 431 U.
S. 733 n. 13.
Nor should the fact that the price-fixed product in this case (the concrete block) was combined with
another product (the buildings) before resale operate as an absolute bar to recovery. It may well be true,
as the State claims, that the cost of the block was included separately in the project bids, and therefore
can be factored out from the price of the building with relative certainty. In any case, this is a factual
matter to be determined based on the strength of the plaintiff's evidence. [Footnote 2/15] See, e.g., In
re Western Liquid Asphalt Cases, 487 F. 2d 191 (CA9 1973), cert. denied sub nom. Standard Oil Co. of Cal.
v. Alaska, 415 U.S. 919 (1974). Admittedly, there will be many cases in which the plaintiff will be unable
to prove that the overcharge was passed on. In others, the portion of the overcharge passed on may be
only approximately determinable. But again, this problem hardly distinguishes this case from other
antitrust cases. Reasoned estimation is required in all antitrust cases, but,
"while the damages [in such cases] may not be determined by mere speculation or guess, it will be
enough if the evidence show the extent of the damages as a matter of just and reasonable inference,
although the result be only approximate."
Story Parchment Co. v. Paterson Co., 282 U. S. 555, 282 U. S. 563 (1931). See also Bigelow v. RKO Radio
Pictures, 327 U.S. at 327 U. S. 266; Eastman Kodak Co. v. Southern Photo Materials Co., 273 U. S.
359, 273 U. S. 379 (1927). Lack of precision in apportioning damages between direct and indirect
purchasers is thus plainly not a convincing reason for denying
Page 431 U. S. 760
indirect purchasers an opportunity to prove their injuries and damages. Moreover, from the deterrence
standpoint, it is irrelevant to whom damages are paid, so long as someone redresses the violation.
Antitrust violators are equally deterred whether the judgments against them are in favor of direct or
indirect purchasers.Hanover Shoe said as much. The Court's decision recognized that some plaintiffs
would recover more than their due, but concluded that the necessity of assuring that someone recover,
and thus deter future violations and prevent the antitrust offender from profiting by his illegal
overcharge, outweighed any resulting injustice. [Footnote 2/16]
I concede that, despite the broad wording of 4, there is a point beyond which the wrongdoer should
not be held liable. See, e.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U. S. 477 (1977); Hawaii v.
Standard Oil Co. of Cal., 405 U. S. 251 (1972). Courts have therefore developed various tests of antitrust
"standing," not unlike the concept of proximate cause in tort law, to define that point. The definition has
been variously articulated, usually in terms of two tests. The more restrictive test focuses on the
directness of the injury; [Footnote 2/17] the more liberal, and more widely accepted, on whether the
plaintiff is within the "target area" of the defendant's violation. [Footnote 2/18]
Page 431 U. S. 761
But if the broad language of 4 means anything, surely it must render the defendant liable to those
within the defendant's chain of distribution. It would indeed be "paradoxical to deny recover to the
ultimate consumer while permitting the middlemen a windfall recovery." P. Areeda, Antitrust Analysis:
Problems, Text, Cases 75 (2d ed.1974).
IV
I acknowledge some abstract merit in the argument that to allow indirect purchasers to sue while at the
same time precluding defendants from asserting pass-on defenses in suits by direct purchasers subjects
antitrust defendants to the risk of multiple liability. But, as a practical matter, existing procedural
mechanisms can eliminate this danger in most instances. Even though, as the Court says, no procedure
currently exists which can eliminate the possibility entirely, ante at 431 U. S. 731 n. 11, the hypothetical
possibility that a few defendants might be subjected to the danger of multiple liability does not, in my
view, justify erecting a bar against all recoveries by indirect purchasers without regard to whether the
particular case presents a significant danger of double recovery. The "double recovery" specter was
argued in the Congress that passed the Hart-Scott-Rodino Act, and was rejected. The Senate Report
recorded the Act's purpose to codify the holding of the Court of Appeals for the Ninth Circuit in In re
Western Liquid Asphalt Cases, supra:
"'We therefore see no problem of double recovery, and we believe that, if this difficulty should arise in
some other connection, the district court will be able to fashion relief accordingly. In addition to the
court's control over its decree, numerous devices exist. We note that the consolidation of cases, which
has already occurred, is one means of averting duplicitous awards. The short, four-year statute of
limitations is another; later suits, after
Page 431 U. S. 762
final judgment herein, are unlikely. 15 U.S.C. 15b. In other cases, it may be that statutory interpleader,
28 U.S.C. 1335, could be used by antitrust defendants to avoid double liability. If necessary, special
masters may be appointed to handle complex cases. Finally, there are the doctrines of res judicata and
collateral estoppel and procedures for compulsory joinder. The day is long past when courts, particularly
federal courts, will deny relief to a deserving plaintiff merely because of procedural difficulties or
problems of apportioning damages.'"
"We would prefer to place the burden of proving apportionment upon appellees, rather than deny all
recovery to appellants. Such a burden would be the consequence of appellees' illegal acts, not
appellants' suits. Where the choice is between a windfall to intermediaries or letting guilty defendants
go free, liability is imposed.Hanover Shoe, supra, 392 U.S. at 392 U. S. 494. So, too, between ultimate
purchasers and defendants."
S.Rep. No. 94-803, p. 44 (1976), quoting 487 F.2d at 201 (citation omitted).
Moreover, the possibility of multiple recovery arises in only two situations: (1) where suits by direct and
indirect purchasers are pending at the same time but in different courts; and (2) where additional suits
are filed after an award of damages based on the same violation in a prior suit. [Footnote 2/19] In the
first situation, the United States, Brief as Amicus Curiae 25, cogently points out that district courts may
make use of the alternatives suggested by the Manual for Complex Litigation, 1 (pt. 2) J. Moore, Federal
Practice (1976): district courts may use the intra-district transfer power created by 28 U.S.C. 1404(b),
coordinate pretrial proceedings of cases pending in
Page 431 U. S. 763
different districts, or transfer oases to a single district pursuant to 1404(a). In addition, the Judicial
Panel on Multidistrict Litigation is empowered by 28 U.S.C. 1407 to transfer cases involving common
questions of fact to any district for coordinated pretrial proceedings upon its determination that the
transfer "will be for the convenience of parties and witnesses, and will promote the just and efficient
conduct of such actions." After pretrial transfers under this section, cases can be consolidated and
transferred to the same district for trial pursuant to the transfer power under 1404(a). [Footnote 2/20]
A further device mentioned in Western Liquid Asphalt is statutory interpleader under 28 U.S.C. 1335,
by which the defendant can bring all potential plaintiffs into the same court and require them to
litigate inter se to determine their appropriate shares of the total recovery. [Footnote 2/21]
True, there is a greater hypothetical danger of multiple recovery where suits are independently
instituted after an earlier suit based on the same violation has proceeded to judgment. [Footnote 2/22]
But, even here, the likelihood that defendants
Page 431 U. S. 764
will be subjected to multiple liability is, as a practical matter, remote. The extended nature of antitrust
actions, often involving years of discovery, combines with the short four-year statute of limitations to
make it impractical for potential plaintiffs to sit on their rights until after entry of judgment in the earlier
suit.
The Court today regrettably weakens the effectiveness of the private treble damages action as a
deterrent to antitrust violations by, in most cases, precluding consumers from recovering for antitrust
injuries. For, in many instances, consumers, although indirect purchasers, bear the brunt of antitrust
violations. To deny them an opportunity for recovery is particularly indefensible when direct purchasers,
acting as middlemen and ordinarily reluctant to sue their suppliers, [Footnote 2/23] pass on the bulk of
their increased costs to consumers farther along the chain of distribution. Congress has given us a clear
signal that 4 is not to be read to have the restrictive
Page 431 U. S. 765
scope ascribed to it by the Court today. I would follow the congressional understanding, and therefore
would affirm. [Footnote 2/24]
[Footnote 2/1]
The block was sold to various general and special contractors who had successfully bid to construct
public buildings. The State was thus an indirect purchaser of the block.
[Footnote 2/2]
There is, of course, a point beyond which antitrust defendants should not be held responsible for the
remote consequences of their actions. See the discussion in Part III, infra at 431 U. S. 760-761.
[Footnote 2/3]
The portion of an illegal overcharge that a direct purchaser can pass on depends upon the elasticity of
demand in the relevant product market. If the market is relatively inelastic, he may pass on a relatively
large portion. If demand is relatively elastic, he may not be able to raise his price, and will have to
absorb the increase, making it up by decreasing other costs or increasing sales volume. It is extremely
unlikely that a middleman could pass on the entire cost increase. But rarely would he have to absorb the
entire increase. R. Posner, Antitrust Cases, Economic Notes, and Other Materials 147-149 (1974).
[Footnote 2/4]
The opinion recognizes that
"there might be situations -- for instance, when an overcharged buyer has a preexisting 'cost-plus'
contract, thus making it easy to prove that he has not been damaged -- where the considerations
requiring that the passing-on defense not be permitted in this case would not be present."
392 U.S. at 392 U. S. 494.
[Footnote 2/5]
Hanover Shoe did not involve the consumers of the plaintiff's shoes, to whom the overcharge allegedly
was passed. United's passing-on argument is referred to as "defensive" passing on. The State's position,
seeking recovery of illegal overcharges allegedly passed on to it and its citizens, is referred to as
"offensive" passing on.
[Footnote 2/6]
Hanover alleged that United monopolized the shoe machinery industry in violation of 2 of the
Sherman Act by its practice of leasing but refusing to sell its shoemaking machinery.
[Footnote 2/7]
In Darnell-Taenzer, shippers brought suit for reparations against a railroad claiming that the railroad had
charged unreasonable rates. The railroad argued that the shippers had, in turn, passed on to their
customers any excess over the reasonable rate.
[Footnote 2/8]
"[T]he impact of a single change in the relevant conditions cannot be measured after the fact; indeed, a
businessman may be unable to state whether, had one fact been different. . . . The would have chosen a
different price. . . ."
392 U.S. at 392 U. S. 492-493. The Court further observed that it is equally difficult to ascertain "what
effect a change in a company's price will have on its total sales"; and it is all but impossible to
demonstrate that the particular plaintiff "could not or would not have raised his prices absent the
overcharge or maintained the higher price had the overcharge been discontinued." Id. at 392 U. S.
493. See generally Posner, supra, n. 3 at 147-149.
[Footnote 2/9]
The pass-on defense in Hanover Shoe was asserted by a defendant against whom a prima facie case of
liability had already been made out. The Clayton Act provides:
"A final judgment . . . rendered in any civil or criminal proceeding brought by or on behalf of the United
States under the antitrust laws . . . shall be prima facie evidence against such defendant. . . ."
15 U.S.C. 16(a). The Government had secured a judgment against United in United States v. United
Shoe Machinery Corp., 110 F.Supp. 295 (Mass.1953), summarily aff'd, 347 U. S. 521 (1954).
[Footnote 2/10]
Commentators almost unanimously conclude that, despite Hanover Shoe, 4 should be construed to
authorize indirect purchasers to recover upon proof that increases were passed on to them. See,
e.g., Comment, Standing to Sue in Antitrust Cases: The Offensive Use of Passing-on, 123 U.Pa.L.Rev. 976
(1975); Comment, Mangano and Ultimate-Consumer Standing: The Misuse of the Hanover Doctrine, 72
Colum.L.Rev. 394 (1972); Note, The Effect of Hanover Shoe on the Offensive Use of the Passing-on
Doctrine, 46 So.Cal.L.Rev. 98 (1972). But see Handler & Blechman, Antitrust and the Consumer Interest:
The Fallacy of Parens Patriae and A Suggested New Approach, 85 Yale L.J. 626, 638-655 (1976). In
addition, most courts have read Hanover Shoe as not preventing indirect purchasers from attempting to
prove that they have been injured. See, e.g., Yoder Bros., Inc. v. California-Florida Plant Corp., 537 F.2d
1347 (CA5 1976); In re Western Liquid Asphalt Cases, 487 F.2d 191 (CA9 1973), cert. denied sub nom.
Standard Oil Co. of Cal. v. Alaska, 415 U.S. 919 (1974); Illinois v. Bristol-Myers Co., 152 U.S.App.D.C. 367,
470 F.2d 1276 (1972); West Virginia v. Chas. Pfizer & Co., 440 F.2d 1079 (CA2), cert. denied sub nom.
Cotler Drugs, Inc. v. Chas. Pfizer & Co., 404 U.S. 871 (1971); In re Master Key Antitrust Litigation, 1973-2
Trade Cas. 74,680 (Conn.).
[Footnote 2/11]
A further indication of Congress' desire to create a remedy for all persons, including consumers, even
though their individual injuries might be comparatively slight, was the elimination of the jurisdictional
amount requirement for antitrust actions. See 21 Cong. Rec. 2612, 3148-3149 (1890) (remarks of Sens.
Sherman and Edmunds).
[Footnote 2/12]
The fact that damages are trebled both aids deterrence and provides the incentive of compensation,
since it encourages suits for relatively minor injuries.
[Footnote 2/13]
Congress rejected earlier Court of Appeals and District Court decisions erecting standing barriers to suits
by indirect purchasers, and chose instead to pattern the Act
"after such innovative decisions as In re Western Liquid Asphalt Cases, 487 F.2d 191 (9th Cir.1973); In re
Master Key Litigation, 1973 Trade Cases 74,680 and 1975 Trade Cases 60,377 (DC Conn.); State of
Illinois v. Ampress Brick Co., 1975 Trade Cases 60,295 (DC Ill.) [this case below]; Carnivale Bag Co. v.
Slide Rite Mfg., 1975 Trade Cases 60,370 (S.D.N.Y.); In re Antibiotics Antitrust Actions, 333 F.Supp. 278
(S.D.N.Y.1971); and West Virginia v. Charles Pfizer & Co., 440 F.2d 1079 (2d Cir.1971)."
Congress accepted these decisions as correctly stating the law. S.Rep. No. 94-803, pp. 443 (1976).
[Footnote 2/14]
In Hanover Shoe, the measure of damages was the difference between the amount Hanover paid for the
lease and the amount it would have pad had United agreed to sell the machinery. It has been suggested
that the burden of demonstrating a pass-on may be no more difficult or speculative than the plaintiff's
initial task of proving an overcharge in the first instance. See Pollock, Automatic Treble Damages and the
Passing-on Defense: The Hanover Shoe Decision, 13 Antitrust Bull. 1183, 1210 (1968).
[Footnote 2/15]
One commentator has suggested that, in deciding whether to permit recovery by indirect purchasers in
a particular case, courts should consider the number of intervening hands the product has passed
through and the extent of its change in the process. P. Areeda, Antitrust Analysis: Problems, Text, Cases
75 (2d ed. 1974).
[Footnote 2/16]
This holding is consistent with the Court's continuing concern for the effectiveness of the treble
damages action, which has been sustained even when the plaintiff was "no less morally reprehensible
than the defendant" with whom he had conspired. Perma Life Mufflers, Inc. v. International Parts
Corp., 392 U. S. 134, 392 U. S. 139 (1968).
[Footnote 2/17]
See, e.g., Loeb v. Eastman Kodak Co., 183 F. 704 (CA3 1910).
[Footnote 2/18]
Earlier this Term, Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., disallowed a treble damages recovery,
stating that, in order to recover, antitrust plaintiffs must prove
"antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that
flows from that which makes [the] defendants' acts unlawful."
429 U.S. at 429 U. S. 489. At least one Court of Appeals has rephrased the target-area test in terms of
whether the injury to the plaintiff is a reasonably foreseeable consequence of the defendant's illegal
conduct. Mulvey v. Samuel Goldwyn Productions, 433 F.2d 1073 (CA9 1970), cert. denied, 402 U.S. 923
(1971).
[Footnote 2/19]
If direct and indirect purchasers bring suit in the same court, the cases may be consolidated and
damages allocated in accordance with Fed.Rule Civ.Proc. 42(a). See Vest Virginia v. Chas. Pfizer &
Co., 440 F.2d 1079 (CA2 1971).
[Footnote 2/20]
For a discussion of this process, see Note, The Judicial Panel and the Conduct of Multidistrict Litigation,
87 Harv.L.Rev. 1001 (1974); Comment, The Experience of Transferee Courts Under the Multidistrict
Litigation Act, 39 U.Chi.L.Rev. 588 (1972).
[Footnote 2/21]
Petitioners suggest that interpleader may be an impractical alternative for some defendants, since it
requires a defendant to complicate the suit by bringing in ultimate consumers, and to post bond for the
amount in controversy. See 28 U.S.C. 1335(a)(2). Although 1335 clearly places a burden upon
defendants who elect to use it in order to avoid potential multiple liability, that burden is not unique to
antitrust cases, and Congress has clearly indicated that it considers the burden justified. See S.Rep. No.
94 803, p. 44 (1976).
[Footnote 2/22]
The problem of potential multiple recoveries is not present in this case. All suits against petitioners were
filed in the Northern District of Illinois. Petitioners never sought consolidation under Fed.Rule Civ.Proc.
42(a) and stipulated in settlements with direct purchasers that the settlement would not affect the
rights of indirect purchasers.
[Footnote 2/23]
The opinion for the Court "recognize[s] that direct purchasers sometimes may refrain from bringing a
treble damages suit for fear of disrupting relations with their suppliers," but concludes that,
"on balance, and until there are clear directions from Congress to the contrary, we conclude that the
legislative purpose in creating a group of 'private attorneys general' to enforce the antitrust laws . . . is
better served by holding direct purchasers to be injured to the full extent of the overcharge paid by
them than by attempting to apportion the overcharge among all that may have absorbed a part of it."
Ante at 431 U. S. 746. But the intent of Congress in enacting the parens patriae provision of the 1976 Act
was clearly to provide a mechanism to permit recovery by consumers, and this purpose is not furthered
by a rule that will keep most consumers out of court.
The Court's opinion further observes that
"[m]any of the indirect purchasers barred from asserting pass-on claims . . . have such a small stake in
the lawsuit that even if they were to recover as part of a class, only a small fraction would be likely to
come forward to collect their damages."
Ante at 431 U. S. 747. Yet it was precisely because of judicially perceived weaknesses in the class action
as a device for consumer recovery for antitrust violations that Congress enacted the parens
patriae provision of the 1976 Act.
[Footnote 2/24]
Abundant authority sanctions deference to congressional indications in subsequent legislation regarding

the congressional meaning in earlier Acts worded consistently with that meaning. NLRB v. Bell Aerospace
Co., 416 U. S. 267, 416 U. S. 275 (1974); Red Lion Broadcasting Co. v. FCC, 395 U. S. 367, 395 U. S.
380 (1969); FHA v. The Darlington, Inc., 358 U. S. 84, 358 U. S. 90 (1958); United States v. Stafoff, 260 U.
S. 477, 260 U. S. 480 (1923); New York & Norfolk R. Co. v. Peninsula Exchange, 240 U. S. 34, 240 U. S.
39 (1916). Although it is true, as the Court's opinion states, ante at 431 U. S. 734 n. 14, that the post-
enactment statements of "particular legislators" who participated in the enactment of a statute cannot
change its meaning, see Regional Rail Reorganization Act Cases,419 U. S. 102, 419 U. S. 132 (1974),
quoting National Woodwork Manufacturers Assn. v. NLRB, 386 U. S. 612, 386 U. S. 639 n. 34 (1967), in
this case, the House and Senate Reports accompanying the amendments to 4 of the Clayton Act clearly
reveal the 94th Congress' interpretation of that section as permitting the kind of consumer action which
the Court now prohibits. Moreover, it is no answer to this to say that the new parens patriaeprovision
will not in all cases directly compensate indirect purchasers, ante at 431 U. S. 747 n. 31, for it is clear
that, despite the difficulty of distributing benefits to such injured persons, the new Act authorizes
recovery by the State on their behalf.
MR. JUSTICE BLACKMUN, dissenting.
I regard MR. JUSTICE BRENNAN's dissenting opinion as persuasive and convincing, and I join it without
hesitation.
I add these few sentences only to say that I think the plaintiffs-respondents in this case, which they now
have lost, are the victims of an unhappy chronology. If Hanover Shoe, Inc. v. United Shoe Machinery
Corp., 392 U. S. 481(1968), had not preceded this case, and were it not "on the books," I am positive that
the Court today would be affirming, perhaps unanimously, the judgment of the Court of Appeals. The
policy behind the Antitrust Acts and all the signs point in that direction, and a conclusion in favor of
indirect purchasers who could demonstrate injury would almost be compelled.
But Hanover Shoe is on the books, and the Court feels that it must be "consistent" in its application of
pass-on. That,
Page 431 U. S. 766
for me, is a wooden approach, and it is entirely inadequate when considered in the light of the
objectives of the Sherman and Clayton Acts. The Hart-Scott-Rodino Antitrust Improvements Act of 1976
tells us all that is needed as to Congress' present understanding of the Acts. Nevertheless, we must now
await still another statute which, as the Court acknowledges, ante at 431 U. S. 734 n. 14, the Congress
may adopt. One regrets that it takes so long and so much repetitious effort to achieve, and have this
Court recognize, the obvious congressional aim.
[No. L-376. Septiembre 1, 1947]
AMANDA T. ABAD SANTOS, recurrente, contra EL AUDITOR GENERAL y
El GOVERNMENT SERVICE INSURANCE SYSTEM, recurridos.
1. 1.JUZGADOS; HERMENUTICA LEGAL; OPINIONES DEL DEPARTAMENTO

EJECUTIVO, FUERZA DEL.El procurador General, como excusndose en cierto
modo de tener que ejecutar la "nada envidiable tarea de tener que discutir una
reclamacin hecha en nombre de uno de los heroes de la nacin," asevera que le
reconforta, sin embargo, la firme conviccin de que si el ilustre finado viviera y
hubiese de emitir juicio sobre la cuestin con toda seguridad adoptara la misma
opinion que rindi siendo Secretario de Justicia. Acaso a esto se pueda contestar
diciendo que ello es presumir demasiado sobre la inmutabilidad de las opiniones,
mxime tratndose, como se trata, de una legislacin que participa de la naturaleza
del seguro social-materia que est en todo tiempo sujeta al ritmo creciente de las
ideas progresivas. De todos modos, parece superfluo decir que las opiniones del
departamento ejecutivo del Gobierno no tienen fuerza compulsiva sobre los
tribunales de justicia en asuntos de carcter decididamente judicial.
1. 2.FUNCIONARIOS Y EMPLEADOS PBLICOS; PENSIN NO ES UNA MERA

GRATIFICACIN, SINO UNA ESPECIE DE SUELDO.La posicin que esta
Corte adopt desde, por lo menos, el' Septiembre de 1935, cuando todas las leyes de
pensiones estaban en vigor, era que staslas pensionesno eran meras
gratificaciones o gratuities. Mientras la gratificacin es una donacin, un acto de
pura liberalidad del Estado, la pension, segn el criterio de esta Corte siguiendo lo
declarado en el asunto de Kroner vs, Abbot, ms que acto de generosidad, es un
acto de justicia, emanado del deseo de proveer, siquiera tardamente, una adecuada
"compensacin a servicios prestados anteriormente, por los cuales no se recibi
cabal y adecuada compensacin al tiempo en que se prestaron." La pension, en este
caso, viene a ser una especie de sueldo retenido para un doble fin: primero, para
alentar al empleado fiel y competente a permanecer en el servicio; y segundo, para
permitir que se retire del servicio con relativa seguridad el empleado que ha
quedado incapacitado para seguir cumpliendo sus deberes, permitiendo de esta
manera tambin que los "desempeen individuos ms jvenes y ms vigorosos."
1. 3.ID.; ID.; DIFERENCIA FUNDAMENTAL ENTRE LAS LEYES DE PENSIONES

Y LA LEY DE SEGURO No. 186.Bajo las leyes de pensiones los
177
VOL. 79, SEPTEMBER 1, 1947 1
77
Abad Santos vs. Auditor General
1. fondos provenan de las deducciones de los sueldos y de las contribuciones del

Gobierno; bajo la ley de Seguro No. 186 los fondos tienen el mismo origen y el
mismo modo de extraccin. Pero hay esta diferencia fundamental: mientras la
pension no era objeto de ningn contrato, la pliza de seguro bajo la ley No. 186 es
un verdadero contrato como cualquier otra pliza bajo las leyes ordinarias de.
seguro de vida. En esa pliza son partes contratantes el tenedor de la pliza o sea el
funcionario o empleado asegurado, la institucin aseguradora o sea el "Government
Service Insurance System," y el Estado, toda vez que ste, en la ley que crea el
Sistema, asume ciertas obligaciones, entre ellas el presuponer y votar fondos para
hacer efectivas sus contribuciones, y el garantizar el pago de las plizas en caso de
mora o insolvencia por parte del Sistema. Que el seguro es un contrato, as lo
establecen las autoridades y los tratados.
1. 4.ID.; ID.; ID.; SISTEMA GUBERNAMENTAL DE SEGURO DE VIDA BAJO LA

LEY No. 186, NATURALEZA DEL.La Ley del Commonwealth No. 186 crea y
provee un sistema gubernamental de seguro de vida. Es un sistema fundado sobre
bases cientficas, edificado con la asistencia tcnica y los clculos de nuestros
mejores actuarios. No es un sistema de subsidios, ddivas o limosnas. Es un
verdadero negocio, una empresa gigantesca en que estn vitalmente interesados
miles de clienteslos miles de funcionarios y empleados del Gobierno que tienen la
obligacin de asegurarse bajo la ley. Lo avala, adems, el Estado con la solvencia de
la hacienda pblica. Lo informan las teoras, prcticas y principios bien conocidos y
establecidos en la ciencia y materia de seguros, y su administracin no slo
participa de las ventajas de una burocracia bien organizada bajo los auspicios de un
servicio civil independiente, sino que est penetrada del ms genuino sentido
mercantil. Es finalmente una empresa tan lucrativa como cualquier otra empresa
extraoficial y ordinaria de seguros, y desde luego est a prueba de quiebras y
bancarrotas hasta donde se puede estarlo humanamente. Figrense, pues, si hay
diferencia entre los sistemas de pensiones ya liquidados y este sistema actual de
seguro!
1. 5.ID.; ID.; ID.; ID.; CONTRIBUCIN DEL FUNCIONARIO o EMPLEADO AL

PAGO DE LAS PRIMAS ES DE su PROPIEDAD o PERTENENCIA.Que el 3 por
ciento con que el funcionario o empleado contribuye al pago de las primas es de su
absoluta propiedad y pertenencia, es cosa que no admite ninguna discusin de
acuerdo con la letra y espritu de las leyes que rigen la materia. Tenemos, en
primer lugar, que el sueldo bsico del funcionario o empleado est sealado
especficamente en la ley de presupuestos que,
178
1 PHILIPPINE REPORTS ANNOTATED
78
1. como se sabe, se aprueba cada ao fiscal. Al hacerse las deducciones de los sueldos
de conformidad con el art. 5 de la ley No. 186, las cantidades deducidas (3 por
ciento en el caso de los empleados civiles y 5 por ciento en el de los militares) se
desprenden completamente del dominio y control del Gobierno y se trasladan
enteramente a los fondos del Sistema de Seguro.
1. 6.ID.; ID. ; ID. ; ID. ; ID. ; SISTEMA NACIONAL DE SEGURO NO ES EL MISMO

GOBIERNO.La ley del Commonwealth No. 186 est toda ella penetrada e
informada de un principio fundamental, a saber: que el Sistema Nacional de Seguro
no es el mismo Gobierno, sino que es una institucin aparte, con propia existencia,
con personalidad propia, autnoma e independiente.
1. 7.ID.; ID.; ID.; ID.; ID.; MAGISTRADOS DEL TRIBUNAL SUPREMO.Hay una
razn peculiar, aplicable particularmente al caso de los Magistrados del Tribunal
Supremo, y es que sus haberes estn fijados en la Constitucin y no pueden ser
disminudos durante el desempeo de sus cargos. (Constitucin de Filipinas, art. 8.,
sec. 9.) Esto quiere decir que el Magistrado del Tribunal Supremo tiene derecho
ntegramente a todo su haber, sin que el Estado pueda quedarse con ninguna parte
del mismo o reclamar ttulo de propiedad sobre dicha parte. As que cuando el
Magistrado (en el presente caso el finado A. S.) aporta el 3 por ciento de su sueldo,
mediante deduccin que hace automticamente el Gobierno, para pagar la mitad
del importe de las primas de su pliza de seguro, lo hace con dinero de su absoluta
propiedad, aunque no haya llegado a sus manos ni por un momento. Luego el
Gobierno no le ha regalado nada, no le ha dado ninguna gratificacin por lo menos
en tal respecto. Luego la mitad, por lo menos, de la pliza la pertenece por derecho
propio absoluto.
1. 8.ID.; ID.; ID.; ID.; ID.; IMPORTE ENTERO DE LA PLIZA PERTENECE AL

ASEGURADO; CONTRIBUCIN DEL GOBIERNO, UNA OBLIGACIN
CONTRACTUAL; CAUSA o CONSIDERACIN.El importe entero de la pliza
pertenece al asegurado; por tanto, debe pagarse totalmente a la beneficiaria, la
recurrente y apelante en el presente asunto. Esta conclusion fluye del
convencimiento de que an la contribucin de 3 por ciento que aporta el Gobierno
para completar el pago de las primas no es una mera liberalidad, no es una simple
largueza o gratificacin, sino que es una verdadera obligacin, de ndole claramente
contractual, asumida por el Gobierno en virtud de ciertas consideraciones
perfectamente apreciables y valorables no slo desde el punto de vista moral o
social, sino an en trminos materiales, tangibles. Por qu el Gobierno asume y
contrae esa obligacin? Cul
179
79
1. es la causa o consideracin? Lo dice el art. 3 de la ley que crea el Sistema; "Para

promover la eficiencia y bienestar de los empleados del Gobierno de Filipinas * * *."
1. 9.ID. ; ID. ; ID. ; ID. ; PLIZA BAJO EL SISTEMA DE SEGURO, UN

CONTRATO.Se arguye que bajo el Sistema de Seguro que nos ocupa la pliza no
es un contrato, pues f alta en l un elemento esencial en todo contrato: la
voluntariedad. Es verdad que bajo la ley todo funcionario o empleado regular y
permanente debe asegurarseen este sentido el seguro es obligatorio y forzoso.
Pero es acaso obligatorio el entrar en el servicio pblico? Hay por ventura alguna
ley que obligue a uno a servir al Estado an contra su voluntad, excepto en
situaciones de grave emergencia en que, segn la Constitucin, cabe recurrir
incluso a la llamada conscripcin civil, para la defensa del Estado? (Constitucin de
Filipinas, art. 2., sec 2.) Uno puede celebrar un contrato imponindose ciertas
restricciones e inhibiciones a lo largo de su realizacin y cumplimiento. All no hay
fuerza, coercion determinante de nulidad, puesto que uno entr libremente en el
convenio; es decir, pudo haber entrado o no en l con toda voluntariedad. El
ingrediente esencial en un contrato es la libertad inicial.No quiere uno asegurarse
bajo la ley del Commonwealth No. 186? Pues muy sencillo: no hacerse funcionario
pblico, ni empleado civil.
SOLICITUD de revision de la decision del Auditor General.

Los hechos aparecen relacionados en la decision del Tribunal.
D. Guillermo B. Guevara en representacin de la recurrente.
El Primer Procurador General Auxiliar Sr. Jose B. L. Reyes en representacin de
los recurridos.
BRIONES, M.:
Al estallar la guerra del Pacfico en Diciembre de 1941 el Honorable Sr. Jose Abad
Santos desempeaba el cargo de Presidente del Tribunal Supremo de Filipinas, Era
el quinto Presidente de dicho Tribunal desde que se implant la soberana
americana en este Archipilago. Cuando el alto mando de las fuerzas filipino-
americanas estim necesario que el Gobierno del Commonwealth desalojase Manila
por considerarse inminente la cada de esta capital ante la
180
fuerza arrolladora de la invasion japonesa tanto ms incontrastable cuanto que el
ataque haba sido traicionero y cogido completamente desprevenidas a las fuerzas
defensoras, las que, por otra partetriste es decirlo !no estaban suficientemente
preparadas para la sbita agresin, cuando todo esto ocurri con la celeridad
fulminante y aturdidora de un rayo, el Presidente de Filipinas Hon. Manuel L.
Quezon hubo de prepararse precipitadamente para trasladar provisionalmente el
asiento del Gobierno a la Isla de Corregidor donde los defensores planeaban hacerse
fuertes y ofrecer la ltima y mxima resistencia; y a dicho efecto form un pequeo
gabinete de guerra. Abad Santos era uno de los miembros de este gabinete,
figurando adems como primer consejero del Presidente.
En Marzo de 1942 el Presidente Quezon, por razones de estrategia y para poder
ayudar ms efectivamente a la temprana liberacin de Filipinas mediante continuos
y persistentes apremios y estmulos al Gobierno de Washington, decidi salir del
pas y trasladarse con su gabinete primero a Australia y despus a Estados Unidos.
En vez, sin embargo, de llevarse consigo a Abad Santos a ultramar, el Presidente
resolvi dejarle en Filipinas como representante suyo en el territorio no ocupado por
los japoneses.
Las islas visayas todava no estaban ocupadas por el enemigo. Atareado estaba
Abad Santos supervisando el gobierno civil en ellas y adoptando las disposiciones y
medidas necesarias para afrontar la invasion cuando los japoneses desembarcaron
en uno de los pueblos de la costa occidental de Ceb estando aqul en la ciudad del
mismo nombre. Enterado Abad Santos del desembarco sali precipitadamente de la
ciudad para trasladarse a la isla vecina de Negros, pero con tan mala fortuna que
los japoneses se cruzaron con l en el camino de Carcar a Barili, y reconocindole lo
cogieron llevndole a la ciudad de Ceb. Parece que all ya los japoneses trataron
por todos los medios de obtener su ayuda y cooperacin, urgindolo adems que
181
revelase los encargos que recibiera del Presidente Quezon. Es de historia
contempornea que Abad Santos rechaz corts pero dignamente las demandas
japonesas, alegando que ante todo y por encima de los azares de la guerra deba
lealtad a su Gobierno y a su Presidente. Esto encoleriz a los japoneses, quienes lo
embarcaron para el municipio de Malabang, provincia de Lanao, isla de
Mindanao, y all fu pasado por las armas en 7 de Mayo de 1942.
Apenas es necesario decir que el puro y sublime sacrificio de Jose Abad Santos le
coloca decididamente al lado de los protomrtires de nuestra Patria. Su sitio en el
concierto de los inmortales est entre Rizal y los Padres Burgos, y Zamora. Las
generaciones futuras se mirarn en el lmpido espejo de su conducta y martirio para
templar y endurecer sus almas ante los golpes de la adversidad.
Para compensar de alguna manera a la familia del mrtir de la irreparable
prdida, se aprob la Ley No. 708 del Commonwealth cuyo texto es como sigue:
"SECTION 1. In consideration of the unselfish patriotism and meritorious public service
rendered to the Commonwealth of the Philippines and its people by the late Chief Justice,
Jose Abad Santos, who was killed by the Japanese during the war, his widow, Amanda
Teopaco de Abad Santos, shall be paid a gratuity equivalent to three years' salary as Chief
Justice of the Supreme Court. The gratuity provided for in this Act shall not be subject to
attachment or levy: Provided, That, upon the approval of this Act no other gratuity under
existing law or laws shall be granted to the late Chief Justice of the Supreme Court."
De autos resulta que el 31 de Mayo, 1937, Abad Santos, siendo a la sazn miembro
asociado del Tribunal Supremo, y en cumplimiento de las disposiciones de la Ley del
Commonwealth No. 186, adquiri del "Government Service Insurance System" una
pliza de seguro de vida conocida como pliza No. 21, 21-A y 21-B avaluada en
P17,673. Los trminos y condiciones de la pliza son, a saber:
"THE GOVERNMENT SERVICE INSURANCE SYSTEM, Hereby guarantees to pay the
amount of P1 17,673 to Jose Abad Santos if living on the last day of May, 1956 (the
maturity date) and this Policy is
182
in force; or if the Insured should die before the maturity date and during the continuance of
the policy, guarantees to pay the amount of insurance immediately upon the receipt of due
proof of death of the Insured to Amanda Teopaco Abad Santos, Wife (hereinafter referred to
as the beneficiary), or to such other beneficiary or beneficiaries as may be designated by the
Insured in the manner hereinafter provided.
"The insurance is granted subject to the terms and conditions here inafter set forth
and in consideration of the information therefor and of the payment on the day this policy
takes effect of the monthly premium of P95, of which P47.50 is due from and payable by the
Insured and P47.50 by the Commonwealth of the Philippines or by the government entity or
instrumentality concerned where the Insured is employed, and the like payment on the last
day of every month during the lifetime of the Insured until premiums for 19 full years have
been paid on this policy or until prior death of the Insured.
"Unless the beneficiary has been irrevocably designated or this policy assigned, in which
case the consent of the beneficiary or assignee, as the case may be, is necessary, the Insured
may, without the consent of the beneficiary, receive every benefit, exercise every right, and
enjoy every privilege conferred upon the Insured by this Policy.
"The conditions, benefits, and privileges recited on the succeeding pages hereof
constitute part of this contract.
"In witness whereof the GOVERNMENT SERVICE INSURANCE SYSTEM has caused
this Policy to be executed as of the last day of May. 1937, which is the date this Policy takes
effect."
Amanda Teopaco, viuda del finado, como nica beneficia ria nombrada en la pliza,
requiri posteriormente del Auditor General y del "Government Service Insurance
System", recurridos, el pago del importe de dicha pliza, pero los recurridos,
apoyndose en la referida Ley No. 708 del Commonwealth tal como ellos la
interpretan, se han negado a efectuar el pago solicitado. La recurrente ha apelado,
en tiempo oportuno, de la resolucin de los recurridos para ante este Supremo
Tribunal. De ah el presente recurso que ahora vamos a decidir.
Los recurridos sostienen que la pliza de seguro de vida expedida a cada
funcionario o empleado asegurado bajo las disposiciones de la Ley del
Commonwealth No. 186 constituye una gratificacin (gratuity). Como quierase
183
arguyeque la ley del Commonwealth No. 708 arriba transcrita provee
expresamente que "al aprobarse esta ley ninguna otra gratificacin creada por ley o
leyes existentes deber concederse al finado Presidente del Tribunal Supremo";
luego es obvioconcluyen los recurridosque, habindose la recurrente
aprovechado de la gratificacin otorgada por la referida Ley No. 708 cobrando la
suma de P48,000, ella no tiene ahora derecho, como beneficiaria, a cobrar el valor
lquido de la pliza de su marido.
Por su parte, la peticionaria y apelante sostiene que cuando su marido falleci el
7 de Mayo, 1942, pasado por las armas, la pliza qued ipso facto exigible y
pagadera conforme se halla estipulado en el contrato en que est escriturada dicha
pliza; que el seguro de vida del finado bajo la ley No. 186 no es una gratificacin
sino un contrato otorgado mediante la correspondiente causa o consideracin como
cualquier otro contrato ordinario sobre seguro de vida; que ella jams ha renunciado
expresamente a cobrar el importe de la pliza en cuestin; que tampoco ha hecho
renuncia tcita al cobrar la gratificacin de P48,000 proveida en la citada ley No.
708, pues como ya se ha dicho, ella jams ha considerado como una simple
gratificacin la pliza de seguro de su dif unto marido.
Como se ve, la apelacin plantea cuestiones de recia envergadura y su resolucin
puede trascender mucho ms all de los lmites del presente caso. Hemos prestado
al asunto la ms cuidadosa atencin y apenas es necesario decir que nuestra
decision es el resultado de muy laboriosas y detenidas deliberaciones. Esto explica el
por que se ha demorado algn tanto el despacho de este asunto.
Tiene razn el Procurador General al decir en su alegato presentado en nombre y
representacin de los recurridos que toda la cuestin en este asunto se reduce a
determinar "si deben considerarse o no como gratificacin los beneficios del seguro
de vida concedidos por el 'Government Service Insurance System' a los funcionarios
y empleados del Commonwealth." Los recurridos y el Procurador General, al
184
sostener el lado afirmativo, invocan principalmente dos opiniones emitadas por el
mismo finado Jose Abad Santos siendo Secretario de Justicia del Gobierno del
Commonwealth: la primera, fechada el 17 de Marzo, 1939; y la segunda, en
reiteracin de la primera, fechada el 25 de Octubre de aquel mismo ao. El
Procurador General, como excusndose en cierto modo de tener que ejecutar la
"nada envidiable tarea de tener que discutir una reclamacin hecha en nombre de
uno de los heroes de la nacin," asevera que le reconforta, sin embargo, la firme
conviccin de que si el ilustre finado viviera y hubiese de emitir juicio sobre la
cuestin, con toda seguridad adoptara la misma opinion que rindi siendo
Secretario de Justicia. Acaso a esto se pueda contestar diciendo que ello es presumir
demasiado sobre la inmutabilidad de las opiniones, mxime tratndose, como se
trata, de una legislacin que participa de la naturaleza del seguro social-materia
que est en todo tiempo sujeta al ritmo creciente de las ideas progresivas. De todos
modos, parece superfluo decir que las opiniones del departamento ejecutivo del
gobierno no tiene fuerza compulsiva sobre los tribunales de justicia en asuntos de
carcter decididamente judicial.
La opinion del Secretario de Justicia que se invoca se basa en los siguientes f
fundamentos:
(a) La ley del Commonwealth No. 136 sobre seguro de vida de los funcionarios y
empleados del Gobierno no viene a ser ms que una medida sustitutiva de las
antiguas leyes de pensiones del Gobiernola Ley No. 3050, sobre pension y retiro
de los maestros de escuela; la Ley No. 3173, sobre retiro y pension de funcionarios y
empleados del Servicio de Sanidad de Filipinas; y la Ley No. 1638, sobre fondos de
retiro de la Constabularia filipina; es as que los beneficios concedidos por todas
estas leyes tenan el carcter de gratificacin (gratuity); luego la ley de seguro No.
186 que reemplaza a dichas leyes de pensiones tiene que ser tambin
necesariamente ley de gratificacin.
185
(b) Los diferentes fondos creados por la Ley No. 186, sobre todo el fondo para
afrontar el pago del importe de las plizas en casos de vencimiento o de exigibilidad
total o parcial, provienen principalmente de dos f fuentes, a saber: (1) las
deducciones de los sueldos bsicos de los funcionarios y empleados del Gobierno
consistentes en un 3 por ciento; (2) las correspondientes contribuciones del Gobierno
consistentes tambin en otro 3 por ciento. (En el caso de los servicios armados las
deducciones de los sueldos bsicos suben al 5 por ciento.) Se sostiene que todos estos
fondos, sin excluir las deducciones individuales de los sueldos bsicos,
son donaciones hechas por el Gobierno con dinero que es de su absoluta propiedad;
que an lo que aporta el f funcionario o empleado para pagar las primas, es decir, el
3 por ciento que se deduce de su sueldo, no es, en realidad de su pertenencia, sino
que es slo suyo nominalmente; por tanto, tales fondos son el producto de actos de
pura liberalidad del Estado; luego, son mera gratificacin o gratuity.
Examinemos el primer f fundamento. Lo primero que hay que determinar es si es
cierto, como se sostiene, que las tres citadas leyes de pensionesla de los maestros,
la de los sanitarios, y la de los constabularioseran leyes de pura y simple
gratificacin. Existen buenas razones para afirmar que no lo eran. Por lo menos, as
opin y declar esta Corte Suprema en un asunto que se decidi el 28 de Septiembre
de 1935el asunto de Derkum contra Junta de Pension e Inversion (62 Jur. Fil.,
184), bajo la ponencia del Magistrado Sr. Hull, y con la conformidad del Presidente
Sr. Avancea y de los Magistraclos Sres. Malcolm, Villa-Real, Abad Santos, Vickers,
Imperial, Goddard y Recto; es decir, con la concurrencia de todos los Magistrados,
menos el Sr. Butte que no tom parte por haber sido el Presidente de la Junta de
Pension e Inversion de los Maestros en la poca en que se engendr el derecho de
accin del demandante. Pero lo ms notable en dicho asunto, para los efectos del
que nos ocupa, es que, como se ha visto, el Sr. Abad Santos, que entonces era
miembro
186
de esta Corte, fu uno de los firmantes de la sentencia. Tratbase en el asunto de la
interpretacin de ciertas disposiciones bsicas de la Ley No. 3050 sobre pension y
retiro de los maestros de escuela. Pues bien; esta Corte hizo en su sentencia el
siguiente pronunciamiento definitivo acerca del carcter de la pension de los
maestros y consiguientemente de las pensiones similares, a saber:
"La pretension del recurrente de que su anualidad no es una mera gratificacin, es acertada.
(People ex rel. Kroner vs. Abbott, 274 111., 380; 113 N. E., 696, y casos que all se citan.)
Cuando se cumplen las condiciones de la ley, el empleado adquiere el derecho, como tal
derecho, a la anualidad. * * *" (Derkum contraJunta de Pension e Inversion, supra, pg.
270.)
Es ms ilustrativa y terminante todava la doctrina sentada en el citado asunto
de Kroner vs. Abbott, la que transcribimos ntegramente a continuacin por no
tener desperdicio, a saber:
"A system of pensions to municipal officers and employes injured or disabled while on duty
or retiring after a term of service has gradually arisen and is being extended during recent
years. The constitutionality of statutes establishing such pension system is sustained upon
the ground that 'these annuities * * * are in the nature of compensation for services
previously rendered for which full and adequate compensation was not received at the time
of the rendition of the services. It is, in effect, pay withheld to induce longcontinued and
faithful service, and the public benefit accrues in two ways:' By encouraging competent
employees to remain in the service? and by retiring from the public service those who have
become incapacitated from performing the duties as well as they might be performed by
younger or more vigorous men. 1 Dillon on Mun. Corp. (5th Ed.), Sec. 430. This Court, in
Hughes vs. Traeger, 264 111., 612; 106 N. E., 431, upheld the constitutionality of a pension
act and approved the doctrine just quoted from Dillon. Such pensions generally are not
considered donations or gratuities. The rule in the majority of jurisdictions is that the
Legislature has power to require municipalities to pension their employees and raise the
funds for that purpose. 5 McQuillin on Mun. Corp., sec. 2422; 1 Dillon on Mun. Corp. (5th
Ed.), secs. 105, 430; State vs. Love, 89 Neb., 149; 131 N. W., 196; 34 L. R. A. (N. S.), 607,
and note, Ann. Cas. 1912C, 542, and note; Trustees of Firemen's Fund vs. Roome, 93
187
N. Y., 313; 45 Am. Rep., 217; Commonwealth vs. Walton, 182 Pa., 373; 38 Atl., 790; 61 Am.
St. Rep., 712. * * *" (113 Northeastern Reporter, p. 698.)
La posicin, pues, que esta Corte adopt desde, por lo menos, el Septiembre de 1935,
cuando todas las leyes de pensiones estaban en vigor, era que staslas
pensionesno eran meras gratificaciones o gratuities. Mientras la gratificacin es
una donacin, un acto de pura liberalidad del Estado, la pension, segn el criterio
de esta Corte siguiendo lo declarado en el asunto de Kroner, ms que acto de
generosidad, es un acto de justicia, emanado del deseo de proveer, siquiera
tardamente, una adecuada "compensacin a servicios prestados anteriormente, por
los cuales no se recibi cabal y adecuada compensacin al tiempo en que se
prestaron." La pension, en este caso, viene a ser una especie de sueldo retenido para
un doble fin: primero, para alentar al empleado fiel y competente a permanecer en
el servicio; y segundo, para permitir que se retire del servicio con relativa seguridad
el empleado que ha quedado incapacitado para seguir cumpliendo sus deberes,
permitiendo de esta manera tambin que los "desempeen invididuos ms jovenes y
ms vigorosos."
La pension, pues, segn el expresado criterio, no es un mero regalo hecho por el
Estado como patrono esplndido y munfico sino la concrecin material de un acto de
verdadera justicia distributiva, dictado al mismo tiempo por razones morales de
equidad y tambin del ms alto sentido prctico y utilitario. As que, como
acertadamente dijo el ponente Sr. Hull en el citado asunto de Derkum contra Junta
de Pension e Inversion, "cuando se cumplen las condiciones de la ley, el empleado
adquiere el derecho, como tal derecho, a la anualidad"
De lo expuesto resulta evidente que la doctrina seguida en esta jurisdiccin no ha
sido la expuesta en el asunto de Pennie contra Reis (132 U. S., 464; 33 Law. ed.,
426) que citan los recurridos en su alegato-doctrina que concepta la pension como
una pura liberalidad del Estado,
188
sin ninguna implicacin de derechos establecidos a favor del empleado, sino la
doctrina verdaderamente liberal y progresiva sentada en el tantas veces citado
asunto de Kroner vs. Abbott. Es verdad que en otro asunto un poco anterior,
Alano contra Florido y Tabien (61 Jur. Fil., 321), esta Corte haba dicho que la
concesin de una pension bajo la ley No. 3050 era en cierto modo un acto de
liberalidad, pero cualific este dictum con un pronunciamiento harto significativo e
importante: que ello era en "cumplimiento de la obligacin del Estado, impuesta por
la justicia social, de ayudar a las personas envejecidas e incapacitadas que, en el
apogeo de sus f acultades mentales y fsicas, han servido a la comunidad con
fidelidad, constancia y abnegacin." Ntese que fu slo algunos meses despus, el
25 de Septiembre del mismo ao 1935, cuando la Corte en pleno, evolucionando ms
resueltamente, decidi el asunto bsico y autoritativo de Derkum en que se
estableci la doctrina terminante de que Ia anualidad bajo la ley de pension y retiro
de los maestros no era, una mera gratificacin.
Pero an suponiendo por un momento que las antiguas leyes de pension y retiro
eran leyes de gratificacin o gratuity se sigue de ello necesariamente que la ley de
seguro gubernamental No. 186 es tambin de gratificacin tan slo porque ha
venido a reemplazarlas ? En otras palabras: la ley sucediente tiene que ser
necesariamente de igual naturaleza que la ley precedente? El argumento de que las
leyes de pension ya derogadas y la vigente del Commonwealth No. 186 son de igual
ndole se funda en que todas ellas tienen de comn una cosa, a saber: que sus f
fondos son el producto acumulado de las deducciones hechas de los sueldos de los
funcionarios y empleados asegurados y de las correspondientes contribuciones
aportadas por el Gobierno, Como quiera que todas estas deducciones y
contribuciones son simples liberalidades o donaciones hechas por el Gobierno y
nada en absoluto es del patrimonio del asegurado; luegoconcluye la
argumentacintanto las anteriores le-
189
yes de pension y retiro como la de seguro de vida No. 186 tienen el mismo carcter,
esto es, que todas son leyes de simple gratificacin o gratuity.
La premisa mayor es en cierto modo correcta: bajo las leyes de pensiones los
fondos provenan de las deducciones de los sueldos y de las contribuciones del
Gobierno; bajo la ley de seguro No. 186 los fondos tienen el mismo origen y el mismo
modo de extraccin. Pero hay esta diferencia fundamental: mientras la pension no
era objeto de ningn contrato, la pliza de seguro bajo la ley No. 186 es un
verdadero contrato como cualquier otra pliza bajo las leyes ordinarias de seguro de
vida. En esa pliza son partes contratantes el tenedor de la pliza o sea el
funcionario o empleado asegurado, la institucin aseguradora o sea el "Government
Service Insurance System", y el Estado, toda vez que ste, en la ley que crea el
sistema, asume ciertas obligaciones, entre ellas el presuponer y votar fondos para
hacer efectivas sus contribuciones, y el garantizar el pago de las plizas en caso de
mora o insolvencia por parte del Sistema. Que el seguro es un contrato, as lo
establecen las autoridades y los tratados.
"Insurance, broadly defined, is a contract by which one party, for a compensation called the
premium, assumes particular risk of the other party and promises to pay to him or his
nominee a certain or ascertainable sum of money on a specific contingency. As regards to
property and liability insurance, it is a contract by which one party promises on
a consideration to compensate or reimburse the other if he shall suffer loss from a specific
cause or to guarantee or indemnify or secure him against loss from that cause." (32 C. J.,
975.)
La definicin preinserta es tan buena aplicada a las plizas ordinarias de seguro
como a la expedida bajo la ley del Commonwealth No. 186. No hay ms que leer, por
ejemplo, la pliza de que se trata en este asunto y compararla con una pliza
ordinaria para ver la fundamental identidad. Es que, segn el art. 12 de la ley No.
186, ninguna pliza se expedir a un funcionario o empleado del Gobierno, a menos
que contenga en sustancia las condiciones
190
incorporadas en el art. 184 de la ley No. 2427 que, como se sabe, es la ley ordinaria
sobre seguro de vida. Esta ley dice categricamente que el seguro es un contrato
y define la pliza como un contrato escrito de seguro.
Es indudable que la ley del Commonwealth No. 186 ha venido a reemplazar a las
antiguas leyes de pensiones yretiro, pero la sustitucin ha sido tan radical, tan
profunda y tan completa, que la transf ormacin no ha sido una simple
remodelacin, algo as como un revoque de la f achada, sino que se trata de un
vuelco redondo, un cambio completo y fundamental del sistema. Antes de la
promulgacin de la Ley No. 186 en Noviembre 14, 1986, era generalmente sabido,
siendo materia de historia contempornea, que los diferentes sistemas de pensiones
vigentes a la sazn estaban abocados a una inminente quiebra y, adems, tendan a
crear en el pas las llamadas clases pasivas que han sido una maldicin social en
muchos pases. Se estudi la situacin con el mayor cuidado, solicitando la ayuda y
consejo de los mejores expertos en la materia. Fu entonces cuando se redact y
aprob la ley del Commonwealth No. 186 que crea y provee el sistema
gubernamental de seguro de vida, Es un sistema fundado sobre bases cientficas,
edificado con la asistencia tcnica y los clculos de nuestros mejores actuarios. No es
un sistema de subsidios, ddivas o limosnas. Es un verdadero negocio, una empresa
gigantesca en que estn vitalmente interesados miles de clientesIos miles de
funcionarios y empleados del Gobierno que tienen la obligacin de asegurarse bajo
la ley. Lo avala, adems. el Estado con la solvencia de la hacienda pblica. Lo
informan las teoras, prcticas y principios bien conocidos y establecidos en la
ciencia y materia de seguros, y su administracin no slo participa de las ventajas
de una burocracia bien organizada bajo los auspicios de un servicio civil
independiente, sino que est penetrada del ms genuino sentido mercantil. Es
finalmente una empresa tan lucra tiva como cualquier otra empresa extraoficial y
ordinaria de seguros, y desde luego est a prueba de quiebras y ban-
191
VOL. 79, SEPTEMBER, 1, 1947 191
carrotas hasta donde se puede estarlo humanamente. i Figrense, pues, si hay
diferencia entre los sistemas de pensiones ya liquidados y este sistema actual de
seguro!
Pasemos ahora a examinar el segundo f fundamento de la tesis de los recurridos,
a saber: "que las deducciones de 3 por ciento o 5 per ciento, segn sea el caso que se
hacen mensualmente de los sueldos del empleado y las correspondientes
contribuciones del Gobierno, todas ellas pertenecen actualmente al Gobierno, as que
la entera consideracin para la expedicin de la pliza de seguro bajo la ley del
Commonwealth No. 186 es puramente una liberalidad del Gobierno". (Alegato de los
recurridos, pg. 5.) En apoyo de esta tesis absoluta se invoca la doctrina sentada en
el asunto generalmente conocido de Pennie vs.Reis (132 U. S., 464; 33 Law. ed., 426;
10 Sup. Ct. Rep., 149; Op. Atty. Gen., No. 33, s. 1948.) La Legislatura de California
cre en 1878 una especie de "Fondos de Seguro y Salud para la Polica" mediante la
aprobacin de una ley en que sustancialmente se provea lo siguiente: (a) que el
sueldo bsico de $100 de ciertos oficiales se aadiran $2, pero que el tesorero de la
ciudad o condado retendra esta ltima cantidad para aportarla a los referidos
fondos; (b) que a la muerte de cualquier miembro de la polica el tesorero pagara a
sus herederos o a su representante legal la cantidad de $1,000 que se sacara de los
mencionados fondos * * *."
El administrador de los bienes relictos de un oficial policaco llamado Edward A.
Ward entabl demanda contra el tesorero de la ciudad de San Francisco para cobrar
los $1.000 bajo las disposiciones de la citada ley de 1878. El tesorero interpuso la
defensa de que el demandante careca de motivo de accin por la razn de que dicha
ley de Abril 1, 1878, fu abolida o derogada por la ley de Marzo 4,1889, y esta
derogacin era perfectamente vlida y constitucional; as que el finado polica Ward
no haba adquirido ningn derecho bajo la antigua ley, arguyndose que los 2
dlares mensuales aportados por l a los Fondos si bien se haban deducido de su
sueldo no eran de l sino del Estado que
192
los haba retenido para la mantenencia de dichos fondos. La Corte Suprema Federal
sostuvo la defensa del tesorero sentando las conclusiones que con bastante
extension se reproducen en la opinion del Secretario de Justicia que se discute
opinin que, como ya se ha visto, hacen suya los recurridos y el Procurador General
en su alegato. El meollo de la doctrina es que, aunque la cantidad adicional de $2
pareca ser parte de la compensacin del polica, de hecho sta nunca la haba
recibido ni haba tenido control sobre la misma, ni hubiera podido prevenir su
apropiacin para los fondos en cuestin. Por aadidura se sostene: "El (el polica) no
tuvo tal poder de disposicin sobre ello (el dinero), tal como ocurre siempre cuando
se trata del dominio de una propiedad. * * * Hasta que ocurriera el hecho del cual
dependa si se haba de pagar el dinero o una parte del mismo, el oficial no tena
ningn derecho adquirido a tal pago. Su inters en el fondo era, hasta entonces, una
mera expectativa creada por la ley, y estaba sujeta a ser revocada o destruda por la
misma autoridad * * *."
El Secretario de Justicia (Abad Santos) subraya su opinion con el siguiente
pronunciamiento:
"The insurance fund created by Commonwealth Act No. 186 of the National Assembly is
very similar to the 'Police Life and Health Insurance Fund' created by the Legislature of
California on April 1, 1878. Both are in the nature of an insurance. Both required that the
employees affected by it should contribute to such fund by the deduction of certain amounts
from their salaries each month. If, therefore, we are to follow, in this case, the doctrine laid
down by the United States Supreme Court in Pennie vs. Reis, supra, the conclusion is
inevitable that in point of fact, government employees are not actually contributing
anything to the Government Service Insurance Fund, created by Commonwealth Act No.
186; that the actual effect of the forced deduction of 3 per cent from the monthly salaries of
the government employees under Commonwealth Act No. 186 is to reduce the salaries of
the government employees by 3 per cent, the 3 per cent deduction being money from the
State, retained in its possession for the creation of the Government Service Insurance
Fund. (See also Op. Attorney General, No. 33, s. 1938.)"
193
Y hemos dicho ms arriba que la doctrina seguida en esta jurisdiccin, an en
relacin con las leyes de pensiones, ha sido la sentada en el asunto
de Kroner vs. Abbott y no la expuesta en el asunto de Pennie vs. Reis. En
Derkum contra Junta de Pensin e Inversin hemos declarado que la anualidad bajo
las leyes de pensiones no era una simple gratificacin. Esta era la jurisprudencia
cuando se aprob la ley del Commonwealth No. 186 sobre seguro de vida. Como
quiera que no hay nada en esta ltima ley que abrogue dicha doctrina, es forzoso
concluir que la jurisprudencia se halla en pleno vigor, no obstante cualquier opinion
en contrario del departamento ejecutivo del Gobierno. Y la jurisprudencia debe
aplicarse con tanto ms rigor cuanto que ya no se trata ahora de una simple pension
o retiro sino de seguro de vida, real y genuino, con todas las f formalidades de un
contrato en que las prestaciones son recprocas, es decir, derechos por un lado, y
obligaciones por otro lado. Pero bien analizado el asunto de Pennie vs. Reis, se ve a
las claras que la posicin jurdica de Filipinas sobre el respecto es enteramente
diferente de la de California. Bajo la ley californiana el sueldo bsico del polica era
$100 al mes, y los 2 dlares eran una adicin especial para los Fondos de Vida y
Salud de la Polica. En Filipinas el sueldo bsico del funcionario o empleado est
fijado en la ley de presupuestos sin consideracin al seguro; es decir, ese sueldo
sera el mismo hubiera o no seguro; el 3 por ciento o 5 por ciento, segn sea el caso,
que se deduce del sueldo, no es aditamento especial sino que es parte normal del
mismo sueldo bsico y le pertenece al empleado como cualquier otra parte de su
sueldo. Es verdad que esa porcin no llega fsicamente a manos del funcionario o
empleado, pues para facilitar ciertos arreglos de carcter administrativo el Gobierno
hace automticamente las deducciones y las entrega al "Government Service
Insurance System;" pero cabe decir, por esto, que ese percentaje no es del empleado
sino del Estado? Es claro que hasta cierto punto todo lo que percibe el empleado es
del Estado, pues procede del
194
mismo. Pero no se trata de esto: se trata de que ese percentaje de deducciones es
propiedad del empleado quien ha merecido ganarlo con su trabajo; se trata de que
con el dinero resultante de las deducciones el empleado paga lo que le corresponde
en el importe de la pliza. Resulta demasiado violento, por no decir absurdo, el
sostener que ese dinero no es todava del empleado tan slo porque ste no ha
llegado a cogerlo con sus manos; es decir, que, a sensu contrario, sera suyo si lo
hubiese cogido siquiera por un momento antes de pagar con el mismo las primas de
su pliza. No tenemos acaso la forma simblica de la propiedad? En el mundo
moderno de los negocios, vasto y complejsimo cuntas veces uno se hace dueo de
una propiedad (dinero, muebles, inmuebles, etc.) sin el previo requisito del
asimiento o entrega material? Bajo la ley No. 186 el sueldo podra entregarse al
empleado todo entero ydespus cobrar del mismo el importe de las primas so pena
de accin disciplinaria si no lo pagara, en cuyo caso, segn el criterio de los
recurridos, no habra ninguna cuestin: el dinero de las primas, pagado por el
empleado, sera conceptuado como de su propiedad sin discusin. De donde resulta
que una circunstancia tan tenue, de simple formulismo, como es la de que el Estado,
por medio de una operacin de caja, hace automticamente por si mismo las
deducciones para entregarlas al Sistema de Seguro, influye y determina un
verdadero cambio de modalidad jurdica, convirtiendo en propiedad del Estado lo
que indudablemente y por todos los conceptos es propiedad del empleado, La
argumentacin es, en verdad, peregrina.
Que el 3 por ciento con que el f uncionario o empleado contribuye al pago de las
primas es de su absoluta propiedad y pertenencia, es cosa que no admite ninguna
discusin de acuerdo con la letra y espritu de las leyes que rigen la materia.
Tenemos, en primer lugar, que el sueldo bsico del funcionario o empleado est
sealado especficamente en la ley de presupuestos que, como se sabe, se aprueba
cada ao fiscal. AI hacerse las deducciones de los sueldos
195
de conformidad con el artculo 5 de la ley No. 186, las cantidades deducidas (3 por
ciento en el caso de los empleados civiles y 5 por ciento en el de los militares) se
desprenden completamente del dominio y control del Gobierno y se trasladan
enteramente a los fondos del Sistema de Seguro. He aqu la fraseologa categrica y
terminante del referido artculo 5:
"All deductions and payments made as herein provided, shall be paid and delivered to the
System and the latter shall credit the same to the individual account of the paying
member."
Dudamos que la propiedad o pertenencia individual se pueda expresar con mayor
fuerza que la que entraan las palabras preinsertas. Resulta evidente que en la
mecnica del Sistema cada asegurado tiene su cuenta, individual y en ella se van
acumulando las primas pagadas por l, provinientes de las deducciones de su sueldo.
Pero hay ms todavay esto es decisivo para la resolucin del presente asunto: en
esa cuenta individual se van acumulando tambin las contribuciones de 3 por ciento
que hace el Gobierno para completar el pago del importe de las primas. De todo ello
se infiere indeclinablemente lo siguiente: que esa cuenta individual es algo
completamente separada y distinta; que al Gobierno no le asiste ningn derecho de
propiedad sobre ella; y que el Estado no puede disponer de esa cuenta a su antojo
como se dispone, por ejemplo, de los fondos generales del tesoro. Esa cuenta es cosa
tan personal, tan separada y tan distinta de las pertenencias del Gobierno que ste
puede quebrarse y quedar intacta, sin embargo, dicha cuenta.
Hay en la ley del Commonwealth No. 186 otras disposiciones que reafirman
fuertemente la teora de que el Estado no reclama ttulo de propiedad sobre los
fondos del Sistema Nacional de Seguro, mucho menos sobre las contribuciones que
aporta el asegurado con las deducciones de sus sueldos. El art. 9 de dicha ley
dispone que cuando un asegurado o miembro del Sistema es separado del servicio
del Gobierno por destitucin o mediante causa (for cause), los
196
beneficios que le corresponden en virtud de su pliza de seguro quedan
automticamente confiscados a favor del Sistema, excepto la mitad del "cash or
surrender value" (valor en efectivo metlico de la pliza), la cual suma ser pagada
a dicho miembro, o en caso de muerte, a su beneficiario. Pero hay una cosa harto
ms significativa todava: a regln seguido dicho art. 9 dispone que en otros casos de
separacin antes de la madurez de la pliza, es decir, cuando la separacin del
servicio no es por razn de culpabilidad o alguna mala nota, el asegurado tendr,
entre otras opciones, la siguiente: (a) cobrar por entero el "cash or surrender value"
(valor en efectivo metlico) de la pliza. ;,No significan estas disposiciones legales
un expreso reconocimiento de que la cuenta individual que cada asegurado tiene,
por virtud de su pliza, en los libros del Sistema, le pertenece personal y
exclusivamente? Ntese que cuando el asegurado deja el servicio por motivo que no
implique mala nota, se le entrega todo el "cash or surrender value" de la pliza sin
excluir la mitad que representan las contribuciones del Gobierno. Slo cuando la
separacin del servicio es mediante causa (for cause), se confisca la mitad de los
beneficios anejos a la pliza; pero a favor de quin se hace la confiscacin? a favor
del Gobierno? No, por cierto; la prdida de la mitad de los derechos redunda en
favor del mismo Sistema. Es que la ley del Commonwealth No. 186 est toda ella
penetrada e informada de un principio fundamental, a saber: que el Sistema
Nacional de Seguro no es el mismo Gobierno, sino que es una institucin aparte, con
propia existencia, con personalidad propia, autnoma e independiente,
La autonoma, la propia individualidad del Sistema queda ms acentuada si se
tiene en cuenta que, segn el artculo 24 de la referida ley del Commonwealth No.
186, cada ao se presupone y consigna automticamente de los fondos del tesoro la
cantidad necesaria para cubrir las contribuciones de 3 por ciento que al Gobierno le
incumbe apor-
197
tar para pagar las primas, sin que sea necesario que la Legislatura incluya dicha
cantidad en la ley presupuestal de cada ao fiscal; es decir, que hay un presupuesto
permanente para tal fin. Esto significa sencillamente que los fondos del Sistema
estn completamente separados de los fondos generales y que el Estado no puede
disponer de aquellos para ningn otro fin, en contraposicin a lo declarado en el
asunto de Pennie vs. Reis.
Ms todava: segn el artculo 19 de la misma ley, la junta directiva del Sistema,
despus de aportar la suma necesaria y suficiente para cubrir el pago de las
anualidades, las reclamaciones por fallecimiento y los gastos incidentales a la
administracin del Sistema, puede colocar o invertir sus fondos en 8 clases de
inversiones lucrativas que especifica la ley, todas ellas con buenas garantas para la
devolucin del capital y el reparto de razonables dividendos o crditos. Cmo
podran compaginarse estas inversiones esencialmente contractuales y privadas con
la idea de que el Gobierno tuviera control sobre los fondos del Sistema, con la
libertad de disponer de ellos a su talante, a tenor de lo declarado en el asunto
repetidas veces citado de Pennie vs. Reis?
Luego tenemos otro artculo de la ley que rie completamente con toda
pretension por parte del Estado de tener algn ttulo de propiedad sobre los fondos
del Sistema o alguna parte de los mismos. Es el artculo 22, sobre fondos excedentes,
que reza lo siguiente:
"SEC. 22. Disposable surplus.Any disposable surplus that may result from the operation
of the System due to earnings from investments and mortality savings shall be apportioned
annually among the members of the System in accordance with the schedule prepared by
the Actuary and approved by the Board. * * *"
Qu mejor prueba que la terminologa de este artculo para demostrar con fuerza
irrebatible la proposicin de que los miembros del Sistema, esto es, los mismos f
uncionarios y
198
empleados asegurados son los dueos de los fondos del Sistema?
Todo lo dicho hasta aqu ha sido en relacin con los sueldos de los funcionarios y
empleados, en general, del Gobierno. Pero hay una razn peculiar, aplicable
particularmente al caso de los Magistrados del Tribunal Supremo, y es que sus
haberes estn fijados en la Constitucin y no pueden ser disminudos durante el
desempeo de sus cargos. (Constitucin de Filipinas, art. VIII, sec. 9.) Esto quiere
decir que el Magistrado del Tribunal Supremo tiene derecho ntegramente a todo su
haber, sin que el Estado pueda quedarse con ninguna parte del mismo o reclamar
ttulo de propiedad sobre dicha parte. As que cuando el Magistrado (en el presente
caso el finado Abad Santos) aporta el 3 por ciento de su sueldo, mediante deduccin
que hace automticamente el Gobierno, para pagar la mitad del importe de las
primas de su pliza de seguro, lo hace con dinero de su absoluta propiedad,aunque
no haya llegado a sus manos ni por un momento. Luego el Gobierno no le ha
regalado nada, no le ha dado ninguna gratificacin, por lo menos en tal respecto.
Luego la mitad, por lo menos, de la pliza le pertenece por derecho propio absoluto.
Pero an vamos ms all. Nuestra conclusion, tomada, vamos a repetir, despus
de una deliberacin la ms rigurosa posible a ritmo con la extraordinaria
importancia del casoes que el importe entero de la pliza pertenece al asegurado;
por tanto, debe pagarse totalmente a la beneficiaria, la recurrente y apelante en el
presente asunto. Esta conclusion fluye del convencimiento de que an la
contribucin de 3 por ciento que aporta el Gobierno para completar el pago de las
primas no es una mera liberalidad, no es una simple largueza o gratificacin, sino
que es una verdadera obligacin, de ndole claramente contractual, asumida por el
Gobierno en virtud de ciertas consideraciones perfectamente apreciables y
valorables no slo desde el punto de vista moral o social, sino an en trminos ma-
199
teriales, tangibles. Por que el Gobierno asume y contrae esa obligacin? cul es la
causa o consideracin? Lo dice el art. 3 de la ley que crea el Sistema: "Para
promover la eficiencia y bienestar de los empleados del Gobierno de Filipinas * * *."
Al Estado le interesa vitalmente el que sus f uncionarios y empleados gocen de
cierto grado de bienestar y comodidadel mximo posible bajo las circunstancias
para que sean capaces de rendir un servicio 100 por ciento eficiente. Para este fin no
slo hay que dotarles de emolumentos y haberes razonablemente adecuados, sino
que tambin se les debe proveer de ciertas garantas de seguridad econmica en el
futuro, sobre todo para sus familias y dependientes, para el caso de que ellos falten
por muerte o incapacidad f sica. Al Estado le interesa vitalmente tambin el
retener y conservar a sus mejores funcionarios y empleados para evitar que dejen el
servicio pblico y acepten tentadoras y jugosas ofertas afuera, mxime en los
tiempos de prosperidad y bonanza econmica en que las empresas privadas estn
naturalmente en mejor situacin que el Estado para pagar esplndidamente al
personal. Todo esto requiere naturalmente la creacin de alicientes, de estmulos
artificiales que aviven y fomenten el espritu cvico innato del empleado civil, y una
de las formas ms efectivas de estmulo que el Estado filipino ha ideado y planeado
es el seguro de vida tal como se ha estatudo en la ley que nos ocupa, la ley del
Commonwealth No. 186. Resulta, pues, evidente que la intervencin del Gobierno
filipino en la creacin y operacin del Sistema Nacional de Seguro de Vida no est
dictada por un simple impulso de generosidad y liberalidadimpulso de amo bueno,
grande y esplndidosino que constituye un verdadero golpe de ingenio mercantil,
de habilidad en los negocios, calculado matemticamente para obtener resultados
positivos y beneficiosos en forma de servicio eficiente, honrado, continuo y
permanente de parte de los funcionarios y empleados pblicos y civiles. Luego an
la parte del Estado en esa pliza de seguro no es una simple donacin o gratificacin,
como
200
sostienen los recurridos, sino que es una obligacin onerosa, de do ut des. Luego, al
cumplirse las condiciones que establece la ley, el importe entero de la pliza
pertenece al asegurado, y en caso de muerte, al beneficiario.
Estas ideas no son nuevas en esta jurisdiccin. Su nica novedad est en que
ahora tienen aristas ms pronunciadas, un tono ms avanzado y resuelto. Pero su
germen es claramente visible en el asunto de Alano contraFlorido y Tabien antes
citado (61 Jur. Fil., 321). Ya all esta Corte dijo lo siguiente: "Nosotros creemos que
la concesin de una pension, adems de ser un acto de liberalidad, es en
cumplimiento de la obligacin del Estado, impuesta por la justicia, social, de ayudar
a las personas envejecidas e incapacitadas que, en el apogeo de sus facultades
mentales y fsicas, han servido a la comunidad con fidelidad, constancia y
abnegacin."
Se arguye que bajo el Sistema de Seguro que nos ocupa la pliza no es un
contrato, pues falta en el un elemento esencial en todo contrato: la voluntariedad.
Es verdad que bajo la ley todo funcionario o empleado regular y permanente debe
asegurarseen este sentido el seguro es obligatorio y forzoso. Pero es acaso
obligatorio el entrar en el servicio pblico? Hay por ventura alguna ley que obligue
a uno a servir al Estado an contra su voluntad, excepto en situaciones de grave
emergencia en que, segn la Constitucin, cabe recurrir incluso a la llamada
conscripcin civil, para la defensa del Estado? (Constitucin de Filipinas, artculo II,
seccin 2.) Uno puede celebrar un contrato imponindose ciertas restricciones e
inhibiciones a lo largo de su realizacin y cumplimiento. All no hay fuerza, coercion
determinante de nulidad, puesto que uno entr libremente en el convenio; es decir,
pudo haber entrado o no en l con toda voluntariedad. El ingrediente esencial en un
contrato es la libertad inicial. No quiere uno asegurarse bajo la ley del
Commonwealth No. 186? Pues muy sencillo: no hacerse funcionario pblico, ni em-
201
pleado civil. Trabajar particularmente, ya que despus de todo hay en el campo de
actividades y negocios privados varias y buenas oportunidades para empleos y
modos de vida provechosos y lucrativos. Una de las saludables tendencias en todo
pas, sobre todo en un pas joven y democrtico como el nuestro, es combatir el
parasitismo oficial y burocrtico, fomentando el empleo y colocacin en las empresas
y actividades privadas. El ideal sera establecer un sano equilibrio entre los destinos
pblicos y civiles y los empleos particulares; que el Estado no encuentre dificultad
en buscar y hallar buenos y eficientes servidores, pero que tampoco sea la meta de
todas las ambiciones y anhelos * * *.
Hay otra razn de equidad, de justicia, por que no se debe privar a la familia del
ilustre finado de los beneficios de su pliza de seguro. Antes de morir el mismo
haba establecido debidamente sus derechos bajo la ley Osmea presentando la
correspondiente solicitud de retiro. Entre retiro y otros emolumentos como
vacaciones acumuladas, etc., el ilustre finado o sus herederos hubiesen tenido
derecho a recibir unos P50,000, es decir, casi, casi la misma cantidad de P48,000
que el Gobierno filipino ha donado a su familia mediante la aprobacin de la ley del
Commonwealth No. 708, "en consideracin a su desinteresado patriotismo y
meritorios servicios pblicos prestados al pueblo y gobierno de Filipinas."
Puede decirse, pues, que con la aprobacin de la ley No. 708 el Gobierno no ha
dado ms de lo que hubiese tenido necesariamente que dar bajo la ley Osmea, sobre
retiro, y otras leyes pertinentes. Si, por contera, todava se negasen a la familia los
beneficios de la pliza de seguro, entonces se colocara al Gobierno filipino en una
situacin harto precaria, nada envidiable, pues del mismo se podra decir que nada
ha hecho por los seres queridos del que indudablemente fu el primer mrtir de
nuestra patria en la ltima guerra.
202
As que razones tanto de orden moral como de orden juridico aconsejan de consuno
que revoquemos, como por la presente revocamos, la resolucin del recurrido
Auditor General confirmatoria de la accin de su correcurrido "Government Service
Insurance System"; y ordenamos que se pague a la recurrente y apelante el valor
entero de la pliza en cuestin, o sea la suma de P17,673. Sin expreso
pronunciamiento en cuanto a las costas. As se ordena.
Moran, Pres., Pars, Pablo, Hilado y Tuason, MM.,estn conformes.
PERFECTO, J., concurring:
The insurance policy under which the petitioner filed her claim is reproduced in the
decision penned by Mr. Justice Briones.
Under the terms of the first paragraph, the policy guarantees the payment of P1
7,673 to Jose Abad Santos if living on the last day of May, 1956,the maturity
dateor if the insured should die before said date, to his wife, Amanda Teopaco.
Said first paragraph is quoted below:
"THE GOVERNMENT SERVICE INSURANCE SYSTEM, hereby guarantees to pay the
amount of P17,673 to Jose Abad Santos if living on the last day of May, 1956 (the maturity
date) and this Policy is in force; or if the Insured should die before the maturity date and
during the continuance of the policy, guarantees to pay the amount of insurance
immediately upon the receipt of due proof of death of the Insured to Amanda Teopaco Abad
Santos, wife (hereinafter referred to as the beneficiary), or to such other beneficiary or
beneficiaries as may be designated by the Insured in the manner hereinafter provided."
There is no question that on May 7, 1942, when Jose Abad Santos was executed by
the Japanese, the policy was in force, and since then, Amanda Teopaco, herein
petitioner, had her right to claim the amount of the policy perf ected. What she had
to do in order to collect the amount was only to submit the due proof of death of Jose
Abad Santos, and in this case there seems to be no question that such
203
proof has been received by the Government Service Insurance System.
The main issue in this case is raised upon the interpretation and application of
the proviso accompanying section 1 of Commonwealth Act No. 708, which reads as
follows:
"In consideration of the unselfish patriotism and meritorious public service rendered to the
Commonwealth of the Philippines and its people by the late Chief Justice, Jose Abad
Santos, who was killed by the Japanese during the war, his widow, Amanda Teopaco de
Abad Santos shall be paid a gratuity equivalent to three years' salary as Chief Justice of
the Supreme Court. The gratuity provided for in this Act shall not be subject to attachment
or levy: provided, That, upon the approval of this Act no other gratuity under existing law
or laws shall be granted to the late Chief Justice of the Supreme Court."
The parties had limited their controversy to the question whether the amount
provided in the insurance policy of Jose Abad Santos is a gratuity or not, and the
majority opinion offers a brilliant discussion in support of the negative side.
We do not feel ready to support the majority position on the controversy, as we
believe that there are weightier reasons in support of the theory that the amount
provided in the insurance policy in question partakes of the nature of a gratuity.
Those reasons are ably stated in the brief of respondent's counsel. It is not
necessary to restate them here, not only because anyone interested in knowing
them may read the brief, but because the full discussion appears to be unnecessary
from our point of view.
The proviso in question says: "That, upon the approval of this Act no other
gratuity under existing law or laws shall be granted to the late Chief Justice of the
Supreme Court." The clear text of the proviso cannot refer to the amount claimed by
petitioner Amanda Teopaco under the terms of the policy of her deceased husband.
Although said amount partakes of the nature of a gratuity, it is not comprehended
within the wording of the proviso. The amount claimed by petitioner is not a
gratuity "granted to the late Chief Justice of the Supreme Court," but a gratuity
204
granted to Amanda Teopaco under the precise terms of the insurance policy itself.
Therefore, the proviso is not applicable to the amount in question.
If Jose Abad Santos should have lived to collect the amount himself on the date
of the maturity of the policy, May 31, 1956, there cannot be any question that the
gratuity will be within the terms of the proviso. But since his death on May 7, 1942,
the gratuity has ceased to be a gratuity "to the late Chief Justice of the Supreme
Court," who has ceased to exist, to become a gratuity "to Amanda Teopaco" whose
title to claim the payment of the amount has been established since then.
Even in the far-fetched hypothesis that the drafters of Commonwealth Act No.
708, when they wrote in the proviso in question the words "late Chief Justice of the
Supreme Court," they intended to mean "Amanda Teopaco, widow of Jose Abad
Santos," the proviso cannot be given effect, because it would be tantamount to
nullifying by legislative fiat a vested right acquired by Amanda Teopaco since May
7, 1942, and of depriving her of her property without due process of law, in violation
of elemental constitutional guarantees.
We must add that the hypothesis cannot be entertained as the authors of
Commonwealth Act No. 708 drafted it with the evident purpose of granting the
benefit to Amanda Teopaco, widow of Jose Abad Santos, as a token of the people's
gratitude and admiration for the heroism shown by the late Chief Justice, praised
in glowing terms in the majority opinion and for which we had the opportunity of
offering our modest tribute in our dissenting opinion in the habeas corpus case
of Reyes vs. Crisologo (75 Phil., 225). Congress could not grant to Amanda Teopaco
the gratuity provided by Commonwealth Act No. 708 and, at the same time, deprive
her of her vested right to claim the value of the insurance policy in question. That is
tant-
205
amount to taking by the left hand what is given by the right. Such a double dealing
is unthinkable.
Our conclusion is that the petition must be granted and that the Government
Service Insurance System should be ordered to pay to petitioner Amanda Teopaco
the amount of P17,673.
BENGZON, J., concurring and dissenting:
I concur in the decision in so f ar as it finds the appeal to be meritorious. However, I

regret my inability to vote for disbursement of the whole amount of the policy. Not
because I believe the family of the deceased has been adequately compensated for
the loss of their precious head, but because the law which I swore to uphold
regardless of preference or inclination, only permits the return of the premiums
paid. The deceased himself, olympically seated among the immortals, would surely
frown upon mortals at the judgment seat he once presided, straining a principle or
blinking a statute, even if their labors meant thousands of pesos for those dearest to
his heart. For if to him their interests did not outweigh the demands of national
honor and official integrity, I am sure those same interests will not dim his vision of
the only award possible under the laws of the Republic. I refuse to join those who
imagine he had f eet of clay. He was made of sterner stuff.
In the year 1939, the then Secretary of Justice, Jose Abad Santos, rendered an
opinion of the following tenor:
"The first question to be determined, therefore, is whether Commonwealth Act No. 186 is a
gratuity act within the meaning of section 2 of Act No. 4151, the benefits of which can not
be enjoyed jointly with those granted under Act No. 4151.
"In speaking of the gratuity acts the benefits of which can not be enjoyed together with
the benefits granted under Act No. 4151, section 4 of Act No. 4151 enumerates as examples
thereof, the Teachers' Retirement and Disability Fund under Act No. 3050, the Pension and
Retirement Fund of the Philippine Health Service under Act No. 3173, and the Pension and
Retirement Fund of the Philippine Constabulary under Act No. 1638.
206
"In the opinion of this Department, Commonwealth Act No. 186 is a gratuity act, similar to,
if not the same as, Acts Nos. 1638, 3050, and 3173, mentioned in section 2 of Act No. 4151.
(Italics ours.)
"This conclusion is supported by the very language of Acts Nos. 1638, 3050, and 3173.
An examination of their provisions shows that the pension funds created by themthe
Teachers' Retirement and Disability Fund, the Pension and Retirement Fund of the
Philippine Health Service, and the Pension and Retirement Fund of the Philippine
Constabularycome from two principal sources, to wit: (1) the deductions of 3 per cent or 4
per cent from the monthly salaries of the government employees affected, and (2) the
contributions of the Government equal or less than the amount deducted from the salaries
of the employees. The payment of a pension from the funds thus raised is considered by Act
No. 4151 as a gratuity which cannot be enjoyed concurrently with the benefits granted
under Act No. 4151.
"Is the Government less liberal or gratuitous towards the employees in creating the
Government Service Insurance Fund under Commonwealth Act No. 186 than it was in
creating the pension funds under Acts Nos. 1638, 3050, and 3173? Under Commonwealth
Act No. 186, the Government Service Insurance Fund comes also from two principal sources,
to wit: (1) deductions of 3 per cent or 5 per cent from the salaries of the officers or
employees affected, and (2) the contribution of the Government equal to the deductions
made on the salaries of the Government employees.
"Inasmuch as the gratuity or liberality of the government to its employees must
necessarily be measured by the financial sacrifice that it makes for their welfare, and it
appearing that the financial sacrifice of the Government under Commonwealth Act No. 186
for the benefits of its employees is similar to, if not the same as, those under Acts Nos. 1638,
3050, and 3173, it seems inevitable that Commonwealth Act No. 186 should also be
considered as a gratuity act for the purposes of the prohibition in section 2 of Act No. 4151.
"Besides, as may be seen from section 3 of Commonwealth Act No. 186, the provisions of
Commonwealth Act No. 186 were precisely intended to take the place of or to substitute the
provisions of Acts Nos. 3050, 3173, and 1638. This view is borne out by the legislative
history of Commonwealth Act No. 186. (Seethe debates on Oct. 29, 1936, of the National
Assembly on Bill No. 2373, which later became Com. Act No. 186.) If a person who enjoys
the benefits granted by Act No. 4151 is not allowed to enjoy concurrently the benefits
originally granted under Acts Nos. 3050, 3173, and 1638, such person should not also be
allowed to enjoy the benefits granted
207
by Commonwealth Act No. 186, which is the substitute of the three aforesaid pension acts.
* * * * * * *
"But the question of whether the insurance under Commonwealth Act No. 186 is a
contract or not seems to be immaterial in this case. Gratuity or liberality is not inconsistent
with the existence of a contract. Under our laws, donation is a contract (arts. 1254, 1261,
1274, Civ. Code; 5 Manresa C. C., pp. 65-66, 70-71) and yet donation is being used as a
means of bestowing a bounty, gratuity or any other form of liberality.
"It must be noted, in this connection, that the benefit granted under Act No. 3050,
creating the Teachers' Retirement and Disability Fund, was also in the form of an
insurance, as may be seen from section 3 thereof which says: 'All eligible persons shall be
automatically insured * * *'. However, the fact that the benefit granted under Act No. 3050
was also in the form of insurance did not prevent Act No. 4151 from considering Act No.
3050, a gratuity act. Notwithstanding the compulsory contribution or deduction from the
salaries of the teachers, the Teachers' Retirement and Disability Fund has always been
regarded as a gratuity act (see Alano vs. Florido et al., 34 Off. Gaz., 997)."
In favor of his family, the majority of this Court, in the year 1947, completely
reverses the foregoing pronouncements, by upholding these two propositions: (1)
The Teachers' Retirement and Disability Fund, and the Funds of the Philippine
Health Service and of the Philippine Constabulary which were substituted by
Government Service Insurance System gave the teachers and officers no gratuities,
but rights. (2) The Government Service Insurance System has no gratuitous
character, and the policy issued by it is a contract, like any other insurance policy.
The first proposition is contradicted by the Legislature, that in sec. 4 of Act No.
4051 calls the benefit derived from the said pension systems a "gratuity." And, mark
it well, we are interpreting here what the Philippine Congress meant by the words
"no other gratuity" in Commonwealth Act No. 708. That those systems did not
create "rights" but established a system to regulate the Government liberality to the
offices affected, is palpably shown by the fact that they were liquidated by
subsequent enactment (Com-
208
monwealth Acts Nos. 187, 188 and 189) abolition which the Legislature could not
have ordered, had they accorded rights, and no gratuities, to the respective
employees,
The majority gives the ruling in Derkum vs. Pension and Investment Board, 62
Phil,, 171, a wider scope thanit originally had. The Court merely said that when a
teacher is retired after completing the legal requirements he acquires a right to his
pension. The court did not hold that a teacher had a right to the system of
pensions even beforehe is retired, in such a way that the Legislature may not, before
he retires, amend the law without his consent.
The second proposition forgets that the very Government Service Insurance Act
provides it shall not be governed by the Insurance Act. (Section 25, Commonwealth
Act No. 186.) The mere fact that the statute calls the policy a contract is not
incompatible with its being an act of governmental liberality, because a donation
may also be a contract as pointed out in the opinion of the Secretary of Justice. And
I doubt whether the Court foresees, and approves, the resulting inference that,
being a part of the "contract", the Government Service Insurance Act may no longer
be modified without the employee's consent, What effect this holding will have upon
the People's money is hard to foretell.
But granting that the policy on the life of the deceased was in every sense an
insurance contract, the unsurmountable difficulty which the majority overlooked is
the circumstance that no premiums were paid on the policy from January, 1942 to
May, 1942. Non-payment of premiums is defense to a policy. And the Government
Service Insurance System did not exist, or was suspended, if you please, in 1942,
1943, etc. For these reasons, claims against the System for casualties occurring
during the Japanese occupation were unenforceable; so much so that the
Congress saw fit lo approve, after the liberation, Commonwealth Act No. 706
providing that "each and every life
209
insurance policy issued by the Government Service Insurance System to its
members which was in force as of December thirty-first nineteen hundred and forty-
one, is hereby considered and declared in force notwithstanding the nonpayment of
premiums, and any policy which matured by death or otherwise shall become
payable to the insured or his beneficiaries". Which makes it crystal clear that if the
deceased Abad Santos or his beneficiaries can now receive anything under the
policy, it is through the liberality or largesse of Congress in passing Act No. 706.
Need it be demonstrated that any payment on the policy would now be a gratuity?
It is markworthy that at the time Commonwealth Act No. 708 was approved, the
Congress had just enacted Commonwealth Act No. 706 generously directing
payment of policies of the Government Insurance System notwithstanding the non-
payment of premiums.' In view thereof, is it reasonable to suppose that Congress in
ordering that "no other gratuity shall be paid" to Abad Santos entirely forgot the
policy necessarily connected with his death of which it took official cognizance?
Let it not be argued that there could be no default in the payment of premiums
because the salary of the deceased at that time was automatically applied to it. The
fact is that there was no salary at that time. And no law, so far, has recognized the
right to salary during the occupation of the personnel belonging to the Executive
and Judicial branches. And there is the unavoidable inference from Commonwealth
Act No. 706 that for non-payment of premiums the policies were annulled.
And it would be playing with words, amounting to judicial quibbling, to declare
that as the policy is to be paid to herein petitioner, no gratuity is thereby given to
the late, Chief Justice of the Supreme Court; for in the eyes of Congress evidently
the herein petitioner was and is the representative of the deceased. The Congress
could not accurately say in the law that "no other gratuity shall be paid to
her", because having had no connection with the
210
Government she was not supposed to be entitled to other Government gratuities.
It should be observed that counsel for petitioner, impliedly confesses to
misgivings about the non-gratuitous character of the policy, when he pleads for "At
least onehalf of the face value of the policy" representing the portion thereof
purchased with the premiums taken out of the salary of the deceased.
Precisely, the deductions f from the salary of the deceased should in my opinion
be handed to the petitioner. These are my reasons:
It is generally known that the Government Service Insurance System was
established by the government to substitute different pension systems previously
operating for the benefit of special classes of public servants, like the Teachers'
Retirement and Disability Fund, the Pension and Retirement Fund of the
Philippine Health Service and the Pension and Retirement Fund of the Philippine
Constabulary under Acts 3050, 3173, and 1638, respectively, and to extend the
beneficial effects of pension to all employees of all the branches of the Government.
Incidentally, it may be remarked that the power to rewardin the form of
pensionsmeritorious public service with a view to promoting loyalty and efficiency,
has long been recognized as one of the attributes of organized government. (Ann.
Cases, 1913B, p. 952.)
The funds of these pre-existing pension systems came principally from two
sources, namely: the deductions of 3 per cent or 4 per cent from the monthly salaries
of the employees affiliated to the system, and the periodical contributions of the
Commonwealth equal to the amounts so deducted. The nature of these special funds
came up for determination before us in several cases. In Derkum vs.Pension and
Investment Board, 62 Phil., 171, this Court expressly held that the pension under
the Teachers' Retirement and Disability Fund (Act 3050) was not a mere
gratuity, and refused to follow the California decisions to the contrary, interpreting
similar statutes there. In Alano
211
vs. Florido and Tabien, 61 Phil., 303, this Court reiterated the idea that the
pensions received by retired and disabled teachers were partly their
savings (deductions from salary) and partly aid or donation by the
Government(contribution). Applying the above doctrines, it would seem safe to rule
that the funds of the government service insurance system are partly the product of
the savings of the government employee (insured), and partly the donations given
by the State.
At this point, we may advert to a portion of the opinion of the Secretary of Justice
quoted in respondents' brief:
"Another reason in support of the conclusion that the benefits granted under
Commonwealth Act No. 186 is a 'gratuity,' is the fact that the employees of the Government
do not contribute anything to the Government Service Insurance Fund created under
Commonwealth Act No. 186. Both the 3 per cent or 5 per cent deductions made on the
salaries of the government employees every month and the contribution of the Government
actually belong to the Government so that the entire consideration for the insurance of the
membership insurance under Commonwealth Act No. 186 is purely a liberality of the
Government. (See Pennie vs. Reis, 132 U.S., S., 464, 33 L. ed., 426; 10 Sup. Ct. Rep., 149;
Op. Atty. Gen. No. 33, s. 1938.) "
It will be observed that the fundamental reasoning of the Pennie vs. Reis decision
and others of similar tenor, is that contributions made by the officer ostensibly
taken from his salary are not, and have never been, his salary, because the law in
effect deducted from his emoluments the 2 per cent or 3 per cent required for his
premiums, and made it a part of the Government Service Insurance System. It is
significant, however, that although the theory may be conceded, for purposes of
argument only, in the matter of other employees, still it must be remembered that
when Commonwealth Act No. 186 was approved (Nov. 14, 1936) and the policy
issued, Jose Abad Santos was then actually an Associate Justice (see Vol. 63, Phil.
Reports), his salary was fixed by law, and could not, by an act of the Legislature, be
validly diminished at all without his consent during his continuance in office.
212
(Section 9, Art. VII of the Constitution.) In allowing, therefore, deductions from his
salary for the payment of premiums, the element of contract or voluntariness on his
part may not be ignored. Consequently, the ratio decidendi of those cases holding
that pension retirement or insurance funds are mere gratuities which the
government may at any time withhold or reduce does not, and should not, apply to
his case.
It seems apparent that in establishing the Government Service Insurance
System, the Commonwealth never intended to cut off the employees' rights to the
amounts deducted from his salary to pay the premiums of the policy issued to him.
This is to be inferred from the provision that upon his dismissal for cause from the
Government Service, he shall be paid one-half of the cash surrender value. And in
the event he is separated for any other cause, he may collect the whole cash
surrender value of the policy, or continue the policy by paying the full premiums
thereof. (Section 9, Commonwealth Act No. 186.) These provisions are inconsistent
with the idea that all the funds, or any amounts due the employee under the
Government Service Insurance System, are entirely a gratuity, for it is
inconceivable that a dismissed employee for cause, should be given a gratuity.
Further corroboration of this view may be obtained from the provisions of Act No.
4151, section 2, the pertinent portions of which read as follows:
"If an officer or employee separated or retired under the provisions of this Act is entitled to
the benefits of Act No. 2589, as amended, * * * he shall be granted such gratuity, and the
amounts deducted from his salary as contribution to the Teachers' Retirement and
Disability Fund, the Pension and Retirement Fund of the Philippine Health Service or the
Pension and Retirement Fund of the Philippine Constabulary, or the Retirement Fund of
the University of the Philippines, as the case may be, shall be refunded to him, * * *."
(Italics ours.)
The reservation expressly made therein, referring to the several funds which have
merged into the Government
213
Service Insurance System, plainly indicate that the deductions made from salaries
of the employees for such funds (now the employees insured under the government
service insurance system) are definitely earmarked as their salaries or
contributions to the Service, which the government never considered as a part of the
general f funds which it may dispose at any time, or as a gratuity which may be
withheld at its pleasure.
Once it is conceded that the portions deducted from the salary of the late Chief
Justice were his ownhis savingsthe consequence is unavoidable that they are
not gratuities, and should be handed to his heirs, notwithstanding the last proviso
of Commonwealth Act No. 708.
The power of the Government to cancel, and the cancellation of the policy is not
questioned here. But did it mean to forfeit the premiums paid too? That is the point.
It is hard to believe that our government, by the approval of Commonwealth Act No.
708 intended to give the family of the deceased patriot a smaller compensation than
he would otherwise have earned under our laws. The deceased was entitled to the
benefits of the retirement act, namely, two years' compensation at the highest
salary received. That is P40,000. He was also entitled to vacation leave, which may
amount to one year (P15,000). Therefore, without Commonwealth Act No. 708, he
might have been entitled to a greater sum of money than the sum of P48,000
awarded to his heirs. In fact, if he had been retired under the retirement act and
gotten his vacation leave privileges, he would still be entitled to a return of the
contributions he had made to the funds of the government service insurance system.
In fairness to the respondent Auditor-General, it must be explained that he has
not been asked specifically by petitioner to return to her the premiums paid or
deducted from the salary of her late husband. Consequently his ruling did not
expressly take up this point. However, considering that it was within the general
issue, and that it is for the best interests of the parties concerned that
214
People vs. Solon
the point be promptly settled, the Court may pass definitely on the matter in this
proceeding.
Wherefore, I vote to modify the appealed ruling by allowing the reimbursement
to the petitioner of all the amounts deducted from the salary of the deceased, Jose
Abad Santos, for premiums upon the policies issued to him by the Government
Service Insurance System. Without costs.
FERIA, J.:
I concur in this dissenting opinion.

PADILLA, J.:
I concur.
Se revoca la, decision del Auditor General.
____________
EN BANC
G.R. No. 109976 April 26, 2005
PHILIPPINE NATIONAL OIL COMPANY, Petitioner,

vs.
THE HON. COURT OF APPEALS, THE COMMISSIONER OF INTERNAL REVENUE and TIRSO
SAVELLANO,Respondents.
x--------------------x
G.R. No. 112800 April 26, 2005
PHILIPPINE NATIONAL BANK, Petitioner,

vs.
THE HON. COURT OF APPEALS, COURT OF TAX APPEALS, TIRSO B. SAVELLANO and COMMISSIONER OF
INTERNAL REVENUE, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a consolidation of two Petitions for Review on Certiorari filed by the Philippine National Oil
Company (PNOC)1 and the Philippine National Bank (PNB),<2 assailing the decisions of the Court of
Appeals in CA-G.R. SP No. 295833 and CA-G.R. SP No. 29526,4 respectively, which both affirmed the
decision of the Court of Tax Appeals (CTA) in CTA Case No. 4249.5
The Petitions before this Court originated from a sworn statement submitted by private respondent
Tirso B. Savellano (Savellano) to the Bureau of Internal Revenue (BIR) on 24 June 1986. Through his
sworn statement, private respondent Savellano informed the BIR that PNB had failed to withhold the
15% final tax on interest earnings and/or yields from the money placements of PNOC with the said bank,
in violation of Presidential Decree (P.D.) No. 1931. P.D. No. 1931, which took effect on 11 June 1984,
withdrew all tax exemptions of government-owned and controlled corporations.
In a letter, dated 08 August 1986, the BIR requested PNOC to settle its liability for taxes on the interests
earned by its money placements with PNB and which PNB did not withhold.6 PNOC wrote the BIR on 25
September 1986, and made an offer to compromise its tax liability, which it estimated to be in the sum
of P304,419,396.83, excluding interest and surcharges, as of 31 July 1986. PNOC proposed to set-off its
tax liability against a claim for tax refund/credit of the National Power Corporation (NAPOCOR), then
pending with the BIR, in the amount of P335,259,450.21. The amount of the claim for tax refund/credit
was supposedly a receivable account of PNOC from NAPOCOR.7
On 08 October 1986, the BIR sent a demand letter to PNB, as withholding agent, for the payment of the
final tax on the interest earnings and/or yields from PNOC's money placements with the bank, from 15
October 1984 to 15 October 1986, in the total amount of P376,301,133.33.8 On the same date, the BIR
also mailed a letter to PNOC informing it of the demand letter sent to PNB.9
PNOC, in another letter, dated 14 October 1986, reiterated its proposal to settle its tax liability through
the set-off of the said tax liability against NAPOCOR'S pending claim for tax refund/credit.10 The BIR
replied on 11 November 1986 that the proposal for set-off was premature since NAPOCOR's claim was
still under process. Once more, BIR requested PNOC to settle its tax liability in the total amount
of P385,961,580.82, consisting of P303,343,765.32 final tax, plus P82,617,815.50 interest computed
until 15 November 1986.11
On 09 June 1987, PNOC made another offer to the BIR to settle its tax liability. This time, however,
PNOC proposed a compromise by paying P91,003,129.89, representing 30% of the P303,343,766.29
basic tax, in accordance with the provisions of Executive Order (E.O.) No. 44.12
Then BIR Commissioner Bienvenido A. Tan, in a letter, dated 22 June 1987, accepted the
compromise. The BIR received a total tax payment on the interest earnings and/or yields from PNOC's
money placements with PNB in the amount of P93,955,479.12, broken down as follows:
Previous payment made by PNB P 2,952,349.23
Add: Payment made by PNOC pursuant to the P 91,003,129.89

compromise agreement of June 22, 1987
Total tax payment P 93,955,479.1213
Private respondent Savellano, through four installments, was paid the informer's reward in the total
amount of P14,093,321.89, representing 15% of the P93,955,479.12 tax collected by the BIR from PNOC
and PNB. He received the last installment on 01 December 1987.14
On 07 January 1988, private respondent Savellano, through his legal counsel, wrote the BIR to demand
payment of the balance of his informer's reward, computed as follows:
BIR tax assessment P 385,961,580.82
Final tax rate 0.15
Informer's reward due (BIR deficiency tax P 57,894,237.12

assessment x Final tax rate)
Less: Payment received by private respondent P 14,093,321.89

Savellano
Outstanding balance P 43,800,915.2515

BIR Commissioner Tan replied through a letter, dated 08 March 1988, that private respondent Savellano
was already fully paid the informer's reward equivalent to 15% of the amount of tax actually collected
by the BIR pursuant to its compromise agreement with PNOC. BIR Commissioner Tan further explained
that the compromise was in accordance with the provisions of E.O. No. 44, Revenue Memorandum
Order (RMO) No. 39-86, and RMO No. 4-87.16
Private respondent Savellano submitted another letter, dated 24 March 1988, to BIR Commissioner Tan,
seeking reconsideration of his decision to compromise the tax liability of PNOC. In the same letter,
private respondent Savellano questioned the legality of the compromise agreement entered into by the
BIR and PNOC and claimed that the tax liability should have been collected in full.17
On 08 April 1988, while the aforesaid Motion for Reconsideration was still pending with the BIR, private
respondent Savellano filed a Petition for Review ad cautelam with the CTA, docketed as CTA Case No.
4249. He claimed therein that BIR Commissioner Tan acted "with grave abuse of discretion and/or
whimsical exercise of jurisdiction" in entering into a compromise agreement that resulted in "a gross
and unconscionable diminution" of his reward. Private respondent Savellano prayed for the
enforcement and collection of the total tax assessment against taxpayer PNOC and/or withholding agent
PNB; and the payment to him by the BIR Commissioner of the 15% informer's reward on the total tax
collected.18 He would later amend his Petition to implead PNOC and PNB as necessary and indispensable
parties since they were parties to the compromise agreement.19
In his Answer filed with the CTA, BIR Commissioner Tan asserted that the Petition stated no cause of
action against him, and that private respondent Savellano was already paid the informer's reward due
him. Alleging that the Petition was baseless and malicious, BIR Commissioner Tan filed a counterclaim
for exemplary damages against private respondent Savellano.20
PNOC and PNB filed separate Motions to Dismiss, both arguing that the CTA lacked jurisdiction to decide
the case.21 In its Resolution, dated 28 November 1988, the CTA denied the Motions to Dismiss since the
question of lack of jurisdiction and/or cause of action do not appear to be indubitable.22
After their Motions to Dismiss were denied by the CTA, PNOC and PNB filed their respective Answers to
the amended Petition. PNOC averred, among other things, that (1) it had no privity with private
respondent Savellano; (2) the BIR Commissioner's discretionary act in entering into the compromise
agreement had legal basis under E.O. No. 44 and RMO No. 39-86 and RMO No. 4-87; and (3) the CTA had
no jurisdiction to resolve the case against it.23On the other hand, PNB asserted that (1) the CTA lacked
jurisdiction over the case; and (2) the BIR Commissioner's decision to accept the compromise was
discretionary on his part and, therefore, cannot be reviewed or interfered with by the courts.24 PNOC
and PNB later filed their amended Answer invoking an opinion of the Commission on Audit (COA)
disallowing the payment by the BIR of informer's reward to private respondent Savellano.25
The CTA, thereafter, ordered the parties to submit their evidence,26 to be followed by their respective
Memoranda.27
On 23 November 1990, private respondent Savellano, filed a Manifestation with Motion for Suspension
of Proceedings, claiming that his pending Motion for Reconsideration with the BIR Commissioner may
soon be resolved.28 Both PNOC and PNB opposed the said Motion.29
Subsequently, the new BIR Commissioner, Jose U. Ong, in a letter to PNB, dated 16 January 1991,
demanded that PNB pay deficiency withholding tax on the interest earnings and/or yields from PNOC's
money placements, in the amount of P294,958,450.73, computed as follows:
Withholding tax, plus interest under the letter of P 385,961,580.82

demand dated November 11, 1986
Less: Amount paid under E.O. No. 44 P 91,003,129.89
Amount still due and collectible P 294,958,450.7330
This BIR letter was received by PNB on 06 February 1991,31 and was protested by it through a letter,
dated 11 April 1991.32 The BIR denied PNB's protest on the ground that it was filed out of time and, thus,
the assessment had already become final.33
Private respondent Savellano, on 22 February 1991, filed an Omnibus Motion moving to withdraw his
previous Motion for Suspension of Proceeding since BIR Commissioner Ong had finally resolved his
Motion for Reconsideration, and submitting by way of supplemental offer of evidence (1) the letter of
BIR Commissioner Ong, dated 13 February 1991, informing private respondent Savellano of the action
on his Motion for Reconsideration; and (2) the demand-letter of BIR Commissioner Ong to PNB, dated
16 January 1991.34
Despite the oppositions of PNOC and PNB, the CTA, in a Resolution, dated 02 May 1991, resolved to
allow private respondent Savellano to withdraw his previous Motion for Suspension of Proceeding and
to admit the supplementary evidence being offered by the same party.35
In its Order, dated 03 June 1991, the CTA considered the case submitted for decision as of the following
day, 04 June 1991.36
On 11 June 1991, PNB appealed to the Department of Justice (DOJ) the BIR assessment, dated 16
January 1991, for deficiency withholding tax in the sum of P294,958,450.73. PNB alleged that its appeal
to the DOJ was sanctioned under P.D. No. 242, which provided for the administrative settlement of
disputes between government offices, agencies, and instrumentalities, including government-owned
and controlled corporations.37
Three days later, on 14 June 1991, PNB filed a Motion to Suspend Proceedings before the CTA since it
had a pending appeal before the DOJ.38 On 04 July 1991, PNB filed with the CTA a Motion for
Reconsideration of its Order, dated 03 June 1991, submitting the case for decision as of 04 June 1991,
and prayed that the CTA hold its resolution of the case in view of PNB's appeal pending before the
DOJ.39
On 17 July 1991, PNB filed a Motion to Suspend the Collection of Tax by the BIR. It alleged that despite
its request for reconsideration of the deficiency withholding tax assessment, dated 16 January 1991, BIR
Commissioner Ong sent another letter, dated 23 April 1991, demanding payment of
the P294,958,450.73 deficiency withholding tax on the interest earnings and/or yields from PNOC's
money placements. The same letter informed PNB that this was the BIR Commissioner's final decision
on the matter and that the BIR Commissioner was set to issue a warrant of distraint and/or levy against
PNB's deposits with the Central Bank of the Philippines. PNB further alleged that the levy and distraint
of PNB's deposits, unless restrained by the CTA, would cause great and irreparable prejudice not only to
PNB, a government-owned and controlled corporation, but also to the Government itself.40
Pursuant to the Order of the CTA, during the hearing on 19 July 1991,41 the parties submitted their
respective Memoranda on PNB's Motion to Suspend Proceedings.42
On 20 September 1991, private respondent Savellano filed another Omnibus Motion calling the
attention of the CTA to the fact that the BIR already issued, on 12 August 1991, a warrant of
garnishment addressed to the Central Bank Governor and against PNB. In compliance with the said
warrant, the Central Bank issued, on 23 August 1991, a debit advice against the demand deposit account
of PNB with the Central Bank for the amount of P294,958,450.73, with a corresponding transfer of the
same amount to the demand deposit-in-trust of BIR with the Central Bank. Since the assessment had
already been enforced, PNB's Motion to Suspend Proceedings became moot and academic. Private
respondent Savellano, thus, moved for the denial of PNB's Motion to Suspend Proceedings and for an
order requiring BIR to deposit with the CTA the amount of P44,243,767.00 as his informer's reward,
representing 15% of the deficiency withholding tax collected.43
Both PNOC and PNB opposed private respondent Savellano's Omnibus Motion, dated 20 September
1991, arguing that the DOJ already ordered the suspension of the collection of the tax deficiency. There
was therefore no basis for private respondent Savellano's Motion as the same was premised on the
erroneous assumption that the tax deficiency had been collected. When the DOJ denied the BIR
Commissioner's Motion to Dismiss and required him to file his answer, the DOJ assumed jurisdiction
over PNB's appeal, and the CTA should first suspend its proceedings to give the DOJ the opportunity to
decide the validity and propriety of the tax assessment against PNB.44
The CTA, on 28 May 1992, rendered its decision, wherein it upheld its jurisdiction and disposed of the
case as follows:
WHEREFORE, judgment is rendered declaring the COMPROMISE AGREEMENT between the Bureau of
Internal Revenue, on the one hand, and the Philippine National Oil Company and Philippine National
Bank, on the other, as WITHOUT FORCE AND EFFECT;
The Commissioner of Internal Revenue is hereby ordered to ENFORCE the ASSESSMENT of January 16,
1991 against Philippine National Bank which has become final and unappealable by collecting from
Philippine National Bank the deficiency withholding tax, plus interest totalling (sic) P294,958,450.73;
Petitioner may be paid, upon collection of the deficiency withholding tax, the balance of his entitlement
to informer's reward based on fifteen percent (15%) of the deficiency withholding total tax collected in
this case or P44,243.767.00 subject to existing rules and regulations governing payment of reward to
informers.45
In a Resolution, dated 16 November 1992, the CTA denied the Motions for Reconsideration filed by
PNOC and PNB since they substantially raised the same issues in their previous pleadings and which had
already been passed upon and resolved adversely against them.46
PNOC and PNB filed separate appeals with the Court of Appeals seeking the reversal of the CTA decision
in CTA Case No. 4249, dated 28 May 1992, and the CTA Resolution in the same case, dated 16 November
1992. PNOC's appeal was docketed as CA-G.R. SP No. 29583, while PNB's appeal was CA-G.R. SP No.
29526. In both cases, the Court of Appeals affirmed the decision of the CTA.
In the meantime, the Central Bank again issued on 02 September 1992 a debit advice against the
demand deposit account of PNB with the Central Bank for the amount of P294,958,450.73,47 and on 15
September 1992, credited the same amount to the demand deposit account of the Treasurer of the
Republic of the Philippines.48 On 04 November 1992, the Treasurer of the Republic issued a journal
voucher transferring P294,958,450.73 to the account of the BIR.49 PNB, in turn,
debited P294,958,450.73 from the deposit account of PNOC with PNB.50
PNOC and PNB then filed separate Petitions for Review on Certiorari with this Court, praying that the
decisions of the Court of Appeals in CA-G.R. SP No. 29583 and CA-G.R. SP No. 29526, respectively, both
affirming the decision of the CTA in CTA Case No. 4249, be reversed and set aside. These two Petitions
were consolidated since they involved identical parties and factual background, and the resolution of
related, if not exactly, the same issues.
In its Petition for Review, PNOC alleged the following errors committed by the Court of Appeals in CA-
G.R. SP No. 29583:
1. The Court of Appeals erred in holding that the deficiency taxes of PNOC could not be the subject of a
compromise under Executive Order No. 44; and
2. The Court of Appeals erred in holding that Savellano is entitled to additional informer's reward.51
PNB, in its own Petition for Review, assailed the decision of the Court of Appeals in CA-G.R. SP No. 29526,
assigning the following errors:
1. Respondent Court erred in not finding that the Court of Tax Appeals lacks jurisdiction on the
controversy involving BIR and PNB (both government instrumentalities) regarding the new assessment
of BIR against PNB;
2. The respondent Court erred in not finding that the Court of Tax Appeals has no jurisdiction to
question the compromise agreement entered into by the Commissioner of Internal Revenue; and
3. The respondent Court erred in not ruling that the Commissioner of Internal Revenue cannot
unilaterally annul tax compromises validly entered into by his predecessor.52
The decisions of the Court of Appeals in CA-GR SP No. 29583 and CA-G.R. SP No. 29526, affirmed the
decision of the CTA in CTA Case No. 4249. The resolution, therefore, of the assigned errors in the Court
of Appeals' decisions essentially requires a review of the CTA decision itself.
In consolidating the present Petitions, this Court finds that PNOC and PNB are basically questioning the
(1) Jurisdiction of the CTA in CTA Case No. 4249; (2) Declaration by the CTA that the compromise
agreement was without force and effect; (3) Finding of the CTA that the deficiency withholding tax
assessment against PNB had already become final and unappealable and, thus, enforceable; and (4)
Order of the CTA directing payment of additional informer's reward to private respondent Savellano.
Jurisdiction of the CTA
A. The demand letter, dated 16 January 1991 did not constitute a new assessment against PNB.
The main argument of PNB in assailing the jurisdiction of the CTA in CTA Case No. 4249 is that the BIR
demand letter, dated 16 January 1991,53 should be considered as a new assessment against PNB. As a
new assessment, it gave rise to a new dispute and controversy solely between the BIR and PNB that
should be administratively settled or adjudicated, as provided in P.D. No. 242.
This argument is without merit. The issuance by the BIR of the demand letter, dated 16 January 1991,
was merely a development in the continuing effort of the BIR to collect the tax assessed against PNOC
and PNB way back in 1986.
BIR's first letter, dated 08 August 1986, was addressed to PNOC, requesting it to settle its tax
liability. The BIR subsequently sent another letter, dated 08 October 1986, to PNB, as withholding agent,
demanding payment of the tax it had failed to withhold on the interest earnings and/or yields from
PNOC's money placements. PNOC wrote the BIR three succeeding letters offering to compromise its tax
liability; PNB, on the other hand, did not act on the demand letter it received, dated 08 October
1986. The BIR and PNOC eventually reached a compromise agreement on 22 June 1987. Private
respondent Savellano questioned the validity of the compromise agreement because the reduced
amount of tax collected from PNOC, by virtue of the compromise agreement, also proportionately
reduced his informer's reward. Private respondent Savellano then requested the BIR Commissioner to
review and reconsider the compromise agreement. Acting on the request of private respondent
Savellano, the new BIR Commissioner declared the compromise agreement to be without basis and
issued the demand letter, dated 16 January 1991, against PNB, as the withholding agent for PNOC.
It is clear from the foregoing that the BIR demand letter, dated 16 January 1991, could not stand alone
as a new assessment. It should always be considered in the factual context summarized above.
In fact, the demand letter, dated 16 January 1991, actually referred to the withholding tax assessment
first issued in 1986 and its eventual settlement through a compromise agreement. In addition, the
computation of the deficiency withholding tax was based on the figures from the 1986 assessments
against PNOC and PNB, and BIR no longer conducted a new audit or investigation of either PNOC and
PNB before it issued the demand letter on 16 January 1991.
These constant references to past events and circumstances demonstrate that the demand letter, dated
16 January 1991, was not a new assessment, but rather, the latest action taken by the BIR to collect on
the tax assessments issued against PNOC and PNB in 1986.
PNB argues that the demand letter, dated 16 January 1991, introduced a new controversy. We see it
differently as the said demand letter presented the resolution by BIR Commissioner Ong of the previous
controversy involving the compromise of the 1986 tax assessments. BIR Commissioner Ong explicitly
declared therein that the compromise agreement was without legal basis, and requested PNB, as the
withholding agent, to pay the amount of withholding tax still due.
B. The CTA correctly retained jurisdiction over CTA Case No. 4249 by virtue of Republic Act No. 1125.
Having established that the BIR demand letter, dated 16 January 1991, did not constitute a new
assessment, then, there could be no basis for PNB's claim that any dispute arising from the new
assessment should only be between BIR and PNB.
Still proceeding from the argument that there was a new dispute between PNB and BIR, PNB sought the
suspension of the proceedings in CTA Case No. 4249, after it contested the deficiency withholding tax
assessment against it and the demand for payment thereof before the DOJ, pursuant to P.D. No.
242. The CTA, however, correctly sustained its jurisdiction and continued the proceedings in CTA Case
No. 4249; and, in effect, rejected DOJ's claim of jurisdiction to administratively settle or adjudicate BIR's
assessment against PNB.
The CTA assumed jurisdiction over the Petition for Review filed by private respondent Savellano based
on the following provision of Rep. Act No. 1125, the Act creating the Court of Tax Appeals:
SECTION 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
review by appeal, as herein provided -
(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other law or part of law administered by the
Bureau of Internal Revenue; . . . (Underscoring ours.)
In his Petition before the CTA, private respondent Savellano requested a review of the decisions of then
BIR Commissioner Tan to enter into a compromise agreement with PNOC and to reject his claim for
additional informer's reward. He submitted before the CTA questions of law involving the interpretation
and application of (1) E.O. No. 44, and its implementing rules and regulations, which authorized the BIR
Commissioner to compromise delinquent accounts and disputed assessments pending as of 31
December 1985; and (2) Section 316(1) of the National Internal Revenue Code of 1977 (NIRC of 1977), as
amended, which granted to the informer a reward equivalent to 15% of the actual amount recovered or
collected by the BIR.54 These should undoubtedly be considered as matters arising from the NIRC and
other laws being administered by the BIR, thus, appealable to the CTA under Section 7(1) of Rep. Act No.
1125.
PNB, however, insists on the jurisdiction of the DOJ over its appeal of the deficiency withholding tax
assessment by virtue of P.D. No. 242. Provisions on jurisdiction of P.D. No. 242 read:
SECTION 1. Provisions of law to the contrary notwithstanding, all disputes, claims and controversies
solely between or among the departments, bureaus, offices, agencies, and instrumentalities of the
National Government, including government-owned or controlled corporations, but excluding
constitutional offices or agencies, arising from the interpretation and application of statutes, contracts
or agreements, shall henceforth be administratively settled or adjudicated as provided
hereinafter; Provided, That this shall not apply to cases already pending in court at the time of the
effectivity of this decree.
SECTION 2. In all cases involving only questions of law, the same shall be submitted to and settled or
adjudicated by the Secretary of Justice, as Attorney General and ex officio legal adviser of all
government-owned or controlled corporations and entities, in consonance with Section 83 of the
Revised Administrative Code. His ruling or determination of the question in each case shall be
conclusive and binding upon all the parties concerned.
SECTION 3. Cases involving mixed questions of law and of fact or only factual issues shall be submitted
to and settled or adjudicated by:
(a) The Solicitor General, with respect to disputes or claims controversies between or among the
departments, bureaus, offices and other agencies of the National Government;
(b) The Government Corporate Counsel, with respect to disputes or claims or controversies between or
among government-owned or controlled corporations or entities being served by the Office of the
Government Corporate Counsel; and
(c) The Secretary of Justice, with respect to all other disputes or claims or controversies which do not
fall under the categories mentioned in paragraphs (a) and (b).
The PNB and DOJ are of the same position that P.D. No. 242, the more recent law, repealed Section 7(1)
of Rep. Act No. 1125,55 based on the pronouncement of this Court in Development Bank of the
Philippines v. Court of Appeals, et al., 56] quoted below:
The Court expresses its entire agreement with the conclusion of the Court of Appeals and the basic
premises thereof that there is an "irreconcilable repugnancybetween Section 7(2) of R.A. No. 1125
and P.D. No. 242," and hence, that the later enactment (P.D. No. 242), being the latest expression of the
legislative will, should prevail over the earlier.
In the said case, it was expressly declared that P.D. No. 242 repealed Section 7(2) of Rep. Act No. 1125,
which provides for the exclusive appellate jurisdiction of the CTA over decisions of the Commissioner of
Customs. PNB contends that P.D. No. 242 should be deemed to have likewise repealed Section 7(1) of
Rep. Act No. 1125, which provide for the exclusive appellate jurisdiction of the CTA over decisions of the
BIR Commissioner.57
After re-examining the provisions on jurisdiction of Rep. Act No. 1125 and P.D. No. 242, this Court finds
itself in disagreement with the pronouncement made in Development Bank of the Philippines v. Court of
Appeals, et al.,58and refers to the earlier case of Lichauco & Company, Inc. v. Apostol, et al.,59 for the
guidelines in determining the relation between the two statutes in question, to wit:
The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of
later date clearly reveals an intention on the part of the law making power to abrogate the prior law,
this intention must be given effect; but there must always be a sufficient revelation of this intention, and
it has become an unbending rule of statutory construction that the intention to repeal a former law will
not be imputed to the Legislature when it appears that the two statutes, or provisions, with reference to
which the question arises bear to each other the relation of general to special. (Underscoring ours.)
When there appears to be an inconsistency or conflict between two statutes and one of the statutes is a
general law, while the other is a special law, then repeal by implication is not the primary rule
applicable. The following rule should principally govern instead:
Specific legislation upon a particular subject is not affected by a general law upon the same subject
unless it clearly appears that the provisions of the two laws are so repugnant that the legislators must
have intended by the later to modify or repeal the earlier legislation. The special act and the general law
must stand together, the one as the law of the particular subject and the other as the general law of the
land. (Ex Parte United States, 226 U. S., 420; 57 L. ed., 281; Ex Parte Crow Dog, 109 U. S., 556; 27 L. ed.,
1030; Partee vs. St. Louis & S. F. R. Co., 204 Fed. Rep., 970.)
Where there are two acts or provisions, one of which is special and particular, and certainly includes the
matter in question, and the other general, which, if standing alone, would include the same matter and
thus conflict with the special act or provision, the special must be taken as intended to constitute an
exception to the general act or provision, especially when such general and special acts or provisions are
contemporaneous, as the Legislature is not to be presumed to have intended a conflict. (Crane v. Reeder
and Reeder, 22 Mich., 322, 334; University of Utah vs. Richards, 77 Am. St. Rep., 928.)60
It has, thus, become an established rule of statutory construction that between a general law and a
special law, the special law prevails Generalia specialibus non derogant.61
Sustained herein is the contention of private respondent Savellano that P.D. No. 242 is a general law
that deals with administrative settlement or adjudication of disputes, claims and controversies between
or among government offices, agencies and instrumentalities, including government-owned or
controlled corporations. Its coverage is broad and sweeping, encompassing all disputes, claims and
controversies. It has been incorporated as Chapter 14, Book IV of E.O. No. 292, otherwise known as the
Revised Administrative Code of the Philippines.62 On the other hand, Rep. Act No. 1125 is a special
law63 dealing with a specific subject matter the creation of the CTA, which shall exercise exclusive
appellate jurisdiction over the tax disputes and controversies enumerated therein.
Following the rule on statutory construction involving a general and a special law previously discussed,
then P.D. No. 242 should not affect Rep. Act No. 1125. Rep. Act No. 1125, specifically Section 7 thereof
on the jurisdiction of the CTA, constitutes an exception to P.D. No. 242. Disputes, claims and
controversies, falling under Section 7 of Rep. Act No. 1125, even though solely among government
offices, agencies, and instrumentalities, including government-owned and controlled corporations,
remain in the exclusive appellate jurisdiction of the CTA. Such a construction resolves the alleged
inconsistency or conflict between the two statutes, and the fact that P.D. No. 242 is the more recent law
is no longer significant.
Even if, for the sake of argument, that P.D. No. 242 should prevail over Rep. Act No. 1125, the present
dispute would still not be covered by P.D. No. 242. Section 1 of P.D. No. 242 explicitly provides that only
disputes, claims and controversies solely between or among departments, bureaus, offices, agencies,
and instrumentalities of the National Government, including constitutional offices or agencies, as well as
government-owned and controlled corporations, shall be administratively settled or adjudicated. While
the BIR is obviously a government bureau, and both PNOC and PNB are government-owned and
controlled corporations, respondent Savellano is a private citizen. His standing in the controversy could
not be lightly brushed aside. It was private respondent Savellano who gave the BIR the information that
resulted in the investigation of PNOC and PNB; who requested the BIR Commissioner to reconsider the
compromise agreement in question; and who initiated CTA Case No. 4249 by filing a Petition for Review.
In Bay View Hotel, Inc. v. Manila Hotel Workers' Union-PTGWO, et al.,64] this Court upheld the jurisdiction
of the Court of Industrial Relations over the ordinary courts and justified its decision in the following
manner:
We are unprepared to break away from the teaching in the cases just adverted to. To draw a tenuous
jurisdictional line is to undermine stability in labor litigations. A piecemeal resort to one court and
another gives rise to multiplicity of suits. To force the employees to shuttle from one court to another
to secure full redress is a situation gravely prejudicial. The time to be lost, effort wasted, anxiety
augmented, additional expense incurred these are considerations which weigh heavily against split
jurisdiction. Indeed, it is more in keeping with orderly administration of justice that all the causes of
action here "be cognizable and heard by only one court: the Court of Industrial Relations."
The same justification is used in the present case to reject DOJ's jurisdiction over the BIR and PNB, to the
exclusion of the other parties. The rights of all four parties in CTA Case No. 4249, namely the BIR, as the
tax collector; PNOC, the taxpayer; PNB, the withholding agent; and private respondent Savellano, the
informer claiming his reward; arose from the same factual background and were so closely interrelated,
that a pronouncement as to one would definitely have repercussions on the others. The ends of justice
were best served when the CTA continued to exercise its jurisdiction over CTA Case No. 4249. The CTA,
which had assumed jurisdiction over all the parties to the controversy, could render a comprehensive
resolution of the issues raised and grant complete relief to the parties.
II
Validity of the Compromise Agreement
A. PNOC could not apply for a compromise under E.O. No. 44 because its tax liability was not a
delinquent account or a disputed assessment as of 31 December 1985.
PNOC and PNB, on different grounds, dispute the decision of the CTA in CTA Case No. 4249 declaring the
compromise agreement between BIR and PNOC without force and effect.
PNOC asserts that the compromise agreement was in accordance with E.O. No. 44, and its implementing
rules and regulations, and should be binding upon the parties thereto.
E.O. No. 44 granted the BIR Commissioner or his duly authorized representatives the power to
compromise any disputed assessment or delinquent account pending as of 31 December 1985, upon the
payment of an amount equal to 30% of the basic tax assessed; in which case, the corresponding
interests and penalties shall be condoned. E.O. No. 44 took effect on 04 September 1986 and remained
effective until 31 March 1987.
The disputed assessments or delinquent accounts that the BIR Commissioner could compromise under
E.O. No. 44 are defined under Revenue Regulation (RR) No. 17-86, as follows:
a) Delinquent account Refers to the amount of tax due on or before December 31, 1985 from a
taxpayer who failed to pay the same within the time prescribed for its payment arising from (1) a self
assessed tax, whether or not a tax return was filed, or (2) a deficiency assessment issued by the BIR
which has become final and executory.
Where no return was filed, the taxpayer shall be considered delinquent as of the time the tax on such
return was due, and in availing of the compromise, a tax return shall be filed as a basis for computing
the amount of compromise to be paid.
b) Disputed assessment refers to a tax assessment disputed or protested on or before December 31,
1985 under any of the following categories:
1) if the same is administratively protested within thirty (30) days from the date the taxpayer
received the assessment, or
2.) if the decision of the BIR on the taxpayer's administrative protest is appealed by the taxpayer
before an appropriate court.
PNOC's tax liability could not be considered a delinquent account since (1) it was not self-assessed,
because the BIR conducted an investigation and assessment of PNOC and PNB after obtaining
information regarding the non-withholding of tax from private respondent Savellano; and (2) the
demand letter, issued against it on 08 August 1986, could not have been a deficiency assessment that
became final and executory by 31 December 1985.
The dissenting opinion contends, however, that the tax liability of PNOC constitutes a self-assessed tax,
and is, therefore, a delinquent account as of 31 December 1985, qualifying for a compromise under E.O.
No. 44. It anchors its argument on the declaration made by this Court in Tupaz v. Ulep,65 that internal
revenue taxes are self-assessing.
It is not denied herein that the self-assessing system governs Philippine internal revenue taxes. The
dissenting opinion itself defines self-assessed tax as, "a tax that the taxpayer himself assesses or
computes and pays to the taxing authority." Clearly, such a system imposes upon the taxpayer the
obligation to conduct an assessment of himself so he could determine and declare the amount to be
used as tax basis, any deductions therefrom, and finally, the tax due.
E.O. No. 44 covers self-assessed tax, whether or not a tax return was filed. The phrase "whether or not
a tax return was filed" only refers to the compliance by the taxpayer with the obligation to file a return
on the dates specified by law, but it does not do away with the requisite that the tax must be self-
assessed in order for the taxpayer to avail of the compromise. The second paragraph of Section 2(a) of
RR No. 17-86 expressly commands, and still imposes upon the taxpayer, who is availing of the
compromise under E.O. No. 44, and who has not previously filed any return, the duty to conduct self-
assessment by filing a tax return that would be used as the basis for computing the amount of
compromise to be paid.
Section 2(a)(1) of RR No. 17-86 thus involves a situation wherein a taxpayer, after conducting a self-
assessment, discovers or becomes aware that he had failed to pay a tax due on or before 31 December
1985, regardless of whether he had previously filed a return to reflect such tax; voluntarily comes
forward and admits to the BIR his tax liability; and applies for a compromise thereof. In case the
taxpayer has not previously filed any return, he must fill out such a return reflecting therein his own
declaration of the taxable amount and computation of the tax due. The compromise payment shall be
computed based on the amount reflected in the tax return submitted by the taxpayer himself.
Neither PNOC nor PNB, the taxpayer and the withholding agent, respectively, conducted self-
assessment in this case. There is no showing that in the absence of the tax assessment issued by the BIR
against them, that PNOC and/or PNB would have voluntarily admitted their tax liabilities, already
amounting to P385,961,580.82, as of 15 November 1986, and would have offered to compromise the
same. In fact, both PNOC and PNB were conspicuously silent about their tax liabilities until they were
assessed thereon.
Any attempt by PNOC and PNB to assess and declare by themselves their tax liabilities had already been
overtaken by the BIR's conduct of its audit and investigation and subsequent issuance of the
assessments, dated 08 August 1986 and 08 October 1986, against PNOC and PNB, respectively. The said
tax assessments, uncontested and undisputed, presented the results of the BIR audit and investigation
and the computation of the total amount of tax liabilities of PNOC and PNB. They should be controlling
in this case, and should not be so easily and conveniently ignored and set aside. It would be a
contradiction to claim that the tax liabilities of PNOC and PNB are self-assessed and, at the same time,
BIR-assessed; when it is clear and simple that it had been the BIR that conducted the assessment and
determined the tax liabilities of PNOC and PNB.
That the BIR-assessed tax liability should be differentiated from a self-assessed one, is supported by the
provisions of RR No. 17-86 on the basis for computing the amount of compromise payment. Note that
where tax liabilities are self-assessed, the compromise payment shall be computed based on the tax
return filed by the taxpayer.66 On the other hand, where the BIR already issued an assessment, the
compromise payment shall be computed based on the tax due on the assessment notice.67
For instances where the BIR had already issued an assessment against the taxpayer, the tax liability
could still be compromised under E.O. No. 44 only if: (1) the assessment had been final and executory on
or before 31 December 1985 and, therefore, considered a delinquent account as of said date;68 or (2) the
assessment had been disputed or protested on or before 31 December 1985.69
RMO No. 39-86, which provides the guidelines for the implementation of E.O. No. 44, does mention
different types of assessments that may be compromised under said statute (i.e., jeopardy assessments,
arbitrary assessments, and tax assessments of doubtful validity). RMO No. 39-86 may not have
expressly stated any qualification for these particular types of assessments; nonetheless, E.O. No. 44
specifically refers only to assessments that were delinquent or disputed as of 31 December 1985.
E.O. No. 44 and all BIR issuances to implement said statute should be interpreted so that they are
harmonized and consistent with each other. Accordingly, this Court finds that the different types of
assessments mentioned in RMO No. 39-86 would still have to qualify as delinquent accounts or disputed
assessments as of 31 Dcember 1985, so that they could be compromised under E.O. No. 44.
The BIR had first written to PNOC on 08 August 1986, demanding payment of the income tax on the
interest earnings and/or yields from PNOC's money placements with PNB from 15 October 1984 to 15
October 1986. This demand letter could be regarded as the first assessment notice against PNOC.
Such an assessment, issued only on 08 August 1986, could not have been final and executory as of 31
December 1985 so as to constitute a delinquent account. Neither was the assessment against PNOC an
assessment that could have been disputed or protested on or before 31 December 1985, having been
issued on a later date.
Given that PNOC's tax liability did not constitute a delinquent account or a disputed assessment as of 31
December 1985, then it could not be compromised under E.O. No. 44.
The assessment against PNOC, instead, was more appropriately covered by Revenue Memorandum
Circular (RMC) No. 31-86. RMC No. 31-86 clarifies the scope of availment of the tax amnesty under E.O.
No. 4170 and compromise payments on delinquent accounts and disputed assessments under E.O. No.
44. The third paragraph of RMC No. 31-86 reads:
[T]axpayers against whom assessments had been issued from January 1 to August 21, 1986 may settle
their tax liabilities by way of compromise under Section 246 of the Tax Code as amended by paying 30%
of the basic assessment excluding surcharge, interest, penalties and other increments thereto.
The above-quoted paragraph supports the position that only assessments that were disputed or that
were final and executory by 31 December 1985 could be the subject of a compromise under E.O. No.
44. Assessments issued between 01 January to 21 August 1986 could still be compromised by payment
of 30% of the basic tax assessed, not anymore pursuant to E.O. No. 44, but pursuant to Section 246 of
the NIRC of 1977, as amended.
Section 246 of the NIRC of 1977, as amended, granted the BIR Commissioner the authority to
compromise the payment of any internal revenue tax under the following circumstances: (1) there exists
a reasonable doubt as to the validity of the claim against the taxpayer; or (2) the financial position of the
taxpayer demonstrates a clear inability to pay the assessed tax.71
There are substantial differences in circumstances under which compromises may be granted under
Section 246 of the NIRC of 1977, as amended, and E.O. No. 44. Although PNOC and PNB have
extensively argued their entitlement to compromise under E.O. No. 44, neither of them has alleged,
much less, has presented any evidence to prove that it may compromise its tax liability under Section
246 of the NIRC of 1977, as amended.
B. The tax liability of PNB as withholding agent also did not qualify for compromise under E.O. No. 44.
Before proceeding any further, this Court reconsiders the conclusion made by BIR Commissioner Ong in
his demand letter, dated 16 January 1991, that the compromise settlement executed between the BIR
and PNOC was without legal basis because withholding taxes were not actually taxes that could be
compromised, but a penalty for PNB's failure to withhold and for which it was made personally liable.
E.O. No. 44 covers disputed or delinquency cases where the person assessed was himself the taxpayer
rather than a mere agent.72 RMO No. 39-86 expressly allows a withholding agent, who failed to
withhold the required tax because of neglect, ignorance of the law, or his belief that he was not
required by law to withhold tax, to apply for a compromise settlement of his withholding tax liability
under E.O. No. 44. A withholding agent, in such a situation, may compromise the withholding tax
assessment against him precisely because he is being held directly accountable for the tax.73
RMO No. 39-86 distinguishes between the withholding agent in the foregoing situation from the
withholding agent who withheld the tax but failed to remit the amount to the Government. A
withholding agent in the latter situation is the one disqualified from applying for a compromise
settlement because he is being made accountable as an agent, who held funds in trust for the
Government.74
Both situations, however, involve withholding agents. The right to compromise under these provisions
should have been claimed by PNB, the withholding agent for PNOC. The BIR held PNB personally
accountable for its failure to withhold the tax on the interest earnings and/or yields from PNOC's money
placements with PNB. The BIR sent a demand letter, dated 08 October 1986, addressed directly to PNB,
for payment of the withholding tax assessed against it, but PNB failed to take any action on the said
demand letter. Yet, all the offers to compromise the withholding tax assessment came from PNOC and
PNOC did not claim that it made the offers to compromise on behalf of PNB.
Moreover, the general requirement of E.O. No. 44 still applies to withholding agents that the
withholding tax liability must either be a delinquent account or a disputed assessment as of 31
December 1985 to qualify for compromise settlement. The demand letter against PNB, which also
served as its assessment notice, had been issued on 08 October 1986 or two months later than
PNOC's. PNB's withholding tax liability could not be considered a delinquent account or a disputed
assessment, as defined under RR No. 17-86, for the same reasons that PNOC's tax liability did not
constitute as such. The tax liability of PNB, therefore, was also not eligible for compromise settlement
under E.O. No. 44.
C. Even assuming arguendo that PNOC and/or PNB qualified under E.O. No. 44, their application for
compromise was filed beyond the deadline.
Despite already ruling that the tax liabilities of PNOC and PNB could not be compromised under E.O. No.
44, this Court still deems it necessary to discuss the finding of the CTA that the compromise agreement
had been filed beyond the effectivity of E.O. No. 44, since the CTA made a declaration in relation thereto
that paragraph 2 of RMO No. 39-86 was null and void for unduly extending the effectivity of E.O. No. 44.
Paragraph 2 of RMO No. 39-86 provides that:
2. Period for availment. Filing of application for compromise settlement under the said law shall be
effective only until March 31, 1987. Applications filed on or before this date shall be valid even if the
payment or payments of the compromise amount shall be made after the said date, subject, however,
to the provisions of Executive Order No. 44 and its implementing Revenue Regulations No. 17-86.
It is well-settled in this jurisdiction that administrative authorities are vested with the power to make
rules and regulations because it is impracticable for the lawmakers to provide general regulations for
various and varying details of management. The interpretation given to a rule or regulation by those
charged with its execution is entitled to the greatest weight by the court construing such rule or
regulation, and such interpretation will be followed unless it appears to be clearly unreasonable or
arbitrary.75
RMO No. 39-86, particularly paragraph 2 thereof, does not appear to be unreasonable or arbitrary. It
does not unduly expand the coverage of E.O. No. 44 by merely providing that applications for
compromise filed until 31 March 1987 are still valid, even if payment of the compromised amount is
made on a later date.
It cannot be expected that the compromise allowed under E.O. No. 44 can be automatically granted
upon mere filing of the application by the taxpayer. Irrefutably, the applications would still have to be
processed by the BIR to determine compliance with the requirements of E.O. No. 44. As it is
uncontested that a taxpayer could still file an application for compromise on 31 March 1987, the very
last day of effectivity of E.O. No. 44, it would be unreasonable to expect the BIR to process and approve
the taxpayer's application within the same date considering the volume of applications filed and pending
approval, plus the other matters the BIR personnel would also have to attend to. Thus, RMO No. 39-86
merely assures the taxpayers that their applications would still be processed and could be approved on
a later date. Payment, of course, shall be made by the taxpayer only after his application had been
approved and the compromised amount had been determined.
Given that paragraph 2 of RMO No. 39-86 is valid, the next question that needs to be addressed is
whether PNOC had been able to submit an application for compromise on or before 31 March 1987 in
compliance thereof. Although the compromise agreement was executed only on 22 June 1987, PNOC is
claiming that it had already written a letter to the BIR, as early as 25 September 1986, offering to
compromise its tax liability, and that the said letter should be considered as PNOC's application for
compromise settlement.
A perusal of PNOC's letter, dated 25 September 1986, would reveal, however, that the terms of its
proposed compromise did not conform to those authorized by E.O. No. 44. PNOC did not offer to pay
outright 30% of the basic tax assessed against it as required by E.O. No. 44; and instead, made the
following offer:
(2) That PNOC be permitted to set-off its foregoing mentioned tax liability of P304,419,396.83 against
the tax refund/credit claims of the National Power Corporation (NPC) for specific taxes on fuel oil sold to
NPC totaling P335,259,450.21, which tax refunds/credits are actually receivable accounts of our
Company from NPC.76
PNOC reiterated the offer in its letter to the BIR, dated 14 October 1986.77 The BIR, in its letters to PNOC,
dated 8 October 198678 and 11 November 1986,79 consistently denied PNOC's offer because the claim for
tax refund/credit of NAPOCOR was still under process, so that the offer to set-off such claim against
PNOC's tax liability was premature.
Furthermore, E.O. No. 44 does not contemplate compromise payment by set-off of a tax liability against
a claim for tax refund/credit. Compromise under E.O. No. 44 may be availed of only in the following
circumstances:
SEC. 3. Who may avail. Any person, natural or juridical, may settle thru a compromise any delinquent
account or disputed assessment which has been due as of December 31, 1985, by paying an amount
equal to thirty percent (30%) of the basic tax assessed.
SEC. 6. Mode of Payment. Upon acceptance of the proposed compromise, the amount offered as
compromise in complete settlement of the delinquent account shall be paid immediately in cash or
manager's certified check.
Deferred or staggered payments of compromise amounts over P50,000 may be considered on a case to
case basis in accordance with the extant regulations of the Bureau upon approval of the Commissioner
of Internal Revenue, his Deputy or Assistant as delineated in their respective jurisdictions.
If the Compromise amount is not paid as required herein, the compromise agreement is automatically
nullified and the delinquent account reverted to the original amount plus the statutory increments,
which shall be collected thru the summary and/or judicial processes provided by law.
E.O. No. 44 is not for the benefit of the taxpayer alone, who can extinguish his tax liability by paying the
compromise amount equivalent to 30% of the basic tax. It also benefits the Government by making
collection of delinquent accounts and disputed assessments simpler, easier, and faster. Payment of the
compromise amount must be made immediately, in cash or in manager's check. Although deferred or
staggered payments may be allowed on a case-to-case basis, the mode of payment remains unchanged,
and must still be made either in cash or in manager's check.
PNOC's offer to set-off was obviously made to avoid actual cash-out by the company. The offer defeated
the purpose of E.O. No. 44 because it would not only delay collection, but more importantly, it would
not guarantee collection. First of all, BIR's collection was contingent on whether the claim for tax
refund/credit of NAPOCOR would be subsequently granted. Second, collection could not be made
immediately and would have to wait until the resolution of the claim for tax refund/credit of
NAPOCOR. Third, there is no proof, other than the bare allegation of PNOC, that NAPOCOR's claim for
tax refund/credit is an account receivable of PNOC. A possible dispute between NAPOCOR and PNOC as
to the proceeds of the tax refund/credit would only delay collection by the BIR even further.
It was only in its letter, dated 09 June 1987, that PNOC actually offered to compromise its tax liability in
accordance with the terms and circumstances prescribed by E.O. No. 44 and its implementing rules and
regulations, by stating that:
Consequently, we reiterate our previous request for compromise under E.O. No. 44, and convey our
preparedness to settle the subject tax assessment liability by payment of the compromise amount
of P91,003,129.89, representing thirty percent (30%) of the basic tax assessment of P303,343,766.29, in
accordance with E.O. No. 44 and its implementing BIR Revenue Memorandum Order No. 39-86.80
PNOC claimed in the same letter that it had previously requested for a compromise under the terms of
E.O. No. 44, but this Court could not find evidence of such previous request. There are stark and
substantial differences in the terms of PNOC's offer to compromise in its earlier letters, dated 25
September 1986 and 14 October 1986 (set-off of the entire amount of its tax liability against the claim
for tax refund/credit of NAPOCOR), to those in its letter, dated 09 June 1987 (payment of the
compromise amount representing 30% of the basic tax assessed against it), making it difficult for this
Court to accept that the letter of 09 June 1987 merely reiterated PNOC's offer to compromise in its
earlier letters.
This Court likewise cannot give credence to PNOC's allegation that beginning 25 September 1986, the
date of its first letter to the BIR, there were continuing negotiations between PNOC and BIR that
culminated in the compromise agreement on 22 June 1987. Aside from the exchange of letters
recounted in the preceding paragraphs, both PNOC and PNB failed to present any other proof of the
supposed negotiations.
After the BIR denied the second offer of PNOC to set-off its tax liability against the claim for tax
refund/credit of NAPOCOR in a letter, dated 11 November 1986, there is no other evidence of
subsequent communication between PNOC and the BIR. It was only after almost seven months, or on
09 June 1987, that PNOC again wrote a letter to the BIR, this time offering to pay the compromise
amount of 30% of the basic tax assessed against. This letter was already filed beyond 31 March 1987,
after the lapse of the effectivity of E.O. No. 44 and the deadline for filing applications for compromise
under the said statute.
Evidence of meetings between PNOC and the BIR, or any other form of communication, wherein the
parties presented their offer and counter-offer to the other, would have been very valuable in
explaining and supporting BIR Commissioner Tan's decision to accept PNOC's third offer to compromise
after denying the previous two. The absence of such evidence herein negates PNOC's claim of actual
negotiations with the BIR.
Therefore, even assuming arguendo that the tax liabilities of PNOC and PNB qualify as delinquent
accounts or disputed assessments as of 31 December 1985, the application for compromise filed by
PNOC on 09 June 1987, and accepted by then BIR Commissioner Tan on 22 June 1987, was still filed way
beyond 31 March 1987, the expiration date of the effectivity of E.O. No. 44 and the deadline for filing of
applications for compromise under RMO No. 39-86.
D. The BIR Commissioner's discretionary authority to enter into a compromise agreement is not absolute
and the CTA may inquire into allegations of abuse thereof.
The foregoing discussion supports the CTA's conclusion that the compromise agreement between PNOC
and the BIR was indeed without legal basis. Despite this lack of legal support for the execution of the
said compromise agreement, PNB argues that the CTA still had no jurisdiction to review and set aside
the compromise agreement. It contends that the authority to compromise is purely discretionary on the
BIR Commissioner and the courts cannot interfere with his exercise thereof.
It is generally true that purely administrative and discretionary functions may not be interfered with by
the courts; but when the exercise of such functions by the administrative officer is tainted by a failure to
abide by the command of the law, then it is incumbent on the courts to set matters right, with this Court
having the last say on the matter.81
The manner by which BIR Commissioner Tan exercised his discretionary power to enter into a
compromise was brought under the scrutiny of the CTA amidst allegations of "grave abuse of discretion
and/or whimsical exercise of jurisdiction."82 The discretionary power of the BIR Commissioner to enter
into compromises cannot be superior over the power of judicial review by the courts.
The discretionary authority to compromise granted to the BIR Commissioner is never meant to be
absolute, uncontrolled and unrestrained. No such unlimited power may be validly granted to any officer
of the government, except perhaps in cases of national emergency.83 In this case, the BIR
Commissioner's authority to compromise, whether under E.O. No. 44 or Section 246 of the NIRC of 1977,
as amended, can only be exercised under certain circumstances specifically identified in said
statutes. The BIR Commissioner would have to exercise his discretion within the parameters set by the
law, and in case he abuses his discretion, the CTA may correct such abuse if the matter is appealed to
them.84
Petitioners PNOC and PNB both contend that BIR Commissioner Tan merely exercised his authority to
enter into a compromise specially granted by E.O. No. 44. Since this Court has already made a
determination that the compromise agreement did not qualify under E.O. No. 44, BIR Commissioner
Tan's decision to agree to the compromise should have been reviewed in the light of the general
authority granted to the BIR Commissioner to compromise taxes under Section 246 of the NIRC of 1977,
as amended. Then again, petitioners PNOC and PNB failed to allege, much less present evidence, that
BIR Commissioner Tan acted in accordance with Section 246 of the NIRC of 1977, as amended, when he
entered into the compromise agreement with PNOC.
E. The CTA may set aside a compromise agreement that is contrary to law and public policy.
PNB also asserts that the CTA had no jurisdiction to set aside a compromise agreement entered into in
good faith. It relies on the decision of this Court in Republic v. Sandiganbayan85 that a compromise
agreement cannot be set aside merely because it is too one-sided. A compromise agreement should be
respected by the courts as the res judicata between the parties thereto.
This Court, though, finds that there are substantial differences in the factual background of Republic v.
Sandiganbayan and the present case.
The compromise agreement executed between the Presidential Commission on Good Government
(PCGG) and Roberto S. Benedicto in Republic v. Sandiganbayan was judicially approved by the
Sandiganbayan. The Sandiganbayan had ample opportunity to examine the validity of the compromise
agreement since two years elapsed from the time the agreement was executed up to the time it was
judicially approved. This Court even stated in the said case that, "We are not dealing with the usual
compromise agreement perfunctorily submitted to a court and approved as a matter of course. The
PCGG-Benedicto agreement was thoroughly and, at times, disputatiously discussed before the
respondent court. There could be no deception or misrepresentation foisted on either the PCGG or the
Sandiganbayan."86
In addition, the new PCGG Chairman originally prayed for the re-negotiation of the compromise
agreement so that it could be more just, fair, and equitable, an action considered by this Court as an
implied admission that the agreement was not contrary to law, public policy or morals nor was there
any circumstance which had vitiated consent.87
The above-mentioned circumstances strongly supported the validity of the compromise agreement in
Republic v. Sandiganbayan, which was why this Court refused to set it aside. Unfortunately for the
petitioners in the present case, the same cannot be said herein.
The Court of Appeals, in upholding the jurisdiction of the CTA to set aside the compromise agreement,
ruled that:
We are unable to accept petitioner's submissions. Its formulation of the issues on CIR and CTA's lack of
jurisdiction to disturb a compromise agreement presupposes a compromise agreement validly entered
into by the CIR and not, when as in this case, it was indubitably shown that the supposed compromise
agreement is without legal support. In case of arbitrary or capricious exercise by the Commissioner or if
the proceedings were fatally defective, the compromise can be attacked and reversed through the
judicial process (Meralco Securities Corporation v. Savellano, 117 SCRA 805, 812 [1982]; Sarah E. Ramsay,
et. al. v. U.S. 21 Ct. C1 443, aff'd 120 U.S. 214, 30 L. Ed. 582; Tyson v. U.S., 39 F. Supp. 135 cited in page
18 of decision) .88
Although the general rule is that compromises are to be favored, and that compromises entered into in
good faith cannot be set aside,89 this rule is not without qualification. A court may still reject a
compromise or settlement when it is repugnant to law, morals, good customs, public order, or public
policy.90
The compromise agreement between the BIR and PNOC was contrary to law having been entered into
by BIR Commissioner Tan in excess or in abuse of the authority granted to him by legislation. E.O. No.
44 and the NIRC of 1977, as amended, had identified the situations wherein the BIR Commissioner may
compromise tax liabilities, and none of these situations existed in this case.
The compromise, moreover, was contrary to public policy. The primary duty of the BIR is to collect taxes,
since taxes are the lifeblood of the Government and their prompt and certain availability are imperious
needs.91 In the present case, however, BIR Commissioner Tan, by entering into the compromise
agreement that was bereft of any legal basis, would have caused the Government to lose almost P300
million in tax revenues and would have deprived the Government of much needed monetary resources.
Allegations of good faith and previous execution of the terms of the compromise agreement on the part
of PNOC would not be enough for this Court to disregard the demands of law and public
policy. Compromise may be the favored method to settle disputes, but when it involves taxes, it may be
subject to closer scrutiny by the courts. A compromise agreement involving taxes would affect not just
the taxpayer and the BIR, but also the whole nation, the ultimate beneficiary of the tax revenues
collected.
F. The Government cannot be estopped from collecting taxes by the mistake, negligence, or omission of
its agents.
The new BIR Commissioner, Commissioner Ong, had acted well within his powers when he set aside the
compromise agreement, dated 22 June 1987, after finding that the said compromise agreement was
without legal basis. When he took over from his predecessor, there was still a pending motion for
reconsideration of the said compromise agreement, filed by private respondent Savellano on 24 March
1988. To resolve the said motion, he reviewed the compromise agreement and, thereafter, came upon
the conclusion that it did not comply with E.O. No. 44 and its implementing rules and regulations.
It had been declared by this Court in Hilado v. Collector of Internal Revenue, et al.,92 that an
administrative officer, such as the BIR Commissioner, may revoke, repeal or abrogate the acts or
previous rulings of his predecessor in office. The construction of a statute by those administering it is
not binding on their successors if, thereafter, the latter becomes satisfied that a different construction
should be given.
It is evident in this case that the new BIR Commissioner, Commissioner Ong, construed E.O. No. 44 and
its implementing rules and regulations differently from that of his predecessor, former Commissioner
Tan, which led to Commissioner Ong's revocation of the BIR approval of the compromise agreement,
dated 22 June 1987. Such a revocation was only proper considering that the former BIR Commissioner's
decision to approve the said compromise agreement was based on the erroneous construction of the
law (i.e., E.O. No. 44 and its implementing rules and regulations) and should not give rise to any vested
right on PNOC.93
Furthermore, approval of the compromise agreement and acceptance of the compromise payment by
his predecessor cannot estop BIR Commissioner Ong from setting aside the compromise agreement,
dated 22 June 1987, for lack of legal basis; and from demanding payment of the deficiency withholding
tax from PNB. As a general rule, the Government cannot be estopped from collecting taxes by the
mistake, negligence, or omission of its agents94 because:
. . . Upon taxation depends the Government ability to serve the people for whose benefit taxes are
collected. To safeguard such interest, neglect or omission of government officials entrusted with the
collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner
as private persons may be made to suffer individually on account of his own negligence, the
presumption being that they take good care of their personal affairs. This should not hold true to
government officials with respect to matters not of their own personal concern. This is the philosophy
behind the government's exception, as a general rule, from the operation of the principle of estoppel.
(Republic vs. Caballero, L-27437, September 30, 1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent
and Protective Order of the Elks, Inc. vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy
vs. Central Bank of the Philippines, L-41480, April 30, 1976, 70 SCRA 571; Balmaceda vs. Corominas & Co.,
Inc., 66 SCRA 553; Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit Bus
Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance Telephone Company, L-18841, January 27,
1969, 26 SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36 SCRA 77; E.
Rodriguez, Inc. vs. Collector of Internal Revenue, L-23041, July 31, 1969, 28 SCRA 119).95
III
Finality of the Tax Assessment

A. The issue on whether the BIR complied with the notice requirements under RR No. 12-85 is raised for
the first time on appeal and should not be given due course.
PNB, in another effort to block the collection of the deficiency withholding tax, this time raises doubts as
to the validity of the deficiency withholding tax assessment issued against it on 16 January 1991. It
submits that the BIR failed to comply with the notice requirements set forth in RR No. 12-85.96
Whether or not the BIR complied with the notice requirements of RR No. 12-85 is a new issue raised by
PNB only before this Court. Such a question has not been ventilated before the lower courts. For an
appellate tribunal to consider a legal question, it should have been raised in the court below.97 If raised
earlier, the matter would have been seriously delved into by the CTA and the Court of Appeals.98
B. The assessment against PNB had become final and unappealable, and therefore, enforceable.
The CTA and the Court of Appeals declared as final and unappealable, and thus, enforceable, the
assessment against PNB, dated 16 January 1991, since PNB failed to protest said assessment within the
30-day prescribed period. This Court, though, finds that the significant BIR assessment, as far as this
case is concerned, should be the one issued by the BIR against PNB on 08 October 1986.
The BIR issued on 08 October 1986 an assessment against PNB for its withholding tax liability on the
interest earnings and/or yields from PNOC's money placements with the bank. It had 30 days from
receipt to protest the BIR's assessment.99 PNB, however, did not take any action as to the said
assessment so that upon the lapse of the period to protest, the withholding tax assessment against it,
dated 8 October 1986, became final and unappealable, and could no longer be disputed.100 The courts
may therefore order the enforcement of this assessment.
It is the enforcement of this BIR assessment against PNB, dated 08 October 1986, that is in issue in the
instant case. If the compromise agreement is valid, it would effectively bar the BIR from enforcing the
assessment and collecting the assessed tax; on the other hand, if the compromise agreement is void,
then the courts can order the BIR to enforce the assessment and collect the assessed tax.
As has been previously discussed by this Court, the BIR demand letter, dated 16 January 1991, is not a
new assessment against PNB. It only demanded from PNB the payment of the balance of the
withholding tax assessed against it on 08 October 1986. The same demand letter also has no substantial
effect or impact on the resolution of the present case. It is already unnecessary and superfluous, having
been issued by the BIR when CTA Case No. 4249 was already pending before the CTA. At best, the
demand letter, dated 16 January 1991, constitute a useful reference for the courts in computing the
balance of PNB's tax liability, after applying as partial payment thereon the amount previously received
by the BIR from PNOC pursuant to the compromise agreement.
IV
Prescription
A. The defense of prescription was never raised by petitioners PNOC and PNB, and should be considered
waived.
The dissenting opinion takes the position that the right of the BIR to assess and collect income tax on
the interest earnings and/or yields from PNOC's money placements with PNB, particularly for taxable
year 1985, had already prescribed, based on Section 268 of the NIRC of 1977, as amended.
Section 268 of the NIRC of 1977, as amended, provides a three-year period of limitation for the
assessment and collection of internal revenue taxes, which begins to run after the last day prescribed
for filing of the return.101
The dissenting opinion points out that more than four years have elapsed from 25 January 1986 (the last
day prescribed by law for PNB to file its withholding tax return for the fourth quarter of 1985) to 16
January 1991 (the date when the alleged final assessment of PNB's tax liability was issued).
The issue of prescription, however, was brought up only in the dissenting opinion and was never raised
by PNOC and PNB in the proceedings before the BIR nor in any of their pleadings submitted to the CTA
and the Court of Appeals.
Section 1, Rule 9 of the Rules of Civil Procedure lays down the rule on defenses and objections not
pleaded, and reads:
SECTION 1. Defenses and objections not pleaded. Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings
or the evidence on record that the court has no jurisdiction over the subject matter, that there is
another action pending between the parties for the same cause, or that the action is barred by prior
judgment or by the statute of limitations, the court shall dismiss the claim.
The general rule enunciated in the above-quoted provision governs the present case, that is, the
defense of prescription, not pleaded in a motion to dismiss or in the answer, is deemed waived. The
exception in same provision cannot be applied herein because the pleadings and the evidence on record
do not sufficiently show that the action is barred by prescription.
It has been consistently held in earlier tax cases that the defense of prescription of the period for the
assessment and collection of tax liabilities shall be deemed waived when such defense was not properly
pleaded and the facts alleged and evidences submitted by the parties were not sufficient to support a
finding by this Court on the matter.102In Querol v. Collector of Internal Revenue,103 this Court pronounced
that prescription, being a matter of defense, imposes the burden on the taxpayer to prove that the full
period of the limitation has expired; and this requires him to positively establish the date when the
period started running and when the same was fully accomplished.
In making its conclusion that the assessment and collection in this case had prescribed, the dissenting
opinion took liberties to assume the following facts even in the absence of allegations and evidences to
the effect that: (1) PNB filed returns for its withholding tax obligations for taxable year 1985; (2) PNB
reported in the said returns the interest earnings of PNOC's money placements with the bank; and (3)
that the returns were filed on or before the prescribed date, which was 25 January 1986.
It is not safe to adopt the first and second assumptions in this case considering that Section 269 of the
NIRC of 1977, as amended, provides for a different period of limitation for assessment and collection of
taxes in case of false or fraudulent return or for failure to file a return. In such cases, the BIR is given 10
years after discovery of the falsity, fraud, or omission within which to make an assessment.104
It is also not safe to accept the third assumption since there can be a possibility that PNB filed the
withholding tax return later than the prescribed date, in which case, following the dictates of Section
268 of the NIRC of 1977, as amended, the three-year prescriptive period shall be counted from the date
the return was actually filed.105
PNB's withholding tax returns for taxable year 1985, duly received by the BIR, would have been the best
evidence to prove actual filing, the date of filing and the contents thereof. These facts are relevant in
determining which prescriptive period should apply, and when such prescriptive period should begin to
run and when it had lapsed. Yet, the pleadings did not refer to any return, and no return was made part
of the records of the present case.
This Court could not make a proper ruling on the matter of prescription on the mere basis of
assumptions; such an issue should have been properly raised, argued, and supported by evidences
submitted by the parties themselves before the BIR and the courts below.
B. Granting that this Court can take cognizance of the defense of prescription, this Court finds that the
assessment of the withholding tax liability against PNOC and collection of the tax assessed were done
within the prescriptive period.
Assuming, for the sake of argument, that this Court can give due course to the defense of prescription, it
finds that the assessment against PNB for its withholding tax liability for taxable year 1985 and the
collection of the tax assessed therein were accomplished within the prescribed periods for assessment
and collection under the NIRC of 1977, as amended.
If this Court adopts the assumption made by the dissenting opinion that PNB filed its withholding tax
return for the last quarter of 1985 on 25 January 1986, then the BIR had until 24 January 1989 to assess
PNB. The original assessment against PNB was issued as early as 08 October 1986, well-within the
three-year prescriptive period for making the assessment as prescribed by the following provisions of
the NIRC of 1977, as amended:
SEC. 268. Period of limitation upon assessment and collection. Except as provided in the succeeding
section, internal revenue taxes shall be assessed within three years after the last day prescribed by law
for the filing of the return, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period
SEC. 269. Exceptions as to period of limitation of assessment and collection of taxes.

(c) Any internal revenue tax which has been assessed within the period of limitation above-prescribed
may be collected by distraint or levy or by a proceeding in court within three years following the
assessment of the tax.
Sections 268 and 269(c) of the NIRC of 1977, as amended, should be read in conjunction with one
another. Section 268 requires that assessment be made within three years from the last day prescribed
by law for the filing of the return. Section 269(c), on the other hand, provides that when an assessment
is issued within the prescribed period provided in Section 268, the BIR has three years, counted from the
date of the assessment, to collect the tax assessed either by distraint, levy or court action. Therefore,
when an assessment is timely issued in accordance with Section 268, the BIR is given another three-year
period, under Section 269(c), within which to collect the tax assessed, reckoned from the date of the
assessment.
In the case of PNB, an assessment was issued against it by the BIR on 08 October 1986, so that the BIR
had until 07 October 1989 to enforce it and to collect the tax assessed. The filing, however, by private
respondent Savellano of his Amended Petition for Review before the CTA on 02 July 1988 already
constituted a judicial action for collection of the tax assessed which stops the running of the three-year
prescriptive period for collection thereof.
A judicial action for the collection of a tax may be initiated by the filing of a complaint with the proper
regular trial court; or where the assessment is appealed to the CTA, by filing an answer to the taxpayer's
petition for review wherein payment of the tax is prayed for.106
The present case is unique, however, because the Petition for Review was filed by private respondent
Savellano, the informer, against the BIR, PNOC, and PNB. The BIR, the collecting government agency;
PNOC, the taxpayer; and PNB, the withholding agent, initially found themselves on the same side. The
prayer in the Amended Petition for Review of private respondent Savellano reads:
WHEREFORE, in view of the foregoing, petitioner respectfully prays that the compromise agreement of
June 22, 1987 be reviewed and declared null and void, and that this Court directs:
a) respondent Commissioner to enforce and collect and respondents PNB and/or PNOC to pay in a joint
and several capacity, the total tax liability of P387,987,785.73, plus interests from 31 October 1986; and
b) respondent Commissioner to pay unto petitioner, as informer's reward, 15% of the tax liability
collected under clause (a) hereof.
Other equitable reliefs under the premises are likewise prayed for.107 (Underscoring ours.)
Private respondent Savellano, in his Amended Petition for Review in CTA Case No. 4249, prayed for (1)
the CTA to direct the BIR Commissioner to enforce and collect the tax, and (2) PNB and/or PNOC to pay
the tax making CTA Case No. 4249 a collection case. That the Amended Petition for Review was filed
by the informer and not the taxpayer; and that the prayer for the enforcement of the tax assessment
and payment of the tax was also made by the informer, not the BIR, should not affect the nature of the
case as a judicial action for collection. In case the CTA grants the Petition and the prayer therein, as
what has happened in the present case, the ultimate result would be the collection of the tax
assessed. Consequently, upon the filing of the Amended Petition for Review by private respondent
Savellano, judicial action for collection of the tax had been initiated and the running of the prescriptive
period for collection of the said tax was terminated.
Supposing that CTA Case No. 4249 is not a collection case which stops the running of the prescriptive
period for the collection of the tax, CTA Case No. 4249, at the very least, suspends the running of the
said prescriptive period. Under Section 271 of the NIRC of 1977, as amended, the running of the
prescriptive period to collect deficiency taxes shall be suspended for the period during which the BIR
Commissioner is prohibited from beginning a distraint or levy or instituting a proceeding in court, and
for 60 days thereafter.108 Just as in the cases of Republic v. Ker & Co., Ltd.109 and Protector's Services, Inc.
v. Court of Appeals,110 this Court declares herein that the pendency of the present case before the CTA,
the Court of Appeals and this Court, legally prevents the BIR Commissioner from instituting an action for
collection of the same tax liabilities assessed against PNOC and PNB in the CTA or the regular trial
courts. To rule otherwise would be to violate the judicial policy of avoiding multiplicity of suits and the
rule on lis pendens.
Once again, that CTA Case No. 4249 was initiated by private respondent Savellano, the informer, instead
of PNOC, the taxpayer, or PNB, the withholding agent, would not prevent the suspension of the running
of the prescriptive period for collection of the tax. What is controlling herein is the fact that the BIR
Commissioner cannot file a judicial action in any other court for the collection of the tax because such a
case would necessarily involve the same parties and involve the same issues already being litigated
before the CTA in CTA Case No. 4249. The three-year prescriptive period for collection of the tax shall
commence to run only after the promulgation of the decision of this Court in which the issues of the
present case are resolved with finality.
Whether the filing of the Amended Petition for Review by private respondent Savellano entirely stops or
merely suspends the running of the prescriptive period for collection of the tax, it had been premature
for the BIR Commissioner to issue a writ of garnishment against PNB on 12 August 1991 and for the
Central Bank of the Philippines to debit the account of PNB on 02 September 1992 pursuant to the said
writ, because the case was by then, pending review by the Court of Appeals. However, since this Court
already finds that the compromise agreement is without force and effect and hereby orders the
enforcement of the assessment against PNB, then, any issue or controversy arising from the premature
garnishment of PNB's account and collection of the tax by the BIR has become moot and academic at
this point.
Additional Informer's Reward
Private respondent Savellano is entitled to additional informer's reward since the BIR had already
collected the full amount of the tax assessment against PNB.
PNOC insists that private respondent Savellano is not entitled to additional informer's reward because
there was no voluntary payment of the withholding tax liability. PNOC, however, fails to state any legal
basis for its argument.
Section 316(1) of the NIRC of 1977, as amended, granted a reward to an informer equivalent to 15% of
the revenues, surcharges, or fees recovered, plus, any fine or penalty imposed and collected.111 The
provision was clear and uncomplicated an informer was entitled to a reward of 15% of the total
amount actually recovered or collected by the BIR based on his information. The provision did not make
any distinction as to the manner the tax liability was collected whether it was through voluntary
payment by the taxpayer or through garnishment of the taxpayer's property. Applicable herein is
another well-known maxim in statutory construction Ubi lex non distinguit nec nos distinguere
debemos when the law does not distinguish, we should not distinguish.112
Pursuant to the writ of garnishment issued by the BIR, the Central Bank issued a debit advice against the
demand deposit account of PNB with the Central Bank for the amount of P294,958,450.73, and credited
the same amount to the demand deposit account of the Treasurer of the Republic of the
Philippines. The Treasurer of the Republic, in turn, already issued a journal voucher
transferring P294,958,450.73 to the account of the BIR.
Since the BIR had already collected P294,958,450.73 from PNB through the execution of the writ of
garnishment over PNB's deposit with the Central Bank, then private respondent Savellano should be
awarded 15% thereof as reward since the said collection could still be traced to the information he had
given.
WHEREFORE, in view of the foregoing, the Petitions of PNOC and PNB in G.R. No. 109976 and G.R. No.
112800, respectively, are hereby DENIED. This Court AFFIRMS the assailed Decisions of the Court of
Appeals in CA-G.R. SP No. 29583 and CA-G.R. SP No. 29526, which affirmed the decision of the CTA in
CTA Case No. 4249, with modifications, to wit:
(1) The compromise agreement between PNOC and the BIR, dated 22 June 1987, is declared void for
being contrary to law and public policy, and is without force and effect;
(2)Paragraph 2 of RMO No. 39-86 remains a valid provision of the regulation;
(3)The withholding tax assessment against PNB, dated 08 October 1986, had become final and
unappealable. The BIR Commissioner is ordered to enforce the said assessment and collect the amount
of P294,958,450.73, the balance of tax assessed after crediting the previous payment made by PNOC
pursuant to the compromise agreement, dated 22 June 1987; and
(4) Private respondent Savellano shall be paid the remainder of his informer's reward, equivalent to
15% of the deficiency withholding tax ordered collected herein, or P 44,243,767.61.
SO ORDERED.
Quisumbing, Sandoval-Gutierrez, Austria-Martinez, Callejo, Sr., and Garcia, JJ., concur.
Davide, Jr., C.J., Corona, and Carpio-Morales, joins J. Carpio in his dissenting opinion.
Puno, and Panganiban, J., concurs with the majority and the separate opinion of J. Tinga.
Ynares-Santiago, J., no part.
Carpio, J., see dissenting opinion.
Azcuna, J., no partwas PNB Chairman in 1991.
Tinga, J., see separate concurring opinion.
DISSENTING OPINION
CARPIO, J.:
I dissent from the majority opinion penned by Justice Minita V. Chico-Nazario.
First, the withholding tax liability of Philippine National Oil Company ("PNOC") is a delinquent account
that falls within the coverage of Executive Order No. 44 ("EO No. 44"), the tax compromise law.
Second, PNOC filed its application for tax compromise under EO No. 44 within the period prescribed by
EO No. 44 and its implementing regulations.
Third, the tax compromise agreement made by PNOC with the Bureau of Internal Revenue ("BIR") is
now res judicata. The parties to the compromise agreement have fully implemented the agreement in
good faith.
Fourth, the BIR failed to collect the tax from within the three-year prescriptive period. Thus, the
collection of the tax is now barred by prescription.
PNOC's Tax Liability Falls under EO No. 44
On 16 January 1991, BIR Commissioner Jose U. Ong declared void the tax compromise agreement that
his predecessor Commissioner Bienvenido A. Tan made with PNOC more than three years earlier. The
compromise agreement, dated 22 June 1987, settled the P385,961,580.82 tax liability of PNOC and the
Philippine National Bank ("PNB") arising from PNB's failure to withhold the final tax on interest income
on money market placements of PNOC covering the years 1984 to August 1986.1 Under the compromise
agreement, PNOC paid the BIR P93,955,479.12 in full settlement of the tax liability arising from PNB's
failure to withhold the final tax.
Article 2028 of the Civil Code defines a compromise as "a contract whereby the parties, by making
reciprocal concessions, avoid litigation or put an end to one already commenced." The purpose of
compromise is to settle the claims of the parties and bar all future disputes and controversies.2
In the present case, the BIR and PNOC entered into the tax compromise agreement in accordance with
the provisions of Executive Order No. 44 ("EO No. 44"), Revenue Memorandum Order No. 39-86 ("RMO
No. 39-86") and Revenue Memorandum Order No. 4-87 ("RMO No. 4-87"). The relevant provisions read:
Executive Order No. 44
SECTION 1. The Commissioner of Internal Revenue or his duly authorized representatives may
compromise any disputed assessment or delinquent account pending as of December 31, 1985, upon
the payment of an amount equal to thirty percent (30%) of the basic tax assessed. In such cases, the
Commissioner of Internal Revenue or his duly authorized representatives shall condone the
corresponding interests and penalties. (Emphasis supplied)
xxx
SECTION 4. Section 246 of the National Internal Revenue Code, as amended, is hereby suspended with
respect to the disputed assessments and delinquent accounts referred to herein for the duration of the
effectivity hereof.
SECTION 5. All laws, orders, issuances, rules and regulations or any part thereof inconsistent with this
Executive Order is hereby repealed or modified accordingly.
SECTION 6. This Executive Order shall take effect immediately and shall remain effective until March 31,
1987.
Revenue Memorandum Order No. 39-86
1. Coverage. - This Order shall apply only to (1) delinquent tax accounts; or (2) disputed tax assessments
pending as of December 31, 1985 within the purview of Executive Order No. 44 and its implementing
regulations. (Emphasis supplied)
1. x x x
2. Disqualification.
3.1. There are pending assessments for withholding taxes.
By operation of law, the relationship between the Government and the withholding agent is one of
agency for which reason the withholding agent only holds the funds withheld by him in trust for the
Government. Accordingly, a withholding tax assessment issued against a withholding agent (1) who
withheld the tax (2) but did not remit the same to the Government, shall not qualify for compromise
settlement herein prescribed, even if the assessment was issued as of December 31, 1985, because
under this situation he is being made accountable not as a taxpayer but as an agent. The disputed or
delinquency cases covered by Executive Order No. 44 refer only to those where the person assessed is
himself the taxpayer rather than a mere agent.
3.2. There is, however, another situation whereby a withholding agent did not withhold the tax either
because of neglect, ignorance of law or his belief that he is not required by law to withhold a tax.
Under this situation, such person is made directly accountable for the tax. This latter situation shall,
however, qualify for compromise settlement, subject to the provisions of paragraph 1 hereof, in
relation to implementing revenue regulations of Executive Order No. 44. (Emphasis supplied)
xxx
8. Clearance.
8.1. 30% compromise settlement rate. - If the compromise settlement rate is equivalent to 30% of the
basic tax assessed, immediate action shall be taken on the taxpayer-applicant's application. After
payment of the compromise amount, the revenue office which passed upon the application as
referred to in paragraph 5.2 hereof, shall issue to the taxpayer a letter, signed by the chief of the said
revenue office, confirming the payment and advising that the case is already closed. (Emphasis
supplied)
xxx
Revenue Regulations No. 17-86
a) Delinquent account - Refers to the amount of tax due on or before December 31, 1985 from a
assessed tax, whether or not a return was filed, or (2) a deficiency assessment issued by the BIR which
has become final and executory. (Emphasis supplied)
Revenue Memorandum Order No. 4-87
2.0 Notwithstanding the lapse of Executive Order No. 41 as amended, pre-assessment notices,
assessment notices and letters of demand issued after August 21, 1986 which are not otherwise covered
by the availment of the amnesty, may nevertheless be compromised under Sec. 246 of the Tax Code by
paying 30% of the basic tax assessed or pre-assessed.
RMO No. 39-86 expressly provides that a compromise shall include a "situation whereby a withholding
agent did not withhold the tax either because of neglect, ignorance of law or his belief that he is not
required by law to withhold a tax." In the present case, the majority opinion states that the "BIR held
the PNB personally accountable for its failure to withhold the tax on the interest earnings and/or yields
from PNOCs money placements."
PNB did not withhold and keep the tax for itself. PNB's case is a failure to withhold, not a failure to remit
to the BIR what it withheld for PNB withheld nothing. PNB is not the taxpayer here but merely a
withholding agent, burdened by law with a public duty to collect the tax for the government. PNB is not
only the withholding agent of the BIR, but also the agent of the taxpayer in preparing the return and
paying the tax. In Philippine Guaranty Co., Inc. v. Commissioner of Internal Revenue,3 the Court held:
x x x Thus, the withholding agent is constituted the agent of both the Government and the taxpayer.
With respect to the collection and/or withholding of the tax, he is the Government's agent. In regard to
the filing of the necessary income tax return and the payment of the tax to the Government, he is the
agent of the taxpayer. The withholding agent, therefore, is no ordinary government agent especially
because under Section 53(c) he is held personally liable for the tax he is duty bound to withhold;
whereas, the Commissioner of Internal Revenue and his deputies are not made liable by law. (Emphasis
supplied)
For failure to withhold the tax, PNB is made directly liable to pay the tax, not because it is the taxpayer,
but because it failed to comply with the law.4 PNB's legal duty is to withhold the tax, file the prescribed
quarterly return, and remit the tax to the BIR.5
PNB, which at that time was a government-owned and controlled corporation, did not withhold because
of an honest belief that there was no withholding tax on the interest income of a wholly owned
government corporation like PNOC. PNOC's application for restoration of its tax-exempt status was then
pending with the Fiscal Incentives Review Board.
Under paragraph 3.2 of RMO No. 39-86, a mere failure to withhold by the withholding agent shall
"qualify for compromise settlement." Thus, PNB's failure to withhold expressly falls within the coverage
of EO No. 44. What is outside the coverage of EO No. 44 is the failure of a withholding agent to remit
what it had withheld. In such a situation, the withholding agent absconds with trust funds in its
possession. Such a situation is definitely not subject to a tax compromise under EO No. 44. RMO No. 39-
86 provides that "a withholding tax assessment issued against a withholding agent (1) who withheld the
tax (2) but did not remit the same to the Government, shall not qualify for compromise settlement."
PNB's case, however, is not a failure to remit the withheld tax but a plain failure to withhold the tax.
PNB did not withhold the tax and thus did not abscond with public or trust funds.
EO No. 44, issued on 4 September 1986, is a special law enacted when then President Corazon C. Aquino
exercised legislative powers. EO No. 44 is separate and distinct from the authority of the BIR
Commissioner to compromise taxes under the Tax Code.6 EO No. 44 is a one-time tax compromise
scheme, "effective until March 31, 1987" and covering only "disputed assessment or delinquent
account pending as of December 31, 1985." EO No. 44 was issued to generate immediate revenues for
the new government following the 1986 EDSA revolution, as well as to clear the tax dockets of the BIR as
of 31 December 1985. Thus, the whereas clauses of EO No. 44 state in part:
xxx
WHEREAS, there is a need to clear this backlog of pending cases of disputed assessments and
delinquent accounts;
WHEREAS, there is a further need to raise revenues.
x x x.
The power of the BIR Commissioner to compromise under EO No. 44 is broader than his power to
compromise under the Tax Code. Under Section 204 of the Tax Code,7 the BIR Commissioner can
compromise a tax only if there is reasonable doubt as to its validity or if the taxpayer's financial position
shows a clear inability to pay the tax. EO No. 44 does not require these conditions. A compromise under
Section 204 requires an examination of the legal basis of the assessment or the financial capacity of the
taxpayer to pay the assessment. EO No. 44 does not require such examination.
The conditions in EO No. 44 are straightforward and require no examination of the legal basis of the
assessment or financial capacity of the taxpayer. The conditions in EO No. 44 are plain and simple: first,
the disputed assessment or delinquent account is pending as of 31 December 1995; and second, the
taxpayer is willing to pay thirty percent of the basic tax assessed. EO No. 44 prescribed simple, plain
and straightforward conditions precisely to encourage taxpayers to avail of the tax compromise program
under EO No. 44.
EO No. 44 is a special law that prevails over Section 204 of the Tax Code. Section 4 of EO No. 44 states:
Section 4. Section 246 (now 204) of the National Internal Revenue Code, as amended, is hereby
suspended with respect to the disputed assessments and delinquent accounts referred to herein for the
duration of the effectivity hereof.
The stringent standards prescribed in Section 204 of the Tax Code do not apply to compromise
agreements under EO No. 44. The law expressly suspended the effectivity of Section 204 of the Tax
Code during the effectivity of EO No. 44.
Thus, during the effectivity of EO No. 44, the only tax compromise possible for delinquent accounts as
of 31 December 1985 is under EO No. 44. PNOC filed its application with the BIR for a tax compromise
during the effectivity of EO No. 44. Obviously, PNOC's application for a tax compromise of its delinquent
accounts as of 31 december 1985 meant a tax compromise under eo no. 44. the bir had no authority to
entertain any other tax compromise.
rr no. 17-86 defines a "delinquent account" to include a "self-assessed tax." the majority opinion adopts
respondents' argument that pnoc's withholding tax liability is not a "self-assessed tax" because the bir
investigated the taxpayer and assessed the tax. here lies the fundamental error of the majority
opinion. the majority opinion states:
pnoc's tax liability could not be considered a delinquent account since (1) it was not self-assessed,
because the bir conducted an investigation and assessment of pnoc and pnb after obtaining
information regarding the non-withholding of tax from private respondent savellano; x x x. (emphasis
supplied)
the majority opinion's thesis is contrary to the very concept of a self-assessed tax.
a self-assessed tax, as the term implies, is self-assessed by the taxpayer without the intervention of an
assessment by the taxing authority to create the tax liability. a self-assessed tax means a tax that the
taxpayer himself assesses or computes and pays to the taxing authority. in Tupaz v. Ulep,8 this Court
explained that a self-assessed tax is one where "no further assessment by the government is required
to create the tax liability." A self-assessed tax falls due without need of any prior assessment by the BIR,
and non-payment of a self-assessed tax on the date prescribed by law results in penalties even in the
absence of any assessment by the BIR.
A clear example of a self-assessed tax is the annual income tax, which the taxpayer himself computes
and pays without the intervention of any assessment by the BIR. The annual income tax becomes due
and payable without need of any prior assessment by the BIR. The BIR may or may not investigate or
audit the annual income tax return filed by the taxpayer. The taxpayer's liability for the income tax does
not depend on whether or not the BIR conducts such subsequent investigation or audit.
However, if the taxing authority is first required to investigate, and after such investigation to issue the
tax assessment that creates the tax liability, then the tax is no longer self-assessed. This is not the case
of the final withholding tax on interest income on money market placements.
The computation of the amount of the final withholding tax on interest income does not require any
assessment by the BIR. The taxpayer can easily determine the amount of the tax since it is a flat rate
based on the interest paid. In fact, the bank automatically computes the amount of the final withholding
tax, deducts the tax from the taxpayer's interest income, and remits the tax to the BIR. The BIR does not
make any assessment. Plainly, the final withholding tax on interest payment is a self-assessed tax.
The taxpayer's failure to pay when due a self-assessed tax, while it may result in a subsequent
investigation and assessment by the BIR, does not remove the character of the tax as a self-assessed tax.
The tax liability of the taxpayer arises on due date of the tax, and the non-payment of the self-assessed
tax on due date does not prevent the tax liability from attaching. The tax liability is created by operation
of law, even in the absence of an investigation and assessment by the BIR. The subsequent BIR
investigation and assessment is for the purpose of collecting a past due tax, and not for the purpose of
creating the tax liability. Of course, the computation by the taxpayer of his tax liability under a self-
assessed tax is not conclusive on the BIR. After investigation or audit, the BIR can issue an assessment
for any deficiency tax still due from the taxpayer.
In Tupaz v. Ulep,9 the Court declared that "internal revenue taxes are self-assessing." The final
withholding tax on interest income is an internal revenue tax. Indeed, the Tax Code follows the pay-as-
you-file system of taxation under which the taxpayer computes his own tax liability, prepares the return,
and pays the tax as he files the return. The pay-as-you-file system is a self-assessing tax system.
EO No. 44 is a general tax compromise program covering all delinquent taxes and disputed assessments
under the Tax Code as of 31 December 1985. EO No. 44 does not distinguish between delinquent
accounts that are or are not the subject of subsequent investigation and assessment by the BIR.
Where the law does not distinguish, courts should not distinguish. To remove from the coverage of EO
No. 44 delinquent accounts that became the subject of subsequent investigation and assessment would
severely limit the coverage of EO No. 44, a limitation that is not found in the language or intent of EO No.
44. Indeed, such a limitation would defeat the avowed purpose of EO No. 44 to clear the tax dockets of
the BIR. The big delinquent accounts, such as PNOC's tax liability, which normally go through subsequent
investigation and assessment, would not qualify for the general tax compromise program, preventing EO
No. 44 from attaining its objectives.
Clearly, PNOC's tax liability is a delinquent account within the coverage of EO No. 44 because it is a
self-assessed tax unpaid as of 31 December 1985.10 There can be no dispute that the final withholding
tax on interest payments by PNB on PNOC's money market placements does not require the
intervention of the BIR for its assessment and remittance to the BIR.
Thus, the compromise agreement between PNOC and BIR falls within the coverage of EO No. 44 and its
implementing rules. The non-payment of the final withholding tax has resulted in a delinquent tax
account of PNOC. In addition, the failure of PNB to withhold the tax falls within the coverage of RMO No.
39-86.
However, the majority opinion insists that PNOC's withholding tax liability is outside the coverage of EO
44 because there is no proof that PNOC or PNB filed the tax return in compliance with the self-
assessment system. The majority opinion states:
Neither PNOC nor PNB, the taxpayer and the withholding agent, respectively, complied with the
system and conducted self-assessment in this case. There is no showing that in the absence of tax
assessment issued by the BIR against them, that PNOC and/or PNB would have voluntarily admitted
their tax liabilities, already amounting to P385,961,580.82, as of 15 November 1986, and would have
offered to compromise the same. In fact, both PNOC and PNB were conspicuously silent about their tax
liabilities until they were assessed thereon. (Emphasis supplied)
The majority opinion conveniently forgets that the tax compromise under EO 44 and its implementing
rules covers "a self-assessed tax, whether or not a return was filed." Revenue Regulations No. 17-86
provides:
Delinquent account - Refers to the amount of tax due on or before December 31, 1985 from a taxpayer
who failed to pay the same within the time prescribed for its payment arising from (1) a self assessed
tax, whether or not a return was filed, or (2) a deficiency assessment issued by the BIR which has
become final and executory.
the amount of compromise to be paid. (Emphasis supplied)
Clearly, the tax compromise under EO No. 44 applies to a self-assessed tax, whether or not a return was
filed, because Revenue Regulations No. 17-86 expressly so provides.
Revenue Regulations No. 17-86 even states, "Where no return was filed, the taxpayer shall be
considered delinquent as of the time the tax on such return was due, and in availing of the compromise,
a tax return shall be filed as a basis for computing the amount of compromise to be paid." If the
taxpayer failed to file the return, he can avail of the tax compromise by filing a return, which shall serve
as basis for computing the compromise amount. Revenue Regulations No. 17-86 expressly applies to
delinquent accounts of taxpayers who failed to file the returns.
EO No. 44 and its implementing rules do not require that PNOC or PNB must have "complied with the
system and conducted self-assessment" before they could avail of the tax compromise. The BIR could
not have required the thousands of taxpayers who availed of the tax compromise under EO No. 44 to
show proof that they filed their tax returns. There is no such requirement in EO No. 44 or in its
implementing rules. On the contrary, Revenue Regulations No. 17-86 expressly states "whether or not a
return was filed" which means that the filing of a tax return is not a condition for the availment of the
tax compromise. The BIR never required the thousands of taxpayers who availed of EO No. 44 to prove
that they filed their tax returns. For the majority opinion to require now PNOC and PNB to prove that
they filed the tax returns would constitute denial of equal protection of the law.
The tax compromise under EO No. 44 and its implementing rules applies to self-assessed taxes, whether
or not the corresponding tax returns were filed. The definition of a delinquent account that is subject
to the tax compromise expressly includes a self-assessed tax "whether or not a return was filed." There
can be no clearer language than this to express that the taxpayer is not required to prove that he filed
the tax return. There is absolutely no legal basis in requiring PNOC or PNB to show proof that they filed
the proper tax returns before they could avail of the tax compromise. The majority opinion is patently
wrong in holding that PNOC and PNB must prove that they filed the tax returns before they can avail of
the tax compromise.
The majority opinion also insists that PNOC's withholding tax liability is outside the coverage of EO No.
44 because the BIR subsequently investigated and assessed PNOC for the withholding tax liability. The
majority opinion states:
It is important to remember that, in this case, any attempt by PNOC and PNB to assess and declare by
themselves their tax liabilities had already been overtaken by the BIR's conduct of its audit and
investigation and subsequent issuance of the assessments, dated 8 August 1986 and 8 October 1986,
against PNOC and PNB, respectively. The said tax assessments, uncontested and undisputed, already
presented the results of the BIR audit and investigation and the computation of the total amount of
tax liabilities of PNOC and PNB, and should be controlling in this case. They should not be so easily and
conveniently ignored and set aside. It would be a contradiction to claim that the tax liabilities of PNOC
and PNB are self-assessed and, at the same time, BIR-assessed; when it is clear and simple that it had
been the BIR that conducted the assessment and determined the tax liabilities of PNOC and PNB.
The majority opinion theorizes that a taxpayer with a delinquent account consisting of a self-assessed
tax cannot avail of EO No. 44 if the BIR issued an assessment against the taxpayer because the BIR
assessment is allegedly controlling.
The majority opinion's theory that a subsequent BIR assessment removes a delinquent account from the
coverage of EO No. 44 collides directly with Revenue Memorandum Order No. 39-8611 which
implements EO No. 44. Revenue Memorandum Order No. 39-86 expressly recognizes that the
delinquent accounts subject to compromise under EO No. 44 may be "covered by a letter of demand
and assessment notice" by the BIR. Revenue Memorandum Order No. 39-86 provides:
xxx
6. Base of the compromise settlement rate. - The compromise settlement rate shall be applied against
the basic tax assessed referred to under paragraph 5.1 hereof. In no case may any revenue office
passing upon cases covered hereunder cause any computational adjustment or adjustments in
determining the basic tax before applying the compromise settlement rate, any error in the assessment
and demand being compromised notwithstanding. In all instances, the compromise settlement rate shall
be applied against the basic tax assessed. If the assessment is covered by a letter of demand and
assessment notice, the compromise settlement rate shall be applied against the basic tax assessed as
shown in the said letter of demand and assessment notice.
7. Allowable compromise settlement rates below thirty percent (30%). - The Evaluation Committee shall
apply exclusively the compromise settlement rates prescribed hereunder:
7.1 "Jeopardy" tax assessment as defined under RMO 17-85 (while RMO 17-85 speaks only of income
tax assessments, this compromise settlement shall, however, apply to all internal revenue tax
assessments in the nature of a "jeopardy" tax assessment) - 10%
7.2 Arbitrary assessments which have been issued only and primarily to forestall prescription - 10%
7.3 Tax assessments of doubtful validity whether as to law or as to facts - 15%
x x x.
Paragraph 6 of Revenue Memorandum Order No. 39-86 expressly provides, "If the assessment is
covered by a letter of demand and assessment notice, the compromise settlement rate shall be
applied against the basic tax assessed as shown in the said letter of demand and assessment notice."
The BIR assessment is even made the basis in applying the 30% settlement rate under EO No. 44.
Indisputably, a subsequent BIR assessment does not remove a delinquent account from the coverage of
EO No. 44.
With or without a BIR assessment, a delinquent account qualifies for tax compromise under EO NO. 44
provided it is a self-assessed tax unpaid as of 31 December 1985. EO No. 44 and its implementing rules
do not exclude delinquent accounts that were issued BIR assessments. On the contrary, Revenue
Memorandum Order No. 39-86 expressly states that the BIR assessment shall serve as basis in applying
the compromise settlement rate under EO No. 44. The majority opinion is mistaken in holding that EO
No. 44 and its implementing rules exclude BIR-assessed delinquent accounts from the coverage of the
tax compromise. Revenue Memorandum Order No. 39-86 even expressly includes within the coverage
of EO No. 44 jeopardy assessments, arbitrary assessments, and doubtful assessments issued by the BIR.
Clearly, a subsequent BIR assessment indeed any kind of subsequent BIR assessment - does not
remove a delinquent account from the coverage of EO No. 44.
Thousands of taxpayers availed of the tax compromise under EO No. 44 although the BIR had issued
them assessments, whether regular assessments, jeopardy assessments, arbitrary assessments or
doubtful assessments. For the majority opinion to exclude PNOC or PNB from availing of the same tax
compromise because the BIR issued PNOC an assessment would constitute a denial of equal protection
of the law. PNOC's and PNB's withholding tax liability clearly falls within the coverage of EO No. 44 and
its implementing rules.
The majority opinion further claims that PNOC does not fall under EO No. 44 but under Revenue
Memorandum Circular No. 31-86 because the assessment against PNOC was issued on 8 August 1986.
The majority opinion states:
As has already been discussed in the main opinion, the assessment against PNOC, issued on 08 August
1986, is more appropriately covered by the following provision of Revenue Memorandum Circular (RMC)
No. 31-86:
[T]axpayers against whom assessments had been issued from January 1 to August 21, 1986 may settle
their tax liabilities by way of compromise under Section 246 of the Tax Code as amended by paying 30%
of the basic tax assessment excluding surcharge, interest, penalties and other increments thereto.
(Emphasis supplied)
The majority opinion gratuitously states that PNOC is "more appropriately covered" by Revenue
Memorandum Circular No. 31-86. However, the majority opinion then declares that PNOC is still not
qualified for tax compromise under Revenue Memorandum Circular No. 31-86, thus:
However, even though the tax assessment against it was issued on 08 August 1986, PNOC would still not
be entitled to compromise its tax liability under the above-quoted provision of RMC No. 31-86 because
it failed to allege, must less present any evidence that: (1) there existed a reasonable doubt as to the
validity of the claim against it; or (2) its financial position demonstrated a clear inability to pay the
assessed tax, as required by Section 246 of the Tax Code of 1977, as amended.
The majority opinion wants to deprive PNOC from availing of the tax compromise under EO No. 44 just
because the BIR issued the assessment on 8 August 1986. There is nothing in EO No. 44 or in Revenue
Regulations No. 17-86 that excludes from the tax compromise delinquent accounts as of 31 December
1985 that were the subject of assessments issued after 31 December 1985. On the contrary, Revenue
Regulations No. 17-86 expressly provides that the delinquent accounts may be covered by regular
assessments, jeopardy assessments, arbitrary assessments and doubtful assessments. Revenue
Regulations No. 17-86 does not state that these assessments should be issued before 1 January 1986.
In fact, taxes falling due in the fourth quarter of 1985 could never be issued assessments before 1
January 1986. The assessments for most of the taxes falling due in tax year 1985 could only be issued
from 1 January 1986 onwards. To exclude unpaid taxes falling due in 1985 just because the BIR issued
assessments on these accounts from 1 January 1986 onwards would render the tax compromise under
EO No. 44 inutile.
The period from 1 January to 21 August 1986 in Revenue Memorandum Circular No. 31-86 refers to
those who could not avail of the tax amnesty under Executive Order No. 4112 which was issued on 22
August 1986. The cut-off date is 21 January 1986 because this is the day before EO No. 41 was issued.
However, this period has become irrelevant because EO No. 41, which originally covered only tax years
1981 to 1985, was amended by Executive Order No. 9513 to extend the tax amnesty up to 31 January
1987.
Clearly, the reference to 1 January to 21 August 1986 has nothing to do with EO No. 44 which is different
from EO No. 41. EO No. 44 is a tax compromise while EO No. 41 is a tax amnesty and they cover
different taxable years. PNOC's tax delinquency for the period 1 January 1986 onwards is not covered by
EO No. 44 which applies only to unpaid taxes as of 31 December 1985. This is why in its letter of 26
September 1986 to the BIR requesting for a tax compromise PNOC also invoked Section 246 of the Tax
Code to cover the period from 1 January 1986 onwards.
Although PNB is not a signatory to the compromise agreement, the subject matter of the compromise
falls expressly within the coverage of EO No. 44 and its implementing rules. The compromise agreement
absolved PNOC from any tax liability after PNOC paid the compromise amount. The BIR can no longer
recover the foregone tax, either from PNOC or from PNB. Unless an express reservation is made in the
compromise agreement and there is none here, the compromise amount stands in the place of the
amount originally assessed against PNOC.
PNOC Filed its Tax Compromise Application on Time
The majority opinion states that PNOC filed its application for tax compromise under EO No. 44 out of
time. The majority opinion asserts:
More importantly, even assuming arguendo that the liabilities of PNOC and PNB qualify as delinquent
accounts, the application for compromise filed by PNOC on 09 June 1987, and accepted by then BIR
Commissioner Tan on 22 June 1987, was filed way beyond 31 March 1987, the expiration date of the
effectivity of E.O. No. 44 and the deadline for filing of applications for compromise under Revenue
Memorandum Order (RMO) No. 39-86. (Emphasis supplied)
Revenue Memorandum Order No. 39-86 fixes the period for availing of the tax compromise under EO
No. 44. Paragraph 2 of Revenue Memorandum Order No. 39-86 provides:
2. Period for availment. - Filing of application for compromise settlement under the said law shall be
The deadline for filing the application is 31 March 1987. Applications filed on or before 31 March 1987
"shall be valid" even if the compromise amount is paid after 31 March 1987.
Contrary to the majority opinion's claim that the effectivity of EO No. 44 expires on 31 March 1987,
Revenue Memorandum Order No. 39-86 provides that applications filed on or before 31 March 1987
shall be valid even if the payment is made after 31 March 1987. Thus, the crucial issue is whether PNOC
filed any application to avail of the tax compromise under EO No. 44 on or before the deadline of 31
March 1987.
On 25 September 1986, long before the 31 March 1987 deadline, PNOC wrote the BIR submitting a
compromise settlement pursuant to EO No. 44 as well as Section 246 of the Tax Code. PNOC's letter
reads:
We would like to amicably settle this liability with the BIR. In this regard, we wish to invoke the
authority vested by law in your office, particularly under Section 246 of the National Internal Revenue
Code, as amended, and the spirit underlying Executive Order No. 44 dated September 4, 1986.
Consequently, we hereby request for a compromise settlement and submit our offer for compromise
of the matter, as follows: x x x.14
More than five months before the deadline of 31 March 1987, PNOC had already applied with the BIR
for a tax compromise under EO No. 44 and Section 246 of the Tax Code. Apparently, PNOC invoked EO
No. 44 for its delinquent tax liability from 15 October 1984 to 31 December 1985, and Section 246 of the
Tax Code for its tax liability from 1 January 1986 onwards since EO No. 44 covered only delinquent
accounts as of 31 December 1985.
PNOC filed its application for tax compromise on 25 September 1986, during the effectivity of EO No. 44.
EO No. 44 suspended during the effectivity of EO No. 44 the BIR Commissioner's power to enter into tax
compromises under Section 204 of the Tax Code. This suspension refers to delinquent accounts as of 31
December 1985, the delinquencies covered under EO No. 44. Thus, when PNOC applied for tax
compromise of its delinquent accounts as of 31 December 1985, the application for tax compromise
could only have referred to EO No. 44 and not to any other tax compromise law. During the effectivity
of EO No. 44, the BIR Commissioner had no power to compromise tax delinquencies as of 31
December 1985 under any law except EO No. 44. PNOC's application for tax compromise of its
delinquent accounts as 31 December 1985 was clearly based on EO No. 44 as the only law then
governing tax compromises for such delinquencies.
After the BIR received PNOC's letter of 26 September 1986, several meetings took place between the
BIR and PNOC on PNOC's request to avail of the tax compromise under EO No. 44. On 14 October 1986,
PNOC reiteratedits compromise settlement proposal to the BIR. There were also several exchanges of
communications between the BIR and PNOC. On 9 June 1987, the PNOC wrote again the BIR in this
manner:
If your office will recall, our Company (even under the administration of then PNOC Chairman and
President Vicentc T. Paterno) had originally requested in writing and negotiated for the compromise of
the subject tax assessment pursuant to the beneficial provisions of E.0. No. 44, as early as September,
1986, shortly after the effectivity of Executive Order.
It appears, however, that the provisions of BIR Revenue Memorandum Order No. 39-86 may not have
been applied or considered at length in evaluating the legal basis and merits of our compromise request,
in our favor, since most of the negotiations and the earlier decisions of your office were made prior to
the promulgation of BIR Revenue Memorandum Order No. 39-86 on November 18, 1986. (In fact, the
last letter in the 1986 series of correspondences between your office and our Company is dated
November 11, 1986.)
We cite in particular the provisions of Section 3.2 of your Revenue Memorandum Order No. 39-86, by
virtue of which the subject tax assessment is qualified for compromise settlement under E.0. No. 44.
Under these provisions, the tax liability resulting from the situation "whereby a withholding agent did
not withhold the tax either because of neglect, ignorance of law or his belief that he is not required by
law to withhold a tax," is deemed qualified for compromise settlement under E.O. No. 44.
The case contemplated by the cited provisions of BIR Revenue Memorandum Order No. 39-86
squarely covers our present case, considering that the final withholding tax on the interest earnings of
our Company's placements with PNB were not withheld by PNB because of PNB's honest belief then,
that it was not required by law to commence withholding the tax. At that time, it was the clear
impression and understanding of both PNB and our Company that PNOC's tax exemptions continued to
subsist during the pendency of PNOC's tax exemption restoration application with the Fiscal Incentives
Review Board (FIRB), until and unless the application is categorically denied or resolved to the contrary.
In fact, it was only in the course of the subject BIR tax assessment that the effective loss of PNOC's tax
exemptions was categorically raised by the BIR.
Consequently, we reiterate our previous request for compromise under E.O. No. 44, and convey our
preparedness to settle the subject tax assessment liability by payment of the compromise amount
of P91,003,129.89, representing thirty percent (30%) of the basic tax assessment of P303,343,766.29,
in accordance with E.O. No. 44 and its implementing BIR Revenue Memorandum Order No. 39-
86.15(Emphasis supplied)
PNOC's letter of 9 June 1987 explains why the BIR could not immediately act on its 26 September 1986
request for tax compromise under EO No. 44. When PNOC wrote the 26 September 1986 letter, only EO
No. 44 and Revenue Regulations No. 17-86 were in existence. The BIR Commissioner had not yet issued
Revenue Memorandum Order No. 39-86 which clarified that the failure to withhold taxes did not
prevent the taxpayer or withholding agent from availing of the tax compromise under EO No. 44, which
was the situation of PNOC and PNB. It was only during the course of the negotiations between PNOC
and the BIR that the BIR Commissioner issued Revenue Memorandum Order No. 39-86.
As a result of the negotiations, PNOC reiterated its 26 September 1986 application for tax compromise
under EO No. 44 by writing the 9 June 1987 letter to the BIR. In turn, the BIR Commissioner approved
the tax compromise on 22 June 1987. Thereafter, PNOC paid the full amount of the tax compromise in
three installments from June to October 1987. Revenue Regulations No. 17-86 authorized the
instalment payment because the compromise amount was over P50,000.16 Clearly, PNOC's 26
September 1986 letter-request for tax compromise under EO No. 44 culminated successfully on 22 June
1987 in the approval of the tax compromise under EO No. 44. This is actual compliance with the
requirement that the application for tax compromise under EO No. 44 should be filed on or before 31
March 1987.
Indeed, the BIR knew that PNOC filed its application for tax compromise "under E.O. 44 as early as
September 1986." The Memorandum dated 16 January 199117 submitted by Venancia M. Pangilinan,
Chief of the BIR Litigation Division, and approved by BIR Commissioner Ong, states:
PNOC, through the letter of its legal counsel dated June 9, 1987, offered to pay P91,003,129.89
representing 30% of the basic withholding tax of P303,343,766.29 pursuant to E.O. 44 which took effect
on September 4, 1986, to be paid on installment basis, viz:
xxx
x x x From the tenor of the above letter, it appears PNOC has made a previous offer of settlement of
this case under E.O. 44 as early as September 1986, shortly after the effectivity of said E.O. (Emphasis
supplied)
The Tax Compromise is now Res Judicata
A compromise agreement constitutes a final and definite settlement of the controversy between the
parties.18 A compromise agreement, even if not judicially approved, has the effect of res judicata on the
parties. Article 2037 of the Civil Code provides:
A compromise has upon the parties the effect and authority of res judicata; but there shall be no
execution except in compliance with a judicial compromise. (Emphasis supplied)
The compromise agreement has the force of law between the parties and no party may discard
unilaterally the compromise agreement.19 Under Section 8.1 of RMO No. 39-86, upon payment of the
compromise amount, the tax "case is already closed." The Solicitor General, who withdrew as counsel
for the BIR, maintains that the compromise agreement is valid.
Where a party has received the consideration for the compromise agreement, such party is estopped
from questioning its terms and asking for the reopening of the case on the ground of mistake.20 As
explained in McCarthy v. Barber Steamship Lines:21
Hence it is general rule in this country, that compromises are to be favored, without regard to the
nature of the controversy compromised, and that they cannot be set aside because the event shows all
the gain to have been on one side, and all the sacrifice on the other, if the parties have acted in good
faith, and with a belief of the actual existence of the rights which they have respectively waived or
abandoned; and if a settlement be made in regard to such subject, free from fraud or mistake, whereby
there is a surrender or satisfaction, in whole or in part, of a claim upon one side in exchange for or in
consideration of a surrender or satisfaction of a claim in whole or in part, or of something of value, upon
the other, however baseless may be the claim upon either side or harsh the terms as to either of the
parties, the other cannot successfully impeach the agreement in a court of justice * * *. Where the
compromise is instituted and carried through in good faith, the fact that there was a mistake as to the
law or as to the facts, except in certain cases where the mistake was mutual and correctable as such in
equity, cannot afford a basis for setting a compromise aside or defending against a suit brought thereon
***
xxx
And whether one or the other party understood the law of the case more correctly than the other,
cannot be material to the validity of the bargain. For if it were, then it would follow that contracts by the
parties settling their own disputes, would at last be made to stand or fall, according to the opinion of the
appellate court how the law would have determined it. (Emphasis supplied)
In People v. Magdaluyo,22 the BIR Commissioner approved the agreement which compromised the
taxpayer's violation of the Tax Code. The taxpayer paid the compromise amount before the filing of the
criminal information in court. The Court ruled that the government could no longer prosecute the
taxpayer for violation of the Tax Code.
The same principle holds true in the present case. The parties to the compromise agreement have
voluntarily settled the tax liability arising from PNB's failure to withhold the final tax on PNOC's interest
income. The parties have fully implemented in good faith the compromise agreement. The new BIR
Commissioner cannot just annul the legitimate compromise agreements made by his predecessors in
the performance of their regular duties where the parties entered into the compromise agreements in
good faith and had already fully implemented the compromise agreements.23
To rule otherwise would subject the validity and finality of a tax compromise agreement to depend on
the different interpretations of succeeding BIR Commissioners. Such lack of finality of tax compromises
would discourage taxpayers from entering into tax compromises with the BIR, considering that
compromises entail admissions by taxpayers of violations of tax laws. A tax compromise cannot be
invalidated except in case of mistake, fraud, violence, undue influence, or falsity of documents. Article
2038 of the Civil Code provides:
Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or
falsity of documents, is subject to the provisions of Article 1330 of this Code.
x x x (Emphasis supplied)
Article 1330 of the Civil Code makes compromises tainted with such circumstances voidable.24 In the
present case, there is no mistake because PNOC's delinquent account clearly falls within the coverage of
EO No. 44. Also, PNOC clearly filed its application for tax compromise before the deadline. Thus, none of
the circumstances that make a compromise voidable is present in this case.
PNB was a government-owned and controlled corporation when it failed to withhold the tax. PNOC, the
taxpayer primarily liable for the tax, was then also a government-owned and controlled corporation, and
remains so until now. PNB did not abscond with any tax money because this is a case of failure to
withhold the tax and not a failure to remit a withheld tax. No fraud or bad faith is ascribable to PNB or
PNOC in the execution of the compromise agreement.
Collection of Tax is Barred by Prescription
PNB regularly filed its quarterly returns covering the final withholding tax on all money market
placements with PNB for the years 1984 to 1985.25 Under Revenue Regulations No. 12-80, PNB prepared
its quarterly returns using BIR Form No. 1745,26 as follows:
SECTION 4. Manner of Computation of Tax Base. For purposes of Section 3 above, tax bases of the
following taxes shall be computed in the following manner:
(a) Final withholding tax on savings deposits. x x x
xxx
(c) Final withholding tax on yield of deposit substitutes.- The final withholding tax on yield of deposit
substitute shall be based on the adjusted gross interest or yield paid or accrued by banks or non-bank
financial intermediaries on all of its deposit substitute debt instruments issued.
The adjusted gross interest or yield paid or accrued is arrived at after deducting from the total interest
or yield paid or accrued on deposit substitutes, the sum of
(1) All interest and/or yield paid or accrued on deposit substitute earned by tax-exempt entities;
(2) All interest and/or yield paid or accrued on inter-bank loans, including those between or among
quasi-banks;
(3) All interest and/or yield paid or accrued on borrowings from World Bank, Asian Development Bank,
International Finance Corporation and similar institutions; and
(4) All interest and/or yield paid or accrued on deposit substitutes exempt from withholding tax.
The adjusted gross interest and/or yield paid or accrued on deposit substitute debt instruments shall
further be detailed as to amount subjected in full to the twenty per centum (20%) final withholding tax
and amount subjected to preferential final withholding tax rates in the prescribed from (B.I.R. Form No.
_____). (Emphasis supplied)
Thus, the computation for the quarterly returns already took into account "[A]ll interest and/or yield
paid or accrued on deposit substitute earned by tax-exempt entities," including interest income of PNOC
on its money market placements since PNB believed in good faith that PNOC was exempt from the
withholding tax. After filing of the quarterly returns, the BIR had every opportunity to investigate and
audit the correctness of the PNB's computation.
The last day for filing the quarterly return for the last quarter of 1985 was 25 January 1986. The BIR and
PNOC signed the compromise agreement on 22 June 1987. BIR Commissioner Ong abrogated the
compromise agreement on 16 January 1991, the same day the BIR issued the final assessment against
PNOC and PNB for the P294,958,450.73 foregone tax. From 25 January 1986, the last day for PNB to file
the fourth quarter return for 1985, to the issuance of the final assessment for the foregone tax on 16
January 1991, more than four years had lapsed. The Tax Code requires the BIR to assess and collect the
tax within three years from the last day of filing of the tax return.
In the present case, the BIR had until 25 January 1990 to assess and collect the tax. Otherwise, the
right of the government to assess or collect the tax would prescribe. Section 318 of the Tax Code, the
section governing prescription during the taxable years 1984 and 1985, then provided as Section
20327 of the Tax Code now similarly provides:
Sec. 318. Period of limitation upon assessment and collection Except as provided in the succeeding
taxes shall be begun after the expiration of such period: Provided, That in case where a return is filed
beyond the period prescribed by law, the three-year period shall be counted from the day the return
was filed. For the purposes of this section, a return filed before the last day prescribed by law for the
filing thereof shall be considered as filed on such last day.
The law prescribes two conditions for the collection of internal revenue taxes. First, the BIR must assess
the tax on the taxpayer within three years from the last day of filing of the tax return. Second, the BIR
must collect judicially or administratively the tax also within three years from the last day of filing of the
tax return. In short, the BIR must institute both the assessment and the collection case within three
years from the last day of filing of the return, but the assessment must precede the collection case. One
textbook writer put it succinctly in this manner:
As mandated by law (Sec. 203, 1997 NIRC), the Government must assess on time, that is to say, not later
than three years counted from and after the period fixed by law for the filing of the tax return or the
actual date of filing, whichever is the later date.
xxx
In the case of self-assessed taxes like the income tax that the taxpayer himself assesses and reflects on
his return, the collection thereof may proceed without any further assessment; in which case,
therefore, the prescriptive period of collection applies. Hence, the BIR must collect such tax, either by
summary or judicial remedies, within three (3) years from the date of filing of the tax return. This is so
because the date of assessment in the case of self-assessed taxes would be the date of the actual filing
of the return as it is on such date when the tax is said to have been assessed (Sec. 222[c], 1997
NIRC).28 (Emphasis supplied)
Since more than four years had lapsed since the filing of the last quarterly return on 25 January 1986,
the BIR could no longer assess the foregone tax on PNOC when the BIR abrogated the compromise
agreement on 16 January 1991. The reckoning date for the three-year prescriptive period for
withholding taxes due before the last quarter of 1985 is even earlier than 25 January 1986. Even
assuming that the BIR had assessed the tax within the three-year prescriptive period, the BIR could no
longer collect the foregone tax when it demanded payment from PNOC and PNB on 16 January 1991,
the date the BIR abrogated the compromise agreement. The BIR must issue the tax assessment, and
judicially collect the assessed tax, within three years from the last day of filing of the last quarterly
return.
Of course, the BIR may also administratively collect the assessed tax by distraint of personal property or
levy on real property.29 However, the BIR must take these summary remedies within the three-year
prescriptive period for collecting the assessed tax. In the present case, the BIR issued the warrant of
garnishment against PNB on 12 August 1991, more than five years from the last day of filing of the last
quarterly return on 25 January 1986. Thus, the garnishment of PNB's account with the Central Bank on
23 August 1991 is void since the right of the BIR to collect the tax had already prescribed by then.
Section 318 (now 203) of the Tax Code clearly provides that the three-year prescriptive period is
counted from the due date of the filing of the return. The BIR must assess and collect the tax within
three years from the filing of the tax return.
In the present case, the majority opinion expressly admits that the BIR issued the assessment against
PNB on 8 October 1986, and that the BIR had until 7 October 1989, or three years from the issuance of
the assessment, to collect the tax. The majority opinion declares:
Neither has the three-year prescriptive period for the collection of the tax prescribed. Considering
that the assessment against PNB was issued on 8 October 1986, the BIR had until 7 October 1989 to
enforce collection based thereon. (Emphasis and underscoring supplied)
The majority opinion is mistaken in stating that the three-year period is counted from the date of
issuance of the assessment. Section 318 (now 203) of the Tax Code clearly states that the three-year
period is counted from the due date of the filing of the return. This means that the prescriptive period
in the present case expired on 24 January 1989 since the last quarterly return was due on 25 January
1986. This is almost 9 months earlier than the 7 October 1989 expiry date that the majority opinion
claims.
The majority opinion further claims that there is no proof that PNB filed its quarterly withholding tax
returns. The majority opinion asserts:
In making its conclusions that the assessment and collection in this case has prescribed, the dissenting
opinion has taken liberties to assume the following facts even in the absence of allegations and
evidences to the effect that: (1) PNB filed returns for its withholding tax obligations for taxable year
1985; (2) PNB reported in the said returns the interest earnings of PNOC's money placements with the
bank; and (3) that the returns were filed on or before the prescribed date, which was 25 January 1986.
Contrary to the majority opinion's claim, the BIR audit report on PNB's failure to withhold the tax from
1984 to 1985 does not state that PNB failed to file its quarterly return. Had PNB failed to file its quarterly
return, the tax assessment against PNB would have been increased by a penalty equivalent to either
25% or 50% of the tax due as mandated by Section 248 of the Tax Code, thus:
SEC. 248. Civil Penalties. (A) There shall be imposed, in addition to the tax required to be paid, a
penalty equivalent to twenty-five percent (25%) of the amount due, in the following cases:
(1) Failure to file any return and pay the tax due thereon as required under the provisions of this Code
or rules and regulations on the date prescribed; or
xxx
(B) In case of willful neglect to file the return within the period prescribed by the Code or by the rules
and regulations, x x x the penalty to be imposed shall be fifty percent (50%) of the tax x x x.
The tax assessment against PNB, made after the investigation and audit of PNB's failure to withhold the
tax for the years 1984 and 1985, does not include the 25% or 50% penalty for failure to file the return.
The assessment letter to PNB dated 8 October 1986 states:
Please be informed that upon investigation, there was found due from you as a withholding agent
within the provisions of Section 31 of the National Internal Revenue Code, the total sum of
P376,301,133.23, representing deficiency withholding final tax inclusive of interests, as the yield of the
deposit substitutes placed with your Bank by the Philippine National Oil Company, as shown below:
Deficiency withholding final Tax on - P298,863,332.51

the total yield of P1,960,881,332.25
covering the period from October
15, 1984 to July 31, 1986
Interests due - computed up to - P77,455,580.72

October 15, 1986
Total Deficiency Amount P376,301,133.23
As you will note the interest due on the deficiency withholding final tax was computed up to October 15,
1986. Should you fail to pay the total deficiency amount on due date, the provisions of Section 283, NIRC,
provide that in case of failure to pay "a deficiency tax, or any surcharge or interest therein, on due date
appearing in the notice and demand of the Commissioner, there shall be assessed and collected, on the
unpaid amount, interest at the rate prescribed in paragraph (a) hereof until the amount is fully paid,
which amount shall form part of the tax." x x x.30
Nowhere in the assessment letter does it state that PNB failed to file the returns and thus should be
liable for the mandatory 25% or even 50% penalty. This only means that PNB did not fail to file the
quarterly returns.
Even assuming for the sake of argument that PNB failed to file the quarterly returns, PNOC filed an
amended return when the BIR Commissioner approved on 22 June 1987 the tax compromise. Under
Revenue Regulations No. 17-86, the taxpayer who avails of the tax compromise under EO No. 44 must
file a tax return for the income covered by the delinquent account. Section 2 (a) of Revenue Regulations
No. 17-86 provides:
a) x x x
return was due, and in availing of the compromise, a return shall be filed as a basis for computing the
amount of compromise to be paid. (Emphasis and underscoring supplied)
Thus, PNOC for sure filed a return in June 1987 even assuming its agent, PNB, failed to file the return on
25 January 1986. Under the worst-case scenario that PNB failed to file the return on 25 January 1986,
the BIR still had only until June 1990 to collect the tax from PNOC and PNB, applying the three-year
period from PNOC's actual filing of the return in June 1987. This is the rule in Section 318 (now 203) of
the Tax Code, which provides:
x x x Provided, That in case where a return is filed beyond the period prescribed by law, the three (3)-
year period shall be counted from the day the return was filed. x x x. (Emphasis supplied)
Whether the BIR had only until 24 January 1989, or 7 October 1989, or even until the end of June 1990
to collect the tax would not really matter. The collection of the tax would still be time-barred in the
present case under any of these three prescriptive periods.
The BIR garnished PNB's funds with the Central Bank on 2 September 1992, long after the prescriptive
period had expired under any of the three prescriptive periods. The garnishment was thus void since
the BIR's right to collect the tax had already prescribed. The BIR did not also file any collection case in
court against PNB within any of the three prescriptive periods. The present case is not even a collection
case against PNB or PNOC. Before 2004, the year Republic Act No. 9282 took effect, the Court of Tax
Appeals had no jurisdiction to enforce the collection of taxes. Prior to 2004, judicial action to collect
internal revenue taxes fell under the jurisdiction of the regular trial courts.
In the case of PNOC, the BIR issued the assessment even earlier, on 8 August 1986. If we follow the
majority opinion's erroneous computation that the three-year period begins from the issuance of the
assessment, the BIR had only until 7 August 1989 to collect from PNOC the tax administratively or
judicially. If we assume, for the sake of argument, that there was a failure to file the return, the BIR had
also only until 7 August 1989, or three years after the issuance of the assessment, to collect the tax
from PNOC. This is pursuant to Section 319 (now 222) of the Tax Code, which provided:
Sec. 319. Exceptions as to period of limitation of assessment and collection of taxes - (a) In the case of x
x x failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax
may be begun without assessment, at any time within ten years after discovery of the x x x omission: x x
x
xxx
(a) Any internal revenue tax which has been assessed within the period of limitation above-specified
may be collected within three years following the assessment of the tax.31 (Emphasis supplied)
Until now, after a lapse of more than 18 years, the BIR has made no distraint or levy on PNOC's assets.
Neither has the BIR filed any collection case in court against PNOC. In short, the pleadings and the
evidence on record clearly establish that prescription had long set in to bar the collection of the tax
against PNB and PNOC.
The majority opinion, however, claims that prescription cannot bar the collection of PNOC's or PNB's
withholding tax liability because neither PNOC nor PNB raised the defense of prescription. The majority
opinion contends:
The undersigned believes that the defense of prescription of the period for the assessment and
collection of tax liabilities should be considered waived since it was not raised in the answers or any
other pleadings filed by PNOC and PNB. Such a defense had not been properly pleaded and the facts
alleged and evidences submitted by the parties were not sufficient to support a finding by the Cout on
the matter. In Querol v. Collector of Internal Revenue, this Court ruled that prescription, being a matter
of defense, imposes on the taxpayer to prove that the full period of the limitation has expired, and
this requires him to positively establish the date when the period started running and when the same
was fully accomplished.
The majority opinion is clearly mistaken.
While the rule is that prescription is waived if not raised as a defense, the present case falls under
the express exception to this rule. Section 1, Rule 9 of the 1997 Rules of Civil Procedure provides:
Section 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a
motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings
or the evidence on record that the court has no jurisdiction over the subject matter, that there is
another action pending between the same parties for the same cause, or that the action is barred by
prior judgment or by the statute of limitations, the court shall dismiss the claim. (Emphasis and
underscoring supplied)
Thus, if the pleadings or evidence on record show that the action is barred by prescription, the court
is mandated to dismiss the action even if prescription is not raised as a defense.
Justice Florence D. Regalado, in Volume I of his Remedial law Compendium,32 explains this exception as
follows:
Under the amended provision, the following defenses are not waived even if not raised in a motion to
dismiss or in the answer: (a) lack of jurisdiction over the subject matter; (b) litis pendentia; (c) res
judicata; and (d) prescription of the action.
xxx
Res judicata and prescription of the claim have also been added as exceptions since they are grounds for
extinguishment of the claim. It would appear to be unduly technical, if not contrary to the rule on unjust
enrichment, to have the defending party respond all over again for the same claim which has already
been resolved or is no longer recoverable under the law. It is worth mentioning in this connection that,
in Sec. 5 of Rule 16 as amended, an order granting a motion to dismiss on the grounds, inter alia, of res
judicata or prescription shall bar the refiling of the same action or claim.
The presence of any of these four grounds authorizes the court to motu proprio dismiss the claim, that
is, the claims asserted in the complaint, counterclaim, crossclaim, third (fourth, etc.) party complaint
or complaint-in-intervention (see Sec. 2, Rule 6). In order that it may do so, it is necessary, however, that
such grounds be raised in a motion to dismiss or in the answer with evidence duly adduced to prove the
same, or where such grounds appear in the other pleadings filed or in the evidence of record in the case.
Specifically with respect to the defense of prescription, the present provision is similar to the rule
adopted in civil cases, but dissimilar to the rule and rationale in criminal cases. In civil cases, it has been
held that the defense of prescription may be considered only if the same is invoked in the
answer, except where the fact of prescription appears in the allegations in the complaint or the
evidence presented by the plaintiff, in which case such defense is not deemed waived (Ferrer vs. Ericta,
et al., L-41767, Aug. 23, 1978; Garcia vs. Mathis, et al., L-48577, Sept. 30, 1980). It would thus appear
that the non-waiver is dependent on the timeliness of the invocation of the defense, or where such
defense is a matter of record or evidence. (Emphasis supplied)
The ruling of this Court in Gicano, et al. v. Gegato, et al.,33 decided in January 1988, became the basis of
the present Section 1 of Rule 9. In Gicano this Court ruled:
x x x We have ruled that trial courts have authority and discretion to dismiss an action on the ground of
prescription when the parties' pleadings or other facts on record show it to be indeed time-barred;
(Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97; Bambao v. Lednicky, Jan. 28, 1961;
Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan,
136 SCRA 408); and it may do so on the basis of a motion to dismiss, or an answer which sets up such
ground as an affirmative defense; or even if the ground is alleged after judgment on the merits, as in a
motion for reconsideration; or even if the defense has not been asserted at all, as where no statement
thereof is found in the pleadings, or where a defendant has been declared in default. What is essential
only, to repeat, is that the facts demonstrating the lapse of the prescriptive period, be otherwise
sufficiently and satisfactorily apparent on the record: either in the averments of the plaintiffs
complaint, or otherwise established by the evidence. (Emphasis supplied)
Thus, even before the adoption of the present Section 1 of Rule 9, prevailing jurisprudence had already
recognized the exceptions laid down in Section 1 of Rule 9.
The majority opinion further claims that the running of the prescriptive period was suspended when
petitioner filed with the Court of Tax Appeals on 8 April 1988 the present petition to declare void the tax
compromise between the BIR and PNOC. The majority opinion asserts that the running of the
prescriptive period remains suspended up to now. The majority opinion contends:
x x x However, the running of the prescriptive period for the collection of the assessment against PNB
is for the meantime suspended during the pendency of the case before the CTA, then before the Court
of Appeals, and finally before this Court, because the issue for resolution by the courts is whether or
not the assessment should actually be enforced.
The majority opinion's contention collides with the applicable provision of the Tax Code. Section 223 of
the Tax Code governs the suspension of the running of the prescriptive period to assess and collect
internal revenue taxes. Section 223 provides:
SEC. 223. Suspension of Running of Statute of Limitations. The running of the Statute of
Limitationsprovided in Sections 203 and 222 on the making of assessment and the beginning of distraint
or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the
period during which the Commissioner is prohibited from making the assessment or beginning
distraint or levy or a proceeding in court and for sixty (60) days thereafter; when the taxpayer requests
for a reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the
address given by him in the return filed upon which a tax is being assessed or collected: Provided, That,
if the taxpayer informs the Commissioner of any change in address, the running of the Statute of
Limitations will not be suspended; when the warrant of distraint or levy is duly served upon the taxpayer,
his authorized representative, or a member of his household with sufficient discretion, and no property
could be located; and when the taxpayer is out of the Philippines. (Emphasis supplied)
Section 223 suspends the running of the prescriptive period if the BIR Commissioner "is prohibited from
x x x beginning distraint or levy or a proceeding in court" to enforce collection of the tax assessed. In
the present case, the Court of Tax Appeals, Court of Appeals and this Court never prohibited the BIR
Commissioner from commencing a distraint, levy or civil suit against PNB or PNOC to collect the tax. No
court ever issued an order prohibiting the BIR from collecting the tax from PNB or PNOC. In Republic v.
Ret,34 this Court ruled:
As heretofore stated, the plaintiff-appellant made the assessment on January 20, 1951 and had up to
January 20, 1956 to file the necessary action. It was only on September 5, 1957, that an action was filed
in Court for the collection of alleged deficiency income tax far beyond the 5 year period. This
notwithstanding, plaintiff-appellant argues that during the pendency of the criminal cases, it was
prohibited from instituting the civil action for the collection of the deficiency taxes. This contention is
untenable. The present complaint against the defendant-appellee is not for the recovery of civil liability
arising from the offense of falsification; it is for the collection of deficiency income tax. The provisions of
Section 1, Rule 107 (supra) that "after a criminal action has been commenced, no civil action arising
from the same offense can be prosecuted", is not applicable. The said criminal cases would not affect,
one way or another, the running of the prescriptive period for the commencement of the civil suit. The
criminal actions are entirely separate and distinct from the present civil suit. There is nothing in the law
which would have stopped the plaintiff-appellant from filing this civil suit simultaneously with or
during the pendency of the criminal cases. Assuming the applicability of the rule, at most, the
prosecution of the civil action would be suspended but not its filing within the prescribed period.
Section 332 of the Tax Code provides: "the running of the statutory limitation . . . shall be suspended for
the period during which the Collector of Internal Revenue is prohibited from making the assessment, or
beginning distraint or levy or a proceeding in court, and for sixty days thereafter". As heretofore stated,
the plaintiff-appellant was not prohibited by any order of the court or by any law from commencing or
filing a proceeding in court. x x x (Emphasis supplied)
The BIR could have filed a collection suit against PNB or PNOC with the proper regional trial court, which
before 2004 had jurisdiction over tax collection cases. At the very least, the BIR should have filed with
the proper regional trial court a collection case ad cautelam during the pendency of the present case in
court. This would have suspended the running of the prescriptive period. However, the BIR neglected to
file a collection case before 7 October 1989, the expiration of the prescriptive period to collect the tax
from PNB.
The BIR could also have administratively collected the tax from PNB and PNOC. In fact, during the
pendency of the case in the Court of Tax Appeals, the BIR Commissioner administratively garnished
PNB's funds with the Central Bank, although the garnishment is void because the prescriptive period
had already expired even by the majority opinion's own computation of the prescriptive period. This
only proves that nothing prevented the BIR from administratively garnishing PNB's or PNOC's
accounts even during the pendency of the present case. However, the BIR garnished PNB's funds only
after the prescriptive period had expired on 7 October 1989.
Obviously, the BIR failed to collect the tax before 7 October 1989 because of the fault or negligence of
the BIR, and not because a court order prevented the BIR from collecting the tax before the expiration
of the prescriptive period on 7 October 1989. The BIR was free at any time to distrain or levy on the
assets of PNB or PNOC, as well as to file a collection suit before the regular courts against PNB or PNOC,
even during the pendency of the present petition in the various courts.
In particular, the BIR could have distrained or levied on the assets of PNB at any time because PNB was
not even a party to the tax compromise between the BIR and PNOC. Indeed, the BIR did garnish the
funds of PNB, but only after the expiration of the prescriptive period. The BIR simply slept on its rights.
Neither PNOC nor PNB instituted the present case against the BIR to prevent the collection of the tax.
Private respondent Tirso B. Savellano, who is not the taxpayer, originally filed this petition against the
BIR Commissioner only, and later on impleaded PNOC and PNB. This Court has applied Section 223 of
the Tax Code suspending the running of the prescriptive period in cases where the taxpayer sued the
BIR Commissioner to prevent the collection of a tax, as when the taxpayer disputed the validity or
amount of the assessment before the Court of Tax Appeals.35 This is not the situation in the present case
since PNOC and PNB have not sued the BIR Commissioner to prevent the collection of the tax, and they
do not dispute the validity or amount of the assessment issued against them.
Nothing legally prevented the BIR from collecting the tax, administratively or judicially, from PNOC or
PNB at any time before 7 October 1989. Thus, the BIR cannot invoke Section 223 of the Tax Code to
claim the suspension of the running of the prescriptive period during the pendency of the present case
in the courts.
Conclusion
To conclude, the compromise agreement between the BIR and PNOC falls within the coverage of EO No.
No. 44 and its implementing rules. The compromise agreement is not contrary to law, morals, good
customs, public order, or public policy.36 Thus, the compromise agreement is valid, and has the effect
of res judicata on the BIR and PNOC. In any event, the collection of the foregone tax is barred by
prescription.
Accordingly, I dissent from the majority opinion. I vote to grant the petition, to declare valid the 22 June
1987 tax compromise between PNOC and the BIR, and to deny the claim of private respondent Tirso B.
Savellano for an additional informer's reward of P43,800,915.25.
SEPARATE OPINION
TINGA, J.:
I agree with the ponencia that no valid compromise agreement had been entered into between the
Philippine National Oil Company (PNOC) and the Bureau of Internal Revenue (BIR).
First, the coverage of the governing special compromise tax measure.
Executive Order No. 44, on which the compromise agreement was predicated, explicitly delineates the
parameters within which the amnesty provided therein may be availed of. Section 1 thereof allows the
compromise of disputed assessments or delinquent accounts pending as of 31 December 1985, viz.:
SECTION 1. The Commissioner of Internal Revenue or his duly authorized representatives may
compromise any disputed assessment or delinquent account pending as of December 31, 1985, upon
the payment of an amount equal to thirty percent (30%) of the basic tax assessed. In such cases, the
Commissioner of Internal Revenue or his duly authorized representatives shall condone the
corresponding interests and penalties. (Emphasis supplied)
The directive in Section 1 is reiterated in the first paragraph of Revenue Memorandum Circular No. 31-
861, Sections 2 and 3 of Revenue Regulation No. 17-862, and Section 1 of Revenue Memorandum Order
No. 39-86.3
Evidently, E.O. No. 44 applies only to "disputed assessment or delinquent account pending as of
December 31, 1985". This is not an executive issuance meant to give blanket authority on the
Commissioner of Internal Revenue to compromise away tax liabilities. In fact, the "cut-off" period
stipulated in the executive order refers to a date nine months prior to the date of the promulgation of
the issuance, 4 September 1986.
The authority to compromise was delegated for a specific purpose, as stated in E.O. No. 44. Significantly
in that regard, the Executive Order is not a mere executive issuance but a legislative edict in much the
same fashion as an Act of Congress, issued as it was by then President Corazon C. Aquino in the exercise
of her legislative powers under the Freedom Constitution. The perambulatory clauses of E.O. No. 44
state the need to clear the backlog of pending cases of disputed assessments and delinquent
accounts4 in view of the fact that the records of Bureau of Internal Revenue show that over the past ten
years, a great number of cases involving disputed assessments and delinquent accounts for internal
revenue had accumulated.5 The interpretation of the provisions of E.O. No. 44 cannot be strained in
order to cover taxes that accrued after 31 December 1985, since this would no longer be included in the
"backlog" adverted to in the issuance. Parenthetically, the Executive Order is akin to a tax exemption
statute which should be construed strictly against the taxpayer.
The taxes sought to be compromised in this case concern the final tax on interest income representing
the earnings and/or yield from PNOC's money placements with the Philippine National Bank (PNB) for
the period from 15 October 1984 to 15 October 1986. Evidently, a cursory glance reveals that the PNOC
cannot invoke E.O. No. 44 with reference to its entire tax liability, as the period covered under the
Executive Order was only up to 31 December 1985. The withholding taxes due for the period of 01
January 1986 to 16 October 1986 are neither disputed assessments nor delinquent accounts pending as
of 31 December 1985.
Moreover, these are taxes that accrue from the yield of interest income of money market placements,
and clearly not at the time such placements were made by the PNOC. Even if the money market
placements were made in 1984 or 1985, it would not necessarily mean that the interest yields on these
placements were paid out or credited during those years. It is unclear when exactly between 1984 to
1986 did such interest incomes had accrued, but admittedly this is a question of fact that need not be
reviewed by this Court.
Nonetheless, I maintain that even without need of ascertaining when exactly such interest income
accrued, the compromise agreement in question is null and void in its entirety for being contrary to E.O.
No. 44.
While PNB failed to submit any application for compromise, PNOC submitted two offers not
applications for compromise settlement. PNOC's first proposal, contained in a letter dated 22
September 1986, offered to clear its basic6 tax liability through a set-off thereof against the claim for tax
refund/credit of the National Power Corporation (NPC), which amount was also supposedly a receivable
of PNOC from NPC. This proposal was reiterated in another letter dated 14 October 1986. The operative
portions of the first letter read:
We would like to amicably settle this liability with the BIR. In this regard, we wish to invoke the authority
vested by law in your office, particularly under Section 246 of the national Internal Revenue Code, as
amended, and the spirit underlying Executive Order No. 44 dated September 4, 1986. Consequently, we
hereby request for a compromise settlement and submit our offer for a compromise of the matter. xxx
(2) That PNOC be permitted to set-off its foregoing mentioned tax liability of P304,419,396.83 against
the tax refund/credit claims of the National Power Corporation (NPC) for specific taxes on fuel oil sold to
NPC totaling P335,239,450.21, which tax refunds/credits are actually receivable accounts of our
Company from NPC.7
Section 1 of E.O. No. 44 is explicit in declaring that the compromise of a disputed assessment or
delinquent account is accomplished through payment of an amount equal to thirty percent (30%) of the
basic tax assessed, a generous sum if I may add. Payment, as defined in this jurisdiction, means the
delivery of money or the performance of an obligation8. It institutes a totally different mode of
extinguishment of an obligation from compensation and/or confusion or merger9. PNOC invokes the
concepts of compensation and/or confusion or merger as it seeks to have the NPC, which allegedly had
outstanding payables due to PNOC, absorb PNOC's tax liabilities with its own outstanding tax credit due
from the BIR.
However, as noted by the BIR in its initial response to PNOC's proposal, NPC's claim was still under
process. Hence, at the time PNOC offered its terms for compromise to the BIR, no extinguishment of
PNOC's tax liability could have taken place whether by compensation, confusion or merger. There
was no mutual creditor-debtor relationship between PNOC and the BIR the existence of which is one
of the requisites for compensation to take place.10 Also, neither was there an outstanding creditor-
debtor relationship between the NPC and the BIR. Moreover, the "credit" which PNOC proposed to use
for the purpose of offsetting emanated from a segregate obligation than that due the BIR from PNOC;
hence, there could be no confusion or merger11 which could lead to payment.
In short, there was no legal basis for the NPC then to offset PNOC's tax liabilities through its own "tax
credit," as the said "tax credit" had not, in the first place, yet ripened as an existing obligation.
For that reason, PNOC cannot be deemed as having made payment, or even a valid offer of payment
through its first two letters, as there was no legal basis to effect its proposed mode of payment. In the
meantime, the outstanding tax liability had accrued and eventually, the deadline set forth in RMO No.
39-86 passed.
So now, the prescribed period of availment and the effective duration of the special compromise tax
measure.
RMO No. 39-86 pertains to "Guidelines for Implementation of Executive Order No. 44 re compromise
settlement of (1) delinquent tax accounts; or (2) disputed tax assessments as of December 31, 1985".
Paragraph 2 thereof is explicit as to the period for availment of the compromise settlement:
2. Period for availment. Filing of application for compromise settlement under the said law shall
be effective only until March 31, 1987. Applications filed on or before this date shall be valid even if the
(emphasis supplied)
The deadline was occasioned by Section 6 of E.O. No. 44, which itself provides for the term of effectivity
of the period for compromise:
Section 6. This Executive Order shall take effect immediately and shall remain effective until March 31,
1987.
The plain meaning of paragraph (2), in relation to Section 6, E.O. No. 44, is that the deadline for the
submission of an application for compromise settlement shall be effective only until 31 March 1987. As
of that point, had PNOC submitted an application for compromise settlement within the contemplation
of law?
Plainly, the two letters in 1986 of PNOC are not in the form of an "application for compromise
settlement". Though the Court need not be strict in demanding obeisance with the formal requisites, I
would consider any valid form of an application for compromise should concede the liability for tax, and
make a valid offer of payment. To require otherwise would render a mockery of the offer of tax
compromise. Owing to the legal implausibility of the initial offer of PNOC to the BIR, I could not consider
the first two letters as a valid application for compromise settlement. Moreover, the BIR expressly
rejected this application, if it could be construed as such, as early as November of 1986. If there was
indeed a bona fide intent on the part of PNOC to comply with E.O. No. 44 and its attendant revenue
issuances, it should have exerted efforts to comply with this deadline set forth under RMO No. 39-86, in
light of the BIR's rejection of its earlier offer. Instead, the 31 March 1987 deadline passed without a
word or renewed offer from the PNOC.
Instead, on 09 June 1987, or two months after the deadline had elapsed, PNOC made a second,
different offer, proposing by way of compromise to pay thirty (30%) of its basic tax liability, specifically
invoking Section 1 of E.O. 44. This new offer was subsequently accepted by the BIR.
The contrary view argues that owing to the administrative power of the tax commissioner, such
subsequent acceptance can be deemed as an effective extension of the deadline set forth under RMO
No. 39-86. However, E.O. No. 44 is explicit in declaring that its effectivity subsists only until 31 March
1987, a fact which is similarly demonstrated by paragraph (2) of RMO No. 39-86.
The dissent relies on the fact that E.O. No. 44, issued in the exercise of legislative powers then vested in
President Aquino, is a special law of more specific application in this case than the Tax Code. Yet the
delegation of authority to the tax commissioner to effect compromises is limited by the confines of E.O.
No. 44, which is explicit in stating that its effectivity runs only until 31 March 1987. Hence, contrary to
the dissenting view, the BIR Commissioner had no authority to extend the effectivity of E.O. No. 44, or
the deadline prescribed thereupon. RMO No. 39-86 properly recognizes such limitation, and assuming
that the subsequent acts of the tax commissioner contravene the deadline set by law and regulation,
those acts should be deemed as beyond the ambit of delegated power, and thus void. Under the
circumstances, only Congress could have validly extended the effectivity of the special compromise
tax measure.
Thus, the ponencia correctly concludes that the compromise agreement entered into on 22 June 1987 is
void. It was entered into after the lapse of the authority of BIR Commissioner to effect such compromise
agreement, owing to the prescribed effectivity of E.O. No. 44, from which such authority was derived.
Needless to say, much trouble would have been saved had the PNOC been timely in seeking a
compromise agreement with the BIR, and prudent enough in proposing one that had basis under law. It
cannot rely upon its status as a component of the government as basis for relief.
We should not discount the damage inflicted by the void compromise agreement on the informer, Tirso
Savellano. The financial remuneration to be obtained by the informer is designed to alleviate whatever
socio-political stigma that may attach as a result of the information that is divulged. The informer's right
is predicated on the amount actually paid, and if the amount paid is less than what is due as a result of
an unauthorized compromise, then the informer indubitably has an interest to assail the said
compromise.
Finally, the dissent raises the argument that prescription had run to bar the annulment of the
compromise agreement. Notably, this issue was not raised before any of the fora involved, by the Court
of Tax Appeals, the Court of Appeals, or this Court. Neither was it discussed in any of the assailed rulings.
The proper taxes due in this case have actually been paid to the government. Petitioners unfortunately
seek the refund of what has been already collected, despite the fact that they have all along conceded,
not denying at all, the basis for their tax liability. The Court should not be privy to the divestiture of the
huge tax payment already remitted to the cash-strapped government if there is no unequivocal basis for
the return thereof. More so, should it not be a party to the forfeiture of the informer's reward to which
the private respondent has a vested right as a matter of law and equity.
I vote to DENY the petitions.
Footnotes
1
Rollo (G.R. No. 109976), pp. 7-29.
2
Rollo (G.R. No. 112800), pp. 7-27.
3
Penned by Associate Justice Regina G. Ordonez-Benitez, with Associate Justices Arturo B. Buena and
Eduardo G. Montenegro, concurring, on 23 April 1993.
4
Penned by Associate Justice Oscar M. Herrera, with Associate Justices Consuelo Y. Santiago (now
Supreme Court Associate Justice) and Corona I. Somera, concurring, on 23 November 1993.
5
Penned by Associate Judge Constante C. Roaquin, with Presiding Judge Ernesto D. Acosta and Acting
Associate Judge Stella Dadivas-Farrales, concurring, on 28 May 1992.
6
CTA Rollo, p. 643.
7
Ibid., pp. 199-200.
8
Ibid., pp. 17-18.
9
Ibid., p. 644.
10
Id.
11
Ibid., pp. 19-20.
12
Ibid., pp. 196-198.
13
Ibid., p. 645.
14
Id.
15
Ibid. p. 21.
16
Ibid., p. 22.
17
Ibid., pp. 202-208.
18
Ibid., pp. 1-16.
19
Ibid., pp. 50-66.
20
Ibid., pp. 32-40.
21
Ibid., pp. 99-103, 106-112.
22
Penned by Presiding Judge Amante Filler, with Associate Judges Alex Z. Reyes and Constante C.
Roaquin, concurring; Ibid., p. 141.
23
Ibid., pp. 158-164.
24
Ibid., pp. 168-172.
25
This Court, in the case of Commissioner of Internal Revenue v. Commission on Audit (G.R. No. 101976,
29 January 1993, 218 SCRA 203, 214), set aside the disallowance in audit by the Commission on Audit
(COA) and affirmed the payment by the BIR Commissioner of informer's reward to Savellano, private
respondent in the present case, ruling thus:
That the informer's reward was sought and given to tax delinquencies of government agencies provides
no reason for disallowance. The law on the matter makes no distinction whatsoever between delinqent
taxpayers in this regard, whether private persons or corporation, or public or quasi-public agencies, it
being sufficient for its operation that the person or entity concerned is subject to, and violated, revenue
laws, and the informer's report thereof resulted in the recovery of revenues.
26
Resolution, dated 28 December 1989, penned by Presiding Judge Amante Filler, with Associate Judges
Alex Z. Reyes and Constante C. Roaquin, concurring; CTA Rollo, pp. 233-234.
27
Resolution, dated 17 May 1990, penned by Presiding Judge Amante Filler, with Associate Judge Alex Z.
Reyes and Constante C. Roaquin, concurring; Ibid., pp. 281-282.
28
Ibid., pp. 398-399.
29
Ibid., pp. 433-435, 439-442.
30
Ibid., pp. 447-448.
31
Rollo (G.R. No. 112800), p. 21.
32
CA Rollo (CA-G.R. SP No. 29526), p. 11.
33
CTA Rollo, pp. 538-541.
34
Ibid., pp. 449-458.
35
Penned by Presiding Judge Alex Z. Reyes, with Associate Judges Ernesto D. Acosta and Constante C.
Roaquin, concurring; Ibid., pp. 484-485.
36
Penned by Presiding Judge Alex Z. Reyes; CTA Rollo, p. 489.
37
Ibid, p. 490.
38
Ibid., pp. 490-493.
39
Ibid., pp. 523-527.
40
Ibid., pp. 528-543.
41
Ibid., p. 565.
42
Ibid., pp. 566-571, 572-580.
43
Ibid., pp. 598-603.
44
Ibid., pp. 605-607, 608-610.
45
Ibid., p. 800.
46
Penned by Presiding Judge Ernesto D. Acosta, with Associate Judges Ramon O. De Veyra and Manuel K.
Gruba, concurring; Ibid., pp. 834-841.
47
CA Rollo (CA-G.R. SP No. 29583), p. 83.
48
Ibid., p. 84.
49
Ibid., p. 124.
50
Ibid., p. 122.
51
Rollo (G.R. No. 109976), pp. 7-29.
52
Rollo (G.R. No. 112800), pp. 7-27.
53
The full text of the BIR demand letter reads as follows:
Lungsod ng Quezon
January 16, 1991
PHILIPPINE NATIONAL BANK

Escolta, Manila
G e n t l e m e n:
This is in connection with the withholding taxes assessed against you in the amount of P303,343,765.32,
plus interest of P82,617,815.50 or a total of P385,961,580.82 on the interest earnings on the money
market placements of Philippine National Oil Company (PNOC) subject matter of our letter dated
November 11, 1986, copy attached.
It appears that the aforesaid withholding taxes have been compromised in the amount of
P91,003,129.83 representing 30% of P303,343,765.32 (basic tax) pursuant to E.O. 44.
After a circumspect study of the case, this Office has arrived at the conclusion that the compromise
settlement is without legal basis considering that E.O. 44 contemplates disputed or delinquent
taxes. The withholding taxes are actually not tax but penalty for your failure to withhold the same from
PNOC (National Development Corp. vs. Comm. Of Int. Rev., G.R. No. 539611, June 30, 1987.) Moreover,
the obligation to withhold the tax is your personal liability as withholding agent (Comm. Of Int. Rev. vs.
Malayan Insurance Co., G.R. No. L-21913, November 18, 1967.) Such liability is imposed under Section
51(e) of the NIRC.
Accordingly, there is still due from you the amount of P294,958,450.93 arrived at as follows:
Withholding tax, plus interest under P 385,961,580.82

letter of demand dated November 11,
1986
Less: Amount paid under E.O. 44 P 91,003,129.89
Amount still due and collectible P 294,958,450.73
IN VIEW THEREOF, it is requested that you cause to be paid to the Chief, Receivable Accounts/Billing
Division, thru the Chief, Litigation Division, Room 703, BIR National Office Building, Diliman, Quezon City,
within thirty (30) days from receipt hereof in order that this case may be considered closed and
terminated.
Very truly yours,

(SGD) JOSE U. ONG
(CTA Rollo, pp. 447-448).

54
Section 282(A) of the National Internal Revenue Code of 1997 still provide for informer's reward to
persons instrumental in the discovery of violations of the Code, equivalent to ten percent (10%) of the
revenues, surcharges or fees recovered and/or fine or penalty imposed and collected or P1,000,000.00
per case, whichever is lower.
55
Rep. Act No. 1125 became effective on 16 June 1954, while P.D. No. 242 was promulgated on 09 July
1973.
56
G.R. No. 86625, 22 December 1989, 180 SCRA 609, 617.
57
Section 7 of Rep. Act No. 1125 provides that:
SECTION 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
review by appeal, as herein provided -
(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other law or part of law administered by the
Bureau of Internal Revenue;
(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or
other money charges; seizure, detention or release of property affected; fines, forfeitures or other
penalties imposed in relation thereto; or other or other matters arising under the Customs Law or other
law or part of law administered by the Bureau of Customs; and
(3) Decisions of provincial or city Boards of Assessment Appeals in cases involving the assessment
and taxation of real property or other matters arising under the Assessment Law, including rules and
regulations relative thereto.
58
Supra, note 56.
59
44 Phil 138, 149 (1922).
60
Lichauco & Company, Inc. v. Apostol, et al., 44 Phil 138, 146-147 (1922).
61
Manila Railroad Co. v. Rafferty, 40 Phil 224 (1919).
62
National Power Corporation v. Hon. Presiding Judge, RTC, Br. XXV, G.R. No. 72477, 16 October 1990,
190 SCRA 477.
63
Mison v. Natividad, G.R. No. 82586, 11 September 1992, 213 SCRA 734; Marubeni Corporation v.
Commissioner of Internal Revenue, G.R. No. 76573, 14 September 1989, 177 SCRA 500; Papa, et al. v.
Mago, et al., 130 Phil 886 (1968).
64
G.R. No. L-21803, 17 December 1966, 18 SCRA 946, 953.
65
G.R. No. 127777, 01 October 1999, 316 SCRA 118, citing Vitug and Acosta, Tax Law and
Jurisprudence, 1st Edition, 1997, p. 267.
66
Revenue Regulations No. 17-86, Section 2(a), paragraph 2.
67
Revenue Regulations No. 17-86, Section 2(c)(4).
68
Revenue Regulations No. 17-86, Section 2(a)(2) defines delinquent accounts as:
a) Delinquent Account refers to the amount of tax due on or before December 31, 1985 from a
taxpayer who failed to pay the same within the time prescribed for its payment, arising from (2) a
deficiency assessment issued by the BIR which has become final and executory.
69
Revenue Regulations No. 17-86, Section 2(b) provides:
b) Disputed Assessment refers to a tax assessment disputed or protested on or before December

31, 1985 under any of the following categories:
1) if the same is administratively protested within thirty (30) days from the date the taxpayer
received the assessment; or
2) if the decision of the BIR on the taxpayer's administrative protest is appealed by the taxpayer
before an appropriate Court.
70
E.O. No. 41 offers tax amnesty to taxpayers who failed to declare the correct amount of taxes from 01
January 1981 to 31 December 1985. To avail of said tax amnesty, the taxpayer must filed a return and
pay a tax equivalent to 10% of the increase in his/its net worth from 31 December 1980 to 31 December
1985, provided that in no case shall the tax be less than P5,000 for individuals and P10,000 for juridical
persons.
71
The exact text of Section 246(1) of the National Internal Revenue Code of 1977, as amended, is
reproduced below:
SEC. 246. Authority of the Commissioner to compromise, abate, and refund/credit taxes. The
Commissioner may
(1) Compromise the payment of any internal revenue tax when
(a) A reasonable doubt as to the validity of the claim against the taxpayer exists; or
(b) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.

Now Section 204(A) of the National Internal Revenue Code of 1997.

72
Revenue Memorandum Order No. 39-86, par. 3.1.
73
Revenue Memorandum Order No. 39-86, par. 3.2.
74
Supra, note 72.
75
Geukeko v. Araneta, 102 Phil 706 (1957).
76
Supra., note 7.
77
There is no copy in the records of PNOC's letter to the BIR, dated 14 October 1986. The second
paragraph of BIR's letter to PNOC, dated 11 November 1986 (Supra., note 11), however, made reference
to PNOC's letter stating therein that:
In your letter to us dated October 14, 1986, you submitted a proposal to settle this tax liability by off-
setting the outstanding claim for refund/credit of the National Power Corporation with this Bureau, in
the total sum of P335,259,450.21. which you claim will ultimately be assigned to Petrophil Corporation,
your subsidiary, against the unpaid basic withholding final tax liability; and you further requested this
Office to reconsider the waiver of the deficiency interests due for the same reason that the 25%
surcharge was waived by this Office.
78
Supra., note 8.
79
Supra., note 11.
80
Supra., note 12.
81
Leongson, et al. v. Court of Appeals, 151 Phil 314 (1973).
82
CTA Rollo, pp. 56-57.
83
Primicias v. Fugoso, 80 Phil 71 (1948).
84
Antiquera v. Baluyot, 91 Phil 213 (1952); Gatmaitan v. Pascual, 76 Phil. 315 (1946).
85
G.R. No. 108292, 10 September 1993, 226 SCRA 314.
86
Ibid., p. 328.
87
Id.
88
Rollo (G.R. No. 112800), p. 58.
89
Mayuga, et al. v. Court of Appeals, et al., G.R. No. L-46953, 28 September 1987, 154 SCRA 309.
90
Republic of the Philippines v. Sandiganbayan, supra, note 85; First Philippine Holdings Corp. v.
Sandiganbayan, G.R. No. 95197, 30 September 1991, 202 SCRA 212.
91
Commissioner of Internal Revenue v. Pineda, G.R. No. L-22734, 15 September 1967, 21 SCRA 105.
92
100 Phil 288 (1956).
93
Id.
94
Atlas Consolidated Mining and Development Corp. v. Commissioner of Internal Revenue, G.R. No. L-
26911, 27 January 1981, 102 SCRA 246; Philippine Guaranty Company, Inc. v. Commissioner of Internal
Revenue, et al., 121 Phil 755 (1965).
95
Vera, et al. v. Fernandez, et al., G.R. No. L-31364, 30 March 1979, 89 SCRA 199, 204.
96
Revenue Regulations No. 12-85 provides the procedure for the issuance of an assessment by the BIR,
as well as, the procedure for protesting an assessment. According to Revenue Regulations No. 12-85,
when the BIR Commissioner or his duly authorized representative had found that taxes should be
assessed, he should notify the taxpayer of the findings. The pre-assessment notice should be in writing
and sent to the taxpayer's address as indicated in his returns or at his last known address. The BIR could
proceed to issuing an assessment notice only in the event that the taxpayer failed to respond to the pre-
assessment notice within the prescribed period, or when the taxpayer's response was unmeritorious.
97
Aguinaldo Industries Corporation v. Commissioner of Internal Revenue, G.R. No. L-29790, 25 February
1982, 112 SCRA 136.
98
Atlas Consolidated Mining and Development Corp. v. Commissioner of Internal Revenue, supra, note 94.
99
Revenue Regulations No. 12-85, Section 7.
100
Revenue Regulations No. 12-85, Section 9.
101
Section 268 of the National Internal Revenue Code of 1977, as amended, reads in full as:
SEC. 268. Period of limitation upon assessment and collection. Except as provided in the succeeding
taxes shall be begun after the expiration of such period; Provided, that in a case where a return is filed
beyond the period prescribed by law, the three-year period shall be counted from the day the return
was filed. For purposes of this section, a return filed before the last day prescribed by law for the filing
thereof shall be considered filed on such last day.
Now Section 203 of the National Internal Revenue Code of 1997.

102
Navare v. Court of Appeals, G.R. No. 56838, 26 April 1990, 184 SCRA 584; Commissioner of Internal
Revenue v. Yusay, 124 Phil 1395 (1966); Bollozos v. Court of Tax Appeals, 121 Phil 440 (1965); Hodges v.
Salas, 63 Phil 567 (1936).
103
116 Phil 615 (1962).
104
Section 269 (a) of the National Internal Revenue Code of 1977, as amended, reads:
SEC. 269. Exceptions as to period of limitation of assessment and collection of taxes. (a) In the case
of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at
any time within ten years after the discovery of the falsity, fraud, or omission; Provided, That in a fraud
assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance
of in the civil or criminal action for the collection thereof.
Now Section 222(a) of the National Internal Revenue Code of 1997.

105
Supra., note 101.
106
Palanca, et al. v. Commissioner of Internal Revenue, 114 Phil 203, citing the unreported case
of Alhambra Cigar and Cigarette Mfg. Co. v. Collector of Internal Revenue, G.R. No. L-12026 and L-12131,
29 May 1959.
107
CTA Rollo, p. 65.
108
Section 271 of the National Internal Revenue Code of 1977, as amended, is reproduced in full below:
SEC. 271. Suspension of running of statute. The running of the statute of limitations provided in
Sections 268 and 269 on the making of assessment and the beginning of distraint or levy or a proceeding
in court for collection, in respect of any deficiency, shall be suspended for the period during which the
Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in
court and for sixty days thereafter; when the taxpayer requests for a reinvestigation which is granted by
the Commissioner; when the taxpayer cannot be located in the address given by him in the return filed
upon which a tax is being assessed or collected; Provided, That, if the taxpayer informs the
Commissioner of any change in address, the running of the statute of limitations will not be suspended;
when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative,
or a member of his household with sufficient discretion, and no property could be located; and when
the taxpayer is out of the Philippines.
Now Section 223 of the National Internal Revenue Code of 1997.

109
G.R. No. L-21609, 29 September 1966, 18 SCRA 207.
110
386 Phil 611 (2000).
111
Section 316(1) of the National Internal Revenue Code of 1977, as amended, reads:
SEC. 316. Informer's reward to persons instrumental in the discovery of violations of the National
Internal Revenue Code and in the discovery and seizure of smuggled goods.
(1) For violations of the National Internal Revenue Code. Any person, except an internal revenue
official or employee, or other public official, or his relative within the sixth degree of consanguinity, who
voluntarily gives definite and sworn information, not yet in the possession of the Bureau of Internal
Revenue, leading to the discovery of frauds upon the internal revenue laws or violations of any of the
provisions thereof, thereby resulting in the recovery of revenues, surcharges and fees and/or the
conviction of the guilty party and/or the imposition of any fine or penalty shall be rewarded in a sum
equivalent to fifteen per centum of the revenues, surcharges or fees recovered and/or fine or penalty
imposed and collected. The same amount of reward shall also be given to an informer where the
offender has offered to compromise the violation of law committed by him and his offer has been
accepted by the Commissioner and in such a case, the fifteen per centum reward fixed herein shall be
based on the amount agreed upon in the compromise and collected from the offender; Provided, That
should no revenue, surcharges or fees be actually recovered or collected, such person shall not be
entitled to a reward; Provided, further, That the information mentioned herein shall not refer to a case
already pending or previously investigated or examined by the Commissioner or any of his deputies,
agents or examiners, or the Minister of Finance or any of his deputies or agents; Provided, finally, That
the reward provided herein shall be paid under regulations issued by the Commissioner of Internal
Revenue with the approval of the Minister of Finance.
Now Section 282(A) of the National Internal Revenue Code of 1997, with modifications, supra., note
54.
112
Philippine British Assurance Co., Inc. v. Intermediate Appellate Court, G.R. No. 72005, 29 May 1987,
150 SCRA 520; Loc Cham v. Ocampo, 77 Phil. 636 (1946).
CARPIO, J.:
1
Executive Order No. 44 covers the tax liability from 1984 to 31 December 1985, while Revenue
Memorandum Circular No. 31-86 covers the tax liability from 1 January 1986 to 21 August 1986.
2
Araneta v. Perez, No. L-16187, 30 April 1963, 7 SCRA 923.
3
G.R. No. L-22074, 6 September 1965.
4
Commissioner of Internal Revenue v. Court of Appeals, Court of Tax Appeals and A. Soriano
Corporation, G.R. No. 108576, 20 January 1999.
5
Sections 57 and 58, Tax Code.
6
National Internal Revenue Code.
7
Section 204 of the Tax Code provides: "Authority of the Commissioner to compromise, abate, and
refund/credit taxes. The Commissioner may
(1) Compromise the payment of any internal revenue tax, when:
(a) A reasonable doubt as to the validity of the claim against the taxpayer exists; or
(b) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
x x x."
8
316 SCRA 118 (1999), citing Vitug and Acosta, Tax Law and Jurisprudence, 1st Edition, 1997, p. 267.
9
Ibid.
10
The withholding tax liability from 1 January 1986 to 21 August 1986 is not covered by EO No. 44 but by
Revenue Memorandum Circular No. 31-86.
11
Guidelines for implementation of Executive Order No. 44 re compromise settlement of (1) delinquent
accounts; or (2) disputed tax assessments, as of December 31, 1985.
12
Declaring A One-Time Tax Amnesty Covering Unpaid Income Taxes For The Years 1981 To 1985. The
amnesty tax amount is 10% of the taxpayer's net worth from 31 December 1980 to 31 December 1985.
13
Section 1 of Executive Order No. 95 dated 17 December 1986 provides: "The period within which
taxpayers may avail themselves of the expanded tax amnesty under Executive Order No. 41, as
amended, is hereby extended up to January 31, 1987."
14
Exhibit "4", PNOC, CTA Records, p. 199.
15
Exhibit "1", PNOC, CTA Records, pp.196-197.
16
Section 5 of Revenue Regulations No. 17-86 provides: "Mode of Payment. - x x x.
Deferred or staggered payments of compromise amounts over P50,000 may be considered on a case to
case basis in accordance with the extant regulations of the Bureau upon approval of the Commissioner
of Internal Revenue, his Deputy or Assistant as delineated in their respective jurisdictions.
17
Annex "Y" of Omnibus Motion dated 21 February 1991 submitted by Tirso B. Savellano with the Court
of Tax Appeals, CTA Records, pp. 449-450.
18
Republic of the Philippines v. Hon. Estenzo, 134 Phil. 139 (1968).
19
Hernaez v. Yan Kao, 123 Phil. 1147 (1966).
20
Sabino v. Cuba, 125 Phil. 140 (1966).
21
45 Phil. 488 (1923).
22
111 Phil. 609 (1961).
23
See Republic v. Sandiganbaya, G.R. No. 108292, 10 September 1993, 226 SCRA 314.
24
Article 1330 of the Civil Code states: "A contract where consent is given through mistake, violence,
intimidation, undue influence, or fraud is voidable."
25
Section 58(A) of the Tax Code provides in part: "The return for final withholding tax shall be filed and
the payment made within twenty-five (25) days from the close of each calendar quarter, x x x."
26
Revenue Regulations No. 1-84.
27
Section 203 of the Tax Code provides: "Period of Limitation Upon Assessment and Collection. - Except
as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last
day prescribed by law for the filing of the return, and no proceeding in court without assessment for the
collection of such taxes shall be begun after the expiration of such period: Provided, That in case where
a return is filed beyond the period prescribed by law, the three-year prescriptive period shall be counted
from the day the return was filed. For purposes of this Section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as filed on such last day."
28
Benjamin B. Aban, The Law of Basic Taxation in the Philippines, pp. 267-268 (2001).
29
Section 207, Tax Code.
30
Annex "A" of Petition for Review dated 5 April 1988 filed by Tirso B. Savellana with the Court of Tax
Appeals, CTA Records, pp. 1-16.
31
Under the present Section 222(c) of the Tax Code as amended by RA No. 8424 which took effect on 1
January 1998, this period has been increased to five years.
32
7th Edition, 1999.
33
G.R. No. L-63575, 20 January 1988, 157 SCRA 140.
34
G.R. No. L-13754, 31 March 1962, 4 SCRA 783.
35
Protector's Services v. Court of Appeals, 386 Phil. 611 (2000); Republic v. Ker & Company, 124 Phil.
822 (1966).
36
Article 1306 of the Civil Code.
TINGA, J.:
1
Revenue Memorandum Circular No. 31-86, 12 September 1986: x x x [U]nder Executive Order No. 44,
the Commissioner of Internal Revenue or his duly authorized representatives shall accept compromise
payments by taxpayers with outstanding delinquent accounts and disputed assessments (except
withholding taxes whether final or creditable) pending as of December 31, 1985.
2
Revenue Regulation No. 17-86, 08 October1986:
SECTION 2. Definition of terms. In applying the provisions of these regulations the following terms
shall have the meaning indicated below:
a) Delinquent account Refers to the amount of tax due on or before December 31, 1985 from a
assessed tax, whether or not a tax return was filed, or (2) a deficiency assessment issued by the BIR
which has become final and executory.
the amount of compromise to be paid. x x x
SECTION 3. Who may avail. Any person, natural or juridical, may settle thru a compromise, any
delinquent account or disputed assessment which has been due as of December 31, 1985, by paying an
amount equal to thirty (30%) per cent of the basic tax assessed.
3
Revenue Memorandum Order No. 39-86, 18 November 1986:
Par. 2. Period for availment. - Filing of application for compromise settlement under the said law shall be
4
E.O. No. 44, s. 1986, second whereas clause.
5
E.O. No. 44, s. 1986, first whereas clause.
6
Excluding interest and surcharges as of 31 July 1986.
7
Rollo, p. 19.
8
Article 1232, Civil Code.
9
Article 1231, Civil Code.
10
See Article 1278, Civil Code.
11
See Article 1275, Civil Code, in relation to 1231(5), Civil Code.
[No. L-11176. June 29, 1959]
THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs. MANILA
LODGE No. 761 OF THE BENEVOLENT & PROTECTIVE ORDER OF ELKS
and THE COURT OF TAX APPEALS, respondents.
1. 1.TAXATION; PRIVILEGE TAX; DEALER OF LIQUOR AND TOBACCO, WHEN

MAY BE SUBJECTED TO PRIVILEGE TAX.The "retail liquor dealers", "retail
dealers in fermented liquors" and "retail tobacco dealers" required in section 193 of
the Tax Code, in relation to section 178 of the same, to pay taxes, are those engaged
in the "business" of selling liquor and tobacco.
1. 2.ID.; ID.; ID.; NON-PROFIT ORGANIZATIONS; LIABILITY FOR THE PAYMENT

OF PRIVILEGE TAX.The plain and ordinary meaning of "business" is restricted
to activities- or affairs where profit is the purpose, or livelihood is the motive . As
the term "business" is used without any qualification in the aforementioned
sections of the Tax Code, it should be construed in its plain and ordinary meaning.
Thus, in the case at bar the respondent club cannot be considered as engaged in the
"business" of selling liquor and tobacco because, in pursuance of its purpose as a
fraternal social club, it sells on retail at its clubhouse, liquor, cigars and cigarettes,
on a very limited scale only to its members and their guests, providing just enough
margin to cover operational expenses without intention to obtain profit. Hence, it
cannot be held liable for of the privilege taxes required by section 193 of the Tax
Code.
PETITION for review by certiorari of a decision of the Court of Tax Appeals.

Solicitor General Ambrosio Padilla and Solicitor Frin C. Zaballero for petitioner.
Manuel O. Chan for respondent Lodge.
984
Collector of Internal Revenue vs. Manila Lodge No. 761 of
the Benevolent & Protective Order of Elks and the CTA
CONCEPCIN, J.:
This is an appeal taken by the Collector of Internal Revenue from a decision of the
Court of Tax Appeals holding that the Manila Lodge No. 761 of the Benevolent &
Protective Order of Elks "is not liable for privilege taxes on its sale by retail of
liquor and tobacco exclusively to its members and their guests," and reversing and
setting aside a decision of said appellant to the contrary, dated November 19, 1953,
without special pronouncement as to costs. The uncontested facts are set forth in
the decision of said Court, from which we quote:
"This is an appeal from two decisions of the respondent Collector of Internal Revenue
assessing and demanding from the petitioner herein the sums of P1,203.50 and P332.00,
respectively representing fixed taxes as retail dealer in liquor, fermented liquor, and
tobacco, allegedly due from petitioner for the period from the 4th quarter of 1946 to 1953
and the period from 1954-1955. pursuant to subsections (i), (k) and (n) of section 193 of the
Tax Code, in relation to 178 of the same Code.
"The petitioner, Manila Lodge No. 761 is admittedly a fraternal, civic, non-stock, non-
profit organization duly incorporated under Philippine laws. It owns and operates a
clubhouse located at Dewey Boulevard, Manila, wherein it sells at retail, liquor, fermented
liquor, cigar and cigarettes only to its members- and their guests. B.I.R. agents discovered
that the Manila Elks Club had not paid for the period in question the privilege tax for retail
liquor dealer (B-4), retail dealer in fermented liquor (B-7), and retail tobacco dealer (B-9-a)
prescribed in section 193 of the Tax Code.
"On November 19, 1953, the Collector of Internal Revenue assessed against and
demanded from the petitioner the payment of the sum of P1,203.50 representing fixed taxes,
as retail dealer, for the period from its 4th quarter of 1946 to 1953, exclusive of the
suggested compromise penalty of P80.00. The petitioner, claiming that it was exempted
from the payment of the privilege taxes in question, requested that the said assessment be
reviewed by the Conference Staff of the Bureau of Internal Revenue. The Conference Staff,
after due hearing, upheld and reiterated the assessment made by the respondent Collector
of Internal Revenue. Forthwith, the petitioner appealed to this Court on June 1, 1955.
"During the pendency of the original petition for review in the above-entitled case,
respondent issued another assessment covering
985
VOL. 105, JUNE 29, 1959 985
Collector of Internal Revenue vs. Manila, Lodge No. 761 of
fixed taxes for the years 1954 to 1955 in the amount of P332.00, exclusive of the suggested
compromise penalty of P50.00. Consequently, petitioner with leave of Court filed a
supplemental petition for review which included the latter assessment.
"Petitioner bases its claim for exemption from the payment of the privilege taxes in
question on the grounds that it is not engaged in the business of selling at retail liquor,
fermented liquor, and tobacco because the sale of these aforementioned specific goods is
made only to members of the club and their guests' on a very limited scale in pursuance
only of its general purpose as a fraternal social club, to provide comfort, recreation, and
convenience to such members, and merely to provide enough margin to cover operational
expenses.' (Petitioner's Memo p. 3).
"Respondent, on the other hand, maintains that persons selling articles subject to
specific tax, such as cigars, tobacco. liquor and the like, are subject to the fixed taxes
imposed by section 193 of the Tax Code, irrespective of whether or not they made profit,
and whether or not they are civic or fraternal clubs selling only to their members and their
guests. This contention is based on a ruling promulgated by the Bureau of Internal
Revenue made in 1921."
Petitioner herein maintains that:
1. "1.The respondent Court of Tax Appeals erred in reversing the decision of the
petitioner-appellant which held the respondent club liable for fixed taxes.
2. "2.The respondent Court of Tax Appeals erred in holding that before respondent
club's liability for the privilege taxes imposed by section 193 of the Tax Code
attaches it is necessary that it be engaged in the 'business' of selling liquor and
tobacco.
3. "3.The respondent Court of Tax Appeals erred in holding that a fraternal, civic, non-
stock, non-profit organization like the respondent club selling at retail liquor and
tobacco only to its members and their guests with just enough margin to cover
operational expenses should not be held liable for the fixed taxes incident to the
business of selling at retail, liquor and tobacco.
4. "4.The respondent Court of Tax Appeals erred in holding that the administrative
construction of the Bureau of Internal Revenue on the matter in question is outside
the ambit of, and is inconsistent with, the Revised Administrative Code and Tax
Code."
This appeal is untenable. In the language of the Court of Tax Appeals:

"The bone of contention between the two parties herein * * *, lies in the proper
interpretation and application of the pertinent provi-
986
sions of the Tax Code, namely, subsections (i), (k) and (n) of section 193 in relation to
section 178 of the Tax Code, which we quote hereunder: 'Sec. 178. Payment of privilege
taxes.A privilege tax must be paid before any business or occupation hereinafter specified
can be lawfully begun or pursued. The tax on business is payable for every separate or
distinct establishment or place where the business subject to the tax is conducted; and one
occupation or line of business does not become exempt by being conducted with some other
occupation or business for which such tax has been paid.
'The occupation tax must be paid by each individual engaged in a calling subject thereto;
the tax on a business by the person, firm, or company conducting the same.' (Italics
supplied.)
SEC. 193. Amount of tax on business.Fixed taxes on business shall be collected as
follows, the amount stated being for the whole year when not otherwise specified:
(i) Retail liquor dealers, one hundred pesos.
(k) Retail dealers in fermented liquors, fifty pesos.
* * * * * * *
(n) Wholesale tobacco dealers, sixty pesos; retail tobacco dealers, sixteen pesos.'
"The aforequoted provisions of the Tax Code are clear and precise. The privilege taxes
prescribed in section 193 of the Tax Code in relation to section 178 of the same, are to be
imposed only on persons or entities who engage in the activities mentioned or classified
therein for 'business' purposes. This evident intention of the law becomes more palpable
when we take into consideration the fact that the drafters of our Tax Code had grouped the
aforequoted provisions of law under one general division of the Tax Code headed as Title V,
Privilege Taxes on Business and occupation.'
"It is not therefore entirely correct to maintain as respondent does, that all persons
selling articles subject to specific taxes, like liquor and tobacco, should likewise be subject
to the fixed taxes imposed by section 193 of the Tax Code. We believe, that in order that
these persons should be subjected to the privilege taxes imposed by the aforementioned
section of the Tax Code, it is necessary that they be engaged in the 'business' of selling
liquor and tobacco, otherwise the privilege taxes as a dealer of liquor and tobacco can not
attach.
"At this juncture a definition of the word 'business' is in order and we have the following:
The word 'business' in its ordinary and common use is employed to designate human
efforts which have for their and living or reward; it is not commonly used as descriptive of
charitable, religious, educa-
987
VOL. 105, JUNE 29, 1959 987
tional or social agencies.' (Ballantine's Law Dictionary, 1948 Ed. P. 179)
'Business'that which busies or engages time, attention or labor as a principal serious
concern or interest; any particular occupation or employment habitually engaged in
specially for livelihood or gain.' (Vol. 1, 1949 Merriam-Webster's New International
Dictionary, 2nd Ed. p. 362.).
"Other definitions of the term 'business' as given by judicial pronouncement are found in
Volume V, Words and Phrases, page 999 as follows:
'Business is a word of large signification, and denotes the employment or occupation in
which a person is engaged to procure a living'. (Citing: Goddard v. Chaffee, 84 Mass (Allen)
395; 79 Am Dec. 796).
'Business in common speech means habitual or regular occupation that a party is
engaged in with a view to winning a livelihood or some gain.' (Citing: In re Lemont, 41 p.
2D, 497, 502)
'An enterprise not conducted as a means of livelihood or for profit does not come within
the ordinary meaning of the terms, 'business, trade or industry.' (Citing City of
Rochester vs.Rochester Girl's Home, 194 N.Y.S. 236, 237).
'The term 'business' as used in law imposing a license tax on business, trades, etc.
ordinarily means business in the trade or commercial sense only, carried on with a view to
profit or livelihood.' (Citing: Cuzner vs. California Club 100 p. 868, 867, 155, Cal. 303, 20
L.R.A. N.S. 1095).
"From the foregoing definitions, it is evident that the plain, ordinary meaning of
'business' is restricted to activities or affairs where profit is the purpose, or livelihood is the
motive. The term 'business' being used without any qualification in section 193 of the Tax
Code in relation to section 178 of the same, should therefore be construed in its plain and
ordinary meaning, restricted to activities for profit or livelihood.
"With these considerations in mind, we now come to the question of whether or not the
Manila Elks Club is engaged in the 'business' of selling liquor and tobacco.
"Respondent, in paragraph 1 of his answer, admits that the petitioner herein, Manila
Elks Club is a fraternal, civic, non-stock, non-profit organization. lt has been established
without contradiction that the Manila Elks Club, in pursuance of its purpose as a fraternal
social club, sells on retail at its clubhouse on Dewey Boulevard, liquor, cigars and cigarettes,
on a very limited scale, only to its members and their guests, providing just enough margin
to cover operational expenses without intention to obtain profit. Such being the case then,
the Manila Elks Club cannot be considered as engaged in the 'business' of selling liquor and
tobacco.
988
'Where the corporation handled no money except such as was necessary to cover operational
expenses, conducted no business for itself, and engaged in no transactions that
contemplated a profit for itselfsuch a corporation is considered not organized for profit
under the General Corporation Law.' (Read v. Tidewater Coal Exch., 116 A 898, 904, cited
in Vol. 34, Words & Phrases, p. 220, defining 'profits'; underscoring provided.)
"The petitioner herein, Manila Elks Club, not being engaged in the business of selling at
retail liquor and tobacco, cannot therefore be held liable for the privilege taxes required by
section 193, subsections (1), (k) and (n). The weight of American authorities enhances the
strength of our findings that a fraternal, civic, non-stock, nonprofit organization, like the
Elks Club, selling at retail liquor and tobacco only to its members and their guests in
pursuance with its general purpose as a fraternal social club with just enough margin to
cover operational expenses, should not be held liable for the fixed taxes incident to the
business of selling at retail, liquor and tobacco.
'A bonafide social club, which disposes of liquors at its clubhouse to members and their
guests at a fixed charge as incident to the general purposes of the organizational is not
required to take out a license by Rev. Laws No. 3777-3785, approved March 15, 1905, which
provides for a license upon the business of disposing intoxicating liquors; the term business
in such statute meaning business in the trade or commercial sense. (State v. University
Club, 130 p. 468, 470; 35 Nev. 475; 44 L.R.A., N. S. 1026).
A social club, not organized for the purpose of evading the liquor laws, but which
furnishes its members with liquors and refreshments without profit to itself, is not a retail
liquor dealer, within the statute imposing a license tax on all persons dealing in, selling or
disposing of intoxicating liquors by retail.' (Barden v. Montan Club, 25 P. 1042, 10 Mont.
330, II L.R.A. 593).
'Acts 1881, C. 149, authorizing taxation of liquors dealers, does not include a social club
maintaining a library, giving musical entertainments, and furnishing meals for its
members, which keeps a small stock of liquor; the members paying for its drink as it is
taken, but no profit being made on such sales.' (Tennessee Club of Memphis v. Dwyer, 79
Tenn. (11 Lea) 452, 461, 47 Am. Rep. 298.)
'A social club composed of members who have no proprietary interest in the assets which
provides a reading room, restaurant, bar room, library, billiard rooms and sitting rooms for
its members, the expenses of which are defrayed by annual dues from each member, and by
payments made by the members for food and drinks, is not engaged in the business of a
retail liquor dealer, within section 11 of the Louisiana License Tax Laws.' (La Ann. 585, 20
L.R.A. 185).
989
VOL. 105, JUNE 29, 1959 989
Respondent, however, insists that the petitioner should pay the privilege tax on the sale at
retail of liquor and tobacco because this has been allegedly the practice consistently
followed by the Bureau of Internal Revenue since 1921. and because section 1464 of the
Revised Administrative Code under which said ruling was then based had been reenacted
by the legislature as section 193 of the National Internal Revenue Code. Thus, respondent
contends, that the policy of the Bureau of Internal Revenue has therefore gained 'approval
by legislative reenactments.'
"The alleged administrative practice is founded upon the following ruling rendered in
1921.
'Clubs selling exclusively to members thereof liquors and other products on which the
specific tax is imposed should pay the privilege tax corresponding to the business engaged
in. The fact that such products are sold at cost to the members of the club does not affect
the club's liability to tax.' (Ruling, Oct. 13, 1921, B.I.R. 105.02; Exh. 3, pp. 66-69. BIR
records.)
"We do not agree with the contention of the respondent. While there is admittedly a
ruling on this point in 1921, there is no showing that such has been a long-continued
practice. Be that as it may, any such administrative construction must be within the ambit
of, and must be consistent with, the Revised Administrative Code and the Tax Code. It is
likewise the rule that where the statute is unambiguous, an administrative construction is
unwarranted (U. S. vs. Missouri P. R. Co. 278 U. S. 269, 73 L. Ed. 322) and no construction
may be made to restrict or enlarge the meaning of an Act. (Blatt vs. U. S., 305 U. S. 267, 83
L. Ed. 167).
"An examination of section 1464 of the Revised Administrative Code taken in connection
with section 1453 of the same, discloses the fact that aside from the change in rates of taxes
to be paid and the arrangement of the classification of businesses enumerated therein,
section 193 of the present Tax Code is a verbatim copy of the aforementioned provisions of
the Revised Administrative Code. The policy or principle followed by the said code
regarding privileges taxes, i.e. that the privilege taxes are payable only by those persons or
entities engaged in the business enumerated in section 1464 of the said Code, has not
suffered any change, and the same still obtains under our present Tax Code. In the absence
of a showing that the legislative body had been apprised of the aforesaid ruling, what has
gained legislative approval thru reenactment is, we believe, the policy behind the above-
mentioned provision of the Revised Administrative Code of taxing persons engaged in
business and not the alleged practice following the administrative ruling of 1921. We
believe that no amount of trenchant adherence to an established practice may justify its
continued application where it is clear and
990
Collector of Internal Revenue vs. Manila, Lodge No. 761 of
manifest that the same is not in consonance with the policy of the legislature as defined by
law."
It is urged by appellant that emphasis should be placed not on the term "business",
but on the phrases "retail liquor dealers", "retail dealers in fermented liquors" and
"retail tobacco dealers", appearing in section 193 of the National Internal Revenue
Code, which are defined in section 194 thereof as follows:
"SEC. 194. Words and phrases, defined.In applying the provisions of the preceding section,
words and phrases shall be taken in the sense and extension indicated below:
* * * * * * *
"(i) Retail liquor dealer' includes every person, except a retail vino dealer, who for
himself or on commission sells or offers for sale wine or distilled spirits (other than
denatured alcohol) in quantities of five liters or less at any one time and not for resale.
* * * * * * *
"(k) 'Retail dealer in fermented liquors' includes every person, except retail dealers in
tuba, basi, and tapuy, who for himself or on commission sells or offers for sale fermented
liquors and quantities of five liters or less at any one time and not for resale.
* * * * * * *
"(o) 'Tobacco dealer' comprehends every person who for himself or on commission sells or
offers for sale cigars, cigarettes, or manufactured tobacco."
Undoubtedly, these definitions must be given all the weight due thereto, in the
interpretation of section 193 of the Tax Code. As used therein, the phrases above
referred to are, however, part and parcel of the provisions contained, not only in
said section 193, but, also, in section 178 and other parts of the Tax Code, all of
which must be given effect in their entirety as a harmonious, coordinated and
integrated unit, not as a mass of heterogeneous and unrelated if not incongruous
terms, clauses and sentences. In other words, the phrases in question should be
construed in the light of the context of the whole Tax Code, of which they are
integral parts. And when this is donewhen we consider that section 193 requires
"retail liquor dealers", "retail dealers in fermented liquors" and "retail tobacco
991
VOL. 105, JUNE 29, 1959 991
dealers" to pay the taxes on business" therein specified; that said section 193 is
entitled "Amount of tax on business"; that said section 193 merely implements the
general provision in section 178, to the effect that "a privilege tax must be paid
before any business or occupation hereinafter specified can be lawfully begun and
pursued"; that the term "business" is used in said section 178 six (6) times; and that
the aforementioned sections 178, 193 and 194 are part of Title V of the Tax Code,
entitled "Privilege taxes on business and occupation"it becomes crystal clear that
the "retail liquor dealers", "retail dealers in fermented liquors" and "retail tobacco
dealers" alluded to in said section 193 are those engaged in "business", not fraternal,
civic, non-stock, non-profit organizations, like herein respondent, which sells wines,
distilled spirits, fermented liquors and tobacco, exclusively to its members and their
guests, at such prices as are merely sufficient to cover operational expenses.
Petitioner assails the applicability of the decisions relied upon by the Court of
Tax Appeals, upon the ground that said decisions refer to the authority to license,
and, hence, to the exercise of the police power, not that of taxation which is involved
in the case at bar. However, the distinction made enhancesinstead of detracting
fromthe weight of said decisions as precedents, insofar as the issue herein is
concerned. Indeed, the police power is, in general broader and subject to less
restrictions than the power to tax. It is not difficult to conceive the advisability, if
not, necessity, of requiring a license for some activities undertaken by so-called
"clubs", owing to the possibility, if not probability, of use of said name, appellation
or denomination, in order to avoid or evade some laws or to camouflage certain
ventures, pursuits or enterprises which otherwise would clearly be illegal, immoral
or contrary to public policy. Upon the other hand, a tax is a burden and, as such, it
will not be deemed imposed upon fraternal, civic,
992
Santos vs. Vda. de Caparas
non-profit, non-stock organizations, unless the intent to the contrary is manifest
and patent.
Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed,
without special pronouncement as to costs. It is so ordered.
Pars, C. J., Bengzon, Padilla, Montemayor, Bautista
Angelo, Endencia and Barrera, JJ., concur.
Decision affirmed.

Hkuuh

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Hkuuh

Uploaded by

Copyright:

Available Formats

418 SUPREME COURT REPORTS ANNOTATED

Legaspi vs. Minister of Finance

VALENTINO L. LEGASPI, petitioner, vs. THE HONORABLE MINISTER OF

Abad Santos, J., Concurs in the result:

De Castro, Jr., J., separate opinion:

PETITION to review the decision of the Minister of Finance.

The facts are stated in the opinion of the Court.

ABAD SANTOS, J.: Concurring

I concur in the result. I should state that as Secretary of Justice I participated in

IN THE MATTER OF THE PETITION FOR THE ISSUANCE OF THE WRIT OF

Fernando, C.J., concurring in the result and dissenting:

Teehankee, J., dissenting:

Constitutional Law; Criminal Procedure; Habeas Corpus;Statutes; There is no point for

The facts are stated in the opinion of the Court.

1. CIA, EUFRONIO ORTIZ, JR., JUANITO GRANADA and TOM VASQUEZ,

II. AFFIRMATIVE DEFENSE

NOW, THEREFORE, I, FERDINAND E. MARCOS, President/Prime Minister of the Philippines, by

1212 U.S. 416, 417.

to checknot to supplantthe Executive, or to ascertain merely whether he has

4Lansang vs. Garcia, 42 SCRA 488.

5Section 9, Article VII, Constitution.

be released on bail on being charged in court with bailable offenses.

6Encyclopedia of the Social Sciences, Vol. VIII, p. 236, 1950 Ed.

9Lansang vs. Garcia, supra.

1. 1.The arrest and detention effected by virtue of a warrant issued by a judge;

1. (a)When resort to judicial process is not possible or expedient without endangering

1. (a)When resort to judicial process is not possible or expedient without endangering

The reliance of petitioners on paragraphs 1 and 2 of LOI 1211 as to the alleged

the provisions of the LOI would be an illegality and of no effect.

Section 6, 1976 Amendment to the Constitution.

Nava vs. Gatmaitan, 90 Phil. 172.

The ruling was non-doctrinal for lack of the necessary votes.

Ex parte Milligan, 4 Wallace 2 (1866).

Section 15, Article VIII, 1973 Constitution.

Amendment No. 6 of the 1973 Constitution, as earlier cited, affords further

judiciary could subject the suspension, if decreed through congressional action, to

FERNANDO, C.J., concurring in the result with qualification

4 91 Phil. 882 (1952).

rendered by the illustrious Chief Justice Marshall, enunciating the principle of

2. Thus the judiciary can be appealed to and in appropriate cases, annul

5 L-32613, December 27, 1972, 48 SCRA 382.

8 1 Cranch 137 (1803).

9 63 Phil. 139 (1936).

11 Black, The People and the Court, 8 (1960).

interference with policy formulation, better left to the political branches. It is an

constitutional right, it, for eminent commentators, protean in scope. A reference to

15 L-30026, January 30, 1971, 37 SCRA 420.

4. So it is in the United States. As so well put by Justice Brennan in Fay v.

Writ, habeas corpus ad subjiciendum, in Anglo-American jurisprudence: the most

5. To repeat, it is the ruling of this Court that an issuance of a presidential

8. It may be worthwhile to touch briefly on the exercise of power of preventive

32 L-47185, January 15, 1981, 102 SCRA 7.

ordered.34 The power of preventive detention is likewise recognized in India.

of Realm Act Regulations, 1914, during World War I

32 Suffian, (1976), An Introduction to the Constitution of Malaysia, 226.

relevant constitutional provisions having a bearing on preventive detention: A law

37 Ibid. Liversidge is reported in [1942] A.C. 206.

judicial rather than political.

authority, the function of the Court is merely to checknot to supplantthe

times of stress, it is inescapable that efforts be made to reconcile time-tested

53 84 Phil. 368 (1949).

TEEHANKEE, J., dissenting:

I am constrained to dissent from the all-encompassing scope of the main opinion of