Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

80391 February 28, 1989 SULTAN ALIM USAR P. LIM ONA, petitioner, vs. CONTE MANGELIN, SALIC ALI, SALIN!ATO ALI, PILIMPINAS CON!ING, ACMA! TOMA"IS, GERR# TOMA"IS, $ESUS ORTI%, ANTONIO !ELA FUENTE, !IEGO PALOMARES, $R., RAUL !AGALANGIT, a&' IM O SINSUAT, respondents. SARMIENTO, J.: The acts of the Sangguniang Pa poo! of Region "## are assailed in this petition. The antecedent facts are as follo$s% &. 'n Septe ber (), &*+,, petitioner Sultan Ali busar -i bona $as appointed as a e ber of the Sangguniang Pa poo!, Regional Autono ous .overn ent, Region "##, representing -anao del Sur. (. 'n March &(, &*+/ petitioner $as elected Spea!er of the Regional -egislative Asse bl0 or Batasang Pa poo! of Central Mindanao 1Asse bl0 for brevit02. 3. Said Asse bl0 is co posed of eighteen 1&+2 e bers. T$o of said e bers, respondents Ac ad To a$is and Pa!il 4agalangit, filed on March (3, &*+/ $ith the Co ission on Elections their respective certificates of candidac0 in the Ma0 &&, &*+/ congressional elections for the district of -anao del Sur but the0 later $ithdre$ fro the aforesaid election and thereafter resu ed again their positions as e bers of the Asse bl0. ). 'n 'ctober (&, &*+/ Congress an 4atu .ui id Matala , Chair an of the Co ittee on Musli Affairs of the 5ouse of Representatives, invited Mr. "avier Ra6ul, Pa poo! Spea!er of Region "#, 7a boanga Cit0 and the petitioner in his capacit0 as Spea!er of the Asse bl0, Region "##, in a letter $hich reads% The Co ittee on Musli Affairs $ell underta!e consultations and dialogues $ith local govern ent officials, civic, religious organi6ations and traditional leaders on the recent and present political develop ents and other issues affecting Regions #" and "##. The result of the conference, consultations and dialogues $ould hopefull0 chart the autono ous govern ents of the t$o regions as envisioned and a0 prod the President to constitute i ediatel0 the Regional Consultative Co ission as andated b0 the Co ission. 8ou are re9uested to invite so e e bers of the Pa poo! Asse bl0 of 0our respective asse bl0 on Nove ber & to &:, &*+/, $ith venue at the Congress of the Philippines. 8our presence, unstinted support and cooperation is 1sic2 indispensable. :. Consistent $ith the said invitation, petitioner sent a telegra to Acting Secretar0 ;ohnn0 Ali bu0ao of the Asse bl0 to $ire all Asse bl0 en that there shall be no session in Nove ber as <our presence in the house co ittee hearing of Congress ta!e 1sic2 precedence over an0 pending business in batasang pa poo! ... .< ,. #n co pliance $ith the aforesaid instruction of the petitioner, Acting Secretar0 Ali bu0ao sent to the e bers of the Asse bl0 the follo$ing telegra % TRANSM#TT#N. ='R 8'>R #N='RMAT#'N AN4 .>#4ANCE TE-E.RAM RECE#?E4 =R'M SPEA@ER -#MB'NA A>'TE C'N.RESSMAN ;#MM8 MATA-AM C5A#RMAN '= T5E 5'>SE C'MM#TTEE 'N M>S-#M A==A#RS REA>ESTE4 ME T' ASS#ST

SA#4 C'MM#TTEE #N T5E 4#SC>SS#'N '= T5E PR'P'SE4 A>T'N'M8 'R.AN#C N'?. &ST T' &:. 5ENCE BERE A-- ASSEMB-8MEN T5AT T5ERE S5A-- BE N' SESS#'N #N N'?EMBER AS '>R PRESENCE #N T5E 5'>SE C'MM#TTEE 5EAR#N. '= C'N.RESS TA@E PRECE4ENCE '?ER AN8 PEN4#N. B>S#NESS #N BATASAN. PAMP''@ '= MATA-AM ='--'BS >NA>'TE RE.AR4S. /. 'n Nove ber (, &*+/, the Asse bl0 held session in defiance of petitionerCs advice, $ith the follo$ing asse bl0 en present% &. Sali, Salic (. Conding, Pilipinas 1sic2 3. 4agalangit, Ra!il ). 4ela =uente, Antonio :. Mangelen, Conte ,. 'rti6, ;esus /. Palo ares, 4iego +. Sinsuat, Bi bo *. To a$is, Ac ad &D. To a$is, ;err0 After declaring the presence of a 9uoru , the Spea!er ProETe pore $as authori6ed to preside in the session. 'n Motion to declare the seat of the Spea!er vacant, all Asse bl0 en in attendance voted in the affir ative, hence, the chair declared said seat of the Spea!er vacant. +. 'n Nove ber :, &*+/, the session of the Asse bl0 resu ed $ith the follo$ing Asse bl0 en present% &. Mangelen ConteEPresiding 'fficer (. Ali Salic 3. Ali Salindatu ). Aratuc, Mali! :. CaFelo, Rene ,. Conding, Pilipinas 1sic2 /. 4agalangit, Ra!il +. 4ela =uente, Antonio *. 'rti6, ;esus &D Palo ares, 4iego &&. AuiFano, ;esus &(. Sinsuat, Bi bo

&3. To a$is, Ac ad &). To a$is, ;err0 An eGcerpt fro the debates and proceeding of said session reads%

5'N. 4A.A-AN.#T% Mr. Spea!er, 5onorable Me bers of the 5ouse, $ith the presence of our colleagues $ho have co e to attend the session toda0, # ove to call the na es of the ne$ co ers in order for the to cast their votes on the previous otion to declare the position of the Spea!er vacant. But before doing so, # ove also that the designation of the Speaker Pro Tempore as the Presiding 'fficer and Mr. ;ohnn0 Evangelists as Acting Secretar0 in the session last Nove ber (, &*+/ be reconfir ed in toda0Cs session. 5'N. SA-#C A-#% # second the otions. otions presentedH Me chair hears none

PRES#4#N. '==#CER% An0 co ent or obFections on the t$o and the said otions are approved. ... T$elve 1&(2 e bers voted in favor of the abstained and none voted against. 1

otion to declare the seat of the Spea!er vacantI one

Accordingl0, the petitioner pra0s for Fudg ent as follo$s% B5ERE='RE, petitioner respectfull0 pra0s thatE 1a2 This Petition be given due courseI 1b2 Pending hearing, a restraining order or $rit of preli inar0 inFunction be issued enFoining respondents fro proceeding $ith their session to be held on Nove ber :, &*+/, and on an0 da0 thereafterI 1c2 After hearing, Fudg ent be rendered declaring the proceedings held b0 respondents of their session on Nove ber (, &*+/ as null and voidI 1d2 5olding the election of petitioner as Spea!er of said -egislative Asse bl0 or Batasan Pa poo!, Region "## held on March &(, &*+/ valid and subsisting, and 1e2 Ma!ing the inFunction per anent. Petitioner li!e$ise pra0s for such other relief as a0 be Fust and e9uitable.
2

Pending further proceedings, this Court, on ;anuar0 &*, &*++, received a resolution filed b0 the Sangguniang Pa poo!, <E"PECT#N. A-#MB>SAR P. -#MB'NA =R'M MEMBERS5#P '= T5E SAN..>N#AN. PAMP''@ A>T'N'M'>S RE.#'N "##,< 3 on the grounds, a ong other things, that the petitioner <had caused to be prepared and signed b0 hi pa0ing JsicK the salaries and e olu ents of 'din Abdula, $ho $as considered resigned after filing his Certificate of Candidac0 for Congress en for the =irst 4istrict of Maguindanao in the last Ma0 &&, elections. . . and nothing in the record of the Asse bl0 $ill sho$ that an0 re9uest for reinstate ent b0 Abdula $as ever ade . . .< ( and that <such action of Mr. -i bona in pa0ing Abdula his salaries and e olu ents $ithout authorit0 fro the Asse bl0 . . . constituted a usurpation of the po$er of the Asse bl0,< ) that the petitioner <had recentl0 caused $ithdra$al of so uch a ount of cash fro the Asse bl0 resulting to the nonEpa0 ent of the salaries and e olu ents of so e Asse bl0 JsicK,< * and that he had <filed a case before the Supre e Court against so e e bers of the Asse bl0 on 9uestion $hich should have been resolved $ithin the confines of the Asse bl0,< + for $hich the respondents no$ sub it that the petition had beco e < oot and acade ic<. 8 The first 9uestion, evidentl0, is $hether or not the eGpulsion of the petitioner 1pending litigation2 has and acade ic. ade the case oot

Be do not agree that the case has been rendered oot and acade ic b0 reason si pl0 of the eGpulsion resolution so issued. =or, if the petitionerCs eGpulsion $as done purposel0 to a!e this petition oot and acade ic, and to pree pt the Court, it $ill not a!e it acade ic. 'n the ground of the i utable principle of due process alone, $e hold that the eGpulsion in 9uestion is of no force and effect. #n the first place, there is no sho$ing that the Sanggunian had conducted an investigation, and $hether or not the petitioner had been heard in his defense, assu ing that there $as an investigation, or other$ise given the opportunit0 to do so. 'n the other hand, $hat appears in the records is an ad ission b0 the Asse bl0 1at least, the respondents2 that <since Nove ber, &*+/ up to this $riting, the petitioner has not set foot at the Sangguniang Pa poo!.< 9 <To be sure, the private respondents aver that <JtKhe Asse bl0 en, in a conciliator0 gesture, $anted hi to co e to Cotabato Cit0,< 10 but that $as <so that their differences could be threshed out and settled.< 11 Certainl0, that avo$ed $anting or desire to thresh out and settle, no atter ho$ conciliator0 it a0 be cannot be a substitute for the notice and hearing conte plated b0 la$. Bhile $e have held that due process, as the ter is !no$n in ad inistrative la$, does not absolutel0 re9uire notice and that a part0 need onl0 be given the opportunit0 to be heard, 12 it does not appear herein that the petitioner had, to begin $ith, been ade a$are that he had in fact stood charged of graft and corruption before his collegues. #t cannot be said therefore that he $as accorded an0 opportunit0 to rebut their accusations. As it stands, then, the charges no$ levelled a ount to ere accusations that cannot $arrant eGpulsion. #n the second place, 1the resolution2 appears strongl0 to be a bare act of vendetta b0 the other Asse bl0 en against the petitioner arising fro $hat the for er perceive to be abdurac0 on the part of the latter. #ndeed, it 1the resolution2 spea!s of <a case Jhaving been filedK Jb0 the petitionerK before the Supre e Court . . . on 9uestion $hich should have been resolved $ithin the confines of the Asse bl0 an act $hich so e e bers clai ed unnecessaril0 and undul0 assails their integrit0 and character as representative of the people< 13 an act that cannot possibl0 Fustif0 eGpulsion. Access to Fudicial re edies is guaranteed b0 the Constitution, 1( and, unless the recourse a ounts to alicious prosecution, no one a0 be punished for see!ing redress in the courts. Be therefore order reinstate ent, $ith the caution that should the past acts of the petitioner indeed $arrant his re oval, the Asse bl0 is enFoined, should it still be so inded, to co ence proper proceedings therefor in line $ith the ost ele entar0 re9uire ents of due process. And $hile it is $ithin the discretion of the e bers of the Sanggunian to punish their erring colleagues, their acts are nonetheless subFect to the oderating band of this Court in the event that such discretion is eGercised $ith grave abuse. #t is, to be sure, said that precisel0 because the Sangguniang Pa poo!1s2 are <autono ous,< the courts a0 not rightfull0 intervene in their affairs, uch less stri!e do$n their acts. Be co e, therefore, to the second issue% Are the soEcalled autono ous govern ents of Mindanao, as the0 are no$ constituted, subFect to the Furisdiction of the national courtsH #n other $ords, $hat is the eGtent of selfEgovern ent given to the t$o autono ous govern ents of Region #" and "##H The autono ous govern ents of Mindanao $ere organi6ed in Regions #" and "## b0 Presidential 4ecree No. &,&+1) pro ulgated on ;ul0 (:, &*/*. A ong other things, the 4ecree established <internal autono 0< 1* in the t$o regions <J$Kithin the fra e$or! of the national sovereignt0 and territorial integrit0 of the Republic of the Philippines and its Constitution,< 1+ $ith legislative and eGecutive achiner0 to eGercise the po$ers and responsibilities 18specified therein. #t re9uires the autono ous regional govern ents to <underta!e all internal ad inistrative atters for the respective regions,< 19 eGcept to <act on atters $hich are $ithin the Furisdiction and co petence of the National .overn ent,< 20 <$hich include, but are not li ited to, the follo$ing% 1&2 National defense and securit0I 1(2 =oreign relationsI 132 =oreign tradeI 1)2 Currenc0, onetar0 affairs, foreign eGchange, ban!ing and 9uasiEban!ing, and eGternal borro$ing,

1:2 4isposition, eGploration, develop ent, eGploitation or utili6ation of all natural resourcesI 1,2 Air and sea transport

1/2 Postal

atters and teleco

unicationsI

1+2 Custo s and 9uarantineI 1*2 # igration and deportationI

1&D2 Citi6enship and naturali6ationI 1&&2 National econo ic, social and educational planningI and 1&(2 .eneral auditing. 21 #n relation to the central govern ent, it provides that <JtKhe President shall have the po$er of general supervision and control over the Autono ous Regions ...< 22 No$, autono 0 is either decentrali6ation of ad inistration or decentrali6ation of po$er. There is decentrali6ation of ad inistration $hen the central govern ent delegates ad inistrative po$ers to political subdivisions in order to broaden the base of govern ent po$er and in the process to a!e local govern ents < ore responsive and accountable,< 23 <and ensure their fullest develop ent as selfEreliant co unities and a!e the ore effective partners in the pursuit of national develop ent and social progress.< 2( At the sa e ti e, it relieves the central govern ent of the burden of anaging local affairs and enables it to concentrate on national concerns. The President eGercises <general supervision< 2) over the , but onl0 to <ensure that local affairs are ad inistered according to la$.< 2* 5e has no control over their acts in the sense that he can substitute their Fudg ents $ith his o$n. 2+ 4ecentrali6ation of po$er, on the other hand, involves an abdication of political po$er in the favor of local govern ents units declare to be autono ous . #n that case, the autono ous govern ent is free to chart its o$n destin0 and shape its future $ith ini u intervention fro central authorities. According to a constitutional author, decentrali6ation of po$er a ounts to <selfEi olation,< since in that event, the autono ous govern ent beco es accountable not to the central authorities but to its constituenc0. 28 But the 9uestion of $hether or not the grant of autono 0 Musli Mindanao under the &*+/ Constitution involves, trul0, an effort to decentrali6e po$er rather than ere ad inistration is a 9uestion foreign to this petition, since $hat is involved herein is a local govern ent unit constituted prior to the ratification of the present Constitution. 5ence, the Court $ill not resolve that controvers0 no$, in this case, since no controvers0 in fact eGists. Be $ill resolve it at the proper ti e and in the proper case. >nder the &*+/ Constitution, local govern ent units enFo0 autono 0 in these t$o senses, thus% Section &. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, unicipalities, and baranga0s. 5ere shall be autono ous regions in Musli Mindanao ,and the Cordilleras as hereinafter provided. 29 Sec. (. The territorial and political subdivisions shall enFo0 local autono 0. GGG GGG GGG See. &:. Mere shall be created autono ous regions in Musli Mindanao and in the Cordilleras consisting of provinces, cities, unicipalities, and geographical areas sharing co on and distinctive historical and cultural heritage, econo ic and social structures, and other relevant characteristics $ithin the fra e$or! of this Constitution and the national sovereignt0 as $ell as territorial integrit0 of the Republic of the Philippines. 31 An autono ous govern ent that enFo0s autono 0 of the latter categor0 JC'NST. 1&*+/2, art. ", sec. &:.K is subFect alone to the decree of the organic act creating it and accepted principles on the effects and li its of <autono 0.< 'n the other hand, an autono ous govern ent of the for er class is, as $e noted, under the supervision of the national govern ent acting through the President 1and the 4epart ent of -ocal .overn ent2. 32 #f the Sangguniang Pa poo! 1of Region "##2, then, is autono ous in the latter sense, its acts are, debatabl0 be0ond the do ain of this Court in perhaps the sa e $a0 that the internal acts, sa0, of the Congress of the Philippines are be0ond our Furisdiction. But if it is autono ous in the for er categor0 onl0, it co es unarguabl0 under our Furisdiction. An eGa ination of the ver0 Presidential 4ecree creating
30

the autono ous govern ents of Mindanao persuades us that the0 $ere never eant to eGercise autono 0 in the second sense, that is, in $hich the central govern ent co its an act of selfEi olation. Presidential 4ecree No. &,&+, in the first place, andates that <JtKhe President shall have the po$er of general supervision and control over Autono ous Regions.< 33 #n the second place, the Sangguniang Pa poo!, their legislative ar , is ade to discharge chiefl0 ad inistrative services, thus% SEC. /. Po$ers of the Sangguniang Pa poo!. The Sangguniang Pa poo! shall eGercise local legislative po$ers over regional affairs $ithin the fra e$or! of national develop ent plans, policies and goals, in the follo$ing areas% 1&2 'rgani6ation of regional ad inistrative s0ste I 1(2 Econo ic, social and cultural develop ent of the Autono ous RegionI 132 Agricultural, co ercial and industrial progra s for the Autono ous RegionI

1)2 #nfrastructure develop ent for the Autono ous RegionI 1:2 >rban and rural planning for the Autono ous RegionI 1,2 TaGation and other revenueEraising easures as provided for in this 4ecreeI

1/2 Maintenance, operation and ad inistration of schools established b0 the Autono ous RegionI 1+2 Establish ent, operation and facilitiesI aintenance of health, $elfare and other social services, progra s and

1*2 Preservation and develop ent of custo s, traditions, languages and culture indigenous to the Autono ous RegionI and 1&D2 Such other atters as a0 be authori6ed b0 la$,including the enact ent of such easures as be necessar0 for the pro otion of the general $elfare of the people in the Autono ous Region. a0

The President shall eGercise such po$ers as a0 be necessar0 to assure that enact ent and acts of the Sangguniang Pa poo! and the -upong Tagapagpaganap ng Poo! are in co pliance $ith this 4ecree, national legislation, policies, plans and progra s. The Sangguniang Pa poo! shall aintain liaison $ith the Batasang Pa bansa.
3(

5ence, $e assu e Furisdiction. And if $e can a!e an in9uir0 in the validit0 of the eGpulsion in 9uestion, $ith reason can $e revie$ the petitionerCs re oval as Spea!er.

ore

Briefl0, the petitioner assails the legalit0 of his ouster as Spea!er on the grounds that% 1&2 the Sanggunian, in convening on Nove ber ( and :, &*+/ 1for the sole purpose of declaring the office of the Spea!er vacant2, did so in violation of the Rules of the Sangguniang Pa poo! since the Asse bl0 $as then on recessI and 1(2 assu ing that it $as valid, his ouster $as ineffective nevertheless for lac! of 9uoru . >pon the facts presented, $e hold that the Nove ber ( and :, &*+/ sessions $ere invalid. #t is true that under Section 3& of the Region "## Sanggunian Rules, <JsKessions shall not be suspended or adFourned eGcept b0 direction of the Sangguniang Pa poo!,< 3) but it provides li!e$ise that <the Spea!er a0, on JsicK his discretion, declare a recess of <short intervals.< 3* 'f course, there is disagree ent bet$een the protagonists as to $hether or not the recess called b0 the petitioner effective Nove ber & through &:, &*+/ is the <recess of short intervals< referred toI the petitioner sa0s that it is $hile the respondents insist that, to all intents and purposes, it $as an adFourn ent and that <recess< as used b0 their Rules onl0 refers to <a recess $hen argu ents get heated up so that protagonists in a debate can tal! things out infor all0 and obviate dissenssion JsicK and disunit0. 3+ The Court agrees $ith the respondents on this regard, since clearl0, the Rules spea! of <short intervals.< Secondl0, the Court li!e$ise agrees that the Spea!er could not have validl0 called a recess since the Asse bl0 had 0et to convene on Nove ber &, the date session opens under the sa e Rules. 38 5ence, there can be no recess to spea! of that could possibl0 interrupt an0 session. But $hile this opinion is in accord $ith the respondentsC o$n, $e still invalidate the t$in sessions in 9uestion, since at the ti e the petitioner called

the <recess,< it $as not a settled atter $hether or not he could. do so. #n the second place, the invitation tendered b0 the Co ittee on Musli Affairs of the 5ouse of Representatives provided a plausible reason for the inter ission sought. Thirdl0, assu ing that a valid recess could not be called, it does not appear that the respondents called his attention to this ista!e. Bhat appears is that instead, the0 opened the sessions the selves behind his bac! in an apparent act of utin0. >nder the circu stances, $e find e9uit0 on his side. =or this reason, $e uphold the <recess< called on the ground of good faith. #t does not appear to us, oreover, that the petitioner had resorted to the aforesaid <recess< in order to forestall the Asse bl0 fro bringing about his ouster. This is not apparent fro the pleadings before us. Be are convinced that the invitation $as $hat precipitated it. #n holding that the <recess< in 9uestion is valid, $e are not to be ta!en as establishing a precedent, since, as $e said, a recess can not be validl0 declared $ithout a session having been first opened. #n upholding the petitioner herein, $e are not giving hi a carte blanche to order recesses in the future in violation of the Rules, or other$ise to prevent the la$ful eetings thereof. Neither are $e, b0 this disposition, discouraging the Sanggunian fro reorgani6ing itself pursuant to its la$ful prerogatives. Certainl0, it can do so at the proper ti e. #n the event that be petitioner should initiate obstructive Court is certain that it is ar ed $ith enough coercive re edies to th$art the . 39 #n vie$ hereof, $e find no need in d$elling on the issue of 9uoru . B5ERE='RE, pre ises considered, the petition is .RANTE4. The Sangguniang Pa poo!, Region "##, is EN;'#NE4 to 1&2 RE#NSTATE the petitioner as Me ber, Sangguniang Pa poo!, Region "##I and 1(2 RE#NSTATE hi as Spea!er thereof. No costs. S' 'R4ERE4. Fernan, C.J., Narvasa, Melencio-Herrera, Gutierre , Jr., Cru , Paras, Feliciano, Ganca!co, "i#in, Cortes, Gri$o-%&uino, Me#ial#ea an# 'e(ala#o, JJ., concur. Pa#illa, J., took no part. Republic of the Philippines SUPREME COURT Manila EN G.R. No. 118303 $a&uary 31, 199* ANC

oves, the

SENATOR ,E,ERSON T. AL-ARE%, SENATOR $OSE !. LINA, $R., MR. NICASIO . AUTISTA, MR. $ESUS P. GON%AGA, MR. SOLOMON !. MA#LEM, LEONORA C. ME!INA, CASIANO S. ALIPON, petitioners, vs. ,ON. TEOFISTO T. GUINGONA, $R., .& /.0 1a2a1.3y a0 E4e1u3.5e Se1re3ary, ,ON. RAFAEL ALUNAN, .& /.0 1a2a1.3y a0 Se1re3ary o6 Lo1a7 Go5er&8e&3, ,ON. SAL-A!OR ENRI9UE%, .& /.0 1a2a1.3y a0 Se1re3ary o6 u':e3, T,E COMMISSION ON AU!IT, ,ON. $OSE MIRAN!A, .& /.0 1a2a1.3y a0 Mu&.1.2a7 Mayor o6 Sa&3.a:o a&' ,ON. C,ARITO MANUFA#, ,ON. -ICTORINO MIRAN!A, $R., ,ON. ARTEMIO AL-ARE%, ,ON. !ANILO -ERGARA, ,ON. PETER !E $ESUS, ,ON. NELIA NATI-I!A!, ,ON. CELSO CALEON a&' ,ON. A EL MUSNGI, .& 3/e.r 1a2a1.3y a0 SANGGUNIANG A#AN MEM ERS, MR. RO!RIGO L. SANTOS, .& /.0 1a2a1.3y a0 Mu&.1.2a7 Trea0urer, a&' ATT#. ALFRE!O S. !IRIGE, .& /.0 1a2a1.3y a0 Mu&.1.2a7 A'8.&.03ra3or, respondents. !ECISION ,ERMOSISIMA, $R., J.; 'f ain concern to the petitioners is $hether Republic Act No. //(D, Fust recentl0 passed b0 Congress and signed b0 the President into la$, is constitutionall0 infir .

#ndeed, in this Petition for Prohibition $ith pra0er for Te porar0 Restraining 'rder and Preli inar0 Prohibitor0 #nFunction, petitioners assail the validit0 of Republic Act No. //(D, entitled, <An Act Converting the Municipalit0 of Santiago, #sabela into an #ndependent Co ponent Cit0 to be !no$n as the Cit0 of Santiago,< ainl0 because the Act allegedl0 did not originate eGclusivel0 in the 5ouse of Representatives as andated b0 Section (), Article ?# of the &*+/ Constitution. Also, petitioners clai that the Municipalit0 of Santiago has not et the ini u average annual inco e re9uired under Section ):D of the -ocal .overn ent Code of &**& in order to be converted into a co ponent cit0. >ndisputed is the follo$ing chronicle of the eta orphosis of 5ouse Bill No. ++&/ into Republic Act No. //(D%

'n April &+, &**3, 5B No. ++&/, entitled <An Act Converting the Municipalit0 of Santiago into an #ndependent Co ponent Cit0 to be !no$n as the Cit0 of Santiago,< $as filed in the 5ouse of Representatives $ith Representative Antonio Aba0a as principal author. 'ther sponsors included Representatives Ciriaco Alfelor, Rodolfo Albano, Santiago Respicio and =austino 40. The bill $as referred to the 5ouse Co ittee on -ocal .overn ent and the 5ouse Co ittee on Appropriations on Ma0 :, &**3. 'n Ma0 &*, &**3, ;une &, &**3, Nove ber (+, &**3, and 4ece ber &, &**3, public hearings on 5B No. ++&/ $ere conducted b0 the 5ouse Co ittee on -ocal .overn ent. The co ittee sub itted to the 5ouse a favorable report, $ith a end ents, on 4ece ber *, &**3. 'n 4ece ber &3, &**3, 5B No. ++&/ $as passed b0 the 5ouse of Representatives on Second Reading and $as approved on Third Reading on 4ece ber &/, &**3. 'n ;anuar0 (+, &**), 5B No. ++&/ $as trans itted to the Senate. Mean$hile, a counterpart of 5B No. ++&/, Senate Bill No. &()3, entitled, <An Act Converting the Municipalit0 of Santiago into an #ndependent Co ponent Cit0 to be @no$n as the Cit0 of Santiago,< $as filed in the Senate. #t $as introduced b0 Senator ?icente Sotto ###, as principal sponsor, on Ma0 &*, &**3. This $as Fust after the 5ouse of Representatives had conducted its first public hearing on 5B No. ++&/. 'n =ebruar0 (3, &**), or a little less than a onth after 5B No. ++&/ $as trans itted to the Senate, the Senate Co ittee on -ocal .overn ent conducted public hearings on SB No. &()3. 'n March &, &**), the said co ittee sub itted Co ittee Report No. 3/+ on 5B No. ++&/, $ith the reco endation that it be approved $ithout a end ent, ta!ing into consideration the realit0 that 5.B. No. ++&/ $as on all fours $ith SB No. &()3. Senator 5eherson T. Alvare6, one of the herein petitioners, indicated his approval thereto b0 signing said report as e ber of the Co ittee on -ocal .overn ent. 'n March 3, &**), Co ittee Report No. 3/+ $as passed b0 the Senate on Second Reading and $as approved on Third Reading on March &), &**). 'n March ((, &**), the 5ouse of Representatives, upon being apprised of the action of the Senate, approved the a end ents proposed b0 the Senate. The enrolled bill, sub itted to the President on April &(, &**), $as signed b0 the Chief EGecutive on Ma0 :, &**) as Republic Act No. //(D. Bhen a plebiscite on the Act $as held on ;ul0 &3, &**), a great aForit0 of the registered voters of Santiago voted in favor of the conversion of Santiago into a cit0. The 9uestion as to the validit0 of Republic Act No. //(D hinges on the follo$ing t$in issues% 1#2 Bhether or not the #nternal Revenue Allot ents 1#RAs2 are to be included in the co putation of the average annual inco e of a unicipalit0 for purposes of its conversion into an independent co ponent cit0, and 1##2 Bhether or not, considering that the Senate passed SB No. &()3, its o$n version of 5B No. ++&/, Republic Act No. //(D can be said to have originated in the 5ouse of Representatives. # The annual inco e of a local govern ent unit includes the #RAs Petitioners clai that Santiago could not 9ualif0 into a co ponent cit0 because its average annual inco e for the last t$o 1(2 consecutive 0ears based on &**& constant prices falls belo$ the re9uired annual inco e of T$ent0 Million Pesos 1P(D,DDD,DDD.DD2 for its conversion into a cit0, petitioners having co puted SantiagoCs average annual inco e in the follo$ing anner%

Total inco e 1at &**& constant prices2 for &**& Total inco e 1at &**& constant prices2 for &**( Total inco e for &**& and &**( Minus% #RAs for &**& and &**( Total inco e for &**& and &**( Average Annual #nco e

P (D,3/*,D:/.D/

P (&,:/D,&D,.+/

P )&,*)*,&,3.*)

P &:,/3D,D)3.DD P (,,(&*,&(D.*) P &3,&D*,:,D.)/ LLLLLLLLLLLLLLL

B0 dividing the total inco e of Santiago for calendar 0ears &**& and &**(, after deducting the #RAs, the average annual inco e arrived at $ould onl0 be P&3,&D*,:,D.)/ based on the &**& constant prices. Thus, petitioners clai that SantiagoCs inco e is far belo$ the aforesaid T$ent0 Million Pesos average annual inco e re9uire ent. The certification issued b0 the Bureau of -ocal .overn ent =inance of the 4epart ent of =inance, $hich indicates SantiagoCs average annual inco e to be P(D,*/),:+&.*/, is allegedl0 not accurate as the #nternal Revenue Allot ents $ere not eGcluded fro the co putation. Petitioners asseverate that the #RAs are not actuall0 inco e but transfers andMor budgetar0 aid fro the national govern ent and that the0 fluctuate, increase or decrease, depending on factors li!e population, land and e9ual sharing. #n this regard, $e hold that petitioners asseverations are untenable because #nternal Revenue Allot ents for inco e of -ocal .overn ent >nits. part of the

#t is true that for a unicipalit0 to be converted into a co ponent cit0, it ust, a ong others, have an average annual inco e of at least T$ent0 Million Pesos for the last t$o 1(2 consecutive 0ears based on &**& constant prices. & Such inco e ust be dul0 certified b0 the 4epart ent of =inance. Resolution of the controvers0 regarding co pliance b0 the Municipalit0 of Santiago $ith the aforecited inco e re9uire ent hinges on a correlative and conteGtual eGplication of the eaning of internal revenue allot ents 1#RAs2 vis-avis the notion of inco e of a local govern ent unit and the principles of local autono 0 and decentrali6ation underl0ing the institutionali6ation and intensified e po$er ent of the local govern ent s0ste . A -ocal .overn ent >nit is a political subdivision of the State $hich is constituted b0 la$ and possessed of substantial control over its o$n affairs.3 Re aining to be an intra sovereign subdivision of one sovereign nation, but not intended, ho$ever, to be an imperium in imperio,) the local govern ent unit is autono ous in the sense that it is given ore po$ers, authorit0, responsibilities and resources.: Po$er $hich used to be highl0 centrali6ed in Manila, is thereb0 deconcentrated, enabling especiall0 the peripheral local govern ent units to develop not onl0 at their o$n pace and discretion but also $ith their o$n resources and assets. The practical side to develop ent through a decentrali6ed local govern ent s0ste certainl0 concerns the atter of financial resources. Bith its broadened po$ers and increased responsibilities, a local govern ent unit ust no$ operate on a uch $ider scale. More eGtensive operations, in turn, entail ore eGpenses. >nderstandabl0, the vesting of dut0, responsibilit0 and accountabilit0 in ever0 local govern ent unit is acco panied $ith a provision for reasonabl0 ade9uate resources to discharge its po$ers and effectivel0 carr0 out its functions. / Avail ent of such resources is effectuated through the vesting in ever0 local govern ent unit of 1&2 the right to create and broaden its o$n source of revenueI 1(2 the ri(ht to be allocate# a )ust share in national ta*es, such share bein( in the +orm o+ internal revenue allotments ,-'%s. I and 132 the right to be given its e9uitable share in the proceeds of the utili6ation and develop ent of the national $ealth, if an0, $ithin its territorial boundaries.+

The funds generated fro local taGes, #RAs and national $ealth utili6ation proceeds accrue to the general fund of the local govern ent and are used to finance its operations subFect to specified odes of spending the sa e as provided for in the -ocal .overn ent Code and its i ple enting rules and regulations. =or instance, not less than t$ent0 percent 1(DN2 of the #RAs ust be set aside for local develop ent proFects. * As such, for purposes of budget preparation, $hich budget should reflect the esti ates of the inco e of the local govern ent unit, a ong others, the #RAs and the share in the national $ealth utili6ation proceeds are considered ite s of inco e. This is as it should be, since inco e is defined in the -ocal .overn ent Code to be all revenues and receipts collected or received for ing the gross accretions of funds of the local govern ent unit.&D The #RAs are ite s of inco e because the0 for part of the gross accretion of the funds of the local govern ent unit. The #RAs regularl0 and auto aticall0 accrue to the local treasur0 $ithout need of an0 further action on the part of the local govern ent unit.&& The0 thus constitute inco e $hich the local govern ent can invariabl0 rel0 upon as the source of uch needed funds. =or purposes of converting the Municipalit0 of Santiago into a cit0, the 4epart ent of =inance certified, a ong others, that the unicipalit0 had an average annual inco e of at least T$ent0 Million Pesos for the last t$o 1(2 consecutive 0ears based on &**& constant prices. This, the 4epart ent of =inance did after including the #RAs in its co putation of said average annual inco e. =urther ore, Section ):D 1c2 of the -ocal .overn ent Code provides that <the average annual inco e shall include the inco e accruing to the general fund, eGclusive of special funds, transfers, and nonErecurring inco e.< To reiterate, #RAs are a regular, recurring ite of inco eI nil is there a basis, too, to classif0 the sa e as a special fund or transfer, since #RAs have a technical definition and eaning all its o$n as used in the -ocal .overn ent Code that une9uivocall0 a!es it distinct fro special funds or transfers referred to $hen the Code spea!s of <funding support fro the national govern ent, its instru entalities and govern entEo$nedEorEcontrolled corporations<. &( Thus, 4epart ent of =inance 'rder No. 3:E*3&3 correctl0 encapsuli6es the full i port of the above dis9uisition $hen it defined ANN>A- #NC'ME to be <revenues and receipts reali6ed b0 provinces, cities and unicipalities fro regular sources of the -ocal .eneral =und inclu#in( the internal revenue allotment an# other shares provided for in Sections (+), (*D and (*& of the Code, but eGclusive of nonErecurring receipts, such as other national aids, grants, financial assistance, loan proceeds, sales of fiGed assets, and si ilar others< 1E phasis ours2. &) Such order, constituting eGecutive or conte poraneous construction of a statute b0 an ad inistrative agenc0 charged $ith the tas! of interpreting and appl0ing the sa e, is entitled to full respect and should be accorded great $eight b0 the courts, unless such construction is clearl0 sho$n to be in sharp conflict $ith the Constitution, the governing statute, or other la$s. &: ## #n the enact ent of RA No. //(D, there $as co pliance $ith Section (), Article ?# of the &*+/ Constitution Although a bill of local application li!e 5B No. ++&/ should, b0 constitutional prescription, &, originate eGclusivel0 in the 5ouse of Representatives, the clai of petitioners that Republic Act No. //(D did not originate eGclusivel0 in the 5ouse of Representatives because a bill of the sa e i port, SB No. &()3, $as passed in the Senate, is untenable because it cannot be denied that 5B No. ++&/ $as filed in the 5ouse of Representatives first before SB No. &()3 $as filed in the Senate. Petitioners the selves cannot disavo$ their o$n ad ission that 5B No. ++&/ $as filed on April &+, &**3 $hile SB No. &()3 $as filed on Ma0 &*, &**3. The filing of 5B No. ++&/ $as thus precursive not onl0 of the said Act in 9uestion but also of SB No. &()3. Thus, 5B No. ++&/, $as the bill that initiated the legislative process that cul inated in the enact ent of Republic Act No. //(D. No violation of Section (), Article ?#, of the &*+/ Constitution is perceptible under the circu stances attending the instant controvers0. =urther ore, petitioners the selves ac!no$ledge that 5B No. ++&/ $as alread0 approved on Third Reading and dul0 trans itted to the Senate $hen the Senate Co ittee on -ocal .overn ent conducted its public hearing on 5B No. ++&/. 5B No. ++&/ $as approved on the Third Reading on 4ece ber &/, &**3 and trans itted to the Senate on ;anuar0 (+, &**)I a little less than a onth thereafter, or on =ebruar0 (3, &**), the Senate Co ittee on -ocal .overn ent conducted public hearings on SB No. &()3. Clearl0, the Senate held in abe0ance an0 action on SB No. &()3 until it received 5B No. ++&/, alread0 approved on the Third Reading, fro the 5ouse of Representatives. The filing in the Senate of a substitute bill in anticipation of its receipt of the bill fro the 5ouse, does not contravene the constitutional re9uire ent that a bill of local application should originate in the 5ouse of Representatives, for as long as the Senate does not act thereupon until it receives the 5ouse bill.

Be have alread0 addressed this issue in the case of Tolentino vs. Secretar! o+ Finance.&/ There, on the atter of the EGpanded ?alue Added TaG 1E?AT2 -a$, $hich, as a revenue bill, is nonetheless constitutionall0 re9uired to originate eGclusivel0 in the 5ouse of Representatives, $e eGplained% . . . To begin $ith, it is not the la$ O but the revenue bill O $hich is re9uired b0 the Constitution to <originate eGclusivel0< in the 5ouse of Representatives. #t is i portant to e phasi6e this, because a bill originating in the 5ouse a0 undergo such eGtensive changes in the Senate that the result a0 be a re$riting of the $hole. . . . as a result of the Senate action, a distinct bill a0 be produced. To insist that a revenue statute O and not onl0 the bill $hich initiated the legislative process cul inating in the enact ent of the la$ O ust substantiall0 be the sa e as the 5ouse bill $ould be to den0 the SenateCs po$er not onl0 to <concur $ith a end ents< but also to <propose a end ents.< #t $ould be to violate the coe9ualit0 of legislative po$er of the t$o houses of Congress and in fact a!e the 5ouse superior to the Senate. GGG GGG GGG

#t is insisted, ho$ever, that S. No. &,3D $as passed not in substitution of 5. No. &&&*/ but of another Senate bill 1S. No. &&(*2 earlier filed and that $hat the Senate did $as erel0 to <ta!e J5. No. &&&*/K into consideration< in enacting S. No. &,3D. There is reall0 no difference bet$een the Senate preserving 5. No. &&&*/ up to the enacting clause and then $riting its o$n version follo$ing the enacting clause 1$hich, it $ould see petitioners ad it is an a end ent b0 substitution2, and, on the other hand, separatel0 presenting a bill of its o$n on the sa e subFect atter. #n either case the result are t$o bills on the sa e subFect. #ndeed, $hat the Constitution si pl0 eans is that the initiative for filing revenue, tariff, or taG bills, bills authori6ing an increase of the public debt, private bills and bills of local application ust co e fro the 5ouse of Representatives on the theor0 that, elected as the0 are fro the districts, the e bers of the 5ouse can be eGpected to be ore sensitive to the local needs and proble s. 'n the other hand, the senators, $ho are elected at large, are eGpected to approach the sa e proble s fro the national perspective. Both vie$s are thereb0 ade to bear on the enact ent of such la$s. Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill fro the 5ouse, so long as action b0 the Senate as a bod0 is $ithheld pending receipt of the 5ouse bill. . . . &+ ### Ever0 la$, including RA No. //(D, has in its favor the presu ption of constitutionalit0 #t is a $ellEentrenched Furisprudential rule that on the side of ever0 la$ lies the presu ption of constitutionalit0.&*Conse9uentl0, for RA No. //(D to be nullified, it ust be sho$n that there is a clear and une9uivocal breach of the Constitution, not erel0 a doubtful and e9uivocal oneI in other $ords, the grounds for nullit0 ust be clear and be0ond reasonable doubt.(D Those $ho petition this court to declare a la$ to be unconstitutional ust clearl0 and full0 establish the basis that $ill Fustif0 such a declarationI other$ise, their petition ust fail. Ta!ing into consideration the Fustification of our stand on the i ediatel0 preceding ground raised b0 petitioners to challenge the constitutionalit0 of RA No. //(D, the Court stands on the holding that petitioners have failed to overco e the presu ption. The dis issal of this petition is, therefore, inevitable. B5ERE='RE, the instant petition is 4#SM#SSE4 for lac! of S' 'R4ERE4. EN BANC erit $ith costs against petitioners.

<G.R. No. 132988. $u7y 19, 2000=

A9UILINO 9. PIMENTEL $R., petitioner, vs. ,o&. ALE>AN!ER AGUIRRE .& /.0 1a2a1.3y a0 E4e1u3.5e Se1re3ary, ,o&. EMILIA ONCO!IN .& /er 1a2a1.3y a0 Se1re3ary o6 3/e !e2ar38e&3 o6 u':e3 a&' Ma&a:e8e&3, respondents. RO ERTO PAG!ANGANAN, .&3er5e&or. !ECISION PANGANI AN, J.; The Constitution vests the President $ith the po$er of supervision, not control, over local govern ent units 1-.>s2. Such po$er enables hi to see to it that -.>s and their officials eGecute their tas!s in accordance $ith la$. Bhile he a0 issue advisories and see! their cooperation in solving econo ic difficulties, he cannot prevent the fro perfor ing their tas!s and using available resources to achieve their goals. 5e a0 not $ithhold or alter an0 authorit0 or po$er given the b0 the la$. Thus, the $ithholding of a portion of internal revenue allot ents legall0 due the cannot be directed b0 ad inistrative fiat.

T/e Ca0e

Before us is an original Petition for Certiorari and Prohibition see!ing 1&2 to annul Section & of Ad inistrative 'rder 1A'2 No. 3/(, insofar as it re9uires local govern ent units to reduce their eGpenditures b0 (: percent of their authori6ed regular appropriations for nonEpersonal servicesI and 1(2 to enFoin respondents fro i ple enting Section ) of the 'rder, $hich $ithholds a portion of their internal revenue allot ents. 'n Nove ber &/, &**+, Roberto Pagdanganan, through Counsel Alberto C. Agra, filed a Motion for #nterventionMMotion to Ad it Petition for #ntervention, J&K attaching thereto his Petition in #ntervention J(K Foining petitioner in the reliefs sought. At the ti e, intervenor $as the provincial governor of Bulacan, national president of the -eague of Provinces of the Philippines and chair an of the -eague of -eagues of -ocal .overn ents. #n a Resolution dated 4ece ber &:, &**+, the Court noted said Motion and Petition.

T/e Fa130 a&' 3/e Ar:u8e&30

'n 4ece ber (/, &**/, the President of the Philippines issued A' 3/(. #ts full teGt, $ith e phasis on the assailed provisions, is as follo$s% <A4M#N#STRAT#?E 'R4ER N'. 3/( A4'PT#'N '= EC'N'M8 MEAS>RES #N .'?ERNMENT ='R =8 &**+ B5EREAS, the current econo ic difficulties brought about b0 the peso depreciation re9uires continued prudence in govern ent fiscal anage ent to aintain econo ic stabilit0 and sustain the countr0Cs gro$th o entu I B5EREAS, it is i perative that all govern ent agencies adopt cash available resourcesI anage ent easures to atch eGpenditures $ith

N'B, T5ERE='RE, #, =#4E- ?. RAM'S, President of the Republic of the Philippines, b0 virtue of the po$ers vested in e b0 the Constitution, do hereb0 order and direct% SECTION 1. A77 :o5er&8e&3 'e2ar38e&30 a&' a:e&1.e0, .&17u'.&: 03a3e u&.5er0.3.e0 a&' 1o77e:e0, :o5er&8e&3? o@&e' a&' 1o&3ro77e' 1or2ora3.o&0 a&' 7o1a7 :o5er&8e&30 u&.30 @.77 .'e&3.6y a&' .827e8e&3 8ea0ure0 .& F# 1998 3/a3 @.77 re'u1e 3o3a7 e42e&'.3ure0 6or 3/e year by a3 7ea03 2)A o6 au3/or.Be' re:u7ar a22ro2r.a3.o&0 6or &o&? 2er0o&a7 0er5.1e0 .3e80, a7o&: 3/e 6o77o@.&: 0u::e03e' area0; &. Continued i ple entation of the strea lining polic0 on organi6ation and staffing b0 deferring action on the follo$ing%

a. b. c. d.

'perationali6ation of ne$ agenciesI EGpansion of organi6ational units andMor creation of positionsI =illing of positionsI and 5iring of additionalMne$ consultants, contractual and casual personnel, regardless of funding source. (. Suspension of the follo$ing activities% a. # ple entation of ne$ capitalMinfrastructure proFects, eGcept those $hich have alread0 been contracted outI Ac9uisition of ne$ e9uip ent and otor vehiclesI

b. c.

All foreign travels of govern ent personnel, eGcept those associated $ith scholarships and trainings funded b0 grantsI Attendance in conferences abroad $here the cost is charged to the govern ent eGcept those clearl0 essential to Philippine co it ents in the international field as a0 be deter ined b0 the CabinetI Conduct of trainingsM$or!shopsMse inars, eGcept those conducted b0 govern ent training institutions and agencies in the perfor ance of their regular functions and those that are funded b0 grantsI Conduct of cultural and social celebrations and sports activities, eGcept those associated $ith the Philippine Centennial celebration and those involving regular co petitionsMeventsI .rant of honoraria, eGcept in cases $here it constitutes the onl0 source of co pensation fro govern ent received b0 the person concernedI Publications, edia advertise ents and related ite s, eGcept those re9uired b0 la$ or those alread0 being underta!en on a regular basisI .rant of ne$Madditional benefits to e plo0ees, eGcept those eGpressl0 and specificall0 authori6ed b0 la$I and 4onations, contributions, grants and gifts, eGcept those given b0 institutions to victi s of cala ities.

d.

e.

f.

g.

h.

i.

F.

3. Suspension of all taG eGpenditure subsidies to all .'CCs and -.>s ). Reduction in the volu e of consu ption of fuel, $ater, office supplies, electricit0 and other utilities :. 4efer ent of proFects that are encountering significant i ple entation proble s ,. Suspension of all realign ent of funds and the use of savings and reserves SECT#'N (. Agencies are given the fleGibilit0 to identif0 the specific sources of costEsavings, provided the (:N savings under Section & is co plied $ith. ini u

SECT#'N 3. A report on the esti ated savings generated fro these easures shall be sub itted to the 'ffice of the President, through the 4epart ent of Budget and Manage ent, on a 9uarterl0 basis using the attached for at. SECTION 4. Pending the assessment and evaluation b the !evelopment "udget Coordinating Committee o# the emerging #is$al situation, the amount e%uivalent to &'( o# the internal revenue allotment to lo$al government units shall be )ithheld. SECT#'N :. The 4evelop ent Budget Coordination Co ittee shall conduct a onthl0 revie$ of the fiscal position of the National .overn ent and if necessar0, shall reco end to the President the i position of additional reserves or the lifting of previousl0 i posed reserves.

SECT#'N ,. This Ad inistrative 'rder shall ta!e effect ;anuar0 &, &**+ and shall re ain valid for the entire 0ear unless other$ise lifted. 4'NE in the Cit0 of Manila, this (/th da0 of 4ece ber, in the 0ear of our -ord, nineteen hundred and ninet0Eseven.< Subse9uentl0, on 4ece ber &D, &**+, President ;oseph E. Estrada issued A' )3, a ending Section ) of A' 3/(, b0 reducing to five percent 1:N2 the a ount of internal revenue allot ent 1#RA2 to be $ithheld fro the -.>s. Petitioner contends that the President, in issuing A' 3/(, $as in effect eGercising the po$er of control over -.>s. The Constitution vests in the President, ho$ever, onl0 the po$er of general supervision over -.>s, consistent $ith the principle of local autono 0. Petitioner further argues that the directive to $ithhold ten percent 1&DN2 of their #RA is in contravention of Section (+, of the -ocal .overn ent Code and of Section ,, Article " of the Constitution, providing for the automatic release to each of these units its share in the national internal revenue. The solicitor general, on behalf of the respondents, clai s on the other hand that A' 3/( $as issued to alleviate the <econo ic difficulties brought about b0 the peso devaluation< and constituted erel0 an eGercise of the PresidentCs po$er of supervision over -.>s. #t allegedl0 does not violate local fiscal autono 0, because it erel0 #irects local govern ents to identif0 easures that $ill reduce their total eGpenditures for nonEpersonal services b0 at least (: percent. -i!e$ise, the $ithholding of &D percent of the -.>sP #RA does not violate the statutor0 prohibition on the i position of an0 lien or holdbac! on their revenue shares, because such $ithholding is <te porar0 in nature pending the assess ent and evaluation b0 the 4evelop ent Coordination Co ittee of the e erging fiscal situation.<

T/e I00ue0

The PetitionJ3K sub its the follo$ing issues for the CourtCs resolution% <A. Bhether or not the president co itted grave abuse of discretion JinK ordering all -.>S to adopt a (:N cost reduction progra in violation of the -.>JCKS fiscal autono 0 <B. Bhether or not the president co -.>JCKS #RA< itted grave abuse of discretion in ordering the $ithholding of &DN of the

#n su , the ain issue is $hether 1a2 Section & of A' 3/(, insofar as it <directs< -.>s to reduce their eGpenditures b0 (: percentI and 1b2 Section ) of the sa e issuance, $hich $ithholds &D percent of their internal revenue allot ents, are valid eGercises of the PresidentCs po$er of general supervision over local govern ents. Additionall0, the Court deliberated on the 9uestion $hether petitioner had the locus stan#i to bring this suit, despite respondentsC failure to raise the issue. J)K 5o$ever, the intervention of Roberto Pagdanganan has rendered acade ic an0 further discussion on this atter.

T/e Cour3C0 Ru7.&:

The Petition is partl0

eritorious.
Ma.& I00ue; *alidit o# +O ,-. Inso#ar as /01s +re Con$erned

Before resolving the ain issue, $e dee it i portant and appropriate to define certain crucial concepts% 1&2 the scope of the PresidentCs po$er of general supervision over local govern ents and 1(2 the eGtent of the local govern entsC autono 0.

S$ope o# President2s Po)er o# Supervision Over /01s

Section ) of Article " of the Constitution confines the PresidentCs po$er over local govern ents to one of general supervision. #t reads as follo$s%

<Sec. ).

The President of the Philippines shall eGercise general supervision over local govern ents. G G G<

This provision has been interpreted to eGclude the po$er of control. #n Mon#ano v. Silvosa,J:K the Court contrasted the PresidentCs po$er of supervision over local govern ent officials $ith that of his po$er of control over eGecutive officials of the national govern ent. #t $as e phasi6ed that the t$o ter s EE supervision and control EE differed in eaning and eGtent. The Court distinguished the as follo$s% <G G G #n ad inistrative la$, supervision eans overseeing or the po$er or authorit0 of an officer to see that subordinate officers perfor their duties. #f the latter fail or neglect to fulfill the , the for er a0 ta!e such action or step as prescribed b0 la$ to a!e the perfor their duties. Control, on the other hand, eans the po$er of an officer to alter or odif0 or nullif0 or set aside $hat a subordinate officer haJsK done in the perfor ance of his duties and to substitute the Fudg ent of the for er for that of the latter.< J,K #n Taule v. Santos,J/K $e further stated that the Chief EGecutive $ielded no ore authorit0 than that of chec!ing $hether local govern ents or their officials $ere perfor ing their duties as provided b0 the funda ental la$ and b0 statutes. 5e cannot interfere $ith local govern ents, so long as the0 act $ithin the scope of their authorit0. <Supervisor0 po$er, $hen contrasted $ith control, is the po$er of ere oversight over an inferior bod0I it does not include an0 restraining authorit0 over such bod0,<J+K $e said. #n a ore recent case, /rilon v. 0im,J*K the difference bet$een control and supervision $as further delineated. 'fficers in control la0 do$n the rules in the perfor ance or acco plish ent of an act. #f these rules are not follo$ed, the0 a0, in their discretion, order the act undone or redone b0 their subordinates or even decide to do it the selves. 'n the other hand, supervision does not cover such authorit0. Supervising officials erel0 see to it that the rules are follo$ed, but the0 the selves do not la0 do$n such rules, nor do the0 have the discretion to odif0 or replace the . #f the rules are not observed, the0 a0 order the $or! done or redone, but onl0 to confor to such rules. The0 a0 not prescribe their o$n anner of eGecution of the act. The0 have no discretion on this atter eGcept to see to it that the rules are follo$ed. >nder our present s0ste of govern ent, eGecutive po$er is vested in the President. J&DK The e bers of the Cabinet and other eGecutive officials are erel0 alter egos. As such, the0 are subFect to the po$er of control of the President, at $hose $ill and behest the0 can be re oved fro officeI or their actions and decisions changed, suspended or reversed. J&&K #n contrast, the heads of political subdivisions are elected b0 the people. Their sovereign po$ers e anate fro the electorate, to $ho the0 are directl0 accountable. B0 constitutional fiat, the0 are subFect to the PresidentPs supervision onl0, not control, so long as their acts are eGercised $ithin the sphere of their legiti ate po$ers. B0 the sa e to!en, the President a0 not $ithhold or alter an0 authorit0 or po$er given the b0 the Constitution and the la$.

E3tent o# /o$al +utonom

5and in hand $ith the constitutional restraint on the PresidentCs po$er over local govern ents is the state polic0 of ensuring local autono 0.J&(K #n Gan on v. Court o+ %ppeals,J&3K $e said that local autonom! signified <a ore responsive and accountable local govern ent structure instituted through a s0ste of decentrali6ation.< The grant of autono 0 is intended to <brea! up the onopol0 of the national govern ent over the affairs of local govern ents, G G G not G G G to end the relation of partnership and interdependence bet$een the central ad inistration and local govern ent units G G G.< ParadoGicall0, local govern ents are still subFect to regulation, ho$ever li ited, for the purpose of enhancing selfEgovern ent. J&)K /ecentrali ation si pl0 eans the devolution of national ad inistration, not po$er, to local govern ents. -ocal officials re ain accountable to the central govern ent as the la$ a0 provide. J&:K The difference bet$een decentrali6ation of ad inistration and that of po$er $as eGplained in detail in 0imbona v. Man(elinJ&,K as follo$s% <No$, autono 0 is either decentrali6ation of ad inistration or decentrali6ation of po$er. There is decentrali6ation of ad inistration $hen the central govern ent delegates ad inistrative po$ers to political subdivisions in order to broaden the base of govern ent po$er and in the process to a!e local govern ents C ore responsive and accountable,C J&/K and Censure their fullest develop ent as selfEreliant co unities and a!e the ore effective partners in the pursuit of national develop ent and social progress.CJ&+K At the sa e ti e, it relieves the central govern ent of the burden of anaging local affairs and enables it to concentrate on national concerns. The President eGercises Cgeneral supervisionCJ&*K over the , but onl0 to Censure that local affairs are ad inistered according to la$.C J(DK 5e has no control over their acts in the sense that he can substitute their Fudg ents $ith his o$n. J(&K

4ecentrali6ation of po$er, on the other hand, involves an abdication of political po$er in the favor of local govern ent units declared to be autono ous. #n that case, the autono ous govern ent is free to chart its o$n destin0 and shape its future $ith ini u intervention fro central authorities. According to a constitutional author, decentrali6ation of po$er a ounts to CselfEi olation,C since in that event, the autono ous govern ent beco es accountable not to the central authorities but to its constituenc0.< J((K >nder the Philippine concept of local autono 0, the national govern ent has not co pletel0 relin9uished all its po$ers over local govern ents, including autono ous regions. 'nl0 ad inistrative po$ers over local affairs are delegated to political subdivisions. The purpose of the delegation is to a!e governance ore directl0 responsive and effective at the local levels. #n turn, econo ic, political and social develop ent at the s aller political units are eGpected to propel social and econo ic gro$th and develop ent. But to enable the countr0 to develop as a $hole, the progra s and policies effected locall0 ust be integrated and coordinated to$ards a co on national goal. Thus, polic0Esetting for the entire countr0 still lies in the President and Congress. As $e stated in Ma(ta)as v. Pr!ce Properties Corp., -nc., unicipal govern ents are still agents of the national govern ent. J(3K

The Nature o# +O ,-.

Consistent $ith the foregoing Furisprudential precepts, let us no$ loo! into the nature of A' 3/(. As its prea bular clauses declare, the 'rder $as a <cash anage ent easure< adopted b0 the govern ent <to atch eGpenditures $ith available resources,< $hich $ere presu abl0 depleted at the ti e due to <econo ic difficulties brought about b0 the peso depreciation.< Because of a loo ing financial crisis, the President dee ed it necessar0 to <direct all govern ent agencies, state universities and colleges, govern entEo$ned and controlled corporations as $ell as local govern ents to reduce their total eGpenditures b0 at least (: percent along suggested areas entioned in A' 3/(. >nder eGisting la$, local govern ent units, in addition to having ad inistrative autono 0 in the eGercise of their functions, enFo0 fiscal autono 0 as $ell. =iscal autono 0 eans that local govern ents have the po$er to create their o$n sources of revenue in addition to their e9uitable share in the national taGes released b0 the national govern ent, as $ell as the po$er to allocate their resources in accordance $ith their o$n priorities. #t eGtends to the preparation of their budgets, and local officials in turn have to $or! $ithin the constraints thereof. The0 are not for ulated at the national level and i posed on local govern ents, $hether the0 are relevant to local needs and resources or not. 5ence, the necessit0 of a balancing of vie$points and the har oni6ation of proposals fro both local and national officials, J()K $ho in an0 case are partners in the attain ent of national goals. -ocal fiscal autono 0 does not ho$ever rule out an0 anner of national govern ent intervention b0 $a0 of supervision, in order to ensure that local progra s, fiscal and other$ise, are consistent $ith national goals. Significantl0, the President, b0 constitutional fiat, is the head of the econo ic and planning agenc0 of the govern ent, J(:K pri aril0 responsible for for ulating and i ple enting continuing, coordinated and integrated social and econo ic policies, plans and progra sJ(,K for the entire countr0. 5o$ever, under the Constitution, the for ulation and the i ple entation of such policies and progra s are subFect to <consultations $ith the appropriate public agencies, various private sectors, and local govern ent units.< The President cannot do so unilaterall0. Conse9uentl0, the -ocal .overn ent Code provides%J(/K <G G G J#Kn the event the national govern ent incurs an un anaged public sector deficit, the President of the Philippines is hereb0 authori6ed, upon the reco endation of JtheK Secretar0 of =inance, Secretar0 of the #nterior and -ocal .overn ent and Secretar0 of Budget and Manage ent, and subFect to consultation $ith the presiding officers of both 5ouses of Congress and the presidents of the liga, to a!e the necessar0 adFust ents in the internal revenue allot ent of local govern ent units but in no case shall the allot ent be less than thirt0 percent 13DN2 of the collection of national internal revenue taGes of the third fiscal 0ear preceding the current fiscal 0ear G G G.< There are therefore several re9uisites before the President a0 interfere in local fiscal atters% 1&2 an un anaged public sector deficit of the national govern entI 1(2 consultations $ith the presiding officers of the Senate and the 5ouse of Representatives an# the presi#ents o+ the various local lea(ues1 and 132 the corresponding reco endation of the secretaries of the 4epart ent of =inance, #nterior and -ocal .overn ent, and Budget and Manage ent. =urther ore, an0 adFust ent in the allot ent shall in no case be less than thirt0 percent 13DN2 of the collection of national internal revenue taGes of the third fiscal 0ear preceding the current one. Petitioner points out that respondents failed to co pl0 $ith these re9uisites before the issuance and the i ple entation of A' 3/(. At the ver0 least, the0 did not even tr0 to sho$ that the national govern ent $as suffering fro an un anageable public sector deficit. Neither did the0 clai having conducted consultations $ith the different

leagues of local govern ents. Bithout these re9uisites, the President has no authorit0 to adFust, unilaterall0 the -.>Cs internal revenue allot ent.

uch less to reduce,

The solicitor general insists, ho$ever, that A' 3/( is erel0 director0 and has been issued b0 the President consistent $ith his po$er of supervision over local govern ents. #t is intended onl0 to a#vise all govern ent agencies and instru entalities to underta!e costEreduction easures that $ill help aintain econo ic stabilit0 in the countr0, $hich is facing econo ic difficulties. Besides, it does not contain an0 sanction in case of nonco pliance. Being erel0 an advisor0, therefore, Section & of A' 3/( is $ell $ithin the po$ers of the President. Since it is not a andator0 i position, the directive cannot be characteri6ed as an eGercise of the po$er of control. Bhile the $ordings of Section & of A' 3/( have a rather co anding tone, and $hile $e agree $ith petitioner that the re9uire ents of Section (+) of the -ocal .overn ent Code have not been satisfied, $e are prepared to accept the solicitor generalCs assurance that the directive to <identif0 and i ple ent easures G G G that $ill reduce total eGpenditures G G G b0 at least (:N of authori6ed regular appropriation< is erel0 advisor0 in character, and does not constitute a andator0 or binding order that interferes $ith local autono 0. The language used, $hile authoritative, does not a ount to a co and that e anates fro a boss to a subaltern. Rather, the provision is erel0 an advisor0 to prevail upon local eGecutives to recogni6e the need for fiscal restraint in a period of econo ic difficult0. #ndeed, all concerned $ould do $ell to heed the PresidentCs call to unit0, solidarit0 and tea $or! to help alleviate the crisis. #t is understood, ho$ever, that no legal sanction a0 be i posed upon -.>s and their officials $ho do not follo$ such advice. #t is in this light that $e sustain the solicitor generalCs contention in regard to Section &.

4ithholding a Part o# /01s2 I5+

Section ) of A' 3/( cannot, ho$ever, be upheld. A basic feature of local fiscal autono 0 is the automatic release of the shares of -.>s in the national internal revenue. This is andated b0 no less than the Constitution. J(+K The -ocal .overn ent CodeJ(*K specifies further that the release shall be ade directl0 to the -.> concerned $ithin five 1:2 da0s after ever0 9uarter of the 0ear and < shall not be sub)ect to an! lien or hol#back that ma! be impose# b! the national (overnment +or 2hatever purpose.<J3DK As a rule, the ter <shall< is a $ord of co and that ust be given a co pulsor0 eaning.J3&K The provision is, therefore, i perative. Section ) of A' 3/(, ho$ever, orders the $ithholding, effective ;anuar0 &, &**+, of &D percent of the -.>sC #RA <pending the assess ent and evaluation b0 the 4evelop ent Budget Coordinating Co ittee of the e erging fiscal situation< in the countr0. Such $ithholding clearl0 contravenes the Constitution and the la$. Although te porar0, it is e9uivalent to a holdbac!, $hich eans <so ething held bac! or $ithheld, often te poraril0.< J3(K 5ence, the <te porar0< nature of the retention b0 the national govern ent does not atter. An0 retention is prohibited. #n su , $hile Section & of A' 3/( a0 be upheld as an advisor0 effected in ti es of national crisis, Section ) thereof has no color of validit0 at all. The latter provision effectivel0 encroaches on the fiscal autono 0 of local govern ents. Concededl0, the President $as $ellEintentioned in issuing his 'rder to $ithhold the -.>sP #RA, but the rule of la$ re9uires that even the best intentions ust be carried out $ithin the para eters of the Constitution and the la$. ?eril0, laudable purposes ust be carried out b0 legal ethods.

5e#utation o# Justi$e 6apunan2s !issent

Mr. ;ustice Santiago M. @apunan dissents fro our 4ecision on the grounds that, allegedl0, 1&2 the Petition is pre atureI 1(2 A' 3/( falls $ithin the po$ers of the President as chief fiscal officerI and 132 the $ithholding of the -.>sP #RA is i plied in the PresidentCs authorit0 to adFust it in case of an un anageable public sector deficit. First, on pre aturit0. According to the 4issent, $hen <the conduct has not 0et occurred and the challenged construction has not 0et been adopted b0 the agenc0 charged $ith ad inistering the ad inistrative order, the deter ination of the scope and constitutionalit0 of the eGecutive action in advance of its i ediate adverse effect involves too re ote and abstract an in9uir0 for the proper eGercise of Fudicial function.< This is a rather novel theor0 EE that people should a$ait the i ple enting evil to befall on the before the0 can 9uestion acts that are illegal or unconstitutional. Be it re e bered that the real issue here is $hether the Constitution and the la$ are contravened b0 Section ) of A' 3/(, not $hether the0 are violated b0 the acts i ple enting it. #n the unani ous en banc case TaQada v. Angara,J33K this Court held that $hen an act of the legislative depart ent is seriousl0 alleged to have infringed the Constitution, settling the controvers0 beco es the dut0 of this Court. B0 the ere enact ent

of the 9uestioned la$ or the approval of the challenged action, the dispute is said to have ripened into a Fudicial controvers0 even $ithout an0 other overt act. #ndeed, even a singular violation of the Constitution andMor the la$ is enough to a$a!en Fudicial dut0. Said the Court% <#n see!ing to nullif0 an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a Fusticiable controvers0. Bhere an action of the legislative branch is seriousl0 alleged to have infringed the Constitution, it beco es not onl0 the right but in fact the dut0 of the Fudiciar0 to settle the dispute. CThe 9uestion thus posed is Fudicial rather than political. The dut0 1to adFudicate2 re ains to assure that the supre ac0 of the Constitution is upheld.CJ3)K 'nce a Ccontrovers0 as to the application or interpretation of a constitutional provision is raised before this Court G G G , it beco es a legal issue $hich the Court is bound b0 constitutional andate to decide.C J3:K GGG GGG GGG

<As this Court has repeatedl0 and fir l0 e phasi6ed in an0 cases, J3,K it $ill not shir!, digress fro or abandon its sacred dut0 and authorit0 to uphold the Constitution in atters that involve grave abuse of discretion brought before it in appropriate cases, co itted b0 an0 officer, agenc0, instru entalit0 or depart ent of the govern ent.< #n the sa e vein, the Court also held in Tatad v. Secretar0 of the 4epart ent of Energ0 3J3/K <G G G ;udicial po$er includes not onl0 the dut0 of the courts to settle actual controversies involving rights $hich are legall0 de andable and enforceable, but also the dut0 to deter ine $hether or not there has been grave abuse of discretion a ounting to lac! or eGcess of Furisdiction on the part of an0 branch or instru entalit0 of govern ent. The courts, as guardians of the Constitution, have the inherent authorit0 to deter ine $hether a statute enacted b0 the legislature transcends the li it i posed b0 the funda ental la$. Bhere the statute violates the Constitution, it is not onl0 the right but the dut0 of the Fudiciar0 to declare such act unconstitutional and void.< B0 the sa e to!en, $hen an act of the President, $ho in our constitutional sche e is a coe9ual of Congress, is seriousl0 alleged to have infringed the Constitution and the la$s, as in the present case, settling the dispute beco es the dut0 and the responsibilit0 of the courts. Besides, the issue that the Petition is pre ature has not been raised b0 the partiesI hence it is dee ed $aived. Considerations of due process reall0 prevents its use against a part0 that has not been given sufficient notice of its presentation, and thus has not been given the opportunit0 to refute it. J3+K Secon#, on the PresidentCs po$er as chief fiscal officer of the countr0. ;ustice @apunan posits that Section ) of A' 3/( confor s $ith the PresidentCs role as chief fiscal officer, $ho allegedl0 <is clothed b0 la$ $ith certain po$ers to ensure the observance of safeguards and auditing re9uire ents, as $ell as the legal prere9uisites in the release and use of #RAs, ta!ing into account the constitutional and statutor0 andates.< J3*K 5e cites instances $hen the President a0 la$full0 intervene in the fiscal affairs of -.>s. Precisel0, such po$ers referred to in the 4issent have specificall0 been authori6ed b0 la$ and have not been challenged as violative of the Constitution. 4n the other han#, Section 5 o+ %4 678, as e*plaine# earlier, contravenes e*plicit provisions o+ the 0ocal Government Co#e ,0GC. an# the Constitution . #n other $ords, the acts alluded to in the 4issent are indeed authori6ed b0 la$I but, 9uite the opposite, Section ) of A' 3/( is bereft of an0 legal or constitutional basis. Thir#, on the PresidentCs authorit0 to adFust the #RA of -.>s in case of an un anageable public sector deficit. #t ust be e phasi6ed that in stri!ing do$n Section ) of A' 3/(, this Court is not ruling out an0 for of reduction in the #RAs of -.>s. #ndeed, as the President a0 a!e necessar0 adFust ents in case of an un anageable public sector deficit, as stated in the ain part of this 4ecision, and in line $ith Section (+) of the -.C, $hich ;ustice @apunan cites. 5e, ho$ever, erel0 glances over a specific re9uire ent in the sa e provision EE that such reduction is subFect to consultation $ith the presiding officers of both 5ouses of Congress and, ore i portantl0, $ith the presi#ents o+ the lea(ues o+ local (overnments. Notabl0, ;ustice @apunan recogni6es the need for <interaction bet$een the national govern ent and the -.>s at the planning level,< in order to ensure that <local develop ent plans G G G he$ to national policies and standards.< The proble is that no such interaction or consultation $as ever held prior to the issuance of A' 3/(. This is $h0 the petitioner and the intervenor 1$ho $as a provincial governor and at the sa e ti e president of the -eague of Provinces of the Philippines and chair an of the -eague of -eagues of -ocal .overn ents2 have protested and instituted this action. Significantl0, respondents do not den0 the lac! of consultation. #n addition, ;ustice @apunan cites Section (+/ J)DK of the -.C as i pliedl0 authori6ing the President to $ithhold the #RA of an -.>, pending its co pliance $ith certain re9uire ents. Even a cursor0 reading of the provision reveals that it

is totall0 inapplicable to the issue at bar. #t directs -.>s to appropriate in their annual budgets (D percent of their respective #RAs for develop ent proFects. #t spea!s of no positive po$er granted the President to priorl0 $ithhold an0 a ount. Not at all. ",EREFORE, the Petition is G'%NT9/. Respondents and their successors are hereb0 per anentl0 P'4H-"-T9/ fro i ple enting Ad inistrative 'rder Nos. 3/( and )3, respectivel0 dated 4ece ber (/, &**/ and 4ece ber &D, &**+, insofar as local govern ent units are concerned. SO OR!ERE!. /avi#e, Jr., C.J., "ellosillo, Melo, Puno, :itu(, Men#o a, ;uisumbin(, Par#o, "uena, Gon a(a-'e!es, and /e 0eon, Jr., JJ., concur. <apunan, J., see dissenting opinion. Purisima, an# =nares-Santia(o, JJ., Foin J. @apunan in his dissenting opinion.

!ISSENTING OPINION

DAPUNAN, J.; #n stri!ing do$n as unconstitutional and illegal Section ) of Ad inistrative 'rder No. 3/( 1<A' No. 3/(<2, the aForit0 opinion posits that the President eGercised po$er of control over the local govern ent units 1<-.>R2, $hich he does not have, and violated the provisions of Section ,, Article " of the Constitution, $hich states% SEC. ,. -ocal govern ent units shall have a Fust share, as deter ined b0 la$, in the national taGes $hich shall be auto aticall0 released to the . and Section (+,1a2 of the -ocal .overn ent Code, $hich provides% SEC. (+,. %utomatic 'elease o+ Shares. - ,a. The share of each local govern ent unit shall be released, $ithout need of an0 further action, directl0 to the provincial, cit0, unicipal or baranga0 treasurer, as the case a0 be, on a 9uarterl0 basis $ithin five 1:2 da0s after the end of each 9uarter, and $hich shall not be subFect to an0 lien or holdbac! that a0 be i posed b0 the national govern ent for $hatever purpose. The share of the -.>s in the national internal revenue taGes is defined in Section (+) of the sa e -ocal .overn ent Code, to $it% SEC. (+). %llotment o+ -nternal 'evenue Ta*es. - -ocal govern ent units shall have a share in the national internal revenue taGes based on the collection of the third fiscal 0ear preceding the current fiscal 0ear as follo$s% 1a2 'n the first 0ear of the effectivit0 of this Code, thirt0 percent 13DN2I 1b2 'n the second 0ear, thirt0Efive 13:N2 percentI and 1c2 'n the third 0ear and thereafter, fort0 percent 1)DN2. Provi#e#, That in the event that the national govern ent incurs an un anageable public sector deficit, the President of the Philippines is hereb0 authori6ed, upon the reco endation of Secretar0 of =inance, Secretar0 of #nterior and -ocal .overn ent and Secretar0 of Budget and Manage ent, and subFect to consultation $ith the presiding officers of both 5ouses of Congress and the presidents of the Sliga,R to a!e the necessar0 adFust ents in the internal revenue allot ent of local govern ent units but in no case shall the allot ent be less than thirt0 percent 13DN2 of the collection of national internal revenue taGes of the third fiscal 0ear preceding the current fiscal 0ear% Provi#e#, further, That in the first 0ear of the effectivit0 of this Code, the local govern ent units shall, in addition to the thirt0 percent 13DN2 internal revenue allot ent $hich shall include the cost of devolved functions for essential public services, be entitled to receive the a ount e9uivalent to the cost of devolved personal services. GGG The aForit0 opinion ta!es the vie$ that the $ithholding of ten percent 1&DN2 of the internal revenue allot ent 1<#RA<2 to the -.>s pending the assess ent and evaluation b0 the 4evelop ent Budget Coordinating Co ittee of the

e erging fiscal situation as called for in Section ) of A' No. 3/( transgresses against the aboveE9uoted provisions $hich andate the <auto atic< release of the shares of the -.>s in the national internal revenue in consonance $ith local fiscal autono 0. The pertinent portions of A' No. 3/( are reproduced hereunder%

A!MINISTRATI-E OR!ER NO. 3+2

A4'PT#'N '= EC'N'M8 MEAS>RES #N .'?ERNMENT ='R =8 &**+ B5EREAS, the current econo ic difficulties brought about b0 the peso depreciation re9uires continued prudence in govern ent fiscal anage ent to aintain econo ic stabilit0 and sustain the countr0Ps gro$th o entu I B5EREAS, it is i perative that all govern ent agencies adopt cash anage ent easures to atch eGpenditures $ith available resourcesI N'B T5ERE='RE, #, =#4E- ?. RAM'S, President of the Republic of the Philippines, b0 virtue of the po$ers vested in e b0 the Constitution, do hereb0 order and direct% SECT#'N &. All govern ent depart ents and agencies, including G G G local govern ent units $ill identif0 and i ple ent easures in =8 &**+ that $ill reduce total appropriations for nonEpersonal services ite s, along the follo$ing suggested areas% GGG SECT#'N ). Pending the assess ent and evaluation b0 the 4evelop ent Budget Coordinating Co ittee of the e erging fiscal situation the a ount e9uivalent to &DN of the internal revenue allot ent to local govern ent units shall be $ithheld. GGG Subse9uentl0, on 4ece ber &D, &**+, President ;oseph E. Estrada issued Ad inistrative 'rder No. )3 1SA' No. )3R2, a ending Section ) of A' No. 3/(, b0 reducing to five percent 1:N2 the #RA to be $ithheld fro the -.>s, thus%

A!MINISTRATI-E OR!ER NO. (3

AMEN4#N. A4M#N#STRAT#?E 'R4ER N'. 3/( 4ATE4 (/ 4ECEMBER &**/ ENT#T-E4 <A4'PT#'N '= EC'N'M8 MEAS>RES #N .'?ERNMENT ='R =8 &**+< B5EREAS, Ad inistrative 'rder No. 3/( dated (/ 4ece ber &**/ entitled <Adoption of Econo 0 Measures in .overn ent for =8 &**+< $as issued to address the econo ic difficulties brought about b0 the peso devaluation in &**/I B5EREAS, Section ) of Ad inistrative 'rder No. 3/( provided that the a ount e9uivalent to &DN of the internal revenue allot ent to local govern ent units shall be $ithheldI and, B5EREAS, there is a need to release additional funds to local govern ent units for vital proFects and eGpenditures. N'B, T5ERE='RE, #, ;'SEP5 E;ERC#T' ESTRA4A, President of the Republic of the Philippines, b0 virtue of the po$ers vested in e b0 la$, do hereb0 order the reduction of the $ithheld #nternal Revenue Allot ent 1#RA2 of local govern ent units fro ten percent to five percent. The five percent reduction in the #RA $ithheld for &**+ shall be released before (: 4ece ber &**+. 4'NE in the Cit0 of Manila, this &Dth da0 of 4ece ber, in the 0ear of our -ord, nineteen hundred and ninet0 eight. Bith all due respect, # beg to disagree $ith the aForit0 opinion.

Section ) of A' No. 3/( does not present a case ripe for adFudication. The language of Section ) does not conclusivel0 sho$ that, on its face, the constitutional provision on the auto atic release of the #RA shares of the -.>s

has been violated. Section ), as $orded, eGpresses the idea that the $ithholding is erel0 te porar0 $hich fact alone $ould not erit an outright conclusion of its unconstitutionalit0, especiall0 in light of the reasonable presu ption that ad inistrative agencies act in confor it0 $ith the la$ and the Constitution. Bhere the conduct has not 0et occurred and the challenged construction has not 0et been adopted b0 the agenc0 charged $ith ad inistering the ad inistrative order, the deter ination of the scope and constitutionalit0 of the eGecutive action in advance of its i ediate adverse effect involves too re ote and abstract an in9uir0 for the proper eGercise of Fudicial function. Petitioners have not sho$n that the alleged :N #RA share of -.>s that $as te poraril0 $ithheld has not 0et been released, or that the 4epart ent of Budget and Manage ent 14BM2 has refused and continues to refuse its release. #n vie$ thereof, the Court should not decide as this case suggests an abstract proposition on constitutional issues. The President is the chief fiscal officer of the countr0. 5e is ulti atel0 responsible for the collection and distribution of public one0% SECT#'N 3. Po$ers and =unctions. E The 4epart ent of Budget and Manage ent shall assist the President in the preparation of a national resources and eGpenditures budget, preparation, eGecution and control of the National Budget, preparation and aintenance of accounting s0ste s essential to the budgetar0 process, achieve ent of ore econo 0 and efficienc0 in the anage ent of govern ent operations, ad inistration of co pensation and position classification s0ste s, assess ent of organi6ational effectiveness and revie$ and evaluation of legislative proposals having budgetar0 or organi6ational i plications.& #n a larger conteGt, his role as chief fiscal officer is directed to$ards <the nationCs efforts at econo ic and social uplift ent<( for $hich ore specific econo ic po$ers are delegated. Bithin statutor0 li its, the President can, thus, fiG <tariff rates, i port and eGport 9uotas, tonnage and $harfage dues, and other duties or i posts $ithin the fra e$or! of the national develop ent progra of the govern ent,R 3 as he is also responsible for enlisting the countr0 in international econo ic agree ents.) More than this, to achieve <econo 0 and efficienc0 in the anage ent of govern ent operations,< the President is e po$ered to create appropriation reserves, : suspend eGpenditure appropriations,, and institute cost reduction sche es./ As chief fiscal officer of the countr0, the President supervises fiscal develop ent in the local govern ent units and ensures that la$s are faithfull0 eGecuted. + =or this reason, he can set aside taG ordinances if he finds the contrar0 to the -ocal .overn ent Code.* 'rdinances cannot contravene statutes and public polic0 as declared b0 the national gove ent.&D The goal of local econo 0 is not to <end the relation of partnership and interEdependence bet$een the central ad inistration and local govern ent units,< && but to a!e local govern ents < ore responsive and accountable< JtoK <ensure their fullest develop ent as selfEreliant co unities and a!e the ore effective partners in the pursuit of national develop ent and social progress.<&( The interaction bet$een the national govern ent and the local govern ent units is andator0 at the planning level. -ocal develop ent plans ust thus he$ to <national policies and standardsR &3 as these are integrated into the regional develop ent plans for sub ission to the National Econo ic 4evelop ent Authorit0. < &) -ocal budget plans and goals ust also be har oni6ed, as far as practicable, $ith <national develop ent goals and strategies in order to opti i6e the utili6ation of resources and to avoid duplication in the use of fiscal and ph0sical resources.< &: Section ) of A' No. 3/( $as issued in the eGercise b0 the President not onl0 of his po$er of general supervision, but also in confor it0 $ith his role as chief fiscal officer of the countr0 in the discharge of $hich he is clothed b0 la$ $ith certain po$ers to ensure the observance of safeguards and auditing re9uire ents, as $ell as the legal prere9uisites in the release and use of #RAs, ta!ing into account the constitutional &, and statutor0&/ andates. 5o$ever, the phrase <auto atic release< of the -.>sC shares does not ean that the release of the funds is echanical, spontaneous, selfEoperating or refleG. #RAs ust first be deter ined, and the one0 for their pa0 ent collected.&+ #n this regard, ad inistrative docu entations are also underta!en to ascertain their availabilit0, li its and eGtent. The phrase, thus, should be used in the conteGt of the $hole budgetar0 process and in relation to pertinent la$s relating to audit and accounting re9uire ents. #n the $or!ings of the budget for the fiscal 0ear, appropriations for eGpenditures are supported b0 eGisting funds in the national coffers and b0 proposals for revenue raising. The one0, therefore, available for #RA release a0 not be eGisting but erel0 inchoate, or a ere eGpectation. #t is not infre9uent that the EGecutive 4epart entCs proposals for raising revenue in the for of proposed legislation a0 not be passed b0 the legislature. As such, the release of #RA should not ean release of absolute a ounts based erel0 on athe atical co putations. There ust be a prior deter ination of $hat eGact a ount the local govern ent units are actuall0 entitled in light of the econo ic factors $hich affect the fiscal situation in the countr0. =ore ost of these is $here, due to an un anageable public sector deficit, the President a0 a!e the necessar0 adFust ents in the #RA of -.>s. Thus, as eGpressl0 provided in Article (+) of the -ocal .overn ent Code% G G G 1#2n the event that the national govern ent incurs an un anageable public sector deficit, the President of the Philippines is hereb0 authori6ed, upon the reco endation of Secretar0 of =inance, Secretar0 of #nterior and -ocal .overn ent and Secretar0 of Budget and Manage ent and subFect to consultation $ith the

presiding officers of both 5ouses of Congress and the presidents of the <liga,< to a!e the necessar0 adFust ents in the internal revenue allot ent of local govern ent units but in no case shall the allot ent be less than thirt0 percent 13DN2 of the collection of national internal revenue taGes of the third fiscal 0ear preceding the current fiscal 0ear. G G G. >nder the aforecited provision, if facts reveal that the econo 0 has sustained or $ill li!el0 sustain such <un anageable public sector deficit,< then the -.>s cannot assert absolute right of entitle ent to the full a ount of fort0 percent 1)DN2 share in the #RA, because the President is authori6ed to a!e an adFust ent and to reduce the a ount to not less than thirt0 percent 13DN2. #t is, therefore, i practical to i ediatel0 release the full a ount of the #RAs and subse9uentl0 re9uire the local govern ent units to return at ost ten percent 1&DN2 once the President has ascertained that there eGists an un anageable public sector deficit. B0 necessar0 i plication, the po$er to a!e necessar0 adFust ents 1including reduction2 in the #RA in case of an un anageable public sector deficit, includes the discretion to $ithhold the #RAs te poraril0 until such ti e that the deter ination of the actual fiscal situation is ade. The test in deter ining $hether one po$er is necessaril0 included in a stated authorit0 is% <The eGercise of a ore absolute po$er necessaril0 includes the lesser po$er especiall0 $here it is needed to a!e the first po$er effective.< &* #f the discretion to suspend te poraril0 the release of the #RA pending such eGa ination is $ithheld fro the President, his authorit0 to a!e the necessar0 #RA adFust ents brought about b0 the un anageable public sector deficit $ould be e asculated in the idst of serious econo ic crisis. #n the situation conFured b0 the aForit0 opinion, the one0 $ould alread0 have been gone even before it is deter ined that fiscal crisis is indeed happening. The aForit0 opinion overstates the re9uire ent in Section (+, of the -ocal .overn ent Code that the #RAs <shall not be subFect to an0 lien or holdbac! that a0 be i posed b0 the national govern ent for $hatever purpose< as proof that no $ithholding of the release of the #RAs is allo$ed albeit te porar0 in nature. #t is $orth0 to note that this provision does not appear in the Constitution. Section ,, Art " of the Constitution erel0 directs that -.>s <shall have a Fust share< in the national taGes <as deter ined b0 la$< and $hich share Sshall be auto aticall0 released to the .R This eans that before the -.>Ps share is released, there should be first a deter ination, $hich re9uires a process, of $hat is the correct a ount as dictated b0 eGisting la$s. =or one, the # ple enting Rules of the -ocal .overn ent Code allo$s deductions fro the #RAs, to $it% Article 3+). Auto atic Release of #RA Shares of -.>s% GGG 1c2 The #RA share of -.>s shall not be subFect to an0 lien or hold bac! that a0 be i posed b0 the National .overn ent for $hatever purpose unless other$ise provided in the Code or other applicable la$s and loan contract on proFect agree ents arising fro foreign loans and international co it ents, such as pre iu contributions of -.>s to the .overn ent Service #nsurance S0ste and loans contracted b0 -.>s under foreignEassisted proFects. Apart fro the above, other andator0 deductions are ade fro the #RAs prior to their release, such as% 1&2 total actual cost of devolution and the cost of cit0Efunded hospitalsI (Dand 1(2 co pulsor0 contributions(& and other re ittances.(( #t follo$s, therefore, that the President can $ithhold portions of #RAs in order to setEoff or co pensate legiti atel0 incurred obligations and re ittances of -.>s. Significantl0, Section (+, of the -ocal .overn ent Code does not a!e ention of the eGact a ount that should be auto aticall0 released to the -.>s. The provision does not andate that the entire )DN share entioned in Section (+) shall be released. #t erel0 provides that the E0/areE of each -.> shall be released and $hich <shall not be subFect to an0 lien or holdbac! that a0 be i posed b0 the national govern ent for $hatever purpose.< The provision on auto atic release of #RA share should, thus, be read together $ith Section (+), including the proviso on adFust ent or reduction of #RAs, as $ell as other relevant la$s. #t a0 happen that the share of the -.>s a0 a ount to the full fort0 percent 1)DN2 or the reduced a ount of thirt0 percent 13DN2 as adFusted $ithout an0 la$ being violated. #n other $ords, all that Section (+, re9uires is the auto atic release of the a ount that the -.>s are r.:/36u77y a&' 7e:a77y e&3.37e' 3o, $hich, as the sa e section provides, should not be less than thirt0 percent 13DN2 of the collection of the national revenue taGes. So that even if five percent 1:N2 or ten percent 1&DN2 is either te poraril0 or per anentl0 $ithheld, but the ini u of thirt0 percent 13DN2 allot ent for the -.>s is released pursuant to the PresidentCs authorit0 to a!e the necessar0 adFust ent in the -.>SC share, there is still full co pliance $ith the re9uire ents of the auto atic release of the -.>sC share. =inall0, the aForit0 insists that the $ithholding of ten percent 1&DN2 or five percent 1:N2 of the #RAs could not have been done pursuant to the po$er of the President to adFust or reduce such shares under Section (+) of the -ocal .overn ent Code because there $as no sho$ing of an un anageable public sector deficit b0 the national govern ent, nor $as there evidence that consultations $ith the presiding officers of both 5ouses of Congress and the presidents of the

various leagues had ta!en place and the corresponding reco endations of the Secretar0 of =inance, Secretar0 of #nterior and -ocal .overn ent and the Budget Secretar0 $ere ade. # beg to differ. The po$er to deter ine $hether there is an un anageable public sector deficit is lodged in the President. The PresidentCs deter ination, as fiscal anager of the countr0, of the eGistence of econo ic difficulties $hich could a ount to <un anageable public sector deficit< should be accorded respect. #n fact, the $ithholding of the ten percent 1&DN2 of the -.>sC share $as further Fustified b0 the current econo ic difficulties brought about b0 the peso depreciation as sho$n b0 one of the E",EREASESE o6 AO No. 3+2.(3#n the absence of an0 sho$ing to the contrar0, it is presu ed that the President had ade prior consultations $ith the officials thus entioned and had acted upon the reco endations of the Secretaries of =inance, #nterior and -ocal .overn ent and Budget. () Therefore, even assu ing h0potheticall0 that there $as effectivel0 a deduction of five percent 1:N2 of the -.>sC share, $hich $as in accordance $ith the PresidentCs prerogative in vie$ of the pronounce ent of the eGistence of an un anageable public sector deficit, the deduction $ould still be valid in the absence of an0 proof that the -.>sC allot ent $as less than the thirt0 percent 13DN2 li it provided for in Section (+) of the -ocal .overn ent Code. #n resu e, the $ithholding of the a ount e9uivalent to five percent 1:N2 of the #RA to the -.>s $as te porar0 pending deter ination b0 the EGecutive of the actual share $hich the -.>s are rightfull0 entitled to on the basis of the applicable la$s, particularl0 Section (+) of the -ocal .overn ent Code, authori6ing the President to a!e the necessar0 adFust ents in the #RA of -.>s in the event of an un anageable public sector deficit. And assu ing that the said five percent 1:N2 of the #RA pertaining to the &**+ =iscal 8ear has been per anentl0 $ithheld, there is no sho$ing that the a ount actuall0 released to the -.>s that sa e 0ear $as less than thirt0 percent 13DN2 of the national internal revenue taGes collected, $ithout even considering the proper deductions allo$ed b0 la$. ",EREFORE, # vote to 4#SM#SS the petition. Re2ub7.1 o6 3/e P/.7.22.&e0 Su2re8e Cour3 Ma&.7a EN P5#-#PP#NE S'C#ET8 ='R T5E PRE?ENT#'N '= CR>E-T8 T' AN#MA-S, Petitioners, ANC

..R. No. &,*/:( Me bers% P>N', C.J. A>#S>MB#N., 8NARESESANT#A.', SAN4'?A-E.>T#ERRE7, CARP#', A>STR#AEMART#NE7, C'R'NA, CARP#'EM'RA-ES, A7C>NA, T#N.A, C5#C'ENA7AR#', .ARC#A, ?E-ASC', ;R., NAC5>RA, and RE8ES, JJ.

E versus E

C'MM#SS#'N 'N A>4#T, 4#R. R'4>-=' ;. AR#ES.A 1in his official capacit0 as 4irector of the Co ission on Audit2, MS. MER-E M. ?A-ENT#N and MS. S>SAN .>AR4#AN 1in their official capacities as Tea -eader and Tea Me ber, respectivel0, of the audit Tea of the Co ission on Audit2, Pro ulgated% Respondents. Septe ber (:, (DD/ GEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE G

!ECISION AUSTRIA?MARTINE%, J.; Before the Court is a special civil action for Certiorari and Prohibition under Rule ,: of the Rules of Court, in relation to Section ( of Rule ,), filed b0 the petitioner assailing 'ffice 'rder No. (DD:ED(& J&K dated Septe ber &), (DD: issued b0 the respondents $hich constituted the audit tea , as $ell as its Septe ber (3, (DD: -etter J(K infor ing the petitioner that respondentsP audit tea shall conduct an audit surve0 on the petitioner for a detailed audit of its accounts, operations, and financial transactions. No te porar0 restraining order $as issued. The petitioner $as incorporated as a Furidical entit0 over one hundred 0ears ago b0 virtue of Act No. &(+:, enacted on ;anuar0 &*, &*D:, b0 the Philippine Co ission. The petitioner, at the ti e it $as created, $as co posed of ani al aficionados and ani al propagandists. The obFects of the petitioner, as stated in Section ( of its charter, shall be to enforce la$s relating to cruelt0 inflicted upon ani als or the protection of ani als in the Philippine #slands, and generall0, to do and perfor all things $hich a0 tend in an0 $a0 to alleviate the suffering of ani als and pro ote their $elfare. J3K

At the ti e of the enact ent of Act No. &(+:, the original Corporation -a$, Act No. &):*, $as not 0et in eGistence. Act No. &(+: antedated both the Corporation -a$ and the constitution of the Securities and EGchange Co ission. # portant to note is that the nature of the petitioner as a corporate entit0 is distinguished fro erce. the socie#a# anonimas under the Spanish Code of Co

=or the purpose of enhancing its po$ers in pro oting ani al $elfare and enforcing la$s for the protection of ani als, the petitioner $as initiall0 i bued under its charter $ith the po$er to apprehend violators of ani al $elfare la$s. #n addition, the petitioner $as to share oneEhalf 1&M(2 of the fines i posed and collected through its efforts for violations of the la$s related thereto. As originall0 $orded, Sections ) and : of Act No. &(+: provide% SEC. ). The said societ0 is authori e# to appoint not to eGceed five agents in the Cit0 of Manila, and not to eGceed t$o in each of the provinces of the Philippine #slands 2ho shall have all the po2er an# authorit! o+ a police o++icer to make arrests +or violation o+ the la2s enacted for the prevention of cruelt0 to ani als and the protection of ani als, and to serve an0 process in connection $ith the eGecution of such la$sI and in addition thereto, all the police force of the Philippine #slands, $herever organi6ed, shall, as occasion re9uires, assist said societ0, its e bers or agents, in the enforce ent of all such la$s. SEC. :. 4ne-hal+ o+ all the +ines impose# an# collecte# throu(h the e++orts o+ sai# societ! , its e bers or its agents, for violations of the la$s enacted for the prevention of cruelt0 to ani als and for their protection, shall belon( to sai# societ! an# shall be use# to promote its ob)ects . 1e phasis supplied2 Subse9uentl0, ho$ever, the po$er to entiret0, thus% Be it enacted b0 the National Asse bl0 of the Philippines% a!e arrests as $ell as the privilege to retain a portion of the fines collected on$ealth Act 1C.A.2 No. &)+, J)K $hich reads, in its

for violation of ani alErelated la$s $ere recalled b0 virtue of Co

Section &. Section four of Act Nu bered T$elve hundred and eight0Efive as a ended b0 Act Nu bered Thirt0 five hundred and fort0Eeight, is hereb0 further a ended so as to read as follo$s% Sec. ). The said societ0 is authori6ed to appoint not to eGceed ten agents in the Cit0 of Manila, and not to eGceed one in each unicipalit0 of the Philippines 2ho shall have the authorit! to #enounce to re(ular peace o++icers an0 violation of the la$s enacted for the prevention of cruelt0 to ani als and the protection of ani als and to cooperate $ith said peace officers in the prosecution of transgressors of such la$s. Sec. (. The +ull amount o+ the +ines collecte# for violation of the la$s against cruelt0 to ani als and for the protection of ani als, shall accrue to the (eneral +un# o+ the Municipalit! $here the offense $as co itted. Sec. 3. This Act shall ta!e effect upon its approval. Approved, Nove ber +, &*3,. 1E phasis supplied2

ediatel0 thereafter, then President Manuel -. Aue6on issued EGecutive 'rder 1E.'.2 No. ,3 dated Nove ber

&(, &*3,, portions of $hich provide% Bhereas, during the first regular session of the National Asse bl0, Co on$ealth Act Nu bered 'ne 5undred =ort0 Eight $as enacte# #eprivin( the a(ents o+ the Societ! +or the Prevention o+ Cruelt! to %nimals o+ their po2er to arrest persons $ho have violated the la$s prohibiting cruelt0 to ani als thereb! correctin( a serious #e+ect in one o+ the la2s e*istin( in our statute books . GGGG >hereas, the cruel treatment o+ animals is an o++ense a(ainst the State, penali e# un#er our statutes, 2hich the Government is #ut! boun# to en+orce1 No$, therefore, #, Manuel -. Aue6on, President of the Philippines, pursuant to the authorit0 conferred upon e b0 the Constitution, hereb0 decree, order, and direct the Co issioner of Public Safet0, the Provost Marshal .eneral as head of the Constabular0 4ivision of the Philippine Ar 0, ever0 Ma0or of a chartered cit0, and ever0 unicipal president to #etail an# or(ani e special members o+ the police +orce, local, national, an# the Constabular! to 2atch, capture, an# prosecute o++en#ers against the la$s enacted to prevent cruelt0 to ani als. 1E phasis supplied2

'n 4ece ber &, (DD3, an audit tea

fro

respondent Co

ission on Audit 1C'A2 visited the office of the petitioner

to conduct an audit surve0 pursuant to C'A 'ffice 'rder No. (DD3ED:& dated Nove ber &+, (DD3J:K addressed to the petitioner. The petitioner de urred on the ground that it $as a private entit0 not under the Furisdiction of C'A, citing Section (1&2 of Article #" of the Constitution $hich specifies the general Furisdiction of the C'A, vi % Section &. General Juris#iction. The Co ission on Audit shall have the po$er, authorit0, and dut0 to e*amine, au#it, an# settle all accounts pertainin( to the revenue an# receipts o+, an# e*pen#itures or uses o+ +un#s an# propert!, o2ne# or hel# in trust b!, or pertainin( to the Government, or an! o+ its sub#ivisions, a(encies, or instrumentalities, inclu#in( (overnment-o2ne# an# controlle# corporations 2ith ori(inal charters, and on a postEaudit basis% 1a2 constitutional bodies, co issions and officers that have been granted fiscal autono 0 under the ConstitutionI 1b2 autono ous state colleges and universitiesI ,c. other (overnment-o2ne# or controlle# corporations an# their subsi#iaries1 an# ,#. such non(overnmental entities receivin( subsi#! or e&uit!, #irectl! or in#irectl!, +rom or throu(h the (overnment, 2hich are re&uire# b! la2 or the (rantin( institution to submit to such au#it as a con#ition o+ subsi#! or e&uit!. 5o$ever, $here the internal control s0ste of the audited agencies is inade9uate, the Co ission a0 adopt such easures, including te porar0 or special preEaudit, as are necessar0 and appropriate to correct the deficiencies. #t shall !eep the general accounts of the .overn ent, and for

such period as a0 be provided b0 la$, preserve the vouchers and other supporting papers pertaining thereto. 1E phasis supplied2 Petitioner eGplained thus% a. Although the petitioner $as created b0 special legislation, this necessaril0 ca e about because in ;anuar0 &*D: there $as as 0et neither a Corporation -a$ or an0 other general la$ under $hich it and incorporated, nor a Securities and EGchange Co organi6ation and incorporation. b. That EGecutive 'rder No. ,3, issued during the Co its po$er to on$ealth period, effectivel0 deprived the petitioner of a0 be organi6ed ission $hich $ould have passed upon its

a!e arrests, and that the petitioner lost its operational funding, underscore the fact that it

eGercises no govern ental function. #n fine, the govern ent itself, b0 its overt acts, confir ed petitionerPs status as a private Furidical entit0. The C'A .eneral Counsel issued a Me orandu
J/K J,K

dated Ma0 ,, (DD), asserting that the petitioner $as subFect to

its audit authorit0. #n a letter dated Ma0 &/, (DD), respondent C'A infor ed the petitioner of the result of the evaluation, furnishing it $ith a cop0 of said Me orandu dated Ma0 ,, (DD) of the .eneral Counsel.

Petitioner thereafter filed $ith the respondent C'A a Re9uest for ReEevaluation dated Ma0 &*, (DD),J+K insisting that it $as a private do estic corporation. Acting on the said re9uest, the .eneral Counsel of respondent C'A, in a Me orandu
J*K

dated ;ul0 &3, (DD),

affir ed her earlier opinion that the petitioner $as a govern ent entit0 that $as subFect to the audit Furisdiction of aintaining its position that the petitioner $as subFect to its audit Furisdiction, and re9uested an initial

respondent C'A. #n a letter dated Septe ber &), (DD), the respondent C'A infor ed the petitioner of the result of the reEevaluation, conference $ith the respondents. #n Co a Me orandu dated Septe ber &,, (DD), 4irector 4elfin Aguilar reported to C'A Assistant

issioner ;uanito Espino, Corporate .overn ent Sector, that the audit surve0 $as not conducted due to the refusal aintained that it $as a private corporation.

of the petitioner because the latter

Petitioner received on Septe ber (/, (DD: the subFect C'A 'ffice 'rder (DD:ED(& dated Septe ber &), (DD: and the C'A -etter dated Septe ber (3, (DD:.

5ence, herein Petition on the follo$ing grounds% A.

RESP'N4ENT C'MM#SS#'N 'N A>4#T C'MM#TTE4 .RA?E AB>SE '= 4#SCRET#'N AM'>NT#N. T' -AC@ 'R E"CESS '= ;>R#S4#CT#'N B5EN #T R>-E4 T5AT PET#T#'NER #S S>B;ECT T' #TS A>4#T A>T5'R#T8. B. PET#T#'NER #S ENT#T-E4 T' T5E RE-#E= S'>.5T, T5ERE BE#N. N' APPEA-, N'R AN8 P-A#N, SPEE48 AN4 A4EA>ATE REME48 #N T5E 'R4#NAR8 C'>RSE '= -AB A?A#-AB-E T' #T. J&DK The essential 9uestion before this Court is $hether the petitioner 9ualifies as a govern ent agenc0 that subFect to audit b0 respondent C'A. Petitioner argues% +irst, even though it $as created b0 special legislation in &*D: as there $as no general la$ then eGisting under $hich it a0 be organi6ed or incorporated, it eGercises no govern ental functions because these have been revo!ed b0 C.A. No. &)+ and E.'. No. ,3I secon#, no$here in its charter is it indicated that it is a public corporation, unli!e, for instance, C.A. No. &&& $hich created the Bo0 Scouts of the Philippines, defined its po$ers and purposes, and specificall0 stated that it $as SAn Act to Create a Public CorporationR in $hich, even as a ended b0 Presidential 4ecree No. ),D, the la$ still adverted to the Bo0 Scouts of the Philippines as a Spublic corporation,R all of $hich are not obtaining in the charter of the petitionerI thir#, if it $ere a govern ent bod0, there $ould have been no need for the State to grant it taG eGe ptions under Republic Act No. &&/+, and the fact that it $as so eGe pted strengthens its position that it is a private institutionI +ourth, the e plo0ees of the petitioner are registered and covered b0 the Social Securit0 S0ste e plo0ees been considered govern ent e plo0eesI +i+th, the petitioner does not receive an0 for fro at the latterPs initiative and not through the .overn ent Service #nsurance S0ste , $hich should have been the case had the of financial assistance the govern ent, since C.A. No. &)+, a ending Section : of Act No. &(+:, states that the Sfull a ount of the fines, ittedRI si*th, C.A. No. &)+ effectivel0 deprived the petitioner of its a0 be

collected for violation of the la$s against cruelt0 to ani als and for the protection of ani als, shall accrue to the general fund of the Municipalit0 $here the offense $as co po$ers to a!e arrests and serve processes as these functions $ere placed in the hands of the police forceI seventh, no

govern ent appointee or representative sits on the board of trustees of the petitionerI ei(hth, a reading of the provisions of its charter 1Act No. &(+:2 fails to sho$ that an0 act or decision of the petitioner is subFect to the approval of or control b0 an0 govern ent agenc0, eGcept to the eGtent that it is governed b0 the la$ on private corporations in generalI and finall0, ninth, the Co ittee on Ani al Belfare, under the Ani al Belfare Act of &**+, includes e bers fro both the private and the public sectors. The respondents contend that since the petitioner is a Sbod0 politicR created b0 virtue of a special legislation and endo$ed $ith a govern ental purpose, then, indubitabl0, the C'A govern ent corporation lies in the a0 audit the financial activities of the latter. Respondents in effect divide their contentions into siG strains% +irst, the test to deter ine $hether an entit0 is a anner of its creation, and, since the petitioner $as created b0 virtue of a special charter, it is thus a govern ent corporation subFect to respondentsP auditing po$erI secon#, the petitioner eGercises Ssovereign po$ers,R that is, it is tas!ed to enforce the la$s for the protection and $elfare of ani als $hich Sulti atel0 redound to the public good and $elfare,R and, therefore, it is dee ed to be a govern ent Sinstru entalit0R as defined under the Ad inistrative Code of &*+/, the purpose of $hich is connected $ith the ad inistration of govern ent, as purportedl0 affir ed b0 A erican FurisprudenceI thir#, b0 virtue of Section (3,J&&K Title ##, Boo! ### of the sa e Code, the

'ffice of the President eGercises supervision or control over the petitionerI +ourth, under the sa e Code, the re9uire ent under its special charter for the petitioner to render a report to the Civil .overnor, $hose functions have been inherited b0 the 'ffice of the President, clearl0 reflects the nature of the petitioner as a govern ent instru entalit0I +i+th, despite the passage of the Corporation Code, the la$ creating the petitioner had not been abolished, nor had it been reEincorporated under an0 general corporation la$I and finall0, si*th, Republic Act No. +)+:, other$ise !no$n as the SAni al Belfare Act of &**+,R designates the petitioner as a of Agriculture. #n vie$ of the phrase S 4ne-hal+ o+ all the +ines impose# an# collecte# throu(h the e++orts o+ sai# societ! ,R the Court, in a Resolution dated ;anuar0 3D, (DD/, re9uired the 'ffice of the Solicitor .eneral 1'S.2 and the parties to co a2 petitionerCs authorit0 to i pose fines and the validit0 of the provisions of Act No. &(+: and Co considering that there are no standard easures provided for in the aforecited la$s as to the ent on% on$ealth Act No. &)+ anner of i ple entation, e ber of its Co ittee on Ani al Belfare $hich is attached to the 4epart ent

the specific violations of the la$, the personMs authori6ed to i pose fine and in $hat a ountI and, b2 the effect of the &*3: and &*+/ Constitutions on $hether petitioner continues to eGist or should organi6e as a private corporation under the Corporation Code, ".P. "l(. ,+ as a ended. Petitioner and the 'S. filed their respective Co $ere being represented b0 the 'S. $hich filed its Co adopt for the purpose that of the 'S.. The petitioner avers that it does not have the authorit0 to i pose fines for violation of ani al $elfare la$sI it onl0 enFo0ed the privilege of sharing in the fines i posed and collected fro corporation since it $as created b0 the Philippine Co and the &*3: and &*+/ Constitutions. The 'S. sub its that Act No. &(+: and its a endator0 la$s did not give petitioner the authorit0 to i pose fines for violation of la$sJ&(K relating to the prevention of cruelt0 to ani als and the protection of ani alsI that even prior to the a end ent of Act No. &(+:, petitioner $as onl0 entitled to share in the fines i posedI C.A. No. &)+ abolished that privilege to share in the fines collectedI that petitioner is a public corporation and has continued to eGist since Act No. &(+:I petitioner $as not repealed b0 the &*3: and &*+/ Constitutions $hich contain transitor0 provisions la$s issued not inconsistent there$ith until a ended, The petition is i pressed $ith erit. odified or repealed. aintaining all its efforts in the enforce ent of ani al $elfare la$sI such privilege, ho$ever, $as subse9uentl0 abolished b0 C.A. No. &)+I that it continues to eGist as a private ission before the effectivit0 of the Corporation la$, Act No. &):*I ents. Respondents filed a Manifestation stating that since the0 ent, the0 opted to dispense $ith the filing of a separate one and

The argu ents of the parties, interlaced as the0 are, can be disposed of in five points. First, the Court agrees $ith the petitioner that the Scharter testR cannot be applied. Essentiall0, the Scharter testR as it stands toda0 provides%

JTKhe test to deter ine $hether a corporation is govern ent o$ned or controlled, or private in nature is si ple. -s it create# b! its o2n charter +or the e*ercise o+ a public +unction, or b! incorporation un#er the (eneral corporation la2? Those 2ith special charters are (overnment corporations sub)ect to its provisions, and its e plo0ees are under the Furisdiction of the Civil Service Co ission, and are co pulsor0 e bers of the .overn ent Service #nsurance S0ste . GGG 1E phasis supplied2J&3K The petitioner is correct in stating that the charter test is predicated, at best, on the legal regi e established b0 the &*3: Constitution, Section /, Article "###, $hich states% Sec. /. The National Asse bl0 shall not, eGcept b0 general la$, provide for the for ation, organi6ation, or regulation of private corporations, unless such corporations are o$ned or controlled b0 the .overn ent or an0 subdivision or instru entalit0 thereof. J&)K The foregoing proscription has been carried over to the &*/3 and the &*+/ Constitutions. Section &, of Article "## of the present Constitution provides% Sec. &,. The Congress shall not, eGcept b0 general la$, provide for the for ation, organi6ation, or regulation of private corporations. .overn entEo$ned or controlled corporations a0 be created or established b0 special charters in the interest of the co on good and subFect to the test of econo ic viabilit0. Section &, is essentiall0 a reEenact ent of Section / of Article "?# of the &*3: Constitution and Section ) of Article "#? of the &*/3 Constitution. 4uring the for ulation of the &*3: Constitution, the Co ittee on =ranchises reco ended the foregoing

proscription to prevent the pressure of special interests upon the la$ a!ing bod0 in the creation of corporations or in the regulation of the sa e. To per it the la$ a!ing bod0 b0 special la$ to provide for the organi6ation, for ation, or regulation of private corporations $ould be in effect to offer to it the te ptation in the preFudice of others or to the preFudice of the interests of the countr0. J&:K And since the underpinnings of the charter test had been introduced b0 the &*3: Constitution and not earlier, it follo$s that the test cannot appl0 to the petitioner, $hich $as incorporated b0 virtue of Act No. &(+:, enacted on ;anuar0 &*, &*D:. Settled is the rule that la$s in general have no retroactive effect, unless the contrar0 is provided. J&,K All statutes are to be construed as having onl0 a prospective operation, unless the purpose and intention of the legislature to give the doubt a retrospective effect is eGpressl0 declared or is necessaril0 i plied fro ust be resolved against the retrospective effect. J&/K There are a fe$ eGceptions. Statutes can be given retroactive effect in the follo$ing cases% 1&2 $hen the la$ itself so eGpressl0 providesI 1(2 in case of re edial statutesI 132 in case of curative statutesI 1)2 in case of la$s interpreting othersI and 1:2 in case of la$s creating ne$ rights. J&+K None of the eGceptions is present in the instant case. The general principle of prospectivit0 of the la$ li!e$ise applies to Act No. &):*, other$ise !no$n as the Corporation -a$, $hich had been enacted b0 virtue of the plenar0 po$ers of the Philippine Co ission on March &, the language used. #n case of doubt, the an0 cases to favor certain groups, to

&*D,, a little over a 0ear after ;anuar0 &*, &*D:, the ti e the petitioner e erged as a Furidical entit0. Even the Corporation -a$ respects the rights and po$ers of Furidical entities organi6ed beforehand, vi6% SEC. /:. An0 corporation or socie#a# anonima for ed, organi6ed, and eGisting under the la$s of the Philippine #slands and la$full0 transacting business in the Philippine #slands on the date of the passage of this Act, shall be subFect to the provisions hereof so far as such provisions a0 be applicable and shall be entitle# at its option either to continue business as such corporation or to re+orm an# or(ani e un#er an# b! virtue o+ the provisions o+ this %ct , transferring all corporate interests to the ne$ corporation $hich, if a stoc! corporation, is authori6ed to issue its shares of stoc! at par to the stoc!holders or e bers of the old corporation according to their interests. 1E phasis supplied2. As pointed out b0 the 'S., both the &*3: and &*+/ Constitutions contain transitor0 provisions la$s issued not inconsistent there$ith until a ended, odified or repealed. J&*K ere fact that a corporation has been #n a legal regi e $here the charter test doctrine cannot be applied, the aintaining all

created b0 virtue of a special la$ does not necessaril0 9ualif0 it as a public corporation. Bhat then is the nature of the petitioner as a corporate entit0H Bhat legal regi e governs its rights, po$ers, and dutiesH As stated, at the ti e the petitioner $as for ed, the applicable la$ $as the Philippine Bill of &*D(, and, e phaticall0, as also stated above, no proscription si ilar to the charter test can be found therein. The teGtual foundation of the charter test, $hich placed a li itation on the po$er of the legislature, first appeared in the &*3: Constitution. 5o$ever, the petitioner $as incorporated in &*D: b0 virtue of Act No. &(:+, a la$ antedating the Corporation -a$ 1Act No. &):*2 b0 a 0ear, and the &*3: Constitution, b0 thirt0 0ears. There being neither a general la$ on the for ation and organi6ation of private corporations nor a restriction on the legislature to create private corporations b0 direct legislation, the Philippine Co the petitioner as a private Furidical entit0. Ti e and again the Court ust caution even the ost brilliant scholars of the la$ and all constitutional historians on ission at that o ent in histor0 $as $ell $ithin its po$ers in &*D: to constitute

the danger of i posing legal concepts of a later date on facts of an earlier date. J(DK The a end ents introduced b0 C.A. No. &)+ ade it clear that the petitioner $as a private corporation and not an

agenc0 of the govern ent. This $as evident in EGecutive 'rder No. ,3, issued b0 then President of the Philippines Manuel -. Aue6on, declaring that the revocation of the po$ers of the petitioner to appoint agents $ith po$ers of arrest Scorrected a serious defectR in one of the la$s eGisting in the statute boo!s. As a curative statute, and based on the doctrines so far discussed, C.A. No. &)+ has to be given retroactive effect, thereb0 freeing all doubt as to $hich class of corporations the petitioner belongs, that is, it is a 9uasiEpublic corporation, a !ind of private do estic corporation, $hich the Court $ill further elaborate on under the +ourth point.

Secon#, a reading of petitionerPs charter sho$s that it is not subFect to control or supervision b0 an0 agenc0 of the State, unli!e govern entEo$ned and Econtrolled corporations. No govern ent representative sits on the board of trustees of the petitioner. -i!e all private corporations, the successors of its petitioner in accordance $ith its b0Ela$s, and internal operations% the petitioner shall be as the po$ers to hold propert0, to sue and be sued, to use a co force.R The pertinent provisions of the charter provide% Section &. Anna -. #de, @ate S. Bright, ;ohn -. Cha berlain, Billia =. Tuc!er, Mar0 S. =ergusson, A asa S. Crossfield, Spencer Cosb0, Seal0 B. Rossiter, Richard P. Strong, ;ose Robles -ahesa, ;osefina R. de -u6uriaga, and such other persons as a0 be associated $ith the in confor it0 $ith this act, and their successors, are hereb0 constituted and created a bod0 politic and corporate at la$, under the na e and st0le of SThe Philippines Societ0 for the Prevention of Cruelt0 to Ani als.R As incorporated b0 this Act, said societ0 shall have the po$er to add to its organi6ation such and as an0 e bers as it desires, to provide for and choose such officers as it a0 dee advisable, and in such anner as it a0 $ish, and to re ove e bers as it shall provide. #t shall have the right to sue and be sued, to use a co on seal, to receive legacies and donations, to conduct social enterprises for the purpose of obtaining funds, to lev0 dues upon its e bers and provide for their collection to hold real and personal estate such as a0 be necessar0 for the acco plish ent of the purposes of the societ0, and to adopt such b0Ela$s for its govern ent as a0 not be inconsistent $ith la$ or this charter. GGGG Sec. 3. The said societ0 shall be operated under the direction of its officers, in accordance $ith its b0Ela$s in force, and this charter. GGGG Sec. ,. The principal office of the societ0 shall be !ept in the cit0 of Manila, and the societ0 shall have full po$er to locate and establish branch offices of the societ0 $herever it a0 dee advisable in the Philippine #slands, such branch offices to be under the supervision and control of the principal office. e bers are deter ined voluntaril0 and solel0 b0 the on seal, and so forth. #t a0 adopt b0Ela$s for its a0 eGercise those po$ers generall0 accorded to private corporations, such anaged or operated b0 its officers Sin accordance $ith its b0Ela$s in

Thir#. The e plo0ees of the petitioner are registered and covered b0 the Social Securit0 S0ste

at the latterPs

initiative, and not through the .overn ent Service #nsurance S0ste , $hich should be the case if the e plo0ees are considered govern ent e plo0ees. This is another indication of petitionerPs nature as a private entit0. Section & of Republic Act No. &&,&, as a ended b0 Republic Act No. +(+(, other$ise !no$n as the Social Securit0 Act of &**/, defines the e plo0er% E plo0er T An0 person, natural or Furidical, do estic or foreign, $ho carries on in the Philippines an0 trade, business, industr0, underta!ing or activit0 of an0 !ind and uses the services of another person $ho is under his orders as regards the e plo0 ent, e*cept the Government an# an! o+ its political sub#ivisions, branches or instrumentalities, inclu#in( corporations o2ne# or controlle# b! the Government% Provided, That a selfEe plo0ed person shall be both e plo0ee and e plo0er at the sa e ti e. 1E phasis supplied2 Fourth. The respondents contend that the petitioner is a Sbod0 politicR because its pri ar0 purpose is to secure the protection and $elfare of ani als $hich, in turn, redounds to the public good.

This argu ent, is, at best, specious. The fact that a certain Furidical entit0 is i pressed $ith public interest does not, b0 that circu stance alone, a!e the entit0 a public corporation, inas uch as a corporation a0 be private although its a0 charter contains provisions of a public character, incorporated solel0 for the public good. This class of corporations
J(&K

be considered 9uasiEpublic corporations, $hich are private corporations that render public service, suppl0 public $ants, or pursue other elee os0nar0 obFectives. Bhile purposel0 organi6ed for the gain or benefit of its e bers, the0 are re9uired b0 la$ to discharge functions for the public benefit. EGa ples of these corporations are utilit0, J((K railroad, $arehouse, telegraph, telephone, $ater suppl0 corporations and transportation co panies. J(3K #t renders to the public% if it perfor s a public service, then it beco es a 9uasiEpublic corporation. J()K ust be stressed that a 9uasiEpublic corporation .0 a 02e1.e0 o6 2r.5a3e 1or2ora3.o&0, but the 9ualif0ing factor is the t0pe of service the for er

Authorities are of the vie$ that the purpose alone of the corporation cannot be ta!en as a safe guide, for the fact is that al ost all corporations are no$ada0s created to pro ote the interest, good, or convenience of the public. A ban!, for eGa ple, is a private corporationI 0et, it is created for a public benefit. Private schools and universities are li!e$ise private corporationsI and 0et, the0 are rendering public service. Private hospitals and $ards are charged $ith heav0 social responsibilities. More so $ith all co it is endo$ed $ith gifts or donations fro on carriers. 'n the other hand, there a0 eGist a public corporation even if private individuals.

The true criterion, therefore, to deter ine $hether a corporation is public or private is found in the totalit0 of the relation of the corporation to the State. #f the corporation is created b0 the State as the latterPs o$n agenc0 or instru entalit0 to help it in carr0ing out its govern ental functions, then that corporation is considered publicI other$ise, it is private. Appl0ing the above test, provinces, chartered cities, and baran(a!s can best eGe plif0 public corporations. The0 are created b0 the State as its o$n device and agenc0 for the acco plish ent of parts of its o$n public $or!s.J(:K

#t is clear that the a end ents introduced b0 C.A. No. &)+ revo!ed the po$ers of the petitioner to arrest offenders of ani al $elfare la$s and the po$er to serve processes in connection there$ith. Fi+th. The respondents argue that since the charter of the petitioner re9uires the latter to render periodic reports to the Civil .overnor, $hose functions have been inherited b0 the President, the petitioner is, therefore, a govern ent instru entalit0. This contention is inconclusive. B0 virtue of the fiction that all corporations o$e their ver0 eGistence and po$ers to the State, the reportorial re9uire ent is applicable to all corporations of $hatever nature, $hether the0 are public, 9uasiE public, or private corporationsOas creatures of the State, there is a reserved right in the legislature to investigate the activities of a corporation to deter ine $hether it acted $ithin its po$ers. #n other $ords, the reportorial re9uire ent is the principal eans b0 $hich the State a0 see to it that its creature acted according to the po$ers and functions conferred upon it. These principles $ere eGtensivel0 discussed in "ataanShip!ar# @ 9n(ineerin( Co., -nc. v. Presi#ential

Commission on Goo# Government.J(,K 5ere, the Court, in holding that the subFect corporation could not invo!e the right against selfEincri ination $henever the State de anded the production of its corporate boo!s and papers, eGtensivel0 discussed the purpose of reportorial re9uire ents, vi % G G G The corporation is a creature of the state. #t is presu ed to be incorporated for the benefit of the public. #t received certain special privileges and franchises, and holds the subFect to the la$s of the state and the li itations of its charter. #ts po$ers are li ited b0 la$. #t can a!e no contract not authori6ed b0 its charter. #ts rights to act as a corporation are onl0 preserved to it so long as it obe0s the la$s of its creation. There is a reserveJdK right in the legislature to investigate its contracts and find out $hether it has eGceeded its po$ers. -t 2oul# be a stran(e anomal! to hol# that a state, havin( chartere# a corporation to make use o+ certain +ranchises, coul# not, in the e*ercise o+ soverei(nt!, in&uire ho2 these +ranchises ha# been emplo!e#, an# 2hether the! ha# been abuse#, an# #eman# the pro#uction o+ the corporate books an# papers +or that purpose . The defense a ounts to this, that an officer of the corporation $hich is charged $ith a cri inal violation of the statute a0 plead the cri inalit0 of such corporation as a refusal to produce its boo!s. To state this proposition is to ans$er it. >hile an in#ivi#ual ma! la2+ull! re+use to ans2er incriminatin( &uestions unless protecte# b! an immunit! statute, it #oes not +ollo2 that a corporation veste# 2ith special privile(es an# +ranchises ma! re+use to sho2 its han# 2hen char(e# 2ith an abuse o+ such privile(es. 1Bilson v. >nited States, :: -a$ Ed., //&, /+D.2J(/K

B5ERE='RE, the petition is GRANTE!. Petitioner is !ECLARE! a private do estic corporation subFect to the Furisdiction of the Securities and EGchange Co ission. The respondents are EN$OINE! fro investigating, eGa ining and auditing the petitionerCs fiscal and financial affairs. S' 'R4ERE4. EN BANC

<G.R. No. 1*1081. May 10, 200)=

RAMON M. ATIEN%A, .& /.0 1a2a1.3y a0 -.1e?Go5er&or o6 3/e Pro5.&1e o6 O11.'e&3a7 M.&'oro, petitioner, vs. $OSE T. -ILLAROSA, .& /.0 1a2a1.3y a0 Go5er&or o6 3/e Pro5.&1e o6 O11.'e&3a7 M.&'oro, respondent. !ECISION CALLE$O, SR., J.; Before the Court is the petition for revie$ on certiorari filed b0 Ra on M. Atien6a, in his capacit0 as ?iceE.overnor of the Province of 'ccidental Mindoro, see!ing to reverse and set aside the 4ecision J&K dated Nove ber (+, (DD3 of the Court of Appeals in CAE..R. SP No. /(D,*. The assailed decision dis issed the petition for prohibition under Rule ,: of the Rules of Court filed b0 petitioner Atien6a $hich had sought to enFoin the i ple entation of the Me oranda dated ;une (:, (DD( and ;ul0 &, (DD( issued b0 ;ose T. ?illarosa, .overnor of the sa e province. The present case arose fro the follo$ing undisputed facts%

Petitioner Atien6a and respondent ?illarosa $ere the ?iceE.overnor and .overnor, respectivel0, of the Province of 'ccidental Mindoro. 'n ;une (,, (DD(, the petitioner ?iceE.overnor received the Me orandu dated ;une (:, (DD( issued b0 the respondent .overnor concerning the SA>T5'R#T8 T' S#.N P>RC5ASE 'R4ERS '= S>PP-#ES, MATER#A-S, EA>#PMENTJSK, #NC->4#N. =>E-, REPA#RS AN4 MA#NTENANCE '= T5E S%NGGAN-%NG P%N0%0%>-G%N.R The said e orandu reads%

=or proper coordination and to ensure efficient and effective local govern ent ad inistration particularl0 on atters pertaining to suppl0 and propert0 anage ent, effective i ediatel0, all Purchase 'rders issued in connection $ith the procure ent of supplies, aterials and e9uip entJsK including fuel, repairs and aintenance needed in the transaction of public business or in the pursuit of an0 underta!ing, proFect or activit0 of the Sangguniang Panlala$igan, this province, shall be approved b0 the undersigned in his capacit0 as the local chief eGecutive of the province. The provision of 4#-. 'pinion No. &)+E&**3 $hich states that the authorit0 to sign Purchase 'rders of supplies, aterials and e9uip entJsK of the Sanggunian belongs to the local chief eGecutive, serves as basis of this e orandu . =or strict co pliance.J(K #n repl0 to the above e orandu , the petitioner ?iceE.overnor $rote the respondent .overnor stating that%

Be are of the opinion that U purchase orders for supplies, aterials and e9uip ent are included under those as authori6ed for signature b0 the ?iceEchief eGecutive of the Sanggunian on the basis of the 4#-. 'pinion No. *,E&**: as affir ed b0 the C'A 'pinions on ;une (+, April && and =ebruar0 *, &**) and coursing it to the .overnor for his approval is no longer necessar0, the fact that JSecs.K ),, and ),+, RA /&,D alread0 provides for the separation of po$ers bet$een the eGecutive and legislative. Such authorit0 even include ever0thing necessar0 for the legislative research progra of the Sanggunian.J3K >ni pressed, the respondent .overnor issued the Me orandu dated ;ul0 &, (DD( relating to the STERM#NAT#'N '= C'NTRACT '= SER?#CES '= CAS>A-M;'B 'R4ER EMP-'8EES AN4 REAPP'#NTMENT '= T5E RESPECT#?E REC'MMEN4EES.R The said e orandu reads% =or faithful and appropriate enforce ent and eGecution of la$s and issuances and to pro ote efficienc0 in the govern ent service, effective i ediatel0, all eGisting contract of e plo0 ent T casualMFob order basis and reappoint ent of the reco endees T entered into b0 ?iceE.overnor Ra on M. Atien6a are hereb0 ter inated for being unauthori6ed. Aside fro being signed b0 the unauthori6ed signator0, the follo$ing facts regarding the appoint ents $ere considered% anifestation of an

&. The appoint ent of (+ cler!s T on top of eGisting per anent e plo0ees T is a clear eGcessive and bloated bureaucrac0I

(. The appoint ent of an "Era0 Technician detailed at the Provincial 5ealth 'ffice and so e cler!s detailed at various offices in the province $ere not proper to be assigned b0 the ?iceE.overnorI 3. The appoint ent of 3D essengers, utilit0 $or!ers and drivers ran counter to C'A 'pinion as cited in the letter of the undersigned dated (+ ;une (DD(, addressed to the ?iceE.overnor. 5o$ever, in order to acco odate the ?iceE.overnor and the e bers of the Sangguniang Panlala$igan, the undersigned, in his capacit0 as the local chief eGecutive of the province, $ill allo$ four 1)2 casualMFob order e plo0ees to be assigned to the ?iceE.overnor and one 1&2 casualMFob order e plo0ee to be assigned to each e ber of the Sangguniang Panlala$igan. The ?iceE.overnor and all the Sanggunian Me bers are hereb0 directed to sub it i ediatel0 the na es of their reco endees to the undersigned for i ediate approval of their respective appoint ents. Please be guided accordingl0.J)K 'n ;ul0 3, (DD(, the respondent .overnor issued another Me orandu regarding the SEN='RC#B#-#T8 1 sic2 '= PRE?#'>S MEM'RAN4A #SS>E4 'N ;>NE (D, (, AN4 ;>-8 &, (DD(.R #t provides that% Please be properl0 advised that the Me oranda dated ;une (D, (, and ;ul0 &, (DD( issued b0 the undersigned regarding the issuance of per it to travel and authorit0 to sign Purchase 'rders of supplies, aterials, e9uip ent, including fuel, repairs and aintenance of the Sangguniang Panlala$igan, is to be strictl0 adhered to for co pliance. -i!e$ise for strict co pliance is the Me orandu dated ;ul0 &, (DD( $ith reference to the Cancellation o+ the %ppointment o+ CasualBJob 4r#er 9mplo!ees o+ the San((unian( Panlala2i(an MembersB4++ice o+ the :iceGovernor previousl0 signed b0 ?iceE.overnor Ra on M. Atien6a.

Please be guided accordingl0.J:K #n his -etter dated ;ul0 *, (DD(, the petitioner ?iceE.overnor invo!ed the principle of separation of po$ers as applied to the local govern ent units, i.e., the respondent, as the .overnor, the head of the eGecutive branch, and the petitioner, as the ?iceE.overnor, the head of the legislative branch, $hich is the San((unian( Panlala2i(an. The petitioner ?iceE .overnor reiterated his re9uest for the respondent to a!e a Sdeeper stud0R on the atter before i ple enting his e oranda. The re9uest, ho$ever, $ent unheeded as the respondent .overnor insisted on obliging the depart ent heads of the provincial govern ent to co pl0 $ith the e oranda. The petitioner ?iceE.overnor thus filed $ith the Court of Appeals the petition for prohibition assailing as having been issued $ith grave abuse of discretion the respondent .overnorPs Me oranda dated ;une (:, (DD( and ;ul0 &, (DD(. The petitioner ?iceE.overnor clai ed that these e oranda eGcluded hi fro the use and enFo0 ent of his office in violation of the pertinent provisions of Republic Act No. /&,D, or the -ocal .overn ent Code of &**&, and its i ple enting rules and regulations. #t $as pra0ed that the respondent .overnor be enFoined fro i ple enting the assailed e oranda. The appellate court, in its 4ecision dated Nove ber (+, (DD3, dis issed the petition for prohibition. Citing Section 3))J,K of Rep. Act No. /&,D, the CA upheld the authorit0 of the respondent .overnor to issue the Me orandu dated ;une (:, (DD( as it recogni6ed his authorit0 to approve the purchase orders. The said provision provides in part that Sapproval of the disburse ent voucher b0 the local chief eGecutive hi self shall be re9uired $henever local funds are disbursed.R The CA eGplained that Section ),,1a21&2 J/K of the sa e Code, relied upon b0 the petitioner ?iceE.overnor, spea!s of the authorit0 of the ?iceE.overnor to sign Sall 2arrants dra$n on the public treasur0 for all eGpenditures appropriated for the operation of the san((unian( panlala2i(an.R #n declaring this provision inapplicable, the CA reasoned that the approval of purchase orders is different fro the po$er of the ?iceE.overnor to sign $arrants dra$n against the public treasur0. Section 3,&J+K $as, li!e$ise, held to be inapplicable ratiocinating, thus% JRKe9uisitioning, $hich is provided under Section 3,& of RA /&,D, is the act of re9uiring that so ething be furnished. #n the procure ent function, it is the sub ission of $ritten re9uests for supplies and aterials and the li!e. #t could be inferred that, in the sche e of things, approval of purchase re9uests is different fro approval of purchase orders. Thus, the inapplicabilit0 of Section 3,&. Anent the Me orandu dated ;ul0 &, (DD(, the CA ruled that the issue on $hether it could be enFoined had alread0 been rendered oot and acade ic. The CA pointed out that the subFect of the said e orandu could no longer be enFoined or restrained as the ter ination of the e plo0ees had alread0 been effected. #t opined that $here the act sought to be enFoined in the prohibition proceedings had alread0 been perfor ed and there is nothing ore to restrain, the case is alread0 oot and acade ic. The petitioner ?iceE.overnor no$ see!s recourse to this Court alleging that the appellate court co itted reversible error in ruling that it is the .overnor, and not the ?iceE.overnor, $ho has the authorit0 to sign purchase orders of supplies, aterials, e9uip ent, including fuel, repairs and aintenance of the San((unian( Panlala2i(an. The petitioner ?iceE.overnor, li!e$ise, ta!es eGception to the holding of the CA that the issue relating to the ;ul0 &, (DD( Me orandu had been rendered oot and acade ic. 5e points out that the appoint ent of casualMFob order e plo0ees is eGercised b0 the appointing authorit0 ever0 siG onths in the case of casual e plo0ees and per Fob order as to Fob order e plo0ees. Thus, $hile the ;ul0 &, (DD( Me orandu had alread0 been i ple ented, $hat is being sought to be enFoined is the respondent .overnorPs continued usurpation of the petitioner ?iceE.overnorPs authorit0 to appoint the e plo0ees of the San((unian( Panlala2i(an under the pertinent provisions of Rep. Act No. /&,D. =or his part, the respondent .overnor aintains that his Me oranda dated ;une (:, (DD( and ;ul0 &, (DD( are valid. 5e asserts that the approval of purchase orders is different fro the po$er of the ?iceE.overnor to sign $arrants dra$n against the provincial treasur0 under Section ),,1a21&2 of Rep. Act No. /&,D. Rather, he insists on the application of the last clause in Section 3)) $hich states that the approval of the disburse ent b0 the local chief eGecutive is re9uired $henever local funds are disbursed. The respondent .overnor li!e$ise defends the validit0 of the Me orandu dated ;ul0 &, (DD( stating that it $as issued upon finding that the petitioner ?iceE.overnor appointed, a ong others, (+ cler!s on top of the eGisting per anent e plo0ees resulting in an eGcessive and bloated bureaucrac0. 5e concedes the appointing po$er of the ?iceE.overnor but sub its that this is li ited to the e plo0ees of the San((unian( Panlala2i(an and that he is not authori6ed to appoint officials and e plo0ees of the 'ffice of the ?iceE.overnor. As correctl0 presented b0 the appellate court, the issues for resolution in this case are%

A. Bho bet$een the petitioner and the respondent is authori6ed to approve purchase orders issued in connection $ith the procure ent of supplies, aterials, e9uip ent, including fuel, repairs and aintenance of the Sangguniang Panlala$iganH B. 4oes respondent ?illarosa, as local chief eGecutive, have the authorit0 to ter inate or cancel the appoint ents of casualMFob order e plo0ees of the Sangguniang Panlala$igan Me bers and the 'ffice of the ?iceE.overnorH J*K Before resolving the foregoing issues, it is noted that petitioner Atien6a and respondent ?illarosa had ceased to be the ?iceE.overnor and .overnor, respectivel0, of the Province of 'ccidental Mindoro effective ;une 3D, (DD) $hen the ne$l0Eelected officials of the province too! their oaths of offices. The petitioner ?iceE.overnor did not run for reEelection during the Ma0 (DD) elections $hile the respondent .overnor did not succeed in his reEelection bid. The eGpiration of their ter s of offices has effectivel0 rendered the case oot. 5o$ever, even in cases $here supervening events had ade the cases oot, the Court did not hesitate to resolve the legal or constitutional issues raised to for ulate controlling principles to guide the bench, bar and the public. J&DK #n this case, there is co pelling reason for the Court to resolve the issues presented in order to clarif0 the scope of the respective po$ers of the .overnor and ?iceE.overnor under the pertinent provisions of the -ocal .overn ent Code of &**&. To resolve the substantive issues presented in the instant case, it is $ell to recall that Rep. Act No. /&,D $as enacted to give flesh to the constitutional andate to Sprovide for a ore responsive and accountable local govern ent structure instituted through a s!stem o+ #ecentrali ation $ith effective echanis of recall, initiative and referendu , allocate amon( the #i++erent local (overnment units their po2ers, responsibilities, an# resources , and provide for the 9ualifications, election, appoint ent and re oval, ter , salaries, po2ers an# +unctions an# #uties o+ local o++icials , and all atters relating to the organi6ation and operation of the local units.R J&&K #n this connection, the provisions of Rep. Act No. /&,D are anchored on principles that give effect to decentrali6ation. A ong these principles are% JtKhere shall be an effective allocation a ong the different local govern ent units of their respective po$ers, functions, responsibilities, and resourcesI JtKhere shall be established in ever0 local govern ent unit an accountable, efficient, and d0na ic organi6ational structure and operating echanis that $ill eet the priorit0 needs and service re9uire ents of its co unitiesI JpKrovinces $ith respect to co ponent cities and unicipalities, and cities and unicipalities $ith respect to co ponent baranga0s, shall ensure that the acts of their co ponent units are $ithin the scope of their prescribed po$ers and functionsI and JeKffective echanis s for ensuring the accountabilit0 of local govern ent units to their respective constituents shall be strengthened in order to upgrade continuall0 the 9ualit0 of local leadership.J&(K Bith these guideposts, the Court shall no$ address the issue on $ho bet$een the .overnor and ?iceE.overnor is authori6ed to approve purchase orders issued in connection $ith the procure ent of supplies, aterials, e9uip ent, including fuel, repairs and aintenance of the San((unian( Panlala2i(an. Be hold that it is the ?iceE.overnor $ho has such authorit0. >nder Rep. Act No. /&,D, local legislative po$er for the province is eGercised b0 the San((unian( Panlala2i(anJ&3K and the ?iceE.overnor is its presiding officer. J&)K Being vested $ith legislative po$ers, the San((unian( Panlala2i(an enacts ordinances, resolutions and appropriates funds for the general $elfare of the province in accordance $ith the provisions of Rep. Act No. /&,D.J&:K The sa e statute vests upon the ?iceE.overnor the po$er to% 1&2 Be the presiding officer of the sangguniang panlala$igan and sign all $arrants dra$n on the provincial treasur0 for all eGpenditures appropriated for the operation of the sangguniang panlala$igan. J&,K =urther, Section 3)) provides% Sec. 3)). Certi+ication on, an# %pproval o+, :ouchers. T No one0 shall be disbursed unless the local budget officer certifies to the eGistence of appropriation that has been legall0 ade for the purpose, the local accountant has obligated said appropriation, and the local treasurer certifies to the availabilit0 of funds for the purpose. ?ouchers and pa0rolls shall be certified to and approved b0 the head of the depart ent or office $ho has ad inistrative control of the fund concerned, as to validit0, propriet0 and legalit0 of the clai involved. EGcept in cases of disburse ents involving regularl0 recurring ad inistrative eGpenses such as pa0rolls for regular or per anent e plo0ees, eGpenses for light, $ater, telephone and telegraph services, re ittances to govern ent creditor agencies such as the .S#S, SSS, -BP, 4BP, National Printing 'ffice, Procure ent Service of the 4BM and others, approval of the disburse ent voucher b0 the local chief eGecutive hi self shall be re9uired $henever local funds are disbursed. #n cases of special or trust funds, disburse ents shall be approved b0 the ad inistrator of the fund.

#n case of te porar0 absence or incapacit0 of the depart ent head or chief of office, the officer neGtEinEran! shall auto aticall0 perfor his function and he shall be full0 responsible therefor. Reliance b0 the CA on the clause Sapproval of the disburse ent voucher b0 the local chief eGecutive hi self shall be re9uired $henever local funds are disbursedR of the above section 1Section 3))2 to rule that it is the .overnor $ho has the authorit0 to approve purchase orders for the supplies, aterials or e9uip ent for the operation of the San((unian( Panlala2i(an is isplaced. This clause cannot prevail over the ore specific clause of the sa e provision $hich provides that Svouchers and pa0rolls shall be certified to and approved b0 the head of the depart ent or office $ho has ad inistrative control of the fund concerned.R The ?iceE.overnor, as the presiding officer of the San((unian( Panlala2i(an, has ad inistrative control of the funds of the said bod0. Accordingl0, it is the ?iceE.overnor $ho has the authorit0 to approve disburse ent vouchers for eGpenditures appropriated for the operation of the San((unian( Panlala2i(an. 'n this point, Section 3* of the Manual on the Ne$ .overn ent Accounting S0ste prepared b0 the Co ission on Audit 1C'A2, is instructive% for -ocal .overn ent >nits,

Sec. 3*. %pproval o+ /isbursements. T Approval of disburse ents b0 the -ocal Chief EGecutive 1-CE2 hi self shall be re9uired $henever local funds are disbursed, eGcept for regularl0 recurring ad inistrative eGpenses such as% pa0rolls for regular or per anent e plo0ees, eGpenses for light, $ater, telephone and telegraph services, re ittances to govern ent creditor agencies such as .S#S, B#R, P5#-5EA-T5, -BP, 4BP, NP', PS of the 4BM and others, $here the authorit0 to approve a0 be delegated. 4isburse ent vouchers for eGpenditures appropriated for the operation of the Sanggunian shall be approved b0 the provincial ?ice .overnor, the cit0 ?iceEMa0or or the unicipal ?iceEMa0or, as the case a0 be.
J&/K

Bhile Rep. Act No. /&,D is silent as to the atter, the authorit0 granted to the ?iceE.overnor to sign all $arrants dra$n on the provincial treasur0 for all eGpenditures appropriated for the operation of the San((unian( Panlala2i(an as $ell as to approve disburse ent vouchers relating thereto necessaril0 includes the authorit0 to approve purchase orders covering the sa e appl0ing the doctrine of necessar0 i plication. This doctrine is eGplained, thus% No statute can be enacted that can provide all the details involved in its application. There is al$a0s an o ission that a0 not eet a particular situation. Bhat is thought, at the ti e of enact ent, to be an allEe bracing legislation a0 be inade9uate to provide for the unfolding of events of the future. SoEcalled gaps in the la$ develop as the la$ is enforced. 'ne of the rules of statutor0 construction used to fill in the gap is the doctrine of necessar0 i plication. The doctrine states that $hat is i plied in a statute is as uch a part thereof as that $hich is eGpressed. Ever0 statute is understood, b0 i plication, to contain all such provisions as a0 be necessar0 to effectuate its obFect and purpose, or to a!e effective rights, po$ers, privileges or Furisdiction $hich it grants, including all such collateral and subsidiar0 conse9uences as a0 be fairl0 and logicall0 inferred fro its ter s. 9* necessitate le(is. And ever0 statutor0 grant of po$er, right or privilege is dee ed to include all incidental po$er, right or privilege. This is so because the greater includes the lesser, eGpressed in the aGi , in eo plus sit, simper inest et minus.J&+K Barrants are SorderJsK directing the treasurer of the unicipalit0 to pa0 one0 out of funds in cit0 treasur0 $hich are or a0 beco e available for purpose specified to designated personJsK.R J&*K Barrants of a unicipal corporation are generall0 orders pa0able $hen funds are found. The0 are issued for the pa0 ent of general unicipal debts and eGpenses subFect to the rule that the0 shall be paid in the order of presentation. J(DK The ordinar0 eaning of SvoucherR is a docu ent $hich sho$s that services have been perfor ed or eGpenses incurred. #t covers an0 ac9uittance or receipt discharging the person or evidencing pa0 ent b0 hi . Bhen used in connection $ith disburse ent of one0, it i plies so e instru ent that sho$s on $hat account or b0 $hat authorit0 a particular pa0 ent has been ade, or that services have been perfor ed $hich entitle the part0 to $ho it is issued to pa0 ent.J(&K Purchase order, on the other hand, is San authori6ation b0 the issuing part0 for the recipient to provide aterials or services for $hich issuing part0 agrees to pa0I it is an offer to bu0 $hich beco es binding $hen those things ordered have been provided.RJ((K Bhen an authori6ed person approves a disburse ent voucher, he certifies to the correctness of the entries therein, a ong others% that the eGpenses incurred $ere necessar0 and la$ful, the supporting docu ents are co plete and the availabilit0 of cash therefor. =urther, the person $ho perfor ed the services or delivered the supplies, aterials or e9uip ent is entitled to pa0 ent.J(3K 'n the other hand, the ter s and conditions for the procure ent of supplies, aterials or e9uip ent, in particular, are contained in a purchase order. The tenor of a purchase order basicall0 directs the supplier to deliver the articles enu erated and subFect to the ter s and conditions specified therein. J()K 5ence, the eGpress authorit0 to approve disburse ent vouchers and, in effect, authori6e the pa0 ent of one0 clai s for supplies,

aterials or e9uip ent, necessaril0 includes the authorit0 to approve purchase orders to cause the deliver0 of the said supplies, aterials or e9uip ent. Since it is the ?iceE.overnor $ho approves disburse ent vouchers and approves the pa0 ent for the procure ent of the supplies, aterials and e9uip ent needed for the operation of the San((unian( Panlala2i(an, then he also has the authorit0 to approve the purchase orders to cause the deliver0 of the said supplies, aterials or e9uip ent. #ndeed, the authorit0 granted to the ?iceE.overnor to sign all $arrants dra$n on the provincial treasur0 for all eGpenditures appropriated for the operation of the San((unian( Panlala2i(an as $ell as to approve disburse ent vouchers relating thereto is greater and includes the authorit0 to approve purchase orders for the procure ent of the supplies, aterials and e9uip ent necessar0 for the operation of the San((unian( Panlala2i(an. Anent the second issue, the appellate court li!e$ise co itted reversible error in holding that the i ple entation of the Me orandu dated ;ul0 &, (DD( had rendered the petition oot and acade ic. #t is recogni6ed that courts $ill decide a 9uestion other$ise oot and acade ic if it is Scapable of repetition 0et evading revie$.R J(:K Even if the e plo0ees $hose contractual or Fob order e plo0 ent had been ter inated b0 the i ple entation of the ;ul0 &, (DD( Me orandu a0 no longer be reinstated, still, si ilar e oranda a0 be issued b0 other local chief eGecutives. 5ence, it behooves the Court to resolve $hether the .overnor has the authorit0 to ter inate or cancel the appoint ents of casualMFob order e plo0ees of the San((unian( Panlala2i(an and the 'ffice of the ?iceE.overnor. Be hold that the .overnor, $ith respect to the appoint ent of the officials and e plo0ees of the San((unian( Panlala2i(an, has no such authorit0. A ong the po$ers granted to the .overnor under Section ),: of Rep. Act No. /&,D are% Sec. ),:. The Chie+ 9*ecutive3 Po2ers, /uties, Functions an# Compensation .T 1a2 The provincial governor, as the chief eGecutive of the provincial govern ent, shall eGercise such po$ers and perfor such duties and functions as provided b0 this Code and other la$s. 1b2 =or efficient, effective and econo ical governance the purpose of $hich is the general $elfare of the province and its inhabitants pursuant to Section &, of this Code, the provincial governor shall% U 1v2 Appoint all officials and e plo0ees $hose salaries and $ages are $holl0 or ainl0 paid out of provincial funds and $hose appoint ents are not other$ise provided for in this Code, as $ell as those he a0 be authori6ed b0 la$ to appoint. 'n the other hand, Section ),, vests on the ?iceE.overnor the po$er to, a ong others% 1(2 SubFect to civil service la$, rules and regulations, appoint all officials and e plo0ees of the sangguniang panlala$igan, eGcept those $hose anner of appoint ent is specificall0 provided in this Code. Thus, $hile the .overnor has the authorit0 to appoint officials and e plo0ees $hose salaries are paid out of the provincial funds, this does not eGtend to the officials and e plo0ees of the San((unian( Panlala2i(an because such authorit0 is lodged $ith the ?iceE.overnor. #n the sa e anner, the authorit0 to appoint casual and Fob order e plo0ees of the San((unian( Panlala2i(an belongs to the ?iceE.overnor. The authorit0 of the ?iceE.overnor to appoint the officials and e plo0ees of the San((unian( Panlala2i(an is anchored on the fact that the salaries of these e plo0ees are derived fro the appropriation specificall0 for the said local legislative bod0. #ndeed, the budget source of their salaries is $hat sets the e plo0ees and officials of the San((unian( Panlala2i(an apart fro the other e plo0ees and officials of the province. Accordingl0, the appointing po$er of the ?iceE .overnor is li ited to those e plo0ees of the San((unian( Panlala2i(an, as $ell as those of the 'ffice of the ?iceE .overnor, 2hose salaries are pai# out o+ the +un#s appropriate# +or the San((unian( Panlala2i(an . As a corollar0, if the salar0 of an e plo0ee or official is charged against the provincial funds, even if this e plo0ee reports to the ?iceE .overnor or is assigned to his office, the .overnor retains the authorit0 to appoint the said e plo0ee pursuant to Section ),:1b21v2 of Rep. Act No. /&,D. 5o$ever, in this case, it does not appear $hether the contractualMFob order e plo0ees, $hose appoint ents $ere ter inated or cancelled b0 the Me orandu dated ;ul0 &, (DD( issued b0 the respondent .overnor, $ere paid out of the provincial funds or the funds of the San((unian( Panlala2i(an. Nonetheless, the validit0 of the said e orandu cannot be upheld because it absolutel0 prohibited the respondent ?iceE.overnor fro eGercising his authorit0 to appoint the e plo0ees, $hether regular or contractualMFob order, of the San((unian( Panlala2i(an and restricted such authorit0 to

one of reco endator0 nature onl0. J(,K This clearl0 constituted an encroach ent on the appoint ent po$er of the respondent ?iceE .overnor under Section ),,1a21(2 of Rep. Act No. /&,D. At this Functure, it is $ell to note that under "atas Pambansa "l(. 33/, the -ocal .overn ent Code prior to Rep. Act No. /&,D, the .overnor $as the presiding officer of the San((unian( Panlala2i(an% Sec. (D:. Composition. 1&2 Each provincial govern ent shall have a provincial legislature hereinafter !no$n as the san((unian( panlala2i(an, upon $hich shall be vested the provincial legislative po$er. 1(2 The san((unian( panlala2i(an shall be co posed of the governor, viceEgovernor, elective e bers of the said san((unian, and the presidents of the katipunan( panlala2i(an and the kabataan( baran(a! provincial federation $ho shall be appointed b0 the President of the Philippines. U Sec. (D,. Sessions. T 132 The governor, $ho shall be the presiding officer of the san((unian( panlala2i(an, shall not be entitled to vote eGcept in case of a tie. U Bith Rep. Act No. /&,D, the union of legislative and eGecutive po$ers in the office of the local chief eGecutive under the BP Blg. 33/ has been disbanded, so that either depart ent no$ co prises different and nonEinter ingling official personalities $ith the end in vie$ of ensuring a better deliver0 of public service and provide a s0ste of chec! and balance bet$een the t$o.J(/K Senator A9uilino Pi entel, the principal author of Rep. Act No. /&,D, eGplained that Sthe ?iceE.overnor is no$ the presiding officer of the San((unian( Panlala2i(an. The Cit0 ?iceEMa0or presides at eetings of the San((unian( Panlun(so# and the Municipal ?iceEMa0or at the sessions of the San((unian( "a!an. The i#ea is to #istribute po2ers amon( elective local o++icials so that the le(islative, 2hich is the San((unian, can properl! check the e*ecutive, 2hich is the Governor or the Ma!or an# vice versa an# e*ercise their +unctions 2ithout an! un#ue inter+erence +rom one b! the other.RJ(+K The avo$ed intent of Rep. Act. No. /&,D, therefore, is to vest on the San((unian( Panlala2i(an independence in the eGercise of its legislative functions vis-a-vis the discharge b0 the .overnor of the eGecutive functions. The Me oranda dated ;une (:, (DD( and ;ul0 &, (DD( of the respondent .overnor, $hich effectivel0 eGcluded the petitioner ?iceE .overnor, the presiding officer of the San((unian( Panlala2i(an, fro signing the purchase orders for the procure ent of supplies, aterials or e9uip ent needed for the operation of the San((unian( Panlala2i(an as $ell as fro appointing its casual and Fob order e plo0ees, constituted undue interference $ith the latterPs functions. The assailed e oranda are clearl0 not in !eeping $ith the intent of Rep. Act No. /&,D and their i ple entation should thus be per anentl0 enFoined. ",EREFORE, the petition is .RANTE4. The Me oranda dated ;une (:, (DD( and ;ul0 &, (DD( issued b0 respondent .overnor ;ose T. ?illarosa are N>-- AN4 ?'#4. SO OR!ERE!. /avi#e, Jr., C.J., ;uisumbin(, =nares-Santia(o, Carpio, %ustria-Martine , Corona, Carpio-Morales, % cuna, Tin(a, Chico-Na ario, and Garcia, JJ., concur. Puno, J., on sic! leave. Pan(aniban, and San#oval-Gutierre , JJ., on official leave. Re2ub7.1 o6 3/e P/.7.22.&e0 Su2re8e Cour3 Ma&.7a EN ANC

!ANTE -. LI AN, RE#NAL!O ERNAR!O a&' SAL-A!OR M. -IARI, Petitioners,

M.

G. R. No. 1+)3)2 Present% C'R'NA, C.J., CARP#', CARP#' M'RA-ES, ?E-ASC', ;R., NAC5>RA, -E'NAR4'E4E CASTR', BR#'N, PERA-TA, BERSAM#N, 4E- CAST#--', ABA4, ?#--ARAMA, ;R., PERE7, MEN4'7A, and SEREN', JJ. Pro ulgated% ;anuar0 &+, (D&&

? versus ?

RIC,AR! $. GOR!ON, Respondent. P,ILIPPINE NATIONAL RE! CROSS, #ntervenor.

GEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEG 5ESO/1TION LEONAR!O?!E CASTRO, J.;

This resolves the Mo3.o& 6or C7ar.6.1a3.o& a&'For 6or Re1o&0.'era3.o& J&K filed on August &D, (DD* b0 respondent R.1/ar' $. Gor'o& 1respondent2 of the!e1.0.o& pro ulgated b0 this Court on ;ul0 &:, (DD* 1the 4ecision2, the Mo3.o& 6or Par3.a7 Re1o&0.'era3.o&J(K filed on August (/, (DD* b0 ovantEintervenorP/.7.22.&e Na3.o&a7 Re' Cro00 GPNRCH, and the latterPs Ma&.6e03a3.o& a&' Mo3.o& 3o A'8.3 A33a1/e' Po0.3.o& Pa2er J3K filed on 4ece ber (3, (DD*. #n the 4ecision,J)K the Court held that respondent did not forfeit his seat in the Senate $hen he accepted the chair anship of the PNRC Board of .overnors, as Sthe office of the PNRC Chair an is not a govern ent office or an office in a govern entEo$ned or controlled corporation for purposes of the prohibition in Section &3, Article ?# of the &*+/ Constitution.RJ:K The 4ecision, ho$ever, further declared void the PNRC Charter Sinsofar as it creates the PNRC as a private corporationR and conse9uentl0 ruled that Sthe PNRC should incorporate under the Corporation Code and register $ith the Securities and EGchange Co 4ecision reads as follo$s% ission if it $ants to be a private corporation.R J,K The dispositive portion of the

",EREFORE, $e declare that the office of the Chair an of the Philippine National Red Cross is not a govern ent office or an office in a govern entEo$ned or controlled corporation for purposes of the prohibition in Section &3, Article ?# of the &*+/ Constitution. Be also declare that Sections &, (, 3, )1a2, :, ,, /, +, *, &D, &&, &(, and &3 of the Charter of the Philippine National Red Cross, or Republic Act No. *:, as a ended b0 Presidential 4ecree Nos. &(,) and &,)3, are ?'#4 because the0 create the PNRC as a private corporation or grant it corporate po$ers.J/K #n his Mo3.o& 6or C7ar.6.1a3.o& a&'For 6or Re1o&0.'era3.o& , respondent raises the follo$ing grounds% 1&2 as the issue of constitutionalit0 of Republic Act 1R.A.2 No. *: $as not raised b0 the parties, the Court $ent be0ond the case in deciding such issueI and 1(2 as the Court decided that Petitioners did not have standing to file the instant Petition, the pronounce ent of the Court on the validit0 of R.A. No. *: should be considered obiter.J+K Respondent argues that the validit0 of R.A. No. *: $as a nonEissueI therefore, it $as unnecessar0 for the Court to decide on that 9uestion. Respondent cites0aurel v. Garcia,J*K $herein the Court said that it S$ill not pass upon a constitutional 9uestion although properl0 presented b0 the record if the case can be disposed of on so e other groundR and goes on to clai that since this Court, in the 4ecision, disposed of the petition on so e other ground, i.e., lac! of standing of petitioners, there $as no need for it to delve into the validit0 of R.A. No. *:, and the rest of the Fudg ent should be dee ed obiter. #n its Mo3.o& 6or Par3.a7 Re1o&0.'era3.o&, PNRC pra0s that the Court sustain the constitutionalit0 of its Charter on the follo$ing grounds% A. T5E ASSA#-E4 4EC#S#'N 4EC-AR#N. >NC'NST#T>T#'NA- REP>B-#C ACT N'. *: AS AMEN4E4 4EPR#?E4 #NTER?EN'R PNRC '= #TS C'NST#T>T#'NA- R#.5T T' 4>E PR'CESS. &. (. B. #NTER?EN'R PNRC BAS NE?ER A PART8 T' T5E #NSTANT C'NTR'?ERS8. T5E C'NST#T>T#'NA-#T8 '= REP>B-#C ACT N'. *:, AS AMEN4E4 BAS NE?ER AN #SS>E #N T5#S CASE.

T5E C>RRENT C5ARTER '= PNRC #S PRES#4ENT#A- 4ECREE N'. &(,) AN4 N'T REP>B-#C ACT N'. *:. PRES#4ENT#A- 4ECREE N'. &(,) BAS N'T A CREAT#'N '= C'N.RESS. PNRCPS STR>CT>RE #S SA- G9N9'-SI #T #S A C-ASS '= #TS 'BN. B5#-E #T #S PER='RM#N. 5>MAN#TAR#AN =>NCT#'NS AS AN A>"#-#AR8 T' .'?ERNMENT, #T #S A NE>TRA- ENT#T8 SEPARATE AN4 #N4EPEN4ENT '= .'?ERNMENT C'NTR'-, 8ET #T 4'ES N'T A>A-#=8 AS STR#CT-8 PR#?ATE #N C5ARACTER.

C.

#n his Co88e&3 a&' Ma&.6e03a3.o&J&DK filed on Nove ber *, (DD*, respondent of said Co

anifests% 1&2 that he agrees $ith

the position ta!en b0 the PNRC in its Motion for Partial Reconsideration dated August (/, (DD*I and 1(2 as of the $riting ent and Manifestation, there $as pending before the Congress of the Philippines a proposed bill entitled SAn Act Recogni6ing the PNRC as an #ndependent, Autono ous, NonE.overn ental 'rgani6ation AuGiliar0 to the Authorities of the Republic of the Philippines in the 5u anitarian =ield, to be @no$n as The Philippine Red Cross.R J&&K After a thorough stud0 of the argu ents and points raised b0 the respondent as $ell as those of in their respective ovantEintervenor

otions, $e have reconsidered our pronounce ents in our 4ecision dated ;ul0 &:, (DD* $ith regard to

the nature of the PNRC and the constitutionalit0 of so e provisions of the PNRC Charter, R.A. No. *:, as a ended.

As correctl0 pointed out in respondentPs Motion, the issue of constitutionalit0 of R.A. No. *: $as not raised b0 the parties, and $as not a ong the issues defined in the bod0 of the 4ecisionI thus, it $as not the ver0 lis mota of the case. Be have reiterated the rule as to $hen the Court $ill consider the issue of constitutionalit0 in %lvare v. P-C4P 'esources, -nc.,J&(K thus% T/.0 Cour3 @.77 &o3 3ou1/ 3/e .00ue o6 u&1o&03.3u3.o&a7.3y u&7e00 .3 .0 3/e 5ery lis mota. I3 .0 a @e77? e03ab7.0/e' ru7e 3/a3 a 1our3 0/ou7' &o3 2a00 u2o& a 1o&03.3u3.o&a7 Iue03.o& a&' 'e1.'e a 7a@ 3o be u&1o&03.3u3.o&a7 or .&5a7.', u&7e00 0u1/ Iue03.o& .0 ra.0e' by 3/e 2ar3.e0 and that $hen it is raised, if the record also presents so e other ground upon $hich the court a0 JrestK its Fudg ent, that course $ill be adopted and the constitutional 9uestion $ill be left for consideration until such 9uestion $ill be unavoidable.J&3K

>nder the rule 9uoted above, therefore, this Court 0/ou7' &o3 have declared void certain sections of R.A. No. *:, as a ended b0 Presidential 4ecree 1P.4.2 Nos. &(,) and &,)3, the PNRC Charter. #nstead, the Court should have eGercised Fudicial restraint on this atter, especiall0 since there $as so e other ground upon $hich the Court could have ost adversel0 affected b0 this declaration of unconstitutionalit0, based its Fudg ent. =urther ore, the PNRC, the entit0

$hich $as not even originall0 a part0 to this case, $as being co pelled, as a conse9uence of the 4ecision, to suddenl0 reorgani6e and incorporate under the Corporation Code, a63er 8ore 3/a& 0.43y G*0H year0 o6 e4.03e&1e .& 3/.0 1ou&3ry . #ts eGistence as a chartered corporation re ained unchallenged on ground of unconstitutionalit0 not$ithstanding that R.A. No. *: $as enacted on March ((, &*)/ during the effectivit0 of the &*3: Constitution, $hich provided for a proscription against the creation of private corporations b0 special la$, to $it% SEC. /. The Congress shall not, eGcept b0 general la$, provide for the for ation, organi6ation, or regulation of private corporations, unless such corporations are o$ned and controlled b0 the .overn ent or an0 subdivision or instru entalit0 thereof. 1Art. "#?, &*3: Constitution.2 Si ilar provisions are found in Article "#?, Section ) of the &*/3 Constitution and Article "##, Section &, of the &*+/ Constitution. The latter reads% SECT#'N &,. The Congress shall not, eGcept b0 general la$, provide for the for ation, organi6ation, or regulation of private corporations. .overn entEo$ned or controlled corporations a0 be created or established b0 special charters in the interest of the co on good and subFect to the test of econo ic viabilit0.

Since its enact ent, the PNRC Charter $as a ended several ti es, particularl0 on ;une &&, &*:3, August &,, &*/&, 4ece ber &:, &*//, and 'ctober &, &*/*, b0 virtue of R.A. No. +::, R.A. No. ,3/3, P.4. No. &(,), and P.4. No. &,)3, respectivel0. The passage of several la$s relating to the PNRCPs corporate eGistence not$ithstanding the effectivit0 of the constitutional proscription on the creation of private corporations b0 la$, is a recognition that the PNRC is not strictl0 in the nature of a private corporation conte plated b0 the aforesaid constitutional ban.

A closer loo! at the nature of the PNRC $ould sho$ that there is none li!e it not Fust in ter s of structure, but also in ter s of histor0, public service and official status accorded to it b0 the State and the international co erit in PNRCPs contention that its structure is sui generis. The PNRC succeeded the chapter of the A erican Red Cross $hich $as in eGistence in the Philippines since &*&/. #t $as created b0 an Act of Congress after the Republic of the Philippines beca e an independent nation on ;ul0 ,, &*), and proclai ed on =ebruar0 &), &*)/ its adherence to the Convention of .eneva of ;ul0 (*, &*(* for the A elioration of the Condition of the Bounded and Sic! of Ar ies in the =ield 1the S.eneva Red Cross ConventionR2. B0 that action the Philippines indicated its desire to participate $ith the nations of the $orld in itigating the suffering caused b0 $ar and to establish in the Philippines a voluntar0 organi6ation for that purpose and li!e other volunteer organi6ations established in other countries $hich have ratified the .eneva Conventions, to pro ote the health and $elfare of the people in peace and in $ar.J&)K The provisions of R.A. No. *:, as a ended b0 R.A. Nos. +:: and ,3/3, and further a ended b0 P.4. Nos. &(,) and &,)3, sho$ the historical bac!ground and legal basis of the creation of the PNRC b0 legislative fiat, as a voluntar0 organi6ation i pressed $ith public interest. Pertinentl0 R.A. No. *:, as a ended b0 P.4. &(,), provides% B5EREAS, during the eeting in .eneva, S$it6erland, on (( August &+*), the nations of the $orld unani ousl0 agreed to di inish $ithin their po$er the evils inherent in $arI B5EREAS, ore than one hundred fort0 nations of the $orld have ratified or adhered to the .eneva Conventions of August &(, &*)* for the A elioration of the Condition of the Bounded and Sic! of Ar ed =orces in the =ield and at Sea, The Prisoners of Bar, and The Civilian Population in Ti e of Bar referred to in this Charter as the .eneva ConventionsI ",EREAS, 3/e Re2ub7.1 o6 3/e P/.7.22.&e0 be1a8e a& .&'e2e&'e&3 &a3.o& o& $u7y (, 19(*, a&' 2ro17a.8e' o& February 1(, 19(+ .30 a'/ere&1e 3o 3/e Ge&e5a Co&5e&3.o&0 o6 1929, a&' by 3/e a13.o&, .&'.1a3e' .30 'e0.re 3o 2ar3.1.2a3e @.3/ 3/e &a3.o&0 o6 3/e @or7' .& 8.3.:a3.&: 3/e 0u66er.&: 1au0e' by @ar a&' 3o e03ab7.0/ .& 3/e P/.7.22.&e0 a 5o7u&3ary or:a&.Ba3.o& 6or 3/a3 2ur2o0e a0 1o&3e827a3e' by 3/e Ge&e5a Co&5e&3.o&0J B5EREAS, there eGisted in the Philippines since &*&/ a chapter of the A erican National Red Cross $hich $as ter inated in vie$ of the independence of the PhilippinesI and B5EREAS, the volunteer organi6ations established in other countries $hich have ratified or adhered to the .eneva Conventions a00.03 .& 2ro8o3.&: 3/e /ea73/ a&' @e76are o6 3/e.r 2eo27e .& 2ea1e a&' .& @ar, and through their utual assistance and cooperation directl0 and through their international organi6ations pro ote better understanding and s0 path0 a ong the people of the $orldI N'B, T5ERE='RE, #, =ER4#NAN4 E. MARC'S, President of the Philippines, b0 virtue of the po$ers vested in e b0 the Constitution as Co anderEinEChief of all the Ar ed =orces of the Philippines and pursuant to Procla ation No. &D+& dated Septe ber (&, &*/(, and .eneral 'rder No. & dated Septe ber ((, &*/(, do hereb0 decree and order that Republic Act No. *:, Charter of the Philippine National Red Cross 1PNRC2 as a ended b0 Republic Acts No. +:: and ,3/3, be further a ended as follo$s% Se13.o& 1. T/ere .0 /ereby 1rea3e' .& 3/e Re2ub7.1 o6 3/e P/.7.22.&e0 a bo'y 1or2ora3e a&' 2o7.3.1 3o be 3/e 5o7u&3ary or:a&.Ba3.o& o66.1.a77y 'e0.:&a3e' 3o a00.03 3/e Re2ub7.1 o6 3/e P/.7.22.&e0 .& '.01/ar:.&: 3/e ob7.:a3.o&0 0e3 6or3/ .& 3/e Ge&e5a Co&5e&3.o&0 a&' 3o 2er6or8 0u1/ o3/er 'u3.e0 a0 are .&/ere&3 u2o& a &a3.o&a7 Re' Cro00 So1.e3y. T/e &a3.o&a7 /ea'Iuar3er0 o6 3/.0 Cor2ora3.o& 0/a77 be 7o1a3e' .& Me3ro2o7.3a& Ma&.7a. 1E phasis supplied.2 unit0. There is

The significant public service rendered b0 the PNRC can be gleaned fro provides% Se13.o& 3. That the purposes of this Corporation shall be as follo$s%

Section 3 of its Charter, $hich

1a2 To provide volunteer aid to the sic! and $ounded of ar ed forces in ti e of $ar, in accordance $ith the spirit of and under the conditions prescribed b0 the .eneva Conventions to $hich the Republic of the Philippines proclai ed its adherenceI 1b2 =or the purposes entioned in the preceding subEsection, to perfor all duties devolving upon the Corporation as a result of the adherence of the Republic of the Philippines to the said ConventionI 1c2 To act in atters of voluntar0 relief and in accordance $ith the authorities of the ar ed forces as a ediu of co unication bet$een people of the Republic of the Philippines and their Ar ed =orces, in ti e of peace and in ti e of $ar, and to act in such atters bet$een si ilar national societies of other govern ents and the .overn ents and people and the Ar ed =orces of the Republic of the PhilippinesI 1d2 To establish and aintain a s0ste of national and international relief in ti e of peace and in ti e of $ar and appl0 the sa e in eeting and e ergenc0 needs caused b0 t0phoons, flood, fires, earth9ua!es, and other natural disasters and to devise and carr0 on easures for ini i6ing the suffering caused b0 such disastersI 1e2 To devise and pro ote such other services in ti e of peace and in ti e of $ar as found desirable in i proving the health, safet0 and $elfare of the =ilipino peopleI 1f2 To devise such the Red Cross. eans as to a!e ever0 citi6en andMor resident of the Philippines a a0 be

e ber of

The PNRC is one of the National Red Cross and Red Crescent Societies, $hich, together $ith the #nternational Co ittee of the Red Cross 1#CRC2 and the #=RC and RCS, a!e up the #nternational Red Cross and Red Crescent ove ent, $hose ission is% Move ent 1the Move ent2. The0 constitute a $orld$ide hu anitarian

JTKo prevent and alleviate hu an suffering $herever it a0 be found, to protect life and health and ensure respect for the hu an being, in particular in ti es of ar ed conflict and other e ergencies, to $or! for the prevention of disease and for the pro otion of health and social $elfare, to encourage voluntar0 service and a constant readiness to give help b0 the e bers of the Move ent, and a universal sense of solidarit0 to$ards all those in need of its protection and assistance. J&:K

The PNRC $or!s closel0 $ith the #CRC and has been involved in hu anitarian activities in the Philippines since &*+(. A ong others, these activities in the countr0 include% &. (. 3. ). .iving protection and assistance to civilians displaced or other$ise affected b0 ar ed clashes bet$een the govern ent and ar ed opposition groups, pri aril0 in MindanaoI Bor!ing to ini i6e the effects of ar ed hostilities and violence on the populationI ?isiting detaineesI and Pro oting a$areness of international hu anitarian la$ in the public and private sectors. J&,K

National Societies such as the PNRC act as au4.7.ar.e0 to the public authorities of their o$n countries in the hu anitarian field and provide a range of services including disaster relief and health and social progra es.

The #nternational =ederation of Red Cross 1#=RC2 and Red Crescent Societies 1RCS2 Position Paper, J&/K sub itted b0 the PNRC, is instructive $ith regard to the ele ents of the specific nature of the National Societies such as the PNRC, to $it% National Societies, such as the Philippine National Red Cross and its sister Red Cross and Red Crescent Societies, have certain specificities deriving fro the &*)* .eneva Convention and the Statutes of the #nternational Red Cross and Red Crescent Move ent 1the Move ent2. The0 are also guided b0 the seven =unda ental Principles of the Red Cross and Red Crescent Move ent% ,u8a&.3y, I82ar3.a7.3y, Neu3ra7.3y, I&'e2e&'e&1e, -o7u&3ary Ser5.1e, U&.3y a&' U&.5er0a7.3y. A Na3.o&a7 So1.e3y 2ar3aKe0 o6 a sui generis 1/ara13er. #t is a protected co ponent of the Red Cross ove ent under Articles () and (, of the =irst .eneva Convention, especiall0 in ti es of ar ed conflict. These provisions re9uire that the staff of a National Societ0 shall be respected and protected in all circu stances. Such protection is not ordinaril0 afforded b0 an international treat0 to ordinar0 private entities or even nonEgovern ental organisations 1N.'s2. This sui (eneris character is also e phasi6ed b0 the =ourth .eneva Convention $hich holds that an 'ccup0ing Po$er cannot re9uire an0 change in the personnel or structure of a National Societ0. Na3.o&a7 0o1.e3.e0 are 3/ere6ore or:a&.Ba3.o&0 3/a3 are '.re137y re:u7a3e' by .&3er&a3.o&a7 /u8a&.3ar.a& 7a@, .& 1o&3ra03 3o o3/er or'.&ary 2r.5a3e e&3.3.e0, .&17u'.&: NGO0. GGGG #n addition, National Societies are not onl0 officiall0 recogni6ed b0 their public authorities as voluntar0 aid societies, auGiliar0 to the public authorities in the hu anitarian field, but also benefit fro recognition at the #nternational level. This is considered to be an ele ent distinguishing National Societies fro other organisations 1 ainl0 N.'s2 and other for s of hu anitarian response. G G G. No other organisation belongs to a $orldE$ide Move ent in $hich all Societies have e9ual status and share e9ual responsibilities and duties in helping each other. This is considered to be the essence of the =unda ental Principle of >niversalit0. =urther ore, the National Societies are considered to be au4.7.ar.e0 to the public authorities in the hu anitarian field. G G G. The auGiliar0 status of JaK Red Cross Societ0 8ea&0 3/a3 .3 .0 a3 o&e a&' 3/e 0a8e 3.8e a 2r.5a3e .&03.3u3.o& a&' a 2ub7.1 0er5.1e or:a&.Ba3.o& be1au0e 3/e 5ery &a3ure o6 .30 @orK .827.e0 1oo2era3.o& @.3/ 3/e au3/or.3.e0, a 7.&K @.3/ 3/e S3a3e. #n carr0ing out their aFor functions, Red Cross Societies give their hu anitarian support to official bodies, in general having larger resources than the Societies, $or!ing to$ards co parable ends in a given sector. G G G No o3/er or:a&.Ba3.o& /a0 a 'u3y 3o be .30 :o5er&8e&3L0 /u8a&.3ar.a& 2ar3&er @/.7e re8a.&.&: .&'e2e&'e&3.J&+K 1E phases ours.2

#t is in recognition of this sui (eneris character of the PNRC that R.A. No. *: has re ained valid and effective fro the ti e of its enact ent in March ((, &*)/ under the &*3: Constitution and during the effectivit0 of the &*/3 Constitution and the &*+/ Constitution.

The PNRC Charter and its a endator0 la$s have not been 9uestioned or challenged on constitutional grounds, not even in this case before the Court no$.

#n the 4ecision, the Court, citing Feliciano v. Commission on %u#it,J&*K eGplained that the purpose of the constitutional provision prohibiting Congress fro creating private corporations $as to prevent the granting of special privileges to certain individuals, fa ilies, or groups, $hich $ere denied to other groups. Based on the above discussion, it can be seen that the PNRC Charter does not co e $ithin the spirit of this constitutional provision, as it does not grant special privileges to a particular individual, fa il0, or group, but creates an entit0 that strives to serve the co =urther ore, a strict and State in adopting on good.

echanical interpretation of Article "##, Section &, of the &*+/ Constitution $ill hinder the

easures that $ill serve the public good or national interest. #t should be noted that a special

la$, R.A. No. *:(D, the Philippine Cooperative Code of (DD+, and not the general corporation code, vests corporate po$er and capacities upon cooperatives $hich are private corporations, in order to i ple ent the StatePs avo$ed polic0. #n the 4ecision of ;ul0 &:, (DD*, the Court recogni6ed the public service rendered b0 the PNRC as the govern entPs partner in the observance of its international co it ents, to $it%

The PNRC is a nonEprofit, donorEfunded, voluntar0, hu anitarian organi6ation, $hose ission is to bring ti el0, effective, and co passionate hu anitarian assistance for the ost vulnerable $ithout consideration of nationalit0, race, religion, gender, social status, or political affiliation. The PNRC provides siG aFor services% Blood Services, 4isaster Manage ent, Safet0 Services, Co unit0 5ealth and Nursing, Social Services and ?oluntar0 Service. The Republic of the Philippines, adhering to the .eneva Conventions, established the PNRC as a voluntar0 organi6ation for the purpose conte plated in the .eneva Convention of (/ ;ul0 &*(*. G G G. J(DK 1Citations o itted.2

So 8u03 3/.0 Cour3 re1o:&.Be 3oo 3/e 1ou&3ryL0 a'/ere&1e 3o 3/e Ge&e5a Co&5e&3.o& a&' re02e13 3/e u&.Iue 03a3u0 o6 3/e PNRC .& 1o&0o&a&1e @.3/ .30 3rea3y ob7.:a3.o&0. The .eneva Convention has the force and effect of la$.J(&K >nder the Constitution, the Philippines adopts the generall0 accepted principles of international la$ as part of the la$ of the land.J((K This constitutional provision ust be reconciled and har oni6ed $ith Article "##, Section &, of the Constitution, instead of using the latter to negate the for er. B0 re9uiring the PNRC to organi6e under the Corporation Code Fust li!e an0 other private corporation, the 4ecision of ;ul0 &:, (DD* lost sight of the PNRCPs special status under international hu anitarian la$ and as an auGiliar0 of the State, designated to assist it in discharging its obligations under the .eneva Conventions. Although the PNRC is called to be independent under its =unda ental Principles, it interprets such independence as inclusive of its dut0 to be the govern entPs hu anitarian partner. To be recogni6ed in the #nternational Co autono ous status, and carr0 out its hu anitarian ission in a neutral and i partial ittee, the PNRC anner. ust have an

5o$ever, in accordance $ith the =unda ental Principle of ?oluntar0 Service of National Societies of the Move ent, the PNRC ust be distinguished fro private and profitE a!ing entities. #t is the ain characteristic of it ent and devotion to National Societies that the0 Sare not inspired b0 the desire for financial gain but b0 individual co andMor e bers render to the Co unit0.R J(3K

a hu anitarian purpose freel0 chosen or accepted as part of the service that National Societies through its volunteers

The PNRC, as a National Societ0 of the #nternational Red Cross and Red Crescent Move ent, can neither Sbe classified as an instru entalit0 of the State, so as not to lose its character of neutralit0R as $ell as its independence, nor strictl0 as a private corporation since it is regulated b0 international hu anitarian la$ and is treated as an au4.7.ary of the State.J()K Based on the above, the sui (eneris status of the PNRC is no$ sufficientl0 established. Although it is neither a subdivision, agenc0, or instru entalit0 of the govern ent, nor a govern entEo$ned or Econtrolled corporation or a subsidiar0 thereof, as succinctl0 eGplained in the 4ecision of ;ul0 &:, (DD*, so uch so that respondent, under the 4ecision, $as correctl0 allo$ed to hold his position as Chair an thereof concurrentl0 $hile he served as a Senator, such a conclusion does &o3ipso +acto i pl0 that the PNRC is a Sprivate corporationR $ithin the conte plation of the provision of the Constitution, that basis. #n su , the PNRC enFo0s a special status as an i portant all0 and auGiliar0 of the govern ent in the hu anitarian field in accordance $ith its co it ents under international la$. This Court cannot all of a sudden refuse to recogni6e its eGistence, especiall0 since the issue of the constitutionalit0 of the PNRC Charter $as never raised b0 the parties. #t bears e phasi6ing that the PNRC has responded to al ost all national disasters since &*)/, and is $idel0 !no$n to provide a substantial portion of the countr0Ps blood re9uire ents. #ts hu anitarian $or! is unparalleled. The Court should not sha!e its eGistence to the core in an unti el0 and drastic Philippines in the international co 03ay. ",EREFORE, 2re8.0e0 1o&0.'ere', respondent Richard ;. .ordonPs Mo3.o& 6or C7ar.6.1a3.o& a&'For 6or Re1o&0.'era3.o& and ovantEintervenor PNRCPs Mo3.o& 6or Par3.a7 Re1o&0.'era3.o& of the !e1.0.o& in G.R. No. 1+)3)2 dated ;ul0 &:, (DD* are GRANTE!. The constitutionalit0 of R.A. No. *:, as a ended, the charter of the Philippine National Red Cross, $as not raised b0 the parties as an issue and should not have been passed upon b0 this Court. The structure of the PNRC is sui (enerisC being neither strictl0 private nor public in nature. R.A. No. *: re ains valid and constitutional in its entiret0. The dispositive portion of the 4ecision should therefore be MO!IFIE! b0 deleting the second sentence, to no$ read as follo$s% ",EREFORE, $e declare that the office of the Chair an of the Philippine National Red Cross is not a govern ent office or an office in a govern entEo$ned or controlled corporation for purposes of the prohibition in Section &3, Article ?# of the &*+/ Constitution. SO OR!ERE!. anner that $ould not onl0 have negative conse9uences to those $ho depend on it in ti es of disaster and ar ed hostilities but also have adverse effects on the i age of the unit0. T/e 0e13.o&0 o6 3/e PNRC C/ar3er 3/a3 @ere 'e17are' 5o.' 8u03 3/ere6ore ust be organi6ed under the Corporation Code. As correctl0 entioned b0 ;ustice Roberto A. Abad, the sui (eneris character of PNRC re9uires us to approach controversies involving the PNRC on a caseEtoEcase

Republic of the Philippines SUPREME COURT Manila

T5#R4 4#?#S#'N

G.R. No. 80+*+ A2r.7 22, 1991 O# SCOUTS OF T,E P,ILIPPINES, petitioner, vs. NATIONAL LA OR RELATIONS COMMISSION, FORTUNATO ESGUERRA, RO ERTO MALA OR OR, ESTANISLAO MISA, -ICENTE E-ANGELISTA, a&' MARCELINO GARCIA, respondents. Julio 4. 0ope +or petitioner.

FELICIANO, J.:p This Petition for Certiorari is directed at 1&2 the 4ecision, 1 dated (/ =ebruar0 &*+/, and 1(2 the Resolution 2dated &, 'ctober &*+/, both issued b0 the National -abor Relations Co ission 1<N-RC<2 in Case No. &,3/E+). Private respondents =ortunato C. Es9uerra, Roberto '. Malaborbor, Estanislao M. Misa, ?icente N. Evangelista and Marcelino P. .arcia, had all been ran!EandEfile e plo0ees of petitioner Bo0 Scouts of the Philippines 1<BSP<2. At the ti e of ter ination of their services in =ebruar0 &*+:, private respondents $ere stationed at the BSP Ca p in Ma!iling, -os BaQos, -aguna. The events $hich led to such ter ination of services are as follo$s% 'n &* 'ctober &*+), the Secretar0E.eneral of petitioner BSP issued Special 'rders Nos. +D, +&, +3, +) and +: addressed separatel0 to the five 1:2 private respondents, infor ing the that on (D Nove ber &*+), the0 $ere to be transferred fro the BSP Ca p in Ma!iling to the BSP -and .rant in Asuncion, 4avao del Norte. These 'rders $ere opposed b0 private respondents $ho, on ) Nove ber &*+), appealed the atter to the BSP National President. 'n , Nove ber &*+), petitioner BSP conducted a preEtransfer briefing at its National 5ead9uarters in Manila. Private respondents $ere in attendance during the briefing and the0 $ere there assured that their transfer to 4avao del Norte $ould not involve an0 di inution in salar0, and that each of the $ould receive a relocation allo$ance e9uivalent to one 1&2 onthCs basic pa0. This assurance, ho$ever, failed to persuade private respondents to abandon their opposition to the transfer orders issued b0 the BSP Secretar0E.eneral. 'n &3 Nove ber &*+), a co plaint 3 1doc!eted as N-RC Case No. &,E+);2 for illegal transfer $as filed $ith the then Ministr0 of -abor and E plo0 ent, SubERegional Arbitration Branch #?, San Pablo Cit0, -aguna. Private respondents there sought to enFoin i ple entation of Special 'rders Nos. +D, +&, +3, +) and +:, alleging, a ong other things, that said orders $ere <indubitable and irrefutable actionJsK preFudicial not onl0 to Jthe K but to JtheirK fa ilies and J$ouldK seriousl0 affect JtheirK econo ic stabilit0 and solvenc0 considering the present cost of living.< 'n (& Nove ber &*+) 1or the da0 i ediatel0 follo$ing the date of scheduled transfer2, the BSP Ca p Manager in Ma!iling issued a Me orandu re9uiring the five 1:2 private respondents to eGplain $h0 the0 should not be charged ad inistrativel0 for insubordination. The Me orandu $as a direct result of the refusal b0 private respondents, t$o 1(2 da0s earlier, to accept fro petitioner BSP their respective boat tic!ets to 4avao del Norte and their relocation allo$ances. Mean$hile, in a letter of the sa e date, the BSP National President infor ed private respondents that their refusal to co pl0 $ith the Special 'rders $as not sufficientl0 Fustified and constituted ran! disobedience. Me oranda subse9uentl0 issued b0 the BSP Secretar0E.eneral stressed that such refusal as $ell as the eGplanations proffered therefor, $ere unacceptable and could altogether result in ter ination of e plo0 ent $ith petitioner BSP. These $arnings not$ithstanding, private respondents continued pertinaciousl0 to disobe0 the disputed transfer orders. Petitioner BSP conse9uentl0 i posed a fiveEda0 suspension on the five 1:2 private respondents, in the latter part of ;anuar0 &*+:. Subse9uentl0, b0 Special 'rder dated &( =ebruar0 &*+: issued b0 the BSP Secretar0E.eneral, private respondentsC services $ere ordered ter inated effective &: =ebruar0 &*+:.

'n (( =ebruar0 &*+:, private respondents a ended their original co plaint to include charges of illegal dis issal and unfair labor practice against petitioner BSP. ( The -abor Arbiter thereafter proceeded to hear the co plaint. #n a decision ) dated 3& ;ul0 &*+:, the -abor Arbiter ordered the dis issal of private respondentsC co plaint for lac! of erit. 'n (/ =ebruar0 &*+/, ho$ever, the ruling of the -abor Arbiter $as reversed b0 public respondent, N-RC, $hich held that private respondents had been illegall0 dis issed b0 petitioner BSP. The dispositive portion of the N-RC decision read% B5ERE='RE, pre ises considered the 4ecision appealed fro is hereb0 SET AS#4E and a ne$ one entered ordering the respondentEappellee Jpetitioner BSPK to reinstate the co plainantsEappellants Jprivate respondentsK to their for er positions $ithout loss of seniorit0 rights and other benefits appurtenant thereto and $ith full bac!$ages fro the ti e the0 $ere illegall0 dis issed fro the service up to the date of their actual reinstate ent. S' 'R4ERE4. The Court notes at the outset that in the Position Paper * filed b0 petitioner BSP $ith the -abor Arbiter, it $as alleged in the second paragraph thereof, that petitioner is a <civic service, nonEstoc! and nonEprofit organi6ation, rel0ing ostl0 JonK govern ent and public support, e*istin( un#er an# b! virtue o+ Common2ealth %ct No . DDD, as amen#e#, b! Presi#ential /ecree No. 5EF . . . < A si ilar allegation $as contained in the Brief for Appellee + and in the Petition 8 and Me orandu 9 filed b0 petitioner BSP $ith public respondent N-RC and this Court, respectivel0. The sa e allegation, oreover, appeared in the Co ent 10 1also treated as the Me orandu 2 sub itted to this Court b0 the Solicitor .eneral on behalf of public respondent N-RCI for their part, private respondents stated in their Appeal Me orandu 11 $ith the N-RC that petitioner BSP is <b! man#ate o+ la2 a Public Corporation,< a state ent reiterated b0 the in their Me orandu 12 before this Court. #n a Resolution dated * August &*+*, this Court re9uired the parties and the 'ffice of the .overn ent Corporate Counsel to file a co ent on the 9uestion of $hether or not petitioner BSP is in fact a govern entEo$ned or controlled corporation. Petitioner, private respondents, the 'ffice of the Solicitor .eneral and the 'ffice of the .overn ent Corporate Counsel filed their respective co ents. The central issue is $hether or not the BSP is e braced $ithin the Civil Service as that ter 1&2 of the &*+/ Constitution $hich reads as follo$s% is defined in Article #" 1B2 1(2

The Civil Service e braces all branches, subdivisions, instru entalit0 entalities and agencies of the .overn ent, including govern entEo$ned or controlled corporations $ith original charters. GGG GGG GGG The ans$er to the central issue $ill deter ine $hether or not private respondent N-RC had Furisdiction to render the 4ecision and Resolution $hich are here sought to be nullified. The responses of the parties, on the one hand, and of the 'ffice of the Solicitor .eneral and the 'ffice of the .overn ent Corporate Counsel, upon the other hand, in co pliance $ith the Resolution of this Court of * August &*+*, present a note$orth0 unifor it0. Petitioner BSP and private respondents sub it substantiall0 the sa e vie$ <that the BSP is a purel0 private organi6ation<. #n contrast, the Solicitor .eneral and the .overn ent Corporate Counsel ta!e uch the sa e position, that is, that the BSP is a <public corporationC or a <9uasiEpublic corporation< and, as $ell, a <govern ent controlled corporation.< Petitioner BSPCs co pliance $ith our Resolution invo!es the follo$ing provisions of its Constitution and B0Ela$s% The Bo0 Scouts of the Philippines declares that it is an independent, voluntar0, nonEpolitical, nonE sectarian and nonEgovern ental organi6ation, $ith obligations to$ards nation building and $ith international orientation. The BSP, petitioner stresses, does not receive an0 onetar0 or financial subsid0 fro the .overn ent $hether on the national or local level. 13 Petitioner declares that it is a <purel0 private organi6ation< directed and controlled

b0 its National EGecutive Board the Cabinet Secretaries. 1(

e bers of $hich are, it is said, all <voluntar0 scouters,< including seven 1/2

Private respondents sub itted a supple entar0 e orandu arguing that $hile petitioner BSP $as created as a public corporation, it had lost that status $hen Section ( of Co on$ealth Act No. &&& as a ended b0 P.4. No. ),D conferred upon it the po$ers $hich ordinar0 private corporations organi6ed under the Corporation Code have% Sec. (. The said corporation shall have perpetual succession $ith po$er to sue and be suedI to hold such real and personal estate as shall be necessar0 for corporate purposes, and to receive real and personal propert0 b0 gift, devise, or be9uestI to adopt a seal, and to alter or destro0 the sa e at pleasureI to have offices and conduct its business and affairs in the Cit0 of Manila and in the several provincesI to a!e and adopt b0Ela$s, rules and regulations not inconsistent $ith the la$s of the Philippines, and generall0 to do all such acts and things 1including the establish ent of regulations for the election of associates and successors% as a0 be necessar0 to carr0 into effect the provisions of the Act and pro ote the purposes of said corporation. Private respondents also point out that the BSP is registered as a private e plo0er $ith the Social Securit0 S0ste and that all its staff e bers and e plo0ees are covered b0 the Social Securit0 Act, indicating that the BSP had lost its personalit0 or standing as a public corporation. #t is further alleged that the BSPCs assets and liabilities, official transactions and financial state ents have never been subFected to audit b0 the govern ent auditing office, i.e., the Co ission on Audit, being audited rather b0 the private auditing fir of S0cip .orres ?ela0o and Co. Private respondents finall0 state that the appoint ents of BSP officers and staff $ere not approved or confir ed b0 the Civil Service Co ission. The vie$s of the 'ffice of the Solicitor .eneral and the 'ffice of the .overn ent Corporate Counsel on the above issue appeared to be generall0 si ilar. The Solicitor .eneralCs 'ffice, although it had appeared for the N-RC and filed a Co ent on the latterCs behalf on the erits of the Petition for Certiorari, sub itted that the BSP is a govern entEo$ned or controlled corporation, having been created b0 virtue of Co on$ealth Act No. &&& entitled <An Act to Create a Public Corporation to be !no$n as the Bo0 Scouts of the Philippines and to 4efine its Po$ers and Purposes.< The Solicitor .eneral stressed that the BSP $as created in order to <pro ote, through organi6ation, and cooperation $ith other agencies the abilit0 of bo0s to do things for the selves and others, to train the in scoutcraft, and to teach the patriotis , courage, selfEreliance, and !indred virtues, using the ethods $hich are no$ in co on use b0 bo0 scouts.< ) 5e further noted that the BSPCs obFectives and purposes are <solel0 of a benevolent character and not for pecuniar0 profit b0 its e bers. 1* The Solicitor .eneral also underscored the eGtent of govern ent participation in the BSP under its charter as reflected in the co position of its governing bod0% The governing bod0 of the said corporation shall consist of a National EGecutive Board co posed of 1a2 thePresi#ent o+ the Philippines or his representativeI 1b2 the charter and life e bers of the Bo0 Scouts of the PhilippinesI 1c2 the Chair an of the Board of Trustees of the Philippine Scouting =oundationI 1d2 the Regional Chair an of the Scout Regions of the PhilippinesI 1e2 the Secretar! o+ 9#ucation an# Culture, the Secretar! o+ Social >el+are, the Secretar! o+ National /e+ense, the Secretar! o+ 0abor, the Secretar! o+ Finance, the Secretar! o+ =outh an# Sports, an# the Secretar! o+ local Government an# Communit! /evelopmentI 1f2 an e9ual nu ber of individuals fro the private sectorI 1g2 the National President of the .irl Scouts of the PhilippinesI 1h2 one Scout of Senior age fro each Scout Region to represent the bo0 e bershipI and 1i2 three representatives of the cultural inorities. EGcept for the Regional Chair an $ho shall be elected b0 the Regional Scout Councils during their annual eetings, and the Scouts of their respective regions, all members o+ the National 9*ecutive "oar# shall be either b! appointment or cooption, sub)ect to rati+ication an# con+irmation b! the Chie+ Scout, 2ho shall be the Hea# o+ State. . . . 1+ 1E phasis supplied2 The .overn ent Corporate Counsel, li!e the Solicitor .eneral, describes the BSP as a <public corporation< but, unli!e the Solicitor .eneral, suggests that the BSP is ore of a <9uasi corporation< than a <public corporation.< The BSP, unli!e ost public corporations $hich are created for a political purpose, is not vested $ith political or govern ental po$ers to be eGercised for the public good or public $elfare in connection $ith the ad inistration of civil govern ent. The .overn ent Corporate Counsel sub its, ore specificall0, that the BSP falls $ithin the a bit of the ter <govern entE o$ned or controlled corporation< as defined in Section ( of P.4. No. (D(* 1approved on ) =ebruar0 &*+,2 $hich reads as follo$s% A govern entEo$ned or controlled corporation is a stoc! or a non-stock corporation, 2hether per+ormin( (overnmental or proprietar! +unctions, 2hich is #irectl! chartere# b! special la2 or if organi6ed under the general corporation la$ is o$ned or controlled b0 the govern ent directl0, or indirectl0 through a parent

corporation or subsidiar0 corporation, to the eGtent of at least a its outstanding voting capital stoc!. GGG GGG GGG 1E phasis supplied2

aForit0 of its outstanding capital stoc! or

EGa ining the relevant statutor0 provisions and the argu ents outlined above, the Court considers that the follo$ing need to be considered in arriving at the appropriate legal characteri6ation of the BSP for purposes of deter ining $hether its officials and staff e bers are e braced in the Civil Service. =irstl0, BSPCs functions as set out in its statutor0 charter do have a public aspect. BSPCs functions do relate to the fostering of the public virtues of citi6enship and patriotis and the general i prove ent of the oral spirit and fiber of our 0outh. The social value of activities li!e those to $hich the BSP dedicates itself b0 statutor0 andate have in fact, been accorded constitutional recognition. Article ## of the &*+/ Constitution includes in the <4eclaration of Principles and State Policies,< the follo$ing% Sec. &3. The State recogni6es the vital role of the 0outh in nationEbuilding and shall pro ote and protect their ph0sical, oral, spiritual, intellectual, and social $ellEbeing. #t shall inculcate in the 0outh patriotis and nationalis , and encourage their involve ent in public and civic affairs. At the sa e ti e, BSPCs sanctions do not relate to the governance of an0 part of territor0 of the PhilippinesI BSP is not a public corporation in the sa e sense that unicipal corporations or local govern ents are public corporations. BSPCs functions can not also be described as proprietar0 functions in the sa e sense that the functions or activities of govern entEo$ned or controlled corporations li!e the National 4evelop ent Co pan0 or the National Steel Corporation can be described as proprietar0 or <businessEli!e< in character. Nevertheless, the public character of BSPCs functions and activities ust be conceded, for the0 pertain to the educational, civic and social develop ent of the 0outh $hich constitutes a ver0 substantial and i portant part of the nation. The second aspect that the Court ust ta!e into account relates to the governance of the BSP. The co position of the National EGecutive Board of the BSP includes, as noted fro Section : of its charter 9uoted earlier, includes seven 1/2 Secretaries of EGecutive 4epart ents. The seven 1/2 Secretaries 1no$ siG J,K in vie$ of the abolition of the 4epart ent of 8outh and Sports and erger thereof into the 4epart ent of Education, Culture and Sports2 b0 the selves do not constitute a aForit0 of the e bers of the National EGecutive Board. Be ust note at the sa e ti e that the appoint ents of e bers of the National EGecutive Board, eGcept onl0 the appoint ents of the Regional Chair an and Scouts of Senior age fro the various Scout Regions, are subFect to ratification and confir ation b0 the Chief Scout, $ho is the President of the Philippines. ?acancies to the Board are filled b0 a aForit0 vote of the re aining e bers thereof, but again subFect to ratification and confir ation b0 the Chief Scout. 18 Be ust assu e that such confir ation or ratification involves the eGercise of choice or discretion on the part of ratif0ing or confir ing po$er. #t does appears therefore that there is substantial govern ental 1 i.e., Presidential2 participation or intervention in the choice of the aForit0 of the e bers of the National EGecutive Board of the BSP. The third aspect relates to the character of the assets and funds of the BSP. The original assets of the BSP $ere ac9uired b0 purchase or gift or other e9uitable arrange ent $ith the Bo0 Scouts of A erica, of $hich the BSP $as part before the establish ent of the Co on$ealth of the Philippines. The BSP charter, ho$ever, does not indicate that such assets $ere public or statal in character or had originated fro the .overn ent or the State. According to petitioner BSP, its operating funds used for carr0ing out its purposes and progra s, are derived principall0 fro e bership dues paid b0 the Bo0 Scouts the selves and fro propert0 rentals. #n this respect, the BSP appears si ilar to private nonEstoc!, nonE profit corporations, although its charter eGpressl0 envisages donations and contributions to it fro the .overn ent and an0 of its agencies and instru entalities. 19 Be note onl0 that BSP funds have not apparentl0 heretofore been regarded as public funds b0 the Co ission on Audit, considering that such funds have not been audited b0 the Co ission. Bhile the BSP a0 be seen to be a iGed t0pe of entit0, co bining aspects of both public and private entities, $e believe that considering the character of its purposes and its functions, the statutor0 designation of the BSP as <a public corporation< and the substantial participation of the .overn ent in the selection of e bers of the National EGecutive Board of the BSP, the BSP, as presentl0 constituted under its charter, is a govern entEcontrolled corporation $ithin the eaning of Article #". 1B2 1(2 1&2 of the Constitution. Be are fortified in this conclusion $hen $e note that the Ad inistrative Code of &*+/ designates the BSP as one of the attached agencies of the 4epart ent of Education, Culture and Sports 1<4ECS<2. 20 An <agenc0 of the .overn ent< is defined as referring to an0 of the various units of the .overn ent including a depart ent, bureau, office, instru entalit0,

govern entEo$ned orEcontrolled corporation, or local govern ent or distinct unit therein. 21<.overn ent instru entalit0< is in turn defined in the &*+/ Ad inistrative Code in the follo$ing anner% -nstrumentalit! TT refers to an0 agenc0 of the National .overn ent, not inte(rate# 2ithin the #epartment +rame2ork, vested $ith special functions or Furisdiction b0 la$, en#o2e# 2ith some i+ not all corporate po2ers, ad inistering special funds, and en)o!in( operational autonom! usuall! throu(h a charter. This term inclu#esregulator0 a(encies, chartere# institutions an# (overnment-o2ne# or controlle# corporations. 22 1E phasis supplied2 The sa e Code describes a <chartered institution< in the follo$ing ter s% Chartere# institution TT refers to an0 a(enc! or(ani e# or operatin( un#er a special charter, an# veste# b! la2 2ith +unctions relatin( to speci+ic constitutional policies or ob)ectives . This ter includes the state universities and colleges, and the onetar0 authorit0 of the State. 23 1E phasis supplied2 Be believe that the BSP is appropriatel0 regarded as <a govern ent instru entalit0< under the &*+/ Ad inistrative Code. #t thus appears that the BSP a0 be regarded as both a <govern ent controlled corporation $ith an original charter< and as an <instru entalit0< of the .overn ent $ithin the eaning of Article #" 1B2 1(2 1&2 of the Constitution. #t follo$s that the e plo0ees of petitioner BSP are e braced $ithin the Civil Service and are accordingl0 governed b0 the Civil Service -a$ and Regulations. #t re ains onl0 to note that even before the effectivit0 of the &*+/ Constitution e plo0ees of the BSP alread0 fell $ithin the scope of the Civil Service. #n National Housin( Corporation v. Juco, 2( decided in &*+:, the Court, spea!ing through Mr. ;ustice .utierre6, held% There should no longer be an0 9uestion at this ti e that emplo!ees o+ (overnment-o2ne# or controlle# corporations are (overne# b! the civil service la2 an# civil service rules an# re(ulations . Section &, Article "##EB of the J&*/3& Constitution specificall0 provides% The Civil Service e braces ever0 branch, agenc0, subdivision and instru entalit0 of the .overn ent, including ever0 govern entEo$ned or controlled corporation. . . . The &*3: Constitution had a si ilar provision in its Section &, Article "## $hich stated% A Civil Service e bracing all branches and subdivisions of the .overn ent shall be provided b0 la$. The inclusion of <govern entEo$ned or controlled corporations< $ithin the e brace of the civil service sho$s a deliberate effort of the fra ers to plug an earlier loophole $hich allo$ed govern entEo$ned or controlled corporations to avoid the full conse9uences of the all enco passing coverage of the civil service s0ste . The sa e eGplicit intent is sho$n b0 the addition of <agenc0< and <instru entalit0< to branches and subdivisions of the .overn ent. All offices and fir s of the govern ent are covered. The a end ents introduced in &*/3 are not idle eGercises or eaningless gestures. The0 carr0 the strong essage that civil service coverage is broad and allEe bracing insofar as e plo0 ent in the govern ent in an0 of its govern ental or corporate ar s is concerned. 2) The co plaint in N-RC Case No. &,3/E+) having been filed on &3 Nove ber &*+), $hen the &*/3 Constitution $as still in force, our ruling in Juco applies in the case at bar. 2* #n vie$ of the foregoing, $e hold that both the -abor Arbiter and public respondent N-RC had no Furisdiction over the co plaint filed b0 private respondents in N-RC Case No. &,3/E+)I neither labor agenc0 had before it an0 atter $hich could validl0 have been passed upon b0 it in the eGercise of original or appellate Furisdiction. The appealed 4ecision and Resolution in this case, having been rendered $ithout Furisdiction, vested no rights and i posed no liabilities upon an0 of the parties here involved. That neither part0 had eGpressl0 raised the issue of Furisdiction in the pleadings poses no obstacle to this ruling of the Court, $hich a0 motu proprio ta!e cogni6ance of the issue of eGistence or absence of Furisdiction and pass upon the sa e. 2+

ACC'R4#N.-8, the 4ecision of the -abor Arbiter dated 3& ;ul0 &*+:, and the 4ecision dated (/ =ebruar0 &*+/ and Resolution dated &, 'ctober &*+/, issued b0 public respondent N-RC, in N-RC Case No. &,3/E+), are hereb0 SET AS#4E. All other orders and resolutions rendered in this case b0 the -abor Arbiter and the N-RC are li!e$ise SET AS#4E. No pronounce ent as to costs. Fernan, C.J., Gutierre , Jr., "i#in an# /avi#e Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G. R. No. 1))02+ February 28, 200*

T,E -ETERANS FE!ERATION OF T,E P,ILIPPINES re2re0e&3e' by E08era7'o R. A1or'a, Petitioner, vs. ,o&. ANGELO T. RE#ES .& /.0 1a2a1.3y a0 Se1re3ary o6 Na3.o&a7 !e6e&0eJ a&' ,o&. E!GAR!O E. ATENGA .& /.0 1a2a1.3y a0 U&'er0e1re3ary 6or C.5.7 Re7a3.o&0 a&' A'8.&.03ra3.o& o6 3/e !e2ar38e&3 o6 Na3.o&a7 !e6e&0e, Respondents. 4EC#S#'N C,ICO?NA%ARIO, J.: This is a Petition for Certiorari $ith Prohibition under Rule ,: of the &**/ Rules of Civil Procedure, $ith a pra0er to declare as void 4epart ent Circular No. D) of the 4epart ent of National 4efense 14N42, dated &D ;une (DD(. Petitioner in this case is the ?eterans =ederation of the Philippines 1?=P2, a corporate bod0 organi6ed under Republic Act No. (,)D, dated &+ ;une &*,D, as a ended, and dul0 registered $ith the Securities and EGchange Co ission. Respondent Angelo T. Re0es $as the Secretar0 of National 4efense 14N4 Secretar02 $ho issued the assailed 4epart ent Circular No. D), dated &D ;une (DD(. Respondent Edgardo E. Batenga $as the 4N4 >ndersecretar0 for Civil Relations and Ad inistration $ho $as tas!ed b0 the respondent 4N4 Secretar0 to conduct an eGtensive anage ent audit of the records of petitioner. The factual and procedural antecedents of this case are as follo$s% Petitioner ?=P $as created under Rep. Act No. (,)D, & a statute approved on &+ ;une &*,D. 'n &: April (DD(, petitionerPs incu bent president received a letter dated &3 April (DD( $hich reads% Col. E President ?eterans =ederation of the Philippines Ma!ati, Metro Manila 4ear Col. 4e 'ca po% Please be infor ed that during the preparation of 0 briefing before the Cabinet and the President last March *, (DD(, $e ca e across so e legal bases $hich tended to sho$ that there is an organi6ational and anage ent relationship bet$een ?eterans =ederation of the Philippines and the Philippine ?eterans Ban! $hich for an0 0ears have been inadvertentl0 overloo!ed. anuel ?. 4e 'ca po 1Ret.2

# refer to Republic Act (,)D creating the bod0 corporate !no$n as the ?=P and Republic Act 3:&+ creating the Phil. ?ets JsicK Ban!. &. RA (,)D dated &+ ;une ,D Section & ... <hereb0 created a bod0 corporate, under the control and supervision of the Secretar0 of National 4efense.< (. RA (,)D Section &( ... <'n or before the last da0 of the onth follo$ing the end of each fiscal 0ear, the =ederation shall a!e and trans it to the President of the Philippines or to the Secretar0 of National 4efense, a report of its proceedings for the past 0ear, including a full, co plete and ite i6ed report of receipts and eGpenditures of $hatever !ind.< 3. Republic Act 3:&+ dated &+ ;une &*,3 1An Act Creating the Philippine ?eterans Ban!, and for 'ther Purposes2 provides in Section , that ... <the affairs and business of the Philippine ?eterans Ban! shall be directed and its propert0 anaged, controlled and preserved, unless other$ise provided in this Act, b0 a Board of 4irectors consisting of eleven 1&&2 e bers to be co posed of three eG officio e bers to $it% the Philippine ?eterans Ad inistrator, the President of the ?eteranPs =ederation of the Philippines and the Secretar0 of National 4efense G G G. #t is therefore in the conteGt of clarification and rectification of $hat should have been done b0 the 4N4 14epart ent of National 4efense2 for and about the ?=P and P?B that # a re9uesting appropriate infor ation and report about these t$o corporate bodies. Therefore it a0 beco e necessar0 that a conference $ith 0our staffs in these t$o bodies be set.

Than! 0ou and anticipating 0our action on this re9uest. ?er0 trul0 0ours, 1S.42 AN.E-' T. RE8ES J4N4K Secretar0 'n &D ;une (DD(, respondent 4N4 Secretar0 issued the assailed 4N4 4epart ent Circular No. D) entitled, <=urther # ple enting the Provisions of Sections &( and (3 of Republic Act No. (,)D,< the full teGt of $hich appears as follo$s% 4epart ent of National 4efense 4epart ent Circular No. D) SubFect% =urther # ple enting the Provisions of Sections & V ( of Republic Act No. (,)D Authorit0% Republic Act No. (,)D EGecutive 'rder No. (*( dated ;ul0 (:, &*+/ Section & These rules shall govern and appl0 to the anage ent and operations of the ?eterans =ederation of the Philippines 1?=P2 $ithin the conteGt provided b0 E' (*( sE&*+/. Section ( T 4E=#N#T#'N '= TERMS T for the purpose of these rules, the ter s, phrases or $ords used herein shall, unless the conteGt indicates other$ise, ean or be understood as follo$s% Supervision and Control T it shall include authorit0 to act directl0 $henever a specific function is entrusted b0 la$ or regulation to a subordinateI direct the perfor ance of a dut0I restrain the co ission of actsI approve, reverse or odif0

acts and decisions of subordinate officials or unitsI deter ine priorities in the eGecution of plans and progra sI and prescribe standards, guidelines, plans and progra s. Po$er of Control T po$er to alter, odif0, nullif0 or set aside $hat a subordinate officer had done in the perfor ance of his duties and to substitute the Fudg ent of the for er to that of the latter. Supervision T eans overseeing or the po$er of an officer to see to it that their subordinate officers perfor does not allo$ the superior to annul the acts of the subordinate. their dutiesI it

Ad inistrative Process T e braces atter concerning the procedure in the disposition of both routine and contested atters, and the atter in $hich deter inations are ade, enforced or revie$ed. .overn ent Agenc0 T as defined under P4 &)):, a govern ent agenc0 or agenc0 of govern ent or <agenc0< refers to an0 depart ent, bureau or office of the national govern ent, or an0 of its branches or instru entalities, of an0 political subdivision, as $ell as an0 govern ent o$ned or controlled corporation, including its subsidiaries, or other selfEgoverning board or co ission of the govern ent. .overn ent '$ned and Controlled Corporation 1.'CC2 T refer to an0 agenc0 organi6ed as a stoc! or nonEstoc! corporation, vested $ith functions relating to public needs $hether govern ental or proprietar0 in nature, and o$ned b0 the govern ent directl0 or through its instru entalities $holl0 or, $here applicable as in the case of stoc! corporations, to the eGtent of at least :DN of its capital stoc!. =und T su of one0 or other resources set aside for the purpose of carr0ing out specific activities or attaining certain obFectives in accordance $ith special regulations, restrictions or li itations and constitutes an independent, fiscal and accounting entit0. .overn ent =und T includes public onies of ever0 sort and other resources pertaining to an0 agenc0 of the govern ent.

?eteran T an0 person $ho rendered ilitar0 service in the land, sea or air forces of the Philippines during the revolution against Spain, the Philippine A erican Bar, Borld Bar ##, including =ilipino citi6ens $ho served in Allied =orces in the Philippine territor0 and foreign nationals $ho served in Philippine forcesI the @orean ca paign, the ?ietna ca paign, the AntiEdissidence ca paign, or other $ars or ilitar0 ca paignsI or $ho rendered ilitar0 service in the Ar ed =orces of the Philippines and has been honorabl0 discharged or separated after at least siG 1,2 0ears total cu ulative active service or sooner separated due to the death or disabilit0 arising fro a $ound or inFur0 received or sic!ness or disease incurred in line of dut0 $hile in the active service. Section 3 T Relationship Bet$een the 4N4 and the ?=P 3.& Sec & of RA 3&)D provides <... the follo$ing persons 1heads of various veterans associations and organi6ations in the Philippines2 and their associates and successors are hereb0 created a bod0 corporate, under the control and supervision of the Secretar0 of National 4efense, under the na e, st0le and title of <?eterans =ederation of the Philippines ...< The Secretar0 of National 4efense shall be charged $ith the dut0 of supervising the veterans and allied progra under the Furisdiction of the 4epart ent. #t shall also have the responsibilit0 of overseeing and ensuring the Fudicious and effective i ple entation of veterans assistance, benefits, and utili6ation of ?=P assets. 3.( To effectivel0 supervise and control the corporate affairs of the =ederation and to safeguard the interests and $elfare of the veterans $ho are also $ards of the State entrusted under the protection of the 4N4, the Secretar0 a0 personall0 or through a designated representative, re9uire the sub ission of reports, docu ents and other papers regarding an0 or all of the =ederationPs business transactions particularl0 those relating to the ?=P functions under Section ( of RA (,)D. The Secretar0 or his representative he a0 dee relevant. a0 attend conferences of the supre e council of the ?=P and such other activities

3.3 The Secretar0 shall fro ti e to ti e issue guidelines, directives and other orders governing vital govern ent activities including, but not li ited to, the conduct of electionsI the ac9uisition, anage ent and dispositions of properties, the accounting of funds, financial interests, stoc!s and bonds, corporate invest ents, etc. and such other transactions $hich a0 affect the interests of the veterans.

3.) =inancial transactions of the =ederation shall follo$ the provisions of the govern ent auditing code 1P4 &)):2 i.e. govern ent funds shall be spent or used for public purposesI trust funds shall be available and a0 be spent onl0 for the specific purpose for $hich the trust $as created or the funds receivedI fiscal responsibilit0 shall, to the greatest eGtent, be shared b0 all those eGercising authorit0 over the financial affairs, transactions, and operations of the federationI disburse ents or dispositions of govern ent funds or propert0 shall invariabl0 bear the approval of the proper officials. Section ) T Records of the =E4ERAT#'N As a corporate bod0 and in accordance $ith appropriate la$s, it shall !eep and carefull0 preserve records of all business transactions, inutes of eetings of stoc!holdersM e bers of the board of directors reflecting all details about such activit0. All such records and inutes shall be open to directors, trustees, stoc!holders, and other copies of $hich a0 be re9uested. e bers for inspection and

As a bod0 corporate, it shall sub it the follo$ing% annual reportI proceedings of council eetingsI report of operations together $ith financial state ent of its assets and liabilities and fund balance per 0earI state ent of revenues and eGpenses per 0earI state ent of cash flo$s per 0ear as certified b0 the accountantI and other docu entsMreports as a0 be necessar0 or re9uired b0 the SN4. Section : T Sub ission of Annual and Periodic Report As andated under appropriate la$s, the follo$ing reports shall be sub itted to the SN4, to $it% a. Annual Report to be sub itted not later than ever0 ;anuar0 3& of the follo$ing 0ear. Said report shall consist of the follo$ing% &. =inancial Report of the =ederation, signed b0 the Treasurer .eneral and Auditor .eneralI (. Roster of Me bers of the Supre e CouncilI 3. Roster of Me bers of the EGecutive Board and National 'fficersI and ). Current listing of officers and anage ent of ?=P. onth after the

b. Report on the proceedings of each Supre e Council Meeting to be sub itted not later than one eetingI c. Report of the ?=P President as =ederationI a0 be re9uired b0 SN4 or as

a0 be found necessar0 b0 the President of the

d. Resolutions passed b0 the EGecutive Board and the Supre e Council for confir ation to be sub itted not later than one onth after the approval of the resolutionI e. After 'perationMActivit0 Reports to be sub itted not later than one Section , T Penal Sanctions As an attached agenc0 to a regular depart ent of the govern ent, the ?=P and all its instru entalities, officials and personnel shall be subFect to the penal provisions of such la$s, rules and regulations applicable to the attached agencies of the govern ent. #n a letter dated , August (DD( addressed to the President of petitioner, respondent 4N4 Secretar0 reiterated his instructions in his earlier letter of &3 April (DD(. Thereafter, petitionerPs President received a letter dated (3 August (DD( fro respondent >ndersecretar0, infor ing hi that 4epart ent 'rder No. &(* dated (3 August (DD( directed <the conduct of a Manage ent Audit of the ?eterans =ederation of the Philippines.<) The letter $ent on to state that respondent 4N4 Secretar0 <believes that the andate onth after such operation or activit0I

given b0 said la$ can be eaningfull0 eGercised if this depart ent can better appreciate the functions, responsibilities and situation on the ground and this can be done b0 underta!ing a thorough stud0 of the organi6ation.< : Respondent >ndersecretar0 also re9uested both for a briefing and for docu ents on personnel, ongoing proFects and petitionerPs financial condition. The letter ended b0 stating that, after the briefing, the support staff of the Audit Co ittee $ould begin their $or! to eet the oneE onth target $ithin $hich to sub it a report. A letter dated (+ August (DD3 infor ed petitionerPs President that the Manage ent Audit .roup headed b0 the >ndersecretar0 $ould be pa0ing petitioner a visit on 3D August (DD( for an update on ?=PPs different affiliates and the financial state ent of the =ederation. Subse9uentl0, the Secretar0 .eneral of the ?=P sent an undated letter to respondent 4N4 Secretar0, $ith notice to respondent >ndersecretar0 for Civil Relations and Ad inistration, co plaining about the alleged broadness of the scope of the anage ent audit and re9uesting the suspension thereof until such ti e that specific areas of the audit shall have been agreed upon. The re9uest $as, ho$ever, denied b0 the >ndersecretar0 in a letter dated ) Septe ber (DD( on the ground that a specific ti efra e had been set for the activit0. Petitioner thus filed this Petition for Certiorari $ith Prohibition under Rule ,: of the &**/ Rules of Civil Procedure, pra0ing for the follo$ing reliefs% &. =or this Court to issue a te porar0 restraining order and a $rit of preli inar0 prohibitor0 and andator0 inFunction to enFoin respondent Secretar0 and all those acting under his discretion and authorit0 fro % 1a2 i ple enting 4N4 4epart ent Circular No. D)I and 1b2 continuing $ith the ongoing anage ent audit of petitionerPs boo!s of accountI (. After hearing the issues on notice T a. 4eclare 4N4 4epart ent Circular No. D) as null and void for being ultra viresI b. Convert the $rit of prohibition, preli inar0 prohibitor0 and .#?#N. 4>E C'>RSE T' T5E PET#T#'N Petitioner asserts that, although cases $hich 9uestion the constitutionalit0 or validit0 of ad inistrative issuances are ordinaril0 filed $ith the lo$er courts, the urgenc0 and substantive i portance of the 9uestion on hand and the public interest attendant to the subFect atter of the petition Fustif0 its being filed $ith this Court directl0 as an original action. / #t is settled that the Regional Trial Court and the Court of Appeals also eGercise original Furisdiction over petitions for certiorari and prohibition. As $e have held in nu erous occasions, ho$ever, such concurrence of original Furisdiction does not ean that the part0 see!ing eGtraordinar0 $rits has the absolute freedo to file his petition in the court of his choice.+ Thus, in Co issioner of #nternal Revenue v. -eal,* $e held that% Such concurrence of original Furisdiction a ong the Regional Trial Court, the Court of Appeals and this Court, ho$ever, does not ean that the part0 see!ing an0 of the eGtraordinar0 $rits has the absolute freedo to file his petition in the court of his choice. The hierarch0 of courts in our Fudicial s0ste deter ines the appropriate foru for these petitions. Thus, petitions for the issuance of the said $rits against the first level 1inferior2 courts ust be filed $ith the Regional Trial Court and those against the latter, $ith the Court of Appeals. A direct invocation of this CourtPs original Furisdiction to issue these $rits should be allo$ed onl0 $here there are special and i portant reasons therefor, specificall0 and sufficientl0 set forth in the petition. This is the established polic0 to prevent inordinate de ands upon the CourtPs ti e and attention, $hich are better devoted to atters $ithin its eGclusive Furisdiction, and to prevent further overEcro$ding of the CourtPs doc!et. Thus, it $as proper for petitioner to institute the special civil action for certiorari $ith the Court of Appeals assailing the RTC order den0ing his otion to dis iss based on lac! of Furisdiction. The petition itself, in this case, does not specificall0 and sufficientl0 set forth the special and i portant reasons $h0 the Court should give due course to this petition in the first instance, hereb0 failing to fulfill the conditions set forth in Co issioner of #nternal Revenue v. -eal.&D Bhile $e reiterate the policies set forth in -eal and allied cases and continue to abhor the propensit0 of a nu ber of litigants to disregard the principle of hierarch0 of courts in our Fudicial s0ste , $e, andator0 inFunction into a per anent one. ,

ho$ever, resolve to ta!e Fudicial notice of the fact that the persons $ho stand to lose in a possible protracted litigation in this case are $ar veterans, an0 of $ho have precious little ti e left to enFo0 the benefits that can be conferred b0 petitioner corporation. This bic!ering for the po$er over petitioner corporation, an entit0 created to represent and defend the interests of =ilipino veterans, should be resolved as soon as possible in order for it to once and for all direct its resources to its rightful beneficiaries all over the countr0. All these said, $e hereb0 resolve to give due course to this petition. #SS>ES Petitioner ainl0 alleges that the rules and guidelines laid do$n in the assailed 4epart ent Circular No. D) eGpanded the scope of <control and supervision< be0ond $hat has been laid do$n in Rep. Act No. (,)D. &&Petitioner further sub its the follo$ing issues to this Court% &. Bas the challenged depart ent circular passed in the valid eGercise of the respondent Secretar0Ps <control and supervision<H (. Could the challenged depart ent circular validl0 la0 standards classif0ing the ?=P, an essentiall0 civilian organi6ation, $ithin the a bit of statutes onl0 appl0ing to govern ent entitiesH 3. 4oes the depart ent circular, $hich grants respondent direct encroach on the prerogatives of ?=PPs governing bod0H anage ent control on the ?=P, undul0

At the heart of all these issues and all of petitionerPs pra0ers and assertions in this case is petitionerPs clai private nonEgovern ent corporation. CENTRA- #SS>E% #S T5E ?=P A PR#?ATE C'RP'RAT#'NH

that it is a

Petitioner clai s that it is not a public nor a govern ental entit0 but a private organi6ation, and advances this clai to prove that the issuance of 4N4 4epart ent Circular No. D) is an invalid eGercise of respondent Secretar0Ps control and supervision.&( This Court has defined the po$er of control as <the po$er of an officer to alter or odif0 or nullif0 or set aside $hat a subordinate has done in the perfor ance of his duties and to substitute the Fudg ent of the for er to that of the latter.<&3 The po$er of supervision, on the other hand, eans <overseeing, or the po$er or authorit0 of an officer to see that subordinate officers perfor their duties. #f the latter fail or neglect to fulfill the , the for er a0 ta!e such action or step as prescribed b0 la$ to a!e the perfor their duties.< &) These definitions are s0non0 ous $ith the definitions in the assailed 4epart ent Circular No. D), $hile the other provisions of the assailed depart ent circular are ere conse9uences of control and supervision as defined. Thus, in order for petitionerPs pre ise to be able to support its conclusion, petitioners should be dee ed to i pl0 either of the follo$ing% 1&2 that it is unconstitutionalMi per issible for the la$ 1Rep. Act No. (,)D2 to grant control andMor supervision to the Secretar0 of National 4efense over a private organi6ation, or 1(2 that the control andMor supervision that can be granted to the Secretar0 of National 4efense over a private organi6ation is li ited, and is not as strong as the0 are defined above. The follo$ing provision of the &*3: Constitution, the organic act controlling at the ti e of the creation of the ?=P in &*,D, is relevant% Section /. The Congress shall not, eGcept b0 general la$, provide for the for ation, organi6ation, or regulation of private corporations, unless such corporations are o$ned and controlled b0 the .overn ent or an0 subdivision or instru entalit0 thereof.&: 'n the other hand, its counterparts in the &*/3 and &*+/ constitutions are the follo$ing% Section ). The National Asse bl0 shall not, eGcept b0 general la$, provide for the for ation, organi6ation, or regulation of private corporations, unless such corporations are o$ned or controlled b0 the govern ent or an0 subdivision or instru entalit0 thereof.&,

Sec. &,. The Congress shall not, eGcept b0 general la$, provide for the for ation, organi6ation, or regulation of private corporations. .overn entEo$ned and controlled corporations a0 be created or established b0 special charters in the interest of the co on good and subFect to the test of econo ic viabilit0. &/ =ro the foregoing, it is cr0stal clear that our constitutions eGplicitl0 prohibit the regulation b0 special la$s of private corporations, $ith the eGception of govern entEo$ned or controlled corporations 1.'CCs2. 5ence, it $ould be i per issible for the la$ to grant control of the ?=P to a public official if it $ere neither a public corporation, an unincorporated govern ental entit0, nor a .'CC.&+ Said constitutional provisions can even be read to prohibit the creation itself of the ?=P if it $ere neither of the three entioned above, but $e cannot go into that in this case since there is no challenge to the creation of the ?=P in the petition as to per it this Court fro considering its nullit0. Petitioner vigorousl0 argues that the ?=P is a private nonEgovern ent organi6ation, pressing on the follo$ing contentions% &. The ?=P does not possess the ele ents $hich $ould 9ualif0 it as a public office, particularl0 the possessionMdelegation of a portion of sovereign po$er of govern ent to be eGercised for the benefit of the publicI (. ?=P funds are not public funds because T a2 No budgetar0 appropriations or govern ent funds have been released to the ?=P directl0 or indirectl0 fro the 4epart ent of Budget and Manage ent 14BM2I b2 ?=P funds co e fro e bership duesI

c2 The lease rentals raised fro the use of govern ent lands reserved for the ?=P are private in character and do not belong to the govern ent. Said rentals are fruits of ?=PPs labor and efforts in anaging and ad inistering the lands for ?=P purposes and obFectives. A close analog0 $ould be an0 =ilipino citi6en settling on govern ent land and $ho tills the land for his livelihood and sustenance. The fruits of his labor belong to hi and not to the o$ner of the land. Such fruits are not public funds. 3. Although the Furidical personalit0 of the ?=P e anates fro a statutor0 charter, the ?=P retains its essential character as a private, civilian federation of veterans voluntaril0 for ed b0 the veterans the selves to attain a unit0 of effort, purpose and obFectives, e.g. T a. The e bers of the ?=P are individual e bers and retirees fro the public and ilitar0 serviceI

b. Me bership in the ?=P is voluntar0, not co pulsor0I c. The ?=P is governed, not b0 the Civil Service -a$, the Articles of Bar nor the .S#S -a$, but b0 the -abor Code and the SSS -a$I d. The ?=P has its o$n Constitution and B0E-a$s and is governed b0 a Supre e Council $ho are elected fro and b0 the e bers the selvesI ). The Ad inistrative Code of &*+/ does not provide that the ?=P is an attached agenc0, nor does it provide that it is an entit0 under the control and supervision of the 4N4 in the conteGt of the provisions of said code. :. The 4BM declared that the ?=P is a nonEgovern ent organi6ation and issued a certificate that the ?=P has not been a direct recipient of an0 funds released b0 the 4BM. These argu ents of petitioner not$ithstanding, $e are constrained to rule that petitioner is in fact a public corporation. Before responding to petitionerPs allegations one b0 one, here are the ore evident reasons $h0 the ?=P is a public corporation% 1&2 Rep. Act No. (,)D is entitled <An Act to Create a Public Corporation to be @no$n as the ?eterans =ederation of the Philippines, 4efining its Po$ers, and for 'ther Purposes.< 1(2 An0 action or decision of the =ederation or of the Supre e Council shall be subFect to the approval of the Secretar0 of 4efense.&*

132 The ?=P is re9uired to sub it annual reports of its proceedings for the past 0ear, including a full, co plete and ite i6ed report of receipts and eGpenditures of $hatever !ind, to the President of the Philippines or to the Secretar0 of National 4efense.(D 1)2 >nder EGecutive 'rder No. 3/ dated ( 4ece ber &**(, the ?=P $as listed as a ong the govern entEo$ned and controlled corporations that $ill not be privati6ed. 1:2 #n Ang Bagong Ba0ani T '=B -abor Part0 v. C'ME-EC, (& this Court held in a inute resolution that the <?=P J?eterans =ederation Part0K is an adFunct of the govern ent, as it is erel0 an incarnation of the ?eterans =ederation of the Philippines. And no$ to ans$er petitionerPs reasons for insisting that it is a private corporation% &. Petitioner clai s that the ?=P does not possess the ele ents $hich $ould 9ualif0 it as a public office, particularl0 the possessionMdelegation of a portion of sovereign po$er of govern ent to be eGercised for the benefit of the publicI #n -aurel v. 4esierto,(( $e adopted the definition of Meche of a public office, that it is <the right, authorit0 and dut0, created and conferred b0 la$, b0 $hich, for a given period, either fiGed b0 la$ or enduring at the pleasure of the creating po$er, an individual is invested $ith so e portion of the sovereign functions of the govern ent, to be eGercised b0 hi for the benefit of the public.< #n the sa e case, $e $ent on to adopt Meche Ps vie$ that the delegation to the individual of so e of the sovereign functions of govern ent is <JtKhe ost i portant characteristic< in deter ining $hether a position is a public office or not.(3 Such portion of the sovereignt0 of the countr0, either legislative, eGecutive or Fudicial, ust attach to the office for the ti e being, to be eGercised for the public benefit. >nless the po$ers conferred are of this nature, the individual is not a public officer. The ost i portant characteristic $hich distinguishes an office fro an e plo0 ent or contract is that the creation and conferring of an office involves a delegation to the individual of so e of the sovereign functions of govern ent, to be eGercised b0 hi for the benefit of the publicI T that so e portion of the sovereignt0 of the countr0, either legislative, eGecutive or Fudicial, attaches, for the ti e being, to be eGercised for the public benefit. >nless the po$ers conferred are of this nature, the individual is not a public officer. () The issue, therefore, is $hether the ?=APs officers have been delegated so e portion of the sovereignt0 of the countr0, to be eGercised for the public benefit. #n several cases, $e have dealt $ith the issue of $hether certain specific activities can be classified as sovereign functions. These cases, $hich deal $ith activities not i ediatel0 apparent to be sovereign functions, upheld the public sovereign nature of operations needed either to pro ote social Fustice (: or to sti ulate patriotic senti ents and love of countr0.(, As regards the pro otion of social Fustice as a sovereign function, $e held in Agricultural Credit and Cooperative =inancing Ad inistration 1ACC=A2 v. Confederation of >nions in .overn ent Corporations and 'ffices 1C>.C'2, (/ that the co pelling urgenc0 $ith $hich the Constitution spea!s of social Fustice does not leave an0 doubt that land refor is not an optional but a co pulsor0 function of sovereignt0. The sa e reason $as used in our declaration that sociali6ed housing is li!e$ise a sovereign function.(+ 5ighl0 significant here is the observation of for er Chief ;ustice Auerube Ma!alintal% The gro$ing co pleGities of odern societ0, ho$ever, have rendered this traditional classification of the functions of govern ent Jinto constituent and inistrant functionsK 9uite unrealistic, not to sa0 obsolete. The areas $hich used to be left to private enterprise and initiative and $hich the govern ent $as called upon to enter optionall0, and onl0 <because it $as better e9uipped to ad inister for the public $elfare than is an0 private individual or group of individuals,< continue to lose their $ellEdefined boundaries and to be absorbed $ithin activities that the govern ent ust underta!e in its sovereign capacit0 if it is to eet the increasing social challenges of the ti es. 5ereJ,K as al ost ever0$here elseJ,K the tendenc0 is undoubtedl0 to$ards a greater sociali6ation of econo ic forces. 5ere, of course, this develop ent $as envisioned, indeed adopted as a national polic0, b0 the Constitution itself in its declaration of principle concerning the pro otion of social Fustice.(* 1E phasis supplied.2 #t $as, on the other hand, the fact that the National Centennial Celebrations $as calculated to arouse and sti ulate patriotic senti ents and love of countr0 that it $as considered as a sovereign function in -aurel v. 4esierto. 3D #n -aurel, the Court then too! its cue fro a si ilar case in the >nited States involving a =ourth of ;ul0 fire$or!s displa0. The holding of the Centennial Celebrations $as held to be an eGecutive function, as it $as intended to enforce Article "#? of the Constitution $hich provides for the conservation, pro otion and populari6ation of the nationPs historical and cultural heritage and resources, and artistic relations.

#n the case at bar, the functions of petitioner corporation enshrined in Section ) of Rep. Act No. (,)D 3& should ost certainl0 fall $ithin the categor0 of sovereign functions. The protection of the interests of $ar veterans is not onl0 eant to pro ote social Fustice, but is also intended to re$ard patriotis . All of the functions in Section ) concern the $ellEbeing of $ar veterans, our countr0 en $ho ris!ed their lives and lost their li bs in fighting for and defending our nation. #t $ould be inFustice of catastrophic proportions to sa0 that it is be0ond sovereignt0Ps po$er to re$ard the people $ho defended her. -i!e the holding of the National Centennial Celebrations, the functions of the ?=P are eGecutive functions, designed to i ple ent not Fust the provisions of Rep. Act No. (,)D, but also, and ore i portantl0, the Constitutional andate for the State to provide i ediate and ade9uate care, benefits and other for s of assistance to $ar veterans and veterans of ilitar0 ca paigns, their surviving spouses and orphans.3( (. Petitioner clai s that ?=P funds are not public funds. Petitioner clai s that its funds are not public funds because no budgetar0 appropriations or govern ent funds have been released to the ?=P directl0 or indirectl0 fro the 4BM, and because ?=P funds co e fro e bership dues and lease rentals earned fro ad inistering govern ent lands reserved for the ?=P. The fact that no budgetar0 appropriations have been released to the ?=P does not prove that it is a private corporation. The 4BM indeed did not see it fit to propose budgetar0 appropriations to the ?=P, having itself believed that the ?=P is a private corporation.33 #f the 4BM, ho$ever, is ista!en as to its conclusion regarding the nature of ?=PPs incorporation, its previous assertions $ill not prevent future budgetar0 appropriations to the ?=P. The erroneous application of the la$ b0 public officers does not bar a subse9uent correct application of the la$. 3) Nevertheless, funds in the hands of the ?=P fro $hatever source are public funds, and can be used onl0 for public purposes. This is andated b0 the follo$ing provisions of Rep. Act No. (,)D% 1&2 Section ( provides that the ?=P can onl0 <invest its funds for the eGclusive benefit of the ?eterans of the PhilippinesI< 1(2 Section ( li!e$ise provides that <1a2n0 action or decision of the =ederation or of the Supre e Council shall be subFect to the approval of the Secretar0 of National 4efense.< 5ence, all activities of the ?=P to $hich the Supre e Council can appl0 its funds are subFect to the approval of the Secretar0 of National 4efenseI 132 Section ) provides that <the =ederation shall eGist solel0 for the purposes of a benevolent character, and not for the pecuniar0 benefit of its e bersI<Davvphil.net 1)2 Section , provides that all funds of the ?=P in eGcess of operating eGpenses are <reserved for disburse ent, as the Supre e Council a0 authori6e, for the purposes stated in Section t$o of this ActI< 1:2 Section &D provides that <1a2n0 donation or contribution $hich fro ti e to ti e a0 be ade to the =ederation b0 the .overn ent of the Philippines or an0 of its subdivisions, branches, offices, agencies or instru entalities shall be eGpended b0 the Supre e Council onl0 for the purposes entioned in this Act.<I and finall0, 1,2 Section &( re9uires the sub ission of annual reports of ?=P proceedings for the past 0ear, including a full, co plete and ite i6ed report of receipts and eGpenditures of $hatever !ind, to the President of the Philippines or to the Secretar0 of National 4efense. #t is i portant to note here that the e bership dues collected fro the individual e bers of ?=PPs affiliate organi6ations do not beco e public funds $hile the0 are still funds of the affiliate organi6ations. A close reading of Section &3: of Rep. Act No. (,)D reveals that $hat has been created as a bod0 corporate is not the individual e bership of the affiliate organi6ations, but erel0 the aggregation of the heads of the affiliate organi6ations. Thus, onl0 the one0 re itted b0 the affiliate organi6ations to the ?=P parta!e in the public nature of the ?=P funds. #n Republic v. C'C'=E4,3, $e held that the Coconut -ev0 =unds are public funds because, inter alia, 1&2 the0 $ere eant to be for the benefit of the coconut industr0, one of the aFor industries supporting the national econo 0, and its far ersI and 1(2 the ver0 la$s governing coconut levies recogni6e their public character. The sa e is true $ith regard to the ?=P funds. No less public is the use for the ?=P funds, as such use is li ited to the purposes of the ?=P $hich $e

have ruled to be sovereign functions. -i!e$ise, the la$ governing ?=P funds 1Rep. Act No. (,)D2 recogni6es the public character of the funds as sho$n in the enu erated provisions above. Be also observed in the sa e C'C'=E4 case that <1e2ven if the one0 is allocated for a special purpose and raised b0 special eans, it is still public in character.<3/ #n the case at bar, so e of the funds $ere raised b0 even ore special eans, as the contributions fro affiliate organi6ations of the ?=P can hardl0 be regarded as enforced contributions as to be considered taGes. The0 are ore in the nature of donations $hich have al$a0s been recogni6ed as a source of public funding. Affiliate organi6ations of the ?=P cannot co plain of their contributions beco ing public funds upon the receipt b0 the ?=P, since the0 are presu ed a$are of the provisions of Rep. Act No. (,)D $hich not onl0 specifies the eGclusive purposes for $hich ?=P funds can be used, but also provides for the regulation of such funds b0 the national govern ent through the Secretar0 of National 4efense. There is nothing $rong, $hether legall0 or orall0, fro raising revenues through nonEtraditional ethods. As re ar!ed b0 ;ustice =lorentino =eliciano in his concurring opinion in @ilosba0an, #ncorporated v. .uingona, ;r.3+ $here he eGplained that the funds raised b0 the 'nEline -otter0 S0ste $ere also public in nature, thus% G G G JTKhe ore successful the govern ent is in raising revenues b0 nonEtraditional ethods such as PA.C'R operations and privati6ation easures, the lesser $ill be the pressure upon the traditional sources of public revenues, i.e., the poc!et boo!s of individual taGpa0ers and i porters. Petitioner additionall0 harps on the inapplicabilit0 of the case of -aurel v. 4esierto 3* $hich $as cited b0 Respondents. Petitioner clai s that a ong the reasons National Centennial Co ission Chair Salvador -aurel $as considered a public officer $as the fact that his co pensation $as derived fro public funds. 5aving ruled that ?=P funds fro $hatever source are public funds, $e can safel0 conclude that the Supre e CouncilPs co pensation, ta!en as the0 are fro ?=P funds under the ter <operating eGpenses< in Section , of Rep. Act No. (,)D, are derived fro public funds. The particular no enclature of the co pensation ta!en fro ?=P funds is not even of relevance here. As $e said in -aurel concerning co pensation as an ele ent of public office% >nder particular circu stances, <co pensation< has been held to include allo$ance for personal eGpenses, co issions, eGpenses, fees, an honorariu , ileage or traveling eGpenses, pa0 ents for services, restitution or a balancing of accounts, salar0, and $ages.)D 3. Petitioner argues that it is a civilian federation $here e bership is voluntar0.

Petitioner clai s that the Secretar0 of National 4efense <historicall0 did not indulge in the direct or W icro anage entP of the ?=P precisel0 because it is essentiall0 a civilian organi6ation $here e bership is voluntar0.< )& This reliance of petitioner on $hat has <historicall0< been done is erroneous, since la$s are not repealed b0 disuse, custo , or practice to the contrar0.)( =urther ore, as earlier stated, the erroneous application of the la$ b0 public officers does not bar a subse9uent correct application of the la$.)3 Neither is the civilian nature of ?=P relevant in this case. The Constitution does not contain an0 prohibition, eGpress or i plied, against the grant of control andMor supervision to the Secretar0 of National 4efense over a civilian organi6ation. The 'ffice of the Secretar0 of National 4efense is itself a civilian office, its occupant being an alter ego of the civilian Co anderEinEChief. This setEup is the anifestation of the constitutional principle that civilian authorit0 is, at all ti es, supre e over the ilitar0. )) There being no such constitutional prohibition, the creation of a civilian public organi6ation b0 Rep. Act No. (,)D is not rendered invalid b0 its being placed under the control and supervision of the Secretar0 of National 4efense. PetitionerPs stand that the ?=P is a private corporation because e bership thereto is voluntar0 is li!e$ise erroneous. As stated above, the e bership of the ?=P is not the individual e bership of the affiliate organi6ations, but erel0 the aggregation of the heads of such affiliate organi6ations. These heads for ing the ?=P then elect the Supre e Council and the other officers,): of this public corporation. ). Petitioner clai s that the Ad inistrative Code of &*+/ does not provide that the ?=P is an attached agenc0, and nor does it provide that it is an entit0 under the control and supervision of the 4N4 in the conteGt of the provisions of said code. The Ad inistrative Code, b0 giving definitions of the various entities covered b0 it, ac!no$ledges that its enu eration is not eGclusive. The Ad inistrative Code could not be said to have repealed nor enor ousl0 odified Rep. Act No. (,)D b0 i plication, as such repeal or enor ous odification b0 i plication is not favored in statutor0 construction. ),

:. Petitioner offers as evidence the 4BM opinion that the ?=P is a nonEgovern ent organi6ation in its certification that the ?=P <has not been a direct recipient of an0 funds released b0 the 4BM.< Respondents clai that the supposed declaration of the 4BM that petitioner is a nonEgovern ent organi6ation is not persuasive, since 4BM is not a 9uasiEFudicial agenc0. The0 aver that $hat $e have said of the Bureau of -ocal .overn ent =inance 1B-.=2 in Philippine -ong 4istance Telephone Co pan0 1P-4T2 v. Cit0 of 4avao )/ can be applied to 4BM% #n an0 case, it is contended, the ruling of the Bureau of -ocal .overn ent =inance 1B-.=2 that petitionerPs eGe ption fro local taGes has been restored is a conte poraneous construction of Section (3 Jof R.A. No. /*(: and, as such, is entitled to great $eight. The ruling of the B-.= has been considered in this case. But unli!e the Court of TaG Appeals, $hich is a special court created for the purpose of revie$ing taG cases, the B-.= $as created erel0 to provide consultative services and technical assistance to local govern ents and the general public on local taGation and other related atters. Thus, the rule that the <Court $ill not set aside conclusions rendered b0 the CTA, $hich is, b0 the ver0 nature of its function, dedicated eGclusivel0 to the stud0 and consideration of taG proble s and has necessaril0 developed an eGpertise on the subFect, unless there has been an abuse or i provident eGercise of authorit0< cannot appl0 in the case of the B-.=. 'n this score, though, $e disagree $ith respondents and hold that the 4BMPs appraisal is considered persuasive. Respondents isread the P-4T case in asserting that onl0 9uasiEFudicial agenciesP deter ination can be considered persuasive. Bhat the P-4T case points out is that, for an ad inistrative agenc0Ps opinion to be persuasive, the ad inistrative agenc0 involved 1$hether it has 9uasiEFudicial po$ers or not2 ust be an eGpert in the field the0 are giving their opinion on. The 4BM is indeed an eGpert on deter ining $hat the various govern ent agencies and corporations are. This deter ination is necessar0 for the 4BM to fulfill its andate% Sec. (. Mandate. E The 4epart ent shall be responsible for the for ulation and i ple entation of the National Budget $ith the goal of attaining our national socioEecono ic plans and obFectives. The 4epart ent shall be responsible for the efficient and sound utili6ation of govern ent funds and revenues to effectivel0 achieve our countr0Cs develop ent obFectives. )+ The persuasiveness of the 4BM opinion has, ho$ever, been overco e b0 all the previous eGplanations $e have laid so far. #t has also been eclipsed b0 another si ilarl0 persuasive opinion, that of the 4epart ent of National 4efense e bodied in 4epart ent Circular No. D). The 4N4 is clearl0 ore of an eGpert $ith respect to the deter ination of the entities under it, and its Ad inistrative Rules and Regulations are entitled to great respect and have in their favor the presu ption of legalit0.)* The 4BM opinion further ore suffers fro its lac! of eGplanation and Fustification in the <certification of nonEreceipt< $here said opinion $as given. The 4BM has not furnished, in said certification or else$here, an eGplanation for its opinion that ?=P is a nonEgovern ent organi6ation. T5E =ATE '= 4EPARTMENT C#RC>-AR N'. D) 'ur ruling that petitioner is a public corporation is deter inative of $hether or not $e should grant petitionerPs pra0er to declare 4epart ent Circular No. D) void. Petitioner assails 4epart ent Circular No. D) on the ground that it eGpanded the scope of control and supervision be0ond $hat has been laid do$n in Rep. Act No. (,)D. Petitioner alleges that <1t2he e9uation of the eaning of XcontrolP and XsupervisionP of the Ad inistrative Code of &*+/ as the sa e Xcontrol and supervisionP under Rep. Act No. (,)D, ta!es out the conteGt of the original legislative intent fro the peculiar surrounding circu stances and conditions that brought about the creation of the ?=P.<:D Petitioner clai s that the ?=P <$as intended as a selfEgoverning autono ous bod0 $ith a Supre e Council as governing authorit0,< and that the assailed circular <preEe pts ?=PPs original selfEgovernance and autono 0 1in2 representing veterans organi6ations, and substitutes govern ent discretion and decisions to that of the veteransP o$n deter ination.<:& Petitioner sa0s that the circularPs provisions practicall0 render the Supre e Council inutile, despite its being the statutor0 governing bod0 of the ?=P. :(

As previousl0 entioned, this Court has defined the po$er of control as <the po$er of an officer to alter or odif0 or nullif0 or set aside $hat a subordinate has done in the perfor ance of his duties and to substitute the Fudg ent of the for er to that of the latter.<:3 The po$er of supervision, on the other hand, eans <overseeing, or the po$er or authorit0 of an officer to see that subordinate officers perfor their duties.< :) >nder the Ad inistrative Code of &*+/%:: Supervision and control shall include the authorit0 to act directl0 $henever a specific function is entrusted b0 la$ or regulation to a subordinateI direct the perfor ance of dut0I restrain the co ission of actsI revie$, approve, reverse or odif0 acts and decisions of subordinate officials or unitsI deter ine priorities in the eGecution of plans and progra sI and prescribe standards, guidelines, plans and progra s. G G G The definition of the po$er of control and supervision under Section ( of the assailed 4epart ent Circular are s0non0 ous $ith the foregoing definitions. Conse9uentl0, and considering that petitioner is a public corporation, the provisions of the assailed 4epart ent Circular No. D) did not supplant nor odif0 the provisions of Republic Act No. (,)D, thus not violating the settled rule that <all such 1ad inistrative2 issuances ust not override, but ust re ain consistent and in har on0 $ith the la$ the0 see! to appl0 or i ple ent. Ad inistrative rules and regulations are intended to carr0 out, neither to supplant nor to odif0, the la$.< :, Section 3.( of the assailed depart ent circular, $hich authori6es the Secretar0 of National 4efense to <G G G personall0 or through a designated representative, re9uire the sub ission of reports, docu ents and other papers regarding an0 or all of the =ederationPs business functions, G G G.< as $ell as Section 3.3 $hich allo$s the Secretar0 of 4N4 to G G G J=Kro ti e to ti e issue guidelines, directives and other orders governing vital govern ent activities including, but not li ited to, the conduct of elections, the ac9uisition, anage ent and dispositions of properties, the accounting of funds, financial interests, stoc!s and bonds, corporate invest ents, etc. and such other transactions $hich a0 affect the interests of the veterans. are erel0 conse9uences of both the po$er of control and supervision granted b0 Rep. Act No. (,)D. The po$er to alter or odif0 or nullif0 or set aside $hat a subordinate has done in the perfor ance of his duties, or to see to it that subordinate officers perfor their duties in accordance $ith la$, necessaril0 re9uires the abilit0 of the superior officer to onitor, as closel0 as it desires, the acts of the subordinate. The sa e is true $ith respect to Sections ) and : of the assailed 4epart ent Circular No. D), $hich re9uires the preservation of the records of the =ederation and the sub ission to the Secretar0 of National 4efense of annual and periodic reports. Petitioner li!e$ise clai s that the assailed 4N4 4epart ent Circular No. D) $as never published, and hence void.:/ Respondents den0 such nonEpublication.:+ Be have put forth both the rule and the eGception on the publication of ad inistrative rules and regulations in the case of TaQada v. Tuvera%:* G G G Ad inistrative rules and regulations pursuant also to a valid delegation. ust also be published if their purpose is to enforce or i ple ent eGisting la$

#nterpretative regulations and those erel0 internal in nature, that is, regulating onl0 the personnel of the ad inistrative agenc0 and not the public, need not be published. Neither is publication re9uired of the soEcalled letters of instructions issued b0 ad inistrative superiors concerning the rules on guidelines to be follo$ed b0 their subordinates in the perfor ance of their duties. Even assu ing that the assailed circular $as not published, its validit0 is not affected b0 such nonEpublication for the reason that its provisions fall under t$o of the eGceptions enu erated in TaQada. 4epart ent Circular No. D) is an internal regulation. As $e have ruled, the0 are eant to regulate a public corporation under the control of 4N4, and not the public in general. As li!e$ise discussed above, $hat has been created as a bod0 corporate b0 Rep. Act No. (,)D is not the individual e bership of the affiliate organi6ations of the ?=P, but erel0 the aggregation of the heads of the affiliate organi6ations. Conse9uentl0, the individual e bers of the affiliate organi6ations, $ho are not public officers, are be0ond the regulation of the circular.

Sections (, 3 and , of the assailed circular are additionall0 erel0 interpretative in nature. The0 add nothing to the la$. The0 do not affect the substantial rights of an0 person, $hether part0 to the case at bar or not. #n Sections ( and 3, control and supervision are defined, entioning actions that can be perfor ed as conse9uences of such control and supervision, but $ithout specif0ing the particular actions that shall be rendered to control and supervise the ?=P. Section ,, in the sa e vein, erel0 state $hat the drafters of the circular perceived to be conse9uences of being an attached agenc0 to a regular depart ent of the govern ent, enu erating sanctions and re edies provided b0 la$ that a0 be availed of $henever desired. Petitioner then obFects to the i ple entation of Sec. 3.) of the assailed 4epart ent Circular, $hich provides that T 3.) =inancial transactions of the =ederation shall follo$ the provisions of the govern ent auditing code 1P4 &)):2 i.e. govern ent funds shall be spent or used for public purposesI trust funds shall be available and a0 be spent onl0 for the specific purpose for $hich the trust $as created or the funds receivedI fiscal responsibilit0 shall, to the greatest eGtent, be shared b0 all those eGercising authorit0 over the financial affairs, transactions, and operations of the federationI disburse ents or dispositions of govern ent funds or propert0 shall invariabl0 bear the approval of the proper officials. Since $e have also previousl0 deter ined that ?=P funds are public funds, there is li!e$ise no reason to declare this provision invalid. Section 3.) is correct in re9uiring the ?=P funds to be used for public purposes, but onl0 insofar the ter <public purposes< is construed to ean <public purposes enu erated in Rep. Act No. (,)D.< 5aving in their possession public funds, the officers of the ?=P, especiall0 its fiscal officers, fiscal responsibilit0 to the greatest eGtent. ust indeed share in the

As to petitionerPs allegation that ?=P $as intended as a selfEgoverning autono ous bod0 $ith a Supre e Council as governing authorit0, $e find that the provisions of Rep. Act No. (,)D concerning the control and supervision of the Secretar0 of National 4efense clearl0 $ithholds fro the ?=P co plete autono 0. To sa0, ho$ever, that such provisions render the ?=P inutile is an eGaggeration. An office is not rendered inutile b0 the fact that it is placed under the control of a higher office. These subordinate offices, such as the eGecutive offices under the control of the President, eGercise discretion at the first instance. Bhile their acts can be altered or even set aside b0 the superior, these acts are effective and are dee ed the acts of the superior until the0 are odified. Surel0, $e cannot sa0 that the offices of all the 4epart ent Secretaries are $orthless positions. #n su , the assailed 4N4 4epart ent Circular No. D) does not supplant nor odif0 and is, on the contrar0, perfectl0 in consonance $ith Rep. Act No. (,)D. Petitioner ?=P is a public corporation. As such, it can be placed under the control and supervision of the Secretar0 of National 4efense, $ho conse9uentl0 has the po$er to conduct an eGtensive anage ent audit of petitioner corporation. B5ERE='RE, the Petition is hereb0 4#SM#SSE4 for lac! of 4epart ent Circular No. D) is A==#RME4. S' 'R4ERE4. erit. The validit0 of the 4epart ent of National 4efense

T,IR! !I-ISION

ENGR. RANULFO C. FELICIANO, .& /.0 1a2a1.3y a0 Ge&era7 Ma&a:er o6 3/e Ley3e Me3ro2o7.3a& "a3er !.03r.13 GLM"!H, Ta17oba& C.3y, Petitioner, NAPOLEON G. ARANE%, .& /.0 1a2a1.3y a0 Pre0.'e&3 a&' C/a.r8a& o6 MNo Ta4, No I82a.r8e&3 o6 Co&3ra130 Coa7.3.o&, I&1.,N PetitionerEinEintervention, E 5er0u0 ?

G.R. No. 1*)*(1 Present% CARP#' M'RA-ES, J., Chairperson, BR#'N, BERSAM#N, ?#--ARAMA, ;R., and SEREN', JJ.

Pro ulgated% ,ON. CORNELIO C. GISON, U&'er0e1re3ary, !e2ar38e&3 o6 F.&a&1e, August (:, (D&D Respondent. 4EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE 4 !ECISION RION, J.%

Before this Court is the Petition for Revie$ on CertiorariJ&K under Rule ): of the Rules of Court filed b0 -e0te Metropolitan Bater 4istrict 10M>/2 through its .eneral Manager, Engr. Ranulfo C. =eliciano, $hich see!s to set aside the ;ul0 &), (DD) decision of the Court of Appeals 1 C%2J(K that in turn affir ed the ruling of the Court of TaG Appeals 1 CT%2 in CTA Case No. ,&,:.J3K The CTA dis issed -MB4Ps petition for lac! of Furisdiction to tr0 the case. ;oining the petitioner is the SNo TaG, No # pair ent of Contracts Coalition, #nc.R 1 Coalition2, a corporation represented b0 its President and Chair an, Napoleon .. Arane6, $hich filed a petition in intervention on =ebruar0 &/, (DD:. J)K The Court granted said -MB4, to sub it their respective e oranda in a resolution dated ;ul0 :, (DD,.J:K otion for leave to ad it co plaintE otion and re9uired the Coalition, together $ith

ACDGROUN! FACTS The present petition arose fro eGe pted fro the taG case initiated b0 -MB4 after it filed $ith the 4epart ent of =inance 1 /4F2 a otor vehicle, particularl0 a To0ota 5iE-uG pic!Eup truc!, be

petition re9uesting that certain $ater suppl0 e9uip ent and a rehabilitation of its t0phoonEda aged $ater suppl0 s0ste .

taG. These properties $ere given to -MB4 through a grant b0 the ;apanese .overn ent for the

#n an indorse ent dated ;ul0 :, &**:, the 4'= granted the taG eGe ption on the $ater suppl0 e9uip ent but assessed the corresponding taG and dut0 on the To0ota 5iE-uG pic!Eup truc!. J,K 'n ;une *, (DDD, -MB4 oved to reconsider the disallo$ance of the taG eGe ption on the subFect vehicle. The 4'=, through then >ndersecretar0 Cornelio C. .ison, denied -MB4Ps re9uest for reconsideration because the taG eGe ption privileges of govern ent agencies and

govern ent o$ned and controlled corporations 1G4CCs2 had alread0 been $ithdra$n b0 EGecutive 'rder No. *3. J/K This pro pted -MB4, through its .eneral Manager Engr. Ranulfo C. =eliciano, to appeal to the CTA. After considering the evidence presented at the hearing, the CTA found -MB4 to be a .'CC $ith an original charter. =or this reason, the CTA resolved to dis iss -MB4Ps appeal for lac! of Furisdiction to ta!e cogni6ance of the case.J+K The CTAPs resolution $as $ithout preFudice to the right of -MB4 to refile the case, if it so desires, in the appropriate foru . -i!e$ise, the CTA denied -MB4Ps otion to reconsider the dis issal of its appeal. J*K

-MB4 filed a petition for revie$ J&DK $ith the CA raising the issues of $hether the CTA decided the case in accord $ith the evidence presented and the applicable la$, and @/e3/er 3/e LM"! .0 a GOCC @.3/ or.:.&a7 1/ar3er. The CA found the petition to be un eritorious and affir ed the CTAPs ruling that the -MB4 is a .'CC $ith original charter, and not a private corporation or entit0 as -MB4 argued. 5ence, the present petition for revie$ on certiorari filed b0 -MB4 $ith this Court.

T,E PETITION LM"! a22ea70 3o u0 2r.8ar.7y 3o 'e3er8.&e @/e3/er @a3er '.03r.130 are, by 7a@, GOCC0 @.3/ or.:.&a7 1/ar3er. Citing the Constitution and Presidential 4ecree 1 P./.2 No. &*+,J&&K -MB4 clai s that $ater districts are private corporations and as such are entitled to certain taG eGe ptions under the la$. -MB4 argues that P.!. No. 198 .0 a :e&era7 7a@, 0.8.7ar 3o 3/e Cor2ora3.o& Co'e a&' o3/er :e&era7 7a@0, a&' .0 &o3 a 02e1.a7 7a@. Because it is a general la$, $ater districts constituted under its ter s are private corporations, not a govern entEo$ned or controlled corporation 1G4CC2 $ith original charter. #n support of its position, -MB4 points out provisions in P.4. No. &*+ that it clai s i ple ents the general polic0 of the decree as enunciated in its Section (, specificall0, Section : J&(K 1pertaining to the purpose of $ater districts2, Section , 1for ation of a $ater district2, as a ended b0 P.4. No. &)/*, J&3K and Section / 1filing of resolution for ing a $ater district2, as a ended b0 P.4. No. /,+, J&)K of Chapter ##. -MB4 concludes fro Code 1Batas Pa bansa Blg. ,+2. #n dra$ing parallelis $ith the Corporation Code, -MB4 cites 1&2 the 'esolution o+ Formation passed b0 this eGa ination that P.4. No. &*+ is not an original charter but a general act authori6ing the for ation of $ater districts on a local option basis, si ilar to the Corporation

the san((unian under P4 &*+ for the creation of a $ater district as an e9uivalent to the %rticles o+ -ncorporation an# "!la2s under the Corporation Code, and 1(2 the +ilin( o+ the 'esolution o+ Formation of the $ater district $ith the -B>A as the counterpart of the issuance o+ the Certi+icate o+ Filin( o+ the %rticles o+ -ncorporation an# "!-la2s to the private corporation b0 the Securities and EGchange Co ission 1 S9C2. The Furidical personalit0 of a $ater district is ac9uired on the date of filing of the resolution in the sa e $a0 that the Furidical personalit0 of a private corporation is ac9uired on the date of issuance of the certificate of filing $ith the SEC.

-MB4 further clai s that the Constitution does not li it the

eaning of the ter

Sgeneral la$R to the Corporation

Code, as there are other general la$s such as Republic Act 1 '.%.2 No. ,*3+J&:K 1including R.A. No. ,*3* EE An Act Creating the Cooperative 4evelop ent Authorit02, and R.A. No. ,+&D. J&,K >nder R.A. No. ,*3+ and R.A. No. ,+&D, an0 group of individuals can for a cooperative and a Countr0side and "aran(a! Business Enterprise 1C""92, respectivel0, and their creators, e bers or officers provided that the0 co pl0 $ith anner, an0 group of individuals in a given local govern ent unit can ac9uire a Furidical personalit0 separate and distinct fro all the re9uire ents under said la$s. #n the sa e for

and organi6e the selves into a $ater district provided that the0 co pl0 $ith the re9uire ents under P.4. No. &*+. Part of -MB4Ps theor0 is that P.4. No. &*+ is not the operative act that created the local $ater districtsI the0 are

created through co pliance $ith the nine separate and distinct operative acts found in the Procedural =or ation of a Bater 4istrict prescribed under Section , of P.4. No. &*+ and its # ple enting Rules and Regulations. The last step of these operative acts is the filing of the Resolution of =or ation of the san((unian concerned $ith the -B>A after the latter has deter ined that such resolution has confor ed to the re9uire ents of Section , and the polic0 obFectives in Section ( of P.4. No. &*+, as a ended.J&/K According to -MB4, no $ater district is for ed b0 the enact ent of P.4. No. &*+. The decree erel0 authori6ed the for ation of $ater districts b0 the san((unian, in the sa e anner that the Corporation Code authori6es the for ation of private corporations. -MB4 theori6es that $hat is actuall0 chartered, for ed and created under P.4. No. &*+ is the -ocal Bater >tilities Ad inistration 10>A%2, as provided in Section )* of the decree. This provision establishing -B>APs charter and the polic0 state ent in Section ( of P.4. No. &*+, are in star! contrast to the decreePs failure to provide an eGpress provision on $hat constitutes the $ater districtsP charter, leading to the inference that the decree is not the charter of the $ater districts but erel0 authori6es their for ation, on a local option basis.

T,E PETITION?IN?INTER-ENTION 'n =ebruar0 &/, (DD:, Napoleon .. Arane6 1%rane 2, acting in behalf of the SNo TaG, No # pair ent of Contracts Coalition, #nc.R 1Coalition2 filed a otion for leave to ad it co plaintEpetition in intervention in connection $ith the petition ore or less four for revie$ on certiorari filed b0 -MB4 $ith this Court. Arane6 is the CoalitionPs president and chair an. The Coalition clai s to indirectl0 represent all the $ater district concessionaires of the entire countr0 figuring to hundred illion, aside fro the (,,DDD concessionaires situated in the cit0 of Tacloban and the Palo, Pastrana, Sta. =e, TabonETabon, Tanauan, Tolosa EE all $ithin the province of -e0te. The petition in intervention raises three ain argu ents% 1&2 that the $ater districts are not .'CCs as the0 are unicipalities of 4aga i,

9uasiEpublic corporations or private corporations eGercising public functions, 1(2 that classif0ing the $ater districts as .'CCs $ill result in an unFust disregard of the SnonEi pair ent of contractsR clause in the Constitution, and 132 that the appealed CA decision, if not corrected or reversed, $ould result in a nation$ide crisis and $ould create social unrest. #nterestingl0, the Coalition sets forth the pre ise that P.4. No. &*+ is not entirel0 a special la$ or a general la$, but a co posite la$ ade up of both la$s% Title ## T -ocal Bater 4istrict -a$ being the general la$, and Title ### T -ocal

Bater >tilities -a$ being the special la$ or charter. =or the rest of the petition in intervention, the Coalition adopts supporting argu ents si ilar, if not eGactl0 the sa e, as those of -MB4Ps.

T,E COURTLS RULING Be find no erit in the petition and the petition in intervention, particularl0 in their core position that $ater districts atter that -MB4 and the Coalition see! to revive

are private corporations, not .'CCs. The 9uestion is a longEsettled and to reElitigate in their respective petitions.

The present petition is not the first instance that the petitioner -MB4, through Engr. Ranulfo C. =eliciano, has raised for deter ination b0 this Court the corporate classification of local $ater districts. J&+K -MB4 posed this eGact sa e 9uestion in Feliciano v. Commission on %u#it 1C4%2.J&*K #n ruling that local $ater districts, such as the -MB4, are .'CCs $ith special charter, the Court even pointed to settled Furisprudence J(DK cul inating in /avao Cit! >ater /istrict v. Civil Service CommissionJ(&K and recentl0 reiterated in /e Jesus v. C4%. J((K #n Feliciano, -MB4 li!e$ise clai ed that it is a private corporation and therefore, should not be subFect to the audit Furisdiction of the C'A. -MB4 then argued that P.4. No. &*+ is not an Soriginal charterR that $ould place the $ater districts $ithin the audit Furisdiction of the C'A as defined in Section ( 1&2, Article #"E4 of the &*+/ Constitution. J(3K Neither did P.4. No. &*+ eGpressl0 direct the creation of the $ater districts. -MB4 posited that the decree erel0 provided for their for ation on an optional or voluntar0 basis and $hat actuall0 created the $ater districts is the approval of the San((unian Resolution.J()K Significantl0, these are the ver0 sa e positions that the -MB4 and the Coalition 1as petitionerEintervenor2 sub it in the present petition. 'ur ruling in Feliciano s9uarel0 addressed the difference bet$een a private corporation created under general la$ and a .'CC created b0 a special charter, and $e need onl0 to 9uote $hat Feliciano said% Be begin b0 eGplaining the general fra e$or! under the funda ental la$. The Constitution recogni6es t$o classes of corporations. The first refers to private corporations created under a general la$. The second refers to govern entEo$ned or controlled corporations created b0 special charters. Section &,, Article "## of the Constitution provides% Sec. &,. The Congress shall not, eGcept b0 general la$, provide for the for ation, organi6ation, or regulation of private corporations. .overn entEo$ned or controlled corporations a0 be created or established b0 special charters in the interest of the co on good and subFect to the test of econo ic viabilit0. The Constitution e phaticall0 prohibits the creation of private corporations eGcept b0 a general la$ applicable to all citi6ens. The purpose of this constitutional provision is to ban private corporations created b0 special charters, $hich historicall0 gave certain individuals, fa ilies or groups special privileges denied to other citi6ens. #n short, Congress cannot enact a la$ creating a private corporation $ith a special charter. Such legislation $ould be unconstitutional. Private corporations a0 eGist onl0 under a general la$. #f the corporation is private, it ust necessaril0 eGist under a general la$. Stated differentl0, onl0 corporations created under a general la$ can 9ualif0 as private corporations. >nder eGisting la$s, that general la$ is the Corporation Code, eGcept that the Cooperative Code governs the incorporation of cooperatives.

The Constitution authori6es Congress to create govern entEo$ned or controlled corporations through special charters. Since private corporations cannot have special charters, it follo$s that Congress can create corporations $ith special charters onl0 if such corporations are govern entEo$ned or controlled. 'bviousl0, -B4s Jre+errin( to local 2ater #istricts K are not private corporations because the0 are not created under the Corporation Code. -B4s are not registered $ith the Securities and EGchange Co ission. Section &) of the Corporation Code states that SJAKll corporations organi6ed under this code shall file $ith the Securities and EGchange Co ission articles of incorporation G G G.R -B4s have no articles of incorporation, no incorporators and no stoc!holders or e bers. There are no stoc!holders or e bers to elect the board directors of -B4s as in the case of all corporations registered $ith the Securities and EGchange Co ission. The local a0or or the provincial governor appoints the directors of -B4s for a fiGed ter of office. This Court has ruled that -B4s are not created under the Corporation Code, thus% =ro the foregoing pronounce ent, it is clear that $hat has been eGcluded fro the coverage of the CSC are those corporations created pursuant to the Corporation Code. S.:&.6.1a&37y, 2e3.3.o&er0 are &o3 1rea3e' u&'er 3/e 0a.' 1o'e, bu3 o& 3/e 1o&3rary, 3/ey @ere 1rea3e' 2ur0ua&3 3o a 02e1.a7 7a@ a&' are :o5er&e' 2r.8ar.7y by .30 2ro5.0.o&. 1E phasis supplied2R 1Citations 4mitte#2J(:K Feliciano further categoricall0 held that P.4. No. &*+ constitutes the special charter b0 virtue of $hich local $ater districts eGist. >nli!e private corporations that derive their legal eGistence and po$er fro districts derive their legal eGistence and po$er fro the Corporation Code, $ater P.4. No. &*+. Section , of the decree in fact provides that $ater

districts Sshall eGercise the po$ers, rights and privileges given to private corporations under eGisting la$s, in addition to the po$ers granted in, and subFect to such restrictions i posed under this Act.R Therefore, $ater districts $ould not have corporate po$ers $ithout P.4. No. &*+. As alread0 entioned above, the Court reiterated this ruling T i.e. that a $ater district is a govern entEo$ned and

controlled corporation $ith a special charter since it is created pursuant to a special la$, P4 &*+ T albeit $ith respect to the authorit0 of the C'A to audit $ater districts, in /e Jesus v. C4%.J(,K #n light of these settled rulings, specificall0 rendered conclusive on -MB4 b0 Feliciano v. C4% and the application of the principle of Sconclusiveness of Fudg ent,R $e cannot but den0 the present petition and petition in intervention. The principle of doctrine of Sconclusiveness of Fudg entR T a branch of the rule on res )u#icataJ(/K T provides that issues actuall0 and directl0 resolved in a for er suit cannot again be raised in an0 future case bet$een the sa e parties involving a different cause of action. Bhere there has been a previous final Fudg ent on the parties or substantiall0 the sa e parties, rendered b0 a court of co petent Furisdiction over the erits bet$een the sa e atter and the parties, the

atters or issues raised and adFudged in the previous final Fudg ent shall be conclusive on the parties although the0 are no$ litigating a different cause of action J(+K and shall continue to be binding bet$een the sa e parties for as long as the facts on $hich that Fudg ent $as predicated continue to be the facts of the case or incident before the court. J(*K No doubt eGists that the Fudg ent in Feliciano v. C4% $as a final Fudg ent rendered b0 a court $ith co petent Furisdiction over the subFect atter and the parties. The decision $as in fact a ruling of this Court on the sa e issue erits as it s9uarel0 responded to the issues the parties raised on posed in the present case. The ruling $as also on the

the basis of their sub itted argu ents. There $as, li!e$ise, bet$een Feliciano v. C4% and the present case a substantial identit0 of parties and issue presented. #n both cases, the ain petitioner has been -MB4, represented b0 its .eneral Manager Engr. Ranulfo C. ission on Audit and the

=eliciano. Bhile the respondents in these cases $ere different govern ent offices Tthe Co

4epart ent of =inance T the0 nevertheless represented and spo!e for the sa e govern entI thus, a substantial identit0 of respondents obtained in resolving the sa e contentious issue of $hether local $ater districts should be treated as private corporations and not as .'CCs $ith special charter. IN -IE" OF T,E FOREGOING, $e hereb0 !EN# the petition and the petition for intervention for lac! of Appeals in CTA Case No. ,&,:. Costs against the petitioners. erit

and accordingl0 AFFIRM the decision of the Court of Appeals dated ;ul0 &), (DD) affir ing the ruling of the Court of TaG

SO OR!ERE!. EN BANC ..R. No. &33(:D ;ul0 *, (DD(

=RANC#SC' #. C5A?E7, petitioner, vs. P>B-#C ESTATES A>T5'R#T8 and AMAR# C'ASTA- BA8 4E?E-'PMENT C'RP'RAT#'N, respondents. CARP#', ;.% This is an original Petition for Manda us $ith pra0er for a $rit of preli inar0 inFunction and a te porar0 restraining order. The petition see!s to co pel the Public Estates Authorit0 1<PEA< for brevit02 to disclose all facts on PEACs then onEgoing renegotiations $ith A ari Coastal Ba0 and 4evelop ent Corporation 1<AMAR#< for brevit02 to reclai portions of Manila Ba0. The petition further see!s to enFoin PEA fro signing a ne$ agree ent $ith AMAR# involving such recla ation. The =acts 'n Nove ber (D, &*/3, the govern ent, through the Co issioner of Public 5igh$a0s, signed a contract $ith the Construction and 4evelop ent Corporation of the Philippines 1<C4CP< for brevit02 to reclai certain foreshore and offshore areas of Manila Ba0. The contract also included the construction of Phases # and ## of the ManilaECavite Coastal Road. C4CP obligated itself to carr0 out all the $or!s in consideration of fift0 percent of the total reclai ed land. 'n =ebruar0 ), &*//, then President =erdinand E. Marcos issued Presidential 4ecree No. &D+) creating PEA. P4 No. &D+) tas!ed PEA <to reclai land, including foreshore and sub erged areas,< and <to develop, i prove, ac9uire, G G G lease and sell an0 and all !inds of lands.<& 'n the sa e date, then President Marcos issued Presidential 4ecree No. &D+: transferring to PEA the <lands reclai ed in the foreshore and offshore of the Manila Ba0<( under the ManilaECavite Coastal Road and Recla ation ProFect 1MCCRRP2. 'n 4ece ber (*, &*+&, then President Marcos issued a e orandu directing PEA to a end its contract $ith C4CP, so that <JAKll future $or!s in MCCRRP G G G shall be funded and o$ned b0 PEA.< Accordingl0, PEA and C4CP eGecuted a Me orandu of Agree ent dated 4ece ber (*, &*+&, $hich stated% <1i2 C4CP shall underta!e all recla ation, construction, and such other $or!s in the MCCRRP as a0 be agreed upon b0 the parties, to be paid according to progress of $or!s on a unit priceMlu p su basis for ite s of $or! to be agreed upon, subFect to price escalation, retention and other ter s and conditions provided for in Presidential 4ecree No. &:*). All the financing re9uired for such $or!s shall be provided b0 PEA. GGG

1iii2 G G G C4CP shall give up all its develop ent rights and hereb0 agrees to cede and transfer in favor of PEA, all of the rights, title, interest and participation of C4CP in and to all the areas of land reclai ed b0 C4CP in the MCCRRP as of 4ece ber 3D, &*+& $hich have not 0et been sold, transferred or other$ise disposed of b0 C4CP as of said date, $hich areas consist of approGi atel0 Ninet0ENine Thousand =our 5undred Sevent0 Three 1**,)/32 s9uare eters in the =inancial Center Area covered b0 land pledge No. : and approGi atel0 Three Million Three 5undred Eight0 T$o Thousand Eight 5undred Eight0 Eight 13,3+(,+++2 s9uare eters of reclai ed areas at var0ing elevations above Mean -o$ Bater -evel located outside the =inancial Center Area and the =irst Neighborhood >nit.<3 'n ;anuar0 &*, &*++, then President Cora6on C. A9uino issued Special Patent No. 3:&/, granting and transferring to PEA <the parcels of land so reclai ed under the ManilaECavite Coastal Road and Recla ation ProFect 1MCCRRP2 containing a total area of one illion nine hundred fifteen thousand eight hundred ninet0 four 1&,*&:,+*)2 s9uare eters.< Subse9uentl0, on April *, &*++, the Register of 4eeds of the Municipalit0 of ParaQa9ue issued Transfer Certificates of Title Nos. /3D*, /3&&, and /3&(, in the na e of PEA, covering the three reclai ed islands !no$n as the <=reedo #slands< located at the southern portion of the ManilaECavite Coastal Road, ParaQa9ue Cit0. The =reedo #slands have a total land area of 'ne Million =ive 5undred Sevent0 Eight Thousand =our 5undred and =ort0 'ne 1&,:/+,))&2 s9uare eters or &:/.+)& hectares. 'n April (:, &**:, PEA entered into a ;oint ?enture Agree ent 1<;?A< for brevit02 $ith AMAR#, a private corporation, to develop the =reedo #slands. The ;?A also re9uired the recla ation of an additional (:D hectares of sub erged areas surrounding these islands to co plete the configuration in the Master 4evelop ent Plan of the Southern Recla ation ProFectEMCCRRP. PEA and AMAR# entered into the ;?A through negotiation $ithout public bidding.) 'n April (+, &**:, the Board of 4irectors of PEA, in its Resolution No. &():, confir ed the ;?A.: 'n ;une +, &**:, then President =idel ?. Ra os, through then EGecutive Secretar0 Ruben Torres, approved the ;?A., 'n Nove ber (*, &**,, then Senate President Ernesto Maceda delivered a privilege speech in the Senate and denounced the ;?A as the <grand other of all sca s.< As a result, the Senate Co ittee on .overn ent Corporations and Public Enterprises, and the Co ittee on Accountabilit0 of Public 'fficers and #nvestigations, conducted a Foint investigation. The Senate Co ittees reported the results of their investigation in Senate Co ittee Report No. :,D dated Septe ber &,, &**/./ A ong the conclusions of their report are% 1&2 the reclai ed lands PEA see!s to transfer to AMAR# under the ;?A are lands of the public do ain $hich the govern ent has not classified as alienable lands and therefore PEA cannot alienate these landsI 1(2 the certificates of title covering the =reedo #slands are thus void, and 132 the ;?A itself is illegal. 'n 4ece ber :, &**/, then President =idel ?. Ra os issued Presidential Ad inistrative 'rder No. 3,: creating a -egal Tas! =orce to conduct a stud0 on the legalit0 of the ;?A in vie$ of Senate Co ittee Report No. :,D. The e bers of the -egal Tas! =orce $ere the Secretar0 of ;ustice,+ the Chief Presidential -egal Counsel,* and the .overn ent Corporate Counsel.&D The -egal Tas! =orce upheld the legalit0 of the ;?A, contrar0 to the conclusions reached b0 the Senate Co ittees.&& 'n April ) and :, &**+, the Philippine 4ail0 #n9uirer and Toda0 published reports that there $ere onEgoing renegotiations bet$een PEA and AMAR# under an order issued b0 then President =idel ?. Ra os. According to these reports, PEA 4irector Nestor @ala$, PEA Chair an Arsenio 8ulo and retired Nav0 'fficer Sergio Cru6 co posed the negotiating panel of PEA. 'n April &3, &**+, Antonio M. 7ulueta filed before the Court a Petition for Prohibition $ith Application for the #ssuance of a Te porar0 Restraining 'rder and Preli inar0 #nFunction doc!eted as ..R. No. &3(**) see!ing to nullif0 the ;?A. The Court dis issed the petition <for un$arranted disregard of Fudicial hierarch0, $ithout preFudice to the refiling of the case before the proper court.<&( 'n April (/, &**+, petitioner =ran! #. Chave6 1<Petitioner< for brevit02 as a taGpa0er, filed the instant Petition for Manda us $ith Pra0er for the #ssuance of a Brit of Preli inar0 #nFunction and Te porar0 Restraining 'rder. Petitioner contends the govern ent stands to lose billions of pesos in the sale b0 PEA of the reclai ed lands to AMAR#. Petitioner pra0s that PEA publicl0 disclose the ter s of an0 renegotiation of the ;?A, invo!ing Section (+, Article ##, and Section /, Article ###, of the &*+/ Constitution on the right of the people to infor ation on atters of public concern. Petitioner assails the sale to AMAR# of lands of the public do ain as a blatant violation of Section 3, Article "## of the &*+/ Constitution prohibiting the sale of alienable lands of the public do ain to private corporations. =inall0, petitioner asserts that he see!s to enFoin the loss of billions of pesos in properties of the State that are of public do inion. After several otions for eGtension of ti e,&3 PEA and AMAR# filed their Co ents on 'ctober &*, &**+ and ;une (:, &**+, respectivel0. Mean$hile, on 4ece ber (+, &**+, petitioner filed an ' nibus Motion% 1a2 to re9uire PEA to sub it the ter s of the renegotiated PEAEAMAR# contractI 1b2 for issuance of a te porar0 restraining orderI and 1c2 to set the

case for hearing on oral argu ent. Petitioner filed a Reiterative Motion for #ssuance of a TR' dated Ma0 (,, &***, $hich the Court denied in a Resolution dated ;une ((, &***. #n a Resolution dated March (3, &***, the Court gave due course to the petition and re9uired the parties to file their respective e oranda. 'n March 3D, &***, PEA and AMAR# signed the A ended ;oint ?enture Agree ent 1<A ended ;?A,< for brevit02. 'n Ma0 (+, &***, the 'ffice of the President under the ad inistration of then President ;oseph E. Estrada approved the A ended ;?A. 4ue to the approval of the A ended ;?A b0 the 'ffice of the President, petitioner no$ pra0s that on <constitutional and statutor0 grounds the renegotiated contract be declared null and void.<&) The #ssues The issues raised b0 petitioner, PEA&: and AMAR#&, are as follo$s% #. B5ET5ER T5E PR#NC#PA- RE-#E=S PRA8E4 ='R #N T5E PET#T#'N ARE M''T AN4 ACA4EM#C BECA>SE '= S>BSEA>ENT E?ENTSI ##. B5ET5ER T5E PET#T#'N MER#TS 4#SM#SSA- ='R =A#-#N. T' 'BSER?E T5E PR#NC#P-E .'?ERN#N. T5E 5#ERARC58 '= C'>RTSI ###. B5ET5ER T5E PET#T#'N MER#TS 4#SM#SSA- ='R N'NEE"5A>ST#'N '= A4M#N#STRAT#?E REME4#ESI #?. B5ET5ER PET#T#'NER 5AS -'C>S STAN4# T' BR#N. T5#S S>#TI ?. B5ET5ER T5E C'NST#T>T#'NA- R#.5T T' #N='RMAT#'N #NC->4ES '==#C#A- #N='RMAT#'N 'N 'NE .'#N. NE.'T#AT#'NS BE='RE A =#NA- A.REEMENTI ?#. B5ET5ER T5E ST#P>-AT#'NS #N T5E AMEN4E4 ;'#NT ?ENT>RE A.REEMENT ='R T5E TRANS=ER T' AMAR# '= CERTA#N -AN4S, REC-A#ME4 AN4 ST#-- T' BE REC-A#ME4, ?#'-ATE T5E &*+/ C'NST#T>T#'NI AN4 ?##. B5ET5ER T5E C'>RT #S T5E PR'PER ='R>M ='R RA#S#N. T5E #SS>E '= B5ET5ER T5E AMEN4E4 ;'#NT ?ENT>RE A.REEMENT #S .R'SS-8 4#SA4?ANTA.E'>S T' T5E .'?ERNMENT. The CourtCs Ruling =irst issue% $hether the principal reliefs pra0ed for in the petition are oot and acade ic because of subse9uent events.

The petition pra0s that PEA publicl0 disclose the <ter s and conditions of the onEgoing negotiations for a ne$ agree ent.< The petition also pra0s that the Court enFoin PEA fro <privatel0 entering into, perfecting andMor eGecuting an0 ne$ agree ent $ith AMAR#.< PEA and AMAR# clai the petition is no$ oot and acade ic because AMAR# furnished petitioner on ;une (&, &*** a cop0 of the signed A ended ;?A containing the ter s and conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitionerCs pra0er for a public disclosure of the renegotiations. -i!e$ise, petitionerCs pra0er to enFoin the signing of the A ended ;?A is no$ oot because PEA and AMAR# have alread0 signed the A ended ;?A on March 3D, &***. Moreover, the 'ffice of the President has approved the A ended ;?A on Ma0 (+, &***. Petitioner counters that PEA and AMAR# cannot avoid the constitutional issue b0 si pl0 fastEtrac!ing the signing and approval of the A ended ;?A before the Court could act on the issue. Presidential approval does not resolve the constitutional issue or re ove it fro the a bit of Fudicial revie$. Be rule that the signing of the A ended ;?A b0 PEA and AMAR# and its approval b0 the President cannot operate to oot the petition and divest the Court of its Furisdiction. PEA and AMAR# have still to i ple ent the A ended ;?A. The pra0er to enFoin the signing of the A ended ;?A on constitutional grounds necessaril0 includes preventing its i ple entation if in the eanti e PEA and AMAR# have signed one in violation of the Constitution. PetitionerCs principal basis in assailing the renegotiation of the ;?A is its violation of Section 3, Article "## of the Constitution, $hich prohibits the govern ent fro alienating lands of the public do ain to private corporations. #f the A ended ;?A indeed violates the

Constitution, it is the dut0 of the Court to enFoin its i ple entation, and if alread0 i ple ented, to annul the effects of such unconstitutional contract. The A ended ;?A is not an ordinar0 co ercial contract but one $hich see!s to transfer title and o$nership to 3,/.: hectares of reclai ed lands and sub erged areas of Manila Ba0 to a single private corporation. #t no$ beco es ore co pelling for the Court to resolve the issue to insure the govern ent itself does not violate a provision of the Constitution intended to safeguard the national patri on0. Supervening events, $hether intended or accidental, cannot prevent the Court fro rendering a decision if there is a grave violation of the Constitution. #n the instant case, if the A ended ;?A runs counter to the Constitution, the Court can still prevent the transfer of title and o$nership of alienable lands of the public do ain in the na e of AMAR#. Even in cases $here supervening events had ade the cases oot, the Court did not hesitate to resolve the legal or constitutional issues raised to for ulate controlling principles to guide the bench, bar, and the public.&/ Also, the instant petition is a case of first i pression. All previous decisions of the Court involving Section 3, Article "## of the &*+/ Constitution, or its counterpart provision in the &*/3 Constitution,&+ covered agricultural lands sold to private corporations $hich ac9uired the lands fro private parties. The transferors of the private corporations clai ed or could clai the right to Fudicial confir ation of their i perfect titles&* under Title ## of Co on$ealth Act. &)& 1<CA No. &)&< for brevit02. #n the instant case, AMAR# see!s to ac9uire fro PEA, a public corporation, reclai ed lands and sub erged areas for nonEagricultural purposes b0 purchase under P4 No. &D+) 1charter of PEA2 and Title ### of CA No. &)&. Certain underta!ings b0 AMAR# under the A ended ;?A constitute the consideration for the purchase. Neither AMAR# nor PEA can clai Fudicial confir ation of their titles because the lands covered b0 the A ended ;?A are ne$l0 reclai ed or still to be reclai ed. ;udicial confir ation of i perfect title re9uires open, continuous, eGclusive and notorious occupation of agricultural lands of the public do ain for at least thirt0 0ears since ;une &(, &*): or earlier. Besides, the deadline for filing applications for Fudicial confir ation of i perfect title eGpired on 4ece ber 3&, &*+/.(D -astl0, there is a need to resolve i ediatel0 the constitutional issue raised in this petition because of the possible transfer at an0 ti e b0 PEA to AMAR# of title and o$nership to portions of the reclai ed lands. >nder the A ended ;?A, PEA is obligated to transfer to AMAR# the latterCs sevent0 percent proportionate share in the reclai ed areas as the recla ation progresses. The A ended ;?A even allo$s AMAR# to ortgage at an0 ti e the entire reclai ed area to raise financing for the recla ation proFect.(& Second issue% $hether the petition erits dis issal for failing to observe the principle governing the hierarch0 of courts.

PEA and AMAR# clai petitioner ignored the Fudicial hierarch0 b0 see!ing relief directl0 fro the Court. The principle of hierarch0 of courts applies generall0 to cases involving factual 9uestions. As it is not a trier of facts, the Court cannot entertain cases involving factual issues. The instant case, ho$ever, raises constitutional issues of transcendental i portance to the public.(( The Court can resolve this case $ithout deter ining an0 factual issue related to the case. Also, the instant case is a petition for anda us $hich falls under the original Furisdiction of the Court under Section :, Article ?### of the Constitution. Be resolve to eGercise pri ar0 Furisdiction over the instant case. Third issue% $hether the petition erits dis issal for nonEeGhaustion of ad inistrative re edies.

PEA faults petitioner for see!ing Fudicial intervention in co pelling PEA to disclose publicl0 certain infor ation $ithout first as!ing PEA the needed infor ation. PEA clai s petitionerCs direct resort to the Court violates the principle of eGhaustion of ad inistrative re edies. #t also violates the rule that anda us a0 issue onl0 if there is no other plain, speed0 and ade9uate re ed0 in the ordinar0 course of la$. PEA distinguishes the instant case fro TaQada v. Tuvera(3 $here the Court granted the petition for anda us even if the petitioners there did not initiall0 de and fro the 'ffice of the President the publication of the presidential decrees. PEA points out that in TaQada, the EGecutive 4epart ent had an affir ative statutor0 dut0 under Article ( of the Civil Code() and Section & of Co on$ealth Act No. ,3+(: to publish the presidential decrees. There $as, therefore, no need for the petitioners in TaQada to a!e an initial de and fro the 'ffice of the President. #n the instant case, PEA clai s it has no affir ative statutor0 dut0 to disclose publicl0 infor ation about its renegotiation of the ;?A. Thus, PEA asserts that the Court ust appl0 the principle of eGhaustion of ad inistrative re edies to the instant case in vie$ of the failure of petitioner here to de and initiall0 fro PEA the needed infor ation. The original ;?A sought to dispose to AMAR# public lands held b0 PEA, a govern ent corporation. >nder Section /* of the .overn ent Auditing Code,(, the disposition of govern ent lands to private parties re9uires public bidding. PEA $as under a positive legal dut0 to disclose to the public the ter s and conditions for the sale of its lands. The la$ obligated PEA to a!e this public disclosure even $ithout de and fro petitioner or fro an0one. PEA failed to a!e this public disclosure because the original ;?A, li!e the A ended ;?A, $as the result of a negotiated contract, not of a public

bidding. Considering that PEA had an affir ative statutor0 dut0 to a!e the public disclosure, and $as even in breach of this legal dut0, petitioner had the right to see! direct Fudicial intervention. Moreover, and this alone is deter inative of this issue, the principle of eGhaustion of ad inistrative re edies does not appl0 $hen the issue involved is a purel0 legal or constitutional 9uestion.(/ The principal issue in the instant case is the capacit0 of AMAR# to ac9uire lands held b0 PEA in vie$ of the constitutional ban prohibiting the alienation of lands of the public do ain to private corporations. Be rule that the principle of eGhaustion of ad inistrative re edies does not appl0 in the instant case. =ourth issue% $hether petitioner has locus standi to bring this suit PEA argues that petitioner has no standing to institute anda us proceedings to enforce his constitutional right to infor ation $ithout a sho$ing that PEA refused to perfor an affir ative dut0 i posed on PEA b0 the Constitution. PEA also clai s that petitioner has not sho$n that he $ill suffer an0 concrete inFur0 because of the signing or i ple entation of the A ended ;?A. Thus, there is no actual controvers0 re9uiring the eGercise of the po$er of Fudicial revie$. The petitioner has standing to bring this taGpa0erCs suit because the petition see!s to co pel PEA to co pl0 $ith its constitutional duties. There are t$o constitutional issues involved here. =irst is the right of citi6ens to infor ation on atters of public concern. Second is the application of a constitutional provision intended to insure the e9uitable distribution of alienable lands of the public do ain a ong =ilipino citi6ens. The thrust of the first issue is to co pel PEA to disclose publicl0 infor ation on the sale of govern ent lands $orth billions of pesos, infor ation $hich the Constitution and statutor0 la$ andate PEA to disclose. The thrust of the second issue is to prevent PEA fro alienating hundreds of hectares of alienable lands of the public do ain in violation of the Constitution, co pelling PEA to co pl0 $ith a constitutional dut0 to the nation. Moreover, the petition raises atters of transcendental i portance to the public. #n Chave6 v. PC..,(+ the Court upheld the right of a citi6en to bring a taGpa0erCs suit on atters of transcendental i portance to the public, thus E <Besides, petitioner e phasi6es, the atter of recovering the illEgotten $ealth of the Marcoses is an issue of Ctranscendental i portance to the public.C 5e asserts that ordinar0 taGpa0ers have a right to initiate and prosecute actions 9uestioning the validit0 of acts or orders of govern ent agencies or instru entalities, if the issues raised are of Cpara ount public interest,C and if the0 Ci ediatel0 affect the social, econo ic and oral $ell being of the people.C Moreover, the ere fact that he is a citi6en satisfies the re9uire ent of personal interest, $hen the proceeding involves the assertion of a public right, such as in this case. 5e invo!es several decisions of this Court $hich have set aside the procedural atter of locus standi, $hen the subFect of the case involved public interest. GGG #n TaQada v. Tuvera, the Court asserted that $hen the issue concerns a public right and the obFect of anda us is to obtain the enforce ent of a public dut0, the people are regarded as the real parties in interestI and because it is sufficient that petitioner is a citi6en and as such is interested in the eGecution of the la$s, he need not sho$ that he has an0 legal or special interest in the result of the action. #n the aforesaid case, the petitioners sought to enforce their right to be infor ed on atters of public concern, a right then recogni6ed in Section ,, Article #? of the &*/3 Constitution, in connection $ith the rule that la$s in order to be valid and enforceable ust be published in the 'fficial .a6ette or other$ise effectivel0 pro ulgated. #n ruling for the petitionersC legal standing, the Court declared that the right the0 sought to be enforced Cis a public right recogni6ed b0 no less than the funda ental la$ of the land.C -egaspi v. Civil Service Co ission, $hile reiterating TaQada, further declared that C$hen a anda us proceeding involves the assertion of a public right, the re9uire ent of personal interest is satisfied b0 the ere fact that petitioner is a citi6en and, therefore, part of the general CpublicC $hich possesses the right.C =urther, in Albano v. Re0es, $e said that $hile eGpenditure of public funds a0 not have been involved under the 9uestioned contract for the develop ent, anage ent and operation of the Manila #nternational Container Ter inal, Cpublic interest J$asK definitel0 involved considering the i portant role Jof the subFect contractK . . . in the econo ic develop ent of the countr0 and the agnitude of the financial consideration involved.C Be concluded that, as a conse9uence, the disclosure provision in the Constitution $ould constitute sufficient authorit0 for upholding the petitionerCs standing. Si ilarl0, the instant petition is anchored on the right of the people to infor ation and access to official records, docu ents and papers O a right guaranteed under Section /, Article ### of the &*+/ Constitution. Petitioner, a for er solicitor general, is a =ilipino citi6en. Because of the satisfaction of the t$o basic re9uisites laid do$n b0 decisional la$ to

sustain petitionerCs legal standing, i.e. 1&2 the enforce ent of a public right 1(2 espoused b0 a =ilipino citi6en, $e rule that the petition at bar should be allo$ed.< Be rule that since the instant petition, brought b0 a citi6en, involves the enforce ent of constitutional rights E to infor ation and to the e9uitable diffusion of natural resources E atters of transcendental public i portance, the petitioner has the re9uisite locus standi. =ifth issue% $hether the constitutional right to infor ation includes official infor ation on onEgoing negotiations before a final agree ent. Section /, Article ### of the Constitution eGplains the peopleCs right to infor ation on anner% atters of public concern in this

<Sec. /. The right of the people to infor ation on atters of public concern shall be recogni6ed. Access to official records, and to docu ents, and papers pertaining to official acts, transactions, or decisions, as $ell as to govern ent research data used as basis for polic0 develop ent, shall be afforded the citi6en, subFect to such li itations as a0 be provided b0 la$.< 1E phasis supplied2 The State polic0 of full transparenc0 in all transactions involving public interest reinforces the peopleCs right to infor ation on atters of public concern. This State polic0 is eGpressed in Section (+, Article ## of the Constitution, thus% <Sec. (+. SubFect to reasonable conditions prescribed b0 la$, the State adopts and i ple ents a polic0 of full public disclosure of all its transactions involving public interest.< 1E phasis supplied2 These t$in provisions of the Constitution see! to pro ote transparenc0 in polic0E a!ing and in the operations of the govern ent, as $ell as provide the people sufficient infor ation to eGercise effectivel0 other constitutional rights. These t$in provisions are essential to the eGercise of freedo of eGpression. #f the govern ent does not disclose its official acts, transactions and decisions to citi6ens, $hatever citi6ens sa0, even if eGpressed $ithout an0 restraint, $ill be speculative and a ount to nothing. These t$in provisions are also essential to hold public officials <at all ti es G G G accountable to the people,<(* for unless citi6ens have the proper infor ation, the0 cannot hold public officials accountable for an0thing. Ar ed $ith the right infor ation, citi6ens can participate in public discussions leading to the for ulation of govern ent policies and their effective i ple entation. An infor ed citi6enr0 is essential to the eGistence and proper functioning of an0 de ocrac0. As eGplained b0 the Court in ?al onte v. Bel onte, ;r.3D T <An essential ele ent of these freedo s is to !eep open a continuing dialogue or process of co unication bet$een the govern ent and the people. #t is in the interest of the State that the channels for free political discussion be aintained to the end that the govern ent a0 perceive and be responsive to the peopleCs $ill. 8et, this open dialogue can be effective onl0 to the eGtent that the citi6enr0 is infor ed and thus able to for ulate its $ill intelligentl0. 'nl0 $hen the participants in the discussion are a$are of the issues and have access to infor ation relating thereto can such bear fruit.< PEA asserts, citing Chave6 v. PC..,3& that in cases of onEgoing negotiations the right to infor ation is li ited to <definite propositions of the govern ent.< PEA aintains the right does not include access to <intraEagenc0 or interEagenc0 reco endations or co unications during the stage $hen co on assertions are still in the process of being for ulated or are in the CeGplorator0 stageC.< Also, AMAR# contends that petitioner cannot invo!e the right at the preEdecisional stage or before the closing of the transaction. To support its contention, AMAR# cites the follo$ing discussion in the &*+, Constitutional Co ission% <Mr. Suare6. And $hen $e sa0 CtransactionsC $hich should be distinguished fro contracts, agree ents, or treaties or $hatever, does the .entle an refer to the steps leading to the consu ation of the contract, or does he refer to the contract itselfH Mr. 'ple% The CtransactionsC used here, # suppose is generic and therefore, it can cover both steps leading to a contract and alread0 a consu ated contract, Mr. Presiding 'fficer. Mr. Suare6% This conte plates inclusion of negotiations leading to the consu Mr. 'ple% 8es, subFect onl0 to reasonable safeguards on the national interest. Mr. Suare6% Than! 0ou.<3( 1E phasis supplied2 ation of the transaction.

AMAR# argues there ust first be a consu ated contract before petitioner can invo!e the right. Re9uiring govern ent officials to reveal their deliberations at the preEdecisional stage $ill degrade the 9ualit0 of decisionE a!ing in govern ent agencies. .overn ent officials $ill hesitate to eGpress their real senti ents during deliberations if there is i ediate public disse ination of their discussions, putting the under all !inds of pressure before the0 decide. Be ust first distinguish bet$een infor ation the la$ on public bidding re9uires PEA to disclose publicl0, and infor ation the constitutional right to infor ation re9uires PEA to release to the public. Before the consu ation of the contract, PEA ust, on its o$n and $ithout de and fro an0one, disclose to the public atters relating to the disposition of its propert0. These include the si6e, location, technical description and nature of the propert0 being disposed of, the ter s and conditions of the disposition, the parties 9ualified to bid, the ini u price and si ilar infor ation. PEA ust prepare all these data and disclose the to the public at the start of the disposition process, long before the consu ation of the contract, because the .overn ent Auditing Code re9uires public bidding. #f PEA fails to a!e this disclosure, an0 citi6en can de and fro PEA this infor ation at an0 ti e during the bidding process. #nfor ation, ho$ever, on onEgoing evaluation or revie$ of bids or proposals being underta!en b0 the bidding or revie$ co ittee is not i ediatel0 accessible under the right to infor ation. Bhile the evaluation or revie$ is still onEgoing, there are no <official acts, transactions, or decisions< on the bids or proposals. 5o$ever, once the co ittee a!es its official reco endation, there arises a <definite proposition< on the part of the govern ent. =ro this o ent, the publicCs right to infor ation attaches, and an0 citi6en can access all the nonEproprietar0 infor ation leading to such definite proposition. #n Chave6 v. PC..,33 the Court ruled as follo$s% <Considering the intent of the fra ers of the Constitution, $e believe that it is incu bent upon the PC.. and its officers, as $ell as other govern ent representatives, to disclose sufficient public infor ation on an0 proposed settle ent the0 have decided to ta!e up $ith the ostensible o$ners and holders of illEgotten $ealth. Such infor ation, though, ust pertain to definite propositions of the govern ent, not necessaril0 to intraEagenc0 or interEagenc0 reco endations or co unications during the stage $hen co on assertions are still in the process of being for ulated or are in the <eGplorator0< stage. There is need, of course, to observe the sa e restrictions on disclosure of infor ation in general, as discussed earlier T such as on atters involving national securit0, diplo atic or foreign relations, intelligence and other classified infor ation.< 1E phasis supplied2 Contrar0 to AMAR#Cs contention, the co issioners of the &*+, Constitutional Co ission understood that the right to infor ation <conte plates inclusion of negotiations leading to the consu ation of the transaction.< Certainl0, a consu ated contract is not a re9uire ent for the eGercise of the right to infor ation. 'ther$ise, the people can never eGercise the right if no contract is consu ated, and if one is consu ated, it a0 be too late for the public to eGpose its defects.&Y$phi&.nZt Re9uiring a consu ated contract $ill !eep the public in the dar! until the contract, $hich a0 be grossl0 disadvantageous to the govern ent or even illegal, beco es a fait acco pli. This negates the State polic0 of full transparenc0 on atters of public concern, a situation $hich the fra ers of the Constitution could not have intended. Such a re9uire ent $ill prevent the citi6enr0 fro participating in the public discussion of an0 proposed contract, effectivel0 truncating a basic right enshrined in the Bill of Rights. Be can allo$ neither an e asculation of a constitutional right, nor a retreat b0 the State of its avo$ed <polic0 of full disclosure of all its transactions involving public interest.< The right covers three categories of infor ation $hich are < atters of public concern,< na el0% 1&2 official recordsI 1(2 docu ents and papers pertaining to official acts, transactions and decisionsI and 132 govern ent research data used in for ulating policies. The first categor0 refers to an0 docu ent that is part of the public records in the custod0 of govern ent agencies or officials. The second categor0 refers to docu ents and papers recording, evidencing, establishing, confir ing, supporting, Fustif0ing or eGplaining official acts, transactions or decisions of govern ent agencies or officials. The third categor0 refers to research data, $hether ra$, collated or processed, o$ned b0 the govern ent and used in for ulating govern ent policies. The infor ation that petitioner a0 access on the renegotiation of the ;?A includes evaluation reports, reco endations, legal and eGpert opinions, inutes of eetings, ter s of reference and other docu ents attached to such reports or inutes, all relating to the ;?A. 5o$ever, the right to infor ation does not co pel PEA to prepare lists, abstracts, su aries and the li!e relating to the renegotiation of the ;?A.3) The right onl0 affords access to records, docu ents and papers, $hich eans the opportunit0 to inspect and cop0 the . 'ne $ho eGercises the right ust cop0 the records, docu ents and papers at his eGpense. The eGercise of the right is also subFect to reasonable regulations to protect the integrit0 of the public records and to ini i6e disruption to govern ent operations, li!e rules specif0ing $hen and ho$ to conduct the inspection and cop0ing.3: The right to infor ation, ho$ever, does not eGtend to atters recogni6ed as privileged infor ation under the separation of po$ers.3, The right does not also appl0 to infor ation on ilitar0 and diplo atic secrets, infor ation affecting national

securit0, and infor ation on investigations of cri es b0 la$ enforce ent agencies before the prosecution of the accused, $hich courts have long recogni6ed as confidential.3/ The right a0 also be subFect to other li itations that Congress a0 i pose b0 la$. There is no clai b0 PEA that the infor ation de anded b0 petitioner is privileged infor ation rooted in the separation of po$ers. The infor ation does not cover Presidential conversations, correspondences, or discussions during closedEdoor Cabinet eetings $hich, li!e internal deliberations of the Supre e Court and other collegiate courts, or eGecutive sessions of either house of Congress,3+ are recogni6ed as confidential. This !ind of infor ation cannot be pried open b0 a coEe9ual branch of govern ent. A fran! eGchange of eGplorator0 ideas and assess ents, free fro the glare of publicit0 and pressure b0 interested parties, is essential to protect the independence of decisionE a!ing of those tas!ed to eGercise Presidential, -egislative and ;udicial po$er.3* This is not the situation in the instant case. Be rule, therefore, that the constitutional right to infor ation includes official infor ation on onEgoing negotiations before a final contract. The infor ation, ho$ever, ust constitute definite propositions b0 the govern ent and should not cover recogni6ed eGceptions li!e privileged infor ation, ilitar0 and diplo atic secrets and si ilar atters affecting national securit0 and public order.)D Congress has also prescribed other li itations on the right to infor ation in several legislations.)& SiGth issue% $hether stipulations in the A ended ;?A for the transfer to AMAR# of lands, reclai ed or to be reclai ed, violate the Constitution. The Regalian 4octrine The o$nership of lands reclai ed fro foreshore and sub erged areas is rooted in the Regalian doctrine $hich holds that the State o$ns all lands and $aters of the public do ain. >pon the Spanish con9uest of the Philippines, o$nership of all <lands, territories and possessions< in the Philippines passed to the Spanish Cro$n.)( The @ing, as the sovereign ruler and representative of the people, ac9uired and o$ned all lands and territories in the Philippines eGcept those he disposed of b0 grant or sale to private individuals. The &*3:, &*/3 and &*+/ Constitutions adopted the Regalian doctrine substituting, ho$ever, the State, in lieu of the @ing, as the o$ner of all lands and $aters of the public do ain. The Regalian doctrine is the foundation of the ti eEhonored principle of land o$nership that <all lands that $ere not ac9uired fro the .overn ent, either b0 purchase or b0 grant, belong to the public do ain.<)3 Article 33* of the Civil Code of &++*, $hich is no$ Article )(D of the Civil Code of &*:D, incorporated the Regalian doctrine. '$nership and 4isposition of Reclai ed -ands The Spanish -a$ of Baters of &+,, $as the first statutor0 la$ governing the o$nership and disposition of reclai ed lands in the Philippines. 'n Ma0 &+, &*D/, the Philippine Co ission enacted Act No. &,:) $hich provided for the lease, but not the sale, of reclai ed lands of the govern ent to corporations and individuals. -ater, on Nove ber (*, &*&*, the Philippine -egislature approved Act No. (+/), the Public -and Act, $hich authori6ed the lease, but not the sale, of reclai ed lands of the govern ent to corporations and individuals. 'n Nove ber /, &*3,, the National Asse bl0 passed Co on$ealth Act No. &)&, also !no$n as the Public -and Act, $hich authori6ed the lease, but not the sale, of reclai ed lands of the govern ent to corporations and individuals. CA No. &)& continues to this da0 as the general la$ governing the classification and disposition of lands of the public do ain. The Spanish -a$ of Baters of &+,, and the Civil Code of &++* >nder the Spanish -a$ of Baters of &+,,, the shores, ba0s, coves, inlets and all $aters $ithin the ariti e 6one of the Spanish territor0 belonged to the public do ain for public use.)) The Spanish -a$ of Baters of &+,, allo$ed the recla ation of the sea under Article :, $hich provided as follo$s% <Article :. -ands reclai ed fro the sea in conse9uence of $or!s constructed b0 the State, or b0 the provinces, pueblos or private persons, $ith proper per ission, shall beco e the propert0 of the part0 constructing such $or!s, unless other$ise provided b0 the ter s of the grant of authorit0.< >nder the Spanish -a$ of Baters, land reclai ed fro the sea belonged to the part0 underta!ing the recla ation, provided the govern ent issued the necessar0 per it and did not reserve o$nership of the reclai ed land to the State. Article 33* of the Civil Code of &++* defined propert0 of public do inion as follo$s% <Art. 33*. Propert0 of public do inion is T

&. That devoted to public use, such as roads, canals, rivers, torrents, ports and bridges constructed b0 the State, riverban!s, shores, roadsteads, and that of a si ilar characterI (. That belonging eGclusivel0 to the State $hich, $ithout being of general public use, is e plo0ed in so e public service, or in the develop ent of the national $ealth, such as $alls, fortresses, and other $or!s for the defense of the territor0, and ines, until granted to private individuals.< Propert0 devoted to public use referred to propert0 open for use b0 the public. #n contrast, propert0 devoted to public service referred to propert0 used for so e specific public service and open onl0 to those authori6ed to use the propert0. Propert0 of public do inion referred not onl0 to propert0 devoted to public use, but also to propert0 not so used but e plo0ed to develop the national $ealth. This class of propert0 constituted propert0 of public do inion although e plo0ed for so e econo ic or co ercial activit0 to increase the national $ealth. Article 3)& of the Civil Code of &++* governed the reEclassification of propert0 of public do inion into private propert0, to $it% <Art. 3)&. Propert0 of public do inion, $hen no longer devoted to public use or to the defense of the territor0, shall beco e a part of the private propert0 of the State.< This provision, ho$ever, $as not selfEeGecuting. The legislature, or the eGecutive depart ent pursuant to la$, ust declare the propert0 no longer needed for public use or territorial defense before the govern ent could lease or alienate the propert0 to private parties.): Act No. &,:) of the Philippine Co ission

'n Ma0 +, &*D/, the Philippine Co ission enacted Act No. &,:) $hich regulated the lease of reclai ed and foreshore lands. The salient provisions of this la$ $ere as follo$s% <Section &. The control and disposition of the foreshore as defined in eGisting la$, and the title to all .overn ent or public lands ade or reclai ed b0 the .overn ent b0 dredging or filling or other$ise throughout the Philippine #slands, shall be retained b0 the .overn ent $ithout preFudice to vested rights and $ithout preFudice to rights conceded to the Cit0 of Manila in the -uneta EGtension. Section (. 1a2 The Secretar0 of the #nterior shall cause all .overn ent or public lands ade or reclai ed b0 the .overn ent b0 dredging or filling or other$ise to be divided into lots or bloc!s, $ith the necessar0 streets and alle0$a0s located thereon, and shall cause plats and plans of such surve0s to be prepared and filed $ith the Bureau of -ands. 1b2 >pon co pletion of such plats and plans the .overnorE.eneral shall give notice to the public that such parts of the lands so ade or reclai ed as are not needed for public purposes $ill be leased for co ercial and business purposes, G G G. GGG 1e2 The leases above provided for shall be disposed of to the highest and best bidder therefore, subFect to such regulations and safeguards as the .overnorE.eneral a0 b0 eGecutive order prescribe.< 1E phasis supplied2 Act No. &,:) andated that the govern ent should retain title to all lands reclai ed b0 the govern ent. The Act also vested in the govern ent control and disposition of foreshore lands. Private parties could lease lands reclai ed b0 the govern ent onl0 if these lands $ere no longer needed for public purpose. Act No. &,:) andated public bidding in the lease of govern ent reclai ed lands. Act No. &,:) ade govern ent reclai ed lands sui generis in that unli!e other public lands $hich the govern ent could sell to private parties, these reclai ed lands $ere available onl0 for lease to private parties. Act No. &,:), ho$ever, did not repeal Section : of the Spanish -a$ of Baters of &+,,. Act No. &,:) did not prohibit private parties fro reclai ing parts of the sea under Section : of the Spanish -a$ of Baters. -ands reclai ed fro the sea b0 private parties $ith govern ent per ission re ained private lands. Act No. (+/) of the Philippine -egislature

'n Nove ber (*, &*&*, the Philippine -egislature enacted Act No. (+/), the Public -and Act.), The salient provisions of Act No. (+/), on reclai ed lands, $ere as follo$s% <Sec. ,. The .overnorE.eneral, upon the reco endation of the Secretar0 of Agriculture and Natural Resources, shall fro ti e to ti e classif0 the lands of the public do ain into T 1a2 Alienable or disposable, 1b2 Ti ber, and 1c2 Mineral lands, G G G. Sec. /. =or the purposes of the govern ent and disposition of alienable or disposable public lands, the .overnorE.eneral, upon reco endation b0 the Secretar0 of Agriculture and Natural Resources, shall fro ti e to ti e declare $hat lands are open to disposition or concession under this Act.< Sec. +. 'nl0 those lands shall be declared open to disposition or concession $hich have been officiall0 deli ited or classified G G G. GGG Sec. ::. An0 tract of land of the public do ain $hich, being neither ti ber nor ineral land, shall be classified as suitable for residential purposes or for co ercial, industrial, or other productive purposes other than agricultural purposes, and shall be open to disposition or concession, shall be disposed of under the provisions of this chapter, and not other$ise. Sec. :,. The lands disposable under this title shall be classified as follo$s% 1a2 -ands reclai ed b0 the .overn ent b0 dredging, filling, or other 1b2 =oreshoreI 1c2 Marsh0 lands or lands covered $ith $ater bordering upon the shores or ban!s of navigable la!es or riversI 1d2 -ands not included in an0 of the foregoing classes. G G G. Sec. :+. The lands co prised in classes 1a2, 1b2, and 1c2 of section fift0EsiG shall be disposed of to private parties b0 lease onl0 and not other$ise, as soon as the .overnorE.eneral, upon reco endation b0 the Secretar0 of Agriculture and Natural Resources, shall declare that the sa e are not necessar0 for the public service and are open to disposition under this chapter. The lands included in class 1d2 a0 be disposed of b0 sale or lease under the provisions of this Act.< 1E phasis supplied2 Section , of Act No. (+/) authori6ed the .overnorE.eneral to <classif0 lands of the public do ain into G G G alienable or disposable<)/ lands. Section / of the Act e po$ered the .overnorE.eneral to <declare $hat lands are open to disposition or concession.< Section + of the Act li ited alienable or disposable lands onl0 to those lands $hich have been <officiall0 deli ited and classified.< Section :, of Act No. (+/) stated that lands <disposable under this title)+ shall be classified< as govern ent reclai ed, foreshore and arsh0 lands, as $ell as other lands. All these lands, ho$ever, ust be suitable for residential, co ercial, industrial or other productive nonEagricultural purposes. These provisions vested upon the .overnorE.eneral the po$er to classif0 inalienable lands of the public do ain into disposable lands of the public do ain. These provisions also e po$ered the .overnorE.eneral to classif0 further such disposable lands of the public do ain into govern ent reclai ed, foreshore or arsh0 lands of the public do ain, as $ell as other nonEagricultural lands. Section :+ of Act No. (+/) categoricall0 andated that disposable lands of the public do ain classified as govern ent reclai ed, foreshore and arsh0 lands <shall be disposed of to private parties b0 lease onl0 and not other$ise.< The .overnorE.eneral, before allo$ing the lease of these lands to private parties, ust for all0 declare that the lands $ere <not necessar0 for the public service.< Act No. (+/) reiterated the State polic0 to lease and not to sell govern ent reclai ed, foreshore and arsh0 lands of the public do ain, a polic0 first enunciated in &*D/ in Act No. &,:). .overn ent reclai ed, foreshore and arsh0 lands re ained sui generis, as the onl0 alienable or disposable lands of the public do ain that the govern ent could not sell to private parties. eansI

The rationale behind this State polic0 is obvious. .overn ent reclai ed, foreshore and arsh0 public lands for nonE agricultural purposes retain their inherent potential as areas for public service. This is the reason the govern ent prohibited the sale, and onl0 allo$ed the lease, of these lands to private parties. The State al$a0s reserved these lands for so e future public service. Act No. (+/) did not authori6e the reclassification of govern ent reclai ed, foreshore and arsh0 lands into other nonE agricultural lands under Section :, 1d2. -ands falling under Section :, 1d2 $ere the onl0 lands for nonEagricultural purposes the govern ent could sell to private parties. Thus, under Act No. (+/), the govern ent could not sell govern ent reclai ed, foreshore and arsh0 lands to private parties, unless the legislature passed a la$ allo$ing their sale.)* Act No. (+/) did not prohibit private parties fro reclai ing parts of the sea pursuant to Section : of the Spanish -a$ of Baters of &+,,. -ands reclai ed fro the sea b0 private parties $ith govern ent per ission re ained private lands. 4ispositions under the &*3: Constitution 'n Ma0 &), &*3:, the &*3: Constitution too! effect upon its ratification b0 the =ilipino people. The &*3: Constitution, in adopting the Regalian doctrine, declared in Section &, Article "###, that T <Section &. All agricultural, ti ber, and ineral lands of the public do ain, $aters, inerals, coal, petroleu , and other ineral oils, all forces of potential energ0 and other natural resources of the Philippines belong to the State, and their disposition, eGploitation, develop ent, or utili6ation shall be li ited to citi6ens of the Philippines or to corporations or associations at least siGt0 per centu of the capital of $hich is o$ned b0 such citi6ens, subFect to an0 eGisting right, grant, lease, or concession at the ti e of the inauguration of the .overn ent established under this Constitution. Natural resources, $ith the eGception of public agricultural land, shall not be alienated, and no license, concession, or lease for the eGploitation, develop ent, or utili6ation of an0 of the natural resources shall be granted for a period eGceeding t$ent0E five 0ears, rene$able for another t$ent0Efive 0ears, eGcept as to $ater rights for irrigation, $ater suppl0, fisheries, or industrial uses other than the develop ent of $ater po$er, in $hich cases beneficial use a0 be the easure and li it of the grant.< 1E phasis supplied2 The &*3: Constitution barred the alienation of all natural resources eGcept public agricultural lands, $hich $ere the onl0 natural resources the State could alienate. Thus, foreshore lands, considered part of the StateCs natural resources, beca e inalienable b0 constitutional fiat, available onl0 for lease for (: 0ears, rene$able for another (: 0ears. The govern ent could alienate foreshore lands onl0 after these lands $ere reclai ed and classified as alienable agricultural lands of the public do ain. .overn ent reclai ed and arsh0 lands of the public do ain, being neither ti ber nor ineral lands, fell under the classification of public agricultural lands.:D 5o$ever, govern ent reclai ed and arsh0 lands, although subFect to classification as disposable public agricultural lands, could onl0 be leased and not sold to private parties because of Act No. (+/). The prohibition on private parties fro ac9uiring o$nership of govern ent reclai ed and arsh0 lands of the public do ain $as onl0 a statutor0 prohibition and the legislature could therefore re ove such prohibition. The &*3: Constitution did not prohibit individuals and corporations fro ac9uiring govern ent reclai ed and arsh0 lands of the public do ain that $ere classified as agricultural lands under eGisting public land la$s. Section (, Article "### of the &*3: Constitution provided as follo$s% <Section (. No private corporation or association a0 ac9uire, lease, or hold public agricultural lands in eGcess of one thousand and t$ent0 four hectares, nor a0 an0 individual ac9uire such lands b0 purchase in eGcess of one hundred and fort0 hectares, or b0 lease in eGcess of one thousand and t$ent0Efour hectares, or b0 ho estead in eGcess of t$ent0Efour hectares. -ands adapted to gra6ing, not eGceeding t$o thousand hectares, a0 be leased to an individual, private corporation, or association.< 1E phasis supplied2 Still, after the effectivit0 of the &*3: Constitution, the legislature did not repeal Section :+ of Act No. (+/) to open for sale to private parties govern ent reclai ed and arsh0 lands of the public do ain. 'n the contrar0, the legislature continued the long established State polic0 of retaining for the govern ent title and o$nership of govern ent reclai ed and arsh0 lands of the public do ain. Co on$ealth Act No. &)& of the Philippine National Asse bl0

'n Nove ber /, &*3,, the National Asse bl0 approved Co on$ealth Act No. &)&, also !no$n as the Public -and Act, $hich co piled the then eGisting la$s on lands of the public do ain. CA No. &)&, as a ended, re ains to this da0 the

eGisting general la$ governing the classification and disposition of lands of the public do ain other than ti ber and ineral lands.:& Section , of CA No. &)& e po$ers the President to classif0 lands of the public do ain into <alienable or disposable<:( lands of the public do ain, $hich prior to such classification are inalienable and outside the co erce of an. Section / of CA No. &)& authori6es the President to <declare $hat lands are open to disposition or concession.< Section + of CA No. &)& states that the govern ent can declare open for disposition or concession onl0 lands that are <officiall0 deli ited and classified.< Sections ,, / and + of CA No. &)& read as follo$s% <Sec. ,. The President, upon the reco endation of the Secretar0 of Agriculture and Co classif0 the lands of the public do ain into T 1a2 Alienable or disposable, 1b2 Ti ber, and 1c2 Mineral lands, and a0 at an0 ti e and in li!e ad inistration and disposition. anner transfer such lands fro one class to another,:3 for the purpose of their erce, shall fro ti e to ti e

Sec. /. =or the purposes of the ad inistration and disposition of alienable or disposable public lands, the President, upon reco endation b0 the Secretar0 of Agriculture and Co erce, shall fro ti e to ti e declare $hat lands are open to disposition or concession under this Act. Sec. +. 'nl0 those lands shall be declared open to disposition or concession $hich have been officiall0 deli ited and classified and, $hen practicable, surve0ed, and $hich have not been reserved for public or 9uasiEpublic uses, nor appropriated b0 the .overn ent, nor in an0 anner beco e private propert0, nor those on $hich a private right authori6ed and recogni6ed b0 this Act or an0 other valid la$ a0 be clai ed, or $hich, having been reserved or appropriated, have ceased to be so. G G G.< Thus, before the govern ent could alienate or dispose of lands of the public do ain, the President ust first officiall0 classif0 these lands as alienable or disposable, and then declare the open to disposition or concession. There ust be no la$ reserving these lands for public or 9uasiEpublic uses. The salient provisions of CA No. &)&, on govern ent reclai ed, foreshore and follo$s% arsh0 lands of the public do ain, are as

<Sec. :+. An0 tract of land of the public do ain $hich, being neither ti ber nor ineral land, is intended to be used for residential purposes or for co ercial, industrial, or other productive purposes other than agricultural, and is open to disposition or concession, shall be disposed of under the provisions of this chapter and not other$ise. Sec. :*. The lands disposable under this title shall be classified as follo$s% 1a2 -ands reclai ed b0 the .overn ent b0 dredging, filling, or other 1b2 =oreshoreI 1c2 Marsh0 lands or lands covered $ith $ater bordering upon the shores or ban!s of navigable la!es or riversI 1d2 -ands not included in an0 of the foregoing classes. Sec. ,D. An0 tract of land co prised under this title a0 be leased or sold, as the case a0 be, to an0 person, corporation, or association authori6ed to purchase or lease public lands for agricultural purposes. G G G. Sec. ,&. The lands co prised in classes 1a2, 1b2, and 1c2 of section fift0Enine shall be disposed of to private parties b0 lease onl0 and not other$ise, as soon as the President, upon reco endation b0 the Secretar0 of Agriculture, shall declare that the sa e are not necessar0 for the public service and are open to disposition under this chapter. The lands included in class 1d2 a0 be disposed of b0 sale or lease under the provisions of this Act.< 1E phasis supplied2 Section ,& of CA No. &)& readopted, after the effectivit0 of the &*3: Constitution, Section :+ of Act No. (+/) prohibiting the sale of govern ent reclai ed, foreshore and arsh0 disposable lands of the public do ain. All these lands are eansI

intended for residential, co ercial, industrial or other nonEagricultural purposes. As before, Section ,& allo$ed onl0 the lease of such lands to private parties. The govern ent could sell to private parties onl0 lands falling under Section :* 1d2 of CA No. &)&, or those lands for nonEagricultural purposes not classified as govern ent reclai ed, foreshore and arsh0 disposable lands of the public do ain. =oreshore lands, ho$ever, beca e inalienable under the &*3: Constitution $hich onl0 allo$ed the lease of these lands to 9ualified private parties. Section :+ of CA No. &)& eGpressl0 states that disposable lands of the public do ain intended for residential, co ercial, industrial or other productive purposes other than agricultural <shall be disposed of under the provisions of this chapter and not other$ise.< >nder Section &D of CA No. &)&, the ter <disposition< includes lease of the land. An0 disposition of govern ent reclai ed, foreshore and arsh0 disposable lands for nonEagricultural purposes ust co pl0 $ith Chapter #", Title ### of CA No. &)&,:) unless a subse9uent la$ a ended or repealed these provisions. #n his concurring opinion in the land ar! case of Republic Real Estate Corporation v. Court of Appeals,:: ;ustice Re0nato S. Puno su ari6ed succinctl0 the la$ on this atter, as follo$s% <=oreshore lands are lands of public do inion intended for public use. So too are lands reclai ed b0 the govern ent b0 dredging, filling, or other eans. Act &,:) andated that the control and disposition of the foreshore and lands under $ater re ained in the national govern ent. Said la$ allo$ed onl0 the CleasingC of reclai ed land. The Public -and Acts of &*&* and &*3, also declared that the foreshore and lands reclai ed b0 the govern ent $ere to be <disposed of to private parties b0 lease onl0 and not other$ise.< Before leasing, ho$ever, the .overnorE.eneral, upon reco endation of the Secretar0 of Agriculture and Natural Resources, had first to deter ine that the land reclai ed $as not necessar0 for the public service. This re9uisite ust have been et before the land could be disposed of. But even then, the foreshore and lands under $ater $ere not to be alienated and sold to private parties. The disposition of the reclai ed land $as onl0 b0 lease. The land re ained propert0 of the State.< 1E phasis supplied2 As observed b0 ;ustice Puno in his concurring opinion, <Co on$ealth Act No. &)& has re ained in effect at present.<

The State polic0 prohibiting the sale to private parties of govern ent reclai ed, foreshore and arsh0 alienable lands of the public do ain, first i ple ented in &*D/ $as thus reaffir ed in CA No. &)& after the &*3: Constitution too! effect. The prohibition on the sale of foreshore lands, ho$ever, beca e a constitutional edict under the &*3: Constitution. =oreshore lands beca e inalienable as natural resources of the State, unless reclai ed b0 the govern ent and classified as agricultural lands of the public do ain, in $hich case the0 $ould fall under the classification of govern ent reclai ed lands. After the effectivit0 of the &*3: Constitution, govern ent reclai ed and arsh0 disposable lands of the public do ain continued to be onl0 leased and not sold to private parties.:, These lands re ained sui generis, as the onl0 alienable or disposable lands of the public do ain the govern ent could not sell to private parties. Since then and until no$, the onl0 $a0 the govern ent can sell to private parties govern ent reclai ed and arsh0 disposable lands of the public do ain is for the legislature to pass a la$ authori6ing such sale. CA No. &)& does not authori6e the President to reclassif0 govern ent reclai ed and arsh0 lands into other nonEagricultural lands under Section :* 1d2. -ands classified under Section :* 1d2 are the onl0 alienable or disposable lands for nonEagricultural purposes that the govern ent could sell to private parties. Moreover, Section ,D of CA No. &)& eGpressl0 re9uires congressional authorit0 before lands under Section :* that the govern ent previousl0 transferred to govern ent units or entities could be sold to private parties. Section ,D of CA No. &)& declares that T <Sec. ,D. G G G The area so leased or sold shall be such as shall, in the Fudg ent of the Secretar0 of Agriculture and Natural Resources, be reasonabl0 necessar0 for the purposes for $hich such sale or lease is re9uested, and shall not eGceed one hundred and fort0Efour hectares% Provided, ho$ever, That this li itation shall not appl0 to grants, donations, or transfers ade to a province, unicipalit0 or branch or subdivision of the .overn ent for the purposes dee ed b0 said entities conducive to the public interestI but the land so granted, donated, or transferred to a province, unicipalit0 or branch or subdivision of the .overn ent shall not be alienated, encu bered, or other$ise disposed of in a anner affecting its title, eGcept $hen authori6ed b0 Congress% G G G.< 1E phasis supplied2 The congressional authorit0 re9uired in Section ,D of CA No. &)& Act No. (+/). irrors the legislative authorit0 re9uired in Section :, of

'ne reason for the congressional authorit0 is that Section ,D of CA No. &)& eGe pted govern ent units and entities fro the aGi u area of public lands that could be ac9uired fro the State. These govern ent units and entities should not Fust turn around and sell these lands to private parties in violation of constitutional or statutor0 li itations. 'ther$ise, the

transfer of lands for nonEagricultural purposes to govern ent units and entities could be used to circu vent constitutional li itations on o$nership of alienable or disposable lands of the public do ain. #n the sa e anner, such transfers could also be used to evade the statutor0 prohibition in CA No. &)& on the sale of govern ent reclai ed and arsh0 lands of the public do ain to private parties. Section ,D of CA No. &)& constitutes b0 operation of la$ a lien on these lands.:/ #n case of sale or lease of disposable lands of the public do ain falling under Section :* of CA No. &)&, Sections ,3 and ,/ re9uire a public bidding. Sections ,3 and ,/ of CA No. &)& provide as follo$s% <Sec. ,3. Bhenever it is decided that lands covered b0 this chapter are not needed for public purposes, the 4irector of -ands shall as! the Secretar0 of Agriculture and Co erce 1no$ the Secretar0 of Natural Resources2 for authorit0 to dispose of the sa e. >pon receipt of such authorit0, the 4irector of -ands shall give notice b0 public advertise ent in the sa e anner as in the case of leases or sales of agricultural public land, G G G. Sec. ,/. The lease or sale shall be 1E phasis supplied2 ade b0 oral biddingI and adFudication shall be ade to the highest bidder. G G G.<

Thus, CA No. &)& andates the .overn ent to put to public auction all leases or sales of alienable or disposable lands of the public do ain.:+ -i!e Act No. &,:) and Act No. (+/) before it, CA No. &)& did not repeal Section : of the Spanish -a$ of Baters of &+,,. Private parties could still reclai portions of the sea $ith govern ent per ission. 5o$ever, the reclai ed land could beco e private land onl0 if classified as alienable agricultural land of the public do ain open to disposition under CA No. &)&. The &*3: Constitution prohibited the alienation of all natural resources eGcept public agricultural lands. The Civil Code of &*:D The Civil Code of &*:D readopted substantiall0 the definition of propert0 of public do inion found in the Civil Code of &++*. Articles )(D and )(( of the Civil Code of &*:D state that T <Art. )(D. The follo$ing things are propert0 of public do inion% 1&2 Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed b0 the State, ban!s, shores, roadsteads, and others of si ilar characterI 1(2 Those $hich belong to the State, $ithout being for public use, and are intended for so e public service or for the develop ent of the national $ealth. G G G. Art. )((. Propert0 of public do inion, $hen no longer intended for public use or for public service, shall for patri onial propert0 of the State.< part of the

Again, the govern ent ust for all0 declare that the propert0 of public do inion is no longer needed for public use or public service, before the sa e could be classified as patri onial propert0 of the State.:* #n the case of govern ent reclai ed and arsh0 lands of the public do ain, the declaration of their being disposable, as $ell as the anner of their disposition, is governed b0 the applicable provisions of CA No. &)&. -i!e the Civil Code of &++*, the Civil Code of &*:D included as propert0 of public do inion those properties of the State $hich, $ithout being for public use, are intended for public service or the <develop ent of the national $ealth.< Thus, govern ent reclai ed and arsh0 lands of the State, even if not e plo0ed for public use or public service, if developed to enhance the national $ealth, are classified as propert0 of public do inion. 4ispositions under the &*/3 Constitution The &*/3 Constitution, $hich too! effect on ;anuar0 &/, &*/3, li!e$ise adopted the Regalian doctrine. Section +, Article "#? of the &*/3 Constitution stated that T <Sec. +. All lands of the public do ain, $aters, inerals, coal, petroleu and other ineral oils, all forces of potential energ0, fisheries, $ildlife, and other natural resources of the Philippines belong to the State. Bith the eGception of agricultural, industrial or co ercial, residential, and resettle ent lands of the public do ain, natural resources shall not be alienated, and no license, concession, or lease for the eGploration, develop ent, eGploitation, or utili6ation of an0 of the natural resources shall be granted for a period eGceeding t$ent0Efive 0ears, rene$able for not ore than t$ent0Efive

0ears, eGcept as to $ater rights for irrigation, $ater suppl0, fisheries, or industrial uses other than the develop ent of $ater po$er, in $hich cases, beneficial use a0 be the easure and the li it of the grant.< 1E phasis supplied2 The &*/3 Constitution prohibited the alienation of all natural resources $ith the eGception of <agricultural, industrial or co ercial, residential, and resettle ent lands of the public do ain.< #n contrast, the &*3: Constitution barred the alienation of all natural resources eGcept <public agricultural lands.< 5o$ever, the ter <public agricultural lands< in the &*3: Constitution enco passed industrial, co ercial, residential and resettle ent lands of the public do ain.,D #f the land of public do ain $ere neither ti ber nor ineral land, it $ould fall under the classification of agricultural land of the public do ain. Both the &*3: and &*/3 Constitutions, therefore, prohibited the alienation of all natural resources eGcept agricultural lands of the public do ain. The &*/3 Constitution, ho$ever, li ited the alienation of lands of the public do ain to individuals $ho $ere citi6ens of the Philippines. Private corporations, even if $holl0 o$ned b0 Philippine citi6ens, $ere no longer allo$ed to ac9uire alienable lands of the public do ain unli!e in the &*3: Constitution. Section &&, Article "#? of the &*/3 Constitution declared that T <Sec. &&. The Batasang Pa bansa, ta!ing into account conservation, ecological, and develop ent re9uire ents of the natural resources, shall deter ine b0 la$ the si6e of land of the public do ain $hich a0 be developed, held or ac9uired b0, or leased to, an0 9ualified individual, corporation, or association, and the conditions therefor. No private corporation or association a0 hold alienable lands of the public do ain eGcept b0 lease not to eGceed one thousand hectares in area nor a0 an0 citi6en hold such lands b0 lease in eGcess of five hundred hectares or ac9uire b0 purchase, ho estead or grant, in eGcess of t$ent0Efour hectares. No private corporation or association a0 hold b0 lease, concession, license or per it, ti ber or forest lands and other ti ber or forest resources in eGcess of one hundred thousand hectares. 5o$ever, such area a0 be increased b0 the Batasang Pa bansa upon reco endation of the National Econo ic and 4evelop ent Authorit0.< 1E phasis supplied2 Thus, under the &*/3 Constitution, private corporations could hold alienable lands of the public do ain onl0 through lease. 'nl0 individuals could no$ ac9uire alienable lands of the public do ain, and private corporations beca e absolutel0 barred fro ac9uiring an0 !ind of alienable land of the public do ain. The constitutional ban eGtended to all !inds of alienable lands of the public do ain, $hile the statutor0 ban under CA No. &)& applied onl0 to govern ent reclai ed, foreshore and arsh0 alienable lands of the public do ain. P4 No. &D+) Creating the Public Estates Authorit0 'n =ebruar0 ), &*//, then President =erdinand Marcos issued Presidential 4ecree No. &D+) creating PEA, a $holl0 govern ent o$ned and controlled corporation $ith a special charter. Sections ) and + of P4 No. &D+), vests PEA $ith the follo$ing purposes and po$ers% <Sec. ). Purpose. The Authorit0 is hereb0 created for the follo$ing purposes% 1a2 To reclai landI land, including foreshore and sub erged areas, b0 dredging, filling or other eans, or to ac9uire reclai ed

1b2 To develop, i prove, ac9uire, ad inister, deal in, subdivide, dispose, lease and sell an0 and all !inds of lands, buildings, estates and other for s of real propert0, o$ned, anaged, controlled andMor operated b0 the govern entI 1c2 To provide for, operate or ad inister such service as utili6ation of the above properties. a0 be necessar0 for the efficient, econo ical and beneficial

Sec. :. Po$ers and functions of the Authorit0. The Authorit0 shall, in carr0ing out the purposes for $hich it is created, have the follo$ing po$ers and functions% 1a2To prescribe its b0Ela$s. GGG 1i2 To hold lands of the public do ain in eGcess of the area per itted to private corporations b0 statute. 1F2 To reclai GGG lands and to construct $or! across, or other$ise, an0 strea , $atercourse, canal, ditch, flu e G G G.

1o2 To perfor such acts and eGercise such functions as obFectives herein specified.< 1E phasis supplied2

a0 be necessar0 for the attain ent of the purposes and

P4 No. &D+) authori6es PEA to reclai both foreshore and sub erged areas of the public do ain. =oreshore areas are those covered and uncovered b0 the ebb and flo$ of the tide.,& Sub erged areas are those per anentl0 under $ater regardless of the ebb and flo$ of the tide.,( =oreshore and sub erged areas indisputabl0 belong to the public do ain,3 and are inalienable unless reclai ed, classified as alienable lands open to disposition, and further declared no longer needed for public service. The ban in the &*/3 Constitution on private corporations fro ac9uiring alienable lands of the public do ain did not appl0 to PEA since it $as then, and until toda0, a full0 o$ned govern ent corporation. The constitutional ban applied then, as it still applies no$, onl0 to <private corporations and associations.< P4 No. &D+) eGpressl0 e po$ers PEA <to hold lands of the public do ain< even <in eGcess of the area per itted to private corporations b0 statute.< Thus, PEA can hold title to private lands, as $ell as title to lands of the public do ain. #n order for PEA to sell its reclai ed foreshore and sub erged alienable lands of the public do ain, there ust be legislative authorit0 e po$ering PEA to sell these lands. This legislative authorit0 is necessar0 in vie$ of Section ,D of CA No.&)&, $hich states T <Sec. ,D. G G GI but the land so granted, donated or transferred to a province, unicipalit0, or branch or subdivision of the .overn ent shall not be alienated, encu bered or other$ise disposed of in a anner affecting its title, eGcept $hen authori6ed b0 CongressI G G G.< 1E phasis supplied2 Bithout such legislative authorit0, PEA could not sell but onl0 lease its reclai ed foreshore and sub erged alienable lands of the public do ain. Nevertheless, an0 legislative authorit0 granted to PEA to sell its reclai ed alienable lands of the public do ain $ould be subFect to the constitutional ban on private corporations fro ac9uiring alienable lands of the public do ain. 5ence, such legislative authorit0 could onl0 benefit private individuals. 4ispositions under the &*+/ Constitution The &*+/ Constitution, li!e the &*3: and &*/3 Constitutions before it, has adopted the Regalian doctrine. The &*+/ Constitution declares that all natural resources are <o$ned b0 the State,< and eGcept for alienable agricultural lands of the public do ain, natural resources cannot be alienated. Sections ( and 3, Article "## of the &*+/ Constitution state that T <Section (. All lands of the public do ain, $aters, inerals, coal, petroleu and other ineral oils, all forces of potential energ0, fisheries, forests or ti ber, $ildlife, flora and fauna, and other natural resources are o$ned b0 the State. Bith the eGception of agricultural lands, all other natural resources shall not be alienated. The eGploration, develop ent, and utili6ation of natural resources shall be under the full control and supervision of the State. G G G. Section 3. -ands of the public do ain are classified into agricultural, forest or ti ber, ineral lands, and national par!s. Agricultural lands of the public do ain a0 be further classified b0 la$ according to the uses $hich the0 a0 be devoted. Alienable lands of the public do ain shall be li ited to agricultural lands. Private corporations or associations a0 not hold such alienable lands of the public do ain eGcept b0 lease, for a period not eGceeding t$ent0Efive 0ears, rene$able for not ore than t$ent0Efive 0ears, and not to eGceed one thousand hectares in area. Citi6ens of the Philippines a0 lease not ore than five hundred hectares, or ac9uire not ore than t$elve hectares thereof b0 purchase, ho estead, or grant. Ta!ing into account the re9uire ents of conservation, ecolog0, and develop ent, and subFect to the re9uire ents of agrarian refor , the Congress shall deter ine, b0 la$, the si6e of lands of the public do ain $hich a0 be ac9uired, developed, held, or leased and the conditions therefor.< 1E phasis supplied2 The &*+/ Constitution continues the State polic0 in the &*/3 Constitution banning private corporations fro ac9uiring an0 !ind of alienable land of the public do ain. -i!e the &*/3 Constitution, the &*+/ Constitution allo$s private corporations to hold alienable lands of the public do ain onl0 through lease. As in the &*3: and &*/3 Constitutions, the general la$ governing the lease to private corporations of reclai ed, foreshore and arsh0 alienable lands of the public do ain is still CA No. &)&. The Rationale behind the Constitutional Ban The rationale behind the constitutional ban on corporations fro ac9uiring, eGcept through lease, alienable lands of the public do ain is not $ell understood. 4uring the deliberations of the &*+, Constitutional Co ission, the co issioners probed the rationale behind this ban, thus%

<=R. BERNAS% Mr. ?iceEPresident,

0 9uestions have reference to page 3, line : $hich sa0s% a0 hold alienable lands of the public do ain eGcept b0 lease, not to eGceed one

XNo private corporation or association thousand hectares in area.C

#f $e recall, this provision did not eGist under the &*3: Constitution, but this $as introduced in the &*/3 Constitution. #n effect, it prohibits private corporations fro ac9uiring alienable public lands. But it has not been ver0 clear in Furisprudence $hat the reason for this is. #n so e of the cases decided in &*+( and &*+3, it $as indicated that the purpose of this is to prevent large landholdings. #s that the intent of this provisionH MR. ?#--E.AS% # thin! that is the spirit of the provision. =R. BERNAS% #n eGisting decisions involving the #glesia ni Cristo, there $ere instances $here the #glesia ni Cristo $as not allo$ed to ac9uire a ere 3&3Es9uare eter land $here a chapel stood because the Supre e Court said it $ould be in violation of this.< 1E phasis supplied2 #n A0og v. Cusi,,) the Court eGplained the rationale behind this constitutional ban in this $a0% <#ndeed, one purpose of the constitutional prohibition against purchases of public agricultural lands b0 private corporations is to e9uitabl0 diffuse land o$nership or to encourage Co$nerEcultivatorship and the econo ic fa il0Esi6e far C and to prevent a recurrence of cases li!e the instant case. 5uge landholdings b0 corporations or private persons had spa$ned social unrest.< 5o$ever, if the constitutional intent is to prevent huge landholdings, the Constitution could have si pl0 li ited the si6e of alienable lands of the public do ain that corporations could ac9uire. The Constitution could have follo$ed the li itations on individuals, $ho could ac9uire not ore than () hectares of alienable lands of the public do ain under the &*/3 Constitution, and not ore than &( hectares under the &*+/ Constitution. #f the constitutional intent is to encourage econo ic fa il0Esi6e far s, placing the land in the na e of a corporation $ould be ore effective in preventing the brea!Eup of far lands. #f the far land is registered in the na e of a corporation, upon the death of the o$ner, his heirs $ould inherit shares in the corporation instead of subdivided parcels of the far land. This $ould prevent the continuing brea!Eup of far lands into s aller and s aller plots fro one generation to the neGt. #n actual practice, the constitutional ban strengthens the constitutional li itation on individuals fro ac9uiring ore than the allo$ed area of alienable lands of the public do ain. Bithout the constitutional ban, individuals $ho alread0 ac9uired the aGi u area of alienable lands of the public do ain could easil0 set up corporations to ac9uire ore alienable public lands. An individual could o$n as an0 corporations as his eans $ould allo$ hi . An individual could even hide his o$nership of a corporation b0 putting his no inees as stoc!holders of the corporation. The corporation is a convenient vehicle to circu vent the constitutional li itation on ac9uisition b0 individuals of alienable lands of the public do ain. The constitutional intent, under the &*/3 and &*+/ Constitutions, is to transfer o$nership of onl0 a li ited area of alienable land of the public do ain to a 9ualified individual. This constitutional intent is safeguarded b0 the provision prohibiting corporations fro ac9uiring alienable lands of the public do ain, since the vehicle to circu vent the constitutional intent is re oved. The available alienable public lands are graduall0 decreasing in the face of an everE gro$ing population. The ost effective $a0 to insure faithful adherence to this constitutional intent is to grant or sell alienable lands of the public do ain onl0 to individuals. This, it $ould see , is the practical benefit arising fro the constitutional ban. The A ended ;oint ?enture Agree ent The subFect atter of the A ended ;?A, as stated in its second Bhereas clause, consists of three properties, na el0%

&. <JTKhree partiall0 reclai ed and substantiall0 eroded islands along E ilio Aguinaldo Boulevard in Parana9ue and -as Pinas, Metro Manila, $ith a co bined titled area of &,:/+,))& s9uare etersI< (. <JAKnother area of (,)(&,::* s9uare eters contiguous to the three islandsI< and ore or less to regulari6e the configuration of the

3. <JAKt AMAR#Cs option as approved b0 PEA, an additional 3:D hectares reclai ed area.<,:

PEA confir s that the A ended ;?A involves <the develop ent of the =reedo #slands and further recla ation of about (:D hectares G G G,< plus an option <granted to AMAR# to subse9uentl0 reclai another 3:D hectares G G G.<,, #n short, the A ended ;?A covers a recla ation area of /:D hectares. 'nl0 &:/.+) hectares of the /:DEhectare recla ation proFect have been reclai ed, and the rest of the :*(.&: hectares are still sub erged areas for ing part of Manila Ba0. >nder the A ended ;?A, AMAR# $ill rei burse PEA the su of P&,+*),&(*,(DD.DD for PEACs <actual cost< in partiall0 reclai ing the =reedo #slands. AMAR# $ill also co plete, at its o$n eGpense, the recla ation of the =reedo #slands. AMAR# $ill further shoulder all the recla ation costs of all the other areas, totaling :*(.&: hectares, still to be reclai ed. AMAR# and PEA $ill share, in the proportion of /D percent and 3D percent, respectivel0, the total net usable area $hich is defined in the A ended ;?A as the total reclai ed area less 3D percent ear ar!ed for co on areas. Title to AMAR#Cs share in the net usable area, totaling 3,/.: hectares, $ill be issued in the na e of AMAR#. Section :.( 1c2 of the A ended ;?A provides that T <G G G, PEA shall have the dut0 to eGecute $ithout dela0 the necessar0 deed of transfer or conve0ance of the title pertaining to AMAR#Cs -and share based on the -and Allocation Plan. PEA, $hen re9uested in $riting b0 AMAR#, shall then cause the issuance and deliver0 of the proper certificates of title covering AMAR#Cs -and Share in the na e of AMAR#, G G GI provided, that if ore than sevent0 percent 1/DN2 of the titled area at an0 given ti e pertains to AMAR#, PEA shall deliver to AMAR# onl0 sevent0 percent 1/DN2 of the titles pertaining to AMAR#, until such ti e $hen a corresponding proportionate area of additional land pertaining to PEA has been titled.< 1E phasis supplied2 #ndisputabl0, under the A ended ;?A AMAR# $ill ac9uire and o$n a $ill be titled in its na e. aGi u of 3,/.: hectares of reclai ed land $hich

To i ple ent the A ended ;?A, PEA delegated to the unincorporated PEAEAMAR# Foint venture PEACs statutor0 authorit0, rights and privileges to reclai foreshore and sub erged areas in Manila Ba0. Section 3.(.a of the A ended ;?A states that T <PEA hereb0 contributes to the Foint venture its rights and privileges to perfor Ra$land Recla ation and 5ori6ontal 4evelop ent as $ell as o$n the Recla ation Area, thereb0 granting the ;oint ?enture the full and eGclusive right, authorit0 and privilege to underta!e the ProFect in accordance $ith the Master 4evelop ent Plan.< The A ended ;?A is the product of a renegotiation of the original ;?A dated April (:, &**: and its supple ental agree ent dated August *, &**:. The Threshold #ssue The threshold issue is $hether AMAR#, a private corporation, can ac9uire and o$n under the A ended ;?A 3,/.: hectares of reclai ed foreshore and sub erged areas in Manila Ba0 in vie$ of Sections ( and 3, Article "## of the &*+/ Constitution $hich state that% <Section (. All lands of the public do ain, $aters, inerals, coal, petroleu , and other ineral oils, all forces of potential energ0, fisheries, forests or ti ber, $ildlife, flora and fauna, and other natural resources are o$ned b0 the State. Bith the eGception of agricultural lands, all other natural resources shall not be alienated. G G G. GGG Section 3. G G G Alienable lands of the public do ain shall be li ited to agricultural lands. Private corporations or associations a0 not hold such alienable lands of the public do ain eGcept b0 lease, G G G.<1E phasis supplied2 Classification of Reclai ed =oreshore and Sub erged Areas PEA readil0 concedes that lands reclai ed fro foreshore or sub erged areas of Manila Ba0 are alienable or disposable lands of the public do ain. #n its Me orandu ,,/ PEA ad its that T <>nder the Public -and Act 1CA &)&, as a ended2, reclai ed lands are classified as alienable and disposable lands of the public do ain% CSec. :*. The lands disposable under this title shall be classified as follo$s% 1a2 -ands reclai ed b0 the govern ent b0 dredging, filling, or other eansI

G G G.C< 1E phasis supplied2 -i!e$ise, the -egal Tas! =orce,+ constituted under Presidential Ad inistrative 'rder No. 3,: ad itted in its Report and Reco endation to then President =idel ?. Ra os, <JRKeclai ed lands are classified as alienable and disposable lands of the public do ain.<,* The -egal Tas! =orce concluded that T <4. Conclusion Reclai ed lands are lands of the public do ain. 5o$ever, b0 statutor0 authorit0, the rights of o$nership and disposition over reclai ed lands have been transferred to PEA, b0 virtue of $hich PEA, as o$ner, a0 validl0 conve0 the sa e to an0 9ualified person $ithout violating the Constitution or an0 statute. The constitutional provision prohibiting private corporations fro holding public land, eGcept b0 lease 1Sec. 3, Art. "?##,/D &*+/ Constitution2, does not appl0 to reclai ed lands $hose o$nership has passed on to PEA b0 statutor0 grant.< >nder Section (, Article "## of the &*+/ Constitution, the foreshore and sub erged areas of Manila Ba0 are part of the <lands of the public do ain, $aters G G G and other natural resources< and conse9uentl0 <o$ned b0 the State.< As such, foreshore and sub erged areas <shall not be alienated,< unless the0 are classified as <agricultural lands< of the public do ain. The ere recla ation of these areas b0 PEA does not convert these inalienable natural resources of the State into alienable or disposable lands of the public do ain. There ust be a la$ or presidential procla ation officiall0 classif0ing these reclai ed lands as alienable or disposable and open to disposition or concession. Moreover, these reclai ed lands cannot be classified as alienable or disposable if the la$ has reserved the for so e public or 9uasiE public use./& Section + of CA No. &)& provides that <onl0 those lands shall be declared open to disposition or concession $hich have been officiall0 deli ited and classified.</( The President has the authorit0 to classif0 inalienable lands of the public do ain into alienable or disposable lands of the public do ain, pursuant to Section , of CA No. &)&. #n -aurel vs. .arcia,/3 the EGecutive 4epart ent atte pted to sell the Roppongi propert0 in To!0o, ;apan, $hich $as ac9uired b0 the Philippine .overn ent for use as the Chancer0 of the Philippine E bass0. Although the Chancer0 had transferred to another location thirteen 0ears earlier, the Court still ruled that, under Article )((/) of the Civil Code, a propert0 of public do inion retains such character until for all0 declared other$ise. The Court ruled that T <The fact that the Roppongi site has not been used for a long ti e for actual E bass0 service does not auto aticall0 convert it to patri onial propert0. An0 such conversion happens onl0 if the propert0 is $ithdra$n fro public use 1Cebu 'G0gen and Acet0lene Co. v. Bercilles, ,, SCRA )+& J&*/:K. A propert0 continues to be part of the public do ain, not available for private appropriation or o$nership Cuntil there is a for al declaration on the part of the govern ent to $ithdra$ it fro being suchC 1#gnacio v. 4irector of -ands, &D+ Phil. 33: J&*,DK.< 1E phasis supplied2 P4 No. &D+:, issued on =ebruar0 ), &*//, authori6ed the issuance of special land patents for lands reclai ed b0 PEA fro the foreshore or sub erged areas of Manila Ba0. 'n ;anuar0 &*, &*++ then President Cora6on C. A9uino issued Special Patent No. 3:&/ in the na e of PEA for the &:/.+) hectares co prising the partiall0 reclai ed =reedo #slands. Subse9uentl0, on April *, &*** the Register of 4eeds of the Municipalit0 of Parana9ue issued TCT Nos. /3D*, /3&& and /3&( in the na e of PEA pursuant to Section &D3 of P4 No. &:(* authori6ing the issuance of certificates of title corresponding to land patents. To this da0, these certificates of title are still in the na e of PEA. P4 No. &D+:, coupled $ith President A9uinoCs actual issuance of a special patent covering the =reedo #slands, is e9uivalent to an official procla ation classif0ing the =reedo #slands as alienable or disposable lands of the public do ain. P4 No. &D+: and President A9uinoCs issuance of a land patent also constitute a declaration that the =reedo #slands are no longer needed for public service. The =reedo #slands are thus alienable or disposable lands of the public do ain, open to disposition or concession to 9ualified parties. At the ti e then President A9uino issued Special Patent No. 3:&/, PEA had alread0 reclai ed the =reedo #slands although subse9uentl0 there $ere partial erosions on so e areas. The govern ent had also co pleted the necessar0 surve0s on these islands. Thus, the =reedo #slands $ere no longer part of Manila Ba0 but part of the land ass. Section 3, Article "## of the &*+/ Constitution classifies lands of the public do ain into <agricultural, forest or ti ber, ineral lands, and national par!s.< Being neither ti ber, ineral, nor national par! lands, the reclai ed =reedo #slands necessaril0 fall under the classification of agricultural lands of the public do ain. >nder the &*+/ Constitution, agricultural lands of the public do ain are the onl0 natural resources that the State a0 alienate to 9ualified private parties. All other natural resources, such as the seas or ba0s, are <$aters G G G o$ned b0 the State< for ing part of the public do ain, and are inalienable pursuant to Section (, Article "## of the &*+/ Constitution.

AMAR# clai s that the =reedo #slands are private lands because C4CP, then a private corporation, reclai ed the islands under a contract dated Nove ber (D, &*/3 $ith the Co issioner of Public 5igh$a0s. AMAR#, citing Article : of the Spanish -a$ of Baters of &+,,, argues that <if the o$nership of reclai ed lands a0 be given to the part0 constructing the $or!s, then it cannot be said that reclai ed lands are lands of the public do ain $hich the State a0 not alienate.</: Article : of the Spanish -a$ of Baters reads as follo$s% <Article :. -ands reclai ed fro the sea in conse9uence of $or!s constructed b0 the State, or b0 the provinces, pueblos or private persons, $ith proper per ission, shall beco e the propert0 of the part0 constructing such $or!s, unless other$ise provided b0 the ter s of the grant of authorit0.< 1E phasis supplied2 >nder Article : of the Spanish -a$ of Baters of &+,,, private parties could reclai fro the sea onl0 $ith <proper per ission< fro the State. Private parties could o$n the reclai ed land onl0 if not <other$ise provided b0 the ter s of the grant of authorit0.< This clearl0 eant that no one could reclai fro the sea $ithout per ission fro the State because the sea is propert0 of public do inion. #t also eant that the State could grant or $ithhold o$nership of the reclai ed land because an0 reclai ed land, li!e the sea fro $hich it e erged, belonged to the State. Thus, a private person reclai ing fro the sea $ithout per ission fro the State could not ac9uire o$nership of the reclai ed land $hich $ould re ain propert0 of public do inion li!e the sea it replaced./, Article : of the Spanish -a$ of Baters of &+,, adopted the ti eEhonored principle of land o$nership that <all lands that $ere not ac9uired fro the govern ent, either b0 purchase or b0 grant, belong to the public do ain.<// Article : of the Spanish -a$ of Baters ust be read together $ith la$s subse9uentl0 enacted on the disposition of public lands. #n particular, CA No. &)& re9uires that lands of the public do ain ust first be classified as alienable or disposable before the govern ent can alienate the . These lands ust not be reserved for public or 9uasiEpublic purposes./+ Moreover, the contract bet$een C4CP and the govern ent $as eGecuted after the effectivit0 of the &*/3 Constitution $hich barred private corporations fro ac9uiring an0 !ind of alienable land of the public do ain. This contract could not have converted the =reedo #slands into private lands of a private corporation. Presidential 4ecree No. 3EA, issued on ;anuar0 &&, &*/3, revo!ed all la$s authori6ing the recla ation of areas under $ater and revested solel0 in the National .overn ent the po$er to reclai lands. Section & of P4 No. 3EA declared that T <The provisions of an0 la$ to the contrar0 not$ithstanding, the recla ation of areas under $ater, $hether foreshore or inland, shall be li ited to the National .overn ent or an0 person authori6ed b0 it under a proper contract. 1E phasis supplied2 G G G.< P4 No. 3EA repealed Section : of the Spanish -a$ of Baters of &+,, because recla ation of areas under $ater could no$ be underta!en onl0 b0 the National .overn ent or b0 a person contracted b0 the National .overn ent. Private parties a0 reclai fro the sea onl0 under a contract $ith the National .overn ent, and no longer b0 grant or per ission as provided in Section : of the Spanish -a$ of Baters of &+,,. EGecutive 'rder No. :(:, issued on =ebruar0 &), &*/*, designated PEA as the National .overn entCs i ple enting ar to underta!e <all recla ation proFects of the govern ent,< $hich <shall be underta!en b0 the PEA or through a proper contract eGecuted b0 it $ith an0 person or entit0.< >nder such contract, a private part0 receives co pensation for recla ation services rendered to PEA. Pa0 ent to the contractor a0 be in cash, or in !ind consisting of portions of the reclai ed land, subFect to the constitutional ban on private corporations fro ac9uiring alienable lands of the public do ain. The reclai ed land can be used as pa0 ent in !ind onl0 if the reclai ed land is first classified as alienable or disposable land open to disposition, and then declared no longer needed for public service. The A ended ;?A covers not onl0 the =reedo #slands, but also an additional :*(.&: hectares $hich are still sub erged and for ing part of Manila Ba0. There is no legislative or Presidential act classif0ing these sub erged areas as alienable or disposable lands of the public do ain open to disposition. These sub erged areas are not covered b0 an0 patent or certificate of title. There can be no dispute that these sub erged areas for part of the public do ain, and in their present state are inalienable and outside the co erce of an. >ntil reclai ed fro the sea, these sub erged areas are, under the Constitution, <$aters G G G o$ned b0 the State,< for ing part of the public do ain and conse9uentl0 inalienable. 'nl0 $hen actuall0 reclai ed fro the sea can these sub erged areas be classified as public agricultural lands, $hich under the Constitution are the onl0 natural resources that the State a0 alienate. 'nce reclai ed and transfor ed into public agricultural lands, the govern ent a0 then officiall0 classif0 these lands as alienable or disposable lands open to disposition. Thereafter, the govern ent a0 declare these lands no longer needed for public service. 'nl0 then can these reclai ed lands be considered alienable or disposable lands of the public do ain and $ithin the co erce of an.

The classification of PEACs reclai ed foreshore and sub erged lands into alienable or disposable lands open to disposition is necessar0 because PEA is tas!ed under its charter to underta!e public services that re9uire the use of lands of the public do ain. >nder Section : of P4 No. &D+), the functions of PEA include the follo$ing% <JTKo o$n or operate railroads, tra $a0s and other !inds of land transportation, G G GI JTKo construct, aintain and operate such s0ste s of sanitar0 se$ers as a0 be necessar0I JTKo construct, aintain and operate such stor drains as a0 be necessar0.< PEA is e po$ered to issue <rules and regulations as a0 be necessar0 for the proper use b0 private parties of an0 or all of the high$a0s, roads, utilities, buildings andMor an0 of its properties and to i pose or collect fees or tolls for their use.< Thus, part of the reclai ed foreshore and sub erged lands held b0 the PEA $ould actuall0 be needed for public use or service since an0 of the functions i posed on PEA b0 its charter constitute essential public services. Moreover, Section & of EGecutive 'rder No. :(: provides that PEA <shall be pri aril0 responsible for integrating, directing, and coordinating all recla ation proFects for and on behalf of the National .overn ent.< The sa e section also states that <JAKll recla ation proFects shall be approved b0 the President upon reco endation of the PEA, and shall be underta!en b0 the PEA or through a proper contract eGecuted b0 it $ith an0 person or entit0I G G G.< Thus, under E' No. :(:, in relation to P4 No. 3EA and P4 No.&D+), PEA beca e the pri ar0 i ple enting agenc0 of the National .overn ent to reclai foreshore and sub erged lands of the public do ain. E' No. :(: recogni6ed PEA as the govern ent entit0 <to underta!e the recla ation of lands and ensure their aGi u utili6ation in pro oting public $elfare and interests.</* Since large portions of these reclai ed lands $ould obviousl0 be needed for public service, there ust be a for al declaration segregating reclai ed lands no longer needed for public service fro those still needed for public service.&Y$phi&.nZt Section 3 of E' No. :(:, b0 declaring that all lands reclai ed b0 PEA <shall belong to or be o$ned b0 the PEA,< could not auto aticall0 operate to classif0 inalienable lands into alienable or disposable lands of the public do ain. 'ther$ise, reclai ed foreshore and sub erged lands of the public do ain $ould auto aticall0 beco e alienable once reclai ed b0 PEA, $hether or not classified as alienable or disposable. The Revised Ad inistrative Code of &*+/, a later la$ than either P4 No. &D+) or E' No. :(:, vests in the 4epart ent of Environ ent and Natural Resources 1<4ENR< for brevit02 the follo$ing po$ers and functions% <Sec. ). Po$ers and =unctions. The 4epart ent shall% 1&2 G G G GGG 1)2 EGercise supervision and control over forest lands, alienable and disposable public lands, ineral resources and, in the process of eGercising such control, i pose appropriate taGes, fees, charges, rentals and an0 such for of lev0 and collect such revenues for the eGploration, develop ent, utili6ation or gathering of such resourcesI GGG 1&)2 Pro ulgate rules, regulations and guidelines on the issuance of licenses, per its, concessions, lease agree ents and such other privileges concerning the develop ent, eGploration and utili6ation of the countr0Cs arine, fresh$ater, and brac!ish $ater and over all a9uatic resources of the countr0 and shall continue to oversee, supervise and police our natural resourcesI cancel or cause to cancel such privileges upon failure, nonEco pliance or violations of an0 regulation, order, and for all other causes $hich are in furtherance of the conservation of natural resources and supportive of the national interestI 1&:2 EGercise eGclusive Furisdiction on the anage ent and disposition of all lands of the public do ain and serve as the sole agenc0 responsible for classification, subEclassification, surve0ing and titling of lands in consultation $ith appropriate agencies.<+D 1E phasis supplied2 As anager, conservator and overseer of the natural resources of the State, 4ENR eGercises <supervision and control over alienable and disposable public lands.< 4ENR also eGercises <eGclusive Furisdiction on the anage ent and disposition of all lands of the public do ain.< Thus, 4ENR decides $hether areas under $ater, li!e foreshore or sub erged areas of Manila Ba0, should be reclai ed or not. This eans that PEA needs authori6ation fro 4ENR before PEA can underta!e recla ation proFects in Manila Ba0, or in an0 part of the countr0. 4ENR also eGercises eGclusive Furisdiction over the disposition of all lands of the public do ain. 5ence, 4ENR decides $hether reclai ed lands of PEA should be classified as alienable under Sections ,+& and /+( of CA No. &)&. 'nce 4ENR decides that the reclai ed lands should be so classified, it then reco ends to the President the issuance of a procla ation classif0ing the lands as alienable or disposable lands of the public do ain open to disposition. Be note that

then 4ENR Secretar0 =ulgencio S. =actoran, ;r. countersigned Special Patent No. 3:&/ in co pliance $ith the Revised Ad inistrative Code and Sections , and / of CA No. &)&. #n short, 4ENR is vested $ith the po$er to authori6e the recla ation of areas under $ater, $hile PEA is vested $ith the po$er to underta!e the ph0sical recla ation of areas under $ater, $hether directl0 or through private contractors. 4ENR is also e po$ered to classif0 lands of the public do ain into alienable or disposable lands subFect to the approval of the President. 'n the other hand, PEA is tas!ed to develop, sell or lease the reclai ed alienable lands of the public do ain. Clearl0, the ere ph0sical act of recla ation b0 PEA of foreshore or sub erged areas does not a!e the reclai ed lands alienable or disposable lands of the public do ain, uch less patri onial lands of PEA. -i!e$ise, the ere transfer b0 the National .overn ent of lands of the public do ain to PEA does not a!e the lands alienable or disposable lands of the public do ain, uch less patri onial lands of PEA. Absent t$o official acts T a classification that these lands are alienable or disposable and open to disposition and a declaration that these lands are not needed for public service, lands reclai ed b0 PEA re ain inalienable lands of the public do ain. 'nl0 such an official classification and for al declaration can convert reclai ed lands into alienable or disposable lands of the public do ain, open to disposition under the Constitution, Title # and Title ###+3 of CA No. &)& and other applicable la$s.+) PEACs Authorit0 to Sell Reclai ed -ands PEA, li!e the -egal Tas! =orce, argues that as alienable or disposable lands of the public do ain, the reclai ed lands shall be disposed of in accordance $ith CA No. &)&, the Public -and Act. PEA, citing Section ,D of CA No. &)&, ad its that reclai ed lands transferred to a branch or subdivision of the govern ent <shall not be alienated, encu bered, or other$ise disposed of in a anner affecting its title, eGcept $hen authori6ed b0 Congress% G G G.<+: 1E phasis b0 PEA2 #n -aurel vs. .arcia,+, the Court cited Section )+ of the Revised Ad inistrative Code of &*+/, $hich states that T <Sec. )+. 'fficial Authori6ed to Conve0 Real Propert0. Bhenever real propert0 of the .overn ent is authori6ed b0 la$ to be conve0ed, the deed of conve0ance shall be eGecuted in behalf of the govern ent b0 the follo$ing% G G G.< Thus, the Court concluded that a la$ is needed to conve0 an0 real propert0 belonging to the .overn ent. The Court declared that E <#t is not for the President to conve0 real propert0 of the govern ent on his or her o$n sole $ill. An0 such conve0ance ust be authori6ed and approved b0 a la$ enacted b0 the Congress. #t re9uires eGecutive and legislative concurrence.< 1E phasis supplied2 PEA contends that P4 No. &D+: and E' No. :(: constitute the legislative authorit0 allo$ing PEA to sell its reclai ed lands. P4 No. &D+:, issued on =ebruar0 ), &*//, provides that T <The land reclai ed in the foreshore and offshore area of Manila Ba0 pursuant to the contract for the recla ation and construction of the ManilaECavite Coastal Road ProFect bet$een the Republic of the Philippines and the Construction and 4evelop ent Corporation of the Philippines dated Nove ber (D, &*/3 andMor an0 other contract or recla ation covering the sa e area is hereb0 transferred, conve0ed and assigned to the o$nership and ad inistration of the Public Estates Authorit0 established pursuant to P4 No. &D+)I Provided, ho$ever, That the rights and interests of the Construction and 4evelop ent Corporation of the Philippines pursuant to the aforesaid contract shall be recogni6ed and respected. 5enceforth, the Public Estates Authorit0 shall eGercise the rights and assu e the obligations of the Republic of the Philippines 14epart ent of Public 5igh$a0s2 arising fro , or incident to, the aforesaid contract bet$een the Republic of the Philippines and the Construction and 4evelop ent Corporation of the Philippines. #n consideration of the foregoing transfer and assign ent, the Public Estates Authorit0 shall issue in favor of the Republic of the Philippines the corresponding shares of stoc! in said entit0 $ith an issued value of said shares of stoc! 1$hich2 shall be dee ed full0 paid and nonEassessable. The Secretar0 of Public 5igh$a0s and the .eneral Manager of the Public Estates Authorit0 shall eGecute such contracts or agree ents, including appropriate agree ents $ith the Construction and 4evelop ent Corporation of the Philippines, as a0 be necessar0 to i ple ent the above. Special land patentMpatents shall be issued b0 the Secretar0 of Natural Resources in favor of the Public Estates Authorit0 $ithout preFudice to the subse9uent transfer to the contractor or his assignees of such portion or portions of the land

reclai ed or to be reclai ed as provided for in the aboveE entioned contract. 'n the basis of such patents, the -and Registration Co ission shall issue the corresponding certificate of title.< 1E phasis supplied2 'n the other hand, Section 3 of E' No. :(:, issued on =ebruar0 &), &*/*, provides that E <Sec. 3. All lands reclai ed b0 PEA shall belong to or be o$ned b0 the PEA $hich shall be responsible for its ad inistration, develop ent, utili6ation or disposition in accordance $ith the provisions of Presidential 4ecree No. &D+). An0 and all inco e that the PEA a0 derive fro the sale, lease or use of reclai ed lands shall be used in accordance $ith the provisions of Presidential 4ecree No. &D+).< There is no eGpress authorit0 under either P4 No. &D+: or E' No. :(: for PEA to sell its reclai ed lands. P4 No. &D+: erel0 transferred <o$nership and ad inistration< of lands reclai ed fro Manila Ba0 to PEA, $hile E' No. :(: declared that lands reclai ed b0 PEA <shall belong to or be o$ned b0 PEA.< E' No. :(: eGpressl0 states that PEA should dispose of its reclai ed lands <in accordance $ith the provisions of Presidential 4ecree No. &D+),< the charter of PEA. PEACs charter, ho$ever, eGpressl0 tas!s PEA <to develop, i prove, ac9uire, ad inister, deal in, subdivide, dispose, lease and sell an0 and all !inds of lands G G G o$ned, anaged, controlled andMor operated b0 the govern ent.<+/ 1E phasis supplied2 There is, therefore, legislative authorit0 granted to PEA to sell its lands, $hether patri onial or alienable lands of the public do ain. PEA a0 sell to private parties its patri onial properties in accordance $ith the PEA charter free fro constitutional li itations. The constitutional ban on private corporations fro ac9uiring alienable lands of the public do ain does not appl0 to the sale of PEACs patri onial lands. PEA a0 also sell its alienable or disposable lands of the public do ain to private individuals since, $ith the legislative authorit0, there is no longer an0 statutor0 prohibition against such sales and the constitutional ban does not appl0 to individuals. PEA, ho$ever, cannot sell an0 of its alienable or disposable lands of the public do ain to private corporations since Section 3, Article "## of the &*+/ Constitution eGpressl0 prohibits such sales. The legislative authorit0 benefits onl0 individuals. Private corporations re ain barred fro ac9uiring an0 !ind of alienable land of the public do ain, including govern ent reclai ed lands. The provision in P4 No. &D+: stating that portions of the reclai ed lands could be transferred b0 PEA to the <contractor or his assignees< 1E phasis supplied2 $ould not appl0 to private corporations but onl0 to individuals because of the constitutional ban. 'ther$ise, the provisions of P4 No. &D+: $ould violate both the &*/3 and &*+/ Constitutions. The re9uire ent of public auction in the sale of reclai ed lands Assu ing the reclai ed lands of PEA are classified as alienable or disposable lands open to disposition, and further declared no longer needed for public service, PEA $ould have to conduct a public bidding in selling or leasing these lands. PEA ust observe the provisions of Sections ,3 and ,/ of CA No. &)& re9uiring public auction, in the absence of a la$ eGe pting PEA fro holding a public auction.++ Special Patent No. 3:&/ eGpressl0 states that the patent is issued b0 authorit0 of the Constitution and P4 No. &D+), <supple ented b0 Co on$ealth Act No. &)&, as a ended.< This is an ac!no$ledg ent that the provisions of CA No. &)& appl0 to the disposition of reclai ed alienable lands of the public do ain unless other$ise provided b0 la$. EGecutive 'rder No. ,:),+* $hich authori6es PEA <to deter ine the !ind and anner of pa0 ent for the transfer< of its assets and properties, does not eGe pt PEA fro the re9uire ent of public auction. E' No. ,:) erel0 authori6es PEA to decide the ode of pa0 ent, $hether in !ind and in install ent, but does not authori6e PEA to dispense $ith public auction. Moreover, under Section /* of P4 No. &)):, other$ise !no$n as the .overn ent Auditing Code, the govern ent is re9uired to sell valuable govern ent propert0 through public bidding. Section /* of P4 No. &)): andates that T <Section /*. Bhen govern ent propert0 has beco e unserviceable for an0 cause, or is no longer needed, it shall, upon application of the officer accountable therefor, be inspected b0 the head of the agenc0 or his dul0 authori6ed representative in the presence of the auditor concerned and, if found to be valueless or unsaleable, it a0 be destro0ed in their presence. #f found to be valuable, it a0 be sold at public auction to the highest bidder under the supervision of the proper co ittee on a$ard or si ilar bod0 in the presence of the auditor concerned or other authori6ed representative of the Co ission, after advertising b0 printed notice in the 'fficial .a6ette, or for not less than three consecutive da0s in an0 ne$spaper of general circulation, or $here the value of the propert0 does not $arrant the eGpense of publication, b0 notices posted for a li!e period in at least three public places in the localit0 $here the propert0 is to be sold. #n the event that the public auction fails, the propert0 a0 be sold at a private sale at such price as a0 be fiGed b0 the sa e co ittee or bod0 concerned and approved b0 the Co ission.< #t is onl0 $hen the public auction fails that a negotiated sale is allo$ed, in $hich case the Co ission on Audit ust approve the selling price.*D The Co ission on Audit i ple ents Section /* of the .overn ent Auditing Code through

Circular No. +*E(*,*& dated ;anuar0 (/, &*+*. This circular e phasi6es that govern ent assets ust be disposed of onl0 through public auction, and a negotiated sale can be resorted to onl0 in case of <failure of public auction.< At the public auction sale, onl0 Philippine citi6ens are 9ualified to bid for PEACs reclai ed foreshore and sub erged alienable lands of the public do ain. Private corporations are barred fro bidding at the auction sale of an0 !ind of alienable land of the public do ain. PEA originall0 scheduled a public bidding for the =reedo #slands on 4ece ber &D, &**&. PEA i posed a condition that the $inning bidder should reclai another (:D hectares of sub erged areas to regulari6e the shape of the =reedo #slands, under a ,DE)D sharing of the additional reclai ed areas in favor of the $inning bidder.*( No one, ho$ever, sub itted a bid. 'n 4ece ber (3, &**), the .overn ent Corporate Counsel advised PEA it could sell the =reedo #slands through negotiation, $ithout need of another public bidding, because of the failure of the public bidding on 4ece ber &D, &**&.*3 5o$ever, the original ;?A dated April (:, &**: covered not onl0 the =reedo #slands and the additional (:D hectares still to be reclai ed, it also granted an option to AMAR# to reclai another 3:D hectares. The original ;?A, a negotiated contract, enlarged the recla ation area to /:D hectares.*) The failure of public bidding on 4ece ber &D, &**&, involving onl0 )D/.+) hectares,*: is not a valid Fustification for a negotiated sale of /:D hectares, al ost double the area publicl0 auctioned. Besides, the failure of public bidding happened on 4ece ber &D, &**&, ore than three 0ears before the signing of the original ;?A on April (:, &**:. The econo ic situation in the countr0 had greatl0 i proved during the intervening period. Recla ation under the B'T -a$ and the -ocal .overn ent Code The constitutional prohibition in Section 3, Article "## of the &*+/ Constitution is absolute and clear% <Private corporations or associations a0 not hold such alienable lands of the public do ain eGcept b0 lease, G G G.< Even Republic Act No. ,*:/ 1<B'T -a$,< for brevit02, cited b0 PEA and AMAR# as legislative authorit0 to sell reclai ed lands to private parties, recogni6es the constitutional ban. Section , of RA No. ,*:/ states T <Sec. ,. Repa0 ent Sche e. E =or the financing, construction, operation and aintenance of an0 infrastructure proFects underta!en through the buildEoperateEandEtransfer arrange ent or an0 of its variations pursuant to the provisions of this Act, the proFect proponent G G G a0 li!e$ise be repaid in the for of a share in the revenue of the proFect or other nonE onetar0 pa0 ents, such as, but not li ited to, the grant of a portion or percentage of the reclai ed land, subFect to the constitutional re9uire ents $ith respect to the o$nership of the land% G G G.< 1E phasis supplied2 A private corporation, even one that underta!es the ph0sical recla ation of a govern ent B'T proFect, cannot ac9uire reclai ed alienable lands of the public do ain in vie$ of the constitutional ban. Section 3D( of the -ocal .overn ent Code, also entioned b0 PEA and AMAR#, authori6es local govern ents in land recla ation proFects to pa0 the contractor or developer in !ind consisting of a percentage of the reclai ed land, to $it% <Section 3D(. =inancing, Construction, Maintenance, 'peration, and Manage ent of #nfrastructure ProFects b0 the Private Sector. G G G GGG #n case of land recla ation or construction of industrial estates, the repa0 ent plan or percentage of the reclai ed land or the industrial estate constructed.< a0 consist of the grant of a portion

Although Section 3D( of the -ocal .overn ent Code does not contain a proviso si ilar to that of the B'T -a$, the constitutional restrictions on land o$nership auto aticall0 appl0 even though not eGpressl0 entioned in the -ocal .overn ent Code. Thus, under either the B'T -a$ or the -ocal .overn ent Code, the contractor or developer, if a corporate entit0, can onl0 be paid $ith leaseholds on portions of the reclai ed land. #f the contractor or developer is an individual, portions of the reclai ed land, not eGceeding &( hectares*, of nonEagricultural lands, a0 be conve0ed to hi in o$nership in vie$ of the legislative authorit0 allo$ing such conve0ance. This is the onl0 $a0 these provisions of the B'T -a$ and the -ocal .overn ent Code can avoid a direct collision $ith Section 3, Article "## of the &*+/ Constitution. Registration of lands of the public do ain

=inall0, PEA theori6es that the <act of conve0ing the o$nership of the reclai ed lands to public respondent PEA transfor ed such lands of the public do ain to private lands.< This theor0 is echoed b0 AMAR# $hich aintains that the <issuance of the special patent leading to the eventual issuance of title ta!es the subFect land a$a0 fro the land of public do ain and converts the propert0 into patri onial or private propert0.< #n short, PEA and AMAR# contend that $ith the issuance of Special Patent No. 3:&/ and the corresponding certificates of titles, the &:/.+) hectares co prising the =reedo #slands have beco e private lands of PEA. #n support of their theor0, PEA and AMAR# cite the follo$ing rulings of the Court% &. Su ail v. ;udge of C=# of Cotabato,*/ $here the Court held T <'nce the patent $as granted and the corresponding certificate of title $as issued, the land ceased to be part of the public do ain and beca e private propert0 over $hich the 4irector of -ands has neither control nor Furisdiction.< (. -ee 5ong 5o! v. 4avid,*+ $here the Court declared E <After the registration and issuance of the certificate and duplicate certificate of title based on a public land patent, the land covered thereb0 auto aticall0 co es under the operation of Republic Act )*, subFect to all the safeguards provided therein.<3. 5eirs of .regorio Tengco v. 5eirs of ;ose Ali$alas,** $here the Court ruled E <Bhile the 4irector of -ands has the po$er to revie$ ho estead patents, he a0 do so onl0 so long as the land re ains part of the public do ain and continues to be under his eGclusive controlI but once the patent is registered and a certificate of title is issued, the land ceases to be part of the public do ain and beco es private propert0 over $hich the 4irector of -ands has neither control nor Furisdiction.< ). Manalo v. #nter ediate Appellate Court,&DD $here the Court held T <Bhen the lots in dispute $ere certified as disposable on Ma0 &*, &*/&, and free patents $ere issued covering the sa e in favor of the private respondents, the said lots ceased to be part of the public do ain and, therefore, the 4irector of -ands lost Furisdiction over the sa e.< :.Republic v. Court of Appeals,&D& $here the Court stated T <Procla ation No. 3:D, dated 'ctober *, &*:,, of President Magsa0sa0 legall0 effected a land grant to the Mindanao Medical Center, Bureau of Medical Services, 4epart ent of 5ealth, of the $hole lot, validl0 sufficient for initial registration under the -and Registration Act. Such land grant is constitutive of a Cfee si pleC title or absolute title in favor of petitioner Mindanao Medical Center. Thus, Section &(( of the Act, $hich governs the registration of grants or patents involving public lands, provides that CBhenever public lands in the Philippine #slands belonging to the .overn ent of the >nited States or to the .overn ent of the Philippines are alienated, granted or conve0ed to persons or to public or private corporations, the sa e shall be brought forth$ith under the operation of this Act 1-and Registration Act, Act )*,2 and shall beco e registered lands.C< The first four cases cited involve petitions to cancel the land patents and the corresponding certificates of titles issued to private parties. These four cases unifor l0 hold that the 4irector of -ands has no Furisdiction over private lands or that upon issuance of the certificate of title the land auto aticall0 co es under the Torrens S0ste . The fifth case cited involves the registration under the Torrens S0ste of a &(.+Ehectare public land granted b0 the National .overn ent to Mindanao Medical Center, a govern ent unit under the 4epart ent of 5ealth. The National .overn ent transferred the &(.+Ehectare public land to serve as the site for the hospital buildings and other facilities of Mindanao Medical Center, $hich perfor ed a public service. The Court affir ed the registration of the &(.+Ehectare public land in the na e of Mindanao Medical Center under Section &(( of Act No. )*,. This fifth case is an eGa ple of a public land being registered under Act No. )*, $ithout the land losing its character as a propert0 of public do inion. #n the instant case, the onl0 patent and certificates of title issued are those in the na e of PEA, a $holl0 govern ent o$ned corporation perfor ing public as $ell as proprietar0 functions. No patent or certificate of title has been issued to an0 private part0. No one is as!ing the 4irector of -ands to cancel PEACs patent or certificates of title. #n fact, the thrust of the instant petition is that PEACs certificates of title should re ain $ith PEA, and the land covered b0 these certificates, being alienable lands of the public do ain, should not be sold to a private corporation. Registration of land under Act No. )*, or P4 No. &:(* does not vest in the registrant private or public o$nership of the land. Registration is not a ode of ac9uiring o$nership but is erel0 evidence of o$nership previousl0 conferred b0 an0 of the recogni6ed odes of ac9uiring o$nership. Registration does not give the registrant a better right than $hat the registrant had prior to the registration.&D( The registration of lands of the public do ain under the Torrens s0ste , b0 itself, cannot convert public lands into private lands.&D3

;urisprudence holding that upon the grant of the patent or issuance of the certificate of title the alienable land of the public do ain auto aticall0 beco es private land cannot appl0 to govern ent units and entities li!e PEA. The transfer of the =reedo #slands to PEA $as ade subFect to the provisions of CA No. &)& as eGpressl0 stated in Special Patent No. 3:&/ issued b0 then President A9uino, to $it% <N'B, T5ERE='RE, @N'B 8E, that b0 authorit0 of the Constitution of the Philippines and in confor it0 $ith the provisions of Presidential 4ecree No. &D+), supple ented b0 Co on$ealth Act No. &)&, as a ended, there are hereb0 granted and conve0ed unto the Public Estates Authorit0 the aforesaid tracts of land containing a total area of one illion nine hundred fifteen thousand eight hundred ninet0 four 1&,*&:,+*)2 s9uare etersI the technical description of $hich are hereto attached and ade an integral part hereof.< 1E phasis supplied2 Thus, the provisions of CA No. &)& appl0 to the =reedo #slands on atters not covered b0 P4 No. &D+). Section ,D of CA No. &)& prohibits, <eGcept $hen authori6ed b0 Congress,< the sale of alienable lands of the public do ain that are transferred to govern ent units or entities. Section ,D of CA No. &)& constitutes, under Section )) of P4 No. &:(*, a <statutor0 lien affecting title< of the registered land even if not annotated on the certificate of title.&D) Alienable lands of the public do ain held b0 govern ent entities under Section ,D of CA No. &)& re ain public lands because the0 cannot be alienated or encu bered unless Congress passes a la$ authori6ing their disposition. Congress, ho$ever, cannot authori6e the sale to private corporations of reclai ed alienable lands of the public do ain because of the constitutional ban. 'nl0 individuals can benefit fro such la$. The grant of legislative authorit0 to sell public lands in accordance $ith Section ,D of CA No. &)& does not auto aticall0 convert alienable lands of the public do ain into private or patri onial lands. The alienable lands of the public do ain ust be transferred to 9ualified private parties, or to govern ent entities not tas!ed to dispose of public lands, before these lands can beco e private or patri onial lands. 'ther$ise, the constitutional ban $ill beco e illusor0 if Congress can declare lands of the public do ain as private or patri onial lands in the hands of a govern ent agenc0 tas!ed to dispose of public lands. This $ill allo$ private corporations to ac9uire directl0 fro govern ent agencies li itless areas of lands $hich, prior to such la$, are concededl0 public lands. >nder E' No. :(:, PEA beca e the central i ple enting agenc0 of the National .overn ent to reclai sub erged areas of the public do ain. Thus, E' No. :(: declares that T <E"EC>T#?E 'R4ER N'. :(: 4esignating the Public Estates Authorit0 as the Agenc0 Pri aril0 Responsible for all Recla ation ProFects Bhereas, there are several recla ation proFects $hich are ongoing or being proposed to be underta!en in various parts of the countr0 $hich need to be evaluated for consistenc0 $ith national progra sI Bhereas, there is a need to give further institutional support to the .overn entCs declared polic0 to provide for a coordinated, econo ical and efficient recla ation of landsI Bhereas, Presidential 4ecree No. 3EA re9uires that all recla ation of areas shall be li ited to the National .overn ent or an0 person authori6ed b0 it under proper contractI Bhereas, a central authorit0 is needed to act on behalf of the National .overn ent $hich shall ensure a coordinated and integrated approach in the recla ation of landsI Bhereas, Presidential 4ecree No. &D+) creates the Public Estates Authorit0 as a govern ent corporation to underta!e recla ation of lands and ensure their aGi u utili6ation in pro oting public $elfare and interestsI and Bhereas, Presidential 4ecree No. &)&, provides the President $ith continuing authorit0 to reorgani6e the national govern ent including the transfer, abolition, or erger of functions and offices. N'B, T5ERE='RE, #, =ER4#NAN4 E. MARC'S, President of the Philippines, b0 virtue of the po$ers vested in the Constitution and pursuant to Presidential 4ecree No. &)&,, do hereb0 order and direct the follo$ing% e b0 foreshore and

Section &. The Public Estates Authorit0 1PEA2 shall be pri aril0 responsible for integrating, directing, and coordinating all recla ation proFects for and on behalf of the National .overn ent. All recla ation proFects shall be approved b0 the President upon reco endation of the PEA, and shall be underta!en b0 the PEA or through a proper contract eGecuted b0 it $ith an0 person or entit0I Provided, that, recla ation proFects of an0 national govern ent agenc0 or entit0 authori6ed under its charter shall be underta!en in consultation $ith the PEA upon approval of the President.

G G G .< As the central i ple enting agenc0 tas!ed to underta!e recla ation proFects nation$ide, $ith authorit0 to sell reclai ed lands, PEA too! the place of 4ENR as the govern ent agenc0 charged $ith leasing or selling reclai ed lands of the public do ain. The reclai ed lands being leased or sold b0 PEA are not private lands, in the sa e anner that 4ENR, $hen it disposes of other alienable lands, does not dispose of private lands but alienable lands of the public do ain. 'nl0 $hen 9ualified private parties ac9uire these lands $ill the lands beco e private lands. #n the hands of the govern ent agenc0 tas!ed and authori6ed to dispose of alienable of disposable lands of the public do ain, these lands are still public, not private lands. =urther ore, PEACs charter eGpressl0 states that PEA <shall hold lands of the public do ain< as $ell as <an0 and all !inds of lands.< PEA can hold both lands of the public do ain and private lands. Thus, the ere fact that alienable lands of the public do ain li!e the =reedo #slands are transferred to PEA and issued land patents or certificates of title in PEACs na e does not auto aticall0 a!e such lands private. To allo$ vast areas of reclai ed lands of the public do ain to be transferred to PEA as private lands $ill sanction a gross violation of the constitutional ban on private corporations fro ac9uiring an0 !ind of alienable land of the public do ain. PEA $ill si pl0 turn around, as PEA has no$ done under the A ended ;?A, and transfer several hundreds of hectares of these reclai ed and still to be reclai ed lands to a single private corporation in onl0 one transaction. This sche e $ill effectivel0 nullif0 the constitutional ban in Section 3, Article "## of the &*+/ Constitution $hich $as intended to diffuse e9uitabl0 the o$nership of alienable lands of the public do ain a ong =ilipinos, no$ nu bering over +D illion strong. This sche e, if allo$ed, can even be applied to alienable agricultural lands of the public do ain since PEA can <ac9uire G G G an0 and all !inds of lands.< This $ill open the floodgates to corporations and even individuals ac9uiring hundreds of hectares of alienable lands of the public do ain under the guise that in the hands of PEA these lands are private lands. This $ill result in corporations a assing huge landholdings never before seen in this countr0 E creating the ver0 evil that the constitutional ban $as designed to prevent. This $ill co pletel0 reverse the clear direction of constitutional develop ent in this countr0. The &*3: Constitution allo$ed private corporations to ac9uire not ore than &,D() hectares of public lands.&D: The &*/3 Constitution prohibited private corporations fro ac9uiring an0 !ind of public land, and the &*+/ Constitution has une9uivocall0 reiterated this prohibition. The contention of PEA and AMAR# that public lands, once registered under Act No. )*, or P4 No. &:(*, auto aticall0 beco e private lands is contrar0 to eGisting la$s. Several la$s authori6e lands of the public do ain to be registered under the Torrens S0ste or Act No. )*,, no$ P4 No. &:(*, $ithout losing their character as public lands. Section &(( of Act No. )*,, and Section &D3 of P4 No. &:(*, respectivel0, provide as follo$s% Act No. )*, <Sec. &((. Bhenever public lands in the Philippine #slands belonging to the G G G .overn ent of the Philippine #slands are alienated, granted, or conve0ed to persons or the public or private corporations, the sa e shall be brought forth$ith under the operation of this Act and shall beco e registered lands.< P4 No. &:(* <Sec. &D3. Certificate of Title to Patents. Bhenever public land is b0 the .overn ent alienated, granted or conve0ed to an0 person, the sa e shall be brought forth$ith under the operation of this 4ecree.< 1E phasis supplied2 Based on its legislative histor0, the phrase <conve0ed to an0 person< in Section &D3 of P4 No. &:(* includes conve0ances of public lands to public corporations. Alienable lands of the public do ain <granted, donated, or transferred to a province, unicipalit0, or branch or subdivision of the .overn ent,< as provided in Section ,D of CA No. &)&, a0 be registered under the Torrens S0ste pursuant to Section &D3 of P4 No. &:(*. Such registration, ho$ever, is eGpressl0 subFect to the condition in Section ,D of CA No. &)& that the land <shall not be alienated, encu bered or other$ise disposed of in a anner affecting its title, eGcept $hen authori6ed b0 Congress.< This provision refers to govern ent reclai ed, foreshore and arsh0 lands of the public do ain that have been titled but still cannot be alienated or encu bered unless eGpressl0 authori6ed b0 Congress. The need for legislative authorit0 prevents the registered land of the public do ain fro beco ing private land that can be disposed of to 9ualified private parties. The Revised Ad inistrative Code of &*+/ also recogni6es that lands of the public do ain Torrens S0ste . Section )+, Chapter &(, Boo! # of the Code states T a0 be registered under the

<Sec. )+. 'fficial Authori6ed to Conve0 Real Propert0. Bhenever real propert0 of the .overn ent is authori6ed b0 la$ to be conve0ed, the deed of conve0ance shall be eGecuted in behalf of the govern ent b0 the follo$ing% 1&2 G G G 1(2 =or propert0 belonging to the Republic of the Philippines, but titled in the na e of an0 political subdivision or of an0 corporate agenc0 or instru entalit0, b0 the eGecutive head of the agenc0 or instru entalit0.< 1E phasis supplied2 Thus, private propert0 purchased b0 the National .overn ent for eGpansion of a public $harf a0 be titled in the na e of a govern ent corporation regulating port operations in the countr0. Private propert0 purchased b0 the National .overn ent for eGpansion of an airport a0 also be titled in the na e of the govern ent agenc0 tas!ed to ad inister the airport. Private propert0 donated to a unicipalit0 for use as a to$n pla6a or public school site a0 li!e$ise be titled in the na e of the unicipalit0.&D, All these properties beco e properties of the public do ain, and if alread0 registered under Act No. )*, or P4 No. &:(*, re ain registered land. There is no re9uire ent or provision in an0 eGisting la$ for the deE registration of land fro the Torrens S0ste . Private lands ta!en b0 the .overn ent for public use under its po$er of e inent do ain beco e un9uestionabl0 part of the public do ain. Nevertheless, Section +: of P4 No. &:(* authori6es the Register of 4eeds to issue in the na e of the National .overn ent ne$ certificates of title covering such eGpropriated lands. Section +: of P4 No. &:(* states T <Sec. +:. -and ta!en b0 e inent do ain. Bhenever an0 registered land, or interest therein, is eGpropriated or ta!en b0 e inent do ain, the National .overn ent, province, cit0 or unicipalit0, or an0 other agenc0 or instru entalit0 eGercising such right shall file for registration in the proper Registr0 a certified cop0 of the Fudg ent $hich shall state definitel0 b0 an ade9uate description, the particular propert0 or interest eGpropriated, the nu ber of the certificate of title, and the nature of the public use. A e orandu of the right or interest ta!en shall be ade on each certificate of title b0 the Register of 4eeds, and $here the fee si ple is ta!en, a ne$ certificate shall be issued in favor of the National .overn ent, province, cit0, unicipalit0, or an0 other agenc0 or instru entalit0 eGercising such right for the land so ta!en. The legal eGpenses incident to the e orandu of registration or issuance of a ne$ certificate of title shall be for the account of the authorit0 ta!ing the land or interest therein.< 1E phasis supplied2 Conse9uentl0, lands registered under Act No. )*, or P4 No. &:(* are not eGclusivel0 private or patri onial lands. -ands of the public do ain a0 also be registered pursuant to eGisting la$s. AMAR# a!es a parting shot that the A ended ;?A is not a sale to AMAR# of the =reedo #slands or of the lands to be reclai ed fro sub erged areas of Manila Ba0. #n the $ords of AMAR#, the A ended ;?A <is not a sale but a Foint venture $ith a stipulation for rei burse ent of the original cost incurred b0 PEA for the earlier recla ation and construction $or!s perfor ed b0 the C4CP under its &*/3 contract $ith the Republic.< Bhether the A ended ;?A is a sale or a Foint venture, the fact re ains that the A ended ;?A re9uires PEA to <cause the issuance and deliver0 of the certificates of title conve0ing AMAR#Cs -and Share in the na e of AMAR#.<&D/ This stipulation still contravenes Section 3, Article "## of the &*+/ Constitution $hich provides that private corporations <shall not hold such alienable lands of the public do ain eGcept b0 lease.< The transfer of title and o$nership to AMAR# clearl0 eans that AMAR# $ill <hold< the reclai ed lands other than b0 lease. The transfer of title and o$nership is a <disposition< of the reclai ed lands, a transaction considered a sale or alienation under CA No. &)&,&D+ the .overn ent Auditing Code,&D* and Section 3, Article "## of the &*+/ Constitution. The Regalian doctrine is deepl0 i planted in our legal s0ste . =oreshore and sub erged areas for part of the public do ain and are inalienable. -ands reclai ed fro foreshore and sub erged areas also for part of the public do ain and are also inalienable, unless converted pursuant to la$ into alienable or disposable lands of the public do ain. 5istoricall0, lands reclai ed b0 the govern ent are sui generis, not available for sale to private parties unli!e other alienable public lands. Reclai ed lands retain their inherent potential as areas for public use or public service. Alienable lands of the public do ain, increasingl0 beco ing scarce natural resources, are to be distributed e9uitabl0 a ong our everEgro$ing population. To insure such e9uitable distribution, the &*/3 and &*+/ Constitutions have barred private corporations fro ac9uiring an0 !ind of alienable land of the public do ain. Those $ho atte pt to dispose of inalienable natural resources of the State, or see! to circu vent the constitutional ban on alienation of lands of the public do ain to private corporations, do so at their o$n ris!. Be can no$ su ari6e our conclusions as follo$s%

&. The &:/.+) hectares of reclai ed lands co prising the =reedo #slands, no$ covered b0 certificates of title in the na e of PEA, are alienable lands of the public do ain. PEA a0 lease these lands to private corporations but a0 not sell or transfer o$nership of these lands to private corporations. PEA a0 onl0 sell these lands to Philippine citi6ens, subFect to the o$nership li itations in the &*+/ Constitution and eGisting la$s. (. The :*(.&: hectares of sub erged areas of Manila Ba0 re ain inalienable natural resources of the public do ain until classified as alienable or disposable lands open to disposition and declared no longer needed for public service. The govern ent can a!e such classification and declaration onl0 after PEA has reclai ed these sub erged areas. 'nl0 then can these lands 9ualif0 as agricultural lands of the public do ain, $hich are the onl0 natural resources the govern ent can alienate. #n their present state, the :*(.&: hectares of sub erged areas are inalienable and outside the co erce of an. 3. Since the A ended ;?A see!s to transfer to AMAR#, a private corporation, o$nership of //.3) hectares&&D of the =reedo #slands, such transfer is void for being contrar0 to Section 3, Article "## of the &*+/ Constitution $hich prohibits private corporations fro ac9uiring an0 !ind of alienable land of the public do ain. ). Since the A ended ;?A also see!s to transfer to AMAR# o$nership of (*D.&:, hectares&&& of still sub erged areas of Manila Ba0, such transfer is void for being contrar0 to Section (, Article "## of the &*+/ Constitution $hich prohibits the alienation of natural resources other than agricultural lands of the public do ain. PEA a0 reclai these sub erged areas. Thereafter, the govern ent can classif0 the reclai ed lands as alienable or disposable, and further declare the no longer needed for public service. Still, the transfer of such reclai ed alienable lands of the public do ain to AMAR# $ill be void in vie$ of Section 3, Article "## of the &*+/ Constitution $hich prohibits private corporations fro ac9uiring an0 !ind of alienable land of the public do ain. Clearl0, the A ended ;?A violates glaringl0 Sections ( and 3, Article "## of the &*+/ Constitution. >nder Article &)D*&&( of the Civil Code, contracts $hose <obFect or purpose is contrar0 to la$,< or $hose <obFect is outside the co erce of en,< are <ineGistent and void fro the beginning.< The Court ust perfor its dut0 to defend and uphold the Constitution, and therefore declares the A ended ;?A null and void ab initio. Seventh issue% $hether the Court is the proper foru disadvantageous to the govern ent. to raise the issue of $hether the A ended ;?A is grossl0

Considering that the A ended ;?A is null and void ab initio, there is no necessit0 to rule on this last issue. Besides, the Court is not a trier of facts, and this last issue involves a deter ination of factual atters. B5ERE='RE, the petition is .RANTE4. The Public Estates Authorit0 and A ari Coastal Ba0 4evelop ent Corporation are PERMANENT-8 EN;'#NE4 fro i ple enting the A ended ;oint ?enture Agree ent $hich is hereb0 declared N>-- and ?'#4 ab initio. S' 'R4ERE4. 4avide, ;r., C.;., Bellosillo, Puno, ?itug, @apunan, Mendo6a, Panganiban, Auisu bing, 8naresESantiago, SandovalE .utierre6, AustriaEMartine6, and Corona, ;;., concur.