Article III - Section 1

Primacy of Human Rights and Enforcement

Republic v. Sandiganbayan (Bill of Rights after EDSA revolution) 2003
1. Immediately upon her assumption to office following the successful EDSA Revolution, then President Corazon C. Aquino issued
Executive Order No. 1 (EO No. 1) creating the Presidential Commission on Good Government (PCGG). EO No. 1 primarily tasked
the PCGG to recover all ill-gotten wealth of former President Ferdinand E. Marcos
2. EO No. 1 vested the PCGG with the power:
(a) to conduct investigation as may be necessary in order to accomplish and carry out the purposes of this order and the
power
(b) to promulgate such rules and regulations as may be necessary to carry out the purpose of this order.
3. PCGG, through its then Chairman Jovito R. Salonga, created an AFP Anti-Graft Board (AFP Board) tasked to investigate reports of
unexplained wealth and corrupt practices by AFP personnel
4. Based on its mandate, the AFP Board investigated various reports of alleged unexplained wealth of respondent Major General
Josephus Q. Ramas (Ramas)
5. Evidence in the record showed that respondent is the owner of a house and lot located at 15-Yakan St., La Vista, Quezon City
6. He is also the owner of a house and lot located in Cebu City. The lot has an area of 3,327 square meters.
7. Value of the property located in Quezon City may be estimated modestly at P700,000.00.
8. The equipment/items and communication facilities which were found in the premises of Elizabeth Dimaano and were
confiscated by elements of the PC Command of Batangas were all covered by invoice receipt in the name of CAPT. EFREN
SALIDO, RSO Command Coy, MSC, PA.
9. These items could not have been in the possession of Elizabeth Dimaano if not given for her use by respondent Commanding
General of the Philippine Army.
10. Raiding team was also able to confiscate money in the amount of P2,870,000.00 and $50,000 US Dollars in the house of
Elizabeth Dimaano on 3 March 1986.
11. Affidavits of members of the Military Security Unit, Military Security Command, Philippine Army, stationed at Camp Eldridge, Los
Baos, Laguna, disclosed that Elizabeth Dimaano is the mistress of respondent.
12. That respondent usually goes and stays and sleeps in the alleged house of Elizabeth Dimaano in Barangay Tengga, Itaas,
Batangas City and when he arrives, Elizabeth Dimaano embraces and kisses respondent.
13. That on February 25, 1986, a person who rode in a car went to the residence of Elizabeth Dimaano with four (4) attache cases
filled with money and owned by MGen Ramas.
14. Sworn statement in the record disclosed also that Elizabeth Dimaano had no visible means of income and is supported by
respondent for she was formerly a mere secretary.
15. In view of the foregoing, the Board finds that a prima facie case exists against respondent for ill-gotten and unexplained wealth
16. The PCGG filed a petition for forfeiture
17. Before Ramas could answer the petition, then Solicitor General Francisco I. Chavez filed an Amended Complaint naming the
Republic of the Philippines (petitioner), represented by the PCGG, as plaintiff and Ramas as defendant. The Amended Complaint
also impleaded Elizabeth Dimaano (Dimaano) as co-defendant.
18. The Sandiganbayan noted that petitioner had already delayed the case for over a year mainly because of its many
postponements.
19. Private respondents then filed their motions to dismiss based on Republic v. Migrino.[9] The Court held in Migrino that the
PCGG does not have jurisdiction to investigate and prosecute military officers by reason of mere position held without a
showing that they are subordinates of former President Marcos.
20. Sandiganbayan dismissed the complaint – no evidence, illegal search and seizure

ISSUE: Does PCGG have J to investigate private respondents

RULING: NOOOOOOOO
1. The PCGG, through the AFP Board, can only investigate the unexplained wealth and corrupt practices of AFP personnel who fall
under either of the two categories mentioned in Section 2 of EO No. 1. These are:
a. AFP personnel who have accumulated ill-gotten wealth during the administration of former President Marcos by being the
latters immediate family, relative, subordinate or close associate, taking undue advantage of their public office or using
their powers, influence x x xor
b. AFP personnel involved in other cases of graft and corruption provided the President assigns their cases to the PCGG
2. Petitioner, however, does not claim that the President assigned Ramas case to the PCGG.
3. We hold that Ramas was not a subordinate of former President Marcos in the sense contemplated under EO No. 1
4. The PCGG has to provide a prima facie showing that Ramas was a close associate of former President Marcos

ISSUE: W/N the search and seizure was legal

RULING: NOOOOOOOooo
1. On 3 March 1986, the Constabulary raiding team served at Dimaanos residence a search warrant captioned Illegal Possession of
Firearms and Ammunition.
2. Dimaano was not present during the raid but Dimaanos cousins witnessed the raid.
3. The raiding team seized the items detailed in the seizure receipt together with other items not included in the search warrant.
4. The raiding team seized these items: one baby armalite rifle with two magazines; 40 rounds of 5.56 ammunition; one pistol,
caliber .45; communications equipment, cash consisting of P2,870,000 and US$50,000, jewelry, and land titles.
5. Petitioner wants the Court to take judicial notice that the raiding team conducted the search and seizure on March 3, 1986 or
five days after the successful EDSA revolution
6. Petitioner argues that a revolutionary government was operative at that time by virtue of Proclamation No. 1 announcing that
President Aquino and Vice President Laurel were taking power in the name and by the will of the Filipino people
7. Petitioner asserts that the revolutionary government effectively withheld the operation of the 1973 Constitution which
guaranteed private respondents exclusionary right.
8. Moreover, petitioner argues that the exclusionary right arising from an illegal search applies only beginning 2 February 1987,
the date of ratification of the 1987 Constitution. Petitioner contends that all rights under the Bill of Rights had already reverted
to its embryonic stage at the time of the search.
9. Therefore, the government may confiscate the monies and items taken from Dimaano and use the same in evidence against her
since at the time of their seizure, private respondents did not enjoy any constitutional right.
10. The EDSA Revolution took place on 23-25 February 1986. As succinctly stated in President Aquinos Proclamation No. 3 dated 25
March 1986, the EDSA Revolution was done in defiance of the provisions of the 1973 Constitution
11. We hold that the Bill of Rights under the 1973 Constitution was not operative during the interregnum. However, we rule that
the protection accorded to individuals under the Covenant and the Declaration remained in effect during the interregnum.

Hierarchy of Rights
PH Blooming Mills Employees Org v. PH Blooming Mills Co. Inc. (hierarchy of rights) 1973
1. March 2, 1969: Philippine Blooming Mills discovered that Philippine Blooming Mills Employees Organization (PBMEO) decided to
stage a mass demonstration as a valid exercise of their constitutional right of freedom expression in general and of their right of
assembly and petition for redress of grievances in particular before appropriate governmental agency, the Chief Executive,
alleged abuses of the police officers of the municipality of Pasig at Malacañang on March 4, 1969 to be participated in by the
workers in the first, second and third shifts (6am-2pm, 7am-4pm. and 8am-5pm respectively)
2. March 3, 1969: Philippine Blooming Mills held 2 meetings in the morning and afternoon where PBMEO confirmed the
demonstration which has nothing to do with the Company because the union has no quarrel or dispute with Management.
3. That Management, thru Atty. C.S. de Leon, Company personnel manager, informed PBMEO that the demonstration is an
inalienable right of the union guaranteed by the Constitution but emphasized, however, that any demonstration for that matter
should not unduly prejudice the normal operation thus whoever fails to report for work the following morning shall be
dismissed for violation of the existing CBA Article XXIV: NO LOCKOUT — NO STRIKE amounting to an illegal strike
4. March 3, 1969 9:50 am: Wilfredo Ariston, adviser of PBMEO sent a cablegram to the Company: REITERATING REQUEST EXCUSE
DAY SHIFT EMPLOYEES JOINING DEMONSTRATION MARCH 4, 1969
5. The Company filed for violation of the CBA.
6. PBMEO answered that there is no violation since they gave prior notice. Moreover, it was not a mass demonstration for strike
against the company.
7. Judge Joaquin M. Salvador: PBMEO guilty of bargaining in bad faith and PBMEO officers directly responsible for ULP losing their
status as employees
8. September 29, 1969: PBMEO motion for reconsideration – dismissed since 2 days late

ISSUE: W/ the collective bargaining agreement unduly hampers the rights of free expression, free assembly and petition
HELD: YES. Set aside as null and void the orders of CFI and reinstate the petitioners.

1. In a democracy, the preservation and enhancement of the dignity and worth of the human personality is the central core as well
as the cardinal article of faith of our civilization. The inviolable character of man as an individual must be "protected to the
largest possible extent in his thoughts and in his beliefs as the citadel of his person
2. The Bill of Rights is designed to preserve the ideals of liberty, equality and security "against the assaults of opportunism, the
expediency of the passing hour, the erosion of small encroachments, and the scorn and derision of those who have no patience
with general principles.
3. The freedoms of expression and of assembly as well as the right to petition are included among the immunities reserved by the
sovereign people
4. The rights of free expression, free assembly and petition, are not only civil rights but also political rights essential to man's
enjoyment of his life, to his happiness and to his full and complete fulfillment.
5. Thru these freedoms the citizens can participate not merely in the periodic establishment of the government through their
suffrage but also in the administration of public affairs as well as in the discipline of abusive public officers.
6. While the Bill of Rights also protects property rights, the primacy of human rights over property rights is recognized.
a. Property and property rights can be lost thru prescription; but human rights are imprescriptible.
b. A constitutional or valid infringement of human rights requires a more stringent criterion, namely existence of a grave and
immediate danger of a substantive evil which the State has the right to prevent
7. Injunction would be trenching upon the freedom expression of the workers, even if it legally appears to be illegal picketing or
strike
8. In the hierarchy of civil liberties, the rights of free expression and of assembly occupy a preferred position as they are essential
to the preservation and vitality of our civil and political institutions; 10 and such priority "gives these liberties the sanctity and
the sanction not permitting dubious intrusions." 11
9. The pretension of their employer that it would suffer loss or damage by reason of the absence of its employees from 6 o'clock
in the morning to 2 o'clock in the afternoon, is a plea for the preservation merely of their property rights.
10. The dismissal for proceeding with the demonstration and consequently being absent from work, constitutes a denial of social
justice likewise assured by the fundamental law to these lowly employees. Section 5 of Article II of the Constitution imposes
upon the State "the promotion of social justice to insure the well-being and economic security of all of the people," which
guarantee is emphasized by the other directive in Section 6 of Article XIV of the Constitution that "the State shall afford
protection to labor ...".
11. The respondent company is the one guilty of unfair labor practice defined in Section 4(a-1) in relation to Section 3 of Republic
Act No. 875, otherwise known as the Industrial Peace Act. Section 3 of Republic Act No. 8 guarantees to the employees the right
"to engage in concert activities for ... mutual aid or protection"; while

Due Process: IN General

Tupas v. CA (late petition) 1991
1. The record shows that the petitioners received a copy of the decision of the Regional Trial Court of Pasay City on April 3, 1989,
and that the motion for reconsideration thereof was filed on April 17, 1989, or fourteen days later.
2. Instead of filing the petition for review with the Court of Appeals within the remainder of the 15-day reglementary period, that
is, on May 10, 1989, the petitioner did so only on May 23, 1989, or 14 days later. The petition was therefore clearly tardy.
3. CA dimissed the case based on tardiness

ISSUE: W/N the CA erred in dismissing the case based on tardiness

RULING: NOOOOOOooooo
1. Lacasamana v. CA - If a motion for reconsideration is filed with and denied by a regional trial court, the movant has only the
remaining period within which to file a petition for review. Hence, it may be necessary to file a motion with the Court of Appeals
for extension of time to file such petition for review
2. The petitioners' counsel did not file the petition for review within the remaining period, which he should have known was only
one day. Neither did he move for an extension that would have been granted as a matter of course.
3. Rules of procedure are intended to ensure the orderly administration of justice and the protection of substantive rights in
judicial and extrajudicial proceedings.
4. The policy of the courts is to give effect to both kinds of law, as complementing each other, in the just and speedy resolution of
the dispute between the parties. Observance of both substantive and procedural rights is equally guaranteed by due process,
whatever the source of such rights, be it the Constitution itself or only a statute or a rule of court.
5. The petitioners have not shown that their counsel was exceptionally inept or motivated by bad faith or excusably misled by the
facts. There is no reason why we should not apply the rule that clients should be bound by the acts of their counsel, including
his mistakes
6. The petitioners themselves describe him as "a graduate of one of the top law schools in the country, a bar examiner in Remedial
Law, a law professor in Remedial Law and other law subjects, a former National Officer of the Integrated Bar of the Philippines
and a seasoned practitioner for more than 30 years.
7. The procedural mistake might have been understandable in an ordinary lawyer but not in the case of the petitioners' former
counsel.
8. Such a reason is hardly plausible as the petitioner's new counsel should know. Otherwise, all a defeated party would have to do
to salvage his case is claim neglect or mistake on the part of his counsel as a ground for reversing the adverse judgment. There
would be no end to litigation if this were allowed as every shortcoming of counsel could be the subject of challenge by his client
through another counsel who, if he is also found wanting, would likewise be disowned by the same client through another
counsel, and so on ad infinitum.
9. It has not escaped the attention of the Court that the motion for reconsideration of the decision of the trial court was filed on
the fourteenth day of the reglementary period and that the petition for review was filed, presumably under the belief that a
 new 15-day period had begun, fourteen days after the petitioners' counsel was notified of the denial of the motion. This smacks
of a dilatory tactic.
10. For all its conceded merits, equity is available only in the absence of law and not as its replacement.1âwphi1 Equity is described
as justice outside legality, which simply means that it cannot supplant although it may, as often happens, supplement the law.
11. It is clear that the respondent court did not commit any reversible error in dismissing the petitioners' appeal on the ground of
tardiness.

I. Procedural Due Process

A. Judicial Proceedings
In General
Banco Espanol v. Palanca (jurisdiction over person)
1. Engracio Palanca Tanquinyeng y Limquingco mortgaged various parcels of real property in Manila to El Banco Espanol-Filipino.
2. Upon March 31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8 per centum per annum,
payable at the end of each quarter. It appears that the parties to this mortgage at that time estimated the value of the property
in question at P292,558, which was about P75,000 in excess of the indebtedness.
3. Afterwards, Engracio returned to China and there he died on January 29, 1810 without returning again to the Philippines.
4. The mortgagor then instituted foreclosure proceeding but since defendant is a non-resident, it was necessary to give notice by
publication.
5. The Clerk of Court was also directed to send copy of the summons to the defendant’s last known address, which is in Amoy, China.
6. It is not shown whether the Clerk complied with this requirement.
7. Nevertheless, after publication in a newspaper of the City of Manila, the cause proceeded and judgment by default was rendered.
8. The decision was likewise published and afterwards sale by public auction was held with the bank as the highest bidder.
9. On August 7, 1908, this sale was confirmed by the court.
10. However, about seven years after the confirmation of this sale, a motion was made by Vicente Palanca, as administrator of the
estate of the original defendant, wherein the applicant requested the court to set aside the order of default and the judgment,
and to vacate all the proceedings subsequent thereto.
11. The basis of this application was that the order of default and the judgment rendered thereon were void because the court had
never acquired jurisdiction over the defendant or over the subject of the action.

ISSUE: W/N the lower court acquired J over the defendant and the subject matter.
RULING: YEEEEeeeeessssssss
1. Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage foreclosure, it is evident that the
court derives its authority to entertain the action primarily from the statutes organizing the court.
2. Here the property itself is in fact the sole thing which is impleaded and is the responsible object which is the subject of the exercise
of judicial power.
3. It follows that the jurisdiction of the court in such case is based exclusively on the power which, under the law, it possesses over
the property; and any discussion relative to the jurisdiction of the court over the person of the defendant is entirely apart from
the case.
4. The jurisdiction of the court over the property, considered as the exclusive object of such action, is evidently based upon the
following conditions and considerations, namely:
A. that the property is located within the district;
B. that the purpose of the litigation is to subject the property by sale to an obligation fixed upon it by the mortgage; and
C. that the court at a proper stage of the proceedings takes the property into custody, if necessary, and expose it to sale for the
purpose of satisfying the mortgage debt.
5. An obvious corollary is that no other relief can be granted in this proceeding than such as can be enforced against the property.
6. The Court then formulated the following proposition relative to the foreclosure proceeding against the property of a nonresident
mortgagor who fails to come in and submit himself personally to the jurisdiction of the court:
a. That the jurisdiction of the court is derived from the power which it possesses over the property;
b. that jurisdiction over the person is not acquired and is nonessential;
c. That the relief granted by the court must be limited to such as can be enforced against the property itself.
7. In Pennoyer vs. Neff, involved in this decision is the principle that in proceedings in rem or quasi in rem against a nonresident who
is not served personally within the state, and who does not appear, the relief must be confined to the res, and the court cannot
lawfully render a personal judgment against him. Therefore in an action to foreclose a mortgage against a nonresident, upon
whom service has been effected exclusively by publication, no personal judgment for the deficiency can be entered.

ISSUE: W/N due process of law was observed

RULING: YEEEEEEEesssssss
1. The observations of the Court led to the conclusions:
a. that the failure of the clerk to send the notice to the defendant by mail did not destroy the jurisdiction of the court
b. that such irregularity did not infringe the requirement of due process of law.
2. Notice was given by publication in a newspaper and this is the only form of notice which the law unconditionally requires.
3. This is all that was absolutely necessary to sustain the proceedings.
4. Property is always assumed to be in the possession of its owner, in person or by agent; and he may be safely held, under certain
conditions, to be affected with knowledge that proceedings have been instituted for its condemnation and sale.
5. The court either has jurisdiction or it has not; and if the requirement as to the mailing of notice should be considered as a step
antecedent to the acquiring of jurisdiction, there could be no escape from the conclusion that the failure to take that step was
fatal to the validity of the judgment.
6. In the application of the idea of due process of law, on the other hand, it is clearly unnecessary to be so rigorous.
7. The jurisdiction being once established, all that due process of law thereafter requires is an opportunity for the defendant to be
heard; and as publication was duly made in the newspaper, it would seem highly unreasonable to hold that failure to mail the
notice was fatal.
8. From this point of view, however, it is obvious that any motion to vacate the judgment on the ground of the irregularity in question
must fail unless it shows that the defendant was prejudiced by that irregularity.
Aspects of the Proceedings
Publicity and TV Coverage

B. Administrative; Quasi-Judicial Proceedings; Arbitration

In General; administrative due process
Ang Tibay v. CIR (due process in admin proceedings)
1. Ang Tibay was a manufacturer of rubber slippers.
2. There was a shortage of leather soles, and it was necessary to temporarily lay off members of the National Labor Union.
3. According to the Union however, this was merely a scheme to systematically terminate the employees from work, and that the
shortage of soles is unsupported.
4. It claims that Ang Tibay is guilty of unjust labor practice because the owner, Teodoro, is discriminating against the National
Labor Union, and unjustly favoring the National Workers Brotherhood, which was allegedly sympathetic to the employer.
5. The Court of Industrial Relation decided the case and elevated it to the Supreme Court, but a motion for new trial was raised by
the NLU.
6. But the Ang Tibay filed a motion for opposing the said motion.
7. The motion for new trial was raised because according to NLU, there are documents that are so inaccessible to them that even
with the exercise of due diligence they could not be expected to have obtained them and offered as evidence in the Court of
Industrial Relations. That these documents, which NLU have now attached as exhibits are of such far-reaching importance and
effect that their admission would necessarily mean the modification and reversal of the judgment rendered therein.

Issue: WON the union was denied due process by CIR.

Held: YESSS because there was failure to receive all relevant evidence thus case is remanded to CIR

1. The CIR is a special court whose functions are specifically stated in the law of its creation which is the Commonwealth Act No.
103.
2. It is more an administrative board than a part of the integrated judicial system of the nation.
3. It is not intended to be a mere receptive organ of the government.
4. Unlike a court of justice which is essentially passive, acting only when its jurisdiction is invoked and deciding only cases that are
presented to it by the parties litigant, the function of the CIR, as will appear from perusal of its organic law is more active,
affirmative and dynamic.
5. It not only exercises judicial or quasi-judicial functions in the determination of disputes between employers and employees but
its functions are far more comprehensive and extensive.
6. It has jurisdiction over the entire Philippines, to consider, investigate, decide, and settle any question, matter controversy or
disputes arising between, and/ or affecting employers and employees or laborers, and landlords and tenants or farm-laborers,
and regulates the relations between them, subject to, and in accordance with, the provisions of CA 103.
7. The fact, however, that the CIR may be said to be free from rigidity of certain procedural requirements does not mean that it
can in justiciable cases coming before it, entirely ignore or disregard the fundamental and essential requirements of due process
in trials and investigations of an administrative character. There are cardinal primary rights which must be respected even in
proceedings of this character:
a. the right to a hearing, which includes the right to present one's cause and submit evidence in support thereof;
 b. The tribunal must consider the evidence presented;
c. The decision must have something to support itself;
d. The evidence must be substantial;
e. The decision must be based on the evidence presented at the hearing; or at least contained in the record and
disclosed to the parties affected;
f. The tribunal or body or any of its judges must act on its own independent consideration of the law and facts of the
controversy, and not simply accept the views of a subordinate;
g. The Board or body should, in all controversial questions, render its decision in such manner that the parties to the
proceeding can know the various Issue involved, and the reason for the decision rendered.

Shu v. Dee
1. The petitioner is the President of the 3A Apparel Corporation.
2. He filed a complaint before the National Bureau of Investigation (NB!) charging the respondents of falsification of two deeds of
real estate mortgage submitted to the Metropolitan Bank and Trust Company (A4etrobank).
3. Both deeds of real estate mortgage were allegedly signed by the petitioner, one in his own name while the other was on behalf
of 3A Apparel Corporation.
4. According to the petitioner, the respondents were employees of Metrobank.
5. Based on these deeds, Metrobank foreclosed the two properties securing the 3A Apparel Corporation’s loan.3
6. After investigation, the NBI filed a complaint with the City Prosecutor of Makati (city prosecutor) charging the respondents of
the crime of forgery and falsification of public documents.
7. The NBI supported the complaint with the Questioned Documents Report No. 746-1098 (questioned documents report) issued
by its Questioned Documents Division.
8. The questioned documents report states that the signatures of the petitioner which appear on the questioned deeds are not the
same as the standard sample signatures he submitted to the NBI.4
9. The respondents argued in their counter-affidavits that they were denied their right to due process during the NBI investigation
because the agency never required them and Metrobank to submit the standard sample signatures of the petitioner for
comparison.
10. The city prosecutor found no probable cause against the respondents and, consequently, dismissed the complaint for lack of
merit.
11. The city prosecutor ruled that the questioned documents report is not conclusive evidence that the respondents committed the
crime charged. It only proves that the sample signatures which were submitted solely by the petitioner are different from the
signatures appearing on the questioned deeds.
12. The Secretary of Justice reversed the city prosecutor’s findings. She ruled that the city prosecutor failed to consider the
evidentiary value of the findings of the NBI questioned documents experts. This NBI finding is entitled to full faith and credit in
the absence of proof of irregularity in the performance of the experts’ duties. 11
13. The CA granted the petition and annulled the assailed resolution of the Secretary of Justice.15
14. According to the CA, the respondents were denied their right to due process in the proceedings before the NBI and the
Secretary of Justice.16
ISSUE: W/N the respondents were denied due process
RULING: NOoooooooooooooo
1. We find no merit in the respondent’s claim that they were denied due process when they were not informed by the Secretary of
Justice of the pendency of the petitioner’s appeal.
2. The essence of due process is simply the opportunity to be heard.
3. What the law prohibits is not the absence of previous notice but its absolute absence and lack of opportunity to be heard.
Sufficient compliance with the requirements of due process exists when a party is given a chance to be heard through his
motion for reconsideration.28
4. In the present case, we do not find it disputed that the respondents filed with the Secretary of Justice a motion for
reconsideration of her resolution. Therefore, any initial defect in due process, if any, was cured by the remedy the respondents
availed of.
5. On the respondents’ allegation that they were denied due process during the NBI investigation, we stress that the functions of
this agency are merely investigatory and informational in nature. It has no judicial or quasi-judicial powers and is incapable of
granting any relief to any party. It cannot even determine probable cause.
6. The NBI is an investigative agency whose findings are merely recommendatory. It undertakes investigation of crimes upon its
own initiative or as public welfare may require in accordance with its mandate. It also renders assistance when requested in the
investigation or detection of crimes in order to prosecute the persons responsible. 29
7. Additional info: It is well-settled that the findings of the Secretary of Justice are not subject to interference by the courts, save
only when he acts with grave abuse of discretion; when he grossly misapprehends facts; when he acts in a manner so patent
 and gross as to amount to an evasion of positive duty or a virtual refusal to perform the duty enjoined by law; or when he acts
outside the contemplation of law.41

Judges and Disciplinary Cases

Aspects of the Proceedings
GMA v. COMELEC

1. Resolution 9615 of the Commission on Elections (COMELEC) changed the airtime limitations for political campaign from “per
station” basis, as used during the 2007 and 2010 elections, to a “total aggregate” basis for the 2013.
2. Various broadcast networks such as ABS-CBN, ABC, GMA, MBC, NBN, RMN and KBP questioned the interpretation of the
COMELEC on the ground that the provisions are oppressive and violative of the constitutional guarantees of freedom of
expression and of the press.
3. Collectively, they question the constitutionality of Section 9 (a), which provides for an “aggregate total” airtime instead of the
previous “per station” airtime for political campaigns or advertisements, and also required prior COMELEC approval for
candidates' television and radio guestings and appearances.
4. Limiting the broadcast and radio advertisements of candidates and political parties for national election positions to an
aggregate total of one hundred twenty (120) minutes and one hundred eighty (180) minutes, respectively.
5. Section 6 of Republic Act No. 9006 (R.A. No. 9006), otherwise known as the Fair Election Act:
a. Each bona fide candidate or registered political party for a nationally elective office shall be entitled to not more
than one hundred twenty (120) minutes of television advertisement and one hundred eighty (180) minutes of
radio advertisement whether by purchase or donation.
b. Each bona fide candidate or registered political party for a locally elective office shall be entitled to not more
than sixty (60) minutes of television advertisement and ninety (90) minutes of radio advertisement whether by
purchase or donation.
6. Petitioners claim that Section 9(a) limits the computation of “aggregate total” airtime and imposes unreasonable burden on
broadcast media of monitoring a candidate’s or political party’s aggregate airtime.
7. Comelec maintains that the per candidate rule or total aggregate airtime limit is in accordance with the Fair Election Act as this
would truly give life to the constitutional objective to equalize access to media during elections.
8. It sees this as a more effective way of "levelling the playing field" between candidates/political parties with enormous resources
and those without much.
9. In addition to the foregoing, petitioner GMA further argues that the Resolution was promulgated without
public consultations, in violation of petitioners' right to due process.

ISSUE: W/N the resolution is valid and effectual even without public hearing before adoption
RULING: NOOoooooooo
1. The COMELEC promulgated Resolution No. 9615 on January 15, 2013 then came up with a public hearing on January 31, 2013 to
explain what it had done
2. It must not be overlooked that the new Resolution introduced a radical change in the manner in which the rules on airtime for
political advertisements are to be reckoned.
3. In this regard, it is not enough that they be published – or explained – after they have been adopted.
4. While it is true that the COMELEC is an independent office and not a mere administrative agency under the Executive
Department, rules which apply to the latter must also be deemed to similarly apply to the former, not as a matter of
administrative convenience but as a dictate of due process.
5. And this assumes greater significance considering the important and pivotal role that the COMELEC plays in the life of the
nation.
6. Thus, whatever might have been said in Commissioner of Internal Revenue v. Court of Appeals,58 should also apply mutatis
mutandis to the COMELEC when it comes to promulgating rules and regulations which adversely affect, or impose a heavy and
substantial burden on, the citizenry in a matter that implicates the very nature of government we have adopted
7. It should be understandable that when an administrative rule is merely interpretative in nature, its applicability needs nothing
further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed.
8. When, upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render
least cumbersome the implementation of the law but substantially adds to or increases the burden of those governed, it
behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed,
before that new issuance is given the force and effect of law.
9. For failing to conduct prior hearing before coming up with Resolution No. 9615, said Resolution, specifically in regard to the new
rule on aggregate airtime is declared defective and ineffectual.
ISSUE: Does Section 9(a) of Comelec Resolution No. 9615 on airtime limit violate the constitutional guaranty of freedom of
expression, of speech and of the press?
RULING: YEEEEeeeeesssss
1. Political speech is one of the most important expressions protected by the Fundamental Law. “Freedom of speech, of
expression, and of the press are at the core of civil liberties and have to be protected at all costs for the sake of democracy.”
2. GMA came up with its analysis of the practical effects of such a regulation: Given the reduction of a candidate’s airtime minutes
in the New Rules, petitioner GMA estimates that a national candidate will only have 120 minutes to utilize for his political
advertisements in television during the whole campaign period of 88 days, or will only have 81.81 seconds per day TV exposure
allotment.
3. If he chooses to place his political advertisements in the 3 major TV networks in equal allocation, he will only have 27.27
seconds of airtime per network per day.
4. This barely translates to 1 advertisement spot on a 30-second spot basis in television.
5. The Court agrees. The assailed rule on “aggregate-based” airtime limits is unreasonable and arbitrary as it unduly restricts and
constrains the ability of candidates and political parties to reach out and communicate with the people.
6. Here, the adverted reason for imposing the “aggregate-based” airtime limits – leveling the playing field – does not constitute a
compelling state interest which would justify such a substantial restriction on the freedom of candidates and political parties to
communicate their ideas, philosophies, platforms and programs of government.

ISSUE: Does resolution No. 9165 impose unreasonable burden on the broadcast industry?
RULING: NOOOOOOOOOOOOooo
1. The Court cannot agree with the contentions of GMA.
2. The apprehensions of COMELEC appear more to be the result of a misappreciation of the real import of the regulation rather
than a real and present threat to its broadcast activities.
3. The Court is more in agreement with COMELEC when it explained that the legal duty of monitoring lies with the COMELEC.
4. Broadcast stations are merely required to submit certain documents to aid the COMELEC in ensuring that candidates are not
sold airtime in excess of the allowed limits.
5. There is absolutely no duty on the broadcast stations to do monitoring, much less monitoring in real time.
6. GMA grossly exaggerates when it claims that the non-existent duty would require them to hire and train an astounding
additional 39,055 personnel working on eight-hour shifts all over the country.

Extradition Proceedings
Gov’t of Hongkong v. Olalia

1. On January 30, 1995, the Republic of the Philippines and the then British Crown Colony of Hong Kong signed an "Agreement for
the Surrender of Accused and Convicted Persons." It took effect on June 20, 1997.
2. On July 1, 1997, Hong Kong reverted back to the People’s Republic of China and became the Hong Kong Special Administrative
Region.
3. Private respondent Muñoz was charged before the Hong Kong Court with three (3) counts of the offense of "accepting an
advantage as agent," in violation of Section 9 (1) (a) of the Prevention of Bribery Ordinance, Cap. 201 of Hong Kong.
4. He also faces seven (7) counts of the offense of conspiracy to defraud, penalized by the common law of Hong Kong.
5. Warrants of arrest were issued against him.
6. If convicted, he faces a jail term of seven (7) to fourteen (14) years for each charge.
7. DOJ received from the Hong Kong Department of Justice a request for the provisional arrest of private respondent.
8. The DOJ then forwarded the request to the National Bureau of Investigation (NBI) which, in turn, filed with the RTC of Manila,
Branch 19 an application for the provisional arrest of private respondent.
9. RTC, Branch 19, Manila issued an Order of Arrest against private respondent. That same day, the NBI agents arrested and
detained him.
10. Private respondent filed with the Court of Appeals a petition for certiorari, prohibition and mandamus with application for
preliminary mandatory injunction and/or writ of habeas corpus questioning the validity of the Order of Arrest.
11. On November 9, 1999, the Court of Appeals rendered its Decision declaring the Order of Arrest void.
12. On November 12, 1999, the DOJ filed with this Court a petition for review on certiorari, docketed as G.R. No. 140520, praying
that the Decision of the Court of Appeals be reversed.
13. On December 18, 2000, this Court rendered a Decision granting the petition of the DOJ and sustaining the validity of the Order
of Arrest against private respondent.
14. The Decision became final and executory on April 10, 2001.
15. Meanwhile, as early as November 22, 1999, petitioner Hong Kong Special Administrative Region filed with the RTC of Manila a
petition for the extradition of private respondent, docketed as Civil Case No. 99-95733, raffled off to Branch 10, presided by
Judge Ricardo Bernardo, Jr.
16. For his part, private respondent filed, in the same case,- a petition for bail which was opposed by petitioner.
17. Judge Bernardo, Jr. issued an Order denying the petition for bail, holding that there is no Philippine law granting bail in
extradition cases and that private respondent is a high "flight risk."
18. Judge Bernardo, Jr. inhibited himself from further hearing Civil Case No. 99-95733. It was then raffled off to Branch 8 presided
by respondent judge.
19. Private respondent filed a motion for reconsideration of the Order denying his application for bail.
20. This was granted by respondent judge in an Order dated December 20, 2001 allowing private respondent to post bail, thus:
21. In conclusion, this Court will not contribute to accused’s further erosion of civil liberties. The petition for bail is granted subject
to the following conditions:
22. Bail is set at Php750,000.00 in cash
23. Accused must surrender his valid passport to this Court;
24. The Department of Justice is given immediate notice and discretion of filing its own motion for hold departure order before this
Court even in extradition proceeding; and
25. Accused is required to report to the government prosecutors handling this case or if they so desire to the nearest office, at any
time and day of the week; and if they further desire, manifest before this Court to require that all the assets of accused, real and
personal, be filed with this Court soonest, with the condition that if the accused flees from his undertaking, said assets be
forfeited in favor of the government and that the corresponding lien/annotation be noted therein accordingly.
26. Petitioner filed an urgent motion to vacate the above Order, but it was denied by respondent judge in his Order dated April 10,
2002.
27. Hence, the instant petition.
28. Petitioner alleged that the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in
admitting private respondent to bail; that there is nothing in the Constitution or statutory law providing that a potential
extraditee has a right to bail, the right being limited solely to criminal proceedings.
29. In his comment on the petition, private respondent maintained that the right to bail guaranteed under the Bill of Rights extends
to a prospective extraditee; and that extradition is a harsh process resulting in a prolonged deprivation of one’s liberty.
30. Section 13, Article III of the Constitution provides that the right to bail shall not be impaired, thus:
31. Sec. 13. All persons, except those charged with offenses punishable by reclusion perpetua when evidence of guilt is strong, shall,
before conviction, be bailable by sufficient sureties, or be released on recognizance as may be provided by law. The right to bail
shall not be impaired even when the privilege of the writ of habeas corpus is suspended. Excessive bail shall not be required.

ISSUE: W/N respondent judge commited GAD when he granted the bail

RULING: NOOOOOOOoooooooo

1. Jurisprudence provides that the right to bail is not granted in extradition proceedings.
2. However, this Court cannot ignore the following trends in international law:
a. the growing importance of the individual person in public international law who, in the 20th century, has gradually
attained global recognition;
b. the higher value now being given to human rights in the international sphere;
c. the corresponding duty of countries to observe these universal human rights in fulfilling their treaty obligations; and
d. the duty of this Court to balance the rights of the individual under our fundamental law, on one hand, and the law on
extradition, on the other.
3. The modern trend in public international law is the primacy placed on the worth of the individual person and the sanctity of
human rights.
4. For one, the Nuremberg and Tokyo trials after World War II resulted in the unprecedented spectacle of individual defendants
for acts characterized as violations of the laws of war, crimes against peace, and crimes against humanity.
5. Recently, under the Nuremberg principle, Serbian leaders have been persecuted for war crimes and crimes against humanity
committed in the former Yugoslavia. These significant events show that the individual person is now a valid subject of
international law.
6. On a more positive note, also after World War II, both international organizations and states gave recognition and importance
to human rights.
7. Thus, on December 10, 1948, the United Nations General Assembly adopted the Universal Declaration of Human Rights in which
the right to life, liberty and all the other fundamental rights of every person were proclaimed.
8. While not a treaty, the principles contained in the said Declaration are now recognized as customarily binding upon the
members of the international community.
9. Thus, in Mejoff v. Director of Prisons,2 this Court, in granting bail to a prospective deportee, held that under the
Constitution,3 the principles set forth in that Declaration are part of the law of the land.
10. In 1966, the UN General Assembly also adopted the International Covenant on Civil and Political Rights which the Philippines
signed and ratified
11. This commitment is enshrined in Section II, Article II of our Constitution which provides: "The State values the
12. In other words, the Philippine authorities are under obligation to make available to every person under detention such remedies
which safeguard their fundamental right to liberty.
13. These remedies include the right to be admitted to bail.
14. First, we note that the exercise of the State’s power to deprive an individual of his liberty is not necessarily limited to criminal
proceedings. Respondents in administrative proceedings, such as deportation and quarantine, 4 have likewise been detained.
15. Second, to limit bail to criminal proceedings would be to close our eyes to our jurisprudential history.
16. Section 2(a) of Presidential Decree (P.D.) No. 1069 (The Philippine Extradition Law) defines "extradition" as "the removal of an
accused from the Philippines with the object of placing him at the disposal of foreign authorities to enable the requesting state
or government to hold him in connection with any criminal investigation directed against him or the execution of a penalty
imposed on him under the penal or criminal law of the requesting state or government."
17. It is not a trial to determine the guilt or innocence of the potential extraditee. 12
18. Nor is it a full-blown civil action, but one that is merely administrative in character.13
19. But while extradition is not a criminal proceeding, it is characterized by the following:
a. it entails a deprivation of liberty on the part of the potential extraditee and
b. the means employed to attain the purpose of extradition is also "the machinery of criminal law."
20. In other words, he had been detained for over two (2) years without having been convicted of any crime.
21. The applicable standard of due process, however, should not be the same as that in criminal proceedings.
22. The time-honored principle of pacta sunt servanda demands that the Philippines honor its obligations under the Extradition
Treaty it entered into with the Hong Kong Special Administrative Region.
23. An extradition proceeding being sui generis, the standard of proof required in granting or denying bail can neither be the proof
beyond reasonable doubt in criminal cases nor the standard of proof of preponderance of evidence in civil cases.
24. In his Separate Opinion in Purganan, then Associate Justice, now Chief Justice Reynato S. Puno, proposed that a new standard
which he termed "clear and convincing evidence" should be used in granting bail in extradition cases.
25. In this case, that private is a flight risk.

Arbitration
RCBC v. Banco de Oro
1. Before the Court are:
a. the Joint Motion and Manifestation by RCBC Capital Corporation ("RCBC Capital"), BDO Unibank, Inc. ("BDO"), and George
L. Go, in his personal capacity and as attorney-in-fact of the individual stockholders as listed in the Share Purchase
Agreement thru their respective counsels; and
b. the Joint Motion and Manifestation dated October 1, 2013 filed in G.R. No. 200213 by BDO and RCBC Capital thru their
respective counsel.
2. All three petitions emanated from arbitration proceedings commenced by RCBC Capital pursuant to the arbitration clause under
its Share Purchase Agreement (SPA) with EPCIB involving the latter’s shares in Bankard, Inc.
3. In the course of arbitration conducted by the Tribunal constituted and administered by the International Chamber of
Commerce-International Commercial Arbitration (ICC-ICA), EPCIB was merged with BDO which assumed all its liabilities and
obligations.
4. The RTC confirmed the Second Partial Award issued by the Arbitration Tribunal ordering BDO to pay RCBC Capital proportionate
share in the advance costs and dismissing BDO’s counterclaims. -> challenged through petition for review
5. Resolution in CA-G.R. SP No. 120888 which denied BDO’s application for the issuance of a stay order and/or temporary
restraining order (TRO)/preliminary injunction against the RTC of Makati City -> challenged through petition for cetiorari
6. Acting upon RCBC Capital’s urgent motion, the RTC issued on August 22, 2011 a writ of execution for the implementation of the
court’s order confirming the Final Award rendered by the Arbitration Tribunal on June 16, 2010.
7. The CA denied BDO’s petition for certiorari and prohibition with application for issuance of a TRO and/or writ of preliminary
injunction against the RTC of Makati City,
8. By Order dated June 24, 2009, the RTC denied BDO’s motion for access of the computerized accounting system of Bankard, Inc.
after Chairman Richard Ian Barker had denied BDO’s request that it be given access to the said source of facts or data used in
preparing the accounting summaries submitted in evidence before the Arbitration Tribunal.
9. Both RCBC Capital and BDO filed motions for partial reconsideration of the above decision.
10. In their Joint Motion and Manifestation the parties submit and pray that –
 a. settle their differences with respect to their respective causes of action, claims or counterclaims in the RCBC Capital Petition
and the BDO Petition, with a view to a renewal of their business relations.
b. have agreed to jointly terminate and dismiss the same in accordance with their agreement.
c. In view of the foregoing compromise between the Parties, BDO, RCBC Capital and Go/Shareholders, with the assistance of
their respective counsels, have decided to jointly move for the termination and dismissal of the above-captioned cases with
prejudice.
11. BDO and RCBC Capital respectfully pray for such other relief as may be deemed just or equitable under the premises. 3
12. IN VIEW OF THE FOREGOING and as prayed for, G.R. Nos. 196171, 199238 and 200213 are hereby ordered DISMISSED with
prejudice and are deemed CLOSED and TERMINATED.

C. Academic Discipline
In General
ADMU v. Capulong (fraternity)
1. Eighteen (18) years later, the right of a University to refuse admittance to its students, this time in Ateneo de Manila University
proper, is again challenged.
2. Whereas, in the Garcia case referred to in the opening paragraph, the individual concerned was not a regular student, the
respondents in the case at bar, having been previously enrolled in the University, seek re-admission.
3. Moreover, in the earlier case, the petitioner was refused admittance, not on such considerations as personality traits and
character orientation, or even inability to meet the institution's academic or intellectual standards, but because of her behavior
in the classroom. The school pointedly informed her that ". . . it would seem to be in your best interest to work with a Faculty
that is more compatible with your orientations."
4. On the other hand, students who are now being refused admission into petitioner University have been found guilty of violating
Rule No. 3 of the Ateneo Law School Rules on Discipline which prohibits participation in hazing activities.
5. The case attracted much publicity due to the death of one of the neophytes and serious physical injuries inflicted on another.
6. As a requisite to membership, the Aquila Legis, a fraternity organized in the Ateneo Law School, held its initiation rites on
February 8, 9 and 10, 1991, for students interested in joining its ranks.
7. As a result of such initiation rites, Leonardo "Lennie" H. Villa, a first year student of petitioner university, died of serious physical
injuries at Chinese General Hospital on February 10, 1991.
8. He was not the lone victim, though, for another freshman by the name of Bienvenido Marquez was also hospitalized at the
Capitol Medical Center for acute renal failure occasioned by the serious physical injuries inflicted upon him on the same
occasion.
9. Dean Cynthia del Castillo created a Joint Administration-Faculty-Student Investigating Committee2 which was tasked to
investigate and submit a report within 72 hours on the circumstances surrounding the death of Lennie Villa.
10. Said notice also required respondent students to submit their written statements within twenty-four (24) hours from receipt.
11. Although respondent students received a copy of the written notice, they failed to file a reply. In the meantime, they were
placed on preventive suspension.
12. In a notice dated February 14, 1991, the Joint Administration-Faculty-Student Investigating Committee, after receiving the
written statements and hearing the testimonies of several witness, found a prima facie case against respondent students for
violation of Rule 3 of the Law School Catalogue entitled "Discipline."4
13. Respondent students were then required to file their written answers to the formal charge on or before February 18, 1991;
otherwise, they would be deemed to have waived their right to present their defenses.
14. On February 20, 1991, petitioner Dean created a Disciplinary Board composed of petitioners Judge Ruperto Kapunan, Justice
Venicio Escolin, Atty. Marcos Herras, Fiscal Miguel Albar and Atty. Ferdinand Casis, to hear the charges against respondent
students.
15. Respondent students, through counsel, requested that the investigation against them be held in abeyance, pending action on
their request for copies of the evidence against them.
16. Subsequently, respondent students were directed to appear on March 2, 1991 for clarificatory questions. 8 They were also
informed that:
a) The proceedings will be summary in nature in accordance with the rules laid down in the case of Guzman vs. National
University;9
b) Petitioners have no right to cross-examine the affiants-neophytes;
c) Hazing which is not defined in the School catalogue shall be defined in accordance with the proposed bill of Sen. Jose
Lina, Senate Bill No. 3815;
d) The Board will take into consideration the degree of participation of the petitioners in the alleged hazing incident in
imposing the penalty;
e) The Decision of the Board shall be appealable to the President of the University, i. e., Respondent Joaquin Bernas S. J.
17. Bernas wrote Dean Castillo that, "in cases where the Disciplinary Board is not prepared to impose the penalty of dismissal, I
would prefer that the Board leave the decision on the penalty to the Administration so that this case be decided not just on the
Law School level but also on the University level." 10
18. Board found that respondent students acted as master auxiliaries or "auxies" during the initiation rites of Aquila Legis, and
exercised the "auxies privilege," which allows them to participate in the physical hazing.
19. Although respondent students claim that they were there to assist and attend to the needs of the neophytes, actually they were
assigned a definite supportive role to play in the organized activity.
20. In conclusion, the Board pronounced respondents guilty of hazing, either by active participation or through acquiescence.
21.
However, in view of the lack of unanimity among the members of the Board on the penalty of dismissal, the Board left the
imposition of the penalty to the University Administration.
22. Petitioner Dean del Castillo waived her prerogative to review the decision of the Board and left to the President of the
University the decision of whether to expel respondents or not.
23. Fr. Joaquin G. Bernas, as President of the Ateneo de Manila University, accepted the factual findings of the Board,
24. In a resolution dated March 18, 1991 and concurred in by petitioner Fr. Bernas, 13 the Board excluded respondent students Abas
and Mendoza from the coverage of the resolution
25. On March 18, 1991, respondent students filed with the Regional Trial Court of Makati, a petition for certiorari, prohibition
and mandamus with prayer for temporary restraining order and preliminary injunction 14 alleging that they were currently
enrolled as students for the second semester of school year 1990-91.
26. Unless a temporary restraining order is issued, they would be prevented from taking their examinations.
27. The petition principally centered on the alleged lack of due process in their dismissal.
28. On the same day, Judge Madayag issued a temporary restraining order the enjoining petitioners from dismissing respondent
students and stopping the former from conducting hearings relative to the hazing incident. 15
29. Temporary restraining order were issued on March 18, 1991 lapsed.
30. Consequently, a day after the expiration of the temporary restraining order, Dean del Castillo created a Special Board composed
of Atty.(s) Jose Claro Tesoro, Ramon Caguioa, and Ramon Ereñeta to investigate the charges of hazing against respondent
students Abas and Mendoza.
31. Respondent students reacted immediately by filing a Supplemental Petition of certiorari, prohibition and mandamus with prayer
for a temporary restraining order and preliminary injunction, to include the aforesaid members of the Special Board, as
additional respondents to the original petition.16
32. Petitioners moved to strike out the Supplement Petition arguing that the creation of the Special Board was totally unrelated to
the original petition which alleged lack of due process in the conduct of investigations by the Disciplinary Board against
respondent students
33. Respondent Judge ordered petitioners to reinstate respondent students.
34. Simultaneously, the court ordered petitioners to conduct special examinations in lieu of the final examinations which allegedly
the students were not allowed to take, and enjoined them to maintain the status quo with regard to the cases of Adel Abas and
Zosimo Mendoza pending final determination of the issue of the instant case.
35. Lastly, it directed respondent students to file a bond in the amount of P50,000.00. 19
36. Special Board investigating petitioners Abas and Mendoza and directed the dropping of their names from its roll of students. 20
37. Respondent judge issued the writ of preliminary injunction upon posting by respondents of a bond dated May 17, 1991 in the
amount of P50,000.00.
38. Hence, this special civil action of certiorari under Rule 65 with prayer for the issuance of a temporary restraining order enjoining
the enforcement of the May 17, 1991 order of respondent judge. 21

ISSUE: W/N Ateneo has the right to expel students pursuant to its disciplinary rules and moral standards.
RULING: YYYYYYYeeeeeeeeeeeeessssssssssssssssssss
1. We grant the petition and reverse the order of respondent judge ordering readmission of respondent students.
2. Respondent judge committed grave abuse of discretion when he ruled that respondent students had been denied due process
in the investigation of the charges against them.
3. Corollary to their contention of denials of due process is their argument that it is Ang Tibay case25 and not the Guzman case
which is applicable in the case at bar. Though both cases essentially deal with the requirements of due process,
the Guzman case is more apropos to the instant case, since the latter deals specifically with the minimum standards to be
satisfied in the imposition of disciplinary sanctions in academic institutions, such as petitioner university herein, thus:
a. the students must be informed in writing of the nature and cause of any accusation against them; (2) that they shall
have the right to answer the charges against them with the assistance of counsel, if desired:
b. they shall be informed of the evidence against them
c. they shall have the right to adduce evidence in their own behalf; and
d. the evidence must be duly considered by the investigating committee or official designated by the school authorities to
hear and decide the case.26
4. It cannot seriously be asserted that the above requirements were not met.
5. When, in view of the death of Leonardo Villa, petitioner Cynthia del Castillo, as Dean of the Ateneo Law School, notified and
required respondent students on February 11, 1991 to submit within twenty-four hours their written statement on the
incident,27 the records show that instead of filing a reply, respondent students requested through their counsel, copies of the
charges.28
6. Indubitably, the nature and cause of the accusation were adequately spelled out in petitioners' notices dated February 14 and
20, 1991.30
7. The requisite assistance of counsel was met when, from the very start of the investigations before the Joint Administration
Faculty-Student Committee, the law firm of Gonzales Batiler and Bilog and Associates put in its appearance and filed pleadings
in behalf of respondent students.
8. Respondent students may not use the argument that since they were not accorded the opportunity to see and examine the
written statements which became the basis of petitioners' February 14, 1991 order, they were denied procedural due
process.31
9. Granting that they were denied such opportunity, the same may not be said to detract from the observance of due process, for
disciplinary cases involving students need not necessarily include the right to cross examination.
10. An administrative proceeding conducted to investigate students' participation in a hazing activity need not be clothed with the
attributes of a judicial proceeding.
11. A closer examination of the March 2, 1991 hearing which characterized the rules on the investigation as being summary in
nature and that respondent students have no right to examine affiants-neophytes, reveals that this is but a reiteration of our
previous ruling in Alcuaz.32
12. Respondent students' contention that the investigating committee failed to consider their evidence is far from the truth
because the February 14, 1992 ordered clearly states that it was reached only after receiving the written statements and
hearing the testimonies of several witnesses.33
13. With regard to the charge of hazing, respondent students fault petitioners for not explicitly defining the word "hazing" and
allege that there is no proof that they were furnished copies of the 1990-91 Ateneo Law School Catalogue which prohibits
hazing.
14. Such flawed sophistry is not worthy of students who aspire to be future members of the Bar.
15. It cannot be overemphasized that the charge filed before the Joint Administration-Faculty-Student Investigating Committee and
the Disciplinary Board is not a criminal case requiring proof beyond reasonable doubt but is merely administrative in
character.
16. Respondent students argue that petitioners are not in a position to file the instant petition under Rule 65 considering that they
failed to file a motion for reconsideration first before the trial court, thereby by passing the latter and the Court of Appeals. 35
17. It is accepted legal doctrine that an exception to the doctrine of exhaustion of remedies is when the case involves a question of
law,36 as in this case, where the issue is whether or not respondent students have been afforded procedural due process prior to
their dismissal from petitioner university.
18. Lastly, respondent students argue that we erred in issuing a Temporary Restraining Order since petitioners do not stand to
suffer irreperable damage in the event that private respondents are allowed to re-enroll.
19. No one can be so myopic as to doubt that the immediate reinstatement of respondent students who have been investigated
and found by the Disciplinary Board to have violated petitioner university's disciplinary rules and standards will certainly
undermine the authority of the administration of the school.
20. This we would be most loathe to do.
21. More importantly, it will seriously impair petitioner university's academic freedom which has been enshrined in the 1935,
1973 and the present 1987 Constitutions.
22. At this juncture, it would be meet to recall the essential freedoms subsumed by Justice Felix Frankfurter in the term "academic
freedom" cited in the case of Sweezy v. New Hampshire,37 thus:
a. who may teach:
b. what may be taught;
c. how it shall be taught; and
d. who may be admitted to study.

Go v. Colegio de San Juan de Letran

1. In October 2001, Mr. George Isleta, the Head of Letran’s Auxiliary Services Department, received information that certain
fraternities were recruiting new members among Letran’s high school students.
2. He also received a list of the students allegedly involved.
3. School authorities started an investigation, including the conduct of medical examinations on the students whose names were
on the list.
4. Dr. Emmanuel Asuncion, the school physician, reported that six (6) students bore injuries, probable signs of blunt trauma of
more than two weeks, on the posterior portions of their thighs. 5
5. Mr. Rosarda, the Assistant Prefect for Discipline, conferred with the students and asked for their explanations in writing.
6. Four (4) students, namely: Raphael Jay Fulgencio, Nicolai Lacson, Carlos Parilla, and Isaac Gumba, admitted that they were
neophytes of the Tau Gamma Fraternity and were present in a hazing rite held on October 3, 2001 in the house of one Dulce in
Tondo, Manila.
7. They also identified the senior members of the fraternity present at their hazing. These included Kim, then a fourth year high
school student.
8. In the meantime, Gerardo Manipon, Letran’s security officer, prepared an incident report6 that the Tau Gamma Fraternity had
violated its covenant with Letran by recruiting members from its high school department.
9. Manipol had spoken to one of the fraternity neophytes and obtained a list of eighteen (18) members of the fraternity currently
enrolled at the high school department. Kim’s name was also in the list.
10. At the Parents-Teachers Conference held on November 23, 2001, Mr. Rosarda informed Kim’s mother, petitioner Mrs. Angelita
Go (Mrs. Go), that students had positively identified Kim as a fraternity member.
11. Mrs. Go expressed disbelief as her son was supposedly under his parents’ constant supervision.
12. Mr. Rosarda thereafter spoke to Kim and asked him to explain his side. Kim responded through a written statement dated
December 19, 2001; he denied that he was a fraternity member.
13. He stated that at that time, he was at Dulce’s house to pick up a gift, and did not attend the hazing of Rafael, Nicolai, Carlos, and
Isaac.
14. On the same day, Mr. Rosarda requested Kim’s parents (by notice) to attend a conference on January 8, 2002 to address the
issue of Kim’s fraternity membership.7
15. Both Mrs. Go and petitioner Mr. Eugene Go (Mr. Go) did not attend the conference.
16. In time, the respondents found that twenty-nine (29) of their students, including Kim, were fraternity members.
17.
The respondents found substantial basis in the neophytes’ statements that Kim was a senior fraternity member. Based on their
disciplinary rules, the Father Prefect for Discipline (respondent Rev. Fr. Jose Rhommel Hernandez) recommended the fraternity
members’ dismissal from the high school department rolls
18. After a meeting with the Rector’s Council,9 however, respondent Fr. Edwin Lao, Father Rector and President of Letran, rejected
the recommendation to allow the fourth year students to graduate from Letran.
19. Students who were not in their fourth year were allowed to finish the current school year but were barred from subsequent
enrollment in Letran.
20. Mr. Rosarda conveyed to Mrs. Go and Kim, in their conference on January 15, 2002, the decision to suspend Kim from January
16, 2002 to February 18, 2002.10 Incidentally, Mr. Go did not attend this conference. 11
21. On even date, Mrs. Go submitted a request for the deferment of Kim’s suspension to January 21, 2002 12 so that he could take a
previously scheduled examination.13
22. The request was granted.14
23. On January 22, 2002, the respondents conferred with the parents of the sanctioned fourth year students to discuss the
extension classes the students would take (as arranged by the respondents) as make-up for classes missed during their
suspension.
24. These extension classes would enable the students to meet all academic requirements for graduation from high school by the
summer of 2002. T
25. The respondents also proposed that the students and their parents sign a pro-forma agreement to signify their conformity with
their suspension.
26.
Mr. and Mrs. Go refused to sign.
27. They also refused to accept the respondents’ finding that Kim was a fraternity member. They likewise insisted that due process
had not been observed.
28. On January 28, 2002, the petitioners filed a complaint16 for damages before the RTC of Caloocan City claiming that the
respondents17 had unlawfully dismissed Kim.18 Mr. and Mrs. Go also sought compensation for the "business opportunity losses"
they suffered while personally attending to Kim’s disciplinary case.
29. RTC ruled in favor of MR and MRS. Go
30. CA reversed the decision
ISSUE: W/N the CA erred in reversing the decision of RTC.
RULING: NOOOOOOOOOOOOOooo
1. Preliminarily, we note that the disciplinary sanction the respondents imposed on Kim was actually a suspension and not a
"dismissal" as the petitioners insist in their complaint.
2. We agree with the CA that the petitioners were well aware of this fact, as Mrs. Go’s letter specifically requested that
Kim’s suspension be deferred.
3. That this request was granted and that Kim was allowed to take the examination further support the conclusion that Kim had
not been dismissed.
4. Further, the RTC’s statement that Letran, a private school, possesses no authority to impose a dismissal, or any disciplinary
action for that matter, on students who violate its policy against fraternity membership must be corrected. The RTC reasoned
out that Order No. 20, series of 1991, of the then Department of Education, Culture, and Sports (DECS Order No. 20, s.
1991),29 which the respondents cite as legal basis for Letran’s policy, only covered public high schools and not private high
schools such as Letran.
5. Even a cursory perusal of the rest of DECS Order No. 20, s. 1991 reveals the education department’s clear intent to apply the
prohibition against fraternity membership for all elementary and high school students, regardless of their school of enrollment.
6. The order’s title, "Prohibition of Fraternities and Sororities in Elementary and Secondary Schools," serves to clarify whatever
ambiguity may arise from its fourth paragraph.32 It is a straightforward title.
7. For this Court to sustain the RTC’s restrictive interpretation and accordingly limit the prohibition in DECS Order No. 20, s. 1991
to students enrolled in public schools would be to impede the very purpose of the order. 33
8. Incidentally, the penalty for non-compliance with DECS Order No. 20, s. 1991, is expulsion, a severe form of disciplinary penalty
consisting of excluding a student from admission to any public or private school in the country.
9. It requires the approval of the education secretary before it can be imposed. 35
10. In contrast, the penalty prescribed by the rules of Letran for fraternity membership among their high school students
is dismissal, which is limited to the exclusion of an erring student from the rolls of the school.
11. The right to establish disciplinary rules is consistent with the mandate in the Constitution 38 for schools to teach discipline;39 in
fact, schools have the duty to develop discipline in students.40
12. Corollarily, the Court has always recognized the right of schools to impose disciplinary sanctions on students who violate
disciplinary rules.41 The penalty for violations includes dismissal or exclusion from re-enrollment.
13. We find Letran’s rule prohibiting its high school students from joining fraternities to be a reasonable regulation, not only
because of the reasons stated in DECS Order No. 20, s. 1991,42 but also because of the adult-oriented activities often associated
with fraternities.
14. Expectedly, most, if not all, of its high school students are minors.
15. In this case, the petitioners were notified of both rule and penalty through Kim’s enrollment contract for school year 2001 to
2002.
16. On the issue of due process, the petitioners insist that the question be resolved under the guidelines for administrative due
process in Ang Tibay v. Court of Industrial Relations.47
17. They argue that the respondents violated due process
a. by not conducting a formal inquiry into the charge against Kim;
b. by not giving them any written notice of the charge; and
c. by not providing them with the opportunity to cross-examine the neophytes who had positively identified Kim as a
senior member of their fraternity. The petitioners also fault the respondents for not showing them the neophytes’
written statements, which they claim to be unverified, unsworn, and hearsay.
18. These arguments deserve scant attention.
19. In Ateneo de Manila University v. Capulong,48 the Court held that Guzman v. National University,49 not Ang Tibay, is the
authority on the procedural rights of students in disciplinary cases. I
20. SEE above standards
21. We are likewise not moved by the petitioners’ argument that they were not given the opportunity to examine the neophytes’
written statements and the security officer’s incident report.53
22. Since disciplinary proceedings may be summary, the insistence that a "formal inquiry" on the accusation against Kim should
have been conducted lacks legal basis.
23. It has no factual basis as well. While the petitioners state that Mr. and Mrs. Go were "never given an opportunity to assist
Kim,"56 the records show that the respondents gave them two (2) notices
24. The raison d’etre of the written notice rule is to inform the student of the disciplinary charge against him and to enable him to
suitably prepare a defense. The records show that as early as November 23, 2001, it was already made plain to the petitioners
that the subject matter of the case against Kim was his alleged fraternity membership.
25. And Kim had been heard. His written explanation was received, indeed even solicited, by the respondents.1âwphi1 Thus, he
cannot claim that he was denied the right to adduce evidence in his behalf.
26. The respondents' liability for actual damages cannot be based on speculation.

D. Deportation Proceedings
In General
Lao Gi v. CA
1. Secretary of Justice rendered Opinion No. 191 finding Filomeno Chia, Jr., alias Sia Pieng Hui to be a Filipino citizen as it appears
that his father Filomeno Chia, Sr. is a Filipino citizen born on November 28, 1899 being the legitimate son of Inocencio Chia and
Maria Layug of Guagua, Pampanga.
2. However on October 3, 1980 the Minister of Justice rendered Opinion No. 147, series of 1980 cancelling Opinion No. 191, series
of 1958 and setting aside the citizenship of Filomeno Chia, Sr. on the ground that it was founded on fraud and
misrepresentation.
3. On March 9, 1981 a charge for deportation was filed with the Commission on Immigration and Deportation (CID) against Lao Gi
alias Filomeno Chia, Sr., his wife and children.
4. An amended charge was filed with the CID on March 19,1981 alleging that said respondents refused to register as aliens having
been required to do so and continued to refuse to register as such.
5. On August 31, 1981 another amended charge was filed alleging that Manuel Chia committed acts of undesirability.
6. On September 4, 1981 said respondents filed a motion to dismiss the amended charges on the ground that the CID has no
authority to reopen a matter long settled under Opinion No. 191, series of 1958.
7. Said respondents then filed with this Court on February 11, 1982 a petition for certiorari and prohibition with a prayer for the
issuance of a writ of preliminary injunction and restraining order docketed as G.R. No. 59619. After requiring a comment
thereon, on April 28, 1982 this court en banc resolved to dismiss the petition for lack of merit.
8. Earlier, Manuel Chia was charged with falsification of public documents in the Court of First Instance (CFI) of Manila in Criminal
Case No. 60172 for alleging that he was a Filipino citizen in the execution of a Deed of Absolute Sale of certain real property.
9. He was acquitted by the trial court in an order dated May 5, 1982 on the ground that Opinion No. 191, series of 1958 of the
Secretary of Justice may be equated as res judicata and that revocation thereof by Opinion No. 147, series of 1980 cannot be
considered just, fair and reasonable.
10. On June 1, 1982 respondents filed a motion for reconsideration of the aforesaid resolution of this Court dismissing the petition
but this was denied by another resolution of this Court dated August 17, 1982.
11. On September 23, 1982 the CID set the deportation case against respondents for hearing and Acting Commissioner Victor G.
Nituda gave respondents three (3) days to move for reconsideration of the order directing them to register as aliens and to
oppose the motion for their arrest.
12. An appeal therefrom was interposed to the Court of Appeals. In due course a decision was rendered on August 19, 1987
dismissing the appeal with costs against petitioners.
13. A motion for reconsideration of the decision filed by petitioners was also denied in a resolution dated January 7, 1988.
ISSUE: W/N the petitioners should be deported
RULING: NOoooooooo
1. There can be no question that the CID has the authority and jurisdiction to hear and determine the deportation case against
petitioners and in the process determine also the question of citizenship raised by the petitioners.
2. From the foregoing provision it is clear that before any alien may be deported upon a warrant of the Commissioner of
Immigration, there should be a prior determination by the Board of Commissioners of the existence of the ground as charged
against the alien.
3. In this case it appears that petitioners are charged with having entered the Philippines by means of false and misleading
statements or without inspection or admission by the immigration authorities at a designated port of entry.
4. After appropriate charges are filed in the CID the specific grounds of which he should be duly informed of, a hearing should be
conducted, and it is only after such a hearing by the CID that the alien may be ordered deported. In such a hearing, Opinion
No. 191, Series of 1958 of the Secretary of Justice and Opinion No. 147, Series of 1980 of the Minister of Justice will bear much
weight in the determination by the CID of the citizenship of said petitioners.
5. The petitioners question the Order of Acting Commissioner Nituda that they register as aliens as required by the Immigration
Act.
6. While it is not disputed that it is also within the power and authority of the Commissioner to require an alien to so register, such
a requirement must be predicated on a positive finding that the person who is so required is an alien.
7. In this case where the very citizenship of the petitioners is in issue there should be a previous determination by the CID that
they are aliens before the petitioners may be directed and required to register as aliens.
8. The power to deport an alien is an act of the State. It is an act by or under the authority of the sovereign power. 1 It is a police
measure against undesirable aliens whose presence in the country is found to be injurious to the public good and domestic
tranquility of the people. 2
9. Although a deportation proceeding does not partake of the nature of a criminal action, however, considering that it is a harsh
and extraordinary administrative proceeding affecting the freedom and liberty of a person, the constitutional right of such
person to due process should not be denied.
10. Thus, the provisions of the Rules of Court of the Philippines particularly on criminal procedure are applicable to deportation
proceedings.
11. Under Section 37(c) of the Philippine Immigration Act of 1940 as amended, it is provided:
c. No alien shall be deported without being informed of the specific grounds for deportation nor without
being given a hearing under rules of procedure to be prescribed by the Commissioner of Immigration.
12. Hence, the charge against an alien must specify the acts or omissions complained of which must be stated in ordinary and
concise language to enable a person of common understanding to know on what ground he is intended to be deported and
enable the CID to pronounce a proper judgment. 3
13. In deportation cases, the Court cannot conceive of any justification for a private party to have any right to intervene. Even if
such party can establish any damages due him arising from the deportation charge against the alien, such relief cannot be
afforded him in the deportation proceeding. His recourse if at all is in the ordinary courts.
14. Thus the Court rules that the intervention of a private prosecutor should not be allowed in deportation cases.
15. The possibility of oppression, harrassment and persecution cannot be discounted.
16. The deportation of an alien is the sole concern of the State. This is the reason why there are special prosecutors and fiscals
tasked to prosecute such cases.

E. Regulations: Fixing of Rates and Regulation of Profession

Rates
Maceda v. ERB (fixing rates)

1. Maceda seeks nullification of the Energy Regulatory Board (ERB) Orders dated December 5 and 6, 1990 on the ground that the
hearings conducted on the second provisional increase in oil prices did not allow him substantial cross-examination, in effect,
allegedly, a denial of due process.
2. Upon the outbreak of the Persian Gulf conflict on August 2, 1990, private respondents oil companies filed with the ERB their
respective applications on oil price increases (docketed as ERB Case Nos. 90-106, 90-382 and 90-384, respectively).
3. On September 21, 1990, the ERB issued an order granting a provisional increase of P1.42 per liter.
4. Petitioner Maceda filed a petition for Prohibition on September 26, 1990 (E. Maceda v. ERB, et al., G.R. No. 95203), seeking to
nullify the provisional increase.
5. We dismissed the petition on December 18, 1990, reaffirming ERB's authority to grant provisional increase even without prior
hearing, pursuant to Sec. 8 of E.O. No. 172, clarifying as follows:
6. What must be stressed is that while under Executive Order No. 172, a hearing is indispensable, it does not preclude the Board
from ordering, ex-parte, a provisional increase, as it did here, subject to its final disposition of whether or not: (1) to make it
permanent; (2) to reduce or increase it further; or (3) to deny the application.
7. In the same order of September 21, 1990, authorizing provisional increase, the ERB set the applications for hearing with due
notice to all interested parties on October 16, 1990.
8. Petitioner Maceda failed to appear at said hearing as well as on the second hearing on October 17, 1990.
9. To afford registered oppositors the opportunity to cross-examine the witnesses, the ERB set the continuation of the hearing
to October 24, 1990. This was postponed to November 5, 1990, on written notice of petitioner Maceda.
10. On November 5, 1990, the three oil companies filed their respective motions for leave to file or admit amended/supplemental
applications to further increase the prices of petroleum products.
11. The ERB admitted the respective supplemental/amended petitions on November 6, 1990 at the same time requiring applicants
to publish the corresponding Notices of Public Hearing in two newspapers of general circulation (p. 4, Rollo and Annexes "F"
and "G," pp. 60 and 62, Rollo).
12. Hearing for the presentation of the evidence-in-chief commenced on November 21, 1990 with ERB ruling that testimonies of
witnesses were to be in the form of Affidavits
13. Petitioner Maceda maintains that this order of proof deprived him of his right to finish his cross-examination of Petron's
witnesses and denied him his right to cross-examine each of the witnesses of Caltex and Shell.
14. He points out that this relaxed procedure resulted in the denial of due process.

ISSUE: W/N there is denial of due process

RULING: NOOOOOoooooooooooooo

1. The order of testimony both with respect to the examination of the particular witness and to the general course of the trial is
within the discretion of the court and the exercise of this discretion in permitting to be introduced out of the order prescribed
by the rules is not improper (88 C.J.S. 206-207).
2. Such a relaxed procedure is especially true in administrative bodies, such as the ERB which in matters of rate or price fixing is
considered as exercising a quasi-legislative, not quasi-judicial, function As such administrative agency, it is not bound by the
strict or technical rules of evidence governing court proceedings
3. In fact, Section 2, Rule I of the Rules of Practice and Procedure Governing Hearings Before the ERB provides that —
4. Petitioner Maceda also claims that there is no substantial evidence on record to support the provisional relief.
5. The Solicitor General likewise commented: Among the pieces of evidence considered by ERB in the grant of the contested
provisional relief were:
 a. certified copies of bins of lading issued by crude oil suppliers to the private respondents;
b. reports of the Bankers Association of the Philippines on the peso-dollar exchange rate at the BAP oil pit; and
c. OPSF status reports of the Office of Energy Affairs.
6. The ERB was likewise guided in the determination of international crude oil prices by traditional authoritative sources of
information on crude oil and petroleum products, such as Platt's Oilgram and Petroleum Intelligence Weekly.
7. Thus, We concede ERB's authority to grant the provisional increase in oil price, as We note that the Order of December 5, 1990
explicitly stated:
8. We lament Our helplessness over this second provisional increase in oil price.
9. We have stated that this "is a question best judged by the political leadership" (G.R. Nos. 95203-05, G.R. Nos. 95119-21, supra).
Profession
Corona v. UHPAP (pilot)
1. In issuing Administrative Order No. 04-92 (PPA-AO No. 04-92), limiting the term of appointment of harbor pilots to one year
subject to yearly renewal or cancellation, did the Philippine Ports Authority (PPA) violate respondents right to exercise their
profession and their right to due process of law?
2. The PPA was created on July 11, 1974, by virtue of Presidential Decree No. 505.
3. On December 23, 1975, Presidential Decree No. 857 was issued revising the PPAs charter.
4. Pursuant to its power of control, regulation, and supervision of pilots and the pilotage profession, [1] the PPA promulgated PPA-
AO-03-85 [2] on March 21, 1985, which embodied the Rules and Regulations Governing Pilotage Services, the Conduct of Pilots
and Pilotage Fees in Philippine Ports.
5. These rules mandate, inter alia, that aspiring pilots must be holders of pilot licenses [3] and must train as probationary pilots in
outports for three months and in the Port of Manila for four months.
6. It is only after they have achieved satisfactory performance [4] that they are given permanent and regular appointments by the
PPA itself [5] to exercise harbor pilotage until they reach the age of 70, unless sooner removed by reason of mental or physical
unfitness by the PPA General Manager. [6]
7. Harbor pilots in every harbor district are further required to organize themselves into pilot associations which would make
available such equipment as may be required by the PPA for effective pilotage services
8. In fact, every new pilot appointed by the PPA automatically becomes a member of a pilot association and is required to pay a
proportionate equivalent equity or capital before being allowed to assume his duties, as reimbursement to the association
concerned of the amount it paid to his predecessor.
9. Subsequently, then PPA General Manager Rogelio A. Dayan issued PPA-AO No. 04-92 [7] on July 15, 1992, whose avowed policy
was to instill effective discipline and thereby afford better protection to the port users through the improvement of pilotage
services.
10. This was implemented by providing therein that all existing regular appointments which have been previously issued either by
the Bureau of Customs or the PPA shall remain valid up to 31 December 1992 only and that all appointments to harbor pilot
positions in all pilotage districts shall, henceforth, be only for a term of one (1) year from date of effectivity subject to yearly
renewal or cancellation by the Authority after conduct of a rigid evaluation of performance.
11. Meanwhile, on August 31, 1992, the PPA issued Memorandum Order No. 08-92 [8] which laid down the criteria or factors to be
considered in the reappointment of harbor pilots, viz.: (1) Qualifying Factors: [9] safety record and physical/mental medical exam
report and (2) Criteria for Evaluation: [10] promptness in servicing vessels, compliance with PPA Pilotage
12. Respondents reiterated their request for the suspension of the implementation of PPA-AO No. 04-92, but Secretary Garcia
insisted on his position that the matter was within the jurisdiction of the Board of Directors of the PPA.
13. Compas appealed this ruling to the Office of the President (OP), reiterating his arguments before the DOTC.
14. On the alleged unconstitutionality and illegality of PPA-AO No. 04-92 and its implementing memoranda and circulars, Secretary
Corona opined that:
15. PPA-AO 04-92 does not forbid, but merely regulates, the exercise by harbor pilots of their profession in PPAs jurisdictional area.
(Emphasis supplied)
16. Finally, as regards the alleged absence of ample prior consultation before the issuance of the administrative order, Secretary
Corona cited Section 26 of P.D. No. 857, which merely requires the PPA to consult with relevant Government agencies.
17. Since the PPA Board of Directors is composed of the Secretaries appointed by the President to the Board, he concluded that the
law has been sufficiently complied with by the PPA in issuing the assailed administrative order.
18. RTC declared unconsti such PPA
19.
The court a quo pointed out that the Bureau of Customs, the precursor of the PPA, recognized pilotage as a profession and,
therefore, a property right under Callanta v. Carnation Philippines, Inc. [13]
20. From this decision, petitioners elevated their case to this Court on certiorari.
ISSUE: W/N respondents were denied procedural due process
RULING: NOOOOOOOoooo
1. First the respondents fail to prove that they were deprived procedural due process since they were able to seek reconsideration
of the action
2. In the case at bar, respondents questioned PPA-AO No. 04-92 no less than four times [16] before the matter was finally elevated
to the SC.
3. While respondents emphasize that the Philippine Coast Guard, which issues the licenses of pilots after administering the pilots
examinations, was not consulted, [17] the facts show that the MARINA, which took over the licensing function of the Philippine
Coast Guard, was duly represented in the Board of Directors of the PPA.
4. Neither does the fact that the pilots themselves were not consulted in any way taint the validity of the administrative order.
5. As a general rule, notice and hearing, as the fundamental requirements of procedural due process, are essential only when an
administrative body exercises its quasi-judicial function.
6. In the performance of its executive or legislative functions, such as issuing rules and regulations, an administrative body need not
comply with the requirements of notice and hearing.[19]
ISSUE: W/N respondents were deprived of property without due process of law (substantive)
RULING: YEEeeeees
1. There is no dispute that pilotage as a profession has taken on the nature of a property right.
2. Even petitioner Corona recognized this when he stated in his March 17, 1993, decision that (t)he exercise of ones profession falls
within the constitutional guarantee against wrongful deprivation of, or interference with, property rights without due process. [20]
3. Pilotage, just like other professions, may be practiced only by duly licensed individuals.
4. Licensure is the granting of license especially to practice a profession. It is also the system of granting licenses (as for professional
practice) in accordance with established standards. [21]
5. A license is a right or permission granted by some competent authority to carry on a business or do an act which, without such
license, would be illegal. [22]
6. Before harbor pilots can earn a license to practice their profession, they literally have to pass through the proverbial eye of a
needle by taking, not one but five examinations, each followed by actual training and practice. Thus, the court a quo observed:
a. Third mate – train and practice 1 year
b. Second mate - 1 yr
c. Chief Mate – 1 year
d. Master Mariner then captain of a vessel – 2 years
e. Pilots
7. Under the new issuance, they have to contend with an annual cancellation of their license which can be temporary or permanent
depending on the outcome of their performance evaluation.
8. Veteran pilots and neophytes alike are suddenly confronted with one-year terms which ipso facto expire at the end of that
period. Renewal of their license is now dependent on a rigid evaluation of performance which is conducted only after the license
has already been cancelled. Hence, the use of the term renewal.
9. It is this pre-evaluation cancellation which primarily makes PPA-AO No. 04-92 unreasonable and constitutionally infirm. In a real
sense, it is a deprivation of property without due process of law.
10. In the absence of proof to the contrary, Dayan should be presumed to have acted in accordance with law and the best of
professional motives. In any event, his actions are certainly always subject to scrutiny by higher administrative authorities.

F. Dismissals, Suspensions, Reinstatements etc.

Dismissal in Government Boards and Commissions
Dismissal in Private Sector
Salaw v. NLRC
1. Espero Santos Salaw, was employed by the private respondents in September 1967 as a credit investigator-appraiser.
2. His duties included inspecting, investigating, appraising, and identifying the company's foreclosed assets; giving valuation to its
real properties, and verifying the genuineness and encumbrances of the titles of properties mortgaged to the respondents.
3. Criminal Investigation Service (CIS) of the Philippine Constabulary, National Capital Region, extracted from the petitioner —
without the assistance of counsel — a Sworn Statement3 which made it appear that the petitioner, in cahoots with a co-
employee, Reynaldo Madrigal, a supervisor in charge of the acquired assets of respondent Associated Bank, sold twenty sewing
machines and electric generators which had been foreclosed by the respondent bank from Worldwide Garment and L.P. Money
Garment, for P60,000.00, and divided the proceeds thereof in equal shares of P30,000.00 between the two of them.
4. Petitioner was requested by private respondent Rollie Tuazon, the bank manager, to appear before the bank's Personnel
Discipline and Investigation Committee (PDIC) which would be meeting the following day, December 6, 1984, at 9:00 a.m., in
connection with the Worldwide case.
5. Petitioner was terminated from his employment effective March 27, 1985, for alleged serious misconduct or willful
disobedience and fraud or willful breach of the trust reposed on him by the private respondents.
6. Subsequently, the petitioner filed with the NLRC on April 17, 1985, a complaint for illegal dismissal against respondent Bank,
Jose R. Tengco, and Rollie Tuazon.
7. This case was docketed as Case No. NCR-4-1272-85. He likewise submitted an affidavit recanting his Sworn Statement before
the CIS (Annex "A") mentioned earlier.
8. Labor arbiter declared dismissal to be illegal.
9. The private respondents appealed the labor arbiter's decision to the National Labor Relations Commission (NLRC) reversing that
of the labor arbiter
10. The petitioner filed a Motion for Reconsideration of the NLRC decision, but this was denied
ISSUE: W/N the dismissal was legally justified
RULING: NOOOOOOOoo
1. Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee by his employer are two-fold: the
substantive and the procedural.
2. Not only must the dismissal be for a valid or authorized cause as provided by law but the rudimentary requirements of due
process — notice and hearing — must also be observed before an employee may be dismissed.
3. One does not suffice; without their concurrence, the terminate would, in the eyes of the law, be illegal. 8
4. The inviolability of notice and hearing for a valid dismissal an employee can not be over-emphasized.
5. Those twin requirements constitute essential elements of due process in cases employee dismissal.
6. The requirement of notice is intended inform the employee concerned of the employer's intent dismiss him and the reason for
the proposed dismissal;
7. On other hand, the requirement of hearing affords the employee the opportunity to answer his employer's charges against
him and accordingly to defend himself therefrom before dismissal effected. Neither one of these two requirements can be
dispensed with without running afoul of the due process requirement of the Constitution. 9
8. The investigation of petitioner Salaw by the respondent Bank' investigating committee violated his constitutional right to due
process, in as much as he was not given a chance to defend himself, as provided in Rule XIV, Book V of the Implementing Rules
and Regulations of the Labor Code governing the dismissal of employees.
9. Here petition was perfunctorily denied the assistance of counsel during investigation to be conducted by the PDIC.
10. It is true that administrative and quasi-judicial bodies are not bound by the technical rules of procedure in the adjudication
cases.
11. However, the right to counsel, a very basic requirement of substantive due process, has to be observed.
12. Section 12(1), Article III provides this right
13. As aptly observed by the labor arbiter, the respondents premised their action in dismissing the complainant on his supposed
admission of the offense imputed to him by the Criminal Investigation Service (CIS) in its interrogation in November, 1984.
14. The said admission was carried in a three-page Sworn Statement signed by the complainant.
15. Aside from this Statement, other evidence was presented by the respondents to establish the culpability of the complainant in
the fraudulent sale of respondents' foreclosed properties.
16. Even the minutes of proceeding taken during the investigation conducted by respondents were not presented. ... This is a
glaring denial of due process.
17. We find it worth reiterating the cardinal primary rights which must be respected even in proceedings of administrative
character as enunciated by this Court in classic landmark decision of Justice Laurel in Ang Tibay,
18. Considering further that the admission by the petitioner which was extracted from him by the Criminal Investigate Service of the
Philippine Constabulary (National Capital Region) without the assistance of counsel and which was made the sole basis for his
dismissal, can not be admitted in evidence against him, then, the finding of guilt of the PDIC, which was affirmed by the public
respondent NLRC; has no more leg stand on.
19. A decision with absolutely nothing to support it is a nullity.
20. Significantly, the dismissal of the petitioner from his employment was characterized by undue haste.
21. The law is clear that even in the disposition of labor cases, due process must not be subordinated to expediency or dispatch.

Preventive Suspension
G. Ordinance /Statute/Memo Cir/ Rules
People v. Nazario (“manager” void for vagueness)

The petitioner was charged with violation of certain municipal ordinances of the municipal council of Pagbilao, in Quezon province. By way of confession and
avoidance, the petitioner would admit having committed the acts charged but would claim that the ordinances are unconstitutional, or, assuming their
constitutionality, that they do not apply to him in any event.

The facts are not disputed:

This defendant is charged of the crime of Violation of Municipal Ordinance in an information filed by
the provincial Fiscal, dated October 9, 1968, as follows:

That in the years 1964, 1965 and 1966, in the Municipality of Pagbilao, Province of
Quezon, Philippines, and within the jurisdiction of this Honorable Court, the above-
named accused, being then the owner and operator of a fishpond situated in the
barrio of Pinagbayanan, of said municipality, did then and there willfully, unlawfully
and feloniously refuse and fail to pay the municipal taxes in the total amount of
THREE HUNDRED SIXTY TWO PESOS AND SIXTY TWO CENTAVOS (P362.62),
required of him as fishpond operator as provided for under Ordinance No. 4, series of
1955, as amended, inspite of repeated demands made upon him by the Municipal
Treasurer of Pagbilao, Quezon, to pay the same.

Contrary to law.

For the prosecution the following witnesses testified in substance as follows;

MIGUEL FRANCIA, 39 years of age, married, farmer and resident of Lopez, Quezon —

In 1962 to 1967, I resided at Pinagbayanan, Pagbilao, Quezon. I know the accused as I worked in
his fishpond in 1962 to 1964. The fishpond of Nazario is at Pinagbayanan, Pagbilao, Quezon. I
worked in the clearing of the fishpond, the construction of the dikes and the catching of fish.

On cross-examination, this witness declared:

I worked with the accused up to March 1964.

NICOLAS MACAROLAY, 65 years of age, married, copra maker and resident of Pinagbayanan,
Pagbilao, Quezon —

I resided at Pinagbayanan, Pagbilao, Quezon since 1959 up to the present. I know the accused
since 1959 when he opened a fishpond at Pinagbayanan, Pagbilao, Quezon. He still operates the
fishpond up to the present and I know this fact as I am the barrio captain of Pinagbayanan.

On cross-examination, this witness declared:

I came to know the accused when he first operated his fishpond since 1959.

On re-direct examination, this witness declared:

I was present during the catching of fish in 1967 and the accused was there.

On re-cross examination, this witness declared:

I do not remember the month in 1962 when the accused caught fish.

RODOLFO R. ALVAREZ, 45 years old, municipal treasurer of Pagbilao, Quezon, married —

As Municipal Treasurer I am in charge of tax collection. I know the accused even before I was
Municipal Treasurer of Pagbilao. I have written the accused a letter asking him to pay his taxes
(Exhibit B). Said letter was received by the accused as per registry return receipt, Exhibit B-1. The
letter demanded for payment of P362.00, more or less, by way of taxes which he did not pay up to
the present. The former Treasurer, Ceferino Caparros, also wrote a letter of demand to the accused
(Exhibit C). On June 28, 1967, I sent a letter to the Fishery Commission (Exhibit D), requesting
information if accused paid taxes with that office. The Commission sent me a certificate (Exhibits D-
1, D-2 & D-3). The accused had a fishpond lease agreement. The taxes unpaid were for the years
1964, 1965 and 1966.

On cross-examination, this witness declared:

I have demanded the taxes for 38.10 hectares.

On question of the court, this witness declared:

What I was collecting from the accused is the fee on fishpond operation, not rental.

The prosecution presented as part of their evidence Exhibits A, A-1, A-2, B, B-2, C, D, D-1, D-2, D-3,
E, F, F-1 and the same were admitted by the court, except Exhibits D, D-1, D-2 and D-3 which were
not admitted for being immaterial.

For the defense the accused EUSEBIO NAZARIO, 48 years of age, married, owner and general
manager of the ZIP Manufacturing Enterprises and resident of 4801 Old Sta. Mesa, Sampaloc,
Manila, declared in substance as follows:

I have lived in Sta. Mesa, Manila, since 1949. I buy my Residence Certificates at Manila or at San
Juan. In 1964, 1965 and 1966, I was living in Manila and my business is in Manila and my family
lives at Manila. I never resided at Pagbilao, Quezon. I do not own a house at Pagbilao. I am a lessee
of a fishpond located at Pagbilao, Quezon, and I have a lease agreement to that effect with the
Philippine Fisheries Commission marked as Exhibit 1. In 1964, 1965 and 1966, the contract of lease,
Exhibit 1, was still existing and enforceable. The Ordinances Nos. 4, 15 and 12, series of 1955, 1965
and 1966, were translated into English by the Institute of National Language to better understand the
ordinances. There were exchange of letters between me and the Municipal Treasurer of Pagbilao
regarding the payment of the taxes on my leased fishpond situated at Pagbilao. There was a letter of
demand for the payment of the taxes by the treasurer (Exhibit 3) which I received by mail at my
residence at Manila. I answered the letter of demand, Exhibit 3, with Exhibit 3-A. I requested an
inspection of my fishpond to determine its condition as it was not then in operation. The Municipal
Treasurer Alvarez went there once in 1967 and he found that it was destroyed by the typhoon and
there were pictures taken marked as Exhibits 4, 4-A, 4-B and 4C. I received another letter of
demand, Exhibit 5, and I answered the same (Exhibit 5-A). I copied my reference quoted in Exhibit
5-A from Administrative Order No. 6, Exhibit 6. I received another letter of demand from Tomas
Ornedo, Acting Municipal Treasurer of Pagbilao, dated February 16, 1966, Exhibit 7, and I answered
the same with the letter marked as Exhibit 7-A, dated February 26, 1966. I received another letter of
demand from Treasurer Alvarez of Pagbilao, Exhibit 8, and I answered the same (Exhibit 8-A). In
1964, I went to Treasurer Caparros to ask for an application for license tax and he said none and he
told me just to pay my taxes. I did not pay because up to now I do not know whether I am covered by
the Ordinance or not. The letters of demand asked me to pay different amounts for taxes for the
fishpond. Because under Sec. 2309 of the Revised Administrative Code, municipal taxes lapse if not
paid and they are collecting on a lapsed ordinance. Because under the Tax Code, fishermen are
exempted from percentage tax and privilege tax. There is no law empowering the municipality to
pass ordinance taxing fishpond operators.

The defense presented as part of their evidence Exhibits 1, 2, 3, 3-A, 4, 4-B, 4-B, 4-C, 5, 5-A, 6, 6-A,
6-B, 6-C, 7, 7-A, 8 and 8-A and the same were admitted by the court.

From their evidence the prosecution would want to show to the court that the accused, as lessee or
operator of a fishpond in the municipality of Pagbilao, refused, and still refuses, to pay the municipal
 taxes for the years 1964, 1965 and 1966, in violation of Municipal Ordinance No. 4, series of 1955,
as amended by Municipal Ordinance No. 15, series of 1965, and finally amended by Municipal
Ordinance No. 12, series of 1966.

On the other hand, the accused, by his evidence, tends to show to the court that the taxes sought to
be collected have already lapsed and that there is no law empowering municipalities to pass
ordinances taxing fishpond operators. The defense, by their evidence, tried to show further that, as
lessee of a forest land to be converted into a fishpond, he is not covered by said municipal
ordinances; and finally that the accused should not be taxed as fishpond operator because there is
no fishpond yet being operated by him, considering that the supposed fishpond was under
construction during the period covered by the taxes sought to be collected.

Finally, the defendant claims that the ordinance in question is ultra vires as it is outside of the power
of the municipal council of Pagbilao, Quezon, to enact; and that the defendant claims that the
ordinance in question is ambiguous and uncertain.

There is no question from the evidences presented that the accused is a lessee of a parcel of forest
land, with an area of 27.1998 hectares, for fishpond purposes, under Fishpond Lease Agreement
No. 1066, entered into by the accused and the government, through the Secretary of Agriculture and
Natural Resources on August 21, 1959.

There is no question from the evidences presented that the 27.1998 hectares of land leased by the
defendant from the government for fishpond purposes was actually converted into fishpond and
used as such, and therefore defendant is an operator of a fishpond within the purview of the
ordinance in question. 1

The trial Court 2 returned a verdict of guilty and disposed as follows:

VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Court finds the accused guilty beyond reasonable doubt of
the crime of violation of Municipal Ordinance No. 4, series of 1955, as amended by Ordinance No. 15, series of
1965 and further amended by Ordinance No. 12, series of 1966, of the Municipal Council of Pagbilao, Quezon; and
hereby sentences him to pay a fine of P50.00, with subsidiary imprisonment in case of insolvency at the rate of
P8.00 a day, and to pay the costs of this proceeding.

SO ORDERED. 3

In this appeal, certified to this Court by the Court of Appeals, the petitioner alleges that:

I.

THE LOWER COURT ERRED IN NOT DECLARING THAT ORDINANCE NO. 4, SERIES OF 1955, AS AMENDED
BY ORDINANCE NO. 15, SERIES OF 1965, AND AS FURTHER AMENDED BY ORDINANCE NO. 12, SERIES OF
1966, OF THE MUNICIPALITY OF PAGBILAO, QUEZON, IS NULL AND VOID FOR BEING AMBIGUOUS AND
UNCERTAIN.

II.

THE LOWER COURT ERRED IN NOT HOLDING THAT THE ORDINANCE IN QUESTION, AS AMENDED, IS
UNCONSTITUTIONAL FOR BEING EX POST FACTO.

III.

THE LOWER COURT ERRED IN NOT HOLDING THAT THE ORDINANCE IN QUESTION COVERS ONLY
OWNERS OR OVERSEER OF FISHPONDS OF PRIVATE OWNERSHIP AND NOT TO LESSEES OF PUBLIC
LANDS.

IV.
THE LOWER COURT ERRED IN NOT FINDING THAT THE QUESTIONED ORDINANCE, EVEN IF VALID,
CANNOT BE ENFORCED BEYOND THE TERRITORIAL LIMITS OF PAGBILAO AND DOES NOT COVER NON-
RESIDENTS. 4

The ordinances in question are Ordinance No. 4, series of 1955, Ordinance No. 15, series of 1965, and Ordinance
No. 12, series of 1966, of the Municipal Council of Pagbilao. Insofar as pertinent to this appeal, the salient portions
thereof are hereinbelow quoted:

Section 1. Any owner or manager of fishponds in places within the territorial limits of Pagbilao,
Quezon, shall pay a municipal tax in the amount of P3.00 per hectare of fishpond on part thereof per
annum. 5

xxx xxx xxx

Sec. l (a). For the convenience of those who have or owners or managers of fishponds within the
territorial limits of this municipality, the date of payment of municipal tax relative thereto, shall begin
after the lapse of three (3) years starting from the date said fishpond is approved by the Bureau of
Fisheries. 6

xxx xxx xxx

Section 1. Any owner or manager of fishponds in places within the territorial limits of Pagbilao shall
pay a municipal tax in the amount of P3.00 per hectare or any fraction thereof per annum beginning
and taking effect from the year 1964, if the fishpond started operating before the year 1964. 7

The first objection refers to the ordinances being allegedly "ambiguous and uncertain." 8 The petitioner contends that
being a mere lessee of the fishpond, he is not covered since the said ordinances speak of "owner or manager." He
likewise maintains that they are vague insofar as they reckon the date of payment: Whereas Ordinance No. 4
provides that parties shall commence payment "after the lapse of three (3) years starting from the date said fishpond
is approved by the Bureau of Fisheries." 9 Ordinance No. 12 states that liability for the tax accrues "beginning and
taking effect from the year 1964 if the fishpond started operating before the year 1964." 10

As a rule, a statute or act may be said to be vague when it lacks comprehensible standards that men "of common
intelligence must necessarily guess at its meaning and differ as to its application." 11 It is repugnant to the
Constitution in two respects: (1) it violates due process for failure to accord persons, especially the parties targetted
by it, fair notice of the conduct to avoid; and (2) it leaves law enforcers unbridled discretion in carrying out its
provisions and becomes an arbitrary flexing of the Government muscle.

But the act must be utterly vague on its face, that is to say, it cannot be clarified by either a saving clause or by
construction. Thus, in Coates v. City of Cincinnati, 12 the U.S. Supreme Court struck down an ordinance that had
made it illegal for "three or more persons to assemble on any sidewalk and there conduct themselves in a manner
annoying to persons passing by." 13 Clearly, the ordinance imposed no standard at all "because one may never know
in advance what 'annoys some people but does not annoy others.' " 14

Coates highlights what has been referred to as a "perfectly vague" 15 act whose obscurity is evident on its face. It is
to be distinguished, however, from legislation couched in imprecise language — but which nonetheless specifies a
standard though defectively phrased — in which case, it may be "saved" by proper construction.

It must further be distinguished from statutes that are apparently ambiguous yet fairly applicable to certain types of
activities. In that event, such statutes may not be challenged whenever directed against such activities. In Parker v.
Levy, 16 a prosecution originally under the U.S. Uniform Code of Military Justice (prohibiting, specifically, "conduct
unbecoming an officer and gentleman"), the defendant, an army officer who had urged his men not to go to Vietnam
and called the Special Forces trained to fight there thieves and murderers, was not allowed to invoke the void for
vagueness doctrine on the premise that accepted military interpretation and practice had provided enough
standards, and consequently, a fair notice that his conduct was impermissible.
It is interesting that in Gonzales v. Commission on Elections, 17 a divided Court sustained an act of Congress
(Republic Act No. 4880 penalizing "the too early nomination of candidates" 18 limiting the election campaign period,
and prohibiting "partisan political activities"), amid challenges of vagueness and overbreadth on the ground that the
law had included an "enumeration of the acts deemed included in the terms 'election campaign' or 'partisan political
activity" 19 that would supply the standards. "As thus limited, the objection that may be raised as to vagueness has
been minimized, if not totally set at rest." 20 In his opinion, however, Justice Sanchez would stress that the conduct
sought to be prohibited "is not clearly defined at all." 21 "As worded in R.A 4880, prohibited discussion could cover
the entire spectrum of expression relating to candidates and political parties." 22 He was unimpressed with the
"restrictions" Fernando's opinion had relied on: " 'Simple expressions of opinions and thoughts concerning the
election' and expression of 'views on current political problems or issues' leave the reader conjecture, to guesswork,
upon the extent of protection offered, be it as to the nature of the utterance ('simple expressions of opinion and
thoughts') or the subject of the utterance ('current political problems or issues')." 23

The Court likewise had occasion to apply the "balancing-of-interests" test, 24 insofar as the statute's ban on early
nomination of candidates was concerned: "The rational connection between the prohibition of Section 50-A and its
object, the indirect and modest scope of its restriction on the rights of speech and assembly, and the embracing
public interest which Congress has found in the moderation of partisan political activity, lead us to the conclusion
that the statute may stand consistently with and does not offend the Constitution." 25 In that case, Castro would have
the balance achieved in favor of State authority at the "expense" of individual liberties.

In the United States, which had ample impact on Castro's separate opinion, the balancing test finds a close kin,
referred to as the "less restrictive alternative " 26 doctrine, under which the court searches for alternatives available to
the Government outside of statutory limits, or for "less drastic means" 27 open to the State, that would render the
statute unnecessary. In United States v. Robel, 28 legislation was assailed, banning members of the (American)
Communist Party from working in any defense facility. The U.S. Supreme Court, in nullifying the statute, held that it
impaired the right of association, and that in any case, a screening process was available to the State that would
have enabled it to Identify dangerous elements holding defense positions. 29 In that event, the balance would have
been struck in favor of individual liberties.

It should be noted that it is in free expression cases that the result is usually close. It is said, however, that the
choice of the courts is usually narrowed where the controversy involves say, economic rights, 30 or as in
the Levycase, military affairs, in which less precision in analysis is required and in which the competence of the
legislature is presumed.

In no way may the ordinances at bar be said to be tainted with the vice of vagueness. It is unmistakable from their
very provisions that the appellant falls within its coverage. As the actual operator of the fishponds, he comes within
the term " manager." He does not deny the fact that he financed the construction of the fishponds, introduced fish
fries into the fishponds, and had employed laborers to maintain them. 31 While it appears that it is the National
Government which owns them, 32 the Government never shared in the profits they had generated. It is therefore only
logical that he shoulders the burden of tax under the said ordinances.

We agree with the trial court that the ordinances are in the character of revenue measures 33 designed to assist the
coffers of the municipality of Pagbilao. And obviously, it cannot be the owner, the Government, on whom liability
should attach, for one thing, upon the ancient principle that the Government is immune from taxes and for another,
since it is not the Government that had been making money from the venture.

Suffice it to say that as the actual operator of the fishponds in question, and as the recipient of profits brought about
by the business, the appellant is clearly liable for the municipal taxes in question. He cannot say that he did not have
a fair notice of such a liability to make such ordinances vague.

Neither are the said ordinances vague as to dates of payment. There is no merit to the claim that "the imposition of
tax has to depend upon an uncertain date yet to be determined (three years after the 'approval of the fishpond' by
the Bureau of Fisheries, and upon an uncertain event (if the fishpond started operating before 1964), also to be
determined by an uncertain individual or individuals." 34 Ordinance No. 15, in making the tax payable "after the lapse
of three (3) years starting from the date said fishpond is approved by the Bureau of Fisheries," 35 is unequivocal
about the date of payment, and its amendment by Ordinance No. 12, reckoning liability thereunder "beginning and
taking effect from the year 1964 if the fishpond started operating before the year 1964 ," 36 does not give rise to any
ambiguity. In either case, the dates of payment have been definitely established. The fact that the appellant has
been allegedly uncertain about the reckoning dates — as far as his liability for the years 1964, 1965, and 1966 is
concerned — presents a mere problem in computation, but it does not make the ordinances vague. In addition, the
same would have been at most a difficult piece of legislation, which is not unfamiliar in this jurisdiction, but hardly a
vague law.

As it stands, then, liability for the tax accrues on January 1, 1964 for fishponds in operation prior thereto (Ordinance
No. 12), and for new fishponds, three years after their approval by the Bureau of Fisheries (Ordinance No. 15). This
is so since the amendatory act (Ordinance No. 12) merely granted amnesty unto old, delinquent fishpond operators.
It did not repeal its mother ordinances (Nos. 4 and 15). With respect to new operators, Ordinance No. 15 should still
prevail.

To the Court, the ordinances in question set forth enough standards that clarify imagined ambiguities. While such
standards are not apparent from the face thereof, they are visible from the intent of the said ordinances.

The next inquiry is whether or not they can be said to be ex post facto measures. The appellant argues that they
are: "Amendment No. 12 passed on September 19, 1966, clearly provides that the payment of the imposed tax shall
"beginning and taking effect from the year 1964, if the fishpond started operating before the year 1964.' In other
words, it penalizes acts or events occurring before its passage, that is to say, 1964 and even prior thereto." 37

The Court finds no merit in this contention. As the Solicitor General notes, "Municipal Ordinance No. 4 was passed
on May 14, 1955. 38 Hence, it cannot be said that the amendment (under Ordinance No. 12) is being made to apply
retroactively (to 1964) since the reckoning period is 1955 (date of enactment). Essentially, Ordinances Nos. 12 and
15 are in the nature of curative measures intended to facilitate and enhance the collection of revenues the originally
act, Ordinance No. 4, had prescribed. 39 Moreover, the act (of non-payment of the tax), had been, since 1955, made
punishable, and it cannot be said that Ordinance No. 12 imposes a retroactive penalty. As we have noted, it
operates to grant amnesty to operators who had been delinquent between 1955 and 1964. It does not mete out a
penalty, much less, a retrospective one.

The appellant assails, finally, the power of the municipal council of Pagbilao to tax "public forest land." 40 In Golden
Ribbon Lumber Co., Inc. v. City of Butuan 41 we held that local governments' taxing power does not extend to forest
products or concessions under Republic Act No. 2264, the Local Autonomy Act then in force. (Republic Act No.
2264 likewise prohibited municipalities from imposing percentage taxes on sales.)

First of all, the tax in question is not a tax on property, although the rate thereof is based on the area of fishponds
("P3.00 per hectare" 42). Secondly, fishponds are not forest lands, although we have held them to the agricultural
lands. 43 By definition, "forest" is "a large tract of land covered with a natural growth of trees and underbush; a large
wood." 44 (Accordingly, even if the challenged taxes were directed on the fishponds, they would not have been taxes
on forest products.)

They are, more accurately, privilege taxes on the business of fishpond maintenance. They are not charged against
sales, which would have offended the doctrine enshrined by Golden Ribbon Lumber, 45 but rather on occupation,
which is allowed under Republic Act No. 2264. 46 They are what have been classified as fixed annual taxes and this
is obvious from the ordinances themselves.

There is, then, no merit in the last objection.

WHEREFORE, the appeal is DISMISSED. Costs against the appellant.

Estrada v. Sandiganbayan (plunder, void for vagueness)

JOHN STUART MILL, in his essay On Liberty, unleashes the full fury of his pen in defense of the rights of
the individual from the vast powers of the State and the inroads of societal pressure. But even as he draws a
sacrosanct line demarcating the limits on individuality beyond which the State cannot tread - asserting that
"individual spontaneity" must be allowed to flourish with very little regard to social interference - he veritably
acknowledges that the exercise of rights and liberties is imbued with a civic obligation, which society is justified
in enforcing at all cost, against those who would endeavor to withhold fulfillment. Thus he says -

The sole end for which mankind is warranted, individually or collectively, in interfering with the
liberty of action of any of their number, is self-protection. The only purpose for which power can be
rightfully exercised over any member of a civilized community, against his will, is to prevent harm
to others.

Parallel to individual liberty is the natural and illimitable right of the State to self-preservation. With the end
of maintaining the integrity and cohesiveness of the body politic, it behooves the State to formulate a system of
laws that would compel obeisance to its collective wisdom and inflict punishment for non-observance.
The movement from Mill's individual liberalism to unsystematic collectivism wrought changes in the social
order, carrying with it a new formulation of fundamental rights and duties more attuned to the imperatives of
contemporary socio-political ideologies. In the process, the web of rights and State impositions became tangled
and obscured, enmeshed in threads of multiple shades and colors, the skein irregular and broken. Antagonism,
often outright collision, between the law as the expression of the will of the State, and the zealous attempts by its
members to preserve their individuality and dignity, inevitably followed. It is when individual rights are pitted
against State authority that judicial conscience is put to its severest test.
Petitioner Joseph Ejercito Estrada, the highest-ranking official to be prosecuted under RA 7080 (An Act
Defining and Penalizing the Crime of Plunder),[1] as amended by RA 7659,[2] wishes to impress upon us that the
assailed law is so defectively fashioned that it crosses that thin but distinct line which divides the valid from the
constitutionally infirm. He therefore makes a stringent call for this Court to subject the Plunder Law to the crucible
of constitutionality mainly because, according to him, (a) it suffers from the vice of vagueness; (b) it dispenses
with the "reasonable doubt" standard in criminal prosecutions; and, (c) it abolishes the element of mens rea in
crimes already punishable under The Revised Penal Code, all of which are purportedly clear violations of the
fundamental rights of the accused to due process and to be informed of the nature and cause of the accusation
against him.
Specifically, the provisions of the Plunder Law claimed by petitioner to have transgressed constitutional
boundaries are Secs. 1, par. (d), 2 and 4 which are reproduced hereunder:

Section 1. x x x x (d) "Ill-gotten wealth" means any asset, property, business, enterprise or material
possession of any person within the purview of Section Two (2) hereof, acquired by him directly or
indirectly through dummies, nominees, agents, subordinates and/or business associates by any
combination or series of the following means or similar schemes:

(1) Through misappropriation, conversion, misuse, or malversation of public funds or raids on the
public treasury;

(2) By receiving, directly or indirectly, any commission, gift, share, percentage, kickbacks or any
other form of pecuniary benefit from any person and/or entity in connection with any government
contract or project or by reason of the office or position of the public office concerned;

(3) By the illegal or fraudulent conveyance or disposition of assets belonging to the National
Government or any of its subdivisions, agencies or instrumentalities, or government owned or
controlled corporations and their subsidiaries;
(4) By obtaining, receiving or accepting directly or indirectly any shares of stock, equity or any
other form of interest or participation including the promise of future employment in any business
enterprise or undertaking;

(5) By establishing agricultural, industrial or commercial monopolies or other combinations

and/or implementation of decrees and orders intended to benefit particular persons or special
interests; or

(6) By taking advantage of official position, authority, relationship, connection or influence to

unjustly enrich himself or themselves at the expense and to the damage and prejudice of the
Filipino people and the Republic of the Philippines.

Section 2. Definition of the Crime of Plunder, Penalties. - Any public officer who, by himself or in
connivance with members of his family, relatives by affinity or consanguinity, business associates,
subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth through
a combination or series of overt or criminal acts as described in Section 1 (d) hereof, in the
aggregate amount or total value of at least fifty million pesos (P50,000,000.00) shall be guilty of
the crime of plunder and shall be punished by reclusion perpetua to death. Any person who
participated with the said public officer in the commission of an offense contributing to the crime of
plunder shall likewise be punished for such offense. In the imposition of penalties, the degree of
participation and the attendance of mitigating and extenuating circumstances as provided by
the Revised Penal Code shall be considered by the court. The court shall declare any and all ill-
gotten wealth and their interests and other incomes and assets including the properties and shares
of stocks derived from the deposit or investment thereof forfeited in favor of the State (underscoring
supplied).

Section 4. Rule of Evidence. - For purposes of establishing the crime of plunder, it shall not be
necessary to prove each and every criminal act done by the accused in furtherance of the scheme
or conspiracy to amass, accumulate or acquire ill-gotten wealth, it being sufficient to establish
beyond reasonable doubt a pattern of overt or criminal acts indicative of the overall unlawful
scheme or conspiracy (underscoring supplied).

On 4 April 2001 the Office of the Ombudsman filed before the Sandiganbayan eight (8) separate
Informations, docketed as: (a) Crim. Case No. 26558, for violation of RA 7080, as amended by RA 7659; (b)
Crim. Cases Nos. 26559 to 26562, inclusive, for violation of Secs. 3, par. (a), 3, par. (a), 3, par. (e) and 3, par. (e),
of RA 3019 (Anti-Graft and Corrupt Practices Act), respectively; (c) Crim. Case No. 26563, for violation of Sec.
7, par. (d), of RA 6713 (The Code of Conduct and Ethical Standards for Public Officials and Employees); (d)
Crim. Case No. 26564, for Perjury (Art. 183 of The Revised Penal Code); and, (e) Crim. Case No. 26565, for
Illegal Use Of An Alias (CA No. 142, as amended by RA 6085).
On 11 April 2001 petitioner filed an Omnibus Motion for the remand of the case to the Ombudsman for
preliminary investigation with respect to specification "d" of the charges in the Information in Crim. Case No.
26558; and, for reconsideration/reinvestigation of the offenses under specifications "a," "b," and "c" to give the
accused an opportunity to file counter-affidavits and other documents necessary to prove lack of probable
cause. Noticeably, the grounds raised were only lack of preliminary investigation, reconsideration/reinvestigation
of offenses, and opportunity to prove lack of probable cause. The purported ambiguity of the charges and the
vagueness of the law under which they are charged were never raised in that Omnibus Motion thus indicating the
explicitness and comprehensibility of the Plunder Law.
 On 25 April 2001 the Sandiganbayan, Third Division, issued a Resolution in Crim. Case No. 26558 finding
that "a probable cause for the offense of PLUNDER exists to justify the issuance of warrants for the arrest of the
accused." On 25 June 2001 petitioner's motion for reconsideration was denied by the Sandiganbayan.
On 14 June 2001 petitioner moved to quash the Information in Crim. Case No. 26558 on the ground that the
facts alleged therein did not constitute an indictable offense since the law on which it was based was
unconstitutional for vagueness, and that the Amended Information for Plunder charged more than one (1)
offense. On 21 June 2001 the Government filed its Opposition to the Motion to Quash, and five (5) days later or
on 26 June 2001 petitioner submitted his Reply to the Opposition.On 9 July 2001 the Sandiganbayan denied
petitioner's Motion to Quash.
As concisely delineated by this Court during the oral arguments on 18 September 2001, the issues for
resolution in the instant petition for certiorari are: (a) The Plunder Law is unconstitutional for being vague; (b)
The Plunder Law requires less evidence for proving the predicate crimes of plunder and therefore violates the
rights of the accused to due process; and, (c) Whether Plunder as defined in RA 7080 is a malum prohibitum, and
if so, whether it is within the power of Congress to so classify it.
Preliminarily, the whole gamut of legal concepts pertaining to the validity of legislation is predicated on the
basic principle that a legislative measure is presumed to be in harmony with the Constitution.[3] Courts invariably
train their sights on this fundamental rule whenever a legislative act is under a constitutional attack, for it is the
postulate of constitutional adjudication. This strong predilection for constitutionality takes its bearings on the idea
that it is forbidden for one branch of the government to encroach upon the duties and powers of another. Thus it
has been said that the presumption is based on the deference the judicial branch accords to its coordinate branch
- the legislature.
If there is any reasonable basis upon which the legislation may firmly rest, the courts must assume that the
legislature is ever conscious of the borders and edges of its plenary powers, and has passed the law with full
knowledge of the facts and for the purpose of promoting what is right and advancing the welfare of the
majority.Hence in determining whether the acts of the legislature are in tune with the fundamental law, courts
should proceed with judicial restraint and act with caution and forbearance. Every intendment of the law must be
adjudged by the courts in favor of its constitutionality, invalidity being a measure of last resort. In construing
therefore the provisions of a statute, courts must first ascertain whether an interpretation is fairly possible to
sidestep the question of constitutionality.
In La Union Credit Cooperative, Inc. v. Yaranon[4] we held that as
long as there is some basis for the decision of the court, the constitutionality of the challenged law will not be
touched and the case will be decided on other available grounds. Yet the force of the presumption is not sufficient
to catapult a fundamentally deficient law into the safe environs of constitutionality. Of course, where the law
clearly and palpably transgresses the hallowed domain of the organic law, it must be struck down on sight lest the
positive commands of the fundamental law be unduly eroded.
Verily, the onerous task of rebutting the presumption weighs heavily on the party challenging the validity of
the statute. He must demonstrate beyond any tinge of doubt that there is indeed an infringement of the
constitution, for absent such a showing, there can be no finding of unconstitutionality. A doubt, even if well-
founded, will hardly suffice. As tersely put by Justice Malcolm, "To doubt is to sustain."[5] And petitioner has
miserably failed in the instant case to discharge his burden and overcome the presumption of constitutionality of
the Plunder Law.
As it is written, the Plunder Law contains ascertainable standards and well-defined parameters which would
enable the accused to determine the nature of his violation. Section 2 is
sufficiently explicit in its description of the acts, conduct and conditions required or forbidden, and prescribes the
elements of the crime with reasonable certainty and particularity. Thus -

1. That the offender is a public officer who acts by himself or in connivance with members of his
family, relatives by affinity or consanguinity, business associates, subordinates or other persons;
2. That he amassed, accumulated or acquired ill-gotten wealth through a combination or series of
the following overt or criminal acts: (a) through misappropriation,
conversion, misuse, or malversation of public funds or raids on the public treasury; (b) by
receiving, directly or indirectly, any commission, gift, share, percentage, kickback or any other
form of pecuniary benefits from any person and/or entity in connection with any government
contract or project or by reason of the office or position of the public officer; (c) by the illegal or
fraudulent conveyance or disposition of assets belonging to the National Government or any of its
subdivisions, agencies or instrumentalities of Government owned or controlled corporations or
their subsidiaries; (d) by obtaining, receiving or accepting directly or indirectly any shares of
stock, equity or any other form of interest or participation including the promise of future
employment in any business enterprise or undertaking; (e) by establishing agricultural, industrial
or commercial monopolies or other combinations and/or implementation of decrees and orders
intended to benefit particular persons or special interests; or (f) by taking advantage of official
position, authority, relationship, connection or influence to unjustly enrich himself or themselves at
the expense and to the damage and prejudice of the Filipino people and the Republic of the
Philippines; and,

3. That the aggregate amount or total value of the ill-gotten wealth amassed, accumulated or
acquired is at least P50,000,000.00.

As long as the law affords some comprehensible guide or rule that would inform those who are subject to it
what conduct would render them liable to its penalties, its validity will be sustained. It must sufficiently guide the
judge in its application; the counsel, in defending one charged with its violation; and more importantly, the
accused, in identifying the realm of the proscribed conduct. Indeed, it can be understood with little difficulty that
what the assailed statute punishes is the act of a public officer in amassing or accumulating ill-gotten wealth of at
least P50,000,000.00 through a series or combination of acts enumerated in Sec. 1, par. (d), of the Plunder Law.
In fact, the amended Information itself closely tracks the language of the law, indicating with reasonable
certainty the various elements of the offense which petitioner is alleged to have committed:

"The undersigned Ombudsman, Prosecutor and OIC-Director, EPIB, Office of the Ombudsman,
hereby accuses former PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES, Joseph
Ejercito Estrada, a.k.a. 'ASIONG SALONGA' and a.k.a. 'JOSE VELARDE,' together with Jose
'Jinggoy' Estrada, Charlie 'Atong' Ang, Edward Serapio, Yolanda T. Ricaforte, Alma Alfaro, JOHN
DOE a.k.a. Eleuterio Tan OR Eleuterio Ramos Tan or Mr. Uy, Jane Doe a.k.a. Delia Rajas, and
John DOES & Jane Does, of the crime of Plunder, defined and penalized under R.A. No. 7080, as
amended by Sec. 12 of R.A. No. 7659, committed as follows:

That during the period from June, 1998 to January 2001, in the Philippines, and within the
jurisdiction of this Honorable Court, accused Joseph Ejercito Estrada, THEN A PRESIDENT OF
THE REPUBLIC OF THE PHILIPPINES, by
himself AND/OR in CONNIVANCE/CONSPIRACY with his co-accused, WHO ARE
MEMBERS OF HIS FAMILY, RELATIVES BY AFFINITY OR CONSANGUINITY,
BUSINESS ASSOCIATES, SUBORDINATES AND/OR OTHER PERSONS, BY TAKING
UNDUE ADVANTAGE OF HIS OFFICIAL POSITION, AUTHORITY, RELATIONSHIP,
CONNECTION, OR INFLUENCE, did then and there willfully, unlawfully and criminally
amass, accumulate and acquire BY HIMSELF, DIRECTLY OR INDIRECTLY, ill-gotten
wealth in the aggregate amount or TOTAL VALUE of FOUR BILLION NINETY SEVEN
MILLION EIGHT HUNDRED FOUR THOUSAND ONE HUNDRED SEVENTY THREE
PESOS AND SEVENTEEN CENTAVOS (P4,097,804,173.17), more or less, THEREBY
UNJUSTLY ENRICHING HIMSELF OR THEMSELVES AT THE EXPENSE AND TO
THE DAMAGE OF THE FILIPINO PEOPLE AND THE REPUBLIC OF THE
PHILIPPINES, through ANY OR A combination OR Aseries of overt OR criminal acts, OR
SIMILAR SCHEMES OR MEANS, described as follows:

(a) by receiving OR collecting, directly or indirectly, on SEVERAL INSTANCES, MONEY IN

THE AGGREGATE AMOUNT OF FIVE HUNDRED FORTY-FIVE MILLION PESOS
(P545,000,000.00), MORE OR LESS, FROM ILLEGAL GAMBLING IN THE FORM OF
GIFT, SHARE, PERCENTAGE, KICKBACK OR ANY FORM OF PECUNIARY
BENEFIT, BY HIMSELF AND/OR in connection with co-accused CHARLIE 'ATONG'
ANG, Jose 'Jinggoy' Estrada, Yolanda T. Ricaforte, Edward Serapio, AND JOHN DOES AND
JANE DOES, in consideration OF TOLERATION OR PROTECTION OF ILLEGAL
GAMBLING;

(b) by DIVERTING, RECEIVING, misappropriating, converting OR misusing DIRECTLY OR

INDIRECTLY, for HIS OR THEIR PERSONAL gain and benefit, public funds in the amount of
ONE HUNDRED THIRTY MILLION PESOS (P130,000,000.00), more or less, representing a
portion of the TWO HUNDRED MILLION PESOS (P200,000,000.00) tobacco excise tax share
allocated for the province of Ilocos Sur under R.A. No. 7171, by himself and/or in connivance
with co-accused Charlie 'Atong' Ang, Alma Alfaro, JOHN DOE a.k.a. Eleuterio Ramos Tan or
Mr. Uy, Jane Doe a.k.a. Delia Rajas, AND OTHER JOHN DOES & JANE DOES; (italic
supplied).

(c) by directing, ordering and compelling, FOR HIS PERSONAL GAIN AND BENEFIT, the
Government Service Insurance System (GSIS) TO PURCHASE 351,878,000 SHARES OF
STOCKS, MORE OR LESS, and the Social Security System (SSS), 329,855,000 SHARES OF
STOCK, MORE OR LESS, OF THE BELLE CORPORATION IN THE AMOUNT OF
MORE OR LESS ONE BILLION ONE HUNDRED TWO MILLION NINE HUNDRED
SIXTY FIVE THOUSAND SIX HUNDRED SEVEN PESOS AND FIFTY CENTAVOS
(P1,102,965,607.50) AND MORE OR LESS SEVEN HUNDRED FORTY FOUR MILLION
SIX HUNDRED TWELVE THOUSAND AND FOUR HUNDRED FIFTY PESOS
(P744,612,450.00), RESPECTIVELY, OR A TOTAL OF MORE OR LESS ONE BILLION
EIGHT HUNDRED FORTY SEVEN MILLION FIVE HUNDRED SEVENTY EIGHT
THOUSAND FIFTY SEVEN PESOS AND FIFTY CENTAVOS
(P1,847,578,057.50); AND BY COLLECTING OR RECEIVING, DIRECTLY OR
INDIRECTLY, BY HIMSELF AND/OR IN CONNIVANCE WITH JOHN DOES AND
JANE DOES, COMMISSIONS OR PERCENTAGES BY REASON OF SAID PURCHASES
OF SHARES OF STOCK IN THE AMOUNT OF ONE HUNDRED EIGHTY NINE
MILLION SEVEN HUNDRED THOUSAND PESOS (P189,700,000.00) MORE OR LESS,
FROM THE BELLE CORPORATION WHICH BECAME PART OF THE DEPOSIT IN
THE EQUITABLE-PCI BANK UNDER THE ACCOUNT NAME'JOSE VELARDE;'

(d) by unjustly enriching himself FROM COMMISSIONS, GIFTS, SHARES,

PERCENTAGES, KICKBACKS, OR ANY FORM OF PECUNIARY BENEFITS, IN
CONNIVANCE WITH JOHN DOES AND JANE DOES, in the amount of MORE OR
LESS THREE BILLION TWO HUNDRED THIRTY THREE MILLION ONE HUNDRED
FOUR THOUSAND ONE HUNDRED SEVENTY THREE PESOS AND SEVENTEEN
CENTAVOS (P3,233,104,173.17) AND DEPOSITING THE SAME UNDER HIS ACCOUNT
NAME 'JOSE VELARDE' AT THE EQUITABLE-PCI BANK."

We discern nothing in the foregoing that is vague or ambiguous - as there is obviously none - that will confuse
petitioner in his defense. Although subject to proof, these factual assertions clearly show that the elements of the
crime are easily understood and provide adequate contrast between the innocent and the prohibited acts.Upon
such unequivocal assertions, petitioner is completely informed of the accusations against him as to enable him to
prepare for an intelligent defense.
Petitioner, however, bewails the failure of the law to provide for the statutory definition of the
terms "combination" and "series" in the key phrase "a combination or series of overt or criminal acts" found in
Sec. 1, par. (d), and Sec. 2, and the word "pattern" in Sec. 4. These omissions, according to petitioner, render the
Plunder Law unconstitutional for being impermissibly vague and overbroad and deny him the right to be informed
of the nature and cause of the accusation against him, hence, violative of his fundamental right to due process.
The rationalization seems to us to be pure sophistry. A statute is not rendered uncertain and void merely
because general terms are used therein, or because of the employment of terms without defining them; [6] much
less do we have to define every word we use. Besides, there is no positive constitutional or statutory command
requiring the legislature to define each and every word in an enactment. Congress is not restricted in the form of
expression of its will, and its inability to so define the words employed in a statute will not necessarily result in
the vagueness or ambiguity of the law so long as the legislative will is clear, or at least, can be gathered from the
whole act, which is distinctly expressed in the Plunder Law.
Moreover, it is a well-settled principle of legal hermeneutics that words of a statute will be interpreted in
their natural, plain and ordinary acceptation and signification,[7] unless it is evident that the legislature intended a
technical or special legal meaning to those words.[8] The intention of the lawmakers - who are, ordinarily,
untrained philologists and lexicographers - to use statutory phraseology in such a manner is always
presumed. Thus, Webster's New Collegiate Dictionary contains the following commonly accepted definition of
the words "combination" and "series:"

Combination - the result or product of combining; the act or process of combining. To combine is
to bring into such close relationship as to obscure individual characters.

Series - a number of things or events of the same class coming one after another in spatial and
temporal succession.

That Congress intended the words "combination" and "series" to be understood in their popular meanings is
pristinely evident from the legislative deliberations on the bill which eventually became RA 7080 or the Plunder
Law:

DELIBERATIONS OF THE BICAMERAL COMMITTEE ON JUSTICE, 7 May 1991

REP. ISIDRO: I am just intrigued again by our definition of plunder. We say THROUGH A
COMBINATION OR SERIES OF OVERT OR CRIMINAL ACTS AS MENTIONED IN SECTION
ONE HEREOF. Now when we say combination, we actually mean to say, if there are two or more
means, we mean to say that number one and two or number one and something else are included,
how about a series of the same act? For example, through misappropriation, conversion, misuse,
will these be included also?
REP. GARCIA: Yeah, because we say a series.
REP. ISIDRO: Series.
REP. GARCIA: Yeah, we include series.
REP. ISIDRO: But we say we begin with a combination.
REP. GARCIA: Yes.
REP. ISIDRO: When we say combination, it seems that -
REP. GARCIA: Two.
REP. ISIDRO: Not only two but we seem to mean that two of the enumerated means not twice of one enumeration.
REP. GARCIA: No, no, not twice.
REP. ISIDRO: Not twice?
REP. GARCIA: Yes. Combination is not twice - but combination, two acts.
REP. ISIDRO: So in other words, thats it. When we say combination, we mean, two different acts. It cannot be a
repetition of the same act.
REP. GARCIA: That be referred to series, yeah.
REP. ISIDRO: No, no. Supposing one act is repeated, so there are two.
REP. GARCIA: A series.
REP. ISIDRO: Thats not series. Its a combination. Because when we say combination or series, we seem to say that
two or more, di ba?
REP. GARCIA: Yes, this distinguishes it really from ordinary crimes. That is why, I said, that is a very good
suggestion because if it is only one act, it may fall under ordinary crime but we have here a combination or series
of overt or criminal acts. So x x x x
REP. GARCIA: Series. One after the other eh di....
SEN. TANADA: So that would fall under the term series?
REP. GARCIA: Series, oo.
REP. ISIDRO: Now, if it is a combination, ano, two misappropriations....
REP. GARCIA: Its not... Two misappropriations will not be combination. Series.
REP. ISIDRO: So, it is not a combination?
REP. GARCIA: Yes.
REP. ISIDRO: When you say combination, two different?
REP. GARCIA: Yes.
SEN. TANADA: Two different.
REP. ISIDRO: Two different acts.
REP. GARCIA: For example, ha...
REP. ISIDRO: Now a series, meaning, repetition...
DELIBERATIONS ON SENATE BILL NO. 733, 6 June 1989
SENATOR MACEDA: In line with our interpellations that sometimes one or maybe even two acts may already result in
such a big amount, on line 25, would the Sponsorconsider deleting the words a series of overt or, to read,
therefore: or conspiracy COMMITTED by criminal acts such as. Remove the idea of necessitating a series.
Anyway, the criminal acts are in the plural.
 SENATOR TANADA: That would mean a combination of two or more of the acts mentioned in this.
THE PRESIDENT: Probably two or more would be....
SENATOR MACEDA: Yes, because a series implies several or many; two or more.
SENATOR TANADA: Accepted, Mr. President x x x x
THE PRESIDENT: If there is only one, then he has to be prosecuted under the particular crime. But when we say acts
of plunder there should be, at least, two or more.
SENATOR ROMULO: In other words, that is already covered by existing laws, Mr. President.
Thus when the Plunder Law speaks of "combination," it is referring to at least two (2) acts falling under
different categories of enumeration provided in Sec. 1, par. (d), e.g., raids on the public treasury in Sec. 1, par.
(d), subpar. (1), and fraudulent conveyance of assets belonging to the National Government under Sec. 1, par. (d),
subpar. (3).
On the other hand, to constitute a series" there must be two (2) or more overt or criminal acts falling under
the same category of enumeration found in Sec. 1, par. (d), say, misappropriation, malversation
and raids on the public treasury, all of which fall under Sec. 1, par. (d), subpar. (1). Verily, had the legislature
intended a technical or distinctive meaning for "combination" and "series," it would have taken greater pains in
specifically providing for it in the law.
As for "pattern," we agree with the observations of the Sandiganbayan[9] that this term is sufficiently defined
in Sec. 4, in relation to Sec. 1, par. (d), and Sec. 2 -

x x x x under Sec. 1 (d) of the law, a 'pattern' consists of at least a combination or series of overt or
criminal acts enumerated in subsections (1) to (6) of Sec. 1 (d).Secondly, pursuant to Sec. 2 of the
law, the pattern of overt or criminal acts is directed towards a common purpose or goal which is to
enable the public officer to amass, accumulate or acquire ill-gotten wealth. And thirdly, there must
either be an 'overall unlawful scheme' or 'conspiracy' to achieve said common goal. As commonly
understood, the term 'overall unlawful scheme' indicates a 'general plan of action or method' which
the principal accused and public officer and others conniving with him follow to achieve the
aforesaid common goal. In the alternative, if there is no such overall scheme or where the schemes
or methods used by multiple accused vary, the overt or criminal acts must form part of a
conspiracy to attain a common goal.

Hence, it cannot plausibly be contended that the law does not give a fair warning and sufficient notice of
what it seeks to penalize. Under the circumstances, petitioner's reliance on the "void-for-vagueness" doctrine is
manifestly misplaced. The doctrine has been formulated in various ways, but is most commonly stated to the
effect that a statute establishing a criminal offense must define the offense with sufficient definiteness that persons
of ordinary intelligence can understand what conduct is prohibited by the statute. It can only be invoked against
that specie of legislation that is utterly vague on its face, i.e., that which cannot be clarified either by a saving
clause or by construction.
A statute or act may be said to be vague when it lacks comprehensible standards that men of common intelligence
must necessarily guess at its meaning and differ in its application. In such instance, the statute is repugnant to the
Constitution in two (2) respects - it violates due process for failure to accord persons, especially the parties
targeted by it, fair notice of what conduct to avoid; and, it leaves law enforcers unbridled discretion in carrying
out its provisions and becomes an arbitrary flexing of the Government muscle.[10] But the doctrine does not apply
as against legislations that are merely couched in imprecise language but which nonetheless specify
a standard though defectively phrased; or to those that are apparently ambiguous yet fairly applicable to certain
types of activities. The first may be "saved" by proper construction, while no challenge may be mounted as against
the second whenever directed against such activities.[11] With more reason, the doctrine cannot be invoked where
the assailed statute is clear and free from ambiguity, as in this case.
The test in determining whether a criminal statute is void for uncertainty is whether the language conveys a
sufficiently definite warning as to the proscribed conduct when measured by common understanding and
practice.[12] It must be stressed, however, that the "vagueness" doctrine merely requires a reasonable degree of
certainty for the statute to be upheld - not absolute precision or mathematical exactitude, as petitioner seems to
suggest. Flexibility, rather than meticulous specificity, is permissible as long as the metes and bounds of the
statute are clearly delineated. An act will not be held invalid merely because it might have been more explicit in
its wordings or detailed in its provisions, especially where, because of the nature of the act, it would be impossible
to provide all the details in advance as in all other statutes.
Moreover, we agree with, hence we adopt, the observations of Mr. Justice Vicente V. Mendoza during the
deliberations of the Court that the allegations that the Plunder Law is vague and overbroad do not justify a facial
review of its validity -

The void-for-vagueness doctrine states that "a statute which either forbids or requires the doing of
an act in terms so vague that men of common intelligence must necessarily guess at its meaning
and differ as to its application, violates the first essential of due process of law."[13] The overbreadth
doctrine, on the other hand, decrees that "a governmental purpose may not be achieved by means which sweep
unnecessarily broadly and thereby invade the area of protected freedoms."[14]

A facial challenge is allowed to be made to a vague statute and to one which is overbroad because
of possible "chilling effect" upon protected speech. The theory is that "[w]hen statutes regulate or
proscribe speech and no readily apparent construction suggests itself as a vehicle for rehabilitating
the statutes in a single prosecution, the transcendent value to all society of constitutionally
protected expression is deemed to justify allowing attacks on overly broad statutes with no
requirement that the person making the attack demonstrate that his own conduct could not be
regulated by a statute drawn with narrow specificity."[15] The possible harm to society in permitting
some unprotected speech to go unpunished is outweighed by the possibility that the protected
speech of others may be deterred and perceived grievances left to fester because of possible
inhibitory effects of overly broad statutes.

This rationale does not apply to penal statutes. Criminal statutes have general in terrorem effect
resulting from their very existence, and, if facial challenge is allowed for this reason alone, the
State may well be prevented from enacting laws against socially harmful conduct. In the area of
criminal law, the law cannot take chances as in the area of free speech.

The overbreadth and vagueness doctrines then have special application only to free speech
cases. They are inapt for testing the validity of penal statutes. As the U.S. Supreme Court put it, in
an opinion by Chief Justice Rehnquist, "we have not recognized an 'overbreadth' doctrine outside
the limited context of the First Amendment."[16] In Broadrick v. Oklahoma,[17] the Court ruled that
"claims of facial overbreadth have been entertained in cases involving statutes which, by their
terms, seek to regulate only spoken words" and, again, that "overbreadth claims, if entertained at
all, have been curtailed when invoked against ordinary criminal laws that are sought to be applied
to protected conduct." For this reason, it has been held that "a facial challenge to a legislative act is
the most difficult challenge to mount successfully, since the challenger must establish that no set of
circumstances exists under which the Act would be valid."[18] As for the vagueness doctrine, it is
said that a litigant may challenge a statute on its face only if it is vague in all its possible
applications. "A plaintiff who engages in some conduct that is clearly proscribed cannot complain
of the vagueness of the law as applied to the conduct of others."[19]

In sum, the doctrines of strict scrutiny, overbreadth, and vagueness are analytical tools developed
for testing "on their faces" statutes in free speech cases or, as they are called in American law, First
Amendment cases. They cannot be made to do service when what is involved is a criminal
statute. With respect to such statute, the established rule is that "one to whom application of a
statute is constitutional will not be heard to attack the statute on the ground that impliedly it might
also be taken as applying to other persons or other situations in which its application might be
unconstitutional."[20] As has been pointed out, "vagueness challenges in the First Amendment
context, like overbreadth challenges typically produce facial invalidation, while statutes found
vague as a matter of due process typically are invalidated [only] 'as applied' to a particular
defendant."[21] Consequently, there is no basis for petitioner's claim that this Court review the Anti-
Plunder Law on its face and in its entirety.

Indeed, "on its face" invalidation of statutes results in striking them down entirely on the ground
that they might be applied to parties not before the Court whose activities are constitutionally
protected.[22] It constitutes a departure from the case and controversy requirement of the
Constitution and permits decisions to be made without concrete factual settings and in sterile
abstract contexts.[23] But, as the U.S. Supreme Court pointed out in Younger v. Harris[24]

[T]he task of analyzing a proposed statute, pinpointing its deficiencies, and requiring correction of
these deficiencies before the statute is put into effect, is rarely if ever an appropriate task for the
judiciary. The combination of the relative remoteness of the controversy, the impact on the
legislative process of the relief sought, and above all the speculative and amorphous nature of the
required line-by-line analysis of detailed statutes, . . . ordinarily results in a kind of case that is
wholly unsatisfactory for deciding constitutional questions, whichever way they might be decided.

For these reasons, "on its face" invalidation of statutes has been described as "manifestly strong
medicine," to be employed "sparingly and only as a last resort,"[25]and is generally disfavored.[26] In
determining the constitutionality of a statute, therefore, its provisions which are alleged to have
been violated in a case must be examined in the light of the conduct with which the defendant is
charged.[27]

In light of the foregoing disquisition, it is evident that the purported ambiguity of the Plunder Law, so
tenaciously claimed and argued at length by petitioner, is more imagined than real. Ambiguity, where none exists,
cannot be created by dissecting parts and words in the statute to furnish support to critics who cavil at the want
of scientific precision in the law. Every provision of the law should be construed in relation and with reference to
every other part. To be sure, it will take more than nitpicking to overturn the well-entrenched presumption of
constitutionality and validity of the Plunder Law. A fortiori, petitioner cannot feign ignorance of what the Plunder
Law is all about. Being one of the Senators who voted for its passage, petitioner must be aware that the law was
extensively deliberated upon by the Senate and its appropriate committees by reason of which he even registered
his affirmative vote with full knowledge of its legal implications and sound constitutional anchorage.
The parallel case of Gallego v. Sandiganbayan[28] must be mentioned if only to illustrate and emphasize the
point that courts are loathed to declare a statute void for uncertainty unless the law itself is so imperfect and
deficient in its details, and is susceptible of no reasonable construction that will support and give it effect. In that
case, petitioners Gallego and Agoncillo challenged the constitutionality of Sec. 3, par. (e), of The Anti-Graft and
Corrupt Practices Act for being vague. Petitioners posited, among others, that the term "unwarranted" is highly
imprecise and elastic with no common law meaning or settled definition by prior judicial or administrative
precedents; that, for its vagueness, Sec. 3, par. (e), violates due process in that it does not give fair warning or
sufficient notice of what it seeks to penalize. Petitioners further argued that the Information charged them with
three (3) distinct offenses, to wit: (a) giving of "unwarranted" benefits through manifest partiality; (b) giving of
"unwarranted" benefits through evident bad faith; and, (c) giving of "unwarranted" benefits through gross
inexcusable negligence while in the discharge of their official function and that their right to be informed of the
nature and cause of the accusation against them was violated because they were left to guess which of the three
(3) offenses, if not all, they were being charged and prosecuted.
In dismissing the petition, this Court held that Sec. 3, par. (e), of The Anti-Graft and Corrupt Practices
Act does not suffer from the constitutional defect of vagueness. The phrases "manifest partiality," "evident bad
faith," and "gross and inexcusable negligence" merely describe the different modes by which the offense penalized
in Sec. 3, par. (e), of the statute may be committed, and the use of all these phrases in the same Information does
not mean that the indictment charges three (3) distinct offenses.

The word 'unwarranted' is not uncertain. It seems lacking adequate or official support; unjustified;
unauthorized (Webster, Third International Dictionary, p. 2514); or without justification or
adequate reason (Philadelphia Newspapers, Inc. v. US Dept. of Justice, C.D. Pa., 405 F. Supp. 8,
12, cited in Words and Phrases, Permanent Edition, Vol. 43-A 1978, Cumulative Annual Pocket
Part, p. 19).

The assailed provisions of the Anti-Graft and Corrupt Practices Act consider a corrupt practice and
make unlawful the act of the public officer in:

x x x or giving any private party any unwarranted benefits, advantage or preference in the discharge
of his official, administrative or judicial functions through manifest partiality, evident bad faith or
gross inexcusable negligence, x x x (Section 3 [e], Rep. Act 3019, as amended).

It is not at all difficult to comprehend that what the aforequoted penal provisions penalize is the act
of a public officer, in the discharge of his official, administrative or judicial functions, in giving any
private party benefits, advantage or preference which is unjustified, unauthorized or without
justification or adequate reason, through manifest partiality, evident bad faith or gross inexcusable
negligence.

In other words, this Court found that there was nothing vague or ambiguous in the use of the
term "unwarranted" in Sec. 3, par. (e), of The Anti-Graft and Corrupt Practices Act, which was understood in its
primary and general acceptation. Consequently, in that case, petitioners' objection thereto was held inadequate to
declare the section unconstitutional.
On the second issue, petitioner advances the highly stretched theory that Sec. 4 of the Plunder Law
circumvents the immutable obligation of the prosecution to prove beyond reasonable doubt the predicate acts
constituting the crime of plunder when it requires only proof of a pattern of overt or criminal acts showing
unlawful scheme or conspiracy -

SEC. 4. Rule of Evidence. - For purposes of establishing the crime of plunder, it shall not be
necessary to prove each and every criminal act done by the accused in furtherance of the scheme
or conspiracy to amass, accumulate or acquire ill-gotten wealth, it being sufficient to establish
beyond reasonable doubt a pattern of overt or criminal acts indicative of the overall unlawful
scheme or conspiracy.
 The running fault in this reasoning is obvious even to the simplistic mind. In a criminal prosecution for
plunder, as in all other crimes, the accused always has in his favor the presumption of innocence which is
guaranteed by the Bill of Rights, and unless the State succeeds in demonstrating by proof beyond reasonable
doubt that culpability lies, the accused is entitled to an acquittal.[29] The use of the "reasonable doubt" standard is
indispensable to command the respect and confidence of the community in the application of criminal law. It is
critical that the moral force of criminal law be not diluted by a standard of proof that leaves people in doubt
whether innocent men are being condemned. It is also important in our free society that every individual going
about his ordinary affairs has confidence that his government cannot adjudge him guilty of a criminal offense
without convincing a proper factfinder of his guilt with utmost certainty. This "reasonable doubt" standard has
acquired such exalted stature in the realm of constitutional law as it gives life to the Due Process Clause which
protects the accused against conviction except upon proof beyond reasonable doubt of every fact necessary to
constitute the crime with which he is charged.[30] The following exchanges between Rep. Rodolfo Albano and
Rep. Pablo Garcia on this score during the deliberations in the floor of the House of Representatives are
elucidating -

DELIBERATIONS OF THE HOUSE OF REPRESENTATIVES ON RA 7080, 9 October 1990

MR. ALBANO: Now, Mr. Speaker, it is also elementary in our criminal law that what is alleged in the information
must be proven beyond reasonable doubt. If we will prove only one act and find him guilty of the other acts
enumerated in the information, does that not work against the right of the accused especially so if the amount
committed, say, by falsification is less than P100 million, but the totality of the crime committed is P100 million
since there is malversation, bribery, falsification of public document, coercion, theft?
MR. GARCIA: Mr. Speaker, not everything alleged in the information needs to be proved beyond reasonable
doubt. What is required to be proved beyond reasonable doubt is every element of the crime charged. For
example, Mr. Speaker, there is an enumeration of the things taken by the robber in the information three pairs of
pants, pieces of jewelry. These need not be proved beyond reasonable doubt, but these will not prevent the
conviction of a crime for which he was charged just because, say, instead of 3 pairs of diamond earrings the
prosecution proved two. Now, what is required to be proved beyond reasonable doubt is the element of the
offense.
MR. ALBANO: I am aware of that, Mr. Speaker, but considering that in the crime of plunder the totality of the amount
is very important, I feel that such a series of overt criminal acts has to be taken singly. For instance, in the act of
bribery, he was able to accumulate only P50,000 and in the crime of extortion, he was only able to accumulate P1
million. Now, when we add the totality of the other acts as required under this bill through the interpretation on
the rule of evidence, it is just one single act, so how can we now convict him?
MR. GARCIA: With due respect, Mr. Speaker, for purposes of proving an essential element of the crime, there is a
need to prove that element beyond reasonable doubt. For example, one essential element of the crime is that the
amount involved is P100 million. Now, in a series of defalcations and other acts of corruption in the enumeration
the total amount would be P110 or P120 million, but there are certain acts that could not be proved, so, we will
sum up the amounts involved in those transactions which were proved. Now, if the amount involved in these
transactions, proved beyond reasonable doubt, is P100 million, then there is a crime of plunder(underscoring
supplied).
It is thus plain from the foregoing that the legislature did not in any manner refashion the standard quantum
of proof in the crime of plunder. The burden still remains with the prosecution to prove beyond any iota of doubt
every fact or element necessary to constitute the crime.
The thesis that Sec. 4 does away with proof of each and every component of the crime suffers from a dismal
misconception of the import of that provision. What the prosecution needs to prove beyond reasonable doubt is
only a number of acts sufficient to form a combination or series which would constitute a pattern and involving
an amount of at least P50,000,000.00. There is no need to prove each and every other act alleged in the
Information to have been committed by the accused in furtherance of the overall unlawful scheme or conspiracy
to amass, accumulate or acquire ill-gotten wealth. To illustrate, supposing that the accused is charged in an
Information for plunder with having committed fifty (50) raids on the public
treasury. The prosecution need not prove all these fifty (50) raids, it being sufficient to prove by pattern at least
two (2) of the raids beyond reasonable doubt provided only that they amounted to at least P50,000,000.00.[31]
A reading of Sec. 2 in conjunction with Sec. 4, brings us to the logical conclusion that "pattern of overt or
criminal acts indicative of the overall unlawful scheme or conspiracy" inheres in the very acts of accumulating,
acquiring or amassing hidden wealth. Stated otherwise, such pattern arises where the prosecution is able to prove
beyond reasonable doubt the predicate acts as defined in Sec. 1, par. (d). Pattern is merely a by-product of the
proof of the predicate acts. This conclusion is consistent with reason and common sense. There would be no other
explanation for a combination or series of
overt or criminal acts to stash P50,000,000.00 or more, than "a scheme or conspiracy to amass, accumulate or
acquire ill gotten wealth." The prosecution is therefore not required to make a deliberate and conscious effort to
prove pattern as it necessarily follows with the establishment of a series or combination of the predicate acts.
Relative to petitioner's contentions on the purported defect of Sec. 4 is his submission that "pattern" is "a
very important element of the crime of plunder;" and that Sec. 4 is "two pronged, (as) it contains a rule of evidence
and a substantive element of the crime," such that without it the accused cannot be convicted of plunder -
JUSTICE BELLOSILLO: In other words, cannot an accused be convicted under the Plunder Law without applying
Section 4 on the Rule of Evidence if there is proof beyond reasonable doubt of the commission of the acts
complained of?
ATTY. AGABIN: In that case he can be convicted of individual crimes enumerated in the Revised Penal Code, but not
plunder.
JUSTICE BELLOSILLO: In other words, if all the elements of the crime are proved beyond reasonable doubt without
applying Section 4, can you not have a conviction under the Plunder Law?
ATTY. AGABIN: Not a conviction for plunder, your Honor.
JUSTICE BELLOSILLO: Can you not disregard the application of Sec. 4 in convicting an accused charged for
violation of the Plunder Law?
ATTY. AGABIN: Well, your Honor, in the first place Section 4 lays down a substantive element of the law x x x x
JUSTICE BELLOSILLO: What I said is - do we have to avail of Section 4 when there is proof beyond reasonable
doubt on the acts charged constituting plunder?
ATTY. AGABIN: Yes, your Honor, because Section 4 is two pronged, it contains a rule of evidence and it contains a
substantive element of the crime of plunder. So, there is no way by which we can avoid Section 4.
JUSTICE BELLOSILLO: But there is proof beyond reasonable doubt insofar as the predicate crimes charged are
concerned that you do not have to go that far by applying Section 4?
ATTY. AGABIN: Your Honor, our thinking is that Section 4 contains a very important element of the crime of plunder
and that cannot be avoided by the prosecution.[32]
We do not subscribe to petitioner's stand. Primarily, all the essential elements of plunder can be culled and
understood from its definition in Sec. 2, in relation to Sec. 1, par. (d), and "pattern" is not one of them. Moreover,
the epigraph and opening clause of Sec. 4 is clear and unequivocal:
SEC. 4. Rule of Evidence. - For purposes of establishing the crime of plunder x x x x
It purports to do no more than prescribe a rule of procedure for the prosecution of a criminal case for
plunder. Being a purely procedural measure, Sec. 4 does not define or establish any substantive right in favor of
the accused but only operates in furtherance of a remedy. It is only a means to an end, an aid to substantive
law.Indubitably, even without invoking Sec. 4, a conviction for plunder may be had, for what is crucial for the
prosecution is to present sufficient evidence to engender that moral certitude exacted by the fundamental law to
prove the guilt of the accused beyond reasonable doubt. Thus, even granting for the sake of argument that Sec. 4
is flawed and vitiated for the reasons advanced by petitioner, it may simply be severed from the rest of the
provisions without necessarily resulting in the demise of the law; after all, the existing rules on evidence can
supplant Sec. 4 more than enough. Besides, Sec. 7 of RA 7080 provides for a separability clause -

Sec. 7. Separability of Provisions. - If any provisions of this Act or the application thereof to any
person or circumstance is held invalid, the remaining provisions ofthis Act and the application of
such provisions to other persons or circumstances shall not be affected thereby.

Implicit in the foregoing section is that to avoid the whole act from being declared invalid as a result of the
nullity of some of its provisions, assuming that to be the case although it is not really so, all the provisions thereof
should accordingly be treated independently of each other, especially if by doing so, the objectives of the statute
can best be achieved.
As regards the third issue, again we agree with Justice Mendoza that plunder is a malum in se which requires
proof of criminal intent. Thus, he says, in his Concurring Opinion -

x x x Precisely because the constitutive crimes are mala in se the element of mens rea must be
proven in a prosecution for plunder. It is noteworthy that the amended information alleges that the
crime of plunder was committed "willfully, unlawfully and criminally." It thus alleges guilty
knowledge on the part of petitioner.

In support of his contention that the statute eliminates the requirement of mens rea and that is the
reason he claims the statute is void, petitioner cites the following remarks of Senator Taada made
during the deliberation on S.B. No. 733:

SENATOR TAADA . . . And the evidence that will be required to convict him would not be
evidence for each and every individual criminal act but only evidence sufficient to establish the
conspiracy or scheme to commit this crime of plunder.[33]

However, Senator Taada was discussing 4 as shown by the succeeding portion of the transcript
quoted by petitioner:

SENATOR ROMULO: And, Mr. President, the Gentleman feels that it is contained in Section 4,
Rule of Evidence, which, in the Gentleman's view, would provide for a speedier and faster process
of attending to this kind of cases?

SENATOR TAADA: Yes, Mr. President . . .[34]

Senator Taada was only saying that where the charge is conspiracy to commit plunder, the
prosecution need not prove each and every criminal act done to further the scheme or conspiracy, it
being enough if it proves beyond reasonable doubt a pattern of overt or ciminal acts indicative of
the overall unlawful scheme or conspiracy.As far as the acts constituting the pattern are concerned,
however, the elements of the crime must be proved and the requisite mens rea must be shown.

Indeed, 2 provides that -

Any person who participated with the said public officer in the commission of an offense
contributing to the crime of plunder shall likewise be punished for such offense. In the imposition
of penalties, the degree of participation and the attendance of mitigating and extenuating
circumstances, as provided by the Revised Penal Code, shall be considered by the court.

The application of mitigating and extenuating circumstances in the Revised Penal Code to
prosecutions under the Anti-Plunder Law indicates quite clearly that mens rea is an element of
plunder since the degree of responsibility of the offender is determined by his criminal intent. It is
true that 2 refers to "any person who participates with the said public officer in the commission of
an offense contributing to the crime of plunder." There is no reason to believe, however, that it does
not apply as well to the public officer as principal in the crime. As Justice Holmes said: "We agree
to all the generalities about not supplying criminal laws with what they omit, but there is no canon
against using common sense in construing laws as saying what they obviously mean."[35]

Finally, any doubt as to whether the crime of plunder is a malum in se must be deemed to have
been resolved in the affirmative by the decision of Congress in 1993 to include it among the
heinous crimes punishable by reclusion perpetua to death. Other heinous crimes are punished with
death as a straight penalty in R.A. No. 7659.Referring to these groups of heinous crimes, this Court
held in People v. Echegaray:[36]

The evil of a crime may take various forms. There are crimes that are, by their very nature,
despicable, either because life was callously taken or the victim is treated like an animal and utterly
dehumanized as to completely disrupt the normal course of his or her growth as a human being . . .
. Seen in this light, the capital crimes of kidnapping and serious illegal detention for ransom
resulting in the death of the victim or the victim is raped, tortured, or subjected to dehumanizing
acts; destructive arson resulting in death; and drug offenses involving minors or resulting in the
death of the victim in the case of other crimes; as well as murder, rape,
parricide,infanticide, kidnapping and serious illegal detention, where the victim is detained for
more than three days or serious physical injuries were inflicted on the victim or threats to kill him
were made or the victim is a minor, robbery with homicide, rape or intentional mutilation,
destructive arson, and carnapping where the owner, driver or occupant of the carnapped vehicle is
killed or raped, which are penalized by reclusion perpetua to death, are clearly heinous by their
very nature.

There are crimes, however, in which the abomination lies in the significance and implications of
the subject criminal acts in the scheme of the larger socio-political and economic context in which
the state finds itself to be struggling to develop and provide for its poor and underprivileged
masses. Reeling from decades of corrupt tyrannical rule that bankrupted the government and
impoverished the population, the Philippine Government must muster the political will to dismantle
the culture of corruption, dishonesty, greed and syndicated criminality that so deeply entrenched
itself in the structures of society and the psyche of the populace. [With the government] terribly
lacking the money to provide even the most basic services to its people, any form of
misappropriation or misapplication of government funds translates to an actual threat to the very
existence of government, and in turn, the very survival of the people it governs over. Viewed in this
context, no less heinous are the effects and repercussions of crimes like qualified bribery,
destructive arson resulting in death, and drug offenses involving government officials, employees
or officers, that their perpetrators must not be allowed to cause further destruction and damage to
society.
The legislative declaration in R.A. No. 7659 that plunder is a heinous offense implies that it is
a malum in se. For when the acts punished are inherently immoral or inherently wrong, they
are mala in se[37] and it does not matter that such acts are punished in a special law, especially since
in the case of plunder the predicate crimes are mainly mala in se. Indeed, it would be absurd to treat
prosecutions for plunder as though they are mere prosecutions for violations of the Bouncing Check
Law (B.P. Blg. 22) or of an ordinance against jaywalking, without regard to the inherent wrongness
of the acts.

To clinch, petitioner likewise assails the validity of RA 7659, the amendatory law of RA 7080, on
constitutional grounds. Suffice it to say however that it is now too late in the day for him to
resurrect this long dead issue, the same having been eternally consigned by People v. Echegaray[38] to the archives
of jurisprudential history. The declaration of this Court therein that RA 7659 is constitutionally valid stands as a
declaration of the State, and becomes, by necessary effect, assimilated in the Constitution now as an integral part
of it.
Our nation has been racked by scandals of corruption and obscene profligacy of officials in high places which
have shaken its very foundation. The anatomy of graft and corruption has become more elaborate in
the corridors of time as unscrupulous people relentlessly contrive more and more ingenious ways to bilk the
coffers of the government. Drastic and radical measures are imperative to fight the increasingly sophisticated,
extraordinarily methodical and economically catastrophic lootingof the national treasury. Such is the Plunder
Law, especially designed to disentangle those ghastly tissues of grand-scale corruption which, if left unchecked,
will spread like a malignant tumor and ultimately consume the moral and institutional fiber of our nation. The
Plunder Law, indeed, is a living testament to the will of the legislature to ultimately eradicate this scourge and
thus secure society against the avarice and other venalities in public office.
These are times that try men's souls. In the checkered history of this nation, few issues of national importance
can equal the amount of interest and passion generated by petitioner's ignominious fall from the highest office,
and his eventual prosecution and trial under a virginal statute. This continuing
saga has driven a wedgeof dissension among our people that may linger for a long time. Only by responding to
the clarion call for patriotism, to rise above factionalism and prejudices, shall we emerge triumphant in the midst
of ferment.
PREMISES CONSIDERED, this Court holds that RA 7080 otherwise known as the Plunder Law, as
amended by RA 7659, is CONSTITUTIONAL.Consequently, the petition to declare the law unconstitutional
is DISMISSED for lack of merit.

H. Motion for Reconsideration

I. Suretyship
J. Tariff and Custom Code
Feeder v. CA

The instant petition seeks the reversal of the decision of respondent Court of Appeals dated May 8, 1990, affirming
the decision rendered by respondent Court of Tax Appeals which found the vessel M/T "ULU WAI" liable under
Section 2530(a) of the Tariff and Customs Code of the Philippines (Presidential Decree No. 1464), as amended, and
its cargo of 1,100 metric tons of gas oil and 1,000 metric tons of fuel oil liable under Section 2530(a), (f), and (1-1) of
the same Code and ordering the forfeiture of the said vessel and its cargo.1

The facts as culled from the decision of the Court of Appeals in CA-G.R. SP No. 20470 are as follows:
The M/T "ULU WAI" foreign vessel of Honduran registry, owned and operated by Feeder International
Shipping Lines of Singapore, left Singapore on May 6, 1986 carrying 1,100 metric tons of gas oil and 1,000
metric tons of fuel oil consigned to Far East Synergy Corporation of Zamboanga, Philippines.

On May 14, 1986, the vessel anchored at the vicinity of Guiuanon Island in Iloilo without notifying the Iloilo
customs authorities. The presence of the vessel only came to the knowledge of the Iloilo authorities by
information of the civilian informer in the area. Acting on said information, the Acting District Collector of
Iloilo dispatched a Customs team on May 19, 1986 to verify the report.

The Customs team found out that the vessel did not have on board the required ship and shipping
documents, except for a clearance from the port authorities of Singapore clearing the vessel for
"Zamboanga."

In view thereof, the vessel and its cargo were held and a Warrant of Seizure and Detention over the same
was issued after due investigation. The petitioner then filed its Motion to Dismiss and to Quash the Warrants
of Seizure and Detention which the District Collector denied in his Order dated December 12, 1986.

In the course of the forfeiture proceedings, the parties, through their respective counsel, agreed on a
stipulation of facts, to wit:

l. That the existence and identity of MT "ULU WAI" subject of Sl-2-86, herein identified as Exh. "A", is
admitted.

2. That the existence and identity of l,100 metric tons of gas oil, subject of Sl-2-86-A, herein
identified as Exh. "B", is admitted;

3. That the existence and identity of 1,000 metric tons of fuel oil, subject of Sl-2-86 herein identified
as Exh. "B-1", is admitted;

4. That M/T "ULU WAI" left Singapore May 6, 1986 and was cleared by Singapore customs
authorities for Zamboanga, Philippines;

5. That subject vessel arrived at Guiuanon Island, Municipality of Nueva Valencia, sub-province of
Guimaras, Province of Iloilo, Philippines, about 1120HRS, May 14,1986;

6. That subject vessel was boarded by Customs and Immigration authorities for the first time in the
afternoon of May 19, 1986, at about 1600HRS;

7. That an apprehension report dated May 21, 1986, submitted by the Team leader of the Customs
and Immigration Team, Roberto Intrepido, marked and identified as Exh. "C", is admitted;

8. That at the time of boarding, the Master of subject vessel could not produce any ship and/or
shipping documents regarding her cargo except the Port Clearance Certificate No. 179999 issued by
the Port of Singapore authority dated May 4, 1986, marked as Exh. "D", which is hereby admitted;

9. That on May 26, 1986, the Master of M/T "ULU WAI", Capt. Romeo E. Deposa filed a Marine
Protest dated same date, which Marine Protest, marked and identified as Exh. "E", is hereby
admitted;

10. That the sworn statement of said Capt. Romeo E. Deposa, marked and identified as Exh. "F",
given on May 26, 1986 before Atty. Hernando Hinojales, Customs Legal Officer, is admitted;

11. That the sworn statement of Mr. Antonio Torres, Owner's representative of M/T "ULU WAI"
marked and identified as Exh. "G" given before Atty. Hernando Hinojales on May 28,1986, is
admitted;
 12. That the sworn statement of Wilfredo Lumagpas, Master of M/T "CATHEAD" given before Lt.
Dennis Azarraga on June 4, 1986, marked and identified as Exh. "H", is admitted;

13. That the existence of Fixture Note No. FN-M-86-05-41 entered into by and between the National
Stevedoring & Lighterage Corporation and the Far East Synergy Corporation, marked and identified
as Exh. "I", is admitted; and;

14. That the Preliminary Report of Survey Sounding Report dated June 17, 1986, signed by J.P.
Piad, Surveyor of Interport Surveying Services, Inc. and duly attested by Ernesto Cutay, Chief
Officer of the M/T "ULU WAI" marked and identified as Exh. "J", is also admitted.2

On March 17, 1987, the District Collector issued his decision, with the following disposition:

WHEREFORE, premises considered, the M/T "ULU WAI" hereby found guilty of violating Section
2530 (a) of the Tariff and Customs Code of the Philippines (PD 1464), as amended, while her cargo
of 1,100 M/T Gas Oil and 1,000 M/T Fuel Oil are hereby found guilty of violating Section 2530* (a),
(f), and (1-1) under the same Code and are hereby forfeited in favor of the Republic of the
Philippines.

SO ORDERED.3

Petitioner appealed to the Commissioner of Customs who rendered a decision dated May 13, 1987, the
decretal portion of which reads:

WHEREFORE, premises considered, the decision dated March 19, 1987 of the District Collector of
Customs of Iloilo, ordering the forfeiture of M/T "ULU WAI" and its cargo of 2,100 metric tons of gas
and fuel oil is hereby affirmed in toto.

SO ORDERED.4

On June 25, 1987, petitioner filed a petition for review of the decisions of the Collector and the
Commissioner of Customs with the Court of Tax Appeals, praying for the issuance of a writ of preliminary
injunction and/or a restraining order to enjoin the Commissioner from implementing his decision. On
December 14, 1988, the Court of Tax Appeals issued its decision, with this dispositive portion:

WHEREFORE, the decision of respondent Commissioner of Customs dated May 13, 1987, ordering
the forfeiture of the vessel M/T "ULU WAI" for violation of Section 2530(a) of the Tariff and Custom
Codes (sic), as amended, and its cargo of 1,100 metric tons of Gas Oil and 1,000 metric tons of Fuel
Oil for violation of Section 2530 * (a) and (f), and (I-1) of the same Code, is hereby affirmed. With
costs.

SO ORDERED.5

Petitioner, on January 19, 1990, filed a petition for review of the Court of Tax Appeals' decision with this
Court. On March 21, 1990, we issued a resolution6 referring the disposition of the case to the Court of
Appeals in view of our decision in Development Bank of the Philippines vs. Court of Appeals, et al.7 holding
that final judgments or decrees of the Court of Tax Appeals are within the exclusive appellate jurisdiction of
the Court of Appeals.

On May 8, 1990, the Court of Appeals rendered its questioned decision affirming the decision of the Court of
Tax Appeals. Petitioner's motion for reconsideration having been denied on July 4, 1990, it interposed this
instant petition contending that:

1. The Court of Appeals erred in finding on the basis of circumstantial evidence that an illegal importation
had been committed;
 2. Petitioner was deprived of property without due process of law in that its right to be presumed innocent
was not recognized and the decision was not supported by proof beyond reasonable doubt; and

3. The sworn statements of Deposa and Torres were taken without assistance of counsel in violation of their
constitutional right thereto.8

We find no merit in the Petition.

1. It must be here emphasized that a forfeiture proceeding under tariff and customs laws is not penal in nature,
contrary to the argument advanced by herein petitioner. In the case of People vs. Court of first Instance of Rizal
etc., et al.,9 this Court made an exhaustive analysis of the nature of forfeiture proceedings, in relation to criminal
proceedings, as follows:

. . . It is quite clear that seizure and forfeiture proceedings under the tariff and customs laws are not criminal
in nature as they do not result in the conviction of the offender nor in the imposition of the penalty provided
for in Section 3601 of the Code. As can be gleaned from Section 2533 of the code, seizure proceedings,
such as those instituted in this case, are purely civil and administrative in character, the main purpose of
which is to enforce the administrative fines or forfeiture incident to unlawful importation of goods or their
deliberate possession. The penalty in seizure cases is distinct and separate from the criminal liability that
might be imposed against the indicted importer or possessor and both kinds of penalties may be imposed.

In the case at bar, the decision of the Collector of Customs, as in other seizure proceedings, concerns
the res rather than the persona. The proceeding is a probe on contraband or illegally imported goods. These
merchandise violated the revenue law of the country, and as such, have been prevented from being
assimilated in lawful commerce until corresponding duties are paid thereon and the penalties imposed and
satisfied either in the form of fine or of forfeiture in favor of the government who will dispose of them in
accordance with law. The importer or possessor is treated differently. The fact that the administrative penalty
be falls on him is an inconsequential incidence to criminal liability. By the same token, the probable guilt
cannot be negated simply because he was not held administratively liable. The Collector's final declaration
that the articles are not subject to forfeiture does not detract his findings that untaxed goods were
transported in respondents' car and seized from their possession by agents of the law. Whether criminal
liability lurks on the strength of the provision of the Tariff and Customs Code adduced in the information can
only be determined in a separate criminal action. Respondents' exoneration in the administrative cases
cannot deprive the State of its right to prosecute. But under our penal laws, criminal responsibility, if any,
must be proven not by preponderance of evidence but by proof beyond reasonable doubt.

Considering, therefore, that proceedings for the forfeiture of goods illegally imported are not criminal in nature since
they do not result in the conviction of the wrongdoer nor in the imposition upon him of a penalty, proof beyond
reasonable doubt is not required in order to justify the forfeiture of the goods. In this case, the degree of proof
required is merely substantial evidence which means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.10

In the case at bar, we find and so hold that the Government has sufficiently established that an illegal importation, or
at least an attempt thereof, has been committed with the use of the vessel M/T "ULU WAI," thus warranting the
forfeiture of said vessel and its cargo pursuant to the provisions of the Tariff and Customs Code.

Before we proceed to a discussion of the factual findings of the Court of Appeals, it bears mention that petitioner,
which is a corporate entity, has no personality to invoke the right to be presumed innocent which right is available
only to an individual who is an accused in a criminal case.

2. The main issue for resolution is whether or not there was an illegal importation committed, or at least an attempt
thereof, which would justify a forfeiture of the subject vessel and its cargo.

Petitioner avers that respondent court erred in finding that an illegal importation had been committed on the basis of
circumstantial evidence, erroneously relying on Section 5 (now Section 4), Rule 133 of the Rules of Court. As earlier
stated, forfeiture proceedings are not criminal in nature, hence said provision of Rule 133 which involves. such
circumstantial evidence as will produce a conviction beyond reasonable doubt does not apply.
Section 1202 of the Tariff and Customs Code provides that importation begins when the carrying vessel or aircraft
enters the jurisdiction of the Philippines with intention to unload therein. It is clear from the provision of the law that
mere intent to unload is sufficient to commence an importation. And "intent," being a state of mind, is rarely
susceptible of direct proof, but must ordinarily be inferred from the facts,11 and therefore can only be proved by
unguarded, expressions, conduct and circumstances generally.12

In the case at bar, that petitioner is guilty of illegal importation, there having been an intent to unload, is amply
supported by substantial evidence as clearly demonstrated by this comprehensive discussion in respondent court's
decision:

It is undisputed that the vessel M/T "ULU WAI" entered the jurisdiction of the Philippines. The issue that calls
for Our resolution is whether or not there was an intention to unload. The facts and circumstances borne by
the evidence convince Us that there was intent to unload. The following circumstances unmistakably point to
this conclusion.

1. Considering that the vessel came from Singapore, the route to Zamboanga was shorter and Iloilo lies
further north. It is not logical for the sailing vessel to travel a longer distance to get the necessary repairs.
1âwphi1

2. When the vessel M/T "ULU WAI" anchored at Guiuanon Island, Guimaras, Iloilo, it did not notify the Iloilo
port or Customs authorities of its arrival. The master of the vessel did not file a marine protest until 12 days
after it had anchored, despite the supposed urgency of the repairs needed and notwithstanding the provision
(Sec. 1016) of the Code requiring the master to file protest within 24 hours.

3. At the time of boarding by the customs personnel, the required ship's and shipping documents were not
on board except the clearance from Singaporean port officials clearing the vessel for Zamboanga. Petitioner
claims that these were turned over to the shipping agent who boarded the vessel on May 15, 1986.
However, this claim is belied by the sworn marine protest (Exhibit "E") of the master of M/T "ULU WAI" Mr.
Romeo Deposa.

It was only on or about the 20th of May when I instructed one of the crew to: get down of (sic) the
vessel and find means and ways to contact the vessel's representative.

Moreover, in such Sworn Statement (Exhibit "G"), ship agent, Antonio Torres, stated that he did not know
the buyer of the oil, which is impossible if he had the Local Purchase Order of the alleged buyer, Pogun
Construction SDN. Torres also swore that his knowledge came from the vessel's owner, without mentioning
the shipping documents which indicate such data. He also said that he did not know the consignee of the oil
which would have been patent from the documents. Lastly, as also pointed out by the court a quo, the
captain of the vessel M/T "ULU WAI" Romeo Deposa, in his sworn statement to custom authorities on May
26, 1986, enumerated the documents he allegedly gave to Mr. Antonio Torres, but did not mention as
among them the Local Purchase Order of Pogun Construction SDN and the Bill of Lading.

4. When the vessel was inspected, the tugboat M/T "CATHEAD", and the large M/T "SEMIRANO NO. 819"
were alongside it. A fixture note revealed that the barge and the tugboat were contracted by Consignee Far
East Synergy to load the cargo of the vessel into the awaiting barge and to discharge the same to Manila
(Exhibits "I" and "I-1").

It is of no moment that the fixture note did not expressly mention the vessel M/T "ULU WAI" Government
witnesses, Asencio and Lumagpas, testified that it was the vessel's cargo which was to be unloaded and
brought to Manila by them.13

The aforequoted findings of fact of respondent Court of Appeals are in consonance with the findings of both the
Collector and the Commissioner of Customs, as affirmed by the Court of Tax Appeals. We, therefore, find no
compelling reason to deviate from the elementary principle that findings of fact of the Court of Appeals, and of the
administrative and quasi-judicial bodies for that matter, are entitled to great weight and are conclusive and binding
upon this Court absent a showing of a grave abuse of discretion amounting to lack of jurisdiction.
3. The fact that the testimonies of Deposa and Torres were given without the assistance of counsel may not be
considered an outright violation of their constitutional right to be assisted by counsel. As explained in the case
of Nera vs. The Auditor General:14

The right to the assistance of counsel is not indispensable to due process unless required by the
Constitution or a law. Exception is made in the charter only during the custodial investigation of a person
suspected of a crime, who may not waive his right to counsel except in writing and in the presence of
counsel, and during the trial of the accused, who has the right "to be heard by himself and counsel," either
retained by him or provided for him by the government at its expense. These guarantees are embodied in
the Constitution, along with the other rights of the person facing criminal prosecution, because of the odds
he must contend with to defend his liberty (and before even his life) against the awesome authority of the
State.

In other proceedings, however, the need for the assistance of counsel is not as urgent nor is it deemed
essential to their validity. There is nothing in the Constitution that says a party in a non-criminal proceeding
is entitled to be represented by counsel and that without such representation he will not be bound by such
proceedings. The assistance of lawyers, while desirable, is not indispensable. The legal profession was not
engrafted in the due process clause such that without the participation of its members the safeguard is
deemed ignored or violated. The ordinary citizen is not that helpless that he cannot validly act at all except
only with a lawyer at his side.

Besides, if ever there was any doubt as to the veracity of the sworn statements of Deposa and Torres, they should
have been presented during any appropriate stage of the proceedings to refute or deny the statements they made.
This was not done by petitioner. Hence, the presumption that official duty was regularly performed stands. In
addition, petitioner does not deny that Torres is himself a lawyer. Finally, petitioner simply contends that the sworn
statements were taken without the assistance of counsel but, however, failed to allege or prove that the same were
taken under anomalous circumstances which would render them inadmissible as evidence against petitioner. We
thus find no compelling reason to doubt the validity or veracity of the said sworn statements.

WHEREFORE, the instant petition is DENIED for lack of merit and the judgment appealed from is hereby
AFFIRMED in toto.

SO ORDERED.

K. Appeal
L. Closure Proceedings
CB v. CA (relative constitutionality)

May a Monetary Board resolution placing a private bank under receivership be annulled on the ground of lack of
prior notice and hearing?

This petition seeks review of the decision of the Court of Appeals in CA G.R. S.P. No. 07867 entitled "The Central
Bank of the Philippines and Ramon V. Tiaoqui vs. Hon. Jose C. de Guzman and Triumph Savings Bank,"
promulgated 26 September 1986, which affirmed the twin orders of the Regional Trial Court of Quezon City issued
11 November 19851 denying herein petitioners' motion to dismiss Civil Case No. Q-45139, and directing petitioner
Ramon V. Tiaoqui to restore the private management of Triumph Savings Bank (TSB) to its elected board of
directors and officers, subject to Central Bank comptrollership.2

The antecedent facts: Based on examination reports submitted by the Supervision and Examination Sector (SES),
Department II, of the Central Bank (CB) "that the financial condition of TSB is one of insolvency and its continuance
in business would involve probable loss to its depositors and creditors,"3 the Monetary Board (MB) issued on 31 May
1985 Resolution No. 596 ordering the closure of TSB, forbidding it from doing business in the Philippines, placing it
under receivership, and appointing Ramon V. Tiaoqui as receiver. Tiaoqui assumed office on 3 June 1985.4
On 11 June 1985, TSB filed a complaint with the Regional Trial Court of Quezon City, docketed as Civil Case No. Q-
45139, against Central Bank and Ramon V. Tiaoqui to annul MB Resolution No. 596, with prayer for injunction,
challenging in the process the constitutionality of Sec. 29 of R.A. 269, otherwise known as "The Central Bank Act,"
as amended, insofar as it authorizes the Central Bank to take over a banking institution even if it is not charged with
violation of any law or regulation, much less found guilty thereof.5

On 1 July 1985, the trial court temporarily restrained petitioners from implementing MB Resolution No. 596 "until
further orders", thus prompting them to move for the quashal of the restraining order (TRO) on the ground that it did
not comply with said Sec. 29, i.e., that TSB failed to show convincing proof of arbitrariness and bad faith on the part
of petitioners;' and, that TSB failed to post the requisite bond in favor of Central Bank.

On 19 July 1985, acting on the motion to quash the restraining order, the trial court granted the relief sought and
denied the application of TSB for injunction. Thereafter, Triumph Savings Bank filed with Us a petition
for certiorariunder Rule 65 of the Rules of Court6 dated 25 July 1985 seeking to enjoin the continued implementation
of the questioned MB resolution.

Meanwhile, on 9 August 1985; Central Bank and Ramon Tiaoqui filed a motion to dismiss the complaint before the
RTC for failure to state a cause of action, i.e., it did not allege ultimate facts showing that the action was plainly
arbitrary and made in bad faith, which are the only grounds for the annulment of Monetary Board resolutions placing
a bank under conservatorship, and that TSB was without legal capacity to sue except through its receiver.7

On 9 September 1985, TSB filed an urgent motion in the RTC to direct receiver Ramon V. Tiaoqui to restore TSB to
its private management. On 11 November 1985, the RTC in separate orders denied petitioners' motion to dismiss
and ordered receiver Tiaoqui to restore the management of TSB to its elected board of directors and officers,
subject to CB comptrollership.

Since the orders of the trial court rendered moot the petition for certiorari then pending before this Court, Central
Bank and Tiaoqui moved on 2 December 1985 for the dismissal of G.R. No. 71465 which We granted on 18
December 1985.8

Instead of proceeding to trial, petitioners elevated the twin orders of the RTC to the Court of Appeals on a petition
for certiorari and prohibition under Rule 65.9 On 26 September 1986, the appellate court, upheld the orders of the
trial court thus —

Petitioners' motion to dismiss was premised on two grounds, namely, that the complaint failed to
state a cause of action and that the Triumph Savings Bank was without capacity to sue except
through its appointed receiver.

Concerning the first ground, petitioners themselves admit that the Monetary Board resolution placing
the Triumph Savings Bank under the receivership of the officials of the Central Bank was done
without prior hearing, that is, without first hearing the side of the bank. They further admit that said
resolution can be the subject of judicial review and may be set aside should it be found that the
same was issued with arbitrariness and in bad faith.

The charge of lack of due process in the complaint may be taken as constitutive of allegations of
arbitrariness and bad faith. This is not of course to be taken as meaning that there must be previous
hearing before the Monetary Board may exercise its powers under Section 29 of its Charter. Rather,
judicial review of such action not being foreclosed, it would be best should private respondent be
given the chance to show and prove arbitrariness and bad faith in the issuance of the questioned
resolution, especially so in the light of the statement of private respondent that neither the bank itself
nor its officials were even informed of any charge of violating banking laws.

In regard to lack of capacity to sue on the part of Triumph Savings Bank, we view such argument as
being specious, for if we get the drift of petitioners' argument, they mean to convey the impression
that only the CB appointed receiver himself may question the CB resolution appointing him as such.
This may be asking for the impossible, for it cannot be expected that the master, the CB, will allow
the receiver it has appointed to question that very appointment. Should the argument of petitioners
be given circulation, then judicial review of actions of the CB would be effectively checked and
 foreclosed to the very bank officials who may feel, as in the case at bar, that the CB action ousting
them from the bank deserves to be set aside.

xxx xxx xxx

On the questioned restoration order, this Court must say that it finds nothing whimsical, despotic,
capricious, or arbitrary in its issuance, said action only being in line and congruent to the action of
the Supreme Court in the Banco Filipino Case (G.R. No. 70054) where management of the bank
was restored to its duly elected directors and officers, but subject to the Central Bank
comptrollership.10

On 15 October 1986, Central Bank and its appointed receiver, Ramon V. Tiaoqui, filed this petition under Rule 45 of
the Rules of Court praying that the decision of the Court of Appeals in CA-G.R. SP No. 07867 be set aside, and that
the civil case pending before the RTC of Quezon City, Civil Case No.
Q-45139, be dismissed. Petitioners allege that the Court of Appeals erred —

(1) in affirming that an insolvent bank that had been summarily closed by the Monetary Board should
be restored to its private management supposedly because such summary closure was "arbitrary
and in bad faith" and a denial of "due process";

(2) in holding that the "charge of lack of due process" for "want of prior hearing" in a complaint to
annul a Monetary Board receivership resolution under Sec. 29 of R.A. 265 "may be taken as . .
allegations of arbitrariness and bad faith"; and

(3) in holding that the owners and former officers of an insolvent bank may still act or sue in the
name and corporate capacity of such bank, even after it had been ordered closed and placed under
receivership.11

The respondents, on the other hand, allege inter alia that in the Banco Filipino case,12 We held that CB violated the
rule on administrative due process laid down in Ang Tibay vs. CIR (69 Phil. 635) and Eastern Telecom Corp. vs.
Dans, Jr. (137 SCRA 628) which requires that prior notice and hearing be afforded to all parties in administrative
proceedings. Since MB Resolution No. 596 was adopted without TSB being previously notified and heard, according
to respondents, the same is void for want of due process; consequently, the bank's management should be restored
to its board of directors and officers.13

Petitioners claim that it is the essence of Sec. 29 of R.A. 265 that prior notice and hearing in cases involving bank
closures should not be required since in all probability a hearing would not only cause unnecessary delay but also
provide bank "insiders" and stockholders the opportunity to further dissipate the bank's resources, create liabilities
for the bank up to the insured amount of P40,000.00, and even destroy evidence of fraud or irregularity in the bank's
operations to the prejudice of its depositors and creditors. 14 Petitioners further argue that the legislative intent of
Sec. 29 is to repose in the Monetary Board exclusive power to determine the existence of statutory grounds for the
closure and liquidation of banks, having the required expertise and specialized competence to do so.

The first issue raised before Us is whether absence of prior notice and hearing may be considered acts of
arbitrariness and bad faith sufficient to annul a Monetary Board resolution enjoining a bank from doing business and
placing it under receivership. Otherwise stated, is absence of prior notice and hearing constitutive of acts of
arbitrariness and bad faith?

Under Sec. 29 of R.A. 265,15 the Central Bank, through the Monetary Board, is vested with exclusive authority to
assess, evaluate and determine the condition of any bank, and finding such condition to be one of insolvency, or
that its continuance in business would involve probable loss to its depositors or creditors, forbid the bank or non-
bank financial institution to do business in the Philippines; and shall designate an official of the CB or other
competent person as receiver to immediately take charge of its assets and liabilities. The fourth paragraph,16which
was then in effect at the time the action was commenced, allows the filing of a case to set aside the actions of the
Monetary Board which are tainted with arbitrariness and bad faith.
Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice and hearing before a bank
may be directed to stop operations and placed under receivership. When par. 4 (now par. 5, as amended by E.O.
289) provides for the filing of a case within ten (10) days after the receiver takes charge of the assets of the bank, it
is unmistakable that the assailed actions should precede the filing of the case. Plainly, the legislature could not have
intended to authorize "no prior notice and hearing" in the closure of the bank and at the same time allow a suit to
annul it on the basis of absence thereof.

In the early case of Rural Bank of Lucena, Inc. v. Arca [1965],17 We held that a previous hearing is nowhere required
in Sec. 29 nor does the constitutional requirement of due process demand that the correctness of the Monetary
Board's resolution to stop operation and proceed to liquidation be first adjudged before making the resolution
effective. It is enough that a subsequent judicial review be provided.

Even in Banco Filipino, 18 We reiterated that Sec. 29 of R.A. 265 does not require a previous hearing before the
Monetary Board can implement its resolution closing a bank, since its action is subject to judicial scrutiny as
provided by law.

It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial institution placed under
receivership of the opportunity to be heard and present evidence on arbitrariness and bad faith because within ten
(10) days from the date the receiver takes charge of the assets of the bank, resort to judicial review may be had by
filing an appropriate pleading with the court. Respondent TSB did in fact avail of this remedy by filing a complaint
with the RTC of Quezon City on the 8th day following the takeover by the receiver of the bank's assets on 3 June
1985.

This "close now and hear later" scheme is grounded on practical and legal considerations to prevent unwarranted
dissipation of the bank's assets and as a valid exercise of police power to protect the depositors, creditors,
stockholders and the general public.

In Rural Bank of Buhi, Inc. v. Court of Appeals,19 We stated that —

. . . due process does not necessarily require a prior hearing; a hearing or an opportunity to be heard
may be subsequent to the closure. One can just imagine the dire consequences of a prior hearing:
bank runs would be the order of the day, resulting in panic and hysteria. In the process, fortunes
may be wiped out and disillusionment will run the gamut of the entire banking community.

We stressed in Central Bank of the Philippines v. Court of Appeals20 that —

. . . the banking business is properly subject to reasonable regulation under the police power of the
state because of its nature and relation to the fiscal affairs of the people and the revenues of the
state (9 CJS 32). Banks are affected with public interest because they receive funds from the
general public in the form of deposits. Due to the nature of their transactions and functions, a
fiduciary relationship is created between the banking institutions and their depositors. Therefore,
banks are under the obligation to treat with meticulous care and utmost fidelity the accounts of those
who have reposed their trust and confidence in them (Simex International [Manila], Inc., v. Court of
Appeals, 183 SCRA 360 [1990]).

It is then the Government's responsibility to see to it that the financial interests of those who deal
with the banks and banking institutions, as depositors or otherwise, are protected. In this country,
that task is delegated to the Central Bank which, pursuant to its Charter (R.A. 265, as amended), is
authorized to administer the monetary, banking and credit system of the Philippines. Under both the
1973 and 1987 Constitutions, the Central Bank is tasked with providing policy direction in the areas
of money, banking and credit; corollarily, it shall have supervision over the operations of banks (Sec.
14, Art. XV, 1973 Constitution, and Sec. 20, Art. XII, 1987 Constitution). Under its charter, the CB is
further authorized to take the necessary steps against any banking institution if its continued
operation would cause prejudice to its depositors, creditors and the general public as well. This
power has been expressly recognized by this Court. In Philippine Veterans Bank Employees Union-
NUBE v. Philippine Veterans Banks (189 SCRA 14 [1990], this Court held that:
 . . . [u]nless adequate and determined efforts are taken by the government against
distressed and mismanaged banks, public faith in the banking system is certain to
deteriorate to the prejudice of the national economy itself, not to mention the losses
suffered by the bank depositors, creditors, and stockholders, who all deserve the
protection of the government. The government cannot simply cross its arms while the
assets of a bank are being depleted through mismanagement or irregularities. It is
the duty of the Central Bank in such an event to step in and salvage the remaining
resources of the bank so that they may not continue to be dissipated or plundered by
those entrusted with their management.

Section 29 of R.A. 265 should be viewed in this light; otherwise, We would be subscribing to a situation where the
procedural rights invoked by private respondent would take precedence over the substantive interests of depositors,
creditors and stockholders over the assets of the bank.

Admittedly, the mere filing of a case for receivership by the Central Bank can trigger a bank run and drain its assets
in days or even hours leading to insolvency even if the bank be actually solvent. The procedure prescribed in Sec.
29 is truly designed to protect the interest of all concerned, i.e., the depositors, creditors and stockholders, the bank
itself, and the general public, and the summary closure pales in comparison to the protection afforded public
interest. At any rate, the bank is given full opportunity to prove arbitrariness and bad faith in placing the bank under
receivership, in which event, the resolution may be properly nullified and the receivership lifted as the trial court may
determine.

The heavy reliance of respondents on the Banco Filipino case is misplaced in view of factual circumstances therein
which are not attendant in the present case. We ruled in Banco Filipino that the closure of the bank was arbitrary
and attendant with grave abuse of discretion, not because of the absence of prior notice and hearing, but that the
Monetary Board had no sufficient basis to arrive at a sound conclusion of insolvency to justify the closure. In other
words, the arbitrariness, bad faith and abuse of discretion were determined only after the bank was placed under
conservatorship and evidence thereon was received by the trial court. As this Court found in that case, the
Valenzuela, Aurellano and Tiaoqui Reports contained unfounded assumptions and deductions which did not reflect
the true financial condition of the bank. For instance, the subtraction of an uncertain amount as valuation reserve
from the assets of the bank would merely result in its net worth or the unimpaired capital and surplus; it did not
reflect the total financial condition of Banco Filipino.

Furthermore, the same reports showed that the total assets of Banco Filipino far exceeded its total liabilities.
Consequently, on the basis thereof, the Monetary Board had no valid reason to liquidate the bank; perhaps it could
have merely ordered its reorganization or rehabilitation, if need be. Clearly, there was in that case a manifest
arbitrariness, abuse of discretion and bad faith in the closure of Banco Filipino by the Monetary Board. But, this is
not the case before Us. For here, what is being raised as arbitrary by private respondent is the denial of prior notice
and hearing by the Monetary Board, a matter long settled in this jurisdiction, and not the arbitrariness which the
conclusions of the Supervision and Examination Sector (SES), Department II, of the Central Bank were reached.

Once again We refer to Rural Bank of Buhi, Inc. v. Court of Appeals,21 and reiterate Our pronouncement therein that
—

. . . the law is explicit as to the conditions prerequisite to the action of the Monetary Board to forbid
the institution to do business in the Philippines and to appoint a receiver to immediately take charge
of the bank's assets and liabilities. They are: (a) an examination made by the examining department
of the Central Bank; (b) report by said department to the Monetary Board; and (c) prima
facieshowing that its continuance in business would involve probable loss to its depositors or
creditors.

In sum, appeal to procedural due process cannot just outweigh the evil sought to be prevented; hence, We rule that
Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the Constitution in the exercise of police
power of the state. Consequently, the absence of notice and hearing is not a valid ground to annul a Monetary
Board resolution placing a bank under receivership. The absence of prior notice and hearing cannot be deemed acts
of arbitrariness and bad faith. Thus, an MB resolution placing a bank under receivership, or conservatorship for that
matter, may only be annulled after a determination has been made by the trial court that its issuance was tainted
with arbitrariness and bad faith. Until such determination is made, the status quo shall be maintained, i.e., the bank
shall continue to be under receivership.

As regards the second ground, to rule that only the receiver may bring suit in behalf of the bank is, to echo the
respondent appellate court, "asking for the impossible, for it cannot be expected that the master, the CB, will allow
the receiver it has appointed to question that very appointment." Consequently, only stockholders of a bank could
file an action for annulment of a Monetary Board resolution placing the bank under receivership and prohibiting it
from continuing operations.22 In Central Bank v. Court of Appeals, 23 We explained the purpose of the law —

. . . in requiring that only the stockholders of record representing the majority of the capital stock may
bring the action to set aside a resolution to place a bank under conservatorship is to ensure that it be
not frustrated or defeated by the incumbent Board of Directors or officers who may immediately
resort to court action to prevent its implementation or enforcement. It is presumed that such a
resolution is directed principally against acts of said Directors and officers which place the bank in a
state of continuing inability to maintain a condition of liquidity adequate to protect the interest of
depositors and creditors. Indirectly, it is likewise intended to protect and safeguard the rights and
interests of the stockholders. Common sense and public policy dictate then that the authority to
decide on whether to contest the resolution should be lodged with the stockholders owning a
majority of the shares for they are expected to be more objective in determining whether the
resolution is plainly arbitrary and issued in bad faith.

It is observed that the complaint in this case was filed on 11 June 1985 or two (2) years prior to 25 July 1987 when
E.O. 289 was issued, to be effective sixty (60) days after its approval (Sec. 5). The implication is that before E.O

. 289, any party in interest could institute court proceedings to question a Monetary Board resolution placing a bank
under receivership. Consequently, since the instant complaint was filed by parties representing themselves to be
officers of respondent Bank (Officer-in-Charge and Vice President), the case before the trial court should now take
its natural course. However, after the effectivity of E.O. 289, the procedure stated therein should be followed and
observed.

PREMISES considered, the Decision of the Court of Appeals in CA-G.R. SP No. 07867 is AFFIRMED, except
insofar as it upholds the Order of the trial court of 11 November 1985 directing petitioner RAMON V. TIAOQUI to
restore the management of TRIUMPH SAVINGS BANK to its elected Board of Directors and Officers, which is
hereby SET ASIDE.

Let this case be remanded to the Regional Trial Court of Quezon City for further proceedings to determine whether
the issuance of Resolution No. 596 of the Monetary Board was tainted with arbitrariness and bad faith and to decide
the case accordingly.

SO ORDERED.

M. Biddings
N. UDHA – RA 7279; Squatting for relocation; summary abatement
Perez v. Madrona (not nuisance per se)

Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, seeking to set aside the March 31, 2008 Decision[1] and September
10, 2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R. CV. No. 83675. The CA
affirmed in toto the Decision[3] of the Regional Trial Court (RTC) of Marikina City, Branch 192
granting respondents prayer for injunction against petitioner.

The antecedents follow:

Respondent-spouses Fortunito Madrona and Yolanda B. Pante are registered owners of a

residential property located in Lot 22, Block 5, France Street corner Italy Street, Greenheights
Subdivision, Phase II, Marikina City and covered by Transfer Certificate of Title No. 169365[4] of
the Registry of Deeds of Marikina. In 1989, respondents built their house thereon and enclosed it
with a concrete fence and steel gate.

In 1999, respondents received the following letter dated May 25, 1999 from petitioner
Jaime S. Perez, Chief of the Marikina Demolition Office:
Owner Judge F.L. Madrona
Lot 22 B. 5 Phase II
Green Heights[, Concepcion,] Marikina City

G./ Gng. F.L. Madrona[:]

Ito po ay may kinalaman sa bahay/istruktura na inyong itinayo sa (naturang lugar), Marikina,

Kalakhang Maynila.

Bakod umusli sa Bangketa

Ang naturang pagtatayo ng bahay/istruktura ay isang paglabag sa umiiral na batas/programa na

ipatutupad ng Pamahalaang Bayan ng Marikina na nauukol sa:

[] PD 1096
(National Building Code of the Philippines)

[ ] PD 772
(Anti-Squatting Law)

[] Programa sa Kalinisan at Disiplina sa Bangketa

[ ] RA 7279
(Urban Development and Housing Act of 1992)

[ ] PD 296
(Encroachment on rivers, esteros, drainage channels and other
waterways)

[] RA 917 as amended by Section 23, PD. No. 17, DO No. 4

Series of 1987
(Illegally occupied/constructed improvements within the road
right-of-way)
 Dahil po dito, kayo ay binibigyan ng taning na Pitong (7) araw simula sa pagkatanggap ng sulat
na ito para kusang alisin ang inyong istruktura. Ang hindi ninyo pagsunod sa ipinag-uutos na ito
ay magbubunsod sa amin upang gumawa ng kaukulang hakbang na naa[a]yon sa itinatadhana ng
Batas.

Sa inyong kaalaman, panuntuan at pagtalima.

Lubos na gumagalang,

(Sgd.)
JAIME S. PEREZ
Tagapamahala
Marikina Demolition Office[5]

As response, respondent Madrona sent petitioner a three-page letter[6] dated June 8, 1999 stating
that the May 25, 1999 letter (1) contained an accusation libelous in nature as it is condemning
him and his property without due process; (2) has no basis and authority since there is no court
order authorizing him to demolish their structure; (3) cited legal bases which do not expressly
give petitioner authority to demolish; and (4) contained a false accusation since their fence did
not in fact extend to the sidewalk.

On June 9, 1999, respondents received a letter[7] from petitioner requesting them to provide his
office a copy of the relocation survey on the subject property. Respondents, however, did not
oblige because it was as if petitioner was fishing evidence from them.

More than a year later or on February 28, 2001, petitioner sent another letter[8] with the same
contents as the May 25, 1999 letter but this time giving respondents ten days from receipt thereof
to remove the structure allegedly protruding to the sidewalk. This prompted respondents to file a
complaint[9] for injunction before the Marikina City RTC on March 12, 2001.

In respondents injunction complaint, they alleged that (1) petitioners letters made it appear that
their fence was encroaching on the sidewalk and directed them to remove it, otherwise he would
take the corresponding action; (2) petitioners threat of action would be damaging and adverse to
respondents and appears real, earnest and imminent; (3) the removal of their fence, which would
include the main gate, would certainly expose the premises and its occupants to intruders or third
persons; (4) petitioner has no legal authority to demolish structures in private properties and the
laws he cited in his letters do not give him any authority to do so; (5) respondents enjoy the legal
presumption of rightful possession of every inch of their property; (6) if petitioner accuses them
of erroneous possession, he should so prove only through the proper forum which is the courts;
(7) their fence is beside the sidewalk and the land on which it stands has never been the subject
of acquisition either by negotiation or expropriation from the government; (8) petitioners intended
act of demolition even in the guise of a road right of way has no factual or legal basis since there
is no existing infrastructure project of the national government or Marikina City government; and
(9) petitioners letter and his intended act of demolition are malicious, unfounded, meant only to
harass respondents in gross violation of their rights and in excess and outside the scope of his
authority, thereby rendering him accountable both in his personal and official capacity.

Respondents likewise sought the issuance of a temporary restraining order (TRO) and a writ of
preliminary injunction to enjoin petitioner and all persons acting under him from doing any act
of demolition on their property and that after trial, the injunction be made permanent. They also
prayed for moral and exemplary damages and attorneys fees.

On March 14, 2001, petitioner was served the corresponding summons.[10]

On March 16, 2001, the RTC issued a TRO against petitioner.[11]

On March 29, 2001, petitioner filed an Urgent Ex Parte Motion for Extension to File
Answer[12] until April 13, 2001. It appears however that petitioners counsel failed to file an
Answer within the extended period requested. Thus, on motion[13] of respondents, petitioner was
declared in default on July 13, 2001.[14]

On July 25, 2001, petitioner filed a Motion to Lift Order of Default (with Ex-Parte Motion to
Admit Answer and Notice Entry of Appearance).[15] According to petitioners new counsel, an
answer was not filed due to the former counsels voluminous work load as lone lawyer in the City
Legal Office.

On December 10, 2001, the RTC issued an Order[16] denying the motion to lift the order of
default. Aside from finding that the motion failed to include a notice of hearing, the RTC also
held that the alleged cause of delay is not excusable as voluminous work load of the counsel
cannot justify the disregard of court processes or failure to abide by the period fixed by the rules
and since the delay consisted not only a few days but over a hundred and three days. Petitioner
moved to reconsider the order but the same was denied by the RTC in its March 6, 2002Order.[17]
Petitioner thereafter filed a petition for certiorari [18] before the CA assailing the default
order. Thus, on April 18, 2002, the RTC issued an order suspending the proceedings of the
injunction case until such time when the Petition for Certiorari shall have been disposed of with
finality.[19]

On August 20, 2002, the CA rendered a decision[20] dismissing the petition for certiorari
for lack of merit. Petitioner moved to reconsider the appellate courts decision, but the motion was
denied by Resolution[21] dated January 30, 2003.

On September 15, 2003, the RTC issued an Order[22] dismissing the injunction complaint
without prejudice. It held that respondents have not instituted any action before th[e] Court
showing that they are still interested in further prosecuting th[e] case and [i]n accordance with
Section 3, Rule 17 of the Rules of Court, the Court is constrained to dismiss the complaint for
failure of [respondents] to prosecute their complaint for an unreasonable length of time. However,
upon motion of respondents, the dismissal order was set aside and the complaint was reinstated
by Order[23] dated December 3, 2003. The RTC agreed with the observation of respondents that
it was the court which suspended the proceedings in the injunction case pending final disposition
of the petition for certiorari before the CA, and when the RTC issued the dismissal order, there
was yet no entry of judgment from the CA and so it cannot be said that the petition was already
disposed of with finality. Respondents were then allowed to present their evidence ex
parte before the branch clerk of court.

On July 27, 2004, the RTC rendered a Decision[24] in favor of respondents. The fallo of the
RTC decision reads:
WHEREFORE, Judgment is hereby rendered in favor of the plaintiffs. As prayed for, defendant
Jaime S. Perez, Chief of the Demolition Office of Marikina City, or any person acting for and in
his behalf as well as the successors to his office, is permanently enjoined from performing any act
which would tend to destroy or demolish the perimeter fence and steel gate of the plaintiffs
property situated at Lot 22, Block 5, France Street corner Italy Street, Phase II, Greenheights
Subdivision, Concepcion, Marikina City.

Defendant is further ordered to pay the amount of Twenty Thousand (P20,000.00) Pesos as
attorneys fees and Five Thousand (P5,000.00) Pesos for the costs of suit.[25]

The RTC held that respondents, being lawful owners of the subject property, are entitled
to the peaceful and open possession of every inch of their property and petitioners threat to
demolish the concrete fence around their property is tantamount to a violation of their rights as
property owners who are entitled to protection under the Constitution and laws. The RTC also
ruled that there is no showing that respondents fence is a nuisance per se and presents an
immediate danger to the communitys welfare, nor is there basis for petitioners claim that the fence
has encroached on the sidewalk as to justify its summary demolition.

Petitioner appealed the RTC decision to the CA. On March 31, 2008, the appellate court
rendered the assailed decision affirming the RTC decision.

Hence this petition based on the following grounds:

I.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN AFFIRMING THE
ACTION OF THE LOWER COURT IN REINSTATING/REVIVING THE COMPLAINT
FILED BY THE RESPONDENTS.

II.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN AFFIRMING THE
RULING OF THE LOWER COURT THAT THE RESPONDENTS ARE ENTITLED TO
PERMANENT INJUNCTION, THEREBY RESTRAINING THE PETITIONER OR ANYONE
ACTING FOR AND ON HIS BEHALF FROM CARRYING OUT THE THREATENED
DEMOLITION OF THEIR PERIMETER FENCE AND STEEL GATE.

III.
THE COURT OF APPEALS COMMITTED A REVERSIBLE [ERROR] IN AFFIRMING THE
RULING OF THE LOWER COURT ORDERING THE PETITIONER TO PAY THE
RESPONDENTS THE AMOUNTS OF TWENTY THOUSAND PESOS (P20,000.00) AS
ATTORNEYS FEES AND FIVE THOUSAND PESOS (P5,000.00) AS COSTS OF SUIT.[26]

Essentially, the issues to be resolved in the instant case are: (1) Did the trial court err in reinstating
the complaint of respondents? (2) Are the requisites for the issuance of a writ of injunction
present? and (3) Is petitioner liable to pay attorneys fees and costs of suit?

Petitioner argues that there was express admission of negligence by respondents and
therefore, reinstatement of their dismissed complaint was not justified.

We disagree.

A perusal of the respondents motion for reconsideration[27] of the order of dismissal reveals
that there was no admission of negligence by respondents, either express or implied. Respondents
only contended that (1) they were under the impression that it would be the RTC which would
issue the order to continue the proceedings once it considers that the petition before the CA had
already been disposed of with finality, and (2) their counsels records do not show that the CA had
already issued an entry of judgment at the time the dismissal order was issued. They also only
stated that they followed up with the CA the issuance of the entry of judgment but they were just
told to wait for its delivery by mail. Petitioners imputation that respondents expressly admitted
negligence is therefore clearly unfounded.

Additionally, as correctly found by both the RTC and the CA, it did not appear that
respondent lost interest in prosecuting their case nor was their counsel negligent in handling
it. Accordingly, there was no basis for the dismissal order and reinstatement of respondents
complaint was justified.

As to the propriety of the issuance of the writ of injunction, petitioner claims that the
requisites therefor are not present in the instant case. Petitioner contends that service of a mere
notice cannot be construed as an invasion of a right and only presupposes the giving of an
opportunity to be heard before any action could be taken. He also claims that it is clear from the
records of the case that respondents concrete fence was constructed on a part of the sidewalk in
gross violation of existing laws and ordinance and thus, they do not have absolute right over the
same. According to petitioner, the encroachment is clearly apparent in the Sketch Plan of the
government geodetic engineer as compared to the Location Plan attached to respondents
complaint. He likewise contends that the clearing of the sidewalks is an infrastructure project of
the Marikina City Government and cannot be restrained by the courts as provided in Presidential
Decree No. 1818.[28] Lastly, petitioner points out that the trial court should not have merely relied
on the testimonies of respondents alleging that his men were already in the subdivision and
destroying properties on other streets to prove that there was urgent necessity for the issuance of
the writ.

We disagree.

For injunction to issue, two requisites must concur: first, there must be a right to be
protected and second, the acts against which the injunction is to be directed are violative of said
right.[29] Here, the two requisites are clearly present: there is a right to be protected, that is,
respondents right over their concrete fence which cannot be removed without due process; and
the act, the summary demolition of the concrete fence, against which the injunction is directed,
would violate said right.
 If petitioner indeed found respondents fence to have encroached on the sidewalk, his
remedy is not to demolish the same summarily after respondents failed to heed his request to
remove it. Instead, he should go to court and prove respondents supposed violations in the
construction of the concrete fence. Indeed, unless a thing is a nuisance per se, it may not be abated
summarily without judicial intervention.[30] Our ruling in Lucena Grand Central Terminal, Inc.
v. JAC Liner, Inc., on the need for judicial intervention when the nuisance is not a nuisance per
se, is well worth mentioning. In said case, we ruled:
Respondents can not seek cover under the general welfare clause authorizing the abatement
of nuisances without judicial proceedings. That tenet applies to a nuisance per se, or one which
affects the immediate safety of persons and property and may be summarily abated under the
undefined law of necessity (Monteverde v. Generoso, 52 Phil. 123 [1982]). The storage of copra
in the quonset building is a legitimate business. By its nature, it can not be said to be injurious to
rights of property, of health or of comfort of the community. If it be a nuisance per accidens it may
be so proven in a hearing conducted for that purpose. It is not per se a nuisance warranting its
summary abatement without judicial intervention. [Underscoring supplied.]

In Pampanga Bus Co., Inc. v. Municipality of Tarlac where the appellant-municipality

similarly argued that the terminal involved therein is a nuisance that may be abated by the
Municipal Council via an ordinance, this Court held: Suffice it to say that in the abatement of
nuisances the provisions of the Civil Code (Articles 694-707) must be observed and
followed. This appellant failed to do.[31]

Respondents fence is not a nuisance per se. By its nature, it is not injurious to the health or
comfort of the community. It was built primarily to secure the property of respondents and
prevent intruders from entering it. And as correctly pointed out by respondents, the sidewalk still
exists. If petitioner believes that respondents fence indeed encroaches on the sidewalk, it may be
so proven in a hearing conducted for that purpose. Not being a nuisance per se, but at most a
nuisance per accidens, its summary abatement without judicial intervention is unwarranted.

Regarding the third issue, petitioner argues that he was just performing his duties and as public
officer, he is entitled to the presumption of regularity in the performance of his official
functions. Unless there is clear proof that he acted beyond his authority or in evident malice or bad
faith, he contends that he cannot be held liable for attorneys fees and costs of suit.

Respondents, for their part, counter that the presumption of regularity has been negated by the
fact that despite their reply to the first notice, which put petitioner on notice that what he was
doing was ultra vires, he still reiterated his earlier demand and threat of demolition. Having been
warned by respondents that his acts were in fact violations of law, petitioner should have been
more circumspect in his actions and should have pursued the proper remedies that were more in
consonance with the dictates of due process. Respondents further pray for moral damages for the
serious anxieties and sleepless nights they suffered and exemplary damages to serve as an
example to other public officials that they should be more circumspect in the performance of their
duties.

We agree with respondents.

As respondents were forced to file a case against petitioner to enjoin the impending demolition
of their property, the award of attorneys fees and costs of suit is justified. Clearly, respondents
wanted to settle the problem on their alleged encroachment without resorting to court processes
when they replied by letter after receiving petitioners first notice. Petitioner, however, instead of
considering the points raised in respondents reply-letter, required them to submit the relocation
plan as if he wants respondents to prove that they are not encroaching on the sidewalk even if it
was he who made the accusation of violation in the first place. And when he did not get the proof
he was requiring from respondents, he again sent a notice with a threat of summary
demolition. This gave respondents no other choice but to file an injunction complaint against
petitioner to protect their rights.

With regard to respondents claim for moral damages, this Court rules that they are entitled
thereto in the amount of P10,000.00 pursuant to Article 2217[32] of the Civil Code. As testified to
by respondents, they suffered anxiety and sleepless nights since they were worried what would
happen to their children who were left by themselves in their Marikina residence while they were
in Ormoc City if petitioner would make real his threat of demolition on their fence.

We likewise hold that respondents are entitled to exemplary damages in the amount
of P5,000.00 to serve as an example to other public officials that they should be more circumspect
in the performance of their duties.

WHEREFORE, the March 31, 2008 Decision and September 10, 2008 Resolution of the Court
of Appeals in CA-G.R. CV. No. 83675 are AFFIRMED with MODIFICATION. Petitioner
Jaime S. Perez, Chief of the Demolition Office of Marikina City is ORDERED to pay respondent
Spouses Fortunito L. Madrona and Yolanda B. Pante moral damages in the amount of P10,000.00
and exemplary damages in the amount of P5,000.00.
O. Cancellation of Property Rights/ Privileges
British American Tobacco v. Camacho (expansive tax category)

This petition for review assails the validity of: (1) Section 145 of the National Internal
Revenue Code (NIRC), as recodified by Republic Act (RA) 8424; (2) RA 9334, which
further amended Section 145 of the NIRC on January 1, 2005; (3) Revenue Regulations
Nos. 1-97, 9-2003, and 22-2003; and (4) Revenue Memorandum Order No. 6-2003.
Petitioner argues that the said provisions are violative of the equal protection and
uniformity clauses of the Constitution.

RA 8240, entitled "An Act Amending Sections 138, 139, 140, and 142 of the NIRC, as
Amended and For Other Purposes," took effect on January 1, 1997. In the same year,
Congress passed RA 8424 or The Tax Reform Act of 1997, re-codifying the NIRC. Section
142 was renumbered as Section 145 of the NIRC.

Paragraph (c) of Section 145 provides for four tiers of tax rates based on the net retail
price per pack of cigarettes. To determine the applicable tax rates of existing cigarette
brands, a survey of the net retail prices per pack of cigarettes was conducted as of
October 1, 1996, the results of which were embodied in Annex "D" of the NIRC as the
duly registered, existing or active brands of cigarettes.

Paragraph (c) of Section 145, 1 states –

SEC. 145. Cigars and cigarettes. –

xxxx

(c) Cigarettes packed by machine. – There shall be levied, assessed and collected
on cigarettes packed by machine a tax at the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax) is
above Ten pesos (P10.00) per pack, the tax shall be Thirteen pesos and forty-
four centavos (P13.44) per pack;

(2) If the net retail price (excluding the excise tax and the value-added tax)
exceeds Six pesos and fifty centavos (P6.50) but does not exceed Ten pesos
(10.00) per pack, the tax shall be Eight pesos and ninety-six centavos (P8.96)
per pack;

(3) If the net retail price (excluding the excise tax and the value-added tax) is
Five pesos (P5.00) but does not exceed Six pesos and fifty centavos (P6.50)
per pack, the tax shall be Five pesos and sixty centavos (P5.60) per pack;

(4) If the net retail price (excluding the excise tax and the value-added tax) is
below Five pesos (P5.00) per pack, the tax shall be One peso and twelve
centavos (P1.12) per pack.
 Variants of existing brands of cigarettes which are introduced in the domestic
market after the effectivity of this Act shall be taxed under the highest classification
of any variant of that brand.

xxxx

New brands shall be classified according to their current net retail price.

For the above purpose, net retail price shall mean the price at which the cigarette is
sold on retail in 20 major supermarkets in Metro Manila (for brands of cigarettes
marketed nationally), excluding the amount intended to cover the applicable excise
tax and the value-added tax. For brands which are marketed only outside Metro
Manila, the net retail price shall mean the price at which the cigarette is sold in five
major supermarkets in the region excluding the amount intended to cover the
applicable excise tax and the value-added tax.

The classification of each brand of cigarettes based on its average net retail
price as of October 1, 1996, as set forth in Annex "D" of this Act, shall remain
in force until revised by Congress. (Emphasis supplied)

As such, new brands of cigarettes shall be taxed according to their current net retail
price while existing or "old" brands shall be taxed based on their net retail price as of
October 1, 1996.

To implement RA 8240, the Bureau of Internal Revenue (BIR) issued Revenue

Regulations No. 1-97,2which classified the existing brands of cigarettes as those duly
registered or active brands prior to January 1, 1997. New brands, or those registered after
January 1, 1997, shall be initially assessed at their suggested retail price until such time
that the appropriate survey to determine their current net retail price is conducted.
Pertinent portion of the regulations reads –

SECTION 2. Definition of Terms.

xxxx

3. Duly registered or existing brand of cigarettes – shall include duly registered,

existing or active brands of cigarettes, prior to January 1, 1997.

xxxx

6. New Brands – shall mean brands duly registered after January 1, 1997 and shall
include duly registered, inactive brands of cigarette not sold in commercial quantity
before January 1, 1997.

Section 4. Classification and Manner of Taxation of Existing Brands, New Brands

and Variant of Existing Brands.
 xxxx

B. New Brand

New brands shall be classified according to their current net retail price. In the
meantime that the current net retail price has not yet been established, the
suggested net retail price shall be used to determine the specific tax classification.
Thereafter, a survey shall be conducted in 20 major supermarkets or retail outlets in
Metro Manila (for brands of cigarette marketed nationally) or in five (5) major
supermarkets or retail outlets in the region (for brands which are marketed only
outside Metro Manila) at which the cigarette is sold on retail in reams/cartons, three
(3) months after the initial removal of the new brand to determine the actual net
retail price excluding the excise tax and value added tax which shall then be the
basis in determining the specific tax classification. In case the current net retail price
is higher than the suggested net retail price, the former shall prevail. Any difference
in specific tax due shall be assessed and collected inclusive of increments as
provided for by the National Internal Revenue Code, as amended.

In June 2001, petitioner British American Tobacco introduced into the market Lucky Strike
Filter, Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes, with a suggested
retail price of P9.90 per pack.3 Pursuant to Sec. 145 (c) quoted above, the Lucky Strike
brands were initially assessed the excise tax at P8.96 per pack.

On February 17, 2003, Revenue Regulations No. 9-2003,4 amended Revenue

Regulations No. 1-97 by providing, among others, a periodic review every two years or
earlier of the current net retail price of new brands and variants thereof for the purpose of
establishing and updating their tax classification, thus:

For the purpose of establishing or updating the tax classification of new brands and
variant(s) thereof, their current net retail price shall be reviewed periodically through
the conduct of survey or any other appropriate activity, as mentioned above, every
two (2) years unless earlier ordered by the Commissioner. However,
notwithstanding any increase in the current net retail price, the tax classification of
such new brands shall remain in force until the same is altered or changed through
the issuance of an appropriate Revenue Regulations.

Pursuant thereto, Revenue Memorandum Order No. 6-20035 was issued on March 11,
2003, prescribing the guidelines and procedures in establishing current net retail prices of
new brands of cigarettes and alcohol products.

Subsequently, Revenue Regulations No. 22-20036 was issued on August 8, 2003 to

implement the revised tax classification of certain new brands introduced in the market
after January 1, 1997, based on the survey of their current net retail price. The survey
revealed that Lucky Strike Filter, Lucky Strike Lights, and Lucky Strike Menthol Lights, are
sold at the current net retail price of P22.54, P22.61 and P21.23, per pack,
respectively.7 Respondent Commissioner of the Bureau of Internal Revenue thus
recommended the applicable tax rate of P13.44 per pack inasmuch as Lucky Strike’s
average net retail price is above P10.00 per pack.

Thus, on September 1, 2003, petitioner filed before the Regional Trial Court (RTC) of
Makati, Branch 61, a petition for injunction with prayer for the issuance of a temporary
restraining order (TRO) and/or writ of preliminary injunction, docketed as Civil Case No.
03-1032. Said petition sought to enjoin the implementation of Section 145 of the NIRC,
Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum Order No.
6-2003 on the ground that they discriminate against new brands of cigarettes, in violation
of the equal protection and uniformity provisions of the Constitution.

Respondent Commissioner of Internal Revenue filed an Opposition8 to the application for

the issuance of a TRO. On September 4, 2003, the trial court denied the application for
TRO, holding that the courts have no authority to restrain the collection of
taxes.9 Meanwhile, respondent Secretary of Finance filed a Motion to
Dismiss,10 contending that the petition is premature for lack of an actual controversy or
urgent necessity to justify judicial intervention.

In an Order dated March 4, 2004, the trial court denied the motion to dismiss and issued a
writ of preliminary injunction to enjoin the implementation of Revenue Regulations Nos. 1-
97, 9-2003, 22-2003 and Revenue Memorandum Order No. 6-2003.11 Respondents filed a
Motion for Reconsideration12 and Supplemental Motion for Reconsideration.13 At the
hearing on the said motions, petitioner and respondent Commissioner of Internal Revenue
stipulated that the only issue in this case is the constitutionality of the assailed law, order,
and regulations.14

On May 12, 2004, the trial court rendered a decision15 upholding the constitutionality of
Section 145 of the NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue
Memorandum Order No. 6-2003. The trial court also lifted the writ of preliminary injunction.
The dispositive portion of the decision reads:

WHEREFORE, premises considered, the instant Petition is hereby DISMISSED for

lack of merit. The Writ of Preliminary Injunction previously issued is hereby lifted and
dissolved.

SO ORDERED.16

Petitioner brought the instant petition for review directly with this Court on a pure question
of law.

While the petition was pending, RA 9334 (An Act Increasing The Excise Tax Rates
Imposed on Alcohol And Tobacco Products, Amending For The Purpose Sections 131,
141, 143, 144, 145 and 288 of the NIRC of 1997, As Amended), took effect on January 1,
2005. The statute, among others,–

(1) increased the excise tax rates provided in paragraph (c) of Section 145;
(2) mandated that new brands of cigarettes shall initially be classified according to their
suggested net retail price, until such time that their correct tax bracket is finally determined
under a specified period and, after which, their classification shall remain in force until
revised by Congress;

(3) retained Annex "D" as tax base of those surveyed as of October 1, 1996 including the
classification of brands for the same products which, although not set forth in said Annex
"D," were registered on or before January 1, 1997 and were being commercially produced
and marketed on or after October 1, 1996, and which continue to be commercially
produced and marketed after the effectivity of this Act. Said classification shall remain in
force until revised by Congress; and

(4) provided a legislative freeze on brands of cigarettes introduced between the period
January 2, 199717 to December 31, 2003, such that said cigarettes shall remain in the
classification under which the BIR has determined them to belong as of December 31,
2003, until revised by Congress.

Pertinent portions, of RA 9334, provides:

SEC. 145. Cigars and Cigarettes. –

xxxx

(C) Cigarettes Packed by Machine. – There shall be levied, assessed and collected
on cigarettes packed by machine a tax at the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax) is below
Five pesos (P5.00) per pack, the tax shall be:

Effective on January 1, 2005, Two pesos (P2.00) per pack;

Effective on January 1, 2007, Two pesos and twenty-three centavos (P2.23) per
pack;

Effective on January 1, 2009, Two pesos and forty-seven centavos (P2.47) per
pack; and

Effective on January 1, 2011, Two pesos and seventy-two centavos (P2.72) per
pack.

(2) If the net retail price (excluding the excise tax and the value-added tax) is Five
pesos (P5.00) but does not exceed Six pesos and fifty centavos (P6.50) per pack,
the tax shall be:

Effective on January 1, 2005, Six pesos and thirty-five centavos (P6.35) per pack;
Effective on January 1, 2007, Six pesos and seventy-four centavos (P6.74) per
pack;

Effective on January 1, 2009, Seven pesos and fourteen centavos (P7.14) per pack;
and

Effective on January 1, 2011, Seven pesos and fifty-six centavos (P7.56) per pack.

(3) If the net retail price (excluding the excise tax and the value-added tax) exceeds
Six pesos and fifty centavos (P6.50) but does not exceed Ten pesos (P10.00) per
pack, the tax shall be:

Effective on January 1, 2005, Ten pesos and thirty-five centavos (10.35) per pack;

Effective on January 1, 2007, Ten pesos and eighty-eight centavos (P10.88) per
pack;

Effective on January 1, 2009, Eleven pesos and forty-three centavos (P11.43) per
pack; and

Effective on January 1, 2011, Twelve pesos (P12.00) per pack.

(4) If the net retail price (excluding the excise tax and the value-added tax) is above
Ten pesos (P10.00) per pack, the tax shall be:

Effective on January 1, 2005, Twenty-five pesos (P25.00) per pack;

Effective on January 1, 2007, Twenty-six pesos and six centavos (P26.06) per pack;

Effective on January 1, 2009, Twenty-seven pesos and sixteen centavos (P27.16)

per pack; and

Effective on January 1, 2011, Twenty-eight pesos and thirty centavos (P28.30) per
pack.

xxxx

New brands, as defined in the immediately following paragraph, shall initially be

classified according to their suggested net retail price.

New brands shall mean a brand registered after the date of effectivity of R.A. No.
8240.

Suggested net retail price shall mean the net retail price at which new brands, as
defined above, of locally manufactured or imported cigarettes are intended by the
manufacturer or importer to be sold on retail in major supermarkets or retail outlets
in Metro Manila for those marketed nationwide, and in other regions, for those with
 regional markets. At the end of three (3) months from the product launch, the
Bureau of Internal Revenue shall validate the suggested net retail price of the new
brand against the net retail price as defined herein and determine the correct tax
bracket under which a particular new brand of cigarette, as defined above, shall be
classified. After the end of eighteen (18) months from such validation, the Bureau of
Internal Revenue shall revalidate the initially validated net retail price against the net
retail price as of the time of revalidation in order to finally determine the correct tax
bracket under which a particular new brand of cigarettes shall be
classified; Provided however, That brands of cigarettes introduced in the
domestic market between January 1, 1997 [should be January 2, 1997] and
December 31, 2003 shall remain in the classification under which the Bureau
of Internal Revenue has determined them to belong as of December 31, 2003.
Such classification of new brands and brands introduced between January 1,
1997 and December 31, 2003 shall not be revised except by an act of
Congress.

Net retail price, as determined by the Bureau of Internal Revenue through a price
survey to be conducted by the Bureau of Internal Revenue itself, or the National
Statistics Office when deputized for the purpose by the Bureau of Internal Revenue,
shall mean the price at which the cigarette is sold in retail in at least twenty (20)
major supermarkets in Metro Manila (for brands of cigarettes marketed nationally),
excluding the amount intended to cover the applicable excise tax and the value-
added tax. For brands which are marketed only outside Metro Manila, the "net retail
price" shall mean the price at which the cigarette is sold in at least five (5) major
supermarkets in the region excluding the amount intended to cover the applicable
excise tax and value-added tax.

The classification of each brand of cigarettes based on its average net retail
price as of October 1, 1996, as set forth in Annex "D", including the
classification of brands for the same products which, although not set forth in
said Annex "D", were registered and were being commercially produced and
marketed on or after October 1, 1996, and which continue to be commercially
produced and marketed after the effectivity of this Act, shall remain in force
until revised by Congress. (Emphasis added)

Under RA 9334, the excise tax due on petitioner’s products was increased to P25.00 per
pack. In the implementation thereof, respondent Commissioner assessed petitioner’s
importation of 911,000 packs of Lucky Strike cigarettes at the increased tax rate of P25.00
per pack, rendering it liable for taxes in the total sum of P22,775,000.00.18

Hence, petitioner filed a Motion to Admit Attached Supplement19 and a Supplement20 to

the petition for review, assailing the constitutionality of RA 9334 insofar as it retained
Annex "D" and praying for a downward classification of Lucky Strike products at the
bracket taxable at P8.96 per pack. Petitioner contended that the continued use of Annex
"D" as the tax base of existing brands of cigarettes gives undue protection to said brands
which are still taxed based on their price as of October 1996 notwithstanding that they are
now sold at the same or even at a higher price than new brands like Lucky Strike. Thus,
old brands of cigarettes such as Marlboro and Philip Morris which, like Lucky Strike, are
sold at or more than P22.00 per pack, are taxed at the rate of P10.88 per pack, while
Lucky Strike products are taxed at P26.06 per pack.

In its Comment to the supplemental petition, respondents, through the Office of the
Solicitor General (OSG), argued that the passage of RA 9334, specifically the provision
imposing a legislative freeze on the classification of cigarettes introduced into the market
between January 2, 1997 and December 31, 2003, rendered the instant petition
academic. The OSG claims that the provision in Section 145, as amended by RA 9334,
prohibiting the reclassification of cigarettes introduced during said period, "cured’ the
perceived defect of Section 145 considering that, like the cigarettes under Annex "D,"
petitioner’s brands and other brands introduced between January 2, 1997 and December
31, 2003, shall remain in the classification under which the BIR has placed them and only
Congress has the power to reclassify them.

On March 20, 2006, Philip Morris Philippines Manufacturing Incorporated filed a Motion for
Leave to Intervene with attached Comment-in-Intervention.21 This was followed by the
Motions for Leave to Intervene of Fortune Tobacco Corporation,22 Mighty
Corporation, 23 and JT International, S.A., with their respective Comments-in-Intervention.
The Intervenors claim that they are parties-in-interest who stand to be affected by the
ruling of the Court on the constitutionality of Section 145 of the NIRC and its Annex "D"
because they are manufacturers of cigarette brands which are included in the said Annex.
Hence, their intervention is proper since the protection of their interest cannot be
addressed in a separate proceeding.

According to the Intervenors, no inequality exists because cigarettes classified by the BIR
based on their net retail price as of December 31, 2003 now enjoy the same status
quo provision that prevents the BIR from reclassifying cigarettes included in Annex "D." It
added that the Court has no power to pass upon the wisdom of the legislature in retaining
Annex "D" in RA 9334; and that the nullification of said Annex would bring about
tremendous loss of revenue to the government, chaos in the collection of taxes, illicit trade
of cigarettes, and cause decline in cigarette demand to the detriment of the farmers who
depend on the tobacco industry.

Intervenor Fortune Tobacco further contends that petitioner is estopped from questioning
the constitutionality of Section 145 and its implementing rules and regulations because it
entered into the cigarette industry fully aware of the existing tax system and its
consequences. Petitioner imported cigarettes into the country knowing that its suggested
retail price, which will be the initial basis of its tax classification, will be confirmed and
validated through a survey by the BIR to determine the correct tax that would be levied on
its cigarettes.

Moreover, Fortune Tobacco claims that the challenge to the validity of the BIR issuances
should have been brought by petitioner before the Court of Tax Appeals (CTA) and not the
RTC because it is the CTA which has exclusive appellate jurisdiction over decisions of the
BIR in tax disputes.

On August 7, 2006, the OSG manifested that it interposes no objection to the motions for
intervention.24Therefore, considering the substantial interest of the intervenors, and in the
higher interest of justice, the Court admits their intervention.

Before going into the substantive issues of this case, we must first address the matter of
jurisdiction, in light of Fortune Tobacco’s contention that petitioner should have brought its
petition before the Court of Tax Appeals rather than the regional trial court.

The jurisdiction of the Court of Tax Appeals is defined in Republic Act No. 1125, as
amended by Republic Act No. 9282. Section 7 thereof states, in pertinent part:

Sec. 7. Jurisdiction. — The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue or
other laws administered by the Bureau of Internal Revenue;

2. Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relations thereto, or other matters arising under the National Internal Revenue Code
or other laws administered by the Bureau of Internal Revenue, where the National
Internal Revenue Code provides a specific period of action, in which case the
inaction shall be deemed a denial; xxx.25

While the above statute confers on the CTA jurisdiction to resolve tax disputes in general,
this does not include cases where the constitutionality of a law or rule is challenged.
Where what is assailed is the validity or constitutionality of a law, or a rule or regulation
issued by the administrative agency in the performance of its quasi-legislative function, the
regular courts have jurisdiction to pass upon the same. The determination of whether a
specific rule or set of rules issued by an administrative agency contravenes the law or the
constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests
the power of judicial review or the power to declare a law, treaty, international or executive
agreement, presidential decree, order, instruction, ordinance, or regulation in the courts,
including the regional trial courts. This is within the scope of judicial power, which includes
the authority of the courts to determine in an appropriate action the validity of the acts of
the political departments. Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable and enforceable, and
to determine whether or not there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or instrumentality of the Government.26

In Drilon v. Lim,27 it was held:

 We stress at the outset that the lower court had jurisdiction to consider the
constitutionality of Section 187, this authority being embraced in the general
definition of the judicial power to determine what are the valid and binding laws by
the criterion of their conformity to the fundamental law. Specifically, B.P. 129 vests
in the regional trial courts jurisdiction over all civil cases in which the subject of the
litigation is incapable of pecuniary estimation, even as the accused in a criminal
action has the right to question in his defense the constitutionality of a law he is
charged with violating and of the proceedings taken against him, particularly as they
contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution
vests in the Supreme Court appellate jurisdiction over final judgments and orders of
lower courts in all cases in which the constitutionality or validity of any treaty,
international or executive agreement, law, presidential decree, proclamation, order,
instruction, ordinance, or regulation is in question.

The petition for injunction filed by petitioner before the RTC is a direct attack on the
constitutionality of Section 145(C) of the NIRC, as amended, and the validity of its
implementing rules and regulations. In fact, the RTC limited the resolution of the subject
case to the issue of the constitutionality of the assailed provisions. The determination of
whether the assailed law and its implementing rules and regulations contravene the
Constitution is within the jurisdiction of regular courts. The Constitution vests the power of
judicial review or the power to declare a law, treaty, international or executive agreement,
presidential decree, order, instruction, ordinance, or regulation in the courts, including the
regional trial courts.28Petitioner, therefore, properly filed the subject case before the RTC.

We come now to the issue of whether petitioner is estopped from assailing the authority of
the Commissioner of Internal Revenue. Fortune Tobacco raises this objection by pointing
out that when petitioner requested the Commissioner for a ruling that its Lucky Strike Soft
Pack cigarettes was a "new brand" rather than a variant of an existing brand, and thus
subject to a lower specific tax rate, petitioner executed an undertaking to comply with the
procedures under existing regulations for the assessment of deficiency internal revenue
taxes.

Fortune Tobacco argues that petitioner, after invoking the authority of the Commissioner
of Internal Revenue, cannot later on turn around when the ruling is adverse to it.

Estoppel, an equitable principle rooted in natural justice, prevents persons from going
back on their own acts and representations, to the prejudice of others who have relied on
them.29 The principle is codified in Article 1431 of the Civil Code, which provides:

Through estoppel, an admission or representation is rendered conclusive upon the person

making it and cannot be denied or disproved as against the person relying thereon.

Estoppel can also be found in Rule 131, Section 2 (a) of the Rules of Court, viz:

Sec. 2. Conclusive presumptions. — The following are instances of conclusive

presumptions:
 (a) Whenever a party has by his own declaration, act or omission, intentionally and
deliberately led another to believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration, act or omission be
permitted to falsify it.

The elements of estoppel are: first, the actor who usually must have knowledge, notice or
suspicion of the true facts, communicates something to another in a misleading way,
either by words, conduct or silence; second, the other in fact relies, and relies reasonably
or justifiably, upon that communication; third, the other would be harmed materially if the
actor is later permitted to assert any claim inconsistent with his earlier conduct; and fourth,
the actor knows, expects or foresees that the other would act upon the information given
or that a reasonable person in the actor's position would expect or foresee such action.30

In the early case of Kalalo v. Luz,31 the elements of estoppel, as related to the party to be
estopped, are: (1) conduct amounting to false representation or concealment of material
facts; or at least calculated to convey the impression that the facts are other than, and
inconsistent with, those which the party subsequently attempts to assert; (2) intent, or at
least expectation that this conduct shall be acted upon by, or at least influence, the other
party; and (3) knowledge, actual or constructive, of the real facts.

We find that petitioner was not guilty of estoppel. When it made the undertaking to comply
with all issuances of the BIR, which at that time it considered as valid, petitioner did not
commit any false misrepresentation or misleading act. Indeed, petitioner cannot be faulted
for initially undertaking to comply with, and subjecting itself to the operation of Section
145(C), and only later on filing the subject case praying for the declaration of its
unconstitutionality when the circumstances change and the law results in what it perceives
to be unlawful discrimination. The mere fact that a law has been relied upon in the past
and all that time has not been attacked as unconstitutional is not a ground for considering
petitioner estopped from assailing its validity. For courts will pass upon a constitutional
question only when presented before it in bona fide cases for determination, and the fact
that the question has not been raised before is not a valid reason for refusing to allow it to
be raised later.32

Now to the substantive issues.

To place this case in its proper context, we deem it necessary to first discuss how the
assailed law operates in order to identify, with precision, the specific provisions which,
according to petitioner, have created a grossly discriminatory classification scheme
between old and new brands. The pertinent portions of RA 8240, as amended by RA
9334, are reproduced below for ready reference:

SEC. 145. Cigars and Cigarettes. –

xxxx

(C) Cigarettes Packed by Machine. – There shall be levied, assessed and collected
on cigarettes packed by machine a tax at the rates prescribed below:
(1) If the net retail price (excluding the excise tax and the value-added tax) is below
Five pesos (P5.00) per pack, the tax shall be:

Effective on January 1, 2005, Two pesos (P2.00) per pack;

Effective on January 1, 2007, Two pesos and twenty-three centavos (P2.23)

per pack;

Effective on January 1, 2009, Two pesos and forty-seven centavos (P2.47)

per pack; and

Effective on January 1, 2011, Two pesos and seventy-two centavos (P2.72)

per pack.

(2) If the net retail price (excluding the excise tax and the value-added tax) is Five
pesos (P5.00) but does not exceed Six pesos and fifty centavos (P6.50) per pack,
the tax shall be:

Effective on January 1, 2005, Six pesos and thirty-five centavos (P6.35) per
pack;

Effective on January 1, 2007, Six pesos and seventy-four centavos (P6.74)

per pack;

Effective on January 1, 2009, Seven pesos and fourteen centavos (P7.14) per
pack; and

Effective on January 1, 2011, Seven pesos and fifty-six centavos (P7.56) per
pack.

(3) If the net retail price (excluding the excise tax and the value-added tax) exceeds
Six pesos and fifty centavos (P6.50) but does not exceed Ten pesos (P10.00) per
pack, the tax shall be:

Effective on January 1, 2005, Ten pesos and thirty-five centavos (10.35) per
pack;

Effective on January 1, 2007, Ten pesos and eighty-eight centavos (P10.88)

per pack;

Effective on January 1, 2009, Eleven pesos and forty-three centavos (P11.43)

per pack; and

Effective on January 1, 2011, Twelve pesos (P12.00) per pack.

(4) If the net retail price (excluding the excise tax and the value-added tax) is above
Ten pesos (P10.00) per pack, the tax shall be:
 Effective on January 1, 2005, Twenty-five pesos (P25.00) per pack;

Effective on January 1, 2007, Twenty-six pesos and six centavos (P26.06) per
pack;

Effective on January 1, 2009, Twenty-seven pesos and sixteen centavos

(P27.16) per pack; and

Effective on January 1, 2011, Twenty-eight pesos and thirty centavos

(P28.30) per pack.

xxxx

New brands, as defined in the immediately following paragraph, shall initially be

classified according to their suggested net retail price.

New brands shall mean a brand registered after the date of effectivity of R.A. No.
8240.

Suggested net retail price shall mean the net retail price at which new brands, as
defined above, of locally manufactured or imported cigarettes are intended by the
manufacturer or importer to be sold on retail in major supermarkets or retail outlets
in Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product launch, the
Bureau of Internal Revenue shall validate the suggested net retail price of the new
brand against the net retail price as defined herein and determine the correct tax
bracket under which a particular new brand of cigarette, as defined above, shall be
classified. After the end of eighteen (18) months from such validation, the Bureau of
Internal Revenue shall revalidate the initially validated net retail price against the net
retail price as of the time of revalidation in order to finally determine the correct tax
bracket under which a particular new brand of cigarettes shall be classified;
Provided however, That brands of cigarettes introduced in the domestic market
between January 1, 1997 [should be January 2, 1997] and December 31, 2003 shall
remain in the classification under which the Bureau of Internal Revenue has
determined them to belong as of December 31, 2003. Such classification of new
brands and brands introduced between January 1, 1997 and December 31, 2003
shall not be revised except by an act of Congress.

Net retail price, as determined by the Bureau of Internal Revenue through a price
survey to be conducted by the Bureau of Internal Revenue itself, or the National
Statistics Office when deputized for the purpose by the Bureau of Internal Revenue,
shall mean the price at which the cigarette is sold in retail in at least twenty (20)
major supermarkets in Metro Manila (for brands of cigarettes marketed nationally),
excluding the amount intended to cover the applicable excise tax and the value-
added tax. For brands which are marketed only outside Metro Manila, the "net retail
price" shall mean the price at which the cigarette is sold in at least five (5) major
 supermarkets in the region excluding the amount intended to cover the applicable
excise tax and value-added tax.

The classification of each brand of cigarettes based on its average net retail price as
of October 1, 1996, as set forth in Annex "D", including the classification of brands
for the same products which, although not set forth in said Annex "D", were
registered and were being commercially produced and marketed on or after October
1, 1996, and which continue to be commercially produced and marketed after the
effectivity of this Act, shall remain in force until revised by Congress.

As can be seen, the law creates a four-tiered system which we may refer to as the low-
priced,33 medium-priced,34 high-priced,35 and premium-priced36 tax brackets. When a
brand is introduced in the market, the current net retail price is determined through the
aforequoted specified procedure. The current net retail price is then used to classify under
which tax bracket the brand belongs in order to finally determine the corresponding excise
tax rate on a per pack basis. The assailed feature of this law pertains to the mechanism
where, after a brand is classified based on its current net retail price, the classification is
frozen and only Congress can thereafter reclassify the same. From a practical point of
view, Annex "D" is merely a by-product of the whole mechanism and philosophy of the
assailed law. That is, the brands under Annex "D" were also classified based on their
current net retail price, the only difference being that they were the first ones so classified
since they were the only brands surveyed as of October 1, 1996, or prior to the effectivity
of RA 8240 on January 1, 1997.37

Due to this legislative classification scheme, it is possible that over time the net retail price
of a previously classified brand, whether it be a brand under Annex "D" or a new brand
classified after the effectivity of RA 8240 on January 1, 1997, would increase (due to
inflation, increase of production costs, manufacturer’s decision to increase its prices,
etc.) to a point that its net retail price pierces the tax bracket to which it was previously
classified.38 Consequently, even if its present day net retail price would make it fall under a
higher tax bracket, the previously classified brand would continue to be subject to the
excise tax rate under the lower tax bracket by virtue of the legislative classification freeze.

Petitioner claims that this is what happened in 2004 to the Marlboro and Philip Morris
brands, which were permanently classified under Annex "D." As of October 1, 1996,
Marlboro had net retail prices ranging from P6.78 to P6.84 while Philip Morris had net
retail prices ranging from P7.39 to P7.48. Thus, pursuant to RA 8240,39 Marlboro and
Philip Morris were classified under the high-priced tax bracket and subjected to an excise
tax rate of P8.96 per pack. Petitioner then presented evidence showing that after the lapse
of about seven years or sometime in 2004, Marlboro’s and Philip Morris’ net retail prices
per pack both increased to about P15.59.40 This meant that they would fall under the
premium-priced tax bracket, with a higher excise tax rate of P13.44 per pack,41 had they
been classified based on their 2004 net retail prices. However, due to the legislative
classification freeze, they continued to be classified under the high-priced tax bracket with
a lower excise tax rate. Petitioner thereafter deplores the fact that its Lucky Strike Filter,
Lucky Strike Lights, and Lucky Strike Menthol Lights cigarettes, introduced in the market
sometime in 2001 and validated by a BIR survey in 2003, were found to have net retail
prices of P11.53, P11.59 and P10.34,42 respectively, which are lower than those of
Marlboro and Philip Morris. However, since petitioner’s cigarettes were newly introduced
brands in the market, they were taxed based on their current net retail prices and, thus,
fall under the premium-priced tax bracket with a higher excise tax rate of P13.44 per pack.
This unequal tax treatment between Marlboro and Philip Morris, on the one hand, and
Lucky Strike, on the other, is the crux of petitioner’s contention that the legislative
classification freeze violates the equal protection and uniformity of taxation clauses of the
Constitution.

It is apparent that, contrary to its assertions, petitioner is not only questioning the undue
favoritism accorded to brands under Annex "D," but the entire mechanism and philosophy
of the law which freezes the tax classification of a cigarette brand based on its current net
retail price. Stated differently, the alleged discrimination arising from the legislative
classification freeze between the brands under Annex "D" and petitioner’s newly
introduced brands arose only because the former were classified based on their "current"
net retail price as of October 1, 1996 and petitioner’s newly introduced brands were
classified based on their "current" net retail price as of 2003. Without this corresponding
freezing of the classification of petitioner’s newly introduced brands based on their current
net retail price, it would be impossible to establish that a disparate tax treatment occurred
between the Annex "D" brands and petitioner’s newly introduced brands.

This clarification is significant because, under these circumstances, a declaration of

unconstitutionality would necessarily entail nullifying the whole mechanism of the law and
not just Annex "D." Consequently, if the assailed law is declared unconstitutional on equal
protection grounds, the entire method by which a brand of cigarette is classified would
have to be invalidated. As a result, no method to classify brands under Annex "D" as well
as new brands would be left behind and the whole Section 145 of the NIRC, as amended,
would become inoperative.43

To simplify the succeeding discussions, we shall refer to the whole mechanism and
philosophy of the assailed law which freezes the tax classification of a cigarette brand
based on its current net retail price and which, thus, produced different classes of brands
based on the time of their introduction in the market (starting with the brands in Annex "D"
since they were the first brands so classified as of October 1, 1996) as the classification
freeze provision.44

As thus formulated, the central issue is whether or not the classification freeze
provision violates the equal protection and uniformity of taxation clauses of the
Constitution.

In Sison, Jr. v. Ancheta,45 this Court, through Chief Justice Fernando, explained the
applicable standard in deciding equal protection and uniformity of taxation challenges:

Now for equal protection. The applicable standard to avoid the charge that there is a
denial of this constitutional mandate whether the assailed act is in the exercise of
the police power or the power of eminent domain is to demonstrate "that the
governmental act assailed, far from being inspired by the attainment of the common
weal was prompted by the spirit of hostility, or at the very least, discrimination that
finds no support in reason. It suffices then that the laws operate equally and
uniformly on all persons under similar circumstances or that all persons must be
treated in the same manner, the conditions not being different, both in the privileges
conferred and the liabilities imposed. Favoritism and undue preference cannot be
allowed. For the principle is that equal protection and security shall be given to
every person under circumstances, which if not identical are analogous. If law be
looks upon in terms of burden or charges, those that fall within a class should be
treated in the same fashion, whatever restrictions cast on some in the group equally
binding on the rest." That same formulation applies as well to taxation measures.
The equal protection clause is, of course, inspired by the noble concept of
approximating the ideal of the laws's benefits being available to all and the affairs of
men being governed by that serene and impartial uniformity, which is of the very
essence of the idea of law. There is, however, wisdom, as well as realism, in these
words of Justice Frankfurter: "The equality at which the 'equal protection' clause
aims is not a disembodied equality. The Fourteenth Amendment enjoins 'the equal
protection of the laws,' and laws are not abstract propositions. They do not relate to
abstract units A, B and C, but are expressions of policy arising out of specific
difficulties, addressed to the attainment of specific ends by the use of specific
remedies. The Constitution does not require things which are different in fact or
opinion to be treated in law as though they were the same." Hence the constant
reiteration of the view that classification if rational in character is allowable.
As a matter of fact, in a leading case of Lutz v. Araneta, this Court, through Justice
J.B.L. Reyes, went so far as to hold "at any rate, it is inherent in the power to tax
that a state be free to select the subjects of taxation, and it has been repeatedly
held that 'inequalities which result from a singling out of one particular class for
taxation, or exemption infringe no constitutional limitation.'"

Petitioner likewise invoked the kindred concept of uniformity. According to the

Constitution: "The rule of taxation shall be uniform and equitable." This requirement
is met according to Justice Laurel in Philippine Trust Company v. Yatco, decided in
1940, when the tax "operates with the same force and effect in every place where
the subject may be found." He likewise added: "The rule of uniformity does not call
for perfect uniformity or perfect equality, because this is hardly attainable." The
problem of classification did not present itself in that case. It did not arise until nine
years later, when the Supreme Court held: "Equality and uniformity in taxation
means that all taxable articles or kinds of property of the same class shall be taxed
at the same rate. The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation, . . . As clarified by Justice
Tuason, where "the differentiation" complained of "conforms to the practical dictates
of justice and equity" it "is not discriminatory within the meaning of this clause and is
therefore uniform." There is quite a similarity then to the standard of equal protection
for all that is required is that the tax "applies equally to all persons, firms and
corporations placed in similar situation."46 (Emphasis supplied)
In consonance thereto, we have held that "in our jurisdiction, the standard and analysis of
equal protection challenges in the main have followed the ‘rational basis’ test, coupled
with a deferential attitude to legislative classifications and a reluctance to invalidate a law
unless there is a showing of a clear and unequivocal breach of the Constitution."47 Within
the present context of tax legislation on sin products which neither contains a suspect
classification nor impinges on a fundamental right, the rational-basis test thus finds
application. Under this test, a legislative classification, to survive an equal protection
challenge, must be shown to rationally further a legitimate state interest.48 The
classifications must be reasonable and rest upon some ground of difference having a fair
and substantial relation to the object of the legislation.49 Since every law has in its favor
the presumption of constitutionality, the burden of proof is on the one attacking the
constitutionality of the law to prove beyond reasonable doubt that the legislative
classification is without rational basis.50 The presumption of constitutionality can be
overcome only by the most explicit demonstration that a classification is a hostile and
oppressive discrimination against particular persons and classes, and that there is no
conceivable basis which might support it.51

A legislative classification that is reasonable does not offend the constitutional guaranty of
the equal protection of the laws. The classification is considered valid and reasonable
provided that: (1) it rests on substantial distinctions; (2) it is germane to the purpose of the
law; (3) it applies, all things being equal, to both present and future conditions; and (4) it
applies equally to all those belonging to the same class.52

The first, third and fourth requisites are satisfied. The classification freeze provision was
inserted in the law for reasons of practicality and expediency. That is, since a new brand
was not yet in existence at the time of the passage of RA 8240, then Congress needed a
uniform mechanism to fix the tax bracket of a new brand. The current net retail price,
similar to what was used to classify the brands under Annex "D" as of October 1, 1996,
was thus the logical and practical choice. Further, with the amendments introduced by RA
9334, the freezing of the tax classifications now expressly applies not just to Annex "D"
brands but to newer brands introduced after the effectivity of RA 8240 on January 1, 1997
and any new brand that will be introduced in the future.53 (However, as will be discussed
later, the intent to apply the freezing mechanism to newer brands was already in place
even prior to the amendments introduced by RA 9334 to RA 8240.) This does not explain,
however, why the classification is "frozen" after its determination based on current net
retail price and how this is germane to the purpose of the assailed law. An examination of
the legislative history of RA 8240 provides interesting answers to this question.

RA 8240 was the first of three parts in the Comprehensive Tax Reform Package then
being pushed by the Ramos Administration. It was enacted with the following objectives
stated in the Sponsorship Speech of Senator Juan Ponce Enrile (Senator Enrile), viz:

First, to evolve a tax structure which will promote fair competition among the
players in the industries concerned and generate buoyant and stable revenue for
the government.
 Second, to ensure that the tax burden is equitably distributed not only amongst the
industries affected but equally amongst the various levels of our society that are
involved in various markets that are going to be affected by the excise tax on
distilled spirits, fermented liquor, cigars and cigarettes.

In the case of firms engaged in the industries producing the products that we are
about to tax, this means relating the tax burden to their market share, not only in
terms of quantity, Mr. President, but in terms of value.

In case of consumers, this will mean evolving a multi-tiered rate structure so

that low-priced products are subject to lower tax rates and higher-priced products
are subject to higher tax rates.

Third, to simplify the tax administration and compliance with the tax laws that are
about to unfold in order to minimize losses arising from inefficiencies and tax
avoidance scheme, if not outright tax evasion.54

In the initial stages of the crafting of the assailed law, the Department of Finance (DOF)
recommended to Congress a shift from the then existing ad valorem taxation system to a
specific taxation system with respect to sin products, including cigarettes. The DOF noted
that the ad valorem taxation system was a source of massive tax leakages because the
taxpayer was able to evade paying the correct amount of taxes through the undervaluation
of the price of cigarettes using various marketing arms and dummy corporations. In order
to address this problem, the DOF proposed a specific taxation system where the
cigarettes would be taxed based on volume or on a per pack basis which was believed to
be less susceptible to price manipulation. The reason was that the BIR would only need to
monitor the sales volume of cigarettes, from which it could easily compute the
corresponding tax liability of cigarette manufacturers. Thus, the DOF suggested the use of
a three-tiered system which operates in substantially the same manner as the four-tiered
system under RA 8240 as earlier discussed. The proposal of the DOF was embodied in
House Bill (H.B.) No. 6060, the pertinent portions of which states—

SEC. 142. Cigars and cigarettes.—

(c) Cigarettes packed by machine.— There shall be levied, assessed and collected
on cigarettes packed by machine a tax at the rates prescribed below:

(1) If the manufacturer’s or importer’s wholesale price (net of excise tax and value-
added tax) per pack exceeds four pesos and twenty centavos (P4.20), the tax shall
be seven pesos and fifty centavos (P7.50);

(2) If the manufacturer’s or importer’s wholesale price (net of excise tax and value-
added tax) per pack exceeds three pesos and ninety centavos (P3.90) but does not
exceed four pesos and twenty centavos (P4.20), the tax shall be five pesos and fifty
centavos (P5.50): provided, that after two (2) years from the effectivity of this Act,
cigarettes otherwise subject to tax under this subparagraph shall be taxed under
subparagraph (1) above.
 (3) If the manufacturer’s or importer’s wholesale price (net of excise tax and value-
added tax) per pack does not exceeds three pesos and ninety centavos (P3.90), the
tax rate shall be one peso (P1.00).

Variants of existing brands and new brands of cigarettes packed by machine to be

introduced in the domestic market after the effectivity of this Act, shall be taxed
under paragraph (c)(1) hereof.

The rates of specific tax on cigars and cigarettes under paragraphs (a), (b),
and (c) hereof, including the price levels for purposes of classifying cigarettes
packed by machine, shall be revised upward two (2) years after the effectivity
of this Act and every two years thereafter by the Commissioner of Internal
Revenue, subject to the approval of the Secretary of Finance, taking into
account the movement of the consumer price index for cigars and cigarettes
as established by the National Statistics Office: provided, that the increase in
taxes and/or price levels shall be equal to the present change in such
consumer price index for the two-year period: provided, further, that the
President, upon the recommendation of the Secretary of Finance, may
suspend or defer the adjustment in price levels and tax rates when the
interest of the national economy and general welfare so require, such as the
need to obviate unemployment, and economic and social
dislocation: provided, finally, that the revised price levels and tax rates
authorized herein shall in all cases be rounded off to the nearest centavo and
shall be in force and effect on the date of publication thereof in a newspaper
of general circulation. x x x (Emphasis supplied)

What is of particular interest with respect to the proposal of the DOF is that it contained a
provision for the periodic adjustment of the excise tax rates and tax brackets, and a
corresponding periodic resurvey and reclassification of cigarette brands based on the
increase in the consumer price index as determined by the Commissioner of Internal
Revenue subject to certain guidelines. The evident intent was to prevent inflation from
eroding the value of the excise taxes that would be collected from cigarettes over time by
adjusting the tax rate and tax brackets based on the increase in the consumer price index.
Further, under this proposal, old brands as well as new brands introduced thereafter
would be subjected to a resurvey and reclassification based on their respective values at
the end of every two years in order to align them with the adjustment of the excise tax rate
and tax brackets due to the movement in the consumer price index.55

Of course, we now know that the DOF proposal, insofar as the periodic adjustment of tax
rates and tax brackets, and the periodic resurvey and reclassification of cigarette brands
are concerned, did not gain approval from Congress. The House and Senate pushed
through with their own versions of the excise tax system on beers and cigarettes both
denominated as H.B. No. 7198. For convenience, we shall refer to the bill deliberated
upon by the House as the House Version and that of the Senate as the Senate Version.
The House’s Committee on Ways and Means, then chaired by Congressman Exequiel B.
Javier (Congressman Javier), roundly rejected the DOF proposal. Instead, in its
Committee Report submitted to the plenary, it proposed a different excise tax system
which used a specific tax as a basic tax with an ad valorem comparator. Further, it deleted
the proposal to have a periodic adjustment of tax rates and the tax brackets as well as
periodic resurvey and reclassification of cigarette brands, to wit:

The rigidity of the specific tax system calls for the need for frequent congressional
intervention to adjust the tax rates to inflation and to keep pace with the expanding
needs of government for more revenues. The DOF admits this flaw inherent in the
tax system it proposed. Hence, to obviate the need for remedial legislation, the DOF
is asking Congress to grant to the Commissioner the power to revise, one, the
specific tax rates: and two, the price levels of beer and cigarettes. What the DOF is
asking, Mr. Speaker, is for Congress to delegate to the Commissioner of Internal
Revenue the power to fix the tax rates and classify the subjects of taxation based on
their price levels for purposes of fixing the tax rates. While we sympathize with the
predicament of the DOF, it is not for Congress to abdicate such power. The power
sought to be delegated to be exercised by the Commissioner of Internal Revenue is
a legislative power vested by the Constitution in Congress pursuant to Section 1,
Article VI of the Constitution. Where the power is vested, there it must remain— in
Congress, a body of representatives elected by the people. Congress may not
delegate such power, much less abdicate it.

xxxx

Moreover, the grant of such power, if at all constitutionally permissible, to the

Commissioner of Internal Revenue is fraught with ethical implications. The debates
on how much revenue will be raised, how much money will be taken from the
pockets of taxpayers, will inexorably shift from the democratic Halls of Congress to
the secret and non-transparent corridors of unelected agencies of government, the
Department of Finance and the Bureau of Internal Revenue, which are not
accountable to our people. We cannot countenance the shift for ethical reasons, lest
we be accused of betraying the trust reposed on this Chamber by the people. x x x

A final point on this proposal, Mr. Speaker, is the exercise of the taxing power of the
Commissioner of Internal Revenue which will be triggered by inflation rates based
on the consumer price index. Simply stated, Mr. Speaker, the specific tax rates will
be fixed by the Commissioner depending on the price levels of beers and cigarettes
as determined by the consumers’ price index. This is a novel idea, if not necessarily
weird in the field of taxation. What if the brewer or the cigarette manufacturer sells at
a price below the consumers’ price index? Will it be taxed on the basis of the
consumer’s price index which is over and above its wholesale or retail price as the
case may be? This is a weird form of exaction where the tax is based not on what
the brewer or manufacturer actually realized but on an imaginary wholesale or retail
price. This amounts to a taxation based on presumptive price levels and renders the
 specific tax a presumptive tax. We hope, the DOF and the BIR will also honor a
presumptive tax payment.

Moreover, specific tax rates based on price levels tied to consumer’s price index as
proposed by the DOF engenders anti-trust concerns. The proposal if enacted into
law will serve as a barrier to the entry of new players in the beer and cigarette
industries which are presently dominated by shared monopolies. A new player in
these industries will be denied business flexibility to fix its price levels to promote its
product and penetrate the market as the price levels are dictated by the consumer
price index. The proposed tax regime, Mr. Speaker, will merely enhance the
stranglehold of the oligopolies in the beer and cigarette industries, thus, reversing
the government’s policy of dismantling monopolies and combinations in restraint of
trade.56

For its part, the Senate’s Committee on Ways and Means, then chaired by Senator Juan
Ponce Enrile (Senator Enrile), developed its own version of the excise tax system on
cigarettes. The Senate Version consisted of a four-tiered system and, interestingly
enough, contained a periodic excise tax rate and tax bracket adjustment as well as a
periodic resurvey and reclassification of brands provision ("periodic adjustment and
reclassification provision," for brevity) to be conducted by the DOF in coordination with the
BIR and the National Statistics Office based on the increase in the consumer price
index— similar to the one proposed by the DOF, viz:

SEC. 4 Section 142 of the National Internal Revenue Code, as amended, is hereby
further amended to read as follows:

"SEC. 142. Cigars and cigarettes. –

xxxx

(c) Cigarettes packed by machine. – There shall be levied, assessed and collected
on cigarettes packed by machine a tax at the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax) is above
Ten pesos (P10.00) per pack, the tax shall be Twelve pesos (P12.00) per pack;

(2) If the net retail price (excluding the excise tax and the value-added tax) exceeds
Six pesos and fifty centavos (P6.50) per pack, the tax shall be Eight pesos (P8.00)
per pack;

(3) If the net retail price (excluding the excise tax and the value-added tax) is Five
pesos (P5.00) up to Six pesos and fifty centavos (P6.50) per pack, the tax shall be
Five pesos (P5.00) per pack;

(4) If the net retail price (excluding the excise tax and the value-added tax) is below
Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per pack.
 Variants of existing brands of cigarettes which are introduced in the domestic
market after the effectivity of this Act shall be taxed under the highest classification
of any variant of that brand.

xxx

The rates of specific tax on cigars and cigarettes under subparagraph (a), (b)
and (c) hereof, including the net retail prices for purposes of classification,
shall be adjusted on the sixth of January three years after the effectivity of
this Act and every three years thereafter. The adjustment shall be in
accordance with the inflation rate measured by the average increase in the
consumer price index over the three-year period. The adjusted tax rates and
net price levels shall be in force on the eighth of January.

Within the period hereinabove mentioned, the Secretary of Finance shall

direct the conduct of a survey of retail prices of each brand of cigarettes in
coordination with the Bureau of Internal Revenue and the National Statistics
Office.

For purposes of this Section, net retail price shall mean the price at which the
cigarette is sold on retail in 20 major supermarkets in Metro Manila (for brands of
cigarettes marketed nationally), excluding the amount intended to cover the
applicable excise tax and the value-added tax. For brands which are marketed only
outside Metro Manila, the net retail price shall mean the price at which the cigarette
is sold in five major supermarkets in the region excluding the amount intended to
cover the applicable excise tax and the value-added tax.

The classification of each brand of cigarettes in the initial year of

implementation of this Act shall be based on its average net retail price as of
October 1, 1996. The said classification by brand shall remain in force until
January 7, 2000.

New brands shall be classified according to their current net retail

price.57 (Emphasis supplied)

During the period of interpellations, the late Senator Raul S. Roco (Senator Roco)
expressed doubts as to the legality and wisdom of putting a periodic adjustment and
reclassification provision:

Senator Enrile: This will be the first time that a tax burden will be allowed to be
automatically adjusted upwards based on a system of indexing tied up with the
Consumers Price Index (CPI). Although I must add that we have adopted a similar
system in adjusting the personal tax exemption from income tax of our individual
taxpayers.

Senator Roco: They are not exactly the same, Mr. President. But even then, we do
note that this the first time we are trying to put an automatic adjustment. My concern
is, why do we propose now this automatic adjustment? What is the reason that
impels the committee? Maybe we can be enlightened and maybe we shall embrace
it forthwith. But what is the reason?

Senator Enrile: Mr. President, we will recall that in the House of Representatives, it
has adopted a tax proposal on these products based on a specific tax as a basic tax
with an ad valoremcomparator. The Committee on Ways and Means of the Senate
has not seen it fit to adopt this system, but it recognized the possibility that there
may be an occasion where the price movement in the country might unwarrantedly
move upwards, in which case, if we peg the government to a specific tax rate of
P6.30, P9.30 and P12.30 for beer, since we are talking of beer, 58 the government
might lose in the process.

In order to consider the interest of the government in this, Mr. President, and in
order to obviate the possibility that some of these products categorized under the
different tiers with different specific tax rates from moving upwards and piercing their
own tiers and thereby expose themselves to an incremental tax of higher
magnitude, it was felt that we should adopt a system where, in spite of any
escalation in the price of these products in the future, the tax rates could be
adjusted upwards so that none of these products would leave their own tier. That
was the basic principle under which we crafted this portion of the tax proposal.

Senator Roco: Mr. President, we certainly share the judgment of the distinguished
gentleman as regards the comparator provision in the House of Representatives
and we appreciate the reasons given. But we are under the impression that the
House also, aside from the comparator, has an adjustment clause that is fixed. It
has fixed rates for the adjustment. So that one of the basic differences between the
Senate proposed version now and the House version is that, the House of
Representatives has manifested its will and judgment as regards the tax to which
we will adjust, whereas the Senate version relegates fundamentally that judgment to
the Department of Finance.

Senator Enrile: That is correct, Mr. President, because we felt that in imposing a
fixed adjustment, we might be fixing an amount that is either too high or too low. We
cannot foresee the economic trends in this country over a period of two years, three
years, let alone ten years. So we felt that a mechanism ought to be adopted in order
to serve the interest of the government, the interest of the producers, and the
interest of the consuming public.

Senator Roco: This is where, Mr. President, my policy difficulties start. Under the
Constitution— I think it is Article VI, Section 24, and it was the distinguished
chairman of the Committee on Ways and Means who made this Chamber very
conscious of this provision— revenue measures and tariff measures shall originate
exclusively from the House of Representatives.
 The reason for this, Mr. President, is, there is a long history why the House of
Representatives must originate judgments on tax. The House members represent
specific districts. They represent specific constituencies, and the whole history of
parliamentarism, the whole history of Congress as an institution is founded on the
proposition that the direct representatives of the people must speak about taxes.

Mr. President, while the Senate can concur and can introduce amendments, the
proposed change here is radical. This is the policy difficulty that I wish to clarify with
the gentleman because the judgment call now on the amount of tax to be imposed is
not coming from Congress. It is shifted to the Department of Finance. True, the
Secretary of Finance may have been the best finance officer two years ago and now
the best finance officer in Asia, but that does not make him qualified to replace the
judgment call of the House of Representatives. That is my first difficulty.

Senator Enrile: Mr. President, precisely the law, in effect, authorizes this rate
beforehand. The computation of the rate is the only thing that was left to the
Department of Finance as a tax implementor of Congress. This is not unusual
because we have already, as I said, adopted a system similar to this. If we adjust
the personal exemption of an individual taxpayer, we are in effect adjusting the
applicable tax rate to him.

Senator Roco: But the point I was trying to demonstrate, Mr. President, is that we
depart precisely from the mandate of the Constitution that judgment on revenue
must emanate from Congress. Here, it is shifted to the Department of Finance for no
visible or patent reason insofar as I could understand. The only difference is, who
will make the judgment? Should it be Congress?

Senator Enrile: Mr. President, forgive me for answering sooner than I should. My
understanding of the Constitution is that all revenue measures must emanate from
the House. That is all the Constitution says.

Now, it does not say that the judgment call must belong to the House. The judgment
call can belong both to the House and to the Senate. We can change whatever
proposal the House did. Precisely, we are now crafting a measure, and we are
saying that this is the rate subject to an adjustment which we also provide. We are
not giving any unusual power to the Secretary of Finance because we tell him, "This
is the formula that you must adopt in arriving at the adjustment so that you do not
have to come back to us."59

Apart from his doubts as to the legality of the delegation of taxing power to the DOF and
BIR, Senator Roco also voiced out his concern about the possible abuse and corruption
that will arise from the periodic adjustment and reclassification provision. Continuing—

Senator Roco: Mr. President, if that is the argument, that the distinguished
gentleman has a different legal interpretation, we will then now examine the choice.
Because his legal interpretation is different from mine, then the issues becomes: Is
it more advantageous that this judgment be exercised by the House? Should
 we not concur or modify in terms of the exercise by the House of its power or
are we better off giving this judgment call to the Department of Finance?

Let me now submit, Mr. President, that in so doing, it is more advantageous to

fix the rate so that even if we modify the rates identified by Congress, it is
better and less susceptible to abuse.

For instance, Mr. President, would the gentlemen wish to demonstrate to us how
this will be done? On page 8, lines 5 to 9, there is a provision here as to when the
Secretary of Finance shall direct the conduct of survey of retail prices of each brand
of fermented liquor in coordination with the Bureau of Internal Revenue and the
National Statistics Office.

These offices are not exactly noted, Mr. President, for having been sanctified by the
Holy Spirit in their noble intentions. x x x60 (Emphasis supplied)

Pressing this point, Senator Roco continued his query:

Senator Roco: x x x [On page 8, lines 5 to 9] it says that during the two-year period,
the Secretary of Finance shall direct the conduct of the survey. How? When? Which
retail prices and what brand shall he consider? When he coordinates with the
Bureau of Internal Revenue, what is the Bureau of Internal Revenue supposed to be
doing? What is the National Statistics Office supposed to be doing, and under what
guides and standards?

May the gentleman wish to demonstrate how this will be done? My point, Mr.
President, is, by giving the Secretary of Finance, the BIR and the National
Statistics Office discretion over a two-year period will invite corruption and
arbitrariness, which is more dangerous than letting the House of
Representatives and this Chamber set the adjustment rate. Why not set the
adjustment rate? Why should Congress not exercise that judgment now? x x x

Senator Enrile: x x x

Senator Roco: x x x We respectfully submit that the Chairman consider choosing the
judgment of this Chamber and the House of Representatives over a delegated
judgment of the Department of Finance.

Again, it is not to say that I do not trust the Department of Finance. It has won
awards, and I also trust the undersecretary. But that is beside the point. Tomorrow,
they may not be there.61 (Emphasis supplied)

This point was further dissected by the two senators. There was a genuine difference of
opinion as to which system— one with a fixed excise tax rate and classification or the
other with a periodic adjustment of excise tax rate and reclassification— was less
susceptible to abuse, as the following exchanges show:
 Senator Enrile: Mr. President, considering the sensitivity of these products from the
viewpoint of exerted pressures because of the understandable impact of this
measure on the pockets of the major players producing these products, the
committee felt that perhaps to lessen such pressures, it is best that we now
establish a norm where the tax will be adjusted without incurring too much political
controversy as has happened in the case of this proposal.

Senator Roco: But that is exactly the same reason we say we must rely upon
Congress because Congress, if it is subjected to pressure, at least balances off
because of political factors.

When the Secretary of Finance is now subjected to pressure, are we saying that the
Secretary of Finance and the Department of Finance is better-suited to withstand
the pressure? Or are we saying "Let the Finance Secretary decide whom to yield"?

I am saying that the temptation and the pressure on the Secretary of Finance is
more dangerous and more corruption-friendly than ascertaining for ourselves now a
fixed rate of increase for a fixed period.

Senator Enrile: Mr. President, perhaps the gentleman may not agree with this
representation, but in my humble opinion, this formulation is less susceptible to
pressure because there is a definite point of reference which is the consumer price
index, and that consumer price index is not going to be used only for this purpose.
The CPI is used for a national purpose, and there is less possibility of tinkering with
it.62

Further, Senator Roco, like Congressman Javier, expressed the view that the periodic
adjustment and reclassification provision would create an anti-competitive atmosphere.
Again, Senators Roco and Enrile had genuine divergence of opinions on this matter, to
wit:

Senator Roco: x x x On the marketing level, an adjustment clause may, in fact, be

disadvantageous to both companies, whether it is the Lucio Tan companies or the
San Miguel companies. If we have to adjust our marketing position every two years
based on the adjustment clause, the established company may survive, but the new
ones will have tremendous difficulty. Therefore, this provision tends to indicate an
anticompetitive bias.

It is good for San Miguel and the Lucio Tan companies, but the new companies—
assuming there may be new companies and we want to encourage them because of
the old point of liberalization— will be at a disadvantage under this situation. If this
observation will find receptivity in the policy consideration of the distinguished
Gentleman, maybe we can also further, later on, seek amendments to this
automatic adjustment clause in some manner.

Senator Enrile: Mr. President, I cannot foresee any anti-competitiveness of this

provision with respect to a new entrant, because a new entrant will not just come in
 without studying the market. He is a lousy businessman if he will just come in
without studying the market. If he comes in, he will determine at what retail price
level he will market his product, and he will be coming under any of the tiers
depending upon his net retail price. Therefore, I do not see how this particular
provision will affect a new entrant.

Senator Roco: Be that as it may, Mr. President, we obviously will not resort to
debate until this evening, and we will have to look for other ways of resolving the
policy options.

Let me just close that particular area of my interpellation, by summarizing the points
we were hoping could be clarified.

1. That the automatic adjustment clause is at best questionable in law.

2. It is corruption-friendly in the sense that it shifts the discretion from the

House of Representatives and this Chamber to the Secretary of Finance, no
matter how saintly he may be.

3. There is,— although the judgment call of the gentleman disagrees— to our
view, an anticompetitive situation that is geared at…63

After these lengthy exchanges, it appears that the views of Senator Enrile were sustained
by the Senate Body because the Senate Version was passed on Third Reading without
substantially altering the periodic adjustment and reclassification provision.

It was actually at the Bicameral Conference Committee level where the Senate Version
underwent major changes. The Senate Panel prevailed upon the House Panel to abandon
the basic excise tax rate and ad valorem comparator as the means to determine the
applicable excise tax rate. Thus, the Senate’s four-tiered system was retained with minor
adjustments as to the excise tax rate per tier. However, the House Panel prevailed upon
the Senate Panel to delete the power of the DOF and BIR to periodically adjust the excise
tax rate and tax brackets, and periodically resurvey and reclassify the cigarette brands
based on the increase in the consumer price index.

In lieu thereof, the classification of existing brands based on their average net retail price
as of October 1, 1996 was "frozen" and a fixed across-the-board 12% increase in the
excise tax rate of each tier after three years from the effectivity of the Act was put in place.
There is a dearth of discussion in the deliberations as to the applicability of the freezing
mechanism to new brands after their classification is determined based on their current
net retail price. But a plain reading of the text of RA 8240, even before its amendment by
RA 9334, as well as the previously discussed deliberations would readily lead to the
conclusion that the intent of Congress was to likewise apply the freezing mechanism to
new brands. Precisely, Congress rejected the proposal to allow the DOF and BIR to
periodically adjust the excise tax rate and tax brackets as well as to periodically resurvey
and reclassify cigarettes brands which would have encompassed old and new brands
alike. Thus, it would be absurd for us to conclude that Congress intended to allow the
periodic reclassification of new brands by the BIR after their classification is determined
based on their current net retail price. We shall return to this point when we tackle the
second issue.

In explaining the changes made at the Bicameral Conference Committee level, Senator
Enrile, in his report to the Senate plenary, noted that the fixing of the excise tax rates was
done to avoid confusion.64Congressman Javier, for his part, reported to the House plenary
the reasons for fixing the excise tax rate and freezing the classification, thus:

Finally, this twin feature, Mr. Speaker, fixed specific tax rates and frozen
classification, rejects the Senate version which seeks to abdicate the power of
Congress to tax by pegging the rates as well as the classification of sin products to
consumer price index which practically vests in the Secretary of Finance the
power to fix the rates and to classify the products for tax
purposes.65 (Emphasis supplied)

Congressman Javier later added that the frozen classification was intended to give
stability to the industry as the BIR would be prevented from tinkering with the classification
since it would remain unchanged despite the increase in the net retail prices of the
previously classified brands.66 This would also assure the industry players that there
would be no new impositions as long as the law is unchanged.67

From the foregoing, it is quite evident that the classification freeze provision could hardly
be considered arbitrary, or motivated by a hostile or oppressive attitude to unduly favor
older brands over newer brands. Congress was unequivocal in its unwillingness to
delegate the power to periodically adjust the excise tax rate and tax brackets as well as to
periodically resurvey and reclassify the cigarette brands based on the increase in the
consumer price index to the DOF and the BIR. Congress doubted the constitutionality of
such delegation of power, and likewise, considered the ethical implications thereof.
Curiously, the classification freeze provision was put in place of the periodic adjustment
and reclassification provision because of the belief that the latter would foster an anti-
competitive atmosphere in the market. Yet, as it is, this same criticism is being foisted by
petitioner upon the classification freeze provision.

To our mind, the classification freeze provision was in the main the result of Congress’s
earnest efforts to improve the efficiency and effectivity of the tax administration over sin
products while trying to balance the same with other state interests. In particular, the
questioned provision addressed Congress’s administrative concerns regarding delegating
too much authority to the DOF and BIR as this will open the tax system to potential areas
for abuse and corruption. Congress may have reasonably conceived that a tax system
which would give the least amount of discretion to the tax implementers would address the
problems of tax avoidance and tax evasion.

To elaborate a little, Congress could have reasonably foreseen that, under the DOF
proposal and the Senate Version, the periodic reclassification of brands would tempt the
cigarette manufacturers to manipulate their price levels or bribe the tax implementers in
order to allow their brands to be classified at a lower tax bracket even if their net retail
prices have already migrated to a higher tax bracket after the adjustment of the tax
brackets to the increase in the consumer price index. Presumably, this could be done
when a resurvey and reclassification is forthcoming. As briefly touched upon in the
Congressional deliberations, the difference of the excise tax rate between the medium-
priced and the high-priced tax brackets under RA 8240, prior to its amendment, was
P3.36. For a moderately popular brand which sells around 100 million packs per year, this
easily translates to P336,000,000.68 The incentive for tax avoidance, if not outright tax
evasion, would clearly be present. Then again, the tax implementers may use the power
to periodically adjust the tax rate and reclassify the brands as a tool to unduly oppress the
taxpayer in order for the government to achieve its revenue targets for a given year.

Thus, Congress sought to, among others, simplify the whole tax system for sin products to
remove these potential areas of abuse and corruption from both the side of the taxpayer
and the government. Without doubt, the classification freeze provision was an integral part
of this overall plan. This is in line with one of the avowed objectives of the assailed law "to
simplify the tax administration and compliance with the tax laws that are about to unfold in
order to minimize losses arising from inefficiencies and tax avoidance scheme, if not
outright tax evasion."69 RA 9334 did not alter this classification freeze provision of RA
8240. On the contrary, Congress affirmed this freezing mechanism by clarifying the
wording of the law. We can thus reasonably conclude, as the deliberations on RA 9334
readily show, that the administrative concerns in tax administration, which moved
Congress to enact the classification freeze provision in RA 8240, were merely continued
by RA 9334. Indeed, administrative concerns may provide a legitimate, rational basis for
legislative classification.70 In the case at bar, these administrative concerns in the
measurement and collection of excise taxes on sin products are readily apparent as afore-
discussed.

Aside from the major concern regarding the elimination of potential areas for abuse and
corruption from the tax administration of sin products, the legislative deliberations also
show that the classification freeze provision was intended to generate buoyant and stable
revenues for government. With the frozen tax classifications, the revenue inflow would
remain stable and the government would be able to predict with a greater degree of
certainty the amount of taxes that a cigarette manufacturer would pay given the trend in its
sales volume over time. The reason for this is that the previously classified cigarette
brands would be prevented from moving either upward or downward their tax brackets
despite the changes in their net retail prices in the future and, as a result, the amount of
taxes due from them would remain predictable. The classification freeze provision would,
thus, aid in the revenue planning of the government.71

All in all, the classification freeze provision addressed Congress’s administrative concerns
in the simplification of tax administration of sin products, elimination of potential areas for
abuse and corruption in tax collection, buoyant and stable revenue generation, and ease
of projection of revenues. Consequently, there can be no denial of the equal protection of
the laws since the rational-basis test is amply satisfied.
Going now to the contention of petitioner that the classification freeze provision unduly
favors older brands over newer brands, we must first contextualize the basis of this claim.
As previously discussed, the evidence presented by the petitioner merely showed that in
2004, Marlboro and Philip Morris, on the one hand, and Lucky Strike, on the other, would
have been taxed at the same rate had the classification freeze provision been not in place.
But due to the operation of the classification freeze provision, Lucky Strike was taxed
higher. From here, petitioner generalizes that this differential tax treatment arising from
the classification freeze provision adversely impacts the fairness of the playing field in the
industry, particularly, between older and newer brands. Thus, it is virtually impossible for
new brands to enter the market.

Petitioner did not, however, clearly demonstrate the exact extent of such impact. It has not
been shown that the net retail prices of other older brands previously classified under this
classification system have already pierced their tax brackets, and, if so, how this has
affected the overall competition in the market. Further, it does not necessarily follow that
newer brands cannot compete against older brands because price is not the only factor in
the market as there are other factors like consumer preference, brand loyalty, etc. In other
words, even if the newer brands are priced higher due to the differential tax treatment, it
does not mean that they cannot compete in the market especially since cigarettes contain
addictive ingredients so that a consumer may be willing to pay a higher price for a
particular brand solely due to its unique formulation. It may also be noted that in 2003, the
BIR surveyed 29 new brands72 that were introduced in the market after the effectivity of
RA 8240 on January 1, 1997, thus negating the sweeping generalization of petitioner that
the classification freeze provision has become an insurmountable barrier to the entry of
new brands. Verily, where there is a claim of breach of the due process and equal
protection clauses, considering that they are not fixed rules but rather broad standards,
there is a need for proof of such persuasive character as would lead to such a conclusion.
Absent such a showing, the presumption of validity must prevail.73

Be that as it may, petitioner’s evidence does suggest that, at least in 2004, Philip Morris
and Marlboro, older brands, would have been taxed at the same rate as Lucky Strike, a
newer brand, due to certain conditions (i.e., the increase of the older brands’ net retail
prices beyond the tax bracket to which they were previously classified after the lapse of
some time) were it not for the classification freeze provision. It may be conceded that this
has adversely affected, to a certain extent, the ability of petitioner to competitively price its
newer brands vis-à-vis the subject older brands. Thus, to a limited extent, the assailed law
seems to derogate one of its avowed objectives, i.e. promoting fair competition among the
players in the industry. Yet, will this occurrence, by itself, render the assailed law
unconstitutional on equal protection grounds?

We answer in the negative.

Whether Congress acted improvidently in derogating, to a limited extent, the state’s

interest in promoting fair competition among the players in the industry, while pursuing
other state interests regarding the simplification of tax administration of sin products,
elimination of potential areas for abuse and corruption in tax collection, buoyant and stable
revenue generation, and ease of projection of revenues through the classification freeze
provision, and whether the questioned provision is the best means to achieve these state
interests, necessarily go into the wisdom of the assailed law which we cannot inquire into,
much less overrule. The classification freeze provision has not been shown to be
precipitated by a veiled attempt, or hostile attitude on the part of Congress to unduly favor
older brands over newer brands. On the contrary, we must reasonably assume, owing to
the respect due a co-equal branch of government and as revealed by the Congressional
deliberations, that the enactment of the questioned provision was impelled by an earnest
desire to improve the efficiency and effectivity of the tax administration of sin products. For
as long as the legislative classification is rationally related to furthering some legitimate
state interest, as here, the rational-basis test is satisfied and the constitutional challenge is
perfunctorily defeated.

We do not sit in judgment as a supra-legislature to decide, after a law is passed by

Congress, which state interest is superior over another, or which method is better suited to
achieve one, some or all of the state’s interests, or what these interests should be in the
first place. This policy-determining power, by constitutional fiat, belongs to Congress as it
is its function to determine and balance these interests or choose which ones to pursue.
Time and again we have ruled that the judiciary does not settle policy issues. The Court
can only declare what the law is and not what the law should be. Under our system of
government, policy issues are within the domain of the political branches of government
and of the people themselves as the repository of all state power.74 Thus, the legislative
classification under the classification freeze provision, after having been shown to be
rationally related to achieve certain legitimate state interests and done in good faith, must,
perforce, end our inquiry.

Concededly, the finding that the assailed law seems to derogate, to a limited extent, one
of its avowed objectives (i.e. promoting fair competition among the players in the industry)
would suggest that, by Congress’s own standards, the current excise tax system on sin
products is imperfect. But, certainly, we cannot declare a statute unconstitutional merely
because it can be improved or that it does not tend to achieve all of its stated
objectives.75 This is especially true for tax legislation which simultaneously addresses and
impacts multiple state interests.76 Absent a clear showing of breach of constitutional
limitations, Congress, owing to its vast experience and expertise in the field of taxation,
must be given sufficient leeway to formulate and experiment with different tax systems to
address the complex issues and problems related to tax administration. Whatever
imperfections that may occur, the same should be addressed to the democratic process to
refine and evolve a taxation system which ideally will achieve most, if not all, of the state’s
objectives.

In fine, petitioner may have valid reasons to disagree with the policy decision of Congress
and the method by which the latter sought to achieve the same. But its remedy is with
Congress and not this Court. As succinctly articulated in Vance v. Bradley:77

The Constitution presumes that, absent some reason to infer antipathy, even
improvident decisions will eventually be rectified by the democratic process, and
 that judicial intervention is generally unwarranted no matter how unwisely we may
think a political branch has acted. Thus, we will not overturn such a statute unless
the varying treatment of different groups or persons is so unrelated to the
achievement of any combination of legitimate purposes that we can only conclude
that the legislature's actions were irrational.78

We now tackle the second issue.

Petitioner asserts that Revenue Regulations No. 1-97, as amended by Revenue

Regulations No. 9-2003, Revenue Regulations No. 22-2003 and Revenue Memorandum
Order No. 6-2003, are invalid insofar as they empower the BIR to reclassify or update the
classification of new brands of cigarettes based on their current net retail prices every two
years or earlier. It claims that RA 8240, even prior to its amendment by RA 9334, did not
authorize the BIR to conduct said periodic resurvey and reclassification.

The questioned provisions are found in the following sections of the assailed issuances:

(1) Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97, as amended by
Section 2 of Revenue Regulations 9-2003, viz:

For the purpose of establishing or updating the tax classification of new brands and
variant(s) thereof, their current net retail price shall be reviewed periodically through
the conduct of survey or any other appropriate activity, as mentioned above, every
two (2) years unless earlier ordered by the Commissioner. However,
notwithstanding any increase in the current net retail price, the tax classification of
such new brands shall remain in force until the same is altered or changed through
the issuance of an appropriate Revenue Regulations.

(2) Sections II(1)(b), II(4)(b), II(6), II(7), III (Large Tax Payers Assistance Division II) II(b) of
Revenue Memorandum Order No. 6-2003, insofar as pertinent to cigarettes packed by
machine, viz:

II. POLICIES AND GUIDELINES

1. The conduct of survey covered by this Order, for purposes of determining the
current retail prices of new brands of cigarettes and alcohol products introduced in
the market on or after January 1, 1997, shall be undertaken in the following
instances:

xxxx

b. For reclassification of new brands of said excisable products that were introduced
in the market after January 1, 1997.

xxxx
 4. The determination of the current retail prices of new brands of the aforesaid
excisable products shall be initiated as follows:

xxxx

b. After the lapse of the prescribed two-year period or as the Commissioner may
otherwise direct, the appropriate tax reclassification of these brands based on the
current net retail prices thereof shall be determined by a survey to be conducted
upon a written directive by the Commissioner.

For this purpose, a memorandum order to the Assistant Commissioner, Large

Taxpayers Service, Heads, Excise Tax Areas, and Regional Directors of all
Revenue Regions, except Revenue Region Nos. 4, 5, 6, 7, 8 and 9, shall be issued
by the Commissioner for the submission of the list of major supermarkets/retail
outlets where the above excisable products are being sold, as well as the list of
selected revenue officers who shall be designated to conduct the said activity(ies).

xxxx

6. The results of the survey conducted in Revenue Region Nos. 4 to 9 shall be

submitted directly to the Chief, LT Assistance Division II (LTAD II), National Office
for consolidation. On the other hand, the results of the survey conducted in Revenue
Regions other than Revenue Region Nos. 4 to 9, shall be submitted to the Office of
the Regional Director for regional consolidation. The consolidated regional survey,
together with the accomplished survey forms shall be transmitted to the Chief, LTAD
II for national consolidation within three (3) days from date of actual receipt from the
survey teams. The LTAD II shall be responsible for the evaluation and analysis of
the submitted survey forms and the preparation of the recommendation for the
updating/revision of the tax classification of each brand of cigarettes and alcohol
products. The said recommendation, duly validated by the ACIR, LTS, shall be
submitted to the Commissioner for final review within ten (10) days from the date of
actual receipt of complete reports from all the surveying Offices.

7. Upon final review by the Commissioner of the revised tax classification of the
different new brands of cigarettes and alcohol products, the appropriate revenue
regulations shall be prepared and submitted for approval by the Secretary of
Finance.

xxxx

III. PROCEDURES

xxxx

Large Taxpayers Assistance Division II

xxxx
 1. Perform the following preparatory procedures on the identification of brands to be
surveyed, supermarkets/retail outlets where the survey shall be conducted, and the
personnel selected to conduct the survey.

xxxx

b. On the tax reclassification of new brands

i. Submit a master list of registered brands covered by the survey pursuant to the
provisions of Item II.2 of this Order containing the complete description of each
brand, existing net retail price and the corresponding tax rate thereof.

ii. Submit to the ACIR, LTS, a list of major supermarkets/retail outlets within the
territorial jurisdiction of the concerned revenue regions where the survey will be
conducted to be used as basis in the issuance of Mission Orders. Ensure that the
minimum number of establishments to be surveyed, as prescribed under existing
revenue laws and regulations, is complied with. In addition, the names and
designations of revenue officers selected to conduct the survey shall be clearly
indicated opposite the names of the establishments to be surveyed.

There is merit to the contention.

In order to implement RA 8240 following its effectivity on January 1, 1997, the BIR issued
Revenue Regulations No. 1-97, dated December 13, 1996, which mandates a one-time
classification only.79 Upon their launch, new brands shall be initially taxed based on their
suggested net retail price. Thereafter, a survey shall be conducted within three (3) months
to determine their current net retail prices and, thus, fix their official tax classifications.
However, the BIR made a turnaround by issuing Revenue Regulations No. 9-2003, dated
February 17, 2003, which partly amended Revenue Regulations No. 1-97, by authorizing
the BIR to periodically reclassify new brands (i.e., every two years or earlier) based on
their current net retail prices. Thereafter, the BIR issued Revenue Memorandum Order
No. 6-2003, dated March 11, 2003, prescribing the guidelines on the implementation of
Revenue Regulations No. 9-2003. This was patent error on the part of the BIR for being
contrary to the plain text and legislative intent of RA 8240.

It is clear that the afore-quoted portions of Revenue Regulations No. 1-97, as amended by
Section 2 of Revenue Regulations 9-2003, and Revenue Memorandum Order No. 6-2003
unjustifiably emasculate the operation of Section 145 of the NIRC because they authorize
the Commissioner of Internal Revenue to update the tax classification of new brands
every two years or earlier subject only to its issuance of the appropriate Revenue
Regulations, when nowhere in Section 145 is such authority granted to the Bureau.
Unless expressly granted to the BIR, the power to reclassify cigarette brands remains a
prerogative of the legislature which cannot be usurped by the former.

More importantly, as previously discussed, the clear legislative intent was for new brands
to benefit from the same freezing mechanism accorded to Annex "D" brands. To reiterate,
in enacting RA 8240, Congress categorically rejected the DOF proposal and Senate
Version which would have empowered the DOF and BIR to periodically adjust the excise
tax rate and tax brackets, and to periodically resurvey and reclassify cigarette brands.
(This resurvey and reclassification would have naturally encompassed both old and new
brands.) It would thus, be absurd for us to conclude that Congress intended to allow the
periodic reclassification of new brands by the BIR after their classification is determined
based on their current net retail price while limiting the freezing of the classification to
Annex "D" brands. Incidentally, Senator Ralph G. Recto expressed the following views
during the deliberations on RA 9334, which later amended RA 8240:

Senator Recto: Because, like I said, when Congress agreed to adopt a specific tax
system [under R.A. 8240], when Congress did not index the brackets, and Congress
did not index the rates but only provided for a one rate increase in the year 2000, we
shifted from ad valorem which was based on value to a system of specific which is
based on volume. Congress then, in effect, determined the classification based on
the prices at that particular period of time and classified these products accordingly.

Of course, Congress then decided on what will happen to the new brands or
variants of existing brands. To favor government, a variant would be classified as
the highest rate of tax for that particular brand. In case of a new brand, Mr.
President, then the BIR should classify them. But I do not think it was the intention
of Congress then to give the BIR the authority to reclassify them every so often. I do
not think it was the intention of Congress to allow the BIR to classify a new brand
every two years, for example, because it will be arbitrary for the BIR to do so. x x
x80 (Emphasis supplied)

For these reasons, the amendments introduced by RA 9334 to RA 8240, insofar as the
freezing mechanism is concerned, must be seen merely as underscoring the legislative
intent already in place then, i.e. new brands as being covered by the freezing mechanism
after their classification based on their current net retail prices.

Unfortunately for petitioner, this result will not cause a downward reclassification of Lucky
Strike. It will be recalled that petitioner introduced Lucky Strike in June 2001. However, as
admitted by petitioner itself, the BIR did not conduct the required market survey within
three months from product launch. As a result, Lucky Strike was never classified based on
its actual current net retail price. Petitioner failed to timely seek redress to compel the BIR
to conduct the requisite market survey in order to fix the tax classification of Lucky Strike.
In the meantime, Lucky Strike was taxed based on its suggested net retail price of P9.90
per pack, which is within the high-priced tax bracket. It was only after the lapse of two
years or in 2003 that the BIR conducted a market survey which was the first time that
Lucky Strike’s actual current net retail price was surveyed and found to be from P10.34
to P11.53 per pack, which is within the premium-priced tax bracket. The case of petitioner
falls under a situation where there was no reclassification based on its current net retail
price which would have been invalid as previously explained. Thus, we cannot grant
petitioner’s prayer for a downward reclassification of Lucky Strike because it was never
reclassified by the BIR based on its actual current net retail price.
It should be noted though that on August 8, 2003, the BIR issued Revenue Regulations
No. 22-2003 which implemented the revised tax classifications of new brands based on
their current net retail prices through the market survey conducted pursuant to Revenue
Regulations No. 9-2003. Annex "A" of Revenue Regulations No. 22-2003 lists the result of
the market survey and the corresponding recommended tax classification of the new
brands therein aside from Lucky Strike. However, whether these other brands were
illegally reclassified based on their actual current net retail prices by the BIR must be
determined on a case-to-case basis because it is possible that these brands were
classified based on their actual current net retail price for the first time in the year 2003
just like Lucky Strike. Thus, we shall not make any pronouncement as to the validity of the
tax classifications of the other brands listed therein.

Finally, it must be noted that RA 9334 introduced changes in the manner by which the
current net retail price of a new brand is determined and how its classification is
permanently fixed, to wit:

New brands, as defined in the immediately following paragraph, shall initially be

classified according to their suggested net retail price.

New brands shall mean a brand registered after the date of effectivity of R.A. No.
8240 [on January 1, 1997].

Suggested net retail price shall mean the net retail price at which new brands, as
defined above, of locally manufactured or imported cigarettes are intended by the
manufacture or importer to be sold on retail in major supermarkets or retail outlets in
Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product launch, the
Bureau of Internal Revenue shall validate the suggested net retail price of the
new brand against the net retail price as defined herein and determine the
correct tax bracket under which a particular new brand of cigarette, as defined
above, shall be classified. After the end of eighteen (18) months from such
validation, the Bureau of Internal Revenue shall revalidate the initially
validated net retail price against the net retail price as of the time of
revalidation in order to finally determine the correct tax bracket under which a
particular new brand of cigarettes shall be classified; Provided however, That
brands of cigarettes introduced in the domestic market between January 1, 1997
and December 31, 2003 shall remain in the classification under which the Bureau of
Internal Revenue has determined them to belong as of December 31, 2003. Such
classification of new brands and brands introduced between January 1, 1997
and December 31, 2003 shall not be revised except by an act of
Congress. (Emphasis supplied)

Thus, Revenue Regulations No. 9-2003 and Revenue Memorandum Order No. 6-2003
should be deemed modified by the above provisions from the date of effectivity of RA
9334 on January 1, 2005.
In sum, Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97, as amended
by Section 2 of Revenue Regulations 9-2003, and Sections II(1)(b), II(4)(b), II(6), II(7), III
(Large Tax Payers Assistance Division II) II(b) of Revenue Memorandum Order No. 6-
2003, as pertinent to cigarettes packed by machine, are invalid insofar as they grant the
BIR the power to reclassify or update the classification of new brands every two years or
earlier. Further, these provisions are deemed modified upon the effectivity of RA 9334 on
January 1, 2005 insofar as the manner of determining the permanent classification of new
brands is concerned.

We now tackle the last issue.

Petitioner contends that RA 8240, as amended by RA 9334, and its implementing rules
and regulations violate the General Agreement on Tariffs and Trade (GATT) of 1947, as
amended, specifically, Paragraph 2, Article III, Part II:

2. The products of the territory of any contracting party imported into the territory of
any other contracting party shall not be subject, directly or indirectly, to internal
taxes or other internal charges of any kind in excess of those applied, directly or
indirectly, to like domestic products. Moreover, no contracting party shall otherwise
apply internal taxes or other internal charges to imported or domestic products in a
manner contrary to the principles set forth in paragraph 1.

It claims that it is the duty of this Court to correct, in favor of the GATT, whatever
inconsistency exists between the assailed law and the GATT in order to prevent triggering
the international dispute settlement mechanism under the GATT-WTO Agreement.

We disagree.

The classification freeze provision uniformly applies to all newly introduced brands in the
market, whether imported or locally manufactured. It does not purport to single out
imported cigarettes in order to unduly favor locally produced ones. Further, petitioner’s
evidence was anchored on the alleged unequal tax treatment between old and new
brands which involves a different frame of reference vis-à-vis local and imported products.
Petitioner has, therefore, failed to clearly prove its case, both factually and legally, within
the parameters of the GATT.

At any rate, even assuming arguendo that petitioner was able to prove that
the classification freeze provision violates the GATT, the outcome would still be the same.
The GATT is a treaty duly ratified by the Philippine Senate and under Article VII, Section
2181 of the Constitution, it merely acquired the status of a statute.82 Applying the basic
principles of statutory construction in case of irreconcilable conflict between statutes, RA
8240, as amended by RA 9334, would prevail over the GATT either as a later enactment
by Congress or as a special law dealing with the taxation of sin products. Thus, in Abbas
v. Commission on Elections,83 we had occasion to explain:

Petitioners premise their arguments on the assumption that the Tripoli Agreement is
part of the law of the land, being a binding international agreement. The Solicitor
 General asserts that the Tripoli Agreement is neither a binding treaty, not having
been entered into by the Republic of the Philippines with a sovereign state and
ratified according to the provisions of the 1973 or 1987 Constitutions, nor a binding
international agreement.

We find it neither necessary nor determinative of the case to rule on the nature of
the Tripoli Agreement and its binding effect on the Philippine Government whether
under public international or internal Philippine law. In the first place, it is now the
Constitution itself that provides for the creation of an autonomous region in Muslim
Mindanao. The standard for any inquiry into the validity of R.A. No. 6734 would
therefore be what is so provided in the Constitution. Thus, any conflict between the
provisions of R.A. No. 6734 and the provisions of the Tripoli Agreement will not have
the effect of enjoining the implementation of the Organic Act. Assuming for the sake
of argument that the Tripoli Agreement is a binding treaty or international
agreement, it would then constitute part of the law of the land. But as internal law it
would not be superior to R.A. No. 6734, an enactment of the Congress of the
Philippines, rather it would be in the same class as the latter [SALONGA, PUBLIC
INTERNATIONAL LAW 320 (4th ed., 1974), citing Head Money Cases, 112 U.S.
580 (1884) and Foster v. Nelson, 2 Pet. 253 (1829)]. Thus, if at all, R.A. No. 6734
would be amendatory of the Tripoli Agreement, being a subsequent law. Only a
determination by this Court that R.A. No. 6734 contravenes the Constitution would
result in the granting of the reliefs sought. (Emphasis supplied)

WHEREFORE, the petition is PARTIALLY GRANTED and the decision of the Regional
Trial Court of Makati, Branch 61, in Civil Case No. 03-1032,
is AFFIRMED with MODIFICATION. As modified, this Court declares that:

(1) Section 145 of the NIRC, as amended by Republic Act No. 9334,
is CONSTITUTIONAL; and that

(2) Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97, as amended by
Section 2 of Revenue Regulations 9-2003, and Sections II(1)(b), II(4)(b), II(6), II(7), III
(Large Tax Payers Assistance Division II) II(b) of Revenue Memorandum Order No. 6-
2003, insofar as pertinent to cigarettes packed by machine, are INVALID insofar as they
grant the BIR the power to reclassify or update the classification of new brands every two
years or earlier.

SO ORDERED.

British American Tobacco v. Camacho (MR)

RESOLUTION
YNARES-SANTIAGO, J.:

On August 20, 2008, the Court rendered a Decision partially granting the petition in this
case, viz:

WHEREFORE, the petition is PARTIALLY GRANTED and the decision of the

Regional Trial Court of Makati, Branch 61, in Civil Case No. 03-1032,
is AFFIRMED with MODIFICATION. As modified, this Court declares that:

(1) Section 145 of the NIRC, as amended by Republic Act No. 9334,
is CONSTITUTIONAL; and that

(2) Section 4(B)(e)(c), 2nd paragraph of Revenue Regulations No. 1-97, as amended by
Section 2 of Revenue Regulations 9-2003, and Sections II(1)(b), II(4)(b), II(6), II(7), III (Large
Tax Payers Assistance Division II) II(b) of Revenue Memorandum Order No. 6-2003, insofar as
pertinent to cigarettes packed by machine, are INVALID insofar as they grant the BIR the power
to reclassify or update the classification of new brands every two years or earlier.

SO ORDERED.

In its Motion for Reconsideration, petitioner insists that the assailed provisions (1) violate
the equal protection and uniformity of taxation clauses of the Constitution, (2) contravene Section
19,[1] Article XII of the Constitution on unfair competition, and (3) infringe the constitutional
provisions on regressive and inequitable taxation. Petitioner further argues that assuming the
assailed provisions are constitutional, petitioner is entitled to a downward reclassification of
Lucky Strike from the premium-priced to the high-priced tax bracket.

The Court is not persuaded.

The assailed law does not violate the equal protection

and uniformity of taxation clauses.

Petitioner argues that the classification freeze provision violates the equal protection and
uniformity of taxation clauses because Annex D brands are taxed based on their 1996 net retail
prices while new brands are taxed based on their present day net retail prices. Citing Ormoc Sugar
Co. v. Treasurer of Ormoc City,[2] petitioner asserts that the assailed provisions accord a special
or privileged status to Annex D brands while at the same time discriminate against other brands.

These contentions are without merit and a rehash of petitioners previous arguments before this
Court. As held in the assailed Decision, the instant case neither involves a suspect classification
nor impinges on a fundamental right. Consequently, the rational basis test was properly applied
to gauge the constitutionality of the assailed law in the face of an equal protection challenge. It
has been held that in the areas of social and economic policy, a statutory classification that neither
proceeds along suspect lines nor infringes constitutional rights must be upheld against equal
protection challenge if there is any reasonably conceivable state of facts that could provide a
rational basis for the classification.[3] Under the rational basis test, it is sufficient that the
legislative classification is rationally related to achieving some legitimate State interest. As the
Court ruled in the assailed Decision, viz:

A legislative classification that is reasonable does not offend the constitutional guaranty of
the equal protection of the laws. The classification is considered valid and reasonable provided
that: (1) it rests on substantial distinctions; (2) it is germane to the purpose of the law; (3) it applies,
all things being equal, to both present and future conditions; and (4) it applies equally to all those
belonging to the same class.

The first, third and fourth requisites are satisfied. The classification freeze provision was
inserted in the law for reasons of practicality and expediency. That is, since a new brand was not
yet in existence at the time of the passage of RA 8240, then Congress needed a uniform mechanism
to fix the tax bracket of a new brand. The current net retail price, similar to what was used to
classify the brands under Annex D as of October 1, 1996, was thus the logical and practical
choice. Further, with the amendments introduced by RA 9334, the freezing of the tax
classifications now expressly applies not just to Annex D brands but to newer brands introduced
after the effectivity of RA 8240 on January 1, 1997 and any new brand that will be introduced in
the future. (However, as will be discussed later, the intent to apply the freezing mechanism to
newer brands was already in place even prior to the amendments introduced by RA 9334 to RA
8240.) This does not explain, however, why the classification is frozen after its determination
based on current net retail price and how this is germane to the purpose of the assailed law. An
examination of the legislative history of RA 8240 provides interesting answers to this question.

xxxx

From the foregoing, it is quite evident that the classification freeze provision could hardly
be considered arbitrary, or motivated by a hostile or oppressive attitude to unduly favor older
brands over newer brands. Congress was unequivocal in its unwillingness to delegate the power to
periodically adjust the excise tax rate and tax brackets as well as to periodically resurvey and
reclassify the cigarette brands based on the increase in the consumer price index to the DOF and
the BIR. Congress doubted the constitutionality of such delegation of power, and likewise,
considered the ethical implications thereof. Curiously, the classification freeze provision was put
in place of the periodic adjustment and reclassification provision because of the belief that the
latter would foster an anti-competitive atmosphere in the market. Yet, as it is, this same criticism
is being foisted by petitioner upon the classification freeze provision.

To our mind, the classification freeze provision was in the main the result of Congresss
earnest efforts to improve the efficiency and effectivity of the tax administration over sin products
while trying to balance the same with other State interests. In particular, the questioned provision
addressed Congresss administrative concerns regarding delegating too much authority to the DOF
and BIR as this will open the tax system to potential areas for abuse and corruption. Congress may
have reasonably conceived that a tax system which would give the least amount of discretion to
the tax implementers would address the problems of tax avoidance and tax evasion.

To elaborate a little, Congress could have reasonably foreseen that, under the DOF proposal
and the Senate Version, the periodic reclassification of brands would tempt the cigarette
manufacturers to manipulate their price levels or bribe the tax implementers in order to allow their
brands to be classified at a lower tax bracket even if their net retail prices have already migrated
 to a higher tax bracket after the adjustment of the tax brackets to the increase in the consumer price
index. Presumably, this could be done when a resurvey and reclassification is forthcoming. As
briefly touched upon in the Congressional deliberations, the difference of the excise tax rate
between the medium-priced and the high-priced tax brackets under RA 8240, prior to its
amendment, was P3.36. For a moderately popular brand which sells around 100 million packs per
year, this easily translates to P336,000,000. The incentive for tax avoidance, if not outright tax
evasion, would clearly be present. Then again, the tax implementers may use the power to
periodically adjust the tax rate and reclassify the brands as a tool to unduly oppress the taxpayer
in order for the government to achieve its revenue targets for a given year.

Thus, Congress sought to, among others, simplify the whole tax system for sin products to
remove these potential areas of abuse and corruption from both the side of the taxpayer and the
government. Without doubt, the classification freeze provision was an integral part of this overall
plan. This is in line with one of the avowed objectives of the assailed law to simplify the tax
administration and compliance with the tax laws that are about to unfold in order to minimize
losses arising from inefficiencies and tax avoidance scheme, if not outright tax evasion. RA 9334
did not alter this classification freeze provision of RA 8240. On the contrary, Congress affirmed
this freezing mechanism by clarifying the wording of the law. We can thus reasonably conclude,
as the deliberations on RA 9334 readily show, that the administrative concerns in tax
administration, which moved Congress to enact the classification freeze provision in RA 8240,
were merely continued by RA 9334. Indeed, administrative concerns may provide a legitimate,
rational basis for legislative classification. In the case at bar, these administrative concerns in the
measurement and collection of excise taxes on sin products are readily apparent as afore-discussed.

Aside from the major concern regarding the elimination of potential areas for abuse and
corruption from the tax administration of sin products, the legislative deliberations also show that
the classification freeze provision was intended to generate buoyant and stable revenues for
government. With the frozen tax classifications, the revenue inflow would remain stable and the
government would be able to predict with a greater degree of certainty the amount of taxes that a
cigarette manufacturer would pay given the trend in its sales volume over time. The reason for this
is that the previously classified cigarette brands would be prevented from moving either upward
or downward their tax brackets despite the changes in their net retail prices in the future and, as a
result, the amount of taxes due from them would remain predictable. The classification freeze
provision would, thus, aid in the revenue planning of the government.

All in all, the classification freeze provision addressed Congresss administrative concerns
in the simplification of tax administration of sin products, elimination of potential areas for abuse
and corruption in tax collection, buoyant and stable revenue generation, and ease of projection of
revenues. Consequently, there can be no denial of the equal protection of the laws since the
rational-basis test is amply satisfied.

Moreover, petitioners contention that the assailed provisions violate the uniformity of
taxation clause is similarly unavailing. In Churchill v. Concepcion,[4] we explained that a tax is
uniform when it operates with the same force and effect in every place where the subject of it is
found.[5] It does not signify an intrinsic but simply a geographical uniformity.[6] A levy of tax is
not unconstitutional because it is not intrinsically equal and uniform in its operation. [7] The
uniformity rule does not prohibit classification for purposes of taxation.[8] As ruled in Tan v. Del
Rosario, Jr.:[9]
 Uniformity of taxation, like the kindred concept of equal protection, merely requires that
all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and
liabilities (citations omitted). Uniformity does not forfend classification as long as: (1) the
standards that are used therefor are substantial and not arbitrary, (2) the categorization is germane
to achieve the legislative purpose, (3) the law applies, all things being equal, to both present and
future conditions, and (4) the classification applies equally well to all those belonging to the same
class (citations omitted).[10]

In the instant case, there is no question that the classification freeze provision meets the
geographical uniformity requirement because the assailed law applies to all cigarette brands in
the Philippines. And, for reasons already adverted to in our August 20, 2008 Decision, the above
four-fold test has been met in the present case.

Petitioners reliance on Ormoc Sugar Co. is misplaced. In said case, the controverted
municipal ordinance specifically named and taxed only the Ormoc Sugar Company, and excluded
any subsequently established sugar central from its coverage. Thus, the ordinance was found
unconstitutional on equal protection grounds because its terms do not apply to future conditions
as well. This is not the case here. The classification freeze provision uniformly applies to all
cigarette brands whether existing or to be introduced in the market at some future time. It does
not purport to exempt any brand from its operation nor single out a brand for the purpose of
imposition of excise taxes.

At any rate, petitioners real disagreement lies with the legitimate State interests. Although
it concedes that the Court utilized the rationality test and that the classification freeze
provision was necessitated by several legitimate State interests, however, it refuses to accept the
justifications given by Congress for the classification freeze provision. As we elucidated in our
August 20, 2008 Decision, this line of argumentation revolves around the wisdom and expediency
of the assailed law which we cannot inquire into, much less overrule. Equal protection is not a
license for courts to judge the wisdom, fairness, or logic of legislative choices. [11] We reiterate,
therefore, that petitioners remedy is with Congress and not this Court.
The assailed provisions do not violate the constitutional
prohibition on unfair competition.

Petitioner asserts that the Court erroneously applied the rational basis test allegedly because
this test does not apply in a constitutional challenge based on a violation of Section 19, Article
XII of the Constitution on unfair competition. Citing Tatad v. Secretary of the Department of
Energy,[12] it argues that the classification freeze provision gives the brands under Annex D a
decisive edge because it constitutes a substantial barrier to the entry of prospective players; that
the Annex D provision is no different from the 4% tariff differential which we invalidated
in Tatad; that some of the new brands, like Astro, Memphis, Capri, L&M, Bowling Green,
Forbes, and Canon, which were introduced into the market after the effectivity of the assailed law
on January 1, 1997, were killed by Annex D brands because the former brands were reclassified
by the BIR to higher tax brackets; that the finding that price is not the only factor in the market
as there are other factors like consumer preference, active ingredients, etc. is contrary to the
evidence presented and the deliberations in Congress; that the classification freeze provision will
encourage predatory pricing in contravention of the constitutional prohibition on unfair
competition; and that the cumulative effect of the operation of the classification freeze
provision is to perpetuate the oligopoly of intervenors Philip Morris and Fortune Tobacco in
contravention of the constitutional edict for the State to regulate or prohibit monopolies, and to
disallow combinations in restraint of trade and unfair competition.

The argument lacks merit. While previously arguing that the rational basis test was not satisfied,
petitioner now asserts that this test does not apply in this case and that the proper matrix to
evaluate the constitutionality of the assailed law is the prohibition on unfair competition under
Section 19, Article XII of the Constitution. It should be noted that during the trial below,
petitioner did not invoke said constitutional provision as it relied solely on the alleged violation
of the equal protection and uniformity of taxation clauses. Well-settled is the rule that points of
law, theories, issues and arguments not adequately brought to the attention of the lower court will
not be ordinarily considered by a reviewing court as they cannot be raised for the first time on
appeal.[13] At any rate, even if we were to relax this rule, as previously stated, the evidence
presented before the trial court is insufficient to establish the alleged violation of the constitutional
proscription against unfair competition.

Indeed, in Tatad we ruled that a law which imposes substantial barriers to the entry and exit of
new players in our downstream oil industry may be struck down for being violative of Section
19, Article XII of the Constitution.[14]However, we went on to say in that case that if they are
insignificant impediments, they need not be stricken down.[15] As we stated in our August 20,
2008 Decision, petitioner failed to convincingly prove that there is a substantial barrier to the
entry of new brands in the cigarette market due to the classification freeze provision. We further
observed that several new brands were introduced in the market after the assailed law went into
effect thus negating petitioners sweeping claim that the classification freeze provision is an
insurmountable barrier to the entry of new brands. We also noted that price is not the only factor
affecting competition in the market for there are other factors such as taste, brand loyalty, etc.

We see no reason to depart from these findings for the following reasons:

First, petitioner did not lay down the factual foundations, as supported by verifiable
documentary proof, which would establish, among others, the cigarette brands in competition
with each other; the current net retail prices of Annex D brands, as determined through a market
survey, to provide a sufficient point of comparison with those covered by the BIRs market survey
of new brands; and the causal connection with as well as the extent of the impact on the
competition in the cigarette market of the classification freeze provision. Other than petitioners
self-serving allegations and testimonial evidence, no adequate documentary evidence was
presented to substantiate its claims. Absent ample documentary proof, we cannot accept
petitioners claim that the classification freeze provision is an insurmountable barrier to the entry
of new players.

Second, we cannot lend credence to petitioners claim that it cannot produce cigarettes that
can compete with Marlboro and Philip Morris in the high-priced tax bracket. Except for its self-
serving testimonial evidence, no sufficient documentary evidence was presented to substantiate
this claim. The current net retail price, which is the basis for determining the tax bracket of a
cigarette brand, more or less consists of the costs of raw materials, labor, advertising and profit
margin. To a large extent, these factors are controllable by the manufacturer, as such, the decision
to enter which tax bracket will depend on the pricing strategy adopted by the individual
manufacturer.The same holds true for its claims that other new brands, like Astro, Memphis,
Capri, L&M, Bowling Green, Forbes, and Canon, were killed by Annex D brands due to the
effects of the operation of the classification freeze provision over time. The evidence that
petitioner presented before the trial court failed to substantiate the basis for these claims.

Essentially, petitioner would want us to accept its conclusions of law without first laying
down the factual foundations of its arguments. This Court, which is not a trier of facts, cannot
take judicial notice of the factual premises of these arguments as petitioner now seems to
suggest. The evidence should have been presented before the trial court to allow it to examine
and determine for itself whether such factual premises, as supported by sufficient documentary
evidence, provide reasonable basis for petitioners conclusion that there arose an unconstitutional
unfair competition due to the operation of the classification freeze provision. Petitioner should be
reminded that it appealed this case from the adverse ruling of the trial court directly to this Court
on pure questions of law instead of resorting to the Court of Appeals.

Third, Tatad is not applicable to the instant case. In Tatad, we found that the 4% tariff
differential between imported crude oil and imported refined petroleum products erects a high
barrier to the entry of new players because (1) it imposes an undue burden on new players to
spend billions of pesos to build refineries in order to compete with the old players, and (2) new
players, who opt not to build refineries, suffer from the huge disadvantage of increasing their
product cost by 4%.[16] The tariff was imposed on the raw materials uniformly used by the players
in the oil industry. Thus, the adverse effect on competition arising from this discriminatory
treatment was readily apparent. In contrast, the excise tax under the assailed law is imposed based
on the current net retail price of a cigarette brand. As previously explained, the current net retail
price is determined by the pricing strategy of the manufacturer. This Court cannot simply
speculate that the reason why a new brand cannot enter a specific tax bracket and compete with
the brands therein was because of the classification freeze provision, rather than the
manufacturers own pricing decision or some other factor solely attributable to the
manufacturer. Again, the burden of proof in this regard is on petitioner which it failed to muster.

Fourth, the finding in our August 20, 2008 Decision that price is not the only factor which
affects consumer behavior in the cigarette market is based on petitioners own evidence. On cross-
examination, petitioners witness admitted that notwithstanding the change in price, a cigarette
smoker may prefer the old brand because of its addictive formulation.[17] As a result, even if we
were to assume that the classification freeze provision distorts the pricing scheme of the market
players, it is not clear whether a substantial barrier to the entry of new players would thereby be
created because of these other factors affecting consumer behavior.
 Last, the claim that the assailed provisions encourage predatory pricing was never raised
nor substantiated before the trial court. It is merely an afterthought and cannot be given weight.

In sum, the totality of the evidence presented by petitioner before the trial court failed to
convincingly establish the alleged violation of the constitutional prohibition on unfair
competition. It is a basic postulate that the one who challenges the constitutionality of a law
carries the heavy burden of proof for laws enjoy a strong presumption of constitutionality as it is
an act of a co-equal branch of government. Petitioner failed to carry this burden.

The assailed law does not transgress the constitutional

provisions on regressive and inequitable taxation.

Petitioner argues that the classification freeze provision is a form of regressive and
inequitable tax system which is proscribed under Article VI, Section 28(1) [18] of the
Constitution. It claims that people in equal positions should be treated alike. The use of different
tax bases for brands under Annex D vis--vis new brands is discriminatory, and thus, iniquitous.
Petitioner further posits that the classification freeze provision is regressive in character. It asserts
that the harmonization of revenue flow projections and ease of tax administration cannot override
this constitutional command.

We note that the points raised by petitioner with respect to alleged inequitable taxation
perpetuated by the classification freeze provision are a mere reformulation of its equal protection
challenge. As stated earlier, the assailed provisions do not infringe the equal protection clause
because the four-fold test is satisfied. In particular, the classification freeze provision has been
found to rationally further legitimate State interests consistent with rationality review. Petitioners
repackaged argument has, therefore, no merit.

Anent the issue of regressivity, it may be conceded that the assailed law imposes an excise
tax on cigarettes which is a form of indirect tax, and thus, regressive in character. While there
was an attempt to make the imposition of the excise tax more equitable by creating a four-tiered
taxation system where higher priced cigarettes are taxed at a higher rate, still, every consumer,
whether rich or poor, of a cigarette brand within a specific tax bracket pays the same tax rate. To
this extent, the tax does not take into account the persons ability to pay. Nevertheless, this does
not mean that the assailed law may be declared unconstitutional for being regressive in character
because the Constitution does not prohibit the imposition of indirect taxes but merely provides
that Congress shall evolve a progressive system of taxation. As we explained in Tolentino v.
Secretary of Finance:[19]

[R]egressivity is not a negative standard for courts to enforce. What Congress is required by the
Constitution to do is to "evolve a progressive system of taxation." This is a directive to Congress,
just like the directive to it to give priority to the enactment of laws for the enhancement of human
dignity and the reduction of social, economic and political inequalities [Art. XIII, Section 1] or for
the promotion of the right to "quality education" [Art. XIV, Section 1]. These provisions are put
in the Constitution as moral incentives to legislation, not as judicially enforceable rights.[20]
Petitioner is not entitled to a downward reclassification
of Lucky Strike.

Petitioner alleges that assuming the assailed law is constitutional, its Lucky Strike brand
should be reclassified from the premium-priced to the high-priced tax bracket. Relying on BIR
Ruling No. 018-2001 dated May 10, 2001, it claims that it timely sought redress from the BIR to
have the market survey conducted within three months from product launch, as provided for under
Section 4(B)[21] of Revenue Regulations No. 1-97, in order to determine the actual current net
retail price of Lucky Strike, and thus, fix its tax classification. Further, the upward reclassification
of Lucky Strike amounts to deprivation of property right without due process of law. The conduct
of the market survey after two years from product launch constitutes gross neglect on the part of
the BIR. Consequently, for failure of the BIR to conduct a timely market survey, Lucky Strikes
classification based on its suggested gross retail price should be deemed its official tax
classification. Finally, petitioner asserts that had the market survey been timely conducted
sometime in 2001, the current net retail price of Lucky Strike would have been found to be under
the high-priced tax bracket.

These contentions are untenable and misleading.

First, BIR Ruling No. 018-2001 was requested by petitioner for the purpose of fixing Lucky
Strikes initial tax classification based on its suggested gross retail price relative to its planned
introduction of Lucky Strike in the market sometime in 2001 and not for the conduct of the market
survey within three months from product launch. In fact, the said Ruling contained an express
reservation that the tax classification of Lucky Strike set therein is without prejudice, however,
to the subsequent conduct of a survey x x x in order to determine if the actual gross retail price
thereof is consistent with [petitioners] suggested gross retail price.[22] In short, petitioner
acknowledged that the initial tax classification of Lucky Strike may be modified depending on
the outcome of the survey which will determine the actual current net retail price of Lucky Strike
in the market.

Second, there was no upward reclassification of Lucky Strike because it was taxed based
on its suggested gross retail price from the time of its introduction in the market in 2001 until the
BIR market survey in 2003. We reiterate that Lucky Strikes actual current net retail price was
surveyed for the first time in 2003 and was found to be from P10.34 to P11.53 per pack, which is
within the premium-priced tax bracket. There was, thus, no prohibited upward reclassification of
Lucky Strike by the BIR based on its current net retail price.

Third, the failure of the BIR to conduct the market survey within the three-month period
under the revenue regulations then in force can in no way make the initial tax classification of
Lucky Strike based on its suggested gross retail price permanent. Otherwise, this would
contravene the clear mandate of the law which provides that the basis for the tax classification of
a new brand shall be the current net retail price and not the suggested gross retail price. It is a
basic principle of law that the State cannot be estopped by the mistakes of its agents.
 Last, the issue of timeliness of the market survey was never raised before the trial court
because petitioners theory of the case was wholly anchored on the alleged unconstitutionality of
the classification freeze provision. As a consequence, no documentary evidence as to the actual
net retail price of Lucky Strike in 2001, based on a market survey at least comparable to the one
mandated by law, was presented before the trial court. Evidently, it cannot be assumed that had
the BIR conducted the market survey within three months from its product launch sometime in
2001, Lucky Strike would have been found to fall under the high-priced tax bracket and not the
premium-priced tax bracket. To so hold would run roughshod over the States right to due
process. Verily, petitioner prosecuted its case before the trial court solely on the theory that the
assailed law is unconstitutional instead of merely challenging the timeliness of the market
survey. The rule is that a party is bound by the theory he adopts and by the cause of action he
stands on. He cannot be permitted after having lost thereon to repudiate his theory and cause of
action, and thereafter, adopt another and seek to re-litigate the matter anew either in the same
forum or on appeal.[23] Having pursued one theory and lost thereon, petitioner may no longer
pursue another inconsistent theory without thereby trifling with court processes and burdening
the courts with endless litigation.

WHEREFORE, the motion for reconsideration is DENIED.

P. Administrative and preliminary Investigation – Ombudsman