Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. 179848 November 27, 2008

NESTOR A. JACOT, petitioner, vs. ROGEN T. DAL and COMMISSION ON ELECTIONS, respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Petitioner Nestor A. Jacot assails the Resolution1 dated 28 September 2007

of the Commission on Elections (COMELEC) En Banc in SPA No. 07-361, affirming the Resolution dated 12 June 2007 of the COMELEC Second Division

2 disqualifying him from running for the position of Vice-Mayor of

Catarman, Camiguin, in the 14 May 2007 National and Local Elections, on the ground that he failed to make a personal renouncement of his United States (US) citizenship.

Petitioner was a natural born citizen of the Philippines, who became a naturalized citizen of the US on 13 December 1989.

3

Petitioner sought to reacquire his Philippine citizenship under Republic Act No. 9225, otherwise known as the Citizenship Retention and Re-Acquisition Act. He filed a request for the administration of his Oath of Allegiance to the Republic of the Philippines with the Philippine Consulate General (PCG) of Los Angeles, California. The Los Angeles PCG issued on 19 June 2006 an Order of Approval

4 of petitioner’s request, and on the same day, petitioner

took his Oath of Allegiance to the Republic of the Philippines before Vice Consul Edward C. Yulo.

5 On 27 September 2006, the Bureau of Immigration

issued Identification Certificate No. 06-12019 recognizing petitioner as a citizen of the Philippines.

6

Six months after, on 26 March 2007, petitioner filed his Certificate of Candidacy for the Position of Vice-Mayor of the Municipality of Catarman, Camiguin.

7

On 2 May 2007, respondent Rogen T. Dal filed a Petition for Disqualification

8 before the COMELEC Provincial Office in Camiguin against

petitioner, arguing that the latter failed to renounce his US citizenship, as required under Section 5(2) of Republic Act No. 9225, which reads as follows:

Section 5. Civil and Political Rights and Liabilities.–Those who retain or reacquire Philippine citizenship under this Act shall enjoy full civil and political rights and be subject to all attendant liabilities and responsibilities under existing laws of the Philippines and the following conditions:

x x x x

(2) Those seeking elective public office in the Philippines shall meet the qualifications for holding such public office as required by the Constitution and existing laws and, at the time of the filing of the certificate of candidacy, make a personal and sworn renunciation of any and all foreign citizenship before any public officer authorized to administer an oath.

In his Answer9 dated 6 May 2007 and Position Paper

10 dated 8 May 2007,

petitioner countered that his Oath of Allegiance to the Republic of the Philippines made before the Los Angeles PCG and the oath contained in his Certificate of Candidacy operated as an effective renunciation of his foreign citizenship.

In the meantime, the 14 May 2007 National and Local Elections were held. Petitioner garnered the highest number of votes for the position of Vice Mayor.

On 12 June 2007, the COMELEC Second Division finally issued its Resolution

11 disqualifying the petitioner from running for the position of Vice-

Mayor of Catarman, Camiguin, for failure to make the requisite renunciation of his US citizenship. The COMELEC Second Division explained that the reacquisition of Philippine citizenship under Republic Act No. 9225 does not automatically bestow upon any person the privilege to run for any elective public office. It additionally ruled that the filing of a Certificate of Candidacy cannot be considered as a renunciation of foreign citizenship. The COMELEC Second Division did not consider Valles v. COMELEC

12 and Mercado v.

Manzano13

applicable to the instant case, since Valles and Mercado were dual citizens since birth, unlike the petitioner who lost his Filipino citizenship by means of naturalization. The COMELEC, thus, decreed in the aforementioned Resolution that:

ACCORDINGLY, NESTOR ARES JACOT is DISQUALIFIED to run for the position of Vice-Mayor of Catarman, Camiguin for the May 14, 2007 National and Local Elections. If proclaimed, respondent cannot thus assume the Office of Vice-Mayor of said municipality by virtue of such disqualification.

14

Petitioner filed a Motion for Reconsideration on 29 June 2007 reiterating his position that his Oath of Allegiance to the Republic of the Philippines before the Los Angeles PCG and his oath in his Certificate of Candidacy sufficed as an effective renunciation of his US citizenship. Attached to the said Motion was an "Oath of Renunciation of Allegiance to the United States and Renunciation of Any and All Foreign Citizenship" dated 27 June 2007, wherein petitioner explicitly renounced his US citizenship.

15 The COMELEC en

banc dismissed petitioner’s Motion in a Resolution16

dated 28 September 2007 for lack of merit.

Petitioner sought remedy from this Court via the present Special Civil Action for Certiorari under Rule 65 of the Revised Rules of Court, where he presented for the first time an "Affidavit of Renunciation of Allegiance to the United States and Any and All Foreign Citizenship"

17 dated 7 February 2007.

He avers that he executed an act of renunciation of his US citizenship, separate from the Oath of Allegiance to the Republic of the Philippines he took before the Los Angeles PCG and his filing of his Certificate of Candidacy, thereby changing his theory of the case during the appeal. He attributes the delay in the presentation of the affidavit to his former counsel, Atty. Marciano Aparte, who allegedly advised him that said piece of evidence was unnecessary but who, nevertheless, made him execute an identical document entitled "Oath of Renunciation of Allegiance to the United States and Renunciation of Any and All Foreign Citizenship" on 27 June 2007 after he had already filed his Certificate of Candidacy.

18

Petitioner raises the following issues for resolution of this Court:

I

WHETHER OR NOT PUBLIC RESPONDENT EXERCISED GRAVE ABUSE OF DISCRETION WHEN IT HELD THAT PETITIONER FAILED TO COMPLY WITH THE PROVISIONS OF R.A. 9225, OTHERWISE KNOWN AS THE "CITIZENSHIP RETENTION AND RE-ACQUISITION ACT OF 2003," SPECIFICALLY SECTION 5(2) AS TO THE REQUIREMENTS FOR THOSE SEEKING ELECTIVE PUBLIC OFFICE;

II

WHETHER OR NOT PUBLIC RESPONDENT EXERCISED GRAVE ABUSE OF DISCRETION WHEN IT HELD THAT PETITIONER FAILED TO COMPLY WITH THE PROVISIONS OF THE COMELEC RULES OF PROCEDURE AS REGARDS THE PAYMENT OF THE NECESSARY MOTION FEES; AND

III

WHETHER OR NOT UPHOLDING THE DECISION OF PUBLIC RESPONDENT WOULD RESULT IN THE FRUSTRATION OF THE WILL OF THE PEOPLE OF CATARMAN, CAMIGUIN.

19

The Court determines that the only fundamental issue in this case is whether petitioner is disqualified from running as a candidate in the 14 May 2007 local elections for his failure to make a personal and sworn renunciation of his US citizenship.

This Court finds that petitioner should indeed be disqualified.

Contrary to the assertions made by petitioner, his oath of allegiance to the Republic of the Philippines made before the Los Angeles PCG and his Certificate of Candidacy do not substantially comply with the requirement of a personal and sworn renunciation of foreign citizenship because these are distinct requirements to be complied with for different purposes.

Section 3 of Republic Act No. 9225 requires that natural-born citizens of the Philippines, who are already naturalized citizens of a foreign country, must take the following oath of allegiance to the Republic of the Philippines to reacquire or retain their Philippine citizenship:

SEC. 3. Retention of Philippine Citizenship.–Any provision of law to the contrary notwithstanding, natural-born citizens of the Philippines who have lost their Philippine citizenship by reason of their naturalization as citizens of a foreign country are hereby deemed to have reacquired Philippine citizenship upon taking the following oath of allegiance to the Republic:

"I __________ solemnly swear (or affirm) that I will support and defend the Constitution of the Republic of the Philippines and obey the laws and legal orders promulgated by the duly constituted authorities of the

Philippines; and I hereby declare that I recognize and accept the supreme authority of the Philippines and will maintain true faith and allegiance thereto; and that I impose this obligation upon myself voluntarily, without mental reservation or purpose of evasion."

Natural-born citizens of the Philippines who, after the effectivity of this Act, become citizens of a foreign country shall retain their Philippine citizenship upon taking the aforesaid oath.

By the oath dictated in the afore-quoted provision, the Filipino swears allegiance to the Philippines, but there is nothing therein on his renunciation of foreign citizenship. Precisely, a situation might arise under Republic Act No. 9225 wherein said Filipino has dual citizenship by also reacquiring or retaining his Philippine citizenship, despite his foreign citizenship.

The afore-quoted oath of allegiance is substantially similar to the one contained in the Certificate of Candidacy which must be executed by any person who wishes to run for public office in Philippine elections. Such an oath reads:

I am eligible for the office I seek to be elected. I will support and defend the Constitution of the Philippines and will maintain true faith and allegiance thereto; that I will obey the laws, legal orders and decrees promulgated by the duly constituted authorities of the Republic of the Philippines; and that I impose this obligation upon myself voluntarily, without mental reservation or purpose of evasion. I hereby certify that the facts stated herein are true and correct of my own personal knowledge.

Now, Section 5(2) of Republic Act No. 9225 specifically provides that:

Section 5. Civil and Political Rights and Liabilities.–Those who retain or reacquire Philippine citizenship under this Act shall enjoy full civil and political rights and be subject to all attendant liabilities and responsibilities under existing laws of the Philippines and the following conditions:

x x x x

(2) Those seeking elective public office in the Philippines shall meet the qualifications for holding such public office as required by the Constitution and existing laws and, at the time of the filing of the

certificate of candidacy, make a personal and sworn renunciation of any and all foreign citizenship before any public officer authorized to administer an oath.

The law categorically requires persons seeking elective public office, who either retained their Philippine citizenship or those who reacquired it, to make a personal and sworn renunciation of any and all foreign citizenship before a public officer authorized to administer an oath simultaneous with or before the filing of the certificate of candidacy.

20

Hence, Section 5(2) of Republic Act No. 9225 compels natural-born Filipinos, who have been naturalized as citizens of a foreign country, but who reacquired or retained their Philippine citizenship (1) to take the oath of allegiance under Section 3 of Republic Act No. 9225, and (2) for those seeking elective public offices in the Philippines, to additionally execute apersonal and sworn renunciation of any and all foreign citizenship before an authorized public officer prior or simultaneous to the filing of their certificates of candidacy, to qualify as candidates in Philippine elections.

Clearly Section 5(2) of Republic Act No. 9225 (on the making of a personal and sworn renunciation of any and all foreign citizenship) requires of the Filipinos availing themselves of the benefits under the said Act to accomplish an undertaking other than that which they have presumably complied with under Section 3 thereof (oath of allegiance to the Republic of the Philippines). This is made clear in the discussion of the Bicameral Conference Committee on Disagreeing Provisions of House Bill No. 4720 and Senate Bill No. 2130 held on 18 August 2003 (precursors of Republic Act No. 9225), where the Hon. Chairman Franklin Drilon and Hon. Representative Arthur Defensor explained to Hon. Representative Exequiel Javier that the oath of allegiance is different from the renunciation of foreign citizenship:

CHAIRMAN DRILON. Okay. So, No. 2. "Those seeking elective public office in the Philippines shall meet the qualifications for holding such public office as required by the Constitution and existing laws and, at the time of the filing of the certificate of candidacy, make a personal and sworn renunciation of any and all foreign citizenship before any public officer authorized to administer an oath." I think it’s very good, ha? No problem?

REP. JAVIER. … I think it’s already covered by the oath.

CHAIRMAN DRILON. Renouncing foreign citizenship.

REP. JAVIER. Ah… but he has taken his oath already.

CHAIRMAN DRILON. No…no, renouncing foreign citizenship.

x x x x

CHAIRMAN DRILON. Can I go back to No. 2. What’s your problem, Boy? Those seeking elective office in the Philippines.

REP. JAVIER. They are trying to make him renounce his citizenship thinking that ano…

CHAIRMAN DRILON. His American citizenship.

REP. JAVIER. To discourage him from running?

CHAIRMAN DRILON. No.

REP. A.D. DEFENSOR. No. When he runs he will only have one citizenship. When he runs for office, he will have only one. (Emphasis ours.)

There is little doubt, therefore, that the intent of the legislators was not only for Filipinos reacquiring or retaining their Philippine citizenship under Republic Act No. 9225 to take their oath of allegiance to the Republic of the Philippines, but also to explicitly renounce their foreign citizenship if they wish to run for elective posts in the Philippines. To qualify as a candidate in Philippine elections, Filipinos must only have one citizenship, namely, Philippine citizenship.

By the same token, the oath of allegiance contained in the Certificate of Candidacy, which is substantially similar to the one contained in Section 3 of Republic Act No. 9225, does not constitute the personal and sworn renunciation sought under Section 5(2) of Republic Act No. 9225. It bears to emphasize that the said oath of allegiance is a general requirement for all those who wish to run as candidates in Philippine elections; while the renunciation of foreign citizenship is an additional requisite only for those who have retained or reacquired Philippine citizenship under Republic Act No. 9225 and who seek elective public posts, considering their special circumstance of having more than one citizenship.

Petitioner erroneously invokes the doctrine in Valles21

and Mercado,22

wherein the filing by a person with dual citizenship of a certificate of candidacy, containing an oath of allegiance, was already considered a renunciation of foreign citizenship. The ruling of this Court in Valles andMercado is not applicable to the present case, which is now specially governed by Republic Act No. 9225, promulgated on 29 August 2003.

In Mercado, which was cited in Valles, the disqualification of therein private respondent Manzano was sought under another law, Section 40(d) of the Local Government Code, which reads:

SECTION 40. Disqualifications. The following persons are disqualified from running for any elective local position:

x x x x

(d) Those with dual citizenship.

The Court in the aforesaid cases sought to define the term "dual citizenship" vis-à-vis the concept of "dual allegiance." At the time this Court decided the cases of Valles and Mercado on 26 May 1999 and 9 August 2000, respectively, the more explicitly worded requirements of Section 5(2) of Republic Act No. 9225 were not yet enacted by our legislature.

23

Lopez v. Commission on Elections24

is the more fitting precedent for this case since they both share the same factual milieu. In Lopez, therein petitioner Lopez was a natural-born Filipino who lost his Philippine citizenship after he became a naturalized US citizen. He later reacquired his Philippine citizenship by virtue of Republic Act No. 9225. Thereafter, Lopez filed his candidacy for a local elective position, but failed to make a personal and sworn renunciation of his foreign citizenship. This Court unequivocally declared that despite having garnered the highest number of votes in the election, Lopez is nonetheless disqualified as a candidate for a local elective position due to his failure to comply with the requirements of Section 5(2) of Republic Act No. 9225.

Petitioner presents before this Court for the first time, in the instant Petition for Certiorari, an "Affidavit of Renunciation of Allegiance to the United States and Any and All Foreign Citizenship,"

25which he supposedly executed on 7

February 2007, even before he filed his Certificate of Candidacy on 26 March 2007. With the said Affidavit, petitioner puts forward in the Petition at bar a new theory of his case–that he complied with the requirement of making a personal and sworn renunciation of his foreign citizenship before filing his

Certificate of Candidacy. This new theory constitutes a radical change from the earlier position he took before the COMELEC–that he complied with the requirement of renunciation by his oaths of allegiance to the Republic of the Philippines made before the Los Angeles PCG and in his Certificate of Candidacy, and that there was no more need for a separate act of renunciation.

As a rule, no question will be entertained on appeal unless it has been raised in the proceedings below. Points of law, theories, issues and arguments not brought to the attention of the lower court, administrative agency or quasi-judicial body need not be considered by a reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations of fairness and due process impel this rule.

26 Courts have neither the time nor the resources

to accommodate parties who chose to go to trial haphazardly.27

Likewise, this Court does not countenance the late submission of evidence.

28 Petitioner should have offered the Affidavit dated 7 February 2007

during the proceedings before the COMELEC.

Section 1 of Rule 43 of the COMELEC Rules of Procedure provides that "In the absence of any applicable provisions of these Rules, the pertinent provisions of the Rules of Court in the Philippines shall be applicable by analogy or in suppletory character and effect." Section 34 of Rule 132 of the Revised Rules of Court categorically enjoins the admission of evidence not formally presented:

SEC. 34. Offer of evidence. - The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified.

Since the said Affidavit was not formally offered before the COMELEC, respondent had no opportunity to examine and controvert it. To admit this document would be contrary to due process.

29 Additionally, the piecemeal

presentation of evidence is not in accord with orderly justice.30

The Court further notes that petitioner had already presented before the COMELEC an identical document, "Oath of Renunciation of Allegiance to the United States and Renunciation of Any and All Foreign Citizenship" executed on 27 June 2007, subsequent to his filing of his Certificate of Candidacy on 26 March 2007. Petitioner attached the said Oath of 27 June 2007 to his Motion for Reconsideration with the COMELEC en banc. The COMELEC en banc eventually refused to reconsider said document for being belatedly

executed. What was extremely perplexing, not to mention suspect, was that petitioner did not submit the Affidavit of 7 February 2007 or mention it at all in the proceedings before the COMELEC, considering that it could have easily won his case if it was actually executed on and in existence before the filing of his Certificate of Candidacy, in compliance with law.

The justification offered by petitioner, that his counsel had advised him against presenting this crucial piece of evidence, is lame and unconvincing. If the Affidavit of 7 February 2007 was in existence all along, petitioner’s counsel, and even petitioner himself, could have easily adduced it to be a crucial piece of evidence to prove compliance with the requirements of Section 5(2) of Republic Act No. 9225. There was no apparent danger for petitioner to submit as much evidence as possible in support of his case, than the risk of presenting too little for which he could lose.

And even if it were true, petitioner’s excuse for the late presentation of the Affidavit of 7 February 2007 will not change the outcome of petitioner’s case.

It is a well-settled rule that a client is bound by his counsel’s conduct, negligence, and mistakes in handling the case, and the client cannot be heard to complain that the result might have been different had his lawyer proceeded differently.

31 The only exceptions to the general rule -- that a client

is bound by the mistakes of his counsel -- which this Court finds acceptable are when the reckless or gross negligence of counsel deprives the client of due process of law, or when the application of the rule results in the outright deprivation of one’s property through a technicality.

32These exceptions are not

attendant in this case.

The Court cannot sustain petitioner’s averment that his counsel was grossly negligent in deciding against the presentation of the Affidavit of 7 February 2007 during the proceedings before the COMELEC. Mistakes of attorneys as to the competency of a witness; the sufficiency, relevancy or irrelevancy of certain evidence; the proper defense or the burden of proof, failure to introduce evidence, to summon witnesses and to argue the case -- unless they prejudice the client and prevent him from properly presenting his case -- do not constitute gross incompetence or negligence, such that clients may no longer be bound by the acts of their counsel.

33

Also belying petitioner’s claim that his former counsel was grossly negligent was the fact that petitioner continuously used his former counsel’s theory of the case. Even when the COMELEC already rendered an adverse decision, he persistently argues even to this Court that his oaths of allegiance to the

Republic of the Philippines before the Los Angeles PCG and in his Certificate of Candidacy amount to the renunciation of foreign citizenship which the law requires. Having asserted the same defense in the instant Petition, petitioner only demonstrates his continued reliance on and complete belief in the position taken by his former counsel, despite the former’s incongruous allegations that the latter has been grossly negligent.

Petitioner himself is also guilty of negligence. If indeed he believed that his counsel was inept, petitioner should have promptly taken action, such as discharging his counsel earlier and/or insisting on the submission of his Affidavit of 7 February 2007 to the COMELEC, instead of waiting until a decision was rendered disqualifying him and a resolution issued dismissing his motion for reconsideration; and, thereupon, he could have heaped the blame on his former counsel. Petitioner could not be so easily allowed to escape the consequences of his former counsel’s acts, because, otherwise, it would render court proceedings indefinite, tentative, and subject to reopening at any time by the mere subterfuge of replacing counsel.

34

Petitioner cites De Guzman v. Sandiganbayan,35

where therein petitioner De Guzman was unable to present a piece of evidence because his lawyer proceeded to file a demurrer to evidence, despite the Sandiganbayan’s denial of his prior leave to do so. The wrongful insistence of the lawyer in filing a demurrer to evidence had totally deprived De Guzman of any chance to present documentary evidence in his defense. This was certainly not the case in the Petition at bar.

Herein, petitioner was in no way deprived of due process. His counsel actively defended his suit by attending the hearings, filing the pleadings, and presenting evidence on petitioner’s behalf. Moreover, petitioner’s cause was not defeated by a mere technicality, but because of a mistaken reliance on a doctrine which is not applicable to his case. A case lost due to an untenable legal position does not justify a deviation from the rule that clients are bound by the acts and mistakes of their counsel.

36

Petitioner also makes much of the fact that he received the highest number of votes for the position of Vice-Mayor of Catarman during the 2007 local elections. The fact that a candidate, who must comply with the election requirements applicable to dual citizens and failed to do so, received the highest number of votes for an elective position does not dispense with, or amount to a waiver of, such requirement.

37 The will of the people as

expressed through the ballot cannot cure the vice of ineligibility, especially if they mistakenly believed that the candidate was qualified. The rules on

citizenship qualifications of a candidate must be strictly applied. If a person seeks to serve the Republic of the Philippines, he must owe his loyalty to this country only, abjuring and renouncing all fealty and fidelity to any other state.

38 The application of the constitutional and statutory provisions on

disqualification is not a matter of popularity.39

WHEREFORE, the instant appeal is DISMISSED. The Resolution dated 28 September 2007 of the COMELEC en banc in SPA No. 07-361, affirming the Resolution dated 12 June 2007 of the COMELEC Second Division, is AFFIRMED. Petitioner is DISQUALIFIED to run for the position of Vice-Mayor of Catarman, Camiguin in the 14 May 2007 National and Local Elections, and if proclaimed, cannot assume the Office of Vice-Mayor of said municipality by virtue of such disqualification. Costs against petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIO Associate Justice

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. 198742 August 10, 2012

TEODORA SOBEJANA-CONDON, Petitioner, vs. COMMISSION ON ELECTIONS, LUIS M. BAUTISTA, ROBELITO V. PICAR and WILMA P. PAGADUAN,Respondents.

D E C I S I O N

REYES, J.:

Failure to renounce foreign citizenship in accordance with the exact tenor of Section 5(2) of Republic Act (R.A.) No. 9225 renders a dual citizen ineligible to run for and thus hold any elective public office.

The Case

At bar is a special civil action for certiorari1 under Rule 64 of the Rules of Court seeking to nullify Resolution2 dated September 6, 2011 of the Commission on Elections (COMELEC) en banc in EAC (AE) No. A-44-2010. The assailed resolution (a) reversed the Order3 dated November 30, 2010 of COMELEC Second Division dismissing petitioner’s appeal; and (b) affirmed the consolidated Decision4 dated October

22, 2010 of the Regional Trial Court (RTC), Bauang, La Union, Branch 33, declaring petitioner Teodora Sobejana-Condon (petitioner) disqualified and ineligible to her position as Vice-Mayor of Caba, La Union.

The Undisputed Facts

The petitioner is a natural-born Filipino citizen having been born of Filipino parents on August 8, 1944. On December 13, 1984, she became a naturalized Australian citizen owing to her marriage to a certain Kevin Thomas Condon.

On December 2, 2005, she filed an application to re-acquire Philippine citizenship before the Philippine Embassy in Canberra, Australia pursuant to Section 3 of R.A. No. 9225 otherwise known as the "Citizenship Retention and Re-Acquisition Act of 2003."5 The application was approved and the petitioner took her oath of allegiance to the Republic of the Philippines on December 5, 2005.

On September 18, 2006, the petitioner filed an unsworn Declaration of Renunciation of Australian Citizenship before the Department of Immigration and Indigenous Affairs, Canberra, Australia, which in turn issued the Order dated September 27, 2006 certifying that she has ceased to be an Australian citizen.6

The petitioner ran for Mayor in her hometown of Caba, La Union in the 2007 elections. She lost in her bid. She again sought elective office during the May 10, 2010 elections this time for the position of Vice-Mayor. She obtained the highest numbers of votes and was proclaimed as the winning candidate. She took her oath of office on May 13, 2010.

Soon thereafter, private respondents Robelito V. Picar, Wilma P. Pagaduan7 and Luis M. Bautista,8 (private respondents) all registered voters of Caba, La Union, filed separate petitions for quo warranto questioning the petitioner’s eligibility before the RTC. The petitions similarly sought the petitioner’s disqualification from holding her elective post on the ground that she is a dual citizen and that she failed to execute a "personal and sworn renunciation of any and all foreign citizenship before any public officer authorized to administer an oath" as imposed by Section 5(2) of R.A. No. 9225.

The petitioner denied being a dual citizen and averred that since September 27, 2006, she ceased to be an Australian citizen. She claimed that the Declaration of Renunciation of Australian Citizenship she executed in Australia sufficiently complied with Section 5(2), R.A. No. 9225 and that her act of running for public office is a clear abandonment of her Australian citizenship.

Ruling of the RTC

In its consolidated Decision dated October 22, 2010, the trial court held that the petitioner’s failure to comply with Section 5(2) of R.A. No. 9225 rendered her ineligible to run and hold public office. As admitted by the petitioner herself during trial, the personal declaration of renunciation she filed in Australia was not under oath. The law clearly mandates that the document containing the renunciation of foreign citizenship must be sworn before any public officer authorized to administer oath. Consequently, the RTC’s decision disposed as follows:

WHEREFORE, premises considered, the Court renders judgment in FAVOR of [private respondents] and AGAINST (petitioner):

1) DECLARING [petitioner] TEODORA SOBEJANA-CONDON, disqualified and ineligible to hold the office of Vice-Mayor of Caba, La Union;

2) NULLIFYING her proclamation as the winning candidate for Vice-Mayor of said municipality; and

3) DECLARING the position of Vice-Mayor in said municipality vacant.

SO ORDERED.9

Ruling of the COMELEC

The petitioner appealed to the COMELEC but the appeal was dismissed by the Second Division in its Order10 dated November 30, 2010 for failure to pay the docket fees within the prescribed period. On motion for reconsideration, the appeal was reinstated by the COMELEC en banc in its Resolution11 dated September 6, 2011. In the same issuance, the substantive merits of the appeal were given due course. The COMELEC en banc concurred with the findings and conclusions of the RTC; it also granted the Motion for Execution Pending Appeal filed by the private respondents.

The decretal portion of the resolution reads:

WHEREFORE, premises considered the Commission RESOLVED as it hereby RESOLVES as follows:

1. To DISMISS the instant appeal for lack of merit;

2. To AFFIRM the DECISION dated 22 October 2010 of the court a quo; and

3. To GRANT the Motion for Execution filed on November 12, 2010.

SO ORDERED.12 (Emphasis supplied)

Hence, the present petition ascribing grave abuse of discretion to the COMELEC en banc.

The Petitioner’s Arguments

The petitioner contends that since she ceased to be an Australian citizen on September 27, 2006, she no longer held dual citizenship and was only a Filipino citizen when she filed her certificate of candidacy as early as the 2007 elections. Hence, the "personal and sworn renunciation of foreign citizenship" imposed by Section 5(2) of R.A. No. 9225 to dual citizens seeking elective office does not apply to her.

She further argues that a sworn renunciation is a mere formal and not a mandatory requirement. In support thereof, she cites portions of the Journal of the House of Representatives dated June 2 to 5, 2003 containing the sponsorship speech for House Bill (H.B.) No. 4720, the precursor of R.A. No. 9225.

She claims that the private respondents are estopped from questioning her eligibility since they failed to do so when she filed certificates of candidacy for the 2007 and 2010 elections.

Lastly, she disputes the power of the COMELEC en banc to: (a) take cognizance of the substantive merits of her appeal instead of remanding the same to the COMELEC Second Division for the continuation of the appeal proceedings; and (b) allow the execution pending appeal of the RTC’s judgment.

The Issues

Posed for resolution are the following issues: I) Whether the COMELEC en banc may resolve the merits of an appeal after ruling on its reinstatement; II) Whether the COMELEC en banc may order the execution of a judgment rendered by a trial court in an election case; III) Whether the private respondents are

barred from questioning the qualifications of the petitioner; and IV) For purposes of determining the petitioner’s eligibility to run for public office, whether the "sworn renunciation of foreign citizenship" in Section 5(2) of R.A. No. 9225 is a mere pro-forma requirement.

The Court’s Ruling

I. An appeal may be simultaneously reinstated and definitively resolved by the COMELEC en banc in a resolution disposing of a motion for reconsideration.

The power to decide motions for reconsideration in election cases is arrogated unto the COMELEC en banc by Section 3, Article IX-C of the Constitution, viz:

Sec. 3. The Commission on Elections may sit en banc or in two divisions, and shall promulgate its rules of procedure in order to expedite disposition of election cases, including pre-proclamation controversies. All such election cases shall be heard and decided in division, provided that motions for reconsideration of decisions shall be decided by the Commission en banc.

A complementary provision is present in Section 5(c), Rule 3 of the COMELEC Rules of Procedure, to wit:

Any motion to reconsider a decision, resolution, order or ruling of a Division shall be resolved by the Commission en banc except motions on interlocutory orders of the division which shall be resolved by the division which issued the order.

Considering that the above cited provisos do not set any limits to the COMELEC en banc’s prerogative in resolving a motion for reconsideration, there is nothing to prevent the body from directly adjudicating the substantive merits of an appeal after ruling for its reinstatement instead of remanding the same to the division that initially dismissed it.

We thus see no impropriety much more grave abuse of discretion on the part of the COMELEC en banc when it proceeded to decide the substantive merits of the petitioner’s appeal after ruling for its reinstatement.

Further, records show that, in her motion for reconsideration before the COMELEC en banc, the petitioner not only proffered arguments on the issue on docket fees but also on the issue of her eligibility. She even filed a supplemental motion for reconsideration attaching therewith supporting documents13 to her contention that she is no longer an Australian citizen. The petitioner, after obtaining an unfavorable decision, cannot be permitted to disavow the en banc’s exercise of discretion on the substantial merits of her appeal when she herself invoked the same in the first place.

The fact that the COMELEC en banc had remanded similar appeals to the Division that initially dismissed them cannot serve as a precedent to the disposition of the petitioner’s appeal. A decision or resolution of any adjudicating body can be disposed in several ways. To sustain petitioner’s argument would be virtually putting a straightjacket on the COMELEC en banc’s adjudicatory powers.

More significantly, the remand of the appeal to the COMELEC Second Division would be unnecessarily circuitous and repugnant to the rule on preferential disposition of quo warranto cases espoused in Rule 36, Section 15 of the COMELEC Rules of Procedure.14

II. The COMELEC en banc has the power to order discretionary execution of judgment.

We cannot subscribe to petitioner’s submission that the COMELEC en banc has no power to order the issuance of a writ of execution and that such function belongs only to the court of origin.

There is no reason to dispute the COMELEC’s authority to order discretionary execution of judgment in view of the fact that the suppletory application of the Rules of Court is expressly sanctioned by Section 1, Rule 41 of the COMELEC Rules of Procedure.15

Under Section 2, Rule 39 of the Rules of Court, execution pending appeal may be issued by an appellate court after the trial court has lost jurisdiction. In Batul v. Bayron,16 we stressed the import of the provision vis-à-vis election cases when we held that judgments in election cases which may be executed pending appeal includes those decided by trial courts and those rendered by the COMELEC whether in the exercise of its original or appellate jurisdiction.

III. Private respondents are not estopped from questioning petitioner’s eligibility to hold public office.

The fact that the petitioner’s qualifications were not questioned when she filed certificates of candidacy for 2007 and 2010 elections cannot operate as an estoppel to the petition for quo warranto before the RTC.

Under the Batas Pambansa Bilang 881 (Omnibus Election Code), there are two instances where a petition questioning the qualifications of a registered candidate to run for the office for which his certificate of candidacy was filed can be raised, to wit:

(1) Before election, pursuant to Section 78 thereof which provides that:

Sec. 78. Petition to deny due course or to cancel a certificate of candidacy. – A verified petition seeking to deny due course or to cancel a certificate of candidacy may be filed by any person exclusively on the ground that any material representation contained therein as required under Section 74 hereof is false. The petition may be filed at any time not later than twenty-five days from the time of the filing of the certificate of candidacy and shall be decided, after due notice and hearing, not later than fifteen days before the election; and

(2) After election, pursuant to Section 253 thereof, viz:

Sec. 253. Petition for quo warranto. – Any voter contesting the election of any Member of the Batasang Pambansa, regional, provincial, or city officer on the ground of ineligibility or of disloyalty to the Republic of the Philippines shall file a sworn petition for quo warranto with the Commission within ten days after the proclamation of the results of the election. (Emphasis ours)

Hence, if a person qualified to file a petition to disqualify a certain candidate fails to file the petition within the twenty-five (25)-day period prescribed by Section 78 of the Omnibus Election Code for whatever reasons, the elections laws do not leave him completely helpless as he has another chance to raise the disqualification of the candidate by filing a petition forquo warranto within ten (10) days from the proclamation of the results of the election, as provided under Section 253 of the Omnibus Election Code.17

The above remedies were both available to the private respondents and their failure to utilize Section 78 of the Omnibus Election Code cannot serve to bar them should they opt to file, as they did so file, a quo warranto petition under Section 253.

IV. Petitioner is disqualified from running for elective office for failure to renounce her Australian citizenship in accordance with Section 5(2) of R.A. No. 9225.

R.A. No. 9225 allows the retention and re-acquisition of Filipino citizenship for natural-born citizens who have lost their Philippine citizenship18 by taking an oath of allegiance to the Republic, thus:

Section 3. Retention of Philippine Citizenship. – Any provision of law to the contrary notwithstanding, natural-born citizens of the Philippines who have lost their Philippine citizenship by reason of their naturalization as citizens of a foreign country are hereby deemed to have re-acquired Philippine citizenship upon taking the following oath of allegiance to the Republic:

"I, _____________________, solemnly swear (or affirm) that I will support and defend the Constitution of the Republic of the Philippines and obey the laws and legal orders promulgated by the duly constituted authorities of the Philippines; and I hereby declare that I recognize and accept the supreme authority of the Philippines and will maintain true faith and allegiance thereto; and that I imposed this obligation upon myself voluntarily without mental reservation or purpose of evasion."

Natural-born citizens of the Philippines who, after the effectivity of this Act, become citizens of a foreign country shall retain their Philippine citizenship upon taking the aforesaid oath.

The oath is an abbreviated repatriation process that restores one’s Filipino citizenship and all civil and political rights and obligations concomitant therewith, subject to certain conditions imposed in Section 5, viz:

Sec. 5. Civil and Political Rights and Liabilities. – Those who retain or re-acquire Philippine citizenship under this Act shall enjoy full civil and political rights and be subject to all attendant liabilities and responsibilities under existing laws of the Philippines and the following conditions:

(1) Those intending to exercise their right of suffrage must meet the requirements under Section 1, Article V of the Constitution, Republic Act No. 9189, otherwise known as "The Overseas Absentee Voting Act of 2003" and other existing laws;

(2) Those seeking elective public office in the Philippines shall meet the qualification for holding such public office as required by the Constitution and existing laws and, at the time of the filing of the certificate of candidacy, make a personal and sworn renunciation of any and all foreign citizenship before any public officer authorized to administer an oath;

(3) Those appointed to any public office shall subscribe and swear to an oath of allegiance to the Republic of the Philippines and its duly constituted authorities prior to their assumption of office: Provided, That they renounce their oath of allegiance to the country where they took that oath;

(4) Those intending to practice their profession in the Philippines shall apply with the proper authority for a license or permit to engage in such practice; and

(5) That right to vote or be elected or appointed to any public office in the Philippines cannot be exercised by, or extended to, those who:

(a) are candidates for or are occupying any public office in the country of which they are naturalized citizens; and/or

(b) are in active service as commissioned or non-commissioned officers in the armed forces of the country which they are naturalized citizens. (Emphasis ours)

Under the provisions of the aforementioned law, the petitioner has validly re-acquired her Filipino citizenship when she took an Oath of Allegiance to the Republic of the Philippines on December 5, 2005. At that point, she held dual citizenship, i.e., Australian and Philippine.

On September 18, 2006, or a year before she initially sought elective public office, she filed a renunciation of Australian citizenship in Canberra, Australia. Admittedly, however, the same was not under oath contrary to the exact mandate of Section 5(2) that the renunciation of foreign citizenship must be sworn before an officer authorized to administer oath.

To obviate the fatal consequence of her inutile renunciation, the petitioner pleads the Court to interpret the "sworn renunciation of any and all foreign citizenship" in Section 5(2) to be a mere pro forma requirement in conformity with the intent of the Legislature. She anchors her submission on the statement made by Representative Javier during the floor deliberations on H.B. No. 4720, the precursor of R.A. No. 9225.

At the outset, it bears stressing that the Court’s duty to interpret the law according to its true intent is exercised only when the law is ambiguous or of doubtful meaning. The first and fundamental duty of the Court is to apply the law. As such, when the law is clear and free from any doubt, there is no occasion for construction or interpretation; there is only room for application.19 Section 5(2) of R.A. No. 9225 is one such instance.

Ambiguity is a condition of admitting two or more meanings, of being understood in more than one way, or of referring to two or more things at the same time. For a statute to be considered ambiguous, it must admit of two or more possible meanings.20

The language of Section 5(2) is free from any ambiguity. In Lopez v. COMELEC,21 we declared its categorical and single meaning: a Filipino American or any dual citizen cannot run for any elective public position in the Philippines unless he or she personally swears to a renunciation of all foreign citizenship at the time of filing the certificate of candidacy. We also expounded on the form of the renunciation and held that to be valid, the renunciation must be contained in an affidavit duly executed before an officer of the law who is authorized to administer an oath stating in clear and unequivocal terms that affiant is renouncing all foreign citizenship.

The same meaning was emphasized in Jacot v. Dal,22 when we held that Filipinos re-acquiring or retaining their Philippine citizenship under R.A. No. 9225 must explicitly renounce their foreign citizenship if they wish to run for elective posts in the Philippines, thus:

The law categorically requires persons seeking elective public office, who either retained their Philippine citizenship or those who reacquired it, to make a personal and sworn renunciation of any and all foreign citizenship before a public officer authorized to administer an oath simultaneous with or before the filing of the certificate of candidacy.

Hence, Section 5(2) of Republic Act No. 9225 compels natural-born Filipinos, who have been naturalized as citizens of a foreign country, but who reacquired or retained their Philippine

citizenship (1) to take the oath of allegiance under Section 3 of Republic Act No. 9225, and (2) for those seeking elective public offices in the Philippines, to additionally execute a personal and sworn renunciation of any and all foreign citizenship before an authorized public officer prior or simultaneous to the filing of their certificates of candidacy, to qualify as candidates in Philippine elections.

Clearly Section 5(2) of Republic Act No. 9225 (on the making of a personal and sworn renunciation of any and all foreign citizenship) requires of the Filipinos availing themselves of the benefits under the said Act to accomplish an undertaking other than that which they have presumably complied with under Section 3 thereof (oath of allegiance to the Republic of the Philippines). This is made clear in the discussion of the Bicameral Conference Committee on Disagreeing Provisions of House Bill No. 4720 and Senate Bill No. 2130 held on 18 August 2003 (precursors of Republic Act No. 9225), where the Hon. Chairman Franklin Drilon and Hon. Representative Arthur Defensor explained to Hon. Representative Exequiel Javier that the oath of allegiance is different from the renunciation of foreign citizenship;

x x x x

The intent of the legislators was not only for Filipinos reacquiring or retaining their Philippine citizenship under Republic Act No. 9225 to take their oath of allegiance to the Republic of the Philippines, but also to explicitly renounce their foreign citizenship if they wish to run for elective posts in the Philippines. To qualify as a candidate in Philippine elections, Filipinos must only have one citizenship, namely, Philippine citizenship.23(Citation omitted and italics and underlining ours)

Hence, in De Guzman v. COMELEC,24 we declared petitioner therein to be disqualified from running for the position of vice-mayor for his failure to make a personal and sworn renunciation of his American citizenship.

We find no reason to depart from the mandatory nature infused by the above rulings to the phrase "sworn renunciation". The language of the provision is plain and unambiguous. It expresses a single, definite, and sensible meaning and must thus be read literally.25 The foreign citizenship must be formally rejected through an affidavit duly sworn before an officer authorized to administer oath.

It is conclusively presumed to be the meaning that the Legislature has intended to convey.26 Even a resort to the Journal of the House of Representatives invoked by the petitioner leads to the same inference, viz:

INTERPELLATION OF REP. JAVIER

Rep. Javier initially inquired whether under the Bill, dual citizenship is only limited to natural-born Filipinos and not to naturalized Filipinos.

Rep. Libanan replied in the affirmative.

Rep. Javier subsequently adverted to Section 5 of the Bill which provides that natural-born Filipinos who have dual citizenship shall continue to enjoy full civil and political rights. This being the case, he sought clarification as to whether they can indeed run for public office provided that they renounce their foreign citizenship.

Rep. Libanan replied in the affirmative, citing that these citizens will only have to make a personal and sworn renunciation of foreign citizenship before any authorized public officer.

Rep. Javier sought further clarification on this matter, citing that while the Bill provides them with full civil and political rights as Filipino citizens, the measure also discriminates against them since they are required to make a sworn renunciation of their other foreign citizenship if and when they run for public office. He thereafter proposed to delete this particular provision.

In his rejoinder, Rep. Libanan explained that this serves to erase all doubts regarding any issues that might be raised pertaining to the citizenship of any candidate. He subsequently cited the case of Afroyim vs. Rusk, wherein the United States considered a naturalized American still as an American citizen even when he cast his vote in Israel during one of its elections.

Rep. Javier however pointed out that the matter of voting is different because in voting, one is not required to renounce his foreign citizenship. He pointed out that under the Bill, Filipinos who run for public office must renounce their foreign citizenship. He pointed out further that this is a contradiction in the Bill.

Thereafter, Rep. Javier inquired whether Filipino citizens who had acquired foreign citizenship and are now entitled to reacquire their Filipino citizenship will be considered as natural-born citizens. As such, he likewise inquired whether they will also be considered qualified to run for the highest elective positions in the country.

Rep. Libanan replied in the affirmative, citing that the only requirement is that they make a sworn renunciation of their foreign citizenship and that they comply with the residency and registration requirements as provided for in the Constitution.

Whereupon, Rep. Javier noted that under the Constitution, natural-born citizens are those who are citizens at the time of birth without having to perform an act to complete or perfect his/her citizenship.

Rep. Libanan agreed therewith, citing that this is the reason why the Bill seeks the repeal of CA No. 63. The repeal, he said, would help

Filipino citizens who acquired foreign citizenship to retain their citizenship. With regard then to Section 5 of the Bill, he explained that the Committee had decided to include this provision because Section 18, Article XI of the Constitution provides for the accountability of public officers.

In his rejoinder, Rep. Javier maintained that in this case, the sworn renunciation of a foreign citizenship will only become a pro forma requirement.

On further queries of Rep. Javier, Rep. Libanan affirmed that natural-born Filipino citizens who became foreign citizens and who have reacquired their Filipino citizenship under the Bill will be considered as natural-born citizens, and therefore qualified to run for the presidency, the vice-presidency or for a seat in Congress. He also agreed with the observation of Rep. Javier that a natural-born citizen is one who is a citizen of the country at the time of birth. He also explained that the Bill will, in effect, return to a Filipino citizen who has acquired foreign citizenship, the status of being a natural-born citizen effective at the time he lost his Filipino citizenship.

As a rejoinder, Rep. Javier opined that doing so would be discriminating against naturalized Filipino citizens and Filipino citizens by election who are all disqualified to run for certain public offices. He then suggested that the Bill be amended by not considering as natural-born citizens those Filipinos who had renounced their Filipino citizenship and acquired foreign citizenship. He said that they should be considered as repatriated citizens.

In reply, Rep. Libanan assured Rep. Javier that the Committee will take note of the latter’s comments on the matter. He however stressed that after a lengthy deliberation on the subject, the Committees on Justice, and Foreign Affairs had decided to revert back to the status of being natural-born citizens those natural-born Filipino citizens who had acquired foreign citizenship but now wished to reacquire their Filipino citizenship.

Rep. Javier then explained that a Filipina who loses her Filipino citizenship by virtue of her marriage to a foreigner can regain her repatriated Filipino citizenship, upon the death of her husband, by simply taking her oath before the Department of Justice (DOJ).

Rep. Javier said that he does not oppose the Bill but only wants to be fair to other Filipino citizens who are not considered natural-born. He reiterated that natural-born Filipino citizens who had renounced their citizenship by pledging allegiance to another sovereignty should not be allowed to revert back to their status of being natural-born citizens once they decide to regain their Filipino citizenship. He underscored that this will in a way allow such Filipinos to enjoy dual citizenship.

On whether the Sponsors will agree to an amendment incorporating the position of Rep. Javier, Rep. Libanan stated that this will defeat the purpose of the Bill.

Rep. Javier disagreed therewith, adding that natural-born Filipino citizens who acquired foreign citizenships and later decided to regain their Filipino citizenship, will be considered as repatriated citizens.

Rep. Libanan cited the case of Bengzon vs. HRET wherein the Supreme Court had ruled that only naturalized Filipino citizens are not considered as natural-born citizens.

In reaction, Rep. Javier clarified that only citizens by election or those whose mothers are Filipino citizens under the 1935 Constitution and who elected Filipino citizenship upon reaching the age of maturity, are not deemed as natural-born citizens.

In response, Rep. Libanan maintained that in the Bengzon case, repatriation results in the recovery of one’s original nationality and only naturalized citizens are not considered as natural-born citizens.

On whether the Sponsors would agree to not giving back the status of being natural-born citizens to natural-born Filipino citizens who acquired foreign citizenship, Rep. Libanan remarked that the Body in plenary session will decide on the matter.27

The petitioner obviously espouses an isolated reading of Representative Javier’s statement; she conveniently disregards the preceding and succeeding discussions in the records.

The above-quoted excerpts of the legislative record show that Representative Javier’s statement ought to be understood within the context of the issue then being discussed, that is – whether former natural-born citizens who re-acquire their Filipino citizenship under the proposed law will revert to their original status as natural-born citizens and thus be qualified to run for government positions reserved only to natural-born Filipinos, i.e. President, Vice-President and Members of the Congress.

It was Representative Javier’s position that they should be considered as repatriated Filipinos and not as natural-born citizens since they will have to execute a personal and sworn renunciation of foreign citizenship. Natural-born citizens are those who need not perform an act to perfect their citizenship. Representative Libanan, however, maintained that they will revert to their original status as natural-born citizens. To reconcile the renunciation imposed by Section 5(2) with the principle that natural-born citizens

are those who need not perform any act to perfect their citizenship, Representative Javier suggested that the sworn renunciation of foreign citizenship be considered as a mere pro forma requirement.

Petitioner’s argument, therefore, loses its point. The "sworn renunciation of foreign citizenship" must be deemed a formal requirement only with respect to the re-acquisition of one’s status as a natural-born Filipino so as to override the effect of the principle that natural-born citizens need not perform any act to perfect their citizenship. Never was it mentioned or even alluded to that, as the petitioner wants this Court to believe, those who re-acquire their Filipino citizenship and thereafter run for public office has the option of executing an unsworn affidavit of renunciation.

It is also palpable in the above records that Section 5 was intended to complement Section 18, Article XI of the Constitution on public officers’ primary accountability of allegiance and loyalty, which provides:

Sec. 18. – Public officers and employees owe the State and this Constitution allegiance at all times and any public officer or employee who seeks to change his citizenship or acquire the status of an immigrant of another country during his tenure shall be dealt with by law.

An oath is a solemn declaration, accompanied by a swearing to God or a revered person or thing, that one’s statement is true or that one will be bound to a promise. The person making the oath implicitly invites punishment if the statement is untrue or the promise is broken. The legal effect of an oath is to subject the person to penalties for perjury if the testimony is false.28

Indeed, the solemn promise, and the risk of punishment attached to an oath ensures truthfulness to the prospective public officer’s abandonment of his adopted state and promise of absolute allegiance and loyalty to the Republic of the Philippines.

To hold the oath to be a mere pro forma requirement is to say that it is only for ceremonial purposes; it would also accommodate a mere qualified or temporary allegiance from government officers when the Constitution and the legislature clearly demand otherwise.

Petitioner contends that the Australian Citizenship Act of 1948, under which she is already deemed to have lost her citizenship, is entitled to judicial notice. We disagree.

Foreign laws are not a matter of judicial notice. Like any other fact, they must be alleged and proven.29 To prove a foreign law, the party invoking it must present a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of Court which reads:

Sec. 24. Proof of official record. – The record of public documents referred to in paragraph (a) of Section 19, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of the embassy or legation, consul general, consul, vice- consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. (Emphasis ours)

Sec. 25. What attestation of copy must state. – Whenever a copy of a document or record is attested for the purpose of the evidence, the attestation must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as the case may be. The attestation must be under the official seal of the attesting officer, if there be any, or if he be the clerk of a court having a seal, under the seal of such court.

The Court has admitted certain exceptions to the above rules and held that the existence of a foreign law may also be established through: (1) a testimony under oath of an expert witness such as an attorney-at-law in the country where the foreign law operates wherein he quotes verbatim a section of the law and states that the same was in force at the time material to the facts at hand; and (2) likewise, in several naturalization cases, it was held by the Court that evidence of the law of a foreign country on reciprocity regarding the acquisition of citizenship, although not meeting the prescribed rule of practice, may be allowed and used as basis for favorable action, if, in the light of all the circumstances, the Court is "satisfied of the authenticity of the written proof offered." Thus, in a number of decisions, mere authentication of the Chinese Naturalization Law by the Chinese Consulate General of Manila was held to be a competent proof of that law.30

The petitioner failed to prove the Australian Citizenship Act of 1948 through any of the above methods.1âw phi 1 As uniformly observed by the RTC and COMELEC, the petitioner failed to show proof of the existence of the law during trial. Also, the letter issued by the Australian government showing that petitioner already renounced her Australian citizenship was unauthenticated hence, the courts a quo acted judiciously in disregarding the same.

We are bound to arrive at a similar conclusion even if we were to admit as competent evidence the said letter in view of the photocopy of a Certificate of Authentication issued by Consular Section of the Philippine Embassy in Canberra, Australia attached to the petitioner’s motion for reconsideration.

We have stressed in Advocates and Adherents of Social Justice for School Teachers and Allied Workers (AASJS) Member v. Datumanong31 that the framers of R.A. No. 9225 did not intend the law to concern itself with the actual status of the other citizenship.

This Court as the government branch tasked to apply the enactments of the legislature must do so conformably with the wisdom of the latter sans the interference of any foreign law. If we were to read the Australian Citizen Act of 1948 into the application and operation of R.A. No. 9225, we would be applying not what our legislative department has deemed wise to require. To do so would be a brazen encroachment upon the sovereign will and power of the people of this Republic.32

The petitioner’s act of running for public office does not suffice to serve as an effective renunciation of her Australian citizenship. While this Court has previously declared that the filing by a person with dual citizenship of a certificate of candidacy is already considered a renunciation of foreign citizenship,33 such ruling was already adjudged superseded by the enactment of R.A. No. 9225 on August 29, 2003 which provides for the additional condition of a personal and sworn renunciation of foreign citizenship.34

The fact that petitioner won the elections can not cure the defect of her candidacy. Garnering the most number of votes does not validate the election of a disqualified candidate because the application of the constitutional and statutory provisions on disqualification is not a matter of popularity.35

In fine, R.A. No. 9225 categorically demands natural-born Filipinos who re-acquire their citizenship and seek elective office, to execute a personal and sworn renunciation of any and all foreign citizenships before an authorized public officer prior to or simultaneous to the filing of their certificates of candidacy, to qualify as candidates in Philippine elections.36 The rule applies to all those who have re-acquired their Filipino citizenship, like petitioner, without regard as to whether they are still dual citizens or not. It is a pre-requisite imposed for the exercise of the right to run for public office.

Stated differently, it is an additional qualification for elective office specific only to Filipino citizens who re-acquire their citizenship under Section 3 of R.A. No. 9225. It is the operative act that restores their right to run for public office. The petitioner's failure to comply therewith in accordance with the exact tenor of the law, rendered ineffectual the Declaration of Renunciation of Australian Citizenship she executed on September 18, 2006. As such, she is yet to regain her political right to seek elective office. Unless she

executes a sworn renunciation of her Australian citizenship, she is ineligible to run for and hold any elective office in the Philippines.

WHEREFORE, in view of all the foregoing, the petition is hereby DISMISSED. The Resolution dated September 6, 2011 of the Commission on Elections en bane in EAC (AE) No. A-44-2010 is AFFIRMED in toto.

SO ORDERED.

BIENVENIDO L. REYES<br />Associate Justice

WE CONCUR:

ANTONIO T. CARPIO Senior Associate Justice

Revival of the Grandfather Rule?

In a surprising opinion, the General Counsel of the Securities and Exchange Commission held that the grandfather

rule should be used in determining the nationality of a corporation engaged in a partly nationalized activity instead of

the traditionally used control test.

As stated in SEC-OGC Opinion No. 10-31 (December 9, 2010), Medusa Mining Ltd (MML) is an investor in a joint

venture that is the holder of a mineral production sharing agreement. It is in partnership with PHILSAGA Mining Corp.

(PHILSAGA), apparently a Filipino corporation. MML, a 100% foreign corporation, owns 40 % of the joint venture,

while PHILSAGA owns the remaining 60% equity. Answering the question of MML on whether it has violated the

Constitution and other pertinent laws regarding foreign participation in mining activities, the OGC said that:

We opine that we must look into the citizenship of the individual stockholders, i.e. natural persons, of that investor-corporation in order to determine if the Constitutional and statutory restrictions are complied with. If the shares of stock of the immediate investor corporation is in turn held and controlled by another corporation, then we must look into the citizenship of the individual stockholders of the latter corporation. In other words, if there are layers of intervening corporations investing in a mining joint venture, we must delve into the citizenship of the individual stockholders of each corporation. This is the strict application of the grandfather rule, which the Commission has been consistently applying prior to the 1990s.

This opinion, as admitted by then General Counsel Vernette G. Umali-Pacio, is in contravention of the SEC’s

prevailing policy of applying the “control test”. Under this latter test, a legal fiction is created where if 60% of the

shares of an investing corporation are owned by Philippine citizens then all of the shares of the 100% of that

corporation’s share are considered Filipino owned for purposes of determining the extent of foreign equity in an

investee corporation engaging in an activity restricted to Philippine citizens. The opinion defended its stand in this

way:

Control test must not be applied in determining if a corporation satisfies the Constitution’s citizenship requirements in certain areas of activities…Philippine citizenship is being unduly attributed to foreign individuals who own the rest of the shares in a 60% Filipino equity corporation investing in another corporation. Thus, applying the control test effectively circumvents the Constitutional mandate that corporations engaging in certain activities must be 60% owned by Filipino citizens. The words of the Constitution clearly provide that we must look at the citizenship of the

individual/natural person who ultimately owns and controls the shares of stocks of the corporation engaging in the nationalized/partly-nationalized activity. In fact, the Mining Act strictly adheres to the text of the Constitution and does not provide for the application of the control test.

EN BANC

WILSON P. GAMBOA,

Petitioner,

G.R. No. 176579

Present:

- versus -

FINANCE SECRETARY

MARGARITO B. TEVES,

FINANCE UNDERSECRETARY

JOHN P. SEVILLA, AND

COMMISSIONER RICARDO

ABCEDE OF THE PRESIDENTIAL

COMMISSION ON GOOD

GOVERNMENT (PCGG) IN

THEIR CAPACITIES AS CHAIR

AND MEMBERS,

RESPECTIVELY, OF THE

PRIVATIZATION COUNCIL,

CHAIRMAN ANTHONI SALIM OF

FIRST PACIFIC CO., LTD. IN HIS

CAPACITY AS DIRECTOR OF

METRO PACIFIC ASSET

HOLDINGS INC., CHAIRMAN

MANUEL V. PANGILINAN OF

PHILIPPINE LONG DISTANCE

TELEPHONE COMPANY (PLDT)

IN HIS CAPACITY AS

MANAGING DIRECTOR OF

FIRST PACIFIC CO., LTD.,

CORONA, C.J.,

CARPIO,

VELASCO, JR.,

LEONARDO-DE CASTRO,

BRION,

PERALTA,

BERSAMIN,

DEL CASTILLO,

ABAD,

VILLARAMA, JR.,

PEREZ,

MENDOZA, and

SERENO, JJ.

PRESIDENT NAPOLEON L.

NAZARENO OF PHILIPPINE

LONG DISTANCE TELEPHONE

COMPANY, CHAIR FE BARIN OF

THE SECURITIES EXCHANGE

COMMISSION, and PRESIDENT

FRANCIS LIM OF THE

PHILIPPINE STOCK EXCHANGE,

Respondents.

PABLITO V. SANIDAD and

ARNO V. SANIDAD,

Petitioners-in-Intervention.

Promulgated:

June 28, 2011

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

D E C I S I O N

CARPIO, J.:

The Case

This is an original petition for prohibition, injunction, declaratory relief and

declaration of nullity of the sale of shares of stock of Philippine Telecommunications

Investment Corporation (PTIC) by the government of the Republic of the Philippines

to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company

Limited (First Pacific).

The Antecedents

The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine

Long Distance Telephone Company (PLDT), are as follows:1

On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which

granted PLDT a franchise and the right to engage in telecommunications business. In

1969, General Telephone and Electronics Corporation (GTE), an American company

and a major PLDT stockholder, sold 26 percent of the outstanding common shares of

PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was incorporated by several

persons, including Roland Gapud and Jose Campos, Jr. Subsequently, PHI became the

owner of 111,415 shares of stock of PTIC by virtue of three Deeds of Assignment

executed by PTIC stockholders Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the

111,415 shares of stock of PTIC held by PHI were sequestered by the Presidential

Commission on Good Government (PCGG). The 111,415 PTIC shares, which

represent about 46.125 percent of the outstanding capital stock of PTIC, were later

declared by this Court to be owned by the Republic of the Philippines.2

In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm,

acquired the remaining 54 percent of the outstanding capital stock of PTIC. On 20

November 2006, the Inter-Agency Privatization Council (IPC) of the Philippine

Government announced that it would sell the 111,415 PTIC shares, or 46.125 percent

of the outstanding capital stock of PTIC, through a public bidding to be conducted on

4 December 2006. Subsequently, the public bidding was reset to 8 December 2006,

and only two bidders, Parallax Venture Fund XXVII (Parallax) and Pan-Asia Presidio

Capital, submitted their bids. Parallax won with a bid of P25.6 billion or US$510

million.

Thereafter, First Pacific announced that it would exercise its right of first refusal as a

PTIC stockholder and buy the 111,415 PTIC shares by matching the bid price of

Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set by

IPC and instead, yielded its right to PTIC itself which was then given by IPC until 2

March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific, through its

subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of the

111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of PTIC, with

the Philippine Government for the price of P25,217,556,000 or US$510,580,189. The

sale was completed on 28 February 2007.

Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of

46.125 percent of PTIC shares is actually an indirect sale of 12 million shares or about

6.3 percent of the outstanding common shares of PLDT. With the sale, First

Pacific’s common shareholdings in PLDT increased from 30.7 percent to 37

percent, thereby increasing the common shareholdings of foreigners in PLDT to

about 81.47 percent. This violates Section 11, Article XII of the 1987 Philippine

Constitution which limits foreign ownership of the capital of a public utility to not

more than 40 percent.3

On the other hand, public respondents Finance Secretary Margarito B. Teves,

Undersecretary John P. Sevilla, and PCGG Commissioner Ricardo Abcede allege the

following relevant facts:

On 9 November 1967, PTIC was incorporated and had since engaged in the business

of investment holdings. PTIC held 26,034,263 PLDT common shares, or 13.847

percent of the total PLDT outstanding common shares. PHI, on the other hand, was

incorporated in 1977, and became the owner of 111,415 PTIC shares or 46.125

percent of the outstanding capital stock of PTIC by virtue of three Deeds of

Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the

111,415 PTIC shares held by PHI were sequestered by the PCGG, and subsequently

declared by this Court as part of the ill-gotten wealth of former President Ferdinand

Marcos. The sequestered PTIC shares were reconveyed to the Republic of the

Philippines in accordance with this Court’s decision4 which became final

and executory on 8 August 2006.

The Philippine Government decided to sell the 111,415 PTIC shares, which represent

6.4 percent of the outstanding common shares of stock of PLDT, and designated the

Inter-Agency Privatization Council (IPC), composed of the Department of Finance

and the PCGG, as the disposing entity. An invitation to bid was published in seven

different newspapers from 13 to 24 November 2006. On 20 November 2006, a pre-bid

conference was held, and the original deadline for bidding scheduled on 4 December

2006 was reset to 8 December 2006. The extension was published in nine different

newspapers.

During the 8 December 2006 bidding, Parallax Capital Management LP emerged as

the highest bidder with a bid of P25,217,556,000. The government notified First

Pacific, the majority owner of PTIC shares, of the bidding results and gave First

Pacific until 1 February 2007 to exercise its right of first refusal in accordance with

PTIC’s Articles of Incorporation. First Pacific announced its intention to match

Parallax’s bid.

On 31 January 2007, the House of Representatives (HR) Committee on Good

Government conducted a public hearing on the particulars of the then impending sale

of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those who

attended the public hearing. The HR Committee Report No. 2270 concluded that: (a)

the auction of the government’s 111,415 PTIC shares bore due diligence, transparency

and conformity with existing legal procedures; and (b) First Pacific’s intended

acquisition of the government’s 111,415 PTIC shares resulting in First Pacific’s

100% ownership of PTIC will not violate the 40 percent constitutional limit on

foreign ownership of a public utility since PTIC holds only 13.847 percent of the

total outstanding common shares of PLDT.5 On 28 February 2007, First Pacific

completed the acquisition of the 111,415 shares of stock of PTIC.

Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted a

public bidding for the sale of 111,415 PTIC shares or 46 percent of the outstanding

capital stock of PTIC (the remaining 54 percent of PTIC shares was already owned by

First Pacific and its affiliates); (b) Parallax offered the highest bid amounting

to P25,217,556,000; (c) pursuant to the right of first refusal in favor of PTIC and its

shareholders granted in PTIC’s Articles of Incorporation, MPAH, a First Pacific

affiliate, exercised its right of first refusal by matching the highest bid offered for

PTIC shares on 13 February 2007; and (d) on 28 February 2007, the sale was

consummated when MPAH paid IPC P25,217,556,000 and the government delivered

the certificates for the 111,415 PTIC shares. Respondent Pangilinan denies the other

allegations of facts of petitioner.

On 28 February 2007, petitioner filed the instant petition for prohibition, injunction,

declaratory relief, and declaration of nullity of sale of the 111,415 PTIC shares.

Petitioner claims, among others, that the sale of the 111,415 PTIC shares would result

in an increase in First Pacific’s common shareholdings in PLDT from 30.7 percent to

37 percent, and this, combined with Japanese NTT DoCoMo’s common shareholdings

in PLDT, would result to a total foreign common shareholdings in PLDT of 51.56

percent which is over the 40 percent constitutional limit.6 Petitioner asserts:

If and when the sale is completed, First Pacific’s equity in PLDT will go up

from 30.7 percent to 37.0 percent of its common – or voting- stockholdings,

x x x. Hence, the consummation of the sale will put the two largest foreign

investors in PLDT – First Pacific and Japan’s NTT DoCoMo, which is the

world’s largest wireless telecommunications firm, owning 51.56 percent of

PLDT common equity. x x x With the completion of the sale, data culled from

the official website of the New York Stock Exchange (www.nyse.com) showed

that those foreign entities, which own at least five percent of common equity,

will collectively own 81.47 percent of PLDT’s common equity. x x x

x x x as the annual disclosure reports, also referred to as Form 20-

K reports x x x which PLDT submitted to the New York Stock

Exchange for the period 2003-2005, revealed that First Pacific and

several other foreign entities breached the constitutional limit of

40 percent ownership as early as 2003. x x x”7

Petitioner raises the following issues: (1) whether the consummation of the then

impending sale of 111,415 PTIC shares to First Pacific violates the constitutional limit

on foreign ownership of a public utility; (2) whether public respondents committed

grave abuse of discretion in allowing the sale of the 111,415 PTIC shares to First

Pacific; and (3) whether the sale of common shares to foreigners in excess of 40

percent of the entire subscribed common capital stock violates the constitutional limit

on foreign ownership of a public utility.8

On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave

to Intervene and Admit Attached Petition-in-Intervention. In the Resolution of 28

August 2007, the Court granted the motion and noted the Petition-in-Intervention.

Petitioners-in-intervention “join petitioner Wilson Gamboa x x x in seeking, among

others, to enjoin and/or nullify the sale by respondents of the 111,415 PTIC shares to

First Pacific or assignee.” Petitioners-in-intervention claim that, as PLDT subscribers,

they have a “stake in the outcome of the controversy x x x where the Philippine

Government is completing the sale of government owned assets in [PLDT],

unquestionably a public utility, in violation of the nationality restrictions of the

Philippine Constitution.”

The Issue

This Court is not a trier of facts. Factual questions such as those raised by

petitioner,9 which indisputably demand a thorough examination of the evidence of the

parties, are generally beyond this Court’s jurisdiction. Adhering to this well-settled

principle, the Court shall confine the resolution of the instant controversy solely on

the threshold and purely legal issue of whether the term “capital” in Section 11,

Article XII of the Constitution refers to the total common shares only or to the total

outstanding capital stock (combined total of common and non-voting preferred shares)

of PLDT, a public utility.

The Ruling of the Court

The petition is partly meritorious.

Petition for declaratory relief treated as petition for mandamus

At the outset, petitioner is faced with a procedural barrier. Among the remedies

petitioner seeks, only the petition for prohibition is within the original jurisdiction of

this court, which however is not exclusive but is concurrent with the Regional Trial

Court and the Court of Appeals. The actions for declaratory relief,10 injunction, and

annulment of sale are not embraced within the original jurisdiction of the Supreme

Court. On this ground alone, the petition could have been dismissed outright.

While direct resort to this Court may be justified in a petition for prohibition,11 the

Court shall nevertheless refrain from discussing the grounds in support of the petition

for prohibition since on 28 February 2007, the questioned sale was consummated

when MPAH paid IPC P25,217,556,000 and the government delivered the certificates

for the 111,415 PTIC shares.

However, since the threshold and purely legal issue on the definition of the term

“capital” in Section 11, Article XII of the Constitution has far-reaching implications

to the nationaleconomy, the Court treats the petition for declaratory relief as one for

mandamus.12

In Salvacion v. Central Bank of the Philippines,13 the Court treated the petition for

declaratory relief as one for mandamus considering the grave injustice that would

result in the interpretation of a banking law. In that case, which involved the crime of

rape committed by a foreign tourist against a Filipino minor and the execution of the

final judgment in the civil case for damages on the tourist’s dollar deposit with a local

bank, the Court declared Section 113 of Central Bank Circular No. 960, exempting

foreign currency deposits from attachment, garnishment or any other order or process

of any court, inapplicable due to the peculiar circumstances of the case. The Court

held that “injustice would result especially to a citizen aggrieved by a foreign guest

like accused x x x” that would “negate Article 10 of the Civil Code which provides

that ‘in case of doubt in the interpretation or application of laws, it is presumed that

the lawmaking body intended right and justice to prevail.’” The Court therefore

required respondents Central Bank of the Philippines, the local bank, and the accused

to comply with the writ of execution issued in the civil case for damages and to

release the dollar deposit of the accused to satisfy the judgment.

In Alliance of Government Workers v. Minister of Labor,14 the Court similarly

brushed aside the procedural infirmity of the petition for declaratory relief and treated

the same as one for mandamus. In Alliance, the issue was whether the government

unlawfully excluded petitioners, who were government employees, from the

enjoyment of rights to which they were entitled under the law. Specifically, the

question was: “Are the branches, agencies, subdivisions, and instrumentalities of the

Government, including government owned or controlled corporations included among

the four ‘employers’ under Presidential Decree No. 851 which are required to pay

their employees x x x a thirteenth (13th) month pay x x x ?” The Constitutional

principle involved therein affected all government employees, clearly justifying a

relaxation of the technical rules of procedure, and certainly requiring the interpretation

of the assailed presidential decree.

In short, it is well-settled that this Court may treat a petition for declaratory relief as

one for mandamus if the issue involved has far-reaching implications. As this Court

held inSalvacion:

The Court has no original and exclusive jurisdiction over a petition for

declaratory relief. However, exceptions to this rule have been

recognized. Thus, where the petition has far-reaching implications and

raises questions that should be resolved, it may be treated as one for

mandamus.15 (Emphasis supplied)

In the present case, petitioner seeks primarily the interpretation of the term “capital”

in Section 11, Article XII of the Constitution. He prays that this Court declare that the

term “capital” refers to common shares only, and that such shares constitute “the sole

basis in determining foreign equity in a public utility.” Petitioner further asks this

Court to declare any ruling inconsistent with such interpretation unconstitutional.

The interpretation of the term “capital” in Section 11, Article XII of the Constitution

has far-reaching implications to the national economy. In fact, a resolution of this

issue will determine whether Filipinos are masters, or second class citizens, in their

own country. What is at stake here is whether Filipinos or foreigners will

have effective control of the national economy. Indeed, if ever there is a legal issue

that has far-reaching implications to the entire nation, and to future generations of

Filipinos, it is the threshhold legal issue presented in this case.

The Court first encountered the issue on the definition of the term “capital” in Section

11, Article XII of the Constitution in the case of Fernandez v. Cojuangco, docketed as

G.R. No. 157360.16 That case involved the same public utility (PLDT) and

substantially the same private respondents. Despite the importance and novelty of the

constitutional issue raised therein and despite the fact that the petition involved a

purely legal question, the Court declined to resolve the case on the merits, and instead

denied the same for disregarding the hierarchy of courts.17 There, petitioner Fernandez

assailed on a pure question of law the Regional Trial Court’s Decision of 21 February

2003 via a petition for review under Rule 45. The Court’s Resolution, denying the

petition, became final on 21 December 2004.

The instant petition therefore presents the Court with another opportunity to finally

settle this purely legal issue which is of transcendental importance to the national

economy and a fundamental requirement to a faithful adherence to our Constitution.

The Court must forthwith seize such opportunity, not only for the benefit of the

litigants, but more significantly for the benefit of the entire Filipino people, to ensure,

in the words of the Constitution, “a self-reliant and independent national

economy effectively controlled by Filipinos.”18 Besides, in the light of vague and

confusing positions taken by government agencies on this purely legal issue, present

and future foreign investors in this country deserve, as a matter of basic fairness, a

categorical ruling from this Court on the extent of their participation in the capital of

public utilities and other nationalized businesses.

Despite its far-reaching implications to the national economy, this purely legal issue

has remained unresolved for over 75 years since the 1935 Constitution. There is no

reason for this Court to evade this ever recurring fundamental issue and delay again

defining the term “capital,” which appears not only in Section 11, Article XII of the

Constitution, but also in Section 2, Article XII on co-production and joint venture

agreements for the development of our natural resources,19 in Section 7, Article XII

on ownership of private lands,20 in Section 10, Article XII on the reservation of

certain investments to Filipino citizens,21 in Section 4(2), Article XIV on the

ownership of educational institutions,22 and in Section 11(2), Article XVI on the

ownership of advertising companies.23

Petitioner has locus standi

There is no dispute that petitioner is a stockholder of PLDT. As such, he has the right

to question the subject sale, which he claims to violate the nationality requirement

prescribed in Section 11, Article XII of the Constitution. If the sale indeed violates the

Constitution, then there is a possibility that PLDT’s franchise could be revoked, a dire

consequence directly affecting petitioner’s interest as a stockholder.

More importantly, there is no question that the instant petition raises matters of

transcendental importance to the public. The fundamental and threshold legal issue in

this case, involving the national economy and the economic welfare of the Filipino

people, far outweighs any perceived impediment in the legal personality of the

petitioner to bring this action.

In Chavez v. PCGG,24 the Court upheld the right of a citizen to bring a suit on matters

of transcendental importance to the public, thus:

In Tañada v. Tuvera, the Court asserted that when the issue concerns a public right and the

object of mandamus is to obtain the enforcement of a public duty, the people are regarded

as the real parties in interest; and because it is sufficient that petitioner is a citizen and as

such is interested in the execution of the laws, he need not show that he has any legal or

special interest in the result of the action. In the aforesaid case, the petitioners sought to

enforce their right to be informed on matters of public concern, a right then recognized in

Section 6, Article IV of the 1973 Constitution, in connection with the rule that laws in order to be

valid and enforceable must be published in the Official Gazette or otherwise effectively

promulgated. In ruling for the petitioners’ legal standing, the Court declared that the right they

sought to be enforced ‘is a public right recognized by no less than the fundamental law of the

land.’

Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that ‘when a

mandamus proceeding involves the assertion of a public right, the requirement of personal

interest is satisfied by the mere fact that petitioner is a citizen and, therefore, part of the

general ‘public’ which possesses the right.’

Further, in Albano v. Reyes, we said that while expenditure of public funds may not have been

involved under the questioned contract for the development, management and operation of the

Manila International Container Terminal, ‘public interest [was] definitely involved

considering the important role [of the subject contract] . . . in the economic development of

the country and the magnitude of the financial consideration involved.’ We concluded that,

as a consequence, the disclosure provision in the Constitution would constitute sufficient

authority for upholding the petitioner’s standing. (Emphasis supplied)

Clearly, since the instant petition, brought by a citizen, involves matters of

transcendental public importance, the petitioner has the requisite locus standi.

Definition of the Term “Capital” in

Section 11, Article XII of the 1987 Constitution

Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution

mandates the Filipinization of public utilities, to wit:

Section 11. No franchise, certificate, or any other form of authorization for

the operation of a public utility shall be granted except to citizens of the

Philippines or to corporations or associations organized under the laws of

the Philippines, at least sixty per centum of whose capital is owned by such

citizens; nor shall such franchise, certificate, or authorization be exclusive in

character or for a longer period than fifty years. Neither shall any such

franchise or right be granted except under the condition that it shall be subject

to amendment, alteration, or repeal by the Congress when the common good so

requires. The State shall encourage equity participation in public utilities by the

general public. The participation of foreign investors in the governing body of

any public utility enterprise shall be limited to their proportionate share in its

capital, and all the executive and managing officers of such corporation or

association must be citizens of the Philippines. (Emphasis supplied)

The above provision substantially reiterates Section 5, Article XIV of the 1973

Constitution, thus:

Section 5. No franchise, certificate, or any other form of authorization for

the operation of a public utility shall be granted except to citizens of the

Philippines or to corporations or associations organized under the laws of

the Philippines at least sixty per centum of the capital of which is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive

in character or for a longer period than fifty years. Neither shall any such

franchise or right be granted except under the condition that it shall be subject

to amendment, alteration, or repeal by the National Assembly when the public

interest so requires. The State shall encourage equity participation in public

utilities by the general public. The participation of foreign investors in the

governing body of any public utility enterprise shall be limited to their

proportionate share in the capital thereof. (Emphasis supplied)

The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV

of the 1935 Constitution, viz:

Section 8. No franchise, certificate, or any other form of authorization for

the operation of a public utility shall be granted except to citizens of the

Philippines or to corporations or other entities organized under the laws of

the Philippines sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or

authorization be exclusive in character or for a longer period than fifty years.

No franchise or right shall be granted to any individual, firm, or corporation,

except under the condition that it shall be subject to amendment, alteration, or

repeal by the Congress when the public interest so requires. (Emphasis

supplied)

Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional

Commission, reminds us that the Filipinization provision in the 1987 Constitution is

one of the products of the spirit of nationalism which gripped the 1935 Constitutional

Convention.25 The 1987 Constitution “provides for the Filipinization of public utilities

by requiring that any form of authorization for the operation of public utilities should

be granted only to ‘citizens of the Philippines or to corporations or associations

organized under the laws of the Philippines at least sixty per centum of whose capital

is owned by such citizens.’ The provision is [an express] recognition of the

sensitive and vital position of public utilities both in the national economy and for national security.”26 The evident purpose of the citizenship requirement is to

prevent aliens from assuming control of public utilities, which may be inimical to the

national interest.27 This specific provision explicitly reserves to Filipino citizens

control of public utilities, pursuant to an overriding economic goal of the 1987

Constitution: to “conserve and develop our patrimony”28 and ensure “a self-reliant and

independent national economy effectively controlled by Filipinos.”29

Any citizen or juridical entity desiring to operate a public utility must therefore meet

the minimum nationality requirement prescribed in Section 11, Article XII of the

Constitution. Hence, for a corporation to be granted authority to operate a public

utility, at least 60 percent of its “capital” must be owned by Filipino citizens.

The crux of the controversy is the definition of the term “capital.” Does the term

“capital” in Section 11, Article XII of the Constitution refer to common shares or to

the total outstanding capital stock (combined total of common and non-voting

preferred shares)?

Petitioner submits that the 40 percent foreign equity limitation in domestic public

utilities refers only to common shares because such shares are entitled to vote and it is

through voting that control over a corporation is exercised. Petitioner posits that the

term “capital” in Section 11, Article XII of the Constitution refers to “the ownership

of common capital stock subscribed and outstanding, which class of shares alone,

under the corporate set-up of PLDT, can vote and elect members of the board of

directors.” It is undisputed that PLDT’s non-voting preferred shares are held mostly

by Filipino citizens.30 This arose from Presidential Decree No. 217,31 issued on 16

June 1973 by then President Ferdinand Marcos, requiring every applicant of a PLDT

telephone line to subscribe to non-voting preferred shares to pay for the investment

cost of installing the telephone line.32

Petitioners-in-intervention basically reiterate petitioner’s arguments and adopt

petitioner’s definition of the term “capital.”33 Petitioners-in-intervention allege that

“the approximate foreign ownership of common capital stock of PLDT x x x already

amounts to at least 63.54% of the total outstanding common stock,” which means that

foreigners exercise significant control over PLDT, patently violating the 40 percent

foreign equity limitation in public utilities prescribed by the Constitution.

Respondents, on the other hand, do not offer any definition of the term “capital” in

Section 11, Article XII of the Constitution. More importantly, private

respondents Nazareno andPangilinan of PLDT do not dispute that more than 40

percent of the common shares of PLDT are held by foreigners.

In particular, respondent Nazareno’s Memorandum, consisting of 73 pages, harps

mainly on the procedural infirmities of the petition and the supposed violation of the

due process rights of the “affected foreign common shareholders.”

Respondent Nazareno does not deny petitioner’s allegation of foreigners’ dominating

the common shareholdings of PLDT. Nazarenostressed mainly that the petition “seeks

to divest foreign common shareholders purportedly exceeding 40% of the total common shareholdings in PLDT of their ownership over their shares.” Thus, “the

foreign natural and juridical PLDT shareholders must be impleaded in this suit so that

they can be heard.”34 Essentially, Nazareno invokes denial of due process on behalf of

the foreign common shareholders.

While Nazareno does not introduce any definition of the term “capital,” he states that

“among the factual assertions that need to be established to counter petitioner’s

allegations is the uniform interpretation by government agencies (such as the

SEC), institutions and corporations (such as the Philippine National Oil

Company-Energy Development Corporation or PNOC-EDC) of including both

preferred shares and common shares in “controlling interest” in view of testing

compliance with the 40% constitutional limitation on foreign ownership in public utilities.”35

Similarly, respondent Manuel V. Pangilinan does not define the term “capital” in

Section 11, Article XII of the Constitution. Neither does he refute petitioner’s claim of

foreigners holding more than 40 percent of PLDT’s common shares. Instead,

respondent Pangilinan focuses on the procedural flaws of the petition and the alleged

violation of the due process rights of foreigners. Respondent Pangilinan emphasizes in

his Memorandum (1) the absence of this Court’s jurisdiction over the petition; (2)

petitioner’s lack of standing; (3) mootnessof the petition; (4) non-availability of

declaratory relief; and (5) the denial of due process rights. Moreover,

respondent Pangilinan alleges that the issue should be whether “owners of shares in

PLDT as well as owners of shares in companies holding shares in PLDT may be

required to relinquish their shares in PLDT and in those companies without any law

requiring them to surrender their shares and also without notice and trial.”

Respondent Pangilinan further asserts that “Section 11, [Article XII of the

Constitution] imposes no nationality requirement on the shareholders of the

utility company as a condition for keeping their shares in the utility company.”

According to him, “Section 11 does not authorize taking one person’s property (the

shareholder’s stock in the utility company) on the basis of another party’s alleged

failure to satisfy a requirement that is a condition only for that other party’s retention

of another piece of property (the utility company being at least 60% Filipino-owned to

keep its franchise).”36

The OSG, representing public respondents Secretary Margarito Teves, Undersecretary

John P. Sevilla, Commissioner Ricardo Abcede, and Chairman Fe Barin, is likewise

silent on the definition of the term “capital.” In its Memorandum37 dated 24

September 2007, the OSG also limits its discussion on the supposed procedural

defects of the petition, i.e. lack of standing, lack of jurisdiction, non-inclusion of

interested parties, and lack of basis for injunction. The OSG does not present any

definition or interpretation of the term “capital” in Section 11, Article XII of the

Constitution. The OSG contends that “the petition actually partakes of a collateral

attack on PLDT’s franchise as a public utility,” which in effect requires a “full-blown

trial where all the parties in interest are given their day in court.”38

Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of

the Philippine Stock Exchange (PSE), does not also define the term “capital” and

seeks the dismissal of the petition on the following grounds: (1) failure to state a cause

of action against Lim; (2) the PSE allegedly implemented its rules and required all

listed companies, including PLDT, to make proper and timely disclosures; and (3) the

reliefs prayed for in the petition would adversely impact the stock market.

In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to be

a stockholder of record of PLDT, contended that the term “capital” in the 1987

Constitution refers to shares entitled to vote or the common shares. Fernandez

explained thus:

The forty percent (40%) foreign equity limitation in public utilities prescribed

by the Constitution refers to ownership of shares of stock entitled to vote, i.e.,

common shares, considering that it is through voting that control is being

exercised. x x x

Obviously, the intent of the framers of the Constitution in imposing limitations

and restrictions on fully nationalized and partially nationalized activities is for

Filipino nationals to be always in control of the corporation undertaking said

activities. Otherwise, if the Trial Court’s ruling upholding respondents’

arguments were to be given credence, it would be possible for the ownership

structure of a public utility corporation to be divided into one percent (1%)

common stocks and ninety-nine percent (99%) preferred stocks. Following the

Trial Court’s ruling adopting respondents’ arguments, the common shares can

be owned entirely by foreigners thus creating an absurd situation wherein

foreigners, who are supposed to be minority shareholders, control the public

utility corporation.

x x x x

Thus, the 40% foreign ownership limitation should be interpreted to apply to

both the beneficial ownership and the controlling interest.

x x x x

Clearly, therefore, the forty percent (40%) foreign equity limitation in public

utilities prescribed by the Constitution refers to ownership of shares of stock

entitled to vote, i.e., common shares. Furthermore, ownership of record of

shares will not suffice but it must be shown that the legal and beneficial

ownership rests in the hands of Filipino citizens. Consequently, in the case of

petitioner PLDT, since it is already admitted that the voting interests of

foreigners which would gain entry to petitioner PLDT by the acquisition of

SMART shares through the Questioned Transactions is equivalent to 82.99%,

and the nominee arrangements between the foreign principals and the Filipino

owners is likewise admitted, there is, therefore, a violation of Section 11,

Article XII of the Constitution.

Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited

by the Trial Court to support the proposition that the meaning of the word

“capital” as used in Section 11, Article XII of the Constitution allegedly refers

to the sum total of the shares subscribed and paid-in by the shareholder and it

allegedly is immaterial how the stock is classified, whether as common or

preferred, cannot stand in the face of a clear legislative policy as stated in the

FIA which took effect in 1991 or way after said opinions were rendered, and as

clarified by the above-quoted Amendments. In this regard, suffice it to state

that as between the law and an opinion rendered by an administrative agency,

the law indubitably prevails. Moreover, said Opinions are merely advisory and

cannot prevail over the clear intent of the framers of the Constitution.

In the same vein, the SEC’s construction of Section 11, Article XII of the

Constitution is at best merely advisory for it is the courts that finally determine

what a law means.39

On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V. Pangilinan,

Carlos A. Arellano, Helen Y. Dee, Magdangal B. Elma, Mariles Cacho-Romulo,

Fr. BienvenidoF. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F. Del

Rosario, and Orlando B. Vea, argued that the term “capital” in Section 11, Article XII

of the Constitution includes preferred shares since the Constitution does not

distinguish among classes of stock, thus:

16. The Constitution applies its foreign ownership limitation on the corporation’s

“capital,” without distinction as to classes of shares. x x x

In this connection, the Corporation Code – which was already in force at the

time the present (1987) Constitution was drafted – defined outstanding capital

stock as follows:

Section 137. Outstanding capital stock defined. – The term “outstanding capital

stock”, as used in this Code, means the total shares of stock issued under

binding subscription agreements to subscribers or stockholders, whether or not

fully or partially paid, except treasury shares.

Section 137 of the Corporation Code also does not distinguish between

common and preferred shares, nor exclude either class of shares, in determining

the outstanding capital stock (the “capital”) of a corporation. Consequently,

petitioner’s suggestion to reckon PLDT’s foreign equity only on the basis of

PLDT’s outstanding common shares is without legal basis. The language of the

Constitution should be understood in the sense it has in common use.

x x x x

17. But even assuming that resort to the proceedings of the Constitutional

Commission is necessary, there is nothing in the Record of the Constitutional

Commission (Vol. III) – which petitioner misleadingly cited in the Petition

x x x – which supports petitioner’s view that only common shares should form

the basis for computing a public utility’s foreign equity.

x x x x

18. In addition, the SEC – the government agency primarily responsible for

implementing the Corporation Code, and which also has the responsibility of

ensuring compliance with the Constitution’s foreign equity restrictions as

regards nationalized activities x x x – has categorically ruled that both common

and preferred shares are properly considered in determining outstanding capital

stock and the nationality composition thereof.40

We agree with petitioner and petitioners-in-intervention. The term “capital” in Section

11, Article XII of the Constitution refers only to shares of stock entitled to vote in the

election of directors, and thus in the present case only to common shares,41 and not to

the total outstanding capital stock comprising both common and non-voting preferred

shares.

The Corporation Code of the Philippines42 classifies shares as common or preferred,

thus:

Sec. 6. Classification of shares. - The shares of stock of stock corporations may

be divided into classes or series of shares, or both, any of which classes or

series of shares may have such rights, privileges or restrictions as may be stated

in the articles of incorporation: Provided, That no share may be deprived of

voting rights except those classified and issued as “preferred” or

“redeemable” shares, unless otherwise provided in this Code: Provided,

further, That there shall always be a class or series of shares which have

complete voting rights. Any or all of the shares or series of shares may have a

par value or have no par value as may be provided for in the articles of

incorporation: Provided, however, That banks, trust companies, insurance

companies, public utilities, and building and loan associations shall not be

permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in

the distribution of the assets of the corporation in case of liquidation and in the

distribution of dividends, or such other preferences as may be stated in the

articles of incorporation which are not violative of the provisions of this Code:

Provided, That preferred shares of stock may be issued only with a stated par

value. The Board of Directors, where authorized in the articles of incorporation,

may fix the terms and conditions of preferred shares of stock or any series

thereof: Provided, That such terms and conditions shall be effective upon the

filing of a certificate thereof with the Securities and Exchange Commission.

Shares of capital stock issued without par value shall be deemed fully paid and

non-assessable and the holder of such shares shall not be liable to the

corporation or to its creditors in respect thereto: Provided; That shares without

par value may not be issued for a consideration less than the value of five

(P5.00) pesos per share: Provided, further, That the entire consideration

received by the corporation for its no-par value shares shall be treated as capital

and shall not be available for distribution as dividends.

A corporation may, furthermore, classify its shares for the purpose of insuring

compliance with constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated in the

certificate of stock, each share shall be equal in all respects to every other

share.

Where the articles of incorporation provide for non-voting shares in the cases

allowed by this Code, the holders of such shares shall nevertheless be entitled

to vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

3. Sale, lease, exchange, mortgage, pledge or other disposition of all or

substantially all of the corporate property;

4. Incurring, creating or increasing bonded indebtedness;

5. Increase or decrease of capital stock;

6. Merger or consolidation of the corporation with another corporation or

other corporations;

7. Investment of corporate funds in another corporation or business in

accordance with this Code; and

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary

to approve a particular corporate act as provided in this Code shall be deemed

to refer only to stocks with voting rights.

Indisputably, one of the rights of a stockholder is the right to participate in the control

or management of the corporation.43 This is exercised through his vote in the election

of directors because it is the board of directors that controls or manages the

corporation.44 In the absence of provisions in the articles of incorporation denying

voting rights to preferred shares, preferred shares have the same voting rights as

common shares. However, preferred shareholders are often excluded from

any control, that is, deprived of the right to vote in the election of directors and on

other matters, on the theory that the preferred shareholders are merely investors in the

corporation for income in the same manner as bondholders.45 In fact, under the

Corporation Code only preferred or redeemable shares can be deprived of the right to

vote.46 Common shares cannot be deprived of the right to vote in any corporate

meeting, and any provision in the articles of incorporation restricting the right of

common shareholders to vote is invalid.47

Considering that common shares have voting rights which translate to control, as

opposed to preferred shares which usually have no voting rights, the term “capital” in

Section 11, Article XII of the Constitution refers only to common shares. However, if

the preferred shares also have the right to vote in the election of directors, then the

term “capital” shall include such preferred shares because the right to participate in

the control or management of the corporation is exercised through the right to vote in

the election of directors. In short, the term “capital” in Section 11, Article XII of

the Constitution refers only to shares of stock that can vote in the election of

directors.

This interpretation is consistent with the intent of the framers of the Constitution to

place in the hands of Filipino citizens the control and management of public utilities.

As revealed in the deliberations of the Constitutional Commission, “capital” refers to

the voting stock or controlling interest of a corporation, to wit:

MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or

Filipino equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section

9 and 2/3-1/3 in Section 15.

MR. VILLEGAS. That is right.

MR. NOLLEDO. In teaching law, we are always faced with this question:

“Where do we base the equity requirement, is it on the authorized capital stock,

on the subscribed capital stock, or on the paid-up capital stock of a

corporation”? Will the Committee please enlighten me on this?

MR. VILLEGAS. We have just had a long discussion with the members of the

team from the UP Law Center who provided us a draft. The phrase that is

contained here which we adopted from the UP draft is “60 percent of

voting stock.”

MR. NOLLEDO. That must be based on the subscribed capital stock, because

unless declared delinquent, unpaid capital stock shall be entitled to vote.

MR. VILLEGAS. That is right.

MR. NOLLEDO. Thank you.

With respect to an investment by one corporation in another corporation, say, a

corporation with 60-40 percent equity invests in another corporation which is

permitted by the Corporation Code, does the Committee adopt the grandfather

rule?

MR. VILLEGAS. Yes, that is the understanding of the Committee.

MR. NOLLEDO. Therefore, we need additional Filipino capital?

MR. VILLEGAS. Yes.48

x x x x

MR. AZCUNA. May I be clarified as to that portion that was accepted by

the Committee.

MR. VILLEGAS. The portion accepted by the Committee is the deletion of the

phrase “voting stock or controlling interest.”

MR. AZCUNA. Hence, without the Davide amendment, the committee report

would read: “corporations or associations at least sixty percent of whose

CAPITAL is owned by such citizens.”

MR. VILLEGAS. Yes.

MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60

percent of the capital to be owned by citizens.

MR. VILLEGAS. That is right.

MR. AZCUNA. But the control can be with the foreigners even if they are

the minority. Let us say 40 percent of the capital is owned by them, but it is

the voting capital, whereas, the Filipinos own the nonvoting shares. So we

can have a situation where the corporation is controlled by foreigners

despite being the minority because they have the voting capital. That is the

anomaly that would result here.

MR. BENGZON. No, the reason we eliminated the word “stock” as stated

in the 1973 and 1935 Constitutions is that according to Commissioner

Rodrigo, there are associations that do not have stocks. That is why we say

“CAPITAL.”

MR. AZCUNA. We should not eliminate the phrase “controlling interest.”

MR. BENGZON. In the case of stock corporations, it is

assumed.49 (Emphasis supplied)

Thus, 60 percent of the “capital” assumes, or should result in, “controlling interest”

in the corporation. Reinforcing this interpretation of the term “capital,” as referring to

controlling interest or shares entitled to vote, is the definition of a “Philippine

national” in the Foreign Investments Act of 1991,50 to wit:

SEC. 3. Definitions. - As used in this Act:

a. The term “Philippine national” shall mean a citizen of the Philippines; or a

domestic partnership or association wholly owned by citizens of the

Philippines; or a corporation organized under the laws of the Philippines of

which at least sixty percent (60%) of the capital stock

outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business

in the Philippines under the Corporation Code of which one hundred percent

(100%) of the capital stock outstanding and entitled to vote is wholly owned by

Filipinos or a trustee of funds for pension or other employee retirement or

separation benefits, where the trustee is a Philippine national and at least sixty

percent (60%) of the fund will accrue to the benefit of Philippine

nationals: Provided, That where a corporation and its non-Filipino stockholders

own stocks in a Securities and Exchange Commission (SEC) registered

enterprise, at least sixty percent (60%) of the capital stock outstanding and

entitled to vote of each of both corporations must be owned and held by

citizens of the Philippines and at least sixty percent (60%) of the members of

the Board of Directors of each of both corporations must be citizens of the

Philippines, in order that the corporation, shall be considered a “Philippine

national.” (Emphasis supplied)

In explaining the definition of a “Philippine national,” the Implementing Rules and

Regulations of the Foreign Investments Act of 1991 provide:

b. “Philippine national” shall mean a citizen of the Philippines or a domestic

partnership or association wholly owned by the citizens of the Philippines; or a

corporation organized under the laws of the Philippines of which at least

sixty percent [60%] of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for

pension or other employee retirement or separation benefits, where the trustee

is a Philippine national and at least sixty percent [60%] of the fund will accrue

to the benefit of the Philippine nationals; Provided, that where a corporation its

non-Filipino stockholders own stocks in a Securities and Exchange

Commission [SEC] registered enterprise, at least sixty percent [60%] of the

capital stock outstanding and entitled to vote of both corporations must be

owned and held by citizens of the Philippines and at least sixty percent [60%]

of the members of the Board of Directors of each of both corporation must be

citizens of the Philippines, in order that the corporation shall be considered a

Philippine national. The control test shall be applied for this purpose.

Compliance with the required Filipino ownership of a corporation shall be

determined on the basis of outstanding capital stock whether fully paid or

not, but only such stocks which are generally entitled to vote are

considered.

For stocks to be deemed owned and held by Philippine citizens or

Philippine nationals, mere legal title is not enough to meet the required

Filipino equity. Full beneficial ownership of the stocks, coupled with

appropriate voting rights is essential. Thus, stocks, the voting rights of

which have been assigned or transferred to aliens cannot be considered

held by Philippine citizens or Philippine nationals.

Individuals or juridical entities not meeting the aforementioned

qualifications are considered as non-Philippine nationals. (Emphasis

supplied)

Mere legal title is insufficient to meet the 60 percent Filipino-owned “capital”

required in the Constitution. Full beneficial ownership of 60 percent of the

outstanding capital stock, coupled with 60 percent of the voting rights, is required.

The legal and beneficial ownership of 60 percent of the outstanding capital stock must

rest in the hands of Filipino nationals in accordance with the constitutional mandate.

Otherwise, the corporation is “considered as non-Philippine national[s].”

Under Section 10, Article XII of the Constitution, Congress may “reserve to citizens

of the Philippines or to corporations or associations at least sixty per centum of whose

capital is owned by such citizens, or such higher percentage as Congress

may prescribe, certain areas of investments.” Thus, in numerous laws Congress has

reserved certain areas of investments to Filipino citizens or to corporations at least

sixty percent of the “capital” of which is owned by Filipino citizens. Some of these

laws are: (1) Regulation of Award of Government Contracts or R.A. No. 5183; (2)

Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro,

Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping

Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act of 2004

or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055;

and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term “capital” in Section

11, Article XII of the Constitution is also used in the same context in numerous

laws reserving certain areas of investments to Filipino citizens.

To construe broadly the term “capital” as the total outstanding capital stock, including

both common and non-voting preferred shares, grossly contravenes the intent and

letter of the Constitution that the “State shall develop a self-reliant and independent

national economy effectively controlled by Filipinos.” A broad definition unjustifiably

disregards who owns the all-important voting stock, which necessarily equates to

control of the public utility.

We shall illustrate the glaring anomaly in giving a broad definition to the term

“capital.” Let us assume that a corporation has 100 common shares owned by

foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both

classes of share having a par value of one peso (P1.00) per share. Under the broad

definition of the term “capital,” such corporation would be considered compliant with

the 40 percent constitutional limit on foreign equity of public utilities since the

overwhelming majority, or more than 99.999 percent, of the total outstanding capital

stock is Filipino owned. This is obviously absurd.

In the example given, only the foreigners holding the common shares have voting

rights in the election of directors, even if they hold only 100 shares. The foreigners,

with a minuscule equity of less than 0.001 percent, exercise control over the public

utility. On the other hand, the Filipinos, holding more than 99.999 percent of the

equity, cannot vote in the election of directors and hence, have no control over the

public utility. This starkly circumvents the intent of the framers of the Constitution, as

well as the clear language of the Constitution, to place the control of public utilities in

the hands of Filipinos. It also renders illusory the State policy of an independent

national economy effectively controlled by Filipinos.

The example given is not theoretical but can be found in the real world, and in fact

exists in the present case.

Holders of PLDT preferred shares are explicitly denied of the right to vote in the

election of directors. PLDT’s Articles of Incorporation expressly state that “the

holders of Serial Preferred Stock shall not be entitled to vote at any meeting of the stockholders for the election of directors or for any other purpose or

otherwise participate in any action taken by the corporation or its stockholders, or to

receive notice of any meeting of stockholders.”51

On the other hand, holders of common shares are granted the exclusive right to vote in

the election of directors. PLDT’s Articles of Incorporation52 state that “each holder of

Common Capital Stock shall have one vote in respect of each share of such stock held

by him on all matters voted upon by the stockholders, and the holders of Common

Capital Stock shall have the exclusive right to vote for the election of directors

and for all other purposes.”53

In short, only holders of common shares can vote in the election of directors, meaning

only common shareholders exercise control over PLDT. Conversely, holders of

preferred shares, who have no voting rights in the election of directors, do not have

any control over PLDT. In fact, under PLDT’s Articles of Incorporation, holders of

common shares have voting rights for all purposes, while holders of preferred shares

have no voting right for any purpose whatsoever.

It must be stressed, and respondents do not dispute, that foreigners hold a majority

of the common shares of PLDT. In fact, based on PLDT’s 2010 General Information

Sheet (GIS),54 which is a document required to be submitted annually to the Securities

and Exchange Commission,55 foreigners hold 120,046,690 common shares of PLDT

whereas Filipinos hold only 66,750,622 common shares.56 In other words, foreigners

hold 64.27% of the total number of PLDT’s common shares, while Filipinos hold only

35.73%. Since holding a majority of the common shares equates to control, it is clear

that foreigners exercise control over PLDT. Such amount of control unmistakably

exceeds the allowable 40 percent limit on foreign ownership of public utilities

expressly mandated in Section 11, Article XII of the Constitution.

Moreover, the Dividend Declarations of PLDT for 2009,57 as submitted to the SEC,

shows that per share the SIP58 preferred shares earn a pittance in dividends compared

to the common shares. PLDT declared dividends for the common shares at P70.00 per

share, while the declared dividends for the preferred shares amounted to a

measly P1.00 per share.59So the preferred shares not only cannot vote in the election

of directors, they also have very little and obviously negligible dividend earning

capacity compared to common shares.

As shown in PLDT’s 2010 GIS,60 as submitted to the SEC, the par value of PLDT

common shares is P5.00 per share, whereas the par value of preferred shares is P10.00

per share. In other words, preferred shares have twice the par value of common shares

but cannot elect directors and have only 1/70 of the dividends of common shares.

Moreover, 99.44% of the preferred shares are owned by Filipinos while foreigners

own only a minuscule 0.56% of the preferred shares.61 Worse, preferred shares

constitute 77.85% of the authorized capital stock of PLDT while common shares

constitute only 22.15%.62 This undeniably shows that beneficial interest in PLDT is

not with the non-voting preferred shares but with the common shares, blatantly

violating the constitutional requirement of 60 percent Filipino control and Filipino

beneficial ownership in a public utility.

The legal and beneficial ownership of 60 percent of the outstanding capital stock must

rest in the hands of Filipinos in accordance with the constitutional mandate. Full

beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60

percent of the voting rights, is constitutionally required for the State’s grant of

authority to operate a public utility. The undisputed fact that the PLDT preferred

shares, 99.44% owned by Filipinos, are non-voting and earn only 1/70 of the

dividends that PLDT common shares earn, grossly violates the constitutional

requirement of 60 percent Filipino control and Filipino beneficial ownership of a

public utility.

In short, Filipinos hold less than 60 percent of the voting stock, and earn less

than 60 percent of the dividends, of PLDT. This directly contravenes the express

command in Section 11, Article XII of the Constitution that “[n]o franchise,

certificate, or any other form of authorization for the operation of a public utility shall

be granted except to x x xcorporations x x x organized under the laws of the

Philippines, at least sixty per centum of whose capital is owned by such citizens

x x x.”

To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class of

shares exercises the sole right to vote in the election of directors, and thus exercise

control over PLDT; (2) Filipinos own only 35.73% of PLDT’s common shares,

constituting a minority of the voting stock, and thus do not exercise control over

PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights; (4)

preferred shares earn only 1/70 of the dividends that common shares earn;63 (5)

preferred shares have twice the par value of common shares; and (6) preferred shares

constitute 77.85% of the authorized capital stock of PLDT and common shares only

22.15%. This kind of ownership and control of a public utility is a mockery of the

Constitution.

Incidentally, the fact that PLDT common shares with a par value of P5.00 have a

current stock market value of P2,328.00 per share,64 while PLDT preferred shares

with a par value ofP10.00 per share have a current stock market value ranging from

only P10.92 to P11.06 per share,65 is a glaring confirmation by the market that control

and beneficial ownership of PLDT rest with the common shares, not with the

preferred shares.

Indisputably, construing the term “capital” in Section 11, Article XII of the

Constitution to include both voting and non-voting shares will result in the abject

surrender of our telecommunications industry to foreigners, amounting to a clear

abdication of the State’s constitutional duty to limit control of public utilities to

Filipino citizens. Such an interpretation certainly runs counter to the constitutional

provision reserving certain areas of investment to Filipino citizens, such as the

exploitation of natural resources as well as the ownership of land, educational

institutions and advertising businesses. The Court should never open to foreign

control what the Constitution has expressly reserved to Filipinos for that would be a

betrayal of the Constitution and of the national interest. The Court must perform its

solemn duty to defend and uphold the intent and letter of the Constitution to ensure, in

the words of the Constitution, “a self-reliant and independent national

economy effectively controlled by Filipinos.”

Section 11, Article XII of the Constitution, like other provisions of the Constitution

expressly reserving to Filipinos specific areas of investment, such as the development

of natural resources and ownership of land, educational institutions and advertising

business, is self-executing. There is no need for legislation to implement these self-

executing provisions of the Constitution. The rationale why these constitutional

provisions are self-executing was explained in Manila Prince Hotel v. GSIS,66 thus:

x x x Hence, unless it is expressly provided that a legislative act is necessary to

enforce a constitutional mandate, the presumption now is that all provisions of

the constitution are self-executing. If the constitutional provisions are treated as

requiring legislation instead of self-executing, the legislature would have the

power to ignore and practically nullify the mandate of the fundamental law.

This can be cataclysmic. That is why the prevailing view is, as it has always

been, that —

. . . in case of doubt, the Constitution should be considered self-executing rather

than non-self-executing. . . . Unless the contrary is clearly intended, the

provisions of the Constitution should be considered self-executing, as a

contrary rule would give the legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated to

the will of the lawmaking body, which could make them entirely meaningless

by simply refusing to pass the needed implementing statute. (Emphasis

supplied)

In Manila Prince Hotel, even the Dissenting Opinion of then Associate

Justice Reynato S. Puno, later Chief Justice, agreed that constitutional provisions are

presumed to be self-executing. Justice Puno stated:

Courts as a rule consider the provisions of the Constitution as self-executing,

rather than as requiring future legislation for their enforcement. The reason is

not difficult to discern. For if they are not treated as self-executing, the

mandate of the fundamental law ratified by the sovereign people can be

easily ignored and nullified by Congress. Suffused with wisdom of the ages

is the unyielding rule that legislative actions may give breath to

constitutional rights but congressional inaction should not suffocate them.

Thus, we have treated as self-executing the provisions in the Bill of Rights on

arrests, searches and seizures, the rights of a person under custodial

investigation, the rights of an accused, and the privilege against self-

incrimination. It is recognized that legislation is unnecessary to enable courts to

effectuate constitutional provisions guaranteeing the fundamental rights of life,

liberty and the protection of property. The same treatment is accorded to

constitutional provisions forbidding the taking or damaging of property for

public use without just compensation. (Emphasis supplied)

Thus, in numerous cases,67 this Court, even in the absence of implementing

legislation, applied directly the provisions of the 1935, 1973 and 1987 Constitutions

limiting land ownership to Filipinos. In Soriano v. Ong Hoo,68 this Court ruled:

x x x As the Constitution is silent as to the effects or consequences of a sale by

a citizen of his land to an alien, and as both the citizen and the alien have

violated the law, none of them should have a recourse against the other, and it

should only be the State that should be allowed to intervene and determine

what is to be done with the property subject of the violation. We have said that

what the State should do or could do in such matters is a matter of public

policy, entirely beyond the scope of judicial authority. (Dinglasan, et al. vs. Lee

Bun Ting, et al., 6 G. R. No. L-5996, June 27, 1956.) While the legislature has

not definitely decided what policy should be followed in cases of violations

against the constitutional prohibition, courts of justice cannot go beyond

by declaring the disposition to be null and void as violative of the Constitution. x x x (Emphasis supplied)

To treat Section 11, Article XII of the Constitution as not self-executing would mean

that since the 1935 Constitution, or over the last 75 years, not one of the constitutional

provisions expressly reserving specific areas of investments to corporations, at least

60 percent of the “capital” of which is owned by Filipinos, was enforceable. In short,

the framers of the 1935, 1973 and 1987 Constitutions miserably failed to effectively

reserve to Filipinos specific areas of investment, like the operation by corporations of

public utilities, the exploitation by corporations of mineral resources, the ownership

by corporations of real estate, and the ownership of educational institutions. All the

legislatures that convened since 1935 also miserably failed to enact legislations to

implement these vital constitutional provisions that determine who will effectively

control the national economy, Filipinos or foreigners. This Court cannot allow such an

absurd interpretation of the Constitution.

This Court has held that the SEC “has both regulatory and adjudicative

functions.”69 Under its regulatory functions, the SEC can be compelled by mandamus

to perform its statutory duty when it unlawfully neglects to perform the same. Under

its adjudicative or quasi-judicial functions, the SEC can be also be compelled by

mandamus to hear and decide a possible violation of any law it administers or

enforces when it is mandated by law to investigate such violation.

Under Section 17(4)70 of the Corporation Code, the SEC has the regulatory function to

reject or disapprove the Articles of Incorporation of any corporation where “the

required percentage of ownership of the capital stock to be owned by citizens of

the Philippines has not been complied with as required by existing laws or the Constitution.” Thus, the SEC is the government agency tasked with the statutory

duty to enforce the nationality requirement prescribed in Section 11, Article XII of the

Constitution on the ownership of public utilities. This Court, in a petition for

declaratory relief that is treated as a petition for mandamus as in the present case, can

direct the SEC to perform its statutory duty under the law, a duty that the SEC has

apparently unlawfully neglected to do based on the 2010 GIS that respondent PLDT

submitted to the SEC.

Under Section 5(m) of the Securities Regulation Code,71 the SEC is vested with the

“power and function” to “suspend or revoke, after proper notice and hearing, the

franchise or certificate of registration of corporations, partnerships or

associations, upon any of the grounds provided by law.” The SEC is mandated

under Section 5(d) of the same Code with the “power and function” to “investigate

x x x the activities of persons to ensure compliance” with the laws and regulations

that SEC administers or enforces. The GIS that all corporations are required to submit

to SEC annually should put the SEC on guard against violations of the nationality

requirement prescribed in the Constitution and existing laws. This Court can compel

the SEC, in a petition for declaratory relief that is treated as a petition for mandamus

as in the present case, to hear and decide a possible violation of Section 11, Article

XII of the Constitution in view of the ownership structure of PLDT’s voting shares, as

admitted by respondents and as stated in PLDT’s 2010 GIS that PLDT submitted to

SEC.

WHEREFORE, we PARTLY GRANT the petition and rule that the term “capital”

in Section 11, Article XII of the 1987 Constitution refers only to shares of stock

entitled to vote in the election of directors, and thus in the present case only to

common shares, and not to the total outstanding capital stock (common and non-

voting preferred shares). Respondent Chairperson of the Securities and Exchange

Commission is DIRECTED to apply this definition of the term “capital” in

determining the extent of allowable foreign ownership in respondent Philippine Long

Distance Telephone Company, and if there is a violation of Section 11, Article XII of

the Constitution, to impose the appropriate sanctions under the law.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice

WE CONCUR:

I join the dissent of Mr. Justice Velasco

RENATO C. CORONA

Chief Justice

SEC Memo Circular 8-2013

SEC Guidelines on Compliance with Filipino-

Foreign Ownership Requirements Posted on June 3, 2013 by Imelda A. Manguiat • Posted in Constitutional Law • The Securities and Exchange Commission (“SEC”) issued Memorandum Circular No. 8-2013 on May 20,

2013. The Circular sets out the guidelines to determine compliance with the required percentage of Filipino-

foreign ownership in corporations engaged in nationalized and partly-nationalized activities.

Nationalized activities refer to those areas of investments which are completely or partly reserved to Philippine

nationals pursuant to the 1987 Constitution, the Foreign Investments Act, as amended (“FIA”), and other

existing laws such as the Retail Trade Liberalization Act.

The Circular was issued pursuant to the Supreme Court’s directive in the case of Gamboa v. Teves, where the

Court interpreted the term “capital” in Article XII, Section 11 of the 1987 Constitution to refer “only to shares

of stock entitled to vote in the election of directors.” Under the Circular, for purposes of determining

compliance with the nationality restrictions, the required percentage of Filipino ownership shall be applied

to both (a) the total number of outstanding shares of stock entitled to vote in the election of directors, and (b)

the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors. On

the other hand, corporations covered by special laws providing for specific citizenship requirements shall

continue to be guided by the provisions of those special laws. The corporate secretaries of covered

corporations are directed to monitor compliance with the provisions of the Circular.

The SEC provided for a one-year grace period to enable all corporations to comply with its new Circular,

failing which, the corporation shall be subjected to administrative sanctions under the FIA, as amended.

SEC Memorandum Circular No. 8-2013 took effect immediately after its publication last May 22.

SEC Guidelines on Compliance with Filipino-

Foreign Ownership Requirements Posted on June 3, 2013 by Imelda A. Manguiat • Posted in Constitutional Law • The Securities and Exchange Commission (“SEC”) issued Memorandum Circular No. 8-2013 on May 20,

2013. The Circular sets out the guidelines to determine compliance with the required percentage of Filipino-

foreign ownership in corporations engaged in nationalized and partly-nationalized activities.

Nationalized activities refer to those areas of investments which are completely or partly reserved to Philippine

nationals pursuant to the 1987 Constitution, the Foreign Investments Act, as amended (“FIA”), and other

existing laws such as the Retail Trade Liberalization Act.

The Circular was issued pursuant to the Supreme Court’s directive in the case of Gamboa v. Teves, where the

Court interpreted the term “capital” in Article XII, Section 11 of the 1987 Constitution to refer “only to shares

of stock entitled to vote in the election of directors.” Under the Circular, for purposes of determining

compliance with the nationality restrictions, the required percentage of Filipino ownership shall be applied

to both (a) the total number of outstanding shares of stock entitled to vote in the election of directors, and (b)

the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors. On

the other hand, corporations covered by special laws providing for specific citizenship requirements shall

continue to be guided by the provisions of those special laws. The corporate secretaries of covered

corporations are directed to monitor compliance with the provisions of the Circular.

The SEC provided for a one-year grace period to enable all corporations to comply with its new Circular,

failing which, the corporation shall be subjected to administrative sanctions under the FIA, as amended.

SEC Memorandum Circular No. 8-2013 took effect immediately after its publication last May 22.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. 115455 October 30, 1995

ARTURO M. TOLENTINO, petitioner, vs. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115525 October 30, 1995

JUAN T. DAVID, petitioner, vs.

TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary of Finance; LIWAYWAY VINZONS-CHATO, as Commissioner of Internal Revenue; and their AUTHORIZED AGENTS OR REPRESENTATIVES, respondents.

G.R. No. 115543 October 30, 1995

RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners, vs. THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE BUREAU OF INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents.

G.R. No. 115544 October 30, 1995

PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN PUBLISHING CORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L. DIMALANTA, petitioners, vs. HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary; and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115754 October 30, 1995

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 115781 October 30, 1995

KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT COALITION, INC., and PHILIPPINE BIBLE SOCIETY, INC. and WIGBERTO TAÑADA, petitioners, vs. THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL REVENUE and THE COMMISSIONER OF CUSTOMS, respondents.

G.R. No. 115852 October 30, 1995

PHILIPPINE AIRLINES, INC., petitioner, vs. THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115873 October 30, 1995

COOPERATIVE UNION OF THE PHILIPPINES, petitioner, vs. HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON.

TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary, and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115931 October 30, 1995

PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and ASSOCIATION OF PHILIPPINE BOOK SELLERS, petitioners, vs. HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO, as the Commissioner of Internal Revenue; and HON. GUILLERMO PARAYNO, JR., in his capacity as the Commissioner of Customs,respondents.

R E S O L U T I O N

MENDOZA, J.:

These are motions seeking reconsideration of our decision dismissing the petitions filed in these cases for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. The motions, of which there are 10 in all, have been filed by the several petitioners in these cases, with the exception of the Philippine Educational Publishers Association, Inc. and the Association of Philippine Booksellers, petitioners in G.R. No. 115931.

The Solicitor General, representing the respondents, filed a consolidated comment, to which the Philippine Airlines, Inc., petitioner in G.R. No. 115852, and the Philippine Press Institute, Inc., petitioner in G.R. No. 115544, and Juan T. David, petitioner in G.R. No. 115525, each filed a reply. In turn the Solicitor General filed on June 1, 1995 a rejoinder to the PPI's reply.

On June 27, 1995 the matter was submitted for resolution.

I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino, Kilosbayan, Inc., Philippine Airlines (PAL), Roco, and Chamber of Real Estate and Builders Association (CREBA)) reiterate previous claims made by them that R.A. No. 7716 did not "originate exclusively" in the House of Representatives as required by Art. VI, §24 of the Constitution. Although they admit that H. No. 11197 was filed in the House of Representatives where it passed three readings and that afterward it was sent to the Senate where after first reading it was referred to the Senate Ways and Means Committee, they complain that the Senate did not pass it on second and third readings. Instead what the Senate did was to pass its own version (S. No. 1630) which it approved on May 24, 1994. Petitioner Tolentino adds that what the Senate committee should have done was to amend H. No. 11197 by striking out the text of the bill and substituting it with the text of S. No. 1630. That way, it is said, "the bill remains a House bill and the Senate version just becomes the text (only the text) of the House bill."

The contention has no merit.

The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment to a House revenue bill by enacting its own version of a revenue bill. On at least two occasions during the Eighth Congress, the Senate passed its own version of revenue bills, which, in consolidation with House bills earlier passed, became the enrolled bills. These were:

R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY EXTENDING FROM FIVE (5) YEARS TO TEN YEARS THE PERIOD FOR TAX AND DUTY EXEMPTION AND TAX CREDIT ON CAPITAL EQUIPMENT) which was approved by the President on April 10, 1992. This Act is actually a consolidation of H. No. 34254, which was approved by the House on January 29, 1992, and S. No. 1920, which was approved by the Senate on February 3, 1992.

R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD TO ANY FILIPINO ATHLETE WINNING A MEDAL IN OLYMPIC GAMES) which was approved by the President on May 22, 1992. This Act is a consolidation of H. No. 22232, which was approved by the House of Representatives on August 2, 1989, and S. No. 807, which was approved by the Senate on October 21, 1991.

On the other hand, the Ninth Congress passed revenue laws which were also the result of the consolidation of House and Senate bills. These are the following, with indications of the dates on which the laws were approved by the President and dates the separate bills of the two chambers of Congress were respectively passed:

1. R.A. NO. 7642

AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR THIS PURPOSE THE PERTINENT SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992).

House Bill No. 2165, October 5, 1992

Senate Bill No. 32, December 7, 1992

2. R.A. NO. 7643

AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE THE PAYMENT OF THE VALUE-ADDED TAX EVERY MONTH AND TO ALLOW LOCAL GOVERNMENT UNITS TO SHARE IN VAT REVENUE, AMENDING FOR THIS PURPOSE CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992)

House Bill No. 1503, September 3, 1992

Senate Bill No. 968, December 7, 1992

3. R.A. NO. 7646

AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO PRESCRIBE THE PLACE FOR PAYMENT OF INTERNAL REVENUE TAXES BY LARGE TAXPAYERS, AMENDING FOR THIS PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED (February 24, 1993)

House Bill No. 1470, October 20, 1992

Senate Bill No. 35, November 19, 1992

4. R.A. NO. 7649

AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS, INSTRUMENTALITIES OR AGENCIES INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCS) TO DEDUCT AND WITHHOLD THE VALUE-ADDED TAX DUE AT THE RATE OF THREE PERCENT (3%) ON GROSS PAYMENT FOR THE PURCHASE OF GOODS AND SIX PERCENT (6%) ON GROSS RECEIPTS FOR SERVICES RENDERED BY CONTRACTORS (April 6, 1993)

House Bill No. 5260, January 26, 1993

Senate Bill No. 1141, March 30, 1993

5. R.A. NO. 7656

AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS TO DECLARE DIVIDENDS UNDER CERTAIN CONDITIONS TO THE NATIONAL GOVERNMENT, AND FOR OTHER PURPOSES (November 9, 1993)

House Bill No. 11024, November 3, 1993

Senate Bill No. 1168, November 3, 1993

6. R.A. NO. 7660

AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION OF THE DOCUMENTARY STAMP TAX, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, ALLOCATING FUNDS FOR SPECIFIC PROGRAMS, AND FOR OTHER PURPOSES (December 23, 1993)

House Bill No. 7789, May 31, 1993

Senate Bill No. 1330, November 18, 1993

7. R.A. NO. 7717

AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK LISTED AND TRADED THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH INITIAL PUBLIC OFFERING, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, BY INSERTING A NEW SECTION AND REPEALING CERTAIN SUBSECTIONS THEREOF (May 5, 1994)

House Bill No. 9187, November 3, 1993

Senate Bill No. 1127, March 23, 1994

Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of its power to propose amendments to bills required to originate in the House, passed its own version of a House revenue measure. It is noteworthy that, in the particular case of S. No. 1630, petitioners Tolentino and Roco, as members of the Senate, voted to approve it on second and third readings.

On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere matter of form. Petitioner has not shown what substantial difference it would make if, as the Senate actually did in this case, a separate bill like S. No. 1630 is instead enacted as a substitute measure, "taking into Consideration . . . H.B. 11197."

Indeed, so far as pertinent, the Rules of the Senate only provide:

RULE XXIX

AMENDMENTS

xxx xxx xxx

§68. Not more than one amendment to the original amendment shall be considered.

No amendment by substitution shall be entertained unless the text thereof is submitted in writing.

Any of said amendments may be withdrawn before a vote is taken thereon.

§69. No amendment which seeks the inclusion of a legislative provision foreign to the subject matter of a bill (rider) shall be entertained.

xxx xxx xxx

§70-A. A bill or resolution shall not be amended by substituting it with another which covers a subject distinct from that proposed in the original bill or resolution. (emphasis added).

Nor is there merit in petitioners' contention that, with regard to revenue bills, the Philippine Senate possesses less power than the U.S. Senate because of textual differences between constitutional provisions giving them the power to propose or concur with amendments.

Art. I, §7, cl. 1 of the U.S. Constitution reads:

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.

Art. VI, §24 of our Constitution reads:

All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the phrase "as on other Bills" in the American version, according to petitioners, shows the intention of the framers of our Constitution to restrict the Senate's power to propose amendments to revenue bills. Petitioner Tolentino contends that the word "exclusively" was inserted to modify "originate" and "the words 'as in any other bills' (sic) were eliminated so as to show that these bills were not to be like other bills but must be treated as a special kind."

The history of this provision does not support this contention. The supposed indicia of constitutional intent are nothing but the relics of an unsuccessful attempt to limit the power of the Senate. It will be recalled that the 1935 Constitution originally provided for a unicameral National Assembly. When it was decided in 1939 to change to a bicameral legislature, it became necessary to provide for the procedure for lawmaking by the Senate and the House of Representatives. The work of proposing amendments to the Constitution was done by the National Assembly, acting as a constituent assembly, some of whose members, jealous of preserving the Assembly's lawmaking powers, sought to curtail the powers of the proposed Senate. Accordingly they proposed the following provision:

All bills appropriating public funds, revenue or tariff bills, bills of local application, and private bills shall originate exclusively in the Assembly, but the Senate may propose or concur with amendments. In case of disapproval by the Senate of any such bills, the Assembly may repass the same by a two-thirds vote of all its members, and thereupon, the bill so repassed shall be deemed enacted and may be submitted to the President for corresponding action. In the event that the Senate should fail to finally act on any such bills, the Assembly may, after thirty days from the opening of the next regular session of the same legislative term, reapprove the same with a vote of two-thirds of all the members of the Assembly. And upon such reapproval, the bill shall be deemed enacted and may be submitted to the President for corresponding action.

The special committee on the revision of laws of the Second National Assembly vetoed the proposal. It deleted everything after the first sentence. As rewritten, the proposal was approved by the National Assembly and embodied in Resolution No. 38, as amended by Resolution No. 73. (J. ARUEGO, KNOW YOUR CONSTITUTION 65-66 (1950)). The proposed amendment was submitted to the people and ratified by them in the elections held on June 18, 1940.

This is the history of Art. VI, §18 (2) of the 1935 Constitution, from which Art. VI, §24 of the present Constitution was derived. It explains why the word "exclusively" was added to the American text from which the framers of the Philippine Constitution borrowed and why the phrase "as on other Bills" was not copied. Considering the defeat of the proposal, the power of the Senate to propose amendments must be understood to be full, plenary and complete "as on other Bills." Thus, because revenue bills are required to originate exclusively in the House of Representatives, the Senate cannot enact revenue measures of its own without such bills. After a revenue bill is passed and sent over to it by the House, however, the Senate certainly can pass its own version on the same subject matter. This follows from the coequality of the two chambers of Congress.

That this is also the understanding of book authors of the scope of the Senate's power to concur is clear from the following commentaries:

The power of the Senate to propose or concur with amendments is apparently without restriction. It would seem that by virtue of this power, the Senate can practically re-write a bill required to come from the House and leave only a trace of the original bill. For example, a general revenue bill passed by the lower house of the

United States Congress contained provisions for the imposition of an inheritance tax . This was changed by the Senate into a corporation tax. The amending authority of the Senate was declared by the United States Supreme Court to be sufficiently broad to enable it to make the alteration. [Flint v. Stone Tracy Company, 220 U.S. 107, 55 L. ed. 389].

(L. TAÑADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247 (1961))

The above-mentioned bills are supposed to be initiated by the House of Representatives because it is more numerous in membership and therefore also more representative of the people. Moreover, its members are presumed to be more familiar with the needs of the country in regard to the enactment of the legislation involved.

The Senate is, however, allowed much leeway in the exercise of its power to propose or concur with amendments to the bills initiated by the House of Representatives. Thus, in one case, a bill introduced in the U.S. House of Representatives was changed by the Senate to make a proposed inheritance tax a corporation tax. It is also accepted practice for the Senate to introduce what is known as an amendment by substitution, which may entirely replace the bill initiated in the House of Representatives.

(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).

In sum, while Art. VI, §24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills must "originate exclusively in the House of Representatives," it also adds, "but the Senate may propose or concur with amendments." In the exercise of this power, the Senate may propose an entirely new bill as a substitute measure. As petitioner Tolentino states in a high school text, a committee to which a bill is referred may do any of the following:

(1) to endorse the bill without changes; (2) to make changes in the bill omitting or adding sections or altering its language; (3) to make and endorse an entirely new bill as a substitute, in which case it will be known as acommittee bill; or (4) to make no report at all.

(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))

To except from this procedure the amendment of bills which are required to originate in the House by prescribing that the number of the House bill and its other parts up to the enacting clause must be preserved although the text of the Senate amendment may be incorporated in place of the original body of the bill is to insist on a mere technicality. At any rate there is no rule prescribing this form. S. No. 1630, as a substitute measure, is therefore as much an amendment of H. No. 11197 as any which the Senate could have made.

II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that S. No. 1630 is anindependent and distinct bill. Hence their repeated references to its certification that it was passed by the Senate "insubstitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No. 11197," implying that there is something substantially different between the reference to S. No. 1129 and the reference to H. No. 11197. From this premise, they conclude that

R.A. No. 7716 originated both in the House and in the Senate and that it is the product of two "half-baked bills because neither H. No. 11197 nor S. No. 1630 was passed by both houses of Congress."

In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere amendments of the corresponding provisions of H. No. 11197. The very tabular comparison of the provisions of H. No. 11197 and S. No. 1630 attached as Supplement A to the basic petition of petitioner Tolentino, while showing differences between the two bills, at the same time indicates that the provisions of the Senate bill were precisely intended to be amendments to the House bill.

Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was a mere amendment of the House bill, H. No. 11197 in its original form did not have to pass the Senate on second and three readings. It was enough that after it was passed on first reading it was referred to the Senate Committee on Ways and Means. Neither was it required that S. No. 1630 be passed by the House of Representatives before the two bills could be referred to the Conference Committee.

There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When the House bill and Senate bill, which became R.A. No. 1405 (Act prohibiting the disclosure of bank deposits), were referred to a conference committee, the question was raised whether the two bills could be the subject of such conference, considering that the bill from one house had not been passed by the other and vice versa. As Congressman Duran put the question:

MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill is passed by the House but not passed by the Senate, and a Senate bill of a similar nature is passed in the Senate but never passed in the House, can the two bills be the subject of a conference, and can a law be enacted from these two bills? I understand that the Senate bill in this particular instance does not refer to investments in government securities, whereas the bill in the House, which was introduced by the Speaker, covers two subject matters: not only investigation of deposits in banks but also investigation of investments in government securities. Now, since the two bills differ in their subject matter, I believe that no law can be enacted.

Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:

THE SPEAKER. The report of the conference committee is in order. It is precisely in cases like this where a conference should be had. If the House bill had been approved by the Senate, there would have been no need of a conference; but precisely because the Senate passed another bill on the same subject matter, the conference committee had to be created, and we are now considering the report of that committee.

(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))

III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct and unrelated measures also accounts for the petitioners' (Kilosbayan's and PAL's) contention that because the President separately certified to the need for the immediate enactment of these measures, his certification was ineffectual and void. The certification had to be made of the version of the same revenue bill which at the moment was being considered. Otherwise, to follow petitioners' theory, it would be necessary for the President to certify as many bills as are presented in a house of Congress even though the bills are merely versions of the bill he has already certified. It is enough that he certifies the bill which, at the time he makes the certification, is under consideration. Since on

March 22, 1994 the Senate was considering S. No. 1630, it was that bill which had to be certified. For that matter on June 1, 1993 the President had earlier certified H. No. 9210 for immediate enactment because it was the one which at that time was being considered by the House. This bill was later substituted, together with other bills, by H. No. 11197.

As to what Presidential certification can accomplish, we have already explained in the main decision that the phrase "except when the President certifies to the necessity of its immediate enactment, etc." in Art. VI, §26 (2) qualifies not only the requirement that "printed copies [of a bill] in its final form [must be] distributed to the members three days before its passage" but also the requirement that before a bill can become a law it must have passed "three readings on separate days." There is not only textual support for such construction but historical basis as well.

Art. VI, §21 (2) of the 1935 Constitution originally provided:

(2) No bill shall be passed by either House unless it shall have been printed and copies thereof in its final form furnished its Members at least three calendar days prior to its passage, except when the President shall have certified to the necessity of its immediate enactment. Upon the last reading of a bill, no amendment thereof shall be allowed and the question upon its passage shall be taken immediately thereafter, and theyeas and nays entered on the Journal.

When the 1973 Constitution was adopted, it was provided in Art. VIII, §19 (2):

(2) No bill shall become a law unless it has passed three readings on separate days, and printed copies thereof in its final form have been distributed to the Members three days before its passage, except when the Prime Minister certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in the Journal.

This provision of the 1973 document, with slight modification, was adopted in Art. VI, §26 (2) of the present Constitution, thus:

(2) No bill passed by either House shall become a law unless it has passed three readings on separate days, and printed copies thereof in its final form have been distributed to its Members three days before its passage, except when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in the Journal.

The exception is based on the prudential consideration that if in all cases three readings on separate days are required and a bill has to be printed in final form before it can be passed, the need for a law may be rendered academic by the occurrence of the very emergency or public calamity which it is meant to address.

Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a country like the Philippines where budget deficit is a chronic condition. Even if this were the case, an enormous budget deficit does not make the need for R.A. No. 7716 any less urgent or the situation calling for its enactment any less an emergency.

Apparently, the members of the Senate (including some of the petitioners in these cases) believed that there was an urgent need for consideration of S. No. 1630, because they responded to the call of the President by voting on the bill on second and third readings on the same day. While the judicial department is not bound by the Senate's acceptance of the President's certification, the respect due coequal departments of the government in matters committed to them by the Constitution and the absence of a clear showing of grave abuse of discretion caution a stay of the judicial hand.

At any rate, we are satisfied that S. No. 1630 received thorough consideration in the Senate where it was discussed for six days. Only its distribution in advance in its final printed form was actually dispensed with by holding the voting on second and third readings on the same day (March 24, 1994). Otherwise, sufficient time between the submission of the bill on February 8, 1994 on second reading and its approval on March 24, 1994 elapsed before it was finally voted on by the Senate on third reading.

The purpose for which three readings on separate days is required is said to be two-fold: (1) to inform the members of Congress of what they must vote on and (2) to give them notice that a measure is progressing through the enacting process, thus enabling them and others interested in the measure to prepare their positions with reference to it. (1 J. G. SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION §10.04, p. 282 (1972)). These purposes were substantially achieved in the case of R.A. No. 7716.

IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the Movement of Attorneys for Brotherhood, Integrity and Nationalism, Inc. (MABINI)) that in violation of the constitutional policy of full public disclosure and the people's right to know (Art. II, §28 and Art. III, §7) the Conference Committee met for two days in executive session with only the conferees present.

As pointed out in our main decision, even in the United States it was customary to hold such sessions with only the conferees and their staffs in attendance and it was only in 1975 when a new rule was adopted requiring open sessions. Unlike its American counterpart, the Philippine Congress has not adopted a rule prescribing open hearings for conference committees.

It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least staff members were present. These were staff members of the Senators and Congressmen, however, who may be presumed to be their confidential men, not stenographers as in this case who on the last two days of the conference were excluded. There is no showing that the conferees themselves did not take notes of their proceedings so as to give petitioner Kilosbayan basis for claiming that even in secret diplomatic negotiations involving state interests, conferees keep notes of their meetings. Above all, the public's right to know was fully served because the Conference Committee in this case submitted a report showing the changes made on the differing versions of the House and the Senate.

Petitioners cite the rules of both houses which provide that conference committee reports must contain "a detailed, sufficiently explicit statement of the changes in or other amendments." These changes are shown in the bill attached to the Conference Committee Report. The members of both houses could thus ascertain what changes had been made in the original bills without the need of a statement detailing the changes.

The same question now presented was raised when the bill which became R.A. No. 1400 (Land Reform Act of 1955) was reported by the Conference Committee. Congressman Bengzon raised a point of order. He said:

MR. BENGZON. My point of order is that it is out of order to consider the report of the conference committee regarding House Bill No. 2557 by reason of the provision of Section 11, Article XII, of the Rules of this House which provides specifically that the conference report must be accompanied by a detailed statement of the effects of the amendment on the bill of the House. This conference committee report is not accompanied by that detailed statement, Mr. Speaker. Therefore it is out of order to consider it.

Petitioner Tolentino, then the Majority Floor Leader, answered:

MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection with the point of order raised by the gentleman from Pangasinan.

There is no question about the provision of the Rule cited by the gentleman from Pangasinan, but this provision applies to those cases where only portions of the bill have been amended. In this case before us an entire bill is presented; therefore, it can be easily seen from the reading of the bill what the provisions are. Besides, this procedure has been an established practice.

After some interruption, he continued:

MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for the provisions of the Rules, and the reason for the requirement in the provision cited by the gentleman from Pangasinan is when there are only certain words or phrases inserted in or deleted from the provisions of the bill included in the conference report, and we cannot understand what those words and phrases mean and their relation to the bill. In that case, it is necessary to make a detailed statement on how those words and phrases will affect the bill as a whole; but when the entire bill itself is copied verbatim in the conference report, that is not necessary. So when the reason for the Rule does not exist, the Rule does not exist.

(2 CONG. REC. NO. 2, p. 4056. (emphasis added))

Congressman Tolentino was sustained by the chair. The record shows that when the ruling was appealed, it was upheld by viva voce and when a division of the House was called, it was sustained by a vote of 48 to 5. (Id., p. 4058)

Nor is there any doubt about the power of a conference committee to insert new provisions as long as these are germane to the subject of the conference. As this Court held in Philippine Judges Association v. Prado, 227 SCRA 703 (1993), in an opinion written by then Justice Cruz, the jurisdiction of the conference committee is not limited to resolving differences between the Senate and the House. It may propose an entirely new provision. What is important is that its report is subsequently approved by the respective houses of Congress. This Court ruled that it would not entertain allegations that, because new provisions had been added by the conference committee, there was thereby a violation of the constitutional injunction that "upon the last reading of a bill, no amendment thereto shall be allowed."

Applying these principles, we shall decline to look into the petitioners' charges that an amendment was made upon the last reading of the bill that eventually became R.A. No. 7354 and that copies thereof in its final formwere not distributed among the members of each House. Both the enrolled bill and the legislative journals certify that

the measure was duly enacted i.e., in accordance with Article VI, Sec. 26 (2) of the Constitution. We are bound by such official assurances from a coordinate department of the government, to which we owe, at the very least, a becoming courtesy.

(Id. at 710. (emphasis added))

It is interesting to note the following description of conference committees in the Philippines in a 1979 study:

Conference committees may be of two types: free or instructed. These committees may be given instructions by their parent bodies or they may be left without instructions. Normally the conference committees are without instructions, and this is why they are often critically referred to as "the little legislatures." Once bills have been sent to them, the conferees have almost unlimited authority to change the clauses of the bills and in fact sometimes introduce new measures that were not in the original legislation. No minutes are kept, and members' activities on conference committees are difficult to determine. One congressman known for his idealism put it this way: "I killed a bill on export incentives for my interest group [copra] in the conference committee but I could not have done so anywhere else." The conference committee submits a report to both houses, and usually it is accepted. If the report is not accepted, then the committee is discharged and new members are appointed.

(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND LEGISLATURES: A COMPARATIVE ANALYSIS 163 (J. D. LEES AND M. SHAW, eds.)).

In citing this study, we pass no judgment on the methods of conference committees. We cite it only to say that conference committees here are no different from their counterparts in the United States whose vast powers we noted in Philippine Judges Association v. Prado, supra. At all events, under Art. VI, §16(3) each house has the power "to determine the rules of its proceedings," including those of its committees. Any meaningful change in the method and procedures of Congress or its committees must therefore be sought in that body itself.

V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, §26 (1) of the Constitution which provides that "Every bill passed by Congress shall embrace only one subject which shall be expressed in the title thereof." PAL contends that the amendment of its franchise by the withdrawal of its exemption from the VAT is not expressed in the title of the law.

Pursuant to §13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "in lieu of all other taxes, duties, royalties, registration, license and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed or collected by any municipal, city, provincial or national authority or government agency, now or in the future."

PAL was exempted from the payment of the VAT along with other entities by §103 of the National Internal Revenue Code, which provides as follows:

§103. Exempt transactions. — The following shall be exempt from the value-added tax:

xxx xxx xxx

(q) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory.

R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending §103, as follows:

§103. Exempt transactions. — The following shall be exempt from the value-added tax:

xxx xxx xxx

(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, 1590. . . .

The amendment of §103 is expressed in the title of R.A. No. 7716 which reads:

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES.

By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT) SYSTEM [BY] WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER PURPOSES," Congress thereby clearly expresses its intention to amend any provision of the NIRC which stands in the way of accomplishing the purpose of the law.

PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific reference to P.D. No. 1590. It is unnecessary to do this in order to comply with the constitutional requirement, since it is already stated in the title that the law seeks to amend the pertinent provisions of the NIRC, among which is §103(q), in order to widen the base of the VAT. Actually, it is the bill which becomes a law that is required to express in its title the subject of legislation. The titles of H. No. 11197 and S. No. 1630 in fact specifically referred to §103 of the NIRC as among the provisions sought to be amended. We are satisfied that sufficient notice had been given of the pendency of these bills in Congress before they were enacted into what is now R.A. No. 7716.

In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was rejected. R.A. No. 7354 is entitled AN ACT CREATING THE PHILIPPINE POSTAL CORPORATION, DEFINING ITS POWERS, FUNCTIONS AND RESPONSIBILITIES, PROVIDING FOR REGULATION OF THE INDUSTRY AND FOR OTHER PURPOSES CONNECTED THEREWITH. It contained a provision repealing all franking privileges. It was contended that the withdrawal of franking privileges was not expressed in the title of the law. In holding that there was sufficient description of the subject of the law in its title, including the repeal of franking privileges, this Court held:

To require every end and means necessary for the accomplishment of the general objectives of the statute to be expressed in its title would not only be unreasonable but would actually render legislation impossible. [Cooley, Constitutional Limitations, 8th Ed., p. 297] As has been correctly explained:

The details of a legislative act need not be specifically stated in its title, but matter germane to the subject as expressed in the title, and adopted to the accomplishment of the object in view, may properly be included in the act. Thus, it is proper to create in the same act the machinery by which the act is to be enforced, to prescribe the penalties for its infraction, and to remove obstacles in the way of its execution. If such matters are properly connected with the subject as expressed in the title, it is unnecessary that they should also have special mention in the title. (Southern Pac. Co. v. Bartine, 170 Fed. 725)

(227 SCRA at 707-708)

VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the press is not exempt from the taxing power of the State and that what the constitutional guarantee of free press prohibits are laws which single out the press or target a group belonging to the press for special treatment or which in any way discriminate against the press on the basis of the content of the publication, and R.A. No. 7716 is none of these.

Now it is contended by the PPI that by removing the exemption of the press from the VAT while maintaining those granted to others, the law discriminates against the press. At any rate, it is averred, "even nondiscriminatory taxation of constitutionally guaranteed freedom is unconstitutional."

With respect to the first contention, it would suffice to say that since the law granted the press a privilege, the law could take back the privilege anytime without offense to the Constitution. The reason is simple: by granting exemptions, the State does not forever waive the exercise of its sovereign prerogative.

Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other businesses have long ago been subject. It is thus different from the tax involved in the cases invoked by the PPI. The license tax inGrosjean v. American Press Co., 297 U.S. 233, 80 L. Ed. 660 (1936) was found to be discriminatory because it was laid on the gross advertising receipts only of newspapers whose weekly circulation was over 20,000, with the result that the tax applied only to 13 out of 124 publishers in Louisiana. These large papers were critical of Senator Huey Long who controlled the state legislature which enacted the license tax. The censorial motivation for the law was thus evident.

On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 75 L. Ed. 2d 295 (1983), the tax was found to be discriminatory because although it could have been made liable for the sales tax or, in lieu thereof, for the use tax on the privilege of using, storing or consuming tangible goods, the press was not. Instead, the press was exempted from both taxes. It was, however, later made to pay a special use tax on the cost of paper and ink which made these items "the only items subject to the use tax that were component of goods to be sold at retail." The U.S. Supreme Court held that the differential treatment of the press "suggests that the goal of regulation is not related to suppression of expression, and such goal is presumptively unconstitutional." It would therefore appear that even a law that favors the press is constitutionally suspect. (See the dissent of Rehnquist, J. in that case)

Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely and unqualifiedly" by R.A. No. 7716. Other exemptions from the VAT, such as those previously granted to PAL, petroleum concessionaires, enterprises registered with the Export Processing Zone

Authority, and many more are likewise totally withdrawn, in addition to exemptions which are partially withdrawn, in an effort to broaden the base of the tax.

The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which are profit oriented, continue to enjoy exemption under R.A. No. 7716. An enumeration of some of these transactions will suffice to show that by and large this is not so and that the exemptions are granted for a purpose. As the Solicitor General says, such exemptions are granted, in some cases, to encourage agricultural production and, in other cases, for the personal benefit of the end-user rather than for profit. The exempt transactions are:

(a) Goods for consumption or use which are in their original state (agricultural, marine and forest products, cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn, sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the manufacture of feeds).

(b) Goods used for personal consumption or use (household and personal effects of citizens returning to the Philippines) or for professional use, like professional instruments and implements, by persons coming to the Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum products subject to excise tax and services subject to percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and services rendered under employer-employee relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

The PPI asserts that it does not really matter that the law does not discriminate against the press because "even nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional." PPI cites in support of this assertion the following statement in Murdock v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):

The fact that the ordinance is "nondiscriminatory" is immaterial. The protection afforded by the First Amendment is not so restricted. A license tax certainly does not acquire constitutional validity because it classifies the privileges protected by the First Amendment along with the wares and merchandise of hucksters and peddlers and treats them all alike. Such equality in treatment does not save the ordinance. Freedom of press, freedom of speech, freedom of religion are in preferred position.

The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its imposition on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its application to others, such those selling goods, is valid, its application to the press or to religious groups, such as the Jehovah's Witnesses, in connection with the latter's sale of religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on income or property of a preacher. It is quite another thing to exact a tax on him for delivering a sermon."

A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386 (1957) which invalidated a city ordinance requiring a business license fee on those engaged in the sale of general merchandise. It was held that the tax could not be imposed on the sale of bibles by the American Bible Society without restraining the free exercise of its right to propagate.

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue purposes. To subject the press to its payment is not to burden the exercise of its right any more than to make the press pay income tax or subject it to general regulation is not to violate its freedom under the Constitution.

Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the sales are used to subsidize the cost of printing copies which are given free to those who cannot afford to pay so that to tax the sales would be to increase the price, while reducing the volume of sale. Granting that to be the case, the resulting burden on the exercise of religious freedom is so incidental as to make it difficult to differentiate it from any other economic imposition that might make the right to disseminate religious doctrines costly. Otherwise, to follow the petitioner's argument, to increase the tax on the sale of vestments would be to lay an impermissible burden on the right of the preacher to make a sermon.

On the other hand the registration fee of P1,000.00 imposed by §107 of the NIRC, as amended by §7 of R.A. No. 7716, although fixed in amount, is really just to pay for the expenses of registration and enforcement of provisions such as those relating to accounting in §108 of the NIRC. That the PBS distributes free bibles and therefore is not liable to pay the VAT does not excuse it from the payment of this fee because it also sells some copies. At any rate whether the PBS is liable for the VAT must be decided in concrete cases, in the event it is assessed this tax by the Commissioner of Internal Revenue.

VII. Alleged violations of the due process, equal protection and contract clauses and the rule on taxation. CREBA asserts that R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies transactions as covered or exempt without reasonable basis and (3) violates the rule that taxes should be uniform and equitable and that Congress shall "evolve a progressive system of taxation."

With respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of real property by installment or on deferred payment basis would result in substantial increases in the monthly amortizations to be paid because of the 10% VAT. The additional amount, it is pointed out, is something that the buyer did not anticipate at the time he entered into the contract.

The short answer to this is the one given by this Court in an early case: "Authorities from numerous sources are cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or impairs its obligation, within the meaning of the Constitution. Even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one

class and release the burdens of another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil. 567, 574 (1919)). Indeed not only existing laws but also "the reservation of the essential attributes of sovereignty, is . . . read into contracts as a postulate of the legal order." (Philippine-American Life Ins. Co. v. Auditor General, 22 SCRA 135, 147 (1968)) Contracts must be understood as having been made in reference to the possible exercise of the rightful authority of the government and no obligation of contract can extend to the defeat of that authority. (Norman v. Baltimore and Ohio R.R., 79 L. Ed. 885 (1935)).

It is next pointed out that while §4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products, food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of real property which is equally essential. The sale of real property for socialized and low-cost housing is exempted from the tax, but CREBA claims that real estate transactions of "the less poor," i.e., the middle class, who are equally homeless, should likewise be exempted.

The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and services was already exempt under §103, pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is in error in claiming that R.A. No. 7716 granted exemption to these transactions, while subjecting those of petitioner to the payment of the VAT. Moreover, there is a difference between the "homeless poor" and the "homeless less poor" in the example given by petitioner, because the second group or middle class can afford to rent houses in the meantime that they cannot yet buy their own homes. The two social classes are thus differently situated in life. "It is inherent in the power to tax that the 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.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of Baguio v. De Leon, 134 Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).

Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, §28(1) which provides that "The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation."

Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement it is enough that the statute or ordinance applies equally to all persons, forms and corporations placed in similar situation. (City of Baguio v. De Leon, supra; Sison, Jr. v. Ancheta, supra)

Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716 merely expands the base of the tax. The validity of the original VAT Law was questioned in Kapatiran ng Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on grounds similar to those made in these cases, namely, that the law was "oppressive, discriminatory, unjust and regressive in violation of Art. VI, §28(1) of the Constitution." (At 382) Rejecting the challenge to the law, this Court held:

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. . . .

The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public, which are not exempt, at the constant rate of 0% or 10%.

The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engaged in business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from its application. Likewise exempt from the tax are sales of farm and marine products, so that the costs of basic food and other necessities, spared as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of the general public.

(At 382-383)

The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of the Philippines, Inc. (CUP), while petitioner Juan T. David argues that the law contravenes the mandate of Congress to provide for a progressive system of taxation because the law imposes a flat rate of 10% and thus places the tax burden on all taxpayers without regard to their ability to pay.

The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall "evolve a progressive system of taxation." The constitutional provision has been interpreted to mean simply that "direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized." (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed. (1977)). Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, §17(1) of the 1973 Constitution from which the present Art. VI, §28(1) was taken. Sales taxes are also regressive.

Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, §4, amending §103 of the NIRC).

Thus, the following transactions involving basic and essential goods and services are exempted from the VAT:

(a) Goods for consumption or use which are in their original state (agricultural, marine and forest products, cotton seeds in their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services to enhance agriculture (milling of palay, corn sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the manufacture of feeds).

(b) Goods used for personal consumption or use (household and personal effects of citizens returning to the Philippines) and or professional use, like professional instruments and implements, by persons coming to the Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum products subject to excise tax and services subject to percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and services rendered under employer-employee relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

On the other hand, the transactions which are subject to the VAT are those which involve goods and services which are used or availed of mainly by higher income groups. These include real properties held primarily for sale to customers or for lease in the ordinary course of trade or business, the right or privilege to use patent, copyright, and other similar property or right, the right or privilege to use industrial, commercial or scientific equipment, motion picture films, tapes and discs, radio, television, satellite transmission and cable television time, hotels, restaurants and similar places, securities, lending investments, taxicabs, utility cars for rent, tourist buses, and other common carriers, services of franchise grantees of telephone and telegraph.

The problem with CREBA's petition is that it presents broad claims of constitutional violations by tendering issues not at retail but at wholesale and in the abstract. There is no fully developed record which can impart to adjudication the impact of actuality. There is no factual foundation to show in the concrete the application of the law to actual contracts and exemplify its effect on property rights. For the fact is that petitioner's members have not even been assessed the VAT. Petitioner's case is not made concrete by a series of hypothetical questions asked which are no different from those dealt with in advisory opinions.

The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here, does not suffice. There must be a factual foundation of such unconstitutional taint. Considering that petitioner here would condemn such a provision as void on its face, he has not made out a case. This is merely to adhere to the authoritative doctrine that where the due process and equal protection clauses are invoked, 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.

(Sison, Jr. v. Ancheta, 130 SCRA at 661)

Adjudication of these broad claims must await the development of a concrete case. It may be that postponement of adjudication would result in a multiplicity of suits. This need not be the case, however. Enforcement of the law may give rise to such a case. A test case, provided it is an actual case and not an abstract or hypothetical one, may thus be presented.

Nor is hardship to taxpayers alone an adequate justification for adjudicating abstract issues. Otherwise, adjudication would be no different from the giving of advisory opinion that does not really settle legal issues.

We are told that it is our duty under Art. VIII, §1, ¶2 to decide whenever a claim is made that "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." This duty can only arise if an actual case or controversy is before us. Under Art . VIII, §5 our jurisdiction is defined in terms of "cases" and all that Art. VIII, §1, ¶2 can plausibly mean is that in the exercise of that jurisdiction we have the judicial

power to determine questions of grave abuse of discretion by any branch or instrumentality of the government.

Put in another way, what is granted in Art. VIII, §1, ¶2 is "judicial power," which is "the power of a court to hear and decide cases pending between parties who have the right to sue and be sued in the courts of law and equity" (Lamb v. Phipps, 22 Phil. 456, 559 (1912)), as distinguished from legislative and executive power. This power cannot be directly appropriated until it is apportioned among several courts either by the Constitution, as in the case of Art. VIII, §5, or by statute, as in the case of the Judiciary Act of 1948 (R.A. No. 296) and the Judiciary Reorganization Act of 1980 (B.P. Blg. 129). The power thus apportioned constitutes the court's "jurisdiction," defined as "the power conferred by law upon a court or judge to take cognizance of a case, to the exclusion of all others." (United States v. Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its jurisdiction, this Court cannot inquire into any allegation of grave abuse of discretion by the other departments of the government.

VIII. Alleged violation of policy towards cooperatives. On the other hand, the Cooperative Union of the Philippines (CUP), after briefly surveying the course of legislation, argues that it was to adopt a definite policy of granting tax exemption to cooperatives that the present Constitution embodies provisions on cooperatives. To subject cooperatives to the VAT would therefore be to infringe a constitutional policy. Petitioner claims that in 1973, P.D. No. 175 was promulgated exempting cooperatives from the payment of income taxes and sales taxes but in 1984, because of the crisis which menaced the national economy, this exemption was withdrawn by P.D. No. 1955; that in 1986, P.D. No. 2008 again granted cooperatives exemption from income and sales taxes until December 31, 1991, but, in the same year, E.O. No. 93 revoked the exemption; and that finally in 1987 the framers of the Constitution "repudiated the previous actions of the government adverse to the interests of the cooperatives, that is, the repeated revocation of the tax exemption to cooperatives and instead upheld the policy of strengthening the cooperatives by way of the grant of tax exemptions," by providing the following in Art. XII:

§1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged.

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

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged to broaden the base of their ownership.

§15. The Congress shall create an agency to promote the viability and growth of cooperatives as instruments for social justice and economic development.

Petitioner's contention has no merit. In the first place, it is not true that P.D. No. 1955 singled out cooperatives by withdrawing their exemption from income and sales taxes under P.D. No. 175, §5. What P.D. No. 1955, §1 did was to withdraw the exemptions and preferential treatments theretofore

granted to private business enterprises in general, in view of the economic crisis which then beset the nation. It is true that after P.D. No. 2008, §2 had restored the tax exemptions of cooperatives in 1986, the exemption was again repealed by E.O. No. 93, §1, but then again cooperatives were not the only ones whose exemptions were withdrawn. The withdrawal of tax incentives applied to all, including government and private entities. In the second place, the Constitution does not really require that cooperatives be granted tax exemptions in order to promote their growth and viability. Hence, there is no basis for petitioner's assertion that the government's policy toward cooperatives had been one of vacillation, as far as the grant of tax privileges was concerned, and that it was to put an end to this indecision that the constitutional provisions cited were adopted. Perhaps as a matter of policy cooperatives should be granted tax exemptions, but that is left to the discretion of Congress. If Congress does not grant exemption and there is no discrimination to cooperatives, no violation of any constitutional policy can be charged.

Indeed, petitioner's theory amounts to saying that under the Constitution cooperatives are exempt from taxation. Such theory is contrary to the Constitution under which only the following are exempt from taxation: charitable institutions, churches and parsonages, by reason of Art. VI, §28 (3), and non-stock, non-profit educational institutions by reason of Art. XIV, §4 (3).

CUP's further ground for seeking the invalidation of R.A. No. 7716 is that it denies cooperatives the equal protection of the law because electric cooperatives are exempted from the VAT. The classification between electric and other cooperatives (farmers cooperatives, producers cooperatives, marketing cooperatives, etc.) apparently rests on a congressional determination that there is greater need to provide cheaper electric power to as many people as possible, especially those living in the rural areas, than there is to provide them with other necessities in life. We cannot say that such classification is unreasonable.

We have carefully read the various arguments raised against the constitutional validity of R.A. No. 7716. We have in fact taken the extraordinary step of enjoining its enforcement pending resolution of these cases. We have now come to the conclusion that the law suffers from none of the infirmities attributed to it by petitioners and that its enactment by the other branches of the government does not constitute a grave abuse of discretion. Any question as to its necessity, desirability or expediency must be addressed to Congress as the body which is electorally responsible, remembering that, as Justice Holmes has said, "legislators are the ultimate guardians of the liberties and welfare of the people in quite as great a degree as are the courts." (Missouri, Kansas & Texas Ry. Co. v. May, 194 U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R. No. 115543 does in arguing that we should enforce the public accountability of legislators, that those who took part in passing the law in question by voting for it in Congress should later thrust to the courts the burden of reviewing measures in the flush of enactment. This Court does not sit as a third branch of the legislature, much less exercise a veto power over legislation.

WHEREFORE, the motions for reconsideration are denied with finality and the temporary restraining order previously issued is hereby lifted.

SO ORDERED.

Narvasa, C.J., Feliciano, Melo, Kapunan, Francisco and Hermosisima, Jr., JJ., concur.

Padilla and Vitug, JJ., maintained their separate opinion.

Regalado, Davide, Jr., Romero, Bellosillo and Puno, JJ, maintained their dissenting opinion.

Panganiban, J., took no part.

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-66006 February 28, 1985

BAGONG FILIPINAS OVERSEAS CORPORATION and GOLDEN STAR SHIPPING, LTD., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, DIRECTOR PATRICIA SANTO TOMAS and PROSERFINA PANCHO respondents.

Elizer A. Odulios for petitioners.

Pedro L. Linsangan for respondent P. Pancho.

AQUINO, J.:

The issue in this case is whether the shipboard employment contract or Hongkong law should govern the amount of death compensation due to the wife of Guillermo Pancho who was employed by Golden Star Shipping, Ltd., a Hongkong based firm.

The shipboard employment contract dated June 1, 1978 was executed in this country between Pancho and Bagong Filipinas Overseas Corporation, the local agent of Golden Star Shipping. It was approved by the defunct National Seamen Board. Pancho was hired as an oiler in the M/V Olivine for 12 months with a gross monthly wage of US $195.

In October, 1978, he had a cerebral stroke. He was rushed to the hospital while the vessel was docked at Gothenberg, Sweden. He was repatriated to the Philippines and confined at the San Juan de Dios Hospital. He died on December 13, 1979.

The National Seamen Board awarded his widow, Proserfina, P20,000 as disability compensation benefits pursuant to the above-mentioned employment contract plus P2,000 as attorney's fees. Proserfina appealed to the National Labor Relations Commission which awarded her $621 times 36 months or its equivalent in Philippine currency plus 10% of the benefits as attorney's fees. Golden Star Shipping assailed that decision by certiorari.

We hold that the shipboard employment contract is controlling in this case. The contract provides that the beneficiaries of the seaman are entitled to P20,000 "over and above the benefits" for which the Philippine Government is liable under Philippine law.

Hongkong law on workmen's compensation is not the applicable law. The case of Norse Management Co. vs. National Seamen Board, G. R. No. 54204, September 30, 1982, 117 SCRA 486 cannot be a precedent because it was expressly stipulated in the employment contract in that case that the workmen's compensation payable to the employee should be in accordance with

Philippine Law or the Workmen's Insurance Law of the country where the vessel is registered "whichever is greater".

The Solicitor General opines that the employment contract should be applied. For that reason, he refused to uphold the decision of the NLRC.

WHEREFORE, the judgment of the National Labor Relations Commission is reversed and set aside. The decision of the National Seamen Board dated February 26, 1981 is affirmed. No costs.

SO ORDERED.

Concepcion, Jr., Abad Santos, Escolin and Cuevas, JJ., concur.

Makasiar, J., I reserve my vote.

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